The paper for EASP conference 2005
Three Worlds of Welfare Capitalism: International Situation as a Factor of Welfare State Building Shogo Takegawa
Introduction
In the field of social policy studies in the North East Asia, there have been two approaches that have exerted powerful influences on the academic community.
The first one is what I call the Welfare Orientalism. I refer to it as the Swedocentric, the Eurocentric and the ethnocentric tendencies in the comparative studies of welfare states.
This approach was used by not only European scholars but also North East Asian ones. For example, even in Japan, many social policy students see the European welfare systems as typical, normal and standard and see Japanese one as exceptional, deviant or peculiar. I think this attitude is a kind of self-Orientalism.
The second one is the welfare state regime theory. During the 1970s and 1980s, quantitative methodology of (Wilensky 1975) had been a paradigm in the comparative welfare state research in Japan. However, since the beginning of the 1990s, it has been replaced by (Esping-Andersen 1990) like other countries.
The combination of these two approaches tends to give rise to two assumptions as follows.
Japan and Korea belongs to the same welfare state regime. Japan and Korea must belong to the social democratic, the conservative, the liberal, or the forth welfare state regime that is intrinsic to East Asian countries.
I do not think these two propositions are valid. So, in the first half of this paper, I will explain why these two propositions cannot be accepted by showing the East Asian experiences. In the process of reasoning, I would like to insist that Orientalism should be ended and the welfare regime controversy about North East Asian countries should be ended. Furthermore, in the latter half of this paper, I will try to show the contribution of East Asian experiences to the theory of comparative welfare state including European welfare states.
The end of Welfare Orientalism
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Firstly, I would like to discuss the Orientalist tendency in social policy studies. European scholars tend to think that both Japan and Korea are Confucian countries. It is not wrong because it is not wrong to say that both Russia and Britain are Christian countries. However, Japan and Korea have had traditionally different cultures and social structures. In most European countries, people use the same letters, such as the Roman alphabet, but Japanese and Korean use the completely different letters. Religions are different in two countries as well. Christian population of Korea is approximately 20% of total population, though that of Japan is only 1%. Even the kinship structures are different in both countries. Patrilineage and blood relationship in Korea are stronger than in Japan. In the pre-modern China and Korea, there were the civilian ruling classes who acquired Confucian culture such as mandarin and yangban, but in Japan there were not such civilian classes. In the age of feudalism in Japan, the rulers were warriors, that is, samurai. Saying that Japan and Korea belong to the same welfare regime because of Confucianism is the same as saying that Britain and Germany belong to the same welfare state regime because of Christianity.
Social policy should be understood in relation to the existing social structures which sustained and conditioned it. However, thee structures of two countries are different. For example, political structures in two countries are completely different. One country has a parliamentary system of government and the other country has a presidential government. Although there are some similarities in economic structures in two countries, for example, enterprise unions, there are many differences in the economic organizations such as labour market, industrial relation, corporate governance and so on.
Furthermore, regarding the orientations of public policy in the latter half of 1990s, there were the contrast between Korea and Japan. Firstly, though Korean government adopted a neo-liberal IMF approach and succeeded in a recovery from financial crisis, so that it was called “early graduation from the IMF Program”, Japanese government confronted a resistance to a neo-liberal approach from the establishment and failed in decreasing bad debts in financial market, so that it was called the Lost Decade. Secondly, though in the 1990s Japanese government continued to retrench social expenditure, especially in the field of pension and health care, Korean government began to expand social expenditure at the end of 1990s. This expansion reflected the beginning of Korean Welfare State formation.
In sum, Japan and Korea are different in culture, economy, polity and recent policy orientations. It means that Welfare Orientalism that identifies Korea with Japan should be ended. The study of social policy in North East Asia should be liberated from Welfare Orientalism.
