Globalisation country’s participation in the global market.

Globalisation has a had great impact in shaping the world as
is today. It is defined as the international flow of knowledge and information
and global civil societies. Globalisation

concerns cross-border interactions between individuals,
companies and governments and it entails economic, social and political
dimensions. Economic globalisation which is the extent to which countries are
integrated into the world market as reflected in their level of economic
openness is the focus of this essay. It is conceptualised as the amplification
of international economic exchange between different global market economies
(Brady et al 2005). Welfare states have a great impact in the level of a
country’s participation in the global market. Due to the fact that welfare
states vary considerably in their political orientations and distributional
outcomes, globalisation also impacts them differently. This essay will discuss
the impacts globalisation has on social welfare spending and education policies
in Western European welfare states.

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As previously mentioned, welfare regimes can differ greatly
in their social policies. Esping?Andersen’s typologies of welfare
state regimes help in their comparison as it does not only focus on their level
of expenditure on policy programmes. According to Esping?Andersen,
the focus when analysing welfare regimes should not only be on how much they
spend but also on what they do and how they do it. He identifies three
different dimensions that can explain what and how of welfare regimes. The
first is the degree of decommodification in that is present in the regime. The
second is the degree or extent of welfare state stratification. This looks at
the degree of socio economic inequalities present within a regime The last dimension
is the different patterns of state, market and household forms of provision.

Using these three axes, Esping Anderson identified three different models of
welfare regimes. The first model is a liberal or Anglo Saxon model. The second
is a conservative model and the last model is a social democratic or
Scandinavian model. A Scandinavian model of welfare regimes are characterised
by high levels of decommodification and low levels of stratification while
liberal regimes are characterised by low levels of decommodification and high
levels of stratification. The conservative model on the other hand is typically
characterised with medium levels of decommodification and high levels of
stratification. Grouping welfare state into different typologies allows for the
comparison of their social policy developments. (Arts and Gelissen 2010)


A number of theories and arguments have been proposed to discuss
the impacts of globalisation on welfare. The first is globalisation has had an
expanding effect on welfare states and has allowed them to grow. This is due to
the fact that as economic openness increases with the rise in the number of
multilateral trade agreements countries are now vulnerable more than ever due
to their exposure to the interconnected world market and the increasing
competition. According to (Brady et al 2005) this has a positive effect on the
welfare spending as countries attempt to appease their population as a response
to increased external risks. The second argument is that globalisation causes
there to be a retrenchment in the welfare state. This is due to the welfare
state losing full control over their policies as the global interconnectedness
of global markets increase. Using the two different hypotheses of compensation
and effectiveness, this essay will attempt to fully explain both arguments in
terms of social welfare spending. The compensation hypothesis claims that the increasing
interconnectedness of economies leads to an increase in social welfare spending,
which in turn  enables  an 
upward  shift of taxation. Therefore,
there is a positive correlation between economic openness and public spending.

The countries and the countries with the largest welfare states are also tend
to be the most economically open ones. Economically open countries are
countries that are active on the global market whether it be through
involvement with supranational organisations such as The World Trade
Organisation and The World Bank or through trade agreements. A major aspect of
this view is the instability of the labour market.


There are two arguments for the expansion of the welfare
state through an increase of social welfare spending due to economic openness i.e.

the compensation hypothesis. According to the first view, economic openness
causes insecurity. The reason is that economically open countries are more
affected by variations on the world market. Due to a greater economic interconnectedness
between countries, issues that happen in one country can have major a affect on
other countries. These fluctuations in the world economy have the ability to increase
unemployment, therefore individuals in a more economic open country require the
support of a social welfare state. According to the second argument, economic
openness places an importance on increasing the investments into the welfare
state as this can to boost the competitiveness of a country. Such investments
are enabled by increased prosperity and commitment to welfare spending
Moreover, spending on social arrangements creates social stability, increases
human capital and enables collective agreements between employers and employees
that may counter the negative effects of economic openness Whether the
investments in the welfare state are made to deal with insecurity or to stay
competitive, in both instances economic openness leads to an expansion of the
welfare state; in the first case governments respond to effects that economic openness
may have, and in the latter governments actively develop policies to remain
competitive in the world market.


The efficiency hypothesis
on the other hand argues that globalisation has a detrimental effect of on
social welfare spending and welfare state growth. This is due to the fact that
as result of globalisation, countries are in competition to attract capital.

Therefore, taxes are reduced in many countries which leads to a decrease in
social welfare spending (Onaran and Boesch, 2014).  Capital flight may result from high tax
levels and due to the globalisation, instantaneous capital transfers are
available, therefore those with money or capital will end up moving their money
to This threatens the financial base of the welfare state since those with the
strongest incentive to leave the country are individuals and companies
contributing the most to the welfare state due to the levels of tax . It is
argued that governments will respond to problems of competitiveness and capital
flight by lowering taxes, resulting in a race to the bottom amongst countries. The logic behind the race to the bottom is
that countries will adjust their tax level in accordance with that in other
countries. If one country lowers its taxes in order to be more attractive to
individuals and companies, others will follow and in the end all countries will
end up with low taxes and few financial resources to support the welfare state.

Social welfare spending will therefore decrease globally.


In a study carried out by Garrett and Mitchell (1999)
differences were found in social welfare spending patterns differences between
the welfare regimes within Western Europe. Within conservative welfare regimes
such as Germany, the share of social protection was said to increase. This can
be explained by the compensation hypothesis. Social welfare however is
decreasing in social-democratic welfare regimes such as Sweden.  This phenomenon can be explained by the effectiveness
hypothesis. As for the liberal countries, no apparent relationship was found to
exist between globalisation and social welfare expenditure. A theory for that
could be the cancelling out affect of the compensation and effective patterns.