The Political Economy of the Irish Welfare State

Church, State and Capital

Powell, Fred, Fred Powell

• Publisher: Policy Press
• Year: 2017
• Edition: 1
• eBook ISBN:
  9781447335375
• Topic: Politics & International Relations
• Subtopic: Social Policy
• Index: Politics & International Relations

The political economy of the Irish welfare state provides a fascinating interpretation of the evolution of social policy in modern Ireland, as the product of a triangulated relationship between church, state and capital.

Using official estimates, Professor Powell demonstrates that the welfare state is vital for the cohesion of Irish society with half the population at risk of poverty without it. However, the reality is of a residual welfare system dominated by means tests, with a two-tier health service, a dysfunctional housing system driven by an acquisitive dynamic of home-ownership at the expense of social housing, and an education system that is socially and religiously segregated.

Using the evolution of the Irish welfare state as a narrative example of the incompatibility of political conservatism, free market capitalism and social justice, the book offers a new and challenging view on the interface between structure and agency in the formation and democratic purpose of welfare states, as they increasingly come under critical review and restructuring by elites.

ONE

Why the welfare state matters

The concept of a welfare state has strong normative connotations. It is conceptually associated with a commitment to both democracy and social justice. Democracy – which encompasses human rights, citizen’s voice and participatory decision-making power, freedom of information, and many other factors – is a prerequisite to striving for and genuinely accepting social justice. It is also necessary to create the societal and political coalitions necessary to achieve at least acceptable levels of social justice, and at the practical level to finance and accept the institutions, policies, and patterns that enable a welfare state to function.

Gabriele Kohler, 2014: 2

Gabriele Kohler’s description of the welfare state reminds us of the imperative of preserving our democratic heritage in a global era dominated by neoliberal market values and the pessimism of postmodernists about the possibilities of human progress. It may sound dramatic but some think that the very basis of our civilisation may be at stake in the defence of the welfare state. The renowned French sociologist, Pierre Bourdieu (1998: 24), describes it as a fight ‘against the destruction of a civilization, associated with the existence of public services, the civilization of republican equality of rights, rights to education, to health, culture, research, art and, above all, work’. This is a powerful humanist endorsement of the purpose and ethos of the welfare state, one which defines it as a set of institutionalised provisions designed to meet the social and economic needs of citizens in a democratic society. Social policy is not simply another area of governance but also the framework for modern civilised social life. The ethos that has underpinned the welfare state is the modern expression of civic humanism in a secular world governed by democratic institutions. It is the link with our past in the classical civilisation but it is also our compass for the future, if we are to protect ourselves from another Dark Ages in which we begin to witness ‘the degradation of civic virtue’ (Bourdieu, 1998: 4).

Social justice is at the core of the ideal of the welfare state, which strategically seeks to redress poverty and income and wealth inequalities. The welfare state promotes nation building by creating the concept of a reciprocal society, supported by its citizens, thus enhancing social and political cohesion. It also enhances economic progress through an active state, supporting and regulating the market and simultaneously providing the necessary investment for social and economic development, infrastructure and strategic planning. The welfare state represents a set of socio-cultural values, based on the principles of redistribution and reciprocity, that reflect democratic struggle against the acquisitiveness of the self-regulating market. In that sense, the welfare state ideal is progressive, inclusive and democratic, addressing citizens’ needs for shelter, education, healthcare and a basic income. In this opening chapter, we will explore the ideal of the welfare state with particular reference to Ireland and why it matters to us as European citizens.

Origins of the welfare state

Kohler’s description of the welfare state captures its humanistic essence and political location in social rights and democratic discourse. Europeans tend to view the welfare state as a European project, reflecting the continent’s Enlightenment values, especially during the post-war reconstruction period of 1945-75. It was a progressive and peaceful project constructed on the ashes of the destruction of the Second World War, the legacy of the Great Depression in the 1920s and 1930s, and the nihilism of fascism. It offered hope and social equality. In this European narrative the German Chancellor, Otto von Bismarck (1815-98) is represented as the historical architect of the first welfare state. The origins of the welfare state (‘first wave’) came during the period 1880-1945, when pensions, social insurance, child protection and industrial regulatory legislation were introduced.

In political reality, Bismarck was no idealist. He viewed the welfare state as a form of social pacification while he suppressed the trade union movement and social democrats. Bismarck was driven by the cause of national unity (his real political movement) and German economic development. Likewise US President Franklin D. Roosevelt (1882-1942), celebrated for his ‘New Deal’ welfare policies, was seeking to combat the effects of economic depression and restore national unity. In Britain, the Beveridge reforms after World War 2 were intended to unite the country and rebuild the nation. The British model of the welfare state became influential because of the international influence of John Maynard Keynes (1833-1946), who put social policy at the core of economic development, the Keynesian welfare state. Keynesianism was built around three goals: to sustain full employment; to achieve greater distributional justice through progressive taxation; and to provide state funded social services for housing, health and education. It is important to acknowledge that Keynes was primarily driven by the goal of post-war economic recovery. His macro-economic strategy complemented the welfare state as a pact between capital and labour.

