state side

Welfare state

This article refers to the general concept of the Welfare state. For the Welfare state of the United Kingdom, please see Welfare State.
There are three main interpretations of the idea of a welfare state:

  • the provision of welfare services by the state.
  • an ideal model in which the state assumes primary responsibility for the welfare of its citizens. This responsibility in theory ought to be comprehensive, because all aspects of welfare are considered and universally applied to citizens as a "right". Welfare state can also mean the creation of a "safety net" of minimum standards of varying forms of welfare. Here is found some confusion between a "welfare state" and a "welfare society" (see below) in common debate about the definition of the term.
  • the provision of welfare in society. In many "welfare states", especially in continental Europe, welfare is not actually provided by the state, but by a combination of independent, voluntary, mutualist and government services. The functional provider of benefits and services may be a central or state government, a state-sponsored company or agency, a private corporation, a charity or another form of non-profit organisation. However, this phenomenon has been more appropriately termed a "welfare society," and the term "welfare system" has been used to describe the range of welfare state and welfare society mixes that are found.

Etymology

The English term "welfare state" is believed by Asa Briggs to have been coined by Archbishop William Temple during the Second World War, contrasting wartime Britain with the "warfare state" of Nazi Germany. Friedrich Hayek contends that the term derived from the older German word Wohlfahrtsstaat, which itself was used by nineteenth century historians to describe a variant of the ideal of Polizeistaat ("police state"). It was fully developed by the German academic Sozialpolitiker—"socialists of the chair"—from 1870 and first implemented through Bismarck's "state socialism". Bismarck's policies have also been seen as the creation of a welfare state.

In German, a roughly equivalent term (Sozialstaat, "social state") had been in use since 1870. There had been earlier attempts to use the same phrase in English, for example in Munroe Smith's text "Four German Jurists", but the term did not enter common use until William Temple popularized it. The Italian term "Social state" (Stato sociale) has the same origin.

The Swedish welfare state is called Folkhemmet and goes back to the 1936 compromise between the Union and big Corporate companies. It is a Mixed economy, built on strong unions and a strong system of Social security and universal health care.

In French, the synonymous term "providence state" (État-providence) was originally coined as a sarcastic pejorative remark used by opponents of welfare state policies during the Second Empire (1854-1870).

In Spanish and many other languages, an analogous term is used: estado del bienestar; translated literally: "state of well-being".

In Portuguese, a similar phrase exists: Estado de Bem-Estar-Social; which means "social-well-being state".

The development of welfare states

One of the earliest versions of a welfare state appeared in the Abbasid Caliphate. The concepts of welfare and pension were introduced in early Islamic law as forms of Zakat (charity), one of the Five Pillars of Islam, since the time of Caliph al-Mansur in the 8th century. The taxes (including Zakat and Jizya) collected in the treasury of an Islamic government was used to provide income for the needy, including the poor, elderly, orphans, widows, and the disabled. According to the Islamic jurist Al-Ghazali (Algazel, 1058-1111), the government was also expected to store up food supplies in every region in case a disaster or famine occurred.

Another early version of the welfare state appeared in China during the Song Dynasty in the 11th century. Prime Minister Wang Anshi believed that the state was responsible for providing its citizens the essentials for a decent living standard. Accordingly, under his direction the state initiated agricultural loans to relieve the farming peasants. He appointed boards to regulate wages and plan pensions for the aged and unemployed. These reforms were known as the "new laws," New Policies, or xin fa (新法).

Modern welfare states developed through a gradual process beginning in the late 19th century and continuing through the 20th. They differed from previous schemes of poverty relief due to their relatively universal coverage. The development of social insurance in Germany under Bismarck was particularly influential. Some schemes, like those in Scandinavia, were based largely in the development of autonomous, mutualist provision of benefits. Others were founded on state provision. The term was not, however, applied to all states offering social protection. The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare and capitalism.

Examples of early welfare states in the modern world are Germany, all of the Nordic Countries, the Netherlands, Australia, Uruguay and New Zealand in the 1930s. Germany is generally held to be the first social welfare state. Changed attitudes in reaction to the Great Depression were instrumental in the move to the welfare state in many countries, a harbinger of new times where "cradle-to-grave" services became a reality after the poverty of the Depression. During the Great Depression, it was seen as an alternative "middle way" between communism and capitalism. In the period following the Second World War, many countries in Europe moved from partial or selective provision of social services to relatively comprehensive coverage of the population.

The activities of present-day welfare states extend to the provision of both cash welfare benefits (such as old-age pensions or unemployment benefits) and in-kind welfare services (such as health or childcare services). Through these provisions, welfare states can affect the distribution of wellbeing and personal autonomy among their citizens, as well as influencing how their citizens consume and how they spend their time.

