From welfare rights to welfare fights: Neo -liberalism and the retrenchment of social provision
This study investigates welfare system retrenchment in the advanced capitalist countries over the period 1980–97. During this time, welfare retrenchment occurred along three dimensions: expenditure growth slowdown, organizational/programmatic restructuring, and policy reversal. Explaining the political attack on social provision has been a matter of controversy within the social sciences, yet an increasing number of studies are focusing on the impact of economic globalization on welfare system delivery. Research on the globalization-retrenchment relationship is marked by mixed conclusions. Some analysts argue that capital mobility and economic integration have produced a generalized convergence toward retrenchment, while others emphasize that globalization has either increased social provision effort or that it has had no impact at all on welfare system operation.
This study addresses both the theoretical and empirical limitations of previous globalization-retrenchment research. First, it conceptualizes and historicizes the processes of capitalist transformation over time, highlighting the crisis of capital accumulation and its subsequent reordering through economic globalization. Second, it provides an analytic framework that centers on the broader socio-economic context within which welfare systems are embedded. A comparative political economy approach to welfare system retrenchment allows changes in contemporary capitalism to be linked to social provision outcomes.
Historical analysis shows that the early 1980s employers' offensive was launched to restore capitalist profitability. Neo-liberal transformative action aimed to reorder post-war capitalism's structural and institutional arrangements, and to shift the balance of class forces in capital's favor. This neo-liberal reordering unleashed the economic transforming tendencies of state rationalization, market contestability, and factor mobility (“coercive competition”) on all nations. The importance of coercive competition is that it simultaneously acted on and transcended domestic institutional-policy frameworks.
In this new political economic context, domestic welfare systems faced a number of transformatory pressures, including the erosion of government autonomy over social provision, integration induced convergent welfare effects, and welfare system rivalry. The prime source of retrenchment pressures was that mobile capital has an aversion to anything that contributes to competitive locational disadvantage. How these pressures were dealt with politically determines the nature and scope of welfare system retrenchment.