The Transformation of Welfare States?

Nick Ellison

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781134765690
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica

This accessible work provides a 'political sociology' of welfare states in industrial societies, with both historical and contemporary perspectives. Ellison focuses on the social and political underpinnings of a number of welfare regimes and looks at the transformations they have undergone and the challenges they face.

This book assesses current debates about the role of 'globalization' in welfare state change, paying particular attention to contemporary views about the capacity of embedded institutional structures to limit the effects of global economic pressures. Ellison assesses the changing nature of social policies in nine OECD countries – selected to include 'liberal, 'social democratic' and 'continental' welfare regimes. Taking labour market and pension policies as the main areas of investigation, this volume provides 'snapshots' of welfare reform in each case, charting the ways in which different regimes 'manage' the range of challenges with which they are confronted. Ultimately, the book suggests that all contemporary welfare regimes are experiencing a level of 'neoliberal drift'. As yet, this trend towards liberalization remains constrained in those countries with more 'coordinated' economies and institutionalized forms of social partnership – but the question is for how long?

This book will be of great interest to students and scholars of International Politics, Sociology and Social Policy.

1 ‘Globalization’, institutions and welfare regimes

This book takes as axiomatic the fact that welfare states in the ‘mature democracies’ are changing. According to many observers, ‘globalization’ is somehow responsible for the development of different social policy alternatives in contemporary welfare systems and it is primarily this issue that will be considered in detail throughout this volume. However, the apparently simple relationship between ‘globalization’ and welfare regime change is of course nothing of the sort. For one thing, the nature and extent of global challenges are hotly contested and it is not clear that the – primarily economic – pressures involved have had the impact on welfare policies that globalization enthusiasts claim. Certainly, the argument here does not hold that welfare systems in the OECD are embarked upon an inexorable ‘race to the bottom’ in which rampant globalization forces once-autonomous nation-states to outdo one another in their efforts to cut social spending, maintain low interest and tax rates, and thus remain economically attractive for inward investment – a sort of economic beauty contest in which multinational corporations sit as judge and jury. Arguments of this nature will be examined in the course of this volume but, on the whole, they will be rejected in favour of an analysis that presents a more complex and mixed picture of the fortunes of contemporary welfare regimes.

Such an analysis certainly recognizes that globalization has influenced welfare policies in different welfare systems – indeed a key argument of this book is that ‘neoliberal drift’ is an important phenomenon from which few regimes are entirely immune. The difficulty, though, is how best to understand the pressures and counter-pressures to which national governments are increasingly subject while bearing in mind that their welfare systems, which have become deeply embedded over time, are unlikely simply to ‘collapse’ in the face of new challenges. As an initially schematic starting-point, two significant dimensions of discussion need some elaboration before being explored more fully in Chapters Two and Three. First, the economic dimension is important in its own right and ‘globalization’, however contentious the term appears to be, is an immensely significant issue. Some observers, for example (see Giddens, 1990, 2000), argue that the increasing power of global capital constitutes by far the most serious difficulty for national governments struggling to manage welfare systems in increasingly open economies. Others appear equally convinced that the pressures confronting contemporary welfare systems are more attributable to endogenous economic difficulties, particularly the domestic roots of deindustrialization and the turn towards the service economy. An alternative perspective would play down the causal significance of economic factors to suggest that institutional infrastructures can prevent, or at least mitigate, pressures in ways that preserve the core characteristics of national welfare systems as these developed over the second half of the last century. Whether or not these ‘institutionalist’ arguments are accepted, they have come to influence perceptions of contemporary welfare state politics in some quarters in recent years, acting as a significant counterpoint to those who believe that economic pressures – ‘global’ or ‘domestic’ – can directly account for welfare regime change.

But to conceive change in terms of these stark binaries is itself problematic as the discussion below suggests. If these key perspectives broadly frame the main concerns examined in this book, it is important to understand not only how they might ‘condition’ one another – the interrelationship between economic and institutional factors being of central significance – but also how this ‘economic-institutional nexus’ organizes other factors which also play a major role. Here shifting demographic patterns are amongst the most important new challenges facing national welfare systems, the contention being that these do not somehow lie outside the nexus but are very much a part of it – as the discussion of the changes currently being made to pensions systems demonstrates (see Chapters Six and Seven).