After the discovery and inflow of the oil revenue, Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates all became welfare states.

In the United Kingdom, the beginning of the modern welfare state was in 1911 when David Lloyd George suggested everyone in work should pay national insurance contribution for unemployment and health benefits from work.

In 1942, the 'Social Insurance and Allied Services' was created by Sir William Beveridge in order to aid those who were in need of help, or in poverty. Beveridge worked as a volunteer for the poor, and set up national insurance. He stated that 'All people of working age should pay a weekly national insurance contribution. In return, benefits would be paid to people who were sick, unemployed, retired or widowed.' The basic assumptions of the report were the National Health Service, which provided free health care to the UK. The Universal Child Benefit was a scheme to give benefits to parents, encouraging people to have children by enabling them to feed and support a family. This was particularly beneficial after the second world war when the population of the United Kingdom declined. Universal Child Benefit may have helped drive the Baby boom. The impact of the report was huge and 600,000 copies were made. He recommended to the government that they should find ways of tackling the five giants, being Want, Disease, Ignorance, Squalor and Idleness. He argued to cure these problems, the government should provide adequate income to people, adequate health care, adequate education, adequate housing and adequate employment. Before 1939, health care had to be paid for, this was done through a vast network of friendly societies, trade unions and other insurance companies which counted the vast majority of the UK working population as members. These friendly societies provided insurance for sickness, unemployment and invalidity, therefore providing people with an income when they were unable to work. But because of the 1942 Beveridge Report, in 5th July 1948, the National Insurance Act, National Assistance Act and National Health Service Act came into force, thus this is the day that the modern UK welfare state was founded.

Effects on poverty

Empirical evidence suggests that taxes and transfers considerably reduce poverty in all developed countries, whose welfare states commonly constitute at least a fifth of GDP.

Country Absolute poverty rate
(threshold set at 40% of U.S. median household income)
Relative poverty rate
Pre-transfer Post-transfer Pre-transfer Post-transfer
Sweden 23.7 5.8 14.8 4.8
Norway 9.2 1.7 12.4 4.0
Netherlands 22.1 7.3 18.5 11.5
Finland 11.9 3.7 12.4 3.1
Denmark 26.4 5.9 17.4 4.8
Germany 15.2 4.3 9.7 5.1
Switzerland 12.5 3.8 10.9 9.1
Canada 22.5 6.5 17.1 11.9
France 36.1 9.8 21.8 6.1
Belgium 26.8 6.0 19.5 4.1
Australia 23.3 11.9 16.2 9.2
United Kingdom 16.8 8.7 16.4 8.2
United States 21.0 11.7 17.2 15.1
Italy 30.7 14.3 19.7 9.1

Debating the welfare state

The concept of the welfare state remains controversial, and there is continuing debate over governments' responsibility for their citizens' welfare. Here, it is crucial to clarify what exactly one means by welfare state. A welfare state is not a state run economy. The welfare state refers to government provision of certain public services (such as health care, education or social security) to all citizens irrespective of their personal wealth. It also refers to government provision of money or other financial assistance - often temporary or conditional - to those legally unable to provide to themselves because of health problems, unemployment, mental diseases, or a major natural disaster or terrorist attack. Arguments in favor

  • humanitarian - the right to the basic necessities of life is a fundamental human right, and people should not be allowed to suffer unnecessarily through lack of provision.
  • altruism - helping others is a moral obligation in most cultures; charity and support for people who cannot help themselves are also widely thought to be moral choices.
  • utilitarian - the same amount of money will produce greater happiness in the hands of a less well-off person than if given to a well-off person; thus, redistributing wealth from the rich to the poor will increase the total happiness in society.
  • religious - major world religions emphasize the importance of social organization rather than personal development alone. Religious obligations include the duty of charity and the obligation for solidarity. Many religious people feel that a welfare state reflects such values and creates a just society.
  • economic - social programs perform a range of economic functions, including e.g. the regulation of demand and structuring the labour market.
  • pragmatic - the provision of 'free' healthcare and education produces a healthier, more skilled labour force than would otherwise be the case. This results in a greater benefit in terms of increased productivity than the cost in increased taxes.
  • social - social programs are used to promote objectives regarding education, family and work.
  • market failure – in certain cases, the private sector fails to meet social objectives or to deliver efficient production, due to such things as monopolies, oligopolies, or asymmetric information.
  • social justice - the money the state provides comes from the nation's labor and natural resources through universal taxation, the rich manages the wealth that is often inherited, and do not necessarily contribute more than the average worker, therefore it is a matter of justice to provide for the private individual who cannot legally provide to himself. Further, there will also be members of societies who through disability, health problems, or other causes out of the individual's control, are unable to provide for themselves.
  • economies of scale - some services can be more efficiently paid for when bought "in bulk" by the government for the public, rather than purchased by individual consumers. The highway system, water distribution, the fire department, universal health , and national defense might be some examples.

