The Welfare State: Prospects for reinvention in the twenty-first-century world orderABSTRACT
The most prominent current developments of capitalism are the new Schumpeterian cycle and the new international division of labor. The emergence of new global actors takes place through state intervention, which suggests that state regulation tends to preserve its role. The conclusion is that the Welfare State has its role assured as an instrument that guarantees the proper functioning of the capitalist economy in the twenty-first century. It is likely to undergo changes in its scope, though not in its essence, and a possible synthesis of the Welfare State is likely to be forged.
KEYWORDS:
Welfare State; welfare state; social security; public regulation; regulated capitalism.
INTRODUCTION
The existence of so many extremes characterizing the twentieth century fully justifies the designation given to it by Eric Hobsbawm as the Age of Extremes (Hobsbawm, 2003). The transition into the new century has been so abrupt that only we, its contemporaries, can truly feel the consequences of these transformations. Yet, although we are able to perceive the impacts of change, it is difficult for us to grasp their essential meaning and, in this regard, historians of future generations will be in a better position to interpret history than we are. After all, as Machiavelli had already warned, it is from the tops of hills that one observes the full extent of valleys and, in that sense, history is easier to interpret after it has unfolded. Nevertheless, even as contemporaries of these transformations, it is possible to analyze them rationally, provided that we apply the appropriate methods and means for doing so; this is the intention expressed here.
Among the transformations undergone by capitalism at the end of the twentieth century are the shocks to which the Welfare State has been subjected. The extraordinary advance in social organization - which seemed to represent the triumph of advanced capitalism over actually existing socialism - has shown signs of fracture, tending toward retrenchment in the twenty-first century. For a considerable number of analysts, this crisis would be the consequence of the conservative offensive of restructured capital, the loss of labor’s centrality, and the end of the Keynesian compromise. From this perspective, the crisis would amount to an intentional conservative offensive, on the part of adherents of neoliberal thought, aimed at dismantling the Social State and replacing it with the minimal state.
This study holds that, for the time being, the shocks through which the Welfare State is passing are seasonal and characteristic of the current transitional phase of capitalism. There are no clear signs of a presumed death of the regulatory state, much less of a disaggregating regression of social policies. On the contrary, economic, political, and social state regulation appears to be a well-established instrument of capitalism’s self-preservation; indeed, there seems to be a universal awareness of its virtue in ensuring the proper functioning of the economy.
According to the interpretation developed here, world capitalism is inaugurating a new stage of accumulation, in which a new Schumpeterian cycle and a new international division of labor predominate, both of which have unsettled the old structural fracture between the core and periphery. As a result, the equilibrium once enjoyed by the core economies in the twentieth century has been profoundly shaken by the competitiveness imposed by emerging countries, especially the Asian countries.
Yet the very emergence of recently industrialized countries has occurred by virtue of the existence of strong, planning, and above all interventionist states, which suggests that, despite the eloquent discourse of the late twentieth century, liberalism is unlikely to establish itself as the hegemonic doctrine in the new world order. All competitive Asian economies have strong, interventionist, and regulatory states.
At present, there is a conflict setting emerging countries against those of advanced capitalism. Once the war in Ukraine has ended, the world political and economic order will never be the same. U.S. unipolarity and Atlanticist hegemony are gradually losing ground in the new global geopolitical setting now taking shape. The consolidation of a multipolar world is inexorable, with the formation of other poles of political and economic power. With the inflection of Europe and the United States, the new emerging poles of power will tend to impose, or at least influence, a new world political and economic order, definitively burying the Bretton Woods exchange-rate regime and the hegemony of the dollar. Indeed, these new poles of power will also tend to build or export their own models of Welfare State, since they regard the European model as harmful to national productivity. Therefore, the debate on the Welfare State lies at the very heart of contemporary conflicts, and this study seeks to discuss it from that perspective.
Most likely, a new international concertation will take place, in which a standard type of Welfare State will be agreed upon and negotiated within multilateral organizations. This new Welfare State would no longer be the classic Institutional-Universalist model typically associated with Europe, but rather a synthesis between that model and another type dictated by the financing possibilities of emerging countries. Even if such concertation does not occur, should deglobalization be confirmed and national economies retreat into protectionism, this would not imply the end of the Social State, since emerging economies have stood out precisely because of the high degree of state intervention. And, as history has shown, with rare exceptions, every form of interventionism somehow results in the materialization of a particular type of Social State.
THE IDEOLOGICAL BASIS FOR THE LEGITIMATION OF THE PROTECTIVE STATE AND OF SOCIAL POLICIES
Throughout history, there has always been a very strong symbiosis between the state and the economy. Rome, the most powerful society on record, achieved such supremacy thanks to the action of its expansionist state, which, through the use of military force, propelled the most solid economy to exist within the ancient mode of production.
