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Rethinking the welfare state - Asia's next revolution

Rethinking the welfare state

Asia’s next revolution

Countries across the continent are building welfare states—with a chance to learn from the West’s mistakes

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ASIA’S economies have long wowed the world with their dynamism. Thanks to years of spectacular growth, more people have been pulled from abject poverty in modern Asia than at any other time in history. But as they become more affluent, the region’s citizens want more from their governments. Across the continent pressure is growing for public pensions, national health insurance, unemployment benefits and other hallmarks of social protection. As a result, the world’s most vibrant economies are shifting gear, away from simply building wealth towards building a welfare state.

The speed and scale of this shift are mind-boggling (see article). Last October Indonesia’s government promised to provide all its citizens with health insurance by 2014. It is building the biggest “single-payer” national health scheme—where one government outfit collects the contributions and foots the bills—in the world. In just two years China has extended pension coverage to an additional 240m rural folk, far more than the total number of people covered by Social Security, America’s public-pension system. A few years ago about 80% of people in rural China had no health insurance. Now virtually everyone does. In India some 40m households benefit from a government scheme to provide up to 100 days’ work a year at the minimum wage, and the state has extended health insurance to some 110m poor people, more than double the number of uninsured in America.

If you take Germany’s introduction of pensions in the 1880s as the beginning and Britain’s launch of its National Health Service in 1948 as the apogee, the creation of Europe’s welfare states took more than half a century. Some Asian countries will build theirs in a decade. If they get things wrong, especially through unaffordable promises, they could wreck the world’s most dynamic economies. But if they create affordable safety nets, they will not just improve life for their own citizens but also become role models themselves. At a time when governments in the rich world are failing to redesign states to cope with ageing populations and gaping budget deficits, this could be another area where Asia leapfrogs the West.

Beyond Bismarck and Beveridge

History offers many lessons for the Asians on what to avoid. Europe’s welfare states began as basic safety nets. But over time they turned into cushions. That was partly because, after wars and the Depression, European societies made redistribution their priority, but also because the recipients of welfare spending became powerful interest groups. The eventual result, all too often, was economic sclerosis with an ever-bigger state. America has kept its safety net less generous, but has made mistakes in creating its entitlements system—incl



    
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