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Richard Titmuss versus the IEA: the transition from idealism to neo-liberalism in

British social policy1

Ben Jackson

Faculty of History & University College, Oxford University

benjamin.jackson@univ.ox.ac.uk

Forthcoming in Lawrence Goldman (ed.), Welfare and Social Policy in Britain Since

1870: Essays in Honour of Jose Harris (Oxford University Press, 2018/19)

An influential strand of Jose Harris’s research has emphasised the importance of idealist

political thought to the rise and fall of the British welfare state. Harris has suggested that

idealism, broadly construed, legitimated British welfare state formation up to the Second

World War as helping to realise justice, inclusive citizenship, and an ideal state. But

idealism as a theoretical enterprise faded rapidly from view in the mid-twentieth century,

expelled from philosophical respectability by the rise of linguistic philosophy and

determinist Marxism. Harris argues that later social policy experts in this tradition – she

mentions Richard Titmuss and T. H. Marshall – found themselves cast adrift from any

coherent intellectual tradition, invoking ideals of community and citizenship that owed

their lineage to idealism, but lacking any compelling theoretical defence of them, and

offering instead policy advice that was positivist or utilitarian in orientation. Harris

1 For comments on an earlier version of this chapter I am grateful to Howard Glennerster, Jose Harris and the participants at the conference on ‘Welfare and Social Policy in British Historical Perspective, 1850-2010’ held in Oxford in April 2012.

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concludes that the mid-century demise of serious political theory about social policy

therefore left the welfare state vulnerable to theoretical attack because its defenders

lacked a philosophical discourse with the depth, coherence, and reach of idealism.2 In this

chapter I will test this argument by looking in more detail at an illuminating case study

from the post-1945 discussion about the welfare state: the debate between the group of

socialist social policy academics loosely associated with Richard Titmuss and the market

liberals at the Institute of Economic Affairs (IEA), spear-headed by the IEA’s editorial

director, Arthur Seldon. This exchange was an emblematic one for two reasons.

First, because it to some extent supports Harris’s claim that in the 1960s and

1970s the defenders of the Beveridgean welfare state lacked theoretical firepower when

confronted by a sustained philosophical counterblast from the sceptics of that model of

social welfare. But the exchange is also significant for a second reason: it served as the

overture for the arrival of a new philosophy of social welfare, one that would in due

course replace an attenuated idealism as the most influential political theory in British

social policy in the latter part of the twentieth century. This new philosophy of social

welfare I will call for short ‘neo-liberalism’. It may seem surprising to suggest that neo-

liberalism is a philosophy of social welfare, on the grounds that this form of market

liberalism is often seen as viscerally hostile in principle to the welfare state, and therefore

philosophically committed to a minimal state without welfare functions. But this is a

2 J. Harris, ‘Political thought and the welfare state, 1870-1940’, Past and Present, 135 (1992), pp. 116-41; J. Harris, ‘Political thought and the state’, in S. Green and R. Whiting (eds.), The Boundaries of the State in Modern Britain (Cambridge, 1996), pp. 15-28; J. Harris, ‘Citizenship in Britain and Europe: some missing links in T. H. Marshall’s theory’, ZeS-Arbeitspapier, No. 02/2010, 2010, pp. 16-18, 21-2, http:// hdl.handle.net/10419/43703 (accessed 11 January 2018). For a discussion of idealism and British social policy influenced by Harris’s account, see J. Offer, An Intellectual History of British Social Policy: Idealism versus Non-Idealism (Bristol, 2006).

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misunderstanding of the position of key neo-liberal thinkers such as Friedrich Hayek and

Milton Friedman, which conflates neo-liberalism with fully-fledged libertarianism of the

sort espoused by Robert Nozick or Murray Rothbard, who did indeed support a pure

night-watchman state.3 In contrast, Hayek, Friedman and their popularisers in the IEA

did endorse significant state welfare functions, but their vision of welfare differed

markedly from that articulated by figures such as Beveridge and Titmuss.

The intellectual outriders of the free market right first began to make themselves

known in British public policy debates in the 1960s. Their initial target – before even

Keynesian demand management – was the Beveridgean welfare state. As David Collard

observed in the pamphlet in which he coined the term ‘the New Right’ to describe the

IEA’s agenda, the key argument of neo-liberals was that ‘as far as possible, state-

provided services should be taken into the private sector on normal market principles

except for those hard cases really needing direct state intervention.’4 In order to make this

case, and to garner publicity, the IEA sought to challenge the social policy academics

who acted as expert analysts of the welfare state for the government and in the media. In

particular, they targeted those who one commentator labeled ‘the high priests of

universalism’: essentially Titmuss and his close colleagues, such as Peter Townsend and

Brian Abel-Smith.5 Their links with the 1964-70 Labour government made them an

enticing target and their work was extensively scrutinised in IEA publications and private

3 M. Rothbard, For a New Liberty (New York, 1973); R. Nozick, Anarchy, State and Utopia (New York, 1974). 4 D. Collard, The New Right: A Critique, Fabian Tract No. 387 (London, 1968), p. 1. 5 M. Blaug, ‘Selectivity in education’, in Social Services For All? Part II, Fabian Tract No. 383 (London, 1968), p. 30.

