If the conservative activists get their way, and manage to use the current economic crisis to advance their political project and dismantle universal welfare programmes, it will reinforce their hegemony.

Spot on – but I suspect New Labour will choose the stupid option and capitulate on this issue.

but I suspect New Labour will choose the stupid option and capitulate on this issue.
You don’t say!

Good piece. Important argument. Agree about the bait and switch description. And it does seem to be an argument that risks being given up by default.

We will have something on this out at conference, and will also be publishing some longer-term research which looks at the comparative evidence on what reduces poverty, and on how to retain support for anti-poverty measures.

Firstly, they argue that the government should cut back its spending and only give services to poorer people. Then they turn to the middle classes, and stir up anger that they are paying for other people to receive services, but not getting anything for themselves – and use that anger to help cut back services for poor people.

This will be the inevitable outcome of any policy which ends universal benefits/public services.

Good article.

‘There’s no intrusive means testing, or having to jump through humps set by bureaucrats’

How come we have ‘people in public service’ when the government threatens to cut their numbers, but ‘bureacrats’ if they do their job?

” …quite simply an unconditional surrender to people who loathe and despise left-wing values.”

Wait a minute. This is New Labour. Are you saying that they are surrendering to themselves?

The argument I think is lost. Why did social democratic policies become hegemonic in Europe in the generations after WW2?

First, because they were seen as a recompense for enduring the horrors of both wars and, like international structures, as a bulwark against a third European war. In particular, it was politically impossible to have welfare-less capitalism in Europe while the Communists were providing welfare in their part of the continent.
One reason why it was so important for capitalists to defeat Communism in Europe, which posed it no threat, was precisely so that the welfare systems could be removed in due course.

Second, because labour movements at that time represented an important source of social solidarity and it was necessary to include them in the reconstructionist consensus.

Third, ethnic homogeneity meant that the transfer payments implicit in social democracy were more acceptable: those who paid our more than they received could identify with the beneficiaries.

None of these factors apply in the 21st century. And of course, the Chilean experiment showed that if you want to dissolve a welfare state quickly, a military coup can do so successfully.

If, as some indicators suggest, we are about to experience another asset bubble and crash cycle during the next 5-10 years, it will not be possible to rein in goverment spending by conventional means. The only hope of even preserving a democratic figleaf will be the merger of UKIP and the BNP to form a force which can electorally challenge the upcoming Conservative hegemony by offering patronage politics as a way of managing the transition to a welfare-free state.

This is what happens when the government spends beyond its means. Blame Gordon.

@8 i think you’ll find it’s a bit more complicated than that. Brown should have paid down debt, but that would only have marginally improved our position. It’s not the only issue.

When it comes to benefits going to the ‘wrong’ people, the most efficent ‘means test’ is a proper direct taxation regieme.

If New Labour are keen not to waste benefits on the better off the best way to make sure that money income tax claws most of it back, rather than add more snoopers to the payroll.

@1-@6 Agree absolutely. The “bait & switch” concept of how removal of universal benefits will be used is a very useful one.

Jackie Ashley has been sold a pup and should go and stand in the corner with a dunce’s cap on.

@7 “The argument I think is lost.”

This is defeatist crap. The argument is far from lost. Both the argument, and the actual political battle to defend the idea of universal benefits, can be won.

[9] Left outside

How would it only have marginally improved our position? We borrowed £35bn in 07/08 and paid £30bn in debt interest. Gordon had enough time and money to have completely paid off debt if he’d wanted, but if we assume he reduced it to around £200bn before this crisis we’d have had zero borrowing and £11bn a year interest payments.

Borrowing boomed in 08/09 to £90bn. If he’d paid down debt as set out above borrowing would have been around £36bn on the year (£35bn lower as a result of the previous budget being balanced and £19bn a year lower through lower interest payments).

We’d still have had heavy borrowing, but we wouldn’t be looking ahead a few years and thinking “well, it’s not £175bn, but we’re still borrowing an awful lot”.

12

Exactly. By borrowing so much money, Gordon has sown the seeds of whatever cuts come out of Westminster. What’s more, he could have paid of most of our debts without any great difficulty.

The left need to decide if running permanent deficits are really a good thing.

@Mark M, I didn’t have time then and sadly I’m at work now but I’ll check the figures later. But I don’t want to say the position would not be better if Brown had paid down debt, it almost certainly would be.

