week 11 - the welfare state + development Flashcards
political economy
the study of how politics and economy interrelate and affect one another.
what is a key thing welfare states do and provide
- A key thing they do is they help reduce economic inequality.
- “government-protected minimum standards of income, nutrition, health, housing and education.”
economic inequality
the extent to which wealth is spread unevenly.
most useful indicator of inequality
the Gini coefficient: it gives a continuous measure of inequality.
how does the gini coefficient work
- a value of 0 indicates that everyone has the same wealth (perfect equality)
- a value of 100 indicates that one person owns all the wealth (perfect inequality).
the lorenz cure explanation
- Perfect Inequality: Lorenz Curve would arch down to the right angle of triangle.
- Perfect Equality: Lorenz Curve would flatten out to the line of the triangle.
how do welfare states reduce inequality
by redistributing wealth via taxation and spending on food assistance, healthcare, education, housing and income support.
communism and welfare states
- Social Spending is not communism/socialism.
- Welfare states are part of capitalist economies: fruits of capitalism are redistributed to those who do not share in them.
types of welfare states
Liberal
Social Democratic
Conservative
liberal welfare states
- most hands-off
- Benefits are relatively low and aimed at particular societal groups: individuals are responsible for purchasing more comprehensive insurance.
- The welfare state is primarily financed by taxes; overall public spending is relatively low.
- the U.S. is an example.
social democratic welfare states
- most hands-on
- Benefits are granted to all individuals; not aimed at particular groups.
- The welfare state is primarily financed by taxes; overall public spending is relatively high.
conservative welfare states
- Contributions to a social insurance fund are tied to employment.
- developed in Germany
- Benefits are differentiated: vary levels of benefits, depending on the status of the labor associations.
- The government uses public tax money to supplement the fund.
the first explanation of the development of welfare states
- With industrialization, traditional, community-based bonds of mutual assistance declined.
- People were exposed to things like industrial accidents and unemployment.
- They started demanding state assistance which increased size of the welfare state.
the second explanation of the development of welfare states
explanation 2:
- Politicians create policies that get them votes.
- There are a lot poorer and middle-class people than rich people.
- By transferring resources away from the rich, politicians can court poor and middle-class voters: increases the size of the welfare state.
the problems with welfare states
- Very high taxes can discourage investment and innovation.
- Generational Deficit: countries can amass debts that will have to be paid by younger generations.
- Fewer Incentives to Work: Workers are twice as likely to be on sick leave.
politicians and welfare state
Incumbents target spending at constituencies they think they can swing – it tends to pay off.
why are european welfare states bigger than the American welfare states
- Differences in attitudes: americans are more likely to believe that the poor are lazy.
- European countries tend to have proportional representation which allows small leftist parties to gain influence.
- The U.S. is more ethnically heterogeneous than almost any European country, and people are less likely to support redistribution those who ‘look different.’
two types of development
- Economic: wealth accumulation and equality.
- Social and Human: life expectancy; race and gender relations, life satisfaction etc.
the measure of economic development
gross Domestic Product (GDP) and GDP per capita is used as a measure of development.
GDP
the value of all the goods and services produced in a given country and a given year.
(GDP per capita is the GDP per person.)
PPP and GDP
- GDP and GDP per capita are often adjusted for purchasing power parity (PPP), which accounts for differences in the cost of living.
causes of economic development
- market-led development
- state-led development
market-led development
- as people and countries compete privately to maximize their own gains, society as a whole becomes better off.
- there was a big push toward market-led development in the 1980s and 1990s.
state-led development
- sustained development requires a central actor than coordinate disparate agents and make long term plans.
- Dominated after WWII; it is an existing model in China; there is renewed enthusiasm for it in the West.
