Globalisation And Social Security Politics Essay

The underlying idea behind social security measures is that it is a duty of the society to protect the working class that contributes to the welfare of the society against hazard. It protects not just the workman, but also his entire family in financial security and health care. The Sate bears the primary responsibility for developing appropriate system for providing protection and assistance to its workforce. Hence, a welfare state is expected to engage in all activities necessary for the promotion of the social and economic welfare of the community. But, globalisation has affected the capacity of the welfare state.

This chapter undertakes the review of the literature. The chapter is organized as follows: Section 2.1 evaluates relationship between globalisation and social security and with the welfare State. Section 2.2 determines the relationship between welfare economics and social security. Section 2.3 examines the social security in developed and developing countries. Section 2.4 discusses the public action as a strategy for social security in developing countries. Section 2.5 evaluates social security in India and in Indian States. Section 2.6 compares the social security in organized and unorganized sector. Section 2.7 examines the resettlement and welfare of retired Defence personnel (ESM) / Veterans: Problems and solutions. Section 2.8 concludes the study.

To have a better understanding about the impact of globalisation on social security, a review of the different studies carried out in different dimensions is essential. For the convenience of the study the literature reviewed have been classified into three categories as – (a) issues related to globalisation, social security, welfare state and welfare economics, (b) issues related to social security in developed countries and in developing countries especially in India and (c) issues related to resettlement and welfare of ESM (PBOR).

2.1 Globalisation and Social Security –

There are few studies based on the exact relationship between globalization and social security. Most of the studies analysed globalisation in relation to its impact on welfare state.

In the first perspective, D’Haeseleer, Steven and Berghman, Jos (2005), argued that challenges of globalization for social security systems are real and it increases the need for redesigning social security. The study concluded by suggesting that social security provision in low-income countries should be organized in a complementary way, drawing on the strengths of both formal and informal arrangements. Future reforms should be attempted to promote economic development and international economic integration.

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Similar analyses offered by Dries Crevits and Bea Van Buggenhout (2005), the study attempts to assess the impact of the process of globalisation on social protection. Analysis of globalisation shows that it has increased the need for socially protective measures, considering the fact that it causes more inequality, and insecurity concerning jobs and earnings and that it has increased the territorial mobility of employees and employers. At the same time, globalisation constitutes a threat for the existing levels of social protection, as pointed out by the social dumping hypothesis. Social policy makers therefore face some tremendous challenges, building a frame for a generalised basic social protection at a global level, securing the financing of existing social security systems and adapting the schemes to the increased mobility.

Jitka Dolezalova (2001), analysed the influence of globalisation on systems of Social Security in Europe. Globalisation forces the countries to compete for the investments with lower taxes, and lower social contributions. The influence of globalisation is becoming more and more substantial and globalisation process will force the Social Security Systems on a revision.

Dutt, Amitava Krishna and J. Mohan Rao (2001), study recorded diverse views about effects of economic reforms on social outcomes. It analysed that employment and wages are the most important potential channels through which the social impact of globalization can be felt. Further, the study point out that impact of globalisation can be seen in government policy for spending on social security programmes.

2.1.1 Globalisation, social security and welfare State –

The relationship between globalization and welfare state is addressed in this section. There is a wide divergence of views as to how globalization impacts on the welfare state. In most of the studies, international comparisons tend to be confined to particular organisation for Economic Cooperation and Development (OECD) countries in welfare spending such as Germany, Britain, Japan, Sweden, and the USA, and neglected the ‘developing’ countries.

Bowles, Paul and Barnet Wagman (1997), identified four hypotheses concerning the relationship between globalization and welfare state in the context of OECD countries namely, downward harmonization hypothesis, upward convergence hypothesis, the convergence hypothesis and the globalization irrelevance hypothesis. To prove the hypothesis the indicators like welfare state spending on education, health and social security and welfare has been used. The results shown that globalization may indeed have posed a challenge to the welfare state.

Rudra, Nita (2004), investigates the relationship between openness, government social expenditures (i.e., education, health, and social security and welfare), and income distribution through a time-series cross-sectional panel data set for 35 less developed countries (LDCs) from 1972 to 1996. The results show that while all categories of social spending help improve income distribution in richer countries, the effects of social spending are much less favourable in LDCs. Only spending on education in LDCs encourages a more favorable distribution of income in the face of globalization. The pressures of a more competitive global economy increase incentives for more redistributive education spending, whereas publicly sponsored health programs and, particularly, social security and welfare programs confront greater political lobbying.

