Social Welfare Provision in the United States - Essay Example

The end of the Second World War marked the beginnings of a golden age for the welfare ushering in a new trend of increased policy-making and spending directed towards the provision of social security and welfare for the state's citizens. Characterized by generous state provisions for new sectors that had heretofore been neglected by social policy, the developments leading to the "golden age" of the 1950s and 1960s have largely been explained as a product of economic conditions existing at the time. Fueled by an international economic boom, Western countries, particularly in Europe, undertook the expansion of welfare provision's scope, with the aim of redistributing the fruits of the economic boom among its citizens. (Cochrane 2001, 44; Pierson 2001, 334) In as much as the economic boom of the post-war decades has been seen as the main pillar which held up the "golden age" of the welfare state, the economic recession of the mid-70s is also said to mark its decline.(Cochrane 2001) Apart from the economic conditions which allowed for the state's generosity in regards to welfare provision, political rationales have also been forwarded as contributory to the rise of the welfare state. The widespread victory of Labour parties in Europe, particularly in Britain, for example, is said to have led to an increase in social policies targeted towards the social and economic security of the working class, the main beneficiaries of the welfare state and the backbone of these parties. (Korpi 2003) Esping-Andersen also articulates another view of the welfare state's "golden age" as a political move to instill social citizenship among the citizenry: "In moral terms, the welfare state promised a more universal, classless justice and solidarity of 'the people': it was presented as a ray of hope to those who were asked to sacrifice for the common good in the war effort. The welfare state was therefore also a political project of nation-building: the affirmation of liberal democracy against the twin perils of fascism and bolshevism. Many countries became self-proclaimed welfare states not so much to give a label to their social policies as to foster social integration." (1997) The presence of several contributory factors accountable for the welfare state's "golden age" precludes the existence also of more than one factor responsible for its decline. As has been stated earlier, the decline of the welfare state is said to be marked by the economic recession of the mid-70s. Beginning from then, the expansion of welfare state provisions which marked the golden age of the post-war decades has grounded to a halt, and in most countries has reversed into a retrenchment. This trend continues to persist, and the factors contributing to it have been a matter of much debate. Demographics, or population characteristics such as age, fertility rates, and the gender composition of the labor force within these welfare states is one of the key factors that has often been forwarded in regards to the welfare state's decline. Changes in the demography of these welfare states, particularly an increase in the number of welfare recipients brought about by an ageing population and decreased fertility rates, is said to exert demands on the welfare state which it cannot meet, resulting in a retrenchment of welfare policies. (Pierson 2001) As the main proponent of this view, Pierson further explains that this age shift in the population structure of these welfare states exerts tremendous pressure since it increases the demand on two key welfare sectors: health and pension, sectors which, in the EU alone, accounted for almost 2/3 of the total spending on social protection in 1991. (2001) Cochrane agrees that demographics do influence the policy-making of welfare states: In the golden age, the same demographic trends exerted similar pressure to the welfare states to increase welfare benefits and services. (Cochrane 2001) The differences in government response then and now, though, indicate the prevalence of other factors which determine what kind of changes will be made on social policy to respond to these demographic shifts. While the problem of demographic shifts is largely recognized as contributory to the challenges faced by welfare states today, globalization has been attacked as the biggest challenge for welfare states. (Andersen 2003; Cochrane 2001; Rieger 1999; Yeates 2001) Yeates provides a basic definition of globalization as "an an extensive network of economic, cultural, social, and political interconnections and processes which routinely transcend national boundaries." (2001) Characterized by an "increased ease of movement of goods, services, capital, people, and information across national borders" and a "diffusion of global norms and values", (Secretary of State 2000) globalization is said to affect how labour markets work, pressuring welfare states to retrench labor policies which, though beneficial to the local labor force, will in the long run result in their diminished competitiveness in the international arena. (Andersen 2003) This global demand for more flexible and less protectionist labor policies, as well as globalization's requisite for dramatic reductions in trade tariffs is expected to bear heavily on the finances of welfare states as well as result in reducing the autonomy of nation states to determine their own social and economic policy. (Cochrane 2001) The interplay and impact of demographics and globalization, as well as the role of political choice in the construction of social policy reforms is best examined by reviewing the reforms that have been made in the United States, Germany, and Hungary. Social welfare provision in the United