The New Welfare State-Service Sector Complex

08 Apr 2015 1:20 PM | Deleted user
When President Eisenhower left office he admonished the nation about the rising military industrial complex. This was the regime in which vast amounts of public money spent on military projects would flow to major corporations producing the military’s weapons systems and generate billions in corporate profits. Of course, it also created millions of jobs in the private sector and did much to sustain the American middle class.

One might ask the obvious question: why if jobs are created and the middle class is being sustained, is this really a problem? The answer lies in understanding the concept of regime theory and untangling the thorny knot of iron triangles in the legislative process.

A regime is often defined as a set of relationships between private and public actors intended to achieve a public purpose or distribute public goods. With the military industrial complex the nation’s defense is, of course, the public purpose, but private interests also derive benefit. These relationships that constitute the regime also form iron triangles. An iron triangle is a relationship between an interest group, a government agency, and a congressional committee. Each essentially lobbies the other for mutual benefit.

The interest group lobbies the congressional committee for appropriations for say a weapons system. The interest group can be any number of defense contractors that stand to get a contract to build a piece of that system if Congress approves it. The same defense contractor then lobbies the Pentagon for the contract, even if it only gets to build a piece of it. The Pentagon, of course lobbies Congress for the appropriations so that it can build the system. It also measures its power in Washington by the size of its budget; so the more money appropriated to it, the more power it has.

Meanwhile, members of Congress want to please interest groups because their members vote and make contributions to their campaigns; so they lobby the Pentagon to award contracts to certain groups. Pentagon officials then want to please those in the defense contracting industry because in time they may want to trade in their government jobs for considerably more lucrative opportunities in corporate America.

The result of all this are impenetrable triangles that make it difficult for those who are not insiders to even gain voice, let alone introduce new ideas that could potentially be even more in the public interest. Iron triangles, in short, which also grow out of regimes, distort democracy. That ultimately is why we need to be wary of the military industrial complex.

This complex still exists, but in recent years we are seeing the emergence of another dangerous complex, albeit for different reasons. With the decline of middle class jobs in manufacturing, the rise of the low-wage service sector economy, stagnant wages, and increased government spending on food stamps and other subsidies to the working poor and lower middle class families, we are seeing the emergence of what can only be defined as the welfare state-service sector complex.

Obviously a nation as wealthy as ours has a moral responsibility to feed its citizens. But it doesn’t follow from that a specific type of policy, such as public subsidies financed through redistributive taxation, be pursued. On the contrary, government could just as easily meet its obligation to not allow citizens to starve by ensuring greater growth with a simpler tax code and higher wages through a wage policy in concert with the standard fiscal and monetary tools. In other words, policies aimed at encouraging high wage jobs that would make workers less dependent on the state for subsidies would also fulfill our moral obligation not to allow our citizens to starve.

It is one thing to talk about how government programs — the welfare state — expanded to meet people’s needs because of market failure — the idea that the market place failed to produce sufficient opportunity for people. But when we as a nation take pride in the welfare state as an essential ingredient in the growth of a low-wage economy we are signaling perhaps a new level of moral bankruptcy in domestic policy.

We as a nation have bought into the standard model in conjunction with greater globalism that whatever jobs are created, no matter how low the wages, are a good thing. It lowers unemployment. We have even convinced ourselves that it is better to create low wage jobs than no jobs at all. Hence the opposition to the minimum wage and labor unions because they are seen as the source of wage rigidity, and it is wage rigidity that leads to unemployment, especially in today’s global market place.

This thinking, however, misses the point. When workers can fall back on the welfare state to subsidize their low wages, we are only encouraging employers to pay low wages. We are in effect subsidizing corporate profits by enabling businesses to pay low wages. In the early part of the Twentieth Century when minimum wages were first being introduced, such employers were referred to as parasitic industries. Now public officials court them to create jobs. But the real problem is that this new welfare state-service sector complex undermines a core American value which has been central to our identity: personal autonomy and independence.

The America Republic is founded on the principle of human agency — that individuals are free to choose for themselves how they want to live their lives and then chart a course for doing so. This is what the words “life, liberty, and the pursuit of happiness” in the Declaration of Independence mean. If because we earn low wages we are dependent on the state, we no longer have that personal autonomy to live independent lives.

Nobel Laureate economist and philosopher Amartya sen has defined poverty not merely as the absence of income, but as the deprivation of capabilities. These capabilities include personal autonomy. Moreover, without personal autonomy, democracy can’t survive because that autonomy is one of democracy’s essential ingredients. Democracy requires that individuals be autonomous so that they can participate responsibly in the public square.

It would seem that we should be just as wary today of the welfare state-service sector complex as we should of the military-industrial complex because at the end of the day both are a threat to American values. The welfare state-service sector is nothing to be proud of.

I am available for comment: (914) 629-6351
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