Nordic Social Policy

Changing Welfare States

Matti Heikkila, Bjorn Hvinden, Mikko Kautto, Staffan Marklund, Niels Ploug

• Publisher: Routledge
• Year: 2002
• eBook ISBN:
  9781134618415
• Topic: Politique et relations internationales
• Subtopic: Prestation de soins de santé

By focusing on developments in the Nordic welfare states during the past decade, Nordic Social Policy provides new insights into the evolution of welfare state measures and generally assesses the peoples health in Sweden, Finland, Norway and Denmark.
This comparative work includes chapters on
*the changed preconditions of welfare policies
*changes in the welfare measures
*developments in the welfare of the people
*developments in public support for the welfare states.

1
Introduction The Nordic welfare states in
the 1990s

Mikko Kautto, Matti Heikkilä, Bjørn
Hvinden, Staffan Marklund and Niels Ploug

Are the Nordic welfare states facing a new era?

In international settings it has become customary to speak of the Nordic, or Scandinavian,¹ countries as a distinct unit of nations that share a variety of common features, be they in terms of geography, religion, language, history, politics or economics. A closer look reveals substantial differences in most areas, pointing to country-specific traits. Similarly, in welfare state research, by speaking of a ‘Nordic (or Scandinavian) model’ one can transmit a multitude of information about public policy, social policy arrangements, labour markets, etc. shown to be common to Denmark, Finland, Norway and Sweden. For those interested in a closer examination of the Nordic model, the similarities between the countries may sometimes prove arbitrary and be subjected to criticism.

Much of the literature about and around the Nordic model has been produced with data from the ‘Golden era’; in the 1980s all Nordic countries were among the most prosperous industrialized countries, with good records of economic development. In all countries economic prosperity was combined with policies aiming at high levels of equality and low levels of poverty. Comparative evidence pointed to the success of the Nordic model; it was possible to combine good economic performance and social justice. The treatment of the Nordic countries as an entity already had its critics, but keeping in mind the differences in development in various spheres during the early and mid-1990s could make one even more dubious about the common practice of looking at the four countries as an homogeneous group.

The Nordic countries’ political and macroeconomic development shows a picture of diverging paths since the beginning of the 1990s. Politically, the deepening of European integration has meant new questions for the welfare states in the northern corner of Europe. Finland and Sweden revised their policy in the early 1990s, applied for membership and, after a negotiation process and referendums that followed, became new members of the European Union in 1995. Norway negotiated with the European Commission about membership simultaneously with Finland and Sweden, but after referendum it opted to remain out of the Union. As Denmark has been a member since the mid-1970s, three of the Nordic countries now are EU member states, while Norway, co-operating under different rules laid out by the EEA (European Economic Area) agreement, is also affected by integration although in a slightly different manner.

The countries’ domestic policy development in the 1990s has seen a period of power changes between the conservative and social-democratic parties that has perhaps not ended, but has at least challenged, the ruling position of social democrats in the governments. At least in the early 1990s, the social democrats had a weaker position in the national parliaments than in the middle of the 1980s in Sweden, Finland and Norway. In 1993 in Denmark, in 1994 in Sweden and in 1995 in Finland, social democrats were able to win back their position in the government. On the other hand, in Norway the social democrats found themselves in opposition after the elections in fall 1997.

Economically, the Nordic countries have also followed different paths. At the beginning of the decade, Sweden and Finland faced a severe recession, which ended a long period of steady economic growth. Denmark had already experienced economic difficulties from the 1970s, and for the Danes the economic developments of the 1990s have not been dramatically different compared to those of the late 1980s. Denmark’s foreign debt is falling and it has achieved economic growth in the 1990s. Thanks to oil revenues Norway has been able to recover from its bank crisis and recession quickly, although from a level that never reached the depths experienced in Finland and Sweden.

From a social point of view, the unemployment trends suggest further differing paths. In Finland and Sweden unemployment has risen very sharply from the times of full employment that lasted until 1990. Denmark has had its ups and downs, leaving the country today with roughly the same unemployment rates that it had in the early 1980s. Norway has experienced some fluctuations, but overall a slowly increasing unemployment trend may be traced, although an unemployment rate of less than 5 per cent can hardly be deemed a problem in the same way as the unemployment rates in other industrialized countries.

Giving an intermediate summary of Nordic macroeconomic and political developments, one would have to draw attention to how the paths of Sweden and Finland differ from those of Denmark and Norway. Yet, there are also common elements when it comes to assessing the developments from a welfare state perspective. Noteworthy is the fact that, despite differences in economic performance, the countries seem to share a common preoccupation with the state of public finance. Growing public debt and deficit are, at least in political speeches, named as key problems. Fast-growing budget deficits have been a major preoccupation especially in Finland and Sweden during this decade, with consequences for public expenditure and the preservation of welfare states. But cuts, or at least cost-containment in public spending, are suggested not only in Finland and Sweden, but to some degree also in Denmark and, perhaps surprisingly, in Norway, although their economic situations are far better than those of their neighbours.