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discussions.6 In 1971, Arthur Seldon wrote to Keith Joseph a few days after they had met

for a characteristically gloomy discussion about the political situation: ‘I hope we are

both happier than when we parted last Monday. I confess I woke up at about three and

punished myself for an hour reading a couple of chapters of Titmuss. After that I felt

better – or worse.’7 In return, Titmuss and his allies took the neo-liberal challenge to

social democracy far more seriously than the rest of the left at this time, and undertook

the only rigorous left-wing analysis of the ideas of the free-market right before the

1980s.8 As Mike Reddin (a close colleague of Titmuss at the LSE) observed, the ensuing

debate between the IEA and Titmuss et al. at times ‘assumed the language and hostility of

a factious religious war’.9 This hostility stretched beyond the usual proprieties of

academic debate, and a robust intellectual exchange became an exchange of lawyers’

letters when the IEA threatened Titmuss with a libel suit (relating to a footnote in one of

Titmuss’s articles suggesting the IEA was not politically independent).10 Little love was

lost between both sides, although at one point Ralph Harris, the Director of the IEA,

invited Titmuss to the Institute to discuss matters over lunch (convivial lunches being an

important weapon for the IEA in the struggle to win over opinion-formers). Titmuss

declined the invitation and firmly closed the door to any future social overtures: ‘I am

6 On the links between Titmuss et al. and the Labour government, see P. Baldwin, The Politics of Social Solidarity (Cambridge, 1990), pp. 232-46; S. Thornton, Richard Crossman and the Welfare State (London, 2009). 7 A. Seldon to K. Joseph, 15 March 1971, IEA Papers, Hoover Institution, Stanford University (hereafter IEA Papers), 333/5. 8 A point made at the time by Collard, New Right, p. 1 and then in the 1980s by H. Rose, ‘Rereading Titmuss’, Journal of Social Policy, 10 (1981), p. 485, n. 18. For the left’s response in the 1980s, see Simon Griffiths, Engaging Enemies: Hayek and the Left (London, 2014). 9 M. Reddin, ‘Universality versus selectivity’, Political Quarterly, 40 (1969), p. 12. 10 Titmuss’s account of this episode can be found in his Commitment to Welfare (London, 1968), pp. 263-4; the correspondence relating to the legal action between the IEA and Titmuss is in the Richard Titmuss Papers, LSE Library (hereafter Titmuss Papers), 2/182.

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going abroad shortly and I would rather not enter into any commitments now for a more

distant date.’11 Titmuss’s view, expressed privately to the editor of Encounter (who had

invited him to reply to a piece by Seldon), was that the threat of libel action indicated that

the IEA did not understand the norms of scholarly controversy and could not be treated

just like any other critical interlocutor.12

The most celebrated intellectual manifestation of this antagonism related to the

publication of Titmuss’s classic work on the NHS and blood donation, The Gift

Relationship (1970), which Titmuss wrote as a direct engagement with the nascent neo-

liberalism of the IEA. This was probably the book that Seldon had been reading at three

in the morning after meeting Keith Joseph. The genesis and reception of The Gift

Relationship have already been brilliantly reconstructed by Philippe Fontaine, in whose

footsteps I will follow in this chapter.13 The differences between the two sides were

wider than the specific dispute over how to supply blood to the NHS, or even health-care:

the battleground comprised the whole of social policy, encompassing health, education,

pensions, housing and social insurance.14 And the issues at stake not only concerned the

most efficient practical organisation of social policy but also ranged over their underlying

philosophical objectives, and how different institutional structures – universal or

selective; state-run or voluntary – might advance or inhibit liberty, equality and social

solidarity. This chapter will build on Fontaine’s treatment of this debate by examining the

11 R. Harris to R. Titmuss, 27 September 1967 & R. Titmuss to R. Harris, 2 October 1967, Titmuss Papers, 7/13. On the importance of sociability to the IEA, see B. Jackson, ‘The think tank archipelago: Thatcherism and neo-liberalism’, in B. Jackson and R. Saunders (eds.), Making Thatcher’s Britain (Cambridge, 2012), pp. 53-4. 12 R. Titmuss to M. Lasky, 27 November 1967, Titmuss Papers, 2/182. 13 P. Fontaine, ‘Blood, politics and social science: Richard Titmuss and the Institute of Economic Affairs, 1957-73’, Isis, 93 (2002), pp. 401-34. 14 Titmuss assiduously read the IEA’s output and the related press coverage: see the very large collection of articles and press clippings on the IEA’s work (frequently annotated) in the Titmuss Papers, 2/227.

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two contrasting philosophies of social welfare espoused by the participants. The

analytical focus of the chapter will be an assessment of how far the theoretical defences

of the welfare state had been critically weakened by the 1960s and 1970s (as Harris has

argued), and how far Titmuss and his colleagues were able to meet the neo-liberal

critique of the Beveridgean welfare state with a coherent theory of welfare of their own.

Universalism and selectivism

In her influential article on political thought and the rise of the welfare state, Jose Harris

defined idealism broadly, to include ‘anyone who thought that knowledge rested on

certain a priori categories, who viewed society and/or the state as having a real corporate

identity, and who saw the prime concerns of social science as being the interpretation of

“meaning” and “purpose” rather than the discovery of causal laws.’15 Harris argued that

this idealism meshed with empirical social science in the early twentieth century to

generate an influential body of research which pictured the welfare state as the vehicle for

the advancement of justice, citizenship and the common good, drawing on classical

political theorists such as Plato and Rousseau, whose work inspired and animated this

idealist tradition.16 The contrast between the idealist tradition and the neo-liberal

philosophy of welfare examined in this chapter is stark. According to the analysis of

these free market revivalists, Plato and Rousseau were not to be venerated, but were in

15 Harris, ‘Political thought and the welfare state’, p. 123, n. 20. 16 Harris, ‘Political thought and the welfare state’, pp. 122-31.

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fact numbered among the historic enemies of liberty.17 Similarly, the state and society

had, in their view, no corporate identity beyond the separate individuals who populated

them.18 The neo-liberal view of social science was more diverse than is sometimes

assumed, but leading neo-liberals were generally convinced that they had discovered

critical universal economic laws that trumped historical or cultural particularities.19

Finally, it was the particular form taken by the twentieth-century welfare state that in the

opinion of neo-liberals inhibited rather than facilitated the realisation of an ideally just

society. The differences between neo-liberalism and idealism were therefore

considerable, and centred around three issues of progressively greater theoretical

complexity.