The end of the regime controversy
If it is not obvious that Japan and Korea belong to the same welfare regime, what kind of regimes do they belong to? Are they liberal, conservative, social democratic, or the forth East Asian regime? It looks like a kind of “puzzle solving” (Kuhn).
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I think this is a kind of false question. I do not think the main contribution of the regime theory to the comparative welfare states study is the construction of the three models of welfare capitalism and the measurement of decommodification; but there are two contributions as follows.
The first one is theoretical. Introducing the theoretical concept of commodification and decommodification, Esping-Andersen clarifies the theoretical relation between capitalism and the welfare states. He bridged the theory of capitalism after Marx and Polanyi and the theory of social policy after Titmuss and Marshall. Thereafter this orientation was elaborated into the recent concept of “production regime”
By the way, as many people pointed out, it is the relation between patriarchy and the welfare state was lacked in Esping Andersen’s analysis. After feminists’ critique, he introduced the concept of defamiliarization. It was a theoretical advance but I do not think it is enough. Of course family matters in the patriarchy, but other aspects of social structure such as labour market are important as well. If decommodification is essential to the capitalist system, gendering is essential to the patriarchal system. I have proposed using the concepts of gendering (Sainsbury 1994) degendering, instead of defamiliarization. Considering this issue in the context of regime theory, I think the concept of “reproduction regime” should be elaborated and I am studying it now. But it does not have a direct relation to today’s subject. Let us return to it.
The second one is empirical. Esping-Andersen’s uniqueness was based on both diachronic and synchronic analysis of the welfare states. He related the characteristics of social policies in Sweden, Germany and USA to the history and social structures in each country. The welfare state should not be treated in a isolated form but in the relation to the “substructures of welfare state” that sustains and conditions its social and economic policy. It means that it is wrong to apply the typology directly and inflexibly to the non- western countries.
East Asian countries have a diversity of culture as well as economic development. The regime theory functions as clustering and classification in European countries but it may function as diversification and divergence even in North East Asian countries. Not only Japan and Korea may belong to other regimes, but also One China may have several welfare regimes: Inland agricultural China, Inshore industrial China, Taiwan, and Hong Kong.
I think we should end the welfare regime controversy that makes East Asian countries classify into three type of welfare capitalism. Furthermore it is too early to conclude the question if the East Asian welfare regime do exist or not. Korea and Taiwan began to construct the welfare state recently. The comparative study of welfare states in North East Asian countries has just begun.
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Factors of the welfare state formation
As stated before, we can observe the two facts in 1990s’ North East Asia: the rapid welfare state formation in Korea and the contrast of economic and social policies between Japan and Korea. These two facts have an important theoretical implication for a general comparative study of welfare states; that is a significance of international situation for welfare state building.
According to the convergence theory, the three variables are key factors for welfare state development measured by the size of social security expenditure per GDP: the level of economic development, the ageing level of population, and the age of the social security scheme (Wilensky 1975). Although this theory has been criticized by many researchers, these three variables have still much explanatory power in terms of global and long-term perspective.
Furthermore the path-dependent theory regards a legacy of the past in each country.
These two theories are common in considering that domestic factors are important. On the other hand, North East Asian experience indicates the possibility of the third way in the theory of welfare state formation. It is a theory that emphasizes the international conditions as the determinants of domestic social policy.
There have been some political scientists who insist the significance of international regimes: (Ruggie 1983), (Keohane 1984), and (Ruggie 2003). North East Asian experiences can develop this approach into other directions different from ones that they thought at first.
Two hypothetical propositions concerning the welfare state formation as follows can be derived from the experiences of Japan and Korea.
Domestic factors determine the time of taking off for the welfare state. The international situation of that time shapes the subsequent development of the welfare state.
Let us illustrate these points briefly. In the case of Japan, welfare state building began in 1973, as stated later, and the period of formation was overlapped with that of the worldwide stagflation. As a result, the formation and the crisis of the welfare state synchronized in Japan. And it conditioned the welfare state development.
