The level of international integration has increased significantly within the past six decades. This means that different public sectors have been growing very fast. During the early years of this kind of expansion, many industrialised nations continued to record enlarged welfare states. However, past studies and analyses have revealed that the wave of globalisation has resulted in reduced welfare states in a number of developed economies. This research examines and describes the existing relationship between globalisation and the declining welfare state in the United Kingdom.
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Globalisation and the Decline of the Welfare State in the United Kingdom: Analysis
Taylor-Gooby (2016) defines “welfare state” as a model implemented by governments to protect the well-being of every needy citizen. This approach targets persons who have financial difficulties. This support is provided through the use of social benefits, pension schemes and grants. In the recent past, many economists have focused on the potential impacts of globalisation on welfare state policies in the developed world (Beland et al. 2014). The existence of national differences when it comes to the issue of social welfare is something that has forced many researchers to relate the problem to global integration.
Edgerton (2018) believes that historical analyses can offer meaningful insights in an attempt to understand how integration has influenced welfare states in different countries such as the United Kingdom. The postwar period resulted in what economists call “embedded liberalism” (Edgerton 2018). During this period, many states were able to control the amount of imports and exports through the use of policies and trade policies. The existing environment prevented many nations such as the United Kingdom from recording increased fiscal deficits (Edgerton 2018). This government could control exchange rates, influence capital transfers and monitor the conditions associated with exportation and importation. Consequently, the reduced level of international integration (or globalisation) made it easier for the UK to focus on the best practices and domestic policies that would result in economic development. This situation made it easier for the UK to shape every national system.
Taylor-Gooby (2016) acknowledges that the resultant level of freedom empowered different government agencies to control or increase employment opportunities, collect tax from importers and exporters and provide welfare services to every needy citizen. This means that the welfare state in the country was sustainable and capable of addressing the social and health demands of many people. According to Bochel and Powell (2016), this favorable environment was experienced in the developed world throughout the 1970s and the 1980s. However, a new environment characterised by increased levels of integration emerged towards the end of the 1980s. As a result, new trade pacts were signed as many multinational corporations found their way in different countries across the globe (Pankratz 2017). This development catalysed a new international environment that influenced local economies across the globe. Many countries, including the United Kingdom, were no longer able to implement or focus on a wide range of policies that could influence welfare states positively.
The 1990s saw a new pact that resulted in the famous European integration. The formation of the European Union (EU) was appreciated since it would support and improve regional trade and transport (Taylor-Gooby 2016). During the same time, many nations in Europe were observed to form trade pacts with the United States, Canada, Japan and China. The outcome was a global economic environment that was more integrated than ever before. This new development replaced embedded liberalism that had been enjoyed after the end of the Second World War in 1945 (Edgerton 2018). This new global arrangement facilitated by the wave of globalisation created a scenario whereby the United Kingdom was unable to use existing legal and policy instruments to maintain the sustainability of its economy.
This government found itself in a precarious situation since it could not use its programs to improve the welfare of its citizens. The constraints increased as the EU continued to attract more member states. The European Monetary Union was yet another negative force that reshaped the UK’s financial policy. This was the case because the competitiveness of the Sterling Pound was affected. Most of the critical sectors such as manufacturing were exposed to increased competition from countries such as Germany and Italy (Beland et al. 2014). Globalisation became a reality as more goods from foreign nations found their way in the United Kingdom. The introduction of free trade pacts and agreements worsened the situation. This was due to the country’s inability to collect taxes from imported and exported products. The reduced level made it impossible for different government-sponsored agencies to operate smoothly and support the changing needs of the its aging population.
The current global economy has continued to force governments to focus on appropriate fiscal and monetary frameworks that are capable of reducing inflation, minimising deficits and improving economic growth (Fjader 2014). These incentives have resulted in high interest rates, thereby creating the right environment for financial breakdowns. These issues have, therefore, been observed to affect the bargaining power of the UK government whenever promoting appropriate programs to support its welfare state.
Globalisation has been supported by modern or emerging technologies. This development has affected both white and blue collar jobs. The global economy has also created new employment opportunities for many people in both the developed and the developing world. The changes have trapped the UK government, thereby being unable to support its citizens. It is also evident that more workers have lost their jobs as many companies focus on cheap labor from the developing world. This challenge has been worsened by the increasing number of retirees in the country. These issues have increased the level of wage pressure on various low and middle-income households (Edgerton 2018). In an attempt to meet the needs of its people, this government has been trying to use expansionary strategies and policies different regions. Unfortunately, such policies have been ineffective due to the challenges and pressures arising from the forces of global integration.
Fjader (2014) acknowledges that the UK government has been encountering difficulties whenever collecting taxes and revenues to deliver quality medical services and social support to its people. The decision or attempt to tax foreign corporations is nonviable since it can force them to move to other nations. This analysis, therefore, shows that globalisation has resulted in reduced levels of industrialisation. The use of budget deficits has resulted in the devaluation of the Pound. Increased interest rates employed in the country have slowed the economy much further. As inequality continues to increase due to the nature of changes arising from the wave of globalisation, the UK government is yet to grapple with the current decline in welfare state. These challenges have forced many analysts and economists to support the nation’s decision to exit from the European Union (Taylor-Gooby, P 2017). This move is believed to transform the current situation and ensure that the needs of many citizens are addressed.
Fjader (2014) asserts that the developed world is entrapped since it is unable to address the evils of globalisation. This being the face, the UK government can implement powerful measures and policies that can result in reduced inflation rates. Different agencies can also be empowered and funded to offer adequate protections to local workers. Employees should be encouraged to join different unions in order to compete with their counterparts in the developing world.
Additionally, it would be appropriate to attract foreign investors in an attempt to benefit from this aspect of globalisation. Increased foreign direct investment (FDI) will stimulate the country’s economic performance and growth. Taylor-Gooby (2017) encourages the UK government to transform its education sector in order to equip its people with adequate skills in information technology. This strategy will make them competitive in the global arena and reduce the current pressures associated with its welfare state (Edgerton 2018). When these measures are put in place, the country will address most of the existing predicaments in welfare state such as increased housing costs, poor education attainment, insecurity, and poor health services.
This discussion has revealed that globalisation is a wave that has produced a new economic system that promotes competition, outsourcing and trade integration. The level of rivalry has made it impossible for many corporations in the UK to succeed in the global arena. The government has been left with minimum options regarding the use of policies to improve its people’s welfare. Issues such as increased FDIs, improved education and reduced inflation have the potential to recover the status of welfare state.
Beland, D, Blomqvist, P, Anderson, JG, Palme, J & Waddan, A 2014, ‘The universal decline of universality? Social policy change in Canada, Denmark, Sweden and the UK’, Social Policy & Administration, vol. 48, no. 7, pp. 739-756.
Bochel, H & Powell, M 2016, The coalition government and social policy: restructuring the welfare state, Policy Press, Chicago.
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