Welfare state: Theory and practice

Abstract: A recent remark by Prime Minister Modi on avoiding what he calls “revadi culture”
has caused much furore. He was referring to uneconomical subsidies and handouts being
rolled out in the name of welfare. This has a deleterious effect on the economy as a whole
and might do more harm than any good. Rationalising subsidies and identifying the right
candidates for welfare programmes is what we need. The following paper discusses the
origin of welfare state and contemporary issues associated with it. We will also talk about
newer approaches to welfare and recommendation made by renowned experts.
Executive summary;
The origin of welfare state lies in the post second world war world order. It was Britain
which took the lead. “Social Insurance and allied services” or popularly known as Beveridge
report after its author Sir William Beveridge, became the magna carta of welfare state.
Submitted in 1942, it greatly influenced the wartime and post war social and welfare policy
of England. Prior to this landmark report, Welfare provision and support still owed
something to the Poor Laws, which had been in place for hundreds of years and which were
only formally repealed with the 1948 National Assistance Act. Many different benefits and
services were administered by different government departments and local government
agencies, with other help provided by or with the support of the voluntary and charity
sector and Trade Unions. Beveridge recognised this as an opportunity to reconfigure and
reshape post war social services, to remake them. As he wrote in the early pages of his
report: “Now, when the war is abolishing landmarks of every kind, is the opportunity for
using experience in a clear field. A revolutionary moment in the world’s history is a time for
revolutions, not for patching.” The Crown jewel of British Welfare state is National Health
System. In Beveridge own words “The vitality of a nation must depend on its individual
members, and will increase in proportion to their vitality. Thus, it is in the national interest
to raise the general health of the individuals as high as possible.”
The report is remembered for one more famous The Five Giants that stalks a community.
These were personifications – abstract ideas represented by people – of the most pressing
issues facing the country: want, squalor, ignorance, idleness, and disease. At the heart of a
welfare state was to tackle unemployment, improve sanitary conditions, protect health and
provide basic necessities to the people. Beveridge proposed a universal system of social
insurance financed by the state with contributions made by employers and employees from
their pay. A flat-rate basic (subsistence) payment would be made to protect people not
working through sickness, unemployment or old age. This meant no means testing and
everyone received the same amount whatever their social class or income. The insurance
would be taken from pay at a flat tax rate across all pay. It was a minimum income for
subsistence to – as Beveridge put it – prevent Want but discourage Idleness, i.e., the
incentive was to work.
Welfare state also owes its origins to John Maynard Keynes (1883-1946), a Cambridge
economist. He systematically demolished the arguments presented by neoclassical notion of
less government intervention in the economy and reliance on market forces. The great
depression arrived just in time to boost Keynes standing in the world dominated by
neoclassical economist. The great depression of 1929 came as a rude shock and devastated
businesses and lives of innumerable people. The market forces proved incapable of not only
optimization but also merely keeping workers employed. Keynes advocated using fiscal
policy, as with deficit spending by states- that is, governments deliberately spending more
than they take in as revenues through tax systems, again increasing demand and dragging it
out of slumber. This new kind of liberal economists began to favour state intervention in
comparison with the older school that abhorred state intervention in market systems. These
spendings can be used for social investment like improving education and social services.
Keynes proved what was basically understood later by developing world that free market do
not spontaneously maximize human well-being. Instead, state has to intervene through
demand management, changing the aggregate level of demand of a capitalist economy
through monetary and fiscal policies.
Contemporary scenario;
Today, every state is torn between social spending and tax cuts to stimulate economy.
Those who depend upon state welfare are seen as free loaders and unproductive while big
businesses who champion tax subsidies have become villain in public eyes. India is uniquely
placed in this debate as it hosts both groups, i.e., big corporate houses and large number of
people in need of state support. Programmes like MNREGA, POSHAN, PM-GARIB KALYAN
YOJANA, AYUSHMAAN BHARAT, PDS, cost humongous money and increasingly becoming a
burden on the state exchequer which has come under severe stress post covid.
Political parties have also resorted to offering largesse in their manifesto in order to garner
votes. Some of them like free electricity, free bus rides, free water supply have been
criticised for being a gimmick which only adds to the woes of exchequer without providing
any substantial welfare. But many of these welfare programmes are not a gimmick but
actual needed in a country like ours. There is clear distinction between these needs and
freebies offered by political parties. There are two sets of actors in the ‘revadi’/freebies
culture: the political parties and the target sections. The political parties distribute revadi to
get the votes of the target sections. Why are people willing to barter their political choice
for freebies? Because they do not have a decent income to fulfil their family’s needs and
make savings to live with respect, dignity and financial security
The revadi culture exists because poverty exists, and poverty exists because the
government’s economic policy has delivered growth to the economy but not to the large
masses of people. More than 75 per cent of the country’s farmers own less than a hectare
(2.47 acres). They supplement their income from small fields by working as labourers. That
is a huge part of the population. There are more than 110 million beneficiaries under the
PM Kisan-Samman Yojana. Of them, 82.5 million farmer households (75 per cent)
supplement their farm income with wage labour. That translates to 82.5 x 4 = 330 million
Indians (taking 4 members to a family on average).
These 330 million Indians live extremely vulnerable lives. If the crop fails in one season for
any reason, they slide into poverty. If even one working male of the family suffers long
illness or remains unpaid for his labour for months, the family has to live hand-to-mouth.
For lack of food and nutrition, other members might fall ill, and that means greater misery.
The conventional wisdom of economists is that if the surplus labour in agriculture moved to
non-farm employment, it would bring about economic growth and higher wages and better
living conditions for workers. Though economic growth has taken place, the wages and
living conditions of workers have not improved. Most urban workers (for example, gig
workers) have casual, low-wage jobs, with no paid leave, medical reimbursement, safety,
accident insurance, provident fund or pension.
Why there is a Need for Freebies?
Facilitates growth: There are some examples showing that some expenditure disbursements
have general benefits, such as the Public Distribution System, employment guarantee
schemes, support for education and improved disbursements for health, particularly during
the pandemic.

Helpless developed states: With states having a comparatively lower level of development
having a higher proportion of the population suffering from poverty, these types of gifts are
based on need/demand and it becomes essential to offer people such allowances for their
own elevation.

Essential to meet expectations: In a country like India where the states have (or do not
have) a certain level of development, at the time of the elections, there are expectations on
the part of the people that are met by such promises of gifts.

Help Less Developed States: In States that are lacking in development, gifts are based on
need/demand and it becomes essential to offer people such subsidies for their own
betterment.
State’s shadow in citizen life is constant, right from cradle to the grave. For a developing
country, it is even more important as it serves both the purposes of reinvigorating the
economy and making a person productive by proving free education, free health care and
housing. But at the same time state must be rational about designing welfare. The most
important factor is identifying those who need it the most. Another critical area is stopping
the profligacy in the delivery process. The welfare schemes have become major source of
corruption and intended beneficiaries have been left high and dry. This can be done only
through more involvement of civil society and using new technologies like Blockchain, digital
payment and signature and facial recognition to provide support.
State has a contract with its citizen which is the bedrock of modern democracy. This
contract must not either be violated nor misinterpreted for the sake of democracy.
References;
1. https://thewire.in/government/revdi-culture-welfare-narendra-mod
2. https://groundreport.in/explained-what-is-revdi-culture-its-history-and-all-
controversies
3. https://mylearning.org/stories/the-beveridge-report-making-the-welfare-state/
4. https://blog.nationalarchives.gov.uk/beveridge-report-foundations-welfare-state
5. Theories of Development-Richard Peet and Elaine Hartwick-2 ND CHAPTER