In 1651, in Leviathan, or The Matter, Forme and Power of a Common-Wealth Ecclesiasticall and Civil, Thomas Hobbes wrote that the existence of a strong state is a necessity of human organization, in order to prevent man from becoming a wolf to man himself (Hobbes, 2003). Even if one qualifies the fact that Hobbes was referring to the absolutist state, his warning cannot be ignored: above economic needs, political elements must prevail in order to guarantee the harmony of social formations.
In his remarkable 1940 book, Karl Polanyi demonstrates how, throughout history, the economy and markets were always subordinate to political organizations, this universal rule having been broken only for a brief period in nineteenth-century England. The failure to observe this principle by the then-hegemonic English capitalism led the world economy to ruin in the first half of the twentieth century.
For Karl Polanyi, as well as for other thinkers such as Eric Hobsbawm, the two World Wars and the Great Depression of the 1930s were consequences of the irrational way in which the market was elevated to the regulator of human life. According to Polanyi, “economic liberalism misread the history of the Industrial Revolution because it insisted on judging social events from an economic viewpoint” (Polanyi, 2000, p. 52).
Yet it was John Maynard Keynes who, in 1936, formulated the most solid basis of argument regarding the need to subordinate the market to politics. In summary, for Keynes, the psychological component exerts great influence over the market, and economic agents become fearful or less inclined to invest during times of crisis or uncertainty regarding rates of return on capital. When a large share of the economic agents within a productive system feel unmotivated or hesitant to invest, a conjunction of negative expectations arises, creating a situation of declining investment levels that culminates in a profound economic crisis (Keynes, 1992).
Observing the experiences of the recovery of the American and German economies in the 1930s, Keynes concluded that the state has a fundamental function in maintaining rates of economic growth and other macroeconomic aggregates, and that its regulatory role is indispensable to the proper functioning of the capitalist economy (Keynes, 1992).
Perhaps, however, T. H. Marshall’s argument is the most important for supporting the thesis that concerns us here, namely, the consecration of the Welfare State as a most important stage in the civilizing process. For Marshall, inequality in class society is acceptable only if the principle of citizenship prevails. And citizenship must be achieved through the complementarity of three elements, namely: the civil, the political, and the social. The civil element comprises individual liberty, freedom of the press, freedom of movement, religious freedom, and the right to property. The political element encompasses the right to political participation. The social element includes the right to social welfare and to economic achievements (Marshall, 1967).
For Marshall, the realization of social rights carries great weight in the harmonization of capitalist society because its objective is to reduce the distance among classes. What matters is that there be a concrete enrichment of the substance of civilized life, and the public provision of services by the state carries great weight in the degree of homogeneity that a harmonious society must attain. According to Marshall, beyond income, public services can exert a profound effect on the qualitative aspects of social differentiation; they form part of social welfare.
For Desmond King, history has demonstrated that capitalism does not function when governed by the laws of the market alone; some degree of regulation is fundamental. The most effective way of achieving this is through the state, and the Welfare State is a profound restructuring of capitalism. Within it, the distinction between the state and the market is only faintly palpable, because the changes brought about in the structure of employment and in the size of the public sector imply a symbolic relationship among those institutions. As King states: “Contemporary political economies combine welfare state structures and economic structures: the two are essentially interlocked and provide defining features of advanced industrial democracies” (King, 1988, p. 54).
According to Desmond King, it is mistaken to attribute the consecration of the Welfare State to the consolidation of the social-democratic project. The work of Gøsta Esping-Andersen makes clear that, up to the 1930s, the weight of socialist and social-democratic parties was residual, while throughout Europe there was a proto-hegemony of liberal or conservative-oriented parties (Esping-Andersen, 1990). Nevertheless, by 1930 there were twelve European countries with social security systems already in place (King, 1998, p. 59).
Although it was not a social-democratic achievement, it was during the period of hegemony of social-democratic governments - that is, in the thirty years following the Second World War - that the Welfare State underwent its remarkable refinement, establishing itself as one of the most important stages of the civilizing process. In broad areas of advanced capitalism, the blurring of the boundaries between the state and the market produced a mixed economy, freeing a significant share of the labor force from subordination to market interests. In countries such as the Scandinavian ones, income derived from state transfers reached nearly 50% of total national income. In the United States, in 1980, 41.7% of all primary incomes came from the state.
The Welfare State promoted the decommodification of life and labor relations, giving capitalism a more civilizational physiognomy. At the same time, it brought into being, developed, or strengthened classes or social strata entirely connected to and dependent on state transfers or on the very management of social programs, such as beneficiaries of social services and the public bureaucracy itself.
At the same time, from a strictly economic standpoint, as John Maynard Keynes (1992) had already proposed, the constancy of state expenditure - whether through direct and indirect wages, the provision of public services, or other income transfers - produced a strong multiplier effect, making the continuity of state investment a source of solid effective demand and thereby also producing a certain macroeconomic stability for societies.
