The New Politics of the Welfare State Author(s): Paul Pierson Source: World Politics, Vol. 48, No. 2 (Jan., 1996), pp. 143-179 Published by: The Johns Hopkins University Press Stable URL: http://www.jstor.org/stable/25053959 Accessed: 01/08/2009 16:03

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http://www.jstor.org THE NEW POLITICS OF THE WELFARE STATE

ByPAULPIERSON*

much-discussed crisis of the welfare state is now two decades

THE old. The tremendous twentieth-century expansion of social pro grams has been a remarkable feature of advanced industrial societies. In state a core all these countries the welfare is institution, accounting for between one-fifth and one-third of GNP. Ever since the postwar eco nomic boom ended in the early 1970s, however, social programs have faced mounting political challenges. Questions of expansion have long to an to state since given way acknowledgment of the limits welfare growth and the prospect for extended austerity. Despite this funda we mental change, however, still know stunningly little about the poli In contrast to our vast tics of social policy retrenchment. knowledge of state most the dynamics of welfare expansion?arguably the well-tilled state re subfield of comparative public policy?welfare retrenchment mains largely uncharted terrain.1 Theoretically informed discussion has been limited to very abstract commentaries or the rather reflexive, often implicit application of propositions derived from the study of social policy expansion. state in success This puzzling of affairs results part from the very of on earlier scholarship. The quality of historical research the welfare state a of has encouraged simple process borrowing already developed models for the examination of a new environment. Iwould argue, how are reasons to a ever, that there compelling reject such straightforward new state is extrapolation, that the politics of the welfare instead quite state enactment different from the old. Welfare expansion involved the of in a environ popular policies relatively undeveloped interest-group ment. state By contrast, welfare retrenchment generally requires elected

* am to to I grateful the Russell Sage Foundation for financial and administrative support and as as comments. Glatzer for considerable research assistance, well helpful Miguel1 state see Worlds On welfare expansion, G?sta Esping-Andersen, The Three of Welfare Capitalism (Princeton: Princeton University Press, 1990); and Evelyne Huber, Charles Ragin, and John D. Stephens, "Social Democracy, Christian Democracy, Constitutional Structure, and theWelfare State," 99 American Journal of Sociology (November 1993).

WorldPolitics 48 (January1996), 143-79 144 WORLD POLITICS officials to that must pursue unpopular policies withstand the scrutiny of both voters and well-entrenched networks of interest groups. It is not to therefore surprising that variables crucial understanding the for mer are use one. process of limited for analyzing the latter to an state This essay seeks lay the foundations for analysis of welfare I on retrenchment. emphasize the critical constraints reform resulting from the role of supportive interest groups and, ultimately, voters.2 The state growth of the welfare itself transforms the politics of social policy. a state to more As result, the welfare has proved be far resilient than more other key components of national political economies and far state one to ex durable than existing theories of the welfare would lead is in pect. The argument presented four stages. Section I highlights the characteristic qualities of retrenchment politics. Section II discusses in more state detail the principal theories of welfare expansion and sug a gests why the distinctiveness of retrenchment makes straightforward to state application of these arguments the contemporary welfare prob lematic. Section III explores the dynamics of retrenchment in four cases: Great Britain, the United States, Germany, and Sweden. Section IV builds on this theoretical and empirical analysis to offer some basic propositions about retrenchment politics.

I.Why the Politics of Retrenchment Is Different

This essay s central claim is that because retrenchment is a distinctive to same process, it is unlikely follow the rules of development that op state are two erated during the long phase of welfare expansion. There reasons this. the of fundamental for First, political goals policymakers are different; second, there have been dramatic changes in the political context. Each of these points requires elaboration. a to There is profound difference between extending benefits large numbers of people and taking benefits away.3 For the past half century, was a expanding social benefits generally process of political credit to overcome concern tax claiming. Reformers needed only diffuse about rates resort to (often sidestepped through social insurance "contribu tions") and the frequently important pressures of entrenched interests. had Not surprisingly, the expansion of social programs until recently

2 s as In this sense, my analysis parallels Verdier recent effort to interpret foreign trade policy "the outcome of a process influenced by voters." Daniel Verdier, Democracy and International Trade: Britain, xv. France and the United States, 1860-1990 (Princeton: Princeton University Press, 1994), 3 6 R. Kent Weaver, "The Politics of Blame Avoidance," Journal of Public Policy (October-Decem ber 1986). POLITICS OF THE WELFARE STATE 145

been a favored political activity, contributing greatly to both state building projects and the popularity of reform-minded politicians.4 to A combination of economic changes, political shifts the right, and costs states rising associated with maturing welfare has provoked grow to turn ing calls for retrenchment. At the heart of efforts these de mands into policy have been newly ascendant conservative politicians. Conservative governments have generally advocated major social pol icy reforms, often receiving significant external support in their effort, new especially from the business community.5 Yet the policy agenda contrast to initiatives dur stands in sharp the credit-claiming pursued state ing the long period of welfare expansion. The politics of retrench ment it on is typically treacherous, because imposes tangible losses voters return concentrated groups of in for diffuse and uncertain gains. Retrenchment entails a delicate effort either to transform program an at matic change into electorally attractive proposition or, the least, to costs Advocates retrenchment minimize the political involved. of must of reform is persuade wavering supporters that the price manage a able?a task that substantial public outcry makes almost impossible. an in Retrenchment is generally exercise blame avoidance rather than costs are con credit claiming, primarily because the of retrenchment centrated (and often immediate), while the benefits are not. That con a centrated interests will be in stronger political position than diffuse ones a in As interests is standard proposition political science.6 become more concentrated, the prospect that individuals will find itworth their to concen while engage in collective action improves. Furthermore, are more to to trated interests likely be linked organizational networks about how their interests. that keep them informed policies affect These informational networks also facilitate political action. reason An additional that politicians rarely get credit for program cutbacks concerns the well-documented asymmetry in the way that voters react to losses and gains. Extensive experiments in social psy

4 in and Peter Flora and Arnold J. Heidenheimer, eds., The Development of Welfare States Europe America (New Brunswick, N.J.: Transaction, 1982). 5 to treat as As recent research has suggested, it would be wrong business always and everywhere to opposed welfare state programs. For illuminating studies of the United States, see, for example, Colin Gordon, New Deals: Business, Labor, and Politics inAmerica, 1920-1935 (Cambridge: Cambridge or University Press, 1994); and Cathie Jo Martin, "Nature Nurture? Sources of Firm Preference for National Health Reform," American Political Science Review 89 (December 1995). Nonetheless, it is clear that most business organizations in all the advanced industrial democracies have favored?often over vehemently?cutbacks in the welfare state the past fifteen years. 6 and Mancur Olson, The Logic of Collective Action: Public Goods the Theory of Groups (Cambridge: Harvard University Press, 1965); James Q? Wilson, Political Organizations (New York: Basic Books, 1973), 330-37. 146 WORLD POLITICS

chology have demonstrated that individuals respond differently to pos a itive and negative risks. Individuals exhibit negativity bias: they will more take chances?seeking conflict and accepting the possibility of even current greater losses?to prevent any worsening of their posi tion.7 Studies of electoral behavior, at least in the United States, con are more firm these findings. Negative attitudes toward candidates a strongly linked with range of behaviors (for example, turnout, desert voters are ing the normal party choice) than positive attitudes.8 reasons are While the for this negativity bias unclear, the constraints on are not. to that it imposes elected officials When added the imbal ance between concentrated and diffuse interests, the message for advo cates of retrenchment is straightforward. A simple "redistributive" resources to transfer of from program beneficiaries taxpayers, engineered cuts a through in social programs, is generally losing proposition. The are more to concentrated beneficiary groups likely be cognizant of the are to are change, easier mobilize, and because they experiencing losses are more to vot rather than gains likely incorporate the change in their a ing calculations. Retrenchment advocates thus confront clash be tween their policy preferences and their electoral ambitions. to creates new If the shift in goals from expansion cutbacks political so a new context dynamics, does the emergence of the development of state are now a the welfare itself. Large public social programs central part of the political landscape. As Peter Flora has noted, "Including the assistance? recipients of [pensions,] unemployment benefits and social and the persons employed in education, health and the social services? or in many countries today almost 1/2 of the electorate receive transfer work income from the welfare state."9 With these massive programs come have dense interest-group networks and strong popular attach ments to to re particular policies, which present considerable obstacles one form. To take prominent example, by the late 1980s the American Association of Retired People (AARP)had a membership of twenty eight million and a staff of thirteen hundred (including a legislative

7 Daniel Kahneman and Arnos Tversky, "Prospect Theory: An Analysis of Decision under Risk," Econometrica 47 (March 1979); idem, "Choices, Values and Frames," American Psychologist 39 (April 1984). 8 to Howard S. Bloom and H. Douglas Price, "Voter Response Short-Run Economic Conditions: The Asymmetric Effect of Prosperity and Recession," American Political Science Review 69 (December 1975); Samuel Kernell, "Presidential Popularity and Negative Voting: An Alternative Explanation of the Midterm Congressional Decline of the President's Party," American Political Science Review 71 (March 1977); and Richard R. Lau, "Explanations for Negativity Effects in Political Behavior," Amer ican Journal of Political Science 29 (February 1985). 9 to Peter Flora, "From Industrial Postindustrial Welfare State?" Annals of the Institute of Social Sci ence, special issue (Institute of Social Science, University of Tokyo) (1989), 154. POLITICS OF THE WELFARE STATE 147

staff of more than one hundred).10 The maturation of the welfare state nature of In fundamentally transforms the interest-group politics. of short, the emergence powerful groups surrounding social programs state on so may make the welfare less dependent the political parties, cial movements, and labor organizations that expanded social programs in is context the first place. Nor the altered simply because welfare states create their own constituencies. The structures of social programs may also have implications for the decision rules governing policy change (for example, whether national officials need the acquiescence of local ones) and for how visible cutbacks will be. "Policy feedback" state to a from earlier rounds of welfare development is likely be promi nent feature of retrenchment politics.11 context creates a new In short, the shift in goals and politics. This new to politics, marked by pressures avoid blame for unpopular poli new cies, dictates political strategies.12 Retrenchment advocates will try to one re play off group of beneficiaries against another and develop forms that compensate politically crucial groups for lost benefits. Those to favoring cutbacks will attempt lower the visibility of reforms, either by making the effects of policies more difficult to detect or by making voters to trace to it hard for responsibility for these effects back partic ular policymakers.13 Wherever possible, policymakers will seek broad consensus on to reform in order spread the blame. Whether these ef on structure forts succeed may depend very much the of policies already I in next of the in place. As argue the section, theoretical discussions state to to welfare have failed take this point sufficiently heart.

