Power Resources Theory - Analysis

Paul Pierson stated, albeit thought provoking, that “the world of affluent democracies, the welfare states is at the centre of political discussion and social conflict (2001, p. 1). In many European welfare states the recent economic downturn has led to thousands of people demonstrating against cut to social programmes, wages and pensions. There has also been demonstration and protest in Greece, Spain and Portugal nations hits particularly hard by the crisis which started happening after European banks lost billions of dollars they had invested in the US subprime mortgage market which collapsed back in 2008. Recently, in France and the United Kingdom, there has been widespread social unrest as a result of government efforts to introduce significant changes to social policy. In fact in Britain, the parliaments passage of the bills to cut government spending in education have provoked sharp conflict and mass demonstration by the students.

Historically, the welfare states which first emerged in England was founded through voluntary contribution before the allowance system was devised and so unemployment relief was funded by involuntary contributions commonly known as taxes. At the dawn of the new era, which is often refers to as the golden age (the post world period from 1945-1975) there has been major expansion of social programmes across the world of affluent democracies. During this period, all seems well. The people to be benefited from social programmes were few and the taxpayers available to finance them are available. Therefore taxpayer’s money is enough to maintain the welfare states and thus provides significant benefit to the few in needs of social cover. As welfare programme expanded, the numbers changed. The new politics of the welfares state is to be dominated by reforms; this period often called the era of austerity began in the mid 1970s.

The welfares state, as espoused above, thrives on the taxes paid by the working class. “The welfare system is a complex of government-funded programs including pensions, health-care subsidies, transfer payments and unemployment insurance” (Manzi 2010, p. 32). According to Power Resource Theory (PRT), the generosity of the welfare state is a function of its working class (Rothstein, Samanni & Teorell, 2010). The welfare system represents the majority of government spending in most modern, advanced nation (Manzi 2010, p. 32). Closely associated with the work of Walter Korpi, the power resource theory places emphasis on comparative and quantitative studies of the relationship between social policy and labour movement (O’Connor & Olsen 1998, p. 3). It thus enables the ordering of the welfare states of Scandinavia, Western Europe and North America according to the salient characteristics and their impact on social inequality (Ibid, p. 3). This short piece will explain how the power resource theory of the welfare state explains the differences in European welfare states.

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The paper is organised in four parts. The first part, which is this section, is the introduction. The second section explains the power resources theory of the welfare state. Scholars have attempted to explain the waves of reforms that have led to dramatic increase in government spending particularly from the late 1950s to the mid 1970s. This section focuses on the power resource theory device, among others, to explain this development. The third section is an examination of how the power resource theory explains the differences in the coordinated social policy of Western European countries. Beginning after the golden age, there has been a tremendous increase and improvement of the social programmes of Western European countries. These countries are today, the hallmark of European welfare states. The last section concludes the paper.

2.0 Power Resource Theory of the Welfare State

The contemporary studies of the modern welfare state came of age in the 1970s (Myles and Quadagno 2002, p. 34). Across the industrialised nations, there were outpourings of competing theoretical accounts of the origins, development, character and impacts of modern welfare states (O’Connor & Olsen 1998, p. 3). One of the major theories that stand-out during this period was the power resource theory which highlights the differences in the welfare states on the basis of certain characteristics that many of these other theories tend to ignore. “Power resource theory essentially posits that working-class mobilization is a critical determinant of the public provision of social welfare or, more specifically, the extents to which public welfare system redistribute income and labor-markets risks” (Pontusson and Kwon 2006, p. 1).

As a reaction to the dominant structural functionalist approach, associated with the work of pre eminent macro sociologist Emile Durkheim and Talcott Parsons, that the idea of welfare state follow from a functional logic of modernisation and industrialisation and that of Marxist-Leninist schools that the welfare state should be understood as a merely functional requisite for the reproduction of capitalist exploitation; the power resource theory puts forward two important issues. According to Rothstein, Samanni, and Teorell power resource scholars were “the first to point out the variation in things like coverage, extension and generosity among existing welfare states and that variation needed to be explained” (2010, p. 6-7) Second, citing (Korpi, 1974, 1983) power resource theorists introduced the important of political mobilisation based on social class as an explanation for this variation (Rothstein, Samanni, and Teorell 2010, p. 7).

