Can the Welfare State Survive? - Andrew Gamble (2016)

Chapter 2. The Battle of Ideas

The creation, maintenance, and future of the welfare state has never been just a question of political economy narrowly conceived. It has also always been a question of moral economy: how should the economy and society be ordered? Moral economy introduces ideas of fairness, duties, rights, expectations, and entitlements, equality and liberty. In relation to the welfare state, the key issue is whether seeking to provide welfare through the state is a desirable or undesirable state of affairs. This issue has been debated throughout the history of modern political economy. Moral issues have always been inextricably linked with the development of the welfare state. If a particular set of institutions are seen as fair, then their legitimacy will be high and political support for them easier to mobilize. This is why arguments about the welfare state often take an explicitly moral form. At a time of economic and financial crisis, old stigmas and moral dividing lines are quickly revived. Since 2008, the traditional discourse of the deserving and undeserving poor has returned, only this time politicians distinguish between strivers and shirkers, or between makers and takers. Benefit cheats and benefit tourists are contrasted with families who are trying to do the right thing. The latter are entitled to their benefits but the former are not.

There are three important moral positions in relation to welfare and the desirability of welfare states: the socialist, the conservative, and the market libertarian. The first question which divides them is whether welfare should be provided collectively, and, if it should, whether that should be done by the state. The second question is how great the involvement of the state ought to be – what is the appropriate scope and scale of the welfare state? The answers given to these questions are not abstract, remote from the world of practice. The discourses on welfare have a powerful influence on events. They have a huge bearing on whether welfare states can survive the challenges they currently face. The ability to persuade citizens that welfare states should or should not exist is a crucial component in determining whether they will survive. Ideas matter, and key to welfare states are the contending ideas which define them.

The socialist case both for collective welfare and for a welfare state became one of the dominant ideas of the twentieth century. Socialists emphasize the need for solidarity based on mutual dependence, and argue that we have a moral obligation to share resources in communities in accordance with socially agreed criteria of fairness and need. Individuals are not free-standing. They depend for their existence and survival on communities. As members of those communities, they have a duty to contribute resources to help those less well off than themselves. Socialists have always placed the community above the individual. Individuals have rights and entitlements but only as members of communities. Redistribution of resources does not have to be through the state. As noted earlier, socialists were once extremely suspicious of the state because they saw it as the instrument of the propertied class which served their interests and not those of the wider community. The Israeli kibbutz is an example of a socialist community which redistributes resources and provides welfare for all its members without relying on a state bureaucracy to do so. The moral duty to serve the community and participate in its collective decision-making takes precedence over individual self-realization.

The problem with socialist experiments which do not rely upon the state is that they tend to be local and small-scale. Faced with the challenge of dealing with welfare in modern industrial urbanized societies, non-state coordination proved impractical, although there have been exceptions, such as the cooperative movement. But in the twentieth century the socialist case for welfare almost everywhere became a case for some form of welfare state. Forms of self-management were too partial and local. They could not match the universality and comprehensiveness which the modern state could supply. The practical advantages of using the state were obvious, once socialists had persuaded themselves that democracy had transformed the state and made it something they could use to achieve their goals. Although some socialists remained unreconciled to the state, the majority movements of the Left, the social democrats, all made their peace with it, and in time came to see it as essential. From being critics of the state, the socialists became its champions. One of the main reasons for this transformation was the development of the welfare state. Socialists realized they could build on the limited welfare states established by conservatives and liberals, using the enhanced capacities and tax-raising powers created during the world wars to introduce far-reaching universal programmes, involving substantial redistribution not only between generations but also between classes, relieving poverty and investing in citizens, creating a public sphere beyond the market.

