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Updated: 19 February 1998 For information about GRD and related documents go to the GRD site.
Peace Institute Talk
The Incredible Shrinking State
Will there be social services when the state goes out of business?
Deane Neubauer
Draft--Not for citation or distribution: Comments to the author appreciated. Please write him at Deane Neubauer, or phone 808 956-8092. This paper is reproduced, by permission of the author, primarily for use by members of GRD (The Gulbenkian Report Discourse group) at the UH College of Social Sciences. For information about GRD and related documents go to the GRD site.
The neo-conservative attack on welfare is a symptom of a more
profound underlying phenomenon involving the transformation of the nation
state. The cause of this transformation is, of course, the continuing
globalization of the world's economy. In essence, as the linkages,
relationships, and behaviors that define the global economy grow stronger,
the nation state becomes correspondingly weaker; in many important ways,
this is a zero sum relationship. But not entirely. In this paper I trace
some aspects of globalization and relate them to nation-state attributes.
I then turn to the subject of the providing of social services within the
mature industrial states. My analysis will focus on the United States as
the particular case in point, while drawing from time to time on the
behavior of other states to indicate where I think this argument is both
generalizable and limited.
I have argued in another place that the liberal state, which in the United States coincides
temporally with the creation of this modern nation state, has passed through four stages. I see it
developing into a fifth. Each of these stages developed attributes consistent with the political
economy of the time. The emergent fifth stage is no exception. To some extent--but the
differences are important--all the mature industrial states that have taken the liberal democratic
political form have developed on their own time line a version of these four stages. Put another
way, all of these states have appropriated these attributes, which in Britain and the United States
occurred as distinct stages. And not surprisingly so, because the "drivers" of these developments
have been the elements of liberal political economy themselves. (Lash and Urry, 1987)
The first of the four stages was the minimalist state, in which government's purposes were to
ensure order and provide for minimal conditions to promote business, while also protecting
citizens from undue governmental interference in their affairs. This minimalist contract lasted until
the Civil War.
The post-Civil War period witnessed the emergence of monopoly firms in the economy and
ushered in a new kind of politics. Those opposed to this concentration of power sought to employ
government in a regulatory mannerin their view, reforming the economic playing field. The
populist and progressive movements created the basic institutions of what would become the
regulatory stage in which government was expected to perform an activist role to regulate
economic power in the public interest. This concept of the public interest emphasized maintaining
a democratic political system in which no one set of interests, in this case large scale capital, is
permitted to dominate. (Eisner, 1993; Kolko, 1976.)
The Depression ushered in the welfare stage. With the collapse of the economic system,
government was pressed into the role of economic manager. Many millions of people found
themselves, for no fault of their own and without respect for their willingness to work, unable to
obtain the means of social survival. The great principle that emerged was that when the economic
system proved incapable of supplying the primary wants of the population, it was the state's
responsibility to do so. As has frequently been pointed out, the welfare state in the U.S., so
vehemently opposed by the forces of capital, saved the system from its own actions.
A fourth stage is the development of the postive state symbolized by the Full Employment Act of
1946. Government was to actively manage the economy to promote good ends for business,
labor and the general citizenry by utilizing the tools of both monetary and fiscal policy to thwart
the worst effects of the business cycle with its euphoric highs and devastating lows. When the
post war period moved quickly into its Cold War reality, government also became a substantial
purchaser of services and goods--primarily to support the military in a condition of
unprecedented "peace time" readiness--and as a giver of subsidies to many segments of the
economy. The means to pay for these things was increasingly found through governmental debt.
The "positive" state developed the expectation that government would be responsible in a positive manner for broad aspects of social well-being of the citizenry. We can see the positive state at work in the significant way that government has socialized risk for many groups in the population, groups that would have been exposed to the vicissitudes of the market in earlier periods. Examples include price supports and usage controls for farmers, protection for bank and savings and loan depositors,, the assistance supplied by FEMA in times of natural disaster, and protection for student loans. There are literally hundreds more. As Lowi has pointed out, the "off-budget" extent to these governmental guarantees of private sector activities is in excess of two trillion dollars. (Lowi, 1978: Wildavsky, 1988) While some have characterized such policies as "just another form of welfare" much of the citizenry have come to view these policies as a new class of rights--rights not from governmental action, as the case in the early protections provided by the Bill of Rights, but rights to governmental service and assistance. (Reich, 1991)
These new rights have benefited the middle class and well-to-do as least as much as the poor, and
arguably far more so. Medicare and Medicaid are cases in point, for while it is true that Medicaid
and Social Security do provide essential benefits to some of the poor, Medicare and Social
Security significantly benefit the middle class. Many of these benefits are framed within tax policy.
