What History Teaches Us About the Welfare State.
'In the wake of the economic crash, which has led to soaring budget deficits, Democrats and Republicans are negotiating “to move forward to trillions of spending cuts,” as House Majority Leader Eric Cantor said recently. A report from House Speaker John Boehner’s office called for “eliminating government agencies and programs” and “reducing transfer payments to households.” These changes would result in unprecedented reductions in the size of the welfare state and the American social compact as it developed over the last century.'
'Lost in this debate is an appreciation of the historical origins of the American welfare state -- long before FDR and the New Deal, after another epochal financial crash.'
'The Panic of 1873
triggered a severe international economic depression in both Europe and the United States that lasted until 1879, and even longer in some countries.'
'In the face of economic calamity and skyrocketing unemployment, the government did, well, nothing. No federal unemployment insurance eased families’ suffering and kept a floor on demand. No central bank existed to fight deflation. Large-scale government stimulus was a thing of the distant future.'
Neither party did anything - 'neither Democrats nor Republicans were inclined to challenge their corporate masters.'
'The vast disparities between rich and poor, the spectacular concentration of wealth amassed by the richest Americans in the previous two generations, and the inability of government policies to mitigate the crisis brought the nation to the edge of class warfare and social disintegration.
'The specter of a European social order, with societies irredeemably divided between aristocrats and a permanent underclass, seemed to have arrived on U.S. shores. Wealthy Americans began to fear for the stability of the social order. What force, the wealthy asked in desperation, might mitigate the social chaos and misery, and mute what one public official called “the antagonism between rich and poor”?
Today, new fortunes have been accumulated that rival those of the Gilded Age. Some of that wealth, possessed by people like Charles G. Koch and David H. Koch or Peter G. Peterson, has been used to promote cuts to social spending. Before these opponents and their allies in Congress move forward with the dismantling of the welfare state, however, they might think harder about the reasons such policies were put in place.
The Gilded Age plutocrats who first acceded to a social welfare system and state regulations did not do so from the goodness of their hearts. They did so because the alternatives seemed so much more terrifying.'