Social science has labored under the controversial association of globalization with the welfare state. Researchers, analysts, and scholars have contributed to the expanding literature with a consensus emerging that relations between globalization and welfare provisions are present even if the nature remains ambiguous (Perraton 2012, p. 3). Despite the emerging consensus, many others are skeptical about the association of globalization with the welfare state. Positively, globalization has expanded welfare and countries have become more outwardly oriented to participate in international economic exchanges.
Governments with greater knowledge of the volatile and fluctuating international finance and trade have responded by developing social policies to stabilize economic security and appease political citizens. Contrary claims have also risen that globalization is the cause of reduction in the welfare state. Several researchers acknowledge that globalization has ended the period of fixed exchange rates and eliminated autonomy over welfare policies in the global economy (Antr`as, de Gortari & Itskhoki 2017, p. 387). States have undergone neoliberal restructures to increase flexibility and competition in the globalized economy where rollbacks in welfare state programs are the norm. In this study, the relationship is revisited using the United Kingdom as a case study to provide a comprehensive assessment of whether the welfare state is declining because of globalization.
Globalization and State Sovereignty
The changing face of sovereignty from the state to humans where the wellbeing of persons is prioritized and the state is mandated to provide these rights has been embraced. The sovereign state was previously free to direct economic, political and economic life according to internal values without external pressure or coercion (Ip 2010, p. 636). However, the sovereign states are morally obligated to secure and grow the political and socio-economic rights of its citizens.
The shifting normativity of sovereignty alters the perception of the nation as a welfare state. The welfare state at its basic level refers to the numerous public policies in which governments are engaged to provide social security for its citizens (Gesthuizen, Solga & Kunster 2011, p. 264). Throughout the last three decades, the welfare state has been attacked in numerous developing democracies. Many policy options that state actors relied on have been recalled because of the increasing scope of economic globalization. Currencies have been devalued, capital markets are highly regulated, domestic industries have been nationalized to protect their erosion, and extensive public spending has created high public deficits. As the market is integrated and pressures encourage the state to take risks in international competition, fiscal markets have opened up to attract high labor costs within the global economy (Ip 2010, p. 638).
Globalization has a twofold impact on the sovereignty of the UK as a state. The normative framework of human rights was embedded in 1945 to create state obligations towards citizens (Armingeon & Baccaro 2012, p. 254). However, the simultaneous economic integration has minimized options available to states. As a result, the state’s capacity to meet its obligations has been curtailed. In the United Kingdom alone, the welfare state has suffered severe cutbacks that have been steadily introduced since the 1980s. The primacy of the market over every other thing has encouraged cuts in public sector employment, reduction in pensions paid to public sector workers and removal of Sure Start Centers, which are elements of the welfare estate. Austerity measures using the justification of competition and economic efficiency have also become the norm after the 2008 financial crisis (Armingeon & Baccaro 2012, p. 256).
Factors beyond the nation-state have challenged absolute authority, which gave the UK control over its territory. The scare of global terrorism, the impacts of climate change and the power of international organizations to sway global markets keeps diminishing the state’s capacity to meet its obligations to citizens. Capitalism also alters state sovereignty through a reactive and passive process. Actively, the UK has formulated policies favoring marketing principles in which the structure of globalization operates. Reactively, it has changed response to crises in the global economy. As a result, the UK is no longer free as a state or entirely sovereign to enact policies as it wills (Fernández-Macías 2012, p. 157).
Curvilinear Effects and Convergence in Globalization
Empirical studies linking globalization to the welfare state have emerged using the UK as a case study. Numerous authors recognize the curvilinear relationship between the welfare state and globalization and note that low-level globalization expands the welfare state and economic development (Melitz & Redding 2015, p. 1105). Contrastively, high-level globalization contracts mature, generous and developed welfare states. The theory of curvilinear effects asserts the positive impact of globalization within the short term and a negative impact in the long term.
Curvilinear effects suggest that globalization converges with the welfare state. Globalization forces low and high spenders to take up a mean level of effort in welfare provision. Although globalized economies are expected to have liberal welfare programs, increased globalization retrenches welfare. The symmetric convergence ensures that globalized economies such as the UK retrench welfare while low spenders from developing countries expand the welfare state (Melitz & Redding 2015, p. 1107). On this point, skeptics agree that globalization has caused a significant amount of state convergence.
The convergence in globalization has triggered political dynamics to create generous welfare programs, which have expanded the welfare state to compensate the harms of economic openness and stabilize the volatility of markets. Although literature on the causal mechanism is often vague, consensus tends to infer that increased globalization renders generous welfare states uncompetitive (Obinger & Starke 2014, p. 1).