II.The Limits of Existing Theories

state Each of the main theories of welfare expansion?arguments about of the ar economic development, arguments about the power left, and guments about institutions?has been loosely appropriated for discus state. sions of the contemporary welfare In this section I make explicit an the kinds of claims that inversion of existing theories of expansion a might suggest for theory of retrenchment. While each perspective

10 Christine L. Day, What Older Americans Think: Interest Groups and Aging Policy (Princeton: Princeton University Press, 1990), 25-26. 11 to G?sta Esping- Andersen, Politics against Markets: The Social Democratic Road Power (Princeton: Princeton University Press, 1985); Paul Pierson, "When Effect Becomes Cause: Policy Feedback and Political Change," World Politics 45 (July 1993). 12 and the Politics Re Weaver (fn. 3); Paul Pierson, Dismantling theWelfare State? Reagan, Thatcher of trenchment (Cambridge: Cambridge University Press, 1994), chap. 1. 13 R. Douglas Arnold, The Logic of Congressional Action (New Haven: Yale University Press, 1990). 148 WORLD POLITICS

a contains insights, my main contention is that convincing analysis of must move retrenchment beyond these formulations. A New "Logic of Industrialism'?

state The earliest well-developed theory of welfare growth, associated work the particularly with the of Harold Wilensky, stressed relationship state to of welfare expansion processes of economic growth.14 Welfare state was effort correlated with affluence, suggesting that "strong while ex economies produce strong welfare states." Yet this argument plained broad social policy differences between rich and poor nations, it proved to be far less helpful in explaining differences within the club of rich democracies.

Nonetheless, versions of economic determinism have been promi a nent in discussions of the contemporary welfare state. The claim that new a so "logic of industrialism" encourages convergence of national on of economic cial policy models is based asserted consequences global is of markets re change.15 One possibility that the globalization capital moves crucial economic policy tools from national governments and as constrains social policy options. However, Garrett and Lange have fiscal new persuasively argued, while monetary and policies may face restrictions, there is little evidence that supply-side policies of transfers so as tax and services need be constrained, long bases remain sufficient to in con insure relatively low deficits.16 Some social policies may fact to the tribute economic growth, for example, by encouraging formation of human capital and certain kinds of labormarket flexibility. re A related argument is that heightened economic integration will term to the sult in what Europeans call "social dumping." The refers that where "social are low be possibility firms operating wages" may to able undercut the prices of competitors, forcing higher-cost firms ei or or ther to go out of business, to relocate to low social wage areas, to costs. extreme sce pressure their governments to reduce social wage In a narios these actions could fuel downward spiral in social provision, eventually producing very rudimentary, lowest-common-denominator for a of social national welfare states.17 The evidence process dumping

14 of California Wilensky, The Welfare State and Equality (Berkeley: University Press, 1975). 15 a a recent ex One could fill small library with books and articles that make this claim. For good see in in Den ample, Herman Schwartz, "Small States Big Trouble: State Reorganization Australia, mark, New Zealand, and Sweden in the 1980s," World Politics 46 (July 1994). 16 to Geoff Garrett and Peter Lange, "Political Responses Interdependence: What's Left for the Left," International Organization 45 (1991). 17 see For a classic treatment of this dynamic, William L. Cary, "Federalism and Corporate Law: Reflections on Delaware," Yale Law Journal'83 (March 1974). POLITICS OF THE WELFARE STATE 149

one remains limited. The social wage is only factor in investment deci sions, and firms will not invest in countries with low social wages unless other factors (for example, infrastructure, worker productivity) justify such investments.18 Neoclassical trade theory suggests that countries not so as con with high social wages should face problems long overall ditions allow profitable investment.19 to A further, critical objection the economic determinist argument a were has received less attention. Even if high social wage associated with poor economic performance, the assumption that downward ad justments in social policy would necessarily follow is unjustified. As North has recently reminded us, countries have maintained widely dif ferent levels of economic performance for very long periods of time, a without marked pressures toward convergence.20 In world where par ticular arrangements have been institutionalized and where local actors no auto have adopted strategies that succeed in local terms, there is or movement matic necessary toward any particular definition of effi or ciency?market dictated otherwise. Politicians in democratic systems generally worry first and foremost about getting elected. Help not ing improve the economy may make that easier, but if it requires not are to hugely unpopular policies, and if the economic benefits likely at some in appear point the distant (that is, postelection) future. even Thus, if social dumping arguments proved valid?a big if? much would still depend on the balance of political forces favoring and a state. to resisting substantial restructuring of the welfare Tendencies must sources ward fragility be weighed against the considerable of wel

18 in Peter Lange, "The Politics of the Social Dimension," Alberta Sbragia, ed., Euro-politics (Wash on ington, D.C.: Brookings Institution, 1992). For evidence casting doubt the proposition that sys on see tems of social protection have significant negative effects economic performance, Rebecca M. versus a Blank, ed., Social Protection Economic Flexibility: Is There Trade-off? (Chicago: University of Chicago Press, 1994). 19 occur amore as "Unraveling" could in subtle way, heightened capital mobility strengthens the bar gaining position of business, leading to the gradual erosion of "tightly coupled" systems of industrial a see relations and, perhaps, welfare states. For good example of this kind of argument, Wolfgang to on Streeck, "From Market-Making State-Building? Reflections the Political Economy of European Social Policy," in Stephan Leibfried and Paul Pierson, eds., European Social Policy: Between Fragmenta a cannot tion and Integration (Washington, D.C.: Brookings Institution, 1995). While such scenario be to more ruled out, the evidence for it remains quite limited. These arguments appear be popular among on those, like Streeck, who focus industrial relations systems. See, for example, Jonas Pontusson and Peter Swenson, "Labor Markets, Production Strategies, and Wage Bargaining Institutions: The Swedish Employer Offensive in Comparative Perspective," Comparative Political Studies (forthcom ing); and Kathleen Thelen, "West European Labor in Transition: Sweden and Germany Compared," seem more World Politics 46 (October 1993). Industrial relations systems, however, fragile than welfare state structures. Welfare states, I will suggest, have considerably broader bases of support, which pro occurs some mote the restoration of equilibrium and inhibit the kind of unraveling that in industrial relations systems. 20 Douglass C. North, Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990). 150 WORLD POLITICS

fare state In outcomes cannot be stability. short, policy derived directly from economic new trends. The logic of industrialism suffers from of the defects the one. many of old Expansive claims of economic de terminism insufficient attention to the pay politics of policy change. The same cannot resource be said about power and institutionalist argu ments, to which I now turn.

Left Power Resources and the Politics of Retrenchment

The resources power perspective, which attributes cross-national varia tions in social provision largely to differences in the distribution of po litical resources has been among classes, the leading approach in to of state comparative politics explaining patterns welfare expansion.21 over occurs Class-based struggle social provision because social pro affect the of workers grams bargaining position and employers. Many social earners programs limit the economic vulnerability of wage and increase worker to resource solidarity. According power theorists, unions and left to strong parties contribute the growth of these pro The resources success grams. power approach has had considerable in for cross-national variations in accounting social provision during the three decades following World War II. Furthermore, the replacement of crude social more expenditure data with fine-grained distinctions of social among patterns provision has greatly improved the model's explanatory power.22 resource re A straightforward application of power arguments to trenchment would that welfare states are in suggest deep trouble. The of labor and left power organized parties has shrunk considerably in many advanced industrial societies. As Iwill argue in Section III, how ever, there is very little evidence that this decline has had a funda on states. mental impact welfare Cutbacks in social programs have been far more moderate than the in sharp drop labor strength in many countries lead one to to corre might expect, and there appears be little lation declines in resources between left power and the magnitude of retrenchment. The shift in both context and new goals that characterizes the poli tics of the state to so. welfare helps explain why this is Analysis of the state's must not contemporary welfare supporters include only orga 21 D. to John Stephens, The Transition from Capitalism Socialism (London: Macmillan, 1979); Walter Korpi, The Democratic Class Struggle (London: Routledge, 1983); Esping-Andersen (fn. 11);Walter and State in Korpi, "Power, Politics, Autonomy the Development of Social Citizenship: Social Rights Sickness in OECD Countries since during Eighteen 1930," American Sociological Review 54 (June 1989). 22 Esping-Andersen (fn. 1); Huber, Ragin, and Stephens (fn. 1). POLITICS OF THE WELFARE STATE 151

more nized labor and left parties but also the varied constituencies of to individual programs. Interest groups linked particular social policies are now actors. prominent political The rise of these interest groups is one of the clearest examples of how policy feedback from previous can political choices influence contemporary political struggles. Groups of program beneficiaries did not build the welfare state, but the wel state to fare contributed mightily the development of these groups. By a to the time politics of austerity began emerge in the mid-1970s, most welfare state programs were connected to extensive networks of were social support. Most prominent the recipients of the various ben care consumers. efits?pensioners, the disabled, health The providers of a in public services also had major stake sustaining expenditure and were was a usually well organized.23 Finally, there range of public to too to on interest organizations seeking protect those weak mobilize own. even are not their Indeed, when groups of recipients particularly reason to to well organized, politicians may have be attentive their concerns. are to Cutbacks, if recognized, likely incense voters, and polit to ical competitors stand ready exploit such opportunities. The possibil of at the means that the ity exacting punishment polls potentially even mobilized'influence policymakers in the absence of ongoing orga nized activity.24 are reasons to Thus, there good believe that the centrality of left to state outcomes party and union confederation strength welfare has declined. The diminished relevance of power resource arguments re flects the fact that welfare states are now mature and that retrenchment not state In a context is simply the mirror image of welfare expansion. is existence of where public social provision just emerging, the very an be cru broad organizations pushing expansionist policy agenda may emer cial. However, the unpopularity of program cutbacks and the new even gence of bases of support will give politicians pause where are unions and left parties weak. Equally important, maturing social new programs develop bases of organized support that have substantial movement. autonomy from the labor This shifting base of support may have consequences for the dynamics of policy development, but the not into a weakening of organized labor need translate automatically commensurate state. weakening of the welfare

23 to In this respect, organized labor (public employee unions) continues be of significance, although resource are now to em not in the way posited by power theorists. Union interests linked primarily the to ployment-generating effects of specific public programs rather than the broad consequences of gen erous of public provision for the bargaining position workers. 24 see On this point, Arnold (fn. 13). 152 WORLD POLITICS

