Discussions of the origins of social policies treat concerns about inequality and social justice as not necessarily tied to explanations of policy development. Interpretation of social policy origins is a matter of some intellectual controversy, often driven by ideology, in which it seems impossible to arrive at definitive conclusions. This point is revisited at the end of the chapter, as a link to the chapters that follow. Inequality is given primary attention here since one of the challenges to comprehensive social policy analysis involves the assertion that it is primarily concerned with exceptional casualties of society, in a context in which it is economic policy that is crucial for overall social progress. Such a view, of course, largely excludes the possibility that market systems have a role to play in the production of social casualties, and it is not the view that is taken in this book. On the contrary, discussions in this and following chapters are presented from the position that the need for social policy arises largely because of the inadequacies of market societies. Such a view takes social policy analysts deep into many aspects of economic policy, and in so doing widens rather than narrows the range of issues that social policy is expected to address.
However, it is appropriate to mention briefly the alternative point of view and to highlight its limitations. The view that social progress emerges from good economic policy ensuring a strong and growing economy tends to embrace two propositions. One of these is that economic institutions work best when constraints upon the market are minimized. The other is that economic progress produces social progress inasmuch as ‘a rising tide lifts all boats’. The first of these is contestable within economics in terms of the range of issues that markets do not handle very effectively. Welfare economics literature, for example, emphasizes externalities and monopolistic forces that are hard to restrain. Furthermore, it is contestable that it is any longer feasible to protect vigorously competitive markets in the face of powerful global monopolistic tendencies. With regard to the second proposition, there is now a great deal of evidence that it is not working. First, the boat-lifting image is misleading. When a real tide rises it does of course lift all boats indiscriminately, but in the context described here some boats are lifted much faster than others, and this is true both within individual countries and across world regions. This is demonstrated in Figure 2.1, which presents data on changes in the distribution of increasing global wealth between 2000 and 2016, indicating limited gains in wealth accumulation in Africa, India and Latin America in comparison to those in other regions.
In the starkest terms, wealth inequality has been calculated as ninety-two individual billionaires holding as much wealth as the poorest half of the world (Oxfam, 2015). Second, in reality, the rising of the tide is very slow in many of the so-called advanced economies, and this has been the case particularly since the global financial crisis when economic growth measured in GDP has barely reached its lowest pre-crisis points, and is predicted to slow even further up to 2020 (IMF, 2017a). This unequal distribution of world assets and opportunities, combined with limited capacity for any meaningful wealth creation, suggests not only difficult questions for economists but also a need to look more closely at the social fallout from the market economy.
Figure 2.1: Regional and selected country percentage of global total wealth (US$ trillion), 2000 and 2018
Note: Calculation from smoothed exchange rates, i.e. five-year moving average exchange rates.
Source: Authors’ calculation from Credit Suisse (2018, p. 154, table 6.3)
Embedded particularly in writings that generalize about the rise of ‘the welfare state’ is the idea that social policies emerged in the twentieth century to curb the rampant inequality produced by capitalism. This argument, it may be noted, is given currency as much in terms of the need to protect capitalism as in terms of the recognition of inequality as a social problem. Indeed, the role of social policy in the reinforcement of the status quo led socialist movements in the nineteenth and twentieth centuries to see reforms as distracting attention from the fight against capitalism. In that respect welfare provision may be seen as a means to ‘buy’ votes for the status quo in the context of universal democracy, a theme continued in scholarly presentations of the Marxist interpretation of social policy (O’Connor, 1973). Moreover, the strongest impetus towards the reduction in wealth inequality is shown to have occurred around the two world wars (Piketty, 2014).
Questions about social policy’s egalitarian goals have become particularly significant because of the evidence of increases in income and wealth inequality across the industrialized nations during the twentieth and early twenty-first centuries, often framed as a more combative question of whether this implies a failure of the so-called welfare state project (see discussions in Taylor-Gooby, 2013 and Gamble, 2016). Inasmuch as rising inequality embodies a fightback by economic elites against equalization, it implies a need to give attention to the structural factors determining achieved income before, as well as after, any direct state interventions with respect to taxes and benefits. It is here that a particular justification for a perspective on social policy that embraces much more than income-related interventions can be found. The weakening of redistributive action may need to be explained not merely in terms of policy ‘retrenchment’ but also by deindustrialization, globalization and demographic change. There are complex interactions here, which cannot be addressed satisfactorily in any analysis that separates issues about social policy from those about economic policy. These issues are explored further in the next two chapters.
Problems such as these have been highlighted especially by the advocates of ‘basic income’ or ‘citizens’ income’ schemes. Their arguments coalesce around a need to detach a concern with the relief of poverty from the labour market assumptions characteristic of social protection schemes established from the mid-twentieth century in advanced economies (see the discussion in Chapter 6). The rise of conditional cash transfer systems of social assistance as a means of poverty relief in low-income countries is indicative of how this policy problematic is emerging. In countries where administrative systems and formal labour markets are not so well established, the idea that income support may be made conditional on participation in other forms of welfare-related behaviour aiming to improve health and education outcomes and ultimately human capital development has been attractive to governments. But the arguments for resource transfers implicit in both these universal basic income and conditional cash transfer schemes cannot side-step the question of the relationship between those who pay their costs and those who receive their benefits, even though this division is in many ways artificial (Farnsworth and Irving, 2018a). The implicit ‘universalism’ (whether categorical, that is, based on membership of a particular social group, or not) has to rest upon some notion of deductions to support payments. In that sense the fundamental proposition of this chapter remains relevant: that social policy analysis needs to address the wider distribution of resources as a whole.
Finally, the recognition of intimate connections between social policy and inequality is given additional support from research that identifies the extent to which the most unequal societies have inherent problems even for those who are advantaged within them. That point is explicitly addressed in, for example, the work of Wilkinson and Pickett (2010), in which they show the relationship between, on the one hand, economic inequalities and health inequalities, and on the other, the relationship between the latter and other social problems. In summary, they argue that even the better off are disadvantaged (in terms of health and other problems) in unequal societies. Hence specific ameliorative interventions in societies (even the provision of universal health services) will be undermined where economic inequalities are not addressed.
Such a view has more recently found echoes in some unexpected places. Christine Lagarde, managing director of the IMF, for example, argued in a speech in May 2014 that rising income inequality was one of the ‘leading economic stories of our time’. After