Deacon, Bob (2000), argues that neoliberal globalization is presenting a challenge to welfare provisioning in the industrialized countries and to the prospects for equitable social development in developing and transition economies. This challenge flows partly from the unregulated nature of the emerging global economy and partly from intellectual currents dominant in the global discourse concerning social policy and social development. The study contends that certain global conditions are undermining the prospects for the alternative: equitable public social provision in both developed and developing countries. These conditions include the World Bank’s preference for a safety-net and privatizing strategy for welfare; the self-interest of international non-governmental organizations (NGOs) in providing basic education, health and livelihood services that might otherwise be provided by the state; and the World Trade Organizations (WTO’s) push for an open global market in health services, education and social insurance.

Ming-Chnag Tsai (2007), study investigated the effect of globalization on progress in human well-being by using a time-series cross-national data during 1980-2000, a period that observed an extremely high tide of global flows crossing borders to deepen international economic integration, establish supranational governance, and foster cultural harmonization. The study contributes in offering a theoretical model and providing empirical evidence by testing the hypothesized relationship between globalization and human well-being. It is concluded that globalization identified by increased global flows and exchanges contributes rather than hampers progress in human welfare.

Stefanie, Walter (2010), discussed how globalization affects the welfare state. Based on survey data from Switzerland, the study provides empirical micro foundations for the compensation hypothesis. It finds that globalization losers are more likely to express feelings of economic insecurity. Such feelings, in turn, increase preferences for welfare state expansion, which in turn increase the likelihood of voting for the Social Democratic Party. The analysis also shows that globalization losers and winners differ significantly with regard to their social policy preferences and their propensity to vote for left parties.

Burgoon, Brain (2001), argued that globalisation may have varying effects on welfare policy. It can spark more concentrated demand for welfare compensation or less compensation. The vulnerable group demand for more compensation. To prove the same, a cross-sectional data on the relationship between openness and welfare spending for eighteen OECD countries for the period 1961-94 analysed with regression analysis. The result shows that openness has a slight effect on welfare outcomes and therefore, it is not the most important determinant of welfare efforts in OECD countries.

From the above review, it is possible to identify two main arguments about the current and future condition of the welfare state under globalization: the first of these claims that globalization erodes the welfare states and its foundations; the second claims that globalization effects are absorbed and mediated by the welfare state.

2.2 Welfare Economics and social security –

From macro-economics angle, social security policies are always analysed within the framework of welfare state theories. The extent of welfarism undertaken by the nation-states consequently, became the benchmark in understanding different social security mechanisms. This approach evaluates social security policies in terms of the quantum of the programmes and aggregate of expenditures.

On the other side, micro-economics analyse the issue of social security and welfare [1] policies in the framework of welfare economics. Welfare economics examine the effects of economic policies on the welfare level of individuals or groups of people (social welfare).

Social security is a part of economic policy which contributes to social welfare. To compare situations in the society economist’s had constructed welfare criteria’s. A brief historical survey of welfare economics will provide us the tools given by welfare economics to measure the welfare and maximising the social welfare. The theory underlying social welfare can be traced back to the welfare economics. It is discussed below.

Classical Economist on social welfare –

Jeremy Bentham [2] defined social welfare as “the sum total of the happiness (or welfare) of all the individuals in society.” Following Bentham’s doctrine, Pigou (1920) defined social welfare as the arithmetic sum of the individual welfare. According to him, social welfare increases if there is an increase in national dividend without any increase in the supply of factors, and a transfer of wealth from rich to the poor. In nutshell, social welfare was regarded by the economists of cardinal utility tradition as the arithmetic sum of the utility gained by the individual members of society.

This concept of social welfare has, however, met with certain serious objections. First, it is argued that utility cannot be cardinally measured and, hence, cannot be added to obtain the social welfare. It is, therefore, meaningless to define social welfare as the sum of the individual utilities. This objection is universally accepted. Secondly, it is also widely accepted that ordinal measurement of utilities is not possible either and, therefore, inter-personal comparison of utilities is not possible in an objective or scientific manner. It would, therefore, not be possible to determine how a change in existing pattern of resource allocation would affect the aggregate welfare unless it is unrealistically assumed that all individuals have identical income-utility and commodity-utility functions. Owing to these problems, Bentham’s and Pigovian concepts of social welfare had become in- operational, in the sense that, it cannot be used objectively in any policy formulation. Therefore, the cardinal utilitarian thesis that the welfare of different individuals could be added up to arrive at the welfare of society had to be abandoned.

