Why welfare states differ: from Bismarck’s social insurance to Esping-Andersen’s three worlds, and the East Asian path

In 1883, the German Chancellor Otto von Bismarck introduced compulsory health insurance for industrial workers, followed by accident insurance in 1884 and old-age and disability pensions in 1889. Bismarck was not a socialist. He banned the Social Democratic Party under the Anti-Socialist Laws of 1878, and he presented social insurance openly as a way to tie workers to the monarchy and weaken support for the left. Even so, his reforms created the first modern social insurance state, and they started a debate that political science is still having: why do states provide welfare, and why do they do it in such different ways?

The puzzle of variation

By the mid-twentieth century, almost every industrialised democracy had built a substantial welfare state, but the results varied greatly. Sweden’s system was universal, generous and financed through taxation. Germany’s remained tied to employment and status, with separate schemes for different occupational groups. The United States developed a residual system, providing support mainly to those proven to be in need, alongside private employer-based benefits. Britain moved from the means-tested Poor Law to the Beveridge model after 1945, with flat-rate national insurance and a National Health Service free at the point of use.

Explanations for this variation fall into several broad schools.

Industrialism and functionalism

Early theories, such as Harold Wilensky’s comparative work in the 1970s, saw welfare states as the result of industrialisation and economic development. As societies grow richer and older, and as extended families weaken, states take on the job of protecting people against risks. This explains why rich countries spend more on welfare than poor ones, but not why countries at similar levels of development built very different systems.

Power resources

The power resources theory, developed by Walter Korpi (1983) and others, argues that the size and form of the welfare state reflect the political strength of the working class, measured by union membership and the electoral success and coalition partners of social democratic parties. Where labour was strong and allied with farmers, as in Scandinavia, it could win universal, egalitarian programmes. Where it was weak or divided, welfare remained limited and fragmented.

Peter Baldwin’s The Politics of Social Solidarity (1990) offered an important correction. He showed that universal welfare in Scandinavia often came from the interests of farmers and the middle classes, who wanted to be included in programmes that would otherwise have benefited only industrial workers. Solidarity, he argued, could result from many groups each seeking its own advantage.

Esping-Andersen’s three worlds

Gøsta Esping-Andersen’s The Three Worlds of Welfare Capitalism (1990) is the most cited book in the field. Building on power resources theory and on T. H. Marshall’s concept of social citizenship, he classified welfare states by two main criteria: decommodification, the degree to which people can maintain a decent life without depending on the labour market, and stratification, whether the system reduces or reinforces class and status differences. He identified three regime types:

• Liberal (United States, Canada, Australia, United Kingdom): means-tested assistance, modest universal benefits and reliance on the market. Low decommodification.
• Conservative-corporatist (Germany, Austria, France, Italy): social insurance linked to occupation and status, often shaped by Catholic social teaching and the principle of subsidiarity, with a male-breadwinner family model. Moderate decommodification, high status preservation.
• Social democratic (Sweden, Norway, Denmark): universal, generous benefits based on citizenship, financed through taxes, with commitments to full employment and gender equality. High decommodification.

Each regime, he argued, resulted from different historical class coalitions, and once established, each produced its own political supporters.

Critiques and extensions

Feminist scholars, including Ann Orloff and Jane Lewis, criticised the typology for ignoring unpaid care work and the family. Theda Skocpol’s Protecting Soldiers and Mothers (1992) showed that the early American welfare state was organised around Civil War veterans and mothers rather than workers, and that the structure of the state shaped which demands could succeed. Paul Pierson’s Dismantling the Welfare State? (1994) argued that the politics of cutting welfare is different from the politics of building it: established programmes create beneficiaries who defend them, which makes large cuts politically very costly.

The East Asian path and Indonesia

Esping-Andersen’s model was built on Western cases. Ian Holliday (2000) proposed a fourth type, productivist welfare capitalism, for East Asia. In Japan, South Korea, Taiwan, Singapore and Hong Kong, social policy was subordinated to economic growth, focused on education and health spending that increased productivity, and relied heavily on families and employers. Stephan Haggard and Robert Kaufman (2008) compared East Asia, Latin America and Eastern Europe and showed how democratisation in South Korea and Taiwan in the late 1980s produced a large expansion of social insurance.

Indonesia is now one of the most important cases in this debate. The 2004 National Social Security System Law (UU SJSN) and the 2011 law creating the BPJS agencies laid the basis for Jaminan Kesehatan Nasional (JKN), launched in 2014, which has become one of the largest single-payer health insurance systems in the world by membership. Its expansion followed democratic competition: candidates at regional and national level campaigned on free health care. Indonesia therefore combines features of several of Esping-Andersen’s types. JKN is universal in aim like the social democratic model. Contributions and labour programmes through BPJS Ketenagakerjaan are linked to employment like the conservative model. Large targeted cash transfers such as PKH resemble the liberal model. A very large informal sector does not fit any of the three easily.

Questions for seminar discussion

• Does power resources theory apply in a country like Indonesia, where organised labour is relatively weak but welfare spending has expanded?
• Is “productivist welfare capitalism” a separate regime type, or a stage that East Asian welfare states are moving beyond?
• How does a large informal sector change the logic of welfare states that were designed around formal employment?

References and further reading

• Baldwin, P. (1990). The Politics of Social Solidarity: Class Bases of the European Welfare State, 1875–1975. Cambridge University Press.
• Esping-Andersen, G. (1990). The Three Worlds of Welfare Capitalism. Polity Press / Princeton University Press.
• Haggard, S., & Kaufman, R. R. (2008). Development, Democracy, and Welfare States: Latin America, East Asia, and Eastern Europe. Princeton University Press.
• Hennock, E. P. (2007). The Origin of the Welfare State in England and Germany, 1850–1914: Social Policies Compared. Cambridge University Press.
• Holliday, I. (2000). Productivist welfare capitalism: Social policy in East Asia. Political Studies, 48(4), 706–723.
• Korpi, W. (1983). The Democratic Class Struggle. Routledge & Kegan Paul.
• Marshall, T. H. (1950). Citizenship and Social Class and Other Essays. Cambridge University Press.
• Orloff, A. S. (1993). Gender and the social rights of citizenship: The comparative analysis of gender relations and welfare states. American Sociological Review, 58(3), 303–328.
• Pierson, P. (1994). Dismantling the Welfare State? Reagan, Thatcher, and the Politics of Retrenchment. Cambridge University Press.
• Skocpol, T. (1992). Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States. Belknap Press of Harvard University Press.
• Aspinall, E. (2014). Health care and democratization in Indonesia. Democratization, 21(5), 803–823.