Redefining Res Publica
Unemployment insurance was originally private and self-organized. In many European countries trade unions had started to offer mutual private unemployment insurance benefits under voluntary plans. When confronted with mass unemployment during the Great Depression in the 1920 and in the 1930, these private arrangements came under pressure. Often the state first subsidized voluntary arrangements and then eventually took over this task by implementing national public compulsory insurance. The role of the state in financing unemployment insurance varies. In some European countries, such as Luxembourg, Cyprus and Malta, the state pays a fixed contribution. In others, the state covers the insurance deficit. These include corporatist states such as Austria, Belgium and the Czech Republic, but also other types of welfare states such as Ireland and Finland. In some countries the state provides subsidies, such as in Germany and the United Kingdom. And in others the state does not contribute, such as in the Netherlands. Unemployment insurance is legitimized by efficiency arguments. Adverse selection, moral hazard, and so on would make private insurers through the market go bankrupt. However, institutions between the market and the state, such as trade unions, can manage unemployment funds. In the Nordic countries they still do. Unemployment insurance has seen cuts in benefits and duration of pay, but definitely retains a public or semi-public role between the market and the state.