Evolution of North America’s Welfare States

by astanhaus

Originally submitted for an independent research project comparing North America’s welfare states with Professor Antonia Maioni at McGill University.

In light of the Great Depression and World War II, North America no longer blindly trusted the free market in the 1940s, instead Keynes was the economist du jour. Social reformers did not have to decide between capitalism and socialism, but could justify their Keynesian policies as economic necessities to achieve stabilization, regulation and stimulation.[1] Influenced by Keynesian thought, Sir William Beveridge concluded in his 1942 report that there was a need for a national, contributory, social insurance system covering ill health, unemployment, permanent disability, old-age, and need for medical care.[2] While North American social reform was not as comprehensive as Beveridge-inspired British reform, his ideas are seen in North America’s incremental welfare state changes. Until the Golden Age ended in the 1970s, North America’s welfare states expanded program by program to provide income security and health insurance to the politically feasible portion of citizens.

World War II caused America to fully recover from the Great Depression and Americans no longer perceived welfare state expansion as an urgent necessity. Yet, America knew only too well the powerful effect of Keynesian stimulus from the Great Depression and America’s Marshall Plan bankrolled the post-war reconstruction of Europe and its comprehensive welfare states.[3] The exception to the otherwise stagnant post-war period was the U.S.’s amendments to Social Security in 1950, which Berkowitz proclaims “made Social Security America’s largest and most important social welfare program…enab[ling] the elderly, at least, to live in a Beveridge-style welfare state.”[4] Berkowitz notes a nuance in that the successful amendments of 1950 allowed states to continue running their unemployment compensation programs, meanwhile the failed 1943 Wagner-Murray-Dingell bills, based on the British Beveridge plan, proposed that the federal government take over state unemployment compensation programs.[5] Other than the 1950 amendments to Social Security, the U.S. welfare state did not significantly expand immediately following World War II.

Not until President Lyndon B. Johnson’s War on Poverty would welfare be reformed. President Johnson hoped his War on Poverty’s  Economic Opportunity Act of 1964, with its rehabilitation programming, would expand on President Franklin Delano Roosevelt’s New Deal.[6] This law created community action projects to alleviate poverty by developing employment opportunities and improve the living, learning and working conditions of beneficiaries.[7] This rehabilitation program comprehensively attacked what Beveridge saw as the five roadblocks to progress: want, disease, ignorance, squalor, and idleness.[8] President Johnson lived the benefits of the New Deal’s welfare state expansion, as head of  Texas’s  National Youth Administration early in his career.[9] There is no coincidence that LBJ’s War on Poverty would similarly expand the welfare state like FDR’s New Deal.

Compared to the U.S., Beveridge’s report was much more influential in Canada; one of Beveridge’s protégés, Leonard Marsh, wrote a report similarly proposing comprehensive welfare state reform for Canada. Marsh’s 1943 Report on Social Security for Canada outlined how to achieve an ideal social minimum and eradicate poverty.[10] Marsh urged society to recognize that both employment and universal risks were part of modern industrial society; collectively these risks could be alleviated with income-maintenance programs, national health insurance, children’s allowances, and pensions for old age, permanent disability, and widows and orphans.[11] While the Marsh Report would not become a final blueprint like Beveridge’s was for the British, its tenants influenced post-war Canadian welfare state expansion and its values aligned with what  T.H. Marshall coined the social rights of citizenship.[12] Marsh did not become an instant celebrity as Beveridge did, but Marsh’s report proved extremely relevant to the steady expansion of Canada’s welfare state.

The creation of the Canada Pension Plan and the Quebec Pension Plan in 1965 reflects the values of the Marsh Report. These compulsory pension plans covered all employees between the ages of eighteen and seventy plus self-employed individuals; the benefits included retirement, disability, and survivors’ pensions, plus a lump-sum death benefit, just as Marsh had concluded was necessary.[13]  As was Marsh’s recommendation, Guest notes the social minimum was raised with old age pensions allowing the elderly to maintain their living standard during retirement.[14] While Marsh was not praised for his report, as was Beveridge, both were the basis for what became the Canada Pension Plan and the Quebec Pension Plan.

The Beveridge Report influenced North America to recognize that health insurance was a necessary  post-war social reform, yet political realities of each country caused the outcomes to be drastically different. Due to party discipline, the CCF and NDP were able to act as social democratic third parties and policy entrepreneurs specializing in health reform.[15] Meanwhile, the U.S.’s patchwork of health reform reflects the fact that any social reform had to appeal to the broader coalition of the Democratic party.[16] Canada’s resulting health insurance would be universal and comprehensive, while the U.S.’s would cover the elderly’s expenses and those of the indigent.

In light of Canada’s unique political system and various commissions & reports, universal health insurance became a Canadian reality. Marsh broke with precedent, viewing health as a critical aspect of the welfare state, rather than an extra feature.[17] Similarly important was 1943’s Heagerty Report, which concluded there was a need for a joint federal-provincial program of health insurance.[18] In addition to these reports, the precedent set by the CCF in Saskatchewan led to the first of two major health reforms, the first being  the Hospital Insurance and Diagnostic Services Act of 1957.[19] With this legislation, federal general revenue payments funded provincially administered hospital insurance and diagnostic services programs.[20]  Comprehensive and universal in scope, the benefits were provided regardless of age, sex or physical condition and would contribute to a sense of community solidarity.[21] Yet again, the social minimum was raised; Guest explains  “the new social minimum in hospital care became the most medically suitable treatment the provincial government and its various hospital boards were able to provide.”[22] The second major health insurance reform would yet again begin in Saskatchewan; Maioni describes that in 1961, this province introduced “a medical insurance program that combined private fee-for-service delivery with public administration and financing.”[23] Guest explains, The Hall Commission of 1961 concluded “that a comprehensive, universal health service administered by government and financed by means of provincial general revenues, federal government grants, sale or other taxes, or by premiums was the only means of assuring access with dignity to adequate health care services for all Canadians.”[24] The Medical Care Act of 1966 was passed with extra political pressure from the NDP; the law mandated requirements that provinces would have to meet to receive federal funds, including providing comprehensive, universal, publicly administered benefits for all citizens “under uniform terms and conditions” transferable between provinces.[25]  The social minimum had been further raised, as Guest notes that now the majority of the population had uninhibited access to doctor’s services.[26] Canada’s post-war welfare state would expand to include universal health insurance thanks to provincial policy innovation, a unique political structure, and the conclusions of the Marsh Report, Heagerty Report, and Hall Commission.

