1. No category

Collapsing Worlds and Varieties of Welfare Capitalism:
How to Step Out of Weber’s Long Shadow
Waltraud Schelkle (European Institute, LSE)
OCSID WORKING PAPER
NOVEMBER 2008
OXFORD CENTRE FOR THE STUDY OF INEQUALITY AND DEMOCRACY
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OCSID Working Paper November 2008
Abstract
Draft, comments most welcome.
Collapsing Worlds and Varieties of welfare capitalism: How to step out of
Weber’s long shadow*
This contribution does not propose another welfare regime typology. It tries to explain,
on the contrary, why classifications of countries according to the welfare capitalism they
represent are so attractive for comparative political economy and social policy research,
despite their limitations and the raft of convincing criticism they have received over the
years. Throughout, my paper will focus on the time-honoured Worlds of Welfare
Capitalism (Esping-Andersen 1990, 1999: ch.5) and the newly imported Varieties of
(Welfare) Capitalism derived from Hall and Soskice (2001) since they are the two most
popular typologies. A major part of the paper is devoted to outlining a different analytical
framework to studying welfare capitalism in comparative political economy. The unit of
classification is social policies, not countries, and the analysis identifies the political
economy norms in these policy areas. Theoretically, the comparative political economy
of welfare regimes needs to grasp the political role of the welfare state in modern society
which is to ensure inclusion in a wider than economic sense. This framework can
arguably make more sense of the incrementalism and institutional layering that
characterizes the evolution of welfare systems and their reforms empirically. It can also
give a meaningful account of notoriously complex processes such as liberalisation of
welfare that undermine regime typologies.
Dr. Waltraud Schelkle
London School of Economics & Political Science
European Institute
Houghton Street
London WC2 2AE
ph. +44-(0)20-7955 6942
fax +44-(0)20-7955 7546
email: [email protected]
*
In writing this paper, I have greatly benefited from discussions with Wolf-Hagen Krauth (BerlinBrandenburg Academy of Sciences) and Deborah Mabbett (Birkbeck, University of London). Christa van
Wijnbergen (LSE) gave me excellent comments on a first draft. Helen Bolderson (Birkbeck), Richard
Bronk (LSE), Bernhard Ebbinghaus (Mannheim), Alison Johnston (LSE), Andreas Kornelakis (LSE),
Costanza Rodriguez d’Acri (LSE), Iyiola Solanke (East Anglia) and in particular Abby Innes (LSE) and
Gwen Sasse (Oxford) were very helpful with encouraging and critical remarks on a version that was
presented at the ESPAnet conference in Helsinki, September 2008. This version is based on a presentation
at the Oxford Centre for the Study of Inequality and Democracy (OCSID), and while I made slight changes,
I could not yet do justice to all the useful comments I got.
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OCSID Working Paper November 2008
Collapsing Worlds and Varieties of welfare capitalism:
How to step out of Weber’s long shadow
Waltraud Schelkle (European Institute, LSE)
Welfare capitalism in comparative political economy
The question of how to study welfare capitalism brings us back to one of the founding
questions of comparative political economy: ‘how is it possible to combine capitalism
with democracy?’ (Iversen 2006: 601) Capitalism produces inequalities that distribute
economic power unevenly while democracy assigns political power, in terms of the vote,
evenly. So why do the many poor not elect politicians that expropriate the rich; or if they
do, how can capitalism survive? One answer is (Przeworski and Wallerstein 1988): the
class compromise enshrined in the welfare state prevents the poor from soaking the rich.
Redistribution and social insurance provided by the welfare state may even benefit the
capitalist economy.
But this begs the next question (Iversen 2006: 604): why do we find, even among
advanced wealthy democracies, so many different variants of the class compromise? One
set of comparative political economists gave the answer: the size and structure of the
welfare state shows the historical importance of the political left and its alliances with the
middle classes (Korpi 1983). The three Worlds classification of welfare capitalisms that
Esping-Andersen (1990, 1999: ch.5) identified is a direct descendant of this social policy
tradition. Another set of comparative political economist concentrated on the role of
organized labour and the extent to which it was co-opted by the state (Goldthorpe 1984).
The two Varieties of (welfare) capitalism that Hall and Soskice (2001) postulate is in this
industrial relations school of thought, following Swenson (1991) in the shift of research
interest to the role of big business and organized employers.
This contribution does not propose another welfare regime typology, more or less
different from theirs. Rather, it tries to explain why classifications of countries according
to the welfare capitalism they represent are so attractive for comparative research in
social policy, despite their limitations and the raft of convincing criticism they received
over the years. Throughout, I will focus on the time-honoured Worlds (Esping-Andersen
1990) and the newly imported Varieties derived from Hall and Soskice (2001a) because
they seem to be the two most popular typologies. A major part of my paper is then
devoted to outlining a different analytical framework to studying welfare capitalism in
comparative political economy, trying to take the substantive achievements of regime
typologies on board but overcome some of their shortcomings -- or better, trade them in
for others, in my view less severe shortcomings.
For the study of social policy, regime typologies fulfil a similar role to what Weber’s
ideal types did for sociology in the early 20th century. In fact, the proponents do see their
Worlds or Varieties as ideal types of welfare capitalisms. The Worlds of a socialdemocratic, liberal and conservative welfare regime (Esping-Andersen 1990) or the
Varieties of a liberal and a coordinated market economy (Hall and Soskice 2001a) hardly
exist as such in the real world which consists of countries that are more or less hybrid
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OCSID Working Paper November 2008
variants of these abstractions.1 This long shadow of Weber is the point of departure for
my argument that country typologies have outlived their usefulness for the comparative
study of welfare regimes in political economy. While strongly committed ‘to make sense
of what is going on in the world around us’ (Hancké, Rhodes and Thatcher 2007a: 38), an
analytical framework built on ideal types captures this world as an aberration from the
theory at best (Luhmann 1980: 244), not as a reality unpacked and enlightened by theory.
To the credit of all the research that has been done in their wake or in parallel, we are no
longer in the phase where we need ideal types to map the terrain. The exercise has shown
that these ideal types of welfare capitalism give us rather distorted maps, typically out of
date and missing crucial detail for some, while stressing irrelevant features for others.
Moreover, the political raison d’être of regime typologies – to go on the counterattack
against the ‘neoliberal’ convergence view -- has lost some credibility. Regime typologies
seemed to provide effective counterarguments to the view that there is one best practice
of a market economy and economic pressures force to converge on a minimalist welfare
state. They meant to substantiate the claim that there are categorically different ways of
doing things which produce equally good outcomes. However, both the Worlds and the
Varieties proponents have come to nurture within themselves strong normative
preferences for convergence: either in the form of the maxim that we should all become
social-democratic Scandinavians now or the proposition that only two types of market
economies are really viable alternatives.2
The next section elaborates what makes the Worlds and Varieties typologies still so
attractive. Then follows my critique of country classifications that concentrates on their
limitations for empirical research in comparative studies of social policy; I leave aside
many other valid points that have been raised by insightful critics and led to fruitful
debates with the proponents of Worlds and Varieties.3 Finally, I outline an alternative that
is a concrete illustration of the differences in the conceptualization of political economy
and in comparative methodology, rather than a fully specified alternative theory. The
conclusions indicate how this alternative relates to recent research on the political
economy of welfare reform.
1
Cf. Esping-Andersen (1990: 49) notes that ‘[i]n reality, however, there are no one-dimensional
nations in the sense of a pure case’. Those who use his classification invariably think of Worlds as ideal
types (eg Ebbinghaus and Manow 2001a: 8-9, Arts and Gelissen 2002). For Varieties, see Hall and Soskice
(2001b: 8, 35), Ebbinghaus and Manow (2001a: 5) and Hancké, Rhodes and Thatcher (2007a: 13, 25).
