ARENA Working Papers
WP 99/19



Survival of the European Welfare State*

Stein Kuhnle
Department of Comparative Politics, University of Bergen



The `crisis' of the welfare state has been with us for some time. From the 1970s, various theorists have claimed a fiscal crisis (O'Connor, 1973); a crisis of government overload (e.g. Rose and Peters, 1979); a crisis of legitimacy (e.g. Habermas, 1976); a crisis of liberal democracy (e.g. Crozier et al., 1975). According to Alber (1988), the financial implications of the emerging social insurance policies in Germany in the beginning of this century were perceived to indicate a crisis by politicians - i.e. at a time when social expenditure in Germany made up only 1.4% of GDP. In the most recent decade, abundant theorizing on crisis has focussed on the increased internationalization or globalization of the economy, aptly epitomized in the question: ?Has the happy, post war, marriage between the nation state and the welfare state come to an end?? (Hagen, 1998). Given the persistency of the best-selling crisis perspectives, one may wonder if and to what extent the alternative conception of a `happy marriage' was ever true. In my view, crisis perspectives were always overblown, at least if by `crisis' is meant breakdown or fundamental change of a system. Processes of piecemeal, democratic adaptation to changing social, economic and political circumstances and challenges appear to have been underestimated. One might even argue that the marriage between nation state and welfare state has never been stronger than today. Divorce is hardly in question, but perhaps a reasonable long term perspective might be that the relationship between nation state and welfare state has moved from loose co-habitation (limited population coverage, few rights, weak entitlements, modest benefits) through consolidated marriage (universal coverage, many rights, strong entitlements, generous benefits) towards a future of legally regulated co-habitation (universal population coverage, many rights, weak entitlements, basic benefits)? The nation state is - not least because of the welfare state - a different state than it was 40, 80 or 100 years ago, but any state of today is also part of an entirely different international environment. For reasons of endogenous as well as exogenous factors the European welfare state is likely to change. But we do not necessarily have to cry `crisis' every time social or welfare reforms are made: it would indeed be a strange capitalist conservative-liberal-social democratic society which did not experience continuous social reform activity.

The welfare states of Western Europe continued to grow during the 1980s and 90s in terms of expenditures and beneficiaries, and to a large extent in terms of employees, in spite of all crisis-theories since the mid 1970s. This has happened partly because of established social rights and entitlements which automatically lead to increase in expenditure as the composition of the population changed and which in Europe has meant first and foremost an increase in number of old age (and disability) pensioners, but also significant increase in recipients of unemployment benefits and social assistance; partly because of conscious political decisions to improve social security or welfare schemes or establish new programs; partly because the welfare state - and especially the health system - is able to solve or meet more needs than earlier, which again has lead to increased demand; partly because some known problems have gained in importance, such as unemployment; and partly because some relatively new `problems' or needs have increased in importance, for example as a result of increase in divorces and single-parent households. No doubt, the welfare state has met and will in the future face great challenges. Empirical research on changes in European welfare states during the last two decades shows that almost everywhere succesful attempts to reduce benefit levels in selected social security or welfare programs have taken place, but that there are few signs of radical or fundamental change. Welfare cutbacks and reforms have been strictly limited in scope (Pierson, 1994, 1996). There appears to be a significant discrepancy between theoretical and political rhetoric about crisis and the actual political opposition on mass and elite level against change in most of the core programs of the welfare state. Popular and electoral support for the welfare state is strong all over Europe, but whether this is a good or bad indicator for the future of the welfare state can be questioned. High expectations of more state welfare may have to be adjusted downwards in light of public budgets and public debts. In spite of similar challenges in single states and assumed unifying forces generated by accelerated European economic integration, great institutional variations between European welfare states persist - variations as to coverage or access to social programs; to benefit structures; to financing regulations; and to organizational arrangements. At the macro-institutional level, it still does give meaning to talk about (at least) `four social Europes' (Ferrera, 1997) in Western Europe, exemplified by countries in Scandinavia, the Anglo-Saxon area, Continental Europe, and Southern Europe, perhaps dividing the Continental model into a Bismarckian and a Christian-democratic type (Baldwin, 1997).