The case for using the state in this way was not just practical, it was also moral. To make modern society a true community to which everyone contributed and from which everyone benefited, and in which extremes of poverty were overcome, meant making sure that everyone was treated the same. In a complex modern society, this could only be achieved through a central bureaucracy of the kind developed in many European states. Even liberal Victorian Britain developed new institutions like the Post Office. Under rules established in the mid-nineteenth century, the Post Office undertook to deliver letters anywhere in Britain for the same flat fee, rather than charging extra for distance or remoteness. All citizens were treated the same. This became the aspiration for the welfare state. Wherever citizens lived, they were entitled to the same service as everyone else. There should be no postcode lottery. A highly centralized state, once distrusted and opposed by socialists, became accepted as the best instrument for ensuring equal treatment and consolidating a sense of national citizenship. This universalism of the modern state, as the Germans and the French had already discovered, gave it potentially enormous reach and legitimacy. The state could act for the whole national community and become its embodiment.

The moral case for providing welfare collectively emphasizes the vulnerability of the majority of citizens to misfortunes and risks beyond their control – such as illness, unemployment, or incapacity. It appeals to the idea of solidarity: that those most able and fortunate have a duty to assist those in need or suffering misfortune. By pooling resources and risks, everyone can be helped at the point of their lives where they most need it. The state is an association of citizens who recognize their common fate and their common predicament, and allow the organized power of their association, the state, to act collectively on their behalf, collecting resources from citizens and redistributing them to those whose needs are most pressing. People’s circumstances and inherited qualities vary enormously, and policies and institutions need to be developed to take proper account of them.1

In the socialist view, the moral basis of the welfare state is both equality and solidarity. But equality does not mean equality of outcomes; it means that everyone is treated the same by having the same entitlements and opportunities. The outcomes will be unequal not only because some citizens will earn more than others, but also because benefits will not be distributed equally. Those in greatest need will receive the most. Those who do not have children, or who never fall sick, or whose jobs are secure do not benefit as much from the welfare state as many others. But as Bo Rothstein has pointed out, they do benefit from living in a society in which every individual enjoys a basic security and opportunity to live a full life. In this way, everyone has a stake in the welfare state.2

From this standpoint, welfare, like defence, is a public good which the state should provide because the market either will not, or will not do so efficiently or sufficiently. Using taxes to redistribute income regardless of individual preferences is justified because the goal is to create a cohesive society from which everyone benefits. Clean air or safe drinking water may not emerge from the interplay of individual preferences. There will always be those for whom it is not a priority. But once achieved, everyone benefits, and very few would choose to give them up. This is the consequentialist argument. Many welfare policies are like this. A society with a developed welfare state and low levels of inequality and poverty is likely to promote trust, contentment, and social peace, all public goods which, once experienced, a society is not likely to want to surrender. But the case can also be stated in terms of first principles. A pattern of society in which every individual is provided with the means necessary for basic human dignity and flourishing is a society which conforms to universal principles of social justice. It is not a society in which there is equality of outcome or any attempt to create such equality, but it is a society in which there is substantial redistribution between classes and between generations.

The socialist case has been substantially extended in recent years by the incorporation of feminist and green perspectives. They have questioned some of the assumptions of the traditional socialist discourse and raised the key issue of sustainability. Earlier socialist and trade union ideas about welfare still emphasized the male breadwinner and the patriarchal household as the foundation of the welfare state. These attitudes shared much in common with the conservative perspective on welfare. One of the big changes in socialist thinking in the last four decades has been the recognition that the welfare state is seriously incomplete if it rests upon unpaid domestic labour to deal with problems such as unemployment, child care, social care, and old age. In the golden age of the welfare state, much welfare was still being provided through households, relying on a traditional division of labour between men and women. The key insight of feminist political economy is the priority it gives to the reproductive economy.3 Ensuring the wider well-being of all members of households, reproducing people rather than just labour power, and investing in the services which free individuals from dependency on the market or the family are central to the feminist idea of a sustainable society. Greens further argue that the concept of well-being and sustainability needs to be extended to include the natural environment. A public sphere has to be built which can counter not only the impact of markets on the well-being of individuals in households but also damage to the ecosystems on which human life depends. The need in any political economy to understand the complex interaction between the state, markets, households, and the biosphere has only recently been fully understood. It has broadened the idea of the welfare state, extending its reach, but this in turn increases the challenges which welfare states face to deliver what they promise, and sharpens the dilemma of how to win support for an expanding not a contracting welfare state.

