The War against Welfare
by Sandhya Jain on 31 Jul 2012 24 Comments

The collapse of the Soviet Union two decades ago was followed by the rise of two unnoticed but related phenomena: first, the West pushed the liberalization agenda on nations that had hitherto resisted integration with its market economy; second, the United States and Europe rapidly demolished the welfare state they had erected after World War II.  This resulted in the end of job security, sharp cuts in public employment, pensions, health and social services. As prices rose steeply across the board, a class of low-paid wage-earners emerged alongside a class of super-rich. The latter’s vertigo-inducing lifestyles contrast sharply with the declining standards of living of the former, driving millions to despair in countries that once bragged about the wonders of capitalism.


With hindsight, some events can be readily discerned. The collapse of the Soviet Union was followed by NATO’s decimation of Yugoslavia (another strike at the Orthodox Church), ruination of Iraq and Libya, and current pressures on Syria and Iran. In other words, all nations with advanced welfare programs for their peoples were destroyed or are en route to being annihilated.


After World War II, Stalin and the Soviet allies launched a massive reconstruction program based on welfare measures such as full employment, guaranteed job security, universal health care, free higher education, one month paid vacation leave, full pay pensions, free summer camps and vacation resorts for worker families, and long paid maternity leave. This model emphasized social welfare over individual consumption; the stability it provided ensured Stalin’s place in Russian hearts.


Western regimes were forced to follow suit, or their people would turn to political parties with similar programmes, notes Prof James Petras. So they offered welfare, suppressed domestic Communist and radical Left parties, tamed the trade unions, and topped it all by promoting high individual consumption through cheap credit and installment payments. This phase lasted till the mid-1970s; both blocs witnessed worker unrest on different counts, but essentially related to entrenching the welfare state.


Economic stagnation made Western capitalists seek leaders to challenge the Soviet bloc and dismantle the welfare state; they found Ronald Reagan (America), Margaret Thatcher (Britain), and Mikhail Gorbachev (Russia). Reagan and Thatcher let capitalists control the social agenda; curbed trade unions; and launched an arms race that bankrupted Moscow.


Simultaneously, Soviet-style ‘welfarism’ was undermined within the Eastern bloc by a new class of educated elites who ganged up with kleptocrats and neo-liberals backed by Western foundations, intelligence agencies, the Vatican (especially in Poland), and ‘anti-Stalinist’ leftist intellectuals. They preyed on public wealth and became overnight billionaires after Gorbachev triggered the collapse of the Soviet Union and Warsaw Pact nations.


These neo-liberal pro-Western adventurers dismantled public ownership of property, basic protective labour laws, and job security. Workers soon realized the merits of the welfare state when the Western-oriented trade unions ruined them. The Gdansk shipyard workers affiliated to Solidarity in Poland were fired and left to chase odd jobs; their ‘leaders’ supported by Western intelligence metamorphosed into prosperous politicians, editors and entrepreneurs.


Once Stalin’s welfare model was demolished, Western capitalism promptly dismantled its own social welfare measures. For the past two decades, all Western capitals have been busy ending job security and workplace protections, chopping severance pay, making firing of workers easy, curbing pensions, and extending retirement age under a doctrine of ‘work till you drop’.  Capital mobility has risen to new heights with exploitation of highly qualified low-paid labour across the world.


Readers would have noted the parallels with India’s own liberalization journey and the growing miseries of the common citizen, best exemplified by the Planning Commission’s cynical claim that Rs. 28/day keeps poverty away. The bitter truth is that this policy has been covertly endorsed by the polity across the spectrum, which explains the brutality at Nandigram and Singur; the POSCO face-off; farmers protests in various parts of the country, and State insistence on the right to grab private land for ‘development’. Emerging trade union militancy is a natural response to this trend.


Some Left intellectuals have exonerated themselves by making polite noises about jobless growth, but have studiously avoided investigating or articulating any serious issue. Thus, despite the trauma experienced by citizens due to privatization of electricity in the capital – with a chief minister hell-bent upon privatizing water as well – no political party or all-India trade union has done basic homework to reveal how many permanent employees of the public utility retired naturally, how many were phased out with compensation packages, how many permanent employees remain on the rolls, and how many employees are simply contract labour without benefits, who live in terror of losing their small wages.


Worse, when some public-spirited citizens began a movement against the steep hikes in bills some years ago, no political party or leader supported them, causing the movement to fizzle out. Even after the abject failure of the privatization of an essential service, no serious move has been initiated to challenge it.


Some fundamental issues arise. Public utilities like electricity and water are permanent because their demand is perennial. So what justification is there for their being privatized, and then not engaging permanent employees? Second, should any organisation get the tag of ‘industry’, with resultant tax and other benefits, if it does not provide permanent jobs and only exploits contract labour? Utilities with 40% contract labour should be designated as ‘unorganized sector’.


Some argue that industries need contract labour to leverage lean seasons and maintain profit margins. Today, over one-third of India’s industrial workforce is contract labour. Yet, not one trade union or political party has demanded that contract labour be paid equal wages for equal work done by permanent employees, with a fair package on exit. The declining public esteem of the Supreme Court is linked to its indifference to these burning issues.


Currently, only Latin America has realised the dangers of anti-welfare neo-liberalism; hence labour’s share of national income is rising here even as it shrinks in Western Europe and North America. Venezuela is supporting massive health, educational and labour reforms through its nationalized petroleum sector. Ominously, Myanmar is planning to privatize its petroleum sector following its new openness to the West, but Russia under President Vladimir Putin is determined to curb gangster capitalism. Will India awaken or will it let Western diktat ruin its citizenry? The resistance of some regional parties to FDI expansion gives ground for hope.


The author is Editor,


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