The Oxford Handbook of the Welfare State 9780198828389, 0198828381

Table of contents :
cover
The Oxford Handbook of the Welfare State
Copyright
Dedication
Contents
List of Figures
List of Tables
Select List of Abbreviations
List of Contributors
A Note on the Jacket Illustration
Stephan Leibfried
1 Introduction
PART I PHILOSOPHICAL JUSTIFICATIONS AND CRITIQUES OF THE WELFARE STATE
2 Ethics
3 Intellectual Roots of the Welfare State
4 The Critics of Welfare: From Neoliberalism to Populism
PART II HISTORY
5 The Emergence of the Western Welfare State
6 Post-​War Welfare State Development: The ‘Golden Age’
7 Recent Developments: Social Investment Reform in the Twenty-​First Century
PART III APPROACHES
8 Research Methods
9 Public and Private Social Welfare
10 Governance
11 Social Investment
12 Families, States, and Markets
13 Disciplinary Perspectives on Welfare States
PART IV INPUT AND ACTORS
14 Needs and Risks in the Welfare State
15 Democracy and Capitalism
16 Unions and Employers
17 Parties
18 Political Institutions
19 Public Attitudes
20 Gender
21 Religion
22 Migration and New Ethnic Minorities
23 European and National Social Policy
24 Intergovernmental Organizations
25 Globalization
PART V POLICIES
26 Social Expenditure and Welfare State Financing
27 The Welfare State as Employer
28 Old-​Age Pensions
29 Health
30 Long-​Term Care
31 Work Accident and Sickness Benefits
32 Disability
33 Unemployment Insurance
34 Employment Promotion
35 The Regulation of Employment
36 Social Assistance
37 Family Benefits and Services
38 Housing
39 Education
PART VI POLICY OUTCOMES
40 The Social Rights of Citizenship
41 Inequality and Poverty
42 Macroeconomic Outcomes
43 Gendered Outcomes
44 Welfare Retrenchment
PART VII WORLDS OF WELFARE
45 Models of the Welfare State
46 The Nordic Countries
47 Continental Western Europe
48 The South European Countries
49 The English-​Speaking Countries
50 Central and Eastern European Countries
PART VIII PROSPECTS
51 From Welfare States to Planetary Well-​Being
Name Index
Subject Index

Citation preview

T H E OX F O R D H A N DB O O K OF

THE W E L FA R E   STAT E

The Oxford Handbook of

THE WELFARE STATE Second edition Edited by

DANIEL BÉLAND KIMBERLY J. MORGAN HERBERT OBINGER and CHRISTOPHER PIERSON

1

3 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2021 The moral rights of the author‌have been asserted First Edition published in 2010 Second Edition published in 2021 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2021931011 ISBN 978–​0–​19–​882838–​9 DOI: 10.1093/oxfordhb/9780198828389.001.0001 Printed in Great Britain by Bell & Bain Ltd., Glasgow Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

In memory of Stephan Leibfried (1944–​2018)

Preface

This is the second edition of The Oxford Handbook of the Welfare State, a comprehensive, cross-​disciplinary and multi-​author survey of the state of the welfare state in its advanced capitalist homelands. It is eleven years since the first edition was published, and much has changed in the intervening period. This second edition fully reflects those changes. All of the chapters that have been retained from the first edition have been substantially rewritten to reflect what has happened over the past decade. In addition, we have commissioned five entirely new chapters, and a new conclusion, which focuses upon the challenge that climate change poses for all future social policy regimes. It is our expectation and our belief that this new edition of the Handbook will reflect the breadth of issues and experience in the welfare state today in just the way that the first edition did in 2010. It is designed to tell a comprehensive story about the comparative experience of advanced welfare states right now. There have been some significant changes of personnel since 2010. We have recruited a number of new authors, all of whom have a proven expertise in the topics about which they write. Two of the original editors—​Jane Lewis and Frank Castles—​have retired, though their mark can still be seen upon the book in its revised form. Two of the other editors—​Herbert Obinger1 from the University of Bremen and Christopher Pierson from the University of Nottingham—​remain on the editorial team. We have recruited two new and highly experienced editors from North America, Professors Kimberly Morgan (from George Washington University) and Daniel Béland (from McGill University), who have brought new insight and expertise to the editorial process. Very sadly, in the early stages of preparing this second edition, Professor Stephan Leibfried, the mastermind of the entire project (alongside Dominic Byatt at Oxford University Press), died. Stephan’s death was a terrible shock and a grievous loss to all those who knew him. He was a very funny and generous man, who took his work, including this project, extremely seriously and ensured that things were always done and done right. He is irreplaceable. We have retained his characteristically insightful and off-​centre essay on the postage stamps of welfare in this second edition of the book, which we dedicate to his memory. Finally, we also want to pay tribute to contributor Dennis Spies, who passed suddenly away at age 40 shortly before this volume went to print. Such a large collaborative project requires the support of many people, including—​but also going well beyond—​the editors and the authors. We have all had the institutional 1  Herbert Obinger and all other authors of the University of Bremen thank the German Research Foundation (DFG) for financial support (grant 374666841 - SFB 1342)

viii   Preface support of the universities and research centres for which we work. Special mention is due to the University of Bremen, to its Research Center on Inequality and Social Policy (SOCIUM), and to the associated Hanse-​Wissenschaftskolleg (based in Delmenhorst, Lower Saxony), which supported various members of the editorial team during their visits to Germany. We are also grateful to Emma Gasster for great editorial assistance. Dominic Byatt and a team of editors and production staff at Oxford University Press have overseen both editions from conception to publication. We are grateful for all this support. Assailed from almost every quarter, the welfare state is here to stay. It remains what governments—​local and central—​do, most of the time. It provides a key part of the infrastructure of our shared lives—​in health and education, for example. It is still an engine of redistribution—​of money, of life-​chances, and of well-​being. And it helps support people in times of crisis, as we saw in the aftermath of the 2008 financial crisis and, more recently, in the wake of the 2020 COVID-​19 pandemic. But it faces a series of unprecedented challenges: demographic, institutional, and (in the case of climate change) existential. And it seems certain that COVID-​19 and its consequences will change the context for social policy profoundly and for a long time to come. Given this, we do well to be armed with the best possible guide to the welfare state as we have it right now. That is what this second edition of the Oxford Handbook of the Welfare State is designed to be.

Contents

List of Figures List of Tables Select List of Abbreviations List of Contributors A Note on the Jacket Illustration Stephan Leibfried

1 Introduction Daniel Béland, Kimberly j. Morgan, Herbert Obinger, and Christopher Pierson

xv xvii xix xxiii xxvii 1

PART I  PHILOSOPHICAL JUSTIFICATIONS AND CRITIQUES OF THE WELFARE STATE 2 Ethics Stuart White

23

3  Intellectual Roots of the Welfare State Christopher Pierson and Matthieu Leimgruber

39

4  The Critics of Welfare: From Neoliberalism to Populism Gerda Hooijer and Desmond King

53



PART II  HISTORY

5  The Emergence of the Western Welfare State Stein Kuhnle and Anne Sander

73

6  Post-​War Welfare State Development: The ‘Golden Age’ Frank Nullmeier and Franz-​Xaver Kaufmann

93

x   Contents

7 Recent Developments: Social Investment Reform in the Twenty-​First Century Anton Hemerijck and Stefano Ronchi

112

PART III  APPROACHES 8  Research Methods Edwin Amenta and Alexander M. Hicks

133

9  Public and Private Social Welfare Willem Adema and Peter Whiteford

153

10 Governance Daniel Béland and Kimberly J. Morgan

173

11  Social Investment Julian L. Garritzmann, Silja Häusermann, and Bruno Palier

188

12  Families, States, and Markets Mary Daly

206

13  Disciplinary Perspectives on Welfare States Einar Øverbye

222

PART IV  INPUT AND ACTORS 14  Needs and Risks in the Welfare State Jan Zutavern and Martin Kohli

241

15  Democracy and Capitalism Torben Iversen

259

16  Unions and Employers Bernhard Ebbinghaus

278

17 Parties Manfred G. Schmidt

298

18  Political Institutions Ellen M. Immergut

313

19  Public Attitudes Staffan Kumlin, Achim Goerres, and Dennis C. Spies

329

Contents   xi

20 Gender Ann Shola Orloff and Marie Laperrière

346

21 Religion Kees van Kersbergen and Philip Manow

364

22  Migration and New Ethnic Minorities Simone Scarpa, Stephen Castles, and Carl-​Ulrik Schierup

380

23  European and National Social Policy Manfred G. Schmidt

397

24  Intergovernmental Organizations Klaus Armingeon

417

25 Globalization Duane Swank

433 PART V  POLICIES

26  Social Expenditure and Welfare State Financing Herbert Obinger

453

27  The Welfare State as Employer Karin Gottschall and Markus Tepe

473

28  Old-​Age Pensions Karl Hinrichs and Julia F. Lynch

492

29 Health Heinz Rothgang

506

30  Long-​Term Care August Österle and Heinz Rothgang

524

31  Work Accident and Sickness Benefits Olli Kangas

540

32 Disability Mark Priestley

557

33  Unemployment Insurance Ola Sjöberg, Eero Carroll, and Joakim Palme

573

xii   Contents

34  Employment Promotion Lane Kenworthy

589

35  The Regulation of Employment Patrick Emmenegger and Paul Marx

606

36  Social Assistance Thomas Bahle and Claus Wendt

624

37  Family Benefits and Services Naomi Finch and Jonathan Bradshaw

641

38 Housing Tony Fahey and Michelle Norris

661

39 Education Marius R. Busemeyer and Rita Nikolai

679



PART VI  POLICY OUTCOMES

40  The Social Rights of Citizenship John D. Stephens

701

41  Inequality and Poverty Peter Saunders

717

42  Macroeconomic Outcomes Isabela Mares and Christopher Pierson

733

43  Gendered Outcomes Jennifer Hook and Leah Ruppanner

750

44  Welfare Retrenchment Jonah D. Levy

767



PART VII  WORLDS OF WELFARE

45  Models of the Welfare State Philip Manow

787

46  The Nordic Countries Mikko Kautto and Kati Kuitto

803

Contents   xiii

47  Continental Western Europe Bruno Palier

826

48  The South European Countries Maurizio Ferrera

844

49  The English-​Speaking Countries Francis G. Castles and Christopher Pierson

863

50  Central and Eastern European Countries Linda J. Cook and Tomasz Inglot

881



PART VIII  PROSPECTS

51  From Welfare States to Planetary Well-​Being Ian Gough

901

Name Index Subject Index

921 945

List of Figures

7.1 Employment rate, equality, and welfare spending (the size of the pie charts) in selected OECD countries (averages 2010–​2015)

113

7.2 Total employment rates (squares) and female employment rates (triangles) in the late 1990s and 2018 in twelve OECD countries

121

9.1 Pension and health care are the largest public social spending items. Public social expenditure by broad social policy area by % GDP, in 2015–​ 2017 or latest year available.

159

11.1 Social investment and social compensation in thirty-​five advanced economies, 2010

193

11.2 Welfare legacies and the politicization of social investment

199

16.1 Trade union density, social expenditure, and bargaining coverage, 1980 and 2000

285

26.1 Total tax revenue, % GDP, 1965 vs 2015

463

26.2 Tax-​to-​GDP, 2015 and income inequality, 2017 (Gini post taxes and transfers) 464 26.3 Tax wedge and public social spending, 2015

464

26.4 Share of social contributions as a percentage of public social expenditure, 2015 466 27.1 General government employment expenditure and size

482

27.2 Female and immigrant employment share in the public and private sectors 484 27.3 Public–​private wage differentials

487

28.1 Typology of pension systems

495

28.2 Pension spending as a share of total non-​health social expenditure

497

31.1 The sequential introduction of social insurance laws in different continents and in OECD-​18 (OECD-​18 countries excluded from their continents) 541 31.2 Generosity (net benefit/​net wage) and coverage (insured/​labour force) of sickness benefits in OECD countries in the 2010s

551

34.1 Employment rates, 1989 and 2017

600

34.2 Jobs with equality

601

35.1 Development of job security regulations in Western Europe, 1950–​2013

611

xvi   List of Figures 35.2 Changes in the regulation of dismissal protection in the case of open-​ ended contracts (black circles) and temporary employment (grey circles), 1985–​2008

614

35.3 Percentage of temporary contracts among workers twenty-​five–​thirty-​ four years in five countries, 2000–​2018

616

36.1 Extent and generosity of social assistance, OECD countries, 1992

628

36.2 Rate of social assistance beneficiaries, 2007 (as % of total population)

631

36.3 Rate of social assistance beneficiaries, 2007 (as % of population twenty–​ sixty-​four and sixty-​five plus)

632

36.4 Net income on social assistance, couple with two children, OECD countries, 2015 (as % of median income)

633

36.5 Net income on social assistance, couple with two children and single parent with one child, EU countries, 2012 (as % of median income)

634

37.1 Percentage of children living in a lone-​parent family, 2014

643

37.2 Spending per child in percentage of spending per older person, 1990–​2013 647 37.3 Child benefit package for couple with two children, one earner by level of earnings. Ranked by average earnings: percentage extra over a childless couple on the same earnings.

650

37.4 Fertility rate, 2014 by family spending by % GDP, 2013

652

37.5 Maternal employment rate by % GDP spent on family services

654

37.6 Child poverty rates of single parents before and after transfers, 2014

655

37.7 Overall child well-​being by percentage GDP devoted to family benefits and services, 2013

658

38.1 Real house price trends in 14 western countries, 1870–​2010

663

38.2 Housing costs as percentage of household income at different income levels in England and Wales, 1961–​2016

667

38.3 Housing costs as percentage of household income among poor and non-​ poor, EU 28, 2017

668

38.4 Poverty rates on all income and on residual income after housing costs

669

39.1 The relationship between public education and social spending by % GDP, 2015

683

39.2 Variation on education in spending, 2015

684

41.1 The relationship between income inequality and social expenditure in OECD countries

724

41.2 The relationship between poverty and social expenditure in OECD countries

727

50.1 Total social expenditure in CEE states by % GDP

883

51.1 A safe and just space for humanity to thrive in

903

51.2 The impact of a consumption-​based view on emissions by country

908

51.3 Global distribution of consumption-​based emissions

909

List of Tables

4.1 The critics on the welfare state

54

5.1 Overview: establishment of first statutory social security schemes in selected ILO member countries down to 1945

78

8.1 Causal research according to methodological approaches

135

8.2 Welfare programme consolidation in early democracies and proto-​ democracies, 1920

138

9.1 From gross to net social spending: social expenditure by % GDP at market prices

164

9.2 The income accounting framework

168

12.1 Constellation of factors animating state policy towards families

215

14.1 Socio-​economic drivers of new social needs and risks

248

14.2 Selected risk and need profiles: employment

252

14.3 Selected risk and need profiles: family

254

16.1 Ideal-​typical modes of labour relations and their institutional affinities

286

17.1 Social policy positions of major families of parties in Western democracies since the mid-​1950s

308

23.1 Social policy’s degree of Europeanization, 1957–​2017

406

26.1 Trends in social expenditure, 1980–​2015

455

26.2 Programme-​related public spending by % GDP, 2015

458

26.3 Revenue from main tax categories as a percentage of total tax revenue, 2016 467 28.1 Funding and types of pension scheme

501

31.1 Characteristics of work accident and sickness benefit schemes throughout the world in the late 2010s

542

33.1 Years of introduction of first laws providing for unemployment benefits at the national level among 18 OECD countries

575

33.2 Net replacement rates and coverage in labour force (all in %) for eighteen countries: averages for the periods 1930–​1939, 1947–​1970, and 1975–​2015

577

37.1 Child well-​being in the OECD dimension, c. 2013

657

38.1 Schematic illustrations of inflation-​adjusted accumulated wealth flows associated with mortgage-​financed home purchase in the United Kingdom for selected mortgage terms

671

xviii   List of Tables 38.2 Decline of owner occupation of housing in the English-​speaking world

674

40.1 Social rights generosity (decommodification) indexes by welfare state regime

708

40.2 (Quasi) social rights indicators of services and gendered policies

711

42.1 Average unemployment in advanced industrialized political economies: cross-​national and temporal trends, 1960–​1975 and 1976–​1995

744

46.1 Public social expenditure and tax revenue in the OECD countries, 1995–​2015

810

46.2 Expenditure in services and social investment in the OECD countries, 1995–​2015

812

46.3 Selected social policy outcomes in the OECD countries, 1995–​2015

814

49.1 Liberal regime characteristics according to Espin-​Andersen (1999) and English-​speaking family of nation characteristics according to Castles and Obinger (2008)

870

49.2 Shares and progressivity of cash benefits and household taxes in household disposable income in English-​speaking and selected other OECD countries, mid-​2000s

872

49.3 Measures of the dispersion of components of social expenditure, child poverty, and inequality in eighteen OECD countries, mid-​2000s

874

50.1 Selected welfare indicators, 2016

887

Select List of Abbreviations

ADLs

Activities of daily living

AEI

American Enterprise Institute, Washington, DC (1943 ff.; http://​www. aei.org)

AFDC Aid to Families with Dependent Children, USA (1935–​1997; now TANF) ALMP Active labour market policies (1990s ff.) ATTAC The international anti-​ globalization network ATTAC (1998 ff.; Action pour une Taxe Tobin d’Aide aux Citoyens ¼ Association for the Taxation of Financial Transactions for the Aid of Citizens; http://​www.attac.org/​) BRIC

Brazil, Russia, India, & China

CCT

Conditional cash transfer programme

CEE

Central and Eastern European

CEPAL Comisio´n Econo´mica para Ame´rica Latina y el Caribe, Santiago, Chile (¼ ECLAC; 1948 ff.; http://​www.eclac.org/​) CPF

Central Provident Fund, Singapore (1955 ff.; http://​mycpf.cpf.gov.sg)

CPS

Centre for Policy Studies, London (1974 ff.; http://​www.cps.org.uk/​)

CV

Coefficient of variation CWED Comparative Welfare Entitlements Dataset (http://​www.sp.uconn.edu/​ ~scruggs/​wp.htm)

DC

Defined contribution

DRG

Diagnosis related group

ECJ

European Court of Justice, Luxembourg (1952 ff.; http://​curia.europa.eu)

ECLAC Economic Commission for Latin America and the Caribbean, Santiago, Chile (¼ CEPAL; 1948 ff.; http://​www.eclac.org/​) ECM

Error correction models

EFTA

European Free Trade Association, countermovement to founding the

EEC

[EU] in 1957 (1960 ff.; http://​www.efta.int/​)

EITC

Earned Income Tax Credit, USA (also EIC; 1975 ff.; in UK: Working Tax Credit)

EPL

Employment protection legislation

ESA

Event structure analysis

ESF

European Social Fund, Brussels (EU; 1957 ff.; http://​ec.europa.eu/​employment_​social/​esf/​index_​en.htm)

xx    SELECT LIST OF ABBREVIATIONS EU

European Union as of Maastricht Treaty 1992, Brussels (EEC [European Economic Community] or EC [European Community]; 1957–​1992; http://​ europa.eu/​ index_​ en.htm) OUP CORRECTED PROOF –​FINALS, 3/​ 8/​ 2012, SPi

EUR

The Euro currency (also !; accounting currency 1999–​2001; in circulation as of 2002, 2009 in 16 Member States) Eurostat Statistical Office of the European Communities [European Union], Luxembourg (1953 ff.; http://​ec.europa.eu/​ eurostat)

GATS General Agreement on Trade in Services (1995 ff.; under WTO; see http://​ www.wto.org/​) GATT General Agreement on Tariffs and Trade (1947 ff.; see now WTO http://​www. wto.org/​) GDP

Gross domestic product

GNP

Gross national product

GP

General (medical) practitioner, UK

GPA

Global Program on AIDS, UN (but see also WHO; 2001 ff.; http://​www. un.org/​ga/​aids/​ungassfactsheets/​html/​fssgcall_​en.htm and http://​www. unaids.org/​en/​default.asp)

HMO

Health Maintenance Organization, USA

HRS

Health and Retirement Study, USA (http://​hrsonline.isr.umich.edu/​)

IBRD International Bank for Reconstruction and Development ¼ World Bank (WB),Washington, DC (1946 ff.; with IMF one of the two BrettonWoods institutions founded in 1944; http://​www.worldbank.org/​) ICSID International Center for the Settlement of Investment Disputes,Washington, DC (1966 ff.; WB founded arbitration institution devoted to investor-​state dispute settlement; http://​icsid.worldbank.org/​ICSID/​) IDA International Development Association,Washington, DC (1960 ff.; grantmaking or interest free credit-​providing branch of the WB; via http://​ www.worldbank.org/​) IEA

Institute for Economic Affairs, London (1955 ff.; http://​www.iea.org.uk/​)

IFC

International Finance Corporation, Washington, DC (1956 ff.; member of WB Group, financing investment in private sector in developing countries; http://​ www.ifc.org/​)

IFI

International financial institutions

IGO

International governmental organizations

ILO

International Labour Organization [and Office], Geneva, Switzerland (1919 ff.; http://​www.ilo.org/​)

IMF

International Monetary Fund, Washington, DC (1944 ff. http://​www.imf. org/​)

SELECT LIST OF ABBREVIATIONS    xxi INGO

International non-​governmental organizations

IO

Intergovernmental organizations

ISI

Import substitution industrialization

ISSP

International Social Survey Programme (1984 ff.; http://​www.issp.org/​)

KMT

Kuomintang, China

LDC

Less developed country

LDP

Liberal Democratic Party, Japan

LIS

Luxembourg Income Study, Luxembourg (1983 ff.; http://​www.lisproject. org/​)

LTC

Long-​term care

MIGA Multilateral Investment Guarantee Agency,Washington, DC (1988 ff.; WB Group; http://​www.miga.org/​) MLSG Minimum Living Standard Guarantee, China (and South Korea) NDC

Notional defined contribution

NHI

National health insurance

NHS

National Health Service, UK (1948 ff.; http://​www.nhs.uk)

NICS

Newly industrialized countries

OECD Organization for Economic Co-​operation and Development, Paris (1961 ff.; dates back to Marshall Plan 1948–​1951; http://​www.oecd.org) OMC

Open Method of Coordination, EU (Lisbon Strategy; 2000 ff.)

OPEC Organization of Petroleum Exporting Countries, Vienna (1960 ff.; http://​ www.opec.org) PAYG

Pay as you go

PPP

Purchasing power parity

QCA

Qualitative comparative analysis

SCIP

Social Citizenship Indicators Programme (http://​ www.snd.gu.se/​ sv/​ catalogue/​series/​55)

SD

Standard deviation

SERPS State Earnings-​Related Pension Scheme, UK (1978–​2002; replaced 2002 by State Second Pension) SHARE Survey of Health, Ageing and Retirement in Europe (http://​ www. shareproject. org/​) SOCX Social Expenditure Data Set (OECD; http://​ www.oecd.org/​ els/​ social/​ expenditure) SOE

State-​owned enterprise

TANF

Temporary Assistance for Needy Families, US (1997 ff.)

xxii    SELECT LIST OF ABBREVIATIONS TRIPS

Trade-​related Aspects of Intellectual Property Rights (1994 ff.; under WTO; see http://​www.wto.org/​)

TSCS

Time-​series cross-​section

UN

United Nations, New York (1945 ff.; http://​www.un.org)

UNDP

United Nations Development Program, New York etc. (1965 ff.; http://​ www.undp.org/​)

UNESCO

United Nations Educational, Scientific and Cultural Organization, Paris (1946 ff.; http://​portal.unesco.org/​)

USD

US Dollars (US$)

WB

World Bank; Washington, DC (1946 ff.; see also IBRD; with IMF one of the two Bretton Woods institutions founded in 1944; http://​www.worldbank. org/​)

WHO

World Health Organization, Geneva, Switzerland (1948 ff.; http://​www. who.int/​en/​)

WTC

Working Tax Credit, UK (2003 ff., predecessor 1999–​2003 WFTC with ‘F’ standing for families; see also EITC, USA)

WTO

World Trade Organization, Geneva, Switzerland (1993 ff.; http://​www.wto. org)

US AID

United States Agency for International Development, Washington, DC (1961 ff.; originates with Marshall Plan 1948–​1951; http://​www.usaid.gov/​)

List of Contributors

Willem Adema  is Senior Economist in the OECD Social Policy Division in Paris. Edwin Amenta  is Professor of Sociology at the University of California, Irvine. Klaus Armingeon  is Professor Emeritus of Political Science at the University of Bern and associated researcher at the University of Zurich. Thomas Bahle  is a Senior Researcher at the Department of European Societies and their Integration at the Mannheim Centre for European Social Research (MZES). Daniel Béland  is James McGill Professor of Political Science at McGill University. Jonathan Bradshaw  is Emeritus Professor of Social Policy at the University of York. Marius R. Busemeyer  Professor of Political Science and Speaker of the Excellence Cluster “The Politics of Inequality” at the University of Konstanz. He is also a Senior Research Fellow at the WSI in Düsseldorf. Eero Carroll  is an analyst at the Swedish Agency for Public Management in Stockholm. Francis G. Castles  is Professor Emeritus at the University of Edinburgh and Adjunct Professor of Political Science at the Research School of Social Sciences at Australian National University. Stephen Castles  is an Honorary Professor of Sociology at the University of Sydney. Linda J. Cook  is Professor Emerita of Political Science and Slavic Studies at Brown University and Academic Supervisor, ILSIR, Higher School of Economics Moscow. Mary Daly  is Professor of Sociology and Social Policy at the University of Oxford. Bernhard Ebbinghaus  is Professor of Social Policy at the University of Oxford. Patrick Emmenegger  is Professor of Political Science at the University of St. Gallen. Tony Fahey  is Professor Emeritus of Social Policy at University College Dublin Ireland. Maurizio Ferrera  is Professor of Political Science at the University of Milan. Naomi Finch  is Lecturer in Social Policy at the University of York. Julian L. Garritzmann  is Professor of Political Science at the University of Frankfurt/​Main. Achim Goerres  is Professor of Political Science at the University of Duisburg-​Essen.

xxiv   List of Contributors Karin Gottschall  is Professor of Sociology at the University of Bremen. Ian Gough  is Professor Emeritus of Social Policy at the University of Bath and Visiting Professor, London School of Economics, Centre for the Analysis of Social Exclusion (CASE). Silja Häusermann  is Professor of Political Science at the University of Zurich. Anton Hemerijck  is Professor of Political Science at the European University Institute in Florence. Alexander M. Hicks  is Winship Distinguished Research Professor at Emory University in Atlanta, Georgia. Karl Hinrichs  is a Senior Research Fellow (ret.) at the University of Bremen. Gerda Hooijer  is Assistant Professor of Comparative Political Economy at University College London. Jennifer Hook  is Professor of Sociology at the University of Southern California. Ellen M. Immergut  is Professor of Political Sciences and Comparative Politics at the European University Institute in Florence and Humboldt-​Universität zu Berlin. Tomasz Inglot  is Distinguished Faculty Scholar and Professor of Political Science in the Department of Government, Minnesota State University-Mankato. Torben Iversen  is the Harold Hitchings Burbank Professor of Political Economy at Harvard University. Olli Kangas  is Professor of Practice at the Department of Social Research, University of Turku and Director of the Equal Society program, Strategic Research at the Academy of Finland. Franz-​Xaver Kaufmann  is Professor Emeritus of Sociology at the University of Bielefeld. Mikko Kautto  is Managing Director of the Finnish Centre for Pensions. Lane Kenworthy  is Professor of Sociology and Yankelovich Chair in Social Thought at the University of California-​San Diego. Kees van Kersbergen  is Professor of Political Science at Aarhus University. Desmond King  is the Andrew W. Mellon Professor of American Government and Fellow, Nuffield College at the University of Oxford. Martin Kohli  is Emeritus Professor of Sociology at the European University Institute in Florence. Stein Kuhnle  is Professor Emeritus of Comparative Politics at the University of Bergen and Professor Emeritus of Comparative Social Policy at the Hertie School, Berlin. Kati Kuitto  is Senior Researcher at the Finnish Centre for Pensions.

List of Contributors    xxv Staffan Kumlin  is a Professor of Political Science at the University of Oslo. Marie Laperrière  is a PhD candidate in the Department of Sociology at Northwestern University. Matthieu Leimgruber  is Professor of History at the University of Zurich. Jonah D. Levy  is Professor of Political Science at the University of California, Berkeley. Julia F. Lynch  is Professor of Political Science at the University of Pennsylvania. Philip Manow  is Professor of Political Science at the University of Bremen. Isabela Mares  is Arnold Wolfers Professor of Political Science at Yale University. Paul Marx  is Professor of Political Science and Socio-​Economics at the University Duisburg-​Essen and a part-​time professor at the Danish Center for Welfare Studies, University of Southern Denmark. Kimberly J. Morgan  is Professor of Political Science and International Affairs at George Washington University. Rita Nikolai  is Professor of Comparative Education at the Faculty of Philosophy and Social Sciences, University of Augsburg. Michelle Norris is Professor and Director the Geary Institute for Public Policy at University College Dublin Ireland. Frank Nullmeier  is Professor of Political Science at the University of Bremen. Herbert Obinger  is Professor of Political Science at the University of Bremen. Ann Shola Orloff  is Professor of Sociology, Gender Studies and Political Science at Northwestern University. August Österle    is Associate Professor of Social Policy at the Vienna University of Economics and Business. Einar Øverbye is Professor of International Social and Health Policy at Oslo po Metropolitan University. Bruno Palier  is CNRS Director of research in Political Science at Sciences Po, Paris. Joakim Palme  is Professor of Political Science at the University of Uppsala. Christopher Pierson is Professor Emeritus of Politics at the University of Nottingham. Mark Priestley  is Professor of Disability Policy at the University of Leeds. Stefano Ronchi  is Postdoctoral Researcher at the Department of Social and Political Science, University of Milan.

xxvi   List of Contributors Heinz Rothgang  is Professor of Health Economics at the University of Bremen. Leah Ruppanner  is Associate Professor of Sociology at the University of Melbourne. Anne Sander  is a Research Associate at the Hertie School, Berlin. Peter Saunders is Emeritus Professor in the Social Policy Research Centre at the University of New South Wales. Simone Scarpa is Associate Professor at the Department of Social Work, Umeå University. Carl-​Ulrik Schierup  is Professor Emeritus at the Institute for Research on Migration, Ethnicity and Society (REMESO) at Linköping University. Manfred G. Schmidt  is Professor Emeritus of Political Science at the University of Heidelberg. Ola Sjöberg  is Professor of Sociology at the Swedish Institute for Social Research at Stockholm University. Dennis C. Spies  was Professor of Political Science at the University of Düsseldorf. John D. Stephens  is the Gerhard E. Lenski, Jr. Distinguished Professor of Political Science and Sociology and Director of the Center for European Studies at the University of North Carolina, Chapel Hill. Duane Swank  is Professor Emeritus of Political Science at Marquette University in Milwaukee, Wisconsin. Markus Tepe  is Professor of Political Science at the University of Oldenburg. Claus Wendt  is Professor of Sociology at the University of Siegen. Stuart White  is University Lecturer in Politics and Tutorial Fellow in Politics at Jesus College at the University of Oxford. Peter Whiteford  is Professor in the Crawford School of Public Policy at the Australian National University and an Adjunct Professor at the Social Policy Research Centre at the University of New South Wales. Jan Zutavern  is a team leader at the University of Luxembourg a ???

A Note on the Jacket Illustration

Stephan Leibfried In order to highlight the comparative, international nature of this volume’s chapters, we wished to illustrate the book jacket with symbols of welfare states from all over the world. The welfare state has received little, if any, notice on most national icons such as flags, state seals, coins, and banknotes, but many nations have issued postage stamps that honour welfare state founders or champion social policies and ideals. Perhaps tellingly, most, if not all, of these are special commemorative stamps, rather than regular-​ issue stamps:  even in countries whose welfare states developed hand-​in-​hand with nationhood—​in Germany, Australia, New Zealand, and Uruguay—​welfare motifs were not chosen for the core national icons. While hunting for stamps to adorn the book jacket, I noticed that the welfare motifs used fall into five distinct categories, roughly corresponding to the types of protagonists in welfare state development. First, international welfare motifs have appeared on many nations’ stamps, often in recognition of some event, like the World Social Summit in Copenhagen in 1995, or a United Nations special observance, such as the International Women’s Year, the Year of Older Persons, or the Year for the Eradication of Poverty. The United Nations also issues its own postal stamps with these themes, as do the International Labour Organization (ILO) and the World Health Organization (WHO). The latter has been especially successful in popularizing its yearly health themes, and its members also tend to issue their own stamps for the WHO’s yearly campaigns. Second, stamps celebrating the anniversaries of welfare state institutions such as social insurance and pension insurance began to appear after the Second World War. Many nations have issued commemorative stamps in honour of the founders and architects of their welfare states. There are German stamps depicting Chancellor Otto von Bismarck and Uruguayan ones of President José Batlle y Ordoñez, both nineteenth-​ century nation builders and pioneers of the welfare state—​though Batlle’s role is now largely forgotten outside of Latin America (cf. Mesa-​Lago, 1978. Social Security in Latin America:  Pressure Groups, Stratification, and Inequality. Pittsburgh:  University of Pittsburgh Press: 70–​112; Papadopulos, Jorge, 1992. Seguridad social y polıtica en el Uruguay. Orıgenes, evolucion y mediacion de intereses en la restauracion democratica [Social Security Politics in Uruguay:  Origins, Evolution and Interest Mediation in the Restoring of Democracy]. Montevideo:  CIESU). Third, of the twentieth-​century

xxviii    A Note on the Jacket Illustration welfare state founders and reformers, President Franklin D. Roosevelt and his Secretary of Labour, Frances Perkins, are both honoured on US stamps. And of the post-​ Second World War reformers and founders, Chancellor Konrad Adenauer appears on German stamps, Prime Minister Einar Gerhardsen on Norwegian ones, and Tommy Douglas, who founded the Canadian health system, is honoured on Canadian stamps. Interestingly, though we associate the welfare state with these leaders, many of them are also known for nation building or post-​Second World War economic reconstruction, and the stamps—​with the exception of a single Roosevelt stamp—​do not specifically recognize their contributions to social policy. Notably missing from the line-​up of founders’ stamps are William Beveridge—​recognized as the father of the National Health Service in the United Kingdom—​and New Zealand’s first Labour Party Prime Minister, Michael Joseph Savage, who introduced a comprehensive cradle-​to-​grave welfare state in the 1930s and served as inspiration for the post-​war welfare state reform on the other side of the world [ILO (International Labour Organization), 1949; Systems of Social Security. New Zealand. Geneva: ILO]. Fourth, examples of other individuals whose work has had far-​reaching consequences for welfare state cultures include the German protestant minister, Johann Hinrich Wichern; reformist doctors such as Arvo Ylppö, who founded childcare clinics in Finland, and Julius Tandler, who introduced industrial hygiene in Austria; agitators for social reform such as the unionist Ferdinand Hanusch and the Catholic reformer Karl Freiherr von Vogelsang in Austria; and the American unionist Samuel Gompers, who was instrumental in setting up the International Labour Organization. Most of these figures are recognized only in the nations where they worked, but there are a number of Catholic heroes of social welfare, such as the Albanian nun, Mother Theresa, who are honoured on stamps around the world. Non-​state instruments of social policy comprise the fifth and most varied category of postage stamp motifs that I identified. There are stamps that pay tribute to children’s clinics, hospitals, medical associations, nurses, accident prevention and protection measures, and, of course, the International and National Red Cross. In Finland, even day care centre anniversaries, women’s support groups, and a novel have commemorative stamps. (The novel is Vāinō Linna's trilogy Under the North Star (1959–​1962), which helped set the stage for the introduction and acceptance of a Scandinavian type welfare state in Finland). In China, where near-​universal health insurance is now being introduced, there is a series of stamps depicting the barefoot itinerant doctors who have long served the rural poor. Another series indirectly highlights China’s default policy of individual savings in lieu of a comprehensive pension system: these stamps celebrate the one-​child family planning policy, which has led to an ageing population that can no longer rely on traditional means—​family—​but has a savings rate that is 50 per cent of GDP. Public awareness campaigns have also made use of postage stamps to call attention to social and health issues such as child and youth welfare, AIDS, cancer, polio, and tuberculosis. Controlling the spread of tuberculosis was one of the first grand successes of public health and the theme appears frequently on stamps from various countries, but for some reason it completely dominates Finnish stamps between 1946 and the mid-​1970s.

A Note on the Jacket Illustration    xxix In comparing stamps from different nations, I also noticed that they reflected some of the major regional differences in welfare state cultures. Education and housing are prevalent stamp themes in Southeast Asia and China, where social policies emphasize these aspects of welfare more than in twentieth-​century Western welfare states (Rieger and Leibfried, 2003. Limits to Globalization:  Welfare States and the World Economy. Cambridge: Polity: 255 ff.). Since the 1990s, the countries of Eastern Europe have produced far fewer welfare state commemorative stamps than any other region of the world, perhaps because welfare provision was part of the communist system that these countries rejected and they have not had time to reconstruct (but see Chapter 50). One does, in fact, find stamps celebrating a return to pre-​communist social insurance systems in some Eastern European countries (e.g. Lithuania, 2006). In Latin America and Southern Europe, as well as parts of Eastern Europe, the stamps frequently depict Saint John Bosco or other Catholic saints who were known for their work with the underprivileged and epitomized the church’s formal and informal contributions to national welfare states. Scandinavia’s stamps have a strong focus on the provision of health and other services, whereas stamps from continental Western Europe are more likely to focus on welfare state institutions and funds and on their founders. Worker protection and industrial hygiene was a starting point for many countries’ welfare states, and, accordingly, seems to be a common early theme for stamps around the world. Regional treatments of more recently recognized welfare state issues such as gender, race, age, or other types of discrimination that might produce unequal life chances are, however, quite varied. Historically, relations between nation states have played a significant role in the development of many welfare states and this is also evident in some of the stamps. Both Switzerland and tiny Lichtenstein issued commemorative stamps for the fifty-​year anniversary of their pension insurance systems (AHV), as Lichtenstein had adopted it from the Swiss. Uruguay, with its large population of Italian immigrants, has a commemorative stamp for the Ente Nazionale Assistenza Sociale, an Italian welfare programme for expatriots around the world. Ireland honoured the centennial of the founding of its pension system—​in the United Kingdom—​with a commemorative stamp in 2008. This created some controversy in Britain, where the centennial was not similarly recognized, and there were outcries of discrimination from the Welsh community, as the founder of the pension system, Prime Minister Lloyd George, was a Welsh statesman. We might note, however, that the British postal system has generally done little to honour the founding of its model welfare state, with the notable exception of a four-​stamp series issued to celebrate the fifty-​year anniversary of the National Health Service in 1998. (A 50 pence commemorative coin was also issued for the occasion.) Neither William Beveridge, who designed the system, nor Aneurin Bevan (another Welshman), who insured its enactment, are acknowledged with their own stamps, though Beveridge appears on a first-​day cover for the 1998 NHS stamps. A number of public-​awareness and health campaigns in the Americas have involved continent-​wide actions, wherein the participating nations issue their own stamps around themes such as ‘the fight against poverty’, ‘education for all’, and the ‘campaign against hunger’. Though the European Union plays a significant role in its member

xxx    A Note on the Jacket Illustration states’ welfare policies (see Chapter 23) and might well benefit from public awareness of that role, none of the member states have issued stamps that attest it and the European Union itself is not authorized to issue stamps. My brief sojourn into the world of stamps revealed a colourful, international array of welfare state themes and icons—​too many to be included in the jumble portrayed on the book jacket of this Handbook. Stamps with such themes appear to have been on the increase since the 1960s—​an increase that, ironically, has continued uninterrupted through the 1990s and 2000s, a period when welfare state expansion in most regions stopped and threats of retrenchment dominated political rhetoric (see Chapter  44). During this period, postal services in some countries were privatized, perhaps weakening the role of stamp imagery as a statement of national sentiment. And yet, the societal consensus that built the effective welfare states of the 1950s and 1960s is still honoured, and the treatable ills of hunger, poverty, discrimination, lack of education, inadequate housing, and ageing societies is maintained in the public eye by the images chosen for postage stamps.

CHAPTER 1

I n t rodu ction Daniel Béland, Kimberly J. Morgan, Herbert Obinger, & Christopher Pierson

The Scope of this Handbook The twentieth century is often portrayed as one of extremes (Hobsbawm 1994). Its first half witnessed the rise of totalitarian regimes, two world wars, and more than a few genocides. The second half was characterized by the spread of democracy, unprecedented economic wealth and, in consequence, a degree of well-​being and a guarantee of social rights arguably unknown in human history. In retrospect, however, this is largely a ‘Western’ story, because war, starvation, dictatorship, and impoverishment remained the norm throughout the twentieth century and beyond for millions of people living in other parts of the world (Cornia 2004). This bifurcated development has many causes. Unquestionably, though, one of the major reasons for the successful Western trajectory is connected to a mostly European invention of the late nineteenth century, which today is referred to as the welfare state—​or Sozialstaat, l`État providence, verzorgingsstat, estado providencia or sociale or del bienestar or social de derecho, stato sociale or del benessere, estado de bem-​estar-​social, folkhemmet, fukushikokka (社会福利国家), shèhuì fúlì guójiā (Pinyin simplified characters 社会福利国家, traditional characters 社 會福利國家)—​but which developed to its fullest extent after the Second World War. All of these terms for the welfare state invoke something different—​folkhemmet is definitely not the same as l`État providence—​and the term ‘welfare state’ itself is radically undetermined. At its narrowest, it may simply describe a given country’s arrangements for income maintenance. At its broadest, it is a descriptor for the full range of economic, social, political, and even cultural traits of a given polity. This can generate confusion. In this volume, the focus is upon policies and outcomes, though these go well beyond income maintenance (to include, e.g. health, education, and housing), and the idea of the welfare state as a particular political economy is an ever-​present background condition, sometimes brought to the fore.1 1 

On these conceptual issues see Béland and Petersen (2014) and Wincott (2013).

2    Béland, Morgan, Obinger, and Pierson At all times, our survey of the ‘state of the welfare state’ adopts a comparative perspective, a perspective vital for demonstrating the huge variability of welfare state forms and trajectories, providing a methodology for understanding the factors contributing to that variability, and understanding the corridors laid out to bound such variability in the many Atlantic and other Crossings (Rodgers 1998) of reform ideas in academia and politics. The Handbook is designed to cover all the relevant aspects of the modern Western welfare state2 and to summarize the state of the art in contemporary welfare state research. In eight Parts, it sheds light on the philosophical justifications underlying the welfare state; the approaches, methods, and disciplinary perspectives of comparative social policy research; the historical development and driving forces of the welfare state; and its past achievements, contemporary challenges, and likely future developments. Such a comprehensive endeavour inevitably requires an international and interdisciplinary division of labour. This volume consists of fifty-​one chapters written by scholars from diverse disciplinary backgrounds. The fact that the welfare state is, in essence, a European invention (Flora 1986–​87: vol. 1, xii) and has experienced its greatest proliferation and expansion in north-​western Europe explains the strong presence of European scholars in contemporary welfare state research. In contrast with the dominance of US-​based scholars in political science and other social science disciplines, this volume brings together scholars from many countries and achieves a balance between the English-​speaking and continental European worlds of scholarship.

Origins of the Welfare State The origins of the Western welfare state (Part II) date back to the final quarter of the nineteenth century and are closely associated with the deep societal, economic, and political transformations taking place at that time. This Great Transformation (Polanyi 1957 [1944]) included industrialization and the rise of capitalism, urbanization, and population growth. On the one hand, these fundamental changes undercut the traditional forms of welfare provision offered by family networks, charity organizations, feudal ties, guilds, and municipalities, as well as churches and led, in consequence, to a massive pauperization which was so impressively described by Friedrich Engels in his analysis of the situation of the working class in England (Engels 1975 [1845]), and is captured in nineteenth-​century fiction from Charles Dickens’s Oliver Twist (1849/​50) to Victor Hugo’s Les misérables (2008 [1882]). On the other hand, the gains in productivity resulting from industrialization provided the resources necessary to cope with the emerging ‘social question’. In political terms, the second half of the nineteenth century 2  This handbook focuses exclusively on the welfare state in economically advanced democracies, those which are long-​term members of the Organization of Economic Co-​operation and Development (OECD). Since a separate handbook on social protection in the Global South is in preparation, this handbook no longer includes the chapters on emerging welfare states that were part of the first edition.

Introduction   3 witnessed the formation of nation-​states, secularization—​with fierce conflicts over jurisdiction in social and educational affairs between the Catholic Church and liberals in continental Europe, an unusually long period of peace, and, finally, the spread of civil rights and mass democracy, putting in place the institutional basis for the political articulation of ever-​increasing social needs (Rimlinger 1971; Alber 1982). Political and economic ideas also underwent substantial change, with liberalism developing a strand more ready to accept legislation designed to enable the individual to reach their potential and an increasingly wider body of economic theory ready to admit the possibility of raising taxes in order to permit state spending on social programmes (broadly, for national variants on these themes, see Rimlinger 1971: 35 ff.). The countermovement to Polanyi’s Great Transformation (1957[1944]) gave rise to collective organization, initially along class lines, and fashioned a growing labour movement, which itself became an important driver of welfare state consolidation. While all the countries of Western Europe—​and a few European offshoots in North America and the Antipodes—​were affected by these fundamental transformations, the political responses to these common challenges and the moral purposes in providing more or less ‘welfare’ differed in many ways. Thus, we find remarkable diversity with respect to the timing of welfare state consolidation; policy goals (whether to provide a safety net for a few, to work towards optimal provision for all, or simply to maintain the status quo); the precise institutional solutions in terms of financing mechanisms, programme type and administration, and the public–​private mix; the type of intervention (provision of transfers vs regulatory social policy); and national trajectories of welfare state building, i.e. whether social programmes were enacted from the top down (as in the authoritarian monarchies in Europe) or emerged from the bottom up (as in the democracies of the New World plus Switzerland). This diversity can be attributed to significant differences in national political contexts that have, in their turn, been shaped by different legacies in terms of state and nation building (Rokkan 1999); distinctive national political cultures, particularly in terms of the degree of trust in the state and its capacity to solve problems; differences in societal cleavage patterns and actor-​constellations; and differences in the pressure of socio-​ economic problems. However, even this list of factors explaining the emergence and diversity of the welfare state is far from exhaustive. Peter Baldwin (1990:  36–​37) has noted that there is hardly a variable which has not been regarded as influential in this respect: ‘Industrialisation, free trade, capitalism, modernisation, socialism, the working class, civil servants, corporatism, reformers, Catholicism, war—​rare is the variable that has not been invoked to explain some aspect of its development.’ In fact, there is neither a specific configuration of socio-​economic variables triggering welfare state consolidation, nor is welfare state building related to a particular group of actors. Rather, the countermovement against unregulated capitalism consisted of actors from across the entire political spectrum (Polanyi 1957: 147). Looking back at this founding period of the welfare state from the vantage point of the early twenty-​first century, what stands out is that these early beginnings of state social policy coincided with what we now recognize as the ‘first era of globalization’,

4    Béland, Morgan, Obinger, and Pierson commencing in the 1870s and brought to an abrupt end with the declaration of war in 1914 (see James 1996: 1–​26; Bayly 2004). Creating a social insurance system for blue-​ collar workers in the 1880s was perceived by welfare state founders such as Bismarck as providing Germany with a competitive advantage over England through what we might now describe as a programme of social investment aimed at promoting ‘endogenous growth’. The British bought into this view, feeling that their former position as ‘workshop of the world’ was profoundly challenged by developments elsewhere in Europe (Hennock 2007). It is not surprising then, that welfare state theorizing has mainly been inductive and that the welfare state was almost at the peak of its development by the time that modern welfare state theories identifying the inputs and actors consequential for welfare state growth (see Part IV) were formulated from the 1950s onwards. There is, however, one exception to this rule that theorizing had to await the mature development of the welfare state, and it is, arguably, no coincidence that the first (functionalist) generation of modern welfare state theories strongly built on this tradition of reasoning. Even at the time of its inception, numerous social scientists attributed the emergence of the welfare state to the fundamental changes in society and economy brought about by industrialization. Amongst them, German economist Adolph Wagner, a leading Kathedersozialist, argued in 1893 that the far-​reaching changes in economy and society would generate increasing levels of state intervention and rising public expenditure. On this basis, he predicted the transformation of the nineteenth-​century night watchman state into a ‘Cultur-​und Wohlfahrtsstaat’ (Wagner 1893). Wagner’s law of a ‘growing public’ sphere (Lindert 2004) turned out to be a powerful prediction. The rise of the welfare state during the course of the twentieth century was impressive, as was the concomitant growth and transformation of the public sector. In the nineteenth century, the state had been substantially a warfare state, with military spending amounting to 25 per cent of total public expenditure. Public social expenditure, by contrast, was a residual spending item equivalent to only about 5 per cent of public expenditure, or less than one per cent of gross national product (GDP) in most countries (Lindert 2004: 171–​172; Cusack 2007: 105). By the second decade of the twenty-​ first century, however, spending priorities had been entirely turned upside down. Today, on average, in the long-​standing Organisation for Economic Co-​operation and Development (OECD) member states, more than half of total public expenditure is absorbed by the welfare state, while the military now occupies a residual position similar to that of the welfare state in the late nineteenth century. However, this growth in the size of the state, in terms of both spending and the numbers of people it employs, together with its more interventionist role, occurred in spurts and assumed quite different trajectories in different countries. Governments may finance social provision, directly provide welfare services as well as cash benefits, and/​or regulate provision made by the third or private sectors. Different countries have committed to different roles for the state at different periods in time. A first period of expansion occurred between the two world wars (Rimlinger 1971; Alber 1982). The devastating social repercussions of the First World War were a triggering event (Obinger et al. 2018),

Introduction   5 but the transformation also had important political sources. Democratization followed the collapse of the imperial empires in Europe. Extensions to the franchise provided underprivileged sections of society with a voice and gave the parties of labour and an emergent Christian presence in party politics access to the corridors of power for the first time. And first efforts to internationalize social policy were already underway, with the establishment of International Labour Office (ILO) in 1919. In many countries, the Great Depression put an end to this first phase of welfare state expansion. In some of them, such as Britain and Australia, this represented merely a conservative turn, but in others the effects were cataclysmic. Against a backdrop of dramatic economic slowdown, some of the countries of continental Europe made major benefit cutbacks, reinforcing political crisis, and, in a number of cases, contributing to the downfall of democratic regimes. In a few countries, however, economic stagnation was an impetus to social policy transformation. In the United States and New Zealand, the crisis was the prelude for welfare state take-​off, while, in Scandinavia, the same economic events were the precursor of a move towards a new—​and, arguably, more advanced—​stage of welfare state development.

Post-​Second World War Development The Second World War once again made the warfare state the first priority, but, like its dreadful First World War predecessor, the end of the war impelled further social policy expansion (Obinger and Schmitt 2019). But note that, for the first time, it was also a war in which the idea of welfare was presented as part of the casus belli and as a reason why the war should be seen as a just war. Two of the eight war aims in the Atlantic Charter of 14 August 1941, which Roosevelt and Churchill agreed on in Ship Harbour, Newfoundland, concerned social welfare, specifically ‘securing, for all, improved labor standards, economic advancement and social security’ (point 5) and ‘that all men in all the lands may live out their lives in freedom from fear and want’ (point 6). ‘Social security’ now became the grand international slogan (Kaufmann 2003). The Beveridge Plan of 1942 is justly famous as one of the founding documents of the modern welfare state, but much less well known is the fact that there were also Nazi counterplans for a new kind of welfare state after assumed victory (Recker 1985; Kott and Patel 2018). At this tipping point of European history, the warfare and the welfare state were ideologically fused into one. The catastrophe of war and the subsequent commitment to establish a new and internationally sanctioned order which would protect peace and security had a major impact on post-​war welfare state development and social outcomes, such as income inequality (Piketty 2014). War itself can be a ‘locomotive of change’, enhancing and building new forms of social solidarity (Titmuss 1958; Goodin and Dryzek 1995) and making state intervention and the funding to finance it more acceptable in the ensuing peace (Scheve and Stasavage 2016; Obinger et al. 2018). Moreover, the need for economic reconstruction after the Second World War was a profound stimulus to economic growth and

6    Béland, Morgan, Obinger, and Pierson provided resources for welfare state expansion on an unprecedented scale. And the ‘Cold War’, starting in 1947, if not even in 1945, instigated a competition of economic systems and further supported ambitions to outcompete the Eastern Bloc in terms of welfare performance (Obinger and Schmitt 2011; Petersen 2013). This is the period which, in retrospect, has sometimes been described, with a mixture of hindsight and nostalgia, as a ‘Golden Age’ both of economic and of welfare state development. War and the economic displacement it caused had once again created enormous social needs, to which countries were now better able to respond, given the centralization of tax powers enacted during wartime and the sustained economic growth initiated by post-​war reconstruction. Moreover, a commitment to prevent war ever again causing such physical, economic, and social destruction was a driving force for European integration, which was promoted in the initial post-​war period as a mechanism for preventing future conflicts through increased economic integration and trade. Although increased trade integration was the leitmotif of future European economic development, the massive growth of the welfare state during the so-​called trentes glorieuses (1945–​74) took place against the backdrop of relatively closed economies. Because exit options for mobile factors of production were low in the initial period of the post-​war settlement, there was considerable room for redistribution, and this was exploited by governments of all partisan complexions. ‘Liberalism’ could then be ‘embedded’, mostly in a lasting fashion—​and even the United States could see itself, at first, as catching up with the European Joneses, and not, as in the period from the 1980s onwards, as standing against the European welfare tide in a kind of principled ‘exceptionalism’ (see Glazer 1998). The experience of war and depression paved the way for the emergence of a Keynesian consensus (however brittle in some countries), justifying policies that promoted high levels of employment and high tax and expenditures levels, as well as nourishing the notion that government intrusion in economic and social affairs was imperative for stabilizing demand and the business cycle in capitalist economies. Distributional conflicts were mitigated by a comparatively symmetrical balance of power between the interest organizations of labour and capital and by exceptionally high rates of economic growth. Partisan competition, as well as system competition in a world now divided by an Iron Curtain, further fuelled welfare state expansion. Under these circumstances, social benefits were everywhere significantly raised, existing programmes were extended to cover new groups of beneficiaries, and entirely new schemes adopted (see Part V, describing trajectories of development of expenditures and revenues, as well as a wide range of separate social programmes). As a consequence, welfare state coverage, as well as spending levels, rose dramatically, with important impacts on policy outcomes, including a decrease in inequality and poverty, the guarantee of social rights, and strong macroeconomic performance (see Part VI). Despite this massive expansion, however, the institutional differences laid down in the era of welfare state consolidation persisted or were transformed into new ones. Hence, Western countries took different routes to and through welfare state modernity (Therborn 1995; Castles 1998). In contrast to the claims of functionalist accounts in the 1950s, 1960s, and into the mid-​1970s (Wilensky 1975), no marked convergence occurred

Introduction   7 as these countries became wealthier. This holds true for social expenditure and welfare state institutional patterns alike. Thus, the United States remained a residual direct provider of public welfare, preserving insurance-​based benefits for particular groups deemed to be deserving (in the main older people), using tax subsidies and regulation to encourage private welfare provision and eschewing the development of major state services (particularly health care)—​the latter leading to ever deeper conflict and recurring attempts at health insurance reform (Oberlander 2016). At the other end of the spectrum, the Scandinavian countries developed a full range of tax and insurance-​based benefits and public services. In light of these persisting cross-​national dissimilarities, welfare state research has devoted a substantial intellectual effort to identifying the character of these variations and their sources. Among the various classifications suggested in the literature, Esping-​Andersen’s (1990) typology of welfare regimes is unquestionably the most important. The historical origins, achievements, and vulnerabilities of these welfare regimes, as well as of other ‘families of nations’ both within and without the OECD area, constitute the topic of Part VII.

Critiques and Challenges In the 1970s and early 1980s, the ‘Golden Age’ of welfare capitalism began to falter, and the ‘Silver Age’ began to dawn (Taylor-​Gooby 2002; Chapter 6 below). Deteriorating economic performance in the wake of the oil shocks and the failure of many governments to cope with emergent stagflation led to a (renewed) scepticism concerning the role of the state in society and economy. As a consequence, the welfare state was increasingly critiqued from almost every point on the political spectrum. Conservatives complained about ungovernability in general (Crozier et al. 1975), while liberals lamented inefficiencies and paternalism. Certainly, though, the most influential critiques—​in terms of real-​world political consequences—​were those articulated by theorists of neoliberalism and a newly morally engaged conservatism (see Chapter 4 below), the ideas of which gained more and more importance over time. In influential conservative (‘New Right’) critiques of US attempts to address the issue of poverty in the post-​war era, Charles Murray (1984) launched a powerful attack on the moral hazard of welfare policies, making a case for the abolition of welfare benefits in the United States, while Lawrence Mead (1986) also attacked the provision of welfare, but argued for much greater conditionality in their administration—​the beginnings of the idea of ‘welfare-​ to-​work’. In these accounts, and in a pincer movement of both economists and political scientists, some inspired by the neoliberal ideas of Hayek (1944) and Friedman (1992 [1962]) and others persuaded by the logic of rational choice theories, who cast doubt on who really benefited from social policies, state intervention was increasingly seen as part of the problem, rather than as a tool for overcoming macroeconomic imbalances or for social amelioration (documented and confronted by Goodin 1988). Post-​materialists argued that a growing welfare state bureaucracy undermined individual autonomy and

8    Béland, Morgan, Obinger, and Pierson the institutions of civil society (Beck 1999), while feminists perceived the welfare state as an institution underpinning and freezing traditional gender relations (Fraser 1994). Marxists, as they had at previous stages of capitalist development, identified an emergent contradiction, arguing that capitalism had ceased to be viable without the welfare state but that, at the same time, the very growth of the welfare state undermined the logic of capitalist accumulation, producing a so-​called ‘crisis of crisis management’ to cite Gough (1979; see also Offe 1984; O’Connor 1973). Arguably, though, the most influential critique—​in terms of its real-​world political consequences—​was that articulated by theories of neoliberalism (see Part I), the ideas of which gained greater importance over time. An ideological climate change was in the making (Le Grand 1997): commentators and politicians in many countries urged that more attention should be paid to the responsibilities as opposed to the rights of individuals, particularly the responsibility to engage in paid work. Such calls resulted in policies that often were punitive in the United States, while Western Europe developed more enabling ‘activation’ strategies, even though, in the Nordic countries, the welfare state had been built firmly on conditionality and the work/​welfare relationship. Two decades of unrelenting intellectual attack along these lines increasingly challenged the optimistic faith in the beneficial effects of big government on which the post-​war welfare state consensus had rested. Increasingly, the aspiration was to replace states with markets—​or, where that was not possible, with ‘quasi-​markets’ (Le Grand 1999). With the first moves being made in the English-​speaking countries, neoliberal ideas soon spread across the globe. This process was accelerated and reinforced by international organizations such as the World Bank and the International Monetary Fund and triggered a major rethinking of the role of the state in economic and social affairs (Deacon et al. 1997), minimally counterbalanced by international social institutions such as the ILO and the World Health Organization, and by UN World Social Summits as in 1995. ‘Rolling back the state’ to its core functions was increasingly seen as offering major comparative advantages in an international political economy which had undergone a fundamental transformation (Scharpf 2000). This transformation had occurred in several stages. The collapse of the Bretton Woods financial system and the economic slowdown resulting from the two oil price shocks in the 1970s began the process. The 1980s witnessed deregulation and internationalization of capital markets and ever-​increasing trade liberalization. The collapse of communism in 1989 was a geopolitical event that seemed to confirm the neoliberal view that public intrusion in economic affairs leads to inefficiencies. The 1990s witnessed the emergence of a truly ‘global’ economy and could build on significant progress in European integration with the formation of the Single European Market and later European Monetary Union, with a European ‘common currency’ from 2002. Finally, eastwards enlargement of the European Union (EU) from 2004 onwards anchored a considerable disparity in wealth across EU member states and created new opportunities to remove business and capital to low wage countries. Taken together, these external changes had far-​reaching consequences for advanced welfare states. The deepening of European integration not only imposed constraints

Introduction   9 on fiscal and monetary policy, which precluded the practice of traditional Keynesian macroeconomic policies at the national level, but also created ‘semi-​sovereign’ welfare states which became embedded in an emerging multi-​level social policy regime (Leibfried and Pierson 1995). More generally, the second era of economic globalization setting in since the 1970s increased competition between nation-​states for footloose capital and intensified pressures on national social standards. Enhanced exit options for capital imposed tighter limits for taxation and redistribution and also led to a newly asymmetric balance of power between labour and capital. It also led to an ideological climate shift, contrasting radically with that of the era of nineteenth-​century globalization. In a nutshell, the transformation of the international political economy decreased the autonomy and sovereignty of the nation-​state—​but did not support the evolution of functionally equivalent higher authorities at the international level. That economic conditions were no longer as propitious for domestic welfare state development is uncontested. Actual impacts are, however, more open to question. Effects of increasing trade are by no means all negative. Trade is an important source of economic growth, which may generate the fiscal resources necessary for the viability of the welfare state in the long run. In this view, the major challenge to mature welfare states is to find an optimal adjustment strategy that is able to reconcile the trinity of economic imperatives generated by globalization—​liberalization, flexibilization, deregulation—​ with solidarity. Retrenchment is not inevitable and its progress is a highly contentious theme of the literature (see discussions in Parts V and VI), with several contributions to this Handbook arguing strongly that the idea that globalization has simply unleashed a ‘race to the bottom’ in social provision lacks empirical foundation. In addition to these external challenges, mature welfare states have also been confronted with a set of domestic challenges closely connected to societal modernization and structural economic change. Although they are less frequently the stuff of political debate, it is possible that these other ‘unseen’ changes are even more important for changes in the character of welfare provision than are changes in the international political economy (Pierson 1998). One important challenge results from the transition from industrial to post-​industrial economies (Wren 2013). The rise of the tertiary sector in the post-​war period created two major problems. First, the productivity of the service sector is lower than that of industry. As a result, both the rate of growth of the economy and of wages has been reduced, with negative feedback effects on public revenues. Western governments have experienced growing difficulty in financing generous cash benefits and public services, where a reduction in labour costs tends to threaten the quality of the service, which in turn has electoral consequences. Second, gains in employment in the private service sector can only be achieved at the expense of higher inequality, unless the public sector exercises a compensatory function (Scharpf 2000). Hence, some scholars diagnosed a ‘trilemma of the service economy’ characterized by a trade-​off between employment growth, income equality, and sound state finances (Iversen and Wren 1998). Structural change in the economy, in combination with intensified international regime competition, has triggered fundamental changes in labour markets. The pressure to raise productivity levels and the transition towards a post-​industrial information

10    Béland, Morgan, Obinger, and Pierson society has raised skill requirements. Huge numbers of low-​skilled jobs have either been destroyed or else relocated to low-​wage economies. Higher flexibility requirements, as well as increased labour market participation by women, have led to the spread of atypical employment forms such as part-​time work, temporary work, or fixed-​term employment. Existing welfare states were not well designed for these forms of employment. Moreover, some pessimists anticipate a wholesale transformation in the world of work, as artificial intelligence (AI), tied to already-​existing information technologies, may mean the elimination of many millions of jobs in the coming two to three decades (Frey and Osborne 2017). Under these circumstances, an employment-​dependent welfare state—​and the rubric of ‘welfare-​to-​work’—​may become more difficult to sustain. Moreover, digitization will likely create new inequalities related to skills. Another major shift is the rise of female labour market participation, which has cast doubt on the assumption that, in families, men would take primary responsibility for earning and women for care. Measures to reconcile paid employment with unpaid family work have greatly expanded in Western welfare states since the mid-​1990s. Given the general desire to increase employment rates, the challenge for the welfare state has been to provide sufficient social services for children and frail elderly people. In some countries, particularly the United States, an externalization to the market is seen as an appropriate solution that is also affordable, due to the availability of low-​wage labour. In addition, societal modernization has undercut the welfare production capacity of families. Divorce rates, the number of births out of wedlock and, hence, the number of lone-​parent households, have increased. The erosion of traditional family forms and changes in the contributions men, and more particularly women, make to families have generated new social risks and needs. For example, poverty has demographically spilled downwards from elderly people to single parents and families with many children, and the process of family change has increased the demand for social care. Two other domestic challenges are of relevance. The first is demographic. Higher standards of living have significantly bolstered life expectancy, but the welfare state has also contributed to this positive development through the provision of improved health-​ care services. Fertility rates have declined rapidly, owing to innovations in contraceptive technology, individualization, and the mounting opportunity costs of family formation, primarily for women. The consequences of these demographic changes—​which will fully unfold as the ‘baby boomers’ retire in the coming years—​are quite clear: The ‘greying’ of society directly affects the most expensive programmes of the welfare state, i.e. pensions, health and long-​term care, and will therefore require greater financial resources in the future. Along with the decline in fertility, this means that the size of the economically active population is diminishing, so that the age-​group of the twenty-​to-​ sixty-​year-​olds will have to bear an ever-​increasing financial burden. The second further challenge is the growing ethnic heterogeneity of Western societies. The immediate post-​war period was characterized by relatively high levels of ethnic homogeneity in Europe (Therborn 1995). The migration of workers, their families, and refugees has reversed this situation from the 1960s onwards. Migration may have various impacts on the welfare state. It creates new needs resulting from a higher

Introduction   11 incidence of poverty among immigrants, it requires efforts to improve social inclusion, but may also help to attenuate the demographic pressure of ageing—​at least for a transitory period. A more recent debate focuses on the possible impacts of growing ethnic heterogeneity on solidarity and redistribution. The argument is that the ethnically homogenous nation-​state provided a set of common values and a political setting—​a sort of political community—​which was able to achieve legitimacy for a redistributive regime among its members. According to some scholars, growing ethnic heterogeneity will reduce this solidarity and drive Europe towards a more US-​style social policy (Alesina and Glaeser 2004; but see Banting and Kymlika 2006 and Chapter 22 below). In sum, the challenges and risk patterns of post-​industrial societies today are very different from those of the industrial societies that historically were the main reference point for the era of welfare state construction and consolidation. Old welfare states meet new social risks and the discrepancy between outdated social regulations and new challenges is an important site for welfare state adaptation (Esping-​Andersen et al. 2002). Some argue that the policy changes we have seen in response to this challenge since the 1990s are so substantial that it makes sense for us to think of a new welfare state paradigm—​built around the idea of social investment (Hemerijck 2017). In contrast to the now-​outmoded Keynesian welfare state, the social investment welfare state has a stronger supply-​side orientation. At its simplest, the suggestion is that policymakers have, more or less successfully, adapted to the sorts of challenges in the domestic and international political economy that we have identified above and generated a new social policy approach that retains the broadly progressive outcomes of earlier welfare state policies and contributes to economic growth via investment in human capital. The aim is said to be to promote social inclusion and to minimize poverty (and the intergenerational transmission of poverty), above all, by giving all citizens the human capital with which to participate successfully in a very different (and post-​industrial) economy. Activation and an emphasis upon life-​long education are the means of giving citizens the capacity to manage their way successfully through increasingly complex economies and societies. Chapters 7 and 11 in this volume represent an enthusiastic endorsement of this approach. Others—​for example, Ellison (2016) and Taylor-​Gooby et al. (2014)—​remain unconvinced. As was the case with the external changes, the domestic challenges we have identified affect different national welfare states in different ways. To a significant degree, the extent of each nation’s vulnerability to these forces of transformation can be related to variations in existing welfare and production regimes and the extent of their coordination with other public policy areas, such as education or fiscal policy. Given cross-​nationally varying vulnerabilities and records of success, it comes as no surprise that the advanced democracies have responded quite differently to these challenges. Moreover, cross-​ national differences in adjustment pathways have been further influenced by the impact of welfare state patterns on political reform capabilities (see Parts V and VI). A synopsis of the external and domestic challenges to mature welfare states reveals the following picture: the shift to a predominantly service economy and economic globalization entail tighter constraints on public revenues, while societal modernization and

12    Béland, Morgan, Obinger, and Pierson changes in the economic structure produce mounting social needs, new risk patterns, and new priorities for social policy intervention, with education and social service provision on top of the list. Moreover, shrinking public revenues and rising pressures on public expenditure constitute a situation of what Paul Pierson (1998) calls ‘permanent austerity’, which must be managed by nation-​states whose sovereignty and autonomy have declined significantly in the wake of globalization and European integration, without international authorities able to pick up the slack.