These developments created powerful forces in defense of the Welfare State, such that its elimination has become practically impossible, even though reductions in public expenditure and in the scope of social services may occur in times of crisis. Obviously, we referring here to interventionist economies and not to those of state dirigisme, as was the case with the defunct Union of Soviet Socialist Republics (USSR), where - vainly and without support in economic theory - an attempt was made to dislodge the market in favor of a state-controlled and planned economy. Today, we know that the Soviet market was never displaced; rather, part of it was pushed underground, where it operated clandestinely for decades. The authentic Welfare State does not seek to dislodge the market, not least because such an aim is an unrealizable utopia. Rather, it seeks to impose certain rules on capital accumulation, among which is the establishment of a package of social guarantees for the full consolidation of advanced democracies.
In sum, the Welfare State is the most developed form of regulation that society has found to minimize the disaggregating aspects of capital accumulation. Within the possibilities allowed by the productive forces of the capitalist mode of production, it is the most developed stage of the civilizing process, and universal social services constitute the most important aspect of the decommodification of life. The Welfare State represents a profound state intervention in economic activity, and its emergence, development, and consecration are a necessity for the survival of capitalism.
For Karl Polanyi, allowing the market mechanism to be the sole director of the fate of human beings and of their natural environment, and even the arbiter of the amount and use of purchasing power, would result in the demolition of society (Polanyi, 2000, p. 94). By transforming labor power into a commodity and subordinating it to the interests of capital, industrial capitalism produced profound imbalances within societies, thereby generating the need for state intervention. Therefore, if industrialization is not to destroy the human race, it must be subordinated to the requirements of man (Polanyi, 2000, p. 289).
THE IDEOLOGICAL BASIS FOR THE LEGITIMATION OF THE PROTECTIVE STATE AND OF SOCIAL POLICIES
Since the nineteenth century, England had suffered from the catastrophic consequences of industrialization, urbanization, wage labor, and the subordination of labor power to the dictates of the market. In The Great Transformation, Karl Polanyi offers a compelling analysis of the social cataclysm generated by the incidence of these economic and social phenomena in a society dominated by a blind, devout, and almost idolatrous faith in the free market (Polanyi, 2000). The chaos into which England descended in the nineteenth century might have been avoided had this devout belief in the laws of the market not been so deeply rooted.
Among scholars, there is a relative consensus regarding the emergence and development of the Welfare State. According to this consensus, the last decade of the nineteenth century may be identified as the moment of its emergence, while the end of the Second World War marks the starting point of its expansion. From the immediate postwar period until the mid-1970s, especially in Europe, there was a profound refinement of the Social State, corresponding to what is known as the Golden Years or the Thirty Glorious Years (King, 1998).
The period of refinement of the Welfare State - that is, the interregnum between the immediate postwar years and the end of the 1970s - deserves closer attention because of the unprecedented nature of the practical experience it provided in support of Keynesian theory. According to Desmond King, the most positive lesson that may be drawn from this period is the indivisibility of economic policy and social policy, both of which appear intertwined within a single model of state management aimed at economic and social stability. It is undeniable that the sharp increase in state expenditure, through the expansion of the public sector workforce and, above all, through income transfers to society, strengthened the multiplier effect, thereby ensuring constant effective demand and the preservation of employment levels (King, 1998).
Contrary to what many imagine, the Welfare State is not a phenomenon confined to European capitalism; rather, it spread throughout the world in diverse forms. In Latin America, one may identify a Social State in Brazil, albeit a rudimentary one. In Argentina, Chile, Costa Rica, and Uruguay, one can identify models of Welfare State that approximate the traditional European models. There is also little doubt that one may speak of rudimentary forms of Welfare State in the United States and in the former Soviet Union.
The Welfare State did not arise as something deliberately planned in order to grant capitalism a long life through social stability; rather, it emerged as an immediate response to specific economic, political, or social problems. The emergence of the first complete Welfare State, the German one, illustrates this argument. In Germany, in the 1870s, the reforms implemented by Count Bismarck - especially social security and pension rights - were adopted because that government felt the need to weaken the influence of trade unions and socialist parties among the masses. In Europe, political forces of every ideological stripe contributed to the construction of the Welfare State (King, 1998).
There is a cyclopean controversy regarding the conditioning factors that made possible the development and consolidation of the Welfare State. Ann Shola Orloff and Theda Skocpol classify the four principal groups of conditioning factors as follows: (i) welfare is intrinsic to capitalist development: industrialization or economic development would have produced more or less logical outcomes, including the formation of the Welfare State; (ii) welfare is a consequence of liberal thought: certain strands of liberal thinking held that a system of social protection is an inexorable necessity of capitalism; (iii) welfare is an achievement of the organized working class: this thesis argues that the Social State is a historical conquest of the working class after decades of trade-union organization; and (iv) welfare is the result of pressures arising from the public bureaucracy: it is undeniable that the growth of public services would affect budgets and public employment itself, producing the gigantism of the state apparatus (Orloff and Skocpol, 1984).
According to Desmond King, it is an incontrovertible fact that, at a certain point, the public bureaucracy itself came to defend the Social State as a way of maintaining its power over budgets and preserving its own status. In his view, these four groups of factors combine in the construction and refinement of the Welfare State. Nevertheless, it is apparent that the first two groups exert greater influence in the phase of construction of welfare - that is, from the last decade of the nineteenth century to 1945 - whereas the latter two groups exert greater influence in the phase of refinement of the Social State, that is, from the postwar period to the end of the 1980s (King, 1998).
