PIGS and welfare states

The fiscal crisis besetting the southern European countries -- Portugal, Italy, Greece, and Spain, irreverently termed "the PIGS" -- has led some proponents of free markets to declare the death of the democratic welfare state. The latest of these cheerleaders is Neil Reynolds. Writing in the Globe and Mail (July 12), Reynolds argues that, "Democracy assembled the welfare state peacefully enough," but that Europe's fiscal crisis will witness the onset of disorder, perhaps violence. The result, he implies, may be the rise of tyrannical governments of the fascist type as arose in Italy in the 1920s so as to deal with the twin economic and political crises.

This is not the first time critics of the democratic welfare state have heralded its death. In the mid-1970s, conservative economists such as Milton Friedman argued an "excess of democracy" was leading to fiscal ruin. Thus was launched the Reagan-Thatcher revolution of small government and deregulated markets, which in turn begat the Bush/Clinton era in the U.S. and the Blair/Brown years in the U.K., with inroads also into Canada and elsewhere.

What has been the result? Besides recurrent economic instability -- the collapse of financial markets after 2008 is only one of several instances -- attempts at downsizing the welfare state and freeing capital have seen the gap between the rich and poor grow steadily larger, with the middle classes in the U.S. and U.K. gradually hollowed out. As Dr. Phil might say, "How is that working for you?"

Returning to the argument's central thesis, however, the death of the welfare state is greatly exaggerated. Indeed, the PIGS provide no evidence at all for the coroner's report as they scarcely classify as welfare states in the sense most people understand.

There is a wide variety of welfare states. Gregg Olsen, a political sociologist at the University of Manitoba, who has studied them, notes three main types of welfare states: the liberal democratic type (e.g., the United States) marked by low taxes, low expenditures and limited universality; the social democratic type (e.g., Sweden and Norway) marked by features nearly the exact opposite of the liberal democratic model; and the conservative type. The conservative type is further split between two models, the achievement-performance type (e.g., Germany) with high expenditures and medium taxes; and a Catholic/rudimentary type (e.g., the Mediterranean countries) with low public expenditures and a reliance on civil-sector welfare provisions (mainly local charities, the church, and the extended family). In other words, the welfare state type present in the PIGS is of the least developed, most pre-modern form.

Having been in Greece in early May, I can attest that it (and the other Mediterranean countries) have many problems, corruption and inefficient taxation among them. But the biggest problems they face are, first, they are not democratic enough and, second, they are being forced to pay back foreign debts that these same oligarchic governments accumulated at the urging of the IMF and various investment houses, money that rarely went toward the general good. With the economic downturn, the creditors now want their money and the citizens of these countries are being squeezed to pay the bills.

Meanwhile, it is worth noting the countries with functioning democracies and developed welfare states -- especially the social democratic types -- came through the recent crisis quite well. One reason is these welfare states provide real jobs and real services, rather than short-term jobs based on physical infrastructure that often drives up inflation and debt.

Moreover, we should remember such welfare states do not merely take care of the poor and the sick. The more elaborated welfare states also provide education, labour-force retraining and health care -- all necessary ingredients for a good economy; ingredients insufficiently funded in the minimalist welfare states of southern Europe.

Recent attacks upon the welfare state are part of a broader effort by apologists and conservative political leaders (in the U.K., Germany and Canada) to shift the blame and the responsibility for the recent economic crisis onto the backs of ordinary workers and the poor. Two years ago, these leaders could not shovel public money out the doors fast enough to save the banks and credit houses. Today, these same leaders, with encouragement from the business community, are suddenly concerned about the debt and want ordinary people, some having already lost their jobs, their houses and their savings, to shoulder the costs of these bailouts. Should citizens everywhere be angry? In the immortal words of Sarah Palin, "You betcha!"

Trevor W. Harrison is a political sociologist at the University of Lethbridge.

Republished from the Winnipeg Free Press print edition July 21, 2010 A11