Let's discuss the sustainability of the welfare state

Nom Chompsky

Nom Chompsky

High Tory
Joined
Mar 6, 2004
Messages
54,583
Reaction score
39,432
Location
Cape Town
I've just read this fascinating paper by Gruber and Wise (2005) which look at welfare systems around the world. I've hand-picked a few graphs which provide alarming reading to those who believe the modern welfare state can survive in its current form.

picture1fr.png


The first graph clearly shows that the world is 'getting older' - well in developed economies at least. This implies the dependency ratio - % of dependent people (not of working age) / number of people of working age (economically active) - will rise. Look at Belgium, Italy and Spain especially.


picture2tiq.png


The second graph shows the labour force participation rate for men between 60-64. As you can see, the LFP for all countries has had a large downwards trajectory from 1960-1995 - including Sweden... the poster child of the modern welfare state. This trend most likely has continued post-1995.
 
I think this Youtube video sums up one of the biggest issues of the welfare state [video=youtube;LH5ay10RTGY]http://www.youtube.com/watch?v=LH5ay10RTGY[/video]

If the government simply just gives to the poor they land up making videos like these! Terrible situation.
(Would be worse if the government let the bottom fall out, but let's pretend this is a GOP debate to keep on track)
 
You speak of population problems? Easily solved with migration management. The reason their populations are declining is because more educated people tend to have less babies these days.

However, if we look at their economics, we see that welfare has paid off:

One of the great challenges of sustainable development is to combine society's desires for economic prosperity and social security. For decades economists and politicians have debated how to reconcile the undoubted power of markets with the reassuring protections of social insurance. America's supply-siders claim that the best way to achieve well-being for America's poor is by spurring rapid economic growth and that the higher taxes needed to fund high levels of social insurance would cripple prosperity. Austrian-born free-market economist Friedrich August von Hayek suggested that high taxation would be a "road to serfdom," a threat to freedom itself.*

Most of the debate in the U.S. is clouded by vested interests and by ideology. Yet there is by now a rich empirical rec-ord to judge these issues scientifically. The evidence may be found by comparing a group of relatively free-market economies that have low to moderate rates of taxation and social outlays with a group of social-welfare states that have high rates of taxation and social outlays.

Not coincidentally, the low-tax, high-income countries are mostly English-speaking ones that share a direct historical lineage with 19th-century Britain and its theories of economic laissez-faire. These countries include Australia, Canada, Ireland, New Zealand, the U.K. and the U.S. The high-tax, high-income states are the Nordic social democracies, notably Denmark, Finland, Norway and Sweden, which have been governed by left-of-center social democratic parties for much or all of the post World War II era. They combine a healthy respect for market forces with a strong commitment to antipoverty programs. Budgetary outlays for social purposes average around 27 percent of gross domestic product (GDP) in the Nordic countries and just 17 percent of GDP in the English-speaking countries.

Friedrich Von Hayek was wrong
On average, the Nordic countries outperform the Anglo-Saxon ones on most measures of economic performance. Poverty rates are much lower there, and national income per working-age population is on average higher. Unemployment rates are roughly the same in both groups, just slightly higher in the Nordic countries. The budget situation is stronger in the Nordic group, with larger surpluses as a share of GDP.

The Nordic countries maintain their dynamism despite high taxation in several ways. Most important, they spend lavishly on research and development and higher education. All of them, but especially Sweden and Finland, have taken to the sweeping revolution in information and communications technology and leveraged it to gain global competitiveness. Sweden now spends nearly 4 percent of GDP on R&D, the highest ratio in the world today. On average, the Nordic nations spend 3 percent of GDP on R&D, compared with around 2 percent in the English-speaking nations.

The Nordic states have also worked to keep social expenditures compatible with an open, competitive, market-based economic system. Tax rates on capital are relatively low. Labor market policies pay low-skilled and otherwise difficult-to-employ individuals to work in the service sector, in key quality-of-life areas such as child care, health, and support for the elderly and disabled.

The results for the households at the bottom of the income distribution are astoundingly good, especially in contrast to the mean-spirited neglect that now passes for American social policy. The U.S. spends less than almost all rich countries on social services for the poor and disabled, and it gets what it pays for: the highest poverty rate among the rich countries and an exploding prison population. Actually, by shunning public spending on health, the U.S. gets much less than it pays for, because its dependence on private health care has led to a ramshackle system that yields mediocre results at very high costs.