The deduction of private health care insurance and home mortgage costs are the largest single
governmental benefits provided the middle class and total hundreds of billions of dollars each
year.
To a large extent each of these stages has been cumulative to the one that followed. The emergent
fifth stage is different in that efforts are now being made to eliminate elements of the previous
three stages. Each of the four previous stages represented an outcome consistent with the political
economy that came to define it. The fifth stage is an effort to forge a state consistent with a
political economy dominated by globalism.
Some date the beginning of this stage with the oil shock of 1973. (Dyer, 1997) I believe a better
date is the revision of the U.S. banking act in 1966 which permitted American banks to move
swiftly into Latin American as major leveragers of capital for the then dominant American multi-national corporations. (Barnet and Muller, 1974) Others see the Reagan administration as the first
example of a political regime fully dedicated to establishing a policy environment oriented around
the emergent agenda of the global economy.
The characteristics of the restructuring of national economies under the regime of globalism are
well known. (Greider, 1997; Reich, 1991) They include the migration of large amounts of the
heavy manufacturing burden of the former industrial nations to Asia and Latin America, the
emergence of vast new institutions of finance operating outside the boundaries of any single
nation or group of nations, and the transformation of the older economies into markets for the
newer economies. Global firms, once located and identified with discrete nations now operate to
maximize their own fortunes irrespective of how those actions affect their ostensible nations of
identification. Neo-conservative economic and political discourse calls for open markets, free
trade, reduced taxation, deregulation, increased levels of privatization, and overall a smaller state.
The core of this view is that the social value to be maximized is wealth, the belief is that all desire
it, and that it can be best achieved by this program.
The fourth stage state is weakened both by the positive actions it takes to accommodate the
interests of large scale capital and by the power of emergent global institutions. "Weakened" in
this context means the ability of the state to create and implement policies designed to affect the
internal affairs of the nation and over which it has control. Examples of these would be
respectively trade agreements and the operation of the international financial system. The former
produces effects which counteract other national policies in place such as those protecting
employment, protections for labor, or environmental protection; the latter create effects which
stand outside the capacity of national policy to counter act, such as the rise and fall of currency
rates, or the movement of equity and bond prices, all of which impact on nation-state monetary
policy.
Another sense in which one can speak of the relative strength of a state is its capacity to achieve
compliance with its policies; the higher the cost of compliance, the weaker the state. (Neubauer
and Kastner, 1968). From this point of view we would be interested in assessing whether
globalization is increasing the cost of compliance. There is some evidence that it is. (Dyer, 1997)
II.
The relative success of neo-conservative politics in recent years leads to the impression that this is
the emergent agenda in all developed states, and that the "incredible shrinking state" by which one
means a smaller, weaker state defined by fourth stage standards, will be the defining characteristic
of the fifth stage. And, because the most visible aspect of this program has been the attack on the
welfare state and the state provisioning of social services, this leads to the only modest burlesque
of the title: will there be social services when the state goes out of business?
The neo-conservative political agenda has been successful to date, on my view, because of three
factors. One, by almost anyone's standards, state support of welfare programs does not produce
all the results one desires, these programs produce many obvious negatives, they have become
more expensive over time, and their recipients--the poor--are easily stigmatized. Second, we are
early in the debate over the nature of the fifth stage and globalization, and the forces of capital
have had most of the resources to frame the issue in their terms. Neo-conservatives have been the
fast horse from the pole. The question is: how long is the race? The move to globalization was
framed within the conventional discourse of economics, making it appear as if these structural
dynamics were mere extensions of what had gone before. Unlike the three previous stages of the
state, there has not been a particular crisis that focused political attention on the nature of the
structural transformation. Third, the effective political coalition of neo-conservatism may be
insufficient to survive its successes.
Let me expand these briefly. The attack on welfare is likely to succeed only on two conditions.
