This week’s book learning is part 8 of a 12 part series on The Ascent of Money by Niall Ferguson. (Parts 1, 2, 3, 4, 5, 6, 7)
The concept of the welfare state was pioneered in Germany by Otto van Bismarck thanks to 2 beliefs-
1) A man with a pension is easier to deal with
2) A person embracing the welfare state idea is the one that would come to power (more people are poor than rich and thus, there would be more votes for socialist moves)
Following World War 1, more and more states began nationalizing industry et al to cushion effects for people but none took it as far as Japan.
Japan initial went the way of the warfare state. But, after World War II, it set upon being the welfare state where every citizen was taken care of by all sorts of coverage thanks to the government nationalizing insurance, medical, and pharmaceutical industries. Until 1970, this worked really well as the economy was predicted to overtake the US by 2000 and other countries like Britain decided to follow suit. But, things began to fall apart since..
Sketch by EB
Interestingly, what worked well in Japan in the 30 years post World War II didn’t work anywhere as well in Britain. Unlike Japan, the society wasn’t built on norms of social conformity leading to more people gaming the system and viewing welfare as social hand-outs.
So, what was the issue with the welfare state concept? How do you structure a welfare system? Coming up next week..
A Learning a Day 