Governmental efforts to control alcoholic beverages go back as far as recorded history. The Code of Hammurabi included regulations of prices, taverns, and sellers. That the laws often failed to produce the desired effects—temperance and good public order and perhaps revenue exceeding the social costs of excess—is inferred from the frequent legislative attempts at total prohibition in numerous lands throughout history, all apparently without lasting success. The most resounding failure was that in the United States from 1919 to 1933. Current prohibitions in parts of India appear to be equally ineffective.
Less totalitarian efforts to control the use of alcohol include licensing systems that limitthe number and locations of places of sale; restriction of days and hours of sale; prohibitions of sale to the young, with ages varying in different parts of the United Statesand across the world; and regulation of the strength of beverages, the size of containers, advertising, prices, or profits. Some governments—for instance, those of Finland and several states of the U.S.—have sought to eliminate the private-profit motive from the sale of alcoholic beverages by reserving a monopoly in the trade to themselves. Communist countries have government monopolies. But indications that this has made any difference in the kinds, degree, or severity of problems are lacking; apparently problem drinkers do not need to be persuaded by profit seekers. Some governments—for instance, those of Sweden, Finland, and the U.S. state of Ohio—have attempted to control individual drinking by a system of personal ration books for purchases. In Sweden this system was abandoned after 38 years of trial; evidently, those who needed to drink a lot could find supplies—even when their ration books were withdrawn. The most universal regulation of alcoholic beverages takes the form of taxation (or, in government monopolies, an added profit), which is often quite heavy. Usually, however, though the taxing policy may have the ostensible purpose of reducing consumption or controlling licensees, the real object is revenue. In any event, none of the common forms of government control have proved themselves able to promote temperance in those whose need to drink heavily is uncontrollable. The persistence of massive restrictions and regulations, with costly enforcing bureaucracies, reflects the tendency of legislatures to give some satisfaction to the substantial minority of convinced opponents of alcohol and the tendency of segments of the drinking population—and even of some people in the liquor trade—to accept the naïve notions of the anti-alcoholists that these regulations do some good.
Though not significantly influenced by governmental efforts, the rate and severity of alcohol problems have indeed been influenced by nongovernmental movements and agencies. The most obvious example is the success of religious movements, such as Buddhism, Isl(m, and numerous Christian denominations and sects, in confirming their followers as total abstainers. The Methodist and Baptist denominations, the Quakers, the Mormons, the Christian Scientists, the Seventh-day Adventists, and the Jehovah’s Witnesses are examples of Christian churches that have made abstinence a condition of loyal membership, though the Methodist Church has modified its stand in recent times. Other Christian denominations, such as the Congregationalists, have advocated abstinence without making it a requirement. Though not formally allied with these churches, the Woman’s Christian Temperance Union (WCTU) and other temperance societies, particularly in the United States, once drew much support from them. In several European countries the abstinence movement also drew some support from the Socialist-influenced labour movement and found some organizationalexpression in the form of fraternal orders, particularly the Order of Good Templars. The importance of the religious orientation is indicated by the relatively larger proportion of abstainers in the United States than in countries where the ideal was more largely politically motivated. The decline in the numbers of abstainers in recent times may reflect the changing character of religious adherence.
The new scientific orientation
In the past generation the character and influence of citizen movements have changed markedly. Whereas in former times the personnel, teaching aids, and ideologies of the temperance movement had generally dominated the research and education regardingalcohol, the tendency now is toward deriving objective information from academic and scientific sources. Among the major efforts to bring a scientific orientation to bear on the consideration of alcohol problems has been the founding of a systematic documentation and publication of the biological and social-science knowledge of the entire world; this is now a function of the Center of Alcohol Studies at Rutgers Universityin New Brunswick, New Jersey. The new trend had its repercussions also on international cooperation. The International Bureau Against Alcoholism, founded in 1907, became, in 1964, the International Council on Alcohol and Alcoholism—more recently renamed the International Council on Alcohol and Addictions. The change of name represented a change in aims and policies, from total opposition to any drinking to advocacy of an objective consideration of alcohol problems. This change was manifested also in the character of the international congresses convened by anti-alcohol organizations since 1885 and by the International Bureau since 1925. Formerly devoted essentially to descriptions of the horrible effects and denunciations ofthe evils of alcohol, beginning with the 26th Congress in 1960 the program has been infiltrated by presentations from the scientific-academic world, and the 28th Congress in Washington, D.C., in 1968 was marked by the total absence of representation from the remnants of the old temperance movement; the papers and lectures offered by representatives of religious organizations and societies were on an equal level of scholarship and objectivity with those from the scientific and academic community.
