The Extent to Which Globalisation Has Undermined Welfare State and Restrict Welfare Development - Coursework Example

Title: The Extent to which Globalisation has undermined Welfare State and Restrict Welfare Development Name Institution The extent to which Globalisation has undermined welfare state in developed countries and restricted welfare development in developing countries Introduction There has been a major concern over a long time about the relationship between changes in the international radical economy (globalisation in this case) and institutional arrangements especially those based from traditional welfare state of developed countries (Fitzpatrick,, 2001; 220). Apparently, this is a systematic relationship that has a lot of reproaches and comments that will, in the end, acknowledges the impact of globalisation on social policy both in developed and developing countries. Globalisation and the consolidation of welfare state issues leave no option but to impact on the nation’s economic, political and social problems. According to Harcourt (2001), globalisation is a complex phenomenon that comprise of several predispositions in the economy, society and cultural spheres. Its multidimensional character gives a unique definition that describes increase in the movement of factors of production, goods and services, information as well as people between countries. This act of globalisation leads to integration of various economic, social and cultural aspects and for this reason, costs and opportunities are created thus affecting the world either way (Feldmann, 2001; 550). Actually, globalisation is inevitable especially in the contemporary world society where technology is improving. The focus will be on the driving forces which include; a) free trade liberalization, b) advance in technology that lead to reduction in the cost of communication, c) innovations (entrepreneurship) and d) the social networks around the world (Garrett, 2001). Washington and Paylor (1998) believe that change in technology and entrepreneurship is the main forces that accelerate the aspect of globalization and these factors alone cannot explain economic integration without involvement of social welfare of a country. For any economic observers, globalisation has created an impression of a state withdrawal from its social welfare as well as ameliorative purposes thus undervaluing traditional welfare (Panic, 2003). However, since the early times of capitalism most developed and developing countries perhaps may have not realize the impact of global capital on welfare state (Esping-Andersen, 1999). For example, labour movements in Europe have been retreated since socio-democratic concern has minimal safety and the reality is safety on social provision proves to be important when it comes to economic success and social stability particularly in developed countries (advanced capitalized nations). On the other side, developing countries that may in the past depended on traditional support for instance extended families and village groups is currently under pressure to shift from traditional functions to state functions(Weiss-Gal and Gal, 2007: 350). This may be considered as a process of life commodification but at some point it weakens old social networks. Apparently, the process has made the developing countries more vulnerable to the demand of huge capital since privatisation especially of public services looks to be a reliable investment and aid. Developing countries must struggle persistently in order to encourage a decent social endowment (Cousins, 2005). According to Gelissen (2005) capitalist nation/economy with a balance state of economic and minimal social disruptions would long survive. Well, globalisation has undermined traditional states and social networks and has function less than required in the capitalist system (Ferrera et al, 2000). This does not mean that capital will always promote social provision but the ‘hostility’ effects of globalization to social programmes seem to be a contradiction to welfare state. Globalisation has a lot to do with welfare state What is globalisation? This is a process of global integration that results from interchange of global/world views products ideas as well as various aspects of culture (Harcourt, 2001; 3). Many economic observers have found that the increase in the internalisation of state economy have tumbledown the welfare state along two lines; The concentration on the production and the real economy. a) Concentration on the production Any impact on production normally affects the welfare state of a country. There is always redistribution and reorganization of production when a country enters global arena (Harcourt, 2001; 25). According to Kotz et al (1994; 125) the investment of new world system transforms the structure in the nation’s capitalised system. This has resulted to the movement of people from the countryside to towns and cities of developing nations creating a practical pool of cheap labour and development of good transport system and advance communication technologies in the cities. This defines economic inequality since the benefits only goes to the people around the place of production while those far from the producing site would only survive when there is effective policy intervention by the government (Bradshaw and Hatland, 2008). A different dimension of how production change due to globalisation has undermined the traditional welfare of countries is the focus on shift in the pattern of trade. When the firms in the developing countries