Operation "Welfare State" And Its Future

The welfare state is yet another of mankind's attempts to build Heaven on Earth. After its heyday in the second half of the 20th century, in the 1980s the welfare state plunged into a deep crisis. What kind of lessons can we learn from welfare state policy and practice? Does the welfare state have a future?

The Rise and Fall of the Welfare State

The welfare state as the realization of a socially-oriented model of economy, combining elements of both top-down organization and the market, flourished after World War II. While Western Europe experienced conditions of economic growth, mankind's eternal dream appeared to be coming true, as was seen in its living standards and quality of life, extensive social security, stable incomes, high pensions, etc.

But in the mid-1970s, the severe oil crisis brought Europe serious economic problems, and with them the end of the economic Golden Age. Excessive social guarantees, high unemployment and an ageing population required ever-growing social spending. As a result, in the 1990s Europe experienced a trend toward the conclusion of social efforts on the governmental level.

The 21st Century: Welfare Policy Challenges

Today, we face ever more problems associated with the changing contours of welfare policy, which require involvement at the transnational and global levels.

Photo: AP / Vadim Ghirda
Bucharest, Romania, 2010

Whereas in the mid-20th century the welfare state's scope included health, education, housing, social security and a certain involvement of social services in solving the problems of special needs groups, the current social policy scope is wider, covering demographics, social mobility, migration, public order, environment, family and many other issues.

Several decades ago, the state played an essential part in resolving, above all, social issues relating to the nation and its specific circumstances. Today, we face ever more problems associated with the changing contours of welfare policy, which require involvement at the transnational and global levels.

One such problem is state competitiveness. Analyzing the European welfare societies, top British social policy expert Peter Taylor-Gooby has come to the conclusion that policy development in many countries rests on the competitiveness imperative. He believes that “welfare policy should be directed at the creation of conditions for citizens to make the state competitive” [1].

"Welfare Mix" vs "Welfare State"

With the social obligations of the state curtailed, there is now considerably greater interest in institutions for citizens’ self-organization, which can act as the state’s partner in the elaboration and implementation of social programs. The creation of a more comprehensive welfare system is thought to imply transition from the welfare state to a "welfare mix" policy that engages civil organizations alongside the state, the market and the informal household economy. From this point of view, the third sector acts as a segment of public space within civil society.

In recent years, the USA has seen a rapid increase in calls for the welfare state to be replaced by a so-called "welfare society" through significant expansion of voluntary civil and communal institutions engaging in social efforts. Its advocates focus on the personal responsibility of citizens for their own lives, following the principle that "God helps those who help themselves".

Many Models with One Core Principle

Photo: bigpicture.ru
Pamplona, Spain, October, 2010

Most industrialized countries have implemented various models of the welfare state. According to the basic typology of Gosta Esping-Andersen, the key types (regimes) of the welfare state are liberal, conservative and social-democratic. The conservative regime is exemplified by Germany, with its enormous wealth and hierarchical social system. Sweden is the closest to an egalitarian social democratic regime. The U.S.A. and other English-speaking countries offer an example of the liberal approach.

Sweden provides the most vibrant welfare state model, with comprehensive social policy coverage as the goal of state economic activities, a, progressive tax system, the dominance of equality and solidarity as ideals, the preventative nature of social measures, high quality and accessibility of social services, and the prioritization of the state's role in financing social expenditure through overall tax earnings.

Welfare in the U.S.A. is a complex system of payments, allowances and subsidies within a historically built pattern of public and private welfare channels, with the two branches independent from each other. There is a division of labor of sorts, in that the government is more responsible for maintaining a minimum level of assistance, and its accessibility, whereas businesses in many cases offer larger and better social services (pensions, allowances etc.), which are normally associated with social development programs available with practically all companies.

France has a conservative welfare state model, different from the Swedish and English systems in that it is financed via social insurance. There are different insurance funds implementing separate social programs. These augment the obligatory social services through common social security schemes.

Along with globalization, territorial transformations and some other factors, the economic crisis of the 1980-1990s has caused changes in welfare policy, including a mitigation of differences between the models. States with predominant budgetary social spending are taking up social insurance and putting some state social services on a paid basis. At the same time, the social-insurance countries are tending to seek to attract more budgetary sources than before.

Photo: Reuters
London, UK, November, 2010

It seems pointless to discuss the comparative efficiency of the national models, since they rest on a universal underlying principle – that the viability of a welfare state depends on the economic prosperity and balanced development of the economic and social spheres.

However, there is no full unity of welfare state policies even within the same model. For example, they differ in England and Scotland. The latter maintains many free services despite the crisis environment, including education and healthcare, while the former is cutting higher education allocations for austerity and the reduction of the budgetary deficit. In 2012, the maximum education fee in British higher education institutions grew to £9,000 a year, with the number of applicants decreasing by 8.9 percent compared to 2011, i.e. 50,000 fewer applications.

Is the Welfare State to Blame?

The social state has revealed its downsides, in a sense having become its own enemy. Politicians have found a new scapegoat, as since the 1980s government social spending has been named a key source of budget deficit, and has become the main target of monetarist policy (which, to one degree or another, has been taken up by all industrialized countries). The welfare state has emerged more and more as the culprit behind all current social and economic troubles, including the EU debt crisis.

