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The New Politics of the Welfare State

Published online by Cambridge University Press:  13 June 2011

Paul Pierson
Paul Pierson
Affiliation:
Harvard University
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Abstract

This essay seeks to lay the foundation for an understanding of welfare state retrenchment. Previous discussions have generally relied, at least implicitly, on a reflexive application of theories designed to explain welfare state expansion. Such an approach is seriously flawed. Not only is the goal of retrenchment (avoiding blame for cutting existing programs) far different from the goal of expansion (claiming credit for new social benefits), but the welfare state itself vastly alters the terrain on which the politics of social policy is fought out. Only an appreciation of how mature social programs create a new politics can allow us to make sense of the welfare state's remarkable resilience over the past two decades of austerity. Theoretical argument is combined with quantitative and qualitative data from four cases (Britain, the United States, Germany, and Sweden) to demonstrate the shortcomings of conventional wisdom and to highlight the factors that limit or facilitate retrenchment success.

Type
Research Article
Information
World Politics , Volume 48 , Issue 2 , January 1996 , pp. 143 - 179
Copyright
Copyright © Trustees of Princeton University 1996

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References

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23 In this respect, organized labor (public employee unions) continues to be of significance, although not in the way posited by power resource theorists. Union interests are now linked primarily to the employment-generating effects of specific public programs rather than to the broad consequences of generous public provision for the bargaining position of workers.

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30 Pierson(fn. 11).

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33 What seems more likely is that the structure of formal institutions will influence the strategies of retrenchment advocates. I return to this point in the conclusion.

34 On expansion, see Heclo (fn. 27); and Skocpol (fn. 26). On retrenchment, see Pierson (fn. 12).

35 Esping-Andersen (fn. 1); Esping-Andersen, Gösta, “Postindustrial Cleavage Structures: A Comparison of Evolving Patterns of Social Stratification in Germany, Sweden, and the United States,” in Piven, Francis Fox, ed., Labor Parties in Postindustrial Societies (Oxford: Polity Press, 1991)Google Scholar; and idem, “The Emerging Realignment between Labour Movements and Welfare States,” in Regini, Marino, ed., The Future of Labour Movements (London: Sage, 1992)Google Scholar.

36 Huber, Ragin, and Stephens (fn. 1), 733; Esping-Andersen (fn. 1), 33, 32. Of course, Esping-Andersen has also emphasized that the growth of the welfare state affects welfare state politics.

37 Esping-Andersen (fn. 1), 21.

38 A recent draft paper by Stephens, Huber, and Ray presents the first sophisticated statistical analysis of retrenchment, utilizing newly assembled data that allow investigation of fairly detailed programmatic changes over a large number of countries. There are important limitations: much of the programmatic data end in 1986 or 1987; many programs are not covered; and the still-small sample allows the statistical testing of only a few broad hypotheses (essentially, the impact of partisanship) about the politics of program change. The results reported strongly support most of the analysis presented here, although they view Thatcher as more successful than I do. Stephens, John D., Huber, Evelyne, and Ray, Leonard, “The Welfare State in Hard Times” (Paper presented at the conference on the “Politics and Political Economy of Contemporary Capitalism,” University of North Carolina, Chapel Hill, September 1994)Google Scholar.

39 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 programs. Roughly though, that point is reached when because of policy reform a program can no longer play its traditional role (e.g., when pension benefits designed to provide a rough continuation of the retiree's earlier standard of living are clearly unable to do so).

40 This broad conclusion is echoed for a much larger number of cases in Stephens, Huber, and Ray (fh. 38).

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50 In the case of AFDC, which is not indexed, this happened largely because state governments faile to index benefits to inflation. Given this structural feature of the program, “nondecisions” allowed quiretrenchment. This trend predated Reagan's arrival in office. Indeed, cuts in real benefits were great during Carter's presidency (when inflation was high) than under Reagan.

51 See, for example, two frequently cited studies: Rosenberry, Sara A., “Social Insurance, Distributi Criteria and the Welfare Backlash: A Comparative Analysis,” British Journal of Political Science 12 (Otober 1982)CrossRefGoogle Scholar; and Palmer, John and Sawhill, Isabel, eds., The Reagan Experiment (Washington, D.C.: Urban Institute Press, 1982)Google Scholar.

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59 Esping-Andersen (fn. 35, 1991 and 1992).

60 Combined employer and employee social insurance contributions were 26.5% of gross income in 1970,32.4% in 1980, and are forecast to hit 39.2% in 1994. Financial Times, July 2, 1993, p. 13.

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62 Esping-Andersen (fn. 35,1992) rightly suggests that the development of private pension schemes could encourage such a polarization, since it would allow current workers to sever the link between their own retirement situation and that of the preceding generation. Yet the enormous institutional and political barriers to any radical change in a mature, pay-as-you-go pension system make a major development along these lines highly unlikely. See Pierson (fn. 31).

63 Hinrichs, Karl, “Public Pensions and Demographic Change: Generational Equity in the United States and Germany,” Centre for Social Policy Research Working Paper no. 16/93 (Bremen: University of Bremen, 1993)Google Scholar; Schmähl, Winifried, “Die Finanzierung der Rentenversicherung im vereinten Deutschland,” Wirtschaftsdienst, no. 1 (1992)Google Scholar.

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67 Offe (fn. 66), 140.

68 Plaschke, Jürgen, “Die Sozialpolitik in den Monaten November, Dezember 1993 und ein sozialpolitischer Riickblick auf das Jahr 1993,” Nachrichtendienst, no. 2 (1994)Google Scholar.