In essence, the argument here is that national welfare systems are changing as new economic pressures interact with existing institutional arrangements – political, social and cultural – in ways that render the latter less stable. This embryonic instability means that welfare systems are becoming more vulnerable to other challenges that confront them – less able, for example, to rely on the ‘traditional’ policy solutions and institutional configurations that characterized welfare politics throughout the postwar period. Clearly the nature of change will depend on the particular welfare system in question – and a short discussion about the nature of ‘welfare regimes’ will be conducted below. Before getting to this, however, a brief assessment of the key themes of ‘institutionalism’ and ‘globalization’ is required.

Institutions, ‘globalization’ and retrenchment politics

As March and Olsen (1998: 948) state, institutionalization refers to processes that involve ‘the development of practices and rules in the context of using them [that have] earned a variety of labels … which refer to the development of codes of meaning, ways of reasoning, and accounts in the context of acting on them’. So far as welfare is concerned, the main contention behind the institutionalist position is that the embedded organizational structures on which particular policies rest, together with the assumptions and expectations about the nature of ‘welfare’ that develop over time among interested parties, conspire to make radical reform difficult. Paul Pierson (1996: 152) notes, for instance, that ‘relatively stable, routinized arrangements structure political behavior’. Depending to a degree on regime type, those who are critical of the extensive state-based welfare systems which developed among the advanced democracies, mainly in the postwar period, can find it difficult to formulate policy alternatives acceptable to a range of interests which have come to depend – socially, economically, culturally – on specific forms of welfare provision. There are a number of reasons why this may be the case, the precise argument varying according to different interpretations of the institutionalist position. Rational choice institutionalists, for instance, contend that ‘actors follow a logic of expected consequences within institutional constraints’ (Beyeler 2003: 154), the suggestion being that change will only occur ‘because of shifts in the actors’ opportunity structure’. In short, the core focus is on ‘how individuals build and modify their institutions to achieve their interests’ (Campbell, 2004: 15). A second, more ‘sociological’ variant of institutionalist thinking argues that social actors ‘behave according to a logic of appropriateness within their institutionally defined roles’ (Beyeler, 2003: 154). Behaviour here is less ‘rational’ and more likely to be generated through the sense of identity that institutions can create in both individual and collective actors. Importantly, according to Beyeler (2003: 157), in the sociological institutionalist view ‘the autonomy of actors is based on rather than restricted by institutions’ with the result that ‘institutions are changed if the underlying values are eroding and identities with the previous institution get weaker’.

These differing approaches are best understood as ideal types within the institutionalist paradigm. In effect they form the two ends of a continuum of potential behavioural responses to pressures for change with the pure ‘rational actor’ model at one end and the more sociological, identity-driven model of institutional attachment and belonging at the other. Significantly for the discussion here, Beyeler (2003: 158) notes that the further that strict rationality arguments are relaxed the easier it becomes to understand that ‘policy-making can clearly not be conceived as a simple functional reaction to changes in the environment’. Struggles and power conflicts will emerge in key areas of institutional change with different actors adopting different positions and strategies depending on their particular interests and location within the prevailing institutional structure – that is to say, their ‘location’ within the sets of ‘rules, norms, institutions and identities that drive human action’ (see March and Olsen, 1998: 958) in particular ways and specific contexts.

