Politicians pursuing retrenchment face a difficult challenge; just how difficult will depend on the political context in which they operate. These actors seek their goals within specific environments. The distribution of political resources and the institutional rules of the game help to determine the prospects for successfully pursuing various strategies, as well as the benefits and costs associated with particular outcomes. This chapter considers the aspects of this broader context that are most relevant for retrenchment politics.

Existing scholarship offers only limited help in this effort. The recent shift in the welfare state's fortunes has been widely noted, but so far there have been few attempts to explain retrenchment outcomes. This absence stands in stark contrast to the flourishing literature on the origins and development of welfare states. A wealth of detailed research has generated clear analytical perspectives on the main factors contributing to or retarding welfare state expansion. Two such theories have been particularly influential. One emphasizes the power resources of labor movements, whereas the other focuses on the role of institutions.

There is a natural inclination to turn directly to those theories to explain contemporary welfare state politics. In a study of retrenchment, however, these arguments need to be carefully reappraised. As I have already noted, there is little reason to assume that theories designed to explain outcomes in a particular context and involving the pursuit of particular goals will still apply once the environment and the goals of key actors have changed.