ABSTRACT
Friedrich Hayek (1944) warned that socialism would lead society down the road to serfdom, robbing individuals of their freedom for self-determination, and subjecting them to domination by a centralized political and economic authority. Hayek succeeded in striking fear of socialism in the hearts of Americans, a concern that 65 years later dominated the debate regarding the provision of universal health care in the United States. Ironically, Americans have held dear their attachment to Social Security and Medicare benefits that provide quasi-universal protection for elderly citizens, even resisting the proposed privatization of social security investment accounts before the stock market plunge of 2008. The historical lesson is that initial resistance by Americans to universal protections may eventually give way to steadfast adherence to social rights. Additionally, the institution of social protections has not dismantled the capitalist enterprise. Apparent confusion in the American mind about the ability of socialist policies to co-exist with capitalism provides hope that, in the future, U.S. citizens could become more amenable to other universal policies that simultaneously improve well-being and enrich democratic freedoms. From a theoretical perspective, the state, the market, and civil society form a triumvirate that provides order for supporting the economic and social fabric. Offe (1984) depicts these systems in a continual power struggle, not between classes as in Marxist analyses, nor between interest groups, as in pluralist conceptions of political and economic power, but among the very systems of the state, market, and family. The market reigns supreme, but the state and family are “flanking subsystems” that buttress the market while simultaneously constraining it (Keane, 1984, p. 13). As part of the triumvirate, capitalism cannot function without welfare state interventions, despite the friction between the two institutions. Indeed, history provides ample evidence of devastating episodes of market failure that necessitated state intervention in order to ensure human survival and revive the economy. The birth of the Western welfare state in the late nineteenth century is attributed to such a moment, charged with balancing economic growth with human need. As witnessed in the previous and current centuries, market failures continue to occur, requiring innovations in state intervention and new conceptions of social rights in order to sustain economic and social stability. Polanyi (1944/2001) characterized the shift from agrarian to industrial economies as nothing short of a “great transformation,” and North (1981) referred to the transition as the
“second economic revolution,” succeeding the progression from hunter and gatherer societies to agricultural civilizations. This author posits that the current period of economic and social internationalization spurred by advances in science and technology constitutes the third economic revolution and another great transformation with ramifications for humanity equally vast to those of previous eras. The transition during the twenty-first century will involve a re-examination and re-calibration of social rights conducive to a new balance of state, market, and civil society. Marshall (1950/1992) describes how post-World War II economic growth resulted in a compression of the scale of the income distribution, such that people’s standards of living were closely comparable to one another. Between 1945 and 1970, the years characterized as America’s “Great Prosperity,” the American economy provided the most dynamic and widely shared economic growth in world history (Reich, 2010, p. 48). Rising incomes conveyed a “universal right to real income” (Marshall, 1950/1992, p. 28). In the United States and Europe, a “golden era” of welfare state expansion prevailed. After the mid-1970s, the boundaries of domestic economies began to dissolve into an internationalized economy, and capital and labor within countries were differentially affected. Capital could move easily across the globe, while labor could not. Capital could find cheap labor in less developed countries, putting people out of work and lowering wages in the industrialized welfare states. In the United States, new technologies required skilled labor by educated workers, and those with limited education became severely disadvantaged by the lack of job opportunities that remained after manufacturing jobs were off-shored (Yellen, 2006). Although U.S. jobs in the service sector grew, they paid poorly and afforded few if any benefits. The schism of inequality began to widen, and the American dream of upward mobility began to slip away. Poverty and inequality in the United States are inextricably linked. Despite dramatic growth in the U.S. GDP per capita, disproportionate income gains for higher-income earners were accompanied by declines in real wages for less-skilled workers earning below the median wage, thus widening inequality between those at the top and bottom of the income distribution (Yellen, 2006; Kahne and Mabel, 2010). While a small percentage of citizens reaped unprecedented rewards from greater economic productivity, inequality widened to troubling proportions, with the United States leading this trend (Giddens, 2000; Stiglitz, 2012). Unlike the years of the “Great Prosperity” (Reich, 2010, p. 42) when economic growth lifted all boats, the economic rewards of globalization have been a boon for the wealthiest and a burden for the least fortunate. The internationalization of contemporary economies now poses substantial challenges to Western welfare states, and to liberal welfare states in particular, due to their predominant reliance on the market for social provisioning. The need for social welfare endures through time and becomes most acute during historical transformations, pressuring political actors to take new actions that expand the influence of government relative to the market and civil society. The United States, along with other industrially advanced nations, now stands at a crossroads with the chance to choose a direction that could lead to more equitable social policies that uphold human rights to well-being.