The transformations undergone by the world economy at the end of the twentieth century, especially the increase in competitiveness among economic systems, brought numerous changes both to the nature and to the scale of Welfare States. From the late 1970s onward, and throughout the 1980s and 1990s, we witnessed the neoliberal offensive against regulatory principles and regulation-oriented governments, above all a devastating attack on universal social policies.
The book that perhaps best synthesizes the fear that seized a significant portion of the intelligentsia regarding the possible end of the Welfare State is the one written by Robert Castel. According to him, the concrete possibility of a profound regression, and even of the end of the Social State, has been on the table since the end of the twentieth century (Castel, 2003).
Throughout this study, we intend to demonstrate that Castel’s alarmism is unjustifiable, and that his line of argument is valid only if taken as a warning about the magnitude of what the Welfare State represents as a superior form of organization of social formations. After all, only the possibility - even an imaginary one - of losing it could draw the attention of unwary segments of society to the extent to which it is beneficial to economic stability and social peace. So far as can be seen through the lenses of rigorous observation, the world economy will continue to depend on increasingly sophisticated forms of state regulation, including in what concerns the protection of labor power from the disaggregating consequences of an unregulated market.
THE CRISIS OF THE WELFARE STATE
The first symptom of the crisis of the 1970s materialized in the unilateral U.S. rupture with the Bretton Woods exchange-rate regime in 1971. The two oil shocks, in 1973 and 1979, intensified the global crisis of capitalism, marking the end of the prodigious postwar cycle of growth. The election of liberal-spectrum politicians in the United States and the United Kingdom appeared to signal the exhaustion of Keynesian macroeconomic management by the state and the bankruptcy of social-democratic ideology. Until the collapse of the moribund economies of state dirigisme in Eastern Europe in 1989, global capitalism would witness the intensification of neoliberal discourse.
Since the 1960s, liberals had been mobilizing against the regulatory state. Despite the success of the Welfare State in promoting capitalist stability, liberals continued to argue that the path of regulation was, in essence, the Road to Serfdom, which would inexorably lead the world economy into bankruptcy. For von Hayek, the greater equality thereby achieved was harmful to competitiveness, since it discourages competition (Hayek, 2010).
In the 1980s and 1990s, Hayek’s ideas triumphed throughout the Organisation for Economic Co-operation and Development (OECD), turning neoliberalism into an ideological discourse on a planetary scale. As a result, pressures for governments to manage state budgets under a regime of fiscal discipline gained relative consensus, and the most forceful attack aimed at reducing the size of the state came through cuts in social expenditure (Anderson, 1995).
According to Perry Anderson, numerous arguments - most often unfounded - were employed by multilateral institutions and international speculators in order to persuade peripheral countries to surrender to the principles of the free market. Anderson argues, for example, that the inflationary surges experienced by Latin America in the 1980s and 1990s were deliberately planned in order to convince populations to accept a regime of fiscal discipline (Anderson, 1995).
After the year 2000, the balance sheet of managing the economy under free-market principles points to the failure of neoliberal dogmas, while also revealing that they are unfounded and, above all, inapplicable to the capitalist economy. On the positive side, liberalism only succeeded in containing inflation. On the negative side, liberalism: (i) increased corporate profits; (ii) raised unemployment rates; (iii) increased inequality; (iv) caused investment to decline; and (v) promoted brutal financial deregulation (Anderson, 1995). As a consequence, the long cycles of growth of the world economy, expressed in Kondratieff waves, gave way to the short oscillations of stop-and-go.
Undeniably, the intensification of liberal dogmas and, above all, the emergence of new highly competitive zones of recent industrialization negatively affected the Welfare State, laying bare its crisis. Nevertheless, there is a profusion of other arguments concerning the reasons for this crisis, some of which are presented below.
For Simon Clarke, there is no crisis of social democracy, nor of its mode of governance. Rather, capitalism is undergoing a crisis of the Fordist system of production, which has become exhausted and has thereby shaken the Fordist mode of regulation. On the basis of this diagnosis, social democracy must work toward the construction of a new regulation in line with the reconfigured economy of the twenty-first century. This obviously does not imply abandoning regulation or the Welfare State; rather, it requires adapting them to the new economic reality (Clarke, 1991).
In this transitional moment, neoliberalism attempted to implement its agenda. However, its experiment failed, since the application of its principles was unable to engender a cycle of growth, stability, and prosperity. For Clarke, history has demonstrated that there is no capitalist way out beyond a model of state regulation, and that social democracy is seeking - and will probably find - a new regulation adaptable to the new stage of accumulation (Clarke, 1991).
