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The Future of the Welfare State - Perspectives from the Baltic Sea Region

pdfDevelopment and Social Investment

In a collaborative effort with the International Centre for Research and Analysis (ICRA), the Friedrich Ebert Foundation organised its 3rd seminar in the series entitled "The Fu-ture of the Welfare State - Perspectives from the Baltic Sea Region". The event took place on October 27 and 28 and focused on the topic of social investment and develop-ment. Similarly to the previous seminars of the series, the workshop in Warsaw brought together practitioners, trade unionists and researchers from the Baltic Sea region.

27-28 10 2016

After an introduction by Roland Feicht, Director of the Friedrich Ebert Foundation in Poland, and Dorota Szelewa, Chief Director of ICRA, the delegates discussed various aspects of social investment in three thematic blocks.
The aim of the first session was to define and discuss the concept of social investment and its actual innovative value. In both political and academic socio-political discourses, social investment is regarded as a new idea at its formative stage. The origins of this prevention- and productivity-oriented concept date back to the 1930s when it became the backbone of Sweden's modern social democratic welfare state.
The concept is often described as a new way to overcome social problems, and is placed in opposition to the so-called "old" model of social protection. Whereas the "old social protection" is based on the principle of "corrective action", i.e. intervention which follows a social risk, social investment is grounded on the principle of "prevention", i.e. intervention which occurs before social issues materialise and which, in a perfect scenario, facilitates the preventive avoidance of such risks. An improvement in the productivity of human capital, which is an essential part of the social investment concept, offers a long-term positive contribution to a state's economic development. From the economic point of view it is of key importance to invest more heavily in social protection infrastructure than in financial transfers. The reason for this approach is the clearly larger multiplier effect in the case of social services - provided, however, that these services are of high quality. The attendees of the seminar in Warsaw agreed that, particularly as regards family policies, a combination of financial support as well as non-financial support is required.

27-28 10 2016The discussion gradually revealed a fundamental conflict stemming from the position and role of social investment in the context of social and verbal economisation. The delegates discussed the question whether we should purposefully use economic vocabulary in the public discourse in order to legitimise social investment, or rather emphasise that social investment represents an entirely different value which cannot be constrained to the framework of commercial arguments. A recurring example here was the public discourse concerning refugees and migrants whose influx and presence are often presented in terms of profits and losses. The participants of the discussion drew the conclusion that the new model of social investment is to be assessed as completely ambivalent. A future-oriented social policy, according to the delegates, is in general a positive development. On the other hand, due to the emphasis on economic benefits resulting from the application of social policy, the importance of profit, markets and consumers increases at the expense of solidarity, state and citizenship. The participants warned against the application of a purely financial evaluation of the welfare state because, in their view, such a perspective undermines the fundamental ideals of the welfare state.

27-28 10 2016The second session was devoted to the specific question of how we can convince the critics of social investment, and to the impact of the model on equal access to rights. The feminists present at the event criticised the mechanism of social investment as, in their opinion, the fact that the problem of non-remunerated work has been ignored means that gender inequalities per se cannot be eliminated. The participants underlined that gender equality must be achieved, predominantly on the labour market. However, they also emphasised that it will not happen without the application of extended regulatory mechanisms.

Additionally, the question appeared to what extent social investment can replace monetary transfers. Here, the participants drew a two-tiered conclusion. Firstly, income inequality is the element which leads to the necessity of introducing a redistribution mechanism in the form of financial transfers. Secondly, there is huge political support for monetary transfers as a "traditional" social policy measure. An example here can be Germany where money transfers are widely supported even among the core voters of social democrats. A replacement of these transfers with services could incite these voters to walk away from their party.

27-28 10 2016The third session focused on the strategic and political dimension of social investment. The participants shared the opinion that the welfare states of the region are oriented towards social investment to a varied extent, whereby the Nordic states represent fully progressive policies. At the same time the participants claimed that social investment seems not to be recognised to a satisfactory extent by policymakers. Austerity measures are still the political norm, which weakens a further development of social investment. The subsequent discussions focused on the question of availability of funding for social investment and, more generally, on the issue of funding of the modern welfare state. A few ideas for improvement in this field surfaced during the talks. For example, faced with austerity measures and new financial burdens for the social state, governments could opt for progressive tax systems coupled with a reduction of the number of tax incentives and exemptions. A further reform could also be related to the introduction of new monetary policy and a regulation of the financial system.

The participants also recognised social investment as a likely political mobilisation factor. Whereas social democratic parties have so far been able to mobilise the "average" employee, the question remains how to attain political support from the poorest layers of the society which have so far tended to vote for populist right-wing parties.

At the end of the workshop the delegates once again summarised the outputs of their work. The resulting impression is that social investment can be perceived as a cure-all solution in many areas. However, such investment ought to be carefully discussed and implemented. It can by no means serve as a replacement of the social state of today; rather, it should be treated as a complement thereof because the eventual equalisation capacity of social investment depends on other factors present in the social state such as the labour market, anti-discriminatory laws or redistribution policies.

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