The Poor Laws in England and the US today

editor’s note: This is political/economic and not related to sports. Feel free to skip it. You’ve been warned.

“By the turn of the century — and especially following the end of the French Wars in 1815 — the cost of relieving the poor in England was considered by most contemporaries to be unsustainable. The Elizabethan poor laws, whose original focus was the aged, the sick and the infirm, were now being used wholesale not only to feed the chronically un- and under-employed, but also as a way of supplementing the inadequate wages of the workforce.”—Last week while reading some secondary literature on poverty in nineteenth century England, I stumbled across this interesting summary from Peter Jones writing “Clothing the Poor in Early-Nineteenth-Century England” in Textile History 37, no. 1 (May 2006): 17-37.

It reminded me of George Will’s column from early in February about the deficit and America’s future demographic problem. Will examined the growing cost of healthcare (much of it funded by entitlements) and another issue that could threaten national security—the rise of China. Will outlined an argument that believes more people living longer means more demand for healthcare that becomes more expensive the longer people live. This creates a “demographic destiny (that) might entail starving every other sector of society — including national defense, at great cost to America’s international standing.”

And he couples this with the rise of China. According to Will, Robert Fogel “expects that by 2040 China’s GDP will be $123 trillion, or three times the entire world’s economic output in 2000. He says China’s per capita income will be more than double what is forecast for the European Union. China’s 40 percent share of global GDP will be almost triple that of the United States’ 14 percent.” (You can read more about that at Foreign Policy.)

Some skepticism seems to be in order. I’m bullish on China for a number of reasons including no capital gains tax and a better understanding of fiscal policy than the U.S. Congress—it is no secret that the Chinese are better capitalists than what we have in Washington today. I continue to invest in China via stocks. However, China faces its own demographic hurdles. Anyone remember Japan? In the late 1980s Japan was going to rule the world. But Minxin Pei (also in Foreign Policy July/Aug 2009) pointed out “Aging is a principal cause of Japan’s stagnation.” Pei continued, “China’s elderly population will soar in the middle of the next decade. Its savings rate will fall while healthcare and pension costs explode.” Pei outlined other serious obstacles to continued Asian growth ranging from water shortages to political instability. With obstacles there, it seems prudent to expect some corrections in China—there will be setbacks to the rapid growth.

But Will and Fogel are right. America is facing a demographic crisis. It isn’t as bad as Europe because of the better fertility rate in the U.S. and immigration. (Immigration is a topic for another day because it presents lots of negatives and lots of positives.) However, the entitlement costs continue to grow and there is no way to view it other than as a threat to national security.

But this brings us back to England in the nineteenth century. The Old Poor Law of 1601 passed under the reign of Elizabeth placed a tax on property with the proceeds being administered by the local parish for the benefit of the poor. Taxpayers at the parish elected a board of overseers to administer the law. However, by the nineteenth century the poor law had created a wave of issues, and as Jones noted it was felt “the cost of relieving the poor in England was considered by most contemporaries to be unsustainable.” One of the reasons identified was the expansion of this program beyond its original scope. Again, as Jones pointed out what was supposed to help the aged, the sick and infirm had become much more. It sure looks similar to many entitlement programs today. And that isn’t to condemn the Old Poor Law or modern entitlements, but to put into context that programs like Social Security today are nothing like the safety net once envisioned.

What is most worrisome is that everyone wants to help the poor. However, the demographic pressures, growing deficits and national security threats make doing so much more difficult in the future. Will the U.S. face the same decision England faced in 1834 when it passed the New Poor Law?

Will reform come and what will it look like?