I want to conclude my account of the welfare state by setting out an argument that encapsulates the historical and sociological ideas discussed in the book so far. I want to insist that the welfare state is not a policy option that we are free to adopt or reject at will. Nor is it a phase of post-war history that we are now leaving behind. The welfare state is, instead, a fundamental dimension of modern government, absolutely integral to the economic functioning and social health of capitalist societies. Welfare regimes can take a variety of different forms, and can be more or less effective, but a welfare state of some description is a vital part of any modern nation.
We can make this claim in its most concise form by stating that in contemporary western societies the welfare state is what the classical sociologist Emile Durkheim described as a ‘normal social fact’ (and by ‘normal’ Durkheim means functionally essential and integral to social health).
Durkheim sets out two criteria by means of which we can classify a social institution as normal or abnormal. A normal social fact is an institution or collective arrangement that (i) exists in all societies that have reached a comparable stage of development; and (ii) is bound up with, and integral to, the functioning of these societies.
It is an easy matter to show that the welfare state meets the first of these criteria. The welfare state exists, in some version or other, in every developed society that has an industrial or a post-industrial economy. And that continues to be true even after three decades of assaults on the welfare state by neoliberal policy reforms. In the USA and the UK, anti-welfare politics have transformed aid to the poor, reducing benefit levels, and tightening eligibility conditions. Anti-union legislation—along with structural changes in the labour market—has reduced workplace freedom, increased income inequality, and made working-class households more insecure. And the UK and US economies are nowadays governed less by Keynesian demand management and more by monetary controls and supply-side interventions. But all of these changes have had little impact on the welfare state’s institutional core. Social Security and Medicare in the USA, and National Insurance and the NHS in the UK, have expanded over that time and continue to command massive popular and political support—a pattern of persistence in adversity that is replicated in all of the OECD nations over the same period. Today’s welfare states have been transformed in important respects but, as shown in Chapter 7, their infrastructures remain firmly in place and they remain a vital dimension of modern government and of social and economic life.
The second test is more complicated. How can we show that the welfare state is essential to the functioning of developed capitalist societies? How can we demonstrate that it is, as Durkheim put it, ‘bound up with the fundamental conditions of social life’?
Here we need to recall some of the harsher characteristics of capitalist economies and competitive markets—features that we often forget precisely because welfare states moderate and obscure their effects. Modern societies are capitalist societies. They are, to paraphrase the German sociologist Wolfgang Streeck, societies that have set up their economies in a capitalist manner and in so doing have entrusted the vital task of material provision (upon which all human life depends) to private economic actors—i.e. to capitalist firms whose actions are oriented towards the accumulation of capital on the basis of private calculations of utility.
Capitalism is, it should be said, a tremendously powerful system of production and exchange. No other economic system can compare in terms of sheer productivity, innovation, and dynamism. And capitalism’s impact on technological progress and the accumulation of goods is unsurpassed in human history.
Open markets also have their virtues. They are remarkable arrangements for generating choice, communicating information, and promoting certain kinds of freedom and equality. And the worldwide expansion of trade and commerce has, if some historians are to be believed, contributed to the softening of manners, the expanded scope of solidarities, and the civilizing of nations. In all these respects, capitalist economies have been an enormous boon to human welfare.
But there is also a fundamental sense in which capitalism, as a system of economic action, is profoundly anti-social. Societies that allow economic life to be governed by the logic of private profit and market competition are societies at risk. They are prone to rapid undirected change; to socially damaging concentrations of wealth and inequality; to crises of accumulation; and to periodic economic collapse—sometimes on a worldwide scale. The chief characteristics of capitalist societies are not stability and equilibrium: these are the unfounded assumptions of economic theory, not facts about real world economies. The chief characteristics of capitalist societies are uncertainty, insecurity, inequality, and undirected change—all of which generate damaging consequences for our social and natural environments.
As Marx and Engels pointed out long ago, capitalism permanently revolutionizes the societies it inhabits. It generates what the economist Joseph Schumpeter called ‘creative destruction’ leaving a trail of disruption in its path. We see this all the time: in the collapse of the old industrial sector, the 1970s oil shocks, the 2008 housing bubble, the Eurozone crisis, the global financial crisis, all of which caused massive disruptions to people’s lives. But even as it brings social disruption in its wake, profitable capitalist action requires a supportive social environment and an enabling material infrastructure. It needs socialized, educated, healthy workers—and the functioning families, communities, schools, and healthcare systems that produce them. It needs a dependable supply of raw materials and resources; a transportation infrastructure; a population of consumers; a stable political environment and much else besides (see Box 14).
Left to their own devices, competitive markets and private profit-seeking tend to destroy these essential social supports. Their tendency is to commodify, to consume, to expand, and to destroy all obstacles that stand in the way of accumulation. And these capitalist processes produce disastrous side-effects—as witness the threats currently affecting the climate, our natural resources, family life, and the physical and economic health of populations.
‘There is nobody in this country who got rich on their own. Nobody. You built a factory out there—good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory—and hire someone to protect you against this—because of the work the rest of us did.’
US Senator Elizabeth Warren, 2011
Market capitalism is, to quote Streeck again, an inherently ‘self-destructive social formation’ which is protected from the dangers it creates by the operation of anti-market and market-moderating processes. The paradoxical—one might say dialectical—consequence is that ‘capitalism depends vitally on the presence, essential but never guaranteed, of effective opposition to it’. To avoid self-destruction capitalism needs a set of countervailing forces. And welfare states are the embodiment of these forces established in a functional, institutional form.
Beveridge, Keynes, and their contemporaries recognized the uncertainty, instability, and anti-social effects generated by capitalist processes. They designed an apparatus that would manage these uncertainties, flatten out booms and busts, and establish a framework of collective economic security in which capitalist risk-taking might proceed. Since that time, the social regulation of markets, the social insuring of workers, and the public provision of social services and protections—in short, the welfare state in one or other of its variants—has become our established means of restraining the anti-social dynamics and the destructive externalities that are the essential concomitants of free-market capitalism.
The genius of the welfare state is its capacity to use the magic of averages and the collectivization of risks to render market capitalism habitable for humans and compatible with modern democracy. We have seen how the enfranchisement of working people, beginning in the early 20th century, meant that the power of private ownership came to be tempered by the power of governmental action and public law. And though the quality of government varies—and constant vigilance is needed if the effects of ineptitude, corruption, overreach, and special interests are to be minimized—the record of the last hundred years shows that welfare state government can succeed in civilizing and democratizing the stupendous power of capitalist enterprise.
Critics of these arrangements describe the welfare state as a hindrance to economic and social vitality. But the analysis presented in this book suggests the exact contrary: that welfare states are an essential means of sustaining that vitality.
Welfare state programmes are, for reasons I have indicated, inherently problematic and non-ideal. And today they are everywhere under stress and in need of adaptive reform. But they are also an essential counterweight to problem-prone capitalist economies that could not exist without them. Once we establish that historical and sociological truth, and put an end to the destructive dismissal of the welfare state project, we can more clear-sightedly turn to the task of improving welfare state institutions and adapting them to the social and economic challenges of our time.