Welfare Recalibration in Motion

The adaptive capacities of European welfare states

Are European welfare states fit for twenty-first century global capitalism? This question has haunted European policymakers for at least in excess of two decades. In the early 2000s, slow economic growth and elusive job creation culminated in a fierce ideological battle between different socio-economic 'models'. The 2005 French referendum campaign over the new Constitutional Treaty of the European Union revealed polarized positions. The 'French' social model, supposedly offering a high degree of social protection, was pitted against the stereotype of an 'Anglo-Saxon' model of capitalism, allegedly a 'free market without a safety net', producing high levels of poverty and inequality. In the wake of the fall-out of the global financial crisis I expect the political debate about competing models—ranging from Anglo-Saxon liberal to the Rhineland social market economies and the new statist Chinese capitalism—will reach new levels of intensity in the years ahead. However, it is my firm contention that couching the policy debate in terms of a battle between warring alternatives easily triggers ideological strife, separating antagonistic advocacy coalitions, rather than moving comparative analysis and political debate towards a better understanding of institutional and programmatic social policy change.

At the outset of this chapter, I wish to raise four principled reservations against framing policy analysis in terms of 'best' models or 'worst' cases in general, and more particularly, about using the underspecified notion of a 'European social model' (see also Visser and Hemerijck, 1997: 195). In the first place, too often, the 'European social model' is referred to as if it were a uniform phenomenon manifest across national territories. This surely cannot be empirically supported in an EU of 27 Member States. As will be revealed below, there are immense differences in economic development, the size and structure of the public sector, and social policy design across Europe, as a consequence of the divisive experiences of feudalism, Catholicism, rival military strife, absolutism, the Reformation, the Enlightenment, democracy, capitalist industrial development, and working-class protest, economic depression, and two dislocating twentieth-century world wars, in European history (Esping-Andersen, 1990, 1999; Ferrera, Hemerijck, and Rhodes, 2000). While some countries tax their citizens very heavily and spend quite generously on social programmes, others prefer low taxes and lower levels of spending with leaner services. Hence, it would be a mistake to overgeneralize the nature of welfare state change in such a way as to obscure these national distinctions. Welfare states are based on politically defined boundaries and demarcations. If Europe does have unique models, they are certainly plural rather than singular (Berger and Dore, 1996; Hemerijck, Keune and Rhodes, 2006; see also Alber, 2006; Baldwin, 2009; Alber and Gilbert, 2010; Pontusson, 2010). An appreciation of the different problems facing Europe's multifarious welfare regimes is critical for accurate analysis, comparison, and informed policy prescription. That is why this chapter is squarely anchored in the institutional perspective of welfare regime analysis.

Second, the idea of distinct national economic 'best practice' models of the moment renders a rather misguided impression of unity, national sovereignty, and institutional completeness in social policymaking. The 2008 global financial crisis exemplifies the growing 'institutional incompleteness' of domestic social policy repertoires, brought about by the profound change of economic internationalization over the past quarter-century. The term 'model', by contrast, implies that the inside is clearly separated from the outside, marked off by system boundaries. Any notion of a self-contained European model(s), however, belies the extent to which Europe's social market economies have, over the past decades, become part and parcel of the global anglophone financial system (see Chapter 9).

Third, the notion of distinct economic models also problematically implies virtue on the part of successful domestic policymakers, giving the faulty impression that best practices can easily be transported from one country to the next. In the second half of the 1980s, it was fashionable to argue that the US 'liberal market economy' needed to recast its political economy along the lines of the model of Europe's 'coordinated market economies'. Whether European social programmes are truly exportable is questionable. The bitter debates over healthcare reform in the US testify to the significant political hurdles for reforming Anglo-American capitalism.

Finally, my most serious objection to the term is that every conception of a 'European social model' is inherently static. While the architects of the postwar welfare state, John Maynard Keynes and William Beveridge, could assume stable male-breadwinner families and expanding industrial labour markets, this picture of the economy and society no longer holds true. Since the late 1970s, continuous changes in the world economy, European politics (most spectacularly the demise of communism in Eastern Europe), labour markets, and family structures have disturbed the once sovereign and stable social and economic policy repertoires. Unwittingly, most EU Member States have, over the past thirty years, come to recast the basic policy mix upon which their national systems of social protection are built (Hemerijck and Schludi, 2000; Lindvall, 2010). This chapter is about welfare recalibration in motion, about reform trajectories and political destinations in an era of rapid economic, social, and political restructuring. The term 'model' is too unidirectional to be useful in this respect.

Models come and go. In the second half of the 1980s, it was already fashionable to argue that the US 'liberal market economy' needed to recast its political economy along the lines of the model of Germany's 'coordinated market economies'. In the 1990s, the Dutch employment, Danish flexicurity, and Finnish knowledge-economy miracles played a prominent role in discussions about the possibilities for a new 'capitalism with a social face' in an age of global competition, industrial restructuring, and ageing populations. Up to the global financial crisis the—now disqualified—Irish 'Celtic Tiger' became the model to emulate. Today, it is highly unclear what kind of new welfare state is truly compatible with twenty-first century capitalism. In this chapter, I will highlight how many reform successes in the areas of employment policy, pensions, and social services across the EU over the past two decades, were expedient responses to impending economic crisis and political contingen- cies—a question of fortuna as much as virtu, to use Machiavelli's words, with long incubation periods. Usually, it is incoming governments that reap the benefits of painful reforms enacted by their predecessors (Hemerijck and Visser, 2001).

With these caveats in mind, the rest of this chapter is organized as follows. We begin by discussing Europe's heterogeneous welfare regimes typologies in section 2. We then look more closely, in sections 3 to 7, at recalibration policy strategies adopted across the Nordic countries, the anglophone Ireland and the United Kingdom, the continental welfare regimes of the European mainland, the southern European rim social policy systems, and, finally the new Member States of former Communist Eastern Europe, which entered the EU in 2004 and 2007. By diachronically tracing processes of welfare recalibration along the four key dimensions of functional, distributive, normative, and institutional recalibration, I hope to ascertain the complex ways in which modern social contracts have been redrafted. Finally, in conclusion, section 8 devotes attention to the question of whether, over the past decades of structural, social, economic, and political change, different welfare regimes have grown further apart, or whether apparent regime specific 'exceptionalisms' have been somewhat abated through long-term social reform in the face of intensified economic competition and capital mobility, de-industrialization, high unemployment, fundamental gender and family demography change, and accelerated European integration. Across a fair number of countries a process of 'contingent convergence', undergirded by increasingly similar cognitive and normative orientations, is indeed observable across many European polities, but not for all welfare states under review in this chapter.

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