In Defence of the Welfare State

The famous economist Joan Robinson once said: “There is only one thing that is worse than being exploited by capitalists. And that is not being exploited by capitalists.”

Of course this was not to be interpreted literally but was rather meant as a severe condemnation of this most cruel of the consequences of the capitalist system: EXCLUSION. It is undeniably in the nature of the free market system to exclude people: as consumers in cases where they do not have the necessary means or the purchasing power to participate in the market, as producers when they do not have the necessary qualities or wherewithal to produce goods or services for the market or, what is a more recent trend, as workers when they do not have the necessary skills to join the labour market.

Thus “growth without employment creation” has become the bane of a system for which many Finance ministers fail to find a solution through traditional economic measures. “Marginalization” of larger and larger sections of the population in developing as well as developed countries and the galloping increase in income inequality rank among the dominant socio-economic trends in the global economy and are the cause of many social problems.

In developing countries, governments acting under the influence of the World Bank and the IMF have tried to mitigate some of the effects of such exclusion by providing for special funds in the budget. The weakness of these programmes for “poverty alleviation” is precisely that they aim to deal with the effects and not the cause of such phenomena. Mauritius has not been an exception to that rule. Successive budgets have set up a number of such special funds. The common characteristic of these programmes is that the funds so earmarked are used for the provision of goods or services for socially impaired groups, when they do not take the form of straight “handovers” to companies under the guise of “stimulus packages.”

While it can be argued that these programmes, when they are actually implemented (often these funds remain unutilized because of poor design) may sometimes contribute to alleviate poverty to some extent, it is nevertheless questionable whether they represent the most effective method of achieving these limited objectives.

Everything else notwithstanding, such programmes may be justified in poorer countries, although more often than not the government does not have the institutional capacities to deliver them efficiently. In fact what is most paradoxical if not ironic in Mauritius is the fact that the same people who profess to support such programmes for “alleviation of poverty” also in the same breath talk of the need to dismantle the existing “welfare state” for its purported inefficiency. The origin of this blatant contradiction lies with the well-documented practice of the Washington institutions of proposing one-size-fits-all solutions to diverse countries without any regard to their particular situations.

Mauritius, for example, is arguably a unique case among developing countries to provide the kind of structured welfare measures (many visitors from developed countries are in awe) which the population enjoys here. It must be recalled that although it is often taken for granted, the Welfare State has been the outcome of fierce political struggles in the specific historical and economic context of Mauritius. One of the major factors contributing to this outcome has been the strong influence of Fabian socialism on the leaders of the Labour Party from the 1950s onwards and leading up to independence.

The Welfare State is part and parcel of a historically determined social contract – an important adjunct to the Public-Private partnership. Government works hand-in-hand with the private sector and carries out heavy investments in public infrastructure. It also facilitates investments and promotes export of goods and services through an array of institutions such as the Board of Investment or the Tourism Authority. In return it expects the private sector to contribute to the welfare of the nation through the creation of productive employment, innovations and increased productivity by means of appropriate investments for the promotion of sustainable development. Because, as we have stated above, these private initiatives by their very nature tend to be “exclusionary”, there is a need for the State to make sure that such exclusion does not remain a lifelong handicap or confined to only some categories of people — this is the foundational reason for maintaining the Welfare State and improving its delivery mechanisms.

Ironically the greatest threat to, and weakness of, the Welfare State in Mauritius does not come only from the dominant liberal ideology which has swept over the world over the past decades and those who stand to gain the most from it. The very generations who have benefited from free public schooling and a public health service, for example, and who have taken advantage of the social mobility made possible by the system – the new middle classes – are among the first to abandon ship.

Faced with a difficult situation there are two ways in which stakeholders in a situation can react: VOICE OR WALK i.e. either engage with the system with a view to improve what is not working or give up and look for alternative solutions. The dominant trend is that of an increasing disinterest from those who are the most apt to propose appropriate solutions. Government policies may be partly to blame for such a situation for not providing the necessary mechanisms for this interaction to take place.

In the new narrative which some have been trying hard to sell to the nation over the past decade or so, the concept of Welfare State has been reduced to almost the status of a bad word. It is assimilated to a model in which an “undeserving lot” are being provided with benefits for which the hardworking folks are being made to pay. We take the view that this is a caricature of truth which while sounding “politically correct” and music to the ears of the new dominant ideologues is a distortion of historical facts and totally fails to properly assess the origins of poverty and misery in society.

* Published in print edition on 18 July 2014