2
Manow (2004) characterized the normative preferences in Esping-Andersen (1990) pertinently by
translating the Worlds typology of social democratic, liberal and conservative welfare regimes into ‘The
good, the bad and the ugly.’ Castles and Mitchell (1993) have also remarked on the fact that EspingAndersen’s classification is more about the author’s political preferences than equivalent welfare
arrangements.- For the dual convergence hypothesis in the Varieties approach, see Hall and Gingerich
(2004: sect.4-5), Hancké, Rhodes and Thatcher (2007a: 13-14) and Molina and Rhodes (2007).
3
The introduction by Hancké, Rhodes and Thatcher (2007a) is a role model of how to deal with
critique respectfully and constructively.
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OCSID Working Paper November 2008
Why is identifying Worlds or Varieties of Welfare Capitalism so attractive?
As indicated in the introduction, there are at least two good reasons why comparativists in
social policy find regime typologies so attractive: the non-convergence hypothesis and
the systemic approach as a research programme. The non-convergence hypothesis is to a
large extent an achievement of the methodology, ie the use of regime typologies that
Esping-Andersen (1990: 114-115) advocated. It provided an alternative to research that
used regression analysis and cross-section data to identify the factors that can account for
the different size and growth of welfare states, measured solely in expenditure terms.
Such factors are, for instance, the advancement of industrialisation, strength of leftist
parties, religious traditions etc. Regression analysis, with its dependant variable of more
or less social spending, is ironically more likely to find similarities and convergence, the
more diverse the underlying countries in terms of development are. It is unable to detect
differences among the selection of rich countries that happen to have the mature welfare
states social policy scholars have been most interested in (Bolderson and Mabbett 1999:
43-44). Rueda and Pontusson (2000: 351-352), however, do apply pooled regression
analysis to the distribution of market wages in regime typologies.
The non-convergence hypothesis was once directed against modernization theories, then
against the neo-liberal best practice view and now against globalization of all variants (cf.
Esping-Andersen 1999: 96; Hall 2007: 64). So it remains relevant. But at the same time,
it is untenable to suggest that waves of trade liberalisation and European integration, or
socio-demographic change and deindustrialisation do not have any effect on the existing
configurations of welfare systems. There are plausible orthodox responses to this
(Hancké, Rhodes and Thatcher 2007a: 10-13). One is that comparative institutional
advantages and institutional complementarities will play themselves out and lead to even
more pronounced regime formations: In welfare reforms, some may utilise their traditions
of social partnership, while others promoted effective targeting combined with absorptive
labour markets (Featherstone 2004: 426-427). Another orthodox response is to identify
regime-specific pathways of adjustment, for instance different welfare reform strategies
of dealing with the trilemma of the expanding service sector economy between budgetary
restraint, income equality, and employment growth (Iversen and Wren 1998): the socialdemocratic strategy compromises on budgetary restraint, the neo-liberal sacrifices income
equality, and the corporatist strategy foregoes employment growth.
Recently, scholars in this tradition have called for taking the possibility of gradual and
endogenous transformation more seriously and overcome a conservative bias in the
institutionalist research paradigm of which regime typologies are one strand (Thelen and
van Wijnbergen 2003; Crouch 2005; Streeck and Thelen 2005).4 While still in the
institutionalist tradition, their proposals amount to a potentially more radical step because
it is no longer the assumed existence of regimes that guides the research effort but their
possible dissolution. The five modes of ‘gradual yet transformative change’ that Streeck
4
‘[W]ether such frameworks are premised on an equilibrium model (as in the varieties of
capitalism literature) or not (as in much of the welfare state literature), current scholarship is prone to
ignore or downplay observed changes, or to code all that appears to be new as a variation of the old.’
(Streeck and Thelen 2005: 16). Hall (2007) is a good example for ‘a distinct if inadvertent conservative
bias’ (ibid.).
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OCSID Working Paper November 2008
and Thelen (2005) identify are a good example: there is no reason to think that particular
modes are used only in particular Worlds or Varieties, they are generic ways of
describing both the evolution of institutions and intentional reform strategies.5 The
outcome is likely to be hybridization that, I will argue below, contains the seeds of
typology destruction. In a similar vein, Crouch (2005: 13, 99) argues that ‘real-world
institutions’ contain ‘elements of complexity and incoherence’ that give room for change
and innovation, sought by opportunistic actors. Again, the research interest is no longer in
reconstructing adaptive regimes as ‘embodiments of ideal types’ (ibid.) moving along
their particular historical trajectories, but on the possible departure from the trajectory.
But even if the non-convergence hypothesis has become problematic, if not abandoned,
there is another good reason why regime typologies are so attractive. A lasting
achievement is the systemic view of social policy and the disciplinary outreach thereby
attained. Esping-Andersen (1990: 29-33) was quite explicit about the necessity to
reconnect the research of welfare states and regimes with political economy: ultimately, it
is differences in political coalition-building across economically defined classes that gave
contemporary welfare states their particular shape and ideological imprint. Varieties was
one of the many neo-institutionalist attempts at ‘intellectual recombination’ of different
social sciences studying how ‘mechanisms of the market economy’ are constructed and
permanently reconstructed (Crouch 2005: 6). This specific typology draws the attention
of social policy scholars to the ‘ways in which social policies can improve the operation
of labor markets, notably from the perspective of the firm.’ (Hall and Soskice 2001: 50)
Hence it provides arguments for ‘social policy as a productive factor’, to put it in terms of
the mantra of the EU’s Lisbon Strategy.
The systemic view of social policy that both typologies fostered has, again, a
methodological dimension. Esping-Andersen (1990) operationalised in exemplary
fashion what was until then a domain of qualitative case studies, so that regime
typologies came to be noted by comparative quantitative researchers. Similarly, the
contributors to the Varieties approach use a wide range of methods, from cluster analysis
to game theory, macroeconomic modelling to critical single case study. Without this
methodological pluralism, regime typologies could neither lend themselves to the study
of social policy nor link social policy to a number of social sciences.
Having elaborated on these commonalities and lasting achievements which, in my view,
any proposal for an alternative should acknowledge, the differences between Worlds and
Varieties deserve to be mentioned as well. Shared attractiveness does not make them
compatible, contrary to the claim of Hall and Soskice (2001: 50-51). That they differ is
not surprising, given different academic origins in social policy and power resources
theory, industrial relations and neo-corporatist theory, respectively. Hence, the Worlds
classification is based on all major transfer programmes of welfare states while Varieties,
as a ‘firm-centred political economy’ (Hall and Soskice 2001b: 6), captures mainly
employment-enhancing social policies. And while the decommodification and
5
The five modes are ‘displacement of dominant with dormant institutions, institutional layering
and subsequent differential growth, tolerated drift of institutions away from social reality, slow conversion
of existing institutions to new purposes, and exhaustion due to systemic incompatibility and erosion of
resources.’ (Streeck and Thelen 2005: 33; my emphasis)
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OCSID Working Paper November 2008
stratification index in Worlds portray the welfare state as an institution that emancipates
individuals from the market and replaces class differences by status differences of its
own, the liberal-coordination distinction of Varieties portrays social protection as
commodifying, often reflecting the power of employers.
These two differences cannot be easily reconciled. First, regarding the scope of social
policy that these two typologies capture: it has been pointed out by many that the three
Worlds classification is so neat only because Esping-Andersen (1990) left out all
programmes based on services rather than transfers, notably health care in contrast to sick
pay.6 This is a particularly effective critique, because Esping-Andersen (1990: 19-20)
himself was critical of expenditure-based classifications – only to reproduce this
expenditure bias in his decommodification index (Castles and Mitchell 1993: 103).
Moreover, the Worlds classification is based on the notion of ‘regimes’, comprising
welfare as provided by the state, the market and the family, and yet the huge area of care
services provided in the family and by the market is ignored. The transfer bias of the
Worlds has a (male) gender bias in its wake. Why, scholars like Jane Lewis asked early
on, is defamilialisation not a criterion of classification, as fundamental as
decommodification and stratification?7
The focus on occupational welfare in Varieties includes services, in particular education.