One, is that it is confined to the poor, and two, that the conditions of political democracy continue
to prevail. What each of the three previous stages of the liberal state demonstrated is that in
transformations of the political economy, capital can win with its agenda to control the state for
its purposes, up to the point that the bulk of the population comes to perceive that "its
interests"--however these are defined--are not centrally threatened. When the bulk of the
population does perceive that its interests are not being met by the policies pursued by a political
elite being dominated by the largest economic forces, it has employed its superior numbers to gain
electoral victories for those who would act in the name of respecting the interests of larger
numbers. During the regulatory crisis, the initial politics pitted the relatively poor western farmers
and eastern labor against the forces of capital, but it was the entrance of the middle class into the
political scene that provided the coalition that produced the bulk of regulatory action, including
reform of the political system, against the opposition of capital. The Depression impoverished a
vast portion of the nation, in absolute and relative terms, and generated a powerful political
coalition. The coalition of the positive state, built on the unique event of the "great American
post-war prosperity", included capital in a politics of an ever-expanding pie.
Globalization is creating significant amounts of income inequality. The United States now has the
highest level of income inequality of any industrial nation.(Weinberg, 1997) The Gini index
indicates that relative equality of income improved in the United States up through the later sixties
and then began to turn downward again. By the mid-80s the level of inequality had reached
immediate post war levels, and since the 80s it has continued. (See also p. 8)This means that the
nature of the poor is changing in American, as the lower middle-class loses relative position. And,
it means that the middle class as a whole is losing position rapidly to the upper-middle and upper
classes. It can be argued that as income inequality intensifies and as the middle class loses relative
status, it will become less easy to stigmatize the poor. Further, if the attack on welfare comes to
include what can be easily seen as welfare payments to the middle class, the politics of "welfare
reform" will change. Note only the role that "Medicare reform" has played in the last two national
elections, or the repeal of the catastrophic coverage provision of Medicare some five years ago.
Welfare reform has been an easy target in the neo-conservative attack on the state, only because
of the lack of political power of the poor.
This is related to my second point. Because there has to date been no defining crisis in global
transformation of the economy and society, capital and its allies in the political center have been
able to carry the day with arguments and programs designed to suggest that the gains of
globalization--which have been broadly defined as economic progress--outweigh its losses,
namely changes in the nature of the job structure, falling or stagnant real wages, and intensifying
income inequality. Political administrations are content to point to low levels of unemployment
(defined as those actively searching for work), and consistent quarters of economic growth to
demonstrate the efficacy of their programs and the economy's direction. But, the defining crisis
comes from those increasingly left out of the system, those whose relative social position is
declining, those losing out in the distribution patterns of economic growth and their inability to
make ends meet in an economy ever more defined by consumption norms. Further, declining
governmental services mean that these services must either be purchased in the market or done
without. Both of these positions are conducive to a sense of relative deprivation, and each feeds a
politics of resentment.
Neo-conservatism and its particular emphasis on market mechanisms, privatization, outsourcing
and contracting in the United States has served the interests of business. It has permitted a means
for many businesses to downsize (which often results in the downward social mobility of those let
go), for profits to increase, for productivity to increase (especially since productivity is defined in
terms of outcome gained by wages paid--falling wage rates result in relative increases in
productivity ratios), and for increased concentration to occur. It has been a tool of convenience
that permits a coalition of many elements all of which are clustered under the banner of balanced
budgets achieved through smaller governmental spending and restricted services. It is this
coalition which has led the sharp break from the gate. The issue is whether this coalition is
sufficient to sustain itself in the face of the social dislocation it creates.
And this raises the third point. The-neo conservative agenda is composed of highly disparate
elements brought together largely to contest the program of the positive state. Particular parts of
the positive state program have been the focus of different elements of this coalition. The overall
umbrella has been the debt and the quest for a balanced budget, two of the key elements of
Gingrich's Contract with America. This coalition has three quite separable elements which
package quite different agendas; which means that the large brushstroke elements of neo-conservative reform are mutually supported but for very different reasons.
