In a televised speech before the Dutch parliament, King Willem-Alexander said that the welfare state of the 20th century is gone and should be replaced by a society in which people create their own social and financial safety nets with less help from the state. The focus of the address, written for the king by Prime Minister Mark Rutte’s government, was that the current levels at which the state pays for unemployment benefits and subsidized health care are unsustainable amid Europe’s ongoing economic woes. While the king’s speech does not necessarily portend an end of the welfare state in the Netherlands, it was a relatively rare acknowledgment of the severity of the European crisis by the Continental elite.
The king’s words were highly symbolic for several reasons. The welfare state, where the state is expected to ensure the well-being of its population from cradle to grave, is mainly a European creation. It emerged in its earliest forms in the late 19th century in Bismarck’s Germany, and it took root in the United Kingdom, Nordic Europe and other parts of the continent in the 1930s in response to the Great Depression. Since the end of World War II, it has become a central element of fiscal and economic policies throughout Western Europe, though systems vary from one country to the next. Today, the welfare state is part of the backbone of modern Europe.
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Though limited reforms have been enacted over the decades, the European elite – whether from the center-right or the center-left – have resisted challenging the welfare state, since it is part of the social contract between Europe’s rulers and the ruled. However, the European crisis is threatening the long-term survival of the system, with economic problems raising serious questions about its sustainability, as well as the very definition of the nation-state in Europe.
Europe’s plight is actually a combination of several crises over issues ranging from competitiveness to demographics. In the six decades that followed the end of World War II, the Europeans built large, heavy nation-states that eventually became financially unsustainable. Prior to the financial turmoil that began in 2007, most Western European governments covered their structural shortcomings by issuing debt. This allowed states to postpone painful structural reforms and the electoral backlash that were likely to follow. The introduction of the euro in the early 2000s further complicated matters, since countries no longer had the ability to use monetary policy to compensate for their lost competitiveness.
Now, the European crisis is forcing most Western European countries to face the consequences of their inability to implement reforms. For decades, the Europeans enjoyed the benefits of the welfare state essentially without addressing its costs. But the crisis has accelerated a day of reckoning that seemed inevitable, since Europe’s shrinking, aging population (which will substantially reduce European labor forces and tax revenues) would have forced most governments to eventually implement structural reforms anyway.