Occasional Paper 9/2022
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Inclusive Society Institute
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by Robert Mopp & Daryl Swanepoel
Picture source: apdconnaissances.com
This report traces the development journey of the ‘welfare state’ since it was first conceptualised by Thomas More in 1516. It explores the constant deepening and broader reach towards what is today considered the modern welfare state, characterised as a pragmatic compromise between capitalism and socialism. It emphasises equality, justice and redistribution solidarity. The focus then shifts to its development in the South African context and the report concludes that the state should be regarded as containing considerable features of a welfare state, but that it is not yet a full-fledged one. It exhibits features of an intermediate and residual welfare state, which still requires further development in line with evolving economic capacity. It is also proposed that it may perhaps more aptly be described as a modern social-democratic state to avoid the less positive connotations often associated with the term ‘welfare’ in the South African setting.
After the events of World War II, the welfare state came to occupy a central space in discussions and endeavours to improve the quality of people’s lives. However, central as it may have been, it is easier today to describe the functions of such a state rather than defining it. Most of the literature on the subject identifies the “modern” welfare state as European in design, scope and methodology. At present, there is almost no typology provided for states in the developing world, particularly in Africa. The literature, with its attendant terminology and paradigms, focuses solely on the state as it manifests itself in Europe, a modern reality that makes it challenging to use this prism in reference to a South African welfare state.
In its current form, the welfare state is not homogenous, as it projects a variety of shapes. Its genesis is intrinsically linked to the rise of industrialisation and its attendant contradictions, risks and deprivations. Developed to mitigate these risks and provide security for workers initially, it was soon extended to the larger population. As such, the notion of the “well-being” of citizens is paramount within the framework of their civil and social rights.
In the text that follows, the genesis of the welfare state will be traced to explore what constitutes this form of state and its typologies. Its intellectual foundations will be uplifted, so that its form becomes more discernible, especially within the context of the respective roles of state and market and the interplay that occurs in this process. The post-1970s crisis period and the changes it wrought will be teased out.
Next, the South African welfare regime will be discussed in the context of whether the country identifies as a welfare state within the specificities of its challenges. The question will be asked: Does South Africa conform to the notion of a welfare state, and if it does, what kind of typology applies? Issues around the specificity of a welfare state in a country like South Africa, with its history of segregation and accompanied discrimination and deprivation of the majority, as well as the need for a welfare state – accompanied by high growth rates that will absorb large numbers of workers – to ensure the future cohesion, stability and well-being of South Africa’s citizens and society, will be discussed.
Welfare State Genesis
The term ‘welfare state’ can be traced back to the idea of a guaranteed basic income, with which it was first associated. A guaranteed income is first mentioned in the 1516 novel by English social philosopher, Thomas More, with its inspirational title of Utopia. Another step in the direction of the welfare state was the “poor law”, introduced in England in 1834, as a system of relief for workers and the poor. Next, classical political economist and philosopher, John Stuart Mill, advocated for a minimum income for all adult men for their subsistence, in his 1848 textbook, Principles of Political Economy. By 1850 most industrialising countries had introduced some updated version of the poor law, allied with labour protection measures in 1883; health insurance in 1883; an industrial accident scheme in 1884; and an old-age insurance scheme in 1889 (Van Kersbergen, 2016).
With the rise of industrialisation, these ideas vis-à-vis social welfare languished until they reappeared in Germany in the 1880s under the “conservative” chancellor, Otto von Bismarck. Even though he was fiercely anti-socialist and against workers’ struggles, Bismarck introduced the first form of mandatory social security to protect workers – including the establishment of health funds – building on the measures introduced by the Prussian state in the 1840s. The motivations of Bismarck were deemed to promote a healthy workforce for the smooth functioning of the economy and to “stave off calls for more radical socialist alternatives” (ILO, 2009). It contained a combination of economic and political considerations that “gave the Germans a comprehensive system of income security based on social insurance principles” (ILO, 2009). And then, under the “New Deal” rubric in 1935, then American President Ted Roosevelt introduced the Social Security Act, which combined “economic security” with “social insurance”.
Further developments towards the modern welfare state came in 1942 when the Beveridge’s Report on Social Insurance and Allied Services, underpinned by the economics of Milton Keynes, was released. Keynes 1936 treatise, The General Theory of Employment, Interest and Money, revolutionised economic theory and policy, and is seen as providing the intellectual foundation for the Keynesian “welfare state” or welfare capitalism. The report established the first unified social security system globally, which gained it recognition as the first major social welfare framework of the modern welfare state. Beveridge subsequently defined welfare policy as a struggle against five evils: poverty, disease, ignorance, poor housing conditions and unemployment (ills of Want, Disease, Ignorance, Squalor and Idleness). Keynes was in agreement with the proposals contained in the Beveridge report citing, however, concerns as to the affordability of the scheme.
In 1945, the UN General Assembly adopted the Universal Declaration of Human Rights, which introduced social and economic rights as the cornerstone of social policy. Article 22 recognises that “everyone, as a member of society, has the right to social security”. By 1960, every developed nation had a core of welfare state institutions in place. Most theorists reference the industrialisation process as pivotal to the development of the social welfare system to ensure the well-being of citizens to lead a fulfilled life. Rawls’s theory of justice and the social contract and Sen’s “capability” theory expanded on the social welfare notion.
Solidarity, equality and providing equal opportunities – irrespective of socio-economic background – are other important attributes of the welfare state. A robust role was also accorded the state, namely, to be more interventionist with regards to the market, as well as a high level of trust between social classes, especially between business and labour. Citizens in Scandinavian countries are prime examples of this high level of trust in their governments and top the World Happiness Report. Sadly, in South Africa the opposite is the case, and this results in weak social cohesion.
