SPEAKER_00: Amazing, fascinating stories of inventions, ideas and innovations. Yes, this is the podcast about the things that have helped to shape our lives. Podcasts from the BBC World Service are supported by advertising.
SPEAKER_02: 50 Things That Made the Modern Economy with Tim Harford
SPEAKER_01: Women in politics are sometimes accused of consciously exploiting their femininity to get ahead in a male-dominated world. Frances Perkins did that, but in an unusual way.
SPEAKER_01: She tried to remind men of their mothers. She dressed in a plain three-cornered hat, and she refined the way she acted based on careful observation of what seemed to be most effective in persuading men to accept her ideas. Perhaps it's no coincidence that those ideas could reasonably be described as maternal or at least parental. Any parent wants to shield their children from serious harm, and Perkins believed governments should do the same for their citizens. She became President Franklin D. Roosevelt's Secretary of Labour in 1933. The Great Depression was ravaging America. A third of workers were unemployed. Those in jobs saw their wages plunge. Perkins drove through the reforms that became known as the New Deal, including a minimum wage, benefits for the unemployed and pensions for the elderly. Historians will tell you it wasn't Frances Perkins who invented the welfare state. It was Otto von Bismarck, Chancellor of the German Empire half a century earlier. But it was largely during Frances Perkins' era that various welfare states took their recognisably modern shape across the developed world. Details differ from place to place, measure to measure, and time to time. But the same basic idea links every welfare state, that the ultimate responsibility for ensuring people don't starve on the street should lie not with family, or charity, or private insurers, but with government. This idea is not without its enemies. It is possible, after all, to mother too much. And if overprotective parenting stunts personal growth, might too generous welfare states stunt economic growth? It's a plausible worry. Imagine a single mother with two children. She might qualify for various payouts. Housing benefit, child benefit, unemployment benefit. Could she accumulate more from the welfare system than she could get by working at the minimum wage? In 2013, in no fewer than nine European countries, the answer to that question was yes. In three of them, Austria, Croatia, and Denmark, her marginal tax rate was nearly 100%. That means if she took a part-time job to earn some extra cash, she'd immediately lose it in reduced benefits. Such a welfare trap hardly seems sensible. But it's also plausible to think that welfare states can improve economic productivity. If you lose your job, unemployment benefit means you don't have to rush into another one. It gives you time to find a new position that makes best use of your skills. Entrepreneurs might take more risks when they know that a bankruptcy won't be catastrophic. They could still send their kids to school and get treatment when they're sick. So, do welfare states boost economic growth, or stunt it? That's not an easy question to answer. The systems have many moving parts, and each part could affect growth in many ways. But the weight of evidence suggests that it's a wash. The positive and negative effects balance out. Welfare states don't make the pie smaller or bigger, but they do change the size of each individual slice. And that helps to keep a lid on inequality. At least it used to. In the last two decades, the data show welfare states haven't been doing that so well. And that's not surprising. They're creaking under the weight of a rapidly changing world. There's demographic change. People are living for longer after retirement. There's social change. Entitlements often date from an age when most women relied on male breadwinners, and most jobs were full-time and long-lasting. In the UK, for example, more than half the new jobs created since the 2008 crisis are people employing themselves. Yet a builder who's employed will get statutory sick pay if there's an accident at work. A self-employed builder will not. And there's globalisation. Welfare states originated when employers were more geographically rooted than today's footloose multinationals. They couldn't easily relocate to jurisdictions with less burdensome regulations and taxes. The ability of labour creates headaches too. The thought of immigrants claiming benefits may have helped set the UK on the path to Brexit. As we ponder how or even whether to fix the welfare state, we shouldn't forget that one of the biggest ways they shaped the modern economy was to take the heat out of demands for much more radical change. Otto von Bismarck was no social reformer in the Francis Perkins mould. His motives were defensive. He feared that the public would turn to the revolutionary ideas of Karl Marx and Friedrich Engels. In America, the New Deal was attacked as much from the left as the right. The populist Louisiana governor Huey Long complained that Francis Perkins hadn't gone far enough. He prepared to run for president on the slogan, share our wealth, and a promise to confiscate fortunes from the rich. But he was shot dead in 1935, so that policy was never tested. Some say we're experiencing another industrial revolution now as the robots come for our jobs. Inequality, which in many countries widened sharply during the 1980s and 90s, may widen further. In the past, new and better jobs have come along to replace those that were lost. But perhaps artificial intelligence will be able to do those new jobs better too. If in the future human labour is needed less, keeping societies stitched together may require us to reinvent the welfare state. Not all economists think that's worth worrying about just yet, but those who do are reviving an idea that dates back to Thomas More and his 1516 book, Utopia. That idea is a universal basic income. It does seem utopian in the sense of fantastically unrealistic. Could we really imagine a world in which everyone gets a regular cash handout enough to meet their basic needs, no questions asked? Some evidence suggests it's worth considering. In the 1970s, the idea was trialled in a Canadian town called Dorfin. For years, thousands of residents got cheques every month. And it turns out that guaranteeing people an income had interesting effects. Fewer teenagers dropped out of school. Fewer people were hospitalised with mental health problems. Hardly anyone gave up work. New trials are underway to see if the same thing happens elsewhere. It would, of course, be enormously expensive. Suppose you gave every American adult, say, $12,000 a year. That would cost 70% of the entire federal budget. It seems impossibly radical. But then, impossibly radical things do sometimes happen, and quickly. In the 1920s, not a single US state offered old age pensions. By 1935, Frances Perkins had rolled them out across the nation.
SPEAKER_02: Kirsten Downey wrote the biography of Frances Perkins. The title is The Woman Behind the New Deal. For a full list of our sources, please see bbcworldservice.com slash 50 things. This is the point when I start feeling a bit sad.
SPEAKER_01: That was the 48th episode. Yeah, just two more of our 50 things to go. But remember, there will be a 51st thing. Yes, you came up with the suggestions. And you voted on my six favourites. Voting is now closed. A big thank you to everybody who took part. We had a brilliant response. And we have a winning thing. You probably want to know what it is. Well, we'll announce it in the final podcast of the series. So tune in, watch this space, and if you haven't already, please do subscribe to the podcast feed so you don't miss out.
