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L12 - Political Economy of the Welfare State

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University of Ottawa
Political Science
Joseph Roman

April 1, 2014 The Political Economy of the Welfare State 1. Understanding the effects of entitlements on capitalism 2. The three worlds of welfare capitalism 3. The role of class and other influences on welfare state formation 4. Changes to welfare states What is a welfare state? • All states claim to be welfare states • Which services fall under the welfare state? -Historically - everyone ought to be entitled to sanitized water and gas • Do high levels of spending indicate a commitment to social equality? -Not necessarily • The simplest definition of the welfare state is that it is about social citizenship -equality that exists among everyone, regardless of class, gender, socioeconomic status • Goods and services are collectively provided in a society that generates inequality because of capitalism -capitalism entails inherent inequality  The welfare state is about citizenship Social Citizenship as a Concept • Rights that emerge under conditions of capitalism • Capitalism requires social embedding because of its atomistic qualities • “Free labor” dominates -the only way you get access to goods is through participation in the market • Capitalist societies are inherently stratified because they are class-based and because the necessities of life are commodified • Class is an institution that emerges from property relations and economic structures • Citizenship in general refers to a basic equality that everyone enjoys regardless of one’s class or status • Three rights are accorded within a general matrix of citizenship: civil rights (the right to assemble), political rights (the right to vote), and social rights (basic goods and services/the necessities of life) • Social rights are unique because it speaks to community membership, putting it at odds with capitalism’s alleged individualism • Social citizenship permits a paradoxical situation within capitalism: a basic human equality is apposite market-based inequality What do Welfare StatesAccomplish? • a floor is provided for citizens and, thus, represent the most significant change in capitalist democracies • social risks that appear throughout one’s lifetime are managed • cost effectiveness through economies of scale, i.e. resources are pooled, thereby becoming cheaper on a per person basis • while markets can provide anything, the excessive rent-seeking nature of agents cause many goods and services to be out of reach • decommodification of labor • labor can use the welfare state as a political tool in two ways: (1) improve solidarity between workers as (2) they do not entirely rely on the market for the necessities of life • workers may opt out of work when it is necessary for them to do so • welfare states, however, have no effect on the willingness to work or economic performance The Politics of Decommodification I: Power Resource Theory • Labor needs to mobilize its power since it has to act collectively • the development of collective bargaining and the emergence of Left parties enhances demands for the welfare state • what does labor need to consider?: The reality of opposition forces, the durability of labor power, and patterns of alliances • Patterns of alliance are especially important given that the working class has never made up the majority of the population, save for Belgium in 1912 when they made up 50.1% of the population. • The structure of the economy is important for it affects cross-class alliances • White-collar workers are important allies and the development of the welfare state did stimulate their expansion The Politics of Decommodification II: Electoral Systems • Proportional representation (PR) systems are more amenable for the emergence of Left parties • Third parties have easier electoral breakthroughs • First-past-the-post systems can permit for electoral breakthroughs, though, e.g. the Australian Labor Party as the most successful Left party prior to the election fo the first majority Labor government in the UK • Nonetheless, PR systems promote Centre-Left coalitions • In first-past-the-post systems, median voters prefer Right parties because they fear Left parties will tax them • Left parties have generally governed more often in PR systems than in first-past-the-post systems  The presence of a Left party promotes decommodification The Politics of Decommodification III: The VOC Approach • Coordinated market economics (CMEs) are more open to decommodification than liberal market economies (LMEs) • Tendency of institutional complementarities • The welfare state acts as a tool against risk to ensure workers if they need to retrain • CMEs promote social protection because firms require skills retraining and depend on workers’willingness to invest in firm-specific skills • Firms in LMEs neither benefit from nor have an interest in skills retraining • The demand for general skills in LMEs means employers prefer market forms of coordination and workers often do not support measures to insure against the social risks of unemployment and retraining • Employers in CMEs are generally supportive of social protection since it gives them access to a highly skilled workforce • Wage compression is encouraged in CMEs because of worker solidarity How Are Welfare States Delivered? 1. Cash transfers -unemployment insurance -social assistance -child benefits 2. The direct provision of goods and services 3. Tax credits -RSPs Explanation of the Development of the Welfare State: FunctionalistApproaches • Welfare states serve to support capitalism • Provides a social supports for capitalism, i.e. extra-economic aspects • Social reproduction is required • Social reproduction is required Explanation of the Development of the Welfare State: StructuralistApproaches • Two sub-sets in this approach • (a) Bureaucratic expansion facilitates the welfare state • The state’s administrative capacities are better developed and it can now gather information more effectively and then deploy resources • (b) Capitalism produces systematic contradictions that need to be managed Explanation of the Development of the Welfare State: InstitutionalApproaches • Focuses on social embedding • Inspired by Karl Polanyi’s The Great Transformation, institutional approaches argue that markets cannot sustain themselves without political coordination and social cohesion • Working class power is propped up because welfare states create new constituencies that are often represented in parliaments Explanation of the Development of the Welfare State: ConflictApproaches • Examines social cleavages and their
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