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Transformation of Welfare Policies Comparisons of Post-Socialist Development in
Eastern Europe, China and Vietnam
Kjell Nilsson
Lund University
Presentation Kyiv 19 May 2016
Background
• The presentation is related to the cooperation
with our partners from China and Vietnam
within the research programme:
• Social Welfare Assessments: East Asian and
Scandinavian Redistribution Models in a
Global Context
The approach rests on following
assumptions:
• Existing analytical models do not fit the mixtures of welfare
provision and redistributive mechanisms in many countries
• Traditional typologies were initially designed with the
objective of analysing and categorizing social welfare in
industrialised countries with developed welfare regimes and
labour markets
• “Sectorial welfare regimes”: Configuration of welfare
provisions differ between welfare sectors.
• Most countries in the world cannot be described as welfare
states according to the traditional meaning of the concept.
• Recent analyses are not easily applicable to transitional
economies and in the case of Asia there is a lack of a thorough
account of transitional welfare policies in post-socialist
countries.
The social impact of transformation in some
former socialist societies (Deacon 1998)
Country
GDP
Poverty rate
Infant mort.
School enr.
China
Russia
Bulgaria
Hungary
+40
-38
-39
-3
-35
+36
+4
+4
-25
+13
+8
-15
+29
-5
-7
+3
Social welfare in Eastern Europe before
transition
• Subsidized prices on food, housing, transport
and basic necessities
• Guaranteed employment
• Adequate health and education
• Small differences between wages of workers,
professionals and managers
• Social benefits from the workplace
• No articulation of interests and needs from
the people
Consequences after 1989
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Unemployment
Inflation eroding living standard
Removal of subsidies, increasing rents
Rising mortality rates (esp. former Soviet Union)
Real per capita income decreased between 1988-93
by 54% in the Slavic republics (incl. Russia), 41% in
the Baltic, 54% in Central Asia, 25% in Eastern Europe
• Increased inequality. Gini coefficient in Russia from
0,25 to 0,48. 80% of the people losing, top 20%
winners.
Distribution of income (gini)
Christian democratic welfare regimes (Alpater et al)
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Before taxes&transfers
Czech Republic
0.44
Hungary
0.47
Poland
0.47
Slovenia
0.43
Slovakia
0.42
Croatia
Serbia
After T&T
0.26 (0.31 2009)
0.27
0.31 (0.34 2008)
0.24 (0.28 2008)
0.26
0.27 (2009)
0.28 (2008)
Liberal welfare regime (Cerami)
Before T&T
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Russian Federation
Estonia
Latvia
Lithuania
0.46
Mediterranean/Rudimentary welfare regime
• Romania (Hacker)
• Bulgaria?
After T&T
0.42 (2010)
0.31
0.35 (2010)
0.35 (2009)
0.33 (2010)
0.45 (2007)
China and Vietnam
• China and Vietnam are two transitional
economies that both officially adhere to socialist
ideologies while implementing extensive marketoriented economic reforms.
• A development policy in which social policies and
welfare are subordinate to that of economic
growth
• Essential public services have been commodified
and there has been a significant increase in social
inequalities and the gap between the rich and the
poor has widened.
• The two countries differ significantly in both
economic and social developments.
• It is difficult to discuss China as one empirical
entity.
Vietnam
• Cooperatives were disbanded in 1988, and
following cuts in public social sector spending and
various privatisation and liberalisation measures,
much of the cost burden for such services has
shifted to households.
• The marketisation of social and health services
has contributed to increased inequality.
• Informal employment is the general norm, either
in self-employment or through salaried
employment in the informal sector.
• Around two-third of the labour force is selfemployed or belongs to the household economy
• Given the size of the informal sector, merely
looking at system level would create a bias in the
data. To understand the system and its outcomes,
we need to consider the everyday practices and
strategies on a micro level.
• The most common forms of social security in
Vietnam are also informal and delivered through
family and social networks.
China
• China has followed a gradual approach to
reform.
