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Welfare states and the great unraveling

We appear to be on the verge of a great unraveling – a period in which the established arrangements of political and economic life are rapidly coming undone. And at heart of these events is the question of the welfare state and the security of working people in contemporary capitalism.

Many of us look on, incredulous, as one unimaginable event follows another. Last month’s Brexit vote rocked the foundations not just of the European Union, but also of Great Britain, where the major parties are in disarray and the future of the 300 year-old United Kingdom is suddenly in question. In the US, the unscripted success of maverick showman Donald Trump and self-described ‘socialist’ Bernie Sanders highlights the weakness of America’s political party establishments, the visceral force of populist disaffection, and the utterly unforeseen nature of the present moment. Meanwhile in countries such as Denmark, France, Germany and the Netherlands, popular discontent nourishes the revival of ultra-nationalism and a powerful backlash against the project of European unification. And Austria’s next president may yet be the leader of the far-right, anti-immigrant Freedom Party. “Unbelievable!” we say. But each new development is another sign that the political settlements forged in the second half of the 20th century are now endangered by currents of nationalism, protectionism, and xenophobia not seen in the West since the 1930s.

These developments are replete with contradictions. In the UK referendum, the regions where support for leaving the EU was strongest were the biggest net beneficiaries of EU funding. Donald Trump draws his support from working people angry about the very business practices – offshoring, below-minimum wages, undocumented workers, tax-breaks for the very rich – that have helped Trump become a billionaire. And the migrant workers who attract so much hostility contribute considerably more in taxes than they receive in benefits.

But the motivating cause behind these developments is obvious enough. Dispossessed, insecure working people are making it clear that they will no longer tolerate an economic system that has long-since ceased to work for them. Following the decline of trade unions and of old-style Labour and Democratic parties, working people have seen their political and economic power drain away, only to see corporate and financial interests fill the vacuum and proceed to remake the economy in their own image.

Since the 1970s and the rise of neoliberal, ‘free-market’ ideas, inequality has increased, wages have stagnated, employment protections have been dismantled, and productivity gains have flowed to the very rich. And when this freewheeling casino-capitalism brought the economy to its knees in 2008, the governmental response was to bail out the banks and restore financiers’ bonuses while insisting that public services must be cut and austerity imposed in order to foot the bill. The opposition between ‘Wall Street’ and ‘Main Street’ has never been so apparent and it should surprise no one that we are now witnessing such a powerful wave of anger and resentment.

Working people rightly view ‘the system’ as being rigged against them. And frustrated by their powerlessness they take every opportunity to lash out, to protest, to punish the powers-that-be, whatever the result. A political whirlwind, long in the making, is suddenly being reaped.

The western world has seen such forces before and has witnessed the devastation they can produce. In the 1930s, when an unrestrained capitalism culminated in financial crashes, mass unemployment, and a Great Depression, the political result was that democracies collapsed, Fascism and authoritarian communism flourished, and the world was plunged into a cataclysmic war.

Public Health nursing made available through child welfare services
Social Security: Public Health nursing made available through child welfare services by Franklin D. Roosevelt Presidential Library and Museum. Public Domain via Wikimedia Commons.

In the post-war reconstruction, western governments resolved to move away from the arrangements that produced these disastrous class conflicts and national rivalries. In their place they built various versions of the welfare state – a compromise settlement that married market capitalism to mass democracy by means of a social state that guaranteed social and economic security, union rights, full employment, and the political integration of working people. These welfare states – nested in an expanding world economy and an international monetary system designed to enable national governments to manage their own economies – gave rise to decades of economic growth, diminishing inequalities, and improved standards for working people. And the creation of the EU sustained a long-term peace on a continent that had so recently been torn apart by warring nation-states.

Since the 1970s, we have witnessed the erosion of these welfare states and the protections they provide – partly because of globalisation, but largely as a result of political choices that favour the financial sector and corporate power while rendering working class life more precarious. Three decades of peace and prosperity – together with the ideological insistence of a resurgent capital that Keynsianism is dead and there is no alternative to deregulated, unrestrained markets – make it hard for us to recall the disastrous political consequences that these economic policies previously unleashed.

Welfare states are not charity; nor are they a drag on economic growth. Economically, they are systems of social insurance and social protection that make market society fit for human habitation. Politically, they are the cross-class compromises that make capitalism compatible with mass democracy.

But recent social and economic policies have undermined these vital institutions – especially in the neoliberal bastions of the US and the UK – and the political fallout now threatens the unity, peace, and stability so painstakingly constructed in the wake of World War II.

If there is any cause for hope in this dismal season, it is that the current US election has, for the first time in living memory, put wages, social security, and employment protection back on the agenda. Otherwise, the portents are distressingly clear. Unless our political classes rediscover the necessity of a strong social state, the future we face will be increasingly bleak and dangerous.

Featured image credit: Hand help by smahel. Public domain via Pixabay.

Recent Comments

  1. Rick Bennett

    The author fears a great unraveling, but a different view may be that we are watching the return to a historical norm from a period of unprecedented prosperity in the wake of the great wars.

    Darwinism limits population to what resources can bear. Capitalism drives efficiency in use of those resources. So objectively, we should have a choice to lower population to return to the halcyon days of the welfare state or to shift toward a purer capitalism to support the greater population Unfortunately, the previous implementation of the welfare state was as a Ponzi scheme that must fail in the face of a population decrease.

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