The end of the welfare state? – by Shiraz Paracha

Europe is at the verge of the biggest overhaul since the Second World War. The target of the change is the welfare state.

At the beginning of the Cold War, several Western countries adopted the idea of the welfare state and showcased it as the best model for a society. The actual aim, however, was to discredit Communist and Socialist systems.

Twenty years after the end of the Cold War, Western governments are winding up the idea of the welfare state by axing welfare services. Hundreds and thousands of people are protesting on the streets of Europe against job cuts and slashing of the public health services. Pension cuts and trimming of the public education are also underway in several European countries. There are proposals to rise the age of retirement.

Value Added Tax has been increased in Britain to two and a half percent. Family and child benefits have been frozen and a two-year freeze on salaries of the public sector employees is proposed in the emergency budget presented by the coalition government of Prime Minister David Cameron. The poor of Europe are feeling most of the burnt from the changes.

At the recently concluded G8 and G20 meetings in Canada, European leaders pressed for more cuts while the Americans argued to increase consumption. Interestingly, one group of Capitalists wanted to further deprive the poor by cutting jobs and services and the other pushed for more consumers spending. To Americans, it does not matter if people use credit cards and borrow money to increase consumption.

For two days, thousands protested against the flawed and discriminating policies of the G8 and G20 countries in Toronto, but Western leaders left the meetings without giving solutions that can protect the poor.

A welfare state protects and promotes the economic and social well-being of its citizens. Such a state follows principles of equality of opportunity and equal distribution of wealth. Under this system the state also takes the responsibility to protect the disadvantaged.
The concept of the welfare state began in Germany in the late 19th century when Conservative German Chancellor, Otto Eduard Leopold von Bismarck, who was concerned about the Socialists’ gains in the German Parliament, announced measures that, he hoped, would win him the support of working class people and discredit the Socialist movement in Germany.

Bismarck failed to attract the support of working classes but in his effort to stop the newly unified Germany turning Socialist, he introduced world’s first social insurance legislations. He entitled workers to health insurance, accident insurance as well as to old age pensions and disability insurance.

In Britain, the concept of the welfare state came in several stages. Voluntary help and support exited in Britain in the 19th century through Church and social organizations but in 1911, the then British Prime Minister, David Lloyd George, suggested that all workers should pay a national insurance contribution for unemployment and health benefits from work. Three decades later, a British economist Sir William Beveridge published a report that aimed to further refine the British welfare system. However, the real promotion of the welfare state occurred during the Cold War.

The 1917 Bolshevik Revolution in Russia and the creation of the People’s Republic of China in 1949 forced European governments and politicians to fully embrace the idea of the welfare state. The purpose was to offer Western citizens incentives so that they would not seek Socialist or Communist solutions to their problems.

In the Soviet Union, the State provided free primary, secondary and higher education. It also provided jobs for people and paid an average salary. Finding employment was not a problem in the USSR. Similarly, the right for housing was guaranteed by the State. The Soviet Union built hundreds and thousands of comfortable homes for its citizens that were given to the public for free or at a very low rent. In the Soviet Union, utilities such as gas, electricity, telephone and hot and cold water were provided at each home for free.

Free health care was guaranteed by the State to all Soviet citizens. The State was responsible for the safety and hygiene at work place; extensive preventive measures to improve the environment were taken. Child labor was prohibited in the Soviet Union and the State took special care for the health of children. The State provided for material security in old age as well as benefits for sickness, full or partial disability, and death. Workers and employees had a working week not exceeding 41 hours. They were provided with paid annual holidays and sports and cultural activities were supported and sponsored by the State.

Western Europe was puzzled by the free and comprehensive welfare program that was successfully implemented in the Soviet Union. The West realized that they had to do something otherwise demand for the Soviet style welfare system could take roots in Europe.

In response to the Soviet social services and benefits, some Western European countries opted for providing free health and education to their citizens. Other benefits included state housing, public funding for pensions and child benefits. Nevertheless, as opposed to the Soviets, Western countries charged taxes for the welfare system they had provided to the public. The role of trade unions was accepted and expanded in Western Europe. Workers won rights and got several concessions at their work places.

