Welfare Recalibration as Social Learning

Explaining welfare state change

Welfare states are complex policy systems, defying easy explanation. The overriding objective of this book is to trace the dynamic of social reform that has swept across Europe over the past two decades. Welfare reform is difficult, to be sure, but it happens!

Since the early 1990s, leading scholars have conjectured that mature welfare states are remarkably change-resistant in spite of the 'irresistible' internal and external forces requiring profound reform (Esping-Andersen, 1996, 1999; Pierson, 1996, 2001, 2004). As the empirical cards are no longer stacked in favour of the welfare status quo, this raises important theoretical questions. If policymakers, contrary to received wisdom, do engage in major reforms, in spite of numerous institutional obstacles and political disincentives, what distinguishes these actors and the institutional settings within which they operate from the purported more general case of change-resistant welfare states? Given the constrained room for manoeuvre of policymakers, under conditions of rapid population ageing, skill-biased economic change, and fiscal austerity, does politics matter at all, and if so, how? How important are mechanisms of social learning, new ideas, and information feedback from past performance? Do normative issues of social justice come into the equation? Does international diffusion of 'best practices' and reform successes and failures, surveyed by international organizations such as the OECD, IMF, World Bank, and ILO, inspire domestic social reform to any extent, and if so, how? As argued by Maurizio Ferrera, the progressive 'nesting' of domestic social policy and labour market regulation in the expanding repertoire of EU macroeconomic governance, single market legislation, and social and employment policy regulation already displays a steady and growing influence of the EU on national social policies (Radaelli, 2004; Zeitlin, 2011).

This chapter deals with the theoretical imperative of constructing and explicating a brand of institutional policy analysis, capable of interpreting and explaining substantive post-formative welfare state change (Hemerijck, 2008). In the light of the profound welfare reform momentum, especially since the mid 1990s, there is a real need for a more open and dynamic institutional perspective on welfare reform and institutional change. It is imperative to go beyond popular theoretical dichotomies of juxtaposing 'expansion' versus 'retrenchment', 'welfare' versus 'workfare', 'prosperity' versus 'austerity', 'credit claiming' versus 'blame avoidance', and 'punctuated change' versus 'institutional inertia'. Bipolar analytic heuristics, I believe, limit the analytic scope for a better understanding of the multifarious nature of changing welfare states. What I take issue with in this chapter is the increasingly deterministic understanding of self-reinforcing institutional complementarities, to the effect of immobilizing contemporary welfare states, which over the past ten years has progressively become the new theoretical mainstream in institutional analysis. I am not suggesting throwing out with the bathwater the fundamental insight of institutional analysis that existing political structures and social policy legacies pre-shape the behaviour of today's reformers in a path-dependent fashion (Hall and Taylor, 1996). History matters: once established, institutions tend to endure.

In the course of this chapter, I develop three amendments on mainstream institutional analysis. In the first place I will nuance the deterministic bias in comparative welfare state research. Based on available empirical evidence, I maintain that we have to allow for far more institutional contingency and heterogeneity, unanticipated and unintended consequences of spillover dynamics across interdependent social and economic policy areas. Second and more fundamentally, I advocate an open institutional perspective that helps us understand through what causal mechanisms the adaptive challenges of intensified economic internationalization, post-industrial societal change, conditions of relative austerity, and accelerated European integration trigger and inspire domestic social reform efforts. For this, at a minimum, we have to allow for reflexivity in the dispositions of relevant policy actors. As Hugh Heclo reminds us, contemporary welfare reform is not merely the outcome of 'a contest for power' but is critically informed by the 'play of ideas' about the cognitive definition of policy problems and the normative benchmarks with which selected policy solutions are weighed and judged (Heclo, 1974). Hence social learning processes must necessarily have an important place in the explanation of welfare state change. My third amendment to mainstream institutionalism concerns the problematique of methodological nationalism in comparative welfare state research. It is about time theoretically to integrate the mounting influence of the EU and other international organizations in the articulation and 'nesting' of domestic social reform.

Following this introduction, section 2 surveys the rise of power resource theory and historical institutionalism to theoretical prominence in the field of comparative welfare state research since the 1980s. Next, section 3 turns to the emergence of novel theoretical insights of scholars, closely associated with the tradition of historical institutionalism, on mechanisms of incremental policy change, pioneered by Wolfgang Streeck and Kathy Thelen (2005), which much better captures the gradual and negotiated character of contemporary welfare state change. Section 4 examines expansive literature on the transformative power of ideas and policy learning. The theoretical advantage of both the literatures of the power of ideas and the mechanisms of incremental institutional transformation is their explicit emphasis on institutional change. The two approaches part company over actor preferences, with the ideational perspective being fundamentally based on fluid preferences, while the incremental change approach remains faithful to more static materialist interests suppositions. Section 5 then further exemplifies the empirically grounded and multidimensional heuristic of welfare recalibration. As an instance of 'social learning', the notion of 'recalibration' suggests that reform decisions nearly always pass through, and are based upon, cognitive and normative judgement, distributive bargaining, and institutional redesign, in an attempt to improve policy performance of welfare programmes faced with severe adaptive challenges (Ferrera, Hemerijck, and Rhodes, 2000). Section 6 puts forward a suggestion to integrate theoretically cross-national benchmarking and policymaking, through the intermediation of international organizations, in the ongoing recalibration of national welfare states and EU social policy. Section 7 concludes by drawing out the wider theoretical implications for future welfare state research.