What are the Limits, if Any, to the Privatisation of the Welfare State - Essay Example

?What are the limits, if any, to the privatisation of the welfare The central issue considered in this essay concentrates on the privatisationof the welfare state. The essay will therefore examine the definition of privatisation as perceived by scholars. This will lead into the history of privatisation and further examine the concept’s development as a functional phenomenon in the welfare state. As privatisation is a multi-faceted phenomenon, the different dimensions and principles of the concept will be discussed in this essay, to enable greater comprehension of its scope. At this juncture, definitions and features of the welfare state will be discussed. As privatisation is considered an important global financial phenomenon, its implementation in a welfare state is crucial because of its scope, its capability to privatise public entities and in an extensive manner. An analysis of the discussion at this point will show the scope of privatisation in the welfare state and the factors that limit its scope. This essay will thus explore whether or not the welfare state can be completely privatised; and if not, justify reasons behind its failure to do so. The conclusion to this essay will be drawn accordingly, from the arguments as specified above. In considering the issue of privatisation limits on the welfare state, relevant literature on the subject matter has been considered. Reliable internet sites have therefore been explored to obtain the relevant literature for this essay. A considerable attention was given towards the reliability and the authenticity of the sources considered as eligible. Adequate background research was also conducted when structuring this essay to gain an in-depth knowledge regarding the various dimensions and noteworthy features of the debated topic, which further helped in gathering requisite materials to substantiate the arguments in the discussion henceforth. The Concept and Rationale of Privatisation Privatisation in itself is a multifaceted phenomenon (Andersen, 2007; Jessop, 2002). As the concept of poverty and governance are contested and therefore, poses difficulties in their definitions, privatisation lends itself in that category of a contested phenomenon. Starr (1988) refers to privatisation as a “fuzzy concept”, perceiving privatisation as an idea and a policy movement, but generally agreeing that the concept involves the transfer of public or state ownership of assets to the private domain. Many other scholars, including Mohammed & et. al. (2013), Spronk & Terhorst (2012) and Beland (2007) agree to this definition of Starr (1988), although, certain of them go in more detail as to what the concept entails. In line with Starr (1988), Doogan (2012) describes privatisation as the “relocation of the services from mother ship of the public sector to the alien landscape of the company…) while on the other hand, the concept is regarded as “the comprehensive strategy of permanently restructuring the welfare state and public services in the interest of capitalism” (Whitfield, 1983) . Drawing from these studies and the corresponding arguments of the scholars it can be well interpreted that the general and basic understanding of the concept of privatisation is a transfer of ownership from public to private domain. There is however methods of this transfer, which needs to be explored. Transfer of ownership can be a complete transfer of the whole or partial. It can take the form of outsourcing or contracting services to the private sector, normally regarded as partial privatisation. Nevertheless, the concept should not be confused with marketisation, which is regarded as a multidirectional externalisation and internalisation of both services and administration of the public sector (Doogan, 2012). In marketisation, as opposed to privatisation, the state commercialises its establishments and co-operations to compete in the market. By so doing, the state continues to finance its welfare programmes. The rationale behind the concept of privatisation can be accounted from a critical perspective on the basis of three dimensions, viz. political, economic and social dimensions. Political dimension of privatisation comes about as a result of the state, changing or modifying a specific programme within its paradigms. Thus, politicians perceive privatisation mainly as a transfer of assets to the private sector. It goes further to explain that it is sometimes a political move, when there is a shift of public services and goods production to the private sector, as opposed to within the state, in its entirety. Such shifts can be triggered by political choice of the state. This has seen the emergence of private schools, academies and private health insurances as a result of the state not making adequate provisions for the citizens. This does not however mean any reduction in states’ spending, as privatisation concept would suggest. Rodrik (1996) accordingly enlightens that when states open up their economies, it goes in line with increased government spending. In accordance, it will be crucial to mention the interpretation to political theory of privatization in welfare state as presented in Doogan (2012). As argued by Doogan (2012), globalization effects cause