Introduction

The welfare state has become the topic of much research. Answering the
questions of how the growth in Western Europe became possible in the postwar period and whether or not it is possible to repeat this experience, with
necessary adjustments, remains a question for many developing states.
Some claim that a welfare state is a new step in the capitalist development,
while others believe it is nothing more than preservation of the status quo.
At the same time, there seems to be no universal model of a welfare state,
and each case is different, despite the similar characteristics.
As a result of social unrest subject to poor economic and labor conditions in
the end of the nineteenth century and later as a result of the Great
Depression, it became clear how vulnerable and insecure the average citizen
has been. Among the pioneers to secure the citizens well-being were
Germany, all of the Nordic countries, the Netherlands, Uruguay and New
Zealand and the United Kingdom. A substantial contribution to the spread of
these policies was made by the United States after the World War II under
the Marshalls plan.
Today the club of welfare states is much bigger than in early times and it
includes most of developed and even some developing countries. In the
framework of this paper a special interest represent the post-Soviet countries
and Ukraine in particular. Like other communist states in the Soviet time, it
was characterized by strong but disproportional social development. The
classical term of the welfare state could not be applicable to Ukraine,
because social and economic rights were not always if at all accompanied by
the civil and political rights, both in theory and especially practice.

The paper discusses the meaning of the welfare state and considers its
evolution. A special emphasis will be given to the existing models and
possibility of their implementation in modern Ukraine. To identify that an
analysis of political and economic environment will be made.
Part I theoretical background of the welfare state
What is a welfare state?
The amount of literature which directly or indirectly deals with aspects of the
welfare state abounds, however there seems to be no clear and finished
definition of what a welfare state actually is. In its essence it involves state
responsibility to secure some basic modicum of welfare for its citizens, and in
the word basic or degree of actual wealth distributed people (as well as
how), future differences between different models of welfare states will arise.
Technically speaking a welfare state is a pattern of government policies
where the state plays a key role in the protection and promotion of the
economic and social wellbeing of its citizens. Unlike the free market
economy, where the government is simply a watchdog, in the welfare state

system it is tasked to realize the principles of equality of opportunity of

distribution of wealth, and public responsibility for those unable to have it
otherwise. From the economic side it is a type of mixed economic system,
where the social benefits to individuals are achieved through redistribution of
taxation. At the same time, no welfare state is actually possible without
social dimension.1
Social rights is indeed an important element in the welfare state system, and
among all social rights the right to de-commodification of an employee
seems to be the most important. From that very moment when workers were
deprived of their resources like land, their capital, i.e. tools of producing
goods and the finished results of their work they came to depend on those
enslaving them, firstly physically and later more economically, whether you
call them feudalists or capitalists. At the same time it was not until the
moment that workers survival became dependent on cash nexus that one
could speak of his commodification. The problem of commodification lay at
the heart of Marxs analysis of class development in the accumulation of
capital: depriving workers of their labors turned them from independent
producers into wage-earners having no property. Marx implied and I totally
support this view, commodification of labor implies alienation and leads to
stratification of society. As commodities, people are prisoners to powers
beyond their control; commodity is easily destroyed by even minor social
contingencies, such as illness, not to speak about macroeconomic changes
such as the business cycle. If workers actually do behave as commodities,
they will by definition compete; and the fiercer the competition, the cheaper
the price. As commodities, workers are replaceable, easily redundant, and
atomized.2 The same ideas were expressed by the Russian writer and
philosopher, Leo Tolstoy. He accurately points out that a big difference
between the former feudal system and the new capitalist one lies in the fact
that feudal workers were provided with minimum conditions of sustaining
life, and were more or less under his patronage, whereas with monetization
of labor no responsibility from the former feudal was there and the existence
of people came to depend exclusively on the market and luck.3
In this way, with the introduction of social rights (understood in modern
context) loosening of the pure commodity status of a worker becomes
possible. According to Mr. Espring-Andersen, the author of a famous book
The Three Worlds of Welfare Capitalism, de-commodification takes place
when work is done as a matter of right and not a necessity, and when a
person can maintain a livelihood without reliance on the market, entailing
1 Indeed, from this perspective authoritarian regimes like that in the former Soviet
Union may hardly be called a welfare state in its meaning.

