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Asia Sees Blue Social Model as a Cautionary Tale

Over the past few decades, rising countries in Asia have looked to American and European systems of social services as something more or less to aspire to. But as both the U.S. and European safety nets fray under staggering budget deficits, unfulfilled promises to public-sector workers, and unsustainable healthcare costs, countries like China and India are realizing that they may need to find alternatives to the blue social model.

As the Economist reports, they are taking this search seriously:

Last October Indonesia’s government promised to provide all its citizens with health insurance by 2014. It is building the biggest “single-payer” national health scheme—where one government outfit collects the contributions and foots the bills—in the world. In just two years China has extended pension coverage to an additional 240m rural folk, far more than the total number of people covered by Social Security, America’s public-pension system. A few years ago about 80% of people in rural China had no health insurance. Now virtually everyone does. In India some 40m households benefit from a government scheme to provide up to 100 days’ work a year at the minimum wage, and the state has extended health insurance to some 110m poor people, more than double the number of uninsured in America.

If you take Germany’s introduction of pensions in the 1880s as the beginning and Britain’s launch of its National Health Service in 1948 as the apogee, the creation of Europe’s welfare states took more than half a century. Some Asian countries will build theirs in a decade. If they get things wrong, especially through unaffordable promises, they could wreck the world’s most dynamic economies. But if they create affordable safety nets, they will not just improve life for their own citizens but also become role models themselves. At a time when governments in the rich world are failing to redesign states to cope with ageing populations and gaping budget deficits, this could be another area where Asia leapfrogs the West.

How to maintain economic growth while providing health and retirement services to vast populations? The countries of Asia now view the U.S. and Europe, at best, as cautionary tales rather than role models.

We hope they figure it out. Not only does the welfare of a large chunk of humanity directly depend on it, but so too does the world economy.

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