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2016-09-23

"For a Targeted Criticism of the Welfare State" - referat L. Balcerowicza i M. Radzikowskiego

For a Targeted Criticism of the Welfare State

This criticism of the welfare state (WS) would be more effective if it were better targeted. This is why we start with certain clarification distinguishing three dimensions of the WS. We use them to show how large are the differences between the welfare states in the real world. Then we identify those countries that appear to face the greatest challenges regarding the sustainability of their welfare states. We conclude with same remarks on how to make the criticism of the overgrown and/or baldy structured welfare state more effective.

Some clarifications

It is best to define the welfare state not through its noble goals but through its instruments. At the minimum they include transfers in cash (PAYG pensions, unemployment benefits, family allowances, etc.) and transfers in kind (especially publicly financed health and education). One can add to these components the tax subsidies, e.g. subsidies to the employers financed health insurance in the USA. (see: e.g. Feldstein, 2006) and “social” regulations like the minimum wage, rent controls, employment protection, etc. We will focus on the social transfers because they are by far the most important instruments of the WS and also due to the availability of data. However, occasionally we will also refer to the two other policies.

It is useful to regard the WS as a special kind of a welfare system which we define as arrangements to deal with various individuals’ risks: acute poverty, sickness, accidents, etc. A brief look at history reveals the existence of various welfare arrangements: family (kin) based, religion-based, civil-based, corporate–based, the market-based (insurance through jobs, private savings and commercial insurance). Countries have always had some welfare systems being the combinations of all or some of the above “pure type” arrangements. The poor laws in Europe constituted the early welfare states (Tocqueville, 1835) had shown the incentive problems of the early welfare state in Britain which foreshadowed those of a larger WS).

The concept of a welfare system (as distinct from the welfare state) is a useful communication device: First, is highlights, a basic fact that a lack of large WS does not need to mean the absence of the alternative welfare arrangements. Second, it draws the attention to the question of what happens to these arrangements when the WS expends and shrinks. There is a large body of empirical literature on the crowding out effects of the growing WS or (e.g Morduch, 1999, Kelly 2009) and, more interestingly, for the present situation of the unsustainable WS, there is some literature on the crowding in effects of the shrinking WS (Heutel, 2009). Third, distinguishing various welfare arrangements should lead to more comparative analysis of the WS. There are many ideologically idealized descriptions of this system and not enough comparative research which would, for example, show how different is the treatment of the welfare beneficiaries by the welfare officials and by the other suppliers of the welfare services (family, churches, other voluntary organizations, the employers of the commercial organizations).

There are many criticisms of the WS. They can be grouped into economic, moral and philosophical and political. The distinctions between these categories are to some extent arbitrary but still useful because different types of criticism lead to partially different proposed remedies. And any proposal for reform should start with a clarification of what is its main goal.

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