How Does Globalization Affect European Welfare States?
How does globalization affect European Welfare States?
Introduction
The effect that the process of globalization is having on the European welfare states has been the subject of much debate. The source of this debate lies in the fact that there has been a positive correlation between economic openness and the size of the welfare state in European countries. This directly contradicts liberal economic theory that increased economic openness will require the retrenchment of the welfare state in order for national economies to remain competitive in the international market. There are some that argue that this relationship proves that increased trade and capital mobility have no meaningful effect on the viability of European welfare states, whilst there are those that attribute this relationship to the fact that globalization places greater social security demands on the state. It is my argument that the forces of globalization are posing a fundamental dilemma for European welfare states. Free trade and capital mobility are altering the structure of European economies and posing greater risks for individuals, which are placing greater demands on the welfare state, whilst also simultaneously limiting the ability of the state to provide such assistance. In order for European economies to remain strong, and thus their welfare states to remain sustainable, there will have to be a change in policy that allows European countries to remain competitive in the global economy. I will begin by outlining the liberal theory, before discussing the argument against the process of globalization affecting European welfare states. I will then go on to show how globalization does in fact affect European welfare states, both through the increased demands and constraints its effects place upon them. Finally, I will analyse the implications for the future of European welfare states and how they will have to adapt in order to sustain strong economies and thus their own viability.
Introduction
The effect that the process of globalization is having on the European welfare states has been the subject of much debate. The source of this debate lies in the fact that there has been a positive correlation between economic openness and the size of the welfare state in European countries. This directly contradicts liberal economic theory that increased economic openness will require the retrenchment of the welfare state in order for national economies to remain competitive in the international market. There are some that argue that this relationship proves that increased trade and capital mobility have no meaningful effect on the viability of European welfare states, whilst there are those that attribute this relationship to the fact that globalization places greater social security demands on the state. It is my argument that the forces of globalization are posing a fundamental dilemma for European welfare states. Free trade and capital mobility are altering the structure of European economies and posing greater risks for individuals, which are placing greater demands on the welfare state, whilst also simultaneously limiting the ability of the state to provide such assistance. In order for European economies to remain strong, and thus their welfare states to remain sustainable, there will have to be a change in policy that allows European countries to remain competitive in the global economy. I will begin by outlining the liberal theory, before discussing the argument against the process of globalization affecting European welfare states. I will then go on to show how globalization does in fact affect European welfare states, both through the increased demands and constraints its effects place upon them. Finally, I will analyse the implications for the future of European welfare states and how they will have to adapt in order to sustain strong economies and thus their own viability.