predominantly have market supply overseas, local workers who formally produces the same goods will become unemployed thus there will be growing rate of unemployment within the country. This is as a result of undermining policies in the capitalist system. b) Focus on globalisation of finance relative to country’s welfare state Globalisation of finance also increases the levels of unemployment but through a different mechanism that operates under economic constraints imposed by policy autonomy from the national government. According to the report by Terry et al (1994), economic constraints (growing level of unemployment) are systematically asymmetrical therefore they frustrate national microeconomic policies. The national government will concentrate on how to lower the raising rate of unemployment instead on focusing on development of economy (Mishra, 1999). Therefore, pursuing deflationary policies for the purpose of reducing money supply regardless of the effect for employment would successfully achieve deflationary issues caused by unemployment (Ferrera, 1996). On the other hand, expansionary policies perhaps may not remedy the situation of economic constrains as expected. The net element of this asymmetry is any alliteration of national finance would strain economic state thus undermining welfare state of the nation (Terry et al, 1994; 226). Government institutions, NGOs, trade unions and other trade associations are currently directing political actions to global arena in an attempt to influence capitalism (Meeuwisse and Swärd, 2009: 366). For example, some political actions from NGOs and private organizations that support social movements are normally encouraged and the community interest on the other side is to be part of international community. European Union has promoted transnational policies through formation of alliances of state, regional and local authorities (O'connor, 2005: 353). These alliances have domestic interest that perhaps may be hostile to a developing state. Development and sharing of a common policy among civil associations in this case diminish the wishes of capitalists therefore social policies will no longer confine to the domestic sphere of the developing country (Marston and McDonald, 2008). The concentration of loss of state independence and autonomy when it comes to globalisation is not without its difficulties. In traditional welfare state, state managers had freedom to decide, for instance, the development plans to track and allocation of resources for specific actions. This social policy in this case was shaped by national government and any weakness when it comes to implementation owed domestic institutions rather than global ones (Frost, 2008: 345). The framing of social policies in a globalised state leads to loss of autonomy thus present restriction on power, be it internal or external. For example, petition by human right organizations to hold the state government account for a certain conduct. Without organized capitals, the new global order characterized by integrated cultural and social issues would not be achieved. A qualitative shift may be anticipated but social welfare at some point are restricted and undermined (Alcock and Craig, 2009). This means that all the subsets of a state will hardly be approached equally without undermining. What is the relationship between globalisation and social inequality? Ferrera, Hemerijck and Rhodes (2000) claimed that globalisation causes social inequality among and within developing and developed countries. The domain of welfare state is undermined and restricted at all cost since the resource allocation for development is compromised by the contemporary state of service offered by interacted nations. Many economic observes found that globalisation is characterized by liberal movement of capitalism as well as technology form nations with relatively high regulations and tax revenue to those countries with low level of labour value (Sirgy et al, 2004). Developing countries in this case would reduce wages and the cost of spending in the social sphere. However, protection of working environment may be observed especially when the local employers offer high wedges to the households. Well, this can be seen a way forward but in the context of welfare state, specific conditions for development perhaps may have been operated through a bias means. According to Harcourt (2001) engagement in foreign trade may not necessarily foster the development of a nation state. Apparently, trade is a small, if not insignificant, factor in the economy. Does it create inequality between the poor and the rich? The fact is household development as well as increase in production of goods and services merely depend on national policies (Fitzpatrick, 2001: 229). This national policy defines country’s political culture, institutional framework as well as the kind of leadership role that play a crucial role in promoting economic development and social welfare. This means variances in economic efficiency correlates closely to variances in the kind of legal framework offered by a state. What does this means hence? Globalisation is not responsible for bad governance that would cause poverty in a country. However, globalisation affects the domestic policies both in developing and developed countries responsible for management of poor economic performance with the available resources. Globalisation perhaps may not contemplate on technical skills of labour force but rather for citizens to fit in the context of globalisation, they need