The ECONOMICS and POLITICS of WELFARE STATES

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The ECONOMICS and POLITICS of WELFARE STATES
In a welfare state, government programs take
primary responsibility for providing the economic
security of unemployed, ill, or retired citizens.

• Why were paternalistic poor relief schemes
  replaced by more universalistic welfare states in
  advanced capitalist nations?
• What explains cross-national variations of
  state-provided services in combination with
  voluntary, nonprofit, private-sector support?

• Should comprehensive, universal welfare be
  considered a human right? Or is the state
  obligated to provide only a minimal safety-net?
• Will inevitable fiscal crises necessitate severe
  retrenchments of the modern welfare states?

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European Social Insurance Programs
Modern welfare states, emerging gradually in late
19th century from poor relief schemes, provided
relatively universal coverage in the 20th.
To block socialisms appeal, German Chancellor
Otto von Bismarck created first state-run social
insurance program paying retirement benefits
(1889). System was funded with payroll taxes
paid by employees and employers, with
governmental contributions. It also included
disability benefits for injured workers. Why
did Bismarck set the age of retirement at 65
years? What problems does it create for today?
Nordic systems of 1930s based on mutualist
benefit provisions. UKs 1942 Beveridge Report
formed basis for a pension fund to which workers
made compulsory contributions during working
lives. Universal coverage included income
assistance to workers and their families in the
event of injury or illness eventually a
socialized medicine system.
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From New Deal to Great Society
Americas individualist culture delayed the
welfare state, but the Great Depression (1929-41)
made rudimentary welfare politically feasible.
FDRs New Deal tried to rationalize market
instabilities by strong federal government
intervention. It transferred money to unemployed
workers by Federal Emergency Relief
Administration (FERA), Civilian Conservation
Corps (CCC), and Civil Works Administration
(CWA). The Social Security Act of 1935 provided
Old Age and unemployment insurance, and welfare
benefits for such dependent groups as children
and the handicapped.
High-water mark for U.S. welfare state was 1960s,
when Lyndon Johnson used his landslide political
capital to push through Great Society
legislation Medicare/Medicaid, Job Corps, Head
Start, Upward Bound, Neighborhood Youth Corps,
VISTA, Model Cities. The U.S. poverty rate fell
from 22 to 13. Yet the Great Society was never
fully funded why?
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Conservative Backlash
By the 1980s, both Britain and America turned
politically conservative, electing leaders who
cut the welfare state in favor of market
solutions.
To promote a more entrepreneurial culture,
Margaret Thatcher reduced state controls over
business. She curtailed the trade unions power
and fostered a more flexible labour market to
create jobs. Her policies initially created very
high unemployment and wealth inequality, but by
the mid-1980s sustained economic growth led to
improved U.K. economic performance.
Applying supply-side and trickle-down
economic theories, Ronald Reagan used slowed
social welfare spending, tight-money policies,
across-the-board tax cuts to boost business
investments. Following a sharp recession, the
U.S. economy dramatically expanded. But, high
Cold War military spending contributed to huge
federal budget deficits, tripling the national
debt. Was Reagan deficit a strategy to starve
the welfare state?
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Rolling Back the Welfare State?
Bill Clinton tried to expand the welfare state,
putting Hillary in charge of an ultimately failed
effort to create a universal health care system.
Their proposal combined complex government and
market reform ideas that provoked opposition from
many interest groups. With Democrats in
disarray, Republicans effectively mobilized a
grassroots anti-government campaign to defeat the
plan. The 1994 right-wing Republican election
victories killed any future chance for
comprehensive health care reform.

• Further evidence of a welfare-state rollback?
• Employers are reducing their health care
  coverage. By 2003, 45 million Americans (15.6)
  were uninsured.
• Under the 1996 welfare reform bill, no person
  can receive welfare payments for more than five
  years.
• George Bush wants to strengthen Social
  Security by using some of its taxe for private
  investment accounts.

