© Casa Verde Publishing, 2005 · ISSN 1681 2816 Journal of Societal & Social Policy, Vol. 4/1: 1-20

The Welfare State in East Asia: An Ideal-Typical Welfare Regime

Christian Aspalter Korean Institute of Health and Social Affairs, Korea; The University of Hong Kong, Hong Kong Abstract This article set out to broaden our understanding of the East Asian welfare state by looking onto the existing welfare state systems from the perspective of comparative political-historical analysis, while also exploring the possibility of classifying a distinct, ideal-typical model of the welfare state in the region. The key for doing so is to look at both the existing functional equivalence of institutional systems, as well as the logic behind social policy making, i.e. the strategy of welfare. In East Asia, real-typical systems do vary – but their welfare effects, as well as their overall policy approach fall in line a great deal with that of the ideal-typical model. Hence, this article stresses the importance of the principle of functional equivalence and that of overall welfare strategies in the study of comparative social policy. Keywords: East Asia, welfare state, ideal-typical model, functional equivalence, regime theory, political rationale of welfare. When reviewing the current literature on East Asian welfare state systems, one may observe a newfound interest in the study of regime theory when applied to East Asia.1 The regime theory approach advances the idea that welfare state systems resemble each other within so-called “families of nations,” a term that has been coined by Castles and Mitchell (1993).

For a long time, East Asian welfare state systems have been regarded as resembling rudimentary forms of welfare state systems, i.e. residual welfare states—as opposed to full-fledged, institutional welfare states. They have been understood to represent hybrid, developing models that are yet to emerge as fully-grown welfare states in the years to come—resembling to a large extent the case of welfare states in Southern Europe (cf Esping-Andersen, 1997). The idea that welfare states are developing in East Asia has been put forward by scholars like Midgley (1986) and Tang (2000), and strengthened by Aspalter (2002a) who observed that welfare states in East Asia develop as “naturally” as in most Western countries.

As the study of comparing welfare state systems in East Asia has been maturing in recent years, two major lines of argumentation emerged—that is, one

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advocating the diversity of welfare state systems in East Asia (Ramesh, 2000; White and Goodman, 1998: 14) and the other proposing the existence of a distinct welfare state regime, an East Asian model (Jones, 1993; Holliday, 2000; Gough, 2000). While proponents of welfare particularism point, for the most part, to institutional differences in the setup of those welfare state systems. Advocates of the East Asian welfare model basically follow two different approaches—namely, a cultural and a developmental/statist approach.

Catherine Jones was the first researcher who suggested that one can identify a specific type of welfare capitalism in East Asia. Jones proposed the existence of an “oikonomic” or “Confucian” model of welfare in East Asia, putting forward cul-tural factors as the main explanatory determinant in welfare state development. Though the cultural argument constitutes a “more or less prominent theme” in East Asian welfare analysis, researchers like White and Goodman (1998: 12, 15) and Kwon (1999) hold that this approach is not helpful in analyzing the development of social welfare policies over time and the particular institutional set-up of welfare states in East Asia.

The second major support for the existence of a distinct East Asian model comes from the developmental, statist explanation of welfare state development in East Asia (Tang, 2000; Holliday, 2000; Gough, 2000, 2002). A special variant of the developmental approach, the institutional, political approach, has extensively focused on the impact of a series of political determinants on social welfare policy—such as, power of state institutions, the constitution, electoral systems, party systems, party competition, social welfare movements and alliances (Aspalter, 2001b, 2002a,b; Kim and Ahn, 2003).

One particular scholar, Ian Holliday (2000), has though identifying a distinct East Asian welfare model argued for the existence of three sub-models: one referring to Japan, South Korea, Taiwan; and the other two to Singapore and Hong Kong. This certainly reflects a middle-of-the-road stance in current comparative East Asian welfare state research.

The main purpose of this article is to deepen our understanding of the East Asian welfare state and to reexamine the possibility of conceptualizing an East Asian welfare model when referring to the method of constructing ideal-typical welfare state regimes, as has been the case with Esping-Andersen’s regime typo-logy (1990, 1998). It is the new aspect of an ideal-typical classification of East Asian welfare state systems that sets apart this article from earlier works on the existence and the particular features of an East Asian welfare model or welfare regime.

The Development of the Regime Theory Approach: The First Three Models

The welfare regime theory approach of Esping-Andersen (1990) focuses mainly on two aspects of comparative welfare state analysis—on policy institutions and particular welfare outcomes. By and large, welfare state analysis may concentrate on three different aspects—that is, on the input, throughput, and output of welfare

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state systems in concern. The input of welfare state systems is described either by the institutional setup of welfare programs and policies or, alternatively, by the financial means that go into the welfare system or that are transferred within the welfare system. When investigating the throughputs of social welfare systems one may concentrate on the processes and principles of how welfare is provided within welfare.2 On the output level, researchers usually look at the distributional/ stratificational and decommodifying effects of welfare state systems in place.

The welfare regime theory as advanced by Gøsta Esping-Andersen (1990) does not focus on welfare state expenditures, on the contrary to generations of welfare state researchers before him. Instead he gives priority to the study of the institu-tional set up of welfare state systems—that is, the patterns of social policies and programs and the wider pattern of welfare provision in terms of the division of responsibility between the state, the market and the family (cf Gough, 2002). Further, Esping-Andersen highlighted the importance of stratification effects of welfare state systems and the generated degree of decommodification, which are two major aspects of welfare output.

Identifying different welfare models, Gøsta Esping-Andersen has arrived at a tripartite typology, distinguishing between a social democratic, a liberal and a corporatist welfare regime. Esping-Andersen (1990) argued that the history of class coalitions is the most distinctive cause of welfare state variations. He advances the idea that once the interests of political actors are articulated, class alliances formed, and welfare ideologies of majoritarian groups develop, each welfare regime follows its own path of development (Esping-Andersen, 1990, 1998). In his comparative analysis that mainly centered on European countries he found that there are three such distinct welfare trajectories, hence welfare state regimes. He understood them as being “ideal-typical”, meaning that smaller and larger vari-ations from the norm may occur, but still the greater picture would remain intact and valid.

According to Esping-Andersen, a social democratic trajectory in welfare state development leads, in the ideal-typical case, to the establishment of a compre-hensive welfare state, with universal social security provision, comprehensive full-employment policies (e.g., public employment particularly aimed at women), and a strong network of social service provision by the state—as the majority of people support public provision of social security and social welfare services, even at the cost of high taxation. The government assumes a commanding role in welfare provision, resulting in the erection of a comprehensive, redistribution-heavy welfare state system. The government takes care of the individual, so to speak, from the cradle to the grave. Individuals stay at the heart of public welfare provision; eligibility is typically tight to social citizenship—not to work records, or family status. Welfare provision by the family or the private market economy is not emphasized in social security and social service provision. Countries that belong to this regime type are Sweden and Norway, and to some extent also Finland and Denmark (Esping-Andersen, 1998: 142). A typically social democratic welfare state would reduce status differentials and, thus, the class-divide—leading to low

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levels of stratification. The second major yardstick aiming at conceptualizing wel-fare outcomes is the degree of decommodification3 that refers to the extent to which citizens may rely on the social safety net without considering their work status and past work record. The level of decommodification in a typically social democratic welfare regime, so Esping-Andersen, is very high—thus, pushing back the boundaries of the market economy even further.

In a liberal welfare state regime, the majority stance of middle class voters is to reject a comprehensive welfare state, as they throw in their support for keeping personal income and consumer taxes low. As a result, the government’s role in providing and regulating welfare is kept to a minimum. The individual is expected to care for him- or herself. Lower taxes lead to higher average wages, and thus greater capacities of the working and middle classes to provide for themselves. The state’s engagement in public housing, education, and health care is either non-existent, or plays a marginal role. The workings of an “undistorted” market economy and individual actors themselves are expected to meet and prevent welfare needs. Social assistance programs are highly targeted—for the most part applying asset and means tests in allocating the generally meager resources to those most in need. There is room, though, for the implementation of modest universal transfers and modest social insurance plans. The state encourages the market by providing only a minimum safety net, or actively by subsidizing private welfare schemes. Liberal welfare regimes reveal, typically, high levels of stratification and social exclusion, as well as a low degree of decommodification, and hence a large dependency of the population on income generated directly from wages, or private capital assets, such as savings. Countries that are considered to belong to this type of welfare regime are the United States, Canada, and Australia. Nations that approximate this model are e.g. the United Kingdom, Switzerland, and to some extent Denmark (Esping-Andersen, 1998: 142).

The ideal-typical corporatist model—which can be found in Germany, Austria, France, and Italy—rests on the idea of preserving status differentials (Esping-Andersen, 1998: 141-142). Without a doubt, so Kersbergen (1995), occupationally divided social insurance systems form a basic element of Christian Democratic social welfare policy. A further key element of the corporatist—Christian Democratic—welfare regime is the corporatist system of social service provision that gives high priority to welfare provision by NGOs and especially Church organizations (cf Bode, 2003). Both the principle of subsidiarity and the principle of solidarity, as laid down and amplified in a great number of social encyclicals (e.g., Rerum Novarum and Quadragesimo Anno), form the base of Christian social teachings, and, hence, also the key features of the “Christian Democratic” welfare state (cf Kersbergen, 1995; Huber and Stephens, 2001). The strong emphasis on the principle of solidarity—which emphasizes the duty of the state to help those in need—explains high levels of social expenditure and government welfare provision in Continental European welfare states. Both social democrats and Christian democrats fully subscribe to this core principle. Esping-Andersen (1990, 1998: 141) stated that in the corporatist welfare regime “the liberal obsession with market

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efficiency and commodification was never pre-eminent and, as such, the granting of social rights was hardly ever a seriously contested issue.” With regard to both the induced degree of stratification and decommodification, the corporatist welfare regime ranks amid the social democratic and liberal regimes.

Comparative Social Policy and the East Asian Welfare Regime

A series of comparative analyses has focused on the existence and design of an East Asian welfare regime. In the beginning, Esping-Andersen was rather unde-cided where to fit in Japan—either in the corporatist or the liberal regime type (1990). At last, Esping-Andersen (1997) found that Japan represents a hybrid form of welfare state model.4 Today, however, a growing number of welfare state experts, who integrate the East Asian region5 into their analysis, support the existence of a distinct model in the region; one that is based on different ideologies and principles. These experts have included additional aspects that have, so far, not been included in regime theory analysis—such as the developmental ideology of policy makers, while paying also special attention to policy areas, such as health, education, and housing (cf Holliday, 2000; Gough, 2000, 2002).

At first, several studies attempted to apply the analytical, European-centered framework of Esping-Andersen to the case of East Asia (e.g., H. Kwon, 1997; Peng, 1998). Some experts (especially Ku, 2000; Ku and Lee, 2004) found that the original framework developed by Esping-Andersen has not been particularly helpful in extending our understanding of the East Asian welfare model as we deal with very different politico-economic and historical contexts. Then, in the year 2000, a new string of studies on the welfare state in East Asia has reopened the case for the existence of an East Asian welfare model by allowing for an independent interpretation of what constitutes a welfare regime and what not—while still building on the work of Esping-Andersen, but extending the policy and program focus of welfare state systems under scrutiny.

Kwong-Leung Tang (2000: 10) drew attention to the important aspect of social development in the comparative theory of welfare state research. Tang succeeded in deepening the current understanding of welfare state development in East Asia by revealing the importance of particular common traits of East Asian welfare state systems—focusing on the nature of developmental states and their particular ideologies. While taking the examples of the four Asian Tiger states, Tang6 (2000: 137) notes that these developmental states have all extensively applied government intervention and policies to promote industrialization—and that it is for this reason why these countries opted for considerable investment in social development. The various governments of these developmental states applied social policies that (1) promoted the legitimacy of the government and labor stabilization, and (2) invested a great deal in the education and health of the workforce. Tang—though not explicitly referring to the existence of an East Asian welfare model, or welfare regime—indicated that the common ideology of these countries is their strong believe in trickle-down theory of development (i.e., economic growth will

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eventually benefit all of the population) and that these countries are all marked by small governmental spending, relative flexible labor markets, and the application of social security as an instrument to target politically important interest groups (2000: 139).

Also in 2000, Ian Holliday proposed the existence of a “productivist” welfare regime in the mature economies of East Asia (especially Japan, South Korea, Taiwan, Hong Kong, and Singapore), where social policies are subordinated to economic policy making—that is, social policies are supported on the condition that they help to generate social peace, stability, and economic growth. Ian Holliday, thus, advanced the idea of a unique welfare regime in East Asia, which is characterized by the underlying political rationale and the economic function of social policies, rather than the institutional setup of welfare programs or their welfare outcomes. Ian Holliday’s argument has been supported and extended by Ian Gough (2000, 2002), who in a slightly different manner emphasized the concentration of social policy on education and health— “as part of a strategy of nation-building, legitimization, and productive investment.”

The work of these scholars show remarkable resemblance to each other, indicating their strong argument, while revealing a different method of identifying welfare regimes, as European-centered versions of classifying welfare regimes often do not apply to the non-European social policy context. As mentioned above, there is more than one possible method of classifying—that is, identifying— “welfare regimes,” or “families of nations” in comparative welfare state theory.

Another study by Aspalter (2001a) focused on the importance of politics and state institutions. For both Tang (2000) and Aspalter (2001a) the state is considered to be the main causal explanatory dimension for welfare state development. On top of that, Aspalter—while focusing on dominant political parties and their doctrines, state structures, and social movements—found that a distinct type of conservative social policy is prevalent in the East Asian region.

Conservative social policy in East Asia (Aspalter, 2001a; cf Shinkawa, 2004) manifests itself in erection and development of work-based social security systems, a clear priority given to special interest groups of the state,7 a dualism between welfare provision by large-scale enterprises and that of small- and medium-scale enterprises,8 and “a gradual extension of social security schemes to the entire popu-lation while avoiding major financial commitments of the state” (Aspalter, 2001a: 90).

An alternative theory in explaining the existence of a distinctive East Asian welfare model is that the cultural heritage of Confucianism provides a common explanatory cause for welfare development in the East Asian region (Jones, 1993; Rieger and Leibfried, 2003). Apart from the fact that some East Asian countries do not share the Confucian heritage at all or only to a very limited extent (especially in Southeast Asia), the theory has not been able to convincingly demonstrate the uniqueness of shared Confucian values and culture in worldwide comparison, nor to reveal any causal linkage between policy proposals and implementation on the one hand and the more than two thousand year old history of Confucian values

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prevalent in most parts of this region (cf White and Goodman, 1998; H. Kwon, 1999; Ramesh, 2000). Shinkawa (2004: 66) pointed out that “group-oriented postures as seen in the respect to hierarchy, duty, compliance, consensus, order, harmony, and so on are not unique in Confucian societies but common in any traditional society.” Following Shinkawa’s argument, we may ascribe the relative perseverance of traditional values in economics, society and politics in today’s East Asia to the combined effect of the late onset and the very rapid process of industrialization, and the delayed, or only partial, arrival of a liberal society and full-fledged democracy.

Political and business elites in East Asia often legitimate their authority-centered policy stance by bringing up the issue of traditional indigenous cultural values—i.e., Confucianism. But, to be clear, this referral to Confucian values and traditions is only a symptom of, and not the cause for, conservative social policies applied in the region. Nevertheless, the strong perseverance of traditional values in East Asia helped to legitimize the conservative ideology of “market and the family first” and to delay Western-style, or indigenous-style, modern social policies (cf Turner, 2002).

In recent years, pertaining to filial piety and intra-family welfare provision, a great deal of research findings point to the fact that elderly people are increasingly prone to poverty, as the rising popularity of the nuclear family pattern leaves them not being taken care of—living alone, or with their elderly partner (e.g., Asher, 1999; H. Kwon, 1999; Tang and Wong, 2003). The common trend of a rising female labor force participation rate and rapid ageing of society, in addition, add to mounting pressures that push East Asian governments to rethink their welfare rhetoric and to implement public social services and welfare benefits for the elderly—preparing for the onset of super-aged societies9 within the next two and a half decades (cf Chi et al., 2001; Takahashi, 2002; Chow, 2004).

Case Studies

Japan

The Japanese welfare state is rooted in the immediate postwar era and the political economy of those years. Welfare bureaucrats first aimed to erect a Beveridge-style welfare system, based on universal social security systems covering the entire population. However, in the period of postwar reconstruction the government lacked the necessary financial means for such an endeavor. Instead, social welfare benefits were targeted to those most in need, the poor and war victims (cf Shinkawa, 2004; Maruo, 1986). Also, the American influence on Japan has been tremendous during these years,10 which swayed the governing elite to switch rather to the American model in welfare politics, and the supremacy of economic development.

As the Employment Pension Insurance stopped functioning during the postwar turmoil, companies started to introduce lump-sum retirement benefits. With the

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granting of a preferential tax regime for retirement benefits, companies began to launch more welfare programs. After the founding of the Japan Socialist Party in 1955, its strong showing in especially regional and city government elections in the 1960s, and then the revival of the Japan Communist Party in 1972 (winning 10.5 percent of votes in parliamentary elections), the conservative governing elite made use of the new company welfare system as a means to fight back the influence of the Left and to tie employees’ loyalty to the company—thus, curbing potential support for labor unions and Leftist parties. Though the number and the coverage of social security programs extended a great deal in the late 1950s, the overall expenditure level of the welfare system remained stable until the mid-1970s, hover-ing at the 2 percent mark of GDP.

However, in absolute terms welfare expenditure rose, mainly due to increases in health care and pension benefits. The 1970s brought the introduction of uni-versal child allowances, free medical care for the elderly, and the introduction of automatic increases in pension benefits (in relation to the Consumer Price Index). As a result, the social spending doubled as percentage of national income. In the 1980s, the government attempted to yet again curb welfare expenditures, and to intensify the institutional fragmentation of the Japanese social security system—by introducing a new basic pension scheme comprising old-age, disability, and survivor’s pension. With the onset of the economic depression in 1989, welfare expenditures increased in 1990s, as unemployment hit new highs and the percen-tage of the elderly in the overall population continued to rise. The government also introduced new social service schemes for the elderly in 1989 and 1995 and a new long-term care insurance program in 1997 (Aspalter, 2001a; Shinkawa, 2004).