In this paper I shall discuss why we - on the basis of domestic and external and international factors can expect relatively less state welfare in Europe, especially in the richest countries, whatever their model of `social Europe', and why - in spite of this - we can expect a relatively comprehensive European welfare state to survive.

Why expect less state welfare?

In all societies, welfare is provided by a mixture of providers: the state (central and/or local government); firms (based on market demand or welfare for own employees); households/families; and voluntary organizations. These providers - and interrelationships between them - have varying importance over time and across the `four social Europes': e.g. the state has overall importance in Scandinavia; families and voluntary organizations relatively more importance in Southern Europe. Much research has gone into why different types or `models' of welfare states have developed in Europe: different pre-industrial social structures, political institutions, degree of homogeneity of population and cultural characteristics, problem perceptions, and preferences induce different political-institutional solutions, and new ideas, new solutions hit political systems and societies at different points in `developmental time'. At this present day, with much economic determinism dominating political debate and public policy studies in general and welfare state studies in particular (e.g. `globalization of capital mobility leads to less state welfare') we do well to remind ourselves that social insurance was a political invention, a politically motivated invention leading to the establishment and cross-national spread of institutions which in the beginning were weakly correlated with scope of industrialization, level of economic development, `problem pressure' and degree of democracy. Thus, social insurance - and a variety of different principles of coverage, financing and organization - was instituted in different economic, social and political institutional settings, and different relationships between different welfare providers, and different weight to different providers were established. Pre-social insurance structures and institutions (e.g. the supra-national Catholic Church, the family in Southern Europe; a merged state and church bureaucracy, local government in Scandinavia) have a long-lasting impact, as well as the early institutions of social insurance established. Institutional inertia is one factor why different welfare models persist in Europe, and one factor why welfare states persist and are likely to do so. Politics and institutions matter.

Since the early 1980s there has been a growing attention to the welfare role played by the market, family and voluntary organizations among political and bureaucratic elites, mass media, social science researchers, and, to some extent, voters. Paradoxically, this new attention based on sharp criticism of the welfare state emanated from political leaders of the less advanced of Western `welfare states': Thatcher in Britain and Reagan in the USA, but this paradox serves to emphasize the importance of political rather economic factors for policy change. Likewise, welfare cutbacks have subsequently not been more pronounced in the expensive and comprehensive Scandinavian countries than in leaner welfare states. A more general indicator of an increased attention devoted to non-state welfare providers came in an OECD-publication: ?New relationships between action by the state and private action must be thought; new agents for welfare and well-being developed; the responsibilities of individuals for themselves and others reinforced. It is in this sense that the emergence of the Welfare Society is both inevitable and desirable? (OECD, 1981: 12). This political statement was based upon perceptions of demographic and economic challenges and implied a clear ambition to shift the burden of welfare responsibilities among the various possible welfare providers. Modifications of welfare programs have occured all over Europe since then, but without affecting much the overall cost of the welfare state (given demographic composition, entitlements, increasing welfare needs). The new awareness of other possible welfare providers than the state may have been induced by economic or financial imperatives and constraints, and thus modifications of schemes could be looked upon as simply pragmatic adjustments to `economic realities' defined by those in position to define. But the new awareness can also be interpreted as an indicator of a major ideological shift: that state `monopoly' of welfare provision is not a good thing, that maximum state organized welfare is not necessarily an expression of the most progressive welfare policy, that voluntary organizations offer other qualities in welfare provision, that market competition can stimulate both better and more efficient health and other welfare service delivery. On the rhetorical-ideological level, the welfare state has also been claimed to undermine individual initiative, threaten economic prosperity, create `dependency culture' (as if the market, organizations and the family do not create dependencies). These arguments and beliefs to justify less state welfare may be fictional or real. We still lack a model that explains how and why the boundaries between market, state, voluntary agencies and the family in the provision of social welfare change over time and across countries (Paci, 1987). It is also an empirical, underresearched question to what extent boundaries in fact have changed. One hypothesis could be that, controlled for demographic composition, as people and countries become richer, more resources will be spent on welfare because meeting welfare needs have high priority for individuals as well as for governments in democratic societies. Thus, although there have been cuts and adjustments of benefits in many social security schemes in European countries, the overall governmental expenditure effort has increased in absolute terms. What may have happened since 1980s at a general level is that welfare provided by other resource allocation mechanisms have increased at the same time. Thus, we may observe not so much a shift in the welfare mix formula as a simultaneous growth of all kinds of welfare provision. Welfare provision is not a zero-sum game between providers. One hypothesis for what has happened in terms of welfare provision in Scandinavian countries during the 1980s and 1990s would be: more state, more market (both individual and occupational welfare), stable voluntary organizations, more family (more time spent on family care?).