But Varieties confines itself to a limited set and only particular aspects of social policy.8
For instance, all education is analysed in terms of whether it enhances general or specific
skills, ie whether, as vocational training, it is more in line with the liberal or the
coordinated market economy, respectively (Estévez-Abe, Iversen and Soskice 2001,
Soskice 2007: 92-93). This leaves out all the social discipline and integration aspects of
universal schooling. Care services are ignored in this typology as well, which is not
surprising given the interest in macro-coordination and the large manufacturing firm as
the prototypical key player. And if care services are indirectly taken into account, namely
insofar they affect women’s career and employment prospects, Estévez-Abe (2006) finds
that the coordinated market economy does worse in terms of both equality and flexibility
of labour market outcomes for women. Hence, the equivalence of the two regimes (low
equality/ high flexibility in liberal, high equality/ low flexibility in coordinated market
economies) breaks down. A similar anomaly arises for gender equality in the Worlds
classification: Scandinavian countries exhibit more occupational segregation between
men and women than Anglo-Saxon countries (Estévez-Abe 2006: 143).
6
See Jensen (2008) for a recent deconstruction of the ‘Worlds of services’. Sick pay is included in
the decommodification index, along with pensions and unemployment benefits. For each of these, a net
income replacement rate is calculated; the generosity of other conditions and coverage are taken into
account as well (Esping-Andersen 1990: 54).
7
See Lewis (1992), O’Connor (1993), and Orloff (1993), early feminist critiques which EspingAndersen (1999: ch.4) conceded without changing his Worlds classification.
8
See the contributions by Molina and Rhodes, Hassel and Iversen in Part IV of Hancké, Rhodes
and Thatcher (2007b) for the narrow range of social policies dealt with, often remaining implicit, treated as
a kind of institutional furniture of political economies. Similarly, the contributions in Ebbinghaus and
Manow (2001) are all on employment related social policy, with the notable exception of Estévez-Abe
(2001). But she explores how the regulation of pension funds contributes to the availability of long-term
credit to Japanese firms.
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OCSID Working Paper November 2008
Those interested in combining the two approaches, like Ebbinghaus and Manow (2001a:
3, 7-8), might be tempted to conclude that both typologies are similar in their having a
male or anti-care bias. Yet, amending this bias leads into quite different directions, for
good, theoretically consistent reasons: Esping-Andersen (1999) proposes to give more
consideration to the family and the household economy, Estévez-Abe (2006) more to sex
segregation in employment, ‘gendering’ the Varieties approach by analysing and
classifying women’s labour market opportunities in different types of market economies.
This relates to the second difference, the assumed relationship between state and market.
The decommodification index of the three Worlds measures to what extent social
transfers replace earnings that ensure a living standard independent of market
participation (Esping-Andersen 1990: 37; Rueda and Pontusson 2000: 363-364). By
contrast, authors in the Varieties approach explicitly contradict this and argue ‘that
employment and income protection can be seen as efforts to increase workers’
dependence on particular employers, as well as their exposure to labour market risks.
Moreover, social protection often stems from the strength rather than the weakness of
employers.’ (Estévez-Abe, Iversen and Soskice 2001: 181). Worlds and Varieties are
diametrically opposed in this respect. The new economics of the welfare state supports
neither position in its one-sidedness, as I will indicate below.
Why are these typologies counterproductive for the comparative study of
welfare regimes?
Both the Worlds and the Varieties typologies have solicited much criticism. The high
quality of this criticism is to their credit, however, indicating that it is worth engaging
with these typologies. Many of the points I will make resonate with Crouch (2005: ch.2)
on the typologies of capitalism, even though I do not draw the same conclusions for an
alternative. I concentrate on two issues that have practical implications for comparative
research in social policy. This has a methodological aspect, challenging the parsimony
enforced by ideal-type classifications of countries, and it has a theoretical political
economy aspect, raising the question how intertwined the economic and the political
should be in the study of welfare states.
Parsimony or reductionism?
Classifying countries according to ideal types of welfare regimes or market economies,
respectively, is a supposedly parsimonious way of mapping the messy terrain of social
policy in comparative research. It can avoid the richness of historicist approaches that, for
instance, find that ‘interests, ideas and institutions’ explain the size or growth of welfare
states. Explaining something with everything is committing Popper’s cardinal sin (‘it
can’t even be wrong’) and tells us hardly anything we did not know. However, parsimony
based on the maxim ‘at least we can be wrong’ may turn into reductionism, so much so
that it can’t ever be right. There is an infinite number of ways in which one can be wrong.
Milton Friedman (1953), refreshingly provocative as usual, has admitted that much in his
positive methodology. His response was that correct predictions, not realistic
assumptions, are the real test for a model or theory. Predicting correctly that demand will
fall when prices go up, despite the manifestly unrealistic assumptions about households’
rationality, shows the model works (produced the data) ‘as if’ it would capture the world
in all its relevant features. Yet, neither Worlds nor Varieties strive to be predictive
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OCSID Working Paper November 2008
theories, for good reason in my view. But there is then no test for whether they are just
stylized or too wrong for comfort.
The criteria for ideal types are based on theory, an a priori decision that parsimonious
distinctions, decommodification and stratification, market or corporatist coordination, are
key in all units (countries) under consideration (Crouch 2005: 39-40). This is the long
shadow of Weber in that he set out to formulate ideal types as rational constructs of
historical phenomena, deliberately ignoring empirical fit, and then to move on and
describe the real types in their specific deviations from the construct. This can be justified
as the source of abstraction that all theory needs and makes us see things we would not
see without it, for instance the irrationality of arrangements we are used to. But it
contributes to the Mephistophelian view (‘Grey is all theory, my friend!’) that theory is
the rational reconstruction of reality, its skeleton missing flesh and blood. The empirical
world itself tends to become quite skinny and anaemic in the process because it figures
only as material for applying the parsimonious check-list. Such a consistent application of
ideal typology is inherently prescriptive, in fact can only be used for prescription because
it is not meant to be ‘realistic’. All equilibrium economics based on optimising agents is
of that nature. This could explain why the three Worlds came to be incorporations of ‘the
good, the bad and the ugly’ (Manow 2004).
There is a methodologically more problematic use which constructs ideal types from
empirical generalisations.9 It is quite popular outside of economics, and Varieties is
arguably one of them. Instead of taking the ideal type as a screening device for reality,
real cases are reduced to a few important traits -- and it remains opaque why some traits
are deemed important, while others are not -- and then elevated to the benchmark (ideal
type) for all other cases. This is ‘reasoning from example’ (Bolderson and Mabbett 1995:
123), in the case of Varieties typically from Germany and the UK or the US (Crouch
2005: 34-35). Specialists on other countries invariably feel that it does not quite fit their
favourite example. But they can happily engage with the typology and contribute their
case. Unfortunately, the typology tends to fall apart subsequently in the sense that all
other countries become hybrids (and sometimes even the original if it happens to change).
We end up with what Streeck and Thelen (2005: 21) note rather sanguinely: ‘All societies
are [..] in some way hybrids, some more or less so.’ But then each regime is hybrid in
different ways, not linearly ‘more or less so’ as in a regression type analysis. And it
implies that the world cannot be tidied up by parsimonious distinctions, it remains this
mess of cases that deviate from the theory.
This requires, sooner or later, to say farewell to ‘the idea of parsimony as meaning a kind
of rough, tough macho theory that concentrates on the big picture’ (Crouch 2005: 40).
The extension to four types of welfare capitalisms in Beyond Varieties is noteworthy in
this respect,10 which comes on top of talking about mixed and emerging market
economies. The anomalies abound as Crouch (2005) and others have argued for Varieties
9
I am grateful to Wolf-Hagen Krauth for illuminating me on the different uses of ideal types.
10
Hancké, Rhodes and Thatcher (2007a: 23-28) have extended the Varieties approach by a state
component which adds an etatist and a compensating state variety, noting that the liberal and the
coordinated market economies cover only OECD countries where the state-economy relationship is arm’s
length.