The Welfare State and Social Democracy
Social democracy is most often associated with the Scandinavian countries, where it is regarded as a “pragmatic compromise between capitalism and socialism” (Jackson, 2013). Behind this association are the Swedish pioneers of the welfare state – economists such as Knut Wicksell and Gustav Cassel, who studied in Germany under Gustav von Schmoller of the German Historical School. Von Schmoller was a scholar famous for the methodological debate (Methodenstreit) with Carl Menger, a pioneer of the neoclassical school. This was followed by adherents of the Stockholm School of Economics, like Gunnar Myrdal, Bertil Ohlin, Dag Hammarskjöld et al, who shared the vision of the counter-cyclical views of Keynes and the welfare policies designed by Myrdal and Gustav Möller (Carlson, 2016).
On a governmental level, the Swedish welfare state model was developed by Social Democratic states from 1933 onwards, spearheaded by the People’s Home (Folkhemmet) concept founded by the leader of the Social Democrats, Per Albin Hansson, in 1928. Hansson used the following words to describe the People’s Home: “A home is founded upon community and affinity. The good home is not aware of any privileged or underprivileged, any pets or stepchildren” (Carlson, 2016). Two more key components of the Swedish model are the labour market model, which was established through the Saltsjöbaden Agreement signed in 1938 by the Swedish Trade Union Confederation and the Swedish Employers’ Confederation, and the Rehn-Meidner model (two Swedish labour economists), which sought to increase structural change through the “solidarity wage policy”.
Today, social democracy is a global phenomenon. With its emphasis on equality, justice and redistribution solidarity, the system is – somewhat ironical considering equality and solidarity emanate from the values of socialism – opposed to the inequality created by the free market system (laissez-faire capitalism). Furthermore, when it was conceived in the 20th century, the system proposed the maintenance of full employment, echoing Keynes. Keynes, however, doubted that democracy would continue to survive if it does not counter the problems of mass unemployment and the “arbitrary and inequitable distribution of wealth”, associated with the weakness of the market (capitalist) system (Keynes, 1936). Yet, Keynes believed in the capitalist system, despite its shortcomings, seeing as “capitalism offers the best safeguard of individual freedom, choice, and entrepreneurial initiative” (Keynes, 1936). He saw an active role for government to solve the problems of society and was a proponent of moderate redistribution to help secure full employment. In support of the economist, Skidelsky stated in 2010 that Keynes emphasised sound economics, rather than political ideology and insisted that the state has a duty to supplement and regulate market forces.
Keynes’s views were in contrast to the neoclassical school’s belief that market economics have an automatic tendency to full employment equilibrium, are efficient, and generally functioned well (Stiglitz, 2017). This school further believed that markets are more efficient than governments in allocating capital; state spending and taxes should be kept as low as possible; and budgets should be balanced (Skidelsky, 2020).
The “Great Financial Crisis” of 2008, together with the economic downturn occasioned by the Covid-19 pandemic, are evidence that that is not always the case, however. In reality, left to its own devices, capitalism has been characterised by outbreaks of instability and rising inequality since the 1980s, associated with the onset of neoliberalism; unfettered free market forces; globalisation; and service economy supplanting manufacturing globally, leading to de-industrialisation in many developing countries, including South Africa. All of which led to increasing dominance of finance capital at the expense of the real economy.
What Exactly is the Welfare State?
Despite its widespread usage, the welfare state has no simple, single definition. It is heterogeneous and must be seen in its specific context, historical evolvement and political set-up. According to David Garland, the term “welfare state” is misleading. It is not about welfare or welfare for the poor, Garland says. Instead, the term refers to social insurance, social rights, social provision and the social regulation of economic action. Maurizio Ferrera defines it thus: “The welfare state is a set of public interventions related to the modernisation process, which provide protection in the form of assistance, insurance and social security, introducing, amongst others, specific social rights in the case of specific events as well as specific duties of financial contribution” (Antoni, 2018).
The welfare state can be thought of as a “device for optimal risk sharing” and acting as an “insurance at birth against unknowable future outcomes, it helps relieve poverty” (Barr, 2018). As risks get shared, Barr proposes, economic growth can flourish. The safety nets that are provided make people more prepared to embark on ventures, as the landing will be softer. There are some real lessons here for South Africa and our challenges on the entrepreneurship front.
Using the Swedish social democracy as the quintessential social democratic welfare state exemplar, Goran Therborn noted that such a welfare state displays the following features: full employment; a prosperous open economy that is competitive on world markets; a generous welfare state; and an egalitarian society which, by 1980, had the lowest rates of income and gender inequality in the world. Furthermore, the welfare state is closely associated with the notions of nation-building and common citizenship. It is infused with a spirit of collectivism and solidarity that has the support of both ends of the political spectrum. It also stresses the obligations by governments to ensure the welfare of citizens. This implies a divergence from the ideologies of laissez-faire and economic liberalism.
A further component of the definition of the welfare state, which is a key lesson for South Africa’s overdue efforts in reaching an accord, is a social accord between business and labour that ensures stability in the workplace and society.
Critiques of the Welfare State
A shortcoming of the definition of the welfare state in its current form is that it has little room for the gender dimension. The original Beveridge report and welfare regimes have been criticised for their neglect on this front. Titmuss and Andersen have been criticised on this ground too, albeit less severely. The critique against Beveridge, in particular, was his assumption that men are the main breadwinners, while women attend to household tasks for which they aren’t paid, when the reality was that women increasingly entered the labour market over the ensuing decades. Andersen’s decommodification index was also criticised on methodological grounds. Andersen subsequently responded to these critiques, including the lack of involvement of the global South. He noted the different historical contexts of the North and South and the different development trajectories.
