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Cook explores the politics and policy of social welfare from to in the Postcommunist welfare politics throughout Russia and Eastern Europe, she.
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- Linda J. Cook
- Linda Cook
- Eastern Europe's Postcommunist Transformations
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It cannot, however, be used to justify any kind of crude, artificial attempt to level the great differences that exist among people.
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Principle 2 must be applied in conjunction with Principle 1. Most people find "alms" demeaning. The needy must be helped primarily by being given a chance to work and undertake useful activity. The degree to which claimants are capable of helping themselves and adapting to their situation must be considered when the degree and type of help are determined.
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Principles 1 and 2 must also be taken into account with respect to compulsory insurance. All citizens should be legally obliged to purchase minimum levels of pension and health insurance. Such policies could be held by decentralized insurance institutions.
Although this obligation restricts the application of Principle 1 voluntary action is preempted by a legal requirement , it should not be seen as paternalism or an attempt to impose happiness. The motive here is collective self-interest, not altruism.
Linda J. Cook
Humane societies will feel compelled to care for the sick who are bereft of treatment or the penniless elderly, and they will do so at the taxpayers' expense. To avoid this undesirable external effect, the law must oblige all citizens to obtain at least minimal levels of insurance coverage Lindbeck and Weibull, Principle 2 should be brought into play only on behalf of those who are unable to afford even minimal insurance.
The differences between this proposal and the schemes presently in operation in the post-communist world are obvious. The former requires citizens to maintain minimum levels of insurance with the possibility of adding supplementary insurance voluntarily and targets state assistance to the needy, while the latter promises universal entitlements, with resources channeled through paternalist state redistributive institutions.
One further comment seems appropriate. This study does not embody a discussion of the ultimate values of freedom, equality, well-being, or social justice, or of the relationship between those ultimate values and particular social institutions. These are the concerns of political theory and deal with the ethical foundations of the "good" society.
We can single out a few, especially influential works from the vast literature on the subject: Berlin , Buchanan , Nozick , Rawls , and Sen , For a broad survey on the debate about the philosophical ramifications of the modern welfare state, see Culpitt Although Culpitt favors the preservation of the status quo, the survey presents a balanced exposition of the main arguments pro and con. Principles 1 and 2 deal with what might be termed "intermediate" ethical requirements, not ultimate values.
These requirements can provide a broad base that is acceptable to people with widely differing views on the nature of freedom, equality, and social justice. Still, Principle 1 will be alien, and Principle 2 may be superfluous, to those whose axiomatic point of departure is collectivist, i.
A survey conducted under the aegis of Richard Rose's "New Democracies" project Rose and Haerpfer, yielded findings that shed light on the issue of individualism versus collectivism. On the basis of replies to four questions, analysts ranked respondents' viewpoints as approximating individualist or collectivist views of the world. The results are shown in Figure In every country, with the exception of Bulgaria and Poland, more people were inclined to take an individualist rather than a collectivist approach, and in three countries, fully two-thirds of the population favored individualist ideas.
The proportion of ambivalent positions is also significant. Although there are some differences between the definitions used in that survey and those used here, it is remarkable that ideas of individual sovereignty and responsibility play such an important role in the value systems of considerable segments of the population throughout the post-communist region.
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NOTE: The respondents had to choose between an "individualist" and a "collectivist" alternative concerning four issues. The responses were coded as follows: individualists, three or four individualist preferences; mixed, two individualist and two collectivist preferences; collectivist, three or four collectivist preferences. Reprinted with permission. Let us now turn to another plane of reform. The process of reform eliminates or alters old institutions and coordination mechanisms—the rules of the game—and establishes new ones.
Principles 3 to 7 concern key attributes of these institutions and coordination mechanisms.
Eastern Europe's Postcommunist Transformations
Principle 3—Competition: There must be competition among different ownership forms and coordination mechanisms. The almost total monopoly of state ownership and control must cease. Principle 3 does not prescribe quantitative proportions between state and nonstate institutions. However, the nonstate sector must attain a critical mass before it can overcome the enervating effect of the state's dominance, which enables the producer the welfare state to dictate to the consumer. Although considerations of efficiency argue in favor of competition see Principle 4 , the main source from which Principle 3 is derived is Principle 1.
There must be competition in order for citizens to be able to make choices. If they do not like what they receive from the state, they can go elsewhere. The survival of the previous system in the welfare sector leaves citizens defenseless in a number of important areas, even though decisions originate with more diffuse "state authorities" rather than the politburo. Decisions as to which resources will go to medical care or what income the elderly will receive depend on the squabbling of political parties, which subordinate policy positions to their rivalry for popularity, and the relative strength of different lobbies and groups of bureaucrats, which reach compromises behind the scenes.
Principle 3 seeks to place a much larger proportion of decisions on these matters in the hands of the persons directly concerned. At least for a sizable portion of these expenditures, people should decide individually what they want to spend on their health and that of their families and how they want to prepare for their old age.
Such choices will become available when at least a fraction of total welfare resources ceases to be subject to state allocation, and households and individuals are able to decide on their use through market mechanisms. Principle 3 seeks to open up all aspects of the welfare sector to private for-profit and nonprofit enterprise. It would be useful for private hospitals, clinics, laboratories, kindergartens, and retirement homes to emerge on a broad scale, through either the founding of new organizations or the privatization of those currently in the hands of the state.
Commercial insurance companies and nonprofit organizations should be encouraged to expand into pension plans and medical insurance as well. The function of applying Principle 2 solidarity could be shared among the state, nonprofit organizations, and the for-profit segment of the welfare sector.
Those who insist on the complete nationalization of the welfare sector argue that the public demands security and that only the state can provide it. Yet both sophisticated analyses of uncertainty and common sense suggest a simple rule: do not put all your eggs in one basket. In investment-portfolio terms, people should diversify.
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Just as it would be a mistake to entrust all of one's retirement savings to a single pension fund, total reliance on the state can render an individual vulnerable. By the time a person retires, the political authorities may have revised the rules for compensation, effectively expropriating part or all of an individual's contributions.
Thus, the most expedient proposals for pension reform are those that rest on several pillars, allowing different pension schemes to be used concurrently see Fox, in this volume. Similar "multipillar" solutions will be needed to fund the health service and other elements of the welfare sector. Principle 1 suggests that citizens should not be forced into any particular scheme; to the extent possible, they should be able to choose for themselves.
A "menu" of various forms of ownership and mechanisms of control and coordination should be developed from which citizens can choose. They should be able to learn from their own and others' experience, to experiment, and to modify their points of view.
This is one more reason why competition is needed in the welfare sector. In the presence of competition, selection can be made not only through the friction-ridden political process, but also directly, through the market choices of households and individuals. Principle 4—Incentives for efficiency: There must be incentives for forms of ownership and control that encourage efficiency.
This principle is so self-evident that it scarcely need be argued. The only reason for including it among our declared principles is that it tends to be. This applies in most post-communist countries today. The "pay-as-you-go" system and the repeated changes in pension rules, coupled with tendencies to level out pensions, have left only a very loose correlation between anticipated pension levels and pension contributions.
Incentives for efficiency and this is a substantial departure from previous practice must be provided on the demand side as well, to the recipients of welfare services. This means that with only the rarest possible exceptions, services should not be free. Rather than state subsidies forcing prices down below market levels, state assistance should be targeted by vouchers, for example to those for whom it is justified normally this would mean those in need, in line with the principle of solidarity. Even if the state or the insurer covers most of the cost, recipients should contribute a copayment so that they recognize the service is not free.
Proper incentives on the demand side include inducing efficiency among the insurers that will largely finance welfare services.