considerable pressures on political responses associated with the restructuring of the national institutions. The impression caused by globalization along with factors related to economic dimensions (such industrialization trends) and social dimensions (such as gender relations) have also been agreed in Myles & Quadagno (2002). Emphasizing a similar notion, Hacker (2004) agrees with the concept as he argued that privatization could be seen as a policy change strategy, where there are challenges to policy change and economic advancement, guaranteeing public responsibility. The economic dimension of privatisation explains the relocation of the state’s economic functions to the private. The widely held view in this assertion is that privately owned establishments and manufacturing companies are more efficient and effective in the production of goods in the competitive market (Weiss 2006; Stiglitz, 2002). The social dimension of privatisation concerns us about the effects of the concept on the civil society. Starr (1988) in agreement to the statement argued that such transfers, strengthening the state of the community is vital for community cohesion and efficient functioning. Therefore, the voluntary organisations, non-profit organisations, and other community groups create more concrete service mediation without the bureaucracies that the state would otherwise have (Starr, 1988). The Scope of Privatisation Privatisation can be precisely explained as a concept that can be applied in any economy, willing to adopt the neoliberal principles. Britain and the USA are known to be two of the most privatised countries within the global market. In Britain, for example, the eighteen years of conservative rule witnessed a massive transformation in its economy. These years of governance saw a significant shift of pubic establishments and industries into the private domain. From 1979 to 1997, industries scaling from telecommunications, Aerospace, Britoil, Airport Authority, public transport, gas , water and electricity supply, railways, nuclear power plant, to a range of health, education and social sectors provisions were privatised (Whal, 2011). Privatisation was inherited as a force for the market and the economy under new labour laws. The political groups thus claimed that privatisation drives down costs and creates competition for the efficiency of the private sector by providing choices to the consumers as the end users (Whitfield, 2006). In the political reign from 1997 onwards, a lot more contractual and franchised outsourcing were done, which Whitfield (2006) claims it is all privatisation in theory and practice, as denied by New Labour. Privatisation therefore has a wide scope of operations and can be instituted in any sphere of welfare states operations (Mohammed & et. al., 2013)). It could take different forms for political, economic and social reasons. Its success is also dependent on two main important factors; namely, political and economic factors. Politically, it depends on the governing party to adopt the privatisation concept for its practice in a particular state. Economically, the question arises as to whether an activity or service can be funded through the market is critical. This limits the scope of privatisation as the subsequent question will arise, as to, whether in-mates souls pay for their own incarceration. However, as any other phenomenon, privatisation has its own challenges in theory and practice in the welfare state. It is therefore significant to have a good understanding of the meaning of the welfare state. By so doing, one would comprehend how the limitations come about in the practice of the concept of privatisation in the welfare state. The Welfare State and Privatisation To comprehend the limits of privatisation of the welfare state, it is significant to define the concept of welfare state. The basic understanding of the welfare state is that it is grounded on certain principles of equality in the area of opportunity, wealth distribution and public development (Algan & et. al., 2011). As mentioned in Veit-Wilson (2000, pg. 11), Briggs defined a welfare state as “a state in which organised power is deliberately used (through politics and administration) in an effort to modify the play of market forces …”. Definition of a welfare state according to Oxford Dictionary states that it is “a system whereby the state undertakes to protect the health and well-being of its citizens, especially those in financial or social need, by means of grants, pensions, and other benefits” (Oxford Dictionaries, n.d.). Similarly, Lindbeck (2006) defines welfare state as an economic formation that “comprises two types of government spending arrangements: (i) cash benefits to households (transfers, including mandatory income insurance) and (ii) subsidies or direct government provision of human services (such as child care, pre-schooling, education, health care, and old-age care)” (pp. 2). It is through the welfare state construction that government makes investments in different areas in need for development. Under such circumstances, the question that becomes primary is that if privatisation of welfare states can be practiced in reality and if privatisation shall make towards the betterment of the situation rather than deteriorating it (Algan & et. al., 2011). It