are adequately set, whether the administration of the system is seen as fair and efficient, and whether there is an effective mechanism for checking frauds in the system. Third, trying to raise more taxes in order to finance a social welfare programme in a context where its political legitimacy is not firmly established may lead to ‘investment strikes’ by the rich – or even support for a violent reversal, as in the case of Chile under Allende.
Whatever the exact benefits and costs of a particular social welfare institution may be, the fact that all NDCs have developed a common set of social welfare institutions over time (except for the persistent and disturbing absence of comprehensive health care in the USA) suggests that there are some common needs that have to be addressed across countries. However, it is important to note that social welfare institutions tend to be established at quite a late stage in most countries’ development.
Institutions that take some care of the weaker sections of a society have always been necessary to guarantee social stability. Before industrialization, this care was provided by extended families, local communities and religious organizations. In the NDCs, with the weakening of these institutions following industrialization and urbanization during the nineteenth century, social tensions began to rise, as can be seen from the constant fear of revolution that gripped many of these countries during the century.
However, before the 1870s, social welfare institutions in the NDCs were very poor, with the English Poor Law-type legislation at their core. The poor relief laws of the time stigmatized the recipients of state help, with many countries depriving them of voting rights. For example, Norway and Sweden introduced universal male suffrage in 1898 and 1918 respectively, but it was not until 1918 and 1921 respectively that those who had received state assistance were allowed to vote.[123]
As we can see in table 3.4 below, social welfare institutions in NDCs only started to emerge in the late nineteenth century. Their development was spurred on by the increasing political muscle-flexing of the popular classes after the significant extension of suffrage during this period (see section 3.2.1) and by union activism. There was, however, no fundamental relationship between the extension of suffrage and the extension of welfare institutions. While in countries like New Zealand there is a clear link between the early extension of suffrage and the development of welfare institutions, in cases like that of Germany welfare institutions grew quickly under relatively limited suffrage.
In fact, Germany was the pioneer in this area. It was the first to introduce industrial accident insurance (1871), health insurance (1883) and state pensions (1889), although France was the first country to introduce unemployment insurance (1905) .124 Germany’s early welfare institutions were already very ‘modern’ in character (having, for example, universal coverage), and they apparently attracted great admiration from the French Left at the time. It is important to note that under the leadership of Gustav Schmoller, the scholars belonging to the German Historical School (see Chapter 1) formed the influential
Social welfare institutions made impressive progress in the NDCs during the fifty-year period between the last quarter of the nineteenth century and the first quarter of the twentieth century. In 1875, none of the 19 countries listed in table 3.4 had any of the four welfare institutions covered in the table, with the exception of Germany, which had introduced industrial accident insurance in 1871. However, by 1925, 16 countries had industrial accident insurance, 13 had health insurance, 12 had a pension system and 12 had unemployment insurance.
| Table 3.4 | ||||
|---|---|---|---|---|
| Introduction of social welfare institutions in the NDCs | ||||
| Industrial Accident | Health | Pension | Unemployment | |
| Germany | 1871 | 1883 | 1889 | 1927 |
| Switzerland | 1881 | 1911 | 1946 | 1924 |
| Austria | 1887 | 1888 | 1927 | 1920 |
| Norway | 1894 | 1909 | 1936 | 1906 |
| Finland | 1895 | 1963 | 1937 | 1917 |
| UK | 1897 | 1911 | 1908 | 1911 |
| Ireland* | 1897 | 1911 | 1908 | 1911 |
| Italy | 1898 | 1886 | 1898 | 1919 |
| Denmark | 1898 | 1892 | 1891 | 1907 |
| France | 1898 | 1898 | 1895 | 1905 |
| New Zealand | 1900 | 1938 | 1898 | 1938 |
| Spain | 1900 | 1942 | 1919 | n.a. |
| Sweden | 1901 | 1891 | 1913 | 1934 |
| Netherlands | 1901 | 1929 | 1913 | 1916 |
| Australia | 1902 | 1945 | 1909 | 1945 |
| Belgium | 1903 | 1894 | 1900 | 1920 |
| Canada | 1930 | 1971 | 1927 | 1940 |
| USA | 1930 | No | 1935 | 1935 |
| Portugal | 1962 | 1984[+] | 1984[+] | 1984[+] |
Sources: Pierson 1998, p. 104, table 4.1. The information on Spain is from Voltes 1979, Maza 1987 and Soto 1989. The information .on Portugal is from Wiener 1977 and Magone 1997.
1. The countries are arranged in the order in which they introduced industrial accident insurance (starting with Germany in 1871). If it was introduced in the same year in more than one country, we list the country that introduced health insurance earlier first.
2. The figures include schemes which were initially voluntary but state-aided, as well as those that were compulsory.
* Ireland was a UK colony during the years mentioned.
+ Although some social welfare institutions were introduced in Portugal from the 1960s, they remained very fragmented systems, consisting of partial regimes regulating the social insurance of certain social groups until 1984.
Child labour has generated particularly heated debate since the early days of industrialization, as we shall soon see. More recently, however, the debate has taken on a new international dimension. There is now a demand that developed countries should put pressure on developing countries to eliminate child labour. Particularly controversial is the proposal to reduce child labour by imposing trade sanctions through the WTO on countries that violate ‘international labour standards’, including in particular those standards on child labour.[126]
There is widespread concern that such sanctions will impose institutional standards on developing countries that cannot afford them, although exactly what is ‘affordable’ is difficult to establish. Some are worried that such measures may be abused in the interests of ‘unfair’, covert protectionism; others argue that, whether or not they are economically viable, issues like child labour regulation should never be internationally sanctioned. Some commentators point out that it is unreasonable to expect a swift eradication of child labour in today’s developing countries, when the NDCs took centuries to achieve it.
Child labour was widespread in the NDCs during the earlier days of their industrialization. In the 1820s, it was reported that British children were working between 12.5 and 16 hours per day. Between 1840 and 1846, children under 14 accounted for up to 20 per cent of the factory workforce in Germany. In Sweden, children as young as five or six years old could still be employed as late as 1837.[127]