States has been largely shaped by political choice. While the country also took part in the global trend of increased social welfare provision in the post-war period with the establishment of social insurance for the elderly, the unemployed, the disabled, and other recognized dependents in society, these provisions have never been as generous as that of the European Welfare States. This marked difference between the US and its European counterparts, according to Esping-Anderson, has largely been produced by how social welfare as an ideology has been constructed in America as market-based. (1997) American social insurance and welfare "operate through, and not against markets". (Rieger 1999) Employment is seen and accepted as necessary for social security, with the employer delivering half of the contribution. (Simonovits 2006) Although there have been periods of enlargement in the welfare system, particularly in the 1960s, these have been reversed by an anti-welfare backlash propelled by the rise of the New Right in American politics in the 1980s and 1990s. (Cochrane 2001) According to Cochrane, it was the emergence of the New Right as a dominant force in US politics which led to retrenchments in the old social welfare system, a system that was criticized as dependency-breeding and over-regulating of the market. (2001) Unlike in the European Welfare States wherein institutional control is welcomed as a safety net for the workforce against market forces, institutional control through trade and labor policies is severely criticized in the US since a free market is perceived as more beneficial to the social and economic security of the populace. (Rieger 1999) The decline of the welfare state in the US, therefore, has been propelled mainly by the political demands of the populace and not by any outside forces demanding compliance of globalization requisites. Germany shares some similarities with how social policies have been constructed in the US, albeit in a completely opposite direction. Although its membership in the EU and the global trend of globalization may have been expected to diminish public expenditure on social services and benefits, Germany's expenditure for this sector has actually increased by 10% between 1995 and 2001. (Adelantado 2001) This has been brought about, firstly, by an ageing population bearing heavily on expenses for the pension and health sectors, and, similar to the US, political pressure from the populace. Whereas the American populace do not perceive any "class struggle" between market and labor sectors, the notion of a "class struggle" and resulting demands for government protection have increased through the years among the German populace. (Rieger 1999) Germany's social welfare state provides for both employment-centered social insurance and a distinct social assistance program for the unemployed and other dependents, (Cochrane 2001) and enjoys broad public support. (Esping-Andersen 1997) According to Rieger, at the same time that globalization requisites pressure Germany to deregulate and open its trade, political pressure from the populace also pushes the German government to allocate an increasing proportion of its budget to social expenditure as a price for the population's consent to globalization and free trade. (1999) In contrast to the cases of Germany and the US, the case of Hungary differs in the extent by which its reforms in social policy and welfare were directly influenced by external forces and organizations. Hungary's transition from a "socialist" regime towards a "liberal" one gave way to several challenges in social policy. (Lelkes 2000) Primary among these problems was the decline in employment figures: With a population of around 10 million, only 3.8 million were employed. (Ferge 2004) Low fertility rates produced an old-age demographic dependency rate of 40% in 1994, tempered only by a relatively high age-specific adult mortality rate. (Simonovits 2006) The decrease in available resources for social expenditure brought about by the decrease in employment, the increase in the demand for such expenditure, and Hungary's movement towards membership in the EU thus combined into a need for reforms of existing social policy. The reforms that were undertaken by Hungary, unlike that of the US and Germany, were influenced by major international institutions, notably the World Bank and the IMF. Resident missions from both the World Bank (WB) and USAID directly took part in the construction of new reforms within Hungary's Ministry of Finance. (Deacon 2004) Mandatory private account schemes approved and encouraged by the World Bank replaced the old Pay-As-You-Go system in 1998. (Deacon 2004) As a consequence also of economic and trade programs undertaken to meet economic and trade requisites of EU membership, Hungary cut its public social expenditure nearer to the EU average. (Ferge 2004) From the case of Hungary, we can see how the influence of international institutions, much of which coincides with the globalization movement, can dictate the formation of not only economic policy but of social policy as well. From the example of Hungary, we can see where the opponents of globalization are coming from in regards to the degree by which globalization can reduce the autonomy of individual states in forming their own economic and social policy. However, contrary to the notion that the effects of globalization on social policy and the welfare state would be mostly negative, the example of Hungary also exemplifies how globalization does not necessarily entail the sacrifice and/or demise of the welfare state. I agree that globalization does pose a tremendous challenge on the welfare state, but that challenge is not simply a challenge to survive