Poverty of the Welfare State or: Poverty: construction – de-construction – and losing the battle

The following notes had been made in preparation of the contrubution to the Spring Symposium “Conceptualising and Measuring Poverty: methods for the 21st century” at University College Cork – it took place on the 17th of May 2013.

At a later stage an elaborated annd extended version of these catchwords will be published in the framework of the book under the title

Poverty of the Welfare State.



Surely it is necessary, painting a bleak picture, showing the harsh measures and consequences of austerity policies under the aegis of neo-liberalism.

Sure, I would love to deconstruct now for the next two hours the ideology of neo-liberalism – I think there is much more and something different in it than we usually think about. Anyway, as I am supposed to talk about the EU, I may end right now with reference to just one letter from an official from the European Commission outlining in a very firm and concise form the EU’s privatisation strategy.


being originally from Germany I may start here pointing out what this potentially means in such a rich and democratic country – of which the constitution has still some obligation to

democratic, social and federal principles (Article 23)[1]

In my view it is hardly possible to justify under such heading a strategy of evicting homeless people.


It is equally clear that we have to highlight the immorality of such policies.

Having lived for some time in Ireland, I want to refer to Michael Higgins, addressing the European Parliament – see on this also already an earlier post)

There he stated

– Schuman, who was aware of it, reached back to recall the early monastic perigrinatio and declared Columbanus to be “the patron saint of all those who now seek to build a united Europe”.

– The Schuman meeting, and the others which followed it, assisted by such as Jean Monnet, was responding to near and terrible events. But we should never forget, and I emphasize it today, that in their response they recognized its immense value, and drew on, the rich scholarship, philosophy, moral instincts and generous impulses of European thought as they sought, not only to replace war with peace, but more importantly, to construct a vision of Europe’s people working together in an inclusive way. It was not any abstract construction. It was a practical proposal drawn from the head, propelled by the heart, and uniting economy and ethics in its aspiration.

(Higgins, Michael D., 2013: ‘Towards a European Union of the Citizens’. Adress to the European Parliament, Strasbourg, Wednesday, 17th April, 2013http://www.president.ie/speeches/address-by-president-michael-d-higgins-towards-a-european-union-of-the-citizens-european-parliament-strasbourg-wednesday-17th-april-2013-2/ – 10/05/2013)


Furthermore we should not hesitate to critically discuss the various “approaches” of dismantling the “welfare state”

Coming currently from Hungary Victor Orbán has to be mentioned, of course. He shocked some people by the orientation on a munka alapú társadalmat , i.e. work-based society – mind, there are some issues around translation – the official translation speaks of workfare society though the actual translation is likely “work based”. –

More captivating is in Hungary the shift of social policy issues to the minister of inner affairs – defining relevant issues a matter of control.

And more shocking is the fact that going through Budapest and seeing the amount of people sleeping rough. And it may actually be the contrast I faced actually last Sunday: passing one of the beautiful old buildings, still carrying the marks of the recent renovation and the archway offering shelter, no: a living space for a group of homeless people.


Criticising such positions: the harsh measures, the rejection on moral and ethical grounds and the conceptual dismantling means not least to defend the welfare state and actually to engage for its formation.

Living now in Italy we still face the challenge of replacing the traditional social protectionism as it had been established by Mafia with a modern welfare state.

But of course, it is then a question if our constitution gets the priorities right.

L’Italia è una Repubblica democratica, fondata sul lavoro.

Actually some may remember the times when the inclusion of the employment chapter into the EU-treaties had been celebrated as major success of social policy on the European level.


And of course I could go on with this EUropean game. And finally I would return to Brussels.

Well, two weeks ago I had been there again. After about four years I re-entered that stage. A bit strange, having been there for several years, being allowed to walk in and out …; this time it had  been more like entering an alien world of a fortress – with external and not least internal borders – discussing clear lines of programs, policy packages … – and knowing: the transparency suggested by the massive glass fronts showing as much reality as the screen saver of our computers.


Sure, there are reasons to celebrate – the EU as Nobel laureate.

But it had been on the personal level – carrying specific experiences from my Brussels years with me – again frightening to see how the less celebratory parts are forgotten – the memorial by ATD-Fourth World in front of the European Parliament is worn out.


OK, enough of this little EUropean game

We face some kind of paradox:

Poverty is seemingly a “general condition of socio-human existence – or even a condito humana, rooted in eternal greed and the immortality of immorality? Occasionally reaching unbearable scope, and reminding us of the need of a good life?

Or poverty is a very specific pattern of a very specific formation of society?


