By Francine Mestrum* – Meer

If we want to fight inequality and promote social change, we will have to relaunch the brilliant idea of welfare states or, even better, promote a new eco-social contract.

It is surprising to note that many academics still believe that all policies to fight poverty are necessarily positive and will in the end, if not eradicate poverty, at least help poor people to survive. This is a sad mistake and leads to wrong assessments of social policies promoted by the World Bank and other international financial organisations.

When the World Bank put poverty reduction on the international agenda in 1990, this had nothing to do with social justice or its fear of riots and rebellions against its structural adjustment policies. Nothing could be further from the truth, as I have shown more than twenty years ago. This structural adjustment was part of the proposed solution for poverty and the message behind it, manifested with even more clarity by UNDP (United Nations Development Programme), was against existing welfare states and other systems of social protection. Poverty reduction, then, was an openly neoliberal policy which became part and parcel of the enlarged Washington Consensus. It was not an improvement to social protection policies but an alternative to them.

The shift to poverty reduction also confirmed a full shift away from development economics that claimed poor countries needed specific policies to close the ‘gap’ with rich countries. It brought an end to post-war development thinking. In neoliberalism there can only be one kind of economic policy, giving as much freedom to markets as possible, protecting these markets and promoting competition and property rights. Consumption rights took the place of labour rights. States had to be strong but lean. Economic policies were taken out of the democratic debate.

In fact, all liberal and neoliberal thinkers have stressed the importance of poverty reduction, since their theories would never have survived if people were left to die in the streets from hunger and cold. From John Stuart Mill to Friedrich Hayek and Thomas Friedman, they all promoted minimum incomes and opposed broader social protection programmes. For Hayek, social justice was a mirage and a road to serfdom. We should never forget.

If, in 1990, reality did not yet conform to this new discourse, the thirty years since then have amply delivered evidence of this analysis. In all countries, in the South as well as in the North, poverty is now high on the agenda. It is mostly called ‘social protection’ now, since the word indeed acquired a new meaning to hide the ideological shift away from welfare states.

This ‘social protection’ is being introduced in bits and pieces; some small family allowances, ‘universal’ health care (for the poor), social pensions and so on, not as a ‘system’ but as partial and targeted programmes. All the rest is not on the agenda, and as far as it existed in rich countries, is being dismantled; public services, including the care sector, postal service and public transport, are all being privatised. Unemployment allowances are being drastically cut. Assistance and other ‘universal credit’ are more and more conditional. More and more people work part-time, without contracts, with zero hour contracts or doing mini-jobs. Pensions have largely been privatised as well. Students need loans to have access to university… It is clear that especially in countries where trade unions are weak, the damage to welfare is considerable.

There is, of course, not one single reason why poverty reduction should be part of a neoliberal strategy. Poverty is a real and on-going drama and poverty eradication policies can perfectly fit into a welfare state system and be oriented towards full-fledged citizenship, but how to make the difference? It can be useful to mention a few points that must be kept in mind.

A neoliberal poverty policy considers poverty reduction a point of common interest. It is easy to build a consensus around it, in fact, who can oppose it? As the World Bank and UNDP repeatedly mentioned in the 1990s, poor people will rapidly participate in producing growth, they will maintain social cohesion, population growth and migration will be stopped, etc. In brief, with less poverty, the whole world will be a better place.

In this neoliberal perspective, poverty is not a matter of incomes. Poor people rarely speak of income, so the World Bank states. Redistribution, then, is not on the agenda. For neo-liberals, poverty is the result of mistaken government policies with mistaken ideas of welfare states that exclude poor people from the market. Welfare states, they assert, are for privileged workers. In opening up markets and giving poor people access, the problem can easily be solved. It means labour markets have to be deregulated and minimum wages abolished. Poverty reduction, then, does not cost any money. It does not touch the wealth of the rich, in fact quite the contrary.

In fact, welfare states and poverty reduction follow two opposing logics. Whereas, in the past, social protection was meant to protect people from the whims of the market, in case of unemployment, for example, and from other problems that may arise – an illness or an accident etc. – neoliberal poverty reduction is meant to encourage people to participate in markets. Welfare states imply the decommodification of services which lead to an emancipation from markets, whereas neoliberal poverty reduction allows for the introduction of more markets.

There are more opposing logics. Welfare states are an important element of social citizenship, as T.H. Marshall explained. It means they are based on rights and legally regulated solidarity. Giving people economic and social rights is a matter of collective empowerment that will allow them to defend and enhance these rights. In neo-liberal poverty reduction, however, poor people only acquire the right… to survive. These rights for poor people are civil rights – the right to life – not social rights. In neo-liberal economies, poor people have a right to receive, contrary to the reciprocity of welfare states. That is why charity and philanthropy are so very much in vogue these days. And it is why welfare states are now said to be ‘cold solidarity’; that is solidarity from all with all, even from or with people one does not know.