The need for to judge the events and policies economically, leads to development of the idea of ‘social optimum’ by Pareto (1896).

Pareto’: Concept of Welfare

This concept is central to Pareto’s welfare economics. According to Pareto, although it is not possible to measure and add up utilities of individuals to arrive at the total social welfare, it is possible to determine whether social welfare is optimum. Conceptually, social welfare is said to be optimum when nobody can be made better-off without making somebody worse-off. It’s important to note that Pareto’s concept of social optimum does not define or suggest a magnitude of optimum social welfare. Pareto was concerned with the question whether the magnitude of social welfare from a given economic situation can be or cannot be increased by changing the economic situation. The test of increase in social welfare is that at least one person should be made better-off without making anybody else worse-off.

The Modern View of Social Optimum

According to the modern view of social optimum, it is difficult to conceive economic policies which can improve the welfare of an individual without injuring the other. To overcome this problem, economists, viz., Kaldor-Hicks (1939) have evolved the ‘compensation principle’. It asserts that, even if the economic change makes some person better off and other worse off, the change is still desirable provided the gainers can compensate the losers for their loss.

This principle recognizes that most economic policy measures make some one better off and someone worse off. It does not attempt to quantify the total social welfare. It concerns itself with only the indicators of change in welfare. The present study applies Kaldor-Hicks compensation criteria to analyse the impact of globalisation on social security (with respect to resettlement and welfare benefits) of retired army PBOR. It has been discussed in detail in chapter-3.

The concept of social security has been playing important role in developed as well as in developing countries. The following section reviews the literature on social security in developed and developing countries.

2.3 Social Security in developed and developing Countries –

Johanees, Jutting (1999), overviewed the kinds of social security systems that are currently in place in developed and developing countries. It dealt with the reasons for the failure of the State and the market in providing social security in the developing countries. It presents an overview of the importance of the State, market, community and private household-based social security systems in the developing world.

Midgley, James (1984), analysed the growth of social security system in developing countries, in African, Asian and Central and S. American countries during the colonial period. Although more and more developing countries established social security schemes covering a large number of contingencies since the mid 50’s, the situation is basically similar to that of the pre-war colonial period when a very small number of individuals and their dependents were covered by social security. The system caters only to small proportion of the labour force engaged in regular wage or salaried employment in the urban areas of developing countries, while the majority of the population who work in subsistence agriculture in the urban informal sector is excluded.

Dreze, Jean and Amartya Sen (1999), addressed some foundational and strategic issues of social security, including the nature and form of human deprivation, the distinction between protective and promotional social security, the interconnections between economic growth and public support, the influence of market mechanism, and the relationship between State action and public action.

Atkinson, A.B. and John Hills (1999), investigated the relevance of the experiences of the developed countries to the strategy of social security in developing countries. They bring out how the social security system of developed countries has evolved along quite different routes, in response to country specific objectives, constraints and pressures.

Wouter van Ginneken (2003), reviewed the main trends and policy issues with regard to the extension of social security in developing countries. It shows that in many middle-income countries, statutory social insurance can form the basis for the extension process. However, this is generally not so in the low-income countries, where only a small minority of the population is covered by social security. The paper concludes national policies should consist of improving and reforming statutory social insurance programmes, of promoting community and area based social insurance schemes.

The above studies are related to types of social security system, growth and trends of social security in developed and developing countries. It also reveals that the issues in developing countries, where the social security is yet to become full fledged, are however, entirely different from the developed countries. There are very few studies on social security systems in the developing countries.

2.4 Public Action – A strategy for Social Security in developing countries –

The ILO defines social security vary narrowly and advocates strategy of social insurance and social assistance for providing social security. It does not capture the socio-economic conditions (deprivation and vulnerability) of developing countries like India (discussed in detail in chapter-3). Therefore, public action has been suggested as a strategy to provide social security in developing countries. In this context, Dreze, Jean and Amartya Sen (1999) argued on the basis of economic analysis as well as empirical evidence, that public support has an irreplaceable role to play in removing deprivation and vulnerability, and that this role can be played quite effectively even at an early stage of development.

Burges, Robin and Nicholas Stern (1999) provided a systematic analysis of the content of social security, the motivation for public support, the possible contributions of different agents, and the dilemmas that public action has to face. The study strongly supported for extensive public involvement in the fields of social security.

Agarwal, Bina (1999) investigates some aspects of the relation between public action and family relations in the provision of social security. This study examines the survival strategies of vulnerable households, with special attention to issues of intra-household inequalities. The study brings out the close connection between the external and internal vulnerabilities of particular household and suggests public action to support more vulnerable individuals.

