Free, equal, and fiscally expansive
The liberal case for welfare state expansion has never been stronger, but the real world of welfare politics may render it largely irrelevant
The demise of liberalism as meta-ideology is now firmly within sight.
Democracy is increasingly unpopular — not only among right-wing boomers, but also a generation of young people quite understandably wondering what democratically-elected politicians have ever done for them. And the triumph of human rights as an organising principle of liberal democracies, solidified towards the end of the twentieth century, is now rapidly unravelling: the freedom of various groups to control their own bodies or define their own identity is under attack, the desire to escape violence and persecution is being criminalised, and our entitlement to the basic necessities of life seem increasingly dependent on adhering to what policy-makers deem to be worthy and disciplined lifestyles. International law is a fiction.
There may of course be an economic upside to liberalism’s demise. We could finally dispense with the notion that the market knows best, and indeed the silences induced by the mythical assumption that the market is capitalism’s organising principle.
However, competition is being replaced by concentrated industries and oligopolistic firms, not socialist planning. The strengthening of competition law in the 1990s can perhaps now be seen as economic liberalism’s last stand, before the reassertion of neoliberalism’s veneration of corporate power and shareholder primacy.
Liberalism’s demise should also worry anyone who cares about the future of the welfare state in countries such as the UK.
Welfare provision in the UK is not underpinned by an historic compromise between conservatism or nationalism and socialism — as in the Bismarckian tradition in continental Europe — but rather the British left’s embrace of liberalism. In short, as I argue alongside Kate Alexander-Shaw and Nick O’Donovan in our recent Renewal editorial, ‘the same ideological perspective that legitimised capitalism was deemed also to be the principal source of the ideas and practices that would restrain and reform capitalism’. The liberal, Beveridgean welfare state which prevailed in the UK of course encompassed significant public services expansion after the Second World War, but less so social security transfers, which focused on poverty relief and a minimal contributory system (primarily the state pension).
This approach has set the parameters for the left’s welfare imaginary ever since. But it is struggling to survive a sustained period of low growth and stagnant earnings — as well as other challenges such as population ageing — in part because it has failed to defend itself against neoliberal norms.
As discussed below, there is a liberal case for the radical expansion of welfare provision now required. But there remains complacency about how this might be financed, the broader economic (and ecological) circumstances in which the welfare state will operate in future, and the waning force of liberal morality in driving progressive change.
Rebooting liberalism
One way or another, we are going to be spending a great deal more on welfare provision for the foreseeable future. It may take a while for policy-makers to move past whether questions, but the question we should really be asking now is how we are going to expand the welfare state to achieve the greatest social and economic benefit.
Daniel Chandler’s recent book Free and Equal: What Would a Fair Society Look Like? provides an excellent guide in this regard. Chandler offers a muscular defence of liberalism and its radical egalitarianism — which would be reflected among other things in generous welfare provision — dipping into the archives to draw upon the last great liberal philosopher, John Rawls.
Chandler essentially tells us that, as a philosopher, Rawls has figured it all out. Rawls does not offer a blueprint for social and economic policy in the contemporary era though; that is our job. Much of Free and Equal is unoriginal, but rather majestically so. The book’s great strength is in establishing that many of the the things the centre-left has been advocating for in recent years — from wealth taxes to common ownership of private firms — are both rooted in basic fairness, and aligned with general societal interests.
Chandler is a self-styled ‘economist and philosopher’, and these often-conflicting disciplinary modes combine well in Free and Equal to enhance the persuasiveness of its conclusions. But the book’s tone is actually more judicial than analytical: in another life, its author might have been a formidable lawyer.
Chandler’s treatment of universal basic income (UBI) is a good example of this approach. In just a handful of pages, Chandler moves from a sceptical position to arguing that UBI, or something close to it, is a moral imperative. He is hardly an enthusiast, but sharply demonstrates that the various objections to UBI are illogical or disingenuous, leaving an irrefutable case.
Reinforcing neoliberalism
I am more sceptical than Chandler that Rawls is an appropriate guru for the policy agenda he endorses. Chandler offers a faithful reading of Rawls’s key thesis (in short: if we had to choose how to organise society while ignorant of who we are or our status relative to others, we would choose a society in which basic liberties are protected, and everyone has the same opportunity to succeed). Yet his best arguments would work even without Rawls in his corner.
Free and Equal offers a strangely decontextualised version of Rawls. In Chandler’s implicit account, Rawls’s work had a limited political impact because it appeared at an inopportune moment, between the unravelling of the postwar consensus and the era of neoliberalism.
Yet we can see Rawls in another light, as one of the forebears of neoliberal thought. The ‘difference principle’ (which Chandler accurately defines as: ‘social and economic inequalities can be justified only if they ultimately benefit everyone’) takes us to a fundamentally anti-egalitarian position, helping to reinforce the notion that wealth ‘trickles down’ to the worst-off if we liberate the well-off from social obligations which induce inefficiency.
Rawls would presumably disagree with this interpretation, and I hesitate to over-state it. Essentially, however, Rawls’s mission was providing coherence to liberalism’s contradictory impulses, as capitalism began to morph (back) into something decidedly illiberal. That he largely achieved this, as the author of a very good book, is hardly relevant to the fact that, in the real world, the intellectual cracks were insurmountable. Rawls ultimately failed to refashion liberalism into an unequivocally progressive force.
And I would worry that, as much as I agree with (and indeed take inspiration from) Chandler’s policy agenda, any rediscovery of Rawls is at least partly explicable by the fact that liberalism finds itself at a similar juncture. Capitalism is constitutive of liberal ideals, but it is also a threat to them. The solution offered here is essentially a more inclusive model of capitalism, and more thoroughly distributing the proceeds of capitalism via the welfare state.