The most obvious issue at stake in this debate, and the focus of the greatest public

attention, was the merits of a ‘universal’ versus a ‘selective’ welfare state. The

intellectuals associated with the IEA were interested in the so-called ‘rediscovery of

poverty’ of the 1960s, which had been stimulated by the scholarship and activism of

Townsend and Abel-Smith.20 Both sides in fact started from an overlapping, revisionist

orientation towards the actually existing welfare state – like Townsend and Abel-Smith,

Seldon and his colleagues noted that existing welfare institutions had failed to achieve

17 Two important accounts, targeted against Plato and Rousseau respectively, were K. Popper, The Open Society and its Enemies Volume I: The Spell of Plato (London, 1945); and J. Buchanan and G. Tullock, The Calculus of Consent (Indianapolis, 1999 [1962]). 18 Buchanan and Tullock, Calculus, pp. 11-12; F. A. Hayek, The Constitution of Liberty (Chicago, 1960), pp. 65-7; F. A. Hayek, Law, Legislation and Liberty Volume II: The Mirage of Social Justice (London, 1982 [1976]), pp. 1-30. 19 Hayek, Constitution, pp. 3-4; M. Friedman, Essays in Positive Economics (Chicago, 1953), pp. 3-43; T. Stapleford, ‘Positive economics for democratic policy: Milton Friedman, institutionalism, and the science of history’, in R. Van Horn, P. Mirowski and T. Stapleford (eds.), Building Chicago Economics (Cambridge, 2011), pp. 4-5, 23-6. 20 R. Lowe, ‘The rediscovery of poverty and the creation of the Child Poverty Action Group, 1962-68’, Contemporary Record, 9 (1995), pp. 602-11; S. Middleton, ‘“Affluence” and the left in Britain, c. 1958-1974’, English Historical Review, 129 (2014), pp. 107-38.

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their objectives because so many remained poor in 1960s Britain. They further agreed

with the Titmuss school’s anxieties about the unresponsive bureaucracy and arbitrary

power over the individual produced by post-1945 welfare institutions.21 The neo-liberal

right and the neo-idealist left therefore both drew their intellectual energy from an

impulse to address deficiencies in the existing welfare state.

Of course, from these shared premises, each group drew quite different

conclusions. The associates of the IEA thought that most of these problems stemmed

from a confusion inherent in any universal welfare system, namely the apparent

contradiction between desiring to alleviate the plight of the poor while simultaneously

refusing to target resources specifically at the worst off. Instead, expenditure that might

go to the poor was, as they put it, ‘wasted’ in doling out benefits to the wealthy. The

welfare state, said Seldon, had become ‘a vast, wasteful, futile machine for taking money

out of people’s pockets and putting it back into their purses.’22 This was a point made

repeatedly throughout all of the IEA’s publications on the welfare state, but the most

influential version of this case was in fact put by the Labour MP and former minister for

social services, Douglas Houghton, in a 1967 pamphlet published by the IEA.

Houghton’s text did draw on the IEA’s work on social welfare, but his main focus was

how to augment the existing funding of the welfare state, particularly the NHS. He

suggested that, since the electorate would be reluctant to assent to higher taxation to fund

21 B. Abel-Smith, Freedom in the Welfare State, Fabian Tract No. 353 (London, 1964); A. Seldon, ‘Which way to welfare?’, reprinted in The Collected Works of Arthur Seldon Volume IV: Introducing Market Forces into ‘Public’ Services (Indianapolis, 2005 [1966]), p. 4; D. Lees, ‘Poor families and fiscal reform’, Lloyds Bank Review, No. 86, October 1967, pp. 6-7. The IEA’s apparent interest in the rediscovery of poverty was probably strategic rather than sincere: on other occasions it was described as ‘the question-begging discovery of seven million “poor”’: A. Seldon, ‘What kind of welfare?’, Spectator, 18 March 1966. 22 A. Seldon, ‘The reluctant crutch’, reprinted in The Collected Works of Arthur Seldon Volume VI: The Welfare State: Pensions, Health, and Education (Indianapolis, 2005 [1959]), p. 3.

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public services at the level required, then private expenditure could be mobilised for this

purpose through the introduction of service charges for the better off administered

through the tax system.23 Although this was an argument for selectivity of some sort, it

was actually rather different from the position usually espoused by the IEA, which

recommended the creation of a residualised, and lower cost, welfare system that handed

greater responsibility to each individual for insurance against risk. In spite of the fact that

what Houghton offered was by no means the neo-liberal party line – ‘there can be no

turning back on the concept of a National Health Service’, he argued – the symbolism of

a Labour MP broaching this question was irresistible and the IEA regularly invoked

Houghton as an important fellow traveler.24

Titmuss and his allies devoted considerable energy to rebutting the IEA’s case for

a more selective, targeted welfare state, although they were always careful to note that

they did not defend a purely universal welfare model. Rather, they favoured a mixture of

universal and selective services and benefits, allocated on the basis of need and not

ability to pay.25 Partly, their criticism of a purely selective model was empirical: the well-

known practical arguments against means-tests, for example problems with take-up and

administrative complexity, were rehearsed. But they also made more theoretical points.

One was the characteristic Titmuss argument that universal social services were

necessary as a mechanism of social integration and to prevent stigma. With the 1930s

means test still casting a long shadow in British social policy, the Titmuss group argued

23 D. Houghton, Paying for the Social Services, IEA Occasional Paper 16 (London, 1967), pp. 10, 14, 15-19. 24 Houghton, Paying, p. 17; Fontaine, ‘Blood, politics and social science’, p. 412, n. 17. In spite of Houghton’s support for the NHS, he was extensively cited in A. Seldon, After the NHS, IEA Occasional Paper 21 (London, 1968), pp. 19-21. 25 Titmuss, Commitment, pp. 114-15, 122.