Status differentials are highly reinforced by the workings of the pension system. Average pension benefits of the basic pension schemes, which caters mainly to non-employees, are on average four times lower than the average benefits of the earnings-related pension scheme for government and private sector employees (¥43,000 and ¥168,000 respectively in 1995). While pensions for non-employees are organized on an individual-unit basis, earnings-related pensions for employees are organized on a family-unit basis. In the latter, dependent spouses are covered by the pension of the head of the household, and survivor pension benefits are granted equivalent to two thirds of the full pension (Yashiro and Oshio, 1999).

Japan pursued welfare objectives, such as a high level of equality, more through progressive income taxation and a set of employment-support policies (mainly trade protection, competition-inhibiting regulations, price subsidies, and investment in public infrastructure) and not through redistributive welfare state programs. The governing elites concentrated, in the first place, on generation of economic growth—the investment in social development ranked second, and enlargement of people’s welfare third (cf Campbell, 2002; Shiratori, 1983).

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South Korea

The development of the welfare state in South Korea only took off in the early 1960s, and was continued to be rather incremental for another two and a half decades. The first social security schemes that have been implemented were the Civil Service Pension of 1960 and the Military Personnel Pension Scheme of 1962, followed by the introduction of the Industrial Accident Compensation Insurance in 1964, and the beginning of the Livelihood Assistance Scheme and experimental health insurance schemes in 1965. The timing of this new wave of social security programs was not accidental. A military coup d’état put an abrupt end to the first democratic government that lasted less than a year, from August 1960 to May 1961. For two and a half years, the country was ruled by a military junta, only to be replaced by another authoritarian regime, under the President Park Chung-Hee. The lack of legitimacy and support for the new governing elite represented the key motive behind the formation and extension of social security and welfare programs in the long period of authoritarian rule from 1961 to 1987 (H. Kwon, 1998; Aspalter, 2001a).

Only with the onset of formal democracy, welfare state development shifted gear and a series of vital extensions of the social security system took place. The logic of the formation of South Korea’s welfare state system may resemble a great deal that of its neighbors Japan and Taiwan, yet when looking closer, apparent differences become visible—one point in concern is company welfare provision.

The industrial landscape of both Japan and South Korea is dominated by large corporations—in Taiwan small companies are dominant—while industrial relations are largely communitarian (based on harmony and integration) in Japan, they are relatively patriarchal and authoritarian in South Korea (cf S. Chan, 2002), which is reflected in the great level of industrial strikes and the outbursts of violence in industrial disputes in South Korea. Labor unions are strong, but their activities do not yet have a decisive effect on employment security, wages, working hours, and welfare provision of ordinary workers and employees. Therefore the institutional set-up of the South Korean welfare state differs significantly from that of Japan, with regard to the importance of company welfare in particular, and public welfare provision in general. Public and private sectors in South Korea spend 10 and 1 percent of GDP respectively on social welfare (cf Holliday, 2000).

The difference in institutional logic of the welfare state in South Korea and Japan may be also explained, to a large extent, by the lack of socialism and left-wing parties in South Korea—hence, the government was not urged to reinforce company welfare by way of preferential tax treatment, as it was the case in Japan.

South Korea’s welfare state system has been universalized to some extent in the last one and a half decades, but is far from being a universal welfare state that grants social rights based on citizenships. Public assistance continues to be means-tested and highly stigmatized. The pensions system is not unified yet, since there are still four different schemes existing: (1) for government employees, (2) military personnel, (3) private school teachers and employees, and (4) the rest of the popu-

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lation. In addition, up to one third of the urban workforce is not covered or evade the coverage of the system. Although universal coverage was introduced for the National Health Insurance, it still does not provide adequate protection against income loss from illness. As of today, the health service system, in essence, con-stitutes a “market-oriented, private-sector dominated, fee-for-service payment sys-tem” (H. Kwon, 2004; Kim and Lee, 2004; Yang, 2002: 64).

Taiwan

The starting point for and the logic behind the construction of the Taiwanese social security system again sets the case of Taiwan, to some extent, apart from its northern neighbors. In Taiwan, the initial beginning of labor insurance system11 in 1950 was prompted by the defeat of the Kuomintang on the Mainland by the Communists, and the launching of a labor insurance program as early as in 1948 in, at that time, Communist-controlled Manchuria and, then, in all of Mainland China.

Legitimacy problems and the continuous attempt to pacify labor unions stood at the center of the government’s motivation to introduce new welfare programs, and to extend coverage of the existing labor insurance. There were no Com-munists—or left-wing parties—in Taiwan during the authoritarian rule of the Kuomintang, from 1945 to 1987. However, there were significant oppositional forces from the very beginning, as independent candidates were allowed to join local government elections as early as 1951. Most locals regarded the Kuomintang regime to be alien to Taiwanese soil, as almost all government officials and high-ranking military officers, at that time, were born in Mainland China.12

The rise of powerful political forces in the mid-1970s that later culminated in the formation of the Democratic Progressive Party pushed the Kuomintang regime, to speed up social reform and further extend the coverage of social security systems. In doing so, the KMT had to incorporate workers and farmers in what was, in fact, a comfortable welfare state system, which however until the mid-1980s only catered to certain privileged groups that were needed to support the Kuo-mintang regime—above all government employees, military personnel, and private school teachers and employees (Aspalter, 2002b; Ku, 1997). Beginning with the year 1980, the government started to address social welfare problems more seri-ously, at it enacted a series of new welfare laws and programs, starting with the introduction of a new social assistance scheme in 1980.

With the lift of Martial Law and the onset of democracy, the conservative Kuomintang regime needed, for the first time, to compete for votes on national, provincial, county and city level. It is largely for this reason that in 1987 Premier Yu Kuo-Hua announced the plan to introduce a national health insurance system by the year 2000. Due to heightened political pressure—with the rise of powerful social welfare movements and opposition parties—a national health insurance was enacted much earlier, in 1994, and went into operation in March of the following year. The Farmers Health Insurance Law was set up in 1989, and in 1990 and 1991

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special health insurance schemes were established to cater to low-income families and the handicapped.

Today, the Taiwanese welfare state is in effect, to a great extent, universal—with regard to National Health Insurance (introduced in 1995), and universal old-age allowances for all citizens aged 65 and above. Over the past years, the govern-ment repeatedly promised and, then again, delayed the introduction of a national pension scheme. Decision makers tend, for the time being, to favor a balance between a funded and a non-funded scheme in setting up the design for a national pension scheme, the timing of its introduction and the institutional design are still uncertain.

Singapore

The government of Singapore took the provident fund system that was put in place by the British Colonial administration in 1955 and developed it into a full-fledged, comprehensive welfare system. The logic behind the great extension of the Central Provident Fund (CPF)—in size and function—is connected with particular political circumstances of the Singaporean nation. Social security in Singapore was under-stood to constitute the main tool for nation building—in a multi-ethnic society, an export-dependent economy with virtually no natural resources, and a tiny nation that is surrounded by mighty neighbors (Aspalter, 2002a).

The Singaporean government added various schemes to the CPF over time, such as housing schemes (e.g., the Public Housing Scheme in 1968), investment schemes (starting with the Singapore Bus Service Ltd. Share Scheme in 1978), family protection schemes (Home Protection Insurance in 1982, Dependants’ Protection Insurance in 1989), health care schemes (Medisave in 1984, Medishield in 1990), special retirement schemes (Minimum Sum Scheme in 1987), and an education scheme (Approved Education Scheme in 1989).

In 1977, the government divided the original account into two separate ac-counts—the Ordinary and the Special Account. In the mid-1980s, the government increased the function of its CPF system by introducing an additional Medisave Account. Today, 75 percent of savings go into the Ordinary Account (for invest-ment, insurance, housing, and education), 15 percent into the Medisave Account, and 10 percent into the Special Account for old-age income maintenance. Pensions security is an underdeveloped feature of the Singaporean social security system—however, housing schemes that provide 90 percent of the population with their own housing serve, indeed, as a functional equivalent to old-age retirement income.

The strategy of asset building—as a means for welfare enhancement—lays at the heart of the Singaporean welfare state (cf Sherraden, 1990, 1997). There is no mechanism of redistribution built in the CPF and benefits are fully dependent on one’s lifetime work performance and income. The Singaporean welfare state is not expenditure-oriented, which enables low levels of taxation that in return facilitates high levels of employment and income. The funds accumulated by the CPF made possible both economic and social development—increasing national savings, as

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well as investment in infrastructure, education, and health care. Economic develop-ment and social welfare development in Singapore were intrinsically connected to the workings of its provident fund system. In the particular case of Singapore, hence, it is hard to say that social policy was subordinated to economic policy goals—rather one might say that both social and economic policy were interwoven, and this to such an extent that it is unclear if there was at all any distinction between the two and, if there were, where to locate the borderline in between them.

Hong Kong

Among our case studies here, Hong Kong certainly stands out a bit from the rest of the group of East Asian welfare state systems discussed so far. From 1945 to 1997, Hong Kong was under British Colonial rule. Hence, some features of the welfare state system we find in Hong Kong resemble quite a bit that of its former mother country, the United Kingdom. An obvious point in concern is the emphasis on—rather redistributive and, hence, expenditure heavy—means-tested, and quite generous, social assistance schemes, which still form a core column of the Hong Kong welfare state system. In addition, health care is funded to a large extent out of government revenue, providing each citizen with a comfortable safety net. Health care in Hong Kong is very affordable, as fees for services provided are kept very low. In terms of safety provided, the health care system in Hong Kong matches to a large extent the National Health Service of the United Kingdom.

A key factor for welfare state development in Hong Kong was massive migra-tion from Mainland China into Hong Kong after World War II, and this by the millions. The desperate situation of new arrivals led to the engagement of foreign charities and NGOs in Hong Kong, which led to the development of a strong local NGO sector by the end of the 1960s. Another important factor was the fear of the government, in the late 1960s and early 1970s, that the Cultural Revolution could sweep into Hong Kong, and that Communist forces would gain considerable strength in the territory. As a result, in 1971, the government of Hong Kong started to act and, subsequently, launched a series of new social welfare policies, putting social welfare provision high up on its agenda.

Rather than providing social services itself, which would have been much more costly, the government decided to set up a long-term partnership with the new local NGO sector—which then took over the main responsibility of providing of social services, while receiving most of its funding from the government. Today, nearly 90 percent of voluntary welfare agencies are completely dependent on govern-mental financial support from the government. The special partnership between the NGO sector and the government in social service provision has become a particular feature of the Hong Kong welfare state. The new social service system was designed “to prevent social tensions from building up” (Aspalter, 2002b; R.K.H. Chan, 2002: 88).

Two other major columns of the newly erected welfare state system were public housing and public funding of educational institutions. Public housing pro-

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grams formed the mainstay for social integration of new arrivals from Mainland, as well as poor segments of society. The government of Hong Kong was very active in social investment as it was seen to be economically productive. Social invest-ment aimed at supporting economic development by increasing the human capital of the workforce, as well as avoiding social tension and friction, or worse. Hence, seen from this perspective, social development was also an integral part of eco-nomic strategy of the state, rather than a subordinate, second-rank objective that stood for itself.

The introduction of the Mandatory Provident Fund (MPF) in December 2000 brought Hong Kong, again closer to the East Asian welfare regime, as social security is upgraded to serve the majority of the population while, from now on, being tightly connected to employment and income of the workforce. The MPF is not administered by the state, as it is the case in Singapore. The state merely supervises and regulates investment funds of the MPF scheme.

Constructing the East Asian Welfare Regime: The Fourth Model

In this study, the identification of the East Asian welfare regime as the fourth major welfare regime worldwide follows the approach of applying an ideal-typical typo-logy in the terminology of Max Weber (cf Hekman, 1983), and as applied by Esping-Andersen (1990).

In doing so, single aspects of the reality of welfare states in the case studies in concern are highlighted to play a central part in each ideal-typical category—knowing that in reality there are minor, and some rather major, deviations from the ideal type. The existence of a universal health service in the United Kingdom and the existence of an occupationally divided—and still fairly redistributive—social security system in the United States (cf Esping-Andersen, 1990) are examples of how in particular cases rather important facts are disregarded for the sake of “terminological purity”—in the making of general classifications. It is the task of each comparative social scientist to find out in each case how close the reality can resemble the ideal-typical classification (cf Opielka, 2004).

The existence of provident fund systems in East Asia (e.g., Singapore, Malay-sia, and Hong Kong) may appear to be fundamentally different from company-based welfare provision as in the case of Japan, South Korea, or Taiwan, but when looking closely one may see that provident fund systems serve as a functional equivalent of company-bound pension, housing, and welfare benefits elsewhere. In Singapore, the government administers the Central Provident Fund (CPF) and, hence, the loyalty of the people is bound primarily to the state. In Japan, the government supports, and hence controls, company welfare provision by way of special tax concessions (Shinkawa, 2004), in a mutual agreement that binds the loyalty of the people to their company (benefits are increasing with number of years the employee is employed in the same company and with the size of the company). In both Singapore and Japan, employees’ welfare benefits are not financed by the state, but entirely by the private market economy. While in Japan

Christian Aspalter: The Welfare State in East Asia: An Ideal-Typical Welfare Regime

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companies come up for all of the benefits directly, in Singapore half of con-tributions are financed by way of wage earners’ salary—the burden of which however is also carried by the company. In both cases the government acts as a regulator of “employment-based” welfare.13

Another source for much discussion with regard to East Asian welfare parti-cularism is emergence and extension of universal social security schemes across the region—displaying different benefit coverage and levels. There is a clear trend towards greater universalism in some East Asian welfare states, which may add—if this trend is sustained—a key distinctive feature to the ideal-typical East Asian welfare regime in the years to come. In Korea universal coverage was instituted in 1989, however, with only a limited benefit package and high co-payments by patients (S. Kwon, 2003). Taiwan implemented a national health insurance scheme in 1995, with wide coverage of benefits and low co-payments by patients (cf Lu and Hsiao, 2003). With regard to old-age income security, the coverage of the Korean pension system has been extended to also cover the urban self-employed. However, due to massive evasion and underreporting, the system in not very effective in tackling poverty of today’s and tomorrow’s generation of elderly people (S. Kwon, 2003; Kim and Lee, 2004). Taiwan has implemented universal old-age allowance schemes for elderly citizens aged 65 and above (cf Aspalter, 2002b).

For the time being, it needs to stress that pensions in Korea are, in actual fact, not at all universally granted, and that the Taiwanese solution of old-age allow-ances was rather accidental, due to the absence and delay of a national pension scheme. However, universal provision of low-cost health care in Hong Kong and Taiwan does in fact represent a strong deviant case in an otherwise highly conservative social policy framework.

All in all, the picture of conservative social policy in East Asia14 is not hampered by various differences in the institutional setup of national social security systems. Strong similarities in the logic behind—i.e., the motivation of the government—and the functional effect (outcome) of welfare state systems in East Asia suggest the existence of a unique type of welfare regime in the region. The existence of a distinct, ideal-typical East Asian welfare model cannot be doubted, as the set of its institutional features and policies and the welfare ideology upon which they are based are fundamentally different from the other three ideal-typical welfare regimes as identified by Esping-Andersen (cf Table 1).

To begin with, occupational social security systems are a first choice of predominantly conservative East Asian governments in setting up national welfare systems. Japan, South Korea, Taiwan, Hong Kong, all have special social security schemes, especially with regard to pensions, for different occupational groups, and/or special interest groups, such as public sector employees.

Second, the preferential treatment of special interest groups is obvious in most countries, especially in Japan (pensions and health insurance plans are divided into central and local government employees, private sector employees, and the self-employed), South Korea and Taiwan (separate pensions for government employees,

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military personnel and private school teachers and employees), Mainland China (with the labor insurance catering particularly to employees in public/semi-public sector), but also Hong Kong (with a separate pension scheme for public em-ployees). The ideology behind the construction of occupationally divided social security systems originates in the defense of status differentials and the prevention of major redistribution of financial resources between upper and lower strata of society. Table 1: Comparison of Ideal-Typical Welfare Regimes

Social Democratic Welfare Regime

Corporatist/ Christian

Democratic Welfare Regime

Liberal Welfare Regime

Conservative Welfare Regime

Dominant Social Policy Instruments

• Universal Social Security

• Public Social Services

• Public Employment

• Social Transfers (redistribution* by way of subsidies, social assistance, and taxation)

• Occupational Social Security

• Preferential Treatment of Special Interest Groups

• Corporatism in Social Service Provision (esp. NGOs and the Church)

• Social Transfers (redistribution* by way of subsidies, social assistance, and taxation)

• Means-Tested Welfare Benefits

• Private Savings and Insurance

• Tax Programs (mostly tax cuts benefiting the rich)

• Occupational Social Security

• Preferential Treatment of Special Interest Groups

• Emphasis on Employment-Based Welfare Provision

• Social Investment (investment in education, health, and housing)

Focus in Social Welfare Policy lays on:

• Individual

• State

• Family

• State

• Individual

• Market

• Family

• Market

Degree of Decommodification

Strong Medium Weak Weak

Degree of Redistribution* (Effect on Stratification)

Strong Medium Weak Weak to medium

Example Sweden Germany United States Japan Note: *from rich to poor Sources: Based on Aspalter (2001a, 2003a,b), Huber and Stephens (2001), Kersbergen (1995),

Howard (1993), and Esping-Andersen (1990, 1998). Third, a clear-cut emphasis is laid upon employment-based welfare and social se-curity programs that does not rely on public funding—e.g. either a company welfare system that is induced by way of tax subsidies as in Japan, or employer-

Christian Aspalter: The Welfare State in East Asia: An Ideal-Typical Welfare Regime

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and employee-financed savings accounts as the case in Singapore, Hong Kong, China, and partly now also in Japan (cf Shinkawa, 2004).

Fourth, the wider pattern of the welfare mix that is applied in the East Asian region represents, at heart, a unique welfare formula. Governments in East Asia tend not to support welfare policies that focus on the individual per se, but rather welfare policies that take into consideration the need of families and market provision in the institutional setup of national welfare systems. The role of the state provision is rather marginal, while the state instead focuses on the regulation and/or support of market-based/private social welfare provision.

Fifth, the degree of decommodification is weak in the East Asian welfare regime. Without doubt, East Asian governments deliberately pursued the strategy of “commodification plus state regulation” in welfare provision—that is, govern-ments supported or created strong employment-based social security systems that rely, first and foremost, on private sector finance. Thus, rivalry between the private and the public sector with regard to social security provision has been kept to a minimum.

Sixth, another outcome of welfare systems in East Asia is the relatively low level of redistribution—whereas here the major emphasis of redistribution is not placed on redistribution from the rich to the poor, which would according to the prevalent ideology of elites and government authorities lead to “negative” distor-tions in the private market economy. Redistribution, instead, is directed toward growth-generating investment in social development.