Further critiques of the welfare state come from the right of the political spectrum, citing negative elements of the system relating to paternalism and the stigmatising and disciplining of claimants. This includes the claim of “idleness” on the part of recipients and that a culture of “entitlement” will set in, resulting in a dependency on the state. The evidence shows this is not the case. The Scandinavian social democratic states have the highest levels of employment, despite their extensive welfare measures in place. Proof that these benefits are not a disincentive to seek employment. Elsewhere, the jury is still out in this regard, as evidence differs from region to region and country to country.
A key paradox and ongoing criticism at the heart of the welfare state that continues to be debated is that it “created a conflict between the priority given to maximising economic growth by boosting profitability and investment and the priority given to maximising democratic legitimation by expanding welfare programmes” (Gamble, 2016).
As a result, the affordability and competitiveness of social welfare regimes has taken centre stage since the 1970s “oil crisis”, a point of contention that has been reinforced since the 2008 Global Financial Crisis, despite the positive evidence in Scandinavian countries. In a welfare state, politicians are under pressure to lower taxes for individuals and companies. This engineers an irresistible shift to a regime of low taxes, which gradually eliminates progressivity in the tax system by moving towards flat rates. In a few instances, like in the USA and the UK, some taxes such as inheritance taxes are eliminated in totality. This results, in many instances, in a residual welfare state due to the state losing the capacity to fund anything else.
Another criticism is that there has been a retreat from the original insurance principle proposed by Beveridge. Welfare is increasingly being funded from general taxation, which means welfare benefits are no longer regarded as something that has to be earned by recipients who make payment contributions. Instead, it’s regarded as a right, resulting in an entitlement culture within which the contribution principle has been lost.
Types of Welfare States and its Intellectual Paradigms
Despite the many references to it in the public discourse as singular, the welfare state paradigm is diverse and heterogeneous. In 1950, the British theorising pioneer, Richard Titmuss who’s work surprisingly took place in the context of the Conservative Party’s dominance, advocated for a shift from universal to selective social services, which stands in direct opposition to the “universalism” principle of the Scandinavian welfare system. Titmuss’s classification encapsulates the terminology of residual, meritocratic-occupational and institutional-redistributive (Antoni, 2018). It makes strong provision for market forces, whilst incorporating principles of “equality and the fulfilment of social needs with state services being generous” (Antoni, 2018).
Danish sociologist Gosta Esping-Andersen’s influential “worlds of welfare” typology depiction “emerged as somewhat of a master-frame for comparative inquiries” (Svallfors, 2012). In it, he stressed the importance of the relationships between the state, family and markets as key distinguishing factors with which to explain the differing welfare systems. For Esping-Andersen, the “sum total of social welfare depends on the way in which the inputs of state, market and family are combined” and generate welfare outcomes. In addition, the welfare state creates social stability by “tempering the inegalitarian consequences of the market” and creating “de-commodified spheres in which allocation was based on citizen rights” (Esping-Andersen, 1990).
With regards to interconnectivity, Andersen argued that the manner in which the social programmes and labour market regimes are connected results in different welfare regimes with different development and operational functioning. According to the Dane, the Swedish model is “universal”, as the basic social security system is based upon income up to a certain level (Carlson, 2016), although this “universal” tag has been questioned, especially by the those in the developing world, who wonder whether it applies as widely as its name suggests.
Furthermore, Andersen said that the Swedish social-democratic model is based on the idea of “decommodification” or the notion that people should not be obliged to sell their labour in order to survive. The irony is that Sweden has one of the highest employment rates globally. Andersen’s original 1990 typology was critiqued in the main for its narrow Western European focus and generalisation, without due consideration for countries in Asia, Latin America and Africa. His models were also accused of misspecification.
Andersen broadly differentiates between three types of welfare capitalism in the 1970s and 1980s, namely:
The social democratic or industrial achievement model, with its highly regulated labour markets and a large ”de-commodified” sphere of public provision (in essence, the models found in the Scandinavian countries of Sweden, Norway, Finland and Denmark);
The liberal or residual welfare model of limited welfare provision and “flexible labour markets” (as seen in the Anglo-Saxon countries of the USA, UK, Canada and Australia);
The intermediate continental European “social market” tradition/conservative-corporate regime of welfare rights based on secure private sector employment (as seen in continental European countries including Germany and France and elsewhere including Japan).
And a fourth category was subsequently added. Known as the Mediterranean or familist model, it is characterised by the rudimentary character of the welfare programmes, weakness of state institutions, the prominent role of the family as a social buffer and a highly fragmented system of social protection. Yet it offers very generous social protection benefits such as old-age pensions (Italy, Greece, Spain and Portugal).
(The different development trajectory of most Asian countries should be noted. The emphasis in Asia was on economic growth, with well-being a derivative/by-product of their phenomenal growth. In South Africa, we have a strong emphasis on redistribution, starting with the Reconstruction and Development Programme (RDP) in 1994; some Left critics say that this has faded. This was largely a result of South Africa’s unfortunate political and socio-economic history. Our growth rate was relatively good in the decade prior to 2008, when an average of around 5% was registered. Subsequently, our growth rate has been anaemic.)
The social welfare models are further identified and distinguished by the “instruments used; the access rules; the financing methods adopted; and the organisational structures” (Antoni, 2018, Carlson, 2016; Hemerijck, 2020; Noyoo, 2017). The various models and different systems essentially differ on the basis of the “size and composition of public spending; the institutional aspects; the types of services provided; and the funding mechanisms” (Antoni, 2018; Barr, 2018; Carlson, 2016; Gamble, 2016; Hemerijck, 2020).
These welfare state models differ substantially in their expenditure. According to various theorists, what matters most for social outcomes – such as social protection and inequality – is the social purposes on which money is spent; how the programmes are organised, taxed and financed; and how transfer/service-orientated they are.
