Political Economy of Social Policy

This article's focus is the political economy of social policy. The history, policymaking, and funding of social policy in the United States are discussed, including social welfare, social welfare provisions, the war on poverty, and the concept of a social safety net. The use of social indicators and social reports as the basis for policy choices are analyzed, and the strengths and limitations of problem-based and strength-based approaches to social policy are described.

Keywords Political Economy; Social Indicators; Social Policy; Social Reports; Social Safety Net; Social Welfare; Social Welfare Provisions

Business & Public Policy > Political Economy of Social Policy

Overview

Social policy, like all public policy, is an expression of the values held by citizens and their government. Social policy is an expression of moral and economic values and viewpoints. In the United States, social policies, enacted through social welfare programs and serving as a social safety net, regulate and govern human behavior in areas such as general morality and quality of life.

Social policy is created, in part, to respond to pressing social needs such as poverty, social exclusion, unemployment, aging, children, mental illness, learning disabilities, and physical disabilities. Social policy is developed, enacted, and implemented to create self-sufficiency, equity, and social cohesion for all members of a society. Examples of significant social policy created in the United States during the twentieth century include the social security system, welfare, public housing, hunger and nutrition programs, childcare and child support, health care for people on low incomes, public education, and the social and health services of the Veterans' Administration (Spicker, 2006). All these social policies, and social policies in general, reflect moral, political, and economic choices.

The focus of this article is on the political economy of social policy. Political economy, a subfield of economics dating back to the eighteenth century, refers to the interactions between political processes and economic variables such as economic policies. Political economy describes how political institutions, the political environment, and market forces and structures, such as capitalism, influence each other. Thus, the political economy of social policy is an examination of the relationship between politics, economics, and social policy (moral and value-based policy choices for citizens).

One of the main realms and purposes of political economy is the formulation of public policy. Political economy of social policy is a form of social economics that examines the ways in which market principles resolve social problems. Political economy of social policy is a tool for understanding social inequalities that exist in society due to policy choices, enduring structures, and status-quo power and economic relations. Political economy of social policy describes how public welfare is connected to public access to public services and social programs (Klein, 1998).

In the United States, the political economy of social policy refers to the efforts of federal and state governments to address the economic insecurity and inequality that result from lapses in regular income. Social policies tend to focus on maintenance of incomes, healthcare for sick and basic services to those in crisis due to loss of income. In the United States, social policy is interconnected with economic policy (Amenta & Bonastia, 2001).

The following sections provide an in-depth description and analyses of social policy history and funding as well as an explanation of the American government's policymaking process. The policymaking section, with its focus on the U.S. Government Accountability Office's production of social indicators and social reports, will serve as a foundation for a later discussion of the complex issues concerning the problem-based approach of U.S. social policy.

The United States: Social Policy History & Funding

Social policy in the United States serves and functions a social safety net for citizens. The United States has a welfare state that serves, protects, and provides for its members through social welfare provisions, social policy, social programs, and social welfare initiatives. Public sector (or governmental) social policy and support became common practice in the twentieth century. The twentieth century was characterized, in part, by a switch in national perspective from individualism to interdependence. The social safety net switched from the private sector (family, charity, community) to the public sector (social policies such as welfare). The government became a source for social welfare provisions, such as public education, welfare payments, pensions, and social security for disadvantaged groups such as the poor, elderly, disabled, and students.

Significant social policy of the twentieth century includes Social Security, welfare, Medicare, Medicaid, and public housing. America's welfare system, the cornerstone of much U.S. social policy, began in 1935 with President Franklin D. Roosevelt's enactment of a social welfare program called Aid to Dependent Children (ADC) and expanded in the 1960s when President Lyndon B. Johnson added Medicare, Medicaid, and public housing programs. In 1996, President Bill Clinton reformed the social policies that structure the American welfare state or system to increase work requirements and reduce overall welfare dependence.

