Welfare Reform in the Global Economy

than the embarrassment of his impeachment, Bill Clinton’s legacy will be the
disgrace of his welfare reform debacle. Elected initially to help safeguard
the safety net and reforge a role for government in the economy he has, under
the guise of forging a middle way, dismantled programs and disarmed the
electorate as no Republican could have.

The lesson for the left
should be that there is no such thing as slipping progressive reforms into a
conservative agenda. AFDC wasn’t repealed because it was an impossibly
unpopular program. It was repealed because it was a beach head in a much
larger economic, political, and social battle by capital to redistribute
wealth, deregulate capital and labor markets, and disarm government as a tool
for any purpose other than increasing profit. It is a battle in which personal
responsibility has been made into a metaphor for economic virtue, national
strength, and global competitiveness. Welfare, rather than standing for mutual
responsibility, solidarity, and the primacy of human needs, has come to
symbolize moral, economic, and social decay. Yet the problem is not so much
that this battle is being fought. It is that the battle is so one-sided.
Ultimately the right-wing attack is against the very notion of social
solidarity and the foundation it provides for economic and political
democracy, as we are now seeing from the attempts to privatize social
security, and the intensified attacks on Medicaid, Medicare, public education,
and social services. Yet despite the scope of the threat, in each phase of the
battle the left has confined itself to defending programs that are so
fragmented and poor they meet no ones needs. At worst, it has collaborated in
undermining support for them. Throughout, it has failed utterly to respond to
the neoliberal economic agenda with its own call for radical redistribution of
wealth and income, re-regulation of capital and labor markets, and
organization of the economy on the basis of equality and human need rather
than free market competition.

To remake welfare into a
symbol of social solidarity, the left needs to defend economic and political
democracy. But it also needs to remake the concept of welfare. This means
replacing the right wing’s mythology of individual morality with an
explanation that places class and the power of unregulated capital at center
stage. It means countering race and gender scapegoating by transforming the
problem of welfare from a problem of poor people—“those others”—to the
right of all persons to basic human needs and physical and economic security.
It means exchanging the dogma of competition for understanding the need for
democratic control not only over the national, but the global economy.




Poverty Of Welfare

the right’s claim that welfare is about individual morality, history shows
that the U.S. welfare system has always been about controlling the low wage
labor market. It has never been about eradicating poverty. It has never been
about guaranteeing the social well being of working families. After World War
II the European labor movements and their parties consolidated universal
programs that benefited all workers: family allowances, universal health care,
portable pensions, and paid family and educational leave. These programs
formed part of the basis for the postwar boom in Europe by ensuring a
distribution of income that could support robust consumer economies. Even
today, these programs remain part of active labor market policies that raise
wages, encourage worker education and training, and support social solidarity.

In the United States, the
post war boom rested on the industrial capacity built during the war, the
absence of significant international competition, and redistribution of income
via collective bargaining. The welfare system remained what it had always
been: a way to make unemployment and poverty so degrading that workers will
take any job available, no matter how low paid or unsafe. This was as true in
the late 19th century when poorhouses were used to herd dispossessed
agricultural workers into the new industrial working class, as it was in the
early 20th century when immigrants were forced, if they were lucky, onto home
relief and if they were unlucky into workhouses.

New Deal policies that formed
the core of the liberal agenda for almost 60 years did little to change this
basic reality of poor relief. The welfare system enacted during the 1930s
established a gendered and racially differentiated system of supports that
deepened labor market inequalities, provided only the most meager benefits,
and served as a prime tool for controlling the supply of low wage labor. By
stigmatizing welfare, this system also laid the foundation for a class
mentality in which workers believe themselves to be “middle class” as long
as they are not “on welfare.”

Aid to Dependent Children,
the precursor of AFDC, wasn’t intended to decrease poverty, but to enable
widows, and to a lesser extent divorced mothers, to stay home with children
while also keeping them out of the labor force and leaving more jobs to men.
Unemployment insurance was more effective in alleviating poverty. But because
it tied benefit levels to earnings it mainly benefited those most likely to be
employed: white males. It also institutionalized the family wage and the idea
that the economic well being of women and families should depend on male

These gender divisions
applied fully only to white workers. In a pact with Southern elites that bound
the Democratic party to conservative Southern interests for more than 40
years, the Roosevelt administration agreed to exclude agricultural and
domestic workers from eligibility for both unemployment insurance and social
security, allowed states to set eligibility standards for remaining workers,
and eliminated federal requirements that states pay benefits in conformity
with “decency and health.” The scheme effectively prevented many southern
blacks—men or women—from receiving benefits. For those not thus excluded,
eligibility rules and low benefits could still be used to keep workers in or
out of the work force, depending on the need for labor.