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OCSID Working Paper November 2008
and, more devastatingly, Scruggs and Allan (2006a, 2006b) show for the Worlds
classification. Their up-to-date and methodologically transparent estimate of the
decommodification index finds that ‘at least six of the eighteen countries rank in a group
inconsistent with type’ (Scruggs and Allan 2006a: 61). Their other attempt at replicating
the Worlds classification with their own data set11 finds that on the socialist stratification
index the presumably liberal countries like the UK and Canada score highest or higher
than most social-democratic countries, respectively (Scruggs and Allan 2006b: 20). The
authors suggest that Esping-Andersen (1990) has come to his classifications in other,
mysterious, ways than the ones stated in the Appendices of his book. Those who rely on
the Worlds typology may want to take notice, not least Varieties authors like Hall and
Soskice (2001b: 50-51) or Soskice (2007: 90-92, 117-119).
A parsimonious typology cannot be the maxim of a research programme, it is at best a
desirable research finding – that must be amenable to empirical scrutiny. Scrupulous
attempts have been made, eg by Castles and Mitchell (1993).12 But I think it is fair to
conclude that the desirable research finding has not been established. And why should
countries with their idiosyncratic histories and imagined communities, their different
demographic composition and geopolitical dimensions, the ideological swings of
democratic government, fall neatly into a few boxes that exhaust the possibilities of
welfare states in the past, present and future? The best we can hope to get from country
typologies is a contrived analytics for area studies. There must be better ways of
comparing welfare regimes, based on a theory of political economy in modern society.
Political economics or political economy?
The crucial question raised by these typologies is how to think about the political
economy implied by the notion of ‘welfare capitalism’. The term collapses a relationship
into one phenomenon. But talking about the relationship between state and market
requires a theory of the political and the economic separately so that they can relate: ‘It is
often assumed that political economy involves an integration of politics and economics. It
is less often conceded that the very idea of political economy rests on a prior separation
of politics and economics.’ (Caporaso and Levine 1998: 4) Yet, Worlds and Varieties
share this conflation with mainstream theories in political economy, adding to the curious
state of affairs that most political economy theories ignore the differentiation of
economics and politics. For instance, both Public Choice (PC) and International Political
Economy (IPE) do, from opposite ends. Mature political economies are analysed as if
they were banana republics, where either political processes resemble market exchanges
and policies are sold against votes (PC) or economic processes resemble political
exchanges and it is not competitiveness but proximity to power that makes or breaks a
firm (IPE). While these phenomena undoubtedly exist, they are pathologies which a
plausible theory of mature political economies should identify as such.
11
The data used by Esping-Andersen has been made publicly available only recently, cf. Korpi and Palme
(2008)
12
See Esping-Andersen (1999: 88-92) for a discussion of major proposals for a three-plus regime.
In the typologies of capitalism, Crouch (2005: 38-39) endorses Amable (2003) as an alternative, identifying
five groups of countries derived from data about product and labour markets, financial and social protection
systems.
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The implausible amalgamation is a direct consequence of treating political economy as if
it were about institutions integrating economics and politics and not about the
relationship between differentiated entities. The theory must be all of a piece. Because the
welfare state is there to decommodify labour or to enhance the quality and availability of
the labour force that firms employ, respectively, the economic theory must centre on the
labour market as the pivotal macro-market of the system. It determines in its interplay
with the aggregate commodity market, what employment and inflation will be (Soskice
2007: 107-110).13 If the economy and politics would be seen and thought through as
differentiated systems or spheres, one could have a truly Keynesian conceptualisation for
the economy – with which research in the Worlds and Varieties tradition has more
affinity. It would propose that in capitalist economies, the labour market is a residual
market and there is no price (real wage) adjustment that would make much difference to
the employment that employers and banks (through the latter households as savers) with
their investment-credit decisions allow to emerge. At the same time, the labour market
may be the politically salient market and it certainly has been in the 19th and 20th century
– not least for policy advisers with Keynesian credentials. But this may well change and
the instability of financial markets could become the preoccupation of social
policymakers, in particular markets for private life insurance, occupational pensions and
housing assets. So to tie the political economy of welfare regimes to an economic theory
that centres on the labour market may render the former obsolete. But the tie is
unnecessary, if only political economists could be bothered to think about the constituent
parts of their field of study specifically.
The problematic consequences can also be seen in the conceptualization of the political
system. In the Worlds classification, all politics collapses into the past triumph of one
dominant ideology in European political economy that became institutionalised in its
welfare regime. As if the countries thus classified were not democracies in which
governments with different ideological leanings hold power from time to time. In
Varieties, politics as a separate force shaping adjustment of market economies comes as
an afterthought in Beyond Varieties, in the guise of cross-class coalitions that EspingAndersen also stressed (Hancké, Rhodes and Thatcher 2007: 19-23). And while
compatible with the more functionalist appearance of its original formulation, politics is
about corporatist battles and compromises only. In neither typology is there a role for
administrations or party politics independent of the class struggle in parts of the
electorate. This seems to be rather odd for research on welfare states, although this is
admittedly more a shortcoming of Worlds than Varieties, since the latter have never
claimed to study the welfare state.
13
The New Keynesian ‘three-equation model’ of Soskice (2007: 107-110) has only one equation
that captures the capitalist market economy. This is the infamous Phillips curve which is about the more or
less sluggish response of wages in the aggregate labour market to excess demand in the aggregate
commodity market. The other two equations are policy determined, by the monetary and the fiscal
authorities, respectively. By contrast, a Keynesian model treats the labour market as the residual market,
changes in employment and inflation result from the interplay of commodity and financial markets (for
which one would have at least one equation each). New Keynesian Macroeconomics is therefore
fundamentally neoclassical, the only difference being that they stress imperfections in price adjustment
which neoclassical economists ‘discovered’ but tended not to make the focus of analysis.
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OCSID Working Paper November 2008
How can the comparative study of social policies in political economy move
on from ideal types?
In the first part of this section, I propose an alternative conceptualisation of the political
economy of the welfare state, which comprises the institutions of public welfare
provision and social policymaking at local, national and supranational level.14 Because of
the change in the unit of analysis I advocate in the second part, namely from countries to
social policies, this alternative appears to be a radical break with regime typology. But it
actually tries to preserve and develop what makes the classification of welfare states and
national production systems so attractive to the comparative study of social policies. One
main attraction is the systemic view of welfare provision, another is the non-convergence
hypothesis, asking scholars to think in terms of functional and normative equivalence or
relative advantages and disadvantages of particular ways in which welfare is provided.
Both of these insights or endeavours can be traced back to the work of Richard Titmuss
while it seems rather contrived to identify him with the classification of national welfare
states15: The three models of social policy – not of welfare states! -- that Titmuss labels as
residual welfare, industrial achievement-performance, and institutional redistributive
take up one page in lecture notes that were published posthumously. They are ‘ends of
the value spectrum’ (Titmuss 1974: 32) rather than distinct, institutionally entrenched
categories, meant to caution against the notion that the telos of all social policy is
redistribution – it is the telos only in the third model. Titmuss repeatedly put forward a
systemic view in statements like ‘the study of social policy cannot be isolated from the
study of society as a whole in all its varied social, economic and political aspects.’
(Titmuss 1968: 164; cf. 1974: 15) And a non-convergence hypothesis was implied in that
Titmuss considered ‘the welfare state’ to be a ‘myth’ that originated in the 19th century
belief in one irresistible path to socio-economic progress, brought about by enlightened
authorities (Titmuss 1958: 34, 219; 1968: 124). We can use the term now for exactly the
reasons that Titmuss was suspicious of it: even if we disagree on how many Worlds there
are and whether the search for these worlds is useful, all the research following up on
Esping-Andersen (1990) has confirmed that there are many welfare states and none has
eradicated all market risks or avoided stratification altogether.
The political economy of the welfare state
For the theory of political economy underpinning this alternative, it is helpful not to start
with the notion of ‘welfare capitalism’. Welfare capitalism suggests one logic that rules
both the economics and the politics of social policy, the welfare state tends to become an
epiphenomenon of industrialisation and capitalism. I propose instead to see political
14
Examples for a supranational welfare state are EU prohibitions of sex-discrimination in insurance
or regulations on non-discrimination of migrant EU-citizens and their families with respect to social
benefits.
