AFTER THE WELFARE STATE? HOWARD GLENNERSTER Major economic and social...
AFTER THE WELFARE STATE?
HOWARD GLENNERSTER
Major economic and social changes have transformed the environment within which social policies must operate world
wide. This will challenge old institutional structures, not leastthrough competition with the private personal service market.
On the other hand, demographic and labour market changes are creating fresh demands for social action. New welfare
economies will emerge that will embody some of the past, but also owe much to the dominant consumer societies of
the late twentieth century.
Dr. Howard Glennerster is Professor, London School of Economics.
A New Agenda
Social policy will never be quite the same again. Two decades of economic upheaval
in the developing world and the more advanced economies too, have changed the way
governments, political parties, consumers and academics think about social policy. In
the aftermath of the economic disorder that followed the first and second oil crises, most
economies were forced to re-examine tax financed services, and do so in increasingly
fundamental ways, with or without the help of the IMF. The costs of readjustment have
fallen differentially on groups like children and younger families. In the developing world,
such trends have been documented by Cornia, et al(1987). The same kind of story can
be pieced together from European and American sources. Governments devoted to
rolling back the boundaries of state activity, assumed power in many countries for
varying periods of time, and the one which stayed longest was Mrs. Thatcher's
conservative administration in Britain. Not only was her period in office unusually long,
but it was also unusually ideological, and firm in its free market theories. This Govern-
ment carried through into practice, in a determined and consistent way, a range of
reforms more far reaching than anything since the period immediately after the Second
World War. This was more surprising still to many outside Great Britain, because they
looked on Britain as the country that had led the world as an example of an advanced
welfare state. Many reformers believed that what Britain did today, the rest of the world
may do tomorrow. If that is so, does Britain's fate presage a gradual dismantling of the
social institutions created in many countries, in the first part of this century, and
especially after the Second World War? Will this happen world wide? Fundamental
economic forces are at work which suggest that this could well be the case. Some
advocates of the free market do believe that the end of all but minimal state involvement
in welfare services is now in sight (Seldon, 1987). On the other hand, there are other
demographic and social changes that are working in the favour of welfare. That does
not mean that existing welfare institutions will continue. It does suggest that new welfare
service economies will emerge owing debts to the pioneers of the 1940s, but also owing
much to the newly dominant consumer societies.
The Long March?
For a century and more, governments have intervened on an increasing scale all over
the world to provide finance, or regulate health care, education, income and the care of

392 Howard Glennerster
the elderly and handicapped. It was always a misleading journalistic convenience to call
the result "welfare states". Many countries had local and diverse systems of delivery. In
very few countries did the central state provide a full range of services.
Nevertheless, the combined economic importance of these activities grew. In the seven
largest OECD nations which include the USA, Japan, and Canada, the share of income
spent by governments, at every level on social welfare, rose from 14 per cent in 1960
to 24 per cent in 1981 (OECD, 1985). The figure was over 30 per cent in many European
countries. Developing countries, too, were allocating more of their resources to such
purposes. Many writers portrayed these trends as an almost inevitable parade of
progress, but, in truth, success in achieving better standards of life expectancy, public
health, literacy and nutrition were to be found in a range of economic systems, some
giving more weight to the market, others less (Stewart, 1984). It is the extent to which
societies succeed in achieving such basic entitlements for all their citizens, by which
they should be judged as welfare states and not by the form of their institutions. The
1970s not only checked this long march, it also called into question the whole presump-
tion that there was a common direction or purpose in the evolution of systems of welfare.
A New Environment
1. The most obvious and most discussed effect of the economic crises of the period
was to cut the growth rates of the major economies and their capacity to fund social
service expansion while, at the same time, permitting private living standards to rise
too. We can see a good example of this effect in health care spending. In the period
from 1960 to 1975, spending on health care rose more than half as fast again as
incomes, in the OECD countries. This began to change in the 1970s, and by the
period 1980 to 1984, the rate of increase was only half the increase in incomes
(OECD, 1987).
