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Growth Strategies and Welfare State Reforms in Europe
Abstract
This chapter ends the volume's journey exploring the role of growth strategies and associated welfare reforms in the evolution of advanced capitalist economies. Its key argument is that welfare reforms are institutionally and politically linked to countries’ growth strategies, i.e. their adaptations to the new era of growth since the 1980s. Linkages between welfare systems and growth regimes (and economic activity more generally) are rarely made in the social policy literature. Usually, the
main explanation for welfare state reforms refers to sociodemographic changes such as aging, entry of women into the labor market, and emergence of new social risks (Esping-Andersen 1999; Bonoli 2005; Hemerijck 2013). Recent research on the politics of the welfare state highlights the relevance of changes in citizen preferences for explaining welfare state reforms (e.g. Gingrich and Häusermann 2015). Here again, there is no link between welfare state reforms and national economic strategies. When welfare state reforms are linked to economic issues and policies, they are often portrayed as being imposed by generic global factors such as globalization, neoliberalism, and austerity, but not as mitigated by countries’ institutional and political idiosyncrasies.
Yet, in practice, when welfare systems have changed (Hemerijck 2013; Palier and Hay 2017; Taylor-Gooby et al. 2017), their transformations have not been the same across all countries; they have not followed the same timing or the same logic, although the countries were exposed to the same exogenous, sociodemographic or economic forces of change.
... Countries have a specific policy legacy in terms of the ratio of welfare resources that is bound in policies entailing immediate vs. future distributive effects, or -in other words -in policies immediately correcting market outcomes vs. policies enhancing productivity. This legacy in terms of an investment/consumption ratio structures the relative saliency of policy functions in a country, the problem diagnosis/growth strategy, as well as the reform capacity (Hassel and Palier 2015;Beramendi et al. 2015). Functional "problem pressure", such as low employment performance or high child poverty rates do not explain directly the type of problems policy makers perceive as relevant, the diagnosis they make of these problems and the solutions they will adopt. ...
This policy article presents a study conducted as part of my Marie Sklodowska-Curie research project “Southeast Europe’s emerging growth advocates: Domestic firms, technology and economic governance in
institutionally weak states - SEEGROW”. SEEGROW analyses processes related to the economic integration of the Western Balkans from the perspective of the SME sector and its needs, and the impact of SMEs on more inclusive socio-economic development. Summarized are the findings of a scientific paper that in December 2021 won the runner up award in a competition organised by the LSEE (Research on South Eastern Europe at the London School of Economics) and the CEFTA
Secretariat. The analysis consists of a review and critique of existing policies and guidelines, and suggestions on how to improve public policies towards the SME sector, both at the level of individual countries and territories, as well as at the level of the entire region. The purpose
of the research is to better understand the role of SMEs in the context of the “Open Balkans” initiative and to contribute to reflections on what type of support for the SME sector would contribute to a more balanced and
inclusive economic integration of the region.
In this article, I analyse solidarity between regions during times of crisis. To begin with, I define two types of solidarity preferences. Negative solidarity means that territories will regard solidarity only as appropriate in the limits of intergovernmental contracts and consider the fiscal consequences of solidarity to be more important than the social consequences. Positive solidarity implies that regions consider solidarity even if it goes beyond existing intergovernmental contracts as they regard social consequences to be more important than fiscal consequences. I argue that the combination of regional collective identities, the relative importance of intergovernmental over parliamentary decision-making, and the complexity of policy problems impact on preferences for solidarity. To illustrate my argument empirically, I use the European Union (EU) and federal states as examples. More generally, I make a theoretical contribution to understanding the politics of solidarity.
Central banks have been important yet underexplored actors in the fight against the Great Recession. In addition to ultra-low interest rates, they adopted large-scale bond-buying programs known as quantitative easing (QE). Yet, there is significant variation in QE programs with important distributive consequences. Why has the Fed adopted multi-trillion-dollar bond-buying programs in housing, while the ECB has not? This article argues that the Fed targeted the integrated housing finance market as a monetary transmission strategy to stimulate core elements of the U.S. growth model: credit, demand, and consumption. In contrast, the ECB hardly stimulated housing given the eurozone's fragmented housing finance markets and the macroeconomic frictions with some eurozone growth models, particularly export-oriented Germany. Analyzing archival and interview data, this article traces the decisions of these central banks since the Great Recession, contributing to scholarship on the politics of central banking, economic policy in hard times, and the welfare state.