“The power resource approach focuses not only on the direct but also on the indirect consequences of power, indirect consequences mediated through various alternative strategies and actions available to holder of power resources” (O’Connor and Olsen 1998, p. vii).Workers Union is argued to be the key to the ability of workers to assert their interests in politics. Therefore, “Power resource theorist maintained that without politics there was nothing compelling rich nations to commit resources to the development of a welfare state” (O’Connor and Olsen 1998, p. 7). Although recent arguments by power resource theorists are been informed by the partisan effects of the displacement of trade unions by left parties, the extents of the effectiveness of working-class mobilization has much more impact in effecting government policies. According to Myles and Quadagno (2002, p.38) power resource theory and “a plethora of later studies in this tradition (Korpi 1989; Palme 1990; Kangas 1991; among many others) supported the conclusion that major differences in welfare state spending and entitlements among the capitalist democracies could be explained by the relative success of left parties, particularly Social Democratic parties, aligned with strong trade unions in shaping the democratic class struggle”.

Essentially, power resource theory indicates that the working class union is a very important tool that effect government policies towards development of social programmes. The worker’s union are therefore seen as the driver of the extents to which social justice is grounded in the state, this union is the underpinning active actor that tends to keep the welfare state. In this sense, labour union could be argued as the most organise voice for average citizens on essential matters. They played an absolutely essential role in constructing the system of social provisions that has developed into the welfare state system. As O’Connor and Olsen (1998, p. 11) note, “the distribution of power resources between collectives or classes and the changes in this distribution are of crucial importance for societal processes and social change”. Therefore, “this approach assumes bounded rationality in the sense that actors not only attempt to do as well as they can under the structural position in which they find themselves, but also to change the structures to their long term advantage” (O’Connor and Olsen 1998, p. vii). Despite that class and class conflict constitute the central role of Marx’s work, Marxism tended to ignore or depreciate the role of workers in the creation of social programmes and largely fails to acknowledge significant variation in the growth and development of these welfare states (Ibid 1998, p. 7).

In the light of above, the strength of organise labour is an important factor towards the creation and effectiveness of a welfare state. Democratic struggles is related to the pattern of struggles between competing interest in the state, that is to say public provision of social welfare is the object of democratic class struggle. Therefore, the balance of power between the classes, particular between the employers and economically well endowed categories and employees relying primarily on labor power is a major determinant of the extent of public welfare provision and also the extent to which public welfare provision redistributes risks and income (Korpi, 2006). This is why Huber and Stephens (2001, p. 1) submit that the dominant government in the welfare state that a given country had will determine the extents of its generosity, the structure of its transfer payments, and the type and volume of services it offered. However, this is not to say that the structure of decision making in such government does not influence the development of the welfare states.

3.0 How the power resource theory explains the differences in the coordinated social policy of Western European countries.

It is inevitable to ignore the fact that the decline in social union will have consequential effect on social provisions in the welfare state. This decline or the strength of the labour unions varies from state to state within the European Union. It might be tempting to attempt at comparing the labour unions of these wealthy European states, however the fact is that the capacity of the labour union in each of these state to pressurise the government in effecting improved social programmes varies in degree. This variation is directly related to the number of labour union, since the number of organise labour will implicates government income receive from taxation. For instance, the German labour union will be stronger because of their population strength compare to that of Switzerland more so national labour unions are influenced by the ideals of the party in power. In the social-democratic welfare states for instance, the citizen criterion predominate whereas, the liberal welfare state is characterized by a strong emphasis on mean-tested programs, and the conservative welfare state is distinguish by its variety of class and status-based social insurance schemes (O’Connor & Olsen 1998, p. 13).