Though showing strong resemblance to parts of either the Corporatist and the Liberal welfare regime, the East Asian welfare regime pursues a distinct welfare approach. Social investment, social stability, and government legitimacy are consi-dered to be important factors in economic development, for sustaining economic growth and a favorable investment climate. Conservative governments in East Asia, thus, are not “liberal” (in the economic sense), as they do not shy away from growing social commitment of the state—as long as they see that these extended ambitions in social welfare support, and not hamper, short- and long-term econo-mic growth. In this context, it becomes understandable why conservative govern-ments in East Asia heavily committed themselves in the field of social investment, and also—reluctantly though, but still—implemented, on occasion, fairly generous welfare programs: for example, means-tested social assistance programs in Hong Kong and universal old-age allowances in Taiwan. In recent years, welfare commitments of the state are increasing across the region, also in countries like e.g. South Korea, Japan, and Singapore (cf Tang and Wong, 2003).

Even though, special historical circumstances pushed the one or other government, now and then, into a particular direction in welfare regulation and delivery, the conservative framework in social policy making stays intact, when looking beneath the surface (at functional equivalence at program level) and behind the curtain of social welfare policy in East Asia (at the political rationale—i.e., the logic behind welfare state formation and extension).

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Notes 1. Cf Holliday (2000); Gough (2000);

Aspalter (2001a); Holliday and Wil-ding (2004); Ku and Lee (2004); Hag-gard and Kaufmann (2004).

2. A major issue here is the nexus of uni-versalism versus selectivity, cf e.g. Shaver (1995).

3. This measure, however, was evoked strong skepticism from the side of re-searchers specializing in gender rela-tions in social policy, as this meant that unpaid work (housework, care-work, etc.) usually could not be captured by the concept of decom-modification. A key feature of the social democratic welfare state, in fact, was public employment opportunity of women, which represents a form of welfare that com-modifies women’s labor. The question that arises is that how useful is the concept of decom-modification in an era of increased demand for commodified forms of welfare provision, especially in the case of women, and other socially disadvantaged or vulnerable groups (cf Langan and Ostner, 1992; Lewis, 1992; Hobson, 1994; Kersbergen, 1995; Pixley, 1996).

4. This finding however, as it is shown in this study, may serve merely as a vague description of welfare systems across the East Asian region.

5. East Asia here is understood to com-prise what is commonly referred to as Northeast and Southeast Asia.

6. Building extensively on the work of Midgley (1986, 1995).

7. Especially government employees, military personnel, and private school employees and employees.

8. In the large-scale enterprises, em-ployees typically benefit from better coverage in social security systems and/or occupational welfare benefits.

9. That is, societies with more than 20 percent of population over the age of 65.

10. To note, the Japanese Constitution was drafted by a team of 24 Wes-terners within only five days, under the super-vision of General Douglas MacArthur from the United States.

11. First only on an experimental basis, while successively, and significantly, extending coverage and benefits until 1958, the time of the formal launching of the program.

12. The new ruling elite spoke Mandarin Chinese and not Taiwanese, which to-day is still the mother tongue of three quarters of the population, besides Hakka, Mandarin, and a variety of Aboriginal languages.

13. The main difference in the effect of both systems is that in Singapore labor mobility is enhanced by the CPF, while in Japan company welfare acts as a restraint to labor mobility, which indispensably leads to increased unemployment.

14. A number of academics have stressed that welfare provisions in East Asia were introduced by conservative elites, while the particular set of social policies adopted also reflects conser-vative ideologies (cf Ku, 1997, 2000; White and Goodman, 1998; Aspalter, 2001a; Ku and Lee, 2004)

.

Christian Aspalter: The Welfare State in East Asia: An Ideal-Typical Welfare Regime

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© Casa Verde Publishing, 2005 · ISSN 1681 2816 Journal of Societal & Social Policy, Vol. 4/1: 21-50

A Comparative Study of Welfare State Transition

Ahn Sang-Hoon Seoul National University, Korea Abstract This study puts forth an empirical analysis of welfare state transition between 1960 and 1989, building on the argument that different periods in the political economy of the welfare state – especially before and after the economic crisis of the 1970s – will set forth a distinct logic of policy making. Hence, they impact of internal and external, or socioeconomic and political determinants of the welfare state may change from period to period. The study concludes that welfare-internal driving forces are strongly dependent on political factors, while the dominance of different political actors gives rise to changes in the welfare politics – as embodied in the new inter-class politics that is based on status groups. Keywords: Welfare state theory, political determinants, logic of welfare, class politics, political actors, welfare statuses. This dissertation explores the changing conditions of the welfare state and the underlying driving forces behind these changes. More specifically, the political mechanisms behind the changes in public welfare program structure will be uncovered by examining theoretically important variables at a macro level. This article examines two questions that are central to the changed logic of the driving forces behind welfare state development. First, does the impact of driving forces change in accordance with the distinct periods of the welfare state? Second, what kind of driving forces appear to exert greater influence: internal or external, socioeconomic or political?

We must first consider how to deal with the first question concerning a suggestion that there are at least two characteristically distinct periods of the welfare state (Ahn, 2000). In order to address this question, three models with three different time spans are comparatively tested: (1) the entire 30-year period between 1960 and 1989, (2) the Golden Age period (1960-1974), and (3) the Retrenchment Period (1975-1989). The designation of two separate periods within the 30-year time frame is in part an acknowledgement of the insights of the argument that there must be changed logic at work in welfare after the economic crisis of the 1970s (Pierson, 1996, cf Schmidt, 1983).

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Table 1: Variables Included in the Analysis of Welfare Effort Models

Variable Scholars Operational Definition Source Hypo-

thesis

Economic wealth

Industrialism (Galbraith, 1958; Wilensky and Lebeaux, 1965;

Wilensky, 1975; Inkeles, 1981; Kerr et al., 1964; Goldthorpe,

1969; Maddison, 1982; Wagner, 1883; Cameron, 1978; Pampel

and Williamson, 1989)

GDP per capita in US$ at current

prices and exchange rates

OECD, National Accounts +

Unemploy-ment

Neo-Marxism (O’Connor, 1973; Offe, 1987; Gough, 1979; cf

Pampel and Williamson, 1989)

% of total labor force

OECD, Labor Force Statistics +

Openness of economy

Corporatism (Cameron, 1978; Katzenstein, 1985; Castles, 1982;

Schmidt, 1982) / Globalization (George, 1998)

‘Export + import’ as % of GDP

Summers and Heston (1991) +/-

Population aging

Interest group theory (Pampel and Williamson, 1989)

Industrialism (Wilensky, 1975; Ahn, 2000)

Age 65+ as % of total population

OECD, Labor Force Statistics +/-

Union mobili-zation density

Power resource theory (Korpi, 1985; Esping-Andersen, 1985; Stephens, 1979; Shalev, 1983;

Ahn, 2000)

Union membership rate in total labor

force

OECD, Labor Force Statistics +

Left power

Power resources theory (Korpi, 1985; Esping-Andersen, 1985; Stephens, 1979; Shalev, 1983;

Ahn, 2000)

% of parliamentary seats

Huber et al. (1997) +

Christian power

Christian democratic power theory (Wilensky, 1981; Stephens, 1979, 1996;

Esping-Andersen, 1990; Huber and Stephens, 2001)

% of parliamentary seats

Huber et al. (1997) +

Female/public employee

State-centered theory (Skocpol, 1985; Skocpol and Amenta, 1986; Heclo, 1974;

DeViney, 1983; Esping-Andersen, 1990)

(public employment rate as % of total

labor force) X (female labor force/

male labor force)

OECD, Labor Force Statistics +

Indirect tax Visibility-of-tax thesis

(Marklund, 1988; Cameron, 1978; Wilensky, 1976, 1985)

Indirect tax / direct tax

OECD, Nat’l Accounts; ILO,

The Cost of Social Security

+

Contribution

Visibility-of-social-security-contribution thesis (Messere,

1998; Steinmo, 1994; Marklund, 1988)

Insured’s contribu-tion/employers’

contribution

OECD, Nat’l Accounts; ILO, Cost of Social

Security

-

Selectivism Welfare backlash thesis (Korpi

and Palme, 1998; Kangas, 1995; Shaver, 1998; Marklund, 1988)

Social assistance expenditure as %

of total social exp.

OECD, Nat’l Accounts; ILO,

Cost of Soc. Sec. -

Pension effort

Intergenerational conflict thesis (Walker and Naegele, 1999; Ahn and Olsson Hort,

1999; Walker, 1999)

Pension expendi- ture as % of total social expenditure

ILO, Cost of Social Security

-

Journal of Societal & Social Policy, Vol. 4/1

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Indeed, existing studies present quite a large number of cases that exemplify the changed environment of the welfare state in conditions of the economic crisis. However, none has explicitly and comprehensively tested the changed logic of driving forces of the welfare state between the two periods in a standard linear modeling approach. This point highlights the importance of the first empirical question of this study.

The following discussions and analyses of this study concentrate on publicly provided welfare programs. This is because the on-going welfare retrenchment is more directly connected with the traditional public welfare programs, rather than to the new types of welfare goods and services. Moving on to primary focus of this study, a number of the core driving forces suggested by conventional welfare theories are briefly discussed and summarized in Table 1.

The rationale for testing the seemingly “outdated” or “already redundant” notions of welfare state development also deserves explanation. When conven-tional social policy theorists found shortcomings in existing major theories, they have usually sought to overcome these defects by shifting their focus to new elements. As a result, the various contributions made by seemingly outdated theory were cast aside, rather than synthesizing them into a new, more comprehensive model. This is one of the reasons contemporary theories of the welfare state remain tremendously diverse. In addition, existing studies usually touch upon merely one or two partial dimensions of the welfare state. Although this has often been the case, there have been important attempts to integrate the theoretical and empirical merits of the past theories.

The works of Uusitalo (1984), Pierson (1991), Marklund (1988) and Esping-Andersen (1990, 1992) must be considered distinguished examples of such efforts. However, their achievement lies principally in their theoretical synthesis, rather than in the empirical comparison of the “competing” driving forces. Even where such empirical comparisons were attempted, there are methodological short-comings that significantly undermine the persuasive power of their interpretations. All in all, contemporary welfare research continues to struggle with both theo-retical and methodological blind spots. Indeed, what has been achieved in terms of “theory building” in this research field is still considered unsatisfactory and sparse, and far from a general theory (Ahn, 2000; Uusitalo, 1984; cf Esping-Andersen and Kersbergen, 1992).

Variables, Hypothesis, and Method

The major differences among the competing schools of thought seeking to explain welfare state change lie in their identification of the primary driving forces behind the welfare state development. The detailed explanations in the various empirical studies often complement one another to a significant degree (Ahn, 2000; Uusitalo, 1984; Wilensky et al., 1985). For this reason, it is important to include what have been regarded as the principal driving forces in welfare in the same equations of pooled time-series analysis that will be presented in the following. The selection

Ahn Sang-Hoon: A Comparative Study of Welfare State Transition

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criteria used are theoretical relevance and possibility of contribution to under-standing of the recent changes of the welfare state. These core driving forces behind welfare state changes will be extracted and classified into two blocks––welfare-external driving forces and welfare-internal driving forces––following the classification of driving forces suggested by Marklund (1988). Also important to note is that welfare-internal variables are sorted out in accordance of the logic of welfare status theory suggested by Ahn (2000; cf Ahn and Olsson-Hort, 2001).

Mainstream theories of the welfare state have suggested the major driving forces behind welfare state changes as follows: (1) level of economic wealth, (2) population aging, (3) social democratic power or (4) Christian democratic power, (5) openness of economy, (6) unemployment and (7) union mobilization density. These are basically welfare-external driving forces that reside outside the welfare program structure and have initially generated the welfare state development. There are several distinct perspectives concerning the reasons for the postwar development of the welfare state. They typically focus on particular aspects of socioeconomic change as the key driving forces behind welfare state development.

Several other important concepts can be extracted from the series of theoretical observations about the actor-oriented aspects of the welfare state changes. These can be grouped under the category of “internal” driving forces of the welfare state change. They are (1) the female labor force in the public sector, (2) tax visibility, (3) contribution visibility, (4) the redistribution structure of “selectivism,” and (5) pension effort. If we borrow from Marklund’s (1988) notion, these driving forces are originally “endogenous” because they are derived from the welfare state development of the Golden Age period. These conceptual variables were often treated as minor, merely complementing the major “external” variables of the conventional theories. Some welfare state researchers, however, especially for the last decade or so, have increasingly emphasized the theoretical importance of these internal driving forces. Thus, it may be argued that they may not any longer be endogenous only, but also exogenous in the recent politics of the welfare state crisis. As Pierson (1993) pointed out, major public policies also constitute important rules of the game, influencing the allocation of economic and political resources, modifying the costs and benefits associated with alternative political strategies, and consequently altering ensuing political development. These pro-gram-structure-based driving forces will be looked into in detail in the following sections.

In the previous sentences, mainstream theories about important driving forces behind welfare state changes have been pointed out in order to identify relevant driving forces in the development of welfare states. The political mechanisms behind recent changes in European welfare states are a particular focus of this study. When Marklund (1988) asserted that endogenous factors became more important in the face of welfare crisis, he did not explicitly define what the nature of such factors were. In this study we assume welfare-internal factors are basically political because they are directly or indirectly relevant to distinct interests of the individual. Since political attitudes and subsequent political action stem from indi-

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vidual interests, it is perhaps reasonable to make this argument. In this sense, the inclusion of socioeconomic driving forces may facilitate a more complete interpre-tation of political driving forces.

In addition, the relationship between welfare-internal driving forces and politico-ideological powers will also be analyzed for the purpose of examining the distinct roles of two different party powers (cf Esping-Andersen 1990, 1996; Kers-bergen, 1991; Stephens et al., 1995; Wilensky, 1981). For our analysis, three as-sumptions are central. First, because the environment of the two periods is dis-tinctly different, periodically separated models would explain the level of welfare effort much more effectively. Second, welfare-internal driving forces become more important in Retrenchment Period. Third, political driving forces play more im-portant roles than socioeconomic ones. The essential logic behind the individual driving forces is summarized below in the form of hypotheses.

1. The greater the economic wealth of a country, the higher the welfare effort will be.

2. The larger the size of population aging, the higher the welfare effort will be—hence the smaller the size of population aging, the higher the welfare effort will be.1

3. The higher the union mobilization density, the higher the welfare effort will be.

4. The higher the unemployment rate, the higher the welfare effort will be.

5. The greater the level of a country’s economic openness, the higher the welfare effort will be—thus, the less the economy of a country is open, the higher the welfare effort will be.2

6. The larger the Left power, the higher the welfare effort will be.

7. The larger the Christian power, the higher the welfare effort will be.

8. The more a government utilizes indirect taxes, the higher the welfare effort will be—the more a government utilizes contribution, the higher the welfare effort will be.3

9. The larger the number of female/public employees, the higher the welfare effort will be.

10. The less the level of selectivism, the higher the welfare effort will be.

11. The less the pension effort, the higher the welfare effort will be.

The data cover the welfare states for 12 countries from 1960 to 1989. The included countries are Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Netherlands, Norway, Sweden, Switzerland, and United Kingdom. The reason for selecting these 12 countries for the cross-sectional units is two-fold. First, the

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countries include different types of welfare regimes (cf Esping-Andersen, 1990). Second, the statistical method that is used to examine the models does not allow missing cases; only the data for these 12 countries (for the period between 1960 and 1989) are complete in the existing statistical materials.4

In the pooled time series empirical analysis, different kinds of models with three kinds of dependent variables are used. These dependent variables are welfare effort and two kinds of pro-welfare political party powers, i.e. left power and Christian power. Except for welfare effort, these variables are utilized as inde-pendent variables as well.

Welfare effort is defined as percentage share of total social expenditure in the gross domestic product.5 The social expenditure includes social insurance programs and other supplementary programs directly relevant to the traditional function of the welfare state as redistribution mechanism.

Now let us move onto the estimation technique of the study. Given that each case stands for a variable in country c and time t, the resulting data set is a pool created across both spatial and temporal dimensions. The main advantage to com-bining cross-sections and time series in this manner is to capture variation across different units in space, as well as variation that emerges over time. The boost of sample size is another reason of the pooling in this analysis, making possible analysis that is otherwise highly problematic (Maddala, 1977).

The estimation procedure thus must account for the pooled structure of the data. The main problem encountered when the preliminary ordinary least squares (OLS) estimation was attempted was a clear symptom of first-order autoregression, which was detected by correlograms and confirmed by pooled Durbin-Watson’s d statistics.6 This problem was treated by employing one of the more sophisticated estimation techniques, i.e., estimated generalized least squares (EGLS). There are a number of different approaches available to address the problems that emerge when pooled time series analysis is used (Kangas, 1994). Each approach has its own merit and shortcoming and we need to choose a proper technique to meet the characteristic of the concerned data set.7 As the problems of autocorrelation and heteroscedasticity arise at the same time, a procedure adopted by Parks was em-ployed (cf Judge et al., 1985, SAS 1993).

In this technical procedure, the concerned problems of autocorrelation and heteroscedasticity are effectively considered in the estimation of model parameters. Although the selected country cases are European countries with relatively high level of welfare effort, it is still necessary to be concerned about the unit effects that might distort the estimations. As our analysis was designed to consider the heteroscedasticity as well, the first-order autoregression coefficients were esti-mated for each cross-section. In conclusion, even though the included country cases are confined to the 12 countries, the result can be interpreted as generalizing the causal mechanism of the welfare effort respectively for the periods concerned.

In addition, comparative analysis of the changes in terms of the welfare state structure before and after the oil crises that occurred in 1973 and 1979 are performed. The two periods are the Golden Age (1960-1974) and the Retrenchment

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Period (1975-1989). Although a general picture of the changed features of the welfare state is suggested in earlier research, the changed structure of the welfare state has not yet been verified using a comparative linear approach. In the recent studies involving regime approaches, European welfare states in the period after the 1970s are characterized by the prevalence of economic troubles and increa-singly influential neoliberal politics. To check the thesis that two periods are logically different in the welfare state structuring, reference models for the whole period are also tested.

In the following section, I will first discuss the findings about the changed logic of the forces driving the changes in the level of public welfare expenditure. Then, in the second section, I will specifically look into the relationships between welfare-internal driving forces and pro-welfare political powers.