Ideology and rhetorics aside: why is it likely that the relative role (if not necessarily the absolute role, at least not in the first place) of the state will decline in the decades ahead? My argument would go like this: More wealth in society and higher incomes for a large part, for a large majority, of the population in a country give greater meaning to the concept `freedom of choice', or to use the concepts and theory developed by Hirschman (1971): greater individual economic resources make `exit' from an organization possible, and greater individual resources make it more likely that possible alternative providers will arise as a reaction to subjectively felt poor quality, or declining quality of services, or unmet demand, in - in this case - the public state welfare system (e.g. waiting lists for health operation; infrequent home help services; low income replacement in public pension scheme). As long as the state provides a near monopoly of social insurance, health and welfare services, the use of political voice to demand better or more services is realistically the only option open for dissatisfied voters. When the majority of the population was relatively less well off , one would expect - at least, for historical reasons, in a Scandinavian context - that demands for equal or universal access to welfare resulted in a political pressure for more state welfare. Income and wealth means freedom of choice, and one hypothesis could be that people are rather pragmatic as to choosing between public and private providers of welfare, as long as services are considered good, satisfactory and efficient (cf. Deng Xiaoping, 1961: ?It does not matter whether the cat is white or black as long as it catches mice?). If one values equality of quality of services, or equal access to the best possible services, the problem is of course that a dual public-private welfare system most likely will become differentiated in the way that the private providers pay better wages for professional employees as well as provide better services catering to the economically well-off in society, and that the economically well off gradually will lose interest in paying taxes for a public system they do not need for their own welfare demands, thus causing further differentiation of private and public service provision and deterioration of the public system. Still, the possibility of `exit' does noe necessarily lead to massive exit. The threat of exit can be efficient, and the use of voice can be more productive once the threat of exit is real. And there is also the possibility that public and private welfare provision are not substitutes: people can have both, or even more kinds of welfare provision at the same time. There is also a third possibility (and fourth, if we consider the family) beyond the dichotomy public vs. private or market welfare provision: namely provision by voluntary organizations and institutions, which have been, and can be, more or less dependent upon or integrated with either the market or government. Weisbrod (1977) argues that changes over time and across countries in the substitution ratios among the three sectors can be explained in terms of political demand and changes in per capita income levels: Until a political majority is able to demand public provision of a collective good, the minority will have to remain satisfied with voluntary organizations. A sufficiently coherent political demand emerges and as society generates sufficient national income, it moves to supplant traditional family or charitable provisions with public welfare. Once per capita income reaches a relatively high level (and I would add, with a relatively equal income distribution producing a large `middle class'), however, consumers develop diversified needs and seek market substitutes for the public provision of goods. This perspective may supplement the exit-voice perspective. A graphic illustration of one element of this hypothesis applied on the size of the welfare state would be an inverted U-curve for the relationship between the size of the welfare state and income levels (and equality of distribution of income) in society. As income increases, market and other substitutes to public welfare are likely to develop because consumers (voters, patients, clients, gainfully employed) develop or can act upon their more or less diversified needs (determined by a number of factors), and thus causing market and `third sector' welfare provision to develop as complements or supplements to public welfare. An overall increase in the demand for welfare may thus subsequently lead to greater supply of welfare provision. Paci (1987) claims that there is a revival of the voluntary sector which seems to confirm a long-waved cyclical development of the complex system of social protection. I am not so sure it is revived as much as it it rediscovered. Whether the voluntary sector in relative terms plays a more important role today than 30-40 years ago is questionable, but it may play a different role because it relates differently to both market and the state, and voluntary organizations themselves may be of a different character and function differently (Selle and �ymyr, 1995). My expectations would be, though, that in (European) societies with high levels of income, a large middle class, a large and growing class of well-off, highly educated pensioners, and in a situation where welfare needs enjoy high priority and increasing welfare needs are not easily met by the welfare state, more space for market and `third sector' solutions will be opened. Once this space is being filled, the relative importance of the state will decline, and the longer term scenario will be that more mixed welfare provision will give new generations another experience than old generations, thus perhaps slowly reducing expectations towards the welfare state and the high demands for state welfare which have been evident during most of the post-WWII period. Younger generations will grow accustomed to finding non-public solutions, and most likely,more frequently, also solutions outside the nation state. With the EU and EEA, the market for welfare, health and social insurance services is no longer limited to the territory of the nation state: supply and demand will grow across national boundaries, something which will also in itself reduce the near public monopoly (in Scandinavia) of welfare provision of today. The likely development of a greater proportion of transnational households may also undermine the `monopoly' position of national welfare states, and a likely more heterogenous (ethnic, cultural) composition of `national' populations may also make it more difficult to preserve or create the political consensus for unified state welfare solutions (Barry, 1983; Baldwin, 1997; �sterud, 1999).