is primarily owing to these scepticisms that certain limitations have been imposed on the privatisation of welfare states. The 21st century construction of welfare states needs to perform two very distinct procedures where on one hand, it faced the challenge to comply with the economic needs of the society and on the other hand, it provides the source of prosperity needs of the community. In order to render these benefits, government principally undertakes measures to implement different policies in relation to price regulations, working environment regulations, housing policies, environmental policies and legal policies with regard to job-security (Lindbeck, 2006). At the onset, it can be speculated that perhaps it is owing to these regulatory norms followed by governments to control its objectives as a welfare state that limits its complete privatisation, which might bring threat to its customary developmental initiatives as well as its overall integrity. It has been fundamentally due to this reason that various scepticisms have been centred to the legal construction of welfare state in the 21st century context. Esping-Anderson (1996) provides a brief account of the dilemmas that were observed cropping up during the end of the 20th century. According to Esping-Anderson (1996), with rising inclination of governmental progressive efforts, in alliance with its obligations as a welfare state has been witnessed to be shifting towards paradoxical boundaries related to the legal rights, political rights and the social rights of the citizens. As a matter of fact, with the rising trends of global integration and significance delivered to the concept of social citizenship, governments have been facing unavoidable dilemmas when performing as welfare states. The effects could be apparently witnessed in the role of institutions operational amid western welfare states, when assessing their contributions to welfare state economies during the end of the 20th century. As noted in Esping-Anderson (1996), welfare states, in the mentioned period, were facing problems associated with the changing needs of the social citizens and the uprising risks of a capitalised society, which demanded for a change in the construction of welfare states too. It is in this context that welfare state faces both positive and negative impacts of globalisation. These impacts reflect on the state’s core function to organise power in relation to politics, administrations and developing the market forces. This is to ensure equal opportunities in every aspect of wealth distribution and employment. This means that in a welfare state, the government seeks that the citizens are offered with a minimum level of assured income irrespective of their work and property acquired, provided with certain facilities in order to minimise insecurity in relation to social contingencies such as unemployment and healthcare benefits (Pierson, 1996). The citizens are also required to be provided with standard services and assistance irrespective of culture, race along with religions (Pierson & Castles, 2006). It is this particular set of functions that the welfare state needs to perform, which further mandates effective scrutiny of the community and social structures (TSO, 2010; Winston, 2002). It is in this context that because welfare state constructions depend largely on social structures, which are again determined under the influence of labour market formations, family structures, and relationships existing between public-private, governmental-nongovernmental and state-civil societies, changes in these paradigms are likely to lead to the challenges witnessed by welfare states (Pavolini & Ranci, 2008). Some of these challenges point to the limitations that neoliberal ideology of privatisation presents. However, one should hasten to point out that with the rapid transition in the global economy, states are left with the option to attempt to solve global economy with the new concept of privatisation. Welfare states therefore have the choice to privatise its assets and administration. In most cases, these reforms of privatisation are done by the state, which indicates the state is deeply involved in the global economic and political transformations (Doogan, 2012). As specified by Doogan (2012), the state holds the power of privatising its national institutions as per its requirements, based on the economic, political and social transitions witnessed within its periphery. It is in this context or in such settings that globalisation and welfare restructuring become interdependent with the effect of policy response given by the ruling party of the state. These indications show that the welfare state is not getting weaker or smaller and any such thought can be regarded as a myth (Weiss, 1998). Therefore, the continual involvement in the transformation of the welfare state by the government poses significant limitations on privatization, which again rage from political, economic to social factors. Limitations of Privatisation of the Welfare State Reflecting on the speed of the Thatcher government to privatise state assets, one would presume that there is no end to privatising the welfare state provisions and assets. The emergence of Blair’s New Labour saw a redefinition of the concept of privatisation, limiting it to just