The Changed Logic of Public Welfare Expenditure

In order to analyze the relative impacts of competing concepts on welfare effort, I prepared three different tables (Tables 2 to 4). For all the three tables, the depen-dent variable is welfare effort and all the relevant regressors are comprehensively included en masse.

Table 2 is of primary interest, while Tables 3 and 4 will also be referred for additional information, but only when necessary––especially when the resulting impact of a variable appears to be obscure in Table 2. In Table 3, the variable of unemployment is excluded, since it might distort the overall picture of times of economic hardship––when unemployment is high in all the countries. As will be discussed, European countries generally suffered from unemployment problems during the Retrenchment Period. Since quite a large number of changes in welfare effort were triggered by the problem, the inclusion of unemployment expenditures would lead to an underestimation of the influence of other variables on welfare effort.

Also important, the unemployment variable is included elsewhere to test the logic of monopoly capitalism; but this must be seen as a rough indicator for grasping the broader logic of neo-Marxist arguments about the mechanisms of monopoly capital. Hence, I decided to compare the results from the models both with and without the variable. Table 4, contains three more variables in comparison to Table 2––the sub-program expenditures of unemployment, sickness benefits, and family benefits. The reason for considering the results from this modeling is twofold. First, by including the unemployment benefit in real terms, we can extract the pure impact of unemployment, and can more plausibly test the logic of monopoly capital. Second, we need to examine the role of pension effort as the indicator of “intergenerational conflict” in controlling for other relevant variables of subprogram expenditures; and to comparatively explore relationships among the variables of the sub-programs. In answer to the questions regarding the first study question of the study, i.e. “two distinct periods,” the adjusted R2s for the three models are respectively 0.752, 0.972, and 0.827, as illustrated in Table 2.

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Table 2: Standardized Coefficients for Welfare Effort Models WHOLE GOLDEN RETRENCH Intercept 0.718 4.964 *** 16.626 *** Union mobilization density 0.006 -0.035 0.058 Unemployment 0.295 *** 0.223 *** 0.284 *** Open economy -0.030 0.051 0.115 *** Economic wealth 0.012 0.188 *** 0.012 Population aging 0.221 *** 0.170 *** -0.282 *** Left power 0.054 ** 0.137 *** 0.088 *** Christian power 0.209 *** 0.555 *** 0.517 *** Contribution 0.103 *** 0.069 *** 0.282 *** Indirect tax 0.025 -0.056 * 0.076 ** Female/public employee 0.627 *** 0.498 *** 0.899 *** Selectivism -0.082 ** -0.235 *** -0.040 Pension effort -0.084 *** -0.239 *** -0.139 *** Adj. R2 0.752 0.972 0.827 Note: Coefficient for intercept is unstandardized; * p < 0.05; ** p < 0.01; *** p < 0.001; N = 360 for the whole model and 180 for the others. Table 3. Standardized Coefficients for Welfare Effort Models Without Unemployment Variable WHOLE GOLDEN RETRENCH Intercept 4.718 ** 3.998 ** 25.731 *** Union mobilization density 0.006 0.020 -0.121 Open economy -0.100 * 0.136 *** 0.051 Economic wealth 0.011 0.040 -0.063 * Population aging 0.103 0.186 *** -0.350 *** Left power 0.054 * -0.002 0.234 ** Christian power 0.333 *** 0.694 *** 0.670 *** Contribution 0.052 *** 0.098 *** 0.007 *** Indirect tax 0.000 0.007 0.003 *** Female/public employee 0.732 *** 0.612 *** 0.970 *** Selectivism -0.102 ** -0.132 *** -0.039 Pension effort -0.104 *** -0.168 *** -0.217 *** Adj. R2 0.752 0.930 0.785 Note: Coefficient for intercept is unstandardized; * p < 0.05; ** p < 0.01; *** p < 0.001; N = 360 for the whole model and 180 for the others. Although the separate period models of the Golden Age and the Retrenchment Period explain more variance, we need more information in order to conclude that there are two different periods with distinctly different logic. Because the directions and degrees of influences of some individual regressors are con-

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spicuously changed according to the periods, it can be concluded that there is a logical difference between the two periods.

Overall, the generally accepted thesis of “the welfare state in transition for the recent period” is supported by our findings. Although increase of the explanatory powers for the separate period models varies between the models according to the included independent and dependent variables, the general trends also remain the same in Tables 3 and 4. Table 4: Standardized Coefficients for Welfare Effort Models with Subprogram Expenditures WHOLE GOLDEN RETRENCH Intercept -8.537 -6.269 48.202 *** Union mobilization density -0.002 -0.064 0.112 Unemployment 0.280 *** 0.183 *** 0.343 *** Open economy -0.023 0.056 0.050 Economic wealth 0.004 0.186 *** 0.018 Population aging 0.254 *** 0.221 *** -0.303 *** Left power 0.060 ** 0.135 *** 0.116 *** Christian power 0.210 *** 0.529 *** 0.447 *** Contribution 0.101 *** 0.081 *** 0.335 *** Indirect tax 0.008 -0.063 ** 0.082 ** Female/public employee 0.610 *** 0.498 *** 0.804 *** Selectivism -0.065 * -0.161 ** 0.021 Pension effort 0.054 0.035 -0.858 *** Sickness benefits 0.121 0.220 * -0.574 *** Unemployment benefits 0.099 0.144 ** -0.462 *** Family benefits 0.120 0.232 ** -0.184 *** Adj. R2 0.809 0.974 0.903 Note: Coefficient for intercept is unstandardized; * p < 0.05; ** p < 0.01; *** p < 0.001; N = 360 for the whole model and 180 for the others; three additional variables of sub-program expenditures denote the percentage share of individual programs in total social security expenditure. Proceeding to the second question of this article, the relative explanatory power of driving forces, let us begin the discussion about welfare-external variables. The indicator of union mobilization density has traditionally been utilized as an indi-cator for the validity of power resources theories. However, contrary to the existing logic regarding this indicator, union mobilization density is consistently statistic-cally insignificant in all the three tables. This suggests two explanations: European countries are not significantly different in their level of labor movement, or union membership does not have direct influence on the welfare effort.

Moreover, according to power resources theory, the role of labor movement can be influential only when it is combined with a strong relationship with left party politics (Korpi, 1998; Esping-Andersen, 1985). This point will be reexamined

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and strengthened in the next section where we concentrate on the role of the pro-welfare political powers.

Unemployment is a somewhat naive indicator of the monopoly capitalism thesis (Pampel and Williamson, 1989) and, at the same time, it represents an economic hardship that is generally applicable to the European countries for the period concerned. The coefficients of this variable are all significant in Table 2 and 3, which involve the variable of unemployment. The beta coefficients of this variable indeed increase from 0.223 for the Golden Age to 0.284 for the Retrenchment Period in Table 2. The same pattern can be found in Table 4 as well. Thus, the hypothesis for this variable is statistically supported.

However, it is difficult to regard this finding as confirming the logic of monopoly capitalism, because the indicator is naive and circumstantial at best. Therefore, it may be better to interpret the finding in the context of its influence on the welfare programs. As well known, unemployment dramatically increased after mid-1970s, although the degree varies among countries. All the countries involved in the analysis have unemployment benefit programs. Moreover, rationing of these programs in order to reduce the strain on national budgets was not broadly attempted immediately after the economic crisis of the 1970s. Hence, the increase in the unemployment rate is simultaneously reflected in the increase of unemployment benefit expenditures, accordingly boosting total social expenditures.

Contrary to the arguments made by earlier studies as to the thesis of openness of economy (e.g., Cameron, 1978; Katzenstein, 1985), the variable of open economy does not have any visible impact on welfare effort for Golden Age. This is indicated by the insignificant coefficients in Table 2. In the conventional treat-ment of the concept, researchers related the political impact of an open economy to the complex mechanisms of industrial relations in small industries such as the Nordic and Benelux countries. These countries are characterized by industrial concentration and a heightened role of the labor movement––regarded as the real driving forces for making the welfare state grow. This original logic behind open economy is not supported in the Golden Age model of Table 2.

It does, however, become significant in the Retrenchment Period, although its standardized coefficient ends up at a somewhat low level (0.115). It is interesting to note that when the unemployment variable is excluded from the equations, as shown in Table 3, the results are reversed. In Table 4, the impact of the variable is insignificant for all the models. Given this information, it is hard to make an empirically supported interpretation. A comparison of Tables 2 and 1, however, provides clues for a plausible interpretation of the role of this variable. As men-tioned above, the original logic behind the economic openness thesis emphasizes the industrial relations of a country as a real driving force behind the phenomenon. Unemployment is relevant to this logic.8 Therefore, it may be reasonable to exclude unemployment from the model since it may have an interaction effect with open economy. Therefore, result from Table 3 best fits reality––i.e., open economy had a significant and positive influence on welfare growth during the Golden Age, but it loses its influence in the face of economic hardships and economic globalization.

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Based on these findings, it cannot be concluded that the level of open economy, as an indicator of economic globalization, has a negative impact on welfare effort (cf Taylor-Gooby, 1997). This is so despite the fact that it loses its influence for the Retrenchment Period. In fact, all the statistically significant coefficients of this variable are positive. It would be hasty, however, to suggest this as the final word since the analyzed data covers only the period until 1989. Rather, we should leave this question for the future study, which should be carried out with more updated data.

The next variable concerns the central notion of industrialist theories. In Tables 2 and 4, the economic wealth variable reveals significant impact on the growth of public welfare expenditure only for the Golden Age. This at least partly supports the original notion of industrialist theorists about the variable. As almost all of studies based on such thesis were accomplished before the mid-1970s, it is perhaps fair to say that their argument was correct.

However, in Table 3, where unemployment is excluded, it reveals no signifi-cance for the Golden Age, while its beta becomes –0.063 and statistically signi-ficant for the Retrenchment Period. Combining all these findings, we can reach a tentative conclusion that the economic wealth variable is less influential than other determinants in terms of its hidden interaction effect with other variables.

Moreover, strongly in accordance with the common sense notion about the welfare state crisis (or retrenchment), economic wealth loses its positive impact on the welfare state after the mid-1970s. This reflects two facts that are contradictory to each other. On the one hand, this might be due to the general economic hardships that prevailed in European countries during the 1980s. On the other, this might be due to political difficulties of rationing of state welfare programs in the short run, even though economic hardships require such reforms. This point will be discussed again in the following sections when the meaning of this variable is compared with those of other political factors.

The population aging variable appears with interesting trends in connection with the periodic changes. The beta coefficient of the variable dramatically changes from 0.170, showing positive influence on welfare effort for the Golden Age, to the negative and stronger influence of -0.282 for the Retrenchment Period in Table 2. This pattern remains the same in the other tables. Note however, that its level of impact on public welfare expenditure is quite highly positive for the whole period models in the second columns, which confirms the findings of the recent studies (cf Pampel and Williamson, 1989). All the tables agree upon this aspect.

The findings from the two models of distinct periods are thus quite opposite from the original notion about this variable. In the original arguments advanced by industrialist and interest group theories, the positive impact of political power of elders’ interest groups on welfare state growth is underscored. If they were correct, it should show a positive impact also for the Retrenchment Period. Population was in reality “aging,” even during the Retrenchment Period, which has been regarded as an economic burden for younger generations by the neoliberals. The burden on the younger generations, in its turn, provokes intergenerational conflict, and it

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should result in exclusive and stronger politicization of elders’ interest groups. This could also result in a continuous growth of public welfare expenditure. This logic is not supported by our findings in the full sense. A closer look into the detailed mechanisms of old age politics comes later, in the following chapter, in which pension politics is specifically discussed. All in all, the notion of interest group politics theory is at least partly rejected, since population aging did not auto-matically result in the victory of older people.

We can now examine the findings regarding the power of politico-ideological parties. Both Left and Christian powers have all positive impacts on the welfare effort. Interestingly, however, Christian power appears to play a far greater role than Left power. In Table 2, the beta coefficients of both powers decrease for the Retrenchment Period. For the Golden Age, beta level of Left power is 0.137 and Christian power 0.555; and, for Retrenchment Period, 0.088 and 0.517 respectively. All in all, Christian power is the most influential external variable for both periods in all the three tables, which support the theoretical and empirical findings by Wilensky (1981). He argued that both political powers are strongly connected to corporatism as a consensus-making devise. Wilensky found that as corporatism is an important condition permitting the welfare state to develop, both powers are also strongly correlated with the welfare effort. In his research of democratic corporatism––which he considered as the very driving force behind the welfare development––Wilensky found that the Catholic power has much stronger impact on the welfare effort than Left power does (Wilensky, 1981). However, he also found that the variable of Left power explained much more of the variation of the programs that had more redistributive effect.

The results illustrated in Table 4 replicate the findings of Table 2. However, when the unemployment variable is excluded from the models in Table 3, we end up with a quite different picture. In Table 3, the impact of Left power is not significant for the Golden Age. This finding contradicts the traditional emphasis of the Left power––especially the power of social democratic parties––that we find at the center of power resources theory (Korpi, 1998). Contrary to the expectations of the theory, the relative impact of Left power on welfare effort appears marginal for the Golden Age. This is so especially in comparison with Christian power. However, Left power plays a greater role in the context of economic hardships that produce an environment unfavorable to the welfare state. The beta coefficient increases to 0.234 for the Retrenchment Period. The results for the Christian power remain the same as in the other tables. Although the coefficients of Christian power for the two periods are statistically significant, the impact of that power appears to be mitigated in the context of economic hardship.

To summarize, the findings from Table 2 and 3 allude to two interpretations. First, Christian power plays a relatively important role in enhancing welfare effort. Second, however, its influence in welfare effort is mitigated in the context of economic hard times. Findings from Table 3 implies that Left power plays a much greater role––or begin to play a distinctly greater role––in the context of economic

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difficulties, while Christian power loses its importance, or becomes less supportive, in defense of the traditional welfare state.

Because the results from the different models vary to such a degree, we can suspect a hidden relationship between politico-ideological powers and their orientation toward labor market policies, and which are connected to the results of unemployment in different countries. Generally speaking, Left powers tend to be more eager to achieve full employment in comparison to Christian powers. This is because the core supporters of Left parties are the labor classes, who also support full employment. Reflecting on this tendency, unemployment was not that problematic in countries where Left power dominates for the entire time span analyzed––for example, in the Nordic. In addition, since the dependent variable is total welfare expenditure, which is sensitive to the changes of unemployment growth and resulting changes in unemployment benefits, inclusion of unemploy-ment might induce an interaction problem along with policy orientations of politico-ideological powers. Because our models do not involve such problems in an explicit way, it would perhaps be wise to remove unemployment and sub-program variables from the models, which is the case of Table 3.

It can therefore be concluded that Left power seems to provide ardent support for the traditional welfare state, even in the face of the series of problems that produce new environments of the welfare state. It may also be argued that Christian power becomes less supportive of the welfare state when it faces environmental changes such as the economic hardships caused by unemployment and economic globalization. Hypothetically, then, Left power is the stronger supporter of the welfare state through rainy days, while other kinds of politico-ideological powers are far less so. These non-left political powers perhaps accept, or even encourage, the rationalizing of the welfare state in economic hard times. Because these findings about the difference between two politico-ideological powers seem interesting and thus deserve more attention, they are investigated in greater detail in the context of political mechanisms of these two driving forces later in this chapter.

Welfare-internal variables appear at least as significant as the welfare-external variables in their influence on welfare effort. This conforms to the emphasis on these driving forces argued by recent scholars who have recognized political importance of welfare program changes (Esping-Andersen, 1990; Marklund, 1988; Pierson, 1996).

Marklund (1988) argued that contribution-based financing systems were more robust than tax-based ones in the context of welfare retrenchment. Indeed, the role of social security contributions has actually been enhanced for the state welfare financing in European welfare states during the Retrenchment Period (Messere, 1998; Edlund, 1999).9 Conforming to these assertions, the beta coefficient of social insurance contribution by the insured jumps from 0.069 for Golden Age, to 0.282 for Retrenchment Period, as shown in Table 2.

Given that macro-level policymaking reflects, at least to some degree, the micro attitudes of individuals, less conflict-prone means for social security

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contribution are preferred to taxation (Messere, 1998; cf Edlund, 1999; Steinmo, 1993, 1994). Hence, it can be argued that European welfare states started to rely more on social security contribution in the face of the financial hardships of wel-fare programs because welfare contributions have less potential to result in a wel-fare backlash than welfare taxes. In other words, social security contributions might be considered by the public as more equitable than welfare taxes. This is so since people can easily relate a specific welfare contribution to a concrete welfare program from which they expect to benefit. To the contrary, welfare tax is often used without any specification of targeted usage, which make it easier for people to feel that they are paying excessive taxes for anonymous others. This is a crucial point that all types of governments––from the left to the right––might consider when they attempt fiscal rationalization aiming at budget equilibrium.

In addition, the enhanced role of contributions during the Retrenchment Period reflects an amplified voice for employers during the Retrenchment Period. Remem-ber that the variable is a ratio of the share of social security contribution between the insured and employers. An increased share of the contribution from the insured might point to a refusal of employers to pay a larger absolute amount, because they see it as harmful to their economic competitiveness, especially in the case of export industries. If this is true, a downsizing of the role of the employers in financing welfare programs might increase in step with economic globalization. Despite the fact that his/her own contribution level is increased, the individual might have a more positive view of the contribution, which implies less political backlash for the governments. This point is distinctly different from the following results about taxes.

Findings from the tables also support Wilensky’s (1976) argument about tax revolt, which was believed to occur in the context of the welfare state crisis. While the beta coefficient of indirect tax is -0.056 in the Golden Age, it becomes 0.076 in Retrenchment Period, as shown in Table 2. Although the level of impact of this variable is not high, it is still statistically significant. Moreover, the changed direction of the variable conforms to the argument made by Wilensky (1976). This tendency is replicated in the other tables of Table 2 and Table 4.

Based on these findings, it may be plausible to conclude that Golden Age welfare growth was achieved primarily by means of direct tax, while the protection of public welfare programs in times of economic hardship is only possible when tax visibility is minimized. In addition, the analytical separation of tax and contri-bution, and emphasis on the latter, proves to be legitimate. Indeed, the impacts of contribution on public welfare expenditure are much stronger than that of tax in each of the models, and without exception.

Overall, a conclusion can be drawn from the results about tax and social se-curity contributions. The increased emphasis on the invisible taxes and self-finan-cing system of social security contribution implies two points. First, European go-vernments began to recognize problems of budget deficit at the macro level. Second, they tried to solve the problem in a politically easy way at the micro level. In the following section, I will consider the political implications of these points in

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two ways. First, I will compare difference of politico-ideological powers in terms of tax and contribution policies. Second, I will see how tax/contribution-related interests of the individual can be connected to the politics of the welfare state.