One element is large scale capital which is sympathetic to a program that would promote
deregulation and lowered taxes because it would be the greatest beneficiary. Large capital in
general is engaged in a political agenda in which it seeks to gain access to public resources at low
costs (timber, water, minerals, band width, etc.) and then seeks to employ them with minimal
regulatory oversight. It further seeks a program in which its capital, whether corporate or
personal, remains in the private sector. Regulation has always been a complex issue for large
capital. It has resisted regulation when it worked to directly raise business costs; it has supported,
indeed, demanded regulation when it believed that regulation could be in its own interests, e.g. the
demand that the federal government restrict auto imports during the 1980's. In general big
business has learned to live with many versions of regulation because its profit margins are larger
and it can pass the costs along to consumers. Kolko in his analysis of early progressive regulation
points to the success big business had in channeling the progressive demand for a regulated
marketplace into one that met its needs. (Kolko, 1976) Finally, political scientists for at least four
decades have pointed to the phenomena of "client captivity" and the development of "iron
triangles" to demonstrate how big business has been able to transform ostensibly repressive
governmental regulatory agendas into programs in which their interests will not be fundamentally
damaged. These have become by extension the dynamics of the global firms operating within the
U.S. The underlying pattern of seeking political control of the center also goes far to explain the
current pattern of money in electoral politics, but it is necessary to point out once again that the
current situation is but an extension of a previous pattern.
A second element is comprised of small scale capital, influential at a local level. Historically small
capital has been a frequent enemy of large scale capital (it was historically opposed to the
monopolies), but it shares an interest in deregulation and lower taxes in part because the relative
burden of these policies falls more heavily on it than on large capital. It also "gets less" directly
from positive state programs than does big business. This is, however, not true to the income
class that represents small business which has been a beneficiary of many middle-class welfare
benefits. This group was particularly well represented in the new 1994 Republican Congress
sounding the clarion call of reducing the budget deficit, reducing regulation, lowering taxes,
eliminating welfare and "government handouts", but preeminently, returning government the
local level. The elements of small scale capital are strongest at the state level, especially in
activities such as real-estate and insurance (even as these activities are being increasingly
aggregated to the national and global level). The demand for local control is motivated in part
because this group has greater access to government at this level; it also is code for the "moral
politics" of race and class.
The interests of this third element, the "moral right", lie less directly in economic concerns and
more in the nature and tenor of social relations and seek deregulation and privatization as means
for limiting government action on the behalf of minorities, especially recent immigrants. This
complex association of views shares in common its white racist bias, its fear of foreigners, its fear
of losing control to "outsiders", which comes to be represented in the view that government is
controlled by various elements that are "outside", including those present on the stage of global
transformation. While it is likely to express its views in terms of discrete and closed codes, such as
Christian fundamentalism, and the promotion of family values, it seeks the policy ends endorsed
by neo-conservatism--embodied in the shrinking state--only incidentally. Its primary goal is to
seek power, to control the state to reshape the vast welter of policy that defines the state's role in
society's status relationships. This element is anti-interventionist on economic issues, but highly
interventionist on social issues. Individuals and groups fitting this profile are often termed by
political scientists as engaged in "symbolic" or "status politics" (Edelman, 1964.)
The rightist political location of this neo-conservative coalition is joined by two other sizable
groups, one focused within the confines of electoral politics and the other outside it. The political
candidacy of Patrick Buchannan rallies voters who have been characterized as representative of a
politics of resentment. The core of their resentment is the transformation of the economy through
globalization, the loss of jobs associated with that and the policies of free trade that appear to
privilege foreigners while stimulating an uncontrollable illegal immigration. The Buchannan model
is rightist in its attacks on the political center for its globalization policies and on liberals for their
social welfare attitudes toward outsiders, but it is fundamentally interventionist in tone and
therefore must be differentiated from neo-conservatism. A Buchannan administration, should one
occur, would presumably support policies that were strongly in favor of nativist industry
(whatever that might mean in a global context), and do much to ameliorate the plight of its largely
working class constituency.
This neo-conservative political coalition is distinguished in part by its commitments to electoral
politics. It is supplemented on the far right by a significantly sized body of opinion, belief, and
action that sees the state as a danger to individual liberty, which translates deregulatory notions to
broad templates for the wholesale elimination of governmental authority, and which seeks to
destroy what it perceives as the coalition of wealth, privilege and power which rules the society
and controls government. Richard Hofsteader's analysis of the Radical Right of the 1950s and
1960s focuses on downward social mobility as an integral factor in the social composition of such
groups. Joel Dyer's recent work on the politics of rage points to a very similar phenomenon
having emerged since the mid 1970s, particularly in rural America where the effects of social
transformation directly linked to globalism have been devastating. (Dyer, 1997) At the far right of
the far right are militia groups armed to protect their liberty and already engaged in sporadic
actions against the federal government, most especially the Bureau of Land Management which
along with the AFT are viewed as those federal agencies of most direct threat to their
disarmament and dispossession.