While Europeans and North American progressives celebrated the welfare state as a symbol of the assumed superior capitalist development of the Northern hemisphere, welfare states have prospered in the Southern hemisphere since the early twentieth century (Midgley, 1997; Seekings, 2012; Wehr et al, 2012; and Kohler, 2014). Sandbrook et al (2007) argue Latin America produced welfare regimes as early as the 1910s, encompassing Uruguay, Argentina, Chile, Brazil and Costa Rica. Kohler (2014: 1) also notes the presence of a welfare state ethos in South Asia from the late 1940s and early 1950s in India, Nepal and Pakistan. This diversity of origins suggests that the welfare state was a global project of modernity and democratisation. UN global development initiatives from the 1950s put human rights, social development and poverty alleviation at the centre of its agenda. The ‘second wave’ of the welfare state in the form of the Keynesian welfare state (1945-75), reflected an ethos of social citizenship rights and the ‘decommodification’ of labour in the form of the recognition of economic rights (Esping-Andersen, 1990).

Kohler (2014: 3) argues that ‘the specific composition of the welfare state in each country ultimately differs as a function of power politics’. She views the development of individual welfare state regimes as the product of negotiations, which may result from direct action by social movements and grassroots protest or as the product of parliamentary social reform or both. Welfare states can be progressive, reflecting bottom-up pressure from trade unions, women’s movements, poor people’s movements and faith-based civil society organisations. On the other hand, welfare states may reflect top-down elite agendas (pace Bismarck) concerned with nation building, economic development or social appeasement (Kohler, 2014: 3). There is also a third possibility, that development may occur without the alleviation of poverty or may even entail a worsening of poverty (Thomas, 2000: 3) in the form of a competition state that subordinates welfare to economic growth, market values and the process of production.

Sweden elected a Social Democratic-led government in 1932 and built the world’s most advanced welfare state based upon universalist principles, in which services were open to all without a means test. It was a collectivist response to the consequences of industrialisation and mass emigration. The Swedish welfare state became linked to the ideal of building a better society, grounded in the principles of social justice. Mass democracy introduced during the late nineteenth century and early twentieth centuries made this ambition politically possible. The Nordic model is premised on a rights-based universal welfare state, in marked contrast to Ireland’s residual welfare state.

Karl Polanyi (1886-1964), in his classic study The great transformation (2001), analysed the economic and social changes brought about by the Industrial Revolution in which ‘there was an almost miraculous improvement in the tools of production, which was accompanied by a catastrophic dislocation of the lives of the common people’ (Polanyi, 2001: 35). Polanyi was writing about an earlier historical era but his analysis is equally applicable to the age of globalisation. His observations in reference to ‘the self-regulating market’ system go to the core of global capitalism:

All types of societies are limited by economic factors. Nineteenth century civilization alone was economic in a different and distinctive sense, for it chose to base itself on a motive only rarely acknowledged as valid in the history of human societies and certainly never before raised to the level of a justification of action and behaviour in everyday life, namely gain. (Polanyi, 2001: 31)

At the core of Polanyi’s argument is a rejection of the view propagated by Adam Smith (1723-90) and other classical economists that the economic motive of personal financial gain is a normal human characteristic, which will prosper once external regulation is removed. Polanyi represents the emergence of personal financial gain as the driving force behind industrial capitalism, as historically unique and anti-social. It is, he contends, a paradigm shift in civilization. Ayn Rand (1905-82), in her 1957 novel Atlas shrugged, celebrates enlightened self-interest in a dystopian plot, where the elite respond to the welfare state by striking and retreating into their own utopian free market world. In the 1987 movie Wall Street the anti-hero, Gordon Gekko, expresses a similar sentiment in his slogan, ‘Greed is good’.

Polanyi (2001) views the economy as ‘embedded’ in society – part of social relations – rather than a separate sphere of activity. He argues that a pure free market society would be a utopian project and, therefore, impossible to achieve because citizens will resist being commodified, that is being turned into objects (along with land and money) to be exploited for the purposes of ‘gain’ in the form of capitalist profit. Instead, Polanyi argues that there is a constant struggle within capitalist society, which he calls ‘the double movement’, between the push for self-regulating markets that seek to commodify labour as instruments of production and a push-back for social justice that constitutes the democratic origins of the welfare state. Polanyi (2001: 80) concludes that ‘a deep seated movement sprang into being to resist the pernicious effects of a market controlled economy. Society protected itself against the perils inherited in a self-regulatory market system – this was the comprehensive feature in the history of the age’. While Polanyi was writing in 1944 before the golden age of the welfare state (1945-75), his analysis has proven to be enduringly influential.

