Which political forces are responsible for retrenchment in social services in social democratic welfare states?
Research Paper (postgraduate) 2006 31 Pages
3.1 New Institutionalism
3.2 Historical Institutionalism
3.3 Path Dependency
3.4 Theories of Retrenchment
4.1.1 Dependent Variable
4.1.2 Independent Variable
5.2.1 Dependent Variable
5.2.2 Independent Variable
5.4 Research design
5.4.1 Social Expenditure, demographic and economic indicator
5.4.2 Share of Parliament
6 Empirical analysis
6.1 The reforms in the 1990s
6.1.1 Reforms of the market-liberal coalition
6.1.2 Reaction of the SAP
Most of the issues discussed in domestic politics deal with the extension of the welfare state. The discussions are about income transfers and social services, like social insurances, old-age pensions, workers' compensation, actuarial risk, waiting time, point-indexing or cost-of-living differentials. The academic debate on the welfare capitalism has naturally centered on equality. In the center were either the distribution and its results or the institutional commitments of welfare states, such as universalism, solidarity, the generosity of social rights and their ability to de-com modify workers (Es ping-Andersen 1990:1-2). The recently most popular approach is the social democracy model of the welfare state. In his book The Three Worlds of Welfare Capitalism, Esping-Andersen compares welfare states with respect to social security (organized by state, market or family) the decommodification (”the degree to which individuals, or families, can uphold a socially acceptable standard of living independently of market participation” (Esping-Andersen 1990:37)) and the stratification (”the extend of status and class differentiation, segmentation and inequality typically implied in a social security systems” (van Kersbergen 1995:20) of 18 advanced capitalist countries. According to the results of his cross-national, pooled-time series analyze, he defines three different types of welfare states:
- The liberal welfare state is characterized by a low level of public social services. In this type, the private insurances play an important role thus that social rights are attached to performance on the labor market. Along with the USA and Britain, Esping-Andersen also accounts Switzerland to this type.
- The conservative welfare state is characterized through particular corporatism and unwillingness to alter the status and class structure. Another feature of this type is that it favors a social policy that privileges and preserves the family.
- The social democratic welfare state finally is seen as the most universal one. In the Scandinavian countries, public spending for social services is the highest in the world. That results in a high degree of de-commodification and a low one in stratification.
Although most political scientist accepted this typology in general, there exist some critics and proposals for a modification. In showing up the weakness of the conservative welfare state, Kees van Kersbergen (1995) points out that not only social democratic parties, but also christian democrats were very influencing in creating the welfare states of the conservative type. Another critic comes from Manow (2002) who figures out that the Esping- Andersens typology is too generalizing and that especially the different confessions (protestant, catholic, lutheran) are important variables to explain the differences of welfare states.
A new impact to welfare state research was given by the crisis and the resulting, far-reaching changes during the past two decades. Not only the development and extension of the welfare state, but also the retrenchment became a topic of theorists and researchers. There exist a lot of explanations about the reasons of the crisis of the welfare state: globalization and the liberalization of the economy, heavily state-debts and the ageing society were some of the most dominant.
In this paper, I’m not primary interested in the reasons of retrenchment. I’ll focus on how they were realized. Which groups are interested in a smaller welfare state? How does retrenchment work on the political level? My question therefore is:
Which political forces are responsible for retrenchment in social services in social democratic welfare states? The crisis of the welfare state brought also new challenges for political scientists: instead of explaining the different degrees of extensions, some of them focused in their research to search for explanations for retrenchment. Most of the discussions still base on the typology of Esping-Andersen. In the liberal welfare states, the ”New Right”-governments under Thatcher and Reagan largely failed in their attempts to dismantle the welfare state, but substantial retrenchment occurred nonetheless (Pierson 2004), while political scientists don’t agree on the question whether the reforms in the social democrat welfare state also failed. Without doubt, there were a lot of reforms to save the social democratic welfare state. But the question whether they could maintain the high standards or they didn’t should not be my primary interest. I’ll focus on how these cutbacks were realized.
Special attention in the research of politic of retrenchment gained the concepts path dependency and increasing returns (Pierson 2000). But also here, there are different explanations. Pierson (1994) argues for example that, due to the fact that it’s not popular to cut services because it’s provokes public opposition, politics of retrenchment are very different from the dynamics of welfare state expansion. According to him, these feedback effects of previous policies, rather than the influence of political parties, social movements, and labor organizations, are the crucial variable for eplaining the institutional resistance of welfare states to change. Anderson (2001) answers that this might be true in the case of liberal welfare states (Pierson analyzed the UK and the USA), but shows that in social democratic welfare systems, unions and the social democratic parties still are the main influence.
I’ll follow the argumentation of Anderson (2001) and analyze the reforms of the Swedish welfare state in the 1990s with special attention to political parties. But since I try to explain this development using the ideas of historical institutionalism, I’ll on the same time, focus on the concept of path dependency and feedbacks. Like that, I try to demonstrate that historical institutionalism and especially path dependency and feedbacks indeed are useful concepts to analyze politics of retrenchment.
