The rise and rise of neo-liberal social protection

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The Just KIDDing blog is Dr. Stephen Kidd’s take on key issues in social policy in international development

Monday 1st April was not only April Fool’s day; it was also the day chosen by the British government to make the most drastic changes to the UK’s social security system in decades, throwing many poor people into even deeper poverty. People with disabilities were the hardest hit: as the attached article below shows, some will lose up to £23,000 over five years. If the cuts had not been announced well in advance, many people may well have regarded them as no more than a pretty good April Fool’s joke, so damaging are they to poor families.

http://www.guardian.co.uk/society/2013/mar/27/welfare-cuts-disabled-people?INTCMP=SRCH

The British government had, however, prepared for these cuts for some time. It followed a clever two-pronged strategy of alienating the middle class from much of the social security system while simultaneously creating a negative image of social security among the general public.

This process of alienation began around two years ago when the government decided to means test the UK’s universal child benefit and reduce its value. At the time it caused a furore, with opposition from all sides of the political spectrum. Yet, despite negative press coverage, the government persisted and managed to cut the umbilical cord that linked the middle class to a key part of the UK’s social security system, thereby reducing opposition to subsequent cuts targeted at the poor. However, to be on the safe side the government shored up its support among the middle class by providing them with a range of concessions, including making the state old age pension more generous and universal while putting in place a range of tax cuts and childcare subsidies.  

In effect, the poor have been hit by a neo-liberal pincer movement: while they take the brunt of the cuts to social security, they also gain the least from the tax cuts and childcare subsidies (as the articles below demonstrate). Indeed, the very rich have received the greatest benefits: those on incomes above £150,000 per year have gained a tax cut worth at least £10,000, rising to £100,000 per year for those on incomes above £1 million.

http://www.guardian.co.uk/commentisfree/2013/apr/02/the-great-tax-swindle?INTCMP=SRCH

http://www.guardian.co.uk/money/2013/mar/24/poorer-familes-deserve-childcare?INTCMP=SRCH

The second part of the government’s strategy has been to generate negative images of social security among the general public. The two articles below describe how a distinction has been created in the public imagination between the  “skivers,” who are supposedly dependent on means-tested benefits, and the hardworking “strivers,” those working families that survive through the fruits of their own labour. Of course, this distinction is a complete fiction since the majority of those receiving benefits are in employment – in fact, only 3% of benefits go to the unemployed – but it resonates with many people. Further myths have been created about benefit cheats who spend their money on drink, cigarettes and pay TV.

http://www.guardian.co.uk/commentisfree/2013/mar/28/benefit-cuts-monday-defines-government?INTCMP=SRCH

http://www.guardian.co.uk/commentisfree/2013/mar/31/we-have-to-talk-why-some-want-benefit-cuts?INTCMP=SRCH

In the past couple of weeks, the campaign to cut social security has reached a new low with the Chancellor of the Exchequer suggesting a link between dependency on social security and an infamous killer who was recently found guilty of murdering his own children. While the claims are at odds with the facts, as the following articles show, they are successfully building the public’s emotional support for cuts to social security.

http://www.guardian.co.uk/politics/2013/apr/06/welfare-debate-osborne-mick-philpott

http://www.guardian.co.uk/commentisfree/2013/apr/07/labour-must-raise-minimum-wage

The negative images created of the poor in the UK have led to growing demands for social security to be made conditional. For example, some local councils want to make the receipt of benefits conditional on losing weight or good behaviour (see the following article on the introduction of food stamps to the UK). Workfare is also gradually being introduced, with recipients of social security being forced to work for private sector companies for free, with non-compliance leading to a loss of benefits.

http://www.guardian.co.uk/politics/2013/mar/26/payment-cards-emergency-assistance-food-stamps

However, it is unfair to blame only the current government for the loss of public support for means-tested social security. The article below explains how, over recent decades, the term “social security” – which is strongly associated with rights and entitlements – has gradually been replaced in popular and political discourse by the term “welfare”, characterized by negative connotations of dependency and handouts.

http://www.guardian.co.uk/commentisfree/2013/apr/01/language-welfare-social-security

The campaign in the UK against social security has strong parallels in developing countries. As in the UK, politicians in developing countries often claim that social security will breed dependency and laziness. These arguments have been used by agencies such as the World Bank to create support for schemes that force behaviour change on poor people. Conditional cash transfers (CCTs) have becoming increasingly popular, despite strong evidence that conditions achieve nothing. Similarly a growing number of workfare programmesare being established – often with significant financial support from international donors – despite growing evidence that they may harm child nutrition and do not reach the poorest. Indeed, it could be argued that supporters of CCTs and workfare are merely recreating the type of poor relief that was common in nineteenth century Europe, when support for the poor was made conditional on participation in the workhouse.

