Front Page Titles (by Subject) Inflation and the Welfare State - Literature of Liberty, July/September 1979, vol. 2, No. 3
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Inflation and the Welfare State - Leonard P. Liggio, Literature of Liberty, July/September 1979, vol. 2, No. 3 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Inflation and the Welfare State
“Economic Growth and Social Welfare.” Scottish Journal of Political Economy 24 (November 1977): 193–206.
The relationship between economic growth and “social welfare” is complex since sometimes they complement and other times they counter one another.
Since World War II, 30 years of prosperity have ensued partly because of “full employment” policies. But these policies can lead to serious problems and even contain the seeds of their own destruction.
The acceleration of wage inflation toward the end of the 1960s was in part the delayed effect of the full employment policies. These government inflationary policies led employers to believe that they could not price themselves out of the market, and workers to believe that they could not price themselves out of a job because the government would always bail them out.
The welfare state was the main reason why public expenditure in Britain rose from 25%–30% of GNP during most of the inter-war years, to 40%–45% during most of the first two post-war decades. But the upsurge of government costs since the mid-1960s displays the irresponsibility of politicians who tried to act on the popular belief that government could provide goods and services like manna from heaven. It printed money and rationalized its actions in terms of the Keynesian acceptance of unbalanced budgets. It would be wrong to blame the founders of the welfare state for recent developments. What we are now witnessing, however, highlights the danger of absent-minded and unlimited enlargement of the state's role.
People in Britain are, however, becoming more aware of the enormous waste in the administration of public expenditure and the arbitrariness in spending public funds. They perceive how they are being forced to accept a pattern of consumption dictated by the state, whereas they would prefer more “private wage” and less “social wage.”
Above all, people are increasingly aware that public expenditure has to be paid for by higher taxation. Whereas during the first post-war decade a married man with two young children paid income tax only if his earnings were at or above the British national average, now he has to pay even if his earnings are under half the national average.