The Welfare State, Fordism, and Economic Crisis
The Welfare State
The welfare state is a concept of government where the state or social institutions play a key role in protecting and promoting the economic and social well-being of citizens. It is based on equality of opportunity, equitable wealth distribution, and public responsibility for those in need. A fundamental feature is social insurance, common in advanced industrialized countries like the UK (National Insurance) and the US (Social Security), usually financed by compulsory contributions to provide benefits during times of need.
The welfare state also typically includes public provision of basic education, health services, and sometimes housing. It is more extensive in Western Europe than in the United States. Antipoverty programs and personal taxation systems can also be considered aspects of the welfare state.
Key administrative challenges include:
- Determining the appropriate level of service provision.
- Balancing benefit and contribution systems with individual needs and work incentives.
- Ensuring efficiency in state-run operations.
- Equitably financing services beyond direct beneficiary contributions.
Fordism and its Crisis
Fordism
Fordism represents a mode of mass production and productivity intensification. It emerged as a response to the 1929-30 international crisis, lasting until the mid-1950s. It involved state management of demand, fiscal policies, and consumption policies guided by the welfare state. Fordism’s four key dimensions are: labor process, regime of accumulation, mode of regulation, and mode of societalization. It combines with a wage relation indexed to productivity and inflation, a central state role in managing demand, and policies promoting mass consumption.
Crisis
Following post-WWII economic growth, the early 1970s saw a decline. This was partly due to New Left resistance against assembly-line work and rising oil and raw material prices. Governments responded with reflationary policies, but unlike before, this Fordist approach failed. The world economy experienced persistent inflation, currency instability, and rising unemployment.
This policy failure stemmed from the globalization of production. Multinational corporations, operating outside national control, created a global trading system regulated by world financial markets. After the collapse of fixed exchange rates, international currency competition increasingly dictated national economic policies. Reflationary efforts were hampered by balance of payments crises, forcing deflationary measures.
As governments lost control over national economies, the cycle of rising production and consumption broke. Workers faced benefit cuts, stagnant wages, and unemployment. The reemergence of social problems necessitated new solutions to address the deepening crisis of Fordism.