Part of this problem is the difficulty we face when it comes to defining poverty


We see terms that are questionably used to be near to synonyms:

  • deprivation
  • social exclusion
  • disadvantage
  • exclusion


We find complex approaches towards a definitional framework:

  • relative income or equality as matter of well-being
  • subjective and objective criteria
  • capability approach
  • human development and human security

And we find with this the different analytical perspectives behind it, e.g.

  • Human Development Index (HDI)
  • Human Wellbeing Index (HWI)
  • Weighted Index of Social Progress (WISP)
  • Social Quality (SQ)


Two issues are – in today’s debates – somewhat permanent companions.


While we are talking about poverty, we are actually concerned with wealth

  • for Adam Smith it had been the Wealth of the Nation
  • implicitly linked to the wealth of individuals, inherently understood as matter of increased availability of goods – SI, QoL
  • and frequently questioned by the wealth of society –in the pre-capitalist society for instance by an important economist like John Stuart Mill with his notion of the stationary state

I cannot, therefore, regard the stationary state of capital and wealth with the unaffected aversion so generally manifested towards it by political economists of the old school. I am inclined to believe that it would be, on the whole, a very considerable improvement on our present condition. I confess I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling, crushing, elbowing, and treading on each other’s heels, which form the existing type of social life, are the most desirable lot of human kind, or anything but the disagreeable symptoms of one of the phases of industrial progress. It may be a necessary stage in the progress of civilization, and those European nations which have hitherto been so fortunate as to be preserved from it, may have it yet to undergo. It is an incident of growth, not a mark of decline, for it is not necessarily destructive of the higher aspirations and the heroic virtues; as America, in her great civil war, has proved to the world, both by her conduct as a people and by numerous splendid individual examples, and as England, it is to be hoped, would also prove, on an equally trying and exciting occasion. But it is not a kind of social perfection which philanthropists to come will feel any very eager desire to assist in realizing. Most fitting, indeed, is it, that while riches are power, and to grow as rich as possible the universal object of ambition, the path to its attainment should be open to all, without favour or partiality. But the best state for human nature is that in which, while no one is poor, no one desires to be richer, nor has any reason to fear being thrust back by the efforts of others to push themselves forward.

(Mill, John Stuart, 1848: Principles of Political Economy with some of their Apllications to Social Philosophy; London et altera: Longmans, Green, and Co., 1920 [based on the 6th edition from 1865]: 748 f.)

Sure, talking about wealth is somewhat breath-taking then 150 billion USD that computer giant apple stores hording is the proper term, as we know it from Marx.



It had been also a somewhat unquestioned reference established to capitalism.

Occasionally it meant to criticise capitalism as fundamentally problematic.

More often it had been about a fundamentally affirmative approach, possibly slightly brushed up by looking at the varieties of capitalism (Hall, Peter A./Soskice, David (eds.): Varieties of Capitalism. The Institutional Foundations of Comparative Advantage. Oxford: Oxford University Press, 2001), the claim of a “good capitalism” (Baumoll, William J./Litan, Robert E./Schramm, Carl J. Schramm (2007): Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity; Yale University Press).


Sure, as we accepted taking responsibility over from god, we have to look now at The Spirit Level (Wilkinson, Richard G./Pickett, Kate, 2009: The Spirit Level: Why More Equal Societies Almost Always Do Better. London, Allen Lane) – mind the multiple meaning, linking to bubbles, levelling and spirituality itself. And with this we find of course easily also a link to the mushrooming moral economy.


What do these two links

  • wealth
  • capitalism

actually mean? We have to explore this against the background of a by and large undefined understanding of welfare.

We may translate it into the concern for the nation state as new framework for (re-)production of social and individual existence, defined by the means of production.


It has to be left to a side remark: this shift to the nation state as framework had been not least a fundamental shift of what (re-)production is about. Coming back to John Stuart Mill we see at the beginning of the chapter from which the quote is taken the actually interesting concern.

The preceding chapters comprise the general theory of the economical progress of society, in the sense in which those terms are commonly understood; the progress of capital, of population, and of the productive arts. But in contemplating any progressive movement, not in its nature unlimited, the mind is not satisfied with merely tracing the laws of the movement; it cannot but ask the further question, to what goal? Towards what ultimate point is society tending by its industrial progress? When the progress ceases, in what condition are we to expect that it will leave mankind?

It must always have been seen, more or less distinctly, by political economists, that the increase of wealth is not boundless that at the end of what they term the progressive state lies the stationary state, that all progress in wealth is but a postponement of this, and that each step in advance is an approach to it. We have now been led to recognise that this ultimate goal is at all times near enough to be fully in view ; that we are always on the verge of it, and that if we have not reached it long ago, it is because the goal itself flies before us. The richest and most prosperous countries would very soon attain the stationary state, if no further improvements were made in the productive arts, and if there were a suspension of the overflow of capital from those countries into the uncultivated or ill-cultivated regions of the earth.

