Policy, Organisation and Society

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Globalisation and the Welfare State: From the

Local to the International

Philip Mendes

To cite this article: Philip Mendes (2000) Globalisation and the Welfare State: From
the Local to the International, Policy, Organisation and Society, 19:1, 117-138, DOI:
10.1080/10349952.2000.11876721

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 POLICY, Organisation & Society
Volume 19 Number 1 2000 pp.117-38

Globalisation and the Welfare State:

From the Local to the International
Philip MENDES
Monash University

Abstract
This article examines the impact of globalisation on welfare states, with some
specifiC reference to the Australian situation. The argument advanced is broadly
commensurate with that of Ramesh Mishra, who argues that globalisation is as
much a political and ideological phenomenon as it is economic. Whilst Mishra
acknowledges that economic globalisation suggests a consistent international
downward trend in social expenditure, he also documents the considerable
differences between the English speaking countries, and other OECD states. I
argue that the influence of globalisation on individual nation states can best be
understood by exploring those political and ideological forces locally and
internationally which are respectively seeking either to retrench or retain the
welfare state.

Introduction
n recent years, welfare states have been the subject of increasing

I political and ideological debate over their effects and effectiveness.

Most advanced western states appear committed to reducing social
expenditure, and to introducing measures such as labour market
deregulation and lowered tax rates which facilitate greater economic
competitiveness, but impact adversely on rates of poverty and inequality.
These economic and political initiatives have coincided with a period of
intense economic globalisation. The growing significance of international
trade, investment, production and fmancial flows appears to be curtailing
the autonomy of individual nation states. In particular, globalisation
appears to be encouraging, if not demanding, a decline in social spending
and standards.
This article examines the impact of globalisation on welfare states, with
some specific reference to the Australian situation. The argument
advanced is broadly commensurate with that of Ramesh Mishra (1999),
who argues that globalisation is as much a political and ideological
phenomenon as it is economic. Whilst Mishra acknowledges that
economic globalisation suggests a consistent international downward trend

© Copyright FLINDERS UNIVERSITY 2000

 Philip MENDES

in social expenditure, he also documents the considerable differences

between the English speaking countries, and other OECD states.
Thus, I will argue that the influence of globalisation on individual nation
states can best be understood by exploring those political and ideological
forces locally and internationally which are respectively seeking either to
retrench or retain the welfare state. Reference will also be made here to the
argument advanced by Deacon (1997) that globalisation has raised social
policy issues to a supranational level, and that global supranational
agencies are exerting increasing influence on the shaping of national social
policies.
Whilst many of these international organisations are currently
supportive of the neo-liberal project to retrench welfare, there is evidence
of increasing resistance to this agenda at the international as well as local
level.

Different Views of Globalisation

E conomic globalisation appears to have been fuelled by the collapse of

communism, and the absence of any serious alternative to the free
market (Mishra 1999, ix). The term refers to a shift in the scale of social
and economic relations from the regional or national to the global.
Processes such as hi-tech communications, lower transport costs, and
unrestricted trade are perceived to be transforming the world into one
single market (Bessant & Watts 1999, 229).
A number of authors view globalisation as transferring power from
national governments to uncontrollable market forces and new economic
actors such as transnational corporations, international banks and other
financial institutions. Concern is expressed that these trends have
important ramifications for the sovereignty and autonomy of individual
states, given that there is no global authority which can impose limits or
rules on international markets (Wiseman 1996a, 115; Capling et al 1998, 5).
However, other authors such as Wiseman (1996a), Fincher and Webber
(1997), Weiss (1998), and Hirst & Thompson (1999) are more sceptical,
and reject the notion that global actors are overwhelmingly displacing
national political and economic power networks. They argue instead that
globalisation tendencies remain subject to autonomous responses and
outcomes within particular nation states.
This debate is crucial for the future of advanced welfare states. Those
who view globalisation as all-powerful argue that all national states are

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 Globalisation and the Welfare State