to be highly educated as well as skilled information and communication technology world with a strong social net. This implies that the government will play a bigger role to secure citizens by offering effective access to high standards of services. Developing countries is normally characterised by weak social policies and therefore it may be difficult for them to reduce the cost fixed by globalisation (Kleinman, 2002). According to Esping-Anderson (1996) the cost of strengthening traditional social welfare in developing nations in a globalised world is high. Due to this cost, developing states may abandon the social service provision thus reducing the level of taxation. Therefore, globalization would affect the role of local institutions and size of state. The impact of globalisation on state As mentioned before globalisation boosts trade barriers, liberalizes world capitalism market and promotes technology progress (essential fields in telecommunication and movement of people). This has brought in a corresponding measure where nation-states are required to transform their traditional norms-setting and regulations in order to fit to the regional and global scale (Terry, Goold, and Harvey, 1994). There are many challenges that face the world currently. These problems (challenges) include terrorism attack, economic crisis, pollution of environment and poverty. These problems cannot be dealt at the national level only or through regional negotiations either. Broadened economy and social interdependence appears to impact on the sate decision making processes in two essential ways; 1) There will be transfer of decisions to the international bodies since state participation is high, and 2) Development of a multi-layered governance system. What are the implications of the two decisions making process? One, decisions at international level would undermine the traditional state of a country and two, decisions through a multi-layered system would restrict development in developed countries since some developed countries may have more advance systems than those of local level of governance. The major subject of debate is the conditions of welfare state of various nations during pre-globalisation (1940s-1980s) and globalisation (1980s up to date). According to Verdu (2002), political and economic circles in 1980s and 1990s has been due to impact of globalisation of economic activities. A dominance position in the circles is that the governments both in the developing and developed nations have been limited to manage their capital flows as well as trade regulations since there are emergences of redistributive policies. Perhaps these policies affect the government activities for example lowering social public expenditure as well as deregulating labour markets in order to make their nations competitive in the global arena (Panic, 2003). This has been reflected in the western countries where political power governing various parties has lost its importance especially in the developing nations. These countries (developing countries in this case) have been obliged to follow unified policies that at the end of the day undermine their traditional welfare state. For example, globalised enabled countries have their capital markets deregulated and weakening of trade forces. Therefore, the government in this case reduces their revenue collection through reduction in taxation level and as well shifting taxation to less mobile factors such as labour from mobile factors like capital. Pierson (1996) found that shift of taxation is a reality imposed by globalisation to the economy since the governments particularly those that governs the developing nations will find difficulty in managing their welfare states (especially those that needs finance). Well, retrenchment of welfare state in developed nations (capitalist countries) and convergence of welfare state in the same developed countries are two big issues of concern when it comes to development. A major concern also is the political choices that clearly define the evolution of welfare states. The impact of politics on the welfare state as far as development is concern (before and during globalisation) Focusing on the political traditions in most Europeans countries between 1948 and 1980, the influence on the welfare state was from social democratic traditions as well as Christian democratic traditions (Pusic, 1964: 3). For example, social democratic tradition in Sweden was prominent during the pre-globalisation period (Verdu, 2002). This political power governed for a long period of time and the dominance regarding the state of welfare was quite impressive. However in Austria, the governance of social democratic tradition was short and affected by Christian democratic tradition. Apparently, the observable results between the two countries used somewhat similar social demographic model. Similar aspects like integration of women into labour force through family-oriented public services (for example homecare services) were discovered by the model (Esping-Anderson, 2009). The two counties that used the same model (social democratic tradition) have strong political forces currently in the globalised world. They have a significant percentage of labour union forces (Verdu, 2000), significant percentage of labours covered by collective percentage agreement and a great political share acquired by parties in the social democracy (OECD, 1997). The justification of development restriction in developed countries according to social democratic model is, during