The Welfare

State Reader
 The Welfare
State Reader
Second Edition

Edited by
Christopher Pierson
and Francis G. Castles

polity
Copyright© Editorial matter and organization Christopher Pierson and Francis G.
Castles 2006

This edition first published in 2006 by Polity Press

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Contents

Acknowledgements Vlll

Editors' Note xu
Editors' Introduction to the Second Edition

PART I APPROACHES TO WELFARE 5

The First Welfare State? Thomas Paine 9

'Classical' 15
The Welfare State in Historical Perspective Asa Briggs 16
Citizenship and Social Class T H. Marshall 30
Universalism versus Selection Richard Titmuss 40

Perspectives on the Left 49

What is Social Justice? Commission on Social justice 50
The Fiscal Crisis of the State james O'Connor 62
Some Contradictions of the Modern Welfare State Claus Offe 66
The Power Resources Model Walter Korpi 76

Responses from the Right 89

The Meaning of the Welfare State Friedrich von Hayek 90
The Two Wars against Poverty Charles Murray 96
The New Politics of the New Poverty Lawrence M. Mead 107
VI Contents
119
Feminism
Feminism and Social Policy Mary Mcintosh 120

The Patriarchal Welfare State Carole Pateman 134

PART II DEBATES AND ISSUES 153

Welfare Regimes 159

Three Worlds of Welfare Capitalism G0sta Esping-Andersen 160
Three Worlds of Welfare Capitalism or More?
A State-of-the-Art Report Wil Arts and john Gelissen 175

Globalization 199
Globalization, Economic Change and the Welfare State: 200
The 'Vexatious Inquisition of Taxation'? Colin Hay
Negative Integration: States and the Loss of Boundary
Control Fritz Scharpf 223
A Race to the Bottom? Francis G. Castles 226

Europeanization 245
Welfare-State Regress in Western Europe: Politics,
Institutions, Globalization, and Europeanization Walter Korpi 246
Deliberative Governance and EU Social Policy Paul Teague 269
The Open Method of Co-ordination and the European
Welfare State Damian Chalmers and Martin Lodge 289

Demographic Challenges to the Welfare State 297

Population Ageing: An U navoidablc Future 298
David Coleman
The Evolving Concept of 'Retirement': Looking Forward
to the Year 2050 james H. Schulz 309
The Global Retirement Crisis Richard jackson 325
Gender Equity in Theories of Fertility Transition
Peter McDonald 333

Political Challenges 347

The New Politics of the Welfare State Paul Pierson 348
 Contents
00

Vll

Beyond Retrenchment: Four Problems in Current Welfare

State Research and One Suggestion on How to Overcome
Them Bruno Palier 358

PART III THE FUTURES OF WELFARE 375

A New World of Welfare 377

Positive Welfare Anthony Giddens 378
The Politics of the New Social Policies: Providing Coverage
against New Social Risks in Mature Welfare States
Giuliano Bonoli 389
Beyond Universalism and Particularism: Rethinking
Contemporary Welfare Theory Nick Ellison 408
Ways Ahead? 433
A Welfare State for the Twenty-First Century
G0sta Esping-Andersen 434
Investing in the Citizen-Workers of the Future: Transformations
in Citizenship and the State under New Labour Ruth Lister 455
Basic Income and the Two Dilemmas of the Welfare State
Philippe van Parijs 473

Index 478
Acknowledgen1ents

The editors and publishers gratefully acknowledge permission to repro-

duce copyright material in the following chapters:

Wil Arts and John Gelissen, 'Three Worlds of Welfare Capitalism or More?
A State-of-the-Art Report'. From journal of European Social Policy, 12
(2002), by permission of the authors and Sage Publications.

Giuliano Bonoli, 'The Politics of the New Social Policies: Providing

Coverage against New Social Risks in Mature Welfare States'. From
Policy and Politics, 33, 3 (2005), by permission of Policy Press and the
author.

As a Briggs, 'The Welfare State in Historical Perspective'. Abridged from

European Journal of Sociology, 2 (1961), by permission of Archives
Europeennes des Sociologies.

Francis G. Castles, 'A Race to the Bottom?' From Francis G. Castles, The
Future of the Welfare State, Oxford University Press, 2004, by permission
of the publisher.

Damien Chalmers and Martin Lodge, 'The Open Method of Co-ordination

and the European Welfare State'. Copyright © Damien Chalmers and
Martin Lodge. The authors would like to thank the London School of
Economics for permission to reproduce this article.

David Coleman, 'Population and Ageing: An Unavoidable Future'. From

journal of Social Biology and Human Affairs, 66 (2001), by permission of
the author and the publisher.
 Acknowledgements IX

Commission on Social Justice, 'What is Social Justice?' From Commission

on Social Justice, The justice Gap, Institute for Public Policy Research,
1993, by permission of the IPPR.

Nick Ellison, 'Beyond Universalism and Particularism: Rethinking

Contemporary Welfare Theory'. From Critical Social Policy, 19, 1 (1999),
copyright © Journal of Critical Social Policy, 1999, by permission of the
author and Sage Publications.

G0sta Esping-Andersen, 'A Welfare State for the Twenty-First Century'.

From Anthony Giddens (ed.), Global Third Way Debate, Polity, 2001, by
permission of the publisher.

G0sta Esping-Andersen, 'Three Worlds of Welfare Capitalism'. From

G0sta Esping-Andersen, The Three Worlds of Welfare Capitalism, Polity
and Princeton University Press, 1990, by permission of the publishers.

Anthony Giddens, 'Positive Welfare'. From Anthony Giddens, The Third

Way, Polity, 1998, by permission of the publisher.

Colin Hay, 'Globalization, Economic Change and the Welfare State. The
"Vexatious Inquisition of Taxation?'". From R. Sykes, B. Palier and P.M.
Prior (eds), Globalization and European Welfare States, Palgrave, 2001, by
permission of Palgrave Macmillan.

Friedrich von Hayek, 'The Meaning of the Welfare State'. From F. A.

Hayek, The Constitution of Liberty, Routledge and University of Chicago
Press, 1959, by permission of University of Chicago Press and Taylor and
Francis Books UK.

Richard Jackson, 'The Global Retirement Crisis'. From The Global

Retirement Crisis, Washington, DC, Center for Strategic and International
Studies, 2002, by permission of the author.

Walter Korpi, 'The Power Resources Model'. From W. Korpi, The

Democratic Class Struggle, Routledge and Kegan Paul, 1983, reproduced
by permission of Taylor and Francis Books UK.

Walter Korpi, 'Welfare-State Regress in Western Europe: Politics,

Institutions, Globalization, and Europeanization'. From Annual Review
of Sociology, 29 (2003), © 2003 by Annual Reviews (www.annualreviews.
org), reprinted by permission.

Ruth Lister, 'Investing in the Citizen-Workers of the Future: Trans-

formations in Citizenship and the State under New Labour'. From Social
X Acknowledgements

Policy and Administration, 37, 5 (2003), by perm1ss1on of Blackwell

Publishing Ltd.

Peter McDonald, 'Gender Equity in Theories of Fertility Transition'.

From Population and Development Review, 26, 3 (2000), by permission of
Blackwell Publishing Ltd.

Mary Mcintosh, 'Feminism and Social Policy'. From Critical Social Policy,
1 (1981 ), ©Journal of Critical Social Policy 1981, by permission of the
author and Sage Publications.

T. H. Marshall, 'Citizenship and Social Class'. From T. H. Marshall,

Citizenship and Social Class and Other Essays, Cambridge University
Press, 1950, originally delivered in Cambridge as the Marshall Lecture in
1949; by permission of Mrs N. Marshall.

Lawrence M. Mead, 'The New Politics of the New Poverty'. From The
Public Interest, 103 (Spring 1991), by permission of the author.

Charles Murray, 'The Two Wars against Poverty'. From The Public Interest,
69 (Winter 1982), by permission of the author.

James O'Connor, 'The Fiscal Crisis of the State'. From the Introduction to
]. O'Connor, The Fiscal Crisis of the State, Transaction, © 2001, by per-
mission of the publisher.

Claus Offe, 'Some Contradictions of the Modern Welfare State'. From

Critical Social Policy, 2, 2 (1982), copyright ©Journal of Critical Social
Policy 1982, by permission of the author and Sage Publications.

Bruno Palier, 'Beyond Retrenchment'. From]. Claesen (ed.), What Future

for Social Security? Kluwer Law International, The Hague, 2003.
Reprinted by permission of the author and Aspen Publishers.

Philippe van Parijs, 'Basic Income and the Two Dilemmas of the Welfare
State'. From Political Quarterly, 67, 1 (1996), by permission of Blackwell
Publishing Ltd.

Carole Patcman, 'The Patriarchal Welfare State'. From Carole Pateman,

The Disorder of Women, Polity, 1988, by permission of the author and
publisher.

Paul Pierson, 'The New Politics of the Welfare State'. From World Politics,
48 (1996), copyright© The Johns Hopkins University Press, by permis-
sion of the publisher.
 Acknowledgements Xl

Fritz Scharpf, 'Negative Integration and the Loss of Boundary Control'.

From G. Marks, F. W. Scharpf, W. Streeck and P. C. Schmitter (eds),
Governance in the European Union, Sage, 1996, copyright© Sage Publi-
cations Ltd 1996, by permission of the publisher.

James H. Schultz, 'The Evolving Concept of "Retirement": Looking

Forward to the Year 2050'. From International Social Security Review, 55,
1 (2002), by permission of Blackwell Publishing Ltd.

Paul Teague, 'Deliberative Governance and EU Social Policy'. From

European Journal of Industrial Relations, 7, 1 (2001), copyright © Sage
Publications Ltd, by permission of the publisher.

Richard Titmuss, 'Universalism versus Selection'. From R. Titmuss,

Commitment to Welfare, Allen and Unwin, 1968, by permission of the
Literary Estate of Richard Titmuss.

Every effort has been made to trace copyright holders, but if any have been
inadvertently overlooked, the publishers will be pleased to make the nec-
essary arrangements at the first opportunity.
Editors' Note

An ellipsis within square brackets indicates an omission from the original

publication, thus: [... ]. Where more than a paragraph has been excluded,
a line space appears above and below such ellipses. Apart from minor
amendments (e.g. capitalization, British rather than American spellings
and the presentation of reference material), the few editorial interventions
necessitated by publishing these extracts in a single volume also appear in
square brackets. The authors' opinions are, of course, those held at the time
of writing; dates of original publication are reflected in the Notes to each
reading.
Editors' Introduction to the
Second Edition

This second edition of The Welfare State Reader continues our efforts to
produce an introduction to the politics of the welfare state that brings
together enduring themes of the literature with up-to-the-minute accounts
of the challenges confronting contemporary welfare states. The enduring
themes of the literature are ones with a continuing broad resonance across
the social sciences. Questions about how best to minimize poverty and
promote equality, what sorts of policy intervention produce the best
results and the extent to which state intervention for welfare purposes is
compatible with other desired goals of modern societies have been central
preoccupations of the disciplines of social theory and social policy and
have informed a large part of the analytical content of both political science
and sociology throughout these disciplines' existence. They are, moreover,
questions that have become ever more salient and of ever greater practical
policy relevance as the governments of democratic states have responded
to popular demands and to new social and economic problems by extend-
ing the scope of the caring state. Today, the state spends more on welfare
than on all other purposes combined, and long-established programmes
like old age pensions, sickness and unemployment benefits and health care
have been joined by programmes catering to the care needs of dual-earner
families, the residential needs of the frail elderly and income needs of
workers whose skills levels do not produce an adequate return in the
market economy. An understanding of the main approaches taken to ques-
tions relating to the early growth and developmental progress of the
welfare state provides an invaluable point of reference for locating the
issues raised by contemporary struggles over the state's role as an agency
of social amelioration.
While, however, the literature's enduring themes remain hugely relevant
to contemporary concerns, the substance of contemporary debates is
2 Editors' Introduction to the Second Edition

constantly changing, being continually shaped and reshaped by develop-

ments in the wider society and economy and by political responses to those
developments. It is because present manifestations of the politic~ of welfare
are in a constant process of transformation that our original conception of
a welfare state reader was built around the notion of marrying an exposi-
tion of enduring themes with a focus on current challenges. It is because
the current challenges of the new century have already begun to change
their form and because current scholarship has already begun to conceive
those challenges differently that only five years later a new edition of our
reader is appropriate. Thus while the main headings of our account are sub-
stantially unchanged - welfare regimes, globalization, Europeanization,
demographic and political change and the future of welfare- there are only
one or two pieces in these sections which have survived from the earlier
edition. This is not updating for its own sake. It is updating because the
issues are evolving and the scholarly perspectives changing. Illustrative
examples treated in this new edition include a reconceptualization of the
extent and character of the social policy impact of economic globalization,
the emergence of 'Europeanization' as a force undermining the high stand-
ards of welfare provision in northern Europe, the evolution of new tech-
niques of social policy decision-making within the European Union and
the challenge of declining fertility and other 'new social risks' to the con-
tinued viability of the Western welfare state. These issues, along with con-
tinuingly important concerns about how we cater to the needs of an ageing
population, how far welfare states have been subject to retrenchment in
recent decades and the viability of new or 'third way' policy solutions for
traditional welfare dilemmas, direct attention to the likely battle lines of
welfare state politics and welfare state scholarly debate in coming years.
A minor change in the presentation of this edition compared with the
last is that each of the three major parts of the volume is preceded by a brief
discussion of the themes and topics treated by the various contributions.
It is our hope that this innovation assists readers in following the argument
and in locating how each selection fits into the debate. In two far more fun-
damental ways our approach in this edition remains the same as previously.
First, in both editions, we have consciously attempted to overcome the
national parochialism that often characterizes welfare state analysis. The
emergence of the modern welfare state is an international phenomenon
that has taken many forms and which poses challenges that are seen dif-
ferently by different scholars in different countries. We have tried very
hard to give a flavour of this variety, first, by choosing contributions from
commentators from many countries and, second, by, wherever possible,
selecting those which make reference to differences as well as similarities
in the development of and challenges facing modern welfare states. Second,
we have been deeply concerned throughout to show that all the issues
treated are genuinely matters of debate. These debates are sometimes ide-
 Editors' Introduction to the Second Edition 3

ological and/ or theoretical, like the debates separating left and right on the
appropriate limits to state intervention or the polemics directed by femi-
nist scholars at the patriarchialism of traditional welfare state arrange-
ments. They are also frequently empirical, when, as in debates over the
appropriateness of particular models of the welfare state, the extent of
welfare retrenchment, the effects of Europeanization and the welfare
implications of population ageing, scholars disagree in their analyses and
diagnoses of contemporary issues and future welfare state prospects.
Whether ideological, theoretical or empirical, such debates are inherently
policy relevant because different welfare preferences and diagnoses imply
different ways of conceptualizing and tackling pressing social problems.
That is why issues concerning the welfare state are inherently political and
will always be of passionate concern to scholars and commentators who
care about the future of the communities of which they are members.
Part I
Approaches to Welfare

In this first part, we bring together a series of 'classic' contributions to the

literature of the welfare state. Tom Paine is our sole representative of think-
ing about welfare before the rise of the modern welfare state. Writing more
than two hundred years ago, many of Paine's thoughts have a strikingly
contemporary resonance. His views on the interaction of poverty, crimin-
ality, indolence and employment are often simply a more elegant and direct
expression of the kinds of arguments that go on today. It is as well to
remember that thinking about welfare did not begin in 1945.
It used to be said that we lacked any serious theoretical account of where
welfare states came from and what they are for. The business of the welfare
state was social administration: the mundane tasks of mopping up poverty
and improving public services. This was always, in part, a caricature. There
have always been sharp and insightful critics of this dreary-but-worthy
view of the welfare state. But we now have a wealth of competing theoret-
ical accounts of the welfare state to choose from and the principal aim of
part I of the reader is to offer a representative survey of the best and the
most influential of this literature. We begin with a series of writings from
the years immediately following the end of the Second World War. These
are not, for the most part, the years in which welfare states were founded.
The origins of welfare states among most developed states actually lie in
the twenty-five years preceding the First World War. But the postwar
period was one of unprecedented and, at least to some extent, consensual
growth in welfare states. It is also the time that gave us the most authori-
tative and enduring social democratic accounts of welfare and state. Here
we have included three 'Classical' statements of the social democratic
approach drawn from the work of Asa Briggs, Tom Marshall and Richard
Titmuss. The views of social democratic writers on the welfare state have
always been vulnerable to misrepresentation, especially as they have so
6 Approaches to Welfare

often been glossed as holding a rather simple-minded and wholly benign

view of both the state and the human condition, a view which it is difficult
to reconcile with a careful reading of what they actually said. But certainly
these authors stand at the fount of a view of the welfare state which sees it
as essentially a 'good thing', capable of forging a new and stable reconcili-
ation between the seemingly competing claims of economic efficiency and
social justice. Much of the rest of the literature on the welfare state is a more
or less explicit engagement with these positions.
In Perspectives on the Left, we bring this more theoretical approach
forward towards our own time. Not all of the contributions here are social
democratic. Indeed, O'Connor and Offe are quite explicitly critical of a
form of political compromise which they see as unsustainable over the
medium term. In slightly differing ways, they argue that capitalist welfare
states are vulnerable to a series of deep-seated contradictions which make
them politically quite unstable. By contrast, the selections from the
Commission on Social Justice and from Walter Korpi represent rather dif-
fering attempts to refashion social democratic impulses under the duress of
changing (and more difficult) circumstances.
The views represented in Responses from the Right have been
extraordinarily influential on welfare debates over the past twenty-five
years. Friedrich Hayek probably remains the most sophisticated represen-
tative of the view that welfare state institutions are essentially irreconcilable
with a social order premised on the value of human freedom. In Hayek's
wake have come a vast array of critics who have condemned the welfare
state, variously, as uneconomic, unproductive, inefficient, ineffective,
despotic and inconsistent with freedom. Two of the most influential
spokespeople for a tradition which has always been at its strongest in the
Anglo-Saxon world (above all, in North America) are Charles Murray and
Lawrence Mead. Murray has become strongly identified with the idea that
welfare state institutions tend to produce a social 'underclass' wedded to
criminality, while Mead is similarly associated with the idea that welfare
generates new forms of poverty and dependency in which the appeal to
rights swamps any corresponding sense of social obligations. The views of
both authors are given characteristically robust expression in the articles
chosen here.
Among the most influential interventions in reshaping the entire debate
about the politics of welfare over the past thirty years have been the con-
tributions of feminist authors. Starting (at least in its contemporary form,
since there are many precursors) with Elizabeth Wilson's 1977 book
Women and the Welfare State, the intervening period has seen the growth
of a literature which has challenged the very terms on which all previous
discussions of state and welfare had proceeded. Although a diverse litera-
ture, feminist writers have consistently sought to show how the nature of
welfare states and, within them, of the interplay of public and private insti-
 Approaches to Welfare 7

tutions and of formal and informal labour markets, voluntary and family
care and so on, have generated welfare regimes which can be seen to be very
clearly gendered in their structures and outcomes. At the same time, they
argue that this aspect of gender within the welfare state is effectively con-
cealed, often under the rubric of the universality of citizenship. The two
papers in the Feminism section, Mcintosh's article on 'Feminism and Social
Policy' and Pateman's piece on 'The Patriarchal Welfare State' arc out-
standing examples of this approach.
The First Welfare State?
Thomas Paine

[ ... ]

When, in countries that are called civilized, we see age going to the work-
house and youth to the gallows, something must be wrong in the system
of government. It would seem, by the exterior appearance of such coun-
tries, that all was happiness; but there lies hidden from the eye of common
observation, a mass of wretchedness that has scarcely any other chance
than to expire in poverty or infamy. Its entrance into life is marked with
the presage of its fate; and until this is remedied, it is in vain to punish.
Civil government does not consist in executions; but in making that pro-
vision for the instruction of youth, and the support of age, as to exclude,
as much as possible, profligacy from the one, and despair from the other.
Instead of this, the resources of a country are lavished upon kings, upon
courts, upon hirelings, impostors and prostitutes; and even the poor them-
selves, with all their wants upon them, are compelled to support the fraud
that oppresses them.
Why is it, that scarcely any are executed but the poor? The fact is a proof,
among other things, of a wretchedness in their condition. Bred up without
morals, and cast upon the world without a prospect, they are the exposed
sacrifice of vice and legal barbarity. The millions that are superfluously
wasted upon governments are more than sufficient to reform those evils,
and to benefit the condition of every man in a nation, not included within
the purlieus of a court.

[ ... ]

In the present state of things, a labouring man, with a wife and two or three
children, does not pay less than between seven and eight pounds a year in
10 The First Welfare State?
taxes. He is not sensible of this, because it is disguised to him in the articles
which he buys, and he thinks only of their dearness; but as the taxes take
from him, at least, a fourth part of his yearly earnings, he is copse:quently
disabled from providing for a family, especially, if himself, or any of them,
are afflicted with sickness.
The first step, therefore, of practical relief, would be to abolish the poor
rates entirely, and in lieu thereof, to make a remission of taxes to the poor
of double the amount of the present poor-rates, viz. 4 millions annually out
of the surplus taxes. By this measure, the poor will be benefited 2 millions,
and the housekeepers 2 millions.

[ ... ]

I proceed to the mode of relief or distribution, which is,

To pay as a remission of taxes to every poor family, out of the surplus
taxes, and in room of poor-rates, four pounds a year for every child under
fourteen years of age; enjoining the parents of such children to send them
to school, to learn reading, writing and common arithmetic; the ministers
of every parish, of every denomination, to certify jointly to an office, for
that purpose, that this duty is performed.
The amount of this expense will be,
For six hundred and thirty thousand children,
at four pounds per ann. each, - - - - - - £2,520,000
By adopting this method, not only the poverty of the parents will be
relieved, but ignorance will be banished from the rising generation, and the
number of poor will hereafter become less, because their abilities, by the
aid of education, will be greater. Many a youth, with good natural genius,
who is apprenticed to a mechanical trade, such as a carpenter, joiner, mill-
wright, shipwright, blacksmith, &c. is prevented getting forward the whole
of his life, from the want of a little common education when a boy.
I now proceed to the case of the aged.
I divide age into two classes. First, the approach of age beginning at fifty.
Secondly, old age commencing at sixty.
At fifty, though the mental faculties of man are in full vigour, and his
judgement better than at any preceding date, the bodily powers for labo-
rious life are on the decline. He cannot bear the same quantity of fatigue as
at an earlier period. He begins to earn less, and is less capable of enduring
wind and weather; and in those more retired employments where much
sight is required, he fails apace, and sees himself, like an old horse, begin-
ning to be turned adrift.
At sixty his labour ought to be over, at least from direct necessity. It is
painful to see old age working itself to death, in what are called civilized
countries, for daily bread.
 Thomas Paine 11

[ ... ]

[I propose] To pay to every such person of the age of fifty years, and until
he shall arrive at the age of sixty, the sum of six pounds per ann. out of the
surplus taxes; and ten pounds per ann. during life after the age of sixty. The
expense of which will be,
Seventy thousand persons at £6 per ann. 420,000
Seventy thousand ditto at £10 per ann. 700,000
£1,120,000
This support, as already remarked, is not of the nature of a charity, but of
a right. Every person in England, male and female, pays on an average in
taxes, two pounds eight shillings and sixpence per ann. from the day of his
(or her) birth; and, if the expense of collection be added, he pays two
pounds eleven shillings and sixpence; consequently, at the end of fifty years
he has paid one hundred and twenty-eight pounds fifteen shillings; and at
sixty, one hundred and fifty-four pounds ten shillings. Converting, there-
fore, his (or her) individual tax into a tontine, the money he shall receive
after fifty years is but little more than the legal interest of the net money
he has paid; the rest is made up from those whose circumstances do not
require them to draw such support, and the capital in both cases defrays
the expenses of government. It is on this ground that I have extended the
probable claims to one third of the number of aged persons in the nation.
Is it then better that the lives of one hundred and forty thousand aged
persons be rendered comfortable, or that a million a year of public money
be expended on any one individual, and him often of the most worthless
or insignificant character?

[ ... ]
After all the above cases are provided for, there will still be a number of
families who, though not properly of the class of poor, yet find it difficult
to give education to their children; and such children, under such a case,
would be in a worse condition than if their parents were actually poor. A
nation under a well-regulated government should permit none to remain
uninstructed. It is monarchical and aristocratical government only that
requires ignorance for its support.
Suppose then four hundred thousand children to be in this condition,
which is a greater number than ought to be supposed, after the provisions
already made, the method will be,
To allow for each of those children ten shillings a year for the
expense of schooling, for six years each, which will give them six
months schooling each year and half a crown a year for paper and spelling
books.
12 The First Welfare State?

The expense of this will be annually £250,000

There will then remain one hundred and ten thousand pounds.
Notwithstanding the great modes of relief which the best instituted and
best principled government may devise, there will be a number of smaller
cases, which it is good policy as well as beneficence in a nation to con0ider.
Were twenty shilling to be given immediately on the birth of a child, to
every woman who should make the demand, and none will make it whose
circumstances do not require it, it might relieve a great deal of instant
distress.
There are about two hundred thousand births yearly in England, and if
claimed, by one fourth,

The amount would be £50,000

And twenty shillings to every new-married couple who should claim in

like manner. This would not exceed the sum of £20,000.
Also twenty thousand pounds to be appropriated to defray the funeral
expenses of persons, who, travelling for work, may die at a distance from
their friends. By relieving parishes from this charge, the sick stranger will
be better treated.
I shall finish this part of the subject with a plan adapted to the particu-
lar condition of a metropolis, such as London.

[ ... J
First, To erect two or more buildings, or take some already erected,
capable of containing at least six thousand persons, and to have in each of
these places as many kinds of employment as can be contrived, so
that every person who shall come may find something which he or she
can do.
Secondly, To receive all who shall come, without enquiring who or what
they are. The only condition to be, that for so much, or so many hours
work, each person shall receive so many meals of wholesome food, and a
warm lodging, at least as good as a barrack. That a certain portion of what
each person's work shall be worth shall be reserved, and given to him, or
her, on their going away; and that each person shall stay as long, or as short
time, or come as often as he choose, on these conditions.
If each person stayed three months, it would assist by rotation twenty-
four thousand persons annually, though the real number, at all times,
would be but six thousand. By establishing an asylum of this kind, persons
to whom temporary distresses occur would have an opportunity to recruit
themselves and be enabled to look out for better employment.
Allowing that their labour paid but one half the expense of supporting
them, after reserving a portion of their earnings for themselves, the sum of
 Thomas Paine 13

forty thousand pounds additional would defray all other charges for even
a greater number than six thousand.
The fund very properly convertible to this purpose, in addition to the
twenty thousand pounds, remaining of the former fund, will be the produce
of the tax upon coals, so iniquitously and wantonly applied to the support
of the Duke of Richmond. It is horrid that any man, more especially at the
price coals now are, should live on the distresses of a community; and any
government permitting such an abuse deserves to be dismissed. This fund
is said to be about twenty thousand pounds per annum.
I shall now conclude this plan with enumerating the several particulars,
and then proceed to other matters.
The enumeration is as follows:
First, Abolition of two million poor-rates.
Secondly, Provision for two hundred and fifty-two thousand poor
families.
Thirdly, Education for one million and thirty thousand children.
Fourthly, Comfortable provision for one hundred and forty thousand
aged persons.
Fifthly, Donation of twenty shillings each for fifty thousand births.
Sixthly, Donation of twenty shillings each for twenty thousand mar-
nages.
Seventhly, Allowance of twenty thousand pounds for the funeral expenses
of persons travelling for work, and dying at a distance from their friends.
Eighthly, Employment, at all times, for the casual poor in the cities of
London and Westminster.
By the operation of this plan, the poor laws, those instruments of civil
torture, will be superseded, and the wasteful expense of litigation pre-
vented. The hearts of the humane will not be shocked by ragged and
hungry children, and persons of seventy and eighty years of age begging
for bread. The dying poor will not be dragged from place to place to
breathe their last, as a reprisal of parish upon parish. Widows will have a
maintenance for their children, and not be carted away, on the death of
their husbands, like culprits and criminals; and children will no longer be
considered as increasing the distresses of their parents. The haunts of the
wretched will be known, because it will be to their advantage; and the
number of petty crimes, the offspring of distress and poverty, will be less-
ened. The poor, as well as the rich, will then be interested in the support of
government, and the cause and apprehension of riots and tumults will
cease.- Ye who sit in ease, and solace yourselves in plenty, and such there
are in Turkey and Russia, as well as in England, and who say to yourselves,
'Are we not well off', have ye thought of these things? When ye do, ye will
cease to speak and feel for yourselves alone.

[ ... ]
14 The First Welfare State?

Note

Thomas Paine's Rights of Man was first published in London by J: S. Jordan in

1791-2. The same publisher produced several new editions in quick succession. The
extract reproduced here is from the Penguin Classics reprint of 1985 (with intro-
duction by Eric Foner and notes by Henry Collins), pp. 218, 240-48.
'Classical'
The Welfare State in
Historical Perspective
Asa Briggs

[ ... J

A welfare state is a state in which organized power is deliberately used

(through politics and administration) in an effort to modify the play of
market forces in at least three directions- first, by guaranteeing individu-
als and families a minimum income irrespective of the market value of their
work or their property; second, by narrowing the extent of insecurity by
enabling individuals and families to meet certain 'social contingencies' (for
example, sickness, old age and unemployment) which lead otherwise to
individual and family crises; and third, by ensuring that all citizens without
distinction of status or class arc offered the best standards available in rela-
tion to a certain agreed range of social services.
The first and second of these objects may be accomplished, in part at
least, by what used to be called a 'social service state', a state in which com-
munal resources are employed to abate poverty and to assist those in dis-
tress. The third objective, however, goes beyond the aims of a 'social service
state'. It brings in the idea of the 'optimum' rather than the older idea of the
'minimum'. It is concerned not merely with abatement of class differences
or the needs of scheduled groups but with equality of treatment and the
aspirations of citizens as voters with equal shares of electoral power.
Merely to define the phrase welfare state in this way points to a number
of historical considerations, which are the theme of this article. First, the
conception of 'market forces' sets the problems of the welfare state (and of
welfare) within the context of the age of modern political economy. In soci-
eties without market economies, the problem of welfare raises quite different
issues. Within the context of the age of modern political economy an
attempt has been made, and is still being made, to create and maintain a
self-regulating system of markets, including markets in the fictitious
 Asa Briggs 17

commodities, land, money and labour. The multiple motives lying behind
the attempt to control these markets require careful and penetrating analy-
sts.
Second, the conception of 'social contingencies' is strongly influenced
by the experience of industrialism. Sickness, old age and death entail hard-
ships in any kind of society. Ancient systems of law and morality include
precepts designed to diminish these hardships, precepts based, for
example, on the obligations of sons to support their parents or on the
claims of charity, obsequium religionis. Unemployment, however, at least
in the form in which it is thought of as a social contingency, is a product of
industrial societies, and it is unemployment more than any other social
contingency which has determined the shape and timing of modern welfare
legislation. Before the advent of mass unemployment, 'unemployability',
the inability of individuals to secure their livelihood by work, was a key
subject in the protracted debates on poor law policy. The existence of
'chronic unemployment', structural or cyclical, has been a powerful spur
from the nineteenth century onwards leading organized labour groups to
pass from concentration on sectional interests to the consideration of
'social rights' of workers as a class; to philanthropic businessmen wishing
to improve the 'efficiency' and strengthen the 'social justice' of the busi-
ness system; and to politicians and governments anxious to avoid what
seemed to be dangerous political consequences of unemployment. The
memories of chronic unemployment in the inter-war years and the dis-
covery of what it was believed were new techniques of controlling it rein-
forced welfare state policies in many countries after the Second World War.
Third, the idea of using organized power (through politics and adminis-
tration) to determine the pattern of welfare services requires careful his-
torical dating. Why not rely for welfare on the family, the church, 'charity',
'self help', 'mutual aid' (guild, trade union, friendly society) or 'fringe ben-
efits' (business itself)? Whole philosophies of welfare have been founded
on each of these ideas or institutions: often the philosophies and the intere-
sts sustaining them have been inimical to the suggestion that the state itself
should intervene. The possibility of using governmental power has been
related in each country to the balance of economic and social forces; esti-
mates of the proper functions and, true or false, of the available resources
of the state; effective techniques of influence and control, resting on
knowledge (including expert knowledge); and, not least, the prevalence (or
absence) of the conviction that societies can be shaped by conscious poli-
cies designed to eliminate 'abuses' which in earlier generations had been
accepted as 'inevitable' features of the human condition.
Not only does the weighting of each of these factors vary from period to
period, but it also varies from place to place. It was Bentham, scarcely dis-
tinguished for his historical sense, who in distinguishing between agenda
(tasks of government) and sponte acta (unplanned decisions of individuals)
18 The Welfare State in Historical Perspective

wrote that 'in England abundance of useful things are done by individuals
which in other countries are done either by government or not at all ...
[while] in Russia, under Peter the Great, the list of sponte acta being a blank,
that of agenda was proportionately abundant.' 1 This contrast was noted by
many other writers later in the nineteenth century, just as an opposite con-
trast between Britain and the United States was often noted after 1945.
If the question of what constitutes welfare involves detailed examination
of the nature and approach to 'social contingencies', the question of why
the state rather than some other agency becomes the main instrument of
welfare involves very detailed examination of a whole range of historical
circumstances. The answer to the question is complicated, moreover, by
differences of attitude in different countries, to the idea of 'the state' itself.
Given these differences, a translation of basic terms into different lan-
guages raises difficulties which politicians and journalists may well have
obscured. For example, is the term Wohlfahrtsstaat the right translation of
welfare state? British and German approaches to 'the state' have been so
different that they have absorbed the intellectual energy of generations of
political scientists. In the nineteenth century there were somewhat similar
difficulties (although on a smaller scale) surrounding the translation of the
British term 'self help'. A French translator of Samuel Smiles's book of that
title (1859) said that the term 'self help' was 'a peu pres intraduisible'.
Fourth, the 'range of agreed social services' set out in the provisional def-
inition of 'welfare state' is a shifting range. Policies, despite the finalism of
much of the post-1945 criticism, are never fixed for all time. What at various
times was considered to be a proper range shifts, as Dicey showed, and con-
sequently must be examined historically. So too must changing areas of
agreement and conflict. Public health was once a highly controversial issue
in European societies: it still is in some other societies. The 'sanitary idea'
was rightly regarded by the pioneers of public health as an idea which had
large and far-reaching chains of consequences. It marked an assault on 'fate'
which would be bound to lead to other assaults. Public health, in the admin-
istrative sphere of drains, sewers and basic 'environmental' services, has been
taken outside the politics of conflict in Britain and other places, but personal
health services remain controversial. There is controversy, very bitter indeed
in the United States, not only about the range of services and who shall enjoy
them but about the means of providing them. The choice of means influ-
ences all welfare state history. Welfare states can and do employ a remark-
able variety of instruments, such as social insurance, direct provision in cash
or in kind, subsidy, partnership with other agencies (including private busi-
ness agencies) and action through local authorities. In health policy alone,
although medical knowledge is the same in all countries of the West and the
same illnesses are likely to be treated in much the same kind of way, there is
a remarkable diversity of procedures and institutions even in countries
which make extensive public provision for personal health services.
 Asa Briggs 19

Fifth, there are important historical considerations to take into account

in tracing the relationship between the three different directions of public
intervention in the free (or partially free) market. The demand for
'minimum standards' can be related to a particular set of cumulative pres-
sures. Long before the Webbs urged the need in 1909 for government
action to secure 'an enforced minimum of civilized life', the case for par-
ticular minima had been powerfully advocated. Yet the idea of basing social
policy as a whole on a public commitment to 'minimum' standards did not
become practical politics in Britain until the so-called 'Beveridge revolu-
tion' of the Second World War. The third direction of 'welfare' policy, and
the distinctive direction of the welfare state, can be understood only in
terms of older logic and more recent history. The idea of separating welfare
policy from 'subsistence' standards (the old minima, however measured)
and relating it to 'acceptable' standards ('usual work income'), provides an
indication of the extent to which 'primary poverty' has been reduced in
'affluent societies'. It may be related, however, to older ideas of equality,
some of which would lead direct not to state intervention in the market but
to the elimination of the market altogether, at least as a force influencing
human relationships. A consideration of the contemporary debate is more
rewarding if it is grounded in history....

German experience in the nineteenth century was in certain important

respects different from that of Britain. If before 1900 factory legislation
was more advanced in Britain than in any other European country,
Germany had established a 'lead' in social security legislation which the
British Liberal governments of 1906 to 1914 tried to wipe out. Bismarck's
reforms of the 1880s -laws of 1882, 1884 and 1889 introducing compul-
sory insurance against sickness, accidents, old age and invalidity- attracted
immense interest in other European countries. Just as British factory leg-
islation was copied overseas, so German social insurance stimulated
foreign imitation. Denmark, for instance, copied all three German pension
schemes between 1891 and 1898, and Belgium between 1894 and 1903.
Switzerland by a constitutional amendment in 1890 empowered the federal
government to organize a system of national insurance. In Britain itself a
friendly observer noted in 1890 that Bismarck had 'discovered where the
roots of social evil lie. He has declared in words that burn that it is the duty
of the state to give heed, above all, to the welfare of its weaker members' .2
More recently Bismarck's social policy has been described by more than
one writer as the creation of a welfare state. 3 The term is very misleading.
Bismarck's legislation rested on a basic conservatism which Oastler himself
would have appreciated and was sustained by a bureaucracy which had no
counterpart in Britain except perhaps in Chadwick's imagination. The
Prussian idea and history of the state and the British idea and history of the
state diverged long before the 1880s, and it is not fanciful to attribute some
20 The Welfare State in Historical Perspective

of the divergences to the presence or absence a century before of 'cameral-

ism', the idea of the systematic application to government of administra-
tive routines.
Equally important, the history of political economy in the two countries
diverged just as markedly. The development of a school of historical eco-
nomics provided a powerful academic reinforcement in Germany for
Sozialpolitik. The refusal of historical economists to 'isolate' economic phe-
nomena, including 'economic man', their distrust of 'laws of political
economy' covering all ages and all societies, their critique of the motives and
institutions of contemporary capitalism and their underlying belief in a
'social order' distinguished them sharply from classical political economists
in Britain. Their influence was considerable enough for Schmoller
(1838-1917), the most important figure in the history of the school, to argue
forcefully that no Smithian was fit to occupy an academic chair in Germany. 4
Even among the 'precursors' of the historical school and among econo-
mists who stayed aloof from Schmoller and his circle, there was a power-
ful tradition linking social reform with conservative views of society. 5
J. K. Rodbertus (1805-75) was a conservative monarchist who combined
dislike of the 'class struggle' and belief in state socialism. Adolf Wagner
(1835-1917), who stayed aloof from Schmoller and admired Ricardo as the
outstanding economic 'theorist', acknowledged his debt to Rodbertus
when he gave a warm welcome to Bismarck's legislation.
According to Wagner Germany had entered a 'new social period', char-
acterized by new economic ideas, new political views and new social pro-
grammes. National economy (Volkswirtschaft) had to be converted into
state economy (Staatswirtschaft): the foundation of the new economy
would have to be welfare. The idea of regarding 'labour power' as a com-
modity and wages as its price was 'inhuman' as well as 'unchristian'.
Wagner proposed a number of practical measures, some of which went
further than those introduced by Bismarck. Schmoller, too, advocated
policies aiming at 'the re-establishment of a friendly relation between
social classes, the removal or modification of injustice, a nearer approach
to the principles of distributive justice, with the introduction of a social
legislation which promotes progress and guarantees the moral and mater-
ial elevation of the lower and middle classes.' 6
Bismarck, for whom the idea of insurance had a particular fascination
both in his domestic and foreign policies, did not envisage a social policy
which would go anywhere near as far as some of the 'socialists of the chair'
would have wished. He objected, for example, to the limitation by law of
the hours of women and children in factories and he was at least as stub-
born as any mill-owner of the Manchester School when 'theorists' talked
of state officials interfering with private concerns in agriculture or indus-
try. He also disliked extensions of direct taxation. He wanted the state,
however, to be actively involved in the financing and administering of the
 Asa Briggs 21

insurance schemes which he proposed and he defended the introduction of

these schemes - against both right-wing and left-wing opposition - in
terms of 'the positive advancement of the welfare of the working classes'.
'The state', it was laid down in the preamble to the first and unsuccessful
bill of 1881, 'is not merely a necessary but a beneficent institution.'
Bismarck disagreed with Theodor Lohmann, who drafted his first social
insurance legislation, about whether the state should contribute directly to
the costs of insurance. Bismarck got his way that it should, but the polit-
ical parties objected and his first attempts at legislation foundered. It was
a measure of his recognition of political realities that the idea of state con-
tributions was dropped in 1884 when his accident insurance bill was intro-
duced. The law of 1889, providing for disability and old age pensions, did
entail a flat-rate contribution from the imperial treasury of fifty marks for
each person receiving a pension, but this was a small element in the total
cost and fell far short of the amount Bismarck had originally envisaged.
Many of Bismarck's critics accused him, not without justification, of
seeking through his legislation to make German workers 'depend' upon
the state. The same charges have been made against the initiators of all
welfare (and earlier, of poor law) policy often without justification, yet it
was Bismarck himself who drew a revealing distinction between the
degrees of obedience (or subservience) of private servants and servants at
court. The latter would 'put up with much more' than the former because
they had pensions to look forward to. Welfare soothed the spirit, or
perhaps tamed it. Bismarck's deliberate invocation of 'subservience' is at
the opposite end of the scale from the socialist invocation of 'equality' as
the goal of the welfare state. It is brutally simple, too, when compared with
sophisticated liberal attempts to define the conditions in which liberty and
equality may be made to complement each other/ The invocation was, of
course, bound up with conscious political calculation. Bismarck was
anxious to make German social democracy less attractive to workingmen.
He feared 'class war' and wanted to postpone it as long as possible. His
talks with Lassalle in 1863 had ranged over questions of this kind, 8 and in
1884 he argued explicitly that if the state would only 'show a little more
Christian solicitude for the workingman', then the social democrats would
'sound their siren song in vain'. 'The thronging to them will cease as soon
as workingmen see that the government and legislative bodies are earnestly
concerned for their welfare. ' 9 It has been suggested that Bismarck was
influenced by Napoleon Ill's successful handling of social policy as an
instrument of politics. He certainly spent time seeking an 'alternative to
socialism' and it was this aspect of his policy which gave what he did con-
temporary controversial significance throughout Europe.
His policy also provided a definite alternative to liberalism. During the
last years of his life when he was prepared to contemplate insurance
against unemployment and when he talked of the 'right to work' as
22 The Welfare State in Historical Perspective

enthusiastically as any Chartist, he was reflecting that sharp reaction

against economic liberalism which could be discerned, in different forms,
in almost every country in Europe. Disraeli's social policy in,his ministry
of 1874-80 had somewhat similar features. It also had the added interest of
appearing to realize hopes first formulated by Disraeli in the age of Oastler
and the Chartists. In 1874 also a royalist and clerical majority in the French
National Assembly carried a factory act, limiting hours of work of chil-
dren below the age of twelve, which went further than a law of 1848 on the
same subject. A later and more comprehensive act of 1892 was the work of
Conservative Republicans. The nineteenth century closed with a British
Moneylenders Act which, Professor Clapham has argued, in effect revived
the medieval law of usury, the last remnants of which had been swept away,
it was thought for ever, in 1854. 10
Medieval attitudes to welfare were echoed most strongly in Christian
apologetics. Papal encyclicals, notably Rerum Novarum (1891), were not
only manifestos in crusades against liberalism or socialism but were also
important documents in the evolution of Sozialpolitik. De Mun, Von
Ketteler and Von Vogelsang were writers who advocated particular or
general welfare policies: so did Heinrich Pesch, who has been singled out
for special treatment by Schumpeter. Among Protestants also there was
renewed call for a 'social gospel'. It is not without interest that Lohmann,
who had advised Bismarck and went on to advise William II in the formu-
lation of the far-reaching Labour Code of 1891, was a deeply religious man,
the son of a Westphalian Lutheran pastor. Canon W. L. Blackley
(1830-1902), the pioneer of old-age pensions schemes not only in Britain
but in other parts of the world and the founder of the National Providence
League, was an honorary canon of Winchester Cathedral. On the Liberal
side- and there was a close association in Britain between religious non-
conformity and political liberalism- Seebohm Rowntree (1871-1954 ), one
of the first systematic investigators of the facts of poverty, was a Quaker.
The whole attack on the limitations of the poor law was guided, though
not exclusively, by men of strong religious principles.

The complexity of the nineteenth-century background contrasts at first

sight with the simplicity of the twentieth-century story. For a tangle of ten-
dencies we have a 'trend', a trend culminating in greater 'order' and simpli-
fication. In fact, however, the twentieth-century story has its own
complexities, which are now in the process of being unravelled. Professor
Titmuss has shown, for instance, that Lloyd George's national health insur-
ance legislation of 1911, a landmark in 'trend' legislation, was the culmina-
tion of a long and confused period in which doctors had been engaged in a
'Hobbesian struggle for independence from the power and authority exer-
cised over their lives, their work and their professional values by voluntary
associations and private enterprise.' He has maintained that the legislation
 Asa Briggs 23

of 1911 can only be understood if it is related, as so much else in the twen-

tieth century must be related, to the history of hidden pressures from estab-
lished interests and a sectional demand for an 'enlargement of professional
freedom' . 11 Many of the complexities of twentieth-century history cer-
tainly lie buried in the records of the network of private concerns and of
professional groups which came into existence in the nineteenth century.
There can be no adequate historical explanation which concerns itself in
large terms with the state alone. Just as the administration of welfare is com-
plicated in practice and can be understood only in detail, so the outline of
welfare state legislation only becomes fully intelligible when it ceases to be
an outline, and when it looks beyond parliamentary legislation to such
crucial twentieth-century relationships as those between governments and
pressure groups and 'experts' and the 'public'.
Yet there are five factors in twentieth-century welfare history (other
than warfare, one of the most powerful of factors) which are beyond
dispute and dominant enough to need little detailed research. They are,
first, the basic transformation in the attitude towards poverty, which made
the nineteenth-century poor law no longer practicable in democratic soci-
eties; second, the detailed investigation of the 'social contingencies' which
directed attention to the need for particular social policies; third, the close
association between unemployment and welfare policy; fourth, the devel-
opment within market capitalism itself of welfare philosophies and prac-
tices; and fifth, the influence of working-class pressures on the content and
tone of welfare legislation.
The first and second of these five factors can scarcely be studied in iso-
lation. The basis of the nineteenth-century British Poor Law of 1834 was
economic logic. That logic was strained when empirical sociologists, like
Charles Booth (1840-1916) and Rowntree, showed that a large number of
poor people were poor through no fault of their own but because of ten-
dencies within the market system. They pitted statistics against logic by
attempting to count how many people were living in poverty and by sur-
veying the various forms that the poverty assumed. 12 Prior to Booth's
'grand inquest', Beatrice Webb wrote, 'neither the individualist nor the
socialist could state with any approach to accuracy what exactly was the
condition of the people of England'. 13 Once the results of the 'inquest' had
been published 'the net effect was to give an entirely fresh impetus to the
general adoption of the policy of securing to every individual, as the very
basis of his life and work, a prescribed natural minimum of the requisites
for efficient parenthood and citizenship.'
Booth's thinking about economics was far less radical than his thinking
about welfare, but Rowntree, who drew a neat distinction between
'primary' and 'secondary' poverty, the former being beyond the control of
the wage-earner, went on to advocate specific welfare policies, ranging
from old-age pensions to family allowances, public-provided housing to
24 The Welfare State in Historical Perspective

supervised welfare conditions in factories. The policies which he urged at

various stages of his long life were, indeed, the main constituent policies of
the welfare state. 14 Like the welfare state, however, Rowntree stopped
short of socialism. He separated questions of welfare from questions of
economic power, and remained throughout his life a 'new Liberal'. The
main tenet of his liberalism was that the community could not afford the
'waste', individual and social, which was implied in an industrial society
divided 'naturally' into 'rich' and 'very poor'. Poverty was as much of a
social problem as 'pauperism'. The roots of poverty were to be found not
in individual irresponsibility or incapacity but in social maladjustment.
Poverty, in short, was not the fault of the poor: it was the fault of society.
Quite apart from 'socialist pressure', society had to do something about
poverty once it was given facts about its extent, its incidence (Rowntree
drew attention to the cycle of poverty in families), its ramifications and its
consequences. All facts were grist to the mill. They included facts not only
about wages but about nutrition: subsistence levels could only be mea-
sured when nutritional criteria were taken into account.
Sharp turns of thought about poverty were by no means confined
to people in Britain. There were signs of fundamental rethinking, allied
[ ... ] to 'feeling', 15 both in Europe and the United States at the end of the
nineteenth and the beginning of the twentieth century. 16 The survey
method, which Booth and Rowntree depended upon, was capable of
general applicabilityY The limitations of systematic 'charity' were noted
at least as generally as the limitations of unsystematic charity had been at
the beginning of the industrial age. It is no coincidence that in Britain and
Sweden, two countries with distinct welfare histories, there was keen
debate about the Poor Law at almost exactly the same time. In Sweden the
Poor Relief Order of 1871, with its checks on poor relief, was criticized by
the Swedish Poor Relief Association which was formed at the first General
Swedish Poor Law Congress in 1906. A year later the government
appointed a committee to draw up proposals for fresh legislation govern-
ing poor relief and the treatment of vagrants. In Britain the Royal
Commission on the Poor Laws, which was appointed in 1905 and reported
in 1909, covered almost all topics in social policy. The issues were clearly
stated and both the social contingencies and the necessary policies of social
control were carefully examined. Although new direct legislation was slow
to come in both countries, there was much indirect legislation and in
both countries there were demands for what Beatrice Webb called 'an
enforced minimum of civilized life'. 18
The main threat to that minimum in the later twentieth century came
from 'mass involuntary unemployment'. This, of course, was a world phe-
nomenon which strained poor law and social service systems in most
countries and presented a threat- or a challenge- to politicians and admin-
istrators. In Britain, which was the first country to introduce compulsory
 Asa Briggs 25

unemployment insurance (1911; greatly extended in 1920), the system of

relief broke down under the stresses of the 1930s. Insurance benefits,
linked to contributions, were stringently restricted, and while tussles about
the 'means test' were leading to extreme differences of outlook between
socialists and their opponents, an Unemployment Assistance Board,
founded in 1934, was providing a second-line income maintenance service,
centrally administered. In Europe there was an extension of unemploy-
ment aid schemes, whether by insurance (the Swedes, for example, intro-
duced state-subsidized unemployment insurance in 1934), 'doles' or in
certain cases 'positive' state-run schemes of 'public works'. In the United
States and Canada, where there had been entrenched resistance to govern-
ment intervention in welfare provision, new legislation was passed, 19 while
in New Zealand, which had long lost its reputation as a pioneer of welfare,
there was a remarkable bout of state intervention after the return of a
Labour government to power in 1935. The Social Security Act of 1938 con-
tained a list of health services and pensions benefits which, while resting
on previous legislation, were everywhere hailed as a bold and daring exper-
iment. The Minister of Finance anticipated later welfare legislators in other
countries by arguing unequivocally that 'to suggest the inevitability of
slumps and booms, associated as they are with affluence for a limited
number during a period, and followed by unemployment, destitution,
hardship and privation for the masses, is to deny all conscious progressive
purpose.' 20 According to the International Labor Office, the 1938 New
Zealand Act 'has, more than any other law, determined the practical
meaning of social security, and so has deeply influenced the course of leg-
islation in other countries' .21
Twentieth-century social security legislation raises many interesting
general issues- the relevance of the insurance principle, for example, the
relationship between 'negative' social policy and 'positive' economic
policy, and, underlying all else, the nature and extent of the responsibilities
of the state. Insurance principles, actuarially unsound though they may be
and inadequate though they have proved as instruments of finance at
moments of crisis, have been historically significant. They removed the
stigma of pauperism from a social service, reconciled 'voluntary' and
'compulsory' approaches to provision, and facilitated 'public approval' of
state expenditures which otherwise would have been challenged. They
thus served as a link between old ways of thinking ('self help' and 'mutual
help') and new. 'Positive' economic policy was in the first instance, as in
Roosevelt's America, the child of improvisation: its systematic justification
had to await revolutions in political economy (Keynes and after) which
accompanied shifts in social power. The difference in tone and content
between two books by William Beveridge- his Unemployment (1909) and
his Full Employment in a Free Society (1944)- is one of the best indications
of the change in the world of ideas between the early and middle periods
26 The Welfare State in Historical Perspective

of the twentieth century. 'Beveridgism', an important British phenomenon

during the Second World War, had sufficient popular appeal to show that
the world of ideas and the world of practical politics were ,no~ very far
apart. For the intellectuals and for the public the magnification of govern-
mental power - and the enormous increase in government expenditure
financed from taxation - were taken for granted.
The fourth and fifth factors are also related to each other. In all advanced
industrial countries in the twentieth century there has been a movement
towards welfare in industry - 'industrial betterment' it was originally
called- which has been accompanied by the emergence of philosophies of
'human relations', 'welfare management' and industrial and labour psy-
chology.22 The movement has to be explained in terms of both economics
and politics. A 'managerial revolution', limited though it may have been in
its economic effects, has accelerated the tendencies making for 'welfare
capitalism'. The need to find acceptable incentives for workers, to avoid
labour disputes and to secure continuous production, to raise output in
phases of technical change and (more recently) to hold labour 'permis-
sively' in a period of full employment has often driven where 'human rela-
tions' philosophies have failed to inspire. Welfare, a word which was often
resented by workers, when it was applied within the structure of the firm,
was, indeed, used in a business context before it began to be applied to a
new kind of state. Within state schemes of welfare employers have made,
and are expected to make, sizeable contributions. In France and Italy, in
particular, obligatory social charges as a percentage of assessable wages
constituted the main source of welfare expenditure. 23 In the United States
business rather than the state was, and is, expected directly to provide a
network of welfare services. As in all such situations, the provision of
welfare varies immensely from one firm (giant businesses are at one end of
the scale) to another.

In contrast to these countries, such as Great Britain, which appear to regard

government (for reasons which have been stated above) merely as the most
effective of several possible institutions for the administration of income secu-
rity programs or the provision of services, [ ... ] a society like the United
States that distrusts its government is likely to seek to organize its social secu-
rity services in such a way as to keep government activity to a minimum. 24

United States experience, in contrast to the experience described in other

countries, shows that this likelihood has been converted into fact.
It is not accidental that the labour movement in the United States has
showed little interest in socialism and that its leaders have chosen of their
own volition to bargain for 'fringe benefits' at the level of the plant. In
most European countries, particularly in Britain and in Scandinavia, there
has been a tendency for working-class pressures to lead to greater state
 Asa Briggs 27

intervention. In Britain nineteenth-century patterns of 'mutual depen-

dence' through 'voluntary action', which impressed so many observers
from Tocqueville onwards, have become less dominant, except in the field
of industrial relations where they have very tenaciously survived. 25
As we have seen, the demand for state action has been related to the
rights of citizenship, to equality as well as to security. During the critical
period between the two World Wars, when economic and social conditions
were very difficult, welfare measures were demanded and provided 'piece-
meal' with varying conditions of regulation and administration, 'a fright-
ening complexity of eligibility and benefit according to individual
circumstances, local boundaries, degrees of need and so forth'. 26 The
Second World War, which sharpened the sense of 'democracy', led to
demands both for 'tidying up' and for 'comprehensiveness'. It encouraged
the move from 'minima' to 'optima', at least in relation to certain specified
services, and it made all residual paternalisms seem utterly inadequate and
increasingly archaic. It was in the light of changes in working-class life
within a more 'equal community' that postwar writers noted the extent to
which the social services of the earlier part of the century had been shaped
by assumptions about the nature of man, 'founded on outer rather than on
inner observation', on the 'norms of behavior expected by one class from
another'. 27 This period of criticism has already ended. The assumptions
which shaped the welfare state have themselves been criticized, 28 and
radical political slogans have concentrated more and more on differences
of income between 'mature' and 'underdeveloped' countries rather than on
differences within 'mature' countries themselves.
It may well be that in a world setting the five twentieth-century factors
discussed in this article will be considered less important than other factors
-the total size of the national income in different countries, for example, and
the share of that income necessary for industrial (as, or when, distinct from
social) investment, or even, on a different plane, the nature of family struc-
ture. Is not the making of the industrial welfare state in part at least the con-
comitant of the decline of the large, extended 'welfare family'? How far has
the pressure of women (or just the presence of women voters) in industrial
societies encouraged the formulation of welfare objectives? The historian
does well to leave such large questions to be answered rather than to suggest
that all or even the most important part of the truth is already known.

Notes

From C. Schottland, ed., The Welfare State, New York, Harper and Row, 1969,
pp. 29-45.
J. Bentham, Works, ed. J. Bowring, 1843, vol. III, p. 35. Cf. J. M. Keynes's view
of the 'agenda' of the state in The End of Laissez Faire (1926).
2 W. H. Dawson, Bismarck and State Socialism (1890), p. ix.
28 The Welfare State in Historical Perspective

3 S. B. Fay, 'Bismarck's Welfare State', Current History, vol. XVIII (1950).

4 J. A. Schumpeter, History of Economic Analysis (1954), p. 765.
5 The pre-history of this approach leads back to Sismondi who. has important
links with Mill and the English utilitarians. He is a seminal figure in the cri-
tique of industrialism and the demand for welfare legislation.
6 A. Wagner, Rede uber die soziale Frage (1872), pp. 8-9. G. von Schmoller,
Ober einige Grundfragen des Rechts und der Volkswirtschaft (1875), p. 92.
7 Por the background of these attempts, seeM. Ginsberg, 'The Growth of Social
Responsibility', in M. Ginsberg, ed., Law and Opinion in England in the
Twentieth Century (1959), pp. 3-26.
8 See G. Mayer, Bismarck und Lassalle (1927).
9 Dawson, op. cit., p. 35. This remark was made in 1884. Five years earlier the
emperor, referring to the anti-socialist law of 1878, had said, 'a remedy cannot
alone be sought in the repression of socialistic excesses; there must be simul-
taneously the positive advancement of the welfare of the working classes'
(quoted ibid., p. 11 0).
10 ]. H. Clapham, An Economic History of Modern Britain, vol. III (1938), p. 445.
11 R. M. Titmuss, 'Health', in Ginsberg, op. cit., p. 308. Cf. p. 313: 'The funda-
mental issue of 1911 was not [ ... ] between individualism and collectivism,
between contract and status; but between different forms of collectivism, dif-
ferent degrees of freedom; open or concealed power.'
12 C. Booth, Life and Labour of the People in London, 17 vols (1892-1903);
B. S. Rowntree, Poverty: A Study of Town Life (1901 ).
13 B. Webb, My Apprenticeship (1926), p. 239.
14 For Booth, see T. S. and M. B. Simey, Charles Booth, Social Scientist (1960); for
Rowntree, see A. Briggs, Seebohm Rowntree (1961 ). See also B. S. Rowntree
and G. R. Lavers, Poverty and the Welfare State (1951).
15 'In intensity of feeling', Booth wrote, 'and not in statistics, lies the power to
move the world. But by statistics must this power be guided if it would move
the world aright.' Life and Labour, Final Volume, Notes on Soa'al Influences
and Conclusion (1903), p. 178.
16 See inter alia C. L. Mowat, The Charity Organisation Society; K. De Schwei-
nitz, England's Road to Social Security (1943); C. W. Pitkin, Social Politics and
Modern Democracies, 2 vols (1931 ), vol. II being concerned with France; R. H.
Bremner, From the Depths: The Discovery of Poverty in the United States (1956).
17 SeeM. Abrams, Social Surveys and Social Action (1951 ); P. V. Young, Scientific
Social Surveys and Research (1950); D. C. Caradog Jones, Social Surveys
(1955).
18 The British controversy is well described in U. Cormack, 'The Welfare State',
Loch Memorial Lecture (1953 ). For Sweden, see The Royal Social Board,
Social Work and Legislation in Sweden (1938).
19 J. C. Brown, Public Relief 1929-39 (1940); E. A. Williams, Federal Aid for
Relief (1939); P. H. Douglas, S'ocial Security in the United States (1939 edn).
20 Quoted in W. K. Hancock, Survey of British Commonwealth Affairs, vol. II
(1940), p. 275.
21 International Labor Office, Social Security in New Zealand (1949), p. 111.
22 See A. Briggs, 'The Social Background', in H. Clegg and A. Flanders, eds,
Industrial Relations in Great Britain (1955); L. Urwick and E. F. L. Brech, The
Human Factor in Management 1795-1943 (1944); E. D. Proud, Welfare Work,
Employers' Experiments for Improving Working Conditions in Factories
(1916); E. T. Kelly, ed., Welfare Work in Industry (1925); PEP, 'The Human
Factor in Industry', Planning (March 1948).
 Asa Briggs 29

23 PEP, 'free Trade and Security', Planning Quly 1957); 'A Comparative
Analysis of the Cost of Social Security', in International Labour Review
(1953).
24 E. M. Burns, Social Security and Public Policy (1956), p. 274.
25 For the nature of the nineteenth-century pattern, see J. M. Baernreither,
English Associations of WorkingMen (1893 ). For industrial relations, see Clegg
and Flanders, op. cit.
26 R. M. Titmuss, Essays on the Welfare State (1958), pp. 21-2.
27 Ibid., p. 19.
28 See A. Peacock, 'The Welfare Society', Unservile State Papers (1960); R. M.
Titmuss, 'The Irresponsible Society', Fabian Tracts (1960); J. Saville, 'The
Welfare State', The New Reasoner, no. 3 (1957).
Citizenship and Social Class
T. H. Marshall

[ ... J
I propose to divide citizenship into three parts. [ ... ] I shall call these three
parts, or elements, civil, political and social. The civil element is composed
of the rights necessary for individual freedom - liberty of the person,
freedom of speech, thought and faith, the right to own property and to
conclude valid contracts, and the right to justice. The last is of a different
order from the others, because it is the right to defend and assert all one's
rights on terms of equality with others and by due process of law. This
shows us that the institutions most directly associated with civil rights are
the courts of justice. By the political element I mean the right to participate
in the exercise of political power, as a member of a body invested with
political authority or as an elector of the members of such a body. The cor-
responding institutions are parliament and councils of local government.
By the social element I mean the whole range, from the right to a modicum
of economic welfare and security to the right to share to the full in the
social heritage and to live the life of a civilized being according to the stan-
dards prevailing in the society. The institutions most closely connected
with it are the educational system and the social services. [ ... J
By 1832 when political rights made their first infantile attempt to walk,
civil rights had come to man's estate and bore, in most essentials, the
appearance that they have today. 1 'The specific work of the earlier
Hanoverian epoch', writes Trevelyan, 'was the establishment of the rule of
law; and that law, with all its grave faults, was at least a law of freedom.
On that solid foundation all our subsequent reforms were built.' This
eighteenth-century achievement, interrupted by the French Revolution
and completed after it, was in large measure the work of the courts, both
in their daily practice and also in a series of famous cases in some of which
 T H. Marshall 31

they were fighting against parliament in defence of individual liberty. The

most celebrated actor in this drama was, I suppose, John Wilkes, and,
although we may deplore the absence in him of those noble and saintly
qualities which we should like to find in our national heroes, we cannot
complain if the cause of liberty is sometimes championed by a libertine.
In the economic field the basic civil right is the right to work, that is to
say the right to follow the occupation of one's choice in the place of one's
choice, subject only to legitimate demands for preliminary technical train-
ing. This right had been denied by both statute and custom; on the one
hand by the Elizabethan Statute of Artificers, which confined certain occu-
pations to certain social classes, and on the other by local regulations
reserving employment in a town to its own members and by the use of
apprenticeship as an instrument of exclusion rather than of recruitment.
The recognition of the right involved the formal acceptance of a funda-
mental change of attitude. The old assumption that local and group
monopolies were in the public interest, because 'trade and traffic cannot be
maintained or increased without order and government', was replaced by
the new assumption that such restrictions were an offence against the
liberty of the subject and a menace to the prosperity of the nation. [ ... ]
By the beginning of the nineteenth century this principle of individual
economic freedom was accepted as axiomatic. You are probably familiar
with the passage quoted by the Webbs from the report of the Select
Committee of 1811, which states that:

no interference of the legislature with the freedom of trade, or with the perfect
liberty of every individual to dispose of his time and of his labour in the way
and on the terms which he may judge most conducive to his own interest, can
take place without violating general principles of the first importance to the
prosperity and happiness of the community. 2 [ ••• J

The story of civil rights in their formative period is one of the gradual add-
ition of new rights to a status that already existed and was held to apper-
tain to all adult members of the community- or perhaps one should say to
all male members, since the status of women, or at least of married women,
was in some important respects peculiar. This democratic, or universal,
character of the status arose naturally from the fact that it was essentially
the status of freedom, and in seventeenth-century England all men were
free. Servile status, or villeinage by blood, had lingered on as a patent
anachronism in the days of Elizabeth, but vanished soon afterwards. This
change from servile to free labour has been described by Professor Tawney
as 'a high landmark in the development both of economic and political
society', and as 'the final triumph of the common law' in regions from
which it had been excluded for four centuries. Henceforth the English
peasant 'is a member of a society in which there is, nominally at least, one
32 Citizenship and Social Class

law for all men'. 3 The liberty which his predecessors had won by fleeing
into the free towns had become his by right. In the towns the terms
'freedom' and 'citizenship' were interchangeable. When freegom became
universal, citizenship grew from a local into a national institution.
The story of political rights is different both in time and in character. The
formative period began, as I have said, in the early nineteenth ce~1tury,
when the civil rights attached to the status of freedom had already acquired
sufficient substance to justify us in speaking of a general status of citizen-
ship. And, when it began, it consisted, not in the creation of new rights to
enrich a status already enjoyed by all, but in the granting of old rights to
new sections of the population. [ ... ]
It is clear that, if we maintain that in the nineteenth century citizenship
in the form of civil rights was universal, the political franchise was not one
of the rights of citizenship. It was the privilege of a limited economic class,
whose limits were extended by each successive Reform Act. [ ... ]
It was, as we shall see, appropriate that nineteenth-century capitalist
society should treat political rights as a secondary product of civil rights.
It was equally appropriate that the twentieth century should abandon this
position and attach political rights directly and independently to citizen-
ship as such. This vital change of principle was put into effect when the Act
of 1918, by adopting manhood suffrage, shifted the basis of political rights
from economic substance to personal status. I say 'manhood' deliberately
in order to emphasize the great significance of this reform quite apart from
the second, and no less important, reform introduced at the same time -
namely the enfranchisement of women. [ ... ]
The original source of social rights was membership of local communi-
ties and functional associations. This source was supplemented and pro-
gressively replaced by a Poor Law and a system of wage regulation which
were nationally conceived and locally administered. [ ... ]
As the pattern of the old order dissolved under the blows of a competi-
tive economy, and the plan disintegrated, the Poor Law was left high and
dry as an isolated survival from which the idea of social rights was gradu-
ally drained away. But at the very end of the eighteenth century there
occurred a final struggle between the old and the new, between the planned
(or patterned) society and the competitive economy. And in this battle cit-
izenship was divided against itself; social rights sided with the old and civil
with the new. [ ... ]
In this brief episode of our history we see the Poor Law as the aggres-
sive champion of the social rights of citizenship. In the succeeding phase
we find the attacker driven back far behind his original position. By the Act
of 1834 the Poor Law renounced all claim to trespass on the territory of
the wages system, or to interfere with the forces of the free market. It
offered relief only to those who, through age or sickness, were incapable
of continuing the battle, and to those other weaklings who gave up the
 T. H. Marshall 33

struggle, admitted defeat, and cried for mercy. The tentative move towards
the concept of social security was reversed. But more than that, the
minimal social rights that remained were detached from the status of citi-
zenship. The Poor Law treated the claims of the poor, not as an integral
part of the rights of the citizen, but as an alternative to them - as claims
which could be met only if the claimants ceased to be citizens in any true
sense of the word. For paupers forfeited in practice the civil right of per-
sonal liberty, by internment in the workhouse, and they forfeited by law
any political rights they might possess. This disability of defranchisement
remained in being until1918; and the significance of its final removal has,
perhaps, not been fully appreciated. The stigma which clung to poor relief
expressed the deep feelings of a people who understood that those who
accepted relief must cross the road that separated the community of citi-
zens from the outcast company of the destitute.
The Poor Law is not an isolated example of this divorce of social rights
from the status of citizenship. The early Factory Acts show the same ten-
dency. Although in fact they led to an improvement of working conditions
and a reduction of working hours to the benefit of all employed in the indus-
tries to which they applied, they meticulously refrained from giving this
protection directly to the adult male- the citizen par excellence. And they
did so out of respect for his status as a citizen, on the grounds that enforced
protective measures curtailed the civil right to conclude a free contract of
employment. Protection was confined to women and children, and champi-
ons of women's rights were quick to detect the implied insult. Women were
protected because they were not citizens. If they wished to enjoy full and
responsible citizenship, they must forgo protection. By the end of the nine-
teenth century such arguments had become obsolete, and the factory code
had become one of the pillars in the edifice of social rights. [ ... ]
By the end of the nineteenth century elementary education was not only
free, it was compulsory. This signal departure from laissez-faire could, of
course, be justified on the grounds that free choice is a right only for mature
minds, that children are naturally subject to discipline, and that parents
cannot be trusted to do what is in the best interests of their children. But
the principle goes deeper than that. We have here a personal right combined
with a public duty to exercise the right. Is the public duty imposed merely
for the benefit of the individual- because children cannot fully appreciate
their own interests and parents may be unfit to enlighten them? I hardly
think that this can be an adequate explanation. It was increasingly recog-
nized, as the nineteenth century wore on, that political democracy needed
an educated electorate, and that scientific manufacture needed educated
workers and technicians. The duty to improve and civilize oneself is there-
fore a social duty, and not merely a personal one, because the social health
of a society depends upon the civilization of its members. And a commu-
nity that enforces this duty has begun to realize that its culture is an organic
34 Citizenship and Social Class
unity and its civilization a national heritage. It follows that the growth of
public elementary education during the nineteenth century was the first
decisive step on the road to the re-establishment of the sociaJ rights of citi-
zenship in the twentieth. [ ... ]

Citizenship is a status bestowed on those who are full members of a com-

munity. All who possess the status arc equal with respect to the rights and
duties with which the status is endowed. There is no universal principle
that determines what those rights and duties shall be, but societies in which
citizenship is a developing institution create an image of an ideal citizen-
ship against which achievement can be measured and towards which aspir-
ation can be directed. The urge forward along the path thus plotted is an
urge towards a fuller measure of equality, an enrichment of the stuff of
which the status is made and an increase in the number of those on whom
the status is bestowed. Social class, on the other hand, is a system of
inequality. And it too, like citizenship, can be based on a set of ideals,
beliefs and values. It is therefore reasonable to expect that the impact of
citizenship on social class should take the form of a conflict between
opposing principles. If I am right in my contention that citizenship has
been a developing institution in England at least since the latter part of the
seventeenth century, then it is clear that its growth coincides with the rise
of capitalism, which is a system, not of equality, but of inequality. Here is
something that needs explaining. How is it that these two opposing prin-
ciples could grow and flourish side by side in the same soil? What made it
possible for them to be reconciled with one another and to become, for a
time at least, allies instead of antagonists? The question is a pertinent one,
for it is clear that, in the twentieth century, citizenship and the capitalist
class system have been at war. [ ... ]
It is true that class still functions. Social inequality is regarded as neces-
sary and purposeful. It provides the incentive to effort and designs the dis-
tribution of power. But there is no overall pattern of inequality, in which
an appropriate value is attached, a priori, to each social level. Inequality
therefore, though necessary, may become excessive. As Patrick Colquhoun
said, in a much-quoted passage: 'Without a large proportion of poverty
there could be no riches, since riches are the offspring of labour, while
labour can result only from a state of poverty ... Poverty therefore is a
most necessary and indispensable ingredient in society, without which
nations and communities could not exist in a state of civilization. 4 [ . . . ]
The more you look on wealth as conclusive proof of merit, the more you
incline to regard poverty as evidence of failure- but the penalty for failure
may seem to be greater than the offence warrants. In such circumstances it
is natural that the more unpleasant features of inequality should be treated,
rather irresponsibly, as a nuisance, like the black smoke that used to
pour unchecked from our factory chimneys. And so in time, as the social
 T. H. Marshall 35
conscience stirs to life, class-abatement, like smoke-abatement, becomes a
desirable aim to be pursued as far as is compatible with the continued effi-
ciency of the social machine.
But class-abatement in this form was not an attack on the class system.
On the contrary it aimed, often quite consciously, at making the class
system less vulnerable to attack by alleviating its less defensible conse-
quences. It raised the floor-level in the basement of the social edifice, and
perhaps made it rather more hygienic than it was before. But it remained a
basement, and the upper storeys of the building were unaffected. [ ... ]
There developed, in the latter part of the nineteenth century, a growing
interest in equality as a principle of social justice and an appreciation of the
fact that the formal recognition of an equal capacity for rights was not
enough. In theory even the complete removal of all the barriers that sepa-
rated civil rights from their remedies would not have interfered with the
principles or the class structure of the capitalist system. It would, in fact,
have created a situation which many supporters of the competitive market
economy falsely assumed to be already in existence. But in practice the atti-
tude of mind which inspired the efforts to remove these barriers grew out
of a conception of equality which overstepped these narrow limits, the
conception of equal social worth, not merely of equal natural rights. Thus
although citizenship, even by the end of the nineteenth century, had done
little to reduce social inequality, it had helped to guide progress into
the path which led directly to the egalitarian policies of the twentieth
century. [ ... ]
This growing national consciousness, this awakening public opinion,
and these first stirrings of a sense of community membership and common
heritage did not have any material effect on class structure and social
inequality for the simple and obvious reason that, even at the end of the
nineteenth century, the mass of the working people did not wield effective
political power. By that time the franchise was fairly wide, but those who
had recently received the vote had not yet learned how to use it. The polit-
ical rights of citizenship, unlike the civil rights, were full of potential
danger to the capitalist system, although those who were cautiously
extending them down the social scale probably did not realize quite how
great the danger was. They could hardly be expected to foresee what vast
changes could be brought about by the peaceful use of political power,
without a violent and bloody revolution. The 'planned society' and the
welfare state had not yet risen over the horizon or come within the view of
the practical politician. The foundations of the market economy and the
contractual system seemed strong enough to stand against any probable
assault. In fact, there were some grounds for expecting that the working
classes, as they became educated, would accept the basic principles of the
system and be content to rely for their protection and progress on the civil
rights of citizenship, which contained no obvious menace to competitive
36 Citizenship and Social Class

capitalism. Such a view was encouraged by the fact that one of the main
achievements of political power in the later nineteenth century was the
recognition of the right of collective bargaining. This me,~nt that social
progress was being sought by strengthening civil rights, not by creating
social rights; through the use of contract in the open market, not through
a minimum wage and social security.
But this interpretation underrates the significance of this extension of
civil rights in the economic sphere. For civil rights were in origin intensely
individual, and that is why they harmonized with the individualistic pbase
of capitalism. By the device of incorporation groups were enabled to act
legally as individuals. This important development did not go unchal-
lenged, and limited liability was widely denounced as an infringement of
individual responsibility. But the position of trade unions was even more
anomalous, because they did not seek or obtain incorporation. They can,
therefore, exercise vital civil rights collectively on behalf of their members
without formal collective responsibility, while the individual responsibil-
ity of the workers in relation to contract is largely unenforceable. These
civil rights became, for the workers, an instrument for raising their social
and economic status, that is to say, for establishing the claim that they, as
citizens, were entitled to certain social rights. But the normal method of
establishing social rights is by the exercise of political power, for social
rights imply an absolute right to a certain standard of civilization which is
conditional only on the discharge of the general duties of citizenship. Their
content does not depend on the economic value of the individual claimant.
There is therefore a significant difference between a genuine collective
bargain through which economic forces in a free market seek to achieve
equilibrium and the use of collective civil rights to assert basic claims to the
elements of social justice. Thus the acceptance of collective bargaining was
not simply a natural extension of civil rights; it represented the transfer of
an important process from the political to the civil sphere of citizenship.
But 'transfer' is, perhaps, a misleading term, for at the time when this hap-
pened the workers either did not possess, or had not yet learned to use, the
political right of the franchise. Since then they have obtained and made full
use of that right. Trade unionism has, therefore, created a secondary system
of industrial citizenship parallel with and supplementary to the system of
political citizenship. [ ... ]
A new period opened at the end of the nineteenth century, conveniently
marked by Booth's survey of Life and Labour of the People in London and
the Royal Commission on the Aged Poor. It saw the first big advance in
social rights, and this involved significant changes in the egalitarian princi-
ple as expressed in citizenship. But there were other forces at work as well.
A rise of money incomes unevenly distributed over the social classes
altered the economic distance which separated these classes from one
another, diminishing the gap between skilled and unskilled labour and
 T. H. Marshall 37

between skilled labour and non-manual workers, while the steady increase
in small savings blurred the class distinction between the capitalist and the
propertyless proletarian. Secondly, a system of direct taxation, ever more
steeply graduated, compressed the whole scale of disposable incomes.
Thirdly, mass production for the home market and a growing interest on
the part of industry in the needs and tastes of the common people enabled
the less well-to-do to enjoy a material civilization which differed less
markedly in quality from that of the rich than it had ever done before. All
this profoundly altered the setting in which the progress of citizenship
wok place. Social integration spread from the sphere of sentiment and
patriotism into that of material enjoyment. The components of a civilized
and cultured life, formerly the monopoly of the few, were brought pro-
gressively within reach of the many, who were encouraged thereby to
stretch out their hands towards those that still eluded their grasp. The
diminution of inequality strengthened the demand for its abolition, at least
with regard to the essentials of social welfare.
These aspirations have in part been met by incorporating social rights
in the status of citizenship and thus creating a universal right to real
income which is not proportionate to the market value of the claimant. Class-
abatement is still the aim of social rights, but it has acquired a new meaning.
It is no longer merely an attempt to abate the obvious nuisance of destitution
in the lowest ranks of society. It has assumed the guise of action modifying
the whole pattern of social inequality. It is no longer content to raise the
floor-level in the basement of the social edifice, leaving the superstructure as
it was. It has begun to remodel the whole building, and it might even end by
converting a skyscraper into a bungalow. It is therefore important to con-
sider whether any such ultimate aim is implicit in the nature of this develop-
ment, or whether, as I put it at the outset, there are natural limits to the
contemporary drive towards greater social and economic equality. [ ... ]
The degree of equalization achieved [by the modern system of welfare
benefits] depends on four things: whether the benefit is offered to all or
to a limited class; whether it takes the form of money payment or service
rendered; whether the minimum is high or low; and how the money to
pay for the benefit is raised. Cash benefits subject to income limit and
means test had a simple and obvious equalizing effect. They achieved
class-abatement in the early and limited sense of the term. The aim was
to ensure that all citizens should attain at least to the prescribed
minimum, either by their own resources or with assistance if they could
not do it without. The benefit was given only to those who needed it, and
thus inequalities at the bottom of the scale were ironed out. The system
operated in its simplest and most unadulterated form in the case of the
Poor Law and old age pensions. But economic equalization might be
accompanied by psychological class discrimination. The stigma which
attached to the Poor Law made 'pauper' a derogatory term defining
38 Citizenship and Social Class

a class. 'Old age pensioner' may have had a little of the same flavour, but
without the taint of shame. [ ... ]
The extension of the social services is not primarily a me,ans of equaliz-
ing incomes. In some cases it may, in others it may not. The question is rela-
tively unimportant; it belongs to a different department of social policy.
What matters is that there is a general enrichment of the concrete substance
of civilized life, a general reduction of risk and insecurity, an equalization
between the more and the less fortunate at all levels - between the healthy
and the sick, the employed and the unemployed, the old and the active~ the
bachelor and the father of a large family. Equalization is not so much
between classes as between individuals within a population which is now
treated for this purpose as though it were one class. Equality of status is
more important than equality of income. [ ... J
I said earlier that in the twentieth century citizenship and the capitalist
class system have been at war. Perhaps the phrase is rather too strong, but
it is quite clear that the former has imposed modifications on the latter. But
we should not be justified in assuming that, although status is a principle
that conflicts with contract, the stratified status system which is creeping
into citizenship is an alien element in the economic world outside. Social
rights in their modern form imply an invasion of contract by status, the
subordination of market price to social justice, the replacement of the free
bargain by the declaration of rights. But are these principles quite foreign
to the practice of the market today, or are they there already entrenched
within the contract system itself? I think it is clear that they are. [ ... J
I have tried to show how citizenship, and other forces outside it, have
been altering the pattern of social inequality. [ ... J We have to look, here,
for the combined effects of three factors. First, the compression, at both
ends, of the scale of income distribution. Second, the great extension of the
area of common culture and common experience. And third, the enrich-
ment of the universal status of citizenship, combined with the recognition
and stabilization of certain status differences chiefly through the linked
systems of education and occupation. [ ... J
I asked, at the beginning, whether there was any limit to the present
drive towards social equality inherent in the principles governing the
movement. My answer is that the preservation of economic inequal-
ities has been made more difficult by the enrichment of the status of cit-
izenship. There is less room for them, and there is more and more
likelihood of their being challenged. But we are certainly proceeding at
present on the assumption that the hypothesis is valid. And this assump-
tion provides the answer to the second question. We are not aiming at
absolute equality. There are limits inherent in the egalitarian movement.
But the movement is a double one. It operates partly through citizenship
and partly through the economic system. In both cases the aim is to remove
inequalities which cannot be regarded as legitimate, but the standard of
 T H. Marshall 39

legitimacy is different. In the former it is the standard of social justice, in

the latter it is social justice combined with economic necessity. It is possi-
ble, therefore, that the inequalities permitted by the two halves of the
movement will not coincide. Class distinctions may survive which have no
appropriate economic function, and economic differences which do not
correspond with accepted class distinctions. [ ... ]

Notes

Originally delivered in Cambridge as the Marshall Lecture for 1949 and published
in Citizenship and Social Class and Other Essays, ed. T. H. Marshall, Cambridge,
Cambridge University Press, 1950. This version extracted from States and Societies,
ed. D. Held, London, Open University/Martin Robertson, 1983, pp. 249-60.
1 G. M. Trevelyan, English Social History (1942), p. 351.
2 Sidney and Beatrice Webb, History of Trade Unionism (1920), p. 60.
3 R. H. Tawney, The Agrarian Problem in the Sixteenth Century (1916),
PP· 43-4.
4 P. Colquhoun, A Treatise in Indigence (1806), pp. 7-8.
Universalism versus Selection
Richard Titmuss

[ ... ]

Universalist and Selective Social Services

In any discussion today of the future of (what is called) 'The Welfare State'
much of the argument revolves around the principles and objectives of uni-
versalist social services and selective social services.

[ ... J

Consider, first, the nature of the broad principles which helped to shape
substantial sections of British welfare legislation in the past, and particu-
larly the principle of universalism embodied in such postwar enactments
as the National Health Service Act, the Education Act of 1944, the
National Insurance Act and the Family Allowances Act.
One fundamental historical reason for the adoption of this princi-
ple was the aim of making services available and accessible to the
whole population in such ways as would not involve users in any humil-
iating loss of status, dignity or self-respect. There should be no sense
of inferiority, pauperism, shame or stigma in the use of a publicly pro-
vided service; no attribution that one was being or becoming a 'public
burden'. Hence the emphasis on the social rights of all citizens to use or
not to use as responsible people the services made available by the com-
munity in respect of certain needs which the private market and the
family were unable or unwilling to provide universally. If these services
were not provided for everybody by everybody they would either not be
available at all, or only for those who could afford them, and for others
 Richard Titmuss 41

on such terms as would involve the infliction of a sense of inferiority

and stigma.
Avoidance of stigma was not, of course, the only reason for the devel-
opment of the twin concepts of social rights and universalism. Many other
forces, social, political and psychological, during a century and more of
turmoil, revolution, war and change, contributed to the clarification and
acceptance of these notions. The novel idea of prevention- novel, at least,
to many in the nineteenth century - was, for example, another powerful
engine, driven by the Webbs and many other advocates of change, which
reinforced the concepts of social rights and universalism. The idea of pre-
vention - the prevention and breaking of the vicious descending spiral of
poverty, disease, neglect, illiteracy and destitution- spelt to the protago-
nists (and still does so) the critical importance of early and easy access to
and use of preventive, remedial and rehabilitative services. Slowly and
painfully the lesson was learnt that if such services were to be utilized in
time and were to be effective in action in a highly differentiated, unequal
and class-saturated society, they had to be delivered through socially
approved channels; that is to say, without loss of self-respect by the users
and their families.
Prevention was not simply a child of biological and psychological the-
orists; at least one of the grandparents was a powerful economist with a
strongly developed streak of nationalism. As Professor Bentley Gilbert
has shown in his [ ... ] book The Evolution of National Insurance: The
Origins of the Welfare State, national efficiency and welfare were seen as
complcmentary. 1 The sin unforgivable was the waste of human resources;
thus, welfare was summoned to prevent waste. Hence the beginnings of
four of our present-day universalist social services: retirement pen-
sions, the Health Service, unemployment insurance and the school meals
serv1ce.
The insistent drumming of the national efficiency movement in those
far-off days before the First World War is now largely forgotten. Let me
then remind you that the whole welfare debate was a curious mixture of
humanitarianism, egalitarianism, productivity (as we would call it today)
and old-fashioned imperialism. The strident note of the latter is now, we
may thank our stars, silenced. The Goddess of Growth has replaced the
God of National Fitness. But can we say that the quest for the other objec-
tives is no longer necessary?
Before discussing such a rhetorical question, we need to examine further
the principal of universalism. The principle itself may sound simple but the
practice- and by that I mean the present operational pattern of welfare in
Britain [in the 1960s]- is immensely complex. We can see something of this
complexity if we analyse welfare (defined here as all publicly provided and
subsidized services, statutory, occupational and fiscal) from a number of
different standpoints.
42 Universalism versus Selection

An Analytical Framework
Whatever the nature of the service, activity or function, and ,whether it be
a service in kind, a collective amenity, or a transfer payment in cash or by
accountancy, we need to consider (and here I itemize in question form for
the sake of brevity) three central issues:

What is the nature of entitlement to use? Is it legal, contractual or con-

tributory, financial, discretionary or professionally determined entitle-
ment?
2 Who is entitled and on what conditions? Is account taken of individual
characteristics, family characteristics, group characteristics, territorial
characteristics or social-biological characteristics? What, in fact, are the
rules of entitlement? Are they specific and contractual - like a right
based on age- or are they variable, arbitrary or discretionary?
3 What methods, financial and administrative, are employed in the deter-
mination of access, utilization, allocation and payment?

Next we have to reflect on the nature of the service or benefit.

What functions do benefits, in cash, amenity or in kind, aim to fulfil?
They may, for example, fulfil any of the following sets of functions, singly
or in combination:

As partial compensation for identified disservices caused by society (for

example, unemployment, some categories of industrial injuries benefits,
war pensions, etc.). And, we may add, the disservices caused by inter-
national society as exemplified [ ... ] by the oil pollution resulting from
the Torrey Canyon disaster in 1967 costing at least £2 million. 2
2 As partial compensation for unidentifiable disservices caused by
society (for example, 'benefits' related to programmes of slum clear-
ance, urban blight, smoke pollution control, hospital cross-infection
and many other socially created disservices).
3 As partial compensation for unmerited handicap (for example, lan-
guage classes for immigrant children, services for the deprived child,
children handicapped from birth, etc.).
4 As a form of protection for society (for example, the probation service,
some parts of the mental health services, services for the control of
infectious diseases, etc.).
5 As an investment for a future personal or collective gain (education-
professional, technical and industrial - is an obvious example here; so
also are certain categories of tax deductibles for self-improvement and
certain types of subsidized occupational benefits).
6 As an immediate and/ or deferred increment to personal welfare
or, in other words, benefits (utilities) which add to personal
 Richard Titmuss 43

command-over-resources either immediately and/or in the future (for

example, subsidies to owner-occupiers and council tenants, tax
deductibles for interest charges, pensions, supplementary benefits,
curative medical care, etc.).
7 As an element in an integrative objective which is an essential charac-
teristic distinguishing social policy from economic policy. As Kenneth
Boulding has said, ' ... social policy is that which is centred in those
institutions that create integration and discourage alienation'. 3 It is thus
profoundly concerned with questions of personal identity whereas
economic policy centres round exchange or bilateral transfer.

This represents little more than an elementary and partial structural map
which can assist in the understanding of the welfare complex [ ... ].
Needless to say, a more sophisticated (inch to the mile) guide is essential
for anything approaching a thorough analysis of the actual functioning of
welfare benefit systems. I do not, however, propose to refine further this
frame of study now, nor can I analyse by these classifications the several
hundred distinctive and functionally separate services and benefits actually
in operation in Britain [in the 1960s].
Further study would also have to take account of the pattern and oper-
ation of means-tested services. It has been estimated by Mr M. J. Reddin,
my research assistant, that in England and Wales today local authorities are
responsible for administering at least 3,000 means tests, of which about
1,500 are different from each other. 4 This estimate applies only to services
falling within the responsibilities of education, child care, health, housing
and welfare departments. It follows that in these fields alone there exist
some 1,500 different definitions of poverty or financial hardship, ability to
pay and rules for charges, which affect the individual and the family. There
must be substantial numbers of poor families with multiple needs and mul-
tiple handicaps whose perception [ ... ] of the realities of welfare is to see
only a means-testing world. Who helps them, I wonder, to fill out all those
forms?
I mention these social facts, by way of illustration, because they do form
part of the operational complex of welfare in 1967. My main purpose,
however, in presenting this analytical framework was twofold. First, to
underline the difficulties of conceptualizing and categorizing needs,
causes, entitlement or gatekeeper functions, utilization patterns, benefits
and compensations. Second, to suggest that those students of welfare who
are seeing the main problem today in terms of universalism versus selec-
tive services are presenting a naive and oversimplified picture of policy
choices.
Some of the reasons for this simple and superficial view are, I think, due
to the fact that the approach is dominated by the concept or model of
welfare as a 'burden'; as a waste of resources in the provision of benefits
44 Universalism versus Selection

for those who, it is said, do not need them. The general solution is thus
deceptively simple and romantically appealing: abolish all this welfare
complexity and concentrate help on those whose needs are g_reatest.
Quite apart from the theoretical and practical immaturity o{this solu-
tion, which would restrict the public services to a minority in the popula-
tion leaving the majority to buy their own education, social se:curity,
medical care and other services in a supposedly free market, certain other
important questions need to be considered.
As all selective services for this minority would have to apply some t~st
of need-eligibility, on what bases would tests be applied and, even more
crucial, where would the lines be drawn for benefits which function as
compensation for identified disservices, compensation for unidentifiable
disservices, compensation for unmerited handicap, as a form of social pro-
tection, as an investment, or as an increment to personal welfare? Can rules
of entitlement and access be drawn on purely 'ability to pay' criteria
without distinction of cause? And if the causal agents of need cannot be
identified or are so diffuse as to defy the wit of law- as they so often are
[ ... ] -then is not the answer 'no compensation and no redress'? In other
words, the case for concentrated selective services resolves itself into an
argument for allowing the social costs or diswelfares of the economic
system to lie where they fall.
The emphasis [ ... ] on 'welfare' and the 'benefits of welfare' often tends
to obscure the fundamental fact that for many consumers the services used
are not essentially benefits or increments to welfare at all; they represent
partial compensations for disservices, for social costs and social insecuri-
ties which are the product of a rapidly changing industrial-urban society.
They are part of the price we pay to some people for bearing part of the
costs of other people's progress; the obsolescence of skills, redundancies,
premature retirements, accidents, many categories of disease and handicap,
urban blight and slum clearance, smoke pollution, and a hundred-and-one
other socially generated disservices. They are the socially caused diswel-
fares; the losses involved in aggregate welfare gains.
What is also of major importance [ ... ] is that modern society is finding
it increasingly difficult to identify the causal agent or agencies, and thus to
allocate the costs of disservices and charge those who are responsible. It is
not just a question of benefit allocation- of whose 'Welfare State'- but also
of loss allocation - whose 'Diswelfare State'.
If identification of the agents of diswelfare were possible - if we could
legally name and blame the culprits- then, in theory at least, redress could
be obtained through the courts by the method of monetary compensation
for damages. But multiple causality and the diffusion of disservices - the
modern choleras of change - make this solution impossible. We have,
therefore, as societies to make other choices; either to provide social ser-
vices, or to allow the social costs of the system to lie where they fall. The
 Richard Titmuss 45

nineteenth century chose the latter- the laissez-faire solution- because it

had neither a germ theory of disease nor a social theory of causality; an
answer which can hardly be entertained today by a richer society equipped
with more knowledge about the dynamics of change. But knowledge in
this context must not, of course, be equated with wisdom.
If this argument can be sustained, we are thus compelled to return to our
analytical framework of the functional concepts of benefit and, within this
context, to consider the role of universalist and selective social services.
Non-discriminating universalist services are in part the consequence of
unidentifiable causality. If disservices are wasteful (to use the economists'
concept of 'waste') so welfare has to be 'wasteful'.
The next question that presents itself is this: can we and should we, in
providing benefits and compensation (which in practice can rarely be dif-
ferentially provided), distinguish between 'faults' in the individual (moral,
psychological or social) and the 'faults of society'? If all services are pro-
vided- irrespective of whether they represent benefits, amenity, social pro-
tection or compensation- on a discriminatory, means-test basis, do we not
foster both the sense of personal failure and the stigma of a public burden?
The fundamental objective of all such tests of eligibility is to keep people
out; not to let them in. They must, therefore, be treated as applicants or
supplicants; not beneficiaries or consumers.
It is a regrettable but human fact that money (and the lack of it) is linked
to personal and family self-respect. This is one element in what has been
called the 'stigma of the means test'. Another element is the historical evi-
dence we have that separate discriminatory services for poor people have
always tended to be poor quality services; read the history of the panel
system under National Health Insurance; read Beveridge on workmen's
compensation; Newsom on secondary modern schools; Plowden on
standards of primary schools in slum areas; Townsend on Part III accom-
modations in The Last Refuge, 5 and so on. 6
In the past, poor quality selective services for poor people were the
product of a society which saw 'welfare' as a residual; as a public burden.
The primary purpose of the system and the method of discrimination was,
therefore, deterrence (it was also an effective rationing device). To this end,
the most effective instrument was to induce among recipients (children as
well as adults) a sense of personal fault, of personal failure, even if the
benefit was wholly or partially a compensation for disservices inflicted by
society.

The Real Challenge in Welfare

Today, with this heritage, we face the positive challenge of providing
selective, high quality services for poor people over a large and complex
46 Universalism versus Selection

range of welfare; of positively discriminating on a territorial, group

or 'rights' basis in favour of the poor, the handicapped, the deprived,
the coloured, the homeless, and the social casualties o£ Oljr society.
Universalism is not, by itself alone, enough: in medical care, in wage-
related social security and in education. This much we have learnt in the
past two decades from the facts about inequalities in the distribution of
incomes and wealth, and in our failure to close many gaps in differential
access to and effective utilization of particular branches of our social
services. 7
If I am right, I think that during the 1960s Britain was beginning to iden-
tify the dimensions of this challenge of positive, selective discrimination-
in income maintenance, in education, in housing, in medical care and
mental health, in child welfare, and in the tolerant integration of immi-
grants and citizens from overseas; of preventing especially the second gen-
eration from becoming (and of seeing themselves as) second-class citizens.
We have continued to seek ways and means, values, methods and tech-
niques, of positive discrimination without the infliction, actual or imag-
ined, of a sense of personal failure and individual fault.
At this point, considering the nature of the search in all its ramifying
complexities, I must now state my general conclusion. It is this. The chal-
lenge that faces us is not the choice between universalist and selective social
services. The real challenge resides in the question: what particular infra-
structure of universalist services is needed in order to provide a framework
of values and opportunity bases within and around which can be devel-
oped socially acceptable selective services aiming to discriminate posi-
tively, with the minimum risk of stigma, in favour of those whose needs are
greatest.
This, to me, is the fundamental challenge. In different ways and in par-
ticular areas it confronts the Supplementary Benefits Commission, the
Seebohm Committee, the National Health Service, the Ministry of
Housing and Local Government, theN ational Committee for Common-
wealth Immigrants, the policy-making readers of the Newsom Report and
the Plowden Report on educational priority areas, the Scottish Report,
Social Work and the Community, and thousands of social workers and
administrators all over the country wrestling with the problems of needs
and priorities. In all the main spheres of need, some structure of universal-
ism is an essential prerequisite to selective positive discrimination; it pro-
vides a general system of values and a sense of community; socially
approved agencies for clients, patients and consumers, and also for the
recruitment, training and deployment of staff at all levels; it sees welfare,
not as a burden, but as complementary and as an instrument of change and,
finally, it allows positive discriminatory services to be provided as rights
for categories of people and for classes of need in terms of priority social
areas and other impersonal classifications.
 Richard Titmuss 47
Without this infrastructure of welfare resources and framework of
values we should not, I conclude, be able to identify and discuss the next
steps in progress towards a 'Welfare Society'.

Notes

Lecture delivered at the British National Conference on Social Welfare, London,

April 1967, and published in the Proceedings of the Conference. This extract from
R. M. Titmuss, Commitment to Welfare, London, Allen and Unwin, 1968,
PP· 128-37.
B. B. Gilbert, The Evolution of National Insurance: The Origins of the Welfare
State, London, Michael Joseph, 1966.
2 The Torrey Canyon, Cmnd 3246, London, HMSO, 1967.
3 K. E. Boulding, 'The Boundaries of Social Policy', Social Work, vol. 12, no. 1,
January 1967, p. 7.
4 This study is to be published by Mr M. J. Reddin as an Occasional Paper on
Social Administration.
5 P. Townsend, The Last Refuge, London, Routledge, 1964.
6 See also R. M. Titmuss, Problems of Social Policy, London, HMSO, 1950.
7 SeeP. Townsend, Poverty, Socialism and Labour in Power, Fabian tract, 371,
1967, and R. J. Nicholson, 'The Distribution of Personal Income', Lloyds
Bank Review, January 1967, p. 11.
Perspectives on the Left
What is Social Justice?
Commission on Social Justice

In deciding to develop a conceptual framework for thinking about social

justice, the Commission made a big assumption, namely that there is such
a thing as 'social justice'. Some people (particularly of the libertarian
Right) deny that there is a worthwhile idea of social justice at all. They say
that justice is an idea confined to the law, with regard to crime, punish-
ment and the settling of disputes before the courts. They claim that it is
nonsense to talk about resources in society being fairly or unfairly dis-
tributed. The free market theorist Friedrich von Hayek, for example,
argued that the process of allocating wealth and property 'can be neither
just nor unjust, because the results are not intended or foreseen, and
depend on a multitude of circumstances not known in their totality to
anybody'.
What libertarians really mean, however, is not that there is no such thing
as social justice, but rather that there is only one criterion of a just outcome
in society, namely that it should be the product of a free market. But this
is not as simple as it may sound, because ideas of fairness (and not merely
of efficiency) are themselves used in defining what counts as a free market.
While it is often said that a given market competition is not fair because it
is not being played 'on a level field', it is not clear what counts as levelling
the field, as opposed to altering the result of the match. For example, anti-
trust laws can be seen as an interference in a free market, or a device for
making the field level.
In fact, people in modern societies do have strong ideas about social
justice. We all know this from daily conversation, and opinion polls regu-
larly confirm it. We are confident that at least in our belief there is such a
thing as 'social justice', we reflect the common sense of the vast majority
of people. However, polls are not easy to interpret, and they make it clear
that people's ideas about social justice are complex.
 Commission on Social justice 51

There is more than one notion associated with the term social justice. In
some connections, for example, justice is thought to have something to do
with equality. Sometimes it seems to relate to need: for example, it can seem
notably unfair if bad fortune prevents someone from having something
they really need, such as medical care, less unfair if it is something they just
happen to want. Yet again, justice relates to such notions as entitlement,
merit and desert. These are not the same as each other. For example, if
someone wins the prize in the lottery, they are entitled to the money, and
it would be unjust to take it away from them, but it has nothing to do with
their merits, and they have done nothing to deserve it. Similarly, if talented
people win prizes in an activity that requires no great practice or effort,
they are entitled to the prize and get it on the strength of their merits (as
opposed, for instance, to someone's getting it because he is the son of the
promoter), but they may well have not done anything much to deserve it.
People who are especially keen on the notion of desert may want there to
be prizes only for effort; or, at least, think that prizes which command
admiration (as the lottery prize does not) should be awarded only for
effort. Humanity has shown so far a steady reluctance to go all the way
with this view.
As well as being complex in this way, people's views about justice are
also indeterminate. This means that it is often unclear what the just
outcome should be - particularly when various considerations of social
justice seem to pull in different directions, as they often do. Most people,
for instance, think that inheritance is at least not intrinsically evil, and that
parents are entitled to leave property to their children. But no one thinks
that one can leave anything one likes to one's children - one's job, for
instance- and almost everyone thinks that it can be just for the state to tax
inheritances in order to deal with social injustice, or simply to help the
common good.
The mere fact that people's ideas about justice are both complex and
indeterminate has an important consequence for democratic politics. There
is more than one step from general ideas to practical recommendations.
There have to be general policies directed to social justice, and these are
going to be at best an interpretation of people's ideas on such matters.
General policies will hope to offer considerations which people can recog-
nize as making sense in the light of their own experience and ideas (this
need not exclude challenging some of those ideas). Specific policies,
however, involve a further step, since they have to express general policies
in a particular administrative form. A given scheme of taxation or social
security is, in that sense, at two removes from the complex and indetermin-
ate ideas that are its moral roots.
This is not to deny that some administrative practices may acquire a
symbolic value of their own. In the 1940s, the death grant was a symbol of
society's commitment to end paupers' funerals and ensure for every family
52 What is Social Justice?

the means to offer deceased relatives a proper burial. It is a matter of acute

political judgement to decide whether one is dealing with an important
example of such a value, as opposed to a fetish (in the more or less literal
sense of an inert object that has been invested with value that does not
belong to it in its own right). Not every arrangement that has been taken
to be an essential embodiment of social justice is, in changing circum-
stances, really so.

Theories of Social Justice

There are important theories of social justice. The most ambitious give a
general account of what social justice is, explain and harmonize the rela-
tions between the different considerations associated with it, do the same
for the relations between justice and other goods, notably liberty, help to
resolve apparent conflicts between different values, and in the light of all
that, even give pointers to practical policies. The most famous such theory
in modern discussion is that of John Rawls, which gives a very rich elabor-
ation to a very simple idea: that the fair division of a cake would be one that
could be agreed on by people who did not know which piece they were
gomg to get.
Rawls invokes an 'Original Position', in which representatives of
various parties to society are behind 'a veil of ignorance' and do not know
what role each party will occupy in the society. They are asked to choose
a general scheme for the ordering of society. The scheme that they would
reasonably choose in these imagined circumstances constitutes, in Rawls's
view, the scheme of a just society.
Rawls's theory, and others with similar aims, contains important
insights, and anyone who is trying to think about these problems should
pay attention to them. But there is an important question- one acknow-
ledged by Rawls himself- of what relation such a theory can have to pol-
itics. Rawls thinks that his theory articulates a widely spread sense of
fairness, but it is certain that the British public would not recognize in such
a theory, or in any other with such ambitions, all its conflicting ideas and
feelings about social justice. Even if the Commission, improbably, all
agreed on Rawls's or some other such theory, we would not be justified in
presenting our conclusions in terms of that theory. The Commission has a
more practical purpose.
Our task is to find compelling ways of making our society more just. We
shall be able to do so only if we think in ways that people can recognize
and respect about such questions as how best to understand merit and
need; how to see the effects of luck in different spheres of life; what is
implied in saying, or denying, that health care is a morally special kind of
good which makes a special kind of demand.
 Commission on Social justice 53
The Commission has to guard against ali-or-nothing assumptions. It is
not true that either we have a complete top-down theory, or we are left
only with mere prejudice and subservience to polls. This particularly
applies to conflict. Confronted, as will often be the case, with an apparent
conflict within justice, or between justice and some other value, we may
rend to assume that there are only two possibilities: the conflict is merely
apparent, and we should understand liberty and equality (for instance) in
such a way that they cannot conflict; or it is a real conflict, and then it can
only be left to politics, majorities, subjective taste, or whatever. This will
not do. Reflection may not eliminate all conflicts, but it can help us to
understand them, and then arrive at policy choices.

The Equal Worth of Every Citizen

Social justice is often thought to have something specially to do with equal-

ity, but this idea, in itself, determines very little. A basic question is: equal-
ity of what? Furthermore, not all inequalities are unjust. For example, what
people can do with money varies. Thus disabled people may well need
more resources to reach a given quality of life than other people do, and if
you are trying to be fair to people with regard to the quality of their life,
unequal amounts of money is what fairness itself will demand. What this
shows, as the philosopher and economist Amartya Sen has insisted, is that
equality in one dimension goes with inequality in another. Since people
have different capacities to turn resources into worthwhile activity (for
instance because they are disabled), people will need different resources to
be equally capable of worthwhile activity.
In fact, virtually everyone in the modern world believes in equality of
something. All modern states are based on belief in some sort of equality
and claim to treat their citizens equally. But what is involved in 'treating
people equally'? Minimally, it implies political and civil liberties, equal
rights before the law, equal protection against arbitrary arrest, and so forth.
These things provide the basis of a 'civil society', a society of equal citizens.
However, these rights and freedoms cannot stand by themselves. More
than this formal level of equality is needed if the minimal demands them-
selves are to be properly met. It is a familiar point that equality before the
law does not come to much if one cannot afford a good lawyer. The 'equal
freedom' of which modern democratic states boast should amount to
more (as Anatole France observed) than the freedom to sleep on park
benches and under bridges. Everyone needs the means to make use of their
equal freedom, which otherwise would be hollow. Formal equalities have
substantive consequences. Perhaps the most basic question about the
nature of social justice in a modern society is what those substantive con-
sequences are.
54 What is Social justice?

Meeting Basic Needs

People are likely to be restricted in what they can do with their freedom
and their rights if they are poor, or ill, or lack the education which, to a
greater extent today than ever before, is the basis of employment oppor-
tunities, personal fulfilment and people's capacities to influence what
happens to them. These concerns define areas of need, and it is a natural
application of the idea that everyone is of equal worth that they should
have access to what they need, or at least to what they basically need,
Some basic needs are met by providing resources, or by helping people to
save or acquire resources. This is the case with paid work; with financial
security in old age; and with provisions for dealing with lack of resources,
such as benefit in case of unemployment. In the case of health care and edu-
cation, however, the most appropriate way of meeting needs seems to be not
through money, but in kind; we think that someone who is ill has a right to
access to treatment for their illness, but not that they have a right to funds
which they can choose to spend on treatment or not. One way of express-
ing this commitment is that the state should itself provide the service.
Another is that the state should provide means which command health care
or education, but which cannot be converted into money. In the case of
health, this may take the form of public insurance, though this can raise basic
questions of fairness (with regard to individual risk) as well as of efficiency.
The case of health now raises a fundamental question which was not
present fifty years ago. Health care has always seemed a very special good,
in relation to social justice as in other respects. It involves our most basic
interests, gives great power to certain professionals, and carries heavy sym-
bolic value (brought out, for instance, in Richard Titmuss's famous dis-
cussion of blood donation The Gift Relationship). Treating health as one
commodity, to be bought and sold like any other, is found offensive in
most parts of the world (and Americans, though used to that attitude, seem
to be turning against it). Our sentiments about health care merge with our
sense of some very basic obligations: most people feel that resources
should be used to save an identified person (as opposed to a merely statis-
tical casualty) from death.
But today it is a fact that medicine's resources to extend life are expand-
ing at an accelerating rate, and so is their cost. This raises hard questions
not only about the distribution of resources devoted to health care (who
gets the kidney machine?), but also about the amount of resources that
should be devoted to health care at all. These hard questions are questions
of justice, among other things. Confronted with the opportunity to save
someone in the street from death, we will think that we should stop to save
them even if the cost is not taking the children to school, but is it fair to
save every saveable person from death at the cost of sending many children
to quite inadequate schools?
 Commission on Social justice 55
To answer these questions, the Commission will need to consider what
sort of goods we take health and health care to be. This was a less pressing
question.in the past, bu~ it ~snow har?er to avoid the issue of what we are
distributmg when we d1stnbute medical care, and of what we most want
it to do.
Education is also a good to which everyone has a right, because it is so
closely tied to basic needs, to personal development, and to one's role in
society. But it is also connected to equality in another way. Disadvantage
is, notoriously, inherited, and an unfair situation in one generation tends to
mean an unfair start for the next. Educational opportunity is still what it
always has been, a crucial means for doing something about this unfairness.
This brings out a further point, that the ideal of 'equality of opportun-
ity', which has often been thought by reformers to be a rather weak aspir-
ation, is in fact very radical, if it is taken seriously. The changes required in
order to give the most disadvantaged in our society the same life-chances
as the more fortunate would be very wide-ranging indeed.

Opportunities and Life-Chances

Self-respect and equal citizenship demand more than the meeting of basic
needs for income, shelter and so on. They demand the opportunities and
life-chances central to personal freedom and autonomy. In a commercial
society (outside monasteries, kibbutzim, etc.), self-respect standardly
requires a certain amount of personal property. As Adam Smith remarked,
a working man in eighteenth-century Scotland needed to own a decent
linen shirt as a condition of self-respect, even though that might not be true
of every man everywhere.
This does not mean that Adam Smith's man should be issued with a
shirt. In a commercial society, his need is rather for the resources to buy
a shirt of his choice. This is connected with his needing it as a matter of
self-respect, which suggests something else, namely that where resources
are supplied directly, for instance to those who are retired or who are
caring for members of their families, it must be in ways which affirm their
self-respect. But most people, for most of their lives, want the opportun-
ities to earn the resources for themselves. The obvious question is
whether everyone therefore has a right to a job, or the right to the means
to gain a job.
The trouble, clearly, is that it may not be in the power of government
directly to bring this about. Having a job, at least as the world is now, is
closely connected with self-respect and hence with the equality of citizens,
and for this as well as other reasons it must be a high priority for any gov-
ernment to create the circumstances in which there are jobs for those who
want them. To insist, however, on a right to work- a right, presumably,
56 What is Social justice?
which each person holds against the government- may not be the best way
of expressing this aim. The Commission will therefore consider not only
ways in which employment may be increased, but also wq_at provision
social justice demands for those who are unable to do paid work, or who
are engaged in valuable unpaid work, or when significant levels of
unemployment persist, even for a temporary period. Tackling unen1ploy-
ment is, of course, central to the realization of social justice.
There are questions here of how resources and opportunities can be
extended to the unemployed. But there is a wider question as well, tha.t
extends to the provision for other needs: how opportunities may be created
for the expression of people's autonomy and the extension of their freedom
to determine their own lives. There is no doubt that advocates of social
justice have often been insensitive to this dimension. The designers of the
welfare state wanted to put rights in the place of charity: the idea of entitle-
ment to benefit was meant to undercut any notion that the better-off were
doing the worse-off a good turn. But the entitlement was often still under-
stood as an entitlement to be given or issued with certain goods and ser-
vices, the nature of which it was, in many cases, the business of experts to
determine. There is a much greater awareness today that what people need
is the chance to provide for themselves: [ ... ] 'there is a limit to what gov-
ernment can do for people, but there is no limit to what they can be enabled
to achieve for themselves'.
Relatedly, there is a stronger sense today that the aims of social justice
are served not only by redistribution, by bringing resources after the event
to people who have done badly. Social justice requires as well that struc-
tures should be adapted and influenced in ways that can give more people
a better chance in the first place. That is why opportunities, and breaking
down barriers to them, are so important.
There are, without doubt, conflicts between these various considera-
tions. You cannot both encourage people's freedom to live their own lives
as they choose, and guarantee that they will not suffer if they do not live
them well. You cannot both allow people to spend money, if they wish,
on their children's education - a right that exists in every democratic
country- and also bring it about that everyone gets exactly the same edu-
cation whether they pay privately for it or not. Here there are questions,
too, of how far publicly supported provision to meet need should aim only
at a minimal level, available to those without other provision, and how far
it should seek to provide a high level of service for everyone. The view of
most people is probably that the first answer applies to some needs and the
goods and services that meet them, while in the case of health care and edu-
cation, at least, no one should be excluded by disadvantage from a very
high level of provision. Exactly how those different aims should now be
conceived, and the extent to which they can realistically be carried out, are
central questions for the Commission.
 Commission on Social Justice 57

Unjustified Inequalities
Proponents of equality sometimes seem to imply that all inequalities are
unjust (although they usually hasten to add that they are not in fact arguing
for 'arithmetical equality'). We do not accept this. It seems fair, for
instance, that a medical student should receive a lower income than the
fully qualified doctor; or that experience or outstanding talent should be
rewarded, and so on. Different people may have different views about what
the basis of differential rewards should be; but most people accept, as we
do, that some inequalities are just. There is, however, a question about the
justifiable extent of an inequality, even if we accept that the inequality per
se is not unjust.
Similarly, most people believe that it is fair for people to bequeath their
property as they see fit, even though this means that some will inherit more
than others. Nonetheless, it is also accepted that society may claim a share
of an inheritance through the taxation of wealth or gifts, particularly when
the estate is large. It is, after all, offensive to most ideas of social justice that
a growing number of people own two homes while others have nowhere
to live at all. This does not imply that one person's property should be con-
fiscated to house another; but it does suggest the need for a fundamental
reform of housing policy, an issue the Commission will certainly be
addressing.
But if some inequalities are just, it is obviously the case that not all are
so. It would, for instance, be unjust to allow people to inherit jobs from
their parents: employment should be open to all, on the basis of merit.
Inheritance of a family title offends many people's views about a classless
society, but could not be said to deny somebody else something which they
deserved. But inheritance of a peerage, in the UK, carries with it automatic
entitlement to a seat and vote in the Second Chamber of Parliament: and
that is an inequality of power which seems manifestly unjust.

Entitlement and Desert

Parents can, however, pass on intelligence, talent, charm and other qual-
ities, as well as property or titles. Rawls in his theory rests a lot on the fact
that a person's talents, and his or her capacity to make productive use of
those talents, are very much matters of luck and are also, in some part, the
product of society. Nobody, he has rightly insisted, deserves his or her
(natural) talents. From this he has inferred that nobody, at a level of basic
principle, deserves the rewards of his or her talents. He argues that no one
has a right to something simply because it is the product of his or her
talents, and society has a right to redistribute that product in accordance
with the demands of social justice.
58 What is Social justice?

This is a very strong and surprising claim. Some people might agree that
no one deserves a reward that they get on the basis of some raw advantage,
without any investment of effort. (Of course, given the e:x;isting rules, that
docs not mean that they are not entitled to it, or that it can merely be taken
away from them. It means that it would not necessarily be an injustice to
change the rules.) But those who agree to this are very likely to think that
people who do invest effort deserve its rewards, at least up to a certain
point. But Rawls's argument applies just as much to effort as to raw talent.
First, it is practically impossible to separate the relative contributions of
effort and talent to a particular product. Moreover, the capacity to make
a given degree of effort is itself not equally distributed, and may plausi-
bly be thought to be affected by upbringing, culture and other social
factors. Virtually everything about a person that yields a product is itself
undeserved. So no rewards, in Rawls's view, are, at the most basic level, a
matter of desert.
Few people believe this. If someone has taken a lot of trouble in design-
ing and tending a garden, for instance, they will be proud of it and appro-
priately think of its success as theirs. The same applies to many aspects of
life. This does suggest that there is something wrong with the idea that
basically people never earn anything by their talents or labours- that in the
last analysis all that anyone's work represents is a site at which society has
achieved something. Yet, certainly, one does not 'deserve' the talents of
birth. It must be true, then, that one can deserve the rewards of one's talents
without deserving one's talents. As the American philosopher Robert
Nozick forcefully put it, why docs desert 'have to go all the way down'?
What the various arguments about entitlement and desert suggest seems
to be something close to what many people believe: that there is basic
justice in people having some differential reward for their productive
activities, but that they have no right to any given differential of their
reward over others. It is not simply self-interest, or again scepticism about
government spending programmes (though that is certainly a factor), that
makes people resist the idea that everyone's income is in principle a
resource for redistribution; that idea also goes against their sense of what
is right. They rightly think that redistribution of income is not an aim
in itself.
At the same time, they acknowledge that the needs of the less fortunate
make a claim. Luck is everywhere, and one is entitled to some rewards of
luck, but there are limits to this entitlement when one lives and works with
other people. Even if one is entitled to some rewards from the product of
one's efforts and talents, there is the further point that in a complex enter-
prise such as a company or family, there is rarely a product which is solely
and definitely the product of a given person's efforts and talents.
This is no doubt one reason why people are sceptical about vast rewards
to captains of industry. It is also a question of the relation of one person's
 Commission on Socialjustice 59

rivity to that of others. Few people mind that Pavarotti or Lenny Henry
ace paid large sums - there is only one of them, and they are undoubtedly
a~e star of the show. But in some cases, one person's reward can be another
t erson's loss. The Nobel Prize winning economist Professor James Meade
Prgued in a submission to the Commission that 'Keynesian full-
:mploymcnt policy.... collapsed simply and solely because a high level of
money expenditures came to lead not to a high level of output and emplo-
yment but to a high rate of n:~ney wages, costs ~nd prices ... It is very
possible that t~ absorb two m.dho.n extra workers m,to employment would
require a considerable reductiOn m real wage costs.
This raises a crucial point, concerning the power to determine one's own
rewards, and the relationship of that power to questions of justice and
desert. In contrast to a simple focus on the distribution of rewards, this
raises the question of the generation of rewards, the processes whereby
inequalities are generated.
Unequal incomes are inherent in a market economy. Even if everyone
started off with the same allocation of money, differences would
soon emerge. Not all labour commands the same price; not all investments
produce the same return; some people work longer hours, others prefer more
leisure and so on. The resulting inequalities are not necessarily unjust -
although the extent of them may be. In the real world, of course, people start
off with very different personal and financial resources. The problem is
that too many of these inequalities are exacerbated in the UK's system of
market exchange.
But market economics are not all of a piece; different kinds of market
produce different outcomes. For instance, Germany, Japan and Sweden all
have more equal earnings distributions than the UK, where the gap
between the highest and lowest paid is wider today than at any time since
1886. Social justice therefore has a part to play in deciding how a market is
constructed, and not simply with the end result.