2. Such macro-economic factors only go part of the way to explain what has happened.
Within advanced economies, a major shift is occurring towards the service sector.
Capital is finding manufacturing industry less rewarding, and the growth of private
services has been rapid. There is no obvious boundary line between private and
social services, at least as far as private entrepreneurs are concerned. The
aggressive selling of hospital and nursing home care, on Britain, are cases in point.
Once corporations see health, education and nursing care as big business, attract-
ing public as well as private funds, they become major interest groups. It is not just
that social services are competing with the defence and agricultural interests for
government attention. They are now battling with alternative private providers for
the limited pot of tax payers' cash. Private services also offer another kind of
competition. The kind of consumer concern and marketing that is the characteristic
of the private sector, often shows the public services in a poor light. That, too,
weakens their political clout.
3. The economic forces and interests which secured the expansion of state services,
in the first part of the century have, in contrast, weakened. Organised labour has
declined in political as well as economic terms. Part-time workers, women in service
jobs, are less unionised. Union pressure, where it exists, is increasingly being
channeled into negotiations about health and welfare plans for full-time employees.
Once more, this creates a counter political interest to publicly provided services.
Why should people pay twice, as they see it, for their pensions or health care?

After the Welfare State? 393
4. As peoples' individual incomes have grown, and as private insurance schemes have
grown more sophisticated, it has become more possible for an increasingly larger
group of households to provide for their own children's education, or care for
themselves when they become old. Thus, the old presumed association in the minds
of the electorate, between more spending on education and better schools for their
child has eroded. More spending on welfare begins to be seen as benefiting the
outcasts and the marginal groups in society. The more governments tried to target
assistance to save hard pressed treasuries, the more welfare came to be seen as
a burden and not a benefit for ordinary citizens.
5. Communities have become less interdependent. A world war seems far away.
Suburban life removes individuals further from the sights of deprivation that might
affect them. The self interest in low property taxes and high property values creates
communities that have no interest in rescuing the poor only a few miles away.
Moreover, residents have little to fear in terms of disorder, they are isolated enough
and can rely on sophisticated private security systems. Buying off civil disorder with
welfare cheques is an expensive option and by no means an effective one.
6. It is only super-imposed on these fundamental changes that the kind of limits to
social policy that Glazer (1988) discusses, begin to come into play. These include
things that are of more direct concern to the social science community: the
over-optimistic claims that were made, notably in America, for what small social
programmes could achieve, our inability to get bureaucracies to do what we wanted
them to do; our basic ignorance about so much of social life. All of these points have
weakened social welfare in the public's eyes, but they pall beside the kinds of
changes described above.
Is there, then, no future for social policy, but a declining and increasingly fruitless attempt
to provide for a separate underclass of outcasts, in whom no one in the larger society
has any real interest?
The Counter Factors at Work
Running counter to these structural forces, that have weakened traditional systems of
welfare, are others that are creating demands that the market has found difficult to meet.
1. The new, more internationally competitive world, has made all economies, including
some that used to be the most powerful, more vulnerable. Market economies have
had to choose alternative paths to constraining inflation. Some have opted to run
at high levels of unemployment to restrain the power of unions to extract inflationary
wage bargains, and reduce their membership. This is enormously costly in social
security payments. In the United Kingdom, the additional costs of such a policy came
to equal the whole cost of the Health Service and the university system put together.
As the United Kingdom reached the peak of its economic cycle in 1989, and had to
resort once again to recession to cure its inflationary disease, it still had a residue
of unemployment three times that of comparable periods two or three decades ago.
Long term unemployment, perhaps, for one in ten of the population, and intermittent
unemployment for another tenth of households, puts the private purchase of many
services outside the reach of a large section of the population as well as increasing
the social security budget. The other route to combat inflation, followed by the
Scandinavian countries, has been to create jobs through a positive labour market
policy and to reach agreements with unions that often involved trading social

394 Howard Glennerster
benefits for containing wage claims. This also cost a lot of money, and certainly,
has extended what had been thought of as the traditional boundaries of social policy.