pre-globalisation, there was social universal character in the country where welfare state such as health and education that integrated all population groups in the country. Nevertheless, the social expenditures during the globalisation period have not declined even with the investment by the government. Also, in some other countries like Belgium, social expenditure during pre-globalisation period was low and it surpassed the threshold during globalisation period (Weiss-Gal and Gal, 2007). Moreover, labour force in developing countries perhaps would be affected by outsourcing programs. This may be an indirect undermining factor that at the end of the day workforce surplus will be realized in the economy. The reason is that firms would prefer outsource cheap labour from the integrated global arena than those produced within the country (Feldmann, 2002). This will directly affect the welfare state of households of the country thus increasing government expenditure on households’ services like delivery of health to the population. Economic analysts using ‘convergent’ theory argues that a country must reduce the welfare state in order to be competitive in the global market (Navarro, 2000; 420). In both developed and developing countries welfare state normally burden economy thus hindering development (economic growth). An observation found by Verdu (2000) shows that between 1980 and 1990, most of the European countries experienced a slowdown in economic growth. This was due to the expansion of nations’ welfare state. The deceleration in rate of development towards 2000 in western cultures was a sign of ‘exhaustion’ welfare state which was an indication that social democratic model was failing due to globalisation (Rothstein, 1996). The thesis that globalisation has hindered traditional welfare state perhaps would not conflict on the employment performance of countries in OECD (OECD, 1997). Traditional institutional structures in the western countries during the pre-globalisation era generated an egalitarian system where the development of the country depended on the national collective contribution. However, strong participation in the global market during the globalisation period allowed demoralization of welfare state. Although there is development in the developing countries, the basis lies on the less mobile factors and it cannot be strategic whatsoever. Globalisation leads to national social disintegration but to what extent? Parsons (1942; 57) pointed out social change in his theory as the cause of social disintegration within a society. From this perspective therefore, globalisation is regarded as the trigger of the social change since a country involved in globalisation changes its society functions and culture. Bradshaw and Hatland (2008) found that globalisation affects mainly the unskilled workers and those with low level of education. It is apparent that most of these workers especially in developing nations are no longer supported by the community. Therefore, process of globalisation induces feelings of anxiety and isolation within the group (Andersen, et al, 2005). Most developed countries in the west strengthen labour in order to develop their economies. Capital as well is a fundamental element that mutually upraises the economy together with other factors though it is free to move across borders unlike labour (Blank and Burau, 2004). Therefore, internationalisation of countries’ activities would favour capital not labour unless only those people with higher levels of learning will earn a place in the international labour union. What will happen to the unskilled and workers with low level of education? As a consequence to this, the income going to profit would definitely increase rather than wages for the labours increasing. The defence of national welfare state is not as easy as such and it may cost a lot to the nation hence restricting development to the nation. Focusing on the framework of capitalism, patriarchy and race differences where a global society will contain global social dissection of class, gender as well as ethnicity, the struggles and competition over work will arise since gab of supranational global social policy is realized. According to Frost (2008) integration of countries of the world leads to the development of the global actors needed to respond to the changing social policy influenced by the global conflict of interest. A question is who is superior in the global level, capital or labour? In terms of class struggle, internationalised organizations formulate policies that favour intellectuals working within and around. This class will try to legitimate and ‘fence’ globalised capital in order to prevent the act of globalised socialism. The most interesting part which has not been effected and has restricted development is there is no that global social-democratic social policy that serves a global social purpose (Feldmann, 2002; 570). In terms of gender struggle, the United Nations statement on human rights has placed restrictions to women. The statement states; “There will be no restrictions for men and women working in the places they are eligible to work unless the employment in the work place is harmful to their morals and health or their life (UN Report, 2014).” Women are part of the economic development especially in the developing countries. Internalisation of labour unions without consideration of women welfare in all dimensions perhaps would develop economic constrains (Esping-Anderson, 2008) since there is no effective global socio-democratic