understanding-shocks-to-welfare-systems

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In an unfortunate coincidence, the Covid-19 pandemic and Angie Jo’s doctoral pursuits in political science both commenced in 2019. Ironically, this worldwide disaster significantly shaped her core research focus.

As nations responded with unparalleled fiscal actions to shield their citizens from economic downturn, Jo MCP ’19 identified remarkable trends among these measures: Countries often perceived as the least generous in social support were unexpectedly implementing the most substantial emergency actions.

“I aimed to grasp why nations like the U.S., renowned for offering minimal state assistance, abruptly spring into action with a massive emergency response during a crisis — only to allow it to dissipate once the crisis subsides,” Jo states.

Motivated by this curiosity, Jo embarked on a comparative investigation of welfare states that constitutes the foundation of her doctoral research. Her work explores how various types of welfare regimes react to collective emergencies and whether these reactions result in enduring institutional changes or merely temporary fixes.

A disparity in funding

Jo’s research zeroes in on a specific category of advanced industrialized democracies — nations such as the United States, United Kingdom, Canada, and Australia — which political economists categorize as “liberal welfare regimes.” These countries contrast sharply with the “social democratic welfare regimes” represented by Scandinavian nations.

“In ordinary times, citizens in countries like Denmark or Sweden enjoy a robust and all-encompassing welfare system,” Jo clarifies. “When crises like Covid emerge, these countries can largely utilize the social policy instruments and administrative setups they already possess, including subsidized childcare and short-time work initiatives that prevent widespread layoffs.”

Liberal welfare regimes, conversely, display a different trend. During regular periods, “state assistance is regarded by many as a last resort,” Jo notes. “It’s often means-tested and meager, with the onus of managing risk placed on the individual.”

Nevertheless, when Covid emerged, these same governments “exceeded historically unparalleled amounts on emergency relief for citizens, including stimulus payments, expanded unemployment benefits, child tax rebates, grants, and debt relief that may have ordinarily provoked backlash from many Americans as government ‘handouts.’”

This stark divergence — minimal investment in social safety nets in regular times, followed by extensive crisis funding — lies at the core of Jo’s inquiry. “What caught my attention was the disparity: The U.S. invests so little in social welfare as a baseline, yet when a crisis strikes, it can suddenly unleash significant aid — just not in sustainable ways. So what transpires when the next crisis arises?”

From design to political economy

Jo traversed a meandering route to her study of welfare states in crisis. Born in South Korea, she relocated with her family to California at three years old as her parents sought an American education for their children. After returning to Korea for high school, she enrolled at Harvard University, where her initial focus was on art and architecture.

“I thought I’d become an artist,” Jo reminisces, “but I always had numerous interests, and I was acutely aware of various countries and political systems, due to frequent relocations.”

While pursuing architecture at Harvard, Jo’s academic focus shifted.

“I came to realize that most decisions regarding construction, whether it involves a building, a city, or infrastructure, are made by the government or significant private entities,” she explains. “The architect serves as the artist’s hand commissioned for execution, yet the underlying decisions intrigued me much more.”

After a year of working in macroeconomic research at a hedge fund, Jo felt drawn to inquiries in political economy. “While I did not find the zero-sum game of finance appealing, I genuinely wanted to understand the interactions between markets and governments that underlie the transactions,” she states.

Jo then opted to pursue a master’s degree in city planning at MIT, where she investigated the political economy of master-planning new cities as a form of industrial policy in China and South Korea before transitioning to the political science PhD program. Her research emphasis changed dramatically with the onset of the Covid-19 pandemic.

“It was the first time I recognized that these affluent Western democracies have significant issues too,” Jo remarks. “They are struggling with this pandemic and the structural inequalities and deep-rooted tensions that have always characterized some of these societies, but which are being further tested by the magnitude of this shock.”

The expenses of crisis management

One of Jo’s central insights contests traditional beliefs regarding fiscal conservatism. The notion that maintaining a small government saves funds over time may be fundamentally misguided when considering crisis management.

“What I’m investigating in my research is the irony that the less you invest in a capable, efficient, and well-resourced government, the more it backfires when a crisis inevitably occurs and you have to patch up the gaps,” Jo asserts. “You’re not saving money; you’re postponing the expense.”

This inefficiency becomes especially evident when analyzing how different nations distributed aid during Covid. Countries like Denmark, equipped with robust data systems integrating health records, employment information, and family data, could allocate assistance with precision. The United States, conversely, relied on broader measures.

“If your system isn’t designed to provide aid in regular times, it won’t suddenly function effectively under pressure,” Jo clarifies. “The U.S. had to create entire programs from the ground up overnight — many of which were clumsy, inefficient, or regressive.”

There is also a political dimension to this limitation. “Not only do liberal welfare states lack the infrastructure to manage crises, but they are often led by powerful factions that do not wish to build it — they intentionally choose to implement temporary benefits that are specifically designed to diminish,” Jo argues. “This creates a cycle where short-term solutions are offered from crisis to crisis, limiting the permanent development of the welfare state.”

Missed chances

Jo’s dissertation also investigates whether crises provide openings for institutional reform. Her second paper delves into the 2008 financial crisis in the United States and the Hardest Hit Fund, a program that allocated federal resources to state housing finance agencies to avert foreclosures.

“I inquire why, with hundreds of millions in federal assistance and few stipulations attached, state agencies ultimately helped so few distressed homeowners alleviate unmanageable debt burdens,” Jo states. “The finances and the mandate were available — the transformative capability wasn’t.”

Some states employed the funds to execute ambitious policy interventions, such as restructuring mortgage debt to permanently lower homeowners’ principal and interest obligations. However, most opted for temporary remedies like assisting borrowers in catching up on missed payments while maintaining their original contracts. Partisan politics, financial influences, and status quo bias likely explain these varying state strategies, according to Jo.

She views this as “another instance of the choice that governments face between providing temporary cash infusions as a short-term fix or utilizing a crisis as a chance to pursue more ambitious, deeper reforms that support individuals in a more sustainable manner over time.”

The importance of crisis response analysis

For Jo, understanding how welfare states react to crises transcends an academic endeavor; it represents a matter of significant human impact.

“When events such as the financial crisis or Covid occur, the scale of suffering and the welfare gap that emerges is catastrophic,” Jo stresses. “I believe political science should actively investigate these infrequent episodes, rather than dismissing them as rare, once-in-a-century anomalies.”

Her research has implications for how we conceptualize welfare state frameworks and crisis readiness. As Jo highlights, the most vulnerable segments of society — “individuals who are unbanked, undocumented, those with minimal or no tax liabilities due to low income, immigrants, or those lacking access to the internet or experiencing homelessness” — often remain invisible to relief systems.

As Jo prepares to embark on her academic career, she is driven to apply her political science education to address such shortcomings. “We will face more crises, whether pandemics, AI advancements, climate catastrophes, or financial upheavals,” Jo cautions. “Identifying improved methods to assist these individuals is crucial, and it’s not something our current welfare state — or our political system — is equipped to handle.”

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