2. A second effect of economic restructuring has been to create a much wider spread
of income distribution than was true only a decade ago. There are more part-time
jobs and more jobs in low paid work. Older workers are being made redundant much
earlier. But, over and above this, social and demographic factors are adding to the
"stretch effect" on income distribution. These include the rise in divorce, separation
and child bearing outside marriage, the predominance of two earner families whose
earnings enable them to just get by, but leaves the single earning low paid family
well below the poverty line. To these factors, we must add the aging of the population
and the numbers of very elderly, whose private pensions, even if they had them,
have lost most of their purchasing power.
The scale of these changes has been poorly understood or appreciated. In 1975, the
average pre-tax incomes of the richest fifth of households in the United Kingdom were
four times the average incomes of the poorest twenty per cent. In 1986, only just over
a decade later, the ratio was not one to four but one to eight (CSO, 1988). In 1970, one
in five of all households in the UK had no earner. By 1985, the figure had risen to one
household in three (Piachaud, 1987). We can also take a measure of relative poverty.
Seebohm Rowntree's measure of poverty was equivalent to expecting a family of two
adults and one child to live on an income equivalent to 83 per cent of the average
consumer expenditure per head at the time. Or, to put it another way, the poverty line
for a family was about a third of the average family's income. In 1953, only about 1.2
per cent of people in Britain fell that far below the average standard of living. By the mid
1980s, the percentage had risen to 16 per cent (Piachaud, 1988 and DHSS, 1988).
Changes in Europe point in similar directions. On current definitions of poverty, in 1975
there were 30 million poor people in Europe. In 1985, the comparable figure was 45
million (EEC, 1988). A recent report from the Congressional Budget Office in the United
States shows the same kind of trends (CBO, 1988). Between 1970 and 1986, the richest
20 per cent of families with children improved their standard of living by a quarter. The
poorest fifth saw their real incomes fall by 12 per cent. Now, it may be that societies can
simply ignore these trends or conclude that the best solution is merely to be tougher on
the poor, helping their misfortune only makes things worse, as Murray (1984) concluded.
The evidence is, however, that while programmes for the poor have been cut, poverty
has also increased. In the UK again, the combined effect has been to increase the size
of the social budget relative to the economy and to increase the redistributive impact of
the welfare state (CSO, 1988).
Source: CSO, 1988.

After the Welfare State? 395
3. Social attitudes have been changing as fast as economic structures. Women's
perceptions of their appropriate roles in society, as well as the demand for their
labour, have created new demands, new political constituencies for day care, care
of mothers and elderly relatives, schooling and the quality of neighbourhood life.
Women are not only becoming more political, they are also joining unions and
changing their agendas too.
4. For much of the period since the Second World War, health care had become
increasingly individualised. Health became a matter between you and your doctor.
The prestige and importance of public health declined as the great epidemics
receded. Now, we have at least as awful a scourge in our midst — AIDS — and
there are no easy solutions. Solutions that do exist are social and global in their
implications.
5. Finally, we are learning the hard way that there are certain things that the private
market is rather bad at as well as things it is rather good at (Barr, 1987). An
increasing number of Americans and even the medical profession, seem to be
drawing that conclusion, (New England Journal of Medicine, 1989). The sheer
mounting cost of medical care, not the least its effects on labour costs, is forcing a
reappraisal.
The way these contradictory forces will work themselves out in different societies is
largely unpredictable. Some things can be postulated, however.
Welfare States of the Future
1. Societies are going to develop increasingly diverse and complex ways of meeting
their social objectives. Targeted tax remissions to employers to provide services in
lieu of state services—regulations requiring individuals to meet their own needs in
old age, tight contracts for the purchase of services for the community from private
bodies, competition between public and private providers, cash given to individuals
by the state to purchase services - these are merely some ways in which govern-
ments in societies with an individualistic set of values may try to mask the growth
of government, which social change is forcing, and to which they feel they cannot
respond directly. It will not mean less social policy, just more subtle and more diffuse
policy.
