6. Welfare State

The welfare state comprises all social services, benefits, and programs provided by the state in order to enhance and protect the well-being and health of the citizens of a country. As such, the welfare state can include programs for employment, health, education, social care, pensions, and income redistribution.

Socialism

The welfare state in socialism can be described as universal and is inspired by the slogan “From each according to his ability, to each according to his needs” which was termed by Karl Marx. As the socialist state is built upon the social ownership of the means of production, workers are fully entitled to access public goods and services. Additionally, as social equality is one of the theoretical pillars of socialist thought, the state is obliged to provide universal and free access to welfare which it can fund through the revenue of its publicly owned assets.

Social Democracy

Social democratic welfare states are heavily influenced by the Keynesian school of thought and are, therefore, quite extensive and egalitarian. As such, they are characterized by a broad coverage of and universal access to public goods such as pensions, free education, and healthcare. Social programs are comprehensive and are funded through high levels of taxation. Theoretically, this stems from the notion of social justice which social democrats try to uphold.

Neoliberalism

Neoliberalism is based upon neoclassical economics and, hence, envisages a minimal welfare state as not to suppress individual and entrepreneurial freedom. The state intervenes only to support those in absolute need who cannot be covered by the market or by their families. Services such as health care or education are privatized as citizens-consumers are enabled to choose between different and competitive social agencies. This, in turn, is supposed to enhance initiatives by private actors in the field of welfare through the prospect of generating profit.

Debate on the Welfare State

In general, social democrats favor a strong welfare state, neoliberals advocate against it and socialists regard it as a double-edged sword.

Social democrats believe that unfettered capitalism, e.g., in a neoliberal framework, produces vast social inequalities which, in turn, hinder social development. That is why a strong welfare state, next to extensive regulations, is supposed to promote the redistribution of wealth from top to bottom. Otherwise, so they argue, a big part of the population gets deprived of its purchasing power which then decreases aggregate demand and slows down economic growth.

Neoliberals, on the other hand, strongly disagree with this argument as for them, a strong welfare state is costly, inefficient, and difficult to maintain in comparison to the provision of such services by the free market. Additionally, according to them, state welfare creates disincentives for employment and, instead, produces dependency on such provisions, thus reducing productivity and slowing down economic growth.

Lastly, socialists regard the welfare state in a capitalist economy in an entirely different light. While they support the idea of empowering the poorest parts of the population through such redistributive means, they simultaneously emphasize that, following a classic Marxist tradition, the welfare state is solely a “class compromise” between capital and labor and is utilized to pacify the working class and to retain the capitalist order.