New Institutionalism and Welfare State Politics

Patterns of governance matter. The "new institutionalist" resurgence in a political science reflects renewed appreciation of how relatively stable, routinized structure arrangements political behavior.25 The political in as stitutions of different countries vary along crucial dimensions, such the rules of electoral competition, the relationship between legislature and executive, the role of the courts, and the place of subnational gov ernments in politics. Institutions establish the rules of the game for po litical struggles?influencing group identities, policy preferences, and some coalitional choices, and enhancing the bargaining power of groups while devaluing that of others. Institutions also affect govern ment resources capacities?their administrative and financial for fash ioning policy interventions. In the field of comparative social policy, the claim that political must structures institutions be considered consequential has been de veloped primarily in the work of Theda Skocpol and her collabora tors.26 These researchers have raised significant questions about the state dynamics of welfare development, pointing out, for example, that resources success in the power approach has had little accounting for new pre-World War II social policy developments. The institutionalist on research agenda, however, has centered explaining "American excep tionalism"?the belated and halfhearted development of socialwelfare in as a on was to policies the United States. Just focus Sweden central resources on the development of the power model, concentration the United States has underscored the importance of political institutions. two claims state Institutionalists make broad about welfare develop ment. states are to First, strong likely produce strong welfare states, state terms ca with strength defined in of governmental administrative pacities and institutional cohesion. Extensive administrative and finan resources it to cial make easier build expansive social policies.27 Where political authority is fragmented, entrenched minorities will often block social legislation.28 Federalism, separation of powers, strong bicameral

25 Peter Hall, Governing the Economy (Oxford: Oxford University Press, 1986); James March and Johan Olsen, Institutions (New York: Free Press, 1989); North (fn. 20). 26 Rediscovering See, for example, Margaret Weir, Ann Shola Orloff, and Theda Skocpol, eds., The Politics of So cial Policy in the United States (Princeton: Princeton University Press, 1988); and Theda Skocpol, Pro tecting Soldiers and Mothers: The Political Origins of Social Policy in the United States (Cambridge: Harvard University Press, 1992). 27 Hugh Heclo, Modern Social Politics in Britain and Sweden (New Haven: Yale University Press, 1974). 28 and Keith G. Banting, The Welfare State Canadian Federalism, 2d ed. (Montreal: McGill-Queens Interests and Institutions in University Press, 1987); Ellen Immergut, Health Politics: Western Europe (Cambridge: Cambridge University Press, 1992). POLITICS OF THE WELFARE STATE 153

ism or reliance on referenda all restrict state may welfare development. Although much of thework on institutions and welfare states has been on case based comparative historical studies, this claim about formal in veto an stitutional points has recently received support in important as quantitative study well.29 concerns The second central institutional argument policy legacies, or state feedback?the consequences of previously introduced welfare are programs. Arguments about policy feedback essentially arguments about the consequences of big government. As policy decisions have on had increasingly pervasive effects economic and social life, their im on state pact political processes has expanded. Given that the welfare is at come as no the very heart of big government, it should surprise that state some most studies of welfare development have generated of the persuasive arguments about policy feedback. structures The possible consequences of preexisting policy for wel state are state structures fare politics quite diverse.30 Welfare affect the size and orientation of various societal groups as well as patterns of in terest-group formation. Programs may provide the basis for processes of social learning that affect prospects for future program expansion, or can create whether negatively positively. Policies long-term commit as contracts common ments?such the pay-as-you-go intergenerational to public pension systems?that lock in particular paths of policy de velopment.31 can to How easily these arguments be applied the distinctive politics no reason to assume of retrenchment? Again, there is that claims for can on earlier periods simply be turned their heads. For example, there reason to is little expect that bureaucratic capacities will be particularly an we an important in age of retrenchment. Can administer it? may be a new or important question in discussion of greatly expanded public to initiatives, but for advocates of retrenchment the primary goal is dis cut mantle existing programs. Closing offices, curtailing services, and not ting benefits do require formidable administrative capacity. Arguments about the consequences of governmental cohesion also to in new one need be reappraised this context.32 At first glance, might

29 Huber, Ragin, and Stephens (fn. 1). 30 Pierson (fn. 11). 31 For of each of these see, examples " arguments, respectively, Esping-Andersen (fn. 11); Skocpol (fn. 26); and Paul Pierson, 'Policy Feedbacks' and Political Change: Contrasting Reagan and Thatcher's Pension-Reform Initiatives," Studies inAmerican Political Development 6 (Fall 1992). 32 on in This paragraph relies Paul Pierson and R. Kent Weaver, "Imposing Losses Pensions Pol at icy," in R. Kent Weaver and Bert Rockman, eds., Do Institutions Matter? Government Capabilities Home andAbroad (Washington, D.C.: Brookings Institution, 1993). 154 WORLD POLITICS

veto a expect that systems with fewer institutional points would be in to an stronger position pursue agenda of radical retrenchment. Because is there are retrenchment generally unpopular, however, compelling reasons to concen question this expectation. While cohesive systems trate concentrate ten authority, they also accountability. The former it. dency facilitates retrenchment, but the latter impedes Where authority is centralized, the public knows that the government of the can day prevent groups from suffering cutbacks. Strong governments, cost anticipating the high political of retrenchment, may forgo the op portunities provided by concentrated power. Thus, the theoretical basis for believing that government cohesion facilitates retrenchment is are weak. We left with the empirical question of whether concentration of power effects outweighs concentration of accountability effects.33 The tremendous scope of modern welfare states suggests that insti even more tutionalist arguments about policy feedback may be relevant to the of retrenchment. There two different politics are, however, quite to to retrenchment. one ways apply policy feedback arguments First, could develop nuanced arguments that emphasize the distinctive char acteristics of individual programs and their implications for successful one retrenchment. Alternatively, could present arguments about the structures state overarching of particular welfare regimes, suggesting that they are likely to promote a particular kind of politics. is to out in The first approach has promise but difficult carry prac resources. tice. Previous policies help shape the distribution of political Preexisting policy designs may influence interest-group networks, the extent of long-term commitments, the rules governing programmatic to cut reform, and the availability of techniques reduce the visibility of case backs. These kinds of arguments have been used in qualitative state studies of both welfare expansion and retrenchment.34 Because to they often apply idiosyncratic characteristics of individual programs, to use to however, it is hard them generate general propositions about variations across countries.

The alternative of developing broad arguments about how welfare state more to regimes affect contemporary politics is easily applied cross-national comparisons. Esping-Andersen has developed proposi tions that link welfare state structures to cross-national variation in oc

33 seems more structure What likely is that the of formal institutions will influence the strategies o? retrenchment advocates. I return to this point in the conclusion. 34 see see On expansion, Heclo (fn. 27); and Skocpol (fn. 26). On retrenchment, Pierson (fn. 12). POLITICS OF THE WELFARE STATE 155

structures to cupational and, in turn, contemporary political cleavages.35 states He suggests, for example, that social democratic welfare like sector Sweden will face growing clashes between public and private states a workers, while conservative welfare like Germany will produce divide between labor market "insiders" and "outsiders." Such an ap proach offers the tantalizing promise of linking the evident significance state structures to of large welfare clear propositions about political not change. Unfortunately, the argument does work. As I will docu ment next in the section, the hypothesized political cleavages emerge to a in only muted forms and have failed generate sustained backlash state. against the welfare The flaw in these broad arguments about wel state as fare regimes is that they greatly underestimate the difficulty of sembling and sustaining proretrenchment coalitions. to our un New institutionalist arguments have contributed greatly state derstanding of welfare politics. Moreover, unlike arguments about no reason to the role of organized labor, there is think that the impor tance structures of institutional and the legacies of previous policy cannot choices has declined. These arguments simply be transferred one context to must recast to to from another, however; they be apply are re the specific settings and strategic problems that characteristic of trenchment politics. From Theories of Expansion to Theories of Retrenchment our state It is commonly maintained that knowledge of welfare expan us into new sion provides with considerable insight the politics of the state. welfare Although this view is rarely stated explicitly, it undoubt are edly explains why political scientists, who usually preoccupied with or recent so understanding contemporary rather events, have become interested in historical studies of social policy. The presumed similarity in some the most of expansion and retrenchment is evident of impor tant on work comparative social policy. In their sophisticated quantita tive investigation of welfare state effort from 1956 to 1988, for use of a example, Huber, Ragin, and Stephens acknowledge that their assumes causal pooled cross-sectional time-series model "that processes are uniform through time." Esping-Andersen claims that"[t]he risks of

35 Esping-Andersen (fn. 1); G?sta Esping-Andersen, "Postindustrial Cleavage Structures: A Com parison of Evolving Patterns of Social Stratification in Germany, Sweden, and the United States," in Francis Fox Piven, ed., Labor Parties in Postindustrial Societies (Oxford: Polity Press, 1991); and idem, "The Emerging Realignment between Labour Movements andWelfare States," inMarino Regini, ed., Labour The Future of Movements (London: Sage, 1992). 156 WORLD POLITICS

... on of welfare-state backlash depend the class character welfare . . . states. [T]he class coalitions in which the three welfare-state were not regime-types founded, explain only their past evolution but also their future prospects." More generally, he maintains that "a theory to to that seeks explain welfare-state growth should also be able under stand its retrenchment or decline."36 I see no reason to believe that this is true. Retrenchment is not sim state we assume ply the mirror image of welfare expansion. Why should to outcomes in a context that theories designed explain particular and involving the pursuit of particular goals will still apply once the politi actors cal environment and the goals of key have undergone radical state change? The question of whether theories of welfare expansion offer insights into the retrenchment process is still open, but this pre are re liminary discussion suggests that major modifications probably on quired. In the following section, I draw evidence from Great Britain, to the United States, Germany, and Sweden demonstrate the distinc are some tiveness of retrenchment politics. Of declining importance as formerly critical factors, such the role of organized labor. Others, as are such the design of political institutions, of continuing signifi cance new a mature but in ways. Yet crucial emerging factor is the wel state fare itself, and its broad and deep reservoirs of public support.

III. Retrenchment Politics in Four Countries

states To what extent have welfare undergone retrenchment? What countries and programs have been most vulnerable to retrenchment ini tiatives and why? In this section I address these questions by reviewing the evolution of welfare states in four affluent democracies since the

late 1970s. The evidence supports a number of claims. (1) There is lit states tle evidence for broad propositions about the centrality of strong or resources to outcomes. left power retrenchment (2) The unpopular con ity of retrenchment makes major cutbacks unlikely except under even ditions of budgetary crisis, and radical restructuring is unlikely same to then. (3) For the reason, governments generally seek negotiate consensus to packages rather than impose reforms unilaterally, which further diminishes the potential for radical reform. And (4) far from a to creating self-reinforcing dynamic, cutbacks tend replenish support for the welfare state.