Fair Reward

Most people have some idea of a 'fair reward'. For example, it is clear to
the vast majority of people that disadvantage and discrimination on
grounds of sex or race or disability is unjust. However, once one gets
beyond the general idea, there is less agreement on what fair rewards
should be. Even if there were more agreement about this, it is very diffi-
cult, both practically and morally, to impose such notions on a modern
economy. The very idea of a society that can be effectively managed from
the top on the basis of detailed centralized decisions is now discredited.
Moreover, our society does not stand by itself and happily does not have
walls around it, and people can go elsewhere.
60 What is Social justice?

Ideas of social justice in this area are not, however, necessarily tied to the
model of a command economy. It is often clear, at least, that_ given rewards
in a market economy are not fair, because they are not bei,ng determined
by such things as talent, effort and the person's contribution to the enter-
prise, but rather by established power relations. Real life does not conform
to economic models: people are not paid for the 'marginal product' of their
labour. They are paid, among other things, according to social norms. In
one sense, such distortions are the product of the market: they are what we
get if market processes, uncorrected, are allowed to reflect establi~hed
structures and habits of power. Examples of this are the huge salaries and
bonuses distributed to the directors of some large companies. [ ... ] These
salaries and bonuses are often quite unrelated to the performance of the
company concerned, and are sometimes actually inversely correlated with
company performance.
In another sense, unjust inequalities are themselves distortions of the
market: it is not a fair market in talent and effort if it is not talent and effort
that determine the outcome. This is most obviously demonstrated in the
case of inequalities of pay between men and women. Although the 1970
Equal Pay Act eliminated overt pay inequities, it had a limited effect on the
gap between men's and women's pay, which resulted in the main from job
segregation and gender-biased views of what different jobs and different
qualities were worth. Hence the concept of 'equal pay for work of equal
value', which permits comparisons between two very different jobs per-
formed for the same employer. Although designed to eradicate gender as a
consideration in earnings, equal value claims may in practice require a
complete transformation in an organization's pay-setting. Equal pay for
work of equal value, after all, implies unequal pay for work of unequal
value: thus, the basis for differentials has to be made explicit and justified.
Different organizations and people will have different views of what
constitutes a fair basis for differentials: it should not be an aim of govern-
ment to substitute its own view of fair wage settlements. It is, however, a
legitimate aim of policy concerned with social justice to develop social
institutions (of which equal value laws are one example) which will enable
people to express their own ideas of a fair reward.

The Meaning of Social Justice: A Summary

In arriving at our principles of social justice, we reject the view, so fash-

ionable in the 1980s, that human beings are simply selfish individuals, for
whom there is 'no such thing as society'. People are essentially social crea-
tures, dependent on one another for the fulfilment of their needs and
potential, and willing to recognize their responsibilities to others as well as
claiming their rights from them. We believe our four principles of social
 Commission on Social Justice 61

·ustice, based on a basic belief in the intrinsic worth of every human being,
~cho the deeply held views of many people in this country. They provide
a compelling justification and basis for our work:

1 The foundation of a free society is the equal worth of all citizens.

2 Everyone is entitled, as a right of citizenship, to be able to meet their
basic needs.
3 The right to self-respect and personal autonomy demands the widest
possible spread of opportunities.
4 Not all inequalities are unjust, but unjust inequalities should be
reduced and where possible eliminated.

[ ... J

Note

From Commission on Social Justice, The Justice Gap, London, Institute for Public
Policy Research, 1993, pp. 4-16.
The Fiscal Crisis of the State
James 0 'Connor

[ ... ]

Our first premise is that the capitalistic state must try to fulfil two basic
and often mutually contradictory functions - accumulation and legit-
imization. [ ... ] This means that the state must try to maintain or create
the conditions in which profitable capital accumulation is possible.
However, the state also must try to maintain or create the conditions for
social harmony. A capitalist state that openly uses its coercive forces to help
one class accumulate capital at the expense of other classes loses its legit-
imacy and hence undermines the basis of its loyalty and support. But a state
that ignores the necessity of assisting the process of capital accumulation
risks drying up the source of its own power, the economy's surplus pro-
duction capacity and the taxes drawn from this surplus (and other forms
of capital). This contradiction explains why President Nixon calls a legis-
lated increase in profit rates a 'job development credit', why the govern-
ment announces that new fiscal policies are aimed at 'stability and growth'
when in fact their purpose is to keep profits high and growing, why the tax
system is nominally progressive and theoretically based on 'ability to pay'
when in fact the system is regressive. The state must involve itself in the
accumulation process, but it must either mystify its policies by calling
them something that they are not, or it must try to conceal them (e.g. by
making them into administrative, not political, issues).
Our second premise is that the fiscal crisis can be understood only in
terms of the basic Marxist economic categories (adapted to the problems
taken up here). State expenditures have a twofold character corresponding
to the capitalist state's two basic functions: social capital and social
expenses. Social capital is expenditures required for profitable private
accumulation; it is indirectly productive (in Marxist terms, social capital
 james 0' Connor 63

indirectly expands surplus value). There are two kinds of social capital:
social investment and social consumption (in Marxist terms, social con-
stant capital and social variable capital). [ ... ] Social investment consists
of projects and services that increase the productivity of a given amount of
labour power and, other factors being equal, increase the rate of profit.
A good example is state-financed industrial-development parks. Social
consumption consists of projects and services that lower the reproduction
costs of labour and, other factors being equal, increase the rate of profit.
An example of this is social insurance, which expands the reproductive
powers of the workforce while simultaneously lowering labour costs. The
second category, social expenses, consists of projects and services which are
required to maintain social harmony - to fulfil the state's 'legitimization'
function. They are not even indirectly productive. [ ... ] The best example
is the welfare system, which is designed chiefly to keep social peace among
unemployed workers. (The costs of politically repressed populations in
revolt would also constitute a part of social expenses.)
Because of the dual and contradictory character of the capitalist state,
nearly every state agency is involved in the accumulation and legitimiza-
tion functions, and nearly every state expenditure has this twofold charac-
ter. For example, some education spending constitutes social capital (e.g.
teachers and equipment needed to reproduce and expand workforce tech-
nical and skill levels), whereas other outlays constitute social expenses (e.g.
salaries of campus policemen). To take another example, the main purpose
of some transfer payments (e.g. social insurance) is to reproduce the work-
force, whereas the purpose of others (e.g. income subsidies to the poor) is
to pacify and control the surplus population. The national income
accounts lump the various categories of state spending together. (The state
does not analyse its budget in class terms.) Clearly, the different categories
cannot be separated if each budget item is not examined.
Furthermore, precisely because of the social character of social capital
and social expenses, nearly every state expenditure serves these two (or
more) purposes simultaneously, so that few state outlays can be classified
unambiguously. For example, freeways move workers to and from work
and are therefore items of social consumption, but they also transport
commercial freight and are therefore a form of social investment. And,
when used for either purpose, they may be considered forms of social
capital. However, the Pentagon also needs freeways; therefore they in part
constitute social expenses. Despite this complex social character of state
outlays we can determine the political-economic forces served by any
budgetary decision, and thus the main purpose (or purposes) of each bud-
getary item. [ ... ]
The first basic thesis presented here is that the growth of the state sector
and state spending is functioning increasingly as the basis for the growth
of the monopoly sector and total production. Conversely, it is argued that
64 The Fiscal Crisis of the State

the growth of state spending and state programmes is the result of the
growth of the monopoly industries. In other words, the growth of the state
is both a cause and effect of the expansion of monopoly capital. [ ... ]
More specifically, the socialization of the costs of social investment and
social consumption capital increases over time and increasingly is needed
for profitable accumulation by monopoly capital. The general reason is
that the increase in the social character of production (specialization, div-
ision of labour, interdependency, the growth of new social forms of capital
such as education, etc.) either prohibits or renders unprofitable the private
accumulation of constant and variable capital. The growth of the monop-
oly sector is irrational in the sense that it is accompanied by unemploy-
ment, poverty, economic stagnation and so on. To ensure mass loyalty and
maintain its legitimacy, the state must meet various demands of those who
suffer the 'costs' of economic growth. [ ... ]
It might help to compare our approach with traditional economic
theory. Bourgeois economists have shown that increases in private con-
sumption beget increases in private investment via the accelerator effect. In
turn, increases in private investment beget increases in private consump-
tion via the multiplier effect. Similarly, we argue that greater social invest-
ment and social consumption spending generate greater private investment
and private consumption spending, which in turn generate surplus capital
(surplus productive capacity and a surplus population) and a larger volume
of social expenses. Briefly, the supply of social capital creates the demand
for social expenses. In effect, we work with a model of expanded repro-
duction (or a model of the economy as a whole) which is generalized to
take into account the socialization of constant and variable capital costs
and the costs of social expenses. The impact of the budget depends on the
volume and indirect productivity of social capital and the volume of social
expenses. On the one hand, social capital outlays indirectly increase pro-
ductive capacity and simultaneously increase aggregate demand. On the
other hand, social expense outlays do not increase productive capacity,
although they do expand aggregate demand. Whether the growth of pro-
ductive capacity runs ahead or behind the growth of demand thus depends
on the composition of the state budget. In this way, we can see that the
theory of economic growth depends on class and political analyses of the
determinants of the budget.
This view contrasts sharply with modern conservative thought, which
asserts that the state sector grows at the expense of private industry. We
argue that the growth of the state sector is indispensable to the expansion
of private industry, particularly monopoly industries. Our thesis also con-
trasts sharply with a basic tenet of modern liberal thought- that the expan-
sion of monopoly industries inhibits the growth of the state sector. The fact
of the matter is that the growth of monopoly capital generates increased
expansion of social expenses. In sum, the greater the growth of social
 james 0' Connor 65

capital, the greater the growth of the monopoly sector. And the greater the
growth of the monopoly .sector, the greater the state's expenditures on
social expenses of productiOn.
The second basic thesis in this study is that the accumulation of social
capital and social expenses is a contradictory process which creates ten-
dencies toward economic, social and political crises. [ ... ] Two separate
but related lines of analysis are explored.
First, we argue that although the state has socialized more and more
capital costs, the social surplus (including profits) continues to be appro-
priated privately. The socialization of costs and the private appropriation
of profits creates a fiscal crisis, or 'structural gap', between state expendi-
tures and state revenues. The result is a tendency for state expenditures to
increase more rapidly than the means of financing them. While the accu-
mulation of social capital indirectly increases total production and
society's surplus and thus in principle appears to underwrite the expansion
of social expenses, large monopoly-sector corporations and unions
strongly resist the appropriation of this surplus for new social capital or
social expense outlays. [ ... ]
Second, we argue that the fiscal crisis is exacerbated by the private
appropriation of state power for particularistic ends. A host of
'special interests' - corporations, industries, regional and other business
interests - make claims on the budget for various kinds of social invest-
ment. [ ... J(These claims are politically processed in ways that must either
be legitimated or obscured from public view.) Organized labour and
workers generally make various claims for different kinds of social con-
sumption, and the unemployed and poor (together with businessmen in
financial trouble) stake their claims for expanded social expenses. Few if
any claims are co-ordinated by the market. Most are processed by the
political system and are won or lost as a result of political struggle.
Precisely because the accumulation of social capital and social expenses
occurs within a political framework, there is a great deal of waste, duplica-
tion and overlapping of state projects and services. Some claims conflict
and cancel one another out. Others are mutually contradictory in a variety
of ways. The accumulation of social capital and social expenses is a highly
irrational process from the standpoint of administrative coherence, fiscal
stability and potentially profitable private capital accumulation.

Note

From J. O'Connor, The Fiscal Crisis of the State, New York, St Martin's Press,
1973, pp. 6-11.
Sotne Contradictions of the
Modern Welfare State
Claus Offe

The welfare state has served as the major peace formula of advanced capi-
talist democracies for the period following the Second World War. This
peace formula consists, first, in the explicit obligation of the state appar-
atus to provide assistance and support (either in money or in kind) to those
citizens who suffer from specific needs and risks which are characteristic
of the market society; such assistance is provided as legal claims granted to
the citizens. Second, the welfare state is based on the recognition of the
formal role of labour unions both in collective bargaining and the forma-
tion of public policy. Both of these structural components of the welfare
state are considered to limit and mitigate class conflict, to balance the
asymmetrical power relation of labour and capital, and thus to overcome
the condition of disruptive struggle and contradiction that was the most
prominent feature of pre-welfare state, or liberal, capitalism. In sum, the
welfare state has been celebrated throughout the postwar period as the
political solution to societal contradictions.
Until [the 1970s], this seemed to be the converging view of political elites
both in countries in which the welfare state is fully developed (e.g. Great
Britain, Sweden) as well as in those where it is still an incompletely real-
ized model. Political conflict in these latter societies, such as the USA, was
centred not on the basic desirability and functional indispensability, but on
the pace and modalities of the implementation of the welfare state model.
This was true, with very minor exceptions, up to the mid-1970s. From
that point on we see that in many capitalist societies this established peace
formula becomes itself the object of doubts, fundamental critique and
political conflict. It appears that the most widely accepted device of polit-
ical problem-solving has itself become problematic, and that, at any rate,
the unquestioning confidence in the welfare state and its future expansion
has rapidly vanished. It is to these doubts and criticisms that I will direct
 Claus Offe 67
my attention in the following remarks. The point to start with is the obser-
vation that the almost universally accepted model for creating a measure of
social peace and harmony in European postwar societies has itself become
the source of new contradictions and political divisions in the 1970s.
Historically, the welfare state has been the combined outcome of a
variety of factors which change in composition from country to country:
Social Democratic reformism, Christian socialism, enlightened conserva-
tive political and economic elites and large industrial unions. They fought
for and conceded comprehensive compulsory insurance schemes, labour
protection legislation, minimum wages, the expansion of health and edu-
cation facilities and state-subsidized housing, as well as the recognition of
unions as the legitimate economic and political representatives of labour.
These continuous developments in Western societies were often dramatic-
ally accelerated in a context of intense social conflict and crisis, particularly
under war and postwar conditions. The accomplishments, which were
won under conditions of war and postwar periods, were regularly main-
tained; added to them were the innovations that could be introduced in
periods of prosperity and growth. In the light of the Keynesian doctrine of
economic policy, the welfare state came to be seen not so much as a burden
imposed upon the economy, but as a built-in economic and political stabi-
lizer which could help to regenerate the forces of economic growth and
prevent the economy from spiralling downward into deep recessions.
Thus, a variety of quite heterogeneous ends (ranging from reactionary pre-
emptive strikes against the working class movement in the case of
Bismarck, to socialist reformism in the case of the Weimar Social
Democrats; from the social-political consolidation of war and defence
economies, to the stabilization of the business cycle) adopted identical
institutional means which today make up the welfare state. It is exactly its
multi-functional character, its ability to serve many conflicting ends and
strategies simultaneously which made the political arrangement of the
welfare state so attractive to a broad alliance of heterogeneous forces. But
it is equally true that the very diversity of the forces that inaugurated and
supported the welfare state could not be accommodated forever within the
institutional framework which today appears to come increasingly under
attack. The machinery of class compromise has itself become the object of
class conflict.

The Attack from the Right

The sharp economic recession of the mid-1970s (gave] rise to a renaissance
of neo-laissez-faire and monetarist economic doctrines of equal intellec-
tual and political power. These doctrines amount to a fundamental critique
of the welfare state, which is seen to be the illness of which it pretends to
68 Some Contradictions of the Modern Welfare State

be the cure. Rather than effectively harmonizing the conflicts of a market

society, it exacerbates them and prevents the forces of social peace and
progress (namely the forces of the market place) to functioi?. properly and
beneficially. This is said to be so for two major reasons. First, the welfare
state apparatus imposes a burden of taxation and regulation upon capital
which amounts to a disincentive to investment. Second, the welfare state
grants claims, entitlements and collective power positions to workers and
unions which amount to a disincentive to work, or at least to work as hard
and productively as they would be forced to under the reign of unfettered
market forces. Taken together, these two effects lead into a dynamic of
declining growth and increased expectations, of economic demand over-
load (inflation) as well as political demand overload (ungovernability)
which can less and less be satisfied by the available output.
The reactionary political uses of this analysis are obvious, but it may well
be that the truth of the analysis itself is greater than the desirability of its
practical conclusions. Although the democratic left has often measured the
former by the latter, the two deserve at least a separate evaluation. In my
view, at least, the above analysis is not so much false in what it says as in
what it remains silent about.
To take up the first point of the conservative analysis: isn't it true that
under conditions of declining growth rates and vehement competition on
domestic and international markets, individual capitalists (at least those
firms which do not enjoy the privileges of the monopolistic sector) have
many good reasons to consider the prospects for investment and profits
bleak, and to blame the welfare state, which imposes social security taxes
and a great variety of regulations on them, for reducing profitability even
further? Isn't it true that the power position of unions, which in turn is
based on rights they have won through industrial relations, collective bar-
gaining and other laws, is great enough as to make an increasing number of
industrial producers unprofitable or to force them to seek investment
opportunities abroad? And isn't it also true that capitalist firms will make
investment (and hence employment) decisions according to criteria of
expected profitability, and that they consequently will fail to invest when
long-term profitability is considered unattractive by them, thus causing an
aggregate relative decline in the production output of the economy?
No one would deny that there are causes of declining growth rates and
capitalists' failure to invest which have nothing to do with the impact of
the welfare state upon business, but which are rather to be looked for in
inherent crisis tendencies of the capitalist economy such as overaccumula-
tion, the business cycle or uncontrolled technical change. But even so, it
still might make sense to alleviate the hardship imposed upon capital and
therefore, by definition, upon the rest of society (within the confines of a
capitalist society), by dropping some of the burdens and constraints of
the welfare state. This, of course, is exactly what most proponents of this
 Claus Offe 69
argument are suggesting as a practical consequence. But after all, as
the fairly compelling logic of the argument continues, who benefits from
the operation of a welfare state that undermines and eventually destroys
the production system upon which it has to rely in order to make its own
promises come true? Doesn't a kind of 'welfare' become merely nominal
and worthless anyway if it punishes capital by a high burden of costs and
hence everyone else by inflation, unemployment or both? In my view, the
valuable insight to be gained from the type of analysis I have just described
is this: the welfare state, rather than being a separate and autonomous
source of well-being which provides incomes and services as citizen rights,
is itself highly dependent upon the prosperity and continued profitability
of the economy. While being designed to be a cure to some ills of capital-
ist accumulation, the nature of the illness is such that it may force the
patient to refrain from using the cure.
A conceivable objection to the above argument would be that capitalists
and conservative political elites exaggerate the harm imposed upon them
by the welfare state arrangements. To be sure, in the political game they
have good tactical reasons to make the welfare state burden appear more
intolerable than it really is. The question boils down then to what we mean,
and how we measure 'reality' in this context. In answering this question
we must remember that the power position of private investors includes
the power to define reality. That is to say, whatever they consider an intol-
erable burden is an intolerable burden which will in fact lead to a declining
propensity to invest, at least as long as they can expect to effectively reduce
welfare-state-related costs by applying such economic sanctions. The
debate about whether or not the welfare state is 'really' squeezing profits
is thus purely academic because investors are in a position to create the
reality and the effects of 'profit squeeze'.
The second major argument of the conservative analysis postulates that
the effect of the welfare state is a disincentive to work. 'Labour does not
work!' was one of the slogans in the campaign that brought Mrs Thatcher
into power. But again, the analytical content of the argument must be care-
fully separated from the political uses to which it is put. And again, this
analytical argument can, often contrary to the intention of its proponents,
be read in a way that does make a lot of empirical sense. For instance, there
is little doubt that elaborate labour protection legislation puts workers in
a position to resist practices of exploitation that would be applied, as a rule,
in the absence of such regulations. Powerful and recognized unions can in
fact obtain wage increases in excess of productivity increases. And exten-
sive social security provisions make it easier, at least for some workers for
some of the time, to avoid undesirable jobs. Large-scale unemployment
insurance covering most of the working population makes unemployment
less undesirable for many workers and thus partially obstructs the reserve
army mechanism. In sum, the welfare state has made the exploitation of
70 Some Contradictions of the Modern Welfare State

labour more complicated and less predictable. On the other hand, as the
welfare state imposes regulations and rights upon the labour-capital
exchange that goes on in production, while leaving the authority structure
and the property relations of production untouched, it is hardly surprising
to see that the workers are not, as a rule, intrinsically motivated to work as
productively as they possibly can. In other words, the welfare state main-
tains the control of capital over production, and thus the basic source of
industrial and class conflict between labour and capital; but it by no means
establishes anything resembling 'workers control'. At the same time, it
strengthens workers' potential for resistance against capital's control, the
net effect being that an unchanged conflict is fought out with means that
have changed in favour of labour. Exploitative production relations coexist
with expanded possibilities to resist, escape and mitigate exploitation.
While the reason for struggle remained unchanged, the means of struggle
increased for the workers. It is not surprising to see that this condition
undermines the work ethic, or at least requires more costly and less reli-
able strategies to enforce such ethic.
My point so far has been that the two key arguments of the liberal-
conservative analysis are valid to a large extent, contrary to what critics
from the left have often argued. The basic fault in this analysis has less to
do with what it explicitly states than with what it leaves out of its consid-
eration. Every worthwhile political theory has to answer two questions:
first, what is the desirable form of the organization of society and state, and
how can we demonstrate that it is at all workable, i.e. consistent with our
basic normative and factual assumptions about social life? This is the
problem of defining a consistent model or goal of transformation. Second,
how do we get there? This is the problem of identifying the dynamic forces
and strategies that could bring about the transformation.
The conservative analysis of the welfare state fails on both counts. To
start with the latter problem, it is extremely hard today in Western Europe
to conceive of a promising political strategy that would aim at even par-
tially eliminating the established institutional components of the welfare
state, to say nothing about its wholesale abolition. That is to say, the
welfare state has, in a certain sense, become an irreversible structure, the
abolition of which would require nothing less than the abolition of polit-
ical democracy and the unions, as well as fundamental changes in the party
system. A political force that could bring about such dramatic changes is
nowhere visible as a significant factor (right-wing middle-class populist
movements that occasionally spring up in some countries notwithstand-
ing). Moreover, political opinion research has shown that the fiercest advo-
cates of laissez-faire capitalism and economic individualism show marked
differences between their general ideological outlook and their willingness
to have special transfers, subsidies and social security schemes aban-
doned from which they personally derive benefits. Thus, in the absence of
 Claus Offe 71

a powerful ideological and organizational undercurrent in Western politics

(such as a nco-fascist or authoritarian one), the vision of overcoming the
welfare state and resurrecting a 'healthy' market economy is not much
more than the politically impotent daydream of some ideologues of the old
middle class. This class is nowhere strong enough to effect, as the examples
0 f Mrs Thatcher and Ronald Reagan demonstrate, more than marginal
alterations to an institutional scheme that they had to accept as given when
taking office.
Even more significant, however, is the second failure of the conservative
analysis, its failure to demonstrate that advanced capitalism minus the
welfare state would actually be a workable model. The reasons why it is
not, and consequently why the neo-laissez-faire ideology would be a very
dangerous cure, if it could be administered, are fairly obvious. In the
absence of large-scale state-subsidized housing, public education and
health services, and extensive compulsory social security schemes, the
working of an industrial economy would be inconceivable. Given the con-
ditions and requirements of urbanization, large-scale concentration of
labour power in industrial production plants, rapid technical, economic
and regional change, the reduced ability of the family to cope with the dif-
ficulties of life in industrial society, the securalization of the moral order,
and the quantitative reduction and growing dependence of the propertied
middle classes, all of which are well known characteristics of capitalist
social structures, the sudden disappearance of the welfare state would leave
the system in a state of exploding conflict and anarchy. The embarrassing
secret of the welfare state is that, while its impact upon capitalist accumu-
lation may well become destructive (as the conservative analysis so
emphatically demonstrates), its abolition would be plainly disruptive (a
fact that is systematically ignored by the conservative critics). The contra-
diction is that while capitalism cannot coexist with the welfare state,
neither can it exist without the welfare state. This is exactly the condition
to which we refer when using the concept 'contradiction'. The flaw of the
conservative analysis is in the one-sided emphasis it puts on the first side
of this contradiction, and its silence about the second one.
This basic contradiction of the capitalist welfare state could of course be
thought to be a mere dilemma which then would be solved or managed by
a circumspect balancing of the two components. This, however, would pre-
suppose two things, both of which are highly uncertain: first, that there is
something like an 'optimum point' at which the order-maintaining func-
tions of the welfare state are preserved while its disruptive effects are
avoided; and second, if so, that political procedures and administrative
practices will be sufficiently 'rational' to accomplish this precarious
balance. Before I consider the prospects for this solution, let me first
summanze some elements of the contending socialist critique of the
welfare state.
72 Some Contradictions of the Modern Welfare State

The Critique from the Socialist Left

Although it would be nonsensical to deny that the struggleJor labour pro~

tection legislation, expanded social services, social security and union
recognition which has been led by the working-class movement for over a
century now, and which has brought substantial improvements to the
living conditions of most wage earners, the socialist critique of the welfare
state is nevertheless a fundamental one. It can be summarized in three
points which we will consider in turn: the welfare state is said to b.e (1)
ineffective and inefficient, (2) repressive and (3) conditioning a false ideo-
logical understanding of social and political reality within the working
class. In sum, it is a device to stabilize rather than a step in the transforma-
tion of capitalist society.
In spite of the undeniable gains in the living conditions of wage earners,
the institutional structure of the welfare state has done little or nothing
to alter the income distribution between the two principal classes of
labour and capital. The huge machinery of redistribution does not work
in a vertical direction but in a horizontal direction, namely within the
class of wage earners. A further aspect of its ineffectiveness is that the
welfare state does not eliminate the causes of individual contingencies and
needs (such as work-related diseases, the disorganization of cities by the
capitalist real· estate market, the obsolescence of skills, unemployment,
etc.) but compensates for some of the consequences of such events (by the
provision of health services and health insurance, housing subsidies,
training and retraining facilities, unemployment benefits and the like).
Generally speaking, the kind of social intervention most typical of the
welfare state is always 'too late', and hence its ex post facto measures are
more costly and less effective than a more 'causal' type of intervention
would allow them to be. This is a generally recognized dilemma of social
policy making, the standard answer to which is the recommendation to
adopt more 'preventive' strategies. It is also recognized that effective pre-
vention would mean interference with the prerogatives of investors
and management, i.e. the sphere of the market and private property
which the welfare state has only very limited legal and de facto powers to
regulate.
A further argument pointing to the ineffectiveness of the welfare state
emphasizes the constant threat to which social policies and social services
are exposed due to the fiscal crisis of the state, which in turn is a reflection
of both cyclical and structural discontinuities of the process of accumula-
tion. All West European countries [ ... ] experienced a sharp economic
recession in the mid-1970s, and we know of many examples of social policy
expenditure cuts in response to the fiscal consequences of this reces-
sion. But even if the absolute and relative rise of social policy expenditures
continues uninterrupted as a percentage of GNP, it is by no means certain,
 Claus Offe 73

Ian Gough and others before him have argued, that increases in the
::penditures ar~ par_alleled by incre,ases in_ real 'w~lfar~'. ~?~ du~l fallacy,
known in techmcal_ hterature_as the spcndmg scrv1ce c_hche, 1s th1s: first, a
arginal increase m expend1tures must not necessanly correspond to a
marginal increment in the 'output' of the welfare state apparatus; it may
:ell be used up in feeding the bureaucratic machinery itself. Second, even
if the output (say of health services) is increased, a still larger increase in the
level of risks and needs (or a qualitative change of these) may occur on the
part of the clients or recipients of such services, so as to make the net effect
negative.
The bureaucratic and professional form through which the welfare state
dispenses its services is increasingly seen to be a source of its own ineffi-
ciency. Bureaucracies absorb more resources and provide less services
than other democratic and decentralized structures could. The reason why
the bureaucratic form of administering social services is maintained in
spite of its inefficiency and ineffectiveness must therefore have to do with
the social control function exercised by centralized welfare bureaucracies.
This analysis leads to the critique of the repressiveness of the welfare state,
its social control aspect. Such repressiveness, in the view of the critics, is
indicated by the fact that in order to qualify for the benefits and services
of the welfare state, the client must not only prove his or her 'need', but
must also be a 'deserving' client, that is, one who complies to the domin-
ant economic, political and cultural standards and norms of the society.
The heavier the needs, the stricter these requirements tend to be defined.
Only if, for instance, the unemployed are willing to keep themselves avail-
able for any alternative employment (often considerably inferior to the
job they have lost) that is made available to them by employment agen-
cies, are they entitled to unemployment benefits; and the claim for welfare
payments to the poor is everywhere made conditional upon their confor-
mity to standards of behaviour which the better-to-do strata of the popu-
lation are perfectly free to violate. In these and other cases, the welfare
state can be looked upon as an exchange transaction in which material
benefits for the needy are traded for their submissive recognition of the
'moral order' of the society which generates such need. One important
precondition for obtaining the services of the welfare state is the ability of
the individual to comply with the routines and requirements of welfare
bureaucracies and service organizations, an ability which is often inversely
correlated to need itself.
A third major aspect of the socialist critique of the welfare state is its
politico-ideological control function. The welfare state is seen not only as
the source of benefits and services, but at the same time the source of false
conceptions about historical realities which have damaging effects on
working-class consciousness, organization and struggle. The welfare
state creates the false image of two separated spheres of working-class life.
74 Some Contradictions of the Modern Welfare State

On the one side is the sphere of work, the economy, production and
'primary' income distribution. On the other is the sphere of citizenship,
the state, reproduction and 'secondary' distribution. This qivi~ion of the
socio-political world obscures the causal and functional links that exist
between the two, and thus prevents the formation of a political under-
standing of society as a coherent totality to be changed. That is to say, the
structural arrangements of the welfare state tend to make people ignore or
forget that the needs and contingencies which the welfare state responds to
are themselves constituted, directly or indirectly, in the sphere of work
and production. The welfare state itself is materially and institutionally
constrained by the dynamics of the sphere of production, and a reliable
conception of social security does therefore presuppose not only the
expansion of citizen rights, but of workers' rights in the process of
production. Contrary to such insights, which are part of the analytical
starting-points of any conceivable socialist strategy of societal transforma-
tion, the inherent symbolic indoctrination of the welfare state suggests the
ideas of class co-operation, the disjunction of economic and political strug-
gles, and an ill-based confidence in an ever continuing cycle of economic
growth and social security.

The Welfare State and Political Change

What emerges from this discussion of the analysis of the welfare state by
the right and the left are three points on which the liberal conservative and
the socialist critic exhibit somewhat surprising parallels.
First, contrary to the ideological consensus that flourished in some of
the most advanced welfare states throughout the 1950s and 1960s, the
welfare state is no longer believed to be the promising and permanently
valid answer to the problems of the socio-political order of advanced cap-
italist economies. Critics in both camps have become more vociferous and
fundamental in their negative appraisal of welfare state arrangements.
Second, neither of the two approaches to the welfare state could or would
be prepared, in the best interests of their respective clientele, to abandon
the welfare state, as it performs essential and indispensable functions both
for the accumulation process as well as for the social and economic well-
being of the working class. Third, while there is, on the conservative side,
neither a consistent theory nor a realistic strategy about the social order
of a non-welfare state (as I have argued before), it is evident that the situ-
ation is not much better on the left where one could possibly speak of a
consistent theory of socialism, but certainly not of an agreed upon and
realistic strategy for its construction. In the absence of the latter, the
welfare state remains a theoretically contested, though in reality firmly
entrenched fact, of the social order of advanced capitalist societies.
 Claus Offe 75

In short, it appears that the welfare state, while being contested both from
the right and the left, will not be easily replaced by a conservative or pro-
gressive alternative.

[ ... J

Note

From Critical Social Policy, 2, 2, 1982, pp. 7-14.

The Po-wer Resources Model
Walter Korpi

Walter Korpi argues that most modern social scientific accounts of social
structure and change have relied upon one of three models: a 'pluralist-
industrial' model which emphasizes the emergence in developed industrial
societies of a plurality of competing interests and social groupings whose
relations are mediated through largely consensual societal institutions; a
'Marxist-Leninist' model which insists that Western societies are still
essentially riven by those forms of class struggle originally identified
by Marx and in which the state acts in the interests of capital; and a
neo-corporatist account in which certain (economically defined) interests
have privileged access to the state and in which collective action is negoti-
ated at an elite level between the state and these privileged social
actors. Here he offers his own alternative account of a 'power resources
model'. (Eds)

Power Resources

The stability implied in the pluralist industrial model of society rests on the
assumption that the distribution of power resources between various
groups and collectivities in the capitalist democracies is potentially equal.
Schmitter's assumption of relative stability of nco-corporatist arrange-
ments appears to imply an unequal yet fairly stable distribution of power
resources. The Leninist interpretation of Marx similarly implies an
unequal but stable power distribution in the capitalist democracies. Such
assumptions must be questioned. One way of elucidating the distribution
of power is to analyse what instruments and resources of power different
groups and collectivities in society have at their disposal in the interaction
which takes place between them over long periods of time.
 Walter Korpi 77
What, then, are power resources? Power resources are characteristics
which provide actors - individuals or collectivities - with the ability to
punish or reward other actors. These resources can be described in terms
of a variety of dimensions. Power resources can thus vary with regard to
domain, which refers to the number of people who are receptive to the par-
ticular type of rewards and penalties. They can also differ in terms of scope
-the various kinds of situation in which they can be used. A third import-
ant dimension is the degree of scarcity of a power resource of a particular
type. Furthermore, power resources can vary in terms of centrality; i.e.
they can be more or less essential to people in their daily lives. They also
differ with regard to how easily they are convertible into other resources.
The extent to which a power resource can be concentrated is a crucial
dimension. Of relevance are also the costs involved in using a power
resource and in its mobilization, i.e. in making it ready for use. Power
resources can furthermore differ in the extent to which they can be used to
initiate action or are limited to responses to actions by others.
It is important to realize that power resources need not be used or acti-
vated in order to have consequences for the actions of other people. An
actor with the ability to reward or punish need thus not always do so to
influence others. Since every activation of power resources entails costs, it
actually lies in the interests of power holders to increase efficiency in the
deployment of power resources. This can be achieved through what we
may call the investment of power resources. Thus, power resources can be
invested through the creation of structures for decision-making and con-
flict regulation, whereby decisions can be made on a routine basis and in
accordance with given principles. Investments of power resources can be
made in institutions for conflict resolution such as laws, ordinances and
bureaucracies, in technologies, in community and national planning, and
in the dissemination of ideologies.
Some types of power resource can be described as basic in the sense that
they in themselves provide the capacity to reward or to punish other
actors. Through processes of investment, from basic power resources
actors can derive new types of power resource. These derived power
resources, however, ultimately depend on the basic power resources for
their effectiveness. The distinction between basic and derived power
resources is not easy to make but appears fruitful. It indicates, for instance,
that power resources such as ideologies can be seen as ultimately based
on resources which provide the capability to apply positive or negative
sanctions.
Let us now look briefly at the characteristics of some of the more import-
ant basic power resources in Western societies. Among resources familiar
to students of power, means of violence have traditionally been considered
important. In terms of the aforementioned dimensions, means of violence
have a large domain, wide scope and high concentration potential, as well
78 The Power Resources Model

as a relatively high convertibility. Although the legitimate use of violence is

typically reserved for the state, resources for violence are not scarce. Their
essential drawback is the high costs associated with their us~.
Two types of power resource are central and their dimensions important
for the theoretical controversy between pluralists and Marxist social sci-
entists. The first type of power resource consists of capital and connol over
the means of production. The second type is what economists often call
'human capital', i.e. labour power, education and occupational skills. The
pluralist approach assumes that persons possessing control over capital ;md
the means of production do not have appreciably greater power resources
at their disposal than persons with only human capital. Yet in terms of the
aforementioned dimensions, capital and control over the means of pro-
duction are power resources which differ drastically from human capital,
making parity between them extremely problematic.
As power resources, capital and the means of production have a large
domain, wide scope and high concentration potential, as well as high
scarcity and convertibility. The costs involved in mobilizing and using
these resources are relatively low. Furthermore, control over the means of
production has high centrality, since it affects people's livelihood. Capital
is also typically used to initiate action.
When regarded as a power resource, human capital is characterized by
serious limitations. Usually it has a fairly small domain and narrow scope.
Since everybody has some of it, human capital is generally not a highly
scarce resource. Where labour power is offered on the labour market, its
value depends on demand from capital, and its ability to initiate action is
limited. Human capital has low convertibility and a low concentration
potential. In an era of mass education, formal training beyond a certain
level can at times yield diminishing returns. To be effective, the human
capital of various individuals and groups must therefore be co-ordinated
on a broad basis. This requires investments in organizations for collective
action and hence fairly large mobilization costs.
In Western countries, most human capital is utilized in the labour
market. Economists often discuss the labour market as one of supply and
demand where commodities are bought and sold. But human labour
power is a very special commodity, since it is inseparable from its owner.
Thus it cannot be sold; that would be slave trade. Labour can be hired
only for a certain time, and the buyer acquires the right to make use of
the seller's labour capacity during hours of work. Once the employment
contract has been concluded, the owner of human capital cannot shed it
like an overcoat but must deliver his labour power at the workplace, and
on the job must personally subordinate himself to the directives of
management. Thus the system of wage labour creates relationships of
authority and subordination among people and the basis for a division
into classes.
 Walter Korpi 79
The possibility of increasing the effectiveness of the power resources of
individuals through collective action provides a rational explanation for
the origin of unions to promote the interests of wage-earners in disputes
with employers. It also offers an explanation of why wage-earners organ-
ize themselves into political parties. As the growth of 'juristic persons' and
corporate actors during the past centuries indicates, other actors also have
organized for collective action to increase the efficiency of their power
resources. Alongside capital and control over the means of production,
organizations to co-ordinate wage-earners' actions - primarily trade
unions and political parties.:_ belong to the strategically important power
resources in the capitalist democracies.
Are, then, either of these types of strategic power resources- on the
one hand control over capital and the means of production, and on the
other hand control over human capital co-ordinated through the organiz-
ations of wage-earners - dominant in the capitalist democracies? Let us
look more closely at the clearest confrontation between them, viz. at the
workplace. Control over the means of production forms the basis of
management's right of command over labour. It is capital which hires
labour, not labour which hires capital. The subordination of labour is,
however, a matter of degree inasmuch as the prerogatives of the repre-
sentatives of capital have been restricted by legislation and by collective
bargaining, the effectiveness of which in turn is influenced by the market
situation. The prerogatives of management still confirm that, in terms
of power resources, the wage-earners in these societies are in a position
of inferiority vis-a-vis capital. The maintenance of a system of author-
ity and subordination based on control over the means of production is
a major problem confronting the dominant groups in the capitalist
democracies.
I agree with the pluralist view on power distribution in the capitalist
democracies to the extent that in these societies power is probably more
widely shared than in other contemporary societies with different political
and economic systems. However, I object to the next and crucial step in
pluralist thought: that the assumed equal opportunities to mobilize power
has generated a distribution of power resources in these societies that is
sufficiently equal to no longer warrant our attention. If we view the devel-
opment of wage-earners' collective organizations as essential for the effect-
iveness with which their 'human capital' can be applied in the conflicts of
interest with capital, it appears evident that the distribution of power
resources in Western societies can vary considerably over time as well as
between countries. Once we drop the assumptions of the distribution of
power resources implicit in the pluralist, nco-corporatist and nco-Leninist
models, a host of interesting questions concerning distributive processes,
social consciousness and patterns of conflict, as well as institutional func-
tioning and stability, come to the fore.
80 The Power Resources Mode!

Social Change
In Western societies variations in the difference in power reso_llrces between
labour and business interests, along with their allied groups, can be
expected to have a variety of consequences. This difference can influence:

1 the distributive processes in the society;

2 the social consciousness of the citizens;
3 the level and patterns of conflicts in the society; and
4 the shaping and functioning of social institutions.

The processes of distribution in society can be viewed as exchange relations

where, for example, the right to control labour power is exchanged for
wages. These exchanges, however, need be neither in accordance with prin-
ciples of equity nor mutually balanced. Instead, we must assume that the
distribution of power resources influences the outcomes of the exchange
processes and consequently the degree of inequality in society. Stronger
groups thus will often get the 'lion's share' of what is to be distributed.
Power resources, which can be regarded as stocks of values, thus influence
the flow of values between individuals and collectivities.
But the distribution of power resources is also critical for the social con-
sciousness and levels of aspiration of citizens as well as for the way in
which they define their interests. Perceptions of what is just, fair and rea-
sonable vis-a-vis other groups of citizens are largely dependent upon the
power relations between these groups. Weak groups often learn, or are
taught to accept, circumstances which stronger groups would consider
unjust. Strong actors also tend to develop more long-range definitions of
their interests than weaker groups.
The distribution of power resources is of major importance for the levels
and patterns of conflict in society. Even if a weak group feels that an
exchange relationship is unjust, the group may have to accept the terms of
exchange because it lacks better alternatives and opposition may lead to
reprisals of various kinds. But when the power resources of actors increase,
they can offer resistance in situations which they previously had to accept.
They can also attempt to change conditions which they find unjust. The
distribution of power resources and its changes thus influences the levels
of conflicts in society. Since changes in the distribution of power resources
also affect the alternatives for action open to the actors, they can be
expected to influence the actors' strategies of conflict and thus the pattern
of conflict between them.
From this perspective, changes in the distribution of power resources
between different collectivities or classes can thus be assumed to be
of central importance for social change. Such changes will affect the
levels of aspiration of the actors and their capacity to maintain or to change
 Walter Korpi 81

existing social structures. Social change can be expected to emerge from

various types of bargaining, but will sometimes involve manifest conflicts.
Since open conflicts are costly to all parties, it is in the interests of the actors
to limit their length and frequency. Through settlements following bar-
gaining and/ or manifest conflicts, the terms of exchange between the
parties are thus moulded.
Where parties are involved in long-term interactions, settlements
between them generally tend to involve different types of compromise.
Such compromises may lead to the creation of new social institutions or
changes in the functioning of existing institutions. Social institutions and
arrangements related, for example, to processes of distribution and deci-
sion-making can thus be seen as outcomes of recurrent conflicts of inter-
est, where the parties concerned have invested their power resources in
order to secure favourable outcomes. Such institutions thus need not be
viewed as neutral or objective arrangements for conflict resolution.
Instead, the ways in which they were created and function reflect the dis-
tribution of power in society. When the distribution of power resources is
altered, the form and functioning of such institutions and arrangements are
also likely to change.
The distribution of power resources between the major collectivities or
classes in society will thus shape people's actions in a variety of ways. These
actions, in turn, will affect social structure as well as the distribution of
power. A continuous interplay between human action and the structure of
society arises. The approach outlined here comes close to the perspective
of Marx, according to which structural change is the result of people,
through co-operation or conflict, seeking solutions to what they define as
important social problems. The definitions of social problems are,
however, not objectively given but depend largely on the distribution of
power resources in society. The alternative solutions considered and ulti-
mately chosen are also affected by the power distribution.
In this perspective the state can be conceived of as a set of institutional
structures which have emerged in the struggles between classes and inter-
est groups in a society. The crucial aspect of this set of institutions is that
they determine the ways in which decision-making on behalf of the whole
society can legitimately be made and enforced. The state must not,
however, be seen as an actor in itself, or as a pure instrument to be used by
whichever group that has it under its control. While the institutional
structures and the state can be used to affect, for example, distributive
processes in the society, these structures also affect the way in which
power resources can be mobilized and are, in turn, affected by the use of
power resources.
Conflicts of interest between different groups or collectivities continu-
ously generate bargaining, manifest conflicts and settlements. At some
points, however, the settlements are the outcomes of important changes
82 The Power Resources Model

in the distribution of power resources and are of such a nature that they
significantly affect institutional arrangements and strategies of conflict for
long periods of time. In connection with such settlements. or 'historical
compromises', the patterns and conceptions of 'normal politics' change.
In the capitalist countries, the acceptance of the wage-earners' right
to organize in unions and parties and to participate in political decision-
making via universal and equal suffrage are examples of such historical
settlements. The winning of political democracy was the result of a
decrease in the disadvantage of working-class power resources brought
about through organization and often through alliances with middle-class
groups. It limited the legitimate use of means of repression by the state and
opened up legitimate avenues for the citizens to participate in the decision-
making of state organs. In many Western countries, the historical settle-
ments concerning political democracy came around the First World War.
These institutional changes significantly affected the patterns of interest
conflicts in the years to come.

Societal Bargaining

With the exception of setbacks in countries like Italy, Germany and Spain,
during the inter-war period the strength of the unions and working-class
parties increased in the Western nations. In the period after the Second
World War this trend has by and large continued. Through increasing
levels of organization the wage-earners have considerably strengthened
their bargaining position in the distributive conflicts in the capitalist
democracies. This has affected strategies of conflict and patterns of insti-
tutional arrangements. It is my hypothesis that the tripartite 'nco-
corporatist' institutional arrangements largely reflect the compromises and
settlements generated by the decreasing differences in the distribution of
power resources between wage-earners and representatives of capital and
allied groups in these countries. The decreasing disadvantage in wage-
earner power resources has generated institutional arrangements and prac-
tices in reaching settlements involving major interest groups, which we can
describe as 'societal bargaining'. The notion of bargaining implies that the
outcome of the interaction cannot be predetermined.
The choice of the term 'societal bargaining' to describe arrangements
and practices which others have termed 'corporatism' is made not only to
avoid a word which many have found hard to swallow. In my view, soci-
etal bargaining of the tripartite type that was developed in some countries
of Western Europe during the postwar period clearly differs from trad-
itional corporatist arrangements. It is therefore misleading to regard the
two as more or less functional equivalents in the way several writers on
nco-corporatism have done.
 Walter Korpi 83

Traditional state corporatism, for example in Italy, Germany and Spain,

must be seen as a successful attack on the working class and its organiza-
tions in a situation where the power gap between classes was very large.
State corporatism was used to widen that gap. The institutional arrange-
ments of societal bargaining, however, have come about in situations where
the disadvantage in power resources of the wage-earners is much smaller
than where the traditional 'state corporatist' solutions have been practised.
Societal bargaining involving the organizations of the wage-earners must,
by and large, be seen as reflecting an increasingly strongly organized
working class. Whether societal bargaining benefits the wage-earners or
not is an empirical question, which cannot be settled through definitions.
We must assume, instead, that its long-term as well as the short-term out-
comes can vary and are dependent on the distribution of power resources
between the parties. From the power resource perspective the institutional
arrangements of societal bargaining (i.e. the 'nco-corporatist' institutions)
appear as intervening variables between, on the one hand, the distribution
of power resources in society and, on the other hand, the pattern and
outcome of distributive conflicts.
The spread of societal bargaining in Western nations during the postwar
period is the result of an important shift in the lines separating decision-
making through markets and politics. Since the breakthrough of political
democracy, the relative importance of these two forms of decision-making
has been largely dependent on the contest between two different types of
power resource: the (at least in principle) equally distributed political
resources, and the highly unequally distributed power resources in the
markets. By using their votes, wage-earners have been able to encroach
upon and to limit the sphere of operations of the markets, where they are
more often at a disadvantage. An example of the shift from markets
towards politics is the decision-making determining levels of unemploy-
ment. Where Keynesian ideas have been accepted, the level of unemploy-
ment has come to be seen as a responsibility of the political authorities, and
no longer to be left only to market processes. Also, distributive processes
have been affected, for example through social policy and taxation.

A Democratic Class Struggle?

I have suggested above that, in the capitalist democracies, it is fruitful to

view politics as an expression of a democratic class struggle, i.e. a struggle
in which class, socio-economic cleavages and the distribution of power
resources play central roles. In contemporary social science, this view will
be challenged from different directions. From a pluralist point of view the
primacy which this interpretation gives to class cleavages will be ques-
tioned. While accepting the importance of class, those who lean towards
84 The Power Resources Model

the Leninist interpretation of Marxism tend to argue that. the major orga-
nized interest groups, which presently are the main actors in these con-
flicts, do not actually represent the interests of the worki,ng .class. Many
writers on nee-corporatism also share such a view. Let us look briefly at
the concepts concerned and the counter-arguments made.
The class concept is of relevance, inter alia, in attempts to explain social
conflict, the distribution of goods and social change. This concept should
therefore sensitize us to the many fissures and rents in the social fabric,
which may become cleavages delineating the bases upon which citi.zens
will organize themselves into collective action in the conflicts of interest in
society. According to my reading of Marx and Weber, the two dominant
figures in the theory of class, they both view the class concept in this per-
spective. Marx no less than Weber recognized a multitude of potential
cleavages on the basis of which citizens can combine themselves for col-
lective action. The two differ, however, in the relative importance which
they ascribe to different types of bases of cleavage.
Marx assumed that, in the long run, the conflicts of interest rooted in the
sphere of production and especially in the economic organization of pro-
duction would come to dominate over the other potential cleavages, such
as those based on market resources and status. Contrary to what is often
assumed, the class theory of Marx is not a one-factor theory. Its basic
hypothesis is instead that, among the multitude of lines of cleavage and
conflicts of interest, the relative importance of those arising from the eco-
nomic organization of production will increase in the long run.
Weber, however, places class, market resources and status on an equal
footing as potential bases for cleavages and assumes that over rime their
importance will tend to oscillate. The class theory of Weber has also often
been misinterpreted, not least by those who regard him as their intellectual
standard-bearer. Weber explicitly argued that power must be seen as the
generic concept of social stratification, the threefold expressions of which
are class, status and party. Yet, pluralist writers have often conceived of
power as a separate 'dimension' of social stratification, parallel to, but not
included in, 'class' and 'status'. In contrast to Weber's stress on power as
the basic independent variable behind social stratification, pluralist writers
have therefore tended to conceive of power as restricted to the realm of the
political order. While Weber saw 'property' and 'the lack of property' as
the basic characteristics of all class situations, the institution of property
has received scant attention in pluralist and functionalist analyses of indus-
trial societies.

[ ... ]

The Marxian hypothesis that, in the development of capitalism, the relative

importance of class will increase at the expense of other possible bases of
 Walter Korpi 85

cleavages has been attacked by generations of social scientists. A recent

challenger, Frank Parkin, develops a self-professed bourgeois critique,
based on a neo-Weberian approach to stratification which puts power and
conflict in a central place. In contrast to the Marxian class theory, which he
interprets to be a one-factor theory of distributive conflict, focused exclu-
sively on the positions in the productive system, Parkin argues for a multi-
dimensional approach where control over productive resources, race,
ethnicity, religion, sex and so on are viewed as equally important bases for
cleavages and the formation of conflict groups. Against the background of
developments during the 1960s and 1970s, for example in Northern
Ireland, Belgium and the United States, Parkin maintains that, in contrast
to Marxian predictions, not class but rather 'racial, ethnic, and religious
conflicts have moved towards the centre of the political stage in many
industrial societies', and that therefore 'any general model of class and
stratification that does not fully incorporate this fact must forfeit all cred-
ibility'.1 Parkin thus explicitly denies the primary role of the sphere of pro-
duction as a basis for conflict of interest.
Another challenge to the centrality of class in modern Western societies
has been made by students of electoral behaviour, who have analysed the
relative importance of different bases for party cleavages. While some of
them stress the importance of socio-economic factors, others argue that reli-
gion and language are more important. Thus in a study of party choice in
Belgium, Canada, the Netherlands and South Africa, Lijphart comes to the
following conclusions: 'Social class is clearly no more than a secondary and
subsidiary influence on party choice, and it can become a factor of import-
ance only in the absence of potent rivals such as religion and language.' 2
It goes without saying that language, religion and race are easily and fre-
quently seen as introducing a communality of interests and therefore often
become bases for collective action. In fact, language and religion are so
important bases of cleavages that over the centuries they have helped to
generate decision-making units, i.e. states, which tend to be more or less
homogenous with respect to these characteristics. Class divisions, on the
contrary, occur within decision-making units. In this sense, then, cleavages
based on language, religion and ethnicity can be seen as primary to class.
However, a different picture emerges when we look at the cleavages
within the present nation-states. Parkin's claim that race, language and reli-
gion are of equal or greater importance than the sphere of production in gen-
erating social cleavages in industrial society appears to be based on the extent
to which different cleavages have generated open or violent conflicts. This,
however, is a rather superficial reading of the evidence. While conflicts based
on religion, race, ethnicity and also on environmental issues clearly have
been the most violent ones during these decades, this fact tells us little about
the importance of different cleavages as bases of collective action, which is
what is here in question. The power distribution approach outlined above
86 The Power Resources Mode!

indicates that the extent of manifest conflicts primarily reflects changes in

the distribution of power resources between groups or collectivities.
To evaluate the relative importance of different bases of _de;avages, we
must primarily look not only at the violent conflicts, dramatic as they may
be, but also at the more institutionalized conflicts and, above all, at the
extent to which these cleavages have served as bases for organizations of
interest. In this perspective class organizations in the sphere of production,
i.e. unions and employers' (or business) organizations, emerge in the
central roles. These organizations have been the key participants. in
the societal bargaining which has emerged in the Western nations during
the postwar period. Only rarely have religious or ethnic groups figured in
such contexts. Socio-economic cleavages also remain central bases for the
party structures in most Western nations.
As indicated above, many nco-corporatist writers have assumed a major
'goal-displacement' within the organizations purporting to represent the
interests of the working class. In nco-corporatism these organizations are
assumed to serve largely the interests of the organizationalleaderships and
to control their members on behalf of the dominant groups in society.
Schmitter assumes that this holds for labour unions while, for example,
Panitch and Jessop acquit unions and place social democratic parties in the
central controlling roles.
While 'goal displacement' within interest organizations is a clear possi-
bility, it is an empirical question to what extent this has occurred in the
wage-earner organizations. Assuming rational actors, a high level of vol-
untary union membership and party support can support the assumption
that the union or party furthers the interests of the actors as perceived by
them. The claim that unions in the Western nations have largely ceased to
represent the interests of their members appears difficult to substantiate.
In view of the fact that union members have daily opportunities to evalu-
ate the consequences of leadership decisions at the place of work, such an
assumption strikes me as rather absurd.
As far as the left parties are concerned, the variations between them
would appear to be greater. Since they are rooted largely in the continuum
of social stratification, political parties have a more flexible basis than
unions, which reflect class divisions. Therefore goal displacements may
occur more easily in left parties than in labour unions. The policy which a
left party comes to represent when in government is affected by many
factors, and such a party may come to choose a strategy which severely
compromises working-class interests. The extent to which this has
occurred probably varies considerably between countries. If we assume
that unions tend to represent working-class interests more closely than the
parties on the left, the closeness of the relationship between a left party and
the union movement can be seen as one indicator of the type of policy
which the party stands for.
 Walter Korpi 87

My general hypothesis is that the presence of reformist socialist parties

in the government can bring public policies closer to wage-earner interests.
Also in this context, the distribution of power resources in society is of
crucial importance. In the tripartite societal bargaining between the state,
labour and capital, the distribution of power resources and the political
composition of the government can affect the pattern of coalition forma-
tion in this triad and the outcomes of the bargaining. The smaller the dis-
advantage in power resources of the labour movement and the stronger the
left party hold over the government, the more likely are state representa-
tives to side with labour in the tripartite bargaining. Accordingly, the com-
promises resulting from societal bargaining can be expected to be more to
the favour of wage-earners. There are considerable differences in the
power position of the wage-earners between the Western nations.

Notes

From W. Korpi, The Democratic Class Struggle, London, Routledge and Kegan
Paul, 1983, pp. 14-25.
F. Parkin, Marxism and Class Theory, New York, Columbia University Press,
1979.
2 A. Lijphart, 'Language, Religion, Class and Party Choice', in R. Rose,
Electoral Participation, Beverly Hills, CA, Sage, 1980.
Responses from the Right
The Meaning of the Welfare
State
Friedrich von Hayek

[ ... ]

Unlike socialism, the conception of the welfare state has no precise

meaning. The phrase is sometimes used to describe any state that 'concerns'
itself in any manner with problems other than those of the maintenance of
law and order. But, though a few theorists have demanded that the activities
of government should be limited to the maintenance of law and order, such
a stand cannot be justified by the principle of liberty. Only the coercive
measures of government need be strictly limited. [ ... ] There is undeniably
a wide field for non-coercive activities of government and [ ... ] a clear need
for financing them by taxation.
Indeed, no government in modern times has ever confined itself to the
'individualist minimum' which has occasionally been described, 1 nor has
such confinement of governmental activity been advocated by the' ortho-
dox' classical economists. 2 All modern governments have made provision
for the indigent, unfortunate and disabled and have concerned themselves
with questions of health and the dissemination of knowledge. There is no
reason why the volume of these pure service activities should not increase
with the general growth of wealth. There are common needs that can be
satisfied only by collective action and which can be thus provided for
without restricting individual liberty. It can hardly be denied that, as we
grow richer, that minimum of sustenance which the community has
always provided for those not able to look after themselves, and which can
be provided outside the market, will gradually rise, or that government
may, usefully and without doing any harm, assist or even lead in such
endeavours. There is little reason why the government should not also
play some role, or even take the initiative, in such areas as social insur-
ance and education, or temporarily subsidize certain experimental
 Friedrich von Hayek 91

developments. Our problem here is not so much the aims as the methods
of government action.
References are often made to those modest and innocent aims of govern-
mental activity to show how unreasonable is any opposition to the welfare
state as such. But, once the rigid position that government should not
concern itself at all with such matters is abandoned - a position which is
defensible but has little to do with freedom- the defenders of liberty com-
monly discover that the programme of the welfare state comprises a great
deal more that is represented as equally legitimate and unobjectionable. If,
for instance, they admit that they have no objection to pure-food laws, this
is taken to imply that they should not object to any government activity
directed toward a desirable end. Those who attempt to delimit the functions
of government in terms of aims rather than methods thus regularly find
themselves in the position of having to oppose state action which appears
to have only desirable consequences or of having to admit that they have no
general rule on which to base their objections to measures which, though
effective for particular purposes, would in their aggregate effect destroy a
free society. Though the position that the state should have nothing to do
with matters not related to the maintenance of law and order may seem
logical so long as we think of the state solely as a coercive apparatus, we
must recognize that, as a service agency, it may assist without harm in the
achievement of desirable aims which perhaps could not be achieved other-
wise. The reason why many of the new welfare activities of government are
a threat to freedom, then, is that, though they are presented as mere service
activities, they really constitute an exercise of the coercive powers of gov-
ernment and rest on its claiming exclusive rights in certain fields.

The current situation has greatly altered the task of the defender of liberty
and made it much more difficult. So long as the danger came from social-
ism of the frankly collectivist kind, it was possible to argue that the tenets
of the socialists were simply false: that socialism would not achieve what
the socialists wanted and that it would produce other consequences which
they would not like. We cannot argue similarly against the welfare state,
for this term does not designate a definite system. What goes under that
name is a conglomerate of so many diverse and even contradictory elem-
ents that, while some of them may make a free society more attractive,
others are incompatible with it or may at least constitute potential threats
to its existence.
We shall see that some of the aims of the welfare state can be realized
without detriment to individual liberty, though not necessarily by the
methods which seem the most obvious and are therefore most popular; that
others can be similarly achieved to a certain extent, though only at a cost
much greater than people imagine or would be willing to bear, or
only slowly and gradually as wealth increases; and that, finally, there are
92 The Meaning of the Welfare State

others - and they are those particularly dear to the hearts of the socialists_
that cannot be realized in a society that wants to preserve personal freedom.
There are all kinds of public amenities which it may be in,,the interest of
all members of the community to provide by common effort, such as parks
and museums, theatres and facilities for sports - though there are strong
reasons why they should be provided by local rather than national author-
ities. There is then the important issue of security, of protection against
risks common to all, where government can often either reduce these risks
or assist people to provide against them. Here, however, an important <;lis-
tinction has to be drawn between two conceptions of security: a limited
security which can be achieved for all and which is, therefore, no privilege,
and absolute security, which in a free society cannot be achieved for all. The
first of these is security against severe physical privation, the assurance of
a given minimum of sustenance for all; and the second is the assurance of
a given standard of life, which is determined by comparing the standard
enjoyed by a person or a group with that of others. The distinction, then,
is that between the security of an equal minimum income for all and the
security of a particular income that a person is thought to deserve. The
latter is closely related to the third main ambition that inspires the welfare
state: the desire to use the powers of government to ensure a more even or
more just distribution of goods. Insofar as this means that the coercive
powers of government are to be used to ensure that particular people get
particular things, it requires a kind of discrimination between, and an
unequal treatment of, different people which is irreconcilable with a free
society. This is the kind of welfare state that aims at 'social justice' and
becomes 'primarily a redistributor of income'. It is bound to lead back to
socialism and its coercive and essentially arbitrary methods.

Though some of the aims of the welfare state can be achieved only by
methods inimical to liberty, all its aims may be pursued by such methods.
The chief danger today is that, once an aim of government is accepted as
legitimate, it is then assumed that even means contrary to the principles of
freedom may be legitimately employed. The unfortunate fact is that, in the
majority of fields, the most effective, certain and speedy way of reaching a
given end will seem to be to direct all available resources towards the now
visible solution. To the ambitious and impatient reformer, filled with indig-
nation at a particular evil, nothing short of the complete abolition of that evil
by the quickest and most direct means will seem adequate. If every person
now suffering from unemployment, ill health or inadequate provision for
[ ... ] old age is at once to be relieved of his [or her] cares, nothing short of
an all-comprehensive and compulsory scheme will suffice. But if, in our
impatience to solve such problems immediately, we give government exclu-
sive and monopolistic powers, we may find that we have been short-sighted.
If the quickest way to a now visible solution becomes the only permissible
 Friedrich von Hayek 93

one and all alternative experimentation is precluded, and if what now seems
the best method of satisfying a need is made the sole starting-point for all
future development, we may perhaps reach our present goal sooner, but we
shall probably at the same time prevent the emergence of more effective
alternative solutions. It is often those who are most anxious to use our exist-
ing knowledge and powers to the full that do most to impair the future
growth of knowledge by the methods they use. The controlled single-
channel development towards which impatience and administrative con-
venience have frequently inclined the reformer and which, especially in the
field of social insurance, has become characteristic of the modern welfare
state may well become the chief obstacle to future improvement.
If government wants not merely to facilitate the attainment of certain
standards by the individuals but to make certain that everybody attains
them it can do so only by depriving individuals of any choice in the matter.
Thus the welfare state becomes a household state in which a paternalistic
power controls most of the income of the community and allocates it to
individuals in the forms and quantities which it thinks they need or deserve.
In many fields persuasive arguments based on considerations of effi-
ciency and economy can be advanced in favour of the state's taking sole
charge of a particular service; but when the state does so, the result is
usually not only that those advantages soon prove illusory but that the
character of the services becomes entirely different from that which they
would have had if they had been provided by competing agencies. If,
instead of administering limited resources put under its control for a spe-
cific service, government uses its coercive powers to ensure that men are
given what some expert thinks they need; if people thus can no longer exer-
cise any choice in some of the most important matters of their lives, such
as health, employment, housing and provision for old age, but must accept
the decisions made for them by appointed authority on the basis of its
evaluation of their need; if certain services become the exclusive domain of
the state, and whole professions- be it medicine, education or insurance-
come to exist only as unitary bureaucratic hierarchies, it will no longer be
competitive experimentation but solely the decisions of authority that will
determine what men shall get. 3
The same reasons that generally make the impatient reformer wish to
organize such services in the form of government monopolies lead him also
to believe that the authorities in charge should be given wide discretionary
powers over the individual. If the objective were merely to improve oppor-
tunities for all by supplying certain specific services according to a rule, this
could be attained on essentially business lines. But we could then never be
sure that the results for all individuals would be precisely what we wanted.
If each individual is to be affected in some particular way, nothing short of
the individualizing, paternalistic treatment by a discretionary authority
with powers of discriminating between persons will do.
94 The Meaning of the Welfare State

It is sheer illusion to think that when certain needs of the citizen have
become the exclusive concern of a single bureaucratic machine, democratic
control of that machine can then effectively guard the libc~ty: ofthe citizen.
So far as the preservation of personal liberty is concerned, the division of
labour between a legislature which merely says that this or that should be
done 4 and an administrative apparatus which is given exclusive power to
carry out these instructions is the most dangerous arrangement possible.
All experience confirms what is clear enough from American as

well as from English experience, that the zeal of the administrative agencies to
achieve the immediate ends they see before them leads them to see their func-
tion out of focus and to assume that constitutional limitations and guaranteed
individual rights must give way before their zealous efforts to achieve what
they see as a paramount purpose of government. 5

It would scarcely be an exaggeration to say that the greatest danger to

liberty today comes from the men who arc most needed and most power-
ful in modern government, namely, the efficient expert administrators
exclusively concerned with what they regard as the public good. Though
theorists may still talk about the democratic control of these activities, all
who have direct experience in this matter agree that (as one [ ... J English
writer put it) 'if the Minister's control ... has become a myth, the control
of Parliament is and always has been the merest fairy tale'. 6 It is inevitable
that this sort of administration of the welfare of the people should become
a self-willed and uncontrollable apparatus before which the individual is
helpless, and which becomes increasingly invested with all the mystique of
sovereign authority - the Hoheitsverwaltung or Herrschaftstaat of the
German tradition that used to be so unfamiliar to Anglo-Saxons that the
strange term 'hegemonic' 7 had to be coined to render its meaning.

Notes

From F. A. von Hayek, The Constitution of Liberty, London, Routledge, 1959,

pp. 257-62.
1 Cf., e.g., Henry Sidgwick, The Elements of Politics, London, 1891, ch. 4.
2 See on this particularly Lionel Robbins, The Theory of Economic Policy,
London, 1952.
3 Cf.]. S. Mill, On Liberty, ed. R. B. McCallum, Oxford, 1946, pp. 99-100: 'If
the roads, the railways, the banks, the insurance offices, the great joint stock
companies, the universities, and the public charities, were all of them branches
of the government; if, in addition, the municipal corporations and local
boards, with all that now devolves on them, became departments of the central
administration; if the employees of all these different enterprises were
appointed and paid by the government, and looked to the government for
every rise in life; not all the freedom of the press and popular constitution of
the legislature would make this or any other country free otherwise than in
 Friedrich von Hayek 95

name. And the evil would be greater, the more efficiently and scientifically the
administrative machinery was constructed- the more skilful the arrangements
for obtaining the best qualified hands and heads with which to work it.'
4 Cf. T. H. Marshall, Citizenship and Social Class, Cambridge, 1958, p. 59: 'So
we find that legislation ... acquires more and more the character of a declara-
tion of policy that it is hoped to put into effect some day.'
5 Roscoe Pound, 'The Rise of the Service State and its Consequence', in The
Welfare State and the National Welfare, ed. S. Glueck, Cambridge, MA, 1952,
p. 220.
6 P. Wiles, 'Property and Equality', in The Unservile State, ed. G. Watson,
London, 1957, p. 107.
7 See L. von Mises, Human Action, New Haven, 1949, pp. 196ff.
The Two Wars against
Poverty
Charles Murray

[ ... ]

When news reports cite percentages of 'people living in poverty', they are
drawing from the official definition of the 'poverty line' established in 1964
by a task force in the Social Security Administration. The poverty line is,
in effect, set at three times the cost of an adequate diet, and is adjusted for
inflation, a variety of family characteristics and one's location (rural or
non-rural).
This measure has been attacked as niggardly by some and as overly gen-
erous by others. Almost everyone agrees that it fails to capture the import-
ant differences in the quality of life between a family living at the poverty
line in the South Bronx, for example, and a family with the same income
that lives in a less punishing environment. But this measure of poverty has
its merits nonetheless. It is widely known, it takes family size and inflation
into account, and it provides a consistent measure for examining income
over time. I will use it to discuss the history of three different 'types' of
poverty: official poverty, net poverty and latent poverty [ ... ].
The most widely used measure of poverty is the percentage of people with
cash incomes that fall beneath the poverty line before taxes, but after taking
cash income transfers from government into account. We shall call it official
poverty because it is the measure reported by the Bureau of the Census.
Conventional wisdom has it that, at least according to this one measure,
the 1960s and 1970s brought economic progress for the poor. The most
widely shared view of recent events is that the United States entered the
1960s with a large population that had been bypassed during the prosper-
ity of the Eisenhower years. The rich and the middle class gained but the
poor did not. Then, after fits and starts during the Kennedy years, came the
explosion in the number and size of social programmes under Johnson.
 Charles Murray 97

The programmes were perhaps too ambitious, it is widely conceded, and

perhaps some of the efforts were misdirected, but at least they put a big
dent in the poverty problem; this can be seen, it is said, in the large reduc-
tion in poverty that occurred during LBJ's administration and thereafter.
The Great Society reforms were seen to have produced results that
Eisenhower's 'trickle-down' economics had not.
The essential assertion of this view is that poverty decreased during the
War on Poverty and had not been decreasing as rapidly before this period.
It is a simple assertion, for which the data are a matter of historical record,
and it is only half right.
Poverty did indeed fall during the five Johnson years, from 18 per cent
of the population in 1964 to 13 per cent in 1968, his last year in office. Yet
this was scarcely an unprecedented achievement. Between 1949 and 1952,
poverty had already begun to fall from 33 to 28 per cent. Under
Eisenhower it fell to 22 per cent. Under Kennedy and Johnson it dropped
to 18 per cent by 1964. In short, the size of the official 'impoverished'
population dropped by twenty percentage points in twenty years, of which
the five Johnson years accounted for precisely their fair share, five points.'
Then, after two decades of reasonably steady progress, improvement
slowed in the late 1960s and stopped altogether in the 1970s. A higher per-
centage of the American population was poor in 1980, in terms of cash
income, than at any time since 1968. The percentage dipped as low as 11.1
per cent in 1973, but by 1980 it stood at 13 per cent and was heading
upward.
When this history of the official poverty level is placed alongside the
history of social welfare expenditures, a paradox appears. Social welfare
expenditures had been increasing at a steady rate through the Eisenhower,
Kennedy and early Johnson years. But it was not until the budgets of 1967
and 1968 that the Johnson programmes were reaching enough people to
have a marked impact on the budget; it was then that social welfare expend-
itures started to take off. So just at the time when the reforms of the mid-
1960s were being implemented, progress in reducing poverty began
grinding to a halt!
The paradox is even more pronounced when we remember what it is we
are measuring. If the measure were of chronic joblessness, for example, the
flattening curve [ ... ] would be understandable: it often is harder to fix the
last 10 per cent of a problem than the first 90 per cent. But in this case, 'offi-
cial poverty' is simply a measure of cash income after taking government
transfers into account. To eliminate official poverty, all we need do is mail
enough cheques with enough money to enough people. Starting in the late
1960s, the number of cheques, the size of the cheques and the number of
beneficiaries all began to increase. Even if we ignore increased in-kind
expenditures such as housing, food stamps and medical care (which are not
included in this definition), and discount administrative costs and the
98 The Two Wars against Poverty

effects of inflation, the federal government increased its real cash-benefit

payments for income maintenance programmes by more than two-thirds
during the 1970s.
Furthermore, the anti-poverty programmes of the 1970s had a much
smaller target population than those of earlier, smaller budgets. In 1950
there were an estimated forty-six million people living beneath the poverty
line (as it was subsequently defined); in 1960 there were 40 million, and in
1970 only 25 million. Given these conditions - more money and fewer
people - progress begun during the 1950s and 1960s should have acceler-
ated in the 1970s instead of slowing, stopping and then reversing.

Net Poverty

The official poverty statistic is based only on cash income. In-kind assist-
ance- food programmes, housing, medical care- is not included. Yet this
assistance has been the fastest-growing component of the social welfare
budget, rising from $2.2 billion in 1965 to $72.5 billion in 1980. If the dollar
value of these benefits is computed and added to cash income, this new
measure may be called net poverty: the percentage of the population
remaining beneath the poverty level after all resources- cash and in-kind,
earned and unearned- are taken into account. 2
In 1950, in-kind transfers were quite small, so the percentage of official
poor (30 per cent) was nearly identical to the percentage of net poor. This
situation continued into the early 1960s as net poverty decreased at
roughly the same rate as official poverty. By 1968, the gap between official
poverty (12.8 per cent) and net poverty (10.1 per cent) was quite small.
Unlike changes in official poverty, however, large decreases in net
poverty continued into the early 1970s. Then, from 1972 until 1980, the
trendline flattened, just as that for official poverty had a few years earlier.
In 1980, net poverty stood at 6.1 per cent of the population, compared with
6.2 per cent in 1972, despite the fact that expenditures on in-kind assistance
had tripled (in constant dollars) during the 1970s.
The concept of net poverty is ambiguous. Taken by itself, 6.1 per cent
represents a near victory over poverty; it is a very small proportion of the
population. But a citizen who lives in a black or Hispanic ghetto, for
example, may be forgiven for arguing that poverty has not come within 6.1
percentage points of vanishing. We must consider what it really means to
live at or near the poverty level through in-kind support.
It means, to begin with, living in housing projects or other subsidized
housing. Given their cost, most of these units ought to provide decent,
comfortable housing, but in practice public housing is among the most
vandalized, crime-ridden and least livable housing in the country. It means
relying on food stamps. In theory, food stamps can purchase the foods
 Charles Murray 99

necessary for a nutritious diet, but in practice they can be misused in other
ways. It also means paying for medical care through Medicaid or Medicare,
which have concrete value only if the recipient is sick.
In short, having the resources for a life that meets basic standards of
decency is not the same as actually living such an existence. Whether this
is the fault of the welfare system or the recipient is not at issue; it is simply
a fact that must be kept in mind when interpreting the small, encouraging
:figure of 6.1 per cent.
But the economic point remains: as of 1980, the many overlapping cash
and in-kind benefit programmes made it possible for almost anyone to
place themselves above the official poverty level. If the ultimate criterion
of social welfare policy is eliminating net poverty, the War on Poverty has
very nearly been won.

Latent Poverty

Of course, eliminating net poverty is not the ultimate criterion. Lyndon

Johnson undertook the War on Poverty to end the dole, to enable people
to maintain a decent standard of living by their own efforts. As he signed
the initial anti-poverty bill he sounded the theme that formed the basis of
the consensus for the Great Society:

We are not content to accept endless growth of relief or welfare rolls. We want
to offer the forgotten fifth of our population opportunity and not doles ....
The days of the dole in our country are numbered. 3

Johnson was articulating a deeply shared understanding among Americans

as to how the welfare system is supposed to work- 'a hand, not a handout'
was the slogan. Throughout American history, the economic independence
of the individual and the family has been the chief distinguishing charac-
teristic of good citizenship.
To measure progress along these lines we must calculate yet a third stat-
istic. The poverty statistic with which I began, the one used by the gov-
ernment in its analyses, is cash income after the cash transfers from the
government have been counted. Then I added the value of the non-cash,
in-kind transfers in order to measure net poverty. Now I must ask: what is
the number of poor before the cash and in-kind transfers are taken into
account? How many people would be poor if it were not for government
help? These may be called the latent poor. For practical purposes, they are
the dependent population, those who were to be made independent as we
eliminated the dole.
Latent poverty decreased during the 1950s. We do not know the precise
level of decline, because 1965 is the first year for which the number of latent
100 The Two Wars against Poverty

poor [was] calculated. 4 But we do know that the number of latent poor (pre-
transfer poor) can be no smaller than the number of post-:-transfer poor;
therefore, since the number of post-transfer poor stood at 30 pzr cent of the
population in 1950, the percentage of latent poor had to have been somewhat
larger (a conservative estimate is 32 per cent). As of 1965, the latent poor
were 21 per cent of the population- a drop of about one-third. Put another
way, dependency decreased during the years 1950-65. Increasing numbers
of people were able to make a living that put them above the poverty level
and progress was being made on the long-range goal of eliminating the dole.
The proportion of latent poor continued to drop through 1968, when the
percentage was calculated at 18.2, but this [ ... ] proved to be the limit of
our success in the war against economic dependence. At some point during
1968-9, progress stopped; the percentage of latent poor then started to grow.
It was 19 per cent by 1972, 21 per cent by 1976, and 22 per cent by 1980. 5
Once again, as in the case of official poverty, the shift in the trendline coin-
cided with the advent of the programmes that were to eliminate poverty.
Again, how could it be that progress against official poverty and net
poverty slowed or stopped when so much more money was being spent
for cash and in-kind transfers? The data on latent poverty provide one of
the most important answers: because latent poverty was increasing, it took
more and more money in transfers just to keep the percentage of post-
transfer poor stable. The social welfare system fell into the classic trap of
having to run faster and faster to stay in the same place. The extremely large
increases in social welfare spending during the 1970s were papering over
the increase in latent poverty.
The three measures of poverty- official poverty, net poverty and latent
poverty- reveal a pattern from 1950 to 1980 that has important implica-
tions for the American welfare state. For example, it explains a major
element in the budget crisis. As of 1980, roughly the same proportion of
people remained above the poverty line through their own earned incomes
as did in the early 1960s. But in the early 1960s, our legislated spending
obligations to those who earned less than that amount were comparatively
small. Whether or not one approves of the spending obligations taken on
since then, they cannot be sustained indefinitely in the face of increasing
latent poverty. Latent poverty must be turned around, or the obligations
must be slashed, or both.

Rising Tide, Sinking Ships

The poverty trendlines [ ... ] are not widely publicized. Because it has not
been recognized that the implementation of the Great Society reforms
coincided with an end to progress in reducing poverty, there has been no
debate over why this should be the case.
 Charles Murray 101

The best place to begin the debate is to examine the common view that
the bright hopes of the 1960s dimmed in the 1970s due to a slowdown in
the economy. According to this view, inflation and dislocations brought on
by the Vietnam War, along with the revolution in energy prices, made the
economy go sour. As the expansionist environment of the 1960s vanished,
strategies and programmes of the War on Poverty had to be put aside. It is
aood
b
that the entitlements and income transfer programmes were in place,
runs this line of argument, or else the troubles in the economy would have
been even more devastating on the poor.
What, if anything, do the data suggest about the merits of this economic
explanation? As in the discussion of poverty, I must start with the simplest,
most widely used measure of the state of the economy, growth in the GNP,
and examine its relation to changes in the number of people living in
poverty. The answer - perhaps surprisingly to those who have ridiculed
'trickle-down' as a way to help the poor- is that changes in GNP have a
very strong inverse relation to changes in poverty. As GNP increases,
poverty decreases. (The simple correlation coefficient for the period
1950-80 is - .69 6 .) The effects of economic growth did indeed trickle down
to the lowest economic levels of the society. Economic growth during the
1950s and 1960s was strong, during the 1970s it was weak- and progress
in reducing poverty ceased.
So it can be said that the fortunes of the economy explain recent trends
in poverty. But the flip side of this finding is that social welfare expendi-
tures did not have an effect on poverty. Once the effects of GNP are taken
into account, increases in social welfare spending do not account for reduc-
tions in poverty [since the 1950s}. The same analysis that supports the eco-
nomic explanation for the failure in the 1970s gives scant support to
remedies that would boost social welfare spending [ ... ].
Conservatives generally recognize the role of economic growth in
reducing poverty, but some feel this is not a sufficient explanation for the
failures of the 1970s. It is not just that the social welfare reforms were inef-
fective in reducing poverty, they argue, but that the reforms actually made
matters worse by emasculating the work ethic and creating 'work disin-
centives'. As people became less inclined to take low-paying jobs, hold
onto them, and use them to get out of poverty, they became dependent on
government assistance. The academic treatment of poverty has generally
dismissed this conservative explanation out of hand. It has understandably
been mistaken for curmudgeonly, mean-spirited and occasionally racist
rhetoric. But the trendline for latent poverty - the key indicator of how
people are doing without government help- offers a solid reason for con-
cluding that the Great Society reforms exacerbated many of the conditions
they sought to alleviate.
It is important to emphasize that the trend in latent poverty did not
reverse direction when the economy went bad; it did not even wait until
102 The Two Wars against Poverty

the official poverty and net poverty figures stabilized .. Latent poverty
started to increa~e.while the other two measures of poverty w.ere still going
down. Most stnkmgly, progress on latent poverty stopped IQ 1968 while
the economy was operating at full capacity (unemployment stood at
3.5 per cent in 1968-9, the lowest rate since the Korean War).

Welfare and Labour-Force Participation

The second half of the 1960s was a watershed in other ways as well.
A number of social indicators began showing strange and unanticipated
shifts during those years, and the onset of these changes had no discernible
relation to the health of the economy. Together, the evidence is sufficiently
provocative to make the conservative interpretation worth looking into.
One such indicator is participation in the labour force. By definition, par-
ticipation in the civilian labour force means either being employed or
intending to work, given the opportunity. Among the poor, participation in
the labour force 'should' be very high, approaching 100 per cent, for able-
bodied adults without childcare responsibilities. Conservatives argue that
such participation has dropped because welfare benefits have become more
extensive and more easily available. The statistics on labour-force participa-
tion- a standard measure calculated by the Bureau of Labor Statistics- are
readily available, and they conform quite well to conservative expectations.
Consider the record of two populations of immediate comparative inter-
est: black males, who are disproportionately poor relative to the entire
population, and white males, who are disproportionately well off. In 1948
(comparable data for 1950 are not available), the participation rate for both
groups was 87 per cent. This equivalence- one of the very few social or eco-
nomic measures on which black males could claim parity with whites in the
1950s - continued throughout the decade and into the early 1960s. As late
as 1965, only a percentage point separated the two groups. But by 1968,
a gap of 3.4 percentage points in participation had opened up between black
males and white males. By 1972, the gap was 5.9 percentage points. In 1980,
70.5 per cent of black males participated in the labour force compared with
78.6 of white males; the gap had grown to 8.1 percentage points. To put it
another way, during the period 1954-67, 1.4 black males dropped out of the
labour force for every white male who dropped out; from 1968 to 1980, 3.6
black males dropped out for every white male who did.
The abrupt drop in the labour-force participation of black males cannot
easily be linked to events in the economy at large. One of the most com-
monly cited popular explanations of why poor people drop out of the
labour force is that they become discouraged- there are no jobs, so people
quit looking. But the gap first opened up during the boom years of 1966-8,
when unemployment was at a historic low. The 'discouraged worker'
 Charles Murray 103

argument cannot be used to explain the drop-out rate during this period.
Nor can the opposite argument be substituted: black males did not stop
dropping out when the Vietnam boom cooled and unemployment rose.
Whether unemployment was high or low, until 1967 black males behaved
the same as whites; after 1967 they did not.
One may ask whether this is a racial phenomenon; it is nothing of the
kind. Using the 1970 census data, participation for 1970 may be broken
down by both race and economic status, and doing so reveals that the
apparent racial difference is artificial. For males at comparable income
levels, labour-force participation among black males was higher than
among white males. The explanation of the gap is not race, but income.
Starting in 1966, low-income males- white or black- started dropping out
of the labour force. The only reason it looks as though blacks were drop-
ping out at higher rates is that blacks are disproportionately poor. If trend-
lines are examined showing participation rates by income rather than race,
the 1970 census data strongly suggest that middle- and upper-income males
participated in the labour force at virtually unchanged rates since the 1950s,
while the participation rate for low-income males decreased slowly until
1966, and plummeted thereafter.
This phenomenon needs explanation, for it was a fundamental change in
economic behaviour - participation in the labour market itself. Once
explanations based on unemployment fail, and once the racial discrepancy
is shown to be artificial, the conservative hypothesis has considerable
force. Without a doubt, something happened in the mid-1960s that
changed the incentives for low-income workers to stay in the job market.
The Great Society reforms constitute the biggest, most visible, most plaus-
ible candidate.

Welfare and Family Breakup (Revisited)

A second social indicator which links increases in latent poverty to the
Great Society reforms is the decline in the intact husband-wife family unit,
especially among blacks.
A racial difference in family composition has existed since statistics have
been kept, but by the middle of this century the proportions for whites and
blacks, while different, were stable. As of 1950, 88 per cent of white fam-
ilies consisted of husband-wife households, compared with 78 per cent of
black families. Both figures had remained essentially unchanged since
before the Second World War (the figures for 1940 were 86 and 77 per cent,
respectively). In the early 1950s, the black proportion dipped slightly, then
remained between 72 and 75 per cent until1965. The figures for white fam-
ilies stayed in the 88 to 89 per cent range between 1958 and 1965, never
varying by more than two-tenths of a percentage point from year to year.
104 The Two Wars against Poverty
The years 1966 and 1967 saw successive drops in the percentage of black
husband-wife households, even though it remained in the 72-5 per cent
range. Then, in a single year (1968), the percentage dropped, to 69, the
beginning of a steep slide that has not yet been arrested. By the end of 1980,
the proportion of black husband-wife families had dropped to 54 per cent
-a drop of 19 percentage points since 1965. The figure for whites dropped
by four percentage points in the same period, from 89 to 85 per cent.
From a demographic perspective, a change of this magnitude is extraor-
dinary, nearly unprecedented in the absence of war or some other pro-:
found social upheaval. Much is made of the social changes that swept
America during the 1960s and 1970s, and discussions of the change in black
family composition have discounted the phenomenon as a slightly exag-
gerated manifestation of this broader social transformation. But the data
do not permit such an easy dismissal. In the rest of society the changes in
family composition were comparatively modest.
As in the case of labour-force participation, we are witnessing a confu-
sion between race and income, though not as severe. When husband-wife
families are examined on the basis of income (using the 1970 census), the
percentage of husband-wife families among blacks above the poverty level
is found to be 82 per cent, very close to the overall rate for whites. This
indicates that data based on income may be expected to show that the pre-
cipitous drop in intact families is concentrated among the low-income
population, not exclusively (perhaps not even disproportionately) among
blacks.
Why did low-income families start to disintegrate in the mid-1960s
while higher-income families did not? As in the case of participation in the
labour force, there is no obvious alternative to the conservatives' hypoth-
esis: namely, during precisely this period, fundamental changes occurred in
the philosophy, administration and magnitude of social welfare pro-
grammes for low-income families, and these changes altered - both
directly and indirectly- the social risks and rewards, and the financial costs
and benefits, of maintaining a husband-wife family. It should surprise no
one that behaviour changed accordingly.
This hypothesis is not 'simplistic', as has been charged. It is plausible
that the forces which changed welfare policy could have affected family
composition even if welfare policy had not been changed. Those forces
were surely various and complex. Still, these forces are not enough to
explain the extraordinary change in family composition. If in the early
1960s one had foreseen the coming decade of sweeping civil rights legisla-
tion, an upsurge in black identity and pride, and a booming economy in
which blacks had more opportunities than ever before, one would not have
predicted massive family breakup as a result. The revolutionary change in
black family composition went against the grain of many contemporan-
eous forces. Casual assertions that 'it was part of the times' are inadequate.
 Charles Murray 105

A Pyrrhic Victory?
The effect of the decline in labour-force participation, and of the breakup
of the husband-wife family, were tragic and severe. In the case of the labour
market, the nature of the effect is obvious: when low-income males drop
out of the labour force and low-income females do not enter it, the size of
the latent poor population will grow. This alone could explain why the
proportion of latent poor increased even as the proportions of official poor
and net poor were still declining.
The effects of family breakup are less obvious, but no less noteworthy.
An analysis by the Bureau of the Census indicates that changes in family
composition accounted for two million additional poor families in the
1970s. 7 For example, the analysis shows that if black family composition
had remained the same as in 1971, the poverty rate for black families would
have been 20 per cent in 1980 instead of 29 per cent. Other findings all lead
to the same conclusion: the changes in family composition that started in
the mid-1960s have raised poverty significantly above the levels that 'would
have' prevailed otherwise. The Bureau's analysis actually understates the
overall effect of the change in family composition on poverty- by 1971, the
baseline for the analysis, much of the deterioration had already occurred.
These are some of the reasons behind the paradox of our failure to make
progress against poverty in the 1970s despite the enormous increases in the
amount of money that the government has spent to do so. There are other
reasons as well- the large proportion of the social welfare budget spent on
people above the poverty level being perhaps the most notable- but the
preceding few will serve to convey a point that is too often missed in the
debates over budget cuts in social welfare programmes. It is genuinely an
open issue - intellectually as well as politically - whether we should be
talking about spending cuts, or whether we should be considering an over-
haul of the entire welfare system as conceived in the Great Society. If the
War on Poverty is construed as having begun in 1950 instead of 1964, it
may fairly be said that we were winning the war until Lyndon Johnson
decided to wage it.

Notes

From The Public Interest, 69,1982, pp. 4-16.

1 Data for 1959-79 are taken from the figures published annually in the
Statistical Abstract of the United States. Figures for 1949-58 are taken from
'Economic Report to the President: Combating Poverty in a Prosperous
Economy', January 1969, reprinted in US Department of Health, Education
and Welfare, The Measure of Poverty, ed. M. Orshansky, Technical Paper I,
vol. 1 [n.d.], p. 349, chart 10. The percentage for 1980 was obtained directly
from the Poverty Statistics Section of the Bureau of the Census.
106 The Two Wars against Poverty

2 The figures are taken from Timothy M. Smeeding, Measuring the Economic
Welfare of Low-Income Households and the Antipoverty Effectiveness of Cash
and Noncash Transfer Programs, PhD diss., Department .of Economics,
University of Wisconsin-Madison, 1975; Smeeding, 'The Antipoverty
Effectiveness of In-Kind Transfers', Journal of Human Resources, 12, 1977,
pp. 360-78; and Smeeding, 'The Anti-poverty Effect of In-Kind Transfers:
A 'Good Idea Gone Too Far?', Policy Studies journal, 10, 3, 1982 pp. 499-522.
3 Quoted in the New York Times, 21 August 1964, p. 1.
4 The figures for 1965-78 are taken from Sheldon Danziger and Robert
Plotnick, 'The War on Income Poverty: Achievements and Failures', in
Welfare Reform in America, ed. P. Sommers, Hingham, MA, Martinus
Nijhoff, 1982, table 3.1, p. 40.
5 It should be noted that the measure of latent poverty excludes social security
income. Since families headed by persons over the age of sixty-five make up
nearly half of those in latent poverty, the percentages reported here may
somewhat exaggerate the extent of the problem among those able to
work. (Unfortunately, no figures on this point prior to 1976 have been pub-
lished.) But even if it were possible to include social security- or exclude the
elderly- in calculations over this period, this adjustment would not affect the
steep rise in latent poverty we have observed. [ ... ]
6 The variables are the first difference in real GNP per household and the first
difference in percentage of population under the poverty line using the official
measure of poverty.
7 Gordon Green and Edward Wclniak, 'Measuring the Effects of Changing
Family Composition during the 1970s on Black-White Differences in
Income', unpublished manuscript, Bureau of the Census, 1982.
The New- Politics of the New
Poverty
Lawrence M. Mead

The poverty of today's underclass differs appreciably from poverty in the

past: underclass poverty stems less from the absence of opportunity than
from the inability or reluctance to take advantage of opportunity. The plight
of the underclass suggests that the competence of many of the poor- their
capacity to look after and take care of themselves - can no longer be taken
for granted as it could in the past.
The changing nature of poverty has also ushered in a fundamental
change in our politics, which formerly focused on class but now empha-
sizes conduct. Prior to the 1960s, in what I call the era of progressive pol-
itics, the overriding issue was how to help ordinary working Americans
advance economically. The solutions of liberals and conservatives differed
greatly, but both groups agreed that available opportunities would be
seized by the poor. They disagreed in locating the barrier to opportunity:
liberals blamed the unregulated economy, and conservatives blamed the
government. As a result, liberals favoured greater government interven-
tion, while conservatives hoped to reduce it. At issue were class inequal-
ities and the need for economic redistribution: was the inequality meted
out by the marketplace acceptable? How desirable were regulations of
wages, hours and working conditions, along with the creation of social-
insurance programmes to benefit workers and their families?
Anti-poverty strategy and politics differ greatly today, because poverty
is rarely found among workers but is common among non-workers. In the
new era, characterized by what I call dependency politics, the leading issue
is how to handle the disorders of inner-city non-workers: conservatives
usually want to enforce civilities, which liberals resist doing. For the most
part, we spend less time debating whether the income of the working poor
should be larger than we do discussing whether and how we can transform
poor non-workers into workers.
108 The New Politics of the New Poverty

Recent disagreements over tax hikes and budget cuts suggest that redis-
tributive conflicts over the economy remain very much with us; economic
inequality has increased, and Kevin Phillips's prediction ,of heightened
conflict between rich and poor received much attention [in 1990].
Nevertheless, in the absence of economic collapse serious class conflict is
unlikely. The politics of conduct, which focuses on dependency and dis-
order, is simply more salient than the politics of class. The problems of
rising crime, welfarism, homelessness and declining schools (and the tax
increases imposed to pay for them) are what chiefly concern most
Americans; they worry far less about the income gap separating them from
their employers. Most Americans doubt government's ability to solve the
new social problems that confront us. Unless government better responds
to them, it will receive no new mandate to tackle the older problem of
unequal fortunes.
The public's focus on dependency and disorder has obviously damaged
the American left, which is more comfortable dealing with issues of eco-
nomic redistribution. The public's conservatism on social (as opposed to
economic) issues largely explains why Republicans have controlled the
White House and the national agenda for most of a generation. Democrats
in presidential politics have paid a high price for their perceived softness
on the question of 'values'. In the 1988 election, Michael Dukakis pro-
posed new benefit programmes of the kind that used to win elections for
Democrats. The Bush campaign easily defeated him by speaking of crime
and Willie Horton.
But despite its electoral advantages, the anti-government right -like the
redistributionist left - is uncomfortable with dependency politics. When
the poor behave badly, bigger government becomes indefensible, because
many of its beneficiaries are 'undeserving'. But smaller government is also
questionable, because many believe that the poor could not cope without
the many benefits and services that they receive. Distrust of the dysfunc-
tional poor defeated the most ambitious plans to expand government
during the Great Society. But concern for these same poor helps explain
why Ronald Reagan was unable significantly to reduce the size of domes-
tic government.

Working Class to Underclass

This political change was brought about by the appearance of an

intractable type of poverty in American cities in the 1960s and early 1970s.
Ironically, the same era witnessed the last great victories of old-style pro-
gressive politics. The victories were achieved by the civil-rights and fem-
inist movements, which were largely composed of working people seeking
expanded economic opportunities. Their demands, like those made in
 Lawrence M. Mead 109

earlier decades by distressed farmers and organized labour, sought to

increase the income of workers.
But in the same era, welfare rolls more than doubled, crime soared and
riots broke out in the ghettos of major cities. These developments raised
issues of order and propriety much more sharply than the earlier move-
ments. By the end of the 1960s, the closely linked problems of poverty,
welfare and the inner city dominated the domestic agenda. Since then, the
claims of broader groups, including minorities and women, have not gone
unnoticed, but they no longer command centre stage. Social-reform efforts
now focus on welfare, education and criminal justice, not the economy.
Even the recessions of the 1970s and early 1980s, the most serious since the
Depression, failed to inspire major new efforts to help workers. Issues of
dependency and dysfunction, not opportunity, now preoccupy us.
Some might say that dependency politics is not new, in that controversies
about the 'undeserving' poor, and what to do about them, have often marked
American history. But if the themes of dependency politics are not new, its
prominence as 'welfare politics' before 1960 was largely a local affair. At the
national level, the arena was always dominated by groups that were not
dependent and were usually employed. Only in the recent era have depend-
ent, mostly non-working groups captured the nation's political attention.
The employment issue, like no other, marks the boundary between the
old politics and the new. The movements of the progressive era had weight
above all because their members worked, or at least had a job history. The
aggrieved might have been destitute, but they could make claims on the
basis of desert. The recent poor seldom can do this. They are controversial,
above all, because they usually do not work. Only 40 per cent of poor
adults had any earnings at all in 1987, and only 9 per cent worked full-time
year-round. That initially was why most of them were poor. Work effort
among the poor has also dropped sharply. Only 47 per cent of the heads of
poor families worked at all in 1987, down from 68 per cent in 1959.
Of course, only about half the poverty population is working-aged, and
only about half remains in poverty for more than two years. The under-
class, consisting of the poor with the most severe behavioural problems,
is quite small: it includes no more than eight million people by various
estimates. Yet persistent poverty is highly visible in cities, and it is central
to all major urban problems- not only welfare, crime and homelessness,
but troubled schools and a decaying economic base. So it gets more
policy-making attention than the affairs of the vastly larger working and
middle classes.
This new poverty created a new politics because the old politics found no
answer to it. Neither of the traditional, competing progressive-era remedies
-increasing or decreasing government intervention in the economy- seems
an appropriate response to the passive poverty of the inner city. It is true
that analysts wedded to progressive-era assumptions -whether liberal or
110 The New Politics of the New Poverty

conservative- continue to try to trace passive poverty to some social barrier

that must be eliminated: liberals say that poor adults cannot earn enough to
make work worthwhile, cannot find jobs or child care, or a,re barred from
jobs by racial bias; conservatives claim that welfare 'pays' dependents not
to marry or work. But the hard evidence mostly undercuts these explana-
tions. Liberal claims notwithstanding, jobs usually are available to the
unskilled; taking these jobs would generally move families in which both
parents worked above the poverty line. The flood of new immigrants enter-
ing the job market is one clear sign that opportunity still exists. Working
mothers can usually arrange child care informally and cheaply, and dis-
crimination in any overt form has disappeared. But conservative claims
notwithstanding, welfare disincentives are also too weak to explain the
collapse of the family or the very low work levels typically found in the
inner city today.
I do not mean that barriers are totally absent. Differences of opportunity
certainly exist in America. Better-educated people, for example, are more
likely to succeed. [Since the 1970s] the income disparity between low-
skilled and high-skilled workers has increased. The progressive-era debate
over whether and how to narrow these differences in wages remains alive.
Unequal opportunities, however, chiefly explain why some workers
earn more than others. They usually do not explain the failure of non-
workers to work steadily at all, which is in turn the cause of most poverty
and dependency among working-aged people. Most Americans have
responded to stagnant wages by working more; only the poor have worked
less. Most Americans refuse to believe that society's failure to expand
opportunity causes the poverty of non-workers who do not take and hold
available jobs.
To explain most entrenched poverty, we must go back to what used to be
called the 'culture of poverty'. Non-working adults apparently want to
work, but they seldom do so consistently- some because the pay offered is
unacceptable, others because they feel overwhelmed by the practical diffi-
culties of employment. These reactions run strongest in the inner city,
because of its isolation from workaday society, and among racial minorities
who have traditionally faced discrimination. The greatest cause of today's
poverty may simply be that the attempts [ ... ] to equalize opportunity
have failed to persuade many blacks and Hispanics that it is worth working.
But if non-work is rooted mostly in the demoralization of the poor, rather
than impersonal impediments, then traditional reformism holds no answer
for it. Passive poverty has defeated, in turn, the strategies of both larger and
smaller governments. The Great Society invented wave after wave of new
anti-poverty programmes, only to see the poverty level stagnate and welfare
rise. The Reagan administration cut or curbed the growth of these pro-
grammes to reinvigorate the economy. But even the longest boom in
American history could not reduce poverty below 13 per cent, because the
 Lawrence M. Mead 111

poor are now substantially detached from the economy. Each in its own way,
these strategies provided new chances to poor adults, but neither directly
addressed the puzzling reluctance of the poor to do more to help themselves.
As a result, social policy has been driven away from structural reforms
and towards paternalism. The drift is toward policies that address motiva-
tion by seeking to direct the lives of those dependent on government.
Public institutions are taking over tutelary functions from weakened fam-
ilies. Social-service agencies are raising children, and schools are organiz-
ing the lives of students before and after class as well as during it. Homeless
shelters and the criminal-justice system are managing the disordered
lives of single men. Above all, recent welfare legislation requires rising
numbers of employable recipients to participate in job placement or train-
ing on pain of cuts in their grants. Such measures violate the traditional pre-
scriptions of liberals, who want benefits given without conditions, but also
those of conservatives, who would prefer to see discipline applied by the
private rather than the public sector. But they seem required by the chang-
ing nature of the social problem.
These trends are most advanced in the US, but they are appearing in
Europe as well. An underclass, largely non-white, has grown up in British
cities, while throughout Europe controversy rages over whether immig-
rants from the Third World are corrupting traditional mores. These racial
and ethnic divisions now arouse more passion than the traditional conflicts
of labour and business. The behaviour of 'outsiders' is far more contro-
versial than economic claims. Crime, dependency and a failure to learn the
national language are at issue, not working-class demands for higher wages
and benefits. The West as a whole seems destined for a politics of conduct
rather than class.

The New Agenda

Dependency politics and progressive-era politics differ substantially in
content, even though there is much overlap in practice. I exaggerate the
contrasts here for emphasis:
The old issues were economic; the new ones are social. Progressive-era
politics debated the proper organization of society, especially the issue of
government control of the economy. Liberals supported higher and more
progressive taxation; public regulation of industries; union rights; the
minimum wage and other protections for workers; pension, health and
unemployment benefits: [ ... ] [The right sought to] weaken or undo all
these steps in the belief that only a revivified free market could really gen-
erate 'good jobs at good wages'.
In dependency politics, in contrast, the question is how to deal with the
problems of basic functioning among the seriously poor. The social, more
112 The New Politics of the New Poverty

than the economic, structure of society is at issue. The focus -is on troubled
individuals or ethnic groups rather than industry, agriculture, or the rela-
tions of labour and management. Social problems are no longe.t seen to stem
directly from injustice, nor are they obviously reformable. So social policy
must focus on motivation and order rather than opportunity or equality.
Affluence helped produce this shift. Before the 1960s, working-class
incomes were still low enough that many people were poor, even though
they worked normal hours. That is much less common today, because the
poverty line is constant in real terms while real wages have risen. The poor,
who used to work more than the better-off, now commonly work less.
Inevitably, the focus of the social agenda has shifted from the low wages
that used to impoverish workers to the dysfunctions that keep the non-
working poor out of the labour force.
In progressive-era politics the issue was government control of the
economy; in dependency politics it is government supervision of behaviour.
Progressive-era politicians disputed how far government should regulate
the free market in the collective interest, how much it should spend on
benefit programmes such as Social Security.
In dependency politics, however, the chief question is how far govern-
ment should control the lives of dysfunctional people in their own inter-
ests. Do we require that people stay in school, obey the law, avoid drugs,
and so on? Above all, do we require adults to work or prepare for work as
a condition of receiving welfare? Proposals to do these things do not much
change what government does for people. Rather, they demand that
dependants do more for themselves in return.
Formerly it was local authorities who grappled with maintaining social
order, while Washington managed the economy. But order issues have
become federal, because national programmes are involved in all the key
areas- welfare, education and criminal justice. It is now the main domestic
challenge of presidents, as of mayors, to reduce crime and dependency and
to raise standards in the schools. Presidents Nixon, Carter and Reagan all
tried to reform welfare, and George Bush aspired to be an 'education pres-
ident'.
The old issues concerned adults; the new issues concern children and
youth. Progressive-era political claims were on behalf of adults, especially
workers. The question was how to reorganize government or the economy
so that adults could have influence and opportunity. In the dependency era,
however, these issues are less salient than people's problems on the road to
adulthood - illegitimacy, educational failure and crime. So dependency
politics focuses heavily on the formative years. Reformism aims to
improve family, neighbourhood and schools rather than the political or
economic structure.
Daniel Patrick Moynihan says that social policy has entered a 'post-
industrial' age. The main challenge is no longer to expand economic
 Lawrence M. Mead 113

opportunity but to overcome social weaknesses that stem from the 'post-
marital' family and the inability of many people to get through school.
The inequalities that stem from the workplace are now trivial in comparison
to those stemming from family structure. What matters for success is
less whether your father was rich or poor than whether you knew your
father at all.
A focus on youth is inevitable once the leading social problem changes
from the poverty of workers to dysfunctional poverty. For if the source of
poverty is behaviour rather than lack of opportunity, remedies must focus
on youth, the stage of life at which behaviour is most malleable.
Conversely, reform for adults must be structural because it must take
personality largely as given.
The pressures in progressive-era politics arise from self-seeking beha-
viour; in dependency politics, they arise from passivity. Progressive-era pol-
itics debates the freedom that America allows people to make money and
get ahead on their own. To conservatives, this prerogative is a right that
government may not limit. To the left, it is a licence that government must
restrain in the name of a broader social interest.
The poor and dependent, however, are not exploitative but inert. They
are controversial mostly because they do so little to help themselves, not
because they hurt others in the pursuit of advantage. Even when violent,
they are unable to exert themselves effectively. They are not aggressive so
much as passive aggressive. So in dependency politics, the issue is whether
poor people should have to do more to help themselves. The question is
how passive you can be and still be a citizen in full standing.
Formerly, the right defended property and the established order against
public controls. Now it is the left that defends the status quo, by justify-
ing passivity among the needy, while the right demands greater activity.
Recent measures such as workfare or reformed schools are attempts to
stimulate the poor, not to curb the rich. The point is to set a floor under
self-advancement, not a ceiling above it. The hope is to make the poor more
effectively self-seeking than they are.
Claims in progressive-era politics derived from strength; those in depend-
ency politics arise from weakness. The chief players in the progressive era
were unions, farmers, businesses and other economic interests that
demanded some benefit or protection from government on a basis of desert.
They were economically disadvantaged, but their demands were also made
from a position of strength, because they had economic and political
resources of their own. They could use these resources to get attention from
politicians, but they could also survive on their own if rebuffed.
In dependency politics, the claimants usually have no such strength, as
they lack any regular position in the economy. They are simply needy.
Their main claim is precisely their vulnerability. It is not their own power
that gets attention, but politicians' fear of a backlash from the better-off if
114 The New Politics of the New Poverty
the needy are left unprotected. Economic groups state their claims by
speaking of troubled finances. The very poor state theirs by a disassembly
of the personality- by failing to function in embarrassing w;:1.ys that force
society to take responsibility for them.
In dependency politics, the poor claim a right to support based on the
injuries of the past, not on anything that they contribute now. Wounds are
an asset today, much as a pay cheque was in progressive-era politics. One
claims to be a victim, not a worker. The non-white poor, particularly,
appeal to historic injustices. Even some policies that aid better-functioning
minorities, such as affirmative action, require their beneficiaries to adopt
the identity of victimhood to some extent- to exploit an appeal, as Shelby
Steele says, based on 'suffering' rather than 'achievements'.
Poverty shifts the agenda from equality to citizenship. The question is
no longer what the worst-off members of the community should receive.
Now the question is who should be considered a bona fide member of the
community in the first place. Who has the moral standing to make the
demands for economic redress typically made in the progressive era? When
dependency comes to dominate politics, class-oriented issues of equality
for workers inevitably move off the agenda, while issues of identity and
belonging replace them.
In Europe as well as the US, dependency concerns replaced progressive
ones as motives for the reconsideration of the welfare state that began in
the 1970s and 1980s. At first, the issues were economic, the fear that exces-
sive spending on income and health programmes was overburdening the
economy. Cuts were made to promote economic growth, the step conser-
vatives always recommend in progressive-era politics. [In the 1990s],
however, the greater concern has been declining social cohesion, as evi-
denced by rises in crime, single parenthood and chronic unemployment.
The response, in Britain and Sweden as in the US, has been new steps to
enforce child support and work effort among the dependent. The shift
from the older, redistributive agenda to these new, more behavioural issues
ushers in a new political age.

[ ... ]

The Western Tradition

Today's efforts to respond to dependency face serious challenges. They

may well not allay our social problems as fully as progressive policies
resolved yesterday's economic disputes. The newer, paternalistic social
programmes probably will do more to reduce poverty than the less
demanding policies of the past: more authoritative schools are producing
some results, and workfare programmes have been able to increase work
 Lawrence M. Mead 115

effort (though they have not yet reduced dependency). But it is doubtful
that even these programmes can do more than contain the social problem.
Even if they are effective, paternalistic measures raise serious political
objections. The new structures reduce disorder, but at a cost to the auton-
omy of clients. This is particularly true if, as is likely, the chronic poor
require direction on an on-going basis, not just temporarily. That is why,
even now, government prefers to spend money on the dependent rather
than try to tell them how to live. Benefits lack the power of public author-
ity to change behaviour, but they do not violate our notions of a free
society.
A more serious problem stems from our political traditions. Anti-depen-
dency policies - and disputes about them- find no basis in the Western
political tradition, which assumes that the individuals who compose society
are competent to advance their own interests, if not society's. The tradi-
tional Western assumption is that politics arises from conflicting interests,
as individuals and groups seek economic advantage. Government's task is
to resolve these disputes in the general interest. It does not animate society,
but rather responds to energy coming from below.
Historically, Western politics has been class-oriented: aristocratic elites,
then bourgeois elements, then workers without property have advanced
their own conceptions of how government and the economy should be
organized. The dominant principles have become more democratic, then
more collectivist, as government came to represent the mass of the popu-
lace and then to serve its needs. The contending visions may seem radically
opposed, but from today's perspective they were remarkably alike: all
assumed a working population, competent to advance its own interests.
This tradition is inapplicable to the problems posed by today's dysfunc-
tional poor. But policy makers in [the US] and Europe are prone to
respond to these problems by replaying the old scenarios. Today's liberals
see history as a grand progression in which the rights of ordinary people
have been expanded: first civil liberties, then representative government,
then protections against the insecurities of capitalism were attained. Faced
with passive poverty, the left can imagine no response other than provid-
ing some further entitlement, for example government jobs. The idea that
dependants should have to function better seems like an attempt to deny
benefits, and is thus anathema.
Anti-government conservatives, for their part, blame poverty on an
excess of government, just as the left blames it on the lack of government
intervention. They insist that cuts in spending and taxes will somehow lib-
erate the energy of the poor, as they do that of entrepreneurs. The idea that
competence is a prior and different problem, requiring perhaps more gov-
ernment rather than less, is unthinkable.
These liberal and conservative responses are doomed to fail. If the ser-
iously poor had the initiative to respond to new opportunities, they would
116 The New Politics of the New Poverty

not be poor for very long in the first place. The Great Society .and the Reagan
era both failed to solve poverty, because each in a different way offered new
chances to the poor without confronting the motivation pi-o~ble~. Neither
could seriously address competence, because that problem fell outside the
Western assumptions underlying their ideas of social reform.
But despite these conceptual failures, government has begun to do some-
thing about poverty: a new, paternalistic regime for the poor is emerging.
Ronald Reagan's greatest domestic legacy, despite his tax cuts, was not to
reduce government; it was to start changing welfare into workfare. But ~he
new regime is accepted grudgingly, if at all. Politicians argue heatedly
about the issues of responsibility and competence that it raises, but they
seldom do so honestly. They mention the 'underclass' and the need for dis-
cipline, but they still talk as if they were offering the poor only 'freedom'
or 'opportunity'.
We need a new political language that considers more candidly the ques-
tions of human nature that now underlie politics. The political contestants
need to defend their positions on a philosophic level, rather than hide
behind outmoded theories. Liberals need to show why poor people are
blameless, therefore still deserving; conservatives need to show how the
poor are competent and why they need to be held accountable, in spite of
dysfunction. From such premises they could then erect consistent doc-
trines of social policy, comparable to the competing theories of economic
management that framed the leading issues in the progressive era.
If anyone is writing this theory, it is not philosophers like John Rawls and
his critics (who assume a rational economic psychology and thus remain
wedded to the competence assumption) but social-policy experts who
grapple concretely with poverty. They know too much of the hard evidence
about barriers to pretend that nothing has changed. To explain poverty and
justify any policy toward it, experts need a psychological doctrine that
explains how personal degradation occurs in an affluent and open society.
Differing visions of human nature are what really divide Charles
Murray, William Julius Wilson, myself and others. For Murray, poor adults
are short-sighted calculators who are tempted into dysfunction by the dis-
incentives of welfare. For Wilson, they are driven into disorder by a chan-
ging economy that denies them jobs that could support a family. My own
view, articulated in Beyond Entitlement: The Social Obligations of
Citizenship [1986], is that they are depressed but dutiful, willing to observe
mainstream norms like work if only government will enforce them. But
none of us has defended these premises in enough depth, or linked them
clearly enough to our prescriptions.
Armed with theories like this, the political process might face more
squarely the issues raised by dependency politics. It is more important that
the positions be candid than that they agree. Progress requires that the fears
of both sides be more fully aired, not that one side wins. The debate might
 Lawrence M. Mead 117

finally generate the consensus needed to support the new paternalistic

social policy that is already emerging. There could be agreement on the
basic civilities that everyone is prepared to enforce. On that basis, the
nation could grapple with passive poverty more successfully.

Note

From The Public Interest, 103,1991, pp. 3-20; fuller version in Lawrence M. Mead,
The New Politics of Poverty, New York, Basic Books, 1992.
Feminism
Feminism and Social Pol~cy
Mary Mclntosh

During the 1970s, feminists developed a critique of the welfare system that
was both sophisticated and damning. It began in a fragmentary way in the
early seventies with specific protests about issues like the 'cohabitation
rule' and the 'tax credit' proposals. There was a growing awareness that
women figure prominently among the clients of social workers, the
inmates of geriatric and psychiatric hospitals, the claimants of supplemen-
tary benefits- despite the fact that married and cohabiting women are not
eligible for many benefits. There was resentment about the degrading way
that women are treated when they need state benefits and state services.
The first responses were articulated most clearly by libertarian feminists,
who could express vividly what women know of the conditions under
which welfare is granted. They know the queues and the forms, the defer-
ence, the anger, the degradation, the sense of invisibility and the loss of
autonomy. They see the mean, withholding face of the state and can readily
take up the negative cry of 'smash the state!' But the cohabitation campaign
also raised deeper issues. It was not just that the 'SS' were 'sex snoopers'
who prevented women claimants from drawing their benefit if they were
suspected of living with a man. They also tried to force women into pros-
titutional dependence on the men they slept with. This raised the whole
question of women's dependence on men and the fact that women were
second-class citizens. The Women's Family Allowance Campaign against
the Tory government's 1972 tax-credit proposals focused on the same
problems. The family allowance paid directly to a mother was preferable
to the same, or even a greater, amount paid in tax credits through a father's
pay packet. The model of the couple as a financial unit bore little relation
to reality as many women experienced it. In the end, after we had defeated
this aspect of the tax-credit scheme, the trade unions' reluctance to accept
the loss of the child tax allowance that accompanied the improved child
 Mary Mcintosh 121

benefit only verified what we already knew: that money in a husband's pay
packet was not equivalent to a direct payment to his wife.

In the context of the women's liberation movement, the developing aware-

ness of women's relation to the welfare state was crystallized at the national
conference in 1974. Elizabeth Wilson's pamphlet Women and the Welfare
State (1974) was launched there and a new demand, for 'legal and financial
independence', was adopted. The new demand, the fifth to be adopted by
the movement, recognized clearly the relevance of the state in solving the
problem of women's dependence upon men. The other demands (con-
cerned with equal opportunities in jobs and training, equal pay, nurseries,
abortion and contraception) all had a bearing on women's independence in
their different ways. But this one, as the paper calling for it to be adopted
expressed it, 'highlights the links between the state and the family, and the
way in which the state systematically bolsters the dependent-woman
family' (Gieve et al., 1974). It saw the relevance of state policy not merely
to those categories of women who receive or are denied state benefits of
various kinds- not merely to mothers and non-mothers, wives and non-
wives, earners and non-earners- but to women as a whole category. For it
saw how state policies play a part in constructing that category and in con-
structing the idea of the family in which it exists. All women suffer from
the stereotype of the woman as properly dependent upon a man. But all
women also suffer in quite practical terms from the fact that there are few
viable alternatives to such dependence. (For an argument against this view,
see Bennett et al., 1980.)
Since then, this critique of state policy has been detailed and sustained.
Academic articles have been published (especially by Hilary Land, 1976,
1977), and so have pamphlets (for instance, Streather and Weir, 1974; Lister
and Wilson, 1976). Many a parliamentary select committee and inter-
departmental working party has been told of our views by various
women's groups. Wider campaigns, like the rousing but in the end rather
abortive one on wives' treatment under income tax, have been mounted.
What is disappointing is how little this critique has really affected thinking
among other radicals about social policy. Goodwill towards feminism
expresses itself in manning the creche, going on the abortion demo and
avoiding sexist styles of behaviour. But how many critics of the DHSS
review of Supplementary Benefit [in the late 1970s]- apart from women-
argued against the aggregation of the income and resources of husband and
wife? Yet separate treatment has been our demand ever since the first femi-
nist critiques of the Beveridge Report in the early 1940s (see, for instance,
Abbott and Bompas, 1943; Pierce, 1979).
At the same time as this awareness of how the state constructs depend-
ent women, there was a growing awareness of women as state employees.
Both the state bureaucracies and the institutions of health, education and
122 Feminism and Social Policy

welfare employ enormous numbers of women in their lower ranks; often

their clients are women; and often they are engaged in classic_ally 'feminine'
types of work both in terms of the contents of their tasks ~md in terms of
the social functions they fulfil. In fact, insofar as previously domestic func~
tions like health care, child care and personal services have become social~
ized, the social tasks are frequently performed by women just as the private
ones were. In struggles to improve social services and nurseries, and in
struggles to unionize women workers and advance their position, feminist
issues and the question of what women in different situations have in
common were fought out time and again. 'The patter of tiny contradic~
tions' was how Val Charlton (1974) described a childcare centre started by
some women's liberation groups in London.
All of these critical approaches to social policy were the feminist version
of the radical and Marxist critiques of the 1960s and 1970s. The burden of
these was that the welfare state is nothing of the kind: that it is not redis~
tributive as between the social classes, but makes the working class pay for
its own social casualties, that it does not even eliminate poverty at the
bottom end of the scale, that it is not the harbinger of socialist provision
according to need- neither in its style nor in its effects- and that it is an
instrument of bourgeois control, forcing people to work and imposing
standards of morality, decency and household management. To this, femi-
nists add that the welfare state is especially oppressive to women, in that it
harnesses them into the team that pulls the whole welfare charabanc along.
What was new, though, was that there was a clear recognition at the same
time that women need state provision. Faced with a choice between a
chancy dependence on a man on the one hand and dependence on the state
or exploitation in waged work on the other, feminists opt for the state and
the wage.
Personal dependence carries with it a whole baggage of psychological
dependence. Lack of autonomy, deference, the need to manipulate personal
relations, all tend to stunt women's potential and make us insecure and unad-
venturous. Indeed the characteristics of femininity which Juliet Mitchell
(1974) has explained in terms of the experience of infancy - passivity,
masochism and narcissism- could equally be explained by the adult experi-
ence of dependence and the practical need to seek support. This explanation
would in fact fit better the reality, which is one of public passivity, based on
self-repression and often masking an underlying attitude of cynicism and
rebellion, similar to that of Franz Fanon's colonized people.