Is the middle class shrinking? This article contributes to the debate on job polarisation in Europe. Based on data from the European Union Labour Force Survey (EU-LFS) and looking at 12 European countries, it shows that there is an evident trend towards job polarisation. While this polarisation takes various forms, it is clearly the highest- and lowest-skilled jobs that have increased most rapidly among the active population over the past 20 years, to the detriment of middle-skilled jobs. The article then goes on to demonstrate that polarisation also exists when it comes to working conditions insofar as the lowest-skilled jobs are also where the most precarious employment conditions are found. Conversely, the remaining middle-skilled jobs are relatively shielded from this decline in working conditions.
Financialisation has become a key feature of post-industrial economies. This special issue sheds light on pre-funded private pensions as one key component of financialisation, as they turn savings into investment via financial services providers. Public pension systems face financial pressures, resulting from ageing and rising public debt, while financial services are keen to move into the market of private pension provision. Pre-funded private pensions are shaped by regulatory policies that create and correct markets. The financial crisis has triggered policy responses including shifts in investment strategies and also a re-assessment of the role of pre-funded private pensions as a complementary, rather than a superior, source of old-age income. Policymakers’ growing awareness of the benefits of collective occupational schemes administered by the social partners may pave the way for a greater role for collective schemes.
Over the last two decades, the German political economy has increasingly relied on export specialisation as a strategy for economic recovery. This export-led development strategy turned out to be a mixed blessing. While, on the one hand, specialisation in high-quality manufactured goods has preserved Germany’s competitive edge vis-à-vis many other industrialised countries, it has, on the other hand, led to an increasing dependency on exports as the engine for growth. There has been no equally strong evolution of a domestic service economy beyond manufacturing-related services. The issue of export dependency becomes increasingly important in light of the financial crisis and global imbalances, vis-à-vis Greece and the Eurozone but also globally. Weak aggregate demand depresses both domestic employment and endangers the still fragile construction of the Eurozone. The paper argues that Germany finds itself in an export-dependency trap due to imbalances between domestic services and export-driven manufacturing. It analyses three sources for the over-reliance on export-oriented manufacturing and weak employment in domestic services: firstly, the industrial relations system, secondly, the social insurance financing of the welfare state and thirdly, fiscal federalism. All three are fundamental pillars of the German political economy and locked into political coalitions that are not easily changed.
The capitalist welfare state achieved its full development within the nearly closed national economies of the early postwar decades. After the rampant protectionism following the Great Depression, and after the complete breakdown of world markets in World War II, the restoration of international competition in the markets for industrial goods was a slow process, while agriculture and services remained largely protected, and capital markets tightly controlled in most countries. Behind these protective barriers, economically advanced democracies were finally free to exploit the economic efficiency of dynamic capitalism without having to accept its unequal distributional consequences, and they learned to control the recurrent crises that had been associated with unfettered international capitalism before World War One and, again, in the inter-war period.
We investigate the impact on social welfare of the United Kingdom (UK) policy introduced in 1980 by which public housing tenants (council housing in UK parlance) had the right to purchase their houses at heavily discounted prices. This was known as the Right to Buy (RTB) policy. Although this internationally-unique policy was the largest source of public privatization revenue in the UK and raised home ownership as a share of housing tenure by around 15%, the policy has been little analyzed by economists. We investigate the equilibrium housing policy of the public authority in terms of quality and quantity of publicly-provided housing both in the absence and presence of a RTB policy. We find that RTB can improve the aggregate welfare of low-income households only if the council housing quality is sufficiently low such that middle-wealth households have no incentive to exercise RTB. We also explore the welfare effects of various adjustments to the policy, in particular (i) reduce discounts on RTB sales; (ii) loosen restrictions on resale; (iii) return the proceeds from RTB sales to local authorities to construct new public properties; and (iv) replace RTB with rent subsidies in cash.