However, in that alternative world, there is still no way which the Cameroons would change tack had the debt burden be lower. Neither would the free marketeers who want to challenge any government project or unbalanced budget.

But like I said I don’t have the figures yet, I agree its a poor Keynsian who doesn’t save in the good to spend in the bad. But I don’t think it’s a game changer at the moment for the opposition arguments.

(And I debt might still increase to £175bn even if Brown had brought us closer to surplus. I want an effective stimulus, and I don’t want the aleged green shoots we see to be a false dawn.)

“People won’t look to the government for help when they need it”

You are right, that is exactly what we want. Looking to the Government for help is only marginally less dangerous than asking Don Corleone for help, and we would rather the government didn’t crowd out alternatives. There was a lot of welfare societies in operation before the welfare state.

[11] I gave reasons for my view. You gave none for yours.

[15] Nick, who is this “we”? The Libertarian Party?

7
Excellent analysis, very few debates about the welfare state address the reasons why it was introduced, and IMO, it is key to the future of welfare, as you have identified. Another factor which drove Conservatives to accept the welfare state was the fear of revolution (albeit this was probably the least important factor)
Lloyd-George introduced the liberal welfare reforms between 1906 and 1914, thiis included the introduction of free school meals. this was a response to the fact that 3 out of 5 men were found to be unfit to fight, due to malnutrition. during the Boar war.

Meanwhile nearly £10 BILLION remains unclaimed

HERE

“There was a lot of welfare societies in operation before the welfare state.”

“Lloyd-George introduced the liberal welfare reforms between 1906 and 1914, thiis included the introduction of free school meals. this was a response to the fact that 3 out of 5 men were found to be unfit to fight, due to malnutrition. during the Boar war.”

Which says a lot about your welfare societies that existed before the welfare state I think.

As well, we have to remember that this is a systemic crisis, and no amount of tweaking government borrowing would have prevented it. If the government hadn’t created a debt-fuelled boom, we would have simply had the crash quicker.

Brown has damaged the case for a welfare state by using the last 12 years as an excuse put large large numbers of white collar workers on the state pay roll. This is no different to to pork barrel politics as practised in he USA or gerrymandering of boundaries to win elections. Britain did need more doctors, nurses, police officers and teachers in 1997 , but the performance of many state organisations seemed to have declined yet the number of white collar workers has increased . Keeping a large number of people on welfare while allowing immigrants to fill unskilled and semi-skilled jobs has been disasterous.

If we change the nature of the welfare state we can still have good services and pay far less- and I do not support PFI or outsourcing as a way of reducing costs.

@16 Mike K: “I gave reasons for my view. You gave none for yours.”

You gave three reasons why “social democratic policies become hegemonic in Europe in the generations after WW2″. You then said these factors no longer apply in the 21st century.

From this you deduce that the argument for a universal welfare system is lost.
It’s a leap of logic too far. Here are three reasons why the argument is not lost:

1. People understand it and feel it to be fair
2. They like it
3. They know we can afford it.

Against this is is the residual tendency of people to believe the lies that are incessantly and aggressively pushed in their face by Murdoch, Dirty Des, the Mail – and their camp followers in the right wing freakshow – that we can’t afford it and it isn’t fair.

These people know they can’t attack the NHS, free education, universal state pension yet, so they have a crack at stuff around the margins first.

None of this means we don’t need welfare simplification and reform. But the principle of universality needs to be defended for the reasons very cleverly pinpointed by Don Paskini here.

@ Nick 15

There was welfare before wellfare states, but people were pretty poor a lot of the time. Check out these graphs from Hopi Sen.

I’m aware correlation isn’t causality, but it certainly gives cause for thought when what is supposedly so harmful goes hand in hand with rising liveing standards.

@ 19

“If the government hadn’t created a debt-fuelled boom, we would have simply had the crash quicker.”

Why?

@19 – eh?

“Crashes” typically follow “booms”.

With no “boom”, there would have been nothing to “crash” from.

The crash is precisely the unwinding of the boom.

[21] OK, I just wanted to know whether or not you agreed with my analysis. Your objection appears to be that it is incomplete. I agree with the three factors that you identify – they neatly sum up why I support social democratic solutions to questions of inequality.

However, the number of people who subscribe to them is declining year on year. And let’s leave the right-wing press out of it, they’ve been singing from the same hymn-sheet since the old King died.

