Neo-liberalism's legacy: A gaping hole in our safety net

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There's a hole in Canada's social safety net and the evidence is all around us: from the homeless on our streets to the growing number of our fellow citizens who rely on food banks for their daily sustenance.

The hole was made by successive governments whose mantra of paying down the debt and controlling inflation at any and all costs has put our country in a precarious position as we slide further into economic despair.

What happened to our safety net?

It didn't have to be this way. The Great Depression highlighted the need for a stronger social safety net. In the post-war years, countries in the industrialized world set about building a welfare state and implementing a regime of social citizenship.

The idea of social citizenship and the social rights it entailed, as British sociologist T.H. Marshall so eloquently theorized, was necessary for the fulfillment of civil and political rights. For Marshall, without a guarantee of the basic necessities of life and protection against the vicissitudes of the market, civil and political rights could not be exercised to their fullest extent and citizenship thus remained incomplete.

Post-war legislation, from public pensions and social housing, minimum wages to welfare, guaranteed citizens the right to retire in a state of dignity, the right to shelter and the right to work at a decent wage and have access to material support from the state when unemployed.

Racialized groups excluded from social rights in Canada

There have always been exclusions and silences in Canada's regime of social rights. Aboriginal people, immigrants and other racialized groups could not enjoy the benefits of social citizenship to the same extent as others. And prior to the struggles waged by the feminist movement in the 1960s and 70s, women primarily had access to the social wage through their male-breadwinner husband.

But despite these limitations, social citizenship was widely recognized by states and citizenry alike as a legitimate and worthwhile ideal. As the economic clouds of the 1970s formed and governments turned their attention to fighting inflation, social citizenship lost favour among ruling elites. In the era of neo-liberalism, where governments are concerned with rolling back the state and allowing the market to work its "magic" for the well being of "all", social rights fell victim to successive cutbacks in government expenditure and an ideology of individualism.

Neo-liberalism's devastating impact

Social policy became synonymous with, and subsumed under, employment policy: The goal of government was not to provide protection from the vagaries of the market, but to put people to work so they could protect themselves. The social safety net became a trampoline, bouncing those who had fallen on hard times and had become reliant on government support back into jobs, no matter what their wages or working conditions.

The impact has been devastating. Not only do we see rising inequality and poverty, the growth of the working poor and the homeless, but the economy's ability to recover from economic downturns has been severely hampered by the withering away of what economists call the automatic stabilizer. Typically, as the economy enters a downturn, government tax receipts fall, expenditures on income supports rise (as more people are laid off) and the government likely runs a deficit (assuming it make no cuts in expenditures). The automatic stabilizer refers to that increase in government expenditure on income supports (such as welfare and EI) that occurs in an economic downturn and thereby props up aggregate demand (people's ability and willingness to buy goods and services) and in theory, eases out the recession. Yet the automatic stabilizer loses its impact as the government dismantles the welfare state and undermines social citizenship.

Employment Insurance now a luxury for the few

Take the case of Employment Insurance. What was once a right has become a luxury for the few, as millions of workers facing unemployment during this crisis will not be able to access EI and instead must rely on that program of last resort, welfare or social assistance, which has been severely undermined by cutbacks and downloading. Currently, only 54 per cent of the unemployed are eligible for EI benefits with 41 per cent actually receiving them. In an effort to make our labour market conform to the neo-liberal mantra of "flexibility" and "competitiveness", these reforms can have the perverse impact of drawing out recessions over a longer period of time.

A failed economic and social model

As the economic crisis has so devastatingly demonstrated, neo-liberalism as a financial model has failed. Deregulation of financial markets and a skewed distribution of the economic surplus has created a series of speculative bubbles, from dot-com to real estate, that have done little to promote sustainable economic growth and have left markets floundering in their wake.

As a social model, neo-liberalism cut a hole in the post-war safety net, weakening the welfare state and the social protections and regime of citizenship it entailed. Living through boom times, although evidence of this hole was apparent amongst society's most marginalized, buoyant markets and consumer credit meant less people fell back on the safety net.

For many, the size of the hole was masked. The markets are no longer buoyant and consumer credit is drying up. As the economy plunges into a deep recession and unemployment grows, if government's at all levels don't act, we are about to see how big that hole really is.

 

Simon Black is a researcher at York University's City Institute and a visiting Fulbright student fellow at the City University of New York. You can find his writings at www.simonjblack.com.

 

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