That individuals act in a more complex and bounded manner than would be dictated by pure ‘rational’ self-interest opens up important dimensions of debate about the nature of path-dependent change and institutional stickiness. These include the need to consider both the ‘formal’ and ‘informal’ factors that may conspire to reduce the potential for radical change while permitting ‘adjustments’ to existing policies and practices. At the formal level of the nation state, for example, ‘veto points’ may be expressly written into constitutional design in order to guard against the prospect of damaging changes driven through by unrepresentative or overpowerful interests. Reinforced majorities may be required for major reforms, while in consociational systems minorities have a constitutional right to block certain types of reform proposal. In federal and/or bicameral political systems there are formal mechanisms for controlling over-enthusiastic governmental executives either through countervailing power from devolved legislatures or the capacity of second, or upper, assemblies to block or delay proposed legislation. Constitutional arrangements such as these can become an entrenched part of political culture and national identity with the result that they are likely to prove ‘sticky’ when confronted by pressures for change. Less formally – and irrespective of constitutional considerations – the ‘embeddedness’ of policies within both the state and civil society can be highly significant, with ‘policy legacies’ or ‘feedback’ exercising powerful sway over attempts to change existing forms of provision, delivery mechanisms and, indeed, the historically induced, cultural assumptions that citizens themselves hold about the role and purposes of (in this case) welfare. The ‘increasing returns’ generated as a result mean that decisions taken at earlier points of policy history can become self-reinforcing or ‘path-dependent’. In this way, as Pierson (2000a: 491 original emphasis) notes, ‘it is not just that institutional arrangements make reversal of course difficult. Individual and organizational adaptations to previous arrangements may also make reversal unattractive’. Core elements of welfare systems offer particularly clear examples of the issues at stake here. Pierson (1998: 552) notes that ‘huge segments of the electorates of advanced industrial societies rely on the welfare state for a large share of their income’ and, further, that ‘deeply institutionalized programs like health care and pensions [mean that] social actors are likely to place high value on predictability and continuity in policy’ (Pierson, 1998: 555). In consequence, it is hardly surprising if proposals for social reform are often closely contested by different interests and that political outcomes tend to favour evolutionary adjustment and the status quo (Ingram and Clay, 2000) over radical change where assumptions about the nature and role of central services – and the identities that are therefore bound into them – encounter external challenges. In this way, such external pressures are socially, politically and culturally ‘mediated’, the argument being that the relationship between these pressures and the attempts by governments and other actors to manage them will be both complex and non-linear.

Conducted at this level of generalization, it seems sensible to suggest that the inclusion of ‘complexity’ – to employ a useful shorthand – in the discussion appears to justify the institutionalist viewpoint over those who argue that global economic pressures can have a direct ‘hypodermic’ effect on national governments and their populations. However, there are a number of weaknesses associated with the institutionalist position that need to be taken into account which undermine its potential influence. It is clear from recent work by Campbell (2004) that institutionalists tend to operate with ill-defined notions of change and loose conceptions of ‘institutions’ with the result that it is not always clear which types of change, levels of institutional analysis, time frames and so on are being examined. This lack of specificity obviously affects efforts to track and explain patterns of institutional change. Going further, Campbell (2004: 66) also points out that the processes or ‘mechanisms’ to which institutionalists refer when analysing the underlying reasons for the prevalence of incremental or evolutionary change are often poorly specified. ‘Path-dependence’ tends to be intuitively associated with incremental shifts but, despite Pierson’s (2000b) efforts to furnish the idea with the additional notions of feedback mechanisms and increasing returns, Campbell believes these processes need to be better articulated.

These points are not trivial, for how core variables and processes are defined and understood influences and conditions perceptions of the consequences of change. For example, an analysis of the development of ‘privatization’ and devolution policies in the welfare arena across the majority of OECD countries could lead to different understandings of welfare state change depending on preconceptions about the role of the state, the history of welfare state development in particular countries and the responses of the institutional actors involved. The ‘typical’ institutionalist response would argue that privatization has become a particular technology of the state, which has been appropriated in ways that enable the latter to continue to play a central role in the development and delivery of social policies. In this way, Smith (2002: 82–3 my emphasis) can argue that although

government social policy increasingly relies upon a mixed public/private delivery system characterized by extensive contracting between government and nonprofit and for-profit service providers [and] tax credits for private organizations to pursue specific public policy goals … and allowances and vouchers for housing, childcare and other services … the rise of these new tools has offered government new opportunities to regulate private social and health organizations.

However, others could argue with equal justification that this shift towards a regulatory state constitutes more than merely an incremental adjustment of existing practices. On this view, the explanations associated with theories of evolutionary change – path-dependence, increasing returns, ‘lock-in’ effects and so on – cannot account alone for the emergence of new policies, or the reconfiguration of old ones, on the scale experienced in many of the mature democracies in recent years.

