Globalization’s Impact on Nordic and Liberal Welfare State Models
Nordic Welfare States and Global Economic Challenges
Kosonen argues that this claim is simplistic, emphasizing that the role of economic policies as a whole must be considered. Welfare policy and its relationship to the labor market and economic policy are more important than total public expenditure.
Vulnerability and Policy Considerations
How vulnerable are the Nordic Welfare States (EB) to globalization? The discussion must focus on changes in the labor market, the financing of social spending, and the policies that legitimize them.
Labor Market Uncertainty
In Nordic labor markets, Europeanization and globalization have created more uncertainty and pushed for increased flexibility. Under global conditions, governments have fewer tools to maintain high employment levels. Global competition improves the situation of qualified employees, while less skilled workers face poorer prospects of entering the labor market. This situation may undermine the Nordic principle of equality.
Structural Funding Problems
Other structural problems relate especially to the way in which social policy is funded. The Nordic EB relies heavily on general taxes. Globalization is associated with the reduction of direct taxes, thereby decreasing the general fund. This issue is remarkable, especially considering the anticipated increase in the number of pensioners in coming decades, implying a significant increase in social spending.
In short, globalization itself may affect current values on issues such as fiscal policy, with implications for the funding models of the Nordic EB. Potentially, there is a conflict between the community and welfare mentality (which values universal high levels of employment and the agency of the EB) and the impositions of the global market.
Strengths in Global Competitiveness
On the other hand, Nordic societies possess strengths in terms of global competitiveness. These elements can help these countries maintain social policies that strengthen a solid Welfare State in the context of globalization:
- High degree of social consensus
- High levels of inclusion of the whole population
- High levels of education and technology
The Liberal Welfare Model (UK and Ireland)
3.3.3. The Liberal Model. This Welfare State (EB) model is appropriate for countries like Britain and Ireland. As Norman Ginsburg (2001) describes in Globalization and the Liberal Welfare State, the governments of these countries during the 1980s developed macroeconomic and industrial policies specifically designed to expose them to global competition. Both governments have facilitated the free flow of goods, services, money, and both internal and external technology.
Defining Characteristics
The Liberal Welfare States are mainly characterized by the following:
- Low level of social spending (low percentage of GDP)
- Focus on social protection needs and risks arising from unemployment, illness, aging, and low-income single parents
- Targeted social policies, including pensions
- Restrictive social insurance
- Relative poverty, stigma, under-funded, and low quality of public social services
- Low or no regulation and subsidiarity of private welfare services
- A culture of trust in self-financing, grants, and family care, supplemented by charity and provision
Some analyses also stress the lack of public support for the full incorporation of women into the workplace.
Effects of Economic Globalization
The main effects of economic globalization and political changes have been:
- The decline in social spending and raising taxes
- The increase in inequality among citizens
- A high degree of flexibility, low labor market regulation, and privatization of welfare services
As Ginsburg states, the pressure of globalization on Liberal Welfare States has evolved in two ways: the decline of resources coupled with increasing demand for services by citizens. Globalization itself has been used in these countries to legitimize the reduction of the Welfare State, all in the name of competition and economic efficiency.