69 Alber, Jens, “The Debate over Long-Term Care Insurance in Germany” (Contribution to an OECD seminar on the Care of the Elderly, Paris, OECD, 1994)Google Scholar; Götting, Ulrike, Haug, Karin, and Hinrichs, Karl, “The Long Road to Long-Term Care Insurance in Germany: A Case Study in Welfare State Expansion” (Paper presented at the World Congress of Sociology, Bielefeld, July 1994)Google Scholar.

70 Tyll Necker, president of the Association of German Industry (BDl), described the original proposal (which did not include the reduction of one paid holiday as an offset) as an official declaration of war against German industry. Alber (fn. 69), 17.

71 By 2040 pensions are expected to account for 61% of German social expenditure, compared with 40% in Britain and 44% in Sweden. OECD, Aging Populations: The Social Policy Implications (Paris: OECD, 1988)Google Scholar.

72 A bourgeois coalition government was in power from 1976 to 1982 and, following the SAP's worst showing in decades in the “earthquake” election of 1991, from 1991 to 1994.

73 Esping Andersen (fn. 1); Esping-Andersen (fn. 35, 1992); see also Swenson, Peter, “Labor and the Limits of the Welfare State,” Comparative Politics 23 (July 1991)Google Scholar.

74 Schwartz (fn. 15); Pontusson and Swenson (fn. 19).

75 OECD, Economic Survey: Sweden (Paris: OECD, 1994)Google Scholar; Huber, Evelyne and Stephens, John, “The Future of the Social Democratic Welfare State” (Paper presented at the International Sociological Association Meeting, Oxford, September 1993), 7–11Google Scholar.

76 OECD(fn. 75), 36.

77 Ibid.

78 Stephens, John D., “The Scandinavian Welfare States: Development and Crisis” (Paper presented at the World Congress of Sociology, Bielefeld, Germany, July 1994)Google Scholar.

79 Pontusson and Swenson (fn. 19).

80 Huber, Evelyne and Stephens, John, “The Swedish Welfare State at the Crossroads,” Current Sweden, no. 394 (January 1993), 1–7Google Scholar; OECD (fn. 75).

81 Rothstein, Bo, “The Crisis of the Swedish Social Democrats and the Future of the Universal Welfare State,” Governance 6 (October 1993)CrossRefGoogle Scholar. Rothstein himself argues that weakening middle-class attachment to the welfare state may have contributed to the SAP's 1991 election defeat, but his article provides no real evidence for this claim and the polling data he presents suggest otherwise.

82 Huber and Stephens (fn. 80).

83 Stephens (fn. 78), 19. Ministry of Health and Social Affairs, Pension Reform in Sweden: A Short Summary (Stockholm: Cabinet Office, 1994)Google Scholar.

84 Schwartz (fn. 15) argues that there has been major change in the four small states he studies: Sweden, Denmark, Australia, and New Zealand. His study focuses on the internal organization of public service provision, rather than on the level and quality of services actually provided, and it does not even discuss the transfer payments that account for the majority of welfare-state spending. Even on its own narrow terms, however, Schwartz's study provides remarkably little evidence that the changes he catalogs add up to radical reform rather than the continuous tinkering common in all modern public sectors. The evidence looks credible only for New Zealand, a tiny country on the periphery of the world economy, which clearly faced severe adjustment problems in light of its long (and unusual) tradition of protectionism. It seems far more reasonable to treat this case as an outlier than to view it as the pacesetter in a global march toward radical reform of the welfare state. See Stephens, Huber, and Ray (fn. 38).

85 Indeed, a cross-national comparison of unemployment programs 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 countries, with data through 1991. This data thus permit, for one program, a recent quantitative appraisal of program 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 Cooperation and Development, The OECD Jobs Study: Facts, Analysis, Strategies (Paris: OECD, 1994), chart 16, p. 24Google Scholar.

86 See David, Paul, “Clio and the Economics of QWERTY,” American Economic Review 75 (May 1985)Google Scholar; and Arthur, W. Brian, “Competing Technologies, Increasing Returns, and Lock-In by Historical Events,” Economic Journal 99 (March 1989), 116–31CrossRefGoogle Scholar. For good extensions to political processes, see Krasner, Stephen A., “Sovereignty: An Institutional Perspective,” in Caporaso, James A., ed., The Eluaw State: International and Comparative Perspectives (Newbury Park, Calif.: Sage Publications, 1989)Google Scholar; and North(fn.20).

87 Thus in Germany, Sweden, and the United States the maturity of existing schemes limited policymakers to very gradual and incremental reforms ot 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 (fn. 31).

88 For an example of this argument, see Garrett (fn. 41).

89 For an argument about how EC institutions may allow blame-avoiding behavior on the part of member state governments, see Moravcsik, Andrew, “Why the EC Strengthens the State” (Manuscript, 1994)Google Scholar.

90 Kuttner, Robert has called this “the most fundamental principle in the political economy of social spending.” Kuttner, “Reaganism, Liberalism, and the Democrats,” in Blumenthal, Sidney and Edsall, Thomas Byrne, eds., The Reagan Legacy (New York: Pantheon, 1988), 113Google Scholar. For a critique, see Pierson (fn. 12), 6, 170.

91 See Pierson (fn. 12), 17–26, 169–75.

92 Steinmo, Sven, Thelen, Kathleen, and Longstreth, Frank, eds., Structuring Politics: Historical Institutionalism in Comparative Analysis (Cambridge: Cambridge University Press, 1992)CrossRefGoogle Scholar.