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The Neoliberal Restructuring of Political Economies

This policy impulse aiming at market creation reflects a major paradigm witnessed by Europe’s political economies from the late 1980s onwards. The perceived failure of Keynesianism in the late 1970s paved the way for the rise of neoliberalism (Campbell 1997). Although neoliberalism is little more than a label encompassing an eclectic set of ideas which has taken various—and sometimes contradictory—forms across time and space, its influence on public policy over the past three decades in Europe can be summarized by a set of principles identified by scholars of political economy: [1]

  • 3. A belief of the desirability, all things being equal, of a limited and non-interventionist role for the state and of the state as a facilitator and custodian rather than a substitute for market mechanisms.
  • 4. A rejection of Keynesian demand management techniques in favour of monetarism, neo-monetarism and supply-side economics.
  • 5. A commitment to the removal of those welfare benefits that might be seen as to act as disincentives to market participation (in short, a subordination of the principles of social justice to those of perceived economic imperatives).
  • 6. A defence of labour market flexibility and the promotion and nurturing of cost competitiveness (Hay 2004 cited in Schmidt and Thatcher 2013b, p. 5).

While the developments pertaining to labour markets and social benefits have attracted more attention among scholars, the provision of welfare services has been to a large extent overlooked. Yet, they epitomize the deep transformations involved with the rise of neoliberalism, namely the role of the state in the context of international competition, the prominence of the market and the theoretical conceptions of labour and welfare. Neoliberalization in the realm of welfare services has meant that the former rationale for public monopolies has become less and less relevant. In the post-World War II era, the role of the State in the provision of welfare services was typically focused on the role of basic services with regard to social cohesion, the need to secure economies of scale and the ‘rationalization’ of natural monopolies and public investment (Keune et al. 2008a, p. 14). In the era of globalization, technological change, the rise of transnational financial markets and the circulation of capital flows have further undermined the pertinence of national services provision in the framework of state monopolies. In contrast, administrations and public companies have been increasingly perceived as less capable of ensuring an efficient allocation of resources than markets and, similarly, less capable of ensuring efficient regulation than independent regulators endowed with more expertise (Petretto 1998, p. 103). Several authors have also noted that the ideational shift and the slow yet ongoing neoliberalization of Europe’s political economies has had broader implications with regard to the marketization of welfare services

(Chambat 1990; Keune et al. 2008a). It has translated into the end of demand-oriented and debt-friendly macroeconomic policy and the rise of the ‘sound money’ paradigm. In this context, the leitmotif of welfare services ‘modernization’ became the main narrative justifying the political will to reduce public spending as deficits had become a main concern in many countries. The introduction of the new public management principles and internal deregulation of welfare services have aimed at increasing the efficiency of welfare services, while the privatization of large public companies has often been seen by governments as a means to quickly provide state revenue.

All this has gone hand in hand with a change in the philosophy and normative principles underpinning the relationship in the provision of these services to society. The idea that services should be provided to all citizens on an equal basis in order to respond to society’s basic needs has given way to competition among providers in respect of winning market shares and attracting consumers. The connection between welfare services and citizenship (Freedland and Sciarra 1998) was progressively replaced by the connection between services and economic performance. The services which used to be understood as merit goods (Musgrave 1959)1 or even fundamental rights have been increasingly recommodified and considered as parts of mass consumption. In this perspective, users’ welfare is achieved if prices can be decreased through technological adaptation, competition and the reduction of labour costs. In tune with neoliberalism and new public management, the focus now lies on service to the public, that is, on consumer choice between various competitive services rather than on the equal provision of welfare services to all citizens (Van Gyes et al. 2009). Insofar, there has been a movement of convergence towards neoliberal capitalism across the Western world, and the mar- ketization of welfare services (including liberalization, privatization and deregulation) has been a global and not solely a European trend (Haque 2001). Notwithstanding, the unique experience of economic and political integration undertaken by the Europeans has heavily contributed to [2]

accentuate this policy direction through particularly effective regulatory and legal mechanisms.

  • [1] A confidence in the market as an efficient mechanism for the allocation of scarce resources. 2. A belief in the desirability of a global trade regime for free trade andfree capital mobility.
  • [2] A merit good is a commodity which is considered as necessary to respond to basic needs andshould therefore be provided regardless of individuals’ capacity or willingness to pay.
 
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