III.
This politics of the right can and often is viewed without differentiation as simply motivated by an
attack on the welfare state. As I have tried to demonstrate, I think that view is wrong. The right
has commonalties, foremost of which are its xenophobia and its racism, and it has a common
target--the positive state--but I believe this coalition is inherently unstable. At least it is unstable
without the occurrence of some further unifying event that would serve to paper over its thin
oppositional consensus.
And now to make three points in pursuit of this talk's title: One, the state is unlikely to go out of
business, because very few people want it to. Two, social services serve indispensable functions in
modern complex societies, and without them, such societies cannot endure. Three, one way out of
the current dilemma may be to locate social services more directly within the logic of capital. Let
me pursue each of these briefly.
First, this is the time to surrender the playfulness of this title. The state is not going out of
business, even though some rhetorical benefit may sometimes be gained to act as if that is what is
being proposed. With the title I asked whether there will still be social services when the state
goes out of business. This served as a pretext for looking a bit more closely at what the neo-conservative proposals for a smaller state might be about. But, of course, it is one thing to argue
that the footprint of the state be shrunk and another to suggest that it is going out of business.
But, again, rhetorically "getting the state out of business" is precisely what some ideologues of
the 1994 Congress have demanded, to the point of abolishing the Department of Commerce, the
Department of Energy, the Department of Agriculture, and the Department of Education. Three
of those four are sites at which the positive state formation of the current federal government
attempts to manage the economy. The fourth, the Department of Education, is the symbolic site
of those most concerned with the erosion of local control by federal authority. My point is to
suggest that by promoting this rhetoric and by championing the language of markets and
privatization, neo-conservatism initiates a wider agenda than it really seeks.
This is a classic case of oppositional rhetoric and can be demonstrated by two bits of political
grounding. First, many of the class of '94 discovered that their fevered attack on the federal
government would mean--if successful--not only the vanquishing of historically elevated and
demonized liberal programs, but many more prosaic bits of conventional pork barrel spending,
and most importantly middle class welfare. A certain leavening in approach has resulted. This is
not to say that programs such as a flat tax and departmental elimination are dead in the water, but
it is to repeat the convention that things do look different from where one looks, and for some of
the class of '94 the hoary lesson of taking care of the folks in the district has been one quickly
learned. A second example lies in the immediate possibility that because of continued economic
performance, the budget may be in positive balance soon. Already the Congress has demonstrated
a penchant to employ any funds thus gained in new spending rather than in spending down the
deficit.
Two additional factors deserve mention. First, even some neo-conservatives realize that the sheer
complexity of modern states continues to require a wide range of regulatory mechanisms to gain
the valued ends of economic growth and performance. And, second, at least for the present, neo-conservatives in politics require the support of their big capital centrist allies to sustain political
office. This group has an appreciation of the effects of market failure and the role that economic
management tools play in grappling with them, and is quite willing to use government
differentially to gain whatever advantages them, including military intervention, etc. This
pragmatic politics of the center leavens the neo-conservative political program.
There are many interests wholly committed to keeping the state alive, well and highly active in the
distribution of benefits, including its conventional subsidization activities. An important
consideration will be whether ideologically committed neo-conservatives can rally support for a
political program to substantially contract the state further and diminish its revenues while selling
it as a benefit to those who would be its obvious victims. How, we might ask, could such an
extraordinary thing happen? Easily. It has been how every tax cut in the past two decades has
been framed: promising small--but symbolically important--cuts to the middle class while
providing huge gains to the well to do. The income inequality structure of the U.S. means that any
tax cut based on percentage reductions will have this effect.
Many concepts become powerful politically because their very generality and ambiguity permit
very different things to be read into them. (Stone, 1997) The key concepts of neo-conservatism
have this property. Markets, decentralization, privatization, deregulation, and efficiency are all
capable of realization in ways that lie almost wholly in the eye of the beholder. The size of the
federal government is smaller than at any time since the Depression. The federal government has
reduced its size since the late 1980's by over 350,000 persons. This makes little impression on
those who desire "less bureaucracy" and mean by it the secession of a particular federal activity.
