Welfare state

A welfare state is a concept of government where the state plays the primary role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life. The general term may cover a variety of forms of economic and social organization.^[1]

There are two main interpretations of the idea of a welfare state:

• A 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 "social safety net" of minimum standards of varying forms of welfare.

There is some confusion between a "welfare state" and a "welfare society," and debate about how each term should be defined. In many countries, especially in the United States, some degree of welfare is not actually provided by the state, but directly to welfare recipients from a combination of independent volunteers, corporations (both non-profit charitable corporations as well as for-profit corporations), and government services. This phenomenon has been 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.^[2] A more extreme version of the modern welfare state is a system referred to as the Nordic model which is practiced in the Scandanavian countries. The welfare state involves a direct transfer of funds from the public sector to welfare recipients, but indirectly, the private sector is often contributing those funds via redistributionist taxation; the welfare state has been referred to as a type of "mixed economy".^[3]

Contents 1 Etymology 2 History of welfare states 2.1 Germany 2.2 Modern model 3 Three forms of the welfare state 4 Effects on poverty 5 Criticisms 6 The welfare state and social expenditure 7 See also 8 Notes 9 References 10 External links 10.1 Data and statistics

[edit] Etymology

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.^[4] It was fully developed by the German academic Sozialpolitiker—"Social Politics"—from 1870 and first implemented through Bismarck's conservative reforms. Bismarck's policies have also been seen as the creation of a welfare state.^[5]

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",^[6] 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 term "Wohlfahrtsstaat", which is a direct translation from English, is used to describe Sweden.

The Swedish welfare state is called Folkhemmet (literally; the folk home) 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 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 Providência; which means "Providing State", as in the State should provide citizens their demands in order to achieve people's well-being.

In Brazil it is referred to as Estado de Bem-Estar Social, translated as social well-being state.

[edit] History of welfare states

[edit] Germany

In Germany, Chancellor Otto von Bismarck created the modern welfare state by building on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s, and by winning the support of business. In the 1880s he introduced old age pensions, accident insurance, medical care and unemployment insurance that formed the basis of the modern European welfare state. His paternalistic programs won the support of German industry because its goals were to win the support of the working classes for the Empire and reduce the outflow of immigrants to America, where wages were higher but welfare did not exist.^[7][8] Bismarck further won the support of both industry and skilled workers by his high tariff policies, which protected profits and wages from American competition, although they alienated the liberal intellectuals who wanted free trade.^[9][10]

[edit] Modern model

Modern welfare programs 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 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, Uruguay and New Zealand and the United Kingdom in the 1930s.

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.^[11] 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.^[12][13]

After the discovery and inflow of the oil revenue, Saudi Arabia,^[14][15] Brunei, Kuwait, Qatar, Bahrain, Oman, and the United Arab Emirates all became welfare states for their respective citizens if not for guest labourers.

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. One theme of the report was the relative cheapness of universal benefits. Beveridge quoted miner's pension schemes as some of the most efficient available, and argued that a state scheme would be cheaper to run than individual friendly societies and private insurance schemes, as well as being cheaper than means-tested government-run schemes for the poor. The cheapness of what was to be called National Insurance was an argument alongside fairness, and justified a scheme in which the rich paid-in and the state paid-out to the rich, just as for the poor. In the original scheme, only some benefits called National Assistance were to be paid regardless of contribution. Universal benefits paid to rich and poor such as child benefit were 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.

Beveridge 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, most health care had to be paid for through non government organisations, 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 5 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. Institutions run by local councils to provide health services for the uninsured poor - part of the poor law tradition of workhouses - were merged into the new national system.

Welfare systems were developing intensively since the end of the World War II. At the end of century due to their restructuring part of their responsibilities started to be channeled through non-governmental organizations which became important providers of social services.^[16]

[edit] Three forms of the welfare state

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According to Esping-Andersen (1990),^[17] there are three ways of organizing a welfare state instead of only two.^[18]

Rothstein argues that the first model the state is primarily concerned with directing the resources to “the people most in need”. This requires a tight bureaucratic control over the people concerned. According to the second model the state distributes welfare with as little bureaucratic interference as possible, to all people who fulfill easily established criteria (e.g. having children, receiving medical treatment, etc.). This requires high taxing. This model was constructed by the Scandinavian ministers Karl Kristian Steincke and Gustav Möller in the 30s and is dominant in Scandinavia. The third model is similar to the one found in Britain (Beveridge model) and is based more on citizenship and a certain level of welfare ‘as a right’, which may then be modified according to needs.

Esping-Andersen argues, based on comparative histories of actual welfare states, that they fall into three types of policies: liberalist (heavily means tested, limited services), corporatist (pre-market conservative welfare state in origin, social insurance schemes), and social democratic (universalistic "Beveridge" style social rights based on citizenship instead of working life).

[edit] Effects on poverty

Empirical evidence suggests that taxes and transfers considerably reduce poverty in most countries, whose welfare states commonly constitute at least a fifth of GDP.^[19][20] The information shows that many "welfare states" would have higher poverty rates than a "non-welfare state" such as the U.S. before the transfer of wealth; an example would be Sweden that has a 23.7% poverty rate pre-transfer while the U.S. has a 21% poverty rate pre-transfer.

