Poles Apart? Alternative Welfare Trajectories under Finance-Dominated Capitalism

Abstract

By connecting the post-Keynesian view of financialization with Comparative Political Economy, we suggest some elements for an updated interpretation of the existing models of welfare. As a main element of novelty, we consider how high-income countries are reacting to the pressures of finance-dominated capitalism, namely by extending, keeping, or retrenching their welfare systems. The contribution of the article is threefold. First, we elaborate on the nexus between welfare and financialization. Second, we introduce a multidimensional index aimed at assessing the degree of welfare of 32 OECD countries for the period 1990–2015. Third, we compare our index with the socio-economic models identified in the literature and with the patterns of financialization. Two trajectories emerge from our exploration: on the one side, Scandinavian and Continental European countries moved toward relatively higher levels of welfare; on the other side, lower levels of welfare feature Anglo-Saxon, Asian, Mediterranean, and Central and Eastern European countries. Besides such divergence, we find that the process of financialization was more intense in countries with stronger welfare, which likely opted for a compensation strategy. Our work highlights the relevance of policies and institutions in shaping different welfare systems and coping with the challenges of the current phase of capitalism.