Erik
Moberg ©:
Professor
Rothstein’s Findings
In its
13th volume "Rationality
and Society" published an article by Bo Rothstein entitled "The
Universal Welfare State as a Social Dilemma" (Rothstein, 2001). Rothstein
opens his article by presenting two "major findings" (all quotations
here from Rothstein’s article are from its two first pages).
The first
one is that "well-known differences […] exist in the quality and
scope of welfare state programs among the industrialized Western
democracies". Thus, writes Rothstein, "the Scandinavian countries spend
about twice as much, as a percentage of gross domestic product (GDP), on social
insurance and social assistance as the United States" and "[m]ost
other European countries’ spending falls somewhere inbetween". All
italics in the quotations are mine, and the intention is to indicate that
Rothstein, although he doesn’t give any precise time, for instance a particular
year, obviously is talking about the present time in some vague sense.
The second
finding is that in "the early 1960s" the countries mentioned
"spent almost the same as a percentage of GDP on welfare policies".
These two
findings constitute the starting point for much of the following discussion in
the article. A first implication of the two findings obviously is, as Rothstein
emphasizes, that the "huge difference in welfare state ambitions is a
fairly recent phenomenon". Rothstein also finds this surprising.
"Given the internationalization of values, increase in trade,
globalization of capital, etc., this is", he says, "an unexpected
development". Underlining the point he adds that "[m]ost social
scientists working in the early 1960s would probably, without the benefit we
have of hindsight, have predicted convergence in social policy between these
countries, rather than a dramatic divergence". Thus, given the importance
of the findings for the article, it is of some importance that they are
correct, that is that they really are "findings". So, are they? What
evidence does Rothstein present in their favor?
He does
not, in fact, present any evidence at all. He just mentions two sources, but he
does not quote any data from them. The first source, which is a work by Walter
Korpi and Joakim Palme (Korpi & Palme, 1998), is relevant for the first
finding, and the second source, an OECD report from 1994 (OECD, 1994), is
relevant for the second finding. So let us look at these two sources and their
figures.
The
figures are presented in the Table 1. As for the earlier time Rothstein
talks only vaguely about the "the early 1960s". The source contains
figures from all the years in the 1960s, and more than that. In order not to be
too restricted I have chosen two of those years, namely 1960 and 1964, as
representing the "the early 1960s". The first two columns of the
table contain these figures. According to the source they represent
"Public expenditure on social protection as a percentage of GDP".
The later
time, about which Rothstein, as I have already said, is utterly vague, proves
to be, when we look into the source, 1985. In this case there is also another
vagueness, namely that the source contains two sets of figures, the one
representing "Total Social Benefit Expenditures" (1985 a in
the table) and the other "Total Expenditures minus Unemployment Insurance
Benefits" (1985 b in the table), in both cases as a percentage of
GDP. Rothstein does not tell us which set he refers to, and therefore I have
included both in the table.
Table 1: Public expenditure on welfare
state programs as a percentage of GDP (figures directly from the sources,
more information in the text) |
||||
|
1960 |
1964 |
1985 a |
1985 b |
Finland |
8.8 |
10.3 |
21.3 |
20.8 |
Norway |
7.9 |
9.5 |
28.0 |
27.3 |
Sweden |
10.8 |
12.5 |
29.5 |
28.8 |
Austria |
15.9 |
17.2 |
24.3 |
23.5 |
Belgium |
- |
15.0 |
26.4 |
22.5 |
France |
13.4 |
15.8 |
27.3 |
24.5 |
Germany |
18.1 |
18.1 |
23.3 |
21.8 |
Italy |
13.1 |
14.3 |
20.5 |
19.7 |
Japan |
4.1 |
5.2 |
11.1 |
10.7 |
Canada |
9.1 |
9.2 |
15.6 |
12.3 |
Denmark |
- |
- |
27.5 |
24.3 |
Ireland |
8.7 |
9.2 |
21.8 |
18.2 |
Netherlands |
11.7 |
15.8 |
28.2 |
24.9 |
New Zealand |
10.4 |
9.8 |
14.6 |
14.0 |
Switzerland |
4.9 |
6.6 |
13.5 |
13.2 |
United Kingdom |
10.2 |
11.0 |
19.4 |
17.6 |
United States |
7.3 |
7.9 |
12.0 |
11.6 |
Australia |
7.4 |
7.5 |
9.9 |
8.6 |
Now,
having the figures, we are in a position to see if they support Rothstein’s findings.
