The Welfare State in the Twenty-First Century

By Joseph Stiglitz |

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Designing the twenty-first-century welfare state is part of a broader debate redefining the role of the market, the state, and “civil society”—non-state forms of collective action.

One of the tenets of the Reagan-Thatcher revolution was questioning the welfare state. Some worried that the financial burdens of the welfare state would drag down growth. Some worried about the effect of the welfare state on the sense of individual responsibility, others that the welfare state provides an opportunity for the lazy and profligate to take advantage of hardworking citizens. A sense of social solidarity had united citizens around the world during World War II. Some thirty years after that global conflict, that solidarity was eroding, and economic arguments quickened its disintegration. Even two decades after the doctrines of the Reagan-Thatcher revolution of the 1980s had taken root—and long after its shortcomings had become obvious—others argued that the welfare state had contributed to the euro crisis.

This paper argues that these arguments criticizing the welfare state are for the most part fallacious and that changes in our economy have even increased the importance of the system. The paper then describes some of the key elements of a twenty-first-century welfare state.

Joseph E. Stiglitz is Senior Fellow and Chief Economist at the Roosevelt Institute and a professor at Columbia University. A recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979), he is a former senior vice president and chief economist of the World Bank and a former member and chairman of the (US president’s) Council of Economic Advisers.