The Welfare State Post the 1970s Crisis
After the 1970s oil crisis, calamity became the prevailing narrative with reference to the welfare state. Before then, the welfare state’s high point, with almost universal appeal in the developed world, was embodied by the “belle epoque” period of high capitalism, which stretched from 1945 to 1973. The period post 1973, however, was characterised by stagflation (high inflation and low growth, eerily reminiscent of the current period) and heralded the nadir of Keynesian economics, together with the rise of Friedman’s monetarism and the ascent of neoliberalism in the wake of Thatcher, Reagan and Kohl gaining political office. It further witnessed the rise of globalisation and the increasing offshoring of production, which impacted significantly on the welfare state. Social protections came to be in the firing line with a shift to the right and renewed focus on the unfettered power of markets, a self-regulating economy, and a minimalist state.
These right-wing critics argued that if their advice is not followed, investment and jobs will be lost. Increasingly, the welfare system was prised open for the private sector, whereas this was previously taboo. The first area that was penetrated was kindergartens in countries like Sweden, although there was strong resistance. On the flip side, in the USA, the world witnessed how Trump could not dismantle Obamacare, even amongst Republican supporters.
Despite the shift to the right, it was the social democratic welfare states like Sweden, Norway, et al that showed the most resilience following the 2008 Great Financial Crisis. Their economies slowed down the least and they lost the least number of jobs. The same pattern was seen during the Covid-19 pandemic. In contrast, the Mediterranean states such as Greece and Italy, with their more segmented welfare states (i.e., regulating access to benefits based on membership in occupational or social groups, rather than based on needs or rights) weathered the storm less successfully (Hemerijck, 2020).
A key issue that arose after the economic slowdown/crisis of the 1970s, was the rising costs associated with expanding welfare programmes. The shift now was towards cost containment and recalibration of the original expansive model, a movement that was taken a few steps further with the introduction of austerity measures (cutting costs by government) post-2008. Britain, under the Tories, was a prime example of the new direction, which was illustrated even more starkly with the subsequent Greek sovereign debt crisis in the aftermath of 2008. South Africa has not remained immune to cost-cutting, with the introduction of “austerity by stealth” over the last few years.
After Covid, another major shift towards the policy of social investment, especially in the European Union (EU), occurred. The policy emphasised investment in people, with measures designed to enhance people’s skills and capacities. The focus was on granting them support towards their full participation in social life. There was a strong link to employability – aligned to the knowledge economy. Synergies between education, employment, gender equity, and social participation were underscored with the objective of the creation of a virtuous cycle of well-being. In relation to these outcomes, Hemerijck said that the national welfare states’ ability to foster institutional capabilities are imperative for an “effective, more service-intensive, social investment European welfare state”.
In the present era, a factor that’s impacting the functioning of the welfare state, is how the nature of work has changed due to the Fourth Industrial Revolution (4IR). As a result of the 4IR, higher levels of automation, with its associated drop in employment, together with the rise of other technological advances like robotics, artificial intelligence (AI), the Internet of Things, 3D printing, genetic engineering, quantum computing, blockchain technology have become common place. The coinciding shift to the service industry has led to rising levels of precarity amongst the workforces – a development that places additional pressure on the welfare system as workers struggle to adjust to the high cost of living.
South Africa’s Welfare
South Africa suffers from a deep malaise characterised by high levels of unemployment, poverty and inequality. Our economic problems are structural and deep-seated and require extensive and thorough surgery. No quick fixes would do.
Globally we top the list on all of these metrics. Our Gini coefficient is the highest according to the World Bank, with Stats SA’s Quarterly Labour Force Survey (QLFS) for Q2: 2022 telling us that a mere 648 000 jobs were gained between the first quarter of 2022 and the second quarter of 2022. The number of unemployed persons increased by 132 000 to 8 million out of a total potential workforce of 23,6 million. The official unemployment rate was 33,9%– and 44,1% for the expanded definition. Further bad news is that the economy shrunk by 0.7% in Q2, denoting weaker economic activity, less spending power and weaker confidence overall. This is against the background of the rising food and energy prices; higher interest rates, which dampens economic activity and demand; and the deep, unprecedented cost of living being experienced globally.
Even though the democratic state elected in 1994 inherited an extensive welfare policy, it was still skewed in favour of the previously advantaged. The emphasis of the new government was to bring about parity in social disbursements and lessen inequalities. The social policy and welfare regime that followed occurred within the macro context of transforming South African society to grow the economy for all, achieve social justice, overcome the social divisions of the past, and forge a united nation. Social policies and laws were comprehensively overhauled, based on a rights-based approach to social welfare. This was in line with the progressive South African Constitution and strong focus on socio-economic rights, enshrined in the Bill of Rights.
Formal racial discrimination in access to services no longer exists and a nationally integrated single welfare system has been created, incorporating all South Africans. Many innovations in social development have been introduced, albeit in stages, and not in an encompassing, universal manner as in the case of the Swedish social-democratic model. A key consideration has been the affordability of the social welfare model in South Africa, which has not been assisted by our weak economic performance, allied to serious political problems like “state capture”, especially since 2008.
The social assistance programmes established since 1994 are extensive and have a reach of more than 18 million people every month in the form of grants, old-age pensions, Covid-grants, public employment generating schemes, and the “social wage”. About 10.3 million people have signed up for the R350 special Covid grant (Ramaphosa, 2022). Although these efforts are admirable, it should be viewed against the unequal distribution of income in South Africa. The welfare bill now represents about 50% of all government spending of R1.1 trillion, of which roughly a quarter is distributed in cash (Kantor, 2022). Higher levels of economic growth are required to provide a larger tax base and ensure education and training deliver better qualified entrants to the labour market, based on the social investment policy found in the EU.
The table below shows the various instruments and policies that encompass the social welfare regime in South Africa, how extensive it is and how it has grown over the years.