36 Huber, Ragin, and Stephens (fn. 1), 733; Esping-Andersen (fn. 1), 33,32. Of course, Esping-An dersen has also emphasized that the growth of the welfare state affects welfare state politics. POLITICS OF THE WELFARE STATE 157

a Measuring retrenchment is difficult task. Quantitative indicators are to for several reasons. likely be inadequate First, pure spending lev are most or els rarely the politically important theoretically interesting states. it in aspects of welfare As Esping-Andersen put his analysis of state to welfare expansion, "It is difficult imagine that anyone struggled sustain for spending per se."37 In particular, rising unemployment may even as are cur high spending social rights and benefits significantly to re tailed. Second, spending estimates will fail capture the impact of are to or forms that designed introduce retrenchment only indirectly over term. must on the long Analysis focus qualitative and quantitative on as as changes in programs and prospective, long-term changes, well on on a immediate cutbacks. My investigation therefore relies combi on nation of quantitative data expenditures and qualitative analysis of state cuts in welfare reforms.38 Rather than emphasizing spending per se, the focus is on reforms that indicate structural shifts in the welfare state. in on These would include (1) significant increases reliance to means-tested benefits; (2) major transfers of responsibility the pri vate sector; and (3) dramatic changes in benefit and eligibility rules that a a signal qualitative reform of particular program.39 The selection of to was on to countries investigate based the desire achieve significant on state are variation what the welfare expansion literature suggests the most The cases in plausible independent variables. vary widely the structure extent in of political institutions, the of shifts the distribution of power resources, the design of preexisting welfare states, and the severity of budgetary crisis. measures Beginning with the quantitative evidence, aggregate pro states vide little evidence that any of the four welfare have undergone dramatic cutbacks. From 1974 through 1990 the expenditure patterns across cases are the four quite similar, despite widely different starting

37 Esping-Andersen (fn. 1), 21. 38 recent A draft paper by Stephens, Huber, and Ray presents the first sophisticated statistical analy sis of retrenchment, utilizing newly assembled data that allow investigation of fairly detailed program over a are matic changes large number of countries. There important limitations: much of the or are not programmatic data end in 1986 1987; many programs covered; and the still-small sample al a lows the statistical testing of only few broad hypotheses (essentially, the impact of partisanship) about most the politics of program change. The results reported strongly support of the analysis presented more here, although they view Thatcher as successful than I do. John D. Stephens, Evelyne Huber, at on and Leonard Ray, "TheWelfare State in Hard Times" (Paper presented the conference the "Pol itics and Political Economy of Contemporary Capitalism," University of North Carolina, Chapel Hill, September 1994). 39 no to Establishing what constitutes "radical" reform is easy task. For instance, it is impossible say amounts to a nature definitively when a series of quantitative cutbacks qualitative shift in the of pro a can no grams. Roughly though, that point is reached when because of policy reform program longer to a re play its traditional role (e.g., when pension benefits designed provide rough continuation of the tiree's earlier standard of living are clearly unable to do so). 158 WORLD POLITICS

points. As Tables 1 and 2 show, social security spending and total gov ernment as a of GDP are over most outlays percentage relatively flat of recent ex the relevant period. The exception is the surge in Swedish penditures, which will be discussed below. There is a slight upward to trend overall, with fluctuations related the business cycle. Table 3, which tracks a public employment, reveals similar pattern (although the expansion of Swedish public employment from an already high base For none of countries a stands out). the does the evidence reveal sharp sector. curtailment of the public 4 more Table offers disaggregated indicators of shifts in social wel

TableI Social Security Transfers as % of gdp (1974-90)

Britain Sweden Germany United States

1974 9.8 14.6 14.3 9.5 1980 11.7 16.6 17.6 10.9 1982 14.0 17.7 18.3 11.9 1984 14.0 16.5 17.6 11.0 1986 14.1 15.9 18.4 11.0 1988 12.3 16.1 19.5 10.6 1990 12.2 15.3 19.7 10.8a

SOURCE: OECD, Historical Statistics, 1960-1990 (1992), table 6.3. a1989.

Table 2 Government Outlays as % of Nominal gdp (1978-94)

Britain Sweden United States Germany

1978 41.4 47.3 58.6 30.0 1980 43.0 47.9 60.1 31.8 1982 44.6 48.9 64.8 33.9 1984 45.2 47.4 62.0 32.6 1986 42.5 46.4 61.6 33.7 1988 38.0 46.3 58.1 32.5 1990 39.9 45.1 59.1 33.3 1992 43.2 49.0 67.3 35.1 1994a 44.8 51.4 70.9 33.9

SOURCE: OECD, Economic Outlook (December 1993), table A23. a Projection. POLITICS OF THE WELFARE STATE 159

Table 3 Government Employment as % of Total Employment

_(1974-90)_ Britain Sweden United States Germany 197419.6 13.0 24.816.1 21.11980 14.6 30.315.4 198222.0 15.1 31.715.4 198422.0 15.5 32.614.8 198621.8 15.6 32.214.8 198820.8 15.6 31.514.4

1990_19I2_151_317_14.4a

SOURCE: OECD, Historical Statistics, 1960-1990 (1992), table 2.13 a1989.

are fare spending among the four countries; spending patterns reported OECD terms for what the "merit goods" (primarily housing, education, as as and health care) well for various income transfers. The figures sug a more gest bit divergence among the cases, with the United States and as more in Germany emerging somewhat successful curbing spending. A very few program areas?notably British housing and German pen sions?experienced significant reductions. Nonetheless, similarities across more countries remain striking than differences. None of the cases or are in show major rises declines in overall effort, and there few dications of dramatic change in any of the subcategories of expenditure. The data suggest a surprisingly high level of continuity and stabil must be with since ity.40 These figures treated caution, however, major changes in the spending for particular programs could be occurring within these broad categories. Policy reforms could have imposed not in lagged cutbacks that do show up spending figures. Furthermore, not are of many other features of programs, just spending levels, signif to a sense icance. To investigate these issues and get better of the we turn to a more processes that generated these aggregate outcomes, cases. detailed investigation of the four Great Britain a By the mid-1970s Britain had developed amidsize welfare statewith and extensive mix of fairly modest income transfer programs relatively

40 a cases This broad conclusion is echoed for much larger number of in Stephens, Huber, and Ray (fn. 38). Table 4 Government Outlays by Function as { >OF TREND GDPAa (1979-90)

Sweden United States Britain Germany 1979 1990 1979-90 1979 1990 1979-90 1979 1990 1979-90 1979 1989 1979-89

44.9Total 43.2 -1.7 49.9 45.8 -4.1 63.2 61.4 -1.8 33.2 36.9 +3.6 9.5 9.7 +0.1 10.0 9.2 -0.8 10.5 8.8 -1.7 8.2 +1.1 9.3 Public goodsb 13.6 12.2 -1.4 12.3 10.9 -1.4 13.4 -2.6 6.1 -0.1 6.0 Merit goods 15.9 Education 5.5 5.0 -0.5 5.2 4.2 -1.0 6.6 5.6 -1.0 4.7 -0.0 4.7 Healthc 4.8 5.1 +0.3 6.3 6.0 -0.3 8.1 6.9 -1.1 0.9 0.9 -0.0

Housing and 3.4 other 2.1 -1.2 0.8 0.7 -0.1 1.2 0.8 -0.4 0.5 0.4 -0.1 Income Trans. 12.5 13.4 +0.9 20.2 18.5 -1.7 24.6 26.8 +2.2 11.2 11.9 +0.7 Pensions 6.7 6.5 -0.2 12.7 11.2 -1.5 11.0 11.5 +0.4 6.9+0.1 7.0 Sickness 0.4 0.3 -0.1 0.8 0.7 -0.1 3.4 4.5 +1.2 0.1 +0.10.2

Family allow. 1.7 1.6 -0.0 1.2 0.8 -0.4 1.6 1.3 -0.3 0.4 -0.0 0.4 +0.4 +0.1 Unemployment 0.7 0.6 -0.1 0.9 1.3 0.4 0.5 0.4 -0.1 0.3 Other income

supports 0.1 0.8 +0.7 1.3 1.6 +0.3 0.1 0.2 +0.1 0.0 0.0 0.0 Admin, and 4.9 0.6 0.6 other spend. 1.4 1.6 +0.3 2.6 2.4 -0.2 5.2 +0.3 -0.0 Add. transfer 1.4 1.8 +0.5 0.5 0.4 -0.1 3.2 3.7 +0.6 2.7 +0.8 3.5

Source: OECD, Economic Outlook (December 1993), table 21. a Numbers may not sum to total due to rounding. b Defense and other public services. c For the U.S., social security related to health spending is included under "additional transfers" below. politics of the welfare state 161

in care and interventionist policies health and housing. The past fifteen a test a years of Conservative rule represent powerful of number of claims about retrenchment. There are few if any cases within the OECD a to re of such radical swing the right in the distribution of power sources. to A balanced two-party system gave way Conservative hege as mony, reflected in four consecutive electoral victories.41 A fairly movement un strong labor suffered repeated defeats in the face of high employment and changes in industrial relations law; union density declined from over 55 percent in 1979 to 35 percent in 1993.42 Fur concentrates thermore, Britain's Westminster political system political a state veto to re authority. If strong with few internal points is the key were forming the contemporary welfare state, the British Conservatives an In a in unusually favorable position. short, simple inversion of wel state fare expansion arguments would suggest that Britain should have for social The not been fertile ground policy cutbacks. evidence does a are support such conclusion.43 While there individual instances of sig are nificant retrenchment, notably in housing and pensions policy, these the exception rather than the rule. The British welfare state, if battered, remains intact. As Table 4 indicates, social expenditure (merit goods as a GDP more plus transfers) share of remains almost unchanged after than a decade of Conservative governance. two cases It is worth starting with the of retrenchment success, be cause are these experiences instructive. One of the triumphs of the was Thatcher government the privatization of public council housing. to tenants The sale of roughly 1.5 million homes laid the foundation a in for major expansion of home ownership and sharp cutbacks subsi was dies for those who remained in the public sector.44 Housing reform a case uniquely popular of retrenchment?in many respects, the excep sector as tion that proves the rule. The liquidation of extensive public sets a rare created opportunity for credit claiming rather than blame for both home avoidance, offering considerable benefits purchasers and taxpayers. Public sector tenants, who under other circumstances would or have fought the government, became disinterested divided.