being increasingly pushed towards a common model of highly deregulated,

privatised, and liberalised capitalism. Under this model, states are forced to
offer lower and lower taxes in order to compete for footloose private
investment. Consequently, globalisation leads inevitably to the decline of
the welfare state through the vetoing of initiatives towards greater social
expenditure and full employment by international financial markets
(Martin & Schumann 1997; Capling et al 1998; Gray 1998; Beck 1999; Shin
2000).
Even the long-time Scandinavian welfare advocate, Esping-Andersen
(1996) argues that globalisation has narrowed domestic policy choices, and
that states are highly vulnerable to international trade, finance and capital
movements. Consequently, welfare states face a fundamental trade-off
between employment growth and efficiency, and egalitarian social
protection.
However, other authors reject this suggested trade-off. Goodin et al
(1999), for example, utilising a comparative study of Holland, Germany
and the USA, argue that social democratic welfare regimes equal or exceed
the performance of corporatist and liberal regimes across all social and
economic objectives. In addition, research by Garrett & Mitchell (1995)
refutes the proposition that increased global trade and capital mobility
necessarily leads to welfare cuts. Similarly, Hirst & Thompson (1999) argue
that individual states retain considerable political flexibility in their
response to globalisation.
Mishra (1999) offers a more complex and ultimately more satisfactory
viewpoint. He acknowledges that global competition has reduced the
autonomy of individual nation states, and that the evidence suggests a
downward spiral of social standards. Whether in Europe or elsewhere, the
consistent trend is towards greater inequality.
Whilst some social democratic governments attempt to resist this trend,
they are arguably limited to acting as reluctant neo-liberals whose policies
inevitably drift closer to their right-wing counterparts. The heroic, but
ultimately unsuccessful attempt of the Swedish social democrats to save
full employment perfectly illustrates this point. The best they appear able
to do is to slow down the erosion of social benefits, and to ensure a more
equitable process of retrenchment whereby the poor and disadvantaged
are protected.
In contrast, right-wing governments enthusiastically pursue an agenda of
retrenchment and privatisation of social protection.
However, Mishra also suggests that standards have declined far more in

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 Philip MENDES

English speaking countries than in continental Europe and Japan, and that
globalisation is as much a political and ideological phenomenon as it is
economic. Thus national social policy responses to globalisation are not
uniform, and continue to reflect the ideological and political traditions of
individual states.

Global Social Policy

T he debate about the effects of economic globalisation is complicated

by the increasing influence of international organisations and
institutions on national social policies.
These include global institutions such as the World Bank, the
International Monetary Fund, the International Labor Organization (ILO),
and UNICEF, supranational bodies such as the Organization for
Economic Co-operation and Development (OECD) and the European
Commission, and supranational non-government agencies like Oxfam.
According to Deacon (1997), globalisation has raised social policy issues
to a supranational level. He deftnes the scope of global social policy as
including social redistribution between countries; global social regulation
of the terms of trade and the operation of ftrms in the interests of social
protection and welfare objectives; and social provision and empowerment
at a level above that of national government (e.g. the United Nations High
Commission for Refugees).
Deacon refers to three particular manifestations of this global social
policy discourse:

1) Economic competition between countries may lead them to shed the

economic costs of social protection in order to be more competitive
(i.e.engage in social dumping - reduce levels of taxation for social
purposes) unless there are global regulations in place to prevent such
actions;

2) International migratory pressures provoke consideration of income

transfers between nations in order to alleviate the political consequences
of mass migration;

3) Common regional markets in capital and labour could lead to the

possibility of an international authority providing at a global or regional
level the social rights denied or threatened at national level.

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 Globalisation and the Welfare State

Deacon argues significandy that a global social reformist project is

required to address the new global social policy framework of
redistribution, regulation, and provision.
lbis project would seek broadly to: 1) Regulate global competition in
the interests of labour and social standards; 2) Make the Bretton Woods
financial institutions - the IMF and World Bank - more accountable; 3)
Reform the United Nations: Introduce a new UN Economic and Social
Committee to lead the debate around alternative social security/ assistance
strategies; 4) Strengthen global political, legal and social rights of
citizenship via international covenants and social charters; 5) Empower
international civil society through international non-government
organisations.
Other authors including (Townsend 1993, 1996 & 1999; Wiseman 1996;
Bourdieu 1998; Langmore 1998; Chossudovsky 1999; Mishra 1999) also
recommend international action to promote social reform. Specific
recommendations include the introduction of the oft-proposed Tobin Tax
to reduce financial speculation and instability, the formation of regional
trade unions, and the establishment of international social standards linked
to the economic standard and capacity of individual nations.
What is significant about this debate is the recognition that national
social policies are becoming more and more influenced by global
economic forces and institutions, and that conversely global social policy
initiatives may be required to offset the common trend towards welfare
retrenchment inspired by global markets.