The conservative case for the welfare state is also a case which gives priority to the community over the individual, and particularly to the national community. Like socialists, conservatives are committed to forms of collective welfare and redistribution. It was conservative politicians who first made moves to institute state welfare provision, but once democracy was extended and socialists and other radical movements became advocates of state welfare, conservative support became much more qualified. Conservatives always emphasized the family and the household as the main site for welfare provision, and saw the state’s role as providing support for families to discharge this role.

Conservative attitudes to welfare are rooted in paternalism, a desire to mitigate extreme poverty, and to allow families to have sufficient autonomy so that they can bring up the next generation and preserve key social values. There are deserving as well as undeserving families, and the difficulty for conservatives is to find ways to change the behaviour of the latter so that they conform to the model that conservatives value. This model has traditionally been the two-parent family, with the father as the main breadwinner and the mother as the main carer, both for children and for elderly relatives. This is regarded as a morally superior form of life. In more recent times, many conservative parties have become more socially liberal, but traditional values are still strong in several countries, including parts of the United States. The conservative instinct is that social order depends on strong and stable families. If the welfare state undermines families, either by promoting a different model for bringing up children or by creating disincentives for people to get married, then that has harmful social consequences. A familiar conservative narrative is the broken society, where the family is undermined by permissiveness, divorce, teenage pregnancies, and welfare dependency. One of the most significant conservative discourses in relation to the welfare state has been that of Christian Democracy, which has drawn specifically on religious doctrines which stress the importance of community and the family.4

Conservatives were often the architects of the extended state of the twentieth century, particularly through their commitment to imperialism, nationalism, and war. They advocated strengthening defences to meet the challenge of rival powers, and this made them receptive to arguments for state spending not just to alleviate poverty and distress but also to increase the health and education of all citizens. The importance of manpower, both its quantity and its quality, became a major theme in conservative thinking. But although some of these conservatives were strong critics of laissez-faire individualism, they also did not want state powers pushed too far. In particular, they fiercely resisted the redistributive agenda of socialists where this began to encroach on the interests of property. Some conservatives worried about the gap between rich and poor, and advocated policies and institutions to create a common national citizenship, but they were not in favour of overturning existing hierarchies of power and wealth. They therefore came to argue against universalism becoming the core principle of welfare states, as socialists wanted. Instead, they stressed that there were many services which were best provided selectively, using means tests to restrict eligibility. The potentially limitless explosion of expectations and entitlements came to preoccupy conservatives and made them advocates of welfare state retrenchment to make it more manageable and affordable.

This is why in the neo-liberal era some conservatives have made common cause with market libertarians and other neo-liberals in seeking to roll back some of the gains of the era of high collectivism when welfare states appeared to be the wave of the future. But conservatives remain committed to a form of welfare state; in particular they are committed to strong and stable families and the relief of poverty, as well as to universal programmes of health and education. But their enthusiasm is limited. In the austerity programmes launched after 2008, conservative governments were at the forefront, putting financial stability and fiscal consolidation ahead of preserving entitlements and the level of welfare spending which had been built up in the previous ten years. Conservatives give increasing priority as well to delivering welfare through voluntary organizations rather than through the state. They are much less concerned than socialists with the unevenness of access to welfare, seeing variation as unavoidable and the attempt to treat people the same as imposing uniformity and requiring an unnecessary and damaging degree of centralization.