Ironically, at the end of the first decade of the 21st century, the European Union (EU) wants to rewrite the history. Politicians in the EU are thinking how to take back many of the benefits which Western countries, afraid of Socialist revolutions, offered to their citizens in the previous century. European leaders hope to persuade their public that times have changed but the people seem to be in a different mood.

From Greece to Spain and from France to Britain people are angry and disappointed. Europe is in deep economic trouble but the people and their governments have different views on how to tackle the problem.

Ageing population is one of the big problems for Western economies. People are living well in their eighties and nineties but the population growth is slow in most of the Western countries. People either do not marry or they marry late. Careers take priority over children and family. Consequently, the number of working people is shrinking and with that the tax base, too. Those who work have to work more and for longer hours to support the ageing populations who depend on pensions and other welfare and support services.

Some trade unions in Britain do not buy politicians talk of people “living longer”. They say that for the poorest people in society, it is far from a reality. British activists claim that for most working people, life expectancy has only risen by less than two years since the 1970s. They argue that life expectancy for an average female hospital cleaner, for example, has not increased by one day since then. Manual workers are likely to die before they get any pension whatsoever.

The claims on who spends more on pension funds are also hotly contested. In Britain, government claims that funding for public pension funds is out of the control. But trade unions say that a woman working in local government lives on less than five British Pounds a day in pension. Also there is another argument that in most cases workers contribute towards pension schemes so it is their own money.

Trade unions point fingers at bankers and bosses of big companies who take the highest amount of pension. They say that since 1987, bosses have taken more than 18 billion British Pounds of pension holidays. According to the Trade Union Congress of Britain, the biggest director’s pension at the oil company British Petroleum is 21.5 million British Pounds. Reportedly, the former chief of the Royal Bank of Scotland (RBS) was awarded with 2.8 million pounds plus a 345,000 pound a year pension when he left the Bank and the RBS was in crisis.

Pension funds and pension plans are a major area of concern for Western governments. The public is also divided on the issue. One solution is to increase the working age because currently when a person retires at the age of 60 he or she is eligible to state pension and if that person lives for another thirty years, the state has to pay a pension and in some case for the healthcare of the elderly.

France has increased the retirement age to 62 from 60. In Britain, the Conservative-Liberal Democrat coalition government says the working age may rise to 70 over the next few decades. It is suggested, in Denmark, that retirement should be linked to life expectancy and the pension age will rise from 65 to 67 by 2027. But there is serious opposition to increase in the retirement age.

Under the welfare state concept, the state provides employment and several employment benefits to millions of public service workers who work in hospitals, schools and other state institutions and organizations. Governments in the EU want to cut expenditure on the public service sector. That means job cuts and slashing of other benefits. Trade unions are opposed to privatization of the key public services.

And where the privatization has taken place, trade unions and associations are struggling to defend the rights of their members. The new private owners of the industries and services do not like strong trade unions. Most private owners are profit oriented; workers’ welfare is not their priority. They want to fire workers and cut benefits. Trade unions are staunchly opposed to such moves. This difference in approach results in industrial disputes and industrial actions are common in the EU causing disruption in production and economic growth.

Critics say that instead of cutting jobs and freezing salaries, a ban should be put on huge pay bonuses to business bosses. They also demand that governments must not rescue failing financial institutions with tax payers’ money.

Growing economic crisis in Europe is causing other tensions as well. Immigration, for example, has become a serious and sensitive issue. With mainstream media playing on people’s, particularly working classes’ fears of losing jobs and benefits, immigrants are easy escape goats and a soft target to be attacked. Most European governments are jumping on the bandwagon of immigrant bashing.

In Britain, France and in a few other EU countries, immigrants from former Eastern Europe are accused of taking jobs. The media blame immigrants for causing a burden on social welfare systems in the EU. Community relations have been deteriorating in the EU due to the hate and fear campaign.

Besides reducing welfare budgets, European politicians are also turning the EU into a fortress. Immigration laws are tightened and non-Europeans will find it difficult to get into Europe. That means younger working people of Europe will continue to pay for their aging populations.

With the demise of the Soviet Union, the West lost an enemy. Now there is no real outside threat but by depriving people, especially the poor, from their livelihood the West might be creating conditions that could pose a threat to the Capitalist system from within.

Shiraz Paracha is an international journalist and analyst. His email address is:



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