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There are three main interpretations of the idea of a welfare state:
- the provision of welfare services by the state.
- an ideal model in which the state assumes primary responsibility for the welfare of its citizens. This responsibility is comprehensive, because all aspects of welfare are considered; a "safety net" is not enough, nor are minimum standards. It is universal, because it covers every person as a matter of right.
- the provision of welfare in society. In many "welfare states", especially in continental Europe, welfare is not actually provided by the state, but by a combination of independent, voluntary, mutualist and government services. The functional provider of benefits and services may be a central or state government, a state-sponsored company or agency, a private corporation, a charity or another form of non-profit organisation.
In German, a roughly equivalent term had been in use since 1870. There had been earlier attempts to use the same phrase in English, for example in the text "Four German Jurists" by Munroe Smith in Political Science Quarterly, 1901, but the term did not enter common use until William Temple popularized it.
In French, the synonymous term "providence state" (êtat-providence) was originally coined as a sarcastic pejorative remark used by opponents of welfare state policies during the Second Empire (1854-1870).
The development of welfare states
Modern welfare states developed through a gradual process beginning in the late 19th century and continuing through the 20th. They differed from previous schemes of poverty relief due to their relatively universal coverage. The development of social insurance in Germany under Bismarck was particularly influential. Some schemes, like those in Scandinavia, were based largely in the development of autonomous, mutualist provision of benefits. Others were founded on state provision. The term was not, however, applied to all states offering social protection. The sociologist T.H. Marshall identified the welfare state as a distinctive combination of democracy, welfare and capitalism.
Examples of early welfare states in the modern world are the Sweden, Netherlands and New Zealand of the 1930s. Changed attitudes in reaction to the Great Depression were instrumental in the move to the welfare state in many countries, a harbinger of new times where "cradle-to-grave" services became a reality after the poverty of the Depression. In the period following the Second World War, many countries in Europe moved from partial or selective provision of social services to relatively comprehensive coverage of the population.
Arguments for and against the welfare state
The concept of the welfare state remains controversial, and there is continuing debate over governments' responsibility for their citizens' well being.
Arguments in favor
- humanitarian - the idea that people should not suffer unnecessarily.
- democratic - voters in most countries have favoured the gradual extension of social protection.
- ethical - reciprocity (or fair exchange) is nearly universal as a moral principle, and most welfare systems are based around patterns of generalised exchange. Altruism, or helping others, is a moral obligation in most cultures, and charity and support for poorer people are also widely thought to be moral.
- utilitarian - the same amount of money will produce more happiness if given to a poor person than if given to a rich person; thus, the simple act of redistributing wealth from the rich to the poor will increase the total happiness in society.
- religious - most major world religions emphasise the importance of social organization rather than personal development alone. Religious obligations include the duty of charity and the obligation for solidarity.
- mutual self-interest - several national systems have developed voluntarily through the growth of mutual insurance.
- economic - social programs perform a range of economic functions, including e.g. the regulation of demand and structuring the labour market.
- social - social programs are used to promote objectives regarding education, family and work.
- the failure of the private sector - advocates of social provision argue that the private sector fails to meet social objectives or to deliver efficient production, due to such things as monopolies, oligopolies, or asymmetric information.
- anarchist - anarchists believe that all states and governments are undesirable and/or unnecessary. Many anarchists would argue that the governmental practice of supporting people is a method of controlling and owning those people, rather than an act of altruism.
- libertarian - libertarians believe that state intervention infringes individual freedom, and that the individual should not be forced to subsidize the consumption of others.
- conservative - some conservatives argue that social spending has undesirable effects on behavior, fostering dependency and reducing incentives to work.
- individualist - social spending reduces the freedom of wealthy individuals by transferring some of their wealth to others (this argument is important also for libertarians and conservatives)
- anti-regulatory - the welfare state is accused of greater state control over businesses, stifling growth and creating unemployment.
- free market - advocates of the free market believe that it leads to more efficient and effective production and service delivery than state-run welfare programs. They argue that social spending is costly and requires high taxes. However, evidence shows that at least in some cases this is not true: National health care systems, for example, tend to be cheaper than equivalent provision through private care. 
- Hayekian - the idea that institutions of government are unable to collect knowledge to respond to specific circumstances as well as individual agents can.
- religious - some Protestant Christians are opposed to a welfare state since they believe it compels people to be generous; they argue that only voluntary giving through private charities is virtuous.
The idea of a welfare state receives the most criticism in the country with the least amount of welfare services in the developed world - namely the United States. Most of this American criticism revolves around the idea that a welfare state would make citizens lazy and less inclined to work. That is unsupported by the economic evidence; there is no association between economic performance and welfare expenditure in developed countries. (See A. B. Atkinson, Incomes and the Welfare State, Cambridge University Press 1995) Similarly, there is no evidence for the contention that welfare state impedes progressive social development. R. Goodin et al, in The Real Worlds of Welfare Capitalism (Cambridge University Press, 2000), show that on major economic and social indicators, the USA performs worse than the Netherlands, which has a high commitment to welfare provision.
A second criticism of the welfare state is that it results in high taxes. This is sometimes true, as evidenced by places like Denmark (tax level at 50.4% of GDP in 2002) and Sweden (tax level at 50.3% of GDP in 2002). However, these countries also have high wage economies and high GNPs; high taxes do not imply poor economic performance. In addition, they have a strong system of progressive taxation, which ensures that less burden falls on the poor and middle classes. Lowering taxes would not necessarily result in more spending money for the average citizen (since a lot of free services would no longer be free).
Third, there is criticism that welfare services provided by the state are supposedly more expensive and less efficient than the same services provided by private businesses. A first response might be that the purpose of state-provided welfare is to respond to social needs, not necessarily to be cheaper overall. In a welfare state, the poor and lower-middle classes receive certain services free of charge, whereas in non-welfare states they would have to pay for those services, and could possibly not afford them. More fundamentally, although private provision can reduce unit costs, it often does so through adverse selection, or exclusion of disproportionately expensive cases. The assumption that public provision is more costly overall is mistaken. National health care systems, for example, tend to be cheaper than equivalent provision through private care .
Welfare provision in the contemporary world tends to be more advanced in the countries with stronger and more developed economies. Poor countries, on the other hand, tend to have limited social services.
Within developed economies, however, there is very little association between economic performance and welfare expenditure (see A. B. Atkinson, Incomes and the Welfare State, Cambridge University Press 1995). There are individual exceptions on both sides, but as the table below suggests, the higher levels of social expenditure in the European Union are not associated with lower growth, lower productivity or higher unemployment, nor with higher growth, higher productivity or lower unemployment. Likewise, the pursuit of free market policies leads neither to guaranteed prosperity nor to social collapse. The table shows that countries with more limited expenditure, like Australia, Canada and Japan, do no better or worse economically than countries with high social expenditure, like Belgium, Germany and Denmark. The table does not show the effect of expenditure on income inequalities.
It should be noted that welfare expenditure refers only to expenditure by the state, and does not encompass other forms of welfare provision (such as occupational welfare).
|Nation||%||Per capita GDP|
Note: China, India, Indonesia, Brazil, Russia, and Pakistan have been left off because they are not members of the OECD, so the OECD didn't have figures for these countries.
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- The Welfare State in Australia
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- The Welfare State: A Critique
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