Tax expenditures are widely used by French governments as employment and social policies. Such programmes together amounted to more than 1.3 points of GDP in 2011. Thanks to a systematic review of academic policy evaluations, we assess the efficiency of the different parts of such policies, showing that at least €6 billion is used for policies whose cost is greater than €62,500 per year and job created, and €0.5 billion for policies whose cost is greater than €160,000 per year and job created. We examine the replacement of these tax expenditures by direct public funding for (publicly or privately delivered) “quality” jobs addressing specific social needs. We discuss the conditions under which at least comparable employment performances could be achieved (factoring in the crowding out of privately funded jobs and the properties of created jobs in terms of the service provided or the characteristics of suppliers and consumers) as well as any positive economic and social externalities.
In this article, we critically discuss the hypothesis linking routine-biased technical change and job polarization. First, we put it in the context of earlier debates on the impact of technology on the employment structure and job quality, discussing the difficulties of the concept of routine used in this new literature and its operationalization. Then, using our own operationalization of tasks, we argue that routine tasks are not associated with skills in the non-linear polarized way predicted by the discussed hypothesis, nor to the observed cases of job polarization in Europe in 1995–2007. Routine and cognitive task content are similarly (albeit in reverse) linked to the relative expansion of higher-paid occupations recently observed in most European economies. This suggests that the occupational effects of Routine- and Skill-Biased technical change are similar, and that the phenomenon of job polarization observed in some European countries is not primarily the result of technological factors.
This contribution shows the relevance of implicit conditionality in the Eurozone crisis, that is, conditionality based on an implicit understanding of the stakes and sanctions involved, underlain by some measure of power asymmetry. The concept of implicit conditionality is applied to the reconstruction of Italy’s sovereign debt crisis and the structural—pension and labour market—reforms introduced by the Monti government following requests from the EU. Actual or potential access to European Union (EU) financial support, carried out through purchase of Italy’s bonds to alleviate market tensions on its debt, was the carrot. The threat of having to enter formalized, explicit conditional lending programmes with the International Monetary Fund (IMF) to avoid default was the stick. Market discipline was the operating mechanism that made implicit conditionality effective, and the role of monitoring by the EU was pervasive. Developments described in this chapter seem to support a revitalization of the fusion hypothesis between EU and member states,at least in the eurozone.
This paper develops an analytical approach to comparative political economy that focuses on the relative importance of different components of aggregate demand—in the first instance, exports and household consumption—and dynamic relations among the “demand drivers” of growth. We illustrate this approach by comparing patterns of economic growth in Germany, Italy, Sweden, and the United Kingdom over the period 1994–2007. Our discussion emphasizes that export-led growth and consumption-led growth have different implications for distributive conflict.
This book investigates whether, and if so how, the patterns of change of labour market policies in EU member states have altered since the emergence in 2010 of reinforced pressures on public spending (‘fiscal austerity’). More specifically, the book explores, through national case studies, whether retrenchment or expansion have taken place; whether there has been a shift in the logic of activation policies; and how retrenchment and expansion of protection have been distributed across the well-protected and the less well-protected labour market populations. Looking at the big European picture, do we see a convergence or a divergence in labour market policy trends and outputs? Can we identify different patterns of change across member states? Last but not least, we ask whether there has been a divergence or convergence in labour market insecurity that can be associated with the ongoing policy changes and macroeconomic conditions
This chapter investigates the political dynamics that hinder social investment reform in Southern Europe. It does that by providing an in-depth analysis of the Italian case. Between 2013 and 2018, a window of opportunity for social investment opened up in Italy, when center-left governments sought to garner support among upper-middle classes. However, the final reform output was a mix of non–social investment strategies: market liberalism (labor market deregulation) and social protectionism (compensatory cash transfers took priority over policies to enhance human capital or work–family reconciliation). The turn away from a social investment strategy was driven by two political supply-side factors: EU pressures for internal devaluation and national party competition favoring compensatory measures for lower-middle classes in the presence of a divided center-left and rising challenger parties. After the 2018 elections, the League and the Five Star Movement formed a government that promoted full-blown social protectionism.