Arguments against

  • moral (compulsion) libertarians believe that the "nanny state" infringes upon individual freedom, forcing the individual to subsidize the consumption of others. They argue that social spending reduces the right of individuals to transfer some of their wealth to others, and is tantamount to a seizure of private property.
  • religious/paternalism – some Protestant Christians believe that only voluntary giving (through private charities) is virtuous. They hold personal responsibility to be a virtue, and they believe that a welfare state diminishes the capacity of individuals to develop this virtue.
  • anti-regulatory - the welfare state is accused of imposing greater burdens on private businesses, of potentially slowing growth and creating unemployment.
  • efficiency - the free market would provide more efficient and effective production and service delivery than state-run welfare programs. Social spending is costly and must be funded out of higher levels of taxation.
  • motivation and incentives - the welfare state may have undesirable effects on behavior, fostering dependency, destroying incentives and sapping motivation to work.
  • charitable - by the state assuming a larger burden for the financial care of people, individuals may feel it is no longer necessary for them to donate to charities or give to philanthropies.
  • managerial statecraft - this paleoconservative view posits that the welfare state is part of an ongoing regime that remains in power, regardless of what political party holds a majority. It acts in the name of abstract goals, such as equality or positive rights, and uses its claim of moral superiority, power of taxation and wealth redistribution to keep itself in power.
  • crime - state provided welfare normally incurs high tax economy, this in turn leads to people feeling protective over their earnings and therefore looking for ways to cheat the tax system to pay less tax. It is also argued that people dependent on welfare may have lower self esteem than working people, which can lead to them feeling rejected, hopeless and/or abandoned by the populace at large, which can in turn lead to crime.
  • welfare fraud - it is argued that state provided welfare benefits often finish by being fraudulently claimed by those who are not in real need. To counter this effect, more and more requirements are introduced for welfare claimants to prove their eligibility to obtain benefits. Thus results in creating complex and costly bureaucratic procedures whose effect is often adverse to the desired - the poor and needy persons who are not able to do the required paperwork are left behind while others get specialized in overcoming the bureaucratic hurdles (often by fraud or bribery) and claiming the benefits.

Discussion of some of the criticisms

Some criticism of welfare states concern the idea that a welfare state makes citizens dependent and less inclined to work. Certain studies indicate there is no association between economic performance and welfare expenditure in developed countries (see A. B. Atkinson, Incomes and the Welfare State, Cambridge University Press, 1995) and that there is no evidence for the contention that welfare states impede progressive social development. R. E. Goodin et al, in The Real Worlds of Welfare Capitalism (Cambridge University Press, 1999), show that on some economic and social indicators the United States performs worse than the Netherlands, which has a high commitment to welfare provision. However, the United States leads most welfare states on certain economic indicators, such as GDP per capita (although in 2006 it had a lower GDP per capita than Norway). The United States also has a low unemployment rate (although not as low as Denmark, Norway) and a high GDP growth rate, at least in comparison to other developed countries (its growth rate, however, is lower than Finland's and Sweden's, two nations with relatively small populations but comparatively high commitments to welfare provision; the United States' growth rate is also lower than the world's overall). The United States also leads most welfare states in the ownership of consumer goods. For example, it has more TV's per capita , more personal computers per capita , and more radios per capita than what people would call welfare states.

Another criticism comes from Classical Liberalism. Namely, that Welfare is theft of Property or Labor. This criticism is based upon classical liberalist ideals, wherein a citizen owns his body, and owns the product of his body's labor (i.e. goods, services, or money). Note that in this definition property that is inherited is not included. So to remove money through legal mechanisms set by a democratically elected assembly from the working or non-working citizen and give it to a non-working or handicapped citizen or to a child is argued to be theft of the worker's property and/or labor and a violation of his property rights.

A third criticism is that the welfare state allegedly provides its dependents with a similar level of income to the minimum wage. Critics argue that fraud and economic inactivity are apparently quite common now in the United Kingdom and France. Some conservatives in the UK claim that the welfare state has produced a generation of dependents who rely solely upon the state for income and support instead of working even though assistance is only given to those unable to work so that actually being able to work and instead relying on the state for income is a criminal offense. The welfare state in the UK was created to provide a carefully selected number of people with a subsistence level of benefits in order to alleviate poverty, but that as a matter of opinion has been overly expanded to provide a large number of people indiscriminately with more money than the country can afford. Some feel that this argument is demonstrably false: the benefits system in the UK hands out considerably less money than the national minimum wage, although people on welfare often find that they qualify for a variety of benefits, including benefits in-kind, such as subsidized accommodation which usually make the overall benefits much higher than figures show.

