1 - The comeback of the welfare state

Summary

Covid-19 and the false necessity of the equity and efficiency trade-off

Barely having had the time to digest the economic and social aftershocks of the Great Recession, Europe has been confronted with an even more disruptive exogenous shock, the Covid-19 pandemic, threatening human life and entailing job losses for many as a consequence of the “freezing of the economy” through lockdown measures. The economy was massively hit: in the European Union, GDP shrank by 6 per cent in 2020 and the government debt-to-GDP ratio increased from 77 per cent at the end of 2019 to 90 per cent at the end of 2020. While unemployment peaked at about 15 per cent in the United States in April 2020, government intervention in the EU helped contain this rate to below 10 per cent over the same period. This headline indicator yet hides considerable differences across countries and segments of the population affected.

Before the Covid-19 virus struck, the aftermath of the Great Recession was already raising existential questions for future welfare provision, as it had deepened already existing social vulnerabilities, unemployment, inequality and poverty, within and between EU member states. Nonetheless, despite several invitations made by well-renowned scholars to rethink our economies and the way in which our societal progress is conceived – reiterated in the wake of an increased awareness of the challenges posed by climate change – it is fair to say that the global financial crisis was not sufficiently utilized as a window of opportunity for progressive welfare reforms.

Now, the social aftershocks of Covid-19 crisis management already point to undermined employment opportunities for millennials as well as an identification of the disproportionate burden of household and care chores on women. And, although the high-skilled were able to work from home to reduce Covid-19 virus transmission risks, medium-skilled production and construction workers were temporarily put on furlough schemes, without knowing for how long. At the same time, low-paid workers in “essential services”, such as health care, retail, delivery, public transport and waste disposal, were doomed to face high contagion risks. All this has important consequences for the overall perception of the increasing uncertainty within which citizens and institutions are called upon to live.