welfare state

welfare state A state that is concerned about the welfare of its citizens, in addition to its traditional purview of internal security, defence, and foreign policy. After initial legislation in industrializing countries which specified minimal working conditions, the first state to accept a responsibility for social welfare through a redistribution of wealth was Germany, through its social insurance legislation (pensions, accident insurance, and health insurance) of 1883–8. However, German social insurance remained extremely limited until World War I so that New Zealand has often been described as the world's first welfare state, on account of the extensive labour and insurance legislation in place there by 1903. In the UK, the ‘New’ Liberal government laid the foundations of a welfare state, most notably through the introduction of unemployment insurance in 1911. After World War I, the most significant departure was F. D. Roosevelt's New Deal from 1933, in which the Federal government financed extensive public work schemes.

In most industrialized countries, it was World War II which brought about a fundamental shift in attitudes towards a welfare state, especially in Europe where all sections of society were similarly affected by the war. In the UK, the 1942 Beveridge Report became the basis of a new welfare state which would provide for its citizens ‘from the cradle to the grave’. A commitment to full employment and universal secondary education was made in 1944, while a comprehensive system of national insurance (to provide for pensions, unemployment benefit, etc.) and a National Health Service were established in 1946. Such measures, as well as the nationalization of industries engaged in transport and the exploitation of mineral resources, were taken by most Western European countries. The Scandinavian countries' welfare provision became particularly famous for its scope and quality.

When Keynesianism, its underlying economic rationale, was first challenged in the 1970s, the economic implications of the welfare state began also to be reassessed. Permanently rising unemployment levels, declining economic growth, and a declining birth-rate after the 1960s (and a subsequently ageing population) made the social welfare provision of the early 1970s unsustainable. New Zealand was one of the few countries to have scaled down its social welfare so dramatically that it was possible to speak of a ‘post-welfare state’ after 1991, but some of these policies were reversed with the return of the Labour government in 1999. In all industrialized countries, however, the welfare state was continually reformed from the 1980s in the face of globalization. This usually entailed a reduction of state expenditure, a cut in welfare costs for employers, and increased inducements for individual economic incentive.

oil-price shock; Social Democratic Labour Party, Sweden