In the case of Korea, welfare state building began in 1998, as stated later, and the period of formation was overlapped with the age of globalization. At that time global capitalism influenced social and economic policies in each country. There are some skeptics about the impact of globalization, but we should admit the general pressure of globalization even if some countries can resist it (Mishra 1999). And the pressure of global capitalism conditioned the subsequent development.
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Let us amplify the above points in the latter half of this paper.
The three points of time for the taking-off
As the convergence theory pointed out, the key factors that determine when each country takes off for the welfare state are domestic: economic development and social change.
Firstly, let us check this point about Japan, Korea and the UK in Table 1 and Figure 1.
Table 1: Domestic factors - Economic growth and Ageing -
UK Japan Korea
OECD 1948 1964 1996 membership
The level of 1930 1970 2000 ageing: 7%
Figure 1: Percentage of the aged population
18 16 14 12 Korea 10 Japan 8 UK 6 4 2 0 1930 1940 1950 1960 1970 1980 1990 2000
Secondly, using the figures indicating the change of social expenditure level over time, we can know the time of taking off. Mieno discovered the fact that social expenditure does not increase gradually but suddenly at one point of time; and after that it accelerates
The first draft 5 Not for quotation Comments welcome The paper for EASP conference 2005 as Figure 2 illustrates. If Mieno’s acceleration principle is right, we can identify this turning point with the time of taking off.
Figure 2: Mieno’s Acceleration Principle
level of social expenditure
Taking off for the Welfare State
time
Let us confirm this point in the following figures. Seeing from Figure 3 to 5, we can know that Korean took off at ca.1998, Japan took off at ca. 1973 and the UK took off at ca. 1948.
Figure 3: Social Expenditure per GDP in Korea
12
10
8
％ 6
4 taking off ? 2
0 90 91 92 93 94 95 96 97 98 99
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Figure 4: Social Security Benefit per National Income in Japan
25
20
15
10
5
taking off ? 0 1940 1950 1960 1970 1980 1990 2000 2010
Figure 5: Government's expenditure for social services per GDP
30
25
20
% 15
10 taking off ? 5
0 1920 1930 1940 1950 1960 1970 1980
Source: Peter Flora, ed., State, Economy and Society, 1983
If that is the case, what was the domestic situation and what was the international situation at each taking off time? Then, how did these facts affect the following development of the welfare state. Table 2 summarizes these points in advance.
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Table 2: Welfare State Building in three countries
UK Japan Korea
Period 1946- 1973- 1998-
Domestic factors Economic growth and social change Global Cold war; Stagflation; Inter- capitalism; national Embedded The welfare Washington situation liberalism state in crisis consensus Japanese type Productive ideology Welfare state of welfare society welfare Synchronization Co-occurrence Charac- Formation in the of Formation & of Welfare and teristic golden age Crisis Workfare
UK: embedded liberalism
In the case of UK, the percentage of aged population to total population was over 10% in 1940s and the UK was one of most developed countries in the world at that time under this condition Clement Richard Attlee won the landslide victory in the general election in 1945. After that he introduced or reformed National Insurance, National Health Service, National Assistance, Council houses and so on. It was the beginning of the welfare state.
After World War II, the United States obtained the hegemony in the world politics. (Ruggie 1983) explained this situation; America demanded the establishment of free trade system, but the commitment to liberalism was weaker in Europe; the political power of the left wing in Europe was growing in the economic difficulties and they disturbed the realization of liberalism; as a result, America should compromise the forces of protectionism in European countries; on the other hand it was necessary for America to help the European countries with the economic recovery against communism in the Cold War; the United States manifested Marshall Plan in 1947 and the OEEC was established in 1948 and it was changed OECD in 1961. In this process, according to (Ruggie 1983), liberalism was embedded into the welfare state. Bretton Woods system was that of “embedded liberalism”. In this system, free trade and fixed exchange were maintained. As a result, each government could have a certain freehand to decide domestic policies.