Thus, the debate over the "size" of government will continue between those who seek to maintain
a benefit and have the political power to do so, and those who for ideological purposes seek to
reduce federal power in all areas but those they favor (e.g. a strong military, a war against drugs,
an expanded prison system, etc.)
This politics will continue to erode support for conventional welfare because the poor lack a
sufficient political coalition to sustain it politically. Maintaining middle class (and to a lesser extent
corporate) welfare has become a zero sum game against sustaining welfare for the poor. The
dynamics for this lie as much in the state's inability to control the cost of its entitlement programs,
primarily Medicare and Medicaid, as they do in neo-conservative ideology. At both state and
federal levels, the discretionary portion of budgets has grown progressively smaller. The real
effect of neo-conservative politics is its emphasis on limiting the growth of new debt or raising
taxes to pay for these outcomes. It will take a crisis to reverse this position.
The second point raises just this possibility. We must remember where welfare spending comes
from. Welfare is an invention of two conservative political leaders, Disraeli in Britain and Bismark
in Prussia and later Germany. They came to understand that the structurally dislocating effects of
rapid industrialization were so profound that in the absence of some profound amelioration of
these conditions by the state, social order would breakdown. This response did not occur in the
United States in the same historical period for a number of idiosyncratic reasons including the
existence of the frontier and the particular politics of immigrant assimilation, but it did occur
during the Great Depression when similar magnitudes of dislocation produced a similar threat of a
breakdown in social order.
I said above that globalization as of yet has not had a defining crisis. It will. The dislocating
affects of global restructuring are arguably as significant as those of the first industrial revolution.
They have already destroyed much of the social and economic life of rural America and their
effect on other important aspects of social structure, such as basic income equality, have already
been pointed to. The United States today lives in the midst of an economic mirage where from the
political and economic center one can point to an unprecedented level of prosperity and the lower
level of unemployment in decades. Yet, the reality for many people is that they cannot make a
living from the jobs they have, they cannot purchase the social services which are increasingly
being made available on the market (the number of individuals without health care insurance has
continued to grow steadily from about 35 million at the time of the Clinton proposals to an
estimated 41 million today), an illegal drug economy is the reality of life in our cities, and one of
the fastest growing industries in the nation is crime control and prisons, money for which is
available (because it is seen as a necessity within tight governmental budgets, and comes to have
the budgetary effect of an entitlement program). The United States now has the largest portion of
its civilian population in prison of any industrial nation in the world. And, these are characteristics
of the system in its time of prosperity.
The defining crisis will come with the inevitable downturn in the global economy. We humans
have an amazing capability to believe that when we are in the midst of economic plenty that it will
last forever. It never does, and when it does not we have a crisis. Yet, when we exit the crisis we
then do things that are meant to correct for the errors of the past and then we proceed once again
with our belief that our next economic plenty is assured.
Neo-conservatism has worked and globalization has produced its prosperity by sharing a similar
structural logic. I follow David Harvey, Immanuel Wallerstein, Richard Barnet and John
Cavanagh and others in pointing out that the global economic miracle is essentially based on
employing the stored consumption capacity of the older industrial world to serve as a market
through which to distribute the cheap labor power of other portions of the globe. Neo-conservatism has worked at governmental and economic levels in the industrial nations because it
has been able to tap a similar "surplus", namely by reducing the wage rates of these nations at the
cost of decreasing the portion of wealth held by the bottom 60% of the population, and by
pursuing policies that reduce the amount of private wealth available to government for
redistribution. The income portion of this statement are reproduced in the following table.
Annual Income Growth in Income Quintile (pre-tax) in percentage
| period/quintile | 1st | 2nd | 3rd | 4th | 5th |
| 1947-1973
1973-1993 |
2.95
-0.78 |
2.66
-0.33 |
2.73
0.07 |
2.72
0.49 |
2.48
1.13 |
Source: John Cassidy, "Who Killed the Middle Class?" The New Yorker, October 16, 1995, p.
114.
These are short-run strategies in that the accrued surplus that can be redirected to fuel
consumption at lower wage rates for the bulk of the population eventually lead, inevitably, to a
decline in purchasing capacity. Trickle down theory, if it can be demonstrated to work at all,
probably only works at given levels of growth and within given patterns of income distribution. I
am arguing that the course we are now following will create eventually a crisis of demand. Of
course, another way to saying all this, is to repeat the familiar concern of welfare advocates for
the past half dozen years, namely that whatever "reforms" are associated with neo-conservatism,
they are being financed at the expense of the poor. Most importantly to correct the level of
ideological cant that comes from the right on this issue, not primarily by denying them the social
services of the state, but by denying them their income shares of the economic prosperity that is
produced by both neo-conservative programs and progressive globalization.