Global Recessions, the COVID-​19 Pandemic, and the Shape of Things to Come Almost all of these challenging trends were intensified by the experience of extended global recession, which has done much to define welfare state policy since 2008. That intensification of longstanding challenges generated new problems of its own, some of them brand new, others reviving issues that had long lain dormant. Growing demands arising unavoidably from already-​existing demographic pressures (above all, an ageing population) have run up against persistently sluggish (sometimes non-​existent) economic growth. This is the ugly politics of doing more with less. It has frequently expressed itself as an ideological drive to impose austerity. The global health and economic crises we see unfolding around us in 2020 will put tremendous strain on budgetary balances and safety nets, yet could also trigger more profound challenges to austerity impulses rooted in neoliberal thought. Of course, austerity focused on the welfare state is not new. It was one of the policy responses to the Great Depression of the 1930s. And, as we have seen, Paul Pierson (2001) identified ‘permanent austerity’ as a background condition for all future welfare state development, at a time when growth in Western economies was relatively healthy (though, as he pointed out, growth was much slower in the 1990s than it had been in the early post-​war decades of welfare state expansion). Yet, traditionally, welfare states have been able to use a growing economic increment (and/​or debt) to avoid zero-​sum policy choices between taxing or spending. Under circumstances of prolonged low growth, as occurred in many countries following the 2008 financial crisis, this is no longer an option. The story of how a crisis in the private banking sector, arising out of systematically reckless lending, was transformed into a crisis of public indebtedness—​as states paid the debts of banks ‘too big to fail’—​has now been comprehensively told (Tooze 2018). To a varying degree in different national contexts, this played out as an attempt to curb national debt, to reallocate the blame from the banks to ‘profligate’ public spending, and to offer austerity as the policy prescription for which there is no alternative (Blyth 2013). The initial response to the 2008 crisis looked classically Keynesian. Given a challenge that, at one time, looked systemic, even existential, governments poured in resources

Introduction   13 to prevent economic collapse. Government budgets—​and indebtedness—​ballooned. Where welfare state payments were preserved, while asset prices plummeted, this temporarily squeezed income inequalities. When the immediate crisis had passed and the time came to pay up (or back), increasingly the problem was presented as one of reducing government debt. Once an increase in revenues through higher taxes had been widely ruled out, this meant government expenditure had to be cut. Inevitably, the target for those promoting austerity was welfare state expenditure—​and this at a time when social need, in the context of rising unemployment and static or falling real wages, was increasing. To varying degrees and manifested in various ways, this has been the context for social policy and welfare state politics over the past decade in many of the countries with which this Handbook is concerned. In some, above all in Greece, it led to a wholesale retrenchment of the welfare order. In others, as in the United Kingdom, it has led to reverses in hard-​won improvements in child poverty. In others again, as in France, it has intensified distributional political struggle—​above all, in relation to pensions. And this has occurred in a context in which all of the other long-​term challenges we have identified, above all, those to do with the complex dynamics of ageing societies, have persisted or intensified. The outcomes, both in terms of expenditure and inequality of wealth and income, have been complex. The rise in economic inequality in most advanced welfare states is longstanding and acute. In some cases, austerity straightforwardly intensified this, with cuts in benefits for the unemployed in real terms and/​or stricter work enforcement, such as making it harder to register for disability or other benefits. However, certain areas of social expenditure were protected (e.g. old-​age pensions), while budget cuts persistently failed to meet their targets. Finally, countries such as Canada and the United States did not witness austerity in the aftermath of the 2008 financial crisis, a situation related to partisan politics. One consequence of austerity in countries that experienced it was simply to make life poorer and meaner for those in the greatest need. But it also had other far-​reaching political consequences. One was the rise of what has been called ‘welfare chauvinism’ (see Greve 2019). In a context of pressure on public budgets, a shortage of affordable housing, stagnation of wages and underemployment, and increasing global mobility of labour (much of it headed into the comparatively affluent welfare states under consideration in this Handbook), there was growing mobilization, especially on the political right, around the need to ‘protect’ the welfare state by confining it to those who ‘belonged’—​above all, the native-​born. Similar reasons and forces were involved in a pushback against the generalized consequences of a process labelled ‘globalization’. Both welfare chauvinism and anti-​globalization were seen as part of a much wider renaissance of ‘populism’ (itself a multi-​variegated and complicated phenomenon; see Norris and Inglehart 2019). This expressed itself in the successes of Trump, Brexit and, in Europe, parties of the far right. Right-​wing populism and welfare chauvinism are not so much hostile to the welfare state, in the style of an older New Right, but to payments and services provided to the ‘non-​deserving’, a rather mixed bag not confined to, though certainly including, immigrants.

14    Béland, Morgan, Obinger, and Pierson Others drew very different conclusions from the experience of austerity. Advocates of a basic income argue that it is cruel and unreasonable to try to coerce more people into paid employment when the jobs either do not exist or are low-​skilled and poorly paying—​and when they are, in any case, likely to be replaced by AI over the next twenty years. Advocacy for a universal basic income (UBI)—​an income paid unconditionally and regularly to all citizens as individuals—​has gained growing support across the social policy community and amongst some political activists over the past twenty years. Thirty years ago, Phillippe van Parijs (1990), UBI’s most indefatigable advocate, described it as ‘the second marriage of justice and efficiency’, where the post-​war welfare state had been the first such marriage. That first marriage no longer works, because, in his opinion, we no longer live in employment-​based societies and should both recognize this and take the necessary steps to break the link between income and employment. Thus, for some of its advocates, one of UBI’s many virtues is that it enables us to untie the imperatives of a just social order (and a progressive social policy) from economic growth. While UBI has attracted enormous attention over the past thirty years, there are plenty of social policy experts who think it simply cannot be made to work (Martinelli 2017). We shall see basic income raised as a future welfare state alternative in several chapters in this Handbook (Chapters 2, 5, 32, 36, 51). The start of the 2020s was defined by the global transmission of the COVID-​19 virus and the massive epidemiological, social, and economic crisis that it brought in its wake. By the beginning of 2021, over two million had died as a result of a virus that continued its rampage deep into societies and around the world, despite the development of several vaccines.3 The economic blowback from the pandemic was also severe, with global GDP growth contracting by over 4 per cent in 2020, according to International Monetary Fund estimates, and throwing many out of work. In the United States, for instance, unemployment jumped from 3.5 per cent in early 2020 to almost 15 per cent in a matter of months. Across the cases that we consider in this volume, normal social and economic life was put on hold, as countries experienced multiple periods of ‘lockdown’. The pandemic also spurred unprecedented levels of state intervention, of a different order from that which had followed the 2008 financial crisis. Social expenditure (and public indebtedness) took off in extraordinary ways. In the United Kingdom, for example, ten years of austerity were blown away in a matter of weeks as the Conservative government of Boris Johnson committed to around £218 billion of new spending in 2020–​21. In France, President Emmanuel Macron halted some of his contested plans for welfare state reform, and instead pushed through several large stimulus packages. The EU greenlighted the turn from austerity to solidarity by suspending the deficit and debt limits that kept many countries in a fiscal straitjacket after the 2008 recession. European and other central banks also took steps to open the monetary floodgates. The pandemic and economic downturn have driven home the importance of welfare systems in protecting health and well-​being. Millions of people have found themselves 3 See https://​covid19.who.int/​; www.imf.org/​en/​Publications/​WEO/​Issues/​2020/​04/​14/​weo-​april-​

2020; https://​cdn.obr.uk/​Coronavirus_​reference_​scenario_​commentary.pdf.

Introduction   15 depending on the support of the state in ways they would never have anticipated. New government spending included an array of income supports, including expanded paid leave to help workers cope with enforced periods of quarantine or care responsibilities as schools and childcare centres closed and family members fell ill. In tackling job loss, some governments relied mostly on extended eligibility and generosity of unemployment benefits, while others paid firms to hold onto their workers at reduced hours. Health-​care systems were mobilized to the maximum. Yet the crisis also revealed considerable gaps in social protection. In some countries, shortages of health-​care personnel and equipment became painfully apparent, while others confronted the fact that many workers lacked adequate social rights. Even with higher benefits spending, job protections, and moratoria on evictions, poverty risks in some countries have grown. Many also have had to face questions about the quality of their old-​age care institutions, given that nursing homes have been epicentres of the pandemic even in the richest, most generous welfare states. The consequences of this crisis will be profound and enduring. As we saw in the wake of the 2008 financial crisis, when a large-​scale economic and social crisis strikes, only the state has the resources—​logistical, economic, and legal—​to be able to cope. How this will all turn out and what it will mean is still very unclear. As countries shut down their economies and retreat behind national walls, metaphorical and real, we can wonder about what lessons policymakers will draw about the relationship between individual countries and the global economy, as well as the obligations governments have to their own citizens. Will we see a Polanyian impulse to re-​embed economies in a renewed social contract, one that builds on a welling sense of solidarity, akin to that experienced during the two world wars of the twentieth century? Will this crisis finally drive a stake in the heart of the neoliberal’s contempt for effective government? Or will we experience a repeat of the decade after the 2008 financial crisis, where the initial embrace of Keynesian prescriptions is followed by a return to austerity politics? There is a larger existential crisis that looms as well (and is the subject of Chapter 51 by Ian Gough): the requirements for securing just social outcomes under the pressing imperatives of a global climate emergency. Gough’s chapter argues that, if we are to meet the urgent necessity of slowing climate change without further aggravating (global) inequalities, we must totally rethink and retool our approach to sustainable well-​being (and social policy). According to him, we need to move from welfare states to climate mitigation states, from sharing growing wealth to managing economic decrementalism, reducing population, and working and consuming less. For him, we need to legislate for both minimum and maximum incomes. Gough doubts that we have the political will to make the changes that we must if we are to avoid ecological catastrophe. Certainly, his radical agenda makes the present challenges of welfare state reform look modest. In a provocatively entitled essay, Andrew Gamble (2016) asked the question:  ‘Can the welfare state survive?’ A  century-​and-​a-​ half of welfare state politics seems to give a clear answer. The big-​ticket items in welfare spending are pensions and health care, and the enthusiasm of democratic publics for states to continue to provide these services seems unabated. Welfare states are likely to

16    Béland, Morgan, Obinger, and Pierson survive, at least for the foreseeable future, but will continue to change in response to shifting needs, demands, and ideas.

References Alber, Jens, 1982. Vom Armenhaus zum Wohlfahrtsstaat. Analysen zur Entwicklung der Sozialversicherung in Westeuropa. Frankfurt a.M.: Campus. Alesina, Alberto, and Glaeser, Edward L., 2004. Fighting Poverty in the US and Europe. A World of Difference. Oxford: Oxford University Press. Baldwin, Peter, 1990. The Politics of Social Solidarity: Class Bases of the European Welfare State 1875–​1975. Cambridge: Cambridge University Press. Banting, Keith G., and Kymlicka, Will (eds), 2006. Multiculturalism and the Welfare State:  Recognition and Redistribution in Contemporary Democracies. Oxford:  Oxford University Press. Bayly, Christopher A., 2004. The Birth of the Modern World, 1780–​1914: Global Connections and Comparisons. Oxford: Blackwell. Beck, Ulrich, 1999. World Risk Society. Cambridge, MA: Polity. Béland, Daniel, and Petersen, Klaus (eds), 2014. Analysing Social Policy Concepts and Language. Comparative and Transnational Perspectives. Bristol: Policy Press. Blyth, Mark, 2013. Austerity:  The History of a Dangerous Idea. Oxford:  Oxford University Press. Castles, Francis G., 1998. Comparative Public Policy: Patterns of Post-​War Transformation. Cheltenham: Edward Elgar. Cornia, Giovanni Andrea, 2004. Inequality, Growth, and Poverty in an Era of Liberalization and Globalization. Oxford: Oxford University Press. Crozier, Michel, Huntington, Samuel P., and Watanuki, Joji, 1975. The Crisis of Democracy:  Report on the Governability of Democracies to the Trilateral Commission. New York: New York University Press. Cusack, Thomas R., 2007. Sinking budgets and ballooning prices: Recent developments connected to military spending, in The Disappearing State? Retrenchment Realities in an Age of Globalisation, ed. Francis G. Castles, Cheltenham: Edward Elgar, 103–​132. Deacon, Bob, Hulse, Michelle, and Stubbs, Paul, 1997. Global Social Policy: International Organizations and the Future of Welfare. London: Sage. Dickens, Charles, 1849/​50. The Adventures of Oliver Twist etc. London: Chapman & Hall. Ellison, Nicholas, 2016. The coalition government, public spending and social policy, in The Coalition Government and Social Policy, ed. Hugh Bochel and Martin Powell, Bristol: Policy Press,  27–​52. Engels, Friedrich, 1975 [1845]. The condition of the working class in England, in Collected Works, Vol. 4, 1844–​45, ed. Karl Marx and Friedrich Engels, New  York:  International Publishers, 295–​596. Esping-​Andersen, Gøsta, 1990. The Three Worlds of Welfare Capitalism. Cambridge, MA, Princeton, NJ: Polity & Princeton University Press. Esping-​Andersen, Gøsta, Gallie, Duncan, Hemerijck, Anton, and Myles, John, 2002. Why We Need a New Welfare State. Oxford: Oxford University Press. Flora, Peter (ed.), 1986–​87. Growth to Limits: The Western European Welfare States since World War II; Vol. 1: Sweden, Norway, Finland, Denmark (1986); Vol. 2: Germany, United Kingdom, Ireland, Italy (1986); Vol. 4: Appendix: Synopses, Bibliographies (1987). Berlin: Walter de Gruyter.

Introduction   17 Fraser, Nancy, 1994. Talking about needs:  Interpretative contests as political conflicts in welfare state societies, in Feminism and Political Theory, ed. Cass R. Sunstein, Chicago, IL: University of Chicago Press, 159–​181. Frey, Carl B., and Osborne, Michael A., 2017. The future of employment: How susceptible are jobs to computerisation? Technological Forecasting and Social Change, 114: 254–​280. Friedman, Milton, 1992 [1962]. Capitalism and Freedom. Chicago, IL: University of Chicago Press. Gamble, Andrew, 2016. Can the Welfare State Survive? Cambridge, MA: Polity. Glazer, Nathan, 1998. The American welfare state:  Exceptional no longer?, in Challenges to the Welfare State:  Internal and External Dynamics for Change, ed. Henry Cavanna, Cheltenham: Edward Elgar, 7–​20. Goodin, Robert E., 1988. Reasons for Welfare:  The Political Theory of the Welfare State. Princeton, NJ: Princeton University Press. Goodin, Robert E., and Dryzek, John S., 1995. Justice deferred:  Wartime rationing and postwar welfare policy. Politics & Society, 23 (1): 49–​73. Gough, Ian, 1979. The Political Economy of the Welfare State. London: Macmillan. Greve, Bent, 2019. Welfare, Populism and Welfare Chauvinism. Bristol: Policy. Hayek, Friedrich August von, 1944. The Road to Serfdom. Chicago, IL:  University of Chicago Press. Hemerijck, Anton (ed.), 2017. The Uses of Social Investment. Oxford: Oxford University Press. Hennock, Ernest P., 2007. The Origin of the Welfare State in England and Germany, 1850–​ 1914: Social Policies Compared. Cambridge: Cambridge University Press. Hobsbawm, Eric J., 1994. Age of Extremes 1914–​1991: The Short Twentieth Century. New York: Vintage. Hugo, Victor, 2008 [1882]. Les miserables, trans. Julie Rose. London: Vintage. Iversen, Torben, and Wren, Anne, 1998. Equality, employment, and budgetary restraint: The trilemma of the service economy. World Politics, 50 (4): 507–​546. James, Harold, 1996. International Monetary Cooperation since Bretton Woods. Washington, DC, Oxford: IMF & Oxford University Press. Kaufmann, Franz-​Xaver, 2003. Die Entstehung sozialer Grundrechte und die wohlfahrtsstaatliche Entwicklung. Paderborn: Schöningh. kott, sandrine and kirian klaus patel (eds) 2018. Nazism Across Borders. The Social Policies of the Third Reich and their Global Appeal. Oxford: Oxford University Press. Le Grand, Julian, 1997. Knights, knaves or pawns? Human behaviour and social policy. Journal of Social Policy, 26 (2): 149–​169. Le Grand, Julian (ed.), 1999. Quasi-​Markets and Social Policy. Basingstoke: Macmillan. Leibfried, Stephan, and Pierson, Paul (eds), 1995. European Social Policy:  Between Fragmentation and Integration. Washington, DC: Brookings Institution Press. Lindert, Peter H., 2004. Growing Public. Social Spending and Economic Growth since the Eighteenth Century, 2 vols. Cambridge: Cambridge University Press. Martinelli, Luke, 2017. Assessing the Case for a Universal Basic Income in the UK. Bath:  Institute for Policy Research, www.bath.ac.uk/​publications/​assessing-​the-​case-​ for-​ a -​ u niversal-​ b asic-​ i ncome-​ i n-​ t he-​ u k/​ attachments/​ ipr-​ a ssessing-​ t he-​ c ase-​ for-​ a ​universal-​basic-​income-​in-​the-​uk.pdf. Mead, Lawrence M., 1986. Beyond Entitlement:  The Social Obligations of Citizenship. New York: Free Press. Murray, Charles A., 1984. Losing Ground. American Social Policy 1950–​1980. New  York: Basic Books. Norris, Pippa, and Inglehart, Ronald, 2019. Cultural Backlash:  Trump, Brexit, and Authoritarian Populism. Cambridge: Cambridge University Press.

18    Béland, Morgan, Obinger, and Pierson Oberlander, Jonathan, 2016. Implementing the Affordable Care Act:  The promise and limits of health care reform. Journal of Health Politics, Policy and Law, 41 (4): 803–​826. Obinger, Herbert, and Schmitt, Carina, 2011. Guns and Butter? Regime competition and the welfare state during the Cold War. World Politics, 63 (2): 246–​270. Obinger, Herbert, and Schmitt, Carina, 2019. World war and welfare legislation in western countries. Journal of European Social Policy, 30 (3), https://​doi.org/​10.1177/​ 0958928719892852. Obinger, Herbert, Petersen, Klaus, and Starke, Peter (eds), 2018. Warfare and Welfare. Military Conflict and Welfare State Development in Western Countries. Oxford:  Oxford University Press. O’Connor, James, 1973. The Fiscal Crisis of the State. New York: St Martin’s Press. Offe, Claus, 1984. Contradictions of the Welfare State. Cambridge, MA: MIT Press. Parijs, Philippe van, 1990. The second marriage of justice and efficiency. Journal of Social Policy, 19 (1): 1–​25. Petersen, Klaus, 2013. The early Cold War and the Western welfare state. Journal of International and Comparative Social Policy, 29 (3): 226–​240. Pierson, Paul, 1998. Irresistible forces, immovable objects: Post-​industrial welfare states confront permanent austerity. Journal of European Public Policy, 5 (4): 539–​560. Pierson, Paul (ed.), 2001. The New Politics of the Welfare State. Oxford:  Oxford University Press. Piketty, Thomas, 2014. Capital in the Twenty-​First Century. Cambridge, MA:  Harvard University Press. Polanyi, Karl, 1957 [1944]. The Great Transformation: The Political and Economic Origins of Our Time. Boston, MA: Beacon Press. Recker, Marie-​Luise, 1985. Nationalsozialistische Sozialpolitik im Zweiten Weltkrieg. Munich: Oldenbourg. Rimlinger, Gaston V., 1971. Welfare Policy and Industrialization in Europe, America and Russia. New York: Wiley & Sons. Rodgers, Daniel T., 1998. Atlantic Crossings: Social Politics in a Progressive Age. Cambridge, MA: The Belknap Press of Harvard University Press. Rokkan, Stein, 1999. State Formation, Nation-​Building, and Mass Politics in Europe:  The Theory of Stein Rokkan, Based on his Collected Works, ed. Peter Flora with Stein Kuhnle and Derek Urwin, Oxford: Oxford University Press. Scharpf, Fritz W., 2000. The viability of advanced welfare states in the international economy: Vulnerabilities and options. European Journal of Public Policy, 7 (2): 190–​228. Scheve, Kenneth, and Stasavage, David, 2016. Taxing the Rich. A History of Fiscal Fairness in the United States and Europe. Princeton, NJ: Princeton University Press. Taylor-​Gooby, Peter, 2002. The silver age of the welfare state: Perspectives on resilience. Journal of Social Policy, 31 (4): 597–​621. Taylor-​Gooby, Peter, Gumy, Julia M., and Otto, Adeline, 2014. Can ‘New Welfare’ address poverty through more and better jobs? Journal of Social Policy, 44 (1): 83–​104. Therborn, Göran, 1995. European Modernity and Beyond:  The Trajectory of European Societies, 1945–​2000. London: Sage. Titmuss, Richard M., 1958. War and social policy, in Essays on ‘The Welfare State’, ed. Richard M. Titmuss, London: Unwin University Books (2nd edn), 75–​87. Tooze, Adam, 2018. Crashed:  How a Decade of Financial Crises Changed the World. Harmondsworth: Allen Lane.

Introduction   19 Wagner, Adolph, 1893. Grundlegung der politischen Őkonomie. Erster Theil: Grundlagen der Volkswirtschaft. Leipzig: Winter. Wilensky, Harold L., 1975. The Welfare State and Equality. Structural and Ideological Roots of Public Expenditures. Berkeley, CA: University of California Press. wincott, daniel. 2013. The (golden) age of the Welfare State: Interrogating a conventional wisdom. Public Administration 91(4): 806–822. Wren, Anne (ed.), 2013. The Political Economy of the Service Transition. Oxford:  Oxford University Press.

Pa rt I

P H I L O S OP H IC A L J U ST I F IC AT ION S A N D C R I T IQU E S OF T H E W E L FA R E STAT E

Chapter 2

Ethic s Stuart White

Introduction What we call the ‘welfare state’ is central to modern democracy. Political scientists debate the causes of its emergence and evolution. Economists debate its consequences for the wider economy. Social policy experts debate the wisdom of specific policies and propose reforms. Amongst this welter of multidisciplinary analysis, political philosophers also have a role. For the welfare state is centrally an expression of certain ethical ideals. It is defended in the name of social justice. It is held by some critics to violate other ideals, such as individual liberty. Political debate over the future of welfare states taps directly into these claims and counterclaims. But since these claims are essentially philosophical, they call for the expertise of the political philosopher. The political philosopher cannot say in detail what welfare states should look like. But they can certainly clarify the normative terrain of debate and, in this way, assist democratic citizens in deciding between different welfare state futures. This chapter seeks to clarify some of the core ethical arguments surrounding welfare states. The analysis focuses on three key values. First, we will consider the concept of need; second, we focus on principles of equality; and, third, we look at arguments surrounding the implications of the welfare state for liberty. A final section concludes by noting some normative issues moving increasingly to the forefront of debate. The focus here is philosophical, rather than on intellectual history or different ideologies of welfare. That said, in the real world of welfare state politics, philosophical argument enters into debates in ways that are shaped and constrained by local institutions and ideological traditions. In what follows, I try to take account of this, drawing on Gøsta Esping-​Andersen’s influential typology of so-​called ‘liberal’, ‘conservative’, and ‘social democratic’ welfare states (Esping-​Andersen 1990).

24   Stuart White

Needs Welfare states are frequently understood as mechanisms for the satisfaction of basic needs. For example, when welfare states are discussed in terms of how far they alleviate or prevent poverty, there is an assumption that it is part of the task of the welfare state to prevent people suffering deprivation of their basic needs. Key issues of debate here concern: what are basic needs? How do we conceptualize and (hence) measure them? Do citizens have rights to what they need? Should welfare states aim only at assisting those most in need? One way to elaborate the idea of basic needs is by drawing on Amartya Sen’s influential notion of capabilities (Sen 1992; Nussbaum 1990; Robeyns 2005, 2006). Sen’s analysis starts by defining a person’s well-​being as constituted by the ‘functionings’: beings and doings [which] . . . can vary from such elementary things as being adequately nourished, being in good health, avoiding escapable morbidity and premature mortality, etc., to more complex achievements such as being happy, having self-​respect, taking part in the life of the community, and so on. (Sen 1992: 39)

A person’s capability is their power to achieve functionings: ‘a set of vectors of functionings, reflecting the person’s freedom to lead one type of life or another’ (Sen 1992: 40). If we can agree on a set of functionings constitutive of a minimally decent life, we can then identify a related set of capabilities. Basic needs can be understood by reference to these capabilities. Sen argues that the notion of basic capabilities should not be understood purely in terms of functionings linked to biological survival. Human beings are social creatures, who have needs as members of a society. We have needs related to social status and opportunity for participation in social life. Thus, as Sen notes, Adam Smith pointed out how important the possession of a good linen shirt was to an eighteenth-​century artisan (Sen 1987). A good linen shirt might not be a biological necessity. But it was, in the social context, a necessity if he was to meet his need for self-​respect and participate in the wider society without ridicule or disapproval. This insight also underpins the claim that ‘poverty’ needs to be understood in terms of how well off people are relative to the general affluence of their society and not simply in terms of their command of absolute levels of commodities (Sen 1987). As the average level of affluence in a society rises, the cost in commodity terms of maintaining status and participation in society is likely to rise, so that individuals need command over more commodities in absolute terms in order to maintain a given level of capability. Of course, agreement on this conceptual approach to understanding basic needs (and, relatedly, poverty) still leaves open lots of questions about the precise specification of the capabilities and commodity bundles which define a basic needs threshold. There is an innate contestability about the

Ethics   25 notion of basic needs, and any satisfactory theory will need to identify political processes whereby debates over the content of needs can be fairly (and always provisionally) resolved (Fraser 1989; Young 1990; Wolff and de-​Shalit 2007). Distinct from the question of what basic needs are is the question of whether, or in what sense, individuals have a moral right to their satisfaction. Focusing primarily on the United Kingdom, T. H. Marshall famously argued that the welfare state represents a further stage in the development of citizenship rights (Marshall 1964 [1950]). Building on civil and political rights, the welfare state realizes ‘social rights’. In recent years, however, many welfare states, perhaps especially liberal welfare states, have shifted towards the increased use of ‘conditionality’ in welfare state programmes; for example, making cash assistance to the unemployed conditional on tougher work-​related requirements. Both critics and supporters of the conditionality movement have argued that this marks a break with the Marshallian philosophy of ‘social rights’. There is, moreover, an important current of opinion across a wide range of welfare state types which argues for the replacement of many conditional and targeted welfare benefits with a universal unconditional cash grant, a basic income or citizen’s income, ideally set at a level sufficient to cover a standard set of basic needs (Parijs 1995; Raventós 2007; Parijs and Vanderborght 2017; Bidadanure 2019). In fact, conditionality is not inherently in conflict with the idea of social rights (White 2000). The key question is just what a social right is a right to. Certainly, if a social right is a right simply to be given resources, then conditionality conflicts with social rights. But social rights might be understood, alternatively, as rights of reasonable access to relevant resources. Whether conditionality then conflicts with a given social right depends on whether the specific conditionality rule denies individuals reasonable access to needed resources. For example, if a minimum income is made conditional on taking up a job, and there is a good range of jobs on offer, then the right of reasonable access to a minimum income is not obviously violated. Justifications of conditionality fall into two categories. On the one hand, there is the paternalist argument: conditionality is justified because it is in the best interest of the welfare recipient themselves (Mead 1992). Of course, there is a strong presumption against paternalism (in practice, this may be especially strong in nations with liberal welfare states). However, some philosophers have argued that paternalism can be justified (Dworkin 1971; see also Conly 2013). For example, Gerald Dworkin argues that paternalism is justified if the restrictions on liberty are ones that the individuals concerned would consent to as a way of insuring themselves against their own short-​ sightedness or weakness of will. In such a case, paternalism is ‘self-​paternalism’ and actually represents a way of strengthening the individual’s ability to act on their own best judgement, rather than overriding this judgement. It is conceivable that conditionality might be justified in these terms. However, the views of welfare recipients themselves are important in delivering this sort of justification. This brings us back to the need for fair political processes (in this case, ones that give effective voice to the welfare recipients) in determining policies to address basic needs. Given the danger that paternalism

26   Stuart White in practice can express and reinforce hierarchies of social status, such as those based on race and class, the need for inclusive, contestatory political process in this area is very important. The second argument for conditionality is the fairness argument. It appeals to the alleged unfairness to others of people taking resources without regard for their behaviour towards society. One version of the argument, relevant to the debate around work-​ related conditionality, appeals to the principle of reciprocity (White 2003). If individuals share in the fruits of their fellow citizens’ labours, then they have a duty to make a corresponding productive contribution to the society in return, within the limits of their capacity to make such a contribution. If they do not make such a contribution, then, the argument runs, they take unfair advantage of, and thus exploit, their fellow citizens. The reciprocity argument can be challenged in at least two ways. First, the demand for reciprocal contribution from welfare recipients should not be divorced from questions about the wider fairness of the economic system. If the structure of opportunity and reward in the economy is fair, then perhaps it is right to say, with John Rawls, that ‘all citizens are to do their part in society’s cooperative work’ (Rawls 2001: 179). The insistence on reciprocal contribution in this context captures one aspect of the ideal of a society as a ‘fair scheme of social cooperation between free and equal persons’ (Rawls 1999 [1971], 2001). However, if the economic system has an unjust structure of opportunity and reward, then the insistence on reciprocal contribution from those receiving welfare benefits is questionable. If those receiving welfare benefits are those who have suffered from society’s failure to achieve just structures of opportunity and reward, then these citizens do not have the obligation to contribute. We are not obliged, as a matter of fairness, to ‘do our bit’ in the context of an economy that fundamentally works to ‘do us down’. Tommie Shelby makes this point with reference to the Black ghetto poor in the United States: . . . job opportunities for low-​skilled workers are severely limited and the jobs that are available are often menial, dead-​end service positions that pay wages too low to provide adequate economic security for a family. Now it might be replied that if the ghetto poor do not want to take these low-​wage jobs they should develop their skills . . . As is widely known, however, the quality of education available to ghetto residents is generally so substandard that most cannot get a basic education there, let alone proper preparation for college . . . This lack of equal educational opportunity, which in turn creates an unfair employment opportunity scheme, vitiates any obligation to work . . . (Shelby 2007: 146–​147)

Not only do the reciprocity-​based obligations not apply in this context of background injustice, but the effort to enforce work through the welfare system risks consolidating or worsening unjust disadvantage; for example, because it weakens the bargaining power of disadvantaged workers or because of the possible ‘expressive harm’ that work conditions stigmatize and demean those subject to them (Shelby 2016: 197–​200).

Ethics   27 The discussions around equality and liberty below, of course, are important in our assessment of how far the existing structure of opportunity and reward is just. A related point is that the justifiability of a given conditionality policy might vary according to the particular kind of welfare state it is embedded in (e.g. liberal or social democratic), since this could affect the degree of background justice. A second challenge to the reciprocity argument is that some resources, such as land and other natural resources, are an inheritance from nature or past generations. As they are not the product of our fellow citizens’ labours, it is not clear that their distribution should be regulated by the reciprocity principle. According to one philosophical tradition with roots in many countries of diverse welfare state types, these inherited assets should be seen as the common property of the nation (or, indeed, of humanity), to which all individuals have a rightful claim (Paine 1987 [1797]). Indeed, if one takes seriously the liberal principle of neutrality, which holds that the state should not discriminate between citizens on the basis of their different conceptions of the good life, then there is a strong presumption in favour of giving each person an equal share of these resources. The value of the relevant assets should revert to the community and should then be distributed as a uniform grant. On this basis, some have recently defended the policy of citizen’s income or related ideas of universal endowment (Parijs 1995; but see also Donselaar 2008, for a critique of this argument). Note, however, that while the effect of a citizen’s income might be to help satisfy a standard set of basic needs, this rationale for the policy does not in fact rest on an alleged right to be given, unconditionally, the resources necessary to meet basic needs. It rests on a presumption in favour of equality as a basis for individuating claims to specific resources. It is really an equality-​based argument of a kind, rather than a needs-​based one. Returning to the basic needs justification for welfare provision, an obvious question arises: should welfare policies be targeted specifically at those ‘in need’? For example, if the state has a commitment to prevent poverty, should it ‘target’ cash assistance so that it is just sufficient to relieve those who would otherwise be in poverty, but offer no assistance beyond this? One of the features distinguishing liberal welfare states from conservative or social democratic welfare states is the strong reliance on ‘means-​testing’ of this kind (Esping-​Andersen 1990). The questions might thus have more immediate salience in a liberal welfare state, although resource scarcity means that no welfare state is ever likely to evade them. It is difficult to generalize about the rightness or wrongness of needs-​based targeting, but we should note the ethical considerations on each side of the debate. On the one hand, means-​testing looks like an ‘efficient’ means of satisfying the community’s obligation to secure basic needs: it apparently meets basic needs at minimum cost to the wider society. This, it might be said, is fair to those who are foregoing resources to help the less advantaged. If the rationale for enforcing their contribution is that there is an obligation to help meet basic needs, then how can we legitimately force people to give up more resources than is strictly necessary to satisfy this obligation? On the other hand, critics argue that the apparent ‘efficiency’ of means-​testing in meeting basic needs is illusory. First, means-​tested benefits might come with greater

28   Stuart White stigma for the benefit recipient. Since, as we have seen, an adequate notion of basic needs must take into account needs for status and respect, means-​testing subverts the meeting of basic needs. Second, critics argue that means-​tested assistance is subject to a political dynamic which leads to inadequate levels of assistance. Having no direct interest in the provision of means-​tested welfare, more affluent citizens vote, over time, for low levels of spending on such welfare, undermining its effectiveness in addressing basic needs. Basic needs might thus be more effectively secured by a welfare state which offers goods and services to a much wider cross-​section of the population than simply those most in need. Clearly, in this case, the resolution of the normative question depends on the results of research into the dynamic properties of different types of welfare state (Rothstein 1998).

Equality Is provision for basic needs the only ethical objective of the welfare state? While the principle of securing basic needs seems to capture what so-​called liberal welfare states are primarily aiming at (albeit in a highly targeted way that can be challenged as inadequate), it does not fully capture the apparent ethical motivations behind conservative and social democratic welfare states (or, indeed, all of the policies adopted in liberal welfare states). Take the case of social insurance. While social insurance schemes do have a role in securing basic needs, they typically also seek to dampen down variation in living standards beyond what is necessary to meet basic needs. This function can, perhaps, be understood in terms of an expanded conception of basic needs: perhaps the interest in continuity of living standards is itself a basic need, insofar as it gives people firmer long-​term expectations about their material circumstances which, in turn, consolidates their ability to formulate long-​term projects (Goodin 1988). However, what if background living standards are themselves unequal? Is it sufficient for a welfare state to increase security in economic expectations, taking this inequality as a given? Or, as in social democratic welfare states, should the welfare state seek to bear down on this background inequality itself? The demand for equality is, of course, highly complex. At the most abstract level, we can distinguish at least three egalitarian objectives: Strong meritocracy. Individuals should have equal opportunity, regardless of features such as class background, race, ethnicity, or gender, to develop their natural abilities into marketable talents and to win positions of reward and status on the basis of their talents (White 2006: ch. 3). Luck egalitarianism. Individuals should not be disadvantaged in their opportunities to lead good lives by differences in endowments that are a matter of ‘brute luck’ (e.g. the class into which one is born or one’s natural ability), but inequalities reflecting different life-​style choices are just (Cohen 1989; Dworkin 2000; Barry 2005; White 2006: ch. 4).

Ethics   29 Relational equality. A good society is one in which social relationships are characterized by equality of status and the absence of domination. (Anderson 1999).

Strong meritocracy is committed to an ambitious form of ‘equality of opportunity’. Equality of opportunity implies an absence of discrimination in employment and related decisions, so that positions go to the applicants with the most job-​relevant talent. But for the strong meritocrat, it also requires that individuals have equal opportunity to develop talents. This directs our attention to a wide range of social forces which influence talent development. Related to this, it may call for a range of public interventions, via the welfare state, to reshape these social forces: interventions to assist children’s development in pre-​school years; in the design of the education system; in the distribution of financial assets which might play an important role in determining educational and labour market opportunity (Ackermann and Alstott 1999; Prabhakar 2008). But is strong meritocracy sufficient for social justice? ‘Luck egalitarianism’, a philosophical position recently developed out of the work of philosophers such as John Rawls and Ronald Dworkin, argues that it is not (Cohen 1989; Rawls 1999; Dworkin 2000; Lippert-​Rasmussen 2015; Axelsen et al. 2019). For even in a strong meritocratic society, resources and life prospects will be unequally distributed as a result of inequalities in endowments of natural ability, over which individuals have no control. Therefore, luck egalitarianism calls for state action to correct for these further sources of ‘brute luck’ inequality.1 Exactly what this implies for the design of the welfare state is a matter of considerable debate. Ronald Dworkin seeks to apply the luck egalitarian intuition, as he understands it, by proposing the thought experiment of a ‘hypothetical insurance market’. Roughly speaking, we are to imagine individuals in an insurance market which has two important characteristics: (a) no individual knows their own endowment of marketable ability (or of what Dworkin calls ‘handicaps’) until they make an insurance purchase; and (b) each individual has equal purchasing power based on a per capita share of society’s external resources. We are also to imagine different insurance companies offering a range of insurance policies; for example, policies that provide insurance against failing to be at a certain point in the distribution of earnings power. The more generous the insurance cover one chooses to purchase (e.g. the higher the earnings power one insures against failing to have), the more of one’s initial share of resources will be paid as an insurance premium. Dworkin argues that we can discern the kind of insurance policies that the ‘average’ individual would choose to buy. Real-​world welfare state programmes should be based on this average insurance package. On this basis, Dworkin calls for generous subsidies to the low-​paid and unemployed (but with work conditions) and for a

1  Disadvantage is a matter of brute luck when it is a result of birth and other kinds of lotteries that are not willingly entered into. It contrasts with what Dworkin calls ‘option luck’, which is a matter of how deliberate gambles turn out.

30   Stuart White comprehensive health-​care package to be available to every citizen as of right (Dworkin 2000).2 If we start from institutions, rather than theory, it is perhaps the institutions of the social democratic welfare states which seem at first sight to conform to the ambitions of luck egalitarianism. Social democratic welfare states are the most successful at bearing down on inequality in the distribution of income and wealth in a way that arguably limits brute luck inequality in this area. They also practice ‘specific egalitarianism’, in which specific goods, such as education and health care, are taken out of the marketplace and provided to all citizens on a strictly egalitarian basis. This can be seen as further insulating the overall distribution of advantage from brute luck. By the same token, from the luck egalitarian point of view, both conservative and liberal welfare states look suspect. The liberal welfare state, by aiming only at assisting those most in need, is unlikely to go far enough in preventing or mitigating brute luck inequality (even if it is successful at securing basic needs). Conservative welfare states appear too concerned with the security of unequal living standards, above a basic needs threshold, without questioning the justifiability of the underlying inequality. Conservative welfare states are also associated with much lower labour force participation by women, and the luck egalitarian (not to mention the strong meritocrat) will view this too as unjust.3 There are, however, two sides to luck egalitarianism. If Smith has a higher income than Jones because they choose to work more, or because they choose a higher-​paying job, then the resulting inequality is just, assuming that these were also real options for Jones. In this respect, luck egalitarianism tries to incorporate a conception of personal responsibility (Cohen 1989). (This perhaps reflects its origins, at least in its present form, in countries which have liberal welfare states.) This complicates the policy implications of luck egalitarianism and might call for some qualification to our earlier assertion that the institutions of the social democratic welfare state come closest, amongst existing welfare states, to meeting the demands of luck egalitarianism. The emphasis on personal responsibility lends support in principle to policies which discriminate welfare provision based on how far people are responsible for their disadvantage. However, even considered on its own terms, luck egalitarianism demands a cautious appraisal of such policies. Luck egalitarianism holds that inequalities due to choice are just when choices are made against a background in which brute luck inequalities in endowments have been handled appropriately. Insofar as this is not achieved,

2  Dworkin’s discussion tends to assume a ‘medical model’ of disability and that disability (a ‘handicap’) is necessarily bad for the individual affected. For a corrective, which works with the alternative ‘social model’ of disability and argues for disability as difference rather than as a negative, see Barnes 2016. 3  It might be objected that the differences in labour force participation largely reflect gender differences in lifestyle choice to which a luck egalitarian should be indifferent. However, this is to ignore the extent to which some choices are shaped by strong social norms, such as gender norms, over which no particular individual has control. We will return to this issue of how brute luck can shape the context of choice below.

Ethics   31 the luck egalitarian has reason to be careful about responsibility-​discriminating policies. For example, if ‘bad choices’ correlate with brute luck disadvantage (e.g. unhealthy eating correlates with low earnings potential), then the luck egalitarian might oppose responsibility-​sensitive health care since, given the correlation, this could further disadvantage groups who are uncompensated victims of bad brute luck. There is a related problem of disentangling the contributions of brute luck and personal responsibility in causing disadvantage. Choices reflect preferences. But preferences are shaped by one’s social environment, something which is largely a matter of brute luck. So, even under ideal conditions, there is a difficult question of how to separate choice and personal responsibility from the effects of (unchosen) social environment (Roemer 1993). The emphasis on personal responsibility in luck egalitarianism is a major concern for some political theorists. In an important paper, Elizabeth Anderson argues that luck egalitarianism is at once implausibly harsh in allowing individuals to face the consequences of their lifestyle choices and also demeaning in calling for those with limited skills or disabilities to be given mere financial compensation (Anderson 1999). Anderson’s paper draws out helpfully a distinct egalitarian perspective (White 2006: ch. 4). According to Anderson, egalitarianism is not fundamentally a matter of how we distribute things, but of the quality of social relationships. Anderson’s account identifies in effect two particularly important features of social relationships: status and power (see also Young 1990; Axelsen et al. 2019). An egalitarian society is, fundamentally, a society in which individuals relate to one another as equals: they regard one another as having equal civic and political standing (status) and no individual has the capacity to dominate another (power). The ideal, in essence, is something like ‘No master, no slave’, a formulation which we cannot reduce to a purely distributive egalitarian principle of the form ‘A and B should be equal in the amount of good X each has’. The significance of the distribution of income and wealth, on this view, derives from how it affects status and power relations. According to this relational egalitarianism, the welfare state’s job is to help secure the conditions for status equality and the absence of domination. In contemporary circumstances, relational egalitarianism highlights the way welfare state policies interact with status and power relations in dimensions such as race, class, gender, and disability. The emphasis on using welfare policies to prevent domination marks a point of commonality with some other philosophical approaches to the welfare state. One is Robert E. Goodin’s analysis of the welfare state as, in part, a device for preventing relationships of ‘vulnerability’ which would otherwise give rise to exploitation (Goodin 1986, 1988). The other is the neo-​republican philosophy which sees the task of the state in general as securing freedom as ‘non-​domination’ (Pettit 1997, 2013; Skinner 1998). Compared to a pure luck egalitarian approach, these relational perspectives are not concerned with eliminating brute luck inequality for its own sake. They may, however, ground a more sceptical approach to policies of both conditionality and responsibility-​based discrimination. Relational egalitarians will be worried about the possible threats to equal civic standing in such policies and, not least, about the way such policies could help to create or consolidate relationships of domination. The relational egalitarian perspective

32   Stuart White has recently become very important in the philosophical defence of citizen’s income (Raventós 2007).

Liberty Since the 1980s, we have seen a shift towards ‘neoliberalism’ in many advanced capitalist countries, with welfare state retrenchment as a chief goal. The neoliberal case has rested in part on claims about efficiency, but retrenchment is also defended as the recovery of individual liberty (Hayek 1960; Nozick 1974). This shift has been particularly pronounced in those countries with liberal welfare states. In these countries, supporters of the welfare state have been under considerable pressure to respond to a confident liberty-​based critique of the welfare state. Is an adequate response to be had? In the era of the welfare state’s emergence, the debate was often structured around a dispute between so-​called ‘negative’ and ‘positive’ conceptions of liberty (Berlin 1969).4 Negative liberty is the liberty of the individual from interference by others (force and coercion) to act as they wish, or might wish to act. The welfare state, with its structures of coercive ‘redistribution’, was seen by critics as an assault on negative liberty. However, some revisionist liberals, taking their cue from thinkers such as T. H. Green, argued that negative liberty represents an inadequate understanding of liberty (Green 1991).5 Liberty, they argued, is the power of self-​development. Negative liberty is valuable insofar as it enhances this power, but loses its value when it works to limit self-​ development. The use of state coercion to establish a framework in which all citizens are guaranteed the resources necessary for self-​development might involve limitations on negative liberty. But these are justified, so it was argued, if they result in more, or all, citizens having the liberty that really matters: the power of self-​development. One can see a clear echo of the revisionist liberal ideal of positive liberty in contemporary thinkers such as Amartya Sen and Martha Nussbaum, specifically in their call to focus state policy round the security of a range of basic ‘capabilities’ (Sen 1992; Nussbaum 1990). Conceptualizing liberty in terms of capability for self-​development, or some other set of basic capabilities, in effect ties the notion of liberty closely to the notion of basic needs and thereby makes it amenable for recruitment to the welfare state cause. One limitation of this approach, however, is that it leaves the welfare state critics free to take their stand on the priority which, so they will claim, ought to be given to negative

4  Berlin (1969) is the most widely noted study of ‘negative’ and ‘positive’ liberty, but it should be noted that Berlin’s central notion of ‘positive liberty’ is arguably somewhat different to that discussed here, focusing much more on the overcoming of irrationality within the agent rather than the absence of resource constraints to action. 5  This is not to say that Green himself was a supporter of many welfare state measures, merely that he offered a conception of liberty which could be used to help justify them.

Ethics   33 liberty. Can the case for welfare state policies be made in terms of the very notion of negative liberty to which the critics appeal? A key insight here is that a lack of income and wealth itself limits negative liberty (Waldron 1993; Cohen 1997: 41–​43; Swift 2001). Take one example. I would like to travel from London to Liverpool on the train, but I can’t afford the ticket. What happens? I get on the train. The ticket inspector discovers I don’t have a ticket. I am removed from the train at, say, Crewe. My lack of a ticket means that I lack the legal permission to be on the train, and that I therefore become subject to coercive interference—​interference ultimately backed up by the coercive apparatus of the state—​in doing what I would like to do. Is this not a curtailment of my negative liberty? Let’s approach the point another way. In a society with private ownership of resources, the property rights of others place us under a huge array of prohibitions about what resources we can use and, therefore, what actions we can perform. Money is the device we use to remove some of these prohibitions, and so acquire the negative freedom to perform specific actions we wish to perform. It is money that enables me to go into the car showroom and leave with a Porsche, which I can then drive from London to Liverpool. Without the money, I would not have the negative freedom to perform this sequence of actions. Now, what if we say that all citizens must be free—​negatively free—​at least to some minimum extent? Then it would seem to follow from what we have just said that all citizens must have some kind of guarantee of (reasonable access to) a minimum income. Going further, we should note that the core commitment of many liberal thinkers is not so much to ‘liberty’ as to ‘equal liberty’ (see e.g. Berlin 1969). But whether one accepts a normative commitment to either a sufficiency or equality of negative liberty, one cannot rest content with a free-​market distribution of income and wealth, since this is almost certainly going to violate either commitment. Some form of state action to regulate the distribution of income and wealth—​and, hence, probably some kind of welfare state policy—​is going to be necessary to secure a sufficiency or equality of negative freedom. There are two ways of resisting this line of thought. One emphasizes the difference between being subject to a power of coercive interference and actually experiencing interference. When the homeless person tries to sleep on the lawn of the millionaire’s house, they are subject to a power of coercive interference, but nevertheless might not experience actual interference. Perhaps the millionaire is willing to let them sleep there. If freedom is lost only when they experience actual interference, then their poverty does not necessarily deprive them of various freedoms. And, if they haven’t necessarily lost said freedoms, we do not necessarily need ‘redistributive’ provisions to help them regain them. Alternatively, one might adopt a ‘moralized’ definition of negative liberty according to which a coercive interference restricts my freedom to act only when it interferes with something I have a right to do (Nozick 1974: 262; Cohen 1988). If the millionaire owns his property justly, then the homeless person has no right to sleep on it (without the owner’s permission). The coercive interference which keeps them off the land, and so prevents them sleeping, does not reduce their negative liberty since it is not preventing them doing something they have a right to do. Consequently, one cannot

34   Stuart White argue that redistributive provision of resources is needed to sustain a negative freedom that would otherwise be lost. Neither of these responses is convincing. In the first case, it is plausible to retort that freedom is constrained by subjection to a power of interference as well as by actual interference (Waldron 2006). The homeless person sleeping on the millionaire’s lawn knows that they can be sent packing whenever the millionaire wishes. To be ‘at the mercy’ of another in this way is itself a constraint on one’s freedom. One is dependent on the goodwill of another, and must take care to behave in a way that maintains that goodwill. This is, in fact, the core intuition behind the neo-​republican conception of freedom as ‘non-​ domination’ which we introduced briefly at the end of the previous section on ‘Equality’ (Pettit 1997, 2013; Skinner 1998). Turning to the moralized definition of liberty, there are two problems. First, the moralized conception of liberty has one strongly counter-​intuitive implication. Imagine a justly imprisoned criminal who wants to leave their prison. Do the prison guards restrict their liberty by keeping them in prison? Of course they do. But on the moralized definition of liberty one must apparently hold that there is no restriction of liberty here because the guards are not stopping them from doing something they have a right to do (Cohen 1988). Second, on a moralized conception of freedom, the contours of freedom now depend on answering the prior question of what is just. This means that one cannot do what many critics of the welfare state want to do: to employ freedom as an independent yardstick either to determine what justice is or as an independent value which competes with, and properly limits, the demands of justice (Cohen 1988). If we have good reason to think that justice requires an egalitarian distribution of some kind (see above), then one cannot say something like: ‘But equality comes at the price of liberty.’ Liberty, on the moralized conception we are discussing, is shaped by the demands of justice, so if justice demands equality, liberty is whatever we are permitted to do within the bounds of equality. We have seen that the conventional, general critique of welfare state policies in terms of (negative) liberty is, at the very least, overstated. This is not to say, however, that there cannot be valid concerns or criticisms about welfare state policies from this standpoint. There is, in particular, an important cluster of issues around paternalism, diversity, and choice in welfare provision which also need to be considered. These concerns are as often voiced by what one might call left-​libertarian critics of existing welfare states as by right-​ libertarian or ‘neoliberal’ critics. One issue here, which links back also to relational egalitarian concerns, is the way welfare state policies can express hierarchy in which some people design and implement policies for the benefit of others (Fraser 1989). Critics argue that this leads to policy that is insensitive to needs and that creates or reinforces domination. A related criticism is that welfare state provision can confuse equality with uniformity. In a society with a plurality of different conceptions of the good life, citizens might reasonably wish that welfare provision be sensitive to difference in religion and culture. These two concerns, about dominating hierarchy and undue uniformity, support an agenda for

Ethics   35 empowering citizens to exercise more control in the design and delivery of welfare services. This agenda includes proposals for introducing elements of participatory democracy into policy design and/​or budgeting decisions (Rowbotham 1983; Wampler 2007; Wainwright 2009). In the words of the slogan, adopted by disability rights campaigners and others: ‘Nothing about us, without us!’ A second proposal for empowerment is ‘associational welfarism’, in which the state retains its role as primary financer of provision, but in which provision is devolved to third-​sector associations such as religious groups and trade unions (Hirst 1994). A third proposal is to create market-​type mechanisms internal to the welfare state (Le Grand 2003). Critics argue that such mechanisms threaten to exacerbate inequalities in provision. However, this depends on the precise way in which the ‘internal markets’ are constructed and on the wider social context in which the mechanisms operate (Brighouse 2000; Le Grand 2007). Here, again, we see how the normative analysis of welfare state policy must draw not only on philosophical analysis, but also on relevant empirical research.

Conclusion Rather than trying to summarize the above discussion, in concluding, I shall note some of the issues we have not had space to address. One important issue concerns global justice and its implications for the welfare state (Caney 2005; Young 2006; Ronzoni 2009; Carens 2013). If the egalitarian concern is to insulate the distribution of advantage from the arbitrariness of the birth lottery, then what could be more arbitrary than nationality of birth? Egalitarianism thus establishes a strong presumption for a policy of open borders. Does a policy of open borders create new challenges for welfare states or new opportunities (or both)? Another important issue not addressed in this chapter is that of intergenerational justice (Barry 1991). This issue is of obvious importance in considering pension policy, for example, and the just distribution of public spending across age groups (Bidadanure 2021). It is also important in thinking about how the welfare state can be consistent with, if not supportive of, environmental sustainability. There are also important questions of reparative justice in relation to historic crimes of slavery and colonialism (Boxill 2003; Butt 2009; Lu 2011). The philosophical issues discussed in this chapter largely reflect an agenda of debate shaped by the politics of welfare state retrenchment and reconstruction which began in many developed capitalist nations in the 1980s, a period in which welfare state supporters have had to clarify and refine their arguments in the face of the confident intellectual opposition of the New Right. As many capitalist nations operate ongoing policies of ‘austerity’, this classic debate retains its significance. However, as neoliberalism evolves, in many nations, into a politics of exclusionary populist-​nationalism, in a context of growing climate emergency, the ethical defence of the welfare state needs also to be shaped by theories of global, intergenerational, and reparative justice.

36   Stuart White

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Ethics   37 Green, Thomas H., 1991. Liberal legislation and freedom of contract, in Liberty, ed. David Miller, Oxford: Oxford University Press, 21–​32. Hayek, Friedrich, 1960. The Constitution of Liberty. Chicago: The University of Chicago. Hirst, Paul Q., 1994. Associative Democracy: New Forms of Economic and Social Governance. Cambridge: Polity. Le Grand, Julian, 2003. Motivation, Agency and Public Policy: Of Knights and Knaves, Pawns and Queens. Oxford: Oxford University Press. Le Grand, Julian, 2007. The Other Invisible Hand. Delivering Public Services through Choice and Competition. Princeton, NJ: Princeton University Press. Lippert-​Rasmussen, Kasper, 2015. Luck Egalitarianism. London: Bloomsbury. Lu, Catherine, 2011. Colonialism as structural injustice: Historical responsibility and contemporary redress. Journal of Political Philosophy, 19 (3): 261–​281. Marshall, Thomas H., 1964 [1950]. Citizenship and social class, in Class, Citizenship and Social Development, ed. Thomas H. Marshall, Garden City, NY: Doubleday, 65–​122. Mead, Lawrence M., 1992. The New Politics of Poverty: The Nonworking Poor in America. New York: Basic Books. Nozick, Robert, 1974. Anarchy, State, and Utopia. Oxford: Blackwell. Nussbaum, Martha C., 1990. Aristotelian social democracy, in Liberalism and the Good, ed. R. Bruce Douglas, Gerald M. Mara, and Henry S. Richardson, London: Routledge, 203–​252. Paine, Thomas, 1987 [1797]. Agrarian justice, in The Thomas Paine Reader, ed. Michael Foot and Isaac Kramnick, Harmondsworth: Penguin, 471–​489. Parijs, Philippe Van, 1995. Real Freedom for All: What (If Anything) Can Justify Capitalism? Oxford: Oxford University Press. Parijs, Philippe Van, and Vanderborght, Yannick, 2017. Basic Income: A Radical Proposal for a Free Society and a Sane Economy. Cambridge, MA: Harvard University Press. Pettit, Philipp, 1997. Republicanism: A Theory of Freedom and Government. Oxford: Oxford University Press. Pettit, Philipp, 2013. On the People’s Terms: A Republican Theory and Model of Democracy. Cambridge: Cambridge University Press. Prabhakar, Rajiv, 2008. The Assets Agenda: Principles and Policy. Basingstoke: Palgrave Macmillan. Raventós, Daniel, 2007. Basic Income: The Material Conditions of Freedom. London: Pluto. Rawls, John, 1999 [1971]. A Theory of Justice: Revised Edition. Cambridge, MA: Harvard University Press. Rawls, John, 2001. Justice as Fairness. A Restatement. Cambridge, MA: Harvard University Press. Robeyns, Ingrid, 2005. The capability approach: A theoretical survey. Journal of Human Development, 6: 93–​117. Robeyns, Ingrid, 2006. The capability approach in practice. Journal of Political Philosophy, 14: 351–​376. Roemer, John E., 1993. A pragmatic theory of responsibility for the egalitarian planner. Philosophy and Public Affairs, 22 (2): 146–​166. Ronzoni, Miriam, 2009. The global order: A case of background injustice? A practice-​ dependent account. Philosophy & Public Affairs, 37 (3): 229–​256. Rothstein, Bo, 1998. Just Institutions Matter. The Moral and Political Logic of the Universal Welfare State. Cambridge: Cambridge University Press. Rowbotham, Shiela, 1983. Dreams and Dilemmas: Collected Writings. London: Virago.

38   Stuart White Sen, Amartya K., 1987. The Standard of Living: The Tanner Lectures, Clare Hall, Cambridge, 1985. Cambridge: Cambridge University Press. Sen, Amartya K., 1992. Inequality Reexamined. New York, Cambridge, MA: Russell Sage Foundation & Harvard University Press. Shelby, Tommie, 2007. Justice, deviance, and the dark ghetto. Philosophy and Public Affairs, 35 (2): 126–​160. Shelby, Tommie, 2016. Dark Ghettos: Injustice, Dissent, and Reform. Cambridge: MA, Harvard University Press. Skinner, Quentin, 1998. Liberty before Liberalism. Cambridge: Cambridge University Press. Swift, Adam, 2001. Political Philosophy. A Beginners’ Guide for Students and Politicians. Cambridge: Polity. Waldron, Jeremy, 1993. Homelessness and the issue of freedom, in Liberal Rights. Collected Papers 1981–​1991, ed. Jeremy Waldron, Cambridge: Cambridge University Press, 309–​338. Waldron, Jeremy, 2006. Mr. Morgan’s Yacht, in The Egalitarian Conscience: Essays in Honour of G. A. Cohen, ed. Christine Sypnowich, Oxford: Oxford University Press, 154–​176. Wampler, Brian, 2007. Participatory Budgeting in Brazil: Contestation, Cooperation, and Accountability. University Park, PA: Penn State University Press. Wainwright, Hilary, 2009. Reclaim the State: Experiments in Popular Democracy. Calcutta: Seagull. White, Stuart, 2000. Social rights and the social contract: Political theory and the New Welfare Politics. British Journal of Political Science, 30 (3): 507–​532. White, Stuart, 2003. The Civic Minimum. On the Rights and Obligations of Economic Citizenship. Oxford: Oxford University Press. White, Stuart, 2006. Equality. Cambridge: Polity. Wolff, Jonathan, and de-​Shalit, Avner, 2007. Disadvantage. Oxford: Oxford University Press. Young, Iris Marion, 1990. Justice and the Politics of Difference. Princeton, NJ: Princeton University Press. Young, Iris Marion, 2006. Responsibility and global justice: A social connection model. Social Philosophy and Policy, 23 (1): 102–​130.

Chapter 3

In tellectual Ro ots of The Welfare Stat e Christopher Pierson and Matthieu Leimgruber

Introduction The intellectual roots of welfare state thinking are complex and tangled. The late-​ breaking and multivalent term ‘welfare state’ occupies a crowded conceptual terrain (which it shares with, amongst others, social security, Sozialstaat, Wohlfahrtstaat, and État providence: see Béland and Petersen 2015) and it covers a wide range of institutions and practices. The defence of the welfare state tout court is a relatively late development and those who fashioned the institutions and policies most widely associated with that term—​statesmen like Bismarck and civil servants such as Beveridge—​were often arguing for something rather (and sometimes quite) different. Although the welfare state project has often come to be identified with the prosecution of normative arguments about ‘social justice’ (see Chapter 2 by Stuart White), in fact its ideational roots (even its normative roots) are much more diverse and contested than this. And although the welfare state comes to be identified (largely after 1945) as, in some sense, the historical project of social democracy, its origins more usually lie with liberal, or even conservative, forces (and ideas). The picture is further complicated by uncertainty over exactly what it is that the ‘welfare state’ (and its cognate terms) connotes. There is some agreement over the inclusion of core social services and insurance programmes (at least for those who would allow an institutionally grounded definition), but should this include provision which is funded and/​or regulated by the state but delivered by others? Does it include public education or labour market policy or tax expenditures (to take just three frequently contested examples)? Further confusion arises from the fact that the welfare state emerges—​if not quite seamlessly, then certainly incrementally—​from a mass of existing legal provision

40    Christopher Pierson and Matthieu LEIMGRUBER and social practice; above all, that dealing with vagrancy, the impoverished elderly, and the regulation of labour. It represents both a breach with, and a continuation of, earlier social policies—​poor laws, laws of settlement, employers’ liability. Pre-​existing traditions of amelioration and correction, quintessentially the varying strands of (above all, Christian) ‘philanthropy’, locally administered poor laws, and the much newer ‘social science’, have played a continuing role (Bridgen and Harris 2007). Any history of the ideational roots of welfare needs also to recognize that there were (especially in the nineteenth century) emergent forms of knowledge in other areas without which it would be hard to imagine the birth of the modern welfare state. These would include advances in the sciences of disease and infection (Baldwin 1999) and the new actuarial and statistical competences without which there could be no social insurance (Ewald 1986). Policy-​making under rapidly changing social and political circumstances often involved a lot of ‘puzzle-​solving’ (Heclo 1974) and this process of puzzling and knowledge sharing was, from its very earliest days, not just international, but truly transnational (Rodgers 1998). Ideas and projects related to the welfare state emerged from the 1880s onwards across a community of shared, but also disputed, knowledge and opinion that reached all the way from Berlin to San Francisco (sometimes via Sydney and Wellington) and onwards to Tokyo (Thomann 2015). More than this, the notion of the welfare state presupposed, or indeed coincided with, the full emergence of the modern nation-​state. It required the development of sufficient bureaucratic capacity to handle the new, highly complex social protection programmes. This is why civil servants, from Theodor Lohmann (in Germany) to Edwin Witte (in the United States) to William Beveridge (in the United Kingdom) and Pierre Laroque (in France), often played such a crucial role in establishing the welfare state on the ground. A new class of national reformers emerged with its own ethos, a secular orientation (though often with a background in ‘practical Christianity’), and a commitment to the amelioration of living conditions. One of the most characteristic of all welfare state developments is welfare ‘creep’: the incremental growth of welfare programmes, coverage, and budgets. There is an element of ‘creep’ in the intellectual case for welfare too. Those who once argued for the introduction of workplace insurance for male workers in the dangerous industrial occupations did not anticipate a comprehensive system of social provision for all ‘from cradle to grave’. Indeed, the earliest welfare programmes were not generally presented as the founding legislation of a new species of citizenship, but focused instead upon workers or ex-​workers. Legislation to regulate the hours and working conditions of women and children was often quite explicitly grounded in a recognition that they were not full citizens, and, on precisely these grounds, such provision was often thought inappropriate for their ‘independent’ male colleagues or parents. Certainly, a (partial) transition from the status of pauper (which traditionally entailed the loss of whatever citizenship rights one enjoyed) into citizen can be widely plotted in welfare debates and practices throughout the twentieth century. But this is not straightforward or universal. The idea of ‘less eligibility’ (the classic rubric of the poor law) never really went away and some of the most important state welfare initiatives were seen as an alternative to citizenship.

Intellectual Roots of The Welfare State    41 The insight that citizenship comes to be identified with paid work (in the public sphere) points to an alternative way in which gendered welfare citizenship has been constructed (Bock and Thane 1991; Pateman, 1989). The welfare state is clearly in part about bringing the ‘popular’ into politics, but not always on the basis of citizenship. Finally, we need to recognize that the intellectual underpinnings of a welfare regime may change across time. The fact that the Scandinavian welfare state was, at its origins, the not-​very-​generous product of conservative forces may argue against the view that the origins of welfare states lie in the mobilization of working-​class numbers. But it tells us nothing about whether the welfare state became, in due course, the medium through which a redistributive politics or the inception of a ‘people’s home’ was realized. The welfare state only really became the project of social democracy after John Maynard Keynes and after 1945 (or after Ernst Wigforss, and somewhat sooner in Sweden). Before that, it was really the intellectual property of others. Having said all of this, it still is possible to identify certain intellectual trends that made possible or plausible a new kind of social policy that comes to be identified with, or as, ‘the welfare state’ (though almost always in retrospect). In this chapter, we review the most important of these trends across a range of national (and international) trajectories. We focus most of our attention upon those formative years, in which the case for a welfare state was first set out, though we do also consider the ways in which these arguments were changed or embellished as the welfare state became rather more of an established fact (especially after 1945). There were important ideational developments in later periods, but these undoubtedly built upon the pattern of what had gone before. While the representatives of labour, more especially those organized in trade unions, were sometimes (though by no means always) happy to support state welfare provision for their members, they often saw social policy as an alternative to socialism. So did their opponents. Early welfare measures were very often motivated by an attempt to answer the ‘social question’, but without challenging the prevailing economic and political order. One of the key insights of historical work on the emergence of the welfare state over the past twenty-​five years has been a growing recognition of the social policy activism of the state throughout the nineteenth century. Nonetheless, we are perhaps still justified in describing the period between 1875 and 1914 as marking the ‘birth’ of the welfare state, above all because of the intensity of policy innovation compressed into these years. It was also a time in which state’s social expenditure budgets grew substantially, albeit from an extremely modest baseline (Pierson, 2006; Lindert 2004). In fact, the pattern of ideas that underlay (or overlay) these early developments is complex and varied. It includes (following Freeden 2003) new ideas about citizenship, new expectations of bureaucratic organization, new beliefs about the proper objects (and extended limits) of state power (both national and local), new understandings about what constitutes well-​being and human flourishing, new (forms of) knowledge about poverty and deprivation, changing ideas about the role of the ‘popular’ in politics and of the proper forms of democratic governance more generally, new views about what constitutes social justice, new attitudes to time and to risk, and changed expectations about

42    Christopher Pierson and Matthieu LEIMGRUBER how a modern economy can be organized and how the redistribution of wealth can be both justified and delivered.

Germany and France It makes sense to begin our survey with the case of Germany, as this is almost universally regarded as the first state to have taken the decisive legislative measures that made it a welfare state or Sozialstaat. Traditionally, the founding of Germany’s welfare state has been identified with the proclamation of the Imperial Message delivered by Chancellor Bismarck on 17 November 1881 and the associated legislation on sickness insurance (1883), accident insurance (1884), and invalidity and old age insurance (1889). In the traditional account, this raft of social legislation is seen, above all, as part of a strategy to bind workers to the newly unified German state and to steer them away from the appeal of the (outlawed) social democrats (Ritter 1986). It was seen to be built around a longstanding and loosely Hegelian commitment to a corporate social role for the state, a paternalistic concern among the governing elite for the well-​being of the general population, and a longstanding practice of support for workers provided through a framework of occupational guilds. It was a strategy prosecuted in the context of rapid industrialization and urbanization—​indeed, it was in part an attempt to deal with the challenges this presented in a more rational and economically efficient way—​but grounded in a profound scepticism about the laissez-​faire claims of English or Manchester liberalism. More recently, the role of Bismarck has been somewhat downplayed and the innovations of the 1880s recast as a part of the low politics of interparty rivalry, rather than as the gradual unfolding of a ‘grand plan’. In this context, others have emerged as intellectual architects of the German reform process. The Verein fur Socialpolitik, for example, founded in 1872, gave an informed intellectual focus to calls for state intervention and a moderation of the outcomes that markets (including labour markets) generated. The label that stuck to members of the group, Kathedersozialisten, was not uniformly accurate, but they were certainly a key source for ideas of ‘market-​substituting, income-​ redistributing social politics’ and (in the case of Gustav Schmoller, for example) a considerable influence upon key political and bureaucratic decision makers (Grimmer-​ Solem 2003). A reduced focus upon Bismarck has exposed the sustained work of a number of less elevated political actors. Theodor Lohmann, a senior bureaucrat advocating factory legislation (which Bismarck consistently resisted), who maintained his interest when Bismarck had moved on, is in many ways characteristic. More liberal than Bismarck, Lohmann was a Christian reformer who favoured state intervention, but who wanted the state, where possible, to act through its support of voluntary organizations (rather than through straightforward compulsion). He worked tirelessly in bureaucratic and political circles to promote legislation that would deliver on this agenda. His ambition was certainly social amelioration and attachment of the working class to the Reich,

Intellectual Roots of The Welfare State    43 but he argued that this might be best achieved by promoting the interests of individuals within their own organizations, including trades unions (Hennock 2007; Tennstedt and Winter 1994; Stremmel et al. 2006). In France, the idea of État providence can be retraced to the 1860s. Its original usage was a critical one and while, in the hands of Napoleon III’s favourite social thinker, Frederic le Play, it came to stand more positively for the role of the state in supporting mutual institutions, its meaning has always been keenly contested. Traditionally, the French welfare system has been presented as decentralized, non-​statist, and built around ideas such as mutualité, solidarisme, and subsidiarité. While the first term indicated a clear preference for voluntary organizations set up to provide for their members’ needs through self-​administered cooperation, the principle of social solidarity or solidarisme relied heavily on state intervention to sustain mutual self-​help. The idea of subsidiarity is different again. In the French context, it embraces the idea that mutual insurance should be managed by all contributors—​workers, employers, and the state—​ and this at some distance from the central state, a system of ‘semiautonomous decision making’ (Bec 2014). Ironically, French experience at the turn of the twentieth century may more properly be understood as a reaction against subsidiarity (insofar as this embodied a key role for the church), but as a more general principle, subsidiarity (the idea that social functions should be carried out at the lowest level consistent with equity and efficiency), was important across continental Europe. And while it has been seen as especially significant in those countries where social Catholicism was dominant, it also had its Protestant, and even Calvinist, equivalents (e.g. in Abraham Kuyper’s advocacy of ‘sphere sovereignty’ in Holland; van Kersbergen and Manow 2009). To this we should add a recurrent interest in support of the family and of children, itself associated with a recurring and widespread fear in France of a declining population (Pedersen 1993). The emergence of early French social policy was, above all, an exercise in state building (following upon the traumatic experience of the Commune and the defeat by Prussian forces in 1871). And, given the late onset of industrialization in France, the initial reform agenda was not so much one of pacifying workers as achieving a fuller laicization of the state (especially in the fields of public education and social assistance). In fact, the contrast between Germany and France has been overdrawn. Despite its explicit statism, the Bismarckian reforms above all strengthened occupational organizations (berufliche Genossenschaften) and municipal institutions (Ortskassen), giving the nascent German welfare state a much more decentralized profile than is often supposed (Kott 2014). Meanwhile, in ‘decentralized’ France, proponents of Republican solidarisme such as Léon Bourgeois envisioned a strong role for the state in supporting and developing the field of mutual organizations. In both countries, contemporary economists and social scientists discussed welfare reform as a way to foster class rapprochement and the integration of the working class into bourgeois society. Seeking to tie workers to the state and to the nation was to be a means to increase the cohesion of both the French Republic and the Wilhelminian Empire (Stone 1985). In both countries, welfare state building was an exercise in nation-​state building.

