Friday, October 14, 2016

The Threat to the Welfare State

Note well: I am all in favour of the welfare state – a generous, decent, and humane one. But there is a terrible threat to the welfare state under the current system of neoliberalism and open borders.

Take Europe as an example.

The threat comes from the following factors:
(1) market economies do not automatically adjust to full employment. The governments of Western Europe – in thrall to neoclassical economics and neoliberal insanity – refuse to use fiscal policy to create full employment. The result is, as any Post Keynesian would expect, a problem of involuntary unemployment which forces people to go onto welfare, and into welfare dependence.

(2) but it is worse than (1). It’s not just some low-level, involuntary unemployment we’re talking about here. Because of the hammer blows of neoliberalism, loss of manufacturing, outsourcing, the 2008 financial crisis, the Great Recession, the vicious Eurozone and EU love of austerity, and the straitjacket of the Euro currency, Europe is suffering mass unemployment. As of August 2016, Eurozone unemployment stood at 10.1%. As of late 2016, Eurozone youth unemployment stands at about 21%.

(3) with mass unemployment and deficient aggregate demand, unemployed people are left to become welfare dependent. Many become deskilled, demoralised, dependent people. Some come to have social, criminal and substance abuse problems.

(4) but it is even worse than (1), (2) or (3). Europe has seen huge mass immigration, whether legal migration, illegal migration, or the flood of refugees and economic migrants in 2015 and 2016. However, many of these migrants are uneducated and unskilled. Many of them do not speak the relevant European languages of nations in which they have been settled, nor do they have the skills to get anything but low-grade service jobs.

Large numbers of these migrants will simply add to the huge pool of unemployed, welfare-dependent class in Europe, and will severely exacerbate the problem of unassimilated immigrant communities in Europe and the threat from Islamism.
Eventually, the combination of these factors may well create a backlash against the welfare state from free market conservatives and libertarians: especially because of (4).

If the populist right conservatives who support free market economics sweep into power in the coming years, and it is quite likely that many will bring with them a hostility to the welfare state, and act on this. Even the populist conservatives more open to protectionism and left-leaning economics might also do this.

And if European people in general come to feel extreme resentment that their welfare states are subsidising segregated immigrant communities with a profoundly different, illiberal, and regressive culture (and one increasingly hostile to the West), there is likely to be a popular backlash in favour of reducing the welfare state.

The solution? This is just another reason why opposition to open borders and mass immigration should now be a perfectly good left-wing political position, given how many good economic, social and cultural reasons there already are in favour of this.


  1. One of the things that attracted me to Keynesian economics was that it promised something better than merely a welfare state.

    It is about jobs and full employment. And not having a huge part of the population end up in dependency.

    Some years ago, I took an interest in the Liberal Party of the UK. Despite their aggressive devotion to the markets, they were the pioneers in early European welfare states. They knew free markets would always have losers, and protecting the losers was essential to protecting capitalism. But it was Keynes who changed the rhetoric from protecting the losers of capitalism to actually generating productive jobs for them.

    1. Reagan said "the best social program is a job" (shame about the unemployment he allowed). Labour could have had a coalition with the Liberals in 1929 and Lloyd George wanted a stimulus to reduce unemployment, saying the deficit would pay for itself in the end. MacDonald turned him down to maintain balanced-budget respectability, and then was defeated electorally anyway. Plus ca change!

  2. Hello,

    Have you seen this?

    “Why hasn’t it worked? Because real growth today is constrained by real resource shortages, while in the 1930s traditional Keynesianism’s assumption of unemployed resources was reasonable. There is still unemployed labor to be sure, but not unemployed natural resources, which have become the limiting factor in today’s full world.”

    1. if so then we will encounter not deflationary recession but stagflation which is nowhere in the horizon.

    2. And inflation has stayed very low despite the fracking revolution increasing the supply of oil cheaply.

    3. Interestingly, this was one of the contradictions Marx pointed out. Capitalism must grow infinitely, and grope beyond and tear down all barriers; but though it must do so, the resources of the earth are finite.

      I think it's a pithy observation, but I don't think it's quite true at this point.

  3. Give everyone a basic income and stop working our bollocks off as a society. The welfare state should be about making life easier.

    I simply don't trust the sophisticrats claim that they can invent the jobs which people are going to be able to do, not in this century. I'd see it as cosying up the public sector middle class all the more whilst the working class shit out of luck in the gig economy.