Missing from FDR’s New Deal, health reform would elude subsequent presidents and only be achieved by LBJ enacting Medicare and Medicaid to provide health insurance for the elderly and indigent. Health reform was not able to be implemented during the Truman and Kennedy administrations as special interest groups, most importantly the American Medical Association, were roadblocks to reform at this time.[27] Berkowitz explains, Johnson’s Great Society was able to amend the Social Security Act in 1965 to include Medicare and Medicaid because there was “an external push, the tragic death of John F. Kennedy in 1963, and good political fortune, the election of a heavily Democratic Congress in 1964.”[28] Medicare included both compulsory hospital insurance coverage and supplementary voluntary insurance for medical and diagnostic services for Americans 65 and over.[29] Medicaid created federal grants to states, who would start health programs for dependent children, the elderly, the blind, and the disabled on welfare or poor enough to qualify as medically indigent.[30] Finally, Berkowitz notes, Medicaid was a policy favored by the AMA as it, “had long favored working with local authorities who ran welfare programs and who restricted benefits to poor people who would otherwise be unable to pay the doctor.”[31] Less than what Beveridge recommended, Medicare and Medicaid were the politically feasible outcome for U.S. health reform. Given the politically astute timing and aligned incentives for both special interest groups and the people, health reform came to both the elderly and indigent.

By the 1970s, the North American welfare states had fully emerged. Specifically in Canada, Rice and Prince note that at either the federal, provincial or intergovernmental level, “all of the categories of social need and risk enumerated by the Marsh Report and others had been provided for in some way.”[32] Yet, as the economy changed, the ideas of Keynes and Beveridge became less relevant, as Esping-Andersen explains, there is now a perceived trade-off between social security and economic growth, between equality and efficiency.[33] Acknowledging that the politics of austerity began to emerge in the mid-1970s, Paul Pierson notes, “interest groups linked to particular social policies are now prominent political actors. The rise of these interest groups is one of the clearest examples of how policy feedback from previous political choices can influence contemporary political struggles.”[34] Overall, the welfare state is now the status quo, and those who try to disband it are at a distinct political disadvantage.[35] The Golden Age ended in the 1970s and no longer would North America’s welfare states greatly expand, yet the fundamental programs were locked in and would weather retrenchment.

[1]James J.Rice and Michael J. Prince, Changing Politics of Canadian Social Policy (Toronto; Buffalo: University of Toronto Press, 2000), 62.

[2] Edward D. Berkowitz, America’s Welfare State: From Roosevelt to Reagan (Baltimore: Johns Hopkins University Press, 1991), 50-51.

[3] Christopher Pierson, Beyond the Welfare State? : The New Political Economy of Welfare (Cambridge: Polity, 2006), 139.

[4] Berkowitz, 56.

[5] Ibid, 63.

[6] Ibid, 111 -113.

[7] Ibid, 113.

[8] Dennis Guest, The Emergence of Social Security in Canada,  (Vancouver: University of British Columbia Press, 1980), 109.

[9] William E. Leuchtenburg, “Lyndon Johnson in the Shadow of Franklin Roosevelt,” in The Great Society and the High Tide of Liberalism, eds. Milkis, Sidney M. and Jerome M. Mileur (Amherst: University of Massachusetts

Press, 2005), 187.

[10] Antonia Maioni, “New century, new risks: the Marsh Report and the post­-war welfare state in Canada,” Policy Options, August 2004, 21.

[11] Ibid, 21.

[12] Ibid, 22.

[13] Guest, 150 & Rice and Prince, 81.

[14] Guest, 151.

[15] Antonia Maioni, “Parting at the Crossroads: The Development of Health Insurance in Canada and the United States, 1940-1965,” Comparative Politics 29, no.4 (1997): 412-413.

[16]Ibid, 412

[17] Maioni, “New century, new risks,”21.

[18] Guest, 138.

[19] Maioni, “Parting at the Crossroads,”417.

[20] Rice and Prince, 75.

[21] Guest, 148.

[22] Ibid, 149.

[23] Maioni, “Parting at the Crossroads,”417.

[24] Guest, 162.

[25]Maioni, “Parting at the Crossroads,”418.

[26] Guest, 163.

[27]Maioni, “Parting at the Crossroads,”419.

[28] Berkowitz, 172.

[29]Maioni, “Parting at the Crossroads,”422.

[30] Berkowitz, 173.

[31] Ibid.

[32] Rice and Prince, 83.

[33] Gøsta  Esping-Andersen, Why we need a new welfare state (New York: Oxford University Press, 2002), 3.

[34] Paul  Pierson, “The New Politics of the Welfare State,” World Politics 48, no.2 (1996):151.

[35] Ibid.