15
I could not find a trace of the classification in Titmuss (1958) which Esping-Andersen (1990: 2021; 1999: 73) references.
12
OCSID Working Paper November 2008
economy as the study of how these two spheres or systems are related and how the
identity of political in contrast to economic transactions and institutions is maintained in
these relationships (Caporaso and Levine 1998: ch.1). The alternative is based on the idea
that the welfare state (with its many variants) is a political phenomenon for which we
need a theory that grasps the major sources of social policymaking, while the economics
of the welfare state can tell us how ambiguous the effects of social policies on the
functioning of capitalist economies are. This starting point of two distinct spheres
requires political economy to engage with disciplinary research and develop a consistent
theory of how economics and politics relate, in which each is identifiable as a different
sphere or system that follows its own norms or logic. Differentiation does not mean that
the economy and the political system are materially independent of each other. A
marriage is defined as being about the relationship between interdependent yet separate
spouses, and if one leaves or seeks divorce, the marriage has ended. In political
economies, the equivalent of leaving or divorce is one system taking over, ie political
command superseding exchange in markets, for instance under conditions of a war
economy, or commercialization penetrating every aspect of social life, eg in the form of
widespread corruption in the political and the legal system. Moreover, in modern society
every citizen is meant to have access to basic education, political and legal representation
and economic participation. The emphasis on inclusion, on social citizenship that dilutes
and multiplies the distinctions of class, follows Marshall (1950) in identifying a social
function of the welfare state in modern society that is genuine and distinct.16 It portrays
politics as differentiated from markets, not predictably for or ‘against markets’ (EspingAndersen 1985).
I start with the economics of the welfare state. It is safe to regard ‘the welfare state’ as a
political response to the social changes that accompanied the maturing of capitalism (the
Worlds angle). Once established as part of the political system, the welfare state has in
turn an immense impact on the economy (the Varieties angle). The ‘Economics of the
Welfare State’ (Barr 1992, 2004) or the new ‘Theory of the Welfare State’ (Sinn 1995)
have extended welfare economics centred exclusively on the notorious equity-efficiency
tradeoff, no longer assuming that all redistribution comes at the price of distorting the
optimal allocation of economic resources.17 What has now become the mainstream looks
at redistribution insofar it can substitute for markets which are failing because of
asymmetric information and externalities or insofar redistribution supports individuals to
make more rewarding economic choices under uncertainty, even in fairly functioning
markets. In other words, it explores the range of social policies that make the provision
of equity or security complementary to the enhancement of efficiency rather than being a
drag on wealth creation.18 The object of study is demand for and supply of insurance and
16
The need for the social function of inclusion can also be traced back to the sociology of Emile
Durkheim to which Titmuss (1958: 44; cf 55) explicitly subscribes, summarizing it approvingly thus: ‘as
man becomes more individual and more specialized he becomes more socially dependant.’
17
See also Atkinson (1996) and Agell (1999).
18
While the market failure account of Nicholas Barr (2001, 2004) distinguishes the welfare state as
Robin Hood (redistribution) and as piggy bank (social insurance), the new theory uses a unified notion of
redistribution. Redistribution ex ante, from the rich to the poor, corresponds to Robin Hood while
redistribution ex post, from the lucky to the unlucky, corresponds to the piggy bank. The new economics
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OCSID Working Paper November 2008
services such as health care or education where information asymmetries and externalities
make market prices an inefficient coordination mechanism. Labour markets are not a
particular focus of the new economics of the welfare state.
The demise of the pervasive equity-efficiency tradeoff is immensely relevant for the
comparative study of welfare states: as long as all the economics of social policy is
framed in terms of this trade-off, it was an unsolvable puzzle that the most developed,
richest economies also have the biggest welfare states (with the US as the notable
exception that proves the rule). These advances in economic theory now can explain
‘why the welfare state looks like a free lunch’ (Lindert 2003), that is neither generally
detrimental to business and the economy nor so advantageous that every government
would rush to implement a big welfare state. Complementarities can become weak and
turn into tradeoffs, social policy no longer ‘a productive factor’ but stifling economic
activity. Thus, we do not have to opt for the one or the other, as the Worlds and Varieties
approaches arguably do, in opposite directions. Both redistribution ‘against markets’ and
‘for markets’ can be explained within coherent economic frameworks.
The ‘discovery’ of a range in which social and economic policy complement each other
pushes the economics of the welfare state almost inevitably into the study of political
economy. The new welfare economics demonstrates the economic equivalence of
different allocation mechanisms, for instance the equivalence of a market-based funded
pension system and a public pay-as-you-go pension system in dealing with the aging of
society (Barr 2000). They have different redistributive implications, create different risks
etc but depending on the specific design, they can provide equivalent amounts of
insurance. The choice of one over the other is then ultimately a matter of political
preferences -- a black box in economics.
The point here is that the welfare state and social policy ultimately belong to the world of
politics, even for economists that can make sense of them in purely economic terms: the
economic rationales of interference with market processes and economic choices are
dominated by and have their limits in political rationales. This calls for a theory of these
political rationales that can also explain the specifics of diverse social policy choices. I
will indicate below that the new welfare economics can help us in this and thus go
beyond country typologies that tend to justify the existing diversity along simple and
overly general dichotomies.
How then can one bring politics back in, a need that the proponents of a Beyond Varieties
classification also realise (cf Hancké, Rhodes and Thatcher 2007a: 28)? A minimalist
theory of policymaking in democracies would identify at least three poles that have a
distinct influence on policymaking: first the public, that is the electorate, organized
interests and possibly the media, second party politics that presents ideological
alternatives competing for office, and the administration which includes formal
legislation. These distinctions inform, for instance, the theory of policymaking in
democracies as a power cycle: the public expresses its preferences in elections or other
emphasizes with respect to social insurance that not every change in risk-taking behaviour is socially
harmful moral hazard (Sinn 1995). There is no tradeoff between security and efficiency as long as
insurance allows individuals to take higher risks, say in terms of specialization, which markets reward with
higher average income, both individually and in the aggregate.
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OCSID Working Paper November 2008
channels of consultation; the party that comes temporarily to power tries to realise its
manifesto by getting budgets and legislation through parliament; the administration uses
the funds and the law to execute the programmes that binds itself and the public. In
mature welfare states, another version of this power cycle is more plausible: ‘The
administration draft[s] the bills for politics and dominate[s] parliamentary committees
and similar institutions. Politics, with the help of its party organizations, suggest[s] to the
public what it should vote for and why. And the public exercise[s] its influence on the
administration though various channels, like interest groups and emotional appeals.’
(Luhmann 1990: 49) In particular the lead that the administration takes in this ‘countercycle’ of power in policymaking must sound familiar to students of social policy.19
Skocpol (1992: ch.9) in her account of American welfare exceptionalism or the new
politics of the welfare state (Pierson 2001) have emphasized the role of welfare
administrations in the evolution of social policies.
The differentiation of the public, party politics and the administration is not only a way of
grasping ‘modern politics’ in the sense of contestation over binding collective decisions
in democracies that have no other source of authority than politics itself, neither the
church nor the monarch. This threefold differentiation makes the welfare state to cater to
an ever greater variety of changing needs and to achieve a degree of inclusion for the
majority of citizens that is historically unprecedented (Marshall 1950). For instance, those
with no market earnings of their own are typically entitled to a minimum income that
allows them to continue participating in the economy, so transfer payments are
decommodifying and commodifying at the same time. The right and obligation to a
child’s primary education does not depend on the economic means of the parents,
although quality is not guaranteed. In turn, entitlement to basic social services can draw
on many legal bases, nationality or residency, asylum or simply need (which may only be
served in the emergency room or prison, however). A transfer recipient does not lose
political rights as under the English Poor Law. All these examples suggest that ‘[t]he
welfare state is the realization of political inclusion’ (Luhmann 1990: 35) into the
economy and education; and makes welfare provisions independent from a particular
legal or economic status of a person. Among EU countries, resident non-nationals and
their families have no voting rights but can claim, for instance, social assistance and
access to education for their children, even if that may require some additional support,
eg in translation and language teaching.
