What If The Welfare State Never Developed?

The Actual History

The modern welfare state—a system where the government assumes primary responsibility for the social and economic well-being of its citizens through programs like universal healthcare, unemployment insurance, and old-age pensions—emerged gradually across industrialized nations between the late 19th and mid-20th centuries. Its development represents one of the most significant transformations in governance, fundamentally altering the relationship between citizens and their governments.

The first building blocks of the welfare state appeared in Imperial Germany under Chancellor Otto von Bismarck in the 1880s. Facing pressure from socialists and seeking to maintain social order, Bismarck introduced pioneering social insurance legislation, including health insurance (1883), accident insurance (1884), and old-age and disability insurance (1889). This "Bismarckian model" spread across continental Europe, with countries like Austria, Hungary, and Sweden adopting similar programs by the early 1900s.

In the United Kingdom, early welfare reforms came under the Liberal government of 1906-1914. The Old Age Pensions Act of 1908 and the National Insurance Act of 1911 established modest protections for workers against sickness and unemployment. However, it was during and after World War II that the British welfare state truly consolidated. The landmark Beveridge Report of 1942, authored by economist William Beveridge, outlined a comprehensive system to address what he called the "five giants": want, disease, ignorance, squalor, and idleness. This report laid the groundwork for post-war reforms including the establishment of the National Health Service in 1948, providing universal healthcare free at the point of service.

In the United States, the Great Depression catalyzed welfare state development. President Franklin D. Roosevelt's New Deal introduced Social Security (1935), unemployment insurance, aid to dependent children, and various public works programs. Though more limited than European counterparts, these initiatives marked a fundamental shift in American governance. Later expansions came with Lyndon Johnson's Great Society programs of the 1960s, including Medicare and Medicaid.

Nordic countries developed particularly comprehensive welfare states, characterized by universal benefits, high taxation, and strong labor market policies. The "Nordic model" crystallized between the 1930s and 1960s, combining extensive social protections with market economies.

By the 1970s, welfare states had become established features across Western democracies, though with significant national variations. The neoliberal turn of the 1980s under leaders like Ronald Reagan and Margaret Thatcher brought challenges to welfare state expansion, emphasizing market solutions and individual responsibility. Nevertheless, core welfare institutions proved remarkably resilient even as they underwent reforms.

Today, despite ongoing debates about sustainability, generosity, and eligibility, welfare states remain fundamental to modern governance. They have dramatically reduced poverty among vulnerable populations, particularly the elderly, and provided crucial economic stabilization during recessions. The COVID-19 pandemic further demonstrated their importance, as governments dramatically expanded supports to prevent economic collapse amid widespread shutdowns.

The welfare state represents one of the most consequential social innovations of modern times, fundamentally reshaping societal expectations about the proper role of government in ensuring basic material security for citizens.

The Point of Divergence

What if the welfare state never developed? In this alternate timeline, we explore a scenario where the complex set of historical forces that gave rise to government welfare systems took a dramatically different course, preventing the establishment of comprehensive social safety nets across Western democracies.

Several plausible divergence points could have steered history away from welfare state development:

One possibility centers on Bismarck's Germany in the 1880s. Had the German Chancellor opted for a purely repressive response to the socialist movement rather than his dual strategy of anti-socialist laws alongside social insurance programs, the template for state-sponsored social protection might never have emerged. Perhaps a more successful campaign against socialist organizations coupled with stronger economic growth could have convinced Bismarck that social insurance was unnecessary, removing the influential model that many European nations later emulated.

Alternatively, the divergence might have occurred during the Great Depression. If Herbert Hoover had won reelection in 1932 against Franklin Roosevelt, or if a more conservative Democrat had secured the nomination and presidency, the New Deal's ambitious social programs might never have materialized. A continued commitment to limited government intervention and reliance on private charity through this critical juncture could have established a powerful precedent against government welfare programs.

A third potential divergence involves the post-WWII settlement. If Winston Churchill's Conservatives had won Britain's 1945 election instead of Clement Attlee's Labour Party, the Beveridge Report might have been implemented in a much more limited fashion. Without Britain's comprehensive National Health Service model and other ambitious post-war welfare institutions, the international momentum toward expanded social protection could have stalled significantly.