as though globalization by its very nature is inherently opposed to the preservation of the welfare state. On the contrary, the challenge of globalization to the welfare states encompasses both survival and enrichment. As has been discussed by Deacon, the globalization movement does not exist only in the economic sphere, but in the political sphere as well where its impact on welfare states "revolves around the influence on national social policy of international organisations and their ideas about desirable policy." (2004) The main attack of those who credit globalization for the demise of the welfare state has been centered on the effects that a deregulated global economy would have upon the social policies of these states, painting a picture of an unprotected workforce left vulnerable to the whims of market forces. This picture is improbable in the light of existing international organizations such as the IMF, the World Bank, and the International Labor Organization (ILO) which may and now do cater to the regulation of unjust labor and social practices in the global arena. Although the free movement of capital would entail increased competition in terms of the global labor market, for example, this does not entail a "race to the bottom" with countries lowering minimum wage to inhumane levels, as healthy wage levels can still be regulated globally by global institutions, particularly the ILO. Andersen, for one, agrees that international integration, either in the form of globalization or regional integration, will definitely have consequences for the welfare state and will entail changes on how such states are constructed, but that nothing right now supports the view that these welfare states would die as a result of such integration (Andersen 2003) The main challenge to these welfare states lies in their reconstruction, a matter which can result either in their diminished or increased effectivity in the face of new social and political structures. The proposal provided by Deacon in regards to the possibility of using global political institutions as regulators of the social impact created by global trade is also supported by Yeates who points out the effectivity of inserting "social clauses" into multilateral trade agreements in order to institutionalize social protection in the absence of domestic legislation. (Yeates 2001) In Ireland, for example, women's groups have been actively using the European Union to challenge domestic social policies which discriminate or disenfranchise them. (Cochrane 2001) Clearly, while deregulation of global trade does pose social dangers, these are dangers which can be avoided or regulated through the use of globalization itself. From the three countries discussed earlier, only Hungary seems to have subscribed to the social policy of supranational organizations. In all three countries, demographic changes demanding for greater social support, and membership to global regulatory institutions, were both present. The extent by which membership to global regulatory institutions influence the construction of the state's response to the social demands of demographic changes, however, was significant only in Hungary. In the United States, the similarity of its response to that prescribed by global institutions such as the World Bank was only incidental, its response being largely hinged on the political choice of the people. On the part of Germany, although it opened its trade in accordance to the requisites of globalization, its social policy took a different route in accordance to the political demands of the populace. From these differences in the responses of these three countries, I believe that we can more clearly see the extent and limitations by which demography and globalization can influence welfare provision. Reforms in the welfare provisions of welfare states are directly brought about by demographic changes and globalization. It is these two forces which set the demand and need for such reforms. Government response to such demand, however, lies on a different sphere. It becomes a matter of political choice. Hungary made a political choice to submit the reconstruction of its social policy to the demands of international institutions thus succumbing to global politics. Both the United States and Germany, on the other hand, made the political choice to submit the reconstruction of its social policy to the demands of it populace, thereby succumbing to domestic politics. Both global and domestic politics exert a degree of influence over the political choice of countries especially in an era of globalization. Where these two are contradictory, the victory of global politics and international pressure over the autonomy of the state is admittedly possible. This perhaps, poses the bigger problem of globalization-its attack on state autonomy. This has also been discussed as Yeates who outlined three domestic factors which determine the degree by which state autonomy overrides global pressure, most notable of which is the balance of political power between the state, labor, capital and civil society. Where there is adequate balance between these sectors, the state cannot haphazardly submit itself to global pressure over domestic political trends without risking a political backlash from within. The presence of such a balance of power within the state then can be viewed as a safeguard against global anarchy. The preservation of state autonomy in the face of globalization, then, poetically rests on the state's ability to preserve the domestic balance of power by distributing it to the different sectors instead of hoarding all political power to itself. BIBLIOGRAPHY Adelantado, J & Calderon E. 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