This chapter argues that distinct growth strategies can explain why political, economic, and social actors in the Baltic reformed their welfare states toward the liberal “Anglo-Saxon Plus” model of social investment, while social investment remained a non-issue in the Visegrád countries. The Baltic countries pursued a growth strategy based on the expansion of information and communications technologies and the knowledge-oriented service economy, which led them to invest in educational reform away from the industry-specific skills and vocational training of the socialist era and toward general skills and expansion of the services-oriented tertiary education. In contrast, the Visegrád countries focused on industrial upgrading, preservation of manufacturing skills from the socialist era, social insurance for industrial workers, and compensation for those who lost jobs due to restructuring. These distinct trajectories were driven by the decisions and coalition-making dynamics of political actors in the post-socialist context of democratization and Europeanization and constrained by the countries’ socialist legacies.
This article argues that the quiet politics of informal business-state interaction explains the political determinants of growth regimes. Building on the business power literature within the study of comparative capitalism, it shows that the noisy politics of elections often leads to changes of government but rarely to fundamental changes in the growth regime. Rather, growth models can be traced to the interactions and interests of dominant corporations within a country and its policymaking elites. The argument is developed through a comparative case study research design, using the case of foreign direct investment–led (FDI-led) growth in Ireland and Hungary. FDI-led growth regimes are a universe of cases that rely on state-led industrial and enterprise policies targeting the capital investment of foreign-owned multinational firms. Despite periods of noisy electoral politics challenging basic tenets of the FDI-led growth model in both Hungary and Ireland, the continuity of FDI-oriented growth is traced to the corporate politics of business-state elite deals.
Growth and Welfare in Advanced Capitalist Economies takes stock of the major economic challenges that advanced industrial democracies have faced since the early 1990s and the responses by governments to them. It has three goals: firstly, to further our understanding of how political economies have transformed over the past decades; secondly, to analyse the contribution of governments to these changes, by looking at their growth strategies and thirdly, to highlight and analyse the role of the reforms of welfare systems in this transformative change.In a nutshell, this book maps and provides general understanding of the evolution of growth regimes in advanced capitalist countries. It identifies five main growth regimes in contemporary advanced capitalist economies (three export-led and two domestic demand-led ones). To do so the book combines a supply side approach to economic growth as advocated by the Varieties of Capitalism Literature (OUP, 2001) with a demand side perspective as the recent discussion on growth models has exemplified. It argues that all political economies consist of growth regimes, which are based on a set of institutions that shape the supply side of the economy as well as on demand drivers such as government spending and private consumption. Both supply and demand are heavily shaped by the welfare state which provides for skills through education systems and stimulates demand through high social spending and private pension funds. The book focuses on the analysis of welfare reforms as growth strategies pursued by governments in an era characterised by financialization and the rise of the knowledge economy.
This chapter describes France as apparently one of the few rich countries to have avoided a significant increase in income inequality in recent decades. However, stable average inequalities mask an asymmetric trend of income between age groups, the elderly improving their situation while the young see theirs worsening. Furthermore, it shows that behind this relatively still surface, a general trend of precarization of more and more ordinary workers is occurring. The importance of wage-setting processes and of regulation of the labour market is brought out, together with the way the tax and transfer systems have operated, in restraining the forces driving inequality upwards. Wage growth, while limited, has thus been reasonably uniform across the distribution and together with the redistributive system have kept household income inequality within bounds. However, in response to high unemployment both regulatory and tax–transfer systems have served to underpin the very rapid growth in precarious working over the last decade, representing a very serious challenge for policy.
This article explores the changing nature of twenty-first-century capitalism with an emphasis on illuminating the political coalitions and institutional conditions that support and sustain it. Most of the existing literature attributes the changing nature of the firm to developments in markets and technology. By contrast, this article emphasizes the political forces that have driven the transformation of the twentieth-century consolidated firm through the firm as a “network of contracts” and toward the platform firm. Moreover, situating the United States in a comparative perspective highlights the distinctive ways US political-economic institutions have facilitated that transformation and exacerbated the associated inequalities.