41 Geoff Garrett, "The Politics of Structural Reform: Swedish Social Democracy and Thatcherism in Perspective," Political Studies 25 (January 1993). Comparative42 Comparative The 1979 figure is from Robert Price and George Sayers Bain, "Union Growth in Britain: Retro Relations 21 47. 1993 is from spect and Prospect," British Journal of Industrial (March 1983), The figure Derek Bird and Louise Corcoran, "Trade Union Membership and Density, 1992-93," Employment Gazette (June 1994), 193. 43 Pierson (fn. 12), chaps. 3-6. 44 Ray Forrest and Alan Murie, Selling the Welfare State: The Privatization of Public Housing (Lon don: Routledge, 1988). 162 WORLD POLITICS

s were The government pension reforms also relatively successful.45 A for less generous indexation rule the basic pension produced gradual but considerable budgetary savings. The government also introduced significant cutbacks in the State Earnings-Related Pension Scheme a (SERPS), while introducing private personal pension alternative. The SERPS a government's initial proposal?to abolish with very limited even phase-in period?met with overwhelming opposition, from usual supporters like the Confederation of British Industry (CBl).Forced into an more embarrassing retreat, the government introduced modest but nonetheless substantial in which will changes SERPS, gradually expand sector private pensions while reducing public benefits. These changes, though criticized, failed to generate the kind of outcry that often led to carrot the government back off from other reforms. Offering the of personal pensions diminished the pain of the cuts in public pensions (although the required tax incentives also diminished the government's use in budgetary savings). More important, the government's of cremental and seemingly technical reforms limited the emergence of opposition. context were Careful political planning in the of programs that either weakly institutionalized (SERPS)or offered rare opportunities for credit claiming (council housing) protected theThatcher government. These cases were exceptions, however. On the whole, the British Conserva state to a as tives found the welfare be political minefield, popular sup port for social spending remained strong. In fact, British public opinion same a regarding social policy reveals the pattern found elsewhere: state modest decline of support for the welfare preceded the arrival of the Thatcher government but rebounded at the first hint of serious re run trenchment. Public opinion in Britain has strongly, and increas or even ingly, in favor of maintaining expanding social provision.46 was to Thus while the government clearly hostile much of the wel state to fare and had the political authority implement dramatic to un changes if it chose do so, the fear of being held accountable for popular initiatives held it in check. Preserving theNational Health Ser vice, for example, became far and away the Labour Party's best issue in the 1980s. Initial exploration of various options for privatization pro voked public outrage. The Thatcher government repeatedly backed off 45 Alan Walker, "Thatcherism and the New Politics of Old Age," in John Myles and Jill Quadagno, Labor eds., States, Markets, and the Future of Old Age Policy (Philadelphia: Temple University Press, 1991); Pierson (fn. 31). 46 Peter Taylor-Gooby, "The Future of the British Welfare State: Public Attitudes, Citizenship and Social Policy under the Conservative Governments of the 1980s," European Sociological Review 4 (May 1988). POLITICS OF THE WELFARE STATE 163

from for of plans fundamental restructuring the system.47 By the end of s NHS the decade the government repeated promise had become "the is safe with us."

While the government achieved some nontrivial incremental cut backs in various programs, radical retrenchment efforts failed, often at cost. ru considerable political The universal Child Benefit, frequently to in at a mored be jeopardy, survived (although somewhat reduced to level), due in part well-organized lobbying efforts. A massive and to a highly publicized social security review promising offer "new Bev to eridge" ended up making modest adjustments programs for low as an income groups.48 Sickness Pay, touted instance of successful a sector privatization, remains thinly disguised public benefit.49 Fur to thermore, attempts foster retrenchment arguably caused Thatcher's to ultimate downfall. The tremendously unpopular poll tax?designed cripple the social spending of local governments by cutting their finan out a source cial legs from under them?was major of the downward spiral in the polls that forced Thatcher's resignation. Her successor, a more course. to John Major, followed moderate While attempting consolidate Thatchers least unpopular reforms, he launched few initia own on in tives of his and retreated unpopular issues like cutbacks Child Benefit.

Parts of the Conservative record demonstrate that major retrench ment not a can conse is impossible. Where government obscure the turn a source quences of reform?or better yet, reform into of tangible benefits?the welfare state may be vulnerable. Had the entire British state welfare resembled council housing, the Conservative agenda s would have succeeded. Yet the government record reveals more cases or to restructure of incremental adjustments failed attempts programs. Overall social expenditure remains almost unchanged; housing and a pensions aside, the government paid significant price for the cutbacks it was to outcome in contrast to the able impose. This stands sharp Thatcher government's remarkably successful efforts in other policy areas, such as its overhaul of Britain's industrial relations system and its privatization of publicly owned industries. 47 Rudolf Klein, The Politics of theNational Health Service, 2d ed. (London: Longman, 1989); Edwin Griggs, "The Politics of Health Care Reform in Britain," Political Quarterly 62 (October-December 1991). 48 Nicholas Deakin, The Politics ofWelfare (London: Methuen, 1987). 49 or Nicholas Barr and Fiona Coulter, "Social Security: Solution Problem?" in John Hills, ed., The 1974 State of Welfare: The Welfare State in Britain since (Oxford: Oxford University Press, 1990), 281; Michael O'Higgins, "Social Welfare and Privatization: The British Experience," in Sheila B. Kamer man and Alfred J. Kahn, eds., Privatization and the Welfare State (Princeton: Princeton University Press, 1989). 164 WORLD POLITICS

The United States

seen as a Many have the United States another likely candidate for dis state. mantling of the welfare Like Britain, the United States experi enced a resources significant rightward shift in power during the 1980s. Republicans captured the presidency in 1980 (aswell as the Senate to until 1986). Union power?never that extensive begin with?con a state was tinued seemingly inexorable decline. The American welfare in to some already fairly modest scope, suggesting observers that pub lic support for maintaining it would be weak. Unlike Thatcher, how a context ever, retrenchment advocates in the United States operated in of severely fragmented political authority. The combination of weak an parties, separation of powers, and federalism created institutional was environment that in many respects the polar opposite of that in Britain. Yet at least through 1994 the American story reads like the British most successes. one, minus of Thatchers sporadic Reagans first year was the the antitax wave that had to elect exception. Riding helped was to a him, Reagan able cobble together loose coalition of southern in to some cuts in Democrats and Republicans his first year pass social programs, especially those affecting the poor. A decade-long expansion was cuts of low-income housing programs rapidly reversed. Significant were introduced in the main program for the poor, AFDC, and in Un ex employment Insurance. The Reagan administration successfully two was ploited the fact that responsibility for these programs shared state with fiscally strapped governments. Both fared poorly in the at state 1980s, although many of the cutbacks occurred the level.50 rev This first-year record has shaped many appraisals of the Reagan olution.51 As in other countries, however, popular support for retrench ment out dissipated rapidly. The Reagan assault petered in 1982, when cuts were further budget overwhelmingly rejected. Reagan's single major reform initiative, the New Federalism proposal, would have AFDC to states re transferred responsibility for and food stamps the (in turn over for the federal governments assumption of complete control

50 case not state In the of AFDC, which is indexed, this happened largely because governments failed to to index benefits inflation. Given this structural feature of the program, "nondecisions" allowed quiet were retrenchment. This trend predated Reagans arrival in office. Indeed, cuts in real benefits greater s was during Carter presidency (when inflation high) than under Reagan. 51 two See, for example, frequently cited studies: Sara A. Rosenberry, "Social Insurance, Distributive Criteria and theWelfare Backlash: A Comparative Analysis," British Journal of Political Science 12 (Oc tober 1982); and John Palmer and Isabel Sawhill, eds., The Reagan Experiment (Washington, D.C.: Urban Institute Press, 1982). POLITICS OF THE WELFARE STATE 165

was so not Medicaid). The proposal unpopular, however, that it could find even a ever single congressional sponsor and died without being introduced.52 second term By Reagans incremental expansions of vari ous social were on programs for the poor back the agenda, and Con a gress passed modest increases in food stamps and Medicaid and dramatic of the income tax expansion earned credit for poor working families.53

Middle-class programs also weathered the storm. Trust fund diffi culties forced was a se significant reforms of Social Security, and there ries of to trim s costs cuts efforts Medicare exploding (mostly through in In all these provider compensation). efforts, however, Republicans fearful of the electoral consequences of retrenchment refused to move in the consensus forward absence of bipartisan agreement. The need for in turn assured that reforms to would be acceptable program defenders was most within the Democratic Party. This clearly evident in the 1983 on a Social Security amendments, where the reliance bipartisan, quasi corporatist commission assured that radical reforms would be rejected.54 was It also true, however, of the series of broad budget packages that sought cutbacks in the Medicare system.55 nature Although it is generally argued that the residual of the wel state creates a narrow fare in the United States political base, the initial state was backlash against the welfare short-lived. Declining support for social From programs preceded Reagans election. 1982 onward? that re is, immediately following the first round of budget cuts?polls true vealed growing support for the welfare state.56 As is elsewhere, was support for means-tested programs far lower than that for middle same class programs, but the public opinion pattern of modest declines in support followed by rapid recovery is evident for both targeted and more as en universal programs. Reagan became much hesitant popular nature thusiasm for retrenchment faded. In any event, the fragmented

52 Tim New to Conlan, Federalism: Intergovernmental Reform from Nixon Reagan (Washington, D.C.: Brookings Institution, 1988), 95-238. 53 Paul E. Peterson, "The Rise and Fall of Special Interest Politics," Political Science Quarterly 105 to (Winter 1990-91); Robert Greenstein, "Universal and Targeted Approaches Relieving Poverty," in Christopher Jencks and Paul Peterson, eds., The Urban Underclass (Washington, D.C.: Brookings In stitution, 1991). 54 Paul Work: The Politics Social (New York: Random House, 1985). 55 Light, Artful of Security Reform Joseph White and Aaron Wildavsky, The Deficit and the Public Interest (Berkeley: University of California Press, 1989). 56 Fay Lomax Cook and Edith J. Barret, Support for theAmerican Welfare State (New York: Columbia University Press, 1992); Robert Y. Shapiro and John T. Young, "Public Opinion and theWelfare State: The United States in Comparative Perspective," Political Science Quarterly 104 (Spring 1989). In line with my general argument, Shapiro and Youngs research indicates similar patterns in other countries. 166 WORLD POLITICS

of American institutions cut political assured that plans for further backs met a hostile in reception Congress. To be with both the a sure, emergence of large structural budget to tax room was deficit during the 1980s and resistance increases, little state left for social policy expansion. The American welfare moved into a zero-sum some came ex era, in which gains for programs often at the re pense of others. This atmosphere continued when the Democrats turned to theWhite House in 1992, although social spending for the was a poor prime beneficiary of the 1993 budget agreement. From the was one an late 1980s through 1994 the situation of reallocation within essentially stagnant budget.57 The 1994 elections, which ended forty years of Democratic predom inance in most to Congress, precipitated the vigorous challenge yet the state. American welfare Republicans had learned important lessons was was from past defeats. Social Security taken off the table. The issue framed as a matter the carefully of controlling deficit and bringing gov ernment to at "closer the people." Efforts institutional change (the line item veto and balanced-budget amendment) preceded (though with on social most limited success) attacks programs. To diminish visibility, of the major cuts were scheduled for the year 2000 and beyond. If fully implemented, the Republican budget proposals introduced in 1995 would a represent fundamental reform of American social policy. It will, however, be several years before the outcome of this latest battle is are now clear. Republican cutbacks only being formulated, and it will some to take time for their impact register with the electorate. While current a test the political environment poses major of the resilience of the welfare state, both American precedent and the experience else cast on a where doubt the proposition that Republicans will discover cuts deep reservoir of public tolerance for sharp in social programs.