Most plausibly, this alternate timeline would involve a combination of factors: stronger intellectual and political opposition to state intervention, different economic conditions that made private solutions seem more viable, and critical electoral defeats for welfare state advocates at key historical moments. Rather than a single point of divergence, we might envision a cascade of events beginning in the late 19th century and continuing through the pivotal decades of the 1930s and 1940s that collectively prevented the welfare state paradigm from taking hold.

In this timeline, the relationship between citizens, markets, and government would develop along radically different lines, with profound implications for economic security, inequality, and social cohesion throughout the 20th and 21st centuries.

Immediate Aftermath

Depression-Era Responses Without the New Deal

In a timeline without developing welfare states, the immediate aftermath of the Great Depression would have unfolded dramatically differently. Without Roosevelt's New Deal programs, the United States would have continued to rely primarily on local relief efforts, private charity, and limited state-level interventions. Herbert Hoover's preference for voluntary cooperation rather than direct federal assistance would have remained the dominant approach, either through his continued presidency or ideologically similar successors.

The human consequences would have been severe. Without Social Security, unemployment insurance, and federal work relief programs, millions of elderly Americans would have faced destitution. The unemployment rate, which peaked at around 25% in 1933, would likely have remained higher for longer without the economic stimulus and direct employment provided by agencies like the Works Progress Administration (WPA) and Civilian Conservation Corps (CCC). Contemporary observers might have witnessed a much more radical political landscape, with greater support for both far-left and far-right movements promising economic salvation.

Alternative Institutional Developments

In the absence of government welfare structures, alternative institutions would have expanded to partially fill the void:

Mutual Aid Societies and Fraternal Organizations: Without government social insurance, membership in fraternal organizations like the Freemasons, Odd Fellows, and mutual benefit societies would have surged beyond their already significant levels of the early 20th century. These organizations, which provided sickness benefits, funeral expenses, and sometimes old-age support to members, would have evolved into more comprehensive providers of social insurance.

Corporate Welfare Capitalism: Companies like Kodak, IBM, and General Electric, which had already pioneered company pensions and health plans, would have expanded these programs to attract and retain workers. This "welfare capitalism" model would have become the primary source of security for many workers, creating stronger bonds between employees and firms but leaving those working for smaller companies or in less profitable industries unprotected.

Religious Charitable Networks: Religious institutions would have assumed an even larger role in providing basic needs assistance. Catholic charities, Protestant relief organizations, and Jewish philanthropic networks would have expanded significantly, potentially becoming more professionalized and coordinated to handle larger-scale needs in the absence of government programs.

Political Realignments

The non-emergence of welfare states would have profoundly reshaped political alignments across Western democracies:

In the United States, without the New Deal coalition that tied urban workers, immigrants, and eventually African Americans to the Democratic Party, political alignments might have developed along different lines. Labor unions, lacking the legal protections and partnership with government that the New Deal provided, might have pursued more radical strategies or remained more fragmented and industry-specific.

In Europe, social democratic parties would have followed a markedly different trajectory without the ability to deliver concrete welfare benefits to their working-class constituents. They might have remained more ideologically radical but politically marginalized, or alternatively, might have abandoned social welfare advancement for other priorities like industrial democracy or cultural issues.

Medical Care Transformation

Healthcare systems would have developed along entirely different lines without government involvement in health insurance and provision:

Private insurance models would have expanded sooner, potentially evolving more efficient mechanisms than emerged in our timeline where they often developed in the shadow of or in response to government programs. Medical care would have remained largely a private transaction between doctors and patients, with charity care for the indigent and employer-provided insurance emerging as the dominant models.

Hospital development would have followed a different pattern, likely with more religious and charitable institutions and fewer large public hospitals. Medical costs might have remained lower in the short term without the inflationary pressure sometimes attributed to third-party payment systems, though access would have been more uneven.

Post-War International Order

The post-WWII international economic order would have taken shape without the domestic welfare state as a stabilizing factor. The Bretton Woods system might have emphasized different priorities without the assumption that national governments would manage domestic social protection. International trade agreements might have developed differently without the offsetting security that welfare states provided to workers facing displacement from global competition.

The absence of welfare states might have complicated European reconstruction after WWII. Without programs like Britain's National Health Service or France's family allowance system, populations exhausted by war might have faced greater hardship during recovery, potentially increasing political instability and slowing economic rebuilding.