2 Esping-Andersen, G., The Three Worlds of Welfare Capitalism, Polity Press, 1990, p.
145
3 Tolstoy, L., What shall we do?, Elpidina, 1884-1886, 150 p.

that citizens can freely, without potential loss of job, income, or general
welfare, opt out of work when they themselves consider it necessary 4.
Securing the de-commodification right is the utmost task of the welfare
system, though this was not a primary rationale behind its creating. When
people completely depend on the market, they are difficult to mobilize for a
coordinated action, as the fear to lose a job and leave his family without any
means of survival is usually bigger than fighting for universal principles.
Hence, de-commodification strengthens the worker and weakens the
absolute bargaining power of the employer, and it is not surprising that there
seems to be the lack of enthusiasm of employers on this issue.
The second characteristic of the welfare state, according to Esping-Andersen,
indirectly deviating from de-commodification, is compulsory state social
insurance, however, the mere its presence does not necessarily mean its
automatic utilization and therefore de-commodification. For instance,
Germany was a pioneer in social insurance at Bismarck times, but for a very
long time it could hardly be said to have brought about much in social
programs, as most if not all benefits depended almost entirely on
contributions, and thus on work and employment, thus in some respect it
was like a vicious circle. Sick insurance and unemployment insurance,
maternity and parental leave as well as educational leave, paid vacation and
finally pension would be good examples of how de-commodification
manifests today, though it is also relatively limited, both in scope and
application.5
Now, let us have a look at some statistical information regarding decommodification in different countries. The data will be presented from
Espring-Andersen results of research, who made a comparative cross-country
analysis for eighteen developed OECD economies in 1980.
Table 1 De-commodification of workers in 1980*
De-commodification score
Australia

13.0

United States

13.8

New Zealand

17.1

Canada

22.0

Ireland

23.3

United Kingdom

23.4

Italy

24.1

4 Esping-Andersen, G., The Three Worlds of Welfare Capitalism, Polity Press, 1990,
p.21

5 Nowadays these academics, civil servants, and higher-echelon white-collar

employees enjoy such benefits, but not always blue-collar workers and less educated
personnel.

Japan

27.1

France

27.5

Germany

27.7

Finland

29.2

Switzerland

29.8

Austria

31.1

Belgium

32.4

Netherlands

32.4

Denmark

38.1

Norway

38.3

Sweden

39.1

Mean

27.2

S. D.

7.7

* The bigger the score, the higher the degree of de-commodification

De-commodification included three basic features of social protection:

pensions, sickness and unemployment security; in the end, the aggregate
results were obtained. Old-age pensions consider minimum pension benefits
for a standard production worker earning average wages, standard pension
benefits for a normal worker, contribution period in years, and individuals
share of pension financing. Sickness and unemployment programs include
benefit replacement rates (net) for a standard worker during the first 26
weeks of illness/unemployment, the number of weeks of employment
required prior to qualification, and the number of waiting days before
benefits are paid.6
As seen from the table, countries tend to group into three normative
categories: low to medium, medium to high and high degree of
commodification. The Anglo-Saxon nations are all concentrated at the
bottom of the index, while the Scandinavian countries are at the top.
Continental European states are located in the middle, however some of
them like Belgium and the Netherlands, fall close to the Nordic states.
In an attempt to explain this positioning of different countries, it is visible
enough that countries where strong labor unions have no waste cooperation
with the regime, i.e. where social democracy seems to play no major role,
de-commodification seems to be relatively low. This is the case for AngloSaxon nations where individualism and the market are superior to collective
6 Esping-Andersen, G., The Three Worlds of Welfare Capitalism, Polity Press, 1990,
p.37

