In a recent issue of The Economist, an article titled “Asia’s Next Revolution” delved into trends that indicate how many Asian countries are now starting to lay down the foundations for a welfare state. The Economist article cites the key countries as Indonesia, Thailand, India, China, and the tiger economies Singapore, South Korea, Taiwan, and Hong Kong. All of these countries are now implementing slightly similar forms of health care and social security schemes.
One of the key explanations to this development was that the regions’ citizens became more affluent, and started wanting more from their governements in the form of national health insurance, public pensions, unemployment benefits, and are shifting their focus form building wealth towards building a welfare state. The speed in which the Asian countries are doing so is unprecedented, as the creation of welfare states in European countries took more than half a century. Asian countries show signs of building their own within a decade, and they are doing it because they are learning from the mistakes of the west.
What the Asians Learned from the West
The key thing about Europe’s welfare states is that they were essentially started as simple safety nets, that over time turned into cushions. The Europeans’ mistake is that they focused too much on redistribution after the wars and the depression. This is compounded by the fact that the recipients of the welfare became powerful interest groups. America managed to last a little longer because their safety net was less generous, but their entitlements system – particularly the pension and healthcare promises, which are tied to their employment – are simply proving to be unaffordable in the long ran and will buckle under its own weight sooner than later.
Asian governments are not blind to all of these, and tend to be averse to the idea of replacing traditions of hard work and thrift with welfare dependency. The safety nets of Asian countries tend to be very minimalist, providing only basic health insurance and pensions that replace a fraction of an individual’s former income.
Three Principles that Must Be Kept in Mind
There are three key principles that governments who want a welfare state model should keep in mind:
- Pay attention to the cost of benefits and pension. Some countries have levels of early retirement that make pension funds unsustainable in the long run.
- Social spending should be targeted to the poor, and avoid subsidizing the rich. While welfare states should provide safety nets for the elderly, it should not be made at the expense of the young and still working.
- The government and entities in charge of the program should be flexible and innovative, especially when it comes to the delivery of the services.
Currently, all signs point to Asia’s next great revolution being the successful beginnings of a true welfare state, but there are signs that it will be pushed forward not just by economics but also by politics. Unlike their first-world counterparts, Asia’s citizens must be willing to plan ahead, work longer, and turn down handouts that only mean debt for future generations. Doing so will provide political maturity that can be considered as the biggest revolution in history.
Source: The Economist