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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 • • • • • 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) » • • • • • • • 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 • • • • 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 • • • • • • • • 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! [email protected]