Global Advocates of Nee-Liberal Welfare Retrenchment

T his section analyses the international neo-liberal (sometimes called the

New Right or economic rationalist) forces which have inspired
welfare retrenchment.
The International Monetary Fund (IMF), for example, was originally
formed at the 1944 Bretton Woods Conference to ensure monetary
stability in an open economy, as a substitute for the gold standard, which
had fulfilled this function successfully until the First World War. Its key
purpose was to discourage individual nations facing external balance of
payments difficulties from taking steps negatively affecting other countries
such as currency and import restrictions, or devaluations.
The IMF has long been regarded as an unrepentant advocate of neo-
liberal ideas. Since 1980, its structural adjustment programmes in the lbird

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 Philip MENDES

World and former Soviet Bloc countries have been based on rigid loan
conditions including trade liberalisation, reduced imports, reduced public
expenditure, cuts in progressive taxation, privatisation of state-owned
firms, increased interest rates, non-inflationary monetary policy, and an
overall reduction in national sovereignty (Deacon 1997, 61-65; Koivusalo
& Ollila 1997, 83-85).
According to its many critics, these policies have lead to further
indebtness, and impoverishment. For example, Chossudovsky (1999) and
Ransom (1999) refer to declining spending on health and education,
leading to millions of children being denied access to primary education,
and a growth in infectious diseases. A recent report by Oxfam (1999)
identifies major declines in social indicators in countries in East Asia, sub-
Saharan Africa, and Latin America involved with IMF programmes.
The IMF has less direct influence on industrialised western nations.
However, the IMF and OECD have actively encouraged European
welfare states to adopt neo-liberal models based on the reduction of social
assistance, and the maximisation of labour market flexibility and
competitiveness (Mishra 1999).
According to Deacon (1997), the IMF has begun to acknowledge the
detrimental social impact of some of its structural adjustment
programmes. In addition, the IMF does support a short term social safety
net to support the poor during periods of economic reform. Deacon
describes, for example, the application of such policies in post-Communist
Hungary.
However, overall, the IMF appears to still prioritise the interests of
commercial banks at the expense of people living in poverty. The World
Bank was also formed in 1944, and has focused principally on making
loans to Third World governments to pay for investments in large basic
infrastructure projects such as dams, power plants, and roads.
In contrast to the IMF, the World Bank has responded to earlier
criticisms of its policies and practice in developing countries by initiating
anti-poverty programmes. According to Deacon, this emphasis has led to
some softening of the earlier structural adjustment policies in Africa and
Latin America. There is also divisions within the Bank between those who
have been influenced by the social guarantees of former Communist States
into supporting more collectivised, social solidaristic forms of policy and
provision, and those who still subscribe to fundamentalist neo-liberalism.
Overall, Deacon argues that the World Bank appears to stand for social
safety nets for the poor, but against organized labour or European

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corporatist social security structures (Deacon 1997, 65-70; Koivusalo &

Illila 1997, 23-45).
Other commentators are more skeptical about ideological changes
within the Bank. Chossudovsky (1999), for example, argues that the Bank's
emphasis on poverty alleviation fails to effectively challenge the dominant
neo-liberal macro-economic agenda. He speaks of a token targeting of
funds to the poor, alongside the dismantling of state social expenditure.
Other international instruments including Regional Trade Agreements
such as the North American Free Trade Agreement (NAFfA) have also
played a role in reducing existing social welfare and labour market rights
and conditions. As Deacon notes, NAFTA lacks 'anything recognizable as
a social dimension' (Deacon 1997, 81).
Similarly, Korten (1995) & Ainger (1999) argue that the World Trade
Organisation is predisposed to defending the rights of the world's largest
corporations at the expense of social justice, health and labour
considerations. Concern has also been expressed about the implications of
the proposed Multilateral Agreement on Investment which aims to protect
the freedom of multinational companies, and restrict what governments
can do to regulate their activity (Wheelwright 1998; Ranald 2000).
In addition, Hayward & Salvaris (1994), Mishra (1999) and
Chossudovsky (1999) argue that international credit rating agencies such as
Moody's and Standard and Poor have pressured governments into cutting
social expenditure.

The Philosophical Origins of Nee-Liberalism

N eo-liberals draw their ideas from the classical liberal doctrines of

eighteenth century anti-collectivist philosopher and economist Adam
Smith, the Austrian theorist Friedrich Hayek and the American economist
Milton Friedman.
Hayek, for example, argued in The Road to Seifdom that economic
inequality produced by the free operation of the market, where distribution
depends partly on the ability and enterprise of the people concerned and
partly on unforseeable circumstances (as opposed to inequality which is
deliberately imposed by totalitarian authority), was the engine of economic
and social progress. Egalitarianism would only lead to coercive policies and
the breakdown of social cohesion (Hayek 1944).
Critics of classical liberal ideology argue that it is 'social darwinist' in
intent, threatens all those unable to compete effectively in the market, and

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 Philip MENDES

serves to increase and legitimise social and economic inequalities

(McChesney 1999).