44    Christopher Pierson and Matthieu LEIMGRUBER

Britain and the Antipodes If we turn our attention to experience in Britain and the innovative social programme of the great reforming Liberal administration of 1906–​11, or indeed if we look to the precocious reform agenda of turn-​of-​the-​century reformers in Australia and New Zealand, it makes sense to give priority to the ideas identified with the ‘new’ or ‘social’ liberalism, advocated by philosopher T. H. Green and his followers (Bruce 1968; Freeden 2003). Of the essence in this new liberal view was the belief that liberty was not primarily about the state’s non-​interference, but rather about its securing the best possible conditions for human flourishing. It was still concerned with the fate of the individual, but of an individual living within and dependent upon a wider human community. It was not well served by a state that confined itself to the maintenance of order and the upholding of contracts. The state ought also to embody a sense of the common good. It could, and should, intervene in the realm of contracts and private property to re-​allocate life chances in a way which equalized access to ‘real’ equality of opportunity. Since the real opportunities of individuals were cramped by poor housing, ill health, and inadequate education (and incomes), the state could, and should, act to address these unnatural disadvantages and it could, and should, use the resources that (progressive) taxation could command in order to do so. It was these ideas that were taken to justify the modest, though still quite transformative, programme of social reforms of the 1906–​11 Liberal government, including the provision of school meals, a schools’ medical service, national health insurance, old-​age pensions, labour exchanges, and urban planning. Just as crucially, it justified the reformed taxation regime that could pay for these (Thane 1996). Though clearly important, the new liberalism was just one element in a complex assemblage of ideas. Older themes persisted, including the ubiquitous condemnation of the ‘unworthy poor’—​the feckless, the idle, and the incompetent—​and the advocacy of Christian philanthropy. But these views now took their place alongside the more ‘scientific’ accounts of the nature of poverty that emerged from social survey work. And some of the remedies were also new: whether it was the casework of the Charity Organization Societies, the community-​based work of the settlement houses or the ‘expertise’ promoted by the Webbs (Harris 2004). The late Victorian idea of progress and (social) evolution also had an impact and, often in association with this, eugenics was, at this time, a ‘social science’ for both conservatives and progressives. Indeed, before it became so inextricably associated with the extreme right, eugenics was often seen by ‘progressive’ opinion as embodying a legitimate concern for raising the general quality of the population. Similarly, there were social imperialists on both right and left. Something of the same admixture of utility and idealism could be found in the yet earlier reforms undertaken in Britain’s southernmost colonies, Australia and New Zealand. Although the parentage of Australasian social reform is contested, factory legislation and the regulation of wages and conditions in the colonies was in its time the most advanced in the world. The novel system of compulsory arbitration (which

Intellectual Roots of The Welfare State    45 encouraged workers to join trade unions) was widely remarked on and admired in both Britain and America, as was the willingness of the state to act as employer of last resort. And New Zealand was one of the first states anywhere to introduce a non-​contributory old-​age pension. The ideas of T. H. Green and his successors were widely read in the reforming environment of turn-​of-​the-​century Australasia and these ideas were promulgated by a small, but influential group of emigré academics who had studied in Britain (Sawer 2003). The commitment to a rough-​and-​ready incarnation of ‘real’ equality of opportunity was captured in the ubiquitous and not-​very-​philosophical Australian notion of the ‘fair go’. The fact that so much of the work that was done elsewhere by state redistribution was done in Australia and New Zealand by state regulation had a decisive impact upon the development of welfare states in both these countries.

The American Case The United States has often been seen (in this, as in so many other ways) as ‘exceptional’; usually, in relation to the welfare state, as exceptionally belated, small, and mean. However, thinking about social policy has a long and rich history in the United States. Even during the late eighteenth-​century revolutionary era, Thomas Paine, in dialogue with French statistician Marquis de Condorcet, was among the first to reflect on the principles of state-​financed old age pensions (Rothschild 1995). Remarkably, by the late nineteenth century, Civil War veterans’ pensions constituted one of the largest public pension systems anywhere in the world (Jensen, 2003; Skocpol 1992). But this substantial entitlement programme died out with the veterans and their survivors, at least in part because it was seen as part of a political economy of patronage, which it was the mission of early twentieth-​century progressives to eliminate. In its place, in Theda Skocpol’s (1992) account came an attempt to institute a ‘maternalist’ welfare state. Largely the work of educated and professional women and women’s organizations, acting politically but outside the formal democratic structures from which they were still largely excluded, this advocacy led to the initiation of a raft of measures to protect women, both as mothers and workers, and their children, including the establishment of the Children’s Bureau in 1912 and the Women’s Bureau in 1920. Insofar as this mobilization was successful, it tended to focus upon the distinctive position of women, above all as mothers. Daniel Rodgers’ (1998) take on this story is rather different. For him, the leitmotiv of North American social politics from the late nineteenth century through to the era of rapid economic growth after 1945 is one of transnational (above all, transatlantic) borrowing. Whatever was the salience of liberal individualism in the wider population and culture, for those who drove forward the process of welfare reform in the United States (not always with great success), the point of reference was almost always Europe. And (at least until 1914) not the Europe of the Manchester liberals, but rather of pioneering Germany. The American Association for Labor Legislation was thus modelled upon the German Gesellschaft für Sozialreform (Moss 1996; Rodgers 1998). The multiple

46    Christopher Pierson and Matthieu LEIMGRUBER institutional obstacles set by a fragmented federal polity and the mounting strength of private alternatives to statist social policy (Hacker 2002) did indeed slow the development of the United States welfare state and brought only partial results before the famous 1935 Social Security Act. However, this cornerstone of the New Deal in many ways only belatedly recapitulated and brought through ideas and concepts that had in fact been in gestation for decades.

Sweden and the Scandinavian Model Scandinavia, and Sweden in particular, has quite a central place in the ideational history of welfare. The idea that there is a ‘Swedish model’ (or a ‘Nordic model’ or a ‘Scandinavian model’) and that it is one that others may want to follow, has been enormously influential (see Chapter 46). The core principle of the model is perhaps best captured in Swedish Prime Minster Per Albin Hansson’s idea of the folkhemmet (or ‘people’s home’), a term coined at the end of the 1920s and often taken to embody the aspirations of the long period of Swedish Social Democratic hegemony from 1932 until 1976. At its simplest, this term captures the idea of a national community which would provide a ‘good home’ for all its members, one grounded in equality and mutual respect. It signalled a new kind of politics for organized labour, one that abandoned the revolutionary millennialism of orthodox Marxism in favour of a strategy of gradual, but real, social change (which its advocates always insisted was quite different from an unprincipled reformism). The aspiration was to move towards a classless society by moderating economic inequality while providing standards of public service, equally for all citizens, that would nullify the social consequences of such economic inequalities as remained. Private ownership was to be tolerated and growth encouraged, but in a context of high social expenditure, extensive social provision, and progressive taxation. Through the 1930s, the economists of the Stockholm School (including Ernst Wigforss and Gunnar Myrdal) pressed the case for deficit financing to be a part of this settlement, famously predating Keynes’s General Theory of Employment, Interest and Money (1936). Meanwhile, Gunnar and Alva Myrdal were exemplars of the attempt to bring the evidence of social science to bear in support of rational welfare reform, as in their 1934 book Crisis in the Population Question (Carlson 1990). Under the terms of the 1938 Saltsjobaden agreement, the social democrats formalized an ‘historic compromise’ with Swedish capital. Capitalist economic growth would be encouraged whilst social democratic governments would pursue Keynesian economic policies to sustain full employment and use progressive taxation to reduce economic inequality and promote provision for collective needs, such as education, health, and housing. When, in the post-​Second World War period, the defence of welfare institutions and full employment threatened inflation and the loss of international competitiveness, this compromise was complemented by the adoption of the ‘Rehn’ model, which entailed an ‘active manpower policy’ and a ‘solidaristic’ wage policy. In this way,

Intellectual Roots of The Welfare State    47 it was hoped that welfare provision and a rising standard of living for the working population could be reconciled with continuing non-​inflationary economic growth (for a fuller account, see Pierson 2006). For a long time, Sweden’s social democratic settlement was represented as pragmatic or ‘post-​ideological’. Critics (and admirers) saw the Swedish Social Democrats as a party that had made its peace with capitalism and settled upon the welfare state as the mechanism through which it could then extract the most effective concessions on the part of its core constituency in the organized working class. However, the party’s proposal (in the 1970s) to set up wage-​earners’ funds and the attendant prospect of gradual socialization of the economy re-​ignited an interest in more radical readings of the Swedish Social Democratic experience. This re-​appraisal of thinkers such as Per Albin Hannson, Gunnar Myrdal and, perhaps above all, Ernst Wigforss revealed an account of the welfare state as a much more radical strategy for the gradual transformation of capitalism through ‘democratic class struggle’ (Tilton 1990; Korpi 1983).

Transnational Social Policy Development The welfare state has usually been understood as quintessentially a national phenomenon or as a set of uniquely national projects. Indeed, it has often been seen to be a part of the process of state and nation making itself. And yet, from the very earliest days of welfare state development, we have plenty of evidence of the international transfer of policy ideas. Sometimes this process was intergovernmental. At the turn of the twentieth century, it was widely supposed that German’s reform programme was being widely imitated across northern Europe, and even as far away as Japan (Hennock 2007; Streeck and Yamamura 2002). Similarly, New Zealand’s precocious pensions reform (of 1898) was the object of study back in the United Kingdom. As early as 1900, reformers, welfare workers, labour lawyers, insurers, and statisticians from many countries met at the social sections of the World Fairs, corresponded through the International Association for Labour Legislation (1901), the ancestor of the International Labour Organization (ILO), and attended professional congresses that debated the mathematical techniques and methods that would later enable the actual implementation of social insurance programmes (Saunier 2008; Rodgers 1998). This theme of transnational expertise persists throughout the twentieth century. In later times, it came to be especially associated with the work of international organizations such as the World Bank, the Organisation for Economic Co-​operation and Development (OECD), and the European Union (EU). In the formative years of welfare, it was most often identified with the expanding role of the ILO. Set up in 1919, the ILO became a key source of technical knowledge and expertise in the inter-​war period. Originally dominated by social policy experts from Germany and central Europe, the coming of war, and

48    Christopher Pierson and Matthieu LEIMGRUBER finally the 1941 exile to Montreal, heralded an increased influence for Anglo-​Saxon ideas. In London, exiled civil servants and politicians from occupied Europe worked in parallel with the Beveridge Commission, generating parallel reform plans for Belgium (Van Acker), France (Laroque), and the Netherlands (Van Rhijn). Roosevelt’s ‘Four Freedoms’ and the social and economic aspects of the 1941 Atlantic Charter also gave a new force to the idea of social security (Rodgers et al. 2009). The imperative to social justice in a post-​ war world was reiterated and expanded upon in the 1944 Philadelphia Declaration of the ILO, as well as the 1948 United Nations (UN) Declaration of Human Rights Convention (Supiot 2012). From this point on, international agencies, including the UN and ILO, were to have a key role in the setting of benchmarks; as, for example, in the 1952 ILO Convention 102 on Social Security (Minimum Standards).

Welfare Thinking after 1945 Many traditional accounts of welfare state development have tended to see 1945 as a decisive date, perhaps even the decisive date, in the emergence of the modern welfare state. The very term ‘welfare state’ is widely associated with Archbishop Temple’s war-​time contrast between the power state of Nazi Germany and the welfare state which was to be the ambition and promise of post-​war Allied reconstruction (Pierson 2006). In the British context (and beyond) the key figure here—​both as man of substance and of potent myth—​is William Beveridge. Certainly, the Beveridge Report (Social Insurance and Allied Services, 1942) was widely represented (and sometimes read) as the blueprint of a universalist, inclusive, and comprehensive welfare state. Despite his patrician tones, Beveridge was a very popular and effective spokesman for his own report. But his reputation owes quite as much to those who came (soon) after him and interpreted both the report and the reforms it had promoted in world-​historical terms. Perhaps the most influential of all these sources is T. H. Marshall and his celebrated lecture on ‘Citizenship and Social Class’ (Marshall 1964 [1950]). Writing as Labour’s new post-​war social regime was being put in place, Marshall offered an historic account of the emergence of the welfare state which focused upon the idea of social citizenship as the latest (and highest) stage in a longstanding (and largely English) trajectory in which the winning of a series of legal, and then political, rights had been the basis of a transformation of the population from subjects to citizens. In fact, for all its Whiggishness, Marshall’s was never a straightforward story of the unshackled triumph of social citizenship. He stressed that there was always a potential clash between citizenship equality and market-​generated inequality. He also insisted that citizenship always involved duties (including a duty to work) as well as rights. But undoubtedly, he captured a sense that we had ‘moved on’ and that the coming of a new welfare state settlement was probably irreversible. As in Britain, the development of the welfare state in continental Europe was also related to the imperatives of post-​war social and economic reconstruction. Electoral successes for parties of the left, either on their own or in coalition, seemed briefly to betoken

Intellectual Roots of The Welfare State    49 a new beginning for social policy and the prospect of a comprehensive and integrated welfare state which might truly provide for its citizens ‘from cradle to grave’. Of course, these expectations were to be disappointed. Many of the reforms built upon what had existed in the inter-​war period and, especially given the financial constraints within which programmes were introduced, the preceding order of conditional payments, user charges, and means-​tested assistance lingered on into the brave new world. In Germany, the story of the welfare state after Bismarck is inevitably subsumed in that country’s more general and catastrophic history in the first half of the twentieth century. Yet, despite the shocks brought by the demise of the Weimar Republic, the economic meltdown of the 1920s, and the destructive reign of the Third Reich, German social programmes showed great resilience. They survived both the Nazi era and the attempt of the various wartime allies to reform them in the immediate aftermath of 1945. During the 1950s and 1960s, a restored Bismarckian welfare order, buttressed by the pensions reform of 1957, became associated with the idea of a ‘social market economy’. As the brain child of ‘ordo-​liberal’ economists and civil servants such as Walter Eucken, Andreas Müller-​Armack, and Ludwig Erhard, the foundations of the Soziale Markwirtschaft were set under the guidance of Germany’s brand of Christian democracy and in coalition with social democrats. During the period of the Wirtschaftswunder (‘economic miracle’), the idea of social welfare became re-​attached to ideas of social solidarity and subsidiarity. Meanwhile in France, the immediate post-​war period saw an attempt to rationalize fragmented pre-​war social institutions within a new and universalist structure. However, the far-​reaching Plan de Sécurité Sociale designed by the ‘French Beveridge’, the Gaullist Pierre Laroque, did not lead to a complete transformation of existing programmes. Centred around a clear opposition to public assistance and with a focus on securing and generalizing new social insurance rights for the whole population, the Sécurité Sociale was composed of both a basic régime général and diversified occupational structures. Financed through extensive payroll contributions (in opposition to the tax-​based Beveridgian model), the ‘extension through diversity’ of the Sécurité Sociale was also based on a complex set of tripartite management procedures, including the state, employers’ federations, and trade unions (Palier 2002). Though Beveridgian in appearance, the post-​war French welfare state had clearly Bismarckian traits. In general, these experiences point us towards three important features of the ideational fate of welfare in the post-​war period. The first was that the welfare state came to be seen increasingly as the political project of social democracy (though it was also very much the political practice of Christian democracy). Of course, the legitimist parties of the left (the social democratic parties that had issued from the split with the communists around 1922) had always been parties of social reform. But they had always maintained (to some extent, still retained) the idea of the social ownership of the economy (in however long a term and by howsoever constitutional means) as their real raison d’être. Increasingly after 1945, they came to argue first, that the welfare state was the means of prosecuting such a strategy and, subsequently, that perhaps the welfare state was itself the name for this transitional society which was ‘not quite yet socialism, but certainly no

50    Christopher Pierson and Matthieu LEIMGRUBER longer capitalism’ (Crosland 1964). A second and closely related change was the claim that the nature of the economy and the tools of (state) economic management had altered decisively. It was the triumph of Keynesianism (or its functional equivalents and its bastard offspring) and the expectation that governments could now run an economy at full employment, control the investment function without taking formal ownership, and steer the distributional outcomes of a market economy through a skilful mixture of taxes and benefits, that were said to have transformed the post-​war political landscape. The popular descriptor, Keynesian welfare state, gave effective expression to this change. Third, this was taken increasingly to be the uncontested terrain on which legitimate parties (from centre-​right to centre-​left) were agreed. What distinguished the post-​war welfare state (in the eyes of its advocates) was that it would make a virtue of public provision, that it would subordinate the logic of charity to the logic of citizenship, and that it would explicitly seek to redistribute both income and life chances in the interests of those who were least favoured by unmediated market outcomes. Public administration would yield greater efficiency and uniformity of provision (compared with the patchy and disorderly regime of semi-​voluntary services). To adopt a later terminology, large areas of social provision would be ‘decommodified’—​that is, taken outside the realm of the market (Esping-​Andersen 1985). With everyone (who wanted one) in a job, the remaining work of income redistribution would come through progressive taxation (rather than transfers), whilst social equality would be enhanced (and class divisions attenuated) by the provision of improving public services (financed by economic growth). Here we can note just one final feature of the post-​war welfare order. Increasingly (in the 1950s and 1960s), social policy (including labour market policy) was presented as a technical problem, one that could be sorted out in the context of a consensus over (a) the way in which the economy should be run; and (b) the desirability of an expanding welfare state. For a time, it appeared that there was a broad-​based political consensus over the welfare state settlement, one from which only unreconstructed Marxists and unreconciled Hayekians were excluded; (though with just a little more hindsight, both the depth and the duration of this ‘consensus’ has been increasingly contested; see Pierson 2006). In 1974, at the very moment when the post-​war order was beginning to falter, both the Swedish Social Democrat Gunnar Myrdal and the Chicago professor of economics Friedrich von Hayek shared the Nobel Memorial Prize in Economics. This joint award served to signal both the zenith of the post-​1945 intellectual justifications of a flowering welfare state and the beginnings of a new, and much more critical, era. As the critical voices became ever louder, it appeared as if defenders of the established social policy regime had forgotten about the moral economy of welfare (which had been so powerful and so important for thinkers like Marshall). But, in fact, the politics of welfare is always strongly moralized. And when it was drastically remoralized by the withering critique of the new right from the 1970s onwards, only a ghost of the old ethical case for the welfare state seemed to survive in a regime that was increasingly eroded by the (however misleading) claim that it was simply a vehicle for the workshy, special interests, and producer monopolies.

Intellectual Roots of The Welfare State    51

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52    Christopher Pierson and Matthieu LEIMGRUBER Palier, Bruno, 2002. Gouverner la sécurité sociale. Les réformes du système français de protection sociale depuis 1945. Paris: Presses Universitaires de France. Pateman, Carole, 1989. The Disorder of Women. Democracy, Feminism, and Political Theory. Cambridge: Polity. Pedersen, Susan, 1993. Family, Dependence, and the Origins of the Welfare State. Britain and France, 1914–​1945. Cambridge: Cambridge University Press. Pierson, Paul, 2006. Public policies as institutions, in Rethinking Political Institutions, ed. Ian Shapiro, Stephen Skowronek, and Daniel Galvin, New York: New York University Press, 114–​131. Ritter, Gerhard A., 1986. Social Welfare in Germany and Britain: Origins and Development. Leamington Spa: Berg (1st German edn, 1983). Rodgers, Daniel T., 1998. Atlantic Crossings: Social Politics in a Progressive Age. Cambridge, MA: The Belknap Press of Harvard University Press. Rodgers, Gerry, Lee, Eddy, Swepston, Lee, and Van Daele, Jasmien, 2009. The ILO and the Quest for Social Justice, 1919–​2009. Geneva: ILO. Rothschild, Emma, 1995. Social security and laissez faire in eighteenth-​century political economy. Population and Development Review, 21 (4): 711–​744. Saunier, Pierre-​Yves, 2008. Les régimes circulatoires du domaine social 1800–​1940: projets et ingénierie de la convergence et de la différence. Genèses, 71 (2): 4–​25. Sawer, Marian, 2003. The Ethical State? Social Liberalism in Australia. Carleton, Australia: University of Melbourne Press. Skopcol, Theda, 1992. Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States. Cambridge, MA: The Belknap Press of Harvard University Press. Stone, Judith F., 1985. The Search for Social Peace: Reform Legislation in France, 1890–​1914. Albany, NY: State University of New York Press. Streeck, Wolfgang, and Yamamura, Kōzō (eds), 2002. The Origins of Nonliberal Capitalism: Germany and Japan in Comparison. Ithaca, NY: Cornell University Press. Stremmel, Ralf, Tennstedt, Florian, and Fleckenstein, Gisela (eds), 2006. Quellensammlung zur Geschichte der deutschen Sozialpolitik 1867 bis 1914. Vol. 1: Grundfragen der Sozialpolitik in der öffentlichen Diskussion: Kirchen, Parteien, Vereine und Verbände. Darmstadt: Wissenschaftliche Buchgesellschaft. Supiot, Alain, 2012. The Spirit of Philadelphia: Social Justice vs. the Total Market. London: Verso. Tennstedt, Florian, and Winter, Heidi (eds), 1994. Quellensammlung zur Geschichte der deutschen Sozialpolitik 1867 bis 1914. Vol. 1: Grundfragen staatlicher Sozialpolitik. Darmstadt: Wissenschaftliche Buchgesellschaft. Thane, Pat, 1996. Foundations of the Welfare State. London: Longman. Thomann, Bernard, 2015. La naissance de l’État social japonais: biopolitique, travail et citoyenneté dans le Japon impérial (1868–​1945). Paris: Presses de Sciences-​Po. Tilton, Timothy A., 1990. The Political Theory of Swedish Social Democracy: Through the Welfare State to Socialism. Oxford: Oxford University Press.

Chapter 4

T HE CRITICS OF W E L FA RE from neoliberalism to populism GERDA HOOIJER and DESMOND KING

Introduction From its origins, the welfare state has been periodically declared to be in crisis and its critics have proposed various theories of why this is the case (Heclo 1981; van Kersbergen 2000; Jæger and Kvist 2003). While the welfare state often enjoys broad public support, it generates intense political conflicts about who should pay for it and who should benefit from it. This chapter explores how the welfare state’s critics, from the political right and the left, have contributed to institutional change through their ideas and advocacy. It also assesses the substance of that transformation across affluent societies. First, we review neoliberal critiques of the welfare state advocated by Friedrich von Hayek and Milton Friedman. These ideas have been deployed directly against Keynesianism and the national welfare state from its earliest days and have influenced the thinking and agenda of the first wave of ideologically driven retrenchers, notably Britain’s Margaret Thatcher and Ronald Reagan in the United States (see King 1987). Next, we explore the thinking and impact of conservative critics, Charles Murray and Lawrence Mead. Though their critiques were developed in the context of the United States and a particular ‘welfare’ programme Aid to Families with Dependent Children (AFDC), which later became Temporary Assistance for Needy Families (TANF), their damning indictment of the relationships between benefits and behaviour has not been confined to the United States. Third, we review social democratic critiques, collectively referred to as the Third Way. These ideas have influenced the reformulation of the welfare state once Keynesianism had collapsed following the oil crises of the 1970s and the subsequent economic and political turmoil. With the ideational transformation of social democracy, the importance (although not the precise position) of the market became uncontested across the political spectrum.

54    GERDA HOOIJER and DESMOND KING Table 4.1 The critics on the welfare state Neoliberals

Conservatives

Social democrats

Right-​wing populists

Main welfare providers

Market

Society, state, and market

State and market

Market and state

Decommodification

Low

Moderate

High

Moderate

Causes of poverty

Effort

Culture of poverty

Luck

Effort and culture

Full members of the welfare state

Workers

Workers and their families

All residents

Natives only

Finally, we discuss the critique of right-​wing populists who, despite holding a wide range of economic positions, are united in their desire to exclude immigrants from the welfare state. Although the impact of their exclusionary ideas is still modest, the rise of right-​wing populist parties across affluent countries and the diffusion of these ideas to mainstream parties on the political right and left suggest that this may change in the future. Table 4.1 summarizes the main ideological differences between the four critics of the welfare state, which will guide the discussion in the remainder of this chapter.

Authors and Agents of Paradigm Change Neoliberal Critiques The ideas of two exponents of classical liberalism, Friedrich von Hayek and his follower, Milton Friedman, are attributed with radically changing the welfare state in the English-​speaking countries and beyond (see King 1987). Warning of the inherent dangers of an interventionist state, Hayek (Keynes’s principal intellectual rival from the 1930s onwards) launched his influential critique before the institutionalization of the welfare state. In his influential work, The Road to Serfdom (1944), Hayek argued that the state had neither the information nor the managerial capacity to effectively control the economy (Feser 2006; Steele 2007). Given these deficiencies, attempts at economic planning would fail. Under such circumstances, the state’s corrective action (and one likely to be driven by public demand), would be to exert ever stronger leadership as a means of delivering desired outcomes. The result of this process would be the road to serfdom, understood as the rise of authoritarian, totalitarian states and a depletion of liberty (Nash 1976, 2008; Feser 2006; Steele 2007). According to Hayek, the state should be limited by a strict rule of law (Feser points out that Hayek rejected extreme

THE CRITICS OF WELFARE    55 laissez-​faire ideas, favouring a basic safety net). The pursuit of individual interests would lead to the greater good. Keynesianism, to Hayek’s mind, was a solution to political turmoil, not a recipe for economic well-​being. On the contrary, government deficits would inevitably produce inflation and state interventionism would suppress individualism, liberty, innovation, responsibility, and risk taking. By freeing the entrepreneurial few to work their magic and by relieving them of taxation and regulation, the masses would benefit through trickle-​down effects (Taylor 2007). Most scholarly works have not envisioned institutional change as a product of a direct clash between competitive ideas at any given moment in time: the policymakers’ vision is circumscribed by dominant ideational paradigms, the lens through which they construct their understanding of policy problems and solutions (see Blyth 2001; Cox 2001). Yet Hayek’s ideas did not simply disappear from the political landscape as the Keynesian agenda was institutionalized, only to be reawakened with the election of two disciples of his work, Margaret Thatcher and Ronald Reagan, when the status quo began to crumble in the midst of the OPEC crises (King 1987; Cockett 1995). On the contrary, their force and number of adherents gathered momentum throughout the post-​war period and, as Feser (2006: 1) argues, ‘The Road to Serfdom (1944) was a key text of the emerging New Right, a movement whose influence ultimately made possible the elections of Margaret Thatcher, Ronald Reagan, and George W. Bush’ [emphasis added]. By the 1950s, Hayek’s ideas, though marginalized in academic circles, were supported by a growing organizational structure, with adherents inside Britain, the United States, and beyond. In 1962, Milton Friedman published Capitalism and Freedom, arguing that as government grows, political and economic freedoms diminish. Within two years, he was providing informal economic advice to Republican presidential nominee, Barry Goldwater, a service he continued to offer Presidents Nixon and Reagan, subsequently joining Reagan’s Economic Policy Advisory Board in 1981 (Judis 1988). Goldwater was roundly defeated by President Lyndon Johnson in 1964, but his opposition to federal programmes for civil rights and income assistance subsequently gained traction in the Republican Party. The significance of the revival of classical liberalism as a credible alternative to Keynesianism was evidenced by Hayek’s award of the Nobel Prize in Economics in 1974 (albeit alongside left-​wing economist, Gunnar Myrdal). Milton Friedman was bestowed with the same honour in 1976. Throughout the 1970s, the ideas of Hayek and Friedman attracted institutional sponsorship by powerful, well-​funded think tanks and institutes, such as the American Enterprise Institute and the Heritage Foundation in the United States and the Centre for Policy Studies in Britain (Judis 1988: 139–​140; Cockett 1995). With their carefully engineered assistance, the New Right sponsored the rise of the Reagan and Thatcher administrations, prioritizing the goal of freeing the market above advancing social planning and decoupling the values of equality and justice, particularly distributive justice. The causes of poverty were deemed to flow, in large measure, from individual behaviours, and thus could not be corrected by the state. Consequently, the welfare state stood accused of incurring high economic costs in pursuit of a flawed mission. Aside from taxation, most

56    GERDA HOOIJER and DESMOND KING problematic in this regard were cash benefits that rewarded sloth and undermined the most fundamental of capitalist values (Taylor 2007). The impact of these ideas, however, was neither confined to the English-​speaking countries nor to actors on the political right. In Sweden, where Keynesian ideas were more embedded than in Britain or the United States, the influence of neoliberalism was promoted by right-​wing think tanks, but with critical legitimization by the social democratic and Keynesian economist Assar Lindbeck. Though he exercised restraint in the extent to which he embraced neoliberalism, Lindbeck shifted the debate in Sweden by arguing that welfare state growth generated reduced returns and imposed increased economic costs. By the end of the 1980s, the impact of these ideas was evident on the social democratic party as well as on the political right (Blyth 2001: 18–​19). The picture that emerges from the neoliberal critique of the welfare state is one of ideational challenge to Keynesianism over a period of time: to use Blyth’s terminology, for neoliberals, ideas served as ‘weapons’. They were strategically peddled by agents and think tanks through an increasingly organized and well-​funded plan for their promotion. Although these neoliberal ideas had a revolutionary impact in challenging the Keynesian status quo and institutionalizing the primacy of the market cross-​nationally, initially they had less success in dismantling the welfare state (Gamble 1994; but see Korpi and Palme 2003: 441). However, with the passage of time, neoliberal aspects of the welfare state agenda, even if melded into other discourses and induced by different actors, have clearly taken effect. This is illustrated perhaps most strikingly by the responses to the global financial crisis of 2008, when many governments in North America and Europe turned to the neoliberal recipe of cutting social expenditures and increasing privatization, even though this often exacerbated the impact of the crisis.

Conservative Critiques If Hayek saw the interventionist state as a ‘Road to Serfdom’, traditional conservatives viewed it as a road to social stability. If Hayek saw markets as a road to freedom, conservatives viewed them as potentially detrimental to social values, particularly collective responsibility. If neoliberals feared the economic liabilities of state intervention, conservatives feared the moral hazards. If neoliberals believed there was no such thing as society, as Margaret Thatcher infamously stated, conservatives believed it to be morally prior to the individual. If neoliberals were (relatively) happy to throw cash at the poor (albeit less of it), conservatives demanded a tight link between benefits and work obligations, with strict regulation of claimants. The welfare state for many conservatives, and particularly European Christian democrats who have traditionally been more concerned with society than market freedoms, has served as a vital safety valve, dampening the potential for social disruption and providing all citizens with a sense of membership and obligation to the community (Barry 1997; Willetts 2003; Taylor 2007). Conservatives were not necessarily locked in to the welfare state as a social democratic project on a cognitive level; rather, they viewed the

THE CRITICS OF WELFARE    57 welfare state as an instrument of conservatism (see Willetts 2003). Uncontrolled markets isolate individuals and destroy the social order. With forceful neoliberal critiques of the welfare state gathering momentum over the post-​war decades and transforming parties of the right, identifying a distinctive conservative welfare state critique is something of a theoretical exercise: with the rise of market liberalism there has been a blurring of ideological boundaries on the right (Barry 1997; Taylor 2007). That said, there are several features of the welfare state that have proved most problematic for conservatives. First, its compulsory and centralizing tendencies crowd out civil society and the private sector. Ideally, the market, state, and civil society should coexist as partners in the provision of welfare. Pluralistic service provision across domains should ensure a vibrant community, encourage enterprise, and tame the state’s capacity for coercion (Taylor 2007). Second, the size of the welfare state, though not in principle a problem, had grown, conservatives charged, to the point of stifling private business, discouraging individual responsibility, and suffocating civil society. Its passive benefit system was damaging the social compact, as well as welfare recipients, who were becoming isolated from mainstream society and suffering from a welfare-​created dependency culture. The cost of the mature welfare state is not irrelevant in conservative critiques, but it is secondary to the social consequences. Strictly conservative critiques of the welfare state have focused on restructuring passive benefit systems, rather than on retrenching the welfare state. The two most prominent conservative critics of the welfare state emerged during the mid-​1980s in the United States: Charles Murray (1984) and Lawrence Mead (1986). Although their critiques targeted a specific federal entitlement (AFDC), and an acknowledgement that poverty in Europe may have structural origins in light of labour market inflexibilities (see Barry 1997: 340), their ideas, and particularly those of Mead, have travelled far. Both argued that the system itself induces dependency and, worse, intergenerational dependency. Benefits do not alleviate poverty; they create it by changing the behaviour of the poor, either as rational utility maximizers (Murray) or due to a lack of efficacy, experience, and aspiration (Mead). As Mead (1997: 12) argues, ‘more important than any economic factor as a cause of poverty . . . is what used to be called the culture of poverty’ (cited in King 1999: 235). According to Mead (1992, 1996), the conservative welfare agenda represents a ‘new paternalism’. Benefits need to come with strict work requirements, the behaviours of the poor require regulation, and thus the state must assume responsibility for assisting and monitoring the needy. To this end, individuals will sacrifice some liberties, but for the individual and collective good. The state must, therefore, intervene more in the lives of the poor (preferably at the lowest unit of government): it must demand and impose the desired morality, specifically the value of work and personal responsibility (see Barry 1997). These ends can be achieved through rigorous workfare programmes. King (1999: 235) summarizes Mead’s argument: ‘This work requirement will break the dependency culture, foster self-​esteem, and equip recipients to enter the world of work permanently and thereby become self-​sufficient functioning individuals.’ King (1999: 236) elaborates: ‘full

58    GERDA HOOIJER and DESMOND KING participation in the labour market is deemed to constitute a key source of self-​esteem, worth and entitlement to equal membership of the polity.’ As Mead (1996: 589) contends, ‘Welfare is changing from a subsidy into a regime . . . The emerging paternalism is justified by antigovernment rhetoric, but its real agenda is state-​building.’ State building in this manner does not come cheap. Charles Murray offers a more low-​cost (neoliberal) solution to the problem: dismantle welfare (Murray 1984: 228; King 1999: 228). He is less concerned with traditional conservative critiques of this solution; notably deeper poverty, individual alienation, and social disquiet. The transformation of AFDC in 1996 into a fully fledged system of workfare (TANF) very much reflected Mead’s paternalistic conservatism. Benefits were cut, but the legislation was fundamentally about regulating the poor and seeking to change their behaviours with regard to the labour market and personal choices (including benefit time limits, marriage initiatives, and family caps). These ideas benefited from strong support from the religious right, particularly during the 1980s. However, Mead’s credibility also derived from his voice as ‘one of the most significant sources of expertise in welfare policy choices’ (King 1999: 236). The poor, by contrast, were never invited to join the debate. The influence of distinctly conservative critiques of the welfare state has not been limited to the United States, although in many places these ideas have become something of a melange, fused with strands of neoliberalism and reformed social democracy. In Britain, US conservative critiques clearly influenced the attitudes of the Thatcher/​ Major governments in the late 1980s and 1990s regarding the conditionality of benefits and contractualist welfare-​to-​work programmes (see Lewis 2001: 159). Although considerably less punitive than US variants of workfare, King and Wickham-​Jones (1999) and Deacon (2000) have documented the direct impact of US reforms on New Labour’s welfare-​to-​work agenda. The conservative critique of passive benefits and the centrality of conditionality reconnecting rights and responsibilities are also evident in Scandinavia, particularly Denmark, Sweden, and Norway (Goul Andersen 2000; Larsen and Goul Andersen 2009). Although the Scandinavian welfare states constitute the quintessential work societies and have a history of conditionality and active labour market policy (see Lewis 2001: 163), the shift from the right to work to the duty to do so in the bottom tier of the benefit system with time limits and impaired work conditions (enforced by sanctions) has been stark (Goul Andersen 2000; Kildal 2001). Although these ideas have been promoted and spread by international organizations such as the European Union (EU) and the Organisation for Economic Co-​operation and Development (OECD), as well as a change in the thinking of dominant economists, rather than a direct import from US critics of the welfare state, their conservative (and market liberal) influence is nonetheless real. As Kildal (2001: 15–​16) notes, ‘a welfare policy that obliges needy citizens to participate in second-​rate inferior work is not based on the equal status of all citizens but rather on an idea of the unequal status of citizens’. She continues: ‘the new policy is less concerned with mutual recognition than with mutual obligations, less concerned with justice than with personal morality’ (Kildal 2001: 16).

THE CRITICS OF WELFARE    59 This is certainly not to argue that social democratic welfare states have become politically conservative (see Lindbom 2008; Pontusson 2011). The Nordic welfare states remain radically different from those of the English-​speaking countries in style and substance. Rather, it is to note that social democratic statism can easily slip into a more authoritarian and moralistic statism when the fine balance of ideas changes. An increasingly distinctive blend of conservative, neoliberal, and social democratic ideas has defined new social democratic critiques of the welfare state under the rubric of the Third Way. The social democratic critique of the welfare state emerged after the collapse of Keynesianism; it did not contribute to the erosion of traditional welfare institutions, although, subsequently, it has exerted a significant influence on restructuring in Europe.

Social Democratic Critiques If neoliberals complained that the welfare state was a fundamentally repressive institution, fostering economic and political illiberalism, and conservatives criticized the moral hazards induced by the welfare state, social democrats argued that the Keynesian welfare state was simply no longer viable in an era of post-​Fordism and globalization. Although conservatives and neoliberals also accepted the impact of post-​industrialism and globalization on the welfare state, in their critiques these trends simply exacerbated extant problems (and created additional ones). For social democrats, the left had to embrace the market or confront obscurity, particularly given the decline of their traditional electoral coalition in the face of post-​industrialism and the resultant need to attract new middle-​class voters (Kitschelt 1999). If well-​prepared neoliberal ideas served as ‘weapons in distributional struggles’, for the left, market ideas, and later the Third Way, provided ‘institutional blueprints during periods of uncertainty’, to apply once again Blyth’s (2001) framework. Of course, there were always radical critics on the left, notably neomarxists, who argued that the welfare state was an instrument of capitalism and served to contain class conflict (Gough 1979; Offe 1984). Radical streams of feminism also charged that it institutionalized patriarchal and repressive social relationships (see Taylor 2007). However, it was only during the 1990s that a principled rejection of the traditional welfare state began to emerge from the mainstream left. The concept of the Third Way as a political label first started circulating in the early 1990s within the Democratic Party in the United States (see King and Wickham-​Jones 1999; Deacon 2000). Attempting to distance himself from old Democratic social liberalism, Clinton marked out a middle way between the severity of the Reagan–​Bush neoliberalism-​ cum-​ conservatism and the ‘bleeding heart’ liberalism of the Great Society that, in the ‘New’ democratic critique, had undervalued work, responsibility, and community. Following the electoral success of Bill Clinton in 1992, and his re-​election in 1996, the British left seemed to have found a political solution to its eighteen years on the opposition benches. At first, the Third Way appeared to be little more than a political

60    GERDA HOOIJER and DESMOND KING and electoral strategy, with the left lurching sharply to the neoliberal right in search of middle-​class voters and support from business. Disassociating itself from its past, New Labour issued proclamations such as, ‘No return to past failures’ and ‘The function of modern government is not to second-​guess the market’ (Blair, cited in Hay and Watson 2003: 297). By the turn of the millennium, however, the British Labour Party and parties of the left in selective parts of Europe (the Netherlands, Germany, and Scandinavia) were proceeding to develop the Third Way (new middle or purple coalition) into a more explicit critique of the welfare state. Though questions remain regarding its cohesion and impact as a distinctive pan-​European social democratic approach (see Bonoli and Powell 2002), the doctrine has marked a break in social democratic thinking in one overarching respect: not only were traditional welfare arrangements deemed to be no longer viable, they were now deemed to be no longer desirable. In Marshallian language, not only did welfare recipients have rights to support, they also had obligations and duties as a consequence of enjoying such assistance. An important exponent of these ideas in the British context has been the sociologist and popularizer Anthony Giddens (1998, 2000, 2001). For Giddens (1998), welfare state change is not simply an economic necessity in a globalized world: it is about a tectonic shift in the foundations of society. It is about development, lifestyle, and risk. The welfare state is a critical part of this transformation because it stands at the centre of what Ulrich Beck (1992), the German exponent of the Third Way, calls the ‘Risk Society’. In Giddens’ view, the welfare state’s emphasis on protecting individuals against insecurity has induced an unhealthy preoccupation with cosseting them against risk. In the Third Way, risk must be embraced; it is the essence of the entrepreneurial, creative, and vital society. To this end, benefits should be conditional upon responsibilities; individuals cannot simply opt out of the risk society and be passively supported by the state. They must be encouraged, supported, and if necessary, required to partake in it, as full members of its community. Individuals help secure their own well-​being by embracing new challenges with flexibility. The role of the state is to coordinate welfare activities, not to deliver them. The state does have an obligation to ensure an adequately skilled and healthy workforce as the foundation for economic competitiveness and social justice (read as social inclusion, not equality of result), but it does not have the traditionally social democratic role of ensuring full employment. Though social democrats have always stressed the importance of work (Huber and Stephens 1998; Lewis 2001), the Third Way is more concerned with the individual’s obligation to actively seek employment (see King 1995) than the state’s obligation to provide jobs. Despite the primacy of the market, the Third Way is not simply toned-​down neoliberalism. In Giddens’s (1998) analysis, one of the most fundamental differences between the new social democracy and neoliberalism is that the former secures social inclusion, while the latter reinforces social exclusion. In Hutton’s (1995) view, neoliberalism commodifies individuals, breeds economic insecurity, and destroys society. The Third Way’s stakeholder capitalism, by contrast, replaces short-​term contracts with long-​term compacts founded on relationships of trust (see Taylor 2007).

THE CRITICS OF WELFARE    61 Green-​Pedersen et al. (2001: 321) argue that unlike neoliberalism, ‘the “third way” does not just aim at job creation; it wants to create good jobs, i.e. well-​paid jobs based on high levels of skills’ (see also Lister 2003; Lewis 2006). On a somewhat less positive note, Ralf Dahrendorf (1999) observes that starkly absent from the Third Way equation is a (neoliberal) sense of liberty. In Dahrendorf ’s (1999: 16) analysis, the Third Way has a strong ‘authoritarian streak’. Indeed, in reaching beyond left and right, the new social democracy incorporates conservative and distinctively Scandinavian social democratic ideas about the enabling and paternalistic state alongside market-​liberal influences. There are variations, of course, in the appeal, application, and institutionalization of Third Way ideas across affluent societies (Clasen and Clegg 2004). The term itself has ‘fizzled out’ even in Britain, as trade union influence on the Labour Party leadership revived with the succession from Gordon Brown to Jeremy Corbyn. Indeed, despite the shallow appeal of Third Way discourse and ancillary concepts such as ‘stakeholders’, there are overriding similarities in the substance of its policy prescriptions across Europe (Green-​Pedersen et al. 2001; Ross 2008). The pro-​market, welfare-​to-​work aspects of the Third Way agenda have been heavily diffused and promoted by international actors, including the European Commission, national think tanks, and critically, social democratic economists. Perhaps more important than the precise blend and administration of Third Way practices across affluent societies is the fact that market orthodoxy, though not pure neoliberalism, triumphed. Although Third Way policies initially reduced poverty and enhanced workers’ skills, Gingrich and King (2018) argue that these policies were not durable because ‘[t]‌he instruments used to create income security were vulnerable to retrenchment and the emphasis on long-​term supply side measures to address structural weaknesses in the labour market (low skills and regional variation) left these weaknesses partially in place’. In the absence of the compensatory measures, many welfare states have become more conditional and more punitive, leaving many exposed to the vagaries of the global market (Rueda 2015). In the aftermath of the 2008 economic crisis, this created a window for the exclusionary ideas from right-​wing populists to spread across affluent societies.

Right-​Wing Populist Critiques If neoliberals placed their trust in the (global) market as the provider of welfare, conservatives relied on strict work requirements to change the behaviour of the poor, and social democrats embraced a generous but activating welfare state for everyone, right-​ wing populists targeted their criticism at the universal character of the welfare state. In their view, the universal welfare state does not only attract undesirable immigrants to their country, whom they often portray as welfare scroungers and frauds, but it also redistributes valuable resources from the ‘deserving’ native population to the ‘undeserving’ immigrants. Economic issues have long been secondary to right-​wing populist parties, who attracted most of their voters based on the second-​dimension issue of immigration. To appeal to as many voters as possible, these parties have often been

62    GERDA HOOIJER and DESMOND KING intentionally vague on their economic positions, leading to a wide variety of stances within their party family (Rovny 2013). Nevertheless, scholars discern a general trend from keen supporters of neoliberal policies in the 1980s to more centrist positions in the 1990s and beyond (Afonso and Rennwald 2018; de Lange 2007). This shift was enabled by the increase in globalization (defined as the movement of capital, goods, and people across national borders) and deindustrialization, which left many low-​skilled workers in advanced democracies exposed to the vagaries of the global market (Kriesi et al. 2006; Colantone and Stanig 2018). At the same time, social democrats shifted their focus from their traditional constituents to the middle class, who preferred social investment policies over traditional social policies. This allowed right-​wing populist parties to pull working-​class voters in by appealing to their desire for less immigration and more social protection (Gingrich and Häusermann 2015). Although these parties remain difficult to place on the economic dimension, they appear to promote a larger role for the state in the provision of welfare than centre-​right parties, while being more selective than traditional left-​wing parties in the scope of the social programs they support. Since government participation by right-​wing populist parties is still limited, though not trivial, their influence on general economic policies has been modest so far. In a cross-​national analysis of seventeen Western European countries from 1970 to 2010, however, Röth et al. (2018) show that coalition governments with centre-​right and right-​wing populist parties (often as junior partners) were less likely to retrench welfare benefits than centre-​right governments. Recent examples also suggest that right-​wing populists may even expand the welfare state when they are in government. This is the case of Viktor Orbán’s large public-​works programs that kicked off in 2011 in Hungary, of the introduction of generous family benefits in 2016 by the Polish Law and Justice Party, and of Italy’s Northern League and 5-​Star Movement government’s plans for a citizen income and lowering the retirement age, despite immense pressures from the European Commission. Whether their countervailing influence on right-​wing policies persists will unfold in the future as more of these parties consolidate their position across affluent societies. While right-​wing populist parties are strategic about their position towards the welfare state, they have consistently and explicitly voiced their desire to exclude immigrants from the welfare state. This exclusionary idea of a welfare state for the native population only, or welfare chauvinism, is not only a reaction to the multiculturalist and inclusionary policies promoted by social democrats, or a way to blame immigrants for insecurities caused by structural changes such as deindustrialization, automation, and globalization. It also reflects their fundamental belief in the nation as homogenous people (see Mudde 2004). For right-​wing populists, the welfare state is a bounded membership community that cannot survive if immigrants and other categories of undeserving groups gain access to it. Through immigration and social policies, two complementary levers, they aim to safeguard the nation against this perceived threat. How right-​wing populists define the legitimate members of the (welfare) community differs across countries. In France, for instance, Marine Le Pen from the National Front, in her 2012 speech in Strasbourg, pledged to give all French citizens, regardless of their

THE CRITICS OF WELFARE    63 country of origin, priority to jobs, social services, and social housing over non-​citizens (Betz 2018). By contrast, Alternative für Deutschland (AfD), which entered the German parliament for the first time as the third largest party in 2017, aims to exclude immigrants from the welfare state even after they obtain German citizenship. Their proposal for a universal state pension, for example, would only be available to Germans who have worked in the country for more than thirty-​five years, a requirement that many naturalized immigrants are unlikely to meet. Such cross-​national differences in how the boundaries of membership into the welfare state are drawn seem to reflect the different citizenship traditions (jus soli versus jus sanguine) identified by Brubaker (1992) in his seminal work Citizenship and Nationhood in France and Germany. To restrict immigrants’ access to social benefits and services, right-​wing populists have proposed direct and indirect welfare chauvinist policies (see Emmenegger and Careja 2012; Careja et al. 2016). While the former entails policies that discriminate based on nationality or country of origin, the latter refers to ‘colour-​blind’ policies that affect immigrants more negatively than the non-​immigrant population, such as residency requirements. Given the strength of anti-​discrimination laws and the need to form coalitions in most Western European countries, direct welfare chauvinist policies have proven to be more difficult to introduce (Careja et al. 2016). Indirect welfare chauvinist policies, however, are more widespread. This can be illustrated with two forerunners in the field of right-​wing populism: Denmark and the Netherlands. The former made headlines in 2015 with its ‘Jewellery Law,’ which allowed the government to seize assets from newly arriving refugees to pay for their care (and deter future refugees). The Danish People’s Party was also the driving force behind the introduction of the start assistance in 2002, a social assistance program with benefit levels up to 50 per cent lower than regular social assistance for anyone who lived abroad (Goul Andersen 2007). Another example comes from the Netherlands, where, in 2015, a Liberal and Social Democratic coalition government introduced language requirements for receiving social assistance. The adoption of exclusionary policies by these mainstream parties cannot be seen separately from the electoral threat posed by Geert Wilders’ Party for Freedom. Such patterns are also found in larger cross-​national studies (see, e.g. Schumacher and van Kersbergen 2016). Exclusionary social policies are often linked to the rise of right-​wing populist parties in Europe, but these ideas existed long before the emergence of these parties and far beyond the European continent. In the United States, for instance, immigrants could already be refused entry into the country in the nineteenth century if they were likely to become a drain on public resources (King 2005). No-​recourse-​to-​public-​funds clauses still exist in the United States and in all other English-​speaking countries. The earlier discussed welfare reform of 1996 (see ‘Social Democratic Critiques’), signed into law by Democratic President Clinton, also had a drastic impact on immigrants and the welfare state, as it barred their access to federal social benefits and services during the first five years of their residence (Sainsbury 2012). In this context, the Trump administration’s plans from 2018 to deny immigrants permanent residency status if they use food stamps, public housing, or Medicaid is a continuation of these earlier, exclusionary policies.

64    GERDA HOOIJER and DESMOND KING The bonds of social solidarity have been tested by several exogenous shocks in recent years, such as the enlargement of the European Union in 2004, the global economic crisis in 2008, and the ‘refugee crisis’ in 2015, and it is unlikely that these pressures will soon ease. Even though inclusive welfare states were never fully realized, as feminist and immigration critiques have demonstrated (see Orloff 1993; Sainsbury 2012), the right-​ wing populist idea of differentiating social rights based on country of birth, nationality, or race could move affluent societies further in the direction of exclusionary welfare states.

Conclusions This chapter discussed the neoliberal, conservative, social democratic, and right-​wing populist critiques on the welfare state. These ideas are important in understanding changes to the welfare state because they create the momentum for institutional disturbance. Our focus on the critics has emphasized the endogenous undercurrents disrupting welfare states, as well as the path-​shaping capacity of new ideas. Simmering ideational pressures have been chipping away at the foundations of the welfare state for decades. Political reforms of the welfare state are not only driven by functional needs, vested interests, institutional habits, and public opinion, but also by ideas and their political advocates. Scholars who assign an important causal role to ideas base their explanatory claims on the premise that the failure of the status quo cannot explain the substance of the emergent consensus (Blyth 2001; Cox 2001; Béland and Hacker 2004; Larsen and Goul Andersen 2009). But the above analysis also demonstrates that ideas have helped create the conditions for institutional restructuring. Certainly, neoliberal ideas have driven a ‘silent revolution’ (Hacker 2004: 244), destabilizing welfare regimes from within. Critics have been articulating and selling their vision of market liberalism within universities, think tanks, and to political leaders on the right from the earliest days of the welfare state. They have not simply defined the direction of change when the status quo collapsed (Hacker 2004: 244). The revolution in market-​liberal ideas has been a well-​ prepared one. Indeed, the very assumption of an ideational ‘consensus’ has possibly obscured more than it has illuminated regarding tensions and tremors in the foundations of national welfare states (see Wincott 2003). The decades of the national Keynesian welfare state may now be read as the punctuation in the long-​term equilibrium of market dominance. The privatization of risk management is congruent with the individualization of social needs (see Hacker 2004) and, once ‘hollowed out’ (Jessop 1994), with policy provision fragmented between state, market, and civil society and towards less controllable actors within each arena (Europe and private contractors), it is difficult for the state to regain control over the provision and substance of social policy. Once responsibility for social risks has been privatized,

THE CRITICS OF WELFARE    65 the institutional and political barriers to recollectivization are considerable. Béland and Hacker (2004: 43) have argued convincingly that: [b]‌y fostering vested interests, shaping public expectations, and embedding institutions, the spread of private social provision (usually in response to indirect state encouragement) may constrain the scope for government programmes even if political conditions are otherwise permissive. Thus, while institutional theorists are correct that state actors often enjoy relative autonomy, attention to private social policies indicates some of the real limits of state autonomy.

Yet we are unlikely to be witnessing the ‘end of history’. The current diagnosis of the relationship between economic growth and social security will face credible challenge: the present does not represent a permanent reconciliation between capital and citizens. As Fitzpatrick (2003: 3) asks with insight, ‘If the resurgence of market capitalism was and is inevitable, then what are the laws of history which will make the future an endless reflection of the present?’ Ideas can serve as cognitive locks, but they also become stale across time, as new challenges emerge and fresh visions for society develop in reaction to the status quo. Likewise, the very trends produced by market capitalism are likely to generate new needs, coalitions, and demands for change. King and Rueda (2008), for example, have documented the surge in low-​cost labour resulting from the spread of market orthodoxy. Similarly, globalization has contributed to the rise in support for right-​wing populist parties (Colantone and Stanig 2018). The construction of the welfare state, of course, was very much part of the state-​building process and social policy may again be called upon to reconstruct social relationships. Politically, we now have a veritable growth industry in organizations whose sole purpose it is to devise and advocate new ideas, from think tanks, to academia, to independent experts and policy advisors, ranging from social democratic to populist in tone. Although the most powerful of these advocacy organizations have been sponsored by pro-​market business interests, cracks will emerge in the market-​dominant paradigm as the social and economic costs of these ideas take their toll or a ‘big-​bang’ unifying event again serves to elevate social justice above market price on the European agenda. These actors will seek to conduct their own ‘silent revolution’ from within and be poised to diagnose the inherent problems with the status quo and supply a credible alternative when post-​industrial societies confront the crisis of market orthodoxy.

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Pa rt I I

H I STORY

Chapter 5

T he Emergen c e of T h e Western Welfa re Stat e Stein Kuhnle And Anne Sander

Introduction This chapter seeks to provide a perspective on the early origins of the welfare state by focusing on the emergence of the institutions of social insurance in the countries of the European cultural complex, including the European (British) settler nations. This take on the welfare state is a relatively narrow one, in that it neglects other areas of emerging governmental responsibility for societal well-​being such as health and education and pays only passing attention to non-​state and substate welfare arrangements, or to the complex public–​private mixed responsibilities which have developed in all countries. Such a narrow perspective is necessitated by considerations of space, but is also historically justifiable. The last two decades of the nineteenth century mark the ‘take-​off of the modern welfare state’ (Flora and Alber 1981, see also Pierson 1991). These founding years and the decades thereafter are very much associated with the emergence and growth of social insurance-​like policies. In what follows, we look at the early period of social insurance and protection developments until the end of the Second World War and point to variations in timing, risk perceptions, and principles of social security across Western states. Industrial, urban, and capitalist developments, with their inherent, unprecedented social problems, spurred political demands for change of regimes and of social rights. Changes in social structure, population movements, growth of wage labour, and new kinds of social insecurity were clearly conducive to a ‘new thinking’ about the social role of the state. The key question was whether the state should take a more active social role and, if so, in what way? On entering the twentieth century, social policy and welfare emerged to become a crucial issue on the political agenda and while some commonalities can be observed in the emergence of Western welfare states, there were also significant variations. The foundations for a divide between a social insurance model premised on an

74    Stein Kuhnle And Anne Sander application of relatively pure-​insurance principles (continental Europe) and a social citizenship model premised on universal tax-​based, provision (Scandinavia, Britain, Canada, New Zealand) was, although not necessarily intentionally, established in this early period. We start with an overall picture of early collective solutions to social problems. We then look at the political innovation of social insurance in the 1880s. Why was imperial, authoritarian Germany a social insurance front-​runner, rather than the more democratic United States and both more democratic and earlier and more industrialized England? And to what extent—​or for how long—​was it a forerunner? What social insurance risks had priority for policy making and legislation and should insurance be voluntary or compulsory? Which groups should be covered and what should be the basis for entitlement to benefits—​labour market status (workers, employees), industry or occupation, citizenship, or need—​to be decided by an income and/​or means test? Why did national authorities react differently to the new challenge of social policy once the idea of social insurance had been emphatically put on the political agenda towards the end of the nineteenth century? The first part of the chapter covers the period until about the end of the First World War. The second major section covers the phase of consolidation, expansion, and geographical diffusion of social insurance and protection legislation after the First World War. We end with a brief look at the Second World War experience.

Early Collective Solutions to Social Problems and Changing Ideas of Public Intervention Poverty has existed in some form or other since time immemorial, but social aspects of poverty were not emphasized until the sixteenth century (Marsh 1980). The British Act Concerning Punishment of Beggars and Vagabonds from 1531 tried to differentiate between the ‘deserving’ and ‘undeserving’ poor, a distinction which is still not everywhere obsolete in practice. Until the end of the Middle Ages, poverty had been a matter of only local concern. This began to change with the development of nation-​states. The famous Elizabethan Act for the Relief of the Poor of 1601 established a national system—​ to be administered by parishes—​for the relief of destitute children, the disabled and infirm, the unemployed, and the work-​shy. The Prussian Landrecht of 1794 gave the state a clear patriarchal responsibility for the poor, but it was delegated to local communities to provide social care (Dorwart 1971). France never created a legal right to poor relief: ‘In France, the feeling was still [mid-​nineteenth century] that the poor had to be threatened with the possibility of starvation to be kept industrious’ (Rimlinger 1971: 46). As modern nation-​states began to develop, the problem of the poor became one of national significance, but, generally, it was still left to local authorities to implement

The Emergence of The Western Welfare State    75 national laws on poor relief, vagrancy, and begging (Rimlinger 1971). And, it should be noted, this was a relief of the poor within a framework of repression. During the nineteenth century, persistent problems of poverty and problems related to poverty, plus population growth, urbanization, and spread of industrialization, all contributed to the increasing salience of social problems in many European countries. The two traditional methods of dealing with social problems, philanthropy and poor laws, were increasingly seen by authorities and people alike as being inadequate (Marsh 1980: 5). Poor laws were reformed in many countries, and during the second half of the nineteenth century two sets of forces were set in motion which slowly, but persistently and radically, came to change the role and responsibility of the national state for the welfare of its citizens. One derived from the changes attendant on the Industrial Revolution, the other revolved around the radical new conception of rights of the individual emanating from the American and French Revolutions (Rimlinger 1971: 2–​3). The experience of industrialization sustainably altered the debate on the nature of social contingency and perceptions of poverty. Old age or sickness had been perceived as a threat to the well-​being of individuals from time immemorial. Now, however, a new-​ found understanding of unemployment and of the operation of the business cycle made for a rethinking of the whole notion of welfare (Briggs 1961). The evolving ‘social question’ accompanying industrialization served as an important spur for the crystallization of the notion of social rights as workers started to perceive themselves as one class and as the labour movement gained increasing importance. Focusing on the question of how economic progress could be secured in the face of the political and moral threat imposed by the condition of the working class, the solution was increasingly seen as some kind of state action. Prior decades had seen the spread of democracy and political rights. Directly or indirectly, these now smoothed the way for social rights.

The Breakthrough of Social Insurance The take-​off period of the modern welfare state followed what Rimlinger (1971) labelled ‘the liberal break’, a break between the old, pre-​industrial concept of dependence and protection and the emerging modern concept of social protection induced by industrialization and democratization. From the end of the eighteenth century to the end of the nineteenth, ideals of liberalism, of principles of individual freedom, equality, and self-​ help, dominated social policy thinking. The erosion of liberal principles was prompted by rapid social transformation, growing political mobilization of workers, and demands for democratization. Surprisingly, one might claim, a radical new social policy solution, the idea and principle of social insurance, was first legislated on a grand scale in authoritarian, imperial Germany, not in the more industrial and democratic, but liberal, England. The idea of social insurance built on Prussian experience in the period from the 1840s onwards (Hennock 2007). At the time of the legislation, Germany was neither the most

76    Stein Kuhnle And Anne Sander industrialized nor—​by far—​the most democratized European country. But it was rapidly industrializing towards the end of the nineteenth century. Announced in the Imperial Decree of 1881, Bismarck’s programme for sickness (1883), accident (1884), and old age and invalidity insurance (1889) was implemented in the course of only six years. The new policy was radical in several senses, but most importantly in the way that individual citizens (initially, largely industrial workers) were to be compulsorily insured and become entitled to social benefits as a matter of right, rather than provided with poor relief benefits on the basis of discretionary needs and means tests. Social insurance and ‘social security’ came to embody an entirely new conception of social protection in the history of nation-​states. Prior to this time, central governments had two main functions. Primarily, they were still concerned with protecting their populations from foreign intrusion and violence, as well as from domestic criminality. Secondarily, and already with a more modernizing focus, state capacity was used to invest in and build infrastructure for transport and communications to promote economic development—​public goods provision which, according to the theory of Adam Smith a hundred years earlier, could not be expected or induced from private interests. Now, with the development of social insurance, the state became involved in social protection on an unprecedented scale, dealing with various categories of economic insecurity and providing services and income on the basis of individual rights (Marshall 1964). Social insurance was the core element of an emerging new role of the state, but governments also increasingly began to take an interest in many other social issues, such as public education; public health; health and hygiene conditions at the workplace; worker protection; factory inspection and protection against child labour; length of working hours; and relations between employers and workers. State responsibility for the well-​ being of citizens other than through cash benefits had started to develop even before major social insurance initiatives, as exemplified, for instance, by the first national Factory Act in England (1802) and by the Prussian law (1839) restricting child and juvenile employment. Statistical offices developed and expanded all over Europe during the latter half of the nineteenth century, thus strengthening state capacity to collect information on and monitor developments in many sectors of society, and thus improving the basis for public policy making (Landes 1972). Which, if any, social policy issues could be acted upon by governments depended quite largely on these and other kinds of ‘state capacity’ (Rueschemeyer and Skocpol 1996; Kuhnle 1996). Sociologists and social scientists—​although few in numbers—​were, at the end of the nineteenth and the beginning of the twentieth centuries, seriously concerned with the ‘social question’ and influential in public debates (Rueschemeyer and Skocpol 1996). Social policy knowledge began to be circulated internationally, not only through governments and professional bureaucracies, but also through civil society associations such as Verein für Socialpolitik (established in 1873). Associations with similar aims for informed discourse were established in many countries in the 1880s; for example, the Fabian Society in Great Britain and associations for national economists in Scandinavian countries.

The Emergence of The Western Welfare State    77

But Was the Innovation German? Although the German social insurance programme of the 1880s stands out as a groundbreaking event and as an example of a critical juncture in terms of national social policy development, Germany was not the first country to embrace the idea of social insurance. Many smaller, limited insurance schemes had been established prior to the 1880s (Alber 1982; Perrin 1969). Bismarck’s social insurance legislation was a top-​down decision, generally understood as an attempt to build worker loyalty towards the imperial regime after having repressed the freedom of organization, assembly, and expression of a growing, radical socialist movement and party (Rimlinger 1971; Wehler 1985). The idea of social protection to secure the loyalty of the workers to the state was supposedly one Bismarck picked up from Napoleon III when he was Prussian ambassador to Paris in the early 1860s, although France itself later lagged behind other industrial countries in the development of social rights (Rimlinger 1971: 61 and Table 5.1 below). However, Bismarckian social policy was not only about pacifying working-​class protest, but also a contribution to state and nation building (Manow 2005). The German legislation was a radical break with liberalism also in the sense that it instituted the principle of state-​ controlled, contributory, and compulsory insurance, ideas still too radical in other national political contexts, where the principles of liberalism had a stronger foothold. A new social policy discourse on the welfare responsibility of the state spread across European countries, and even across the Atlantic and to the Antipodes. International congresses on issues of accident and social insurance were convened and national governments in many countries instigated research, studies, and reports. In the period from 1884 to 1888, for example, and with clear references to German social insurance legislation, the governments of Denmark, Sweden, Norway, and Finland all established public commissions to investigate what could be done on the ‘social question’ in their own countries and what lessons could be drawn from the German example (Kuhnle 1981). Yet working-​class mobilization was not the only direct or indirect factor that played a crucial role and had a significant impact on social policy development. As Manow and van Kersbergen (2006, 2009) emphasize, the impact of religious ideas is often unjustifiably underestimated in welfare state research. With the German Kulturkampf (1871–​78), the struggle for power between the Roman Catholic Church and the Prussian state escalated. This struggle also took place in other countries, leading to the emergence or strengthening of Christian democratic parties and trade unions throughout Western Europe. This conflict contributed to a greater state intrusion into social policy and education in an attempt to lessen the temporal power of the church and its frequently dominant role in welfare provision. Contrasting church–​state conflicts and constellations have ‘led to different coalitions between lower and middle classes [and] [t]‌his, in turn, led to distinct institutional paths of welfare state development in the West’ (Manow and van Kersbergen 2006: 1).

78    Stein Kuhnle And Anne Sander Table 5.1 Overview: Establishment of first statutory social security schemes in selected ILO member countries (down to 1945)a Sickness or maternity benefit scheme

Old-​age, invalidity, and survivors’ pension

Accident insurance; occupational hazards

Argentina

1934 (Maternity insurance)

1919 (Railway workers’ scheme)

Australiab

1912 (Cash maternity benefit)

Austria

Unemployment benefit scheme

Family allowance scheme

1915 (Flat-​rate invalidity and survivors’ benefit)

–​

–​

1908 (Non-​ contributory invalidity and old-​age benefit)

1900 (Southern Australia)

1944

1941

1854 (Miners’ scheme)

1854 (Miners’ scheme)

1888

1920

1948

Belgium

1844 (Seafarers’ scheme)

1884 (Seafarers’ scheme)

1903

1920 (Subsidized, voluntary)

1930

Brazil

1931 (Limited to particular groups of workers)

1923 (Railway workers’ scheme)

1919 (Flat-​rate invalidity and survivors’ benefit)

–​

1941

Bulgaria

1924

1924 (Invalidity and old-​age)

1924

1925

1942

Canada

1935 (Medical care; Alberta only)

1927 (Non-​ contributory old-​age)

1902 (British Columbia only)

1940

1944

Chile

1924

1924 (Invalidity and old-​age)

1916

1937 (Salaried employees’ scheme)

1937

Costa Rica

1941

1941

1925

–​

–​

Cuba

1934 (Maternity insurance)

1923 (Employees in land transport undertakings)

1916

–​

–​

Member state

The Emergence of The Western Welfare State    79

Sickness or maternity benefit scheme

Old-​age, invalidity, and survivors’ pension

Accident insurance; occupational hazards

Czechoslovakiac

1888 (Bohemia, Moravia, Silesia only)

1889 (Miners’ scheme)

1888

1921 (Subsidized, voluntary)

1945

Denmark

1892 (Subsidized, voluntary)

1891 (Non-​ contributory old-​age)

1898

1907 (Subsidized, voluntary)

–​

Ecuador

1935

1928 (Bank employees; invalidity and old-​age)

1921

–​

–​

Finlandd

–​

1937

1895

1917 (Subsidized, voluntary)

1943

France

1928

1885 (Seafarers’ scheme) 1910

1898

1905

1932

Germany

1883

1889 (invalidity and old-​age)

1884

1927

–​

Greece

1926

1922 (Seafarers’ scheme)

1914

1945

–​

Hungary

1907

1925 (Miners’ scheme)

1900 (Agricultural scheme)

–​

1938

Icelande

1936

1890 (Non-​ contributory old-​age)

1903 (Fishermen on decked vessels)

1936

–​

Irelandf

1911 (Cash benefit & medical ass.)

