European Welfare States Beyond Neoliberalism: Toward the Social Investment State

Abstract

After the golden age of welfare state development in Europe, the glorious thirty years from 1945 to 1974, perceptions changed and the welfare state was interpreted to be in crisis. One solution to the crisis was a neo-liberal approach emphasizing privatization and retrenchment. And at least rhetorically this perspective gained ground during the 1980s in Northwestern Europe and during the 1990s in the newly emerging market economies of Central and Eastern Europe. However, on the whole, social science literature has been more concerned about trying to explain welfare state resilience to change than identifying retrenchment even if parts of the literature do argue for such a perspective. This seeming contradiction within the scholarly community calls for a more precise definition of all three import concepts: What should be understood by neo-liberal reform or a neo-liberal approach? Which welfare policies are in question? And what parts of Europe are being investigated? Furthermore, the time perspective is crucial. From the perspective of the late 2000s this paper argues first that neo-liberalism in the form of the so-called Washington consensus is no longer promoted by international organizations. Social policies are no longer regarded as a burden on economies, but rather as investment in human capital. Hence, we are now beyond neo-liberalism. Secondly, the widespread welfare reforms in Europe must be distinguished according to welfare regime. Thus, the paper discusses welfare reform within five different trajectories: former state-socialist states, Continental Europe, Atlantic Europe, Southern Europe and Scandinavia. Although the number and demarcations of welfare regimes are contested (for an excellent overview see Powell and Barrientos, 2008) it is a widespread perspective and a good tool to order European welfare states. Hence, I agree with Francis Castles and Herbert Obinger (2008: 321) when they write: “Our main conclusions are that country clustering is, if anything, more pronounced than in the past, that it is, in large part, structurally determined and that the EU now contains a quite distinct post-Communist family of nations.” A superficial overview of spending on social protection in both relative and absolute terms from 1980 (1990 in Eastern Europe) to 2005 reveals no signs of retrenchment in any regime. But such summary indicators may mask a different distributional profile of benefits and an increase in risks and coverage. Therefore, the remainder of the paper discusses in more detail particular welfare reforms within each of the five welfare regimes. It is concluded that problems of welfare state development differ within the different regimes, but a strong commitment to welfare can be identified everywhere. However, within a bifurcated system where the middle class enjoys generous protection, the marginalized are subjected to increased obligations and reduced entitlements.