The only thing needed, as a preliminary, is to make the numbers in the
different columns comparable to each other. One way to do that is to
"normalize", for each column, the numbers around a common arithmetic
mean, say 100. For the first column, the one for 1960, the mean of the numbers
is 10.1, and in order to bring that to 100 it has to be multiplied by the
factor 9.9 (100/10.1). Then, multiplying all the 16 figures in the 1960-column
with that same factor, we get the result shown in the first column in Table
2, which corresponds to the first column in Table 1. The same
operation for each of the three remaining columns gives the rest of the figures
in Table 2.
Table 2: "Normalization" of the
numbers in Table 1 (more information in the text) |
||||
|
1960 |
1964 |
1985 a |
1985 b |
Finland |
87 |
90 |
102 |
109 |
Norway |
78 |
83 |
135 |
143 |
Sweden |
107 |
109 |
142 |
151 |
Austria |
157 |
150 |
117 |
123 |
Belgium |
- |
131 |
127 |
118 |
France |
133 |
138 |
131 |
128 |
Germany |
179 |
158 |
112 |
114 |
Italy |
130 |
125 |
99 |
103 |
Japan |
41 |
45 |
53 |
56 |
Canada |
90 |
80 |
75 |
64 |
Denmark |
- |
- |
132 |
127 |
Ireland |
86 |
80 |
105 |
95 |
Netherlands |
116 |
138 |
136 |
130 |
New Zealand |
103 |
86 |
70 |
73 |
Switzerland |
48 |
58 |
65 |
69 |
United Kingdom |
101 |
96 |
93 |
92 |
United States |
72 |
69 |
58 |
61 |
Australia |
73 |
65 |
48 |
45 |
Now, in
order to make the comparison between the figures in the four columns of Table
2 more apprehensible, the figures may be presented as in Diagram 1.
Diagram 1: Differences between the Western
nations' welfare state programs in the early 1960s and in 1985 – the dots
represent the figures in Table 2 directly |
|
|
It is now
easy to comment on Rothstein’s two "findings". The first one about
the considerable differences between the present welfare state programs is
obviously correct. Irrespective of which one of the two lowest rows in the
diagram (1985 a or 1985 b) we choose the result is the same, the
differences between countries are great.
Rothstein’s
second finding about small or non-existent differences in the early 1960s is
however manifestly wrong. Irrespective of which one of the two uppermost rows
we choose, the result is the same. The differences between the countries are
considerable.
In
addition to that we see that the differences in the early 1960s are, not only
considerable, but greater than in 1985, again irrespective of which of the rows
from the 1960s, and which of the rows from 1985, we choose. Rothstein’s
conclusion, and cause for his surprise, that there has been divergence rather
than convergence, is thus also wrong. There has, indeed, been convergence.
These
results of mine may perhaps be disputed in various ways. It may, for instance,
be argued that the differences between countries could, and should, be measured
in some other way. Rothstein himself does however legitimate exactly the method
used here. Thus, when describing the differences in 1985, he says (my italics)
that "the Scandinavian countries spend about twice as much, as a
percentage of gross domestic product (GDP) […] as the United States".
Rothstein thus measures differences exactly as I have done, by means of
factors.
It may perhaps
also be argued that extreme values, for one reason or another, may be erratic
and thus should be disregarded. We may, for instance, omit the two most extreme
values at each end of each row in Diagram 1. If so, we get somewhat
different results – even if important differences in the early sixties will
remain the convergence will be less clear. This procedure does however have its
own problems. Why should the extreme values in the first place be considered as
erratic? And even if that question could be given a good answer, why should we
disregard just two values at the ends of the rows, and not for instance one or
three?
The
conclusion is thus inevitable: Rothstein’s "major finding" about
small or non-existent differences in welfare state programs in the early 1960’s
is simply false. And therefore his conclusion about a "dramatic
divergence" in social spending during the decades after that is equally
false – despite his "benefit of hindsight"!
It is
remarkable that a scholarly journal, such as "Rationality and
Society", publishes an article as poorly researched as professor
Rothstein’s.
References
(in order of appearance in the text):
Rothstein,
B, 2001, "The Universal Welfare State as a Social Dilemma", in Rationality
and Society, volume 13, issue 2, pp. 213-233.
Korpi, W
& Palme, J, 1998, "The Paradox of Redistribution and Strategies of
Equality: Welfare State Institutions, Inequality, and Poverty in the Western
Countries", in American Sociological Review, volume 63, pp 661-687.
OECD,
1994, New Orientations for Social Policy. Paris: Organization for
Economic Development, 1994.