ABSTRACT
This chapter discusses facts and figures concerning the rise – and recent fall – of welfare state. It discusses the meaning of the term 'privatisation'. Since the mid 1970s, rate of growth of welfare state expenditure has been severely checked and in some sectors expenditure in real terms has actually fallen. This process, which arose initially because of the perceived need to limit public expenditure in the interests of macroeconomic policy, has been accentuated by recent policies on privatisation. The welfare state is said to create inefficiency in two rather different ways. First, it is argued that state social services encourage a wasteful use of resources by both their suppliers and their consumers. Second, the welfare state is supposed to damage the productive power of the economy through its effects on the incentives to work and to save. Although the second charge could be also levelled at state subsidised social services, it is usually confined to the social security system.