My case is largely that the provision of welfare operated in the interests of capital for a generation or two after 1945 but now “normal service” is being resumed.

“@19 – eh?

“Crashes” typically follow “booms”.

With no “boom”, there would have been nothing to “crash” from.

The crash is precisely the unwinding of the boom.”

Yes, that is basically what I was getting at, but develop that point. What would there have been if there wasn’t a boom? A stagnant or depressed economy even earlier.

@25 “I just wanted to know whether or not you agreed with my analysis.”

I think your analysis makes a case for the argument that if we didn’t have universal welfare provision already, it would be difficult/impossible to get it started today. One proof of that pudding might be in what happens over healthcare in the US.

However, I don’t think your analysis makes the case that it is inevitable that universal welfare will now be dismantled. The inertia factor will tend to keep it there, despite the best efforts of the crazies to campaign against it.

I agree that the generation that set up the welfare state is dead or dying, but the majority of the new generation is not seized by the desire to demolish universal provision.

“My case is largely that the provision of welfare operated in the interests of capital for a generation or two after 1945 but now “normal service” is being resumed.”

Normal service is not being resumed. Anglo-Saxon “neoliberal” capitalist ideology ruled for a coupla decades but is now over. It’s not dead (the next British government will subscribe to it) but it is the living dead – an absurd zombie with no intellectual underpinning that will cease to exist soon. Your closing comments @7 I don’t quite grasp, would you like to expand? Are you saying that the coming political/ideological battle will be between neoliberal capitalism and fascism, with social democracy not even on the field of battle? I think social democracy/social liberalism has got more of a chance than that.

@ 26

Why couldn’t there have been a lower, more stable trend rate of growth?

[26] Gary

If the government had stopped the boom before it staretd we’d have just had slower growth than we did.
If the government missed the start of the boom (likely as booms are hard to sspot until they are going), but had instead not tried to keep it going artificially we’d have had a smaller, earlier crash. The reason this crash was so big is because we tried to keep the house bubble going.

Growths been fairly aneamic in the developed world for a while. ~2% is pretty poor compared with the golden age post war, and with the performance of the catchup economies of Korea, Taiwan, India, China etc.

Like in Japan the real economy started stagnating so a asset price boom was fermented to keep up growth, this popped, and it turns out the basics problems which were affecting the economy hadn’t gone away and are compounded by a shit load of debt to pay off and assets to sell which no one wants at the price on offer.

Major factors in the boom was that it was easier to borrow money for property development and /or financial services than to develop manfuacturing. Gerald Ronson has been very scathing of some of the property development post 2005. If the government had cooled the property sector post 2005 we would have less of crash. Many property developers were out of the sector by 2007, eg John Hunt of Foxtons .

If we had spent last 12 years increasing the size of the manufacturing rather than just relying on property and finance we would have less of a problem. Cable warned Brown of debt in 2003 and many property developers start leaving the market in 2005. Brown thought he knew best.

[15] Nick, who is this “we”? The Libertarian Party?

Nope. Just anyone who believes that a government that is able to provide you with everything, is also able to take it all away.

There was a lot of welfare societies in operation before the welfare state.

C’mon Nick, you don’t believe in this crap do you?

#8: “This is what happens when the government spends beyond its means. Blame Gordon.”

That’s just silly – regardless of whether GB is a good PM or not.

Depressions and recessions in capitalist market economies anywhere inevitably lead to public finance budget deficits because tax revenues fall, with unchanged rates, while public spending on social security rises. In those circumstances, balancing the fiscal budget by raising taxes and/or cutting public spending is very likely to retard recovery or cause the recession to deepen.

As President Obama has been saying, when he walked into the Whitehouse in January this year, there waiting was a leagcy deficit of USD 1 trillion from the Bush administration. Sensibly and helpfully for us, the Obama administration took the bold step of creating a fiscal stimulus package for the US economy of USD 787 billion:

US Appropriations: http://www.house.gov/billtext/hr1_legtext_cr.pdf

US Tax package: http://www.house.gov/billtext/hr1_legtext_crb.pdf

Try “Deficits saved the world” by (Nobel laureate) Paul Krugman
http://krugman.blogs.nytimes.com/2009/07/15/deficits-saved-the-world/

and on the UK: Sam Brittan on “How the budget hole developed”:
http://www.samuelbrittan.co.uk/text341_p.html

[27] Last para. You read me aright. One the basis of the megapoll conducted for the rowntree Federation I think only 20% or so of voters identify with liberal or social democratic principles – there’s room now for two right-wing parties to contest government.

