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 is comprehensive, because all aspects of welfare are considered; a "safety net" is not enough, nor are minimum standards. It is universal, because it covers every person as a matter of right.
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.

Etymology

The English term "welfare state" is believed to have been coined by Archbishop William Temple during the Second World War, contrasting wartime Britain with the "warfare state" of Nazi Germany.^*

In German, a roughly equivalent term (Wohlfahrtsstaat) had been in use since 1870. There had been earlier attempts to use the same phrase in English, for example in the text "Four German Jurists" but the term did not enter common use until William Temple popularized it.

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).

The development of welfare states

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 Sweden (Folkhemmet), Germany, the Netherlands and New Zealand of 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. 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.

Arguments for and against the welfare state

The concept of the welfare state remains controversial, and there is continuing debate over governments' responsibility for their citizens' well being.

Arguments in favor

humanitarian - the right to the basic necessities of life are a fundamental human right, and people should not be allowed to suffer unnecessarily through lack of provision.
democratic - the gradual extension of social protection is increasingly favoured by the citizens of mature economies, who have approved these as part of political election campaign promises.
ethical - reciprocity (or fair exchange) is nearly universal as a moral principle, and most welfare systems are based around patterns of generalised exchange.
altruism , or 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 - most major world religions emphasise the importance of social organization rather than personal development alone. Religious obligations include the duty of charity and the obligation for solidarity.
mutual self-interest - several national systems have developed voluntarily through the growth of mutual insurance.
economic - social programs perform a range of economic functions, including e.g. the regulation of demand and structuring the labour market.
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.
economies of scale - some services can be more efficiently paid for when bought "in bulk" by the governement for the public, rather than purchased by indivdual consumers. The highway system, water distribution, the fire department, universal health, and national defense are 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. 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 also believe that only voluntary giving private charities is virtuous. Through taking away choice, the state also takes away personal responsibility.
anti-regulatory - the welfare state is accused of imposing greater burdens on private businesses, and potentially stifles growth and creates unemployment.
efficiency - advocates of the free market believe that it leads to more efficient and effective production and service delivery than state-run welfare programs. They argue that high social spending is costly and must be funded out of higher levels of taxation. According to Friedrich Hayek, the market mechanism is much more efficient and able to respond to specific circumstances of a large number of individuals than the State.
motivation and incentives - the welfare state may have undesirable effects on behavior, fostering dependency, destroying incentives and sapping motivation to work.

Criticisms

The most extreme criticisms of states and governments, and by extension the welfare state, are from anarchists, who believe that all states and governments are undesirable and/or unnecessary. They would tend to argue that the governmental practice of supporting people (Paternalism) is a method of controlling and "owning" those people, rather than an act of altruism.

The idea of a welfare state also receives much criticism from the United States, which has much more limited welfare services than most developed countries. Some of this criticism concerns the idea that a welfare state makes citizens dependent and less inclined to work. However, using some data sources, an association between welfare expenditure and economic performance cannot be established (see below).

Another criticism is that the welfare state often provides its dependents with a similar level of income to the minimum wage. Benefit fraud and economic inactivity are apparently quite common now in the UK 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. They believe that the welfare state was created (In 1948 in the UK) to provide a carefully selected number of people with a subsistence level of benefits in order to alleviate poverty, but that it 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, and receipt of benefits is dependent on the regular submission of proof that the beneficiary deserves the money, either as a result of genuine incapacity or as a reward for seeking employment.

A third criticism of the welfare state is that it results in high taxes. This is true, as evidenced by places like Denmark (tax level at 50.4% of GDP in 2002) and Sweden (tax level at 50.3% of GDP in 2002). However, these countries also have high wage economies and high GNPs; high taxes do not necessarily result in poor economic performance.

A fourth 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 a welfare state, the poor and lower-middle classes receive certain services free of charge, whereas in non-welfare states they would have to pay for those services, and could possibly not be able to afford them. 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. More fundamentally, although private provision can reduce unit costs, it often does so through adverse selection, or exclusion of disproportionately expensive cases. However, this is not a barrier to carefully regulated private provision. The assumption that public provision is more costly overall, supported by the current state for the NHS (the third greatest employer in the world, which has large deficits looming) may be mistaken. National health care systems, for example, are often thought to be cheaper than equivalent provision through private care^*.

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.

The welfare state and social expenditure

Welfare provision in the contemporary world tends to be more advanced in the countries with stronger and more developed economies. Poor countries, on the other hand, tend to have limited social services.

Within developed economies, however, there is very little correlation between economic performance and welfare expenditure (see A. B. Atkinson, Incomes and the Welfare State, Cambridge University Press 1995). 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 nor to 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).

The table below shows, first, welfare expenditure as a percentage of GDP for OECD member states, and second, GDP per capita (PPP US$) in 2001:

Nation	%	Per capita GDP
Denmark	29.2	$29000
Sweden	28.9	$24180
France	28.5	$23990
Germany	27.4	$25350
Belgium	27.2	$25520
Switzerland	26.4	$28100
Austria	26.0	$26730
Finland	24.8	$24430
Netherlands	24.3	$35184
Italy	24.4	$24670
Greece	24.3	$17440
Norway	23.9	$29620
Poland	23.0	$9450
United Kingdom	21.8	$24160
Portugal	21.1	$18150
Luxembourg	20.8	$53780
Czech Republic	20.1	$14720
Hungary	20.1	$12340
Iceland	19.8	$29990
Spain	19.6	$20150
New Zealand	18.5	$19160
Australia	18.0	$25370
Slovak Republic	17.9	$11960
Canada	17.8	$27130
Japan	16.9	$25130
United States	14.8	$34320
Ireland	13.8	$32410
Mexico	11.8	$8430
South Korea	6.1	$15090

Figures from the OECD and UNDP

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

References

External links

Data and statistics

OECD - National Accounts:Statistics Portal

Social justice | Market failure | Forms of government | Social programs | Political economy

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