The twentieth-century economic expansion and transition to industrialized production created the reasons and means to finance social policy and programs in the United States. The needs of populations change as society transitions from small-scale production to industrialized production. Economic development, created by industrialization, increases the workforce, wage labor, the prevalence of isolated nuclear families, and creates the need for social policy. The new workforce, dependent on income rather than agriculture or small business, is at risk from problems associated with income loss. The government (along with citizen self-support paid through taxes) subsidizes or ensures the risk that citizens take by joining and working in industrialized economies and societies, through social policy. An industrialized society can afford (and desperately needs) social policy. This perspective is known as the modernization argument for social policy (Amenta & Bonastia, 2001).

Public sector social policy, and the welfare state, is funded through provisions established by Congress. Congress established the modern system of grants-in-aid to support state and local governments in the early twentieth century. Grants-in-aid refer to the federal funds appropriated by Congress for distribution to state and local governments. Congress awards four kinds of fiscal grants (Canada, 2003):

• Categorical grants: federal funds that can only be used by states for a predetermined purpose.
• Block grants: federal funds given automatically to states and communities to support community development and social services programs and needs.
• Project grants: federal funds awarded on the basis of the merits and strengths of an application.
• Formula grants: federal funds awarded based on a set legislative or regulatory formula.

The funds for state and local budgets, which support social programs and enact social policies, come from federal grants, as described above, as well as indirect taxes and personal income taxes. Trends in government grants to state and local governments have followed social policy interests over the past few decades. State and local spending during the latter half of the twentieth century was characterized by the need to finance and support public education and Medicaid. Federal grants supported the economic burden and social responsibilities of these two social policy initiatives. Public education and Medicaid expenditures were responsible for 60 percent of the gross domestic product growth from 1952 to 1975, both locally and statewide. For example, between 1952 and 1976, grant increases were related to education, training, employment, and social services. The need to educate a growing population helped to create a peak in federal education grants in the late 1970s. Since that time, education grants have stabilized. Health grants increased significantly with the beginning of Medicaid in 1965 and then leveled off after 1976 (Penner, 1998).

The federally financed social policy program of Medicaid established a strong program and channel of grants to state and local governments. Medicaid characterized an era of big government. The size of grants-in-aid to state and local governments is declining (in areas such as education, training, transportation, and community development) as the federal government works to avoid a budget deficit. The decline in federal support has caused states and local governments to become more fiscally self-reliant in their efforts to finance the budget categories of public education, income support, social security, and welfare.

Making Social Policy: Social Indicators

Modern social policy is made based on the information provided through social indicators and social reporting. Social indicators refer to a social statistic that has significance for quality of life. Social report refers to an organized collection of social indicators. Social indicators are quantifiable tools used for evaluating social policies. Common social indicators include family characteristics, employment, working mothers, poverty persistence, social expenditure, health care expenditure, subjective well-being, and suicides. Social indicators, created and developed by economists, psychologists, sociologists, and politicians, are the link between social policy and economic theory and analyses (Michalos, 2004).

Social indicators are tools used to assess the impact of social policy as well as continued or emerging social needs. The social indicators movement of the 1960s corresponded with a boom in social policy initiatives and programs around the world. In the United States, social policy focuses on poverty. The anti-poverty agenda (typified by the 1960s "War on Poverty" campaign of the federal government) continued to direct current social policy choices (Kalimo, 2005).

The Organization for Economic Cooperation and Development (OECD), which was established in the 1960s, promotes the use of social indicators to evaluate social trends and policy developments. The OECD social indicators serve as a widely adopted tool for planning, decision-making, and for international comparisons of social policy (Kalimo, 2005). The OECD uses five main categories of social indicators. The 2011 categories include general context indicators, self-sufficiency indicators, equity indicators, health indicators, and social cohesion indicators (OECD, 2011).

• General Context Indicators: household income, age-dependency rates, fertility rates, migration, and marriage and divorce.
• Self-Sufficiency Indicators: employment, unemployment, education spending, student performance, and pensionable years.
• Equity Indicators: income inequality, income difficulty, poverty, and public social spending.
• Health Indicators: life expectancy, infant mortality, health care expenditure, water and air quality, and health inequalities.
• Social Cohesion Indicators: voting, confidence in social institutions, trust, tolerance, and pro- and anti-social behavior (OECD, 2011).