These developments, in turn, have had repercussions in government activities. In the United States and Canada they have led to the establishment of some 55 state and provincial agencies, some independent, most attached to departments of health or mental health, with missions chiefly to provide treatment for alcoholics but often also to participate in education and occasionally to engage in research. A few county and city agencies have also been created. On the federal level in the United States, a National Institute on Alcohol Abuse and Alcoholism has been established, and the Department of Transportation is engaged in a program aimed to reduce the alcohol-and-traffic problem. Other governments have shown recognition of the potential of newer, science-oriented approaches and have supported research and education as well as therapeutic activities, sometimes through special institutions such as the Canadian Addiction Research Foundation, supported by the province of Ontario; the Finnish Foundation for Alcohol Studies; the Norwegian National Institute for Alcohol Research; and the Northern Committee for Alcohol Research, with membership from all the Scandinavian countries. The new ferment discernible in the late 20th century in the fieldof alcohol problems is thus far stimulated mainly by concern over the human and economic costs of existing problems and the aim to alleviate them. The idea that only the prevention of alcohol problems or that only the reduction of the numbers of personswho become newly involved in alcohol problems can effect permanent gains is universally given lip service but rarely is the object of direct effort. This is owing to two facts: those who have been chiefly involved in bringing about the new ferment have been inspired mainly by the humanitarian and economic motive to bring relief to those who are already suffering from the consequences of alcohol problems, and practical new methods of prevention, going beyond scattershot education, have yet to be invented.
The rising cost of social security
The cost of social security rose substantially in the period after World War II both in real terms and as a proportion of rising gross domestic product. While social security spending amounted to less than 10 percent of the gross national product in nearly all countries in 1950, it had risen to 20 to 30 percent or more in many European countries by 1980. Among the reasons were the extension of the coverage of social security, the widening of the risks covered, the indexing of benefits, and the greater generosity of benefits, which moved up to or near 100 percent replacement of earnings for certain contingencies in some countries. But also of major importance was the maturing of pension schemes. Many of them were recast in the 1940s and ’50s, and therefore it was not until the 1980s that people had had the opportunity to contribute on the new basis for all or most of their working lives and thus could draw pensions approaching or reaching the maximum for which these schemes provided. Three further factors were the increasing proportion of aged persons in the population, the decline in pension ages, and the lower proportion of working population.
The costs of health care also rose sharply after World War II. Several reasons contributed to this trend. First, the higher proportion of elderly in the population influenced health care costs as well as the costs of cash benefits. Persons over pension age require two to three times more health care than persons of working age, and the difference is still greater for those over 75, the fastest growing age group. A second factor was the decline in working hours, which meant that more persons (e.g., nurses) were needed in order to staff 24-hour services. A third factor was the continuous development of medical technology, such as new equipment and labour-intensive procedures. Instead of replacing labour, as in industry, innovations in health care normally required more labour for their operation. A further reason was the removal of supply restraints with the provision of more doctors and dentists, a major growth of medical auxiliaries, and the construction of new hospitals, which were more expensive to run. A fifth reason was the financial incentives to supply more services, which underlay many of the systems of paying providers under health insurance.
The final and critical factor that destabilized the finances of social security schemes was the rapid growth of unemployment beginning in the 1970s. In those countries that included unemployment benefits in their social insurance schemes, this phenomenon created both unpredicted higher costs for benefit payments and a loss of revenue from those who were unemployed. The burdens on social assistance programs were also substantial in some countries, coming at a time when unemployed persons were no longer in a position to contribute to tax revenue.
The rapid growth of social security expenditure attracted little attention during the periodof rapid economic growth up to 1973. It began to cause concern after the steep rise in oil prices checked economic growth in oil-importing countries. The revenue that financed social security ceased to be buoyant at the same time as new major demands were made on the system. From the late 1970s there was talk of a crisis in social security financing.
