Challenges ahead : western welfare state

Pramod Raj Sedhain (pramodsedhain@gmail.com) - At a time when most of the European countries have been reeling under economic crisis, France has still remained the world’s fifth-leading economic power and second largest economy in Europe. In recent years, some European countries, including Spain, Greece, Portugal, among others have adopted austerity measures. Despite the economic crisis in the continent, France, however, portrays a uniquely-cherished welfare state able to survive in the capitalist western world. In fact, over the past decade, France lost 700,000 industrial jobs, and the unemployment rate is now at 13-year high of about 10 per cent (compares competitor & main trading partner Germany with 5.4%). But, average wages in France are among the highest in Europe -- 20 per cent higher than Germany since the launch of the euro. French Socialist President Francois Hollande has promised to reduce France’s government deficit to below 3 per cent of economic output by next year from the current 4.5 per cent. Several analysts representing the capitalist countries have warned that France’s economic outlook would deteriorate if it failed to make deep spending cuts like Greece, Italy and Portugal. But, President Hollande is of the opinion that “austerity need not be Europe’s fate.” France has bucked the trend, abandoning austerity and protecting its social model. Despite all these, sustainability of the French welfare remains one of the major challenges to the French Socialist Government. The French government spends an estimated 30 per cent of the nation’s entire economic output on social services. In spite of the debt and deficits mounting, France hasn’t recorded a budget surplus since 1974. The pressure to control these expenses is becoming unbearable. Peeking into the French economy, till date, the policies have created a healthy, well-educated population with stable jobs at companies of international stature and an income level that ranks with the world’s highest. Recently, France’s public debt topped 90 percent of the value of everything produced in the economy in a year, well above the eurozone average of 60 percent (its debt level is not an enormous).French welfare-state programs have become entwined with Western nations’ economies, politics and societies, influencing how people spend and save, work and retire, educate children and care for elderly parents. Socialist government is also worried about France’s future welfare sustainability. This was founded on the noblest intentions -- to foster a more equitable society by ensuring that all, no matter what their social status, had access to the fruits and opportunities offered by an advanced economy – ranging from sound education, proper health care and a worry-free retirement. In many ways, its mission has been realized so far. France’s national health system is considered among the world’s best. Education System: The French government commits substantial resources to education with the goal to improve educational attainment. Some students even receive stipends to cover their rent. Health Care: The government provides free heath care to its citizens under the France’s modern Social Security system developed in 1945-46. The idea was to ensure health care and insurance for everyone to be covered by social insurance schemes or public assistance. Family Insurance System: Each family will receive the certain amount to a child until he/she is 16 years of age. Children with special needs are fully provided with the required amount. The Housing System: The government builds social housing and also provides housing subsidies for families in need. In the 1980’s, mortgage subsidies were introduced, which were intended to encourage home ownership. The Unemployment Insurance: The insurance is covered by a variety of separate insurance schemes. Those who are entitled to unemployment insurance receive 35 per cent of their previous income, among other sectors. Socialization of the economy As said earlier, France, as the world’s fifth-leading economic power & second largest economy in Europe, it has a long record of government nationalization of industry. The leading industrial sectors in France are telecommunications (including satellites), aerospace and defense, ship building (naval and specialist ships), pharmaceuticals, construction and civil engineering, chemicals, textiles, and automobile production. Although substantial progress had been made in the privatization process since the last decade, the government still own industries like aeronautics, defense, automobiles, energy, and telecommunications. The first elected National Assembly between November 1945 to April 1946 - after the Second World War - voted the nationalization of the Bank of France among four large deposit banks, public utilities, coal mines and two thirds of the leading insurance companies. In 1981, when Francois Mitterrand became the Socialist President of the Fifth Republic of France, his government put Socialist measures into the French economy. Mitterrand tried to create both job growth and wage growth by nationalizing some big industries. During that time above nationalized companies had a workforce of 800,000. The nationalization of 1981-82 involved seven of the largest twenty conglomerate industrial companies in France plus another five industrial companies. The iron and steel companies (already state-owned majority shares), electricity, gas, coal, railways and Paris transport; two French airlines were state-owned. By 1983, about one-third of French industries—among the 3,500 companies—came under the state control. However, there was some privatization during 1986–88, later resumed in 1993, with 21 state-owned industries, banks, and insurance companies scheduled to be sold. The successful automaker became a private company again in 1996, although the government retains about 15 per cent of its shares. All these indicate that French economy has been highly socialized. With the development of the European Market, certain nationalization programs as well as other economic reforms initiated by Mitterrand could not succeed as planned. However, challenges persist to keep up the economy high at a time when several European countries are reeling under economic crisis. Now, Mitterrand’s party – the French Socialist Party – is in the government. Obviously, the current circumstance is both an opportunity as well as challenge of the centre-left social-democratic socialist government to protect the country’s legacy, ideologically progressivism and welfare characteristics. (Source - People Review Weekly)