Numerous national governments and international aid and development organizations compile and distribute sets of social indicators, in part, to meet the demand for quantifiable data about social progress and social need. Governments around the world, in particular Australia, New Zealand, Canada, and the United Kingdom, use social reporting to inform social policy. International organizations that depend on and produce social indicators include the United Nations and the World Bank.

The United States: Social Policy & National Indicators

The historical origins of social indicators in the United States date back to the early twentieth century. There were at least two major periods of use and dependence on social indicators during the twentieth century. During the 1930s, statistics from National Income and Product Accounts were routinely used for public policymaking. The 1930s were characterized by postwar efforts to resolve and end economic recession. Planning associations, with work and social programs, developed to solve social and economic problems. During the 1950s and 1960s, social indicators were used primarily by governments committed to social activism. New social programs (such as welfare and Medicare) needed social indicators to monitor and evaluate their effect and progress. The motives for social policy indicators during the twentieth century focused on developing a grand social accounting scheme. Governments and aid organizations created social indicators as a means to use quantitative information to solve public policy problems (Michalos, 2004).

In the United States, social policy, such as those policies described above, is made at the federal level. The U.S. government, specifically the Government Accountability Office (GAO) (formerly known as the General Accounting Office), begins the social policymaking process by gathering information about current federal programs, current federal expenditures, and current or developing social needs. The gathering of information is a precursor to Congress's review and creation of its annual social policy agenda. (The policymaking process is known as a policy cycle, with four main stages: agenda setting, policy development, policy implementation, and policy review.) The Government Accountability Office is Congress's investigative arm. The information the GAO gathers and analyzes is used by Congress to make policy decisions that affect U.S. society and culture as well as the economy and the environment. The Government Accountability Office describes its purpose in the following way:

The information provided by the Government Accountability Office that most directly influences social policy is national indicators. National indicators, including economic indicators and social indicators, enable the government to evaluate current programs and expenditures and determine their impact. In addition, the Government Accountability Office uses social indicators to plan future programs and expenditures that reflect government values and goals. The Government Accountability Office's national indicators are comprised of statistics, statistical series, and other forms of evidence.

The federal government researches and produces a portfolio of national indicators for multiple reasons:

• National indicators serve as a framework for related strategic planning efforts.
• National indicators enhance performance and accountability reporting.
• National indicators inform public policy decisions, including baseline review of existing government policies, programs, functions, and activities.
• National indicators facilitate public education and debate as well as informed electorate.

Nearly all the reasons that the federal government, as represented by the Government Accountability Office, produces social reports and social indicators, as well as economic indicators, can be connected to the government's role as a policy maker and policy educator.

Issues

Problem-Centered vs. Strength-Centered Approaches to Policy

Social policies are viewed as societal responses to social problems. Social policy is often characterized as a social goal, enabling objective, or social solution. The social policy process is a problem-solving activity that solves or resolves a problem or conflict in society. Social policy, requested by society and enacted by government, unites and mediates the relationship between society and government. Chapin argues that effective social policy is built on the cornerstone of careful problem definition (1995). The political economy of social policy, as described in this article, illustrates that the American social policy system is predominated by "pathology oriented" policy. The "pathology" affecting society is often viewed by the U.S. government (i.e., public policy makers) to be poverty.

The economic development model or argument for social policy, which seeks to ameliorate risk caused by loss of income, was the impetus for a "war on poverty" approach to policy. The U.S. government announced a "war on poverty" in 1964. Poverty-related topics dominate government sponsored research and programs (Haveman, 1988) and anti-poverty strategies continue to characterize U.S. family policy (Ozawa, 2004).

Ultimately, the political economy of social policy illustrates that the American welfare state influences most social policies. The post-1970 trajectory of the American welfare state has been characterized by efforts to combat poverty. Social policy of the twentieth and twenty-first centuries has been characterized by a problem-centered approach to policy formulation. Governments have used social and economic indicators to evaluate and assess social health. The focus on problem definition and assessment has largely ignored assessment of the strengths of the people and the environment that social policy targets.