In this Marshallian perspective, the dynamic of welfare states, often perceived as their
‘crisis’ or ‘failure’, is driven by a tension between the democratic norm of universal
political inclusion and its selective realisation (Luhmann 1990: 76). This tension arises
partly because the welfare state creates its own exclusions and stratifications, as EspingAndersen (1990: ch.3) noted and, for instance, King and Rueda (2008) argue with respect
to the ‘cheap labour’ that tends to be less integrated in generous than in residual welfare
states. This makes it difficult to characterize ‘political inclusion’ as the dependent
variable, operationalised for instance as ‘coverage and generosity of social security’. Like
stratification in Esping-Andersen’s framework, inclusion is a circular variable, both
19
The role of administrations is consciously ignored in the Worlds typology (Esping-Andersen 1990: 111),
inadvertently in the firm-centred Varieties typology.
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OCSID Working Paper November 2008
dependent and independent variable of welfare state outcomes. The tension also arises
because the economy or the education system produce inequality. These inequalities are
often legitimate by-products of differentiated social processes and confront the welfare
state with unintended consequences and ‘challenges’.
The relationship of the welfare state to other social spheres or systems is not only one of
‘receiving’ policy problems like inequality or exclusion generated elsewhere. The welfare
state is also a user of means, in particular of legal rulings and fiscal resources, that are
provided and controlled by the legal system and the economy, respectively. Like power,
the political system’s own medium of communication (Luhmann 1990: 82-83), legal
rulings and fiscal resources are ways of communicating why some action is (to be) taken:
because an authority ordered it, the law required it, or a payment incentivised it. This
allows the building up of vast and impressive welfare administrations required for
running an array of changing and diverse, universalistic as well as selective programmes
that determine individuals’ living standards. Yet for their very functionality, these media
of the welfare state are problematic as the familiar theme of ‘overload’ indicates
(Luhmann 1990: 92): there seems never to be a compelling social policy reason for less
law or less money, in particular given that that there is always an inequality or exclusion
that deserves to be addressed (and tends to get reproduced elsewhere in addressing it).
This is countered by the ever popular project ‘cutting back the welfare state to size’ that
ends up in tedious reregulation and marginal reallocation of funds, rarely in massive
retrenchment (Pierson 1994).
This outline of a conceptual framework for the comparative study of social policies and
welfare states allows for a relatively flexible combination with theories of the capitalist
economy. In turn, the economic approach chosen must leave room for the social function
of inclusion, eg admits that capitalist economies do not solve all problems of destitution,
sometimes even create them, or may do better with public risk management. The focus on
the state addressed a major weakness of both Worlds and Varieties in that their
conceptualizations of the political have no role for welfare administrations in their
interplay with the public and party or ideological politics.
Comparative study of social policy
The alternative methodology I propose is in the same Titmuss and Marshall tradition as
the Worlds classification (Esping-Andersen 1990: 20-26) and, if anything, it tries to be
more faithful to that tradition. The empirical research that follows from this alternative
will be illustrated with the painstaking work done by Bolderson and Mabbett (1995). The
alternative has the following elements: The unit of analysis is social policies or welfare
provisions, not countries. In these policy areas, the analysis identifies welfare allocation
principles that can be given economic rationales and ideological meaning relevant to
political choices. Theoretically, the comparative political economy of welfare regimes
needs to grasp the political role of the welfare state in modern society which is to ensure
inclusion in a wider than economic sense. The challenge this poses for empirical research
is to make sense of the incrementalism and institutional layering that characterizes
welfare systems and their reforms. The findings of Bolderson and Mabbett (1995) go a
long way in meeting these challenges and resonate with the new politics of the welfare
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OCSID Working Paper November 2008
state (Pierson 2001, Hacker 2005) or the notion of gradual transformation (Streeck and
Thelen 2005): the combination of different principles is the surprisingly structured
outcome of a political process by which diverse constituencies are assembled to ensure
broad support for public welfare.
However, if we go to level of social policies, how can we hope to find any pattern that
can structure our comparative studies of social policy and the welfare state or do we have
to put up with the historicist’s assertion that the world is too rich to be grasped by theory?
To illustrate an anti-historicist research programme, I interpret the work of Bolderson and
Mabbett (1991, 1995) in the light of Titmuss’ writings on social policy as well as the
political economy of reform (Pierson 2001, Hacker 2005, Streeck and Thelen 2005). This
has the advantage that the methodology proposed is tested, developed by researchers with
an intimate knowledge of several social security systems. The main message that the
authors want to get across is that welfare states are ‘mongrels’ rather than
‘thoroughbreds’. This does not only mean that ‘no single country [..] can truly be taken as
representative of a regime type as a whole’ as Goodin et al (1999: 13) summarize
Bolderson and Mabbett (1995). The argument is furthermore that the mongrel nature of
welfare states is the outcome of a political process by which diverse constituencies are
assembled to ensure support for different social policies.
Bolderson and Mabbett (1995) take social policies as units of analysis20 and describe
them according to three administrative principles of allocating social benefits: analogous
to markets, to public goods, and to taxation. They later discuss extensions to voluntary
sector and family principles. These principles are meant to replace the ‘reasoning from
[favourite country] example’ and use instead ‘reasoning by analogy’. The analogies to
market exchange, public goods provision and taxation allow me to bring the insights of
the economics of the welfare state to bear on the analysis of political choices.
Furthermore, I argue that these economic-fiscal allocation principles correspond to
ideological affinities, at least historically, yet these correspondences have become more
fluid in recent welfare reforms. By combining the analytical scheme of Bolderson and
Mabbett (1995) with insights from the new economics of the welfare state and the politics
of reform, I hope to provide a coherent theoretical underpinning for the study of social
policy in comparative political economy.
To outline briefly the framework of three principles and the main findings of ‘Mongrels
rather than thoroughbreds’: First, the market principle of allocating social policy requires
us look for the analogies with exchanges in capitalist markets (Bolderson and Mabbett
1995: table 1). The analogue to paying a price in return for commodities are contributions
to a social insurance scheme as a pre-condition for eligibility. The contribution can also
consist of participation in the labour force, analogous to a payment in kind in a market
transaction. In following market principles, the amount of benefits may vary with the
amount of contributions paid, just as the value of a commodity varies with the price paid.
Beneficiaries may have choice about whether or which scheme to join. Finally, the
20
This resonates with the conclusions of Scruggs and Allan (2006a: 69): ‘If, as our results suggest, scores
among social-insurance programmes are so weakly inter-correlated, we might just as well talk about the
individual welfare programmes, not regimes.’
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OCSID Working Paper November 2008
entitlement may correspond to a contractual obligation on the part of the ‘supplier’ alias
benefit provider, analogous to a private contract with statutory rights for buyer and seller.
Second, public goods principles of allocating social services means that we are looking
for analogies to what economists call public, in contrast to private, goods (Bolderson and
Mabbett 1995: table 2). The first characteristic of such goods is to be non-excludable, like
clean air or a wheelchair ramp that everybody can use. It has its pure analogy in social
policy if no previous contributions nor means and needs tests restrict eligibility. The
characteristic of non-divisibility (everybody gets the same air or wheelchair ramp, it does
not have to be assigned) is analogous to uniformity of the benefit. Anonymity of
provision and state-funding are other characteristics that have obvious analogies in social
policy.
Lastly, taxation principles of allocating social services are an ingenious generalisation of
means-testing (Bolderson and Mabbett 1995: 125-126, table 3). A first analogy is the
compulsory nature of taxation and that it is normally governed by law, so membership in
a scheme may be more or less mandatory and the entitlements a matter of formal
individual rights (means tests are formalized, in contrast to charity not a matter of
discretion)21. And just as the amount of tax to be paid tends to depend on income or
assets, so a benefit or the amount to be received may be related to income or assets, ie
means-tested. The disregards or tapers for small incomes in taxation is analogous to more
or less proportionate withdrawal of benefits with rising income. Finally, the analogy to
tax allowances for special circumstances are the additional entitlements to benefits, say,
for dependants or particular hardships.