3.1 New Institutionalism
To give my research a theoretical background, I’ll follow the ideas of historical institutionalism. This theory belongs to the new institutionalism, which consists of three major perspectives:
- Rational Choice Institutionalism (RCI), which focuses on the institutional constraints on the rational action of individual actors,
- Historical Institutionalism (HI), which focuses on how institutions structure and mediate conflicts between collective actors, and
- Sociological Institutionalism (SCI), which focuses on how interests, rationalities and information are socially constructed within institutional frameworks.
This new institutionalism is developed from the ”old” institutionalism, which has been criticized to be deeply normative, too formalistic and legalistic and too descriptive. These critics were first formulated by representatives from the behavioral approach. They argued in the 1960s and 1970s to shift the focus of political science from formal political institutions to empirical studies of the causal effects of attitudes and behaviors. The problem that faced this approach was that it could explain the behavior, which led to the political outcomes, but it was not able to explain differences of these outcomes when compared with other cases. They couldn’t embed this behavior in an institutional framework.
This was the reason why the new institutionalism argued to ”bring institutions back in”, to know why interest groups demanded different policies in different countries and why class interests were manifested differently. The theorists recognized the relative importance of rational intentional action (RCI theorists more than HI and SCI ones) but claimed at the same time to set this behavior in an institutional context. Policy is seen as a result of politics that takes place within an institutional regime. The aim of the approach is thus, to account for the relation between intentional political actions and their institutional context. Torfing (2001:282) defines ’’intentional action” as:
An intervention by an individual or collective agency which is motivated by a conscious or unconscious desire to achieve something. Intentional actions are political in so far as they involve decisions between inchoate possibilities for how to organize social relations. Intentional political actions take place in an institutional context that is defined in terms of the rule-governed practices that are taken for granted by the political actors.
3.2 Historical Institutionalism
Theorists of all the three perspectives agree with this definition of intentional action. Their difference lies in how to define institutions and how they influence these actions.
HI theorists define according to Torfing (2001:283) institutions as:
Normative constructs that are often inherited from the past.
They consist of formal and informal rules, norms etc. compliance and enforcement procedures, and a common normative and ideological structure.
Institutions have according to the HI theorists various effects on political outcomes: they shape not only the balance of power between the actors and their strategies (as RCI theorists argue), but also their goals. Institutions thus can also influence for preference formation (endogenous), while the goals in rational choice approach are results of maximizing the self-interest (exogenous). Thelen and Steinmo (1992:9) claim, that ”we need a historically based analysis to tell us what they are trying to maximize and why they emphasize certain goals over others.” They conclude that ’’institutions structure political situations and leave their own imprint on political out- comes.”(1992:9)
Another important point in the historical institutionalism is the presence of asymmetric power, which ultimately resolves conflicts between collective actors within the institutions. The institutional distribution of power can favor some actors while disadvantage others. From this point of view, one can see institutions as a ’political opportunity structure”.
When it comes to the question which level the historical institutionalism analyzes, no clear answer can be given. Indeed, the approach doesn’t present universal theories on the macro-level as the rational choice theory. If it comes to the level, HI researchers have eclectical approaches: While some tend to emphasize the macro-level (for example Immergut 1992), others make combinations of micro- and macro-level analyzes.
After having emphasized the differences between the rational choice and the historical institutionalism (Thelen and Steinmo 1992:7-10), Thelen (1999) critizises these differences in a later work. She argues, that during the 1990s, several political scientists worked in an eclectical way. The main difference between these two approaches lies now in the relative centrality of ’’equilibrium order” in the RCI versus the ’’historical process” in the HI.
3.3 Path Dependency
For many researchers the central point in historical institutionalism is the emphasis on the historical process. This is taken into account in the concept of path dependency. Even if also the two other perspectives respected this idea and use it, it’s a core issue for HI theorists.
Path dependency is a concept, which was originally used in economics, seeking to understand technological trajectories. It takes into account that the consequence of a cause is depending on a bigger context. The past influences thus the present - ’’history matters”. As the economic model was, according to Thelen (1999:385) to deterministic and to voluntaristic, political scientist developed the concept and made it more suitable for social sciences.
On an abstract level, the path dependency in political sciences consists from two elements. In critical junctures, the old paths collapses and new pathways are developed - this sends countries in different developmental paths. The emphasis on critical junctures is according to Thelen (1999:388) not enough. She argues together with Pierson (1993) and referring on Ikenberry (1994) this concept insufficiently explains the continuity over time and feedback that sustain institutions dynamically. These authors follow Krasner’s observation that ’path dependent patterns are characterized by self-reinforcing positive feedback” (cited from Thelen 1990:392). Thelen (1999:392-396) points out the two existing types of feedback mechanisms in the literature:
- Functional feedbacks, which implies that actors adapt their strategies according to the new institutional setting and hence reinforce its ”logic”, and
- Distributional effects, according to these new frameworks of institutions re-distribute power among the actors, which favors some of them, while systematically marginalizes others.
