8-12 Jan 2018
11 Jan 2018

New ways to fund the welfare state introduce old problems

Transforming the post-war welfare state in Europe into an entrepreneurial model is making both headway and mistakes. Is it the best way to go?

Daiva Repeckaite
Daiva Repeckaite NewsMavens, Malta
New ways to fund the welfare state introduce old problems  - NewsMavens
Euros. Wikicommons

The Prime Minister of Malta Joseph Muscat's Wikipedia page credits him for making the left ‘electable’ in the Mediterranean archipelago. Generous VAT returns to lure transnational corporations, flirting with the cryptocurrency business, and a cash-for-passports scheme are some of his entrepreneurial ventures to fund the Maltese services without increasing taxes.

Most European countries would not go as far, but it’s safe to say that all are struggling to redefine what their welfare state should look like today -- first and foremost, how it will get its income.

In Romania, organ transplant fraud has exposed the deficiencies of a mixed public-private system, which allows doctors to work in both and shuffle patients to privatize profit and socialize expenses. In Austria, publicly funded shelters for domestic violence victims are run on short-term, precarious contracts and are struggling to meet the demand. The new government is also curbing benefits for asylum seekers and excluding their children from mainstream education in order to show that the country is not “comfortable.”

In neighboring Hungary, an NGO assisting asylum seekers is calling for EU support for civil society organizations filling similar gaps. According to the NGO, public institutions have ceased their cooperation. In Poland, similar NGOs are also said to be on a “starvation diet.”

While many European states remain cash-greedy to asylum seekers and abused women, some, notably France, tend to maintain their generosity to farmers. Yet now this too is going to change.

There is consensus that redistribution of welfare money to select groups in society will not continue its post-war pattern. Yet few can outline what the new post-austerity pattern should look like.

In Malta, Russian oil and gas magnates, a Serbian media tycoon, a Saudi prince and other entrepreneurial characters have paid their way to becoming Maltese. The money is earmarked for social initiatives and projects of national importance, but last month, the local media found out that it took two years to transfer the money to the welfare fund. In the meantime, it was used to buy shares in the Bank of Valletta.

Still, this is unlikely to shake up local trust in the ‘entrepreneurial’ Maltese welfare regime, wherein residents enjoy largely free public healthcare, various services for elderly residents, education at public schools, and evening courses for adults at the cost of a good dinner.

Faced with criticism over their austerity measures, governments in other countries are now breathing a sigh of relief with the economic crisis receding. However, as Ireland clearly demonstrates, the benefits of returning revenues do not necessarily reach those who need it the most.

Historically, welfare states are classified as social democratic (the public sector providing various services free of charge), conservative (the public sector organizing and partly funding services from civil society, religious institutions, etc.), and liberal (where the state is barely present at all).

Each type of welfare provision has proven to be either vulnerable to abuse or insufficient to protect the most vulnerable residents. It is not surprising that many of the EU’s new calls for projects in research and services are begging for social innovation.

Is the new type of ‘entrepreneurial’ welfare state the ultimate post-austerity solution? It could be the right direction, but it is still far from perfect. News from the past weeks shows that, like the public-private partnership model in Romania, the entrepreneurial model is also vulnerable to abuse.

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