Von Hayek was wrong. In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness.

000AF3D5-6DC9-152E-A9F183414B7F0000_chart.gif
Click to expand...

http://www.scientificamerican.com/article.cfm?id=the-social-welfare-state


419390_10150614282966275_177486166274_9580325_277779552_n.jpg
 
Last edited:
There are varying degrees of welfare state. Personally I can't see any society succeeding without some level of welfare state. For example to completely disregard the very elderly and allow them to simply starve to death can cause a lot of damage to society as it brutalises the society and that had consequences.

Too much of a welfare state bankrupts the country.

You need the welfare that the society can afford and at the level that taxpayers are willing to absorb. This makes it political and therefore always contronversial.
 
zippy said:
There are varying degrees of welfare state. Personally I can't see any society succeeding without some level of welfare state. For example to completely disregard the very elderly and allow them to simply starve to death can cause a lot of damage to society as it brutalises the society and that had consequences.

Too much of a welfare state bankrupts the country.

You need the welfare that the society can afford and at the level that taxpayers are willing to absorb. This makes it political and therefore always contronversial.
Click to expand...

I cant believe I would say this, but you are 100% correct. You got it spot on!
 
Btw, an ageing population isnt neccessarily a sign of decline. If that ageing population is on average not poor, then that spawns growth in other areas, such as tourism, insurance products and health products designed specifically for older people.

In the UK old age pensioners are a big specialised market. They are very brand loyal and retired folks are less affected by recessions because they don't lose all of their income due to retrenchments. They only lose a portion due to inflation.

Look after your old folks :) they can keep the economy ticking over in the bad times:)
 
lol @ Ghoti's economics

1. If you didn't tax the rich, the money would be re-invested either through spending and consumption, creating jobs to deal with that demand, or through investment and capital expenditure, creating jobs through that method.

In your scenario, you are basically assuming that the government can magically create wealth, it can't. An economic fact you seem to ignore.

2. No society can peacefully exist without people co-operating to help those out in need. This is a fact. There are many ways such a society can do this, peacefully and non-violently or through violence and coercion to achieve the same ends.

I.E. People can donate to charity, help those in need etc. The advantage of this is that it is voluntary and thus one can demonstrate it creates wealth of enhances society. It also incentivises those in need to become productive members of society. If they don't do things the rest of soceity feels is benificial or good, the funding can be withdrawn. This is a good thing as it encourages relationships that are harmonious and mutually benificial.

The other violent way of doings this is the welfare state. Where the ends of helping those in need, justify the crimes, forceful wealth distribution being commited and all the negatives associated with peoples with different cultures and values, and the fact it encourages the development of a parasitic class, which in a democracy has the power to remain as such.

Basically you are an ends justify the means kind of guy and you feel a little "violent" pursuasion to achieve your goals, which can't be demonstrated to benefit society, is justified. (Since it is non-voluntary you cannot prove it is benificial to society, another fact you choose to ignore.)
 
WilD_CaT said:
lol @ Ghoti's economics

1. If you didn't tax the rich, the money would be re-invested either through spending and consumption, creating jobs to deal with that demand, or through investment and capital expenditure, creating jobs through that method.

In your scenario, you are basically assuming that the government can magically create wealth, it can't. An economic fact you seem to ignore.

2. No society can peacefully exist without people co-operating to help those out in need. This is a fact. There are many ways such a society can do this, peacefully and non-violently or through violence and coercion to achieve the same ends.

I.E. People can donate to charity, help those in need etc. The advantage of this is that it is voluntary and thus one can demonstrate it creates wealth of enhances society. It also incentivises those in need to become productive members of society. If they don't do things the rest of soceity feels is benificial or good, the funding can be withdrawn. This is a good thing as it encourages relationships that are harmonious and mutually benificial.

The other violent way of doings this is the welfare state. Where the ends of helping those in need, justify the crimes, forceful wealth distribution being commited and all the negatives associated with peoples with different cultures and values, and the fact it encourages the development of a parasitic class, which in a democracy has the power to remain as such.

