Business and politics are closely linked in welfare state politics . This is the impression we get from media reports about jobs that policymakers have besides their political position or after resigning as ministers or members of parliament . Let us start with two examples: When former German Minister of Labour and Social Affairs Walter Riester resigned from his position in government, he was soon regularly hired as a well-paid speaker for events of financial service companies.1 They were interested in his expertise and experience with a new private pension scheme, publicly known as Riester-Rente. Some years before Riester had been the minister responsible for the introduction of voluntary, publicly subsidized private pensions . Similarly, in another country and another policy area, Alan Milburn , British Secretary of Health from 1999 to 2003 and responsible for opening the public healthcare system National Health Service (NHS) to private providers , right after resigning from government became consultant with Bridgepoint Capital, an investment firm that provides expertise for companies in the healthcare sector, before joining PricewaterhouseCoopers UK in 2013 as chair of the health industry board (BBC 2004; PricewaterhouseCoopers 2013). Notwithstanding the motives of both politicians and companies about which we can only speculate, these examples have a broader lesson for students of the political economy of welfare reforms : Apparently, relations between politics and business can be close in the area of social policy . It will thus be worthwhile to include these connections into the analysis of welfare state change.
The two examples are not just cases of general welfare state politics , but, rather, they represent a specific trend of recent welfare state change . Both Walter Riester and Alan Milburn were members of governments that promoted the growth of private provision of social policy and the emergence of for-profit providers in the welfare state . Over the last decades markets have become increasingly important in coordinating the production and provision of social policies. Without a doubt markets have always played a role in the welfare state (Zapf 1984)—and welfare mixes have different shapes in different countries as one can learn from the literature about welfare regimes (Esping-Andersen 1990). However, in recent years, there has been a change in the welfare mix all over Western welfare states , shifting the responsibility from the state to the market (and, in some fields, to families and the voluntary sector ). One aspect of marketization is the increasing relevance of for-profit actors for both the provision of services in healthcare , elderly care, or education and the management of cash benefits such as old-age pensions . This process can be called privatization of social policy provision. It is privatization in that previously state-led and not-for-profit production is transformed into a profitable business activity. On the following pages, the sum of firms that are active on markets of social policy provision will be called the welfare industry.
What happens when for-profit firms enter the welfare state as providers of social policies? The political consequences of this development in the transformation of advanced welfare states are the subject of this book. It thereby addresses a paradox of welfare state reforms: While social policies have traditionally been perceived as politics against markets (Esping-Andersen 1985), they are now increasingly provided on markets —and thus also by for-profit providers . The present book sheds light on this new actor by delving into the analysis of the consequence of the rise of firms as providers of social policy . Existing research provides ambiguous answers to the question of what the political role of these providers is. While one scholarly camp sees powerful business as a causal factor for the strengthening of markets and private provision (Farnsworth 2004; Leifeld 2011; Leimgruber 2012; Naczyk and Palier 2014; Orenstein 2008), others highlight various driving forces behind marketization that rule out the influence of private providers (Gingrich 2011; Häusermann 2010). Speaking to this debate about the political success of welfare industries , this book proposes to look into different periods of the privatization of social policy provision . It will be argued that firms , once they have become part of social policy delivery, develop a stake in welfare state politics . Apart from providing social policies, firms will also become political actors that are likely to alter existing actor constellations. Put differently, welfare industries do not just provide services , they also ‘power ’ (Heclo 1974). Analysing how the privatization of social policy provision affects welfare state politics , this book will answer the question whether welfare industries become powerful actors in politics.
State of the Art: From Retrenchment to Welfare Industries
In spite of the increasing relevance of for-profit providers for the production and provision of social policies, welfare state research has so far neglected welfare industries. For quite some time, this was due to the focus on quantitative changes and debates on whether mature welfare states have been retrenched or not. Since the end of the post-war era of economic growth in the mid-1970s, governments have faced increasing constraints on public expenditure. It was this point in time that was later identified by researchers as the end of the golden age of the welfare state . Although political economies have since then found several mechanisms to compensate for weaker economic growth—inflation, public debt , or private debt (Streeck 2011)—there is no doubt that the welfare state is an increasingly contested part of advanced democratic capitalism.
Contradicting all expectations of a fundamental retrenchment of the welfare state which seemed even more plausible in the light of neo-liberal ideas becoming popular and affecting US and UK governments of the 1980s, comparative welfare state research in the 1990s was dominated by the diagnosis that welfare state cuts were largely absent. In his famous contributions, Paul Pierson (1994, 1996, 1998) argued that social policy programmes we...