Lesson 7: Welfare state


Hi, my name is Anneli Portman and in
this lesson on Finnish political culture and system, we will look at the welfare state. Disraeli once said: “The only duty of
power, the social welfare of the people.” And this was in 1845, so the idea of a
welfare state is not a new one. But what does it actually mean? The core idea of the welfare state is that the state plays a key role in the
economic and social well-being of the citizens. This is then based on the
equality of opportunity, equitable distribution of wealth,
and public responsibility for the needy. During this lesson, we will look more
closely at what these concepts mean. Beveridge report in the middle of the war, so about hundred years after Disraeli. In the middle of the Second World War, Lord Beveridge was asked to give a report on what the state of the nation
is and what is needed. And he said, that there are five giants the Government
needs to fight. His words were applicable not only to the UK, but also to other places, such as the Nordic countries. The five giants he
pointed out were want, disease, ignorance, squalor, and idleness. He came up with the idea that everybody who works needs to contribute to a pool of money so that those who cannot work and cannot support themselves, can still have a life of dignity and
will not fall below a certain line. Where do these giants come from?
Well, everybody needs income, everybody needs some sort of health care, everybody needs education, housing, and employment. The giants were the ones fighting
these very basic needs of all citizens. There are different types of welfare states,
so there are different types in how these questions are answered, who should provide them, and how they are done. Esping-Andersen in a seminal book in 1989, classified the most developed
welfare states in the following way: The Social Democratic ones, conservative, and
liberal. The Social Democratic welfare state is the one where the state is responsible, and the emphasis is on redistribution of wealth. This can be seen in the Nordic countries
and in the Netherlands. The conservative, or the Christian Democratic model, centers around the idea that the family is responsible for the well-being of individuals, something that can be seen
in Spain, Italy, Belgium, or Austria. The emphasis of the services is
that this center around the family. The liberal, or the anglo-saxon model, sees the individual as pivotal, so the individual is responsible for his or her well-being, money, provision, housing, etc. The emphasis therefore is on the individual work. That enhances the role of charities and private initiatives to provide for in situations where working isn’t possible. The Nordic model, following the social democratic model, has as its core concepts: Macro-collectivism, solidarity,
and universalism. Macro-collectivism means that the givers and the receivers of the distributed wealth have no personal relationship with one another. You and I will not know whose money it is that we receive as housing benefits, for instance, or who has paid for the schooling of my child, but it comes from a common pool. Solidarity means that there is a joint
responsibility for the well-being of all, based on in the equality of all and the
intrinsic value of each person, regardless of how rich, how poor, how sick, how healthy they are, or what their gender is. The principle of universalism means that there is a low degree of selectivity and there’s a high coverage of social protection, so there are things everybody is entitled to. They are universal, publicly provided services, such as the education, instead of them being targeted at just the few. More features of the Nordic model are that it is like a hybrid between capitalism and socialism. There are egalitarian and extensive benefits based on citizenship or residency, like education, child support. There is gender equality: women and men are equal and are treated as such. Then there is the labor force participating in negotiations of how that the whole work area and
salaries should be done. It is a tripartite negotiations system
where the labor force together with the state and together with the employers
actually talk about things together. That also means that the position of
trade unions is strengthened. Wealth redistribution is done through
state support. It does not come and from private initiatives, but it is the state who supports this and who takes care of it. The Nordic model sees
that the Government is in control in spending and taxes. The Government also tries to stabilize business cycles,
so that they would not affect people so much. Also it is the Government who reduces unemployment and is actively promoting economic growth. How does this work? What makes this money go around? Here you can see a chart. The citizens pay taxes which the State collects. What does the state then do with all this collected money? Part of it go to public services to which
everybody is entitled to, such as pension, health care, housing, childcare, education, so all of this is paid by tax money. There are also individually given benefits
to those who are in dire need of them. For instance for housing, there might be housing support. If you totally fall away from work forces you are entitled to a minimum amount of money with which you will survive, that you will not suffer hunger How is all this funded? Well, the tax burden is quite high. It works with a principle: the more you earn the more you pay. That is called progressive tax, and this welfare system in Finland in Nordic countries is funded through a mixed economy idea so that there is a redistribution, taxation. Then there is also free economy, so the state is kind of doing a balancing act between having free economy, and on the other hand, controlling what happens. Overall tax burdens in welfare countries are quite high. For instance in
Finland as a percentage of the GDP, it is around 48.5%. Public spending is also quite high, which in Finland is a little bit less than half. A little bit less than all the money that the State collects, actually goes to public spending What are the impacts the welfare state has? First of all: gender equality. Nordic women have a higher level of equality with men than most other European countries. It can be seen in the educational level, economic activity, political and cultural participation, for
instance now in the current Parliament, 41.5% percent of the
Members of Parliament are women. It also points towards a quite high level in female employment, which is explained by generous maternity benefits and the organisation, by the state, of daycare facilities. Here you can see a global map of gender gap index, so how different men and women are or how different their fate is or their statuses. While not being the absolute best place – which here would go to Iceland – Finland still scores quite high, meaning the gender gap is very small. Education: One impact of welfare state is that the rights of citizens include
constitutional rights to free basic education. In Finland, this right has been
extended to all immigrants whose children are between 6 and 17,
who are permanently resident in Finland, they have also the right to receive the
same basic education as Finnish citizens. Education also means, that in terms of immigrant policy, immigrants of all ages are provided with the instruction
in either Finnish or Swedish language, once they are permanently residing in Finland. The objective is a functional bilingualism, so that an immigrant is in command of either Finnish or Swedish while maintaining his or her native language. The education has been the bedrock of Finnish society, but under the current circumstances, education and how free it is, is a matter that is under change. Poverty: the Nordic model has been
quite successful in reducing poverty. Taxation has meant that they have not been really poor or really rich, because taxation functions as an
equalizer. In the Nordic countries, there is the lowest rates of child
poverty in the EU. However, relative poverty is increasing. By relative poverty is meant that the incomes of some people are below 60% of the current median income. That does not mean that there would necessarily be absolute poverty in the Nordic countries, but in terms of relative poverty, we can see that the trend has been increasing especially in Finland. In the mid 80s, it was around 10% and is currently around 15%. And this is after taxes. Income distribution is done through the Social Insurance Institution of Finland, in Finnish it’s called Kela. Here you can see their web page, and they provide most of the distribution, most of the benefits. For families, students, unemployed, or if you’re in ill health. In the families, you also have the famous maternity package which has been making international headlines. Economy the impact of welfare state on the economy is that it usually favors economic growth, income distribution, and therefore well-being. An active Government is a part of this, making it succeed, making it happen, as redistributes income and also affects economic policy. But, all of this, of course, is based on a well-functioning market economy. That is where the current difficulties with the current economic situations come into play, because a welfare state will not be possible to maintain, if there is not a pool big enough of tax money that can then be redistributed. Now it is, again, your time to think: How are education and health care paid for in your country? Does the state control economy? So, the welfare state too, is part of a parcel of what makes Finland tick

Daniel Yohans

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