Basically you are an ends justify the means kind of guy and you feel a little "violent" pursuasion to achieve your goals, which can't be demonstrated to benefit society, is justified. (Since it is non-voluntary you cannot prove it is benificial to society, another fact you choose to ignore.)
Click to expand...

Do you expect the poor, aged, and disabled alone to pay for the police, courts, national defence, roads, refuse collection etc. ?
 
I am not aware of any country in the world that has a regressive income tax system.

Also Ghoti you should look up something called the Laffer curve. It shows that you can have a top tax rate up to a certain point and then tax revenues drop off after that point because the rich get around those high tax rates. Look at the UK with its top 50% tax rate - they have recently admitted it hasn't brought in as much as tax revenue as they thought.
 
The most important thing a welfare state is reduce the gap between the rich and the poor. The bigger the gap, the more violent a society is. In South Africa we have one of the biggest gaps between rich and poor, which is why our society is so stable.

I think it was Winston Churchill who once said, "I dare you to agitate a man with a full stomach!"

He was so right. We need to educate the poor people so they can pull themselves out of poverty and thereby become positive contributes to SA. We need to look after the sick because no one on minimum wage can afford Medical Aid, and when your workers are sick.. your companies productivity goes down.

The fact of the matter companies with massive tax breaks are not spending money. They accumulate ever growing war chests as their is less incentive to spend it. This is fact. This is why during the tax cuts for the rich done by Bush.... the rich did not reinvent much of it. They just got richer. The poor got poorer. America was in a a worse state for it.

The rich are not going to suffer with these taxes that all of that can do pay. Sure they might have to keep their G5 instead of getting a G6 this year, but Im sure they`ll survive. Also, by rich I am referring to anyone with more than 20 million dollars in the bank.



While the world was going into depression and the middle and working classes were paying for the mistakes of the 1%... what happened to the 1%?

The U.S. economy appears to be coming apart at the seams. Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression. Many of those laid off fear that the jobs they have lost -- the secure, often unionized, industrial jobs that provided wealth, security, and opportunity -- will never return. They are probably right.

And yet a curious thing has happened in the midst of all this misery. The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer. And not just a little bit richer; a lot richer. In 2009, the average income of the top five percent of earners went up, while on average everyone else's income went down. This was not an anomaly but rather a continuation of a 40-year trend of ballooning incomes at the very top and stagnant incomes in the middle and at the bottom. The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today.
Click to expand...
http://www.foreignaffairs.com/articles/67046/robert-c-lieberman/why-the-rich-are-getting-richer

So cry me a river if I dont feel too bad for them.
 
Last edited:
Typical bleeding hearts. Living off handouts :D
 
Alan said:
Typical bleeding hearts. Living off handouts :D
Click to expand...
Actually... thats false. CONSERVATIVE Red states complain more about welfare, pay the least in welfare, but receive the most federal welfare dollars! Classic conservatives :D Blue liberal states, pay more of the welfare, spend less of the welfare federal dollars and support welfare.

Just goes to show you. Them liberals know whats better for conservatives than what conservatives do. Its simple, if conservatives want less "handouts", them red states need to get off their asses, get educated and get working. The liberals are paying for you guys to get smarter, so the least you could do is take that hard earned money the liberals are sending you.. to do just that. If the conservatives sort themselves out, the country wont have to spend so much on "handouts" ;)
 
Last edited:
TheHiveMind said:
Liberal states generally have a much lower immigrant/minority population.
Click to expand...

I guess Alaska has major migration problems :D I mean, Sarah Palin can see Russia from her home (or so she says), so they must be swamped.... or not :D Either that or those Canadians are tired of their GREAT welfare state, are tired of the free education, are tired of the free health services and are tired of their high quality lives, so decided to migrate to become illegal Alaskans :D

Lol, can you show the percentage of federal welfare dollars being spent on dealing with that so your point has some validity?

Lets get real here. The real reason why conservative states need so much welfare is because of their under developed rural populations (the bible belt Republican supporters).

424202_10150606993211275_177486166274_9553769_2030856088_n.jpg
 
Last edited:
We need a welfare state purely because its impossible to just live off the land.

We don't have a waywhere you can just exist outside of the economic system, like mentioned before you need to have a variable economic state and you need to have a high employment rate.
 
You must log in or register to reply here.
Back
Top
Sign up to the MyBroadband newsletter
X