The welfare safety net widens

By Ollie Campbell

"Boris Johnson ‘Clap for our Carers’" by UK Prime Minister

As the pandemic takes it toll on the global economy, hundreds have cried out for a larger fallback, but will any of the pandemic responses last?

 

In March 2020, it felt like the whole world had abruptly slowed to almost a standstill. Millions of employed workers around the globe had the uncertainty of redundancies looming over their heads. The only rescue available in Britain was in the Government’s semi-successful furlough scheme, without which, most people across Britain would have been left jobless and impecunious. It has to be said that this experience has made most respect the welfare system much more than they previously have been.

 

Across all of human history, crises (such as wars or economic crashes) have always obviously highlighted the weakness in any political structure or current government leadership. The pandemic has only added to this list. Covid-19 has very clearly forced a re-evaluation of how the social contract should be divided among all those in society, individuals, employers and the state. Fiscal stimulus packages in response to the pandemic have dwarfed any previous financial injection since the Second World War and have created the greatest expansion of the welfare state in living memory. This is probably the first international-scale bailout of citizens, as opposed to the usual banks and corporations. 

 

The welfare state is a complex web of finance that in most cases, improves a country’s standard of living. At its most basic, it provides substantial poverty relief and security for those who have been financially damaged by circumstances. The famous Danish sociologist and political scientist Gosta Esping-Andersen was labelled the “dean of welfare state scholars.” This is due to his identification of three models: market-orientated economies where the state plays a residual role, family-orientated economies in which the state plays a more supportive role and then state-orientated economies which involve universal protections and services. The balance between these three models is very fine but fluctuates dramatically over a person’s lifetime. However, in most cases, economies even out as a large proportion takeout similar to what they put in. In any one year 36% of Britons receive more than they pay in taxes, but, over a lifetime, only 7% do. 

 

When the Covid-19 pandemic began, entire industries faced total lockdown and almost bankruptcy. Since last March, over $13.8 trillion has been dished out in emergency funding worldwide, which totals more than four times that amount used for the 2008-9 financial crisis. Almost all spending comes from the most developed countries of Canada, the US, the UK, Germany, Japan, Australia and New Zealand (as a % of GDP), all of which have spent over 10%. Only in 1945 has government debt been this high as Europe was being slowly rebuilt post-war. Emerging economies have never required to borrow this much. 

 

Not only has the welfare state increased in size by a large amount but the shape is slowly transforming as well. Long established principles like means-testing (welfare for the poorest only) and social insurance (only those who have paid in) were almost instantly dropped. Cheques, quantitative easing and all kinds of promised finance has been pumped into all economies to pay for everything including wages, food, insurance and healthcare bills. Some governments have simply dispersed cash. In the US, 18% of all dollar bills were printed in 2020 to help the pandemic response.

 

As the virus concentration slowly dissipates, for what we hope is the last time, how much of these expansionary policies will continue? Over the past decade, the risks of what future life may hold, have mostly been offloaded from the governments and employers onto the individuals, such as the risk of being replaced by a machine/online force or a foreign worker. However, the post-pandemic population are beginning to beckon for a larger safety net as more and more have turned to government help as they suffered from Covid consequences.

 

Covid-19 very clearly accentuated the need for a modernisation of the current welfare state as a new social order and new risks become more prevalent in modern society. Pre-pandemic discontent was on the rise, suggested through the 2019 Edelman Trust Barometer, which reported that less than 1 in 5 people in the 26 countries measured agreed that ‘the system’ was working for them and over half said that it was failing. The governments that have responded aggressively to the pandemic shows that the responsibility for certain societal risks has sat in the wrong place. 

 

Minouche Shafik, Head of the London School of Economics, has said in a new book that “the political turmoil that we observe in many countries is not only a foretaste of what awaits us if we do not rethink what we owe each other.” Again, this suggests maybe it is time for a change in the system that could benefit everyone. The current British Government are doing well in creating various new changes to political structure, only there is a lot more to go to create a truly democratic society that puts the ‘general will’ at the forefront, irrespective of party politics.  


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