Crisis-Mongering

Theodore Marmor

  • The Emergence of the Welfare States by Douglas Ashford
    Blackwell, 352 pp, £25.00, November 1986, ISBN 0 631 15211 3

The last decade has quite obviously been a painful one economically. The persistent stagflation of the Seventies reversed the favourable terms of the post-war expansion of welfare states. Instead of growing economies and dampened inflation, we have grown to live with slowing economies and heightened inflation. And although during the Eighties we have largely tamed inflation, citizens have almost come to expect comparatively high rates of unemployment, modest rates of economic growth, large government deficits, and straitened circumstances for many of the poor who depend on governmental programmes. It has been a bracing time for the welfare state: and one which has occasioned wide-ranging intellectual arguments as to the contemporary circumstances, historical causes and likely future of welfare states.

The claim of crisis has become a major, if not dominant motif of this debate. First widely voiced in the early Seventies, the allegation of crisis is a staple of political discussion in the Eighties. It is associated with calls for a radical restructuring of social-welfare programmes that everywhere expanded greatly in the post-war period. In the American political context, this critical interpretation is very much identified with the election of Ronald Reagan in 1980 and the subsequent attacks on Federal social spending. In Europe, it is associated with the triumph and continued victories of Margaret Thatcher and with shifts away from social-democratic control in a number of other regimes.[1]

That claim of ‘crisis’ is, however, a very ambiguous one. Contemporary discussions, relying on unclear and often misunderstood terms and data, show that the ambiguity arises from confusion as to exactly what is meant by ‘the troubles of the welfare state’. Are the social policies of the modern state in crisis? Or is the state in crisis because desirable welfare commitments overwhelm diminished fiscal capacity? Are we referring to the major spending programmes of contemporary governments – pensions, medical care, education and housing in different mixes in different countries? The major spending programmes in health and pensions are cross-nationally popular. Is the crisis then to do with finding the means to finance crucial – and popular – commitments? Or does the problem include the extension of government authority into such disputed policy areas as abortion and busing in the United States, redistribution towards French-speakers in Canada, guest-workers in Germany and Sweden, and so on?

The impulse to sort out the disagreements is understandable. Much of the contentiousness can be avoided if one changes the question from an analytical one to a historical one. Six years ago, Peter Flora and Arnold Heidenheimer’s The Development of Welfare States in Europe and America shifted attention away from the conditions of the Seventies to the possible origins of those conditions over the course of the 20th century.[2] Douglas Ashford’s The Emergence of the Welfare States pushes the historical focus further back and asks what the growth of welfare states reveals about the institutional capacities of particular states, especially Britain and France. In both instances, the historical development of welfare states, rather than the character, causes and implications of contemporary disputes, is the main subject. It may well be that the historical understanding thus arrived at will illuminate contemporary disputes, but there can be no assurance of this.

Another approach is to assume that we know what the ‘crisis’ is and proceed to ask about its causes and prospects. This was the approach taken by the OECD in the late Seventies and early Eighties. Two years’ work went into preparing for a conference on social policies in the Eighties. But the book that emerged from the conference – The Welfare State in Crisis – showed how little consensus there was. The conference took place in Paris in October 1980. Although the book is based on the assumption that its contributors all have a similar understanding of the worrying state of affairs whose prospects for improvement they are addressing, some contributors ask why protest emerged in such a mix of welfare states, others focus on the trade-offs between investment and consumption policies in the modern state, still others concentrate on the values of citizens in modern states with extensive social programmes. Neither the developmental approach nor the one which (prematurely) assumes agreement promises an adequate understanding of the contemporary problems of the welfare state, however. To understand the ‘crisis’ debate, other starting-points are called for.