1908 (Non-​ contributory old-​age)

1897

1911

1944

Italy

1910 (Maternity insurance)

1861 (Seafarers’ scheme)

1898

1919

1936

Member state

Unemployment benefit scheme

Family allowance scheme

(Continued)

80    Stein Kuhnle And Anne Sander Table 5.1  Continued

Member state

Sickness or maternity benefit scheme

Old-​age, invalidity, and survivors’ pension

Accident insurance; occupational hazards

Japan

1922

1941

Luxembourg

1901

Mexico

Unemployment benefit scheme

Family allowance scheme

1905 (Miners’ scheme)

–​

–​

1911 (Wage earners’ scheme)

1902

1921 (Non-​ contributory)

–​

1942

1942

1931

–​

–​

Netherlands

1913 (Cash benefit & medical ass.)

1913

1901

1916 (Subsidized, voluntary)

1939

New Zealand

1938

1898 (Non-​ contributory old-​age)

1900

1930

1926

Norwayg

1909

1936

1894

1906 (Subsidized, voluntary)

1946

Panama

1941

1941

1916

–​

–​

Paraguay

1943

1924 (Railway workers’ scheme)

1927

–​

–​

Peru

1936 (Wage earners’ scheme)

1936 (Wage earners’ scheme)

1911

–​

–​

Polandh

1889 (West and Upper Silesia only)

1889 (Invalidity and old-​age)

1883

1924

–​

Portugal

1919

1919

1913

–​

1942

Romania

1912

1912

1912

–​

1944

Republic of South Africa

–​

1928 (Non-​ contributory old-​age)

1914

1937

1947

Spain

1929 (Maternity insurance)

1919 (Old-​age benefit)

1922

1919 (Subsidized, voluntary)

1938

The Emergence of The Western Welfare State    81

Sickness or maternity benefit scheme

Old-​age, invalidity, and survivors’ pension

Accident insurance; occupational hazards

Sweden

1891 (Cash benefit & medical ass.)

1913 (Invalidity and old-​age)

1901

Switzerland

1911 (Federal Act)

1916 (Invalidity and old-​age; Glaris only)

1911

USSR

1922

1922

1922

1922

1944

United Kingdom

1911

1908 (Non-​ contributory old-​age)

1897

1911

1945

United Statesi

-​

1908

1935

–​

Member state

Unemployment benefit scheme 1934 (Subsidized, voluntary)

Family allowance scheme 1947

–​ 1924 (Subsidized, voluntary)

1935 (Old-​age benefit) Uruguay

–​

1919 (Limited to particular groups of workers)

1920

1944 (Meat canning industry)

1943

Viet-​Nam

1944 (cash benefit & medical ass.)

–​

1943 (Flat-​rate invalidity and survivors’ benefit)

–​

1944

Yugoslaviaj

1888 (Dalmatia, Slovenia only)

1889 (Dalmatia, Slovenia only; miners’ scheme)

1887

1927

–​

Source: authors’ own, based on Perrin 1969: 285–​287. Notes: a Member countries that had introduced at least three out of five pillars by 1945; b Commonwealth of Australia (federal state) after 1901, separate (British) colonies before that; c Part of Austria/​Austro-​Hungarian Empire until 1918; inherited Austrian law; d Part of Russian Empire until 1919; e Under Act of Union with Denmark from 1918 to 1943; Danish dependency before that;f Under British rule until 1921; g Part of Kingdom of Sweden–​Norway until 1905; h Part of Austro-​Hungarian Empire until 1918; inherited Austrian law; i Civil war pensions for veterans were implemented as early as 1862, including additional provisions for widows and dependants as of 1873; j Kingdom of Yugoslavia as of 1929. Before that, Kingdom of Serbs, Croats, and Slovenes, established in 1918 by the union of the State of Slovenes, Croats, and Serbs and the Kingdom of Serbia. Partly under rule of Austro-​Hungarian Empire.

82    Stein Kuhnle And Anne Sander

Why Germany, Not England or the United States? Flora and Alber (1981) note that the propensity to introduce social insurance early was considerably greater in the constitutional-​dualistic monarchies (Austria, Denmark, Germany, Sweden) than in parliamentary democracies and that this is even more remarkable given differences in socio-​economic development. England was both more democratic and industrialized than Germany at the time. Parliamentary democracies generally adopted social security somewhat later, following extensions of suffrage, but with higher levels of population coverage and adequacy of protection. These findings demonstrate that the emergence of welfare states is not just a matter of progressive development: neither the logic of industrialism nor the strength of the working class are by themselves sufficient explanations. In an alternative comparative (and temporal) perspective, Britain is hailed as a pioneer in launching a ‘modern welfare state’ (Orloff and Skocpol 1984). Before the First World War, Britain had already instituted workers’ compensation (1897), old-​age pensions (1908), health insurance (1911), and the world’s first compulsory unemployment insurance (1911)—​in sharp contrast to the United States, which by that time had quite extensive Civil War pensions covering a large proportion of elderly Americans, but which failed to institute modern pensions and social insurance during the Progressive Era. Already in 1911, Britain had surpassed Germany as a welfare state leader, with more risks and larger parts of the population covered (Flora and Alber 1981: 55). The contrast between Britain and the United States is explained by the existence of a strong civil service and competing, programmatically oriented political parties in Britain. It is less easy to explain why Britain lagged German developments by twenty to thirty years, since both a strong state administration and party competition were well established in Britain by the 1880s, although the Labour Party was founded as late as 1900, thirty-​one years after Bebel and Liebknecht founded the Social Democratic Workers’ Party of Germany. However, British local government structures, necessary for implementation of public policies, were not very comprehensive by the early 1880s. Differences in timing, principles, and scope of early state social insurance or security legislation must, among other factors, be sought in the experience of different institutions; for example, the Prussian health funds (Krankenkassen) versus the friendly societies (Hennock 2007), that were active in the United Kingdom, New Zealand, and Australia. Friendly societies were successful voluntary working-​class associations with a huge membership. Their growth can be regarded as an outcome of early and gradual industrialization (or efficient capitalist agriculture in the cases of Australia and New Zealand). The prevalence of alternative welfare providers at the time of the birth of national social insurance helps to explain the paradox of the relative lateness of welfare state development in more affluent and more democratic nations. When Bismarck’s idea of compulsory social insurance came on the political agenda, Britain and its settler nations had a fairly well-​functioning, non-​state alternative in place, thus the governmental urge to legislate and the ‘objective’ problem pressure were less than in Germany. In fact, the largest organized opposition to the British Old Age Pension Act in 1908, introducing non-​contributory pensions, came from the friendly societies

The Emergence of The Western Welfare State    83 (Rimlinger 1971: 59). In Prussia, the history of compulsory insurance followed both logically and chronologically from the decline of the guild (Hennock, 2007: 331). That Britain, as other parliamentary democracies, did later develop comprehensive, and even compulsory, social insurance is due to other factors, including the parties’ need to appeal to new groups of voters, in combination with the increasing financial feasibility of state social initiatives. It was a Liberal government which, after the landslide electoral victory of 1906, introduced in 1908 a means-​tested old-​age pension scheme payable from general taxation. This was followed by the National Insurance Act of 1911. The 1908 law was an attempt to provide a basic income to ‘deserving’ old people, free from the taint of the Poor Law. This is analogous to the idea behind the old-​age assistance laws introduced in Denmark (1891) and New Zealand (1898). The motivation for the National Insurance Act of 1911 was different in that its purpose was to provide health and unemployment insurance, mainly to those active in the workforce, with the aim of improving national efficiency and economic strength (Rimlinger 1971: 59–​60). The British pension law was amended as a Widows, Orphans, and Old Age Contributory Pensions Act in 1925.

Small, Pioneering Nations in the Shadow of Big Nations Comparative political research in the early post-​Second World War period was dominated by large nation comparisons, reflecting the largely unwarranted assumption that big nations make innovations which are then taken up by (diffused to) smaller countries. Comparative studies of historical (and current) welfare state developments offer a correction to this view. Briggs (1961: 147) has argued that ‘German social insurance stimulated foreign imitation. Denmark, for example, copied all three German pension schemes between 1891 and 1898.’ But this narrative can be questioned. The Danish government and parliament had been concerned with various social policy options since the 1860s—​the legislation that occurred in the 1890s rested on pre-​Bismarckian initiatives and studies (Kuhnle 1996). None of the three laws introduced in Denmark in the 1890s built on German principles of social insurance. The Danish old-​age pension law of 1891 instituted non-​ contributory (local) means-​tested pensions to ‘deserving’ people over sixty years of age who had not received poor relief in the previous ten years. The Danish law bore no resemblance to the German contributory income-​maintenance scheme of 1889, but the timing of social legislation in Denmark, as in the other Nordic countries in the 1890s, was probably influenced by the German legislation. On the other side of the globe, another small nation, New Zealand, introduced a means-​tested old-​age assistance law in 1898. Australia, small in terms of population, passed a non-​contributory national pension scheme in 1908, superseding earlier (but quite similar) colonial schemes introduced in New South Wales (1900), Victoria (1901), and Queensland (1908). Denmark—​before the Social Democratic Party had come close to governmental power—​already had the world’s most extensive coverage of social risks by 1907—​ with, in addition to the old-​age assistance law, legislation covering workmen’s compensation (1898), subsidized voluntary sickness insurance (1892), and subsidized

84    Stein Kuhnle And Anne Sander voluntary unemployment insurance (1907). The first universal contributory old-​age pension scheme, combined with old-​age assistance, such that all citizens above pension age could claim a pension (Palme 1990)—​anticipating a universal citizenship-​based pension scheme (introduced in 1946)—​was introduced by a Liberal government in Sweden in 1913. Although all Nordic governments in the 1880s were inspired by German social insurance legislation to act politically, to do something, on the social question, only Norway is an example of imitation of German legislation. The text of the Norwegian industrial accident insurance law of 1894 closely followed the German text of 1884 and Norway was, with a Conservative government and Liberal parliamentary votes, the only Nordic country in the 1890s to introduce a fully compulsory law.

What Risks Were Given Political Priority? Flora and Alber (1981) found in their pioneering historical comparison of twelve European countries that social insurance for industrial accidents tended to be introduced first, unemployment insurance last, and the other two systems in between. This trend is also evident on the global scale, as Table 5.1 indicates. Altogether, thirty-​two countries in the world had introduced some kind of legislation on insurance or compensation for industrial accidents or occupational hazards by the end of the First World War, eighteen countries had introduced some kind of sickness insurance or benefit scheme, with Germany (1883), Norway (1909), the United Kingdom (1911), and the Netherlands (1913) as the pioneers of compulsory schemes. Some kind of old-​age, disability, or survivors’ insurance or assistance scheme was in place in thirteen countries, and only seven countries had introduced unemployment benefit schemes. But the sequence of introduction of legislation differed both in Europe and in the broader comparison, as also exemplified by the only two countries which had passed laws on all four risks by 1918. The United Kingdom (including Ireland) manifested the sequence accidents—​old age—​sickness—​unemployment, while the Danish sequence was old age—​sickness—​ accidents—​unemployment. No country introduced a scheme for unemployment insurance as its first social insurance law, but Finland and Norway exceptionally introduced measures of unemployment protection as their second laws. Not counting the limited (seafarer’s) old-​age pension scheme of 1885, France is also a member of this group. Germany lagged behind many countries with its first law on unemployment in 1927.

Consolidation, Expansion, Diffusion, and War The factors explaining the timing of policy innovation prior to the First World War have different explanatory weights across countries and time, depending upon, among

The Emergence of The Western Welfare State    85 other things, social cleavages, the history and characteristics of the state, the prevalence of non-​state welfare provision, and political party and government constellations. Obviously, parties also at times change political preferences and strategies. Table 5.1 shows that around fifty social insurance laws were passed before any labour or social democratic party for the first time formed a majority national government (Australia in 1910). Suffrage was significantly extended throughout Western nations during the early decades of the twentieth century, such that universal manhood suffrage was generally in place by 1920 and in many countries also full or near universal woman suffrage. The party-​political basis for voter mobilization and participation had significantly changed since the early phase of social insurance evolution, when governments and parliaments were dominated by conservative and, gradually, liberal political forces. The First World War had a radicalizing effect on post-​war (social) politics, making for a generally much stronger role of government in social matters. During the interwar period, the rising impact of labour and social democratic parties and their participation and leading positions in governments were conducive to more active expansion of social security coverage in the Scandinavian countries (partly 1920s, particularly 1930s) and in New Zealand (after 1935). In the interwar period, state social insurance and protection was extended in three ways: in terms of the scope of risks, in terms of the coverage of population, and through an increase in compulsory provision (Flora and Alber 1981; Table 5.1). For example, industrial accident/​occupational injury insurance, as well as pension insurance were expanded to cover more groups of workers and employees and to cover family dependents. Germany was first to introduce survivors’ pension benefits in 1911 and most Western countries followed suit in the 1930s. Norway pioneered the provision of medical benefits for family members in its first sickness insurance law of 1909 and most countries extended their laws to include family members after 1930. New Zealand became the first country to develop a scheme for family allowances—​in the mid-​1920s. Such laws were passed in many countries during the 1930s, and the Second World War, and immediately thereafter. Before the First World War, social security was almost entirely a concern of governments of European and European settler nations. The idea and practice of social security spread during the interwar period to other regions of the world, most visibly to North, Central, and Latin America, and often with the help of the International Labour Organization (ILO), established in 1919 (see further below).

Social Security Principles Gaining Ground The spread of social insurance and security, both in terms of countries covered and scope of provisions and beneficiaries, increasingly became part of social and economic policy in the aftermath of the First World War. While previous decades had seen rather cautious experimentation with various schemes of social insurance, social security principles gained ground, developing rapidly in most European countries and European

86    Stein Kuhnle And Anne Sander settler nations and also spreading to the European periphery and beyond Europe (see Table 5.1). The function originally assigned to welfare was that of offering relief to the poorest, which was then integrated into the insurance principle whose ‘essential advantage . . . lay in its affirmation of the right of insured persons to protection against specified risks’ (Perrin 1969: 253). This focus on the integration of the proletariat and the notion of social security as a solution to class antagonism was prominent in debates about citizens’ social rights, which became the key rationale for the growing labour movement. The welfare state as a state particularly for the working class, and closely linked to a demand for social rights as inherent aspects of democracy, was increasingly associated with ‘social democracy’ (Briggs 1961: 222). The changing notions of welfare and social security had already become evident before the First World War. Social policy considerations shaped election campaigns in some countries and played a part in the election of the world’s first Labour government in Australia in the first decade of the twentieth century. The role of the state as a provider and protector of social rights became evident in the legislation of many Western European countries before, and increasingly after, the First World War (Briggs 1961). But, as Baldwin (1990) has shown, the ‘laborist social interpretation’ of social and welfare reforms required support from other quarters. Both in Britain and Scandinavia, solidaristic risk-​sharing measures also strongly reflected the interests of the middle classes and, in Scandinavia in particular, the interests of the politically emerging agrarian middle classes (see also Kangas 1991). But not all countries that had started out as pioneers of welfare state development continued on this path—​Germany and Australia being the most prominent examples of erstwhile leaders whose later performance faltered in various ways. Nor did the implementation of social security principles always take the social insurance form. Most notably, the United States—​widely labelled as a laggard in welfare state development and politically criticized for not having (even up to today) introduced universal health insurance—​did not adopt policies along European lines (Skocpol 1995). The focus in the United States was rather on separating welfare and social security, with an early introduction of provision for children, widows, and war veterans, but lagging behind in implementing a national social insurance scheme. It was not until the Great Depression that President Roosevelt and reformers tried to implement more comprehensive measures in the New Deal. The 1935 Social Security Act, introducing contributory old-​age insurance on a national basis and compulsory unemployment insurance, was the centrepiece of these struggles. The reasons for the unequal rise of social security principles are numerous and have initiated broad scholarly discussion. Historical comparative analyses over the years offer different theoretical explanations. Particular significance has been attributed to the social democratic hypothesis, which has repeatedly been amended and transformed to focus not only on left-​wing parties in power, but also on the impact of farmer–​labour coalitions (as in the case of Sweden and Finland) or Christian Democratic rule (Amenta 2003; van Kersbergen 1995). In Europe, trade unions had been able to transform their claims into policy through their respective parties, which

The Emergence of The Western Welfare State    87 in turn led to a continuous expansion of welfare as these parties gained power (Korpi 1983; Esping-​Andersen 1985).

Expansion of Risks and Population Groups Covered Before the outbreak of the First World War, most countries in Europe had introduced at least two of the four pillars in the core fields of insurance; beyond Europe at this time, only Australia had three schemes and New Zealand two schemes. In the interwar period, a fifth type of core social security scheme came on the political agenda, namely family allowances, with New Zealand, Belgium, and France taking the lead. Among the lead countries, social security was extended to cover new risks, unemployment in particular, and larger population groups, although, once again, expansion did not conform to a uniform pattern. Denmark and the United Kingdom were most expansive as to population coverage. Expansion was most visible in countries where socialist or social democratic parties had the greatest electoral support and governmental authority. The weakest expansion occurred under fascist auspices in Italy, Austria, and Germany (Alber 1979). For Western democratic states, the era beginning with the Great Depression, until the aftermath of the Second World War was characterized by reforms and policy developments which pointed in the direction of universalistic welfare states. More and more population groups, including family dependents, were (compulsorily) covered. Also, governments dealt with a broader scope of social risks. However, the depression years also posed a major challenge to governments, with unemployment and social hardships on the rise. It is therefore not surprising that the 1930s saw the greatest variation and heterogeneity of social insurance schemes. While some countries witnessed the first retrenchment of provision, others (such as Norway) joined the league of pioneering welfare states (Alber 1982: 153). Alber finds particularly strong expansion in countries with strong leftist parties and in periods following times of hardship (the First World War, the Great Depression). Even countries with similar backgrounds and prior welfare state development took divergent paths. While the difficulties in coping with unemployment and poverty led to stagnation in welfare expansion in Australia (Castles and Uhr 2005), the post-​1920 years in New Zealand were characterized by a number of major welfare innovations, such as the introduction of the world’s first family allowance scheme (means-​tested). Following a halt in policy innovation during the economic crisis, New Zealand Labour gained a landslide electoral success in 1935 based on their plans for social reform, leaving the new government to be judged by some as ‘the strongest that has ever existed in the English speaking world’ (Castles 1985: 26). The 1938 Social Security Act implemented a comprehensive and unified welfare scheme which the ILO judged as having had an important influence on legislation in other countries. Even countries with rather different concepts of equality and welfare from those in Europe and in the Antipodean settler states shifted towards a more social democratic

88    Stein Kuhnle And Anne Sander philosophy of insuring social risks under the pressure of economic crisis. In the United States and Canada, reformist forces tried to introduce comprehensive social security schemes and moved towards greater state intervention in their New Deal policies, which, in Canada, resulted in a strengthened role for the federal government and the introduction of federal unemployment insurance in 1940.

The Idea of Social Citizenship In most Western countries, in the period after the First World War, social security principles had become an integral part of party politics and government policies. Welfare was increasingly regarded as guaranteeing more than just a minimum of economic security, perhaps offering some sort of protection ‘from cradle to grave’. But there was still a battle over society’s capacity and willingness to treat all of its citizens equally. As Baldwin puts it: ‘the battles behind the welfare state lay bare the structure and conflicts of modern society . . . As economic producers or as members of different classes, individuals were still treated unalike by the market and by inherited hierarchies. But as creatures subject to risk, they could stand equal’ (Baldwin 1990: 1–​2). Pioneering welfare schemes like Bismarck’s were a long way from realizing such equality. Beveridgean ideas may have come somewhat closer. The case for social insurance remained primarily economic and as a means to maintain social stability, and thereby secure economic outputs. The shift in focus from social welfare to social justice is seen by many scholars as a logical consequence of democratization and the emergence of social rights from the prior institutionalization of political rights (Flora and Alber 1981). Famously, T. H. Marshall (1963) saw this process in terms of the development of social citizenship: from civil to political to social rights (for a discussion of social rights of citizenship, see Chapter 40). But the degree to which citizenship is intrinsic to the welfare state has always been contested.

The Internationalization of Social Security and Diffusion beyond Europe and the New World: The Role of the ILO The dawning of a ‘new age’ of social security was also marked by the establishment of the ILO in 1919, and thus the spread of the idea of minimum social standards on an international scale. Created as part of the Treaty of Versailles, the organization reflected the belief that, through social justice, universal peace could be accomplished. The most important rationale behind the ILO was the experience of the First World War. From the very beginning, ILO promoted the diffusion, expansion, and consolidation of social insurance schemes (Perrin 1969). The interwar period was one in which social insurance and social security not only expanded to cover all major risks and more population groups in European countries, but also became a worldwide phenomenon. The ILO came to play not only an important

The Emergence of The Western Welfare State    89 role as catalyser for social insurance and as promoter of international best practice, but also as a storehouse for statistics, documentation, and national social and labour legislation. It passed a large number of norm-​setting conventions and recommendations in all fields of social insurance. Table 5.1 demonstrates that by the end of the Second World War, social insurance had developed well beyond the borders of Western Europe and the European settler nations.

The Wartime Impact Following the Great Depression and its significant impact on social policy in a number of countries, the preparations for and the eventual outbreak of the Second World War marked a further stage in the development of what then came to be modern welfare states after 1945. In fact, the question of what impact warfare has had on welfare, and whether war initiated a break in ongoing developments or rather represented continuity, has provoked a number of debates. Goodin and Dryzek (1995) have argued that wartime experiences shaped the post-​war trajectory of social development by creating a sense of solidarity manifested in subsequent (post-​war) generosity of spending, while Peacock and Wiseman (1961) have suggested that wartime increases in government expenditure increase the threshold of ‘tolerable taxation’ for welfare purposes thereafter. Recently, Obinger et al. (2018) have presented the first systematic comparative analysis of the impact of war on welfare state development in fourteen affluent democracies. The wartime experience also illustrates more malign impacts on the ideology of the welfare state. Social policy, as Titmuss (1974) emphasized, is neither ideology free, nor does it always imply welfare for all. The development of German social policy in the Nazi years is a case in point. The Weimar years in Germany had seen the further expansion and elaboration of ideas of social citizenship, but this conception was now replaced by that of a citizen defined in racial terms, with eugenic principles (widely current at the time in European thinking) and later euthanasia enlisted as a justification for and a means of shaping the Nazi-​type Aryan family. The Second World War also significantly shaped visions and plans for post-​war welfare state development, often with reference to Beveridge’s famous 1942 Report on Social Insurance and Allied Services. Beveridge explicitly urged the government to fight the five ‘Giant Evils of Want, Disease, Ignorance, Squalor and Idleness’ to secure peace by providing ‘security from cradle to grave’. Both Marshall (1964) and Titmuss (1950, 1976) point to the wartime experience as a basis for a spirit of national solidarity and increased social policy efforts in the direction of universal social provision, irrespective of class and status. This perspective is contested. Revisionist historians have argued that there is little evidence that the war induced heightened government awareness of social welfare as a tool of national efficiency or of enhanced social solidarity and it is argued that Titmuss exaggerated the impact of the war on subsequent policy development (Harris 1981; Mommsen 1981; Welshman 1998). Less disputable is the Norwegian case.

90    Stein Kuhnle And Anne Sander All Norwegian political parties from the Communists to the Conservatives came out of five years’ of German occupation with a commitment to a unique joint political programme before the parliamentary elections of 1945. Inspired by the Beveridge Report and the platform and record of the social democrats and the trade union federation (LO) in neutral Sweden, they promised to build a universal national ‘people’s social security system’. Thus, the impact of wartime experience is likely to have varied not only according to pre-​war social policy history, but also as to whether countries were active participants in the war, subject to foreign occupation, materially and physically devastated, and/​or carried huge human losses. The United States was the only big industrial economy of the world that had not been debilitated by the war. Arguably because its economy was so strong, the urge to nurture and expand ideas of a welfare state was not as prevalent there as in Europe (Brinkley 1996). Although the concept of the welfare state can be traced back to the 1840s (Petersen and Petersen 2013), it did not come into common usage—​and, in a positive sense in Britain and subsequently across Europe—​until the late 1940s onwards. A new chapter in Western social policy had begun.

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Chapter 6

P ost-​War Wel fa re Stat e Devel op me nt the ‘golden age’ Frank Nullmeier and Franz-​X aver Kaufmann

Introduction This chapter deals with welfare state developments between the end of the Second World War (1945) and the end of the 1970s. This era might be considered the heyday of welfare state politics in the Western World. Neither before nor since have issues related to the welfare state moved to the centre of political attention with such intensity in most Western countries. Major social reforms were accomplished and different social policy agendas marked the frontlines between political parties, but with the Christian democrats and the social democrats, two party groups dominated the political realm that both supported the expansion of the welfare state. The bulk of the welfare state literature divides the post-​war era into two periods: a phase of expansion and one of retrenchment. In this view, a period characterized by the formidable growth of social security systems—​in which the welfare state firmly established itself as a core institution in Western societies—​has been followed by a phase of expenditure cuts and diminishing social benefits. This two-​phase periodization of post-​war developments—​with an expansion period from 1945 to the oil crisis of 1973 for most OECD countries and a subsequent retrenchment phase that has already endured more than three decades—​is largely uncontroversial today. The main alternative to this periodization is the differentiation within the second period between a phase of retrenchment and neoliberalism on the one hand, and a phase of social investment policies that set in at the turn of the millennium on the other (Hemerijck 2013). The most influential designation for the periodization of a phase of expansion followed by

94    Frank Nullmeier and Franz-Xaver Kaufmann a period of retrenchment has been the ‘Golden Age’ (Pierson 1991; Hobsbawm 1994; Esping-​Andersen 1996) and—​less frequently—​the ‘Silver Age’ (Taylor-​Gooby 2002; Ferrera 2008). Couching the past in a terminology of gold and silver certainly has a strong connotation of decline, as it suggests regret over the loss of what were once better, more harmonious times. The end of the Second World War is a rather obvious historical juncture in the context of social policy research. It coincides with the years of economic recovery from the Great Depression and with the major social policy reforms inspired by Lord Beveridge’s (1942) universalistic reform model that had been implemented in Great Britain by 1950. Thus, 1945 and the early post-​war years might be characterized as the period in which the welfare state became firmly entrenched. Yet with a view to the institutional dimension of the welfare state and the passage of social insurance legislation, this seems less convincing, especially for the Bismarckian social security systems. In fact, this periodization does not even do justice to the history of the US American and Scandinavian welfare states, which experienced massive changes and institutional expansion in the 1930s. If the focus is on institutional innovations, the post-​war era rather appears to be the end of a phase in which the core set of social insurance programmes had been established in most continental European and Anglo-​Saxon countries—​programmes, that is, that protect against the financial risks related to old age and retirement, sickness, industrial accidents, and unemployment. These programmes were usually introduced—​and expanded for the first time—​prior to 1950. Were we to apply institutional innovation as a criterion, then we would have to take the year 1950 as the end of a phase of institutional establishment—​a phase which could itself be divided into three subperiods: an ‘introductory phase’ ranging from early German legislation until 1914; a ‘phase of extension’ between the two world wars; and a ‘phase of completion’ in the post-​war years, followed by a new period, a period of consolidation and stepwise quantitative expansion of social benefits (Flora and Alber 1981: 54). However, the implied shift in the interpretation of the early post-​war years is even more important than the question of whether 1945 or 1950 is the more appropriate cut-​off point as such: the first periodization interprets the early post-​war years as the beginning of the welfare state’s Golden Age, a long expansion phase starting in 1945, while the second highlights the end of the previous innovation ‘cycle’ in 1950. Despite these considerations around these pieces of evidence, it seems appropriate to view 1945 as an important historical juncture. Compared with a pre-​Second World War type of policy that tackled the ‘social question’ by applying a hodgepodge of issue-​specific instruments and benefits, the post-​war understanding of social policy—​ grounded in the notion of basic social rights expressed in the 1948 Universal Declaration of Human Rights—​represents an ideological breakthrough. The post-​war era should be understood as a phase in its own right because it was only during the Second World War that an understanding of social policy and the welfare state based on the notion of universal social rights as key elements of human rights, in addition to liberal and democratic rights, began to emerge (Kaufmann 2012). The key characteristic of the Golden Age is the breakthrough of universal social rights as the normative background to social

Post-War Welfare State Development    95 policy and the responsibility of nation-​states to provide social justice, social protection, and poverty reduction.

The Breakthrough of Universal Social Rights Nearly everywhere, social policies began as piecemeal engineering based on finding solutions to the particular social problems of specific social groups. Among the issues addressed, two stand out, namely, ‘poverty’ and ‘the worker question’. In Great Britain, the poverty issue remained paramount; the worker’s problems were deemed to be solved mainly by the labour movement and friendly societies. On the international scale, the focus was on labour protection, following German problem definitions of the ‘worker question’. Accordingly, the International Labour Organization (ILO), founded within the Treatise of Versailles (1919) that ended the First World War, focused on social policies concerning labour and was the first international body that included the representatives of both employers and workers in its organizational framework. Until the Second World War, the ILO was almost exclusively concerned with setting standards related to the working conditions and social security of industrial workers and seamen. However, under threat to its existence during the Second World War, the ILO issued the ‘Declaration of Philadelphia’ in 1944, which might be called the first manifesto of a universalist welfare state (Kaufmann 2012). After formulating a comprehensive programme of social benefits for ‘all human beings, irrespective of race, creed or sex’, the declaration ended with the emphatic declaration: that the principles set forth in this declaration are fully applicable to all peoples everywhere, and that, while the manner of their application must be determined with due regard to the stage of social and economic development reached by each people, their progressive application to peoples who are still dependent, as well as to those who have already achieved self-​government, is a matter of concern to the whole civilized world. (ILO 1944: Declaration of Philadelphia)

This declaration was in line with the tendency to establish social rights as human rights and later became incorporated into the ILO’s constitution. The acknowledgment of social rights as universal human rights can be dated to the years between 1941 and 1948 and was part of Allied and international efforts to design a political order for the post-​war era. Even before the United States entered the war, talks between US President Franklin D. Roosevelt and the British Prime Minister Winston Churchill in August 1941 resulted in the following important message (points 5 and 6 of the declaration that was later called the Atlantic Charter): Fifth, they desire to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards,

96    Frank Nullmeier and Franz-Xaver Kaufmann economic advancement and social security. Sixth, after the final destruction of the Nazi tyranny, they hope to see established a peace which will afford to all nations the means of dwelling in safety within their own boundaries, and which will afford assurance that all the men in all lands may live out their lives in freedom from fear and want. (The Atlantic Charter 1941)

The last few lines refer to two of the ‘four (essential human) freedoms’ outlined in Roosevelt’s January 1941 State of the Union Address. The Charter embeds the principle of universal social rights in the context of freedom from want: ‘The third is freedom from want—​which, translated into universal terms, means economic understandings which will secure to every nation a healthy peacetime life for its inhabitants—​everywhere in the world’ (Roosevelt 1969, vol. 9, no. 152, 6 January 1941). In the ILO’s Philadelphia Declaration (1944), the principle of universal social security was further strengthened, but it was not until the Universal Declaration of Human Rights, passed by the General Assembly of the United Nations in 1948, that an explicit catalogue of universal social rights was proposed (in articles 23–​28: right to work, to free choice of employment, to rest and leisure, to a standard of living adequate for the health and well-​being of himself and of his family, to education, and to participation in cultural life). This catalogue is prefaced by article 22, which stipulates—​in a somewhat conditional form—​the basic entitlement to the social rights that are specified in the following articles: Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-​operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality. (United Nations 1948: The Universal Declaration of Human Rights)

This integration of social entitlements into the concept of universal rights was mirrored in the academic sphere by T. H. Marshall’s (1950) threefold concept of liberal, political, and social citizenship rights. Whereas the international paradigm for social policy until the Second World War remained selective, especially with respect to industrial workers and the poor, but also with regard to the risks covered, the new international paradigm was universal in that it envisioned coverage for the entire population. This universal coverage was combined with the demand for equality for all, irrespective of race, religion, and gender. And it extended the scope of social policy from the protection of workers to a broad concept of individual welfare. This shift is expressed in the change in key terminology from ‘social insurance’ to ‘social security’ and from ‘social policy’ to ‘welfare state’. This turn to universalism (Baldwin 1990; Heclo 1974), however, was not yet motivated by considerations of human rights, but simply by pragmatic arguments. The human rights movement gained momentum only under the pressure of the Nazi atrocities and the search for a promising post-​war order (Kaufmann 2012).

Post-War Welfare State Development    97 This shift in the social policy paradigm from piecemeal political interventions towards a synthetic vision of furthering the conditions for the well-​being of the entire citizenry was part of much broader developments in the area of international law. Until the Second World War, including the regime of the League of Nations, international law was seen exclusively as an affair of governments, not of peoples. But the fascist consequences of the Great Depression forged a consensus among the international elites that there was a nexus between national social and political orders and international peace. This gave rise to a vision of an international responsibility for the well-​being of nations and their people: welfare internationalism. The ‘Economic and Social Council’ became a main organ of the United Nations (UN), and the ILO, which had already been created under the auspices of the League of Nations, now became an instrument not only for international regulations, but also for practical initiatives, especially in the Third World.

Glorifications of the 1950s–​70s From the perspective of the neoliberal reforms of the 1980s and 1990s, the term ‘Golden Age’ seems to be justified as an act of looking back to better times. However, retrenchment policies have been replaced by developments that cannot simply be understood in terms of decline. The new profile of the welfare state is that of a ‘social investment state’ (see Chapter 7). Essential features of the social protection programmes during the Golden Age have survived the wave of privatization and deregulation. Yet, the history of social policy is a story of neither continuing progress nor ongoing decline since the 1970s. Looking back from a temporal distance, we can also identify the ‘dark sides’ of the Golden Age, as well as some internal causes for the neoliberal turn, which have to do with the structural elements of the post-​war welfare state. A more nuanced analysis has to question the harmonizing image of social policy in the 1950s, 1960s, and early 1970s without denying the central achievement of these times—​the political recognition of universal social rights—​or negating the expansion of social benefits, the higher degrees of inclusion, the growth of social expenditure, and so on. What is called for is embedding these elements in a more balanced analysis of the entire development. We might speak of a glorification and transfiguration of the Golden Age that isolates the post-​war development of social policy from its global political contexts (e.g. the Cold War, constant threat of nuclear war, colonialism) or fails to mention the search for alternatives to capitalism in the political situation after 1945. The fixation on traditional gender relations favouring the male breadwinner model also belongs to the characteristics of the expansion of the welfare state. Sociological and political essays that have sought to understand the recent political constellation of right-​wing populism, identity politics, and the decline of social democracy interpret the period from the 1950s to the 1970s as a historical unity, an interpretation that neglects the rapid development within this period. The immediate post-​war period—​the ‘economic miracle’ of the 1950s in the wake of an international economy

98    Frank Nullmeier and Franz-Xaver Kaufmann regulated by the Bretton Woods institutions, the cultural shift beginning in the late 1950s, the significant event of ‘1968’, the cultural upheaval and the wave of social movements around the world, and the subsequent reform efforts in the early 1970s—​did not represent a uniform historical block. The social movements in the 1960s were precisely directed against those very social structures that had determined the 1950s. The construction of the Golden Age is also strictly OECD-​centric or Eurocentric. In the first half of the Golden period, the success stories of the welfare state were based on colonialism. The exploitation of the Global South continued after decolonization and characterized the entire period. The first reduction in oil production by the Organization of the Petroleum Exporting Countries (OPEC) in 1973 made it clear that the balance of economic power in the world had shifted. The expansion period of the OECD welfare states was part of an international economic division of labour that massively disadvantaged the Global South. Unqualified praise of this period or attempts to recommend it as a kind of model for today’s plans for the future cannot be justified. To avoid such glorifications, it is necessary to discuss the inner tensions and dynamics that marked the Golden Age and led to the instability of this period.

The Golden Age—​Its Main Characteristics and Dynamics The expansion phase of the welfare state can be described more precisely in five dimensions.

(1) (2) (3) (4) (5)

self-​conception: from social policy to the welfare state; finance: developments of social expenditure; performance: new programmes, coverage, and generosity; governance: welfare production and actor constellations; outcomes: the impact of social policy.

In the following, we present, for each dimension, the characteristic structures and the internal dynamics that undermined the stability of these structures. We focus solely on overarching development trends. The differences between the individual countries and welfare regimes in the sense of Esping-​Andersen (1990) are considerable, but cannot be described here in detail (see Huber and Stephens 2001; Kaufmann 2013).

Self-​Conception: From Social Policy to the Welfare State Main Characteristics The spread of the term ‘welfare state’ as a designation of the entirety of social protection programmes, including the state’s commitment to respect and realize social rights,

Post-War Welfare State Development    99 is a development closely linked to a normative breakthrough. Until the Second World War, the debate was dominated by the German terminology of ‘Soc(z)ialpolitik’ and ‘Sozialversicherung’ (social insurance) (Kaufmann 2012). In the United States, the introduction of social programmes in the 1930s used the term ‘social security’, which became widespread through its use by the ILO and accompanied the breakthrough of social programmes in many Western countries after 1945. British social policy of the post-​war years 1945–​49 is often said to have been the driving force behind the international dissemination of the welfare state terminology. Recent research (Petersen and Petersen 2013; Wincott 2015; Edling 2019) has shown, however, that the concept of the welfare state was not used in Great Britain in the immediate post-​war period, but had previously been used in the 1920s. The term had some predecessors in the context of German cameralism. In the modern sense of the term, it emerged as a leading idea of the Swedish Social Democrats for a good and just society in the 1930s. Yet at the international level, the term did not experience its breakthrough until the 1950s. And it was not T. H. Marshall who championed the term in academic discourse—​he did not use it. In Germany, the term ‘Sozialstaat’ (social state) has served to express the social responsibility of the state; in France, it has been the concept ‘état-​providence’. In Scandinavia, the concept of the welfare state has prevailed uninterruptedly since the 1950s, even though a less state-​centred view of social policy has been transported via the ‘folkhem’ as a trademark of the Nordic welfare state. The welfare state concept and its substitutes were also associated with the fact that there was a set of policy areas that had to be regulated by the state. Which policies are subsumed under the heading of the ‘welfare state’ has varied over time and in line with nationally specific traditions. Yet there is undoubtedly an uncontested semantic core that includes old-​age security, health insurance, poverty relief, work-​accident insurance, labour legislation, and unemployment insurance, and sometimes even extends to a number of other policy areas, such as housing or education. What constitutes a welfare state, however, is not primarily determined by the policy areas and social protection programmes that are included. An early and clear-​cut definition by Harry Girvetz (1968: 512) pinpoints the key idea of the welfare state: ‘The welfare state is the institutional outcome of the assumption by a society of legal and therefore formal and explicit responsibility for the basic well-​being of all of its members.’ This definition links the welfare state with the assumption of universalism that claims the ‘explicit responsibility for the basic well-​being of all of its members’.

Dynamics Today, comparative social policy research uses the term ‘welfare state’ to describe the entire conglomerate of institutions, programmes, and regulations in the field of social policy. In many countries that count as welfare states according to scientific standards, the term is nevertheless avoided by the political public. It is too tainted by being associated with the image of an all-​consuming and patronizing state, a ‘nanny state’, the epitome of strong etatism. This rejection of the term started in the 1950s and has struck a chord to varying degrees ever since. The concept of the welfare state is by no means uncontested. At the end of the 1970s, a new and intensified criticism of the welfare state

100    Frank Nullmeier and Franz-Xaver Kaufmann emerged, drawing on the old reservations about state interventionism. However, the understanding of social policy as part of an overall state mission, which is at the heart of the welfare state, has been so enduring that the anti-​welfare rhetoric has failed to succeed in the long term. The semantics of the welfare state, its responsibility for protecting against social risks, and the legal and political recognition of social rights have been preserved. Between 1945 and 1975, the concept of the welfare state spread, along with the idea of universal social rights. Social benefits were no longer seen as charity or discretionary benefits of a paternalistic state that are provided on the basis of compassion, mercy, or administrative whim. Finally, anti-​poverty policy was ‘juridified’—​now the needy, too, could claim social rights and social benefits accordingly. Social rights are a specific type of human right. Realizing them requires active efforts on the part of the state. This stands in contrast to merely refraining from actions in the case of liberal rights. Therefore, social rights are considered subordinate to liberal and democratic rights. During the Golden Age, this understanding stood in the way of treating all types of rights as rights of equal status. An understanding of human rights as rights of defence against arbitrary decisions by public authorities remained dominant in most national contexts. Moreover, social rights do not formulate clearly defined interventions by the state. A social right may be compatible with very different levels of performance and generosity. The implementation of social rights has been accompanied by increasing legal regulation by social and administrative law. In the 1970s, the expansion of social policy was criticized as ‘juridification’ and ‘over-​regulation’. The consequence of these two tendencies—​the view of social rights as subordinate and their pursuit in the form of legal regulation—​is that the welfare state became inflexible, intervened more and more in the private sphere, made it difficult for the state to cope with genuine social problems, and alienated citizens from the welfare state as a bureaucratic-​legalist system.

Finance: Developments of Social Expenditure Main Characteristics Comparative welfare state research has its origins in the study of social expenditure and its enormous growth between 1945 and the 1980s. Even though an analysis of social expenditure data alone would fall short of describing the complexity of the welfare state, the study of social expenditure remains an essential element for assessing the historical development of the welfare state. The development of social expenditure in relation to gross domestic product is particularly meaningful for the characterization of the welfare state, even if the data basis for the period before 1980 is impaired by the fact that the only data available for this period are ILO data on gross national expenditure for public social policies (and no data on tax cuts and private social expenditure). While in 1950 all OECD countries still exhibited a social benefit ratio of below 15 per cent, by 1980 this had shifted such that no country displayed a ratio below 10 per cent and the highest social benefit ratios were around 30 per cent. Hence, social benefits grew faster than gross

Post-War Welfare State Development    101 domestic product (GDP) (Obinger 2019: 541). The rise in social security spending was not at all due to the introduction of additional programmes and the expansion of social services. In the post-​war period, the follow-​up costs of war played a much greater role (Obinger et al. 2018), whereas from the 1950s onward, the extension of life expectancy and the growing number of retirees became a major driver of the growth of social expenditure. During the expansion phase of the welfare state and against the backdrop of enormous GDP growth between 1950 and 1975, the explanatory models of the time singled out industrialization processes as the major driver (Rimlinger 1971; Wilensky 1975). More complex models that built on Stein Rokkan’s version of modernization theory mostly added political factors (e.g. introduction of universal voting rights, democratization of political systems; see Flora and Alber 1981) to this explanation. Moreover, despite the criticism levelled against functional explanations from the perspective of the power-​resources approach, there was also a wave of approaches (based on theories of capitalism) that credited economic factors with the power to determine opportunities of social policymaking. The post-​war era appears in yet another light if we use the development of social expenditure as the sole indicator of welfare state growth. From this angle, the whole period between 1918–​20 and 1973–​75 may then be seen, in accordance with Christopher Pierson (1991), as a phase of growth and expansion. On the basis of the expenditure criterion, the year 1945 (or 1950) does not mark a rupture or discontinuity. Even if social insurance coverage is used as an additional indicator, the data suggest a more or less uninterrupted growth trend from roughly 1910 to the 1970s (Flora and Alber 1981: 49, 55). Therefore, social expenditure cannot serve as the exclusive criterion of periodization. It was, rather, the rights revolution that marked the beginning of the Golden Age, but social expenditure data can nevertheless still be useful to distinguish four subperiods within the Golden Age: (1) 1945–​50, post-​war innovations; (2) 1950–​60, relative stagnation and economic growth; (3) 1960–​73, the main expansion period; and (4) 1973–​79, a transition to retrenchment policies. (1) The British welfare state reforms stand out in interpretations of the early post-​war years (1945–​50). But far-​reaching reforms—​in the context of a social insurance tradition—​were also implemented in France; and major reforms of the social security systems of Belgium, Sweden, and Switzerland deserve to be mentioned as well. By contrast, in the countries that had experienced fascist and national-​ socialist regimes (namely, Italy, Japan, Austria, and Germany), the political agenda was dominated by coping with the consequences of military defeat and the re-​establishment of their pre-​war social security systems. Yet Pierson’s (1991) suggestion to characterize this subperiod as a phase of ‘reconstruction’ appears unconvincing, for the element of innovation was more prominent in these years than mere reconstruction efforts: policy reforms were frequently grounded in the new understanding of social security as a universal right, and so the extension of social security systems to the entire labour force or the citizenry at large became

102    Frank Nullmeier and Franz-Xaver Kaufmann a key objective in this period, albeit pursued to varying extents and implemented with varying success. (2) The years between 1950 and 1960 have been characterized as a phase of relative stagnation (Pierson 1991). This assessment is based on the GDP share of social expenditures. However, against the backdrop of massive economic growth and virtual full employment (as well as a low population share of persons over age sixty-​five), below-​average social expenditure growth has to be viewed as a weak indicator of welfare state development. The high employment rate, which reduced the pressure to offer or rely on social benefits, combined with fundamental old-​age security reforms, are much more telling. Moreover, data on replacement rates (Korpi and Palme 2007) indicate that levels of generosity were already close to their peak values in 1960—​for instance, in two out of three branches of the German social security system. (3) There is widespread agreement that the years between 1960 and 1973 represent the major expansion phase of the welfare state (Pierson 1991), as indicated by social expenditure growth rates considerably above the long-​term average. If the term ‘Golden Age’ makes sense at all, then it is for this period of roughly fifteen years. However, this was primarily an expansion of benefit levels and coverage. Otherwise, the 1960s are not known for being years of social policy innovation. The inputs and demands of the new social movements, from the civil rights movement to the women’s movement, had not yet begun to impact social policy. Important reforms such as the introduction of Medicaid and Medicare in the early 1960s completed the partially blocked establishment of the US welfare state in the 1930s (Hacker 2002; Howard 2007). Hence, the golden years of social policy might well have coincided with a dearth of policy innovations and of policy deliberation on the long-​term stabilization of the welfare state. (4) The impact of economic societal change, the pressure from social movements, and the growing problems of financing the expanding welfare state, as well as international developments (such as the first and second oil crisis, the breakdown of the Bretton Woods system, or the restructuring of capital markets) characterize the fourth subperiod as the phase of transition to retrenchment policies.

Dynamics The increase in social spending had to be financed in one of three ways: first, crowding out other segments of public spending (e.g. defence spending), resulting in competition between policy fields for scarce public funds; second, increasing revenues by raising contribution rates for employers and employees or by raising taxes; and third, increasing government debt. All three options were used—​with the last option playing a growing role. As a result, the welfare state experienced a financial crisis at the end of the Golden Age. The transition to the retrenchment phase, however, can be explained by the interplay of the shrinking capacities of nation-​states to finance growing social expenditures and international economic developments—​such as the oil crises of 1973–​74 and 1979, together with shifts in international trade relations, and the demise of the Bretton

Post-War Welfare State Development    103 Woods system of fixed exchange rates in 1971—​which severely opened up exit solutions for companies and restricted opportunities for social policymaking at the national level. These events can be seen as early signs of economic globalization. Politically decisive consequences of these new forms of international interdependencies were the increased exit options for financial capital, the possibility to search worldwide for the most competitive investment locations, and a gain in power of transnational corporations.

Performance: New Programmes, Coverage, and Generosity Main Characteristics Even early research on welfare state development had already used other indicators alongside social expenditure levels. Drawing on a data set compiled by Walter Korpi on the programme characteristics of social insurance, Esping-​Andersen (1990) then presented a theoretically sound and particularly successful concept for measuring welfare state quality (focusing on decommodification, social stratification, and state–​market–​ family relations) that was used to differentiate welfare state regimes in OECD countries. A basic measurement of the quality of social protection programmes in a historical period can refer to three indicators: the introduction of new programmes, coverage, and generosity.

New Programmes The main social risks (unemployment, sickness, disability, old age, industrial accidents) were covered by social insurance systems in nearly all OECD countries throughout the period. Alongside some southern European countries that were under autocratic rule until the 1970s (Saraceno 2017), the laggards in this respect were Switzerland and the United States, but with a strong occupational pension system in Switzerland, tax benefits and a strong occupational health insurance system in the United States partially compensating for the lack of corresponding social insurance programmes in these other areas (Howard 1997). New social insurance systems were not introduced during this period: long-​term care insurance is an innovation of the 1990s (see Chapter 30 in this book), but different social service programmes in this field were developed much earlier. Also the shift to the so-​called ‘new social risks’ did not take place until the 1990s. This expansion occurred within a set framework of social insurance sectors. The transition to an active employment policy was one of the major changes within the social security system. Social services have been significantly expanded since the 1950s and gained further impetus by the cultural liberalization in the wake of ‘1968’, as the traditional model of institutionalization was supplemented with more open and outpatient forms of social work and care services.

Coverage Despite the universalist claim of the post-​Second World War welfare state, social rights were often differentiated according to social and occupational groups. Even today, the rights granted migrants and refugees depend on their residence status, the economically

104    Frank Nullmeier and Franz-Xaver Kaufmann inactive are treated quite differently from the employed, and family status, gender, and age are used as a basis for the differentiation of benefits and access to social programmes. Institutional discrimination was inherent in the welfare system of the Golden Age. The differentiation in benefit levels and the segmentation of social security systems between different groups of employed persons (e.g. agriculture or mining, freelancers, tradespeople and self-​employed persons, civil servants, judges, employees and workers) fuelled demands for higher benefits in comparison to other groups and the instrumentalization of these demands for electoral campaigns. Social policy in the Golden Age could not establish generalized performance targets for the whole population. The universalism of social rights was accompanied by quite high selectivity in the level of benefits for the individual status groups. After the Second World War, social policy started from a very low level and on the basis of egalitarian promises, as in Great Britain or Scandinavia. Subsequently, the introduction of wage-​related systems, particularly in old-​age provision, complemented the flat-​rate programmes of the immediate post-​war period. The egalitarian structure of social programmes, which enjoyed a high degree of legitimacy in light of the shared suffering inflicted by the war, changed in favour of a more stratified construction in the course of ongoing economic growth.

Generosity The Social Citizenship Indicators Project (SCIP) has made data available for eighteen OECD countries for the period 1930–​2005, including data on old-​age pensions, health insurance, unemployment insurance, and work-​accident insurance. This data makes it possible to calculate replacement rates for the different branches of social security systems. On the basis of average replacement rates, we can identify the expansion period and the beginning of the retrenchment phase: the year with the highest replacement rate can be viewed as the end point of the expansion phase. That retrenchment has indeed occurred—​a claim not corroborated by the analysis of social expenditures alone—​is illustrated by the fact that the bulk of the measurement values for 1995 are below each country’s peak average replacement-​rate levels for the respective programme area. Only two of the peak years were before 1970 and twenty-​three (42.6 per cent) were in the 1970s (i.e. 1970, 1975, or 1980). In all of the other cases, the 1970s still have to be viewed as part of the expansion phase. On the basis of data from the Comparative Welfare Entitlement Dataset Version 2 (CWED 2; Scruggs et al. 2017), which covers the period from 1970 to 2010 for thirty-​three OECD countries, a generosity index can be calculated, which includes replacement rates, benefit duration, expectancy and waiting periods, the expected duration of a pension payment, and other elements for three branches of insurance (unemployment, health, and pension insurance). The three country groups identified by Esping-​Andersen (1990) can also be seen in this data. Over time, the level of generosity has not changed in the liberal welfare states—​the low level has been maintained. Reductions in generosity can be seen in the Scandinavian countries, France, Belgium, and the Netherlands. Other conservative welfare states with medium performance levels even experienced a slight increase in generosity after 1980 (Jahn and Helmdag 2019). With the inclusion of childcare and long-​term care benefits in several

Post-War Welfare State Development    105 countries, the generosity level should be higher today than it was in the 1960s. The aforementioned measurement concepts are very much grounded in an understanding of the welfare state as a social insurance state. However, these data fail to sufficiently capture important policy fields that are viewed as being core elements of social policy in relevant European countries. This is true for a number of social services, labour legislation, and workplace safety regulations. A truly comprehensive measurement of generosity and coverage in welfare services could therefore correct the characterization of the 1950s–​70s.

Dynamics The political recognition of social rights creates a dynamic that aims to fulfil the promise of these rights by expanding coverage and increasing the level of benefits. While there is an ideal value for social provisions in terms of the extent of access and inclusion (the inclusion of all those in work or all residents in a country with a minimum period of residence), there is no benchmark for determining generosity. Especially in the early 1970s, it was not possible to reach a political consensus on objectives for the development of social protection programmes. Attempts to define the ‘standard of living’ as a target value for old-​age pensions remained as controversial as the definition of subsistence or the minimum wage level. In the absence of limitation principles, the development of coverage and generosity was left to political and economic cycles, election campaign needs, and favourable economic constellations. In the neoliberal and conservative literature, this was interpreted as ‘demand inflation’. But if one subscribes to an understanding of the welfare state as the realization of universal social rights, one could certainly speak of growing difficulties to determine what a social right requires to be fulfilled. It was not possible to develop standardized procedures inherent to the welfare state for the determination of scope and level of social benefits, which therefore remained the plaything of political parties’ electoral calculations.

Governance: Welfare Production and Actor Constellations Main Characteristics Changes in the combination of state-​, market-​, and firm-​based, or of associative and family-​based, forms of welfare production (defined as the sum of all transactions that create benefits for third parties; Kaufmann 2001) play a key role in our understanding of the welfare state. The expansion phase is widely viewed as a phase of intensive nationalization of social services, accompanied by the marginalization—​ notably of family-​based forms—​of social service provision. Privatization and the withdrawal of the state, the prioritization of the market, and the creation of fields of private welfare production by competitive businesses (welfare markets) are, by contrast, characteristics of the retrenchment phase. However, it seems difficult to adequately capture all forms of welfare production and to compare the respective shares of markets, the state, families, networks, and civil society in the overall volume of welfare production over time.

106    Frank Nullmeier and Franz-Xaver Kaufmann Non-​governmental forms of social protection were a genuine part of the Golden Age (Howard 1997; Hacker 2002). Consideration of private social security provisions challenges the traditional understanding of the US welfare state, which appears much more extensive than is usually assumed if firm-​based and private security systems supported by tax credits and other taxation instruments are taken into account (Howard 1997). Hacker (2002), moreover, shows that the introduction of the Social Security Act fostered an expansion of private welfare production in the form of firm-​based and private insurance solutions, and hence that the expansion of the private welfare sector in the United States peaked during the 1940s. During the Golden Age, social policy was the playing field of the democratic nation-​ state (Nullmeier et al. 2015) and had not yet become subject to the mechanisms of multi-​level governance. The authority of international organizations (e.g. ILO) and supranational regional organizations to make collectively binding decisions in the field of social policy remained very limited. On the other hand, the 1940s had already been characterized by an internationalization of social policy ideas. The Bretton Woods economic and monetary regime determined the context for social policymaking at the level of the nation-​state. And the dominance of national actors and institutions in the social policy field had not yet been overcome, not even in the European Communities. The fear of communism, system competition with the planned economy of the Eastern bloc, the remembrance of wartime solidarity, and the search for solutions that could avoid mass unemployment in periods of economic downturn created a political climate that facilitated compromises between capital and labour. Social democracy and the trade unions were sufficiently strong to implement significant improvements in the living conditions of workers.

Dynamics In the 1960s, the actor constellation changed. The liberalizing effects of student protests, the new women’s movement, and a focus not only on wage issues, but also on issues such as quality of life, environmental protection, and democratization, slowly gave rise to a line of political conflict beyond traditional class conflict, initially referred to as ‘post-​materialism’. Social security issues were no longer at the centre of public debates. Cultural challenges had now a massive impact on the societal support for the welfare state and the old constellation of capital and labour. These tendencies were supplemented by developments on the employers’ side. The possibility of expanding the welfare state was based on the relative seclusion of national economies. With the end of the Bretton Woods regime in 1971 and the emergence of a free international currency and capital market, shifts in the international division of labour could no longer be prevented, and the national ability to control the economy declined crucially. Workers’ demands could no longer be offset in the national arena, but were reflected in decisive competitive disadvantages for the respective national industries. In the view of employers, the only option for survival was reducing labour costs. In light of the very offensive wage policies of trade unions at the beginning of the 1970s, including occupations

Post-War Welfare State Development    107 of plants and demands for co-​determination within the company, many employers increasingly abandoned the previous policy model. As Wolfgang Streeck (2017) has pointed out, this culminated in a major challenge of the legitimacy of the welfare state in the eyes of those representing capital.

Outcomes: The Impact of Social Policy Main Characteristics Different periods in the development of social security systems can also be distinguished on the basis of their impact or effectiveness; that is, by considering the extent to which they created or transformed social realities. Hence one might, for instance, distinguish the age of relative equality and middle-​class orientation from a period characterized by the shrinking of the middle class and growing inequality. This approach is similar to impact studies, especially studies of the distributional effects of welfare state programmes. Esping-​Andersen’s famous concept for the measurement of social stratification is not a measure of outcomes in this sense because it considers no more than the degree to which the norm of equality is entrenched in social programmes. The relatively high degree of equality after the Second World War was the result of war and hyperinflation, not the effect of the welfare state and its redistributive aspirations. The economic recovery in the 1950s led to an increase in income inequality, which was cushioned only by the expanded social policy programmes. The general increase in prosperity and well-​being went along with steadily growing inequality, even more so in terms of wealth distribution (Piketty 2014). The central effect of the welfare state’s expansion period was therefore an absolute increase in prosperity also among those who were dependent on social benefits. Automatic adjustment mechanisms to wage or price developments or regular increases in social benefits ensured that welfare gains in earned income were reflected in social benefits. This prevented the decline in income when a risk event occurred and maintained an individual’s income status during the retirement phase. Income poverty and social assistance decreased significantly as a consequence of economic growth and expanding social insurance programmes (see Ravallion 2016). But the most decisive effect of the expansion of the welfare state was the attainment of full employment in the late 1950s and its continuation until the early 1970s. In the OECD economies, a new interplay between state and economy (Shonfield 1965) and a strong position in the world economy based on industrial production succeeded in the conquest of the mass unemployment that marked the 1930s and the demobilization phase after the Second World War. A policy of macroeconomic demand management based on the economic theories of John Maynard Keynes prevailed in the OECD world (Hall 1989) and formed the bedrock for a coordination of economic and social policy. However, the measurement of welfare state outcomes cannot focus exclusively on unemployment rates, well-​being, and income distribution. For instance, when considering old-​age pensions, we have to keep in mind that the expansion of the welfare state by

108    Frank Nullmeier and Franz-Xaver Kaufmann creating comprehensive old-​age security systems institutionalized a whole new phase of the life cycle—​with massive consequences for the life of citizens. The post-​1945 welfare state contributed to a standardization of life cycles and enabled older people to enjoy poverty-​free lives to an extent previously unknown. It created a new gender division of labour and family relationships that were no longer dictated by economic necessity. And it contributed to the development of a middle-​class society, even though it could not prevent the reversal of this trend in the face of changing labour market conditions, the increasing fragmentation of societies, and the growth of an underclass. Finally, one might also consider the set of social policy institutions itself as an outcome—​the bureaucracies that administer and pay out social benefits, as well as the sector of professionals working in health care or other social services. As Paul Pierson (1994) pointed out, the welfare state creates its own apparatus and support base—​which does not, however, mean that it is necessarily protected against cuts and retrenchment. Organizationally and institutionally, the modern welfare state often deals with the consequences and requirements of its own emergence and reproduction; social policy has largely become a kind of second-​order operation focused on internal problems, and hence may, at least temporarily, be out of touch with actual social risks and problems. The growth of the welfare administration is part of the expansion of social policy programmes. As such, the retrenchment phase may also be interpreted as a reaction against a rapidly developing and ever more complex welfare state apparatus.

Dynamics The problem of unemployment reappeared in the 1970s, in the wake of the first and second oil crises, accompanied by rising wages and rising prices. In most countries (Scharpf 1991), this problem overburdened the political possibilities of reconciling capital and labour and disrupted the long and successful path of a coordinated economic and social policy. The rise of the service sector and the growing freedom to choose alternative lifestyles different from the work-​centred way of life propelled issues into the arena of public debate that had previously not been considered in evaluating the welfare state: power relations within families, questions of childcare, the division of labour between the sexes, the acceptance of authority and authoritarian behaviour in all social institutions, the role of consumption, and modes of production that are in conflict with the environment. Discrimination has not received much attention up to the end of the 1960s. The rise of anti-​discrimination movements brought new criteria into play for the measurement of welfare state outcomes and promoted the transformation of the welfare state by new types of regulatory policies and reforms of social services.

Summary The years between 1945 and 1975 brought the emergence of a comprehensive welfare state. The increase in social spending, coverage, and benefits is impressive. Social policy

Post-War Welfare State Development    109 experienced a period of expansion, broadening, and deepening. Social issues were at the centre of public attention. The living conditions of the population in OECD countries improved considerably during this period; poverty was greatly reduced and social policy significantly cushioned the increase in income inequality. But the possibility of such a social policy regime that was so strongly governed by the nation-​state depended on very specific conditions: an economic development strongly supported by the industrial sector, with technological advantages over most other regions of the world; favourable access to raw materials in the course of colonialism and post-​colonialism; a regulation of the world economy that made free global trade compatible with high national wage levels by means of capital controls and fixed exchange rates; and social norms that allowed a standardization of social benefits and social services, while concentrating on the risks of the wage earners. The constituent principles of the Western welfare states and the supporting constellations between capital and labour, social democracy, and Christian democracy became fragile in the late 1960s. On the one hand, social change in terms of the pluralization of ways of life called for a reform of the standardized structures of social programmes. The success of the welfare state and the consumption level in an affluent society weakened the potential for solidarity and led to the emergence of new political cleavages. On the other hand, economic success boosted the growth of wealth and financial capital to an extent that the nationally bounded capital markets and the post-​war currency regime could no longer be maintained. More radical positions on the workers’ side in the late 1960s provoked growing resistance on the employers’ side, who turned to the ideas of neoliberalism and market-​centred neoclassical economic theory to voice their own political concerns. The welfare state of the Golden Age lacked the capacity for inherent stabilization. In the long run, the expansion path provoked economic and political resistance and led relevant actors to search for other options. International developments, as well as domestic structures, contributed to the transformation of the Golden Age into a different kind of welfare state. However, the subsequent history of welfare state development in OECD countries attests to the fact that even neoliberal policies or policies of social investment primarily attuned to the economic market could not roll back the once achieved normative level of post-​war social policy. The key achievement of this period is the creation of the definite normative foundations of the welfare state: the political recognition of universal social right (and not only of social policy in OECD countries, but now also in the Global South; Leisering 2019). After the expansion period of the welfare state, the question up for political debate is to what extent these social rights can be enforced and implemented.

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Chapter 7

Recent Deve l opme nts social investment reform in the twenty-​f irst century Anton Hemerijck and Stefano Ronchi

Introduction In the final quarter of the twentieth century, the tension between welfare states’ social and economic priorities was often described as irreconcilable. Most notably, the US economist Arthur Okun coined the ‘big trade-​off ’ between equality and efficiency (Okun 1975). According to this argument, to the extent that welfare spending is used as a political instrument to reduce inequality, this harms economic growth as a consequence of the market distortions that come with comprehensive social protection. In the mid-​1990s, the Organisation of Economic Co-​operation and Development (OECD) Jobs Study exposed the ‘dark side’ of double-​digit unemployment in many of its West European members (OECD 1994). Okun’s trade-​off seemed to apply to the inclusive, yet expensive, European welfare states, whose economic sustainability was called into question. Welfare retrenchment appeared to be the only way out of economic stagnation, albeit at the cost of greater inequality. As Figure 7.1 reveals, this predicament no longer holds today. In the twenty-​first century, the trade-​off between economic efficiency and social equality does not apply to all advanced economies. If anything, it appears to be the exception rather than the rule: the United States and, to a lesser extent, the United Kingdom and Australia attain relatively high employment levels at the cost of high inequality, given their lean welfare states (the size of the country-​markers in Figure 7.1 is proportional to welfare spending). By contrast, many ‘big’ welfare states in continental and northern Europe are able to reconcile the world’s highest employment rates with comparatively low levels of inequality (upper-​right side of Figure 7.1). To be sure, the employment–​equity success does not hold for all European welfare states. Some big welfare spenders, such as France and Belgium, do seemingly well in terms of redistribution but have failed to raise employment rates above the Lisbon employment

Recent Developments   113 80% UK

75%

Australia

Denmark

Germany

70% Employment rate

Sweden

Netherlands

Austria US

65%

France

Portugal

Czech Rep. Hungary

Poland

60% Spain

Finland

Slovakia Belgium

Italy

55% 50% Greece

45%

60

65

70

75

Equity (reverse Gini index) Cash transfers Benefits in kind

Figure 7.1  Employment rate, equality, and welfare spending (the size of the pie charts) in selected OECD countries (averages 2010–​2015) Source: employment rates: OECD Short-​Term Labour Market Statistics; Gini: OECD Income Distribution Database; welfare spending and reference GDP series: OECD–​SOCX; educational expenditure: OECD Education at a Glance data. Note: only OECD countries with at least 5 million inhabitants are shown; missing data for Canada. The reverse Gini index has been obtained by subtracting the Gini index from 100. The size of the pie-​chart markers indicates the total welfare spending, composed of (a) cash transfers (passive labour market policies, disability, family and housing allowances, old-​ age and survivor pensions, and other social assistance transfers); and (b) benefits in kind (active labour market policies, care and rehabilitation services, home help, childcare and day-​care services, public spending on all levels of both public and private education).

target of 70 per cent. More worryingly, Southern European countries fall short of both objectives: they face low employment and high levels of inequality, despite sizable welfare expenditure. Even though social spending levels have stabilized over the past two decades, practically all European welfare regimes have been recalibrating the basic policy mixes upon which they were built after 1945, most importantly to address new social risks. The countries that went beyond Okun’s trade-​off are those that have pursued ‘social investment’ reform strategies (Hemerijck 2013, 2017). This is partially reflected by the relatively high shares of welfare spending taken by in-​kind benefits (which include investment-​ oriented welfare services) in countries located in the upper-​right part of Figure 7.1, and becomes apparent when comparing Northern European countries with cash transfer-​ based Southern European welfare states. If we extend the analysis beyond Europe to North America and the Antipodes, a further distinction becomes apparent. The United States really stands out for the low public spending on welfare provision, whereas Canada and Australia spend more on social programmes while achieving higher levels

114    Anton Hemerijck and Stefano Ronchi of employment participation. As we argue below, the social investment turn has been variable and truncated by major detours. The next section defines social investment as a sui generis welfare paradigm, distinct from both the Keynesian–​Beveridgean welfare state and its neoliberal critique and analytically rooted in the three interrelated policy functions of lifelong human capital stocks, work–​life-​balanced flows, and inclusive buffers. The third section identifies the trajectories of (non-​)social investment reform that have cross-​cut welfare regimes in the past two decades. Section four takes stock of the impact of the 2008 global financial crisis on subsequent welfare state developments. The final section concludes by reflecting on the challenges and opportunities for welfare reform after the Great Recession, in the face of the social and economic disruption caused by the COVID-​19 pandemic. Most notably, it highlights how high public spending on established social protection commitments seemingly operates as a ‘productive constraint’ to accelerate social investment reform, reinforcing employment and productivity growth to sustain popular welfare states.

Social Investment as a Sui Generis Welfare Paradigm Advanced western welfare states share a common legacy, which dates back to the ‘Golden Age’ of economic and welfare growth. In the post-​war decades, social protection programmes were geared towards providing industrial workers (typically also male breadwinners) with ex-​post income compensation in case of sickness, injuries, unemployment, and for old age. Since the 1970s, exogenous economic and endogenous social change weakened the foundations of post-​war social contracts (Esping-​Andersen 1999). The post-​industrial transformation posed a dual challenge to welfare states. On the one hand, it raised the need to adjust welfare provision to new social risks associated with deindustrialization, globalization, and the feminization of employment (Taylor-​ Gooby 2004; Armingeon and Bonoli 2006). On the other, the economic sustainability of established welfare programmes became an issue, given the increasing costs associated with population ageing at a time of ‘permanent austerity’ (Pierson 2001). Since the late 1990s, before the Great Recession struck, the notion of social investment gained considerable purchase as a novel welfare compass to address economic and social change in an integrated fashion. The social investment perspective shifts the focus of welfare state provision from ex-​ post income compensation to ex-​ante risk prevention and capacitation. The objective is to enhance people’s capabilities and opportunities in post-​industrial labour markets, with a view to ensuring high levels of employment. Increasing the number (quantity) and productivity (quality) of current and future employees in turn bolsters tax revenues, which is necessary to guarantee the financial sustainability of generous welfare states (Myles 2002; Hemerijck 2017).