But recognising the necessity of something does not automatically make it so, and demonstrating that capitalism can be tamed might perversely strengthen the argument of those who believe it mustn’t be — because it demonstrates that its inherent virtues could be jeopardised.
Remembering politics
There is obviously a better way, but one of the reasons that Rawlsian theory did not translate into Rawlsian politics is the inability of liberals to create and sustain a constituency comfortable with the fiscal implications of combining capitalism and social justice.
It is worth noting that the spending commitments implied by Chandler’s policy agenda would be substantial: following Thomas Piketty, he estimates that taxes raising around 45-50 per cent of GDP (up from around 33 per cent today in the UK) would be required ‘depend[ing] on the precise combination of policies that we decide to pursue’. Free and Equal steers clear of contemporary debates in economics around money creation practices and their implications for fiscal policy, instead accepting that conventional taxes would directly finance a renewed welfare state.
Chandler makes a fine case for why taxation as this level would be just (and, with his economist hat on, also have little negative impact on productivity). Yet the politics of tax-and-spend amid real-world disagreement of what constitutes fairness (and efficiency) are obviously far too messy to allow for complacency about how straightforward any of this will be.
This future will have to be fought for. How likely are we to see a Rawlsian army rise up and win power? Your guess is as good as mine.
Reading Hay while the sun shines
A related problem with liberal theorising is that capitalism’s ability to generate wealth is assumed to be largely constant.
This brings me to Colin Hay’s article in the latest issue of Renewal on the ‘New Orleans effect’, that is, the implications of climate-related disasters on the welfare state. Hay’s thesis is that climate catastrophe will make traditional welfare provision close to impossible in the coming decades.
For Hay, liberal and social democratic thought assumes that welfare provision generally focuses on decommodifying ‘insurable’ risks like ill-health, old age, and unemployment, so that those least able to afford to insure themselves privately against such outcomes are not left destitute when they materialise. But in practice welfare provision has always protected people against a mix of insurable and ‘uninsurable’ risks (so-called ‘Acts of God’ against which no individual could ever reasonably protect themselves) and the balance is tilting rapidly towards the latter.
The greater ferocity and frequency of climate-related disasters (which would also include problems such as COVID-19 and future pandemics) means that ever-greater volumes of public spending are required, on a discretionary basis, to counter the consequences for welfare and basic infrastructures of intensifying economic disruptions.
This in turn problematises funding for spending arising from the contractual entitlements that historically underpin welfare provision focused on insurable risks — even though the likely consequences of climate change on capital accumulation means that the demands upon conventional welfare instruments will increase significantly.
The coming era of expansionary retrenchment
Hay paints an extraordinarily gloomy — but depressingly plausible — picture of what happens next in countries like the UK:
The familiar cycle between ‘fair weather Keynesianism’ and hyper-austerity will accelerate…
This means sovereign debt default will become a permanent characteristic of the capitalist political economy, not a once-in-a-generation blip…
Over time, the democratic legitimacy of the state will wane as it fails to adequately provide for its citizens…
This in turn serves to reinforce state failure as the state’s ability to raise taxes to fund welfare provision and service debt is undermined.
This is the dynamic which underpins my earlier prophecy that we are going to be spending a great deal more on welfare provision in the future. A little more nuance is clearly necessary. The welfare state will indeed expand into new domains — but it will simultaneously continue the retrenchment process that began in Rawls’s heyday.
I worry that this bloated welfare state will support neither freedom nor equality; it will be focused instead on subsistence and the preservation of order, and even then will lack political foundations to be sustained over the long term.
The end
There are two main sets of objections to Hay’s account. First, we can restructure the welfare state to better support the innovation we need to both combat climate change, and generate the wealth needed to finance this agenda — acknowledging that egalitarian social policy makes us all better off. Second, the welfare state’s demise is not inevitable given that the fiscal and monetary practices that Hay treats as fixed can in fact be refashioned to allow humanity to contest its ecological fate — restricting the influence of financialised capitalism on our imaginaries of what is politically possible.
Inspired by these arguments, we should of course try to resist. But there are few reasons to believe that success is any more likely than failure in this regard.
If our mission is to change capitalism in order to save the welfare state, it is not clear that books like Free and Equal offer a sufficiently comprehensive toolkit. Daniel Chandler comes close to acknowledging this in a short section on ‘the ecological emergency’, in which he argues that degrowth (albeit without using this specific term) may be necessary to secure a sustainable future for subsequent generations.
Such a scenario would of course further problematise the political feasibility of a radically redistributive welfare agenda. Accordingly, Chandler is for the most part content to endorse a mixture of green taxes and tough regulations in order to fix the market failure of environmental damage.
Free and Equal’s policy agenda is highly creditable, and the case for it has been powerfully made. Arguably however it silently heralds liberalism’s end, even as it loudly proclaims the perspective’s continuing relevance. There are few logical limits to the scale of state intervention in the capitalist economy that will be required as Rawlsean principles collide with a reality of economic stagnation and deeply entrenched inequality. This is not fertile ground for liberal ideas.
This takes us back to Colin Hay’s ‘New Orleans effect’. If we are to have any hope of averting the end of progressive welfare provision, a much wider and deeper set of reforms to the basic building blocks of contemporary capitalism will be necessary.
Hay is of course sceptical. Ironically, it may be that liberal egalitarianism becomes relevant — indeed essential — only once Hay’s welfare apocalypse has actually come to pass, as the climate catastrophe forces us into a ‘back to the drawing board’ scenario not dissimilar to Rawls’s original position.