The literature concerning the welfare state falls into three broad categories. Some analysts regard the welfare state’s growth as the main cause of many contemporary political troubles. Most often associated with the apocalyptic Right, those who espouse this belief focus on ways of restraining the overreaching state and redeveloping the institutions of the market and the hegemony of individual choice. Others see the modern state’s experience with slowed economic growth as the source of strain for social-welfare programmes. In the middle politically, these incrementalists of the centre are preoccupied with the way in which fiscal strain and stagflation have required cutbacks. They attribute the current crisis to fiscal strains on welfare-state programmes rather than to any inherent feature of welfare-state institutions. They assume that if and when economic growth resumes, the crisis will abate. A third group stresses the controversies that have arisen over particular social programmes (usually not fiscally important ones) which raise issues of legitimate governmental purpose. Proponents of this view see the strains on the welfare state as evidence of the contradictions of modern capitalism and the crisis in the modern welfare state as a portent of future troubles. There are, of course, overlaps among these three approaches and the first two can, without heroic effort, be tightly linked. But there are differences, and they make a difference in mapping the subject.

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[1] Sweden and Australia in the late Seventies, and more recently, France, Germany and Canada.

[2] Transaction Books, 1981.

[3] For further discussion see David Cameron, ‘On the Limits of the Public Economy’, Annals of the American Academy of Political and Social Science, No 459, 1982, and Manfred Schmidt, ‘The Welfare State and the Economy in Periods of Economic Crisis’, European Journal of Political Research, 11 (1983), pp. 1-26.

[4] Daniel Tarschys, ‘Curbing public expenditure: Current Trends’, Journal of Public Policy, Vol. 5, No 7 (1985), pp. 23-67.

[5] See Robert Kudrle and Theodore Marmor, ‘The Development of Welfare States in North America’ in The Development of Welfare States in Europe and America, especially pages 114-116.

[6] The celebrated public disputes over Charles Murray’s Losing Ground (Basic Books, 1985) are a good example. Few such exchanges have addressed Social Security pensions or Medicare, programmes that are far more significant fiscally (as Table Two shows) than the whole nest of poverty and public programmes.

[7] It is true that some critics of public welfare, such as Murray, also emphasise the consequences for work of public assistance rules and regulations.

[8] See The Development of Welfare States in Europe and America.

[9] Richard Neustadt and Ernest May, Thinking in Time: The Uses of History for Decision-Makers (Free Press, 1986); Paul Light, Artful Work: The Politics of Social Security Reform (Random House, 1985).

[10] Rudolf Klein and Michael O’Higgins, ‘Defusing the crisis of the welfare state: A New Interpretation’ in the forthcoming Social Security in Contemporary American Politics, edited by T.R. Marmor and J.L. Mashaw.

[11] Social Expenditure: 1960-1981, Problems of Growth and Control (OECD, 1985). I am indebted to Rudolf Klein and Michael O’Higgins of the University of Bath for their analysis of these data. While the report makes comparable data conveniently available, it has the disadvantage of ending its time series in 1981. Further, by treating the periods from 1960 to 1975 and 1975 to 1981 as though each were homogeneous, the study may suggest conclusions that would not hold if the focus of analysis were on trends within each of these periods. In addition, the form in which these data are presented begs the question of whether, in the words of the OECD report, ‘the passage of time would probably have seen some automatic moderation as the major social programmes approached maturity’ (page 9).

[12] Details of this analysis can be found in Klein and O’Higgins, ‘Defusing the crisis’.

[13] The income elasticity of social expenditures is defined as the ratio of the growth rate of nominal social expenditures to the growth rate of nominal GDP. An income elasticity of less than 1.0 indicates that the country’s economy grew at a faster rate than its social expenditures. An elasticity of 1.0 indicates that a given per cent increase in economic growth was matched by the same percentage increase in social expenditures.

[14] Klein and O’Higgins, ‘Defusing the crisis’.

[15] See, for example, A.J. Culyer, ‘The Withering of the Welfare State? Whither the Welfare State?’ (University of British Columbia, 1986), Rudolf Klein and Michael O’Higgins (eds), The Future of Welfare (Blackwell, 1985) and Klein and O’Higgins, ‘Defusing the crisis’.