(Mill, John Stuart, 1848: Principles of Political Economy with some of their Apllications to Social Philosophy; London et altera: Longmans, Green, and Co., 1920 [based on the 6th edition from 1865]: 746)

Of course, this opens an interesting debate not least on utilitarianism – a theory of ethics which surely needs to be seen beyond its translation into utilitarian-based conceptualisations of exchange.


The main points are then the following.

(1) The development of the “welfare state” had been a differentiated process – giving answers to distinct socio-economic patterns. – This actually explains very much the different analytical approaches and criticisms around problem solving, control, socialisation, productive function of the welfare system (see Pierson, Christopher/Francis G. Castles (eds.): 2006: The Welfare State Reader; Cambridge: Polity Press)

(2) We are focusing now a comparable situation as it characterised the emergence of the different welfare states: the “EU” establishing itself as new national welfare system, but not (sufficiently) recognising the changed objective conditions.

(3) In order to understand these processes we have to investigate the foundation which is given by the link between means of production – mode of production – social system – social policy.

(4) Following classical economic thinking, EU social policies (and also the national social policies) are tied up by the limited understanding of the economic process as production function. The clearest formulation of this is the Cobb-Douglas production function:

Y = ALßKα

Production equals factor productivity multiplied by Labour input defined by output elasticity multiplied by capital defined by output elasticity

At least some of the problems with this have to be mentioned: it does not clearly spell out what the different factors are, and actually attributes productivity to capital, i.e. it supposes that capital would produce anything. It does not! Furthermore, it suggests implicitly that productivity is solely about commodity production – a factor that is not only in the light of more recent debates questionable. Most importantly, it refers to labour where we actually have to talk about labour power.

The latter point is of special importance as it allows us to focus our attention on the cost of the production and reproduction of labour power.


A brief overview of the analytical – and actually methodological – perspective has to do suffice. The elements will be presented in four matrixes which will lead to a further matrix which presents an analytical tool for welfare systems – they had been introduced already earlier.

focus of the productive process


rationalisation/ technicisation

Demand-supply-side economics

matrix 1: Value Generation


high-value production founded in informational labour

high-volume production based in low-cost labour

redundant producers, reduced on devalued labour

production of raw material founded in natural resources

matrix 2: Resource Reference


autocentric development

extraverted development

relative economic sustainability


matrix 3: Patterns of Growth


monetary policy i.w.s. as means of social integration

monetary policy i.w.s. as means of securing international sovereignty



matrix 4: Socio-Political System and Sovereignty


This taken together provides an analytical tool for looking at development and the welfare system

resource reference

value generation

patterns of growth

socio-political system and sovereignty

matrix 5: welfare system – analytical tool


To some extent this surely reflects the traditional mainstream perspective with the common reference to T.H. Marshall:

I shall be running true to type as a sociologist if I begin by saying that I propose to divide citizenship into three parts. But the analysis is, in this case, dictated by history even more clearly than by logic. I shall call these three parts, or elements, civil, political and social.

(Marshall, Tom H., 1950: Citizenship and Social Class; in: Citizenship and Social Class; Tom H. Marshall/Tom Bottomore; London et altera: Pluto Press, 1992: 8)


The difficulty of understanding consists of the necessary differentiation between

  • secular trends
  • secular capitalist trends
  • specific developments as they are reflecting the connection between them


In any case: Capitalism surely had been up to hitherto the main driver of the development of the means of production, thus allowing also a major development of the productive forces (as matter of the production in Department I) and production of consumables (as matter of the production in Department II), thus being also a matter of the Wealth of Nations.


The fundamental challenge however is the following: This system defines its various borders in a way that contradicts its own conditions

  • e.g. the costs of labour power vs the need to ensure mass purchasing power
  • time
  • space
  • environment and externalities.


Then Social Policy and Welfare States have to be understood in a much broader way, including in particular

  • governance
  • productivity in economic terms
  • productivity in terms of social integration and cohesion
  • global inclusiveness.


It is surely a complex field we are looking and the actually important point is to accept this complexity. We may briefly come back to the Cobb-Doulas function mentioned above. There the approach had been criticised by the following:

“it suggests implicitly that productivity is solely about commodity production – a factor that is not only in the light of more recent debates questionable. Most importantly, it refers to labour where we actually have to talk about labour power.

The latter point is of special importance as it allows us to focus our attention on the cost of the production and reproduction of labour power.”

