Globalisation has a had great impact in shaping the world asis today. It is defined as the international flow of knowledge and informationand global civil societies. Globalisationconcerns cross-border interactions between individuals,companies and governments and it entails economic, social and politicaldimensions. Economic globalisation which is the extent to which countries areintegrated into the world market as reflected in their level of economicopenness is the focus of this essay. It is conceptualised as the amplificationof international economic exchange between different global market economies(Brady et al 2005). Welfare states have a great impact in the level of acountry’s participation in the global market.
Due to the fact that welfarestates vary considerably in their political orientations and distributionaloutcomes, globalisation also impacts them differently. This essay will discussthe impacts globalisation has on social welfare spending and education policiesin Western European welfare states. As previously mentioned, welfare regimes can differ greatlyin their social policies. Esping?Andersen’s typologies of welfarestate regimes help in their comparison as it does not only focus on their levelof expenditure on policy programmes. According to Esping?Andersen,the focus when analysing welfare regimes should not only be on how much theyspend but also on what they do and how they do it. He identifies threedifferent dimensions that can explain what and how of welfare regimes.
Thefirst is the degree of decommodification in that is present in the regime. Thesecond is the degree or extent of welfare state stratification. This looks atthe degree of socio economic inequalities present within a regime The last dimensionis the different patterns of state, market and household forms of provision.Using these three axes, Esping Anderson identified three different models ofwelfare regimes. The first model is a liberal or Anglo Saxon model. The secondis a conservative model and the last model is a social democratic orScandinavian model. A Scandinavian model of welfare regimes are characterisedby high levels of decommodification and low levels of stratification whileliberal regimes are characterised by low levels of decommodification and highlevels of stratification.
The conservative model on the other hand is typicallycharacterised with medium levels of decommodification and high levels ofstratification. Grouping welfare state into different typologies allows for thecomparison of their social policy developments. (Arts and Gelissen 2010) A number of theories and arguments have been proposed to discussthe impacts of globalisation on welfare. The first is globalisation has had anexpanding effect on welfare states and has allowed them to grow. This is due tothe fact that as economic openness increases with the rise in the number ofmultilateral trade agreements countries are now vulnerable more than ever dueto their exposure to the interconnected world market and the increasingcompetition. According to (Brady et al 2005) this has a positive effect on thewelfare spending as countries attempt to appease their population as a responseto increased external risks. The second argument is that globalisation causesthere to be a retrenchment in the welfare state. This is due to the welfarestate losing full control over their policies as the global interconnectednessof global markets increase.
Using the two different hypotheses of compensationand effectiveness, this essay will attempt to fully explain both arguments interms of social welfare spending. The compensation hypothesis claims that the increasinginterconnectedness of economies leads to an increase in social welfare spending,which in turn enables an upward shift of taxation. Therefore,there is a positive correlation between economic openness and public spending.The countries and the countries with the largest welfare states are also tendto be the most economically open ones. Economically open countries arecountries that are active on the global market whether it be throughinvolvement with supranational organisations such as The World TradeOrganisation and The World Bank or through trade agreements. A major aspect ofthis view is the instability of the labour market. There are two arguments for the expansion of the welfarestate through an increase of social welfare spending due to economic openness i.e.
the compensation hypothesis. According to the first view, economic opennesscauses insecurity. The reason is that economically open countries are moreaffected by variations on the world market. Due to a greater economic interconnectednessbetween countries, issues that happen in one country can have major a affect onother countries. These fluctuations in the world economy have the ability to increaseunemployment, therefore individuals in a more economic open country require thesupport of a social welfare state.
According to the second argument, economicopenness places an importance on increasing the investments into the welfarestate as this can to boost the competitiveness of a country. Such investmentsare enabled by increased prosperity and commitment to welfare spendingMoreover, spending on social arrangements creates social stability, increaseshuman capital and enables collective agreements between employers and employeesthat may counter the negative effects of economic openness Whether theinvestments in the welfare state are made to deal with insecurity or to staycompetitive, in both instances economic openness leads to an expansion of thewelfare state; in the first case governments respond to effects that economic opennessmay have, and in the latter governments actively develop policies to remaincompetitive in the world market. The efficiency hypothesison the other hand argues that globalisation has a detrimental effect of onsocial welfare spending and welfare state growth. This is due to the fact thatas result of globalisation, countries are in competition to attract capital.Therefore, taxes are reduced in many countries which leads to a decrease insocial welfare spending (Onaran and Boesch, 2014). Capital flight may result from high taxlevels and due to the globalisation, instantaneous capital transfers areavailable, therefore those with money or capital will end up moving their moneyto This threatens the financial base of the welfare state since those with thestrongest incentive to leave the country are individuals and companiescontributing the most to the welfare state due to the levels of tax . It isargued that governments will respond to problems of competitiveness and capitalflight by lowering taxes, resulting in a race to the bottom amongst countries. The logic behind the race to the bottom isthat countries will adjust their tax level in accordance with that in othercountries.
If one country lowers its taxes in order to be more attractive toindividuals and companies, others will follow and in the end all countries willend up with low taxes and few financial resources to support the welfare state.Social welfare spending will therefore decrease globally. In a study carried out by Garrett and Mitchell (1999)differences were found in social welfare spending patterns differences betweenthe welfare regimes within Western Europe. Within conservative welfare regimessuch as Germany, the share of social protection was said to increase.
This canbe explained by the compensation hypothesis. Social welfare however isdecreasing in social-democratic welfare regimes such as Sweden. This phenomenon can be explained by the effectivenesshypothesis. As for the liberal countries, no apparent relationship was found toexist between globalisation and social welfare expenditure.
A theory for thatcould be the cancelling out affect of the compensation and effective patterns.