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Welfare State and the European Nations
“The phrase ‘welfare state’ was first used in the late 1930s, to distinguish between the policies of the democracies and the war state of European dictators” (Spicker, 2003). From the late nineteenth century, features of a welfare state began emerge in parts of Western Europe. The first European country to put in place a welfare state was Germany in 1883. The then Chancellor Otto Von Bismarck introduced a mandatory national accident and sickness insurance law. The insurance was financed by state subsidy (Spicker).
A welfare state is “a state where more than one half of all government expenditures are devoted to social policy, as opposed to the economy, the military, law and order, infrastructure and other traditional functions of the state” ( Spicker, 2003). Judt (2006) defines a welfare state as a state which is primarily concerned with dispensing welfare to its citizens. Such states spend the bigger proportion of their public expenditures on welfare.
According to Gough (2006), welfare states in Europe were established during the Second World War. Their main purpose was to tackle the five evil giants that were facing most of Europe at that time. These evils included:
Poverty: Because of the war, many people were sick, jobless or widowed hence were poor.
Diseases: Despite many people being sick, they could not afford to seek treatment.
Ignorance: At that time, school-leaving age was 11. Most children were forced to drop out of schools because they could not afford to pay fees.
Squalor: Majority of the population lived in poor housing facilities (slums) because council houses were inadequate.
Idleness: As a result of the war, most people lost their jobs and became unemployed.
The welfare state was therefore established to ensure that children stayed in school; free medical treatment for all was introduced; new council houses were built and more towns established to provide better housing facilities to the slum dwellers and more industries were started to help reduce the unemployment rate.
There are several objectives of a welfare state.
Equitable distribution of wealth and resources: Welfare states used progressive method of tax collection whereby people with higher incomes paid more taxes and those with lower incomes paid less tax. This method of taxation helped in reallocation of public money and shifting of resources from the resource-rich regions to resource-poor regions. This was effective in achieving regional balance and in narrowing the gap between the rich and the poor (Spicker, 2003).
Income and standard of living maintenance: People can temporarily or permanently be rendered incapable participating in the labor market. This can be due to old age, or sickness. This normally results in loss of income for themselves and their families. But in a welfare state, income maintenance was assured whether or not someone was working. This was normally “achieved through a variety of public insurance schemes,” (Judt, 2006). These included deductions from an employee’s salary, contributions made by the employers and the state. These deductions and contributions were deposited into an insurance fund from which individuals were entitled to certain benefits, depending on the level and the number of contributions made. These “insurance schemes covered unemployment, sick pay and old age pensions,” (Gough, 2006).
Helping the disadvantaged groups: welfare states started programs to assist those groups that were considered worse-off than others. Gough (2006) says that:
For instance, European countries have taken specific measures to combat rural poverty; support families with children; provide for re-training and early retirement in industrial problem regions; assist especially those with structural employment problem (the long-term and older unemployed; youth unemployment).
Provision of a public safety net was another objective of welfare states. Welfare States ensured that each individual enjoyed “a minimal level of decent human existence if no other resources are available,” (Gough, 2006). In the pre-industrial era provision for such individuals was mainly done by “local charities, communities, nobleness oblige, and the churches … on a much smaller scale” (Gough).
Most Welfare States used their welfare policy as a form of economic governance. According to Gough (2006), “the economies of continental Europe, often called organized market economies, are characterized by a more pronounced role for the government in the economy ….” Unlike in other states, the different economic sectors were usually in harmony rather than in competition with each other. This contributed to the overall economic organization and stability, and is the reason why such economies were often labeled ‘organized market economies.’
Welfare states put up policies aimed at poverty eradication. Such programs included Medicaid and Aid to Families with Dependent Children (AFDC). However, such programs were not popular among the majority of the population because they only served the marginalized people who comprised a smaller proportion of the population.
