History of social security in Europe

Quick view on EU history of social security Medieval - Renaissance times: Poorhouses & charity Controlling role of the State Guilds, fraternities and commons Craft guilds; in particular in the Low Lands Both “employers organisations and trade unions” Unite members of the same occupational group Serving members’ economic interests And the general well-being of their group Achieving agreements: negotiation and collective action Income security and social security Contributions to secure income Refer to Machiavelli: role of the state; generosity: don’t show it, concept of republican state with important role for guilds Nowadays guilds would probably be considered a Mafiosi closed market conglomerates… After these times: mercantilism: more emphasis on trade… also plain imperialism: colonies – gradual introduction to homo economicus

We’re getting closer…. Industrial revolution 1750-1850 Classical liberalism (A. Smith): Economic doctrine of free enterprise Urbanisation From family economy to industry economy: Rightless workers – no correction mechanisms Child labour Need for organisation of workers’ interests 1848… Always thought Smith was close to a villain; theory based on “homo economicus”, however theory is more subtle than practice Plain capitalism and extortion, short term focus: Human resources were not seen as valuable. What happened in 1848?

Beginning of institutionalised social security 1850-1900 Upcoming socialism (Marx) Upcoming trade unions: First priority for wages and working hours and Christian social thinking (Rerum novarum): First labour laws (child labour and women) Laws for the poor 1889 Germany (Von Bismarck): Retirement benefits (70 years) Disability benefits Sickness insurance Rerum novarum: pope encyclical 1891, defence to upcoming socialism: cooperation state, employers, workers: corporatism; “blessings for trade unions” Also Bismarck was inspired by finding ways to counteract against socialism

Beginning of institutionalised social security 1900-1950 Trade unions: Funds for income support unemployment & sickness WW 1: this never again…. Beginning social dialogue (Low lands, Nordic countries) Beginning overarching international institutions Russian revolution: state communism Crash of 1929 John Maynard Keynes

Beginning of institutionalised social security 1938-1950 WW II … this never again…. Rebuilding Europe: (Nordic & Rhineland countries) Institutionalisation social partnership Strict, central policies: economy rules Social security arrangements and laws Social security institutions Start “Europeanisation”: ECSC European Community Steel and Coal

Social Security Models Bismarck 1880 Germany Defence against socialism Sector organisations Assuring standard of living, income stability - Employees are Insured - Financed via income-related contributions - Benefits based on wages Beveridge 1942 United Kingdom Economic competitiveness Government Securing subsistence level - Entire population is insured - Primarily financed from the state budget - Uniform, lump-sum benefits; flat rate Mixed 1950-1960 Nordic Result controlled wage policy Both Standard of living, followed by social assistance - Schemes for both - Contributions and state budget - Benefits based on wages and minimum

Initial concept and basis social security continental Western-Europe 1950-1980 Mostly based on (non-extended) family with one breadwinner Tendency to cover “each risk” – limited personal risk Open-end arrangements: cradle to grave Wage related Division between general social security and employee insurances Sharp division responsibilities employer - SSI Mostly financed by contributions employer – employee Building initial systems finalised 1960-1970

Europe: one and undivided? Economic models in Europe

Subjects (Socio-) economic models in Europe: Exercise… Rhineland Anglo-Saxon Mediterranean Nordic Exercise… Performances of the models Where does Turkey stand?

Size of EU countries EU parliament seats Size of national GDP Germany France Italy UK Poland Spain Romania Netherlands Belgium Cczech Greece Hungary Portugal Germany France UK Italy Spain Netherlands Belgium Sweden > Poland Austria Greece Denmark Ireland Turkey

Many differences in Europe Economic characteristics Stage of development and Performances Differences in history and applied economic models Two illustrative indicators: GDP and Minimum Wages

Gross Domestic Product per head

Minimum wages 1/1/2009

4 economic models (A. Sapir) Nordic Denmark, Finland, Netherlands, Norway, Sweden, 1730 Billion USD Rhineland Austria, Belgium, France, Germany, Luxemburg 6750 Billion USD Anglo-Saxon UK, US, Australia, Ireland, some Eastern European countries 2425 Billion USD Mediterranean Spain, Italy, Portugal, Greece 4120 Billion USD

Nordic model Productive, well educated work force Strong state, balanced with strong labour actors High public spending (social protection and education) Unregulated labour markets, though with big public sector Flexicurity Universal welfare. Low wage inequality High grade of institutionalization Strong trade unions / social partnership Public private partnerships in social security

Rhineland model These countries typically have: Stake holder economy (owners, government, employers, employees, costumers) Market economy based, striving for balance between free market forces and social responsibility Unemployment benefits and easy access to government payments. Public-funded pensions, early retirement wages. High taxation Social partnership, active social dialogue, government interventions Strong trade unions that variably strive for high labour protection and/or high wages.

Anglo-Saxon model These countries typically have (or had): Share holder economy (stocks) Competition based Social assistance policies designed to serve as a safety net. Unregulated labour markets. Weak social partnership Limited government interventions Class oriented societies High income inequality, possibly without a minimum wage. Low ratios of public debt to gross domestic product.

Mediterranean model These countries typically have: Strong labour protection; highly regulated labour market Costly state pension systems; early retirement age Low level of social partnership Strong family-oriented income transfers – low social security Low participation rate (women) High public debt – GDP ratio

Models’ Performances

GDP cp pc 1970-2008

Where does Turkey stand?

Employment

Economic growth

Taxation

Exercise 1 Which model is closest to Turkey and why? (please do not let the performances be leading, motivate your answer relating to culture and social & economic structure) Is that the best model for Turkey’s development? Are there areas in socio-economic development where you see a need for change? If so: how? Where and how will this possibly effect social security? 40 minutes discussion, 10 minutes prepare report 10 minutes presentation.15 minutes plenary

Productive, well educated work force Strong state, balanced with strong labour actors High public spending (social protection and education) Unregulated labour markets, though with big public sector Flexicurity Universal welfare. Low wage inequality High grade of institutionalization Strong trade unions / social partnership Public private partnerships in social security Stake holder economy (owners, government, employers, employees, costumers) Market economy based, striving for balance between free market forces and social responsibility Unemployment benefits and easy access to government payments. Public-funded pensions, early retirement wages. High taxation Social partnership, active social dialogue, government interventions Strong trade unions that variably strive for high labour protection and/or high wages. Share holder economy (stocks) Competition based Social assistance policies designed to serve as a safety net. Unregulated labour markets. Weak social partnership Limited government interventions Class oriented societies High income inequality, possibly without a minimum wage. Low ratios of public debt to gross domestic product. Strong labour protection; highly regulated labour market Costly state pension systems; early retirement age Low level of social partnership Strong family-oriented income transfers – low social security Low participation rate (women) High public debt – GDP ratio

Who profits most from EU?