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"Welfare without the welfare state": the death of the postwar welfarist consensus

Unconditional cash transfers have seemed an efficient response to the Covid-19 crisis, but Universal Basic Income represents a radical transformation of how states conceptualise and provide for people's needs.

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“Only a crisis – real or perceived – produces real change.” With these words neoliberal Chicago economist Milton Friedman concluded his new 1982 foreword to his Capitalism and Freedom – a best-seller when it first appeared in 1962 and enjoying a rapid resurgence in the era of Thatcher and Reagan.

Friedman’s mantra must sound familiar to today’s Universal Basic Income (UBI) enthusiasts. 2020 has been a boon to their cause: although no government passed the proposal into law, policy experiments moved closer and closer to the real thing. In late March 2020, in response to the Covid-19 crisis the US sent a $1,200 “Trump cheque” to American citizens. Most European countries have extended and automated access to their unemployment benefits since the onset of the pandemic, while Jair Bolsonaro ramped up Brazil’s cash-transfer machine to assist the country’s poorest citizens.

Cash transfers are hardly the only instrument in the toolbox of crisis-fighters, of course. Quantitative easing operations and targeted interventions in healthcare markets have also been deployed, now coupled with large-scale vaccination campaigns. UBI is also not without rivals, from Universal Basic Services to the growing movement for a job guarantee. In an increasingly digital world and an economy reeling from extended lockdowns, however, the idea of a basic income – paid to everyone, continuously and unconditionally – seems built for durability.

The primary drivers of this popularity remain economic. With millions of people under- and unemployed in an increasingly informal economy, a “quantitative easing for the people” appears as a cheap, easy way of providing welfare. Central banks have been furnishing liquidity to their banking sectors for over ten years though quantitative easing programmes. Why could the same generosity not be extended to individuals, too? The US's new treasury secretary Janet Yellen has already announced tax credit payments with central bank assistance.

The Global South arrived at this cash consensus earlier than others. In the aftermath of the structural adjustment programmes of the 1980s and 1990s – which forced countries to repay their IMF loans by pushing through punishing labour market reforms and privatisations – many former developing nations found themselves without adequate state capacity to support their populations. Whether in Brazil, South Africa or India, cash transfers became an attractively simple way of doing welfare in an age of declining institutional capacity. In the 2010s, when Europe seemed to undergo its own structural adjustment process with the austerity packages imposed by the EU after the euro crisis, basic income steadily found its way back to the Old World.

[See also: Paul Mason on why this is the moment for Universal Basic Income]

Economics hardly explains everything, however. More than economic necessity, the “new politics of distribution” exemplified by cash transfers – as the anthropologist James Ferguson has termed it – also arises from deeper, structural changes in our democracy. When mass unemployment and recession forced millions into destitution in the 1930s, instead of fighting for free cash, unions and communist parties pushed for the removal of whole areas of our social life from the tyranny of the market, to be handed over to the state or run by workers themselves. The results were visible in public health care, social housing projects, public works programmes and free education across the Western world, later extended by coalitions in the Third World. All of these stipulated a set of concrete human needs, which capitalist economies had failed to provide for.

Predictably, the welfare regime which emerged out of the Second World War also relied on a strongly normative view of needs – first anchored in a male bread winner, later extended to other subjects. For many reformers and economists, this regime also implied a distrust of cash transfers in favour of collective provision. English economist Arthur C. Pigou, for instance – one of the fathers of the tradition of “Welfare Economics” – famously justified equality on the grounds that it would increase the total welfare of society. “Any transference of income from a relatively rich man to a relatively poor man”, he claimed, “must increase the aggregate sum of satisfaction.”

Such an increase in general wellbeing could not be achieved by simply dispensing cash, however. Welfare, Pigou argued, “is liable to be modified by the manner in which income is spent” and “the reflex effect upon people’s characters of public museums, or even of municipal baths, is very different from the reflex effect of equal satisfactions in a public bar”. William Beveridge – architect of the British welfare state – similarly argued that the increase of “spending power of consumers” would not be the best way to abolish Britain’s “Five Giants” – poverty, lack of education, poor housing, a lack of good jobs, and inadequate healthcare. In place of a price system driven by sovereign consumers, he instead proposed a “democratically controlled state” to secure the allocation of goods. The ordering of British society after total war, Beveridge claimed, would have to be a matter of public deliberation – not simply consumer choice.

