April 2001

Erosion of welfare state

Citizens are hankering back to the golden days of the welfare state but there are no signs that politicians are willing to act according to these wishes. This is the conclusion of Raija Julkunen who has just finished an academic study of what happened to the Finnish welfare state in the 1990s.

In an interview in the newspaper Kansan Uutiset (12 April 2001), Julkunen recommends returning to more distributive policies and raising social benefits. She does not believe that this would sap people's motivation. Small benefits given monthly cannot encourage people to passivity and unemployment.

Is a return to the good old days of the welfare state possible? Julkunen sees a clear backlash against current policies and a wish to defend the welfare state. She also highlights the current debate on poverty.

"But can the direction of policies be changed? I don't believe it can even if one comes up with some sort of package to help the poor.

"Instead, I believe that this move away from the welfare state will continue. It is now suggested that unemployment pension and individual early retirement pensions should be withdrawn. The European ambition now is to opt for high employment and then a reduction in the need for social expenses."

Referring to her research, Julkunen says that in Finland the expansion of social policies lasted for about 30 years. In all industrialised countries they were halted using a similar model which consisted of economic integration, public sector reform, together with a more flexible labour market and a social culture which encouraged individual motivation, Julkunen says.

"The recession was necessary in this process in the sense that it justified the cuts. It has been observed that even if the elites wanted to halt the growth of welfare spending, this was difficult to carry out. Acute budget crises, however, are an important factor in creating a situation where cuts can be implemented."

Compared to other countries, there was little debate about these questions in Finland. In her book, Julkunen tries to build a theory about how the cuts and rollback of the welfare state were carried out. She doesn't believe that the kind of recession policies which Finland experienced were necessary. On the other hand, some constraints on public spending would have at some stage become inevitable.

Julkunen says that what is clearly happening now is that the nature of social security is being changed into a kind of insurance, foremost insuring income. The system will be closed to those who receive income or operate in the labour market. Social benefits are increasingly tied to an income minimum or means testing. This has not previously been part of Nordic welfare thinking.

Another big change, according to Julkunen, has been the emphasis on motivation, and combining social benefits and taxation in a way that makes waged work worthwhile. This does not as such contradict the work-centred Nordic society, but does mean an important psychological shift. The idea of equality has been replaced by individual motivation.

Julkunen is irritated by the "one truth" debate in Finland. The only correct aim is high employment, which, however, is not the same as eliminating unemployment.

"I am concerned that other ideas have been ignored. These include the end of work, redistribution of work and a post-waged work society. I am wondering whether those people who have been recommending a less work-centred society have really been wrong ."

Julkunen thinks that the cuts in welfare policies were accepted without protest because they were introduced as a way of saving the welfare state. Partly this was true. A reduceds welfare state can respond more effectively to future challenges. On the other hand, after the cuts, the welfare state is no longer the same, Julkunen says.

Compared to other countries, what has been different in Finland, is that no ideology — neo-liberal or other — has been necessary to change the nature of the welfare state. The Finns took a very pragmatic attitude and thought that a stable economy is needed to fund any attempts to build a more equal society. Now, however, the nation has woken up and realised how much inequality has grown. Even the government has been forced to design a package to alleviate poverty.

See also:

• Liberation from money with local exchange (9 April 2001)

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