[32] That’s a truism. Governments provide law – but people occasionally die in police stations. And your point is..? That the market can guarantee my personal safety better than the State can? I’m confused…

“If the government had stopped the boom before it staretd we’d have just had slower growth than we did.
If the government missed the start of the boom (likely as booms are hard to sspot until they are going), but had instead not tried to keep it going artificially we’d have had a smaller, earlier crash. The reason this crash was so big is because we tried to keep the house bubble going.”

So you seem to think that it is possible to end boom and bust – perhaps you have more in common with Gordon than you think! And I don’t think that you can lay all the blame at the governments door, it was the government acting hand in hand with the spivs and speculators that created (or should that be imagined) the boom.

“Like in Japan the real economy started stagnating so a asset price boom was fermented to keep up growth, this popped, and it turns out the basics problems which were affecting the economy hadn’t gone away and are compounded by a shit load of debt to pay off and assets to sell which no one wants at the price on offer.”

That’s right, and that’s why I think the boom was inevitable. It wasn’t a choice of boom or eternal low-rate growth as some posters are arguing. There are fundamental, structural problems with the economy – the asset boom was necessary to get round this.

Starter post: “It has been a long term project of the conservative movement in this country to undermine the welfare state”

The fact is that in 2007, before the financial crisis developed, the burden of taxation in Britain – meaning: total tax revenues as a percentage of national GDP – was lower than in most European countries. The most notable exception was Germany, where the burden was marginally lower. Try this OECD source:
http://lysander.sourceoecd.org/pdf/factbook2009/302009011e-10-04-01.pdf

“Scarcely any rich country has stable public finances. America’s public debt is expected to double as a fraction of GDP by 2018. Britain faces many years of budget deficits and a rising debt burden. There is no end in sight for deficits in the rest of Europe either.”
http://www.economist.com/opinion/displaystory.cfm?story_id=14419200

[32] That’s a truism. Governments provide law – but people occasionally die in police stations. And your point is..? That the market can guarantee my personal safety better than the State can? I’m confused…

It is not a question of “market” versus state, but what stands behind the idea of the market, which is basically decentralisation combined with personal choice. I apply the same principle even to essential government services such as the police. If there are many alternative providers of the similar services then people are likely to be safer. If multiple providers within the same area proves unstable, then at least we can keep the size of jurisdictions relatively small (say, about the size of a Swiss canton).

My key point would be that there is no reason to believe that welfare needs to be provided by the same institution that happens to run the police, and certainly not at the same level of centrality. Unless, that is, we are not looking to run our welfare systems on the basis of consent, but on the basis of force.

@ 36

So is it your suggestion that without the housing boom the economy would have stagnated?

If so, where is your evidence for this?

How does one jump through a hump? Is it like jumping through a hoop, but harder?

Nice piece. For some time a consensus has been forming that ‘cuts’ have to happen, regardless. Even back in the early summer Nick Clegg was talking up Lib Dem prospects of planning out cuts, including dropping the Lib Dems pledge to free university education from it’s manifesto before David Howarth MP rebuked Clegg on the issue knowing that it would be a disaster for those Lib Dems who have seats in university towns and cities.

Despite the less than altruistic motives for the creation of the welfare state, the NHS, in particular, remains popular with the public. The welfare state, as a whole, has created better living standards and. as a consequence, has extended life-expectency. ‘The ageing society’ existed before the economic crisis but existing social policy eg community care, has made little difference in addressing the growing health/social care needs.
It may be that I have become cynical over time but the current economic crisis is the ideal environment for governments to justify massive service and spending cuts including the withdrawal of universal benefits. Voters will accept the necessity for those cuts but, IMO, they will never be re-introduced.

“The welfare state, as a whole, has created better living standards and. as a consequence, has extended life-expectency.”

You don’t know that, and perhaps no one can know exactly what would have happened had the welfare state been kept small or never existed. All that wealth expended might have been used more efficetively to produce a higher standard of living and a longer life expectancy.

43
As a socialist I would agree that it is possible that there would be better living standards for the working-class in the absense of the welfare state – many of its’ original supporters (in particular. Conservatives) probably thought that too,
The welfare state was not introduced for altruistic motives (see post 7). on balance I support Tony Benn’s argument – you cannot change the inequalities within capitalism through state intervention.

