June 05th, 2012 | Global Times Debt crisis stems from incompetence, not welfare
The worsening eurozone crisis is attracting worldwide attention. Chinese media commentators often blame the European debt crisis on what they see as the continent’s over-generous welfare systems. But is it proper to conclude that welfare encourages laziness and drains public budgets? What lessons can China learn in building its own social welfare system? Two experts contributed their thoughts on this issue.
“Welfare system not to blame for Europe’s financial failures”
The right method for the EU nations to deal with the debt crisis is not to cut off the financial budget for welfare. The belief that public welfare accounts for the financial crisis is misleading.
In reality, the EU countries that are deeply troubled by the escalating debt crisis are not the traditional welfare states such as Sweden, Finland and other northern European countries.
These countries invest around 40 percent of GDP in the public welfare every year. Their economies have slowed down, as with many countries in the world, but have not been damaged that badly. Instead of austerity, the better way would be launching a stimulus program, which means the government should pay attention to the common good.
When running for election, French President Francois Hollande brought up ideas including promoting social justice and increasing the minimum wage. These strategic policies are positive methods of encouraging people to get better involved in work.
Unequal distribution of social wealth may lead to social divisions. If the social wealth is limited to a few people with vested interests and the wealth gap grows, most people will lose the sense of security and their confidence in work, stifling economic recovery.
The Chinese government had a quick and remarkable reactions to the global economic crisis that erupted in 2008. The government has launched a stimulus program and thus created more job opportunities. When dealing with the global depression, the Chinese government has not panicked. Besides, China has sovereignty over its own currency. Nations within the eurozone do not have such advantages.
As a union, the EU countries are tied together financially. However, the debt crisis in Europe is not caused by the welfare system but corruption and the chaotic government administration.
This point should be emphasized here because nowadays in China, some are playing the misleading tune that national investment in public welfare may lead to economic decline. China’s investment in public welfare is much lower than 40 percent, which we can take as the normal criteria for judging whether a country is a welfare state or not.
- This article was compiled by Global Times reporter Fu Qiang, based on an interview with Gao Qin, associate professor of Graduate School of Social Service, Fordham University.
“Social justice for needy remains heart of socialist values”
Welfare has become a very negative expression in parts of the Western world. Right-wing opinion in nations such as Spain and the US has linked the public welfare with a supposed lack of work ethic, echoed by some groups in China.
But eurozone debt crisis and the welfare system aren’t linked. The cause of the debt crisis is the inefficiency of governmental administration.
I talked with a senior official of the International Monetary Fund about the debt crisis. He agreed with my viewpoint that welfare investment doesn’t contradict economic development.
Many people in China see the Greek economic relapse as an example of the welfare system’s negative influence. But the truth is, the corruption of the government is the root.
In 2010 the New York Times published a story on tax evasion in Greece. Luxury houses with a swimming pool must pay an extra fee. However, in an Athens suburb with 16,974 such houses, only 324 householders paid the tax properly. We can’t solely condemn people’s lack of sense of responsibility for the public affairs. The government’s own inefficiency and corruption during tax collection is also to blame.
Tax revenue is the main income of a nation. Government financial budget is largely based on tax revenue. The debt crisis in the European countries is mainly because the government has failed to run the state efficiently.
China should be a welfare state since it is a socialist country. The distribution system of a socialist country should mean that public benefits comprise a large part of personal income.
However, since the structural economic changes in contemporary China began, our nation has no longer been a welfare state.
Today, some claim China is turning into a welfare state. But their logic is faulty. If we exclude pensions, we can see that the majority of people in China receive almost no welfare. The truth is, the welfare system in China has many flaws and needs to be further improved.
From the discussion of the debt crisis among the European countries and the welfare system in Europe, it is very clear that we do not need to worry that further investment in the welfare system will damage our economy.
- This article was compiled based on a speech by Wang Feng, professor of School of Public Policy and Management, Tsinghua University, during a recent forum held by the Brookings-Tsinghua Center for Public
By Global Times