Datta, Rakesh (1998) studied mathadi labour market in Mumbai where unionization of mathadi workers as a case of public action enabled the manual workers in unorganised sector to achieve protective Social Security benefits. The study suggested that public action can play a central role in ensuring expansion and monitoring of social security.

Ambalavanam V and S Madheswaran (2001), analysed the social protection measures available to urban informal sector workers in Erode district of Tamil Nadu. Public action was suggested towards the goal of extending social cover to wider population on the line of traditional societies protecting the interest of the people in a locality.

2.3 Social Security in India –

In the Indian context, Varandani, G (1987), discussed the historical development of the concept of social security workers for Industrial workers in India since ancient times. The study observed that although the constitution of India imposed on the State to protect the interest of industrial workers either by statutory or non-statutory measures or with the help of economic institutions but the State has not succeeded up to now to achieve the satisfactory results in the field by providing sufficient social security benefits to the Industrial workers. The cause attributed for failure of the State is the lack of proper planning, improper implementation, and lack of sufficient fund with the government.

Subrahmanya, R.K.A. (1995), analysed the social security schemes – promotional and protective schemes provided by the Central government, State governments, and Private sector to the employees both, in the organised sector and unorganised sector. The study pointed out that social security system in India is characterized by multiplicity and heterogeneity of schemes administered by different agencies namely Central government, State governments and also by some voluntary organizations. The cash benefits under the ESI scheme and the schemes under the EPF act administered by Central organization, the administration of all other schemes is in the hands of the State Governments. A coordinated approach has been lacking. It leading to wide gaps in the coverage hand and overlapping of benefits. As there is no unified system of social security, there is also no uniform coverage. Different groups of the people receive different types of benefits.

Planning Commission report on Labour and Employment in the Tenth plan (2002) examined the efforts made through earlier plans to extend the coverage of social security through various acts and laws as well as through programmes viz. social insurance schemes, centrally funded social assistance programmes, social welfare funds etc. It suggested in the tenth plan to provide the social security to the organized and unorganized sector workers on self-sustaining and self-financing basis without putting any additional pressure on the budget of the government. It advocated that in time of liberalisation and globalisation, there is a need of comprehensive social security policy for a large section of the society by integrating the services of the existing schemes

Wardhan, S. K. (1992) studied the role of social security in the context of stabilization and structural adjustment programmes and change in the new industrial policy of India. The restructuring of the industry may substantially add to number of unemployed and create serious and additional social problems. The existing social security can play a substantial role in the alleviation of the suffering caused by displacement of labour due to restructuring of the economy. It stressed that there should be a single agency providing comprehensive package of social insurance including unemployment benefits.

Hirway, Indira (1994) argued that inspite of recent shift in policy towards market economy and the resource constraint the government could not evade that responsibility. A comprehensive and integrated system of social security in India would have to comprise of a variety of elements based on anti-poverty programme covering not only the workers but also the unemployed and the destitute in the form of social assistance as well as social insurance.

Prabhu, K Seeta (2001), viewed that the provision of socio-economic security in India has been unsatisfactory. The Government and the community constitute the two pillars that need to be strengthened for meeting the genuine need for socio-economic security of the masses in India, particularly during the period of economic reforms.

Jetli, N.K. (2004) studied that the social security situation in India is characterized by ambiguity in policy and responsibility. There is a variety of schemes but these have been framed at various point of time and, therefore, do not confirm to any overall design reflecting a comprehensive and consistent policy or direction.

Report of the Study Group on Social Security (2002) recommended for an integrated and comprehensive system of Social Security in India which will encompass the whole population of diverse needs. It cannot be a single scheme but a combination of schemes catering to the needs of different groups with different needs and different paying capacities. To cover the entire population the study group suggested four tier structure –

Social Assistance programmes financed wholly tax based and financed from the exchequer

Schemes which are partly contributory and partly subsidized by the State

Wholly contributory Social Insurance schemes

Voluntary schemes

On social security expenditure, Dev, S Mahendra and Jos Mooji (2002), examined trends in social sector expenditure in the central and state budgets for 1990-91 to 2000-2001. In this analysis they included social services as well as rural development expenditure. They would like to conclude with two observations. First, there is an urgent need for steeping up social sector expenditure. Second, there is an obvious need for stepping up social sector expenditure. Similarly, Prabhu, K Seeta (2001), also analysed the protective and promotional security expenditures of the Union government and 15 major State governments.