With all their problems, then, the state and the employer can be fought col-
lectively and unlike modern marriage they are not intrinsically patriarchal.
And whenever feminists have formulated the demand for the socialization
of housework and of personal care, it has been state provision rather than
private commercial provision that they have had in mind.
 Mary Mcintosh 123

Feminists in [England] have never been for very long attracted to purely
nti-statist positions. Such utopian individualism (or even small-scale col-
~ectivism) is a possible dream for men who can envisage a world of self-
supporting able-bodied people. But women are usually concerned with
how the other three-quarters live. They have argued for new forms of
interdependence based in the community and not in the family, and these
necessarily involve the state at one level or another.
There have been some interesting debates in the women's movement
about the development and provision of feminist services. The question
has been: should we provide these ourselves or should we demand state
provision and then fight about the form that provision should take?
Nurseries, playgroups, health care, advice on contraception and abortion,
refuges for battered women, rape crisis centres, legal and welfare rights
advice- all clearly fall within the ambit of things that we expect to be pro-
vided by state agencies. Yet these are either not available or, when they
are, are inadequate and unfeminist in their approach. Setting up services
like this is a way both of meeting women's needs and also of developing
public awareness of the effects of women's oppression, and providing a
base for feminist analysis and agitation around the issue (Flaskas and
Hounslow, 1980). In Australia and in the United States there has been a
great proliferation of feminist health and welfare services and the results
have sometimes been disappointing in that the energies of the women
involved have been used up in providing a good service so that the more
forward-looking political tasks have been neglected. In England, with the
notable exception of the network of Women's Aid refuges for battered
women, the tendency has been to set up very few feminist agencies but to
concentrate on campaigning for state provision. The more developed
social and health services in England have made this a more promising
direction to work in. It also seems to me to be the right approach, since
it can lead to more long-term and more universal provision than any vol-
untary efforts are likely to do. The character of such campaigns is also dif-
ferent and in some ways more outgoing politically. Instead of the
independent and sometimes rather inward-looking group work involved
in establishing and running a feminist service, there is the need to make
alliances and work in the existing political arena. The struggle to develop
the present services in a feminist direction involves work in the unions
and professional bodies of the service workers as well as organizing
among clients and users.
Making claims on the state thus involves fruitful political work and agi-
tation at many levels and is far from being confined to the politics of
Westminster. So in this respect, as in some others, women have been at
the forefront of the rethinking of the rather facile radical libertarianism
of the 1960s and early 1970s. (The other thing that feminists questioned
was the general assumption that decriminalization, decarceration and
124 Feminism and Social Policy

de-institutionalization were unambiguously progressive. Sometimes

they have gone too far as in calling for exceptionally heavy punishments
and the suspension of the usual rights of the accused in ca,5es.of rape and
of violence against women, and in calling for increased state control over
pornography. In some spheres we have not yet gone far enough: we
should be mounting a much stronger criticism of present ideas of 'com-
munity care' and fighting for new forms of institutional care that avoid
the problems earlier radicals have pointed to.)

[ ... ] We have to develop ideas and organizations that enable us to engage

with social policy as it forms. And this will mean discussing what son of
welfare state we do want, not just sniping at the existing one and waiting
for The Revolution to put everything right.
However, for Marxists this cannot mean a Fabian-style formulation of
gradual ameliorative goals and means. It must mean taking a very clear class
position and working within the labour movement and all organizations
that can take up an anti-capitalist position. It means working out what
gains can be made in any given situation and what threats most need
defending against, not assuming that social policy makers are people of
good will who will see reason when a clear and forceful case is put to
them. I suggest that at the most general level there are two key points to
remember.

(1) The first is that although the dominant factor affecting state policies
will always be the long-term interests of the ruling class and although the
central interests of the working class and the capitalist class are antagonis-
tic, it is not necessarily the case that their interests will be opposed on every
single issue of social policy. The most fundamental reason for this is that,
despite the fact that the wage relation is an antagonistic one, workers' and
capitalists' interests coincide in requiring the satisfaction of the workers'
basic needs, whether through the wage or by other means. The capitalist
requires the reproduction of labour power; the worker requires food and
clothing. Of course, they will differ widely over what sort of needs should
be met and under what conditions: over what constitutes 'adequate' repro-
duction of labour power; and this is where struggles over social policy
come in. The history of the growth of the welfare state and the growth of
collective consumption (Grevet, 1976; Castells, 1978) in general in capital-
ist societies is thus neither a history of cherries snatched from the greedy
hands of capitalists by a militant working class, nor is it a history of a crafty
capitalist plot to control and enfeeble the workers in the interests of guar-
anteeing the reproduction of labour power and of the relations of produc-
tion. It is both. The gains and losses have to be figured partly in terms of
some felicific calculus and partly in political terms: are we better placed for
the next battle? Has morale improved?
 Mary Mcintosh 125

(Z) The second key point is that we need to keep in mind the limits that
reset on social policy by the capital-labour contradiction. In particular,
~e need to recognize that the wage system is fundamental to capitalist pro-
duction and that the primary means of the reproduction of labour power
will be the wage. Social security provisions and collective consumption
will be designed in such a way as to minimize their interference with the
labour market and with the existence of a proletariat obliged to sell its
labour power in order to survive.
This means that demands for a 'guaranteed minimum income' have no
connection with social policy in capitalist society. The 'guaranteed
minimum income' is a demand adopted by the Claimants' Union as a
radical solution to their degrading experiences at the hands of the social
security officials. They see the problems of the means test, the search for
a 'liable relative', and the obligation to sign on for employment as ways
in which the working class are harassed and controlled. So they demand
their abolition, the right of everyone to a guaranteed income regardless
of whether or not they are willing to look for waged work. As a
Claimants' Union representative argued in one of the workshops at the
'Crisis in the Welfare State' conference [1980]: 'People who don't have
jobs need an income as much as those who do; it is hard work just staying
alive in capitalist society.' The demand is thus very different from a
demand for a minimum wage coupled with improved social security ben-
efits at the same level. It is a demand that the need to sell one's labour
power in order to survive should be abolished. So it is nothing less than
a demand that socialism be introduced: but a demand ostensibly made of
the capitalist state and a demand that socialism should enter through the
back door, the relations of distribution; rather than the front door, the
relations of production. It is thus, as its proponents are well aware, an
unrealizable demand under capitalism, since it negates the wage relation
which lies at the heart of capitalism. Any of their supporters who join the
ranks because they think they might actually gain the demand have been
sadly deceived. But the existence of such demands can have the depress-
ing effect of making all real current struggles over policy look paltry and
reformist by comparison.
Feminists have been very aware of this problem in relation to the
demand for 'wages for housework', rejected by the women's liberation
movement in England in 1972, but still having a small, vocal following.
Effectively this is a demand that women should have a guaranteed
minimum income, since the idea that there should be any check on whether
they actually do any housework is rejected. It is thus a demand that all
women should be lifted out of the proletariat and put on a pension. It, too,
can be dispiriting if it has the effect of making current struggles over
matters like invalid care allowances or the infamous 'Housewife's
Non-Contributory Disability Allowance' seem trivial and reformist.
126 Feminism and Social Policy

Though dependence on the wage will continue to be the. primary means

of support for the working class, we have seen during the twentieth
century a notable narrowing of the range of people who ~re ~xpected to
depend upon a wage. A wage-earner is no longer expected to provide the
main support for old and disabled relatives, only for his wife and children
(or, more rarely, her husband and children). The welfare state has defined
whole categories of people out of the labour market- the old, the young,
the disabled - enabling the capitalist work process to be intensified and
many welfare benefits to be offered unconditionally and apparently
benevolently. But there cannot be an infinite extension of such benefits
unless the working class is to be de-proletarianized altogether.
These two key points are proposed as basic considerations for the for-
mulation of any socialist strategy for social policy in capitalist societies.
But I shall illustrate their importance by looking at the problems of femi-
nist strategy. Women have to consider whether they have gained or lost by
the policies accepted by the working class in the past, and how they should
relate to working-class political organization for the future. And we have
to consider what relation we want women to have to wage labour. Should
we become more fully proletarianized or should we seek better conditions
of dependence on husbands or on state benefits?

I shall turn now to these more specific questions of feminist strategy. In

some ways, the central problem is the same one that has plagued feminism
ever since the achievement of the vote left the movement without a central
rallying cry. The problem is whether to press for equality with men,
usually in terms of legal, political and citizenship rights, or to press for
greater support and respect for women in their roles as housewives and
mothers: a right to an independent income and a recognition of the import-
ance of their contribution.
The second position was that of the 'new feminists' who emerged after
the First World War. So Eleanor Rathbone argued in 1925 that the point
had been reached where women could say:

At least we have done with the boring business of measuring everything

women want, or that is offered to them, by men's phraseology. We can
demand what we want for women, not because it is what men have got, but
because it is what women need to fulfill the potentialities of their own natures
and to adjust themselves to the circumstances of their own lives (Rathbone,
1929, quoted in Lewis, 1973).

The argument against the older equalitarianism took the form of a rejec-
tion of male definitions of women's work as inferior and a plea for a new
dignity and new measures of protection. In some respects it was more pro-
gressive than equalitarianism: it sought to change the world, not merely to
 Mary Mcintosh 127

give women access to the better places in it. But in the end it was less radical
because the changes it sought were too shallow. They were designed to ease
the suffering where the shoe pinches rather than build a new shoe on a
better last. For modern feminists it is easy to see why Rathbone's moun-
tainous ideal of Family Endowment brought forth the rather ridiculous
mouse of Child Benefit and why women's dependence is still a key issue
wday. As Hilary Land put it: 'Eleanor Rathbone laid much emphasis on
the unequal economic relationship between husband and wife but had far
less to say about the division of responsibilities for child care and house-
work' (Land, 1980). A deeper analysis would have led her to see the two as
inseparable within any wage-based economy. The problem as it was posed
then is that of the impossibility either of the equalitarian ideal- which asks
for equal treatment for unequal people- or of the 'new feminist' ideal -
which asks for women to be treated as different but equal.
It is interesting to ask whether the difference between these two strat-
egies has been transcended by the more recent feminism of the women's
liberation movement. Certainly it is not the basis for the main divisions
within the movement at present. And the modern movement is character-
ized much more by methods that have nothing to do with legal changes or
state policies and so may appear to sidestep the problems of equalitarian-
ism: cultural politics, the politics of lifestyle and changing household rela-
tionships, self-help and self-defence, support for victims of rape and
violence, forming international links and (perhaps most distinctively)
developing theoretical analyses of women's oppression.
Yet in many fields of work, the choice between those two strategies
remains and continues to pose thorny problems. These tend to be the
modern versions of the very issues of law and social policy that exercised
our feminist grandmothers. The issue of protective legislation, restricting
the hours and conditions of women's work in factories, is a conspicuous
example. Feminists have been divided over it ever since it was first intro-
duced during the nineteenth century. At that time equalitarianism was the
dominant approach and such feminists as took an interest in the question
opposed the legislation on the grounds that it infringed women's liberty and
put them at a disadvantage in the labour market - a view which I think is
justified by the historical evidence (Barrett and Mcintosh, 1980; but for the
opposite view, see Hutchins and Harrison, 1911; Humphries, 1977, 1981).
Later the 'new feminists' attacked this stance and argued that women's
functions of home-making and child-rearing could not be carried out prop-
erly if they were forced to work long hours and at night outside the home.
This is not, of course, a defence that appeals to women's liberationists today.
However, the situation today is not at all comparable to that in the past.
For one thing, we have formulated the goal of transforming the processes
of home-making and child-rearing, so that if these are to be done privately
we want men's factory hours to be limited as well. For another, while the
128 Feminism and Social Policy

CBI wants protective legislation ended, the TUC wants it continued and
extended to cover men and to cover workers everywhere, not just in
factory production. So when the Equal Opportunities Comll)ission (1979)
[ ... ] recommended abolishing the legislation it was siding with the bosses
as well as taking an unhistorical perspective and thinking in terms of imme-
diate equality of treatment (for the unequal) rather than of working to
eliminate the underlying inequality.
However, it should be noted that the position that women's liber-
ationists usually adopt on this issue depends upon trusting the TUC., If
they are not genuine in their commitment to extend protection to men- or
if they have no hope of carrying it through- our position becomes one that
simply accepts the present role of women and seeks to protect us from
some of its worst penalties. I shall come back later to the questions of polit-
ical practice that this raises. I want first to say something about strategy in
relation to one particular feminist campaign, that for 'disaggregation'. I
focus on this campaign because it raises important problems and also
because I happen to have been involved in it, rather than because I believe
it to be any more or less important than other campaigns. It is obviously
just one part of a wider struggle.
Socialist feminists in the women's liberation movement have transcended
the old divide in the sense that they have questioned not only masculinity
and femininity, not only man's place and woman's place, but also the very
existence of social division and difference based on sex. We have firmly
located the origin and support for this division in the family. This does not
mean that we locate it in individual kin-based households, but in the insti-
tution of the family, with its ideology, its imperatives and its constraints,
which spread far beyond households themselves and both cause and enable
the organization of everything else to be marked by gender division.
Women's liberation depends upon the radical transformation of that family.
However, although there is much disagreement about the relation of that
family system to capitalism, most socialist feminists agree on two things:
that the specific character of women's oppression at present is related to the
articulation between the family system and the wage system; and that we
should start working now towards the transformation of the family system
and that it will not automatically arrive along with socialism. Indeed, I
would add that the family system is changing and is under great strain at
present (and not only because of the resurgence of feminism), so that it is
incumbent on us to play a part in determining what form that change takes.
On the whole we choose to campaign for those things that we know will
both help the immediate problems of many women and also help to open up
possibilities for further and more far-reaching change. The demand for 'dis-
aggregation' in social security, income tax, student grants and so on is a
good example. The aggregation of the married couple into a tax unit
and into a means-testable unit - however it may be dressed up in unisex
 Mary M clntosh 129

clothing - represents women's dependence on their husbands. This is a

dependence that is unreliable and degrading when it does exist and which in
any case is a less common pattern than is often supposed, since most women
are breadwinners (Hamill, 1978). In terms of social security, disaggregation
would mean that a married woman who could not get a job could claim sup-
plementary benefit regardless of her husband's income. But it would also
mean that a married man would get a single person's benefit with no
allowance for the wife; she would have to claim herself and fulfil the usual
conditions: unless she was responsible for caring for small children or an
invalid or something like that, she would have to sign on for employment.
This is a demand that comes out of our own experience. Several of the
group which formulated it had suffered indignities and deprivation at the
hands of the social security. Even so, the chief argument for it is not that
thousands of women will be better off. It is that all women will have rights
to full social security and that all men will lose the right to state back-up
for keeping their wives in dependence. We realize that some women, espe-
cially older ones who have not had recent experience of going out to work,
will be disadvantaged. We realize that forcing women onto the labour-
market as it exists for them now is painful. But we believe that married
women's dependence is in part responsible for their dreadful position in
the labour-market, and the movement is simultaneously fighting for better
pay and conditions at work, including the part-time and low-paid jobs that
many women are forced to take.
We realize, too, that many who are concerned about poverty will tell us
that there are other groups worse off than married women, whose needs
should be met first. I think that argument reveals one of the weaknesses of
the approach to social policy that focuses on questions of income equality,
in terms of the outcome of distributional and redistributional processes,
and does not look at the structure of relations involved in producing those
outcomes. Our concern is with moving towards a structural change; by
unhitching marriage from the social security system we hope to contribute
to loosening its ties to the welfare system in general and ultimately to the
wage system itself. We do believe that many unemployed married women
are in poverty; those who are may benefit from the change. So we think
that disaggregation would meet important immediate needs for some
women, but more importantly it would help undermine the existing
unequal marriage system. (Incidentally, I am not much swayed by the
argument that disaggregation would remove one of the few advantages of
forming households not based on the heterosexual pair-bond, and so
provide another bonus for traditional marriage. For one thing, the argu-
ment considers individual types of household rather than the institutions
as a whole. But more importantly, it assumes that marriage would be
strengthened because more people would be motivated to enter it, or to
stay in it, and I doubt whether this would be true for many people.)
130 Feminism and Social Policy

In the present situation, the main point of arguing for disaggregation is

to get an acceptance of the principle as widely as possible:. to get to the
point where the chief basis for resistance to it is cost and all.the. objections
on principle have been rejected, both within the labour movement and in
official circles. Some of the strongest arguments for it will, of course, be
equalitarian ones, not because we want to conceal our real aims, but
because equality is indeed an important dimension of the demand and one
that people most readily latch on to. [ ... ]
The day-to-day battles, unfortunately, are much more defensive ones
against the cuts. But it is important to give these a feminist dimension,
which often means one informed by the perspective of disaggregation, so
that we recognize and attack cuts that force women further into depend-
ence as well as those that take away their jobs or give them extra unpaid
work. Disaggregation and protective legislation are only two examples.
Similar strategic decisions have to be made in relation to almost every field.
Should we press for a share of the matrimonial home and adequate main-
tenance for wives on the breakup of marriage? (Law Commission, 1980)
Should we press for cohabitant women to be given rights equivalent to
those of married women? (Anne Bottomley et al., 1981) These fields need
to be linked and seen as part of the overall strategy for women's liberation,
which of course goes far beyond the confines of social policy, even in its
broadest sense.
The positions that I have argued for here are adopted in the light of the
two key points of guidance for socialist social policy that I outlined earlier.
They arc based on the belief that there can be significant gains for women
and for the working class (real gains for women are also gains for working-
class unity) within capitalist society, since not every working-class gain is
an immediate capitalist loss. And they are based on the belief that the wage
system is fundamental to capitalist society, so that despite all the disadvan-
tages of wage work, the way forward must be through furthering the
process of proletarianization of women and rescuing women from pre-
proletarian dependence. The struggle to end capitalist wage labour cannot
be helped by women opting out and can only be undertaken by a working
class that is less divided by male domination than the present one.

I want to end with some remarks about problems of organization in pur-

suing feminist goals in social policy. I shall not discuss questions of organ-
ization for women's liberation in general, though what I shall say clearly
reflects certain views on that.
Firstly, I think we have got to develop a feminist presence in all the places
where changes in social policy are fought for. This means within the left
political parties, within the labour movement, within all the campaigning
and lobbying bodies, and as much as possible in the women's organiza-
tions. Building up such a presence is often an unattractive activity for con-
 Mary Mcintosh 131

temporary women's liberationists. Once we have experienced the joys and

terrors of swimming in structureless movements like the women's liber-
ation movement (if we managed to keep our heads above water), whose
favourite forums are the mass meeting in an overcrowded school hall with
an inadequate PA system and the small intimate and supportive work-
group, we find it hard even to tread water in the structured world of jock-
eying for office, juggling agendas and bowing to the constraints of
representative democracy. But we cannot bypass those organizations; they
exist, and each of them has carved out its own space of power. If we are not
to be in constant opposition to them we must work within them as well as
working in our own ways outside them. Sometimes this means challenging
and transforming their styles of work and approach. Often, though, it
means forming alliances where we have only a few points of agreement;
and often it means compromises: avoiding taking a line that will lose us the
support that we need for other more important battles. The question of
protective legislation and the TUC, which I discussed earlier, is a case in
point. Above all, it means getting in there and arguing our case in the
context of on-going work.
The second remark I want to make is about men's relation to feminist
social policy and to the Women's Liberation Movement. I think it may be
true to say that there is never an entirely acceptable stance for outsiders
towards a movement of liberation. I have experienced this as a white
person in relation to the black movement in the 1960s and as a Briton in
relation to anti-imperialist movements. It is easy to be caught in the double
bind of being told simultaneously that we should not interfere, not impose
our ideas, not assume we can escape being oppressors by an act of will,
leave the oppressed group to constitute its own autonomous movement.
But it is easier still to use that double bind as an excuse for doing nothing
to support the cause of liberation for carrying on with our own struggles
quite unaffected by those of our neighbours. Many men have used that
double bind as a way of getting off the hook in relation to women's liber-
ation. They respect the autonomy of the women's movement, wish it well,
and there the matter can rest.
But such an easy benevolence is not appropriate to the case. We aim to
overthrow men's dominance and remove their privileges as a gender. Our
cause cannot just be added on to the list of radical causes. We are not a
newly discovered minority group like dyslexics or people whose homes are
threatened by road-widening, because our oppression is built into the very
structure of production and reproduction. So anyone concerned with
social policy must decide what stand to take on the issues we raise and must
sec the question of women as integral to any analysis of social policy. We
have been talking and writing for many years now about the inadequacy
of existing analyses. Yet those of us who are teachers still find that our well-
meaning male colleagues invite us to give a lecture or two on 'women and
132 Feminism and Social Policy

welfare', 'women and crime', or whatever. This is done with a modest, 'I
am only a man; I can't speak for women'. But I sometimes wonder what
they think the other eighteen lectures in their course ar:- apout: men?
neuters? a gender-free society? The welfare system as it stands (or totters)
is utterly dependent upon a specific construction of gender. The
Department of Health and Social Security is well aware of that and it is
time that critics of social policy were as well.

Note

This extract, from Critical Social Policy, 1, 1981, pp. 32-42, is based on the author's
paper given at the Critical Social Policy Conference, 'Crisis in the Welfare State',
November 1980.

References

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Allen, Sandra et al. (eds) (1974) Conditions of Illusion, Leeds, Feminist Books.
Barrett, Michele and Mcintosh, Mary (1980) 'The Family Wage', Capital and
Class, no. 11.
Bennett, Fran et al. (1980) 'The Limitations of the Demand for Independence',
Politics and Power, no. 1.
Bottomley, Anne et al. (1981) The Cohabitation Handbook: A Woman's Guide to
the Law, London, Pluto Press.
Castells, Manuel (1978) 'Collective Consumption and Urban Contradictions in
Advanced Capitalism', reprinted in Castells, City, Class and Power, London,
Macmillan.
Charlton, Valerie (1974) 'The Patter of Tiny Contradictions', Red Rag, no. 5,
reprinted in Allen et al.
Equal Opportunities Commission (1979) Health and Safety Legislation: Should
we Distinguish between Men and Women? London, HMSO.
Flaskas, Carmel and Hounslow, Betty (1980) 'Government Intervention and
Right-Wing Attacks on Feminist Services', Scarlet Woman (Australia) no. 11.
Gieve, Katherine et al. (1974) 'The Independence Demand', in Allen et al.
Grevet, Patrice (1976) Besoins populaires et financement public, Paris, Editions
Sociales.
Hamill, Lynn (1978) 'Wives as Sole and Joint Breadwinners', paper presented to
the Social Science Research Council, Social Security Research Workshop.
Humphries, Jane (1977) 'Class Struggle and the Persistence of the Working-Class
Family', Cambridge journal of Economics, vol. 1, no. 3, pp. 241-58.
Humphries, Jane (1981) 'Protective Legislation, the Capitalist State and Working-
Class Men: 1842 Mines Regulation Act', Feminist Review, no. 7.
Hutchins, B. L. and Harrison, A. (1911) A History of Factory Legislation, London,
P. S. King and Son, 2nd edn.
Land, Hilary (1976) 'Women: Supporters or Supported?', in Diana Barker and
Sheila Allen, Sexual Divisions and Society: Process and Change, London,
Tavistock.
 Mary Mcintosh 133

L nd Hilary (1977) 'Social Security and the Division of Unpaid Work in the
aH~me and Paid Employment in the Labour Market', in Department of Health
and Social Security, Social Security Research Seminar, London, HMSO,
43-61.
L:n~·, Hilary (1980) 'The Family Wage', Feminist Review, no. 6.
Law Commission (1980) Family Law: The Financial Consequences of Divorce:
The Basic Policy: A Discussion Paper, Law Com. no. 103, London, HMSO,
Cmnd. 8041.
Lewis, Jane (1973) 'Eleanor Rathbone and the New Feminism during the 1920s',
mimeograph.
Lister, Ruth and Wilson, Leo (1976) The Unequal Breadwinner, London,
National Council for Civil Liberties.
Mitchell, Juliet (1974) Psychoanalysis and Feminism, London, Allen Lane.
Pierce, Sylvie (1979) 'Ideologies of Female Independence in the Welfare State:
Women's Response to the Beveridge Report', paper given at British Sociological
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Rathbone, Eleanor F. (1929) Milestones: Presidential Addresses at the Annual
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Streather,Jane and Weir, Stuart (1974) Social Insecurity: Single Mothers on Social
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The Patriarchal Welfare State
Carole Pa ternan

[ ... ]

Theoretically and historically, the central criterion for citizenship has been
'independence', and the elements encompassed under the heading of inde-
pendence have been based on masculine attributes and abilities. Men, but
not women, have been seen as possessing the capacities required of 'indi-
viduals', 'workers' and 'citizens'. As a corollary, the meaning of 'depend-
ence' is associated with all that is womanly - and women's citizenship in
the welfare state is full of paradoxes and contradictions. [ ... ] Three elem-
ents of 'independence' are particularly important for present purpqses, all
related to the masculine capacity for self-protection: the capacity to bear
arms, the capacity to own property and the capacity for self-government.
First, women are held to lack the capacity for self-protection; they have
been 'unilaterally disarmed' .1 The protection of women is undertaken by
men, but physical safety is a fundamental aspect of women's welfare that has
been sadly neglected in the welfare state. From the nineteenth century, fem-
inists (including J. S. Mill) have drawn attention to the impunity with which
husbands could use physical force against their wives, 2 but women/wives
still find it hard to obtain proper social and legal protection against violence
from their male 'protectors'. Defence of the state (or the ability to protect
your protection, as Hobbes put it), the ultimate test of citizenship, is also a
masculine prerogative. The anti-suffragists in both America and Britain
made a great deal of the alleged inability and unwillingness of women to use
armed force, and the issue of women and combat duties in the military forces
of the warfare state was also prominent in the [ ... ] campaign [of the 1980s]
against the Equal Rights Amendment in the United States. Although women
are now admitted into the armed forces and so into training useful for later
civilian employment, they are prohibited from combat duties in Britain,
 Carole Pateman 135
Australia and the United States. Moreover, past exclusion of women from
the warfare state has meant that welfare provision for veterans has also ben-
efited men. In Australia and the United States, because of their special 'con-
tribution' as citizens, veterans have had their own, separately administered
welfare state, which has ranged from preference in university education (the
GI bills in the United States) to their own medical benefits and hospital ser-
vices, and (in Australia) preferential employment in the public service.
In the 'democratic' welfare state, however, employment rather than mili-
tary service is the key to citizenship. The masculine 'protective' capacity
now enters into citizenship primarily through the second and third dimen-
sions of independence. Men, but not women, have also been seen as prop-
erty owners. Only some men own material property, but as 'individuals',
all men own (and can protect) the property they possess in their persons.
Their status as 'workers' depends on their capacity to contract out the
property they own in their labour power. Women are still not fully recog-
nized socially as such property owners. To be sure, our position has
improved dramatically from the mid-nineteenth century when women as
wives had a very 'peculiar' position as the legal property of their husbands,
and feminists compared wives to slaves. But today, a wife's person is still
the property of her husband in one vital respect. Despite recent legal
reform, in Britain and in some of the states of the United States and
Australia, rape is still deemed legally impossible within marriage, and thus
a wife's consent has no meaning. Yet women are now formally citizens in
states held to be based on the necessary consent of self-governing individu-
als. The profound contradiction about women's consent is rarely if ever
noticed and so is not seen as related to a sexually divided citizenship or as
detracting from the claim of the welfare state to be democratic.
The third dimension of 'independence' is self-government. Men have
been constituted as the beings who can govern (or protect) themselves, and
if a man can govern himself, then he also has the requisite capacity to govern
others. Only a few men govern others in public life- but all men govern in
private as husbands and heads of households. As the governor of a family,
a man is also a 'breadwinner'. He has the capacity to sell his labour power
as a worker, or to buy labour power with his capital, and provide for his
wife and family. His wife is thus 'protected'. The category of 'breadwinner'
presupposes that wives are constituted as economic dependants or 'house-
wives', which places them in a subordinate position. The dichotomy bread-
winner/housewife, and the masculine meaning of independence, were
established in Britain by the middle of the nineteenth century; in the earlier
period of capitalist development, women (and children) were wage-labour-
ers. A 'worker' became a man who has an economically dependent wife to
take care of his daily needs and look after his home and children. Moreover,
'class', too, is constructed as a patriarchal category. 'The working class' is
the class of working men, who are also full citizens in the welfare state.
136 The Patriarchal Welfare State

[T. H. Marshall first presented his influential account of citizenship in

1949, at the height of the optimism in Britain about the contribution of
the new welfare state policies to social change. He referred ,"specifically
to ... ] the universal, civil right to 'work', that is, to paid employment. The
democratic implications of the right to work cannot be understood
without attention to the connections between the public world of 'work'
and citizenship and the private world of conjugal relations. What it means
to be a 'worker' depends in part on men's status and power as husbands,
and on their standing as citizens in the welfare state. The construction of
the male worker as 'breadwinner' and his wife as his 'dependant' was
expressed officially in the census classifications in Britain and Australia. In
the British Census of 1851, women engaged in unpaid domestic work were
'placed ... in one of the productive classes along with paid work of a
similar kind'. 3 This classification changed after 1871, and by 1911 unpaid
housewives had been completely removed from the economically active
population. In Australia an initial conflict over the categories of classifica-
tion was resolved in 1890 when the scheme devised in New South Wales
was adopted. The Australians divided up the population more decisively
than the British, and the 1891 Census was based on the two categories of
'breadwinner' and 'dependant'. Unless explicitly stated otherwise,
women's occupation was classified as domestic, and domestic workers
were put in the dependant category.
The position of men as breadwinner-workers has been built into the
welfare state. The sexual divisions in the welfare state have received much
less attention than the persistence of the old dichotomy between the
deserving and undeserving poor, which predates the welfare state. This is
particularly clear in the United States, where a sharp separation is main-
tained between 'social security', or welfare-state policies directed at
'deserving workers who have paid for them through "contributions" over
their working lifetimes', and 'welfare'- seen as public 'handouts' to 'barely
deserving poor people'. 4 Although 'welfare' does not have this stark
meaning in Britain or Australia, where the welfare state encompasses much
more than most Americans seem able to envisage, the old distinction
between the deserving and undeserving poor is still alive and kicking, illus-
trated by the popular bogey-figures of the 'scrounger' (Britain) and the
'dole-bludger' (Australia). However, although the dichotomy of deser-
ving/undeserving poor overlaps with the divisions between husband/wife
and worker/housewife to some extent, it also obscures the patriarchal
structure of the welfare state.
Feminist analyses have shown how many welfare provisions have been
established within a two-tier system. First, there are the benefits avail-
able to individuals as 'public' persons by virtue of their participation, and
accidents of fortune, in the capitalist market. Benefits in this tier of the
system arc usually claimed by men. Second, benefits are available to the
 Carole Pateman 137

'dependants' of individuals in the first category, or to 'private' persons,

usually women. In the United States, for example, men are the majority of
'deserving' workers who receive benefits through the insurance system to
which they have 'contributed' out of their earnings. On the other hand, the
majority of claimants in means-tested programmes are women - women
who are usually making their claims as wives or mothers. This is clearly the
case with AFDC (Aid to Families with Dependent Children), where
women are aided because they are mothers supporting children on their
own, but the same is also true in other programmes: '46 per cent of the
women receiving Social Security benefits make their claims as wives'. In
contrast: 'men, even poor men, rarely make claims for benefits solely as
husbands or fathers'. 5 In Australia the division is perhaps even more
sharply defined. In 1980-81, in the primary tier of the system, in which
benefits are employment-related and claimed by those who are expected to
be economically independent but are not earning an income because of
unemployment or illness, women formed only 31.3 per cent of claimants.
In contrast, in the 'dependants group', 73.3 per cent of claimants were
women, who were eligible for benefits because 'they are dependent on a
man who could not support them, ... [or] should have had a man support
them if he had not died, divorced or deserted them'. 6
Such evidence of lack of 'protection' raises an important question about
women's standard of living in the welfare state. As dependants, married
women should derive their subsistence from their husbands, so that wives
are placed in the position of all dependent people before the establishment
of the welfare state; they are reliant on the benevolence of another for their
livelihood. The assumption is generally made that all husbands are benevo-
lent. Wives are assumed to share equally in the standard of living of their
husbands. The distribution of income within households has not usually
been a subject of interest to economists, political theorists or protagonists
in arguments about class and the welfare state - even though William
Thompson drew attention to its importance as long ago as 1825 [in a book
entitled Appeal of One Half the Human Race, Women, against the
Pretensions of the Other Half, Men]- but past and present evidence indi-
cates that the belief that all husbands are benevolent is mistaken.
N everthelcss, women are likely to be better off married than if their mar-
riage fails. One reason why women figure so prominently among the poor
is that after divorce, as recent evidence from the United States reveals, a
woman's standard of living can fall by nearly 75 per cent, whereas a man's
can rise by nearly half/
The conventional understanding of the 'wage' also suggests that there is
no need to investigate women's standard of living independently from
men's. The concept of the wage has expressed and encapsulated the patri-
archal separation and integration of the public world of employment and
the private sphere of conjugal relations. In arguments about the welfare
138 The Patriarchal Welfare State

state and the social wage, the wage is usually treated as a return for the sale
of individuals' labour power. However, once the opposition breadwinner/
housewife was consolidated, a 'wage' had to provide subsistel)ce for several
people. The struggle between capital and labour and the controversy about
the welfare state have been about the family wage. A 'living wage' has been
defined as what is required for a worker as breadwinner to suppon a wife
and family, rather than what is needed to support himself; the wage is not
what is sufficient to reproduce the worker's own labour power, but what
is sufficient, in combination with the unpaid work of the housewife,, to
reproduce the labour power of the present and future labour force.

[ ... ]

Women's Work and Welfare

Although so many women, including married women, are now in paid

employment, women's standing as 'workers' is still of precarious legitim-
acy. So, therefore, is their standing as democratic citizens. If an individual
can gain recognition from other citizens as an equally worthy citizen only
through participation in the capitalist market, if self-respect and respect as
a citizen are 'achieved' in the public world of the employment society, then
women still lack the means to be recognized as worthy citizens. Nor have
the policies of the welfare state provided women with many of the
resources to gain respect as citizens. Marshall's social rights of citizenship
in the welfare state could be extended to men without difficulty. As par-
ticipants in the market, men could be seen as making a public contribution,
and were in a position to be levied by the state to make a contribution more
directly, that entitled them to the benefits of the welfare state. But how
could women, dependants of men, whose legitimate 'work' is held to be
located in the private sphere, be citizens of the welfare state? What could,
or did, women contribute? The paradoxical answer is that women con-
tributed -welfare.
The development of the welfare state has presupposed that certain
aspects of welfare could and should continue to be provided by women
(wives) in the home, and not primarily through public provision. The
'work' of a housewife can include the care of an invalid husband and
elderly, perhaps infirm, relatives. Welfare-state policies have ensured in
various ways that wives/women provide welfare services gratis, disguised
as part of their responsibility for the private sphere. A good deal has been
written about the fiscal crisis of the welfare state, but it would have been
more acute if certain areas of welfare had not been seen as a
private, women's matter. It is not surprising that the attack on public
spending in the welfare state by the Thatcher and Reagan governments
 Carole Pateman 139

[went] hand-in-hand with praise for loving care within families, that is,
with an attempt to obtain ever more unpaid welfare from (house) wives.
The Invalid Care Allowance in Britain has been a particularly blatant
example of the way in which the welfare state ensures that wives provide
private welfare. The allowance was introduced in 1975 - when the Sex
Discrimination Act was also passed - and it was paid to men or to single
women who relinquished paid employment to look after a sick, disabled
or elderly person (not necessarily a relative). Married women (or those
cohabiting) were ineligible for the allowance.
The evidence indicates that it is likely to be married women who provide
such care. In 1976 in Britain it was estimated that two million women were
caring for adult relatives, and one survey in the north of England found
that there were more people caring for adult relatives than mothers looking
after children under sixteen. 8 A corollary of the assumption that women,
but not men, care for others is that women must also care for themselves.
Investigations show that women living by themselves in Britain have to be
more infirm than men to obtain the services of home helps, and a study of
an old people's home found that frail, elderly women admitted with their
husbands faced hostility from the staff because they had failed in their job. 9
Again, women's citizenship is full of contradictions and paradoxes.
Women must provide welfare, and care for themselves, and so must be
assumed to have the capacities necessary for these tasks. Yet the develop-
ment of the welfare state has also presupposed that women necessarily are
in need of protection by and are dependent on men.
The welfare state has reinforced women's identity as men's dependants
both directly and indirectly, and so confirmed rather than ameliorated our
social exile. For example, in Britain and Australia the cohabitation rule
explicitly expresses the presumption that women necessarily must be eco-
nomically dependent on men if they live with them as sexual partners. If
cohabitation is ruled to take place, the woman loses her entitlement to
welfare benefits. The consequence of the cohabitation rule is not only sexu-
ally divided control of citizens, but an exacerbation of the poverty and other
problems that the welfare state is designed to alleviate. In Britain today

when a man lives in, a woman's independence- her own name on the weekly
giro [welfare cheque] is automatically surrendered. The men become the
claimants and the women their dependents. They lose control over both the
revenue and the expenditure, often with catastrophic results: rent not paid,
fuel bills missed, arrears mounting. 10

It is important to ask what counts as part of the welfare state. In Australia

and Britain the taxation system and transfer payments together form a
tax-transfer system in the welfare state. In Australia a tax rebate is avail-
able for a dependent spouse (usually, of course, a wife), and in Britain the
140 The Patriarchal Welfare State

taxation system has always treated a wife's income as her husband's for tax-
ation purposes. It is only relatively recently that it ceased to be the husband's
prerogative to correspond with the Inland Revenue about h_is wife's earn-
ings, or that he ceased to receive rebates due on her tax payments. Married
men can still claim a tax allowance, based on the assumption that they
support a dependent wife. Women's dependence is also enforced through the
extremely limited public provision of childcare facilities in Australia, Britain
and the United States, which creates a severe obstacle to women's full par-
ticipation in the employment society. In all three countries, unlike
Scandinavia, childcare outside the home is a very controversial issue.
Welfare-state legislation has also been framed on the assumption that
women make their 'contribution' by providing private welfare, and, from
the beginning, women were denied full citizenship in the welfare state. In
America 'originally the purpose of ADC (now AFDC) was to keep
mothers out of the paid labor force. . . . In contrast, the Social Security
retirement program was consciously structured to respond to the needs of
white male workers.>~ I In Britain the first national insurance, or contribu-
tory, scheme was set up in 1911, and one of its chief architects wrote later
that women should have been completely excluded because 'they want
insurance for others, not themselves'. Two years before the scheme was
introduced, William Beveridge, the father of the contemporary British
welfare state, stated in a book on unemployment that the 'ideal [social] unit
is the household of man, wife and children maintained by the earnings of
the first alone. . .. Reasonable security of employment for the bread-
winner is the basis of all private duties and all sound social action.' 12 Nor
had Beveridge changed his mind on this matter by the Second World War;
his report, Social Insurance and Allied Services, appeared in 1942 and laid
a major part of the foundation for the great reforms of the 1940s. In a
passage now (in)famous among feminists, Beveridge wrote that 'the great
majority of married women must be regarded as occupied on work which
is vital though unpaid, without which their husbands could not do their
paid work and without which the nation could not continue.' 13 In the
National Insurance Act of 1946 wives were separated from their husbands
for insurance purposes. (The significance of this procedure, along with
Beveridge's statement, clearly was lost on T. H. Marshall when he was
writing his essay on citizenship and the welfare state.) Under the act,
married women paid lesser contributions for reduced benefits, but they
could also opt out of the scheme, and so from sickness, unemployment and
maternity benefits, and they also lost entitlement to an old age pension in
their own right, being eligible only as their husband's dependant. By the
time the legislation was amended in 1975, about three-quarters of married
women workers had opted out. 14
A different standard for men and women has also been applied in the
operation of the insurance scheme. In 1911 some married women were
 Carole Pateman 141

insured in their own right. The scheme provided benefits in case of 'incap-
acity to work', but, given that wives had already been identified as 'incap-
acitated' for the 'work' in question, for paid employment, problems over
the criteria for entitlement to sickness benefits were almost inevitable. In
1913 an inquiry was held to discover why married women were claiming
benefits at a much greater rate than expected. One obvious reason was that
the health of many working-class women was extremely poor. The extent
of their ill health was revealed in 1915 when letters written by working
women in 1913-14 to the Women's Cooperative Guild were published.
The national insurance scheme meant that for the first time women could
afford to take time off work when ill- but from which 'work'? Could they
take time off from housework? What were the implications for the embry-
onic welfare state if they ceased to provide free welfare? From 1913 a dual
standard of eligibility for benefits was established. 15 For men the criterion
was fitness for work. But the committee of inquiry decided that, if a
woman could do her housework, she was not ill. So the criterion for eligi-
bility for women was also fitness for work- but unpaid work in the private
home, not paid work in the public market that was the basis for the con-
tributory scheme under which the women were insured! This criterion for
women was still being laid down in instructions issued by the Department
of Health and Social Security in the 1970s. 16 The dual standard was further
reinforced in 1975 when a non-contributory invalidity pension was intro-
duced for those incapable of work but not qualified for the contributory
scheme. Men and single women were entitled to the pension if they could
not engage in paid employment; the criterion for married women was
ability to perform 'normal household duties'Y

Wollstonecraft's Dilemma

So far, I have looked at the patriarchal structure of the welfare state, but
this is only part of the picture; the development of the welfare state has also
brought challenges to patriarchal power and helped provide a basis for
women's autonomous citizenship. Women have seen the welfare state as
one of their major means of support. Well before women won formal citi-
zenship, they campaigned for the state to make provision for welfare, espe-
cially for the welfare of women and their children; and women's
organizations and women activists have continued their political activities
around welfare issues, not least in opposition to their status as 'depend-
ants'. In 1953 the British feminist Vera Brittain wrote of the welfare state
established through the legislation of the 1940s that 'in it women have
become ends in themselves and not merely means to the ends of men', and
their 'unique value as women was recognised'. 18 In hindsight, Brittain was
clearly overoptimistic in her assessment, but perhaps the opportunity now
142 The Patriarchal Welfare State

exists to begin to dismantle the patriarchal structure of the welfare state. In

the 1980s the large changes in women's social position, technological and
structural transformations within capitalism, and mass unemployment
mean that much of the basis for the breadwinner/dependant dichotomy
and for the employment society itself is being eroded (although both
are still widely seen as social ideals). The social context of Hegel's two
dilemmas is disappearing. As the current concern about the 'feminization
of poverty' reveals, there is now a very visible underclass of women who
are directly connected to the state as claimants, rather than indirectly- as
men's dependants. Their social exile is as apparent as that of poor male
workers was to Hegel. Social change has now made it much harder to gloss
over the paradoxes and contradictions of women's status as citizens.
However, the question of how women might become full citizens of a
democratic welfare state is more complex than may appear at first sight,
because it is only in the current wave of the organized feminist movement
that the division between the private and public spheres of social life has
become seen as a major political problem. From the 1860s to the 1960s
women were active in the public sphere: women fought not only for welfare
measures and for measures to secure the private and public safety of women
and girls, but for the vote and civil equality; middle-class women fought for
entry into higher education; and the professions and women trade union-
ists fought for decent working conditions and wages and maternity leave.
But the contemporary liberal-feminist view, particularly prominent in the
United States, that what is required above all is 'gender-neutral' laws and
policies, was not widely shared. In general, until the 1960s the focus of
attention in the welfare state was on measures to ensure that women had
proper social support, and hence proper social respect, in carrying out their
responsibilities in the private sphere. The problem is whether and how such
measures could assist women in their fight for full citizenship. In 1942 in
Britain, for example, many women welcomed the passage in the Beveridge
Report that I have cited because, it was argued, it gave official recognition
to the value of women's unpaid work. However, an official nod of recogni-
tion to women's work as 'vital' to 'the nation' is easily given; in practice, the
value of the work in bringing women into full membership in the welfare
state was negligible. The equal worth of citizenship and the respect of fellow
citizens still depended on participation as paid employees. 'Citizenship' and
'work' stood then and still stand opposed to 'women'.
The extremely difficult problem faced by women in their attempt to win
full citizenship I shall call 'Wollstonecraft's dilemma'. The dilemma is that
the two routes toward citizenship that women have pursued arc mutually
incompatible within the confines of the patriarchal welfare state, and,
within that context, they are impossible to achieve. For three centuries,
since universal citizenship first appeared as a political ideal, women have
continued to challenge their alleged natural subordination within private
 Carole Pateman 143

life. From at least the 1790s they have also struggled with the task of trying
to become citizens within an ideal and practice that have gained universal
meaning through their exclusion. Women's response has been complex.
On the one hand, they have demanded that the ideal of citizenship be
extended to them, and the liberal-feminist agenda for a 'gender-neutral'
social world is the logical conclusion of one form of this demand. On the
other hand, women have also insisted, often simultaneously, as did Mary
Wollstonecraft, that as women they have specific capacities, talents, needs
and concerns, so that the expression of their citizenship will be differenti-
ated from that of men. Their unpaid work providing welfare could be
seen, as Wollstonecraft saw women's tasks as mothers, as women's work as
citizens, just as their husbands' paid work is central to men's citizenship.
The patriarchal understanding of citizenship means that the two
demands are incompatible because it allows two alternatives only: either
women become (like) men, and so full citizens; or they continue at
women's work, which is of no value for citizenship. Moreover, within a
patriarchal welfare state neither demand can be met. To demand that citi-
zenship, as it now exists, should be fully extended to women accepts the
patriarchal meaning of 'citizen', which is constructed from men's attrib-
utes, capacities and activities. Women cannot be full citizens in the
present meaning of the term; at best, citizenship can be extended to
women only as lesser men. At the same time, within the patriarchal
welfare state, to demand proper social recognition and support for
women's responsibilities is to condemn women to less than full citizen-
ship and to continued incorporation into public life as 'women', that is,
as members of another sphere who cannot, therefore, earn the respect of
fellow (male) citizens.
The example of child endowments on family allowances in Australia and
Britain is instructive as a practical illustration of Wollstonecraft's dilemma.
It reveals the great difficulties in trying to implement a policy that both aids
women in their work and challenges patriarchal power while enhancing
women's citizenship. In both countries there was opposition from the right
and from laissez-faire economists on the ground that family allowances
would undermine the father's obligation to support his children and
undermine his 'incentive' to sell his labour power in the market. The femi-
nist advocates of family allowances in the 1920s, most notably Eleanor
Rathbone in Britain, saw the alleviation of poverty in families where the
breadwinner's wage was inadequate to meet the family's basic needs as only
one argument for this form of state provision. They were also greatly con-
cerned with the questions of the wife's economic dependence and equal
pay for men and women workers. If the upkeep of children (or a substan-
tial contribution toward it) was met by the state outside of wage bargain-
ing in the market, then there was no reason why men and women doing
the same work should not receive the same pay. Rathbone wrote in 1924
144 The Patriarchal Welfare State

that 'nothing can justify the subordination of one group of producers- the
mothers - to the rest and their deprivation of a share of their own in the
wealth of a community'. 19 She argued that family allowances WO\lld, 'once
and for all, cut away the maintenance of children and the reproduction of
the race from the question of wages'. 20
But not all the advocates of child endowment were feminists- so that the
policy could very easily be divorced from the public issue of wages
and dependence and be seen only as a return for and recognition of
women's private contributions. Supporters included the eugenicists and
pronatalists, and family allowances appealed to capital and the state as a
means of keeping wages down. Family allowances had many opponents in
the British union movement, fearful that the consequence, were the
measure introduced, would be to undermine the power of unions in wage
bargaining. The opponents included women trade unionists who were sus-
picious of a policy that could be used to try to persuade women to leave
paid employment. Some unionists also argued that social services, such as
housing, education and health, should be developed first, and the TUC
adopted this view in 1930. But were the men concerned, too, with
their private, patriarchal privileges? Rathbone claimed that 'the leaders
of working men are themselves subsconsciously biased by prejudice of
sex .... Are they not influenced by a secret reluctance to see their wives and
children recognised as separate personalities ?' 21
By 1941 the supporters of family allowances in the union movement had
won the day, and family allowances were introduced in 1946 as part of the
government's wartime plans for postwar reconstruction. The legislation
proposed that the allowance would be paid to the father as 'normal, house-
hold head', but after lobbying by women's organizations, this was over-
turned in a free vote, and the allowance was paid directly to mothers. In
Australia the union movement accepted child endowment in the 1920s
(child endowment was introduced in New South Wales in 1927, and at the
federal level in 1941 ). But union support there was based on wider redis-
tributive policies, and the endowment was seen as a supplement to, not a
way of breaking down, the family wage. 22 In the 1970s, in both countries,
women's organizations again had to defend family allowances and the
principle of redistribution from 'the wallet to the purse'.
The hope of Eleanor Rathbone and other feminists that family
allowances would form part of a democratic restructuring of the wage
system was not realized. Nevertheless, family allowances are paid to
women as a benefit in their own right; in that sense they are an important
(albeit financially very small) mark of recognition of married women as
independent members of the welfare state. Yet the allowance is paid to
women as mothers, and the key question is thus whether the payment to a
mother- a private person- negates her standing as an independent citizen
of the welfare state. More generally, the question is whether there can be a
 Carole Pateman 145

welfare policy that gives substantial assistance to women in their daily lives
and helps create the conditions for a genuine democracy in which women
are autonomous citizens, in which we can act as women and not as 'woman'
(protected/dependent/subordinate) constructed as the opposite to all that
is meant by 'man'. That is to say, a resolution of Wollstonecraft's dilemma
is necessary and, perhaps, possible.
The structure of the welfare state presupposes that women are men's
dependants, but the benefits help to make it possible for women to be eco-
nomically independent of men. In the countries with which I am con-
cerned, women reliant on state benefits live poorly, but it is no longer so
essential as it once was to marry or to cohabit with a man. A considerable
moral panic has developed in recent years around 'welfare mothers', a
panic that obscures significant features of their position, not least the
extent to which the social basis for the ideal of breadwinner/ dependant has
crumbled. Large numbers of young working-class women have little or no
hope of finding employment (or of finding a young man who is employed).
But there is a source of social identity available to them that is out of the
reach of their male counterparts. The socially secure and acknowledged
identity for women is still that of a mother, and for many young women,
motherhood, supported by state benefits, provides 'an alternative to
aimless adolescence on the dole' and 'gives the appearance of self-
determination'. The price of independence and 'a rebellious motherhood
that is not an uncritical retreat into femininity' 23 is high, however; the
welfare state provides a minimal income and perhaps housing (often sub-
standard), but childcare services and other support are lacking, so that the
young women are often isolated, with no way out of their social exile.
Moreover, even if welfare state policies in Britain, Australia and the United
States were reformed so that generous benefits, adequate housing, health
care, child care and other services were available to mothers, reliance on the
state could reinforce women's lesser citizenship in a new way.
Some feminists have enthusiastically endorsed the welfare state as 'the
main recourse of women' and as the generator of 'political resources which,
it seems fair to say, are mainly women's resources'. 24 They can point, in
Australia for example, to 'the creation over the decade [1975-85] of a range
of women's policy machinery and government subsidized women's services
(delivered by women for women) which is unrivalled elsewhere.' 25
However, the enthusiasm is met with the rejoinder from other feminists that
for women to look to the welfare state is merely to exchange dependence on
individual men for dependence on the state. The power and capriciousness
of husbands is being replaced by the arbitrariness, bureaucracy and power
of the state, the very state that has upheld patriarchal power. The objection
is cogent: to make women directly dependent on the state will not in itself
do anything to challenge patriarchal power relations. The direct dependence
of male workers on the welfare state and their indirect dependence when
146 The Patriarchal Welfare State

their standard of living is derived from the vast system of state regulation of
and subsidy to capitalism - and in Australia a national arbitration court _
have done little to undermine class power. However, the o~je<:;tion also
misses an important point. There is one crucial difference between the con-
struction of women as men's dependants and dependence on the welfare
state. In the former case, each woman lives with the man on whose btnevo-
lence she depends; each woman is (in J. S. Mill's extraordinarily apt phrase)
in a 'chronic state of bribery and intimidation combined'. 26 In the welfare
state, each woman receives what is hers by right, and she can, potentially,
combine with other citizens to enforce her rightful claim. The state has enor-
mous powers of intimidation, but political action takes place collectively in
the public terrain and not behind the closed door of the home, where each
woman has to rely on her own strength and resources.
Another new factor is that women are now involved in the welfare state
on a large scale as employees, so that new possibilities for political action
by women also exist. Women have been criticizing the welfare state in
recent years not just as academics, as activists, or as beneficiaries and users
of welfare services, but as the people on whom the daily operation of the
welfare state to a large extent depends. The criticisms range from its patri-
archal structure (and, on occasions, especially in health care, misogynist
practices), to its bureaucratic and undemocratic policy-making processes
and administration, to social work practices and education policy. Small
beginnings have been made on changing the welfare state from within; for
example, women have succeeded in establishing Well Women Clinics
within the NHS in Britain and special units to deal with rape victims in
public hospitals in Australia. Furthermore, the potential is now there for
united action by women employees, women claimants and women citizens
already politically active in the welfare state - not just to protect services
against government cuts and efforts at 'privatization' (which has absorbed
much energy recently), but to transform the welfare state. Still, it is hard to
see how women alone could succeed in the attempt. One necessary condi-
tion for the creation of a genuine democracy in which the welfare of all citi-
zens is served is an alliance between a labour movement that acknowledges
the problem of patriarchal power and an autonomous women's movement
that recognizes the problem of class power. Whether such an alliance can
be forged is an open question.
Despite the debates and the rethinking brought about by mass
unemployment and attack on the union movement and welfare state by the
Reagan and Thatcher governments, there are many barriers to be overcome.
In Britain and Australia, with stronger welfare states, the women's move-
ment has had a much closer relationship with working-class movements
than in the United States, where the individualism of the predominant
liberal feminism is an inhibiting factor, and where only about 17 per cent of
the workforce is now unionized. The major locus of criticism of authori-
 Carole Pateman 147

tarian, hierarchical, undemocratic forms of organization since about 1970

has been the women's movement. The practical example of democratic,
decentralized organization provided by the women's movement has been
largely ignored by the labour movement, as well as in academic discussions
of democracy. After Marx defeated Bakunin in the First International, the
prevailing form of organization in the labour movement, the nationalized
industries in Britain and in the left sects has mimicked the hierarchy of the
state- both the welfare and the warfare state. To be sure, there is a move-
ment for industrial democracy and workers' control, but it has, by and
large, accepted that the 'worker' is a masculine figure and failed to question
the separation of (public) industry and economic production from private
life. The women's movement has rescued and put into practice the long-
submerged idea that movement for, and experiments in, social change must
'prefigure' the future form of social organization. 27
If prefigurative forms of organization, such as the 'alternative' women's
welfare services set up by the women's movement, are not to remain isol-
ated examples, or if attempts to set them up on a wider scale are not to be
defeated, as in the past, very many accepted conceptions and practices have
to be questioned. [ ... ] Debates [during the 1980s] over left alternatives to
Thatcherite economics policies in Britain, and over the Accord between the
state, capital and labour in Australia, suggest that the arguments and
demands of the women's movement are still often unrecognized by labour's
political spokesmen. For instance, one response to unemployment from
male workers is to argue for a shorter working week and more leisure, or
more time but the same money. However, in women's lives, time and money
are not interchangeable in the same way. 28 Women, unlike men, do not have
leisure after 'work', but do unpaid work. Many women are arguing, rather,
for a shorter working day. The point of the argument is to challenge the sep-
aration of part- and full-time paid employment and paid and unpaid 'work'.
But the conception of citizenship needs thorough questioning, too, if
Wollstonecraft's dilemma is to be resolved; neither the labour movement
nor the women's movement (nor democratic theorists) has paid much atten-
tion to this. The patriarchal opposition between the private and public,
women and citizen, dependant and breadwinner is less firmly based than it
once was, and feminists have named it as a political problem. The ideal of
full employment so central to the welfare state is also crumbling, so that
some of the main props of the patriarchal understanding of citizenship are
being undermined. The ideal of full employment appeared to have been
achieved in the 1960s only because half the citizen body (and black men?)
was denied legitimate membership in the employment society. Now that
millions of men are excluded from the ideal (and the exclusion seems per-
manent), one possibility is that the ideal of universal citizenship will be
abandoned, too, and full citizenship will become the prerogative of capital-
ist, employed and armed men. Or can a genuine democracy be created?
148 The Patriarchal Welfare State

The perception of democracy as a class problem and the influence of

liberal feminism have combined to keep alive Engels's old solution to 'the
woman question'- to 'bring the whole female sex back into public indus-
try'.29 But the economy has a patriarchal structure. The Marxist hope that
capitalism would create a labour force where ascriptive characteristics were
irrelevant, and the liberal-feminist hope that anti-discrimination legislation
would create a 'gender-neutral' workforce, look Utopian even without the
collapse of the ideal of full employment. Engels's solution is out of reach-
and so, too, is the generalization of masculine citizenship to women. In
turn, the argument that the equal worth of citizenship, and the self-respect
and mutual respect of citizens, depend upon sale of labour power in the
market and the provisions of the patriarchal welfare state is also undercut.
The way is opening up for the formulation of conceptions of respect and
equal worth adequate for democratic citizenship. Women could not 'earn'
respect or gain the self-respect that men obtain as workers; but what kind
of respect do men 'achieve' by selling their labour power and becoming
wage-slaves? Here the movement for workplace democracy and the femi-
nist movement could join hands, but only if the conventional understand-
ing of 'work' is rethought. If women as well as men are to be full citizens,
the separation of the welfare state and employment from the free welfare
work contributed by women has to be broken down and new meanings
and practices of 'independence', 'work' and 'welfare' created.
For example, consider the implications were a broad, popular political
movement to press for welfare policy to include a guaranteed social income
to all adults, which would provide adequately for subsistence and also par-
ticipation in social life. 3° For such a demand to be made, the old
dichotomies must already have started to break down - the opposition
between paid and unpaid work (for the first time all individuals could have
a genuine choice whether to engage in paid work), between full- and part-
time work, between public and private work, between independence and
dependence, between work and welfare- which is to say, between men and
women. If implemented, such a policy would at last recognize women as
equal members of the welfare state, although it would not in itself ensure
women's full citizenship. If a genuine democracy is to be created, the
problem of the content and value of women's contribution as citizens and
the meaning of citizenship has to be confronted.
To analyse the welfare state through the lens of Hegel's dilemma is to
rule out such problems. But the history of the past 150 years and the
contemporary record show that the welfare of all members of society
cannot be represented by men, whether workers or capitalists. Welfare is,
after all, the welfare of all living generations of citizens and their children.
If the welfare state is seen as a response to Hegel's dilemma, the appropri-
ate question about women's citizenship is: how can women become
workers and citizens like men, and so members of the welfare state like
 Carole Pateman 149

men? If, instead, the starting-point is Wollstonecraft's dilemma, then the

question might run: what form must democratic citizenship take if a
primary tas~ _of all_citizens is to ensure that the welfare of each living gen-
eration of Citizens IS secured?
The welfare state has been fought for and supported by the labour
movement and the women's movement because only public or collective
provision can ~aintai_n. a p_roper stan~~rd of_ living and the mea?s f~r
meaningful social partiCipation for all cltlzens m a democracy. The !mph-
cation of this claim is that democratic citizens are both autonomous and
interdependent; they are autonomous in that each enjoys the means to be
an active citizen, but they are interdependent in that the welfare of each is
the collective responsibility of all citizens. Critics of the class structure of
the welfare state have often counterposed the fraternal interdependence
(solidarity) signified by the welfare state to the bleak independence of iso-
lated individuals in the market, but they have rarely noticed that both have
been predicated upon the dependence (subordination) of women. In the
patriarchal welfare state, independence has been constructed as a mascu-
line prerogative. Men's 'independence' as workers and citizens is their
freedom from responsibility for welfare (except insofar as they 'con-
tribute' to the welfare state). Women have been seen as responsible for
(private) welfare work, for relationships of dependence and interdepen-
dence. The paradox that welfare relies so largely on women, on depen-
dants and social exiles whose 'contribution' is not politically relevant to
their citizenship in the welfare state, is heightened now that women's paid
employment is also vital to the operation of the welfare state itself.
If women's knowledge of and expertise in welfare are to become part of
their contribution as citizens, as women have demanded during the twen-
tieth century, the opposition between men's independence and women's
dependence has to be broken down, and a new understanding and practice
of citizenship developed. The patriarchal dichotomy between women and
independence-work-citizenship is under political challenge, and the social
basis for the ideal of the full (male) employment society is crumbling. An
opportunity has become visible to create a genuine democracy, to move
from the welfare state to a welfare society without involuntary social
exiles, in which women as well as men enjoy full social membership.
Whether the opportunity can be realized is not easy to tell now that the
warfare state is overshadowing the welfare state.

Notes

From C. Pateman, The Disorder of Women, Cambridge, Polity Press, 1989,

pp. 185-9, 192-209.
The graphic phrase is Judith Stiehm's, in 'Myths Necessary to the Pursuit of
War', unpublished paper, p. 11.
150 The Patriarchal Welfare State

2 See especially F. Cobbe, 'Wife Torture in England', The Contemporary Review

32, 1878, pp. 55-87. Also, for example, Mill's remarks when introducing th~
amendment to enfranchise women in the House of Commons in 1867, reprinted
in Women, the Family and Freedom: The Debate in Documents, ed. S. Bell and
K. Offen, vol. 1, Stanford, CA, Stanford University Press, 1983, p. 487.
3 D. Deacon, 'Political Arithmetic: The Nineteenth-Century Australian Census
and the Construction of the Dependent Woman', Signs, 11(1), 1985, p. 31 (my
discussion draws on Deacon); also H. Land, 'The Family Wage', Feminist
Review, 6, 1980, p. 60.
4 T. Skocpol, 'The Limits of the New Deal System and the Roots of
Contemporary Welfare Dilemmas', in The Politics of Social Policy in 'the
United States, ed. M. Weir, A. Orloff and T. Skocpol, Princeton, NJ, Princeton
University Press, 1988.
5 B. Nelson, 'Women's Poverty and Women's Citizenship: Some Political
Consequences of Economic Marginality', Signs, 10(2), 1984, pp. 222-3.
6 M. Owen, 'Women- A Wastefully Exploited Resource', Search, 15, 1984,
pp. 271-2.
7 L.J. Weitzman, The Divorce Revolution, New York, The Free Press, 1985, ch.
10, esp. pp. 337-40.
8 J. Dale and P. Foster, Feminists and the Welfare State, London, Routledge and
Kegan Paul, 1986, p. 112.
9 H. Land, 'Who Cares for the Family?', journal of Social Policy, 7(3), 1978,
pp. 268-9. Land notes that even under the old Poor Law twice as many
women as men received outdoor relief, and there were many more old men
than women in the workhouse wards for the ill or infirm; the women were
deemed fit for the wards for the able-bodied.
10 B. Campbell, Wig an Pier Revisited: Poverty and Politics in the 80s, London,
Virago Press, 1984, p. 76.
11 Nelson, op. cit., pp. 229-30.
12 Both quotations are taken from Land, op. cit., p. 72.
13 Cited in Dale and Foster, op. cit., p. 17.
14 H. Land, 'Who Still Cares for the Family?', in Women's Welfare, Women's
Rights, ed. J. Lewis, London and Canberra, Croom Helm 1983, p. 70.
15 M. Davis, Maternity: Letters from Working Women, New York, Norton, 1978
(first published 1915).
16 Information taken from Land, op. cit. (n. 9), pp. 263-4.
17 Land, op. cit. (n. 14), p. 73.
18 Cited in Dale and Foster, op. cit., p. 3.
19 Cited in Land, op. cit. (n. 3), p. 63.
20 Cited in B. Cass, 'Redistribution to Children and to Mothers: A History of
Child Endowment and Family Allowances', in Women, Social Welfare and the
State, ed.J. Goodnow and C. Pateman, Sydney, Allen and Unwin, 1985, p. 57.
21 Cited in ibid., p. 59.
22 Ibid., pp. 60-1.
23 Campbell, op. cit., pp. 66, 78, 71.
24 F. Fox Piven, 'Women and the State: Ideology, Power, and the Welfare State',
Socialist Review, 14(2), 1984, pp. 14, 17.
25 M. Sawer, 'The Long March through the Institutions: Women's Affairs under
Fraser and Hawke', paper presented to the annual meeting of the Australasian
Political Studies Association, Brisbane, 1986, p. 1.
26 J. S. Mill, 'The Subjection of Women', in Essays on Sex Equality, ed. A. Rossi,
Chicago, University of Chicago Press, 1970, p. 137.
 Carole Pateman 151

27 See S. Rowbotham, L. Segal and H. Wainright, Beyond the Fragments:

Feminism and the Making of Socialism, London, Merlin Press, 1979, a book
that was instrumental in opening debate on the left and in the labour move-
ment in Britain on this question.
28 See H. Heroes, Welfare State and Woman Power: Essays in State Feminism,
Oslo, Norwegian University Press, 1987, ch. 5, for a discussion of the politi-
cal implications of the different time-frames of men's and women's lives.
29 F. Engels, The Origin of the Family, Private Property and the State, New York,
International Publishers, 1942, p. 66.
30 See also the discussion in J. Keane and J. Owens, After Full Employment,
London, Hutchinson, 1986, pp. 175-7.
Part II
Debates and Issues

In part II of the reader, we adopt a more empirical and comparative approach

and our focus is unambiguously on contemporary developments in the
welfare state. The selections here are chosen with three goals in mind. The
first is to convey something of the range and variety of welfare state activity
as demonstrated in the contemporary practice of advanced, industrial
nations. The second is to use the experience of contemporary practice to
identify the major challenges, problems and prospects of the advanced
welfare state in the coming years of the new millennium. The third is to
provide a guide to the major debates and policy issues which have preoccu-
pied scholars from the many disciplines - including sociology, political
science, economics and social administration- which see the welfare state
and the public sector more broadly as among their central concerns. Since
social provision in its many forms is now the predominant activity of the state
in all modern societies, these are debates and issues which are clearly pivotal
to understanding how such societies function and how they are changing.
Our preference for comparative studies has a double rationale. Partly,
we want to avoid the parochialism that comes from identifying any parti-
cular welfare state as the template for welfare states in general. More
importantly, comparison is a key to better understanding. By the standards
of the classic contributors to the welfare state literature discussed in part I,
virtually all modern states are welfare states, but that does not mean that
they are all the same. Different welfare states achieve different degrees of
poverty alleviation, income inequality and risk reduction. Their welfare
systems have different implications for welfare dependency and they struc-
ture gender inequalities in different ways. Such differences are relevant to
both policy goals and normative concerns, because they help us to estab-
lish the conditions under which desired social policy objectives may be
achieved in practice.
154 Debates and Issues

A comparative approach also helps us to locate sources of weakness and

strength in welfare state arrangements and institutions. As noted subse-
quently, a major theme of the contemporary literature is the extent and
range of challenges to the viability of the welfare state in recent years. But
again there are important differences between countries. Some appear to
have coped better with economic and demographic problems than others.
In some, support for the welfare state project seems to have remained rock
solid, while in others there has been a strong political backlash against at
least some forms of public intervention. Locating the reasons why such
differences occur may tell us why some welfare states are more vulnerable
to attack than others and may even provide us with the knowledge
required to redesign welfare state institutions so that they are less vulner-
able in future.
All the pieces appearing in part II have been selected in order to present
arguments central to major debates in the literature. The first of these
debates concerns the ways in which we classify different types of welfare
state. The initial section on Welfare Regimes starts out from G0sta Esping-
Andersen's well-known distinction between what he describes as 'liberal',
'conservative/corporatist' and 'social democratic' regime types. This
typology has been widely welcomed for at least three reasons. It moves
away from expenditure as the sole criterion of welfare effort, replacing it
with the more sociological notion of the 'decommodifying' impact of
diverse systems of social rights. It suggests that the welfare state is about
more than just services and transfers and argues that diverse patterns of
social provision are premised on distinctive labour market formations.
Finally, it provides plausible connections between the class origins of
welfare regimes, their distinctive modes of provision and their conse-
quences for social and economic inequality. The paper by Arts and
Gelissen brings this debate up to date. Esping-Andersen's original classifi-
cation of the three worlds of welfare capitalism sparked off a debate about
a whole series of national experiences which (so their observers suppose)
point to other worlds of welfare capitalism. There is also a suspicion among
some (feminist critics, in particular) that in focusing so strongly on labour
market decommodification, Esping-Andersen was looking in the wrong
place for a comprehensive explanation of the differences between existing
welfare state regimes. Arts and Gelissen offer a comprehensive survey of
these critical approaches to the world of differing welfare regimes.
The supposed impact of globalization on almost every facet of modern
social life has been a ubiquitous feature of discussion in the social sciences
for at least a decade. Over time, it has become commonplace to argue that
processes of globalization have imperiled all of the major institutional for-
mations in which the welfare state has become condensed in developed
capitalist societies. One variant of the argument is that welfare state expan-
sion has reduced economic efficiency and competitiveness and so has
 Debates and Issues 155

become a source of major economic problems, including declining pro-

ductivity growth and high levels of unemployment. Another is the cur-
rently fashionable view that high levels of welfare state spending and
highly regulated labour markets are incompatible with the new realities of
a globalized economy, which impose heavy constraints on the policy
autonomy of the modern state. If nations do not heed the demands of inter-
national markets, domestic economic actors will vote with their feet,
leaving countries increasingly bereft of supplies of mobile capital and
skilled labour. For both variants the bottom line is the same: countries
which do not reduce high levels of social spending and taxation are, quite
literally, likely to go out of business!
The authors in the Globalization section subject these views to crit-
ical scrutiny. In a careful theoretical and empirical review of the existing
literature, Colin Hay shows that the impact of 'globalization' is much
more ambivalent and uncertain than its more committed admirers (and
critics) have supposed. He concludes that under circumstances of real-or-
imagined globalization, 'the welfare state is not only a competitive advan-
tage it is a competitive necessity'. Following a brief selection from Fritz
Scharpf, which shows why and how heightened transborder economic
competition may impact on domestic welfare state settlements, Francis
Castles offers a detailed interrogation of the popular idea of a 'race to the
bottom' in standards of social provision. His conclusion is that, while some
countries have experienced some comparative decline in the standards of
their social provision over the last ten to twenty years, the overall evidence
suggests that the idea of a welfare 'race to the bottom' is 'a crisis myth
rather than a crisis reality'.
One of the most interesting debates of recent years has concerned the
extent to which welfare states in Europe have been reshaped by the ongoing
process of constitutional change associated with the 'widening and deepen-
ing' of the European Union. The first paper in our Europeanization section
considers the ways in which changes in Western European welfare states
have interacted with the logic(s) of globalization. Walter Korpi is particu-
larly concerned about the effects that globalization and Europeanization
have had on the full employment commitments which were an important
component of postwar welfare settlements across Western Europe. In his
view, the entire postwar social contract is under review (and duress) in con-
temporary Europe. Paul Teague's paper on 'Deliberative Governance and
EU Social Policy' is much more explicitly focused on institutional change
at the level of the European Union. Teague surveys the evidence for a dis-
tinctive institutional architecture underpinning 'Social Europe' and consid-
ers whether we are seeing the emergence of new forms of 'deliberative
governance' at the EU level. His conclusion is that, while there are new
competences emerging at the EU level, we should be wary of supposing that
these are likely to bring us much closer to a 'Social Europe' that replaces
156 Debates and Issues

traditional national welfare state structures. Finally, in exploring the

European dimension of social policy development, Chalmers and Lodge
review experience of the 'Open Method of Co-ordination' ~hich has, since
the EU Lisb~n summit of 2?00,.been the preferred mechan~sm for securing
the cooperation and coordmat1on of EU member states m transnational
public policy-making. They conclude that, as yet, the achievement of these
goals is more a matter of policy aspiration than of policy achievement.
Among the most fascinating and intractable problems facing contempo-
rary welfar~ states are those that ar~se from changes i~ the underlying
demographic structure of the populatiOn. There are certamly some writers
(Paul Pierson among them) who remain deeply sceptical about the impact
of globalization and yet profoundly concerned about the challenge that
societal ageing presents to the integrity of contemporary welfare states.
Increasingly this is an issue which is in the news every day as people find
that pension entitlements which they had once believed to be secure are
legislated away from beneath their feet. In the section on Demographic
Challenges to the Welfare State, we look at several issues concerning the
changing population structures of modern welfare states. One hugely
influential strand of argument has been the view that population ageing
combined with excessive state pensions have together seriously compro-
mised the integrity of public finances and that what is required are reforms
to reduce basic pension rights and to privatize provision for the middle
class. A rather newer concern arises from a seemingly rapid decline in fer-
tility rates and with it a decline in the size of the youthful population which
(in developed Western welfare states at least) is going to be called on to
support the ever growing pensioner population of the first half of the
twenty-first century. Here we include a sober and sensible discussion of
the real world of population ageing by David Coleman, an evaluation of
prospects over the next fifty years by James Schulz, as well as a rather ter-
rifying account of the coming crisis of pension provision by Richard
Jackson. Peter McDonald's paper addresses some of the issues surround-
ing gender equity and fertility transition. His argument is that unless and
until we expand our treatment of gender equity from individual-oriented
to family-oriented institutions we shall not reverse (nor should we be able
equitably to reverse) the transition to extremely low fertility rates.
In the final section of part II, we include two papers that take a very broad
perspective on the political challenges that now confront the welfare state.
Paul Pierson's story is of the emergence of a 'new politics' of the welfare
state, in which the natural wish of politicians to avoid blame for unpopular
policies has combined with the development of strong constituencies of
support for established welfare programmes to make retrenchment an issue
of extreme political sensitivity. In Pierson's view, this is ultimately why both
Thatcher and Reagan failed in their ideologically driven campaigns
against public sector spending. His argument suggests that the challenges,
 Debates and Issues 157

opportunities and constituencies that current practitioners of the politics of

welfare confront are quite different from those that faced politicians in the
'classic' years of welfare state growth. Bruno Palier's focus is on the study of
the dynamics of welfare state change 'beyond retrenchment'. Retrenchment
has been a seemingly universal element in discussions of the welfare state
over the past twenty years. But Palier insists that such a focus is too limited
and undifferentiated. Even if the overall direction of change has been
uniform, this conceals differences of pace in different policy areas, differ-
ences between varying welfare regime types and, indeed, moments of innov-
ation and of real change that have been masked by a more general trend of
continuity.
Welfare Regimes
Three Worlds of Welfare
Capitalism
G0sta Esping-Andersen

What Is the Welfare State?

Every theoretical paradigm must somehow define the welfare state. How
do we know when and if a welfare state responds functionally to the needs
of industrialism, or to capitalist reproduction and legitimacy? And how do
we identify a welfare state that corresponds to the demands that a mobil-
ized working class might have? We cannot test contending arguments
unless we have a commonly shared conception of the phenomenon to be
explained.
A remarkable attribute of the entire literature is its lack of much genuine
interest in the welfare state as such. Welfare state studies have been motiv-
ated by theoretical concerns with other phenomena, such as power, indus-
trialization or capitalist contradictions; the welfare state itself has generally
received scant conceptual attention. If welfare states differ, how do they
differ? And when, indeed, is a state a welfare state? This turns attention
straight back to the original question: what is the welfare state?
A common textbook definition is that it involves state responsibility for
securing some basic modicum of welfare for its citizens. Such a definition
skirts the issue of whether social policies are emancipatory or not; whether
they help system legitimation or not; whether they contradict or aid the
market process; and what, indeed, is meant by 'basic'? Would it not be
more appropriate to require of a welfare state that it satisfies more than our
basic or minimal welfare needs?
The first generation of comparative studies started with this type of con-
ceptualization. They assumed, without much reflection, that the level of
social expenditure adequately reflects a state's commitment to welfare. The
theoretical intent was not really to arrive at an understanding of the welfare
state, but rather to test the validity of contending theoretical models in
 G0sta Esping-Andersen 161

political economy. By scoring nations with respect to urbanization, level of

economic growth, and the proportion of aged in the demographic structure,
it was believed that the essential features of industrial modernization were
properly considered. Alternatively, ~ower-oriented theo_r~es ~ompared
nations on left-party strength or workmg-class power mobthzauon.
The findings of the first-generation comparativists are difficult to evalu-
ate, since there is no convincing case for any particular theory. The short-
age of nations for comparisons statistically restricts the number of
variables that can be tested simultaneously. Thus, when Cutright (1965) or
Wilensky (1975) find that economic level, with its demographic and
bureaucratic correlates, explains most welfare-state variations in 'rich
countries', relevant measures of working-class mobilization or economic
openness are not included. Their conclusions in favour of a 'logic of indus-
trialism' view are therefore in doubt. And, when Hewitt (1977), Stephens
(1979), Korpi (1983), Myles (1984) and Esping-Andersen (1985) find
strong evidence in favour of a working-class mobilization thesis, or when
Schmidt (1982, 1983) finds support for a nco-corporatist, and Cameron
(1978) for an economic openness argument, it is without fully testing
against plausible alternative explanations.
Most of these studies claim to explain the welfare state. Yet their focus on
spending may be misleading. Expenditures are epiphenomenal to the the-
oretical substance of welfare states. Moreover, the linear scoring approach
(more or less power, democracy or spending) contradicts the sociological
notion that power, democracy or welfare are relational and structured
phenomena. By scoring welfare states on spending, we assume that all
spending counts equally. But some welfare states, the Austrian one, for
example, spend a large share on benefits to privileged civil servants. This is
normally not what we would consider a commitment to social citizenship
and solidarity. Others spend disproportionately on means-tested social
assistance. Few contemporary analysts would agree that a reformed poor-
relief tradition qualifies as a welfare-state commitment. Some nations spend
enormous sums on fiscal welfare in the form of tax privileges to private
insurance plans that mainly benefit the middle classes. But these tax expen-
ditures do not show up on expenditure accounts. In Britain, total social
expenditure [grew] during the Thatcher period, yet this is almost exclu-
sively a function of very high unemployment. Low expenditure on some
programmes may signify a welfare state more seriously committed to full
employment.
Therborn (1983) is right when he holds that we must begin with a con-
ception of state structure. What are the criteria with which we should judge
whether, and when, a state is a welfare state? There are three approaches
to this question. Therborn's proposal is to begin with the historical trans-
formation of state activities. Minimally, in a genuine welfare state the
majority of its daily routine activities must be devoted to servicing the
162 Three Worlds of Welfare Capitalism

welfare needs of households. This criterion has far-reaching consequences.

If we simply measure routine activity in terms of spending and personnel,
the result is that no state can be regarded as a real welfare s~ate until the
1970s, and some that we normally label as welfare states will not qualify
because the majority of their routine activities concern defence, law and
order, administration and the like (Therborn, 1983 ). Social scientist~ have
been too quick to accept nations' self-proclaimed welfare state status. They
have also been too quick to conclude that if the standard social pro-
grammes have been introduced, the welfare state has been born. ,
The second conceptual approach derives from Richard Titmuss's (1958)
classical distinction between residual and institutional welfare states. In the
former, the state assumes responsibility only when the family or the
market fails; it seeks to limit its commitments to marginal and deserving
social groups. The latter model addresses the entire population, is uni-
versalistic, and embodies an institutionalized commitment to welfare. It
will, in principle, extend welfare commitments to all areas of distribution
vital for societal welfare.
The Titmuss approach has fertilized a variety of new developments in com-
parative welfare state research (Korpi, 1980; Myles, 1984; Esping-Andersen
and Korpi, 1984, 1986; Esping-Andersen, 1985, 1987). It is an approach that
forces researches to move from the black box of expenditures to the content of
welfare states: targeted versus universalistic programmes, the conditions of
eligibility, the quality of benefits and services, and, perhaps most importantly,
the extent to which employment and working life are encompassed in the
state's extension of citizen rights. The shift to welfare state typologies makes
simple linear welfare state rankings difficult to sustain. Conceptually, we are
comparing categorically different types of state.
The third approach is to theoretically select the criteria on which to
judge types of welfare state. This can be done by measuring actual welfare
states against some abstract model and then scoring programmes, or entire
welfare states, accordingly (Myles, 1984). But this is ahistorical, and does
not necessarily capture the ideals or designs that historical actors sought to
realize in the struggles over the welfare state. If our aim is to test causal the-
ories that involve actors, we should begin with the demands that were actu-
ally promoted by those actors that we deem critical in the history of
welfare state development. It is difficult to imagine that anyone struggled
for spending per se.

A Re-specification of the Welfare State

Few can disagree with T. H. Marshall's (1950) proposition that social citi-
zenship constitutes the core idea of a welfare state. But the concept must
be fleshed out. Above all, it must involve the granting of social rights. If
 Gc-'JSta Esping-Andersen 163

social rights are given the legal and practical status of property rights, if
they are inviolable, and if they are granted on the basis of citizenship rather
than performance, they will entail a de-commodification of the status of
individuals vis-a-vis the market. But the concept of social citizenship also
involves social stratification: one's status as a citizen will compete with, or
even replace, one's class position.
The welfare state cannot be understood just in terms of the rights it
grants. We must also take into account how state activities are interlocked
with the market's and the family's role in social provision. These arc the
three main principles that need to be fleshed out prior to any theoretical
specification of the welfare· state.

Rights and De-commodification

In pre-capitalist societies, few workers were properly commodities in the
sense that their survival was contingent upon the sale of their labour power.
It is as markets become universal and hegemonic that the welfare of indi-
viduals comes to depend entirely on the cash nexus. Stripping society of
the institutional layers that guaranteed social reproduction outside the
labour contract meant that people were commodified. In turn, the intro-
duction of modern social rights implies a loosening of the pure commod-
ity status. De-commodification occurs when a service is rendered as a
matter of right, and when a person can maintain a livelihood without
reliance on the market.
The mere presence of social assistance or insurance may not necessarily
bring about significant de-commodification if they do not substantially
emancipate individuals from market dependence. Means-tested poor relief
will possibly offer a safety net of last resort. But if benefits are low and
associated with social stigma, the relief system will compel all but the most
desperate to participate in the market. This was precisely the intent of the
nineteenth-century Poor Laws in most countries. Similarly, most of the
early social-insurance programmes were deliberately designed to maxi-
mize labour-market performance.
There is no doubt that de-commodification has been a hugely contested
issue in welfare state development. For labour, it has always been a priority.
When workers are completely market-dependent, they are difficult to
mobilize for solidaristic action. Since their resources mirror market inequal-
ities, divisions emerge between the 'ins' and the 'outs', making labour-move-
ment formation difficult. De-commodification strengthens the workers and
weakens the absolute authority of the employer. It is for exactly this reason
that employers have always opposed de-commodification.
De-commodified rights are differentially developed in contemporary
welfare states. In social-assistance dominated welfare states, rights are not
164 Three Worlds of Welfare Capitalism

so much attached to work performance as to demonstrable need. Needs-

tests and typically meagre benefits, however, service to curtail the de-
commodifying effect. Thus, in nations where this modet is. dominant
(mainly in the Anglo-Saxon countries), the result is actually to strengthen
the market since all but those who fail in the market will be encouraged to
contract private-sector welfare.
A second dominant model espouses compulsory state social insurance
with fairly strong entitlements. But again, this may not automatically secure
substantial de-commodification, since this hinges very much on the faqric
of eligibility and benefit rules. Germany was the pioneer of social insurance,
but over most of the [twentieth century] can hardly be said to have brought
about much in the way of de-commodification through its social pro-
grammes. Benefits have depended almost entirely on contributions, and
thus on work and employment. In other words, it is not the mere presence
of a social right, but the corresponding rules and preconditions, which
dictate the extent to which welfare programmes offer genuine alternatives
to market dependence.
The third dominant model of welfare, namely the Beveridge-type citi-
zens' benefit, may, at first glance, appear the most de-commodifying. It
offers a basic, equal benefit to all, irrespective of prior earnings, contrib-
utions or performance. It may indeed be a more solidaristic system, but not
necessarily de-commodifying, since only rarely have such schemes been
able to offer benefits of such a standard that they provide recipients with a
genuine option to working.
De-commodifying welfare states are, in practice, fairly recent. A
minimal definition must entail that citizens can freely, and without poten-
tial loss of job, income or general welfare, opt out of work when they
themselves consider it necessary. With this definition in mind, we would,
for example, require of a sickness insurance that individuals be guaranteed
benefits equal to normal earnings, and the right to absence with minimal
proof of medical impairment and for the duration that the individual deems
necessary. These conditions, it is worth noting, are those usually enjoyed
by academics, civil servants and higher-echelon white-collar employees.
Similar requirements would be made of pensions, maternity leave, parental
leave, educational leave and unemployment insurance.
Some nations have moved towards this level of de-commodification, but
only recently, and, in many cases, with significant exemptions. In almost
all nations, benefits were upgraded to nearly equal normal wages in the late
1960s and early 1970s. But in some countries, for example, prompt medical
certification in case of illness is still required; in others, entitlements
depend on long waiting periods of up to two weeks; and in still others, the
duration of entitlements is very short. [ ... ] The Scandinavian welfare
states tend to be the most de-commodifying; the Anglo-Saxon the least.
 G0sta Esping-Andersen 165

The Welfare State as a System of Stratification

Despite the emphasis given to it in both classical political economy and in

T. H. Marshall's pioneering work, the relationship between citizenship and
social class has been neglected both theoretically and empirically. Generally
speaking, the issue has either been assumed away (it has been taken for
granted that the welfare state creates a more egalitarian society), or it has
been approached narrowly in terms of income distribution or in terms of
whether education promotes upward social mobility. A more basic ques-
tion, it seems, is what kind of stratification system is promoted by social
policy. The welfare state is not just a mechanism that intervenes in, and pos-
sibly corrects, the structure of inequality; it is, in its own right, a system of
stratification. It is an active force in the ordering of social relations.
Comparatively and historically, we can easily identify alternative
systems of stratification embedded in welfare states. The poor-relief trad-
ition, and its contemporary means-tested social-assistance offshoot, was
conspicuously designed for purposes of stratification. By punishing and
stigmatizing recipients, it promotes social dualisms and has therefore been
a chief target of labour-movement attacks.
The social-insurance model promoted by conservative reformers such as
Bismarck and von Taffe was also explicitly a form of class politics. It
sought, in fact, to achieve two simultaneous results in terms of stratifica-
tion. The first was to consolidate divisions among wage-earners by legis-
lating distinct programmes for different class and status groups, each with
its own conspicuously unique set of rights and privilege which was
designed to accentuate the individual's appropriate station in life. The
second objective was to tie the loyalties of the individual directly to the
monarchy or the central state authority. This was Bismarck's motive when
he promoted a direct state supplement to the pension benefit. This state-
corporatist model was pursued mainly in nations such as Germany,
Austria, Italy and France, and often resulted in a labyrinth of status-spe-
cific insurance funds.
Of special importance in this corporatist tradition was the establishment
of particularly privileged welfare provisions for the civil service (Beamten).
In part, this was a means of rewarding loyalty to the state, and in part it was
a way of demarcating this group's uniquely exalted social status. The cor-
poratist status-differentiated model springs mainly from the old guild trad-
ition. The nee-absolutist autocrats, such as Bismarck, saw in this tradition
a means to combat the rising labour movements.
The labour movements were as hostile to the corporatist model as they
were to poor relief- in both cases for obvious reasons. Yet the alternatives
first espoused by labour were no less problematic from the point of view
of uniting the workers as one solidaristic class. Almost invariably, the
model that labour first pursued was that of self-organized friendly societies
166 Three Worlds of Welfare Capitalism

or equivalent union- or party-sponsored fraternal welfare plans. This is not

surprising. Workers were obviously suspicious of reforms sponsored by a
hostile state, and saw their own organizations not only as bases of class
mobilization, but also as embryos of an alternative world of solidarity and
justice; as a microcosm of the socialist haven to come. Nonetheless, these
micro-socialist societies often became problematic class ghettos that
divided rather than united workers. Membership was typically restricted
to the strongest strata of the working class, and the weakest - who most
needed protection - were most likely excluded. In brief, the fraternal
society model frustrated the goal of working-class mobilization.
The socialist 'ghetto approach' was an additional obstacle when social-
ist parties found themselves forming governments and having to pass the
social reforms they had so long demanded. For political reasons of coal-
ition-building and broader solidarity, their welfare model had to be recast
as welfare for 'the people'. Hence, the socialists came to espouse the prin-
ciple of universalism; borrowing from the liberals, their programme was,
typically, designed along the lines of the democratic flat-rate, general
revenue-financed Beveridge model.
As an alternative to means-tested assistance and corporatist social insur-
ance, the universalistic system promotes equality of status. All citizens are
endowed with similar rights, irrespective of class or market position. In
this sense, the system is meant to cultivate cross-class solidarity, a solidar-
ity of the nation. But the solidarity of flat-rate universalism presumes a his-
torically peculiar class structure, one in which the vast majority of the
population are the 'little people' for whom a modest, albeit egalitarian,
benefit may be considered adequate. Where this no longer obtains, as
occurs with growing working-class prosperity and the rise of the new
middle classes, flat-rate universalism inadvertently promotes dualism
because the better-off turn to private insurance and to fringe-benefit bar-
gaining to supplement modest equality with what they have decided are
accustomed standards of welfare. Where this process unfolds (as in Canada
or Great Britain), the result is that the wonderfully egalitarian spirit of uni-
versalism turns into a dualism similar to that of the social-assistance state:
the poor rely on the state, and the remainder on the market.
It is not only the universalist but, in fact, all historical welfare state models
which have faced the dilemma of changes in class structure. But the response
to prosperity and middle-class growth has been varied, and so, therefore, has
been the outcome in terms of stratification. The corporatist insurance tradi-
tion was, in a sense, best equipped to manage new and loftier welfare-state
expectations since the existing system could technically be upgraded quite
easily to distribute more adequate benefits. Adenauer's 1957 pension reform
in Germany was a pioneer in this respect. Its avowed purpose was to restore
status differences that had been eroded because of the old insurance system's
incapacity to provide benefits tailored to expectations. This it did simply by
 G0sta Esping-Andersen 167

ving from contribution-to earnings-graduated benefits without altering

010
the framewor k ~ f st~tus- d'lstm~nvene.ss.
· · . . . .
In nations w1th e1ther a soc1al-asststance or a umversahsnc Bevendge-
pe system, the option was whether to allow the market or the state to
;~rnish adequacy and satisfy middle-class aspirations. Two alternative
odels emerged from this political choice. The one typical of Great Britain
:d most of the Anglo-Saxon world was to preserve an essentially modest
universalism in the state, and allow the market to reign for the growing
social strata demanding superior welfare. Due to the political power of
such groups, the dualism that emerges is not merely one between state and
market, but also between forms of welfare-state transfers: in these nations,
one of the fastest growing components of public expenditure is tax subsi-
dies for so-called 'private' welfare plans. And the typical political effect is
the erosion of middle-class support for what is less and less a universalis-
tic public-sector transfer system.
Yet another alternative has been to seek a synthesis of universalism and
adequacy outside the market. This road has been followed in countries
where, by mandating or legislation, the state incorporates the new middle
classes within a luxurious second-tier, universally inclusive, earnings-
related insurance scheme on top of the flat-rate egalitarian one. Notable
examples are Sweden and Norway. By guaranteeing benefits tailored to
expectations, this solution reintroduces benefit inequalities, but effectively
blocks off the market. It thus succeeds in retaining universalism and also,
therefore, the degree of political consensus required to preserve broad and
solidaristic support for the high taxes that such a welfare state model
demands.

Welfare State Regimes

As we survey international variations in social rights and welfare-state

stratification, we will find qualitatively different arrangements between
state, market and the family. The welfare state variations we find are there-
fore not linearly distributed, but clustered by regime-types.
In one cluster we find the 'liberal' welfare state, in which means-tested
assistance, modest universal transfers or modest social-insurance plans
predominate. Benefits cater mainly to a clientele of low-income, usually
working-class, state dependants. In this model, the progress of social
reform has been severely circumscribed by traditional, liberal work-ethic
norms: it is one where the limits of welfare equal the marginal propensity
to opt for welfare instead of work. Entitlement rules are therefore strict
and often associated with stigma; benefits are typically modest. In turn, the
state encourages the market, either passively - by guaranteeing only a
minimum- or actively- by subsidizing private welfare schemes.
168 Three Worlds of Welfare Capitalism

The consequence is that this type of regime minimizes _de-commodifi-

cation effects, effectively contains the realm of social rights, and erects an
order of stratification that is a blend of a relative equality of poverty among
state-welfare recipients, market-differentiated welfare among the majori-
ties, and a class-political dualism between the two. The archetypical exam-
ples of this model are the United States, Canada and Australia.
A second regime-type clusters nations such as Austria, France,
Germany and Italy. Here, the historical corporatist-statist legacy was
upgraded to cater to the new 'post-industrial' class structure. In these
conservative and strongly 'corporatist' welfare states, the liberal obses-
sion with market efficiency and commodification was never pre-eminent
and, as such, the granting of social rights was hardly ever a seriously con-
tested issue. What predominated was the preservation of status differen-
tials; rights, therefore, were attached to class and status. This corporatism
was subsumed under a state edifice perfectly ready to displace the market
as a provider of welfare; hence, private insurance and occupational fringe
benefits play a truly marginal role. On the other hand, the state's empha-
sis on upholding status differences means that its redistributive impact is
negligible.
But the corporatist regimes are also typically shaped by the Church, and
hence strongly committed to the preservation of traditional familyhood.
Social insurance typically excludes non-working wives, and family bene-
fits encourage motherhood. Day care, and similar family services, arc con-
spicuously underdeveloped; the principle of 'subsidiarity' serves to
emphasize that the state will only interfere when the family's capacity to
service its members is exhausted.
The third, and clearly smallest, regime-cluster is composed of those
countries in which the principles of universalism and de-commodification
of social rights were extended also to the new middle classes. We may call
it the 'social democratic' regime-type since, in these nations, social democ-
racy was clearly the dominant force behind social reform. Rather than tole-
rate a dualism between state and market, between working class and
middle class, the social democrats pursued a welfare state that would
promote an equality of the highest standards, not an equality of minimal
needs as was pursued elsewhere. This implied, first, that services and bene-
fits be upgraded to levels commensurate with even the most discriminat-
ing tastes of the new middle classes; and, second, that equality be furnished
by guaranteeing workers full participation in the quality of rights enjoyed
by the better-off.
This formula translates into a mix of highly de-commodifying and uni-
versalistic programmes that, nonetheless, are tailored to differentiated
expectations. Thus, manual workers come to enjoy rights identical with
those of salaried white-collar employees or civil servants; all strata
are incorporated under one universal insurance system, yet benefits are
 G0sta Esping-Andersen 169

graduated according to accustomed earnings. This model crowds out the

market, and consequently constructs an essentially universal solidarity in
favour of the welfare state. All benefit; all are dependent; and all will pre-
sumably feel obliged to pay.
The social democratic regime's policy of emancipation addresses both
the market and the traditional family. In contrast to the corporatist-sub-
sidiarity model, the principle is not to wait until the family's capacity to aid
is exhausted, but to pre-emptively socialize the costs of familyhood. The
ideal is not to maximize dependence on the family, but capacities for indi-
vidual independence. In this sense, the model is a peculiar fusion of liber-
alism and socialism. The result is a welfare state that grants transfers
directly to children, and takes direct responsibility of caring for children,
the aged and the helpless. It is, accordingly, committed to a heavy social-
service burden, not only to service family needs but also to allow women
to choose work rather than the household.
Perhaps the most salient characteristic of the social democratic regime is
its fusion of welfare and work. It is at once genuinely committed to a full-
employment guarantee, and entirely dependent on its attainment. On the
one side, the right to work has equal status to the right of income protec-
tion. On the other side, the enormous costs of maintaining a solidaristic,
universalistic and de-commodifying welfare system means that it must
minimize social problems and maximize revenue income. This is obviously
best done with most people working, and the fewest possible living off
social transfers.
Neither of the two alternative regime-types espouse full employment as
an integral part of their welfare state commitment. In the conservative trad-
ition, of course, women are discouraged from working; in the liberal ideal,
concerns of gender matter less than the sanctity of the market.
[ ... J Welfare states cluster, but we must recognize that there is no
single pure case. The Scandinavian countries may be predominantly
social democratic, but they are not free of crucial liberal elements.
Neither are the liberal regimes pure types. The American social-security
system is redistributive, compulsory and far from actuarial. At least in
its early formulation, the New Deal was as social democratic as was con-
temporary Scandinavian social democracy. And European conservative
regimes have incorporated both liberal and social democratic
impulses. Over the decades, they have become less corporativist and less
authoritarian.
Notwithstanding the lack of purity, if our essential criteria for defining
welfare states have to do with the quality of social rights, social stratifica-
tion and the relationship between state, market and family, the world is
obviously composed of distinct regime-clusters. Comparing welfare states
on scales of more or less or, indeed, of better or worse, will yield highly
misleading results.
170 Three Worlds of Welfare Capitalism

The Causes of Welfare-State Regimes

If welfare states cluster into three distinct regime-types, we f:tcea substan-

tially more complex task of identifying the causes of welfare state differ-
ences. What is the explanatory power of industrialization, economic
growth, capitalism or working-class political power in account~ng for
regime-types ? A first superficial answer would be: very little. The nations
we study are all more or less similar with regard to all but the variable of
working-class mobilization. And we find very powerful labour move-
ments and parties in each of the three clusters.
A theory of welfare state developments must clearly reconsider its causal
assumptions if it wishes to explain clusters. The hope of finding one single
powerful causal force must be abandoned; the task is to identify salient
interaction effects. Based on the preceding arguments, three factors in par-
ticular should be of importance: the nature of class mobilization (especially
of the working class); class-political coalition structures; and the historical
legacy of regime institutionalization.
[ ... ] There is absolutely no compelling reason to believe that workers
will automatically and naturally forge a socialist class identity; nor is it
plausible that their mobilization will look especially Swedish. The actual
historical formation of working-class collectivities will diverge, and so also
will their aims, ideology and political capacities. Fundamental differences
appear both in trade unionism and party development. Unions may be sec-
tional or in pursuit of more universal objectives; they may be denomin-
ational or secular; and they may be ideological or devoted to business
unionism. Whichever they are, it will decisively affect the articulation of
political demands, class cohesion and the scope for labour-party action. It
is clear that a working-class mobilization thesis must pay attention to
union structure.
The structure of trade unionism may or may not be reflected in labour-
party formation. But under what conditions are we likely to expect certain
welfare state outcomes from specific party configurations? There are many
factors that conspire to make it virtually impossible to assume that any
labour, or left-wing, party will ever be capable, single-handedly, of structur-
ing a welfare state. Denominational or other divisions aside, it will be only
under extraordinary historical circumstances that a labour party alone will
command a parliamentary majority long enough to impose its will. [ ... ]
The traditional working class has hardly ever constituted an electoral major-
ity. It follows that a theory of class mobilization must look beyond the major
leftist parties. It is a historical fact that welfare state construction has
depended on political coalition-building. The structure of class coalitions is
much more decisive than are the power resources of any single class.
The emergence of alternative class coalitions is, in part, determined by
class formation. In the earlier phases of industrialization, the rural classes
 G(2}sta Esping-Andersen 171

usually constituted the largest single group in the electorate. If social

democrats wanted political majorities, it was here that they were forced to
look for allies. One of history's many paradoxes is that the rural classes
were decisive for the future of socialism. Where the rural economy was
dominated by small, capital-intensive family farmers, the potential for an
alliance was greater than where it rested on large pools of cheap labour.
And where farmers were politically articulate and well organized (as in
Scandinavia), the capacity to negotiate political deals was vastly superior.
The role of the farmers in coalition formation and hence in welfare state
development is clear. In the Nordic countries, the necessary conditions
obtained for a broad red-green alliance for a full-employment welfare state
in return for farm price subsidies. This was especially true in Norway and
Sweden, where farming was highly precarious and dependent on state aid.
In the United States, the New Deal was premised on a similar coalition
(forged by the Democratic Party), but with the important difference that
the labour-intensive South blocked a truly universalistic social security
system and opposed further welfare-state developments. In contrast, the
rural economy of continental Europe was very inhospitable to red-green
coalitions. Often, as in Germany and Italy, much of agriculture was labour-
intensive; hence the unions and left-wing parties were seen as a threat. In
addition, the conservative forces on the continent had succeeded in incor-
porating farmers into 'reactionary' alliances, helping to consolidate the
political isolation of labour.
Political dominance was, until after the Second World War, largely a
question of rural class politics. The construction of welfare states in this
period was, therefore, dictated by whichever force captured the farmers.
The absence of a red-green alliance does not necessarily imply that no
welfare-state reforms were possible. On the contrary, it implies which
political force came to dominate their design. Great Britain is an exception
to this general rule, because the political significance of the rural classes
eroded before the turn of the century. In this way, Britain's coalition-logic
showed at an early date the dilemma that faced most other nations later;
namely, that the rising white-collar strata constitute the linchpin for polit-
ical majorities. The consolidation of welfare states after the Second World
War came to depend fundamentally on the political alliances of the new
middle classes. For social democracy, the challenge was to synthesize
working-class and white-collar demands without sacrificing the commit-
ment to solidarity.
Since the new middle classes have, historically, enjoyed a relatively priv-
ileged position in the market, they have also been quite successful in
meeting their welfare demands outside the state, or, as civil servants, by
privileged state welfare. Their employment security has traditionally
been such that full employment has been a peripheral concern. Finally, any
programme for drastic income-equalization is likely to be met with great
172 Three Worlds of Welfare Capitalism

hostility among a middle-class clientele. On these grounds, it would appear

that the rise of the new middle classes would abort the social democratic
project and strengthen a liberal welfare state formula. .
The political leanings of the new middle classes have, indeed, been deci-
sive for welfare state consolidation. Their role in shaping the three welfare
state regimes described earlier is clear. The Scandinavian modei relied
almost entirely on social democracy's capacity to incorporate them into a
new kind of welfare state: one that provided benefits tailored to the tastes
and expectations of the middle classes, but nonetheless retained universal-
ism of rights. Indeed, by expanding social services and public employment,
the welfare state participated directly in manufacturing a middle class
instrumentally devoted to social democracy.
In contrast, the Anglo-Saxon nations retained the residual welfare state
model precisely because the new middle classes were not wooed from the
market to the state. In class terms, the consequence is dualism. The welfare
state caters essentially to the working class and the poor. Private insurance
and occupational fringe benefits cater to the middle classes. Given the elec-
toral importance of the latter, it is quite logical that further extensions of
welfare state activities are resisted.
The third, continental European, welfare state regime has also been pat-
terned by the new middle classes, but in a different way. The cause is
historical. Developed by conservative political forces, these regimes insti-
tutionalized a middle-class loyalty to the preservation of both occupa-
tionally segregated social-insurance programmes and, ultimately, to the
political forces that brought them into being. Adenauer's great pension
reform in 1957 was explicitly designed to resurrect middle-class loyalties.

Conclusion

We have here presented an alternative to a simple class-mobilization theory

of welfare-state development. It is motivated by the analytical necessity of
shifting from a linear to an interactive approach with regard to both
welfare states and their causes. If we wish to study welfare states, we must
begin with a set of criteria that define their role in society. This role is cer-
tainly not to spend or tax; nor is it necessarily that of creating equality. We
have presented a framework for comparing welfare states that takes into
consideration the principles for which the historical actors have willingly
united and struggled. When we focus on the principles embedded in
welfare states, we discover distinct regime-clusters, not merely variations
of 'more' or 'less' around a common denominator.
The historical forces behind the regime differences are interactive. They
involve, first, the pattern of working-class political formation and, second,
political coalition-building in the transition from a rural economy to
 G0sta Esping-Andersen 173

a middle-class society. The question of political coalition-formation is

decisive. Third, past reforms have contributed decisively to the institution-
alization of class preferences and political behaviour. In the corporatist
regimes, hierarchical status-distinctive social insurance cemented middle-
class loyalty to a peculiar type of welfare state. In liberal regimes, the
middle classes became institutionally wedded to the market. And in
Scandinavia, the fortunes of social democracy over the past decades were
closely tied to the establishment of a middle-class welfare state that bene- .
fits both its traditional working-class clientele and the new white-collar
strata. The Scandinavian social democrats were able to achieve this in part
because the private welfare market was relatively undeveloped and in part
because they were capable of building a welfare state with features of suf-
ficient luxury to satisfy the wants of a more discriminating public. This also
explains the extraordinarily high cost of Scandinavian welfare states.
But a theory that seeks to explain welfare state growth should also be
able to understand its retrenchment or decline. It is generally believed that
welfare state backlash movements, tax revolts and roll-backs are ignited
when social expenditure burdens become too heavy. Paradoxically, the
opposite is true. Anti-welfare-state sentiments [since the 1980s] have gen-
erally been weakest where welfare spending has been heaviest, and vice
versa. Why?
The risks of welfare state backlash depend not on spending, but on the
class character of welfare states. Middle-class welfare states, be they social
democratic (as in Scandinavia) or corporatist (as in Germany), forge
middle-class loyalties. In contrast, the liberal, residualist welfare states
found in the United States, Canada and, increasingly, Britain, depend on
the loyalties of a numerically weak, and often politically residual, social
stratum. In this sense, the class coalitions in which the three welfare-state
regime-types were founded explain not only their past evolution but also
their future prospects.

Note

From The Three Worlds of Welfare Capitalism, Cambridge, Polity Press, 1990,
pp. 18-34.

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Korpi, W. (1980) 'Social Policy and Distributional Conflict in the Capitalist
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Korpi, W (1983) The Democratic Class Struggle, London, Routledge and Kegan
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in The Impact of Parties, ed. F. Castles, London, Sage.
Schmidt, M. G. (1983) 'The Welfare State and the Economy in Periods of
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Macmillan.
Therborn, G. (1983) 'When, How and Why does a Welfare State become a Welfare
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Three Worlds of Welfare
Capitalism or More?
A State-of-the-Art Report
Wil Arts andjohn Gelissen

[ ... J

Three Worlds of 'Welfare Capitalism' . ..

The central explanatory questions Esping-Andersen (1990, pp. 4,
105) asks are: Why is the world composed of three qualitatively
different welfare-state logics? Why do nations crystallize into distinct
regime-clusters? These questions demand a theoretical answer. Since he is
of the opinion that the existing theoretical models of the welfare state
are inadequate, reconceptualization and retheorization are necessary.
In answering these questions he starts with the orienting statement
that history and politics matter. Or, more specifically: 'The historical char-
acteristics of states, especially the history of political class coalitions as the
most decisive cause of welfare-state variations, have played a determinate
role in forging the emergence of their welfare-statism' (1990, p. 1).
What are the historical and political forces behind the regime differ-
ences? According to Esping-Andersen (p. 29), three interacting factors
are significant: the nature of class mobilization (especially of the working
class), class-political action structures, and the historical legacy of regime
institutionalization. The provisional answer to his central questions is
therefore: If you look at the history of so-called welfare states you find
three ideal-typical trajectories, a liberal, a conservative and a social-
democratic one. Fortunately, one does not have to go back in history,
however, in order to typify 'real' welfare states. We can characterize
them, as we have mentioned before, by looking at their positions on two
fundamental dimensions of welfare statism:
176 Three Worlds of Welfare Capitalism or More?

The degree of decommodification, i.e. the degree to which a (social)

service is rendered as a matter of right, and the degree to which a person
can maintain a livelihood without reliance on the market!.
2 The kind of social stratification and solidarities, i.e. which social strati-
fication system is promoted by social policy and does the welfare state
build narrow or broad solidarities?

What are the characteristics of the three distinct regime-types to which

the historical forces lead? To answer this question, Esping-Andersen
(1990, p. 73) argues that although the before-mentioned dimensions are
conceptually independent, according to his 'theory' he would expect that
there is sufficient covariation for distinct regime-clusters to emerge. In
accordance with this theoretical expectation, he succeeds in empirically
identifying three closely paralleled models- ideal-types- of regime-types
on both the stratification and the decommodification dimension. There
appears to be a clear coincidence of high decommodification and strong
universalism in the Scandinavian, social-democratically influenced welfare
states. There is an equally clear coincidence of low decommodification and
strong individualistic self-reliance in the liberal Anglo-Saxon nations.
Finally, the continental European countries group closely together as cor-
poratist and etatist, and are also modestly decommodifying (Esping-
Andersen, 1990, p. 77).
In spite of anomalies such as the Netherlands and Switzerland, the
overall picture is convincing, at least at first glance. This empirical success
permits a more extensive description of these three worlds of welfare cap-
italism. First, there is the liberal type of welfare capitalism, which embod-
ies individualism and the primacy of the market. The operation of the
market is encouraged by the state, either actively - subsidizing private
welfare schemes- or passively by keeping (often means tested) social bene-
fits to a modest level for the demonstrably needy. There is little redistribu-
tion of incomes within this type of welfare state and the realm of social
rights is rather limited. This welfare regime is characterized by a low level
of decommodification. The operation of the liberal principle of stratifica-
tion leads to division in the population: on the one hand, a minority of low-
income state dependants and, on the other hand, a majority of people able
to afford private social insurance plans. In this type of welfare state,
women are encouraged to participate in the labour force, particularly in the
service sector.
Second, there is a world of conservative-corporatist welfare states,
which is typified by a moderate level of decommodification. This regime
type is shaped by the twin historical legacy of Catholic social policy, 1 on
the one side, and corporatism and etatism on the other side. This blend
had three important consequences in terms of stratification. In the first
place, the direct influence of the state is restricted to the provision of
 Wil Arts and john Gelissen 177

income maintenance benefits related to occupational status. This means

that the sphere of solidarity remains quite narrow and corporatist.
Moreover, labour market participation by married women is strongly
discouraged, because corporatist regimes- influenced by the Church-
are committed to the preservation of traditional family structures.
Another important characteristic of the conservative regime type is
the principle of subsidiarity: the state will only interfere when the
family's capacity to service its members is exhausted (Esping-Andersen,
1990, p. 27).
Finally, Esping-Andersen recognizes a social-democratic world of
welfare capitalism. Here, the level of decommodification is high, and the
social-democratic principle of stratification is directed towards achieving
a system of generous universal and highly distributive benefits not
dependent on any individual contributions. In contrast to the liberal type
of welfare states, 'this model crowds out the market and, consequently,
constructs an essentially universal solidarity in favour of the welfare state'
(1990, p. 28). Social policy within this type of welfare state is aimed at a
maximization of capacities for individual independence. Women in par-
ticular- regardless of whether they have children or not- are encouraged
to participate in the labour market, especially in the public sector.
Countries that belong to this type of welfare state regime are generally
dedicated to full employment. Only by making sure that as many people
as possible have a job is it possible to maintain such a high-level solidaris-
tic welfare system .

. . . or More?

[We have] indicated the tremendous impact of Esping-Andersen's work on

comparative social policy analysis (Esping-Andersen, 1990). Since then,
several authors have developed alternative typologies or added one or
more types to existing classifications for greater empirical refinement.
From this vast array of welfare state typologies we have selected six classi-
fications, which we think draw attention to interesting characteristics of
welfare states not directly included in Esping-Andersen's classification. All
these typologies and their main characteristics are summarized in table 1.
These alternative classifications relate to three important criticisms of
Esping-Andersen's classification (for these and other points of critique
see Schmidt, 1998; Gough, 2000). 2 First, the misspecification of the
Mediterranean welfare states; second, labelling the Antipodean welfare
states as belonging to the 'liberal' welfare state regime; and finally, the
neglect of the gender-dimension in social policy. In the following sections,
we will discuss these criticisms in more detail and present some of the alter-
native classifications developed by his critics.
Table 1 An overview of typologies of welfare states
Types of welfare states and their characteristics Indicators/dimensions

Esping-Andersen ( 1990) Liberal: Low level of decommodification; market-differentiation of welfare • Decommodification

2 Conservative: Moderate level of decommodification; social benefits mainly • Stratification
dependent on former contributions and status
3 Social-Democratic: High level of decommodification; universal benefits and high degree of
benefit equality

Leibfried (1992) Anglo-Saxon (Residual): Right to income transfers; welfare state as compensator of last Poverty, social insurance
resort and tight enforcer of work in the market place and poverty policy
2 Bismarck (Institutional): Right to social security; welfare state as compensator of first
resort and employer of last resort
3 Scandinavian (Modern): Right to work for everyone; universalism; welfare state as
employer of first resort and compensator of last resort
4 Latin Rim (Rudimentary): Right to work and welfare proclaimed; welfare state as a semi-
institutionalized promise

Castles & Mitchell (1993) Liberal: Low social spending and no adoption of equalizing instruments in social policy Welfare expenditure
2 Conservative: High social expenditures, but little adoption of equalizing instruments Benefit equality
in social policy
3 Non-Right Hegemony: High social expenditure and use of highly equalizing instruments Taxes
in social policy
4 Radical: Achievement of equality in pre-tax, pre-transfer income (adoption of equalizing
instruments in social policy), but little social spending

Siaroff (1994) Protestant Liberal: Minimal family welfare, yet relatively egalitarian gender situation in the • Family welfare
labour market; family benefits are paid to the mother, but are rather inadequate orientation
2 Advanced Christian-Democratic: No strong incentives for women to work, but strong • Female. work desirability
incentives to stay at home
 3 Protestant Social-Democratic: True work-welfare choice for women; family benefits are Extent of family benefits
high and always paid to the mother; importance of Protestantism being paid to women
4 Late Female Mobilization: Absence of Protestantism; family benefits are usually paid to the
father; universal female suffrage is relatively new

Ferrera ( 1996) Anglo-Saxon: Fairly high welfare state cover; social assistance with a means test; mixed Rules of access
system of financing; highly integrated organizational framework entirely managed by a (eligibility)
public administration
2 Bismarck: strong link between work position (and/or family state) and social entitlements; Benefit formulae
benefits proportional to income; financing through contributions; reasonably substantial
social assistance benefits; insurance schemes mainly governed by unions and employer
organizations
3 Scandinavian: social protection as a citizenship right; universal coverage; relatively generous • Financing regulations
fixed benefits for various social risks; financing mainly through fiscal revenues; strong
organizational integration
4 Southern: fragmented system of income guarantees linked to work position; generous • Organizational-
benefits without articulated net of minimum social protection; health care as a right of managerial arrangements
citizenship; particularism in payments of cash benefits and financing; financing through
contributions and fiscal revenues

Bonoli (1997) British: Low percentage of social expenditure financed through contributions Bismarck and Beveridge
(Beveridge); low social expenditure as a percentage of GDP model
2 Continental: High percentage of social expenditure financed through contributions
(Bismarck); high social expenditure as a percentage of GDP
3 Nordic: Low percentage of social expenditure financed through contributions (Beveridge); • Quantity of welfare state
high social expenditure as a percentage of GDP expenditure
4 Southern: High percentage of social expenditure financed through contributions (Bismarck);
low social expenditure as a percentage of GDP

(continued)
Table 1 (continued)
Types of welfare states and their characteristics Indicators/dimensions

Korpi & Palme (1998) Basic Security: Entitlements based on citizenship or contributions; application of the flat-
rate benefit principle
2 Corporatist: Entitlements based on occupational category and labour force participation; • Bases of entitlement
use of the earnings-related benefit principle
3 Encompassing: Entitlement based on citizenship and labour force participation; use of the • Benefit principle
flat-rate and earnings-related benefit principle
4 Targeted: Eligibility based on proved need; use of the minimum benefit principle • Governance of social
msurance programme
5 Voluntary State Subsidized: Eligibility based on membership or contributions; application
of the flat-rate or earnings-related principle
 Wil Arts and john Gelissen 181

The Mediterranean

One important criticism of Esping-Andersen's classification is that he did

not systematically include the Mediterranean countries. Specifically, in The
Three Worlds of Welfare Capitalism Italy belongs- according to him- to the
family of the corporatist welfare state regimes, whereas Spain, Portugal and
Greece are not covered by his typology. Although he admits that these coun-
tries have some important characteristics in common- i.e. a Catholic imprint
(with the exception of Greece) and a strong familialism (Esping-Anderscn,
1997, p. 180) - he seems to include them in the continental/corporatist
model. His omission of a systematic treatment of the Mediterranean has
brought about a lively debate about the existence of a 'Southern' or 'Latin
Rim' model of social policy. For example, Katrougalos supports Esping-
Andersen's position by arguing that the Mediterranean countries 'do not
form a distinct group but rather a subcategory, a variant of the Continental
model. They are merely underdeveloped species of the Continental model,
welfare states in their infancy, with the main common characteristics being
the immaturity of the social protection systems and some similar social and
family structures' (1996, p. 43). However, according to other commentators
(Leibfried, 1992; Ferrera, 1996; Bonoli, 1997; Trifiletti, 1999) it seems logical
to see the South European countries as a separate cluster. They have devel-
oped classifications of European welfare states which try to show the exist-
ence of a separate 'southern model' of social policy.
Leibfried (1992) distinguishes four social policy or poverty regimes
within the countries of the European Community: the Scandinavian welfare
states, the 'Bismarck' countries, the Anglo-Saxon countries and the Latin
Rim countries. These policy regimes are based on different policy models-
modern, institutional, residual and rudimentary- in which social citizenship
has developed in different and sometimes incomplete ways. Within these
policy regimes, welfare state institutions have a different function in com-
bating poverty. However, it is particularly important that Leibfried adds a
fourth category- the 'Latin Rim' countries- to Esping-Andersen's original
classification. He emphasizes as an important characteristic of these coun-
tries the lack of an articulated social minimum and a right to welfare.
Ferrera also argues explicitly for the inclusion of a 'Southern model' of
social policy (1996, p. 4-7). He concentrates on four dimensions of social
security systems: the rules of access (eligibility rules), the conditions under
which benefits are granted, the regulations to finance social protection and,
finally, the organizational-managerial arrangements to administrate the
various social security schemes. Based on these dimensions, he makes a
distinction between the Scandinavian, Anglo-Saxon, Bismarckian and
Southern countries. The Scandinavian countries are characterized by uni-
versal coverage for the risks of life. The right to social protection is attrib-
uted on the basis of citizenship. The Anglo-Saxon family of welfare states
182 Three Worlds of Welfare Capitalism or More?

is also characterized by a highly inclusive social security coverage, but only

in the area of health care can one speak of fully universal risk coverage.
Also flat-rate benefits and means testing play an importan"t r()le. In the
third group of countries, the relationship between social security entitle-
ments, a person's labour market status and role within the family (bread-
winner or not) is still clearly visible. Contributions play an important role
in financing the various schemes. Almost everybody has social insurance
coverage through their own or derived rights. Finally, the social protection
systems of Southern countries are highly fragmented and, although th~re
is no articulated net of minimum social protection, some benefits levels are
very generous (such as old age pensions). Moreover, in these countries
health care is institutionalized as a right of citizenship. However, in
general, there is relatively little state intervention in the welfare sphere.
Another important feature is the high level of particularism with regard to
cash benefits and financing, expressed in high levels of clientelism. The
most important features of each type are summarized in table 1.
Bonoli (1997) uses the Mediterranean countries - among others - to
develop the final classification we wish to discuss in this section. He is
especially critical of the decommodification approach. According to him,
it does not allow one to discriminate effectively between the Bismarckian
and the Beveridgean approaches to social policy. As an alternative, he com-
bines two approaches to the classification of welfare states. One concen-
trates on the 'how much' dimension (emphasized in the Anglo-Saxon
literature) and the other on the 'how' dimension of social policy (empha-
sized in the Continental-European or French tradition). As an empirical
indicator of the first dimension, he uses social expenditure as a proportion
of GDP, and of the second dimension the percentage of social expenditure
financed through contributions. These indicators lead him to identify four
types of countries: the British countries, the Continental European coun-
tries, the Nordic countries and the Southern countries, thus giving credit
to the proposal of a 'Southern model'.
Upon examining the combined arguments of Leibfried, Ferrera and
Bonoli, as presented in table 1, it appears that a strong similarity exists
among their first three types and those of Esping-Andersen. However, all
three authors add a fourth- Mediterranean- type of welfare state regime
to the original Esping-Andersenian classification. Using empirical evi-
dence, they argue that this is a prototype rather than a subcategory of the
continental/corporatist model.