The New Right Think Tanks

F ollowing the Great Depression and World War Two,

collectivist/Keynesian ideas urging government intervention to
manage the economy became dominant. Hayek and the classical liberals
were effectively marginalised. However, over the last 25 years, classical
liberal ideas have enjoyed a remarkable international revival to the point
where they can reasonably be described as constituting a new political
orthodoxy.
Their revival has been gready assisted by an international conglomerate
of neo-liberal think tanks generously funded by corporate resources. These
think tanks trace their origins to the relatively obscure Mont Pelerin
Society founded by Friedrich Hayek in 1947 as an international forum for
classical liberal ideas. As noted by Cockett (1994), the think tanks largely
mirror the earlier successes and methods of the left-wing Fabian Society in
their commitment to converting a generation of 'opinion formers' and
politicians to a new set of ideas.
For example, major US think tanks include the Heritage Foundation,
and the Cato Institute. The Heritage Foundation has a budget of over $25
million per year of which almost ninety per cent is raised from more than
6,000 private donors. Both organisations exerted considerable impact on
the Reagan Government's policy agenda. Similarly, in Britain, the Institute
of Economic Affairs and the Centre for Policy Studies were significant
influences on the Thatcher Government. Numerous think tanks also exist
in Europe, Canada, and Latin America (Beder 1997, 7 5-89; Balanya et al
2000, 17-18).
In Australia, a group of academic-style think tanks were established in
the early-to-mid eighties, the best known being Gerard Henderson's
Sydney Institute, the H.R Nicholls Society, the revived Institute of Public
Affairs (IPA), the Institute of Labour Studies at Flinders University, John
Hyde's Australian Institute for Public Policy, the Tasman Institute, the
Centre for Independent Studies (CIS), and the Institute for Private
Enterprise. The Business Council of Australia, and the Australian
Chamber of Commerce and Industry have also espoused neo-liberal views.
The Australian New Right think tanks have considerable resources at
their disposal. According to Ian Marsh (1995, 79), they enjoyed a

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combined income of approximately $4.5 million in 1990. In addition, the

Business Council has an annual income of five million dollars, whilst the
equally conservative National Farmers Federation has a budget of around
$2.3 million.
Marsh (1995) and Smyth (1995) argue that the think tanks have exerted
a substantial impact on the Australian political agenda. Tills was
particularly the case in Victoria where the Tasman Institute and Institute
for Public Affairs provided policy blueprints for the Kennett Government
(Kohler 1997; Hayward 1999, 140-142). They have also exerted
considerable influence on the welfare policies of both Labor and
particularly federal Liberal Governments (Mendes 1993, 9-10; Mendes
1998; Mendes 1999b). In addition, they are also active in opposing debt
relief for Third World countries (See Harper et al1999).
Think tanks have not only been able to shape the policies of individual
governments, but have also succeeded in moving the whole policy debate
to the Right. According to Beder (1997), the free market ideas promoted
by the think tanks have become hegemonic not only amongst conservative
parties, but even within traditionally social democratic groupings. They
have become publicly accepted as self-evident truths against which there is
no other alternative.

The New Right Critique of the Welfare State

~e New Right generally advocates the partial withering of the welfare
l. state, rather than its outright abolition. Most New Right theorists
recognize, for example, that government does have a responsibility to pick
up people in dire straits, and to ensure that people unable to provide for
themselves have access to adequate food, shelter, heat, clothing, health
care, and education. The qualification is that this support should be
minimal and not comfortable, so as not to reduce the incentive to work.
The New Right does, however, mount a significant critique of the
existing welfare state. This critique has been discussed in greater detail
elsewhere (Mendes 1993, 1997a & 1998), and will only be summarised
briefly here:

1) In line with public choice theory which holds that the market is always
superior to the government, the New Right argues that the welfare state
has been captured by 'public interest' pressure groups such as the
Australian Council of Social Service.

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 Philip MENDES

2) The New Right argues that minimum wage laws deny the less skilled
and more disadvantaged workers access to jobs. They emphasize the need
for a more flexible labour market without award and minimum wage
provisions.

3) The New Right maintains that government welfare programs encourage

dependency and anti-social behaviour, and do litde to encourage self-
reliance and desirable behaviour. The New Right, therefore, advocates the
introduction of a six month qualifying period for Sole Parent Pension and
a shorter period of eligibility, and also recommends that Australia follow
other countries such as the USA, Japan and Canada in imposing much
harsher requirements on claimants for unemployment benefit.

4) According to the New Right, current welfare programs encourage

people who do not genuinely need or deserve it (the undeserving poor) to
seek help.