In all likelihood, welfare policies and institutions will and must remain largely national, but a possible weakening national integration, due both to European and global integration (leading to individualization?) on one hand and the resurgence of regional identities at the sub-national level on the other, may reduce the possibilities of nationwide solidarity and redistribution. Both changes in social structure and the demographic transition will most likely affect institutional adjustments and changes of welfare states. Developments towards more segmented welfare states, `dual welfare states', are likely, although national governments may still maintain regulatory and taxation tools to control the growth of market-based and other non-governmental welfare provision in such a way that universal access to quality welfare provision and relatively equal distributions of income and welfare is possible. These will remain domestic political issues and choices for which national governments to a large extent can be held politically accountable. But the social and political bases for state organized solidarity is changing, and perhaps also the possibility of certain forms of organized solidarity. On the other hand, new forms of solidarity may develop on a transnational or transregional basis - state boundaries will to a lesser extent than before constrain such solidarity from developing. Tendencies towards more space for the market, through fiscal and occupational welfare, and greater emphasis on voluntary welfare, and the tendency towards more European, cross-national private `social' insurance and welfare provision, can result in organizational fragmentation, social segmentation and complexity of the welfare system which is not easily `corrected' at the national level even if a political majority within a nation should wish to change its course. This kind of europeanization is brought about not by `positive' political decisions at the European level, but indirectly by the opportunities for organization and business created by the common market and the four freedoms, or by what is called `negative integration', or what I would prefer to label `passive integration'.

A new `Social Europe'?

