The Voluntarism Fantasy
Conservatives dream of returning to a world where private charity fulfilled all public needs. But that world never existed—and we’re better for it.
Ideology is as much about understanding the past as shaping the future. And conservatives tell themselves a story, a fairy tale really, about the past, about the way the world was and can be again under Republican policies. This story is about the way people were able to insure themselves against the risks inherent in modern life. Back before the Great Society, before the New Deal, and even before the Progressive Era, things were better. Before government took on the role of providing social insurance, individuals and private charity did everything needed to insure people against the hardships of life; given the chance, they could do it again.
This vision has always been implicit in the conservative ascendancy. It existed in the 1980s, when President Reagan announced, “The size of the federal budget is not an appropriate barometer of social conscience or charitable concern,” and called for voluntarism to fill in the yawning gaps in the social safety net. It was made explicit in the 1990s, notably through Marvin Olasky’s The Tragedy of American Compassion, a treatise hailed by the likes of Newt Gingrich and William Bennett, which argued that a purely private nineteenth-century system of charitable and voluntary organizations did a better job providing for the common good than the twentieth-century welfare state. This idea is also the basis of Paul Ryan’s budget, which seeks to devolve and shrink the federal government at a rapid pace, lest the safety net turn “into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” It’s what Utah Senator Mike Lee references when he says that the “alternative to big government is not small government” but instead “a voluntary civil society.” As conservatives face the possibility of a permanent Democratic majority fueled by changing demographics, they understand that time is running out on their cherished project to dismantle the federal welfare state.
But this conservative vision of social insurance is wrong. It’s incorrect as a matter of history; it ignores the complex interaction between public and private social insurance that has always existed in the United States. It completely misses why the old system collapsed and why a new one was put in its place. It fails to understand how the Great Recession displayed the welfare state at its most necessary and that a voluntary system would have failed under the same circumstances. Most importantly, it points us in the wrong direction. The last 30 years have seen effort after effort to try and push the policy agenda away from the state’s capabilities and toward private mechanisms for mitigating the risks we face in the world. This effort is exhausted, and future endeavors will require a greater, not lesser, role for the public.
Beyond the need to deflate the imaginary landscape of the contemporary right, there’s also a need for liberals to reform their project. Liberals need to reclaim the public. Liberals need to be able to articulate that the welfare state succeeded in exactly the ways that the private insurance system failed in the Great Depression. Patchy and spotty as it is, today’s welfare state backstopped the economy during the Great Recession, and is still capable of providing broad security for the American people.
It also requires liberals to argue for their own definition of charity, based on the equality that can thrive when the public manages the risks we face, rather than the inequality that’s bred by a private form of dependency. As President Truman said in a 1946 radio address to kick off the annual fundraising campaign of the Community Chest, the predecessor to today’s United Way:
I like the campaign slogan this year: Everybody Gives, Everybody Benefits. It marks a significant change in our thinking about the word “charity.” Today our contributions to the Community Chest are not alms given by the wealthy few to the poor. This Government, through its public welfare program, has long since accepted its responsibility to see that no citizen need face hunger, unemployment, or a destitute old age. The word “charity” has regained its old, true meaning—that of good will toward one’s fellowman; of brotherhood, of mutual help, of love.
The state does many things, but this essay will focus specifically on its role in providing social insurance against the risks we face. Specifically, we’ll look at what the progressive economist and actuary I.M. Rubinow described in 1934 as the Four Horsemen of the Apocalypse: “accident, illness, old age, loss of a job. These are the four horsemen that ride roughshod over lives and fortunes of millions of wage workers of every modern industrial community.” These were the same evils that Truman singled out in his speech. And these are the ills that Social Security, Medicare, Medicaid, food assistance, and our other public systems of social insurance set out to combat in the New Deal and Great Society.
Over the past 30 years the public role in social insurance has taken a backseat to the idea that private institutions will expand to cover these risks. Yet our current system of workplace private insurance is rapidly falling apart. In its wake, we’ll need to make a choice between an expanded role for the state or a fantasy of voluntary protection instead. We need to understand why this voluntary system didn’t work in the first place to make the case for the state’s role in fighting the Four Horsemen.
Social Insurance before the Great Depression
One problem with the conservative vision of charity is that it assumes the government hasn’t been playing a role in the management of risk and social insurance from the beginning. It imagines that there is some golden period to return to, free from any and all government interference. As Senator Lee has said, “From our very Founding, we not only fought a war on poverty—we were winning.” How did we do it? According to Lee, it was with our “voluntary civil society.” We started losing only when the government got involved.
This was never the case, and a significant amount of research has been done over the past several decades to overturn the myth of a stateless nineteenth century and to rediscover the lost role of the state in the pre-New Deal world.
The government’s footprint has always grown alongside the rest of society. The public post office helped unite the national civil society Alexis de Tocqueville found and celebrated in his travels throughout the United States. From tariff walls to the continental railroad system to the educated workforce coming out of land-grant schools, the budding industrial power of the United States was always joined with the growth of the government. The government played a major role throughout the nineteenth century in providing disaster relief in the aftermath of fires, floods, storms, droughts, famine, and more.
Business risk management through the law was crucial in building out this nineteenth-century capitalist economy. The limited liability corporation, for instance, allowed for a massive expansion of passive investments, which provided necessary working capital for business. Charles William Eliot, the president of Harvard University, called this “the most effective legal invention for business purposes made in the nineteenth century.” Bankruptcy laws were introduced in the wake of nineteenth-century economic crises to allocate losses and help the economy move forward.