5) The New Right argues the social security system should be privatised
because voluntary organisations are better at delivering welfare programs
and discourage dependence.

Critics of the New Right

ritics of the New Right's views on welfare argue that:
C -The New Right itself represents vested interests, and these interests
are likely to gain directly from any withering or 'rolling back' of the welfare
state;
- The abolition of minimwn wages is likely to lead to below poverty level
wages and increased inequality;
- The New Right's proposals to eliminate welfare dependency are
repressive and intended to blame and punish the victim, rather than to
attack the structural causes of poverty and dependency;
- Attempts to distinguish between the deserving and undeserving poor are
intended to isolate one group of poor people from the rest, to stigmatise
them, and to give the poor an incentive (ie force them) to work for low
wages; and
-Welfare privatisation is likely to destroy the integrity and accountability of
the income security system, and to force non-profit agencies to target
those able to pay the new or higher fees that they are forced to impose,
rather than low income earners (Mendes 1993; Mendes 1997a; Mendes
1998).

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 Globalisation and the Welfare State

Global and Regional Critics of Nee-Liberalism

n contrast, a number of local and international forces campaign for the
I retention of state welfare provision.
For example, a group of social reformist agencies exist under the
auspices of the United Nations Economic and Social Council. Perhaps the
best known is the United Nations International Children's Emergency
Fund (UNICEF) which was established in 1946 as a temporary body to
meet the emergency needs of children in postwar Europe. More recently,
the Fund has focused its attention on the development of child health and
welfare services to prevent malnutrition in the Third World.
UNICEF has been a persistent critic of the anti-social policies of the
IMF and World Bank, and the negative consequences of structural
adjustment policies for children. UNICEF has consequently had an
important influence on the World Bank's adoption of anti-poverty
programs (Deacon 1997, 84-85; Koivusalo & Ollila 1997, 46-61; UNICEF
website 2000).
The work of UNICEF has been reinforced by the activities of the
United Nations Development Programme (UNDP). The UNDP was
established in 1965 as the central funding and coordinating organisation
for United Nations technical assistance to developing countries. The
UNDP recently created a new measure of social progress, the human
development index, which combines longevity with education attainment
and a modified measure of income and poverty to rank countries on a
scale somewhat differently to a narrow GNP classification.
A further associated agency is the semi-autonomous United Nations
Research Institute for Social Development (UNRISD). The UNRISD has
explored the socially disintegrative aspects of globalisation, and the notion
of citizenship at a global level.
The UN Economic and Social Committee was responsible for the much
publicised 1995 World Social Development Summit which aimed to tackle
issues of poverty, social exclusion and social development, North and
South. The Summit concluded with commitments to the eradication of
poverty, the promotion of full employment, gender equality, and quality
health care and education, and the fostering of social integration (Deacon
1997, 84-89; Koivusalo & Ollila 1997, 62-70).
The International Labor Organization (ILO) aims to set and maintain
common international labour and social standards. The ILO has
established a number of conventions which, if ratified, provide for a well

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 Philip MENDES

functioning system of social insurance, social support, and social

assistance. Currendy, the ILO has more than 172 Conventions on its
books with 5500 ratifications, and it has achieved some success in securing
compliance with ratified Conventions. However, overall the efficacy of
ILO Conventions appears to be weakened by the principally voluntary
nature of ratification and compliance (Deacon 1997, 73-77; ILO website
2000).
At a regional level, the European Union has included a social dimension
via the Charter of the Fundamental Social Rights of Workers of the
European Union comprising free movement of workers and social security
for migrant workers, equal pay for men and women, health and safety
standards, and the requirement to establish a social dialogue with
employers and employees.
According to Deacon (1997, 79-81), the EU has laid the basis for a
regional social policy and forms of social protection, although some touted
initiatives have been frustrated by the existence of global economic
competition, the non-binding status of the Social Charter, and political
constraints such as the Maastricht Treaty which limit fiscal expansion.
Whilst the EU does not endorse social democratic policies of high taxation
and income redistribution, its dominant Christian democratic orientation
also rejects the claims of neo-liberalism.
Other regional and global groups against neo-liberalism include the
charities Oxfam, Cafod, and Christian Aid.
Oxfam International is a network of eleven aid agencies that work in
120 countries throughout the developing world. Oxfam has been highly
critical of the structural adjustment policies of the IMF, and has called for
reforms to ensure the IMF becomes part of the global poverty-reduction
effort (Oxfam 1999).
CAFOD is an international Catholic relief agency which funds projects
in Africa, Asia and the Pacific, Latin America, the Caribbean, and Eastern
Europe. CAFOD has been a strong advocate of debt relief, and has called
for the halving of global poverty by the year 2015. Another supporter of
debt relief is Christian Aid, the official relief and development agency of 40
British and Irish churches (CAFOD website 2000).