Recent Developments   115 The focus on ‘capacitating’ social policy goes along with the new social needs of post-​ industrial societies. While ‘old’ social risks could be addressed by passive cash transfers such as unemployment benefits, new risks require a more diversified set of interventions. Policies such as early child education and care (ECEC); education and training over the life-​course; (enabling) active labour market policies (ALMP); work–​life balance (WLB) policies like (paid) parental leave, flexible employment relations, and work schedules; lifelong learning (LLL); and long-​term care (LTC) all share objectives that transcend the compensatory logic of post-​war welfare programmes. They can be considered ‘investment-​oriented’ policies in that they aim to prepare individuals’ human capital and improve WLB opportunities for working families, in particular for an increasing number of women in the workforce. Social inclusion in today’s knowledge-​based labour markets, rather than mere protection against market risks, thus becomes the lynchpin of social investment as a new sui generis welfare paradigm (Hemerijck 2018). Three complementary policy functions underpin the social investment edifice (Hemerijck 2017): (1) investing in quality education and training to raise and maintain the ‘stock’ of human capital and capabilities throughout the life course (lifelong human capital stocks); (2) easing the ‘flow’ of contemporary labour market and life-​course transitions (work–​life-​balanced flows); and (3) granting inclusive safety nets as income protection and economic stabilization ‘buffers’ (inclusive buffers). Human capital stock features prominently in the social investment debate, often focused on education and training policies, in relation to the rise of the knowledge economy. By comparison, post-​war Keynesian–​Beveridgean welfare provision prioritized social protection buffers. The conservative–​liberal critique of the interventionist welfare state of the 1980s instead gave primacy to flows, understood as efficient labour allocation, undistorted by the ‘moral hazard’ predicament of social benefits. From the social investment perspective, the relationship between the functions of stock, flow, and buffer is not only more intimate than it was in the previous welfare paradigms; each of the three functions individually takes on a specific substantive disposition. While buffers in the post-​war era took the form of employment-​related shock-​ absorbers in relatively homogeneous industrial labour markets, today they are required to undergird far more volatile and precarious post-​industrial labour markets. As such, the substantive emphasis of the social investment perspective is on ‘inclusive’ income protection, rather than employment-​related social insurance for labour market insiders. Similarly, while flows in the conservative–​liberal critique are premised on lean social protection and deregulated labour markets, satisfactory flows in the social investment perspective are inherently connected to WLB, which entails an important element of (re-​)regulation of (gendered) employment relations. Finally, human capital stock in both the Keynesian–​Beveridgean welfare state and the conservative–​liberal edifice did not reach far beyond compulsory primary and secondary education. By contrast, the stock effort in the social investment perspective embraces a lifelong commitment to human capital acquisition from early childhood development to active ageing. Social investment synergies thus require both solid social protection foundations and comprehensive, well-​coordinated investments in human capital and WLB policy

116    Anton Hemerijck and Stefano Ronchi reforms in order to be activated. More often than not, however, practical social policy—​ and politics—​deviates from an ideal-​typical social investment reform trajectory.

Reform Trajectories across Advanced Welfare States Historical policy legacies that consolidated different welfare regimes certainly had a strong influence on the trajectories of reform. However, advanced welfare states did not remain ‘frozen’, nor utterly fell prey to liberalizing retrenchment. Although starting from different institutional structures, to varying degrees, they have striven to adjust welfare provision to post-​industrial societies, and now face mounting economic pressures to maintain human capital and employment levels (Hemerijck 2013). In Europe, a turn to social investment has been particularly evident, assertively pushed for by the European Union (EU) (European Council 2000; European Commission 2013). Based on the different timing, pace, and intensity of adjustments, we first group European countries into five clusters of social investment reform trajectories—​‘vanguards’, ‘bandwagoners’, ‘latecomers’, ‘newcomers’, and ‘laggards’—​and briefly discuss core features of welfare reform for these clusters, focusing on the re-​configuration of stock, flow, and buffers policy portfolios. The European overview is then followed by a synopsis of social investment reform, or lack thereof, in the United States, Canada, Australia, and New Zealand, all with Anglo-​Saxon historical roots.

Vanguards The Nordic ‘social democratic’ welfare states were the forerunners of the social investment turn. Denmark, Finland, Norway, and Sweden have traditionally had strong, inclusive income buffers: social protection is a citizen’s right, coverage is fully universal, and all are entitled to the same basic guarantees. The tradition and principles of universalism remain largely unquestioned, even if across-​the-​board cuts in replacement rates (e.g. sickness benefits) or basic guarantees (e.g. family allowances) and a strengthening of the links between contributions and pension benefits have occurred. Besides generous replacement rates, these systems offer a wide array of public social services beyond health and education, which, together with ALMP, encourage and sustain high levels of both male and female participation in the labour market. Alongside cost containment, the leitmotiv of the Nordic welfare reform agenda from the 1990s has been ‘activation’—​the adaptation of social security programmes in a direction that gives beneficiaries incentives and support to find gainful employment. Notably, the ‘active’ turn in the Danish welfare state ultimately gave rise to the highly influential ‘flexicurity’ model that triangulates flexible labour markets in terms of flow, generous

Recent Developments   117 unemployment benefits in terms of buffers, and ALMP with respect to human capital stock—​‘all coordinated to reduce unemployment and improve the quality and supply of workers to the labour market’ (Campbell and Hall 2006: 30). Flexibility in labour market flows is bolstered by comprehensive WLB policy provision, which has favoured the consolidation of the dual-​earner family model. A strong feature of Swedish welfare reform in the 2000s has been the enhancement of work-​friendly family policies, such as ECEC and paid parental leave, so as to enable parents to combine parenthood with employment or education (Palme et al. 2003). Finally, high levels of investment in education and training ensure consistent lifelong human capital stocks, so as to secure a productive workforce. Finland’s record-​high Programme for International Student Assessment (PISA) scores are the best known indicator of that, although austerity has undermined the momentum of the Finnish social investment strategy in the years of the economic crisis (Ólafsson et al. 2019).

Bandwagoners After Nordic welfare states paved the way, countries like the United Kingdom and the Netherlands jumped on the bandwagon of social investment reform, starting from different welfare policy legacies. The United Kingdom may well be the closest European approximation of a liberal welfare regime-​type, with modest social protection, targeted provisions (with the notable exception of the universal National Health Service), and a limited role of the state. After 1997, the Blair-​led New Labour government embarked on ‘Third Way’ reform, fine-​tuning benefit rules to neutralize ‘traps’ created by welfare-​to-​work schemes, and increasing minimum wage and income guarantees, while introducing new targeted programmes to reduce child poverty. Like the Conservatives before them, New Labour minimized regulatory burdens on labour market flow, but its ‘welfare-​to-​work’ strategy was novel. New Labour supported an ‘enabling’ welfare state, contingent upon paid employment (Clasen 2005). Although anti-​poverty and pro-​employment policy priorities were most visible, New Labour also enacted family policy measures addressing children’s early education and care services to improve female employment and work–​family reconciliation in low-​income urban areas (Daly 2010). However, because childcare is privately provided, with targeted tax rebates, its continuing high costs are associated with much (involuntary) part-​time work. While the political narrative of the Blair years was to upscale ‘education, education, education’ for the sake of human capital stock, the United Kingdom skill system has remained somewhat stuck in a suboptimal ‘low-​skill’ equilibrium. The welfare-​to-​work strategy thus combined biased access to (early) education with a high risk of in-​work poverty in the low-​skilled service sector. As a result, it failed to keep inequality under control, despite high employment (recall Figure 7.1). The 2008 Great Recession hit the United Kingdom, with its large financial sector, hard. Almost immediately, New Labour’s social investment turn came under siege by Conservative(-​led) governments. Child benefits were frozen and family

118    Anton Hemerijck and Stefano Ronchi tax credits reduced, and a new Universal Credit replaced all other out-​of-​work benefits, premised on more punitive activation requirements. Going against the European social investment trend, well before Brexit, the conservative political rhetoric harked back to the 1980s ‘big trade-​off ’ axiom that generous welfare provision traps poor families in welfare dependency. Differently from the United Kingdom, the Netherlands comes from the male-​ breadwinner social insurance tradition typical of continental Europe, and presides over well-​established inclusive social assistance and basic and contributory pension income buffers, together with a well-​balanced education and vocational training stock system. The Netherlands was the first country to adopt a more encompassing approach to continental welfare restructuring and employment creation, starting the reform process in the 1980s. Through revived corporatist negotiations, Dutch policy makers aligned wage restraint, cuts in social benefits, and first steps towards activation, with the expansion of flexible, part-​time service-​sector jobs, which boosted female employment (Visser and Hemerijck 1997). Dutch part-​time jobs are normal jobs in the sense that wages are set by collective bargaining and access to social security and pensions is guaranteed; voluntary part-​time work is widespread, reinforced by private childcare provision. In the new millennium, activation programmes based on individual guidance and training opportunities—​especially those that target ‘outsiders’ such as youngsters, females, or low-​skilled workers—​gained special importance. Post-​crisis welfare politics in the Netherlands represents a backlash against social investment, admittedly coming from relatively high standards of stock, flow, and buffer policies. With its highly financialized economy, the Dutch government had to bail out four of its six international banking groups. While parental leave was extended for each parent, in the aftermath of the 2008 global financial crash, childcare subsidies have been curtailed for families in high-​ income brackets.

Latecomers Another group of countries started to move on social investment later, in the mid-​ 2000s, before the outbreak of the economic crisis. Once again, we take as examples two countries whose welfare policy legacies differ—​Germany, the ideal-​typical Bismarckian welfare state, and Spain, with strong traits of the familialist Southern European model. Around the start of the twenty-​first century, Germany was brandished as the ‘sick man’ of Europe. The root cause of the continental syndrome lay in the combination of four distinct institutional traits: the generosity and long duration of insurance-​based income replacement benefits, the mainly ‘passive’ compensatory nature of such benefits, contributory financing, and high minimum wages (Eichhorst and Hemerijck 2010). After the failure of labour-​supply reduction policies in the 1980s and 1990s (e.g. early retirement), Germany decidedly shifted gear in the early 2000s. The so-​called Hartz reforms (2002–​05) rationalized unemployment insurance and social assistance in a two-​layered benefit system, closely bound to work activation. At the same time, the reforms further

Recent Developments   119 bifurcated the labour market through the introduction of poorly protected mini-​jobs (Hinrichs 2010). A more comprehensive shift towards social investment subsequently materialized in the area of family and childcare policies (Seeleib-​Kaiser 2016). The Red–​ Green governments led by Gerhard Schröder began the trend by putting childcare on the agenda, with tax deductions for parents taking up childcare facilities so as to stimulate demand, especially among low-​income families. The Angela Merkel-​led Grand Coalition of CDU/​CSU and the SPD then considerably expanded public childcare facilities and tax reimbursements to cover childcare costs and introduced a new parental leave benefit. Among South European welfare states, Spain has made the most headway in the direction of social investment. Unlike Italy and Greece, before the crisis, Spain sought to introduce flexibility in the labour market: in 1997 and 2001, labour laws partially relaxed protection for core employees to facilitate labour market flows and upgraded social security buffer rights of non-​standard workers (Guillén and León 2011). A new social assistance scheme—​Renta Activa de Inserción (Active Integration Income)—​was introduced in 2000 to complement regional schemes, and was coupled to tougher activation and job offer requirements. Spain’s Achilles’ heel, however, remains its high level of (youth) unemployment, which skyrocketed after the crisis. Relevant advancements were made in the field of work–​family reconciliation and care policies. In 2006, the centre-​left introduced a national law for long-​term care (Ley de Dependencia), which moved some steps away from a traditionally familialist model (León and Pavolini 2014). Following the onslaught of the global financial crisis, austerity and welfare retrenchment became the rule, and the conservative government rolled back many programmes. Although the government change of 2018 brought a further turnaround in social politics, austerity constrains investment in welfare innovation.

Laggards Contrary to Germany and Spain, France and Italy have not (yet) moved away from the welfare-​without-​work policy conundrum. France, today the largest European welfare state in terms of spending, has retained a bias to passive compensation over active welfare services (recall Figure 7.1). This is not to say that the French welfare state has remained unaltered. Some changes were introduced: since the 1990s, France incrementally expanded its already comparatively advanced system of family and care policies, and, following other countries in northern and continental Europe, attached stricter activation requirements onto recipients of minimum income support, while also expanding more inclusive in-​work benefit buffers for low wage earners (e.g. the French prime pour l’emploi). As testified by stagnant employment levels (Figure 7.1), French governments—​right and left—​failed to boost labour market flows, nor were they able to adjust WLB arrangements so as to favour women’s employment. If the Dutch, German, and Spanish experience suggests that, in terms of reform sequencing, the upgrading of employment flows for working parents and improvements

120    Anton Hemerijck and Stefano Ronchi in ECEC are often preceded by an assertive effort to liberalize the labour market, the French case seems to be the exception that proves the rule. On this score, both Presidents Sarkozy and Hollande proved unable to push through a Hartz-​like reform in the French welfare state. (Surely, the Dutch and German experiences reveal that intrusive reforms take time to materialize.) Meanwhile, President Emmanuel Macron did make the French labour market more flexible, and the benefit system less pension-​biased. His 2018 poverty plan was to improve education for poor children, introduce compulsory job training for school leavers under eighteen, and upgrade child provision for French families, especially for those living in poverty, while merging various types of benefits into a single ‘universal activity revenue’ buffer. In other words, there may in fact be light at the end of the tunnel of French social investment. Italy, on the other hand, is the exemplar case of non-​social investment reform, stuck in a suboptimal-​employment-​plus-​high-​inequality equilibrium with high levels of elderly-​biased social spending. Small steps were taken by centre-​left coalition governments at the turn of the century in the fields of family and labour market policies, but these fell short of breaking with the passive welfare policy legacy. The centre-​right government led by Berlusconi (2001–​06), privileging a welfare model based on family and community support, put social services and family policy aside (Riva 2016). These political setbacks left Italy without provisions to mitigate new social risks and fight social exclusion by the mid-​2000s. The most notable reforms came after the crisis, and are largely characterized by retrenchment, as seen in the pension reform under the Monti government, which also advanced a process of labour market liberalization subsequently carried forward by the centre-​left government led by Matteo Renzi. Although income buffers were improved in terms of inclusiveness, overall, WLB and human capital investments were side-​lined in the reform endeavour (Vesan and Ronchi 2019). Both in France and in Italy, austerity measures and subtractive pension and labour market reforms (or attempts thereto) were politically contested, triggering strong protests and populist backlashes. The starkest example is the Lega-​Five Star Movement government that formed after 2018 elections in Italy, which backtracked on the pension reform of 2011 and expanded short-​term compensatory policies, rather than paving the way for future-​oriented social investment reforms.

Newcomers Undoubtedly, the new EU member states of Central and Eastern Europe (CEE) have witnessed the most radical political and economic transformation of any of the European welfare states. Since the fall of the Berlin wall, social policy change in post-​communist CEE has taken on the aspect of ‘system transformation’, rather than ‘catching up’ with the older member states of the EU. The high growth catch-​up of these new member states has been accompanied by gradually more inclusive buffer provision, layered with investments in education and research and development, especially in the Baltic countries (Avlijaš in press). The

Recent Developments   121 expansion of family policies took centre stage in Poland during the 2000s, surprisingly pursued by conservative right-​wing governments under Donald Tusk, who significantly expanded childcare places, while extending the duration and generosity of parental leave. Although driven largely by nationalist, pro-​natalist objectives, the reforms consistently improved welfare provision for working women: if not the ends, the ‘means’ were largely in line with social investment (Plavgo and Sobocinski 2018). In other words, the illiberal backlash in Eastern Europe does not (yet) seem to be eroding social investment or halting employment performance. However, social investment is under pressure by both familialist-​conservative politics, favouring a traditional male-​breadwinner model, and fiscal consolidation in many parts of Eastern Europe.

Social Investment Reform in North America and the Antipodes After the OECD 1994 Jobs Study decried high-​spending European welfare states for their poor employment record in comparison to the United States, one of the more striking developments has been progressive employment growth in the more generous EU welfare states. Meanwhile, in the United States, employment began to stagnate. Even more surprisingly, the United States’ far more aggressive fiscal stimulus and its earlier turn to quantitative easing in the aftermath of the global financial crisis, intended to protect jobs, did little to dent this paradoxical reversal of fortunes (see Figure 7.2).

Figure 7.2  Total employment rates (squares) and female employment rates (triangles) in the late 1990s and 2018 in twelve OECD countries Source: OECD Short-​Term Labour Market Statistics. https://​stats.oecd.org/​index.aspx?queryid=35253. Note: a Since 1999 employment rates are not available for all countries, we used other reference years for the Netherlands, the United Kingdom, and Poland (2000 instead of 1999), Sweden (2001), France (2003), and Germany (2005).

122    Anton Hemerijck and Stefano Ronchi Declining labour force participation in the OECD area is often associated with demographic ageing, but arguably populations have been ageing more rapidly in the EU than in the United States. Two additional explanatory factors, both directly bearing on social investment or rather lack thereof, lie behind the comparative decline in US labour force participation over the past decades. One bears on growing skill mismatches in the labour market in the transition to the knowledge-​based economy and the other on falling rates of female labour force participation. In the late 1990s, the United States was second to Sweden in terms of women participating in the labour market. In the twenty-​first century, US female employment plateaued, while advanced European economies, such as the Netherlands, Austria, Germany, and the United Kingdom, but also Australia, New Zealand, and Canada, surged ahead (Figure 7.2). American exceptionalism can be attributed to the lack of paid maternity leave, affordable ECEC, and non-​penalizing flexible working-​time arrangements. On these capacitating support policies, many other countries made considerable gains. Similarly, stagnating US labour force participation is associated with underdeveloped (re-​)training and ALMP for workers who require enabling policy support for easing labour market transitions. As it can be observed from Figure 7.1, US public spending on both social protection and social services is extremely low compared to other advanced economies. The US welfare state relies more heavily on tax incentives, means-​testing and private provision and stands alone in not providing universal health insurance (Howard 1997). Even though private and public social spending combined may approximate overall social expenditures in continental Europe, the fragmented structure of the US welfare policy mix, riddled with veto points and strong private actors, has made it practically impossible to tilt the balance towards social investment reform in recent decades. While core public programmes like Social Security and Medicaid have not been dismantled, the US welfare state’s redistributive portent, according to Hacker and Pierson (2011), has been weakened dramatically in favour of the super-​rich. Barely sustaining large social insurance programmes, the policy space for social investment reform has been effectively pre-​empted. President Barack Obama’s endorsement of social investment in his 2015 State of the Union address (Obama 2015), promising better access to high-​quality early care and education as a ‘must-​have’ for middle-​class American families, forcefully explicating that: ‘It’s times we stop treating childcare as a side issue, or a women’s issue, and treat it like the national economic priority for all of us’, seemingly fell of deaf ears. In 2019, President Donald Trump could take easy credit for unemployment at an all-​time low of 3.5 per cent. However, the total labour force participation rate held sway at 63 per cent, the lowest level since the late 1970s (OECD 2020). If we coin the US welfare state as a social investment non-​mover, most other non-​ European liberal welfare states do seem to have joined the social investment bandwagon countries on the wing of rising levels of (female) employment. At first sight, the prospects for social investment reform appear doubtful in less inclusive liberal welfare states, biased towards market-​conforming reform strategies, as they lack a left-​of-​centre political support basis. However, in comparison to the United States, Canada, Australia, and New Zealand, all do preside over higher levels of public expenditure and taxation,

Recent Developments   123 backed also by stronger pro-​welfare political forces and trade unions. The Canadian province of Quebec, akin to Germany, has assertively been transformed from a male-​ breadwinner laggard into a Canadian social investment vanguard. By the late 1990s, key political and social actors agreed on an encompassing social pact with ambitious social investment reform, centred around family policy, which subsequently succeeded in increasing labour market participation, limiting the rise of inequality, and reducing poverty (Noel 2017). Similarly, Australia experienced significant extensions in family policy, paid parental leave, ALMP, and human capital development, together with the reintroduction of universal health insurance (Smyth and Buchanan 2015). New Zealand today surely is the poster child of social investment among liberal welfare states, and perhaps even worldwide. Since the early 2010s, successive governments in New Zealand have pursued an ambitious social investment reform and early intervention agenda across all tiers of the public sector in an evidence-​based manner (Baker and Cooper 2017). In 2017, a Social Investment Agency (SIA) was established to mainstream public administration on the priority of intergenerational well-​being. In 2019, under the helm of Prime Minister Jacinda Ardern, the fiscal budget was emphatically centred around ‘well-​being’ priorities, including significant spending commitments to (mental) health and education, mitigating social disadvantage, reducing child poverty, and fighting domestic violence (OECD 2019).

Welfare Lessons from the Great Recession Ten years after the first economic crisis of twenty-​first-​century capitalism, advanced welfare states seemed to have passed the nadir of the Great Recession. When the COVID-​19 pandemic broke, recovery, however timid, was under way, employment was growing, and unemployment and poverty were coming down. The jury is still out on whether economic and job growth will return to pre-​crisis levels. Even before the COVID crisis, unemployment remained high, especially in the Southern European economies heavily scarred by the euro crisis, such as Greece and Spain. The political aftershocks of the Great Recession, ranging through Brexit, the rise of populism (boosted by the European migration crisis), the spread of illiberal nationalism in Eastern Europe, and escalating trade tensions between China and the United States, confront advanced models of welfare capitalism with novel adaptive challenges. As discussed in the previous section ‘Reform Trajectories across Advanced Welfare States’, advanced welfare states came to the global financial crisis with profoundly different mixes of stock, flow, and buffer policies. While some welfare arrangements proved effective in cushioning the economic and social shocks produced by the crisis, others were unable to contain the outburst of unemployment, poverty, and social exclusion. Moreover, the widespread turn to austerity that followed the euro crisis not only

124    Anton Hemerijck and Stefano Ronchi hindered the progress of social investment in the EU, but also induced policy reversal in some European countries that had previously started to embrace social investment. On the other hand, the earlier shift to quantitative easing, together with a more aggressive fiscal stance, did not suffice to turn the low employment tide in the United States. Based on recent empirical evidence, we can draw a number of fundamental social policy lessons from the Great Recession. We summarize them in the six points that follow. (1) Overall, the past two decades of welfare reform have witnessed a general move towards social investment. Before the global financial crisis struck, with few exceptions (i.e. ‘laggard’ countries in the previous section), social investment recalibration had become the fil rouge in welfare reform among Europe’s mature welfare states. Policymakers in these countries recognized that in the face of intensified demographic ageing and disruptive technological change, future economic growth will rely heavily on high levels of employment and improvements in productivity. Today, there is ample proof that social investments in human capital and WLB policy, in a complementary fashion, significantly contribute to (female) employment, productivity, demographic balance, improved fertility, increased tax revenue, reduced long-​term reliance on compensatory social protection policies, and lower worklessness—​one of the main determinants of poverty (for a review, see Hemerijck 2017: ­chapter 1). (2) While automatic stabilizers are good at buffering the social impact of unemployment, social investment works as an ‘ex-​ante employment shock absorber’, reducing job loss in a preventative fashion. The Great Recession was triggered by a financial crisis, just like the Great Depression, and not by a stagflation real-​economy crisis as in the 1970s and 1980s. Thus, it constituted a real stress test for the Keynesian–​Beveridgean social security buffers introduced after 1945, which act as an ‘automatic stabilizer’ to cushion the crisis through anti-​cyclical consumption smoothing (i.e. unemployment benefits offering income support to those who lose their jobs). Automatic-​stabilization social security, largely absent in the 1930s, indeed provided the largest stimulus in most European welfare states while protecting household income after 2008 (Armingeon 2012; Ólafsson et al. 2019). What is more interesting, for it constitutes a real novelty in post-​industrial welfare provision, is the capacity of social investment in cushioning the employment shock in the first place; that is, by shoring up employment before the need for traditional automatic stabilizers to intervene. While the employment prospects of people living in countries that spend more on social investment remained almost constant throughout the crisis years, they deteriorated drastically for those living in countries less inclined to social investment (this holds true when controlling for macroeconomic and individual factors: Ronchi 2019; see also Nelson and Stephens 2012 and Bakker and Van Vliet 2019 on the employment-​enhancing potential of social investment). (3) Positive institutional complementarities emerge between social investment policies and more traditional social protection policies. To wit, social investment

Recent Developments   125 works better when supported by inclusive social protection buffers and vice versa. Complementarities between different social policies have recently become the subject of empirical analysis, which showed how higher public spending on social investment reduces the work disincentive sometimes attached to out-​of-​ work cash transfers (Ronchi 2019). By the same token, the unintended unfair outcomes which are often attributed to social investment—​generally referred to as ‘Matthew effects’ (Bonoli et al. 2017)—​result mitigated where buffer policies are more generous (Hemerijck et al. 2016; see also Bakker and Van Vliet 2019). If these first three messages reveal that ‘social investment works’, other lessons have to be considered, which nuance the overall positive picture. (4) Social investment recalibration was hardly viable within the narrower fiscal space left by the austerity turn which followed the sovereign debt crisis in the EU. After the outbreak of the euro crisis, social investment reform came to a halt in most EU member states, even in those which embarked on that policy path in the early 2000s (Bouget et al. 2015; Ronchi 2018). Needless to say, the countries that would need social investment reform the most are those in which the economic crisis and fiscal constraints bite harder, thus favouring retrenchment over progressive welfare reform. This predicament seriously risks bringing about further divergence across already unequal European welfare states, casting a shadow on the future prospects for social investment in the EU—​the world region that has most favoured the progress of such policy strategy (Esping-​Andersen et al. 2002; European Commission 2013). (5) Policy incomplementarities persist in those welfare states that did not reform before the outbreak of the crisis, and that find it hard to expand social investment now. As argued above, many countries of the EU are far from having balanced portfolios of stock, flow, and buffer policies. In times of austerity, policy complementarities are very hard to put in place. Fiscal consolidation leaves little space for expanding individual social policies, let alone for coordinated investments in multiple policy areas. When they come in isolation, activation-​only policy provisions can drift into workfare rather than truly inclusive social investment (Bonoli 2012), especially when they are not built on adequate minimum income guarantees. Work per se is not always a sufficient guarantee against poverty. On the other hand, there is no such thing as zero-​cost investment in capacitating social services (León 2017). Cheap services often mean low-​quality services, based on poorly paid, poorly trained workers, or subcontracted to private providers who follow market prices, thus leading to social bias in access (e.g., in the case of education and childcare policies in the United Kingdom), in turn conducive to gendered Matthew effects (poor mothers prefer to stay at home to take care of their children themselves, instead of paying very expensive crèches). (6) Social investment harbours long-​term effects, which clash with the short-​term perspective of national politicians and with the fiscal consolidation priorities of today’s EU. While cash transfers almost immediately benefit welfare recipients, the returns on investments in education, work–​family reconciliation, and activation

126    Anton Hemerijck and Stefano Ronchi policies manifest themselves in the long term. As Ferrera (2017: 1233) framed it, ‘[t]‌he temporal mismatch between social investment reforms and their returns requires a degree of “political patience” on the side of both current voters and incumbent politicians which is not readily available in contemporary democracies’. In the decade following the global financial crisis, the potential of the European social investment strategy was curtailed by the predominance of fiscal austerity across the Economic and Monetary Union (EMU). The in-​built inconsistencies of the EMU favoured austerity and retrenchment, rather than upward recalibration towards social investment. In July 2020 the EU reached an agreement over a COVID-​19 pandemic Recovery Fund of about 750€ billion euro. The Next Generation EU Recovery Fund conjures up a major breakthrough. For the first time in history the European Commission will raise debt on behalf of the member states at a low interest to finance direct fiscal transfers to countries in need. The Recovery Fund is bound to stabilize the Eurozone economy, while at the same time allowing laggard countries to recalibrate their welfare states more assertively in the direction of social investment.

Challenges and Opportunities for Social Investment Reform after the Great Recession As we have argued in this chapter, the social investment turn has been variable and rather truncated across the OECD. Even within the EU, the institution that endorsed this welfare blueprint the most, reform trajectories have been heterogeneous. With their tradition of high female and older worker employment and quality public services, the Nordic social investment vanguard countries continue to display the strongest social investment profile. Social investment progress was achieved in the bandwagon countries of the Netherlands, on WLB and inclusive activation, and in the United Kingdom with respect to fighting child poverty, although the crisis has dampened the reform momentum. Among the latecomers, the German experience has been radical. In the wake of the Hartz reforms, successive German governments introduced parental leave, including strong incentives for women to return to work and for fathers to also take up care leave, and massively expanded public childcare. Social investment catch-​up is discernible across a host of newcomer countries, with a strong emphasis on education and family support, but with male-​breadwinner backsliding in illiberal democracies. In Greece and Italy, by contrast, the social investment impetus remains blocked, while France’s social investment future is uncertain. Outside Europe, except for the United States, social investment reform took root in Canada, Australia, and New Zealand. We conclude on a sanguine note and a somewhat more pessimistic policy lesson. With some country-​specific exceptions, we discern a master trend of gradual social

Recent Developments   127 investment policy diffusion. Even if policymakers worry about the belated returns on, for example, investments in early education in terms of labour productivity, their electorates—​increasingly composed of working parents—​care deeply about quality education for their offspring (Iversen and Soskice 2019). Moreover, as social investment programmes become institutionalized, they create clienteles, which in turn drive up quality standards for new welfare services, exactly like social security programmes in the past. As we know from Paul Pierson (2001), welfare reform is difficult. This is particularly true of big-​spending European welfare states, where compensatory public pre-​commitments, especially in the area of pensions, are vast. When benefit curtailment is difficult, fiscally responsible EU-​member governments are inadvertently forced to explore other reform alternatives. To the extent that social investment reforms raise (female) employment participation and labour productivity, they in effect put the carrying capacity of expensive, yet popular, European welfare states on a more sustainable fiscal footing. Although the Next Generation EU Recovery Fund will possibly allow more fiscal space to economically weaker member states in the post-​COVID years, it is undeniable that the rigidity of the EMU governance under the Fiscal Compact hindered counter-​cyclical social investments in EU countries in dire fiscal straits. With this caveat in mind, however, it could be argued that high-​spending European welfare states entertain a ‘beneficial constraint’ to trigger upward social investment recalibration precisely because intrusive retrenchment is impeded by comprehensive social benefit pre-​commitments. By the same token, the US welfare state, with its very limited public social spending commitments, lacks a sizeable ‘beneficial constraint’ for upward social investment recalibration. This is not to say that liberal welfare regimes are ill-​disposed to social investment reform. The point, rather, is that where productive constraints lack critical mass, progressive politics and policies are all the more important, as in Quebec around the turn of the century and New Zealand after 2010. The notion of social investment speaks to an evidence-​based policy agenda of positive returns on investments, open to monitoring concrete social progress on the basis of relevant economic inputs. Upward social investment recalibration in Canada and the Antipodes are intimately associated with growing levels of female employment participation. Moreover, a cultural factor is relevant to the popularity of social investment in liberal welfare regimes beyond the United States. The idea of ‘well-​being’, strongly associated with the ‘capabilities approach’ of Martha Nussbaum and Amartya Sen (1993) and its emphasis on the ‘flourishing lives’ that people wish to lead, better coheres with notions of individual freedom and opportunity than the heavier European image of a social contract based on organized solidarity.

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PA RT   I I I

A P P ROAC H E S

Chapter 8

Research M et h od s Edwin Amenta and Alexander M. Hicks

Introduction The literature on welfare states and social policy has benefited from a wide-​ranging debate across theoretical perspectives and methodological approaches. Scholars from different theoretical points of view have sought to examine claims across a vast stretch of empirical terrain. They have sought to develop and appraise hypotheses with methods ranging from the detailed examination of a policy sequence in one country to pooled cross-​sectional and time-​series analyses of social spending across all capitalist democracies. In this chapter, we review some of these methodological approaches and address some of their achievements and drawbacks. Scholars’ main focus has been on social spending, either overall or broken down into various types, such as transfers and services, or different functions, such as for health or old age. Social spending in turn has been understood mainly in terms of its ‘effort’ or its amount as a percentage of economic activity (Wilensky 1975), with some attention to per capita spending (Pontusson 2005) and per-​household-​income replacement rates (Allan and Scruggs 2004). Scholars have also addressed the adoption of major social programmes in the first half of the twentieth century (Collier and Messick 1975; Hicks 1999). Moreover, scholars in this area have sought to make sense of social policy ‘regimes’, or overarching configurations of policy (Esping-​Andersen 1990; Castles 1997). In addition, scholars have sought to understand the retrenchment of social policy since the 1980s, both in terms of alterations in programmes and reductions of spending (Pierson 1994; Hicks 1999; Swank 2002; Allan and Scruggs 2004). In the new century, scholarship has often broken past these bounds to examine more detailed questions and to examine programmes outside the usual definitions of social policy. A wide variety of theories and hypotheses about social policy and welfare states has been developed and appraised. Theories have focused on modernization (Wilensky 1975), class struggle (Korpi 1983), political partisanship (Castles 1989), political institutions such as states and party systems (Skocpol 1992; Pierson 1994), interest groups (Pampel and Williamson 1989), social movements (Amenta et al. 2005; Htun and Weldon 2012),

134    EDWIN AMENTA and ALEXANDER M. HICKS cultural, world-​societal influence (Strang and Chang 1993), and gender (Orloff 1993b; for reviews, see Amenta 2003; Hicks and Esping-​Andersen 2005). In most instances, researchers have devised a similarly extensive range of empirical appraisals of theoretical claims. In scholarship on welfare states, there has been an unusual and fruitful dialogue between quantitative and qualitative historical research (Amenta 2003; Pierson 2007). In our review of methods in the study of welfare states, we focus on what Amenta (2003) has termed ‘causal research’. This sort of scholarship deploys self-​conscious research methods to appraise theory and hypotheses in some significant way (Gerring 2007) or develops theoretical claims that are transportable in some fashion, such as in setting scope conditions on hypotheses (George and Bennett 2005), or both. The welfare state area as a whole has benefited from researchers addressing similar subject matter empirically from a variety of methodological approaches (Hicks 1999; Huber and Stephens 2001). The literature has been shaped by its focus on decisions made by states, including the adoption of specific policies, or long-​standing lines of state action, including individual programmes, that typically have consequences that are often easily measurable, such as the amount of spending devoted to programmes. It has led to historical inquiry regarding the adoptions and contractions of these policies and programmes and to quantitative and formal qualitative assessments of spending outputs. Given concern with outputs at the state level, the universe of plausible cases for examination has typically consisted of national states. Studies have mainly been of observational data employing convenience samples shaped by data availability. In what follows, we address these approaches. We do not provide an exhaustive review of all possible research and focus on examples, often from our own work. The latter spans in-​depth historical analyses of a single-​country case to historical analyses of a few countries to Boolean Qualitative Comparative Analyses (QCA) across medium-​ N samples of countries and subnational polities, to cross-​sectional and pooled cross-​ sectional and time-​series analyses of countries and subnational polities. We do this to show the variety of methodological work in the area and to highlight the advantages and disadvantages of different approaches. We conclude with suggestions for synthesizing, triangulating, and combining methods in order to minimize the disadvantages and maximize the advantages of different approaches.

Approaches to Causal Research To situate different research approaches, we make broad distinctions between comparative and historical work. By comparative studies, we refer to studies that address the experiences of two or more country cases (Rueschemeyer 2003) and that make significant macro-​level comparisons in the aid of causal inference. By historical studies, we mean ones that include significant over-​time variation in potential causes and place a premium on a deep knowledge of cases, path-​dependent arguments, and a reliance on primary research (Amenta 2003). However, the main criterion for studies to fit our focus is that studies must take causality seriously in a double sense: to attempt

Research Methods   135 Table 8.1 Causal research according to methodological approaches Comparative approach Historical approach

No

Yes

No

Neither: cross-​sectional quantitative analyses of within-​country subunits; medium-​and small-​N analyses across subunits (1)

Comparative only: cross-​national small-​N analyses of particular periods; formal qualitative (QCA) or cross-​sectional quantitative analyses across countries (2)

Yes

Historical only: analytical historical case studies; time-​ series analyses of one country (3)

Comparative and historical: small-​N comparative and historical analyses; panel, and pooled time-​series cross-​sectional analysis (4)

to explain important welfare state developments by the systematic appraisal of alternative hypotheses; to appraise, modify, or produce something at least partly theoretically transportable—​a line of causal argumentation conceptualized so as to apply to other cases or time periods deemed analytically similar (see Table 8.1). Each of the categories includes both qualitative and quantitative studies. For instance, historical research may include primary document analyses of the development of policy in one country; or quantitative time-​series analyses of spending in a country; or formal, qualitative event structure analyses of policy adoption. Similarly, comparative and historical research may mean the analysis of the adoption of policy across a small-​N sample of countries selected in a most-​similar-​systems design or the quantitative analyses of pooled time series and cross-​sections of social spending among capitalist democracies or event history analyses of programme adoption across the world. Some methodological techniques may fall into more than one of the boxes; standard ordinary least squares (OLS) cross-​sectional regression can be used across countries, subnational polities, or individuals, for instance. We discuss techniques in terms of the methodological approach, and the cell of Table 8.1 with which a technique is most closely associated.

Neither Historical nor Comparative Causal Studies It is possible, however, for a study to be neither historical nor cross-​nationally comparative, but still causal. The most notable examples are within-​country analyses, using either large-​N statistical techniques or formal qualitative ones analysing policy differences in federal polities across individual subunits (Amenta et al. 2005), small-​N qualitative analyses across similar units, and studies of individuals (e.g. citizens, voters) analysed through survey data (Goodin et al. 1999) (see column 1 in Table 8.1).

136    EDWIN AMENTA and ALEXANDER M. HICKS The main advantage in examining one country at one point in time is that many potential causes at the macro-​political and macro-​social level are held constant. In studies of subnational polities, long-​term conditions such as the overall political system and language are typically the same. So, too, are more short-​term systemic conditions, such as the national political regime, state of the economy, and so on. An additional advantage is that the process by which data are collected is often similar across cases, as when national government agencies gather information about programmes administered at the subnational level. These studies also often can yield tests of hypotheses that are sometimes difficult to examine cross-​nationally, in that there may be more variation on some important causal conditions in subunits in one polity than across country-​level polities. In the United States in the middle of the twentieth century, for instance, there was substantial variation among states in democratic political institutions, with some polities greatly restricting such basics as voting rights and others extending these practices widely (Mayhew 1986; Amenta and Halfmann 2000). However, the main advantages of such studies for adequate explanations of a given case also serve as a disadvantage in developing portable theory. The arguments may be closely bound to specific macro-​social and -​political conditions in ways that are not theorized and thus often make it difficult to sift out what is truly transportable in theoretical claims and what is specific to the case at hand. One critic (Pierson 2007) of quantitative political science research in US politics argues that it makes extensive general claims that are rarely formulated with explicit scope conditions or tested beyond the borders of the United States.

Comparative Studies Strictly comparative studies (see column 2 in Table 8.1) encompass some small-​N comparative studies and many early cross-​national quantitative studies of social policy expenditures and policy adoptions. Small-​N comparative studies also often are at least implicitly historical in approach, but some focus on delimited time periods and in their argumentation deploy Mill’s or similar non-​dynamic methods of demonstration across comparative cross-​sections. We refer to this as informal systematic comparison. In the comparative category, we also place cross-​national QCA studies (Hicks et  al. 1995), though QCA may be deployed on any sort of cross-​section.

Systematic Comparison The most rudimentary of systematic comparative methods utilized in sociology is ‘systematic comparison’. This method typically involves the identification of very strong and simple empirical patterns of traits across nations and often relies on Mill’s method of agreement and difference. An instance of such a strong pattern can be found in Hicks

Research Methods   137 (1999, 37), in the association between economic development and early welfare state ‘consolidation’. With development measured as per capita real income over $2000 in 1913 (in 1980 dollars) and early welfare state consolidation meaning the adoption of at least three of the four major types of social insurance programmes (workers compensation, old-​age pensions, health care, and unemployment compensation), by 1920, Hicks finds that non-​developed cases are always cases of no welfare consolidation. This pattern suggests that development is a necessary condition for welfare state consolidation. For an association to be regarded as supportive of a proposition investigated by means of systematic comparisons, the pattern must be very strong and simple enough for eyeballing. Here, ‘strong’ almost always means simple logical relations such as ‘A is a sufficient condition for B’, ‘A is a necessary condition for B’, or ‘A is a sufficient and necessary condition for B’. The cases in which systematic comparisons can yield such clear results are rare, however. Moreover, theoretical claims are usually more complex, and only rarely will one-​factor theories provide much analytical leverage.

Crisp-​and Fuzzy-​Set Qualitative Comparative Analysis These circumstances promoted the development of qualitative comparative analysis (QCA), which extends and goes well beyond systematic comparison. Relying on set logic, QCA makes it possible to isolate conditions that are necessary and/​or sufficient for specific outcomes (Ragin 1987, 2008). The goals and logics of using these analyses are somewhat different from those of social science research, in which the explanation of variance is stressed. By using these methods, one selects an outcome measure and seeks to test or devise an explanation for it. Crisp-​set QCA limits analysis to strictly dichotomous qualitative outcome and explanatory variables (for which elements are in a set with a probability of either 1 or 0). Instead of focusing on how much a given measure adds to explained variance, crisp-​and fuzzy-​set QCA addresses conjunctural causation—​the likelihood that two or more conditions must occur simultaneously to produce a result. They also address the possibility of multiple causation—​that more than one causal path will lead to a result. QCA can generate solutions that are accompanied by quantitative assessments of the strength of results. QCA not only identifies conjunctions of causal factors; it also focuses on the likelihood that given conjunctions of causal factors generate a given outcome (Schneider and Wagemann 2013). Most extant work has been done through crisp-​set analyses, and advancing beyond the example above can show QCA’s value. Say we hypothesize that union strength, left party strength and Catholicism and are all potent causes of welfare programme consolidation in 1920 and construct dichotomous measures of each of these variables (see Table 8.2). A visual assessment of the table suggests an imprecise pattern. Yet, applying the QCA algorithms produces this tidy solution: Welfare Consolidation  =  [Early Union Strength and Early Strong Left Party] or [Early Union Strength and Catholicism]

138    EDWIN AMENTA and ALEXANDER M. HICKS Table 8.2 Welfare programme consolidation in early democracies and proto-​democracies,  1920 No welfare consolidation Non-​Catholic

No welfare consolidation Catholic

Welfare consolidation Non-​Catholic

Early union strength; early strong Left

–​

–​

Australia, Denmark, Austria, Sweden Belgium, Germany

Early union strength; no early strong Left

–​

–​

–​

Netherlands

No early union strength; strong Left

Canada, Norway, US

France, Switzerland

–​

–​

–​

–​

–​

No early union strength; no –​ strong Left

Welfare consolidation Catholic

In this instance, early union strength is part of both solutions. To produce welfare consolidation, however, also needed is a strong left party or Catholicism. If unions are strong in a Catholic country, a coalition will form to generate ample welfare programme legislation, even in the absence of a strong left party. Fuzzy-​set QCA (fsQCA) allows elements to have degrees of inclusion in a set that vary from zero to one and offers several advantages over crisp-​set QCA. FsQCA can address theoretical instances where cases do not completely fit a set and can exploit the information in data sets that is lost when measures are reduced to dichotomies for crisp sets. In addition, fsQCA provides better estimates of the coverage of any given solution (the degree to which the solution or solutions overlap with the outcome set) and the consistency of the solution (the degree to which cases with a given combination of causal conditions constitute a subset of the cases with the outcome). This more precise fuzzy form of analysis has been employed on analyses of poor employment growth (Epstein et al. 2008) and retrenchment (Hicks and Freeman 2009). The analytical advantages of QCA include encouraging more complex theorizing and testing than quantitative techniques usually offer and being able to appraise such claims. It is far easier to think in terms of multiple conjunctural causes when there are means to analyse how well they fit relevant data. QCA is also advantageous in circumstances, common to welfare state research, where the number of (country) cases is too few for extended statistical analyses, but too many to permit conclusions based on inspection. However, there are drawbacks to QCA as well. With QCA in any form, the number of potential explanatory measures is highly limited, making it difficult to appraise the many contending theoretical claims in welfare state research. An analysis of ten causal measures will, for instance, yield 1,024 (210) combinations of measures. Also, analysing

Research Methods   139 any data set with QCA does not obviate the need of scholars to have a deep knowledge of cases. Without that, a researcher may miss the causal connections between concepts and measures, vitiating findings. Decisions about break points in crisp-​set QCA and degree of membership in fuzzy sets also depend on such substantive knowledge (Ragin 2008). (For the most complete discussions and software, see Ragin 2008; Duşa and Theim 2014.)

Cross-​Country Statistical Analyses Where the number of available country cases is large enough for the operation of statistical inference, social scientists often employ it, even though cases and their variable traits are not typically randomly distributed. However, the analyses of data lacking explicit temporal dimensions can still be revealing. Operationally, causality can be established if associations are not statistically spurious, changes in explanatory variables precede changes in the outcome variable, and the explanation relies on an overarching theoretical argument or a specification of plausible mechanisms translating changes in explanatory variables into changes in outcome ones. The typical tool used in comparative statistical analyses of welfare states is OLS multivariate regression (Cameron 1978; Myles 1989; Hicks and Swank 1984; Pampel and Williamson, 1989; see also the panel analyses of Hicks and Kenworthy 1998; 2003). These sorts of regression analyses were influential and important in adjudicating debates and advancing knowledge in the early years of research on welfare states, establishing some basic points about welfare state development in the expansionary immediate post-​Second World War period. Researchers were able to show fairly conclusively that the level of economic development was crucial to the explanation of welfare state efforts and programme adoption across countries of all income levels (Wilensky 1975; Collier and Messick 1975). But development did little to explain variations in welfare state outcomes among the rich capitalist democracies (Myles 1989; Hicks and Swank 1984), whereas political factors offered greater explanatory leverage (Myles 1989 [1984]). An advantage of this sort of research, as with all quantitative work, is the ability to examine concurrently large ranges of theoretically indicated hypotheses against alternatives. However, simple cross-​sectional regression analysis has largely been abandoned by scholars, because of the relative inability to appraise large numbers of measures due to degrees-​of-​freedom issues across selective and theoretically important groups such as rich capitalist democracies. Further, simple cross-​sectional regression cannot exploit case-​based knowledge or yield conjunctural findings as well as can formal qualitative methods such as QCA. For the most part, scholars other than those in the first generation of researchers have concentrated their attention on the numerous data points and historical specificity provided by pooled cross-​section and time-​series analyses (treated below).

140    EDWIN AMENTA and ALEXANDER M. HICKS

Historical Studies Several types of single-​country case studies are considered ‘historical’ in our analysis of causal research (see column 3 of Table 8.1). We address, first, historical narrative work that gains empirical leverage by examining causal propositions by considering historical developments and sequences. The second main type includes quantitative time-​series analyses of data sets within one country. A third type includes event structure analyses, which typically examine sequences of events within one unit, often a country.

Historical Studies Proper Historical causal studies deploy a scholar’s deep historical knowledge, documentary research, and the examination of specific episodes of change to appraise current hypotheses or develop new ones. Historical knowledge makes it possible to identify key instances of relevant variables and events and allows the detailed examination of causal mechanisms. These analyses typically focus on reasons behind key events such as policymaker goals behind major changes in policy (Skocpol 1992; Castles 1989). Often, scholars can identify through documentary evidence what different key actors were proposing and what was likely to occur in terms of policy had some historical event or intervention not taken place. Often these empirical demonstrations of propositions are used to generate portable explanations, historical instances of what Strauss (1987) called ‘grounded research’ (see also Eckstein 1975). Scholars have claimed that there are several standard disadvantages attached to this sort of research. In the standard view, because they provide an N of one, historical studies are seen as limited to the development of hypotheses or a means to reject specific general hypotheses (Rueschemeyer 2003). Also, as mentioned in the discussion of within-​country analyses, many of the aspects of the context seemingly ‘controlled for’ in these studies may be relevant contextual causal factors, yet taken for granted and left untheorized. However, scholars have recently noted many advantages of the historical approach, especially its ability to examine theoretical mechanisms and the details of causal arguments. This sort of analysis is frequently referred to as ‘process tracing’ (George and Bennett 2005; Gerring 2007). If, for instance, a partisanship theory expects key programmes to be adopted under specific types of regimes or to be championed by specific sorts of actors, a historical scholar can examine just how much these conditions mattered in a given episode of policymaking. Similarly, if a theory anticipates legislative or other key action to take a specific sequence, a scholar with deep knowledge of the case can probe these theoretical mechanisms with subtlety. In addition, in historical studies relatively long time periods may exhibit variation of contextual conditions. Moreover, most such studies make comparisons across policy areas and programmes, as well as

Research Methods   141 across periods of activity, inactivity, and retrenchment, and these sources of variation make possible further hypothesis testing (Amenta 1998). In addition, historical one-​country research can generate and appraise more sophisticated theoretical claims that take into account time order sequences (Pierson 2000) and configurational and multiple causes (Ragin 2008). Social scientists working on a case through primary materials can avoid the biases of reliance on secondary research, as in most qualitative comparative historical analyses (Lustick 1996). Historical scholars may also contribute to quantitative research by identifying new sources of data and can often build more valid indicators than can scholars mining data from standard sources (Amenta 2009). Most of all, historical studies are often asking the kinds of big questions that are simultaneously theoretical and historical (Pierson and Skocpol 2002), such as why the United States did not develop a welfare state on the European model when some theories would expect that to have happened. These questions are of both public and social science interest and cannot be addressed simply by way of expanding observations. A deep causal understanding of one case, analysed social scientifically, may provide the best building block for extended theoretical argumentation (Mahoney 2000).

Event Structure Analysis Another means to analyse data over time is event structure analysis (ESA), a formal qualitative tool that is designed to provide narrative causal accounts of particular sequences of events (Heise 1989), culminating in an event of importance. These may include those leading to the enactment of social programmes (Isaac et  al. 1994). In providing specific interpretations and causal accounts of key events, these analyses are based on the historical institutionalist insight that when something happens in a sequence may be causally important as to why something happens (Pierson and Skocpol 2002; Mahoney 2000). Specifically, the standard event structure analysis uses the ETHNO programme (Heise 2014), which induces a researcher to answer a series of questions regarding a specific causal account, forcing consistent reasoning in addressing counterfactual questions. It is a kind of process tracing that can lead to the inductive development of causal accounts. Although the models developed from such analyses are most valid as a causal interpretation of a case, the most useful result is one in which a series of potentially portable middle-​range and time-​ordered theoretical claims are developed. ESA is a promising tool, but its use in social policy analysis is still only emerging, and it must overcome hurdles. Event structure analyses require valid and reasonably complete factual accounts of key events or the means to reconstruct them. Only a deep knowledge of the case materials can aid in understanding where timing might and might not matter and in addressing the many counterfactual questions involved. Although these analyses are replicable, different scholars may answer the questions about causality differently, even

142    EDWIN AMENTA and ALEXANDER M. HICKS for the same case. Used appropriately, however, ESA can aid in both the causal interpretation of specific cases and for the development of causal hypotheses that address time order explicitly.

Time-​Series Analysis A more central type of historical research concerns quantitative analyses over time within one country, or the statistical analysis of times-​series data (Janoski 1992; Swank 2002). Within-​country across-​unit designs that pool cross-​sections and time-​series data are non-​comparative and not necessarily grounded in a deep knowledge of the cases at hand, but they remain historical in the sense used here (Amenta et al. 2005). They often make important claims about the importance of the working of over-​time processes within structurally determined time-​periods (Isaac and Griffin 1989), using historical knowledge to identify the beginning and end of a homogeneous process such as an era of expansion or retrenchment. Time-​series studies typically employ multivariate statistical techniques, and thus can examine several hypotheses simultaneously. Estimation can be complicated, however, with adjustments often needed for non-​ independence of errors over time (‘autocorrelation’) and variability of error variance over time (‘heteroskedasticity’) (Ostrom 1978). One core statistical procedure termed ‘generalized differences’ for addressing these challenges to unbiased and precise estimation may entail problems in particular circumstances; but solutions for these are available (Ostrom 1978 on inefficiency; Gujarati 2003 on lagged dependent variables and inconsistency; Greene 2000). More recently, time-​series analysis has become broadly recognized to confront ‘non-​stationarity’ issues—​complications associated with trending in variables and variable means and variances that do not stay constant over time—​though methods for addressing these issues are now numerous, if not yet entirely settled (Alvarez 2016). Time-​series analyses have some disadvantages beyond the standard analytical disadvantages of one-​country research. They miss the benefits from strictly historical work. The questions addressed in time-​series analyses are usually at one remove from the policymaking decisions at the centre of historical work and usually address important but limited aggregates, such as spending. These analyses also typically suffer from a small-​N problem, as identifying coherent time-​delimited processes also limits the number of cases for statistical manipulation, though sometimes subnational polities can be deployed to augment the number of observations (Amenta et al. 2005). In addition, these analyses have difficulty in addressing time-​invariant explanations and factors, such as political institutions and structure of labour movements. For these reasons, scholars often seek to bring across-​country evidence to bear, such as devising methods to compare and analyse time-​series parameters across countries as outcomes to be explained (Western 1998). More generally, scholars have sought to harness the potential advantages of this research to designs that pool time-​series across countries, which we address below.

Research Methods   143

Comparative and Historical Research As with the previous modes of research, comparative and historical research (column 4 in Table 8.1) includes both qualitative and quantitative studies and approaches. Notably, we include here historical analyses of several country cases and the statistical analysis of a cross-​section of country cases deepened by the examination of time-​series data for each. On the qualitative side, we have what might be termed ‘classical comparative and historical research’. On the quantitative side of comparative and historical research, there are, most notably, pooled data analyses of cross-​sections and time series. These are typically also carried out across capitalist democracies, usually, however, seeking complete coverage of cross-​sections, and focused on the post-​Second World War period.

Classical Comparative and Historical Research Classical comparative and historical research at its most systematic is often conducted like comparative research, for example employing systematic comparison by means of the Millsian methods of agreement and difference. It typically employs ‘most similar systems’ designs (Przeworski and Teune 1970), in which potentially causal characteristics are ‘controlled for’, or become part of the scope condition of the claims, such as advanced capitalist democracies, or liberal welfare state regimes (Gerring 2007). Classical comparative and historical research has most of the advantages and disadvantages of historical research on one country, mentioned in ‘Historical Studies’ above, but also has the key advantage of being able to compare similar trajectories of countries and to pinpoint and explain divergences in policy development (Rueschemeyer 2003). Many key qualitative works make small-​N comparisons across long stretches of time in order to appraise and develop hypotheses about some aspect of social policy (Heclo 1974; Baldwin 1990; Steinmo 1993; Immergut 1992; Orloff 1993a; Pierson 1994; Amenta 1998). Comparative historical research has provided most of what we know regarding the early adoption of social policies among the more economically developed countries and has often driven research agendas (see review in Amenta 2003). Classical comparative and historical researchers have been able to address a wide range of theoretically and historically important questions: Why did social policy take off when it did and why did it become so prevalent? Why did some countries lead and why did some others fall behind in different phases of the development of social policy? Why did some states adopt distinctive forms of social policy? By situating the experiences of different countries against the group portraits, this research brought to light historical anomalies and puzzles to solve. It has also helped to address debates between political institutional approaches based in Weberian and Tocquevillian theory focusing on the structures of political institutions and political organizational approaches based in Marxian theory and on the political organization of social groups, notably the labour movement. From a focus on left-​wing or social democratic party rule, scholars have moved on to

144    EDWIN AMENTA and ALEXANDER M. HICKS consideration of the role of the right-​wing parties (Castles 1985), farmer-​labour political coalitions (Esping-​Andersen 1990), expert-​labour alliances (Orloff 1993a), and Christian democratic rule (Huber and Stephens 2001). Comparative and historical scholars have also gone on to build more theoretically synthetic or configurational arguments, combining the structural strengths of institutional claims with the strengths of claims based on political identities and action (Skocpol 1992; Amenta 1998; Hicks 1999; Huber and Stephens 2001). Classic comparative and historical scholars were also free to rethink what social policy meant and to deepen the concept. Comparative and historical scholars have been able to appraise theoretical arguments by addressing social programmes other than the ones prominent in quantitative work. Among the possibilities were veterans’ benefits (Skocpol 1992), education (Heidenheimer 1981), taxation policy (Steinmo 1993), housing policy (Pierson 1994; Castles 1998; Bonastia 2000), economic policy (Hall 1986; Weir 1992), and work programmes (Amenta 1998). In this process, comparative and historical scholars have devised new questions and have opened new research agendas, helping to develop and refine theoretical argumentation (see reviews in Amenta 2003; Hicks and Esping-​Andersen 2005). Another way to develop the research agenda and advance theory has been to split the concept by entertaining the possibility that different phases of social policy have different determinants, as with the retrenchment of social policy (Pierson 1994), which is a more difficult process than policy adoption and depends crucially on the nature of the policy in question. The argument has been deemed appropriate to explain social policy developments since the 1980s (see also Huber and Stephens 2001; Swank 2002). By this time, most systems of social spending had been completed and expanded—​had become institutionalized—​and bids to cut them back were taken up in force by many political regimes. In addition to conceptual splitting, classical comparative and historical research has been at the centre of broader conceptualizations of social policy or ideal types that characterize policies as a whole. Building on previous models of social policy, Esping-​ Andersen’s (1990) ‘welfare state regimes’ address social policy’s influence on labour-​ market relations. New conceptualizations of social policy have also been provided by feminist scholars (see Chapter 20, many of whom work in the comparative and historical mode of Skocpol 1992 and O’Connor et al. 1999). The main responses have been to modify Esping-​Andersen’s types or to replace them with gender-​based policy regimes. In short, classical comparative and historical research has many of the benefits of historical studies proper, with the added advantage of throwing a case into relief vis-​à-​vis one or more largely similar cases. This makes it possible to ask new and specific questions in analysing diverging trajectories in social policy. These analyses can be used to appraise theories and arguments and to ascertain how far they extend to different processes and outcomes outside a particular domain of welfare state research, as well as to create or enrich theory for appraisal across other cases. However, classical comparative and historical research, with its steep informational requirements, rarely addresses complete populations of theoretically relevant cases. Researchers also must rely on secondary research and its attendant biases (Lustick 1996). Knowledge requirements are

Research Methods   145 steep for these analyses and adding cases without the requisite background can lead to a thinning of analyses, issues of validity, and the loss of the advantages associated with historical research proper (Amenta 2009). Quite possibly, this research will continue to work best in most similar systems designs such as across ‘social democratic’ welfare states, ‘English-​speaking’ countries, or Latin American ones, where researchers can engage in small-​N designs without having to rely as greatly on secondary research.

Statistical Analyses of Pooled Cross-​Sections and Time Series The analysis of pooled cross-​sectional and times-​series (or panel) data has been the method of choice of most sophisticated quantitative analyses of social policy over the past thirty years (see Hicks 1999; Huber and Stephens 2001). Pooled data involves measures arrayed across both time and space, and analysing these data helps to overcome some of the shortcomings of cross-​sectional and time-​series analyses separately. Pooled analyses can address variables acting over time, such as changes in partisan regimes, as well as temporally inert, structural variables, such as policy regimes or political structural arrangements. Pooled data analyses also solve small-​N problems entailed by analyses of time series of limited per-​nation length and cross-​sectional domains of limited numbers of nations (e.g., the approximately twenty advanced capitalist democracies). In addition, pooling helps to illuminate stable differences among countries, as did early cross-​sectional research, while exploring the dynamic processes and changes in social spending efforts, the emphasis of time-​series analyses. Key to this enterprise has been the excellent and voluminous data collected in the post-​war period on these countries by various international organizations, especially the Organisation for Economic Co-​operation and Development (OECD) and the International Labour Organization (ILO). These data have been augmented by individual scholars (e.g., Huber and Stephens 2001; Swank 2002). Although there are several problems with the estimation of these models, including over-​time and spatial auto-​regression, heterogeneous regression intercepts and slopes over time and/​or space, and heterogeneous error variances across time and/​or place, many means of addressing these estimation challenges are available (see Hicks 1993; Beck and Katz 2007; Plümper et al. 2004). A more difficult problem is non-​stationarity, which refers to obstacles to high-​quality estimates where variables cannot be assumed to have single means and/​or variances or, more technically, have ‘unit roots’ (Beck and Katz 2011). Current solutions, which include first-​differencing of all variables and ‘error correction mechanism’ models, remain topics of controversy (Alvarez 2016). Additional problems in the analysis of pooled/​panel data may also arise in the specification and estimation of lag structures—​which may, for example, not simply relate variables values at on particular time point to values at a single subsequent remove, but rather tap effects of variables, distributed across time (Philips 2018). They may even require specifications of

146    EDWIN AMENTA and ALEXANDER M. HICKS observations that go beyond standard time units and instead vary over time like parliamentary governments, which may endure from days to years and may provide superior observations for the estimation of partisan effects on policy (Schmitt 2016). Although data and analysis of welfare states have been largely confined to twenty or so long-​standing, OECD democracies, impressive efforts have been made to extend data to Latin America (Huber et al. 2006; Brooks 2008) and beyond to East Asia and Eastern Europe (Haggard and Kaufman 2008). Moreover, studies have begun to address the complexities of transnational as well as subnational federal contexts (Amenta and Halfmann 2000; Obinger et al. 2005). In short, pooled regression analyses across rich democracies in the post-​Second World War period have helped to answer many questions and to resolve debates about spending efforts in the periods of welfare state growth and retrenchment. Moreover, resolution of kindred debates is extending beyond the rich, long-​standing democracies to new parts of the globe and transnational contexts. To analyse statistically the adoption of programmes, as well as legislation regarding retrenchment, similar data have been used to predict nominal or qualitative outcomes, involving techniques falling under the rubric of ‘event history analysis’ (Usui 1994; Hicks 1999; Hicks and Zorn 2005; for overviews and technical treatments, see Allison 1974; Box-​Steffensmeier and Jones 2004; Kleinbaum and Klein 2005a, 2005b). These analyses are often undertaken across all countries, notably addressing the issue of the adoption of programmes outside the domain of rich capitalist democracies and policies at the margins of social policy research, such as education and the environment (Schofer et al. 2012). Given their wide reach, however, these analyses are often beset with problems of missing data on potentially relevant measures.

Conclusion Research on welfare states and social policy has addressed all manner of methods. Variability in the availability of forms of data has led to a kind of division of labour. Hard and systematic data suitable for quantitative studies existed only for the post-​Second World War periods of expansion and retrenchment, while less complete information of this sort was available for the periods of adoption, consolidation, and completion (Hicks 1999). Quantitative comparative researchers mainly analysed data from the 1960s and beyond, and comparative and historical researchers took charge of the first half of the century. There was a great deal of interesting work as well, however, on the ‘off-​diagonal’ cases, and these studies were often sites of innovation and spurs to analysis of the other variety (see Amenta 2003). Pierson (1994), for instance, opened a new line of thinking and research on retrenchment, providing hypotheses later addressed by quantitative researchers. The quantitative paper by Collier and Messick (1975) cast doubt on the modernization thesis with respect to the adoption of social policy and spurred comparative and historical work, and work by Hicks et al. (1995) applied QCA analyses to policy adoption in the first half of the twentieth century.

Research Methods   147 The development of the area was accelerated by the open-​minded methodological outlook of many prominent researchers. Few quantitative researchers derided the work of comparative and historical researchers as lacking in rigour. Few comparative and historical researchers saw the work of the quantitative scholars as simplistic and lacking in depth and validity. The tone was set early on, with Gaston Rimlinger (1971) employing the gold standard of quantitative studies, social spending ‘effort’, to situate his groundbreaking comparative and historical investigations. The willingness and ability of researchers to work in different modes was key. Francis Castles, Gosta Esping-​Andersen, Alexander Hicks, Evelyne Huber, John Stephens, Theda Skocpol, and Duane Swank comprise some of the scholars proficient in one type of methodology, but willing, or driven sometimes, to employ others. Given the various strengths and weaknesses of the different methodological approaches, as indicated above, it is useful for scholars to employ more than one. Scholars of social policy have combined methods and triangulated them, reaping advantages, while minimizing the disadvantages of any single approach. Studies have been able to address large questions about differences in timing or trajectories or outcomes in social policy, by examining a few cases or one case in a comparative context, by developing and tentatively appraising relatively complex arguments and by sometimes employing multiple and conjunctural causation, sometimes involving mechanisms of process. Standard quantitative techniques have difficulty in assessing these more complex questions, much as standard comparative and historical work can provide only rudimentary tests of more general hypotheses. There have been many examples of syntheses and triangulation of methods in the welfare state literature. Evelyne Huber and John Stephens (2001) address the rise of welfare states and efforts at retrenchment over the past decades with pooled time-​series and cross-​sectional regression analyses and detailed case histories of different types of highly developed welfare states in examining the development of social policy over long periods. The latter technique is used in order to get around the short-​term biases in regression analyses and to closely examine critical periods of policy change. Other examples include work by scholars who employ different techniques on the same subject matter across different works (Skocpol 1992; Skocpol et al. 1993; Pampel and Williamson 1989; Amenta 1998; Amenta and Halfmann 2000). These scholars understood that different approaches had advantages and disadvantages, and exploited the advantages of each to allow greater progress than could be achieved by one or another approach. This outlook has helped advance the field tremendously. Preserving this outlook should bring still greater advances in the future, as both qualitative and quantitative approaches continue to increase in sophistication.

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Chapter 9

Public And Pri vat e So cial Wel fa re Willem Adema * and Peter Whiteford

Introduction It has long been recognized that the objectives of the welfare state can be achieved through a range of different instruments. Titmuss (1976 [1955]) identified several different kinds of distributive mechanisms, arguing that it was not possible to understand the impact of social policy without taking these alternative approaches fully into account. He referred to the ‘social division of welfare’, including three main types of welfare: social welfare (the social services, including cash benefits); fiscal welfare (welfare distributed directly or indirectly through the tax system); and occupational welfare (welfare provided as part of employment). This classification could be extended to include legal welfare (redistribution through the courts) and benefits and services provided by the voluntary sector and the informal sector (Rose 1981), as well as self-​ provision. However, the main underlying idea was to look beyond conventional definitions of the welfare state to identify the different patterns of redistribution provided through alternative mechanisms and to explain that different kinds of programmes (e.g. assistance either provided through tax credits or as cash transfers) can have similar effects in some cases, or offsetting effects in others (Sinfield 1978). Despite this long-​standing recognition of the ‘social division of welfare’ and further studies exploring the details of these provisions (Rein and Rainwater 1986; Hacker 2002, 2004; Gilbert 2005), it remains the case that most analyses of social expenditure continue to be based on gross (before tax) public expenditure data. ‘The prevailing wisdom is easy to summarize. The size of welfare states is measured in the literature by the share *  We are indebted to Pauline Fron for statistical support. The views expressed in this chapter cannot be attributed to the Organisation for Economic Co-​operation and Development (OECD) or its member governments; they are the responsibility of the authors alone.

154    WILLEM ADEMA and PETER WHITEFORD of gross domestic product (GDP) devoted to public social spending, which is sometimes referred to as a nation’s welfare state effort’ (Howard 2003: 411). However, a narrow focus on gross public spending can be misleading, as it ignores the important role of the tax system. Governments can use the tax system to: (a) claw back financial support through direct and indirect taxation of benefit income; (b) directly provide support to households (e.g. child tax credits); and (c) encourage individuals and companies to provide social support (e.g. through favourable tax treatment of private pension contributions and earnings on private fund assets or private health insurance coverage). Accounting for the impact of the tax system on budgetary allocations with a social purpose leads to indicators of net (after tax) public social expenditure (Adema et al. 1996). The conventional emphasis on direct public spending also ignores other forms of public intervention; for example, when governments mandate employers to provide pension coverage or sickness insurance, or when governments regulate the conditions of private health insurance coverage (e.g. by forbidding risk-​related premiums). Furthermore, the private sector, including individuals, can also provide social benefits voluntarily, which top up government regulated provisions. Frequently, these benefits are related to collective labour agreements and/​or are subject to favourable tax treatment (Adema and Einerhand 1998). Overall, a comprehensive assessment of total welfare provisions means that it is necessary to capture the additions to and subtractions from public spending that are effected through the tax system, as well as the additional support provided through mandatory or voluntary private social spending. Such a comprehensive approach facilitates measuring the total share of an economy’s domestic production that recipients of social benefits draw on: net total social expenditure (Adema et al. 2011; OECD 2019a, 2019b). Analysis of net total (public and private) social expenditure is of growing importance from a policy perspective (Pearson and Martin 2005; Gilbert 2005; Fishback 2010). Some countries are searching for alternative means of securing social support other than through the public delivery system. For example, in the 1990s policy initiatives concerning the provision of sickness payments in the Netherlands and some Nordic countries involved a shift from public to private provision. In such cases, governments determine benefit entitlements, but leave the provision to the private sector. In addition, many reforms to pension systems, for example, involve changing pension structures or parameters to make them more similar to private-​sector provisions, either through the replacement or supplementation of defined benefit pension systems with defined contribution systems or ‘notional defined contribution’ systems (Queisser et al. 2007). Part of the rationale for these reforms is that economic incentives are better enhanced under systems that more closely mimic private-​sector arrangements. However, the main concern with these reform proposals is that they will have undesirable distributional outcomes, and the general argument is that universal social support systems that are tax-​financed are more redistributive than the combination of private provision and targeted public income support (Korpi and Palme 1998).