?Welfare states are national states? (Swaan, 1990). European welfare states are fundamentally national in character, and within the EU, social policy is primarily a national responsibility. There exists as of today no European social law on the basis of which individual citizens can claim benefits from Brussels; there exists no direct taxation or social contributions to EU which can finance social welfare; and there hardly exists any welfare bureaucracy in the EU. But a social dimension is clearly evident in EU policies on structural funds (for agriculture, social development, regions); in decisions on coordination of social rights for people moving between member states (including EEA members, as part of the territory of the four freedoms); and in the directives imposing minimum standards for health and security at work places, working hours, and minimum standards for maternity leave and benefits. These policies covering 15 (sometimes 18) nations are already examples of more advanced coordination and harmonization across state boundaries than what exists in any other region in the world. Whether this should be seen as europeanization on the way to globalization, or as a European regional response to the challenge of globalization, or rather simply as a stepping stone towards creating a European state entity, is an open question. Whatever the answer, Leibfried and Pierson (1995) argue convincingly that the status of the national welfare states is affected by the process of European integration: both the sovereignty (i.e. exclusive legislative authority) and the autonomy (the actual capacity to decide on what policies or laws that must be followed within the national territory) of member states (including EEA countries) are affected in the realm of social policy. Leibfried and Pierson (1995) claim that although national welfare states maintain the prime institutions for social policy in Europe, they do so only within a constrained `multi-tiered system' - within the frame of a kind of European federalism. National social policy is, they argue, steadily being more European, although there is no unidirectional nor any unidimensional development. European coordination of national welfare schemes seems more likely than any immediate harmonization of national schemes on a European wide level - not only because of the (current) lack of will at the European or inter-governmental level for such action, but also because of the institutional differences, complexities, and legal entrenchments. Taxation and welfare are largely outside the EU agenda, even after the creation of the EMU (with 11 members so far). A possible pressure for actual harmonization or for an equalization of benefit levels in welfare schemes to a European average can arise from a consideration of the effect of the principles of free movement of labour and sustenance of social rights within the entire EU (EEA) territory. An underlying interest for harmonization would probably be to avoid unfair competition from socalled `social dumping', but it is doubtful whether any country or EU would be interested in imposing less generous welfare on other countries. So far, welfare state standards have increased in the lesser developed welfare states of Europe, and cuts in the most developed welfare states have clearly been motivated by internal financial and demographic challenges rather than by a perception of increased intra-European or global competition, although EU and the ill-defined monster of `globalization' can be used by governments as convenient `blame avoidance' references. Another prospect favouring harmonization initiatives, although not very likely in the short term, is the possibility of people moving to the country with the most generous welfare systems. This has hardly happened, and internal mobility has been limited during the 30 years period that free movement of labour has been possible, perhaps largely due to factors such as language, culture, and employment conditions. Most of the labour migration that has taken place has come from outside into the EU, and one may expect this to remain a great welfare challenge for the EU, as is also the effort to extend the EU eastwards to incorporate former communist countries. When the pressure for the free movement of other groups than just labour increases (as we should anticipate) - groups such as students, pensioners, long-term unemployed - one can foresee a need, if not a demand, for some kind of a harmonized European social minimum income and welfare scheme, perhaps adjusted for some national or regional economic standard. The rationale for such a scheme would probably arise more acutely at the European political level than a demand for harmonization of social insurance and health systems. It is difficult to exclude social issues altogether from the agenda within the internal market of the EU (and EEA). Ever growing market integration undermines in general terms both the autonomy and the sovereignty of national welfare states (Leibfried and Pierson, 1995). A transformation of national welfare states into some kind of multi-tiered polity is pushed forward through three analytically distinct processes: (1) `positive integration' (or maybe better: `active integration'): active reforms being developed at the centre of EU through social policy intiatives of the European Commission and the Council of Ministers, or through decisions made by the European Court, through which European legal norms are spread (e.g. equality of sexes in terms of social security; worker protection; health standards). Active integration depends primarily upon the political agreement of national governments in the Council of Ministers; (2) - `negative integration' (or `passive integration'): social policy resulting from the efforts to take away barriers for the free market to function (e.g. the European Court makes social rights or benefits mobile across national states; decides that rights and benefits can not be limited to own national citizens. Mobile or transportable benefits is a response to the fulfillment of the right to free movement of labour and persons in a common market. Passive integration means measures which increase market integration by eliminating national restraints on trade and distortions of competition; (3) - actual, long-term integration factors which do not constrain national welfare states legally, but which force national states to change their social policies to avoid negative consequences of economic integration (e.g. `social dumping'; harmonization of tax systems, development of EMU).