Germany

a Germany, like Sweden, has very extensive welfare state, though the German is toward transfer than system geared payments rather public over across services, and toward redistribution the life cycle rather than income groups. As in Britain and the United States, there has been a to in auster considerable swing the right elections during the period of in recent ity. A right-of-center coalition has been office since 1982. In

57 recent see on On spending trends, House Ways and Means Committee, Background Material Pro on grams within the Jurisdiction of the Committee Ways and Means (Washington, D.C.: GPO, March 1994). POLITICS OF THE WELFARE STATE 167 years, however, the Social Democrats, with their majority in the Bun desrat, have gained considerable influence. And although Germany's powerful unions have been under pressure, compared with unions in other countries their organizational strength has held up quite well.58 a case Thus, Germany represents of moderately diminished left power resources and relatively fragmented political authority. state not on The German welfare is based, maximizing employment, on to are to but providing subsidies the "outsiders," who encouraged to are leave the labor market those who highly productive. Esping-An to an dersen has speculated that the result is likely be "insider-outsider" conflict inwhich the employed (along with employers) increasingly at cost a balk the of subsidizing large and growing "surplus popula tion."59 Indeed, within the recent wave of commentary about the con to tribution of high wages and extensive social protection Europe's costs economic problems, Germany's huge wage (including steeply ris to ing payroll taxes) have received particular attention.60 Adding the stress has been the cost of unification, as the West German welfare state was to cover extended the far less productive East Germany. are are to The fiscal pressures facing Germany evident and unlikely costs even go away. Demographic shifts will increase if expenses related to to unification begin subside. There is, however, little sign that these a pressures will translate into sharp insider/outsider conflict. This line of potential cleavage is based largely on age, with by far the largest and most expensive group of outsiders consisting of former insiders: pen are to sioners and early retirees. There formidable barriers the develop ment lines.61 Where costs of political cleavages along generational are source associated with aging the main of budgetary pressure, insid ers to too will have recognize that in the future they will be outsiders. to a This is likely temper any tendency toward polarization between "them" and "us."62 a new Far from revealing sharp political cleavage, the reform of pen re sions in the late 1980s fits the general cross-national pattern for

58Thelen(fn.l9). 59 Esping-Andersen (fn. 35,1991 and 1992). 60 were in Combined employer and employee social insurance contributions 26.5% of gross income 1970, 32.4% in 1980, and are forecast to hit 39.2% in 1994. Financial Times, July 2,1993, p. 13. 61 Hugh Heclo, "Generational Politics," in John L. Palmer, Timothy Smeeding, and Barbara Boyle eds., The Vulnerable D.C.: Urban Institute Press, 1988). Torrey,62 (Washington, Esping-Andersen (fn. 35,1992) rightly suggests that the development of private pension schemes a current to sever could encourage such polarization, since it would allow workers the link between own enormous their retirement situation and that of the preceding generation. Yet the institutional a a and political barriers to any radical change in mature, pay-as-you-go pension system make major development along these lines highly unlikely. See Pierson (fn. 31). 168 WORLD POLITICS

trenchment in popular social programs.63 With projections indicating enormous as a long-term deficits result of demographic trends, the was some need for pension reform widely recognized. While critics a pressed for rethinking of the entire scheme, the Kohl government in consensus stead searched for among experts and the social partners, and eagerly sought support from the opposition Social Democrats. Union statements on re and business representatives submitted joint pension form. All parties except the Greens supported the Pension Reform Act passed in November 1989.64 The resulting plan incorporated familiar an in pruning techniques: slightly lower replacement rates, increase the retirement age, and increased contributions. Combined with earlier cutbacks, these reforms have generated substantial budgetary savings. structure The basic of Germany's generous pension system remained case care as unaltered, however. In the of health reform well, corporatist accommodation of entrenched interests and a search for cross-party consensus has been the rule.65 one a cast to The indication of distinctly conservative retrenchment to came in cuts. initiatives prior 1989 the pattern of benefit Most af were fected welfare and unemployment insurance benefits that could be a to considered hindrance labor market flexibility. While these benefits were late relatively well protected under the SPD-led coalition of the 1970s, they experienced disproportionate reductions after 1982.66 Still, were not overturn the differences limited and did the basic reality that within a social welfare policy operated relatively consensual framework. were a As Offe has argued, moderate cutbacks carefully designed by coalition" and orchestrated to a "defacto bipartisan prevent political outcry.67 The strains of the postunification period raised the possibility of more dramatic reform. Germany's worsening fiscal situation, combined concern with about industrial competitiveness, generated growing crit

63 Karl Hinrichs, "Public Pensions and Demographic Change: Generational Equity in the United no. States and Germany," Centre for Social Policy Research Working Paper 16/93 (Bremen: Univer sity of Bremen, 1993); Winifried Schm?hl, "Die Finanzierung der Rentenversicherung im vereinten no. 1 Deutschland," Wirtschaftsdienst, (1992). 64 in Friedbert R?b and Frank Nullmeier, "Altersiccherungspolitik in der Bundesrepublik," Berhard Blanke and Hellmut Wollmann, eds., Die alte Bundesrepublik' Kontinuit?t und Wandel (Opladen: West deutscher Verlag, 1991). 65 in Douglass Webber, "Krankheit, Geld und Politik: Zur Geschichte der Gesundheitsreform Deutschland," Leviathan 16 (1988). 66 Jens Alber, "The West German Welfare State inTransition," in R. Morris, ed., Testing the Limits Brandeis Claus "Smooth Consolidation in of Social Welfare (Hanover: University Press, 1988); Offe, theWest German Welfare State: Structural Change, Fiscal Policies, and Populist Politics," in Piven (fn. 35). 67 Offe (fn. 66), 140. POLITICS OF THE WELFARE STATE 169

state. to icism of the welfare Yet the response unification emphasized were into continuity: East Germans brought the West German social on terms. to policy regime extremely generous In response budgetary a cuts so pressures since then, series of have been introduced in major more cuts are on cial programs, and probably the way.68 Again, how to trim ever, the pattern has been benefit levels rather than challenge the basic structure of programs. recent care The ambitious expansion of long-term covering in-home and nursing-home services is clear grounds for skepticism about the or a prospects for radical retrenchment generational backlash against the German welfare state.69 The system will relieve the sickness funds care and local social assistance budgets of responsibility for long-term amounts to expenditures. While the scheme partly fiscal relief for it new strapped L?nder (state) governments, involves significant bene as at a stress fits well. Its introduction time of budgetary and wide costs spread discussion of high social wage indicates the continuing as as political attractiveness of social programs, well the electoral clout of the elderly.70 There is a possibility that groups more easily defined as problem as cases, such the long-term unemployed (especially disaffected youth, or immigrants, East Germans) could become the targets for political rates mar attacks. Concern about mounting unemployment and labor ket inflexibilities point in the same direction. The Kohl government s recent cuts in do concentrate proposals for social expenditures indeed on will unemployment and welfare benefits. Sharp cuts, however, pro a SPD voke strong challenge from the and unions, since the conditions of have for workers. Further the unemployed significant implications even more, the force of demographic demands is such that these polit ically difficult reforms would have only a limited effect on the recent long-term budgetary situation.71 The history of retrenchment most are to suggests that governments likely be skittish about pursuing

68 J?rgen Plaschke, "Die Sozialpolitik in den Monaten November, Dezember 1993 und ein no. sozialpolitischer R?ckblick auf das Jahr 1993," Nachrichtendienst, 2 (1994). 69 over to an Jens Alber, "The Debate Long-Term Care Insurance in Germany" (Contribution on OECD seminar the Care of the Elderly, Paris, OECD, 1994); Ulrike G?tting, Karin Haug, and Karl to Hinrichs, "The Long Road Long-Term Care Insurance in Germany: A Case Study inWelfare State at theWorld of Sociology, Bielefeld, July 1994). 70 Expansion" (Paper presented Congress Tyll Necker, president of the Association of German Industry (bdi), described the original pro not one as an as an posal (which did include the reduction of paid holiday offset) official declaration of war against German industry. Alber (fn. 69), 17. 71 are to account 61% with By 2040 pensions expected for of German social expenditure, compared 40% in Britain and 44% in Sweden. OECD, Aging Populations: The Social Policy Implications (Paris: OECD, 1988). 170 WORLD POLITICS big social policy battles unless they promise to yield substantial bud getary gains. and assure an Demographic budgetary pressures that atmosphere of to austerity will continue surround the German welfare state. Indeed, the German government has been quite successful in holding the line on as a spending. Yet, Offe aptly puts it, it has been period of "smooth seems a re consolidation.,, A fundamental rethinking of social policy mote structure possibility. The of political institutions?both constitu rules a on tional and corporatist policy networks?puts premium consensus. The SPD's significant gains in the October 1994 elections, a where Kohls coalition government retained only razor-thin majority, are to a never unlikely invigorate governing coalition that has shown much appetite for radical initiatives. Sweden a Sweden combines tremendously successful social democratic party, one smost powerful unions, and of the world extensive and redistribu tive welfare states. With the breakdown of centralized collective bar gaining, union power has weakened in the past decade, and the political SAP to hegemony of the has given way periodic fluctuations between SAP insti governance and coalitions of the bourgeois parties.72 Swedish a tutions, like British ones, provide for considerable concentration of political authority. an must As with Germany, analysis of trends in Swedish social policy two distinguish periods?the cyclical patterns that Sweden shared with to other countries prior 1990 and the dramatic worsening of economic over and budgetary circumstances the past four years. Despite the dis tinctiveness of Swedish politics and the Swedish welfare state, the dy to to namics of reform prior 1990 bears many similarities the processes cases. who was in discussed in the three preceding Regardless of office, was no there only occasional trimming of social programs; government a showed much enthusiasm for major revamping of the Swedish wel fare state. to the to Esping-Andersen has tried link prospects for retrenchment structure policy feedback from the of Sweden's welfare state, positing s sec that Sweden system of extensive service provision and high public tor a in employment promotes cleavage between workers the public and