Harvey, Greider and Wallerstein all point to the nature of the crisis that will occur in the emergent
global system. Harvey sees it as a crisis of demand, Greider calls it a crisis of supply: it is all the
same thing. The system has the capacity to produce far more goods than can be consumed at price
levels sufficient to satisfy continued levels of economic viability. Some version of this supply
surplus has been at the root of every major economic dislocation in the age of modern capitalism,
and unless the new globalism system has produced a version of capital radically different in its
logic and dynamics than anything that has gone before, this will happen again. The important
questions are when the crisis is likely to occur and the nature of its magnitude.
Two factors suggest that the crisis when it comes will be profound. Already two major issues
exist with work in the older industrial nations: as suggested above, much of the work that exists
under the neo-conservative formula does not produce sufficient remuneration for people to live
with either security or comfort; and those European nations which are still resisting a full move to
the neo-conservative economic formula do not have enough work for their populations. Both of
these outcomes bode ill for the long run stability of these societies, and they are likely to get
worse as globalization intensifies. India and China have over two billion people. They are both
societies that are just beginning to enter the global market place as major producers of quality
goods with very cheap labor and their impact on world markets, trade flows and work availability
in the more developed countries is already profound. We are familiar with the easy movement of
capital from one low wage site to another and the absolute lack of loyalty that these firms have to
any given nation in which they currently exist. The global prospect is a "beggar thy neighbor"
policy of goods production that may devastate the labor force of not only the developed nations,
but all of their Asian neighbors as well. Couple this will the progressive decline in real wages in
the mature economies and one has a recipe for profound economic turmoil.
It is under these conditions that the neo-conservative political coalition will prove to be unstable.
The accretionary experience of positive state politics will produce a renewed call for state
intervention and action. One way to see this is in the way the dynamics of crisis act in politics.
Debt spending was initiated as a response to crisis. Crises permit a group (or an individual) to act
in ways that are otherwise barred by the prevailing rules of the game. The more profound the
crisis, the great the departure allowed. However, someone always benefits directly from this new
way of doing things, and they are motivated to perpetuate the "crisis" and its way of doing things.
In time the routinization of these activities is claimed to be a crisis by some new group within the
population. This is what happened with the debt, as the political right was able to frame continued
deficit spending as something that threatened the very nature of the republic itself. Politics in the
late positive state has become in some way a continuous politics of crisis as group after group
seeks to distinguish its issues and its fate by making crisis claims. This in turn leads to a debasing
of the political currency of crisis. (As Jimmy Carter learned when he tried to declare war on the
oil companies: he called a crisis and nobody came.) What this means in our terms is that the crisis
that will replace the agenda of neo-conservatism and restore welfare to its role within accepted
state politics will need to be one large enough to generate support for a crisis that will super-ordinate that operationalized by neo-conservatism.
Under the existing regime of neo-conservative discourse the decline of the middle-class and the
increased reduction in circumstance of the lower and under classes have been normalized. A
broadly based economic turndown, or depression, may de-normalize this condition, making allies
out of two groups which are still separated by the normative and social conventions of residual
positive state politics, kept alive incidentally by the policy dynamics of the political center. At this
state, one can predict, the voting potential of these two groups may be mobilized to develop a
new policy posture for the state.
Whether the response to crisis is accomplished in democratic or undemocratic fashion will be, I
believe, the test of our age. Within the emergent politics of resentment lies a will toward a strong
authoritarian state that is fascist in its tendencies. This would bring us a kind of social
restructuring and relief at the expense of historic American protections of individual liberty and
notions of social justice. I state this as a possibility, recognizing that it deserves to be explored at
far greater length.
Possibilities for democratic reactions to the crisis are intriguing. New Zealand is held out as a
sterling example by neo-conservatives of how its revolution can work to bring about economic
revitalization. Celebratory accounts usually underplay the degree of social dislocation that has
accompanied these reforms. New Zealand, under the press of the crisis of these dislocations, has
quietly embarked on some other experiments which are worth noting. The first has been the
creation of a proportional representational system of election, brought in part by the public
dissatisfaction with having both of its historic political parties move to the political and economic
right.
