A Modest Member of Parliament [Bert Kelly],
“That sod in the Rolls smoking a big cigar …,”
The Australian Financial Review, November 4, 1977, p. 3.

When you live as close to the Government machine as I do it is easy to see the flaws in the welfare State.

People come in to your office complaining that the welfare State will not give its milk down for them when they know that they are asking for something which, though they may well be entitled to it, if they get it, will be either bad for them, or someone else will have to go without.

Politicians know better than most the enervating effect of the welfare State.

We know how the high rate of tax which is necessary to sustain the welfare State discourages effort and risk-taking. So we are, or ought to be, more suspicious of the welfare State than any other group.

Sometimes, just when I have finished explaining to Fred the damage done by the welfare State and how he shouldn’t ask me to try to make everybody equal, along will come some sod with a great pleasure boat towed behind his Rolls-Royce, smoking a cigar and hooting his horn at us, to get us out of his way.

This and similar ostentatious displays of unequal wealth have always made me mad and also made me more complacent about the welfare State than I would otherwise have been.

Perhaps this was to some extent due to my non-conformist upbringing, and perhaps if I had been reared differently my hackles wouldn’t rise so much at this flaunting of inequality.

But, since reading Hayek’s The Constitution of Liberty, I have looked at things rather differently.

I guess Hayek found these displays of ostentatious unequal wealth as irritating as I do but he insists that progress depends on inequality.

His thesis is that someone or some group must always be out in front so that trial and experimentation can proceed. He expressed it far better than I can on page 44:

The range of what will be tried and later developed, the fund of experience that will become available to all, is greatly extended by the unequal distribution of present benefits; and the rate of advance will be greatly increased if the first steps are taken long before the majority can profit from them.

Many of the improvements would indeed never become a possibility for all if they had not long before been available to some.

If all had to wait for better things until they could be provided for all, that day would in many instances never come.

Even the poorest today owe their relative material well-being to the results of past inequality.

The moral is that the welfare State, for the best reasons of morality and Christianity, destroys the incentive for people to get out in front and innovate and experiment.

It is true that much of what they do will fail and even much of what they try to do would be better undone.

But Hayek’s thesis is, because some are out in front, treading smoother the path of progress to goals they seek, the majority of people may one day be able to follow more easily.

They will do so because some pioneer has trodden the path before, even if he was travelling that way for unworthy motives.

Hayek then gives point to his thesis with this powerful statement on page 48:

At any given moment we could improve the position of the poorest by giving them what we took from the wealthy.

But, while such an equalising of the positions in the column of progress would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long run hold back those in the rear.

Recent European experience strongly confirms this.

The rapidity with which rich societies here have become static, if not stagnant, societies through egalitarian policies, while impoverished but highly competitive countries have become very dynamic and progressive, has been one of the most conspicuous features of the postwar period.

You only have to look at Britain. Her standard of living expanded most when there was less equality than there is now.

Now no one thinks it worthwhile to get out in front to innovate, to mess around doing all kinds of odd things as the British once did. And the poorer people of Britain are worse off because of it.

So will we be, if we too wander down the welfare State road. The slices of the economic cake will be admittedly more equal, but they will be smaller also.

We have to choose between equality and progress; you can’t have both, or not for long anyway.