As for social insurance specifically, the historian Michael Katz has documented that there has always been a mixed welfare state made up of private and public organizations throughout our country’s history. Outdoor relief, or cash assistance outside of institutions, was an early legal responsibility of American towns, counties, and parishes from colonial times through the early nineteenth century. During this period, these issues were usually dealt with through questions of “settlement.” A community had a responsibility to provide relief to its own needy, native members, defined as those who had a settlement there. This became increasingly difficult with an industrialized society, as people moved to and fro looking for work and were forced out of communities when they couldn’t find any.
The next major initiative was the construction of poorhouses by state governments, especially in the early nineteenth century. The central idea was that by forcing people in need of aid to live in poorhouses where living conditions were quite harsh, there would be fewer applicants. This ended up not being the case, as able-bodied people would still seek out these poorhouses, especially when work was slack and unemployment high. Worse, these institutions became the default support for orphans, the mentally ill, and the elderly without income or family to support them.
As the political scientist Theda Skocpol has documented, there were also multiple examples of state-issued social insurance programs before the New Deal. In the wake of the Civil War, Congress established an elaborate system of pensions for veterans. At its height in 1910, this de facto disability and old-age pension system delivered benefits to more than 25 percent of all American men over 65, accounting for a quarter of the federal government’s expenditures. Between 1911 and 1920, 40 states passed laws establishing “mothers’ pensions” for single women with children. These programs provided payments for needy widowed mothers in order to allow them to provide for their children.
But there did exist a system of voluntary social insurance during the turn of the century. In From Mutual Aid to the Welfare State, historian David Beito writes that there were thousands of fraternal societies across America during the late nineteenth and early twentieth centuries. These societies were organized by religion, ethnicity, and other similar affiliations. They were also the most common provider of insurance and relief before the New Deal. In general, they would cover funeral costs and provide some sick pay. These were particularly important for low-wage workers, and played a bigger role in insurance than charity or welfare institutions. Politically and socially fragmented, they played no part in calling for a public role in social insurance. These institutions continue to be a focus of celebration for conservatives.
But there were a few major problems with these societies. The first was that they were regionally segregated and isolated. These forms of insurance didn’t exist in places without dense cities, industry, or deep ethnic and immigrant communities. Even in states with large cities and thriving industries like California and New York, only 30 percent of workers had some sort of health-care coverage through fraternal methods. Moreover, the programs were fragmented and provided only partial insurance.
Also, these were programs designed for working men—for the most part, they did not cover women. Health insurance contracts, for example, were explicit in not providing for coverage of pregnancy, childbirth, or child care (seen as women’s responsibilities at the time). The doctors the lodges hired were often seen as providing substandard care. And most of these societies had age limits. Those over 45 were generally ruled out, and those that weren’t were charged higher rates. Those already in poor health were excluded through medical examinations. There were maximum and minimum limits on benefits, and as a result, long-term disability wasn’t covered. As late as 1930, old-age benefits represented just 2.3 percent of social benefits given out by fraternal organizations. Thus, though they were pervasive throughout this time period, they never provided more than a sliver of actual, robust social insurance. As the Russell Sage Foundation concluded at the time, private societies stand “as a tangible expression of a keenly felt need, a feeble instrument for performing a duty beyond its own powers.”
That need was partly what gave rise to the Progressive movement. Private charity simply didn’t have the breadth and depth necessary to truly respond to the Four Horsemen in this industrializing era, and Progressives saw a greater role for government to address these ills.
One reason Progressives looked to the state to provide social insurance was that it was seen as necessarily compulsory. By making it universal, low-wage workers could be included. Also, forcing employers to participate was fair because they would directly benefit from such coverage. As Rubinow argued, American workers “must learn to see they have a right to force at least part of the cost and waste of sickness back upon the industry and society at large, and they can do it only when they demand that the state use its power and authority to help them, indirectly at least, with as much vigor as it has come to the assistance of the business interests.” Because of all this, insurance had a direct public purpose, and should in turn be publicly provided.
Progressives’ original argument for social insurance also wasn’t a matter of simple redistribution. Instead they saw social insurance as having a public interest. Insurance to protect against poverty, disease, unemployment, and the other risks of life would benefit both individuals and the greater public. Progressives argued that all parties have a stake in the efficient provision of insurance.
The Progressive movement made some initial strides, including a system of workers’ compensation laws. But social insurance had trouble going beyond this point. Efforts to pass public health care failed at the state level, notably in New York, as they were opposed by some labor interests, business interests, and physicians. Historians debate what was responsible for the lack of movement on public insurance, arguing over what mixture of the individualistic ethic, the weakness of the labor movement, the power of corporate elites, the shortcomings of public bureaucracies, and hostility to patronage politics was to blame. Regardless of the reason, the United States would have to wait until the Great Depression for a full public role to evolve.
Social Insurance and the New Deal
If the Progressive movement helped shrink the elaborate system of voluntary fraternal societies, the Great Depression all but killed it. The Great Depression had a one-two-three punch that made it uniquely able to destroy this private infrastructure of support. The demand for income support skyrocketed at exactly the moment the Depression decreased the supply of private aid. And the usual way that workers dealt with bad times—to increase the amount of hours they worked—was not an option in a time of mass unemployment.
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