Socialist Worker

Can capitalism live without the welfare state?

The Tories are taking the knife to public services and the welfare state—but how far can they go? Socialist Worker examines the role of welfare under capitalism

Issue No. 2213

The benefits system is on the verge of collapse—or at least that’s what Tory minister Iain Duncan Smith claimed as he launched the latest attack on the welfare state last week.

Think-tanks and media commentators revel in telling us that maintaining public services at their current level is unsustainable. But there is also an ideological attack taking place on the idea of the welfare state.

One minister, off the record, recently told the Times newspaper the rationale behind it. “The undeserving poor,” he said, “are undeserving.”

There is nothing new about cuts in welfare spending. Nor are the ideological justifications new. Labour Party right winger Frank Field has been hawking this rot for two decades.

The Tories are using the economic crisis to speed up the scale of the attacks.

They aim to drastically reduce the levels of welfare and to increase the role of private companies and market mechanisms in the way whatever remains is provided.

But what is the aim of the restructuring that the Tories are trying to drive through?

It is accepted on all sides of the mainstream political spectrum that because of rising, “unfulfillable” demands, we can no longer afford the “generous” state handouts that post-war welfarism took as its starting point.

Welfare can no longer be, as Lord Beveridge and the 1945 Labour government took it to be, a matter of rough equality in which everyone paid their national insurance and everyone was entitled to benefits in times of need.


Since resources can’t keep pace with demand, welfare must be restricted to a system of safety nets, with those able to look after themselves being “encouraged” to fund their own welfare.

Importantly, the welfare state does have to cope with a much different world than when it was first set up—and much of this, like advances in health or a better level of education, are things to celebrate.

The fact that such progress is seen as a problem tells you about the priorities of the system.

It is, of course, not true that we are running out of money. The resources to fund the welfare system exist. But to reallocate them would be to challenge the priorities of capitalism.

For capitalism to work it requires the majority of people to be kept working for wages, and to be subject to the authority of the capitalist class and the state.

On this model, everyone who is not in paid work—lone parents, disabled people and unemployed people—are what the Victorians called the “undeserving poor”.

Part of this ideology is simply an attempt to divide the working class into two—into the good, responsible workers who deserve their benefits and the undeserving “workshy” who should be made to graft for what they get from the state.

But state-organised “welfare” is also more complex and has long been an important field of class struggle.

The ruling class can only prosper by exploiting people’s capacity to work. That capacity is damaged by illness, accidents and malnutrition. So the bosses have to worry about keeping a fit and able body of workers.

That requires healthcare for workers, and benefits to enable them to survive through periods of unemployment so that they can be fit for exploitation when the economy revives.

Another advantage of a welfare state is that it can help capitalism keep a lid on discontent. It allows the system to promote the idea that society works for everybody.

Modern capitalism also has to worry about the upbringing of the next generation of workers, and ensuring it has the right level of education, training and work discipline to be profitably exploited.

Bosses wants workers contented in the same way that a farmer wants contented cows. Workers cannot be expected to labour with any commitment if they face starvation once they reach retirement age.

As the revolutionary Karl Marx put it, there is a historically and socially determined element to the cost of reproducing labour power as well as a biological one.

Not all capitalist countries have the same level of welfare provision. This varies depending on the changing needs of the system and the level of workers’ resistance.

So today, the US has a lower level of welfare provision than many European countries.

In the 19th century, the British ruling class had to spend money on transport, health, sewage systems and education.

Capitalism needed a reasonably healthy, skilled and educated workforce to ensure that companies’ profits continued to grow.

But those who were viewed as less useful were left to the harsh life of the workhouse.


The Boer War in South Africa of 1899–1902 caused a crisis for the British state, as many young men were found to be too unfit and malnourished to enlist to fight.

Much of the ruling class began to recognise the need for a more complete welfare state to protect the interests of British capitalism.

This fed into the 1906 Liberal government’s introduction of school meals and the first pensions.

The belief was that change was necessary if Britain was to compete successfully with Germany and the United States.

The argument then, as now, was about the damage that poverty was doing to the competitive interests of capitalism—rather than the misery it caused to ordinary people.

But workers are not an object just like other commodities, to be passively bought and sold. Workers struggle over the “social wage” of welfare provision just as they do over the normal wage, even if both are, up to a certain degree, necessary for capital.

The Beveridge report of 1942 led to some consensus in the British ruling class that some improved welfare provision was necessary.

But it was pressure from below that produced the welfare state that emerged after the Second World War.

The mood was summed up by the Tory MP Quintin Hogg, who said, “If we don’t give them reform they will give us revolution.”

Labour introduced a universal system of benefits. This, and the new National Health Service, saw a massive increase in workers’ living standards.

But these reforms were only acceptable to the bosses as long as the system was healthy and profitable. When capitalism’s long economic boom came to an end in the mid-1970s, there were major attacks on the welfare state.


Yet the system still needed the welfare state in some form—and the resistance of workers meant it could not be simply dismantled.

This is where “internal markets”, market testing, contracting out, privatisation, encouraging private pensions and all the rest came in.

They are mechanisms for trying to depoliticise the process of social provision.

This makes it easier to refuse welfare to those deemed not to deserve it on the one hand, while also clamping down on the workers in the welfare sector on the other.

The fact that a section of the bosses can make profits out of all this is a happy spin-off.

Our rulers are desperate to cut costs, but they need a level of social spending to compete on the world market. So Britain is sold as a low-wage economy—but the wages combine with a reasonably high skill level.

Any serious restructuring will create massive tensions between demands to cut expenditure and the needs of industry for healthy, skilled workers.

Social spending is a reflection of the class system. Workers pay a disproportionate amount for welfare services. They are disproportionably taxed, but they also produce the wealth in society that makes a welfare state possible.

The fact that, despite years of attacks, most services are still free at point of use and fairly universally available means the ruling class perceives it has won a victory every time it succeeds in cutting services.

This is one reason why the Tories revel in attacking welfare provision. But most of the ruling class knows that some level of social spending is necessary.

Capitalism cannot completely dismantle the welfare state.

But the depths of the crisis internationally, and the weakness of British capitalism, means our rulers are under constant pressure to cut and restructure social spending.

How much they get away with it depends on how much our side resists.

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Tue 3 Aug 2010, 18:18 BST
Issue No. 2213
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