Public And Private Social Welfare    155 This chapter contributes to the discussion of public and private social provisions by drawing together the most up-​to-​date information on these different ways of providing social benefits. It presents the most recent estimates of social expenditure for 2015–​17 and for net social expenditure for 2015. The chapter shows that conventional estimates of gross public spending differ significantly from estimates of net public spending and net total social expenditure, leading to an incorrect measurement and ranking of total social welfare effort across countries. Just as importantly, the fact that total social welfare support is incorrectly measured implies that the outcomes of welfare state support may also be incorrectly measured. Thus, apart from identifying the impact of this broader framework on estimates of the size of the welfare state in different countries, the main objectives of the chapter are to consider the implications of this more comprehensive definition of welfare state effort for analysis of the distributional impact of the welfare state and for an assessment of the efficiency and incentive effects of different welfare state arrangements.

What is Social Expenditure? The OECD (2019a) defines social expenditure as follows: The provision by public and private institutions of benefits to, and financial contributions targeted at, households and individuals in order to provide support during circumstances which adversely affect their welfare, provided that the provision of the benefits and financial contributions constitutes neither a direct payment for a particular good or service nor an individual contract or transfer.1

Spending on social purposes towards circumstances that adversely affect welfare include:2 (1) old-​age—​pensions, home-​help, and residential services for the elderly; (2) survivors—​pensions and funeral payments; (3) incapacity-​related benefits—​disability benefits and services, employee sickness payments;

1  This social expenditure definition only covers benefits provided by institutions, not transfers between households, even though they may be of a social nature. Social expenditure does not include remuneration for work, as it does not include payments in return for the simultaneous provision of services of equivalent value. Employer costs, such as allowances towards transport, holiday pay, or severance payments before the standard retirement are therefore not included here. 2  Although data is broadly compatible and generally reclassifiable, the categorization of social support differs across international organizations. For example, the European System of Social Protection Statistics uses seven functions (Eurostat 2016), while the Social Security Inquiry uses eleven functions (ILO 2005).

156    WILLEM ADEMA and PETER WHITEFORD (4) health—​spending on in-​and out-​patient care, medical goods, and prevention; (5) family—​child allowances and credits, childcare support, income support during leave, sole parent payments; (6) active labour market policies—​employment services, training, youth measures, subsidized employment, employment measures for the disabled; (7) unemployment—​ unemployment compensation, early retirement for labour market reasons; (8) housing—​housing allowances and rent subsidies; and (9) other contingencies—​other support measures as non-​categorical cash benefits to low-​income households, or support programmes for substance abusers, legal aid, etc. There is no international agreement on whether marriage support is a social policy objective or not, and fiscal support towards married couples is not included, though such support can be substantial, and in some countries, married couples are viewed as the appropriate basic economic unit for taxation (OECD 1996). Social benefits to households and individuals can be publicly or privately provided. They are ‘public’ when general government (that is, central, state, and local governments, including social security funds) controls relevant financial flows. Thus, benefits (partly) financed out of social security contributions paid by employers and employees to social security funds are within the public sphere. In line with System of National Accounts 1993 (SNA93), para 8.63 (EC/​ IMF/​ OECD/​ UN/​ WBG 1993)  and SNA08, para 8.76 (EC/​IMF/​OECD/​UN/​WBG, 2009), the OECD Social Expenditure Database (SOCX) records pensions paid to former civil servants through autonomous funds as a private spending item, as for example, in Canada, the Netherlands, Sweden, and the United Kingdom. All social benefits not provided by general government are ‘private’. Private social benefits can be categorized in two broad groups: (1) mandatory private social benefits, including legally stipulated, employment-​ related, incapacity-​related cash transfers such as sickness, disability, and occupational injury benefits (recorded, e.g. in Australia, Germany, Iceland, the Netherlands, Norway, and the United States, in some states); mandatory private health insurance (the Netherlands, Switzerland, and the United States); mandatory employer-​provided retirement allowances (severance payments towards retirement, e.g. Italy and Korea); and, pensions derived from mandatory (individual and/​or employer contributions, e.g. Iceland and Switzerland); (2) voluntary private social expenditure, as for example, social services provided by non-​governmental organizations (NGOs); employer-​provided (perhaps on basis of a collective agreement) income support during child-​related leave or sickness; and pensions derived from employer contributions (in many OECD countries) or fiscally advantaged individual contributions, as, for example, in the United States.

Public And Private Social Welfare    157 Expenditure programmes are considered ‘social’ if participation is compulsory, or if entitlements involve interpersonal redistribution of resources. Public social services, social insurance, and social assistance benefits are either financed through general taxation or social security contributions, and therefore involve the redistribution of resources across the population in general, or within population groups (e.g. all members of a sickness insurance fund). Many private benefits are provided under the influence of government actions. Indeed, interpersonal redistribution in private programmes is often induced by government legislation (e.g. through forcing insurance companies to have one price for the same policy for both sick and healthy people) or, as in many OECD countries, through favourable tax treatment to stimulate take-​up of private pensions. Governments sometimes also influence the collective bargaining process that may lead to employer-​provided support for workers during sickness or child-​related leave periods or for childcare support (OECD 2016). Government intervention introduces and/​or enhances redistribution among population groups participating in private programmes, which leads to a high degree of similarity between legally stipulated private arrangements and tax-​advantaged plans.

What is not Included in these International Comparisons? There are various programmes and policies that may well perform a social function but are nonetheless not included in comprehensive international comparisons of social effort. For example, life insurance saving and/​or general saving are not included, although such programmes can be tax-​advantaged and be used towards retirement, survivor, and/​or accident insurance. However, the extent to which this is the case or whether life insurance policies are merely used in association with home ownership and mortgages is not known. International comparisons of housing support (Chapter  38) are also not without problems (OECD 2019c). Data are available on residential support for the elderly and disabled and on rent subsidies for low-​income households, but information on mortgage relief for low-​income households, while similar in nature, is not available on a cross-​national  basis. Additionally, local governments and private agents as NGOs and employers may have limited incentives to report their social support outlays to central government or another central recording unit. Hence, the quality of data on spending by such agencies is relatively low. For example, it is unclear to what extent employers provide additional income support during parental leave periods. Over the years, the quality and comparability of spending data on some (local and/​or non-​commercial) social services, such as childcare and early years support, has improved notably, but much remains to be done to further improve the quality of data on social and health services. Moreover, if

158    WILLEM ADEMA and PETER WHITEFORD good overall expenditure data is available it is not always possible to identify relevant subcomponents. For example, expenditure data on pensions paid by private pension funds in Switzerland is available, but it is not known to what extent such payments are based on past mandatory and/​or voluntary pension contributions. A full disaggregation cannot be made, but as it is assumed that the majority of relevant pension payments are due to mandatory contributions, this item is recorded under mandatory private social expenditure in SOCX.

Social Support across Countries In 2015–​17, gross public social expenditure—​the conventional measure of ‘welfare state effort’ in international comparison—​averaged just over 20 per cent of GDP across OECD countries. Public social spending-​to-​GDP ratios vary from highs of over 30 per cent in France and Finland to lows of around 7.5 per cent in Mexico (Figure 9.1). With economic downturns in the early 1980s and 1990s, the public social spending-​to-​GDP ratio on average across the OECD increased from 16 per cent in 1980 to 21 per cent at peak in 2008–​09 with the Great Recession, before tailing off to just over 20 per cent in 2018. Figure 9.1 shows that countries on average spend more on public cash benefits (12 per cent of GDP) than on publicly funded health and social services (around 8 per cent of GDP). Italy, Poland, and Portugal spent just over 70 per cent—​and Greece 80 per cent—​ of public social expenditure on cash benefits. In contrast, this proportion was just over 40 per cent in Chile, Korea, and Mexico, and 35 per cent in Iceland. At on average, 8 per cent of GDP across the OECD, public pension payments constitute the largest social policy area in spending terms (Figure 9.1, left-​hand side). However, there is large variation in public pension spending across countries as related to differences in the age structure of populations, the number of senior citizens who have access to pensions, and pension payments rates. For example, public spending on pensions in Greece and Italy accounted for more than 16 per cent of GDP in 2015, while it was 2.3 per cent of GDP in Mexico. To some extent, this can be explained by Mexico being a relatively young country, with many more workers per senior citizen than in Greece and Italy, but also because most Italian and Greek seniors are more likely to receive a pension compared to less than half of older people in Mexico. Public expenditure on health is another important social policy area (Figure 9.1, right-​hand side). On average, OECD countries spent 5.7 per cent of GDP on publicly financed health services. France (8.8 per cent of GDP), the United States (8.5 per cent), and Germany (8.1 per cent) are among the largest spenders. Income support to the working-​age population accounts for 4 per cent of GDP on average across the OECD, of which 0.7 per cent of GDP was spent on unemployment benefits, 1.7 per cent on incapacity benefits, 1.2 per cent on family cash benefits, and another 0.4 per cent on other social supports in cash. Public spending on social services is

Public And Private Social Welfare    159

Figure 9.1  Pensions and health care are the largest public social spending items. Public social expenditure by broad social policy area by % GDP, 2015–​2017 or latest year available. Source: OECD 2019b. Note: countries are ranked by decreasing order of public social expenditure as a percentage of GDP. Spending on active labour market programmes (ALMPs) cannot be allocated among cash and services, but it is included in the public spending totals (in brackets). Income support to the working-​age population refers to spending on the following SOCX cash categories: Incapacity benefits, Family cash benefits, Unemployment, and Other social policy areas categories. Data for Chile, Israel, and Korea refer to 2017; Australia, Mexico, New Zealand, the US, and Turkey to 2016; Poland to 2014; otherwise, they refer to 2015.

relatively low at 2.3 per cent of GDP on average across the OECD, whilst such spending on services for both the elderly and early childhood education and care services for the young is considerably higher in Nordic countries.

Private Social Spending In 2015, private social spending totalled, on average, 3.6 per cent of GDP across the OECD, of which 1.9 per cent was mandatory and 1.7 per cent voluntary. The importance of private social protection arrangements varies considerably across countries and it is most important in the Netherlands, Switzerland, and the United States, where it amounted to 12–​13 per cent of GDP in 2015; it amounted to around 6 per cent of GDP in Australia, Iceland, and the United Kingdom.

160    WILLEM ADEMA and PETER WHITEFORD The role of mandatory private health insurance has long been important in Switzerland, where such spending amounted to 4.7 per cent of GDP in 2016. Following health reform in the Netherlands in 2006 towards compulsory basic health insurance cover by private companies and the introduction of the Affordable Care Act in the United States in 2014, mandatory private health expenditure was just over 5.5 per cent of GDP in 2015 in both these countries. Pension benefits accruing from past mandatory contributions constituted 3.5 per cent of GDP in Iceland, 4.4 per cent in Switzerland, and 4.9 per cent of GDP in Australia (superannuation). Mandatory incapacity benefits (occupational injury benefits and sick pay) amounted to more than 1 per cent of GDP in Germany, Norway, and Iceland. Pension payments based on past voluntary contributions can be an important part of national social protection systems. Such pension benefits based on occupational and industry-​wide programmes or tax-​supported collective or individual plans amounted to 6 per cent of GDP in the Netherlands in 2015. Voluntary private pension expenditure is also important in the United Kingdom and the United States (4–​5 per cent of GDP) and in Canada, Japan, and Sweden (2–​3 per cent of GDP).

THE EFFECTS OF THE TAX SYSTEM ON SOCIAL EFFORT The tax system plays an important role in social policy. Taxation (including social security contributions) is used to finance social support, and the manner in which this is done influences the redistributive effects of tax/​benefit systems (see below). However, tax systems are also used to claw back social support by taxing transfer payments to and consumption by benefit recipients. The extent to which this occurs varies hugely across countries, and therefore affects international comparisons of social support.3 For example, in Austria, the recipient of an unemployment benefit who previously was on average earnings and who lived in a couple family with two young children received the equivalent of EUR 16,750 in 2015, topped up by a tax credit of EUR 669. A similar person in Sweden received annual income support of EUR 18,902, but paid EUR 5,038 in income tax and social security contributions, so that net benefit income was EUR 13,864. For this family, net income in Sweden is lower than in Austria, even though gross income was considerably higher. In aggregate spending terms, this means that countries that tax transfer incomes rather heavily divert a significant part of transfer income to

3 

There is a wide range of measurement and methodological issues involved in the estimation of the magnitude of the effect of the tax system on social effort. In general, the quality of estimates on the size of taxation of benefit income and fiscal support for economic agents (as with private social spending) is lower than the quality of information on social spending by central government. Adema et al. (2011) and OECD (2019a) discuss relevant methodological and measurement issues in detail.

Public And Private Social Welfare    161 flow back into the coffers of the Treasury: in Sweden, for example, net (after tax) public spending on unemployment benefits is about 75 per cent of the level suggested by gross indicators. Apart from variation across countries, different benefits are also taxed differently. Pensions and income support payments during periods of child-​related leave, sickness, and invalidity are generally part of taxable income, but can be taxed at reduced rates; child benefits, social assistance, and housing support are generally not taxed across the OECD (OECD 2018). At around 4 per cent of GDP, direct taxation of public income transfers income is particularly high in a high-​spending welfare state such as Denmark, while the OECD average is just over 1 per cent. Direct tax on public benefit income is 0.5 per cent of GDP or less in Australia, Canada, Chile, the Czech Republic, Hungary, Israel, Japan, Korea, Latvia, Mexico, the Slovak Republic, Turkey, and the United Kingdom. The income tax over mandatory or private social spending-​to-​GDP ratio tends to be small, but is highest in the United Kingdom, the United States, and Switzerland (1.2 per cent of GDP), all countries where mandatory or voluntary pension benefits play an important role.4 Taxation of consumption out of benefit income is lowest in non-​European OECD countries, since indirect tax rates are lower. Indirect taxation levied on consumption of benefit income is less than 0.5 per cent of GDP in Korea, Mexico, and the United States. The OECD average is close to 1.8 per cent of GDP, but indirect tax paid over public benefit income was 2.5 per cent of GDP or more in Austria, Denmark, Finland, France, Greece, Hungary, Luxembourg, Portugal, and Slovenia. In non-​European countries, where indirect taxation is relatively limited, gross spending levels can also be relatively low to generate the same net income level for benefit recipients in countries with high indirect tax rates. The tax system can be used to directly provide social support to clients, and this delivery channel is often used to support families with children in both European and non-​European OECD countries. For example, the value of tax breaks to support children in France through the ‘quotient familial’ was estimated to be around EUR 12.1 billion in 2016. Tax Breaks with a Social Purpose (TBSPs) towards families with children amounted to around 1 per cent of GDP in the Czech Republic, France, and Germany in 2015. The tax system is also used to encourage and subsidize the take-​up of private social protection arrangements. In countries where private pension coverage is substantial, the value of relevant tax breaks is also considerable (Adema and Einerhand 1998).5 Otherwise, tax breaks for current private protection arrangements include favourable

4  Date on the value of direct taxation levied over private pension benefits for the Netherlands is not available, but past data suggest its value would be in excess of 1 per cent of GDP (Adema et al. 2011). 5  Tax breaks for pensions include tax exemptions for contributions to private pensions and tax relief for investment income of capitalized pension funds. Because of the complexities of calculating the value of these tax reliefs that are given at three different stages over the saving period, there are no cross-​ nationally comparable datasets available on the value of tax breaks towards pensions.

162    WILLEM ADEMA and PETER WHITEFORD treatment of contributions to and income of NGOs, but most substantially include fiscal support towards private health plans in Germany and, most importantly, the United States. In general, tax breaks are least important in countries with relatively high direct tax levies: Denmark, Finland, Iceland, and Sweden, and most important at about 1 per cent of GDP in Germany and 2 per cent of GDP in the United States.

The Effect of Taxation and Private Spending on Levels of Social Effort across Countries In Australia, Chile, Korea, Mexico, and Turkey, gross and net public social totals are not very different from each other. In the United States, gross public spending is actually lower than net public spending because benefit income is taxed at very low rates, while the tax system is used extensively to deliver social support directly or to indirectly subsidize its private provision. However, in most countries, governments claw back more money through direct and indirect taxation of public transfer income than they award in tax advantages for social purposes (Table 9.1). Thus, across OECD countries net public social expenditure-​ to-​GDP ratios are on average 2.4 percentage points below gross social spending-​to-​GDP ratios; this difference is highest in Denmark, at just over 6 per cent of GDP. Summing together all public and private social benefits and differences in relevant average tax rates facilitates the identification of the proportion of an economy’s domestic production to which recipients of social benefits can lay claim: net total (public and private) social expenditure. This proportion is highest at almost 32 per cent of GDP in France, followed closely by the United States at 30 per cent, and around 25 per cent in Austria, Belgium, Denmark, Finland, Germany, Italy, Sweden, and the United Kingdom. The similarity of net spending levels is driven by including private social spending, particularly in the United States) and the relatively high level of direct and indirect taxation on income transfers and ensuing consumption in European countries vis-​à-​vis non-​ European countries. In some countries, overall spending levels are contained because of the strong element of targeting in the distribution of social support. For example, around 40 per cent of public transfer income is paid to households in the bottom quintile of the income distribution in Australia and New Zealand (Adema et al. 2014). In both these countries, public social spending is below the OECD average of 20 per cent of GDP. Countries with below average gross public social spending levy little direct tax on benefit income (Australia, Canada, Chile, the Czech Republic, Estonia, Ireland, Israel, Korea, Mexico, New Zealand, the Slovak Republic, Turkey, and the United States), but the opposite does not always hold true. France, in particular, has a relatively limited direct tax burden compared to most other European countries, which contributes to its overall high net social spending level.

Public And Private Social Welfare    163 Of the six countries with tax revenue over public and private transfer income in excess of 5 per cent of GDP (Austria, Denmark, Finland, Italy, Norway, and Sweden), the Scandinavian tax/​benefit systems generate strong redistribution of public resources, also through tax financing of social services for the elderly and the working population (Figure 9.1). By contrast, the Austrian and Italian systems, with their strong emphasis on cash transfers to those in retirement, are less redistributive in nature.

Differences in the Impact of Private and Public Social Spending: Efficiency and Equity Implications The discussion above shows that the conventional measures of welfare state effort are misleading—​total net public and private social expenditure shows much less dispersion than gross public spending, tax effects, or private social spending. If welfare state effort is mismeasured, is it possible that welfare state effects and outcomes are also mismeasured? Do variations in the mix of public and private provision matter as much for incentives and equity as they do for measured levels of spending? One view is that of Schuknecht and Tanzi (2005), who argue that: high levels of public spending create inefficiencies on the tax side—​because they require higher tax rates—​and on the expenditure side—​because they require large bureaucracies, and because, from the individual citizen’s point of view, government services often have a zero (or at least a very low) price thus stimulating greater demand for them. Finally, high public spending may lead to macroeconomic difficulties when it is partly financed by fiscal deficits. (2005: 9)

In contrast, Lindert (2005) argues that: OECD experience since 1980 does not show any negative effect of larger tax-​financed transfers on national product. There are good reasons for this ‘free lunch puzzle.’ High budget welfare states feature a tax mix that is more pro-​growth than the tax mixes of low budget America, Japan, and Switzerland. The high-​budget states also have more efficient health care, better support for child care and women’s careers, and other features that mitigate the negative incentives on transfer recipients. (2005: 1)

It is sometimes argued that private provisions have stronger incentives to work and save than public provisions (Disney 2004), leading to government interest in reforming public provisions to make them more like private provisions, most notably in regard to pensions, but also sickness coverage. However, Disney (2004) points out that

Table 9.1 From gross to net social spending: social expenditure by % GDP at market prices Czech Australia Austria Belgium Canada Chile Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland Israel Italy Japan 1G Gross public social expenditure

18.5

27.7

29.2

17.6

29.0

17.7

30.4

32.0

24.9

25.4

20.9

15.5

15.5

0.1

2.6

2.1

0.5

0.0

0.0

3.9

0.6

3.3

1.8

1.7

1.2

0.2

0.0

0.2

0.1

3.2 0.5

-​Indirect taxes 0.7 (on cash benefits)

2.6

2.3

0.8

0.7

2.2

2.5

2.4

2.9

2.7

1.7

2.8

3.4

1.0

1.4

1.4

2.2 0.9

+ Net TBSPs (not including pensions)

0.6

0.0

0.4

0.8

0.3

0.8

0.0

0.2

0.0

0.8

1.8

0.0

0.9

0.0

0.3

0.3

0.7 0.3

1N Net current public social expenditure

18.4

22.5

25.1

17.2

10.4 17.9

22.6

14.9

24.1

28.4

23.3

21.4

18.2

13.6

14.2

2G Gross mandatory private soc. Exp.

4.7

0.8

0.0

0.0

3.0

0.4

2.6

0.0

0.0

0.2

2.2

0.6

0.0

6.3

0.0

0.2

1.0 0.5

-​Direct taxes and social contributions

0.0

0.2

0.0

0.0

0.0

0.0

0.4

0.0

0.0

0.0

0.5

0.0

0.0

1.0

0.0

0.0

0.1 0.0

-​Indirect taxes

0.4

0.1

0.0

2N Net current mand. private soc. exp.

4.3

0.5

0.0

0.0

0.3

0.1

0.5

0.0

0.0

0.0

0.1

0.1

0.0

1.0

0.0

0.0

0.1 0.0

0.0

2.6

0.3

1.7

0.0

0.0

0.2

1.6

0.5

0.0

4.4

0.0

0.1

0.9 0.4

3G Gross voluntary private soc. exp.

1.2

1.4

1.9

4.7

0.6

0.4

1.8

0.1

1.5

3.3

1.2

0.5

0.3

0.1

2.2

2.3

0.9 2.6

-​Direct taxes and social contributions

0.0

0.1

0.2

0.4

0.0

0.0

0.4

0.0

0.2

0.1

0.2

0.0

0.0

0.0

0.0

0.1

0.1 0.1

-​Indirect taxes 3N Net current voluntary private soc. exp.

0.0

0.1

0.2

0.2

0.0

0.0

0.3

0.0

0.2

0.1

0.1

0.0

0.0

0.0

0.2

0.2

0.0 0.2

1.2

1.2

1.6

4.0

0.6

0.4

1.1

0.1

1.2

3.1

0.9

0.5

0.3

0.1

2.0

2.0

0.8 2.4

4N Net current 5.4 private soc. exp. [2N + 3N]

1.7

1.6

4.0

3.2

0.7

2.8

0.1

1.2

3.3

2.5

1.0

0.3

4.5

2.0

2.2

1.6 2.8

23.5

24.3

26.7

20.9

13.3 18.6

25.4

14.9

25.3

31.7

24.8

22.4

18.1

18.2

16.1

TBSPs towards pensions b

2.1

0.0

0.2

2.1

..

0.0

0.8

0.0

0.1

1.0

0.0

0.0

1.0

0.4

Average indirect taxrate

7.7

16.0

14.2

8.7

14.5 18.5

23.2

22.2

19.3

14.7

13.9

14.6

25.8

18.0

17.3

-​Direct taxes and social contributions

Net total social expenditure a

10.8 19.4

15.5 28.5 21.9

14.3 23.8 20.8

16.5 25.4 23.5

Memorandum item 0.4

1.1

0.0

..

16.1 12.7 8.2

New Slovak United United Korea Latvia Luxemborg Mexico Netherlands Zealand Norway Poland Portugal Republic Slovenia Spain Sweden Switzerland Turkey kingdom States OECD-3​ 5 10.2

15.7 22.1

7.7

17.7

19.2

24.7

20.5

24.0

17.8

22.6

24.7 26.3

15.9

11.6

21.6

18.8

20.6

0.0

0.5

1.8

0.2

..

1.0

2.2

1.7

1.4

0.0

0.4

1.0

2.5

1.8

0.0

0.3

0.7

1.1

0.4

1.7

3.0

0.3

..

1.3

2.2

2.1

2.5

1.6

3.1

2.0

1.8

0.7

1.1

1.6

0.3

1.8

0.5

0.2

0.0

0.2

..

0.1

0.1

0.4

0.8

0.4

0.1

0.3

0.0

0.5

0.6

0.3

2.8

0.4

13.7 17.2

7.4

..

17.0

20.4

17.0

20.9

16.5

19.3

22.0 22.0

13.9

11.1

19.9

20.7

18.2

1.4

10.2

1.0

0.0

0.8

0.0

6.2

0.0

1.3

0.0

0.2

0.1

0.0

0.0

0.4

10.5

0.0

0.9

5.8

0.1

0.0

0.2

0.0

..

0.0

0.3

0.0

0.0

0.0

0.0

0.0

0.1

1.2

0.0

0.1

0.0

0.1

0.0

0.2

0.0

..

0.0

0.2

0.0

0.0

0.0

0.0

0.0

0.1

0.4

0.0

0.1

0.0

0.8

0.0

0.5

0.0

..

0.0

0.8

0.0

0.2

0.1

0.0

0.0

0.3

8.9

0.0

0.7

5.8

1.1

2.0

0.1

0.5

0.4

7.1

0.7

1.3

0.4

2.1

0.9

1.3

1.1

3.2

1.0

0.2

5.3

6.7

1.7

0.0

0.0

0.0

0.0

..

0.0

0.3

0.0

0.1

0.0

0.0

0.0

0.5

0.0

0.0

0.6

0.8

0.0

0.0

0.0

0.0

..

0.0

0.2

0.0

0.1

0.1

0.0

0.1

0.5

0.0

0.0

0.7

0.2

2.0

0.1

0.5

0.4

..

0.7

0.8

0.4

1.9

0.8

1.3

1.0

2.3

1.0

0.2

4.0

5.7

2.8

0.1

1.0

0.4

..

0.7

1.6

0.4

2.1

1.0

1.3

1.0

2.5

9.9

0.2

4.7

11.5

13.04 13.74 18.2

7.7

..

17.6

22.0

17.4

23.0

17.4

20.6

22.9 24.5

23.7

11.2

24.5

30.0

20.5

0.0

0.2

1.9

..

0.3

0.0

0.0

0.0

0.6

0.0

1.2

0.6

1.3

1.0

..

16.3 24.1

8.4

15.1

15.8

20.7

16.5

15.8

14.6

20.5

13.3 19.3

8.1

14.6

16.3

4.0

15.4

.. 10.2

0.1

0.2

1.4

166    WILLEM ADEMA and PETER WHITEFORD contributions to public pension programmes differ from other taxes levied on households to the extent that participants perceive contributions as giving them a claim to future pension benefits: To the extent that pension contributions are perceived as giving individuals rights to future pensions, the behavioural reaction of programme participants to contributions will differ from their reactions to other taxes. In fact, they might regard pension contributions as providing an opportunity for retirement saving, in which case contributions should not be deducted from households’ earnings, and should not be included in the tax wedge. An issue for programme design therefore arises: if pension programmes can be designed explicitly to look like retirement saving programmes, the potentially adverse impact of higher pension contributions on employment might be alleviated. (2004: 270)

Disney (2004) points out that the diversity of programme design can be illustrated by comparing two types of programme. At one extreme, the Swedish public pension reform in 1998 and the Italian pension reform in 1995 tried to make their public pension programme look more like a private retirement saving system by linking individual pension entitlements very closely and explicitly to actual contributions paid. At the other extreme, Australian public pensions are income-​tested and financed out of general taxation. Disney (2004) argues that these design features, as well as the overall costs of the programme, matter for incentives. He estimates what he calls the redistributive and actuarial shares of public pension provision, finding that there appears to be a trade-​ off between the level of contributions (spending) and the degree of redistribution. For a sample of twenty-​two countries, he finds that the effective contribution rates in the 1990s range between 15 per cent in Australia and 58 per cent in Greece, with Australia having the lowest effective contribution rate and the highest redistributive share, around 38 per cent of the effective contribution rate. In contrast, countries like Portugal, Luxembourg, and Greece have much higher contribution rates, but very limited redistribution (effective tax rates of around 5 per cent). Disney’s (2004) results reveal robust evidence that when public pension programme contributions are broken down into a tax component and a savings component, the tax component of the payroll contribution reduces economic activity rates among women, while a higher retirement saving component has the opposite effect. He finds little evidence that average tax rates, however constructed, have any adverse impact on the economic activity rates of men. Disney’s (2004) results can be seen as confirming Lindert’s (2005) arguments—​the design of welfare states matters for outcomes. The reason why some high-​spending welfare states have less adverse implications for incentives than might be expected is that they are structured like private provisions. In these countries, there is a stronger association between what people ‘put into’ the welfare state and what they ‘get out’ from the welfare state. In effect, high-​spending welfare states incorporate private spending design

Public And Private Social Welfare    167 features within their public systems. Lower-​spending welfare states tend to separate public and private provision. What are the implications of these arguments for distributional outcomes? As with studies of the incentive effects of welfare states, there is a vast literature analysing the distributional outcomes of welfare state design. One of the best known is Korpi and Palme (1998), who argue that welfare states that provide high-​income earners with clearly earnings-​related benefits within encompassing social insurance institutions reduce inequality and poverty more efficiently than by flat-​rate or targeted benefits. They note: The traditional arguments favoring low-​income targeting and flat-​rate benefits have focused on the distribution of money actually transferred and overlook three basic circumstances. (1) The size of redistributive budgets is not necessarily fixed but tends to depend on the type of welfare state institutions that exist in a country. (2) There tends to be a tradeoff between the extent of low-​income targeting and the size of redistributive budgets. (3) . . . the outcomes of market-​dominated distribution tend to be even more unequal than those found in earnings-​related social insurance programs. Recognition of these factors helps us understand what we call the Paradox of Redistribution: The more we target benefits at the poor only and the more concerned we are with creating equality via equal public transfers to all, the less likely we are to reduce poverty and inequality. (Emphasis in original, 1998: 681-2)

Relatively few studies have considered the implication of private social provision for distributional outcomes; exceptions include Caminada and Goudswaard (2005), Castles and Obinger (2007), Goudswaard and Caminada (2010), Vliet et al. (2012), and Been et al. (2017). Generally, these studies use cross-​country regression analysis to consider the relationship between variables such as private social spending, taxes paid on benefits, and distributional outcomes. Caminada and Goudswaard (2005), for example, find: a negative relationship between net public social expenditure and income inequality and a positive relationship between net private social expenditure and income inequality. The impact of total expenditures (public and private) on income inequality across 16 wealthy countries appears to be statistically trivial. As a result, changes in the public/​private mix in the provision of social protection may indeed affect the redistributive impact of the welfare state. (2005: 187)

A limitation of this analysis is that it is based on cross-​country correlations or regression analysis measuring the association between the aggregate data on net social spending discussed above and measures of income inequality and poverty derived from household surveys. The household surveys, however, do not directly measure the impact of private welfare provision for distributional outcomes.

168    WILLEM ADEMA and PETER WHITEFORD Table 9.2 sets out the standard accounting framework used to analyse the redistributive effects of the welfare state using income distribution data (OECD 2008). In the framework, income from wages and salaries, self-​employment, and property sum to ‘factor income’; factor income plus occupational and private pensions give ‘market income’; market income plus public and private transfers, as well as other types of cash income, produces ‘gross income’; finally, gross income minus personal income taxes and workers’ social security contributions gives ‘cash disposable income’. This last concept, when adjusted to reflect differences in household needs through an equivalence scale, gives ‘equivalized disposable income’—​the main measure of household well-​being used in virtually all studies of income redistribution. The approach set out in Table 9.2 is an

Table 9.2 The income accounting framework Income-​component

Adjustment

Equivalized income component

–​

–​

–​

–​

1. Factor income +

Equivalence scales

= Equivalent factor income

Occupational and private pensions =

–​

–​

2. Market income +

Equivalence scales

= Equivalent market income

Social security cash benefits (universal, income-​related, contributory) +

–​

–​

Private transfers +

–​

–​

Other cash income =

–​

–​

3. Gross income -​

Equivalence scales

= Equivalent gross income

Income tax (and employee social security contributions) =

–​

–​

4. Cash disposable income

Equivalence scales

= Equivalent cash disposable income

Wages and salaries + Self-​employment  income + Property income =

Public And Private Social Welfare    169 accounting framework that allows different components of income to be related to each other and suitable aggregates to be derived but, as discussed below, the framework is both linear and static. This framework can be used to construct measures of the redistributive impact of social security and taxation policies. With microdata, this framework can be applied to each household’s income to produce the four income measures identified in Table 9.2. These unit records can then be aggregated and analysed to produce measures of distribution and redistribution across the population as a whole. In particular, the degree of redistribution effected by taxes or social security transfers can be calculated by comparing income shares or other measures such as Gini coefficients at different stages in the process outlined in the table. For example, the impact of cash transfers can be evaluated by comparing the difference between measures of inequality or poverty on the basis of market income (Stage 2) and on the basis of gross income (Stage 3), while the effects of taxes can be calculated by comparing measures of gross and disposable incomes (Stage 4). There are a number of significant components of income and social spending missing from this framework. What are included are the direct cash benefits of government spending and some of the taxes used to finance government spending (income taxes and employee payroll taxes). The taxes paid on welfare payments are included as part of observed direct taxes, but not separately identified, while some tax expenditures (e.g. payments for children through the tax system) are also included, if not measured separately. But the standard framework does not include employer social security contributions—​which are insignificant or non-​existent in Australia, Denmark, and New Zealand, but account for more than 25 per cent of total tax revenue in France and the Czech Republic. Given that these contributions actually pay for a large part of social spending in many countries, an assessment of their distributional impact is warranted. The incidence of employer contributions is subject to debate, but one straightforward approach is to assume that they are incident on wages. At the first stage, this would appear to imply that employer contributions should be added at all stages of the framework. Inclusion of employer social security contributions in factor and market income and household taxes would change both factor market–​income inequality and therefore measures of the effectiveness of different tax-​transfer systems (Mitchell 1991), since the difference between factor incomes and disposable incomes would be greater than conventionally measured. But should all taxes financing social benefits be included as taxes that reduce disposable incomes? The argument of Disney (2004) about the incentive effects of different pension systems is equally relevant here. If parts of the contributions towards public provisions are not taxes, but are seen as equivalent to private savings, should they be deducted from incomes? There is a related complication. The standard framework includes private and occupational pensions in the market income of households. But apparently nobody pays for them—​neither employees nor employers. The standard approach (and the SNA conventions) treats contributions to government pensions as a tax that finances the retirement pensions paid out in the same year, while contributions to private pensions are

170    WILLEM ADEMA and PETER WHITEFORD effectively treated as a form of private consumption, and employer contributions to (public and) private pensions are simply outside the scope of household surveys. Similarly, publicly funded sickness benefits are treated as a part of the redistributive activity of the welfare state, while employer-​provided sickness pay is treated as part of the wage package. Similar issues arise with health insurance. Fiscal incidence studies of the broader impact of the welfare state normally include government spending on health insurance, but in a number of countries—​most notably the United States—​ occupationally funded health care is nearly as important as government spending. These factors affect international comparisons of income distribution in several ways that parallel the effects on measures of welfare effort and on incentive effects. For example, countries with earnings-​related social security systems will look more equal because a higher proportion of the savings that well-​off individuals make for retirement are made through taxes. Conversely, where flat-​rate or means-​tested benefits are provided, a higher proportion of savings for retirement are made through occupational and private pension contributions, which are not usually taken into account.6 As far as we are aware, there are no studies that model the impact of the benefits and the costs of occupational welfare on income distribution. Overcoming this bias requires broadening the framework used to assess household well-​being and distributive outcomes. In summary, just as conventional measures of public spending are incomplete measures of welfare state effort, the incentive and distributional effects of private and occupational welfare are usually not included in assessments of welfare state outcomes. Different social security systems produce different distributions of public and private pension rights, and the incomplete treatment of this redistributive activity may bias cross-​country comparisons of income distribution. The implication of this is that, just as comprehensive measures of welfare state effort suggest greater similarities in real spending levels, real outcomes will be more similar than conventionally measured.

References Adema, Willem, 2014. How much do OECD countries spend on social protection and how redistributive are their tax/​benefit systems? International Social Security Review, 67 (1): 1–​25. Adema, Willem, and Einerhand, Marcel, 1998. The growing role of private social benefits (OECD Labour Market and Social Policy Occasional Papers, 32). Paris: OECD, www.oecd-​ ilibrary.org/​docserver/​804013113766.pdf?expires=1582463203&id=id&accname=guest&che cksum=3B5944696C866F96AA433A56AA125F86. Adema, Willem, Einerhand, Marcel, Eklind, Bengt, Lotz, Jørgen, and Pearson, Mark, 1996. Net public social expenditure (OECD Labour Market and Social Policy Occasional Papers, 19). Paris: OECD, www.oecd-​ilibrary.org/​docserver/​122001486025.pdf?expires=158 2463135&id=id&accname=guest&checksum=3C53EA0FF99235349479088D4741657F. 6  These biases can be addressed in several ways. For example, the United Kingdom Households Below Average Income statistics subtract occupational pension contributions from disposable income, on the basis that these contributions do not enhance current living standards.

Public And Private Social Welfare    171 Adema, Willem, Fron, Pauline, and Ladaique, Maxime, 2011. Is the European welfare state really more expensive? Indicators on social spending, 1980–​2012; and a manual to the OECD Social Expenditure Database (SOCX) (OECD Social, Employment and Migration Working Papers, 124). Paris: OECD, www.oecd-​ilibrary.org/​docserver/​5kg2d2d4pbf0-​en.pdf?expire s=1582463019&id=id&accname=guest&checksum=BB1F83ACD34DC7E6F6FCFD618F6C BD9E. Been, Jim, Caminada, Koen, Goudswaard, Kees, and Vliet, Olaf Van, 2017. Public/​private pension mix, income inequality and poverty among the elderly in Europe: An empirical analysis using new and revised OECD data. Social Policy & Administration, 51 (7): 1079–​1100. Caminada, Koen, and Goudswaard, Kees, 2005. Are public and private social expenditures complementary? International Advances in Economic Research, 11 (2): 175–​189. Castles, Francis G., and Obinger, Herbert, 2007. Social expenditure and the politics of redistribution. Journal of European Social Policy, 17 (3): 206–​222. Disney, Richard, 2004. Are contributions to public pension programmes a tax on employment? Economic Policy, 19 (39): 267–​311. Ec/​Imf/​Oecd/​Un/​Wbg, 1993. System of National Accounts 1993. Brussels, Luxembourg, New York, Paris, Washington, DC. Ec/​Imf/​Oecd/​Un/​Wbg, 2009. System of National Accounts 2008. Brussels, Luxembourg, New York, Paris, Washington, DC. Eurostat, 2016. European System of Integrated Social Protection Statistics—​ESSPROS, Manual and User Guidelines, 2016 Edition. Luxembourg: Publications Office of the European Union. Fishback, Price V., 2010. Social welfare expenditures in the United States and the Nordic countries: 1900–​2003 (NBER Working Paper Series, 15982). Cambridge: NBER, www.nber. org/​papers/​w15982.pdf. Gilbert, Neil, 2005. The ‘Enabling State’: From public to private responsibilities for social protection. Pathways and pitfalls (OECD Social, Employment and Migration Working Paper, 26). Paris: OECD, www.oecd.org/​social/​soc/​35304720.pdf. Goudswaard, Kees, and Caminada, Koen, 2010. The redistributive effect of public and private social programmes: A cross‐country empirical analysis. International Social Security Review, 63: 1–​19. Hacker, Jacob S., 2002. The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States. Cambridge: Cambridge University Press. Hacker, Jacob S., 2004. Privatizing risk without privatizing the welfare state: The hidden politics of social policy entrenchment in the United States. American Political Science Review, 98 (2): 243–​260. Howard, Christopher, 2003. Is the American welfare state unusually small? Political Science and Politics, 36 (3): 411–​416. ILO (International labour organization), 2005. ILO Social Security Inquiry. First Inquiry 2005. Manual. Geneva: ILO. Korpi, Walter, and Palme, Joakim, 1998. The paradox of redistribution and the strategy of equality:  Welfare state institutions, inequality and poverty in the Western countries. American Sociological Review, 63 (5): 661–​687. Lindert, Peter H., 2005. Growing public: Is the welfare state mortal or exportable? (American University of Paris, Working Paper No. 25). Paris. Mitchell, Deborah, 1991. Income Transfers in Ten Welfare States. Aldershot: Avebury. OECD, 1996. Tax Expenditures: Recent Experiences, Paris: OECD.

172    WILLEM ADEMA and PETER WHITEFORD OECD, 2008. Growing Unequal:  Income Distribution and Poverty in OECD Countries. Paris: OECD. OECD, 2016. Walking the Tightrope: Background Brief on Parents’ Work–​Life Balance across the Stages of Childhood. Paris: OECD. OECD, 2018. Database: Tax and Benefit Systems: OECD Indicators. Paris: OECD, www.oecd. org/​social/​soc/​benefits-​and-​wages.htm. OECD, 2019a. The OECD Social Expenditure Database (SOCX) Manual—​ 2019 Edition. Paris: OECD. OECD, 2019b. Database: The OECD Social Expenditure Database (SOCX 2019). Paris: OECD, www.oecd.org/​els/​soc/​expenditure.htm. OECD, 2019c. Database: The OECD Affordable Housing Database (AHD 2019). Paris: OECD, www.oecd.org/​social/​affordable-​housing-​database/​. Queisser, Monika; Whitehouse, Edward, and Whiteford, Peter, 2007. The public–​ private pension mix in OECD countries. Industrial Relations Journal, 38 (6): 542–​568. Pearson, Mark, and Martin, John P., 2005. Should we extend the role of private social expenditure? (OECD Social, Employment and Migration Working Papers, 23). Paris: OECD, http://​ftp.iza.org/​dp1544.pdf. Rein, Martin, and Rainwater, Lee (eds), 1986. Public/​Private Interplay in Social Protection: A Comparative Study. Armonk, NY: M. E. Sharpe. Rose, Hilary, 1981. Rereading Titmuss: The sexual division of welfare. Journal of Social Policy, 10: (4): 477–​502. Schuknecht, Ludger, and Tanzi, Vito, 2005. Reforming public expenditure in industrialised countries: Are there trade-​offs? (Working Paper, 435). Frankfurt a.M.: European Central Bank, https://​ec.europa.eu/​economy_​finance/​events/​2004/​bxl1104/​tanzi_​pw_​en.pdf. Sinfield, Adrian, 1978. Analyses in the social division of welfare. Journal of Social Policy, 7, (2): 129–​156. Titmuss, Richard M., 1976 [1955]. The social division of welfare, in Essays on the Welfare State, ed. Richard M. Titmuss, London: Allen and Unwin, 34–​55 (3rd edn). Vliet, Olaf Van, Been, Jim, Caminada, Koen, and Goudswaard, Kees, 2012. Pension reform and income inequality among older people in 15 European countries. International Journal of Social Welfare, 21: 8–​29.

Chapter 10

Governa nc e Daniel Béland and Kimberly J. Morgan

Introduction The governance of social programmes refers to how they are administered, funded, and run. What level of government funds and provides benefits and services? What is the mix of public and private in the financing, administration, and delivery of social programmes? These are some of the concrete questions of governance that accompany the creation of every social programme. Governance is not simply a technical administrative matter, as these decisions can affect the financial well-​being and power of different groups and governing entities. Governance systems also reflect particular views about central versus local power, the role of religious and other groups in social provision, and the balance between markets and states. For these reasons, controversies over welfare governance can be fierce. We write this chapter about governance in part to clear up misunderstandings about it. There is a tendency in welfare state scholarship to assume governance refers solely to public–​private arrangements, as in private contracting and the injection of market principles into public programmes. We use governance in its more traditional sense—​the act of governing—​and attach modifiers to it to reflect differing forms of governance, such as private governance, territorial governance, etc. We do so because questions of governance, including those concerning the public–​private mix, are not simply a product of marketizing reforms, but have been integral to the development of social programmes from the start. Recovering this broader understanding of governance enables a more holistic and historically nuanced understanding of how welfare governance varies historically and across industrialized democracies. A second set of misunderstandings is in popular writing on the welfare state as a centralized, bureaucratized entity that has socialized large swaths of the economy. In fact, no advanced industrialized democracy has such a monolith; all welfare regimes are mixed systems in which the administration and delivery of some—​if not most—​programmes

174    DANIEL BÉLAND and KIMBERLY J. MORGAN occurs at lower levels of government and/​or through non-​state actors. Instead of viewing states as centralized Leviathans, we should understand them as containing many hands that operate through varying relationships with private entities and territorial levels of government (Morgan and Orloff 2017). In so doing, we can better understand how social welfare programmes actually work, how people experience them, and some of the political stakes around them. The first section of this chapter concerns the public–​private mix in welfare governance, while the second explores territorial governance, with a focus on federalism. The conclusion briefly discusses how future scholarship can study the interaction between these two distinct forms of governance.

The Public–​P rivate Mix in Welfare Governance The public–​private mix in social welfare varies by country, programme, and period. Esping-​Andersen’s welfare regime typology corresponds to some of these differences, but cannot fully capture the complexity on the ground. Mapping the governance landscape requires one to specify the range of non-​state actors involved and their relationship with public authorities and funds. Adopting a historical perspective on these relationships helps make sense of contemporary variations in these arrangements, as well as some of the forces driving these differences. That said, common trends across advanced democracies—​social change, economic austerity, and market ideology—​have promoted common shifts in the public and private governance of social programmes without yet producing convergence in them.

Historical Patterns of Welfare Governance A first step in analysing the public–​private mix in social welfare is to chart the non-​state entities involved in it. The voluntary sector includes non-​profit organizations—​formal and often highly professionalized entities that receive public funds to deliver benefits or services—​as well as churches, mutual aid societies, cooperatives, volunteer groups, foundations, and trade unions. The for-​profit provider side is similarly varied, as it can comprise private physicians, commercial care providers (e.g. childcare, nursing homes, home health, hospitals), and for-​profit firms that deliver public benefits. The line between for-​profit and non-​profit may also be blurred. In recent years, scholars and policymakers have used the terms ‘social enterprise’ and ‘social entrepreneurialism’ to characterize hybrid practices and organizations, including non-​profits that rely on commercial activities to help fund their public service goals, and for-​profits with a strong social mission (Defourny and Nyssens 2010).

Governance   175 What relationship have these entities had to public authority in the operation of social programmes? Historically, human welfare needs were largely met by non-​state actors, including charities, churches, employers, trade unions, and philanthropists (Baldwin 1990). These organizations and individuals concentrated their efforts on the poor, giving rise to outdoor relief systems, rudimentary medical care, kindergartens, orphanages, and the like, usually with limited public funding. Other organizations, such as friendly societies and cooperatives, were efforts by workers, occupational groups, and local communities to pool resources to meet common welfare needs. Nineteenth-​century economic liberalism justified many of these arrangements in prescribing a limited role for the state in social aid and redistribution. Aspects of this vision lived on in liberal welfare regimes that developed in the twentieth century, as governments in these countries constructed state-​run social welfare programmes in some areas and left other domains in the hands of non-​state providers, with or without public support. The United States went furthest down the road of private governance, with health insurance, pensions, and other benefits for working people largely provided by employers and encouraged by tax law and regulations (Hacker 2001). Pension systems in the other liberal countries include a significant role for private benefits—​either voluntary schemes (as in Canada, Ireland, New Zealand, the United Kingdom), or mandated private retirement accounts (as in Australia). There is a greater contrast between these countries in their systems of medical care and insurance. Ireland and the United Kingdom established national health services, in which hospitals are public and most practitioners are public employees, whereas Canada has a single-​payer public system that leaves room for supplemental private insurance in areas such as dentistry and prescription drugs. Australia and New Zealand assure broad access, but feature significant sectors of private providers and supplemental private insurance, while the United States has publicly funded insurance programmes (limited to covering seniors, the disabled, and low-​income people) that reimburse private providers. Non-​state actors also supply many welfare-​related services in these countries, supported by direct public subsidies or demand-​side payments to programme users. Expansions of the welfare state thus have often occurred through these organizations, rather than through direct state provision. For example, starting in the 1970s, community-​based, non-​profit organizations were central to the development of early childhood education and care (ECEC) programmes in Australia, Canada, and New Zealand (Brennan 1994; Friendly 1994; May 2009). In the United States, antipoverty initiatives of the 1960s channelled funds to community-​based groups in an effort to not only address economic disadvantage, but also to promote empowerment and racial justice (Morgan 2001). The drive to combat welfare ‘dependency’ in the United States since the 1970s has led to spending on services often provided by non-​profit groups (Demone and Gibelman 1989). In all of the liberal welfare regimes, proprietary firms increasingly compete for government contracts to deliver benefits and services (see below). The social democratic regimes of the Nordic countries represent the antithesis of the liberal vision of welfare governance. In these systems, the public sector not only pays for social welfare, but also directly provides it, albeit often through local governments

176    DANIEL BÉLAND and KIMBERLY J. MORGAN (see ‘Federalism, Territorial Governance, and Social Policy’ below). These countries have national health systems as well as publicly run nursing homes, home health services, ECEC facilities, and other types of services.1 Voluntary organizations therefore have not been very involved in delivering services, although that is less true in Denmark than in the other Nordic countries (Salamon and Sokolowski 2018: 66; Henriksen et al. 2012:  467–​468). Moreover, unemployment compensation in Denmark, Finland, and Sweden is provided through the Ghent model, in which agencies linked to trade unions administer benefits (see Chapter 33 on unemployment insurance). Overall, however, there has been more public than private governance in these systems, although changes in more recent decades have partly altered this picture (more below). Between these two poles lie the Bismarckian welfare systems of continental Europe, in which the non-​state sector has long played a vital role in administering benefits and delivering services, but often through closely structured relationships with public authorities. A  characteristic of some Bismarckian systems is that the social insurance funds that provide for pensions, health insurance, unemployment benefits, and other needs, are non-​state or para-​public institutions governed by representatives of the social partners and other relevant groups (such as health-​care professionals or family associations).2 There is a similarly structured role for civil society in delivering social benefits in some of these countries, resulting in a ‘welfare cartel’ in Germany or the de facto incorporation of civil society into the state in the Netherlands (Zimmer and Obuch 2017: 2,344; Brandsen and Pape 2015: 2,272). In other countries, however, such as France or Italy, the voluntary sector role historically has been more limited (Salamon et al. 2004). The public–​private mix in health care also varies: private health insurance supplements the mainly public system in some countries (France, Germany, Austria) and is the main source of coverage in others (Netherlands, Switzerland), albeit operating under government-​ imposed constraints. Continental European countries generally have large sectors of private health-​care providers, although in France hospitals are public. In Southern Europe, Greece, Italy, Portugal, and Spain introduced reforms in the late 1970s and 1980s to create national health services—​reforms that went furthest in socializing medical care in Italy and Spain, whereas Portugal and Greece maintained larger sectors of private insurance and medical provision (Guillén 2002). How might we account for these differences? There is no comprehensive theory that could explain governance arrangements in so many programmes, time periods, and countries. Instead, we can highlight some important factors, even as their precise role varies by context. There is a general left–​right divide over the relative role of state, market, family, and voluntary sector in welfare provision, and thus the relative power of left and right can help explain some differences in programme governance. Depending

1 

Private practitioners remain important in the health-​care systems in many of these countries. In the Netherlands and Switzerland, private occupational pensions are the main source of income security for older people. 2 

Governance   177 on the nature of the center-​right, either market ideology (for economic liberals) or the principle of subsidiarity (for Christian democrats) has justified leaving responsibility for social provision in the hands of non-​state actors. Yet, the stances of political groups on the administration of welfare programmes have not solely been shaped by the ideological family to which they belong: unions and left parties in continental Europe, for instance, helped develop the social insurance funds that later became part of the ‘welfare state’, and they resisted nationalizing these programmes and therefore losing their power in running them (Baldwin 1990). More generally, the expansion of publicly funded welfare systems took place in environments prepopulated with social welfare arrangements and actors with a stake in them. Explaining modes of governance thus requires analysis of these pre-​existing arrangements and the accommodations reached with their defenders:  replacement by public provision, joint management, or continued private control. Here, attention to societal cleavages that give rise to different types of societal organizations (Alber 1995), as well as the path-​dependent dynamics of welfare systems, can shed light on how different countries arrived at particular mixes of public and private systems. Moments of rapid political change, such as the democratic transitions in Southern Europe, may be critical junctures—​openings for more dramatic shifts in state–​society relations, as in the construction of national health services. However, such accounts assume democratic decision making and moderate left parties. The communist dictatorships of Central and Eastern Europe simply eliminated many private groups and forms of welfare, offering state-​funded and provided benefits and services in what some call a ‘statist’ or ‘authoritarian-​paternalist’ welfare system (Cook 2007: ­chapter 2; Inglot 2008). The collapse of communism by the 1990s dovetailed with and reinforced emerging beliefs in the West in the superiority of markets in all arenas, including in social provision, and thus these ideological currents would mark the governance of these welfare systems. It is to those shifts in governance structures that we now turn.

Changing Governance Structures since the 1990s The welfare governance portrait outlined above conveys the historical roots of contemporary systems. Although many of these arrangements have proven resilient, they have not been immune to the forces of change. Economic stagnation, ageing populations, budgetary austerity, the expanding middle class, and neoliberal ideology all brought challenges to the status quo, breaking down established arrangements in favour of greater pluralism in welfare provision and a stronger role for markets. The result has been important changes in welfare regime architecture across the Organisation for Economic Co-​operation and Development (OECD). Structural economic change is the backdrop to these shifting governance arrangements. What began in the 1970s as an economic crisis became permanently lower growth rates in many countries, compared to the post-​Second World War decades. This

178    DANIEL BÉLAND and KIMBERLY J. MORGAN unsettled policymakers and generated many challenges, including high unemployment, demographic pressures on welfare programmes, and budgetary imbalances. How to squeeze more out of scarce public dollars became a salient concern also because of societal changes, such as rising women’s workforce participation, which generated demands for new types of spending. Market ideologies supplied one set of answers to the resulting dilemmas, but this was not the only force at work, as the needs and tastes of a large, educated middle class also shaped scepticism towards state-​heavy social programmes (Gingrich 2011). These developments spurred efforts to marketize and individualize social welfare provision. As attempts by market liberals to retrench and privatize social programmes foundered on public antipathy (Pierson 1994), neoliberal-​minded governments instead turned to public–​private partnerships and tax-​subsidized private provision. Although public–​private partnerships were nothing new in many countries, what changed was the emphasis on competition. The ‘welfare cartels’ in countries like Germany and the Netherlands lost their monopoly on social welfare provision, and instead faced competition from new organizations, some proprietary, for public funding (Zimmer and Obuch 2017; Brandsen and Pape 2015), while the non-​profit sector expanded and gained a greater role in social provision in countries such as France (Ullman 1998; Bode 2006). For-​profit contractors created competition with existing non-​profits in liberal welfare regimes, while a mix of non-​profit and for-​profit entities exploited new opportunities to deliver social services in the Nordic countries (Sanger 2003; Gingrich 2011; Henriksen et al. 2012). For-​profit firms also gained a growing role in benefits systems, as exemplified by pension reform. The marketization of pension systems went furthest in Eastern Europe, but other countries, such as Denmark, Sweden, and the United Kingdom, also developed new mandatory private pillars of their pension systems (Whiteford and Whitehouse 2006; Anderson 2019). The Netherlands, Germany, and Switzerland created health insurance exchanges in the 1990s, allowing private companies to compete for beneficiaries and, in the Netherlands, to negotiate prices with providers and develop selective contracting relationships (Ven et al. 2015: 1714). In the United States, operation of publicly funded programmes such as Medicaid and Medicare has increasingly been turned over to private managed care companies (Morgan and Campbell 2011), while the 2010 Affordable Care Act created publicly regulated and subsidized health insurance exchanges in an effort to cover those lacking public or private coverage. Countries also have turned to demand-​side subsidies, such as vouchers or tax breaks, that individuals use to purchase services. Although this mode of social policy is a longstanding one in the United States (Howard 1997), it has become more common in other OECD countries in the past few decades (Adema et  al. 2014; Morel and Carbonnier 2015). These initiatives reflect both efforts by state officials to cut costs and promote competition and public demand for more autonomy and control over the services they use. The latter motivations have been especially important in ‘cash-​for-​care’ initiatives to provide for long-​term care needs. In these programmes, individuals receive vouchers for hiring caregivers, in some cases including relatives, to care for them

Governance   179 at home. These programmes are important features of the long-​term care systems developed in Austria, England, France, Germany, Italy, the Netherlands, and Spain, and a supplement to largely public systems in the Nordic countries (Da Roit and Gori 2019). Marketizing ideas also affected welfare governance in Central and Eastern Europe in the 1990s, as governments there faced intense fiscal pressures, as well as the influence of international organizations such as the International Monetary Fund (IMF) and the World Bank that were preaching neoliberal reforms. In many areas, governance shifted from state monopolies to mixed public–​private systems, with the development of privately provided medical care, education programmes, and social services. A crucial set of reforms to pension systems involved the creation of mandatory, capitalized pillars (Orenstein 2013). In most areas of the welfare state, however, large-​scale privatization did not occur; state provision endures in many areas, albeit to varying degrees in different countries. Non-​profit organizations also developed as service providers, in some countries with state support, while being dependent on volunteers and private contributions in others (Cook 2015). Scholars have pointed to the lobbying of social services employees and bureaucrats, electoral dynamics, and public opinion as forces working to curb more radical reform (Cook 2007; Inglot 2008). Although the growing role of markets in welfare provision is a common trend in many countries, there has been no convergence. The weight of the past remains. In some cases, we can speak of institutional layering (Streeck and Thelen 2005), as governments laid new types of arrangements atop existing ones, as in the addition of new private pillars to public pension systems in Sweden and the United Kingdom. In other instances, older governance systems were converted to meet new purposes, as in how Dutch policymakers converted their childcare system from one reliant on supply-​side subsidies to non-​profit providers to allow more for-​profit agents to enter into demand-​subsidized markets (Morgan 2006: ­chapter 6). Still others represent examples of path shifting—​ of fundamental changes away from established practices, as occurred in some of the Central and Eastern European welfare systems (Cook 2015; Klitgaard 2007).

Federalism, Territorial Governance, and Social Policy The territorial organization of social programmes is an essential aspect of social policy research and practice. This is the case because, even in unitary states, social policy systems typically feature decentralized arrangements that help consider local need. Even when programmes are national in nature, their implementation may take place at the local and regional level. Simultaneously, the advent of the European Union has increased the prominence of multi-​level governance as a concept that stresses interaction among local, regional, national, and supranational policy actors (Loughlin 2007). This section focuses primarily on federalism, as the vast literature on federal countries is

180    DANIEL BÉLAND and KIMBERLY J. MORGAN especially helpful to map issues of territorial governance, especially as they involve the role of lower levels of government (Greer and Elliott 2019; Obinger et al. 2005b). Outside of the communist welfare systems described in ‘The Public–​Private Mix in Welfare Governance’ above, the development and implementation of social programmes often occurs at these lower levels of government. That is true even in the unitary states. In fact, social provision in the unitary Nordic systems relies very heavily on local governments, as the majority of public officials in these countries work for local governments, and the latter collect a significant portion of total tax revenues that are used to fund public programmes (Sellers and Lindstrom 2007). Sellers and Lindstrom go further in arguing that such localized governance should be seen as constitutive of the social democratic welfare state model because local governments benefit from their higher degree of legitimacy in the public eye—​thus enhancing their ability to collect taxes—​and ability to tailor local services to local needs, thereby delivering on the promises of an ambitious, egalitarian welfare system. In other words, strong local governments facilitate the implementation of large, universalistic welfare systems. Liberal and Bismarckian systems promise less, in the way of comprehensive coverage, and the Bismarckian countries generally rely on employer and employee contributions to pay for social programmes, making them less dependent on general revenue collections. Yet, while social policy decentralization is a significant issue in most countries, federal states diverge from unitary ones because of the nature of their constitutional makeup (Béland 2010). From a constitutional standpoint, federalism ‘organizes a division of sovereignty by creating several orders of government to coexist within the same political system. The federal principle symbolizes a form of political integration based on a bond at once voluntary and restrictive, between several regional territorial entities, a bond that, in spite of the fragmentation of the political [system], will remain unified on a much larger scale’ (Théret 1999: 480). The coexistence of distinct and constitutionally entrenched orders of government inherent to federalism creates coordination challenges that may slow down social policy development at particular moments in time. Simultaneously, federalism can foster forms of territorial competition among levels of government that may constrain or stimulate social policy expansion over time (Maioni 1998; Théret 1999). Although federalism is likely to shape the development and implementation of social programmes, the way in which it does so can vary greatly from country to country, and even from policy area to policy area within the same country (Béland 2010; Pierson 1995). In the literature, this reality is known as ‘varieties of federalism’ (Obinger et al. 2005c: 8), which is a key concept for three main reasons. First, this concept rightly suggests that federalism and its impact on social policy can vary greatly over time and space (Obinger et al. 2005c: 8) because federalism interacts with other political institutions, such as electoral and party systems (Pierson 1995). Second, both in general and within particular policy areas, specific policy legacies shape the impact of federalism on concrete social programmes (Banting 2005). Finally, territorial identities and mobilizations can affect the politics of federalism as it intersects with social policy and welfare state development (Banting 2005; Béland and Lecours 2008; McEwen 2006).

Governance   181 One way to map the internal ‘varieties of federalism’ of a welfare state is to look at the nature of intergovernmental relations that characterize particular programmes and policy areas, which can exhibit a great level of institutional diversity, even within the same country. In a chapter on Canada, Banting (2005) discusses three types of intergovernmental relations between the federal government and the provinces. First, ‘classical federalism’ refers to social programmes ‘delivered by the federal or provincial governments acting independently within their own jurisdiction’ (Banting 2005: 95). In this context, intergovernmental relations are generally straightforward, as levels of government act independently from one another. Second, ‘shared-​cost federalism’ occurs when ‘the federal government offers financial support to provincial governments on specific terms’ (Banting 2005: 95). Because federal governments have a greater capacity to raise revenue than subnational units, this type of arrangement is rather common. Its main advantage is to allow for regional variation, while maintaining national standards and, in some circumstances, reducing fiscal inequalities among subnational governments. Yet, this type of arrangement is more likely than ‘classical federalism’ to trigger intergovernmental conflict, as subnational units are likely to pressure the federal government to provide additional fiscal resources. Simultaneously, the federal government may impose potentially unpopular conditions in exchange for the grants-​in-​aid it allocates to subnational governments, a situation likely to exacerbate intergovernmental conflict. Finally, Banting (2005: 95) refers to ‘joint decision federalism’, in which ‘the formal agreement of both levels of government is required before any action is possible’. This concept relates to the idea of ‘joint decision trap’ associated with the work of Scharpf (1988) on the (West) German federation and the European Union. Although this work points to the likelihood of suboptimal policy outcomes under joint decision making, the recent history of the Canada Pension Plan, which Banting (2005) defines as a key example of ‘joint decision federalism’, points to the possibility of overcoming multiple veto points to introduce significant, agreed-​upon reforms. In the mid-​1990s, although changes to the Canada Pension Plan require support of both the federal government and at least seven provinces representing more than two-​thirds of the country’s population, it was agreed to dramatically increase payroll contributions and enact other changes to improve the long-​term fiscal sustainability of this earnings-​related pension scheme (Jacobs 2011). Two decades later, in 2016, Ottawa and most of the provinces agreed to increase further payroll contributions, this time to improve the programme’s modest replacement rate (Béland and Weaver 2019). In short, it is possible for political actors from different levels of government to work together to neutralize multiple veto points and bring about seemingly needed policy change (Little 2008). Many factors can shape the territorial organization of social policy in federal countries. For instance, partisan shifts at the subnational level can lead to policy change that may increase or decrease pressure on the federal government to act in a specific policy area (Maioni 1998). More specifically, the mobilization of regionalist and nationalist movements at the subnational level can lead to a territorial reorganization of social policy over time (Béland and Lecours 2008). This is the case in federal countries such as Belgium

182    DANIEL BÉLAND and KIMBERLY J. MORGAN and Canada, but also in Spain and in the United Kingdom, post-​devolution. In these three groups, respectively, nationalist mobilization in Flanders, Quebec, and Scotland led to greater social policy decentralization in key areas (McEwen 2006). The case of Flanders is particularly interesting because it suggests that nationalist mobilization at the subnational level can gradually transform a country’s territorial organization. In just a few decades, Belgium has evolved from a relatively centralized unitary state to a fragmented federal system, in which country-​wide political parties have largely vanished. Yet, because Belgium enacted its social insurance system decades before the country adopted federalism, decentralizing it is a difficult task for Flemish nationalists, who seek to reduce the scope of territorial fiscal redistribution. By contrast, the French-​speaking minority has been more attached to Belgian identity and generally opposes decentralization of the country’s social insurance system. This situation has not prevented the decentralization of some parts of that system in the aftermath of coalition agreements between Dutch-​speaking and French-​speaking political parties (Béland and Lecours 2016). The example of Belgium points to the issue of internal diversity within federal welfare states (on this issue, see Greer and Elliott 2019). Over time, it is clear that, in key policy areas, differences in the nature and scope of social provision across a country’s subnational entities are likely to differ in meaningful ways. For example, in the United States, there is significant variation across the fifty states in both unemployment and welfare benefits (Weaver 2014; Woodbury 2014). The same is true in health care, a situation exacerbated recently by the fact that many Republican-​controlled states have refused to expand Medicaid in the aftermath of the enactment of the federal Affordable Care Act, known as Obamacare (Béland et al. 2016). In Canada, differences among subnational units are also highly significant in a number of policy areas. For instance, Quebec has developed more comprehensive family benefits than the nine other provinces (Van den Berg et al. 2017). Among European federal countries, Switzerland is especially tolerant of regional diversity in both taxation and levels of social benefits (Obinger et al. 2005a). This has led scholars to discuss ‘varieties of cantonal welfare regimes’, a situation clearly visible in areas such as social assistance, which is a cantonal matter (Obinger et al. 2005a: 292–​293). While pressures for greater internal diversity are strong in Belgium (Béland and Lecours 2016), the situation is very different in Austria and Germany, where interregional differences in social protection are much more limited on average (Obinger et al. 2005b). This situation seems to come from a strong fiscal equalization system, but also from the constitutional allocation of authority over different policy areas. As Pamphilis et al. (2019: 161) explain with regard to Germany, ‘The majority of policy issues commonly included as aspects of welfare (excluding education) are controlled predominantly by the federal government, leaving little room for legislative deviation and in essence creating a unitary system.’ Yet, more homogenous legislation does not mean a lack of diversity in welfare outcomes, something once again illustrated by the German case: ‘Variations exist primarily as a product of preexisting disparities between East and West Germany prior to reunification, inequalities based on sociodemographic traits, and differences in access to funding’ (Pamphilis et al. 2019: 161). This means that legislative differences among subnational entities within a federal system are not the same thing as regional equality.

