The need for a new welfare capitalism: postscript

I wrote a couple of months back about the need for a new welfare capitalism in Singapore. This post supplements it with references to a couple more articles and books, which shed light on my argument.

Essentially I advocated a much more robust approach to ensuring job security and mitigating the necessarily insecure conditions of modern, global capitalism. This would involve unemployment insurance, job training and restructuring, and a minimum wage along with many other minimum conditions; complementary to that, the state would also have to reaffirm meritocracy by investing heavily in early childhood education and care (James Heckman at the University of Chicago is one of the biggest advocates for this, and has quantified, in the US context, the economic, educational, health and crime-reduction benefits of ECEC).

I prefaced this with a description of the havoc that global capitalism and technological change wreaks on the life courses of ordinary people. In short, because goods and services whose production can be mechanised or outsourced more efficiently than ever before, world consumer demand can be met with ever smaller inputs of labour, which means fewer workers need to be hired. This is the impact of the globalisation of markets. Simultaneously, technological change has sped up, which means that the job market is demanding ever more skilled workers at a faster rate. This becomes a problem when the change happens faster than workers can reskill, or the education system is failing to adequately prepare its students for the jobs that will be available. At its most extreme, a large chunk of an entire generation of workers can become “surplus to requirements.”

The effects of globalisation are quite well known, partly because it’s easy and obvious to tell when a car plant or a call centre is moving to China or India. The impact of technological change is harder to see, because it happens at the level of individual jobs. But Autor, Levy and Mumane (2003) do a great job of measuring it: they use a fascinating methodology to analyse how the requisite skill-level of any given job has changed over time because of computerisation. For the US in the period 1970-1998, they estimate that about 60% of the observed job-market demand shift from non-graduates to college graduates can be traced to computerisation alone. (The paper is unfortunately less clear about the size of this demand shift.)

You will hopefully have noticed how I referred to workers as “surplus to requirements.” This is callous–and deliberately so–because it is a consequence of what Karl Polanyi, the economic historian, called the fictitious commodification of labour (this is an excerpt from his book The Great Transformation). He argued that labour is human activity; it is produced incidentally as people live their lives. But people do not live merely for the purpose of producing labour. (There’s more to life than work.) This must mean that trading (i.e, commodifying) labour (as we do in the job market) for money can only be a sort of fiction at best.

Gosta Esping-Andersen (in The Three Worlds of Welfare Capitalism) took this insight one step further. Welfare states differ in the extent to which they de-commodify people, or protect them from having to sell their labour on the market. If one can live without relying on the market, one’s labour has been decommodified. No capitalist system can achieve this for every worker, and there are good reasons why some level of commodification is needed. At the same time, there are also good reasons to decommodify certain groups of people–children, the elderly, and people with disabilities–by giving them social grants or other forms of financial support.

I found a blog post this morning which presents and extends this line of thought in a very accessible way. Peter Frase boils down three ideological stances on the extent to which labour is commodified–social democracy, liberal capitalism in the Smithian/Ricardian sense, and a sort of Third Way neoliberalism-in-overdrive model (my words)–into three simple scenarios. Social democracy aims to place the choice of selling (aka commodifying) one’s own labour in the hands of the worker herself–it achieves (partial) decommodification. On the other hand, liberal capitalism is not interested in the willingness of people to be commodified. It simply aims to maximise the utilisation of people’s innate talents, and justifies this by pointing out that this maximises the level of consumption attainable. This is factually correct. But I’ve described the consequences of liberal capitalism coupled with globalisation and technological change above–production far in excess of demand, with the result that many jobs are made uncompetitive and many people redundant. According to Frase’s interpretation, the third view actually addresses this by aiming at commodification–to marketise as many services / commodify as much labour as possible, in the pursuit of job creation (he supports this with a quote from Matt Yglesias). On his interpretation, the mushrooming of stereotypically ‘yuppie’ services (which are premium, personalised and therefore labour-intensive) is a forerunner of this move towards commodification. (I would add that the commodification of ever more services may also be a precursor to the social exclusion of those people who cannot afford those services.) I found this a fascinating thought.

Lastly, some notes on social democracy are in order. I found a reference to a book by Sheri Berman, The Primacy of Politics: Social Democracy and the Making of Europe’s Twentieth Century, analysing the emergence of social democracy in Europe. Social democracy, in her view, is an alternative to both Marxism and liberalism, which forces capitalism and democracy together by subordinating markets to the sociopolitical reality. Under social democracy, states protect the common good by intervening to rein in the market, rather than (as the neoliberal consensus did towards the turn of this century) removing barriers to the market’s operation and treating the free market as an end in itself.

It’s worth noting that Singapore has some of the hallmarks of social democracy–we are familiar with things like the right to housing (which the PAP supported from independence, going so far as to delete the right to own property from the Constitution so that the Land Acquisition Act would not face constitutional challenges). We also have national healthcare insurance, and almost everyone goes to public schools. These are classic social-democratic institutions. But we haven’t updated our institutions to face new realities. Specifically, the consequences of the market running rampant today–the threat of large-scale structural unemployment–cannot just be addressed with talk about meritocracy or self-reliance. Many people who can’t find good work are not particularly incompetent nor lazy; they’ve simply had the rug pulled from under their feet.


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