The creation and development of the welfare state followed different patterns in each of the European countries. The men behind the European welfare state shared Keynes’s view which he voiced before his death in 1946. Keynes said that “after the World War II, there would be a craving for social and personal security in Europe. And there was. The welfare state was constructed primarily as a security revolution rather than a social revolution,” (Judt, 2006)
The German welfare system was based on the three main principles. The first one was “subsidiarity.” This principle holds that “services should be decentralized or independently managed” (Spicker, 2003). The role of the state was limited only to areas which could not be covered by other means like military services. In Germany, high income earners were not covered by the main social insurance system; they were left to make their own decisions.
Economic development was another principle surrounding the German welfare system. Provision of social services was based on this principle. This was clearly evident in “the close relationship of services to people’s position in the labor market. Social benefits were earnings-related, and those without work records found that they were not covered for important contingencies” (Spicker, 2003). Additionally, the state’s spending on welfare had to be directly related to the principle of economic development and growth.
Welfare state in Germany was originally established by Chancellor Otto Von Bismarck who introduced the principle of ‘corporatist structure’. According to Spicker, 2003:
This principle was developed by Bismarck on the basis of existing mutual aid associations, and remained the basis for social protection subsequently. Social insurance, which covered the costs of health, some social care and much of the income maintenance system, was managed by a system of independent funds.
The French system of welfare was regarded as the most generous welfare system. It involved provision of a wide range of social services, rendering it very complex and expensive to maintain it. In France, the welfare system was “based on the principle of solidarity,” which was declared in the first article of the French Code of Social Security (Spicker, 2003). However, the term “solidarity” was ambiguous and was used in different circumstances to mean different things.
To some people, solidarity referred to cooperative mutual support whereby people who benefited from national welfare schemes were expected to contribute on an equal basis. To others, solidarity meant interdependent relationships, “common action, mutual responsibility and shared risks” (Spicker, 2003).
The Swedish Welfare System was viewed as an ideal form of welfare state. The system offered institutional care in that it offered “a universal minimum” (Judt, 2006). Like all welfare states, the Swedish government offered benefits to the unemployed, the sick people, and retired citizens. However, for a long time this welfare system was not effectively practiced because as Judt (2006) says, “the Swedish population had a strong tradition of entrepreneurship and hard work and continued to work hard even though they now had the option to live off government.” However, with time, people adapted to the welfare system.
The welfare state of the United Kingdom was established by William Beveridge in 1942. The aim of the state was to curb the social problems that British citizens were facing due to the effects of the Second World War. The government took the responsibility of providing for its people. This policy resulted in high government expenditure and an increase in the state’s key responsibilities. In addition to the provision of the basic services (education, health, housing and employment) the state also increased “regulation of industry food and redistributive taxation” (Gough, 2006).
Most Welfare States did not last long because of various reasons. The first major reason was the nature of taxation and the salary structure. In most welfare states, the social benefits and salaries for the low-skilled workers were among the highest in the world, whereas those for the high-skilled workers were lower compare to those of other countries. Additionally, the high-skilled workers paid much higher taxes than the low–skilled workers. This attracted more low-skilled workers into these states, becoming a burden to the Welfare State.
The issue of immigration also led to the collapse of the welfare state. Because of the social benefits a welfare state offered, it attracted people from the low income countries. Fjordman (2006) notes that “… they experienced … disintegration with the introduction of mass immigration of persons who did not have the cultural background necessary to uphold the welfare state.”
Lastly, the nature of the services that a welfare state provided contributed to its collapse. Education and health services especially are “ones on which people wish to spend more money as they become richer. Old age and retirement pensions imply that the government would have to spend more as the population ages” (Fjordman, 2006). Because of this, the ratio of public spending to Gross Domestic Product was high and it became practically impossible to meet all the social demands of its citizens.
Fjordman, C. The Welfare State: The Root of Europe’s Problems. The Brussels Journal. 2006, March 08
Gough, I. European Welfare States: Explanations and Lessons for Developing Countries.
University of Bath
Judt, T. The Future of Decadent Europe. The Globalist. 2006, June 02.
Spicker, P. The Welfare State. Centre for Public Policy and Management: Robert Gordon University