By 1980 social security expenditure amounted to 32 percent of the gross national product in Sweden, between 25 and 30 percent in Belgium, Denmark, France, and The Netherlands, and between 20 and 25 percent in Austria, West Germany, Ireland, Luxembourg, and Norway. These figures were much higher than for Australia (12 percent), Canada (15 percent), Japan (11 percent), New Zealand (14 percent), the United States (13 percent), or the United Kingdom (18 percent). The cost was much lower in developing countries. High costs are associated with high levels of social security benefits and also with costly systems of providing health care. Some countries,such as Sweden, have allowed health care costs to continue to rise because of the capacity of this service sector of the economy to provide further jobs and thus avoid high rates of unemployment.
The aim in many industrialized market countries came to be the containment of the costs of social security. This requires that program costs not grow faster than the yield of contributions. Various devices were introduced to help secure this result. Systems ofindexing benefits and pensions to prices or earnings were revised downward, or adjustments were made less frequently. Pensioners were made to pay contributions toward health-care benefits. In France tax income was brought in to supplement the yield of contributions. In the United Kingdom the earnings-related additions to short-term benefits were abolished.
A series of measures was introduced to limit the cost of health care. Charges and copayments were increased or new charges were introduced. Payment for drugs was introduced in West Germany (1977), Italy (1975), and Portugal (1982). Portugal and Luxembourg joined France and Belgium in charging for consultations with doctors. Charges for hospital care were introduced or extended in Belgium, West Germany, Portugal, and France. By 1984 there was no country in western Europe that provided free care to all its insured population.
Payment systems under health insurance were revised to reduce incentives for overservicing. The aim in West Germany was to pay the doctor more for the consultation and less for medical procedures. Payments for diagnostic tests were sharply reduced in Belgium. As part of the introduction of a national health service in Italy, payment to all general practitioners was changed from fee-for-service to capitation, and the bulk of specialists began to receive full-time or part-time salaries. Budgets for each hospital were introduced in Belgium, France, and The Netherlands, inpart to discourage unnecessary retention of patients paying per day of care. Countries in which hospitals were already paid on a budget basis reduced the budgets. In the United States hospitals began to be paid under Medicare and Medicaid according to a schedule of costs for various groups of diagnoses.
Countries maintained strong controls over new hospital construction or expansions, and incentives were created in a number of countries to transfer beds from general useto the care of the long-term sick. Several countries took measures to develop alternatives to hospital care, such as outpatient surgery, outpatient hospitals, nursing homes, residential homes, and home care by domiciliary teams. The United Kingdom closed some 400 hospitals over a period of 10 years. Restrictions on the installation of major new medical equipment went into effect in Belgium and France. By 1955, 10 of the 12 countries of the European Economic Community had instituted quotas for medical schools. In Denmark, France, Ireland, Portugal, and Spain the number of medical students was cut substantially.
Most countries in western Europe introduced restrictions as to what medications a doctor could prescribe under the health service or health insurance system. Most of these countries exercised tight control over pharmaceutical prices and pharmacists’ margins. New measures were introduced in the effort to control overprescribing.
Social security spending tends to vary between countries in direct proportion to their respective standards of living; in other words, the more affluent a country is, the more it is likely to spend on social security. Spending also tends to vary according to the proportion of elderly people in the population. Third, it varies according to the year in which the first legislation was adopted: countries with older social security programs tend to spend more. There are, of course, exceptions to this pattern. For example, the United States and Japan are low spenders both for their standard of living and for their proportion of elderly, and New Zealand is a low spender for a country that introduced pensions as early as the end of the 19th century.
This type of analysis has been criticized, however, for ignoring private arrangements, particularly employers’ provisions established as part of collective bargaining. Thus, forexample, the large role of fringe benefits in Japan helps to explain the relative lack of development of statutory social security. Similarly, the large role of occupational pensions and health insurance negotiated between employers and employees helps to explain the underdevelopment of statutory social security in the United States. Henceit is argued that private and public social security must both be taken into account in any comparison of national programs. In federal countries such as Australia, Canada, Switzerland, and the United States there were constitutional obstacles to adopting social security that led to the private sector’s playing a larger role.