For Sonia Draibe and Wilnês Henrique, the Welfare State is not undergoing a crisis in the strict sense of the term; rather, it is experiencing a mutation in its nature and form. According to these authors, it is undeniable that some of the most prominent features of the Welfare State began to work against it once the regime of fiscal discipline started to pressure governments. Among these features, they identify: (i) the gigantism of the state; (ii) the size of the public bureaucracy; and (iii) the high tax burden imposed on the productive system (Draibe and Henrique, 1988). They are certainly correct when speaking of the Welfare State in general terms; however, in Brazil, the main problem is that the state absorbs society’s resources while its meager public policies return fifth-rate services. The balance generated by this pernicious equation between revenue extraction and the cost of the services delivered flows into the pockets of the bureaucratic estate, in precisely the sense coined by Raymundo Faoro (2001).
After analyzing arguments both favorable and unfavorable to the Welfare State, Sonia Draibe and Wilnês Henrique conclude that the crisis of the Welfare State is, in fact, a crisis of its linkage to Keynesianism, which makes it dependent on constant state investment in order to reinvigorate effective demand. According to them, in Europe, targeted social policies and programs are rejected by the population, whereas universal ones are well accepted. This indicates that, despite requiring unavoidable adjustments, welfare enjoys an immovable base of political support. Thus, a new regulation is needed, capable of adapting social protection to the new reality imposed by the post-industrial economy of the twenty-first century (Draibe and Henrique, 1988).
Perhaps the most opinion-shaping - though not the most rational - analysis of the crisis of welfare is that undertaken by Robert Castel. According to Castel, what is under threat is the collapse of the wage-earning society. Welfare was built on the basis of a society structured around labor, in which individuals’ inclusion in citizenship was tied to their insertion into the labor market as wage earners. By the end of the twentieth century, this model of insertion had entered into crisis, since the new economy no longer rests on full employment and tends instead to maximize the factors of production to the limit, especially labor, with a profound contraction in employment levels (Castel, 2000).
On the other hand, in a line of argument somewhat as alarmist as Robert Castel’s, Pierre Rosanvallon contends that the crisis of welfare is not an economic crisis but a social one; that is, a crisis of solidarity within society itself. According to him, the consolidation of classic welfare eroded the bases of the automatic solidarity that previously existed in society, replacing it with the solidarity of the state. With the weakening of the state and of its regulatory functions, society gropes in search of another model of solidarity. On this point, we presume that the thinkers of the Austrian School would fully agree with Rosanvallon. He also believes that a new institutional framework for social policies cannot be built on financing derived from social contributions, but rather on funding of tax origin (Rosanvallon, 1998).
In sum, there is a profusion of explanatory arguments concerning the crisis of the Welfare State, and all the explanations presented here possess some coherence and some degree of validity. Nevertheless, in our view, none of them touches upon the genesis of the motives that essentially affect the Social State, namely, the consolidation of a new stage of capitalist development, characterized above all by a new international division of labor and a new Schumpeterian cycle. Many of the reasons offered by the authors examined to explain the changes that have occurred in the world of labor and in social protection are well grounded; however, they are, we believe, consequences of a much larger, structural, ontological, and historical event: the transition of the capitalist mode of production into a new stage of accumulation.
For anyone who has read and understood what it truly is, what it means in historical terms, and what its economic, cultural, political, and social consequences are, the Information and Communication Technologies (ICT) Revolution overturns a substantial part of the values of the twentieth century, as Manuel Castells (1999) memorably demonstrated. Any understanding of the crisis of the Welfare State will remain incomplete unless one grasps the depth of the transformations that have affected global capitalism and, in particular, the social repercussions produced by the ICT revolution.
TYPES OF WELFARE STATE
As an economic, political, and social phenomenon of the highest importance, the Welfare State occupied a prominent place in the studies of political economy in the twentieth century. Yet, in the twenty-first century, the theorization surrounding it still seems to fall short of the magnitude of the role it plays in harmonizing social relations and in ensuring the stability of the capitalist economy.
This gap, we believe, is even more evident in studies dealing with the transformations undergone by the Welfare State at the end of the twentieth century, as well as in discussions of its prospects, which are often easily confused with speculation about its future. As we shall return to below, the new stage of capitalist accumulation has introduced a degree of complexity into social policies that has led many theorists to adopt a pessimistic view regarding the future of the Social State.
It should be emphasized, however, that the Welfare State developed in highly differentiated forms throughout the world, in accordance with the economic, political, social, and cultural conditions of each society. At this moment of capitalist transition, and under pressures to reduce its more sophisticated variants, it is especially necessary to understand the various types of Social State that were consolidated in the previous century.
For Geraldo Di Giovanni and Marcelo W. Proni, the beneficial impacts of the Welfare State on social peace and macroeconomic stability are so essential that studies should classify its history into two major phases: (i) its construction, from the nineteenth century through its maturation in the twentieth century; and (ii) its crisis of identity and the threats that fell upon it at the end of the twentieth century (Di Giovanni and Proni, 2006).
As in other fields of Sociology and Political Economy, the United States was a pioneer in studies on the Welfare State. Scholars of the Chicago School developed an efficient methodology for studying the impacts of social policies on the population, one that remains a point of reference to this day.
