The understanding of welfare states hitherto suffers from characteristic biases – national, political and disciplinary. This paper proposes a generalized framework for international comparative research, which remains as neutral as possible to such biases. The guarantee of social rights for everybody and the issue of societal reproduction are taken as reference points to define the political criteria for social welfare. However, politics and social policies remain a partial aspect of the production of welfare in a given society. A theory of the welfare state has to take into account the interactions among household production, market production and associative forms of welfare production, on the one side, and of political interventions on the other.

This paper focuses on the linkages between postwar economic and social policy development. Examining the relationship between affluence and levels of welfare over the period as a whole reveals a tendency for social expenditure effort to be higher in moderately affluent then in extremely affluent nations. Turning to the question of how economic growth impacted on welfare expansion in the early postwar decades, the paper argues that growth was a necessary, rather than a sufficient, condition of welfare development. Finally, analysis of the era of welfare containment suggests that domestic economic performance has been the main factor conditioning expenditure change

In the 1980s and 1990s West European welfare states were exposed to strong pressures to ‘renovate’, to retrench. However, the European social policy landscape today looks as varied as it did at any time during the 20th century. ‘New institutionalism’ seems particularly helpful to account for the divergent outcomes observed, and it explains the resistance of different structures to change through past commitments, the political weight of welfare constituencies and the inertia of institutional arrangements – in short, through ‘path dependency’. Welfare state institutions play a special role in framing the politics of social reform and can explain trajectories and forms of policy change. The institutional shape of the existing social policy landscape poses a significant constraint on the degree and the direction of change. This approach is applied to welfare state developments in the UK and France, comparing reforms of unemployment compensation, old-age pensions and health care. Both countries have developed welfare states, although with extremely different institutional features. Two institutional effects in particular emerge: schemes that mainly redistribute horizontally and protect the middle classes well are likely to be more resistant against cuts. Their support base is larger and more influential compared with schemes that 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. In addition, 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.

Among OECD countries there are two clusters of old-age security systems: (1) ‘Social insurance’ countries had, by the end of the 1960s, fashioned the core of old-age security as public, contributory, earnings-related and unfunded insurance schemes; (2) a diverse collection of countries that, after 1970, topped up their basic pension arrangements with funded occupational pension schemes with (almost) universal coverage. ‘Social insurance’ countries, on which this essay focuses, reveal at least six common trends in pension reform, all about improving the financial sustainability of public schemes. Although the repertoire of incremental adjustment strategies is quite limited, policy changes since the early 1980s have not led to a clear convergence among ‘social insurance’ countries (or across the two clusters). Their original diversity has been somewhat diminished, but it has for the most part merely taken a different form. Public pension reforms regularly harmed (future) beneficiaries. Nevertheless, most reforms were actually based on broad political consensus. The success of attempts to introduce retrenchment policies depends on prior negotiation with – and support obtained from – collective actors above and beyond a simple parliamentary majority. This peculiar prerequisite ensures success in the sense of a sustained implementation of the measures taken and of actual improvement in public trust in ‘reliable’ pension schemes.

Within the framework of a general discussion of ‘the state of the welfare state’ in economically advanced West European democracies, this paper offers an account and interpretation of how the Nordic welfare states, often perceived as the most comprehensive and ‘generous’ welfare states, met a number of challenges in the 1990s. Economic problems were most critical in Finland and Sweden in the early 1990s, and social policy reform activities with the aim of modifications of programmes and cutbacks in expenditure have been most pronounced in these countries. A single common denominator for Nordic welfare state development in the 1990s is a somewhat less generous welfare state, but Norway is generally an exception. The basic structure of the welfare systems has been preserved, and social, health and welfare issues are consistently of high priority for governments and voters. The welfare state is highly valued in Scandinavia, but more space for market and other non-governmental welfare solutions is likely to grow in the future.

The paper presents a preliminary and partial analysis of the information collected in a comparative 12-country study of the adjustment of national employment and social-welfare policies to the increasing internationalisation of product and capital markets. After the postwar decades, when national governments were still able to control their economic boundaries, the first international challenge came in the form of the oil-price crisis of 1973/74, which confronted industrial economies with the double threat of cost-push inflation and demand-gap unemployment. It could be met if countries were able to achieve a form of ‘Keynesian agreement’ in which expansionary monetary and fiscal policies would defend employment while union wage restraint could be relied on to fight inflation. For this solution, ‘corporatist’ industrial-relations institutions were a necessary, but not a sufficient, condition. Since the second oil-price crisis of 1979–80 was met by restrictive monetary and expansionary fiscal policies in the United States, the steep increase of real interest rates in the international capital markets forced other central banks to raise interest rates accordingly. As a consequence, employment-creating investments could only be maintained if the share of profits in the national product was significantly increased. Under the pressure of rapidly rising unemployment, unions in most countries were forced to accept this massive redistribution from labour to capital. In the 1990s, finally, the international integration of product and capital markets has been constraining private sector employment as well as the financial viability of the welfare state. Now, however, institutional differences among different types of revenue systems, welfare states and employment systems – Scandinavian, Anglo-Saxon and Continental – are creating important differences in vulnerability that can no longer be met by standardised responses. This paper concludes with an examination of the specific problems faced by, and the solutions available to, the different countries included in the study.

This article places European welfare states squarely in today's European integration context and looks optimistically at social policy perspectives ‘top down’ from the European level. It has the needs of European policy makers in mind, and thus their interests in optimal policy mixes, lessons from national experiences and in a new institutional architecture that links EU member states more effectively into All-European corridors of reform efforts. The authors argue that the overriding need in welfare state reform is to identify new value combinations and institutional arrangements in national systems that are both mixed – in terms of solidarity and growth objectives – and virtuous, that is capable of producing advances on all necessary fronts. The authors recapitulate the EU's present social agenda – where the search for ‘new value combinations’ is seen to be most actively undertaken. They take up the nature of the ‘bottom up’ challenges to, and the adjustment problems of, the four different sets of European welfare states at length and also their differing needs for functional, distributive as well as normative re-calibration. They present core components of an optimal adjustment strategy that could reconcile growth with solidarity. Finally, they focus on different instruments that might further substantiate the role the EU could play in preserving and developing the ‘European Social Model’ in different welfare domains.