The Maastricht-criteria for membership in the EMU have led member states to make public expenditure cutbacks and reforms to social security and welfare arrangements. Commentators claim that the run-up to monetary union has imposed new constraints on `Social Europe' (by which is meant the national welfare state institutions and collective bargaining backed up by comprehensive labour market regulations) (Teague, 1998). The EMU represents a tightening of the macroeconomic background to `Social Europe'. Social Europe - advanced national welfare states - has prevented the EU (EEA) from widespread poverty and inequality. With or without EMU the problems of sustaining `Social Europe' are substantial. As long as taxing and `active social policy integration' are largely outside the European agenda, the nation states will maintain prime responsibility for welfare. A crucial question is whether national tax systems can be sustained or not in a Europe (and world) with open borders. This is a question of incentives and mobility of tax objects, and, of course, a question of decision-making at the European or inter-governmental level, for example decisions on minimum (and maximum) tax levels as has been reached in the case of V.A.T. (minimum general V.A.T. of 15%). There is little evidence that European integration will fuel `social dumping'. The social wage is only one factor in decisions on investments, and firms will not invest in countries with low social wages unless worker productivity (relative to wages) justifies such investments. On the other hand, there is little doubt that the enhanced exit option for business strengthen their hand in bargaining with governments and unions, thus market-driven economic integration may indirectly lead to gradual downward adjustments of social benefits in the most advanced or generous national welfare states. Unless EMU is followed by some kind of a political union - a federal state with central taxation and redistribution, which seems rather unlikely at the moment - a common monetary policy and a common currency may sharpen the economic imbalance between member countries because they lose autonomy and means of economic adjustments. If the legitimacy of redistribution within many national states today are questioned (e.g. Italy, Belgium, UK, Spain, Germany?), one may surely estimate that establishing legitimacy for redistribution at the supranational European level is a greater challenge. Identity or community-feeling is sometimes perceived as a necessary prerequisite for legitimate redistributive policies (e.g. Offe, 1984), and we may safely assume that national identity on average ranks higher than European identity in the EU/EEA territory. Whatever way we look at EMU, it creates big dilemmas for the further development of European integration. There exists an assymmetry between economic integration and political integration in the EU, creating a `coordination deficit' and `democratic deficit' (Scharpf, 1996, 1997). There exists a mismatch between the free movement of capital and the lack of supranational governance structures. Member states have been very reluctant to develop institutions designed to create European-wide forms of economic and social governance. On the other hand, national legal, political and financial scope for positive social policy action remains despite European integration, and actions by the EU are also possible or imaginable in order to avoid the erosion of `Social Europe'. Lipietz (1997) suggests that one way out of the dilemma is to create `an alternative Social Europe', a regime with four key functions: (1) the reduction of social dumping by the enactment of Union-wide common labour market ground rules and more tightly coordinated national employment policies; (2) the control of fiscal dumping which entices the member states to attract mobile international capital by offering minimal taxation. This would require a much higher degree of fiscal harmonization and, for example, a regime of uniform taxation of capital at source could be imposed by EU; (3) reduce high unemployment through launching a Europe-wide recovery plan; (4) and finally, reorganize the European labour market so that social equity, ecological demands and economic performance are made compatible.

For such a plan to be implemented, the EU would need new fiscal and social policy competences, which can only be done through the building of some kind of democratic political federation. This is, as hinted at, not an idea that brings the European masses of voters into the streets, country and mountain roads for unbridled celebrations and cheers for the time being. The inclusion of Central and East European states into EU over a 5-10 years period makes it less likely that institutions and governance structures for an alternative (supranational) `Social Europe' will be agreed upon. But there might be other, less radical options. Scharpf (1996), for example, has suggested that to avoid competition between different national social rules, the member states should commit themselves to EU-level regulations that establish multi-level social standards. The idea is that the level of social protection should be linked to a member state's level of economic development, thus minimizing the harmful side-effects of crude harmonization. Member states should also adopt a European directive that bind them not to push total welfare expenditure below a mutually agreed share of GDP. Thus, member states would not have to commit themselves to any institutional harmonization, which, as mentioned, would be very problematic in any case. But, still, it may be unrealistic to build - formally or informally - even such a consensus. Both the Lipietz and Scharpf recipes for a new `Social Europe' which matches the `Economic Europe' presuppose a `Political Europe' that does not exist, and is not likely to come into being easily unless we imagine a high probability for equally bold and visionary governments in 15 (or 18 or soon more) countries to emerge and make the necessary decisions simultaneously. But the Maastricht Treaty and the creation of the EMU have put in motion a process towards a more politically integrated Europe, which, in due time, is likely to have consequences for the construction of a new `Social Europe'.

Why survival?

