Different countries use different methods of financing social security schemes. The two general methods are social insurance and general tax revenues. Under social insurance schemes, funds are raised by taxing the employers’ payroll and making deductions from the employers’ salaries. Under the general tax, some amount is voted out of the total tax collection. The latter scheme has generally been preferred by Australia and New Zealand.
Starting from the 1970s, the welfare state started losing favour. It was said to encourage laziness and shiftless habits. It was noted that as long as unemployed person received unemployment allowance sufficient to survive on her or she does not seriously look for employment and that some people do not adopt the habot of having part of their earnings so long as they are guaranteed support in old age. President Ronald Reagan in the United States and Prime Minister Margaret Thatcher in the United Kingdom were pioneers in withdrawing some of the provisions of the welfare system.
In communist countries, practically, the whole working population was employed since the government owed all factors of production and firms; it was able to assume sole responsibility for social services. It was guided by the slogan from treating everybody according to his ability to everybody according to his needs.
Dharam Ghai says one of the communist countries ‘until the critics triggered by the collapse of the soviet bloc, the Cuban system consisted of full employment, free education and health services, nominal rents for housing subsidies on goods and services of mass consumption, food rationing, maternity and disability allowances and old age pensions. These services and benefits provided universal and egalitarian basis. The several crises of the 1990s have led to a dilution of some of these.
The picture painted is dazzling and this is perhaps the reason why Catre was able to remain in office until his late eighties when he had to step down because of ill health. But when you have such a benevolent state, you must also expect limitation of freedoms.
Developing countries provide social services in a variety of easy depending on whether a country is middle-income or one of the poorest. Those which are rich because of their oil minerals such as Kuwait and Botswana provide wide ranging social services. The problem there is gross inequalities. In the poorest countries, attempts are made to provide people with potable water, food during droughts, nutrition, medical services which in case of Malawi tend to be inadequate because of drug theft. Free primary education is given but it is not compulsory while the quality is not impressive.
The newly industrialised countries of the Far East have refrained from adopting the western model of social security and welfare. Lee Kuan Yew of Singapore wrote that instead of a welfare state, he preferd a fair state which gave priority to primary, secondary and tertiary education. He established the Central Provident Fund which provided for high compulsory savings from workers. This catered for old age pensions, health coverage and the provision of house for everyone.
About two years ago, a group of economists gathered by the lake side deliberated and then issued a communiqué in which they recommended that for food security in Malawi, land should be taken away from the peasants and be given to commercial farmers. Nothing was said about how the dispossessed were to survive. This is the danger of over specialization in solving one problem you create others unwittingly.
Malawi is a century of landlessness with the same population as Zambia, but only sixth of Zambia’s size. We need a Beverage Report on how to handle the poor of this country who constitute a big chuck of the population.