Money and Markets: Essays in Honor of Leland B. Yeager

The legacy of Bismarck 243War, the Taiping Rebellion in China, and the Mutiny in India. Each of them costmore blood than the Crimean War, the biggest international war of the period.Indeed if we consider the long run effect, the long series of tiny wars by which theUnited States seized its continental location from its previous owners was probablythe most important use of force to change the status quo.The international adoption of the welfare state, if plotted on a map, would lookmuch like the spread of a contagious disease. It spread from Germany to itsneighbors and then to their neighbors. Cultural affiliation was also important.Countries which had a somewhat similar culture also adopted it quickly. The speedwith which it was adopted was proportional to the distance, both geographicallyand culturally from Germany. Distant Uruguay was the only exception. Suitably,the United States which was far off and whose culture was not very Germanic wasthe last major country to adopt the welfare state. Now, of course, it is almostuniversal among developed countries with European backgrounds.Most people thinking of the welfare state list three programs: unemploymentrelief or aid to the poor, old age pensions, and free medical care. Actually only twoof these, old age pensions and free medical care, go back to Bismarck. Some kindof aid to people who are poor and in particular the unemployed has a very oldtradition in Western culture. The United States, for example, had a program maintainedby local governments, counties, or cities from the very beginning.Liebergott collected data on this, for the period 1830 to 1960 (Liebergott 1976).He used census data which are only available for the 10th years when the census iscollected. From 1830 to 1930 this was entirely a local program. During the GreatDepression it was taken over by the federal government. Notably this did not leadto any increase in the money that the poor received. Throughout this period theyreceived about a quarter of the wages of common labor. Thus as living standardswent up the amount that they received also went up. The switch to federal insteadof local provision during the Great Depression did not lead to any significantincrease.That is the United States, but most countries had one program or another to dealwith the poor. Originally this was mainly a church activity with supplements fromnonreligious private charities. Eventually, at different times in different countries,it was taken over by the larger government bodies. It was thus not the work ofBismarck. At most he may have led to more systematic and regular provision ofsuch aid. Of course in the days before Bismarck people who were sick or elderlymight be included among the poor and hence receive the same aid as other poorpeople. There were no special programs for them, however, except insofar asvarious church organizations or local governments maintained old people’s homesand hospitals.I am old enough to remember the situation before the establishment of the SocialSecurity Administration. Older people might well be taken care of by their families.Both of my grandmothers died in our house. They kept themselves busy by lighthousework and grandchild care. They had not had employment in their earlieryears, being housewives.Men normally continued working if they were in good health. Life expectancy