European national welfare states have been built over a 100 years period. Institutions have survived two world wars. They have great importance for their citizens today. Great differences between national welfare states in terms of expenditure levels and institutional structures persist. Cutbacks in social security and welfare programs have on average been modest during the 1980s and 90s, and real social expenditure has - for various reasons - continuously increased, in some places substantially, also during the last 15 years in most countries, i.e. after the period of `Growth to Limits' (Flora, 1986, 1987). The sustainability of the welfare state is given a high priority among voters (Ferrera, 1993), a fact which sets European voters in general apart from voters in other parts of the world, the USA in particular: less than one third of the Americans were in favour of government responsibility for basic income for all, and for reducing income differences, and less than half of the population for government to be responsible for creating jobs for all, whereas more than two thirds of the Europeans (from UK, Germany, Netherlands, Italy, Hungary) supported all these forms of state intervention (Flora, 1993). In spite of a number of similar financial, employment and demographic problems and challenges, and common external challenges associated with European and global economic integration, European welfare states remain institutionally strong with solid support from voters and major political parties. Citizen welfare will continue to be a prime responsibility of the nation states. The importance of the European Union is very limited. It is too early to say what kind of political entity the EU will become, but a stronger `Political Europe' may be conducive for relatively advanced or comprehensive national welfare states to survive, and a political Europe may - in a long term perspective - play a more active independent role to guarantee the survival of some form of a `Social Europe'. The state is likely to play a relatively less dominant role in the future social Europe given large, economically well-off middle classes which may demand exit options, choice and differentiated services. More space for market and other non-governmental welfare solutions has been opened within and across European nation states, and although more dual public-private welfare states are likely to appear, national governments enjoy a number of policy instruments to regulate and control developments in order to affect access to quality welfare services for all and relatively egalitarian income distributions. Whether to maintain and develop welfare states, and what kind of welfare states to develop, are questions of institutional persistence or `conservatism', of `strong' rights and entitlements, of vested interests, but also of political choices by governments, organizations, firms and individuals - choices which are influenced by institutions, experience, values, socio-structural change and economic opportunity. We should make note of the apparent paradox that at the same time as markets (of all kinds) are globalized, national state barriers lowered, many more nation states have been created during the last 15 years. This combined process of global economic integration and politicization of territorial organization has also meant that social security and other principles of original European welfare state policies seem to undergo a process of globalization. The world has more sovereign nation states than 10 years ago, and the number may still be increasing, even in Western Europe (Flandern, Scotland, Catalonia, ++??). More nation states than ever have now introduced at least one kind of social insurance scheme: 165 countries have introduced social insurance of one kind or another, most oftenly an occupational injury insurance or pension scheme (Social Security Programs Throughout the World 1995). The more nation states, the more public social security institutions in the world. A number of major `welfare state reforms' were made in East and Southeast Asia during the most recent economic miracle period (1985-95), particularly in Korea, Taiwan, China and Thailand, and there are, in spite of more poverty and social misery, few signs of `welfare state dumping' after the `crash of Summer of 1997' (Hort and Kuhnle, 1998). In fact, the lag between industrialization and major state intervention for social protection was probably far greater in Europe than it has been in industrializing Asia, in spite of the assumed or contended (continued) importance of Confucian values and traditions of family welfare provision. If America is not, a number of Asian countries are looking to Europe for solutions for state welfare policies. These trends of Asian welfare development are no guarantee for the survival of European welfare states, but the observation that state welfare schemes are spreading in the globalized world may indicate that some of the external pressure for retrenchments and down-scaling of European welfare states may be alleviated. In fact, because of fairly well-developed welfare states, Europe may - if not in the immediate short-term - be better prepared to meet the challenges of demographic and socio-structural change in the modern world than other regions of the globe. European countries in which, for example, social policies to support families (kindergartens, cash transfers, home help for the elderly, public support for institutional care) exist, may be better prepared for global competition than countries in which welfare provision is solely or primarily a family responsibility. Many factors influence decisions about investments, production and location of production facilities - not only low wages and maximization of profit. Skilled labour, efficient public bureaucracy, little corruption, little poverty, limited social inequalities, public safety, social and political stability, democracy and political accountability, are all factors which have a bearing upon decisions about where, how and at what cost to produce goods and services. An economically integrated Europe, with or without further political integration, may in this context be a `comparative advantage'. European welfare states may, with a number of continuous adjustments and a different welfare mix, fare well. European welfare states are likely to maintain or advance universal coverage of major welfare rights, but may in the longer run attend more to basic rights than to rights which today are earned through gainful employment: income and welfare security beyond basic levels may be left to individual and voluntary decisions and the market and other non-governmental welfare providers. The format of the welfare state may be different from that in the period of the most intense happy marriage between the nation state and the welfare state. But if European voters, for a number of reasons, continue to desire a welfare state, it is likely to survive.


* Paper presented at ARENA-seminar in Oslo, 1 June 1999. I Thank participants for critical questions and comments which will be useful for further work on the topic. Elements from this paper will be used for an introductory chapter to the book Stein Kuhnle (ed.): Survival of the European Welfare State (London, Routledge, forthcoming).


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[Date of publication in the ARENA Working Paper series: 15.08.1999]