By the mid-1950s, this alternate world would already look remarkably different—with greater reliance on private institutions for economic security, more visible inequality, and potentially more volatile politics as workers sought protection through other means than government-provided welfare.

Long-term Impact

Economic System Transformation

A Different Capitalist Model

Without welfare states, capitalism would have evolved along significantly different lines throughout the late 20th and early 21st centuries. Rather than the "mixed economies" that characterized Western nations in our timeline, a more purely market-oriented system would have emerged. This alternative capitalism would feature:

Enhanced Role for Private Insurance: In the absence of social security systems, private insurance markets for old-age, disability, and health risks would have grown more sophisticated. Insurance companies would constitute a much larger sector of the economy, with products tailored to different risk profiles and income levels. However, these markets would struggle with the same challenges that prompted government intervention initially—adverse selection, moral hazard, and the inability of the poorest to afford adequate coverage.

Stronger Corporate Paternalism: Large corporations would provide more extensive benefits to their workers, effectively functioning as private welfare states. Companies might maintain their own hospitals, retirement communities, and educational institutions for employees and their families. This would create stronger company loyalty but reduce labor mobility and increase economic concentration.

Different Patterns of Economic Growth: Without automatic stabilizers like unemployment insurance and progressive taxation, economic cycles would likely be more pronounced. Recessions might be deeper and more socially disruptive, but recoveries potentially faster as wages adjusted more quickly. Overall growth might be higher due to lower tax burdens and less regulation, but with substantially greater volatility and inequality.

The Geography of Inequality

Without welfare state redistributive mechanisms, economic geography would develop differently:

Hyper-Concentrated Prosperity: Certain regions and cities would experience extraordinary prosperity through market mechanisms, while others would face prolonged decline without government transfers to sustain local economies. The economic divergence between successful and struggling regions would be far greater than what we've observed in our timeline.

Charitable Geographic Focus: Private philanthropy would concentrate disproportionately in certain regions with strong traditions of giving or religious organization, while other areas might have minimal safety nets. Rather than the relatively uniform standards of national welfare programs, a patchwork of local approaches would create significant geographic disparities in basic living standards.

Social Structure and Family Life

Demographics and Family Formation

Without welfare systems providing economic security, family structures would evolve differently:

Multi-generational Households: The absence of reliable public pensions would make multi-generational households more common and necessary. Elderly parents would typically live with adult children rather than independently, changing housing patterns and family dynamics.

Birth Rate Patterns: Without family allowances and supports, birth rates in developed countries might have declined even further than in our timeline, accelerating demographic challenges. Alternatively, without access to reliable contraception (which government programs helped distribute in our timeline), some communities might maintain higher fertility rates despite economic challenges.

Marriage Economic Necessity: Marriage would retain more of its traditional economic function as a risk-pooling institution. Divorce rates would likely be lower as separation would carry greater economic risks, particularly for women who would have fewer independent means of support without welfare programs.

Class Structure and Mobility

The absence of welfare states would reshape social class structure:

Hardened Class Boundaries: Without educational subsidies, public healthcare, and income supports that facilitated mobility, class boundaries would be more rigid. Access to education would depend more heavily on family resources, reinforcing intergenerational transmission of advantage and disadvantage.

Different Elite Composition: The elite classes would include a larger proportion of industrial magnates and a smaller proportion of public sector professionals and intellectuals. Without the expansive public sectors that welfare states created, different career paths would define high status.

Charitable Class Relations: Upper classes would engage in more direct charitable activities as their primary relationship with the poor. Noblesse oblige would be a more prominent social value, with wealthy families maintaining philanthropic foundations and directly supporting local institutions as a social expectation.

Political Development and Governance

Altered Democratic Evolution

Democracy would function differently in a world without welfare states:

Different Voter Concerns: Without direct material benefits from government, voter priorities would center more on law and order, moral issues, and basic infrastructure rather than social program expansion or defense. Elections might feature lower participation rates among lower-income citizens who would see less direct stake in political outcomes.

Labor Movement Evolution: Without partnership with welfare-providing states, labor movements might have pursued more radical strategies or, conversely, focused more narrowly on workplace conditions rather than broader social policy. Unions might have developed their own parallel welfare institutions more extensively, similar to the Ghent system of union-administered unemployment benefits.