In this regard, the working class are instrumental to, and are the base of the welfare state thus power resource approach explains the extents of the effect of trade unions on effecting government policies. It also explains labour strength as influenced by the favorability of the nature of party in government. Therefore, the differences in the coordinated social policy of Western European countries is a consequence of the extent to which the labour unions of each of these countries can push for social programs which abinitio defines the welfare state. This is to define power as an attributes (capacity or means) of actors (individual or collectivities) which enable them to reward or punish other actors (Korpi 1998, p.42). Particularly, in this case, where power is conceived as a relational concept between the labour union and government, “the attributes of actors become power resources only among two or more interdependent actors who have at least some interests in the attribute of the other actors” (Ibid, p.42).Certainly, workers combined to fight for their rights particularly on issues which rank top of the union priority list today such as better wages, shorter hours, safe working conditions and the right to bargain collectively.

The capacity and willingness of the masses to protest has the potential to influence the nature of the welfare state. The extent to which mass protest is used as a weapon by the labour union will determine the extent to which the government will initiate social security programmes. This may be argue as something of a clash between citizenship and capitalism which has meant that social issue is increasingly overtaking the importance of market economy this 21st century. Protest doesn’t has to be violent but the people must leave their work, factories, schools, homes etc to facilitate mass protests relegating to the background such factors like business (trade) that capitalism thrives on. However, it must also be stated that mass protest is illegal in all the countries of the world. It is illegal in the sense that the people needs a permit to organize protest and laws guiding the issuance of permits varies from countries to countries even within the European Union. Although some states are more relaxed in issuing permits than the other, all in all, it is illegal to stage a rally without a permit, even with a permit, it is illegal to use a mega phone in some cases.

The changes in the population composition from largely dominated by working class to that dominated by retiree has meant increase in social and welfare payments by the state. In essence, the number of taxpaying citizen has decrease significantly over the last three decades in most, if not all Western European countries. In this light, population composition has direct effect on the nature of the labour movement. In the context of power resource theory, the composition of the population will have effects of power classes. In a situation where the population of these countries are ageing particularly those of Britain, Germany, France, Italy and Spain, the degree at which the labour union can effectively influence social policy is significantly affected. An ageing population will create a likely situation of large number of economically well endowed and at the same time large number of retiree who will rely on pensions. Situation such as this will lead to an increase social spending and reduce tax payers.

In fact this has caused mass protests in France recently when the government increased the retirement age so as to reduce the spending on social programmes such as pension. It is part of the fallout of recent financial crisis, and moreover most of these countries are running a deficit budgets since they are spending more than they could afford to maintain the welfare state. Therefore, there is the need for these countries to cut back on social spending. This variation will create differences in the welfare state, as tax payers are going down in ageing populations, hence ageing populations in these country are creating new social risks that are not well addressed by existing social programmes.

Increasingly, therefore, social programmes reforms are been linked to austerity measures. Although, most of these countries have been seen to be cutting on social programmes, what is particularly striking is how resilience the welfare state has been after this period of austerity and protest. Espen Andersen drew attention to welfare state variable capacity to reduce people’s reliance upon the market through the provision of public alternatives which allow them to maintain a normal and socially acceptable standard of living (Korpi 1998, p. 12). Korpi seeks to explain this scenario as “decommodification or protection from the total dependent on the labour market for surviva which highlight the distinction between weak and strong welfare states (Ibid, p. 12).

4.0 Conclusion

The trend nowadays is that most of the European nations are increasingly reducing the reliance of the people on social programmes. Although, most government will agree that there is a need for government to support the people which they serve, the issue however is around the level of support that welfare state is going to provide to protect the individuals. The whole welfare model should be based on getting people that relies on the welfare state back to work and not to leave them excluded from mainstream society. The dependant of more people depends on welfare state transfers and fewer people paying taxes to support the welfare state, budget deficit ballooned and government moved to control and then reduced deficits by cutting entitlements (Huber and Stephens 2001, p. 2).

Paul Pierson (2001) has argued that the new politics of the welfare state will be dominated by reforms. This is the case now. Several of these countries are increasingly reforming the welfare state so as to meet with the reality on ground, a reality of low number of tax payers compare to the number of people that relies on the social benefits. Birth rate and life expectancy varies in these countries and this variation will create differences in the welfare state, as tax payers are going down and the populations are ageing. The welfare state is been reforming while at the same time these state are aiming to drive down their budget deficits so as to have a sustainable welfare state.