International Campaigns against Nee-Liberalism

I n recent years, we have seen the growth of what Brecher & Costello
(1994, 8) call 'globalisation from below', which is a form of globalisation

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 Globalisation and the Welfare State

involving actions by ordinary people, grass-roots movements, and those

concerned for the goals of social justice, human rights, and environmental
sustainability. Technological advances such as the Internet have opened up
opportunities for not only the powerful, but also the disadvantaged, to act
more quickly and effectively on an intemational basis.
One remarkably effective campaign has been that of Jubilee 2000, an
international coalition of religious groups, trade unions, and aid agencies
which seeks the cancellation of the unpayable debt of the world's poorest
countries by the end of the year 2000. Over 22 million signatures have
been gathered in support of the campaign including 382,000 from
Australia. During the recent Global Week of Action, about one million
people took part in demonstrations around the world.
Recently, US President Bill Clinton agreed to cancel 100% of the $5.7
billion owed by the poorest countries to the United States. Overall, about
$108 billion worth of debt relief has been promised by the G8 - the
world's leading industrialised countries Oubilee 2000 website). This
outcome has been strongly criticized by New Right think tanks such as the
Centre for Independent Studies (See Harper et al1999).
Another remarkably successful campaign has been the international
movement against the signing of the Multilateral Agreement on
Investment. Activists worldwide led by over 600 non-government
organisations from 67 countries have demanded that any agreement
incorporate high labour and environmental standards (Chomsky 1999;
Goodman 2000; Vamey & Martin 2000).

Lobby Groups for the Welfare State

;\ range of consumer groups, professional associations, and welfare
fi!obby groups have also been involved in national and sometimes
international campaigns to defend and extend existing welfare states.
Social work associations have been involved in campaigns for social
justice at both national and international levels.
For example, the International Federation of Social Workers (IFSW)
was formed in 1956 as an international organisation of professional social
workers. The IFSW takes a particular interest in the promotion of human
rights via liaison with Amnesty International and other human rights
organisations. The IFSW makes representations to governments, and also
publicises cases of social workers whose rights have been violated or
threatened. Other associated organisations include the International

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 Philip MENDES

Association of the Schools of Social Work, and the International Council

on Social Welfare (Lyons 1999; IFSW website 2000).
All over the world, self help and conswner groups have been formed to
defend and expand welfare entidements. Unemployed groups have been
particularly active. For example, Gager (1998) discusses the emergence of
large movements of the unemployed in France, Germany and other
European countries. These groups have demanded (with some success)
increases in social security payments. A nwnber of local unemployed
action groups also exist in Australian rural and country areas (Mendes
1999).
National welfare lobby groups include the British Child Poverty Action
Group, the New Zealand Council of Christian Social Services, and the
Canadian group, Campaign 2000 (Whiteley & Winyard 1987; Walker 1997;
Popham et al 1997). In Australia, a nwnber of groups have been active
including ACOSS, the Brotherhood of St Laurence, and the churches.
The Australian Council of Social Service (ACOSS) is the peak lobby
group of the non-government welfare sector in Australia, and acts as the
principal voice of low income and disadvantaged people in social and
economic policy matters. ACOSS was formed in 1956, and aims to
eliminate poverty and create a more just society by tackling the causes, not
just the symptoms, of disadvantage (Mendes 1996).
The Brotherhood is a Christian organisation founded in 1930 by Father
Gerard Tucker, an Anglican Priest, to address the problems of
unemployment, homelessness, and the inner city slwns during the
Depression. The Brotherhood emphasizes structural change and a fairer
distribution of income in order to promote a socially just society.
A nwnber of other church-based groups have also used Christian social
teachings to emphasize the responsibility of government to redress
structural poverty and inequality (Mendes 1997b).