In their empirical analysis of four social security schemes (age, unemployment, disability,
poverty) in seven countries in the mid-1980s, Bolderson and Mabbett (1995) score to
what extent the schemes follow one set of principles or combine it with other principles.
The degree to which these principles apply can vary along a continuum, incorporating
more or less elements of the respective other principles. Schemes can thus be located in a
continuous three-dimensional space where the corners represent a ‘pure’ application of
market, public goods or taxation principles, respectively.
The most relevant empirical finding of Bolderson and Mabbett (1995: 129) in the present
context is that in six of the seven OECD countries three of the four social security
programmes had more than one scheme, typically a primary and a secondary.22 The
21
Cf Doolittle in Bernard Shaw’s Pygmalion: ‘I'm one of the undeserving poor: thats what I am.
Think of what that means to a man. It means that hes up agen middle class morality all the time. If theres
anything going, and I put in for a bit of it, it's always the same story: "Youre undeserving; so you cant have
it." But my needs is as great as the most deserving widow's that ever got money out of six different charities
in one week for the death of the same husband. [..] they charge me just the same for everything as they
charge the deserving. What is middle class morality? Just an excuse for never giving me anything.’ [URL:
http://www.online-literature.com/george_bernard_shaw/pygmalion/] This sums up succinctly the difference
between charitable needs-testing (‘middle class morality’) and administrative means-testing (‘they charge
me just the same’).
22
The country exception was Australia which had only one pension and unemployment benefit scheme.
The programme exception was social assistance where there was only one based on taxation principles in
each country, with some elements of public goods in most.
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OCSID Working Paper November 2008
predominant principle applied in the primary scheme was consistently different from the
one applied in the secondary scheme. Hence, there may be a systematic tendency to
combine principles not only within a welfare system but even at the level of social policy
programmes. Contrary to what Esping-Andersen (1999: ch.5) suggests in responding to
critics, it is not some presumably odd cases that do not fit the bill, say Southern
European-traditionalist or radically-liberal Antipodean welfare states. We should not
expect one ruling principle of stratification, predominantly universalist, status-preserving
or residual, in any country.
How can we take this scheme and the empirical findings further and provide the
theoretical underpinning for an alternative in comparative welfare state research? First,
we must proceed to answer not only ‘what’ but also ‘why’ questions (Hacker 2005: 40).
The layering of schemes could be explained in economic-functional terms as a kind of
policy risk diversification built into welfare states, ie having primary and secondary
safety nets in place that cater to different needs and entitlements. Different principles
have different advantages and shortcomings in welfare economic terms. The market
principle tends to give more work incentives and choice for the entitled but is less
redistributive. The public goods principle avoids stigma and is fairly neutral as regards
work incentives but is one-size-fits-all. The taxation principle tends to be more targeted
and redistributive but creates work disincentives. These are economic considerations
relevant for political choices, and we should not expect that in a democracy these political
choices always opt for the same as the Worlds classification implies.
Each administrative allocation principle also has certain ideological affinities, yet it is the
art of reform politics to turn them into an integral part of one’s own political agenda.
Market principles have an affinity with centrist-corporatist ideologies, supported by
Christian democrats and non-Marxist social democrats alike as they embrace the ‘social
market economy’. Corporatism of different ideological shades is drawn to market
principles because they are centred on the norm of equivalence, hence tend to be status
preserving, and create the social units that form risk pools, be it workers, families or
economic sectors (Goodin et al 1999: 39). Obviously, the norm of equivalence makes it
easy for liberal reformers to make the introduction of market principles a genuine concern
of theirs, by replacing the addressee of social units by the individual. But even
egalitarianism may subscribe to market principles, as long as they serve to ‘creating a
level playing field’ and ‘abolishing privileges’. However, public goods principles are
more congenial to egalitarian ideologies, such as socialism and Republicanism (of French
origin), the latter if we want to stress the etatist nature of ensuring political equality of
citizens through public goods provision. Yet again, other ideologies can make reforms
that introduce public goods principles their own. For corporatism, this could mean to
endorse some free services for all children of ‘working families’, including immigrants
even if this is deemed necessary for socialising future members of the community.
Similarly, liberals can go for public goods principles as long as this serves to provide
‘equal opportunities’ for individuals. But it is taxation principles which have the closest
ideological affinity with liberalism. In fact, the idea of abolishing a separate benefit
system by replacing it with a negative income tax has been first proposed by the liberal
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OCSID Working Paper November 2008
politician Juliet Rhys-Williams in 194423 and was popularized by the economist Milton
Friedman in his book ‘Capitalism and Freedom’. One of the ideas was, ironically in the
light of the criticism of means-testing, to eliminate the stigma that is involved in making
citizens needy applicants for public funds, instead of treating them as a potential
taxpayers like every other citizen. Supporters of corporatism may go for taxation
principles if it allows to target benefits better to ‘deserving’ community members.
Similarly, it is conceivable that egalitarians go for taxation principles as they treat
everybody as a citizen, independently of the fact whether the person actually contributes
to public revenues or not.
By relating these administrative principles to both economic rationales and ideological
affinities, we can begin to explain how different schemes assemble political
constituencies or why welfare states respond quite differently to similar pressures for
change. Moreover, the combination and layering of principles can be taken as evidence
for the Marshallian imperative of political inclusion under which modern welfare states
operate. Historically, targeted, high-industrial social assistance based on taxation
principles was introduced in most countries first but then evolved into a differentiated
system with universal programmes (Bolderson and Mabbett 1995: 123). Once the welfare
state has reached a certain maturity, another sequencing becomes plausible as well: after
a primary scheme has been introduced, say unemployment benefits based on market
principles as in France or Sweden, or pensions based on public goods principles as in the
Netherlands or the UK, political pressure arises to complement it by a secondary scheme
because the poor, female carers or immigrants are not adequately covered.24 This
sequencing implies that the more universal scheme comes first, simply because it is more
encompassing in terms of coverage. The sequencing and rationales given for introducing
secondary schemes is a researchable question for historical analyses that would be
relevant for both social policy research and the political economy of reform.
It is also important for political economy and comparative methodology that these
principles can in practice vary from fairly universal to highly selective in terms of
political inclusion. We thus get rid of ‘the good, the bad, and the ugly’ Worlds
classification (Manow 2004), its ‘quasi-moral calculus’ (Castles and Mitchell 1993: 93)
which assumes that only social-democratic Scandinavia practices universalism. First, the
application of market principles would converge towards the universalism of pure public
goods principles if the requirement of previous contributions is reduced or the link
between the value of benefits and the amounts of contributions paid loosened. Taxation
principles would become increasingly universal by loosening the means and needs tests,
or providing allowances unrelated to income or specific categories of needy dependants.
In turn, public goods principles, universal if applied purely, become increasingly
selective and tend towards ‘club goods’ if there is some prerequisite for establishing
23
The proposals can be read in the archives of the LSE: http://library2.lse.ac.uk/archives/handlists/RhysWilliamsJ/RhysWilliamsJ.html
24
A case in point is the introduction of long-term care insurance in Germany in 1995 based on
strong (but not pure) public goods principles while the general health care system is in line with fairly pure
market principles.
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OCSID Working Paper November 2008
‘citizenship’, say through minimum residency requirements, or if a co-payment has to
make up for tax finance that does not fully cover the costs of the service.
We can thus relate this analysis to Titmuss’ study of universalism and selectivity in social
services. He formulated it as a ‘challenge’ for social policy to develop a ‘particular
infrastructure of universalist services [..] in order to provide a framework of values and
opportunity bases within and around which can be developed socially acceptable
selective services aiming to discriminate positively, with the minimum risk of stigma, in
favour of those whose needs are greatest.’ (Titmuss 1968: 135) We can read this
challenge today as an inherent balancing act of welfare states, balancing between
providing universal inclusion and limiting overload by selectivity.
