Origins of the welfare state and Keynesianism
20th century (esp post-Depression). Closely associated with Keynesianism:
- Depression was a serious challenge to classical economic theory - markets weren't self-adjusting. After the Crash, banks failed, so consumer confidence/spending declined. The US gov became protectionsist, which reduced trade and reinforced problems.
- Keynes argues that the gov should stimulate demand through spending (in a systematic way to ensure that demand stayed up). Resources must be redistributed to the poor/elderly/unemployed.
4 features of the welfare state
1. Demand management - (Keynesian idea) state increases demand when it's down, lowers it in times of inflation
2. Regulation - markets can fail, so the state must regulate certain sectors to produce better outcomes (prevent monopolies/irresponsible lending, provide social services, etc). Degree of reg differs significantly from state to state.
3. Nationalization and pub ownership - the state should strategic own sectors of the economy (transportation/energy/commun.).
4. Social welfare - state ensures that minimal standards are met/social risks are mitigated.
What are the 3 types of welfare states, and what are the implications of their differences?
- Social democratic (most spending)
- Liberal (least spending).
- They vary in the level and kind of spending.
- So the degree of de-commodification (the extent to which individuals can withdraw from the workforce and still survive) in each kind varies greatly.
Social democratic welfare states
- The most robust welfare states (the Scandinavian countries).
- Social programs tend to be universal/benefits generous.
- Primarily funded through taxation.
- An explicit goal is to achieve some level of social equality (the tax system is redistributive).
Liberal welfare states
- Canada, US, UK.
- The state delivers fairly moderate benefits, which tend to be means-tested.
- Benefits are targeted towards the needy (carry stigma), although some may be universal.
- Tend to be financed through taxation.
Conservative/corporatist welfare states
- Germany, France.
- Payment into/access of social insurance programs is linked to your type of employment (status-differentiated).
- In some countries benefits for different groups vary significantly, in others not so much.
- Jointly-managed by employers and employees, not the state (but the state mandates how the funds are distributed).
- Means they are difficult to change (employers can't just cut benefits in lean times).
- Not geared towards promoting equality.
5 problems welfare states are facing
1. Demographics (declining birthrates/ aging pop.
2. Rising cost (esp healthcare: technology).
3. Declining economic growth (slow down of Europe/NA, rise of developing nations).
4. Changes in the labour market (employment less secure - people change jobs more frequently, more part time work, women in the workforce - need mat leave, childcare).
5. Globalization (creates unemployment in advanced ind. democracies, globalization of finance - companies can move out of areas with high taxes - creates race to the bottom).
5 changes to welfare states
1. Modified funding arrangements (attempt to adjust the cost of labour by shifting the contribution burden from employers to employees).
2. Tightening up regulations/qualifying condition (common strategy to cut cost, can involve increasing hours of work needed, adding work requirements, etc.).
3. Measures to integrate people into the workforce (re-training/upgrading skills).
4. Privatization/marketization (encouraging people to save for their retirement through incentives).
5. Tax cuts (form of WS retrenchment - reduces state revenues, causing the restructuring of soc programs).
3 perspectives on how much welfare states have changed
1. Minimal changes due to policy feedback effects of social policies.
2. Extensive change in terms of effects of social policies.
3. Transnational convergence around market-friendly model.
- Need to fill in details.
Why different WSs? INTEREST focused theories
- Often called the Power Resource Perspective.
- Social policy is explained by the balance of power between labour and business - these to groups compete to have their interests represented in policy. Working class parties, unions, etc pursue policies that protect workers from social risks. Data shows that nations with stronger unions have higher social spending.
- Could explain the US - no strong labour party.
Criticisms of INTEREST focused theories
- spending's not the whole picture - must look at nature of policy and whether they actually benefit labour.
- Assumes all workers want the same thing.
- Assumes all workers have the same interests (that interests emerge from social location).
Why different WSs? IDEAS focused theories (and criticisms)
- Social policies are linked to national values (this is overly simplistic - whose ideas matter?)
- Social policies are linked to intellectual ideas about policy (but Keynesianism was all over, and yet we have different WSs).
Why different WSs? INSTITUTIONS focused theories (and criticisms)
- Emphasizes that bureaucrats and politicians have their own interests (esp the bureaucracy - interest in increasing their resources/keeping their jobs).
- Existing organization and institutions shape policy proposal (Keynes' ideas translated differently in different countries because of this) (federalism, separation of power, etc - more levels = less SPs).
- Organization of the state determines which social groups have influence (who has access to key sights of decision making - in Corperatism, business/labour are formally involved).
- Policy feedback, path dependancy.