A fourth criticism of the welfare state is that it results in high taxes. This is usually true, as evidenced by places like Denmark (tax level at 50.4% of GDP in 2002) and Sweden (tax level at 50.2% of GDP in 2002). Such high taxes do not necessarily mean less income for the nation overall, since the state taxes go directly to the people it is taxed from. The real issue is that they result in a major redistribution of that income from the citizens on the productive side of the equation to the citizens on the welfare state side. Thus, productive citizens subsidize the lifestyle of the nonproductive or the underproductive.

A fifth criticism of the welfare state is the belief that welfare services provided by the state are more expensive and less efficient than the same services would be if provided by private businesses. In 2000, Professors Louis Kaplow and Steven Shafell published two papers, arguing that any social policy based on such concepts as justice or fairness would result in an economy which is Pareto inefficient. Anything which is supplied free at the point of consumption would be subject to artificially high demand, whereas resources would be more properly allocated if provision reflected the cost. However it is not clear how this would apply to services such as health and education, where individuals are unlikely to demand more services that are actually required, where the benefits of providing the service flow through to all levels of society (by reducing disease, and increasing the wealth-creation abilities of the population).

The most extreme criticisms of states and governments, are from anarchists, who believe that all states and governments are undesirable and/or unnecessary. Most anarchists believe that while social welfare gives a certain level of independecy from the market and individual capitalists, it creates dependence to the state, which is the institution that, according to this view, supports and protects capitalism in the first place. Nonetheless, according to Noam Chomsky, "social democrats and anarchists always agreed, fairly generally, on so-called 'welfare state measures'" and "Anarchists propose other measures to deal with these problems, without recourse to state authority. Anarchists believe in stopping welfare programs only if it means abolishing government and capitalism as well.

The welfare state and social expenditure

Welfare provision in the contemporary world tends to be more advanced in countries with stronger developed economies. Poor countries tend to have limited resources for social services. There is very little correlation between economic performance and welfare expenditure.

There are individual exceptions on both sides, but as the table below suggests, the higher levels of social expenditure in the European Union are not associated with lower growth, lower productivity or higher unemployment, nor with higher growth, higher productivity or lower unemployment. Likewise, the pursuit of free market policies leads neither to guaranteed prosperity or social collapse. The table shows that countries with more limited expenditure, like Australia, Canada and Japan do no better or worse economically than countries with high social expenditure, like Belgium, Germany and Denmark. The table does not show the effect of expenditure on income inequalities, and does not encompass some other forms of welfare provision (such as occupational welfare). Overall, there is a slight positive correlation between increased spending on social services and higher GDP per capita as well as higher HDI rating.

The table below shows, first, welfare expenditure as a percentage of GDP for some (selected) OECD member states, with and without public education, and second, GDP per capita (PPP US$) in 2001:

Nation Welfare expenditure
(% of GDP)
omitting education
Welfare expenditure
(% of GDP)
including education
GDP per capita (PPP US$)
Denmark 29.2 37.9 $29,000
Sweden 28.9 38.2 $24,180
France 28.5 34.9 $23,990
Germany 27.4 33.2 $25,350
Belgium 27.2 32.7 $25,520
Switzerland 26.4 31.6 $28,100
Austria 26.0 32.4 $26,730
Finland 24.8 32.3 $24,430
Netherlands 24.3 27.3 $27,190
Italy 24.4 28.6 $24,670
Greece 24.3 28.4 $17,440
Norway 23.9 33.2 $29,620
Poland 23.0 N/A $9,450
United Kingdom 21.8 25.9 $24,160
Portugal 21.1 25.5 $18,150
Luxembourg 20.8 N/A $53,780
Czech Republic 20.1 N/A $14,720
Hungary 20.1 N/A $12,340
Iceland 19.8 23.2 $29,990
Spain 19.6 25.3 $20,150
New Zealand 18.5 25.8 $19,160
Australia 18.0 22.5 $25,370
Slovak Republic 17.9 N/A $11,960
Canada 17.8 23.1 $27,130
Japan 16.9 18.6 $25,130
United States 14.8 19.4 $34,320
Ireland 13.8 18.5 $32,410
Mexico 11.8 N/A $8,430
South Korea 6.1 11.0 $15,090

Figures from the OECD and the UNDP.

Note: no data for China, India, Indonesia, Brazil, Russia, and Pakistan, which are not members of the OECD.

See also

References

External links

Data and statistics

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