Thinkers such as Beveridge and Pigou were hardly the strongest buttresses for this vision. Outside of the academe, parties, unions and other civil society organisations also articulated and defended specific needs to an increasingly redistributive state. In the 1970s, however, a drop in the profit rate led businesses to seek a break from the postwar settlement to restore profitability. As a consequence, Beveridge’s welfare order entered into a terminal crisis, both intellectual and infrastructural.

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The death of the welfarist consensus was presaged in the economics profession. By the early 1950s, Beveridge and Pigou’s views came under aggressive attack in the so-called “second neoclassical revolution”, which recast the price system as a more efficient instrument to allocate goods and services than the postwar planning state. This revolution also implied a different view of human needs. Rather than politicised and “constituted” through a democratic process, needs could now simply be “revealed” as individual choices on a market – subject not to public deliberation in parliaments, but rather to consumer prerogative.

Milton Friedman profiled his own version of a basic income in the form of a Negative Income Tax, which guaranteed everyone, whether they worked or not, an unconditional floor of income, by dispensing cash to those who earned too little to pay taxes. By disqualifying any political notion of “needs” or of the “good life”, a social policy organised around cash transfers could secure the most efficient allocation of goods. Absent of a welfare consensus, the cash-based approach would allow for the realisation of what neoliberal economist Arthur Kemp called “welfare without the welfare state” – reconciling the freedom of the market with a minimum of security.

Nixon’s America proved to be ground zero for this new welfare politics – with tax credits, cash transfers and private outsourcing steadily reshaping the New Deal state. Yet the slow death of Europe’s party democracy, expressed in declining party membership, falling electoral participation, and union retrenchment, also led to an increasing “cashification” of welfare in the 1980s and 1990s.

As citizens left the lively postwar network of institutions – unions, parties and other civil society associations – which had translated local needs into concrete, collective demands which the state could then attempt to meet, statesmen increasingly turned to public relations experts to win office. The link between politicians and the public shifted: instead of listening to an organised civil society, they began to project “opinions” onto an atomised public. Welfare politics followed suit: either punitive workfare and the slashing of public programmes, or shooting liquidity downwards, responding to needs in the “abstract” – in the form of increasing spending power – rather than in the “concrete”: providing good schools, decent housing and so on. Poverty was conceptualised as a simple lack of money, not as inadequate access to services.

The “populist explosion” of the 2010s accelerated this process of abstraction. A curious alliance formed between technocrats and populists – both opponents of the old party democracy – over their mutual preference for cash transfers. In a society with fewer permanent jobs, more precarious work and higher ratios of self-employment, a corporatist welfare state built on trade unions and insurance funds seemed increasingly obsolete. Direct cash payments could furnish security for the new “precariat” of atomic individuals, no longer attached to a political party or embedded in the traditional family units postwar welfarism had presupposed.

The left-wing appeal of cash transfers has always rested in their offering a solution to poverty that is less punitive and inefficient than many existing welfare programmes, eroded by 30 years of neoliberal restructuring. But their popularity is also a sign of the times: cash transfers fit all too neatly with our increasingly individualist and “liquid” democracy. A class society which cannot agree on anything can at least agree on individuals’ need for money. In this sense, basic income has become the distant horizon of our new welfare world: we might not get there soon, but everything already happens under its sign.

Anton Jäger is a postdoctoral researcher at the universities of Cambridge and Brussels. Together with Daniel Zamora, he is currently working on an intellectual history of basic income.

Daniel Zamora is a Professor of Sociology at the Université Libre de Bruxelles. He is, with Mitchell Dean, the co-author of the forthcoming The Last Man Takes LSD: Foucault and the End of Revolution (Verso).