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that it would be inevitable that a wholly selective welfare system would single out the

poor and needy as different from, and inferior to, the rest of society. This would, among

other things, distract the rest of society from recognising that poverty and other forms of

social need were produced by structural factors and should therefore not be subject to

state-sanctioned moralising.26 A second objection was an early statement of the idea that

universal social services and benefits create a more durable cross-class political coalition

of support for the welfare state and are therefore more effective than targeted welfare

institutions in eroding poverty. ‘Services for poor people have always tended to be poor

quality services’, as Titmuss famously put it.27 The associates of the IEA were, in private

at least, content with the notion that a more selective welfare state could indirectly lead to

further pressure to reduce the reach of the state. As the American public choice theorist

James Buchanan observed in a letter to Seldon:

I agree that it is a good debating ploy to argue for the replacement of universality

with selectivity. But government cannot really be selective, and the result of the

argument, if successful, is to undermine government in general. This is, of course,

a desirable objective, but we should be clear as to what we are about.28

In reply, Seldon was sceptical of Buchanan’s assumption that it was not really possible to

provide selective state benefits and services, but added: ‘On the other hand, I rejoice in 26 P. Townsend, ‘Means tests – to what end?’, Guardian, 4 October 1967; P. Townsend, ‘The difficulties of negative income tax’, in Social Services For All? Part Four, Fabian Tract No. 385 (London, 1968), pp. 110-11; D. Reisman, Richard Titmuss (Basingstoke, 2001), pp. 91-109. 27 Titmuss, Commitment, p. 134; W. Korpi and J. Palme, ‘The paradox of redistribution and strategies of equality: welfare state institutions, inequality, and poverty in the western countries’, American Sociological Review, 63 (1998), pp. 661-87. 28 J. Buchanan to A. Seldon, 10 August 1970, IEA 330/7.

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the thought that to make government action selective is to undermine government. But

perhaps that is why I instinctively favour selectivity.’29

This sort of debate about the universal welfare state is a familiar one, but there

was another, more unusual element of Titmuss’s case against a selective welfare state: his

use of the economic theory deployed by the neo-liberals to subvert selectivist policies.

Titmuss noted that the welfare state was not simply aimed at alleviating poverty. In fact,

it served a number of functions, including compensation for hardships imposed on

individuals by an industrial society through no fault of their own, such as the

obsolescence of skills, redundancies, early retirement, industrial accidents, disease,

pollution, and so on. In such circumstances, where it can be hard to identify the causal

agent and allocate responsibility, either these social costs could be allowed to lie where

they fall (which Titmuss saw as the nineteenth-century solution), or collective social

services could pick up the bill.30 Titmuss therefore took from economics the concept of a

negative externality: costs imposed by an action on third parties that are not reflected in

the market price of that action. This form of market failure has traditionally been seen as

requiring the state to step in to regulate, subsidise, or tax to make sure that the parties to

the action in question bear the full costs involved in it.31 Titmuss married this economic

analysis to a claim about the complex forms of social interdependence inherent in

industrial societies which meant, he thought, that it was difficult or impossible to work

out who should pay for these costs. Causality could not be clearly identified, and this

29 A. Seldon to J. Buchanan, 19 August 1970, IEA 330/7. 30 Titmuss, Commitment, pp. 117, 131-4. 31 A. C. Pigou, The Economics of Welfare (London, fourth edition, 1932). Although Pigou’s approach to externalities was itself called into question by economists close to the IEA, most famously in R. H. Coase, ‘The problem of social cost’, Journal of Law and Economics, 3 (1960), pp. 1-44; see S. Cheung, The Myth of Social Cost, Hobart Paper 82 (London, 1978).

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meant that non-discriminating universal services allocated on the basis of need had to

step in to act as the mechanism for compensation.32 Titmuss thought that this

compensatory aspect of the welfare state was only one of a number of functions that it

served and which could be analysed in economic terms: he also mentioned the protection

of society; investment for future gain; or an immediate or deferred increment of personal

welfare.33 What was intriguing about Titmuss’s defence of universalism, then, was that

he in fact adopted the language of economic theory while soldering this vocabulary to

ideas about social interdependence and organicism that owed something to the idealist

tradition.34

Choice and welfare

Beneath this debate over welfare universalism was a second, more explicitly

philosophical issue. The neo-liberal case was not only that universal welfare services

were distributively inefficient, but also that they nullified individual choice over key

domains of life. Neo-liberals took their stand on anti-paternalism, or at least the

minimisation of paternalism, and argued for a welfare system that maximised individual

choice. Such a system, they argued, would focus state resources on the poor minority, but

subsidise purchasing power rather than services in kind, and end the state monopoly on

service provision in order to allow a wider range of choice over welfare services. Those 32 Titmuss, Commitment, pp. 133-4. For criticism of Titmuss’s use of the concept of externality and social interdependence, see Reisman, Titmuss, pp. 159-74. 33 Titmuss, Commitment, p. 131. 34 The ‘divorce of idealism from British economic thought’ was, in Jose Harris’s view, ‘a fundamental weakness’ of the theory: Harris, ‘Political thought’, p. 141. On Titmuss’s use of organic language, see M. Freeden, ‘Citizenship and civil society’, in J. Harris (ed.), Civil Society in British History (Oxford, 2003), pp. 286-90.

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outside the poor minority would be able to purchase whatever welfare provision they

desired – or could afford – in the marketplace.