This book serves as a sequel to two distinguished volumes on capitalism: Continuity and Change in Contemporary Capitalism (Cambridge University Press, 1999) and Order and Conflict in Contemporary Capitalism (1985). Both volumes took stock of major economic challenges advanced industrial democracies faced, as well as the ways political and economic elites dealt with them. However, during the last decades, the structural environment of advanced capitalist democracies has undergone profound changes: sweeping deindustrialization, tertiarization of the employment structure, and demographic developments. This book provides a synthetic view, allowing the reader to grasp the nature of these structural transformations and their consequences in terms of the politics of change, policy outputs, and outcomes. In contrast to functionalist and structuralist approaches, the book advocates and contributes to a ‘return of electoral and coalitional politics’ to political economy research.
Studies of the rise of private defined-contribution pensions traditionally focus on social policy concerns about the allocation of risks and costs for beneficiaries and employers. There is, however, another – low-salience, financial – dimension of pension privatisation. Regulations introducing minimum return guarantees in private pensions impact financial markets because they incentivise fund managers to invest plan portfolios in fixed-income securities rather than in equities. While different segments of the financial industry have divergent preferences over such guarantees, policy-makers are caught in a dilemma: Should they prioritise predictable benefit levels or equity market development? Using the case of the introduction of Germany’s ‘Riester-Rente’, we argue that, as politicians linked the introduction of private defined-contribution plans with cuts in statutory pensions, the re-emergence of a high-salience, social policy image of pensions helped insurance firms’ and some trade unionists’ case for minimum guarantees to prevail, thereby hindering equity market development in Germany.
This paper analyses three cases where unions and employers have embraced financialisation in occupational pension provision. The widespread use of funded occupational pensions in Denmark, the Netherlands and Sweden is rooted in social partner agreement that collectively organised, capital funded pensions can be harnessed to generate secure income. External funding (legal separation of pension reserves from the employer) and administration were key elements in strategies to provide secure occupational pensions. The introduction of funded occupational pensions took place in the context of meagre and/or incomplete statutory provision and before the expansion of generous basic pension coverage starting in the 1930s. This sequencing had a ‘crowding in’ effect, because well-paid workers sought collective solutions to their pension gap. Over time, these arrangements came to encompass nearly the entire labour market. Unions and employers have developed distinctive strategies for limiting investment risks, limiting the involvement of private financial actors, and ensuring that the interests of plan participants and investment managers are aligned.
Recent reforms have responded to demographic ageing and fiscal challenges by shifting toward the multipillarisation of pensions to achieve financial sustainability. Reforms towards privatization and marketization of retirement income provision occurred in Britain and Germany with different pension system legacies. While public opinion supports largely the status quo, the stakeholders, in particular, organized capital and labour, have evolved in their positions towards pension reforms. The analysis seeks to draw out how organized interests have sought to influence mulitipillarisation but also adapted their strategies in the context of increasing financialisation in the two political economies. The position of trade unions, employers’ associations, social advocacy groups and the finance sector has increasingly embraced multipillarisation, earlier and more so in Britain than in Germany. A reversal of pension financialisation seems no longer possible but the inequalities and uncertainties need to be addressed in order to make multipillarisation politically sustainable.
Focusing on the critical Hungarian case, this article analyses the fate of embedded neoliberal capitalism in the wake of the global financial crisis. The changes include policies to combat foreign dominance in the financial, energy, and retail sectors, and efforts to reform and retrench the hitherto relatively generous welfare state. Nevertheless, the article finds no less evidence of continuity than of change: the politicisation of fighting dependency is combined with the quiet politics of subsidising foreign direct investment in manufacturing, and the noisy politics of protecting pensioners and middle-class families parallels the erosion of future-oriented social investment. Notwithstanding the radical turn in development rhetoric, the actual path correction has merely shifted the pattern of dependency without breaking out of it: financing socio-economic development in Hungary (as in other Visegrád states) is still largely dependent on foreign sources, albeit of a more diversified nature, including not only manufacturing FDI, but the EU’s structural funds and migrant labour’s remittances as well.
Scholars of political economy have criticised the Baltic states’ transition to capitalism as socially ‘disembedded’ and shaped by a zealous form of neoliberalism. This article argues that the Baltic welfare states have experienced a more complex post-socialist transformation than suggested by the ‘neoliberal retrenchment’ narrative, which relies on the traditional definition of the welfare state and focuses solely on cash compensation for the ‘losers’ of transition. By uncovering higher investment in education, more generous labour market policies and a larger expansion of public sector employment than in the Visegrád countries, the article uncovers social investment oriented welfare states in the Baltic.
