Reforming the welfare states in new growth economies and mature welfare states

Welfare states are being reinvented in some of the new “growth societies”. And they are being reformed in the old welfare states. The pressures for reinvention and reform are the same forces of globalization, demography and cost increases, although they work in opposite ways in the two different, contemporary groups of societies.

The new growth economies are in a sense ‘pre-modern’: individuals are still not liberated from their traditional, local and/or family backgrounds, and societal institutions remain to some degree undifferentiated. In those societies, the challenge of providing for the daily needs of individuals is being met by institution-building: new groups of actors are being empowered in connection with institutional reform and process optimization. This is a costly process, stressing the fiscal capacities of the political economy.

The old welfare states are ‘post-modernizing’ - industrial structures are morphing into a service and knowledge society, and cost pressures are escalating. In those societies, New Public Management has been applied to combat those cost pressures for two decades; efficiency has improved, but the fiscal squeeze remains. In several quarters, the idea of finding innovative means to handle these pressures, has grasped some of the policy makers. Searching for new ways of organizing services is commonplace, but a new trend is to deliberately look for “radical innovation” instead of optimizing tools and processes, a radical innovation will alter the value definition and basic organization of welfare functions. Actors must take on new roles, and the traditional core processes of markets and bureaucracies must be supplanted or supplemented by new forms of cooperation and interaction.