Neo-liberals were confident that such an approach would be popular because they

felt it fitted more naturally with the experience of a consumer capitalist economy than the

form of welfare provision favoured by Titmuss and his colleagues. As Seldon put it, the

British people now enjoyed much greater ‘freedom of choice for their food and drinks,

their clothes, their furniture and household equipment’. Since the average man and

woman were now ‘treated like lords and ladies at their grocer’s, the hairdresser’s and on

the plane to their fortnight in Spain’, it was unlikely that they will ‘tolerate much longer

being treated as servile, cap-in-hand supplicants in the local state school, the doctor’s

surgery, the hospital.’ Hostility to state-provided welfare, Seldon concluded, would

therefore increase as incomes rose.35

We should be careful not to caricature this view and to understand its force,

because it generated a set of ideas and policy proposals that were very influential under

both Conservative and Labour governments after 1979. Neo-liberals (as opposed to full-

throated economic libertarians) on the whole accepted that the market, by itself, would

not provide a sufficient income for everyone and would need to be supported by a state-

organised safety net: economic growth alone would not solve this distributional problem.

However, their vision of that safety net was highly critical of the compulsory provision of

benefits and services that featured in the post-1945 welfare state, which, they charged,

35 Seldon, ‘What kind of welfare?’, pp. 320-1. The IEA backed this argument with surveys of public opinion, which they claimed demonstrated public support for greater choice in the welfare state: Choice in Welfare (London, 1963); R. Harris and A. Seldon, Choice in Welfare 1965 (London, 1965). A strikingly similar argument has been made more recently by Wolfgang Streeck, ‘Citizens as consumers: considerations on the new politics of consumption’, New Left Review, No. 76 (2012), pp. 27-47.

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rationed resources via a state bureaucracy that could not take account of the preferences

of welfare ‘consumers’. Indeed, Seldon invoked Mill when criticising Richard

Crossman’s 1969 National Superannuation and Social Insurance Bill, a piece of

legislation heavily influenced by Brian Abel-Smith, Peter Townsend and Richard

Titmuss. Seldon argued that the expansion of state pensions included in that Bill would

create ‘a more centralised, a less spontaneous society, in which man would have less and

less power to learn by experience how to perfect himself.’36 The corollary of this was that

neo-liberals were prepared, at least at a philosophical level, to bite the bullet and accept

that people should be free not to provide for their own welfare if they so chose. As Milton

Friedman elaborated:

Those of us who believe in freedom must believe also in the freedom of

individuals to make their own mistakes. If a man knowingly prefers to live for

today, to use his resources for current enjoyment, deliberately choosing a

penurious old-age, by what right do we prevent him from doing so?37

Seldon ultimately favoured reducing taxation to the extent that individuals would

be able to use their own incomes to purchase whatever insurance cover they desired in

the market, leaving, he believed, only a tiny minority requiring government support.38

But this ultimate goal was not as important in neo-liberal thinking as the more

36 Seldon, ‘Which way to welfare?’, p. 7; A. Seldon, The Great Pensions ‘Swindle’, reprinted in The Collected Works of Arthur Seldon Volume VI: The Welfare State: Pensions, Health, and Education (Indianapolis, 2005 [1970]), pp. 112-14, quote at p. 114. 37 M. Friedman, Capitalism and Freedom (Chicago, 1962), p. 188. 38 Seldon, ‘Which way to welfare?’, pp. 3, 8-9.

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technocratic but also more credible proposal of a negative income tax (which Seldon

seems to have regarded as an interim measure on the road towards enhancing consumer

purchasing power through tax cuts).39 The negative income tax aimed to sweep away

existing welfare benefits and some social services and to replace them with a cash

payment from the state that would top up the incomes of the poor so that everyone

received whatever was deemed to be the socially acceptable minimum. This idea was

famously advanced by Milton Friedman (although it built on earlier plans along these

lines) and it was popularised in Britain by the IEA in the late 1960s.40 The IEA proposal

was roughly speaking to replace all existing cash benefits, including pensions,

unemployment benefit and family allowances, with a single state payment that would lift

all individuals out of poverty. The advantage of this approach was not only that it avoided

the ‘waste’ of resources on the rich, but also that it handed choice to individuals over how

they spent and prioritised their money.41 Seldon summarised the benefits: ‘A system of

topping up low incomes by cash to create, for the first time for the masses, markets in

personal welfare services, is the most hopeful way of redirecting the welfare state to the

technical opportunities and human aspirations of the late twentieth century.’42

Neo-liberals also accepted that there was a case for state provision of a minimum

level of education, since a democratic society depended for its social stability on certain

39 A. Seldon, ‘Crisis in the welfare state’, Encounter, December 1967, pp. 64-5. 40 Friedman, Capitalism, pp. 191-4; Lees, ‘Poor families and fiscal reform’, pp. 10-15; F. Sutcliffe-Braithwaite, ‘Neo-liberalism and morality in the making of Thatcherite social policy’, Historical Journal, 55 (2012), pp. 499-510. 41 C. Anthony, G. Polanyi, A. Seldon, and B. Shenfield, Policy for Poverty, IEA Research Monograph 20 (London, 1970), pp. 28, 33, 43, 57. 42 A. Seldon, ‘Thaw in the welfare state’, Lloyds Bank Review, No. 105, July 1972, p. 33.