The result was a system that
privileged white male workers, stigmatized women and African Americans, and
helped maintain the South as a low wage region. It also reinforced a
distinction between benefits that were earned and therefore not welfare (those
that went to white men), and benefits that were not earned, and so were
undeserved—the assistance given to women and African Americans.

The stigma of welfare
deepened as ADC, and later AFDC, became disproportionately black as white
widows were siphoned off to get survivors benefits under social security, and
the welfare rights movement gradually decreased discriminatory barriers to
benefits. What made AFDC most vulnerable, however, was the changing economy.
By the 1950s, the shift had begun from manufacturing to service sector
employment. The rate of profit began to fall, and global competition
increased, reaching full swing with the wave of plant closings of the 1980s.
Capital saw its need as increasing the supply of low wage
workers—particularly women—and decreasing wages. Lowering welfare benefits
accomplished both. So did demonizing poor black women as “welfare queens.”
The fact that benefits increased due to welfare rights activism at the same
time that wages began their now familiar 20 year slide further undermined
worker solidarity and sharpened the attack.

Corporations’ success in
shifting their tax burden to individuals—corporate taxes dropped from 25
percent to 12.5 percent of government revenues between 1959 and 1995—poured
more fuel on the fire. By 1967, AFDC, which began as a program to keep women
out of the labor force, was changed to include its first work requirements. By
1996, AFDC was repealed and replaced by Temporary Assistance to Needy Family,
which requires increasing percentages of welfare recipients to work full time,
and places time limits on lifetime support regardless of need.

Since the beginning of 1996,
welfare rolls have dropped precipitously, yet there is little information on
what has happened to those who left. What information is available is
troubling. In New York, two- thirds of those dropped haven’t found jobs. In
Wisconsin, a state with one of the lowest unemployment rates in the country,
out of a sample of 7,500 who left AFDC only 16 percent found jobs above the
poverty level; there are 2.5 applicants for every entry level job in the
state, and only 4 percent of low skill jobs pay a livable wage. Meanwhile, the
Economic Policy Institute has projected that if all recipients leaving the
rolls found jobs, wages in the bottom third of the labor market would be
depressed 17 percent. The guiding principle may be “work first,” but for
most recipients, work alone will not end poverty.




Global Attack

short, welfare reform as we know it is a lie. Yet the system it replaced was
divisive, ineffective, and controlled the low wage labor market with scraps.
It also failed to address the needs of the nearly one-quarter of all workers
who work at or below poverty wages—often thinking of themselves as middle
class—but still do not qualify for assistance. If the left is to have any
success reestablishing a floor of support and rebuilding solidarity it needs
to fashion a system based not on the needs of business for low wage labor, but
on the needs of these workers for jobs, security, and basic dignity. It also
needs to address the condition of the growing numbers of contingent
workers—whether high paid consultants or as “temps”—who work under
fear of job loss and without basic guarantees of health insurance, leave, or

This widespread insecurity is
painted as the inevitable cost for remaining competitive in the global
economy. To construct its agenda and advance it politically, the left must
therefore first understand and deal with the global nature of the attack
against welfare. Whether part of structural adjustment programs imposed on the
third world, or right wing agendas in the U.S. and Europe, the attack remains
remarkable the same: cutting back on public expenditures—particularly
welfare-spending—to eliminate or sharply reduce government deficits; keeping
interest rates high to discourage inflation; deregulating capital markets; and
making labor markets more “flexible,” i.e., increasing the proportion of
part-time temporary jobs while reducing or eliminating benefits and

The justification for these
steps is generally the need to increase economic growth by increasing market
efficiency. In reality, the object of such policies is the transfer of wealth
and income from wages and transfer payments to profits, and the maintenance of
a favorable environment for finance capital. Growth, if it is achieved, is
accompanied by rising unemployment, degradation of the environment, declining
wages, and increased insecurity. Trade is based increasingly on lowering labor
and social standards. It is a prescription for a global race to the bottom,
one that makes the devotion of resources to social needs increasingly

The attack is global on
another level—the level of values. The ideal of equality—always a
foundation of democracy—is transformed from equality of treatment and
condition to equality of opportunity. The moral value of risk and hard
work—and the necessity of winners and losers—crowds out social justice and
solidarity. Falling incomes and unemployment are due to lack of hard work
rather than to the exigencies of finance capital. Competition, rather than
labor, is the basis of wealth. Competition—more specifically, global
competition and the increasing use of low wage labor—is also the enforcer.
If we don’t buckle down and share the pain, we will loose our jobs. We will
loose our wealth. We will loose our national greatness.