Vor dem Hintergrund einer sich deutlich verbessernden Arbeitsmarktlage und eines Rückgangs der Arbeitslosigkeit leitete die Regierung Merkel (2013 bis 2017) Maßnahmen zur Reregulierung des Arbeitsmarktes ein. So wurde mit den zentralen arbeitsmarkt- (und tarifpolitischen) Reformprojekten der letzten Jahre – unter anderem der Einführung des gesetzlichen Mindestlohnes, der Stärkung der Tarifautonomie und den Regelungen zur Verhinderung des Missbrauchs von Werkverträgen und Leiharbeit – das Ziel der Stärkung von Arbeitnehmerrechten und der Sicherung der Qualität von Arbeit verfolgt, auch wenn dieses Ziel teilweise im Gesetzgebungsprozess oder auch in der Umsetzung abgeschwächt wurde. Besondere Herausforderungen bestanden in der dritten Amtsperiode der Regierung Merkel in der trotz Beschäftigungsrekorden wachsenden Ungleichheit auf dem Arbeitsmarkt, in der verfestigten Langzeitarbeitslosigkeit und in der Integration von Flüchtlingen. Geprägt ist die Periode weiterhin von einer Debatte um die Folgen der Digitalisierung für den Arbeitsmarkt.
This chapter presents an argument about the underlying reasons for the persistent economic troubles in the Eurozone based on the two different and divergent growth models in the Eurozone’s member states: the export-oriented, skill-intensive, coordinated model of the northern and continental welfare economies and the demand-driven model with strong public sector unions in southern Europe. The chapter then argues that the interactions between macroeconomic policies and national institutions render policies that are appropriate for southern Europe dysfunctional for northern Europe, and vice versa. Is goes on to discuss different reform scenarios for the Eurozone, emphasizing that all reforms come at a considerable political cost, as the same political-economic institutions that would have to be reformed have strong stakes in the status quo in both political economy models. As there are no political incentives for structural change in either model, crises will persist.
This article builds on recent research on the fortunes of universalism in European social policy by tracing the development of eldercare policy in four Nordic countries: Denmark, Finland, Norway and Sweden. Six dimensions of universalism are used to assess whether and how eldercare has been universalized or de-universalized in each country in recent decades and the consequences of the trends thereby identified. We find that de-universalization has occurred in all four countries, but more so in Finland and Sweden than in Denmark and Norway. Available data show an increase in for-profit provision of publicly funded care services (via policies promoting service marketization), and an increase of family care (re-familialization), as well as of services paid out-of-pocket (privatization). These changes have occurred without an explicit attack on universalism or retrenchment of formal rights. Nevertheless, the changes threaten the class- and gender-equalizing potential of Nordic welfare states.
The Hartz IV reforms are consistently regarded as a successful German model for the reduction of structural unemployment. Is it therefore appropriate to advise other member states of the European monetary union to carry out similar reforms? This paper strongly disagrees, arguing that the reduction in unemployment in Germany since 2005 is mainly due to cyclical factors and to the petering out of the negative employment effects caused by the economic transformation after German unification. © 2017, ZBW and Springer-Verlag GmbH Germany, part of Springer Nature.
In this paper, we argue that Ireland’s post-crisis economic recovery in Europe was driven by foreign direct investment (FDI) from Silicon Valley, and while this growth model was made possible by Ireland’s low-corporate tax rates, it was also a result of these firms using Ireland to directly access the European labour market. We evidence this contention via sectoral and geographic analyses while simultaneously showing that Irish fiscal policies have not redistributed gains from the recovery to the broader population. As a result, the economic recovery has been most actively felt by those in the FDI sectors, including workers from the EU and beyond. Building on theories from the study of comparative capitalism, we suggest that this experience indicates that Ireland’s FDI-led growth model has created clear winners and losers, with significant distributional implications. The FDI growth regime been made possible by inward migration and European integration, but given the unequal distribution of the economic benefits that this generates, it is unlikely to be politically, or electorally, sustainable.