Gøsta Esping Andersen in another monumental study, The three worlds of welfare capitalism (1990), builds on the architecture of Polanyi’s analysis. The task Esping-Andersen (1990: 1) sets himself is to study the welfare state as ‘a means to understand a novel phenomenon in the history of capitalist societies’. For Esping-Andersen (1990: 5) ‘the welfare state [is] a principal institution in the construction of post-war capitalism’. He adopts the term ‘welfare state regimes’ as the organising concept of his book ‘to denote the fact that in the relation between the state and economy a complex of legal and organizational features are systematically interwoven’ (Esping-Andersen, 1990: 2).

Esping-Andersen (1990: 3) locates his study in the tradition of political economy, arguing that a welfare state is not simply the product of expenditures: ‘Equality has always been what welfare states were supposed to produce’, albeit he recognises that ‘the image of equality has always remained rather vague’. He acknowledges that he was inspired by Karl Polanyi’s theory of commodification: ‘We choose to view social rights in terms of their capacity for decommodification’, adding, ‘the outstanding criterion for social rights must be the degree to which they permit people to make their living standards independent of pure market forces. It is in this sense that social rights diminish citizen’s status as commodities’ (Esping-Andersen, 1990: 3). He (1990: 15) concludes: ‘Thus Polanyi sees social policy as one necessary precondition for the integration of the social economy’.

In his study, Esping-Andersen (1990: 26-27) analyses 18 welfare state regimes, which he divides into three clusters:

1. Liberal (Anglo-Saxon) welfare states characterised by selectivity and residual social provision designed to promote the work ethic, in which rules of entitlement in the form of means tests are enforced strictly and are often associated with social stigma, minimising decommodification.
2. Corporatist (European) welfare states, while relatively generous in terms of social expenditure are conservative in ethos, protecting class and status social divisions and upholding traditional values in the form of church, family and charity, informed by the principle of subsidiarity – thus relegating the state to ‘last resort’ and minimising decommodification.
3. Social democratic (Nordic) welfare states characterised by the principle of universalism (that is, benefits are available to all citizens as social rights on the basis of need) maximising decommodification.

What is clear is that there is no set of features that exclusively defines the welfare state. To think so is to make a mistake. There is not a shared set of traits that are common to all welfare states. Different political cultures shape welfare formations in diverse ways that crucially shape decommodification. Social democracy emerges as the key to decommodification. Neoliberalism has sought to dismantle the welfare state as an unsustainable cost on markets and a limitation on human freedom (Murray, 1986; Mead, 1986). The recommodification of labour has followed in the form of deindustrialisation, mass unemployment and zero hours contracts. It has resulted in the rise of populist politics that threatens the post-war political consensus.

Esping-Andersen’s tripartite framework provides an overarching view of the welfare experience of citizens within (as already noted) 18 diverse regimes. He views the welfare state as historically rooted in political economy debates and devolving on two core questions: ‘First, will the salience of class diminish with the extension of social citizenship? In other words, can the welfare state fundamentally transform capitalist society? Second, what are the causal forces behind welfare-state development’ (Esping-Andersen, 1990: 10). The relationship between welfare and citizenship is fundamental in the process of developing social rights. Latterly, Esping-Andersen (2002) has argued the case for a ‘new welfare state’, as a third wave transformation, commonly known as the ‘social investment welfare state’. This futuristic model of productivist social policy seeks to balance social citizenship and economic growth within a new logic of marketisation. It is highly evocative of East Asian productivist welfare capitalism (Holliday, 2000).

Welfare and citizenship

Citizenship can be defined in T. H. Marshall’s classic formulation as consisting of ‘a three legged stool’. First, there are fundamental civil rights, such as freedom of speech, thought and religious toleration and the rule of law in its broadest sense (equality before the law, the due process of the justice system, the right to conclude contracts as equals). Second, there are basic political rights, including the right to vote, form political parties and contest elections – in essence, democratic pluralism. Third, there are basic social rights: ‘the whole range from the right to a modicum of economic welfare and security to the right to share to full the social heritage and to live the life of a civilised being according to the standards of the prevailing society’ (Marshall, 1950: 72).

The development of social citizenship rights, according to Marshall’s thesis, is the product of democracy and class struggle between capital and labour incrementally promoting an increasingly egalitarian society for the majority. The erosion of traditional social inequalities due to the impact of the Keynesian welfare states in Europe and the USA between 1945 and 1975 served: first, to compress income differentials for the working population at both ends of the spectrum; second, to create an increasingly popular and universalistic culture; and third, to establish firm links between education and occupation, based on the meritocratic ideal. A universal status of social citizenship emerged in democratic pluralist societies encompassing the majority working population during this golden era of the welfare state.