The picture is incomplete and
contradictory, but it has the force of explanation. We vastly underestimate
the optimism embedded in this mythology and how appealing it is to many
people—including not least many low wage and blue collar workers. The
message that “Everything will be all right if we only work hard and return
to the basics we know to be true and right,” can be enormously
comforting—even to some who may be working longer hours, receiving less pay,
and seeing family life fall hostage to the demands of economic survival.





easy enough to cite data to show everything is not all right and won’t be
all right. Between 1979 and 1994 family income for the bottom two-fifths of
U.S. families fell by 12 percent, and the next fifth barely held even. Almost
one-third of all workers earn wages that would be below minimum wage if the
minimum wage had kept its 1973 value. Meanwhile, unemployment rose from almost
5 percent between 1950 and 1975 to nearly 7 percent between 1975 and 1995.

Yet in light of the
neoliberal rhetoric that conceptualizes economic success as individual virtue,
more is needed than facts about growing income disparities and how eliminating
welfare lowers wages. The real axe over everyone’s head is the global
economy, and the only agenda for how to deal with it comes from the right
wing. The left needs both to unmask the destructiveness of the neoliberal
agenda as an answer to the global economy, and to set forth an alternative
vision that is rooted in sound economics, basic human values, and workers’

Constructing this agenda
requires clarity. Neoliberalism is not the answer to globalization. It is also
not the cause. The problem of globalization lies in the dynamics of
capitalism. Left to its own devices, capitalism is not capable of maintaining
full employment, as Keynes has argued and as the neoclassical theory of the
“natural rate of unemployment” implies. Nor does capitalist growth
automatically translate into development. Capitalism has to move ahead like a
shark or find itself dead in the water. The result is a constant tendency
toward overcapacity and a fight to maintain profits at the expense of citizens
well being.

Since the late 1960s when the
rate of profit began seriously dropping capital has increasingly relied first
on speculation in worldwide financial markets, and second on intensifying wage
competition through globalized production processes. Governments have
responded to the already huge supply of circulating capital created through
these activities by deregulating capital flows even more. Consequently global
finance capital can now set economic policy virtually worldwide by
manipulating exchange rates through currency transactions. Countries are
forced to pursue low inflation by setting high interest rates to prevent runs
on their currencies—but at the expense of lower growth and higher
unemployment. Trade is increasingly skewed by competition based on wages and
exchange rates.

Under these circumstances,
there is an increasing disjuncture between profits and wages. There is also
increasing instability and the threat of worldwide depression, as we are now
seeing with the so-called Asia crisis. We have moved from an era of national
economies and national governments that worked to regulate the worst excesses
of capitalism, into an era of a worldwide economy without a worldwide system
of regulation.

The role of the left in these
circumstances is not simply to wait for cataclysm and hope that some new
system emerges. Cataclysm may not happen, and if it does, what emerges may not
be democratic. The role of the left is to understand and critique the dynamics
of globalization, which is to say capitalism, and explain why capitalist
competition can provide neither full employment nor global stability. It is to
help build a base of popular support for an economic agenda that places the
need for human development and security before profit. And it is to build
understanding of the need to place limits on capital’s schizophrenic race to
the bottom in pursuit of growth.

In the more limited context
of welfare reform, defending welfare would mean, at the very least, defending
Social Security from privatization, and addressing the most pressing needs
faced by those struggling to enter or stay in the labor market. This would
mean policies such as reforming unemployment insurance to prevent low wage and
part time workers from being excluded by earnings requirement; increasing the
minimum wage and liberalizing the earned income tax credit; guaranteeing
medical care and child care; providing transportation and housing assistance;
enhancing rather than limiting educational and training opportunities;
guaranteeing welfare recipients the basic rights of workers to organize; and
raising benefits and extending or eliminating time limits.

Redefining welfare would mean
rejecting the prescription that it is workers (high wage or low wage) who must
pay the price when corporate profits dip; fighting for a radical
redistribution of wealth and income; and insisting that corporations feel the
pain of adjustment as well as workers. It would mean building programs to
ensure that no worker—with or without a job—would have to go without
health care or housing or food for their family. It would mean insisting on a
real full employment policy, but rejecting the logic that human beings exist
in order to work and that work is an end in itself—so that any job is better
than no job—and embracing the principle that not only work, but the
organization of the economy itself, is a means to the end of human welfare.
And it would mean taking seriously the right to reproductive freedom—whether
by poor women or rich women, recognizing reproduction as a form of work, and
supporting that work socially.