The post-apartheid welfare regime
Non-contributory and means-tested forms of state assistance and public employment schemes
Contributory entitlements and government subsidies
Development social welfare services
Social assistance: · Disability grant · Old Age grant · Child Support grant · Foster Care Grant · Grant-in-Aid · War veterans grant Public employment schemes: · Poverty Alleviation Projects · Community Based Public Works Programme · Expanded Public Works Programme: [Working for Water Programme and Working for the Coast Programme] · Learnerships · Co-operatives and special Flagship Programmes such as the National Youth Service · Unemployment insurance Disaster relief: · Social Relief of Distress Programme · Social Relief Fund · Disaster Relief Fund · Refugee Relief Fund · Special Programme for Food Security In-kind transfers during food crises through the National Food Emergency Fund
Contributory insurance schemes: Medical-aid schemes Broad-Based Black Economic Empowerment (BBBEE or B-BBEE) and Affirmative Action The National Student Financial Aid Scheme (NSFAS) for tertiary level students Tax rebates Road Accident Fund (RAF)
Basic household security: Access to necessities: food, water, housing, electricity, education, medical care Consolidated Municipal Infrastructure Programme Community Water Supply and Sanitation Electricity Based Support Services Tariff Strategy Integrated Sustainable Rural Development Strategy Rural Infrastructure Strategy and Free Basic Services Coordination Free education including Early Childhood Development and free schooling (targeted at only the poor and not universal) Health protection programmes including Primary Health Care Integrated Nutrition Programme National School Nutrition Programme Prevention of Blind-ness/Vision 2020 Free Health Care Services and Protein Energy Malnutrition Scheme
Child protection services Adoption services Services for families in distress Services for abused women Victim empowerment programme Services for the aged Anti-substance abuse programmes Services for orphans and vulnerable children
Source: National Planning Commission, 2011
Is South Africa a Welfare State?
There is a considerable amount of debate about whether South Africa is a welfare state or not. And if it is, to what extent? Founder and Director of the Nelson Mandela School of Public Governance at the University of Cape Town, Prof Alan Hirsch, provides an excellent precis of the democratic government’s economic philosophy, saying the following: “The ANC government had followed a consistent economic philosophy with, at its centre, a social democratic approach to social reform. It is the state’s job to underwrite the improvement in the quality of life of the poor and reduce inequalities, but with a firmly entrenched fear of the risks of personal dependency on the state and of the emergence of entitlement attitudes” (Hirsch, 2005).
The following definition of the welfare state by political scientist Maurizio Ferrera, seems apt for South Africa: “The welfare state is a set of public interventions related to the modernisation process, which provide protection in the form of assistance, insurance and social security, introducing, amongst others, specific social rights in the case of specific events as well as specific duties of financial contribution” (Antoni, 2018).
According to Prof Robert Van Niekerk, Professor of Public Governance and Social Policy at the University of Witwatersrand – with its universal primary education, statutory social insurance and nascent moves towards national health insurance – does possess many of the characteristics of a social democratic welfare state. Sithole, Patel et al, concur with this view, albeit with various caveats. Van Niekerk also states that the goals of African Claims and the Freedom Charter of 1955 could only be achieved with a democratic, interventionist state that could redistribute wealth and resources. This would entail recalibrating the power and resource dynamics between the white minority and the black majority that commenced with the advent of democracy in 1994. This has shades of the Beveridge programme, introduced under Attlee’s Labour government redistributive programme in post-war Britain.
Others pose the problem in the form of a question. Former President General of the ANC, Dr AB Xuma, in the 1943 African Claims document, stressed the equality of treatment for the whole population; a bill of social rights; state medical services; and compulsory education, as well as extension of progressive labour legislation to all racial groups. This was the forerunner of the Freedom Charter of 1955, which demanded income maintenance; universal education; rights to housing; and medical care be provided by the state.
In 2012, the then President Jacob Zuma said that “we are building a developmental and not a welfare state. The social grants will be linked to economic activity and community development to enable short-term beneficiaries to become self-supporting in the long run” (Zuma, 2012).
Another statement reads, “Whilst acting effectively to promote growth, efficiency and productivity, the developmental state must be equally effective in addressing the social conditions of the masses of our people and realising economic progress for the poor” (ANC, 2007).
The concepts of a welfare state versus a developmental state are not divergent, but there is one important difference, with the developmental state’s focus more on economic growth with social welfare as a corollary (this is similar to the rise of the “Asian Tigers” post WWII).
Prof Ndangwa Noyoo of the Department of Social Development at the University of Cape Town stated in 2012 that “South Africa is not a welfare state even though it pursues strong state-led social policy programmes to counter the triple challenge of unemployment, poverty and inequality”. Burger (2008) refers to a welfare system in South Africa.
In contrast, Sithole takes to task the “myth” that South Africa is the biggest welfare state in the world based on the number of social grants recipients as vis-à-vis the taxpayers, which yield the unacceptably high dependency ratio. He says, whilst the dependency ratio is unsustainable in his view, South Africa is certainly not the biggest welfare state in the world. According to Sithole, the South African welfare system is residualist, which implies minimal state intervention in the daily lives of people. Furthermore, because not all citizens have access to services, only those who qualify in terms of the means test get services. The welfare state benefits therefore apply only to those who can prove that they are unable to meet their own welfare needs.
The Minister of Finance, Enoch Godongwana, in February 2022, said that South Africa is fast becoming a welfare state. He told the National Assembly that 46% of its citizens are receiving social grants, which is inimical to economic growth. According to Godongwana, it is the nature of Treasury to generally put the brakes on spending.
A Roadmap to Developing a Social Welfare State in South Africa
A comprehensive social welfare state requires a capable government – one which can look after its citizens from cradle to grave and provide equal opportunities to all, as well as guidance to the market, while being an active participant in a competitive and growing economy (Weir, 2022; Wills, 2022). Although South Africa is still a long way off from being classified as a comprehensive social welfare state, the ANC-led government has made some strides in that direction.