It may be that it is not possible to resolve differences of perception of this kind. Institutionalist conceptions of change and the pressures that drive it may simply be too elastic to permit anything more than a broad account of the possible forces at work and factors involved. To take one further example, it has been suggested by Rothstein (1998) that core institutional components of welfare are likely to persist, even as changes occur, owing to the influence of historically and culturally embedded assumptions (and it could be added ‘identities’) about the role of welfare in any particular polity. So Rothstein (1998: 214) can argue with reference to Sweden that citizens’ demands for ‘freedom of choice and self-determination by no means spell the end of the universal welfare policy’. This conviction is based on the view that ‘how extensive the public commitment to the well-being of citizens should be is an altogether distinct question from whether or not the services following on this commitment should be produced by organizations which are publicly owned’ (Rothstein, 1998: 215). The statement is significant because it appears to suggest that the institutional and cultural parameters of Swedish welfare universalism persist even as the state’s role and indeed citizens’ behaviour, change. Of course, Rothstein may be correct to argue that there is a distinction between a public commitment to the universal welfare state and the delivery mechanisms required to sustain it. Even so, if the Swedish welfare regime does indeed remain formally attached to its universalist principles, could changing citizen perceptions together with the persistent policy changes of the kind implemented in recent years hollow out these principles in a way that ultimately forces a transformation of the role and purposes of welfare? If such a shift was to occur, how sure could institutionalists be of identifying the precise point at which the cumulative impact of change pushed institutionalized practices, norms and values beyond what could be anticipated from persistent incremental adjustment?

In view of these considerations, institutionalist arguments seem to be important for two reasons. First, they act as reminders of the complexities of embedded social, political and cultural arrangements in national welfare regimes, the existence of which reduce the likelihood of external pressures exerting a direct or linear transformative influence on national institutions. Second, however, because the institutionalist perspective is vulnerable to the criticism that it lacks conceptual rigour, it acts as reminder of the necessity not only to be as clear as possible about the definition of key concepts – ‘change’, timescale and even the notion of ‘institution’ itself – but also of the need to recognize that the identification of ‘complexity’ as a core issue is no substitute for the careful consideration of the mechanisms and processes which mediate external pressures. It would be dangerous to assume that, because the impact of external pressures may be nonlinear, they are somehow not important or do not exercise much influence over institutional change. And it is for this reason that it is important to conceptualize the relationship between exogenous pressures and welfare institutions (in the broadest sense) in terms of an economic-institutional nexus within which the balance of influence will shift according to regime type and depending on the mix of factors involved. While it may be correct, for instance, to argue that ‘globalization’ is unlikely to undermine existing arrangements entirely – and to produce statistical evidence to support such a conclusion (see Castles, 2001, 2004; Swank, 2002) – the manner in which global economic pressures (GEPs) impact on different welfare regime types will vary. For those better disposed towards the globalization thesis than institutionalists tend to be, the point is not always to endorse the thesis wholesale but to investigate the extent to which GEPs influence the institutional character of different regimes and vice versa as governments attempt to deal with both global pressures and a range of contingent factors, some of which will be ‘domestic’ in origin. Within the global-institutional nexus, GEPs may corrode existing practices and identities in certain cases or reinforce particular tendencies and arrangements in others. Conversely these pressures themselves can be accommodated, increased or reduced depending on prevailing institutional arrangements and predispositions.

Certainly for Gilbert (2002) and others like Jessop (1994, 2002), welfare states have changed dramatically as part of a broader transformation of the state itself and GEPs are held to play a significant part in this process. Gilbert (2002: 15) suggests, for example, that ‘the evidence indicates that a basic shift has occurred in the institutional framework for social protection … most prominently in the United States and England, with other advanced industrialized nations moving steadily in the same direction’. This shift takes the form of a move from the ‘welfare state’ of the postwar world to the ‘enabling state’ of the late twentieth–early twenty-first centuries and is being driven by a combination of factors, of which ‘the globalization of the economy’ (Gilbert, 2002: 37) is amongst the most prominent.

Jessop regards the changing nature of welfare as part of a wider global transition from Fordist to post-Fordist modes of capitalist accumulation. In relation to welfare states, the move is conceptualized as a transition from the ‘Keynesian Welfare National State’ to the ‘Schumpeterian Competition State’. The processes associated with this Schumpeterian turn are at their most visible in the ‘Atlantic economies’ of the USA, the UK and (because they increasingly became part of this economic bloc owing to their relationship with the UK and military connections with the USA) Australia and New Zealand – although they are also beginning to emerge elsewhere. For the traditional welfare state, the hallmarks of change are the use of social policy to ‘enhance the flexibility of labour markets and to create flexible, enterprising workers [as well as to] put downward pressure on the social wage’ (Jessop, 2002: 168) in order that states remain competitive in the global marketplace. Importantly, however, Jessop does not argue that these changes in accumulation regimes fundamentally undermine all forms of domestic welfare provision. He acknowledges that dif...