Socialists and conservatives prize different things about the welfare state, but both remain committed to a large part of welfare still being delivered through the state, funded by taxes, and therefore involving redistribution at least between groups at different stages of the life-cycle. The moral case for forms of collective welfare provision remains strong, whether the basic unit is the family, the nation, or the community. Organizing the state to redistribute resources and meet needs remains a shared moral commitment. The position for market libertarians is very different. Their moral position rejects the idea that some form of collective has a higher claim than the individual. For socialists and some conservatives, this position has often been seen as advocating selfishness, removing all restrictions on individual behaviour and the maximization of the interests of the individual regardless of the effects on others. Some extreme forms of market libertarianism do take this stance, although even here this is a position no less moral than that of socialists and conservatives.

Since the 1970s it has been the market libertarians who have argued most persistently that the welfare state should not survive, and some also believe that its many internal contradictions will lead to its demise. But here we are chiefly concerned with their moral argument. This argument was put most eloquently by Robert Nozick when he called for capitalism between consenting adults. Voluntary exchanges between free individuals are the basis of a free society. Any intervention by the state in those exchanges is coercive and harmful and should be either banned entirely or limited as much as possible. Nozick conceded a case for a minimal state to provide its citizens with law and order, but anything beyond this was illegitimate.5 Specifically, he regarded any spending on welfare or redistributive taxation as an infringement on liberty. If individuals wished voluntarily to make payments to other citizens to enhance their welfare, that was a matter for them, but no-one should be coerced into doing so through taxation. Many market libertarians rejected even the argument that there was a role for the state in providing basic law and order, preventing people killing one another and stealing each other’s property. But there was no case at all for providing welfare through the state. The state had no business being involved in whether individuals starved or not.

Such a view gives maximum moral weight to liberty, regarding restrictions on the liberty of the individual as inherently harmful. There is an egalitarianism at work here. All human beings are to be treated as equal, but the most important fact which makes them equal is their capacity for liberty. This is the rough equality of the state of nature as Hobbes described it. Equality of opportunity and equality of outcome arise as state projects of redistribution and as such have no place in a free society. On this view, the state has no more need to be providing welfare (whether health, education, pensions, or social security) than it has to be providing steel. Whatever the justifications for the welfare state in past societies, it is no longer needed in a properly constituted and functioning free market economy based on voluntary exchanges between sovereign individuals. Indeed, it is positively harmful, a major drag upon prosperity and growth because it has become wasteful and inefficient, and requires high levels of taxation to fund it. It is the last bastion of the command economy in Western societies, and it displays all the weaknesses of such an economy. Resources are misallocated; there is no proper market discipline or budget constraints. The welfare state has become a giant parasite on the rest of the economy, and threatens to suck the life out of the private sector, so insatiable is its appetite for additional resources.

The original idea that welfare programmes would be funded by individual national insurance contributions has been lost, and welfare programmes are now funded from general taxation. As costs, demands, and entitlements all rise, so does the need for additional resources to fund the welfare state. There is no end to this spiral, which threatens to capsize the public finances. It also politicizes welfare by empowering groups of claimants and public sector employees to push their special interests. Supporters of the welfare state are regarded as defenders of an increasingly indefensible status quo. The welfare state has become a serpent whose coils have fastened around the economy and the state and need to be prised off. Voters will increasingly vote for parties which promise to reduce the number of welfare dependants to a small core of citizens who genuinely cannot make provision for themselves. Similarly, voters will increasingly see the advantages to themselves of contracting for welfare as they contract for any other good or service, and paying much lower taxes in return. As privatization of health, education, and pensions takes hold, expectations will come back into line with resources, and a free economy and a minimal state will be restored, which will maximize the choice and quality of the services previously provided through the state.

