World War II left a large majority of Europe divided, broken, and war-torn. Nazi Germany was defeated and dismantled yet much of Europe appeared the same way. Europe was forced to endure countless political, economic, and social challenges. The solution to many of these issues turned out to be the pact of peace, commonly misconceived as the welfare state. State intervention into the market economies was largely, and for the most part, accepted but not to the point of the Soviet Union’s standards which had a centrally planned economy without a market. The pact of peace was a result of electoral economics and the product of politics and coalitions. Labor, capital, and agriculture all had to concede certain aspects of their demands in exchange
…show more content…
As mentioned above with discussion of labor and agriculture, the negotiations and compromises of the pact of peace created “enhanced opportunities for electoral economics” (Magagna, 3/9/16). The political efficiency and economic inefficiency is evident with labor’s entitlement rights and agriculture’s government subsides of agricultural goods. The welfare state necessitates government involvement and this creates more chances for electoral economics to come into play with interest group lobbying the state to pursue certain policies allegedly conducive towards society’s well being. Although welfare states experienced initial economic growth under the pact of peace, this growth was short-lived. This initial economic growth was followed by “long-term slow growth” with the misallocation of resources. The pact of peace also created moral hazards (Magagna, 3/9/16). With entitlement rights that created social security, individuals were unmotivated to excel. They were insured and this allowed for bad behavior such as inefficiency- being less productive than one should be. This was also coupled with “low rates of innovation” (Magagna, 3/9/16). Under the pact of peace of the welfare states, stability was valued above all else. Innovation demands risks, the very thing welfare states were trying to prevent. Europe is well-known for adopting and adapting, not innovating. This stability in turn can create stagnation among …show more content…
There are pros and cons to both. The European welfare states recognize their shortcoming and have been trying to reform the pact of peace with efforts dating to the 1980s. Reform is necessary in order for the survival of the welfare states as this model has a lot of setbacks such as “a loss of personal liberty, aging, declining populations, and labor market rigidities and high permanent unemployment” (Magagna, 3/9/16). The issue with personal liberty is that individuals with high incomes are taxed at a high rate and thus they lose some liberty to control their wealth and income. This has created a lot of discontent among high-earners. All the entitlement rights are idealistic but depend upon a large population. The older population in Europe is living longer and depending upon this social security. Yet at the same time, many Europeans are having less children which means less individuals to replenish and give into this social security net. The welfare state is becoming more and more costly and thus more and more unrealistic. The United States of America is having this issue with its own social security, but Europe’s issues are tenfold. The entitlement rights are problematic also in that there is less motivation to find job is unemployed because the entitlement rights can help them survive. There are also restrictions
As mentioned above with discussion of labor and agriculture, the negotiations and compromises of the pact of peace created “enhanced opportunities for electoral economics” (Magagna, 3/9/16). The political efficiency and economic inefficiency is evident with labor’s entitlement rights and agriculture’s government subsides of agricultural goods. The welfare state necessitates government involvement and this creates more chances for electoral economics to come into play with interest group lobbying the state to pursue certain policies allegedly conducive towards society’s well being. Although welfare states experienced initial economic growth under the pact of peace, this growth was short-lived. This initial economic growth was followed by “long-term slow growth” with the misallocation of resources. The pact of peace also created moral hazards (Magagna, 3/9/16). With entitlement rights that created social security, individuals were unmotivated to excel. They were insured and this allowed for bad behavior such as inefficiency- being less productive than one should be. This was also coupled with “low rates of innovation” (Magagna, 3/9/16). Under the pact of peace of the welfare states, stability was valued above all else. Innovation demands risks, the very thing welfare states were trying to prevent. Europe is well-known for adopting and adapting, not innovating. This stability in turn can create stagnation among …show more content…
There are pros and cons to both. The European welfare states recognize their shortcoming and have been trying to reform the pact of peace with efforts dating to the 1980s. Reform is necessary in order for the survival of the welfare states as this model has a lot of setbacks such as “a loss of personal liberty, aging, declining populations, and labor market rigidities and high permanent unemployment” (Magagna, 3/9/16). The issue with personal liberty is that individuals with high incomes are taxed at a high rate and thus they lose some liberty to control their wealth and income. This has created a lot of discontent among high-earners. All the entitlement rights are idealistic but depend upon a large population. The older population in Europe is living longer and depending upon this social security. Yet at the same time, many Europeans are having less children which means less individuals to replenish and give into this social security net. The welfare state is becoming more and more costly and thus more and more unrealistic. The United States of America is having this issue with its own social security, but Europe’s issues are tenfold. The entitlement rights are problematic also in that there is less motivation to find job is unemployed because the entitlement rights can help them survive. There are also restrictions