10 September 2021

The social care debate shows how badly Brits need a ‘red pill’ moment


What is the biggest barrier to rolling back the state? Yes: the views of voters seems an obvious answer. But that begs the question: why are voters reluctant to consider it?

Libertarians have theories. These usually involve the role of interest groups or bureaucracies. But there’s perhaps a more all-encompassing explanation we should consider.

Government action in a market alters our behaviour in multiple ways. A tax, subsidy, regulation, or mandate leads to a reorganisation of activity, crowds out certain private endeavours, creates groups who benefit from the policies, and sometimes prohibits certain actions entirely.

The reshaping of the world this elicits creates a new reality – an environment affecting the viability of certain businesses, the payoffs to certain decisions, and the nature and quality of products or services. My colleague Trevor Burrus dubs this ‘The Statrix’ because it’s a constructed world that makes it difficult to imagine what an alternative without the interventions would look like. In fact, the policies and their consequences become the norm, shaping our views about what is viable or desirable.

When Boris Yeltsin visited a Houston supermarket in 1989, the sheer choice of goods and services on offer compared to stores in Soviet Russia shocked him. “Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he said. Faced with this new, striking reality of American living standards, he began to recognise the massive costs of the communist economic system on the Russian people.

Before seeing it with his own eyes, though, Yeltsin was none the wiser. To echo the movie The Matrix again, his supermarket visit was a ‘red pill’ moment – it allowed him to escape the constructed reality of Soviet communism and experience a real, alternative world.

The problem is, red pill moments for voters are rare. Most people don’t experience obtaining, say, healthcare or schooling services in other countries. And even among those that do, they rarely get an insight into what a true market system would entail, as most of those countries themselves have large welfare states. And so, to quote Burrus, ‘we resign ourselves to the cold, impersonal mundanities of government-provided and -controlled services’, in part because, in our Statrix, private efforts often cannot even be conceived of.

Just look at the social care debate and how existing government interventions change our outlook. Even among free-market friends, the existence of an NHS that finances healthcare free at the point of need and prevents people needing to insure or draw down wealth to pay for cancer treatment is said to make it ‘unfair’ that dementia patients might face that fate in the social care system. When the state creates a principle for one condition, in other words, a lack of equalisation with the treatment of others becomes an unjustifiable anomaly.

In fact, insurers regularly say a key barrier to a functioning social care insurance market is that most people assume care is covered by the NHS. At least in part, then, the whole mess around financing stems from existing government actions. But the inability of markets to provide insurance given this reality is simply deemed the way of the world – evidence that a market isn’t possible at all, so justifying the government capping lifetime care costs to try to create one.

There are many other examples of this. Over recent years, minimum wage hikes have hit the social care system hard. To try to manage their fixed labour costs, care homes have turned to zero hours contracts, which encourage employees to take on multiple jobs for income security. Now, there are growing complaints about the consequences of staffing. Private care homes are blamed for insecurity, with the state supposedly needing to step in with more funding. Few question the trade-offs associated with a minimum wage – its effects are just taken as market-driven outcomes.

You can already see what pressures the reality of the new Dilnot-style care cost cap will create too. The Conservatives have created an expectation that the government will protect people from having to sell their home. But once the need to top up above local authority fees for better quality homes and hotel costs are considered, many will still face that prospect. Others will decide to downgrade to the bare-bones local authority offer to avoid it. The demand for more spending or price controls will therefore proliferate, as people facing large hits to their wealth or low quality care now see this as the fault of government.

Perhaps the best evidence of the Statrix at work though is the very question opponents of the reforms get asked: ‘What would your alternative solution for social care be?’.  A market, of course, doesn’t provide “a solution,” but many solutions based upon our tailored wants and needs. In terms of social care and where it takes place, that might mean home care, moving into specialist retirement communities, traditional residential care, or being looked after by your family. In terms of funding, it might mean drawing down savings, equity release, charitable provision, immediate needs annuities, insurance, selling a home, or living off income.

But it’s difficult for us to imagine the full reality of what a pluralistic market approach would entail without seeing it. Without a Yeltsin red pill moment, we are convinced that our government-shaped world is the only reality we can possibly achieve.

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Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.