As a doctrine, market libertarianism has strong utopian features and its full ideals have not so far been achieved anywhere. But it is a powerful and growing current in the politics of Western states. It sets out an alternative moral vision, arguing that the direction of policy should always be to reduce state spending and taxation so as to enlarge the sphere of individual liberty, self-realization, individual projects, and self-fulfilment. Individuals may choose to cooperate, but they should not be forced to do so.6 This is a radical doctrine which challenges all forms of the extended state – spending on defence and arms as much as spending on welfare. It also challenges all interventions by the state which restrict human liberty, including drug laws, immigration controls, parenting classes, and compulsory education. Nations are collectives and have no higher moral authority to coerce individuals. If they arise spontaneously, they are compatible with liberty, but once they become instruments of states, liberty is lost.

Many of the challenges to the survival of the welfare state, whether in its conservative or socialist form, are now expressed in market libertarian language. The various strands of neo-liberalism are all heavily influenced by market libertarian ideas, although many of its currents allow a much greater role for the state, and even a role for the welfare state. Friedrich Hayek defended the idea that the state should guarantee a social minimum, a safety net to prevent extremes of poverty and destitution.7 But even he offered a prudential rather than a principled argument. The social safety net was necessary to guard against the danger of revolution. It was a means to pacify and sedate the poor, a useful insurance policy to preserve the market order from social groups who might seek to destroy it.

The great moral and practical problem for market libertarianism is the same as it was for the classical liberalism of the nineteenth century: what to do about the poor. The ideal is that everyone should be self-reliant, independent, industrious, and self-contained. But what should then be done with those individuals who are not? Liberals, like conservatives, favoured certain forms of intervention, aimed at changing character and behaviour. Education has been a favoured liberal solution to social problems, reflecting an assumption that there is a rational core within every individual which can be released, permitting everyone to behave in ways which are consistent with a liberal order. No-one would be a charge on the state or the community. But progress towards this goal has always been slow, and in the meantime the liberal market order has had to deal with the poor, the feckless, the criminal, the idle, as well as the disabled, the old, and the very young. The moral dilemma of how to handle the poor, all those unable or unwilling to lead an independent life, was resolved in a number of ways, all of them familiar today. At the beginning of the industrial era, the Speenhamland system in England gave outdoor relief to the poor, but this was condemned as encouraging idleness and dependency, and was replaced in 1834 by the New Poor Law, which instituted a much harsher regime, refusing support to those able to fend for themselves, and herding everyone else into workhouses, where they were subject to a highly coercive regime and deprivation of liberty in return for bare subsistence.8 Individuals placed in the workhouse lost their right to liberty, because they were no longer considered rational, independent individuals. Not all individuals were acceptable. They had to conform to a certain standard.

There is no place for the workhouse in the market libertarian utopia, but in the neo-liberal reality of contemporary societies the problem remains of what to do with the swelling numbers of the poor since the destruction of the full-employment economy of the post-war years and the destruction of so many skilled manufacturing jobs. In the austerity programmes imposed across Europe in the wake of the financial crash, the trend has been to punish the poor, steadily reducing the value of benefits and removing some benefits altogether, making it much harder for individuals to make claims, while forcing all citizens to bear more risks themselves. Welfare benefits grew in many countries in the upswing of the economy in the 1990s and the early 2000s, but now in the recession the public mood has changed. Support for certain parts of the welfare state has declined. This is particularly noticeable in relation to non-universal benefits such as social security. The groups in receipt of social security are much more easily stigmatized as undeserving, and politically it has proved easier to squeeze the benefits of these groups. Survey evidence shows that most citizens believe that spending on, for example, benefits for the unemployed is a far higher proportion of the welfare budget than it is in reality.9

Fiscal squeezes at best contain the problem, and for market libertarians the goal is still to remove the problem altogether and get rid of the need to have any state-provided welfare at all. To achieve that they would need to broaden the attack beyond social security to the core universal programmes of the welfare state, such as health and education. The moral argument here is the same as with social security benefits. Welfare should be a matter of individual responsibility. Individuals should pay for the education of their children and should insure themselves against health risks or the risks of unemployment or disability. There is no reason why the state should be involved in the provision of either education or health for its citizens. These are private goods and can be left to the interaction between consumers and producers in free markets in the same way as any other good or service.