Governance   183 Students of federalism have also paid close attention to whether this political system favours a fiscal ‘race to the bottom’ among subnational units (Berry et al. 2003; Volden 2002). The idea here is that subnational units featuring higher taxes, used to fund more generous social programmes, are vulnerable to capital and businesses fleeing to other jurisdictions that offer a more friendly business environment. Because of this situation, subnational units competing for economic investments are said to have no choice but to cut taxes, which weakens the fiscal base for existing social programmes. In the end, this form of economic and fiscal ‘competitive federalism’ should lead to a ‘downward spiral’ known as a ‘race to the bottom’ (Obinger et al. 2005c: 32–​33). The problem with this theory is that is rather simplistic, in light of the ‘varieties of federalism’ literature that stresses the diversity of fiscal and social policy configurations within and across federal countries (Obinger et al. 2005c). According to Théret (1999), horizontal fiscal redistribution towards subnational units operated by the federal government can reduce the negative impact of internal economic and fiscal competition on social protection. This is in part because ‘the existence of federal programmes to equalize the fiscal resources of federated states and the political concern to ease economic inequalities between regions and their citizens are determining elements in the evolution of federal political systems’ (Théret 1999: 506). With the major exception of the United States, most federal countries possess stand-​alone equalization programmes aimed at reducing interregional fiscal inequalities, while preserving the autonomy of subnational units. These programmes, coupled with other forms of horizontal redistribution in fiscal federalism, can help reduce regional inequality and fiscal competition among constituent units (Béland et al. 2017). The federalism issues raised above speak to broad aspects of territorial governance that are present in unitary states. For instance, as in federal systems, the level of social policy decentralization in unitary states can vary greatly from one policy area to the next, as municipalities can play a central role in some policy areas, but not in others. Issues of territorial redistribution are also important in unitary states, where the fiscal relationship between the central government and municipalities or regional bodies is a likely source of political tensions. Finally, regional integration, such as the advent of the European Union, raises issues about policy regulation and fiscal redistribution that have been central to the federalism literature for decades (Théret 1999). Considering the debates about regional inequalities in Europe in the wake of the debt crisis in Southern Europe, students of territorial governance in the European Union are likely to draw even more directly on the federalism literature in order to seek potential solutions to the territorial tensions stemming from European integration.

Conclusion This chapter offered a broad discussion of both public–​private and territorial governance. This double emphasis is crucial, as too often in social policy research the concept of governance refers to the public–​private mix, which is only one aspect of governance

184    DANIEL BÉLAND and KIMBERLY J. MORGAN in the broad sense of the term (i.e. the act of governing). Through this double emphasis, we can also question an understanding of the welfare state as monolithic and centralized by stressing the fragmented nature of contemporary welfare regimes as mixed systems, in which policy development and implementation take place through non-​state actors and/​or at subnational (or supranational) levels of government. Mapping and characterizing differences in the welfare mix is a crucial first step for explaining them. Thus far, however, most scholars have not adopted such a holistic view of welfare governance patterns or sought to account for them. We can imagine many ways in which future research could systematically explore the relationship between public–​private governance and territorial governance. For instance, this research could tackle issues such as the connection between federalism and the development of public–​private health care, or the link between decentralization and privatization in the provision of social services. Scholars could look historically at welfare state formation as a process by which (often messy) boundaries were defined between public and private, as well as levels of government. Cross-​national perspectives on the financing of welfare systems could investigate how different modes of finance are implicated in distinct governance systems, both territorial and public–​private. And we could learn more about how societal diversity influences political debates and decision making about the relative balance of national and subnational, public and private. Regardless of where future scholarship goes, students of social policy should keep in mind that the study of the welfare state should not obscure the different layers that shape the development and the implantation of social programme over time and across welfare regimes.

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Chapter 11

So cial Inv e stme nt Julian L. Garritzmann, Silja Häusermann and Bruno Palier

Introduction Welfare states around the globe are challenged as countries develop from industrial to post-​industrial knowledge economies. Post-​industrial societies have—​for at least two decades now—​witnessed the emergence of ‘new social risks’ (Bonoli 2007; Esping-​ Andersen 1999), such as single parenthood, structural youth unemployment, working poverty, absence or obsolescence of skills, or difficulties of reconciling work and family life. Deindustrialization, globalization, ageing societies, technological change, automation, and changing capitalism have all intensified these challenges. The traditional welfare state that had emerged as a response to industrialization has seemed increasingly unfit to meet these new challenges of the post-​industrial societies. Compensating citizens for income-​or labour-​market losses just does not seem enough anymore to provide people with social protection and social inclusion over their life courses. ‘Social investment’ was proposed by policy experts, policymakers, and bureaucrats as a potential remedy to these new social risks (Esping-​Andersen et al. 2002; Hemerijck 2017; Morel et al. 2012) and to the challenges of developing successful social policies for knowledge economies. The core idea of social investments is to focus social policy on human skills and capabilities in order to ‘prepare’ citizens ex ante for today’s skill-​ intensive labour markets, rather than ‘repair’ potential job losses ex post with traditional compensatory social policies (cf. Morel et al. 2012: 1). Social investments are defined as policies that aim to create, preserve, or mobilize human skills and capabilities. Examples include early childhood education and care (ECEC) policy, education and life-​long learning policy, skill-​focused active labour market policies, family policies aiming to facilitate work–​life reconciliation, and skill-​ focused conditional cash transfer policies. A  defining feature is that social investments jointly pursue both economic and social goals, providing a skilled workforce,

SOCIAL INVESTMENT   189 contributing to low (youth) unemployment levels, and achieving sustainable, inclusive, and employment-​friendly economic growth, while at the same time addressing poverty, inequality, and social cohesion. As social inclusion is a key component of the social investment paradigm, social investment policies are not to be confounded with pure commodification and activation (Garritzmann et al. forthcoming a). Social investment policies come in many variants and have been the subject of much normative discussion. After introducing some of these discussions and prominent social investment models in the next section, this chapter provides a mapping of the degree to which countries around the globe have developed social investment policies—​ and of the forms these have taken. Afterwards, this chapter goes on to discuss socio-​ economic effects of social investments, as well as politics (i.e. different explanations for the fact that countries around the globe have developed social investments to different degrees, at different points in time, and in different forms). The final section concludes by pointing to a range of avenues for future research.

Three Common Social Investment Models What is social investment? Social investments are social policies that centre on human skills and capabilities and aim to fulfil both economic and social goals. Beyond this core, however, the existing literature provides many different definitions and understandings of social investments. In addition, the fact that social investment is being simultaneously discussed both analytically and politically has contributed to a certain blurriness of the concept. In the following, we try to provide some analytical clarification. Early literature tracing the evolution of the concept has identified two variants of the social investment model (Jenson 2010; Morel et al. 2012): an ‘Anglo-​Saxon’ and a ‘Scandinavian’ version. In the Scandinavian tradition, which can be traced back to the productivist welfare approach in Sweden in the 1930s, social investments are conceptualized as complementary to compensatory social policies. Preventive social investments enabling citizens to participate in the labour market (such as early childhood education and care, or skill-​focused active labour market policies) are supposed to work hand in hand with compensatory policies, which bolster labour market failures and losses (such as unemployment benefits) (Esping-​Andersen et al. 2002). In the Anglo-​Saxon tradition, in contrast, social investments are conceptualized as substitutes for traditional compensatory social policies. Sociologist and Blair-​advisor Anthony Giddens (1998) famously proposed a reconceptualization of social policy away from social compensation and towards education and skills (resulting in the famous New Labour campaign slogan: ‘Education, education, education’). In this way, income from social protection should be (partially) replaced with market income. In this understanding, social investments (also) aim at ‘activating’ beneficiaries by ‘negative reinforcement’ (Bonoli 2010),

190    Julian L. Garritzmann, Silja Häusermann and Bruno Palier i.e. by retrenching compensatory policies and by offering retraining and public employment programmes. Literature referring to this Anglo-​Saxon understanding therefore has often regarded social investment as a mere euphemism for ‘neoliberal’ commodification and marketization. Many scholars have discussed which of these understandings is, and should be, the ‘true’ understanding of social investment. From our perspective, the academic discussion has rightly moved beyond this distinction: pure commodification cannot be seen as social investment, since there is no investment (in skills or capabilities) being made, and hence no pursuit of social inclusion. However, the ‘Scandinavian’ policy package needs further analytical distinction to identify its investment-​focused elements more specifically. In a more recent prominent approach of defining and categorizing social investment, Hemerijck (2017) distinguishes between a ‘stock’, a ‘flow’, and a ‘buffer’ function of social investment. According to Hemerijck, social investments aim at ‘raising the quality of the “stock” of human capital and capabilities over the life-​course’, ‘easing the “flow” of contemporary labour-​market and life-​course transitions’, and ‘maintaining strong minimum-​income universal safety nets as income protection and economic stabilization “buffers” in ageing societies’ (Hemerijck 2017: 19). Hemerijck thus clearly positions himself in the ‘Scandinavian’, encompassing tradition (cf. also Kvist 2015). The beauty of his approach is that it emphasizes the large variety of policies and functions that social investment can fulfil. At the same time, the weak point of Hemerijck’s definition is that it is difficult to see which social policies should not be understood as social investment, as basically each and every social policy can be reinterpreted as social investment. We have proposed a third, arguably more clear-​cut definition of social investment (Garritzmann et al. 2017), which helps to keep the concept analytically distinct from compensatory social policies. Elaborating on Morel et al. (2012), we find it helpful to think about social investments primarily in terms of their goals and functions—​and only subsequently in terms of particular policies. We thereby refrain explicitly from providing a policy-​based definition, because many (if not all) social policies can include elements of social investments, but very many clearly do not. In terms of goals, social investment aims to prepare, support, and equip individuals in a way that increases their chance to support themselves in the economy (notably through employment) and reduces their risks of income loss and poverty. Social investments are thus by definition future-​oriented: investments in time 0 are supposed to yield both an individual and societal return in time 1. Moreover, social investment aims to fulfil social and economic goals. Economically, social investments aim at sustainable economic growth, productivity, high-​and well-​skilled labour markets, low (youth) unemployment, and innovation—​all critical aspects of today’s knowledge economies. Socially, social investments aim at alleviating poverty and poverty risks (also inter-​ generationally), fighting different kinds of inequalities (e.g. gender inequality, generational inequality, income inequality, labour market dualization), and contributing to social cohesion, human development, and social well-​being. In terms of their functions, social investments create, mobilize, and preserve human skills and capabilities. First, social investment policies can refer to an investment in

SOCIAL INVESTMENT   191 human capabilities and skills (creation); for example, by investing in (early childhood) education or by offering re-​training to workers with redundant skills. Second, social investment can comprise an investment in the mobilization of human capital for labour market participation (mobilization); for example, by facilitating labour market (re-​) entry and the work–​life balance. Third, social investments can be an investment in the preservation and improvement of human skills and capabilities to better handle (critical) life events and transitions (preservation). According to this understanding, many policies can contain social investment aspects. Typical examples include ECEC policies, education policies, policies supporting life-​long learning, skill-​focused active labour market policies, and family policies easing the reconciliation of work and family life. But other policy areas may also qualify as social investments; for example, preventive health-​care policies, housing or disability policies, and skill-​oriented conditional cash transfers. Within the family of so-​defined social investment policies, we can then further differentiate different types of social investment policies. Analogously to what welfare state scholarship has been doing for traditional social compensatory policies for decades, we suggest paying particular attention to the distributive profile of the respective policies, distinguishing between ‘inclusive’, ‘stratified’, and ‘targeted’ social investment policies (Garritzmann et al. forthcoming a, forthcoming b). This differentiation allows taking an analytical and positive (rather than normative) perspective on social investment, and in our view contributes to the ‘normalization’ of social investment research, i.e. its integration into the canon of outputs and outcomes that welfare state research has been successful at theorizing and explaining for a very long time. That is, rather than talking about social investment in the singular as one homogenous block, we should distinguish different types of social investment policies, paying particular attention to their distributive profiles and functions.

The Differentiated Spread of Social Investment across Countries and Time To what degree have countries around the globe developed social investment policies? And what kinds of social investments have they implemented? Answering these questions on the relevant variation is difficult, as we lack good comparative measures of countries’ social investment effort (often more service-​than transfer-​based). The data situation is thus worse than for compensatory social policies. By now, however, several studies exist at least on (Western) Europe and the Organisation for Economic Co-​operation and Development (OECD) countries. Usually, they analyse public expenditures (e.g. de Deken 2013; Kuitto 2016; Nikolai 2012; Ronchi 2016), but some also offer detailed descriptions of the enacted policies (e.g. Bouget et al. 2015). Even less comparative information is available for countries outside the OECD sample (but see, e.g. Barrientos et al. 2010, as well as Garritzmann et al. forthcoming b).

192    Julian L. Garritzmann, Silja Häusermann and Bruno Palier

A Quantitative Assessment of Countries’ Social Investment Effort As a rough summary of spending and profile patterns, Figure 11.1 uses public expenditure data and plots public spending on social investment (here defined as all spending on education, active labour market policies, and families) against spending on social compensation (here: pensions and unemployment benefits), both as a share of countries’ gross domestic product (GDP). The disadvantage of spending data is, of course, that looking at spending alone does not tell us much about the different policies, their respective distributive profiles, and policy packages. For example, family policies can serve a social investment function (if, for instance, they aim at supporting parents in reconciling work and family life), but they can also be used for social compensatory purposes (e.g. if they create negative work incentives). Thus, treating entire spending categories as ‘social investment’ or ‘social compensation’ bears many assumptions and can only serve as a rough proxy here. Additional weaknesses refer to the (recent) time span and geographical limitations of data availability. Yet, this data is valuable as a first approximation because it shows us the positioning and clustering of countries (even if the exact numbers should be treated with caution). Figure 11.1 shows that the advanced economies differ quite remarkably regarding their respective focus on social investment and compensation. To start with, we can just look at whether countries are above or below the diagonal line: countries above the line spend more on social investment than on compensation, and vice versa: all Nordic European and all Anglo-​Saxon countries prioritize social investments over compensation, whereas all continental, Eastern, and Southern European, and advanced Latin American countries prioritize compensation over investments (with the exception of Luxembourg). A more detailed look at Figure 11.1 shows four different constellations: to show this, we depict the average spending levels of all countries as solid lines in Figure 11.1. In the top right-​hand corner, we see countries with comparatively high spending on both investment and compensation: besides the Nordic European countries we also find Belgium, France, and Austria in this constellation, which most closely resembles the ‘Scandinavian’ understanding of investments and compensation complementing each other. The countries in Figure 11.1’s top left-​hand corner, in contrast, more closely fit the ‘Anglo-​Saxon Third Way’ model: comparatively high investment levels are combined with below-​average compensation spending. As could be expected, we find the United Kingdom, New Zealand, and Ireland here, but also Luxembourg, Iceland, and Norway. Several countries also exhibit the opposite constellation: a heavy focus on compensatory social policy. Italy exemplifies this constellation most clearly, showing a relative neglect of investments (on the Italian case, see Kazepov and Ranci 2017; León et al. 2019). But the other Southern European welfare states also fall within this box; moreover, Germany, Switzerland, Japan, and Slovenia, as well as (most of) the economically advanced Latin American countries show this pattern of relative underinvestment.

15

17

SOCIAL INVESTMENT   193

13 11 9

New Zealand

Sweden Iceland Ireland Norway United Kingdom Luxembourg

Finland Belgium

7

Hungary Australia Slovenia Estonia Netherlands Germany Israel Portugal Poland Costa Rica Switzerland Spain Canada Czech Republic Argentina Slovak Republic Chile United States Brazil Japan

5

Social investment (% of GDP)

Denmark

France Austria

Italy

Uruguay

3

Mexico

3

5

7

9

11

13

15

17

Social compensation (% of GDP)

Figure 11.1  Social investment and social compensation in thirty-​five advanced economies, 2010 Source: all data is taken from OECD Stats 2017, except for the education data (Press World Bank 2017). As a rough, but common measure, ‘social investment’ here includes all public spending on education, active labour market policies, and families; ‘social compensation’ consists of public spending on pensions and unemployment benefits. We added data for several economically advanced Latin American countries. Drawing on Huber and Stephens 2012, we used expenditure on education and social security as proxies for social investment and social compensation (for 2012), shown with X-​symbols in the figure.

Finally, the countries in the bottom left-​hand corner exhibit comparatively low public spending on both areas: North America and Chile (which all heavily encourage private investments), Costa Rica, Mexico, Israel, the Netherlands, and several Visegrád countries. In these countries, both the compensatory and the investment functions of welfare states remain comparatively underdeveloped. Taken together, this brief discussion shows a grouping that resembles welfare state regime characteristics to some degree (e.g. Esping-​Andersen 1990), but also reveals important and interesting variation, which deserves further attention.

A More Detailed Qualitative Assessment An in-​depth qualitative view on countries’ social investment effort allows taking a more detailed look at the types of social investment policies that countries around the globe have established. Comparing democracies in Western, Central, and Eastern Europe, in North, Central, and Latin America, and in North and South East Asia, as well as in (parts of) Africa, we notice remarkable differences (a) in the degree of countries’ social investment effort; (b) in the timing and sequence of installing social investment policies; and

194    Julian L. Garritzmann, Silja Häusermann and Bruno Palier (c) in the distributive types and forms of social investment established. In the following, we provide a rough sketch of this variety, mainly based on material gathered with more than fifty policy and country experts, presented and synthesized in Garritzmann et al. (forthcoming a and b). Taking a bird’s eye perspective on social investment policies in democracies around the globe, we can identify ten regional clusters, as the countries in the respective groups roughly resemble each other regarding their social investment strategies:  (1) Nordic Europe; (2) continental Europe; (3) Southern Europe; (4) the Baltics; (5) the Visegrád group; (6) North America (except Québec, which is closer to a Nordic European model); (7) economically advanced Latin American countries; (8) economically less advanced Latin American countries; (9) North East Asian; and (10) a broad geographical cluster of economically less developed low-​and middle-​income countries. In the following, we briefly sketch the main characteristics of these countries’ social investment policies. Starting with Europe, the Nordic European countries are the front-​runners and ‘founders’ of an (inclusive) social investment strategy. These countries developed social investment policies very early (going back to the 1930s, cf. Morel et al. 2012) and in an inclusive style. Moreover, these countries stand out by offering a range of universal social investment services—​from ECEC via active labour market policies to life-​long learning—​that, moreover, work hand in hand with compensatory social policies. This inclusive and encompassing social investment strategy has recently been challenged by radical right populist parties (van Kersbergen and Kraft 2017), but the inclusive approach has so far mainly remained solid. The continental European countries form a second cluster. Traditionally, social policy in these countries has been focused on an insurance-​based, compensatory-​heavy model. With few exceptions, social investments in this area have remained underdeveloped, not least because care was understood as a task of women and the household. More recently, and somewhat surprisingly to many observers, however, several continental European welfare states have actively started to develop social investments, particularly expanding ECEC policies and reforming family policies (Häusermann 2018). Unlike in Scandinavia, however, the resulting policies have hardly taken an inclusive approach, but are rather stratified at the benefit of the (new) middle classes, contributing to the so-​called ‘Matthew effect’ (Bonoli et al. 2017). In Southern European welfare states, social investments remain generally underdeveloped and social policy is focused on social compensation (especially of pensioners and labour market insiders), while childcare continues to be a family task. As shown above using spending data, Italy is the ideal-​typical example. Even in this cluster, however, some recent change has happened (much more so in Spain, though, than in the other countries), but many social investment reform attempts have been reversed during the Great Recession (León et al. 2019). Turning to Central and Eastern Europe, two larger clusters emerge: despite a roughly similar historical legacy, the three Baltic countries and the Visegrád countries have developed remarkably different social investment strategies. Policymakers in the Baltics as early as the 1990s set their countries on a path towards human skills and knowledge-​intensive

SOCIAL INVESTMENT   195 capitalism (Avlijaš forthcoming; Toots and Lauri forthcoming). By and large, social investment policies here have taken a partial social investment direction, i.e. we see considerable investments in skill creation, but activation takes a rather ‘workfareish’ direction. Yet, the Baltics have not followed a ‘pure’ liberal model, as they have also developed some inclusive pre-​school policies and some generous parental leave schemes. Social policy in the Visegrád countries, in contrast, remains heavily focused on social compensation, particularly of labour market insiders in the manufacturing sector. Social investments are even counteracted, as social compensation promotes familialism and dualization. The few expansions that have taken place—​especially in active labour market policies (ALMPs)—​can be traced back to the engagement of the European Union’s European Social Fund and have little domestic support (Szelewa and Polakowski forthcoming). A sixth cluster consists of North America, with the intraregion exception of (more inclusive) Québec. These liberal welfare states have historically invested considerably—​ and earlier than other countries—​in primary, secondary, and (partly) higher education; all other social investment areas, in contrast, have remained underdeveloped (White and Prentice forthcoming). To give but a few examples, investments in public ECEC and pre-​primary education are among the lowest in the OECD countries, parental leave schemes are absent or lack generosity, and ALMPs only offer short-​term opportunities. Canada is slightly more active than the United States, but still at a low level. Private skill investments, in contrast, are considerable in this cluster (Garritzmann 2016). Over the past twenty to thirty years, Latin America has witnessed a general trend towards the expansion of social investment, mostly in the areas of skill creation (post-​secondary academic and vocational education), in conditional cash transfer programmes (i.e. programmes offering recipients cash under specific conditions, such as sending their children to school and attending health check-​ups), and—​more recently—​ in ECEC. Most of these policies have taken a targeted form, being tightly linked to poverty prevention and relief; but there are also instances of universal programmes. More specifically, we can identify a cluster of economically advanced Latin American countries (Brazil, Chile, Argentina, Costa Rica, and partly Uruguay and Mexico), which have gone the furthest in terms of social investment expansions (i.e. matching the introduction of conditional cash transfer policies with the respective services), and a cluster of economically less advanced countries, where the implementation of social investment programmes is more strongly hampered by state capacity problems, lacking service provision and problems of clientelism (Huber et al. forthcoming). Countries in North East Asia (Japan, Korea, Taiwan) have traditionally been developmentalist (or productivist) welfare states, subordinating social policy to economic goals. Their current social investment policies stand in this tradition. Public welfare expenditures remain limited, but social investments have recently been expanded (first in Korea, and more recently in the two other countries), with the main goal of mobilizing female employment in a context of a quickly ageing society. Accordingly, the focus lies on childcare and parental policies much more than on active labour market and training policies, while education still relies a lot on private provision (Garritzmann 2016). Most policies take a stratified form (Estévez-​Abe et al. 2016).

196    Julian L. Garritzmann, Silja Häusermann and Bruno Palier Finally, we can distinguish a geographically broad cluster of less developed low-​and middle-​income countries (especially, but not only, in South East Asia and Africa). In these countries, social policies have expanded, but remain focused on poverty alleviation and sustaining economic growth, rather than on social investment. Left-​wing government, economic growth, and structural development (tertiarization) are correlates of an investment orientation of increased social assistance (Barrientos forthcoming).

Does Social Investment Work? The Effects of Social Investments Proponents of a social investment agenda (e.g. Esping-​Andersen et al. 2002; Hemerijck 2017) praise and advertise social investments for their positive economic and social returns, both on the country and the individual level. Social investments are argued to simultaneously increase growth, alleviate poverty and inequalities, sustain fertility, increase employment opportunities and the quality of jobs, and contribute to citizens’ economic and social well-​being. Critics of a social investment agenda object that this might be true in theory, and even intention, but that in practice social investments often do not live up to these promises (Nolan 2013). Cantillon and Lancker (2013), for example, argued that social investments often do not benefit the most precarious (i.e. workless poor households and their children), but are rather used by the (educated) middle classes. Similar arguments have been made for higher education (Fernandez and Rogerson 1995). This so-​called ‘Matthew effect’ therefore could contribute to inequalities rather than alleviate them, also leading to a critical normative view on social investments (Bonoli et al. 2017). This conclusion, however, overlooks that just like any other public (social) policy, the economic, social, and political effects of social investments depend on the institutional design of the respective policies, on their implementation, and on the capacity and willingness of citizens to access and use them. While we lack the space here to summarize the extensive literature on effects of social investment policies, we want to provide three examples to illustrate that we need to study distributive effects empirically: Heckman (2006) has shown that investing in high-​quality ECEC has beneficial social and economic (long-​term) effects. Card et al. (2018) found in a large micro-​econometric meta-​analysis of ALMPs that ALMPs have more favourable effects in the long run than in the short run (where they are often said not to perform well in terms of social integration) and that effects differ across programmes (skill-​oriented ALMPs being most successful). In another context, Rawlings and Rubio (2005) reviewed effects of conditional cash transfer programmes on several outcomes, such as educational attainment, health, nutrition, and consumption. The discussed randomized control designs reveal several positive effects, but also show that effects are conditional on policy design and implementation processes.

SOCIAL INVESTMENT   197 We therefore see little value in trying to judge the effects of social investment tout court. Rather, we argue that the (re)distributive dynamics of social investment depend on the characteristics of the respective policies. Just as social compensation varies in distributive effects, so does social investment. Therefore, we need to pay close attention to policy design. This is why we propose to take this discussion one step further by distinguishing three types of social investment policy, depending on its respective distributive profile: inclusive, stratified, and targeted social investments (Garritzmann et al. forthcoming a, forthcoming b). Inclusive social investment policies aim to provide entitlements and provision of services to (almost) all citizens and therefore are supposed and likely to reduce inequalities and contribute to social cohesion. Stratified social investments aim to provide (new) social rights and services either explicitly to the middle class, or implicitly without defining the intended beneficiaries; given complex socialization, information, and norm effects, these benefits are most likely to be picked up by (new) middle-​class citizens and therefore contribute to inequalities. Targeted social investments aim to provide entitlements and provision of services explicitly to lower classes, the poor, outsiders, or other risk groups, and accordingly fight (intergenerational transmission of) poverty. We argue that these distributive profiles are the result of different politics—​an issue to which we turn next.

The Politics of Social Investment How can we explain variation in countries’ social investment policies’ development and distributive profiles? Why do policies differ across the ten regional clusters that we identified above? A recent and rapidly growing body of research points at the crucial role of politics, discussing a number of factors: some highlight the role of international organizations, such as the World Bank, the United Nations (UN), and OECD, in developing a social investment agenda and diffusing these ideas among policymakers (e.g. Jenson 2010; Morel et al. 2012). Others see socio-​economic structural change, such as deindustrialization or technological change, and their ensuing changing class structures, as a main explanation for the increasing emphasis on social investments (e.g. Häusermann and Kriesi 2015; Häusermann and Palier 2017). Others still focus on how public opinion (e.g. Busemeyer et al. 2020) or political parties (e.g. Gingrich 2011; Abou-​Chadi and Immergut 2019) affect social investment policies. None of these explanations can individually explain the large empirical variety identified above. In our own work (Garritzmann et al. 2017; Garritzmann et al. forthcoming a, forthcoming b), we have therefore—​together with a broad network of expert scholars—​ sought to integrate and expand existing contributions into a broader theoretical model that can explain variation in social investment policies. We identify three sets of factors: socio-​economic structural factors, policy legacies, and reform coalitions. We argue and show that the interaction of structural factors and legacies shapes what functions social investment policies are most likely to be politicized (skill creation, preservation, or mobilization), whereas the distributive profile of policies is shaped by the respective reform coalitions. In what follows, we provide a brief sketch of this approach.

198    Julian L. Garritzmann, Silja Häusermann and Bruno Palier Socio-​economic structural factors (and their ideational correlates) provide the background against which the politicization of social investment is happening. We argue that several important structural developments cross-​pressure welfare states around the globe:  deindustrialization, technological change, changing capitalism, the emergence and spread of the knowledge economy, and changing demographics and family patterns. These pressures help explain why a focus on skills, education, and life-​long learning has emerged as societies saw massive middle-​class and service-​sector growth, as well as extensive decline of industrial employment. These societal trends articulate the structural changes on the demand side of social investment politics. Yet, these structural factors alone cannot explain why certain countries have adopted social investment policies, while others have not. Here, a second crucial factor comes in: policy legacies and how they interact with the structural challenges. Legacies—​particularly pre-​existing social policy provisions—​ matter because previous policy choices effect problem diagnoses and structural constraints, preference configurations, and policy agendas. Cutting a long story short, we argue that countries’ welfare legacies, particularly the pre-​existing mix of compensatory and investment social policies, help explain to what degree and in what form social investments become politicized. One can then try to theorize how different legacies affect the politicization of social investment across contexts. Figure 11.2 illustrates this point with a schematic sketch. If we categorize countries as either high-​or low-​spenders on social investment and social compensation, respectively, we can theorize four scenarios: some countries have legacies of both strong compensatory effort and strong investment (e.g. Nordic Europe). The main challenge here is the question of the financial and political sustainability of this inclusive and expansive social investment approach. In other countries (e.g. in the Anglo-​Saxon liberal tradition, but also in North East Asia), the policy legacy is relatively weak regarding compensation, but stronger on investment (cf. Figure 11.2’s top right-​hand corner). These countries tend to already have an accent on human capital formation and employment. However, given the lack of compensatory safety net, these countries are characterized by high inequality levels, which is likely to further a politicization of social investment in terms of improving equality of opportunities and securing minimum protection, as well as securing a growth strategy focused on high-​skill productivity and innovation. Still other countries (e.g. most continental, Southern, and Eastern European countries) are characterized by a welfare legacy of strong compensatory social policies, but underfunded investments. These economies are likely to be challenged by weak employment rates, low fertility, and problems of adapting their workforce to the needs of knowledge economies. Given the shrinking of traditional (industrial) sectors and the occurrence of (gendered) new social risks, a main challenge in these countries is to ease labour market transitions and skill mobilization. Finally, countries might also exhibit a legacy of both weak compensation and investment. These economies are not as close to knowledge economy structures and—​given the underdeveloped status of social policy—​poverty is more prevalent. Given the residual social policy legacies, we would expect social investment to be politicized more modestly, in terms of residual expansion to alleviate poverty

SOCIAL INVESTMENT   199 Investment + Strong focus on human Capital and employment Sustainability of social investment

Human capital Creation

Human capital mobilization

Residual expansion

Consumption Weak and fragmented social security

Consumption + Strong and encompassing social security

Investment Weak focus on human Capital and employment

Figure 11.2  Welfare legacies and the politicization of social investment Source: Authors’ compilation.

or targeting specifically groups of outsiders. For example, this is the case in many Latin American, but also in several African and South East Asian countries. Legacies matter because they shape how social investments are politicized. Yet again, legacies alone cannot explain the respective enacted policy reforms. To illustrate, Spain, Italy, and Portugal share a range of historical legacies, but differ crucially in their social investment reforms, as do Japan and Korea, despite similar legacies. Here, the third set of explanations comes in, namely reform coalitions. Borrowing Korpi’s (2006) vocabulary from another context, we find it helpful to distinguish between reform protagonists (pushing for social investment reforms), antagonists (opposing such reforms), and consenters (taking a neutral position). Who are the social investment protagonists, antagonists, and consenters? We can theorize on and empirically identify several social investment protagonists, antagonists, and consenters in countries around the globe. Here, we can only sketch this analysis (cf. Garritzmann et al. forthcoming a, forthcoming b for details). To start with, we can identify the relevant social groups that support or oppose social investments. The main protagonist is the expanded, educated new middle class (Garritzmann et al. 2018; Häusermann and Kriesi 2015; Häusermann and Palier 2017), which favours social investment for both rational and ideological reasons. The main antagonists are those groups who benefit least from structural economic and social change towards a knowledge economy, i.e. mainly the traditional industrial working class, who favour social compensation to bolster their needs (Häusermann et al. 2019). Relatedly, the voters of radical populist right parties are crucial antagonists of social investment (Garritzmann et al. 2018). On the level of collective actors, (new) left parties (especially Greens and social liberals) are the main protagonists of social investment policies, as they subscribe to the

200    Julian L. Garritzmann, Silja Häusermann and Bruno Palier economic and future-​oriented social agenda that is associated with social investments. The main antagonists are populist right-​wing parties, who tend to oppose progressive social and economic change and rather defend the status quo (ante) of the industrial era. Christian democrats and conservatives have often been tacit consenters, but in some cases (e.g. the German CDU/​CSU) also main protagonists of (stratified) social investment expansion. Moreover, the social partners (i.e. unions and employers) play a crucial role in the politics of social investment. So far, however, their role is much less understood. Recent research shows that unions’ (Durazzi and Geyer forthcoming) and employers’ (Pavolini and Seeleib-​Kaiser forthcoming) positions on social investment and role in the policymaking process are highly contingent. To give but one example, a trade union with traditional blue-​collar (male) workers can be expected to have very different preferences than a union comprising high-​skilled, white-​collar (female) employees. Moreover, these preferences are likely to differ across political institutions, depending on the degree of union centralization and involvement. In sum, a recent body of research shows that the main explanation for variation in social investment policies is political. We have to pay close attention to policy legacies and reform coalitions, as well as to their socio-​economic and ideational backgrounds.

Gaps in the Literature and Avenues Forward Social investment has recently received considerable scholarly attention in welfare state research. Yet most studies focus on specific social investment policies, single countries or small groups of countries, or discuss definitional and normative aspects of social investment. From our view, there are several important blind spots that appear as avenues for future research. We highlight five of these. First, while some important recent steps have been taken (e.g. de Deken 2013; Bouget et al. 2015; Kuitto 2016; Nikolai 2012; Ronchi 2016), we still lack good systematic and comparative descriptive overviews and data on social investment policies, particularly when it comes to indicators of service provision. This is particularly true once we look beyond the Western (European) welfare states and when taking a historical perspective, trying to go back before the 1990s. Second, we still lack systematic, comparative, and comprehensive analyses of the politics of social investment as a distinctive type of welfare state reform. A  range of studies investigated the politics of single social investment policies, such as ECEC (e.g. Morgan 2006), active labour market policies (e.g. Bonoli 2010), higher education (e.g. Garritzmann 2016), conditional cash transfers (Barrientos and Santibáñez 2009), or family policies (e.g. Bothfeld and Rouault 2015; Häusermann 2018). Yet few studies have attempted to theorize and study the politics of social investment overall (but see

SOCIAL INVESTMENT   201 Beramendi et  al. 2015; Garritzmann et  al. forthcoming a, forthcoming b). Without understanding the politics of social investment, however, we are unable to explain variation across countries and time, and we remain ill-​equipped to provide policymakers with advice for politically feasible reform scenarios. Third, the bulk of existing literature seems still focused on (Western) Europe, or the advanced OECD democracies more generally. Social investment policies (and their politics and effects) are much less studied comparatively in other world regions, for example in Latin America, North and South East Asia, and Africa. Comparative analyses of these regions are thus much needed, especially in light of the massive expansion of social assistance schemes throughout low-​and middle-​income countries (Barrientos forthcoming). Do these countries make use of social investment policies? What form do they take and why? Answering these questions would help to develop a better understanding of welfare states around the globe. A fourth important avenue for future research is the study of social investments in complex multi-​level governance systems. In many countries, a large variety of governmental levels are involved in policymaking and policy implementation. Social investments, especially services, tend to be shaped by a complex web of national, subnational, and supranational governance levels. To give but one example, education policy is affected supranationally by institutions such as the European Union, the OECD, or the World Bank. Simultaneously, national governments and other actors shape education policy, as do regional and subregional governments. Moreover, in several countries, education policies and their implementation are further affected by school districts, or even individual schools. While this fact is widely acknowledged in principle, this complex web of governance is hardly disentangled either theoretically or empirically in comparative analyses (but see Garritzmann et al. 2021). Finally, despite numerous studies, we still know too little about the distributive effects of social investments, especially at the macro level, in the longer run, and regarding their respective complex interplay and cumulative effects. While some studies have evaluated specific policies and studied their immediate effects on incomes, inequality, or poverty, we still do not know enough about how specific policy designs (e.g. inclusive, stratified, and targeted social investment policies in our typology) affect these and other outcomes, also in the longer run.

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Chapter 12

Fam ilies, Stat e s , a nd Mark ets Mary Daly

Introduction The organization of family life and the relationship between the family, the state, and the market vary profoundly within and across national settings. In some countries, the uniqueness of family is uppermost, with family seen as distinct from the state and public life. More liberal perspectives privilege family privacy and generally eschew intervention in the family but, rather than setting up an elaborate architecture for this purpose, the preference is to leave family to its own resources. In yet another framing of the relationship, family is more diffuse, not locked away in its own domain, but interlinking closely with a host of institutions. These are patterns set by history. Until relatively recently, governments were able to take for granted the existence of the traditional family, in terms of both its form and the gendered contributions of earnings and care made by the husband/​father and the wife/​mother. During the past thirty years, however, family change has become a major factor driving policy change. This piece focuses mainly on the responses of states, and in particular on how philosophies and practices are institutionalized in social policies in different countries and how social policies are acting as change agents in relation to family functioning and family relationships. The primary objective is to understand family as an object of state policy on the one hand, and market functioning on the other, in a range of countries today. This is accomplished through an analysis of the expansion and reform of family-​related policies over the past ten years and a consideration of how these are to be explained, especially in light of the classical approaches to the family. The empirical line of analysis is to identify emerging policy approaches to the interrelations between family, state, and market in their own right, as they evolve in particular countries and in light of a seeming consensus on the part of the European Union (EU) and the Organisation for Economic

Families, States, and Markets    207 Co-​operation and Development (OECD) about the appropriate focus and organization of family and work life today. Comparison is to the fore. The chapter proceeds in four steps. The first introduces the field, outlining the main features of family policy as it has developed over time and the insights of scholarship. Following this, the piece moves on to consider the main contours of current reform, especially in light of the model(s) of family policy being promoted by the EU and the OECD. The third section considers explanatory factors and the utility of the main approaches to understanding family policy. A conclusion brings the piece to a close.

Understanding Family, State, and Market Interrelations Generalizing somewhat from Bahle (2009), one can identify two contexts in the history of engagement between states, markets, and families. The first was of industrialization and nation building, wherein, from the late nineteenth century on, the state and political interests endeavoured to respond to the needs and problems thrown up by the shift from agricultural to industrial production and the expansion of the state into society. The settlement that underpinned the early welfare state was that between capital and labour, but this was predicated on a second settlement at the level of the household between men as earners and women as carers. With the male breadwinner family as the orienting image, early social policies assumed the existence of a family wage, and provided subsidies for both marriage and the dependants of the breadwinner (Crouch 1999). The dynamic in the second period, commencing in the 1970s, lay in the expansion of the service economy and, associated with this and other factors, the large-​scale movement of women into the labour market. This turned the focus on the nature of family-​related roles and functions and the interaction between family and market as institutions. Gender politics sat alongside class politics as shaping influences in this period when services substituting for maternal care giving and financial support for families grew rapidly, as did state interest in the care of children. In the classical post-​war literature, the family’s intersection with the state and the market has tended to be conceptualized in rather static functionalist (Parsons and Bales 1955) and economic terms (Becker 1981). I want to pursue a broader understanding of family, one that interrelates economic, sociological, ideological, and political aspects. Scholarship on family policy is one of the richest seams of knowledge on the interrelations between state, market, and family. A literature that has taken time to grow, in many ways mirroring the gradually increasing legitimacy of family as an object of attention on the part of the state, it has been rather narrow. Over time, this literature became increasingly comparative, marrying an interest in variations in institutional provision with the study of political motivations for state–​family engagement as they varied by national setting.

208   Mary Daly When variation and comparison have been the focus, there have been two main streams of scholarship on family policy. The first aims for characterization of countries’ policy packages or profiles, with an abiding interest in identifying institutional features of state policies towards families. Attention has centred on types of policy instrument (cash benefits, tax allowances, employment leave, and services), administrative arrangements, and on how policy has engaged with the social conventions governing family life and behaviours (e.g. marriage, parenthood, childhood, generational interrelationships) (Millar and Warman 1996; Hantrais 2004; Ferrarini 2006). A second stream of comparative work is more oriented to explanation (e.g. Kaufmann et al. 2002). This is often historical, tracing the policy path over time and linking developments to the socio-​political context in national settings, such as political contestation (of a party-​political nature or conflict between church and state), societal values and belief systems, and modes of social and economic organization (Bahle 2008). As policy and scholarship have evolved, it is striking how much of the attention has been on what might be called ‘subfields’ of family policy—​childcare, parental leave, family income support, and so forth. An interest in gender has especially fuelled the study of policy subfields (O’Connor et al. 1999; Daly and Rake 2003). Taken as a whole, the comparative work has contributed two important insights. The first is the idea that family policy is part of a broader patterning of state/​society/​ economy relations and that countries cluster comparatively in this regard. The claim here is that family policy is systematic and patterned, so much so that it is possible to identify regimes or nations of family policies. A second insight centres on how states operate with a set of preferences about both family functions and gender and generational patterning. Such preferences not only shape what might be called ‘welfare relations’, but also engage closely with economic and employment policy. Ferrarini (2006), among others, points out that when legislating for services or transfers, policy makers actually modify the broad bundle of choices and options available to an individual, and so affect citizens’ personal agency, as well as more macro-​societal arrangements. This takes family policy into the terrain of employment, education, gender, and generational interrelations, underlining the breadth of its (potential) reach. Such concerns have found their way to the heart of recent policy, and scholarship reflects this, demonstrating that family provides a lynchpin in the functioning of states and markets and that the degree to which social policy seeks to familialize or defamilialize people and activities is a crucial feature of political and economic systems (Esping-​Andersen 1999; Leitner 2003). The idea of familialization or defamilialization has taken hold as an analytic device. With roots in critical feminist work, it has been developed both in the main welfare state scholarship (e.g. Esping-​Andersen 1999) and in more family-​oriented work (e.g. Leitner 2003). Most widely, the framework conceives of policies in terms of the degree to which they support the family and/​or relieve it of tasks and responsibilities by, for example, providing services or other interventions (Saraceno and Keck 2010). It is a perspective built on the idea of a complex relationship (including substitution and functional equivalence) between family, state, and market. A core reference in most uses of the familialization/​defamilialization framework is how

Families, States, and Markets    209 the responsibility for those who need care (such as children, those who are ill, and older and fragile) is distributed (among individuals and institutional spheres). The perspective is especially sensitive to the situation of women and children (Leitner 2003). Definition and specification of the field of family policy has been an ongoing concern. One source of continuing debate is how to define family policy—​the field has broadened so much that it is not so clear that the classic term ‘family policy’ can be employed as readily as in the past. In a framing that picked up on the fact that state policies did not always target the family directly, Kamerman and Kahn suggested a differentiation between countries in terms of whether they operate an explicit or implicit policy approach to family (Kamerman and Kahn 1978). Explicit family policy exists when a country has specific policies and programmes to achieve explicit goals regarding the family; policy is implicit when governmental actions are not specifically or primarily addressed to the family, but still aim to affect the situation of families and the relative well-​being of individual family members. The differentiation plumbs the extent to which the family is targeted by policy, probing the existence or absence of intentionality and politicization on the part of the state and other major actors regarding the family. While it has been used mainly descriptively, the explicit or implicit characterization of family policy has a deeper reach: it engages with fundamental questions about whether family policy is viewed as a means towards affecting the family in its own right or whether it is oriented to the achievement of other objectives, and whether there is sufficient homogeneity or consensus in a society to realize objectives around matters relating to the (often private) family (Kaufmann et al. 2002). All of this leads me to suggest that scholarship should work with a broad understanding of family, and that translating such an understanding to family policy would see it as interrelating with economic, sociological, ideological, and political aspects. My conceptualization of the family views the interrelations between the family, state, and market in the following terms: looked at economically, the main functions of the family relate to income redistribution, human capital formation, labour supply, and consumption; looked at sociologically, the family is a form of social organization that provides for care needs, arranges inter-​generational and gender relations, and through these and other means, plays a key role in the social organization of life; as an ideological entity, the family affects continuity and change in value systems; through a political lens, the family is a site of power relations, social control, and a source of social order.

Main Types of Family Policy Orientation What factors motivate state engagement with the family? Four classic concerns have been identified: demographic change; economic redistribution between those with children and those without; poverty alleviation; gender equality (Wennemo 1994; Gauthier

210   Mary Daly 1996). In a broader framing—​and one that serves well in encompassing the range of motivations potentially prevailing in family policy today—​Kaufmann (2002: 426–​428) identified the following motivations for family policy within and across countries: • the natalist motive—​the importance of keeping the birth rate up and managing demographic change; • the economic motive—​the improvement of the stock of human capital and bolstering the family’s contribution to economic functioning; • the socio-​economic motive—​balancing of employment (self-​sufficiency) and support for the family; • the societal motive—​maintaining the significance of the family as a form of social capital and a source of social stability; • the socio-​political motive—​compensating for the costs of having families; • the institutional motive—​to protect the family as a valued institution; • the gender equality motive—​to affect the distribution of resources and roles between women and men; • the children’s welfare motive—​to ensure that children are reared with sufficient resources and to improve their welfare through a range of services and provisions. The strength of particular underlying motivations and the diversity of national philosophical and religious orientations towards the family have led to a number of distinct models of family–​state–​market relations in Europe historically. To appreciate the complexity, and how deeply family policy is embedded in the national social system, it is helpful to consider a number of country cases. These tend to approximate to the commonly conceived welfare state types, but there are some specificities. A first approach, exemplified by France, is pro-​family and pro-​natalist in orientation. Historically, in France the family had value as a political and moral entity, which meant legitimacy for state policy in securing the material and moral functioning of family and family life (Lenoir 1991). The links between fertility, family, and national interest have been of concern across the political spectrum ever since France first experienced a transition from high to low fertility in the late nineteenth century. The future of the nation became interlinked with the vibrancy of the family (Revillard 2006). Familialism, an ideology that promotes family as a way of life and as a force for social integration, was deeply embedded historically in the national culture, and the state assumed a role as a defender and protector of families, prodded by a highly effective lobby of pro-​family organizations (Lenoir 1991). As it developed, France’s policy framework tended towards generous and broad-​based support (including both financial assistance and childcare services) for families (Pedersen 1993). A second approach, typified by (West) Germany, is more selective about the kind of support given to families, although in it too family has high social value and constitutes a legitimate ground for political action. Indeed, in Germany historically, the claims of the family were elevated and placed above those of other institutions or social categories by the principle of subsidiarity—​which decrees that, while the purpose of state support

Families, States, and Markets    211 is to enhance familial well-​being and functioning, state action should not undermine the autonomy of the family. In this model, internal family relations were viewed as differentiated, with strong preference for the male breadwinner/​female homemaker organizational mode. The mother at home symbolized the appropriate moral order. This, together with the widespread belief that young children should be cared for at home, made for a robust gender division of labour. It was a widely held belief, and one slow to recede, that families should be compensated financially by the state for child rearing. Hence, the (West) German welfare state tended to organize its support of families in the form of income supplements, rather than services (although this is now changing). A third model is more egalitarian, wherein the objective of the state is to support employment on the part of both female and male parents and to give families and their members access to high-​quality childcare and other supportive services. This model, found in the Scandinavian countries before anywhere else, does not conceive of family as a strong or autonomous institution (Ellingsaeter and Leira 2006). Indeed, it tended to airbrush away the family in seeking to secure the conditions for the well-​being and gainful activity of all adults considered from an egalitarian perspective. Women’s role and identity were written into the institutions of state and market as much as those of men, as was a more general principle of individual independence and autonomy. Family membership might be a source of emotional stability and identity, but family as an economic and social unit was much less prominent as compared with other parts of Europe. Fourthly, there are countries—​such as the United Kingdom—​where, rather than generic family support, policy draws mainly from an anti-​poverty and economic functioning orientation. State intervention in family lacked strong legitimacy in these countries, but social policies do have the authority to prevent or manage social ills. The value placed on independence and self-​sufficiency, on the part of both individuals and families, also tended to downgrade state intervention for the purposes of generic family support. This rendered family policy relatively underdeveloped; where it existed, it was oriented mainly to the prevention of poverty and ‘crises’ occasioned by familial dysfunction. Policy stayed well away from the social recognition and claims of the family as found in French and German policy (O’Connor et al. 1999). Finally, in southern Europe—​marked by strong religious roots—​there is another model, also characterized by weak state engagement with the family. In this part of Europe, the state tended to desist from putting in place anything other than rudimentary support for families. Without much in the way of cash benefits or tax allowances for their children, or indeed social services, families tended to be left to their own devices in regard to supporting their members and carrying out the responsibilities and activities associated with family life. This, among other things, creates the need for a flow of support among generations, as well as considerable dependence across generations and among individuals on their families. Family is multigenerational to a degree not found elsewhere and the state is relatively ‘small’ in terms of income redistribution and service provision for family-​related purposes. While these different models might appear like historical artefacts nowadays, in fact the originating philosophy and historical pattern of family policy tend to endure. Hence,

212   Mary Daly new developments are shaped by a country’s history of the relationship between family and the state, on the one hand, and family and economy/​society on the other. There are overarching pressures towards homogenization also though, as we shall see in the next two sections. How are things changing?

Current Orthodoxies and Reforms As we have seen, family policy can have diverse goals, just as there are different interpretations of the relationship between family policy and family life. The past two decades have started to undo the diversity outlined above. Of significance here has been growing interest on the part of key international actors in matters of family and family policy. The EU and the OECD have been especially active. While there are divergences between the policy approaches of the two, and also within them,1 some broad parameters unite them. A key concern is the formation of ‘flexible’ labour markets and households for a globalized economy (Mahon 2006: 174). One can identify a number of commonalities in that both put the accent on: –​ the distribution of employment and family in the lives of both mothers and fathers and the need for social and economic policy to incentivize employment on the part of mothers and more involvement in caring for children on the part of fathers; –​ increased provision of out-​of-​home care and early education of children and wide promotion of children’s early education and well-​being; –​ focus on the ‘balance’ between work and family life (so-​called ‘reconciliation of work and family life’). In effect, in a move away from implicit family policy, countries are being pushed to develop strategies around the family. These strategies should relate first and foremost to the family as an economic unit, but they should also encompass the organization of family life (touching on gender and generational relationships) and the balancing of rights and resourcing of different generational cohorts. Drawing from research by Daly and Ferragina (2018) and Daly (2019)—​on developments in twenty-​three OECD countries2 (excluding the Eastern European countries) and the EU as a whole, respectively—​regarding income support for families, parental leave, and early childcare and education provision, it is possible to identify a number of 1 

Mahon (2006), for instance, shows that two quite different frames are to be found within the respective OECD directorates on employment and education. 2  Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, and the United States of America.

Families, States, and Markets    213 main trends in family policy reform since the turn of the twenty-​first century. Generally in line with the priorities of the EU and the OECD, a range of parent-​related and family/​ work considerations dominate—​gender equality in care giving and employment, activating men’s caregiver responsibilities, greater female employment participation. In terms of policy field, early childhood education and care (ECEC), as well as parental leave, have dominated. A growth in ECEC, especially for very young children (up to age three) is one of EU countries’ strongest trends in social policy in recent years (Daly and Ferragina 2018). Key here has been the growth of guarantees to ECEC for children. While such guarantees are often rhetorical or abstract, some seven EU member states guarantee a legal right to ECEC for each child under two years, often immediately after the end of parental childcare leave (Daly 2019). The countries concerned are Denmark, Estonia, Finland, Germany, Latvia, Slovenia, and Sweden. In most of these countries, the entitlement usually implies a full-​time place. Other countries start the guarantee later. In Belgium, France, Hungary, Luxembourg, Malta, Spain, and the United Kingdom, a place in publicly subsidized ECEC is guaranteed from the age of three, or a little earlier. So over half the EU member states grant children a right to ECEC. A somewhat different approach is to make attendance at ECEC compulsory—​for example, in Austria, Croatia, Cyprus, Greece, the Netherlands, and Poland, the last year of ECEC (pre-​primary classes) is compulsory. Other countries adopting a compulsory approach include Bulgaria, Hungary, Latvia, and Luxembourg.3 Parenting-​related leave is a second area of family policy that has seen great expansion and innovation in the past two decades (Daly and Ferragina 2018). Almost all countries of the EU now have three types of such leave available: maternity, parental, and paternity (European Commission 2017). While historically, maternity leave was the pivotal policy to support parenting, especially intended to improve the health and well-​being of the new mother and baby (Gauthier 1996), there has occurred a two-​fold shift in focus: from mothers to parents, and from mothers to fathers. A (re)distribution of leave between parents has been especially pivotal. This is also a source of considerable policy innovation, with both carrot and stick measures being introduced. In the twenty-​three countries investigated by Daly and Ferragina (2018), the average number of paid weeks reserved for the father went from 0.2 weeks in 1990 to 9.4 weeks in 2015. The thrust of reform undertaken was in the direction of incentivizing fathers’ engagement with leave (through ‘use it or lose it’ conditions or the introduction of bonuses if fathers become more involved in taking parental leave or parents share the leave more equally). To summarize a complex set of developments, the EU countries have seen moves to consolidate maternity leave, expand parental leave, treat the couple as the unit of entitlement for parental leave, rather than the individual parent(s), and increase the availability of paid leave to fathers (either through extending paternity leave and/​or making a portion of

3 

The remaining EU member states make up a third pole, in that they neither offer a guarantee to children nor make ECEC compulsory. This is the case in Ireland, Italy, Lithuania, Romania, and Slovakia.

214   Mary Daly the parental leave more attractive to fathers) (Blum et al. 2017). We could read the current policy consensus as assuming that child well-​being and a ‘good childhood’ are best secured by: (a) having both parents present in the first month or two of life; (b) being cared for at home by the mother, with some input from the father for about another year; and (c) having access to an increasing volume of out-​of-​home ECEC from the age of one onwards (Daly 2019). A third trend has been a change in the form and level of cash supports to families and spending in that regard (European Commission 2017). The recession of 2008 played a major role here, and in many countries marks the fault line between expansion or status quo in financial support to families and its subsequent reduction (Ólafsson et  al. 2019). Twelve member states (mainly Eastern European and Mediterranean countries) have made major cutbacks and, between 2008 and 2012, spending on child and family income support fell in twenty-​one out of the twenty-​eight member states (European Commission 2017). The cutbacks, important in themselves, also heralded a change in the form or channel of support. There are two trends of note here. The first is a greater use of targeting of income support. This, a trend that extends across different family policy or welfare state models, means a change in regard to which families are prioritized for state support—​with strong moves in some countries (e.g. Greece, Poland, Portugal, Romania) to target support towards larger families or those on low incomes and away from smaller families, as well as families in general (Eurofound 2015; European Commission 2017; Daly and Ferragina 2018). There is an underlying dynamic of selectivity and therefore some subversion of the principle of universality, which has some history in Europe as a principle of child and family policy and is a counter-​pole to selectivity in supporting families with children (Wennemo 1994). A second trend is towards fiscalization of financial support to families (Ferrarini et al. 2012). OECD data suggests that the average value of financial support to families through the tax system now rivals that given to families through the benefit system.4 While a fiscal policy approach—​effected through tax credits and allowances, for example—​was, and still is, favoured by the United Kingdom and other liberal-​oriented countries, it is increasingly found also in other parts of Europe (e.g. Austria, Belgium, Germany, and Italy). This, also a portentous change, is at its core an attempt to link more closely child and family income support from the state with income tax status and earnings, hence parental employment. Indirectly, it generalizes a set of norms about childhood and the economic organization of family—​that children should be reared in families where one or both parents are in gainful employment, for example. Taken as a whole then, family policy is a crowded field in terms of instruments, goals, and pressure for reform. One sees a continuing policy interest in family structure—​ as articulated especially by reforms in parental leave and cash supports to families—​ with the parental couple especially targeted as regards periods out of employment for child rearing. While the increasing expansion of ECEC might—​and does—​suggest

4 See www.oecd.org/​els/​soc/​PF1_​1_​Public_​spending_​on_​family_​benefits.pdf.

Families, States, and Markets    215 some individualization of children and in terms of divesting the family of childcare-​ related tasks and responsibilities, individualization is a matter of degree. This point can be read also in the cutting back of financial support to families—​the consequence of which is that a two-​earner family arrangement is increasingly necessary to avoid poverty and deliver on the kind of life and lifestyle that is valued. In addition, as well as the collective/​individual orientation, developments are differentiated by their gender orientation and whether they are intended to promote gender equality or a more gender-​neutral view of both mothers and fathers as (interchangeable) parents/​carers and workers. This is indicative of the complex mix of policy objectives in the field of family policy. What underlies these changes?

Explaining Change Looking across countries, it is possible, and necessary, to identify a number of perspectives that help explain the changes underway (see Table 12.1). One factor, widespread across countries, is grounded in economic, and especially labour market, developments. The needs of the market, and the labour market in particular, elevate policy’s role in shaping the labour supply of family members, and indeed employment availability more broadly. In effect, the underlying thrust is to more closely integrate family policy with employment policy, and, more broadly, economic objectives. While economic and labour market considerations are a key factor shaping family policy changes everywhere, the focus varies. There is also another set of employment-​ related concerns—​employment creation. At least part of the reason for the reform of family support in France and other countries has been employment creation—​parents are given greater choice about how they manage their childcare so as to incentivize the employment of domestic child carers, thereby increasing employment rates (Morel 2007). Looking across countries, Mätzke and Ostner (2010: 388) point out how developments in the family, as well as welfare state changes, have shifted the family to the centre of the new activating labour market policies. The effects extend widely—​the very Table 12.1 Constellation of factors animating state policy towards families Economic

Market demand/​supply/​profits re services; human capital development

Ideological/​cultural

View of children’s role, needs, contribution to society; philosophical orientation towards the family; ideology around welfare

Political

Social class tensions/​orientations, biases; engagement of political actors, including international organizations

Social

New social risks; social integration; demographic renewal; gender-​ related norms and practices

216   Mary Daly nature of family life can be altered by the desire to make family more compatible with employment. Ideological factors are also at play. Political philosophy has always been influential in family-​related matters. In fact, the strength of organized religion or the degree to which religious beliefs and morals galvanized political factions and parties is one of the classic explanations of family policy, especially from a historical perspective (Bahle 2008). Church–​state relations, in particular the power of Catholic-​oriented and conservative parties, were associated with a more elaborated family policy (as well as one oriented to the traditional two-​parent, one-​income family). Recent changes in family-​ related provisions give grounds to question whether the observed historical relationship between political party and family policy (Morgan 2006) still obtains. It is more difficult now to know a party’s stance on the family by its positioning on the left–​right spectrum, although right-​wing populists celebrate the traditional, male breadwinner family. There have been few differences between social democrat-​led and Christian democrat-​led coalitions in Germany, and, if anything, it is the latter that has prosecuted a more extensive move away from support for the traditional family arrangement. A changed political culture is also driving some of the focus on children and childcare—​under the rubric of social investment, especially, the utilitarian functions of social policy in developing future human capital are to the fore. The commitment to social investment promotes ECEC as education, rather than as care, and hence tends to locate it outside the family home and to target the youngest children. Some argue that childhood has become politicized and children a potential asset to be ‘harvested’ for future gain (Jenson 2006). The role and influence of the international organizations must also be factored into the explanation for the changing constellation of family policy. However, it would be wrong to imply that the process of change is one whereby the international organizations dictate and national policy responds. There are at least two arguments against this interpretation. First, diversity is a powerful counter-​argument—​no country has the same reform agenda. Second, national and international reform processes are closest when there are pre-​existing ‘affinities’ between them—​that is, when reform also has a strong national resonance and impetus. The United Kingdom is an exemplar case here. The strong liberal undercurrents in the international agenda find fertile soil in this national setting. The expansion of childcare appeals because it is an opportunity to grow the childcare market sector (true also for other countries) and employment for lone mothers feeds the thrust towards activation and self-​sufficiency. Equally, some of the traditional social class faultlines are being endorsed by reform. The United Kingdom has seen significant investment in family support services for the purpose of improving family functioning and stabilizing family and community relations in poor neighbourhoods. In fact, early education and socialization, especially of children from low-​ income backgrounds, are not necessarily promoted in the United Kingdom on grounds of child well-​being per se, but rather because they serve to integrate children into state-​ controlled programmes and/​or to foster human capital accumulation (Daly 2019).

Families, States, and Markets    217 There is also the possibility that reforms are, in part anyway, a response to societal considerations and problems. The idea of new social risks has considerable resonance as a perspective explaining changes in family policy. Typically juxtaposed to the classic welfare state, which interpreted risk mainly in terms of men being unable to earn an income from the labour market (or for women, the absence of a male breadwinner), the post-​industrial welfare state is faced with a different set of risks, many of which arise in private life (Bonoli 2006). There is a real correspondence between the risks highlighted by this literature and the objects of reform as they have been outlined above: coverage of the risks associated with increasing family instability, dealing with the consequences of the movement of women in large numbers into the labour market, managing inter-​ generational relations, and in particular, balancing the needs and entitlements of the younger vis-​à-​vis those of the older generations. Although it is not theorized as such, the literature on social risks can be expanded to think in terms of risks around social integration. Family is changing, as are the values relating to it, and family policy is as much a response to these factors as it is to changes occurring either in the market or the state. If we locate today’s welfare state in its social context, we can entertain the possibility that reform in family policy is in many ways a response to ‘new’ social problems that are not directly related to economic issues, but rather stem from factors such as people’s commitment to family (values) and how changing cultural norms and lifestyles affect people’s wish to pursue a family-​based life (Kaufmann et al. 2002; Bahle 2008). This is a useful way of filtering policy approaches to demographic change and declining birth rates. Although they may not owe their origins completely to them, policies that offer greater support for families with children and seek to address concerns around work–​ life balance are imbued with concerns about women’s and men’s willingness to bear and raise children. Hence, state policies always have undercurrents of (re-​)embedding individuals in family life and elevating family as a means of social integration. This has gender implications as well. It is obvious from the foregoing analysis that gender relations are being continuously refashioned, especially as regards how mothers and fathers perform their family-​related roles and combine them with employment. What might be less obvious, but nonetheless true, is that the upgrading of perceived generational equity acts to somewhat side-​line, or even downgrade, equity viewed from a gender perspective. All of this leads to two major conclusions. First, family policy is a complex field, a highly contested (politically and morally) domain of policy. Hence, it is important to recognize that a constellation of factors is involved (of a kind sketched in Table 12.1). Explanations must, therefore, reach across disciplines and interests, rather than focusing in isolation on politics, or economics, or social exigencies, or norms and ideologies. Second, it may be that what we are observing is a multiplication of the functions of family policy, encompassing: the mobilization of labour supply (female as well as male); the promotion of economic growth; the advancement of equal opportunities understood in a broader and more diversified manner than in the past; enhancing the educational performance of all children (including the very young); ensuring the financial

218   Mary Daly sustainability of social protection systems; promoting family stability; and promoting sustainable fertility patterns.

Conclusion Societies approach the relationship between family, state, and market in rather different ways, as the evidence reviewed here demonstrates. A range of factors have conditioned this set of interrelations historically; the homogenizing tendency of economic growth and development being reined in by the specificities of political philosophy and politics at nation-​state level. It has generally been accepted that family policy unfolded in two major rounds or periods (the first associated with industrial expansion in the post-​war period and the second from the 1970s on). There is evidence to suggest that we have embarked on a third age of family policy. This is marked by a number of features. First, the family is opened up—​it is no longer private in the way that it once was, as the state and the market compete to undertake some of its activities. Second, greater intervention, especially on the part of the state, makes for more micro-​management of family life and restricts family autonomy. The roles of mother, father, and child are more externally defined than they ever were. Third, the distinctiveness of family policy across countries is being eroded. While no country has exactly the same reform programme and none is following exactly the approach endorsed by the EU and OECD, they have in common a proclivity to ‘mix and match’. The result is a hybridization of existing systems. At the present time, there are a number of impulses for reform, drawing from a mix of economic, ideological, political, and social concerns. They relate essentially to employment and economic self-​sufficiency, a bundle of issues centring on ‘work–​life balance’ (which is rooted in concerns about demographic decline, the quality of family life, and both employment and family as contributing to social integration), and gender equality. The significance of each varies. Of the three, gender equality is weakest as a driver of contemporary reform. The strongest reform dynamic is centred on encouraging employment on the one hand, but finding a balance between that and family life on the other. It is worth taking a little time to consider why there are seemingly contradictory responses. I suggest that this is because, stripped down to fundamentals, there are two main approaches to family and its interaction with state and market (unlike the past, where in Western Europe alone at least five perspectives could be identified see Bahle 2008). The first is to see family as little more than a living arrangement. This approach views family primarily as an economic arrangement, the functions of which can be as—​ if not more—​efficiently carried out by other organizations as economic and other expediencies dictate. The opposing view is that family constitutes a sphere of life and a set of relations that are both unique and valuable in their own right (the view that informed policy historically in France and Germany). If the former sees family as little more than a collection of individuals and pushes reform in the direction of individualization, the second approach is family centred and recognizes family as a social institution meriting

Families, States, and Markets    219 public support. In reality, most countries have something of both, even the liberal ones. Hence, one sees the simultaneous expansion of a family orientation in employment policy (and the increasing use of income support and tax policy to encourage employment by different family members) and a balancing of work and family life (more childcare, more flexibility, more economic support for the care of children, more generous parental leave). Looking at developments across countries, the particularity of family and of family policy—​moral overtones, political complexity, societal setting–​continues, as does the ‘pull’ of historical factors. There are a number of implications in all of this for how to understand the relations between families, states, and markets. I suggest that the interlinkages should be conceptualized as lying at the intersection of five axes or balances: –​ demography and life course (reproduction rates and family-​related roles and practices); –​ employment (labour supply, conditions of employment); –​ care (the supply and cost of caring labour, the meaning and practice of close kinship ties, quality of children’s lives and opportunities, generational relations, the distribution of care within and between state, market, and family); –​ income (sufficiency, access, equality); –​ social integration (management of social risks).









These cut across the classic divides in the field between economics and politics or social and demographic factors and they locate the family in society, as well as in polity and economy. As well as offering a range of categories of analysis, seeing policy as having to field these diverse dimensions also conditions us to expect ambivalence, and even contradiction, in national policies. When it comes to explanations, we need to think in terms of an explanatory constellation, rather than a single factor. Economic, ideological/​cultural, political, and social factors all have relevance. The changes are far-​reaching. What we are seeing across countries now is no less than a new way of organizing everyday family life in which states, as well as markets and international organizations, are more prepared to get involved for the purpose of reconfiguring the family’s place in the economy and society and repurposing aspects of its ‘internal’ organization. Hence, family policy is focused not just on family, but also on the wider arrangements of state, economy, and polity.

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Families, States, and Markets    221 Lenoir, Remi, 1991. Family policy in France since 1938, in The French Welfare State, ed. John S. Ambler, London: New York University Press, 144–​186. Mahon, Rianne, 2006. The OECD and the work/​family reconciliation agenda: Competing frames, in Children, Changing Families and Welfare States, ed. Jane Lewis, Cheltenham: Edward Elgar, 173–​197. Mätzke, Margitta, and Ostner, Ilona, 2010. Introduction: Change and continuity in recent family policies. Journal of European Social Policy, 20 (5): 387–​398. Millar, Jane, and Warman, Andrea. 1996. Family Obligations in Europe. London: Family Policy Studies Centre. Morel, Nathalie, 2007. From subsidiarity to ‘free choice’: Child-​and elder-​care policy reforms in France, Belgium, Germany and the Netherlands. Social Policy & Administration, 41 (6): 618–​637. Morgan, Kimberly, 2006. Religion and the Politics of Work–​Family Policies in Western Europe and the US. Stanford, CA: Stanford University Press. O’Connor, Julia S., Orloff, Ann S., and Shaver, Sheila, 1999. States, Markets, Families Gender, Liberalism and Social Policy. Cambridge: Cambridge University Press. Ólafsson, Stefan, Daly, Mary, Kangas, Olli, and Palme, Joakim, 2019. Welfare and the Great Recession: A Comparative Study. Oxford: Oxford University Press. Parsons, Talcott, and Bales, Robert F., 1955. Family, Socialization and Interaction Process, Glencoe, ILL: Free Press. Pedersen, Susan, 1993. Family, Dependence and the Origins of the Welfare State: Britain and France, 1914–​45. Cambridge: Cambridge University Press. Revillard, Anne, 2006. Work/​family policy in France: From state familialism to state feminism? International Journal of Law, Policy and the Family, 20 (2): 135–​150. Saraceno, Chiara, and Keck, Wolfgang, 2010. Can we identify intergenerational policy regimes in Europe? European Societies, 10 (5): 675–​696. Wennemo, Irene, 1994. Sharing the Costs of Children: Studies on the Development of Family Support in the OECD Countries. Stockholm: Swedish Institute for Social Research.

Chapter 13

Disci plinary Pe rspe c t i v e s on Welfare   Stat e s Einar Øverbye

Introduction A disciplinary perspective is often necessary for in-​depth analyses of welfare states. However, just as often, depth requires knowledge of how welfare states are discussed outside one’s own discipline. This chapter provides an overview of disciplinary debates on welfare states, mainly limited to seven disciplines: sociology, economics, political science, social policy, social administration, social work, and legal studies. Welfare state questions within these disciplines overlap, and there are cross-​cutting questions as well. One cross-​cutting question asks how welfare state designs (also known as welfare regimes or as families of welfare nations) differ from each other. Are some welfare states more economically efficient than others, for example? Another cross-​cutting question is whether welfare states in democracies differ from welfare states in autocracies, including if the notion of an autocratic welfare state is a contradiction in terms. The second question points to an ambiguity in the welfare state concept. For some, the term ‘welfare state’ connotes a set of interconnected legal, political, and social rights. For others, it is just a convenient shorthand for the many welfare programmes that can be found in most states, or at least in most states with high average incomes. The former usually define a democratic decision-​making system (including legal political rights) as an integral part of a welfare state. The latter decouple the political decision-​making system and the welfare state. They may even decouple the rule-​of-​law principle and the welfare state. This ambiguity makes it a complex task to review disciplinary perspectives on welfare states. For example, from the perspective of legal studies, welfare states are necessarily embedded within a rule of law. If not, legal studies would hardly have any starting point

Disciplinary Perspectives on Welfare States    223 for an analysis. In contrast, some political scientists would have no qualms about analysing the ‘welfare state’ of an autocratic regime based on the arbitrary day-​to-​day decisions of an absolute ruler—​as long as the regime provides some modicum of health and social benefits to at least some of its subjects. Different conceptualizations of what a welfare state is about means that some study apples while others study oranges, or even more distantly related fruits. Add fuzzy disciplinary borders and different welfare state concepts also within disciplines and it is easy to understand why reviews of disciplinary perspectives on welfare states are seldom written. With these caveats in mind, a brief presentation of seven major strands in the disciplinary debates on welfare states follows, starting with the three classic social science disciplines: sociology, economics, and political science.