This “embedded liberalism” succeeded in economic recovery and development in the 1950s and the 1960s under favourable terms of trade. Maddison (1989) called this prosperous period from 1950 to 1973 as post-war Golden Age. Its success offered resources for social policy in the welfare state. It was also the Golden Age for the The first draft 8 Not for quotation Comments welcome The paper for EASP conference 2005 welfare state (Flora 1986: XXII). Expansion of social expenditure from 1960 to 1980 was the biggest in the history (Ruggie 2003). This expansion was bigger than those of two World Wars and the Great Depression.
British expansion of social expenditure was smaller than the Continental countries’ expansion during this period. Britain’s annual average growth rate of social expenditure from 1960 to 1975 was 5.9% and this figure was the second low in the OECD countries. However, it can be said that the British governments took more positive attitude for social expenditure than the Continental countries’ governments during that time. Because the GDP growth rate of the UK was lower than that of the Continental countries, the income elasticity of demand for social expenditure was higher than that of other European countries (Mohri 1990: 340).
European welfare states could grow enough in the favourable economic situation in the 1950s and the 1960s. However, the conditions that sustained the success of “embedded liberalism” changed in the 1970s, so that the world economy came into the age of stagflation. It was also the age of “the Welfare State in crisis”. In other words, European welfare states fully developed before the crisis. However, Japan and Korea have formed the welfare state in different ways.
Japan: Welfare State in crisis
During the Golden Age of welfare states in Europe, there was no condition for the welfare state in Japan, because the GDP per capita was one third of OECD countries’ average in 1950 and the percentage of aged population was less than 5%. However, conditions were ready by the 1970s. The GDP per capita became more than four fifths of OECD average in 1973 and the ageing level reached over 7%. And many social policy reforms were made in 1973: free medical care for the elderly, increasing of medical care benefit for younger population, introduction of indexation for pension and increasing of pension level. As a result, social expenditure began to expand. Japan took off for the welfare state in 1973. What had happened in European countries in the 1950s happened in Japan in the 1970s. How were the international circumstances in those days?
As stated earlier, the time when Japan took off was the time when the Golden Age ended after the Nixon shock and the Oil shock. According to Keohane (1984), it was the crisis of embedded liberalism. “Growth to Limits” in social expenditure became hot issue in academics (Flora 1986) and many people worried about the crisis of welfare state (OECD 1981).
The change of world economy influenced the Japanese economy. In the 1950s and 1960s Japan experienced rapid industrialization and urbanization. The growth rate had been more than 10%. However, high speed growth stopped suddenly in 1973 and after that Japan came into the age of low growth rate. Fiscal debt was growing and the retrenchment policy was introduced.
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Consequently Japan took a different path to the welfare state from European countries. Unlike European welfare states that confronted the crisis after full development in favourable conditions, Japan should build the welfare state in unfavourable conditions. It was the synchronization of the formation and the crisis of welfare state. Thus, though there have been a certain force that promotes the welfare state, there have been a stronger force that claims to contain the expansion within a certain level in Japanese society. In order to reconcile these two forces, the latter is exerted invisibly. This shaped the characteristics of Japan’s welfare state.
In the area of welfare politics, the word “welfare” is favoured unanimously by all parties in Japan. In the United States, conservative politician will hate the word “welfare” during the election campaign. However, in Japan, even conservative politicians as well as liberal politicians will proclaim the commitment to welfare. On the other hand, there is another unanimous consensus that the “National Burden” should be reduced. It is a concept peculiar to Japan and indicates the ratio of the sum of tax and social insurance contribution (and recently the fiscal deficit) to the National Income. Even the left politician agree to curtail the National Burden ratio. It is the ideology of Japanese welfare society that was invented in order to reconcile these two opposite tendencies.
Because of general support for universalism in Japan, the rise in self-pay ratio of social services is preferred to the targeting policy for beneficiaries for the sake of curtailing the total cost of social services.