The next variable is female/public employee. This variable appears to be the most influential among the welfare-internal variables for all the models of different periods. In the Retrenchment Period, its standardized regression coefficient becomes the largest among all the variables in the models. Its level of 0.899 is even higher than that of Christian power, the most influential variable among the welfare-external type of variables.

Circumstantial though this might be, it can be maintained that this group of people––who have a distinct interest in the advanced welfare state––add to the power of pro-welfare alliance against neoliberal cutback efforts. To arrive at a firm conclusion, however, it will be necessary to wait until we have the results from a micro-level analysis. In the meantime, it is perhaps reasonable to conclude that gender and employment sectors may have significant impacts on the attitudes and voting behaviors in welfare-political processes.

As illustrated in the tables, selectivism has a negative impact on the level of welfare effort made by a country. Indeed, there is a series of theoretical arguments emphasizing the negative impact of selectivism on welfare development. Shaver (1998) argues that legitimacy of the welfare state cannot be sustained with selective measures. The logic behind this is simple. According to Korpi (1980), means-tested programs generate a much greater possibility for welfare backlash than do the universal ones.10 As is empirically shown, pensions and health care, which are generally universal, are more popular programs than unemployment and social assistance (Coughlin, 1980; Taylor-Gooby, 1985; Sihvo and Uusitalo, 1995).

Conforming to these theoretical and empirical findings, the beta coefficient of this variable for the Golden Age is -0.235 in Table 2. Thus, the hypothesis for the original assumptions about selective measures is supported. However, the variable loses its statistical significance for the Retrenchment Period. This must be due to a direct relationship between this variable and other structural changes such as increasing unemployment. The level and severity of unemployment has a direct impact on the growth of this marginal program. Let us assume a situation in which individuals’ unemployment lasts for long time. Because unemployment benefits usually limit the duration of benefit eligibility, one can eventually lose the right to access to unemployment benefit if trapped in a long-term unemployment situation. In addition, because benefits are normally less than earnings from employment, the unemployed usually lose economic ground. This is the situation when selective programs such as social assistance benefits enters, because they are the main programs to cater for a society’s poorer people. As is often the case, higher unemployment usually boosts the size of population of poorer people in a society, especially in the case of the long-term unemployment that characterizes the European labor market situation since the 1970s. In sum, because of the recognized problem of interaction between unemployment and selective measures on the one hand, and due to the serious unemployment problems of the Retrenchment Period

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on the other, the coefficients of selectivism variable may become statistically in-significant.

There may be another reason behind such an unexpected finding. In the context of retrenchment, selective programs are often employed to alleviate the budget deficits. However, the long-term effect of this change is not that simple. Because selective measures focus only on minor segments of the population, a majority of individuals may well identify such programs as being detached from their own interests. It is thus possible that this change might negatively affect the general attitudes of the public toward the welfare state. This possibility becomes quite plausible in view of the political result of housing policy changes in Denmark (Esping-Andersen, 1985).

The last variable, pension effort, is of major interest in this study because intergenerational relationships will be further discussed in the next chapter, as an example of new conflicts in the welfare state. The hypothesis for this variable can be stated as follows: if pension effort is not followed by growth of other program expenditures primarily addressed to younger generations, it provokes inter-generational conflicts and, as a result, negatively affects the level of total welfare effort.11 This hypothesis is generally supported by the findings. This variable appears as negative for both periods in Table 2. For the Golden Age, the beta coefficient is -0.239, and for the Retrenchment Period, -0.139. The pattern remains the same in Table 4. In Table 3, however, when unemployment is omitted from the models, the beta changes from –0.168 to –0.217, representing a slightly different pattern from the others.

One interpretation that can be made for this pattern is that the relative importance of this variable decreases for the Retrenchment Period. This may be due to the fact that the analyzed models of the distinct periods do not adequately consider the maturation effect of the pension program that occurred even for the Retrenchment Period in several countries. In the case of the countries in which the eligibility or coverage quality of pension efforts were increased relatively late in the Golden Age––as is the case with Belgium, for example––the increase made in the Retrenchment Period has been purely automatic. This happened while these “welfare laggard” countries were less interested in full employment. As a result, given the situation in which unemployment is excluded in Table 3, the negative impact of pension effort is in the whole boosted for the Retrenchment Period when the relative pension effort generally stopped increasing in most country cases.

Nonetheless, the general emphasis on intergenerational conflicts needs not to be harmed by this phenomenon. In fact, these pension effort laggards in the Golden Age did not face any intergenerational conflict when they entered the Retrenchment Period, because the level of relative pension effort was low in the face of economic crisis. As a result, they could postpone the reform of the pension program––a reform that is usually provoked by conflicts between generations. In this sense, it can be assumed that this type of welfare-laggard country also faces the possibility of serious intergenerational conflict in the long run. This is harmful to their pro-welfare alliance, and accordingly future welfare effort.

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All in all, a tentative conclusion can be drawn about the meaning of pension effort with regards to total welfare effort. Because an excessive pension effort in the larger context of relative underdevelopment of other programs for younger generations implies intergenerational conflict, it has a negative impact on the total welfare effort.

Welfare-Internal Driving Forces Behind Pro-Welfare Political Powers

In the analysis so far, we have found two interesting findings related to the impact of the political and ideological party powers on the welfare effort. First, contrary to the mainstream argument of power resources theory, Left power does not appear as the major driving force behind the Golden Age development. Meanwhile, Christian power is conspicuously the most influential driving force of the Golden Age. Second, for the Retrenchment Period, both of the political and ideological powers continue to have a certain impact on the welfare effort, but the level of this impact decreases. However, when we look at the models with the unemployment variable excluded, we find that the role of the Left power increases for the Retrenchment Period (cf Table 3). As is often the case in linear modeling, we cannot directly speak about the hidden cause behind this complex observation. At best, we can attribute the hidden cause to “latent correlations” among the variables––especially the relationships between the groups of internal and external variables.12

As is frequently mentioned in the existing studies, institutional or historical settings of different countries in the whole have a comprehensive impact on the welfare state variations (Korpi and Palme, 1998; Rothstein, 1998). This is the essential logic of the regime approach, in which the Left (or social democratic) or Christian (or more specifically, Catholic) foundations of a country were seen as producing the primary and distinct conditions necessary for the development of the institutional welfare state (Esping-Andersen, 1990; Kersbergen, 1991). The three tables of models so far investigated do not seem to provide full information on these points; our analyses of the three tables provide only circumstantial evidence. Additional information from a different angle is most likely what is needed. This is particularly with regard to the political driving forces behind the welfare state, because these often appear as the most influential variables in the mainstream studies of the welfare state (cf Palme, 1990). This section will thus be devoted to grasping such hidden logic behind the complicated relationships that might reside between the internal variables and the politico-ideological variables of the external variety.

In Tables 5 and 6, the Left and Christian powers are placed respectively in the models as dependent variables. As for the independent variables, I include the welfare-internal variables exclusively in the right hand side of the equations. The other external regressors are not included in these models because the mechanism of welfare-internal variables, the structures of which are effected by the previous era’s welfare state development, is of more interest here. Since the exploration of programs’ structuring and restructuring and its relations with politico-ideological

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powers are of major interest here, external driving forces are excluded from the equations.

As alluded to many times, the internal influences play a significant role as the driving forces behind welfare effort. The political meaning of these welfare-inter-nal variables is related to the framework of distinct interest cleavages of welfare politics. For the purposes of this article, it is sufficient to mention that the welfare-internal driving forces should to be understood as basically political ones. This assumption has already been used in the previous discussions. For example, in the previous section, I regarded the changes of financial system of social security contributions and welfare taxes as a result of political convenience recognized by the governments that sought to avoid political backlash. In connection to this point, I also argued that people’s calculations of their own interests and thereby derived political action must be involved in the explanation of recent changes. In this sense, welfare-internal driving forces should be understood in the context of welfare politics.

The next step in this process is to investigate the different relationships between those internal variables and the two different pro-welfare political powers: Left power and Christian power. As already demonstrated by a series of other studies, these two powers are major driving forces because it has been these political powers who in practice make the social policy decisions in the welfare state (cf Esping-Andersen 1990, 1996; Kersbergen, 1991; Stephens et al., 1995; Wilensky, 1981).

However, existing studies have failed to adequately capture the relevant political actors and their influence on welfare politics. To bridge this gap, two specific questions are posed for this section. First, are the two politico-ideological powers different from each other in terms of their roles in defense of traditional welfare programs? Second, which politico-ideological power has greater potential to bring together the various interests? In order to understand these differences between the two powers, it is necessary to describe possible scenarios of recent changes in the nature of the two politico-ideological powers.

First, virtually all the researchers agree on the fact that Left power is more influential in the development of redistributive kinds of welfare programs (Wilensky, 1981; Esping-Andersen, 1990, 1996; Stephens et al., 1995). For example, Left power more eagerly adopts progressive kind of direct taxes to achieve equality in terms of income redistribution. Hence, Left power usually re-mains as a traditional proponent of the welfare state even in the face of the eco-nomic difficulties of Retrenchment Period. In the same vein, when welfare policies are devised to maintain equality principles, then the political power of left parties will be enhanced. Thus, the first hypothesis is as follows:

The greater the economic hardships, the larger the role of Left power in the defense of the traditional welfare state.

Second, as is argued by Wilensky (1981), Christian power has a wider range of constituencies, and they often appear as strong proponents of the welfare state.

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However, this is the case only when they politically compete with Left powers, which implies a basically reluctant stance on the part of Christian parties in relation to progressive changes in the welfare state (Wilensky, 1981). Therefore, Christian power tends to be willing to sacrifice up the traditional components of the welfare state in the context of economic globalization, and in an environment that contains the more diversified interest cleavages of post-modern society. This implies an increased market orientation of Christian power during the Retrenchment Period. Thus, a hypothesis can be drawn as follows:

The greater the economic hardship, the greater the likelihood that Christian power accepts or embraces market-inspired solutions.

Third, the nature of welfare-relevant policies (indicated by five internal variables in this study), makes it necessary to describe how the five internal variables can be related to the traditional principles of the welfare state––i.e., pro-equality, pro-less-advantaged, or simply, pro-welfare. The following relationships are especially applicable to Retrenchment Period. Higher contributions mean greater burdens on the working class, since they also represent a sharing of the contribution amount paid by both insured and employer. High indirect tax means a greater possibility for convenient, less controversy-prone financing of welfare programs; this implies more pro-welfare policies. Larger numbers of female and public employees imply the stronger possibility of a pro-welfare orientation of government. A high level of selectivism means greater emphasis on the cost-effectiveness of welfare programs, which implies a market orientation. More pension effort results in the greater probability of intergenerational conflicts, and more political antipathy against the welfare state and government. Thus, it is possible to summarize the hypothetical relations between five internal variables and the two powers. The following hypotheses apply particularly to Left power for the Retrenchment Period. The relationships should be considered to be opposite for Christian power.

The smaller the contribution made by the insured in relation to that made by employers, the greater the Left power.13

The more a government utilizes indirect taxes, the greater the Left power.14

The larger the number of female/public employees, the greater the Left power.15

The smaller the level of selectivism, the greater the Left power.16

The larger the pension effort, the greater the Left power.17

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We can now proceed to the findings from the analysis on the politico-ideological powers. As illustrated in Tables 5 and 6, the findings widely support the above-suggested hypotheses. In Table 5, the dependent variable is Left power. Above all, conforming to our hypothesis about two distinct periods of the welfare state, R2-values of separate models are much higher than the whole period models. Table 5: Standardized Coefficients for Left Power Models WHOLE GOLDEN RETRENCH Intercept 38.945 *** 41.173 *** 32.239 *** Contribution 0.011 0.001 -0.062 * Indirect tax 0.026 0.070 *** 0.007 Female/public employee 0.111 ** 0.061 ** 0.363 *** Selectivism -0.028 -0.121 *** 0.022 Pension effort 0.026 0.007 0.059 ** Adj. R2 0.026 0.398 0.817 Note: Coefficient for intercept is unstandardized; * p < 0.05; ** p < 0.01; *** p < 0.001; N = 360 for the whole model and 180 for the others. Examining the coefficients of contribution variable in the Left power models, the social insurance contribution paid by the insured does not have any statistical significance for the Golden Age, but appears with statistically significant and negative beta coefficient of –0.062 for the Retrenchment Period. Judging from this result, it can be concluded that the finding supports the above-mentioned hypothesis about the relationship between contribution and Left power. Left power does not develop social security contributions in a market-oriented direction in which a larger portion is paid by the insured rather than by employers.

This means that Left power tends to support the interests of the insured over those of employers, even in the context of the economic inevitability of a fiscal rationalization of welfare programs and the necessity of enhancing market effici-ency. In the same vein, if less contribution is required from the insured relative to the amount of contribution required from employers, the group of people insured may be seen to be more likely to support Left power, thereby enhancing Left power.

In Table 6, the impact of social insurance contributions appears with negative sign for the Golden Age and a positive sign for the Retrenchment Period. These results also conform to the hypothesis for this variable, since Christian power seems to willing to move away from the traditional, redistributive principles of welfare––although this power was once a proponent of the redistributive welfare state, as demonstrated by the negative impact for the Golden Age. This is perhaps because Christian power has a constituency that extends beyond the narrower boundaries of the working classes. This would result in greater pressure for a rapid, visible reaction to the sense of necessity for enhancing economic competitiveness.

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Table 6: Standardized Coefficients for Christian Power Models WHOLE GOLDEN RETRENCH Intercept 12.073 *** 4.583 ** 23.856 *** Contribution 0.027 * -0.024 * 0.108 *** Indirect tax 0.006 0.102 *** -0.023 ** Female/public employee -0.117 *** -0.105 *** -0.285 *** Selectivism 0.105 *** 0.410 *** 0.062 *** Pension effort 0.000 -0.002 -0.025 *** Adj. R2 0.256 0.890 0.653 Note: Coefficient for intercept is unstandardized; * p < 0.05; ** p < 0.01; *** p < 0.001;N = 360 for the whole model and 180 for the others. In Left power models, indirect taxation has a positive impact for the Golden Age, but it then loses its statistical significance in the Retrenchment period. This points to a tendency of Left power. Although it also tries to avoid the possible tax backlash resulting from an emphasis on direct and visible taxes, Left power tends to choose tax increases rather than welfare benefit cutbacks during economic difficulties. Judging from this finding of indirect tax, it can be concluded that the above-mentioned hypothesis about the relationship between indirect tax and Left power is at least partly supported.

The relationship between indirect tax and Christian power seems to deviate somewhat from general expectations, especially for the Retrenchment Period. The coefficient of the variable is –0.023, which implies that Christian power tends to use more progressive kinds of direct tax when faced with economic hardship. However, the level of the coefficient value is not high, and therefore does not pre-sent any unbearable contradiction. Another reason for this unexpected finding may be relevant to the relationship between tax and contribution, since these two measures are alternative to each other. In fact, for the Retrenchment Period, contributions are more often favored than taxes, which suggests the relatively de-creased importance of taxes during times of economic hardship. Overall, a political interpretation of contribution/tax structure would suggest that Christian power more readily gives up supporting the less-propertied, switching support to em-ployers in hopes of assuring the country’s greater level of economic compe-titiveness.

The results for the Female/public employees variable in Table 5 and 6 strongly conforms to the information found in earlier studies––especially in those of the regime approaches (Esping-Andersen, 1990, 1996; Stephens et al., 1995). Theoreticians of the regime approach have argued that the social democratic regime encourages more female labor market participation, while the conservative Christian democratic regime tends to hinder women from actively participating in the formal labor market. This argument underscores the strong relationship between female labor market participation and Left power. Thus, once emancipated from the conventional and informal obligations of the family, and (often) become

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employed in the public sector, women may become strong supporters of Left power, which supports keeping the more traditional welfare state intact. The opposite case can probably be supposed for Christian power.

Indeed, the coefficients of this variable always show positive relationships with Left power, and negative relationships with Christian power. Especially interesting is the fact that this variable for Christian power in the Retrenchment Period almost triples. This implies that in the countries where Christian power dominates, government will prefer to punish the female labor force as a way to mitigate the economic hardships and unemployment problems. This in turn leads female/public employees not to favor Christian power. To the contrary, coefficients of this variable in the Left power models show a trend very opposite to that of the Christian power models. For the Retrenchment Period, the impact of the variable on Left power is almost 6 times larger than that of the Golden Age. This implies that the measures carried out by left governments to enhance women’s labor market participation now prove to have also been politically successful. This is true in the sense that this segment of the population comes to strongly support the left parties, who maintain their traditional emphasis on the public role of the welfare state.

We can expect that Left power would tend not to support an approach of selectivism, as they prefer universal programs. For Christian power, it could be expected that selective measures would be seen as a cost-effective approach to mitigating poverty, as they have a stronger impact on the short-term alleviation of poverty. These hypothetical expectations are supported by the findings.

In Table 5, Left power has a negative relationship with this variable for the Golden Age, while its significance is nullified for the Retrenchment Period. This indirectly alludes to the fact that in the midst of economic crisis, Left power recognizes the necessity of some welfare reform. In this context, some types of selective measures may be considered to be more acceptable (Esping-Andersen 1996). In the same vein, it may be argued that people in the countries in which Left power dominates may also begin to favor selective measures when faced by economic hardship.

In Table 6, selectivism shows quite high a beta influence level of 0.410 for the Golden Age, which is expected. In the meantime, the standardized level of influence decreases to 0.062 for the Retrenchment Period. The decrease of selectivism in the case of the Christian power for the Retrenchment does not necessarily mean an emphasis on the universalistic programs. Rather, it might be a result of cutbacks even in the programs targeted at the most needy segments of the population. Hence, it is again plausible to suggest that Christian power becomes the more easily market-oriented when facing economic hardship, and when faced with the economic demands of globalization.

In both Tables 5 and 6, pension effort does not have any statistical significance for the pro-welfare politico-ideological powers during the Golden Age. However, the directions of the coefficients run to the opposite extremes for the Retrenchment Period. In Table 5, the beta value of pension effort becomes 0.059, while it is –

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0.025 in Table 6. Defined as indicating the notion of intergenerational conflict, the finding is very interesting. It suggests that older people’s effective politicization can be achieved only through and under hegemonic left party power. By voting for the left-leaning parties, older people have been able to protect their vested in-terest.18 This point will also be more closely investigated in the next chapter where we concentrate upon the pension politics.