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Three Welfare Worlds
Gøsta Esping-Anderson proposed an influential
typology of welfare regimes based on a Marxist
concept of the decommodification of labor.
Decommodified welfare states treat economic
security as an entitlement, removing the
recipients from compulsions and risks of
capitalist markets. Rules about pensions,
sickness, and unemployment benefits govern access
and eligibility, income replacement levels, and
protections against societal risks (1990 The
Three Worlds of Welfare Capitalism).

1. Liberal (U.S.) labor commodification maximizes
   the market much private welfare, means-tested
   benefits, low wealth redistribution
2. Conservative (Germany) medium decommodification,
   state aids families unable to succeed in market,
   to preserve status hierarchy
3. Social Democratic (Sweden) fully decommodified,
   state uses tax transfers to preemptively
   socialize the costs of familyhood

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Conservatism number of major occupationally
distinct pension schemes expenditure on
government-employee pensions as a share of
GDP Liberalism means-tested poor relief private
pensions private health spending Socialism
share of population age 16-64 eligible for
sickness, unemployment, and pension benefits
ratio of basic level of benefits to legal maximum
benefits, average for sickness, unemployment, and
pension programs.
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Hicks Kenworthys factor analysis of E-As data
empirically identified only two welfare-state
dimensions Socialist-liberal and Traditional
conservatism.
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Consequences of Welfare States
Does welfare expenditure affect national economic
performance? Liberals claim that high welfare
spending sacrifices strong growth, social
democrats charge that it increases poverty and
inequality.
E-As typology is related to national income
distribution Social democracies have less
inequality than conservative and liberal welfare
states, as measured by the Gini ratio (where 0
perfect equality). What is the likely impact of
recent Bush Admins tax cut policies on U.S.
inequality?
Hicks Kenworthys multiple regressions found
socialist-liberalism scale decreased income
inequality poverty, raised womens share of
earnings. Traditional conservatism increased
unemployment rate of unemployment.
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Welfare Spending Slows Growth?
James Gwartney, Robert Lawson and Randall
Holcombe. 1998. The Size and Functions of
Government and Economic Growth. Joint Economic
Congressional Committee, Jim Saxton,
chairman.lthttp//www.house.gov/jec/growth/function
/function.htmgt
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Gendering Welfare State Theory
Dana Hill Leann Tigges examined competing
explanations of working-class institutional
effects on quality of womens pensions.
Radical feminism Male-dominated institutions
produce male-biased outcomes, disadvantaging
womens average pensions relative to male
pensions, to average womens wage, to average
societal wage Socialist feminism Working-class
institutions promote class-wide interests of
equal gender benefit
Which nations have higher parity between male
female pensions? Which hypotheses better fit
the data? How do womens access to economic and
political institutions affect their security and
retirement incomes?
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The Politics of Welfare
John Myles Jill Quadagno contrasted
industrialism, class, political explanations of
the historical variations among welfare state
forms.
Recent research shows that politics matters, by
documenting the importance of working-class
mobilization (in unions and parties) as a
condition for early (e.g., 1920s) welfare state
consolidation and for explaining national
differences in their subsequent expansion. and
distinctive role of social Catholicism and
Christian Democratic parties in generating high
levels of social spending
Since 1970s, how have welfare states
accommodated to austerity? What role are
political institutions playing in welfare
responses to globalization? What are the welfare
impacts from slower growth, aging populations,
new gender roles, changing family structures,
shifts in social class composition? Are advanced
capitalist nations engaging in a race to the
bottom, or are reports of the welfare states
demise greatly exaggerated? What is the evidence
for regime retrenchment or program
restructuring? How are the new politics of
welfare creating resilient welfare states?
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New Politics of Retrenchment
Walter Korpi disputed post-industrialist
explanations of retrenchment, where demographic
economic changes drive permanent austerity.
The European welfare-state regress reflects the
return of mass unemployment In the
power-resources approach, conflicts concerning
the determination of demand for labor and levels
of unemployment emerge as key issues. Government
budgetary pressures is to a major extent
correlated with the rise in unemployment levels.
Why is unemployment a key variable? Who has
interests in raising/lowering it? What
short-term benefit programs are being curtailed
in European Union? What role has party politics
played in welfare retrenchment? What will likely
be Europes future implicit social contract
between groups?