[38] Well, that’s one of the things that “stands behind the market” I suppose. Greed is another one. You remind me of the kind of guy who dates a girl for her looks and ignores her character. Nor do I accept that decentralisation is a good in itself (as opposed to a way to the good) – for example, it’s not clear to me why London’s public libraries are better run at borough level than they would be by the Mayor. I suspect it’s a historical accident, no more.

[43] Check out the relative life expectancies in the UK and the USA for a clue here.

Well the USA is continent sized and has different levels of provision across it. It might be better to compare district to district to find out what the effects of the welfare state are.

And, of course, greed does stand behind the market as well (to some extent), but that is actually one of its advantages: http://www.youtube.com/watch?v=RWsx1X8PV_A

Classic! Make everyone dependant on the Welfare State for some of their income and you can keep lefty parties in power for ever as nobody will vote for cuts to their benefits.

“So is it your suggestion that without the housing boom the economy would have stagnated?”

Housing Boom was caused by, and in turn helped cause, easily available credit and the closely linked credit boom. It was this that allowed consumer spending to increase at a time when real wages were either in decline or stagnant.

That may be simplistic, but its the best your getting at the moment – I do have work to be getting on with

Perhaps you can give an indication how the economy would have carried on swimmingly without the housing boom and associated credit binging.

“Well the USA is continent sized and has different levels of provision across it. It might be better to compare district to district to find out what the effects of the welfare state are.”

It might be worth comparing Republican & Democrat-run states to see which have higher incomes, longer life expectancies, better education systems, better health, etc.

The results will not be welcome to right-whingers.

Nick (or Nick Cohen)
My key point would be that there is no reason to believe that welfare needs to be provided by the same institution that happens to run the police, and certainly not at the same level of centrality. Unless, that is, we are not looking to run our welfare systems on the basis of consent, but on the basis of force.
Idiot the whole point of a police force is impartiality.
In your brave new world the rich would decide if any case was right or wrong because they have the boys in blue in their pocket.
No wonder corupt Tories favour the pay as you let you go method.

47
‘Make everyone dependent on the welfare state for some of their income and you can get lefty parties in power forever’
I think you can argue that the existing welfare state equates to subsidising everyone’s income eg education and healthcare unless you pay privately’ About 30 per cent of employees need to claim tax credits to survive, so why doesn’t government increase the minimum wage?
The fact is. the welfare state suits capitalism – it needs a healthy, educated workforce and so taxation extracted from all pays for it. Welfare benefits are mainly invested back into the economy as the poor generally have to spend it. The real cost of welfare is the burden of the masses and not the rich, and furthermore, the welfare system enables the state a great deal of control over its’ recipients.

The proposals to get rid of universal benefits are quite simply an unconditional surrender to people who loathe and despise left-wing values.

So the one thing that no true believer in left-wing values would do, is concentrate public spending on the poor?

51 and 52

Now you’re getting somewhere. If I opposed capitalism totally, the first thing I would do is dismantle the welfare state as it is. Then you get your revolutionary proletariat. Those in favour of the welfare state, are in favour of capitalism, which pays for it.

So you want to see conditions for a revolution, and the nightmares that entails to occur instead of a social democrat state in partnership with private industry and all the individuals of the state.
As for nonsense about spending of the poorer sections. That certainly did not
happen under Thatcherism. When the rich got richer and poor poorer.

@ 48

This graph seems to tell a different story: http://www.lowpay.gov.uk/lowpay/lowpay2006/images/f211.gif

There were pretty much constant increases in real income (not staggering but reasonable) from 1997 to 2002/3 which is when the housing bubble really took off.

54

Who said I wanted a revolution? I said those in favour of the welfare state, as it is, are in favour of capitalism. Ergo, they are capitalists.

Or Social Democrats in partnership with private industry if you prefer.

“It might be worth comparing Republican & Democrat-run states to see which have higher incomes, longer life expectancies, better education systems, better health, etc.

The results will not be welcome to right-whingers.”

I don’t carry any can for either of the main parties in the US. And I know that plenty of Democrats are perfectly sensible and that many Republicans are far from it.

[57] In fairness (!) to the American Right this discussion presumes that the maximsing of life expectancy is an agreed policy goal. I’m not sure that we can take it for granted that evangelical conservatives – whose base mostly expects to be “raptured” really soon – see it that way.