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shared values and a basic standard of literacy and knowledge among its citizens.43 This

rationale for education, they added, did not justify state subsidy of vocational training,

which was undertaken to increase the economic productivity of the individual and the

absence of which caused no externalities of the sort that would be prompted by the

absence of education for citizenship. The solution for this latter sort of education was

therefore government provision of student loans or a graduate tax.44 In the case of the

basic education due to all citizens, Milton Friedman argued that the valid justification for

this form of education did not warrant the ‘nationalisation’ of schooling that had in fact

occurred in the industrialised world. Instead, he argued that neo-liberals should

distinguish between the state funding of education and the state delivery of it. His

favoured education policy focused on directing public subsidy towards consumers rather

than producers: famously, Friedman coined the idea of the government providing parents

with vouchers which they would be free to redeem at any of a wide range of government-

approved (but not run) educational institutions.45 Friedman’s proposal was duly taken up

and adapted to Britain by Alan Peacock and Jack Wiseman, and then E. G. West, writing

for the IEA.46

The neo-liberal approach to education differed from their prescriptions for health-

care. Unlike education, neo-liberals viewed health-care as a personal consumption good

43 Friedman, Capitalism, pp. 85-8. However, E. G. West, although not completely opposed to this argument, did express scepticism about whether this justified comprehensive and compulsory state provision of education: E. G. West, Education and the State (London, 1970 [1965]), pp. 29-49, 225-9. 44 Friedman, Capitalism, pp. 100-7. M. Blaug, ‘Loans for students’, New Society, 4 October 1966, pp. 538-9; Blaug, ‘Selectivity in education’, pp. 35-9. 45 M. Friedman, ‘The role of government in education’, in R. Solo (ed.), Economics and the Public Interest (New Brunswick NJ, 1955), pp. 123-45; Friedman, Capitalism, pp. 85-107. For support for Friedman’s proposal, see Hayek, Constitution, pp. 376-84. 46 A. Peacock and J. Wiseman, Education for Democrats, IEA Hobart Paper 25 (London, 1964); West, Education and the State; C. Welch, ‘Why not freedom in education?’, Daily Telegraph, 8 November 1965.

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that raised none of the concerns that motivated state involvement in education. Leaving

aside questions of public health, which obviously did create externalities, neo-liberals

contended that ‘most medical services are concerned with the treatment of an individual

who is ill and whose illness concerns himself and his family alone.’47 The question of

how best to reform the NHS was raised in this light – the assumption being that the

application of market mechanisms would enhance both efficiency and freedom in British

health-care provision. The IEA suggested that choice over medical cover should rest in

the hands of the individual via the greater application of user charges, private insurance

and private medical care.48 James Buchanan wrote a paper for the IEA along these lines,

arguing that the fundamental problem with the NHS was that it failed to co-ordinate

supply and demand with the same efficiency fostered by market mechanisms: the use of

privately-organised health-care operations – if desired, they could be financed publicly –

would yield better results, Buchanan argued.49 The philosophy of welfare that animated

each of these aspects of the IEA’s work was well-summarised by Seldon:

State benefits in cash or coupon would enable everyone – wage-earner as well as

salary-earner – to act as a buyer with enough purchasing power in the market to

47 A. Kemp, ‘Health services and political economy’, paper to 1962 Mont Pèlerin Society Conference, Knokke, Mont Pèlerin Society Papers, Hoover Institution, Stanford University, 17/5, p. 24. As Titmuss pointed out, some neo-liberals argued that care for mental health should remain the province of the state. Titmuss doubted that physical and mental illness could be kept administratively or operationally separate: Commitment to Welfare, pp. 264-5. 48 D. S. Lees, Health Through Choice, IEA Hobart Paper 14 (London, 1961); D. S. Lees, ‘Expanding personal payment in medicine’, Bulletin of the Fellowship for Freedom in Medicine, No. 53, January 1963, pp. 3-16; Monopoly or Choice in Health Services, Occasional Paper No. 3 (London, IEA, 1964); A. Seldon, ‘National or personal health service?’, The Lancet, 25 March 1967, pp. 674-77; A. Seldon, After the NHS, Occasional Paper No. 21 (London, 1968). 49 J. Buchanan, The Inconsistencies of the National Health Service, IEA Occasional Paper 7 (London, 1965).

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pay for education, medical care, housing or pensions from competing state, local

authority, benevolent, charitable, “mutual” or commercial suppliers. Every man

and woman would in time appear as a buyer and not a “beneficiary”. Social origin

and accent would become irrelevant.50

Titmuss and his colleagues spent less time getting to grips with this second aspect

of the neo-liberal theory of welfare than they did with the debate over selective versus

universal welfare. In part this seems to be because they did not appreciate how important

a challenge it offered to their vision of welfare. But it also required fundamental

theoretical discussion to unpack, of a sort that this generation of British social policy

academics shied away from,51 but which leading exponents of market liberalism such as

Hayek and Buchanan eagerly embraced. Titmuss, for example, drew on an influential

1963 article by Kenneth Arrow to argue that health-care was different from other sorts of

goods for sale in the market – for example, ‘sellers’ of health-care were concerned about

the welfare of patients (unlike sellers of other goods), while ‘consumers’ of health-care

cannot know in advance how much care they will need, or assess whether they have been

given good or bad care, and in most cases such care cannot be returned to the seller.

Titmuss drew on Arrow’s ideas to suggest that medical care should not be treated as a

good to be sold on the market like any other, but he didn’t deploy this as part of a larger

theoretical argument.52 Fragments of such theoretical discussion were scattered

50 Seldon, ‘Crisis in the welfare state’, p. 60. 51 A point first made by Jose Harris: ‘Political thought and the state’, pp. 25-6. 52 Fontaine, ‘Blood, politics and social science’, pp. 406-8; K. Arrow, ‘Uncertainty and the welfare economics of medical care’, American Economic Review, 53 (1963), pp. 941-73; R. M. Titmuss, Choice

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throughout Titmuss’s writings, but not articulated in the systematic terms that could

authoritatively rebut the neo-liberal case. The closest Titmuss came to offering a

philosophical defence of the welfare state against the neo-liberal choice-based critique

was in The Gift Relationship, where he noted that the economic liberties defended by

neo-liberals – the freedom to buy and sell, or to satisfy individual preferences – were not

the only forms of liberty that should be valued. The ‘right to give’ – the freedom ‘to

choose to give to unnamed strangers’ – and the freedom to avoid market coercion were

raised by him as important liberties neglected by neo-liberals.53 Again, these points were

not really expressed as a coherent theoretical alternative to neo-liberalism. In some

respects, Titmuss remained rather elusive about his underlying theory of welfare, and

tended to pose sceptical rhetorical questions about the political theory of market

liberalism, rather than digging into the philosophical structure of the neo-liberal case.