The Antipodes
Esping-Andersen discusses the Antipodean countries (i.e. Australia and
New Zealand) as representatives of the liberal welfare state regime. This is
 Wil Arts and john Gelissen 183

because of their marginal commitment to public welfare and strong

reliance on means testing. However, according to Castles (1998), Australia
and New Zealand have a more particular and a more inclusive approach to
social protection than the standard liberal form. Thresholds are set at com-
paratively high levels, so that a large part of the population receives some
means-tested benefits. The result is that the Antipodes exhibit the world's
most comprehensive systems of means-tested income support benefits.
Redistribution has been traditionally pursued through wage controls and
employment security rather than social programmes. Income guarantees,
realized by using market regulation, thus play an important role in the
institutional set-up of these welfare states. It therefore seems that the
Antipodean countries represent a separate social policy model. It led
Castles and Mitchell (1993) to question whether 'social spending is the
only route to greater income redistribution', implying that there may be
other ways than income maintenance by which states may mitigate the
effects of market forces.
In a discussion of their study, Hill (1996) points out that Castles and
Mitchell's critique of Esping-Andersen's work essentially follows two
lines. In the first place, they draw attention to the fact that political activ-
ity from the left may have been introduced into those countries in the
achievement of equality in pre-tax, pre-transfer income rather than in the
pursuit of equalization through social policy. Second, they argue - again
about Australia but also with relevance to the United Kingdom- that the
Esping-Andersen approach disregards the potential for income-related
benefits to make an effective contribution to redistribution. Australian
income maintenance is almost entirely means-tested. It uses an approach
that neither concentrates on a liberal-type redistribution to the very poor,
nor resembles the more universal social-democratic and hierarchical soli-
daristic conservative ideal-types highlighted in Esping-Andersen's study
(Hill, 1996, p. 46 ). This is the reason why Castles and Mitchell develop an
alternative, four-way classification of welfare states: Liberal, Conservative,
Non-Right Hegemony and Radical. This utilizes the level of welfare
expenditure (i.e. household transfers as a percentage of GDP); average
benefit equality; and income and profit taxes as a percentage of GDP.
Other evidence for the exceptional position of the Antipodean coun-
tries, specifically Australia, is found when countries are classified accord-
ing to the typology developed by Korpi and Palme (1998). This is based on
institutional characteristics of welfare states. They try to investigate the
causal factors which influence the institutional aspects of the welfare
state on the one hand, and the effects of institutions on the formation of
interests, preferences and identities - as well as on the degree of poverty
and inequality in a society - on the other hand. They argue that institu-
tional structures can be expected to reflect the role of conflicts among
interest groups, while they are also likely to form important frameworks
184 Three Worlds of Welfare Capitalism or More?

for the definitions of interests and identities among citizens. They can
thereby be expected to influence coalition formation, which is significant
for income redistribution and poverty. As the basis of their,.classification
Korpi and Palme take the institutional structures of two social pro~
grammes- old age pensions and sickness cash benefits- which they con-
sider to lie at the heart of the welfare state. The institutional structures of
the two programmes are classified according to three aspects: the bases of
entitlements, the principles applied to determine benefit levels (to what
extent social insurance should replace lost income), and the governance of
a social insurance programme (whether or not representatives of employ-
ers and employees participate in the governing of a programme). Based on
these three aspects, they discriminate among five different ideal-types of
institutional structures: the targeted (empirically exemplified by the
Australian case), voluntary state subsidized, corporatist, basic security and
encompassing model. In table 1, these ideal-types and their most impor-
tant features are delineated. Again, the Esping-Andersen model stands.
However, a number of countries arc no longer considered to belong to a
subcategory of his three prototypes, but to a new prototype.

Gender, Familia/ism and Late Female Mobilization

By explicitly incorporating gender, several authors have tried to reconcep-

tualize the dimensions of welfare state variation. Subjecting the main-
stream welfare state typologies to an analysis of the differential places of
men and women within welfare states would, according to them, produce
valuable insights. This does not mean, however, that the characteristics
used to construct the typologies are exhaustive (Sainsbury, 1996, p. 41 ).
Gender analysis suggests that there are whole areas of social policy that
Esping-Anderson simply misses. What seems to be particularly lacking is
a systematic discussion of the family's place in the provision of welfare and
care. Not only the state and the market provide welfare, but also families.
A further omission is that there is no serious treatment of the degree to
which women are excluded from or included in the labour market. 3 Instead
of employing the ali-or-nothing words 'inclusion' and 'exclusion' to
gender differences, it seems sensible to stress the importance of partial citi-
zenship (Bulmer and Rees, 1996, p. 275). Women obtained full civil and
political rights a considerable time ago, but with regard to social rights,
women are still discriminated against, sometimes formally, and nearly
always informally because of different labour market positions, linked to
different gender roles. According to many feminist authors, it is the sexual
division of paid and unpaid work- especially care and domestic labour-
that needs incorporating in the typology (Lewis, 1992; O'Connor, 1993;
Orloff, 1993; Sainsbury, 1996; O'Connor et al., 1999).
 Wil Arts and john Gelissen 185

With respect to another issue, social care, Daly and Lewis (2000, p. 289)
argue that different styles of social policy have incorporated the key
element of social care differently. They identify certain tendencies con-
cerning care in specific welfare states. For example, the Scandinavian coun-
tries form a distinct group in that they have strongly institutionalized care
for both the elderly and children. In the Mediterranean welfare states, care
tends to be privatized to the family, whereas in Germany it is seen as most
appropriately a function of voluntary service providers. In France, a strong
distinction is made between care for children and for the elderly, with a
strong collective sector in the former and little voluntary involvement.
Another form is found in the Beveridge-oriented welfare states - Great
Britain and Ireland - where a strong distinction is also made between
caring for children and caring for (elderly) adults. In the former - as
opposed to the latter -little collectivization has taken place. Although they
do not really classify welfare states into actual clusters, Daly and Lewis
make a strong case for using social care as a critical dimension for analysing
variations.
As far as the gender gap in earnings is concerned, Gornick and ] acobs
(1998) found that Esping-Andersen's regime-types do capture important
distinctions among contemporary welfare states. Their results showed that
the size of the public sector, the extent of the public-sector earnings
premium and the impact of the public sector on gender differentials in
wages all varied more across regimes than within them. In this way, they
showed the fruitfulness of emphasizing the gender perspective in Esping-
Andersen's classification of welfare states. Moreover, Trifiletti (1999)
incorporated a gender perspective into Esping-Andersen's classification
by showing that a systematic relationship exists between the level of
decommodification and whether the state treats women as wives and
mothers or as workers. The latter is also an important dimension identified
by Lewis (1989).
Finally, Siaroff (1994) also argues that the existing literature does not pay
enough attention to how gender inequality is embedded in social policy
and welfare states. In order to arrive at a more gender-sensitive typology
of welfare state regimes, he examines a variety of indicators of gender
equality and inequality in work and welfare. He compares the
work-welfare choice of men and women (i.e. whether to partake in the
welfare state or to engage in paid labour) across countries. This allows him
to distinguish among a Protestant Social-Democratic, a Protestant Liberal,
an Advanced Christian-Democratic and a Late Female Mobilization
welfare state regime. Although the labels suggest otherwise, this typology
also shows a strong overlap with the Esping-Andersenian classification.
Only the latter type- the Late Female Mobilization welfare state regime-
is an addition, which resembles the previously distinguished
Mediterranean type of welfare states.
186 Three Worlds of Welfare Capitalism or More?

Ideal and Real-Types

In table 1, we ordered the types discussed above broadly _jn accordance
with the worlds of welfare capitalism as defined by Esping-Andersen. For
example, Bonoli's Continental type is very much like Esping-Andersen's
Conservative type; in both types contributions play a rather important
role. Equally, Castles and Mitchell's Non-Right Hegemony type shows a
large amount of congruence with Esping-Andersen's Social-Democratic
type, because of the high degree of universalism and equalization in social
policy. We could go on, but we would like to raise another issue.
One may wonder whether, if the relationship among the different typolo-
gies is as strong as we assume, this close correspondence of types will also
be apparent in the actual clustering of countries. Although not every classi-
fication developed by these authors covers the same nations, there is a rather
large overlap which makes it possible to answer this question. For that
purpose, table 2 shows the extent to which the ideal-types -constructed by
Esping-Andersen's critics - coincide with his own ideal-types. We then
added the ideal-types, proposed by these critics, placing related ideal-types,
when possible, under one heading. This results in five- instead of the orig-
inal three- worlds of welfare capitalism and answers our original question.
Next, in table 2 we arranged the real-types according to the different ideal-
types, thereby following the suggestions of the different authors.
It appears that, even when one uses different indicators to classify
welfare states, some countries emerge as standard examples, approximat-
ing certain ideal-types. The United States is, according to everyone's
classification, the prototype of a welfare state which can best be denoted
as Liberal (with or without the suffix: Protestant, Anglo-Saxon or Basic
Security). Germany approaches the Bismarckian/Continental!Cons-
ervative ideal-type and Sweden approximates the Social-Democratic ideal-
type (Scandinavian/Nordic).
However, consensus seems to end here. For example, according to some,
Italy can best be assigned to the second, Corporatist/Continental/Conser-
vative type, but belongs, according to others, along with Greece, Spain and
Portugal to a distinctive Mediterranean type. The same holds for Australia,
which may either be classified as Liberal or is the prototype of a separate,
Radical welfare state. Nevertheless, as far as these countries and types
are concerned, consensus is stronger than was initially assumed. One
must, however, recognize that discussions are mainly concerned with
whether certain types of welfare states are either separate categories or are
subgroups of certain main types.
Hybrid cases are a bigger problem. The Netherlands and Switzerland are
clear examples of this. If we take, for example, a closer look at the Dutch case,
we see that Esping-Andersen (1990) originally assigned the Netherlands to
the Social-Democratic type, whereas Korpi and Palme see it as liberally ori-
 Wil Arts and john Gelissen 187

ented; the Basic Security type. However, most authors place the Netherlands
in the second category of Corporatist/Continental/Conservative welfare
states. This is also the choice of Visser and Hemerijck (1997), perhaps the
foremost specialists on the Dutch welfare state. Curiously enough, this is
done using Esping-Andersen's work as a constant, positive reference. If we
have another look at Esping-Andersen's work, this is not as surprising as one
would expect. It is true that the Netherlands is rated relatively high on social-
democratic characteristics, but not exceptionally low on liberal and conser-
vative characteristics. Recently, Esping-Andersen has called the Netherlands
the 'Dutch enigma' because of its Janus-faced welfare regime (1999, p. 88).
The Netherlands is indeed more a hybrid case than a prototype of a specific
ideal-type. If one attaches more importance to certain attributes than to
others- and adds other characteristics or substitutes previous ones- then it
is easy to arrive at different classifications.

Empirical Robustness of the Three-Way Classification

Esping-Andersen claims that if we rate real welfare states along the dimen-
sions of degree of decommodification and the modes of stratification, three
qualitatively different clusters will appear. Alongside the more fundamen-
tal criticism of his three-way classification - that Esping-Andersen
employs faulty criteria to demarcate a regime - the empirical fit of his
three-way classification has also been questioned. Several authors have
tested the goodness-of-fit of the three-way regime typology. In the fol-
lowing, we discuss their findings, which are presented in table 3.
In an effort to evaluate the possible extent to which quantitative tech-
niques - OLS regression and cluster analysis - suggest the same conclu-
sions as alternative qualitative approaches - such as 'BOOLEAN'
comparative analysis- Kangas (1994) found some support for the existence
of Esping-Andersen's different welfare state regimes. Specifically, cluster
analyses of data on characteristics of health insurance schemes in OECD
countries in 1950 and 1985 corroborated his conjectures. However, the
results also showed the existence of two subgroups within the group of
liberal welfare states, which largely accorded with the classification of
Castles and Mitchell (1993).
Ragin (1994) also tested Esping-Andersen's claim of a three-world clas-
sification. By applying a combination of cluster analysis and 'BOOLEAN'
comparative analysis to characteristics of pension systems, he determined
which, if any, of Esping-Andersen's three worlds of welfare capitalism each
country fitted best. His cluster analysis suggested the existence of a social-
democratic cluster, a corporatist cluster and, finally, a rather large 'spare'
cluster, which accommodates cases that do not conform to Esping-
Andersen's three worlds. On the basis of his findings, Ragin concludes that
Table 2 Classification of countries according to seven typologies
Type

I II III IV v
Esping-Andersen Liberal Conservative Social-Democratic
(Decommodification) • Australia • Italy • Austria
Canada • Japan • Belgium
• United States • France • Netherlands
• New Zealand • Germany • Denmark
• Ireland • Finland • Norway
• United Kingdom • Switzerland • Sweden
Leibfried Anglo-Saxon Bismarck Scandinavian Latin Rim
• United States • Germany • Sweden • S.Illin
• Australia Austria • Norway • Portugal
• New Zealand • Finland • Greece
United Kingdom • Denmark • Italy
• France
Castles & Mitchell Liberal Conservative Non-Right Radical
Hegemony
• Ireland • West-Germany • Belgium • Australia
• Japan • Italy • Denmark • New Zealand
• Switzerland • Netherlands • Norway • United
• United States • Sweden Kingdom
Siaroff Protestant Liberal Advanced Christian- Protestant Social- Late Female
Democratic Democratic Mobilization
• Australia • Austria • Denmark • Greece
•
•
Canada
New Zealand
• Belgium
• France
• Finland
·~ .
•. Ireland
~
 United Kingdom West-Germany Sweden Japan
United States Luxembourg Portugal
• Netherlands • Spain
• Switzerland
Ferrera (Europe only) Anglo-Saxon Bismarckian Scandinavian Southern
• United Kingdom
• Ireland
• Germanv
• France
• Belgium
• Sweden
• Denmark
•
.
• Italy
Spain
• Portugal
~
• Netherlands • Finland • Greece
• Luxembourg
• Austria
• Switzerland
Bonoli (Europe only) British Continental Nordic Southern
• United Kingdom • Netherlands • Sweden • Italy
• Ireland • France • Finland • Switzerland
• Belgium • Norway Spain
• Germany • Denmark Greece
• Luxembourg • Portugal
Korpi & Palme Basic Security Corporatist Encompassing Targeted
• Canada • Austria • Finland • Australia
• Denmark • Belgium • Norway
• Netherlands • France • Sweden
• New Zealand • Germany
Switzerland • Italy
Ireland • Japan
• United Kingdom
• United States

Underlined countries indicate a prototype.

Table 3 Empirical robustness of the three-worlds typology
Number of clusters and cluster assignment Method of analysis

Kangas (1994) Liberal: United States, Canada Cluster analysis

2 Conservative: Austria, Germany, Italy, Japan, the Netherlands
3 Social-Democratic: Denmark, finland, Norway, Sweden
4 Radical: Australia, Ireland, New Zealand, United Kingdom
Ragin (1994) Liberal: Australia, Canada, Switzerland, United States BOOLEAN comparative
2 Corporatist: Austria, Belgium, finland, France, Italy analysis
3 Social-Democratic: Denmark, Norway, Sweden
4 Undefined: Germany, Ireland, Japan, the Netherlands, New Zealand,
United Kingdom
Shalev (1996) Liberal: United States, Canada, Switzerland, Japan Factor analysis
2 Conservative: Italy, France, Belgium, Austria, Ireland
3 Social-Democratic: Sweden, Norway, Denmark, Finland
4 Undefined: Germany, the Netherlands, United Kingdom, Australia,
New Zealand
Obinger & Wagschal (1998) Liberal: United States, Canada, Japan, Switzerland Cluster analysis
2 European: Belgium, Germany, Finland, Ireland, United Kingdom,
the Netherlands
3 Conservative: France, Italy, Austria
4 Social-Democratic: Denmark, Norway, Sweden
5 Radical: Australia, New Zealand
Wildeboer Schut et al. (2001) Liberal: United States, Canada, Australia, United Kingdom Principal component
2 Conservative: France, Germany, Belgium analysis
3 Social-Democratic: Sweden, Denmark, Norway
4 Undefined: the Netherlands
 Wil Arts and John Gelissen 191

the three-worlds scheme does not capture existing diversity as adequately

as one would wish.
Shalev (1996) applied factor analysis to fourteen pension policy indica-
tors collected by Esping-Andersen, to test for the presence of liberal, social-
democratic and corporatist regime-types. This factor analysis showed that
the intercorrelations among these social policy indicators were dependent
on two dimensions. The first factor measured the level of social-democra-
tic features, whereas the second dimension measured corporatist features of
welfare states. Based on the assignment of factor scores to individual
nations, Shalev concluded that his findings were in close correspondence
with Esping-Andersen's characterizations of the three welfare state
regimes. He admitted, however, that some countries are difficult to classify.
Using cluster analysis, Obinger and Wagschal (1998) tested Esping-
Andersen's classification of welfare state regimes using the stratification cri-
terion. After a detailed re-analysis of Esping-Andersen's original data on
stratification, they concluded that these data are best described by five regime
clusters. In addition to Esping-Andersen's conservative, liberal and social-
democratic types, they distinguish a radical and a hybrid European cluster.
The most recent attempt to empirically corroborate Esping-Andersen's
classification has been undertaken by Wildeboer Schut et al. (2001). This
study examined the actual similarities and differences among the welfare
state regimes of the countries originally included in Esping-Andersen's
classification. For these countries, fifty-eight characteristics of the labour
market, tax regime and social protection system at the beginning of
the 1990s were collected. These were submitted to a non-linear principal
component-analysis. The results largely confirmed the three-regime typol-
ogy of Esping-Andersen.
Summing up, Esping-Andersen's original three-worlds typology neither
passes the empirical tests with flying colours, nor dismally fails them. The
conclusion is, first, that his typology has at least some heuristic and descript-
ive value, but also that a case can be made for extending the number of
welfare state regimes to four, or even five. Second, these analyses show that
a significant number of welfare states must be considered hybrid cases: no
particular case can ever perfectly embody any particular ideal-type (Goodin
et al., 1999, p. 56). Third, if one looks at other social programmes than the
ones applied by Esping-Andersen, it becomes clear that they do not conform
so easily- if at all- to his welfare regime patterns (Gough, 2000, p. 4).

Conclusion and Discussion

Before we reach our conclusions, let us examine how Esping-Andersen

himself has reacted to the various attempts to amend his typology. The
problem is that after considerable discussion it seems impossible for him
192 Three Worlds of Welfare Capitalism or More?

to make up his mind once and for all. Initially, Esping-Andersen (1997)
reacted, for example, positively to Castles and Mitchell's proposal to add a
fourth type - a radical welfare state regime - to his typology.. He recog-
nized that the residual character and the matter of a means test are just one
side of the coin of the Antipodean welfare states. However, he felt that a
powerfully institutionalized collection of welfare guarantees, which
operate through the market itself, could not be neglected. Later on,
however, he argued that the passage of time is pushing Australia, Great
Britain and New Zealand towards what appears to be prototypical liberal-
ism (Esping-Andersen, 1999). At first he also partially supported the
proposal to add a separate Mediterranean type to his typology (Esping-
Andersen, 1996, p. 66; 1997, p. 171). He acknowledged the- sometimes
generous- benefits which are guaranteed by certain arrangements, the near
absence of social services and, especially, the Catholic imprint and high
level of familialism. From the feminist critics he learned not so much the
overarching salience of gender as the analytical power that a re-examina-
tion of the family can yield. Recently he argued that the acid test of a dis-
tinct Mediterranean model depends on whether families are the relevant
focus of social aid, and whether families will fail just as markets and states
can fail (Esping-Andersen, 1999, p. 90).
All in all, Esping-Andersen is very reluctant to add more regime-clusters
to his original three. Against the benefits of greater refinement, more
nuance and more precision, he weighs the argument of analytical parsi-
mony, stressing that 'the peculiarities of these cases are variations within a
distinct overall logic, not a wholly different logic per se (Esping-Andersen,
1999, p. 90).
The answer to the question of whether Esping-Andersen's three-type or
a derivative or alternative four-, or five-type typology is preferable
depends, however, not only on parsimony and verisimilitude. It also
depends on whether these typologies lead to a theoretically more satisfy-
ing and empirically more fruitful comparative analysis of welfare state
regimes. As far as theory construction is concerned, Baldwin (1996, p. 29)
has argued that when asking about typologies, whether of welfare states or
anything else, we must ask not just what but also why. Esping-Andersen's
tentative answer to the question of why three different welfare state regime
types emerged has been sketched earlier on in this paper. Different
welfare regimes are shaped by different class coalitions within a context of
inherited institutions. This answer is embedded in a power-resources
mobilization paradigm. The tentative answer to the question of why
regime shifts are scarce is that a national state cannot easily escape its his-
torical inheritance. Institutional inertia is one factor why different welfare
state regime types persist, and path dependency is another (Kohl, 2000,
p. 125; Kuhnle and Alestalo, 2000, p. 9). Korpi and Palme- and some fem-
inist authors- work in the same power-resources mobilization tradition as
 Wil Arts and john Gelissen 193

Esping-Andersen. It would be worthwhile to develop a theoretical recon-

struction of the different contributions of this paradigm (for an initial
impetus to such an endeavour, see Schmidt, 1998, pp. 215-28). Only then
could the explanatory value of the typology become apparent.
Whether there is, within the welfare modelling business, an alternative
available to Esping-Andersen's power-resource mobilization cum institu-
tional inertia/path dependency theory is difficult to determine. The work
of some of the other authors we discussed in this overview has a strong
empiricist flavour. However, if we are searching for an underlying theo-
retical notion, it can be found in the rather general statement that similar
causes have similar consequences. Considering the labels these authors
have put to the prototypes they distinguish, which are predominantly geo-
graphical and ideological in nature, the most important causes are seen to
be the pressure of functional exigencies and the diffusion of innovations
(Gold thorpe, 2000, p. 54). The first factor could be translated into a 'chal-
lenge response' hypothesis. The challenges produced by the force of
similar circumstances (characteristics of pre-industrial social structures,
political institutions, degree of homogeneity of population, culture,
problem perceptions and preferences) lead to comparable welfare state
regimes (responses) (Kuhnle and Alestalo, 2000, p. 7). The second factor
could be put in terms of learning effects in policy-making. New ideas, new
solutions arc often a product of a diffusion process. They hit political
systems and societies at different points in 'developmental time'. As far as
this latter factor is concerned, Boje (1996, p. 15) argues that the fact that
most welfare states are confronted with huge social problems has necessi-
tated politicians finding alternative procedures, which may solve these
problems more efficiently. Politicians have come to realize that much may
be learned from other welfare states.
Castles (1993, 1998) too underscores the importance of both factors. He
argues that it is likely that policy similarities and differences among welfare
states can be attributed to both the force of circumstances and to diffusion. As
far as the latter factor is concerned we can distinguish the institutional arrange-
ments and culture of prototypical welfare states and their transmission and
diffusion to other countries. Regarding the former factor, we can observe the
immediate impact of economic, political and social variables identified in the
contemporary public policy literature. Whether these very general 'challenge
response' and 'diffusion' hypotheses will be further developed remains to be
seen. For the moment, we can conclude that, given the empiricist nature of the
work of the authors who provided alternative typologies, there should be
hardly any objection- for the time being- to the incorporation of their find-
ings into a power-resources mobilization paradigm.
Finally, we arrive at the empirical fruitfulness of the typology. In his
overview, Abrahamson (1999) concludes that as an organizing principle for
comparative studies of welfare states the typologies have proved to be a very
194 Three Worlds of Welfare Capitalism or More?

robust and convincing tool. Within the power-resources mobilization para-

digm (Korpi, 1983; Esping-Andersen and Korpi, 1984; Esping-Andersen
1990) it has been proposed that the nature of the welfare stai:e_regime would
decisively influence support for certain forms of social policy. A type that is
characterized by universalism would generate the strongest support,
whereas arrangements which apply only to minorities would not succeed in
winning the support of majorities. Tests of this hypothesis (Papadakis and
Bean, 1993; Peillon, 1996; Gelissen, 2000; Gevers et al., 2000) have shown
some empirical support, but the evidence is not really encouraging. More
encouraging were the results of an effort (Gundelach, 1994) to explain cross-
national differences in values with respect to welfare and care using the
Esping-Andersenian welfare state regimes. Also, Svallfors's (1997) and Arts
and Gelissen's (2001) tests of the hypothesis that different welfare state
regimes matter for people's attitudes towards income-redistribution were
strongly endorsed. What especially matters to us here is that Svallfors dis-
tributive justice and solidarity had included not only Esping-Andersen's
regime-types, but also other types and Arts and Gelissen.
It is more difficult to draw a conclusion concerning the influence that
welfare state regimes have on social behaviour and their effects. Much of
this research has a bearing on the distributive effects of welfare state
regimes. Because they are often described in terms of their intended social
stratification, a tautological element easily sneaks into the explanations.
Positive exceptions are Goodin et al. (1999) and Korpi and Palme (1998).
Using panel-data, Goodin et al. (1999) show that welfare state regimes do
not only have intended results, but also generate unintended consequences.
As intended and expected, the social-democratic regime succeeds best in
realizing its fundamental value: minimizing inequality. But this regime is
also at least as good in promoting the goals to which other regimes osten-
sibly attach most importance. Specifically, the social-democratic regime
also does very well in reducing poverty -a goal which is prioritized by the
liberal welfare state regime- and in promoting stability and social integra-
tion, which is the home ground of the corporatist welfare state regime.
Korpi and Palme (1998) find that institutional differences lead to a paradox
of redistribution: the more benefits are targeted at the poor and the more
the creation of equality through equal public transfers to all is a matter of
priority, the less poverty and inequality will be reduced. Thus, institutional
arrangements characteristic of certain welfare state regimes not only have
unintended consequences, but even perverse effects.
All in all, these conclusions provide sufficient impetus to continue the
work concerning the resulting welfare state typology. A better formulation
of the theory on which it is based deserves priority. Only then can predic-
tions be logically - instead of impressionistically - deduced from theory.
Only then is a strict test of the theory possible and only then will the
heuristic and explanatory value of the typology become apparent.
 Wil Arts and john Gelissen 195

:Notes

Frorn]ournal of European Social Policy, 12, 2, 2002, pp. 137-58.

The importance of Catholicism is emphasized by van Kersbergen (1995) in his
discussion including Christian-democratic nations such as Germany, Italy and
the Netherlands in mainstream welfare state typologies.
2 For reasons of conciseness we refrain from the debate regarding Esping-
Andersen's classification of Japan as a liberal welfare state. For a reaction to
this critique see Esping-Andersen (1997, 1999). Becker (1996) and Goodman
and Peng (1996) are even of the opinion that Japan belongs to a sixth proto-
type of welfare state regimes, the so-called East-Asian welfare states. We
acknowlege the importance of these arguments, but cannot engage with them
here (Gough, 2000).
3 Gornick and Jacobs (1998, p. 691) point out that Esping-Andersen himself
argues that each regime-type is associated with women's employment levels.
Specifically, he (Esping-Andersen, 1990) expects that women's employment
rates will be highest in social-democratic countries, whereas in liberal welfare
states, moderate levels of female employment will be found. The lowest
levels of women's employment will be found in the conservative welfare
states.

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G lo baliza tion
Globalization, Economic
Change and the Welfare State:
The 'Vexatious Inquisition of
Taxation'?
Colin Hay

Introduction

It has become something of a popular truism that globalization spells if not

quite the passing of the nation-state itself, then the demise of inclusive
social provision and with it the welfare state. The competitive imperatives
of a borderless world characterized by the near perfect mobility of the
factors of production, it is frequently assumed, reveal the welfare state of
the postwar period to be an indulgent luxury of a bygone era. Along with
Keynesianism, social democracy and encompassing labour-market institu-
tions it must now be sacrificed, if it has not already been sacrificed, on the
altar of the competitive imperative- a further casualty of the 'harsh eco-
nomic realities' summoned by globalization.
Invariably such portentous accounts take the form of a dualistic history:
of 'old times' and 'new times', then and now. Once upon a time, when
European economies were closed, macroeconomic policy was Keynesian
and capital bore a national stamp, the welfare state provided a series of pos-
itive externalities, principally wage restraint in return for investment incen-
tives and a social wage. This, in turn, served to establish and sustain a
virtuous cycle of high demand, high productivity, high growth. How times
have changed. With open economies, a distinctly post-Keynesian ideational
environment and heightened capital mobility, positive externalities have
given way to negative externalities. The welfare state is now widely held to
represent a burden on competitiveness, a burden manifest in punitive levels
of taxation and assorted labour-market (and broader supply-side) rigidities.
These can only impede the proper functioning of the market and with it the
competitive and comparative advantage of the economy (see, classically,
Fisher, 1930, 1935; Gilder, 1981; Okun, 1975; for the contemporary centre-
left variant, see, for instance, Cerny, 1997; Kurzer, 1993; Scharpf, 1991 ).
 Colin Hay 201

This, at any rate, is the now conventional orthodoxy. It is the wisdom of

this view that I question in this chapter.
The near-dominant notion of the corrosive impact of economic global-
ization on the welfare state might lead one to expect unequivocal and
unambiguous evidence of systematic welfare retrenchment across the
advanced capitalist economies. Yet the empirical record could scarcely be
more difficult to reconcile with the conventional wisdom. For not only is
(aggregate) evidence of welfare retrenchment, far less systematic welfare
retrenchment, quite difficult to find; the positive correlation between
social expenditure and economic openness first observed by Cameron
(1978) has only strengthened under conditions of globalization (Garrett,
1998; Rodrik, 1997). These are points to which we return in detail below.
Suffice it for now to note that they present something of a paradox: a
widely accepted conception not only of welfare retrenchment but of the
necessity of welfare retrenchment which seems to stand in marked contrast
to the available empirical evidence. There are at least four potential solu-
tions to this conundrum:

That the conventional wisdom on the subject is indeed correct, that the
welfare state represents a drain on competitiveness in an era of global-
ization and the competition state (Cerny, 1990, 1997), but that the insti-
tutional and cultural architecture of the welfare state has become so
entrenched and embedded as to make its reform and retrenchment an
iterative and incremental yet cumulative process down which we are
now only slowly embarking (Pierson, 1994, 1996 ).
2 That the conventional wisdom is simply inaccurate and that far from
representing a drain on competitiveness, the welfare state (at least in
certain institutional and cultural environments) retains and acquires yet
further positive externalities (Barr, 1998; Esping-Andersen, 1994;
Finegold and Soskice, 1988; Garrett, 1998; Gough, 1996; Pfaller et al.,
1991; cf. Polanyi, 1944).
3 That the aggregate empirical evidence in fact masks the actual degree of
retrenchment and that once we control for demographic and other
'welfare inflationary' pressures, observed welfare expenditure is in fact
substantially below that we would anticipate (Esping-Andersen, 1996a,
1996b; Rhodes, 1996, 1997).
4 That, once again, the aggregate evidence masks the degree of real
retrenchment since the market-conforming nature of that process has
served to increase welfare pressures by effectively trading inflation for
unemployment. Consequently, although aggregate spending has
proved 'sticky', once we control for increased welfare demand we
observe both a narrowing of the scope of social provision and retrench-
ment in terms of the value of benefits to claimants (Ferrera, 1998;
Martin, 1997; Rhodes, 1997).
202 Globalization, Economic Change and the Welfare State

Each of these perspectives, that will be discussed further. below, injects

a healthy dose of scepticism and some long-overdue theoretical sophisti-
cation, analytical clarity and empirical detail into the invari<;tbly over-
inflated, grossly exaggerated and seldom defended claims of the orthodox
view. As we shall see, there is something in each of the arguments briefly
sketched above. Moreover, they are by no means incompatible. While one
must in the end choose between accounts suggesting that globalization
imposes pressures for welfare retrenchment (as in position 1) and those
which see a potentially competitiveness-enhancing role for the welfare
state (as in position 2), it is important that we acknowledge the attenuat-
ing and/or mediating role of institutional factors. Similarly, while authors
may differ over the strict composition of welfare inflationary pressures in
contemporary societies- with some attributing these to long-term demo-
graphic trends (position 3), others to short-term political factors (position
4), and yet others to a combination of the two- it is equally important that
we qualify the impression given by the aggregate data of a simple tendency
for social expenditure to grow.
In the pages that follow I seek to defend these claims. I argue that:

there has indeed been significant welfare retrenchment and reform in

recent years in contemporary Europe;
2 such retrenchment has been informed to a considerable extent by
impressions of the 'competitiveness-corrosive' qualities of social spend-
ing; but
3 such impressions, however paradoxically, have come at a time when
evidence of the 'competitiveness-enhancing' qualities of the welfare
state have become ever more transparent.

The argument proceeds in four sections. In the first of these I assess the scale
of welfare retrenchment in contemporary Europe before moving, in the
second, to assess and evaluate the orthodox view in the light of such evi-
dence. In the third section, I attempt to draw up a more balanced assessment
of the positive and negative externalities of the welfare state in the competi-
tive environment of the contemporary global political economy. I conclude
by considering the prospects for the welfare state in an era of putative globa-
lization. In particular, I focus on the consequences for the form and function
of the welfare state of the stark choice currently facing European economies
between cost competitive and quality competitive strategies.

The Scope and Scale of Welfare Retrenchment

However intuitively appealing the familiar argument that globalization

drives an inexorable process of welfare retrenchment, it is surely tempting
 Colin Hay 203

to conclude on the basis of the merest glance at the (aggregate) empirical

data that there is simply nothing to explain. For, as table 1 demonstrates,
the secular tendency of government expenditure to rise does not appear to
have been tempered in recent years. Even in the face of consecutive self-
professedly radical nco-liberal regimes set on 'rolling back the frontiers of
the state' (as, for instance, in Britain), social expenditure has not only held
up rather well, but it now accounts for a greater proportion of national
resources than ever before (Pierson, 1994, 1996). A certain degree of
caution is nonetheless appropriate before we conclude that globalization
has had and is likely to have no impact upon the welfare state. A number
of points might here be made.
First, as noted above, we should be somewhat wary of the aggregate
nature of this data, for it can give us no picture of the changing composi-
tion of social expenditure. It may well be that quantitative continuity
masks qualitative discontinuity - the welfare state has certainly grown in
size yet this in no way excludes the possibility of a quite fundamental
transformation in its very form and function (see, for instance, Jessop,
1994 ). Moreover, even were we prepared to accept on the basis of such evi-
dence that the welfare states which came to characterize the postwar period
remain essentially intact today, this need not imply an unambiguous rejec-
tion of the globalization thesis.
For, as a number of new institutionalists have noted in recent years (see
especially Esping-Andersen, 1990, 1994, pp. 23, 267, 1996a, 1996b, 1999;
Pierson, 1994, 1996; Skocpol and Amenta, 1986 ), welfare states once estab-
lished become embedded and entrenched. Consequently, while globalization
may bring certain pressures for retrenchment to bear upon contemporary
welfare regimes, the process by which such pressures are translated into

Table 1 The secular tendency of state expenditure to rise, 1970-1995 (%

of GDP)

Government expenditure(% of GDP)

DK Ga F IRE NL sw UK EU15

1970 36.1 32.4 33.9 30.1 28.3 36.2 36.8 31.9 31.4
1975 42.4 43.1 35.4 38.8 34.7 45.4 44.6 37.6 35.4
1980 50.8 42.7 42.8 41.4 37.9 51.1 56.8 40.2 41.8
1985 55.2 43.4 49.4 47.4 45.3 53.5 61.1 41.8 45.8
1990 55.5 42.0 46.5 38.5 48.6 51.5 58.4 36.6 44.4b
1995 58.2 46.3 51.0 37.4 49.2 49.0 64.7 41.0 47.6b

aWest Germany (1970-90).

hexcluding Luxembourg.
Source: European Commission, 1996, pp. 190-1, table 71.
204 Globalization, Economic Change and the Welfare State

outcomes is itself likely to prove lengthy and protracted, producing iterative

yet cumulative directional change (Pierson, 1996, pp. 178-9). By such a view
the effects of globalization are far from being fully realized.,. . '
Yet this does not leave the globalization orthodoxy entirely unscathed.
For if, as we are so frequently entreated, inclusive welfare regimes can only
be sustained at considerable cost to economic competitiveness, then we
would expect to see this secular tendency for social spending to rise to be
accompanied by an alarming depreciation in economic performance.
Globalization, so the argument goes, unleashes a competitive firestorm
fuelled by flows of capital in which only the fittest- and leanest- survive.
If global markets clear as instantaneously as casual neoclassicists presume,
then we would expect current levels of welfare expenditure within the EU
to be unsustainable and to precipitate a haemorrhaging of both investment
and portfolio capital. Yet again, however, the empirical evidence simply
does not support this abstract and nee-Darwinian logic of downward har-
monization and competitive deregulation (for more detailed empirical
elaboration, see Hay, 1999a, 1999b ).
Despite the tendency for social expenditure to rise, however, there may
still be reasons for suggesting that welfare retrenchment is under way.
Indeed, if we are prepared to relativize the notion of retrenchment so as to
take account of fluctuations in demand, then there is in fact fairly unam-
biguous evidence of retrenchment across the advanced capitalist
economies. Two rather separate issues need to be identified. The first
relates to the unemployment-inflation trade-off; the second to demo-
graphic and other socioeconomic welfare inflationary pressures.

The Unemployment-Inflation Trade-Off

Since the late 1970s something of a paradigm shift in economic policy-
making has occurred, associated with the widely perceived crisis of
Keynesianism and the growing ascendency of monetarism and supply-side
economics (see, for instance, Hall, 1993; Scharpf, 1991). This was associ-
ated, in turn, with a much greater emphasis upon inflation-targeting, bal-
anced budgets and fiscal austerity with a consequent respecification of the
terms of the postwar social compromise with labour. Accordingly,
unemployment throughout the advanced capitalist economies has risen,
alarmingly in the case of the northern European economies. This has
placed a considerable additional burden upon the welfare state- an ironic
and perverse consequence of the marketization and liberalization heralded
as a solution to the fiscal crisis of the state in the 1970s. Were it not then for
a noticeable tightening of eligibility criteria, a greater emphasis upon
benefit targeting and means-testing and the more general development of
what might be termed a 'conditional welfare state' stressing the obligations
 Colin Hay 205

Log openness
[(exports+ imports)/GDP]

E0 - E 1 expected correlation
0 0 - 0 1 observed correlation (Cameron, 1978; Rodrik, 1996, 1997)

Figure 1 Openness and stateness: rhetoric and reality

and duties of claimants, we would expect far more than a merely secular
tendency for social expenditure to rise (Esping-Andersen, 1996c; Ferrera,
1998; Hagen, 1992; Jordan, 1998; Ormerod, 1998; Rhodes, 1997; Stephens,
1996; Stephens, Huber and Ray, 1999). The difference between expected
welfare expenditure (assuming consistent income replacement ratios and
eligibility criteria) and that observed provides a rough index of the extent
of effective welfare retrenchment (see figure 1).
A further indication of the degree of welfare retrenchment is provided by
income replacement ratios. These express the value of welfare entitlements
(such as unemployment, sickness and disability benefits) as a percentage of
the average net (post-tax) working wage. Throughout the advanced cap-
italist economies they display a common and marked downward trajectory
from a range of start dates (earlier in the liberal countries, later in the social
democratic countries) and a variety of initial levels (lower in the liberal
regimes, higher in the social democratic regimes) (see, for instance, Clark,
1999; Esping-Andersen, 1996c; Hagen, 1992; Stephens et al., 1999).

Endogenous Welfare-Inflationary Pressures

The increase in the rate of unemployment in Europe since the postwar

period is not, however, the only demand-side factor which might account
for mounting pressure on the contemporary welfare state. At least three
206 Globalization, Economic Change and the Welfare State
additional and, for the most part, endogenous variables must be considered
if we are adequately to assess the extent to which the welfare state is under
threat and the precise nature of the challenge it faces. Thes~ are: (i) demo-
graphic change; (ii) the escalating cost of state-of-the-art health provision·
and (iii) the persistence of low rates of economic growth. '

(1) The 'demographic time bomb' If globalization is a largely intangible

and hotly contested factor in the causal melee out of which we might
account for welfare retrenchment, the same is not the case with demo-
graphic change. The problem is simply stated: Europe has a rapidly ageing
population due to the inauspicious combination of declining birth rates
and greater life expectancy. Accordingly, the ratio of net welfare recipients
to net welfare contributors is higher than ever before and rising inexorably.
This presents an alarming fiscal predicament likely only to be exacerbated
by developments in medical technology and by a projected further fall in
the birth rate (see figure 2).
As Rhodes notes, according to EC data, 'in 1995 around 15 per cent of
the population of the EU were aged 65 or over, [equivalent] to 23 per cent
of the working-age population (15 to 64). By 2005 the over 65s will rise to
26 per cent of the working-age population and to 30 per cent by 2015 [40
per cent in Italy]' (1997, p. 64; see also Taylor-Gooby, 1999). Clearly this
represents a significant, escalating and potentially crippling burden on
welfare regimes in contemporary Europe. 1

6:'
a(j
.......
0

~
0.0
~
:..a~
C1)
0...
V)

(;j Oo
"(J
0
trJ

Time

0 0
- E 1 expected
0 0
- 0 1 observed

Figure 2 Expected welfare expenditure assuming consistent levels of social

provision and observed rate of unemployment
 Colin Hay 207

(2) The cost of health provision A related tendency is that of escalating

healthcare demand, a consequence again of an ageing population and a
population whose ageing is to a significant extent made possible by expen-
sive and often interventionist medical practices and procedures. According
to OECD statistics (Oxley and Macfarlan, 1995), the share of GDP
accounted for by health expenditure has doubled since the early 1960s and
is set to do so again by 2020. Quite apart from new demands, Rhodes is
surely right to note that 'the health care sector, broadly defined, contains
its own inflationary dynamic' (1997, p. 64). Yet, were a privatization of
health care considered the solution, it should be noted that:

• market provision invariably proves more expensive per capita for a

given level of care than public provision (the comparison between
Canada and the US is a clear case in point: see Aaron, 1991; Barr, 1998,
pp. 277-318); and
• non-mandatory occupational health insurance schemes may impose sig-
nificant constraints on labour market mobility and hence flexibility. 2

(3) The cost of deflation A third, and equally significant domestic/

endogenous factor is simply the combination of low economic growth
and high unemployment. Since the 1970s, the advanced capitalist
economies have failed to secure the conditions for the high and stable
rates of economic growth to which they became accustomed in the early
postwar period (1945-70). The resulting low growth-high unemploy-
ment environment in which inflation has been held down only by shrink-
ing and deflating the domestic economy renders a welfare state premised
upon the principle of full employment extremely costly. Moreover, this
cost is born disproportionately by capital which, so conventional
wisdom goes, pays a high price for the generosity of welfare provision
and the institutionalized rigidity of a comprehensive welfare state once
established. As Andrew Martin notes, 'the proposition that the viability
of the welfare state is contingent on full employment is familiar and pre-
sumably generally accepted- it is hard to think of welfare states as any-
thing but "full employment welfare states" or "Keynesian welfare
states"' (1997, p. 6). The ability of the welfare state to respond to escal-
ating demands, particularly those associated with an ageing population,
is further compounded by low rates of growth. For, as G0sta Esping-
Andersen notes:

population ageing does not automatically imply crisis ... the cost of ageing
depends on long-run productivity growth. The OECD estimates that real
earnings growth at an annual average rate of 0.5-1.2 per cent (depending on
nation) will suffice to finance the additional pension expenditures. (1996a, p. 7)
208 Globalization, Economic Change and the Welfare State

This may sound simple enough, yet as he goes on to observe-in a footnote:

the earnings performance of many nations in the past decade suggests that
such levels of growth may not be so easily attainable. In the United States, for
example, real manufacturing earnings declined by an annual average of 0.2 per
cent during the 1980s. In Europe, where labour shedding has been much more
dramatic, productivity and thus wages have grown at higher rates (1.7 per cent
in France, 0.9 per cent in Italy, and 2.4 per cent in Germany). (1996a, p. 28 n6)

Yet labour-shedding merely compounds the fiscal crisis of the welfare

state by increasing the ratio of net welfare recipients to net welfare con-
tributors. In the context of such discussions, the global diffusion of
nco-liberalism and with it the global depreciation of growth rates (labour-
shedding notwithstanding) is a worrying trend. Identifiable theoretically
and observable empirically, such a tendency may serve to translate mount-
ing demographic pressure into a pervasive domestic tide of welfare
retrenchment. What this also suggests is that far from being the solu-
tion, nco-liberalism may itself be part of the problem. The low growth-
escalating demand equation is a difficult one to solve; it may well be that
the resuscitation of growth may be a condition for the revivification of the
welfare state.

Reassessing the Conventional Wisdom

As the above paragraphs reveal, a quite plausible, compelling and convinc-

ing narrative of welfare state retrenchment (or at least of the origins of the
pressures for welfare state retrenchment) can be told without reference to
exogenous factors so much as to endogenous factors widely experienced
(cf. Pierson, 1998). So where does this leave the conventional view so fre-
quently voiced by politicians and academics alike which suggests that it is
globalization and the transition from closed to open economics and the
flows of capital this has unleashed which have undermined the somewhat
indulgent luxuries of the European social model? Is it little more than a
convenient alibi, offered as a post hoc rationalization for a secular retrench-
ment already under way and precipitated by rather more immediate and
parochial factors?
If we are to assess the impact (if any) of globalization on the viability of
the welfare state, it is first essential that we unpack the various logics
appealed to and frequently conflated in the claims for incommensurability
of inclusive social provision and international competitiveness in an era of
deepening economic integration. A series of related, if nonetheless distinct,
arguments are frequently invoked, relating to capital mobility, the 'vex-
atious inquisition of taxation' (Adam Smith) and the need for both flexible
 Colin Hay 209

labour-markets and a constant supply of cheap malleable labour. It is

important that we start by acknowledging what they share. For each
exhibits a common analytical-deductive strategy, proceeding on the basis of
relatively simple, indeed intuitive, microfoundations through a process of
macro-aggregation and extrapolation, to derive a generic tendency (or
series of tendencies) for welfare retrenchment. This is an important point.
For, arguably, their common structure reveals a common analytical poverty.
Enticing and alluring though the logical deduction of, say, the negative
externalities of the welfare state may be, there are dangers in extrapolating
so presumptuously from invariably pared-down and institutionally
unspecified microfoundations (see also Gough, 1996, p. 224; and, for more
general critiques of such 'blackboard economics', Fine, 1998; Sen, 1977).
Such microfoundations - those concerning the perfect mobility of the
factors of production, for instance- are often difficult to square with the
empirical evidence. To generalize and extrapolate from such parsimonious
premises in this manner may then merely compound the distorting sim-
plicity of the initial assumptions. The prescriptions derived in this manner
(such as the harsh necessity of welfare retrenchment) are only as reliable as
the premises on which they are based, and these we know to be dubious. It
is crucial then that we: (i) isolate such assumptions, (ii) assess their plausi-
bility, and (iii) consider the sensitivity of orthodox predictions to variations
in initial assumptions. This I attempt, albeit briefly, in the following section.

Capital Flight and the 'Vexatious Inquisition of Taxation'

The ... proprietor of stock is properly a citizen of the world, and is not nec-
essarily attached to any particular country. He would be apt to abandon the
country in which he is exposed to a vexatious inquisition, in order to be
assessed a burdensome tax, and would remove his stock to some country
where he could either carry on his business or enjoy his fortune at his ease. A
tax that tended to drive away stock from a particular country, would so far
tend to dry up every source of revenue, both to the sovereign and to the
society. Not only the profits of stock, but the rent of land and the wages of
labour, would necessarily be more or less diminished by its removal. (Smith,
[1776] 1976,pp. 848-9)

The mobility of capital, specifically the mobility of (foreign) direct

investors, is crucial to orthodox accounts which seek to derive what they
see as the inexorable logic of welfare retrenchment from globalization.
What passes in the name of the conventional wisdom here is relatively
simply stated (and is not so very different from that elaborated by Adam
Smith in the above passage). In the (stylized) closed economies of the initial
postwar period, capital enjoyed no exit option. Consequently, govern-
ments enjoyed the ability to impose punitive taxation regimes upon
210 Globalization, Economic Change and the Welfare State
unwilling and relatively impotent national capitals with little cost to the
domestic economy (except for the tendency for capitalists to accumulate
rather than to reinvest their profits). With financial liberalization and the
elimination of capital controls under open economy conditions, this is no
longer the case. Capital may now exit from national economic environ-
ments at minimal cost (indeed, in most neoclassical-inspired models, at
zero cost).
Accordingly, by playing off the regulatory regimes of different
economies against one another, capital can ensure for itself a higher rate of
return on its investment. This it does by seeking out the high growth
regimes of newly industrialized countries unencumbered by burdensome
welfare traditions, rigid labour-market institutions and correspondingly
higher rates of taxation. Similarly, mobile ('footloose') foreign direct
investors can seek out low taxation regimes and cheap labour while secur-
ing for themselves attractive relocation packages, tax concessions and other
subsidies as competitive national economies (and, indeed, local and
regional economies) are effectively forced to compete through a process of
'social dumping' and 'competitive deregulation'. This logic threatens to
establish a perverse and pathological 'race to the bottom' (Marquand, 1994,
p. 18) lubricated by the 'deregulatory arbitrage' of footloose and fancy-
free transnational corporations. As Duane Swank notes, for both nco-
liberal economists and analytical Marxists alike, the structural power of
capital has been increased. This generates a 'prisoner's dilemma' for policy-
makers. For, 'in the face of inherent impediments to international policy
coordination, governments face incentives to engage in competition for
investment' (Swank, 1998, p. 676). The demise of the welfare state is not
difficult to derive from such a logic. For, according to such a view, the
welfare state represents, quite simply, a cost to capital (in the form of a
direct or indirect taxation premium) and hence a drain on national com-
petitiveness. Consequently, centre-left/social democratic administrations,
if they are not to precipitate a haemorrhaging of investment and portfolio
capital on their election (indeed, in the very anticipation of their election)
must convince capital of their fiscal prudence and moderation in advance
(Przeworski and Wallerstein, 1988; Wickham-Jones, 1995). It is perhaps
chastening at this point to note that, on the basis of such (standard neo-
classical) assumptions, the optimal rate of taxation on income from capital
in small open economies tends to zero (Razin and Sadka, 1991 a, 1991 b;
Tanzi and Zee, 1997; Tanzi and Schuknecht, 1997).
The policy implications of such an account are painfully clear. As globa-
lization serves to establish competitive selection mechanisms within the
international political economy, there is little choice but to cast the welfare
state on the bonfire of regulatory controls and labour-market rigidities.
Compelling though such an alarming logic may sound, it serves us well to
isolate the assumptions which ultimately summon this simple 'logic of no
 Colin Hay 211
alternative' (see also Hay, 1998; Watson, 1999). They are principally
fourfold:

That capital invests where it can secure the greatest net return on that
investment and is possessed of perfect information of the means by
which to maximise this utility.
2 That capital enjoys perfect mobility and that the cost of exit is zero.
3 That capital will invariably secure the greatest return on its investment
through minimizing its labour costs by seeking out a captive supply of
cheap labour in flexible and deregulated labour markets and by reloc-
ating its productive activities in economies with the lowest rates of cor-
porate taxation.

This third assumption leads fairly directly to a fourth and final assumption:

4 That the welfare state (and the taxation receipts out of which it is
funded) represent nothing other than lost capital to mobile asset-
holders and have no positive (or even potentially positive) externalities
for the competitiveness and productivity of the national economy.

Each of these foundational premises is at best dubious, at worst demon-

strably false. Consider each in turn. While it may seem entirely appropri-
ate to attribute to capital the sole motive of seeking the greatest return on
its investment, the history of specific capitals hardly engenders much con-
fidence in the additional assumption that capital is blessed with perfect
information of the means by which to realize that objective. Nonetheless,
this is perhaps the least problematic of the assumptions considered here
and the least consequential for the present analysis.
The second assumption is demonstrably false- or, at least, demonstrably
false for certain types of capital. For while portfolio capital may indeed
exhibit almost perfect mobility - its effectively instantaneous flows con-
ducted in the flickering of a cursor and incurring negligible exit costs- the
same is simply not the case with invested as distinct from (potential) invest-
ment capital. For, once enticed and attracted to a particular locality, for-
merly mobile foreign direct investment flows 'bed down', acquiring an
array of significant sunk costs (however subsidized by their 'hosts') as
virtual/immaterial assets are translated into human and physical capital
(Watson, 1997). Consequently, once installed, exit options become ser-
iously depleted and incur significant loss (in terms of irredeemable sunk
costs). Thus, while it may be entirely 'rational' for foreign direct investors
to proclaim loudly and exaggerate wildly their mobility and their much-
vaunted exit options- especially if they can make these sound credible- it
is not surprising that the threat of exit is so rarely acted upon (Hay, 1997).
What we do witness, however, is the quite predictable phenomenon of
212 Globalization, Economic Change and the Welfare State

what might be termed an 'exit threat business cycle', indicative perhaps of

the hollowness of most exit threats.
What this in turn suggests is that the haemorrhaging of inves~ed capital
predicted by standard neoclassical models of open economies in which gov-
ernments fail to internalize the preferences of capital for minimal social pro-
tection are grossly exaggerated. They summon a seemingly inexorabie logic
of welfare retrenchment which is simply unwarranted and whose logic of
compulsion can be attributed and traced directly to the implausibility of the
initial assumptions. Once we revise such, frankly false, initial premises~ a
much higher 'burden' of corporate taxation would appear sustainable, con-
sistent with current levels of social expenditure in Europe (Boix, 1998;
Locke and Kochan, 1995; Swank, 1998). As Swank again notes, 'contrary to
the claims of the international capital mobility thesis ... the general fiscal
capacity of democratic governments to fund a variety of levels and mixes of
social protection and services may be relatively resilient in the face of inter-
nationalisation of markets' (1999, p. 325). Here it is perhaps instructive to
note that despite a marked tendency for direct corporate taxation to fall in
recent years in line with the predictions of such neoclassical-inspired
models, the overall burden of taxation on firms has in fact remained fairly
constant, rising marginally since the mid-1980s (Swank, 1998, 1999).
Yet this does not exhaust the problems of the international capital mobil-
ity thesis - not by a long way. For perhaps most problematic of all are
assumptions three and four - that capital can only compete in a more
intensely competitive environment on the basis of productivity gains
secured through tax reductions (whether achieved through domestic polit-
ical pressure such as the threat of exit, or exit itself) and cost-shedding
(through rationalization, downsizing and the proletarianization of labour).
This is a distinctly and peculiarly Anglo-US conception of competitive-
ness, though one ever more intimately associated with the political dis-
course of globalization (Watson, 1997).
As we shall see, its considerable limitations are clearly exposed if we seek
to draw up a balance sheet of the competitive merits and demerits of the
contemporary welfare state.

A Competitive Audit of the Welfare State

Here we can usefully develop, adapt and extend the work of Ian Gough
who, in a thorough and perceptive article (1996), assesses the full range of
arguments which might be brought to bear upon the complex relationship
between the welfare state and international competitiveness (see also
Pfaller et al., 1991). Things are considerably more complex than the ortho-
dox globalization thesis would have us believe, for a whole variety of both
positive and negative externalities might be identified. At the very least,
 Colin Hay 213

this suggests that the orthodox account that presents welfare expenditure
simply as a drain on competitiveness is a gross and distorting simplifica-
tion of a far more complex and contingent reality.

Negative Externalities: The 'Competitiveness-Corrosive'

Consequences of the Welfare State

As I have been at pains to demonstrate, the conventional orthodoxy tends

to posit a simple trade-off between equality and efficiency, such that (redis-
tributive) welfare expenditure comes at a direct cost to economic compet-
itiveness. In addition to the arguments reviewed above, a variety of
negative (or 'competitive corrosive') externalities of welfare expenditure-
direct and indirect- are identified in this literature. They are summarized
in table 2. Due to constraints of space they are not reviewed here (though,
for a fuller discussion, see Hay, 1999b ). Suffice it to note that the evidence
is by no means unequivocal.
At this stage, the economic case for the net competitiveness-corrosive
externalities of the welfare state might look impressive. The two most com-
pelling cases are perhaps the first, identifying a tendency for government
borrowing to inject inflationary pressures into the economy, and the third,
suggesting that the direct and indirect taxation burden associated with
social provision increases the cost of labour. Interestingly, however, both of
these tendencies are likely to be unevenly distributed among welfare states.
For, arguably, the presence of encompassing labour-market institutions and
a social democratic tradition of coordinated national wage bargaining

Table 2 Negative externalities of welfare expenditure

Cost/supply Cost/supply Productivity of
of capital of labour capital and labour

Expenditure/ 1 Borrowing 3 Direct taxes

taxation crowds out increase labour
(indirect investment cost and
effects) reduce supply
2 Social costs
encourage
capital flight
Social 4PAYE 5 State pensions 6 Public sector
programmes (pay-as-you- and unemployment social
(direct effects) earn) pensions and sickness prOVISIOn
reduce savings benefits reduce less efficient
labour supply

Source: Inspired by and adapted from Gough, 1996, p. 217.

214 Globalization, Economic Change and the Welfare State

attenuates pressures for wage-push inflation that may be -present in more

liberal welfare regimes. Moreover, tax-induced additional labour costs tend
to have a minimal impact on economies which compete in c;apital-intensive
and quality competitive sectors. For labour costs represent a tiny fraction
of the overall production costs and it is quality and innovation rather than
cost that is most likely to confer a competitive advantage.
What this in turn suggests is that the balance between competitive-
enhancing and competitive-corrosive externalities is likely to be mediated
by institutional factors. Principal among these are the degree of encom-
passment of the wage-bargaining regime and what might be termed the
'regime of competitiveness' of the economy as a whole. For economies
competing solely on the basis of cost in low-skill, labour-intensive indus-
tries, the welfare state is a clear burden on competitiveness, while for those
seeking to pave a high-tech, high-skill route to competitiveness in capital-
intensive sectors, any such negative externalities are significantly attenu-
ated. That this is so becomes rather more transparent if we turn from the
debit to the credit column of the welfare state's competitiveness audit.

Positive Externalities: The 'Competitiveness-Enhancing'

Consequences of the Welfare State

Given the now pervasive orthodoxy, we might expect to find little in the
way of hypothesized competitive-enhancing externalities associated with
inclusive social provision. Yet what is most striking given the ascendancy
of the conventional wisdom is the sheer range and diversity of factors, even
in quite mainstream economic analysis, pointing to the potential contribu-
tion of the welfare state to competitiveness in export markets. These are
presented schematically in table 3 (for a fuller discussion, see Hay, 1999b ).

(1) Macroeconomic stabilization effects High levels of social expenditure

will tend to promote economic stability in so far as they have counter-
cyclical economic effects. This is particularly the case with unemployment
benefits which (higher underlying rates of structural unemployment
notwithstanding) will tend to bolster demand in times of recession.
Similarly, transfer payments to the working class are more likely to stimu-
late consumption (and hence demand) than tax concessions to the middle
classes. Consequently, redistributive welfare regimes, particularly those
prepared to inject demand into the economy during times of recession, are
likely to facilitate macroeconomic stabilization across the economic cycle.

(2) Public housing provision boosts consumption The subsidization or

direct provision of housing frees capital for consumption, thereby raising
the aggregate level of demand within the economy.
Table 3 Positive externalities of welfare expenditure
Productivity of capital
Cost/supply of capital Cost/supply of labour and labour

Macroeconomic effects 1 Macroeconomic

stabilization effects
Social programmes 2 Public social provision 3 Support for women's 4 Human capital enhanced
(direct effects) boosts consumption employment increases through education and
supply of labour trammg
Welfare outcomes 5 Social inclusion tempers 6 Reduced costs of ill 7 Contribution to internal
(indirect effects) criminality; crime deters health work-place flexibility
mvestment (trust and reduced
transaction costs)

Source: Inspired by and adapted from Gough, 1996, p. 217.

216 Globalization, Economic Change and the Welfare State

(3) Support for women's employment increases supply of labour Quite

simply, the provision of nursery places and pre-school care is likely to facil-
itate access (particularly that of women) to the labour-market and hence to
improve the supply of labour with consequent benefits for the productiv-
ity of the economy. Moreover, where access to the labour-market can be
facilitated in this way (as, for instance, in Sweden in recent years), the ratio
of net welfare contributors to net welfare recipients will increase, easing
fiscal pressures generated by demographic change.

(4) Human capital is enhanced through education and training As Gough

notes, most contemporary variants of the competitiveness-enhancing view
of the welfare state focus on its supply-side contribution (1996, p. 222).
Human capital theory is far the most influential current strand of thought
in this area (Allmendinger, 1989; Ashton and Green, 1996; Bosworth et al.,
1996, pp. 211-52; Finegold and Soskice, 1988; Lucas, 1988; Prais and
Wagner, 1987). In an era of heightened competition, it argues, the skill level
of the economy is crucial. Here the welfare state has a central role to play,
ensuring flexible high-quality training and reskilling programmes oriented
directly towards the delivery of the skills required by the economy. The
implications of such a theory are that welfare retrenchment, though fre-
quently couched in terms of competitiveness, may come at a considerable
price in terms of the ability of the domestic economy to compete on any
basis other than cost alone in international markets.

(5) Social inclusion tempers criminality; crime deters investment Con-

sequently, a cost-benefit analysis of welfare retrenchment which fails to
take account of the likely cost (both substantive and qualitative) of
heightened levels of criminality is wholly inadequate. Costs which must
be considered include the expense of incarceration and law enforcement,
the cost to child development of crime and social dislocation and the cost
to capital of excessive insurance premiums in high crime areas. Once such
costs are factored in, the suggestion that competitiveness may be
enhanced by welfare retrenchment is rendered, at best, equivocal. The US
provides a case in point. For, as recent research demonstrates, if the incar-
cerated are counted among the ranks of the unemployed, the US male
jobless rate rises to a level above the European average for most of the
period since 1975 (Western et al., 1998; Western and Beckett, 1998).
Moreover, since the job prospects of ex-convicts are significantly eroded
such that they invariably leave prison to join the ranks of the long-term
unemployed, the impressive employment performance of the US in the
1980s and 1990s has in fact depended in large part on a high and increas-
ing incarceration rate (Western and Beckett, 1999). Moreover, by Bowles
and Gintis's calculations, one-quarter of all labour employed in the US is
'guard labour' (1994).
 Colin Hay 217

(6) Reduced costs of ill health Poor health, arising from under-insurance
or non-insurance in a privately financed system, is likely to disrupt pro-
duction whilst imposing punitive healthcare costs (however funded).
Consequently, health- as a public good- is best provided by the state and
is most efficient when it contains a significant preventative component.
Moreover, a redistributive welfare state contributes significantly to a soft-
ening of social stratification (itself closely correlated to poor health)
(Wilkinson, 1996 ). An inclusive state-funded national health service may,
then, both decrease the volume of healthcare demand (through preventa-
tive medicine) while minimizing the cost of satisfying that demand.

(7) Welfare enhances flexibility via greater trust and reduced transaction
costs Inclusive welfare states, particularly where associated with encom-
passing labour-market institutions, encourage relations of cooperation and
trust. Significantly, this facilitates internal flexibility - in which workers
adapt themselves and their working practices to new demands and new
technology - as opposed to external flexibility (i.e. recourse to the labour
market). This fosters cooperative relations between managers and labour,
with consequent reductions in the rate of labour turnover. This, in turn, is
rewarded by higher levels of investment in human capital as workers are
less likely to depart with their newly acquired skills (skills acquired at the
company's expense) to the competition.

With each of the above observations, the competitiveness balance-sheet of

the welfare state moves further into credit.

Conclusion

What the above discussion serves to suggest is that the relationship

between competitiveness and the welfare state is far more complex (and
perhaps rather more contingent) than the globalization orthodoxy would
have us believe. Nonetheless, this cannot and should not serve to hide the
fact that significant welfare retrenchment has occurred and continues
apace. That this is so is due, in no small part, to the predominance of a view
of the competitiveness-corrosive impact of the welfare state which is at
odds with the empirical evidence [ ... ].
As the analysis of this chapter reveals, however, even this is to present an
overly simplified picture. The specific consequences of welfare provision
will vary on a case-by-case basis, mediated by a range of institutional and
cultural factors. Not the least of these are the scope and scale of welfare
provision itself and the 'regime of competitiveness' of the economy as a
whole. [ ... ] Low-cost-low-skill competitiveness in labour-intensive
industries places a considerable premium upon externally flexible labour
218 Globalization, Economic Change and the Welfare State

markets and a cheap and voluminous supply of docile (for .which read de-
unionized and/or demoralized) labour. The welfare state in such a scenario
is likely to represent little more than an expensive indulgenc/=- though the
social and economic cost of its retrenchment (in terms of the criminaliza-
tion and marginalization of an underclass) should not be underestimated.
Whether out-and-out cost competitiveness represents a viable competitive
strategy for any contemporary European economy is debatable. What it
does suggest, however, is the stark choice that European economies now
face and the significance of that choice for the continued viability of ,the
welfare state. Yet one thing should perhaps be made clear. Europe's most
open economies (Britain excepted) have, throughout the postwar period,
always sought competitiveness on the basis of quality not cost. They have
thus sought to promote internal flexibility within the firm rather than
external flexibility in the labour-market, permanent innovation in produc-
tion as opposed to productivity gains on the basis of hire-and-fire and the
elimination of supply-side rigidities, high and stable levels of both human
and physical capital formation, and inclusive and encompassing labour-
market institutions. Within such a model, far from representing a supply-
side rigidity, the welfare state is not only a competitive advantage it is a
competitive necessity.

Notes

From R. Sykes, B. Palier and P.M. Prior (eds), Globalization and European Welfare
States, London, Palgrave, 2001, pp. 38-58.
The author would like to acknowledge the support of the ESRC for research
on 'Globalization, European Integration and the European Social Model'
(L213252043), research which concentrates on globalization, European integration
and welfare/labour market reform in Denmark, Germany, France, Hungary,
Ireland, Italy, the Netherlands, Sweden and the UK. I would also like to express
gratitude to Pete Alcock, Robert Sykes, Matthew Watson and Daniel Wincott for
comments on an earlier version of this chapter.
This burden is, however, unevenly distributed and has been responded to dif-
ferently in different national contexts. For a more extended discussion see Hay
(1999b ).
2 In the US, for instance, occupationally insured workers are frequently reluc-
tant to move job because of the risk to their eligibility for medical benefits in
a context where private provision is likely to prove punitively expensive.

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 Colin Hay 219

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Negative Integration: States
and the Loss of Boundary
Control
Fritz Scharpf

[ ... ]

Negative Integration: The Loss of Boundary Control

In the history of capitalism, the decades following the Second World War
were unusual in the degree to which the boundaries of the territorial state
had become coextensive with the boundaries of markets for capital, ser-
vices, goods and labour. These boundaries were by no means imperme-
able, but transactions across them were nevertheless under the effective
control of national governments. As a consequence, capital owners were
generally restricted to investment opportunities within the national
economy, and firms were mainly challenged by domestic competitors.
International trade grew slowly, and since governments controlled
imports and exchange rates, international competitiveness was not much
of a problem. While these conditions lasted, government interest rate
policy controlled the rate of return on financial investments. If interest
rates were lowered, job-creating real investments would become rela-
tively more attractive, and vice versa. Thus, Keynesian macroeconomic
management could smooth the business cycle and prevent demand-
deficient unemployment, while union wage policy, where it could be
employed for macro-economic purposes, was able to control the rate of
inflation. At the same time, government regulation and union collective
bargaining controlled the conditions of production. But since all effective
competitors could be, and were, required to produce under the same
regimes, the costs of regulation could be passed on to consumers. Hence
the rate of return on investment was not necessarily affected by high
levels of regulation and union power; capitalist accumulation was as
224 Negative Integration

feasible in the union-dominated Swedish welfare state as it was in the

American free enterprise system.
During this period, therefore, the industrial nations of W~stern Europe
had the chance to develop specifically national versions of the capitalist
welfare state - and their choices were in fact remarkably different. [ ... J
In spite of the considerable differences between the 'social democratic',
'corporatist' or 'liberal' versions of the welfare state, however, all were
remarkably successful in maintaining and promoting a vigorous capitalist
economy, while also controlling, in different ways and to differentdegre_es,
the destructive tendencies of unfettered capitalism in the interest of specific
social, cultural and/ or ecological values [ ... ]. It was not fully realized at
the time, however, how much the success of market-correcting policies did
in fact depend on the capacity of the territorial state to control its economic
boundaries. Once this capacity was lost, through the globalization of
capital markets and the transnational integration of markets for goods and
services, the 'golden years' of the capitalist welfare state came to an end.
Now the minimal rate of return that investors can expect is determined
by global financial markets, rather than by national monetary policy, and
real interest rates are generally about twice as high as they used to be in the
1960s. So if a government should now try to reduce interest rates below the
international level, the result would no longer be an increase of job-
creating real investment in the national economy, but an outflow of capital,
devaluation and a rising rate of inflation. Similarly, once the territorial state
has lost, or given up, the capacity to control the boundaries of markets for
goods and services, it can no longer make sure that all competing suppliers
will be subject to the same regulatory regime. Thus, if now the costs of
regulation or of collective-bargaining are increased nationally, they can no
longer be passed on to consumers. Instead, imports will increase, exports
decrease, profits will fall, investment decline and firms will go bankrupt or
move production to more benign locations.
Thus, when boundary control declines, the capacity of the state and the
unions to shape the conditions under which capitalist economies must
operate is also diminished. Instead, countries are forced into a competition
for locational advantage which has all the characteristics of a Prisoner's
Dilemma game [ ... ]. The paradigmatic example of this form of 'regula-
tory competition' was provided, during the first third of the twentieth
century, by the inability of 'progressive' states in the United States to regu-
late the employment of children in industry. Under the 'negative com-
merce clause' decisions of the Supreme Court, they were not allowed to
prohibit or tax the import of goods produced by child labour in neigh-
bouring states. Hence locational competition in the integrated American
market prevented all states from enacting regulations that would affect
only enterprises within their own state [ ... ]. In the same way, the increas-
ing transnational integration of capital and product markets, and especially
 Fritz Scharpf 225

the completion of the European internal market, reduces the freedom of

national governments and unions to raise the regulatory and wage costs of
national firms above the level prevailing in competing locations. Moreover,
and if nothing else changes, the 'competition of regulatory systems' that is
generally welcomed by neo-liberal economists [ ... ] and politicians may
well turn into a downward spiral of competitive deregulation in which all
competing countries will find themselves reduced to a level of protection
that is in fact lower than preferred by any of them.

[ ... ]

Note

From G. Marks et al., eds, Governance in the E U, London, Sage, 1996, pp. 16-17.
A Race to the Bottotn?
Francis G. Castles

Some Preliminary Considerations

The notion of a 'race to the bottom' in social provision is only a variant of a

more general argument: that enhanced international competition is destruc-
tive of regulatory standards across the board. The earliest articulation of the
argument is to be found in early twentieth-century debates in United States
corporate law on the difficulty of regulating corporations under circum-
stances where they were in a position to escape domestic jurisdiction (see
Rieger and Leibfried, 2003 ). In the contemporary debate, the threat of
welfare cutbacks induced by global competition is, in fact, only a relatively
minor theme in a debate focusing largely on wages, labour protection laws
and environmental standards (see Drezner, 2000). The logic, however, is just
the same. In so far as the costs of social provision, better wages and condi-
tions and environmental safeguards fall on business, they lead to high pro-
duction costs, which, it is argued, will only be endured where business does
not have the alternative of removing itself to a more favourable location.
Where countries are heavily engaged in international trade and where enter-
prises cannot be prevented from relocating to countries in which costs are
lower, governments are seen as having little option but to accede to the
demands of capital for lower taxes, a more flexible labour market and less
'red tape' around health, safety and environmental issues.
The main purpose of this chapter is not to contest the logic of these argu-
ments, but to examine the comparative evidence with a view to establish-
ing how well the 'race to the bottom' hypothesis does actually account for
the trajectory of recent social expenditure development. Nevertheless, it is
worth very briefly noting a few of the reasons why the logic of inter-
national competition might turn out not to have the extreme consequences
suggested by these accounts. First, there are reasons for believing that these
 Francis G. Castles 227

theories exaggerate the extent of the threat resulting from changes in the
international economy. Frequently, they neglect consumption consider-
ations in the determination of locational advantage (i.e. being close to one's
market may be as important as minimizing production costs) and offer an
exaggerated picture of the likely consequences of capital flight (by the mid-
t990s, corporate taxes amounted to somewhat less than 10 per cent of total
taxation in OECD countries - see Ganghof, 2000). Second, there are
reasons for supposing that the consequences of globalization may be quite
different from those presupposed by such accounts. Indeed, rival accounts
suggest that exposure to the world economy may actually serve as an
incentive for governments to intervene to maintain or even improve regu-
latory standards in the hope of thereby mitigating some of the adverse con-
sequences of international economic vulnerability (see Cameron, 1978;
Ruggie, 1982; Katzenstein, 1985; Rodrik, 1997).
Globalization accounts may also be unrealistic in other ways. A third
reason that social expenditures may not have declined as much as predicted
is that the extent of change in the international economy in recent years is
rather less than is sometimes implied in the crisis literature. In the 1990s,
the average level of imports plus exports as a percentage of GDP in OECD
countries was only around 5 per cent higher than in the 1980s. Admittedly,
over the same period, the average level of foreign direct investment had
more than doubled, but this was from a very low base. At the same time,
overseas investment flows in OECD countries during the 1980s and 1990s
averaged less than 3 per cent of GDP, a figure hardly indicative of over-
whelming capital mobility among nations. Finally, these accounts appear
totally to misjudge the dynamics of social expenditure change. The impli-
cation of the 'race to the bottom' analysis is that countries can rapidly
adjust their social expenditure levels in a downward direction, but the pre-
vailing imagery of the policy change literature is of a trajectory of social
policy reform strongly shaped by an inertia and irreversibility stemming
from a logic of 'increasing returns' and 'path dependent' institutional
development (see Pierson, 2000). In Karl Hinrichs's beautiful simile, social
security systems are like 'elephants on the move' (Hinrichs, 2001). When
they are young, they may stampede ahead, but when they are mature they
generally move forward rather slowly. Irrespective of age, turning them
around involves much energy and no little persuasive power.
In this chapter, we are looking for signs that such a turnaround has
occurred during the course of the past two decades. We assess the extent to
which this may have occurred by examining trajectories of social expend-
iture measured in a variety of ways. Our premise is that, a few minor excep-
tions apart, it simply does not make sense to talk of a 'race to the bottom'
in social provision that is not manifested in social expenditure terms. That
is because, in most advanced welfare states, the vast bulk of provision takes
the form of income-maintenance schemes and social services funded from
228 A Race to the Bottom?

various forms of taxation. It is this taxation that business regards as a

burden and that it blames for its failure to compete in international
markets. For governments persuaded of this diagnosis, there ,are only two
available strategies: to cut benefits and services or to increase borrowing.
However, given that the debt interest burden resulting from excessive bor-
rowing is also seen as inimical to the viability of a market economy, the
only viable option available to 'responsible' governments is social expend-
iture cuts. If the theory is correct, there really is 'no alternative'. For coun-
tries delivering welfare state provision largely through state-funded
benefits and services, a 'race to the bottom' without accompanying
expenditure cuts is a contradiction in terms.

Patterns of Aggregate Spending

The first measures we examine in this chapter are changes in total public
social expenditure and total public expenditure, both measured as per-
centages of GDP. We have already argued that the trajectory of welfare
spending in a given period is the key to establishing the reality or other-
wise of a 'race to the bottom'. Aggregate social spending as a percentage of
GDP is also the most widely used measure of the 'welfare effort' govern-
ments make on behalf of their citizens and changes in this measure provide
a useful indicator of a nation's continuing commitment to welfare. A focus
on total public expenditure provides a context for our discussion of social
expenditure trends. It allows us to ask whether trajectories noted as typical
of social expenditure development are replicated in other public expendi-
ture arenas and whether expenditures for social policy purposes have
become a more or less salient aspect of overall public sector spending over
the course of time. Because we seek also to contextualize our discussion in
wider historical terms, we provide data not only for the period of our spe-
cific analysis from 1980 to 1998, but also for the two preceding decades
from 1960 to 1980.
Table 1 provides data for total public social spending as a percentage of
GDP in 1960, 1980 and 1998, and for the time periods 1960-80 and
1980-98. These data come from the OECD Social Expenditure Database
(OECD, 2001c). This source brings together systematic information on
thirteen components of social spending for all the long-term member
countries of the OECD from 1980 onwards. The data are for twenty-one
OECD countries, classified into four 'family of nations' groupings
designed to capture affinities and commonalities arising from history,
geography, language and culture. The four families - in order of their
appearance in this and subsequent tables- consist respectively of English-
speaking, Scandinavian, continental Western European and Southern
European countries. Two countries- Switzerland and Japan- are difficult
Table 1 Total public social expenditure as a percentage of GDP in
rwenty-one OECD countries, 1960, 1980, 1998 and change over time

1960 1980 1998 1960-1980a 1980-1998

Australia 7.4 11.3 17.8 3.9 6.5

Canada 9.1 13.3 18.0 4.2 4.8
Ireland 8.7 18.9 15.8 10.2 -3.1
New Zealand 10.4 19.2 21.0 8.8 1.8
United Kingdom 10.2 18.2 21.4 8.0 3.2
United States 7.3 13.1 14.6 5.8 1.5
Family mean 8.9 15.7 18.1 6.8 2.4
Denmark 10.6 29.1 29.8 18.5 0.8
Finland 8.8 18.5 26.5 9.7 8.0
Norway 7.8 18.6 27.0 10.8 8.4
Sweden 10.8 29.0 31.0 18.2 2.0
Family mean 9.5 23.8 28.6 14.3 4.8
Austria 15.9 23.8 26.8 7.9 3.0
Belgium 13.8 24.2 24.5 10.4 0.4
France 13.4 22.7 28.8 9.3 6.1
Germany 18.1 20.3 27.3 2.2 7.0
Nether lands 11.7 27.3 23.9 15.6 -3.4
Family mean 14.6 23.7 26.3 9.1 2.6
Greece 7.1 11.5 22.7 4.4 11.3
Italy 13.1 18.4 25.1 5.3 6.7
Portugal 11.6 18.2 6.6
Spain 3.2 15.8 19.7 12.6 3.9
Family mean 7.8 14.3 21.4 7.4 7.1
Switzerland 4.9 15.2 28.3 10.3 13.1
Japan 4.1 10.1 14.7 6.0 4.6
Overall mean 10.1 18.7 22.7 9.0 4.0
Coefficient of variation 38.9 31.2 22.3

a Because data for 1960 and for 1980 and onwards come from different sources,
the figures for change 1960-80 are, at best, approximations.
Sources: Data for 1960 from OECD, 1994. In the cases of Denmark, Belgium and
Spain, the 1960 figures are the sum of social security transfers plus health spending
(data from Castles, 1998). Data from 1980 onwards from OECD, 2001c. Missing
data in 1980 for occupational injury spending for Australia and for other
contingencies for Denmark, Greece and Italy. 1980 unemployment cash benefits for
Austria, France and Ireland interpolated from OECD, 1985. 1998 UK total
expenditure reduced by 3.3 per cent of GDP to take account of a definitional change
relating to old age cash benefits. All calculated figures subject to rounding errors.
230 A Race to the Bottom?

to classify in family of nations terms and data for them are presented sep-
arately. In tables 1 to 4, we separately present family of nations means and
overall means for all twenty-one cases. This serves as a simple device for
assessing the extent of differences among groupings of nations. An overall
measure of the similarity of cases is given by the coefficient of variation,
which is provided for all measures of expenditure levels, but not for
changes over time. Lower values of the coefficient imply a reduction in the
overall variation of cases and a consistent downward trend in values sug-
gests a move towards greater convergence in spending patterns.
Looking initially at family of nations patterns in respect of levels of
aggregate spending, we note changes in the groupings featuring as welfare
state leaders and laggards. Table 1 shows that, in 1960, continental Western
Europe was the area making much the greatest welfare effort, with little to
choose between the English-speaking and Scandinavian countries in the
middle of the distribution, and with Southern Europe, Italy excepted, in the
rearguard. By 1980, however, this clear hierarchy of spending had collapsed
into two broader groupings, with the Scandinavian and continental Western
European countries spending around a quarter of GDP for social policy
purposes and the English-speaking and Southern European countries
around 15 per cent. Finally, during the course of the period that concerns
us here, hierarchy was restored, but along lines rather different from those
of the early postwar era. By 1998, the Scandinavian countries had become
outright welfare state leaders, with average spending levels of just below
30 per cent of GDP. The countries of continental Western Europe followed
close behind, with Southern Europe now somewhat ahead of an English-
speaking rearguard. Changes in the welfare state ranking of individual
countries were no less dramatic than those of country groupings, with
Switzerland moving from the position of being OECD's second lowest
spender in 1960 to its third highest in 1998, and with Ireland moving from
a position above the OECD mean in 1980 to the third lowest level of spend-
ing in 1998. The diversity of expenditure patterns demonstrated in table 1,
and the relatively tight bunching of nations sharing close historical, cultural
and linguistic affinities, does not seem readily compatible with hypotheses
of the kind offered by the crisis literature, suggesting that welfare states
everywhere were responding to the same powerful external forces.
Turning now to patterns of expenditure growth, the initial point to note
is the substantial contrast between periods. The 1960 to 1980 period was
one of consistent and strong social expenditure growth. All the OECD
member countries featuring in table 1 experienced increases in spending
measured as a percentage of GDP, with Denmark and Sweden leading the
way with increases in spending of 18.5 and 18.2 per cent of GDP respect-
ively. For OECD countries in general, expenditure grew by 9 per cent of
GDP, which meant a virtual doubling in size of the average OECD welfare
state in just two decades. The 1980 to 1998 period was, in comparison, an
 Francis G. Castles 231

era of more inconsistent and much reduced spending growth. In the earlier
period, there were eight countries which increased their spending by more
than 10 per cent of GDP; in the later period, there were just two,
Switzerland and Portugal, both of them catching up from the rear of the
distribution. In the earlier period, the smallest increase in spending was
Australia's 3.9 per cent of GDP; in the later period, there were no fewer
than nine countries with expenditure growth of less than 3.9 per cent.
Finally, in the second period, the average rate of expenditure growth was
more than halved, dropping from nine to four percentage points of GDP.
Whether as a consequence of globalization or some other concatenation of
forces, there can be no question at all that the pace of welfare state growth
had slowed dramatically after 1980.
However, it declined on nothing like the scale hypothesized by the crisis
literature. Three sets of figures in table 1 make this abundantly plain. A
'race to the bottom' implies an across-the-board contraction in social
spending. However, as the final column of table 1 shows, there were, in
fact, only two countries- Ireland and the Netherlands- that experienced
any overall cutback in aggregate social expenditure during these years. The
second relevant figure is the average 4 per cent increase in spending as a
percentage of GDP between 1980 and 1998. Translated into a percentage
rise in spending, this means that the average OECD country increased its
welfare effort by slightly more than 20 per cent- from 18.7 to 22.7 per cent
of GDP- in precisely that period in which the prevailing crisis accounts
suggest that expenditure should have been dropping like a stone. The
salience of this finding is highlighted by a third set of figures, the consist-
ent downward trend in the coefficients of variation appearing in the final
row of table 1, demonstrating a growing similarity of social expenditure
levels over a period of almost four decades. The 'race to the bottom' argu-
ment implies a sharp break in trend, with a general movement towards
higher expenditures in the early postwar years replaced, more recently, by
a process of downwards convergence. What table 1 demonstrates is that,
throughout the postwar period, increased similarity has been conjoint with
increased spending.
We now turn to corresponding patterns of overall public expenditure
development. Table 2 presents data on total outlays of general government
as a percentage of GDP from OECD Economic Outlook (various years)
for the same time points and periods as table 1. Table 2, in most respects,
tells much the same story as table 1. Total expenditure magnitudes are, of
course, much greater than for social spending, with mean levels of total
expenditure starting out at a level three times greater than social expend-
iture and ending up at a level somewhat less than twice as high. By 1998,
the OECD mean for total outlays was 43 per cent of GDP, with a high of
55.5 per cent of GDP in Sweden and a low of 30.5 per cent of GDP in the
United States. However, despite differences in magnitudes, family of
Table 2 Total outlays of general government as a percentage of GDP in
twenty-one OECD countries, 1960, 1980, 1998 and change over time

1960 1980 1998 1960-1980 1980-1998

Australia 21.6 31.4 33.2 9.8 1.8

Canada 28.6 38.8 40.2 10.2 1.4
Ireland 28.0 49.3 32.2 21.3 -17.1
New Zealand a 39.5
United Kingdom 32.2 43.0 37.7 10.8 -5.3
United States 27.2 31.4 30.5 4.2 -0.9
Family mean 27.5 38.8 34.8 11.3 -4.0
Denmark 24.8 56.2 54.0 31.4 -2.2
Finland 26.6 38.1 48.1 11.5 10.0
Norway 29.9 43.3 46.3 13.4 3.0
Sweden 31.0 60.1 55.5 29.1 -4.6
Family mean 28.1 49.4 51.0 21.3 1.6
Austria 35.7 48.1 50.3 12.4 2.2
Belgium 34.6 58.3 48.0 23.7 -10.3
France 34.6 46.1 49.9 11.5 3.8
Germany 32.4 47.9 46.0 15.5 -1.9
Netherlands 33.7 55.8 43.4 22.1 -12.4
Family mean 34.2 51.1 47.5 16.9 -3.6
Greeceb 17.4 30.4 42.7 13.0 12.3
Italy 30.1 41.9 47.6 11.8 5.7
Portugal 17.0 23.8 39.8 6.8 16.0
Spain 32.2 40.6 8.4
Family mean 21.5 30.1 42.7 10.5 12.6
Switzerland a
Japan 17.5 32.0 34.8 14.5 2.8
Overall mean 27.9 42.6 43.0 15.2 0.7
Coefficient of variation 21.8 25.0 16.6

a Data for New Zealand and Switzerland are not available.

b The Greek figure for 1960 is for current disbursements of general
government rather than total outlays. For that reason, the figure for change
in Greek total outlays for the period 1960-80 should be regarded as an
approximation.
Sources: Data for 1960 from OECD, 1991; for 1980 from OECD, 1997; for 1998
from OECD, 2001 a. All calculated figures subject to rounding errors.
 Francis G. Castles 233

nations patterns were similar, with the single exception that the countries
of Southern Europe remained well below the level of public spending of
the English-speaking countries in 1980. By 1998, the hierarchy of families
of nations in respect of social spending is almost exactly replicated for total
outlays. Also, as in the case of aggregate social expenditure, there was a
very substantial contrast in growth trajectories in the two periods. In the
1960s and 1970s, average total outlays growth of 15 per cent of GDP was
about 60 per cent greater than social expenditure growth in the same
period. However, in the period from 1980 to 1998, overall total outlays in
the OECD were effectively becalmed, ending up only 0.7 of a percentage
point of GDP higher at the end of the period than at its beginning.
This is where the one really significant contrast between total outlays
and aggregate social expenditure trends is to be found. Only two out of
twenty-one countries experienced social expenditure cutbacks between
1980 and 1998, but no less than eight of the nineteen countries for which
we have total outlays data experienced overall public expenditure cuts in
the same period. It is also possible to surmise the expenditure trajectories
of countries for which data are missing. Given the very substantial expan-
sion of Swiss social spending in this period shown in table 1 and docu-
mented in a number of studies (see Lane, 1999; Kriesi, 1999; Armingeon,
2001), it seems reasonable to assume that total outlays in Switzerland
increased markedly between 1980 and 1998. By the same token, the rela-
tively small increase in New Zealand's social expenditure shown in table 1,
combined with a public sector which, by all accounts, was cut to ribbons
in this period (see Kelsey, 1993; Boston and Uhr, 1996; Stephens, 1999),
seems likely to have contributed to an overall decline in total outlays in the
period after 1980. Given the probability of diverse spending trends in these
two countries, it may be concluded that there was some degree of expend-
iture reduction in nearly half the countries of the OECD. There was also
extreme diversity in spending trajectories. Belgium, Ireland and the
Netherlands all experienced expenditure cutbacks in excess of 10 per cent
of GDP. The public sectors of Finland, Greece and Portugal, on the other
hand, grew by similar amounts.
This discrepancy between trends in aggregate social spending and in
total public expenditure is extremely interesting. The items of spending
included in total outlays which are not also included under the social
expenditure head are general public services, public order and safety,
defence, education, housing and community services, economic affairs,
recreation and culture and a residual other category which includes debt
interest payments (see United Nations, 1999). Reading tables 2 and 1 in
conjunction suggests that, over the past two decades, these non-social
components of public spending have, in aggregate, been subject to greater
attrition and downward pressure than has aggregate social spending.
Whether these cutbacks are of sufficient magnitude to suggest a possible
234 A Race to the Bottom?

'race to the bottom' in respect of total outlays is quite another matter. It

certainly seems probable that commentators on the lookout for the influ-
ence of globalizing trends on public sector spending would se.e it.as signifi-
cant that Belgium, Ireland and the Nether lands, the three countries
experiencing the greatest cutbacks in total outlays, were simultaneously
the three countries which, on most counts, can be seen as the most inter-
nationally exposed economies of the 1980-98 period. However, the facts
nevertheless remain that the number of countries increasing their overall
public spending in this period outweighed the number reducing their
public spending and that the average trend of outlays in this period was,
however marginally, in an upward direction. Although total spending may
have been under greater pressure than aggregate social spending, and
although individual country fluctuations in total spending were consider-
ably greater, the evidence for a 'race to the bottom' is simply not there.

Welfare Salience and Welfare Standards

While data on patterns of aggregate spending clearly contradict the 'race to

the bottom' hypothesis, it is perfectly possible that other ways of thinking
about recent trajectories of spending might yield findings that provide
clues as to the nature of the malaise underlying crisis predictions. In this
section, we address two questions with a bearing on such issues. First, we
ask whether public spending on welfare has become a more or a less salient
part of the public budget in recent decades. Greater salience might itself be
a reason magnifying the sense of possible threat. Second, we ask whether
increases in aggregate expenditure in these years might actually mask a
decline in welfare standards. If governments in Western nations no longer
view social protection as a major priority, and if, in consequence, standards
of provision are dropping, the notion of a threat to the future of the welfare
state becomes far more comprehensible.
Goran Therborn (1983) has argued that in order to qualify as a welfare
state, a nation's spending for welfare purposes must exceed its spending for
other purposes, and G0sta Esping-Andersen (1990) has noted that, by this
criterion, there were few welfare states in the world until the 1970s. An
interesting implication of the 'race to the bottom' hypothesis is that it sug-
gests that any increase in the number of countries qualifying as welfare
states as a consequence of expenditure growth in the 'golden age' of welfare
state expansion is likely to have been reversed in recent decades. In the
'golden age', captured in our data by the huge increases in social spending
occurring in the period between 1960 and 1980, spending on health, pen-
sions, sickness, unemployment and other benefits gradually came to rival
the older priorities of state spending for general public services, defence,
public order and community services. However, had the 1980s and 1990s
 Francis G. Castles 235

really been a period in which cutbacks were concentrated on social pro-

grammes, as implied by the 'race to the bottom' hypothesis, the status of
welfare as the dominant concern of the modern state would clearly have
been in some jeopardy.
In fact, we already know that, in broad terms, such a reversal of the
growing salience of the welfare state cannot have occurred. Tables 1 and 2
show that the average rate of growth of social expenditure exceeded that of
total outlays in the period after 1980, which can only mean that, on average,
the salience of the welfare state in OECD countries was continuing to
increase. What we do not know, however, is how individual countries were
affected by the expenditure changes taking place in this period. It would,
for instance, be quite compatible with the evidence of our analysis so far if
we were to discover that some of those countries experiencing cutbacks or
relatively small increases in social spending had simultaneously experienced
a decline in the ratio of social to non-social spending. While that might not
be the same thing as a 'race to the bottom', it could very well explain why
welfare elites and welfare recipients in certain countries felt themselves to
be under pressure. Table 3, which measures aggregate social expenditure as
a proportion of total outlays, provides us with a means of mapping the
balance between social and non-social priorities in state spending. It allows
us to compare the relative salience of the welfare state in different countries,
among different families of nations and at different time points.
An initial point to notice about the figures in table 3 is the massive con-
vergence they demonstrate. In the 1960s, there were very substantial dif-
ferences in the extent to which individual nations and families of nations
prioritized welfare state spending. In that year, Germany was devoting
more than 55 per cent of its total spending to welfare, but Japan, Norway
and the United States only around 25 per cent. Although not as pro-
nounced as these individual country differences, the gaps between families
of nations were also considerable. Initially, patterns were somewhat dif-
ferent from those characterizing aggregate spending. Table 1 reveals that,
with the exception of Italy, the countries of Southern Europe were the
expenditure laggards of the 1960s, but table 3 suggests, despite incomplete
data, that the priority these countries accorded welfare was akin to that of
the countries of continental Western Europe, the expenditure leaders of the
time. Both in 1960 and 1980, the countries according welfare the lowest
priority were to be found largely within the English-speaking family of
nations. By the end of the period, individual country differences had
diminished appreciably. Germany and Japan remained poles apart in terms
of welfare salience, but the gap had decreased from 32.5 to 17.2 percentage
points. Gaps between family of nations groups had also diminished and the
ordering of family groupings had changed. The salience of welfare spend-
ing in the Scandinavian countries had increased hugely over nearly four
decades, and these countries' high levels of spending were now matched by
236 A Race to the Bottom?

Table 3 Total public social expenditure as a proportion of total outlays of

general government in twenty-one OECD countries, 1960, 1980 and 1998

1960 1980 1998

Australia 34.3 36.1 53.6

Canada 31.8 34.2 44.9
Ireland 31.1 38.4 49.0
New Zealand 53.1
United Kingdom 31.7 42.3 56.7
United States 27.1 41.8 47.8
Family mean 31.1 38.6 50.8
Denmark 42.7 51.7 55.2
Finland 33.1 48.6 55.2
Norway 26.1 42.8 58.3
Sweden 34.8 48.3 55.8
Family mean 34.2 47.8 56.1
Austria 44.5 49.4 53.3
Belgium 39.9 41.5 51.1
France 38.7 49.2 57.8
Germany 55.9 42.3 59.3
Netherlands 34.7 48.9 55.1
Family mean 42.7 46.3 55.3
Greece 40.8 37.8 53.2
Italy 43.5 44.0 52.7
Portugal 48.9 45.8
Spain 49.0 48.5
Family mean 42.1 44.9 50.0
Switzerland
Japan 23.4 31.6 42.1
Overall mean 36.1 43.5 52.4
Coefficient of variation 22.2 13.5 9.0
Notes and sources: Social expenditure data from table 1 expressed as percentages
of the total outlays of general government. Sources for total outlays as indicated
in table 2. All calculated figures subject to rounding errors.

the high priority they attached to spending of this nature. In 1960, the gap
in salience between the top and bottom family groups - continental
Western Europe and the English-speaking nations - was 11.6 percentage
points. In 1998, the gap between top and bottom - Scandinavia and
Southern Europe- was just 6.1 percentage points. Summary statistics tell
the same story, with a strongly declining coefficient of variation over time.
 Francis G. Castles 237

The next important point to note is that this process of convergence had
occurred as a consequence of more and more countries becoming welfare
states according to Therborn's criterion. In 1960, Germany was the only
OECD country to devote more resources to welfare than to other pur-
poses. In 1980, Denmark had replaced Germany as the OECD's only
welfare state. By 1998, however, fourteen of the twenty countries featur-
ing in table 3 were welfare states by this criterion and Switzerland, the
country for which data are missing, would also undoubtedly qualify if the
data were available. Finally, and most significantly, this mass shift across
the threshold of welfare statehood occurred, not in the golden years
between 1960 and 1980, but in the supposedly crisis-ridden years after
1980. In 1980, the average level of welfare salience was 43.5 per cent; by
1998, it was 52.4 per cent. By one reckoning, the OECD area had itself
become a giant welfare state, in so far as it was constituted largely by
nations spending more on welfare than for all other purposes. By another,
there was still some way to go, given that two of the countries yet to
become welfare states according to this criterion were the OECD's most
populous nations, the United States and Japan.
This analysis has important implications. Over the past two decades,
most OECD countries have committed themselves to social policy as their
first priority and table 3 provides absolutely no sign that this is a trajectory
of change which has exhausted its potential. As we have seen, part of what
happened in the 1980s and 1990s was an increase in real spending on
welfare, but just as important was a decline in non-social spending.
Admittedly, as already noted, the barriers between the categories of spend-
ing are far from watertight, but, accepting the distinction as given, what
appears to have been happening is that, in a period in which overall expen-
diture increases have been constrained, policy-makers have been privileg-
ing welfare priorities at the margin. This is not what the 'race to the
bottom' theorists would have us believe, but clearly finding out why this
kind of trade-off is occurring is vital for an understanding of contempo-
rary welfare state dynamics.
A possible explanation that might simultaneously account for a general-
ized malaise about the future of the welfare state and for an enhanced pri-
ority for welfare over other purposes would be if demands or needs for
welfare had been increasing over time. This is, in essence, the basis of the
account offered in Paul Pierson's book The New Politics of the Welfare
State (2001 ). The argument is that expenditure retrenchment is a difficult
project for modern governments because they are expected to tackle a wide
range of problems from deindustrialization to population ageing and to
provide a whole range of new services from drug rehabilitation to services
enabling women to combine labour force participation and maternity.
Under these circumstances, it is easy to see why commentators interpret
what is happening in terms of increased pressure on the welfare state or
238 A Race to the Bottom?

even of crisis. If governments feel that there are economic and/or political
constraints on higher taxing and spending, and if, at the same time, there is
an increased demand for welfare services, one of two things,.ml1st happen:
either other expenditure must be cut or existing standards of provision
must decline.
We have already seen that there has been some decline in non-social
expenditure. In what follows, we discuss briefly what has been happening
to standards of welfare provision. Although the 'race to the bottom' argu-
ment is essentially a hypothesis about the likely future trajectory of welfare
spending, an analogous argument is sometimes encountered about effects
on welfare standards. Indeed, for many left-of-centre commentators that
is the main concern. Their worry is that capital will press governments to
reduce existing standards in order for business to compete in an era of
global competition. The arguments are familiar. Enterprises are not com-
petitive when employers must pay huge social security contributions,
when generous sickness benefits create mass absenteeism and when unem-
ployment benefits are so high that they diminish the incentive to work.
Reducing standards of protection- 'social dumping'- can be presented as
the only way for a country to attract new capital or to retain the capital it
already has. In effect, this argument concedes that globalization is not the
sole factor determining expenditure growth, with increased welfare
demand and welfare dependency countering the 'race to the bottom'. The
impact of globalization under these circumstances is not to reduce aggre-
gate welfare spending, but rather to reduce individual welfare generosity.
Table 4 provides an admittedly simplistic measuring rod for assessing
how well contemporary welfare states have been coping with the increased
demands made of them. The two categories of increased welfare need most
generally noted in the literature are the impact of population ageing and
increasing levels of unemployment. The latter has been highlighted by
many commentators as a snare and delusion for those measuring
welfare states in purely monetary terms, since increased spending on this
count is simply seen as a measure of the welfare state's incapacity to control
unemployment (see Esping-Andersen, 1990; Mishra, 1990; Clayton and
Pontusson, 1998). All that we do in table 4 is to divide the aggregates of
expenditure appearing in table 1 by the percentage of the dependent popu-
lation, that is, the population aged 65 and over plus the percentage of the
civilian population registered as unemployed. The resulting ratio gives a
crude measure of welfare generosity, theoretically to be interpreted as the
percentage of GDP received in welfare spending for every 1 per cent of the
population in need.
There are two obvious deficiencies with this measure. First, it presents
an average figure for each country, when we know that benefits to differ-
ent sections of the population in need in a given country often vary quite
markedly. In some countries, and particularly in Southern Europe (see
 Francis G. Castles 239

Table 4 Welfare state generosity ratio in twenty-one OECD countries,

1980, 1998 and change over time

1980 1998 Change

Australia 0.73 0.89 0.16

Canada 0.78 0.88 0.09
Ireland 0.93 0.83 -0.11
New Zealand 1.61 1.10 -0.51
United Kingdom 0.88 0.98 0.10
United States 0.71 0.85 0.13
Family mean 0.94 0.92 -0.02
Denmark 1.36 1.46 0.10
Finland 1.11 1.02 -0.09
Norway 1.12 1.43 0.31
Sweden 1.57 1.20 -0.37
Family mean 1.29 1.28 -0.01
Austria 1.35 1.36 0.01
Belgium 1.07 0.87 -0.20
France 1.04 1.04 0
Germany 1.08 1.05 -0.03
Nether lands 1.54 1.34 -0.20
Family mean 1.21 1.13 -0.08
Greece 0.72 0.81 0.08
Italy 0.89 0.86 -0.03
Portugal 0.61 0.92 0.31
Spain 0.70 0.56 -0.14
Family mean 0.73 0.79 0.06
Switzerland 1.09 1.52 0.43
Japan 0.91 0.72 -0.19
Overall mean 1.04 1.03 -0.01
Coefficient of variation 29.0 25.5

Notes and sources: Welfare state generosity ratio calculated by dividing social
expenditure data from table 1 by the sum of the percentage of the population
aged 65 years and over and the percentage of the civilian population unemployed.
Data on both aged population and unemployment from OECD, 2001 b. All
calculated figures subject to rounding errors.

Ferrera, 1996 ), a marked insider/ outsider differentiation in the labour

market is translated directly into the sphere of social security provision,
with pension provision for core workers being much more generous than
for peripheral workers and the unemployed. Second, it implies that all
240 A Race to the Bottom?

expenditure is delivered to just two categories of welfare recipient. Ideally,

apart from these traditional sources of welfare need, we would have liked
to include a proxy for the new kinds of need emerging frop1 a changing
family structure (see Orloff, 1993; Daly, 1997; Esping-Andersen, 1999).
The percentage of the population constituted by children living in single
parent families might have served this purpose, but the information
required to calculate such a measure is simply unavailable for the time
period covered by this study. The best data available are for eighteen of our
twenty-one OECD countries for the period 1986 to 1996 (see Beaujot and
Liu, 2002). On the basis of these data, we calculate that the percentage of
the population constituted by children living in single parent families
increased from an average of 1.8 per cent to 2.4 per cent over this period of
ten years. Only in five of these countries - Germany, New Zealand,
Sweden, the United Kingdom and the United States - did this lead to an
increase in the population in need of more than 1 per cent. In these coun-
tries, the trend in welfare generosity is likely to have been somewhat-
although not hugely - more adverse than indicated by the figures in the
final column of table 4.
Looking at table 4 in conjunction with table 1 shows that taking depend-
ency levels into account really can make a big difference to our compre-
hension of the relative performance of welfare states. This can be seen by
looking at the cases of New Zealand and Switzerland in 1980 and of Greece
and Italy in 1998. In the earlier period, New Zealand is close to the expend-
iture average and Switzerland a complete laggard, but in ratio terms New
Zealand turns out to be the OECD's most generous welfare provider of the
early 1980s and Switzerland close to the average. This is because, in this
period, these countries had much lower levels of dependency than most
other OECD countries. The Greek and Italian cases tell the reverse story.
In 1998, Greece and Italy were at or around OECD average spending
levels, but both were very much below the OECD average in terms of the
generosity of provision, because both experienced relatively high levels of
dependency. Spain is, undoubtedly, the country in which high and increas-
ing dependency led to the most serious outcomes, with an extraordinarily
high level of unemployment producing a level of generosity markedly
lower than in any other OECD country.
Where generosity is the criterion, there seems to be a three-tier hierarchy
of welfare performance. In both 1980 and 1998, the hierarchy is quite dis-
tinct, as demonstrated by a relatively high coefficient of variation that does
not decline markedly over time. In both periods, there was a small group
of countries with levels of generosity considerably higher than the mean.
In 1980, it consisted of New Zealand, Sweden, the Netherlands, Denmark
and Austria. In 1998, New Zealand and Sweden had dropped out of this
elite group to be replaced by Switzerland and Norway. In both periods,
there is a second middling rank of countries constituted almost entirely by
 Francis G. Castles 241

Scandinavian and continental Western European countries, but with New

Zealand joining in 1998. At the other end of the distribution, with gen-
erosity ratios well below the OECD mean, is a group of Southern
European and English-speaking countries together with Japan and, by the
end of the period, also Belgium. The relative lack of generosity of these
countries stems from different causes. The Southern European countries
other than Portugal, but plus Belgium, are around the middle of the distri-
bution in spending terms, but have high levels of dependency. The English-
speaking nations, other than New Zealand and the United Kingdom,
together with Japan are, by contrast, extremely low spenders, despite quite
moderate levels of dependency. These latter are countries, which, one
might conclude, are ungenerous by policy choice.
The most important conclusion, however, relates to what was happening
to OECD levels of generosity across the board during this period. Between
1980 and 1998, the average level of dependency in OECD countries
increased from 17.8 to 22.8 per cent of the population or by just over 25 per
cent. What table 4 tells us is that this very substantial increase in need was
accommodated with virtually no alteration in the average OECD level of
welfare state generosity. Admittedly, standards declined in about half the
countries featuring in the table, but, interestingly, most of the really large
cuts in generosity - in New Zealand, Sweden and the Netherlands -
occurred in those countries where generosity was highest in 1980. Only four
countries- Belgium, Ireland, Japan and Spain- experienced sizeable reduc-
tions in generosity leaving them well adrift of average OECD standards of
provision. That is simply not enough to sustain an argument that increasing
exposure to the international economy has fuelled a general trend towards
declining welfare standards. The fact, however, that an average 4 per cent
increase in social expenditure as a percentage of GDP led to essentially
unchanged levels of provision might well be argued as evidence for the
proposition that the countries of the OECD have now probably reached the
outer limits of welfare state generosity measured in these terms.

Conclusion

This chapter's main objective has been to use cross-national analysis to

establish the validity or otherwise of the 'race to the bottom' hypothesis.
If that hypothesis is to have any meaning above and beyond the fact that a
minority of countries suffered adverse trends in this period, it must point
to some generalized trend towards cutbacks in spending or, in what is,
essentially, an extremely watered-down variant of the argument, that there
has been some generalized decline in standards of provision. Despite an
extensive examination of a wide range of expenditure indicators, no evi-
dence of such trends has been forthcoming and we can only conclude that
242 A Race to the Bottom?
the 'race to the bottom' is a crisis myth rather than a crisis .reality. Despite
cutbacks in a number of countries, our analysis demonstrates unequivo-
cally that OECD average levels of social expenditure, whether measured
as percentages of GDP as generosity ratios, or in real terms, either
increased or remained constant between 1980 and 1998. Indeed, given that,
during this period, social expenditure was increasing as a percehtage of
GDP and that non-social categories of expenditure were declining,
expenditure for welfare purposes was becoming appreciably more salient
with the passing of time.
This enhanced salience combined with a general slowdown in the rate of
expenditure growth may, in itself, be part of the explanation of increasing
anxiety about the future of the welfare state at a time when all the objec-
tive indicators suggest that expenditure levels and standards of provision
were being maintained at roughly existing levels. In the 'golden age' of the
welfare state, high levels of economic growth made it possible for govern-
ments to increase the scope of social spending without cutting back real
levels of private consumption and without holding back other public pro-
jects. However, in the 1980s and 1990s, new welfare demands could only
be satisfied by cutting private consumption or by making trade-offs against
other public spending programmes. The welfare state had become simul-
taneously more salient and more vulnerable on several fronts. Clearly, this
has meant that those fighting to extend its frontiers have had to fight harder
in recent decades than they did in the years of plenty. Clearly, too, some
battles have been lost, making it extremely tempting for those involved to
seek compelling explanations of why the forces of 'social progress' are now
apparently on the back foot.
This is one of the reasons crisis myths are born. Such accounts general-
ize from particular reverses and from adverse developments in particular
countries in a way that makes such defeats more comprehensible and less
blameworthy. When political actors are confronted by forces 'beyond their
control', they no longer need excuses for failure. But alibis for failure are
only part of the story. Myths also provide excuses for new attacks on the
welfare state by its enemies (see Drezner, 2000). Globalization or declin-
ing economic growth or some other currently supposed cause of crisis pro-
vides a cloak of legitimacy for those seeking to advance plans to cut taxes
and spending. Once they have convinced policy-makers that 'there is no
alternative', and that the state has no capacity to stand against the economic
forces arrayed against it, they have won half the battle. If a 'race to the
bottom' is on the cards, clearly it makes sense to be in it, and in it with a
vengeance! Crisis myths flourish when opposing sides find that the same
abdication of responsibility serves both of their purposes and when neither
side seeks to question anecdotal evidence of supposedly general trends. As
this chapter demonstrates, the best antidote to myth-making is systematic
comparative analysis.
 Francis G. Castles 243

Note

from Francis G. Castles, The Future of the Welfare State, Oxford, Oxford
University Press, 2004, pp. 21-46.

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Europeanization
Welfare-State Regress inc
Western Europe: Politics,
Institutions, Globalization,
and Europeanization
Walter Korpi

Introduction

Once upon a time- not that long ago- there was consensus in Western
Europe that the welfare states' full employment and expanding social-
citizenship rights inaugurated after the end of World War II had come to
stay. This reshaping of the welfare state had emerged in the context of the
sea change in power relations, when for the first time in history left parties
had come to be either dominant parties in governments or the major oppo-
sition parties. In its 1945 election manifesto the British Labour Party made
'jobs for all' and 'social insurance against the rainy day' its primary polit-
ical objectives and outlined 'the means needed to realise them' (Craig, 1975,
pp. 124-5, 130). Labour's unexpectedly great victory set the tone and
impressed a lesson that was widely accepted in Europe. Scholars, polit-
icians, and the public came to see the continued existence of such welfare
states as ensured by a supportive electorate. In the 1950s this mood was
summed up by a leading British Labour politician: 'Any Government
which tampered seriously with the full employment welfare state would
meet with a sharp reversal at the polls' (Crosland, 1956, p. 28). In the mid-
1970s, however, this stability began to evaporate. Before the end of the
century Western scholars had shifted their focus from the study of welfare-
state expansion to analyses of its regress, welfare-state retrenchment. In the
1990s the study of retrenchment became a growth industry with an out-
pouring of articles and books.
In scholarly debates on welfare-state retrenchment, one key issue has
concerned the extent of retrenchment. On this question the dominant view
has been that in Western Europe no sweeping or radical retrenchment has
occurred, a view that has recently been questioned. Other central questions
have concerned the causes of retrenchment. Here the debate has been
 Walter Korpi 247

rather intensive. In the theoretical discussions key issues have concerned

the relative significance of three factors within this context: economic
transnationalization, postindustrialism, and distributive conflict as ex-
pressed in partisan politics. Debates on economic transnationalization
have included not only globalization but also the role of economic and
political integration within Europe. On the significance of globalization
for retrenchment, views have differed. The major proponent for post-
industrial changes as causes for retrenchment has been Paul Pierson. In a
series of pioneering and challenging works, Pierson (1994, 1996, 2001a,
2001b, 2001c) staked the claims for what came to be described as 'the new
politics of the welfare state'. The new-politics strand of thought rejects the
hypothesis that globalization is a main cause of retrenchment, arguing
instead that here postindustrialism exerted the major pressures. The new-
politics perspective also partly counterposes itself in relation to the power-
resources approach to welfare-state development. As is well known, the
latter approach views welfare states to a significant extent as outcomes of
distributive conflicts involving class-related interest groups and political
parties, conflicts where the relative power of actors is significant (Esping-
Andersen, 1985, 1990; Huber and Stephens, 2001; Korpi, 1983, 1989;
Myles, 1984).
Although Pierson holds that the power-resources approach is very fruit-
ful in explaining welfare-state expansion, he argues that in crucial respects
retrenchment is different from expansion. Basic to the new-politics per-
spective is the hypothesis that, in the retrenchment phase, the major forces
driving welfare-state change no longer come from distributive conflicts
among socioeconomic interest groups, but rather emanate from post-
industrial changes (Pierson, 2001 b). Growing service sectors decrease eco-
nomic growth rates, whereas the greying of populations, changing family
patterns, increasing share of women in the public sector labour force, and
maturation of government welfare commitments all tend to increase social
expenditures. Such postindustrial changes generate intense and persistent
pressures on government budgets (Pierson, 2001a). The cold star of per-
manent austerity therefore guides governments of all political shades to
attempt cuts in social expenditures.
A central challenge by the new-politics strand of thought to the power-
resources approach is that, in the retrenchment phase, class-related politi-
cal parties that once drove welfare-state expansion have now largely
receded into the background. Thus, although politics still matter, accord-
ing to the new-politics perspective 'there are good reasons to believe that
the centrality of left party and union confederation strength to welfare
state outcomes has declined' (Pierson, 1996, p. 151). New-politics sup-
porters view these forces as having been replaced to a large extent by new
client groups of benefit recipients generated by welfare states, such as pen-
sioners, healthcare consumers, the disabled, and welfare-state employees.
248 Welfare-State Regress in Western Europe

Because of the size and concentration of interests in such client groups,

they have been able to largely resist government attempts at cutbacks. The
resilience of the welfare state is further fortified by the new ,.sitl1ation in
which governments find themselves. In the expansionary period poli-
ticians could claim credit for carrying out generally popular reforms, but
in the retrenchment phase they have to overcome the negativity bias when
strong interest groups are required to forego rights and benefits seen as
entrenched parts of the status quo. Pierson thus advanced the hypothesis
that for these reasons welfare-state retrenchment is likely to be a limited
phenomenon.
In this paper I focus on Western Europe since the mid-1970s and discuss
studies of the extent and causes of welfare-state regress or retrenchment.
The latter terms are used interchangeably here to refer to policy changes
involving or implying cuts in social rights in ways that are likely to increase
inequality among citizens. Because of the large number of studies dealing
with welfare-state change, this review has to be highly selective, focusing
on works that exemplify the various strands of thought concerning the
driving forces and extent of retrenchment. 1
The review begins with a consideration of the definition of the depen-
dent variable in analyses of welfare-state regress and with methodological
problems in such analyses. I argue that, although most analyses have
focused on social transfers and services, postwar welfare states of Western
Europe have typically included full employment as one cornerstone,
making unemployment increases an important indicator of welfare-state
regress. Furthermore, most comparative studies have been either based
on expenditure data and/or focused on one or a few cases. Recent work
permitting comparison based on social-citizenship rights, with data for a
relatively large number of countries and long time periods, has greatly
improved the description of welfare-state regress as well as causal analy-
sis. The next section compares European countries and the United States
with respect to the role of full employment in their respective welfare
states and their different paths of unemployment development since the
end of World War II. The following section describes the extent of
retrenchment in social-insurance programmes and discusses the role of
welfare-state institutions in this context. Thereafter I discuss the poten-
tial role of partisan politics during the period of retrenchment for differ-
ences among countries as well as the role of retrenchment for gender
inequality. The penultimate section reviews the effects of globalization
and of ongoing processes of political and economic integration in Europe
on welfare-state regress, differentiating between various aspects of
welfare states. The last section discusses the findings in this review. In
dealing with theoretical arguments and causal interpretations, I focus
attention on a comparison between the new-politics perspective and the
power-resources approach.
 Walter Korpi 249

Definition and Measurement of Welfare States

In the study of retrenchment the dependent variable, the welfare state, has
typically been defined in terms of social transfers and/ or social services.
Although these two areas, of course, are central, in analyses of retrench-
ment it is necessary to have a theoretically based definition of the depend-
ent variable. In the power-resources approach scholars view postwar
changes in welfare states to a significant extent as reflecting power contests
among major interest groups related to the relative role of markets and
democratic politics in distributive processes. These conflicts also define
and change institutions that set frames for continued distributive conflicts.
Such an approach indicates that, although transfers and services are
important, here at least one more area must be considered, namely that of
unemployment.
In the power-resources perspective unemployment appears as a central
variable because for categories of citizens with labour power as their main
basic power resource, the efficacy of this resource in distributive conflict
and bargaining is to a major extent determined by the demand for labour
and by the level of unemployment. In this perspective the maintenance of
low levels of unemployment empowers citizens and is an essential preven-
tive part of the welfare state (for example, see Korpi, 1983, p. 188).
However, the right to employment is very difficult to establish as a claim
right. Yet, in almost all countries of Western Europe in the years after the
end of World War II, full employment became what can be called a social
protoright in the sense that it was widely expected by citizens and that irre-
spective of partisan composition most European governments acted so as
to maintain full employment
As Blanchflower and Oswald (1994) have shown, the level of unem-
ployment has a clear relevance to wage levels. In local labour markets and
industries with high unemployment, wages tend to be lower than where
unemployment is low. This empirical fact indicates that the level of unem-
ployment is likely to be both a main bone of contention between employ-
ers and employees and a major factor determining outcomes of the
positive-sum distributive conflict between them concerning the distribu-
tion of firm revenues. The state of the labour market and changes in levels
of unemployment must therefore be seen as essential welfare-state indica-
tors and cannot be overlooked in analyses of welfare-state retrenchment.
As in earlier analyses of welfare-state expansion, in the study of
retrenchment the typical dependent variable has been welfare-state effort,
defined as the size of government social expenditures in relation to the
gross domestic product. With basic data available in publications by the
International Labour Organization (ILO) and the Organization for
Economic Cooperation and Development (OECD), this indicator has
been widely used. Unfortunately, however, the well-known problems
250 Welfare-State Regress in Western Europe

associated with the welfare-effort indicator become agg-ravated in the

analysis of retrenchment. Thus, for example, international developments
and government policies can raise the level of unemployment, thereby
increasing public expenditures for the maintenance of the unemployed
while also tending to slow down growth in the gross domestic product.
Therefore a reliance on the conventional welfare-state effort indicator may
make an unemployment crisis appear as an actual increase in welfare-state
effort. As argued by Swank (2001, p. 215), with proper control variables
some of these problems can be counteracted, yet in this context results
based on expenditure changes are likely to remain problematic.
As a complement to studies on welfare-state development based on
expenditure data and case studies, within the Social Citizenship Indicator
Program (SCIP), alternative measures of welfare-state development are in
the process of being created; these measures focus on describing and quan-
tifying the nature of legislated social rights in major social insurance pro-
grammes. Preliminary data from this source have been used to analyse
retrenchment in social insurance programmes in the 1975-95 period
(Korpi and Palme, 2000, 2001, 2003). Since social rights reflect welfare-
state development from a different angle than the one expressed in expen-
diture data, these analyses provide a relevant point of comparison with
results from earlier studies.