Remaking welfare would mean
putting the goals of full employment and a human economy in their true global
context. Welfare reform in the advanced industrial countries is the
counter-part to structural adjustment in the third world, and both are a means
to increase profit at the expense of human well-being. Limited reforms may be
possible on a national level, particularly in the United States that is—at
least for the time being—still comparatively insulated from the global
economy by the use of the dollar as the world’s currency. But as the Euro
evolves and the results of the worldwide economic crisis increasingly hit
home, even the strength of the dollar is no longer certain. In any case, no
progressive reform is stable without building democratically controlled
international structures capable of stabilizing, and constraining the
destructiveness of global capital.

Just as a healthy national
economy requires that workers have a substantial share of income and wealth, a
healthy global economy requires worldwide economic development. Intensifying
competition between so-called first and third world workers only proves the
point. Increasing workers wages and social supports in the first world is
directly linked to development in third world. Real economic development for
both means activists becoming economically literate and understanding how
institutions like the International Monetary Fund (not to mention the World
Trade Organization, the World Bank, and the proposed Multilateral Agreement on
Investment) threaten first as well as third world workers when they help to
impose structural adjustment programs. It means gradually building new
institutions that can redistribute global income; restructure trade so that it
takes place on equal footings rather than on the basis of wage differentials;
place limits on capital flows and speculation; and establish social charters
so that human need and development become paramount in economic activity.




Capacity on the Left

an agenda that transforms the fight over welfare reform into a fight over the
principles on which to base the global economy can hope to meet the right wing
on the scale on which it is attacking. But setting out these ideas skips the
main job of working to overcome the deep divisions between those who need to
become allies—divisions between white and minority workers, men and women,
employed and unemployed, organized and unorganized, U.S. workers and
immigrants, U.S. and foreign workers.

The fissure between organized
and unorganized workers, especially between the so-called middle class and
working poor, has for the past 40 years been one of the most important divides
in U.S. political life. It also mirrors racial and gender divisions in
society. During the 1930s, the labor movement overcame an orientation towards
skilled trades workers to organize lowly industrial workers, yet unions
remained overwhelmingly white and male. Despite supporting every piece of
major social legislation in the past 60 years, unions continued their primary
focus on private collective bargaining as the basis for members’ well being.
The result was a kind of private welfare state, and uncritical support for
U.S. capitalism in exchange for what were for many years the fruits of
globalization for U.S. workers: expanded profits for U.S. corporations during
the so-called golden era, and favorable terms of trade in which the U.S.
exported manufactured goods while the third word exported cheap commodities.

Since the 1970s, increased
competition and loss of many higher paying industrial jobs to other countries
has begun to wake unions and their members up to the need for increased
international solidarity. In its present incarnation—forcing workers into
the low wage labor market, and often into previously unionized public sector
jobs—welfare reform has also stimulated awareness of the need to organize
welfare recipients and guarantee their rights as workers. In combination,
these two developments make an active alliance between labor and the working
poor imaginable for the first time in decades. What unions bring to the
equation is an institutional structure and resources with which to address
many of the international issues that can only be taken on through direct
communication with workers and activists in other countries. They also bring
resources for organizing welfare recipients domestically, and pushing
political demands for adequate supports. The barriers to successful organizing
are, however, the same for unions as for many advocacy groups. The tendencies
to decide what the needs of low wage workers or welfare recipients are, rather
than spending time in dialogue. And the narrowness of pre-existing agendas. In
the case of unions, pre-existing agendas included a focus on avoiding
displacement of public sector members by workfare participants, rather than
job creation, adequate income support, community development needs, or the
right of poor women to reproductive freedom. In the case of both unions and
many community based organizations, there has also been a tendency to focus on
the immediate objectives—whether helping to improve job skills or providing
counseling or other support—while ceding the larger terrain. These issues
can only be addressed by dialogue with all relevant groups, especially
organizations of welfare recipients.

The last point is the most
difficult, because it involves the problem of developing a true political
opposition. What is needed is to shift the terms of the entire debate and the
struggle over the economy. Neither the Democratic nor the Republican Party is
remotely open enough to permit discussion of what needs to be explored.
Indeed, the Democrats gave us Bill Clinton, who paved the way to passage of
welfare reform as no Republican could have—by making it part of the price
for a Democratic Presidency. At the very least, this fact should be enough to
make us forever skeptical of relying on the process of legislative compromise
through the current political parties to remake the terms of the debate. It
should also put the question of a new party of the left squarely before us.

Sciacchitano is a former labor lawyer and organizer. She is currently a labor
educator at the George Meany Center for Labor Studies. Her articles have been
published in
In These Times, The National Reporter, The Capital Times of
Madison, and Newsday. This article was written for the Back To
Basics Conference.