Global Research
James Petras
Introduction
One of the most striking socio-economic features of the past two decades is the reversal of the previous half-century of welfare legislation in Europe and North America . Unprecedented cuts in social services, severance pay, public employment, pensions, health programs, educational stipends, vacation time, and job security are matched by increases in tuition, regressive taxation, and the age of retirement as well as increased inequalities, job insecurity and workplace speed-up.
The demise of the ‘welfare state’ demolishes the idea put forth by orthodox economists, who argued that the ‘maturation’ of capitalism, its ‘advanced state’, high technology and sophisticated services, would be accompanied by greater welfare and higher income/standard of living. While it is true that ‘services and technology’ have multiplied, the economic sector has become even more polarized, between low paid retail clerks and super rich stock brokers and financiers. The computerization of the economy has led to electronic bookkeeping, cost controls and the rapid movements of speculative funds in search of maximum profit while at the same time ushering in brutal budgetary reductions for social programs.
The ‘Great Reversal’ appears to be a long-term, large-scale process centered in the dominant capitalist countries of Western Europe and North America and in the former Communist states of Eastern Europe . It behooves us to examine the systemic causes that transcend the particular idiosyncrasies of each nation.
The Origins of the Great Reversal
There are two lines of inquiry which need to be elucidated in order to come to terms with the demise of the welfare state and the massive decline of living standards. One line of analysis examines the profound change in the international environment: We have moved from a competitive bi-polar system, based on a rivalry between the collectivist – welfare states of the Eastern bloc and the capitalist states of Europe and North America to an international system monopolized by competing capitalist states.
A second line of inquiry directs us to examine the changes in the internal social relations of the capitalist states: namely the shift from intense class struggles to long-term class collaboration, as the organizing principle in the relation between labor and capital.
The main proposition informing this essay is that the emergence of the welfare state was a historical outcome of a period when there were high levels of competition between collectivist welfarism and capitalism and when class-struggle oriented trade unions and social movements had ascendancy over class-collaborationist organizations.
Clearly the two processes are inter-related: As the collectivist states implemented greater welfare provisions for their citizens, trade unions and social movements in the West had social incentives and positive examples to motivate their members and challenge capitalists to match the welfare legislation in the collectivist bloc.
The Origins and Development of the Western Welfare State
Immediately following the defeat of fascist-capitalist regimes with the defeat of Nazi Germany, the Soviet Union and its political allies in Eastern Europe embarked on a massive program of reconstruction, recovery, economic growth and the consolidation of power, based on far-reaching socio-economic welfare reforms. The great fear among Western capitalist regimes was that the working class in the West would “follow” the Soviet example or, at a minimum, support parties and actions which would undermine capitalist recovery. Given the political discredit of many Western capitalists because of their collaboration with the Nazis or their belated, weak opposition to the fascist version of capitalism, they could not resort to the highly repressive methods of the past. Instead, the Western capitalist classes applied a two-fold strategy to counter the Soviet collectivist-welfare reforms: Selective repression of the domestic Communist and radical Left and welfare concessions to secure the loyalty of the Social and Christian Democratic trade unions and parties.
With economic recovery and post-war growth, the political, ideological and economic competition intensified: The Soviet bloc introduced wide-ranging reforms, including full employment, guaranteed job security, universal health care, free higher education, one month paid vacation leave, full pay pensions, free summer camps and vacation resorts for worker families and prolonged paid maternity leave. They emphasized the importance of social welfare over individual consumption. The capitalist West was under pressure to approximate the welfare offerings from the East, while expanding individual consumption based on cheap credit and installment payments made possible by their more advanced economies. From the mid 1940’s to the mid 1970’s the West competed with the Soviet bloc with two goals in mind: To retain workers loyalties in the West while isolating the militant sectors of the trade unions and to entice the workers of the East with promises of comparable welfare programs and greater individual consumption.
Despite the advances in social welfare programs, East and West, there were major worker protests in East Europe : These focused on national independence, authoritarian paternalistic tutelage of trade unions and insufficient access to private consumer goods. In the West, there were major worker-student upheavals in France and Italy demanding an end of capitalist dominance in the workplace and social life. Popular opposition to imperialist wars ( Indo-China , Algeria , etc.), the authoritarian features of the capitalist state (racism) and the concentration of wealth was widespread.
In other words, the new struggles in the East and West were premised on the consolidation of the welfare state and the expansion of popular political and social power over the state and productive process.
The continuing competition between collectivist and capitalist welfare systems ensured that there would be no roll-back of the reforms thus far achieved. However, the defeats of the popular rebellions of the sixties and seventies ensured that no further advances in social welfare would take place. More importantly a social ‘deadlock’ developed between the ruling classes and the workers in both blocs leading to stagnation of the economies, bureaucratization of the trade unions and demands by the capitalist classes for a dynamic, new leadership, capable of challenging the collectivist bloc and systematically dismantling the welfare state.
The Process of Reversal: From Reagan-Thatcher to Gorbachev
The great illusion, which gripped the masses of the collectivist-welfare bloc, was the notion that the Western promise of mass consumerism could be combined with the advanced welfare programs that they had long taken for granted. The political signals from the West however were moving in the opposite direction. With the ascendancy of President Ronald Reagan in the US and Prime Minister Margaret Thatcher in Great Britain, the capitalists regained full control over the social agenda, dealing mortal blows to what remained of trade union militancy and launching a full scale arms race with the Soviet Union in order to bankrupt its economy. In addition, ‘welfarism’ in the East was thoroughly undermined by an emerging class of upwardly mobile, educated elites who teamed up with kleptocrats, neo-liberals, budding gangsters and anyone else who professed ‘Western values’. They received political and material support from Western foundations, Western intelligence agencies, the Vatican (especially in Poland ), European Social Democratic parties and the US AFL-CIO while, on the fringes, an ideological veneer was provided by the self-described ‘anti-Stalinist’ leftists in the West.
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