The Welfare State Isn’t Dead, It Simply Moved to Asia (Time magazine)
Source Dave Anderson
Date 13/11/02/02:55
The Welfare State Isn’t Dead, It Simply Moved to Asia
Economic and political pressures are mounting on Asian politicians to
create the same welfare policies plaguing government finances in the

By Michael Schuman / Beijing

THE WELFARE STATE IN the West is on the run. Right now in Washington,
the White House and Congress are haggling over what to do with key
entitlement programs like Medicare, which are key to supporting
middle-class lifestyles but, with the population aging and national
debt rising, have become financially unsustainable. For avid Tea
Partiers, large-scale social spending is synonymous with wasteful and
intrusive government — the hated “nanny state” that ruins whatever it
touches. However the budget arguments play out, reform of American
welfare policies seems inevitable. In Europe, the situation is even
worse. Debt-ridden countries like Spain and Greece have had to scale
back their welfare states in an effort to control debt and narrow
deficits. Does the welfare state have a future?

It does in Asia. Ironically, as the West retreats from their welfare
states, Asia is just starting to build them. Indonesia is about to
roll out a national healthcare plan to provide coverage for all of its
240 million people. South Korean President Park Geun Hye came into
office earlier this year with grand plans to subsidize college
tuition, offer free treatment for cancer and other serious illnesses,
and instate a universal pension system. Even Singapore, which has
prided itself on the stinginess of its welfare programs, can’t resist
the trend. In the 2013 budget, the government expanded state
healthcare programs and increased cash handouts to low-income

This trend is a reversal of Asia’s traditional economic policy. While
the West built middle-class lifestyles in part on a state-funded
social safety net, governments throughout Asia tended to rely on
strong family networks to care for society’s downtrodden. Welfare
spending was aimed usually at the most vulnerable, while others who
required assistance — the unemployed, the sick, the elderly — were
expected to turn to their families, not the taxpayer. That strategy
was a key element in the policy mix that sparked the region’s
exceptional growth. Instead of burdening state budgets with heavy
welfare spending, resources were freed up to invest in the education
and infrastructure that supported rapid development.

Now, though, attitudes are changing. In some cases, building better
social safety nets has become an economic necessity. China, for
instance, is trying to repair woefully inadequate healthcare and
pension systems to convince high-saving Chinese households to spend
more of their rising incomes and make the economy’s growth more
sustainable. With populations aging throughout East Asia, states will
have no choice but to care for a larger number of elderly. Politicians
are also reacting to growing discontent over income disparity and
middle-class demands for more substantive social services.

All of these factors are driving a rethink of government welfare
programs. In Singapore, where policymakers have long feared government
aid can become a crutch for the lazy, the demographic realities of the
city-state are causing a change of heart. “Although overall healthcare
expenditure will go up, we want to see Singaporeans’ out-of-pocket
share of medical costs fall, and the Government take on a larger
share,” Finance Minister Tharman Shanmugaratnam said in a February
speech. With the region’s greater wealth has also come an altered view
of both the appropriate role of government and the responsibilities a
modern society should have towards its weakest members.

In her inauguration speech Korean President Park pledged to “usher in
a new era of hope whereby the happiness of each citizen becomes the
bedrock of our nation’s strength.” What Korea needs, she said, was
“economic democratization” to spread Korea’s newly acquired riches
throughout society. “No citizen should be left to fear that he or she
might not be able to meet the basic requirements of life,” she said.

Yet such lofty ideals are already running into financial reality.
Facing a strained budget, Park had to backtrack on her welfare pledges
only months after taking office. She was forced to scale back her
pension plan and delay the subsidization of tuition. “This was
inevitable,” Park told her cabinet, due to the government’s financial
position. That gets at the biggest challenge facing Asia in its
pursuit of the welfare state. How can Asia build them, without taking
on the financial burdens now weighing down the West?

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