Economic crisis, climate change and the future of welfare states

Abstract

This article discusses the future(s) of Western welfare states in the face of two systemic challenges: the economic crisis and the pressures of climate change. It uses a punctuated equilibrium framework of institutional change to argue for path dependency in welfare reform alongside crisis-driven switching points. The second part argues that the economic crisis of 2008 was endogenous to the preceding era of financialised capitalism, and that it will generate a long-term fiscal crisis, notably in Britain. The third part contends that climate change, and the necessary mitigation measures taken to deal with it, will impose severe demands on traditional social policies. It also threatens further growth in rich countries which undermines the resources available for welfare systems. Thus, economic crisis makes future growth uncertain; climate change makes it undesirable. The conclusion is a new political economy analysis must be developed to promote a radical second stage of de-commodification of economies and welfare systems.

Acknowledgements

Thanks to Anna Coote, Miriam David, Kevin Farnsworth, Paul Ormerod, Graham Room and Guy Standing for helpful comments on an earlier draft.

Notes

According to Caporaso & Levine (1992) and Gamble (1995), modern political economy is characterised by two assumptions. The first is that political and economic processes, though analytically distinct under capitalism, are interlinked and should be studied as a complex and interrelated whole. The second is that the economy, the sphere of ‘material provisioning’, has a special weight in explaining and properly understanding the polity and politics.

See http://www.thefreedictionary.com/crisis/.

This was not the only mechanism at work. Real consumption in the West was also boosted by the growing import of very cheap commodities from low-wage countries, primarily China.

IFSA Survey of Public Spending in the UK August 2009 (see http://www.ifs.org.uk/publications/1791).

At this point, the climate change debate intersects with the ethics and politics of human well-being. There is now growing evidence that excessive economic growth beyond some point (that has been exceeded in most OECD countries) can harm both objective well-being and subjective well-being as well as environmental sustainability (Kasser, 2002). However, this issue is not discussed here.

Helm (2009) go on to estimate the scale of the shift required in the UK, a country typified by poor infrastructure compared with Western Europe, and propose ways of altering the financing regime to enable such long-term investments to be guaranteed.