Welfare states can be universal, even if reality does not always live up to it, while poverty reduction policies are necessarily targeted, with all the major problems this implies, even in the best of hypotheses. The Brazilian ‘bolsa familia’ program still had an error margin of around 50 %. Assistance to the poor will always be conditional, allowing for clientelist and arbitrary practices.

If ‘social protection,’ as it is defined today by international organisations, limits itself to a survival minimum, it frees governments from any responsibility to do more than reach the poverty line, and, contrary to welfare states, makes any social transformation impossible. Poverty reduction does not alter existing power relations.

What is happening today is seemingly ‘progress’ at the global and the European level, because indeed small steps are taken in sectors that were previously excluded from supra-national decision-making. However, if, at the same time, backwards steps are taken at national levels, this is what is called a ‘procession of Echternach’ – one step forward, two steps backward. It means inequality is growing while, in many cases, poverty is not even diminishing. It leads to the slow erosion of middle classes and an unsustainable polarisation of societies.

Of course, it does not have to be that way. It is a perverse logic that puts poverty reduction and a common interest against the ‘privileged’ citizens with economic and social rights.

Welfare states can prevent and (in the end) eradicate poverty. Poverty reduction policies are only ‘end-of-the-pipe’ solutions and can, in the best of cases, reduce poverty, while in the meantime allowing inequality to grow. ‘In the best of cases’ because in reality, poverty remains in the North as well as in the South. This is a most bitter reality and moreover there is not yet a serious policy plan to fight inequality.

I would like therefore to mention a few points that seem to me to warrant very urgent examination:

  • first, a re-definition of our social protection systems, because economies and societies have changed dramatically these past decades. ‘Welfare states’ are most probably not the best concept to defend, since our urgent needs now go well beyond direct social help and touch environmental policies such as clean air, drinking water, elimination of unhealthy food, etc. A new eco-social contract is what we really need;
  • rights should become individual and not be dependent on specific and changing family situations;
  • public services, labour rights and poverty assistance should be fully integrated into rights-based legal systems;
  • re-confirmation of the tripartite set-up of social protection systems, giving workers and citizens a voice in the conceptualisation, implementation and monitoring of social policies; contributions of employers and of workers should constitute the bulk of the funding, so as to make the system fully theirs, the property of the people and not of governments;
  • mapping the intersectionalities with other sectors, environmental policies in the first place, but also the economic policies and income and wealth taxes;
  • finally, we have to look at systems for wealth creation. It is socially unjustifiable that in times of crisis and austerity, such as in this COVID-19 crisis, the wealthiest get even wealthier and that in the case of price hikes in the energy sector, corporations make huge profits whereas families have to choose between heating the house and having three meals a day.

The Asia Europe People’s Forum has adopted a Global Charter for social rights that lists all the points that can be taken up, from an aspirational point of view, when discussing at the national and the international level, the development of broad and coherent protection systems.

Welfare states were in the first instance insurance mechanisms intended to preserve the standard of living of workers in case of calamities. Up to a certain level, they can contribute to the redistribution of incomes and in that way, also to reducing inequalities. But this never was their goal. For redistribution we have taxes, for fighting inequality we have to look at both wealth creation and redistribution through taxes. Welfare states were meant to correct the inequality created by markets, in opposition to the political equality that was inherent to full democracy. Hence the idea of ‘social citizenship’.

For several years now, a strong discourse has been developing for a new eco-social contract. That should indeed be developed, away from the austerity and the poverty-focused ‘social protection’. If it is indeed in the hands of people, as a real contract should be, we can speak of social commons.

Poverty, as Riccardo Petrella once pleaded, should be made illegal. We urgently need policies that totally eradicate it and we do have the resources to do it. In this post-COVID period where so many ‘truths’ are being discussed and assessed, the truth of our one single humankind with basic human rights should be on top of our agendas. This includes, obviously, the preservation of our planet.

What should happen now in every country that is preparing the Post-COVID period, is the setting up of a social dialogue with workers and citizens, employers and environmental movements, to discuss the possibility of such an eco-social contract, re-defining social and ecological protection and re-enforcing preventive health care.

This is a highly political agenda. A new political shift is needed, away from poverty, geared towards social development, solidarity and a just transition.


*Francine Mestrum has a PhD in Social Sciences from the Université Libre de Bruxelles, Belgium. She worked at the European institutions and several Belgian universities.

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