7. Welfare State

Citizenship Rise and Development of the Welfare State Welfare State Theories Typology of the Welfare State Transformation of the Welfare State

Social Citizenship T. H. Marshall’s famous essay ‘Citizenship and social class’ first

appeared in 1950. He analyzed the development of citizenship as a development of

civil, then political, then social rights in British society. These were broadly assigned to the eighteenth, nineteenth and twentieth century respectively.

We may define social citizenship as the combination of rights and obligations that define the identity of members of a political community, thereby regulating access to the benefits and privileges of membership.

Thus social citizenship involves equal status for a distribution of rewards, the formation of identities and a set of virtues relating to obligation and responsibility.

Citizenship and the Welfare State T. H. Marshall developed the idea of the ‘hyphenated society’

which refers to the institutional mixture of democracy, welfare state and capitalist economy (Marshall 1981, p. 123).

He recognized that there were inherent tensions between citizenship, welfare and capitalism, since in (social) citizenship is the implicit principle of a redistribution of resources to offset the negative consequences of an unregulated market.

The Welfare State System The welfare state is a concept of government in which the state

plays a main role in the protection and promotion of the social welfare for its citizens.

It involves a transfer of cash (benefits) from the government directly to individuals as well as to the services (healthcare, education) provided.

It is funded through redistributionist taxation. Such taxation usually includes a progressive tax system. This redistribution through taxation helps to reduce the income inequality between the rich and poor.

The Rise of the Welfare States The German welfare state was set up in the 1880s by Chancellor

Bismarck, who had laws banning the German Social Democratic Party and other meetings by trade unionists and socialists.

In Britain, at the turn of the twentieth century, the Liberal Party led by Lloyd George, shifted away from free market economics and began to introduce social legislation to assure equal opportunity for all citizens (and to counteract the appeal of the Labor Party.

The French welfare state originated in the 1930s during a period of socialist political ascendency and the reforms of the Popular Front.

In the United States, it was not until 1935 that social insurance policies and a limited welfare state were introduced under Franklin D. Roosevelt's New Deal.

The Beveridge Report The ‘Beveridge Report’ (the Report of the Inter-Departmental

Committee on Social Insurance and Allied Services) was an historical document in the founding of the welfare state in the United Kingdom, published in1942.

The "Five Giant Evils" in society identified by the report were: Squalor, Ignorance, Want, Idleness, Disease.

Social insurance is only one part of a "comprehensive policy of social progress". Beveridge was opposed to "means-tested" benefits. His original proposal was for a flat rate contribution rate for everyone and a flat rate benefit for everyone.

The Beveridge report formed the basis for Welfare State, which include the expansion of National Insurance and the creation of the National Health Service on the principle of universality.

Welfare State Theories The welfare state emerges as part of the logic of industrial

society (Industrialization Theory). The welfare state develops in response to the needs of capitalist

economy (Marxism and Neo-Marxism). The welfare state is shaped by struggles over politics and social

classes (Power Resource Theory). The welfare state is determined by the structure and interests of

the state or polity (State-centered approach or institutionalism).

Industrial Society The earliest theories tended to adopt a structural or functionalist

approach to the development of welfare states. In other words, they saw the welfare state as emerging to meet the needs of society at a certain stage of industrialization, modernization or advanced capitalism (Wilensky, 1975).

The main emphasis in this highly functionalist approach was that welfare states emerged at a certain stage of industrialization in response to the different needs of industrial societies as compared to ‘traditional’ pre-industrial societies (Wilensky, 1975).

Marxism The Marxist approach, while also adopting a highly functionalist

understanding of the welfare state, emphasized instead that welfare spending was a contradictory process which created tendencies towards economic, social and political crisis.

James O’Connor argued that because of the ‘dual and contradictory character of the capitalist state’ nearly all welfare state spending was involved in both the accumulation and legitimization functions and served both purposes simultaneously (O’Connor, Fiscal Crisis of the State, 1973: 7).

Power Resource Theory The Power Resource theorists criticized the emphasis in the

structural approach on the functional necessities in terms of the requirements of industrialism and the composition of the population.

It focused on the role of politics and social class in determining the structure of welfare states (Korpi, 1980).

In particular, studies emphasized the importance of the mobilization of workers (or trade unions) and of social democratic or left-wing parties.

State-Centered Approach This approach emphasizes the role of the state (or polity) in the

development of the welfare state (Skocpol, 1985). Sweden aimed to become a full-employment society with high

levels of public spending on social welfare, the United States also adopted a broadly Keynesian approach but Britain did not adopt a Keynesian approach nor extend public social benefits until after the Second World War (Weir and Skocpol, 1985: 108–9).

Skocpol (1992) has outlined a ‘polity centerd’ approach which sees the polity as ‘the primary locus of action, yet understands political activities, whether carried out by politicians or by social groups, as conditioned by the institutional configurations of governments and political party systems’

Three Types of the Welfare State In his 1990 book, The Three Worlds of Welfare Capitalism, the

Danish sociologist Gøsta Esping-Andersen classified the most developed welfare state systems into three categories; Social Democratic, Conservative, and Liberal.