2.5.1 Social Security in Indian States –

Dev, S Mahendra (2002,) reviewed the experience of the growth-mediated [3] and support-led social security arrangements for the unorganised sector in Kerala and Tamil Nadu. The author argued that, in the context of marketisation, there is a substantial section of society which does not have the resource power to enter into market operations. The government and those who are already in the market have the responsibility in providing Social Security for the large sections of unorganised workers and other vulnerable groups who are out of the market. But, the government cannot provide security to these workers as there are limits to its administrative and financial capacity. There is a need for public-private partnership in providing social and economic security for unorganised workers.

Kannan, K.P. and Shaji K Francis (2001), highlighted the impressive performance of social sectors achieved mainly through State-sponsored social security measures with public support in Kerala. Compared to other States, Kerala spends a larger share of its budgetary resources on State-assisted social security programmes like food security and employment security, which need to further strengthened rather than expanded. It also demonstrates the possibility of extending the provisioning of social security to a larger proportion of population who are outside the formal sector of employment.

Unni, Jeemol and Uma Rani (2001), carried out a study on social protection in informal economy for informal workers in Gujrat. Traditionally, social security instruments addressed contingencies arising from random shocks and only affecting basic securities such as illness or sudden death. In globalising world, social protection in the context of poor informal workers needs to address both the economic and basic security issues. Besides, the government, private market and NGO initiatives need to be strengthened and many pore innovative approaches have to be devised to bring social protection to poor informal workers.

Vijay, G (2001), analysed social security of labour in the post-liberalisation period in new industrial towns with reference to the State of Andhra Pradesh. It views that; the opening up of markets has resulted in the growth of new industries. The most obvious impact of this has been an increase in the process of flexiblisation and, therefore informalisation in the new industries, resulting in the conditions of labour supply becoming highly vulnerable. Examining the social security benefits of labour in the context of its informalisation, the Mehboob Nagar case reveals that besides the well-recognized insecurities like lack of job security and absence of minimum level of wages, inadequate housing and health facilities, old age and retirement benefits, several other insecurities are faced by the contract and casual labourers.

2.6 Social security in organized and unorganized sector: Methods, problems and solution –

Thakur, C.P. and C.S. Venkat Ratnam (2001), analysed social security for organised sector in the background of constitutional and legal provisions. The emerging trends, in the wake of structural adjustment programme shows that, the government continues to have welfare orientation but is both reluctant and unable to raise contributions commensurate with the needs from its budgetary resources. Its prime concern seems mainly to encourage savings in the economy. As far as employees are concerned, they want income and other sources of security for their employees, which is efficiency enhancing. Workers interest continues to lie in seeking further improvement of existing benefits.

Dev, S Mahendra (1996) reviewed the performance and issues relating to concept, policies, financing and effectiveness of social security for Indian workers in the unorganised sector. The performance and issues relate to five types of social securities, namely, food, employment, health, education and women. The performance has not been satisfactory during the first few years of the reform period. Expenditure in some of the social security programmes may have to be increased in order to cushion the poor during the reform period in order to face the negative consequences of reforms. However, in the short and medium terms, the social security programmes (both promotional and preventive) may have to be continued till economic growth makes some of these programmes redundant. For effective implementation of the programmes, there is a need to have decentralization, transparency in decision making, right to information and social mobilization.

On the ways to provide social security, Ginneken, N.V. (1998), viewed that employment is the most important guarantee for social protection in both the organized and unorganized sector. It provides the basis for earnings, part of which can be saved for insurance -private or social. Social security protection is not just the consequence of a sufficient level of earnings: it also contributes to greater productivity and earnings.

Guhan, S (1993), analysed the problem of social security for the unorganized poor in general. Providing access to assets for the poor is a basic form of social security. The assistance in the form of creation of assets, assurance of minimum wages, food security, subsidized insurance and social assistance for various purposes could provide social security to different groups.

Pillai, S Mohanan (1996) provided an empirical verification of the effectiveness of welfare fund schemes in providing Social Security to the casual workers in the unorganised sector through a case study of scheme for the welfare of loading workers. The study revealed that the welfare funds scheme has brought about drastic changes in the living conditions of the workers both socially and economically. It found be a new experiment not only in providing social security to the under-privileged segments of the workforce but also in the financing of social security for unorganized sector in a resource constrained economy.

Ginneken, N.V. (1998) highlighted the major problems pertaining to the existing measures of social protection –

a. Inadequacy of coverage and benefits of social security

Existence of wide variations in standards of social security, eligibility criteria and scale of be