The Future of the Welfare State as Collective Insurance Against Uninsurable Risks

Renewal Editors’ note:
Analysis of the welfare state tends to assume that welfare-related institutions and
practices develop along a well-trodden path, whereby shocks from outside may
interrupt, but not alter, a given developmental trajectory. This is partly because such
shocks are relatively rare. Welfare states protect us, collectively, against insurable and
knowable risks, essentially by decommodifying them: we pay for welfare collectively
through the tax system, not individually through the market. Countries obviously
differ greatly in what (and how) they choose to decommodify, but the key parameters
of welfare capitalism are assumed to be unchanging. Yet as we enter a new age of
human-generated environmental catastrophe, it is not difficult to see that exogenous
shocks are now increasingly likely – nor where they are most likely to come from.
Welfare states will increasingly be asked to insure us against uninsurable risks
associated with the climate crisis. It is not clear that they will be able to do so, nor
that we even have the analytical tools necessary to understand how welfare provision
is now developing. In a major, original contribution to scholarship on the welfare
state, this article draws upon and critiques academic literatures around welfare and
decommodification, as well as challenging the institutionalist assumptions that under-
pin our understanding of welfare capitalism and its international varieties. In doing so,
it also delivers a stark warning to policy-makers – and all of us – about the future of
the welfare state. Readers are also encouraged to visit the Renewal blog over the
coming weeks, where several leading scholars (including Mark Blyth, Waltraud
Schelkle, Daniel Bailey, and Nick O’Donovan) will be responding to this article’s

Colin Hay writes in Renewal: We are entering, if we have not have already entered, a new phase in the life-course of the welfare state. Set in any kind of comparative historical context it is likely to look very distinctive. For it will see the strange and potentially alarming co-presence of three conditions:

  • Welfare state spending rising to previously unprecedented levels (whether expressed as a percentage of GDP or, as perhaps it should be, on a per capita basis)
  • Expenditure rising, but still failing ever more systematically to protect and insure citizens against the risks (both individual and collective) they face
  • An ever-greater proportion of such spending being debt-financed in an age of
    ostensible austerity.

The likely consequence of the third condition is a new fiscal crisis of the welfare state and pervasive debt default. This, on the face of it, seems paradoxical. How is it that welfare spending might swell to previously unprecedented levels yet fail to meet the needs of citizens? And how is it possible to imagine an ever-greater mountain of public debt capable of precipitating a fiscal crisis of the state and public debt default in an age of institutionalized and normalized austerity? In what follows I will seek to unpick and resolve the paradoxical nexus, to explain how it is that we now find ourselves in such a situation and to explore at least some of the implications.

More here.  And a response from Mark Blyth here.