• This has been a key to avoid the results of
‘shock therapy’ and instantaneous
marketisation of the transition countries in
Eastern Europe and the former Soviet Union.
• China shows similarities to other transitional
countries with regards to social policy.
Pre-reform welfare system in China
• A safety net for all the people, thanks to full
employment and a ration system of basic subsistence
in urban areas, and the system of collective farmland
in the rural areas.
• Social assistance systems and public personal
services in both urban and rural areas to support
those people who could not meet their basic living
requirements through work or by family support.
• A comprehensive welfare system exclusively for
urban state workers and government staff, which
included pensions, free medical care, public housing,
etc.
From state welfare to ”societal welfare”
• Shift from a universal to a selective welfare system
• Shift from a state model, in which almost all the
benefits were paid by government, to a model of
shared responsibility, where expenditure is shared
between government, employers and employees
(and where NGOs of different kinds are encouraged
to join)
• Shift from a single centrally planned and managed
system to a multiplicity of provincially and locally
managed systems.
Development and welfare in China
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China much richer because of the reforms
Number of poor reduced by 400 million
Life expectancy: 72,5 years
HDI 2014: 0.73 (90th place of 188 countries. India 130th,
Ukraine 81st)
More than 1/3 of population with income of less than 2 USD
per day (2006)
Inequality: 0.48 (Gini 2009)
Shanghai HDI = Portugal
Tibet HDI = Cambodia
Economic globalisation in China
• Economic reform, open-door policy, economic
growth strategy
• One of the government´s intentions in reforming the
welfare system in the 1990s was to reduce labour
costs and reinforcing economic competitiveness in
the international market, by cutting down on social
expenditure.
• It is for this reason that the government´s social
policy took a neo-liberal direction.
Current influences on social policy
• Social/political ”stability”
• Popular resistance to neo-liberal welfare
policy
• Ideological influences from other countries
• International pressure for ”fair competition”
and labour standards.
• Financial crisis (2008)
Recent developments
• “Harmonious society”
• Health care reform in China 2009. Goal: To
guarantee all people insurance for basic
health care.
• 5-year plan 2011-2016 (inclusive growth,
domestic demand)
• State revenues increasing by 20% per year.
• “Productivist” welfare regime
Eastern Europe: Political globalisation
- Limited influence on social policy by attracting FDI (foreign
direct investment)
- Limited impact of economic globalisation on social policy
• IMF/World Bank: US liberal model
- Privatisation and residualisation policy conditions for lending
money
- Policy more due to ideology of experts in the World Bank and
IMF than consideration of global competitiveness
• EU/ILO: European model
- World Bank influence counteracted by EU (with social
democratic and christian democratic ideas) regarding
accession countries
‘Shock Therapy’ and Social Policy
• Conditional structural adjustment policies and technical
assistance from the IMF and the World Bank.
• Jeffrey Sachs the chief architect of ‘shock therapy’ partly
tested in Latin America in the 1970s.
• Abrupt dismantling of state-provided social welfare and
removal of subsidies in transition to market economy.
• Immediate and large increases in poverty and inequality
Enlargement of the EU
• The adaptation of Eastern European countries to EU
social policy as accession requirements.
• Redirecting ‘shock therapy’-induced social
policies to comply with EU standards.
• Eastern European countries reshaping welfare
regimes in Bismarckian and Christian
democratic mode.
Liberal transformation in former universal
welfare regimes
• As we contrast the different country contexts we can identify a
number of aspects that could be labelled as least common
“denominators”.
• From the 1990s onwards there is a reconfiguration or liberal
transformation of social welfare policies, albeit to varying degrees
and using different socio-economic strategies
• The liberal transformation consists of a diversion from universal
systems towards hybrid regimes with increased market solutions.
• The absence of social movements and collective actors influencing
change. Instead a tendency towards technocratization of social
policy theorisation and policymaking, adhering to the neoclassical
paradigm.
• This transformative trend concurred with on-going change in global
social development.
Thanks for your attention!
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