No need for catastrophising, it’s bad enough: a response to Colin Hay on the future of the welfare state when ‘environmental catastrophism’ strikes

Waltraud Schelkle

Colin Hay’s recent article for Renewal raises an important question: what will happen to the welfare state as we know it if ‘we are entering… an era of anthropocenic environmental catastrophism’? He asks us, for good reason, to think beyond the apparent trade-off between social and ecological policies: if the environmental catastrophe is upon us, it may be futile to discuss whether the green transition is regressive in redistributive terms.  I also agree that political ecology may be a worthwhile new field of study.

However, thinking big about the welfare state in a deteriorating habitat does not need catastrophising and claiming that conventional social insurance will become obsolete. Political economists can still tell us how the system of social welfare provisions is able to help capitalist democracies to adapt, even if we can no longer prevent the irreversible damage done to the planet.

My counter-argument can be summarised in one sentence: the present system of social welfare provisions covers uninsurable risks already and does not have to wreck public finances by doing so. This sentence has three elements that make a lot of difference to Colin Hay’s analysis.

First, the welfare state is too narrow a conception to capture how social welfare provision works and especially how it can adapt. The godfather of the study of welfare capitalism, Gøsta Esping-Anderson, thought of it as a system of safety nets. This system consists of the family, the market and the state. Even the best healthcare schemes in Europe rely on a lot of care work done in the family. Private health insurance can top up public provisions and tailor health care to particular needs. The worst healthcare system in the rich Western world, that of the United States, relies on credit markets as an integral part: families often take recourse to credit if severe illness strikes and their (private) insurance contract does not cover it or they have no health insurance to begin with. Default on this debt can become unavoidable, so the system is patched up by a relatively forgiving household insolvency law (although it does not protect home-ownership).  

Even this dismal example of the US healthcare system contains an insight that guards against catastrophising. It illustrates that a system of social, not merely public, welfare provision is made up of elements that complement each other and evolve in parts or as a whole. For instance, the welfare system for the anthropocene may have to shift decisively towards preventative healthcare such as regulation of low emission zones, thereby containing the need for curative healthcare treating asthma sufferers.

Second, it has always been the strength of social insurance that it covers uncertainty, risks which are uninsurable in a contractual sense. Uninsurable means that the insurance-takers want cover for risks that the insurance-givers find impossible to specify as the exact contingencies for which a premium can be calculated. For social insurance to step into the breach, it is crucial that it is not a contract: social insurance is mandatory and highly standardised, defined by public authority. Apart from preventing some well-known market failures, this allows for the insurance of contingencies that were not envisaged at the outset and evolve with our political norms: think of how much worse groups associated with the spread of HIV would have been treated in a previous era. Nobody can opt out of public health insurance just because it treats people as patients rather than criminals.[1] Private insurers could deny coverage of HIV and undercut those insurance providers who cover HIV.

Means-tested social assistance can be understood as generalised insurance against uncertainty. It is a blanket safety net for people with all kinds of reasons why they cannot make ends meet without public support. It is not differentiated according to the contingency that afflicts the recipient, but need (politically defined, more or less generously). This is a helpful feature for the unfolding ecological catastrophe: it will hit hard the earnings capacity of people who rely on natural assets for their economic activities as different as farming, fishing, and tourism. Hence, they may have to fall back, at least temporarily, on the safety net of last resort. This is particularly relevant for the self-employed in these sectors. They are often not covered by schemes, such as redundancy payments or unemployment insurance, that kick in if wage earners lose their jobs.

Finally, fiscal collapse is not preordained, as Colin Hay argues in the footsteps of Wolfgang Streeck. Streeck predicted the imminent crisis of the debt state in 2014, only to discover ‘the rise of the European consolidation state’ two years later. This is not to deny that national welfare systems have to adjust drastically if the environmental perma-crisis hits hard and fast. For instance, social insurance may no longer be able to guarantee a certain living standard depending on one’s previous contributions, but become social assistance for all that provides only a minimum standard for every taxpayer and their dependents. Somewhat ironically, this would amount to progressive redistribution as all citizens would then receive what at present only the poorest receive. Moreover, this adjustment would enforce a significant reduction of the average households’ carbon footprint simply because we can afford much less energy consumption and polluting leisure activities. It will be painful but it can still mean constructive adjustment to both fiscal overload and ecological stress.

The transition can be made considerably less painful if we can scale up the welfare state to the transnational level. Just as the national welfare state provides re-insurance for individuals and families when they become overwhelmed by adversity, so can transnational support provide re-insurance to the national welfare state. The EU has arguably evolved into a system of re-insurance for member states, notably when the Covid-19 pandemic struck. The union procured vaccines collectively so that especially smaller or fiscally weakened member states got medication at a more affordable prices; it provided quickly cheap and long-term credit for national job retention schemes that otherwise would have come too late to prevent widespread bankruptcies of firms and mass unemployment; it introduced a massive recovery fund that channelled grants and cheap credit primarily to the poorest and hardest-hit member states, available until 2026.  This re-insurance does not replicate the welfare state with a federal budget that can provide disaster relief: what Colin Hay calls the ‘New Orleans effect’ in the US. But the US model of re-insurance for its member states is quite inflexible, provides little incentive for local adjustment, and is therefore prone to become itself a case for re-insurance.

A different approach may work better for Europe. It would leverage the diversity of the risk pool in which environmental disasters strike in varied ways and find different capacities to cope with them. Studying closely how existing welfare systems in Europe have adapted – and continuously expanded – over the last century is not as futile as Colin Hay suggests. In fact, it may be our best fighting chance to become poorer in a fairer and less painful way.

Waltraud Schelkle is Professor of European Public Policy at the European University Institute in Florence and Visiting Professor at the London School of Economics and Political Science

[1] Some reactionary critics of the welfare state would argue that this leads to endogenous risks, here: with the consequences of certain freely chosen behaviours, such as sexual activity, having to then to be borne by the welfare state. This is true, but can be intentional and progressive: the welfare state should enable such freedoms. To take another example, that divorce rates have gone up ever since there has been income support for female carers after separation allows more women to leave an unhappy marriage.