The first election under proportional representation brought in a coalition government that gave
significant voice to "third way" views that seek to moderate features of the neo-conservative
agenda. The first election under PR was in November 1996, and it is too early to tell what the
lasting effects may be, but from a year's experience one can suggest that political reform that
expands the range of voices in the political environment can be important in articulating the sense
of crisis in the society. Just one example of this is instructive. One of the first steps of the new
government was to review the state's commitment to its wide sweeping health sector reforms and
propose a move from managed competition (and its partner managed care) to something which is
being called managed cooperation, a very different concept. I point out in passing that the key to
Progressive movement reforms in the United States in the early 20th century was reforming the
rules of political participation. Granted New Zealand is a far different country and society than the
United States, but my view is that the principle of seeking political solution to the "problem" of
institutionalized economic reductionism is worth pursuing. And, it is especially worth pursing in
our own political climate where it becomes crystal clear that the role of money in elections will
lead even more transparently to control of the electoral process by the rich and the increasing
alienation of even larger segments of the electorate.
To repeat the point that may have got lost in this digression: a significant economic crisis has the
capacity to mobilize public action (either as a threat against social order or through legitimate
means) which would have the effect of restructuring the state's agenda on the provision of social
services, including breaking the taboo on raising taxes, or extending the deficit.
Finally, and at long last, a more incremental approach to a re-visioned plan of providing social
services lies within the neo-conservative approach. This has been trotted out in a few policy areas
such as proposals to permit individuals to invest privately portions of their social security taxes (as
is done in Chile), or to develop Medical Savings Accounts which seek to create incentives to
reduce medical expenditures by allowing individuals to make decisions on their medical service
options and to gain as personal resources savings accrued.
The proper argument against these devices is that they privilege those with greater means and
knowledge about how to employ such strategies, that they are vulnerable to broad mechanisms of
risk, such as investment market failures, and that they are insufficient to meet the actual needs of
individuals with large needs and few resources.
But there is a kernel of sensibility that lies within these proposals that might be usefully expanded
to a new and emergent view about social services, capital, and the state under globalization. I
enter quickly the caveat that these ideas must be put in the limiting context of a major crisis
discussed above.
These ideas build on the notion that broad scale governmental programs, highly bureaucratized
programs, act as disincentives for individual choice. I think there is hardly a question that they do.
Anyone who has ever struggled to actually get welfare or unemployment benefits knows how
socially destructive these bureaucracies can often be. Lodged within these proposals is the idea
that individuals may have a greater stake in the outcome of a decision if they are intimately
involved in the making of that decision. I need hardly point out that for decades this has been an
operational definition of what many political scientists identify as power.
Much of the critique of neo-conservatism, and certainly of the inequality that is resulting from
neo-conservative policies is that they result in profound alienation. In its rudest possible form:
people find little reason to actively support a system that seems to provide benefits only to those
who already have ample amounts of wealth and power and seemingly little or no commitment to
evince a broader social responsibility to share it in some way that signals the overall value of the
community from which it comes. Put another way, capital may succeed in its program if it can
find authentic ways to involve people more directly in the gains of capital development. This is, of
course, the existing ideology of the investment community and it never tires of informing us of
how many Americans are implicated in mutual funds, etc., but the burden of this argument is more
on the side of who is included than who is excluded.
ESOPs--Employee Self Ownership Plans and other devices of directly implicating workers in
capital enterprises stand as one instance of how the gap between the owners of capital and the rest
of us can be bridged. Neo-conservatism is burdened by its own reformulated social darwinism
which makes it difficult to have informed conversations about what might prove socially useful
ways for the bulk of the population to interact with capital other than as compliant consumers, but
the same logic that suggests that a broad social crisis could result in a recommitment to the state
finance or provision of social services could lead to the state taking an initiative in sponsoring
direct involvement of workers in the profits of capital. These are not new ideas and they don't
speak to the broader questions I raised about how a community should take care of those citizens
for whom work does not exist, or those who are unable to work. But, I advance them here to
suggest that some ways do exist to work within the framework of a presumptive need to reform
the bureaucratic dimensions of welfare and control state spending that can alter aspects of the
prevailing social contract.
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