WELFARE AS AN ENTERPRISING NECESSITY?

Fiscal policy in the recession has been described by many on both sides of the Atlantic by reference to John Maynard Keynes' analogy or metaphor of £5 notes to be earned and paid for by cost of getting unemployed people to first bury and then exhume them. Keynes (according to a very good recent piece by Nick Fraser in The Independent saw this as an alternative to dole money (welfare checks)! http://www.independent.co.uk/news/business/analysis-and-features/john-maynard-keynes-can-the-great-economist-save-the-world-994416.html)
There is a current debate in the UK about whether to tax savings (or unearned income generally) or otherwise TO end any public subsidy of savings. This may be based on Keynes' comment that 'One man's saving is another man's unemployment'. As savings and borrowings are equal, the only way to reduce borrowing is to reduce saving. The purpose is to make those with money spend, so that the poor can earn instead of borrow. The originator of the idea was Silvio Gesell, who advocated a system of depreciating cash by 2.5% a year. In fact this idea persists in the idea of steady long run non-inflationary, optimal productive capacity, growth, by seeking a long run inflation rate of about 2-2.5%. Gesell's system was not comprehensive enough, but his present day followers have tried to deal with the defects. The view that some have come to now is that tax assisted saving should end. Others are advocating the exact opposite. Hidden behind this is the fear that the transmission mechanism by banks which converts savings into loans for productive enterprise is not working, and that Government dispersion of spending power would be more effective i.e. a shift from private to public money 'transmission mechanism'.
There are many ways of achieving such a shift that I will not rehearse here. But, looking at the matter more broadly, or philosophically, there is also a protestant, conservative as well as Marxist, work ethic here that money has to be a value for (and valued by) hard labour. Before the 'hungry thirties', the second 'great depression' (today's may become the third) there had been a century of poor law, public and private relief works etc. For example, in Ireland during the 1840s famine and in the depression of the 1880s and other times (and in Scotland and many parts of England and Wales too, if less so) relief work was proscribed to being non-commercial i.e. not producing anything that could be for sale! Hence, the work was building estate walls (private relief) or roads (public relief) but not anything that might furnish commercial exchange and thereby compete with or displace private enterprise. Similarly, in public housing provision, once it became a state activity, the dimensions and quality had to be to the lowest minimum standard i.e. less than that of private commercial housing - though ironically private homes and sub-divisions of townhouses etc. had presaged these low standards, and subsequently emulated these minima often at lower standards! The difference between private and public housing quality was usually in quality of location and often only superficially in building quality and design for living.
Also, this general bias of social provision being of minimalist quality also explains the city- or town scape cultural desert of council housing estates (or ghettos) e.g. having minimal or zero shops, post office, church, culture spaces, village hall, fire, medical or police stations. Imagine if the enormous benefit and ethos if the design had been more that of Prince Charles's Poundbury than Glasgow's Easterhouse (note that the 1998 social exclusion policy in the UK began rectifying this - http://news.bbc.co.uk/1/hi/uk/171530.stm ) Today, in the UK,there are 1.7m on the council waiting lists in the UK, nearly one third in Scotland
(which is only 10% of UK population) where last year 5,700 new social homes were built after 10 years of zero new builds.
The prejudices (by or, often spuriously so, on behalf of 'taxpayers') about the dole (public welfare) now extends in the credit crunch to governments baling out (or bailing?- joke) bankers' losses only so that private bankers can take all the profit again in the upturn. We have also had over a decade of prejudicial fear that the growth in pensioner numbers (in addition to all other welfare claimant's etc.) are becoming an insupportable burden on enterprise and on 'working families' (the beloved constituency of both US major parties).
A modern Keynesian way of seeing these is quite different, and possibly not one Keynes would have instinctively supported, that welfare safety nets and pensions are not external to the 'real' or 'productive' economy, but more of an essential central engine of the 'real economy'. Welfare system safety nets encourage entrepreneurship in business and the arts (and if also their close relative, crime) by taking away some of the downside fear of taking commercial risks. It also recycles spending from savings to incomes in ways that are more equitable (including geographically) to act as a very useful complementarity to the banks' transmission mechanism and thereby increases everyone's income i.e. 'the welfare state multiplier'.
The idea of welfare (and public infrastructure and services) as a beneficial economic necessity (benefiting general economic growth) as much as, or more than as merely a moral obligation (socialistic view) or a national security requirement (liberal conservative view) or as charity (caring conservative and religious view), has never caught on, not in the public imagination anyway - and that is a gross failure by economists and of all leading thinkers (philosopher politicians and academics).
Similarly, there is no history yet written to show or extol how the design of public provision has been variously innovative and leading (something socialists would love to be able to believe) and/or the very opposite (as neo-liberals firmly believe), a stifler of productive innovation and of 'free markets'.
In my view, political-economy philosophy would have had a very different development if Adam Smith had written some years later than he did and the dominant capitalist model would then have been based on productive growth of cities, as much or more than on the productivity of factories. Cities express the overall system of all transactions (goods and services) mediated by money and self-financing by increasing the velocity of capital (now 250 times GDP in the UK, world's highest), and not based on theories of value (whether on essential resources such as food and shelter production, labour-value, or gold standard and its variants, including Malthusian and Shumpeterian theories, physiocrats, mercantilism etc.). We are still at sea largely in understanding market price values in economics as a basis for fundamental models (except in physiocrat and mercantilist-based philosophy theories).
We also have dysfunctional thinking in relating short term to longer term and working life to total lifetimes. This was part of the debate around Keynes as Davis describes.
As a sub-note to some of my readers: I think it was a major calamity that Prof. Alan Abbott Young (Prof. Nicholas Kaldor's teacher at the LSE) died when he did (1928) before writing and publishing broader philosophical texts about economics, who I think might have more than marginally exceeded Keynes (who was inspired by AA Young) in our estimation today had he lived?