The established theoretical framework provides us with an exceptional intellectual basis for understanding the Welfare State as a historical phenomenon characteristic of the capitalist mode of production and of the civilizing process itself. Among the many scholars who have addressed the subject, we present here, briefly, some noteworthy perspectives, including those of T. H. Marshall, Richard Morris Titmuss, and Pierre Rosanvallon.
T. H. Marshall was the first theorist to formulate a typology intended to classify the models or types of Welfare State. For him, there are two types of welfare polity: (i) the Welfare State; and (ii) the Affluent Society. The authentic Welfare State is one in which the state intervenes in the economy in order to guarantee a minimum basis of social rights and a satisfactory range of universal public services. The Affluent Society is one in which, beyond the traditional prerogatives of the Welfare State, there also exists a dynamic process of social mobility (Marshall, 1967).
Beyond an executable policy of income transfer and a functional structure of public services, full citizenship also requires the satisfaction of consumption needs, which in turn demands the efficiency of the productive system in offering tangible goods and services to society as a whole. In this sense, in addition to serving as a guarantor of income transfer and a provider of social services, the state must also be efficient in its macroeconomic coordination of production, according to the terms of productive efficiency indicated by John Kenneth Galbraith (1983).
In sum, for T. H. Marshall, the Welfare State is one in which organized power is deliberately used “in an effort to modify the play of market forces in at least three directions which can be briefly described as guaranteeing individuals and families a minimum income, narrowing the extent of insecurity, and enabling all citizens without distinction of status or class to meet certain agreed standards in relation to a range of social services” (Marshall, 1967, p. 187).
In the early 1960s, Richard Morris Titmuss proposed another typology of the Welfare State. According to Titmuss, there are three types of Welfare State: (i) the Residual; (ii) the Industrial Achievement-Performance, here rendered as Meritocratic; and (iii) the Institutional Redistributive. The Residual model is, in essence, assistance-based, with low state participation. In the Meritocratic model, benefits are obtained in accordance with the individual’s merit. In the Institutional Redistributive model, social protection is provided by the state on a universal basis, as an affirmation of full citizenship (Titmuss, 1976).
According to this classification - and by way of illustration so as to make the distinctions among each type clearer - the United States has a Residual model of Welfare State, whereas England and the Scandinavian countries operate under the Institutional Redistributive model. Brazil would function under a Particularistic Meritocratic model. Although there are other interpretations of considerable importance, such as that of Esping-Andersen, Richard Morris Titmuss’s typology remains the most widely used in studies of the Welfare State.
Desmond King adopts W. Korpi’s typology for the classification of Welfare States. According to this typology, there are two types: (i) marginal models; and (ii) institutional models (KING, 1988). These are two ideal types of Welfare State, situated at opposite extremes and identified, respectively, by the minimum and maximum attention they devote to social security and social protection. By way of illustration, the U.S. system may be classified as a marginal model, while the Swedish system may be identified as an institutional model.
There is still much to be researched and debated regarding the Welfare State, and Political Economy must devote close attention to this issue, especially at this moment when the new stage of capitalist accumulation is affecting social policies. As Pierre Rosanvallon (1998) warned, there is already talk of a Welfare Society, that is, an alternative model of decentralized, debureaucratized, and de-statized management of social policies, based above all on the choice of non-governmental organizations as managers of budgets.
THE FUTURE OF THE WELFARE STATE AND THE NEW STAGE OF CAPITALIST ACCUMULATION
There is more controversy than convergence regarding the transformations undergone by the capitalist mode of production at the end of the twentieth century. Predominant analyses invariably attribute the disintegration of the Bretton Woods regulatory pattern and the loss of labor’s centrality in social relations to the intensification of global competition, the conservative offensive of capital, and the affirmation of neoliberal-oriented principles. Undeniably, this line of argument possesses a certain degree of validity and coherence, and the perspective developed here does not seek to diminish it; nevertheless, we believe it cannot and should not be accepted as the sole determinant of the changes that currently affect economic systems and social formations. There is something more disruptive and phenomenological in capitalist development affecting both the productive base and the superstructure of societies.
In his remarkable work of the late 1990s, Manuel Castells clarifies how the consolidation of the Knowledge Economy substantially alters the axis of accumulation and the value base of twentieth-century industrial capitalism (Castells, 1999). In a 2011 study, we investigated other aspects of this transformation and concluded that, in addition to pressures of a political nature, there are also constitutive elements of the material and productive forces affecting the course of accumulation, among them a new Schumpeterian cycle of innovations. For all these reasons, the twenty-first century reveals a new phase of capitalist accumulation that has deeply affected social relations, especially the Welfare State (Gomes, 2011).