Political orientation also plays a role in explaining the extent to which social security has been developed in the public sector. After some initial opposition, political parties drawing substantial support from the working classes and the trade unions have promoted the expansion of social security. This includes European Catholic Workers’ movements. Extensions of social security may be introduced by coalition governments with a conservative majority as the price needed to keep the coalition together. The highspending in Scandinavia can be explained by the strong influence of social democratic parties in the period following World War II. Trade unions have had less influence in this direction in Australia and New Zealand. The absence of a working-class party in the United States is part of the explanation of the relative underdevelopment of its social security program.
Some of the trends leading to increased costs are bound to continue. While the number of aged persons in most highly industrialized societies is likely to stabilize during the later years of the 20th century and the early years of the 21st century, the proportion within it of those over 75 will continue to increase substantially. This has major implications for further increases in the cost of health care. Moreover, pension schemes are still maturing, and there are pressures for further improvements of benefits, particularly to provide sex equality, lower pension ages, and better assistance for persons, particularly women, inadequately provided for previously. On top of all this, costly developments in medical technology continue. If the trend to shorter working hours continues this will also have a further major impact on the cost of health services.
Looking further ahead, the proportion of aged in the population is expected to start to increase substantially in the second and third decades of the 21st century as the increase in births after World War II becomes reflected in an increase in pensioners. It is this prospect that has led the United States to plan for increases in pension ages and the United Kingdom to decide to scale down its second tier earnings-related pension scheme.
The level of contributions and taxes needed to sustain present plans for social security cannot be predicted. While the continuing trend toward a higher number of aged in the population can be safely predicted, the birthrate is much harder to forecast. Of vital importance is the level of unemployment because of its impact on both sides of the balance sheet; reduced unemployment would add to contributions and tax income as well as lower the cost of benefits. Nevertheless, the prospect of a substantial increase in pensioners in the 21st century has led to fears in some quarters that the “compact between generations” may not perpetually be honoured. Hence it is argued that the pay-as-you-go method of pension contribution should be replaced by the capitalization method used in early pension schemes and in the private sector. Alternatively it is argued that the privatization of social security pensions would lead to higher savings and investment out of which future pensions could be paid. The disadvantages of either of these approaches are that there would need to be an immediate increase in contributions to provide the planned level of pensions. This could lead to pressure for higher cash earnings. Moreover, the level of pensions would no longer be indexed but would depend on the yield of investments.
Criticisms
It has been argued that the high cost of social security is in part responsible for the low levels of economic growth in industrialized societies since 1973. The argument takes three forms. First, it is said that high levels of unemployment benefits reduce the incentives to take paid work. Second, resistance to the payment of taxes and contributions leads to wage demands, inflation, and government deficits. Third, it is argued that because people have rights to social security benefits they are less likely tosave; this lowers investment and thus economic growth. For all these reasons social security is said to have contributed to or even to have been responsible for not only low growth but also for high levels of unemployment.
In response to these criticisms it has been pointed out that empirical investigations lend little support to the contention that people prefer benefits to work, though the availability of benefits may make them less willing to take low-paying jobs. Second, it isargued that tax resistance would apply whether pensions were provided in the private or in the public sector. Indeed, if pensions were provided in the private sector they would have to be capitalized, which would require higher contributions and therefore lower cash earnings, leading to still greater pressures for higher pay. Third, the evidence that social security reduces savings is by no means conclusive; indeed, in many countries there has been a boom in the variety of different forms of saving following the establishment of pay-as-you-go systems of financing social security. Moreover, investment is limited by the availability of profitable investment opportunities rather than by any shortage of savings. And if low savings does limit investment, governments can generate a budget surplus out of which investment can be financed.
Some critics argue that social insurance benefits should be replaced by a negative income tax. As countries get richer, it is argued, an increasing proportion of the population is in a position to take out private insurance against the risks for which social security provides. If social security were concentrated exclusively on the lower income groups, provision could be more generous and the burden of public provision could be reduced. The administrative and other problems of using annual tax returns as the basis of making cash payments to individuals whose circumstances are constantly changing as they go in and out of employment, marriage, and cohabitation are considerable. But in the context of saving, it was because income-tested pensions were thought to be damaging to thrift that many social insurance programs were established in the first place. Low earners are unlikely to save if the yield of their savings leads to a dollar-for-dollar reduction in pension. Moreover, many countries in Europe already have income-related housing allowance schemes that serve much the same function even though they are separate from income taxes. Where this is the case, there is no room for a further negative income tax or other income-tested schemewithout imposing extremely high tax rates on increased earnings. Most important of all, it is by no means clear that the economically securer members of the population wouldbe willing to accept anything like the existing level of contributions and taxes if they stood to gain nothing from social security. As a result, provision for the poor might be no better or, more probably, it might even be worse than it is as part of a scheme to which all contribute and on which all are in a position to make claims. Historically, services for the poor have always tended to be poor services.