The findings can be summarized as supporting the general notions about the two different pro-welfare political powers. In the preceding section in which we examined the driving forces behind total welfare effort, Christian power showed a much stronger level of impact than the Left power. I suspected this to be a reflection of the methodological limits of the modeling, and as mirroring the conceptual limits of the analyzed dependent variable of welfare effort.19

In this section, I attempted to overcome such shortcomings of previous modeling by acquiring additional information about the differences between the two pro-welfare powers. Judging from the results, the findings of the former section can be successfully complemented with the analysis of this section. Overall, Left power becomes more influential in defense of traditional welfare principles, while the Christian power proves to be more willing to adjust their principles to serve the requirements of the time of economic globalization and hardship. In a similar vein, when redistributive programs and pro-welfare measures are employed, the power of left parties could be enhanced. It is also reasonable to assume the opposite pattern for the Christian power.

Political Dynamics of Welfare-Internal Driving Forces: Results and Conclusions

In the previous sections of empirical analysis, there are several interesting points that deserve to be summarized. First, the notion of two distinct periods, and thereby the value of establishing the different models are all supported by the findings. Interestingly enough, several variables showed changed levels of impact, and sometimes even changed from positive to negative (or vice versa) for the two different periods. Second, both of the competing notions about the kinds of driving forces––i.e., the recently emphasized internal variables and the traditionally underscored external variables––proved to be statistically acceptable. Third, among the external variables, the variables of political logic seem to be more influential, while some of the socioeconomic variables are also influential. Fourth, the difference between the Left and Christian power conforms to the arguments put forward by regime theoreticians––especially the role of Left power in the context of the Retrenchment Period.

In addition, the results confirm the theoretical validity of the suggested thesis of welfare program dynamics, in which the structure of welfare-internal variables are argued to become, de facto, driving forces that influence the new welfare structure. As pointed out in the second empirical analysis of the politico-ideological powers, welfare-internal driving forces are strongly connected to politi-

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cal factors. Although these findings are interesting, there remain several un-answered questions that require a microanalysis, for example. Above all, the exis-ting studies of welfare dynamics do not directly speak to the exact mechanism of the relationship between the internal factors and the political powers. As has been repeatedly mentioned, this can only be resolved by looking into political dynamics at a micro level. Some theoretical clues are offered below for how welfare-internal driving forces can be understood in the context of interest politics of welfare at a micro level.

All the internal driving forces in this study can be understood as collective interests that are based on individuals’ rational and moral choices regarding special societal problems, and which in the long run affect political decisions of welfare policies. These “collective interests” are assumed to be basically individualistic, but also have the potential to be transformed into social and political action (Laver, 1997; Scharpf, 1997). Welfare politics thus can be seen as “dynamic process,” in which a set of specified interests are continuously constructed through the formerly structured welfare state programs. At the same time, political decision-making of social policies is the continuous result of certain sets of collective interests acting from within a given structure of social policy.

The new logic of welfare politics referred to in this dissertation is based on a notion that the cleavage structure of welfare programs is not only a dependent variable, but also an independent variable that has the potential to reconfigure the structure of the welfare state (Pierson, 1993; Esping-Andersen, 1990; Marklund, 1988). In addition, recent changes in the welfare state in general––and specific various aspects of welfare retrenchment politics in particular––are also based upon types of socio-political actors that are qualitatively different than the conven-tionally emphasized actor, the labor class (Crompton, 1993; Breen and Rottman, 1995; Michelletti, 1991, 1993, 1995). The recent politics of the welfare state may reflect more than the conflict between classes; it may also reflect status-based divisions of age, sex, and other statuses that cut across class boundaries (Pampel and Williamson, 1989, 1985; Esping-Andersen, 1990; Ahn and Olsson Hort, 1999). Therefore, it is necessary to extend the notion of “inter-class alliance,” which characterizes recent modification of power resources theory (Esping-Andersen, 1985; Olsson Hort, 1993), to involve status-based groups, which have distinct interests in the structure of the welfare state. This condition is a prerequisite, and necessary for us to understand the multisided picture of political mechanisms of welfare defense.

While the macro data analyzed above, do not directly speak about this issue, some tentative conclusions may be drawn. The empirical results I have reported offer circumstantial evidence suggesting that there is an interest politics based upon “welfare statuses.” This is an alternative to the traditional emphasis on “class cleavage.” Elsewhere I suggested a tri-dimensional framework of interest-related status cleavages in welfare state politics, which includes (1) status as welfare beneficiary, (2) status as welfare taxpayer, and (3) status as welfare service provider (Ahn, 2000; Ahn and Olsson Hort, 2003).

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It seems logically consistent to identify the welfare-internal driving forces as reflecting the three dimensions of political statuses. More attention needs to be paid to this directly political basis of the modern welfare state. The recent literature has increasingly addressed the importance of internal structure of the welfare state, which is based on new types of cleavages such as intergenerational conflicts, sectoral divisions, etc. However, relatively little is known about its political basis in a dynamic and systematic way––at least in the domain of social policy research.

Acknowledgment This study was supported by the Seoul National University Research Grant No. 200-200-200-24.

Notes1. This is because population aging may

be recognized as a burden for the neoliberal government as well as in the eyes of the younger generation

2. The latter hypothesis reflects recent notions about economic globalization, which point to a negative impact of economic globalization on the welfare state.

3. The hypotheses for indirect tax and contribution should be considered to-gether because they are alternatives to one another. Thus, these two hypo-theses are applicable to two periods.

4. For more information on the technical issues about the method, cf Judge et al. (1985) and SAS (1993).

5. Sources: (1) total social security bene-fit expenditure, ILO (various years) The cost of Social Security; and (2) GDP, IMF (1979, 1989, 1996) Inter-national Financial Statistics.

6. As regular d yields an estimate of the amount of autoregression in a single time series, it was necessary to em-ploy an alternative statistic. Following Sayrs’ (1989) suggestion, the pooled d was utilized to detect proper auto-regression estimates. The “pooled” Durbin-Watson statistics were calcu-lated for each cross-section, recog-nizing the uniqueness of each cross-

section, and then averaged. Al-most all the pooled ds of initial OLS proved to reside in the zone of first-order autoregression.

7. For more thorough discussion, cf the following econometric texts that con-cern time series analysis: Judge et al. (1985), Pindyck and Rubinfeld (1998), Stimson (1985), Ostrom (1990), Sayrs (1989), Mills (1990), Gujarati (1995).

8. High unemployment denotes miti-gated power of labor movement on the one hand, and necessity of alleviating industrial disputes provoked by high unemployment on the other hand.

9. Reviewing trends in the OECD coun-tries since the early 1980s, it can also be argued that while there has been a common pattern of constraint, it has taken different form among countries. Several countries, relying on basic security programs as the major pen-sion vehicle, have adopted a tax/ transfer model of reform in which be-nefits are being means tested and the link between contributions and bene-fits weakened. Other countries, rely-ing mainly on earnings-related social insurance programs, have seen the link between contributions and bene-fits tightened.

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10. Not involved in our indicator, we must consider difference between various kinds of selective measures. Kangas (1995) suggested a distinct logical scenario according to the different kind of selectivism. Wage earners and voters of the Social Democratic Party have more reservations toward “stig-matizing” selectivity, whose object is the needy, whereas they are more eager to introduce selectivity into universal social insurance schemes by accepting discrimination at the upper end of the income scale. Salaried employees and conservative voters are more reluctant than others to im-plement restrictions that would ex-clude well-to-do people from uni-versal benefits. Interestingly enough, in certain cases, the middle classes––sometimes seen as a serious threat to the welfare state––turn out to defend the present universal model more strongly than do other socioeconomic groups.

11. I recognize that we need to consider other-than-rational type of decision making about the pension program by younger generation. To cite an in-stance, younger people might support for the pension program because of sense of filial obligation. However, I will concentrate my discussion on the rational or utilitarian aspect of welfare politics. Please note that I am not ar-guing that people’s decision is fully dependent on rational calculation, but I am suggesting that we need to ac-cept that rational aspect of political decision becomes more important in the time of economic difficulties or globalization, implying more compe-tition.

12. In this sense, it may be noted that the results about the relations between politico-ideological powers and wel-

fare expenditure effort cannot be fully sustained.

13. This is because Left power works for the working class.

14. Because Left power may choose to enhance indirect taxes, which facili-tate a better financial environment ra-ther than cutting down direct tax le-vels to promote market efficiency, in-creases in indirect tax will be a signal of strong Left power.

15. Because Left power is more willing to defend the larger government appa-ratus necessary for state welfare pro-grams, the number of female/public employees will be a signal of strong Left power.

16. Because Left power may prefer uni-versal measures to selective ones even though the latter facilitates cost-effi-ciency, it may be a signal of strong government.

17. Even when generational conflicts a-rise, strong Left power will not ration the pension system. This may be espe-cially the case, in comparison to Christian government.

18. In an analysis that is not presented here, population aging that is welfare-external variable proved not to be a statistically significant independent variable for the Left power in the Gol-den Age, but it becomes the most in-fluential variable in the Retrenchment Period. In the Retrenchment Period model, the standardized regression co-efficient of this variable is 0.185, which is stronger than 0.156 of union mobilization density, the most impor-tant variable for the Golden Age.

19. The operationalization of welfare ef-fort only covers aggregate input terms, and thereby it is unable to deal with qualitative output properties of the two politico-ideological powers.

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Inequalities in Accessing Community Services in China

Kim-Ming Lee, Kwok-Kin Fung, Kam-Yee Law, and Agnes Yeung The City University of Hong Kong Abstract In this paper, the authors pay special attention to the transition from welfare under the Chinese planned economy up to the late 1970s to the new welfare regime under the reform and open policy since the early 1980s and its effects on inequality of welfare, particularly inequalities in accessing community services. The study finds that the discrepancy between low-income and middle-income communities are less significant pointing to the positive effects of new com-munity service policies, but it also finds new rising inequalities between the high-income communities and the rest of the population. Keywords: Chinese welfare state, inequality in service provision, work-based welfare services, community service policy. Under the leadership of late Deng Xiaoping, the Chinese planned economy began its transformation into a socialist market economy in the late 1970s. In reforming the economy, the government has had to confront the limitations and constraints posed by the previous Soviet-style system of social service provision. The Chinese authorities have started to work on two avenues of welfare reform: dismantling the workplace-based welfare service delivery system through erecting new social insurance and pension schemes, and strengthening the community-based service delivery systems through introducing market elements. There are a number of studies dealing with the former avenue (e.g. White, 1998; Leung and Nann, 1996; Leung, 1995; Chan, 1992).

This paper, however, focuses on the latter—the introduction of market ele-ments into service delivery. The objective of the present study is to examine whe-ther or not the transition to a more market-oriented community delivery system results in inequalities in service reception.

Community Service Delivery System

In compensating for reduced levels of welfare provided in the workplace, and for the almost complete loss of welfare for the growing numbers of the unemployed, the Chinese government is seeking to strengthen community-based social services.

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The policy took shape in 1987, when the Ministry of Civil Affairs (MCA hereafter) formally endorsed the objectives and the scope of services. Before 1993, the stated overall policy objective for community services was “to help residents in the com-munity, especially those facing financial or social difficulties, through the provision of welfare and social services” (Zhang, 1989: 237). Starting in 1993, new policy objectives were added with the goal of accelerating the establishment of a community-based social service market (Ministry of Civil Affairs et al., 1993: 195).

In addition to providing services to the needy, the community organizations were also directed to provide convenience services (bianmen fuwu) for the com-munity in co-operation with the enterprises and government departments located in the community. These fee-based services, which include those services that are not provided in the market, are purely for profit making. They include general public services to help individuals deal with the tasks and chores of daily life, like bicycle parking and repair, breakfast service, shopping services, sewing and mending, provision of public telephones, as well as leisure and recreational activities.

Besides convenience services, community organizations are even allowed to establish other profit-making enterprises that are available in the market, like catering, karaoke bars and discos, match-making services and travel services. Even though the overall aim of social service provision remains intact, serving the community in general came to be given equal importance as providing welfare services to the needy specifically.1

So while subsidized services are provided to the urban poor who are unable to pay the full cost of service provision,2 it is hoped that the marketization of community services will lead to the provision of a wider array of services to satisfy various needs of the community. And once such service markets are developed, street offices and residents’ committees can better fulfill the dual goals of self-financing and serving the whole community.

Inequalities in Access to Community Resources

We can divide the issue of inequalities in access to community resources into two aspects. The first one is whether the marketization of community services truly helps needy people. Despite the claimed objectives of the community services in helping the needy through a “using services to support services” approach, some scholars have expressed doubt about the access needy people have to community resources.

Since the income of the community service providers (i.e., street offices and residents’ committees) mainly comes from the profit making services, these service providers may focus more on profitable services rather on subsidized and free ser-vices (Leung, 1990: 199). As a result, the better off individuals will have better access to quality services than the poor but needy individuals. As Wang (1997: 2) argues, the for-profit and non-profit services in fact constitute two different structures of community service. The nature of community services has funda-mentally changed from purely remedial to remedial-cum-commodified, or at worst,

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purely commodified. The community service policy is basically a welfare policy, but when services are commodified, the needy may not be able to get access of the services.

Another form of inequality in access to community resources stems from the economic conditions of the community itself. The success of using services to support services is contingent upon the wealth of the local community. In wealthier communities, residents can afford high quality paid services, and consequently the service providers will be able to obtain sufficient resources to help the needy in the community. However, service providers in poor communities may have difficulty in generating enough income to provide adequate services. The probable result may be that both the for-profit and non-profit services would be badly provided.

We suspect that these two types of inequalities in access to community resources may be interrelated. If a locality has good community resources, it would not be surprising to find that more well off people live there. Conversely, we would find more poor people living in localities with few community resources. Put another way, communities with the affluence to pay for services will tend to be communities that are less reliant on remedial services. The individual inequality in access to community services overlaps that of the spatial inequality.

In Tianjin, Logan and Bian (1993) found that households with high socio-economic status tended to reside in good quality communities with better com-munity service provision. More importantly, they found that the political position of one’s work unit had a strong effect on one’s access to community resources, though individual characteristics including education, occupational standing and political status (but not income) also had significant effects. The inequality in access to community resources created by the work unit is through the allocation of housing and the location of the housing among its employees as well as its influence on municipal allocations of infrastructural resources among neighbor-hoods. However, Logan and Bian’s data were collected in 1988, about five years before official advocacy and formal endorsement of the marketization of com-munity services. It would be interesting to find out whether the work unit factor still plays an important part in determining the individual’s access to community services.

The new community service policy is supposed to facilitate reform of state-owned enterprise by compensating for the reduction of the occupation-based wel-fare services. However, such reform of state enterprises must proceed step-by-step—it would be impossible to abandon all the previous workplace-based welfare services overnight. Moreover, most resources and properties, such as housing or for instance, had until recently been allocated by the state through state-owned enter-prises.

It is an enormously complex task to reform resource allocation into a more market-based system. Under these conditions, one wonders to what extent the legacy of allocating community resources through work units affects the imple-mentation of the new community service policy. To phrase it differently, instead of asking how far the new community service policy can help facilitate economic

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reform, we ask to what extent the past workplace-based welfare policy legacies inhibit the success of the new community service policy. Specifically, we have the following research questions:

1. What the meaning of good community quality is as conceived in Mainland

China? Since community quality is a society-specific concept, different socie-ties, with different cultures and stages of development, have different ideas about what a good community is. In order to establish a classificatory scheme of community quality in China, simply borrowing Western concepts is inevi-tably inadequate. A concept of community quality that is rooted in the Chinese world view is the necessary foundation for studying the Chinese community in general, and the delivery of community services in particular.

2. What is the socioeconomic make-up of good, middle and poor quality

communities? And how far does the work unit factor contribute to the composition of residents of good, middle, and poor quality communities? If our conjecture about spatial inequality in access to community resources is correct, we should find that people with higher socioeconomic status and who work in important state organizations live in good communities, while people with lower socioeconomic status and working in non-state organizations or less important state organizations live in poor community.

3. Are there any differences among good, middle and poor quality communities

in community service provision? If there is no spatial inequality in community service provision, one should find that the number of services provided by work units and residents’ committees should be roughly the same among communities regardless of their socioeconomic composition. Moreover, if the spatial inequality is created by the work unit factor, we should find that the number of community services provided by the work units in the good communities is greater than that of poor communities. If, on the other hand, the new community service policy is working, we should find that the number of community services provided by the residents’ committees, street offices and other non-profit-making social service providers in the poor communities is greater than that in good communities.

Research Design

The overall strategy of the research is to identify various Beijing urban commu-nities that can be reasonably classified as good, middle and poor quality, and then study their socioeconomic composition, and finally, to compare their community service provision patterns. The research is divided into two stages. In the first stage, focus group methodology was employed to define the various types communities to be studied and to develop criteria in selecting our research sites for the second stage of the research.

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The advantages of using focus groups in this stage are fourfold (Stewart and Shamdasani, 1990: 16-17). First, they can provide information in a quick and less costly way than other methods. Second, since the concept of community and the standard in assessing community quality are society-specific, it is important for the researcher to interact directly with respondents so that ambiguous or unclear concepts, ideas and facts can be immediately clarified. Focus group methodology allows for this. Third, because of its open-ended format, the researcher can obtain deeper understanding of the cultural and society-specific ideas about good community quality. Lastly, through open discussion, focus group methodology allows group members to react to and build upon the responses of other members. As a result of this synergistic effect, personal biases of the individual group members can be minimized, and more objective findings can be obtained.

The focus group in the first stage of the present study comprised a total of eight persons: five community experts from universities, research institutes and the Ministry of Civil Affairs, and three researchers from the Chinese Academy of Social Sciences who have tremendous experience in surveying different types of commu-nities in different parts of China. There were three discussion themes in the focus group:

1. What is the definition of an urban community in China?

2. What are the criteria in determining a good quality community in China?

3. What kinds of services, organizations, and facilities should be included in com-munity service provision?

In the second stage, a questionnaire survey was conducted in nine communities; three each representing good, middle and poor community quality according to the criteria developed in the first stage. There are eight Districts in Beijing, which comprise 95 street offices, and 4051 residents’ committees. There is a total of 1.7 million house-hold, or a population of 5.43 million of non-rural residents. First we randomly se-lected 14 street offices.