well-being. At the same time, within social democracies there are differences
too; some of the states like Germany and Austria have had more corporate
conservative culture in the past, with the church taking care of a family
unit, but not an individual. Finally, relatively recent successful experiments of
social democracy in Nordic states does lead to a greater financial freedom,
with Sweden leading the score.
Causes and conditions for a welfare state
As everything in history a welfare state must be understood in its historical
context. The two most important questions I continue asking myself with
respect to this theme, is why and how possible? Why did the ruling elites
agreed to cater a greater part of welfare to the masses? Who and what
received as a result of this generosity? Is it going to last long? Let us try to
give some answers on these questions together.
In the after-war period of 1950s onwards, fundamentally the same rationale
lay behind the mass spread of the welfare state. If in the nineteenth century
the enemy was an emerging collective effort, then in the second half of the
twentieth century it was an institutionalized ideological order of communism
as a primary enemy and not care for demands of the people. Thus, a welfare
state was created of fear and interests to preserve the elites position, and
not an act of good will. It is an evolutional phenomenon subject to a
compromise and not a revolutionary change. Indeed, there is a visible
shortage of empirical cases suggesting that industrial working classes ever
had the voting strength, meaning they had at least 50% in highest legislative
bodies to determine national policy making. Leftist governments nearly
always required a coalition of various social groups to expand welfare
policies, and the effect of their work is not easy to witness, as after the first
term they could be easily put away by their opponents, who took every
chance to undo what has been by their former colleagues.
The necessary conditions for a welfare state to spread were: a) perception of
the communist threat; b) demographic changes a sharp increase in the old
age population as a result of war, combined with the subsequent baby-boom
in the 1950s and 1960s.; c) availability of the uncle Sam, i.e. the
superpower country able to finance the introduction of the welfare benefits
at early stages, and d) a specific type of a state i.e. a relatively advanced
democracy which has outgrown early stages of the wild capitalism.
Different models of a welfare state
We have understood how the welfare state has evolved, however by itself it
is a general concept, which encompasses different types or models of
development, coming from both historical differences and specific conditions
at a particular time. Earlier we have already seen that different states had a
different degree of de-commodification of labor force. Now we will address
these differences in greater details.

According to Prof. Esping-Andersen, there are three main models of a

capitalist welfare state:
-

Conservative or Corporatist Welfare Model evident in the continental

Europe

Liberal Welfare Model popular among Anglo-Saxon nations

Social Democratic Welfare Model mostly practiced by the Nordic states

When speaking about different model, we have to bear in mind that they
never existed in a pure form, and every nation shares characteristics
inherent to more than one classical model.
The Conservative Welfare Model. In continental Europe where the influence
of the Catholic Church and of the authoritarian conservative state was
historically strongest, so-called corporatist welfare states developed. The
most prominent example of this regime would the German welfare model of
Bismarck.
In conservative welfare states, maintaining order and status is of utmost
importance, achieved through social insurance funds (old age pension,
health, unemployment, accident insurance). In the top of the corner is a
family unit, where under circumstances of a man only working a wife could
gain access to these benefits only through her husband. Such public
insurance funds were established and operated either by the government or,
as in Germany and Austria, run by labor associations, which descended from
the medieval guild system and 19th century mutual aid societies. While
being formally independent, such associations enjoyed a public status,
meaning that contributions to these funds are mandatory and usually
deducted from payroll. At the same time, the regime gives little if anything to
an individual. Moreover, because this is an extremely hierarchical order, help
from the state would only come if the means and possibilities of a family are
exhausted, not earlier7. Still further, the system is very much dependent on
the labor force employment and an aging population, which both can deplete
funds rapidly.
In this model, an efficient production system comes not from competition,
but from discipline. A state usually has a superior role, much more influential
than that of the chaos of markets.
Conservative political economy evolved in reaction to the French Revolution
and the Paris Commune; it was nationalistic and anti-revolutionary, and
sought to suppress any democratic initiative. If they tolerate democratic
7 Hierarchical order also implies quite varying social benefits for different kinds of
employees, depending on the status of the labour associations, i.e. blue collar, white
collars, civil servant, etc., where the last would have the most privileged status. Those
who come to Austria, will surely notice a lot of titles standing before the name of a
person, like MA, Prof., Doctor Anna Schmidt.