As stated before, in the Golden Age, Japan lacked conditions that promoted the welfare state because of low level of economic development and ageing. Instead of building a welfare state, Japan established a interventionist mechanism of accumulation. The government stimulated the economic growth by expending a large amount of money for the public works. By regulating strictly the economy, they protected the weak sector of economy as well as fostered the strong sector. As a result, in Japan liberalism embedded into the expenditure for public works and strong economic regulation rather than the welfare state. This mechanism survived after the end of golden age and became a functional substitute for the social expenditure in the era of the crisis.
Accordingly the characteristics of Japan’s welfare state can be explained by international circumstances in two senses: fist, the mechanism of accumulation that was formed in the golden age influenced the subsequent development of welfare state; and second, the welfare state began at the time when the golden age ended. Thus social expenditure level of Japan has been preserved lower level than European countries.
Korea: Global Capitalism
In the case of Korea, the domestic conditions for the welfare state had been generated by the 1990s. Korea joined the OECD in 1996 and became one of advanced countries. In 2000, the percentage of the aged population to total population reached the 7% line that is an indicator of ageing society. Liberal forces have been growing since 1987. Then the
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Kim Dae Jung government began to build the welfare state in 1987 by promoting the slogan of “productive welfare”. They reformed public assistance programme, extended the coverage of public pension, integrated the medical insurance and improved employment insurance (Lee 2004). According to Lee Hye Kyung, Korean welfare state is currently in the middle of an “ultra-fast expansion”.
There are some similarities of the welfare state formation in Japan and Korea at first sight. Accordingly someone may think that we can construct the East Asian model. For example, while Japan began to build the welfare state in the era of stagflation, Korea began to build the welfare state in the IMF crisis. It may be said that “the welfare state formation in the crisis” is characteristic of the East Asia. However, I do not think this is the case; though the European welfare states grew in the Golden Age, they began to build the welfare states in the austere society unlike the United States (Heclo 1981). In a sense this is a point in common between the east and the west Eurasia.
Korea is often referred to as the “developmental state”. The developmental dictatorship gave rise to strong state interventions. It must influence the formation of welfare state in Korea. Japan’s state interventionism was strong as well, though it did not use the method of developmental dictatorship. These facts led the temptation to construct the East Asian model. However, attention must be paid to the fact that the strength of the state’s roll in the capitalist economy is the common tendency of late coming capitalist countries, including Germany and Russia (Gerschenkron 1962). It cannot be said that it is the strength of the state that is inherent in East Asian countries unless all countries but England are called as East-Asian type.
Then what was the international circumstance for Korean welfare state? The global capitalism exercised an overwhelming influence over each country’s economy in 1998 when Korea took off for the welfare state. The world in the 1990s was characterized by globalization. Welfare states were influenced by globalism as well (Mishra 1999). Jessop (1994) explained the generation of the Schumpeterian Workfare State instead of the Keynesian Welfare State. In the case of Korea, the impact of global capitalism was direct and concentrated in comparison to other countries because the IMF intervened directly in Korean government’s policy after the financial crisis.
This international situation has characterized the Korean welfare state. Thus the introduction of workfare policy as well as the pursuit of welfare policy occurred simultaneously in Korea. The latter came from domestic factors for the welfare state building, whereas the former came from the pressure of global capitalism.
Because they contradict each other in a sense, the ideology that reconciles them should be invented. It was the ideology of “productive welfare”. If the element of production is emphasised, this ideology can be interpreted as making welfare dependent upon production; if the element of welfare is emphasised, it can be interpreted as pro-welfare one. This ambiguity was convenient to build the welfare state under the pressure of IMF crisis. It performed the similar function in Korea that the Japanese welfare society ideology did in Japan.