72 A bourgeois coalition government was in power from 1976 to 1982 and, following the SAP'sworst to showing in decades in the "earthquake" election of 1991, from 1991 1994. POLITICS OF THE WELFARE STATE 171

1980s sector unions private sectors.73 In the both private and employers criticized public employees. This occurred in part because of the way Sweden's centralized industrial relations system created linkages be tween sector in public and private pay, and part simply because of the tax costs sector high of massive public employment expansion.74 events ex It might be expected that the of the past few years would came acerbate this tension. The Swedish economy under extraordinary pressure after 1990. The fall in output and the rise in unemployment seem to to state have had relatively little do with the welfare itself.75 Yet if state not cause the welfare did the economic crisis, it is clearly impli current cated in Sweden's predicament. Unemployment, including in those participating government-financed active labor market rose over schemes, from 3 percent in 1989 to 12 percent in 1993.76 De to at state cannot signed operate full employment, the Swedish welfare tolerate burdens of this magnitude. Sweden's generous and expensive to social benefits led immediate fiscal trouble when rising unemploy ment revenues produced falling and higher outlays. In only four years went OECD to Sweden from having the largest surplus in the operating the largest deficit. Government outlays reached the extraordinary level of 73 percent of GDP in 1993, and the deficit stood at over 14 percent of was GDP.77 Given existing levels of taxation, the adjustment burden to on bound fall heavily the expenditure side. a true re The emergence of fiscal crisis after 1990 required extensive was forms. Furthermore, between 1991 and 1994 Sweden governed by a one center was bourgeois coalition?and whose of gravity consider ably to the right of the one that governed between 1976 and 1982. to a Conditions thus might have seemed uniquely favorable complete is is even ex overhaul of social policy. What striking that under these was no state traordinary circumstances there sign that the welfare care was to would be radically restructured. Instead, considerable taken structure ex operate within the of existing programs.78 Prominent

73 see Esping Andersen (fn. 1); Esping-Andersen (fn. 35, 1992); also Peter Swenson, "Labor and the Limits of theWelfare State," Politics 23 (July 1991). 74 Comparative Schwartz (fn. 15); Pontusson and Swenson (fn. 19). 75 and OECD, Economic Survey: Sweden (Paris: OECD, 1994); Evelyne Huber John Stephens,"The at Future of the Social Democratic Welfare State" (Paper presented the International Sociological Association Meeting, Oxford, 1993), 7-11. 76 September OECD (fn. 75), 36. 77 Ibid. 78 John D. Stephens, "The Scandinavian Welfare States: Development and Crisis" (Paper presented at theWorld Congress of Sociology, Bielefeld, Germany, July 1994). 172 WORLD POLITICS

an for amples include expansion of waiting days unemployment and a rates sickness benefits, lowering of replacement for unemploy ment benefits (from 90 percent to 80 percent), a freeze on adjustments a in child allowances, and raise in the retirement age, from sixty-five to sixty-six. eco Ironically, the breakdown of other components of the Swedish nomic model also diffused some of the pressure on the divide between sector public and private workers. The end of centralized bargaining sector to has made it easier for private workers decouple pay settle ments from the public sector.79 Higher unemployment made the option sector less atten of cutting the public workforce attractive and shifted to tion transfer programs, where the provision of generous benefits has always depended on keeping the cohort of recipients small. Both the crisis package accepted by the unions and the SAP in late 1992 and the were cuts in transfer government's 1993 budget geared toward pro grams (sick pay, unemployment insurance, pensions).80 Thus, while the welfare economic problems created added pressure for state, they so a a more did in way that encouraged dispersed and incremental pol a itics of austerity, rather than polarization between public and private sector workers. to use The government showed little inclination the opening for rad state. ical restructuring of the welfare Coping with the pain of admin istering austerity weakened the bourgeois coalition's enthusiasm for measures. drastic In any event, only the Conservatives within the gov erning coalition expressed serious doubts about Sweden's universalist welfare state. Polling data from 1992 indicated overwhelming support since 1986 for for social spending, including increases the major pro the rules of blame grams.81 The coalition carefully followed principal SAP re avoidance. It sought and union support for crisis packages of cover at of form, purchasing political the price forgoing opportunities A was taken to for radical change.82 similar approach pension reform, in the paralleling the process followed Germany and United States. in on extensive con The pension reform introduced June 1994, based sultations among the major parties and representative of labor and cap

79 Pontusson and Swenson (fn. 19). 80 at Evelyne Huber and John Stephens, "The Swedish Welfare State the Crossroads," Current Sweden, no. 394 (January 1993), 1-7; OECD (fn. 75). 81 Bo Rothstein, "The Crisis of the Swedish Social Democrats and the Future of the Universal Wel fare State," Governance 6 (October 1993). Rothstein himself argues that weakening middle-class at tachment to the welfare state may have contributed to the SAP s 1991 election defeat, but his article no real evidence for this claim and the polling data he presents suggest otherwise. provides82 Huber and Stephens (fn. 80). POLITICS OF THE WELFARE STATE 173

to on a ital, seeks get Sweden's public pension system stable, long-term footing without challenging its basic principles.83 Far from using its electoral breakthrough and the onset of a bud as a to getary crisis golden opportunity remake the welfare state, Swe a course. den's bourgeois coalition chose cautious Throughout, the to coalition studiously avoided initiatives that might lend credence the to state. accusation that it sought dismantle the welfare The October 1994 elections vindicated the coalitions concerns, but in a way that re even on In vealed the unpopularity of modest assaults social programs. SAP the face of Swedens economic difficulties, the triumphed, posting one vote ever. was of its highest totals Moreover, the victory achieved on a to platform that stressed the SAP's intention reduce the deficit tax cuts. largely through increases rather than budget

IV.The New Politics of the Welfare State

an Economic, political, and social pressures have fostered image of wel states one turns so fare under siege. Yet if from abstract discussions of to an cial transformation examination of actual policy, it becomes to difficult sustain the proposition that these strains have generated cases a fundamental shifts. This review of four does indeed suggest dis new not one a tinctly environment, but that has provoked anything like state. to to dismantling of the welfare Nor is it possible attribute this case two cases neoconser selection, since the choice of prototypical of vatism (Britain and the United States) and two cases of severe bud room getary shocks (Germany and Sweden) gave ample for various scenarios of radical retrenchment. Even in Thatcher's Britain, where an one ideologically committed Conservative Party has controlled of Eu most over a rope's centralized political systems for decade, reform has been incremental rather than revolutionary, leaving the British welfare state most largely intact. In other countries the evidence of continuity is even more apparent.84 83 Stephens (fn. 78), 19. Ministry of Health and Social Affairs, Pension Reform in Sweden: A Short Summary (Stockholm: Cabinet Office, 1994). 84 states Schwartz (fn. 15) argues that there has been major change in the four small he studies: Swe on den, Denmark, Australia, and New Zealand. His study focuses the internal organization of public on even service provision, rather than the level and quality of services actually provided, and it does not account on own discuss the transfer payments that for the majority of welfare-state spending. Even its narrow cata terms, however, Schwartz's study provides remarkably little evidence that the changes he to common sec logs add up radical reform rather than the continuous tinkering in all modern public tors. a on The evidence looks credible only for New Zealand, tiny country the periphery of the world economy, which clearly faced severe adjustment problems in light of its long (and unusual) tradition of seems more as an as protectionism. It far reasonable to treat this case outlier than to view it the paceset ter a state. in global march toward radical reform of the welfare See Stephens, Huber, and Ray (fn. 38). 174 WORLD POLITICS

To be sure, there has been change. Many programs have experienced a or in tightening of eligibility rules reductions benefits. On occasion, individual programs (such as public housing in Britain) have undergone more radical reform. In countries where budgetary pressures have been greatest, cuts have been more severe. Over the span of two decades, some are even however, changes in social policy inevitable; in the boom years of the 1960s specific social programs sometimes fared poorly. What is striking is how hard it is to find radical changes in advanced states. welfare Retrenchment has been pursued cautiously: whenever consensus possible, governments have sought all-party for significant to structures reforms and have chosen trim existing rather than experi ment new or with programs pursue privatization. so seen This finding is striking, given that many observers have the as one in modern post-1973 period of fundamental change political economies. A harsher economic climate has certainly generated de mands for spending restraint. Additional pressures have stemmed from the maturation of social programs and adverse demographic trends. Yet extent compared with the aspirations of many reformers and with the as of change in fields such industrial relations policy, macroeconomic or of what stands out is policy, the privatization public industries, the state. relative stability of the welfare to re I have suggested that understand what has been happening on the welfare state to quires looking beyond the considerable pressures sources are consider enduring of support. There powerful political states forces that stabilize welfare and channel change in the direction of incremental modifications of existing policies. The first major pro stems tection for social programs from the generally conservative char state now acteristics of democratic political institutions. The welfare status sta represents the quo, with all the political advantages that this tus state. confers. Nondecisions generally favor the welfare Major pol numerous actors. icy change usually requires the acquiescence of Where power is shared among different institutions (for example, Germany, the United States), radical reform will be difficult. cases not As the British and Swedish show, radical change is easy even a in situation of concentrated political power. A second and crucial source states comes of the welfare political strength from the high elec costs toral generally associated with retrenchment initiatives. Despite scholarly speculation about declining popular support for the welfare a state, polls show little evidence of such shift, and actual political over even even struggles social spending reveal less. On the contrary, to state a halting efforts dismantle the welfare have usually exacted high POLITICS of the welfare state 175

benefits are concentrated political price. Recipients of social relatively are are also more to and generally well organized. They likely punish for cutbacks than are to reward them for lower politicians taxpayers a costs. Nowhere is there evidence to support the scenario of self-rein to middle-class disenchant forcing dynamic, with cutbacks leading ment more retrenchment. and exit, laying the foundation for Instead, recurrent in has a mild the pattern public-opinion polls been swing state in economic and against the welfare the wake of poor performance a of at the first whiff budgetary stress, followed by resurgence support cuts. of significant seem to se Nor does the welfare state's political position have been in decline of its riously eroded?at least the medium term?by the key for those benefits where traditional constituency, organized labor. Only are as in unions the sole organized constituency, such unemployment immediate surance, has labor's declining power presented problems, even can and here the impact be exaggerated.85 The growth of social the terrain of welfare state spending has reconfigured politics. Maturing new the consumers and social programs produce organized interests, that are well to defend the providers of social services, usually placed welfare state. The networks associated with mature welfare state programs consti tute a to sense as As recent re barrier radical change in another well. on once certain search path dependence has demonstrated, initiated, courses are to reverse.86 and indi of development hard Organizations to commitments that viduals adapt particular arrangements, making costs to some more efficient may render the of change (even potentially costs commit alternative) far higher than the of continuity. Existing ments a lock in policymakers. Old-age pension systems provide good countries on a basis: example. Most operate pensions pay-as-you-go current workers pay "contributions" that finance the previous genera