Sociology, Economics, and Political Science As a necessary oversimplification to be able to present a short text on this grand topic, it is assumed here that the core theme in sociology is the study of the conditions for social integration in a society (or if one prefers a normative framing of the question: how to maintain or enhance social integration). The core theme in economics is the study of the conditions for efficient allocation of limited resources (normatively framed: how to maintain or enhance economic efficiency). And the core theme of political science is the study of how political power is wielded in a territory (normatively framed: how to use power wisely). Correspondingly, the core welfare state questions within each discipline can be formulated as follows: • Sociology: Does the welfare state enhance social integration or does it undermine social integration? • Economics: Does the welfare state enhance economic efficiency or is it a drag on economic efficiency? • Political science: Is the welfare state a result of conflict politics or of consensus politics?

Sociology Modern sociology is a diverse enterprise, but its main—​and oldest—​theme is the study of social integration. This was the theme of Durkheim’s Suicide (1992 [1897]); arguably, the book that launched the sociological enterprise. This book simultaneously launched the sociological study of welfare arrangements. In the last chapter of Suicide, Durkheim

224   Einar Øverbye suggests that, in order to enhance social integration, it is necessary to strengthen ‘the occupational group or corporation’. The practical instrument for making this happen is to ensure that such groups or corporations preside over ‘companies of insurance, benevolent aid and pensions’. In Durkheim’s preface to the second edition of his equally influential The Division of Labour in Society (1984 [1902]), this suggestion is elaborated, and the state is brought in. Here, Durkheim suggests that the state should use regulation policies to stimulate occupational groups to take responsibility over insurance, benevolent aid, and pensions. In short, Durkheim conceptualizes the welfare state as a means of patching up social integration in societies where industrialization and accompanying cultural change threaten to weaken social ties. A line can be drawn from Durkheim’s suggestion to Parsons’ (1971) approach to welfare issues in his structural-​functionalist vision of society. For Parsons, welfare arrangements emerge as one of the feedback mechanisms required to re-​establish social integration in systems upset by external disturbances—​disturbances that can be summed up by the umbrella term ‘modernization’. A related line can be drawn to Wilensky’s (1975) analysis of the relationship between economic growth (a crude indicator of ‘modernization’) and welfare state expansion. The equation of welfare with modernization has further spurred the grand convergence debate, the issue being whether states faced with similar economic, social, and demographic challenges respond in ways that make the states more similar across time. The convergence debate also represents a structure-​versus-​agency debate:  to what extent are political elites constrained in their welfare policy choices by similar historical–​structural challenges and to what extent do they have room to pursue their own ideological or idiosyncratic welfare ideas? The line from Durkheim can be drawn further to the question of whether welfare policies enhance social citizenship and limit social exclusion (Room 1995). Yet another twist on the social integration theme concerns the eventual relationship between ethnic/​cultural homogeneity and welfare state developments. For example, Quadagno (1988) argues that the rather lean US welfare state is the result of a high degree of ethnic fragmentation, which impacted on US welfare-​political developments at critical historical junctures. Another example is the interest in the possible welfare state consequences of the trend towards ethnically heterogeneous European societies (Alesina and Glaeser 2004). This debate has intensified due to the surge in refugee migration to Europe, which peaked (so far) in 2015. The empirical findings in such studies differ; the point being emphasized here is only that a common underlying theme concerns the conditions for, or effects of, social integration. Incidentally, Durkheim (1984) argued that the state should not have a direct role in welfare provision. Durkheim wanted to strengthen the intermediaries between the state and individuals, rather than the state itself. His recommendation was for the state to steer ‘from the second line’ by stimulating corporatist welfare arrangements, not to run the show. This state-​sceptical stance is mirrored in another sociological tradition similarly preoccupied with social integration, but with a different approach to welfare state expansion. Here, scholars worry that the assumption by the state of ever more welfare

Disciplinary Perspectives on Welfare States    225 tasks will weaken, rather than enhance, social integration. An example concerns the ‘substitution issue’, investigating whether welfare states weaken, rather than strengthen, the family and other intermediate collectives between individual and state. A related debate concerns whether welfare states foster the creation of a separate underclass, not integrated in society (Murray 1984). The sociological study of welfare states thus branches out into several research traditions partly at odds with each other, but the underlying theme of social integration is recognizable in them all. Even power resource theory, arguably the most hard-​nosed sociological tradition in the study of welfare states (it is about different material interests, in particular those of labour and capital, mobilizing their various resources and then slugging it out in the democratic class struggle), shares a vision that the end result of an eventual welfare policy victory on the part of the less privileged classes will be a more well-​integrated society (Korpi 1983). The ‘institutional/​universal’ welfare state design resulting from these class wars (if the assumed representatives of the underprivileged win, that is) is supposed to unite the middle classes and the downtrodden, in a material as well as a social sense (Rothstein 1998). Thus, even in the hard-​nosed sociological traditions, where actors are supposed to be motivated mainly by material interests, the theme of social integration is never far away.

Economics A worry that public welfare may serve as a disincentive to thrift is older than the welfare state. Whether or not this worry is well founded, how large eventual negative efficiency effects may be, or whether negative effects are offset by even larger (and usually more subtle) positive efficiency effects, is the core theme in the economic debate on welfare states. The basic underlying question is about economic efficiency, be it on a micro or macro level. The disincentive argument is simple and straightforward: if people get paid for doing nothing, it may reduce their motive to do something. The counterarguments are usually more subtle, for example the notion that unemployment insurance acts as a Keynesian automatic stabilizer, since expenditures go up (and stimulate demand) in hard times and decrease (and make public spending contract) in good times. Another counter-​ argument holds that unemployment benefits allow the unemployed to search longer for optimal work, securing a better fit between the buyers and sellers of labour. These are two of a series of arguments about possible positive efficiency effects of welfare schemes. A welfare state, by dampening social conflicts, may also create a more stable and predictable environment for investors, attracting capital satisfied with modest, but safe, returns. Some even see a large welfare state as a way to get interest groups to accept open markets, by offering them social protection if they should end up as losers (Rodrik 1998). Within this line of thought, a large welfare state is conceptualized as a credible commitment device through which anticipated winners of economic globalization dampen resistance among anticipated losers.

226   Einar Øverbye These different views can be tied to the convergence debate. If all types of welfare states are a drag on efficiency, economic globalization is likely to result in convergence towards the bottom, as large welfare states are out-​competed by smaller welfare states. But if some welfare state designs enhance economic efficiency, other countries are likely to emulate them, resulting in convergence towards some welfare state designs rather than to others. There are more crossovers between economics and sociology. Some economists mirror pessimistic-​type sociological arguments by assuming that welfare policies lead to the learning of dysfunctional norms, making negative incentive effects worse across time. While others link to optimistic-​type sociological arguments, claiming that safety nets encourage risk-​taking behaviour and thereby actually boost an entrepreneurial culture. The debate on positive-​versus-​negative economic effects also comes in political economy versions. Some political economists portray welfare state expansion as the result of rent-​seeking behaviour by vested interests, which is assumed to proliferate and grow stronger the longer the growth of such interests is uninterrupted by war or similar social tumult (Olson 1982). Others see welfare states as a rational response to market failures in private insurance markets, since the state is not subject to adverse selection and interdependent risk problems when providing social protection. Here, mandatory welfare programmes emerge as an efficient way in which the majority can insure themselves against various social risks (Barr 1992). Those who write within a rent-​seeking framework tend to regard welfare policies as a game with winners and losers (Browning 1975). They thus have a conflict view of the political process. This conflict perspective resembles the ‘democratic class struggle’ approach favoured by sociologists writing within the power resource tradition, summarized above. However, the normative connotations of the rent-​seeking approach is often different, since those who portray struggles over welfare policy as clashes between rent-​ seeking actors sometimes have a negative view of rent-​seeking behaviour as such. In contrast, scholars who portray the same policies as outcomes of conflicts between social interests (such as labour versus capital) often regard the interests of workers as more justified than those of capital owners. Both brands of the conflict view can be contrasted with those who argue that a welfare state is simply a rational way to provide insurance, and thus ultimately in the enlightened self-​interest of all. The latter assume (at least implicitly) a long-​run consensus view of welfare politics. There is a correspondence between this consensus view and neo-​functionalist approaches in the sociological study of the welfare state. Neo-​functionalists may portray a majority demand for insurance against social risks as a homeostatic variable; ‘modernization’ represents various disturbances that weaken existing insurance institutions and introduce new risks, which upset a previous equilibrium; competition between political elites represents the correction mechanism that restores equilibrium; and welfare policies are among the means political elites use to accomplish this feat. From a neo-​functionalist perspective, the process from disturbances

Disciplinary Perspectives on Welfare States    227 emerge till the correction mechanism kicks in is analogous to how economists portray how entrepreneurs respond to changing market demands.

Political Science The difference between the conflict and consensus perspective provides a crossover to the questions with which political scientists are concerned. Are welfare arrangements brought into existence by political actors wielding their power to suppress the interests and/​or political ideals of others? Or are welfare arrangements outcomes of a never-​ending debate about ideas, where opponents use the power of persuasion and enlightened debate to approach a state of affairs closer to the common good? The Bismarckian social insurance legislation of the 1880s, arguably the first act in the drama of the modern welfare state, provided the German urban industrial working class with protection against social risks such as work accidents, sickness, disability, unemployment, and old age. These measures were the result of a compromise between what can loosely be labelled a conservative and liberal ideological faction within the ruling strata (Briggs 1961). Conservatives are concerned with political integration and national consensus building, and providing public welfare is a way to tie the loyalty of citizens to the state. Conservatives may thus support state-​run welfare, in particular for groups vital for political integration. While liberals are inclined to limit social protection to the poor, and let the rest care for themselves through voluntary associations and/​ or the market. On the left, a similar split emerged between a social democratic branch, which has supported welfare reforms and often initiated ambitious reforms themselves, and a revolutionary branch, which regarded welfare policies as a means to pacify the working class, which should be resisted in order to bring on the revolution. The Bismarckian social legislation was very influential, in particular in Europe and Latin America. As versions of this legislation were adopted in other countries, these ideological ambiguities on the left and the right were also exported, and interacted with local ideological differences. Ideological ambivalence has allowed for a wide scope of local and situational adaptations and has led to different political configurations across countries. Thus, the answer to the grand question if welfare states are outcomes of conflict politics or consensus politics is that ‘it depends’. In some countries, the expansion of welfare arrangements has been a rather peaceful affair, marked by cross-​party consensus. In others, it has resulted in virulent political conflicts. It can even be argued that many of the revolutions that took place during the turbulent twentieth century occurred when ruling elites were too slow, or unable, to respond to popular demands for social protection (broadly defined). During the 1980s and 1990s, the neo-​institutionalist revival impacted heavily on political science. Neo-​institutionalists build on the ‘cognitive turn’ that took place in psychology in the same period (Powell and Dimaggio 1991). They argue that how people

228   Einar Øverbye perceive their interests is influenced by the institutional setting they find themselves in. Political scientists began to ask questions, such as: how does the structure of the state (e.g. unitary versus federal states) impact on the power struggles (or consensus deliberations) that differently placed local, regional, and central elites engage in with regard to welfare politics? How does the structure of industrial relations (e.g. industry versus crafts-​based unions) impact on how workers perceive their welfare interests and formulate their political goals? How does the institutional design of previous welfare programmes (e.g. universal versus residual welfare schemes) impact on how interest groups, bureaucrats, and politicians perceive the solutions to new welfare challenges—​ such as the rise of precarious employment or the rise in single parenthood? Neo-​institutionalists assume welfare policies to be path-​dependent, meaning that the scope for incoming governments to alter welfare policies is constrained by the existing institutional landscape. This debate concerns the relative importance of structures (the dead hand of existing institutions) versus agency (the living will of present-​day politicians) in shaping welfare state developments. During the 1990s and 2000s, the shift from welfare expansion to welfare retrenchment led to a further disciplinary reorientation. Rather than trying to explain why welfare programmes were expanding, the question became how to explain successful retrenchment. According to Pierson (1996), the earlier expansionist phase was often characterized by a scramble to be the first to launch new welfare initiatives (credit claiming). In contrast, the politics of retrenchment is characterized by governments trying to shift the blame for unpopular cutbacks to other actors (blame avoidance). ‘Other actors’ may be political opponents, local governments, or multilateral institutions (in particular, the International Monetary Fund). In Europe, referring to the European Union (EU) may also resemble a blame-​avoidance strategy: ‘the European Union made me do it’. Pierson assumes that politicians aim to influence voter perceptions of credit and blame in their struggles to conquer of maintain power. This is a conflict view of welfare politics. Welfare retrenchment can alternatively be analysed as a consensus-​building process, where political elites warily investigate each other’s willingness to stick to common cutback proposals. If they succeed, no elite risks losing voters by supporting retrenchment, since frustrated voters then have no alternative place to go with their frustration (Overbye 2008). The odds that cutbacks succeed may also depend on situational factors not under the control of any particular elite. For example, a severe economic crisis often fosters a ‘something-​must-​be-​done’ atmosphere, which allows politicians to get away with radical reforms which otherwise would face stiff institutional resistance. This is sometimes referred to as the ‘benefit of crises’ argument. Beginning during the 2000s, the emphasis on cognitive processes has morphed further into a discursive turn as regards how to study welfare politics. Inspired by postmodern theories, scholars have turned their attention to the study of policy texts and the assumed hidden presumptions embedded in such texts (Bacchi 2009). The core analytical question is, ‘What is the problem constructed to be?’ The theoretical assumption underlying this approach is that if a problem perception emerges as hegemonic, more than half the battle is won as regards what emerges as the ‘sensible’ policy solution.

Disciplinary Perspectives on Welfare States    229 The disciplinary debates within political science differently emphasize the role of interests, ideas (including ideologies), existing institutional arrangements, cognitive structures, discourses, and rhetorical-​strategic considerations when explaining welfare-​ political change. But an underlying theme is, arguably, the extent to which changes reflect irresolvable conflicts or consensus, including whether outcomes are the product of real or manipulated agreement—​or a bit of both.

Social Policy, Social Administration, and Social Work Sociology, economics, and political science are well-​established disciplines. In comparison, social policy, social work, and social administration are disciplinary upstarts, and they are not always taught separately. In the United States, they are often taught together under the heading of social welfare, and in Europe institutional dividing lines differ from one country to another. The shorthand definition of a discipline is ‘a separate branch of knowledge’. It can be debated if social policy, social administration, and social work constitute disciplines or if they should rather be regarded as sub-​themes within sociology, political science, and (possibly) psychology. The pragmatic argument applied in this chapter is that these themes are sufficiently distinct that the disciplinary label can be applied. Yet again to oversimplify, it is assumed here that the main disciplinary debate in social policy concerns problems relating to the outcomes of welfare policies. Social administration is concerned with problems related to the management and delivery of welfare benefits and services. While social work is concerned with how people who experience social problems can be guided to solve them, and whether welfare programmes are a help or a hindrance in this respect. The corresponding core disciplinary questions can be formulated as follows: • Social policy:  does the welfare state redistribute to the poor, or is it mainly of benefit to the better off? • Social administration: is a publicly or privately managed welfare state best able to provide cost-​effective welfare benefits and services of an acceptable quality? • Social work: does a welfare state enable and empower marginal citizens or is it a means to control and discipline them?

Social Policy A founding texts in social policy is Richard Titmuss’s essay ‘the social division of welfare’ (1976 [1955]). Titmuss was concerned with whether social policies redistribute from the

230   Einar Øverbye better-​off to the poor. This question provides a crossover to the sociological study of welfare states, since many sociologists are equally concerned with social inequality and social integration—​not least because social inequality is often considered as a proxy indicator of weakness in the fabric of social cohesion. Titmuss differentiated between residual, achievement-​oriented, and institutional/​ universal welfare policies. This trichotomy roughly corresponds to Esping-​Andersen’s (1990) later differentiation between Anglo-​American (liberal), continental-​European (conservative), and Scandinavian (social democratic) welfare states. Titmuss assumed that institutional/​universal welfare arrangements would be more redistributive than residual (means-​tested) and achievement-​oriented (contributory insurance) welfare arrangements. He was among the first scholars to consider also the redistributional impact of indirect social policies, such as fiscal welfare (tax subsidies) and occupational welfare (health care and pensions provided by employers or trade unions, but regulated and tax-​subsidized by the state). Some scholars have pushed the boundaries of the welfare state even further, arguing that institutional arrangements such as compulsory arbitration, high customs barriers, immigration controls, and subsidized home ownership can, in certain contexts, be considered near substitutes for a tax-​and-​spend welfare state (Castles 1988). This ‘extended welfare state’ concept may imply that in situations where a tax-​and-​spend welfare state is not sufficiently large to credibly compensate the losers of economic globalization, anticipated losers may instead support political entrepreneurs promising protectionist measures and stricter immigration control. Such political entrepreneurs have strengthened their position in many countries, in particular after 2016. Arguably the most debated social policy controversy concerns whether institutional/​ universal welfare arrangements redistribute more to the poor than residual/​means-​tested welfare arrangements. An influential view holds that universal welfare arrangements can bring together the welfare interests of the poor and the middle classes, allowing the former to ride along on the coat-​tails of the latter (Baldwin 1990). This view is contested, however. Goodin and le Grand (1987) suspect that the middle classes, rather than the poor, are the main beneficiaries of universal welfare services. Tullock (1983), for his part, claims that if universal arrangements redistribute more to the poor, it must be because higher-​income groups are unable to ‘see through the universalist veil’ and discover that more money is taken away from them than in a residual welfare state. Tullock doubts that higher-​income groups are really unable to discover this (at least in the long run). This social policy debate has a political economy parallel in the different predictions of the Meltzer–​Richard hypothesis and Director’s Law hypothesis (Mueller 1989). The Meltzer–​Richard hypothesis assumes that redistribution in a democracy will usually go from people earning above the median to those earning below the median. This corresponds with a hypothesis that the poor are in alliance with the lower-​middle classes. Director’s Law, however, assumes that redistribution from both tails of a distribution to the middle is more stable than redistribution from one of the tails. This corresponds with a hypothesis that the middle classes benefit at the expense of both the rich and poor. This empirical debate is not settled. However, one may question whether the taken-​ for-​granted assumption in such studies that redistribution is the primary purpose of a

Disciplinary Perspectives on Welfare States    231 welfare state is accurate. If one alternatively assumes that social investment (in education, health, and so forth) is the main purpose of many welfare policies, it is not obvious that the most redistributive policy is simultaneously the one providing the highest investment returns. Similarly, if insurance (against unemployment, disability, etc.) is the primary purpose of many welfare policies, strong occupational groups may perhaps be quite satisfied if governments limit social protection to their particular groups, excluding other (poorer) groups. Social policy studies assuming that redistribution is the main (or even only) purpose of a welfare state overlook that the welfare objectives of governments can be diverse, complex, and internally in conflict (Clarke and Newman 2012). A less discussed, but probably more important, social policy issue than redistribution per se, is the insider/​outsider schism. The insider/​outsider welfare state represents the ‘typical welfare state design’ in the world at large. It characterizes the welfare state designs in most middle-​and low-​income countries, i.e. in most Asian, Middle East, African, and Latin American countries. Strong insider groups usually have access to generous welfare programmes, while weaker outsider groups more often must rely on the family or on private charity. Thus, public servants and full-​time urban workers in large firms are covered by pension, work accident, disability, and health-​care schemes almost everywhere. But in many countries, those covered comprise limited groups; from roughly two-​thirds of the labour force in most Latin American countries to less than 20 per cent in some Asian and African countries (Bachelet 2011). Among high-​ income countries, the insider/​outsider schism used to characterize the so-​called South European welfare regime in particular (Leibfried 2001). In recent decades, the schism has softened somewhat in Southern Europe, at least with regard to health care, but no country is without ‘outsider’ groups. Insider/​outsider welfare states often redistribute from a majority to an above-​the-​ median minority. This redistributional tendency is hard to explain if one presupposes that the purpose of a welfare state is to care for the poor in particular. The puzzle is solved, however, if one assumes that governments may regard other purposes as more important than redistribution; such as human capital investments targeted at those most likely to utilize such investments, or social insurance limited to powerful groups that pose a potential threat to rulers. Welfare schemes limited to powerful insider groups may serve as beacons showing yet-​excluded groups the promised land, but they may possibly also be regarded as privileges for entrenched groups that tie up tax revenues that could alternatively be used for targeted social assistance aimed at the truly poor and destitute. The insider/​outsider schism is difficult to overcome, since ‘privileged’ social insurance schemes give people incentives to work in the formal sector, while a shift to more redistributive social assistance schemes makes it more lucrative to remain in the informal sector. Here, we encounter a version of the redistribution-​versus-​incentive problem with which economists are concerned. To put insurance and investment alongside redistribution does not exhaust the list of welfare objectives politicians aim at. Further goals include behavioural change (e.g. to nudge men towards caring more for their children by earmarking some parental leave

232   Einar Øverbye for fathers); protection against abuse (e.g. to protect children against abusive parents); control (e.g. some countries offer asylum seekers cash benefits only if they stay in government-​supervised refugee centers); disciplining (e.g. withdrawing cash benefits from claimants who fail to fulfil activation requirements); mainstreaming (e.g. reducing barriers to social participation among people with disabilities through mandatory building codes that demand wheelchair access), and de-​institutionalization (scale down psychiatric institutions, for instance, and instead attempt relocation in local communities). The list is not exhaustive, and welfare objectives can be in conflict. The study of social policy is concerned with how much emphasis is placed on different goals and how goal conflicts are handled in the policy implementation process. The latter question links to issues in social administration.

Social Administration The central issue in social administration concerns how to manage the welfare state, including how to provide cost-​effective welfare benefits and services of an acceptable quality. Social administration focuses attention on the administrative intermediaries between governments and welfare claimants, including how street-​level bureaucrats use their discretionary power (Zacka 2017). The increased cost pressure brought about by economic globalization, coupled with ageing populations, has led to a flurry of reorganization initiatives, known under the umbrella term of New Public Management (Hood 1991). The advantages and disadvantages of this new toolbox of management ideas, set against traditional (Weberian) bureaucratic management, has become the intense core debate within the earlier somewhat sleepy backwater of social administration studies. New management ideas include the introduction of purchaser–​provider models within public welfare services, outsourcing of welfare service provision to private welfare providers, and giving claimants a stronger voice or better exit options if they are dissatisfied (le Grand 2007). More use of targets and performance measures is yet another new management device, as well as decentralization of decision-​making authority to middle-​ level managers, including regional or local governments. These reforms aim to make welfare agencies more efficient and to handle the ever-​ present tension between accountability and professional autonomy within each welfare agency (Bruijn 2007). A second wave of management reforms has been concerned with how to ensure cooperation and coordination across welfare agencies (Christensen and Laegreid 2007). The renewed interest in coordination problems includes finding solutions through governance (network management) between agencies rather than top-​down management, and sometimes to let public–​private partnerships replace fully public welfare systems. In sum, a whole smorgasbord of new, and often contradictory, management ideas are transforming welfare states from within. Such reorganization is seen not only in high-​income countries but also in middle-​and low-​income countries, where public health and social welfare services often have a bad reputation due to administrative

Disciplinary Perspectives on Welfare States    233 inefficiencies, poor quality, and ‘informal user-​fees’. Is the end result a welfare state that provides higher-​quality services in a more cost-​efficient manner? That is still an open question. How the state regulates the welfare professions that provide services on behalf of the state is a related social administration topic. To which extent does the state allow some professions (e.g. medical doctors) to monopolize certain tasks? And does the state employ health and welfare professionals directly, or only hire their services? More generally, how do governments handle the tensions between social administrators at various government levels and the myriads of professions and semi-​professions that serve different claimant groups? These implementation issues are relevant also for welfare questions asked in other disciplines. For example, what is the relationship between different management designs, different ways to organize welfare professions, and the power relations between politicians, social administrators, welfare professionals, and claimants?

Social Work Social work is partly a discipline but also a profession, i.e. an occupation that demands a special education. Its roots are not only among state welfare bureaucracies but also among charitable societies (among the intermediaries between state and individual, to use Durkheim’s vocabulary). An awareness of the tension between the role of helper and the role of controller/​gatekeeper dates back to the origins of social work. Among the founders of the discipline, Mary Richmond’s ‘scientific philanthropy’ perspective emphasized the role as helper, while Jane Addams’ interest in the structural setting of social work also included an awareness of the controlling aspects of welfare policies. The core welfare state question in social work concerns how (if at all) welfare benefits and services can be designed and delivered in ways that empower and enable marginal citizens. Titmuss’s writings, as well as Goffman’s essay on stigma (1990 [1963]), are important founding texts in this regard. Social work has an ambivalent attitude towards power, including its own professional power. Is even a professional helper, by implicitly claiming to have more insight than the claimant, a person who might intimidate a client—​by making their own perception of the problem appear inferior? The self-​doubt among social workers has been fuelled by social movements among welfare recipients. Of particular importance is the independent living movement among people with disabilities. Militants within the movement sometimes claim that even generous disability benefits and services represent a form of repression, since they are necessarily premised on an ideal of what constitutes ‘normality’ (Oliver 1990). Social administrators on their behalf counter that singling out people with disabilities is inevitable, if they are to receive more benefits, services, or legal protection than everybody else. Social workers are often caught in the middle of this crossfire. Due to economic globalization and ageing populations, welfare benefits and services are everywhere being redesigned to ensure that ‘work is the first option’. Some welfare state scholars hail this development as the rise of the ‘enabling state’ (Gilbert 2002).

234   Einar Øverbye Others interpret the same developments as the coming of a disciplining ‘workfare state’ (Lodemel and Moreira 2014). These differences are partly due to different activation instruments, since the activation toolbox contains ‘nice’ as well as ‘not-​so-​nice’ policy measures. Not-​so-​nice measures include benefit cuts, shorter benefit periods, harsher eligibility criteria, or tying benefits to low-​paid public works. Such measures are often regarded with suspicion among social workers, since they fairly explicitly aim to discipline welfare clients and bring down benefit rates. Nicer activation measures include free or subsidized retraining efforts, softer or no means-​testing to prevent poverty traps, and attempts to involve users in their activation process. The slogan is that the user should ‘own the process’. Even nice activation measures are sometimes met with suspicion from bottom-​up social work scholars, in particular social workers inspired by Foucaultian notions of ‘pastoral power’. Pastoral power derives from the desire of professional carers to make their clients accept and internalize what the carers deem good solutions to their problems, including how ‘problems’ should be conceptualized and approached in the first place (Foucault (2007 [1977]). In a Foucaultian framework, nice activation measures, even when—​or particularly if—​they are genuinely well intended, can be regarded as forms of so-​called governmentality—​i.e. attempts from the state to ‘get inside the head’ and manage even the internal life of claimants, with a view to making them manage their own selves (Born and Jensen 2010). The hypersensitivity of social work to the potential abuses of professional power heightens its disciplinary sensitivity concerning the possible darker aspects of a welfare state. A less Foucaultian view might surmise that being exposed to pastoral power is perhaps better than the alternative, if the alternative is the not-​so-​nice activation measures or nothing at all. A related question concerns whether some welfare state designs are more empowering than others. Here, the discussion between the proponents of universal and residual welfare policies resurfaces. Titmuss presumed that universal welfare programmes stigmatize claimants to a lesser extent than residual welfare programmes, but the assumption is controversial. As early as 1971, Robert Pinker suggested that it is the perception of the claimant group (e.g. old-​age pensioners versus young, unemployed males), rather than the design of welfare programmes, that is the crucial factor in explaining eventual stigma. This debate is not settled, despite a huge literature on the topic. Stigma is a sociological concept, yet again illustrating how debates criss-​cross disciplinary boundaries and how similar debates are taken up, in different ways, across disciplines.

Legal Studies The core question within a legal disciplinary approach is whether a welfare state represents a strengthening or a weakening of the rule of law.

Disciplinary Perspectives on Welfare States    235 Like sociology, economics, and political science, law (legal studies) is a well-​ established discipline. Law is a normative science, concerned with creating a predictable environment for human interaction. The antithesis to the rule of law is arbitrary rule, implying that the state-​sanctioned decisions of today have no consequences for what will become the state-​sanctioned decisions of tomorrow. If rules are arbitrary, there is no need to justify a break with established practice, other than simply to register that the rulers have apparently changed their idiosyncratic taste. By contrast, if ruled by law, a break with established practice will need some legal justification. It will not be sufficient simply to register a ‘changed taste’ among the rulers, including a ‘changed taste’ among those who make decisions on behalf of rulers, such as (in a welfare state context) social welfare administrators and professional welfare deliverers. When discussing whether a welfare state strengthens or weakens the rule of law, it is fruitful to draw a distinction between material rights (the right to benefits and/​or services) and procedural rights (the right to be treated respectfully and the right to challenge a perceived wrong decision) (Kjønstad and Syse 2012). With regard to material welfare rights, legal scholars sometimes clash with economists. Economists usually regard macroeconomic flexibility as a good thing. This implies that a government should not ‘tie itself to the mast’ when issuing a very expensive future fiscal promise (e.g. a pension promise). Economists will usually advise a government to keep a legal backdoor for scaling down expensive promises, to ensure there is money enough available for whatever tasks future governments deem most important. (Perhaps kindergartens rather than pensions?) However, this may clash with a legal concern that today’s citizens should be allowed to live in a maximally predictable welfare environment. Thus, some legal scholars may consider ‘legal flexibility’ with regard to state promises as a shift towards arbitrary rule. Similarly, legal scholars sometimes clash with welfare state professionals when specifying the content of procedural welfare rights. Welfare state professionals (including social workers) usually appreciate having a large degree of professional discretion in their dealings with claimants. This allows them to use their professional competence to the max, without being hindered by formal procedures. While legal scholars often emphasize the desirability of predictability as regards what welfare claimants can expect when dealing with welfare professionals. Activation policies increase this tension, since activation is easier to achieve in a flexible legal environment. Flexible rules allow professionals and claimants to tailor-​make whatever activation measures suit claimants. However, procedural flexibility makes it difficult for a claimant to anticipate which aspects of their activation process are unquestionable rights, and which aspects are up to professional discretion to determine. Professional discretion also makes it difficult for a claimant to appeal a perceived ‘wrong’ procedure or ‘wrong’ outcome, since it is difficult to document and operationalize what ‘wrong’ signifies if rules are very flexible. Again, some legal scholars may interpret flexibility in this regard as a shift towards arbitrary rule. These issues become even more contested when we remember that a welfare state has many goals. One of these goals is protective coercion, such as deciding when to

236   Einar Øverbye protect people with psychiatric disorders against themselves, or when to protect children against their parents. Sometimes protecting a child implies severing its ties with the parents. Parents will usually regard this as a very hostile act on behalf of the state. It can be difficult to balance protecting a child and, at the same time, allowing its parents due process. Such difficulties illustrate that not only are there fuzzy borders and overlapping welfare state debates between disciplines: there are also disciplinary antagonisms and ethical dilemmas to be aware of.

Additional Disciplinary Perspectives There are more disciplinary perspectives to consider, but no brief overview can do justice to them all. A shortlist of additional perspectives: history, arguably the mother of all human science disciplines, centres around the grand underlying question: What is the relationship between human agency and inherited structures in explaining welfare state stability and change? How much is due to the ideological and idiosyncratic ideas of the rulers in charge and how much can be traced to the layers upon layers of structural factors reaching down into the darkness of the past? The health sciences, on their part, are concerned with how welfare states impact on the health situation in a population, including if different welfare state designs impact differently on social inequalities in health. Theology and its secular cousin, moral philosophy, asks if it is justifiable that a state compels taxpayers to channel resources to (for them) total strangers; or in which circumstances such compulsion is justifiable. Anthropologists study the many ‘professional tribes’ that have found a home in welfare states, and may also ask the grand question if welfare states facilitate cradle-​to-​grave cultural homogeneity or, on the contrary, stimulate cultural diversity. In sum, disciplines provide different lenses through which different sides of welfare states, and welfare state developments, come into focus.

Conclusion This chapter has offered a brief guide to disciplinary questions related to welfare states, including a review of crossovers and antagonisms between disciplines. References have been kept to a minimum, and mainly limited to ‘classical’ texts. As the chapter has shown, different disciplines are concerned with different aspects of welfare states, depending on how various aspects of a welfare state fit with core debates within a discipline. Knowledge of these debates is necessary if one wants to understand the multifaceted, and sometimes contradictory, reality of modern welfare states. Equally important, questions asked in other disciplines often throw new light on the welfare state questions that are at the core of one’s own discipline.

Disciplinary Perspectives on Welfare States    237

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238   Einar Øverbye Leibfried, Stephan (ed.), 2001. Welfare State Futures. Cambridge:  Cambridge University Press. Lodemel, Ivar, and Moreira, Amilcar, 2014. Activation or Workfare? Governance and the Neo-​Liberal Convergence. Oxford: Oxford University Press. Mueller, Dennis C., 1989. Public Choice II:  A Revised Edition of Public Choice. Cambridge: Cambridge University Press. Murray, Charles A., 1984. Losing Ground. American Social Policy 1950–​ 1980. New York: Basic Books. Oliver, Mike. 1990. The Politics of Disablement. London: MacMillan. Olson, Mancur, 1982. The Rise and Decline of Nations. New Haven, CT: Yale University Press. Overbye, Einar, 2008. How do politicians get away with path-​breaking pension reforms?, in Pension Reform in Europe: Politics, Policies, and Outcomes, ed. Camila Arza and Martin Kohli, London: Routledge, 70–​86. Parsons, Talcott, 1971. The System of Modern Societies. Englewood Cliffs, NJ: Prentice-​Hall. Pierson, Paul, 1996. The new politics of the welfare state. World Politics, 48 (2): 143–​179. Pinker, Robert A, 1971. Social Theory and Social Policy. London: Heinemann. Powell, Walter W., and Dimaggio, Paul J., 1991. The New Institutionalism in Organizational Analysis. Chicago, IL: University of Chicago Press. Quadagno, Jill S., 1988. From old-​age assistance to supplementary security income: The political economy of relief in the South, 1935–​1972, in The Politics of Social Policy in the United States, ed. Margaret Weir, Ann Shola Orloff, and Theda Skocpol, Princeton, NJ: Princeton University Press, 235–​264. Rodrik, Dani, 1998. Why do more open economies have bigger governments? Journal of Political Economy, 106(5): 997–​1032. Room, Graham (ed.), 1995. Beyond the Threshold: The Measurement and Analysis of Social Exclusion. Bristol: Policy Press. Rothstein, Bo, 1998. Just Institutions Matter: The Moral and Political Logic of the Universal Welfare State. Cambridge: Cambridge University Press. Titmuss, Richard M., 1976 [1955]. The social division of welfare, in Essays on ‘The Welfare State’, ed. Richard M. Titmuss, London: Allen & Unwin, 34–​55 (3rd edn). Tullock, Gordon, 1983. Economics of Income Redistribution. Boston, MA: Kluwer Nijhoff. Wilensky, Harold L., 1975. The Welfare State and Equality: Structural and Ideological Roots of Public Expenditures. Berkeley, CA: University of California Press. Zacka, Bernardo, 2017. When the State Meets the Street. Public Service and Moral Agency. Cambridge, MA: The Belknap Press of Harvard University Press.

Pa rt   I V

I N P U T A N D   AC TOR S

Chapter 14

N eeds And Ri sks I n T h e Welfare  Stat e Jan Zutavern and Martin Kohli

Introduction Among all the things invoked as drivers of welfare state development, human needs and risks are perhaps the most evident and intuitive. Evoking needs or risks is an essential way of staking claims to the welfare state, and responding to them is a key justification of its existence. Where material needs are not covered by either labour market transactions or family solidarity, welfare states are there to close the gap, or to mitigate the risk that a need arises.1 As much as modern states have been unable to resist the pressure to respond to certain needs, however, they have often proven doggedly unresponsive towards others. Sometimes they even exacerbate needs or risks. To the empirical welfare state scholar, then, the perspective on needs and risks poses two related questions: first, which needs must welfare states attend to in order to preserve their legitimacy; and second, which needs do welfare states effectively address and how well do they do it? The concepts of needs and risks thus demand a combination of empirical inquiry and an analysis of the values that give factual conditions normative force. Our objective in the first part of this chapter is to clarify what empirical-​analytical research on welfare state responses to needs and risks can learn from normative scholarship. Statements of need fuse the claim to objectivity of social and economic diagnostics with the inherent contestability of moral beliefs and ethical ideals of social justice and individual liberty. Empirical scholarship needs to retrace how the prevailing ethical underpinnings and moral contestants of needs and risks become inscribed in dominant 1  Throughout this chapter, we will refer to risks as the likelihood that a need does or does not arise, where that likelihood can be calculated and influenced by human action (Zinn 2008; Olofsson and Zinn 2019).

242    Jan Zutavern and Martin Kohli views on the nature of social and economic change and its consequences for the welfare state.2 The conceptual distinctions used by normative scholars are helpful tools for such an analysis. They also help us better understand how different theories of the welfare state have used needs and risks to explain welfare state development—​the topic of the second part of this chapter. When it comes to this development in the post-​Fordist era, the picture that emerges is one in which the old labour market and life-​course-​related needs and risks are far from disappearing, while as a result of secular and political-​ economic changes, new needs and risks have been propelled onto the policy agenda. What they are and how they vary between welfare states is the third issue we address.

Conceptualizing Needs and Risks In common parlance, needs are ubiquitous. Plants need water, firms need capital, governments need support, and sometimes all we need is love. The needs that fall within the purview of the welfare state are the socio-​economic needs of individual citizens. According to a widely held view, welfare states respond to the needs of those individuals who, owing to their organizational strength and political resources, prevail in the struggle for influence over governments. But how, then, did welfare states ever come to attend to the destitute and socially marginalized, who lack such political clout? Somehow, needs seem to make demands on the welfare state that are in part independent of the individuals who claim them. To make a case for a need, we must have a credible (‘objective’) account that explains how something—​the satisfier—​fulfils a somehow vital, essential, or otherwise important function for the needing subject. Where human beings are concerned and needs go beyond mechanics (or bodily functions), ‘importance’ is a matter of normative judgement. Whoever claims a need must be ready to back up the claim by shared moral values, ethical ideals, or normative theories that find acceptance beyond the sphere of the subject. This implies that welfare state responses to needs are not entirely contingent upon preferences and the conflicts that ensue from them. Rather, they are always also the result of a (more or less) public evaluation of what people ‘really’ need, and of the risks they effectively face. Such a partial liberation of justifications and causes for social policy from subjective will does not, however, by itself direct us to an unambiguous normative or positive standard by which we could set out the consequences of needs and risks for policy. It is the diversity of such standards that has been the bread and butter of normative debates (see Chapter 2). The most fundamental opposition is between proponents of absolute and of relative conceptions of needs. Advocates of absolute concepts argue that there exists a set of ‘basic’ needs that are so fundamental that their satisfaction becomes a precondition for

2 

For an example, see Birnbaum et al. (2017) on the generational welfare contract.

Needs And Risks In The Welfare State    243 anything else human beings may want to achieve (e.g. Goodin 1985; Alkire 2002). This essential nature of basic needs is what gives them their normative force. It confronts the welfare state with a strong moral obligation to provide whatever it takes to satisfy them where other social institutions fail to do so. One of the most prominent practical applications of the notion of basic needs, the indicators selected for the Human Development Index, may serve as a case in point. Ultimately, proponents of such absolute conceptions of needs have to prove that there exists a list of basic needs that finds sufficiently widespread approval to represent an ‘overlapping consensus’ (Nussbaum 2000), but remains specific enough to serve as practical policy guidance. Doyal and Gough (1991) have addressed this problem by proposing a hierarchical model of universal goals (avoidance of serious harm, participation in a chosen form of life), basic needs (health, autonomy), and satisfiers required to meet them (e.g. adequate nutrition, security). Their model is an attempt systematically to link basic needs to specific, variable, and practically relevant forms of satisfaction. Ultimately, the model stands or falls with the acceptability of their universal goals and with the adequacy of their specific satisfiers for basic needs. Scholars have expressed strong doubts whether Doyal and Gough’s bid is successful (Soper 1993). Similar questions (e.g. Clark 2013) have been addressed to arguments for fundamental capabilities that are conceptualized as much more open-​ended lists (Nussbaum 2011). And it is indeed questionable whether methods for deriving lists of capabilities or standards for the evaluation of needs can ever be ‘fundamental’, in the sense that they unambiguously and completely identify, or even rank, all possible culturally specific interpretations of needs (Sen 2000; Fraser 1989). This is where relative notions of needs step in, by drawing attention to the variety of ways in which any need claimed to be basic can, or must, be satisfied. Proponents of relative concepts put their finger on the practical manifestations of needs and the conditions of their satisfaction. While concepts of absolute needs motion us towards those needs that any society must satisfy in one way or another, relative needs explicate the dimensions in which forms of satisfaction vary. They thus build a bridge between the—​ necessarily open—​normative conceptions of needs and the empirical question of how societies, and welfare states in particular, define and meet needs. One way of addressing the latter question is to assess empirically how basic needs are ‘normally’ satisfied inside a given reference group. This interpretation of group-​specific social standards underlies several statistical measures, such as ‘normal’ baskets of goods or relative poverty thresholds. In contrast to absolute measures, which define a priori or normatively what constitutes ‘adequate’ satisfaction of basic needs, such relative indicators rely on an empirical determination of ‘typical’ levels of satisfaction, to which they may add a relative threshold; for example, 50 per cent of the median. But reference groups are not only an indication for potentially successful need satisfaction. They also define what is required to be accepted, and to participate, as a full member of a given community (Sen 1983; Goodin 1990). Cultural practices and standards constitute the things, beings, and doings that members of a community are generally expected and expect to achieve. By implication, this kind of relativity only applies

244    Jan Zutavern and Martin Kohli to those basic needs for which inter-​individual comparisons are constitutive. These are generally all participatory needs, such as the need for social recognition or the need for a cultural identity. This conception finds important practical application in measures of inequality (Atkinson and Bourguignon 2000; Förster and Mira d’Ercole 2005), relative deprivation (Townsend 1979; Boarini and Mira d’Ercole 2006, Alkire et al. 2015), or social exclusion (Atkinson and Davoudi 2000; Hills et al. 2002). The reverse of the need for identification and participation is the need for distinction. It is needed to assure communities of their identity and individuals of their personal achievements. Satisfaction of such a need for distinction is inversely related to other individuals’ or group-​specific aspirations, achievements, and status endowments; in other words, distinction is satisfied through ‘positional goods’ and the formation of alternative identities and cultures. By implication, participatory and differentiation needs conflict where they demand the same satisfiers. Measures aimed at extending participation through, for example, progressive taxation, redistribution, or equal opportunity policies thus withdraw from individuals some of the means for ascertaining their distinctiveness. Welfare states vary considerably with respect to the relative weights they attach to the two needs (in other words, universalist vs status-​affirming policies) and the characteristics—​occupation, employment status, family and household status, gender, age—​that they select as the basis for legitimate distinction. In sum, different conceptions of needs draw attention to different analytical problems. Absolute conceptions raise the question of the range of things, beings, and doings that are common and essential to human needing. They thus highlight differences in human capabilities between individuals and social groups or entire societies. At the same time, they draw attention to potential conflicts between different basic needs domains, such as education, work, and family life. Relative concepts shift the focus to the dimensions in which conditions of needs satisfaction vary. They form the basis for claims about normality of need satisfaction, with respect to the adequacy of resource provision, to social participation and recognition, and to legitimate distinction. In the next section, we show how welfare state theories have relied on different notions of needs and risks and make some suggestions as to how they can do so more explicitly.

Needs, Risks, and Theories of the Welfare State Most historiographies of post-​war welfare state theorizing distinguish between functionalist, political, and institutionalist families of explanations (Myles and Quadagno 2002; Pierson 1991). All three implicitly use the notion of needs. Nonetheless, we argue that there is room for a more systematic conceptualization of needs in all of them. For functionalists, social policies are the unmediated response to social and economic pressures. Potentially intervening forces such as the political organization of social

Needs And Risks In The Welfare State    245 demands or governmental institutions are assumed to be either neutral towards or fully determined by socio-​economic change. Welfare states change whenever transformations of conditions for economic production and social reproduction cross a threshold beyond which existing forms of needs satisfaction lose their effectiveness. Functionalist explanations, then, stand or fall with their specification of the needs they assume to be within the purview of the welfare state. Wilensky’s classical argument that industrialization and demographic change caused welfare state expansion by creating new needs, especially among the elderly, may serve as a case in point (Wilensky 1975). By failing to distinguish between an expansionary pull that is due to the growing material needs of the elderly and an expansionary push resulting from political demands for reducing age-​related inequalities by enabling the retired to participate more fully in social life or maintain their achieved status, Wilensky neglects the consequences of these different needs conceptions for policy design. Functionalists focus on the social and economic changes that give rise to needs and risks. However, changes become intelligible only on the background of the norms, moral beliefs, and ethical ideals without which no ‘factual’ condition could ever be perceived as human needing. Mindful of functionalist limitations, political and institutional approaches to welfare state theory have argued that ‘politics matters’ by showing how political interests interact with institutionalized procedures for decision making and administrative practices to selectively channel and process social demands and grievances. Social policy outcomes become the result of institutionally mediated power struggles between organized interests (the ‘power resource’ approach, e.g. Korpi 1983; Huber and Stephens 2001). But for identifying the interests that actors are presumed to pursue, power-​based accounts tend to rely in part on the notion of needs. Different conceptions of needs remind us of the potential tensions that actors face when trying to satisfy conflicting needs. If basic needs are indeed absolute, tensions between their respective satisfaction will cut across socio-​ economic status and demographic characteristics. By the same token, there is no principle that would allow us to unambiguously rank the potential needs of any given actor. This means that to carry political force, needs must be articulated and defined as real and legitimate in a given historical context, which makes them inherently contestable (Stone 2002; Fraser 1989; Robertson 1998). One powerful articulation of needs and risks can be found in welfare state institutions themselves. Any social policy entails a specific conception of needs and risks, to which it thereby gives public recognition and legitimacy. Such rule-​based legacies of needs satisfaction and risk protection are often successfully guarded by current beneficiaries to the disadvantage of new, still insufficiently articulated and poorly organized needs and risks (Pierson 2006; Emmenegger et al. 2012; Rueda 2014). This foundation on one or several needs, however, can also create vulnerabilities, where policy instruments and practices can be argued to no longer satisfy the need for which they have once been designed. And even if socio-​economic conditions causing the need persist, dominant moralities may have shifted such that the respective need is recognized for a wider population or its satisfaction is now tied to new behavioural conditions. The shift from concepts of social protection to those of social investment (Häusermann 2012; Hemerijck 2015) reflects

246    Jan Zutavern and Martin Kohli such a shift towards the inclusion of previously neglected groups as legitimate addressees of welfare state intervention and towards the strengthening of individual responsibility for need satisfaction or risk avoidance. Different conceptions of needs are part and parcel of basic welfare regime variations; for example, as originally conceived by Esping-​Andersen (1990). However, it is not only liberal welfare states that are ‘needs-​based’, as Esping-​Andersen’s narrow notion of needs leads him to argue. Liberal welfare states do, indeed, target much of their social policy towards individuals who are unable to satisfy their minimal material needs, avoiding interventions that might curtail the fruits of individual achievement. Scandinavian welfare states, on the other hand, have gone furthest in meeting needs of participation in the national community and, thus, in inequality reduction across social groups, whereas welfare states on the European continent have traditionally placed more emphasis on needs for distinction based on seniority and occupational status. In other words, social policy variations are due to an important extent to the institutionalization of different forms of need satisfaction and risk protection. Such variations may persist even where the socio-​economic conditions responsible for the emergence of needs and risk profiles have been transformed and new needs or risks are competing for political attention. In the next section, we turn to the empirical changes in needs and risks, and thus to the major challenges facing welfare states today.

Socio-​E conomic Challenges Although welfare states are inherently political achievements, the impetus for their development often lies in the disruptive force that large, macro-​historical transformations have levelled against extant social orders. National variations notwithstanding, it was the common hallmark of first-​generation welfare states to have institutionalized a model of social provisioning closely articulated with the problems posed by industrializing societies. The model relied on a gendered division of work based on male full-​time and continuous employment and female care work inside the family, sustained by economic growth and high labour demand. The welfare state’s key contribution was the mobilization of solidarity in those ‘legitimate’ circumstances in the life of a worker, in which the successful commodification of his labour power could no longer be taken for granted. It thereby helped to institutionalize a ‘Fordist’ life course consisting of three main stages (education, employment, retirement), providing financial support for its first and especially its last phase, and protecting its middle phase against unforeseen vulnerabilities (sickness, accidents, disability, unemployment) (Kohli 2007). For some time now, this model has been showing clear signs of wear. The social and economic conditions that sustained its performance have receded. The key developments to which the literature has attributed the emergence of new needs and risks are the tertiarization, feminization, and flexibilization of the labour force, changing family and household structures, and declining fertility rates that combine with higher longevity

Needs And Risks In The Welfare State    247 to tilt the age structure of societies upwards. Moreover, societies and economies have become more open to transnational migration and capital flows. The vulnerability created by transnationalization has been exacerbated by disruptive global crises such as the financial crisis after 2008 and the environmental crisis taking shape today. Digital transformations are another source of new needs and risks. Rapid advances in digital technologies and the growth of the digital economy disrupt existing skill investments, redistribute jobs across sectors, and undermine job security in traditional sectors. At the same time, the moral underpinnings that prevented some inequalities and exclusionary tendencies of the Fordist model—​above all those of gender—​from gaining recognition as the source of legitimate needs have successfully been challenged. Tables 14.1–​14.3 present data on risk/​need profiles of a sample of Organisation for Economic Co-​operation and Development (OECD) countries selected to correspond to the usual regime typologies. Table 14.1 shows that the onset and speed of employment change differs considerably among countries. Employment losses in the primary and secondary sectors between 1970 and today have been comparatively small in the North American countries and the Netherlands, where deindustrialization had considerably advanced already prior to the tightening of economic conditions around the time of the first oil crisis. Moreover, these losses have been more than compensated for by a vigorous expansion of the service sector. Most other countries experienced deindustrialization only from the 1970s onwards, and thus had to cope with the bulk of pressure for adaptation under conditions of lower economic growth and austerity. And while most countries saw primary and secondary sectors declining further in the immediate aftermath of the 2008 crisis, employment in these sectors remained largely stable in Germany and Japan, where it is now almost 50 per cent higher than the average of the other countries (not shown in the table). The low weight of the service sector in Italy and Spain even today might be related to the sizable informal or grey economy in these two countries. While it would seem that the loss of employment in the primary and secondary sectors has been (over-​)compensated for by the growth of the tertiary sector (the German service sector is the only one that, in aggregate terms, has been unable to absorb all employment made redundant in agriculture and manufacturing), the picture changes when we consider rising female labour force participation during this period. While in the two Scandinavian countries a large share of women had already entered the labour market before the 1980s, with little growth since, but still the highest share, other countries have witnessed a stronger expansion of their female labour force since the early 1980s, most massively the Netherlands and Spain, so that today all countries except Italy3 have a female labour force participation rate of more than two-​thirds. In the Netherlands and Spain, this influx correlates with a vigorous expansion of the tertiary sector (even if at very different absolute levels). In contrast, the Scandinavian, and

3 

Low values can indicate low participation during the core adult years, but also low participation in early adulthood (see Table 14.2) and/​or early retirement.

Table 14.1 Socio-​economic drivers of new social needs and risks Sectoral employment Losses Gains 1st & 2nd 3rd ∆

∆

Low-​skill employment

Female LFP rate

Level 3rd

Share at total employment

% point diff. to total empl. rate

Ø

Ø

Ø

Ø

Ø

Ø

∆

1970–2​ 017 1970–​2017 2013–2​ 017 1989–1​ 993 2013–2​ 017 1989–​1993 2013–​2017 1983–​2017 2013–2​ 017 Australia -1​ 3.1

21.0

57.7

37.8

Canada

16.7

-​16.6

-​22.5

20.2

71.3

-​6.5

24.6

59.4

22.3

7.0

-​23.5

-​27.5

15.6

74.5

Denmark -2​ 0.0

24.4

59.5

32.9

15.6

-​17.4

-​21.6

4.2

75.8

France

-1​ 9.4

21.0

51.0

41.0

16.7

-​16.5

-​26.8

12.6

67.6

Germany -2​ 8.2

19.2

54.1

13.4

9.9

-​30.2

-​26.1

21.9

73.2

Italy

-1​ 4.9

19.7

40.3

65.1

31.9

-​10.3

-​20.8

15.8

54.6

Japan

-1​ 4.4

29.1

60.0

–​

–​

–​

–​

16.1

67.1

Netherl. -1​ 2.7

33.2

63.1

33.6

18.0

-​23.0

-​22.5

36.0

74.7

Spain

-2​ 5.7

26.9

45.0

70.6

34.1

-​10.1

-​20.0

36.7

69.9

Sweden -1​ 8.9

24.1

62.5

28.9

13.0

-​7.0

-​21.6

3.4

79.8

UK

-1​ 9.5

25.4

61.2

33.1

15.4

-​14.7

-​22.9

11.8

72.6

US

-​11.6

19.5

58.9

11.9

7.6

-​27.4

-​24.5

6.4

67.3

Sources and definitions: all data except for cohort fertility have been retrieved from stats.oecd.org, December 2018–​January 2019. Sectoral employment = civilian employment in per cent of the working age population (15-​ 64), different ISIC revisions; OECD Annual Labour Force Statistics. Low-​skill employment = employment rate of persons who have not completed an upper secondary education or higher (share at total employment = low-​skilled at total population x low-​skilled employment rate—​total employment rate); earlier data for the United Kingdom refer to 1997–​2001; OECD Education at a Glance 2018. Female labour force participation rate is in per cent of the female working age population (15–​64); OECD Annual Labour Force Statistics. For EU countries, the foreign-​born population refers to non-​EU nationals born abroad in percentage of the total population; for Canada and the US, to residents born outside Canada, the US, and Oceania; OECD Settling In 2018. Births out of wedlock are given as a percentage of all births; OECD Family Database. Cohort fertility rates for the cohorts 1941–​1945 and 1955–​59

Table 14.1 Continued Foreign-​born population

Births out of wedlock Cohort fertility rate

Life expectancy (years) at birth

Ø

Ø

Co.

Co.

Co.

∆

at age 65 Ø

♀

♂

2006–2​ 007 2017 1970–1​ 974 2010–2​ 014 1941–1​ 945 1955–1​ 959 1979 1970–​2016 2016 2016 2016 23.99

28.11 9.4

34.3

2.42

2.17

2.05 11.7

82.5 22.3 19.6

18.02

19.29 9.2

32.9

2.33

1.85

1.84

9.0

81.9 22.0 19.2

3.32

4.48 14.7

50.2

2.13

1.86

1.96

7.6

80.9 20.8 18.2

3.71

4.50

–​

55.8

2.29

2.13

2.08 10.2

82.4 23.5 19.4

4.72

5.49 8.1

34.3

1.84

1.67

1.57 10.5

81.1 21.3 18.1

3.85

5.70 2.4

25.0

2.12

1.77

1.49 11.3

83.3 22.9 19.4

1.60

1.87 0.9

2.2

2.03

1.93

1.47 12.1

84.1 24.4 19.6

1.87

2.14 2.0

46.5

2.09

1.87

1.85

7.9

81.6 21.1 18.5

6.19

5.26 1.4

39.1

2.48

1.86

1.40 11.4

83.4 23.6 19.4

2.58

4.99 25.2

54.4

2.00

2.05

2.03

7.6

82.4 21.5 19.1

3.56

3.65 8.3

47.3

2.23

2.00

2.03

9.3

81.2 21.1 18.8

12.13

13.17 12.1

40.6

2.47

1.99

2.23

7.7

78.6 20.6 18.0

are completed, for 1979 projected; data for 1941–​1959 are from the Human Fertility Database, Max Planck Institute for Demographic Research (Germany) and Vienna Institute of Demography (Austria) at www.humanfertility.org/​cgi-​bin/​main.php; and for 1970 and 1979, from Myrskylä et al. 2013; data for Australia is all from Myrskylä et al. 2013 and refers to 1950 and 1960, respectively, for the first two cohorts; data for Canada 1970 is from Myrskylä et al. 2013; data for Germany 1970 refers to 1969. Life expectancy is reported in years at birth and at age 65; OECD Health Statistics 2018. Notes: data on employment are percentages; Ø is the year average over the indicated time period; ∆ is the sum of yearly changes through the indicated time period. We report five-​year averages to smooth out short-​term variations in the data.

250    Jan Zutavern and Martin Kohli some of the Anglo-​Saxon, countries are evidence that tertiarization is to some extent independent of a growing female labour supply. Another persistent trend is the decline of the relative demand for low-​skilled labour, which over the past twenty-​five years is almost perfectly correlated to levels at around 1990. As the supply of low-​skilled labour has not receded at the same rate, the employment rate of the low skilled has, in most countries, fallen further behind the overall employment rate. Foreign-​born (third-​ country) residents are particularly affected by this skill-​dependent employment gap, as the share of low-​skilled workers in this group tends to be significantly higher than among the native population. In the past decade, the foreign-​born population has increased in all but one of the countries, albeit at very different levels. Australia, Canada, and the United States remain the classical immigration countries and Japan still has almost no foreign-​borns, while in most other countries their share is now around 5 per cent (for the European Union (EU), the indicator reports third-​country nationals born abroad, as exposure of internal EU migrants to migration-​specific risks tends to be lower). The exceptions are the Netherlands and partly also the United Kingdom, which had large immigration from the former colonies that does not show up in the current rates of foreign-​borns. Regarding family and reproduction, the share of births outside of marriage has greatly increased over the past four decades and comprises now more than half in the Scandinavian countries and France. (This should obviously not be equated with single parenthood, see Table 14.3—​many children are born to co-​residing couples, and many are later transitioned into marriage). Countries in which this share has always been comparatively high have today among the highest fertility rates. The outlier at the lower end is Japan, which, together with Italy and Spain, also has the lowest current fertility. Using cohort fertility as our measure, we observe a bifurcation of country-​specific trends. In comparison to the Second-​World-​War-​born cohort, later cohorts have rather consistently had fewer children. But while this trend continues in countries such as Italy, Spain, or Japan, the most recent projections for women who have reached their reproductive age in the late 1990s/​early 2000s (the 1979 birth cohort) suggest that fertility is stabilizing in others and, for the United States and Denmark, has even increased. Life expectancy at birth today is beyond eighty years in all but one of the countries (the United States), over seven years more than for those born in 1970. All countries now have a retirement period of considerable length, with remaining life expectancy at age sixty-​five over twenty years for women and over eighteen years for men. As socio-​economic conditions have changed in the course of the post-​industrial era, so have perceptions of the needs and risks they give rise to. To be sure, the Fordist life course remains an important reference, and risks and needs arising at the critical transitions from education to employment to retirement have far from disappeared. What has changed are their causes and their impact on different social groups, above all with respect to skills. The unwinding of industrial employment and the advance of the digital economy entail a devaluation of sector-​specific skills (Iversen and Cusack 2000) and thus the risk of frictional and structural unemployment. A workforce possessing specialized skills that are aligned with high value-​added, advanced sectors of the

Needs And Risks In The Welfare State    251 (knowledge) economy benefits from ‘location co-​specificity’ (Iversen and Soskice 2019), whereas semi-​and low-​skilled workers are increasingly exposed to the consequences of internationally mobile capital and digitalization. The consequence is a polarization of income and labour market security. Following this logic, we would expect the unwinding of Fordism to bring about a degendering of occupational outcomes in the high-​ skilled sectors, while gendered occupational inequalities are more likely to persist in the low-​skill sectors. As the awareness of the critical importance of the right skills for economic success becomes more acute, ‘child outcomes’ are joining notions of ‘child rearing’ in perceptions of the role of family and kinship (Irwin and Elley 2011; Faircloth and Murray 2015; Miller 2017). Contemporary (middle-​class) perceptions of parenting draw attention to the risks of ‘unwanted’ child outcomes and the responsibility of parents for avoiding such risks. Parents thus turn into allies of a social investment welfare strategy. As this responsibility still falls predominantly on women’s shoulders, rather than those of their male partners, their choice often is between the stress of balancing their own employment aspirations with care for children or the elderly and the stress of having to forego one or the other (Lewis et al. 2008; Hakim 2016). While family configurations have adapted to changing realities and family solidarity within and across generations (Kohli et al. 2010) may step in, the ability of families to stabilize unsteady employment biographies and provide effective safeguards against poverty and social decline is itself dependent on policy support. At the same time, families face new normative challenges as need and risk claims are increasingly founded in values that emphasize individual choice and achievement. Welfare states are thus called upon to invest in policies and services that help individuals and families to improve their chances of social, economic, and cultural success. What is the magnitude of employment-​and family-​related needs and risks today? The country-​specific profiles emerging from Tables 14.2 and 14.3 present a mixed picture. The labour market-​related risks presented here have, on average, either increased or fluctuated in a stable corridor. Youth unemployment is well above 10 per cent in all countries except Japan and Germany. Conspicuous is the growth of involuntary part-​time employment in all countries but the Netherlands (which has by far the highest part-​time employment rate, but almost all of it voluntary). Most country-​specific averages hide significant variations over time. All unemployment data demonstrates the pressure on labour markets in Southern Europe. While Italy and Spain did show some improvement in the early 2000s, they have been unable to weather the shock of the financial crisis of 2008, so that newcomers there still bear a disproportionate burden in the adaptation of labour markets to post-​crisis realities. It is especially the young that are hit, as the high level of youth unemployment confirms. The severity of needs of Italian and Spanish youth is evident in its high long-​term unemployment rate, and even more so in its high share of young people neither in employment nor in education or training (NEETs). The two countries also have the largest gap between the poverty rates of children and the elderly, suggesting that their labour markets and welfare states are geared to the elderly, and thus especially in need of social investment strategies. Add to this the

Table 14.2 Selected risk and need profiles: employment Unemployment >1year

Youth unemployment (15–​24)

% of labour force

% of labour force

% >1 year

1983–1​ 987 2003–2​ 007 2013–​17 1983–1​ 987 2003–​2007 2013–2​ 017 1983–1​ 987 2003–​2007 2013–2​ 017 Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

Ø

21.54

11.07

17.01

Australia

2.5

1.0

1.3

16.0

10.7

12.8

Canada

1.2

0.6

0.8

15.7

11.9

12.5

6.48

2.62

5.43

Denmark

2.6

1.0

1.6

12.1

8.2

11.9

26.16

4.63

8.35

France

3.8

3.2

4.1

20.9

18.4

22.9

30.82

24.31

27.82

Germany

3.0

5.3

2.0

8.5

12.6

7.2

33.53

29.88

22.64

Italy

6.2

3.7

6.9

30.4

22.5

38.0

64.74

45.75

54.94

Japan

0.4

1.5

1.2

4.6

8.5

5.3

8.37

22.83

27.90

Netherl.

5.4

1.5

2.5

17.0

6.9

10.6

39.16

15.56

17.23

12.2

2.6

10.9

43.1

20.1

48.0

59.37

16.47

34.06

Sweden

0.3

1.0

1.1

6.1

15.9

18.1

4.96

5.40

4.61

UK

5.3

1.1

1.8

17.7

13.1

15.5

39.47

12.95

22.26

US

0.8

0.6

1.2

14.0

11.3

12.0

5.68

7.05

11.94

Spain

Sources and definitions: all data are from OECD Annual Labour Force Statistics and have been retrieved from stats.oecd.org, December 2018–​January 2019. Unemployment >1 year is as a percentage of the total labour force. Youth unemployment is unemployment of the 15–​24 years old as a percentage of total employment of the 15–​24 age group; youth unemployment >1 year is as percentage of total youth unemployment. Part-​time employment = civilian employees (15 years +) usually working under 30h per week as a percentage of total employment (based on a common definition); involuntary part-​time employment refers to persons working part-​time who could not find full-​time work (based on national definitions) as a percentage of total part-​time

Table 14.2 Continued Part-​time employment % of total employment

Temporary employment % involuntary

NEETs

Low pay employment

% of total dep. employment

1987–1​ 991 2013–2​ 017 1987–1​ 991 2013–2​ 017 1987–​2017 2013–2​ 017 2003–​2007 2013–2​ 017 2002 2014 Ø

Ø

Ø

Ø

Ø

–​

25.39

19.52

28.04

5.38

17.04

19.12

22.14

25.95

19.12

20.22

11.54

15.10

12.29

14.24

–​

11.84

22.31

5.80

Ø

Ø

Ø

5.34

11.66

11.96

13.77 16.55

12.87

13.42

12.46

12.86

22.38 22.45

10.11

10.48

7.80

10.58

40.17

13.37

16.38

14.57

16.71

12.48

12.48

13.08

13.44

9.28

7.36

8.42

9.00

9.09

17.49 17.89

8.80

18.61

37.01

62.52

10.18

14.04

20.42

26.47

10.45

12.75

22.50

–​

20.31

11.47

7.55

12.04

10.33

14.43 13.91

27.55

38.09

19.44

8.49

14.54

20.96

7.09

8.35

12.87 14.50

4.72

14.36

27.50

63.43

29.23

25.00

15.66

23.17

15.58 14.59

15.41

14.05

11.03

30.62

16.03

17.02

9.53

8.83

20.47

24.01

8.09

15.72

6.17

6.12

14.27

13.82

20.94 20.40

14.46

12.68

–​

8.11

4.48

–​

13.50

14.57

23.50 24.93

–​

7.63

–​

employment. Temporary employment refers to contracts with a pre-​determined termination date and is as a percentage of total dependent employment. NEETs = share of youth (15–​29) not in employment, education, or training. Low pay employment = share of full-​time workers’ earning less than two-​thirds of gross median earnings. Notes: Ø is the year average over the indicated time period. We report five-​year averages to smooth out short-​term variations in the data.

74.8

59.5

83.1

67.1

65.7

Netherl.

Spain

Sweden

UK

USA

18.1

20.3

8.2

16.6

12.4

–​

16.5

20.6

12.4

8.5

14.0

–​

2014

22.3

21.2

24.8

10.3

24.7

–​

25.9

17.6

22.4

–​

23.3

–​

2014

Low vs high education

20.7

13.2

12.8

5.3

7.8

–​

3.9

8.4

7.1

12.3

20.0

21.7

17.8

6.9

9.0

–​

5.0

12.2

11.6

14.3

13.6

20.6

20.4

–​

10.6

11.6

6.2

9.8

15.9

13.7

16.8

12.4

15.2

9.1

16.9

7.3

12.2

6.3

–​

8.9

9.1

10.4

8.9

–​

19.7

25.5

26.3

19.0

19.3

12.7

21.6

26.5

24.5

23.7

15.4

16.0

9.5

17.8

14.0a

8.4

1975

Mid-​ 1980s Ca. 2000 Mid-​2010s 2012

Children

Dependent poor

Elderly

3.6

–​ 4.9 –​

24.6 21.3

31.0 10.9

33.8

30.6 23.5

30.2

46.2

37.8 21.0

34.8 11.4

33.3 11.4

33.0

26.1 17.8

25.0 13.5

-​3.6

-​0.7

–​

10.5

2.7

–​

9.8

3.4

1.6

-​1.6

3.9

-​0.5

∆ mid-​1980s–​2016

3.9

–​

8.5

0.9

–​

6.8

2.5

20.6 -​1.5

10.0 -​1.6

–​

5.8

2.2

–​

7.5

9.9

5.2 -​0.5

4.0 -​1.7

9.0

26.6 -​0.7

∆ 2015 2016 mid-​1980s–​2016 2016

Children Old-​age in jobless dependency households ratio

Notes: a 2011. ∆ is the sum of yearly changes through the indicated time period.

Sources and definitions: employment rate of mothers with 1 or more children below the age of 15; OECD Family Data Base, http://​www.oecd.org/​els/​family/​database. htm. The impact of children on gender differences in employment is measured as the difference between gender gaps (male minus female) in employment rates for households without children and households with at least 1 child below the age of 15, and further differentiated by the difference between mothers/​fathers with less than upper secondary education and mothers/​fathers with tertiary education: OECD 2017: 147. Children in single-​mother households = percentage of all children