2. Because consumers will be so much more demanding, knowledgeable and used to
responsive private services, public services will have to be as consumer based, as
efficient and as aware of their public image as their private counterparts. Easy
conditions of service for public servants will become increasingly rare. Performance
review, the loss of jobs for life, all of this will make public services much more like
private ones. The challenge for social administrators, or public service managers,
will be to retain social service values, while achieving greater efficiency. As the
experience of the American voluntary hospitals shows, that is by no means an easy
task. Market values, and the need to survive in a competitive environment, tend to
drive out community goals. Incentive structures in these new competitive environ-
ments will need to be thought through, and their results evaluated with great care.
3. More social services are, for good or ill, going to be for the poorer members of
society. The number of people who will choose to avail themselves of services that

396 Howard Glennerster
are less good, than the family are able to afford privately, will diminish. The pull of
older notions of social solidarity will wane under the harsh choices posed, like a
ghetto school or a private school for one's child. Housing will become increasingly
polarised as more people can afford their own home. Thus, those who work in these
schools and on these housing estates will face an increasingly difficult professional
task and a more thankless one too. Those who train these young people for such
careers will have to adapt what they teach to the harsh realities of professional work,
in a growingly hostile environment. The students and the teachers will have to come
from those deprived communities, otherwise, what they have to offer will never be
accepted. We shall have to accept that these communities are going to increasingly
find their own means of salvation, running their own businesses, housing associa-
tions schools and day centres, separate and unequal. It may not be what the
founding fathers of the welfare state envisaged, but it may be the best we can hope
for, at least in those societies that have lost their will to live together in peace and
harmony, "as an organic whole" as Titmuss (1958) put it.
4. At the same time, as some of the more traditional services dwindle, so others will
grow. Long term care for the very elderly, outside institutions, will become an
economic necessity, as it will for other dependent groups. Expert care managers
who can organise multiple sources of care within a strict budget limit, will be in
increasing demand. There will be increasing emphasis on preventive health care,
and that will call for a new mix of health and social care professionals. Education
will not cease at childhood or youth for the majority of the population. It will continue
through life in one form or another. To make that possible, more flexible forms of
financing higher and further education will develop. They could well merge with the
social security system to give individuals greater capacity to shift their incomes
through time, not merely to meet the misfortunes of life, but to open up opportunities
too.
5. Social policy is already becoming increasingly concerned with work, access to work,
the creation of work, incentives to work. In countries as different as America and
Sweden, this can be seen. America is developing a range of programmes designed
to give incentives to those on welfare to obtain training and to receive day care.
Sweden has created jobs where local deficiencies exist. Both approaches need to
go together. Increasingly, that will be a part of the role social agencies will play.
Social Administration : a More Complex Task
If even only some of these possible futures come to pass, the task of administering
social policy objectives will become more complex. Ensuring that a mix of public and
private agencies are delivering services up to standard, and that they are not just
selecting the easiest customers rather than those in greatest need, this will demand a
different kind of managerial skill than administering a statutory agency. Richard Titmuss
taught us long ago that social policy and administration were more than statutory
provisions. Now, more than ever, that is true. The academic task of evaluating the
outcome of these interacting forms of social intervention will be a challenge on its own.
Social policy cannot be the study of one set of institutions, as they happened to have
evolved at any one point of time in any one society. As I have argued elsewhere, "social
policy is essentially concerned with the question: what is the appropriate scope for social

After the Welfare State? 397
as distinct from individual action? What are the limits to individualism and what are the
limits to collectivism in our different societies in a changing world? (Glennerster, 1989).
The second order question then becomes : in so far as social action is appropriate, what
is the most effective way of achieving its purposes? The menu of choices to meet those
purposes has expanded in the last decade, as well as, the purposes themselves.
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1988
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