the transfer or re-allocation of resources from public ownership to private domain. This particular initiative can further be asserted as an attempt to camouflage privatisation by Blair’s New Labour (Whitfield, 2006). One would, at his first sight think there is no risk or limitation to privatising the welfare state. In this section however, factors that limit the privatisation of the welfare state will be discussed from the political, economic and social perspectives. Political Limitations Studying the privatisation reforms followed in Britain it can be affirmed that the motive of the government in doing so was to promote paid labour strongly. As per the Marxism view, such securities are likely to hinder labour flow and thus cause disparity within the world economy, which again gave a strong base to the arguments of political opponents, opposing the change. This particular ethical dilemma and political incomprehension underlying the oppositions’ contradiction to privatisation of the state can be further observed to influence the welfare state privatisation in Britain (Marcuzzo, 2012; Doogan, 2009). In precise, opposition parties obstructing the transfer of assets from public domains to private sectors can be deemed as a major political limitation in privatising a welfare state completely. From a broader perspective, even the ruling government can be observed to be in opposition to the privatisation provision, which is deemed as inappropriate or expensive being in contradiction with the welfare interests of the citizens. As argued in Hacker (2004), in the 1990s, the US healthcare sector witnessed the major disadvantages of a welfare state being privatised inappropriately. With the US health insurance sector reformed as privatised domain, the cost of health insurance increased beyond the affordable cost that could be borne by the common public, resulting in the weakening of the societal health. This in turn was apparently causing obstructions to the welfare interests of the common people. In the recent practices, the health insurance sector within the US have further been refined with the imposition of a few underlying norms principally focusing on governmental aids to common public who forego the age bar imposed by privatised insurance programmes and those who lack affordability to purchase such schemes. At this juncture, governmental programs like Medicaid and Medicare are implemented for protecting the common public’s healthcare rights (Braunfeld, 2013). Hence, response of the ruling government to project the various moral principles and liability of the welfare state also, at times, becomes a limitation for privatising the same. Apart from the above mentioned political limitations to complete privatisation of welfare states, inferences can also be drawn by highlighting the constitutional constraints to such transformations. A general perspective to the notion, as explained in Metzger (2003) and Gilman (2001), reveals that the rudimental functions and principles of a welfare state tend to be the main limitations for its complete privatisation. A certain degree of similarity can be witnessed amid the above stated constraints and the constitutional limitations to privatisation in welfare states, where the basic aim is to protect the constitutions rights of the common public in terms of their health benefit rights, education rights and rights to basic amenities to support a healthy living (Metzger 2003). Correspondingly, legislative frameworks are followed within welfare states, which further impose limits on the discretion of the ruling government to impose privatisation reforms. Therefore, imposition of privatisation reforms requires parliamentary supervision and approval to enact the planned provisions to privatise a welfare state (Medina, 2010). Additionally, with the strong impression of global trade systems and interlinked international political network, the control of constitutionality in a welfare state, fundamentally because of the role played by foreign restrictions on majorly traded products/services, tend to restrict privatisation reforms (Schneiderman, 2001). Overall, a major constraint can be observed in terms of the protection of national sovereignty and security in this context, when privatising welfare state. This can be better explained with reference to Wagner (2002, pg. 10), where he states “...The privatization of space contributes to a spiral of decay and indicates the limits of residential citizenship in providing protection and conferring social rights to local residents”, which further imposes a threat to national sovereignty and thus, is limited. Economic Limitations As identified from the example of the US, privatisation led alterations cause budget constraints on economies, essentializing privatisation of public sector organisations to reduce fiscal burden on public spending. This further proclaims the limits imposed on privatisation of the state in the form of financial constraints to market mechanisms, which can further be justified with reference to the impression built by the affordability of common public in obtaining the demanded benefits. Illustratively, the series of privatisation measures taken within the European nations throughout the 1990s were primitively limited owing to their financial limits. The welfare reforms