mass participation and allow authority and status boundaries to dissolve, the
end of the social order would come soon.
The main advantages of the Conservative Welfare State are as follows:
- It enjoys high level of public support
- It allows benefit recipients to maintain their level of income
- It supports private service system without rationing (e.g., in health care)
- Benefits increase as contributions increase8
However, the model has quite a few drawbacks as well:
- It maintains and reinforces social cleavages
- It is sensitive to employment conditions and demographics
- It drives up labor cost (payroll taxes) and low wage unemployment
- Those occupied in new, non-traditional and/or flexible jobs, will likely be
not secured enough
- It often provides few benefits for those outside the insurance model9
Liberal Model of a Welfare State. The liberal welfare regime is characterized
by means-tested programs and modest universal benefits, based on public
services or insurance schemes. It usually delivers benefits to a very low
income working class representatives. The state here generally encourages
the market to act as a co-provider of benefits, partly by providing a low levelof public services, carrying a negative public stigma. In this way, social
dependents will be much encourage to opt for employment, which will
probably provide higher quality and stigma-free health care and pension
benefits. In this model leftist parties hardly come to influence state policies,
despite a strong labor union representation.
In its pure form the liberal model excludes the majority of population from
enjoying welfare benefits, which makes welfare programs politically
unpopular and, in the long run, unsustainable: poor services to poor and
politically marginalized population segments mean high social unrest.
Besides, it tends to create a two-level society.
Liberal political economists were hardly of one mind when it came to policy
advocacy. Nassau Senior and later Manchester liberals emphasized the
laissez-faire element in Smith, rejecting any form of social protection outside
the cash nexus, however all of them were agreed prosperity is to be reached
with a maximum of free markets and a minimum of state interference. The
8 Seeleib-Kaiser, M., Welfare Systems in Europe and the USA: Conservative Germany
Converging towards the US Model?, 2013
9 Ibid.

liberals rightly feared universal suffrage, for it would be likely to politicize the
distributional struggle, pervert the market, and fuel inefficiencies.
Therefore, the liberals were hardly eager to extend social rights.
The liberal model might still have positive sides:
- It is the least sensitive to demographic changes in the population
- It has relatively low taxes
- It stimulates job growth, but mostly in low-skills sector10
Drawbacks of the model have already been listed.
The Social Democratic Model. Social democracy has been the dominate
political force in developing this universalistic welfare state that pervades all
aspects of people's lives. It supports economic and social interventions to
promote social justice within the framework of a capitalist economy, and
includes the instruments of state provisions, collective bargaining
arrangements, and regulation of the economy in the general interest. The
social democratic welfare state emerged as a result of a class alliance
between the industrial working class and the small holders (a red-green
alliance in the interest of full employment and farm price subsidies).
Instead of providing the benefits to the poor, it lifts them to the level of the
middle class, thus fighting substantial stratification of society. Because a high
level of public services is achieved, the state has, in fact, crowded out all
private competition. In addition, the Scandinavian welfare state tends to
reduce class and income differences, while ensuring the highest possible
level of service. It is achieved primarily, but not exclusively, through
progressive income and value-added taxes. The individualization of
agriculture was an intervention by the Crown and it implied the weakening
position of the nobility that gradually turned into an urban and bureaucratic
elite.
The necessary preconditions for an almost dreamy model like this are liberal
tradition with great regard for individualism and equality, cooperation
between working and peasant class, which should result in the dominant role
of leftist parties in politics. The model implies a relatively high degree of
public awareness and social responsibility.
The main advantages of the Nordic system are as follows:
- Universality encourages support of population
- High benefits, differentiated services
10 European Welfare States: Information and resources, How to Conceptualize the
Welfare
State,
2012,
Retrieved
28
July
2015,
http://www.pitt.edu/~heinisch/eusocial.html