The Regress of Full Employment in Europe

As noted above for welfare-state regress, the hypothesis of only limited

retrenchment has won rapid and widespread acceptance among Western
scholars. This acceptance appears to reflect not so much the weight and
depth of the empirical data presented as the symbolic stature of the two
cases originally studied by Pierson (1994). Choosing the United States
under Ronald Reagan and Britain under Margaret Thatcher as his crucial
test cases, Pierson asked, if retrenchment could not be found under such
militant anti-welfare state governments, then where else could it be found?
In the European context, Pierson's conclusion that the 'British welfare
state, if battered, remains intact' was especially persuasive (Pierson, 1994,
p. 161 ). In retrospect it is, however, clear that owing to the pioneering
nature of these studies there are many problems associated with the empir-
ical bases upon which these claims have been based. It can be argued that
several of these claims are premature and reflect problems in the definition
of welfare states, a reliance on case studies of few countries, and the use of
social expenditure data as the prime outcome variable. Here I focus on
Western Europe since the mid-1970s and discuss studies of the extent and
causes of welfare-state regress or retrenchment (Korpi and Palme, 2000,
2001, 2003).
 Walter Korpi 251

One central problem with most analyses of welfare-state regress is that

they have excluded changes in levels of unemployment and have only indi-
rectly dealt with the return of mass unemployment in Europe since the
1970s. In their impressive study Huber and Stephens (2001) brought high
unemployment into the analysis in terms of contexts in which retrench-
ment is likely to occur; however, they did so without analysing the demise
of full employment as part of welfare-state regress. Castles (2001) also con-
siders unemployment as a contextual variable in the retrenchment process.
The role of full employment in the welfare state differs greatly between
Europe and North America. In almost all democracies of Western Europe
the first decades after the end of World War II witnessed a remarkable
change in societal power relations when, for the first time in the history of
capitalism, left parties emerged as either government parties or major
opposition parties and union densities doubled in relation to levels
obtained between the world wars. This dramatic change forms the back-
ground for the expansionary period of European welfare states. The mobi-
lization of the labour force during the war had proved that in the real world
full employment could be achieved. Keynesian ideas showed that also the-
oretically full employment was possible and that deep recessions such as
those appearing between the two world wars could be avoided.
In Western Europe the emergence of full employment as well as the
expansion of social transfers and social services thus emerged at approxi-
mately the same time. Crosland's (1956) statement about government and
full employment (quoted above) indicates that contemporaries saw this
triplet as constituting a unity, the full-employment welfare state, where
expanding social insurance and services were combined with unemploy-
ment rates below the 3 per cent maximum level set by the British social
reformer William Beveridge (1944). In Europe the concept of the Keynesian
welfare state became widely used (e.g., Offe, 1984). In European countries
with an uninterrupted political democracy during the postwar period this
type of full-employment welfare state can be seen as an outcome of dis-
tributive conflicts and macropolitical bargaining that resulted from the
changing relations of power in European societies as noted above. It was a
manifestation of what can be called an implicit social contract between the
main interest groups in these countries (Korpi, 2002). However, some dif-
ferences can be found among countries. Ireland and Italy, with the weakest
traditions of left government incumbency, retained relatively high levels of
unemployment during the 1950s and 1960s. Furthermore, when unem-
ployment levels rose after the first oil shock in 1973, this rise was much
more dramatic in the countries of the European Economic Community
(EEC) than in the countries of the European Free Trade Area (EFTA),
where the rise was delayed for approximately fifteen years.
During the period after World War II Western Europe and the United
States had very different histories when it came to levels of unemployment.
252 Welfare-State Regress in Western Europe

In the United States the postwar social contract did not include full
employment in the European sense. From 1955 to 1973 US unemployment
levels averaged 4.9 per cent (figure 1). In the same period six r:ore countries
of the European Economic Community - Belgium, Denmark, France
Germany, Netherlands, and the United Kingdom- had less than half of th;
US unemployment level, 2.1 per cent. But after the oil shocks in 1'i73 and
1979, the average unemployment level in these countries quadrupled and
was 8.2 per cent during 1982-2000, while changes in the United States were
modest. In fact, after World War II and until the end of the century, US
unemployment rates have shown essentially trendless fluctuation. In stark
contrast Western Europe experienced first the arrival of full employment
and thereafter the return of mass unemployment.
Clearly a number of factors were of relevance to the return of mass
unemployment to Europe. 2 However, conflicts of interest between major
interest groups are likely to have been of significance there. Long-lasting
full employment in Europe came to have consequences unwanted by
important interest groups. Thus business interests saw with increasing
alarm the rising levels of labour-force involvement in industrial conflict as
well as the falling share of profits and increasing share of wages in the
domestic product. Yet the fear of voter reactions pressed governments of

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Year
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0'
00
0'
0'
0'
0'
0'
0
0
(".1

Figure 1 Unemployment rates (three-year moving averages) 1955-2000 in the

United States and in six European countries- Belgium, Denmark, France,
Germany, the Netherlands, and the United Kingdom
 Walter Korpi 253

all political shades to give top priority to full employment in the trade-off
between inflation and employment (OECD, 1970). As argued by Rehn
(1987), many European governments are likely to have used the window
0 f opportunity created by the oil shocks of 1973 and 1979 to allow levels
of unemployment to escalate. In the 1990s US unemployment rates
decreased more than the European average.
Within the European perspective, full employment was thus a constitu-
tive part of the welfare state. When judged in relation to the reality prior
to 1973, the return of mass unemployment must be seen as a major
retrenchment, the eradication of one of the cornerstones of Western
European welfare states. However, this radical change has occurred
outside the focus of the new-politics approach and has therefore not been
conceived as a case of retrenchment.

Social Insurance, Expenditures, and Institutions

Pierson's pioneering work on welfare-state retrenchment has been followed

by a number of interesting studies. 3 Some are comparative and based largely
on expenditure data (see Castles, 2001; Clayton and Pontusson, 1998; Hicks,
1999; Huber and Stephens, 2001; Swank, 2001). However, most of them are
examinations of a single or a few countries, often in qualitative terms (see
Bonoli and Palier, 1998; Green-Pedersen, 2001, 2002; Kautto, 2000;
Leibfried, 2001; Levy, 1999; Olsen, 2002; Palier, 2000; Palme, 2002; Palme
and Wennemo, 1998). These studies largely agree on the nature of the pres-
sures towards retrenchment faced by modern welfare states: population
ageing, changing family patterns, new gender roles, decreasing economic
growth rates, technological change, internationalization of the economy,
and changing relations between nation-states as a result of the end of the
Cold War and political-economic integration in Europe. These studies have
also largely agreed that to a remarkable extent European welfare states have
been resistant to change. Thus, for example, after a survey van Kersbergen
(2000, p. 25) concluded the following: 'The general thesis that may be dis-
tilled from the literature is that while the context of welfare state policies has
changed, this has not lead to a dismantling of existing welfare state regimes
or single programmes.' Green-Pedersen and Haverland (2002, p. 44) note
that in the post-Pierson literature 'the expectation of no sweeping retrench-
ment has largely been confirmed'. Additionally, as the title of his edited
book indicates, Kuhnle (2000) and his colleagues observed the Survival of
the European Welfare State. Furthermore, in the newly redemocratized
countries of Western Europe, such as Spain, welfare states have actually
expanded (Moreno, 2000). To account for this resilience several of these
authors point to the widespread popular support for the welfare state and to
the path dependency created by welfare states.
254 Welfare-State Regress in Western Europe

As noted above, although clearly valuable and relevant, many of the

studies made on retrenchment are problematic. Apart from overlooking
the demise of European full employment, analyses based o.n e?Cpenditure
data face other difficulties in disentangling consequences of factors such as
increasing levels of unemployment and changes in benefit levels, whereas
more qualitatively oriented studies offer rather weak benchmarks for
studying change over time and differences between countries. The SCIP
database (discussed above) provides preliminary data quantifying social
rights in major social-insurance programmes and thereby an alternative
empirical basis for the analysis of retrenchment (Korpi and Palme, 2000,
2001, 2003). Here changes in the net replacement rates of three pro-
grammes for benefits received as a result of short-term interruptions of
work income- that is, benefits during sickness, work accidents, and unem-
ployment - are of particular interest. These programmes are of major
importance to government budget deficits. Furthermore in these pro-
grammes government decisions on cuts will usually have relatively quick
effects on net replacement rates, a circumstance that increases the possibil-
ity of relating cuts to political decision making. Thus, these short-term
programmes differ from old age pensions, where political decisions may
have consequences decades later. Net replacement rates in these pro-
grammes give unidimensional variables for studying change over longer
time periods and for a relatively large number of countries.
Analyses based on the above social-rights data indicate that in the long
perspective starting back in 1930 the average net benefits for thirteen
European countries in each of these three programmes have had a mono-
tonic increase with an acceleration that began in 1950 and continued until
approximately 1975, followed by a decrease until 1995 (Korpi and Palme,
2003). This downward deviation from the long-increasing trend is an indi-
cation of retrenchment. Yet average decreases cannot be described as an
overall dismantling of these social-insurance programmes. Unlike the
removal of full employment from almost all European welfare states after
1973, in these three social-insurance programmes we find great differences
among countries. Here Britain - established as the crucial test case in the
earlier literature on the extent and causes of retrenchment - is a relevant
example. By 1995, following the coming of the Conservative government
in 1979, net replacement rates in these three programmes were cut back
below the minimum levels established in the 1946 reform. Replacement
rates in sickness insurance were actually reduced to approximately the
same level as that in 1930, while unemployment and work-accident insur-
ance benefits plunged to approximately half of their 1930 levels.
Path dependency has often been used as an explanation for welfare-state
resilience. Myles and Pierson (2001) have drawn attention to a major
mechanism explaining such stability in pay-as-you-go pensions systems: the
double payment problem. In countries with well-developed pay-as-you-go
 Walter Korpi 255

pension systems the working generation is paying the pensions for retirees
and cannot easily accept also contributing to their own future pensions in a
funded system. Mature pay-as-you-go pension systems are therefore diffi-
cult to change into funded programmes. It is important that we can explain
differences in the extent of path dependency in terms of specific mechanisms
that generate more or less resistance to cuts. Often, however, the concept of
path dependency is used to label absence of change rather than to explain
resistance to change.
As noted above, in the new-politics perspective it is widely assumed that
resistance to welfare-state cuts comes primarily from categories of benefit
recipients, such as retirees, the unemployed, the handicapped, and health-
care consumers. Although such categories are relevant and retirees in par-
ticular constitute a significant part of the electorate in most countries, other
benefit recipients, for example the unemployed, have traditionally been
very difficult to mobilize. It can be argued that of greater relevance here is
the much larger constituency of risk-averse citizens, who benefit from
insurance in terms of the reduction of risks they are likely to face during
the life course. However, in Western societies risk-averse citizens are inter-
nally differentiated by a number of potential and partly cross-cutting lines
of cleavage, such as occupation, status, income, education, ethnicity, reli-
gion, and region. These cleavages also differentiate citizens in terms of life-
time risk as well as in terms of the resources they control to handle these
risks. Given these circumstances, reflecting theory formation within the
'new institutionalism', it can be argued that major welfare-state institu-
tions are likely to be of relevance for the formation of values, attitudes, and
interests among citizens in ways that are of relevance for patterns of col-
lective action. This is because welfare-state institutions tend to create tem-
plates that emphasize some of the lines of cleavage discussed above while
downplaying others. The institutional contexts generated by welfare states
are therefore likely to affect citizens' coalition formation in terms of the
extent of support and resistance that government efforts to cut back social
rights are likely to face (Korpi and Palme, 1998; Korpi, 2001). The institu-
tional organization of risk-averse citizens, rather than the number of
benefit recipients, is likely to be of main relevance for the degree of path
dependency in welfare-state programmes.
To account for differences among countries in terms of welfare-state
development, it is fruitful to relate changes in social rights to a welfare-state
typology based on the nature of the institutional structures of the main
social-insurance programmes in a country (Korpi and Palme, 1998; Korpi,
2001 ). 4 This typology differentiates social-insurance institutions by using
three criteria: basis for claiming benefits, principles for setting benefit
levels, and forms of governance of insurance programmes. On the bases of
these criteria, it is possible to identify five different types of institutional
structures, which historically have existed in Western welfare states. These
256 Welfare-State Regress in Western Europe

institutional structures constitute the targeted, voluntary state-subsidized

basic security, state corporatist, and encompassing models. In present-cia;
Europe the latter three models are the most important ones"· .
The basic-security model is universalistic and gives benefits to all at a flat
rate, which typically is rather low. Because of the low benefit rates inherent
in this model, it cannot protect accustomed standards of living of better-off
citizens, who therefore are likely to gradually develop private solutions
such as occupational insurance and savings. In the long run, in this model
social-insurance programmes will be a concern primarily for manual
workers, whereas private programmes assume main relevance for the
middle class. This type of institution provides a context where government
attempts to cut public programmes are unlikely to meet widespread or
unified resistance and thus are likely to suffer retrenchment. In contrast, the
state-corporatist model as well as the encompassing model offer earnings-
related benefits. Within these institutional structures, public programmes
tend to safeguard accustomed standards of living among the middle class,
thereby decreasing the need for private solutions and 'crowding out' dif-
ferent types of private insurance. However, the state-corporatist and the
encompassing models affect the middle class within very different contexts.
In the state-corporatist model there are several separate occupation-related
insurance programmes, differentiated in terms of conditions, financing, and
benefits. Each programme is governed by elected representatives of
employers and employees, typically from the unions. Within state-
corporatist institutions, government attempts at retrenchment are likely to
meet resistance from preorganized bodies of risk-averse citizens attempt-
ing to safeguard their specific interests. In contrast, in the encompassing
model the middle class is included in the same programmes as all other citi-
zens. In the expansion phase this broad constituency was mobilized by
political parties and formed a major force in favour of welfare-state expan-
sion. When faced with cutbacks, however, such a heterogeneous assembly
of citizens is difficult to mobilize from the inside. In this institutional
context the degree of resistance is likely to reflect the extent to which polit-
ical parties are willing to mobilize voters against cutbacks.
The widely accepted new-politics hypothesis of only limited retrench-
ment has been called into question by analyses of cutbacks in terms of indi-
cators of social rights, focusing on sickness, work accident, and
unemployment insurance programmes (discussed above) and on changes
in net replacement levels within thirteen European countries (Korpi and
Palme, 2001, 2003). One indicator was based on cuts measured as declines
in benefit levels until1995 from the peak levels reached during 1975-1990.
Important differences were found among countries, some part of
which can be understood in terms of the structure of their dominant
social-insurance institutions. 5 The largest cuts had clearly taken place in
countries dominated by basic security institutions. Here Britain was
 Walter Korpi 257

clearly in the lead with average net replacement rates that were reduced by
almost half. Ireland followed with cutbacks amounting to one-third of
peak rates. Denmark had cutb~cks of the order of one-fifth of pe~k rates,
while lower rates were found m the Netherlands. Among the bas1c secu-
rity countries Switzerland had no major cutbacks. 6 Among the state cor-
poratist countries cuts were, on average, lowest. Thus whereas in Austria,
france, Germany, and Italy unemployment insurance programmes had
seen significant cuts, sickness and work-accident programmes had largely
been spared. An exception here was Belgium, where net benefits decreased
markedly in sickness insurance. In the encompassing category, cuts were
on the average lower than in countries with basic-security programmes,
but both Sweden and Finland had made some important cuts, primarily
during the early 1990s when their unemployment levels exploded. Norway
with its oil economy largely escaped cuts.
With reliable and comparable empirical data reflecting the character of
social rights in a large number of countries over a longer period, we get a
perspective on the extent of retrenchment in social-insurance programmes
that is quite different from the ones based on expenditure data and quali-
tative case studies. In at least a handful of European countries, major
retrenchment in social-insurance rights now appears. There is no general
path dependency; instead the different types of welfare-state institutions in
combination with factors such as constitutional veto points appear to play
significant roles in terms of path dependency and resistance to cuts.

Class and Gender

As noted above, a central hypothesis in the new-politics perspective is that,

although partisan politics and class-related parties were of major import-
ance during welfare-state expansion, in the retrenchment phase they are of
little significance. Although debated, this hypothesis has been accepted by
many. Such a view appears to be supported, for example, by observations
that in Germany the Christian Democratic-Liberal coalition government
was very cautious in attempting to trim its state-corporatist welfare state.
This view has received additional support in empirical studies. On the basis
of expenditure data, Huber and Stephens (2001) found that over time the
role of partisan politics decreased considerably. Similar findings are also
reported by Castles (2001). Ross (2000) argues that according to the
'Nixon-goes-to-China' logic, left parties traditionally associated with the
welfare-state expansion are likely to have more 'degrees of freedom' to
make cuts than have right parties.
On the issue of the role of political parties, we find dissenting voices.
Hicks (1999, pp. 220-1) argues that the left-right dimensions remained sig-
nificant during the retrenchment phase. In a case study of the Netherlands
258 Welfare-State Regress in Western Europe

Green-Pedersen (2001, 2002) analysed the role of the confessional political

tendency, which played a major role in all Dutch governments during the
twentieth century until 1995. He argued that, because of the pivQtal role of
the Christian Democratic Party, in the early 1980s this party was able to
make the reluctant but relatively weak Social Democratic Party accept cut-
backs in welfare benefits. Levy (1999) suggested that, when faced with the
necessity to cut, social democratic governments in continental European
countries attempted to turn 'vice into virtue' by predominantly cutting, for
example, overly lenient pension programmes while improving benefits
for the most needy. Kitschelt (2001) as well as Ross (2000) outlined
factors in political party systems that are likely to favour possibilities for
retrenchment.
In contrast analyses on the role of partisan politics based on SCIP data
indicate clearly significant effects of partisan politics on retrenchment in
social rights (Korpi and Palme, 2001, 2003). Events of retrenchment were
delineated in terms of cuts of at least 10 per cent in net benefit levels in sick-
ness, unemployment, and work-accident insurance during the 1975-1995
period. Taking into account the relative number of cabinet portfolios by
different parties and the duration of these cabinets, the relative risk for
major cuts was approximately four times higher for the secular centre-right
parties than for left parties. Although analyses of welfare-state expansion
based on expenditure data has often viewed confessional parties as almost
equivalent to social democratic ones, when it comes to retrenchment in
social rights they were found to occupy a position between the other two
party constellations. This pattern of partisan political effects was also sup-
ported by event history analysis and remained when a number of institu-
tional and economic control variables were considered.
Attitudinal studies in several Western European countries indicate that
the welfare state has retained widespread public support, a support which
continues to be structured by socioeconomic class and the left-right con-
tinuum in expected patterns (Taylor-Gooby, 1999; Svallfors, 1999, 2003;
Goul Andersen, 1999). Yet changes have also been noted. In Sweden after
the conversion by conservative-centrist parties and the employers' con-
federation to a very critical view of the welfare state, in the early 1990s top-
level employees in the private sector became more negative, whereas
lower-middle-class employees and workers in private as well as in public
sectors largely retained their positive views (Svallfors, 1996). When the
conservative-centrist government (1991-4) introduced major cuts in
social-insurance programmes, it was unseated by a surge of social demo-
cratic support in the 1994 election. In its efforts to decrease large budget
deficits, the new Social Democratic government continued to cut replace-
ment rates, cuts contributing to a precipitous fall in the opinion polls.
When it comes to welfare-state retrenchment, the Nixon-goes-to-China
logic may have a relatively limited sphere of application.
 Walter Korpi 259

Despite the voluminous writing on welfare-state retrenchment in recent

years, one cannot fail to notice the dog that did not bark: little attention has
been paid to consequences of regress for gender inequality. This may indi-
cate that retrenchment has not had very serious effects on the position and
relative life chances of women. O'Connor et al. (1999, p. 113) note that in
the welfare states of Australia, Britain, Canada, and the United States
women have been disadvantaged by changes such as strengthened work
incentives and increased targeting of programmes, yet 'while retrenchment
has occurred, restructuring is perhaps a better overall description of the
social policy changes during the last two decades'. Sainsbury (1996, ch. 9)
argued that in countries such as Britain and the Netherlands an increasing
reliance on means-tested benefits in combination with restricted access to
such benefits has increased gender inequality because women rely on such
benefits much more than men and because means-tested benefits for wives
tend to deter their labour-force participation. Montanari (2000, ch. 3)
observes that in Western countries the long-term trend towards an increas-
ing reliance on universal cash benefits in child support was broken in the
1980s when tax concessions increased in importance. Such a development
tends to disadvantage single mothers.
In this context, it must also be pointed out that in the Nordic countries
with their large public sectors 'manned' largely by women major cuts in
the number of employees without a similar decrease in the clients of the
public sector have to a significant extent increased the burdens of those
remaining there. In continental Europe with relatively low female labour-
force participation rates, high unemployment is likely to have slowed the
rate of increase in female participation while increasing the role of often
insecure part-time jobs.

Globalization and Europeanization

In the 1990s globalization became a term on everybody's lips and was used
to suggest a variety of international challenges facing nation-states and their
welfare-state arrangements in particular. 7 Initially threats from globaliza-
tion against welfare states were often seen as severe, but gradually views
have been shifting. For example, although Mishra (1999) saw globalization
as avery serious threat to the foundations of welfare states, such views have
been questioned by others (e.g., Boyer and Drache, 1996; Garrett, 1998).
Many scholars have come to see the effects of globalization as conditional
on national institutions and political interventions (Esping-Andersen, 1996;
Palier and Sykes; 2001; Swank, 2001). In the processes of globalization
international organizations have played significant roles (Deacon et al.,
1997). As noted above, Pierson largely dismisses globalization as a source
for fundamental welfare-state change. In discussions of the effects of efforts
260 Welfare-State Regress in Western Europe

towards economic and political integration within the EU we also find con-
siderable debates (Leibfried and Pierson, 1995; Rhodes, 1996, 2002).
In analysing the role of international political and economic changes for
national policy-making, distinguishing between different policy sectors in
welfare states is fruitful. One important distinction is found between pol-
icies to maintain full employment and social insurance and social services.
National policies to maintain full employment are likely to be much more
sensitive to, and dependent on, international developments than social-
insurance and social-service programmes are. Of relevance here is that,
with the exception of the largest economies, most Western countries are
markedly export dependent. As Fligstein and Merand (2002) noted, trade
growth has been especially pronounced within the E.U. When countries in
economic crises decrease their imports, export possibilities in other coun-
tries decline and their unemployment problems mount, thereby likely
creating a situation that pressures governments to make cuts in social-
insurance and social-service programmes. In Europe full employment after
the end of World War II was conditioned by Bretton-Woods institutions,
giving national governments influence over cross-border capital flows
while liberalizing cross-border trade. With the dismantling of cross-border
capital controls and increasing economic integration within Europe, if
unemployment is allowed to rise in some countries, maintaining full
employment becomes very difficult, especially for smaller countries.
A large-scale experiment on the role of economic interdependence and
political factors contributing to the rise of unemployment took place in
Europe after the two oil shocks in 1973 and 1979. As discussed above,
while levels of unemployment increased dramatically in the EEC coun-
tries, the EFTA countries (Austria, Finland, Norway, Sweden, and
Switzerland), where social democrats had long participated in govern-
ments, attempted via various means to avoid the return of mass unem-
ployment. For almost two decades, the EFTA countries were relatively
successful in these attempts, but in the early 1990s, especially in Finland
and Sweden, unemployment levels converged to the high European
average (Korpi, 2002).
Many economists have argued that globalization has interacted with
technological developments to increase levels of unemployment in the eco-
nomically advanced countries. The assumption here is that technological
developments in these economies have escalated educational job require-
ments to levels where the less educated no longer are qualified. At the same
time less-qualified production is moved to low-wage countries. In
advanced economies job demands are thus assumed to have outrun the edu-
cational qualifications of significant sectors of the labour force. Such inter-
pretations are often supported by the observation that levels of
unemployment tend to be especially high among workers with low educa-
tional qualifications, a correlation interpreted in causal terms. However,
 Walter Korpi 261

a similar correlation existed already during the period of relatively low

unemployment. Furthermore, in all Western countries levels of education
have been rapidly increasing. Several researchers have found that many
employees are educationally overqualified for their present jobs (Aberg,
2003; Borghans and de Griep, 2000; Freeman, 1976). The observed correla-
tion between education and the risk of unemployment may to a significant
extent reflect statistical discrimination by employers, who use educational
levels as a shorthand when sorting through the increasing numbers of job
applicants. An alternative explanation for the increasing levels of unem-
ployment is that overall demand for labour has been depressed and
remains low.
In the 1990s economic and political integration in Europe accelerated,
with the creation of the EU and the European Monetary Union as import-
ant landmarks. In the European Monetary Union we find institutional
changes that tend to depress overall demand and thereby counteract
decreases in unemployment. In contrast to the Federal Reserve Bank of the
United States, which is instructed to consider the effects of its policies on
employment and growth as well as on inflation, the new European Central
Bank has a very low inflation target as its only goal. Whereas in recent years
the Federal Reserve Bank has tended to frequently decrease its prime rates
in response to increasing unemployment, European central banks have
been steadfast in maintaining high interest levels during long periods,
without regard to unemployment levels (Ball, 1999; Carlin and Soskice,
1997). The European Monetary Union and its associated stability pact
place strict requirements on economic policies of member countries in
terms of low levels of inflation and government debt. It can be argued that
in several countries government attempts to achieve and to maintain these
criteria have contributed to very high levels of unemployment (Guillen and
Alvarz, 2001; Kosonen, 2001).
Yet most of the effects of economic and political integration within the
EU on social insurance and social services appear to have been indirect,
with high unemployment serving as the main catalyst, whereas direct
effects on social policy making have been limited. Most of the interven-
tions of the European Commission in the social-policy arena have been
issued not as binding directives but only as recommendations that member
countries are free to follow or disregard (Deacon, 2000; Hantrais, 2000;
Montanari, 1995, 2001). Based on the SCIP data set, Montanari (1995,
2001) found little evidence for convergence of legislation on social rights
within member countries in five main branches of social insurance in the
period 1970-90. The European Court of Justice has, however, had direct
effects on social policy at the European level by barring some aspects of
negative treatment of women in the labour market (Hobson, 2000). In this
area, however, future development remains open and to a large extent
depends on outcomes of ongoing internal conflicts focused on the issue of
262 Welfare-State Regress in Western Europe

if this assembly of countries is to move towards a federal structure imply-

ing some form of a European government or if it is to remain a union for
cooperation between relatively independent nation-states. ,.

Discussion

The dramatic changes taking place in the economies of the Western coun-
tries during the past three decades have generated a number of important
and informative books and articles on the consequences of these changes
for welfare states. A review of the rapidly expanding research on welfare-
state retrenchment points to the importance of clarifying the nature of the
dependent variable, the welfare state. A definition focusing on social
expenditures for transfers and services easily invites scholars to consider
explanations in terms of general forces related to structural economic
change. In the early decades after the end of World War II, scholars widely
interpreted welfare-state expansion as a result of the development of indus-
trialism generating universally shared needs for a well-trained and inter-
nally differentiated labour force (Kerr et al., 1964). Three decades later,
analysts have explained welfare-state retrenchment in terms of postindus-
trialism, which via demographic and economic changes generates perma-
nent austerity and thereby drives retrenchment. Although it is obvious that
both industrialism and postindustrialism significantly change the contexts
and conditions for policy-making, the question is to what extent these
changes basically alter the nature of distributive conflict in Western soci-
eties. In the power-resources approach, viewing welfare states largely as
outcomes of distributive conflicts between major interest groups differ-
ently endowed in terms of assets to be used in markets and in collective
action via politics, conflicts concerning the determination of demand for
labour and levels of unemployment emerge as key issues. Government
budgetary pressures, the central causal factor driving retrenchment in the
new-politics perspective, is to a major extent correlated with the rise in
unemployment levels.
The widely shared view that welfare-state regress in Western Europe has
been relatively limited partly reflects the fact that many scholars on
welfare-state retrenchment have overlooked the return of mass unem-
ployment, a central feature of Western European retrenchment.
Furthermore, the widespread reliance on expenditure data has tended to
blur the contours of retrenchment. Although the many case studies of a
single or a few countries have given very valuable clues to the processes of
retrenchment, such information has been difficult to forge into a larger
picture of the extent and causes of retrenchment. In this context data on
changes in social rights in social-insurance programmes provide a comple-
ment to earlier studies, offering limited sets of well-defined comparative
 Walter Korpi 263
measures for a large number of countries and a relatively long time period.
Analyses based on such data question earlier interpretations of the extent
and causes of retrenchment. Thus since 1975 in a handful of European
countries citizenship rights in three main social-insurance programmes
have changed in ways that must be described as major retrenchment.
Differences in outcomes between earlier analyses and those based on social
citizenship rights are especially stark when it comes to Britain, a crucial test
case in the discussion on the extent and causes of retrenchment. In the
debates on the role of class-related political parties in welfare-state regress,
analyses based on social-rights data clearly support the hypothesis of a
continued role of partisan politics in the retrenchment phase.
In discussions on the role of globalization and on European integration
for welfare-state regress, conflicting hypotheses have been advanced. Here,
however, considering different aspects of welfare states and their interac-
tions is necessary. It can be argued that a major part of the effects of globali-
zation and transnational integration on welfare-state retrenchment has
been focused on full employment, one of the cornerstones of the postwar
European welfare state, the undercutting of which in turn may have effects
on social insurance and services. The liberalization of cross-border capital
movements has to a significant extent turned the tables to the disadvantage
of governments attempting to safeguard full employment. Within the EU,
developments limiting the economic policy choices of governments in
member countries are also likely to have been significant. In the power-
resources perspective, the return of mass unemployment and attempts
to make cuts in social-citizenship rights appear as a reworking of the
implicit social contract established in Western Europe after the end of
World War II.

Notes

From Annual Review of Sociology, 29, 2003, pp. 589-609.

For valuable help in working with this paper the author wants to thank Eero
Carroll, Stefan Englund, Ingrid Esser, Tommy Ferrarini, Helena Hoog, Tomas
Korpi, Ingalill Montanari, Joakim Pal me, Ola Sjoberg, and Stefan Svallfors.
As pointed out by several authors, welfare states change in a number of ways,
only some of which can be described as regress or retrenchment (Ferrera and
Rhodes, 2000; Pierson, 2001a). The numerous studies that do not concentrate
on retrenchment are not included here. In Eastern Europe developments in
the countries of the former Soviet block are so different that they cannot be
treated here.
2 For analyses of the arrival, continuation, and demise of full employment in
Western countries, see Korpi, 2002.
3 Collective works of significance in this context are volumes by Clasen (2001),
Bonoli et al. (2000), Esping-Andersen (1996 ), Ferrera and Rhodes (2000), Kautto
et al. (see Kautto, 1999, 2001), Kuhnle (2000), Pierson (200lc), and Scharpf and
264 Welfare-State Regress in Western Europe

Schmidt (2000a, 200Gb). Reviews of selected literature are found in Green-

Pedersen and Haverland, 2002, van Kersbergen, 2000, and Lindbom, 2002.
4 In contrast to Esping-Andersen's (1990) influential typology of welfare-state
regimes, which is based on a broad set of indicators and therefore 'fruitful for
general descriptive purposes, this typology is focused on welfare-state institu-
tions, which can be seen as intervening variables, relating causes to outcomes.
This institution-based typology provides a much more precise basis for differ-
entiation of welfare states, for measuring changes over time, as well as for causal
analysis. The social-insurance programmes used for the typology are old age
pensions and sickness cash benefits, programmes that are of major relevance for
all socioeconomic categories. In almost all these countries sickness cash benefit
programmes have the same type of institutional structure as old age pensions.
5 Because of significant correlations between potential causal and contextual
variables, such as the number of constitutional veto points, the type of domin-
ant political parties, and the structure of social insurance institutions, separat-
ing the different contributions of these factors to retrenchment is difficult.
6 The relative stability in Switzerland is likely to partly reflect the large number
of constitutional veto points in its policy-making system.
7 As is well known, the term globalization has many meanings. I use it here to
refer to the liberalization of cross-border capital movements and of interna-
tional trade.

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Deliberative Governance and
EU Social Policy
Paul Teague

Introduction

The two main paradigms for analysing European integration have long
been intergovernmentalism and nco-functionalism. The former suggests
that the Member States control the decision-making process inside the EU
and ensure that national sovereignty is as far as possible protected. From
this point of view, European integration entails not the creation of a super-
state but fostering mutually advantageous political and economic cooper-
ation in a manner that respects national sovereignty. N eo-functionalism
normally assumes the opposite, addressing the conditions under which
people might shift their loyalty and commitment from national to EU
level (Haas, 1958). In explaining just how such a transfer could occur,
much use is made of the concept of spillover, a process whereby integra-
tion in one functional area obliges closer cooperation between Member
States in others.
Although both views still have their robust advocates (Moravcsik, 1999;
Str0by Jensen, 2000), it is now widely accepted that neither is able to capture
the full complexities of European integration. The new consensus is that
while the EU has traits of intergovernmentalism and nco-functionalism, it
fully reflects neither one nor the other. It is a political entity that defies such
established analytical categories. Multi-level governance is the term now
most frequently used to describe its political formation. From this perspec-
tive, the EU is not like the traditional nation-state with a tight fit between
citizenship, political representation and policy-making. Nor is it a fully
fledged supranational body with the capacity to 'steer' the European
economy and polity. Rather it is a multi-layered amalgam of national gov-
ernments and EU institutions, policy networks, independent agencies and
interest groups, creating a patchwork governance regime.
270 Deliberative Governance and E U Social Policy

The purpose of this article is threefold. The first is to suggest that the
consequence of this patchwork form of governance has been to create a
dilemma with regard to the institutional organization of econom.ic citizen-
ship- the bundle of rights and procedures used to incorporate people into
the world of work- in Europe. On the one hand, EU social policy has been
strong enough to create a wedge between economic citizenship and the
nation-state- the notion of 'national' industrial relations systems has been
destabilized. On the other hand, the institutional system of the EU is too
weak to sustain a fully formed model of economic citizenship. Our second
aim is to deepen insight into the origins of this dilemma by outlining the
institutional dynamics and tensions of key parts of the EU social policy
regime. Finally, we argue that EU social policy actors faced with the above
dilemma are now designing a new approach, termed deliberative gover-
nance, which seeks a more comfortable accommodation of the 'national'
and 'European' in the sphere of economic citizenship. It is uncertain
whether this new regime can be made fully sustainable.

The Policy Parameters of Social Europe

According to the multi-level governance thesis, policy-making in the EU

oscillates between a number of loosely interconnected institutional layers,
and the regulatory impact of EU decisions varies not only across policy
arenas but also over time in the same policy area. This is as true for social
policy as it is for other aspects of governance. Thus, in the 1970s the
Member States attempted to give European integration a 'human face' by
enacting employment Directives in tune with economic and social devel-
opments on the ground. In the 1980s, social policy took a different insti-
tutional twist. On the one hand, the formal political decision-making
channels became blocked as the Conservative government in the UK
stoutly opposed most interventionist employment policies. On the other
hand, the European Court of Justice (ECJ) kept alive the EU presence in
labour market governance through a number of important rulings and
judgments. A further reorientation in social policy took place in the 1990s
when the focus shifted away from employment regulation towards the
promotion of policy activity designed to foster job generation. Thus, the
institutional drivers behind EU social policy have varied over time as have
the aims and objectives of such measures.
This continually mutating policy regime has had an important impact on
national employment systems in a number of ways. First of all, an EU-
wide interpretative framework for social policy has evolved, that has
encouraged a common understanding on both the feasibility and desir-
ability of Europe-wide employment measures. More specifically, it has fos-
tered the view that Europe has a distinctive brand of capitalism which
 Paul Teague 271

combines social rules with open markets and which is worth protecting.
The prolonged and acrimonious battles in the European Council over par-
ticular pieces of labour law cannot be dismissed as relatively minor politi-
cal squabbles. On the whole, they reflect a genuine and continued
commitment on the part of large sections of the administrative and politi-
cal elites in Europe to developing some type of 'third way' capitalism. It is
this commitment that explains why most Member States have shied away
from the American 'deregulated' labour market model. At the same time,
the interpretative framework for Social Europe recognizes that the institu-
tional and political diversity of the Member States places enormous con-
straints on the adoption of policies to harmonize or centralize employment
regulation on an EU basis. Most serious advocates of EU social policy rec-
ognize that such a regime will founder if it is not sensitive to the wide vari-
ations in national institutional circumstances inside the EU.
Second, the emerging body of European labour law has opened up a reg-
ulatory arena for labour market affairs at EU level. Clearly some employ-
ment Directives have had a greater impact on domestic employment
systems than others. Those on health and safety have probably had the
biggest impact, followed by legislation on equality. A distinctive feature of
the EU regulatory arena is that while it does not lay down 'tablets of stone'
for national labour law regimes, it has nevertheless created important
frameworks for the development of domestic employment rules. For
example, Marginson (2000) shows that although the European Works
Council Directive is weak in several important respects it has opened the
door to the Europeanization of national systems of corporate governance.
Third, EU social policy has caused an increase in extra-national forms of
policy collaboration and social mobilization. The Amsterdam Treaty made
the benchmarking of employment and social policies across the EU a legal
obligation. As a result, an essential dimension of national employment policy
formation from now on will be lesson-drawing across the Member States.
The aim is a convergence in the goals of employment policy in the context of
national institutional diversity. A similar but more amorphous process is
emerging in relation to the actions of civil associations in the labour market.
Trade unions when setting bargaining demands have one eye on domestic
circumstances and another on European developments. Equal opportunities
groups across the EU are linking up to find the best way to advance the main-
streaming of gender measures in public administration and enterprise prac-
tice. Thus a dense web of social and policy connections has emerged as a
result of the European integration process, fusing together national admin-
istrative and social structures. A loose association, yet to be fully under-
stood, is unfolding between social learning and liberalization inside the EU:
a political marketplace has emerged alongside the economic one.
But it is important to recognize that the relationship between the insti-
tutional architecture of EU social policy and the European market is far
272 Deliberative Governance and E U Social Policy

from symmetrical. In many ways, EU social policy has led to an awkward

hybrid with regard to economic citizenship in Europe .. As suggested
earlier, it has been strong enough to loosen the long-establi.sh~d and close
association between economic citizenship and the nation-state: the operat-
ing institutions of national labour market governance have been opened up
to European influences. At the same time, EU social policy is neit;her suf-
ficiently encompassing nor in-depth to push through a fully developed
supranational model of economic citizenship. Thus, while the EU can
make important interventions in the labour market, it lacks the relarxce-
ment to build a 'dual' or 'multi-tiered' model of economic citizenship as
advocated by Habermas and others (Teague, 1999a).
The prospects of the EU pushing forward and creating a more complete
model of economic citizenship are not particularly encouraging, for three
reasons. One is that the EU lacks the economic and political competence
to build a durable model of economic citizenship. It has virtually none of
the attributes of a conventional welfare state: for example, it cannot mount
a large-scale redistribution programme through the taxation system. Its
policy capacity in important areas such as education and health is weak,
and its competence on employment relations matters is carefully circum-
scribed. For instance, as a result of the legal changes introduced by the
Maastricht and Amsterdam treaties it is now well established that wage
determination, rules governing strikes and lockouts and the right of asso-
ciation are outside its remit. Second, it is questionable whether there is suf-
ficient popular support for the EU to extend its authority further in the
social policy arenas. While talk of a 'legitimacy crisis' may be overplayed,
only the most ardent Europhile would claim that a popular base exists for
a supranational labour market governance system. Third, it is uncertain
whether the institutional drivers behind EU social policy are sufficiently
developed to 'carry' a more advanced model of economic citizenship. In
the following sections, important components of the EU social policy
regime are examined to show just how the EU has arrived at an awkward
dilemma with regard to economic citizenship.

The EU Judicial System and Social Policy

Weiler (1999) has argued that the judicial system of the EU, particularly the
workings of the ECJ, has been the key engine behind its political develop-
ment, even maintaining that it has been responsible for the transformation
of Europe. This overstates the role of the EU judicial system in deepening
institutional and economic ties between the Member States; nevertheless it
has played an influential role across a wide range of policy areas, not least
in the labour market sphere. The EU judicial system has advanced inter-
vention in national employment systems in two important ways. One is by
 Paul Teague 273

developing a body of EU law that has obliged Member States to change in

one or another respect domestic labour law regimes. For example, the
Equal Pay Directive of 1975 forced them to strengthen sex discrimination
legislation. Similarly, the European Works Council Directive has necessi-
tated new legislation on the important matter of employment information
and consultation rights. ECJ rulings have also contributed to this process.
For example, in the landmark Barber case the Court brought the area of
pension rights within the competence of (then) Article 119 of the Treaty.
Such rulings have had important consequences for national legal regimes
in such areas as equal treatment, part-time work and affirmative action.
Thus in some instances, EU legal initiatives on employment relations have
made national labour law more 'European' in character. In addition, they
have promoted a deeper interlocking between domestic and European
judicial structures.
The second impact of the EU judicial system on national employment
systems is by 'framing' domestic discussions on employment law. For
example various ECJ rulings, particularly on sex equality matters, have
altered what have been termed 'domestic opportunity structures' (Knill
and Lehmkuhl, 1999). In other words, the balance of power and resources
between national labour market actors alters as a result of a European ini-
tiative, giving rise to new domestic labour market rules that would not oth-
erwise have emerged. For example, the Barber ruling had the effect of
mobilizing trade unions and equal opportunity groups to search for new
test cases to extend the legal reach of both national and European sex
equality law. Thus through the process of legal framing the EU can change
the domestic labour law agenda. For example, the recent Directive on
parental leave has required many Member States to give greater priority to
family-friendly employment policies. Framing has caused companies and
employees to alter their expectations and preferences about what type of
provision should be made on this important issue.
Thus the EU judicial system has made influential interventions into
domestic law regimes. But there is a long way from this observation to
arguing, as has one distinguished group of academics (Bercusson et al.,
1996 ), that the Member States should transform the EU Social Chapter
into a fully fledged Social Constitution. The authors do not fully outline
the legal mechanism that would realize their proposal, but they are under
no illusion that it would require far-reaching changes. They readily
concede, for example, that national legislation governing trade union
recognition would have to be reorganized to create a broadly similar
European framework for collective rights so as to guarantee common rules
of economic and social citizenship. Changes of this kind would demand a
closer fit between economic citizenship and representative and decision-
making political structures than actually exists. Put differently, enacting a
European social constitution would be tantamount to 'federalizing' labour
274 Deliberative Governance and E U Social Policy

law so that the various tiers of governance with a judicial capacity to inter-
vene in labour market affairs better complement one another.-
Formidable obstacles stand in the way of such a constitutional.ization of
EU social policy. Although the application of national constitutions may
vary, the presumption is that each shares the characteristics of promoting
equal access and that the law is interpreted and enforced within a common
framework of understanding. But are these three attributes- access, inter-
pretation and enforcement - sufficiently developed in the EU judicial
system to support a fully fledged EU social policy constitution? For a stan,
sharply contrasting systems of labour market regulation exist across the
Member States. It is common to classify national legal regimes into three
categories: Roman-Germanic; Anglo-Saxon; and Nordic (Barnard et al.,
1995). In the first, the state has a central and active role in the organization
of the labour market; for instance in almost every case there is a law that
'extends' collective agreements to all workers in the relevant sector. In con-
trast, the Anglo-Saxon system is marked by the relative absence of state
intervention in employment relations; for example, the law does not extend
the coverage of collective agreements to non-unionized workplaces. The
Nordic system lies somewhere between the other two regimes, with com-
prehensive regulation based on voluntary agreement between strong col-
lective organizations, within the framework of a highly developed welfare
state. These national distinctions make it difficult to create a common
European framework for the interpretation and enforcement of labour
market rules.
Other differences reinforce these core distinctions in national law
systems. Thus whereas Germany and the Netherlands use company-based
works councils to reinforce employment rights, in France this function is
largely the responsibility of government labour inspectorates. In some
countries, ordinary courts resolve employment disputes whereas in others
it is the responsibility of specially constituted labour or industrial tri-
bunals; more generally, the frameworks of penalties and compensation
used to encourage compliance with employment laws differ considerably
across the Member States. The use of public agencies to promote and
enforce employment legislation, as with equal opportunities or health and
safety, is yet another arena of unevenness. All these differences in national
labour law traditions and practices make it improbable that an EU social
constitution could be enacted.
Consider the issue of subsidiarity. Included in the Amsterdam Treaty is
a detailed catalogue of procedures to operationalize subsidiarity as a leg-
islative and policy-making instrument. The Commission now has to show
that the Union has the competence to act on a particular matter, explain
why EU intervention is preferable to national action in solving the
problem, and ensure that the envisaged action is proportional or commen-
surate to the problem that is being addressed. It is hard to interpret these
 Paul Teague 275

procedures as anything other than a constraint. Subsidiarity has been

grafted onto existing treaties to reassure uneasy Member States that their
legal and political distinctiveness would not be threatened by the legal
modernization of the EU (N eunreither, 1993 ).
Subsidiarity has already worked its way into EU social policy-making.
Most draft employment Directives are predicated on respecting national
legal diversity. For example, Hunt (1999) shows that the revised and
updated Acquired Rights Directive is very open-ended, with Member
States offered a range of options to implement particular clauses and even
the opportunity to opt out from others. Similarly, the Directive on part-
time work left it to Member States to determine the enforcement mecha-
nisms and sanctions attached to the law. This trend towards 'light-touch'
decentralized labour law is hard to reconcile with the proposal for a
European social constitution. At the same time, the EU will continue to
play an important role in framing parts of domestic labour law regimes,
with a direct impact on particular matters.

The Commission and EU Social Policy-Making

Traditionally, the functions of the European Commission have been clas-
sifled as :fivefold: administrative; initiating; brokerage; guardian; and rep-
resentative (Coombes, 1970). It has used each function, with varying
degrees of success, to develop EU social policy. The administrative func-
tion has been used to obstruct and delay the development of policies which
it does not support. An instance of this essentially gatekeeping activity was
in the mid-1980s when the British government, after some deft political
manoeuvring, persuaded the Council to adopt a labour market flexibility
initiative; the Commission was able to thwart the programme through a
range of administrative tactics (Teague, 1989).
The strongest Commission influence on labour market affairs is through
its capacity to initiate policy. As drafter of proposed Directives and other
EU programmes it enjoys considerable freedom in shaping the employ-
ment policy agenda. The recent Directives on working time and atypical
employment, as well as measures concerning employee information and
consultation, have their origins in proposals :first made by the Commission
nearly two decades ago.
The Commission's brokerage function has been seen to best effect in the
social dialogue process. Promoting dialogue between trade unions and
employers at European level has been a constant element of social policy,
but has been held back by two factors. One is a deep suspicion on the part
of employers that they were being press-ganged into a process that did not
coincide with their interests. The other has been a lack of clarity on the part
of trade unions about what they really want from such a dialogue (D0lvik,
276 Deliberative Governance and E U Social Policy

1997). The Commission has made energetic efforts to. overcome these
hurdles; during the Delors years in particular, it encouraged and cajoled the
social partners to enter into meaningful exchanges (Ross,_.1995). The first
moves came with the Val Duchesse talks which started an open-ended dia-
logue between the social partners. Both sides (for different reasons) were
wary of the initiative, but by assuaging anxieties, resolving disputes and
providing administrative back-up, the Commission successfully addressed
their concerns. As a result of this brokerage role, more cooperative and
purposeful relationships now prevail between the social partners.
As guardian of the Union's legal base, the Commission has the author-
ity to bring cases against Member States considered to be in breach of EU
law. Over the years, it has not shunned this responsibility in the social
policy field, having made complaints at the ECJ against every Member
State for failure to implement properly some piece of EU employment law;
the majority of these cases have related to equal opportunities. While
action of this kind shows that the Commission is more than willing to fulfil
its role as guardian, it also serves to highlight its limited resources to
monitor and enforce EU regulation. The Commission is a relatively small
bureaucracy unable to police properly the legal relationships between the
EU and Member States, that are riven with complexity and lack of trans-
parency (Bercusson, 1996 ).
The Commission's use of its 'representative function' on labour market
matters is relatively undocumented. It has the greatest ability to act
autonomously in the area of external trade relationships, as Member States
forfeit the right to negotiate their own international trade deals on joining
the EU. In the 1970s and 1980s, the Commission used this authority to
introduce standards of human rights practices into trading agreements
with non-Member States. For instance the Lome Convention, which gave
countries in Africa and the Caribbean preferential access to the European
market, committed these countries to enacting a range social and human
rights rules. More recently, the Commission has used this representative
function to enter the hot debate about connecting international labour
standards to world trade agreements. For example, it has supported
enabling the World Trade Organization (WTO) to raise concerns about
social standards as part of the regulation of the global trading regime. In
the future this external dimension of EU social policy is likely to increase
in importance as economic liberalization grows apace and other parts of
the world form regional economic blocs to strengthen their status and bar-
gaining position in the international trading system.
Characterizing the overall role of the Commission in EU social policy is
a matter of some dispute, in line with a wider disagreement about its polit-
ical status in the integration process. Pollack (1997) argues that the
Commission has used the various functions delegated to it by the Member
States to carve out a role as a supranational policy entrepreneur with the
 Paul Teague 277

ability to persuade, mobilize and even manipulate opinion and interest in

support of its preferred position. Not everybody concurs with this view.
Moravcsik (1999) argues that the capacity of the Commission to influence
the policies and programmes of the EU by acting in an entrepreneurial
manner has been greatly exaggerated, since it does not have in its armoury
the two main instruments which policy entrepreneurs use to influence
political decision-making: financial side-payments or credible threats. As a
result, it has to rely mostly on the manipulation of the information and
ideas to effect authoritative political outcomes; but in these circumstances
there must be considerable information asymmetries between the Member
States and the EU centre before the Commission is able to punch its weight
as a policy enterpreneur. This is not normally the case as each Member State
is usually well informed of the others' preferences and strength of opinion,
hence the Commission has little room to operate in an entrepreneurial way.
At first glance Moravcsik's argument is persuasive, but on closer exam-
ination it contains flaws. Some of his key hypotheses are shaped in a
manner that favours his line of argument. Thus he states that 'policy entre-
preneurs aim to induce authoritative political decisions that would not
otherwise occur' (Moravcsik, 1999, p. 272). In the context of national gov-
ernments this statement is not particularly contentious, but in relation to
the decision-making system of the EU it is less straightforward. It is now
widely accepted that in developing policies the EU rarely makes definitive,
clear-cut decisions but builds a presence in a policy area through a gradu-
ated process of political integration. In this situation, it is difficult to deter-
mine when a political decision is genuinely authoritative. The long process
from the initiation of a policy proposal to the realization of a tangible EU
policy presence increases the opportunities for the Commission to influ-
ence the outcome. Considerable evidence exists that it has played an
important role in pushing along graduated integration in various policy
areas, including labour market affairs (Schmidt, 1998). Thus Moravcsik is
simply too trenchant in his argument: the Commission has played a
stronger autonomous role in shaping EU governance than he makes out.
At the same time, his argument is a timely reminder that the Commission
is not some type of supranational policy marauder with the ability to inter-
vene at will in the domestic governance systems of Member States.
Important intergovernmental checks and balances inside the EU decision-
making system constrain its entrepreneurial freedom.

Engrenage and EU Social Policy

The European Council, Court of Justice and Commission are the institu-
tional bulwarks of the EU, yet the dynamics of its social policy cannot be
explained by the activities of these organizations alone. Other factors have
278 Deliberative Governance and E U Social Policy

played a part in the shaping of employment policies. One such influence is

what the French call engrenage- the deepening of interactions between
national administrative structures and EU institutions (Meny etal., 1996).
Although important, these interactions are hard to map and codify as they
are mostly played out informally, usually behind closed bureaucratic
doors. The literature suggests that the administrative connections between
the European and national levels have a Janus-like quality (Hix, 1998). On
the one hand, they can be a blockage, hindering the proper transfer of EU
laws and programmes within the Member States; on the other, they c,an
operate to extend the scope or deepen the reach of some EU employment
policies. To some extent this insight simply accords with the theoretical lit-
erature which suggests that institutions can either function to uphold the
status quo or be the vehicle for policy innovation (March and Olsen, 1989).
At the same time, the way this dual process manifests in the EU is rather
distinctive.
Knill (1998) suggests that the decisive factor in determining whether the
interplay between the national and European administrative structures
takes on a 'negative' or 'positive' character is the 'logic of appropriateness',
meaning the degree of symmetry between EU policy and the existing
systems of national governance. If EU policy implies far-reaching changes
to the core design of national administrative institutions then this logic will
be low and there will be considerable resistance to implementing measures
in their original form. If the initiative poses no such challenge then the logic
of appropriateness will be high, facilitating implementation. Thus EU poli-
cies that threaten a pre-existing institutional equilibrium, which balances a
range of vested interests, are more likely to meet opposition. Another per-
spective is that countries with a high propensity for administrative reform
are likely to diffuse EU policies more easily: since administrative institu-
tions are adaptable and less embedded, the task of accommodation is more
straightforward.
This argument throws light on the implementation process through
which EU social measures are diffused into national regulatory frame-
works. For instance, the UK has consistently adopted a positive approach
to EU health and safety initiatives essentially because it regards its own
regulations in this area as more stringent than in most other Member States
(Eichner, 1997). Yet in other areas such as the regulation of working time
and information and consultation arrangements there is considerable
administrative opposition to EU measures, as they conflict with the
domestic employment regime. In the Republic of Ireland, to use another
example, an inter-administrative 'turf war' has broken out concerning
which arm of government should be the gatekeeper for EU social initia-
tives. The Industrial Development Agency wants a decisive role in the dif-
fusion of EU employment measures so that the country's industrial policy,
centred on attracting mobile international investment, is not compromised
 Paul Teague 279

by over-rigid adherence to new regulations. Other parts of government

view this as an unwarranted intrusion into their administrative portfolio.
Of course the end result of such administrative tussles is uneven imple-
mentation of EU social policy (O'Hagan, 1999). The overall point is that a
number of fault-lines can block the administrative linkages between
national governance structures and the EU bureaucracy, making the imple-
mentation of EU employment measures defective.
The other part of the engrenage literature is more upbeat in its interpre-
tation of the administrative connections between the national and
European levels. According to this view the interface between the EU and
national administration, far from being a drag on the integration process,
has actually worked to advance the regulatory competence of the EU (Hix,
1998). The rise of' comitology'- the use of technical committees and expert
policy networks in the EU decision making process- is normally invoked
to support this perspective. When setting out to draft a law or regulation
the Commission almost always needs 'outside' expert advice and assis-
tance: it is simply too small a bureaucracy to have the necessary knowledge
in-house Qoerges, 1997). Thus technical committees are created, consisting
mainly of national civil servants and officials from other public and semi-
public agencies. Because they meet so regularly to provide possible solu-
tions to identified problems, these committees begin to develop a
European policy agenda in their respective fields. Frequently, this policy
agenda extends EU regulatory competence or institutional presence in a
manner not anticipated at the start of the deliberations. In other words,
comitology helps build advanced forms of regulatory cooperation and
joint-rule making between the Member States (Wessels, 1997). Another
positive spin-off is the Europeanization of national policy officials: com-
mittee members obtain greater understanding of different national
approaches to problem-solving and become more aware of the need for
EU-wide policy solutions. Eichner (1997) gives an authoritative account of
how this process has worked in the health and safety area.
Overall the engrenage literature points in two different directions at
the same time. One emphasizes the administrative failures embedded in the
institutional connections between Member States and the EU centre, the
other highlights the opportunities these very same connections hold for
new forms of pan-European policy collaboration. Since evidence can be
mustered to support both views neither can be seen as completely wrong,
and certainly the policy community in Brussels is not anguishing over
which view is correct. They have simply accepted that the template for
policy development has to be promoting EU-wide coordination without
overly disrupting existing national regulatory structures.
The recently adopted European employment strategy (EES), frequently
referred to as the Luxembourg process, is grounded on this view (Goetschy,
1999). This initiative seeks to mobilize and coordinate policy action across
280 Deliberative Governance and E U Social Policy

the Member States on four key employment themes or 'pillars': employa-

bility, entrepreneurship, adaptability and equal opportunities. A bench-
marking procedure has been introduced to improve thf. connections
between national labour market regimes and to upgrade the monitoring and
evaluation of employment policy across the Member States (Tronti, 1998).
In particular, each Member State is required to submit a national action plan
(NAP) setting out policies to advance the four employment priorities and
explaining how the effectiveness of a particular programme or suite of mea-
sures will be evaluated. The Commission assesses the various NAPs with a
view to identifying 'best practice'.
Initial assessments of the EES only confirmed the suspicion that when it
came to employment policy formation, each Member State tended to
plough its own furrow. Consider the matter of equal opportunities. On the
positive side, the benchmarking exercise brought to light some 'best prac-
tice' initiatives in Portugal and Spain designed to promote the return of
women to work. On the negative side, large gaps were found to exist in
domestic regimes for equality in several Member States: for example only
Austria, Belgium, Sweden and the UK were found to have adopted 'main-
streaming' equality programmes. In addition, the Commission encoun-
tered problems in evaluating the NAPs, finding it hard to establish reliable
benchmarks not only because best practice measures were not easy to iden-
tity, but also because it proved difficult to make definitive judgements
about many schemes as they had only existed for a short period of time.
Thus the early indications of the outcome of promoting EU-wide policy
convergence of employment policies through a benchmarking mechanism
in the context of national institutional diversity were not particularly
encouragmg.
More recent evaluations of the Luxembourg process are upbeat. In its
latest review of the NAPs, the European Commission (2000) refers to
Member States developing new structures and institutions for the forma-
tion and evaluation of employment policies. In addition, it suggests that
most governments are developing open methods of coordination that
allow them to learn more from each other, set better targets for individual
employment initiatives and assess the potential and weakness of experi-
mental initiatives with greater rigour. Thus from the Commission's stand-
point, the rather sobering initial experience of the benchmarking
procedure has been left behind. The Luxembourg process is considered to
be now yielding positive returns. This evaluation has encouraged the
Commission to add new dimensions to the European employment strat-
egy to enforce the four existing pillars: in particular, from now on Member
States will be obliged to strengthen the manner in which social partners
make an input into employment policy formation and to incorporate the
theme of lifelong learning into the benchmarking exercise. Thus the EES
seems destined to become the mainstay of EU social policy over the next
 Paul Teague 281

decade; far from being a 'Euro-watching' exercise it could bring about a

closer convergence in employment policies across the Member States
(Biagi, 1998). As a result, the engrenage process is more likely to stimulate
opportunities for coordinated EU action than create barriers to cross juris-
dictional learning. Yet at the same time, the connections between the
Member States and the EU continue to exhibit fault-lines.

The Socialization Dynamic and EU Social Policy

The final influence on the shape of EU social policy is the socialization

undercarriage of the European integration process. Ever since the early
(post-world war) days of European integration, it has been recognized that
the process involves a range of influences that would impinge on the 'social
glue' that ties national citizens to their particular states. This was very
much the concern of the nco-functionalist approach alluded to earlier. But
when this approach lost its appeal in the mid-1970s the question of social-
ization remained on the margins of the European integration literature.
Recently it has enjoyed something of a revival, largely as a result of the
growing popularity of social constructivist approaches to European inte-
gration (Checkel, 1999).
This body of thinking emphasizes the positive feedback loops associated
with repeated interactions between national actors and interest groups.
European integration is seen as creating a political and social process
whereby national actors alter pre-existing preferences, expectations and
behaviour as a result of interacting with other European political and eco-
nomic forces. This process is seen as destabilizing established national
frameworks of interpretation and action (Carter and Scott, 1998). On this
view, the socialization mechanisms associated with European integration
(which some term 'deliberative supranationalism') forge interdependen-
cies between governments, social institutions and civic actors and expose
the futility of pursuing purely national courses of action. The advantages
of strengthening reciprocal relationships between the Member States and
pursuing joint EU action become more apparent. Thus the socialization
undercarriage to European integration works to increase the legitimacy of
EU social policy. But equally important, it creates 'focal points' that estab-
lish the boundaries between acceptable and unacceptable EU -coordinated
action in the employment-related field.
These dynamics are evident inside and outside the EU decision-making
framework. For instance, the literature on social dialogue and comitology
stresses the importance of socialization influences. Through interacting
with each other in EU-sponsored committees, the social partners as well as
national civil servants have developed a shared understanding about the
potential and limits of EU employment policy measures. But socialization
282 Deliberative Governance and E U Social Policy

dynamics are evident not only inside the 'vertical' institutions of the ED· a
unprecedented level of 'horizontal' communication and exchange' ~ 0
employment-related matters occurs across the Member _.Stc:~,tes (Teague
1999b). Much of this activity seeks to make national industrial relation~
systems consistent with deeper political and economic integration inside
the EU. Monetary union is a striking example of this process. Now that the
introduction of the single currency has begun, trade unions are eager to
develop greater coordination of wage determination so that trade unions
from one Member State do not seek to undercut collective agreements that
prevail in other parts of the EU. For the most part, these moves towards
Europe-wide coordination have not involved formalized and hierarchical
institutional rules or the introduction of American-style pattern bargain-
ing. Instead, coordination is decentralized and horizontal. The motivation
is simply to make national collective bargaining institutions compatible
with monetary integration so that trade unions do not lose influence in
Euroland. In choosing the decentralized route to coordination rather than
any other alternative, the trade unions do not appear to have engaged in any
profound strategic evaluation: it is as if the national trade unions converged
on the decentralized option simultaneously. This can be seen as an instance
where the socialization mechanisms of European integration create 'focal
points' around which actors almost spontaneously converge. Thus trade
unions are increasingly engaging in cross-national learning to weave a
European component into their national employment relations strategies.
The general implication is that the socialization influences associated
with European integration are finally altering the behaviour of industrial
relations actors across the EU: the web of vertical and horizontal employ-
ment relations networks spanning the Member States is more dense
and meaningful than ever before. In less tangible terms, the interpretative
or cognitive frameworks of the separate national employment relations are
now much closer to each other. Thus the socialization dynamic to Euro-
pean integration is breaching the sovereignty/supranational dichotomy
that has consistently held back deeper forms of policy coordination across
the Member States (Taylor, 1996). A common understanding appears to
have emerged across the Member States that the important game in town
is to invent structures and arrangements that marry established systems of
national governance with overarching (but not monolithic) EU regulatory
frameworks. This new permissive environment holds out the promise for
richer forms of pan-European collaboration on employment relations
matters.
However, the argument that socialization dynamics associated with
European integration are encouraging cross-jurisdictional learning rests
on a fairly distinctive theoretical perspective of how labour markets work.
The point of departure of this account is that most market situations
exhibit limited information and high transaction costs and that such imper-
 Paul Teague 283

fectly competitive situations encourage imitative behaviour (Grahl and

Teague, 1992). Given limited information, market agents have a powerful
tendency to take each other's behaviour as an indicator of their own
optimal strateg_r. Mutual i_mi:ation ~f this. kind .can int:~duce and sustain
social conventiOns that hmlt posstble dtstortiOns ansmg from market
imperfections. On the other hand, the same imitative processes can lead to
social contagions that cause and amplify departures from market equilib-
ria. So far the socialization dimension to European integration has worked
in a way to create Europe employment relations conventions. But it is
equally possible for the very same dynamics to give rise to contagions. In
other words, the socialization properties of European integration need
ongoing and active management in order to operate in a positive manner.

Conclusions

The foregoing analysis suggests that the EU lacks the institutional capac-
ity to replicate existing national social systems. It has only sparse compe-
tencies in areas such as fiscal redistribution, health and education, social
benefits, pensions and even central matters relating to the employment
relationship such as pay and industrial action. Because of these limited
competencies, talk of the EU building a Social Europe that effectively
replaces national social systems is fatuous: the institutional design of the
EU always closed off this possibility. At the same time, those accounts that
dismiss Social Europe as a sideshow to the market-making activities of
European integration are either too negative or assess EU social policy
against unrealistic or inappropriate benchmarks. The EU has had an
impact on national labour regimes which may be fragmented and contested
but which nonetheless cannot be discounted. Overall, EU social policy has
evolved in a manner that has raised the prospect of a pan-European form
of economic citizenship but at the same time has neither the institutional
strength nor political legitimacy to deliver on this promise.
In a sense, European integration has created an acute political dilemma
for labour market governance inside the EU. On the one hand, as a result
of the deepening institutional and market interdependencies, it is hard to
see how purely national social systems in Europe can be economically or
institutionally efficient; on the other, the political and institutional foun-
dations are not in place for a fully integrated European model of economic
citizenship. It is unlikely that this dilemma will be addressed by a big polit-
ical 'fix', such as the adoption of a European social constitution or a major
transfer of powers relating to redistribution and regulation from the
national to the European level. Neither the Member States nor the
Commission would support this; instead they have adopted a pragmatic
approach to EU social policy in the face of this political dilemma. Social
284 Deliberative Governance and E U Social Policy

policy has been advanced on a piecemeal basis so that it does not fall foul
of the ever-present political and institutional constraints.
An unintended consequence of this pragmatic approach,, is. that the
design features of what has been termed deliberative governance are
beginning to come into view (Sand, 1998). First, the EU centre, which is
made up of the core decision-making organs and the panoply of sur-
rounding committees and interest groups, has a powerful agenda-setting
capacity. Commission social policy proposals may go through several
burials and resurrections but they tend never to disappear. Directives
passed in the 1990s, for instance on European Works Councils and part-
time employment, have their origins in proposals first made by the
Commission at the start of the 1980s. Through this agenda-setting capac-
ity, the EU is becoming an important 'framing' institution for European
employment relations.
Second, a problem-solving style of policy-making is taking root. This
has a number of interrelated dimensions. One is that discussions between
the social partners at the European-level involve deliberation (preference-
changing behaviour) and planning rather than the straightforward bar-
gaining which is more characteristic of interactions between employers
and trade unions at national level. A distinctive feature of this deliberative
process is reasoned argument in which the social partners find ways to
advance certain matters relating to the organization of the labour market,
even in the absence of an agreed view on how to solve the particular matter
in hand. Deliberation thus enables a procedural consensus to be reached
even when there is disagreement about the substantive issues. A further
benefit of a deliberative process is that it gives rise to credible commitments
through which social partners gain an assurance about each other's behav-
iour. Where credible commitments prevail, opportunistic behaviour is less
likely and trust relations come to the fore. Thus in regard to the European
social dialogue the vision is of the various participants seeking to advance
their own interests by promoting a common agenda that incorporates the
interests and views of others.
Another dimension to problem-solving is the devising of policy packages
that are not heavily prescriptive but open-ended and flexible. In the situa-
tion where there is such diversity in national labour market institutions it
would simply entail policy failure to attempt to over-harmonize employ-
ment rules and regulations. Traditional command-and-control type regula-
tions are also unlikely to succeed as the EU lacks the capacity to monitor
and enforce such one-size-fits-all policies. Thus a major component of
problem-solving in the social policy arena is to accommodate the political
demand for a common or converging industrial relations agenda with the
hard reality of wide variation in national labour market institutions. In this
context, respecting national autonomy through the use of subsidiarity pro-
cedures is not a pretext for pushing 'minimalist' social policies but the only
 Paul Teague 285

credible way of making practical advances towards designated policy goals

in circumstances that are not particularly congenial.
The third element to deliberative governance is the use of cross-
jurisdictional lea:ning .. Europe learnin.g fr?m Euro?e co~ld be the n.ew
motif of EU soc1al pohcy. Benchmarkmg IS the mam pohcy tool behmd
such learning activities, an approach which holds out much promise. In the
first place, as a policy mechanism it is virtually tailor-made for EU social
policy with the heavy emphasis on obtaining policy convergence in the
context of institutional diversity. Moreover, cross-jurisdictional learning
appears particularly suitable at this time as so many Member States are
encouraging experimentation because of widespread dissatisfaction with
existing arrangements. Benchmarking, in theory at least, allows the lessons
of the best (and presumably the worst) practices arising from experimen-
tal labour market programmes to be shared across the EU.
A further feature of this policy approach is that it envisions a pathway
to policy change which evolutionary theorists of the firm call recombina-
tion (Nelson and Winter, 1982). Particular policy measures or relationships
between particular programmes are redesigned through a process of incre-
mental adaptation rather than through large-scale reform. It is not that
radical policy initiatives are ruled out or regarded as somehow faulty, but
simply as exceptional. Moreover, incremental change is not seen as simple
tinkering but, potentially at least, as an ongoing process of internal muta-
tion whereby the overall character and orientation of the policy regime can
be radically altered through the culmination of small-scale changes. Cross-
jurisdictional learning on social policy matters should thus be seen as a
method for devising and diffusing innovatory labour market rules.
Deliberative governance can thus foster much-needed and significant
policy reforms. It is this possibility that has led some to claim that delib-
erative governance is not merely a more efficient and sophisticated form of
policy-making but actually constitutes a new form of polyarchy in Europe
(Cohen and Sabel, 1997). The inference is that institutional frameworks
and procedures are being invented that resolve the governance dilemma
with regard to economic citizenship by allowing 'national' and 'European'
properties to be conjoined. The analysis presented in this article
would suggest that such an interpretation claims too much for deliberative
governance practices. To be a functioning polyarchy, deliberative gover-
nance must have political foundations very different to those that prevail
in most modern parliamentary democracies, where policy programmes are
normally considered legitimate because they are enacted by a government,
or agents of a government, that has won an electoral contest and which is
accountable for its actions in subsequent elections. Political legitimacy
is derived for the most part from voting competitions. But such 'majori-
tarian' principles cannot hold centre stage in a deliberative governance
polyarchy as so many policies arise from the work of administrative
286 Deliberative Governance and E U Social Policy

agencies that are more or less independent of representative political struc~

tures. Deliberative governance as a polyarchy needs radically different cri~
tcria for political legitimization.
A key conclusion from this article is however that while certain proper~
ties of deliberative governance are emerging, most European citizens con~
tinue to measure the acceptability and legitimacy of EU actions against the
'majoritarian' principles of parliamentary democracy. Put differently, the
political dilemma that EU social policy loosens the close bond between eco~
nomic citizenship and nation-states without being able to replace it with a
fully formed model of European economic citizenship has not abated, even
though elements of deliberative governance are evident. Even in terms of a
model of policy-making, deliberative governance cannot be considered to
have reached full maturity. As argued above, it remains questionable whether
the EU centre has yet the full resources and capabilities properly to codify
and interpret the information arising from the benchmarking of employ-
ment policies. Fault-lines remain between national administrative structures
and EU institutions, hampering the coordination of policy measures. Such
weaknesses may become more acute as the challenges of stabilizing the Euro
zone and completing the enlargement exercise loom ever larger.
Thus we must end this article on a level-headed note. Claims that social
policy is playing second fiddle to the main market-making activities of the
EU centre, or that it is of a piece with a wider novel political architecture
for Europe, must be treated with a fair degree of scepticism. At the same
time, the deliberative governance machinery that is beginning to underpin
EU social policy is a positive development, although scope exists to make
it more effective.

Note

From European Journal of Industrial Relations, 7, 1, 2001, pp. 7-26.

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288 Deliberative Governance and E U Social Policy

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The Open Method of
Co-ordination and the
European Welfare State
Damian Chalmers and Martin
Lodge

Introduction

Open Method Co-ordination (OMC) has been treated in the literature as

the Lazarus of European integration. Developed at the Lisbon Summit, it
has led to the reincarnation of the European Union, both in terms of what
it does and how it does it. No longer is the European Union to be centred
around the Classic Community Method (CCM) of supranational manage-
ment of regulation. Instead, it is to be a decentred participatory process, in
which national governments are no longer controlled and commanded by
the imperatives of EC law, but rather commit themselves to review each
other's programmes in the light of a series of mutually agreed standards and
of domestic and transnational participatory processes. The European
Council and its surrounding machinery is placed at the heart of the Union's
policy process, and new types of Union-Member State relations are forged
which are centred less around classical legal prescriptions, and more around
diffuse national adaptation to a wide array of transnational norms, whose
form and origin vary (for initial review, see Hodson and Maher, 2001 ).
[ ... ]
The constitution of the Open Method of Co-ordination was set out at the
Lisbon European Council, 23-24 March 2000. The central thrust of this
European Council was not regulatory reform, however, but the resurrec-
tion of its ambitions and revision of its goals.

5. The Union has today set itself a new strategic goal for the next decade: to
become the most competitive and dynamic knowledge-based economy in the
world, capable of sustainable economic growth with more and better jobs and
greater social cohesion. 1
290 The Open Method of Co-ordination

Four key policies were to be central to this vision, which, if s.uccessful, was
to deliver 20 million jobs by 2010.

• Better policies for the information society and research and develop-
ment (R&D).
• Stepping up the process of structural reform for competitiveness and
innovation.
• Completion of the internal market .
• 'Modernization' of the European social model.
• Applying an appropriate macroeconomic policy mix .
• An employment policy with a goal of full employment in a society
which is more adapted to the personal choices of men and women.
• A Sustainable Development Strategy. 2

In terms of policy remit, the Lisbon Strategy was very wide-ranging

indeed. As the Commission has noted on its website, it covers nearly all of
the Union's social, economic and environmental policies. 3 To that end, a
variety of regulatory regimes have been used to implement the Lisbon
Strategy. The majority of it is still realized through the Classic Community
Method of legislation. In its 2002 Review of the Lisbon Strategy, therefore,
the Commission found there were fifty-seven legislative acts or proposals
for legislation that fell within classic EC competence, compared with
thirty-five initiatives for benchmarking (EC Commission 2002a; our cal-
culation). The scale of the tasks, however, meant the development of poli-
cies involving not merely the regulatory functions of government, but also
those of stabilization, allocation and redistribution. New institutional
arrangements were necessary for such fields. Traditional harmonization of
laws, in which supranational institutions drew up a corpus of legislation,
were perceived as too centralized, too communautaire and too rigid. In
particular, harmonization was felt to be inappropriate where:

• the area of work was closely connected with national identity or

culture, e.g. culture or education;
• the instruments for implementing national policies were so diverse
and/or complex that harmonization seemed disproportionate in rela-
tion to the objectives pursued, e.g. employment;
• [there was] no political will for EC legislation among the Member
States but there was a desire to make progress together. (European
Convention Secretariat 2002)

In these areas there was, instead, to be a Europeanization of national policy-

making, concerned with securing three values. The first, compatibility,
required national policies not to have negative effects for the other Member
States or the achievement of the objectives of the Union. The second, con-
 Damian Chalmers and Martin Lodge 291

sistency, entailed that national policies were to enhance each other's effec-
tiveness. Finally, national government performance was to converge.
Open Method Co-ordination was to provide an institutional frame-
work for securing these values. It was to draw upon the methodologies
that had first been applied to the European Employment Pact: co-ordina-
tion of economic policy and improvement of the interaction between
wage developments and monetary, budget and fiscal policy; improvement
of labour market efficiency; and structural reform of the goods, services
and capital markets. In addition, the method was to be extended to a
number of other fields - the information society, research policy, enter-
prise, education and vocational training, combating social exclusion,
immigration policy, and sustainable development. 4 The institutional
frameworks that were to govern these areas were to be marked by the fol-
lowing features:

The fixing of pan-Union guidelines Guidelines and targets will be set for
each policy sector in which OMC is applied with specific timetables to be set
for achieving the goals which they set in the short, medium and long terms.

The development of national action plans in the light of E U guidelines

National action plans are established setting out specific targets and adopt-
ing specific measures in such a way as to translate these EU guidelines into
national and regional policies, while retaining the freedom to take into
account national and regional differences.

Regular benchmarking and peer review Quantitative and qualitative

indicators and benchmarks are to be established as a means of comparing
best practice. The implementation of national action plans is to be regu-
larly reviewed within the Council in the light of these and the pan-Union
guidelines.

Partnership Regional and local government, as well as the social partners

and civil society, will be actively involved in the development and review
of national action plans. Such processes will be carried out in the light of
'best practices on managing change' devised by the European
Commission, networking with different providers and users, namely the
social partners, companies and NGOs.

Public-private networking Implementation of OMC will rely primarily

on the private sector, as well as on public-private partnerships. It will
depend on mobilizing the resources available on the markets, as well as on
efforts by Member States. The Union's role will be to act as an 'enabling
State' which acts as a catalyst in this process, by establishing an effective
framework for mobilizing and bringing together available resources.
292 The Open Method of Co-ordination

At the Barcelona European Council, held in March 2002, the European

Council endorsed a review of the Strategy carried out by the Commission
(EC Commission 2002a). Its central points were that:

• delivery of the Lisbon goals depended upon a 3 per cent growth rate,
which has proved problematic in the economic climate since
September 11th;
• it is early days for most areas of OMC; the Commission was still in the
process of formulating draft guidelines;
• progress in some areas, notably structural reform of capital markets -
the so-called Cardiff Process- was being held back by a failure to agree
legislation at the EC level.

The European Council endorsed this curate's egg of a document. But, if

the second-year report of the Commission is 'Slow start, but signs of
progress' then there are already ominous signs emerging. The formulation of
guidelines has appeared to be more drawn-out and complex than might have
been anticipated. The Barcelona European Council expressed impatience
and stated that the focus must now move to implementation and away from
the simple annual elaboration of guidelines. 5 In December 2002, the Union
of Industrial and Employers' Confederations of Europe (UNICE) pub-
lished a report in which it was heavily critical of the Lisbon Strategy, arguing
that it had resulted in little structural reform (UNICE, 2002). Meanwhile,
others expressed concern at the lack of progress in addressing welfare reform
and the absence of any meaningful strategy in the area (EAPN, 2002).
This was reflected in an increased institutional pessimism about OMC. In
its report to the 2003 Spring European Council, the Commission assessment
was downbeat across all policy sectors. On employment, the Commission
noted that despite five years of the European Employment Strategy (EES)
there was little evidence of any significant structural reform. There had been
some reform of product service and capital markets in areas covered by EC
internal market legislation, but weak implementation overall. The coopera-
tion in knowledge, research and development, and innovation had been
weak. Progress on social cohesion was difficult to measure, as there was an
absence of clear data. The Sustainable Development Strategy still revolved
around legislation rather than economic instruments (EC Commission,
2003). Both the European Socialist Party and the European Social
Programme, meanwhile, issued statements indicating that they believed the
Lisbon Strategy was focusing insufficiently on jobs, growth, and environ-
mental and social goals (PES, 2003; Social Platform, 2003 ). The British and
Finnish prime ministers issued a joint letter stating that structural reform
and economic performance had been modest (United Kingdom govern-
ment, 2003a). The reasons for this become more apparent if the performance
of OMC is broken up into three headings.
 Damian Chalmers and Martin Lodge 293

Drawing up of pan-Union guidelines The most developed and detailed,

by some way, are the Broad Guidelines on Economic Policies by the
Member States (BEPG). These are individually tailored for Member States,
discussed extensively and subject to considerable monitoring. 6 It will be
remembered that these draw on a similar methodology to OMC and incor-
porate many of the criteria developed elsewhere in Lisbon. Their basis lies
not in Lisbon, but in the commitment developed at Maastricht in Article
99(2) EC to co-ordinate national economic policy, and in the subsequent
commitment made in the Stability and Growth Pact to maintain budgets
close to balance or in surplus (Artis and Buti, 2000). 7
The second category encompasses the guidelines set out in the European
Employment Strategy. These are less wide-ranging than the BEPG. They
focus on elements of employment policy: improving employability; devel-
oping a culture of entrepreneurship; promoting the adaptability of firms;
and modernizing work by organizing and strengthening equal opportuni-
ties. Yet there is a clearly defined and reflexive strategy which has evolved
over time to encompass certain 'horizontal objectives', notably the devel-
opment of lifelong learning, and a broader policy community by attempt-
ing to involve the Social Partners in defining, implementing and evaluating
the guidelines. They are less detailed and wide-ranging than the BEPG, and
are required to be compatible with the BEPG. While evaluation of national
action plans to meet the guidelines takes place, country-specific guidelines
are not provided (Article 128 EC). Like the BEPG, the Employment
Strategy has a longer lineage than OMC, dating back to the Luxembourg
European Council in 1997 (Magnus-Johannsen, 1999).
The third category represents the Sustainable Development Strategy
(SDS) adopted at the Goteborg European Council in June 2001. The
Strategy involves development of national action plans which not only take
account of environmental impacts in decision-making, but also address a
series of themes, notably climate change, sustainable transport, public
health and management of natural resources. While a series of concrete
targets have been set, these are less detailed than under either the EES or
BEPG. As yet, indicators have not been developed by the Commission
and there are no requirements for Member States to present national
action plans for actual discussion. Furthermore, while the Sustainable
Development Strategy can be said to be a genuine OMC, unlike the other
two discussed, it is misleading to see it as such. The SDS is based upon a
mode of governance established in 1993 in the Fifth Action Plan on the
Environment and Sustainable Development, and continued in the Sixth
Environment Action Plan, which is not dissimilar to OMC in that it sets a
series of broad EU targets and guidelines and then commits Member States
to involving civil society and market-players in the meeting of these
targets. It therefore follows pre-existing trajectories, path dependencies
and institutional patterns. What is notable, however, is that it does not
294 The Open Method of Co-ordination

build on these. Thus the SDS is really a redescription of the Sixth Actio
Plan, in that it does not carry any of the features that distinguish OM~
from it, notably feedback and review of national policies. ,.
The fourth category contains the OMCs against poverty and social
exclusion and those on pensions. A series of objectives have been set.These
are, however, very broad. They include facilitating participation in
employment and access to all resources; preventing the risks of exclusion·
helping the most vulnerable; and mobilizing the relevant bodies. Whil;
indicators have been established, no quantitative targets or benchmarks are
set. Instead, there is merely a requirement that Member States develop
national action plans in these areas. 8
Fifthly, there are a number of areas which are subject to wide-scale bench-
marking. These include e-learning, investment in education, early school-
leavers, graduates in mathematics, science and technology, upper secondary
education attainment and participation in lifelong learning. In such cases,
there is no strategy as such. Rather international excellence and the average
of the three cbest performing' states are set as a standard of excellence. 9
Finally, there is one other area, immigration, 10 where proposals for
OMC have been made, but there has been little further development.

Transformation of national practices in the light of Union guidelines

Detailed constraints have applied to Member States only in the case of the
European Employment Strategy and BEPG. In its Five-Year Report on the
European Employment Strategy, the Commission noted that there had
been a development of new policy paradigms; there was increased policy
convergence and some policy-learning. It also noted, however, that there
were few transformative effects in those Member States where there was
already either a strong pre-existing convergence or divergence with the
guidelines, and that these guidelines had led to some unanticipated effects
(EC Commission, 2002c). The position with regard to BEPG was less pos-
itive. The Commission assessed national progress in implementing
country-specific BEPG across three areas - public finances, labour
markets and product markets. It measured progress as either good, some
or limited. Only two States, Sweden and Denmark, were considered as
having made cgood' progress in more than one of these fields, and none in
all three fields. In addition, two Member States, Germany and Austria,
were regarded as having made only (limited' progress in two areas (EC
Commission, 2003, p. 39). These results have been confirmed by indepen-
dent research by the Centre for European Reform, which noted that it was
both the OMC elements of the Lisbon Strategy that had hitherto produced
the most disappointing results, and that it was the performance by the large
economies of France, Germany and Italy that provided most cause for
concern (Murray, 2003).
 Damian Chalmers and Martin Lodge 295

participation in government A central feature of the 'new constitutional-

ist' praise for OMC are the perceived opportunities it offers for participa-
tory democracy (Gerstenberg, 2002). Here, evidence is particularly
disappointing. The Commission notes in its Five-Year Review of the
European Employment Strategy - an area with established institutional
actors - that participation has generally been weak (European
Commission, 2002b ). Furthermore, there is little evidence that, since 1993,
either the Fifth or Sixth Environment Action Plans have served to mobi-
lize civil society or broaden decision-making.
Responses to this crisis seem disjointed. A number of Heads of State
have published communiques, but the policy responses are disjointed and
represent different ideological priorities. The German, UK and French
governments issued a joint letter (known in EU circles as the 'three
tenors' letter) in which they stated that Europe should not become some
form of laboratory for regulation; that there should be some further
market liberalization, but nothing that imperils Services of General
Economic Interest. Agreement focuses only on the establishment of a
High-Level Review Body, paralleling the Hartz Commission in
Germany, to review labour markets (United Kingdom government,
2003a). The British and Finnish governments argued for wide-ranging
structural reform and market liberalization, as an antidote (United
Kingdom government, 2003 b). The sheer ephemerality of the measure
apart, it also represents a damning indictment on the European
Employment Strategy, the predecessor of OMC, to develop a coherent
approach after five year's operation.

[ ... ]

Notes

From a paper for the ESRC Centre for Analysis of Risk and Regulation, London
School of Economics and Political Science, 2003.
Presidency Conclusions (Lisbon European Council), Council of the
European Union, SN 100/00,23-24 Mar. 2000 (emphasis added).
2 This Strategy was introduced not at Lisbon but at the Goteborg European
Council, 15 June 2001.
3 At www.europa.eu.int/comm/lisbon_strategy/index_en.html (accessed 16
June 2003).
4 This was added by the Goteborg European Council, 15 June 2001.
5 Conclusions of the Presidency of the European Council, 15 and 16 Mar. 2002;
para. 39.
6 For the latest, see Decision 2002/549/EC on the broad guidelines of the eco-
nomic policies of the Member States and the Community, OJ 2002, L 182/1.
7 Regulation 1466/97, OJ 1997, L 209/1.
8 The most recent outlines are contained in a Communication from the Social
Protection Committee to the Committee of Permanent Representatives
296 The Open Method of Co-ordination
(COREPER) on 25 Nov. 2002, Doc 14164/02, Rev 1. EC Commission, 'Joint
Report from the Council and the Commission on Adequate and Sustainable
Pensions', 17 Dec. 2002.
9 For analysis of these see EC Commission, 'European Beilchmarks in
Education and Training', COM (2002) 629 final.
10 EC Commission, 'Proposal for Open Method Co-ordination on
Immigration', COM (2001) 387.

References

Artis, M. and Buti, J. (2000). '"Close to Balance or in Surplus": A Policy-Makers

Guide to Implementation of the Stability and Growth Pact', Journal of Common
Market Studies, 38, 4, pp. 563-92.
EAPN (European Anti-Poverty Network) (2002) 'Response to the Commission
Synthesis Report for the Barcelona European Council', 15-16 Mar.
EC Commission (2002a) 'The Lisbon Strategy: Making Change Happen',
Commission Staff Working Paper, SEC (2002) 29/2.
EC Commission (2002b) 'Taking Stock of Five Years of the European Employment
Strategy', COM (2002) 416.
EC Commission (2002c) 'Streamlining the Annual Economic and Employment
Policy Co-ordination Cycles', COM (2002) 487.
EC Commission (2003) 'On the Implementation of the 2002 Broad Economic
Policy Guidelines', COM (2003) 4.
European Convention Secretariat (2002) 'Co-ordination of National Policies: The
Open Method of Co-ordination', WG VI WD015, Brussels, 26 Sept.
Gerstenberg, 0. (2002) 'The New Europe: Part of the Problem - or Part of the
Solution to the Problem?' Oxford journal of Legal Studies, 22, 4, pp. 563-71.
Hodson, D. and Maher, I. (2001) 'The Open Method as a New Mode of
Governance: The Case of Soft Economic Policy Co-ordination', journal of
Common Market Studies, 39, 4, pp. 719-46.
Magnus-Johansson, K. M. (1999) 'Tracing the Employment Title in the Amsterdam
Treaty: Uncovering Transnational Coalitions', journal of European Public
Policy, 6, p. 85.
Murray, A. (2003) The Lisbon Scorecard III: The Status of Economic Reform in the
Enlarging E U, London, Centre for European Reform.
PES (Party of European Socialists) (2003) 'EU Social Democrats Launch
Campaign for Jobs and Sustainable Growth', 14 Mar., atwww.eurosocialists.org.
Social Platform (2003) 'Stability Pact and Lisbon Goals: Foes or Allies? The
European Spring Council Ought to Choose', press release, 11 Mar.
UNICE (2002) 'Time is Running Out, Action Needed Now- Lisbon Strategy Status
2003', Union of Industrial and Employers' Confederations of Europe, Brussels.
United Kingdom government (2003a) 'A Message of Confidence in the Future of
Europe', 5 Feb., at www.inyourarea.gov.uk/output/page1647.asp (accessed
16 June 2003).
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Productivity in the EU', 6 Mar., at www.inyourarea.gov.uk/output/page3222.
asp (accessed 16 June 2003).
Demographic Challenges to
the Welfare State
Population Ageing:
An Unavoidable Future
David Coleman

Why Population Ageing is Inevitable

The population of the whole world is getting older and the whole world,
sooner or later, will have to manage the consequences. This is happening
because birth rates have declined, or are declining, almost everywhere, and
additionally because older people are surviving to enjoy longer lives. In
most richer countries, birth and death rates started to decline in the nine-
teenth century or earlier. In the case of Japan, this transition has been par-
ticularly rapid and did not begin until the twentieth century. In the poorer
countries of the world, rapid declines in birth and death rates have only
emerged in the last few decades and in a few the process has not begun. But
most demographers believe that eventually the whole world will have few
children, but long lives.
When death rates first fell, population started to grow fast. The world
increased from 2 to 6 billion people in 100 years, and in the process acquired
a newly youthful population with its attendant burdens of dependency.
Now as populations mature, we are leaving that behind, the rich countries
much sooner than the poor ones. We exchange youthful dependants for
elderly ones. If the decline in family size halted so that women continued
to have about two children on average (which most women say they want)
then with current death rates the proportion of persons aged 65 and over in
richer countries would eventually remain constant at about 20 per cent of
the total (with 19 per cent aged 15 and under) compared with about 15 per
cent at present. Such a population would eventually remain constant in size.
With fertility at no more than the 'replacement' rate of just over two
children, population, and the size of the workforce, will eventually cease
to grow and would remain constant in size except for the contri-
bution from continued decline in death rates. With fertility below this
 David Coleman 299

replacement rate, as it is everywhere in the developed world outside the

US, population and workforce will eventually decline in numbers. In some
countries where fertility is exceptionally low, as in Italy, Germany,
Romania, Russia and a few others, deaths already exceed births. In the case
of Italy and Germany, where birth rates have been low for a long time, pop-
ulation is prevented from declining only by continued high immigration
(for details see Council of Europe, 2000; Eurostat, 2000.)
Even if population decline is averted by replacement fertility, population
ageing is bound to progress further, to an extent dependent on further
improvements in survival. The lower the level at which fertility will stabi-
lize, the more aged the eventual population structure will be. At an average
family size of 1.8, about the level of the higher fertility European countries
such as France and Norway, the percentage aged is about 23 per cent. At
1.6, about the European average, it rises to about 28 per cent. With con-
tinued lower fertility, like that seen in Japan and the southern European
countries, the proportion would rise to over 30 per cent. Older popula-
tions and their problems will be a permanent feature of developed societies,
and by the end of this century for the whole world, and thereafter for the
whole future of the species.
With constant birth rates (at whatever level), eventually all future popu-
lation ageing will arise from further declines in mortality; although in those
circumstances it seems reasonable to expect that vigorous life would also
be extended and the boundaries of old age, and retirement, would need to
be moved upwards accordingly, as they already have been. Population
ageing through longer survival brings, in part, its own solution, as long as
most of the additional years of life are active ones.
Population ageing and its problems are consequences of growing up.
They seem even worse than they are, because we are coming to the end of
a short and transient period of unusually favourable age-structure. For
about fifty years in the later twentieth century, the more developed coun-
tries could enjoy the new benefits of low dependency from children
together with the relatively low proportion of pensioners. This is because
the birth rate had declined in most rich countries as early as the 1930s,
while small retired age-groups were inherited from an earlier period. That
benevolent phase of population structure, a transitional phase between the
youth dependency of the past and the aged dependency of the future, is
now going. Resources once needed for dependent children must be trans-
ferred to the elderly as a new long-term population system is established.
In the UK and elsewhere, this system has a similar nominal dependency
ratio to the previous one but with a different, less favourable composition.
Richer populations have moved from a position where the average age of
consumption, once lower than the average age of production, is now higher,
perhaps by four years. The maximum real support ratio arises when the two
averages are the same, assuming an equal weighting of needs. The delivery
300 Population Ageing

channels of support will also be different. Families, which .made and still
make the greatest provision for children, will see the burden of transfers
eased except in those richer countries where family support i:s traditionally
more important for the elderly, notably southern Europe and Japan. A higher
proportion of transfers to the elderly will pass through the state. Those pop-
ulations which also have a tradition of family care for the elderly wiil suffer
most unless they can change their system (Ermisch and Ogawa, 1994).

What Can We Do about It?

The first point is to be quite clear that there is no 'solution' to the problem
of population ageing. There cannot be one short of a return to high rates
of population growth or mass age-specific euthanasia. Immigration cannot
solve problems of population ageing except at rates of immigration so high
that they would generate economically and environmentally unsustainable
population growth rates and permanently and radically change the cultural
and ethnic composition of the host population (Coleman, 2000). These
answers are already well known to demographers.
Recent population projections by the United Nations have drawn atten-
tion to the future decline of population size and ageing of the population
which is projected in low-fertility countries. Projections made over such a
very long range of fifty years are bound to be substantially in error.
Nonetheless, by concentrating exclusively on the possible role of migra-
tion in 'solving' such problems they have caused widespread misunder-
standing. The analysis focuses on the change in the 'potential support
ratio', the ratio of the population of nominal old age dependants (aged 65
and over) to persons in the nominally 'active' population (aged 15-64).
This ratio is about 4 or 5: 1 in most richer countries and is projected to fall
to between 2 or 3 : 1 in fifty years.

Pensions, Fiscal and Workforce Reforms

What matters, however, is not demographic abstractions such as the poten-

tial support ratio but whether the future costs of dependency are sustain-
able in the economic and social environment of the future. Fiscal and
workforce reforms within the demographic system offer many flexible and
promising ways of adapting to population ageing and some of the mea-
sures are desirable in their own right. Given the powerful effects of eco-
nomic growth, pensions reform and workforce change on the viability of
economic systems, we may be in danger of missing the point by concen-
trating too much on the outer demographic structure rather than on the
fiscal, economic and workforce structures within it. What matters is
 David Coleman 301

whether an affordable system can be developed, not what the 'potential

support ratios' are or may be in future.
Labour market, retirement and pension reforms, some already under
way, together with future expectations of even modest economic growth
and productivity, together offer the prospect of a reasonably effective and
affordable management of this burden as long as birth rates are not too low,
although definitely not a 'solution' (Daykin and Lewis, 1999). We need to
consider first the 'real' support ratios, that is the actual number of taxpay-
ers in relation to aged dependent people. In making such calculations
we need to take into account the future reduction of dependency arising
from the decline of the youthful dependent population. We need to keep
in mind the successful negotiation of substantial population ageing already
since the beginning of the century, where in the UK the percentage of
persons over age 65 has already tripled from 5 per cent to 15 per cent
without economic disaster. We should also recall the reality of actual retire-
ment ages today, which are already substantially below 'official' retirement
age. Early retirement, late entry into the workforce and modest workforce
participation rates already give us actual support ratios of about 2.5 tax-
payers per pensioner, not the nominal 4.1 of the potential support ratio
(Government Actuary, 1999), without notable problems.
No one management factor can ameliorate the situation all by itself
except with considerable discomfort. We therefore need to address simul-
taneously as many of these contributing factors as possible. For example
the European Commission's Annual Review of the Demographic Situation
in Europe in 1995 (European Commission, 1996) recognized the contri-
bution of migration to further population increase but noted that recent
immigration, at that time declining, had not been primarily related to eco-
nomic needs. Unemployment among foreigners is indeed much higher
than among the native population. It dismissed the notion that immigra-
tion could be an adequate compensation for population ageing, as it would
require between 8 and 14 times even the then current high level of net
immigration (7 million per year by 2024 ). Productivity growth required to
meet the additional demands on the economy created from pensions would
be between 0.1 per cent and 0.3 per cent annually up to 2005, increasing to
0.5 per cent per year by 2025. Such an additional diversion to pensions
costs would, for example, reduce a real annual GDP growth rate from (say)
3 per cent to 2.5 per cent. Similar conclusions have been reached by other
economists in the US (Lee et al., 1988; Lee, 2000).
In the EU, only 62 per cent of the nominal 'active' population aged
15-64 is economically active. This is the lowest of any major industrial area
in the world. An increase of workforce participation rates to the levels
already achieved in Denmark, for example, or a return to the levels actu-
ally achieved among men in the 1960s, would go a long way to meet adverse
future ageing changes. However, improvements in workforce participation
302 Population Ageing

rates cannot have a further enhancing effect once they have reached their
maximum level, beyond say 2020.
The most effective measures would relate to retirement age. ~!hile formal
retirement age is 65 in most EU states, actual retirement age is about 58 or
59. Preservation of today's actual support ratio would require the actual
retirement age to rise by between five and six years, to between 65 and 66.
On that basis, managing the additional costs of elderly dependency simply
requires people to stop work when they are 'expected' to, at some time in
the future. For the UK itself, the scenarios indicate that an annual increase
in work productivity rising to 0.8 per cent by 2025 would be needed to cover
additional costs of pensions transfers, in the absence of any other measures.
The incorporation of all dependency (all those not working of all ages,
including children) into the equation further ameliorates the expectation of
future dependency and future costs. All these measures together could
restore the future position to about the current level in most European
countries at least up to 2020, according to an analysis published in the
Economic Survey of the United Nations Economic Commission for
Europe in 1999 (UNECE, 1999).

Demographic Measures

The most 'strategic' responses involve the number of people themselves.

Population ageing arises from changes in the birth rate and death rate.
Only changes in the birth rate are likely to have any important effect in
moderating population ageing without incurring the penalty of unsustain-
able population growth. Even so, replacement fertility- probably the best
that can be hoped for - cannot increase the potential support ratio in
mature populations to much more than 3 and would not avert some popu-
lation decline in counties with long experience of below-replacement fer-
tility. However, much lower birth rates, like those of Japan and southern
Europe today, would generate an age structure which would be very diffi-
cult to manage with the measures described above. What prospect is there
of the birth rate increasing in future?
There is little consensus on this point, despite an extensive literature (see,
for example, the papers at a recent IUSSP seminar in Tokyo (IUSSP, 2001).
There appear to be no limits to low fertility in the predominantly economic
models which attempt to explain the variation of fertility (Golini, 1998).
Much of the reduction in the usual measures of fertility, as is well known,
is due to the postponement of births. But in most populations the recov-
ery of fertility rates at older ages has so far been insufficient to compensate
for the decline in earlier ages, pointing to a fall in completed family size
to below two children. Most researchers seem pessimistic about a return
of fertility to replacement rates in European countries. Nonetheless,
 David Coleman 303

spontaneous recovery of fertility to levels closer to replacement might arise

from a number of processes. The delay in childbearing has not yet ended
in any country and we cannot foretell what will happen when it does.
There may be general population-level tendencies to equilibrium.
Enhanced welfare arrangements or other measures which improve the
status of women, of the kind being considered by UK government, may
remove obstacles to childbearing. There may be fundamental biological
reasons why fertility is unlikely to drop permanently to very low levels.
The prospect of higher birth rates is underpinned by the consistent
finding, after thirty years of surveys, that women in Europe, at least, wish
on average to have about two children (although seldom many more).
Furthermore, actual birth rates can go up as well as down. Several
Scandinavian countries have experienced rising birth rates since the 1980s,
although that of Sweden took a sharp downturn in the mid-1990s. The Total
Fertility Rate (TFR) in Denmark has declined from its peak but in Norway
it continues at over 1.8 (1.84 in 1999). In Ireland, TFR has remained at about
1.9 after falling below replacement level. Of the fifteen EU countries plus
Norway and Switzerland, thirteen out of seventeen had a higher TFR in
1999 than in 1998, although the increases were mostly tiny. Recent French
data suggests a more substantial increase to 1. 9 in early 2000.
Outside Europe, Australia, Canada, New Zealand and the US, none of
which have ever seen low birth rates, increased their fertility from the 1980s.
The United States continues at about replacement level, New Zealand a bit
less. Although ethnic minority fertility is higher than average in those coun-
tries, the non-minority population also continue to have higher birth rates
than almost any European countries. In the US TFR in all groups increased
further from 1998 to 1999, from 2.059 overall to 2.075. In some populations
richer and better educated women now have more children than average;
female workforce participation is no longer an impediment to the third
child, at least in Scandinavia thanks to state compensation measures. For
whatever reason, most national and international projections expect a
modest recovery in fertility, although stopping short of replacement level.
If the birth rate does not increase spontaneously, is it responsive to
public policy measures? Opinion here is strongly divided. Public policy
effects upon the birth rate can be intended or (more usually in the West)
unintended. Few Western countries explicitly attempt to increase their
birth rate, although many are concerned that it is too low (see United
Nations, 2000). Most governments favour welfare policies for the family
(welfare payments, workplace and housing policies, etc.) for welfare
reasons only. While these might incidentally make it easier for women to
have the number of children they say they want, most governments still
shy away from overtly 'pronatalist' measures or rhetoric. Evaluation of the
effects of welfare policies is difficult because there are so many forms of
assistance from which families can benefit. Direct family allowances may
304 Population Ageing

play only a modest role. Some studies have found evidence only for a weak
effect of welfare and fiscal changes on family size and the pattern of family
formation (Gauthier and Hatzius, 1997). Others report somev,rhat stronger
effects. In the early 1980s French pronatalist measures were estimated to
add about 0.3 to the average family size. The Swedish case in particular is
claimed to be an example of precise, if temporary, response of marriage and
birth rates and intervals to changes in relative financial advantage, includ-
ing the fertility downturn following more recent welfare retrenchment and
raised unemployment (Hoem, 2000). It is noteworthy that the only devel-
oped countries in the world with relatively high birth rates are those which·
also have high levels of childbearing outside marriage.
Family subsidies of various kinds, state child care, preferential access to
housing in the absence of an open housing market and other measures in
the former Communist countries of Eastern Europe attempted simultane-
ously to promote female workforce participation and the birth rate.
Although these policies are often dismissed as having had no more than a
transient effect, they appear to have maintained fertility there at close to
replacement level until their withdrawal during the post-1990 transition
period (UNECE, 1999b ). However, these policies operated in a system of
universally early marriage, limited access to modern contraception and few
social outlets as alternatives to family life.
Elsewhere in the industrial world, there may be tenacious cultural imped-
iments to the development of higher birth rates. Theories of 'gender equity'
suggest that very low birth rates arise from unbalanced equality for women
(McDonald, 2000). If law, state subsidies and cultural preferences allow
women some freedom to engage in work and higher education, but still load
them unfairly with expectations to care for children, older relatives and the
house by themselves, their time and energies will be so squeezed that child-
bearing will be very delayed and minimized. Paradoxically, this is likely to
happen in societies with a traditional 'familist' culture which considers the
care of the elderly to be a family matter, resists state interference and con-
signs women to unequal domestic roles in which men play little part. The
low level of fertility in the familist southern European countries, and in
Japan, seems unlikely to be reversed without a broader shift in personal and
political culture, as well as fiscal measures to support the family and help
women to combine work and child care. Societies with high gender inequal-
ity will continue to suffer lower birth rates.

The Situation in the United Kingdom

The example of UK is somewhat anomalous. There is no tradition of pop-
ulation policy by national government in the United Kingdom. However,
some local authorities in southern areas, which are the centres of economic
 David Coleman 305

growth and population growth (much of the latter from immigration),

consider their areas to be 'full' and resist further house construction. There
is much concern over the destruction of the natural environment by the
spread of urban areas. However, the present government has announced a
controversial re-evaluation of immigration policy, previously restrictive if
ineffective. It considers that labour migration should be encouraged
further to meet specific current shortages and possibly longer term general
needs. Demographic concerns (to do with 'population ageing') have so far
only been hinted at, and only rather vaguely.
The UK demographic regime is relatively benign; with a total fertility
rate which has been around 1.7-1.8 since the 1970s. Population decline is
not projected until after 2035 (partly because of existing high immigra-
tion); population projections by the official Government Actuary's depart-
ment forecast a long-term potential support ratio of around 2.5 (today 4.1),
with a median age of 42. To preserve today's potential support ratio would
require the formal retirement age (now 65/60) to increase to 72. These
results underline the conclusion that substantial population ageing will be
impossible to avoid. No plausible demographic change makes a big differ-
ence. None of these seem to this author to be obviously catastrophic. In
the UK 'demographic time-bombs' only go off in the media, not in real life.
No proposals have been suggested, or even considered, specifically
addressed to the issue of increasing the birth rate. They would be contro-
versial and probably counterproductive. In fact the only UK government
policy aimed at fertility is a specific target to reduce the (high) teenage con-
ception rate by half by 2010, on welfare grounds (Social Exclusion Unit,
1999). If this were eventually successful in reducing teenage fertility to the
EU average, it would bring the UK TFR closer to 1.6 than its current 1.7,
which other things being equal would make future ageing trends worse.
The UK family support programmes and other welfare arrangements
(such as subsidized 'social' housing) are aimed at welfare and have no demo-
graphic intentions, although they may, of course, have unintended demo-
graphic consequences. By northern European standards they are relatively
modest, but the UK nonetheless maintains a relatively high birth rate.
Despite heavier subsidies and an explicitly pronatalist programme, the
birth rate of the UK's French neighbours has been much the same as that of
the UK for many years. French colleagues have attributed this to an excess
of careless, unplanned early childbearing in the UK, encouraged perhaps by
specifically (unhelpful) British attitudes towards sex education and per-
verse incentives in the welfare system. UK birth rates in the 15-19 age-
group are certainly anomalously high, four times the EU average and large
enough to distort the UK age-specific fertility profile compared with that
of most other European countries.
Changes are nonetheless happening, although motivated by welfare con-
cerns for the family and the position of women, not to enhance the birth rate
306 Population Ageing

as such. The fortuitous intervention of the European Court, for example,

obliged the UK government to equalize its pension entitlement age for men
and women on sex equality grounds. Welfare consideratiqns suggested
equalization at 60. Demographic imperatives argued otherwise. Retirement
age for both sexes will be fixed at 65 from 2010-15, occasioning at least a
notional marked improvement in UK dependency ratio trends. Under the
UK's 'Foresight' programme launched in 1993, steps are also in hand to dis-
courage unjustified disability-based early retirement and to encourage later
working. Tax reliefs are being removed from private pensions taken before
age 55, the tax system will make working beyond age 65 easier, legislation is
being introduced, on US lines, to make age alone inadequate grounds for not
hiring, or for dismissing, labour. Both employers and government are likely
to discourage favourable early retirement terms in occupational pension
schemes (e.g. through the use of 'defined contribution', not 'defined benefit'
schemes). Access to ill-health early retirement is likely to be subject to more
stringent criteria. 'Phased retirement' will be encouraged whereby the pen-
sioner continues in part-time work, a response currently discouraged by
'final salary' pension schemes where pension is determined by the last level
of salary, not the maximum ever reached. Workforce participation by lone
parents (lone parenthood is very high in the UK) is being encouraged as a
means of reducing welfare dependency.
While some countries have already started to move their retirement age
back from the original fixed limits, to 67 in the US and to 65 in Italy and
Japan, the UK has not yet decided on such action. However, it can be said
that the UK pensions situation is already much more favourable than that
in continental Europe. The necessary shift away from primary dependency
on state-run pay-as-you-go pension schemes is already far advanced. The
solvency of these unfunded transfer schemes, as is well known, is particu-
larly vulnerable to shifts in the population age structure. Maintaining real
pension levels will require substantial increases in payroll taxes. In the UK,
state pensions are already linked to prices, not to wages. Furthermore, a
high proportion of workers are already members of funded occupational
or private pension schemes and government policy aims to extend such
coverage to an even higher proportion of the population. While funded
schemes cannot entirely evade the consequences of population ageing, they
offer many advantages over non-funded state schemes.
Costs of ill-health among the elderly have not received the same atten-
tion as pensions. Some calculations, taking into account the reduction of
child dependency costs, come to quite modest conclusions about the add-
itional real expenditure, at least for the UK. Sixty per cent of the health
expenditure on an individual is concentrated in the twelve months before
death; 60 per cent of health expenditure therefore depends on the annual
number of deaths, which is projected to increase by 17.5 per cent in the EU
by 2025.
 David Coleman 307

Conclusion
In conclusion, a substantial level of population ageing is here to stay. The
'easy' option of encouraging more immigration to address population
ageing is demographically ineffective. It would be a short-term measure
which enables hard but necessary decisions to be evaded and would bring
serious cultural, social and political difficulties and economic costs.
Excessive population ageing can be avoided if excessively low birth rates
are avoided. Prudent administrative measures, of the kind noted above,
should go hand in hand with policies to make the workplace and the tax
and welfare systems more favourable to women, so they can fulfil ambi-
tions, consistently stated in surveys, to have more than one child. But in
some low-fertility countries, cultural changes in gender equity in the
home, difficult for government to influence, will be essential. In differ-
ent ways, the US and the Scandinavian countries have shown the way,
not for the sake of demographic engineering but to promote equity.
Look after women's interests, it may be said, and population will look
after itself.

Note

From Social Biology and Human Affairs, 66,2001, pp. 1-11.

References

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the UN Population Division Report on Replacement Migration', Expert Group
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Council of Europe (2000) 'Demographic Developments in the Member States of
the Council of Europe', Council of Europe, Strasbourg.
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Systems', British Actuarial journal, 5 (part 1), 21, pp. 55-113.
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Ageing Societies, Oxford, Clarendon.
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Econometric Analysis', Population Studies, 51, 3, pp. 295-306.
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population/popdecline.htm.
The Evolving Concept of
'Retirement': Looking
Forward to the Year 2050
James H. Schulz

Almost a half century ago, Eugene Friedmann and Robert Havighurst

(1954) pioneers in the field of social gerontology, described retirement:

Retirement is not a rich man's luxury or an ill man's misfortune. It is increas-

ingly the common lot of all kinds of people. Some find it a blessing; others, a
curse. But it comes anyway, whether blessing or curse, and it comes often in
an arbitrary manner, at a set age, without direct reference to the productivity
or the interest of the individual in his work.

What Friedmann and Havighurst were referring to was the fact that retire-
ment is a product of the industrial revolution. Older people before that his-
toric economic event were not 'retired' people, and there was no retirement
role. A big part of the dramatic growth in economic productivity arising
from the industrial revolution was a change in the terms of employment-
resulting in increased leisure. This increase was particularly marked during
a period towards the end of life that became known as 'retirement'.
However, not all workers retired. A few avoided this new opportunity
to leave the labour force. Writing about the retirement decision in his book
Chronicles of Wasted Time, Malcolm Muggeridge (1973) observes: 'Few
men of action have been able to make a graceful exit at the appropriate
time.' While retirement has been avoided over the years by 'men of action'
(a few statespeople and many self-employed farmers and professionals),
that is not the interesting part of this historic transformation. Of more
importance is the fact that most people do not avoid retirement, do not
want to, and in fact retire as soon as it is economically feasible. Any list of
the most significant developments of the twentieth century should include
the dramatic decline in male older worker participation rates over that
century and the sharp rise in leisure that went with it.
310 The Evolving Concept of 'Retirement'

In recent years, there have been increasing numbers of people predict-

ing that the decline in labour force participation rates has come to an end
And there are many who now argue that the economics Df ~populatio~
ageing' require people to work longer in the future. It is to this future that
this article looks. How is the retirement concept changing throughout the
world, and what are the implications for people who reach old age, say, five
decades from now? This writer approaches these questions with a crystal
ball in one hand and, in the other, thirty-six years of experience doing
research on the economics of ageing.

Economic Growth is the Key to the Retirement

of the Future

It is not demography but economic growth rates that will determine

the future nature of retirement. One of the biggest hoaxes perpetrated in
the industrialized world today is the promulgation of the notion that the
ageing of population around the world has created a 'crisis'.
What crisis? Is it true that changing demography will place an unsus-
tainable economic burden on nations, given current pension and healthcare
programmes? Many argue that unless a radical reduction in retirement
benefits occurs, older persons will consume so much of the national output
that, as one respected business publication put it, we will end up 'consum-
ing our children' (Chakravarty and Weisman, 1988). Here is an illustrative
but typical statement by two economists:

In every [developed] nation the elderly retire into a world of guaranteed

income support and health insurance coverage. And, thus far, the reaction of
the developed world to population aging has been to simply increase spend-
ing on the elderly ... Such a reaction to population aging is not sustainable.
(Gruber and Wise, 2001)

Such assertions are almost always supported solely by demographic pro-

jections of rising 'dependency ratios' and projections of sharply increasing
social security tax rates using controversial assumptions. They are rarely
supported by sophisticated economic analysis. Analysing the economic
impact of population changes is a far more difficult challenge than simply
presenting demographic dependency ratios (see Easterlin, 1995).
In research that modelled the economic impact of population ageing, we
showed that relatively small increases in economic growth rates have the
potential to substantially moderate the ill effects of other factors (such as
demography) that have a negative impact (Schulz et al., 1991). In fact, the
research concluded that, for the United States, the overall support burden
pertaining to non-working individuals (both young and old) could be less
 James H. Schulz 311

in the years 2030-50 than it was during the 1950-70 period - assuming a
relatively high rate of economic growth. 1
Bow many years will the future aged be able to spend in retirement? The
answer depends fundamentally on the growth of economic output relative
to the size of the labour force. The potential impact of demographic ageing
on growth has been a major issue for decades in the debate about the roles
of public and private pensions. Economists today are virtually unanimous
in stressing the need to increase national saving in order to promote eco-
nomic growth. This emphasis on saving results in part from a long tradi-
tion in economics. Both traditional neoclassical growth theory and more
recent growth theory give major attention to the role of saving. Economist
Robert A. Blecker (1997) points out: 'Since the late 1970s, mainstream
macroeconomics has been dominated by a conservative policy consensus,
which emphasizes raising national saving rates and avoiding government
intervention in financial or labor markets.' But there is a growing literature
(discussed in Barr, 2000; Schulz, 1999) that questions this emphasis, espe-
cially in connection with pension policy. Recent research suggests that
increasing private saving, other factors unchanged, does little to raise
private investment. In fact, econometric analysis by Gordon (1995)
strongly supports the view of some economists that investment generates
saving, not v1ce versa.
Moreover, there is not just one factor (saving) or two (saving and
investment) that are the key determinants of economic growth. While
saving and investment are necessary, they are not sufficient to ensure the
rate of growth will be adequate to achieve any specified set of goals. There
are many other factors that are important- probably more so. These would
include the rate of technological change, the willingness of producers to
take risks, management organizational and human resource skills, the
extent of entrepreneurial drive, and the quality of education and training
given to young and old entrants into the labour force.
Therefore, we are left with two conclusions: first, that economic growth
is the product of many factors- not just saving and investment in physical
capital; and, second, that economic growth is the key to leisure and the
primary determinant of potential future leisure.

[ ... ]

Population Ageing: 'Let's Put the Old Folks

Back to Work'

[W]ith the approaching retirement of the 'baby boomers' and the conse-
quent demographic ageing, there arise new concerns about retirement
policy. As William Jackson (1998) points out: 'A new policy question has
312 The Evolving Concept of 'Retirement'

arisen: how should we adjust economic and social arrangements to allow

for a rising and permanently higher proportion of old people? This ques-
tion has never been posed or answered before, and its very_.noyelty may
provoke alarm.' Population ageing was unknown before the twentieth
century. Now there are ageing populations throughout the world (in both
industrialized and developing countries). The so-called rising burden of
the elderly population in terms of pension and medical costs is a matter of
major concern in many countries.
There is a large literature debating the nature of the impact of popula-
tion ageing and especially its economic ramifications. Much of the focus is
on elderly pension and healthcare benefits (and their costs). While there are
big differences in views on this question, there seems to be a general con-
sensus that population ageing will require some changes in these two
areas - given the projected size of expenditures. Some see a need to radi-
cally change income provision in old age through privatization of pensions.
Others, instead, would incrementally reduce pension and health benefits,
while also raising taxes by a small amount.
One frequent proposal is to force the elderly population to pay more of
the costs and also to encourage older persons who are generally healthy
and living longer to work longer; in fact, a number of countries have
recently begun to raise the 'normal' age of retirement for full pension ben-
efits. In this regard, Victor Fuchs (2001) argues:

If health care expenditures for the elderly continue to grow rapidly ... and if
the ability to finance these expenditures by transfers from the young reaches
its limit, the only alternative is for the elderly to pick up a large share of the
bill. If these payments must come from incomes that grow at only a modest
pace, the elderly will become increasingly 'health care poor' .... To prevent
more and more elderly becoming 'health care poor', they must have addi-
tional personal income. They need more income from savings (including pen-
sions and investments) and from earnings, which means they will have to
work more both before and after age 65.