85 a further for this Indeed, cross-national comparison of unemployment programs provides support OECD rates UI as a of analysis. The has measured replacement for (benefits percentage previous income) one a re over time in twenty countries, with data through 1991. This data thus permit, for program, levels. In the of cent quantitative appraisal of program generosity rather than simply spending majority cases out rates were m 1991 than the rate for either the (twelve of twenty), replacement higher average 1970s or the 1980s, while most of the other cases experienced very marginal declines. Organization for Economic Cooperation and Development, The OECDjobs Study: Facts, Analysis, Strategies (Paris: OECD, 1994), chart 16, p. 24. 86 See Paul David, "Clio and the Economics of QWERTY," American Economic Review 75 (May Lock-In Histori 1985); andW. Brian Arthur, "Competing Technologies, Increasing Returns, and by see cal Events," Economic Journal 99 (March 1989), 116-31. For good extensions to political processes, An in A. The Elu Stephen A. Krasner, "Sovereignty: Institutional Perspective," James Caporaso, ed., and sive State: International Comparative Perspectives (Newbury Park, Calif: Sage Publications, 1989); and North (fn. 20). 176 WORLD POLITICS

cut tior?s retirement. Once in place, such systems may face incremental are resistant to to backs, but they notoriously radical reform.87 Shifting based would an untenable private, occupationally arrangements place on current to burden workers, requiring them finance the previous gen s own. eration retirement while simultaneously saving for their so Over time, all institutions undergo change. This is especially for cannot very large ones, which be isolated from broad social develop ments. state no The welfare is exception. But there is little sign that the two a so last decades have been transformative period for systems of I cial provision. As have argued, expectations for greater change have rested in part on the implicit application of models from the period of state can to welfare expansion, which be read suggest that economic or a state change, the decline in union power, the presence of strong creates the preconditions for radical retrenchment. I find little evidence for these claims. us some a This preliminary investigation still leaves distance from coherent comparative theory of retrenchment politics. It does, however, some a suggest of the building blocks for such theory. The pressures of a at center shifting global economy, which have long been the of dis to cussions of the contemporary welfare state, continue deserve major (if more nuanced) attention. What needs more consideration is what happens when these considerable pressures collide with popular, deeply are institutionalized public policies. I have emphasized that politicians to not likely pursue strategies that will damage their chances for reelec tion. The centrality of electoral considerations, combined with the gen state some eral unpopularity of welfare cutbacks, suggests plausible hypotheses about the political preconditions for significant reform. are to to These hypotheses only tentative and would need be subjected sustained comparative scrutiny. Each, however, is compatible with the analysis of retrenchment outlined here and with the evidence pre sented.

First, radical retrenchment may be facilitated when there is signifi cant are a electoral slack, that is, when governments believe that they in to strong enough position absorb the electoral consequences of unpop one reason ular decisions.88 Thus, for Thatchers relative (though still success limited) may have been the division among her opponents

87 Thus in Germany, Sweden, and the United States the maturity of existing schemes limited poli to cymakers very gradual and incremental reforms of earnings-related pension systems. More dramatic was was reform possible in Britain because the unfunded earnings-related scheme far from maturity, having been passed only in 1975. Pierson (fn. 31). 88 an see For example of this argument, Garrett (fn. 41). POLITICS OF THE WELFARE STATE 177

a within first-past-the-post electoral system. This may have given her more room to that would have been pursue unpopular policies beyond a a the reach of government in precarious electoral position. However, ex ante a most calculating electoral slack is tricky business, and govern ments are to I even likely proceed cautiously. As have indicated, the Thatcher government generally retreated when confronted with wide spread opposition. moments re Second, of budgetary crisis may open opportunities for to moments to form. Advocates of retrenchment will try exploit such as an to save state present reforms effort the welfare rather than destroy manner to it. Framing the issue in this may allow governments avoid widespread blame for program cutbacks. Making the claim of crisis credible, however, generally requires collaboration with the political op consensus to position. In turn, the need for makes it difficult utilize to crises promote radical restructuring. Thus, while the appearance of stress fiscal encourages downward adjustments in social programs, it is a a far less clear that it provides platform for radical overhaul of social policy. Third, the success of retrenchment advocates will vary with the chances for lowering the visibility of reforms. Those seeking retrench ment will try to avoid political outcries by diminishing the visibility of their cutbacks or by trying to hide their own responsibility for unpop outcomes. ular Success in these efforts, I have argued, depends partly on the design of political institutions. Whether political authority is or not to structure to concentrated helps the choices available retrench ment in advocates. Where authority is concentrated (as Britain and to Sweden), governments will be hard-pressed avoid blame for unpop a to ular decisions, but they will have greater capacity develop and im more plement strategies that obscure cutbacks. Governments in must to fragmented systems fashion strategies that minimize the need veto force multiple policy changes through institutional points. How to for ever, they may find it easier duck accountability unpopular poli cies. Federalism, for example, opened up considerable possibilities for to cuts some a is Reagan shift the blame for in programs, tactic that to current central the efforts of congressional Republicans. Finally, the prospects for changing institutions (the rules of the can re game) may be of great significance. If retrenchment advocates structure the ways in which trade-offs between taxes, spending, and are to deficits presented, evaluated, and decided, they may be able shift the balance of political power. So far, these institutional shifts have been rare, but several instances may be of growing relevance. In Europe 178 WORLD POLITICS

the increasing policy significance of the EC may alter the terrain for over state. can as struggles the welfare If reforms be presented legally or or required economically imperative because of the single market moves toward monetary union, national governments may be freed from some blame for welfare-state cutbacks.89 In the United States the new to cut Republican majority in Congress deferred efforts programs a to until after strong (but only modestly successful) push change the was to rules of the game. The intent of the rule changes increase the taxes create a more salience of and favorable climate for attacking social spending. some sources If this analysis suggests plausible of cross-national vari to states con ation, it also highlights the need disaggregate welfare and sider variations across programs. Indeed, in the four cases considered outcomes more across con often differed programs (for example, the trast between council and the NHS in than across housing Britain) across countries. It is commonly argued that the crucial distinction pro grams will be between universal programs and those that target the current poor, and that the latter will be especially vulnerable.90 Yet the not out investigation does support this assertion. Rather, variations in comes across not programs in the four countries do generally track the reasons universal/targeted divide. Among the likely that targeted pro not more cuts in grams have generally proved vulnerable: these pro to grams tend yield only minimal budgetary savings, and conservative in most to governments interested radical reform object the the univer tax rates sal programs that require high and compete with plausible pri vate current a alternatives. Instead, the investigation suggests that area concerns promising of research the features of programs that allow either to obscure the of retrenchment on voters or governments impact to diminish their own for accountability unpopular reforms.91 Programs are to a that poorly indexed, for example, make it easier pursue low-vis ibility strategy of allowing inflation to gradually erode the value of ben efits. All of these hypotheses build on the core argument of this essay: that frontal assaults on the welfare state carry tremendous electoral risks.

89 For an argument about how EC institutions may allow blame-avoiding behavior on the part of see member state governments, Andrew Moravcsik, "Why the EC Strengthens the State" (Manu 1994). script,90 most Robert Kuttner has called this "the fundamental principle in the political economy of social spending." Kuttner, "Reaganism, Liberalism, and the Democrats," in Sidney Blumenthal and Thomas a see Byrne Edsall, eds., The Reagan Legacy (New York: Pantheon, 1988), 113. For critique, Pierson (fn. 12), 6,170. 91 See Pierson (fn. 12), 17-26,169-75. POLITICS OF THE WELFARE STATE 179

state The contemporary politics of the welfare is the politics of blame avoidance. Governments confronting the electoral imperatives of mod ern democracy will undertake retrenchment only when they discover to the costs as ways minimize political involved. But I emphasize, such are to come some techniques hard by. While this analysis suggests of to most the possible keys variation in policy outcomes, the significant concerns not finding variation but commonality. Everywhere, retrench ment a state most re is difficult undertaking. The welfare remains the silient aspect of the postwar political economy. so Understanding why this is requires that old arguments be recast to a new a rethought and address the exigencies of setting. At time when historical institutionalism has become fashionable, this con clusion has broad implications for the study of comparative politics. to con The strong calls incorporate historical analysis into the study of are we must temporary politics compelling.92 Yet remain cognizant of the of on in are hazards drawing history the wrong way. There signifi cant in historical to dangers using analogies study contemporary social context politics, since the goals of social policy reformers and the in which they operate have undergone profound change. Instead, histori a cally grounded analysis should emphasize that social policy change is that over time. focus on the of so process unfolds My impact inherited structures on cial policy draws this precise point. The growth of the state welfare has transformed the politics of social policy. A historical stress an perspective should that today's policymakers operate in envi ronment fundamentally shaped by policies inherited from the past, that current echo a rather than suggesting politics will the conflicts of era. previous

92 Sven Steinmo, Kathleen Thelen, and Frank Longstreth, eds., Structuring Politics: Historical Insti tutionalism in Comparative Analysis (Cambridge: Cambridge University Press, 1992).