His classifications are widely used as a starting point in analysis of modern welfare states and remain an influential tool for welfare state theories.

Social Democratic Welfare State The Social Democratic Welfare State model is based on the

principle of universalism, granting equal access to benefits and services based on citizenship.

It is said to provide a relatively high degree of individual autonomy, limiting reliance on family and market, social policies are perceived as "politics against the market“ (Esping-Andersen, 1984).

It is said to offer a high level of decommodification and a low degree of social stratification.

Sweden, Norway, Denmark and Finland

Conservative Corporatist Welfare State The Conservative Corporatist Welfare State model is based on

the principle of subsidiarity (decentralization) and the dominance of social insurance schemes, offering a medium level of decommodification and permitting a high degree of social stratification.

Germany, Austria, France, Belgium

Liberal Welfare State The Liberal Welfare State model is based on the principle of free

market and private provision. The state only interferes to alleviate poverty and provide for basic

needs, largely on a means-tested basis. The decommodification effect of state benefits is assumed to be

low and social stratification high. The US, Australia, Canada, Japan and Switzerland

Effects of Social Expenditure Empirical evidence suggests that taxes and transfers

considerably reduce absolute and relative poverty in most welfare states.

We have found little evidence that social expenditures contribute to losses in productivity. The American economist Peter Lindert attributes this to policy innovations such as the implementation of “pro-growth” tax policies in welfare states, particularly in Scandinavian countries (Lindert, Growing Public, 2004).

Transformation of the Welfare State Since the mid-1990s a new welfare state settlement may now be

emerging across the most OECD countries, at varying speeds and by different routes, and perhaps most widely accepted in the United Kingdom and other EU countries.

The transformation of the welfare state rejects the monetaristassumption, that welfare states are counter-productive. These attempt to maintain the traditional style of popular social services, with continued fiscal restraint.

The main feature is the emphasis on welfare as social investment rather than as simply a burden on the economy.

This focus on active labour market policies to improve flexibility and to enhance the employability, adaptability and availability of labour through job training spending.

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Varieties of Social Investment Strategy Iversen and Wren’s (1998) focus on the ‘‘trilemma’’ of equality,

employment, and budgetary restraint in service economies may help us to understand the various levels of the institutional arrangements of societies.

(1) Neoliberal societies emphasize on budget restraint, limiting the expansion of public services, as well as job growth. Job growth occurs in private services, where wages is variable and often relatively low.

(2) Christian democratic societies favor budget restraint as well as a good measure of earnings equality. Job growth is restricted.

(3) Social democratic societies pursue equality and still want to promote job growth; they increase public services, allowing the growth of public budget.

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Consequences of Social Investment Successful active labor market policies including youth

placement and vocational training have worked in the Netherlands, Denmark, Ireland, and Sweden, where expenditure on such measures has increased and is better targeted towards those in need.

Between 1995 and 2004 the sharpest falls in the structural unemployment rates in EU-15 were in the United Kingdom (3%) and in Greece, Spain, France, Italy and Finland (2%).

Investment in research and development and education enhancing employment mobility affected relatively higher rate of employment and lower rate of poverty.

Korea’s Welfare State The Korean welfare state has emerged since the military

government led by Park Chung Hee took power in 1961. The national goals of economic development produced the

Korean welfare state with social insurance schemes for industrial workers of large scale enterprises.

The social expenditure in Korea has risen slowly since 1960s but more sharply after 1998.

Under the financial crisis of 1997-1998, the Kim Dae Jung government established social safety net programs which required government expenditure more.

This is a paradox of welfare expansion in an era of economic crisis and globalization.

The Developmental Welfare State The economic success in Korea was due largely to the

developmental state, which played a strategic role in the rapid industrialization process (Amsden, 1989; Wade, 1990;Woo-Cumings, 1999).

The East Asian welfare states were incorporated in the national economic developmental strategy: a development ideology that subordinated welfare to economic efficiency, discouraged dependence on the state, promoted private source of welfare, and diverted the financial resources of social insurance to investment in infrastructure (Goodman and White, 1998: 17).

Whither Way for Welfare Reform? The welfare states in Korea before the financial crisis were closer

to the Bismarckian conservative model. But the recent welfare reform showed the different picture.

Since the 1990s, Korea has moved toward a universalistic public assistance system and integrated the medical insurance and universal pension coverage.

However, there was not necessarily a clear image of “universal welfare state” in Korea.

In light of developments in the country up until the 1980s, it appeared to have found itself in between the conservative model and the liberal models, according to the Esping-Andersons classification.

Welfare State Futures While European countries have moved closer to an East Asian

tradition in the productivist orientation of their approaches to social spending, there are pressures in East Asia to expand social spending in the directions previously developed in Europe.

Recent development in welfare institutions in Korea raises the issue of the impact of equality and social justice.

A considerable proportion of the workforce remains in unstable non-standard jobs (part-time and temporary) and a high proportion of unemployed people and pensioners are not covered by national pension systems. There is concern about rapidly growing economic inequalities in recent decades.

More changes are required to tackle the risk of growing inequality in future years.