In this regard, Esping-Andersen (1990: 21), in the tradition of T. H. Marshall, shares the view that ‘Social citizenship constitutes the core idea of the Welfare State … But the concept of social citizenship also involves social stratification: one’s status as a citizen will compete with, or even replace, one’s class position’. Esping-Andersen is essentially endorsing the view that social rights led to a breaking down of social class inequalities based on labour market positions. According to his decommodification theory, when social rights are added to civil and political rights, society moves away from treating people as commodities or things to a consideration of their essential humanity. Esping-Andersen (1990: 11) has thus reopened an old debate:

the central question, not only for Marxist but for the entire contemporary debate on the Welfare State, is whether and under what condition, the class divisions and social inequalities produced by capitalism can be undone by parliamentary democracy. It is a debate about the social division of welfare that goes beyond access to public services to embrace occupational and fiscal forms of welfare that disproportionally benefits the better-off.

The welfare state under pressure

At the core of the contemporary debate about society is the relationship between welfare and citizenship. Much of this debate has devolved on a crude distinction between individualism and collectivism. The moral and emotional meanings attached to both terms have obscured as much as they have enlightened. Inherent in the debate about these social forms lies a deeper distinction about alternate conceptions of the self, the good life and human potential and purpose. Neoliberals, inspired by the classical liberals of the past such as Adam Smith (1723-90), David Ricardo (1772-1823) and Thomas Malthus (1766-1834), have questioned the rationale of the welfare state from the outset. Their mission has been to hollow out the welfare state, as an institution they view as anathema to individual freedom and the market values of the capitalist system. Since 1989, the welfare state has come under particular pressure from free trade, globalisation and neoliberalism, which are threatening its ethos and foundations. The revival of the liberal political economy was led by the Austrian school, developed by Carl Menger and his students, Friedrich von Wieser and Eugen von Bohm Bawerk. Subsequent prominent members of the Austrian school were Joseph Schumpeter, Ludwig von Mises and Friedrich Hayek. They argued that there was no middle way between capitalism and socialism and rejected the democratic ideal of the welfare state.

Social democrats have cooperated with neoliberals in restructuring the welfare state at the expense of the poor and vulnerable, undermining the post-war consensus. The political consequences have been serious, leading to the alienation of the working class from post-war consensus politics as the bedrock of modern democracy. It has given oxygen to the current popularity of populism, which is opposed to political and economic elites and, in some cases (depending on ideological orientation), driven by hostility to immigrants and minority ethnic communities. Populism has pushed social democracy into a deep crisis of identity and purpose as support amongst working-class voters evaporates. Brexit and the election of Donald Trump as President of the USA have been the most recent manifestation of the power of populist nationalism to deconstruct social democratic politics and the concept of ‘the social’ or public sphere on which its architecture precariously rests.

For neoliberals there is no civil society, only individual enterprise and self-reliance. Hayek has contended that ‘the social’ is merely ‘something which has developed as a practice of individual action in the course of social evolution’ (Hayek, 1976: 78). For Hayek, ‘the social’ was an abhorrent concept that conjured up images of totalitarianism. In his book, The mirage of social justice (1976), he equates the pursuit of equality with tyranny. Neoliberal social theorists have challenged the normative basis of social solidarity, which they view as creating a dependent underclass (Gilder, 1981; Murray, 1986; Mead, 1986; Marsland, 1995 and 1996). Marsland (1995: 4) has likened welfare to a ‘cancer in the body politic’ and added that ‘it has also spread its contagion through more and more organs of society’. He concluded that ‘only markets can provide effectively for the range and ambition of human wants and needs’ (Marsland, 1996: 140).

Neoliberal politicians have taken the welfare state debate into the public arena. They have attacked social solidarity as the embodiment of collectivism. In their zealous efforts to destroy collectivism, they have sought to deny the existence of the ‘so...

Table of contents

• Cover
• Title Page
• Copyright Page
• Dedication
• Contents
• Preface
• Introduction
• Chapter One: Why the welfare state matters
• Chapter Two: Revolution, culture and society
• Chapter Three: Welfare in the Free State
• Chapter Four: Religious nationalism, sectarianism and anti-semitism
• Chapter Five: The welfare state debate
• Chapter Six: Poverty and social inequality
• Chapter Seven: Liberty, gender and sexuality
• Chapter Eight: The marketisation of the welfare state
• Chapter Nine: Crisis, austerity and water
• Chapter Ten: Conclusion
• References
• Back Cover