In order to ensure the communities selected fit to the quality criteria concluded in the focus group stage, we conducted field inspections of the 14 street offices. Then 9 residents’ committees, three each representing one type of community quality (i.e., good, middle and poor), from 4 streets were identified. The household lists of each community were obtained from the corresponding residents’ committees. Systematic sampling was employed in selecting about 200 households from each type of community. A total of 617 cases were successfully interviewed. In sum, our research methodology is a combination of focus group and survey methodologies, in which the latter is primary while the former serves in a preliminary capacity.3

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Findings from the Focus Group

The focus group members agreed that the concept of community in China is quite different from the Western concept in which community refers to a web of human relationships that is not necessarily delimited by administrative boundaries. However, after decades of urban planning and the dominance of centralized administration, Chinese communities are still easily defined by administrative criteria. Indeed, so-called natural communities have been forced to develop and overlap within the rather more unnatural administrative boundaries. As a result, unlike the situation in Western societies, with their high degrees of geographic and occupational mobility and well-developed transportation and communication infrastructures, in China there is a blurring of the concept of community in the Western sense. Accordingly, it was considered methodologically and conceptually sounds to regard the smallest administrative units, residents’ committees, as communities.

Most group members agree that community quality cannot be solely determined by the hardware they contain, i.e. the number and types of community facilities and services, like estate management and community service centers. The software, i.e. the residents’ sense of belonging, solidarity and spirit of mutual dependence, is also important. However, almost all of the focus group members agreed that the ideal community, which would be based purely upon the software, has not yet been established in China. Rather, individuals still focus on the hardware in defining their communities. So in reality, the focus group members observed, the development of the software and hardware of a community in China will not be synchronized.

With regard to the content of community services, again, the group insisted that both hardware and software have to be considered. In terms of hardware, they emphasized establishing community centers, organizing recreational activities, providing convenience services and estate management. Although they cast doubt on the issue that whether estate management should be considered a kind of community service because it only serves relatively well individuals, maintenance of housing and greening the living environment are still necessary functions in any community. In terms of software, more effort has to put into encouraging mutual help and participation in providing community services. Even though the focus group members recognized the problems created by the marketization of community services, they agreed that establishing a community economy is vital to the service provision.

The focus group members consistently argued for including the sense of belonging and community solidarity or residents’ satisfaction of the community as criteria in determining whether a community has good quality. However, the researchers felt that it would be difficult employ these subjective criteria because they would be better discovered through survey methodology rather than brief field observations. Consequently, only the following objective criteria were used to measure the quality of the communities under study. Communities having six to

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eight of the below items were regarded as good, those having four to five were regarded as middle, and those having zero to three were regarded as poor.

1. Over 80 percent of the residential area are houses—that is, not slums or

squatter areas;

2. Over 80 percent of the houses have been renovated since 1985;

3. Over 80 percent of the houses have piped-in natural gas;

4. The presence of estate management;

5. The presence of a primary school;

6. The presence of security services;

7. Good living environment (i.e., cleanliness, green areas, etc.);

8. Good transportation facilities.

The Socioeconomic Status of the Residents in Three Types of Communities

Socioeconomic status is commonly measured by educational level, income and occupation. In China, one’s occupational status is mainly represented by one’s work unit as well as work position. Considering educational level, 59.3, 25.5 and 4.8 percent of the respondents had college or above educational levels in the good, middle and poor communities respectively. There were 72.9 percent of respondents in the poor community whose education reached only the primary or below level, but the percentages are 45.5 and 20.1 percent in the middle and good communities respectively.4

In terms of income, the average personal monthly income of the good, middle and poor communities was about 1120, 740 and 589 yuan respectively. The average household monthly income showed the same result; the household income of the good, middle and poor communities were 2233, 1541 and 1384 respectively. ANOVA tests show the mean differences in both personal and household income were significant at the 0.001 level.5 However, the post hoc tests showed that the mean differences in both personal and household income between middle and poor communities are insignificant.6

In terms of occupation, 81.4, 78 and 59.9 percent of respondents were working in state-owned enterprises for the good, middle and poor communities respectively, while 5.2, 11.5 and 12.6 percent of respondents worked in collective enterprises for the good, middle and poor communities respectively. For working in other forms of enterprises or being unemployed or retired, the percentages were 13.3, 10.5 and 27.5 percent in the good, middle and poor communities respectively. In term of occupational positions, 20.1, 12.7 and 3.4 percent of the respondents were leading cadres in state, collective or party organizations for the good, middle and poor

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communities. The corresponding percentages for respondents who were profess-sionals were 28.7, 13.7 and 5.3 percent. The percentages for the retired or unem-ployed were 15.3, 37.1 and 39.8 percent for the good, middle and poor communi-ties respectively.

The data presented above confirm our conjecture that good communities have larger proportions of higher socioeconomic status residents than do middle and poor communities. The data also show that the good communities have more residents working in state, collective and party organizations. This suggests that the types of work units and work positions of the residents are quite important in determining the quality of community one is living in.

Community Services Provided by Work Units and Community Service Providers

In order to compare the community service provision in the three different types of communities, the respondents were asked whether 19 kinds of services were provided by their work units and whether 20 kinds of services were provided by community service providers such as street offices and residents’ committees.7 When respondents said the service was provided, it was coded as 1. If the service was not provided or the respondent did not know, it was coded as 0. Then an index was constructed by adding up the questions for the work units and the service providers. The indexes indicate the number of services provided by the respon-dents’ work units and community service providers. The average work unit service provision indexes for the good, middle and poor communities were 9.89, 8.29 and 7.97 respectively. The average index for the whole sample was 8.76.

The data reflect that work units provided more services than the average in the good communities, while those in the middle and poor communities provided fewer services than the average. ANOVA testing was employed to see whether the group means differences were due to chance. The F-ratio obtained was 11.6 and significant at the 0.001 level. The post hoc tests showed that the major differences were found between good and middle communities as well as between good and poor communities. The difference between middle and poor communities was not significant.8 These results partially confirm Logan and Brian’s previous findings, as well as our conjecture that the work unit factor still plays an important role in determining access to community resources, though no significant effect was found between middle and poor communities.

The average community service provider indexes were 6.95, 5.72 and 6.45 for the good, middle and poor communities. The average index for the whole sample was 6.34. The data indicate that both the community service providers in the good and poor communities provided more services than the average, while those in the middle communities provided fewer services than the average. The F-ratio of the ANOVA test was 5.2 and significant at the 0.01 level. However, the post hoc tests showed that only the mean difference between good and middle communities was significant. Our conjecture about the spatial inequality in access of services pro-

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vided by street offices and residents’ committees is only partially confirmed. In other words, the new community service policy, to a certain extent, achieved limited success.

The residents in the good communities do have more access to a variety of services. However, it is interesting to find that the middle communities actually have less diversity than the poor communities, though the difference is not statistically significant. One possible reason is that the new community service policy does not totally abandon its aim of helping the needy. In poor communities, residents have greater needs, and hence more community services are provided. Moreover, the middle communities have more services provided by work units,9 so the need for more diversified services provided by community service providers is reduced.

When comparing the work unit indexes and the community service provider indexes,10 we find that the work unit indexes are consistently higher than the corresponding community service provider indexes. This implies that the com-munity service providers are still unable to replace the work units in providing welfare services to the community. In other words, the new community policy is far from effective in patching the deficiencies in social services left in the transition to a more market-oriented economy.

Discussion and Conclusion

Our focus group results show that administrative demarcation is useful in defining Chinese communities. A Chinese community is best represented by jurisdiction of a residents’ committee. With regard to the criteria in defining community quality, the focus group members argued that both subjective and objective standards are required. The subjective standards refer to the level of residents’ satisfaction with the community environment and services and the degree of the sense of belonging and solidarity within the community; while the objective standards refer to the housing and living conditions, transportation, education, and security.

Community services in the Chinese context should include those services that can improve the community solidarity and sense of belongings, such as mutual help services and volunteer projects, as well as services that improve the quality of life of the residents. However, the focus group members repeatedly emphasized the importance of helping the needy and the marketization of the community services as complementary rather than contradictory goals.

One of the limitations of the current exploratory study is that we only em-ployed the objective criteria suggested by the focus group11 in selecting com-munities for the survey research. The subjective criteria were ignored because of the difficulty in objectively assessing community quality in a brief field obser-vation. Even so, our objective criteria seem to be adequate because most Chinese people are currently more concerned with tangible rather than intangible com-munity services.

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Our survey results show that there is a spatial inequality in access to com-munity services, which is mainly caused by the work unit factor. However, this inequality, in terms of service diversity, is to a certain extent compensated for by the new community service policy. In this regard, the legacy from the past workplace-based welfare system still influences the access to community service. Nevertheless, the new community service policy has not abandoned its welfare aims, as feared by some scholars. In terms of diversity of services provided by street offices and residents’ committees, the discrepancy between the good and poor communities seems to be narrow, though the discrepancy that exists between the good and middle communities is more serious.

Despite claims to the contrary by Chinese officials, the new policy is not able to totally compensate for the reduction in the workplace-based welfare services, as the work units still provide a greater number of community services as compared with those provided by street offices and residents’ committees. Hence, it is safe to conclude that the new policy can only achieve a limited success.

Notes1. The content of the policy document

further substantiates such a change. One can easily find paragraphs spe-cifying land use regulations, taxation arrangements, and technical support from the government in promoting the convenience services.

2. For a detailed look at the development and the major features of the Chinese community-based welfare system (cf Dixon, 1981; Leung, 1990; Wong, 1992; Chan, 1992, 1993).

3. For different types of combinations of focus group method and survey me-thod (Morgan, 1996: 133-36). Though the survey was conducted in July 1998, in our best knowledge, the analysis is still valid and reflective under the current circumstance.

4. A cross tabulation between education-nal levels and community quality was performed. The chi-square value was 171, which indicates that there were significant differences among commu-nities in terms of the educational levels of the respondents at p < 0.001.

5. The F-ratio for the personal income and household income tests are 26.3 and 24.5 respectively.

6. The post hoc multiple comparison is done with Bonferroni statistics and with significant level set up 0.05.

7. The 19 kinds of work unit services asked about were: medical insurance, clinics, child care, primary or second-dary schools, canteens, barber shops, bathing facilities, recreational acti-vities, recreational facilities, in-town tours, out-of-town tours, elderly care, skills training, libraries, housing allo-cation, home repair services, hardship subsidies, transportation to and from work, and maintenance of the living environment. The 20 kinds com-munity services asked about were: child care, clinics, primary or second-dary schools, canteens, barber shops, bathing facilities, convenience shops, public toilets, recreational activities, recreational facilities, elderly care, lib-raries, home repair services, hardship subsidies, maintenance of the living environment, youth centers or youth activities, elderly centers, street clea-

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ning, housework assistance, and secu-rity services.

8. The post hoc multiple comparison was done with Bonferroni statistics and with significant level set at 0.05.

9. Again, the difference between middle and poor communities is not statisti-cally significant.

10. Although the types of services for the two indexes are a little bit different, most of the items are the same, and

the community service provider index only includes one extra item. Thus the comparison is still valid and useful.

11. Another limitation of the current re-search is that no ordinary residents were included in our focus group. Fur-thermore, there was only a single focus group interviewed. This was mainly due to funding constraints.

References Chan, C.L.W. (1992), New Challenges to

the Forms of Welfare Provision in Chi-na After a Decade of Economic Re-form, International Social Work, Vol. 35, pp. 347-63.

Chan, C.L.W. (1993), The Myth of Neighbourhood Mutual Help: The Con-temporary Chinese Community-Based Welfare System in Guangzhou, Hong Kong University Press: Hong Kong.

Dixon, J. (1981), Community-Based Wel-fare Support in China: 1949-1979, Community Development Journal, Vol. 16, No. 1, pp. 21-29.

Leung, J.C.B. (1990), The Community-Based Welfare System in China, Com-munity Development Journal, Vol. 25, No. 3, pp. 195-205.

Leung, J.C.B. (1995), The Political Eco-nomy of Unemployment and Unem-ployment Insurance in the People’s Re-public of China, International Social Work, Vol. 38, pp. 139-49.

Leung, J.C.B. and Nann, R.C. (1996), Authority and Benevolence: Social Welfare in China, The Chinese Uni-versity Press: Hong Kong.

Logan, J.R. and Bian, Y. (1993) Access to Community Resources in a Chinese City, Social Forces, Vol. 72, pp. 555-76.

Ministry of Civil Affairs, State Planning Commission, State Commission for

Restructuring Economy, State Educa-tion Commission, Ministry of Finance, Ministry of Personnel, Ministry of La-bor, Ministry of Construction, Ministry of Public Health, State Physical Culture and Sports Planning Commission, State Planning Commission, The People’s Bank of China, State General Admini-stration of Taxation, and China Na-tinal Committee on Aging (1993), Guanyu Jikuai Kaizhan Shequ Fuwuyi de Yijian (Opinions about Accelerating the Development of the Community Service Industry), Zhongguo Minzheng Tongji Nianjian (Annual Statistical Report of Chinese Ministry of Civil Affairs), pp. 193-98.

Morgan, David L. (1996), Focus Groups, Annual Review of Sociology, Vol. 22, pp. 129-52.

Stewart, David W. and Shamdasani, Prem N. (1990), Focus Group: Theory and Practice, Sage: London.

Wang, S. (1997), Zhuanye Peioxun dui Fazhan Shequ Fuwu de Yiyi (The Meanings of Professional Training To-wards the Development of Community Services), paper presented at the Con-ference on Mainland and Hong Kong Social Welfare Development, Wuhan, China.

White, G. (1998), Social Security Reforms in China: Towards an East Asian Mo-

Kim-Ming Lee, Kwok-Kin Fung, Kam-Yee Law, and Agnes Yeung: Inequalities in Accessing Community Services

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del?, in R. Goodman, G. White, and H.J. Kwon (eds.), The East Asian Wel-fare Model: Welfare Orientalism and the State, Routledge: London.

Wong, L. (1992) Community Social Ser-vices in the People’s Republic of China, International Social Work, Vol. 35, pp. 455-70.

Zhang, D. (1989), Guanyu Shenru Kaizhan Chengshi Shequ Fuwu Gongzuo de Jige Wenti (A Few Problems About the Further Development of Ur-ban Community Service Work), Zhongguo Minzheng Tongji Nianjian (Annual Statistical Report of Chinese Ministry of Civil Affairs), pp. 235-52.

© Casa Verde Publishing, 2005 · ISSN 16812816 Journal of Societal & Social Policy, Vol. 4/1: 63-76

Health Care Reforms in the Ex-Socialist South-Eastern

European Countries Kyriakos Souliotis, Charalambos Economou, and Yannis Tountas National School of Public Health/Panteion University/University of Athens, Greece Abstract The aim of this paper is to reexamine the welfare state model applied in ex-socialist countries of Southeastern Europe, and particularly its key element, the health care system. The transition from socialist economy to market-based economy brought wide-ranging changes within the countries’ health care sector. Lessons from the Western European countries have not been learned, as too much emphasis has been given to new forms of efficient management systems and the expansion of financing resources, neglecting the equity in access and the improvement of the population’s health status. Keywords: Welfare state, health care system, health care reform, Southeastern Europe, public health challenges. The year 1989 was a critical year in the history of the world, largely defined by the collapse of the communist regimes in Central and Eastern Europe. 1989 also marked the end of an approximately 70-year historical period and the demise of a particular type of political, economic and social regime. For western democracies, this meant an end to the “fear” of the “opposite force” that would provide an alter-native to every attempt at either confining or largely undermining the welfare state (Hobsbawm, 1992).

The changes that occurred provided the spark for the ensuing scientific discussion in relation to a number of topics such as international relations and the direction of the political, social and economic reforms in the eastern European countries. In addition, they brought up the question of innovations and the emer-gence of a new situation and a new condition, the basic feature of which is the exhaustion of social utopias (Kyriopoulos et al., 2003).

Within this context, uncertainty entered unbidden into the area of decision-making regarding such areas as poverty, social rights and social protection. Inter-preting the social reality has become very difficult since social classifications, defi-nitions and statistical data have ceased to comprise adequate means for understan-

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ding, describing, analyzing and interpreting changing events as they unfold (Gid-dens, 1994; Fitoussi and Rosanvallon, 1996).

The socialist model of the welfare state, as it was developed in the former Soviet Union and applied after the Second World War in the other Central and Eastern European countries, no longer existed. As a result, the challenge of transitioning to a new social policy model became prominent in these countries, along with the search for a “new welfare state model”, a quest shared with most countries of Western Europe (Esping-Andersen, 1996; Rhodes and Meny, 1998; Taylor-Gooby, 2001; Sakellaropoulos, 1999) and the United States (Patterson, 1994; Trattner, 1994; Lo and Schwartz, 1998).

The purpose of this article is to examine one of the most important dimensions of the “new welfare state model” in the ex socialist countries of Southeastern Europe, the emerging health policy trends and the way these affect the overall –changing- welfare system in these countries.

From the Structural to the Institutional or to the Residual Welfare Regime?

The type of the relationship that is formed between the state, the economy, and social institutions determines the varied interpretations given to the welfare state, and it is in this sense that the existence of different “welfare-state regimes” is examined (cf Esping-Andersen, 1990). The form of social protection that deve-loped in the Central and Eastern European countries and held sway until 1989 has been characterized as either “structural” (Mishra, 1977) or “authoritative” (Iatridis, 1994).

The guiding principles of this example of collective consumption and social protection were fundamentally based on the concept of “need” (Heller, 1975). In theory, social protection took the form of universal (coverage of all citizens), complete (coverage against all risks) and adequate (high level) social-service benefits provided by the state at no cost at the point of use. The institutions of social protection were considered to not simply cover or serve social needs, but to express the society’s basic values (such as equity and social justice), and in this sense, were viewed as a core element of the wider socioeconomic structure (Mishra, 1977; and Iatridis, 1994).

The socialist model relied on centralized control and planning for the allocation of resources among competing social protection programs, on the assurance of full employment, on price subsidies and on the immediate provision of services.

Despite apparent problems, such as the inadequacy of the mechanisms for supporting income (low levels of unemployment insurance, pensions and many times also wages), underdevelopment of services, and uneven distribution of resources (privileges for members of the state bureaucracy), the system could be considered functional, in the sense that it ensured wide access to basic social-protection services. The fundamental disadvantage of the system was its low level of efficiency, the limited available resources, as well as the fact that this social-

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protection grid constituted a part of a wider socioeconomic establishment with an inefficient economy, which finally collapsed (Deacon, 1993a,b; Standing, 1996).