But is this feasible based on what we know about past practice and current
attitudes? Employers may not need, or be inclined to hire, older workers.
Moreover, older people may not want the new jobs, even if they are
offered. Without dramatic changes in the ability of countries to moderate
business cycles and keep unemployment low over the long run, there may
be little change in current provisions that encourage retirement and 'early
retirement'. I think that, as in the past, we can expect employers, unions,
politicians, and workers themselves to continue supporting mechanisms
that encourage older workers to retire at increasingly early ages during
periods when unemployment is high.
The issue is further complicated by attitudes of older workers towards
work and training. As they grow older, most workers become very choosy
 James H. Schulz 313

about the work they are willing to do - especially if retirement is a finan-

cially feasible option through pension benefits. Also, with increasing age
comes an understandable reluctance to uproot oneself and make the geo-
graphic moves often associated with attractive employment opportunities.
However, there is one factor regarding older worker employment that is
often overemphasized: the possible mismatch of older worker skills with
future jobs. There is a stereotypical scenario of the job situation in the
future which runs something like this. Under the pressure of foreign com-
petition, nations are producing overwhelming numbers of unappealing,
low-paying jobs for people of all ages. With the decline in traditional
manufacturing industries, more and more workers (both young and old)
will be forced in the future to sell 'fast foods'- chicken nuggets and ham-
burgers at Kentucky Fried Chicken and McDonald's.
Growth in jobs, according to this stereotype, lies in two typical areas: the
expansion of eating and drinking establishments and the mushrooming
information technology/computer industries. Both areas are seen as poor
sources of new jobs for most older workers. Work at McDonald's is tedious
and pays poorly, whereas computer jobs are thought to be too demanding
in their education and skill requirements. Hence, the argument goes, it will
be hard to match the work desires of older workers with the jobs becom-
ing available, unless older workers are ready to settle for 'lousy jobs'.
This potential problem, however, tends to be overdramatized in policy
discussions. A closer look at the occupational shifts taking place in indus-
trial countries indicates that most older workers can be matched with
appropriate jobs. Most of the new jobs in the future will be in a broad span
of industries - including business services, medical services, construction,
financial services, and information processing of many types. A large
number of the new jobs in these industries are unexotic but often chal-
lenging, and can be done by a wide range of workers of any age (Schulz,
1990). Examples are jobs as healthcare specialists, clerks, drivers, salespeo-
ple, maintenance personnel, and receptionists.
The problem lies not so much in the nature of the jobs and their skill
requirements but in the attitudes of both older workers and their potential
employers, in the rigid structure of the workplace, in current hiring prac-
tices, in the prevailing wage structure and compensation policies, and in
attitudes towards training older workers.

Attitudes: The Big Barrier to Employment

Without a doubt, the most serious barrier to the re-employment of older
workers today is the attitudes of the workers themselves and their poten-
tial employers - especially with regard to the issue of productivity and
the ability to train older workers. Conventional notions about workers'
314 The Evolving Concept of 'Retirement'

abilities die hard. Many older workers and most employers truly believe
that productivity almost always declines with age and, as the old saying
goes, 'old dogs cannot learn new tricks'. Moreover, work ,.environments
may remain very rigid with regard to making adjustments to job require-
ments and remuneration patterns -making it nearly impossible to easily
match older workers with existing employment opportunities.
Clearly, there is a need for major changes in employer and union atti-
tudes/practices regarding the training and employment of individuals over
the life cycle. As the rate at which young people enter the labour force
slows in coming years, businesses will be forced to rethink how they will
get the labour necessary for producing their products and services.
However, the outcome of that rethinking is not as predictable as some
writers suggest. Firms can respond to demographic changes in the avail-
ability of labour in a number of ways; recruiting and hiring different
types of workers (such as older workers) is only one of many ways.
Alternatively, firms can invest in more physical capital that reduces labour
needs; or encourage liberalization of immigration policies favouring
applicants with needed skills; or encourage more women with children to
stay in the labour force by, for example, offering daycare facilities; or shift
production processes to developing countries with large labour surpluses
and cheap wages.
As a consequence, the new demographic profile evolving in industrialized
countries does not necessarily mean there will be serious labour shortages in
the future. Nor does it mean that all older workers will find that it is much
easier to obtain suitable re-employment after losing or shifting jobs.
Hopefully, however, the new demographics do provide an opportunity to
devise and promote better policies and programmes for a more efficient use
of potential labour force participants. Raising the size and productivity of
the labour force through human resource policies is a major alternative to
current calls by some for cutbacks in retirement benefits for the old.
Thus, the biggest 'retirement issue' of the new century is likely to be
whether both workers and employers see the need and are willing to
modify the retirement 'right'. Will it be changed to include what each group
sees as viable work options in later life to complement the retirement life
everyone now expects and almost all enjoy?

Productive Ageing
In recent years, a number of gerontologists have sought to promote an ana-
lytical framework that emphasizes the fact that almost all individuals are
engaged in productive activities throughout most of their lives, including
the retirement period. 2 The concept of 'productive ageing' has developed
in part as a reaction to the limited view of work as defined by economists
 James H. Schulz 315

and the resulting structure of the national income and product accounts
which measure the aggregate economic output of the nation. Given present
practices, many of the activities and contributions made after (and some
before) retirement are not counted in official statistical reckonings of
national economic activity.
The productive ageing framework accepts the economic paradigm that
focuses on activities that have 'value'. But it seeks to expand the definition
of economically valuable activities beyond those whose value is determined
by economic markets. Herzog and Morgan (1992), for example, argue that
government 'social reporting efforts aimed at monitoring productivity and
how it might change as a function of the age of the person are biased by the
way productivity is operationalized in most available social statistics'.
In general, the proposed approach to deal with these limitations is to
include both traditional market and non-market economic activities that
result in the production of goods and services. Bass, Caro and Chen (1993),
in the introduction to their edited book on productive ageing, expand this
view by adding to their definition of productive ageing activities that
develop the capacity to produce goods and services.
But as Bass, Caro and Chen point out, even with this change, most def-
initions of productive ageing would exclude 'many important and con-
structive activities undertaken by the elderly. They exclude, for example,
such activities as reflection, worshiping, meditation, reminiscing, reading
for pleasure, carrying on correspondence, visiting with family and friends,
traveling, and so forth'. Given these exclusions, and others, not everyone
agrees with an approach that focuses a discussion of roles in later life
almost solely on older persons' economic activities and potential.
A different approach is one that seeks to escape from the economic para-
digm and looks at the later years of life in primarily non-economic terms.
Philosopher Harry Moody (1993) strongly criticizes the productive ageing
concept. He argues that:

By insisting on the productivity of the old, we put the last stage of life at the
same level as the other stages. This transposition implicitly sets up a kind of
competition or struggle (who can be the most productive?) which the old are
doomed to lose as frailty increases. By celebrating efficiency, productivity or
power, we subordinate any more claim for the last stage of life in favor of
values that ultimately depreciate with meaning of old age.

Moody warns that while the proponents of productive ageing emphasize

non-coercion, options, and opportunity, 'productive aging easily can
become a subtle means of social control and implies a modification of the
"bureaucratized" life course, and in ways that at present remain impon-
derable'. As Moody points out, productive ageing is more than a matter of
semantics. It is a substantive answer to the question: What is later life for?
316 The Evolving Concept of 'Retirement'

To me, it seems appropriate to use a framework that is broader than the

economic productivity focus. There is a need for a 'wider vision' of late-life
'productivity' that includes altruism, citizenship, stewardship, c::reativity,
and the search for faith. With this broader view, we can see that retirement is
more than stopping paid work and engaging in more leisure activities. It is a
period of life where a variety of special activities compete with the traditional
activities of work and leisure for the attention and time of older people.

Retirement in the Future

We are now ready to draw from the above discussion some of the proba-
ble characteristics of retirement in future years. As the World Health
Organization has recently stated in a discussion paper for the Second UN
World Assembly on Ageing:

It is time for a new paradigm, one that views older people as active partici-
pants in an age-integrated society and as active contributors ... [The paradigm
should challenge] the traditional view that learning is the business of children
and youth, work is the business of midlife, and retirement is the business of
old age. (WHO, n.d.)

Attitudes towards retirement in the future are likely to move sharply away
from the simplistic view of all work before retirement and no work after.
Some of the resulting changes we can expect to see arc as follows.

More part-time work At the same time as rates of retirement have

increased, there has also been a large increase in the number of continuing
workers who work part-time. Figures 1 and 2 show the increases between
1983 and 1991, averaging the rates for ten countries in the European Union.
A survey of workers in the United States (The Health and Retirement
Study) found that nearly three-quarters of the respondents in the first wave
of this longitudinal study said that they would 'prefer to phase down from
full-time work to part-time work when they retire' (Gustman ct al., 1995).
Part-time work appeals to many older workers for a variety of reasons.
Many see it as a way of escaping from the demands and problems related to
their prior full-time work. Part-time work is also growing because of the
increased labour force participation of women, since this option has always
been a way of their coping with multiple family responsibilities and per-
sonal preferences. The UK House of Commons (1999) has pointed out that:

Two distinct trends can be identified in EU countries' approaches to part-time

working. A growing number of countries are developing ways to make
part-time work more attractive as a means of promoting the diversity of
working choices. On the other hand, strategies in theN ordic countries in par-
 60

50

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10

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Age 55-59 Age 60-64 Age 65-69 Age 70+

Figure 1 Part-time male workers in ten European countries (aggregate data),

1983 and 1991
Source: Eurostat.

60

50

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20

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Age 55-59 Age 60-64 Age 65-69 Age 70+

Figure 2 Part-time female workers in ten European countries (aggregate data),

1981 and 1993
Source: Eurostat.
318 The Evolving Concept of 'Retirement'
ticular have been based on the full-time norm enabling opportunities for pan-
time work to be associated with a reduction in full-time hours ..

Also, some governments have encouraged part-time work p~licies as a way

of dealing with unemployment problems. For example,

since 1993, French employees have been entitled to take phased early retire-
ment between the ages of 55 and 65. Early retirement schemes with the princi-
pal aim of creating jobs were introduced on an experimental basis in France in
1996, covering both the public and private sectors (House of Commons, 1999).

As we indicated earlier, attitudes towards older workers and different

patterns of work in old age are one key to the future. In this regard, the
social science literature to date indicates that there is still an unyielding
barrier to change regarding work patterns. Regardless of the many advo-
cates of flexible retirement options, real changes will not occur 'unless
management becomes more interested in varying work schedules for older
workers' (Siegenthaler and Brenner, 2000). Hopefully the changing dimen-
sions of an ageing workforce as the number of young entrants sharply
declines will help to encourage this change. And given that workers,
employers, and governments find the part-time work option attractive
(often for different reasons), the trend towards more part-time employ-
ment in the later years is likely to continue.

Expanded 'citizen participation' If part-time employment increases in

future years, will overall paid labour force participation increase? As indi-
cated above, I do not think that will happen- at least not to any significant
extent.
The recent levelling off of labour force participation rates results from a
variety of labour market factors, such as the buoyant demand for labour
during a record period of economic prosperity. It also results from the fact
that the most likely groups to retire early are now doing so. The result is
that those still working full-time in old age are few in number. Moreover,
many of these workers are not inclined to stop working, given their occu-
pational situations (e.g. farmers).
But two things are likely to happen. First, part-time job opportunities will
broaden, given the discussion above and the fact that the demographic
decline in new young entrants will encourage employers to respond to the
part-time work preference of older workers. Second, there will be an expan-
sion in work not currently counted as 'employment' in the official statistics.
Studies show that older persons are not totally opposed to work but often
want work that is more rewarding or different from their earlier '9 to 5' jobs.
Clearly, for many people the retirement years are becoming an attractive
period of exploration and reflection. Relieved of some (or most) of the pres-
 James H. Schulz 319

sures to work 'to survive', we can expect to see a growth in volunteer work
and community and family assistance and involvement, and a rising concern
about the environment and the quality of life. Older people in the coming
decades will not just sit in their rocking chairs and watch television. They
will continue to be active but with a new combination of leisure and work
activities- new forms of what might be called 'citizen participation'.

An older workforce with more training The composition of the labour

force in industrialized countries is undergoing a fundamental change as pop-
ulations age. Fewer younger people are entering the workforce each year.
For example, in the United States, beginning around 1981, there has been a
sharp annual decline in the number of new entrants (see figure 3). By the year
2005, the median age of the United States workforce is projected to be over
40 years, compared with 35 years in 1979. In Europe, there is a great deal of
concern about labour shortages. One recent estimate (Eberstadt, 2000) is
that Europe would need to have sustained net migration at four times its
current level in order to satisfy worker demand owing to decline in the
working-age population. One option is to retrain older workers.
Up till now, the retraining of older workers has been sporadic at best.
'Lifelong learning' of skills that can be used in new jobs is one of those
ideas that many people talk about but few people take seriously.
Why have we paid only lip service to the idea of learning throughout a
worker's lifetime? First, there has been a widespread belief that the wonders
of science have created a situation where there is no longer enough work for
everyone. Technological innovation and modern production methods -
such as mass production, new energy sources, complex machines, and

30

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1950 1960 1970 1980 1990 2000

Figure 3 Entrants to the US workforce (millions of workers)

Source: Population Reference Bureau.
320 The Evolving Concept of 'Retirement'

robotics -are seen as creating a surplus of workers. Many people argue that
nations should recognize the reality of 'surplus labour' and spread the avail~
able work around, creating shorter work weeks and earJier retirement.
Given the seemingly unlimited desire of people for old and new products
and services, economists argue that this view is erroneous - that scarce
resources (including labour) will never be sufficient to keep up with
growing demand. But the idea of labour surplus as a result of technological
revolutions remains strong among many non-economists. In such a world
of labour surplus, there would seem to be no need for workers to be
retrained, especially as they get older- and also given that there often seems
to be no shortage of workers when unemployment is high.
Second, even if a need for labour develops, the view is often that older
workers are not as likely to be suitable for the new jobs. This is because it
is believed that work performance declines with age. However, this view is
not so much the result of research and fact as it is of prejudice and igno~
ranee. To the extent that there has been research, it in large part contradicts
the prevailing views of employers. Regarding performance, Sterns and
McDaniel (1994) point out that

an extensive body of research indicates that age and job performance are by
no means highly correlated. If performance does anything with age, it
improves slightly, but the relationship is very weak. This is true regardless of
whether performance is measured by supervisory ratings or through other
more objective productivity measurements.

Technological change and robotics have not made human employment

unnecessary. Moreover, research shows that most older workers can learn
and can be as productive as young workers. In addition, they are able to bring
to their new job the insights and wisdom that come with years of experience.
But even if older workers can be retrained, most employers view them
as more costly than alternative sources of labour- such as a nation's youth,
middle-aged women returning to the workforce, and workers in develop-
ing countries. The fact is that up till now unions, government, and business
have thought that it is cheaper to terminate workers at early ages than to
retrain them for the new jobs being constantly created.
Third, as we have stressed repeatedly in this article, retirement policy to
date has been determined over the past sixty years mostly by efforts to deal
with chronic unemployment. Why retrain workers, it is argued, when the
country cannot even employ the workers already looking for work?
In the future, however, there is likely to be pressure on governments
and employers to reverse this lack of interest in retraining. Potential
labour shortages in the future are an increasing worry to many industries
-despite the current high levels of unemployment in some industrialized
countries.
 James H. Schulz 321

The biggest pressure is likely to come from workers themselves. Over the
past couple of decades, job insecurity has risen dramatically among workers
at later ages (when job security has traditionally been the highest) and among
white-collar workers (again, where job security has historically been rela-
tively high). Many workers have been unable or unwilling to retire as a result
of 'downsizing', mergers, employment shifts triggered by global competi-
tion, and other results of the new world economic situation. They have had
to take what have come to be called 'bridge jobs'- transitional jobs between
their prior 'regular' jobs and retirement. Often these jobs are less desirable,
given the barriers to 'regular' employment for workers at older ages.
If this bridging phenomenon continues, we can expect workers, and
perhaps their unions, to pressure governments and employers to provide
retraining. Many governments currently give huge tax subsidies to encour-
age people to save for retirement and to retire early but give very little in
the way of incentives for them to seek out the education and training they
need to work longer. Likewise, every country spends huge sums of money
on its educational institutions, but those expenditures are almost exclu-
sively for younger people. We can expect to see that imbalance in govern-
ment resources changed as older workers demand better job opportunities
when forced to leave regular employment before retirement.

Towards a More Flexible Retirement

Pensions were an invention of the twentieth century, designed to provide

more secure and more adequate income for various non-working people.
They were in large part a reaction to the growing insecurity arising out of
the industrial revolution and the inability of families to cope with it by
themselves. One almost accidental consequence of creating pensions was a
dramatic decline in labour force participation at later ages and the intro-
duction of a new phase of life -retirement.
The first pension schemes were very rigid. Public schemes set a 'normal
age of retirement' and often financially penalized workers who deviated
from it. Ages of eligibility were relatively high. Employer-sponsored
pensions typically rewarded only those workers who stayed with the
company, and their provisions were equally rigid.
Eventually this changed. Employers and unions found that pensions
could be an important tool in dealing with various labour problems. Initially
pensions were used to promote employee loyalty and to deal with special
circumstances: physical decline, work accidents, job loss arising from skill
obsolescence, and problems arising from cyclical economic instability.
Gradually, however, workers, unions, and governments began to treat
retirement through pensions as a 'right'. Workers and unions then pushed
for pension benefits that made it possible to retire at a relatively high
322 The Evolving Concept of 'Retirement'

standard of living. Employers generally acquiesced in this. goal. In some

cases, they even led the movement to ever earlier retirement .. For employ-
ers, pensions became an important way of managing their woxkforce. They
saw it as a good way of dealing with the labour force adjustments required
by ever changing competitive market conditions.
Much of the rigidity of pensions and the resulting rigidity of retirement
policies has disappeared. Pension provisions now allow retirement over a
broad span of years without actuarially unfair penalties. Nations have
created a variety of mechanisms that provide flexibility and create many
'pathways to retirement' (Kohli et al., 1991).
There has not been a comparable evolution of opportunities with regard
to working in the later years. Mandatory retirement provisions, age dis-
crimination practices, lack of retraining opportunities, etc. are still wide-
spread. But looking ahead to the future, we are likely to see the beginning of
much greater flexibility in older workers' work and retirement patterns. We
are likely to see (a) greater flexibility in hours worked, (b) an expansion in
what society considers 'work', and (c) greater opportunities for retraining
and new careers in the later years. These changes, together with increases in
pension plan normal retirement ages, will no doubt result in a small rise in
labour force participation rates among some groups of workers.
However, we should not expect the changes to produce a dramatic
upswing in labour force participation. Market-oriented economies will
still have to struggle with chronic unemployment problems and, as a result,
retirement policy will continue to be influenced by the issue: Who gets the
available jobs when full employment does not exist? In addition, for most
workers the choice between retirement and work, if income is adequate, is
no choice at all: retirement is clearly the preferred status. And if economic
growth continues at a reasonable pace, more leisure than we enjoy today
will be possible in the future. How that increased leisure will be distrib-
uted throughout the life cycle is impossible to predict.
One of the important gains from industrialization has been to funda-
mentally change the nature of old age. Instead of working (often in
unpleasant jobs) till ill-health forces older workers to quit, people now
have a meaningful choice between paid work and retirement. Some today
would like to roll back those gains and put people back to work- given the
so-called pension crisis. Even if the crisis were real (and that is debatable),
it is unlikely (I think) that workers would be willing to solve it by signifi-
cantly decreasing the retirement/leisure period. Time will tell.

Notes
From International Social Security Review, 55, 1, 2002, pp. 85-105.
The basic projections were carried out using a real growth rate of 3.0 per cent.
Sensitivity testing was then carried out using lower and higher rates, demon-
 James H. Schulz 323

strating that the burden is very sensitive to the growth rate but not as sensitive
to assumptions with regard to either population growth or labour force par-
ticipation rates.
2 This section is based on material appearing in Schulz (2001).

References

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International Monetary Fund Working Paper 00/139, Washington DC.
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Blecker, R. (1997) 'Review of Macroeconomic Policy after the Conservative Era:
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Chakravarty, S. and Weisman, K. (1988) 'Consuming our Children?', Business
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Easterlin, R. (1995) 'Economic and Social Implications of Demographic Patterns',
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Eberstadt, N. (2000) Prosperous Paupers and Other Population Problems, New
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Friedmann, E. and Havighurst, R. (1954) The Meaning of Work and Retirement,
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324 The Evolving Concept of 'Retirement'

Schulz, J. (1990) 'What can Japan Teach us about an Aging US Work Force)'
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The Global Retiretnent Crisis
Richard]ackson

[ ... J
'Demography is destiny,' demographer Richard Easterlin famously
observed. When it comes to public budgets, it certainly is. Rising longevity
and falling fertility translate directly into a lower ratio of taxpaying
workers to retired beneficiaries, and this in turn translates into a higher
cost rate for retirement programmes.

[ ... J

[In 2001] the European Commission (EC) and the OECD published long-
term projections of the impact of global aging on public budgets.
According to these 'official' numbers, spending on public pensions in the
typical developed country will grow by 4.4 per cent of GDP by 2050, or
from 8.8 to 13.2 per cent of GDP. This represents a 50 per cent increase-
and it may be a serious underestimate.
The official projections, in fact, rest on a remarkably optimistic set of
assumptions about future economic and demographic developments. They
assume that unemployment rates in most countries will fall, that labour
force participation rates will rise, and that fertility will rebound back
towards the replacement level. All of these developments increase the pro-
jected size of the workforce and tax base, and hence decrease the projected
pension cost rate. The projections also assume that the historical rate of
improvement in longevity will slow. Although this is bad news for people
personally, it is good news for government budgets.

[ ... ]
326 The Global Retirement Crisis
To assess the potential magnitude of the ageing challenge> the Center for
Strategic and International Studies' Global Aging Initiative has developed
an alternative projection (see CSIS, 2002). The CSIS projectipn ?egins with
the official projections, but adjusts key assumptions to more closely reflect
historical trends. It assumes that unemployment will continue at its 1990s
level, that women's work patterns will not change (except to aaow for
cohort effects), that fertility will remain constant, and that longevity will
grow at its historical pace.
Pension spending under the CSIS 'historical trends' projection grow~ by
7.0 per cent of GDP between now and 2050 in the typical developed
country, or from 8.8 to 15.8 per cent of GDP (figure 1). This is nearly 3 per-
centage points more than under the official projections - and it is just the
average. In some countries, the difference is much more dramatic. In Italy,
CSIS projects that pension spending will grow by 4.2 per cent of GDP
(rather than 0.3 per cent); in Japan, by 9.6 per cent (rather than 6.3 per cent);
and in Spain by 15.8 per cent (rather than 7.9 per cent).

16 15.8%

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Figure 1 Spending on public pensions is on track to grow by 7 per cent of GDP

in the developed world (spending on public pensions, as a percentage of GDP;
developed country (unweighted) average for 2000 and official and CSIS
projections for 2050)
Source: EC/OECD, 2001, and CSIS, 2002.
 Richard jackson 327

The CSIS projection is by no means a worst-case scenario, since it

merely assumes that historical trends will continue. If fertility rates fall
further or if longevity gains speed up, the bill for public pensions could rise
even higher. Like the EC/OECD projections, moreover, the CSIS projec-
tion assumes robust productivity growth averaging 1.75 per cent per year.
Although this rate is about equal to the developed-country average over
the past quarter-century, it could be difficult to sustain. Rates of savings
and investment may decline as the developed countries age, and this in turn
could lower productivity growth.
The magnitude of the extra pension burden will vary greatly among the
developed countries, partly because some are ageing more rapidly and
partly because some have earlier retirement ages and more generous benefit
formulas (figure 2). Almost everywhere, however, pension costs will begin
to ramp up around 2010. And almost everywhere, they will continue to
climb rapidly for two to three decades before slowing or plateauing at a
higher level. Global ageing is not a temporary challenge. It will bring a per-
manent shift in the age structure of the developed world's population and
will put permanent pressure on public budgets.
Pensions of course aren't the only public costs that are bound to grow
as societies age. Health care for the elderly will also be a large burden. In

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Figure 2 Behind the averages: the size of the projected pension burden varies
greatly among the developed countries (spending on public pensions, as a
percentage of GDP; developed country (unweighted) average for 2000 and
official and CSIS projections for 2050)
Source: ECIOECD, 2001, and CSIS, 2002.
328 The Global Retirement Crisis

the developed countries, each elder on average consumes three to five times
more health care than a younger adult. Moreover, the older. elders are, the
more costly their care becomes. In the United States, the ov;,era_ll per capita
ratio of public health care spending on the 'old old' aged 85 and over to
spending on the 'young old' aged 65 to 74 is roughly 3 to 1; for nursing
home care, the ratio is roughly 20 to 1.
What makes these differentials so ominous is that it is precisely the pop-
ulation of old old that will be growing the fastest. The UN projects that
the number of elderly aged 65 to 74 in the developed world will grow by
roughly 50 per cent between now and 2050, while the number aged 85 and
over will grow by nearly 300 per cent (figure 3). Today, just one out of ten
elders in the developed world is 85 or older. By mid-century, the 'ageing of
the aged' will push this share up to one out of five.
These demographic multipliers threaten to interact explosively with the
rising trend in healthcare costs. Due mostly to the introduction and diffu-
sion of new technologies, per capita public healthcare spending in the
developed countries has grown 1.2 percentage points faster than per capita
GDP over the past thirty years. The official projections assume that in the
future per capita spending will grow no faster than per capita GDP. Even
so, the EC and OECD project that public health benefits for the elderly
will grow by an average of 2.5 per cent of GDP over the next fifty years,
or from 2.1 per cent of GDP today to 4.6 per cent by 2050.

300
273%
c:
.2 250
~
""3
0...
0
0...
200
.::
v
bJ)
c: 150
~
...c:u
vbJ)
~ 100
=
v
u
1-.
v 50
0...

0
Age 65-74 Age 75-84 Age 85 & over

Figure 3 The 'old old' will be the fastest growing age group (percentage change
in the elderly population of the developed world from 2000 to 2050, by elderly
age group: UN projection)
Source: UN, 2001.
 Richard Jackson 329

CSIS assumes that healthcare spending will continue to grow 1 percent-

age point faster than per capita GDP. While this may seem like a small dif-
ference, it has a big impact. Under the CSIS projection, public healthcare
spending on the elderly in the typical developed country rises by 5.5 per
cent of GDP between now and 2050, more than twice what it does under
the official projections. Added to the higher growth in pensions under the
CSIS projection, this pushes up the projected growth in total public retire-
ment spending to 12 per cent of GDP.
Healthcare costs could rise even faster than CSIS projects. Although
some recent studies conclude that the health of the elderly is improving,
this does not mean that the historical cost trend will slow. The health of the
elderly is improving precisely because society is devoting a high and rising
level of real medical resources to their care. And society is doing so because
'good health' is a subjective standard that itself rises over time. As tech-
nology and expectations interact, governments may find it harder - not
easier- to control spending. This is why a recent panel of experts charged
with reviewing the US Medicare projections concluded that a GOP-plus-
one-percentage-point growth assumption lies near 'the lower end of the
reasonable range' (Technical Review Panel, 2000).

Facing Up to the Challenge

Altogether, CSIS projects that public retirement spending in the typical
developed country will grow from 11 to 23 per cent of GDP by 2050
(figure 4). Part of the additional cost will come due in the form of health
benefits rather than pensions. All that matters fiscally and economically,
however, is the total burden of public transfers to retired beneficiaries. The
fact that public healthcare spending on the elderly is growing too makes
the reform of public pensions all the more urgent.
Cost, of course, isn't the only reason public pensions need to be
reformed. Most economists agree that unfunded pension benefits substi-
tute for genuine savings, and so reduce capital formation and economic
growth. It's easy to understand why: when government promises people
future income, they save less on their own. In most countries, retirement
rules and benefit formulas also penalize continued work, once minimum
eligibility ages or service requirements are met. According to OECD
research, a 55-year-old with thirty-five years of employment and a 65-
year-old with forty-five years will receive the same benefit in eleven of the
developed countries (Vanston, 2000).
As pay-as-you-go systems 'mature', moreover, the deal they offer dete-
riorates. In the pay-as-you-go model, early cohorts of retirees can receive
benefits far in excess of the market value of their lifetime contributions- all
paid for by later cohorts of retirees, who necessarily become market losers.
330 The Global Retirement Crisis

24 23.4%

20

17.8%

16
0...
Q 7.0%
0
._
0
<1.1
OJ) 12
ro

=
<1.1
u
~
<1.1
0...
8

10.9% 10.9% 10.9%

4

2000 2050: Official 2050: CSIS

[d Growth in elderly health benefits

D Growth in public pensions
D Total retirement benefits in 2000

Figure 4 Total public retirement spending is on track to grow by 12 per cent of

GDP in the developed world (spending on public pensions and health benefits
for the elderly, as a percentage of GDP; developed country (unweighted) average
for 2000 and official and CSIS projections for 2050)
Source: ECIOECD, 2001, and CSIS, 2002.

In the United States, according to the Urban Institute, the typical single
male retiring in 1960 earned a return of 11.0 per cent on his Social Security
payroll taxes; the typical single male retiring in 1980 earned a return of
4.2 per cent (Steuerle and Bakija, 1994). The same worker retiring today can
expect a return of just 1.6 per cent. By the time today's college graduates
retire, the return will be 1.1 per cent- one-third what they could earn by
investing their payroll taxes in risk-free Treasury bonds (figure 5).
For a long time, the advantages of universal pay-as-you-go pensions-
social solidarity, poverty relief, and 'windfall returns'- seemed to outweigh
 Richard Jackson 331

20

18
~ 16
~
e 14
~ 12
0
~
r: 10
-;;;
;:l
c::
c::
<II

~ 6
r:
~"'
2

Figure 5 Today's pay-as-you-go public pensions offer younger workers a poor

'deal' on their lifetime contributions (real annual return on US social security
taxes for single male average earners retiring at age 65, 1950-2050)
Source: Steuerle and Bakija, 1994.

the drawbacks. Global ageing, however, is changing that calculus. Most

governments are coming to understand that today's public pension systems
are unsustainable and are beginning to enact reforms, although only a few
have faced up to the magnitude of the challenge.
To stabilize spending as a share of GDP, public pension benefits in almost
every developed country would eventually have to be cut by 30 to 60 per
cent beneath current projections. Yet in almost every country, workers
remain highly dependent on public pensions and entirely unprepared for
large benefit reductions. In the United States, where public pension benefit
levels are modest by developed-country standards, Social Security accounts
for roughly 60 per cent of the total income of average-income retirees. In
France, Germany, and Sweden, public pensions account for roughly 80 per
cent. Among lower-income retirees, the dependence is even more complete.
Only a handful of countries, most of them in the English-speaking
world, now have funded private pension systems that cover half or more
of the workforce. Just three countries -the United States, the UK, and
Japan- possess over 80 per cent of the world's funded pension assets. Nor
can the typical retiree fall back on personal savings. Even in the United
States, with its traditions of self-reliance, most workers have saved little for
retirement. According to a recent survey by the Employee Benefit
Research Institute (2000), only 21 per cent of households have accumu-
lated more than $100,000 in retirement savings; 35 per cent say they have
accumulated nothing at all.
332 The Global Retirement Crisis
As societies scale back today's unsustainable public pension promises,
they must develop new means of supporting the elderly that do not over-
burden the economy or overtax the young. Although the g~nerosity of
today's pay-as-you-go systems will inevitably be reduced, retirement secu-
rity can be strengthened - provided reform begins soon.

Note

Short extract from chapter 1, 'Behind the Projections', of The Global Retirement
Crisis, Washington, DC, Center for Strategic and International Studies, 2002.

References

CSIS (2002) The Global Retirement Crisis, Washington, DC, Center for Strategic
and International Studies.
EC/OECD (2001) 'Budgetary Challenges Posed by Ageing Populations: The
Impact of Public Spending on Pensions, Health and Long-Term Care for the
Elderly', Economic Policy Committee, EC; and 'Fiscal Implications of Ageing:
Projections of Age-Related Spending', Economics Department Working Papers
no. 305, OECD.
Employee Benefit Research Institute (2000) The 2000 Retirement Confidence
Survey, Washington, DC, Employee Benefit Research Institute.
Steuerle, C. E. and Bakija, J. M. (1994) Retooling Social Security for the Twenty-
First Century, Washington, DC, Urban Institute.
Technical Review Panel (2000) Review of Assumptions and Methods of the
Medicare Trustees' Financial Projections, Washington, DC, Technical Review
Panel on the Medicare Trustees' Reports.
UN (2001) World Population Prospects: The 2000 Revision, New York, United
Nations.
Vanston, N. (2000) 'Maintaining Prosperity', Washington Quarterly (Summer).
Gender Equity in Theories of
Fertility Transition
Peter McDonald

The 1994 International Conference on Population and Development

placed issues of gender at the centre of discussion of population and devel-
opment (United Nations, 1995). A leading theme of the conference was
that, in less developed countries, higher levels of gender equity are a nec-
essary component in the achievement of lower fertility. In apparent con-
tradiction to this tenet, I have postulated that very low fertility in advanced
countries today is the outcome of a conflict or inconsistency between high
levels of gender equity in individual-oriented social institutions and sus-
tained gender inequity in family-oriented social institutions (McDonald,
2000a). The implication is that higher levels of gender equity in family-
oriented social institutions are necessary to avoid very low fertility. Thus,
on the one hand, a higher level of gender equity in social institutions is
claimed to lead to lower fertility while, on the other hand, a reorientation
of social institutions towards a higher level of gender equity is claimed to
prevent very low fertility. Chesnais (1996, p. 733; 1998, p. 83) has
described this circumstance variously as 'the essence of a future feminist
paradox' and, more recently, as 'the present feminist paradox'. In what
follows I address this apparent contradiction or paradox through consid-
eration of a more generalized theory of gender equity in fertility transition.

What is Gender Equity?

Mason has employed the concept of the gender system, which she defines
as 'the socially constructed expectations for male and female behaviour
that are found (in variable form) in every known human society. A gender
system's expectations prescribe a division of labour and responsibilities
between women and men and grant different rights and obligations to
334 Gender Equity in Theories of Fertility Transition

them' (Mason, 1997, p. 158). Mason observes that 'studies explicitly

concerned with gender systems and their impact on demographic change
are relatively new' (ibid.). That this is the case with respect to,studies of fer-
tility is lamentable. Indeed, it is almost inconceivable that fertility transi-
tion can be studied without considering socially constructed expectations
for female behavior.
Mason (1997, p. 159) subdivides the gender system into gender stratifi-
cation ('institutionalized inequality between male and female members of
society') and gender roles (the division of labour between men and
women). Gender equity derives from both of these elements of the gender
system. Inequality between men and women and the division of labour
between them in a particular gender system can be evaluated from the per-
spective of rights- social, political, and reproductive. Levels of equity in
such an evaluation of rights determine the level of gender equity (Fraser,
1994). Thus, gender equity is a value-laden concept that begs the question
of whose values should be applied.
In consideration of fertility transition, the obvious answer is that the
values of the women and men who are making fertility decisions are
important. Do women (or, at least, some significantly sizeable proportion
of women) in a particular society consider that existing gender inequality
or the existing division of labour is unfair and inequitable? Do the views
of men and women coincide? Of course, women and men are unlikely to
express themselves in the rarefied language of sociology. Even in the
United States, Betty Friedan (1963) could refer to gender inequity only as
The Problem That Has No Name. In high-fertility contexts, gender
inequity within the family may be experienced by women as, inter alia, a
generalized dissatisfaction with the rigours and dangers of a constant
round of childbearing and childrearing imposed by spousal, familial, and
societal expectations.
The use of the word system to describe gender stratification and gender
roles may be misleading in that it implies consistency between different
social institutions as conceptualized in the classic structural-functional
anthropological approach. Essential to my argument is the notion that, in
societies undergoing fertility transition, gender stratification and gender
roles in different social institutions within a given society can become
inconsistent with each other.

Studies of Gender and Fertility

Mason (1997, pp. 163-72) provides a review of the methodologies that

would be required in studies of fertility and the gender system and reports
upon the few studies that approximate her standards of evidence. As she
points out, the complexity involved in proper studies of the gender system
 Peter McDonald 335
and fertility is challenging. Indeed, it may be argued that despite the logical
importance of the gender system to fertility, its lack of centrality in transi-
tion theory (until recently) results in no small measure from the poor
design of quantitative analyses. To test the relationship between gender
equity and fertility, demographers conventionally have studied a sample of
women in which there were measures of each woman's 'status' and a
measure of her fertility. Typically, a multivariate, cross-sectional analysis is
then applied to examine whether a statistically significant relationship
exists between women's status and fertility at the individual level. A more
sophisticated analysis may add community-level measures of the status of
women to the model.
This approach could be described as based on a unidirectional, dichoto-
mous model. As commonly hypothesized, low women's status leads to
high fertility; high women's status leads to low fertility. With regard to the
fertility transition, this is just one example of several unidirectional,
dichotomous models that have been employed in the literature. Some other
hypotheses tested by such models are: high education leads to low fertil-
ity; higher economic status leads to lower fertility; higher levels of social
inclusion lead to lower fertility; lower infant and child mortality leads to
lower fertility; higher costs of children lead to lower fertility; lower fertil-
ity accompanies lower religiosity; lower fertility is associated with a tran-
sition from extended to nuclear families; urbanization leads to lower
fertility; and a lower point on the low fertility-ideation scale leads to lower
fertility. One also finds 'testing' of the tautology that, other things equal,
higher or better use of birth control leads to lower fertility.
In general, the logic of unidirectional, dichotomous models has been
criticized because they imply a simple, evolutionary process of social
change, universal across all societies, in which progression along the path
of the model is always towards a state assessed as superior to the status quo
ante (Derrida, 1976; McDonald, 1994 ). These models have been criticized
for not situating fertility within its cultural and institutional context
(McNicoll, 1980; Greenhalgh, 1995). The unidirectional, dichotomous
model is applied irrespective of, or is only superficially modified by, the
social context. 1
Quantitative studies of the relationship between gender equity and fertil-
ity require measures of gender equity. As defined here, gender equity would
be evaluated for each social institution on the basis of the assessments of
women and, perhaps, men in the society under study. This definition has
inherent difficulties with respect to historical studies. In such studies, we
would need to rely upon diaries, letters, and published statements of
women. On the other hand, much historical research uses these types of
sources. An excellent example of such a historical study that provides con-
clusions supporting the arguments advanced here is Catherine Scholten's
(1985) study of childbearing in American society. 2 If gender inequity in
336 Gender Equity in Theories of Fertility Transition

contemporary societies is a problem that has no name, it is difficult to obtain

measures of the perceptions of gender equity from individual women.
Depending upon the social context, social-psychological s~al~s may be
useful. Inevitably, however, the degree of gender equity will be measured by
the researcher's own assessment of the levels of equity applying in different
social institutions, based upon quantitative measures of those institutions.
Such measurement will require a sophisticated anthropological knowledge
of the society. This is the approach used in the small number of recent quan-
titative studies cited by Mason (1997, pp. 169-72). The argument that com-
plexity requires the use of qualitative methods is also apposite.
The level of gender equity did not emerge from the influential European
Fertility Project as an important determinant of the onset of fertility tran-
sition. In this study, a 10 per cent fall in fertility was taken as evidence for
the onset of fertility transition (Coale and Watkins, 1986). The focus was
on the onset of the decline because the authors concluded that once a fall
of 10 per cent had been observed, continuation of the decline was
inevitable. The study found that few generalizations could be made across
districts of Europe as to the conditions that were contemporaneous with
this 10 per cent fall. Given the extent of institutional variation across cul-
tures at the onset of decline, it is not surprising that generalization proved
difficult. If consideration is extended to a much larger range of world cul-
tures, this lack of generalization is even more likely to be found. I argue
here that the emphasis on the period surrounding the onset of decline may
be misplaced. More value may be obtained from studying why fertility
continues to decline to low levels after it has commenced to fall. In other
words, the scope for theoretical generalization is probably greater in study
of the sustained fall of fertility than in study of the commencement of fer-
tility decline. The influence of changes in the level of gender equity may be
more evident in this later phase.

Some Propositions regarding the Relationship between

Gender Equity and Fertility
The place of gender equity in fertility transition theory can be approached
by considering the following two propositions:

Fertility in a society falls as a result of the cumulative actions of indi-

vidual women and men to prevent births. 3
2 Sustained lower fertility in any society will lead to fundamental
changes in the nature of women's lives.

The first proposition underlies most theories of fertility transition. The

implication is that fertility change in a society must be capable of being
 Peter McDonald 337

explained in individual terms. The dimension I highlight here, gender

equity, is not an individual characteristic. It is a characteristic of the insti-
tutions of society. The first proposition, a truism, says that people, not
institutions, change fertility levels. Thus, in proposing a place in fertility
transition theory for gender equity, a theory must elaborate upon how the
levels of gender equity in social institutions manifest themselves in
individual-level decisionmaking. Folbre (1997) has argued that in contem-
porary market-based economies, the rewards for market production far
exceed the rewards for social reproduction, a theme that I have also taken
up specifically in relation to low fertility (McDonald, 2000b ). It is this
imbalance in the reward structure that brings gender inequities in social
institutions into the consciousness of individual men and women.
The first proposition also implies that individuals have the knowledge
and the social permission necessary to control their births. As I hinted
earlier, the notion that the spread of the practice of birth control is a com-
ponent of fertility transition is tautological. The way in which the idea of
birth control is spread, however, is a highly relevant consideration
(Watkins, 1986 ).
The second proposition states that if fertility in a society falls from high
to low levels then, inevitably, this will change the nature of the society. In
particular, it will change the nature of women's lives. Implicit in the gender
system of a high-fertility society is that women devote a great deal of their
time and energy to childbearing and childrearing. If fertility falls to lower
and lower levels, this in itself is an indication that society no longer places
the same emphasis upon this division of labour. Mason (1997, pp. 173-5)
mentions the small number of studies that have considered the impact of
lower fertility on the gender system, but none of these studies considered
the impact of fertility change on women's lives as a component of fertility
transition theory. Demographic investigation, as mentioned above, con-
ventionally considers the reverse causal direction of this proposition- that
fundamental changes in the nature of women's lives lead to sustained fertil-
ity decline. Thus, in the conventional approach, changes in women's lives
occur first and then fertility falls. The aim of expressing the proposition in
the reverse is to argue that women may elect to have a smaller number of
children in order to change the nature of the rest of their lives, not neces-
sarily because those changes have already occurred. A birth is not an event
that simply occurs at a moment in time and is explained by circumstances
before and about that point in time. In Levinson's (1980) terms, fundamen-
tal life events are constructed as part of a transition in people's lives. The
decision to have a child (or to avoid having a child) is not independent of
the effects upon lives that ensue from that decision. That is, women have a
birth or avoid a birth in an effort to shape their futures, not because the deci-
sion was preordained by a set of characteristics that they had accumulated
prior to the decision (McDonald, 1996 ). This provides a much more active
338 Gender Equity in Theories of Fertility Transition
conception of the role of gender equity in fertility transition. Women in
high-fertility societies may choose to have fewer children in the expectation
(or vague hope) that to do so will change their futures for the_better. 4
The expectation, of course, may not be realized and this complicates the
quantitative study of the issue. A smaller number of children might not
mean that a family is economically better off or that a woman is able to
pursue paid employment outside the family circle. At an early point in the
transition, the statistical evidence may be weak. However, as long as
women are able to maintain the expectation that restriction of their fertil-
ity will lead to an improvement in their lives, eventually, through succes-
sive age cohorts, the expectation will be more often realized.

Fertility Transition, Gender Equity, and the Institution

of the Family
Childbearing is inherent to family reproduction and, as such, it should be
impossible to theorize about fertility transition without considering family
reproduction and family organization (Seccombe, 1993). Folbre (1983,
pp. 267), in addressing conventional theories of fertility transition, has said
that 'the failure to incorporate any consideration of changing power rela-
tions within the family constitutes what many feminists might consider a
fatal error of omission'.
Family organization varies from society to society, and the place of
women in that organization is also highly variable. Thus, in this important
respect, the starting point of each fertility transition is different. This com-
plicates the use of standard variables across cultures as the social meaning
of particular measures will differ. Nevertheless, the following additional
propositions can be made:

3 In pretransition societies, high fertility was (is) socially determined, not

naturally determined.
4 The transition from high fertility to fertility around replacement level
is accompanied by an increase in gender equity within the institution
of the family.

There is a large literature on the social supports to high fertility.

Typically, social-structural arguments are offered to demonstrate the bene-
fits of high fertility. These principally pertain to the value of children to the
family, whatever its structure. (Some studies, of course, also highlight the
fact that a degree of control over fertility was exercised in all pretransition
societies, that is, the valued number of children was high but below the bio-
logical potential.) However, the supports for high fertility in pretransition
societies are more than social-structural. High fertility becomes a part of
 Peter McDonald 339

the established family ethos and is supported by the institutions of moral-

ity, principally religion.
To argue the point just made would require a long detour; just one
evocative example should suffice here:

'A mother with a train of children after her is one of the most admirable and
lovely Sights in the visible Creation of God,' declared Benjamin Colman as he
introduced the text of his sermon 'Fruitful Mothers in Israel' to his
Boston congregation. In 1715 the Old Testament injunction 'Be fruitful and
multiply', which Colman proceeded to discuss, was familiar to his listeners,
and his interpretation of the text was representative of American thought on
the purpose of marriage and on women's ordained part as childbearer.
(Scholten 1985, p. 8)

Fertility transition requires changes not only to the social-structural sup-

ports but also to the moral supports. Here, we would be looking for
changes in the morality governing the nature both of the relationship
between spouses and of women's ordained role as childrearer. In the West,
the assertion of the rights of the individual originating in the Enlightenment
may have gradually filtered down to the rights of women within marriage.
In the past half-century in developing countries, Westernization has been
an increasingly powerful force with which traditional moralities have had
to contend. For example, formal education inculcates ideas that empower
the individual, allowing for a questioning of traditional morality.
In Western Europe, the decline of parentally arranged marriages and the
shift of power over the means of production from the parental generation
to the generation of the young couple are indicators of changing rights for
women within a modified family organization. These changes extend back
into the eighteenth century, predating or contemporaneous with the onset
of fertility decline. Seccombe (1993, ch. 5) argues that women in late
nineteenth-century and early twentieth-century Europe had a far stronger
desire to end the constant cycle of births than men did. The fact that their
wishes began to be deferred to by most husbands represented a shift away
from patriarchy and towards gender equity in the couple relationship.
Prior to the transition, Folbre (1983, p. 270) says, 'women's freedom of
reproductive choice is often constrained by forms of patriarchal oppres-
sion which are coercively pronatal.' At the same time, throughout the fer-
tility transition in Western Europe, women remained in a subordinate
status because of their role within the male-breadwinner model of the
family. Only in the past few decades have women in general, but espe-
cially married women, been able to assert an independent status outside
the family.
Family organization is a vital aspect of cultural identity. Because of this,
the family is a conservative institution that normally changes only very
slowly. In all societies, family organization is protected from radical
340 Gender Equity in Theories of Fertility Transition

change by an idealized family morality, a moral conservatism that is often

enshrined in the prevailing religion. Most often, idealized family morality
confines women to the hegemony of men. Radical change,.usvally occurs
only through changes in political power or through changes in the atti-
tudes of those in power. Otherwise, change is gradual (McDonald, 1992,
1994). Increased gender equity within the family can be a graduai process
that does not portend radical family change. Thus, social norms may allow
women increased control over their own fertility within what is, in most
respects, a male-dominated family system so long as their increased inde-
pendence does not threaten the prevailing family system.
The contemporary example of the remarkable fall in fertility in Iran may
be a case in point. The total fertility rate in Iran fell from 6.2 children per
woman in 1986 to 2.5 in 1996 (Abbasi-Shavazi, 2000). During this period,
there was no significant change in women's position outside the family.
Labour force participation rates for women remain very low and women
have a very restricted role in public life. It is arguable, however, that
increased levels of education for women provided them with a higher level
of equity within the family. Once social permission to practice family plan-
ning was provided by the religious leadership in the late 1980s, the country's
highly developed public health system was able to provide family planning
services to both men and women. More particularly, women were freely
able to gain access to these services, providing them with a greater level of
reproductive rights and, hence, of gender equity within the family.
Depending upon the cultural or economic setting, various factors may
enhance gender equity within the family and hasten the adoption of lower
levels of fertility. Where limited fertility control has been practised before
the onset of sustained fertility decline, decline may proceed more rapidly
because the idea and practice of control is already present in the society.
Advances in education for women will attune them to be receptive to non-
traditional learning and provide them with the confidence to adopt new
ideas. Husbands also may more often defer to the wishes of the educated
wife. As more children survive, measures to limit family size may be imple-
mented. Changing cost structures such as generated by compulsory educa-
tion of children or urban residence may induce changes in fertility. Political
regimes that are more socially inclusive may provide access to contracep-
tive devices and the freedom to use them to a wider range of people. The
free movement of information among women in a society and between
societies is another factor. The medical profession may become increasingly
involved in natal care and warn of the dangers to a woman of having another
birth. Advances in contraceptive technology enhance the ease of control
over fertility. Finally, government-sponsored family planning programmes
may provide social permission and access to contraceptive services. I make
no claim here that increased gender equity within families is a sufficient
condition for fertility transition; however, it is a necessary condition.
 Peter McDonald 341

Government-sponsored family planning programmes in the past thirty

years have succeeded in part because they addressed their campaigns
directly to women, although always within their family context.
Conservatism surrounding family organization clearly provided no other
option, but the effect has been to raise the levels of gender equity within
the family. It has been argued that, in Bangladesh for example, the family
planning programme itself has been an agent in improving the status of
women within the family. The programme exposes women to the modern
outside world, it encourages them to take their own actions with regard to
their fertility, it brings them in contact with other women who are not
members of their family, and, since the programme's change to a clinic-
based delivery system, it allows women to leave their houses unaccompa-
nied by a male family member. This, together with a gradual shift in the
power regime within families from the extended to the conjugal unit, has
increased gender equity within the family (Simmons, 1996).
In summary, there is a strong case that, where women are provided with
greater decision-making power within the family, especially with respect
to the right to determine the number of children they have, fertility can fall
to low level without major changes in women's lives outside the family.
Fertility in the West fell to replacement level by the 1930s even as the male-
breadwinner model of the family was rising to its zenith. That is, fertility
can fall to low levels while most institutions outside the family are marked
by considerable gender inequity. Folbre (1983, p. 276) even argues that the
early advance of capitalism may have worsened gender equity in market
employment while improving it within the family. Yet as proposed earlier,
low fertility will change the nature of women's lives. In time, this will lead
to rising demand for greater levels of equity for women in institutions
outside the family. Recognition of this outcome lies at the heart of conser-
vative, usually religious, opposition to birth controLS In terms of the Cairo
agenda, just as women in developing countries have been the beneficiaries
of more advanced contraceptive technology than was available during the
fertility transition in the West, they are also likely to benefit from a more
rapid shift toward a higher level of gender equity in individual-oriented
institutions than was the case in the West. Thus, compared to the schematic
view of change in the West, depicted in figure 1, gender equity in individ-
ual-oriented institutions may be increasing earlier in the fertility transition
of contemporary developing countries.

Gender Equity in Individual-Oriented Institutions

The increasing demand for individual rights and freedoms in the West in
the past 200 years has led to the development of strongly individual-
oriented institutions. The institutions of democracy, for example, provide
342 Gender Equity in Theories of Fertility Transition

Individual-oriented

. s
. d instituuon
'\y-onente
fatn 1

Time

Figure 1 Conceptual representation of changes in the level of gender equity over

time in family-oriented and in individual-oriented institutions in the West and
their interaction with the transition from high to very low fertility

individual voting rights, not family voting rights. However, the progress to
this situation has passed through a period in which rights and freedoms
were extended to individual men, but not to individual women. Effectively,
prior to the twentieth century, men exercised the democratic rights of
women. Women were educated to the level that would fit them to be suit-
able wives to the husbands whom they were expected to marry. Education
for women was not directed towards future employment in the paid labour
force. By the late nineteenth century, a woman was expected to eschew
paid employment unless she was single or could not rely upon the earnings
of her husband. 6 Thus, individual-oriented institutions were male institu-
tions and, as such, they promoted and protected the male-breadwinner
model of the family. A relatively high level of gender equity was a charac-
teristic of women in their family role only.
Women in the West have gradually gained rights also within individual-
oriented institutions. The early successes were in the domains of property
rights and voting rights. Rights in education grew gradually over a long
period of time to the point of broad equality with men today. Rights of
women in market employment have risen dramatically in the past few
decades. Generally women's remuneration now tends to be guided by the
principle of equal pay for equal work and, at least at the non-managerial
level, women are now able to compete equitably with men in the labour
market. Cumulatively, these changes represent radical or revolutionary
change.
 Peter McDonald 343

At the same time, progress towards gender equity within the family and
hence in family-oriented institutions has continued to advance very slowly.
While, as argued in the previous section, the change within the family has
been sufficient to allow women to have extensive control over their fertil-
ity, it has not provided other forms of equity within the family. Full gender
equity would be achieved only if gender were not a determinant of which
member of the couple undertook the three forms of family work: income
generation, caring and nurturing, and household maintenance. In mar-
riages, women remain the predominant providers of care and continue to
carry most of the burden of household maintenance. Gender stratification
continues to prevail within the contemporary Western family. The same is
true in the East Asian developed economies that also now experience low
fertility.

Gender Equity and Very Low Fertility

In advanced economies today, women are able to compete in the labour
market as equals so long as they are not constrained by their family roles.
Women who value their involvement in individual-oriented institutions
are therefore faced with a dilemma if they perceive a potential future family
role as inconsistent with their aspirations as individuals. Some women in
this circumstance will opt to eschew the family role rather than the indi-
vidual role, that is, they will not form a permanent relationship or they will
elect to have no children or fewer children than they otherwise would have
intended (McDonald, 2000a). Most young women today have been edu-
cated and socialized to expect that they will have a role as an individual
beyond any family role they may have. Thus, a fifth proposition can be
advanced:

5 When gender equity rises to high levels in individual-oriented institu-

tions while remaining low in family-oriented institutions, fertility will
fall to very low levels. 7

Cross-national comparisons of contemporary advanced countries provide

evidence to support this proposition (Chesnais, 1998; McDonald, 2000a).

Conclusion
The apparent contradiction stated at the beginning of this article has been
addressed through distinguishing two broad forms of gender equity: gender
equity in family-oriented institutions and gender equity in individual-
oriented institutions. I have argued that the fertility transition from high to
344 Gender Equity in Theories of Fertility Transition

low levels has been associated mainly with improving gender equity within
family-oriented social institutions, indeed almost exclusively within the
family itself. The fall in fertility is associated with women acquiring rights
within the family that enable them to reduce the number of their births to
more desirable levels. However, change in the institution of the family pro-
ceeds slowly because the family system is strongly linked to conservative
institutions such as religion. The link is the reification of family as defined
by an idealized family morality.
During the twentieth century, a revolution took place in levels of gender
equity in individual-oriented institutions in advanced countries. Starting
from a point where women had a subordinate status in individual institu-
tions such as formal education and market employment, the century ended
with very high levels of gender equity prevailing in these institutions. High
levels of equity enjoyed by women as individuals in combination with con-
tinuing low levels of equity for women in their roles as wives or mothers
mean that many women will end up bearing fewer children than they
aspired to when they were younger. The outcome for the society is a very
low fertility rate.
The achievement of gender equity in individual-oriented institutions
will not be reversed. But in a context of persistent relatively low gender
equity in family-oriented institutions, high gender equity in individual-
oriented institutions results in very low fertility. The idea is conceptual-
ized in figure 1. Very low fertility rates will persist unless gender equity
within family-oriented institutions rises to much higher levels than prevail
today. In a context of high gender equity in individual-oriented institu-
tions, higher gender equity in family-oriented institutions will tend to
raise fertility.

Notes

From Population and Development Review, 26, 3, 2000, pp. 427-39.

The author benefited from discussions about this article with Hera Cook and
Rebecca Kippen.
On the other hand, at the opposite extreme, there is a recent fashion to
attribute unexplained variation to 'context', adding little or nothing to theory.
2 Other examples are Quiggin (1988) and Seccombe (1993).
3 Maybe including non-marriage or delay of marriage, although, in an early
paper, I have argued against this possibility (McDonald, 1981).
4 And, possibly, the futures of their children and of other women. Some altru-
ism may be involved in assuming the role of an innovator.
5 The papal encyclical Humanae Vitae, issued in 1968, is a prime example.
6 For some, this idea is still valid, it seems. Mead (1999) argues that in the United
States today, mothers in two-parent families should not engage in paid
employment while single mothers should.
7 Very low means a total fertility rate below 1.5 births per woman on average.
 Peter McDonald 345

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pp. 420-49.
Political Challenges
The New Politics of the
Welfare State
Paul Pierson

Why the Politics of Retrenchment is Different

This essay's central claim is that because retrenchment is a distinctive

process, it is unlikely to follow the same rules of development that oper-
ated during the long phase of welfare state expansion. There are two fun-
damental reasons for this. First, the political goals of policy makers are
different; second, there have been dramatic changes in the political context.
Each of these points requires elaboration.
There is a profound difference between extending benefits to large
numbers of people and taking benefits away. 1 [After the Second World
War] expanding social benefits was generally a process of political credit
claiming. Reformers needed only to overcome diffuse concern about tax
rates (often sidestepped through resort to social insurance 'contributions')
and the frequently important pressures of entrenched interests. Not sur-
prisingly, the expansion of social programmes had until recently been a
favoured political activity, contributing greatly to both state-building pro-
jects and the popularity of reform-minded politicians. 2
A combination of economic changes, political shifts to the right, and
rising costs associated with maturing welfare states has provoked growing
calls for retrenchment. At the heart of efforts to turn these demands into
policy have been newly ascendant conservative politicians. Conservative
governments have generally advocated major social policy reforms, often
receiving significant external support in their effort, especially from the
business community. 3 Yet the new policy agenda stands in sharp contrast
to the credit-claiming initiatives pursued during the long period of welfare
state expansion. The politics of retrenchment is typically treacherous,
because it imposes tangible losses on concentrated groups of voters in
return for diffuse and uncertain gains. Retrenchment entails a delicate
 · Paul Pierson 349

effort either to transform programmatic change into an electorally attract-

ive proposition or, at the least, to minimize the political costs involved.
Advocates of retrenchment must persuade wavering supporters that the
price of reform is manageable - a task that a substantial public outcry
makes almost impossible.
Retrenchment is generally an exercise in blame avoidance rather than
credit claiming, primarily because the costs of retrenchment are concen-
trated (and often immediate), while the benefits are not. That concentrated
interests will be in a stronger political position than diffuse ones is a stan-
dard proposition in political science. 4 As interests become more concen-
trated, the prospect that individuals will find it worth their while to engage
in collective action improves. Furthermore, concentrated interests are more
likely to be linked to organizational networks that keep them informed
about how policies affect their interests. These informational networks also
facilitate political action.
An additional reason that politicians rarely get credit for programme cut-
backs concerns the well-documented asymmetry in the way that voters
react to losses and gains. Extensive experiments in social psychology have
demonstrated that individuals respond differently to positive and negative
risks. Individuals exhibit a negativity bias: they will take more chances -
seeking conflict and accepting the possibility of even greater losses - to
prevent any worsening of their current position. 5 Studies of electoral behav-
iour, at least in the United States, confirm these findings. Negative attitudes
towards candidates are more strongly linked with a range of behaviours (for
example, turnout, deserting the voter's normal party choice) than are pos-
itive attitudes. 6
While the reasons for this negativity bias are unclear, the constraints that
it imposes on elected officials are not. When added to the imbalance
between concentrated and diffuse interests, the message for advocates of
retrenchment is straightforward. A simple 'redistributive' transfer of
resources from programme beneficiaries to taxpayers, engineered through
cuts in social programmes, is generally a losing proposition. The concen-
trated beneficiary groups are more likely to be cognisant of the change, are
easier to mobilize, and because they are experiencing losses rather than
gains are more likely to incorporate the change in their voting calculations.
Retrenchment advocates thus confront a clash between their policy pre-
ferences and their electoral ambitions.
If the shift in goals from expansion to cutbacks creates new political
dynamics, so does the emergence of a new context: the development of the
welfare state itself. Large public social programmes are now a central part
of the political landscape. As Peter Flora has noted, 'Including the recipi-
ents of [pensions,] unemployment benefits and social assistance- and the
persons employed in education, health and the social services - in many
countries today almost 1/2 of the electorate receive transfer or work
350 The New Politics of the Welfare State

income from the welfare state.' 7 With these massive programmes have
come dense interest-group networks and strong popular attachments to
particular policies, which present considerable obstacles to re{Drm. To take
one prominent example, by the late 1980s the American Association of
Retired People (AARP) had a membership of 28 million and a staff of 1,300
(including a legislative staff of more than 100). 8 The maturation of the
welfare state fundamentally transforms the nature of interest-group pol-
itics. In short, the emergence of powerful groups surrounding social pro-
grammes may make the welfare state less dependent on the political parties,
social movements, and labour organizations that expanded social pro-
grammes in the first place. Nor is the context altered simply because
welfare states create their own constituencies. The structures of social pro-
grammes may also have implications for the decision rules governing
policy change (for example, whether national officials need the acquies-
cence of local ones) and for how visible cutbacks will be. 'Policy feedback'
from earlier rounds of welfare state development is likely to be a prom-
inent feature of retrenchment politics. 9
In short, the shift in goals and context creates a new politics. This new
politics, marked by pressures to avoid blame for unpopular policies, dic-
tates new political strategies. 10 Retrenchment advocates will try to play off
one group of beneficiaries against another and develop reforms that com-
pensate politically crucial groups for lost benefits. Those favouring cut-
backs will attempt to lower the visibility of reforms, either by making the
effects of policies more difficult to detect or by making it hard for voters
to trace responsibility for these effects back to particular policy makers. 11
Wherever possible, policy makers will seek broad consensus on reform in
order to spread the blame. Whether these efforts succeed may depend very
much on the structure of policies already in place.

[ ... ]

To what extent have welfare states undergone retrenchment? What coun-

tries and programmes have been most vulnerable to retrenchment initia-
tives and why? In this section I address these questions by reviewing the
evolution of welfare states in four affluent democracies since the late 1970s.
The evidence supports a number of claims. (1) There is little evidence for
broad propositions about the centrality of strong states or left power
resources to retrenchment outcomes. (2) The unpopularity of retrench-
ment makes major cutbacks unlikely except under conditions of budgetary
crisis, and radical restructuring is unlikely even then. (3) For the same
reason, governments generally seek to negotiate consensus packages rather
than to impose reforms unilaterally, which further diminishes the poten-
tial for radical reform. And (4) far from creating a self-reinforcing dynamic,
cutbacks tend to replenish support for the welfare state.
 Pauf Pierson 351

Measuring retrenchment is a difficult task. Quantitative indicators are

likely to be inadequate for several reasons. First, pure spending levels are
rarely the most politically important or theoretically interesting aspects of
welfare states. As Esping-Andersen put it in his analysis of welfare state
expansion, 'It is difficult to imagine that anyone struggled for spending per
se'Y In particular, rising unemployment may sustain high spending even
as social rights and benefits are significantly curtailed. Second, spending
estimates will fail to capture the impact of reforms that are designed to
introduce retrenchment only indirectly or over the long term. Analysis
must focus on qualitative and quantitative changes in programmes and on
prospective, long-term changes, as well as on immediate cutbacks. My
investigation therefore relies on a combination of quantitative data on
expenditures and qualitative analysis of welfare state reforms. Rather than
emphasizing cuts in spending per se, the focus is on reforms that indicate
structural shifts in the welfare state. These would include (1) significant
increases in reliance on means-tested benefits; (2) major transfers of
responsibility to the private sector; and (3) dramatic changes in benefit and
eligibility rules that signal a qualitative reform of a particular programme. 13
The selection of countries to investigate was based on the desire to achieve
significant variation on what the welfare state expansion literature suggests
are the most plausible independent variables. The cases vary widely in the
structure of political institutions, the extent of shifts in the distribution of
power resources, the design of pre-existing welfare states, and the severity
of budgetary crisis.
Beginning with the quantitative evidence, aggregate measures provide
little evidence that any of the four welfare states have undergone dramatic
cutbacks. From 1974 to 1990 the expenditure patterns across the
four cases are quite similar, despite widely different starting-points. As
tables 6 and 7 show, social security spending and total government
outlays as a percentage of GDP are relatively flat over most of the rele-
vant period. The exception is the recent surge in Swedish expenditures,
which will be discussed below. There is a slight upward trend overall,
with fluctuations related to the business cycle. Table 8, which tracks
public employment, reveals a similar pattern (although the expansion of
Swedish public employment from an already high base stands out). For
none of the countries does the evidence reveal a sharp curtailment of the
public sector.
Table 9 offers more disaggregated indicators of shifts in social welfare
spending among the four countries; spending patterns are reported for what
the OECD terms 'merit goods' (primarily housing, education and health
care) as well as for various income transfers. The figures suggest a bit more
divergence among the cases, with the United States and Germany emerging
as somewhat more successful in curbing spending. A very few programme
areas - notably British housing and German pensions - experienced
Table 6 Social security transfers as % of GDP, 1974-90

Britain Germany Sweden __ UJ?ited States

1974 9.8 14.6 14.3 9.5

1980 11.7 16.6 17.6 10.9
1982 14.0 17.7 18.3 11.9
1984 14.0 16.5 17.6 11.0
1986 14.1 15.9 18.4 11.0
1988 12.3 16.1 19.5 10.6
1990 12.2 15.3 19.7 10.8a

a 1989.

Source: OECD, Historical Statistics, 1960-1990 (1992), table 6.3.

Table 7 Government outlays as % of nominal GDP, 1978-94

Britain Germany Sweden United States

1978 41.4 47.3 58.6 30.0

1980 43.0 47.9 60.1 31.8
1982 44.6 48.9 64.8 33.9
1984 45.2 47.4 62.0 32.6
1986 42.5 46.4 61.6 33.7
1988 38.0 46.3 58.1 32.5
1990 39.9 45.1 59.1 33.3
1992 43.2 49.0 67.3 35.1
1994a 44.8 51.4 70.9 33.9

aProjection.
Source: OECD, Economic Outlook (December 1993), table A23.

Table 8 Government employment as % of total employment, 1974-90

Britain Germany Sweden United States

1974 19.6 13.0 24.8 16.1

1980 21.1 14.6 30.3 15.4
1982 22.0 15.1 31.7 15.4
1984 22.0 15.5 32.6 14.8
1986 21.8 15.6 32.2 14.8
1988 20.8 15.6 31.5 14.4
1990 19.2 15.1 31.7 14.4a

a 1989.

Source: OECD, Historical Statistics, 1960-1990 (1992), table 2.13.

Table 9 Government outlays by function as % of trend GDPa, 1979-90

Britain Germany Sweden United States

1979 1990 1979-90 1979 1990 1979-90 1979 1990 1979-90 1979 1989 1979-89
Total 44.9 43.2 -1.7 49.9 45.8 -4.1 63.2 61.4 -1.8 33.2 36.9 +3.6
Public goodsb 9.5 9.7 +0.1 10.0 9.2 -0.8 10.5 8.8 -1.7 8.2 9.3 +1.1
Merit goods 13.6 12.2 -1.4 12.3 10.9 -1.4 15.9 13.4 -2.6 6.1 6.0 -0.1
Education 5.5 5.0 -0.5 5.2 4.2 -1.0 6.6 5.6 -1.0 4.7 4.7 -0.0
Healthc 4.8 5.1 +0.3 6.3 6.0 -0.3 8.1 6.9 -1.1 0.9 0.9 -0.0
Housing and other 3.4 2.1 -1.2 0.8 0.7 -0.1 1.2 0.8 -0.4 0.5 0.4 -0.1
Income trans. 12.5 13.4 +0.9 20.2 18.5 -1.7 24.6 26.8 +2.2 11.2 11.9 +0.7
Pensions 6.7 6.5 -0.2 12.7 11.2 -1.5 11.0 11.5 +0.4 6.9 7.0 +0.1
Sickness 0.4 0.3 -0.1 0.8 0.7 -0.1 3.4 4.5 +1.2 0.1 0.2 +0.1
Family allowance 1.7 1.6 -0.0 1.2 0.8 -0.4 1.6 1.3 -0.3 0.4 0.4 -0.0
Unemployment 0.7 0.6 -0.1 0.9 1.3 +0.4 0.4 0.5 +0.1 0.4 0.3 -0.1
Other income
supports 0.1 0.8 +0.7 1.3 1.6 +0.3 0.1 0.2 +0.1 0.0 0.0 0.0
Admin. and other
spending 1.4 1.6 +0.3 2.6 2.4 -0.2 4.9 5.2 +0.3 0.6 0.6 -0.0
Add. transfer 1.4 1.8 +0.5 0.5 0.4 -0.1 3.2 3.7 +0.6 2.7 3.5 +0.8
a Numbers may not sum to total due to rounding.
b Defence and other public services.
c For the US, social security related to health spending is included under 'Additional transfers' below.

Source: OECD, Economic Outlook (December 1993), table 21.

354 The New Politics of the Welfare State

significant reductions. Nonetheless, similarities across countries remain

more striking than differences. None of the cases show major rises or
declines in overall effort, and there are few indications of d_raiT1atic change
in any of the subcategories of expenditure.

[ ... ]

The New Politics of the Welfare State

Economic, political and social pressures have fostered an image of welfare

states under siege. Yet if one turns from abstract discussions of social trans-
formation to an examination of actual policy, it becomes difficult to sustain
the proposition that these strains have generated fundamental shifts. This
review of four cases does indeed suggest a distinctly new environment, but
not one that has provoked anything like a dismantling of the welfare state.
Nor is it possible to attribute this to case selection, since the choice of two
prototypical cases of neo-conservatism (Britain and the United States) and
two cases of severe budgetary shocks (Germany and Sweden) gave ample
room for various scenarios of radical retrenchment. Even in Thatcher's
Britain, where an ideologically committed Conservative Party [ ... J con-
trolled one of Europe's most centralized political systems for over a
decade, reform [was] incremental rather than revolutionary, leaving the
British welfare state largely intact. In most other countries the evidence of
continuity is even more apparent.
To be sure, there has been change. Many programmes have experienced
a tightening of eligibility rules or reductions in benefits. On occasion, indi-
vidual programmes (such as public housing in Britain) have undergone
more radical reform. In countries where budgetary pressures have been
greatest, cuts have been more severe. Over the span of two decades,
however, some changes in social policy are inevitable; even in the boom
years of the 1960s specific social programmes sometimes fared poorly.
What is striking is how hard it is to find radical changes in advanced
welfare states. Retrenchment has been pursued cautiously: whenever pos-
sible, governments have sought all-party consensus for significant reforms
and have chosen to trim existing structures rather than experiment with
new programmes or pursue privatization.
This finding is striking, given that so many observers have seen the
post-1973 period as one of fundamental change in modern political
economies. A harsher economic climate has certainly generated demands
for spending restraint. Additional pressures have stemmed from the matu-
ration of social programmes and adverse demographic trends. Yet com-
pared with the aspirations of many reformers and with the extent of
change in fields such as industrial relations policy, macroeconomic policy
 Paul Pierson 355
or the privatization of public industries, what stands out is the relative sta-
bility of the welfare state.
I have suggested that to understand what has been happening requires
looking beyond the considerable pressures on the welfare state to consider
enduring sources of support. There are powerful political forces that stabil-
ize welfare states and channel change in the direction of incremental modifi-
cations of existing policies. The first major protection for social programmes
stems from the generally conservative characteristics of democratic political
institutions. The welfare state now represents the status quo, with all the
political advantages that this status confers. Non-decisions generally favour
the welfare state. Major policy change usually requires the acquiescence of
numerous actors. Where power is shared among different institutions (for
example, Germany, the United States), radical reform will be difficult.
As the British and Swedish cases show, radical change is not easy even in
a situation of concentrated political power. A second and crucial source of
the welfare state's political strength comes from the high electoral costs
generally associated with retrenchment initiatives. Despite scholarly
speculation about declining popular support for the welfare state, polls
show little evidence of such a shift, and actual political struggles over social
spending reveal even less. On the contrary, even halting efforts to disman-
tle the welfare state have usually exacted a high political price. Recipients
of social benefits are relatively concentrated and are generally well organ-
ized. They are also more likely to punish politicians for cutbacks than tax-
payers are to reward them for lower costs. Now here is there evidence to
support the scenario of a self-reinforcing dynamic, with cutbacks leading
to middle-class disenchantment and exit, laying the foundation for more
retrenchment. Instead, the recurrent pattern in public-opinion polls has
been a mild swing against the welfare state in the wake of poor economic
performance and budgetary stress, followed by a resurgence of support at
the first whiff of significant cuts.
Nor does the welfare state's political position seem to have been ser-
iously eroded- at least in the medium term- by the decline of its key trad-
itional constituency, organized labour. Only for those benefits where
unions are the sole organized constituency, such as unemployment insur-
ance, has labour's declining power presented immediate problems, and
even here the impact can be exaggerated. 14 The growth of social spending
has reconfigured the terrain of welfare state politics. Maturing social pro-
grammes produce new organized interests, the consumers and providers of
social services, that are usually well placed to defend the welfare state.
The networks associated with mature welfare state programmes consti-
tute a barrier to radical change in another sense as well. As recent research
on path dependence has demonstrated, once initiated, certain courses of
development are hard to reverse. 15 Organizations and individuals adapt to
particular arrangements, making commitments that may render the costs of
356 The New Politics of the Welfare State

change (even to some potentially more efficient alternative).far higher than

the costs of continuity. Existing commitments lock in policy makers. Old-
age pension systems provide a good example. Most countric;;s operate pen-
sions on a pay-as-you-go basis: current workers pay 'contributions' that
finance the previous generation's retirement. Once in place, such systems
may face incremental cutbacks, but they are notoriously resistant to radical
reform. 16 Shifting to private, occupationally based arrangements would
place an untenable burden on current workers, requiring them to finance the
previous generation's retirement while simultaneously saving for their own.
Over time, all institutions undergo change. This is especially so for very
large ones, which cannot be isolated from broad social developments. The
welfare state is no exception. But there is little sign that the last two decades
have been a transformative period for systems of social provision. As I have
argued, expectations for greater change have rested in part on the implicit
application of models from the period of welfare state expansion, which
can be read to suggest that economic change, the decline in union power,
or the presence of a strong state creates the preconditions for radical
retrenchment. I find little evidence for these claims.

Notes

From World Politics, 48, January 1996, pp. 143-79.

I am grateful to the Russell Sage Foundation for financial and administrative
support and to Miguel Glatzer for considerable research assistance, as well as
helpful comments.
R. Kent Weaver, 'The Politics of Blame Avoidance', journal of Public Policy,
6, October-December 1986.
2 Peter Flora and Arnold J. Heidenheimer, eds, The Development of Welfare
States in Europe and America, New Brunswick, NJ, Transaction, 1982.
3 As recent research has suggested, it would be wrong to treat business as always
and everywhere opposed to welfare state programmes. For illuminating
studies of the United States, see, for example, Colin Gordon, New Deals:
Business, Labor, and Politics in America, 1920-1935, Cambridge, Cambridge
University Press, 1994; and Cathie Jo Martin, 'Nature or Nurture? Sources of
Firm Preference for National Health Reform', American Political Science
Review, 89, December 1995. Nonetheless, it is clear that most business organ-
izations in all the advanced industrial democracies have favoured- often vehe-
mently- cutbacks in the welfare state over the past fifteen years.
4 Mancur Olson, The Logic of Collective Action: Public Goods and the Theory
of Groups, Cambridge, MA, Harvard University Press, 1965; James
Q. Wilson, Political Organizations, New York, Basic Books, 1973, pp. 330-37.
5 Daniel Kahneman and Amos Tversky, 'Prospect Theory: An Analysis of
Decision under Risk', Econometrica, 47, March 1979; idem, 'Choices, Values
and Frames', American Psychologist, 39 April1984.
6 Howard S. Bloom and H. Douglas Price, 'Voter Response to Short-Run
Economic Conditions: The Asymmetric Effect of Prosperity and Recession',
American Political Science Review, 69, December 1975; Samuel Kernell,
 Paul Pierson 357

'Presidential Popularity and Negative Voting: An Alternative Explanation of

the Midterm Congressional Decline of the President's Party', American
Political Science Review, 71, March 1977; and Richard R. Lau, 'Explanations
for Negativity Effects in Political Behavior', American journal of Political
Science, 29, February 1985.
7 Peter Flora, 'From Industrial to Postindustrial Welfare State?', Annals of the
Institute of Social Science (University of Tokyo), special issue 1989, p. 154.
8 Christine L. Day, What Older Americans Think: Interest Groups and Aging
Policy, Princeton, NJ, Princeton University Press, 1990, pp. 25-6.
9 G0sta Esping-Andersen, Politics against Markets: The Social Democratic
Road to Power, Princeton, NJ, Princeton University Press, 1985; Paul Pierson,
'When Effect Becomes Cause: Policy Feedback and Political Change', World
Politics, 45, July 1993.
10 Weaver, op. cit.; Paul Pierson, Dismantling the Welfare State? Reagan,
Thatcher and the Politics of Retrenchment, Cambridge, Cambridge University
Press, 1994, ch. 1.
11 R. Douglas Arnold, The Logic of Congressional Action, New Haven, Yale
University Press, 1990.
12 G0sta Esping-Andersen, The Three Worlds of Welfare Capitalism,
Cambridge, Polity Press, 1990, p. 21.
13 Establishing what constitutes 'radical' reform is no easy task. For instance, it is
impossible to say definitively when a series of quantitative cutbacks amounts
to a qualitative shift in the nature of programmes. Roughly though, that point
is reached when because of policy reform a programme can no longer play its
traditional role (e.g. when pension benefits designed to provide a rough con-
tinuation of the retiree's earlier standard of living are clearly unable to do so).
14 Indeed, a cross-national comparison of unemployment programmes provides
further support for this analysis. The OECD has measured replacement rates
for UI (benefits as a percentage of previous income) over time in twenty coun-
tries, with data to 1991. These data thus permit, for one programme, a [ ... ]
quantitative appraisal of programme generosity rather than simply spending
levels. In the majority of cases (twelve out of twenty), replacement rates were
higher in 1991 than the average rate for either the 1970s or the 1980s, while
most of the other cases experienced very marginal declines. Organization for
Economic Co-operation and Development, The OECD jobs Study: Facts,
Analysis, Strategies, Paris, OECD, 1994, chart 16, p. 24.
15 See Paul David, 'Clio and the Economics of QWERTY', American Economic
Review, 75, May 1985; and W. Brian Arthur, 'Competing Technologies,
Increasing Returns, and Lock-In by Historical Events', Economic journal, 99,
March 1989, pp. 116-31. For good extensions to political processes, see
Stephen A. Krasner, 'Sovereignty: An Institutional Perspective', in James
A. Caporaso, ed., The Elusive State: International and Comparative
Perspectives, Newbury Park, CA, Sage Publications, 1989; and Douglas
North, Institutions, Institutional Change and Economic Reformance,
Cambridge, Cambridge University Press, 1990.
16 Thus in Germany, Sweden, and the United States the maturity of existing
schemes limited policy makers to very gradual and incremental reforms of
earnings-related pension systems. More dramatic reform was possible in
Britain because the unfunded earnings-related scheme was far from maturity,
having been passed only in 1975. Pierson,' "Policy Feedbacks" and Political
Change Contrasting Reagan and Thatcher's Persian-Reform Initiatives',
Studies in American Political Development, 6, Fall1992.
Beyond Retrenchment: Four
Probletns in Current Welfare
State Research and One
Suggestion on How to
Overcotne Thetn
Bruno Palier

Introduction

'Welfare states in transition' (Esping-Andersen, 1996), 'Recasting

European welfare states' (Ferrera and Rhodes, 2000), 'Welfare state
futures' (Leibfried, 2000), 'Survival of the European welfare state' (Kuhnle,
2000b) and 'The new politics of the welfare state' (Pierson, 2001a)- all of
these are among the most important recent publications on the welfare
state. Collectively, they indicate that the focus of the academic agenda has
moved beyond the crisis of the welfare state and towards an analysis of
actual social policy changes which have occurred during the last twenty or
twenty-five years. Probably under Anglo-Saxon influence (Reagan and
Thatcher pursued explicit anti-welfare agendas) the first analyses of these
changes have been phrased in terms of retrenchment (after the 'golden age'
of growth). They sought to discover how deep and to what extent govern-
ments had reduced social expenditure since the late 1970s. After a couple
of decades of debates on the crisis of the welfare state, and countless
welfare reforms adopted throughout the industrialized world, many com-
mentators agree on the fact that the welfare state is much more solid and
robust than had been assumed and argued in the 1970s. To date, most
welfare state analyses have concluded that in the last twenty-five years
there has either been stability, little retrenchment or 'path dependent'
changes. Even if expenditure on certain programmes has been partially cut
back, recent reforms do not change the nature of postwar welfare states.
The idea of only limited changes is particularly linked to continental
'conservative corporatist' welfare states. More precisely, it has often been
argued that these welfare states hardly changed at all and the changes which
 Bruno Palier 359

were introduced were counterproductive ('adjusting badly', as Manow and

Seils, 2000, put it). In the 'frozen' continental European welfare state land-
scape (Esping-Andersen, 1996 ), the French social welfare system in
particular has often been regarded as one of ~he most 'i~movable. objects'
(Pierson 1998, p. 558 n. 8). In France, soctal expenditure contmued to
increase rapidly throughout the 1980s, but no fundamental reform seems
to have been introduced in health services or in old age pension systems.
Attempts to introduce reforms have been fiercely opposed by strikes and
demonstrations, especially in 1995 (Levy, 2000).
However, this gloomy picture must be modified. I have argued that
during the last twenty-five years, French governments have implemented
three different kinds of policies aimed at coping with welfare state prob-
lems (Palier, 2000). During the late 1970s and the 1980s, they have
responded to social security deficits by mainly raising the level of social
contributions; policies which only changed the level of the available instru-
ments. In the early 1990s second order changes appeared with sectorial
reforms, such as new medical agreements in health care, a new benefit in
unemployment insurance and new modes of calculating retirement pen-
sions. Such moderations introduced new instruments but remained within
the traditional (historical and institutional) logic of the French welfare
system. However, since these two kinds of changes appeared to be insuffi-
cient and since the French welfare system itself appeared to exacerbate
economic and social problems (unemployment, social exclusion), govern-
ments have also decided to act indirectly by tackling the institutional
causes of these problems. The French welfare state was felt to be resistant
to change to such a degree that governments decided to introduce struc-
tural reforms which would become less easily repealed. These structural
reforms, such as new means-tested reinsertion policies (RMI), new financ-
ing mechanisms (CSG) and a new role for the state, introduced both new
instruments and a new logic of welfare, i.e. structural change which will
transform the very nature of the system (Palier, 2000).
The thesis of 'eurosclerosis' or the 'path dependent continuity' argu-
ment, commonly found in recent welfare state literature, seem to neglect
the latter kinds of reforms, even though they may lead to profound welfare
state changes. The structural reforms adopted by French governments in
the early 1990s imply the abandonment of some elements of the French
(Bismarckian) tradition and a progressive transformation based on the
development of means-tested benefits, the growing importance of tax
finance and the empowerment of state representatives within the system at
the expense of the social partners. Resistance to change may now be pro-
gressively overcome, leading to new patterns of social protection in France
(Palier, 2001). However, it remains true that, until recently, change has been
difficult to implement in France, as in other Bismarckian social insurance
welfare systems. There should be a specific comparative analysis of why
360 Beyond Retrenchment

these countries are more difficult to change than others. As far as France is
concerned, Giuliano Bonoli and myself have shown that some of the pecu-
liar_ities of the French social policy-making sys_tem help tc. ex;plain why
maJor retrenchm~nt has not occurred. I~ pa_rucular, these are a highly
popular but particularly fragmented soc1al msurance system which is
largely financed by social contributions; numerous divided trade unions
who are particularly eager on keeping their position in the system becaus~
of their weakness in industrial relations; and a central state which is rela-
tively weak in this field and thus obliged to negotiate with the other social
protection actors (Bonoli and Palier, 1998, 2000).
There might therefore have to be a twofold agenda in comparative welfare
state research. On the one hand, we should be able to identify more changes
than are usually recognized. On the other, we should be able to understand
why continental welfare states are more resistant to change, or at least change
differently, than other welfare states. For this, I suggest that we need to draw
on and combine public policy analysis and the role of welfare institutions in
order to develop and arrive at a more adequate framework of analysis.
With reference to my previous work (Bonoli and Palier, 1998, 2000;
Palier, 2000, 2001) and in line with that of others (for instance, Visser and
Hemerijck, 1997), I would argue that current research on welfare state
changes should go beyond the notion of retrenchment so as to be able to
embrace the different kinds of developments which have occurred. Recent
European welfare states changes should be analysed by differentiating
between both different periods of time and different types of changes
introduced by governments. Some reforms may prove to enforce conti-
nuity, some others may prove to introduce a new logic in the welfare
system. In contrast to the general notion of retrenchment, reforms do not
always imply less welfare state. Inspired by general public policy analysis,
in this chapter a specific analytic framework is proposed which empha-
sizes the role of welfare institutions, and distinguishes three types of
changes. This framework has been influenced by some dissatisfaction with
current research on welfare state changes and in particular with four
aspects: the notion of retrenchment, the concept of path dependency,
institutionalist approaches of reform, and the analysis of change. Taking
each of these four issues in turn, I will conclude with putting forward a
proposal for an analytic framework to study recent (and future) social
policy changes.

Beyond Retrenchment

Retrenchment seems to have become one of the most common terms

employed to describe recent welfare state developments. The notion lends
itself to a stage or functionalist model of analysis of the history of welfare
 Bruno Palier 361

states: emergence (late nineteenth century until 1945) is followed by

growth (the golden age, mainly until the 1970s), to limits (or even crisis,
the 1980s), and then retrenchment (since the late 1980s). The notion of
retrenchment harbours the same problems as those of development, mod-
ernization or growth of welfare states. All of these have been criticized for
assuming a uniformity of the processes of welfare state development. If all
changes which have occurred since the 1980s can be termed retrenchment
they would imply shrinking welfare states. Therefore, in this framework,
the main question is often to measure how much retrenchment has been
applied, with large or small cuts as the dependent variable and a focus on
spending. A great deal of academic discussion during the 1990s was aimed
at demonstrating that even if expenditure levels were similar, different
welfare states spent money differently, under different principles, for dif-
ferent purposes and with different institutions (Esping-Andersen, 1990).
These debates should be kept in mind when focusing on recent changes
and it should be taken for granted that different welfare states are chang-
ing differently. Even if increasingly similar welfare efforts are made in that
sense (Esping-Andersen, 1996; Scharpf and Schmidt, 2000; Pierson, 2001a),
there is still a need for a systematic cross-national differentiation of
processes of retrenchment, as there has been differentiation between
welfare states during their 'golden age' (Esping-Andersen, 1990).
It might perhaps be that retrenchment is not a useful term since some
changes in some social protection systems might not be bringing about less
generous benefits. Just as the trente glorieuses (the thirty years of sustained
growth and prosperity that followed the end of the Second World War)
could not be analysed merely in terms of more welfare state, current devel-
opments are more complex than simply representing less welfare state.
Firstly, data show that most of the OECD countries have increased their
social spending over the last two decades. Already in the early 1990s
Pierson (1994) observed that, if anything, overall welfare spending went up
during the years he studied and he concluded that retrenchment efforts had
failed. I may propose another point of view. In recognition of new prob-
lems which welfare states were confronting, some governments were, or
were at least proposing to, spend more rather than less. At least, this applies
to many Bismarckian countries in the late 1970s and during the 1980s
(Palier, 2000; Manow and Seils, 2000). 1
Secondly, for governments the question may not be quantitative (of
more or less spending) but structural: how can welfare states be trans-
formed in order to promote new principles and to develop new institutions
which are more adapted to the current situation? In this case, the meas-
urement of change should not be quantitative (in terms of expenditure,
benefit levels, scope of coverage, etc.) but should provide an assessment of
the degree of innovation introduced by changes. Typical questions would
be whether reforms introduced new institutions or a new logic, or led to
362 Beyond Retrenchment

the involvement of new actors. However, recent analyses usually focus

more on continuity than on change.

Path Dependency and Continuity

Comparing Reagan's and Thatcher's reform ambitions with actual out-
comes, Pierson (1994) emphasized the stability of (American and British)
welfare arrangements. He explained this resistance to change by the force
of past commitments, the political weight of welfare constituencies and the
inertia of institutional arrangements, which all engender a phenomenon of
path dependency. Thus, 'any attempt to understand the politics of welfare
state retrenchment must start from a recognition that social policy remains
the most resilient component of the postwar order' (Pierson, 1994, p. 5).
Broadening the scope to other developed countries in order to analyse
'national adaptation in global economies', G0sta Esping-Andersen came to
a similar conclusion, depicting a general 'frozen landscape' and emphasiz-
ing the rigidity of continental welfare state arrangements. He concluded
that 'the cards are very much stacked in favour of the welfare state status
quo' (1996, p. 267). While the conclusion was that, once again, no dramatic
changes could be (fore)seen, analyses of developments within different
welfare regimes allowed the general notion of retrenchment to be separated
out into different processes which are linked to specific institutions within
each welfare system.
Nevertheless, among others, John Myles and Jill Quadagno demonstrated
subsequently that things were not that fixed. Some changes could be identi-
fied, specifically in pension reforms. To put their argument in a caricatured
nutshell, retrenchment means targeting instead of universal benefits, rein-
forcing selectivity and adding conditions to already targeted benefits, and
tightening the links between contribution and benefits for contributory
benefits (and going from defined benefit to defined contribution) (Myles
and Quadagno, 1997, pp. 247-72). Relating these changes to pension policy,
Pierson and Myles have recently argued that these changes were always path
dependent, demonstrating more continuity than radical changes. While
pension reforms often reduce the level of benefits, all are framed by past
commitments and specific institutional arrangements. They operate differ-
ently and each perpetuates (and sometimes even reinforces) the historical
logic in which the pension system has developed (Myles and Pierson, 2001).
Recently, several studies have broadened the scope of comparison beyond
pension reforms, pointing out that there are different processes of welfare
state adaptation (Scharpf and Schmidt, 2000; Pierson, 2001a). Through their
empirical evidence, these comparative analyses of changes seem to confirm
the notion of 'three worlds of welfare capitalism' (Esping-Andersen, 1990).
In the context of the historical and institutional constraints it seems that
 Bruno Palier 363

there are three paths for welfare state changes. Scharpf and Schmidt (2000)
convincingly show that the three worlds do not have the same kind of vul-
nerabilities in the face of the new global and European environment.
Examining the implementation of several policies, Pierson proposes that in
each world a specific type of reform is predominantly pursued: commodifi-
cation in the liberal welfare states, cutbacks in the Nordic countries and
recalibration of the Continental systems (Pierson, 2001 b).
Very convincingly these analyses provide us with a much better under-
standing of what is going on than others which simply focus on curtail-
ments. They demonstrate that there are (broadly three) different ways of
reforming welfare states and that differences between the welfare regimes
explain difference in reforms implemented. However, they still frame their
approach in terms of retrenchment or adaptation, as if there has been,
within a single country, only one single trend of reform over the last
twenty-five years. Clearly, as Visser and Hemerijck (1997) claimed for the
Netherlands, there is a need to differentiate between different kinds of
reforms within the same country (or welfare regime). Governments have
not always implemented the same recipes. They did not display the same
behaviour in the late 1970s as during the 1980s or during the 1990s. There
is a need for an analytical framework for studying reforms which allows
differentiation between countries, but, in accordance with the type or
period of reform, also within countries.
Usually, recent comparative studies have concluded that reforms had a
limited impact on the structure of the different welfare states, not threaten-
ing but preserving the very nature of each system. In fact, reforms are seen
as merely reinforcing the logic of each welfare system. Due to the different
processes of marketization of their social policies, liberal welfare states have
become even more residual and liberal. The social democratic welfare states,
thanks to an egalitarian distribution of cuts (around 10 per cent across all
benefits) and a rediscovery of the workline, have returned to their traditional
road to welfare (Kuhnle, 2000a). Also most of the continental welfare states
have remained the same, not only because reforms have reinforced their
characteristics but also because of an apparent inability to implement any
substantial reform (giving rise to terms such as 'eurosclerosis or 'frozen
Fordism'). In short, it seems that fundamental structures of welfare states
have remained to a large extent unaltered. The (neo-institutionalist) path
dependence approach often leads to the conclusion of prevailing continuity.

The Role of Welfare Institutions: From Independent

to Dependent Variables

In order to explain the kind of continuity revealed by recent research,

the impact of institutions is regularly referred to. The emphasis has
364 Beyond Retrenchment

mainly been put on the variables of general political systems, including

constitutional rules, party systems, veto points or players and state struc-
tures (federal versus unitary, strong versus weak, etc.). Ho·wever, the role
of welfare state institutions themselves is rarely analysed in any systematic
fashion. It might be argued that welfare institutions play a major role in
shaping the problems which welfare states face, but they also partly deter-
mine the kind of resources which different actors can mobilize, and shape
the kind of solutions adopted to face the problems. By welfare institutions,
I refer here to the institutionalized rules of the social policy legacy.

Explaining Continuity: The Role of Welfare Institutions

During the last ten years, research has been emphasizing the importance of
institutions in understanding the differences in timing in the development
of the welfare states, as well as differences in the content of social policies.
In order to account for these differences, it is necessary to refer to the
general political institution of each country (Bonoli, 2001) as well as to the
political orientation of governments (Levy, 1999; Ross, 2000; Huber and
Stephens, 2001). With Giuliano Bonoli, I have previously argued that there
is a need for more attention to be paid to the institutional dimension of the
social protection system itself in order to understand differences in timing
and in the content of recent reforms (Bonoli and Palier, 2000).
Drawing on Ferrera (1996, p. 59) in a previous contribution we identi-
fied four institutional variables which are helpful in describing social pro-
tection systems (Bonoli and Palicr, 1998). Accordingly, a welfare state
scheme may be characterized by four institutional variables:

• Mode of access to benefits For example citizenship, need, work, the

payment of contributions, or a private contract.
• Benefit structure Benefits can be service-based or in cash. Cash bene-
fits may be means tested, flat-rate, earnings related, or contribution
related.
• Financing mechanisms This can range from general taxation, to
employment-related contributions or premiums.
• Actors who manage the system These are those who take part in the
management of the system and might include state administration
(central and local), social partners (representatives of employers and
employees) and the private sector.

These welfare institutions shape the politics of the reform. Institutional

factors structure debates, political preferences and policy choices. They
affect the positions of the various actors and groups involved. They frame
the kinds of interests and resources which actors can mobilize in favour of
 Bruno Palier 365

or against welfare reforms. In part they also determine who is and who is
not participating in the political game which leads to reforms. Depending
on how these different variables are set, different patterns of support and
opposition can be encountered. In general, one may expect these variables
to influence the politics of social programmes in the following ways.

Mode of access As it delimits the beneficiaries and thus the likely sup-
porters of a scheme, this factor is crucial for shaping the politics of a given
social programme. The mode of access also relates to the objectives of a
programme, i.e. income maintenance, poverty alleviation or equality. As a
result, support for a scheme might come from groups with an ideological
orientation congenial to one of these objectives. Generally, left-wing
parties have tended towards equality, Christian-Democrats have sup-
ported income maintenance and liberal parties have been keener to allevi-
ate poverty (Esping-Andersen, 1990, p. 53).

Benefit structure To some extent this variable is related to the previous

one, as typically earnings-related benefits are granted on a contributory
basis while universal transfers are flat-rate. The nature and the generosity
of benefits also determines the kind of support they will receive. Targeted
or (low) flat-rate benefits are less likely to be supported by the middle and
upper classes than earnings-related benefits. The higher someone's income,
the less flat-rate benefits will contribute to his or her living standard.
Politically, a flat-rate benefit structure- combined with a low level- might
be related to lack of programme support from the middle and upper
classes. As earnings inequality increases in many industrial countries, it
will become ever more difficult to set a flat-rate benefit which is at the same
time affordable and significant for a majority of the population. Targeted
benefits are supported mainly for philanthropical reasons or fear, rather
than based on material interest, and are thus more readily subjected to criti-
cism. The political support of the benefits is the reverse image of their
financial cost. As a consequence, it is more feasible to reduce flat-rate or
means tested benefits than earnings-related ones.

Financing mechanisms While related to the two previous factors, this vari-
able has some significance in its own right. If the mode of access delineates
the beneficiaries of a programme, the financing mechanism determines who
is paying for it. The political support for a financing mechanism is likely to
be stronger if those who pay for a programme are also those who receive the
benefit. The looser the link between benefit and payment, the less legitimate
the financing mechanism becomes. As a result, there is a crucial difference
between tax- and contribution-financed schemes in their ability to attract
public support. Whereas taxation goes to the state, social contributions are
perceived as a 'deferred wage' which will return to the insured person at
366 Beyond Retrenchment

times of sickness, unemployment or retirement. Paying health insurance

contributions, for instance, 'buys' a right to health care which guarantees
protection during periods of sickness. From a political point of v:iew contri~
butions are raised much more easily than taxes, especially income taxes.

Actors who manage the system This dimension determines the account-
ability and legitimacy of different actors. The more the state controls a
system and its generosity, the more the political class is likely to be held
responsible for any changes. When benefits are increased, the government is
credited; when benefits are reduced, it will be blamed (Pierson, 1996). When
management is shared with trade unions and employers, responsibility tends
to be diluted, thus diminishing the state capacity to control the development
of the social protection system, and particularly levels of expenditure. This
variable also determines the range of actors which are regarded as legitim-
ately participating in welfare reform debates. In a state controlled system the
debate is confined to political parties. When the management is handed to
the social partners, their participation in the debate is legitimized. In the
latter case also trade unions are seen as important actors in social policy-
making, and widely regarded as defending the current system against
retrenching governments. This institutional setting gives rise to tensions
over controlling social security between governments on the one hand -
often regardless of political persuasion - and trade unions on the other.
Union involvement in the management of social security grants unions a
de facto veto power against welfare state reforms (Bonoli and Palier, 1996).

From Independent to Dependent Variable

References to welfare state institutions contribute significantly to the
understanding of details regarding both mechanisms of path dependency
and differences between welfare regime changes. The institutional shape of
the existing social policy landscape poses a significant constraint on the
degree and the direction of change. For instance, a comparison between the
UK and France, countries with extremely different social policy legacies,
show two particular institutional effects. Schemes which mainly redistrib-
ute horizontally and protect middle classes well are likely to be more
resistant to cuts. Their support base is larger and more influential com-
pared with schemes which are targeted on the poor or are so parsimonious
as to be insignificant for most of the electorate. The contrast between the
overall resistance of French social insurance against cuts and the withering
away of its British counterpart is telling. Also, the involvement of the social
partners, and particularly of the labour movement in managing the
schemes, seems to provide an obstacle for government-sponsored
retrenchment exercises (Bonoli and Palier, 2000).
 Bruno Palier 367

However, not only social scientists acknowledge the role institutions

play in shaping, and sometimes preventing, change. Through learning
processes, experts and politicians also recognize this effect - and some-
times therefore decide to change the institutions and thus alter the politi-
cal game which is blocking reform projects. Two particular institutional
features preventing welfare state reform are contribution financing and the
involvement of social partners in the management of social security (two
characteristics of the Bismarckian welfare systems, widely regarded as the
most <frozen' systems). Some recent reforms, mainly in Bismarckian coun-
tries, have been aimed at modifying these institutional arrangements
(financing and the management of social security). This is certainly the case
in France (Palier, 2000, 2001) but one could also mention reforms intro-
duced in other Bismarckian countries (for example, the introduction of a
<green tax' in Germany replacing some social contribution funding, or the
introduction of private employment services in the Netherlands). These
developments are not aimed at benefit levels or access and thus cannot be
considered as retrenchment (nor as improvement of the generosity of the
benefits). Yet they may prove to be extremely important reforms since they
could introduce changes in the very nature of national welfare state
systems. Thus, what is needed is a framework of analysis which helps to
distinguish, identify and assess these kinds of changes.

Differentiating between Social Policy Changes

Welfare state analyses which focus on the evolution of social policy, or

processes of adaptation tend to forget the kind of reform referred to above.
Emphasizing the inertia of institutions, they tend to ignore the structural
impact which public policies can have. While integrating phenomena of
path dependency in welfare state analysis is essential, this should not
prevent us from examining the impact of such reforms on social policy. In
other words, recent developments within social protection systems are not
only due to their own evolutionary dynamic, but also to the implementa-
tion of public policies. Incorporating public policy aspects of change into
the study of the ways in which social protection systems adapt would
allow use to be made of the tools of public policy analysis, and particularly
of Peter Hall's approach to change. 2

Social Policy as Public Policy

Peter Hall (1993, p. 278) proposes that we (can think of policymaking as a
process that usually involves three central variables: the overarching goals
that guide policy in a particular field, the techniques or policy instruments
368 Beyond Retrenchment

used to attain those goals, and the precise settings of these instruments ... '.
According to this approach, it is possible to recast our understanding of
welfare regimes in terms of public policies. The instrume9-ts .of social
policy are mainly the four institutional variables mentioned above (the
mode of access, the benefit structure, financing mechanisms and manage-
ment arrangements).
The 'overarching goals' can be related to the three different political logics
which are associated with three welfare state regimes (Esping-Andersen,
1990): the centrality of the market in the allocation of resources and resid-
ual state intervention in the liberal regime; the centrality of equality, citi-
zenship and 'harmonization' of the population in the social-democratic
welfare regime; and the centrality of work, status and occupational identity
in conservative-corporatist social insurance systems.
If the above regimes are interpreted as ideal-types rather than precise
descriptions of specific realities, three major combinations of these prin-
ciples, logics and institutional instruments can be derived from the classic
typology. These three combinations can be seen as three different reper-
toires of social policies which are more or less salient in any one specific
social protection system. [ ... ]
While these kinds of categories cannot pretend to describe the reality of
any specific social protection system either in its entirety or in detail
(because no social protection system would be this consistent, and all
combine different logics and instruments to some extent), they are never-
theless useful for the comparative analysis of a specific programme. Each
social protection programme is close to one of three goals and presents a spe-
cific setting of the four institutional dimensions. Therefore, these categories
represent indicators against which changes can be located. In identifying the
specific characteristics of a programme (i.e. its goal and the specific combi-
nation of the four institutional variables) before and after a reform, objec-
tive criteria for assessing changes will have been established. For example,
did the reform only lower benefit levels, or did it introduce new modes of
access or new rules of calculation- or did the reform set new goals? In other
words, it is possible to assess whether a reform did change one or several of
the institutional dimensions, and whether it implied a change in the goals.

Instrumental, Parametric, or Paradigmatic Changes: Three

Orders of Policy Changes
Elaborating his framework for analysing macroeconomic policy changes,
Peter Hall distinguished three different types of changes.

We can identify three distinct kinds of changes in policy ... First, [a change
of] the levels (or settings) of the basic instruments. We can call the process
 Bruno Palier 369

whereby instrument settings are changed in the light of experience and new
knowledge, while the overall goals and instruments of policy remain the same,
a process of first order change in policy ... When the instruments of policy
as well as their settings are altered in response to past experience even though
the overall goals of policy remain the same, [changes] might be said to reflect
a process of second order change ... Simultaneous changes in all three com-
ponents of policy: the instrument settings, the instruments themselves, and
the hierarchy of goals behind policy ... occur rarely, but when they do occur
as a result of reflection on past experience, we can describe them as instances
of third order change. (Hall, 1993, pp. 278-9)

This approach helps to differentiate between the different impacts which

a reform will have, depending on whether or not it changes the instruments
and the overall logic. It provides a grid for assessing the type of change
beyond a pure quantitative approach (more or less retrenchment) and a
means for judging the degree of innovation introduced by a specific
reform. A first order change will not imply profound changes as far as a
historical path is concerned. It just implies a change in the instrument set-
tings (such as raising the level of social contributions or lowering benefit
levels) without implying a change in the general principles and logic. This
type of change might be called instrumental change. Second order changes,
often referred to as 'parametric change' in the pension literature, involve
the introduction of new instruments (i.e. the introduction of new calcula-
tion rules or new entitlement rules). These types of change appear to be
path dependent, as Myles and others have shown for pension. They may
lead to substantial changes once they have been in place and developed
over time. 3 However, more directly, some reforms may involve a change
both of the instruments and of the goals (such as changes in the financing
mechanisms or in the organization of the management of the system), and
thus represent what Hall has termed 'paradigmatic changes'.

Policy Learning: The Role of I de as.

In addition to identifying different types of change, the aim is also to
explain under what conditions changes occur. Peter Hall's approach is
based on processes of policy learning. First order changes can be under-
stood as the first response which governments may adopt when faced with
a difficulty which at this stage is not perceived as a new problem. By only
changing the settings of the usual instruments, 'old recipes' are resorted to,
repeating what governments are used to doing. Hall points out that as a
response to the first oil shock in the early 1970s, British governments
applied 'traditional' Keynesian policies with the aim of boosting demand.
Similarly, I have shown that the French government after the mid-
1970s merely did what they were used to doing before, i.e. raising social
370 Beyond Retrenchment

contribution rates in order to finance the growth of social expenditure

rather than reducing social expenditure (Palier, 2000). . '
However, when something is progressively perceived as .a new context
old recipes produce unintended effects or 'anomalies'. Advised by differ~
ent kinds of experts (amo~g them, at times, social policy comparativists)
governments became convmced that they needed to abandon the previous
ways of doing things, now perceived to be wrong, and innovate. Two dif-
ferent paths seem available: the introduction of an innovation aimed at pre-
serving the given logic of a system (for example, the so-ca-lled
'consolidation' reforms implemented in Germany at the end of the 1980s
and during the early 1990s, or the French sectoral reforms, see Palier, 2000,
pp. 122-6) or a change of some of the rules of the game, as well as its goals.
An important process here is a change in people's perception of problems
and solutions. I have shown that an explanation of the implementation of
structural changes in France requires taking account of different intellectual
processes. First the idea occurred that former recipes were no longer ade-
quate (such as the Keynesian use of social spending). Second, existing social
and economic difficulties were reinterpreted. In the new explanation which
emerged in the late 1980s, the position of the social insurance system shifted
from one of a victim to one of a cause of the problem. 4 Third, a large major-
ity of the actors concerned about social protection problems agreed with
the new measures bringing about structural changes. However, the precise
analysis of the different positions which actors adopted towards the new
measures shows that the reasons which made them agree with those meas-
ures were very different, and sometimes even contradictory. Indeed, an
important element for the acceptance of a new measure seems to be its
capacity to aggregate different- and even contradictory- interests, based
on different, and sometimes contrasting, interpretations. Structural changes
are achieved through ambiguous measures rather than via a clear ideologi-
cal orientation. Finally, these types of change have been introduced grad-
ually but progressively. Fairly marginal at first, they will play a major role
within the core of the social protection system to come.

Conclusion

Analysing all recent reforms of the social protection systems as forms of

retrenchment, as it has often been the case, represents a linear reductionist,
developmental and purely quantitative view of what is going on. Instead,
it is imperative to differentiate between different reform modalities or
paths with the help of qualitative analysis. When differentiating between
several (usually three) paths of reform, conclusions are often reached that
processes are path dependent, but also that outcomes are marked by con-
tinuity: that after ten to twenty years of reform different welfare states have
 Bruno Palier 371

apparently remaine? all but untouc~ed ~n terms of their own logic and
main features. The lmk, often seen as mev1table, between path dependency
and continuity needs to be questioned. [ ... ] Explaining continuities
usually relies on references to the impact of institutions. However, while
institutions shape the particular context in which problems, interests and
solution are framed, apart from the role played by political institutions,
those of the welfare state created by social policy legacies (both as inde-
pendent and dependent variables) need to be acknowledged more.
Emphasizing continuity rarely takes account of public policies, which can
have an important impact on welfare state structures. Finally, there is a
need for a better differentiation between types of reforms: some reinforce
rhe pattern of a particular system, others introduce structural change. In
order to identify the different kinds of reforms, one has to assess whether
they merely imply a change in the settings of given instruments, a change
of instruments, or a change in both the instruments and in the goals.
With these analytical tools, we will be able to identify more adequately
social policy changes which occurred in the recent past and will continue
to occur. The analytical framework put forward here confirms that
Continental welfare states are more difficult to reform than others.
Reference to the impact of welfare states' institutions help us to understand
why this is the case. For example, contributory benefits enjoy a particu-
larly high level of legitimacy and are therefore difficult to cut back radi-
cally. Transfers are 'paid' for by social contributions, workers assume that
they have 'bought' social rights, and benefits are usually generous. In this
sense their loss would be more significant than the reduction of a benefit
which is already at a low level. Finally, insurance-based transfers are well
defended by organized interests, and in particular by trade unions of dif-
ferent branches corresponding to the different professional schemes.
However, this framework of analysis also helps us to realize that
structural, paradigmatic changes have occurred, and particularly in
Bismarckian countries. In order to cope with structural problems (regard-
ing benefit financing, entitlements and capacities for change), these coun-
tries have created new benefit programmes according to new logics
(means-tested benefits, privately funded schemes in pension and health
systems), they have developed new modes of financing, partly replacing
social contributions, and are implementing new management arrange-
ments (privatization of some administrative tasks, empowerment of the
state at the expense of the social partners). These changes are the result of
a process of policy learning. They have been (or will be) implemented very
gradually. Probably because of their marginal scope and because of the fact
that they do not directly affect the level of expenditure, few analyses have
concentrated on them compared with the more common analyses of
welfare state change (and especially of Continental welfare systems)
which tend to emphasize path dependency and continuity. However, the
372 Beyond Retrenchment

increasingly visible impacts of these structural reforms indicate a need for

a change in the analytical framework. Social science should not be more
resistant to changing their paradigms than, arguably, welfar~ st.ates them-
selves!

Notes

From Jochen Clasen (ed.), What Future for Social Security? Debates and Reforms
in National and Cross-National Perspective, The Hague, Kluwer Law
International, 2003, pp. 105-20. Earlier versions of this chapter were presented at
the University of Stirling, the University of Tokyo, the Max Planck Institut in
Cologne and to Fellows at Harvard University, Center for European Studies.

The author wishes to thank all the commentators from earlier presentations of this
paper, and particularly Olli Kangas, Mari Miura, Fritz Scharpf, Peter Hall and
Rosemary Taylor for their very useful comments.

'The 1980s were not a time of simple retrenchment. Under the condition
where neither federal nor state government was obliged to pay the welfare bill,
the door was open for increased benefits or expanded entitlements' (Manow
and Seils, 2000, p. 279).
2 An increasing number of scholars are using this framework of analysis for
understanding social policy reforms (see for instance Visser and Hemerijck
(1997) or Hinrichs (2000)).
3 Myles and Quadagno (1997) illustrate this. Within pension systems, a tran-
sition from a defined benefit to a defined contribution scheme implies a
change in the mode of pension benefit from deferred wages to savings, for
instance.
4 The social insurance system came to be accused of partly causing some eco-
nomic, social and political problems through three broad mechanisms: the
weight of social contributions preventing job creation; the contributory
nature of most social benefits reinforcing social exclusion; and the joint man-
agement of the system by social partners engendering irresponsibility and a
management crisis of the system.

