The welfare state’s role in the transition to sustainable prosperity

Dan Bailey of the Sheffield Political Economy Research Institute (SPERI) discusses the role and necessity of the welfare state in ensuring the democratic legitimacy of the transition to ‘sustainable prosperity’. He writes here about the welfare state in the context of prolonged austerity and the political revolts of the Trump vote and Brexit referendum, and in dialogue with different streams of work within CUSP.

The welfare state embodies the ethical and normative commitment to social justice and economic security which underpins the institutional transformation CUSP is committed to debating. However, there is also a tradition in social policy scholarship which views the welfare state as a strategically-created agent of social cohesion due to its ability to ameliorate the conflicts emerging from capitalist relations. This tradition is associated with Claus Offe, James O’Connor, Andrew Gamble, Wolfgang Streeck, and Peter Taylor-Gooby amongst others. The welfare state is seen to have played a central role in ensuring the democratic legitimacy of capitalism in the post-war period, when its survival was far from guaranteed, through ensuring a modicum of equitability and the tools of counter-cyclical crisis management.

The thesis has been borne out by the (displaced) societal conflicts in the aftermath of almost a decade of cuts to welfare entitlements for those of working age, which compounded decades of deindustrialisation and labour market deregulation. The so-called ‘Left Behind’ – unskilled or semi-skilled workers in deindustrialised towns – were widely narrated to be a product of, and a backlash against, the (agentless and exogenous) forces of ‘globalisation’ after this constituency emerged as a vital element of the electoral coalition which brought us Brexit and President Trump. Yet inequality and the political disaffection of poorer communities is better understood in reference to the institutional and macroeconomic drivers of economic insecurity, of which the decimation of the social safety net is one component, as is demonstrated by the variegated socio-economic effects of economic integration across the post-industrial world. The austerity agenda which became pervasive after the global financial crash led to seismic cuts to welfare provision, even whilst job creation and GDP levels have stagnated in deindustrialised towns and cities in the American Rust Belt and the North of England. Stripping back the social safety net since 2008 has contributed to the normalisation of economic insecurity, rising levels of in-work poverty, escalating levels of private indebtedness, and worsening mental health issues.

These developments have tragically proven to be fertile ground for political revolt which has found expression in nativist-nationalism. Economic decline has fused with a pre-existing cultural narrative which points the figure of blame at ‘uncontrolled’ immigration for struggling public services, job shortages, a housing crisis, welfare fraud and terrorism, as well as disempowered sovereign states and the intellectual ‘establishment’ who acquiesce it. As such, economic insecurity has combined with, and has facilitated the rise of, an ethno-nationalist nativism which fans the flames of islamophobia and xenophobia.

These expressions of political disaffection may be a feature of all countries that have retrenched welfare provision and deregulated labour market in a bid to instigate an economic recovery since 2008, but it seems to be more pronounced and electorally significant in countries with the most liberal welfare regimes; the UK and the US. The comparative evidence across countries and over time seems to demonstrate the importance of the welfare state in mitigating economic insecurity and the displaced conflicts which typically emerge from these conditions.

It is vital that the contemplation of any transition to environmental sustainability is attuned to the present context. Particularly so when the transition itself may generate increasing instability in the private sector, shorten the working week, circumscribe the fiscal capacity of the state (particularly if the end of economic growth is necessitated by the transition) to fund welfare programmes, and entail the introduction of green taxes despite their regressive consequences. This threatens to damage the material livelihoods of the poorest further. Can we expect the poorest voters to support a party prepared to introduce such measures? Even if so, can we presume that the measures will not exacerbate discontentment which could produce further bouts of divisive expression?

Ensuring the democratic legitimation (or, to put it another way, the social sustainability) of the transition to sustainable prosperity is thus predicated upon a set of institutions which insulate the poorest from market forces through a potentially turbulent period. The welfare state ought to be seen as central to that endeavor. This speaks to the P-theme of CUSP which Philip Catney has written about previously on the CUSP blog.

The politics of the welfare state makes its revitalisation no straightforward task, as Andrew Gamble discusses in his recent book. The ostensible demise of social democratic parties throughout Europe and the rise of nativist-populism means that the discourses shaping welfare state sustainability are increasingly antithetical. The idea that the welfare state inhibits national competitiveness was for decades opposed by the ‘social investment’ arguments of social democrats but it’s potency now appears to be waning. Meanwhile the mendacious narratives of ‘uncontrolled immigration’ placing intolerable strains upon welfare services are increasingly prominent amongst those expounding or accommodating nativist impulses. If this evolving discursive environment does produce further cuts and restrictions on provision, it is likely to entrench material insecurity and potentially serve as a catalyst for further expressions of discontent in the poorest communities. If so, this will only amplify political indeterminacy.

The problems of sustaining the welfare state will be more seismic still if sustainable prosperity entails the end of growth, which will suppress the tax income generated by private sector economic activity and bring forth even greater constraints upon the fiscal capacity of the state to finance welfare entitlements. This means that the means by which we finance the state, and the production of money itself, needs to be repoliticised and challenged in such a context. The need for post-growth scholars to contest the existing capitalist conventions surrounding money production in order to ensure ‘dirigisme beyond growth’ has been expounded by both by myself and Tim Jackson in working papers in recent months. The transition also feasibly demands a renewal of the welfare state itself; with the work of Max Koch, Oksana Mont, Anna Coote, Ian Gough and John Barry on shortening the working week, the basic income, co-production and economic democratisation being particularly salient.

Those advocating the transition to environmental sustainability must thus be cognisant of the social sustainability of its project. This demands a robust set of welfare institutions which offers a robust safety net and insulates citizens from the market forces which will only become more unstable during the transition. The prospect of the charted course toward sustainable prosperity being thwarted by democratic de-legitimation has rarely been such a visible threat as it is in the present moment.