Perhaps the most effective way to speculate about the future of the Welfare State is to analyze the social appeal, argumentative solidity, and even the base of legitimation of social democracy’s antagonist, namely neoliberal thought. From this perspective, Perry Anderson’s work gives us a good idea of what lies ahead. According to Anderson, there was a relatively consolidated awareness of the harmfulness of applying free-market dogmas; yet multilateral organizations - and even, we believe, major international speculators - provoked inflationary surges in peripheral and emerging countries in order to convince their populations that regimes of budgetary and fiscal discipline were necessary (Anderson, 1995).
For Anderson, although neoliberalism is a movement on a planetary scale, it remains on the defensive, since it has failed globally after three decades of successive negative effects produced by the unrestricted application of its principles. In the countries where it predominated, neoliberalism, on the one hand, curbed inflation, but on the other, increased corporate profits, raised unemployment, increased inequality, promoted deregulation, and allowed the rate of investment to fall (Anderson, 1995).
F. A. Hayek’s argument that the system of regulation taking shape in the postwar period was in fact an inexorable Road to Serfdom, to which regimes of state dirigisme and economic regulation would lead (Hayek, 2010), proved fallacious once it was rediscovered that, as Karl Polanyi had warned, true human servitude is the kind that subordinates the essence of man to the interests of the market (Polanyi, 2000).
While respecting the many well-grounded opinions mentioned here, it is likely that the crisis of the Welfare State is due less to neoliberal discourse itself than to the new international division of labor that became consolidated at the end of the twentieth century, together with the emergence of the Third Industrial and Technological Revolution and the new stage of capitalist accumulation.
Although it is a phenomenon of social organization, one cannot ignore that the Welfare State - as we know it - is closely bound up with twentieth-century core capitalism, especially with the Fordist mode of regulation and with the application of the principles of Keynesian macroeconomics. Allowing for the necessary particularities and exceptions, the genuine welfare model of the Institutional Redistributive type is an achievement of advanced capitalism, especially of Western European capitalism.
Obviously, the Welfare State entails a cost to be borne by society, which implies that it must rest upon a relatively stable economy endowed with sufficient backing to sustain the burdens demanded by social protection. For the core countries, this did not constitute a major problem throughout the second half of the twentieth century, since the configuration of the international division of labor reserved to them the monopoly of the production and export of high value-added goods and services.
Thus, a considerable part of the intense accumulation of capital in developed countries could be channeled toward social assistance policies, political stability, and social peace. From a strictly political point of view, of course, the Cold War exerted strong influence over the Welfare States of Western Europe, since the hundreds of Soviet armored infantry divisions stationed in Eastern Europe constantly threatened Western governments, obliging them to maintain good relations with their electorates and with the trade unions.
However, at the end of the twentieth century, the international division of labor was altered as a result of the emergence of new actors on the global stage. The industrialization of several Asian countries, especially the rise of China and the Republic of Korea, shook the supply of goods and services in the world market. Elsewhere in Asia, other strategic actors entered the scene, among them Malaysia, Indonesia, Singapore, Taiwan, and even Vietnam. In Eastern Europe, Russia and some of the former Soviet satellites - such as the Czech Republic and Poland - are modernizing and may in the future help saturate the international market with sophisticated goods and services. In Latin America, Brazil and Mexico - provided they are properly restructured - have the potential to generate a certain level of discomfort for hegemonic economic and political forces. In the Southern Hemisphere as well, Africa and Oceania influence the new global order through the rise of their principal actors, South Africa, Australia, and New Zealand.
Since the European Union has itself accelerated the debate surrounding the energy transition, Brazil - which has had, since the mid-1970s, a plan to become a renewable energy power - now has the conditions to carry that project out in full. In addition to being a major exporter of food and other commodities, Brazil may soon also become an exporter of green energy, thereby becoming one of the important actors in the world economy.
The emergence of these Newly Industrialized Countries is so impactful and disruptive for world capitalism that the senior economist of the Goldman Sachs Group, Jim O’Neill, coined the acronym BRIC (Brazil, Russia, India, and China).
In what is perhaps the best analysis published on the new international division of labor and the possibilities it opens up, Parag Khanna presents a complex panorama and a mosaic of new possibilities. For the author, the immense bloc of emerging countries - which he calls the Second World - has the power to completely reshape the arrangement established in the twentieth century (Khanna, 2008).
Obviously, this entails disequilibria for the formerly core countries, since it negatively affects the benefits acquired through the consolidation of the Keynesian compromise. There is an international economic pressure toward reducing the costs of the factors of production in advanced capitalism, and the first symptom of this was felt in 1971, when the United States broke with the Bretton Woods exchange-rate regime. Despite its eloquent discourse, the European Union has difficulty concealing that the primary objective of that free-trade zone is to limit its exposure to globalization, so that the hegemonic European countries may take refuge in a relatively comfortable level of protectionism, thereby minimizing the negative effects of international competition.
Unless major political events intervene to override world economy and trade, the emergence of the Second World will continue to depress the costs of the factors of production in the First World, intensifying the pressures for flexibility in, or changes to the nature of, its Social States.