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 Bruno Palier 373

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374 Beyond Retrenchment

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Part III
The Futures of Welfare

Part III on the futures of welfare is comparatively short and is more specu-
lative than those that have gone before. In it, we bring together a number
of authors thinking about the 'coming' welfare state. We begin with a short
selection from the work of Anthony Giddens. As director of the London
School of Economics and thinker-in-residence to Britain's New Labour
government especially during its agenda-setting first term, Giddens's
thinking on welfare was extraordinarily influential. Drawing on his wider
articulation of a 'Third Way', Giddens here discusses the ways in which
welfare institutions might be remade in a radically changed social and eco-
nomic environment to underpin a new form of 'positive welfare' within an
'active welfare state' built on the shifting terrain of the new context set by
'reflexive modernity'. This is followed by a much longer piece in which
Giuliano Bonoli considers the emergence of 'new social risks' and consid-
ers their impact on the emergence of a 'politics of the new social policies'.
The 'new' social risks- reconciling work and family life, coping with single
parenthood, dealing with obsolescent skills in mid-career, working outside
the formal economy (and its world of welfare)- pose new challenges for
both citizens and policy-makers. Bonoli considers the ways in which these
issues may be addressed. Finally in this first of the concluding sections, we
include Nick Ellison's discussion of welfare theory 'beyond universalism
and particularism'. Universality - of provision and of citizenship - has
traditionally been seen by its architects (or perhaps, social democratic the-
orists of the welfare state) as one of the key virtues of the modern welfare
state. And yet in recent years these claims to universalism have been
increasingly challenged by those who have seen the logic of universalism
as repressing 'difference' and speaking of and to a privileged majority.
Ellison attempts to think his way around the dualism of 'universalism
versus difference', favouring decentralized and 'deliberative' conceptions
376 The Futures of Welfare

of the politics of the social and a greater role for the 'politics- of presence',
as ways of recasting a social politics that can embrace the virtues of both
difference and universality.
The final section contains three more programmatic papers. In 'A
Welfare State for the Twenty-First Century', G0sta Esping-Andersen pre-
sents his blueprint for a new welfare regime which is up to all of the chal-
lenges (social, economic and political) that social policy at the start of the
new millennium must meet. His emphasis is on the requirements of a
'social investment state', with a special focus on children and families, life-
time learning, lifelong outcomes and 'life chance guarantees rather than
here-and-now equality of all'. Ruth Lister sounds a cautionary note about
the parameters and policy implications of the 'social investment state'
favoured both by Esping-Andersen and the social policy-makers of New
Labour. She is especially concerned that the focus has come to rely so
heavily on the iconic status of children as 'citizen-workers of the future' to
the neglect of issues of equality and 'child-citizens' in the here and now. In
a final, very short but incisive contribution, Philippe van Parijs sketches his
ingenious plan to respond to the current crisis of welfare ('the first mar-
riage of justice and efficiency') by jettisoning most of the existing appara-
tus of the (income transfer) welfare state in favour of a guaranteed Basic
Income for every citizen. Even for those who doubt the political practicab-
ility of Van Parijs's solution, it is a fascinating and challenging proposal
which has provoked a wide-ranging and ongoing debate.
A New World of Welfare
Positive Welfare
Anthony Giddens

[ ... ]

Positive Welfare
No issue has polarized left and right more profoundly in recent years
than the welfare state, extolled on the one side and excoriated on the
other. What became 'the welfare state' (a term not in widespread use until
the 1960s and one William Beveridge, the architect of the British welfare
state, thoroughly disliked) has in fact a chequered history. Its origins were
far removed from the ideals of the left- indeed it was created partly to
dispel the socialist menace. The ruling groups who set up the social insur-
ance system in imperial Germany in the late nineteenth century despised
laissez-faire economics as much as they did socialism. Yet Bismarck's
model was copied by many countries. Beveridge visited Germany in 1907
in order to study the model. 1 The welfare state as it exists today in
Europe was produced in and by war, as were so many aspects of national
citizenship.
The system Bismarck created in Germany is usually taken as the classic
form of the welfare state. Yet the welfare state in Germany has always had
a complex network of third sector groups and associations that the author-
ities have depended on for putting welfare policies into practice. The aim
is to help these to attain their social objectives. In areas such as child care,
third sector groups have almost a monopoly on provision. The non-profit
sector in Germany expanded rather than shrank as the welfare state grew.
Welfare states vary in the degree to which they incorporate or rely upon
the third sector. In Holland, for instance, non-profit organizations are the
main delivery system for social services, while in Sweden hardly any are
 Anthony Giddens 379

used. In Belgium and Austria, as in Germany, about half the social services
are provided by non-profit groups.
The Dutch political scientist Kees van Kersbergen argues that 'one of the
major insights of the contemporary debate [about the welfare state] is that
to equate social democracy and the welfare state may have been a mistake?
He examines in detail the influence of Christian democracy upon the devel-
opment of continental welfare systems and the social market. The Christian
democratic parties descend from the Catholic parties that were important
between the wars in Germany, Holland, Austria and to a lesser degree
France and Italy. The Catholic unionists saw socialism as the enemy and
sought to outflank it on its own ground by stressing co-determination and
class reconciliation. Ronald Reagan's view, expressed in 1981, that 'we have
let government take away those things that were once ours to do voluntar-
ily' finds a much earlier echo in Europe in the Catholic tradition. Church,
family and friends are the main sources of social solidarity. The state should
step in only when those institutions don't fully live up to their obligations.
Recognizing the problematic history of the welfare state, third way poli-
tics should accept some of the criticisms the right makes of that state. It is
essentially undemocratic, depending as it does upon a top-down distribu-
tion of benefits. Its motive force is protection and care, but it does not give
enough space to personal liberty. Some forms of welfare institution are
bureaucratic, alienating and inefficient, and welfare benefits can create per-
verse consequences that undermine what they were designed to achieve.
However, third way politics sees these problems not as a signal to disman-
tle the welfare state, but as part of the reason to reconstruct it.
The difficulties of the welfare state are only partly financial. In most
Western societies, proportional expenditure on welfare systems has
remained quite stable (since the late 1980s]. In the UK, the share of GDP
spent on the welfare state increased steadily for most of the century up to
the late 1970s. Since then it has stabilized, 3 although the gross figures
conceal changes in the distribution of spending and the sources of revenue.
The resilience of welfare budgets in the UK is all the more remarkable
given the determination of Margaret Thatcher's governments to cut them.
Expenditure on education as a percentage of GDP fell between 1975 and
1995 from 6.7 per cent to 5.2 per cent. Spending on the health service,
however, rose over this period. In 1975 it was equivalent to 3.8 per cent of
GDP. By 1995 it had risen to 5.7 per cent (a lower percentage than in most
other industrial countries). Public housing experienced the greatest cut,
declining from 4.2 per cent of GDP in 1975 to 2.1 per cent twenty years
later. As happened elsewhere, spending on social security increased most.
In 1973-4 it made up 8.2 per cent of GDP. This reached 11.4 per cent by
1995-6. Expenditure on social security went up by more than 100 per cent
in real terms over the period. The main factors underlying the increase
were high unemployment, a growth in the numbers of in-work poor, and
380 Positive Welfare

changes in demographic patterns, especially a growth in numbers of single

parents and older people.
Much the same developments have affected all welfare ~.ystems, since
they are bound up with structural changes of a profound kind. They are
causing basic problems for the more comprehensive welfare states, such as
those in Scandinavia. Nordic egalitarianism has historical and cultural
roots rather than being only the product of the universalist welfare state.
There is a wider public acceptance of high levels of taxation than in most
Western countries. But the benefits system comes under strain whenever
unemployment rises, as happened in Finland- this in spite of the fact that
the Nordic countries pioneered active labour market policies. Given its
relative size, the Scandinavian welfare state is a major employer, particu-
larly of women. Yet as a result the degree of sexual segregation in employ-
ment is higher than in most other industrial countries.
The large increase in social security spending is one of the main sources
of attack on welfare systems by nco-liberals, who see in it the widespread
development of welfare dependency. They are surely correct to worry
about the number of people who live off state benefits, but there is a more
sophisticated way of looking at what is going on. Welfare prescriptions
quite often become sub-optimal, or set up situations of moral hazard. The
idea of moral hazard is widely used in discussions of risk in private insur-
ance. Moral hazard exists when people use insurance protection to alter
their behaviour, thereby redefining the risk for which they are insured. It
isn't so much that some forms of welfare provision create dependency cul-
tures as that people take rational advantage of opportunities offered.
Benefits meant to counter unemployment, for instance, can actually
produce unemployment if they are actively used as a shelter from the
labour market.
Writing against the backdrop of the Swedish welfare system, the econo-
mist Assar Lindbeck notes that a strong humanitarian case can be made for
generous support for people affected by unemployment, illness, disability
or the other standard risks covered by the welfare state. The dilemma is
that the higher the benefits the greater will be the chance of moral hazard,
as well as fraud. He suggests that moral hazard tends to be greater in the
long run than in shorter time periods. This is because in the longer term
social habits are built up which come to define what is 'normal'. Serious
benefit dependency is then no longer even seen as such but simply becomes
'expected' behaviour. An increased tendency to apply for social assistance,
more absence from work for alleged health reasons, and a lower level of job
search may be among the results. 4
Once established, benefits have their own autonomy, regardless of
whether or not they meet the purposes for which they were originally
designed. As this happens, expectations become 'locked in' and interest
groups entrenched. Countries that have tried to reform their pensions
 Anthony Giddens 381

systems, for example, have met with concerted resistance. We should have
our pensions because we are 'old' (at age sixty or sixty-five), we have paid
our dues (even if they don't cover the costs), other people before have had
them, everyone looks forward to retirement and so forth. Yet such institu-
tional stasis is in and of itself a reflection of the need for reform, for the
welfare state needs to be as dynamic and responsive to wider social trends
as any other sector of government.
Welfare reform isn't easy to achieve, precisely because of the entrenched
interests that welfare systems create. Yet the outline of a radical project for
the welfare state can be sketched out quite readily.
The welfare state, as indicated earlier, is a pooling of risk rather than
resources. What has shaped the solidarity of social policy is that 'otherwise
privileged groups discovered that they shared a common interest in reallo-
cating risk with the disadvantaged'. 5 However, the welfare state isn't geared
up to cover new-style risks such as those concerning technological change,
social exclusion or the accelerating proportion of one-parent households.
These mismatches are of two kinds: where risks covered don't fit with
needs, and where the wrong groups are protected.
Welfare reform should recognize the points about risk made earlier in
the discussion: effective risk management (individual or collective) doesn't
just mean minimizing or protecting against risks; it also means harnessing
the positive or energetic side of risk and providing resources for risk
taking. Active risk taking is recognized as inherent in entrepreneurial activ-
ity, but the same applies to the labour force. Deciding to go to work and
give up benefits, or taking a job in a particular industry, are risk-infused
activities- but such risk taking is often beneficial both to the individual and
to the wider society.
When Beveridge wrote his Report on Social Insurance and Allied
Services, in 1942, he famously declared war on Want, Disease, Ignorance,
Squalor and Idleness. In other words, his focus was almost entirely nega-
tive. We should speak today of positive welfare, to which individuals them-
selves and other agencies besides government contribute - and which is
functional for wealth creation. Welfare is not in essence an economic
concept, but a psychic one, concerning as it does well-being. Economic
benefits or advantages are therefore virtually never enough on their own
to create it. Not only is welfare generated by many contexts and influences
other than the welfare state, but welfare institutions must be concerned
with fostering psychological as well as economic benefits. Quite mundane
examples can be given: counselling, for example, might sometimes be more
helpful than direct economic support.
Although these propositions may sound remote from the down-to-
earth concerns of welfare systems, there isn't a single area of welfare reform
to which they aren't relevant or which they don't help illuminate. The
guideline is investment in human capital wherever possible, rather than the
382 Positive Welfare

direct provision of economic maintenance. In place of the welfare state We

should put the social investment state, operating in the context of a posi-
tive welfare society.
The theme that the 'welfare state' should be replaced by the 'welfare
society' has become a conventional one in the recent literature on welfare
issues. Where third sector agencies are not already well represented, they
should play a greater part in providing welfare services. The top-down dis-
pensation of benefits should cede place to more localized distribution
systems. More generally, we should recognize that the reconstruction of
welfare provision has to be integrated with programmes for the active
development of civil society.

Social Investment Strategies

Since the institutions and services ordinarily grouped together under the
rubric of the welfare state are so many, I shall limit myself here to com-
ments on social security. What would the social investment state aim for in
terms of its social security systems? Let us take two basic areas: provision
for old age and unemployment.
As regards old age, a radical perspective would suggest breaking out of
the confines within which debate about pension payments is ordinarily
carried on. Most industrial societies have ageing populations, and this is a
big problem, it is said, because of the pensions time bomb. The pension
commitments of some countries, such as Italy, Germany or Japan, are way
beyond what can be afforded, even allowing for reasonable economic
growth. If other societies, such as Britain, have to some extent avoided this
difficulty, it is because they have actively reduced their state pension com-
mitments- in Britain, for example, by indexing pensions to average prices
rather than average earnings.
An adequate level of state-provided pension is a necessity. There is good
reason also to support schemes of compulsory saving. In the UK the effect
of relating pension increases to prices rather than earnings, without other
statutory provisions, is likely to leave many retirees impoverished. A man
who is fifty in 1998 and leaves the labour market aged sixty-five will receive
a government pension amounting to only 10 per cent of average male earn-
ings. Many people don't have either occupational or private pensions. 6
Other countries have come up with more effective strategies. A number of
examples of combined public/private sector funding of pensions exist,
some of which are capable of generalization. The Finnish system,
for example, combines a state-guaranteed basic minimum income and
earnings-related pension with regulated private sector provision.
The interest of the pensions issue, however, stretches more broadly than
the questions of who should pay, at what level and by what means.
 Anthony Giddens 383

It should go along with rethinking what old age is and how changes in the
wider society affect the position of older people. Positive welfare applies
as much in this context as in any other: it isn't enough to think only in
terms of economic benefits. Old age is a new-style risk masquerading as an
old-style one. Ageing used to be more passive than it is now: the ageing
body was simply something that had to be accepted. In the more active,
reflexive society, ageing has become much more of an open process, on a
physical as well as a psychic level. Becoming older presents at least as many
opportu~ities as problems, both for individuals and for the wider social
commumty.
The concept of a pension that begins at retirement age, and the label
'pensioner', were inventions of the welfare state. But not only do these not
conform to the new realities of ageing, they are as clear a case of welfare
dependency as one can find. They suggest incapacity, and it is not surpris-
ing that for many people retirement leads to a loss of self-esteem. When
retirement first fixed 'old age' at sixty or sixty-five, the situation of older
people was very different from what it is now. In 1900, average life
expectancy for a male aged twenty in England was only sixty-two.
We should move towards abolishing the fixed age of retirement, and we
should regard older people as a resource rather than a problem. The cat-
egory of pensioner will then cease to exist, because it is detachable from
pensions as such: it makes no sense to lock up pension funds against reach-
ing 'pensionable age'. People should be able to use such funds as they wish
-not only to leave the labour force at any age, but to finance education, or
reduced working hours, when bringing up young children. 7 Abolishing
statutory retirement would probably be neutral in respect of labour market
implications, given that individuals could give up work earlier as well as
stay in work longer. These provisions won't as such help pay for pensions
where a country has overstretched its future commitments, and this per-
spective is agnostic about what balance should be aimed for between public
and private funding. Yet it does suggest there is scope for innovative think-
ing around the pensions issue.
A society that separates older people from the majority in a retirement
ghetto cannot be called inclusive. The precept of philosophic conservatism
applies here as elsewhere: old age shouldn't be seen as a time of rights
without responsibilities. Burke famously observed that 'society is a part-
nership not only between those who are living, but between those who are
living, those who are dead and those who are to be born'. 8 Such a partner-
ship is presumed, in a relatively mundane context, by the very idea of col-
lective pensions, which act as a conduit between generations. But an
intergenerational contract plainly needs to be deeper than this. The young
should be willing to look to the old for models, and older people should
see themselves as in the service of future generations. 9 Are such goals real-
istic in a society that has retreated from deference, and where age no longer
384 Positive Welfare

appears to bring wisdom? Several factors suggest they may be. Being 'old'
lasts longer than it used to do. There are far more old people in the popu~
~ation and he.nce the old are more soc~ally visible. Final:ly, their growing
mvolvement m wo~k and the commumty should act to lmk them directly
to younger generatwns.
The position of the frail elderly, people who need continuous care, raises
more difficult questions. There are twenty times more people over eighty~
five in the UK today than there were in 1900. Many of the 'young old' may
be in quite a different situation from that of those in the same age group a
couple of generations ago. It is a different matter for the 'old old', some of
whom fare badly. 10 The question of what collective resources should be
made available to the frail elderly is not just one of rationing. There are
issues to be confronted here, including ethical questions of a quite funda~
mental sort, that go well beyond the scope of this discussion.
What of unemployment? Does the goal of full employment mean any-
thing any more? Is there a straight trade-off, as the neo-liberals say,
between employment and deregulated labour markets- contrasting the US
'jobs miracle' with Eurosclerosis? We should note first of all that no simple
comparison between the 'US' and the 'European model' is possible. As
economist Stephen Nickell has shown, labour markets in Europe show
great diversity. Over the period from 1983 to 1996, there were large vari-
ations in unemployment rates in OECD Europe, ranging from 1.8 per cent
in Switzerland to over 20 per cent in Spain. Of OECD countries, 30 per
cent over these years had average unemployment rates lower than the US.
Those with the lowest rates are not noted for having the most deregulated
labour markets (Austria, Portugal, Norway). Labour market rigidities like
strict employment legislation don't strongly influence unemployment.
High unemployment is linked to generous benefits that run on indefinitely
and to poor educational standards at the lower end of the labour market-
the phenomenon of exclusion. 11
The position of the third way should be that sweeping deregulation is
not the answer. Welfare expenditure should remain at European rather
than US levels, but be switched as far as possible towards human capital
investment. Benefit systems should be reformed where they induce moral
hazard, and a more active risk-taking attitude encouraged, wherever pos-
sible through incentives, but where necessary by legal obligations.
It is worth perhaps at this stage commenting briefly on the 'Dutch
model', sometimes pointed to as a successful adaptation of social democ-
racy to new social and economic conditions. In an agreement concluded at
Wassenaar some sixteen years ago, the country's unions agreed to wage
moderation in exchange for a gradual reduction in working hours. As a
result, labour costs have fallen by over 30 per cent [since 1988], while the
economy has thrived. This has been achieved with an unemployment rate
below 6 per cent in 1997.
 Anthony Giddens 385
Looked at more closely, however, the Dutch model is less impressive, at
least in terms of job creation and welfare reform. Substantial numbers who
would in other countries count as unemployed are living on disability
bene:6t- the country in fact has more people registered as un:6t for work
than it has of:6cially unemployed. At 51 per cent, the proportion of the
population aged between :fifteen and sixty-four in full-time work is below
what it was in 1970, when it was nearly 60 per cent and well short of the
European average of 67 per cent. Of jobs created [since 1988], 90 per cent
are part-time. Holland spends the highest proportion of its income on
social security of any European country, and its welfare system is under
considerable strain. 12
Strategies for job creation and the future of work need to be based upon
an orientation to the new economic exigencies. Companies and consumers
are increasingly operating on a world scale in terms of the standards
demanded for goods and services. Consumers shop on a world level, in the
sense that distribution is global and therefore 'the best' no longer has any
generic connection with where goods and services are produced. Pressures
to meet these standards will also apply more and more to labour forces. In
some contexts such pressures are likely to deepen processes of social exclu-
sion. The differentiation will be not only between manual and knowledge
workers, or between high skills and low skills, but between those who are
local in outlook and those who are more cosmopolitan.
Investment in human resources is proving to be the main source of lever-
age which firms have in key economic sectors. One study in the US com-
pared 700 large companies across different industries. The results showed
that even a marginal difference in an index of investment in people
increased shareholder returns by $41,000. 13 The business analyst Rosa beth
Moss Kanter identi:6es :five main areas where government policy can assist
job creation. There should be support for entrepreneurial initiatives con-
cerned with small business startups and technological innovation. Many
countries, particularly in Europe, still place too much reliance upon estab-
lished economic institutions, including the public sector, to produce
employment. In a world 'where customers can literally shop for workers',
without the new ideas guaranteed by entrepreneurship there is an absence
of competition. Entrepreneurship is a direct source of jobs. It also drives
technological development, and gives people opportunities for self-
employment in times of transition. Government policy can provide direct
support for entrepreneurship, through helping create venture capital, but
also through restructuring welfare systems to give security when entre-
preneurial ventures go wrong - for example, by giving people the option
to be taxed on a two- or three-year cycle rather than only annually.
Governments need to emphasize lifelong education, developing educa-
tion programmes that start from an individual's early years and continue
on even late in life. Although training in speci:6c skills may be necessary
386 Positive Welfare

for many job transitions, more important is the development of cognitive

and emotional competence. Instead of relying on unconditional benefits,
policies should be oriented to encourage saving, the use of. equcational
resources and other personal investment opportunities.
Public project partnerships can give private enterprise a larger role in
activities which governments once provided for, while ensuring that the
public interest remains paramount. The public sector can in turn provide
resources that can help enterprise to flourish and without which joint pro-
jects may fail. Moss Kanter points out that welfare to work programmes,in
the US have sometimes foundered on the problem of transport.
Companies offer jobs in areas which those available for them can't easily
reach because of lack of adequate transport facilities.
Government policies can enhance portability, whether through common
standards of education or through portable pension rights. Greater harmon-
ization of educational practices and standards, for instance, is desirable for a
cosmopolitan labour force. Some global corporations have already set up
standardized entrance requirements, but governments need to take the lead.
As in other areas, harmonization is not necessarily the enemy of educational
diversity and may even be the condition of sustaining it.
Finally, governments should encourage family-friendly workplace poli-
cies, something that can also be achieved through public-private collabo-
rations. Countries vary widely in the level of child care they offer, for
instance, as do companies. Not only child care, but other work opportu-
nities, such as telecommuting or work sabbaticals, can help reconcile
employment and domestic life. The more companies emphasize human
resources, the more competition there will be to have the best family-
friendly work environments. Governments which help them will also tend
to attract inward investment. 14
Can these strategies produce a return to full employment in the usual
sense- enough good jobs to go around for everyone who wants one? No
one knows, but it seems unlikely. The proportion of jobs that are full-time
and long-term is declining in Western economies. Comparisons between
the 'full employment economies', such as the US or the UK, and 'high
unemployment' societies, like Germany or France, are less clear cut when
we compare not the number of jobs but the hours of work created. Net job
creation for skilled work that is secure and well paid over the ten years
1986-96 was the same in Germany as in the US, at 2.6 per cent. Labour pro-
ductivity doubled in Germany over that period, whereas in the US it rose
by only 25 per cent. 15
Since no one can say whether or not global capitalism will in future gen-
erate sufficient work, it would be foolish to proceed as though it will. Is the
'active redistribution' of work possible without counterproductive conse-
quences? Probably not in the form of limits to the working week fixed by
government- the difficulties with such schemes are well known. But if we
 Anthony Giddens 387

see it in a wider context, we have no need to ask whether redistribution of

work is possible. It is already happening on a widespread basis, and the
point is to foster its positive aspects. One much-quoted experiment is that
at Hewlett Packard's plant in Grenoble. The plant is kept open on a 24-hour
cycle seven days a week. The employees have a working week averaging just
over 30 hours, but receive the same wages as when they were working a
37.5-hour week. Labour productivity has increased substantially. 16
Since the revival of civic culture is a basic ambition of third way politics,
the active involvement of government in the social economy makes sense.
Indeed some have presented the choice before us in stark terms, given the
problematic status of full employment: either greater participation in the
social economy or facing the growth of 'outlaw cultures'. The possibilities
are many, including time dollar schemes [ ... ] and shadow wages - tax
breaks for hours worked in the social economy. As diverse studies across
Europe show, 'more and more people are looking both for meaningful
work and opportunities for commitment outside of work. If society can
upgrade and reward such commitment and put it on a level with gainful
employment, it can create both individual identity and social cohesion.' 17
In sum, what would a radically reformed welfare state- the social invest-
ment state in the positive welfare society - look like? Expenditure on
welfare, understood as positive welfare, will be generated and distributed
not wholly through the state, but by the state working in combination with
other agencies, including business. The welfare society here is not just the
nation, but stretches above and below it. Control of environmental pollu-
tion, for example, can never be a matter for national government alone, but
it is certainly directly relevant to welfare. In the positive welfare society,
the contract between individual and government shifts, since autonomy
and the development of self- the medium of expanding individual respon-
sibility - become the prime focus. Welfare in this basic sense concerns the
rich as well as the poor.
Positive welfare would replace each of Beveridge's negatives with a pos-
itive: in place of Want, autonomy; not Disease but active health; instead of
Ignorance, education, as a continuing part of life; rather than Squalor, well-
being; and in place of Idleness, initiative.

Notes

From The Third Way, Cambridge, Polity Press, 1998, pp. 111-28.
1 Nicholas Timmins, The Five Giants, London, Fontana, 1996, p. 12.
2 Kees van Kersbergen, Social Capitalism, London, Routledge, 1995, p. 7.
3 Howard Glennerster and John Hills, The State of Welfare, Oxford, Oxford
University Press, 2nd edition, 1998.
4 Assar Lindbeck, 'The End of the Middle Way?', American Economic Review,
vol. 85, 1995.
388 Positive Welfare

5 Peter Baldwin, The Politics of Social Solidarity, Cambridge, Cambridge

University Press, 1990, p. 292.
6 Stuart Fleming, 'What we'll earn when we're 64', New Statesman,5 June 1998.
7 Will Hutton, The State We're In, London, Cape, 1995. · ·
8 Edmund Burke, Reflections on the Revolution in France [1790], London,
Dent, 1910, pp. 93-4.
9 Daniel Callahan, Setting Limits, New York, Simon and Schuster, 1987, p. 46.
10 Ibid., p. 20.
11 Stephen Nickell, 'Unemployment and Labour Market Rigidities', Journal of
Economic Perspectives, vol. 11, 1997.
12 Dominic Vidal, 'Miracle or Mirage in the Netherlands?', Le Monde
Diplomatique, July 1997.
13 Rosabeth Moss Kanter, 'Keynote Address', Centre for Economic
Performance: Employability and Exclusion, London, CEP, May 1998.
14 Ibid., pp. 65-8.
15 Ulrich Beck, 'Capitalism without Work', Dissent, winter 1997, p. 102.
16 Jeremy Rifkin, The End of Work, New York, Putnam's, 1995, p. 225.
17 Beck, op. cit., p. 106.
The Politics of the New- Social
Policies: Providing Coverage
against New Social Risks in
Mature Welfare States
Giuliano Bonoli

[ ... J

What are New Social Risks?

The concept of new social risks (NSRs) is being used with increasing fre-
quency in the literature on the welfare state (Esping-Andersen, 1999a;
Hemerijck, 2002; Jenson, 2002; Taylor-Gooby, 2004). However, a precise
definition of what is considered under this label is generally missing.
Generally speaking, NSR are related to the socioeconomic transformations
that have brought post-industrial societies into existence: the tertiarization
of employment and the massive entry of women into the labour force.
New social risks, as they are understood here, include the following.

Reconciling Work and Family Life

The massive entry of women into the labour market has meant that the
standard division of labour within families that was typical of the trente
glorieuses or the golden age of welfare capitalism (1945-75) has collapsed.
The domestic and childcare work that used to be performed on an unpaid
basis by housewives now needs to be externalized. It can be either obtained
from the state or bought on the market. The difficulties faced by families
in this respect (but most significantly by women) are a major source of
frustration and can result in important losses of welfare, for example if a
parent reduces working hours because of the unavailability of adequate
childcare facilities. As a result, the problem of reconciling work and family
life can be labelled as a social risk.
390 The Politics of the New Social Policies

Single Parenthood

Changes in family structures and behaviour have resulted in incre.ased rates

of single parenthood across Organization for Economic Cooperation and
Development (OECD) countries, which presents a distinctive set of social
policy problems (access to an adequate income, child care, relationship
between parenthood and work). More generally, it is obvious that difficul-
ties in reconciling work and family life are more serious for single parents
than they are for two-parent households.

Having a Frail Relative

As in the case of children, during the trente glorieuses care for frail elderly or
disabled people was mostly provided by non-employed women on an
unpaid, informal basis. Again, with the change in women's patterns of labour
market participation, this task needs to be externalized too. The inability to
do so (because of lack of services) may also result in important welfare losses.

Possessing Low or Obsolete Skills

Low-skilled individuals have obviously always existed. However, during

the postwar years, low-skilled workers were predominantly employed in
manufacturing industry. They were able to benefit from productivity
increases due to technological advances, so that their wages rose together
with those of the rest of the population. The strong mobilizing capacity of
the trade unions among industrial workers further sustained their wages,
which came to constitute the guarantee of a poverty-free existence. Today,
low-skilled individuals are mostly employed in the low value-added
service sector or unemployed. Low value-added services such as retail
sales, cleaning, catering and so forth are known for providing very little
scope for productivity increases (Pierson, 1998). In countries where wage
determination is essentially based on market mechanisms, this means that
low-skilled individuals are seriously exposed to the risk of being paid a
poverty wage (US, UK, Switzerland). The situation is different in countries
where wage determination, especially at the lower end of the distribution,
is controlled by governments (through generous minimum wage legisla-
tion) or by the social partners (through encompassing collective agree-
ments). Under these circumstances, the wages of low-skilled workers are
protected, but job creation in these sectors is limited, so that many low-
skilled individuals are in fact unemployed (Iversen and Wren, 1998).
Overall, the fact of possessing low or obsolete skills today entails a major
risk of welfare loss, considerably higher than in the postwar years.
 Giuliano Bonoli 391

Insufficient Social Security Coverage

The shift to a post-industrial employment structure has resulted in the

presence in modern labour markets of career profiles that are very differ-
ent from that of the standard male workers of the trente glorieuses, char-
acterized by full-time continuous employment from an early age and with
a steadily rising salary. Yet the social security schemes (most notably pen-
sions) that we have inherited from the postwar years are still clearly based
on these traditional assumptions regarding labour market participation.
Pension coverage, in most Western European countries, is optimal for
workers who spend their entire working life in full-time employment.
Part-time work usually results in reduced pension entitlements, as do
career interruptions due to childbearing (Bonoli, 2003). The result of the
presence of these new career profiles in the labour market may be, if
pension systems are not adapted, the translation of the labour market and
working poor problems of today into a poverty problem for older people
in thirty or forty years' time. From an individual point of view, following
an 'atypical' career pattern represents a risk of insufficient social security
coverage, and hence a loss of welfare.
These situations are caused by different factors, but have a number of
things in common. First they arc all 'new', in the sense that they are typical
of the post-industrial societies in which we live today. During the trente
glorieuses, the period of male full employment and sustained economic
growth that characterized the postwar years, these risks were extremely
marginal, if they existed at all. In addition to newness, new social risks
share another feature. They tend to be concentrated on the same groups of
people, usually younger people, families with small children, or working
women. While it is difficult to set clear borders around the section of the
population that bears most NSRs, it is clear that the categories mentioned
here are largely overlapping, and that it is possible to identify in every post-
industrial society a fairly large minority of the population that struggles
daily against the consequences of NSRs.

From Risk Exposure to Political Mobilization

It is tempting to see parallels between the groups that today are exposed to
NSR and industrial workers whose lives were also shattered by social and
economic change centuries ago. In so far as industrial workers are con-
cerned, increased exposure to market risks resulted in what has probably
been one of the most sustained and successful instances of political mobil-
ization in modern Western history: the creation of labour movements and
social democratic parties. These were able to bring workers' concerns to
the centre of the political arena and to force through the adoption of labour
392 The Politics of the New Social Policies

market regulations, social insurance schemes and universal services, which

tremendously improved their living conditions (Stephens, . 1979; Castles )
1982; Korpi, 1983; Esping-Andersen, 1985).
To what extent can we draw a parallel between industrial workers in the
early days of capitalism and NSR groups today? And in particular, is there
any evidence that the political mechanisms that brought traditional welfare
states into existence may be in some way replicated in relation to post-
industrial social policies? This section looks at empirical evidence on the
potential of political mobilization of NSR groups. It focuses on three key
dimensions of mobilization: political participation, representation in key
democratic institutions, and the policy preferences of members of NSR-
exposed groups.

Participation
The key socio-demographic characteristics of NSR groups outlined above
are the fact of being young, of possessing low skills and of being a woman.
Two of these factors are also the main predictors of voting turnout across
Western democracies, and are associated with lower participation. Age is a
particularly strong predictor of political participation. Using survey data
for seventeen countries, Norris finds that age is by far the best predictor of
voting turnout at the micro-level. On average, turnout for the under-25s is
just 55 per cent whereas it reaches 88 per cent for the late middle-aged voters
(Norris, 2002). It is not entirely clear if the impact of age on turnout reflects
a cohort or a life-cycle effect, however. With regard to the US, Putnam pro-
vides evidence that political participation of younger generations does not
increase as they become older, suggesting that the link between age and
turnout reflects a cohort effect (Putnam, 2000). However, other studies
reviewed by Norris support the view that in Western Europe the age gap in
voting turnout has remained more or less constant over the last thirty years,
suggesting instead a life-cycle effect. From the point of view of this article,
however, it is not essential to establish whether it is cohort or position in
the life-cycle that determines participation. What matters is that those who
today have to confront NSRs are less likely to participate in elections.
After age (and together with income), education is the second best pre-
dictor of voting turnout, though its impact varies across countries.
Education does not successfully predict political participation in most
Western European countries, but does so in the US and in Eastern Europe.
Finally, gender used to be a powerful predictor of voting turnout, men
being more likely to participate in elections than women, but in recent
years this is no longer the case (Norris, 2002).
With the exception of women, NSR groups clearly suffer from a partici-
pation gap with regard to the rest of society. It is true that education is
 Giuliano Bonoli 393

a strong predictor of turnout only in countries with big educational inequal-

ities (such as the US) or in former communist countries, and not so in
Western European countries, on which our analysis concentrates. However,
the pre-eminence of age as a determinant of turnout and the fact that it is a
key feature of NSR groups suggests that the capacity of this group to influ-
ence policy-making via standard democratic channels is likely to be limited.

Representation

When examining the problem of representation of NSR groups in key

democratic institutions, two issues need to be addressed: presence and
effective interest representation. Presence refers to whether or not indi-
viduals who belong to the social groups that are more exposed to NSRs
belong to those institutions. In concrete terms, one needs to find out the
extent to which governments, parliaments and labour market-based insti-
tutions of representation such as trade unions include among their
members women, younger people, low-skilled people and so forth. But
presence is arguably not a sufficient condition for effective interest repre-
sentation. Given the fact that there are no political parties or trade unions
that have the explicit function of defending the interests of NSR groups,
those who get elected or appointed are unlikely to be under any form of
constraint in so far as the interests they represent are concerned. There are
reasons to believe the groups exposed to NSR, once elected, will be more
sensitive to the demands of other NSR groups, because of empathy or
because of the fact that socio-demographically similar people constitute
some kind of 'natural' electoral constituency, but, given the absence of
clear constraints and accountability relationships between the representa-
tives and the represented, it is difficult to answer this question on a the-
oretical level, and it probably needs to be settled empirically.
Tables 1 and 2 provide a rough indication of the presence of the social
groups identified as most likely to be exposed to NSR in key democratic
institutions. Women are a minority in all the parliaments included in
table 1, although in some Nordic countries they approach 50 per cent of
members. In the rest of Western Europe and in the US, however, the pro-
portion of women in Parliament is between a tenth and a third. Women are
seldom represented in government cabinets, again with the exception of
some Scandinavian countries (Sweden) where they often represent 50 per
cent of cabinet seats (Siaroff, 2000, p. 200). Young people do not have a
strong presence in Western parliaments either. The average age of parlia-
mentarians is around 50, with some variation (younger parliaments are
found in the Nordic countries, older ones in continental Europe).
Turning to trade unions, a crucial institution in the fields of welfare and
employment regulation, these are characterized in most countries by the
394 The Politics of the New Social Policies

Table 1 Proportion of women in lower houses of parliament(%)

1990 2001

Sweden 38.1 42.7

Denmark n.a. 38.0
Finland n.a. 36.5
Norway 35.8 36.4
Netherlands 21.3 34.0
Germany 20.4 31.7
Spain n.a. 28.3
Austria n.a. 26.8
Switzerland n.a. 23.0
UK 9.2 17.9
us 10.8 14.0
France 5.7 10.9
Italy 12.8 9.8

Source: Inglehart and Norris, 2003.

Table 2 Average age of Members of Parliament (MPs), spring 2002

France 57
Germany 54
Italy 52
Switzerland 51
UK 51
Sweden 49
Finland 47
Denmark 47

Source: Information obtained from individual parliaments.

predominance of older men among their members and leadership (table 3).
There are, however, important country variations. In the Nordic countries
and in the UK women are more likely to be union members than male
workers. In addition, in these countries the age gap in union membership is
virtually non-existent, with similar density rates for younger and older
employees. In continental European countries, by contrast, there is a clear
gender and age gap in unionization rates. It is here that the bias towards
higher density among older male workers is stronger. The picture emerging
from tables 1, 2 and 3 is one that can be described in terms of underrepre-
sentation of NSR groups in key democratic institutions. Governments, par-
liaments and trade unions are mostly composed of late-middle-aged men.
There are some clear country variations, which, interestingly, go in the same
Table 3 Net union density for different social groups, 1996
Men Women Younger workers Older workers
(up to 34) (55 and older)

Sweden 86.9 89.9 80.6 89.9

Norway 60.8 66.6 52.7 71.3
Germany (West) 33.9 15.1 23.2 25.3
Germany (East) 30.1 30.4 24.0 32.4
Italy 36.9 23.2 16.1 37.7
France 18.7 15.7 9.9 29.3
Spain 16.8 14.0 12.6 15.1
Switzerland 25.9 17.5 17.7 25.5
UK 34.4 35.1 35.1 25.3
Source: Ebbinghaus, 2003, on the basis of International Social Survey Project data.
396 The Politics of the New Social Policies

direction. In each of the three tables the presence of NSR groups in key rep-
resentative outfits is stronger in the Nordic countries, and to a lesser extent
in the UK. Their parliaments are younger and more feminiz.ed, and their
labour movements are more feminized and younger than those found in
other Western European countries.
But presence is not a sufficient condition for effective interest represen-
tation. What matters is how elected NSR groups vote in their parliaments
and the positions they defend. The question of whether members of a given
social group tend to represent their fellow members when elected to. a
position of power is one that, in relation to women, has intrigued feminist
political science for several decades.
There is a large corpus of literature on the voting behaviour of women
MPs, on their political attitudes, and on their political activities in general.
Overall, the message that one gets from this literature is that the presence
of women in Parliament matters for decisions on issues that are of parti-
cular concern to women, such as childcare policy or equal opportunities
(Norris and Lovenduski, 1989, 2003; Tramblay, 1998; Sawer, 2000). If we
can rely on several studies on the behaviour of women acting as elected
officials, we know much less about other social groups likely to be more
strongly exposed to NSR, such as the young or the low-skilled. One study
of British parliamentary candidates' attitudes found that support for
gender equality measures was stronger among younger women (Norris
and Lovenduski, 2003 ), suggesting that age might have an impact on issues
that are of relevance to the lives of NSR groups. But we certainly need
more empirical research on this issue if it is to be settled satisfactorily.
The available evidence suggests that, when elected, individuals belong-
ing to NSR-exposed groups are likely to be more sensitive to the needs and
demands of this social group than other elected officials, and that this trend
may be on the increase. This finding goes in the direction of more political
influence for NSR groups, as in spite of the lack of dedicated representa-
tive outfits, they seem capable of making themselves heard through the
existing channels. However, the evidence reviewed is sketchy, and should
be weighed against the presence gap outlined above before concluding that
NSR groups have real opportunities to influence policy-making in parlia-
ments and in labour market institutions.

Preferences
The third condition that needs to be fulfilled for NSR groups to be able to
influence policy to their advantage is some degree of distinctiveness and
homogeneity of their political preferences. Do NSR groups tend to express
political preferences that are different from those of other voters? Are these
shared by all NSR-exposed individuals? The last two decades have seen
 Giuliano Bonoli 397

an interesting and rather puzzling development in the voting behaviour of

women. Throughout the 1950s and the 1960s women's voting patterns
were consistently slightly more right-wing than men's. More recently, first
in the US and then in a majority of advanced democracies, women voters
tend to prefer left-wing parties to a larger extent than their male counter-
parts. This shift has been explained with reference to a mix of structural
and cultural factors: labour market participation, secularization, social
support for gender equality and so forth (Inglehart and Norris, 2003).
The shift to the left of female electorates fits in well with the NSR per-
spective put forward in this article. Women, especially younger ones, who
have become exposed to NSR only in the last few decades, are more likely
to turn to left-wing parties in so far as they tend to promote the kind of
policies that can improve their quality of life (child care, parental leave,
etc.). As a matter of fact, the gender gap in voting behaviour is stronger in
countries which have a higher female employment rate: the more women
are exposed to NSR the more they tend to mobilize for left-wing parties. 1
Perhaps the clearer cases of gender-based cleavages in voting behaviour are
the Scandinavian countries, where women are considerably more likely
than men to support the Social Democrats (Esping- Andersen, 1999b ).
Distinctive patterns of voting among those who are exposed to NSR
emerge also from voting behaviour in referendums on age-related social
policies in Switzerland. In a study of nineteen referendums on decisions
with a different impact according to age group, age turned out to be a sig-
nificant predictor of voting behaviour in fourteen. Policies for the younger
groups, such as paid maternity leave, more funds for universities, better
employment protection or unemployment compensation, were generally
opposed by older voters. Improvements in the pension system, by con-
trast, were supported more strongly by older voters (Bonoli, 2004a).
Similar cleavages on age-related social policy issues can be observed also
in opinion polls in virtually all countries (Esping-Andersen, 1999b, p. 312;
Armingeon, 2004), but voting behaviour in referendums is certainly a more
reliable indicator of political opinions. Note that public opinion data
suggest the cleavage to be one-sided: older respondents do not support
policies for the young, but there is no clear age-related distinction in
support for retirement pensions and other policies for older people. This
is also confirmed by surveys on referendum voting on old-age issues in
Switzerland.
The overall impression is that there is some distinctiveness in the political
preferences expressed by NSR groups but the correlations are usually rather
weak. In addition, the defining socio-demographic features of NSR groups
(age, gender, skill level, family configuration) tend to be less strong a pre-
dictor of policy and political preferences than the traditional determinants
of class and religion: two factors that intersect the cleavage between tradi-
tional welfare state clienteles and welfare groups investigated in this study.
398 The Politics of the New Social Policies

Limited Power Resources

This overview of patterns of political participation, repr\.Sentation and

preferences of NSR groups paints a mixed picture in so far as their ability
to influence policy is concerned. Low participation, internal divisions and
the lack of dedicated representative outfits can be formidable obstacles to
successful political mobilization. On the other hand, distinctiveness in
political preferences and effective interest representation of elected offi-
cials are political assets for NSR groups. On balance, and especially if we
compare the situation of NSR groups to that of industrial workers during
the twentieth century, the evidence reviewed here suggests that, at least for
the time being, the 'power resources' of NSR groups remain largely insuf-
ficient to impose the kind of policies that would serve their interests
through the democratic game. The Nordic countries, and to a lesser extent
the UK, however, may represent an exception here. It is there that, accord-
ing to the data presented in this article, NSR groups have a stronger pres-
ence in democratic and labour market institutions and, as far as the Nordic
countries are concerned, it is also where one finds the most developed poli-
cies for them. In other countries, especially in continental European
nations, if policies providing coverage against NSR are being developed,
this must be as a result of some different mechanism than through imposi-
tion in the political arena.
The political weight of new social risks groups is not insignificant. It is
probably insufficient to bend the political system to their advantage, but it
can still influence adaptation. New social risks groups, if unable to change
the world on their own, may nonetheless represent an interesting con-
stituency for vote-seeking politicians. At the same time, if capable of strik-
ing the right alliances with other groups in society, NSR groups may obtain
at least some policies that protect their interests.

New Patterns of Social Policy-Making for

New Social Risks
The particular nature of NSRs and of the policies aimed at addressing them
generates a distinctive set of opportunities for policy-making that did not
exist, or did not exist to such an extent, during the construction phase of
postwar welfare states. Traditional social policies had among their key
objectives the decommodification of wage earners and, in this respect, they
were bound to develop in the context of an opposition between wage
earners and employers, the latter trying to resist high levels of decom-
modification that could be detrimental to business profitability. Policies
that cover NSRs do not decommodify workers; they just make their con-
dition more attractive. If anything, they represent an additional incentive
 Giuliano Bonoli 399

to work for those groups of the population who have traditionally been
excluded from paid employment, especially women. One of the conse-
quences of better NSR coverage is to increase labour supply. In the current
context of population ageing and, in some countries, population decline
combined with difficulties in integrating immigrant populations, an
increase in domestic labour supply is likely to be welcomed by business.
The new social policies discussed here distinguish themselves from the
traditional ones also in terms of cost. Generally speaking, to provide a
service to a section of the population only, say working parents, is less
costly than to set up a universal pension scheme. A quick comparison of
expenditure figures in social programmes covering old and new risks shows
very clearly that the latter come much cheaper. The biggest spenders on
family services and on active labour market policies have outlays on these
programmes not exceeding 2 per cent of GDP, whereas typical figures for
programmes like health care and pensions are in the region of 10 per cent of
GDP. The comparatively low cost of providing coverage of NSRs may
reduce the opposition against it from those who have to foot the bill.
These key features of NSR coverage policies open up a set of new oppor-
tunities for policy-making that have been exploited, especially in contin-
ental European countries. By understanding the mechanisms that are
behind policy decisions in this broad field, we may be better able to
account for developments in countries where the political mobilization
and representation of NSR groups are particularly weak, and which lack a
tradition of social intervention in this area of policy, or where political
institutions do not allow the unilateral imposition of government policy.

Turning Vice into Virtue

This mechanism for the modernization of conservative welfare states has
been identified by Jonah Levy. It is an approach that 'targets inequities
within the welfare system that are simultaneously a source of either eco-
nomic inefficiency or substantial public spending', and generates savings
that can be used to 'pursue a variety of virtuous objectives: redistributing
income toward the poor ... facilitating the negotiation of far-reaching, tri-
partite social pacts' (Levy, 1999, p. 240). Levy provides a few examples: in
the Netherlands, reductions in public spending on disability pensions, a
scheme that was widely abused in the 1980s, made it possible for the gov-
ernment to introduce tax breaks targeted on low-income households. In
Italy, pension privileges for some workers (civil servants) were abolished
but at the same time the reform introduced flexible retirement age, and
inequities between occupational groups have been done away with.
These (and other) instances of policy-making based on 'turning vice into
virtue' have in common the fact that they originate in the context of budget
400 The Politics of the New Social Policies

austerity that makes intolerable expenditure that is widely regarded as

inefficient. The funds generated by reducing this kind of expenditure can
be used to finance new initiatives. In fact, the prime objeniv.e of reforrn
being cost containment, it is only a small part of the funds freed by the aus-
terity measures that are assigned to the new programmes.

Modernizing Compromises

A similar mechanism, but with a stronger political dimension, has been

observed especially in countries characterized by fragmented political
institutions or by countries temporarily ruled by weak governments.
Typically the compromise takes the shape of the inclusion, within a single
reform, of measures of cost containment or retrenchment, and of improve-
ments in provision. The cost containment measures generally concern
policies that provide coverage for 'old risks', while the improvements and
expansion concern NSR coverage. That is why these reforms can be qual-
ified as 'modernizing compromises'.
Switzerland is probably the clearest case of such compromises. In the
1995 pension reform, an increase in women's retirement age was traded
against contribution credits for carers and contribution sharing between
spouses. The two measures were supported and opposed by important sec-
tions of the population. The inclusion of both in a single piece of legisla-
tion made the reform stronger in parliament and with voters. It survived
the referendum obstacle and is now law. Similarly, the 1995 unemployment
insurance reform combined a two-year time limit on passive benefits with
increased spending on active labour market policies. Again, it was a com-
promise that contained measures strongly supported by the right (the time
limit on benefits) and by the left (active labour market policies) and that
was as a result able to attract the support of a large section of the political
spectrum. It too is now law (Bonoli, 2001).
A modernizing compromise took place also in the Swedish pension
reform of the 1990s. On the one hand, the reform reduced pension entitle-
ments for some occupational groups. The main losers were white collar
employees and managers, or those who start working relatively late after a
long period spent in education, but overall about 80 per cent of the popu-
lation is likely to lose between 7 and 8 per cent of their pension as a result
of changes introduced (Anderson, 2001f On the other hand, in order not
to penalize women but also as a compensation for white collar workers
who had lost out because of the change in the pension formula, the reform
introduced generous contribution credits for several categories of non-
employed people. These are granted for career interruptions due to child-
rearing, periods of unemployment, study, military service and sickness.
With regard to childrearing, if a parent reduces working hours in the four
 Giuliano Bonoli 401

years following the birth of a child, contributions are credited to his or her
pension account on the basis of previous earnings. If he or she stops
working completely, then the contribution credit will be based on 75 per
cent of the average wage. The Swedish reform combined overall retrench-
ment in pensions with the introduction of one of the most generous
systems of contribution credits for carers. Swedish contribution credits,
unlike those in most other countries, apply not only to the state pension,
but also to private individual retirement accounts. In this way, the reform
package was able to attract the support of a sufficient number of political
actors to guarantee its adoption.
Modernizing compromises seem a promising avenue to achieve
advances in the coverage of NSRs. Supporters of welfare retrenchment and
of increased coverage for NSRs usually belong to different political camps,
and if they do join forces on a single reform initiative, they are likely to
form an extremely strong coalition in the political arena. This mechanism
is more likely to exist in countries where political institutions, because of
their fragmentation, encourage the formation of large coalitions around
given policy proposals. Here the incentive for political actors to compro-
mise is strongest (the alternative being stalemate). Paradoxically, one may
thus expect countries with fragmented political institutions to move faster
in the development of policies that cover NSRs.

Convergence of Interests with Employers

Some of the key features of NSR coverage policies make them particularly
attractive to employers. As seen above, these policies do not provide
decommodification, they are generally not as costly as the more traditional
forms of social intervention, and they have a clearly favourable impact on
labour supply. This is the case especially of child care and other policies
aimed at making it easier for families to reconcile work and family life. As
a result of their introduction, one can expect the labour supply of women
to increase significantly (Daly, 2000). Active labour market policies
(ALMPs) can have a similar impact, by encouraging the transition from
non-employment to employment of individuals belonging to various
groups of non-working people, most notably youth and long-term unem-
ployed people, older working-age persons, and some disabled people.
ALMPs have a positive impact on labour supply not only in quantitative
but also in qualitative terms, and can contribute to matching labour supply
and demand.
These sorts of policies would obviously present a clear interest for
employers under any set of circumstances, but the ongoing process of
population ageing makes them essential measures. In virtually all industrial
countries, all other things being equal, population ageing will lead to a
402 The Politics of the New Social Policies

reduction of the working-age population and, as a result, of labour supply.

This could translate into labour shortage in some economic sectors, a
development already observed in the late 1990s and eady 2000s, and as a
result lead to wage increases that could be detrimental to business prof-
itability. Many countries are turning to immigration as a solution to the
labour market problems that may be generated by population ageing and
decline. However, especially in the conservative welfare states of conti-
nental Europe, this strategy is met with scepticism by large sections of the
population who, on many occasions, have contributed to the success of
extreme right-wing populist political parties.
This situation is resulting in an increasing tendency among employers
to look for solutions to the ageing-induced labour market problems
domestically, and particularly among the groups whose employment
rates are lower: above all women, but also older working-age people and
some disabled people. This may be needed in order to strike the neces-
sary alliances with the rest of the political right, which, under pressure
from anti -foreigner extreme right parties, seems to be clearly turning
away from immigration as the solution to the contraction of labour
supply. In policy terms, this translates into support for childcare subsi-
dies and ALMPs.
An example of this mechanism is provided by a recent bill, voted by the
Swiss parliament, which makes provision for a substantial increase in sub-
sidies for day care centres. The bill was supported by a coalition that
included the left (Social Democrats), the Christian Democrats and a
section of the Free Democrats, a Liberal party that closely represents
employers' interests. The director of the Swiss employers' association pub-
licly supported the bill. Swiss employers' attitude towards childcare policy
contrasts sharply with their open opposition to any form of additional
social expenditure, and with the position they took a few years ago on a
paid maternity leave scheme, which they successfully fought (Ballestri and
Bonoli, 2003 ).
Convergence of interests between working women and employers
arguably played a big role in the expansion of publicly subsidized child
care in other countries as well. In France, [while] an extensive pre-school
system was organized as early as the late nineteenth century, the expansion
of provision for the 0-3 year old group goes back to the early 1970s amid
concerns for labour shortage (Morgan, 2001, pp. 26-9). In Sweden,
employers' support for publicly subsidized child care goes back to the late
1950s and 1960s, a period also characterized by labour shortage
(Naumann, 2001 ). The economic consequences of NSR coverage are such
that they favour the formation of cross-class alliances between NSR
groups, mostly represented by left-of-centre parties, and employers. The
resulting coalition can be politically very influential and succeed in pushing
through reform.
 Giuliano Bonoli 403
Affordable Credit Claiming for Post-Socialist
Left-Wing Parties
The late 1990s saw the return to power of left-of-centre parties in twelve
out of fifteen European Union member states. Often, this happened after
long periods of time spent in the opposition (UK, Germany, Italy). As a
result, the accession to government was met with strong expectations by
the traditional and new constituencies of these progressive parties. Left-of-
centre governments, however, were moving under tight constraints.
Economic internationalization meant that it was extremely difficult to levy
the funds needed to (re-)expand the traditional elements of the welfare
state, such as pensions, health care and unemployment insurance. This
problem was compounded by the fact that population ageing, welfare state
maturation and the transformation of labour market and family structure
were imposing increasing costs on the welfare state. The fact that several of
these left-ruled countries were also candidates for the European Monetary
Union further reduced their room for manoeuvre in designing new poli-
cies or expanding existing ones.
The combination of electoral pressures to adopt policies that would be
noticeably different from those of their predecessors, and the economic
constraints that were externally and internally imposed upon them, pushed
several governments towards the adoption of policies providing coverage
against NSRs. If the social democratic parties that ruled most of Europe in
the late 1990s were unable to respond to the expectations of their trad-
itional electorates (who, in several cases, turned to more left-wing parties),
they still could do something different from their predecessors that would
'speak' to a new potential constituency- NSR groups. Because of their
lower cost, these policies were not incompatible with the economic con-
straints outlined above. Their attractiveness for employers meant that this
group, whose support or at least acquiescence was essential for the social
democratic governments of the 1990s, would probably refrain from openly
fighting their policies.
Often under the label of 'third way', a move towards a new orientation
in social policy has happened in virtually all European Union member
countries. Active labour market policies and measures designed to help
parents reconcile work and family life were introduced across Western
Europe in the 1990s. The UK has been at the forefront in this development,
but other countries like Germany, Italy or the Netherlands have taken sig-
nificant steps towards improving the protection against the new social risks
discussed in this article. Often this has been the result of brand new poli-
cies, but on many occasions reform has consisted of improvement or adap-
tation of existing provision (Bonoli, 2004b ).
It is interesting to note, however, that this move did not generally pay off
in electoral terms, as by 2002 most of these governments had suffered sub-
404 The Politics of the New Social Policies

stantial electoral losses. In many cases, the strategy of focusing social policy
on NSR groups has failed to gain the social democrats new votes. This may
be explained with reference to the overall low levels of poli-tical participa-
tion of NSR groups. The fact that in the 1970s, contrary to the 1990s, polit-
ical parties found child care to be a vote winner (for instance in France and
Sweden) may reflect changes in political attitudes but also in the age com-
position of electorates. The proportion of the population aged 65 or more
in France and Sweden in the 1970s was between 13 and 14 per cent. In con-
trast, in the late 1990s, in Italy and Germany, two countries where third
way social democratic parties have suffered major electoral losses, the same
figure is between 16 and 19 per cent. While the difference (between three
and six percentage points) may not look dramatic, one needs to take into
account that because of the participation gap between different age groups,
it underestimates the increase in the political influence of older voters.

Conclusion

In a majority of OECD countries social programmes providing protection

against new social risks are still at an embryonic stage, but virtually every-
where these issues are being discussed in public debates. There are big
country variations in the extent to which NSR coverage has been devel-
oped, with the Nordic countries being at the forefront. However, even in
those countries lagging behind in the adaptation of their social protection
systems, essentially the conservative welfare state of continental and
southern Europe, some steps in this direction have been taken.
This article has tried to put forward hypotheses capable of accounting for
the observed patterns of policy-making. Political explanations developed
for the postwar years, in fact, cannot be transposed to the post-industrial
age. The low levels of participation, the weak representation and the exis-
tence of internal cleavages among those exposed to NSRs means that strong
mobilization capable of obtaining protective legislation is unlikely. The
power resources available to NSR groups are simply not comparable to
those of industrial workers during the heyday of the industrial society.
However, there is evidence that, on occasion, issues that are of interest to
NSR groups are picked up by politicians and are, rightly or wrongly,
believed to be vote winners. Under such circumstances the social groups
exposed to NSRs can still exert political influence via democratic institu-
tions, albeit of a different kind from the one deployed by labour movements
during the twentieth century. Nonetheless, given the low level of participa-
tion among younger voters and the ageing of Western electorates, it is
unlikely that political competition to attract the votes of NSR groups will
be a sufficient force to restructure welfare states. The analysis of instances
of policy-making that have resulted in improved coverage against NSRs
 Giuliano Bonoli 405

suggests that this part of the process of welfare state adaptation will be char-
acterized by mechanisms of political exchange, compromise and cross-class
alliances. As the political weakness of NSR groups makes unilateral impo-
sition of policy impossible, the only path to effective reform is to strike
compromises and form alliances with other political forces. Ironically, these
deals are most likely with those political actors that have been most inimi-
cal to the welfare state: retrenchers and employers. Alliances between NSR
groups and the former can be made on the basis of what has been referred
to above as a modernizing compromise, or the combination within a single
piece of legislation of cuts in provision with improvements in the coverage
0 £ NSRs. Employers may also be interested in joining forces with NSR
groups, especially when protection against NSRs means easier labour
market participation. From the employers' point of view this means
increased labour supply and a more efficient labour market, a goal for which
it may be worth investing some public money.

Notes

From Policy and Politics, 33, 3, 2005, pp. 431-49. Earlier versions of this article have
been presented at the Nordic Social Policy Research Meeting, Helsinki, 22-24 Aug.
2002; at the American Political Science Association annual meeting, Boston, 29
Aug.-1 Sept. 2002; at the annual meeting of the Swiss Political Science Association,
Fribourg, 9 Nov. 2003; and at the conference on The Politics of New Social Risks,
Lugano, 25-27 Sept. 2003. It is based on research financed by the Swiss Office for
Education and Science (grant 00.0438) in the context of the EU Framework
5 project WRAMSOC.
The author would like to thank Karen Anderson, Klaus Armingeon, Maurizio
Ferrera, Silja Hausermann, Peter Taylor-Gooby and Martin Rein for their comments.
As a matter of fact there is a fairly strong and statistically significant correla-
tion among OECD countries between the size of the gender gap in voting and
the female employment rate (r = 0,534, sig. 0.049, two-tailed).
2 This loss should, however, be compensated by the income stream resulting
from newly introduced individual private pensions, although this will depend
to a significant extent on the returns on the invested capital, and is as a result
unpredictable.

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Beyond Universalism and
Particularism: Rethinking
Contemporary Welfare
Theory
Nick Ellison

The universalist impulse has long been a founding principle of modern

welfare theory, particularly in Britain. Marshall's 'Citizenship and Social
Class' (1963) is usually regarded as the paradigm account of a theory of
social rights that held that individuals belonging to a defined community
(typically a national community) were entitled, through their status as
citizens, to a range of social goods guaranteed by the central state
designed to meet their basic needs (food, shelter, education, health, etc.).
Richard Titmuss, writing in the tradition of Tawney, provided an ethical
socialist version of these ideas (Titmuss, 1963). Unlike Marshall, for
whom welfare provision was a means of correcting but not replacing the
inegalitarian bias of the market, Titmuss's ambition was none other than
the substitution of capitalist society for one based on egalitarian fellow-
ship (Ellison, 1994) - solidaristic social integration. To this end he con-
sistently sought to maximize the role of the state in the interests of greater
social equality, most obviously in the area of social security (Titmuss,
1963), while simultaneously promoting the ideals of altruism and reci-
procity (Titmuss, 1970) as key features of a 'welfare society' in which the
effects of the competitive marketplace were severely reduced, if not
entirely eliminated.
These ideas were taken up by many commentators (see, for example, con-
tributors to Bosanquet and Townsend, 1972; Townsend, 1979) and effec-
tively provided the normative basis of welfare theory - and indeed
policy-making- in the postwar period. They stand as evidence of an abiding
conviction that social equality was a realizable goal and that the central
(nation) state was the most appropriate vehicle to guide society towards this
objective. During the 1980s, however, this 'welfare collectivist' perspective
came to be questioned (Le Grand, 1982, 1989; Glennerster, 1983). In an
era of rapid economic change, high unemployment and welfare state
 Nick Ellison 409

retrenchment, the faultlines of postwar paternalistic universalism became

increasingly clear as existing levels of social protection were reduced. The
effect on marginal or vulnerable groups- women and minority ethnic com-
munities, the old and the sick- was to exacerbate difficulties that had always
characterized their relationship with the welfare system. Often not eligible
for contributory benefits because of gaps in their employment record,
women, particularly single mothers, were subjected to the increasing inci-
dence of means-tested and discretionary payments as income support levels
were cut (Millar, 1994). Cuts in health care and the 'privatization' of com-
munity care particularly affected women, both as carers and as those (espe-
cially older women) who needed to be cared for (Baldwin, 1994 ). Again,
evidence of 'institutional racism' in the allocation of scarce public housing
and other services (Skellington, 1992; Mason, 1995; Solomos and Back,
1996) led to a growing conviction that 'universalism', far from treating those
with the same needs in like fashion, in fact further marginalized the already
marginal.
This scepticism has been echoed in a rather different manner by femin-
ists and others who, as part of a wider movement against existing Western
intellectual and social frameworks, were challenging 'humanly inclusive
problematics, concepts, theories, objective methodologies' (Harding,
quoted in DiStefano, 1990, p. 73) in the name of 'difference'. In its effort
to subsume all aspects of social provision under the universalist rubrics
of 'citizenship' and 'social justice', the welfare state was held from this
pluralist standpoint to have created a false uniformity which eliminated,
or reduced, 'the diversity of identity, experience, interest and need in
welfare provision' (Williams, 1992, p. 206-7). The pluralist position has
been best characterized by those like Iris Young (1989, 1990) and Seyla
Benhabib (1996b) who argue that broad, all-inclusive notions of 'citizen-
ship', social justice and so on effectively mask power relations which
operate to the benefit of dominant groups. In Young's view (1989, p. 258),
'persons from one perspective or history can never completely under-
stand and adopt the point of view of those with other group-based per-
spectives and histories'. So where a particular set (or sets) of interests
already predominate, efforts to assimilate others, even where these may
be well-intentioned, are likely to fail because these entrants come 'into
the game after it has already begun, after the rules and standards already
have been set' (Young, 1990, p. 164 ). These inherent differences of power,
perspective and experience suggest that new groups will have to prove
themselves according to existing rules and standards, their interests being
likely to suffer as a result. The difficulty of attending properly to
women's interests in the context of a supposedly universal welfare state
is a case in point (Walby, 1990; Lister, 1990, 1993), but the same could be
said of the position forced upon minority ethnic populations and other
vulnerable groups.
410 Beyond Universalism and Particularism

Debating the Universalist-Particularist Divide.

There is a dichotomy here which runs to the heart of contemporary social
policy analysis. On one side stands the universalist plea for greater social
justice and equality, a 'fair' allocation of social goods to mitigate the
inegalitarian effects of the market and generate social cohesion; on the
other, demands for the recognition of diversity and 'difference' sustain
the view that universalism can, paradoxically, be socially exclusive. A
number of commentators have recently attempted to resolve this divide by
suggesting that it is either less significant, or less rigid, than it appears. As
we shall see, one strand of thought wants to play down the significance of
difference entirely, while others want to discover a means of reconciling the
universalist-particularist duality, the aim being to develop a set of princi-
ples which, by taking greater account of difference and plurality, can
provide not so much an enduring normative base as an acceptable standard
for deciding allocatory issues.
Peter Taylor-Goo by provides a good example of those who continue to
place their faith in universalism, arguing that the particularist challenge is
less significant than it appears. He initiated a rather belated debate among
social policy academics (Taylor-Gooby, 1994) about the potential impact
of 'postmodern' thinking on the discipline in an effort to discredit, if not
the epistemological assumptions, then certainly what he considers to be the
practical implications of postmodernist perspectives. Although his defini-
tion of postmodernism is none too specific (Hillyard and Watson, 1996;
Penna and O'Brien, 1996)- Taylor-Gooby (1994, p. 387) tends to associ-
ate postmodern thinking simply with an 'emphasis on diversity and plu-
ralism in views of what is desirable' - the point is to dispel the idea that
distributional decisions can be based upon notions of fragmentation and
difference. Such an emphasis he holds to be misguided. While acknow-
ledging that contemporary social policy clearly encompasses a greater plu-
rality of provision, reflecting a greater diversity of needs, than was the case
in the postwar era, Taylor-Gooby's main concern is that, in a world where
the practice and ideology of free market liberalism has triumphed over
competing ideologies, the postmodern stress on particularism 'may
obscure one of the great reversals for the most vulnerable groups in a cloud
of detail, may ignore the wood through enthusiasm for bark-rubbing'
(Taylor-Gooby, 1994, pp. 388-9). Inequalities in living standards and the
'stricter regulation of the lives of some of the poorest groups may fail to
attract the appropriate attention if the key themes of policy are seen as dif-
ference, diversity and choice' (Taylor-Gooby, 1994, p. 403 ). So, although
trends towards pluralism should not be discounted entirely, too
much attention to these 'postmodern' concerns will risk subverting efforts
to combat the rising poverty and inequalities associated with the now-
hegemonic free market, which can best be accomplished by embracing the
 Nick Ellison 411

ethic of welfare state universalism traditionally associated with the creation

0 f the socially just society.
This is an extreme position, judged by contemporary standards, and is
vulnerable to the kind of criticisms voiced by 'difference pluralists' like
Young. Moreover, in the face of all available evidence, it continues to place
faith in the prospect of a socialist alternative to the postwar 'Keynesian'
welfare state, which could somehow reorganize welfare provision in the
collective interest. The danger with this pro-state line of argument is that,
in the current socioeconomic climate, welfare state institutions are more
likely to continue to hostage citizens to capitalist fortunes, as Marxists crit-
icized them for doing in the past (Gough, 1979; Offe, 1984 ), rather than act
as bulwarks for the protection of the vulnerable. Events since 'new'
Labour's recent success at the polls would seem to confirm this trend
(Ellison, 1997a). Put bluntly, the postwar 'Keynesian' welfare state failed
to maintain any redistributive momentum in the colder economic and
political climate of the post-1975 period and, far from embracing a social-
ist alternative, national governments in the majority of advanced industrial
societies have been engaged in sustained attempts to reorganize their
welfare systems the better to favour the requirements of global capitalism
(Esping-Andersen, 1996). While Taylor-Gooby plainly understands the
negative consequences of capitalist triumph for the worst off, it is difficult
to see how this undoubted victory can be squared with his continued faith
in welfare state universalism.
Other attempts to discuss the relationship between universalism and
particularism give greater credence to the pluralist turn than Taylor-Gooby
allows, if in certain cases only reluctantly. Spieker (1996, p. 229), for
instance, confesses to an ambivalence about particularism, being 'both
attracted and appalled' by the implications of 'postmodern' diversity. The
difficulty, for him, lies in the realization that neither approach can be taken
too far. In particularist vein Spieker (1996, p. 223) argues, for example, that:

the recognition of duties at the personal level, duties which usually far exceed
those required from universal principles like human rights or altruism, is fun-
damental to much moral conduct ... I suspect that we would feel that there
was something morally wrong with someone whose commitment for the
Third World was so great that he or she subordinated all responsibility to
family, friends and community to it.

It is important, in other words, to recognize the needs and demands of par-

ticular interests, but at the same time acknowledgement of difference must
have limits. What we need to do in Spieker's view 'is to find a way of
appealing to [particularist] values like "community" and "solidarity"
which does not leave room for exclusion and injustice' (Spieker,
1996, p. 230). The solution is thought to lie in a notion of 'moderate
412 Beyond Universalism and Particularism

particularism' (see Jones, 1990) which takes seriously the need to empower
disadvantaged groups but which, in adjudicating amongstdifferent inter-
ests, would also take cognizance of the relative weight of advantage and
disadvantage, especially where this affects freedom and choice over avail-
able resources. Spieker (1996, p. 231) contends that

if principles like 'community' and 'solidarity' are advocated as a means of

empowerment and the removal of disadvantage, there does not have to be any
inconsistency. But this means that they must be treated as secondary rather-
than primary values; universal claims like freedom and equality have priority.

The particular claims of distinct communities or solidarities cannot, then,

be pushed too far for fear of undermining universalist goals.
This view clearly acknowledges that the socially excluded might have
legitimate concerns about the levels of social protection afforded under the
universalist principle but it does not move the argument very much beyond
Taylor-Gooby's more forthright position. If universal values like freedom
and equality have primacy over particularist demands, whose interests ulti-
mately define the nature of these values? One of the most persuasive
aspects of Young's position is precisely that powerful groups define 'uni-
versal' values in ways that are ultimately to their own benefit- but the
argument can also be pursued in a different but equally convincing manner.
Even if we were to accept, pace Young, that appropriate social goods and
services could be provided for the worst off by well-intentioned elites,
inequality and discrimination will not necessarily be eliminated from the
picture. In order to understand why this is so, it is important to recognize,
with Yeatman, that a duality exists at the heart of welfare state 'discourse'.
In her view (Yeatman, 1994, p. 85), universalizing notions like citizenship
are 'predicated on a dualism of independence and dependency'. Some indi-
viduals are able to achieve independent status by freely contracting in the
marketplace, meeting their needs with the proceeds of market transactions
while, for a variety of reasons, others cannot achieve this status without
resorting to public provision, for the receipt of which they are duly stig-
matized. Although an emphasis on 'empowerment' might allow certain
groups to escape the worst effects of this 'welfare tutelage', it is unclear
how far the claims of difference and diversity could be taken in an envi-
ronment where the application of certain 'universal' understandings of
freedom and equality effectively 'coerce' welfare recipients into relations
of subordination even as they claim to be favouring them.
One means of advancing beyond the boundaries of the above debate,
which displays all the hallmarks of theoretical stalemate, is to claim that the
universalist-particularist divide, though significant, is not as rigid as it
might appear. In a manner that echoes Spieker's concerns but attempts to
transcend the position he outlines, Thompson and Hoggett make clear
 Nick Ellison 413

their dissatisfaction with what they regard as the false divide between uni-
versalist and 'postmodern' /particularist perspectives. In their opinion:

the choice of either universalism or particularism is misconceived. Any justi-

fiable universalism, or egalitarianism must take particularity and difference
into account; and any legitimate particularism or politics of difference must
employ some universal or egalitarian standard. (Thompson and Hoggett,
1996, p. 23)

The way forward is to distinguish between universalism and the associated

notion of positive selectivism, on the one hand, and particularism, or the
claims of difference, on the other. This conceptual clarification, according
to Thompson and Haggett, makes it possible to treat universalist and par-
ticularist perspectives not only in less dichotomous terms but, more posi-
tively, as a mutually reinforcing duality.
Their argument suggests that welfare universalism, even where this
incorporates an element of positive selectivism, can create relations of tute-
lage with the state on the lines of Yeatman's analysis (positive discrimin-
ation or 'quotas' would be examples). It is consequently important to move
beyond 'forms of selectivism that only manage to redress certain inequal-
ities in terms of the dominant understanding of what equality requires'-
and it is here that Thompson and Haggett (1996, p. 30) introduce an
element of particularism, arguing that 'particularist principles aim to
attend to specific differences between particular individuals - differences
which make a moral difference' (original emphasis). They have in mind the
kinds of affiliation that Spieker mentions, affiliations that stress 'social
diversity rather than commonality and thereby give emphasis to particular
needs, moral frameworks and social expectations of different groups'.
There are, of course, limits to this line of thought, but it is here that the
universalist and particularist perspectives can be construed as mutually
supportive. Thompson and Haggett reiterate the often-made point that
particularist positions ultimately depend on certain universalist principles
for their coherence: the most obvious examples occur where interest group
demands for fairer or more equal treatment are made in accordance with
underlying universalist assumptions about what constitutes 'fairness',
'equality' and so on. In support of this point of view, they argue that it is
not really logical to define 'difference' as sheer otherness; there is a condi-
tion of (human) relatedness even if this reduces merely to the necessary
condition of linguistic communication across the spaces that divide us -
and in practice the amount of common ground is likely to be greater than
this. In this way it is possible to presuppose at least a degree of common
understanding about what constitutes the 'rules of the game', even where
aspects of these rules may be contested. Endorsement for such an approach
comes from Young (1989, p. 263), who recognizes that even those wishing
414 Beyond Universalism and Particularism

to champion difference need to acknowledge and subscribe to agreed prin-

ciples of justice if all claims are ultimately to be settled.
Returning to the terrain of welfare, it seems plausible, in the light of
these comments, to suggest that universalist nostrums need to be sensitive
to the differences among particular cases, while recognizing that too great
an emphasis on particularism will risk a collapse into 'an untenable rela-
tivism' if actors remain unwilling to seek out comparison with others in the
interests of a wider universalism (Thompson and Hoggett, 1996, p. 35). In
social policy terms it is certainly feasible to imagine the prescription of uni-
versalist goals- for instance the right of all citizens to equal levels of health
care - within which the needs and interests of particular groups can be
accommodated. It might be necessary to underpin universalist provision
by incorporating elements of positive selectivism to ensure, for example,
that health authorities in deprived areas have a greater value of resource in
order to meet proportionately greater needs to match the general goal of
universal care- similar to the educational priority areas of the late 1960s.
But particularist needs may also be met by, say, matching specific types of
service to the needs of specific groups, so introducing a distinctly pluralist
dimension into the account.
How might these concerns be reflected institutionally? The apparatus
required to incorporate the range of issues Thompson and Hoggett
discuss needs to have both centralized and decentralized elements, and the
authors refer to Hirst's (1994) concept of associational democracy to illus-
trate how (universal) basic needs and (differentiated) specific needs might
be reconciled. While basic needs could be met by a form of guaranteed
minimum income paid by the central state, associations could cater for
specific needs either by seeking automatic entitlement where the nature of
provision is determined by a citizen's general status (e.g. the category of
child or older person), or through the creation of specific contracts with
the central state where needs are highly particular and the right quality of
user-specific provision needs to be ensured, as they may be in the case of
certain forms of disability or mental ill-health (Thompson and Hoggett,
1996, p. 38).
This depiction of a decentralized welfare system potentially more sensi-
tive to particular needs is in many ways compelling and appears to leave us
on the cusp of a different, less normatively driven, approach to social
policy. The underlying thrust of the argument advanced by Thompson and
Hoggett suggests that they are willing to play down the significance of
attempting to find points of normative agreement about the nature of
'equality', 'liberty' and so on in favour of more pragmatic questions about
how available resources may best be allocated to meet a wide range of dif-
ferently constituted needs. Recognizing that inequalities can often best be
addressed through attention to the particular as opposed to the universal,
this approach apparently gives ground to pluralist perspectives in a way
 Nick Ellison 415

that the positions advanced by Taylor-Gooby or Spieker do not- but there

are difficulties nevertheless.
On closer analysis, the precise balance to be struck between universalist
and particularist forms of provision remains opaque. Although Thompson
and Hoggett clearly want to see greater space for particularism, they still
want to subsume the particular within the universal. The authors continue
to rely, for example, upon a 'sophisticated universalism' which 'accepts'
certain forms of selectivism and 'elements of particularism' (Thompson and
Hoggett, 1996, p. 32), arguing that 'universalism seeks to provide a fair
standard by which to treat particular cases, and ... particularism derives its
moral force from an underlying universalism' (Thompson and Hoggett,
1996, p. 34 ). But this understanding seems to require particularist interests
to demonstrate that their demands are in fact consistent with universalist
definitions of 'justice'. Although it would be wrong to dismiss this recog-
nition of particularism as insincere or reducible in any easy sense to a dom-
inant universalism, the formulation is insufficiently specific - the
consequence being that it is impossible to know quite how this attempt to
reframe the universalist-particularist paradigm would work out in practice.
Two problems are particularly evident. First, while Thompson and
Hoggett add theoretical weight to their position by continuing to employ
principles of 'equality', 'fairness' and 'justice', these principles remain only
vaguely defined. If liberal notions of 'fairness as impartiality' appear too
abstract and consequently too implicated in universalist conceptions of the
good easily to fit the complex framework Thompson and Hoggett advance,
conceptions directed towards the 'concrete' as opposed to the 'generalized'
other (Gilligan, 1982; Benhabib, 1986; White, 1991) clearly want to
promote a qualitatively different, and not necessarily 'equal', division of
resources which may tip the balance too far in a particularist direction.
Although these considerations are central to their position, Thompson and
Hoggett neither define these principles themselves, nor indicate how agree-
ment about the content of such ideas may be arrived at.
Second, there is the more practical issue of competing claims. Although
associationalism provides an example of how universal and particular
interests may be treated, the authors do not take sufficient account of the
problem of scarce social resources and do not consider how competing
claims might be resolved (Benhabib, 1996a, p. 35). Here there is a danger
of the reassertion of the universalist-particularist divide. Universalists
would argue that the state should have ultimate responsibility for adjudi-
cating among competing demands in the interests of the greater good and
may legitimately ask whether a 'thin' associationalist state could counter,
or even moderate, the claims of powerful interests (Amin, 1995). On the
other hand, any greater centralization of allocational power would activate
particularist scepticism about the emancipatory potential of universalist
solutions.
416 Beyond Universalism and Particularism

These difficulties suggest not only that Thompson and .Hoggett have
failed to resolve the universalist-particularist dichotomy as successfully as
might initially have appeared, but that the attempt to discover <!- means of
reconciling these opposing perspectives might in fact be misguided. For it
seems that efforts to prescribe formulae for integrating universalist and
particularist values will always be vulnerable to inherent centrifugal
impulses, both at the level of theory, where the epistemological status of
proposed distributional principles is open to challenge from either view-
point, and at the level of practice, where specific patterns of resource allo-
cation are likely to be contested on the grounds that they favour one or
other set of interests.
The remainder of this article argues that it is possible to move beyond
the constraints imposed by the universalist-particularist paradigm
without entirely losing our sense of the importance of having universal
allocatory principles for social provision but that, in order to do so, uni-
versalist ambitions must be reduced in favour of a greater recognition of
the claims of specific interests. We need to advance on two fronts.
Theoretically, it is important to strip away the conceptual dualism that
characterized the above discussion. While there is a need to retain a sense
of principled allocation which continues to address issues of 'fairness' and
'justice' there is no reason why this should depend too heavily on univer-
salist prescriptions. Indeed, it will be argued below that the only 'univer-
sal' elements needed to underpin claims to particular patterns of
distribution are those procedural requirements, agreed by all participants
in the public sphere, which underpin agreed norms of communicative
behaviour. With these elements in place, outcomes could be elaborated
according to decentralized, essentially pragmatic, processes of 'delibera-
tion' as parties to particular debates negotiate on the strength of their
claims.
Certain aspects of 'deliberative democracy' are explored below but
before moving on to consider this issue it is important to see how a greater
appreciation of postmodern ideas can sharpen our understanding of the
contemporary social and political context that deliberative theories will
need to address. In an increasingly complex and fragmented social world,
claims to resources become intimately connected to perceptions of iden-
tity and difference, and these in turn are accompanied by dilemmas of
social inclusion and exclusion which threaten efforts to mount coherent
demands because they introduce a genuine ambivalence about the nature
of social belonging into distributional debates. Postmodern thinking can
help to illuminate our perceptions of the difficult, ambiguous nature of
identity and difference in contemporary societies. In so doing, and
even where their logic is not accepted entirely, postmodern insights can
enhance our appreciation of the forms that deliberative institutions will
need to take if they are to facilitate agreement about the (particularist)
 Nick Ellison 417

distribution of social goods and services and, by extension, the nature of

social inclusion itself.

Beyond Universalism and Particularism? Social Policy

and Postmodern Critique
Much of the recent social policy literature which addresses issues of uni-
versalism and particularism tends to treat the latter as somehow 'post-
modern', but this is a misnomer. Difference pluralism has been embraced
by many scholars who, like Young, Benhabib or Carole Pateman, cannot
be described as postmodern thinkers. For a variety of reasons postmod-
ernists may be suggesting rather more than that patterns of political
accountability, social provision and so on should be more responsive to a
plurality of demands. In fact, the postmodern challenge is not so much
concerned with particularist diversity or the claims of difference as with
the ways in which the identities which give voice to such claims are
constituted.
If, for the moment, we accept with those like Judith Butler that identity
and difference are pure social construction, the self having no pre-
determined 'essence', then it becomes difficult to sustain a view of partic-
ularity or difference that is in any sense 'fixed'. According to this radical
postmodernist/poststructuralist perspective we exist as fragmented sub-
jects whose identities are not preconfigured, our 'agency' being constituted
purely in specific actions. As Butler states, 'there need not be a "doer
behind the deed" ... the "doer" is invariably constructed through the
deed' (cited in Evans, 1995, p. 134 ). Particularisms will emerge and recede
as identities are constructed (and deconstructed) within prevailing dis-
courses of power in ways which defy any final sense of integration or res-
olution. On this reading, there is no longer, as Honig (1996, p. 258) puts it:

a place called home, a place free of power, conflict and struggle, a place - an
identity, a form of life, a group vision - unmarked or unriven by difference
and untouched by the power brought to bear upon it by the identities that
strive to ground themselves in its place.

The prospect, then, is one of permanent struggle, both within and among
different identities, to achieve transitory forms of belonging, permanently
threatened by disruption, as these fragile constructions fracture under both
internal and external pressures.
Construing this postmodernist identity politics in the social and polit-
ical language of fairness and social justice is clearly an ambitious task, but
one which postmodern radical democrats like Chantal Mouffe are cur-
rently attempting. In Mouffe's (1996, p. 24) words, 'a radical pluralist
418 Beyond Universalism and Particularism

approach, informed as it is by a non-essentialist politics, acknowledges the

impossibility of a fully realised democracy and of the total elimination of
antagonisms'. But Mouffe thinks it possible that a radical ph::ralist politics
might create 'a chain of equivalence among the democratic demands found
in a variety of groups ... around a radical democratic interpretation of the
political principles of the liberal democratic regime'- an equivalence that
could eventuate in a common radical democratic identity for all citizens.
Of course, according to Mouffe such an outcome is only feasible if we
retain the idea of a decentred subject because it is only by so doing that it
becomes possible to eliminate universalizing notions of inclusion - and
hence domination. The point is to destroy 'subject positions' or discourses
of power (racism, sexism, ageism) while being clear that these are never
synonymous with social and political actors themselves, for the latter are
always constituted by a range of shifting 'subjectivities' which cut through
the individual, allowing her simultaneously to be dominant in some social
contexts while subordinate in others.
At first sight this version of postmodern theorizing seems compelling.
Critical of the 'essentialism' which underpins attempts to mount theoreti-
cal justifications for existing definitions of 'fairness' or 'justice', it ques-
tions the status of the principles governing resource allocation in liberal
and social democratic societies in ways which appear to reduce the salience
of the universalist-particularist divide, thus allowing us to move on. After
all, if identities are as fractured as postmodernists suggest this must effec-
tively eliminate any hope of discovering an agreed theoretical foundation
on which to base allocatory practices and in the process remove any vestige
of universalist principles and policies in favour of a potentially infinite
range of particular identity claims.
But this solution to the theoretical stalemate is bought at a high cost, for
one of the apparent strengths of Mouffe's postmodernist perspective- the
perceived distinction between social actors and subject positions - dis-
guises a severe weakness. Mouffe hopes to avoid obvious charges of
endorsing an unlimited relativism through her notion of a chain of equiv-
alence which will somehow 'select in' certain subject positions while
'selecting out' others. The difficulty, however, is that, if subject positions
are 'fungible' (Benhabib, 1996a), which is to say infinitely constructible
and thus 'replaceable', it is hard to see how they can be so only to the
degree that they open possibilities for the construction of particular (i.e.
radical) positions and not other less palatable alternatives. Fraser (1996,
p. 205) criticizes those she refers to as 'deconstn.ictive anti-essentialists' for
failing to distinguish between 'emancipatory and oppressive identity
claims, benign and pernicious differences'. Applied to Mouffe's notion of
a chain of equivalence, how plausible is it to assume that all challenges to
subject positions will contribute to the liberating project of radical democ-
racy? Might not decentred subjects challenge power discourses from
 Nick Ellison 419

perspectives which are not necessarily compatible with liberating or eman-

cipatory principles?
At this point the full-blown postmodern project retreats into incoher-
ence. An approach which denies the validity of attempts to justify certain
principles of fairness and social justice, whatever their precise theoretical
foundation, not only risks an anarchy of competing claims from a variety
of combinations of subject positions while offering no means of deciding
among them, but also raises questions about how we can deal with those
who seek to maintain, or alter, distributional outcomes at the expense of
others. However, this criticism does not imply that postmodernist think-
ing has no worthwhile contribution to make for, conceptually shaky
though this line of thought may be, postmodern theorists are surely correct
to 'problematize' liberal or social democratic universalist reasoning. By
drawing attention to the difficulties facing attempts to develop and justify
universalist principles, it has been pointed out that postmodernism's
primary role is 'to politicise the nature and identity of the political com-
munity on which these traditions have depended' (Yeatman, 1994, p. 90).
In this way postmodern thinking stands in critical, but not necessarily
oppositional, relation to modernist ideas, acting as an analytical aid which,
by opening up new ways of thinking about rights and social justice, 'is not
to be understood as supplanting but as entering into relationship with the
distinctive rights talk of both liberalism and social democracy' (Yeatman,
1994, p. 90).
This formulation of the relationship between postmodernist and mod-
ernist approaches is helpful for two reasons. First, as intimated, it acknow-
ledges the danger of unqualified relativism which, at its most extreme,
postmodernist thinking embraces. Second, and more importantly for
present purposes, treating postmodern theorizing as an analytical device
facilitates an understanding of the complexities involved in deciding allo-
catory claims because the postmodernist characterization of the frag-
mented nature of identity has a certain presence in the ambivalent character
of demands for social inclusion and in so doing illuminates the ambiguities
that cut through the universalist-particularist divide. A clear aspect of the
new, fractured world of social policy is precisely that vulnerable or mar-
ginal groups want 'social inclusion' while simultaneously demanding
social and political changes which challenge the nature of what it means to
be included. In this way the desire for inclusion (in the sense of gaining
access to the social rights, resources and opportunities available to others)
frequently exists contiguously with demands for the alteration of, inter
alia, the basis of social 'membership', the principles informing resource
allocation and the means of access to resources themselves.
So, while radical postmodernist assumptions about the deracinated
nature of decentred subject positions raise many more difficulties than
they solve, the 'postmodern element' in the present discussion is
420 Beyond Universalism and Particularism

manifested in the following ways. First, the burgeoning-presence of 'dif~

ference' in contemporary social policy suggests that the prospect of per~
manent agreement about principles of resource allocatio.n i~ chimerical.
As suggested earlier, there is nothing necessarily 'postmodern' about
accepting a lack of permanence in allocatory arrangements, but the poten~
tial degree of fragmentation in social politics lends this characterization a
certain postmodern colour (Ellison, 1997b ). Second, this colour is
enhanced by the recognition that social actors, while not purely con-
structed through action - and possessing a grounded sense of identity as
Fraser and others would have it- nevertheless live in a contingent world
and therefore are likely actively to embody the ambivalence which per-
vades claims for inclusion. Not only will this mean that they will stand in
critical relation to the very structures, theoretical and institutional, to
which they wish to belong, or from which they wish to draw particular
resources, but in view of the rapid and extensive changes currently affect-
ing industrial societies in general and their welfare systems in particular,
the further suggestion is that actors will pursue their demands in different
ways depending on the specific manner in which change affects them.
Because of the difficulties any one interest, or set of interests, would
encounter in claiming priority for preferred allocational principles in this
fractured social universe, the result is likely to be a highly complex series
of debates where neither the identities involved, nor the parameters of the
discussions themselves, are permanently fixed.
Framed in this manner, the best method by which different and com-
peting interests can reach agreement about access to goods and services
arguably must be through extensive processes of deliberation. All parties
whose interests are affected by the pattern of distribution in a particular
policy area should have the opportunity to further their claims in negotia-
tions about resource allocation. At first sight such a tentative formulation
may appear weak. It is vulnerable, for example, to the accusation that clear
and defensible (if nonetheless contestable) allocational principles have
been jettisoned in favour of a vague, hand-to-mouth approach which seeks
to judge each claim, at best, according to the preconceptions of the parties
involved in a particular area of debate. Such a dialogic perspective, it may
be argued, betrays little sense of the fundamental issues at stake in debates
about the distribution of resources where the claims of difference may need
to be judged against other, more pressing, considerations about the effects
of, say, increasing poverty and inequality.
These points would have more force if they could counter the arguments
against Taylor-Gooby's defence of welfare universalism mentioned above.
As they stand, however, they have come to be regarded, even it seems by
Taylor-Gooby himself, as 'second best theory' (Taylor-Gooby, 1997). In
the light of these criticisms, the deliberative option deserves attention for,
if it is impossible to agree upon universalist procedures for adjudicating the
 Nick Ellison 421

complexities of competing claims for scarce resources, the allocation of

goods in particular policy areas will only be regarded as legitimate where
each and every party to each and every area of debate is recognized and
given VOlCe.

Deliberative Democracy and a Politics of Presence

Space does not permit a full discussion of the various possible approaches
to deliberative democracy (see, for example, Cohen, 1989; Fishkin, 1991;
Rawls, 1993; Young, 1993; Habermas, 1995). For present purposes, it is
important to develop a deliberative account that can speak to the fragmen-
tary, complex social politics which informs contemporary debates about
social policy, so the ideas of theorists such as Rawls and Habermas, both
of whom perceive deliberation in overly formal and rationalistic terms
(Bohman, 1996, pp. 44-5), will not be drawn upon here.
To accomplish this task we need to be aware of the significance of 'infor-
mal' sites of social and political interaction as 'transformative spaces' in
which the clash of competing interests can lead to potentially new and
unheralded outcomes. As Anne Phillips has written, 'the common core
that characterises theories of deliberative or communicative or discursive
democracy is that political engagement can change initial statements of
preference or interest'. Indeed, the point 'that deliberative democracy
insists on ... is the capacity for formulating new positions in the course of
discussion with others' (Phillips, 1995, p. 149). There is a flexible quality
to this conception which is further developed by Bohman (1996, p. 57)
who argues that deliberation should be based upon 'dialogue' rather than
more formal or regulative types of discourse which may require 'specific
epistemic expertise', hence:

dialogue is the mere give and take of reasons. It does not necessarily aim to
produce well-justified claims; rather it aims to produce claims that are wide
enough in scope and sufficiently justified to be accountable to an indefinite
public space of fellow citizens.

Taken together, these perspectives are attractive because they contain a

capacity for reflexivity which is essential if deliberative theory is to address
the ambivalence associated with social inclusion/ exclusion discussed in the
previous section. The significant point about public deliberation, as
Bohman (1996, p. 58) comments, is precisely that 'it takes place within a
framework of accountable social interaction that is reflexively called into
question as it is being used'.
An important additional dimension to this depiction of a reflexively
ordered public space lies in Phillips's attempt to augment the idea of
422 Beyond Universalism and Particularism
deliberative democracy by reference to a 'politics of presence~. While some
deliberative theorists are chary of a politics which gives too much leeway
to disparate interest groups, believing that factionalism will UJ1dermine
deliberative processes, others like Sunstein (1991) and Phillips argue that it
is important to ensure the 'presence' of the widest possible range of inter-
ests. They attempt to reduce the prospect of endemic factional strife by
arguing that group 'representatives', rather than merely playing the role of
mandated functionaries, should behave as autonomous actors, being pre-
pared to change their positions if convinced by the arguments of others.
'Democracy', on this reading, becomes less a vehicle for giving each group
'a piece of the action' (Sunstein, quoted in Phillips, 1995, p. 152) and more
a method for testing existing preferences against the views and perceptions
of others. The hope is that, with the continuing emphasis on dialogue,
increased understanding of the position of others will help resolve seem-
ingly entrenched conflicts.
This approach goes some way towards providing the theoretical outline
of an institutional framework sufficient to provide the 'transformative
space' in which the complex debates which characterize contemporary
social politics can be played out. How might such a framework be consti-
tuted in practice and how might it avert the recidivistic return towards the
universalist-particularist dichotomy in social policy?
What follows provides only the briefest outline of how a deliberative
social politics might operate in the area of welfare. While this account owes
a good deal to the spirit of Hirst's (1994, 1998) conception of an associa-
tional welfare system, it nevertheless differs from his vision in two impor-
tant ways. First, in practical terms, although Hirst's (1994, p. 167) view that
associationalism 'publicises civil society and pluralises the state' is broadly
endorsed, the institutional mechanisms are quite different. The decentral-
ized 'social policy communities' discussed later do not conform to the
autonomous, self-governing voluntary agencies of the associationalist
vision, nor is the central state as 'thin' as associationalist accounts would
have it. Second, without wanting to push the analysis towards too full an
acceptance of postmodern reasoning, both the principles governing com-
munication and allocation, and the social actors themselves who are
involved in debates about needs, services and resource allocation, will need
to be less 'ontologically grounded' than they appear to be in the associa-
tionalist model.
It is important, in the first place, to distinguish among three levels of
governance and between two types of decision-making represented in the
first and third levels. The first level - that of central democratic institu-
tions -should be primarily concerned with fashioning decision-making
procedures, particularly those designed to regulate communicative behav-
iour and other 'rules of the game' including those rules governing discus-
sions about social justice and, by extension, the division of available
 Nick Ellison 423

resources. Local authorities comprise the second level of governance, their

main role being an adminstrative rather than a decision-making one, while
debates about policy proposals, substantive decisions about which pro-
posals to pursue and associated debates about the prioritizing of resource
claims are the province of the third level, composed of a range of decen-
tralized 'social policy communities'.
It is in the nature of this deliberative vision that these decision-making
levels will be characterized by a high degree of fluidity, responding to the
ebb and flow of group influence as collective actors are confronted by the
pressures of social change. In this connection, it is particularly important to
understand that the principles of communication, distribution and social
justice developed within the first level of central democratic institutions are
mutable. Agreement about such principles will be subject to reappraisal
according to the play of different interests in the context of a prevailing
politics of presence where all potential constituencies are represented, but
where, following Phillips, representatives are not directly mandated.
The key feature of this level is the stress which needs to be placed on
presence in conditions of what Benhabib (1986, p. 30) has called a 'histor-
ically self-conscious universalism'. This refers to a process of 'reflective
equilibrium' by which it is possible to arrive at a '"thick description" of
the moral presuppositions of the cultural horizon of modernity' which is
likely to (but might not) include principles of universal respect and egali-
tarian reciprocity not as transcendental principles of communicative ethics
but as contingent features of social and political discourse upon which all
parties have duly reflected. Of course, this process can only be perceived
as legitimate if the full range of social groups have voice and minority or
marginal interests are properly engaged in drawing up agreement about
communicative principles and procedures, as well as the practical proce-
dures for resource allocation (for a discussion about the numbers necessary
to achieve effective engagement see K ymlicka, 1995, pp. 144-9).
Local authorities, comprising the second, administrative, level, would
need to be organized functionally, mirroring the pattern of decentralized
interests below. With senior staff appointed by independent panels made
up from a cross-section of policy community members and others nomin-
ated by the centre, individual local authority departments would act as
conduits channelling demands up from, and resources down to, policy
community level- but this role needs to be augmented in two important
ways. First, the departments should have an advisory capacity, providing
information to policy communities about available resources, furnishing
expert opinion where required and suggesting methods for optimizing the
returns on budget allocations. Second, existing separately from the func-
tional departments, but appointed in the same way, local authority budget
committees should act as 'budget brokers' using information provided by
the departments to make the case to central institutions for the resources
424 Beyond Universalism and Particularism

demanded by the policy communities but also policing subsequent alloca-

tions coming from above.
The diffuse nature of the third, substantive level makes it more difficult
to describe in detail. Above all, it would need to be characterized by a
decentralized, deliberative politics designed to give voice to the demands
of myriad interests, with deliberative procedures conforming to the com-
municative rules agreed by central democratic institutions. This sphere is
likely to be one of 'mutually interlocking and overlapping networks and
associations of deliberation, contestation and argumentation' (Benhabib,
1996b, p. 74) which, taken together, exhibit a form of 'public conversa-
tion'. Deliberative activity here carries no necessary condition of presence
so long as the parties whose interests arc liable to be affected by change in
a particular policy arena have an equal opportunity to participate in
debates about the goods and services they most need, as well as in the
framing of policy proposals relevant to the realization of their demands. It
is of course possible that individual citizens will be active in more than one
social policy community, advancing different, even contradictory, claims
in different places. In this way the postmodern dimension finds expression
at the level of human action because the identities and demands of social
actors, though not necessarily split among different subject positions, will
nevertheless fragment across different policy spaces, exemplifying the
endemic contingency of identity and so highlighting the ambiguous
nature of human action in the face of persistent dilemmas of social inclu-
sion and exclusion.
At this general level, it becomes possible to see how this brief account of
a deliberative social politics could abrogate the universalist-particularist
divide. By privileging particularist engagement at the level of decentralized
policy debate and formulation, but in the prevailing context of a central-
ized politics of presence in which all agreements about principle are open
to negotiation and change, the universalist-particularist paradigm col-
lapses. Policy proposals will now inevitably reflect particularist concerns
for, by definition, they will be rooted in difference- a formulation which
echoes Calhoun's (1995, p. 72) 'two cheers to particularism'. The remain-
ing cheer is reserved for disembeddcd 'universal' principles of commun-
ication and social justice which, however mutable, give shape to the
deliberative process.
Such is the broad outline of a possible deliberative democracy, but how
might it work in practice? The final task is to put a little social policy flesh
on these admittedly bare theoretical bones. Any social policy community-
the education community, for instance- will inevitably contain producer
and user interests including those concerned about the nature of delivery
systems and existing resource levels, as well as others interested in reform-
ing specific areas of provision the better to service particular needs. The
community is also likely to be divided into different functional sections
 Nick Ellison 425

producing proposals for, say, teaching and learning needs (including special
needs), buildings and equipment, educational opportunities and access,
and so on. Taken as a whole, however, the community's task would be to
decide policy priorities, reaching internal agreement about necessary
goods and services, and the resources required to deliver them, before
channelling its demands for resources through the relevant local authority
department.
How this process might work in practice needs further elaboration on
at least two counts. First, how is the membership of a social policy com-
munity to be decided? Second, how is competition for inevitably limited
resources among policy communities within local authority areas and,
more generally, among local authorities themselves to be managed?

Membership
Because policy community members will not simply debate choices pre-
sented to them but actively develop policy alternatives in ways which evoke
Barber's (1984, p. 200) conception of 'strong democracy', it is vital that all
those who wish to be involved 'feel able to contribute to ongoing debates'.
As suggested, membership of social policy communities would be likely to
reflect a functional mix with individuals desiring different levels of involve-
ment according to the (changing) depth of interest and the nature of the
issues involved. The main concern is how this complex membership can be
honed into a reasonably sophisticated policy-making body. Here it is helpful
to invert Stewart's (1996, p. 31) point that participatory democratic
processes can actively strengthen representative democracy for, conversely,
there is every reason to believe that particular forms of decentralized repre-
sentation can enhance the wider deliberative process. If, for example, indi-
viduals were to be elected by standing policy community 'fora' (formally
constituted bodies but open to all those able to demonstrate a direct inter-
est) to develop proposals for the community's consideration, these policy-
making committees could be placed under a duty both to disseminate
detailed information about their proposals and to invite counter-proposals.
Naturally, these would need to be debated and ultimately endorsed by the
full forum, with opportunities being provided for the expression of dissent-
ing views and recommendations for possible alternatives, but this prefigura-
tion of forum discussions would help to develop fairly sophisticated
knowledge of relevant issues, so ensuring a high standard of deliberation.
Of course, some of the difficulties commonly associated with delibera-
tive democracy (see Johnson, 1998)- monopoly of discussion by power-
ful interests, the undue influence of those who speak last - could well
emerge if the above model, or something like it, was operationalized. These
are complex issues, to be sure, and satisfactory solutions cannot be fully
426 Beyond Universalism and Particularism

developed here, but it is possible to imagine certain basic safeguards that

could help to offset these problems. We have already seen that policy
community discussions must conform to standards of debo,te <1.nd proce-
dure agreed by the central state, where membership is characterized by a
politics of presence, but further conditions could be added. In order to
prevent elected policy-makers succumbing to the temptations of power,
individuals should hold their posts for relatively short periods of time, say
three years; again, in an effort to avoid the dangers of permanent exclusion,
specific consideration of minority social and political needs could be made
a fundamental requirement of all policy discussions.
Smaller but nonetheless significant concerns about the order of speak-
ing in debates, procedures for 'summing up' and so on would need to be
dealt with by agreed procedural rules which could, for example, allow
minority interests a final right of reply, or dissenting positions greater
amounts of time to present their case. It is important to remember,
however, that the decentralized and fragmented nature of the deliberative
process, taken as a whole, should mean that those finding themselves in a
majority position over a specific issue in a particular policy community
could well find themselves in a minority elsewhere. The point of the
process is not to eliminate 'policy winners' but to ensure that the full range
of interests have equal access to debates and that 'winners' should not con-
sistently be drawn from the same social groups in all circumstances.

Managing Competition for Resources

Issues of membership and conduct aside, the model outlined (see figure 1)
raises another potentially unpalatable prospect. Critics may fairly point
out that political, administrative and financial chaos could be the likely
result of deliberative democracy where policy communities within partic-
ular local authorities and across local authorities as a whole demand con-
sistently high resource levels to implement widely differing proposals. To
minimize these risks, decentralized, 'particularized' policy formulation
needs to be balanced against more centralized resource allocation mechan-
isms. Where intra-authority competition is concerned, initial budgetary
control could be exercised by local authority budget committees allocat-
ing fixed sums for each policy community predicated on amounts antici-
pated from central government and additional sums raised by local taxes.
What is still likely to remain a disorganized process, however, could be
further rationalized by the advisory role played by local authority depart-
ments. Teams of policy specialists, augmented where necessary by
co-opted experts, would work closely with each policy community forum
advising on the implications of adopting particular policies, including bud-
getary implications, and the nature of possible alternatives.
 Central State- source of authority: elected on basis of a
politics of presence
Responsibilities:
enforcing agreed conceptions of 'social justice' and
associated deliberative procedures
economic strategy
budgetary and fiscal strategy
budget allocation to local authorities

Local Authorities- source of authority: appointed

Budget committees
Responsibilities: 'budget brokers', channelling demands from
below presented by departments, negotiating with central
institutions and 'policing' central budget allocations

Functional departments
Responsibilities: advising social policy communities on
substantive policy issues and resourcing

Enforced
standards of
procedural and advisers and
social justice elected
forum reps

Source of authority: popular

Policy Community Fora
Responsibilities: policy formulation. Formally constituted
deliberative bodies electing policy-making representatives
with duties to seek advice from local authority departments,
disseminate information, consult with marginal and dissenting
interests, present alternatives

Figure 1 Model for a deliberative social policy

428 Beyond Universalism and Particularism

At inter-authority level the state must be centrally involved in overseeing

budget allocation and, in order to dissuade policy commu.nities from
advancing constantly overinflated demands, central institutions,.wquld need
to be a good deal thicker than Hirst, for example, envisages. Though playing
no direct policy-making role, the state nevertheless would have an impor-
tant part to play as an economic manager and overall budget controller.
Responsibility for supply-side policies designed to secure economic effi-
ciency in a broadly free market context, together with responsibility for the
tax-raising powers necessary to provide resources for social goods and set:-
vices, would exist alongside the final power to decide the total available
budget for distribution through local authority budget committees to policy
communities. Resources would need to be allocated partly on a (egalitarian)
bloc basis to ensure basic levels of funding across all categories of need and
partly on the basis of differentiated need according to the nature of demands
expressed by the policy communities themselves. Where resourcing is con-
cerned, the fact that central democratic institutions must conform to crite-
ria of communication and allocation agreed in debates characterized by a
politics of presence is important. Because particular interests are engaged
(though not mandated) at this level, all social groups will be party to deci-
sions about the size of the 'social budget' and budget allocation, and, by
extension, to deliberations about the resourcing of particular claims. To be
sure, each community may not get precisely what has been demanded and
policies may need to be adjusted to accord with current economic realities,
but appeal mechanisms could take account of contested decisions and,
because policy-making is firmly lodged at policy community level, the
decentralized, particularistic nature of the enterprise remains intact.

Conclusion

This article has questioned the utility of the universalist-particularist par-

adigm in contemporary welfare theory. It has argued that current attempts
either to reject its significance or to harmonize its two constituent elements
have not proved successful and that we need to move beyond the confines
imposed by this duality by exploring the possibilities offered by delibera-
tive conceptions of democracy. As a first step, it is important to acknowl-
edge the ways in which postmodern thinking can help us to break loose
from attempts to develop and justify immutable principles of justice on
which the respective merits of 'universality' and 'difference' can be
founded, allowing space to frame a more variegated understanding of the
increasingly fractured nature of contemporary social politics. While this
need not- indeed should not- imply complete endorsement of postmod-
ern reasoning in which social actors are reduced to fragmented 'subject
positions' in the context of an impossible relativism, the suggestion here is
 Nick Ellison 429

that it is important to take account of the ways in which actors' identities

are likely to be split among different, and increasingly complex, policy
arenas as they struggle to deal with the persistent demands of change.
The brief outline of a decentralized deliberative politics included here
stands as an initial attempt to sketch how this emergent complexity might
take institutional form. Certainly, if we are to take seriously the degree of
social fragmentation which increasingly characterizes late modern soci-
eties, and the implications this holds for efforts to retain a universalist per-
spective in social policy, then we must continue to discuss and elaborate
conceptions of this kind. The most significant point, however, is also the
most paradoxical. Generations of welfare theorists have assumed that
social inclusion is best achieved through state-directed, universal social
policy outputs. It is time to shift our attention from a concern with outputs
to the view that increased participation in developing policy inputs is likely
to prove considerably more socially inclusive. In fact, achieving equality
of, or inclusion in, outputs is not really the issue. A deliberative approach
to social policy, by encouraging all social groups to participate in framing
and pursuing policy proposals through access to deliberative institutions,
would make for a much greater degree of inclusion - and hold out the
prospect of a greater degree of social equality- than traditional universal-
ist welfare ideals managed to achieve.

Note

From Critical Social Policy, 19, 1, 1999, pp. 57-85.

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Williams, F. (1992) 'Somewhere Over the Rainbow: Universality and Diversity in
Social Policy', in N. Manning and R. Page (eds), Social Policy Review 4,
Canterbury, Social Policy Association.
Yeatman, A. (1994) Postmodern Revisionings of the Political, London, Routledge.
Young, I. M. (1989) 'Polity and Group Difference: A Critique of the Ideal of
Universal Citizenship', Ethics, 99, pp. 250-74.
Young, I. M. (1990) Justice and the Politics of Difference, Princeton, Princeton
University Press.
Young, I. M. (1993) 'Justice and Communicative Democracy', in R. Gottlieb (ed.),
Tradition, Counter- Tradition, Politics: Dimensions of Radical Democracy,
Philadelphia, Temple University Press.
Ways Ahead?
A Welfare State for the
Twenty-First Century
G0sta Esping-Andersen

[ ... ]

What I present here is [ ... ] an attempt to construct a welfare edifice that

is in [ ... ] harmony with the kind of economy, employment, and family
that is in the making. [ ... ] The challenge is immense because the revolu-
tions in both employment and family structure are creating massive new
opportunities but also new social risks and needs. Changing technologies,
intensified global integration, and our capacity to adapt, occupy centre-
stage as far as competitiveness is concerned; the service sector will overde-
termine as far as employment is concerned. Although it is evident that
high-end services will dominate job-trends, both the new family needs and
a full employment scenario will imply a sizeable share of low-end, low-
productivity jobs in social and personal services. It will, accordingiy, be
difficult to avoid new dualisms. A knowledge-intensive economy will
produce new skill-based cleavages with, possibly, polarization. How to
deal with the losers is one major challenge. A knowledge-intensive
economy necessitates not just expertise among producers, but also among
consumers. Therefore, unless we succeed in broadly strengthening the cog-
nitive capacities and resource base of citizens, the long-term scenario might
very well be a smattering of 'knowledge islands' in a great sea of marginal-
ized outsiders. This poses the first-order challenge of how to democratize
skills. [ ... ] And it poses the second-order challenge of how to redesign
social policy. The most simple-minded 'third way' promoters believe that
the population, via education, can be adapted to the market economy and
that the social problem will, hence, disappear. This is a dangerous fallacy.
Education, training or lifelong learning cannot be enough. A skill-intensive
economy will breed new inqualities; a full-employment service economy
will reinforce these. And if we are unwilling to accept low-end services, it
 G0sta Esping-Andersen 435

will be difficult to avoid widespread unemployment. In any case, educa-

tion cannot undo differences in people's social capital.
The new family and life course pose an equally formidable challenge.
Greater instability and the rise of 'atypical' households mean also poten-
tial polarization. At one end, divorce, separations, and single parenthood
create severe risks of poverty. At the other end, the trend towards dual-
earner households strengthens families' resource base. We must assume
strong marital homogamy, and therefore a widening gap between strong
and weak households.
The standard male breadwinner model that once guaranteed adequate
welfare and high fertility is declining both numerically and in its capacity
to effectively prevent child poverty. Indeed, the conventional family may
increasingly constitute an obstacle to flexibility and adaptation since the
welfare of too many depends on the job and income security of one
person. And with family revolution is emerging new life course patterns,
much less linear, homogeneous, and predictable. The upshot is that new
risks and resource needs are bundling heavily among youth and in child
families. The challenge, again, is to redefine social policy so that it nurtures
strong and viable families and protects those most at risk. If those most at
risk happen to be children and youth, the urgency of reform is so much
greater because it is today's children who will be tomorrow's productive
base - or, in the case of failure to reform, tomorrow's expensive social
problems.
As was always the case, access to paid work is families' single best
welfare guarantee. The difference today is that emerging family types face
new and severe trade-offs between employment and family obligations;
trade-offs that are better resolved by access to services than traditional
income maintenance. Postwar 'welfare capitalism' functioned well because
labour markets and families themselves were the principal source of
welfare for most citizens, most of their lives. Presently, both labour
markets and families create widespread insecurity, precariousness, and
often social exclusion and this means obviously added burdens on public
social protection schemes. The single greatest challenge we face today is
how to rethink social policy so that, once again, labour markets and fami-
lies are welfare optimizers and a good guarantee that tomorrow's adult
workers will be as productive and resourceful as possible.
The emerging risk and needs structure is in stark contrast with the exist-
ing, highly aged-biased, emphasis of most contemporary European welfare
states. Our social policy challenge implies a rethinking of the life cycle, of
the balance between income transfers and services and, more generally of
the guiding principles of social justice and equality. If Europe aims to max-
imize its competitive position in the world economy and, at the same time,
commit itself to full employment, new inequalities will be difficult to
avoid. The burning question is, what do we do about them? The most
436 A Welfare State for the Twenty-First Century

fundamental conclusion that emerges is that we must re-think the concept

of social rights. The existing principle of guaranteeing maximum welfare
and equality 'for-all-here-and-now' cannot be consistent with the emer-
ging economic imperatives. If relatively low incomes, bad jobs, or precar-
ious employment cannot be avoided (and might arguably even merit
encouragement), there is the issue of how to soften their welfare effects in
the short run. However, the core welfare issue must focus on long-run
dynamics, on citizens' life chances. Low wages or bad jobs are not a threat
to individuals' welfare if the experience is temporary; they arc if individu-
als become trapped. In brief, the core principle of social rights should be
redefined as effective guarantees against entrapment, as the right to a
'second chance'; in short, as a basic set of life chance guarantees.

The Diversity of European Welfare Regimes

These challenges to social protection are not equally severe across all
European welfare systems. We must avoid two errors. One is to ignore the
great diversity of European welfare systems. A second is to remain too nar-
rowly preoccupied with just the welfare state. Society's total welfare
package combines inputs from the welfare state proper, markets (and espe-
cially labour markets), and families. Many view the welfare state as over-
burdened, inefficient, threatened or, simply, malfunctioning. Some
advocate that it be radically slimmed, others that it be strengthened, and
still others that it be overhauled. Whatever opinions are put forth, there is
an implicit view of what, alternatively, ought to be the role of markets and
families. Those who advocate 'decentralization' basically suggest a greater
responsibility to families and the 'local community'; those who champion
privatization assign welfare to the cash-nexus but, in practice, the result
would also be a greater burden on many families. To capture the interplay
of state, family, and market, it is useful to cast our analysis in terms of
welfare regimes.
Turn the clock back to the postwar decades, and we would identify two
distinct European welfare regimes. The Nordic-cum-British was largely
general revenue financed, stressing universal, flat-rate benefits. The other,
prevalent in Continental Europe, emphasized contribution financed and
employment-based social insurance. As social protection systems evolved
and matured by the 1970s, differences emerged much more clearly. The
Nordic countries branched out into a unique model, first by adding an ear-
nings-related component to flat-rate 'citizens' benefits and, secondly, by
shifting the emphasis from income transfers towards servicing families,
stressing employment-activating policies and, above all, women's integra-
tion in the labour market. The Nordic model may be famous for its gen-
erosity and universalism, but what really stands out is its employment-bias
 G0sta Esping-Andersen 437

and its 'de-familialization' of welfare responsibilities. Britain, in contrast,

gradually moved towards more targeting and income testing, assigning more
welfare responsibilities to the market - thus converging with North
America. The hallmark of most Continental European countries is how little
has changed. They remain firmly wedded to employment-based, contribu-
tory social insurance but have extended coverage to residual groups via ad
hoc income-tested programs (like the RMI in France or the pensione sociale
in Italy). A second defining feature of Continental European, and especially
Mediterranean, social protection systems is their strongfamilialism, i.e. the
idea that families hold the principal welfare responsibility for their members,
be it in terms of sharing incomes or in terms of care needs. Hence, these
countries are uniquely committed to protecting the male breadwinner (via
insurance and job protection), highly reliant on social contributions for
financing, and comparatively very underdeveloped in social services.
Such differences mean that we cannot forge general strategies for social
reform at an abstract pan-European level. It also follows that we shall err
terribly if we limit our attention solely to governments' welfare role. I
believe it is futile to discuss whether we should reduce public social com-
mitments without considering what effects such might have on family and
market welfare delivery. A strategy of 'decentralizing' welfare to commu-
nity and family may sound appealing to many, but how will it affect
women's double role as workers and care-givers? Alternatively, a scenario
of more markets may appear more efficient, but if this means that large
populations will be priced out of the welfare market, do potential
efficiency gains clearly outweigh potential welfare losses? Reforming
European welfare commitments for the coming century implies regime
change, that is reordering the welfare contributions of markets, families
and state so that the mix corresponds better to the overall goals we may
have for a more equitable and efficient social system.

The Transformation of the Social Risk and

Needs Structure

Most European social protection systems were constructed in an era with

a very different distribution and intensity of risks and needs than exists
today. With the main exception of Scandinavia (and Britain), the allocation
of welfare responsibilities between state, market, and families has not
changed dramatically over the past fifty years. What has changed, however,
is the capacity of households and labour markets to furnish those basic
welfare guarantees that once were assumed. Indeed, both now generate
new risks and, equally importantly, also new needs.
The postwar model could rely on strong families and well-performing
labour markets to furnish the lion's share of welfare for most people, most
438 A Welfare State for the Twenty-First Century

of their lives. Until the 1970s, the norm was stable, male breadwinner-
based families. With few interruptions, the male could count on secure
employment, steady real earnings growth, and long careers" followed by
a few years in retirement after age 65. Women would typically cease to
work at first birth, and were thus the main societal provider of social care
for children and the frail elderly. Unemployment and poverty were limited
among prime-age households, and the main social risks were concentrated
at the two 'passive' tail-ends of the life cycle: in large child families, and
among the aged. Hence, besides health care, European welfare states came
to prioritize income maintenance and, par excellence, pensions.
The problem behind the new risk configuration is that it stems primar-
ily from weakened families and poorly functioning labour markets. As a
consequence, the welfare state is burdened with responsibilities for which
it was not designed. A well-functioning welfare state for the future must,
accordingly, be recalibrated so that labour markets and families function
more optimally.

Family Risks
Families today have far fewer children, yet child poverty is rising. Ongoing
changes in labour markets and families affect young households most
severely. The reasons are well-documented: Firstly, unemployment and
insecurity are concentrated among youth and the low-educated (males in
particular). The incidence of 'no-work households' is sometimes alarm-
ingly high, and this is one symptom of an emerging new polarization:
Homogamy means that unemployment, precariousness, and poverty
'comes in couples'. Youth often face serious delays in 'getting started', in
making a smooth transition from school to careers, or in forming inde-
pendent families; southern European youth can often anticipate three
years' unemployment and this, obviously, is one cause of falling birth rates.
The consequences of youth precariousness vary nonetheless depending on
social policy approach. The unemployed- particularly youth- face severe
revenue problems in many EU countries. Southern Europe's 'familialism'
implies that most unemployment is absorbed by parents, but this is not the
case in northern Europe. Where, as in Denmark, unemployed youth are
typically entitled to social benefits, poverty is modest; where, as elsewhere,
they rely primarily on assistance, poverty is widespread.
The new risks are also a function of the rise of 'non-standard' households.
[ ... ] Two types have, in particular, become prominent: the 'no work-
income' and the single parent household. Both run high risks of income
poverty. No-work households are generally transfer dependent, often
relying on social assistance. Except in Scandinavia, child poverty is alarm-
ingly high in lone parent families. Yet, across all kinds of child families- in
 G0sta Esping-Andersen 439

two-adult families as well as in single parent households- the strikingly best

safeguard against poverty is that mothers work. The low levels of single-
parenthood poverty in the Nordic countries are, in fact, less due to gener-
ous social transfers than to adequate work incomes made possible by child
care. Simply put, mothers' employment is a very effective antidote to the
risks that come with family instability and labour market precariousness. If
this is the case, the single most pressing social policy issue has less to do with
income maintenance and much more to do with servicing working mothers.
The new distribution of life cycle risks is most evident when we contrast
younger and older households. The economic well-being of child families
has been eroding while, concomitantly, it has improved among the elderly.
High incomes have allowed the elderly to live independently and, coupled
to rising longevity, this implies that the chief needs among the aged have
shifted towards caring services. And herein lies one of the key epochal trans-
formations: the main welfare needs within young and aged households have
less to do with improved income transfers and more to do with access to ser-
vices. Among the ultra-aged in particular, the pressing need is for home-help
services and care centers. Within child families, poverty can best be stemmed
by enhancing parents' labour market prospects and earnings capacity.
Notwithstanding, most European welfare states remain uniquely biased
in favour of the aged rather than youth; in favour of income maintenance
rather than services. The Nordic countries are an exception as far as ser-
vicing is concerned; and with Ireland, they remain the exception in priori-
tizing young families. 1 Put differently, society may be overspending on
passive maintenance and underinvesting in the kinds of resources that
strengthen citizens' capacities.
Services can, besides government, be provided by the market or families
themselves. In Europe, however, marketed family services, such as private
day care, are generally priced out of the market. 2 In brief, where govern-
ment provision (or subsidization) is absent, as in most of continental and
especially southern Europe, families themselves must shoulder most of the
caring burden of children and the elderly. The upshot of familialism is of
course to worsen women's incompatibility between family responsi-
bilities and paid work and, indirectly, to weaken families' capacity to
autonomously combat poverty. But since, in effect, young cohort women
today do work, traditional familialism mainly provokes another perverse
result, namely a de facto low-fertility equilibrium!