Titmuss’ statement about the complementarity of universal and selective social services
are easily turned into two interesting theorems that can enlighten empirical research: (1)
Every mature welfare state has some ‘particular infrastructure of universalist services’.25
It may tell us a lot, if not all, about the nature of a political economy where it places
universalism in a system of social services: in primary or secondary schemes; in health,
pensions, education? (2) Selective services address shortcomings of the universalist
(primary or secondary) schemes. If so, this would tell us what this welfare state
acknowledges as deficiencies of benefit programme(s) embodying its notion of social
citizenship or how the notion of social citizenship changes. Alternatively, the selective
programmes may have been introduced in response to some pressure group which would
not surprise mainstream political economists; nor would it have Titmuss.
Epilogue on how this links up with recent research on the political economy
of reform
This paper argues that national regime typologies have outlived their purpose.26 Their
lasting achievement is to have substantiated the systemic view in social policy; and they
give substance to the non-convergence hypothesis – even though it should be subject to
empirical scrutiny rather than be an assumption of the theory. These typologies presume
that entire countries and their institutions fall in line with (are caused by) an overarching
idea. This leaves no role for politics and the constant battle between temporary public
concerns, competing ideas and their operationalisation in administrative procedures. It is
admitting failure if one then has to classify more and more countries as ‘hybrids’, as if
25
This resonates with Castles and Mitchell (1993: 104) whose critique of Esping-Andersen’s
interpretation of means-testing implies that in ‘radical’ liberal welfare states means-testing is actually a
universal principle of welfare provision: the means-tested unemployment benefits of Australia and New
Zealand ‘provided a genuine “work-welfare choice” [..] since unemployment benefits were, at least until
recently, available irrespective of the duration of unemployment and without contribution.’ Even though
the authors do not put it that way, one could argue that a means-tested unemployment programme provides
the universalist infrastructure. The Earned Income Tax Credit may play a similar role in the US.
26
As Arts and Gelissen (2002: 139) formulated this message from the philosophy of science,
‘typologies are only fruitful to an empirical science that is still in its infancy. [..] [A] mature empirical
science emphasizes the construction of theories and not the formulation of typologies.’ The authors,
however, approve ultimately of the Worlds typology, it seems out of horror vacui.
21
OCSID Working Paper November 2008
real welfare states would exist as deviations from ideal types. Even Goodin et al (1999)
fall into this trap while promising the opposite. Country typologies distort the analysis of
ongoing reform processes more than they help it.
The approach presented here can be directly related to studies of major reforms in mature
welfare states over the last fifteen years. The results – eg that we should expect
combinations of distinct principles in welfare programmes -- support ‘the new politics of
the welfare state’ (Pierson 2001) and beyond (Hacker 2005). Welfare reforms are
unlikely to abolish a scheme outright, yet it can be pushed in second place and another
introduced or upgraded to primary status (Streeck and Thelen 2005: 22-24). The layering
of schemes and the combination of principles ‘is integral to the way political
constituencies of social provisions are assembled and maintained in the face of budgetary
pressures’ (Bolderson and Mabbett 1995: 138). Hence, complexity may be deliberately
created which makes the overall redistributive impact of social services notoriously hard
to establish. This does not boil down to the trivial message that reality is always complex.
It is complex for political reasons. A system has to cater to heterogeneous constituencies;
and not every need is seen as equally worthy of support by a majority of voters (for
instance, needs of HIV infected homosexuals or single mothers). ‘Complexification’ may
be a way of yielding to pressure groups but is also a way of protecting certain selective
programmes against populist pressure.
The economic rationales and ideological affinities of administrative allocation principles
capture real policy choices and reasons for their change. In this sense, the principles
follow the policy changes rather than policies come to conform a dominant principle.27
The outcome is likely to trigger a backlash at some point, and a cycle of complexity
reduction sets in. The methodology proposed here could grasp this by tracing the attempt
to move to ‘pure’ principles or a clearer dominance of one. Unsurprisingly, the backlash
may result in the opposite, for instance pursuing transparency by new public management
is likely to end up in the proliferation of indicators and benchmarks.
An important issue to finally illustrate what difference the approach presented here would
make to the study of welfare reforms is the process of liberalisation, a ‘dominant trend in
advanced political economies’ (Streeck and Thelen 2005: 30). Worlds and Varieties
would grasp this as a move towards the residual, liberal welfare regime of Anglo-Saxon
countries that leads to hybridisation. In the approach proposed here, liberalisation means
a more pervasive application of market principles in welfare programmes. Whether this is
through privatization of social services or by introducing ‘choice’ and ‘quasi-markets’ in
public welfare itself is a matter for empirical research, not a theoretical predisposition of
the classification scheme. The analytics would grasp liberalisation in terms of more
equivalence and less redistribution due to a closer link between contribution and
entitlement, more choice and less targeting or risk-pooling, more mutual obligations for
beneficiaries and providers at the level of the respective social policy scheme. This
appeals to some constituencies, fits the ideological predisposition of some policymakers
27
The US welfare reform in 1996 is a case in point: what was originally a brainchild of conservative
Republicans who ever since Nixon tried to abolish the unpopular social assistance programme AFDC was
turned by Bill Clinton into a milestone of what New Democrats are about, even though it was more down
the road of Reaganism than even Ronald Reagan had dared to go (Goodin et al 1999: 62, 262-263).
22
OCSID Working Paper November 2008
and entails advantages but also challenges for the administration. That is to say, the
political underpinning of the approach suggests that liberalisation is not done for
functional economic reasons. On the contrary, the economic underpinning of the
appraoch suggests that insurance market failures, such as discrimination (‘creamskimming’) or adverse selection of high risks, are bound to rise with liberalisation. There
is also no presumption that the dominant trend of liberalisation adds up to measurable
shifts in outcomes at the country level, such as more inequality of national post-tax-posttransfer income. In capitalist democracies, change is likely to be compensated and/ or
hidden, and economic forces adapt to these changes; hence, what the state does and what
markets do is impossible to disentangle. The policy process and the likely economic
effect of cumulative change can be observed and attributed, at best, in particular social
policy schemes. What this also implies is that we are likely to find similarities (ie
liberalisation) between pension or labour market reforms across advanced political
economies, rather than between all social policy reforms within one country. This may in
particular be the case if there was a coordinated drive towards liberalisation, say through
EU policy processes and/or pressure of an international expert community such as the
OECD. The economic effects of the same reforms may still differ at the national level.
The difference that this comparative political economy approach would make to the
inquiry of a phenomenon like ‘liberalisation of welfare’ is that a) it provides a precise
notion of what the phenomenon means in social policy terms; b) makes it a matter of
research, not presumption, whether the reforms involved will lead to fundamental regime
change or not; c) urges us to look for the political drivers and the economic consequences
of liberalisation separately, one of which research at the social policy level typically
neglects; and d) is open for the possibility that the same reforms are undertaken in very
different welfare states, with the interesting implication that the same reform may lead to
very different political contestations and economic outcomes in different national
settings. What this approach is interested to find is dominant trends, such as
‘liberalisation’ or ‘gendering’ the welfare state, the underlying political drivers of change,
be it public pressure, ideological battles or administrative adaptations, and the largely
unintended economic consequences in terms of selective or universal welfare provisions
or the reconstitution of risk pools.28
What this illustrates is that an alternative conceptualisation and methodology opens up
the empirical material for the comparative study of social policies through the lens of
political economy. It avoids being so rich that it can’t even be wrong, or so parsimonious
that it can’t ever be right.
28
In research within an EU Framework 6 Integrated Project on ‘Reconstituting democracy in Europe’ (led
by ARENA, University of Oslo), I try to apply this framework to the analysis of ongoing reforms in
European welfare states that aim at increasing ‘choice’ for patients and clients. This research is jointly
undertaken with Joan Costa-i-Font and Christa van Wijnbergen (LSE); the policy areas covered are health,
education and employment services.
23
OCSID Working Paper November 2008
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