adopted in Britain emphasised increased reallocation of resources towards the health sector and education sector. Overall, this increased fiscal spending pressure on the government owing to which, it shifted its inclination towards international capitalism becoming a major point of debate amid the ruling and the opposing political parties (Marcuzzo, 2012; Doogan, 2009). Taking the example of the US healthcare privatisation reforms, a similar constraint can be witnessed where complete privatisation of the welfare provision was restricted or limited due to public non-affordability, particularly because of inappropriate and too expensive responses obtained from the private sector (Hacker, 2004). When summed with family structure changes — another determinant of welfare state boundaries — these reforms can be identified to have severe impacts on the demand pattern of social and legal rights of the citizens causing a bitter influence on the labour market structure at large (Kissam, 2004). For instance, taking the classic example of the US, with privatisation reforms in the post-industrialisation era under the Roosevelt administration, demand for skilled labours at the cost of increased level of minimum wage rates in the economy, a degree of disparity was identified in the distribution of wealth and legal rights within every dimension of the welfare state. This implies that privatisation in welfare states are primitively limited owing to the liberalisation demanded in a capitalist market in contradiction to the conservatism approach suggested in such state formations (Callinicos, 2001). This can be better argued with the application of Marx’s theory of welfare state and democracy, which argues that a capitalist society is likely to be infringed by continuous cyclical fluctuations, alienation of a particular group of social citizens and most vitally, exploiting the labour force of the state. In the aftermath, privatisation reforms in welfare states in summation with a capitalist approach taken by the policymakers are likely to impose threats to the social, legal and political risks of the citizens (Tucker, 1995). Drawing from this inference, appropriateness of market funding through privatised mechanisms can also be identified as a major limit to the scope of privatisation. Social Limitations As noted in Pavolini & Ranci (2008), during the late 20th century, these nations were much inclined towards applying a conservatism approach to the welfare state policymaking with greater focus on home care coverage and minimum on residential care coverage. With the advent of the 21st century, almost equal focus was being rendered to both these welfare state benefits wherein the privatisation reform models became more service oriented creating strong influences on the structure of labour market and family structures of these nations (Pavolini & Ranci, 2008; Genschell, 2004). Apparently, the reforms had a strong effect on the family structures as with the reduced mandatory social obligations, the population of these nations could easily afford a larger family, which in turn contradicted the privatised market mechanisms led benefits to privatised welfare state in lieu of the changing family needs and social risks (Pavolini & Ranci, 2008; Bergqvist & Lindbom, 2003). These findings collectively imply that particular welfare functions can be provided effectively in a collective manner, rather than in isolation focusing on one or the other human rights principle of a state. This again puts burden on the government when enacting privatisation reforms within the state owing to the gaps persisting between the ideologies of privatisation (infrastructure) and the definitive features of the welfare state (welfare needs) (to align the legal, social and political rights of the citizens) are also identifiable as limits to welfare state privatisation. Conclusion Privatisation reforms are said to be principally driven by a capitalism market structure, which in turn motivates depoliticising welfare policy making to support free flow of resources driving a change in the infrastructure of the state, which is often opposed by political opposition parties. On the other hand, welfare state operates on the basis of few mandatory principles of both liberalism and pluralism. Although welfare state constructions do comprise a unique combination of capitalisation and democracy, intended towards assuring legitimate rights to the social citizens as per their political and economic needs, these two dimensions often act in opposition to each other, limiting private funding to the privatised provisions in a state. Under such circumstances, practicing privatisation through the adoption of a well-structured policy framework becomes limited. Apparently, the performance and efficiency of the welfare state depends on various factors including family structures. Therefore, a continuous change can be witnessed in the social needs of the citizens in accordance with the alterations continually taking place in the demographic structure, especially with the concurrent effects of globalisation imposition political, economic and social limitations to the complete privatisation of the welfare state. References Andersen, J. G., 2007. Conceptualizing Welfare State Change. 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