Principles of Liberal Social Policy
- 12 Propositions -
Presented at the conference "Liberal Social Policy In Theory and In Practice"
Vilnius, Lithuania, June 11, 2001
by Gerhart Raichle
Director, Liberal Institute of the Friedrich Naumann Foundation, Potsdam
1. The social dimension of liberal policy
It is part and parcel of liberal policy to produce socially desirable results. By upholding the rule of law, it protects the weak against oppression by the strong. By promoting a free market economy, it creates opportunities for all. By strictly limiting the scope of government, it curbs the scandal of state authority serving the interests of the powerful in the distribution struggle. By dismantling excessive regulations and cartels, including those in the labour market, it creates favourable conditions for full employment. By se-curing monetary stability, it makes reliable provision for times of need and old age pos-sible in the first place. By opposing policies of redistribution that cater for every con-ceivable interest, it secures resources for targeted and sustainable help where it is really needed. By easing the tax burden it facilitates the exercise of solidarity where it primar-ily belongs: in the private sphere. By refuting the misconception that compassion can be organised by government, it fosters people's sense of responsibility towards each other. To a large extent, conventional social policy consists of repairing the damage that was caused by ignoring liberal principles.
2. Targeted help, not general equalisation
Liberal social policy means helping people in need and making provision for potential situations of need. It does not mean equalising social differences. Its aim is to avoid pre-dicaments that would undermine individual liberty and the ability to assume responsibil-ity for oneself and for others. Both direct aid by individual subsidies as well as collective provision against risks which individual persons cannot cope with on their own must follow this and no other aim.
3. The principle of subsidiarity
"Subsidiary" means "supportive, supplementary". According to the principle of subsidiar-ity, liberal social policy only requires government involvement where individual or com-munity self-help is impossible or insufficient. Like all liberal policies, liberal social policy relies primarily on individual responsibility and private initiative. Government interven-tion, in social welfare as elsewhere, is warranted only when its specific instruments are indispensable.
4. The principle of efficiency
Liberal social policy pursues explicit and unambiguously defined goals, using means and methods that are conducive to achieving these goals in a rational and economic manner. Achievement of the defined goals must be the sole criterion for measuring the effective-ness of social policy. Clearly defined goals are of particular importance in the case of all subsidies involving redistribution. Furthermore, all principles enumerated in this docu-ment (especially those of subsidiarity, competition, transparency, direct personal aid and responsibility) in themselves increase the efficiency of social policy.
5. Freedom before security
No social policy, not even a liberal one, can offer complete security against all potential risks and hazards. Nor does liberal policy intend to do so, since any state-ordained measure of protection will inevitably infringe upon personal liberty and self-reliance. Faced with the unavoidable trade-off between liberty and (uncertain) security, liberalism will, when in doubt, always give precedence to liberty. It follows that the only hazards that warrant obligatory protective cover are those which (a) are life threatening and (b) cannot normally be dealt with by the individual alone.
6. Minimising coercion
Liberal social policy will not allow more than an absolute minimum of coercion. Insofar as social policy stands for economic redistribution, compulsion is inevitable. However, such compulsion must itself be limited and subject to strict control. The same applies whenever individuals are required by law to cover themselves against future risks (man-datory insurance). In both cases there is no justification for compulsion beyond that of protecting oneself against life-threatening emergencies. For any provision above and beyond this, politically motivated incentives are a possibility; coercion is not. Even where compulsion cannot be avoided, measures can usually be designed in a way which is either more compatible with personal liberty or less so. This calls, above all, for incor-porating elements of choice, which can be offered, e.g. in the form of insurance options, even within schemes that are mandatory.
7. Competition is both liberal and conducive to social well-being
Without competition, mechanisms of social security are doomed to become inefficient, inflexible, expensive and, ultimately, anti-social. Liberal social policy is guided by the insight that competition itself promotes social well-being in a very direct manner: it ensures opportunities for all, including the weak as long as they have proper access to the market. Furthermore, competition between the suppliers of various social services, as well as between agencies and types of insurance, will benefit, first and foremost, the consumers of such services, and is therefore of prime importance in a liberal social pol-icy. In cases where competitive markets cannot deal with social hardship, as in the case of "bad risks" that no one will insure, support must be provided by direct subsidy.
8. The principle of transparency
The general requirement that political processes must be transparent, and thereby en-hance accountability, is of particular importance in the politics of social security, a field in which huge sums are redistributed and many people's life chances are deeply and di-rectly affected. Consequently, a high-ranking goal in liberal social policy is that neither expert knowledge nor undue effort should be required to understand (a) who is being burdened to what purpose and to what extent, (b) conditions under which returns are due, and (c) the volume and direction of redistribution for social purposes. This calls for a clear-cut separation between the different types of social provision, a range of instru-ments limited as far as possible - ideally, one instrument per objective pursued -, and a clear and correct allocation of costs: liberal social policy always comes with price tags attached.
9. Separation between transfer and insurance sectors
Consistent liberal social policy strictly avoids mixing up transfer and insurance services. While transfer payments are a politically organised form of redistribution and therefore always subject to political considerations, insurance is based on an objective arithmeti-cal relationship between contributions and returns which must be protected against po-litical manipulation. This is why transfer payments should always be financed out of tax revenue, while the sole source of insurance payouts must be the contributions paid in (plus interest), governed by the mathematics of insurance. Where social objectives call for insurance cover which not all of those concerned can afford, the liberal solution lies in directly subsidising insurance contributions by individual transfers.
10. Direct personal aid instead of supply-side subsidies or market manipulation
Liberal social policy supports persons in need directly and individually and not by ma-nipulating market mechanisms or prices and thus concealing real costs. Market manipu-lation and supply-side subsidies inevitably produce distortion and undesired side effects and also necessitate an abundance of rules and regulations. Direct personal subsidies, on the other hand, do not interfere with anybody's right to self-determination (except that of the tax-payers who provide the funds), supply help where there is genuine need and, by leaving market forces intact, ensure that the resources needed for social measures are fully available.
11. Intergenerational equity or the principle of sustainability
Liberal policy rules out the solution of today's problems at the expense of future genera-tions: no generation may inflict a burden on the next one larger than the one it was willing to bear itself. To impose an "intergenerational contract" unilaterally on those who cannot object - in line with the saying "the devil may care" - is as illiberal as it is antisocial. Solidarity is not a one-way street.
12. Incentives to encourage self-reliance and discourage free riding: the principle of responsibility
Liberal social policy creates incentives that encourage people to reduce the likelihood of an emergency entailing claims to insurance or benefits. Above all, people should be en-couraged to meet minor expenses on their own. Mandatory insurance schemes, in par-ticular, should offer a variety of options to supplement the compulsory minimum so that people can determine for themselves their individual extent of coverage. Such an ap-proach will not only discourage a mentality of reliance on public handouts - a mentality that ultimately undermines all social policy -; it is also in keeping with the principles of efficiency and subsidiarity which require that public solidarity is invoked only when really needed. The essence of these considerations can be termed the principle of re-sponsibility.
Liberales Institut der Friedrich-Naumann-Stiftung Postfach 90 01 64 D-14437 Potsdam libinst@fnst.org