Welfare Asymmetries across Generations and

the Life Course

We should be careful to avoid a simple zero-sum trade-off between the

welfare of the aged and the young. There exists, of course, some evidence
440 A Welfare State for the Twenty-First Century

that the rising welfare of retirees occurs at the expense .of youth and
children, at least in countries (like the U.S. or Italy) where improvements
in aged welfare have not been accompanied by an upgrading qf family poli-
cies. Also, it is clear that income distribution trends in most countries
favour the aged. The median retired household can usually count on a dis-
posable income of at least 80 per cent of the national median. 3
Certainly there remain pockets of poverty among the aged, typically
concentrated among widows and persons with problematic contribution
histories. Old-age poverty tends to be higher in countries which, until
recently, had large rural populations (Greece, Italy, and Spain, for
example). It is also well known that retirement income declines somewhat
with age. Nonetheless, all indications are that the large mass of pensioners
in most countries have sufficient (and sometimes perhaps 'excess')
incomes, especially in light of reduced consumption and household capital
expenditures, and because an often very large proportion (the EU average
is 75 per cent) of the elderly own their home outright. What is more, in
many countries retirees enjoy preferential tax treatment and are generally
exempt from social contributions.
The economic well-being of today's elderly is the result of a unique com-
bination of factors that produced high retirement income and lifetime asset
accumulation. 4 [ ••. ] The average household at age 65 possesses wealth
that equals 4-5 times its annual income stream. And, although we have
only scattered nation-specific evidence, there are indications of pension
overprovision in some countries. My own analyses of Italian family expen-
diture data indicate a 30 percentage point excess of income over expendi-
ture in the average retiree household. A recent study by Kohli on
intra-family money streams indicates a huge dominance of transfers from
the aged (70+) to their children and grandchildren: 24 per cent of income
is transferred to their children; almost 15 per cent to their grandchildren. 5
Such downward intra-family redistribution surely varies by income
decile and by nation. Moreover, excess revenues reflect not just pension
generosity but also home ownership, private assets, and lower consump-
tion needs. Still, where it exists the redistributive effect must be considered
perverse if the welfare of youth is becoming a function of the riches of their
retired forebears. Indeed, it is doubly perverse in the sense that pay-as-
you-go pensions are financed by the working age population. The welfare
state was presumably built in order to even the playing field, but here is a
case where it helps re-establish inherited privilege.
Any debate on reforming pensions must consider the life course speci-
ficities of past, current and especially future retiring cohorts. If current
retirement cohorts are generally well-off it is because they are the main
beneficiaries of Golden Age capitalism. Firstly, most of their careers
spanned decades of strong productivity and earnings growth with low
unemployment among prime-age males. Secondly, with the regulation of
 Gosta Esping-Andersen 441

seniority rights and the emergence of efficiency wage systems, the

age-wage profile was decoupled from productivity- hence rising earnings
even when productivity declines with age. 6 Thirdly, today's pensioners are
the chief beneficiaries of pension upgrading in the 1960s and 1970s.
Fourthly, although there has been a decline in real earnings growth in
recent decades, the financial returns on investments have risen.
A major reform of present pension systems confronts the dilemma that
future retirement cohorts are unlikely to amass similar lifetime assets,
either through individual initiative (work and savings) or through the
redistributive mechanisms of public pension schemes. Or, more likely,
future retirement cohorts will, if uncorrected, become far more dualistic,
possibly even polarized in terms of life chances. Today's youth often face
serious delays in passing to stable employment: besides longer schooling,
a large proportion can anticipate protracted and maybe frequent unem-
ployment combined with more precarious employment. This correlates
with skills and education. Secondly, as deregulation weakens the security
of the prime-age 'insider' workforce, career interruptions and redundan-
cies are increasingly likely, among the less skilled in particular. 7 Thirdly,
today's young cohorts are unlikely to benefit from decades of powerful
real earnings growth and, if productivity bargaining becomes increasingly
decentralized, seniority-based wage systems may weaken. Again, there is
a clear trend towards more inequality in skills-based earnings power.
Fourthly, these are the cohorts which will fully experience the impact of
ongoing pension reform in EU member countries, with the shift towards
more individualized and actuarially based entitlement calculations. And,
yet again, this will favour the strongest workers in the labour market.
If de facto retirement age will remain at 59-60, today's young cohorts will
be hard put to cumulate a minimum of, say, thirty-five contribution years
towards the basic pension. There cohort-specific disadvantages are,
nonetheless, offset by three key factors: One, their higher educational attain-
ment and superior cognitive skills imply greater adaptability and ability for
retraining across their careers. As they age, an investment in retraining may
appear more logical than, simply, early retirement. The stronger is the skills
and educational base of young workers today, the greater will be the pay-off
when they eventually age. Two, each new retirement cohort shows sharp
improvements in health and longevity, and all indications are that this will
continue. Already today, the typical 65-year-old male can expect another
eight to ten disability-free years. Those who are young now will be able to
count on many more disability-free years. Three, the ongoing growth of
women's lifetime employment implies that future retirement households
will be able to double up pension savings or, in the case of divorce, women
will increasingly have independent pension entitlements.
A strategy of resolving the looming pension crisis by radically reduc-
ing pension entitlements today would be counterproductive in the long
442 A Welfare State for the Twenty-First Century

run if, as is very possible, future retirees will look more like their
forebears in the 1940s or 1960s. If, now, pensioner households have too
much income, it would be a more equitable, and certainly more prudent
policy to simply tax away the excess. 8 If, then, a major reduction of publi~
pensions is a suboptimal long-run strategy, our attention must shift to an
alternative policy. As virtually all agree, the key to long-term sustainabil-
ity lies in population growth and, more realistically, in raising participa-
tion rates. 9

[ ... J

The Link to Labour Markets

The new welfare policy priorities that emerge from the preceding analysis
boil down to one basic issue, namely that social policy must maximize citi-
zens' productive resources and life chances. It is important to recognize
that any 'work-friendly' policy must align itself to the dynamics of a ser-
vices-led economy.
The service economy is tendentially dualistic, combining knowledge-
intensive professional and technical jobs with low-end, low value-added,
and labour intensive, servicing. The former are concentrated in
business and some social services (teachers, doctors); the latter in sales,
consumer, and also some social services (restaurant workers, home helpers,
nursing assistants). Europe, like North America, is very dynamic as far as
business services are concerned. Europe's development of social services is,
excepting Scandinavia, sluggish. And European private consumer services
are stagnant if not actually in decline.
Contrary to popular belief, services are everywhere biased in favour of
skilled and good jobs. The dilemma, nonetheless, is that a significant ameli-
oration of mass unemployment means stimulating also low-productivity
services, and this means that we must rely also on personal consumer ser-
vices and social services. The good news is that these are sheltered from
international trade competition; the bad news is that they compete directly
with unpaid household 'self-servicing'. The problem is that many services
are extremely price sensitive. They will grow if, as in the United States,
wages and costs are relatively low, and thus affordable, or if, as in
Scandinavia, they are subsidized by government. 10
Herein lies the great European policy dilemma. The task of forging a
more equitable and efficient social protection system, as outlined above,
pales in comparison to the trade-offs involved in stimulating employment-
intensive services. Yet, no solution exists unless we realize that social pro-
tection and service employment are directly linked. The gist of the problem
is simple, namely that strong service growth implies more taxation if we
 G0sta Esping-Andersen 443

emphasize public services or, alternatively, more wage inequality (and

lower fixed labour costs) if we emphasize market services.
Most European welfare states and industrial relations systems have com-
mitted themselves for decades to a degree of security for the prime age
(male) worker, and a degree of earnings and income equality, that is not
compatible with a large, low-end service economy. Moreover, the existing
financial pressures on most European welfare states today make it difficult
to replicate the Nordic countries' social service expansion twenty years ago.
This dilemma is now well recognized within EU member states. Witness
the extension of targeted wage subsidies (usually aimed at youth and con-
tingent on training), and recent EU-level proposals to stimulate labour
intensive services through a reduction of the VAT. 11 There is virtually uni-
versal agreement that strong wage compression, a high tax wedge (espe-
cially through mandatory contributions) and, perhaps, overly rigid
employment regulation block lower-end services. The great dilemma,
though, is that the kind of tout court, American-style, deregulation that
would fuel such jobs is unacceptable to European policy-makers. 12
The stagnation of low-end services in Europe is directly linked to the
nexus between families and social protection. On one hand, employment-
based social insurance systems impose very high fixed labour costs whose
marginal effect is especially strong in low-wage, low-productivity jobs: a
high tax-wedge de facto prices them out of the market. On the other hand,
the lion's share of such service jobs compete with households' own inter-
nal servicing capacity. So, where women's employment rate is low, house-
holds service themselves; where most women work, households' demand
for outservicing increases. In brief, the double earner family externalizes
its servicing needs and creates jobs. 13
As discussed above, dual earner families require services to begin with
and herein lies the gist of a win-win policy scenario, namely that more social
care services are a key instrument in combating poverty and a potentially
very effective employment multiplier. Markets cannot generally guarantee
affordable, high-quality care for small children or the aged, and high-
quality day care is crucial if our aim is to optimize the life chances of chil-
dren. In other words, public subsidies or direct public delivery is basically
a first precondition. Here, in other words, is a prime rationale for shifting
welfare priorities in favour of servicing families. An investment in women's
ability to work is also an investment in family welfare and in job creation.
Since the traditional welfare state defined its obligations primarily in
terms of income maintenance for those unable to work, social protection
has been viewed as 'unproductive' consumption and problematic redistri-
bution. This 'income maintenance' philosophy has, by and large, been
carried over in addressing contemporary social problems. Yet, I have tried
to make a strong case that servicing families is the single most effective
policy against poverty, welfare dependency, and also an investment in
444 A Welfare State for the Twenty-First Century

human resources at the same time. In brief, family services should be

regarded not as merely 'passive consumption', but also as active invest-
ments which yield a long-run return.

[ ... ]

The social advantages of a low-end labour market are clear: it provides

easy-entry jobs for youth, immigrants, low-skilled workers, and returning
women. Whereas in much of Europe now, the transition from school to
work can last for years, and where immigrant workers have difficulty inte-
grating themselves into the official economy, and where low-skilled
workers are increasingly condemned to unemployment, low-end services
could play a very positive function if, that is, they do not become lifelong
traps. A brief spell of low earnings and unrewarding work will not, by defi-
nition, harm people's life chances -to the contrary if they provide bridges
into the labour market or help supplement income. The criteria by which
we must judge the costs and benefits of low-end jobs cannot be based on
snapshot notions of equality for all, here and now. The only reasonable
benchmark is life course dynamics.

[ ... ]

A low-end labour market need not be incompatible with a new welfare

state scenario. Indeed, one might restate the point in this way: no win-win
welfare model for Europe will be possible unless we accept a different notion
of equality. We have become accustomed to an overly static, here-and-now
concept of redistributive justice: the welfare state must assure that all citi-
zens are protected always. A far more realistic principle would be that our
future welfare state accepts, perhaps even sanctions, inequalities here and
now in order to maximize better life chances for all. If the 'knowledge
society' and the modern family create inequalities, the most effective social
policy would be one that guarantees that citizens will not become trapped
into social exclusion, poverty, or marginality across their life course.

A European Welfare State for the Twenty-First Century

[ ... ]

The issue before us has to do with the long term, with the kind of society
that our children will live in. And if this means redefining welfare prior-
ities, we cannot escape the need for some common, basic criterion of what
is desirable, given known constraints. What are the common goals to be
reached? What do we seek to accomplish? What are the first principles that
 G('JSta Esping-Andersen 445

must guide policy-making? What, in brief, can be our common yardstick

of justice, of equality, of collective guarantees and individual responsibil-
ity? And, once agreed upon, how can our commitments to equity be best
put to use in order to maximize efficiency?

Basic Criteria for Policy Choice

We must probably assume that most EU countries have reached their
maximum limits of public expenditure and taxation. In fact, convergence
towards the Maastricht criteria compels expenditure reductions, not bold
and expensive reform vistas. The need for restrictive policy already limits
the degree to which nations can promote the knowledge society, be it
investments in infrastructure, education, training, or in improved social
welfare.
The resource dilemma worsens considerably when we take into account
the new inequalities and social risks that knowledge-based economies
inevitably provoke. The evidence is by now clear that the social opportu-
nity structure, rewards, and life chances create new winners and losers and,
most likely, a deepening gulf between those with skills and those without.
The new service economy can create jobs, but it cannot guarantee good
wages and jobs for all. The fabric of our social protection systems will
therefore be put to a severe test in terms of nurturing efficiency while
securing social cohesion, welfare and equity. We must probably accept two
ground rules for policy-making. We are compelled tore-prioritize the allo-
cation of our existing welfare package. One, we cannot pursue too one-
dimensionally a 'learning society', a human capital-based strategy, in the
belief that a tide of education will lift all boats. Such a strategy inevitably
leaves the less endowed behind and, equally importantly, it requires that
we redistribute resources and welfare to families and, especially, to chil-
dren. The modern family is an integral part of the new economic scenario,
and its welfare risks are mounting. Children's ability to make the best out
of schooling depends not just on the quality of schools, but also on the
social conditions in their families; women are today often more educated
than males but will have difficulty putting this to maximum use without
generous leave programs and care services.
The second ground rule is that new social policy challenges cannot be
met by additional taxation or spending as a percent of GDP. We must
accordingly concentrate on how to improve upon the status quo.
Entitlement conflicts and equity issues are easily subdued when the total
pie grows. When, instead, we must divide the pie up differently, a clash of
interests is hard to avoid.

[ ... ]
446 A Welfare State for the Twenty-First Century

Principles of Reform: Towards a Social Investment Bias

Contemporary policy slogans such as work-friendly or wpm~n-friendly

benefits, lifelong learning and social investment strategies, or the popular
distinction between active and passive measures, all have in common an
implicit distinction between policies that somehow enhance or ciiminish
citizens' self-reliance and capacities, economies' efficiency and productiv-
ity. Such slogans reflect a growing unease with the existing bias of com-
pensating the losers of economic change with passive income maintenance,
of reducing labour supply, or of parking surplus workers on public bene-
fits. The new policy vocabulary mirrors a growing consensus that social
policy must become 'productivist', to coin an expression traditionally used
in Swedish policy-making. That is, social policy should actively mobilize
and maximize the productive potential of the population so as to minimize
its need for, and dependence on, government benefits. [ ... ]
Some policies can be regarded as an investment in human resources,
capabilities and self-reliance; others, while welfare enhancing, are clearly
passive income maintenance. Obviously, such a distinction is - and must
be- ambiguous. Unemployment benefits appear 'passive', but they do aid
workers in their search for new employment, and they do improve the
labour-matching process. Similarly, child allowances add to families' con-
sumption power but they do also diminish poverty and thus enhance chil-
dren's future life chances. The important point to stress here is that
contemporary policy fashion tends to stress far too narrowly the wonders of
'activation' policies while ignoring income maintenance. The need for
'passive' measures will not disappear even in the best designed, produc-
tivist welfare state: there will always be people and groups that must
depend primarily on redistribution, and activating citizens' productive
potential often necessitates income subsidies. Regardless, a first principle
of any win-win strategy must be that it prioritizes social investment over
passive maintenance. 14 A second, derivative principle is that highest prior-
ity should go to social investments in children - who are our future pro-
ductive potential.

Towards a New Welfare State Design

[ ... ] The preceding analysis points to a set of concrete policy priorities:

• maximizing mothers' ability to harmonize employment and children

• encouraging older workers to delay retirement
• socializing the cost of children mainly by prioritizing investments in
children and youth
• redefining the mix of work and leisure across the life cycle
 G0sta Esping-Andersen 447

• reconceptualizing 'equality' and basic social rights as being primarily a

question of life chance guarantees

This will, in the most general terms, imply a greater emphasis on pro-
tecting young households, and a stronger emphasis on servicing families.

The Limits of a Learning Strategy

Accelerating the pace towards a knowledge- and skill-intensive economy

implies heavy investments in education, training and cognitive abilities.
Those with low human and social capital will inevitably fall behind and
find themselves marginalized in the job and career structure. The problem
is a double one because such an economy requires not only highly skilled
producers, but also users, of knowledge. It is accordingly imperative that
educational investments be as broad-based as possible. As so much recent
research has shown, concrete expertise may be less salient than possessing
the essential cognitive abilities required to learn, adapt and be trainable in
the first place. Activation measures, such as training or retraining, will have
a low payoff if workers' initial cognitive capacities are low. They are much
more likely to pay off if they are designed around a more comprehensive
and individualized 'activation package'.
One pervasive problem across Europe today is that the stock of low-
educated and low-skilled 'excess' workers can be very high- in part because
of delayed agricultural decline, in part because of heavy job losses in tradi-
tional, low-skill industries, and in part because of an often wide gulf in edu-
cation between generations of workers. A massive investment in learning
will probably reap most of its benefits among younger cohort workers. The
dilemma, then, is how to manage the present stock of mostly older, low-
skilled males. Early retirement has, so far, been the leading policy and it may
have been the only realistic policy so far. Lifelong education is an attractive
alternative, but may be overly costly and ineffective if the main clientele are
older, low-skilled workers. A third policy would be to deregulate job pro-
tection and seniority wage systems so as to align wages closer to produc-
tivity differentials- as is generally American practice. This would cause the
incomes of youth and older workers to decline, possibly sharply so.
There exists no ready-made formula for a win-win policy in this regard-
largely because the problem varies dramatically from country to country. An
obvious first step is to assure that future generations of workers will have a
sufficient skill and cognitive base so that the dilemma eventually evaporates.
The problem is the second step, namely what to do with the existing stock.
If we are assured that early retirement in the past decades has succeeded in
managing what was a transitory glut of elderly low-skilled workers, the
dilemma resolves itself and the process of curtailing early retirement can be
448 A Welfare State for the Twenty-First Century

accelerated. If not, we are left with a mix of continued early retirement, pos-
sibly retraining, or downward wage adjustments (or re-employment). The
social partners are clearly unwilling to accept across-the-bo;::rd .deregulation
of job security and wages, but it might be an efficiency gain to prolong the
employability of older workers by subsidizing part of their wage bill. This
is especially the case if, as often occurs, retired workers return to work in the
undeclared shadow economy. Just as in the case of youth workers, very high
fixed labour costs help price them out of the market.
A lifelong learning strategy can be effective when the basic cognitive
skills are already present, and this means that we need to make sure that
coming generations have the resources required to benefit from invest-
ments in training and education across their lifetime. In many EU coun-
tries, the existing generational gap is enormous and it is, therefore,
imperative that this is not reproduced in the future.

Equitable retirement

The principal problem in today's overly aged-biased welfare systems is that

they provide incentives with inequitable results. Workers easily collude
with employers to retire early because they will gain little or nothing by
postponing exit. At the same time, the pay-as-you-go nature of pension
schemes means that retirement at high benefits is heavily financed by the
active workforce. Reinstating actuarial incentives to delay retirement
would clearly be more equitable and efficient, and it would vastly improve
upon the transparency of costs involved in retiring out older workers.
Since workers can expect to be disability-free until age 75, raising and
flexibilizing retirement age to 65 in the medium-term, and possibly 70 in
the long term, via incentives can be positive for individual workers and also
for welfare state finances. Abolishing mandatory retirement age and devel-
oping flexible mechanisms of gradual exit could be pursued immediately.
Longevity implies that the share of ultra-aged (80+) just about doubles
every two decades. And this means costly and intensive servicing and care
needs. If, as I have suggested, retirement households often enjoy 'excess'
income and wealth which, if not taxed, generates perverse redistribution,
an incentive-neutral and far more equitable policy would be to earmark
taxation of pensioners to their own collective caring needs. Such a taxation
mechanism, even if highly progressive, is also likely to be distributionally
neutral across pensioner households (the rich generally live longer).
Altering the welfare and work nexus among the aged cannot be an end
in itself, but is primarily a means to achieve more intergenerational equity
and a more efficient utilization of public resources. [ ... J There are really
only two genuinely effective policies to combat the long-term financial
consequences of aging: sharply reducing pension entitlements, or raising
 G0sta Esping-Andersen 449
participation levels. Reducing entitlements means stimulating private
pension pla~s for larg~ part~ ~f the .popu~ation .. The prob.lem wi.t~ a
private-dommated penston m1x 1s that It rephcates hfe course mequahues,
and the more that private plans grow, the more is it likely that we shall see
downward pressures on public benefits targeted to low-income house-
holds. Even if a system dominated by private schemes augments national
savings rates (and thus 'efficiency'), they will possibly lead to non-Paretian
outcomes: the weakest may end up worse off. Identifiable trends in labour
markets also threaten the viability of a predominantly private pension
structure since declining job security and more intense inequalities will
negatively affect workers' capacity to accumulate individual savings.

Harmonizing Family Welfare and Labour Markets

Postindustrial, service-dominated labour markets cannot avoid producing
new inequalities. One source of dualisms comes from systems of strong pro-
tection of stably employed 'insiders' with a possibly growing clientele of
'outsiders', such as precariously employed temporary workers or the
unemployed. Insider-outsider cleavages tend to affect youth and women
workers most negatively. A second source of new inequalities comes from the
rising relative wage premium of skills. And a third will emerge if, and once,
labour-intensive consumer services grow. The standard trade-off between
jobs and inequality, epitomized by the US-Europe comparison, is far too
simplistic, but it is difficult to imagine a return to full employment in Europe
unless also low-paid and often low-quality service jobs are encouraged.
European industrial relations systems and welfare policy are generally
premised on a commitment to wage equality and job security. Hence wage
minima, contractual regulations, and high fixed labour costs are difficult to
touch. There are two prevailing arguments against a 'low-wage labour
market' through deregulation. The first, and most convincing, is that US-
style deregulation not only creates huge inequalities, but also that it threat-
ens the basic fabric of trust and cooperation built into European models of
social partnership. Europe's tradition of broadly negotiated 'efficiency
wage' arrangements is, to a great degree, its comparative advantage. The
second, and far less convincing, argument is that a low-wage service
economy poses a direct threat to families. The defence of existing regula-
tory practice is often premised on the traditional assumption that families'
welfare depends almost exclusively on the wages, job security, and accu-
mulated entitlements of the male breadwinner.
This family model is in rapid extinction. Unfortunately, some of its latter-
day successors, like single parent households, are at high risk, but much less
so if the parent is able to work. Two-income families enlarge the tax-base
and minimize the welfare lacunae that prevail when wives' entitlements are
450 A Welfare State for the Twenty-First Century

derived from the husband. And the dual-earner family is the single best
strategy to minimize child poverty. Two earners are moreover an effective
household buffer in the eventuality of employment interruptions. It
follows that a knowledge-society strategy premised on investments in edu-
cation must be coupled to a recast family policy, the cornerstones of which
must be guarantees against child poverty. Such guarantees must centre on
affordable child and aged care, on adequate child benefits, and on maternity
and parental leave arrangements that minimize mothers' employment dis-
ruption and maximize their incentive to have children. In the long xun,
therefore, the most persuasive 'win-win' strategy is to redirect resources to
child families if our goal is to sustain our long-term welfare obligations
towards the aged while effectively combating social exclusion.
Whether the externalization of family care is placed in the market or
directly furnished by public agencies is unimportant, as long as standards
and affordability are guaranteed. [ ... ] There [is] a strong case for priori-
tizing high standard childcare services to the weakest families since optimal
quality care may offset inequalities that stem from uneven social capital
within families.

Life Chance Guarantees rather than Here-and-Now

Equality for All
Any assessment of the pros and cons of heightened labour market inequal-
ities must be premised on a dynamic, life chances perspective and not, as is
typically the case, on a static view of fairness and equality. Low-end, low-
paid jobs, even at near-poverty wages, are not by definition a welfare
problem. The acid test of egalitarianism and justice is not whether such
jobs exist or what share of a population is, at any given moment, low-paid.
Low-end employment would be compatible with 'Rawlsian' optimization
if it does not affect negatively people's life chances. The issue here is entrap-
ment and mobility chances.
On this score, unfortunately, research has not yet provided much undis-
putable evidence. We do know that a sizeable minority of low-wage
workers in the USA remain trapped for many years (a higher rate than is
the case in Europe where, comparably, low-wage jobs are much rarer). And
those most likely to become trapped are the low-skilled. We also have fairly
good evidence that, net of family origins, skills and education constitute the
single best guarantee of mobility. Hence, expanding low-wage service jobs
in tandem with heavy investment in skills would, for the majority, consti-
tute a win-win policy. The problem lies in the risks of entrapment among
the minority which, perhaps, is 'untrainable' or, for various other reasons
excluded from mobility. It is precisely for this reason that a 'learning strat-
egy' needs to be accompanied with a basic income guarantee strategy. 15
 G0sta Esping-Andersen 451

N onethcless, the problem of inequality would disappear if the welfare state

extends a basic life chances guarantee to citizens: a guarantee of job mobil-
ity via education or, alternatively, a guarantee that condemnation to a life of
low wages does not imply income poverty throughout the life course. 16
At the risk of repetition, the greater is the investment in social resources
among children, the greater will be the later pay-off in terms of lifelong
learning abilities and readjustment, and the smaller will be the burden of
compensating the 'losers'.

Leisure and Work

The kind of 'win-win' scenario presented above appears heavily biased
towards work. Notwithstanding sluggish growth, European GDP per
capita is now 50 per cent greater than before the 1970s oil shocks. And such
wealth ought to translate into more leisure time. [ ... ]
Contemporary European political debate is dominated by the contro-
versy over the 35-hour week, promoted for its purported positive effects on
job-creation. If, indeed, its main goal is to stimulate employment, the strat-
egy is at best controversial and, at worst, self-defeating. If the goal is to
extend leisure time, the question that few have posed is, why focus on weekly
or monthly, rather than on life-time distributions of leisure and work?
The irony is that the call for a shorter work-week follows several
decades of significant work-time reductions on a yearly and a life-cycle
basis. The typical EU member country's annual working hours is now
down to 1,600-1,700 hours, mainly attributable to the spread of part-time
work, vacations, holidays, and paid leave arrangements, and - unfortu-
nately - also to unemployment and exclusion from the labour market.
Much more dramatic are reductions in lifetime employment. The average
(male) worker in 1960 would work for roughly forty-five years; his
contemporary equivalent will work perhaps thirty-five years. It is not
altogether clear to what extent more leisure is voluntary and desired, and
to what extent it reflects inability to attain gainful employment. In the case
of women, most leisure is often unpaid housework.
Should we favour more leisure on all accounts? Fewer weekly hours,
annual hours and lifetime hours? If so, do we agree on the associated eco-
nomic opportunity cost? Is it equitable if the cost of leisure for some is
shifted onto the shoulders of others? Do our leisure-time arrangements
adequately maximize our productive potential? Can we envision alterna-
tive, more equitable and efficient, distributions between leisure and work?
These are questions that almost no one raises in the current social policy
debate, but they are crucial for any consideration of a new welfare order.
To some extent, the prevailing leisure-work mix is due to intended policy
effects, like maternity or parental leave. But, to a large extent, it is also due
452 A Welfare State for the Twenty-First Century

to unintended consequences of policies designed to (or unable to) solve

completely different problems. Early retirement and unemployment are
in
obvious examples. Leaving aside 'unwanted' leisure, do we _fac~ have an
adequate understanding of what would be citizens' optimal leisure-work
preferences? I think not. Early retirees may be individually content to exit
prematurely, given constraints and incentives. But if these incentivts are
societally harmful and were thus removed, would the desire to exit remain?
Would Italian women's employment rates follow Holland's if restrictions
against part-time work were eliminated? Or would Dutch women's working
hours approach full-time if, as in Scandinavia, affordable day-care were
available?
The chief problem is that past policy has resulted in overly rigid
leisure-work arrangements that permit individual workers little choice as
to how to optimize their own mix. At the same time, work-leisure incen-
tives for some groups are gained at a cost to others. Basically, existing prac-
tice reflects a social order that is no longer dominant. We have, so far,
bundled free time within the working week, within stipulated vacations
and holidays, and at the tail end of our lives. If our goal is to optimize life
chances in a dynamic sense, such an order may not be compatible with the
exigencies of an evolving knowledge society.
Emerging trends in family and labour market behaviour suggest that citi-
zens' demand for leisure and work may be spaced out across the life cycle
in a radically different manner than so far. The case of paid maternity and
parental leave is one of the few examples of policy that seeks to address
emerging incompatibilities. A full-fledged 'lifelong learning' model will
require similar arrangements, namely paid education or training leaves.
There is a strong case to be made in favour of the idea floated within Nordic
social democracy in the 1970s [ ... ] to rethink the work-leisure mix in
terms of life-time 'leisure accounts', that citizens (after a minimum number
of contribution years) can draw upon their retirement savings accounts at
will, be it for purposes of education, family care-giving, or pure vacation.
There is, in principle, no reason why retirement should be concentrated in
older ages. A radical version of the win-win scenarios developed
above would, in fact, call for the abolition of retirement as we know it and
redefine it as an issue of pacing individuals' life course. If some are more risk
averse, they will opt for educational leaves or minimal career interruptions;
if some are more drawn towards leisure, they will favour interruptions. The
bottom line is that citizens have much greater individual command over
how to design their own life course, over how to mix work, education,
family, and free time. If the financial consequences are transparent, an indi-
vidual will be able to rationally decide whether the choice of time off at age
35 against one year less of retirement is advantageous or not.

[ ... ]
 G0sta Esping-Andersen 453

Notes

Extract from 'Ageing Societies, Knowledge Based Economies, and the Sustainability
of European Welfare States', report prepared for the Portuguese Presidency of the
European Union, Spring 2000; reprinted in this version in Anthony Giddens (ed.),
The Global Third Way Debate, Cambridge, Polity, 2001, pp. 134-56.
1 Social transfers account for only a third of working single mothers' total
income in Scandinavia.
2 My own estimates suggest that due to high fixed labour costs and wage com-
pression, full-time, full-year day care in countries such as Germany or Italy
costs about half of what an average full-time employed mother can expect to
earn. A significant reduction of relative servicing costs can only realistically
occur on the backdrop of a radical deregulation of wages and reduction of
fixed labour costs.
3 We usually define the poverty line as less than 50 per cent of median (adjusted)
disposable income.
4 Public transfers account for the lion's share of total disposable income in coun-
tries like France, Germany and Sweden (70-90 per cent), but far less in others
(such as the UK or the USA, where private pension plans and accumulated
savings play an important role). Earnings (often undeclared) can play an
important role in pensioner income packages. This may be especially pro-
nounced in cases, such as Italy, where early retirement is prevalent and where
there exist strong incentives to supply and demand workers who do not incur
fixed labour costs. Pension schemes are, in some cases, clearly subsidizing the
informal economy.
5 In some countries, young families' access to housing depends heavily on inter-
generational capital transfers of this kind. M. Kohli: 'Private and Public
Transfers between Generations', European Societies, 1, 1999, pp. 81-104.
6 To illustrate the point, workers at age (ca) 60 earn 100 per cent of average wage
in Denmark and the UK, a full140 per cent in France, but only 80 per cent in
the USA:

Estimated age-wage relativities for males, 1990 (average = 100)

At age c.20-25 At age c.SO At age c.60

Denmark 85 105 100

France 70 120 140
UK 80 125 100
USA 65 105 80

Source: OECD.

7 The OECD estimates that workers with less than secondary education can
expect five to seven years of unemployment over their lifetime in the UK,
Finland and Spain, and between three and five years in Ireland, Germany,
Sweden, France, Belgium, Denmark, and Canada.
8 The same argument holds for privatizing pensions. Just like public insurance
schemes, private plans work well for workers with long stable and well-paid
careers. Coverage is low among employees in atypical (such as part-time or
temporary) employment, and traditional employer occupational pension plans
are eroding as a result of the decline of large firms. Encouraging private pensions
454 A Welfare State for the Twenty-First Century

for the top half of the labour market and limiting public pension commitments
to the bottom half of the population is certainly one possible long-term scen-
ario. I assume, however, that such a scenario is not on the political agenda in the
large majority of EU countries. Targeting public pensions only t() the poor
would reduce the public expenditure burden dramatically, but to put it bluntly:
why should we construct inequalities in the future when it is not necessary?
Privatization will never qualify as a Paretian welfare improvement. As far as
taxing retirement income is concerned, one should clearly avoid too much tax-
ation since this may produce negative savings incentives among pre-retirement
workers. If there is inequity in the distribution of resources between the aged
and the young, a system of taxing excess incomes among the aged would be
acceptable (and more incentive-neutral) if it were earmarked to cover other risks
among the elderly (such as disabilities and intensive care needs).
9 Forecast simulations suggest that a move to strictly targeted public pensions
(covering the bottom third only) would bring most countries' pension
finances into balance by 2050.
10 In the Nordic countries, up to a third of total employment is in the public
sector, fuelled by social service growth. There, as across the European
continent, private consumer services are generally 'priced out of the market'-
indeed, they have been declining over the past decades.
11 Individual countries, like Denmark, have experimented with alternative sub-
sidization schemes to induce more consumption of service labour. Often such
subsidies are an attempt to avoid lower-end services ending up in the black
economy.
12 And, that such deregulation would almost surely have adverse consequences
across the entire labour market, not to mention that it would by necessity
imply a major roll-back of existing welfare guarantees.
13 Hence, women's average weekly hours of unpaid domestic labour is almost
twice as high in Spain as in Denmark.
14 Contemporary national accounts systems are unable to distinguish between
social expenditures that play an 'investment role' and those that do not.
Parallel to the distinction between capital and consumption accounts, some
social expenditures arguably enhance a nation's capital stock and reap a divi-
dend. The actual task is daunting and full of ambiguities, but this is also the
case in conventional national economic accounts (should a tank or a jeep for
the military be classified as investment or consumption?).
15 Whether such an income guarantee be designed around the Anglo-Saxon
formula of work-conditional income supplements or along more traditional
social assistance lines is left open.
16 It is very important to distinguish this 'life chances' guarantee from conven-
tional 'guaranteed citizen income' plans that many advocate. Above all, the life
chances guarantee is meant to be premised on work and not, like the latter, on
the assumption that there will not be sufficient work available. Indeed, the
main principle here is to reward the incentive to work. This is not the place to
discuss the practical design of such life chance guarantees. Clearly, active train-
ing and learning policies will come to play a core role. One might consider a
variant of the American 'earned income credit' subsidy, or similar 'negative
income tax' models, as a means to guarantee welfare for those who end up
trapped in inferior employment.
Investing in the Citizen-
Workers of the Future:
Transformations in
Citizenship and the State
under Ne-w Labour
Ruth Lister
Introduction

In a recent scientific report, commissioned by the Belgian Presidency of

the European Union in 2001, G0sta Esping-Andersen and colleagues pre-
sented 'a set of building blocks' for the creation of a 'new welfare archi-
tecture'. The architecture's foundation stone is 'a child-centred social
investment strategy' (Esping-Andersen et al., 2002, pp. 6, 26) 1 The foun-
dation stone is, in fact, already being laid in some countries- most notably
the liberal-oriented welfare states of Canada and the UK. This paper offers
a critical analysis of the strategy's genesis and implications in the UK, in
the context of a brief overview of the more general transformations of citi-
zenship and the state under New Labour. The paper focuses in particular
on the emergent 'social investment state"s construction of children- its
main beneficiaries - as citizen-workers of the future.

Transformations in Citizenship and Governance

'No rights without responsibilities', described by Anthony Giddens as

'a prime motto' for third-way politics, sums up New Labour's position on
citizenship (1998, p. 65). 2 It is reflected in a range of social policies
designed to regulate behaviour (Deacon, 2002). These include use of the
benefits system not merely to promote the paid work ethic in the name of
social inclusion but also to discourage and punish anti-social behaviour.
In the words of Alistair Darling (when Work and Pensions Secretary):

there is no unconditional right to benefit ... It's not only possible, but
entirely desirable that we should look at making sure the social security
456 Investing in the Citizen- Workers of the Future

system and the benefits system are matched by responsibility .... It is right
that we should ask ourselves if there is a role for the benefits system as part of
the wider system in asserting the values we hold and asserting ~he kind of
behaviour that we want to see. (Address to the Parliamentary Press ·Gallery,
reported in the Independent, 16 May 2002)

'Citizenship for the twenty-first century' is how Tony Blair (2002b) has
described New Labour's governance model of partnership between the
individual and the state. This model of governance represents a further
development of the managerial state inherited from the Conservatives
(Clarke and Newman, 1997; Clarke et al., 2000; Lister, 2002). With part-
nership 'out goes the Big State. In comes the Enabling State' (Blair, 2002b,
2002c). The enabling state is a leaner state, in which brokerage and regu-
lating, as well as enabling, are emphasized over providing (Miliband,
1999). Partnership, while not a novel idea, is, in its multifarious guises and
new suits of clothing, the linchpin of New Labour's modernizing govern-
ance agenda (Newman, 2001). 3 Although frequently associated in the
governance literature with the 'hollowing out' of the state, Janet Newman
suggests an alternative interpretation of partnerships:
that they can be viewed as a further dispersal and penetration of state power.
The spread of an official and legitimated discourse of partnership has the
capacity to draw local stakeholders, from community groups to business
organisations, into a more direct relationship with government and involve
them in supporting and carrying out the government's agenda ... Labour's
emphasis on holistic and joined-up government, and its use of partnerships as
a means of delivering public policy, can be viewed as enhancing the state's
capacity to secure political objectives by sharing power with a range of actors,
drawing them into the policy process. (Newman, 2001, p. 125)

The 'joined up government' to which Newman refers, with its slogan of

'joined up solutions for joined up problems', particularly in tackling social
exclusion (Mulgan, 1998, p. 262; Miliband, 1999), is combined with a
problem-solving, technocratic approach under which 'what matters is
what works' (Blair, 1998a, p. 4). This 'dogmatic pragmatism' (Clarke, 1999,
p. 85) diverts attention from the need for more systemic structural change
(Lister, 2001 ).
If partnerships are the linchpin of the new governance, managerialism,
another element in New Labour's inheritance, can be seen as the 'organ-
izational glue' that holds it together (Newman, 1998; Clarke and Hoggett,
1999, p. 15; Clarke et al., 2000). 4 It is embodied in the government's enthu-
siasm for target-setting and its plans to 'root out waste and inefficiency'
and to 'provide efficient and modern public services' (HM Treasury, 1998,
p. 1). Increases in public spending carry a managerialist price tag of value
for money, reform, audit and targets. In his 2002 Spending Review state-
ment, the Chancellor emphasized that
 Ruth Lister 457

in each area of service delivery ... we are tying new resources to reform and
results, and developing a modern way for efficient public services, which
includes setting demanding national targets; monitoring performance by
independent and open audit and inspection; giving front-line staff the power
and flexibility to deliver; extending choice; rewarding success; and turning
around failing services. (Brown, 2002b, col. 22)

The Social Investment State

Brown presented his Spending Review as addressing 'past decades of

chronic underinvestment in education, health, transport and housing'. The
'role of Government', he declared, 'is- by expanding educational, employ-
ment and economic opportunity, and by encouraging stronger commun-
ities- to enable and empower people to make globalization work for their
families and their future' (2002b ). With the exception of the absence of any
explicit reference to children, this sums up pretty well the main elements
of the 'social investment state'.
The term was coined by Giddens in his articulation of the third way. The
guideline, he argues, 'is investment in human capital wherever possible,
rather than direct provision of economic maintenance' (1998, p. 117,
emphasis in original). An earlier template was provided by the
Commission on Social Justice in its vision of an 'Investors' Britain'. Its
central proposition was that 'it is through investment that economic and
social policy are inextricably linked'. 'High investment- in skills, research,
technology, childcare and community development - is the last and first
step' in a 'virtuous circle of sustainable growth' (Commission on Social
Justice, 1994, pp. 97, 103). The emphasis was on economic opportunity in
the name of social justice as well as of economic prosperity and the achieve-
ment of security through investment in and redistribution of 'opportun-
ities rather than just ... income' (1994, p. 95).
Although the Commission's report was seen by many as promoting a
'modernizing' agenda, within a year of publication (after the death of John
Smith, its instigator), its report had effectively metamorphosed from a
symbol of New Labour to one of old, as the juggernaut of accelerated
modernization rolled over it. Nevertheless, the influence of its model of an
'Investors' Britain' is clear, if unacknowledged. New Labour has rejected
the traditional egalitarian model espoused by the Labour Party for a para-
digm and discourse of lifelong opportunity and social inclusion (Lister,
2000a, 2001, 2002). This is linked to 'a new supply-side agenda for the left'.
The agenda emphasizes 'lifetime access to education and training' as part
of the necessary investment in 'human capital'. It is complemented by 'an
active labour market policy for the left' in which 'the state must become an
active agent for employment, not merely the passive recipient of the casu-
alties of economic failure' (Blair and Schroder, 1999, pp. 31, 35 ). 5 Both
458 Investing in the Citizen- Workers of the Future
exemplify Bob Jessop's formulation of the post-Fordist 'Schumpetarian
workfare state' in which 'redistributive welfare rights take second place to
a productivist reordering of social policy' in the name of ipternational
competitiveness and the need to equip the population to respond to global
change Qessop, 1994, pp. 24; 2000; see also Holden, 1999).
As well as investment in 'human capital', the social investment state is
concerned to strengthen social capital: 'investors argue that investment in
social institutions is as important as investment in economic infrastructure'
and that 'the moral and social reconstruction of our society depends on our
willingness to invest in social capital', which is both 'a good in itself' and
'also essential for economic renewal' (Commission on Social Justice, 1994,
pp. 306, 308). New Labour has launched a 'national strategy action plan'
for neighbourhood renewal animated by the 'vision that, within 10 to 20
years, no one should be seriously disadvantaged by where they live' (Social
Exclusion Unit, 2001, p. 8). According to Blair, a 'central goal' and 'a key
task for our second term is to develop greater coherence around our
commitment to community, to grasp the opportunity of "civil renewal".
That means a commitment to making the state work better. But most of all,
it means strengthening communities themselves' (Blair, 2002a, pp. 9, 11;
2002c). The appeal to community has played a key role in the third-way
differentiation of New Labour from the new right and old left, for it posits
'an alternative to both the untrammelled free market (of neo-liberalism)
and the strong state (of social democracy)' (Levitas, 2000, p. 191).

Children
For the Commission on Social Justice (CSJ), families and children were
critical to the strengthening of both social and human capital. 'Children are
100 per cent of the nation's future' it declared, and it argued that 'the best
indicator of the capacity of our economy tomorrow is the quality of our
children today' (1994, p. 311). A similar message emerges from Esping-
Andersen's sketch of a 'new welfare architecture', in which he emphasizes
that 'a social investment strategy directed at children must be a centrepiece
of any policy for social inclusion' (Esping-Andersen et al., 2002, p. 30).
Children emerged as key figures in New Labour's nascent social invest-
ment state early in 1999. In his Beveridge Lecture, the Prime Minister
pledged the government to eradicate child poverty in two decades, explain-
ing that 'we have made children our top priority because, as the Chancellor
memorably said in his Budget, "they are 20 per cent of the population but
they are [echoing the CSJ] 100 per cent of the future"' (Blair, 1999, p. 16).
Around the same time, the Treasury published a document, Tackling
Poverty and Extending Opportunity, which emphasized the impact of
poverty on children's life chances and opportunities (HM Treasury, 1999).
 Ruth Lister 459

Although the pledge to end child poverty was made by Blair, much of
the policy impetus on children has come from the Treasury, which under
Brown has become a key actor in the development of social policy (Deakin
and Parry, 2000). Brown has described child poverty as 'a scar on Britain's
soul', arguing that 'we must give all our children the opportunity to achieve
their hopes and fulfil their potential. By investing in them, we are invest-
ing in our future' (Brown, 1999, p. 8). He has developed these themes in a
series of speeches, together with the argument that 'tackling child poverty
is the best anti-drugs, anti-crime, anti-deprivation policy for our country'
(Brown, 2000a). In his foreword to the pre-2002 Budget report, he states
that 'our children are our future and the most important investment that
we can make as a nation is in developing the potential of all our country's
children' (Brown, 2001, p. iv). While this report does acknowledge that
'action to abolish child poverty must improve the current quality of chil-
dren's lives as well as investing to enable children to reach their full poten-
tial as adults' (HM Treasury, 2001, p. 5, emphasis added), the point is not
developed. 6 Brown went on to present his 2002 Budget as:

building a Britain of greater enterprise and greater fairness, and nothing is

more important to an enterprising, fairer Britain than that, through education
and through support for the family, we invest in the potential of every single
child in our country. (Brown, 2002a, col. 586)

New Investment in Children

Brown also announced 'one of the biggest single investments in children
and families since the welfare state was formed in the 1940s' (2002a, col.
587). He was referring primarily to additional investment in an evolving
tax credits system that reflects the influence of the Canadian and Australian
models and represents what Sylvia Bashevkin has described as an increas-
ingly 'fiscalized social policy' (2000, p. 2). Means-tested benefits for chil-
dren are being replaced by a child tax credit (CTC), which 'will provide a
single, seamless system of income-related support for families with chil-
dren' paid direct to the caring parent with the universal child benefit (HM
Treasury, 2002a, para. 5.17). 7 In addition, a new working tax credit will
incorporate a childcare element (payable to the caring parent). These tax
credits represent a further shift in the balance of financial support towards
means-testing in the name of the principle of 'progressive universalism', i.e.
'giving everyone a stake in the system while offering more help to those
who need it most' (HM Treasury, 2002, para. 5.5). 8
Prior to the introduction of the CTC, the amount of money available for
the children of both employed and non-employed parents has already been
increased significantly. This includes a phased improvement in the social
460 Investing in the Citizen- Workers of the Future

assistance rates for children so that by October 2002 the real value of assist-
ance for under-11-year-old children had virtually doubled. This improve-
ment deviates from the third way in welfare as initially articuL0ted by New
Labour: improvements in out-of-work benefits were dismissed as 'depend-
ency'- inducing 'cash handouts' to be rejected in favour of 'a modern form
of welfare that believes in empowerment not dependency' (DSS, 1998,
p. 19). It has therefore not been trumpeted as loudly as other policy devel-
opments, so much so that many people are still unaware of it. It is an example
of a wider phenomenon: 'redistribution by stealth'. Redistribution of
resources, as opposed to redistribution of opportunities, does not fit the
New Labour template. When pressed on the issue, Brown has therefore
described it as redistribution based on 'people exercising responsibilities' to
work and bring up children in contrast to old forms of redistribution based
on 'something for nothing' (Today Programme, BBC Radio 4, 29 Mar. 1999).
More consistent with the New Labour template has been the piloting
and planned introduction of means-tested educational maintenance
allowances to encourage young people from low-income families to stay
on at school and a commitment to an experiment in 'asset-based welfare'
with a universal 'child trust fund' under which every new-born child
would be given a modest capital sum, accessible only when they reach 18
(Kelly and Le Grand, 2001). Indeed, assets-based welfare has itself been
characterized as representing a transition to a social investment state
(Sherraden, 2002). The New Labour template also informs a series of
service-based initiatives. Of particular significance is Sure Start, which was
inspired by the American Head Start programme (see HM Treasury, 2001).
Sure Start is to be combined with early years education and child care
within a single interdepartmental unit with an integrated budget. A further
injection of funds into the national childcare strategy is promised, in the
face of evidence that the policy is flagging. This will involve the creation of
children's centres and of an additional250,000 childcare places by 2005-6
(Strategy Unit, 2002).
For all its weaknesses, the national childcare strategy represents a break-
through in British social policy. It represents the first time that government
has accepted that child care is a public as well as a private responsibility.
Birte Siim has argued that 'from the point of view of social policies towards
women and children, Britain ... represents an exception to the rule of
European social policies', particularly in the area of childcare services
(Siim, 2000, p. 92). This, she suggests, reflects the dominant liberal philos-
ophy of the separation of public and private spheres and (partial) non-
intervention in the latter (see also Lewis, 1998; O'Connor et al., 1999).
This philosophy has framed general policy towards children other than
those deemed at risk of abuse or neglect. Despite the introduction of family
allowances and their extension and replacement by child benefit, children
have been the subject of public neglect. The UK has been described as
 Ruth Lister 461

'a serious contender for the title of worst place in Europe to be a child'
(Micklewright and Stewart, 2000, p. 23 ). Arguably, this reflects not only
the liberal strand in the dominant social welfare philosophy but also
ambivalence in British attitudes towards children (Lister, 2000b ). A ten-
dency to sentimentalize and idealize children has existed alongside a reluc-
tance to accommodate their presence in the adult world and an element of
hostility and fear, as reflected in the recent demonization of 'feral chil-
dren'.9 In addition, during the Thatcher years there was an increasingly
strongly expressed view that having children is 'essentially a private
matter', akin to other expensive consumer goods (Beenstock, 1984, cited in
J. Brown, 1988). Such claims tap deep-rooted attitudes put most crudely in
the (male) expression- 'why should I pay for another man's pleasure?'
This sentiment underlies some of the hostility that has always existed
towards family allowances/child benefit and the fact that child poverty
has not been a popular cause in the UK. Keith Banting's analysis, for
instance, suggests that, although family poverty became an important
issue for the 1964-70 Wilson Labour government (partly thanks to pres-
sure from the newly formed Child Poverty Action Group), it was a key
concern for neither organized labour nor the wider electorate (Banting,
1979). As the former Conservative Chancellor observes, approvingly, in
his memoirs, 'the moral sense of the nation' is more sympathetic to pen-
sioner than child poverty (Lawson, 1992, p. 595). Such attitudes may help
to explain signs of disappointment among some government ministers
that 'the pledge to end child poverty has not generated the expected polit-
ical returns', particularly in the 'Labour heartlands' (Barnes, 2000, p. 1).
One consequence has been the bizarre spectacle of the Chancellor calling
for an 'alliance for children' to put the kind of pressure on him that Jubilee
2000 did with regard to debt eradication in the South. He envisaged 'a
movement based on faith in the future, a crusade for nothing less than the
kind of society our children will inherit' (Brown, 2000b ). In response, the
End Child Poverty Campaign has been set up by a number of children's
charities.

Children as Citizen- Workers of the Future

We are witnessing a genuine, unprecedented, attempt to shift the social pri-

orities of the state and nation to investing in children. What are the impli-
cations for citizenship? Jane Jenson, writing in the Canadian context, has
suggested that, in the social investment state, children have become the
'model citizens' but they are so symbolically because, as minors, they
cannot be full citizens able 'to employ the force of democratic politics to
insist on social reform in the name of equality' (2001, pp. 122, 125). In
a more recent paper with Denis Saint-Martin she traces a shift in the
462 Investing in the Citizen- Workers of the Future

'ideal-typical representation of citizen' from 'citizen-worker' in the 'social

rights' citizenship regime to 'the child as citizen-in-becoming' in the 'social
investment' regime (Jenson and Saint-Martin, 2001, table 2) ..
In the UK, as argued above, the 'citizen-worker' is still centre stage. In
so far as s/he is being joined there by the child, it is the child as 'citizen-
worker-in-becoming' or 'citizen-worker of the future'. It is the future
worker-citizen more than democratic-citizen who is the prime asset of the
social investment state. Moreover, the future orientation and discourses of
the social investment state encourage not just the elision of demands for ,
equality in the here-and-now, 10 but also, paradoxically, the partial disap-
pearance of childhood and of the child qua child, including the child as a
rights-bearer (under the UN Convention on the Rights of the Child). The
child as cipher for future economic prosperity and forward-looking mod-
ernization overshadows the child as child-citizen. 11
In many ways, the discourse of social investment in children reflects that
deployed by organizations and individuals, in the UK and elsewhere,
making the case for better state financial support and services for chil-
dren.12 As such, it has arguably proved its utility in persuading politicians.
In turn, it may also represent a politically astute discourse for politicians
to use in a culture unsympathetic to children and alongside a rhetoric
hostile to cash benefits. However, there are also dangers: as Sanford
F. Schram has cautioned in the US context, the deployment of the econo-
mistic discourse of investment represents 'a slippery politics' (1995, p. 24).
Valerie Polakow warns that if children are seen to 'matter instrumentally,
not existentially', expenditure on them will only be justifiable where there
is a demonstrable pay-off, so that there is no room for 'expenditure which
merely contributes to the well-being or enjoyment of children as children'
(1993, p. 101 ).
In the UK, while there is strong support for the commitment to eradi-
cate child poverty, there is also an emergent critique of the social invest-
ment paradigm from a child-centred perspective as well as ongoing
criticism of the government's patchy record on children's rights.
According to Alan Prout, the central focus of policy 'is on the better adult
lives that will, it is predicted, emerge from reducing child poverty. It is not
on the better lives that children will lead as children' (2000, p. 305). Fawcett
et al. contrast this focus with what has been called a 'new paradigm' of
childhood:

For governments, children symbolise 'the future', 'social renewal', 'survival

of the nation' or equivalent sentiments. Such a view is at odds with alternative
approaches which counsel the importance of seeing children as 'beings' rather
than 'becomings', as people to be valued in their own right in the present
rather than assessed primarily in terms of how well they will construct the
future. (Fawcett et al., 2004, emphasis added)
 Ruth Lister 463

Prout does not reject the discourse of investment in children but warns that,
'on its own a focus on futurity is unbalanced and needs to be accompanied
by a concern for the present well-being of children, for their participation
in social life and for their opportunities for human self-realisation' (2000,
p. 306). As the Children's Forum declared in their official statement to the
UN General Assembly, 'you call us the future, but we are also the present'
(cited in Stasiulis, 2002, p. 508).
This assertion of their agency as children is supported by a study of
childhood poverty from within the new paradigm of childhood. Its author,
Tess Ridge, criticizes the focus 'on children as "adults to be", as future
investments, rather than as children with their own voices and agency, their
own experiences and concerns' (Ridge, 2002b, p. 12; 2002a; see also Roche,
1999). Goals and targets are future-oriented rather than focused 'on the
quality of children's lives- goals of achieving childhoods that are, as far as
possible, happy, healthy and fulfilled' (Piachaud, 2001, p. 453; see also
Thomas and Hocking, 2003). Likewise, in the target-filled world of the
managerial state, education is reduced to a utilitarian achievement-oriented
measurement culture of tests and exams, with little attention paid to the
actual educational experience.
The state is, however, not monolithic and there are spaces within it where
children are valued as 'beings' and not just 'becomings'. For instance,
Fawcett et al. (forthcoming) suggest that, on the ground, programmes such
as Sure Start do often engage with 'quality of life issues in the here-and-now
as well as investing in the future'. Of particular significance is the Children
and Young People's Unit (CYPU) established by the government in 2000
within the Department for Education and Skills. In 2001 it published a con-
sultation document, Building a Strategy for Children and Young People.
This set out a vision and set of principles that pays attention to the present
as well as the future and that treats children and young people as social
actors whose views should be taken into account. An imaginative consulta-
tion process was designed to maximize children and young people's own
participation. The Unit has also published a guidance document on children
and young people's participation in decisions that affect their lives at every
level from their own lives to national policy-making.
'Promoting citizenship and social inclusion' is one of the arguments put
in favour of such an approach (CYPU, 2001, p. 6). This conjures up what
Daiva Stasiulis calls the 'imaginary of the child citizen as an active partici-
pant in governance', personified in and promoted by an emergent inter-
national children's movement (2002, p. 509; see also Roche, 1999). 13 This
imaginary does not, however, have very deep roots in government think-
ing about children and children's rights, as codified in the UN Convention
on the Rights of the Child.
Children's right to express their views and have them taken seriously in
all matters affecting them is enshrined in Article 12 of the Convention on
464 Investing in the Citizen-Workers of the Future

the Rights of the Child. Gerison Lansdown (2002) has argued .that 'it is far
from adequately implemented in respect of children in the UK'.. Her view
and that of many children's rights activists is that the appointment of a
Children's Rights Commissioner is crucial to the protection and promo-
tion of the human rights of children (Children's Rights Alliance for
England, 2002; Willow, 2002). 14 Hitherto, the government has resisted
such calls for an English Commissioner, despite acceptance in the devolved
administrations and many other countries and a commitment in Labour's
1992 Election Manifesto (subsequently dropped by Blair) (Lansdown)
2002). This was the subject of criticism in the second UK report of the UN
Committee on the Rights of the Child, which highlighted the extent to
which the government's approach to children's rights has been piecemeal
and partial (CRC, 2002). A particular focus of criticism in the report is the
'unequal enjoyment of economic, social, cultural, civil and political rights'
by vulnerable groups of children including asylum and refugee children
(CRC, 2002, para. 22). There has, for instance, been a reluctance to extend
to the children of asylum-seekers the welfare and educational rights
enjoyed by other children (Maternity Alliance, 2002; Sale, 2002; see also
Stasiulis, 2002).
More generally, New Labour has been more willing to countenance
rights for children who do not live with their parents than to intervene in
the private sphere of the family of those who do. This is most notable in
the refusal to remove parents' right to hit their children, again strongly
criticized by the UN Committee as constituting 'a serious violation of the
dignity of the child' (CRC, 2002, para. 35). As Fawcett et al. (forthcom-
ing) observe, the government thereby 'allies itself with older discourses
around "children as property" and sets itself firmly against moves to
democratize the family more fully, a rather curious positioning in view of
its much-vaunted claims to be "modern" and its assumptions about
gender equality'.
Jenson and Saint-Martin (2001) warn that neglect of gender equality
issues may be one consequence of the future-oriented social investment
state. There is a danger that children's poverty is divorced from that of
their mothers and more generally that 'questions of gender power ... are
more and more difficult to raise, as adults are left to take responsibility
for their own lives' Genson, 2001, p. 125). In Canada, the discourse of
child poverty has dominated policy-making on poverty for longer.
A Status of Canada Women report argues that the discourse has served
to make the structural causes of poverty less visible; to encourage a
response motivated by pity for the helpless child; and to displace
women's issues generally and women's poverty specifically (Wiegers,
2002; Stasiulis, 2002).
A focus on children and social investment does not, however, neces-
sarily have to mean the displacement of gender issues. Esping-Andersen,
 Ruth Lister 465

for instance, makes the somewhat instrumentalist case for treating the
development of 'women-friendly' policies as themselves 'a social invest-
ment'. He justifies this position on the grounds that 'in many countries
women constitute a massive untapped labour reserve that can help
narrow future age dependency rates and reduce associated financial pres-
sures' and that 'female employment is one of the most effective means
of combating social exclusion and poverty' (Esping-Andersen et al.,
2002, p. 94 ).
It would be wrong to say that New Labour has ignored the issue of
gender equality but the consensus is that it has accorded it relatively low
priority, despite the establishment of a Women and Equality Unit and a
number of specific policies that will improve women's lives. New Labour's
avoidance of a systematic gendered analysis and strategy is not, however,
simply a function of its child-oriented priorities. It also reflects its associ-
ation of feminism with 'yesterday's politics' (Coote, 2002, p. 3) and a
related reluctance to acknowledge structural inequalities and conflicts of
interest in a concern to promote consensus and cohesion (Franklin, 2000a,
2000b; McRobbie, 2000; Coote, 2001). That said, a focus on the child is one
way of side-stepping social divisions, even though these frame and shape
children's opportunities and adult outcomes: 'because the figure of the
child is unified, homogeneous, undifferentiated, there is little talk about
race, ethnicity, gender, class and disability. Children become a single, essen-
tialized category' (Dobrowolsky, 2002, p. 67).

Conclusion

The design of the new welfare architecture in the UK involves the chan-
ging construction of both citizenship and the state. With regard to citizen-
ship, in return for the promise of investment in economic opportunity by
the state, increased emphasis is being placed on the responsibilities of citi-
zens, most notably: to equip themselves to respond to the challenges of
economic globalization through improved employability; to support
themselves through paid work; to invest in their own pensions; and to
ensure the responsible behaviour of their children.
The changing construction of the state has been analysed here from the
perspective of both governance and its role. In terms of governance, the
emergent state can be characterized as 'the enabling, managerial, partner-
ship state', a partial inheritance from the previous Conservative govern-
ment. In terms of role, the notion of 'the social investment state' captures
its essence, both analytically and normatively. While there are some differ-
ences of detail and emphasis in the various formulations of the social
investment state, broadly its key features are as set out in box 1.
466 Investing in the Citizen- Workers of the Future

Box 1 Key features of the social investment state

• Investment in human and social capital: children and com:'munity as

emblems.
• Children prioritized as citizen-workers of the future.
• Future-focused.
• Redistribution of opportunity to promote social inclusion rather
than of income to promote equality.
• Adaptation of individuals and society to enhance global competi- ·
tiveness.
• Integration of social and economic policy, but with the latter still
the 'handmaiden' of the former.

From a normative perspective, as investment in 'human' and social capital

becomes a primary function of the social investment state, the child and the
community have become its emblems. The child in particular takes on
iconic status. However, it is the child as 'citizen-worker' of the future rather
than the 'citizen-child' of the present who is invoked by the new discourse
of social investment. Thus, despite the prioritizing of children, the quality
of their childhood risks being overshadowed by a preoccupation with their
development as future citizen-workers. At the same time, the poverty of
today's citizens of working age is marginalized. Moreover, despite a strong
emphasis on the need to integrate economic and social policy, integration
has not challenged the traditional subordinate 'handmaiden' relationship of
the social to the economic (Titmuss, 1974, p. 31; see also Becket al., 1997).
From an analytical perspective, it is difficult to make sense of current
developments using only traditional welfare regime analysis. In some ways
the UK is shifting further towards a liberal welfare regime, as convention-
ally articulated, with increased reliance on means-tested and private forms
of welfare provision (Lister, 2000a, 2002). In other ways, most notably in
relation to child care, it is inching in the direction of more institutionalized
Continental and Nordic welfare states, as the state finally acknowledges
that child care is a public as a well as a private responsibility. The idea of the
'social investment state' may therefore provide a more helpful analytic
framework for understanding the emergent new welfare architecture.
Indeed, the suggestion is that it may represent a transformation of some
liberal regimes, most notably the UK and Canada, into a rather different-
hybrid- animal from that described in Esping-Andersen's original analysis
(Dobrowolsky and Saint-Martin, 2002; Jenson and Saint-Martin, 2002). 15
It may be tempting, therefore, to interpret all policy developments in
terms of the social investment state template. We need, though, to be careful.
First, not all policy shifts arc necessarily reducible to the template, even if
they are consistent with it. Thus, for instance, New Labour's preoccupation
 Ruth Lister 467

with citizenship responsibility and the obligations associated with the paid
work ethic needs to be analysed in its own right as well as simply as an
expression of the social investment state. Indeed, it helps us to understand
better the true complexion of the model-citizen in that state. Likewise, shifts
in governance, characterized here as the emergence of the 'managerial, part-
nership state', cannot simply be subsumed under the rubric of social invest-
ment, even if they are associated with it in practice. Second, the state is not
a monolith and it is dangerous to assume 'unity or integration' or to flatten
out complexity (Pringle and Watson, 1992, p. 63; Clarke, 2000). New
Labour itself has been described as 'essentially ambiguous and Janus-faced',
reflecting the 'often contradictory and conflicting traditions of social
democracy, social conservatism, Thatcherism and pragmatism' upon which
it draws (Smith, 2001, p. 267; Lister, 2001 ). Such ambiguities mean that there
are spaces, such as around childhood and poverty, that civil society actors
can exploit to argue for a more genuinely child-focused and also more egal-
itarian approach. Thus, from both a normative and analytic perspective, even
if we are witnessing a genuine paradigm shift, analysts and activists need to
remain alert to complexities and possible inconsistencies within the specific
policy configurations to be found in emergent social investment states.

Notes
This paper was first given at the American Political Science Association annual
meeting in 2002 and then published in this revised form in Social Policy and
Administration, 37, 5, 2003, pp. 427-43. It engages with the work of a team of polit-
ical scientists led by Jane Jenson of Montreal University.
A revised version of the report has been published as Esping-Andersen et al.,
2002. See also 'A Welfare State for the Twenty-First Century' in this volume.
2 Interestingly, Amitai Etzioni has dismissed this formulation as a 'grave moral
error' on the grounds that 'basic individual rights are inalienable, just as one's
social obligations cannot be denied': the relationship between the two is com-
plementary not conditional (2000, p. 29). For a more detailed exposition of the
construction of citizenship under New Labour see, for instance, Dwyer, 1998,
2000; Lister, 1998; Heron and Dwyer, 1999; Rose, 1999.
3 In New Zealand also, partnerships have been identified as a key element in 'a
post-welfarist, post-neoliberal form of social governance' (Lamer and Craig,
2002, p. 4).
4 Under the Tories, managerialism cast welfare subjects as customers and con-
sumers rather than citizens (Clarke, 1997, 1998; Hughes and Lewis, 1998).
New Labour has attempted to marry the two in the person of 'the demanding,
sceptical, citizen-consumer' who expects improved standards from public ser-
vices in line with those in the private sector (DSS, 1998, p. 16). There is the
same emphasis on individual customer service and user- rather than provider-
led welfare as under the Conservatives (a model which was not necessarily
realized in practice and which had more purchase in some arms of the
welfare state than others). At the same time, though, there is something of a
more collective and democratic approach: examples include the introduction
of citizens' juries and various fora for 'listening to' particular groups such as
468 Investing in the Citizen- Workers of the Future

women and older people, as well as resident participation in the neighbour-

hood renewal action plan. Yet, when Blair (1998b) tells us that 'in all walks of
life people act as consumers and not just citizens' the suspicio~ is that it is the
consumer rather than the citizen who represents the ideal New Labour welfare
subject (see also Gamble and Kenny, pp. 1999).
5 Fairclough criticizes New Labour's use of the 'human capital' discourse, with
its 'reification of people' and its translation of learning into an 'economic
rather than an educational process' (2000, pp.49, 75).
6 The November 2002 Pre-Budget Report does acknowledge that poverty
'excludes children from the everyday activities of their peers' (HM Treasury,
2002b). '
7 A higher children's tax credit will be paid during the year of a child's birth as
part of a package to improve support in the early years of a child's life (see HM
Treasury, 2002a).
8 The government did implement a significant increase in the universal child
benefit in its first term, but all the indications are that this will not be repeated.
There is considerable criticism of the heavy reliance on means-testing, not least
from the former minister Frank Field, who has described tax credits as 'a form
of permanent serfdom' (Field, 2002).
9 The 'feral child' figured prominently in a number of newspaper reports of the
acquittal of the young people tried for the murder of the black child Damilola
Taylor. See, for instance, the Daily Mail, 26 Apr. 2002, and Anderson, 2002,
and, for a critical account of its wider use, Hari, 2002.
10 See Jenson, 2001; Jenson and Saint-Martin, 2001; Dobrowolsky and Saint-
Martin, 2002.
11 According to one participant, when ministers were asked at a seminar in 1998
why they were focusing on children, the response was that 'children are the
future; we are not interested in the past' (Seminar for Hilary Land, 25 Mar.
2002, London). A similar future orientation can be found in Esping-
Andersen's exposition in which he argues, for instance, 'minimizing child
poverty now will yield an individual and social dividend in the future. And in
the far-off future, it should diminish the risks of old age poverty' (Esping-
Andersen et al., 2002, p. 55).
12 See, for instance, J. Brown, 1988; England and Folbre, 1999; Esping-Andersen
et al., 2002; European Forum for Child Welfare, 2002. Indeed, I have used the
argument myself, particularly in my former role as director of the Child
Poverty Action Group.
13 The movement was made visible as children took to the streets in March 2003
to protest against war with Iraq.
14 The case has also been made by Cherie Booth QC in the 2002 Barbara Kahn
Memorial Lecture in which she criticized the government for being 'half-
hearted' about children's rights (Guardian, 25 Sept. 2002).
15 Esping-Andersen himself suggests a bifurcation between 'youth-oriented'
liberal regimes and a group that is 'ever more aged-biased and service-lean'
(1999, p. 166). He includes the UK in the latter (with the USA), but this was
before the emergence of New Labour's social investment state.

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Basic Incotne and the Two
Diletnmas of the Welfare State
Philippe van Parijs

Can we avoid a social tragedy? Can we help entering the next century with
our welfare states in disarray, with labour's hard-won conquests under
deadly threat, and with a growing minority of citizens losing all hope of ever
getting a decent job and securing a decent standard of living throughout their
existence? I believe we can, but also that it won't be easy. We shall badly need
intelligence and will, to come to terms with two central dilemmas.

First Dilemma: Fighting Exploitation versus

Fighting Exclusion
Improving the incomes and working conditions of the poorest workers -
whether directly through a statutory minimum wage and other aspects of
labour law or indirectly through improving the levels of the replacement
incomes granted to those out of work- has long been a central objective of
our welfare states. But because exclusion from paid work is also a major
form of deprivation, another central objective must be to fight against
unemployment. The tension between these two objectives generates our
first dilemma. Under a number of (un-Keynesian) assumptions that have
become realistic enough, the more you do to improve the material situa-
tion of the poorest among the workers, the scarcer the jobs become, and
the more people there are who are deprived of the privilege of having one.
Thus the two objectives potentially pull in opposite directions; and as soon
as unemployment ceases to be a marginal phenomenon, this leads to an
acute dilemma.
This dilemma can be highlighted by starting from the dramatic explo-
sion of inequalities in gross earnings that has been observed in much of
the Western world [since the early 1980s]. The exact pattern of causation is
474 Basic Income and the Two Dilemmas

disputed. But it is bound to include such factors as worldwide outlet

expansion, increased competition on both labour and goods markets and
the nature and distribution of the skills made more crucial by the computer
revolution. In both the US and Western Europe, the higher gross earnings
have risen considerably; but at the bottom end, there is a striking differ-
ence. Owing precisely to the better social protection of both the empioyed
and the unemployed, what has led in the US to a sizeable fall in the lower
categories of earnings has led in Europe to a considerable permanent
increase- across cycles- in the proportion of people excluded from gainful
employment. The very success (however partial) of Europe's fight against
exploitation is making exclusion the dominant form of social injustice. Is
there a way out of this painful dilemma between the fight against exploita-
tion and the fight against exclusion, between our concern with poverty and
our concern with unemployment? Yes, there is.
Along with a growing number of people across Western Europe, 1 I have
been arguing that any realistic and desirable solution to this dilemma must
involve the introduction of a comprehensive minimum income guarantee
that takes the form, not of a means-tested safety net in which people get
stuck - as illustrated by the UK's basic social security, Germany's Sozial-
hilfe, France's revenu minimum d'insertion, etc.- but of a genuine uncondi-
tional floor. Under various names - basic income, social dividend,
Grundeinkommen, reddito di cittadinanza, allocation universelle, etc., this
idea is being proposed as a key component of the backbone of a positive pro-
gressive project for a post-nee-liberal, post-communist Europe. Of course,
because of the principled though partial disconnection between labour and
income it implies, this proposal calls for some quite radical rethinking- not
least in those parties whose very name makes it clear that they regard (paid)
labour as central. But contrary to what is sometimes said, it does not rely on
some absurdly optimistic assumption of abundance. Nor does it give up the
aim of full employment, at any rate in the important sense of trying to give
everyone the possibility of doing meaningful paid work. Indeed, something
like a basic income is part of any realistic strategy for achieving it.
Ever wider circles of people are beginning to see some sense in this bold
claim, as they start realizing the narrow limits of what can be expected from
such alternative policies as general working time reduction or active labour
market policies, and as they start sharing the following crucial insights.
Coupled with a corresponding reduction in all other benefits and in the net
minimum wage, basic income can be viewed as an employment subsidy
given to the potential worker rather than to the employer, with crucially
distinctive implications as to the type of low-productivity job that is
thereby made viable. Secondly, because it is given irrespective of employ-
ment status, the introduction of a basic income abolishes or reduces the
unemployment trap, not only by making more room for a positive income
differential between total idleness and some work, but even more by pro-
 Philippe van Parijs 475

viding the administrative security which will enable many people to take
the risk of accepting a job or creating their own. Thirdly, basic income can
be viewed as a soft strategy for job-sharing, by providing all with a small
unconditional sabbatical pay, and thereby making it more affordable for
many either to relinquish their job temporarily in order to get a break, go
self-employed or retrain, or to work durably on a more part-time basis.
The combined effect of these three processes should lead to a far more
flexible working of the labour market, with significantly more stepping-
stone, training-intensive, often part-time jobs. Such jobs must be paid little
because they represent a risky investment on the part of the employer in a
free human being who could leave at any time; and they could acceptably
be paid little because the pay would supplement an income to which the
workers are unconditionally entitled and which therefore enables them to
filter out the jobs that are not sufficiently attractive in themselves or in
terms of the prospects they offer.
Of course, the size of this effect will be very sensitive to the level of the
basic income and to the package of labour-market and tax-and-benefit
institutional adjustments that will need to accompany its introduction. But
if embedded in an appropriate package, even a modest basic income could
put a halt to the growing dualization and demoralization of our socio-
economic system. Under present conditions, the indignation of the jobless
who arc morally and legally expected to keep looking for what many know
they will never find is matched by the outrage of those who subsidize with
their social security contributions the idleness of people who are overtly
transgressing the rules of the game. Once it stops being Utopian to believe
that all those who wish to work can find a job which earns them (when
added to the unconditional part of their income) enough to live on, the
conditions attached to supplementary entitlements- typically, unemploy-
ment benefits restricted to active job-seekers- can more realistically and
more legitimately be expected to be enforced. The introduction of an
unconditional basic income would thereby also make it possible to reha-
bilitate the social insurance aspect of our welfare systems. Consequently,
whereas a well-intentioned gradual increase in the real level of the safety
net could rightly be feared further to disturb the working of the labour
market, a well-embedded gradual lifting of the floor can be expected to
address both the poverty and the unemployment problem.

Second Dilemma: Economic Capacity versus

Political Capacity

Whether or not one is willing to introduce a basic income and make it a

central component of our welfare states, one seems faced with a second
dilemma which was neatly, though shockingly, illustrated by a full-page
476 Basic Income and the Two Dilemmas

advert published some time ago in Belgian newspapers on behalf of the

(socialist) president of the Walloon government. The advert starts with a
copy of a number of large cheques made out by various compan.ies _which
had decided to settle or expand in Wallonia. The headline, and the punch-
line of the message, reads: (What unites us today is no longer charity but
business.'
Here is, then, our second dilemma. Either you try to formulate and
implement your ideal of social justice in one region or in one nation, but
then you soon find out that, for a number of mutually reinforcing reasons,
the potential mobility of savings, investment, skilled labour and consumer
demand is now such in Europe that the only aim you can afford in all areas
of policy - social, educational, environmental and so on - is none other
than (business', as the advert put it. The economic constraints are so pow-
erful that you are compelled to run the state as if it were a firm and to make
competitiveness your paramount concern. Or you try to give yourself
some leeway by attempting to formulate and implement your ideal of
social justice on a large scale- typically, [... ] the European Union- but
then you are soon faced with the powerful obstacles that stem from a wide-
spread distrust of highly centralized institutions, from a lack of identifica-
tion and hence of spontaneous solidarity between residents of the various
areas, and from the difficulty of generating a common public debate across
national and linguistic boundaries about the extent and shape of the soli-
darity you advocate.
Is there a way out of this second dilemma? Once again, I think there is,
and one in which basic income has some role to play. I shall here make no
attempt even to sketch the broad outlines of what I believe [would be] an
adequate solution. Let me just state two firm convictions to which I have
been led by a close observation of the debate around the regional aspect of
redistribution in Europe and in my own country [Belgium], whose very
existence is contingent upon the preservation of a nationwide social secu-
rity system. One is that a high level of structural redistribution across the
borders of broadly autonomous political entities can be sustained only if it
takes the form of an interpersonal transfer system, rather than of grants to
the governments of the beneficiary entities. The other conviction is that,
especially if the political entities involved are culturally and linguistically
very different, such a system can be sustained only if on both the contribu-
tion and the benefit sides it can operate using extremely simple and uncon-
troversial information. Fatal resentment is far less likely to arise, for
example, if all that needs checking on the benefit side is whether [particular
individuals exist] and how old they are, rather than whether they really need
psychiatric treatment or truly are involuntarily unemployed.
Because of the conjunction of these two convictions, I strongly believe
not only that basic income does have a central role to play in solving the first
dilemma of our European welfare states, but also that it has a significant role
 Philippe van Parijs 477
to play in tackling the second one, between the economic unsustainability
of a generous national welfare state and the political unsustainability of a
generous transnational welfare state. The argument sketched here would
need to be elaborated and qualified along many dimensions. But I predict
that as more and more people start realizing the full extent and exact nature
of the two big dilemmas we face, basic income will be transformed from the
pet idea of a handful of cranks who believe abundance has been reached at
long last to a key weapon in the struggle for the preservation of social soli-
darity and the promotion of social justice. 2

Notes

From Political Quarterly, 67, 1, 1996, pp. 63-6.

1 The Basic Income European Network, founded in 1988, gathers together indi-
viduals and organizations from fourteen countries. [ ... ]
2 Several aspects of the argument sketched here are developed in Philippe van
Parijs, Real Freedom for All: What (if Anything) Can justify Capitalism?,
Oxford, Oxford University Press, 1995.
Index

Aaron, H. J., 207 census classifications, 136

Abbasi-Shavazi, Mohammad Jalal, 340 child endowments, 143, 144
Abbott, Elizabeth, 121 feminist services, 123
Aberg, R., 260 rape victims, 146
Abrahamson, P., 193-4 taxation of women, 139-40
Adenauer, Konrad, 166, 172 welfare cutbacks, 259
ageing population welfare model, 137, 168, 186, 192
demographic measures, 302-4 women and welfare state, 137, 145
'demographic time-bomb', 206, 305 women in armed forces, 135
global ageing, 325 Austria
health care, 306, 312, 328-9 Christian democracy, 379
inevitability, 298-300 equal opportunities, 280
old age poverty, 10-11, 440-2 and European Union, 294
older workers, 311-13, 319-21 state corporatist model, 165, 168
pensions, 156, 300-2, 326-7 unemployment, 260, 384
productive ageing, 314-16 welfare expenditure, 161, 240, 257
solutions, 300-4, 401-2 welfare institutions, 379
UK situation, 304-6
welfare reforms, 329-32 Back, L., 409
welfare state challenge, 156 Bakija, C. M., 331
workforce reforms, 300-2 Bakunin, Mikhail, 147
Alestalo, M., 192, 193 Baldwin, P., 192
Allmendinger,]., 216 Baldwin, S., 409
alternatives to welfare state, 17-18 Ball, L., 260
Alvarez, S., 260 Ballestri, Y., 402
Amenta, E., 203 Bangladesh, 341
Amin, A., 415 Banting, Keith, 461
Anderson, K. M., 400 Barber, B., 425
Armingeon, K., 233, 397 Barnard, C., 274
Artis, M., 293 Barnes, M., 461
Arts, Wil, 154, 175-94 Barr, N., 201, 207, 311
Ashton, D., 216 Barrett, Michele, 127
asymmetries, welfare, 439-42 basic income, 125, 376,414,450,473-7
audits, welfare state, 212-17 basic needs, 54-5, 160
Australia Bass, S., 315
Antipodean model, 182-4 Bean, C., 194
birth rate, 303 Beaujol, R., 240
 Index 479
Beck, W., 466 class and electoral choices, 85
Beckett, K., 216 health care costs, 207
Beenstock, M., 461 welfare cutbacks, 259
Belgium welfare model, 166, 168, 173
class and electoral choices, 85 welfare reform, 455, 466
early welfare state, 19 capital mobility, and globalization, 209-12
equal opportunities, 280 capitalism
ethnic conflict, 85 nature, 62
unemployment, 252 welfare capitalism, 175-94
welfare approach, 476 Carlin, W., 260
welfare expenditure, 233, 234, 241, 257 Caro, F., 315
welfare institutions, 379 Carter, C., 281
benchmarking, 285, 286, 291, 294 Carter, Jimmy, 112
Benhabib, Seyla, 409,415,417,418,423, Castells, Manuel, 124
424 Castles, Francis, 155, 178, 183, 186, 187,
Bennett, Fran, 121 188,192,193,226-42,251,253,257
Bentham,Jercmy, 17-18 Catholic Church, 176-7, 181, 192, 379
Bercusson, B., 273, 276 Center for Strategic and International
Beveridge, William, 19,25-6,45, 121, 140, Studies (CSIS), 326-30
142,166,251,378,381,387 Cerny, P. G., 200,201
birth rate see fertility Chakravarty, S., 310
Bismarck, Otto von, 19-22,67, 165,378 Chalmers, Damian, 156, 289-95
Blackley, W. L., 22 change
Blair, Tony, 456, 457, 458, 459, 464 power resources and social change, 80-2
Blanchflower, D. G., 249 US 1960s, 104
Blecker, Robert, 311 welfare cutbacks see retrenchment
blood donation, 54 welfare state and political change, 74-5
Bohman,]., 421 welfare states see welfare reforms
Boix, C., 212 charity, 24, 476
Boje, T., 193 Charlton, Val, 122
Bompas, Katherine, 121 Chartism, 22
Bonoli, Giulano, 179, 181, 182, 186, 189, Checkel, J., 281
253,360,364,366,375,389-405 Chen, Y., 315
BOOLEAN analysis, 187 Chesnais, Jean-Claude, 333, 343
Booth, Charles, 23, 24, 36 Child Poverty Action Group, 461
Borghans, L., 260 children
Bosanquet, N., 408 as property, 464
Boston,]., 233 child benefit, 127
Bosworth, D., 216 child trust fund, 460
Bottomley, Anne, 130 child care, 304,401-2, 466
Boulding, Kenneth, 43 family allowances, 120-1, 127, 143-5,
Bowles, S., 216 303-4,446
Boyer, R., 259 'feral children', 461
Brenner, A., 318 future citizen-workers, 461-5
Briggs, Asa, 5, 16-27 poverty, 438, 459, 461, 462, 464
Brittain, Vera, 141 rights, 462, 463-4
Brown, Gordon, 456-7, 459, 460, 461 social investment state, 446, 455, 458-65,
Brown,]., 461 466
Bulmer, M., 184 UK attitudes to, 461
Bush, George Sr, 108, 112 UK investment in, 459-61
Buti, ]., 293 UN Convention, 462, 463-4
Butler,Judith, 417 Children and Young People's Unit, 463
Children's Forum, 463
Calhoun, C., 424 Children's Rights Alliance for England,
Cameron, D. R., 161, 201, 227 464
Canada Christian democracy, 3 79
1930s unemployment, 25 Church, and welfare models, 168, 176-7,
child poverty, 464 181,192,379
480 Index
citizenship and education, 216
American agenda, 114 European basis, 218
children as future citizen-workers, 461-5 global competition and welfare state,
civil rights, 30, 31, 32, 36 200-42
and class, 30-9, 165 race to the bottom, 226-42
equality, 53 Confederation of British Industry (CBI),
EU economic citizenship, 272, 283 128
industrial citizenship, 36 Coombes, D., 275
political rights, 30-1, 32, 35 Coote, A., 465
and power, 409 corporatism, 82-3, 164, 165, 173, 176-7,
right to work, 136 186
rights and responsibilities, 455, 466-7 Craig, F. W. S., 246
Social Citizenship Indicator Program crime, and investment, 216
(SCIP), 250, 254, 258, 260 Crosland, Anthony, 246, 251
social rights, 30,32-9, 40, 138, 162-3, 'culture of poverty,' 110
408 Cutright, P., 161
test, 134
transformation, 455-7 Daly, M., 185, 240, 401
women, 134, 136, 142-3, 149 Darling, Alistair, 455-6
civil service, privileges, 161, 165,399 Daykin, C. D., 301
civilization, and poverty, 9, 19, 24 De Grip, L., 260
Claimants' Union, 125 Deacon, A., 455
Clapham, J. H., 22 Deacon, B., 259, 260
Clark, G. L., 205 death grant, 51-2
Clarke, J., 456, 467 decentralizing welfare, 436, 437
class de-commodification, 163-4, 168, 176
and Bismarck, 21 deflation, 207-8
and citizenship, 30-9, 165 deliberative democracy, 421-8
class structure of welfare state, 149 Delors, Jacques, 276
democratic class struggle, 83-7 democracy
and electoral choices, 85 associational democracy, 414, 422
Marxist view, 84-5 deliberative democracy, 421-8
social insurance models, 168 democratic class struggle, 83-7
and universalist models, 166 EU participatory democracy, 295
Weber, 84 and power resources, 82
and welfare cutbacks, 257-8 demography
working class mobilization thesis, 161 ageing see ageing population
Clayton, R., 238, 253 'demographic time-bomb', 206,305
Coale, Ansley, 336 fertility see fertility
cohabitation rule, 120, 130 Denmark
Cohen, J., 285, 421 birth rate, 303
Coleman, David, 156, 298-307 early welfare state, 19
collective bargaining, 36, 68, 79 economically active population, 301
Colman, Benjamin, 339 and European Union, 294
Colquhoun, Patrick, 34 unemployment, 252,438
Commission on Social Justice, 6, 50-61, welfare expenditure, 230, 237, 240, 2
457,458 57
community care, 124 dependency culture, 380
comparative approaches dependency politics, 107-17
BOOLEAN analysis, 187 Derrida, Jacques, 335
first generation studies, 160-1 Di Stefano, C., 409
types of welfare models, 154, 162, 167-9, Dicey, A. V., 18
175-94 disability, and equality, 53
uses, 153-4 Disraeli, Benjamin, 22
competition Dobrowolsky, A., 465, 466
Anglo-Saxon conception, 212 D0lvik, J. E., 275-6
competitive audit of welfare state, domestic violence, 127, 134
212-17 Drache, D., 259
 Index 481

Drezner, D., 226, 242 essentialism, 418

Dukakis, Michael, 108 Europe
competitiveness basis, 218
Easterlin, Richard, 310, 325 income differentials, 474
Ebbinghaus, B., 395 legal regimes, 274
Eberstadt, N., 319 postwar social contract, 155
education welfare state regress, 246-63
18th century methods, 11-12, 13 women in parliament, 394
19th century, 33 European Monetary Union, 261, 282,
and competition, 216 403
life chance guarantees, 450-1 European Union
lifelong education, 385-6, 448, 452 21st century welfare state, 444-6
limitations, 434-5, 447-8 Acquired Rights Directive, 275
and poverty, 10 Barcelona Council, 292
purpose, 463 benchmarking, 285, 286, 291, 294
social capital, 63 Broad Guidelines on Economic Policies,
and social justice, 55 293,294
Eichner, V., 279 Classic Community Method, 289,
Eisenhower, Dwight, 96, 97 290
Ellison, Nick, 375-6, 408-29 'comitology', 279
Employee Benefit Research Institute, 332 decision-making techniques, 2, 269-70
employment deliberative governance, 155, 283-6
'bridge jobs,' 321 demographic reviews, 301
children as future citizen-workers, 461-5 diversity of welfare regimes, 435-6
EU parameters, 272 economic citizenship, 272, 283
European Employment Stategy, 279-81, economically active population, 301-2
292,293,294,295 equal opportunities, 280
family-friendly workplaces, 386 equal pay, 273
and family life, 389, 449-50 European Employment Strategy, 279-81,
full employment commitments and EU, 292,293,294,295
155,250-3 global ageing, 325, 326, 327
and leisure, 451-2 Growth and Stability Pact, 293
old and new US politics, 109-11 intergovernmentalism, 269
older workers, 311-13,319-21 internal market, 225
part-time work in retirement, 316-18 legitimacy crisis, 272, 286
poverty wages, 390, 450 Lisbon Summit, 289-90
right to work, 136 Luxembourg process, 279-80
subsidies, 443 nco-functionalism, 269
welfare and work, 102-3, 169, 442-4 Open Method of Co-ordination, 156,
welfare reform, 384-7 289-95
women's work and welfare, 138-41, 216, parental leave, 273
465 participatory democracy, 295
workfare, 116, 458 partnerships, 291
Engels, Friedrich, 148 polyarchy, 285-6
Enlightenment, 339 public-private networking, 291
entitlement, 51, 56, 57-9 recombination, 285
Equal Opportunities Commission, 128 regress on full employment, 250-3
equal pay, 60, 273 retirement age, 316-17
equality Social Chapter, 273
and social justice, 53 social constitution, 273
unjustified inequalities, 57-60 social policy and Commission, 275-7
women see gender equity social policy and judicial system, 272-5
Ermisch, J., 300 social policy dynamics, 277-81
Esping-Andersen, G0sta, 154, 160-73, social policy parameters, 270-2
175-8,181-7,191-4,201,203,205, socialization dynamic, 281-3
207-8,234,238,240,247,259,351,358, subsidiarity, 274-5
359,361,362,376,392,397,411, Sustainable Development Strategy, 290,
434-52,455,458,464-5 292,293-4
482 Index

European Union (cont.) France

Val Duchesse talks, 276 1930s unemployment, 25
and welfare state provision, 260-2 birth rate, 304, 305
works councils, 271, 273, 284 child care, 402
Evans, J., 417 Christian democracy, 379
and European Union, 294, 295
Fabianism, 124 family services, 185
fair rewards, 59-60 fertility rate, 299
family Hewlett Packard in Grenoble, 387
atypical households, 435, 438-9 labour inspectorates, 274
cost of family services, 439 older population, 404
dependent-woman family, 121, 135, 139, pension costs, 331
140, 145 phased retirement, 318
disaggregation, 103-5, 129-30 Revolution, 30
and employment, 386, 389, 449-50 self-help, 18
family-friendly workplaces, 386 unemployment, 252
fertility transition and family institution, welfare expenditure, 26, 257, 359, 366
338-41 welfare model, 165, 168, 359-60,437
new social risks, 438-9 welfare reforms, 367, 369-70
radical transformation, 128 working hours, 22, 387
traditional family and welfare systems, France, Anatole, 53
168 Fraser, N., 418,420
family allowances, 143-5, 303-4,446 Freeman, R. B., 260
Fanon, Franz, 122 Friedan, Betty, 334
farming, 171 Friedmann, Eugene, 309
Fawcett, B., 462, 463, 464 Fuchs, Victor, 312
feminism funeral expenses, 13, 51-2
and Marxism, 124-6, 148 future of welfare
'new feminism,' 125-6 21st century welfare state, 434-52
patriarchal welfare state, 134-49 children as future citizen-workers, 461-5
and social policy, 120-32 equitable retirement, 448-9
strategies, 126-7 family and employment, 449-50
and the state, 122-3 generally, 375-6
and welfare state, 6-7, 120-49, 409 guaranteed minimum income, 376,414,
Wollstonecraft's dilemma, 141-9 450,473-7
Ferrera, Maurizio, 179, 181, 182, 189,201, learning strategy, 434-5,447-8
205,239,358,364 leisure and work, 450-2
fertility life chance guarantees, 450-1
decline, 2, 156 life-work balance, 451-2
delay in childrearing, 303 new social risks, 375, 389-405, 437-9
European Fertility Project, 336 new welfare state design, 376, 446-52,
and family institution, 338-41 455
family planning programmes, 341 political mobilization, 391-8
gender and fertility studies, 334-6 positive welfare, 375, 378-87
and gender equity, 156, 304, 307, postmodernism, 417-21
333-44 priorities, 446-7
public policy measures, 303-4 remaking institutions, 375
rates, 298-9 rethinking universalism, 375-6, 408-29
Fine, Ben, 209 retirement, 316-21
Finegold, D., 201, 216 social investment state, 376, 382-7, 446,
Finland, 233, 257, 260, 292, 295, 380, 382 455-65
Fischer, I, 200 status of children, 376, 455, 458-65, 466
Fishkin, J., 421
Flaskas, Carmel, 123 game theory, 224
Fligstein, N., 260 Ganghof, S., 227
Flora, Peter, 349-50 Garrett, G., 201,259
Folbre, Nancy, 337, 338,339, 341 Gauthier, A. H., 304
foreign direct investment, 210 Gelissen, John, 154, 175-94
 Index 483

gender Gordon, D., 311

and fertility, 156 Gornick, J. C., 185
stratification, 334 Gough, Ian, 73, 177, 191,201,209,212,
system, 333-4 215,216,411
patriarchal welfare state, 134-49 Goul Andersen, J., 258
and social policy, 120-32, 185 governance, UK model, 455-7
and welfare cutbacks, 259 Grahl, J ., 283
and welfare regimes, 184-5 Greece, 181, 186, 233,240,440
gender equity Green, F., 216
equal pay, 60, 273 Greenhalgh, Susan, 335
and European Union, 273,280 Green-Pedersen, C., 253, 258
and fertility, 156, 304, 307, 333-44 Grevet, Patrice, 124
fertility and family institution, 338-41 Gru her, J., 310
gender and fertility studies, 334-6 guaranteed minimum income, 125, 376,
individual-oriented institutions, 341-3 414,450,473-7
meaning, 333-4 guilds, 165
social investment state, 464 Guillen, A. M., 260
and very low fertility, 343 Gundelach, P., 194
Germany Gustman, A., 316
early welfare state, 19-22, 164, 378
and European Union, 294, 295 Haas, E. B., 269
family services, 185 Habermas, Jiirgen, 272,421
farmers, 171 Hagen, K., 205
fertility rate, 299 Hall, Peter, 204, 367-9
income differentials, 59 Hamill, Lynn, 129
job creation, 386 Hantrais, L., 260
new social risks, 403 Harrison, A., 127
older population, 404 Hatzius, J ., 304
pensions, 166-7, 172,331, 351,354, 382 Havighurst, Robert, 309
single parent families, 240 Hay, Colin, 155, 200-18
unemployment, 252 Hayek, Friedrich, 6, 50, 90-4
welfare expenditure, 235, 237, 257, 354 health care
welfare model, 18, 67, 82, 83, 164, 165, ageing population, 306, 312, 328-9
166,168,173,186,378 and competition, 217
welfare reforms, 355, 367, 370 inflation, 207
works councils, 274 and social justice, 54
Gerstenberg, 0., 295 Hegel, Georg, 142, 148
Gevers, J., 194 Hemerijck, Anton, 360, 363
Giddens, Anthony, 375, 378-87, 455, 457 Herzog, A., 315
Gieve, Katherine, 121 Heverland, M., 253
Gilbert, Bentley, 41 Hewitt, C., 161
Gilder, G., 200 Hewlett Packard, 387
Gilligan, C., 415 Hicks, A., 253, 257
Gintis, H., 216 Hill, M., 183
Glennester, H., 408 Hillyard, P., 410
globalization Hinrichs, Karl, 227
capital flight and taxation, 209-12 Hirst, P., 414, 422, 428
competition see competition Hix, S., 278
conventional wisdom, 200-2, 208-9 Hobbes, Thomas, 134
impact on welfare states, 154-6, 200-25, Hobson, B., 260
259-61 Hocking, G., 463
perspectives, 201-2 Hodson, D., 289
and social investment state, 466 Haem, B., 304
unrealistic accounts, 227 Haggett, P., 412-16, 456
welfare retrenchment, 202-8 Holden, C., 458
Gold thorpe, J. H., 193 Honig, B., 417
Golini, A., 302 Horton, Willie, 108
Goodin, R. E., 191, 194 Hounslow, Betty, 123
484 Index

housework, wages for, 125 income differentials, 59

Huber, Evelyne, 205, 247,251, 253,257, pensions, 332, 382
364 retirement age, 306
human capital, 78, 216,381-2, 457, 466 welfare expenditure, 235, 237,
Humphries, Jane, 127 241
Hunt, J., 275 Jenson,Jan~ 461-2,464,466
Hutchins, B. L., 127 Jessop, Bob, 203, 458
Joerges, C., 279
ideological control, welfare state, 73-4 Johnson, J., 425
immigration, 300,301,305,319,402 Johnson, Lyndon, 96, 97, 99, 105
income differentials, 59, 108, 474 Jones, P., 412
individualism, 341-2 Jordan, B., 205
industrial revolution, 309, 321
industry, welfare improvements, 26 Kangas, 0. E., 187, 190
inflation Katrougalos, G. S., 181
health care, 207 Kautto, M., 253
unemployment-inflation trade-off, Kazenstein, P., 227
204-5 Kelly, G., 460
welfare inflationary pressures, 205-8 Kelsey,]., 233
Inglehart, R., 394, 397 Kennedy, J. F., 96, 97
inheritance, 57 Kerr, C., 260
insurance see national insurance Kersbergen, Kees van, 379
interest rates, 260 Keynes, John Maynard, 25
International Convention on the Rights of Keynesianism, 59, 67, 83, 200, 204, 207,
the Child 1989, 462, 463-4 223,251,369,370,411
International Labour Office, 25 Kitschelt, H., 258
Invalid Care Allowance, 139 Knill, C., 273, 278
Ireland knowledge economy, 434, 442, 447-8
Beveridgean approach, 185 Kochan, T., 212
birth rate, 303 Kohl, J ., 192
and EU social policy, 278-9 Kohli, M., 321,440
family policy, 439 Korpi, Walter, 6, 76-87, 155, 161, 162, 180,
family services, 185 183,184,186-7,189,192,194,246-63,
unemployment, 251 392
welfare expenditure, 231, 233, 234, 241, Kosonen, P., 260
257 Kriesi, H., 233
Italy Kuhnle, Stein, 192, 193, 253, 358, 363
Christian democracy, 3 79 Kurzer, P., 200
civil service, 399 Kymlicka, W., 423
and European Union, 294
farmers, 171 Land, Hilary, 121, 127
fertility rate, 299 Lane, J.-E., 233
new social risks, 403 language, and political choices, 85
old age poverty, 440 Lansdown, Gerison, 464
older population, 404 Lassalle, Ferdinand, 21
pensions, 382 Lawson, Nigel, 461
retirement age, 306 Le Grand, J., 408, 460
unemployment, 251 learning strategy, 445, 447-8
welfare expenditure, 26, 240, 257 Lee, R. D., 301
welfare model, 82, 83, 165, 168, 437 left-wing politics
Iversen, T., 390 critique of welfare state, 72-4
United States, 108
Jackson, Richard, 156, 325-32 and welfare state, 6, 50-87
Jackson, William, 311-12 legal regimes, typology, 274
Jacobs,]. A., 185 Lehmkuhl, D., 273
Japan Leibfried, Stephan, 178, 181, 182, 188, 226,
ageing population, 298 253,260,358
birth rate, 299, 302, 304 leisure, 451-2
 Index 485

Leninism, 76, 84 means-tested benefits

Levinson, Daniel, 337 administration, 43
Levitas, R., 458 degrading experiences, 125
Levy, Jonah, 253, 359, 364, 399 design, 165
Lewis, D., 301 family units, 129
Lewis, J., 184, 185, 460 liberal welfare models, 167
liberalism objective, 163
and Bismarck, 21-2 women, 259, 409
and compulsory education, 33 Meny, Y., 278
nco-liberalism, 67-71 Merand, F., 260
v social justice, 50 merit, 34, 51, 57-9, 136
United Kingdom, 466 Micklewright, J., 461
and welfare state, 90-4 Middle Ages, 22
liberty Miliband, David, 456
and social justice, 56 Mill, John Stuart, 94, 134, 146
and welfare state, 91-4 Millar,]., 409
life course, welfare asymmetries, 439-42 minimum income, 125,376, 414,450,
Lijphart, A., 85 473-7
Lindbeck, Assar, 380 minimum wage, 390
Lister, Ruth, 121,376,409,455-67 Mishra, R., 238, 259
Liu, J., 240 Mitchell, D., 178, 183,186, 187, 188,192
Lloyd George, David, 22 Mitchell, Juliet, 122
Locke, R., 212 monopolies, 63-4, 93-4
Lodge, Martin, 156, 289-95 Montanari, L., 259, 260
Lohmann, Theodor, 21, 22 Moody, Harry, 315
Lome Convention, 276 moral hazard, 380
Lovenduski, J., 396 Moravcsik, A., 269, 277
Lucas, R. E. J., 216 Moreno, L., 253
Luxembourg process, 279-81 Morgan, J., 315
Morgan, K., 402
McDaniel, M., 320 Moss Kanter, Rosabeth, 385, 386
McDonald, Peter, 156, 304, 333-44 Mouffe, Chantal, 417-18
MacFarlan, M., 207 Moynihan, Daniel Patrick, 112
Mcintosh, Mary, 7,120-32 Muggeridge, Malcolm, 309
McNicoll, Geoffrey, 335 Mulgan, Geoff, 456
McRobbie, A., 465 Murray, A., 294
Magnus-Johannsen, K. M., 293 Murray, Charles, 6, 96-105, 116
Maher, 1., 289 mutual help, 17,25
managerialism, 456, 463 Myles, John, 161, 162, 247, 254, 362, 369
Manow, Philip, 359, 361
March, J., 278 Napoleon III, 21
Marginson, P., 271 national insurance
market forces, 16-17, 59, 71,442-4 and Bismarck, 19, 20, 21, 164
Marquand, David, 210 gender discrimination, 136, 140-1
Marshall, T. H., 5, 30-9, 136, 138, 140, 162, insufficient coverage, 391
165,408 National Providence League, 22
Martin, Andrew, 207 Nelson, R., 285
Martin, M., 201 nco-corporatism, 82, 84, 86, 161
Marx, Karl, 76, 81, 84, 147 neo-Darwinism, 204
Marxism, and feminism, 124-6, 148 Netherlands
Mason, G., 409 Christian democracy, 379
Mason, Karen Oppenheim, 333-4, 336, class and electoral choices, 85
337 means-tested benefits, 259
mass production, 37 new social risks, 403
Maternity Alliance, 464 non-profit organizations, 378
matrimonial homes, 130 unemployment, 252
Mead, Lawrence, 6, 107-17 welfare expenditure, 231, 233, 234, 240,
Meade, James, 59 241,257,258
486 Index

Netherlands (cont.) Olsen, G. M., 253

welfare model, 176, 186-7,384-5 Olsen, J., 278
welfare reforms, 363, 399 Orloff, A. S., 184, 240
works councils, 274 Ormerod, Paul, 205
Neunreither, K.-H., 275 Oswald, A. J., 249
NewLabou~ 375,376,455-67 Oxley, H., 207
new politics
retrenchment, 247-8, 255, 256, 257, Paine, Tom, 5, 9-13
348-54 Palier, Bruno, 157,253, 259, 358-72
welfare politics, 156-7, 348-56 Palme,J., 180, 183,184, 186-7,192, 194,
new social risks 250,253,254,255,256,258
family risks, 438-9 papacy, 22
frail relatives, 390 Papadakis, E., 194
generally, 375, 389-405 Parkin, Frank, 85
insufficient social security coverage, 391 parliamentary representatives
life chance guarantees, 450-1 age, 393-4
low/obsolete skills, 390 and new social risks, 393-6
meaning, 389-91, 437-9 women, 393-4, 396
new patterns of social policy-making, part-time work, retirement, 316-18
398-404 particularism, universalist-particularist
political mobilization, 391-8 divide, 410-17
and political preferences, 396-7 partnerships, 291, 386, 456
power resources, 398 Pateman, Carol, 7, 134-49,417
single parenthood, 390 paternalism, 93, 114-17
work and family life, 389 patriarchy, 134-49
New Zealand pauperism, 37-8, 40
1930s, 25 peerages, 57
Antipodean model, 182-4 Peillon, M., 194
birth rate, 303 Penna, S., 410
single parent families, 240 pensiOns
welfare expenditure, 233, 240, 241 ageing population, 156, 300-2, 326-7
welfare regime, 192 Germany, 166-7, 172, 331, 351, 354,
Newman, Janet, 456 382
Newson Report, 45,46 pay-as-you-go, 330-1, 356,440
Nickell, Stephen, 384 pioneers, 22
Nixon, Richard, 62, 112 private pensions, 332
Norris, P., 392, 394, 396, 397 reform, 369, 380-4, 441-2
Northern Ireland, 85 Pesch, Heinrich, 22
Norway Peter the Great, 18
birth rate, 299, 303 Pfaller, A., 201, 212
farming, 171 Phillips, Anne, 421-2, 423
unemployment, 260, 384 Phillips, Kevin, 108
welfare expenditure, 235, 240, 257 Piachaud, D., 463
welfare model, 167 Pierson, Paul, 156-7, 203, 208, 227, 237,
Nozick, Robert, 58 247-8,250,253,254,259,260,358,359,
361,362,363,366,390
Oastler, Richard, 19, 22 Plowden Report, 45, 46
Obinger, H., 190, 191 pluralist industrial model, 76, 79
O'Brien, M., 410 Polakow, Valerie, 462
O'Connor, James, 6, 62-5, 184,259, Polanyi, K., 201
460 political mobilization
OECD, 227-33, 237, 239-42, 253, 325-7, economic v political capacity, 475-7
329-30,352-3 new social risks, 391-8
Offe, Claus, 6, 66-75, 251, 411 participation, 391-2
Ogawa, N., 300 preferences, 396-7
O'Hagan, E., 279 representation, 393-6
Okun, A. M., 200 politics of presence, 422-5
old age see ageing population; retirement Pollack, M., 276
 Index 487

polyarchy, 285-6 race

Pontusson, J., 238, 253 and family breakdown, 103-4
Poor Laws, 13, 17, 22, 23, 24, 32-3, 37-8, and political choices, 85
163 and unemployment, 102-3
poor rates, 10, 13 race to the bottom
Portugal, 181, 186, 233, 241,280, 384 exaggerated claims, 227
positive welfare, 375, 378-87 and global competition, 155, 226-42
postmodernism, 410, 416, 417-21 statistical evidence, 228-34
poverty welfare salience and standards, 234-41
child poverty, 438, 459,461,462, 464 Ragin, C., 187, 190, 191
v civilization, 9 rap~ 124, 127, 135, 146
'culture of poverty,' 110 Rathbone, Eleanor, 126, 127, 143-4
and employment, 102-3 Rawls, John, 52, 57, 58, 116, 421, 450
and family breakdown, 103-5 Ray, L., 205
inner cities, 109, 110 Razin, A., 210
latent poverty, 99-100, 101-2 Reagan, Ronald, 71, 112, 116, 138, 146, 156,
measurement, 96-8 250,358,362,379
and merit, 34, 51, 136 recombination, 285
net poverty, 98-9 Reddin, M. J., 43
official poverty, 96-8 Rees, A. M., 184
old age, 10-11, 440-2 reforms see welfare reforms
politics of new poverty, 107-17 Rehn, G., 253
relief methods, 10-13 religion, and political choices, 85
roots, 24 repression, welfare state critique, 73
single parent families, 438-9 research, welfare reforms, 360
and social democratic model, 194 retirement
US statistics, 96-1 OS attitudes to, 313-14
women, 137 and economic growth, 310-11
power resources evolving concept, 309-22
capital, 78 expansion of citizen participation,
democratic class struggle, 83-7 318-19
feminism, 192-3 future, 316-21
human capital, 78, 216, 381-2, 457, 466 global crisis, 325-32
meaning, 76-9 old age poverty, 10-11, 440-2
model, 76-87, 247 part-time work, 316-18
new social risks, 398 productive ageing, 314-16
perspective, 249 ~nd welfare asymmetries, 440-2
and social change, 80-2 retirement age
and societal bargaining, 82-3 actual and official age, 301, 302
violence, 77-8 equity, 448-9
Prais, S. J., 216 European Union, 302, 316-17
Pringle, R., 467 flexibility, 321-2, 383,448
Prisoner's Dilemma, 224 international comparisons, 306
property rights, women, 135 retrenchment
Protestants, 22, 185 academic focus, 358-9, 360-2
Prout, Alan, 462-3 causes, 173
Przeworski, A., 210 and class, 257-8
public expenditure conventional wisdom, 200-2, 208-9
ageing population, 329-32 EU institutions, 253-7
OECD statistics, 231-4 European Union, 246-63, 379-80
welfare see welfare expenditure and gender, 259
welfare expenditure ratios, 236 impact of globalization, 202-8
public health, 18 measurement, 249-50
public housing, 214 myths, 242
public project partnerships, 386 new politics, 247-8, 255, 256, 257,
Putnam, R. D., 392 348-54
OECD statistics, 231, 233-4
Quadagno, Gill, 362 race to the bottom, 226-42
488 Index
retrenchment (cont.) single parents, 306, 390, 438-9
statistical evidence, 228-34, 351-4 Skellington, R., 409
and women, 409 Skocpol, T., 203
Rhodes, M., 201, 205, 206, 260, 358 Smiles, Samuel, 18
Ricardo, David, 20 Smith, Adam, 55, 208, 209
Richmond, Duke of, 13 Smith, John, 457
Ridge, Tess, 463 Smith, M. J., 467
Rieger, E, 226 social capital, 62-5, 458, 466
right-wing attacks on welfare state, 67-71, Social Citizenship Indicator Program
90-117 (SCIP), 250, 254, 258, 260
Roche, J ., 463 social contingencies, 17, 23
Rodbertus, J. K., 20 social democracy, 5-6, 200
Rodrik, D., 201, 227 social democratic models, 168-9, 172, 173
Romania, 299 176, 177 '
Roosevelt, F. D., 25 Social Exclusion Unit, 458
Ross, Fiona, 257, 258, 276, 364 social inclusion
Rowntree, Seebohm, 22, 23-4 and criminality, 216
Royal Commission on the Aged Poor, European Union, 294
36 exploitation v social exclusion, 473-5
Ruggie, J., 227 and fertility, 335
Russia, 18, 299 old people, 383
social investment state, 376, 382-7, 446,
Sabel, C., 285 455-67
Sadka, E., 210 social justice
Sainsbury, D., 184, 259 basic needs, 54-5
Saint-Martin, Denis, 461-2, 464, 466 development of principle, 35-6
Sale, A. U ., 464 equality of citizens, 53
Sand, I.-J., 284 fair rewards, 59-60
Sawer, M., 396 meaning, 50-61
Scharpf, Fritz, 155, 200, 204, 223-5, 361, objective, 17
362,363 opportunities and life chances, 55-6
Schmidt, M.G., 161,177,193 theories, 52-3
Schmidt, S., 277 unjustified inequalities, 57-60
Schmidt, Vivien, 361, 362, 363 social rights, 30, 32-9, 40
Scholten, Catherine, 335, 339 social services
Schram,Sanford, 462 extension, 38
Schroder, Gerhardt, 457 feminist services, 123
Schuknecht, L., 210 universalism v selectivity, 40-7
Schulz, James, 156,309-22 socialism, 91-3, 166
Schumpeter, J. A., 22, 458 societal bargaining, 82-3
Scott, A., 281 Solomos, J ., 409
scroungers, 136 Soskice, D., 201, 216, 260
Seccombe, Wally, 338, 339 South Africa, 85
Seebohm Report, 46 Spain
Seils, Eric, 359, 361 equal opportunities, 280
selectivity old age poverty, 440
analytical framework, 42-5 welfare expenditure, 241,253
real challenge of welfare, 45-7 welfare model, 82, 83, 181, 186
v universalism, 40-7 spending service cliche, 73
self-help, 18, 25 Spieker, P., 411,412,413
Sen, Amartya, 53, 209 stakeholding, 456
service economy, 442, 44 3 Stasiulis, Daiva, 463, 464
Shalev, M., 190, 191 state corporatism, 82-3, 164, 165, 173,
Sherraden, M., 460 176-7, 186
Siaroff, A., 178, 185, 188, 393 Steather, Jane, 121
Siegenthaler, J., 318 Stephens, John, 161,205,247,251,253,
Siim, Birte, 460 257,364,392
Simmons, Ruth, 341 Stephens, R., 233
 Index 489

Sterns, H., 320 Taylor, P., 282

Steuerle, C. E., 331 Taylor-Gooby, Peter, 205,258,410,411,
Stewart, J., 425, 461 420
stigma, 40, 41 Teague, Paul, 155-6, 269-86
Str0by Jensen, C., 269 Thatcher, Margaret, 69, 71, 138, 146, 147,
Sunstein, Cass, 422 156,161,250,354,358,362,379,461,
Sure Start, 460, 463 467
Svallfors, S., 194, 258 theories of welfare
Swank, Duane, 210,212,250,253 classical statements, 5-6, 16-47
Sweden feminism, 6-7, 120-49
birth rate, 303, 304 generally, 5-7
child care, 402 left-wing perspectives, 6, 50-87
dependency politics, 114 right-wing responses, 6, 90-117
equal opportunities, 280 Therborn, Goran, 161-2,234, 237
and European Union, 294 Third Way, 2, 375, 384, 403, 434, 455
farming, 171 Thomas, G., 463
income differentials, 59 Thompson, S., 412-16
older population, 404 Thompson, William, 137
pensions, 331, 400-1 Titmuss, Richard, 5, 22-3, 40-7, 54, 162,
Poor Law debate, 24 408,466
productivist social policy, 446 Tocqueville, Alexis de, 27
single parent families, 240 Torrey Canyon, 42
unemployment, 25, 260 Townsend, P., 45,408
welfare expenditure, 230,240,241, 257, trade unions
258,354 and child tax allowance, 120-1
welfare institutions, 378-9 and European monetary union, 282
welfare model, 66, 167, 186 European social groups, 395
welfare reforms, 355 and family allowances, 144
Switzerland historical compromise, 82
age-related social policies, 397 industrial citizenship, 36
birth rate, 303 Netherlands, 384
child care, 402 and new social risks, 393-5
early welfare state, 19 origins, 79
pension reform, 400 power, 68
poverty wages, 390 welfare models, 165-6
unemployment, 260 Trades Union Congress (TUC), 128, 131,
welfare expenditure, 230, 233, 237, 240, 144
257 training, older workers, 319-21
welfare model, 176 Tramblay, M., 396
Sykes, R., 259 Trevelyan, G. M., 30
'trickle-down' economics, 97, 101
Taffe, von, 165 Trinletti, R., 181, 185
Tanzi, V., 210 Tronti, L., 280
Tawney, R. H., 31,408
taxation Uhr, J., 233
and birth rates, 304 UN Economic Commission for Europe
Bismarck, 20-1 (UNECE), 302, 304
and capital mobility, 209-12 underclass, 6, 107, 108-11, 116
child allowances, 120-1, 127, 143-5, unemployment
303-4,446 chronic unemployment, 17, 97
child tax credits, 459 costs, 207-8
effect of direct taxation, 37 insurance, 24-5
family units, 129 levels, 249-50
private welfare subsidies, 167 mass unemployment, 24-5
relief of poverty, 12-13 and race, 102-3
taxation of the poor, 9-10 social contingency, 17
'vexatious inquisition', 208,209-12 unemployment-inflation trade-off,
women, 121, 139-40 204-5
490 Index

unemployment (cont.) and full employment, 248; 252

and welfare, 23, 102-3 gender equity and fertility, 307
welfare reform, 384-7 Great Society, 97, 99, 100, 103, 105, 108,
Union of Industrial and Employers' 110-11,116
Confederations of Europe (UNICE), Head Start, 460
292 health care, 54, 207, 328
United Kingdom income differentials, 108, 474
1911 legislation, 22-3 industrial welfarism, 26
1945 election, 246 job creation, 386
1970s Keynesianism, 369 left-wing politics, 108
ageing population, 304-6 new agenda, 111-14
census classification of women, 136 New Deal, 169, 171
dependency politics, 114 non-working population, 310-11
equal opportunities, 280 pension costs, 330-1, 332
and European Union, 275, 278, 292, 295 polical participation, 392
Factory Acts, 33, 128, 131 post-Reagan welfare state, 250
family services, 185 poverty statistics, 96-105
feminist social services, 123 poverty wages, 390, 450
health and safety, 278 race differentials, 85, 102-4
housing expenditure, 351, 354 race to the bottom, 226
immigration policy, 305 retirement, 306, 316
means-tested benefits, 259 scope of welfare state, 18
Moneylenders Act, 22 single parent families, 240
mutual dependence, 26-7 social programmes, 96-8
national insurance system, 140-1 social security v welfare, 136
new social risks, 403 stability of welfare system, 362
pensions, 332, 382 underclass, 108-11
Poor Law 1834, 32-3 unregulated employment, 443, 449
poverty wages, 390 Vietnam War, 101
residualist regime, 173 welfare expenditure, 216, 235, 237, 259,
retirement age, 306 354
Royal Commission on the Poor Laws, welfare model, 66, 146, 168, 169, 173,
24 186
rural classes, 171 welfare reforms, 355
single parent families, 240 welfare to work programmes, 386
social investment state, 455-67 women and welfare, 140, 259
stability of welfare system, 362 women in armed forces, 135
Statute of Artificers, 31 workfare, 116
underclass, 111 workforce demographics, 319
unemployment, 24-5, 252 universalism
universalist system, 166, 167 analytical framework, 42-5
welfare expenditure, 161,241,254, and class, 166
256-7,259,354,366,379 historically self-conscious universalism,
welfare model, 66, 192 423
welfare reforms, 355, 455 real challenge, 45-7
welfare state post-Thatcher, 154, 250 rethinking, 375-6, 408-29
women in armed forces, 134 v selectivity of services, 40-7
United States socialist models, 166
1930s unemployment, 25 universalist-particularist divide,
ageing population, 301 410-17
American Association of Retired People, welfare models, 166, 167, 168-9
350
birth rate, 303 Van Kersbergen, K., 253
criminality, 216 Van Parijs, Philippe, 376, 473-7
decline of manufacture, 208 Vanston, N., 329
employment of children, 224 Vietnam War, 101
Equal Rights Amendment, 134 Visser, Jelle, 360, 363
feminist services, 123 volunteering, 318
 Index 491

Wagner, Adolf, 20 corporatist type, 82-3, 164, 165, 173,

Wagner, K., 216 176-7, 186, 187
Wagschal, U., 190, 191 criteria, 162
Walby, S., 409 decommodification, 163-4, 168, 176
Wallerstein, M., 210 empirical robustness of typologies,
Watkins, Susan Cotts, 336, 337 187-91
Watson, M., 211, 212 European diversity, 435-6
Watson, S., 410,467 and farming, 171
Webb, Beatrice and Sidney, 19, 23, 24, 31, friendly societies, 165-6
41 and gender, 184-5
Weber, Max, 84 hybrid regimes, 186-7
Weiler, J., 272 ideal and real types, 186-7
Weir, Stuart, 121 liberal regimes, 167-8, 173, 176,466
Weisman, K., 310 Mediterranean model, 177, 181-2, 185,
welfare asymmetries, 439-42 192
welfare expenditure new welfare state design, 446-52
audits, 212-17 Non-Right Hegemony type, 186
cutbacks see retrenchment radical welfare type, 192
generosity ratio, 238-40 social assistance, 163-4, 167
and global competition, 200-42 social democratic models, 168-9, 172,
measurement, 249-50 173, 17~ 177, 186, 194
negative externalities, 213-14 social insurance model, 164, 165, 168
patterns of aggregate spending, 227-34 systems of stratification, 165-7, 176
positive externalities, 214-17 types, 154, 162, 163-4, 167-9, 175-94
public spending ratios, 236 universalist models, 166, 167, 168-9
race to the bottom, 226-42 viability, 154
statistical evidence, 228-34, 351-4, 361 welfare state
welfare salience and standards, 234-41 burden approach, 43-4, 45, 69, 200-1
welfare institutions debates, 2-3,41, 74-5
actors, 364, 366 definition, 160-2
benefit structures, 364, 365 historical perspective, 16-27, 67
dependent and independent variables, ideological control, 73-4
366-7 ineffectiveness, 72-3
European traditions, 378-9 international phenomenon, 2
financing mechanisms, 364, 365-6 meaning, 90-4
modes of access, 364, 365 objectives, 16-17
and reform, 363-7 political change, 74-5
remaking, 375 pre-welfare, 5, 9-13
welfare reforms range of services, 18
differences, 367-70 repressive nature, 73
'eurosclerosis', 359, 363 re-specification, 162-4
path dependency and continuity, 362-3 retrenchment see retrenchment
pensions, 380-4 Well Women Clinics, 146
public policy, 367-8 Wennemo, J., 253
research, 360 Wessels, W., 279
resistance, 360, 380-1 Western, B., 216
role of ideas, 369-70 Western tradition, 114-17
role of welfare institutions, 363-7 White, S. K., 415
typology of changes, 368-9 Wickham-Jones, M., 210
welfare regimes widows, 13
Antipodean model, 177, 182-4, 192 Wiegers, W., 464
Basic Security type, 187 Wilde boer Schut, J. M., 190, 191
Beveridgean approach, 182, 185 Wilensky, H., 161
Bismarckian model, 182, 186, 359, 367, Wiles, P., 94
378 Wilkes, John, 31
causes, 170-2, 175-7 Wilkinson, R., 217
Conservative type, 186, 187 William II, Emperor, 22
Continental type, 186 Williams, F., 409
492 Index
Willow, C., 464 and welfare cutbacks, 259
Wilson, Elizabeth, 6, 121 'welfare mothers', 145
Wilson, Harold, 461 welfare state employe~s, 121-2
Wilson, Leo, 121 Western revolution, 342 ·
Wilson, WilliamJulius, 116 work and welfare, 138-41, 465
Winter, S., 285 working hours, 128, 131
Wise, D., 310 Women and Equality Unit, 465
Wollstonecraft, Mary, 143 Women's Aid, 123
Wollstonecraft's dilemma, 141-9 Women's Cooperative Guild, 141
women Women's Family Allowance Campaign,
armed forces, 134-5 120
census classification, 136 workfare, 116, 458
citizenship, 134, 136, 142-3, 149 workhouses, 33
cohabitation, 120, 130 working hours
and contributory benefits, 409 and Bismarck, 20
dependent woman family, 121, 135, 139, British legislation, 33, 128, 131
140, 145 debate, 451
employment, 126-7,216,465 EU directive, 275
and future of welfare, 465 France, 22
members of parliament, 393-4, 396 works councils, 271, 273, 274, 284
national insurance, 140-1 World Health Organization, 316
poverty, 137 World War II, 27
property rights, 135 Wren, A., 390
psychological dependence, 122 World Trade Organization (WTO), 276
and social democratic models, 177
social rights, 184 Yeatman, A., 412,413,419
and state corporatist models, 168, 176 Young, Iris, 409,411, 412,413-14,417,
taxation, 121, 139-40 421
unpaid work, 125, 140, 142
voting patterns, 397 Zee, H., 210