Empirical studies have shown some small association between higher levels of socialsecurity spending and lower rates of economic growth. But it is not clear that one necessarily causes the other. Many other factors are at work. Countries that had a high proportion of the population in agriculture were in a favourable position to achieve high growth in the postwar period as their agricultural populations declined. Moreover, countries that have had relatively low rates of economic growth, such as the United Kingdom and the United States, are relatively low spenders on social security, while countries that have had high rates of economic growth, such as Belgium, Denmark, and The Netherlands, are high social security spenders.
Critics of social security are not confined to those concerned about its effects on the economy or about personal freedom regarding the extent to which and methods by which individuals provide for their security. There are also those concerned about the “target inefficiency” of social security, or its limited redistribution to the poor. This attack is generally directed at earnings-related benefits. Proposals have been made to use the yield of social security contributions, supplemented by taxes, to provide everyone with a minimum income on which they could live at a modest level supplemented by earnings if they wished to take paid work. Social dividend schemes of this kind are seen not only as a way of redistributing income but also of reducing unemployment. A major problem with such schemes is the high level of contributions and taxes needed to finance the minimum income if it is to go to those with jobs as well as to those without them and be sufficient to live on, if only at a minimum level.
It is true, however, that high spending on social security has failed to solve the problem of relative poverty in industrialized societies. Yet abolishing poverty was never the original intention, or at least it was not in many countries. Social security was seen as asystem of maintaining income by redistribution from the well to the sick, from the youngto the old, and from those with jobs to those without them. This involves substantial redistribution but not necessarily redistribution from rich to poor. For instance, while there is more illness and unemployment among low earners, higher earners tend to live longer and thus draw pensions for a longer period.
A study financed by the European Economic Community showed the extent to which poverty remained in the Common Market countries around the year 1975. Poverty was defined as half the average level of living for each country. The study showed that the greatest success in combating poverty was achieved in The Netherlands and, second, in the United Kingdom, though Belgium and West Germany came close to the United Kingdom. Both of the first two countries have primarily flat-rate benefits. Poverty, however, was at its greatest in Ireland and Italy—both countries with substantial agricultural populations—though Ireland also relies on flat-rate benefits.
A variety of reasons explain why poverty persists in industrialized countries despite theirelaborate provisions for social security; the precise reasons and their relative importance differ from one country to another. One reason may be that the arbitrarily selected poverty line is just above the level of living provided by social assistance. A second may be the failure of all those entitled to benefits to claim them. A third may be that certain categories of people in some countries are not entitled to claim social assistance (e.g., the long-term unemployed). A fourth reason may be that earnings-related benefits do not secure a sufficient income for low earners to rise above the poverty line or that their record of contributions is insufficient to achieve this result. But considerable poverty may also persist among families headed by a full-time worker. This is more likely to occur in one-parent families when the earner is a female with limited skills and low earnings. But it may also occur in two-parent families with one earner and several children, where family allowances fall below the cost of maintaining a child at the minimum level or the cost of rent is considerable.
In the case of developing countries social security is criticized for reinforcing the dichotomies between urban and rural populations in general and between employed and unemployed persons in the urban sector. Social insurance contributions, which are in effect taxes specifically tied to providing benefits to the members of the schemes,cannot be used by governments for the benefit of the community as a whole. This limitsthe capacity of governments to raise tax revenues for broader purposes. Moreover, different health benefits as well as cash benefits may be provided for different occupational groups, thus perpetuating and accentuating inequalities. Those who defend social security argue in reply that requiring part of earnings to be put into an insurance fund is robbing no one outside the scheme, since only by providing the benefits could the particular taxes be justified and compliance with paying them be secured. Criticisms regarding inequality should be directed at the pattern of original earnings, not at social security, which mobilizes part of them for good purposes.
Information gathered from:
– Encyclopedia Bitannica– “Multilex”– Encarta world english encyclopedia– The American heritage office