Figure 1.-- |
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Western European countries began creating welfare states in the 19th century. One of the first major steps toward this was Bismarck's success in creating a German social security ststem. The Scandinavian countries led the way in the 19th and early 20th century. The Anglo-Saxon countries have been among the last Europen countries to create a welfare state. Britain did not begin to create its welfare state until the victory of the Labour Party in the 1945 General elections. America has been even more reluctant. President Roosevelt did suceed in establishing a social security system during the New Deal (1935), but America still does not have a national health care sytem--tghe only Westerb democracy that does not have one. In America the Conservative have convinced the majority of Americans that the welfare state is if not an actual evil, a limitation on freedom and a drag on individual sucess. It is noit clear why the conservatives have succeeded with this contention, but it is likely that the racial politics is a major reason. Economists today debate the future of the welfare state.
Western European countries began creating welfare states in the 19th century. One of the first major steps toward this was Bismarck's success in creating a German social security ststem. The Scandinavian countries led the way in the 19th and early 20th century. The Anglo-Saxon countries have been among the last Europen countries to create a welfare state. Britain did not begin to create its welfare state until the victory of the Labour Party in the 1945 General elections. The construction of the welfare state in Western European states has been seen by many as one of the great achievements of the 20th century. Only in America has a majority of the populatioin seen the creation of the welfare state as a societal evil. Popular politicans like President Reagan have preached against the welfare state.
The specific characteristics of a welfare state vary widely from country to ciuuntry. The programms are different from country to country or as each country's ability to finance wlfare programs. The essebtial characteristic are programs to safeguard individuals from the vesisitdes of capitalism and the business cycle. The welfare system as it developed has also attempted to promote an equality of opportunity for children regardless of family income and background.
The welfare state has been especially important development for children. Before the creation of the welfare state, not only did children have limited abilities to develop their abilities unless they had affluent parents, but also many children were not properly nourished and clothes, but often did not have access to medical care.
America has been even more reluctant. President Roosevelt did suceed in establishing a social security system during the New Deal (1935), but America still does not have a national health care sytem--tghe only Westerb democracy that does not have one. In America the Conservative have convinced the majority of Americans that the welfare state is if not an actual evil, a limitation on freedom and a drag on individual sucess. It is noit clear why the conservatives have succeeded with this contention, but it is likely that the racial politics is a major reason. It is a characteristic of human behavior that we are moist likely to feel empathy for people that are most like ourselves. It is no accidennt that the United States is the oneof the few Western democracies with a sizeable racial minority. (The only other one we can think of is New Zealand.) Other aspects of the American expeience, the Protestant ethic and the frontier have all acted to make Americans more resiliant to demands for the welfare state. [Lindert]
Economists today debate the future of the welfare state. This debate has even risen in America where the basic foundation of welfare state is still incomplete. The basic problem is the basic demographic trends in countries with welfare states. The birth rate has fallen to very low levels. This is important because the welfare state has been financed by taxing workers. As the working population declimes because of the falling birth rate abd the number of retirees that ned to be supported increases, the ability to finance a welfare state becomes increasingly difficult. To this many conservatives in America would add the charge that the welfare state inhibits economic growth. The demographic trends ar undeniable.
The eldely (people over 65) wil reach 20 percent of the populatrion in the near future: Bekgium (2020), Japan (2008), Germany (2020), Italy (2008), and Sweden (2015). Federal Reserve Chairmn llen Greenspan raused this issue concerning Social Security in America (March 2004). This 20 percent elderly level will come later in America than Europe and Japan because of the higher birth rate of mionrities and high levels of immigration--especially illegal immigration. (The lack of a national health care system hs also tended to impede the longevity of minorities.)
More contentious is the charge that the high taxes required to pay generous benefits will impeded economic growth. To this conservatives often add the charge that the welfare state stifiles individual initiative. This charge is less heard in Europe, but continues in America. (Here again there are racil connotations.) Some economists reject the charge that the welfare state is antithetical to economic growth. One economic historian offers three reasons why welfare state programs to not impede economic growth. One, some welfare programs such as public education or public works improving infrastructure may have a possitive impact on economic growth. Two, benefits may increase unemployment, but the jobs lost in this way are usually unskilled jobs and their loss does not impede real economic growth. Three, modern states have developed tax systems designed to limit consumption (like Europe's value added taxes--VAT ) rather than investment. [Lindert] A noted economist offers a critique to both the Conservative opposing the welfare state and Liberals promoting it. He advises Conservatives that big government by itself does not necesarily impede economic growth and liberals that "soak the rich" taxes can impeded both investment and individual iniative. [Samuelson]
The European Union is finally having to deal with the massive quantities of death rung up by member countries to finance the welfare state. The immediate crisis is the massive amounts of debt that Greece was able to arrange based on jettisoning the dracma and entering the Euro Zone. This is just the immediate problem. Greece is the most endebyed country, but Irelnd and Portugal are also bankrupt and both Spain and Italy also require various levels of EU support--meaning primarily the Germans. It appears that the Germans are going to come up with the money to assist the Greeks. Whether they will be able to support larger countries like Spain and Italy is another question. And futhermore, even if current debts are covered, what about future debts. The current situation was created not only by Socialist politicabns promising more benefits than can ever be paid, but also economic laws and regulations that retard economic growth. The public in many European countries seen unwilling to allow the reforms that would fundamentally change this. The Europeans have been attempting to find investors to help deal with the debt problem. And they have been especially interested in geting help from Chinaith its vast foreign currency reserves. The response from China was especially telling. A press report describes the Chinese reponse, "A top official of China's $400 billion sovereign wealth fund has accused Europe of "indolence" and said any Chinese investment in the debt-laden region would be based on financial returns. Jin Liqun, chairman of the board of supervisors of China Investment Corp, slammed the welfare systems of European countries and said the continent must address its own problems to attract outside investment.
'If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society," Jin told Al-Jazeera television in an interview broadcast at the weekend.
The labour laws induce sloth, indolence, rather than hardworking.' Jin, a former vice finance minister, said Beijing would consider investing in Europe but any decision would be based on likely investment returns.
'Our people would ask us the question: "Wait a moment. Are you sure you can get a fair share of returns?",' Jin told the television network. European leaders have called on China, which has the world's largest foreign exchange reserves at $3.2 trillion, to invest in a bailout fund -- the European Financial Stability Facility -- to help the region overcome the debt crisis. The head of the bailout fund, Klaus Regling, has travelled to Beijing for talks about a possible contribution, but China has so far made no firm commitment to provide financial assistance for the troubled eurozone. A move to help developed European countries would be a hard sell for Communist Party leaders in a country where millions of people live in poverty and inflation and soaring housing costs are straining household budgets. China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.
The losses led to severe criticism of the investment choices made by the sovereign wealth fund, only a year after it was established in 2007. Jin called on European countries to have a 'credible' programme to attract investment and generate confidence. '"As long as eurozone members would fix some of the economic, social problems they have, as long as they have a fairly credible, convincing workout programme, the outside world would have confidence,' he said." ["China fund"]
Lindert, Peter. Growing Public Social Spending and Economic Growth Since the Eighteenth Century.
Samuelson, Robert J. "The future of the elfare state," The Washington Post, March 5, 2004, p. A23.
"China fund official slams 'indolence' in Europe, " AFP (November 7, 2011).
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