Alternative Reform Movements: Progressive energies that in our timeline went into expanding welfare programs would channel into different reform movements—perhaps stronger environmentalism, consumer protection, or religious revival movements promising security through community rather than government.

Revolutionary Pressure and Stability

Without welfare states as "pressure valves" for capitalist economies:

Revolutionary Potential: Periods of economic hardship might generate stronger revolutionary movements without the moderating influence of welfare programs. The absence of basic economic security could fuel more radical political alternatives during crises.

Different Cold War Dynamics: Without Western welfare states demonstrating that capitalism could provide basic security, communist movements might have maintained greater appeal in Western Europe and elsewhere. The ideological battle of the Cold War would have played out differently without the "middle way" that welfare capitalism represented.

The Contemporary World (2025)

By our present day in this alternate timeline, the world would look markedly different:

Technology and Innovation: Private solutions to social problems would be more technologically advanced. Digital platforms facilitating mutual aid, crowdfunding for medical expenses, and private retirement planning would be more sophisticated and central to economic life.

Heightened Inequality: Income and wealth inequality would significantly exceed even the high levels in our timeline. Without redistributive taxation and social spending, wealth concentration would likely reach levels not seen since the Gilded Age.

Global Development Patterns: Developing nations would follow different models, without welfare state templates from Western countries. Some might embrace purely market-based development strategies, while others might maintain stronger traditional family systems and community structures to provide security.

Pandemic Response: The COVID-19 pandemic would have played out dramatically differently without unemployment insurance, public healthcare systems, and government stimulus. Private charity, corporate assistance, and community mutual aid would be the primary supports for those affected, likely resulting in greater economic dislocation and potentially different public health outcomes.

Different Culture and Values: Cultural values would emphasize self-reliance, family responsibility, and private charity more strongly. The idea that government should ensure basic well-being would seem radical rather than expected. Community institutions like churches, fraternal organizations, and neighborhood associations would hold greater social significance as sources of support and identity.

By 2025, this alternate world would have both advantages and severe challenges compared to our own—potentially greater innovation and economic dynamism, but also harsher consequences for misfortune, more entrenched privilege, and potentially more social conflict.

Expert Opinions

Dr. Maria Gonzalez, Professor of Comparative Political Economy at Oxford University, offers this perspective: "A world without welfare states would have developed far more extensive private and community-based security systems than we might initially imagine. Humans have always found ways to mitigate risk—the question is how effectively and at what cost. Without government welfare, we would likely see a fascinating patchwork of mutual aid societies, religious charities, and corporate benefits that would cover many people, though with significant gaps and inequalities. The most intriguing counterfactual question is whether these private systems would have eventually achieved the scale and efficiency needed to address industrial society's insecurities, or whether they would have left such glaring gaps that some form of government intervention would have eventually emerged anyway, perhaps just delayed by decades."

Professor James Harrington, Economic Historian at the University of Chicago, presents a more optimistic assessment: "The absence of comprehensive welfare states might have preserved the vitality of civil society institutions that withered as government assumed their functions. Mutual aid societies, which covered roughly one-third of adult male workers in Britain and America before welfare state development, demonstrated remarkable effectiveness at managing social risks while preserving individual dignity and community bonds. Without crowding out by government programs, these institutions might have modernized and expanded their reach. We might have developed a more dynamic, pluralistic approach to social protection—one with lower tax burdens and greater respect for the principle of subsidiarity. The resulting society would certainly feature more visible inequality but might actually provide more effective support tailored to diverse community needs."

Dr. Sophia Kim, Research Director at the Global Institute for Social Policy, counters with a more pessimistic view: "Without welfare states, vulnerability to economic shocks would be dramatically higher for most citizens. My research on pre-welfare state societies shows that even the most extensive charitable and mutual aid systems left huge portions of the population exposed to destitution from medical emergencies, old age, or economic downturns. The welfare state emerged precisely because private solutions proved inadequate to industrial capitalism's systemic risks. Without this development, we would likely see not only greater material hardship but also more extreme political instability. The post-war democratic consensus in Western nations was built on the foundation of basic economic security provided by welfare states. Without this foundation, liberal democracy itself might have proven unsustainable faced with challenges from both left and right extremes promising security through authoritarian means."