One such stride is South Africa’s guiding principles post-1994, which are rooted in the ruling ANC’s vision to create a social and national democratic developmental state. It reads: The ANC therefore seeks to build democracy with social content, underpinned by a capable developmental state. Informed by our own concrete conditions and experiences, this will, in some respects, reflect elements of the best traditions of social democracy, which include: a system which places the needs of the poor and social issues such as healthcare, education and a social safety net at the top of the national agenda; intense role of the state in economic life; pursuit of full employment; quest for equality; strong partnership with the trade union movement; and promotion of international solidarity (ANC, 2022).
Another step forward is the protection of individual rights as enshrined in the South African Constitution, which also contains South Africans’ socio-economic rights, legislating the rights of people to certain basic needs required for a human being to lead a dignified life (Khoza, 2007). This is an important foundation for the country’s most vulnerable and poor to stand on.
The government further instituted a targeted approach in developing a social safety net. The majority of its social support programmes are premised on an income threshold before an individual can qualify as a recipient. These include monthly financial support payments for children, disabled individuals and the elderly, as well as government’s Reconstruction and Development housing programme (GroundUp, 2022; LFA, 2022).
Limited financial support is also available through the Unemployment Insurance Fund to support, amongst others, retrenched workers and mothers needing maternity leave (SARS, 2022). In 2018, government further agreed to fully subsidise tertiary education for students from poor and working-class households (Gov, 2022a). A few years later, the state stepped in as the Covid-19 pandemic knocked people’s income, by introducing a Social Relief of Distress (SDR) grant of R350 for qualifying individuals (Gov, 2022b).
Looking to the future, the National Treasury has earmarked R3,3 trillion over the medium term to support vulnerable and low-income households. The Social Wage represents 60% of government spending over the next three years, with the largest share allotted to basic education, social protection and health services. In the 2022/23 financial year alone, the state supports an estimated 18,6 million grant recipients with an allocated budget of R364,4 billion, equivalent to 3,9% of the country’s GDP (Crotty, 2022). The financial assistance through the country’s extensive grant system equates to nearly 17% of the state’s total yearly expenditure (NT, 2022a; NT, 2022b). This is expected to increase as further social programmes are being considered.
A universal health care system is amongst the new programmes being considered for implementation. The National Health Insurance (NHI) is a health financing system with the aim to provide affordable health services to all South Africans, regardless of their socio-economic backgrounds (Gov, 2022c). The state intends to create a single fund that will buy medical services on behalf of the population. Citizens will then be able to access the required treatments at accredited health facilities, which include private institutions. The NHI is scheduled to be operational from 2026.
Government is further giving consideration to reshaping the current SDR grant into a basic income grant (BIG) (Osborne, 2022). Whether this will be targeted, like other social grants, or universal, is yet to be determined. The affordability of a BIG will most likely be the determining factor in the extent of such a programme. Supporters of a BIG argue that the financial assistance granted to the poor will be spent on consumer goods, which, in turn, would boost economic activity and therefore growth. Critics, on the other hand, believe the South African government simply cannot afford such a measure at the moment.
Despite these progressive steps towards creating a social welfare state, the movement forward remains limited. If models, like the Nordic social welfare state, are used as a benchmark, the South African government still has gaps to fill. These models are generally characterised by universal programmes for sufficient, amongst others, parental support, medical and old-age assistance, and education subsidies (NC-op, 2022). They further seek to provide effective childcare support to parents, as this has proven to increase a country’s labour force participation rate – especially amongst women (Enevoldsen et al, 2020). Maximising a country’s labour force participation through supportive policies is key, as the more people that are employed, the bigger the pool that can contribute to the country’s welfare fund to continue delivering the required social services (Greve, 2007).
Another point to be addressed, is ensuring the state provides quality education to develop the required skills for future economic performance (Davids, 2020). South Africa’s education system has repeatedly delivered poor learner results, by international standards.
Furthermore, governments of countries considered to be social welfare states operate with near-zero incidents of corruption (Davids, 2020). While these governments still oversee some state-owned entities (SOEs), especially those producing a net social welfare benefit, they’re considered to be value creating and competitive organisations, as opposed to companies burdening taxpayers. These states also enjoy a deep trust between social partners (government, business, labour and civil society) that all who live and function within the country’s borders are working toward the same goal, while contributing their share of funds to the country’s welfare (Karkov, 2012).
In this regard, the current South African government has a mammoth task ahead. It requires rooting out state looters, establishing limited, but successful, SOEs and restoring trust between its social partners. It should be noted that reaching a consensus about the structure of a national social welfare policy framework is going to be vital for the state to move forward with its stated ideal.
Fiscally speaking, underpinning the successful development of any welfare state, is economic performance. Without growth outpacing the birth rate, South Africa won’t be able to garner the fiscal ability to support the required welfare programmes. Government’s duty in achieving this is to create ripe market conditions for the private sector to flourish. If business succeeds, it will expand, and with that comes increased employment and more tax revenue to fund welfare programmes. High taxes and a relatively large tax base are also characteristics shared by some successful welfare states (Greve, 2007). The state should, however, continue to keep a close eye on market operations, as failures could occur where mandates or regulations may be required to guard against it. These should be implemented with caution as to not stifle companies’ performance.
As part of the roadmap to developing a social welfare state in South Africa, the programmes accompanying a social welfare state must be implemented in stages as and when the economy allows for it. It’s a parallel process where the expansion of the economy allows for more funds to implement another welfare net. In turn, these programmes may up labour participation and increase productivity further, boosting growth, and making yet more money available to support and provide services to the poor.