This book serves as a sequel to two distinguished volumes on capitalism: Continuity and Change in Contemporary Capitalism (Cambridge, 1999) and Order and Conflict in Contemporary Capitalism (1985). Both volumes took stock of major economic challenges advanced industrial democracies faced, as well as the ways political and economic elites dealt with them. However, during the last decades, the structural environment of advanced capitalist democracies has undergone profound changes: sweeping deindustrialization, tertiarization of the employment structure, and demographic developments. This book provides a synthetic view, allowing the reader to grasp the nature of these structural transformations and their consequences in terms of the politics of change, policy outputs, and outcomes. In contrast to functionalist and structuralist approaches, the book advocates and contributes to a 'return of electoral and coalitional politics' to political economy research.
The German economy exhibits rising service and declining manufacturing employment, but this decline is much sharper in import-competing than export-oriented branches. We first document the individual-level job transitions behind those trends. They are not driven by manufacturing workers who smoothly switch to services. The observed shifts are entirely due to young entrants and returnees from non-employment. We then investigate if rising trade with China and Eastern Europe causally affected those labor flows. Exploiting variation across industries and regions, we find that globalization did not speed up the manufacturing decline in Germany. It even retained those jobs in the economy.
This article examines the implications of the euro crisis for theories of political economy associated with ‘varieties of capitalism’, considering how those theories help explain the origins of the crisis and how developments during it mandate revisions in such theories. Efforts to understand the crisis have extended these theories in four directions. They have inspired an emerging literature on growth models that integrates the demand side of the economy into theories once oriented to its supply side. They have led to more intensive investigation of the political economies of East Central Europe and Southern Europe. The crisis has drawn attention to the international dimensions of varieties of capitalism and to problems of adjustment, injecting an element of dynamism into varieties of capitalism analyses and underlining that adjustment is a political as well as an economic problem.
The Italian welfare state has experienced a huge reform trend in the last two decades. This has been consistent with a lengthy (and still limited) transition towards a more financially viable system of social policies; and a more effective labour market regulation. These trends have been confirmed in the last few years, when the Italian social and employment policies saw further reforms to address short- and long-term challenges.
The chapter shows the huge reform record (both before and after the recent economic crisis) has not led to paradigmatic changes: the Italian system is still heavily based on transfers, with limited social services, while active labour market policies and social investment measures in general are still of minor importance. All this confirms the Italian welfare system is still part of the Southern European model, with open questions about its future sustainability and adequacy.
Why did the transnational synchronization of wage inflations fail during the first 10 years of the euro? We analyze data from 1999 to 2008 for 12 euro members and estimate increases of nominal unit labor costs both in the overall economy and in manufacturing as dependent variables. While our analysis confirms that differences in economic growth shaped the inflation of labor costs, we add a political-institutional argument to the debate and argue that the designs of the wage regimes had an additional, independent impact. In coordinated labor regimes, increases in nominal unit labor costs tended to fall below the European Central Bank’s inflation target, while in uncoordinated labor regimes, the respective increases tended to exceed the European inflation target. Due to the stickiness of wage-bargaining institutions, the lack of the capacity to synchronize inflation is not likely to disappear in the foreseeable future.
The scientific debate on social investment (SI) is moving from an ideological and normative approach towards a more realistic one. Scholars are paying closer attention to the actual developments in social policy and to the contextual conditions and impacts of SI policies. Considering this, two main issues arise. First, that SI policies are politically feasible and likely to have positive impacts only if specific contextual conditions are met. Second, SI policies were supposed to have a positive impact on both inequalities and economic growth: a strong theoretical assumption that needs to be carefully tested. The Italian case will be used here to illustrate this new perspective and the consequences of the lack of contextual pre-conditions. For this reason, the article is divided into three parts. The first part will present our theoretical argument in the context of the most recent analytical accounts of SI policy in Europe. In particular we will argue that, given the lack of crucial structural pre-conditions, SI policies may have ambiguous and even unexpected negative impacts on both economic growth and equal opportunities. In the second and third parts, we will present empirical evidence of this ambiguity considering childcare and apprenticeship reforms in Italy. More specifically, based on empirical research carried out in Italy, we want to answer two questions: (1) Why is the Italian welfare state so ‘unfriendly’ to SI policies? What are the main factors explaining the limited room for SI policies? (2) When an SI approach is promoted in specific policy areas in Italy, what is its social and economic impact? Do these interventions achieve the positive results to be expected according to the SI approach? Finally, the last part synthesises the main arguments and aims to open a critical discussion on the structural pre-conditions of SI policies and the need for further analysis of the political economy contexts in which SI policy develops.
