The Fiscal Crises in Welfare Democracies: With Some Implications for Public Investment
It is generally acknowledged that Western welfare democracies, in Europe and America (Japan may also be included in the listing), face severe fiscal crises. Constituency demands for entitlement-like welfare transfers based on public expectations for continuance of existing programs, exceed the revenues that the same constituents are willing to provide in taxes. There is a political mismatch between the two sides of the budgetary account. Only in the 1980s and 1990s did the vulnerabilities of the extended welfare states become increasingly apparent, along with emerging recognition of long-run nonsustainability. The “Swedish model,” with generous programs of general income support along with very high rates of tax, has been totally transformed, from a pattern to be emulated in the 1960s to a pattern to be avoided in the 1990s.
KeywordsWelfare State Public Investment Welfare Program Western Democracy Pension Payment
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