- Positive employment effects

- Reduced social cleavages11
However, this system may be difficult to operate, it requires high tax burden,
strong government orientation and a relatively mature society. Economy
should be advanced too, so that a relatively small share of income would
suffice for a decent living.
Social welfare in Sweden
The welfare system in Sweden is composed of three main parts, which are
the social welfare, education and employment; each of the three is mostly
funded by taxes (at the central and local levels) and utilized by the public
sector. In this regard, there are government bodies, responsible for the
smooth functioning of the system: the Ministry of Health and Social Affairs, of
the Ministry of Education and Research, and the Ministry of Employment 12.
The social welfare part includes but is not limited to financial security in the
case of illness, old age and for the family; social services such as health care
for adults and children, assistance to disabled people etc. By and large,
several agencies such as National Agency for Social Insurance and local
municipalities are responsible for redistribution of about 48% of the Swedish
GDP in the form of taxed income.
In education, the welfare focuses mainly on providing pre-school services
and childcare for schoolchildren as well as adult education.
Population ageing as a background for the modern welfare system
Sweden has been experiencing population ageing over more than 100 years,
when the share of elderly has more than doubled. Given existing obstacles
in elderly care as well as healthcare in general, the question is how
Sweden will cope the increased population and sustain economic
growth at the same time.
The population pyramid in 1900 for Sweden (see Fig. 2.1) seems to have a
more classic pattern, with a lot of younger people successively tapering off
with increasing age to a pointed top, the phenomenon common in all
agricultural societies of the past and seen in many developing countries
nowadays.
In the twentieth century, the share of the population over 65 years old more
than doubled, reaching 17% by the end of the century. This lead in turn to a
11 Steger, Manfred B. The Quest for Evolutionary Socialism: Eduard Bernstein And
Social Democracy. Cambridge, England, UK; New York, USA: Cambridge University Press,
1997. p. 146.

12 The Swedish Government official website, http://www.regeringen.se/sveriges-regering/

changing pyramid from traditional to the more urn-shaped age structure,

with a smaller base and wider top.
One of the reasons why the share of t h e elderly increased is that life
expectancy increased and people are living longer. Indeed, life expectancy at
birth in Sweden has increased from 35/38 for men and women respectively in
1750, up to the 77 and 82 years correspondingly in 2000, with projections for
further increases to 83 and 86 years by the year 2050.
Yet the main reasons for population ageing is considered the declining
fertility. Truly so, according to A. Coale, had fertility rates remained the same,
the age structure would mostly have been the identical in 1950 as in 1860,
despite substantial increases in life expectancy during this period. In his
work, he demonstrated that the population ageing occurred in the first half of
the twentieth century was almost entirely the consequence of fertility drop13.
Fig. 2.1 Population Pyramid for Sweden

Source: BiSOS and Befolkning (Statistics Sweden)

Indeed, the fact that fertility, and not mortality, has been the engine of
population ageing may appear contradictory. T. Bengtsson and K. Scott imply
that it is easy to confuse population ageing with individual ageing,
especially in light of the dramatic increase in life expectancy experienced in
industrialized countries. It is nevertheless important to make this distinction,
between the fact that life expectancy increases and the fact that the share of
elderly in the population increases.14 Thus, the phenomenon when higher
fertility rates lead to larger generations, received the name as positive
population momentum; when the otherwise effect takes place, one may
expect negative population momentum.
13

Coale, A. J., How the age distribution of a human population is determined. Cold Spring Harbor Symposia on Quantitative

Biology, 22, 1957, pp. 8389.

14

Bengtsson T., Scott C., Population ageing - a threat to the welfare state? The case of Sweden, Ch. 2, Demographic Research

Monographs, 2010, p. 11