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Furthermore, the rhetoric of “the third way” seemed to take an important role in Korean welfare state formation. The combination of work and welfare has been pursued in Korean social policy. Lee Hye Kyung (2004) stated that one of the most important character of Productive Welfare was the welfare focused on the human development, that is, the welfare through the work. On the other hand, “the work first model” like the US was avoided carefully. According to Kim (2001), the elements of workfare are exceptional in the public assistance system in Korea.
Lastly, the existence of the controversy of the Korean welfare state explained these points. Kim Yeon Myung (2001) insisted that the state responsibility for people’s life enlarged through Kim Dae Jung’s productive welfare. Cheong Mu-Gwon opposed himself to this view and asserted that Productive Welfare was the part of the IMF’s neo liberal reform. The former view reflected the domestic, and intrinsic, aspects of Korean welfare state while the latter view reflected the international, and extrinsic, aspects of Korean welfare state.
Conclusion
European welfare states took off in an austere society after World War II and developed in the golden age of the 1950s and the 1960s. The North East Asian two welfare states took off and developed in different ages and different circumstances; Japan’s welfare state was born in 1973 and developed in the age of stagflation; and Korea’s welfare state was born in 1998 and will develop hereafter in the age of globalism. In sum the international circumstances that each welfare state shaped the three worlds of welfare capitalism: the UK, Japan and Korea.
So far the North East Asian experiences were usually analysed and interpreted in terms of particularism. However, introducing the international situation as a variable of welfare state building, we can, and must, analyse and interpret the North East Asian experiences as well as the West European experiences in terms of universalism. Thus we should abandon the particularistic approach such as Welfare Orientalism and cease to apply the European theory blindly and uncritically to the Asian reality. We should distinguish the universal elements from the particularistic elements in European theroy.
Japan and Korea are no more deviant case of the welfare state than European countries are. We should make an effort to have coherent explanation of the East and the West of Eurasia.
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Heclo, H. (1981). Toward a New Welfare State? The Development of Welfare States in Europe and America. P. Flora and A. Heidenheimer. New Brunswick and London, Transaction Books. Gerschenkron, A. (1962). Economic backwardness in historical perspective: a book of essays. Cambridge, Mass., Belknap Press of Harvard University Press, Jessop, B. (1994). The transition to post-Fordism and the Schumpeterian workfare state. Towards a post-Fordist welfare state? R. Burrows and B. Loader. London and New York, Routledge: 13-37. Keohane, R. O. (1984). The World Political Economy and the Crisis of Embedded Liberalism. Order and Conflict in Contemporary Capitalism. J. H. Goldthorpe. Oxford, Clarendon Press. Kim, Y.-M. (김연명) (2001). "Welfare State or Safety Net? Development of the Social Welfare Policy of the Kim Dae-jung Administration." Korea Journal 41(2): 169- 201. Kuhn, T. S. The structure of scientific revolutions. Chicago, University of Chicago Press, Lee Hye Kyung (이혜경)，2004, 「金大中政府の『生産的福祉』――その歴史的意味と残 された課題」『社会政策学会誌』11 号 Maddison, A. (1989). The World Economy in 20th Century. Paris, OECD.. Mishra, R. (1999). Globalization and the Welfare State. Cheltenham, Edward Elgar Publishing, Mohri, Kenzo (毛利健三), 1990, 『イギリス福祉国家の研究』東京大学出版会． OECD (1981). The Welfare State in Crisis. Paris, OECD, Ruggie, J. G. (1983). International regimes, transactions, and change: embedded liberalism in the postwar economic order. International Regimes. S. D. Krasner. Ithaca and London, Cornell University Press: 195-231. Ruggie, J. G. (2003). Taking embedded liberalism global: the corporate connection. Taming globalization: frontiers of governance. D. Held and M. Koenig-Archibugi. Cambridge, Polity. Sainsbury, D. (1994). Gendering welfare states. London, Sage, Wilensky, H. L. (1975). The Welfare State and Equality: Structural and Ideological Roots of Pu blic Expenditures. Berkley, University of California Press.
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