Nordic Welfare States and Globalization: Challenges and Opportunities
The impact of globalization on welfare states is complex, as Kosonen points out. It’s crucial to consider the role of economic policies, including welfare policy, labor market dynamics, and overall economic strategies, rather than solely focusing on public expenditure.
How are the European welfare states (EB) of Nordic countries vulnerable to globalization? The discussion should center on changes in the labor market, the financing of social spending, and the policies that legitimize them. Europeanization and globalization have introduced uncertainty and increased flexibility in Nordic labor markets. Under global conditions, governments have fewer tools to maintain high employment levels. Global competition benefits qualified employees, while less-skilled workers face reduced opportunities. This situation may undermine the principle of equality in the Nordic model.
Another challenge lies in the funding of social policy. Nordic EB relies heavily on general taxes. Globalization is associated with a reduction in direct taxes, which impacts the general fund. This is particularly concerning given the anticipated increase in pensioners in the coming decades, implying a significant rise in social spending.
In short, globalization may affect current values related to fiscal policy, with implications for the funding models of Nordic EB. There is a potential conflict between the community and the welfare mentality that values universal high levels of employment and agency of the EB and the impositions of the global market.
However, Nordic societies possess strengths in global competitiveness, such as a high degree of social consensus, high levels of inclusion, and strong education and technology sectors. These elements can enable these countries to remain competitive while maintaining social policies that strengthen a solid EB in the context of globalization.
3. Liberal Model
This EB model is appropriate for countries like Britain and Ireland. As Norman Ginsburg (2001) describes in “Globalization and the Liberal Welfare Status,” the governments of these countries during the 1980s developed macroeconomic and industrial policies designed to expose them to competition from globalization. Both governments facilitated the free flow of goods, services, money, and technology, both internally and externally.
The liberal EB model is primarily characterized by:
- Low levels of social spending on social protection relative to GDP.
- Targeted social policies, including pensions.
- Restrictive social insurance.
- Relative poverty, stigma, under-funded, and low-quality public social services.
- Loss of regulation and subsidiarity of private welfare services.
- A culture of trust in self-financing, grants, and family care, supplemented by charity and provision.
Some analyses also stress a lack of public support for the full incorporation of women into the workplace.
The main effects of economic globalization and political changes have been:
- The decline in social spending and rising taxes.
- The increase in inequality among citizens.
- A high degree of flexibility, low labor market regulation, and privatization of welfare services.
As Ginsburg states, the pressure of globalization on the EB Liberals has evolved in two ways: the decline of resources while increasing the demand for services by citizens. Globalization itself has been used in these countries to legitimize the decrease of EB, all in the name of competition and economic efficiency.