More deeply into the topic of policy path dependency, path shaping and dislocation goes Torfing (2001). He (2001:286-7) defines a policy path as:
...a relatively entrenched way of unifying, organizing, and regulating a certain policy field (...) It forms a discursive terrain in which the objects of regulation, the regulatory agencies and the institutional forms of regulation mutually constitute each other.
According to him, this path is formed through a complex interaction between deliberate design, long-lasting traditions, learning processes and ”a chance discoveries” (2001:287). This path is structured by institutions and facilitates, but doesn’t guarantee, the reproduction of certain types of social, economic or political relations. Reforms can occur, if the institutional framework has been destabilized and weakened. The dislocation of a policy path is thus the condition for its transformation. One reason of such a structural crisis can for example be an exogenous event. But as policy paths have certain elasticity, they can adapt to most of these critical situations - so no critical juncture will happen. The possibility of institutional reform is not only depending on the dislocation but also to institutional features of the old path, which can help to explain why some policy paths are more susceptible to change than others. Torfing (2001:288) summarizes, that ’’institutional reform is facilitated by a complex interplay of internal sources of instability and external events that dislocate the structured coherence of the policy path”.
Once a new policy path is established, it will be shaped and influenced by the old one. The new path thereby shapes the strategies of the different actors, which have to adopt the changes in their goals. The re-formulation of policy-strategies is thus also depending on the old paths, which brings the consequence that radical changes are hardly possible - also due to the fact that even if the structured coherence of the policy path may have broken down, many institutional regulations and normative structures remain relatively intact and still influence the new path.
To summarize the concept of path dependency, I’ll stress the most important points with Pierson’s (2000:263) four features of the political process:
- Multiple equilibria. Under a set of initial conditions conducive to increasing returns, a number of outcomes - perhaps a wide range - are generally possible
- Contingency. Relatively small events, if they occur at the right moment, can have large and enduring consequences.
- A critical role for timing and sequencing. In increasing returns processes, when an event occurs may be crucial. Because earlier parts of a sequence matter much more than latter parts, an event that happens ”too late” may have no effect, although it might have been of great consequence if the timing had been different.
- Inertia. Once an increasing returns process is established, positive feedback may lead to a single equilibrium. This equilibrium will in turn be resistant to change.
3.4 Theories of Retrenchment
After the general introduction of the HI-approach with some of its core ideas, I’ll turn now to the more concrete section and conceptualize the term retrenchment. As mentioned above, this is (compared with for example the extension of the welfare state) a relatively new topic in political science. It aims to explain reasons, functions and results of retrenchments in several welfare states in the last two decades. This section bases mainly on articles from Kitschelt (2001) and Pierson (2001b). Kitschelt (2001) is arguing from a rational choice rather point of view, trying to conceptualize and formalize the party competition. After the presentation of his abstract model, I’ll turn to Pierson (2001b), who brings the whole topic back again in the context of historical institutionalism and ties it with concepts like path dependency and feedbacks.
Kitschelt (2001) emphazises the role of party competition when it comes to retrenchment. He argues that ”...the stragetic configuration of party systems, net of public opinion on social policy reforms, is a critical force that shapes social policy reform programmes and their implementation ”.
Before he starts modeling the different configurations, he figures out the incentives for politicians to pursue unpopular policies, to which belong also retrenchments. To do so, he paints first a restrictive model of party competition. Referring mainly to rational-choice authors such as Downs (1957), he explains the logic of the median voter theorem in a multi-party system. Retrenchment in social policy can only take place if the median voter withdraws support from social policy programmes. The party that controls the median voter also tends to be the policy dictator of the entire coalition, because no majority is viable that does not include that party. If the median voter opposes social policy reform, then the party representing that voter will do likewise and no government will be able to pass social reform (Kitschelt 2001:268).
A modification of this multi-party coalition theory is presented in the idea of the ’’center of gravity”: In an unidimensional competitive space, multiparty coalition creates the possibility of responsible partisan government with coalition policies distinctly to the left or the right of the median voter. Thus, with bargaining, other members of the coalition are able to take the position away from the median voter. This will not result in a failure of the coalition, as long it still controls the median voter. With the concept of a ’center of gravity”, several scholars explained the existence of different welfare states (f.e. Esping-Andersen 1990). Two problems of this approach are mentioned by Kitschelt (2001:268-9):
- The theory does not take into account how coalition policy is strategically conditioned by the policy alternatives which are offered by the opposition parties.
- The parties are determined according to typical characteristics of the party families (f.e. social democratic or liberal), without taking into account differences caused by the status in the government or opposition.
With this very abstract and theoretical model in the background, I turn now to the incentives for politicians to promote retrenchment. Especially specific universalist social policy programmes like health care and retirement have a strong public popularity.
 Kitschelt 2001:265
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