Submitted Richard M. Ebeling via The Cobden Centre,
We live in an era in which few can even conceive of a world without the welfare state. Who would care for the old? How would people provide for their medical needs? What would happen to the disadvantaged and needy that fell upon hard times? In fact, there were free market solutions and non-government answers to these questions long before the modern Big Government Welfare State.
In fact, before the arrival of modern welfare state, voluntary, private-sector institutions had evolved to serve as the market providers for many of those “social services” now viewed as the near-exclusive prerogative of the government. Unfortunately, after nearly a century of increasing political and cultural collectivism, the historical memory of the pre-welfare state era has all but been lost.
Great Britain in the 19th and early 20th centuries is an historical case study in how many of these problems were handled without political intervention in the private affairs of society.
The Friendly Societies and Mutual Insurance Protections
The focal point for many of these private-sector answers was the “friendly societies.” When they first arose in the late 18th and early 19th century Britain, the friendly societies were mutual-aid associations for insurance for the cost of funerals of workers or their family members.
But as the 19th century progressed, the friendly societies expanded their activities to encompass four primary services: 1) accident insurance that provided weekly allowances for the families of workers who were injured in their places of employment; 2) medical insurance that covered the cost of medical care and prescribed medicines for workers and their families; 3) life insurance and assistance to maintain family members in case of the death of the primary breadwinner or his spouse; and 4) funeral insurance to cover burial costs for the worker or members of his family. Later on, many of the societies also developed savings and lending facilities for members, fire insurance and loans for home purchases.
By 1910, the year before Britain’s first National Insurance Act was brought into law, approximately three-quarters of the work force of the British economy was covered by the private, voluntary insurance associations of the friendly societies. The memberships in their associations covered the entire income spectrum, from the middle- and higher-income skilled worker to the low-wage, unskilled members of the work force.
The friendly societies also offered instruction in self-responsibility, often rotated their officer positions to teach leadership among the members, and supplied advice on better managing of members’ family financial and related affairs.
In the years before the First World War, the free society had developed and was extending the very social institutions needed to handle all those concerns that in our own time are considered the responsibility of the state. What the modern welfare state did was to preempt and undermine the free market’s solutions to many of what we call today “social services.”
State regulation of the friendly societies, subsidized “free” medical and insurance services, and new taxes to cover the government’s cost for providing these national insurance schemes all resulted in a crowding-out of the voluntary alternatives of the private sector.
Private Charity and Voluntary Assistance to the Poor