policies that support women when restricted to the international obligations (Esping-Anderson, 2009). Focusing on ethnicity, non-white global south countries have huge global inequalities in which the whites are the beneficiaries when it comes to control of globalised economy and social policies (Esping-Anderson, 2009). Education, health and social protection aid from North to South is under the control of World Bank and it is clear that International Monetary Funds is largely owned by North. Alliance of developing countries does not receive the fair share from global integration to promote country’s development. Dialectic model It is assumed that internationalisation expand opportunities as well as increasing wedges in the export sector of a country (Sirgy et al, 2004: 271). As a result, this lowers the prices of imported goods thus promoting the purchasing power of the exporting country. Well, developed countries (in this case that have succeeded in effective flow of capital across borders) would take care of the social welfare. For example, the adoption of advanced technology promotes efficient performance of local firms (Sirgy et al, 2004: 289). The country in this case will produce cultural products that at the end of the day promote cultural wellbeing of the individual within the nation. Globalisation produces a list of influences which include choices of foreign goods consumption that regards expansion of free trade globally. Comparative theory regards globalisation as a favourable process that enlarges access to new investment ideas (World Bank, 2002). What is interesting in the two models? As far as globalisation promotes country’s interdependence on the global society, take inward investment for example. While there is an increase in inward investment, economic wellbeing is positively influenced since more jobs are created from the foreign firms. However, the domestic firms will lose jobs thus influencing countries welfare negatively (Proposition 10, p. 290). Besides, inward investment due to globalisation lowers the prices of products and allows better access thus depleting the natural resources of the nation. Positive contribution from the technology is rather hierarchical where technology is realized from organisational performance, access to cheaper products to domestic/local consumers. But then, the relevant literature is the negative effects that restrict the development objectives of an economy by undermining the welfare state. It is apparent that the inward technology allows the transnational organizations to outperform the domestic ones. As mentioned earlier, this would lead to the growing level of unemployment at the same time there will be creation of insecure jobs at the ground of subsistence (Petras and Velmeyer, 2002: 25). Societal instability and social spending There is a high possibility of greater societal instability when a country enters into a vast global flow particularly in the developing nations. The effect of globalisation on social stability is closely related to those on production since social conditions that controls productions are developed from a social context. According to Esping-Anderson (1996), countries that have greater access to global market have to initiate free market reforms. These reforms will be market-oriented prescriptions that would cultivate aspect of social disequilibrium particularly in the rural areas. As mentioned above, the result of this disequilibrium will inflict cost to the central government thus declining the rate of development of the country. Additionally, hostile human influences are realized from the global integration especially when the capacity of state is weakened. Even with the developed nations, agencies of globalisation implement hostile policies that are directed to cut the cost on social spending. For example, in times of economic crisis, countries that wish to remain strong in terms of capital would lower tax levels fairly to that dominant elsewhere. The result will be that the government will be forced to reduce public resources in order to account for welfare needs (Panic, 2003: 27). The radical approach shows that globalisation brings unequal exchange of ideas, products and culture and this forces domestic society to foster their concern through agencies (Petras and Velmeyer, 2002). Globalisation extract fundamental societal resources needed for development particularly on the developing countries and human welfare in this case is hampered. The instability factors gained from this extraction would definitely produce a significant effect to the state revenue. Conclusion As pointed out by the convergent theory, globalisation has shifted the welfare state funding of countries towards more reliance on taxing fixed factors of production (for example labour) as well as less reliance on mobile factors (for example capital). Aspects resulting from globalisation has led to economic constrains thus the composition of revenues are affected. In this case the social policies developed from deregulation of capital market has affected the ability (undermining in this case) of social democracies in developing the country’s economy. Also, internationalisation of trade perhaps have justified the decline in social security in developed countries where they have been relying heavily on this mode of revenue collection in funding their welfare states. Countries in the west that have reached high level of globalisation have seen their institutional policies reformed. 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