The world is growing more complex and various welfare policies in developed economies such as the UK are being retrenched to keep the economy competitive. The ideological dedication to providing welfare, commitment to institutional frameworks and the streamlining of elements within the local economy has mediated how globalization affects policy-making autonomy in nation states. The global economic foundation is the cause of all the changes because economic integration, open capital markets, and specialization are linked to economic growth rather than social welfare. Despite the socio-economic and political challenges, globalization hinders the expansion of the welfare state by curtailing policy options and state sovereignty (Obinger & Starke 2014, p. 1). States are increasingly being denied the ability to protect and expand the socio-economic rights of their citizens.
Prevailing Effects of Economic Globalization
The welfare state faces numerous challenges to its continuation. Numerous scholars agree that the UK government adopted austerity measures in socio-economic spending after the recession (Desai & Rudra 2016, p. 1). The cutbacks in the welfare estate are associated with the weakened nation-state as a political and economic unit. In return, it has increased the power of regional organizations and the role of non-political actors such as multinational corporations with purely commercial interests. The integration of the European countries into a supra-national, political and economic institution challenges the primacy of nation-states and their efficiency in regulating the welfare of citizens. As a result, the state’s political capacity to enforce welfare policy is constrained. The UK has a greater extractive resource capacity, which increases its efficiency to implement chosen policies and has often commanded and assembled more resources by raising higher and actual taxes (Gesthuizen, Solga & Kunster 2011, p. 264). Nonetheless, the rapidly aging population and shrinking labor force has increased the costs of maintaining welfare benefits for the European state. The extended longevity of populations and the low fertility rates have increased the costs of pension and other services while the economically active populace shrinks. The growing number of entitled persons has increased the socio-economic burden that the economically active populations carry (Fernández-Macías 2012, p. 157).
Although researchers widely believe that globalization is threatening the survival of states, its economic expression has complicated the government’s ability to maintain social cohesion using welfare policies. Even in the UK where the formal welfare structure remains intact, globalization has encouraged labor flexibility (Oesch 2015, p. 94). Where the unemployed easily move to other regions, the competition in markets easily corrects unemployment. The flexibility of labor erodes the cohesion, which is the foundation of national welfare programs. It is on this aspect that the United Kingdom has maintained welfare state institutions. The welfare state has survived because the government has cautiously implemented policies that avoid confrontations with other actors. Despite the caution, the state’s response to the changing demographics and social environment is limited by constrains in its political capacity to implement welfare policies. The desire to increase economic integration is altering the capacity of the government to conduct welfare programs (Desai & Rudra 2016). Maintaining control over the domestic social cohesion should be a priority of the UK if it is to survive the financial and trade integration as well as demographic trends, which pressurize it to change policy options.
The motivation behind the government cutbacks of the welfare state is the neo-liberal ideology that economic globalization reinforces. Globalization hinders states from determining policy outcomes in economic integration, fiscal markets and labor competition. International competition in global markets and the influence of multinational corporations have encouraged states to incentivize and make domestic markets more competitive. Other domestic and economic challenges have altered policy options that the UK government uses to maintain its welfare provisions.
Numerous observers acknowledge that integration of the state in international economies and the demographic trends pressurize the UK government to downsize welfare provisions to compete with states having less generous welfare programs. Plenty of evidence shows that the United Kingdom is shrinking the scope of its institutions to compete with Europe and non-European states with few similar constraints. As a result, the scope of the changes affirm the hypothesis that globalization has reduced the welfare state in the United Kingdom. The government faces an uphill task of redistributing welfare resources to maintain political stability without undermining the long-term viability of the political system. Besides, demographic challenges such as the aging population and the political implications of incentivizing the economy are a serious challenge for continuing the welfare state in the UK.
Antr`as, P., de Gortari, A. and Itskhoki, O. 2017. Globalization, Inequality and Welfare. Journal of International Economics, 108, p. 387-412.
Armingeon, K. and Baccaro, L. 2012. Political Economy of the Sovereign Debt Crisis: The Limits of Internal Devaluation. Industrial Law Journal, 41(3), p. 254-275.
Desai, R. M. and Rudra, N. (2016). Trade, Poverty, and Social Protection in Developing Countries. WIDER Working Paper 2016/139, p. 1-16.
Obinger, H. and Starke, P. 2014. Welfare state transformation: Convergence and the rise of the supply side model. TranState Working Papers, 180, 1-28.
Oesch, D. 2015. Welfare Regimes and Change in the Employment Structure: Britain, Denmark and Germany since 1990. Journal of European Social Policy, 25(1), p. 94-110.
Perraton, J. 2012. Globalisation and the UK Economy since the 1990s. United Kingdom, UK: Department of Economics University of Sheffield, UK.
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