Self-interest and altruism

This conclusion can be amplified in relation to a third and final theme: the different

weighting of self-interest and altruism by the two camps. At the core of the neo-liberal

analysis was the claim that it was futile and dangerous to look beyond self-interest as a

mechanism to motivate individual behaviour. Seldon attributed the enthusiasm for ‘the

common good’ on the part of the advocates of the British welfare state to a mistaken

generalisation from the experience of the Second World War. Rather than being

and ‘the Welfare State’, Fabian Tract No. 370 (London, 1967), pp. 11-12; Titmuss, Commitment, pp. 247-68. 53 R. M. Titmuss, The Gift Relationship (New York, 1997 [1970]), pp. 305-14; Freeden, ‘Citizenship and civil society’, pp. 289-90.

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motivated by abstract social purposes, Seldon argued, ‘human conduct is motivated by

the requirements, desires and hopes of the people whom individuals know around them:

their families, friends, associates.’54 Titmuss’s mistake, Seldon suggested, was to base his

conclusions about social policy on his earlier historical research into the social services in

wartime without making allowance for the very different motivations that permeated

peacetime life:

The experience of common dangers and fears produced a sense of “community”

that could yield a “badge of citizenship”; but the “badge” looked tarnished and as

incongruous as other war-time relics when fathers of families were out of

uniform, military or civil, and resumed concern for the education, health, housing

and income of their families … Wartime gave Professor Titmuss his chance, and

he seems out of his element in the freedoms, aspirations, diversities and

spontaneities of peace.55

Indeed, Seldon said such an outlook amounted to ‘jejune sentimentality’: the clarity of

the pursuit of private interest, neo-liberals were sure, was far superior as a means of

motivating individuals than the invocation of a nebulous public good.56 The practical

upshot of all this was a case for the greater use of the price mechanism in the welfare

54 Seldon, ‘Which way to welfare?’, p. 5. 55 A. Seldon, ‘Commitment to Welfare by Richard M. Titmuss: a review article’, Social Policy and Administration, 2 (1968), p. 199; see R. M. Titmuss, Problems of Social Policy (London, 1950). A similar point about British welfare state development and socialist thought is often made in historical discussions of the impact of the Second World War: see J. Harris, ‘Political ideas and the debate on state welfare, 1940-45’, in H. L. Smith (ed.), War and Social Change (Manchester, 1986), pp. 236, 256-7; S. Fielding, P. Thompson and N. Tiratsoo, ‘England Arise!’ The Labour Party and Popular Politics in 1940s Britain (Manchester, 1995); B. Jackson, Equality and the British Left (Manchester, 2007), pp. 136-40, 183-96. 56 Seldon, ‘Crisis in the welfare state’, p. 65.

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state: services would be run more efficiently and the quality of service would be higher,

the argument ran, if co-payments were required from users, or if welfare service

providers were able to compete against one another. In particular, the IEA sought to bring

these arguments to bear on the NHS.57

Titmuss’s Gift Relationship constituted an extended reply to the IEA’s emphasis

on the benefits of self-interest for the welfare state. As Philip Fontaine has documented,

Titmuss was inspired to write the Gift Relationship as a response to the emergent market

liberal critique of the welfare state, especially the NHS, in the 1960s.58 In the book,

Titmuss criticised work by the IEA which had advocated paying blood donors as a means

of securing a more reliable supply of blood.59 Famously, Titmuss argued that the

introduction of the price mechanism into blood donation would corrode the altruism that

he believed to be essential to the British blood service. Titmuss thought that the ability to

give a gift to anonymous strangers with no expectation of anything in return was what

motivated blood donation in Britain: the form of self-realisation and social integration

created by this ‘gift relationship’ was intrinsic to its success.60 Underlying this argument,

as Titmuss had made plain elsewhere, was a form of communitarian socialism that stood

in a lineage with earlier socialist thinkers such as Morris and Tawney: ‘Socialism is about

community as well as equality. It is about what we contribute without price to the

57 Lees, Health Through Choice; Buchanan, Inconsistencies; Seldon, After the NHS. 58 Fontaine, ‘Blood, politics and social science’, pp. 405-18. 59 M. Cooper and A. Culyer, The Price of Blood: An Economic Study of the Charitable and Commercial Principle, Hobart Paper 41 (London, 1968). 60 Titmuss, Gift Relationship, pp. 276-304.

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community and how we act and live as socialists – and not just about how we debate

socialism.’61

Titmuss also offered another argument in The Gift Relationship: that payment for

blood donation would in fact result in a less efficient and less healthy supply of blood.

Titmuss drew on evidence from the United States to show that paying blood donors

would create incentives for those with the unhealthiest blood, such as drug addicts or

alcoholics, to conceal their conditions and donate. For this reason, Titmuss argued, blood

in the United States was more likely to give its recipient hepatitis than British blood.62

The Gift Relationship is a brilliant and powerful book, but it is also at certain

junctures a frustrating one. The most immediately persuasive argument in the book

focused on the problems caused to blood quality by paying blood donors. In essence,

Titmuss had alighted on what economists would later call ‘asymmetric information’ and

‘adverse selection’: market failure because one party to the transaction knows something

that the other party doesn’t know, and the costs involved in finding out that information

are prohibitively high.63 In making this point, Titmuss in effect again deployed the tools

of economic theory to undermine neo-liberal policy conclusions.