While American social policy is characterized by the problem-centered approach, strength-centered approaches to policy have an important role to play in empowering people within society and promoting social cohesion. These two approaches to policy making—strengths-centered and problem-centered approaches—are based on different understandings of social need.

• Strengths-Centered Approach: The strengths-centered approach to social policy argues that social policy should emphasize the strengths and resources of individuals and their surroundings rather than their problems.
• Problem-Centered Approach: The problem-centered approach to social policy argues that social problems, which appear as deficits in people and environments, can be addressed and resolved through social programs and policies.

Critics of American current social policies, characterized by a problem-centered approach, argue that by emphasizing individual pathologies and deficits, policies ignore structural barriers to social and economic participation (Chapin, 1995).

There are numerous challenges to integrating the strengths perspective into social policy. In fact, the economic development model and argument for social policy in industrialized nations that influenced social policy throughout the twentieth century continued in the twenty-first century with very few exceptions. One example of a social policy that successfully integrates the strength-based approach to social policy is the Americans with Disabilities Act (ADA) of 1990. The Americans with Disabilities Act requires reasonable accommodations for people with disabilities that make it possible for people with disabilities to participate in the workplace and in the community. The Americans with Disabilities Act emphasizes the need for development of structural supports that enable the individual to achieve social and economic inclusion rather than rely exclusively on social services (Chapin 1995).

Conclusion

Governments create public policies—the basic guidelines that serve as the foundation for public laws—for their citizens. There are numerous types of public policy including fiscal policy, monetary policy, national policy, urban policy, environmental, and social policy. In the final analysis, the development of social policy is complex due to finite resources, growing need, and debates about the purpose and scope of social policy and the welfare state. The economic development model of social policy has structured and influenced the majority of U.S. social policy. In the United States, social need, as measured by social indicators, is almost always transmuted and defined as an economic need. Ultimately, social policy in the United States is a problem-based approach to solving the social and economic problem of poverty and its many related conditions.

Terms & Concepts

Congress: The United State government's legislature, granted the power to make laws.

Federal Government: A form of government in which a group of states recognizes the sovereignty and leadership of a central authority while retaining certain powers of government.

Grants-in-Aid: The federal funds appropriated by Congress for distribution to state and local governments to implement and support public policy initiatives.

Policy Cycle: The four major stages of the policymaking process, including agenda setting, policy formulation, implementation, and evaluation.

Public Policy: The basic policy or set of policies that serve as the foundation for public laws.

Political Economy: The interactions between political processes and economic variables such as economic policies.

Social Indicators: A social statistic that has significance for the quality of life in a society.

Social Policy: Policy, enacted through social welfare programs and serving as a social safety net, that regulates and governs human behavior in areas such as general morality and quality of life.

Social Reports: An organized collection of social indicators.

Social Welfare: The relationship and responsibilities of governments to their members.

Social Welfare Provision: Government program that provides a minimum level of income, service, or other support for disadvantaged groups such as the poor, elderly, disabled, and students.

Bibliography

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Suggested Reading

Bagenstos, S. (2004). Has the Americans with Disabilities Act reduced employment for people with disabilities? Berkeley Journal of Employment & Labor Law, 25, 527–563. Retrieved April 4, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=15343438&site=ehost-live

Eyraud, C. (2001). Social policies in Europe and the issue of translation: The social construction of concepts. International Journal of Social Research Methodology, 4, 279–285. Retrieved April 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=5553916&site=ehost-live

Kioukias, D. (2003). Reorganizing social policies through social partnerships: Greece in European perspective. Social Policy & Administration, 37, 121–132. Retrieved April 5, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9229650&site=ehost-live

Lewis, J. (2006). Work/family reconciliation, equal opportunities and social policies: The interpretation of policy trajectories at the EU level and the meaning of gender equality. Journal of European Public Policy, 13, 420–437. Retrieved April 6, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=20063272&site=ehost-live

Thurston, C., & Bowen, K. (2011). U.S. domestic politics and international political economy: An introduction to the special issue. Business & Politics, 13, 1–4. Retrieved November 25, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=70050389