Divergent Trajectories: Healthcare Insurance Reforms in East Asia ...

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Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeand labor, they increase the costs of production for capital. In an open-trade economy,the entry into the domestic markets of goods made in lower-wage countries disadvantageslocal producers, encouraging them to lobby their governments to reduce the burden offinancing welfare programs. According to this perspective, openness to capital flowsspurred a similar dynamic. With “footloose” capital, firms have the ability to move theirassets and investments across borders; consequently, profit-seeking firms will locate theirinvestments to countries where the costs of doing business are lower and where states canprovide a stable macroeconomic environment, including lower inflation and tighter fiscaldiscipline, which generous welfare programs are assumed to impede. 19 By imposing thelogic of the market upon countries’ domestic policies, globalization forces states to forgocollective social protection schemes and to adopt neoclassical economic alternatives thatemphasize individual over collective responsibility.This logic is thought to be even more inexorable in developing countries becausethey rely more heavily on foreign capital inflows to supplement lower levels of domesticsavings, and their domestic producers are less competitive in world markets. Inparticular, analysts argued that the fiscal constraints imposed by neoliberal economicpolicy prescriptives left little room for states to negotiate protective social policy. 20Theimperatives of this policy regime significantly reduced domestic policymakers’independence since their capacity to attract trade and capital investments depended onmaintaining budgetary discipline and flexible labor markets.19 Dani Rodrik, Has Globalization Gone Too Far? (Washington, D.C.: Institute of International Economics,1997)20 Nita Rudra, “Globalization and the Decline of the Welfare State in Less-Developed Countries”International Organization 56:2 (2002)16
Illan Nam, Colgate University, Feb 2011Draft in progress, please do not quote or citeThis first generation of literature has come under considerable fire. A substantialresponse to this earlier thinking presents persuasive evidence that left governments andinstitutions still yield salubrious effects on welfare spending and social policies.Garrett’s work on the advanced industrial economies perhaps best represents thisscholastic response; he found that in countries where left parties were allied withencompassing labor organizations, governments were able to pursue economic policiesthat redistribute wealth and risk in favor of the more vulnerable, in spite of increasedeconomic openness. 21 In a related vein, Swank made the case that “the institutionalstructure of the polity and programmatic structures of the welfare state are fundamentallyimportant for determining the quality and character of interest representation of prowelfarestate interest, the relative political capacity of these interests, and the broaderconstellation of supportive norms and values.” 22Scholars working on welfare spending in developing countries have investigatedthis relationship as well. Kaufman and Segura-Ubiergo (2001) demonstrates that amongLatin American countries, popularly-based governments (defined as governments thathave close historical links with labor unions or a long-standing programmatic orientationtoward the “popular sector”) have a significant and positive short-term effect on socialspending. 23Rudra (2002), in a study of 53 less-developed countries, found that, incontrast to Garrett’s findings in the OECD sample of countries, increased capital andtrade openness combined with weak labor power produced a significant and negative21 Geoffrey Garrett, Partisan Politics in the Global Economy (Cambridge: Cambridge University Press,1998)22 Duane Swank, Global Capital, Political Institutions, and Policy Change in Developed Welfare States(Cambridge: Cambridge University Press, 2002)23 Robert Kaufman and Alex Segura-Ubiergo, “Globalization, Domestic Politics, and Social Spending inLatin America: A Time-Series Cross-Section Analysis, 1973-97,” World Politics 53 (2001)17
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