Presidential election years attract attention to the rhetoric, personalities, and agendas of contending White House aspirants, but these headlines do not reflect the ongoing political shifts that will confront whoever moves into the White House in 2017. Earthquakes and erosions have remade the U.S. political terrain, reconfiguring the ground on which politicians and social groups must maneuver, and it is important to make sure that narrow and short-term analyses do not blind us to this shifting terrain. We draw from research on changes since 2000 in the organizational universes surrounding the Republican and Democratic parties to highlight a major emergent force in U.S. politics: the recently expanded “Koch network” that coordinates big money funders, idea producers, issue advocates, and innovative constituency-building efforts in an ongoing effort to pull the Republican Party and agendas of U.S. politics sharply to the right. We review the major components and evolution of the Koch network and explore how it has reshaped American politics and policy agendas, focusing especially on implications for right-tilted partisan polarization and rising economic inequality.
To what extent have the new economic and budgetary rules adopted since 2010 (the European Semester, Fiscal Compact, Six Pack) changed the relationships between France and Europe in the field of welfare policies? To test whether the hardening of European Union (EU) economic instruments is followed by greater EU influence on social policy than in the past, we compare the role played by the EU in French welfare state reform before and after 2010, focusing on pensions, healthcare and employment policies. If one compares reforms before 2009 and reforms implemented when France has been subjected to Excessive deficit procedures (in 2009 and since 2013), one sees that the EU has gained two means of pressure. First, the need for deficit reduction is now explicitly integrated into French political discourses and policies and, second, the EU is able to demand evidence of reform. However, we show that France has maintained some flexibility on the timing and content of the reforms. Because, on the one side, welfare state reforms need to be negotiated domestically and, on the other side, of growing market concern about public debt, it remains difficult to claim that Brussels is the main driver of welfare state reform.
This chapter makes a comparative analysis of the trajectories of welfare change in Italy and Spain since the outbreak of the financial crisis. We look at the differences in the types of institutional design to study welfare reform in these two countries and assess how recent changes have affected welfare state institutions. This chapter also assesses the level of the European Union (EU) involvement through formal instruments around the European Semester as well as by the means of agreements with the Troika and the European Central Bank (ECB). For this part of the analysis, three sets of documents have been used: Commission Recommendations and Council Decisions in relation to Excessive Deficit Procedures (EDP); Commission country-specific Recommendations based on Stability or Convergence Programmes, and Policy Measures to boost growth and jobs (National Reform Programmes). These documents allow an analysis of the contents of formal adjustment pressures. Other documents and sources (including newspaper articles) have also been analysed to look at the role of conditionality and ‘backroom’ diplomacy.
This contribution asks whether the Memoranda of Understanding on Specific Economic Policy Conditionality (MoU), signed between bailed out member states and the European Union (EU), have changed the latter’s potential to intrude in the reform of national social and labour market policies and, if so, how. What have been the effects of the measures and reforms taken under the MoUs on national social and labour market policies? The MoUs of Greece and Portugal are analysed with a focus on pension systems and labour market policies. It is argued that the MoUs have been unprecedentedly intrusive in national social and labour market policies. The level of intrusiveness has varied, depending on the difficulty of implementing the MoU reforms, the extent to which the adjustment has been seen to be stalling and the degree to which a given policy area is directly relevant to the adjustment in question. The effects of the reforms induced by the MoUs have sometimes been intended as moves in the direction of a necessary modernization. However, the pressing demand to cut public expenditure and substantially improve competitiveness, combined with the increase in demand for social and labour market support due to mounting unemployment rates, has weighed heavily on such attempts.