Hostname: page-component-848d4c4894-5nwft Total loading time: 0 Render date: 2024-05-19T23:12:43.179Z Has data issue: false hasContentIssue false

The viability of advanced welfare states in the international economy. Vulnerabilities and options

Published online by Cambridge University Press:  13 July 2009


The paper presents a preliminary and partial analysis of the information collected in a comparative 12-country study of the adjustment of national employment and social-welfare policies to the increasing internationalisation of product and capital markets. After the postwar decades, when national governments were still able to control their economic boundaries, the first international challenge came in the form of the oil-price crisis of 1973/74, which confronted industrial economies with the double threat of cost-push inflation and demand-gap unemployment. It could be met if countries were able to achieve a form of ‘Keynesian agreement’ in which expansionary monetary and fiscal policies would defend employment while union wage restraint could be relied on to fight inflation. For this solution, ‘corporatist’ industrial-relations institutions were a necessary, but not a sufficient, condition. Since the second oil-price crisis of 1979–80 was met by restrictive monetary and expansionary fiscal policies in the United States, the steep increase of real interest rates in the international capital markets forced other central banks to raise interest rates accordingly. As a consequence, employment-creating investments could only be maintained if the share of profits in the national product was significantly increased. Under the pressure of rapidly rising unemployment, unions in most countries were forced to accept this massive redistribution from labour to capital. In the 1990s, finally, the international integration of product and capital markets has been constraining private sector employment as well as the financial viability of the welfare state. Now, however, institutional differences among different types of revenue systems, welfare states and employment systems – Scandinavian, Anglo-Saxon and Continental – are creating important differences in vulnerability that can no longer be met by standardised responses. This paper concludes with an examination of the specific problems faced by, and the solutions available to, the different countries included in the study.

Focus: The future of the Welfare State
Copyright © Academia Europaea 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Cerny, P. G. (1994) The dynamics of financial globalization: technology, market structure, and policy response, Policy Sciences 27, 319342.CrossRefGoogle Scholar
Esping-Andersen, G. (1990) The Three Worlds of Welfare Capitalism. Princeton: Princeton University Press.Google Scholar
Esping-Andersen, G. (1999) Social Foundations of Postindustrial Economies. Oxford: Oxford University Press.CrossRefGoogle Scholar
Ganghof, S. (1999) National Tax Policy Adjustment to Economic Internationalization. MPIfG Discussion Paper. Köln: Max-Planck-Institut für Gesellschaftsforschung.Google Scholar
Garrett, G. (1998a) Partisan Politics in the Global Economy. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Garrett, G. (1998b) Global markets and national politics: collision course or virtuous circle? International Organization 52, 787824.CrossRefGoogle Scholar
Genschel, P. (1999) Tax competition and the welfare state. Manuscript, 06 1999. Köln: Max-Planck-Institut für Gesellschaftsforschung.Google Scholar
Gerschuny, J. (1978) After Industrial Society: The Emerging Self-Servicing Economy. London: Macmillan.CrossRefGoogle Scholar
Green-Pedersen, C. (1999) Welfare-state retrenchment in Denmark and the Netherlands 1982–1998.The role of party competition and party consensus. Paper for the 11th SASE Conference,Madison, Wisconsin,8–11 July 1999. Department of Political Science. University of Aarhus, Denmark.Google Scholar
Iversen, T. and Wren, A. (1998) Equality, employment, and budgetary restraint: the trilemma of the service economy, World Politics 50, 507546.CrossRefGoogle Scholar
Miegel, M. and Wahl, S. (1999) Solidarische Grundsicherung. Private Vorsorge. Der Weg aus der Rentenkrise. München: Aktuell im Olzog Verlag.Google Scholar
Pierson, P. (1994) Dismantling the Welfare State: Reagan, Thatcher and the Politics of Retrenchment in Britain and the United States. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Pierson, P. (1996) The new politics of welfare, World Politics 48, 143179.CrossRefGoogle Scholar
Polanyi, K. (1957) The Great Transformation. Beacon Hill: Beacon Press.Google Scholar
Quinn, D. (1997) The correlates of change in international financial regulation, American Political Science Review 91, 531552.CrossRefGoogle Scholar
Scharpf, F. W. (1991) Crisis and Choice in European Social Democracy. Ithaca: Cornell University Press.Google Scholar
Schmidt, M. G. (1999) Warum die Gesundheitsausgaben wachsen. Befunde des Vergleichs demokratisch verfasster Länder, Politische Vierteljahresschrift 40, 229245.Google Scholar
Sinn, H.-W. (1990) Tax harmonization and tax competition in Europe, European Economic Review 34, 489504.CrossRefGoogle Scholar
Soskice, D. and Iversen, T. (1997) Central Bank – Trade Union Interventions and the Equilibrium of Employment. Papers FS I 97–308. Berlin: Wissenschaftszentrum für Sozialforschung.Google Scholar
Streeck, W. (1997) German capitalism. Does it exist? Can it survive?, New Political Economy 2, 237256.CrossRefGoogle Scholar
Streeck, W. (1999) Comparative Solidarity: Rethinking the “European Social Model”. MPIfG Working Paper 99/8. Köln: Max Planck Institute for the Study of Societies [].Google Scholar
Swank, D. (1998) Funding the welfare state: globalization and the taxation of business advanced market economies, Political Studies 46, 671692.CrossRefGoogle Scholar
Visser, J. and Hemerijck, A. (1997) A Dutch Miracle. Job Growth, Welfare Reform and Corporatism in the Netherlands. Amsterdam: University of Amsterdam Press.Google Scholar
Vitols, S. (1997) Financial systems and industrial policy in Germany and Great Britain: the limits of convergence. In: Forsyth, D. J. and Notermans, T., (eds), Regime Changes: Macroeconomic Policy and Financial Regulation in Europe from the 1930s to the 1990s. Providence, RI: Berghahn Books, pp. 221–255Google Scholar