As in the UK, there has also been reluctance among international donors to use the term “social security.” It is avoided by donors even in countries – such as Indonesia, Bangladesh, Laos and Kenya – where it is stipulated as a right in national Constitutions. The World Bank has popularized the term “social safety net,” while others prefer “social assistance,” neither of which create the sense of entitlement associated with social security.

The concept of “social safety nets” is deeply embedded within a neo-liberal worldview that celebrates low taxes and low social spending, both of which can be achieved by targeting safety nets at the poor. Yet – as Amartya Sen (1995) has pointed out – poverty targeting results in low quality schemes that provide minimal benefits to a minority of the poor. Exclusion errors are always high with poverty targeting and, as in programmes like Bolsa Familia in Brazil and Oportunidades in Mexico, it is common for the majority of target populations to miss out. And, because the middle class is excluded from poverty targeted programs, such schemes have minimal popular support and political commitment. As a result, they suffer from low budgets and low benefits.

It is illustrative to compare the pension schemes of Nepal and Bangladesh. Nepal provides universal pensions while, in Bangladesh, they are targeted to the poor. As a result, in Nepal the national budget invested in the pension is five times larger than in Bangladesh, while the pension itself is double the size. So, poor people benefit much more in Nepal than in Bangladesh.

As in the UK, debates on social security in international development are deeply ideological. The neo-liberal ideology that currently dominates policy in the UK is also prevalent in international development. Proposals for poverty targeting, conditions, workfare and graduation are all characteristic of neo-liberal thinking since they aim to minimize social spending and taxes while trying to force behaviour change on poor families, who are regarded very negatively. The Tea Party in the United States would be proud of such policies.

It is likely that neo-liberal thinking will be more damaging in developing countries than in the UK. At least in the UK there is a significant commitment to investment in social security, with current spending at around 13% of GDP. Even the current government does not seriously believe that significant reductions in this budget are possible. Yet, in developing countries a neo-liberal ideology is being imposed in countries where spending on social protection is still very limited, with many countries investing virtually nothing.

Many neo-liberals are guilty of propagating the deceit that significant impacts on poverty can be achieved at low cost to the taxpayer. The promotion of Brazil’s Bolsa Familia programme by groups such as the World Bank is characteristic of the attitude of neo-liberals working in social security. In its 2012 Social Protection and Labour Strategy, the Bank claimed that Bolsa Familia had “demonstrated significant results at a cost of half a percent of GDP.” Yet, as we explained in a recent edition of Pathways’ Perspectives, the reality is very different. Bolsa Familia does little more than ameliorate poverty. The real impacts on poverty in Brazil come from its pension system, and this requires investment by the Brazilian government that is four times greater than its investment in Bolsa Familia.

Indeed, the real lesson from Brazil is that, if social security is to transform the lives of poor families, it will require significant spending by governments. Budgets of 0.5% of GDP will never do more than scratch the surface of the problem. Yet, increased spending will require higher taxes, an uncomfortable proposition for neo-liberals. This is where the political economy of social protection needs to enter into our thinking. Realistically, the poor relief championed by neo-liberals will never encourage governments to invest sufficiently in social security. If social security budgets are to grow to acceptable levels, schemes need to become more inclusive rather than targeted only at the poor. As indicated above, if the middle class benefit from a social security scheme, they will push for increased spending and higher benefits, as has happened in many developing countries that have invested in universal old age pensions. Only an inclusive social policy will make possible the levels of taxation that are necessary to bring about real transformation in the lives of poor families.

Anyone working on social security in developing countries needs to understand the political economy of the sector. There are three articles that are essential reading (and see our new essential reading list for further core reading on social protection):

Anyone who claims to be a “social protection expert” must absolutely have read these articles.

The current neo-liberal dominance within social security policy discourse needs to be challenged. It is imperative that more centrist and pragmatic views are given the space to influence policy. We hope that this blog will provide an opportunity for evidence-based policy to be given an airing and for the myths and dodgy analysis of neo-liberals to be exposed and questioned. This is beginning to happen in the UK, as the following article shows. Watch this space as we begin to do the same here.

http://www.guardian.co.uk/politics/2013/apr/06/welfare-britain-facts-myths

2 Responses to “The rise and rise of neo-liberal social protection”

  1. Francine Mestrum Reply

    Thanks for this interesting article. For similar views, on the neoliberalization of social policies at the European and global level, see \’www.globalsocialjustice.eu\’ section \’research\’.

  2. Anthony Hodges Reply

    A really interesting perspective — many thanks for making these thought-provoking insights.

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