It’s vital to not over-extend the fiscus with social welfare programmes, i.e., implementing too many plans at once without sufficient funds available to support them. Further attention must be given to the strategy, through which certain programmes are prioritised in the order they must be launched as the economy moves towards a desired growth rate. In order to achieve the greatest positive impact given the available financial input, implementing plans must be prioritised in a staged process.
The democratic dispensation has taken meaningful steps towards developing a social welfare state in South Africa since 1994. The existing programmes are a lifeline for millions living in poverty. Plans are afoot to expand these programmes, while adding new ones to provide further support. The country’s fiscal constraints to support the necessary measures may, however, prove a difficult hurdle to overcome should government fail to address its own shortcomings. First and foremost, it’s the state’s responsibility to fulfil its role effectively, as befitting an ideal welfare state, before other partners will follow suit. Without this cooperation, the economy may never gain traction, leaving the idea of South Africa operating as a comprehensive social welfare state to revolutionary literature.
Source: Inclusive Society Institute
The welfare state has undergone various changes, especially with the entry of the private sector into key areas of the social welfare system that were previously off-limits. The sentiment was that there should not be profit-taking from social aspects like education, health and so on. The concept has also been under scrutiny and attack due to the rising costs associated with its expansion and the onset of the mid-1970s economic crisis.
And even though Piketty (2019) summarised the universal achievement of the welfare system in Western Europe as “the best social-security system in the world together with the least unequal, social market economic system in the world”, the aging population in those countries, which decreases the number of people in the labour force, plus the increase in health care costs in particular, has added to the negative sentiment.
Recent world events have swung the pendulum once more, however. Post the 2008 Great Financial Crisis and in 2020/21, with the onset of the Covid-19 pandemic, the welfare state has shown its true worth, helping millions when they couldn’t help themselves.
John Stuart Mill and John Maynard Keynes wisely prophesied that humankind can increasingly look forward to a horizon of growing leisure: “The reorientation of life away from the merely useful toward the beautiful and the true”. Or, as according to Skidelsky: “The good life undergirded by a high degree of happiness” (Skidelsky, 2020). It pays to be mindful, however, that Keynes also said in 1936 that if democracies fail to tackle mass unemployment and inequality, people would turn to dictatorship. It happened then, and it is starting to happen now.
In South Africa, we do not have the luxury of starting with the contention that welfare services must be affordable, before embarking upon its provision. Poverty and inequality are way too high and must be mitigated and reduced. The key issue is that more jobs must be urgently created, and a social accord reached between the key social partners. Swanepoel agrees that the tax base needs to be increased, so that the state has sufficient resources to implement welfare programmes and to spend on other societal priorities. He further notes that in Sweden, more than 70% of working-age citizens contribute towards the tax base, whereas the comparative figure for South Africa is around 11%, which is way too low (Swanepoel, 2022).
A well-functioning state machinery, allied to an expansive welfare state will enhance overall well-being in society, as well as social cohesion, thus lessening our growing list of social problems. The riots and looting in July 2021, in mainly KwaZulu-Natal and Gauteng, are signs of what might happen if people go hungry in large numbers and have no jobs. Such circumstances – and the withdrawal of the special Covid-19 grant prior to July 2021 – impact negatively on their dignity and sense of self-worth, all of which were contributing factors in creating a climate conducive to chaos and destruction that was exploited by unscrupulous elements.
It is the contention of this paper that the South African state be regarded as containing considerable or extensive features of a welfare state, but not of a fully-fledged one, à la the social democratic welfare state. Given the negative connotations associated with the term “welfare”, maybe “social democratic state” should suffice. It exhibits features of the intermediate and residual welfare state, as expounded by Esping-Andersen, but not in the neat fashion of those models. The social welfare regime is undergirded by a strong anti-poverty focus, as shown in the public expenditure figures. The other key drawback is that the South African state is weak and flailing, with many commentators preferring the word “failing”. This is a key consideration in the ability of the state to deliver on its commitments to citizens.
The Bureau of Market Research’s (BMR) June 2022 Happiness Index shows that South Africans are now less happy than before, and confidence is at an all-time low. This is in marked contrast to the Scandinavian welfare states, which register consistently as the happiest nations on earth, according to Gallup’s annual World Happiness Report. We are most certainly wedged between Scylla and Charybdis in South Africa currently. The interplay between the state and market must produce the well-being of citizens, allied to sustaining employment and promoting growth. By being timid, rather than bold and innovative, we are not going to slay the beasts of unemployment, poverty, inequality and other social ills.
The capability approach is a theoretical framework that entails two normative claims: first, the claim that the freedom to achieve well-being is of primary moral importance and, second, that well-being should be understood in terms of people’s capabilities and functioning. Capabilities are the doings and beings that people can achieve if they so choose – their opportunity to do or be such things as being well-nourished, getting married, being educated, and travelling; functioning are capabilities that have been realised. Capabilities have also been referred to as real or substantive freedoms as they denote the freedoms that have been cleared of any potential obstacles, in contrast to mere formal rights and freedoms (Robeyns & Morten, 2021).
Dani Rodrik, an economist at Harvard University, who's devoted his career to the interplay between globalisation and economic development, has documented a trend called "premature deindustrialisation". With such a trend, countries start to lose their manufacturing jobs without getting rich first. Developing countries have moved away from manufacturing and ventured into services long before their more developed counterparts did, and at fractions of the income per capita. This led to a phenomenon wherein the growth of an economy's manufacturing sector begins to slow down prematurely in its path towards development. Some economies might even witness a premature movement of resources to the services sector, thus leading to underdevelopment of the manufacturing sector. Premature deindustrialisation – i.e., a decline in the share of manufacturing in the economy and typically a shift towards services – is regarded in literature (especially a‐la‐Kaldor) as being likely to have negative effects on economic growth.