For some reason, during the first half of the 1990s discussion has revolved mainly around ‘economic necessities’ or ‘constraints’, and here the Nordic countries seem to share something in common. But it is not only a question of changing external conditions that have affected the four countries, but there are also internal developments that have forced politicians and administrators to rethink some aspects of the welfare state. Ageing of populations, changes in family stability and gender relations and changes in the organization of work are the most important internal factors that power the push for reforms. It is possible that these internal factors may better explain welfare state development, although their importance seems to vanish in rhetorics that stress external pressures.

In most political speeches the state of the public economy and dependency ratios have become the most crucial question for the future of the welfare state. Increased dependency ratios are mainly due to unemployment and ageing, but also other forms of ‘passivity’ (e.g. early retirement, disability pensions) have to be taken into account in order to form a coherent picture of dependency ratios. The fact that a considerable part of the population does not participate in gainful employment creates needs (and consequent expenditures) while it simultaneously undermines the economic sustainability of welfare state programmes by decreasing revenues. In contrast to the situation in Finland, Sweden and Denmark, where the equation is already seen as alarming, in Norway the warnings about unsustainability are dressed more in the form of future problems that nevertheless have to be solved today. So, policy-wise the preoccupations in this respect seem to have been the same.

At first glance at least, there does not seem to be a uniform Nordic response to the changed circumstances. The governments in Finland and Sweden have curbed public spending by introducing cuts in the social security system starting from 1992. Reforms have been justified by citing mainly economic reasons. On the other hand, Denmark and Norway have adapted to new circumstances by changing their social security legislation in some sectors in ways that can be assessed to be a further expansion of the welfare state, questioning claims that this era is a period of retrenchment.

In sum, there are many grounds on which to claim that in the 1990s the Nordic welfare states have been under pressure to make changes in their welfare state systems. It is also true that all Nordic countries have introduced reforms, but what has remained unclear so far is the character and direction of changes. Have the Nordic countries entered a new era or not? Have they developed similarly?

The framework of the book

From a research point of view the differences in the preconditions for welfare state development pose an interesting starting point. According to theories of welfare state development one should expect differences also in the routes followed by the four welfare states since the beginning of the 1990s. Thus the Nordic welfare states in the 1990s provide a most stimulating research setting and research questions because external factors have affected the national economies differently and some societal development patterns seem to vary. This book aims first and foremost to give an empirically based account of the recent developments in different welfare state aspects of the Nordic countries. The empirical examination provides answers to the character of changes, but should also give material to rethink theories of welfare state development.

The framework adopted for this book is one that tries to look at the Nordic countries from a comparative, intra-Nordic perspective. This strategy may highlight the differences between the countries and challenge the prevailing view in comparative welfare state research about the uniformity of the Nordic countries. Yet again, it can bring stronger evidence in support of some particularly Nordic characteristics.

The effort arises from a combination of interests in welfare state development and in the Nordic model. First, as to welfare state development, there is a wide collection of contributions assessing the current period as one of welfare state curtailment. The common view holds that the 1990s are a different period in the long-term history of the welfare states because the period of expansion is definitely over. This assumption now prevails in the Nordic countries, too. However, despite often-heard claims about the withering of welfare states, their decline is not at all evident. Whether the Nordic welfare states have already entered a period of retrenchment and cutbacks is the main question this book tries to answer. Are there structural changes in the premises of the Nordic model? How have the Nordic welfare states reacted to pressures? Is there any proof of major curtailment? Do the Nordic countries follow a similar path of development and if not, where do they diverge and why?

Second, the existence of a Nordic model has been acknowledged in the scientific community without sharp criticism. In fact, in the modelling branch of research, it is the least controversial example and, for instance, in a relatively recently published comparative study, it is the Scandinavian group of nations which after analysis features most conspicuously as a distinctive group (Castles 1993: xxi). There are therefore good reasons to take the existence of a Nordic model as the starting point of our scrutiny, to ‘revisit’ the Nordic model. A diverging pattern of adjustments could cast a shadow on the existence of a special Nordic model. However, it should be emphasized that this is not a book about the Nordic model. The research interest is rather in changes over time in welfare state development of individual Nordic countries and in intra-Nordic comparison of policies and their outcomes. In the following, we consider these two interest areas which have served as the starting points for this book.

How should we interpret the recent phase of welfare state
development in the Nordic countries?

In all industrialized countries the main question concerning the welfare state has become its affordability (see George and Miller 1996) or sustainability (see Koslowski and Føllesdal 1997). Balancing between available resources and expenditure-creating needs is not a new issue, of course, but it could be argued that it has entered the day-to-day politics of the Nordic countries only during this decade. In a recent book Restructuring the Welfare State it has been stated that we have moved from a stage of modifications to a period of restructuring (Koslowski 1997). Other terms used that are characteristic of these times of welfare state development are ‘retrenchment’ or ‘dismantling’ (e.g. Pierson 1994, 1996); even the old term ‘crisis’ seems to have reared its head.