Progress towards this ideal has mostly been seen through the privatization of many delivery systems, allowing private companies to bid for public contracts, and slimming down public sector workforces. But states have retained control of funding, ensuring that the most important services are still free at the point of use. There have been experiments with vouchers and insurance, but they have run up against some severe practical difficulties. The moral question that arises when withdrawing the state entirely from provision or funding of education and welfare is what happens to those individuals not being covered by any insurance scheme, or who have insufficient cover for the treatments they need. The prevalence of low pay in neo-liberal economies, and the associated drive to take individuals at the bottom of the income scale out of tax makes it paradoxically very difficult to make all individuals responsible for their own health care and education. Those at the bottom of the income scale do not have any spare income to pay for the premiums and would not benefit from the cuts in income and capital taxes.

Conservatives are not committed to state solutions in either education or health, although they have often been ready to intervene in the curriculum or in public health issues. The interest of the national economy in having well-educated and healthy citizens justifies overriding the liberty of individuals. For conservatives, the issue is always how far they would allow either schools or hospitals to escape political control. The same is true for socialists. Both accept, in the way that market libertarians do not, that the nation or the community has a prior moral claim over the individual. In Ken Loach’s film The Spirit of ’45 about the first majority British Labour government, there is the story of a family who had called the doctor to see a sick child. During the visit, the doctor hears another child coughing upstairs and asks to see him as well. The mother says she cannot afford the cost of the consultation, but the doctor explains that the service is now free, and she no longer has to have that anxiety. For socialists and many conservatives, stories like these justified the creation of welfare states. But for market libertarians, while they might sympathize with the particular case, there never can be justification for removing the liberty of individuals to make their own choices. Substituting the state for the individual leads inexorably to greater dependency.

The moral arguments around the welfare state have always come down to this. How desirable is it that the state should intervene in choices individuals make about their lives by requiring that children be educated, by imposing public health requirements, such as bans on smoking, and by using its coercive powers to extract revenue from citizens to fund redistributive welfare states? The balance of this argument is a key component in assessing whether or not the welfare state can survive. For much of the twentieth century, the moral argument was generally won by those arguing for extending state provision and reducing the risks and uncertainties individuals faced in their lives. But it has always been contested, and in recent decades the old laissez-faire liberalism of the nineteenth century has been reborn in the shape of contemporary market libertarianism, and has begun making inroads in many political parties and political systems across Europe. It challenges the reason for welfare states to continue to exist. Those who want welfare states to survive must meet these arguments head-on.

Notes

1. R.H. Tawney, Equality (London: Allen & Unwin, 1931).2. Bo Rothstein, Just Institutions Matter: The Moral and Political Logic of the Universal Welfare State (Cambridge: Cambridge University Press, 1998).3. Ruth Pearson and Diane Elson, ‘Transcending the impact of the financial crisis in the United Kingdom: towards plan F – a feminist economic strategy’, Feminist Review 109 (2015), 8–30; Carole Pateman, The Disorder of Women (Cambridge: Polity, 1989).4. On the role of religion in shaping welfare states, see Philip Manow and Kees van Kersbergen, Religion, Class Coalitions and Welfare States (Cambridge: Cambridge University Press, 2009).5. Robert Nozick, Anarchy, State, and Utopia (Oxford: Blackwell, 1974).6. For an analysis of neo-liberal ideas, see Raymond Plant, The Neo-Liberal State (Oxford: Oxford University Press, 2010).7. F.A. Hayek, The Constitution of Liberty (London: Routledge, 1960).8. For an analysis of the Speenhamland system, see Fred Block and Margaret Somers, The Power of Market Fundamentalism (Cambridge, MA: Harvard University Press, 2014), chapter 5.9. Hills, Good Times, Bad Times.