Country	Absolute poverty rate (1960–1991) (threshold set at 40% of U.S. median household income)[19]		Relative poverty rate (1970–1997)[20]
	Pre-welfare	Post-welfare	Pre-welfare	Post-welfare
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

[edit] Criticisms

The examples and perspective in this section may not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page. (October 2009)

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Critics of the welfare state argue that such a system will make citizens dependent on the system and less inclined to work. However, certain studies indicate there is no association between economic performance and welfare expenditure in developed countries,^[21] 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,^[22] compares the United States, which spends relatively little on social welfare (less than 17 percent of GDP), with other countries which spend considerably more. This study claims 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, until the Financial crisis of 2007–2010 which brought a significant fall in GDP, led most welfare states on certain economic indicators, such as GDP per capita, with the notable exception of Scandinavian countries, where Norway for example has significantly higher GDP per capita.^[23] Until the recession of 2008 brought about a significant rise in unemployment in the USA, the United States also had a low unemployment rate and a high GDP growth rate, at least in comparison to other developed countries (its growth rate, however, is lower than many welfare states which grow from a lower base and may benefit from recent economic liberalizations, further U.S. GDP per capita is sometimes 20-30% higher than that of welfare states).^[23] The United States also had led some welfare states in the ownership of consumer goods. For example, compared to some welfare states, it has more TVs per capita,^[24] more personal computers per capita,^[25] and more radios per capita.^[26]

Socialists criticize welfare state programs as concessions made by the capitalist class in order to divert the working class and middle class away from wanting to pursue a completely new socialist organization of the economy and society, for which it had been historically used in Germany by Bismarck along with his anti-socialist laws. Furthermore, socialists believe social programs are an attempt to "patch up" the ineffective capitalist market economy, therefore only treating the symptoms rather than the cause. By implementing public or cooperative ownership of the means of production, socialists believe there will be no need for a welfare state.^[27] Marxists further argue that welfare states and modern social democratic policies limit the incentive system of the market by providing things such as minimum wages, unemployment insurance, taxing profits and reducing the reserve army of labor, resulting in capitalists have little incentive to invest; in essence, social welfare policies cripple the capitalist system and its incentive system, the only solution being a socialist economic system.^[28]

Another criticism characterizes welfare as theft of property or forced labor (i.e. slavery). This criticism is based upon the classical liberal human right to obtain and own property, wherein every human being owns his body, and owns the product of his body's labor (i.e. goods, services, land, or money). It follows that the removal of money by any state or government mechanism from one person to another is argued to be theft of the former person's property or a requirement to perform forced labor for the benefit of others, and thus is a violation of his property rights or his liberty, even if the mechanism was legally established by a democratically elected assembly.^{[citation needed]} In April, 2010, the Associated Press reported that 47% of US households will pay no federal income taxes at all for 2009.^[29] In his book, The Servile State, English political writer Hilaire Belloc makes his case for the natural instability of pure capitalism and discusses how (as he believes) attempts to reform capitalism will lead almost inexorably to an economy where state regulation has removed the freedom of capitalism and thereby replaced capitalism with what he calls the Servile State. According to Belloc, the Servile State shares with ancient slavery the fact that positive law (as opposed to custom or economic necessity by themselves) dictates that certain people will work for others, who likewise must take care of them. Ergo, according to Belloc, the welfare state may leads to a kind of serfdom where one group works to support another group that does not work.

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^{[citation needed]}. Some conservatives in the UK claim that the welfare state has produced a generation of dependents who, instead of working, rely solely upon the state for income and support; even though assistance is only legally available to those unable to work. The welfare state in the UK was created to provide certain people with a basic level of benefits in order to alleviate poverty, but that as a matter of opinion has been expanded to provide a larger number of people with more money than the country can ideally afford. Some feel that this argument is demonstrably false: the benefits system in the UK provides individuals with 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 accommodation costs which usually make the overall benefits much higher than basic figures show.^[30][31]

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 48.9% of GDP in 2007)^[32] and Sweden (tax level at 48.2% of GDP in 2007).^[32]

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.

The most extreme criticisms of states and governments are made by anarchists, who believe that all states and governments are undesirable and/or unnecessary. Some socialist anarchists believe that while social welfare gives a certain level of independency 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."^[33] Some socialist anarchists believe in stopping welfare programs only if it means abolishing government and capitalism as well.^[34]

[edit] The welfare state and social expenditure

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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.^[35]

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).

The table below shows, first, welfare expenditure as a percentage of GDP for some (selected) OECD member states, with and without public education,^[36] and second, GDP per capita (PPP US$) in 2001:

Nation	Welfare expenditure (% of GDP) omitting education	Welfare expenditure (% of GDP) including education[36]	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	$36,000
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^[37] and the UNDP.^[38]

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

[edit] See also

Constitutional economics Fifth power Flexicurity Hidden Welfare State Malibu surfer problem Mixed economy Nanny state

Social Protection Social security Social stratification Social welfare provision Welfare reform

Models:

• Swedish welfare, Dynamic welfare state
• Third way
• Nordic model
• European welfare state, Universal welfare state
• American welfare state
• United Kingdom

Transfer of wealth:

• Transfer payment
• Redistribution (economics)
• Tax rates of Europe
• Cloward–Piven strategy

Housing:

• Public housing
• Housing estate
• Council house

Technology:

• Welfare Management System

[edit] Notes

[edit] References

• Stein Kuhnle Survival of the European Welfare State 2000 Routledge ISBN 0-415-21291-X

[edit] External links

• Center for Public Policy
• Social Policy Virtual Library
• Social Sciences Information Gateway
• Race and Welfare in the United States
• The Welfare State: A Critique
• Shavell's criticism of social justice programmes
• Kaplow's criticism of social justice programmes.
• World report on Welfare State
• Journal containing free daily information on welfare policies at local, national and EU level

[edit] Data and statistics

• OECD - Health Policy and Data: Health Division Website
• OECD - National Accounts: Statistics Portal
• OECD - Social Expenditure database (SOCX) Website