But the broader argument about altruism in the book puzzled a number of

commentators, not just IEA-style neo-liberals: they found it hard to tell from Titmuss’s

text why he thought gift-giving would be damaged by the introduction of market 61 Titmuss, Choice and ‘the Welfare State’, p. 16. 62 Titmuss, Gift Relationship, pp. 200-35. 63 K. Arrow, ‘Gifts and exchanges’, Philosophy and Public Affairs, 1 (1972), pp. 353-4; I. McLean and J. Poulton, ‘Good blood, bad blood, and the market: The Gift Relationship revisited’, Journal of Public Policy, 6 (1986), pp. 435, 440; K. Akerloff, ‘The market for lemons: quality uncertainty and the market mechanism’, The Quarterly Journal of Economics, 84 (1970), pp. 488–500; M. Spence, ‘Job market signaling’, The Quarterly Journal of Economics 87 (1973), pp. 355–74; J. E. Stiglitz, ‘The theory of “screening”, education, and the distribution of income’, American Economic Review, 65 (1975), pp. 283–300.

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mechanisms into health-care.64 The apparent lack of clarity in this part of Titmuss’s case

enabled the IEA in reply to present themselves as pragmatically offering to run a mixed

economy for blood donation: voluntary efforts supplemented by some use of payments,

which would, they argued, blend the best of both the British and American systems.65

However, the mechanism by which altruism could be damaged by market incentives was

implicit in Titmuss’s argument, though given the absence of explicit justification of this

point in the book it is understandable that some readers found it hard to discern.

Titmuss’s point – which has since been more thoroughly analysed and empirically

documented by economists and psychologists – was that forms of intrinsic motivation,

such as altruism, can be ‘crowded out’ by monetary incentives. To put this point in the

terms of the later academic literature: the application of material incentives can lead

people to feel that they are being controlled by external forces, rendering the need for

intrinsic motivation superfluous or impairing individuals’ self-esteem by suggesting that

their own motives are inadequate.66 In short, if people are treated by social institutions as

self-interested, then there is a good chance that they will behave in a self-interested way.

In retrospect, then, the difficulty with Titmuss’s theory of welfare as a riposte to

neo-liberalism was not necessarily that his arguments lacked theoretical substance,

although he did not always articulate this theoretical substance explicitly or precisely. A

more significant problem was that he presented his analysis as a criticism of ‘economics’

64 R. Solow, ‘Blood and thunder’, Yale Law Journal, 80 (1971), pp. 1703-5, 1710; Arrow, ‘Gifts and exchanges’, pp. 351, 360-1. 65 A. Alchian et al., The Economics of Charity: Essays on the Comparative Economics and Ethics of Giving and Selling, with Applications to Blood, IEA Readings 12 (London, 1973), pp. 123-4, 137-8. 66 P. Singer, ‘Altruism and commerce: a defense of Titmuss against Arrow’, Philosophy and Public Affairs, 2 (1973), pp. 313-14; McLean and Poulter, ‘Good blood, bad blood’, pp. 439-43; B. Frey, Not Just for the Money: An Economic Theory of Personal Motivation (Cheltenham and Brookfield, 1997); B. Frey and R. Jegen, ‘Motivation crowding theory: a survey of empirical evidence’, Journal of Economic Surveys, 15 (2001), pp. 589-612.

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as a discipline and suggested that the study of social policy or ‘sociology’ offered a more

authoritative analysis of the welfare state.67 This played into the hands of the IEA, who

were keen to position themselves as impartially representing ‘economics’ against

sentimental left-wing sociologists. During the debates over pensions policy in the 1960s,

Seldon delighted in referring to his adversaries as ‘Mr Crossman and his sociologists’,68

suggesting that Titmuss and his colleagues somehow constituted Crossman’s personal

retinue of radical dons. But as Robert Solow pointed out, Titmuss was not arguing against

the entire discipline of economics – he was arguing against one specific strand of it.69

Given the authority of economic theory by this time, and its influence on policy-makers,

to build the case for a comprehensive welfare state on an intellectual framework that

styled itself as antagonistic to economics put Titmuss’s vision of the welfare state on the

ideological defensive from the start. Indeed, as we have seen, Titmuss himself actually

used economic theory to make some of his most important points in the contest with the

IEA: theories of externalities and asymmetric information provided powerful intellectual

justifications for a more generous welfare state than neo-liberals were prepared to

entertain. But, as Robert Pinker has pointed out, Titmuss’s ‘occasional excursions’ into

fields such as economics ‘were largely undertaken in the spirit of missionary visitations

to heathen parts.’70 Instead of building on his use of economic theory, Titmuss’s

rhetorical style left space for neo-liberals to claim the mantle of economics and to

popularise a different, purportedly more hard-headed vision of the welfare state: not as an

67 Titmuss, Gift Relationship, pp. 263-4. 68 Seldon, Great Pensions ‘Swindle’, p. 172. The right-wing backlash against sociology in this period is discussed in more detail in Matthew Grimley’s chapter in this book. 69 Solow, ‘Blood and thunder’, p. 1696; Fontaine, ‘Blood, politics and social science’, p. 430. 70 R. Pinker, ‘Richard Titmuss and the making of British social policy studies after the Second World War: a reappraisal’, Sosiologisk tidsskrift, 16 (2008), p. 175.

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inclusive form of social insurance, but as a safety-net for the weak and vulnerable.71 Of

course, the neo-liberals didn’t succeed in winning all of the subsequent arguments – and

indeed they were bitterly disappointed by their failure to make any headway in

privatising the NHS – but in the 1980s and afterwards it was undoubtedly the neo-liberal

theory of welfare that in mainstream political discourse eclipsed the residue of idealism

that had been offered by Richard Titmuss and his supporters.

71 More recently, Julian Le Grand has used economic theory to try to integrate elements of the neo-liberal choice-based critique of the welfare state into a social democratic theory of the welfare state that explicitly departs from Titmuss’s approach: J. Le Grand, Equity and Choice (London, 1991) and his Motivation, Agency and Public Policy: of Knights and Knaves, Pawns and Queens (Oxford, 2003).