Socialists claim that the “welfare” state alone has the merit of granting us social and economic security, but such a security will not function permanently, and even if it could do so, it would be as a long-term policy, both morally and socially undesirable. The political object of security is to remove from the minds of the people the fear of unemployment.
Full employment, which is regarded as one of the aims of the Welfare State, is, in the final analysis, a fraud. It is a farce because as soon as employment is created in one direction, it creates unemployment in the other direction. This is what we find at present in our country, and to add salt to the injury, our ministers, well-versed in making illogical and irresponsible statements, tell us that their aim is to increase the welfare of the people, raise their standard of life and give them complete freedom.
These are empty slogans which do not fill the stomach of the common man. “Welfare” is based upon employment and employment is based upon production. What we find today more and more people are thrown out of employment due to confiscatory pattern of taxation. Unless our production increases, national income cannot increase, and unless national income rises the welfare cannot increase. Welfare State is the prime cause of reducing productivity of the country. Coercion can always provide full employment, but what it cannot do is to provide us with a civilized standard of living and the means to enjoy it in the free fresh air of freedom.
The real problem is not that there will be 11 millions of jobs by 1961 i.e. by the end of the Second Five Year Plan, but how much shall we produce and what in consequence will be our standard of life? The problem of distribution on which much stress is being laid today and for which confiscatory taxation is imposed upon the people, rich and poor alike, is after all more easily solved, the more there is to distribute. It is this truth that must prevail, if we, in India are to survive.
Our national survival depends not on employment qua employment, but production qua production and given the latter, the former will take care of itself. At present we are suffering from rising prices due to inflation and the people are not even able to get two square meals per day. Is it ever possible under this circumstance to increase their welfare under socialist pattern of society? Certainly not. The only solution to the present economic malaise is the increase in production but this can take place only if the private enterprise is allowed free scope.
Economic emancipation
American Economy is successful at increasing production i.e. the output per man hour. This is mainly due to economic freedom and to the large measure of free enterprise. West Germany was able to achieve a “miracle” due to economic freedom. God helps those who help themselves. Soon we say farewell to the State welfare and become our own physicians sooner. We will achieve emancipation from the State itself. Welfare cannot be increased unless we have economic freedom.
Political freedom is meaningless unless we have economic freedom. Economic freedom can be understood in two senses, namely, international field and domestic field. In the international field economic freedom means free trade and free currency exchange and in the domestic field it means freedom to choose your profession and occupation, free competition at all levels, freedom to grow rich or go broke, freedom to make all the profit you can to acquire a fortune and to bequeath or inherit the said fortune.
Economic freedom means private enterprise and the free market as against Statism or socialism or the rugged market. The imposition of checks and controls by Government, especially transference of income from one class of community to another by means of taxation is not only monstrous but also blasphemous and to hope to increase welfare is to cry for the moon. It is the private enterprise and free competition that work for the public good and sooner we realise this and bid farewell to the welfare state we will be increased.
So the remedy for the present malaise is the free economy and not planning. Von Mises, Hayek and Schumpeter like three witches in Shakespeare’s Macbeth had predicted that every deviation from free enterprise would propel the free nations irresistibly from capitalism to socialism and from socialism to some sort of police state, and it is our misfortune to see that this prediction has come to pass in our own country.
We allowed our leaders to make our country a Heaven and they have turned it into a Hell. It is our “Herculean” blunder to place our destiny in the hands of others. Now we cannot escape the consequence of degradation of our manhood. We have become cyphers in the code of politics and now we must be prepared to love, obey and honour the State against our own free will. The “Welfare” State presupposes political and economic planning. It also assumes that man can live by bread alone but the loaf is shamelessly poor.
The Planning Commission does not realise the fact that it is first-class Plans (if at all) produce third class results at first class prices. So welfare state is both socially and economically a national disaster. Socially because man is incited to believe that it is not his own personal responsibility to work out his own destiny and economically because it leads to inflation and bankruptcy. It is parasitic and retrogressive. It produces so many unhappy, frustrated and disgruntled citizens that superintendents and inspectorship become imperative, if good order is to prevail.
In a welfare state the rule of law has been defiled and public opinion and sovereignty of the people, the very foundations of democracy, are being superseded by the undemocratic decrees of the ministers. The distinguishing feature of welfare state is universal poverty. It tries to make the wrong people strong but as Abraham Lincoln aptly puts it “You cannot strengthen the weak by weakening the strong”.
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The vicious circle
It is wrongly assumed that the taxation of higher income groups means limitation of expenditure on the part of these groups and what is expended off from the purchasing power can be directed to social ends in the lower income groups. But it must be remembered that higher income groups according to professor Ropke provide the foundations which are essential to certain functions of society, namely, capital formation, investment etc.
If higher income groups, are liquidated by means of progressive taxation, these functions will hardly be carried out since they are vital to a healthy society, there is no alternative but for them to be take over by the State. It means that purchasing power is not available for the purpose of welfare state and welfare mechanism has to be abandoned. It is not the masses who gain through confiscatory taxation of higher income but the State which acquires extra power and influence.
The consequence is an extraordinary promotion of modern absolutism with its centralisation of decision in all the most important fields i.e. in capital formation, in capital expenditure, in education, research and profits, “charity, honorary functions, liberality, conversation, leisure,” everything that Burke included in the expression “unbought graces of life” all these are strangled by the choking grip of the State.
The road to serfdom
The moral that can be drawn from this is simple. To run after Welfare State is to degrade oneself. Socialism seems to involve a state monopoly of supreme economic planning and in the words of professor Hayek this is a road to serfdom. The only remedy for this is libertarianism. Libertarianism tries to secure the greatest possible freedom for the greatest number of individuals and groups.
According to libertarianism real happiness cannot exist without freedom. Libertarians believe that man is born with and without freedom and cannot feel happy if subdued and subjugated. To him liberty is the essential basis for happiness and welfare. State is not a welfare producing machine. Libertarianism is not a specific economic system, and it is rooted in a non-materialistic conception of human nature. It represents a contrast to Marxian Socialism.
The fundamental idea of libertarianism is that of freedom or liberty. Liberty is the faculty or possibility of making a choice. Liberty is individual and social. As an economic system it makes predominant use of reason appeal and interest appeal. The interest appeal is effected by price mechanism. Freedom of purchase is the very cornerstone of economic liberalism. It is through the use of this liberty that the people direct production and trade.
Free purchase means the liberty of everyone to acquire the means for the satisfaction of his wants to the extent his economy permits. It is more democratic than democracy itself. Liberalism does not wish the State to enter as party into any conflict between capital and labour. It regards the State as the supreme institution which has to stand above economic conflicts. Libertarian State always has some form of democratic government.
Forced free competition is a contradiction in terms. Economic libertarianism is a system of free economic adaptation. So it is Free Economy and not Welfare State that will raise the standard of living of the people and increase their welfare.
This essay is part of a series from the Indian Liberals archive, a project of the Centre for Civil Society. It has been excerpted from the journal “The Indian Libertarian”, published on 1 August 1963. The original version can be accessed here.