Joseph Stiglitz defines globalisation as the process of economic integration of countries through the increasing flow of goods, services, capital and labour. This process is not new and has started at the end of the 19th century with the 1st wave of globalisation. Economic "globalisation" is therefore a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through the movement of goods, services and capital across borders. The term sometimes also refers to the movement of people (labour) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalisation (IMF, 2008).
According to British economist, Prof Alan S. Blinder, Keynesian economics is a theory of total spending in the economy – called aggregate demand – and its effects on output and inflation. The man behind the theory, John Maynard Keynes, spearheaded a revolution in economic thinking that overturned the then-prevailing idea that free markets would automatically provide full employment. That is, that everyone who wanted a job would have one as long as workers were flexible in their wage demands. The main plank of Keynes’s theory is the assertion that aggregate demand – measured as the sum of spending by households, businesses and the government – is the most important driving force in an economy. Keynes further asserted that free markets have no self-balancing mechanisms that lead to full employment. Keynesian economists justify government intervention through public policies that aim to achieve full employment and price stability (Jahan, Mahmud & Papageorgiou, 2014).
With the General Theory, as it became known, Keynes sought to develop a theory that could explain the determination of aggregate output and, as a consequence, employment. He posited that the determining factor is aggregate demand. Amongst the revolutionary concepts initiated by Keynes was the idea of a demand-determined equilibrium wherein unemployment is possible; the ineffectiveness of price flexibility to cure unemployment; a unique theory of money based on "liquidity preference"; the introduction of radical uncertainty and expectations; the marginal efficiency of investment schedule breaking Say's Law (and thus reversing the savings-investment causation); the possibility of using government fiscal; and monetary policy to help eliminate recessions and control economic booms. Indeed, with this book, he almost single-handedly constructed the fundamental relationships and ideas behind what became known as "macroeconomics" (Phelps, 1990).
Neoliberalism is a thorough reinvention of the classical liberal tradition expanded to encompass the whole of human existence as a political animal and a knowing being. In this tradition, the market stands as the ultimate arbiter of truth. The pinnacle of achievement is to become an entrepreneur of the plastic self. In addition, there is no such thing as society and freedom is recoded to mean anything the market allows. Neoliberals privilege the strong state as opposed to the conventional wisdom that they are for a minimalist state under all conditions. All attempts to demote the state to night-watchman (Adam Smith) status end up augmenting the power and size of the state with respect to the market. It is generally conceded to have been initially stabilised by the members of the Mont Pelerin Society, a group founded in 1947 and that is still in existence today. Over the last four decades, the group has expanded to encompass a vast thought-collective ranging from high-profile economists like Friedrich von Hayek and Milton Friedman to politicians like Margaret Thatcher and Ronald Reagan; from the Murdoch media empire to Astroturf movements like the Tea Party (Mirowski, 2014).
In 1601, England experienced a severe economic depression with large-scale unemployment and widespread famine. The Poor Laws were proclaimed as a system of poverty relief in England and Wales (VCU, 2011).
The Original Position is a central feature of John Rawls’s social contract account of justice, “justice as fairness,” set forth in A Theory of Justice (TJ). The Original Position is designed to be a fair and impartial point of view that is to be adopted in our reasoning about fundamental principles of justice. In taking up this point of view, we are to imagine ourselves in the position of free and equal persons who jointly agree upon and commit themselves to principles of social and political justice (Robeyns & Morten, 2021).
The Rehn-Meidner Model was named after two trade union economists, Gösta Rehn and Rudolf Meidner, and launched in 1951. The basic idea was that all industries, irrespective of their profitability, pay the same wages for similar work. Less efficient
companies would then eventually go out of business; efficient companies would make huge profits and expand; and the government would through its labour exchanges transfer workers from the former to the latter.
Social Policy is concerned with the ways societies across the world meet human needs for security, education, work, health and well-being. Social Policy addresses how states and societies respond to global challenges of social, demographic and economic change, and of poverty, migration and globalisation (Platt, 2022).
Social Rights are human rights and have all of the latter’s characteristics. Social Rights are moral, legal or societal rules and an understanding of what is necessary to fulfil people’s social needs and to promote social inclusion and social solidarity. Social Rights are concerned with how people live and work together and the basic necessities of life. They are based on the ideas of equality and guaranteed access to essential social and economic goods, services and opportunities (Council of Europe, 2022).
Socio-Economic Rights are those rights that give people access to certain basic needs necessary for human beings to lead a dignified life. The South African Constitution of 1996 includes social security as one of the socio-economic rights enshrined in the Bill of Rights. Section 27(1)(c) of the Constitution reads: “Everyone has the right to have access to social security, including, if they are unable to support themselves and their dependents, appropriate social security.” This was codified in the ground-breaking Grootboom case and the decision that, “the measures instituted must consider the plight and conditions of people in desperate circumstances and those who are living in conditions of poverty (SAHRC, 2001).
The Social Wage reduces the cost of living and is a measure of how much better off individuals are with the provision of publicly funded welfare services (education, health, social housing and so on) than they would be without these 'in kind' benefits (i.e., if they had to pay the full cost of these services) (SPII, 2018).
The Stockholm School, or Stockholmsskolan, is a school of economic thought that refers to a loosely organised group of Swedish economists that worked together, in Stockholm, Sweden, primarily in the 1930s. Due to translation issues (they published primarily in Swedish), their recognition internationally was initially limited to the extent that they received no credit for theories they developed. Later, however, two of this group were awarded the Nobel Memorial Prize in Economics for their work: Bertil Ohlin, with James Meade, for the Heckscher-Ohlin theory of international trade and Gunnar Myrdal, shared with Friedrich von Hayek, for their work on the theory of money and economic fluctuations. Myrdal gained fame for his sociological approach, which led to cumulative causation theory. The Swedish welfare policies were designed by Myrdal and Gustav Moller during this period (New World Encyclopaedia, 2008).
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This report has been published by the Inclusive Society Institute
The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.
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