Ideally, an international concertation should take place under the initiative of the World Trade Organization (WTO) or the Organisation for Economic Co-operation and Development (OECD), aimed at reaching an agreement on the development of international trade linked to the homogenization of a certain standard of Welfare State. In the 1990s, the International Labour Organization (ILO) signaled toward a similar regulation when it proposed that the Social Clause be adopted by countries in order to internationally homogenize costs and divert competition away from the labor factor. In this way, countries would adopt a relatively homogeneous international commitment regarding labor relations and social protection, allowing the pressures of international trade to fall upon the other factors of production.
In 2000, the signatory countries to the United Nations Development Programme (UNDP) adopted an international protocol committing themselves to accept and pursue the realization of the eight Millennium Development Goals. These objectives are: (i) the reduction of poverty; (ii) universal primary education; (iii) gender equality; (iv) reduction of child mortality; (v) improvement of maternal health; (vi) combating HIV/AIDS, malaria, and other diseases; (vii) environmental sustainability; and (viii) the establishment of a global partnership for development. Without doubt, this initiative represents an attempt at international regulation, however minimal, in favor of quality of life. Something similar, though far more advanced, could be agreed upon at the level of the WTO or the OECD in order to construct a pact through which international competitiveness would be diverted away from social restrictions. Under such a pact, countries would commit themselves to building an intermediate model of Welfare State as a condition for full qualification to participate in international exchange.
Be that as it may, the impression created by the new international division of labor and, especially, by the emergence of Asian countries is not discouraging with regard to the survival of the Welfare State within the new Knowledge Economy of the twenty-first century. If, on the one hand, the arrival of these new actors exerts pressure toward reducing production costs, on the other hand, their dynamism has only been possible thanks to generous and massive public investment in one of the most sensitive aspects of social policy, namely educational policy. An educational system focused on the excellence of the labor force and on mastery of science and technology is unquestionably a strategic requirement rigorously pursued by the dynamic Asian economies, and Linso Kim’s work provides a clear sense of how the success of the Republic of Korea owes much to this approach (Kim, 2005).
The emergence of the Second World has been made possible by intense state intervention in strategic areas such as planning, education, science and technology, and transport logistics, among others. Without doubt, this is a new regulation discovered by emerging countries as a means of overcoming their adversities and securing a more prominent position in international exchange relations (Khanna, 2008).
In the international panorama, however, the most likely scenario is that the Welfare State is undergoing a redefinition during this transitional moment of the capitalist mode of production, in which a new stage of accumulation is imposing itself. If, on the one hand, there are pressures toward reducing the size of the Social States within advanced capitalism, on the other hand, there is a concrete movement toward the construction of structuring social policies in recently industrialized countries. Everything suggests that a point of convergence will emerge in which a possible and intermediate synthesis of the Social State will become consolidated. Desmond King’s conclusion would be beyond reproach, provided it contained the word possible, when referring to the continuity of the Welfare State in the twenty-first century; as King states: “There is no reason to take pleasure in the attack on public welfare provision; but equally, the [possible] welfare state has a public legitimacy and a structural position in modern democracies that make its elimination extremely difficult” (King, 1988, p. 56).
As T. H. Marshall argued, the Welfare State is not a product of the spontaneous development of the superstructure floating above the productive forces of the capitalist mode of production. Above all else, it is the product of the political action of the organized human element, which decided to impose limits on and exercise a certain degree of control over capital accumulation in the name of preserving society (Marshall, 1967).
CONCLUSION
There is no solid basis for the catastrophist argument that foretells the end of the Welfare State or a profound disintegration of its spirit. If, on the one hand, this argument lacks foundation, on the other hand, one cannot infer that such alarmism stems from presumed ill will or hidden interests on the part of those who defend this idea. Even if vague and hypothetical, the possibility of the end of the Welfare State gives rise to enormous fears, for only those who do not fully understand the catastrophes produced by economic liberalism in the early twentieth century would fail to fear such a possibility. In other words, it is entirely understandable that the possible loss of so extraordinary an invention should produce correspondingly profound anxieties.
However, as T. H. Marshall rightly observed, the Welfare State is a higher stage of the civilizing process and, as such, it has its reserved place in history, making any true regression highly unlikely.
As the analysis developed here has sought to demonstrate, everything suggests that twenty-first-century capitalism will shape its own idiosyncratic and feasible form of Welfare State - that is, a synthesis relatively well situated in history between what has traditionally been known as the postwar European social-democratic pattern and the possibilities emerging from the new economic systems. In other words, it will be a model of Welfare State more closely synchronized with the new stage of capitalist accumulation, thereby responding to the demands of the Knowledge Economy and of the new international division of labor.
Obviously, this will have to be a welfare model less complete and less generous than the traditional Scandinavian ones. What matters, however, is that the defining characteristic of the Welfare State will remain present and will tend to spread on a global scale: namely, the regulation of capital accumulation with a view to the decommodification of human existence.
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JEL Classification: D6; D63.
DATA AVAILABILITY
The entire dataset supporting the findings of this study is published within the article.
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Edited by
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Editor responsible for the evaluation process:
Luiz Carlos Bresser-Pereira
