Political theorists have shown that social program development in different jurisdictions was based on varying assumptions about why some people need government assistance, how the state should help them, and how benefits and services are best delivered. In his well-known categorization of welfare states, Gösta Esping-Andersen (1990) argued that the history of strategic alliances between governments and influential interest groups shaped the development of welfare regimes. Welfare regimes are collective agreements about social programs (including services and benefits for families) that endure over time despite changes in government.
Esping-Andersen categorized nations such as the United States and Britain as liberal welfare regimes because they focus on individuals and assume that they should provide for their families through paid employment. These governments invest relatively low levels of public money into social programs and rely mainly on social assistance targeted to those without jobs or private resources. Benefits are financed through general taxation and set below the minimum wage to provide incentives to find jobs. Liberal welfare regimes emphasize efficiency rather than equity and individual responsibility rather than collective responsibility. Neoliberal regimes (such as the United States) pay benefits only to those considered deserving.
Esping-Andersen labeled nations such as Germany or Italy as corporatist welfare regimes because employers' groups, trade unions, and governments collectively developed social insurance programs to share the risk of income lost due to unemployment, disability, or sickness. These schemes are usually financed through payroll deductions from employees and employers (and sometimes matched with government contributions), and benefits are typically generous for contributors. Corporatist regimes are also called conservative because they are not designed to promote equality, but rather to stabilize employee incomes and contribute to social stability and cohesion for employers and governments.
Countries such as Sweden or Denmark have been called social democratic because they were designed to use taxes to redistribute income, to maintain full employment, and to prevent poverty. Social democratic welfare states offer benefits to individuals as citizenship rights and attempt to minimize inequalities. Esping-Andersen argued that variation among welfare regimes depends on such factors as the philosophy of the governing party and coalitions between powerful interest groups and political parties. This has been called the power resource theory, which is a widely accepted explanation of policy variation among nations, although its details have been criticized.
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