And we see marked shift in terms of the latter when we look at the current development not of income but on the source and securitisation. A few examples may do suffice – each of them standing for a specific fundamental problem.

  • Karstadt, a major trade chain at least of German origin and today surely in various ways internationally and globally braided, plans to withdraw for two-years from collective agreements which can be discussed in the perspective of income and rights
  • The eviction of people from their homes in Spain which is answered by a law against the banks, limiting their space for action inclusion and rights
  • The mushrooming of  soup kitchens – surely doing good for people concerned but undermining any rest of cohesion and rights
  • And globally an absurd call for more slums, clearly showing the need to reflect on empowerment and rights


Seen in such perspective, we should actually not be afraid if social policy is seen as productive factor. The question is – as always:

  • what do we actually produce?
  • how do we produce?

This is also important as this perspective allows us to go beyond a perspective that sees social policy as instrument of poor relief and charitable add-on to normal capitalism.

But it faces us with a major challenge, namely linking rights and law – some of you may know from my writing the inherent problem, due to the inherent individualist and individualising character of law.


In any case we may add another useful tool for the analysis, namely the assessment of control – centrally understood as multiple cumulation of power and property.


Of special relevance are here

  • control of means of production
  • control of processes of production
  • control of products
  • control of the distribution of products


The Social/Welfare Welfare Systems (see in this context also already the blog entry on China and Asia – A New Capitalist Centre or A New Capitalism?)

  • the social state – von Itzenplitz
  • the welfare society – Wigforss-Hansson
  • the welfare state – Beveridge
  • the familiarist-public welfare state – Leo XIII
  • the co-operative social economy – Raiffeisen
  • the harmonious familiarist paternalism – Confucius, Mencius

(see in this context in particular Herrmann, Peter, 2012: Social State, Welfare State and Then? Where to Move from the Welfare state? A Cooperative State of Sustainable Sociability as Perspective for Innovation; in: Heiskanen, Johanna/Henry, Hagen/Hytinkoski, Pekka/Köppä, Tapani (eds.): New Opportunities for Co-operatives: New Opportunities for People. Proceedings of the 2011 ICA Research Conference, 24-27 August, 2011, Mikkeli, Finland; Helsinki: University of Helsinki. Ruralia Institute, 2012: 295- 313).


EUrope – here we see roughly the development of the following major stages

  • from basic social security for workers (gender, ESF, social charter)
  • over marginal poverty relief and experimental good-doing
  • to employment policies
  • arriving at social innovation and social investment of the Lisbon competitiveness strategy.


The overall pattern

  • from civil liberties – single market
  • to political rights – crisis of legitimacy and EP-elections
  • to social rights – as matter of employment policies


But also – and not least:

All this is systematically caught in the contradiction of

  • productivist nation state building and
  • consumerist dependencies


Seen in this light, the EU is now facing a new competition between systems.

The wealth of nations is not an option for the EU,

  • being caught in internal and international/global competition
  • not having sufficient power and resources for inner and external colonialisation


In consequence we are confronted with a disastrous mine field

  • several countries “externally bankrupt” as for instance Cyprus and Greece
  • several countries “internally bankrupt” as for instance Germany
  • having a “model” and values for social policy that actually evolved from conditions that do not exist anymore
  • and not having the strength to establish – on its own – a valid socio-economic alternative


The two main problems and challenges I see:

  • the lack of suitable social fabrique
  • the need to reintegrate political economy

I am afraid that technical approaches like those proposed by Gabriele Giudice, Head of Unit, ECFIN.G3: Greece at European Commission and proposals for Social Investment will only provide a mere perspective – this is a nice way to speak of privatised services that are not accessible, and rocketing unemployment rates.


Moving on seems a bit like a Don Quijoterie ….

But at least it would be wrong to say that we have to worry about money – at least here in Ireland there is still so much money around that it can be literally be put into the waste bin. – on ebay a Quinnsworth-plastic bag  had been offered  earlier this year for 997 Euro.

[1]           Basic Law for the Federal Republic of Germany; version October 2010; https://www.btg-bestellservice.de/pdf/80201000.pdf – 10/05/2013

Interestingly he previous version had been different

Article 20 (Basic principles of state order, right to resist).

(1) The Federal Republic of Germany is a democratic and social Federal state.

Basic Law for the Federal Republic of Germany (Promulgated by the Parliamentary Council on 23 May 1949) (as Amended by the Unification Treaty of 31 August 1990 and Federal Statute of 23 September 1990); http://www.constitution.org/cons/germany.txt – 10/05/2013

[2]            Degree to which the economic process is focussed on extended reproduction

Un pensiero riguardo “Poverty of the Welfare State or: Poverty: construction – de-construction – and losing the battle


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