Yet the European debt crisis should not be regarded as a direct result of welfare state policy and the crisis of that model. The crisis of the welfare state is a consequence of significant economic processes in the final third of the 20th century. It has been criticized and discussed in terms of dismantling the welfare state and diminishing state interference in economics and the social sphere.

Welfare state policy is based on the theory of John Keynes, who considered the state's greatest responsibility to be ensuring the welfare of society.

Photo: Welfare state policy is based on
the theory of John Keynes, who considered
the state's greatest responsibility to be ensuring
the welfare of society

Due to the economic crisis of the late 20th century, this principle was extensively condemned, resulting in the reduction of both many social programs, and of the overall participation of the state in economic processes. Accordingly, the debt crisis comes not so much from welfare state policy as from the state’s reduced participation and control, including in the banking sector. Among the factors responsible for the European debt crisis experts usually name the globalization of the financial market, easy credit in 2002-2008, the global financial crisis of 2007-2012, the trade balance deficit of many countries, burst "bubbles" in real estate markets, low growth rates since 2008 through to the present, failed taxation and budgetary measures, the broad practice of emergency state assistance to banks and private bond holders, debt purchases and the transfer of private sector losses to the taxpayer. Welfare state expenditures are obviously not high on the list.

Paul Krugman, Nobel Prize Winner in Economic Sciences, believes that an overgrown welfare state is not the source of the problem. He opposes the widespread theory that "Europe is in trouble because it has done too much to help the poor and unlucky, that we're watching the death throes of the welfare state." Krugman insists that "this story is a perennial right-wing favorite… Look at the 15 European nations currently using the euro (leaving Malta and Cyprus aside), and rank them by the percentage of GDP they spent on social programs before the crisis. Do the troubled GIPSI nations (Greece, Ireland, Portugal, Spain, Italy) stand out for having unusually large welfare states? No, they don’t; only Italy was in the top five, and even so its welfare state was smaller than Germany’s. So excessively large welfare states didn’t cause the troubles".

The Welfare State: Transformation or Collapse?

In the 2010s, the welfare state seems more a metaphor than a goal of economic development. Notably, welfare state policy, and the development of social policy as a branch of state domestic policy in general, were shaped by the intensification of the workers' movement and the growing dangers of communist influence in the late 19th century. Hence a return to welfare state policy as it existed in the mid-20th century is hardly possible.

Well-known French social scientist Alain Touraine sees the key European problem in the fact that "most reasonable men realize the need for structural changes in the welfare state but are not ready to give up the comforts provided by the state. People feel that a major revision of the principles on which Europe has been based during the past decades is imminent, but cannot accept purely liberal methods for governing society even if these methods further success in the global market" [2].

Paul Krugman, End This
Depression Now!
Review by Sergei Afontsev
(in Russian)

What kind of lesson can we draw from the welfare state? Welfare policy has shown that the solution of social problems should not be left to individuals, churches or charities. Rejection of the welfare state's achievements is tantamount to rejection of elementary scientific and technological achievements, as was been proved by scholastic debates at the end of the 20th century , polls and other research.

Thanks to welfare state policy, mankind has acquired experience in solving social problems on the country and regional scales, as well as in overcoming economic and social crises, organizing of social welfare on the state level, and developing of social programs. Despite the crisis, the welfare state presents quite a stable entity. Financial difficulties notwithstanding, most industrialized nations are trying to save their social support systems. But no country seems able to preserve the welfare state in its entirety.

The question of global social policy and the possible existence of a global welfare community is due to arise any time now. However, if this is to be a realistic prospect, it must require the solution of such problems as the North-South relationship, and the gap between rich and poor countries. This issue has been relevant for a long time, with the Club of Rome attempting to address it as far back as the 1980s.

With this and many other global problems unsolved, it seems pointless to talk about building a utopia, as the welfare state (and, indeed, the welfare world) needs political and economic stability. Operation "Welfare State" was successful within a limited space and time, during a period of stable economic growth, with external economic support also available.

* * *

Rumors of the welfare state's death are greatly exaggerated. Despite financial predicaments, most industrialized states are trying to preserve the existing systems of social support. Social problems cannot be resolved solely by individuals, churches and charities. The state should retain the leading position in this field. The rejection of the achievements and expierience gained in the field of social welfare is equivalent to willing rejection of elementary scientific and technological achievements.

Discussion of the welfare state's global prospects also seems premature, since neither third world nor post-communist countries have reached an economic and social level sufficient to perform welfare state functions.

There seems to be only one confident conclusion we can draw – although welfare state policy has provided mankind with positive experience in the solution of economic and social problems in certain countries and regions, the original model has run out of steam. While the EU debt crisis cannot be seen as a direct effect of welfare policies, economic and political stability remains the key prerequisite both for the welfare state and the welfare world. Otherwise social paradise can only be a pipe dream.

1. Taylor-Gooby P. Polity, Policy Making and Welfare Futures // Taylor-Gooby P. (ed.) Welfare States under Pressure. L.: Sage, 2001. P. 187.

2. Touraine A. А. Absence of Democracy Means Absence of Security // Svobodnaya Mysl' magazine – XXI. 2005. № 11. P. 4.