Association for Public Policy Analysis & Management

David Stoesz

Kean University

dstoesz@kean.edu

Abstract

            The American welfare state is confronted with challenges for which it is ill prepared. Drawing on my forthcoming book, The Dynamic Welfare State (Oxford University Press 2016), this paper explicates five propositions that explain the erosion of the welfare state.

Document #2

Decline of the American welfare state can be summarized in five propositions:

1. r > g, where r is return on investment and g is economic growth. Following Thomas Piketty, the consequences are yawning economic inequality, which are manifested in plutocratic politics and corporatization of public programs;
2. c > s, where c is capital and s is state sovereignty. Because capital is not restricted by jurisdiction it can abandon those deemed burdensome, such as governments with high social program obligations. The consequence of capital flight is competition among jurisdictions to reduce tax burden and the rationing of services and benefits;
3. b > i, where b is bureaucracy and i is innovation. Bureaucrats, clientele, and service providers become invested in extant programming; such “path dependence” forecloses alternatives that are more cost-effective and produce positive outcomes, effectively suppressing innovation.
4. h > w, where h is harm and w is well-being. Retraction in funding for program obligations leaves program under resourced and staff having to ration care. Due to mandates, the default tends to be minimal care and/or social control, often at variance with professional ethics and consumer wellbeing.
5. n > o, where n is need, and o is opportunity. Citizen aspirations continue despite retraction in public benefits and services, catalyzing the emergence of social markets. Alternative Financial Services and For-profit Education illustrate how commercial vendors fill the vacuum left by the retreat of government supports.

The synergy of these propositions creates vicious circle foretelling welfare state decline.

Reversing welfare state decline thus becomes urgent. The possibility of an “investment state,” as has been proposed in Europe as a sequel to the “welfare state,” is problematic given American exceptionalism: diminished influence of organized labor, an effective veto retained by a radicalized Right, growth in the secondary labor market, the expansion of the service economy, and economic globalization.