Arguments for the Welfare State

M ost welfare states were introduced in the 1930s and 1940s to

alleviate the immense social injustices existing within free market
capitalist systems. These inequities were typified by the mass poverty and
unemployment of the Great Depression.
The welfare state is based on the notion that people require social rights
(social and economic resources, opportunities and powers) in order to also
exercise their formal political and legal rights. However, if left to the

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 Globalisation and the Welfare State

market, the inequitable distribution of resources would restrict the

freedom of those worst off.
A nwnber of commentators such as Cox (1995), Cass (1996), Brennan
(1998), Goodin et al (1999) and Mishra (1999) argue that the welfare state
has been successful in preventing destitution, and reducing poverty among
particularly vulnerable groups such as the sick, the aged, sole parents, and
the unemployed. Overall, the welfare state has been effective in alleviating
the worst extremes of market-based inequalities, in promoting the
autonomy of those without alternative sources of income, and in
facilitating social cohesiveness and inclusion rather than social exclusion.
To be sure, the welfare state has righdy not escaped criticism from
progressive sources. Marxists have criticized its contribution to reinforcing
the institutions and values of capitalist society, and its failure to resolve
significant social inequalities. Feminists have criticised the welfare state for
its patriarchal nature, and reinforcement of traditional gender inequities.
Neither of these criticisms necessitates the abolition of the welfare state.
Rather, they suggest a need for the expansion and improvement of
existing welfare benefits.

Current Welfare Trends and Future Developments

he above discussion suggests the growing involvement of
T international organisations in national social policy debates.
It also suggests that currendy neo-liberal forces and argwnents are
far more influential than their critics. This is confirmed by the increasingly
common trend towards what Shin has called 'business-friendly social
policy' (Shin 2000).
Nevertheless, as noted by Mishra, there remain significant differences
between the declining social standards in English-speaking countries, and
the continuing commitment to social protection in other OECD
countries. Tills suggests that the impact of economic globalisation on the
welfare state continues to be at least pardy mediated by political and
ideological forces.
However, Mishra still identifies an overall trend towards neo-liberal
ideas and policies, an argwnent confirmed by Marcuse's (1996) description
of increasing policy convergence between the traditionally more
interventionist Australia and the USA. All governments appear to fear that
programmes to combat poverty and unemployment through higher social
spending will provoke speculation against the national currency, or

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 Philip MENDES

disinvestment by foreign firms.

In Australia, for example, nwnerous business leaders and commentators
have argued that Australia must reduce social expenditure in order to be
internationally competitive. As noted by Wiseman (1998, 69), there has
been a gradual narrowing of discussion of alternatives to neo-liberal
policies due to a belief that such ideas would be vetoed by the international
financial markets. Both Labor and particularly Liberal Governments have
followed the general international trend of introducing measures which
tighten eligibility criteria and controls for unemployment benefits, and
increase incentives to become self-reliant (Wiseman 1996b).
Members of the Howard Liberal Government have explicitly welcomed
global economic pressures as a means of justifying proposed cuts to social
expenditure. For example, Treasurer Peter Costello has spoken of the need
to more closely align Australia's tax rates and social spending levels with
those of Australia's Asian trading neighbours (quoted in Wiseman 1998,
64).
Similarly, the government's National Commission of Audit argued that
Australia cannot maintain current levels of social security benefits. They
recommended that the government take action to moderate community
perceptions about the role of government in income support, and so
reduce government activities solely to the provision of law and order, and
the support of those in need (Officer 1996).
The discussion around the fiscal effects of increased life expectancy (the
so-called demographic crisis) on social expenditure is particularly indicative
of this narrow political trend.
International organisations such as the World Bank and the
Organisation for Economic Cooperation and Development suggest a
doubling or tripling of health and pension expenditure and other forms of
care for the aged by the year 2040. Similarly, the Australian Commission of
Audit suggested that future increased expenditure on Australia's ageing
population would cause a massive budget deficit unless action was taken
to reduce social expenditure (Officer 1996, xv & 123-146).
Yet other local authors argue that there is no reason why a reversal of
policies towards early retirement, and overall increased labour force
participation cannot offset the costs of increasing nwnbers of older
people. They also suggest importantly that this debate has been hijacked
by neo-liberals who see demographic change and associated global
pressures as an opportunity to reduce social protection (Hamilton 1996,
36; Mitchell1997, 55-56; Saunders 1998, 20-21).

132
 Globalisation and the Welfare State

Factors contributing to Welfare Retrenchment

P robably the strongest factor contributing to retrenchment is the

absence of a viable alternative model or strategy for managing the
economy and distributing social benefits.
As noted by Mishra (1999), the collapse of communism and the decline
of social democracy has removed any external or internal political
challenge to the domination of free market ideas. Capitalist systems no
longer fear potential revolutionary threats from labour movements or the
disadvantaged. Consequendy, governments have far less political incentive
to address questions of social injustice.
A second factor is the considerable resources available to free market
lobby groups, and their strong influence on key opinion makers in the
public service, media and political parties. For example, local commentator
Fred Argt (1998) has documented the strengthening alliance between
business, finance and the policy elites (senior politicians, ministers,
minders and bureaucrats) in favor of economic rationalist ideas.
Internationally, organisations such as the IMF and the OECD also
remain key influences in favor of neo-liberal agendas of expenditure
reduction, and labour market deregulation. Their views are clearly reflected
in the Maastricht Treaty requirement to limit government borrowing in the
period leading up to European Monetary Union which explicidy mitigates
against social protectionist policies.

