The Future of the Welfare State: Pros and Cons - Essay Sample

Introduction

The future of the welfare state has been debated by economists and political scientists for an extended period. The key concerns have been whether the welfare state will suffice beyond the 21st century. However, there have been two sides to the coin when discussing this issue. Since the onset of the 19th century, some proponents have ascertained that the welfare state could not survive the emerging economic shifts and the impact of the increased rate of globalization (Keizer, 1997). On the other hand, some argue that with proper adjustments, the welfare state could be the sole solution to the anticipated positive change and sustainability. A critical analysis of the current evidence indicates that indeed there is a looming challenge that could impede the success of the welfare state amid the increasing economic, political, and social dynamics if strategic measures are not undertaken. This essay addresses the question regarding whether there is a future for the welfare state.

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Castles (2001) argued that the welfare state is presently characterized by crisis myths as well as several crisis realities. The scholar was concerned with the state welfare that has been analyzed and viewed from the crisis perspective. It is evident that indeed there has been a significant transformation in the social, economic, and political environment in developing and developed states. The down-sizing of the public sector has already been witnessed in major economies of the world. According to Castles (2001), there is a significant rise in expenditure in the public domain or scope, which raises the question of whether governments will sustainably continue to support or control over 50% commonly associated with production and service activities and endeavors. The imbalanced nature in terms of growth rate between the expenditure of governments and the revenue collected leads to a declining financial capacity as depicted by the expanding national debt. An example that is depicting this scenario is the United States. However, scholars have argued that although this the crisis of increased expenditure is already being witnessed in a significant number of countries, there is evidence that ascertains that strategic economic adjustments could lead to a positive outcome (Castel, 2001; Gallarotti, 2000).

Another aspect that has raised concerns regarding the future of the welfare state is the issue of globalization and production dynamics. The competitiveness of the state in terms of meeting the needs of the public has remained on the balance amid increased competitiveness. The redistribution policies adopted in most of the open economies in the world have raised the question of sustainability (Chen et al., 2014). For example, most scholars have questioned whether there exists any form of interconnectedness between the methods of production, integration of international economies, and the welfare states. The response to this concern is centered around the role of globalization. Amid globalization, the preferences of different governments have raised questions regarding their capacity to address the needs of the emerging needs of the population. For example, social expenditure in OECD countries has depicted an increasing trend within the past few decades with a corresponding decline or stagnation of social protection (Chen et al., 2014). Borrowing from this experience while recalling the influence of industrialization, it is evident that the welfare state could fail to meet essential social dynamic needs in the future through globalization, which is a key aspect of open economic models. Nevertheless, Chen et al. (2014) proposed that by paying attention to demographic structure, the advantages of globalization could be used to intensify, improve, and sustain the interventions of the welfare state to improve economic performance.

Additionally, culture transformation and labor market shifts have also increased the doubt regarding the future of the welfare state. According to Ferrera (2008), the transition to the Silver Age from the famous Golden Age came with both internal social structure and economic changes and the external pressures. In this case, governments have been forced to accommodate, incline, or adapt to emerging changes. In most cases, the adaptations characterizing most developed countries have incorporated the politics of blame avoidance and a plurality (Ferrera, 2008). Such conflicting positions increase the doubt of the sustainability of the welfare state. For example, the increased cost of healthcare in the United States has been attributed to external pressures regardless of internally embedded structural imbalances. Moreover, countries such as Australia, Belgium, Canada, Spain, France, Ireland, Germany, Denmark, and the Czech Republic have been characterized by a stagnated annual welfare expenditure as gross domestic product percentage (Chen et al., 2014). However, this is contrary to the popular opinion of increasing GDP. At the same time, increased social expenditure has been interpreted to imply a positive change in living standards or employment; however, some scholars have argued that increased social expenditure is witnessed where the community welfare is highly deteriorating (Castle, 2014).

Furthermore, the problems of the welfare state are inevitable, which further ascertains that there is no future in the welfare state especially when positive changes are to be met through increased social expenditure by the government. One of the identified set of problems falls under the category of exogenous factors (Lindbeck, 2006). Changes in demography could drastically impact the welfare state. For example, a significant number of developed countries within the European Union have already witnessed or could witness an escalating number of people beyond the statutory retirement bracket as opposed working population. The increasing cost of insurance, retirement benefits and healthcare costs among other welfare interventions could exacerbate the future of experiences in terms of expenditure in most developed countries (Lindbeck, 2006). At the same time, globalization has opened the labor market; therefore, with the entry of countries with cheap labor such as China, there is a potential reduction in wage-based national income as well as a reduction in purchasing power of low-skilled laborers. On the other hand, endogenous factors such as moral hazards and insurance income inconsistencies in healthcare could equally impact the welfare state (Lindbeck, 2006). For example, cases of people seeking more medical tests because they have an insurance cover or having social norms that impact work efficiency are inevitable occurrences that have already dominated demographic dynamics.

Conclusion

In conclusion, the challenges associated with the welfare state have revolved around the insufficiency of it to suffice in the future. The key concerns include the impact of globalization on production, social or demographic structure, and labor market. Amid increased government expenditure to meet the ever-rising social needs, there is a need to rethink the approach to production and revenue expansion at the state level. Failure to adopt structural adjustments and strategic resource mobilization only imply that overreliance on the welfare state could be disastrous for the future regardless of the development state of a nation.

References

Castles, F. G. (2014), The Future of The Welfare State: Crisis Myths and Crisis Realities. Department of Social Policy, University of Edinburgh. DOI: 10.2190/GJ9M-WUGX-DMJ2-35PA

Chen, Y., Gorg, H., Gorlich, D., Molana, H., Montagna, C., and Temouri, Y., (2014), Globalization and the Future of the Welfare State. IZA Policy Paper Series: Policy Paper No. 81.

Gallarotti, G. M., (2000), ‘The advent of the prosperous society: the rise of the guardian state and structural change in the world economy.’ Review of International Political Economy, Vol. 7, Iss. 1, pp. 1-52.

Ferrera, M., (2014), ‘The European Welfare State: Golden Achievements, Silver Prospects.’ West European Politics, Vol. 31, Iss. 1-2, pp. 82-107. DOI: 10.1080/01402380701833731

Keizer, P., (1997), The Future of the Welfare State: Reflections on Rogernomics. Universiteit Maastricht Dept. of Economics.

Lindbeck, A. (2006), The Welfare State – Background, Achievements, Problems. Research Institute of Industrial Economics: IFN Working Paper No. 662.