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Does the Welfare State Reduce Poverty and Inequality or Encourage Dependency? (1995)

A welfare state is a concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those unable to avail themselves of the minimal provisions for a good life. The general term may cover a variety of forms of economic and social organization. The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare, and capitalism.

Modern welfare states include the Nordic countries, such as Iceland, Sweden, Norway, Denmark, and Finland which employ a system known as the Nordic model. Esping-Andersen classified the most developed welfare state systems into three categories; Social Democratic, Conservative, and Liberal.

The welfare state involves a transfer of funds from the state, to the services provided (e.g. healthcare, education) as well as directly to individuals ("benefits"). It is funded through redistributionist taxation and is often referred to as a type of "mixed economy." Such taxation usually includes a larger income tax for people with higher incomes, called a progressive tax. This helps to reduce the income gap between the rich and poor.

Early conservatives, under the influence of Malthus, opposed every form of social insurance "root and branch", arguing, as economist Brad DeLong put it: "make the poor richer, and they would become more fertile. As a result, farm sizes would drop (as land was divided among ever more children), labor productivity would fall, and the poor would become even poorer. Social insurance was not just pointless; it was counterproductive."[63] Malthus, a clergyman, for whom birth control was anathema, believed that the poor needed to learn the hard way to practice frugality, self-control, and chastity. Traditional conservatives also protested that the effect of social insurance would be to weaken private charity and loosen traditional social bonds of family, friends, religious, and non-governmental welfare organisations.[64]

Karl Marx, on the other hand, opposed piecemeal reforms advanced by middle class reformers out of a sense of duty. In his Address of the Central Committee to the Communist League, written after the failed revolution of 1848, he warned that measures designed to increase wages, improve working conditions, and provide social insurance were merely bribes that would only temporarily make the situation of working classes tolerable and in the long run would weaken the revolutionary consciousness needed to achieve a socialist economy.[65] Nevertheless, Marx also proclaimed that the Communists had to support the bourgeoisie wherever it acted as a revolutionary progressive class because "bourgeois liberties had first to be conquered and then criticised."[66]

In the twentieth century, opponents of the welfare state have expressed apprehension about the creation of a large, possibly self-interested bureaucracy required to administer it and the tax burden on the wealthier citizens that this entailed.[67]

Political historian Alan Ryan points out that the modern welfare state stops short of being an "advance in the direction of socialism," noting in particular that: "its egalitarian elements are more minimal than either its defenders or its critics think", and because it does not entail advocacy for social ownership of industry. The modern welfare state, Ryan writes, does not set out:

to make the poor richer and the rich poorer, which is a central element in socialism, but to help people to provide for themselves in sickness while they enjoy good health, to put money aside to cover unemployment while they are in work, and to have adults provide for the education of their own and other people’s children, expecting those children’s future taxes to pay in due course for the pensions of their parents’ generation. These are devices for shifting income across different stages in life, not for shifting income across classes. Another distinct difference is that social insurance does not aim to transform work and working relations; employers and employees pay taxes at a level they would not have done in the nineteenth century, but owners are not expropriated, profits are not illegitimate, cooperativism does not replace hierarchical management.

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