Factors against Welfare State Contraction

A mongst some commentators (Pierson (1994), there is a school of

thought that the basic structure of the welfare state is irreversible.
These critics point to the fact that although the Thatcher and Reagan
regimes managed to cut back or privatise some parts of the welfare state,
the overall proportion of government spending on social provisions has
not substantially decreased. They add, however, that the crucial factor in
determining the success of attempts to cut spending was the extent of
resistance by affected constituencies.
Mishra (1999) is less optimistic about this 'irreversibility' thesis, arguing
that globalisation has weakened the influence of domestic national politics
on social policy, and consequendy the ability of pressure groups to
influence policy outcomes.
Nevertheless, he acknowledges that even in Anglo-Saxon countries, a

133
 Philip MENDES

substantial part of the social structure of social provision remains in place.

In addition, social expenditure as a percentage of GDP has not decreased
in most countries, and most European states are still involved in
combatting poverty and social exclusion (See also Nordlund 2000). Even
the British Blair Government has promised to end child poverty in 20
years.
However, Mishra (1999) argues that these statistics should be treated
with caution, noting that the growth of unemployment and family
instability means that a larger social expenditure is necessary simply to
maintain minimum standards. Further, considerable expenditure is being
diverted to increased social problems associated with unemployment such
as family violence, alcoholism, depression and illness. Jordan (1998)
similarly argues that an increasing proportion of the welfare budget is
being spent not on helping people, but rather on contro~ surveillance,
compulsion, and correction.
Despite these arguments, there is evidence that national and
international pressure groups are having some success in policy debates.
Mishra (1999), for example, refers to trade unions (particularly in Belgium,
France, Italy and Germany) as a bulwark against substantial welfare
retrenchment. In the USA particularly, aged lobby groups have been highly
effective in defending social security pensions. Extra-parliamentary protest
movements have also succeeded in slowing down austerity measures.
However, as Pierson (1994) notes, governments can take action to reduce
the impact of such groups by defunding public interest organisations, and
reducing the strength of unions.
A second factor is public opinion. Consistent surveys such as Baldry &
Vinson (1998), Esping-Andersen (1999) & Hirst & Thompson (1999)
reveal public support for government intervention funded by existing or
even higher levels of taxation to create employment and retain social
programmes and benefits.
Such support has led to the election of social democratic governments
in much of Europe including Germany, Italy, and France, and in a number
of Australian States. Nevertheless, the problem remains (as noted by
Mishra) that electoral politics and party competition hardly matter
anymore. Parties of both the Left and Right appear to be following a
similar retrenchment agenda. Those differences that exist appear to be
cross-national, rather than party political. It will, therefore, be interesting
to see whether the newly elected New Zealand Labor Government persists
with its stated intention to reverse many of the neo-liberal initiatives of the

134
 Globalisation and the Welfare State

previous government.
A third factor is the increasing demand for international agencies such
as the IMF and the World Bank to become more representative,
democratic, and accountable. At the very least, these agencies are
beginning to acknowledge the importance of a 'social dimension' in Third
World development. Nevertheless, such changes in rhetoric do not appear
as yet to have been translated into policy.
A fourth and probably crucial factor is attempts to confront
'globalisation from above' with 'globalisation from below'. For example,
the recent meeting of the World Trade Organisation in Seattle was
confronted with massive protests of 50-80,000 people organised by a
coalition of unionists, conservationists, clerics, and consumer groups.
Protesters demanded that the WTO incorporate labour and environmental
standards into its rulings.
As Mishra (1999, 72 & 129) notes, what is desperately required are
international institutions similar to the IMF which have the power to
promote and implement binding social rights at a global level.

Conclusion

T his article has examined the impact of globalisation on welfare states.

Whilst globalisation does appear to curtail the autonomy of individual
nation states and encourage trends towards lower social spending, the
speed and extent of these developments still appears to be influenced by
the political and ideological traditions of individual states. In short, the
influence of globalisation on welfare spending appears to be detennined at
least in part by internal political choice as much as by externally imposed
economic imperatives.
In addition, supranational agencies are increasingly influencing national
social policies, particularly but not exclusively in Third World countries
and the former Soviet Bloc. The future viability of advanced welfare states
may well depend on the emergence of global agencies with the power to
proscribe social rights as well as economic rights.

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