Post the collapse of communism, the countries of Central and Eastern Europe suddenly found themselves in the vortex of the openly competitive world economy, having inherited a non-competitive industrial sector with inadequate technology and low productivity. At the same time, reforms aimed at a transition to a mixed economy, where the market adopted “shock therapy” policies were expected to play the primary role, freeing up prices and trade and applying tight monetary policies. These measures, as expected, negatively affected the living standards of large segments of the population and led to increased social inequity (Standing, 1996).

The above developments were accompanied by similar interventions in the social-protection sector. The state social insurance system was replaced by a sys-tem organized according to the Bismarck model, with social insurance funds main-tained by contributions. In the same direction, international organizations proposed the adoption of a three-pronged pension system (state pension, reciprocal social insurance, complementary supplementary pension) (WB, 1994). Social welfare sought a solution to the question of selectivity of service provision by controlling living conditions and by encouraging charity and volunteerism. Greater responsi-bilities were awarded to local communities and regional administrations for mana-ging, planning, implementing and evaluating social programs (Deacon, 1993a,b; Standing, 1996).

The knock off effect of such structural changes on the type of the welfare system that was developed in each of these countries had to be equally reevaluated. While a review of the numerous efforts at classifying the examples of the welfare state (Esping-Andersen, 1990; Iatridis, 1994; Titmuss, 1974; Jones, 1985; Ginsburg, 1992) would be useful, it is beyond the confines of the present paper.

A wealth of comparative studies has shown that economic, political, social and cultural factors interpret the differentiation of the models of social protection among individual countries (Esping-Andersen, 1990; Marshall, 1965; Wilensky, 1975; Flora and Heidenheimer, 1982; Ashford, 1986; Hicks, 1999). In countries demonstrating relatively high rates of economic development, the formerly “social elite” groups managed to become the capitalistic business class, and the influence of left-wing parties has been, until now, limited; it appears most probable that they will adopt elements more compatible with a “liberal” welfare model, with a limited flow of transfer payments, limited insurance programs and welfare-service pro-vision on the basis of investigation of living conditions (e.g., Slovenia).

In countries with a strong tradition of an authoritative state, where a type of social contract has been achieved between the old “social elite” groups and workers, it is probable that a “corporate-type” system, with emphasis on the individual’s position in society and social services organized on the model of social insurance (e.g., Bulgaria and Romania). On the other hand, where the left-wing parties are influential and strong, the social-democratic model will tend to prevail (Deacon, 1993a,b; Standing, 1996).

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Health Policy: From a “Command and Control” to a “Contractual” Model?

Public health systems are usually classified according to three main models (OECD, 1992):

(a) The “Beveridge Model” characterized by state funding from taxation, a

vertical hierarchical organizational and administrative structure, the existence of an administrative mechanism for transferring and distributing resources, the public character of health units and the remuneration of health professionals by way of salary;

(b) the “Bismarck Model” financed by insurance contributions and/or the state budget, characterized by a decentralized and pluralistic structure, the existence of insurance carriers, the public nature of care provision and remuneration of providers according to contract;

(c) “Private Model for Organization and Provision of Health Care” funded by private insurance and/or out-of-pocket payments.

Most of the countries of Eastern and Central Europe developed health systems,

which, on the basis of the above, could be classified as belonging to the “Beveridge Model” of health care. An exception to this is the Former Republic of Yugoslavia, whose health-care system was financially based on employee self-managed insurance funds. More specifically, Albania, Bulgaria and Romania adopted the “Shemashko” model, the primary characteristics of which are as follows (Zarkovic et al., 1994):

1. The “Shemashko” health system functioned within an ideological, political,

economic, social, administrative and management context inspired by the principles of socialist ideology, in which the state held the defining role. Health-care-services were delivered by the public sector, with no participation of the private sector. There was a state monopoly on the ownership, funding, operation, provision, regulation and control of health services and citizens lacked the freedom to choose their providers. Allocation of resources and funding of services were carried out according to the priorities established by state development programs. Health-care professionals’ wages were low and, at many instances, even lower than the average wage of industrial workers. This resulted in low productivity and low quality of services provided.

2. The composition of health service resources was largely imbalanced, with high numbers of personnel and physical infrastructure (buildings), inadequate economic resources for funding and inadequate technological equipment. As a result, the adequacy of provided services and access to such services was severely undermined. Primary health care services were provided in polyclinics

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by specialized physicians not functionally connected to hospitals and public health services were provided at health stations.

3. The weaknesses of the “Shemashko” model could be identified in the extensive centralization of the system, severe bureaucracy, inadequate funding, lack of motivating factors for health-care professionals, improper composition and distribution of material, financial and human resources, which in turn raised questions of efficiency, effectiveness, quality and equity, and, lastly, in the failure of the structure to adapt to the population’s changing needs.

Health Systems Reforms in the Ex-Socialist South-Eeastern European Countries: An Overview

The 1990s constituted a period of important reforms in the health sector as a part of the social, economic and political changes. In addition to the economic and political challenges faced by all transition countries in Central and Eastern Europe, many of the South-Eastern European countries have suffered violent conflict on a scale unknown in Europe since the Second World War. And while the wars in the countries that emerged from former Yugoslavia received wide media coverage, information on the health of people living in the region has been scarce (Rechel et al., 2004).

Yet, the impact of transition and conflict has been substantial on the health systems of the region. The break-up of Yugoslavia left hundreds of thousands of people dead and millions became refugees and internally displaced persons. The economies in the region plummeted, with a devastating effect on the region’s health infrastructure. The regulatory ability of states disappeared, corruption ran rampart and many people were forced into poverty. In the post transition years, a number of extremely vulnerable population groups have emerged, including victims of trafficking and prostitution, refugees, internally displaced people and Roma (Rechel et al., 2004).

New values, positions and viewpoints regarding health as a result of political change, economic and fiscal austerity along with problems concerning economic restructuring, changes in the epidemiological model in which communicable diseases coexist with the emerging “modern” diseases, increased citizen expec-tations all established the general framework of health reforms. In addition, struc-tural, organizational, operational and financial inadequacies of the health care systems in these countries raised questions regarding efficient administration of funds, effectiveness of clinical procedures, quality of provided services and equal access to health services for all (Makara, 1994; Figueras et al., 1998; Tsalikis and Kyriopoulos and Papageorgiou, 1999). Health systems were required to meet both the challenges of the new international environment in which they were now functioning and the pressures arising from their internal structure.

The governments in the region have responded to this health crisis with a series of reforms and programs that they had to mostly fund themselves. International

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donors have spent large sums of money on the region in the aftermath of war, but almost none of the post-emergency resources went to heath care and the issue remains a low priority for donors. Of the billions allocated for overall development aid, only a small fraction was dedicated to the health sector. In many countries it accounts for well below 1 percent of total external assistance (Rechel et al., 2004).

In such fiscally strict environments, governments focused health reforms primarily on the organization of service provision, financing of the system and methods of remunerating personnel. More specifically, in the area of health services organization, priority has been given to the decentralization of management and to the transfer of responsibilities to the district level, with secondary emphasis on the development of primary health care, the strengthening of the role of the general family doctor, the safeguarding of the freedom of users to choose their physician, and the introduction and implementation of a referral system. Effective systems for disease surveillance have been also put in place and there is a push to reform mental health care in all countries in the region (Rechel and Schwalbe, 2004).

Broadening the funding base of the health sector included strengthening the role of social insurance, enabling consumers to contract for additional or private insurance, and increasing direct private payments. In addition, in these countries, efforts were made to introduce a clear separation of health services providers and third-party payers-insurers, and contracting between them. Finally, attempts have been made to introduce new ways of remunerating physicians, such as the use of capitation mechanisms fee for service/case mechanisms, and new ways of compensating hospitals by introducing prospective global budgeting and Diagnosis Related Groups.

Specifically, Albania has embarked upon major health sector reforms, but it has been hampered by political instability and a struggling economy. Since the early 1990s, the government has had two overriding objectives: (1) to prevent further deterioration of basic services and (2) to transform the health system into one that is financially sustainable. In this light, the government directed its reform efforts towards the reorganization, the rational use and decentralization of health services, as well as towards securing additional sources of financing on top of the state budget, such as from mandatory health insurance, local governments, private co-payments and foreign aid. Given that health care spending has been relatively low, it was essential that it increased if services were to improve.

Diversification of financing has been made possible by a variety of measures, including the introduction of fees in the public sector and the establishment of the Health Insurance Institute. The introduction of private medical practice further diversified financing by shifting more of the financing burden onto consumers of health care. Privatization of drug distribution has improved drug availability, but increasing out-of-pocket payments for drugs and services has reduced access for lower income groups. Some stability has though been preserved through the slow pace of change in the system’s financing and organization (EOHCS, 2003a).

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In the field of primary health care, the country has been examining the possibility of establishing the family physician, who will be remunerated on a capitation basis, based on the number of patients on his patient list, and introducing and implementing a referral system. In the hospital sector, the most important change is related to the closure of the very small and inadequately equipped hospitals (EOHCS, 1999a; Gjonca and Gjonca, 2000; Koko, 2001, Nuri, 2001).

In Bosnia and Herzegovina, the last several years have seen the beginnings of wide-ranging reforms in the health sector, covering the scope, financing, costing, organization and management of health care services. Reform in the health sector is more advanced than in other social sectors. Nevertheless, the share of health spending in GDP remains unusually high which, along with the prevailing weak-nesses in the efficiency, equity and quality of the health services, calls for even deeper reforms, if financial sustainability is to be restored to the sector. As with the other social sectors, the most important challenge is to modernize health services, while reintegrating the system so as to allow better exploitation of economies of scale in the delivery, financing, and administration of health care (EOHCS, 2002a).

In Bulgaria, health sector reforms that began during the 1990s and continue to evolve are focused on the regional decentralization of the administration of the health system, on expanding the sources of financing, strengthening primary health care and reorganizing the country’s hospital sector. They have also undertaken to unify the financing base by establishing (in 1998) the national health insurance fund, legalizing private practice mainly in the areas of dental care and the drug supply network, introducing contracting between providers and third payers, establishing the family physician, limiting hospital beds and decentralizing hospital care. In addition, they are examining the possibility of hospitals being compensated on the basis of Diagnostic Related Groups, DRGs (Balabanova, 1995; EOHCS, 1999b; Delcheva and Balabanova, 2001; Koulaksazov, 2001). Through such volume-based payment methods and the newly introduced insurance-financed sys-tem, high efficiency gains are expected, which are in turn hoped to accompany an increase in resources available to the health sector through social health insurance (EOHCS, 2003b).

In Croatia, recent reforms were aimed at creating a new unified health insur-ance entity, which would replace the existing insurance funds, at strengthening primary health care and at improving the accessibility of the system. At the same time, the private structures of the system were strengthened, especially in the area of primary health care. It was undertaken to break up the large medical groups into individual units and to define their legal status, with the university hospitals remaining under direct state ownership and management, the remaining hospitals and the local health centers being transferred to the responsibility of local governments and specialized outpatient services being privatized. The central idea was to create a health system that would guarantee equity but would incorporate elements of competition and privatization in order to improve efficiency and to expand sources of financing (EOHCS, 1999c; Tragakes, 1999).

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The Croatian Health Care Reform Plan of 2000 aims to achieve a more effective, efficient and financially sustainable health system, recognizing that one key to more effective resource use is better integration between primary care and hospital services. Health services will be provided through a mixed system of public and private health institutions. Public health institutions will mainly cover the higher and more expensive forms of health care i.e. hospitals and polyclinics, while private practitioners will deliver primary health care and some specialist health care. Planning for the supply and distribution of health services (both public and private) will be based on population health needs.

New schemes are being discussed for categorizing facilities and services, for accrediting providers and for undertaking quality assurance. Health care services are to be better integrated through vertical links between local self-government and health administration units. Physical access will be improved by planning a network of hospitals and other health institutions in accordance with the needs of local populations across the country. Financial access will be improved mainly by establishing basic health insurance coverage. Organizational changes and the identification of clinical priorities are expected to reduce waiting lists for elective health services; for example, the wait for a hip replacement is more than two years in some hospital orthopedics departments (Ministry of Health, 2000).

In the Former Yugoslav Republic of Macedonia, the reforms proposed during the 1990s were only partially implemented due to the generalized economic slump and the political instability. Large migratory waves of refugees, resulting in significant problems such as inequity in the regional distribution of resources and their non-rational use, and inadequacies in the material and technical infrastructure remain and raise questions of efficiency, effectiveness, equity and quality of health services (EOHCS, 2000a).

In Moldova, the reform of the health system has proceeded at a slow pace, but important changes have occurred in the recent years. One of these changes has been the development of a minimum package of health care for every citizen. The strengthening of the primary sector through the introduction of the family doctor in primary care and the restructuring of the secondary and tertiary sector through a reduction in the number of beds and a decentralization of the funding mechanism helped make health care more affordable and efficient, although hospitals continue to consume the majority of health resources. The system is still trying to overcome its major funding constraints, due to which the introduction of a compulsory health insurance scheme has been delayed, in order to ensure equal access of all to a basic level of care (EOHCS, 2004).

All of the above reform trends appear to be aimed at constituting a unified health insurance carrier establishing the general physician and a system of referrals, and privatizing not only the field of production and delivery but also the field of financing, where additional insurance for certain categories of health care has been instituted (Tragakes, 1999; EOHCS, 2000a).

In Romania, the main thrusts of new health policy include limiting the state monopoly, introducing the health insurance based system, decentralizing the

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system and strengthening the executive role of the Ministry of Health, increasing the administrative autonomy of hospitals, developing primary health care and general medicine and safeguarding the “free choice” of the family doctor, ensuring the quality of services provided, and reallocating human resources. The main change regarding the primary health sector was centered around general practi-tioners becoming independent providers (EOHCS, 2002b).

The Ministry of Health undertook interventions focused on strengthening the role of district health authorities, which, accordingly, undertook the financing and management of primary health care units and the contracting with general physi-cians, changing the way general physicians are being remunerated, in accordance with the per capita and per service method, strengthening the role of the general physician as gatekeepers of the system, introducing elements of competition by allowing the choice of physician (Enschescu et al., 1999; EOHCS, 2000b; Busse and Dolea, 2001; Sanda, 2001). Yet, still, little is spent on health per capita, equity remains of concern, social care is limited and there is still overuse of hospital care (EOHCS, 2002b)

Lastly, in Slovenia, extensive interventions in the health sector were mainly aimed at controlling the increased costs of health services and at expanding the system’s sources of financing, by mobilizing supplementary funds. Legislation enacted in 1992 revised the methods of financing. It replaced direct funding by the Ministry of Health from general revenue with mainly employment-based financing operated by a new public health insurance agency. The institution of mandatory and voluntary health insurance, the increase in the percentage of additional insurance and participation in the cost of services, as well as the expansion of the role played by the private sector, especially in primary health care, were all equally aimed at ending the dependence of health sector financing on the state budget (EOHCS, 1996; Markota and Albreht, 2001; Svab et al., 2001).

Thanks to the introduction of compulsory insurance and the fact that most of the population purchased voluntary insurance, an increasing proportion of the GDP was secured for the health care sector. To that same direction, some of the public health network was privatized and some formal out-of-pocket payments were introduced, along with free choice of physicians and some elementary gatekeeping functions in primary health care. The care provider contracting processes were also formalized and restructured. Current reform measures focus on harmonizing legislation with that of the EU, improving health care resource allocation methods to increase the incentives to deliver cost-effective care, improving health infor-mation systems and encouraging evidence based clinical practice (EOHCS, 2002c).

Concluding Remarks

The overview of the reforms undertaken in the ex- socialist countries of South-eastern Europe reveals common trends in the organization and provision of health care services and in particular in the decentralization of the management of the system (Albania, Bulgaria, Croatia and Romania), in the development of Social

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Insurance Systems (Albania, Bulgaria, Croatia, FYROM, Slovenia and Romania), in the introduction of market elements, especially in the field of primary health care (Albania, Bulgaria, Croatia, FYROM and Slovenia), where the family physician has also been established.

These trends present significant similarities to the attempts that took place in the field in most Western European countries during the last decade (Saltman and Figueras, 1997). It seems though that Western European countries failed to act as “good examples” to these countries as to the policy choices potentially available to them and the adoption of those measures that could be most effectively adapted to their specific legacy, structures and needs.

On this basis, researchers have expressed serious reservations regarding the effectiveness of the attempted reforms. For example, the exaggerated emphasis placed on the efficient management of resources and expansion of financing sources relegated the important problem of equity in access and improvement of health status to a second priority, when such goals should be foremost in every effort at health reform (Tragakes, 1999).

The transition to a social insurance system raises questions at a moment when the basic prerequisites, such as a strong economy with a high rate of employment, a sufficiently high wage level to allow for insurance contributions, and a strong government to exercise regulatory control, do not exist (Kissimova-Skarbek et al., 1994). At the same time, it is possible to have negative consequences both regarding cost of the health system itself, since it is more difficult to apply cost auditing controls to a system of social insurance as compared to a state-funded system (Chinitz et al., 1998), as well as regarding the extent of insurance coverage if the level of direct private payments cannot be controlled (Preker et al., 2002).

The introduction of market elements and the expansion of the role played by private payments, whether in the form of private insurance or in the form of additional insurance, co-payments or direct payments, negates the criterion of equity (Kutzin, 1998), given the prevalence of a “black” economy in the health care sector in these countries (Ensor, 2000; Lewis, 2002), and may lead to a significant decline in the use of health services, despite existing needs (Robinson, 2002).

The method of fee-for-service leads to over-demand and an emphasis on ser-vices involving treatment rather than prevention (Tragakes, 1999). Contracting can create problems in countries where the infrastructure cannot guarantee adequate information, regulation of the behavior of providers and consumers, relatively low cost of transactions and sufficient financing (Savas et al., 1998).

The degree to which health sector reforms in countries in transition have been successful is yet to be fully documented. Nonetheless, important steps have been taken in the direction of evaluating the effectiveness of the reform efforts and the change such efforts have affected on the actual health “experience” of the popu-lation. Ex-socialist Southeastern European Countries continue to face massive public health challenges in the form of increased alcohol and tobacco consumption and a surge of mental illness primarily due to post-conflict trauma. This paper has

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tried to shed light into the structural concerns of the reform process. Though the authors realize that these might not be the single most important issues the health systems of these countries face, this paper aims to provide the incentive for further discussion on the direction these systems should be taking if to effectively and effi-ciently deal with their increasing concerns.

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