But what exactly do we mean by these notions describing the current period of welfare state development? Retrenchment points more to straightforward cutting of budgets that is based on mainly economic logic. Admittedly, retrenchment has a political connotation, too, when it is used to advocate a smaller public sector. Restructuring in turn does not mean just economic adjustments to balance the budget. It also entails questions of legitimacy and questions about the outcomes of the welfare state apparatus (Koslowski 1997), in other words the efficiency of the welfare state both in economic and social terms. Thus, to make a social reform that benefits some groups of society may well be classified under the notion of restructuring but not under the notion of retrenchment, and in this way restructuring seems to be close to the notion of adjustment.

In many ways the present discussion about the sustainability of the welfare states echoes earlier debates. At different times the discussion about welfare states has revolved around different issues. If in earlier decades the questions have touched upon issues like state involvement or equality, the prevailing debate, which started in the 1980s and has gained impetus in the 1990s, is more concerned with the relation between economy and social policy.

One can track debates about the unsustainability of welfare state arrangements to their roots in early Bismarckian social security schemes. Criticism is often both economic and political. There is a 25-year-old tradition in welfare state research on the notion of welfare state ‘crisis’, that in a way has combined all variants of criticism. The start has been traced to the mid-1970s’ oil crisis, which gave rise to such books as Fiscal Crisis of the Welfare State by James O’Connor (1973), The Political Economy of the Welfare State by Ian Gough (1979), Legitimation Crisis by Jürgen Habermas (1975) and The Contradictions of the Welfare State by Claus Offe (1984 in English). Basically the argument put forward in these books was an analysis of the welfare state that concentrated on the state’s role to both legitimize the capitalist economy and constrain its outcomes. The welfare state’s crisis was seen in the light of a deeper crisis in capitalist economies. This leftist critique was complemented by criticism from the right. The ‘overload’ thesis argued that government functions kept on expanding, while their capacity to fulfil promises became weaker (Brittan 1977). Both Marxist and right-wing critiques agreed that a crisis existed; the disagreement was on its causes and consequences.

However, a central message from all empirical research trying to verify the existence of a welfare state crisis is that despite beliefs, assumptions and forecasts of radical changes in welfare states, empirically oriented research has shown the opposite to be true. Jens Alber could conclude in his article ‘Is There a Crisis of the Welfare State?’ (1988) that there were neither signs of a general welfare backlash nor of a legitimation crisis caused by the curtailments. Staffan Marklund’s (1988) analysis of the developments in the Nordic welfare states from the oil crisis to the mid-1980s confirmed that the crisis debate consisted of little actual proof in the everyday practice of the Nordic welfare states. The Nordic welfare states proved to be stable. They were economically efficient, strongly work oriented, with high labour market participation also involving women and were widely publicly supported (Esping-Andersen 1985; Marklund 1988). In trying to evaluate welfare state research in an article titled ‘O’Goffe’s Tale’, Rudolf Klein (1993) wanted to remind researchers that as there were no empirical signs of crisis, emphasis should rather be directed at analysing the welfare states’ capacity to adapt to changed circumstances.

If anything, crisis debate in one form or another has proven its sustainability for a century. For a research-oriented person this should not mean that there cannot be a crisis of the welfare state. In fact, discussion about the effects of globalization on the welfare state, which has prevailed in the 1990s, seems to raise the ‘crisis of the welfare states’ issue again, but in a revised form. In the 1990s one is constantly confronted with views about the uncompetitiveness of European welfare states in the global market, about their high costs and consequent failures in terms of social integration. There is not much positive said for the welfare states these days.

In the rhetorics at least, it is held that in a globalized economy enterprises are forced into increased competition in world markets. Competitiveness has become the key word both for companies and national economies as well. Companies are forced to adjust their costs and states have to take side costs and social wage into account when formulating policies. Moreover, it is argued that owing to international pressures, states have less room to manoeuvre their economic policies, which in turn affects social policy (Kosonen 1994a). As Pfaller et al. (1991:1) put the issue, the principles of the welfare state are at stake as: ‘[A]bstractly speaking, social and non- economic objectives in general might be sacrificed to the overriding priority of efficient production for highly contested markets.’

Subject to research, the often heard argument about the welfare state as a burden to the economy has ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Contributors
• Acknowledgements
• 1. Introduction: The Nordic Welfare States In the 1990s
• 2. Economic Problems, Welfare Convergence and Political Instability
• 3. Changes In Age Structure, Family Stability and Dependency
• 4. Cuts In and Reform of the Nordic Cash Benefit Systems
• 5. Universal Public Social Care and Health Services?
• 6. Activation Policies In the Nordic Countries
• 7. Changes In the Social Patterning of Living Conditions
• 8. Poverty and Social Exclusion In the Nordic Countries
• 9. The Distribution of Income In the Nordic Countries: Changes and Causes
• 10. The Legitimacy of the Nordic Welfare States: Trends, Variations and Cleavages
• 11. Conclusion: The Nordic Model Stands Stable But On Shaky Ground
• References