Challenges of developing welfare state policy in post-Soviet Georgia

Abstract

The formation of welfare policies in the modern era was a response by the state to the social situation. As a result of the establishment of capitalism, a social structure emerged that was characterised by high economic inequality, tension, and confrontation between different social groups and classes. On the one hand, the aspiration and struggle of subordinate social groups to improve their situation (both economically and politically), and on the other hand, the aspiration of the government to gain and maintain high legitimacy (respectively, to weaken existing confrontations and de-escalate conflicts), pushed the opposing social groups to make several compromises. It can be said that the institutionalisation of such compromises was expressed in the establishment of a normative and executive order of welfare policy. After World War II, the development of welfare policies in Western Europe and North America (later also in East Asia) intensified and expanded. The resource base that allowed the state to implement a welfare policy was mainly created by tax policy, which gradually became more progressive and significantly increased state revenues compared to the pre-war period. Another critical factor was the growth of the state's role, as well as the dominance of Keynesian and “dirigist" economic policies in these countries, which was facilitated by both the wartime experience and the challenging post-war social and economic situation. The sequence of processes of welfare policy formation was radically different in post-Soviet countries, including Georgia. While in the West, the establishment of capitalism preceded the formation of state welfare policy, in post-Soviet countries, on the contrary, the process of capitalism formation began under conditions of a broad welfare policy. Soviet welfare policy was based on the principle that the state was practically the only proprietor, and all resources for implementing welfare policy were concentrated in the hands of the government. There was no other economic actor in society that could receive surplus profits to be used in satisfying social needs. Conditionally, the state can be imagined as the sole “capitalist” that would redistribute the created added value for the general welfare. In the West, the primary source of resources for the welfare state was taxes paid by numerous economic actors based on their financial activities within society. In Soviet conditions, it was the state's own revenues. Due to the establishment of capitalism in the post-Soviet conditions, the state was deprived of the economic resources that it previously possessed and used for welfare policies. The second reason, which extremely reduced state revenues, was the radical reduction of the economy in general, which was caused, on the one hand, by the complete collapse of the integrated Soviet economic system and the disruption of established production chains, and on the other hand, by the complete unpreparedness for the competition that arose as a result of the establishment of liberal trade regimes. In the post-Soviet era, Western-style state revenue mechanisms have proven to be largely ineffective. The public moods and ideas that dominated in the 1990s bear more resemblance to the moods in Western capitalist societies, which were characteristic of the era of so-called primary capital accumulation and unregulated economy (laissez-faire), than to the contemporary (1980s-1990s) welfare state order. This was accompanied by a high level of distrust of the state, which was caused by the extreme delegitimisation of the Soviet state. Accordingly, these factors contributed to the negative attitude of public opinion and new economic actors (formed mainly through privatisation) towards taxes. Both such public sentiments and weak, ineffective state institutions drastically reduced the state's tax revenues and, consequently, the necessary economic resources for implementing welfare policies. At the same time, paradoxically, public expectations for the state to implement welfare policies were high (a habit of the Soviet period). In contrast, the role and participation of society in public policy were neglected (again under the influence of Soviet tradition). The contradictions and social conflicts characteristic of Western (capitalist) societies in the 19th and 20th centuries are now evident in post-communist societies, particularly in Georgia (poor-rich, property owners-propertyless), but in a different economic context (non-industrial, informational, high-tech, globalised), communication order, and cultural space. Thus, the theories, approaches, and paradigms developed in the West require significant rethinking and can be used primarily as methodological tools for analysis, rather than as normative (from a scientific point of view) truths that explain the phenomenon under study.