Contemporary literature often locates the demise of welfare capitalism in the era of welfare state crisis beginning in the mid 1970’s. This process has been described as the discursive naturalisation of the economy (the construction of economic forces of globalisation and industrial restructuring as processes beyond social control), and the parallel demise of the meaning of the social as a collective sphere – and the rise of the individual as social carrier (Stråth-Magnusson, 2001:27).
Nevertheless, before the economic crisis a crisis of industrial capitalism occurred. This crisis highlighted its effects upon nature as well as the social. In the late 1960’s and the early 1970’s an important discourse addressed the negative effects, the ‘costs’, of growth. ‘1968’ was a critique of welfare capitalism, a questioning of the predominance of the economic over other spheres of life, of the political orientation around growth and productivity and of the welfare contract between organized labour and capitalist markets (Stråth-Wagner-Passerini, 2001). Critical social sciences and new social movements questioned post-war conceptualisations of solidarity, equality or security in a fundamental renegotiation of social citizenship. The subject emerged in social policy. Groups previously the objects of policy became the subjects of policy, a move reflected in the rise of social work methodology such as community work, shifting the emphasis from structural reform to individual and local mobilization(Williams 2001).
These changes can be thought of in terms of an autonomization of the social (I borrow this concept from Donzelot, 1984), and a crisis of the relationship between the social and the economic where the social itself took precedence over the economic. This reversal of the power relation between the economic and the social meant a questioning of the link between citizenship and individual productive performance. Security became a right of citizenship (Andersson, 2003).
Peter Wagner has described these changes as a break with the technocratic social reform of the post-war period (Wagner, 1990). Thus they can also be seen as a break with the link between social reform and economic efficiency, as social policy became associated with the failures of welfare capitalism to do away with poverty and inequalities. The social question was rearticulated, especially by leftist movements in critique of social democracy, shifting it from a social problem to be handled within the domains of industrial capitalism and welfare reform, to a social problem that was the direct effect of those very forces. Modern poverty, in the form of groups of people outside of labour markets, was understood to be a result of economic growth and of a disciplining and productivist welfare state where solidarity was structured by the compromise between organized labour and capitalist markets, excluding groups that did not contribute to the productive society.
This stemmed from observations of an emerging social divide in high capitalism between social inclusion and exclusion. The welfare state seemed to have recreated poverty, but in a reversal of the social situation of the naissance of the welfare state. Where historical poverty had lead to social mobilization, modern exclusion seemed to take the form of a two third society, where the interest of the many included was the source of exclusion of the few.
This European discourse on dichotomous society differed fundamentally from its American equivalent, where similar phenomena were addressed from the late 1950’s as a ‘culture of poverty’ or an ‘underclass’ echoing ideas of individual deviations and pathological subcommunities (Katz, 1989). In Europe, concepts such as marginalized or excluded, became the opposites of citizenship (Levitas, 1998).
These discourses on citizenship and participation were linked to the very influential ideas in the late 1960’s and 1970’s of a sustainable society. Welfare capitalism “unbound” had proven destructive to social life, and could not be combined with social progress and a socially sustainable society. In parallel to the environmental debate on wasted natural resources, the social problems of the 1960’s and 1970’s were seen as the waste of social resources by industrial production and conceptualised as externalised social costs. Social policy became deeply associated with the cost side, as the social price for the productivity gains of the post-war era. In Sweden left wing social workers and economists confronted social democratic leader Olof Palme with the idea that social policy was not an investment, but the price of “capitalist destruction of social resources”; and a price that should be included in assessments of progress. ‘Efficiency’ assumed a new connotation, also in international economic planning, as something that could be measured in terms of individual welfare (Andersson, 2003; see OECD 1971). Social inclusion and solidarity with the excluded was understood as necessary for the long-term survival of market capitalism.
However, in the short era from the late 1960’s to the mid 1970’s, narratives of social crisis were replaced by the dominant discourse of economic crisis; a discourse that did not question the consequences of the economic on the social, but rather spotlighted the social as a key element in economic crisis.
The demise of the Fordist welfare state and its Keynesian economic policies was parallelled by what Jelle Visser has called the externalisation of social policy from economic policy (Visser, 2000). Social policy lost its status as economic policy and became deeply associated with redistribution and consumption. Paradoxically, the need to actively recreate growth and competitiveness lead to the questioning of social policy as a productive factor, a questioning that gradually gave way to the construction of social policy as a cost that had to be financed through the surplus provided by more productive sectors in the economy. New means of social intervention – saving and cost cutting – were based on this understanding of social policy as a cost, reflected also in how social spending moved from an indicator of progress to an indicator of economic inefficiency and crisis in international benchmarking (Mullard-Spicker, 1998:185; see OECD, 1977).
The rise of modern supply side economics, coupled with the ideological changes within neoconservatism, neoliberalism, and social democracy’s Third way, signified a renegotiation of the relationship between solidarity and security and economic efficiency. As monetarist ideas translated from the level of macro economic balance to the micro level of social life, solidarity became a matter of how much security the economy could afford and for whom (Mann, 1999). The most flagrant European example of “this turning tide from Fabian socialism and New Deal liberalism” (Milton Friedman quoted in Mishra 1984:27) was clearly Britain under Margaret Thatcher. But also Swedish social democracy engaged in a fundamental rethinking of the political philosophy of the welfare state leading them to construct a Third way in the early 1980’s that incorporated notions of individual responsibility and the marketisation of welfare. When Milton Friedman got the Nobel prize in economics in 1976, he was met with protestors against his involvement in the Chilean junta on the streets of Stockholm, but some of the protestors soon became followers of his monetary doctrine. As the Swedish SAP diabolised Thatcher, Reagan and Pinochet in their 1970’s rhetoric, ‘reaganomics’ were gradually introduced into economic and social policy making (Stråth, 1998; Ryner, 2002; Andersson, 2003).