The Politics of Avoiding Accountability The New Politics of the Welfare State and Welfare State Retrenchment in New Zealand 1984- 1993 Shane S. Sadorski, B.A. (Hons.) A thesis submitted to the Department of Political Studies in conforrnity with the requirements for the degree of Master of Arts Queen's University Kingston, Ontario, Canada September, 2000 Copyright O Shane Sadorski, 2000 National Library Bibliothéque nationale 1+1 ,.,naja du Canada Acquisitions and Acquisitions et Bibliograptiic Services services bibliographiques 395 Wellington Street 395. rue Weliingtori OttawaON K1AW OnawaON K1AûN4 Canada cana& The author has granted a non- L'auteur a accordé me licence non exclusive licence allowing the exclusive permettant à la National Library of Canada to Bibliothèque nationale du Canada de reproduce, loan, distribute or sel1 reproduire, prêter, distribuer ou copies of this thesis in microform, vendre des copies de cette thèse sous paper or electronic formats. la forme de microfiche/fih, de reproduction sur papier ou sur format électronique. The author retaïns ownership of the L'auteur conserve la propriété du copyright in this thesis. Neither the droit d'auteur qui protège cette thèse. thesis nor substantial extracts fiom it Ni la thèse ni des extraits substantiels rnay be printed or othewise de celle-ci ne doivent être imprimés reproduced without the author's ou autrement reproduits sans son permission. autoxisation. A bstract Since the erirly 1980s. debate over the future of the contemporary welfare stare has taken a prominent place in the study of comparative public policy. In the growing acadernic literature on this subject. a sub-debate has emerged over the extensiveness rind pervasiveness of programmes of welfare state reuenchment over the pst twenty yerirs. A few theories have emerged seeking to expiain sirnilarities rind differences in retrenchment throughout the indusuialised democracies. This study seeks to apply one such theory, Paul Pierson3 "New Politics of the Welfare State." to the New Zealand mode1 of reuenchment. In examining New Zealand as a case study beyond the four examples from which Pierson haderived his theory. this study assesses whether Pierson's theory can be used to shed light on New Zea1and.s particular experience with retrenchment. In doing so, this study contributes to the larger debate over welfare state retrenchment by iIlusuating the limitations of Pierson's theory. and recasting that theory to improve upon it as a neo-institutionalist framework for explaining comparative differences in weifare state reuenchment. Acknowledgements 1 wish to first thank Professor Henry Milner of Laval University for his early interest in the subject of rhis thesis and his helpful guidance in getting this project undenvay. His advice as supervisor helped put this study on a solid foundation. 1 would also tike to thank Professor Grant Amyot of Queen*s University for shepherding me through the final stages of the thesis process and for serving as my supervisor during the oral examination. Finally. I wish to thank my partner Catharine whose continual support and encouragement was a vital component in the successful cornpletion of this study. Table of Contents Chapter One The New Politics of the Welfare State and the New Zealand Mode1 1 Chapter Two A Window of Opportunity: Budgetxy Crisis and Reuenchrnent 16 Chapter Three Retrenchment and the Concentration of Political Authority 3 3 Chaptsr Four The Role of Electaral and Party Systems in Retrenchment 50 Chapter Five Towards a Theory of Welfare State Retrenchment 69 Re ferences 79 Vi ta 85 Chapter One The New Politics of the Welfare State and the New Zealand Modei Retrenchment of the Welfare State 1s there a place for the welfare smte in the twenty-first century? Since the arly 1980s. when a ivrtve of right-of-centre govemments preaching the gospel of fiscal austerity rode into political office in a number of indusuialised democracies. it has become fashionable for many acadernics. politicians, media cornmentators. and members of the general public to question the sustaïnability of the twentieth-century welfare state. Whether expressed as part of the "crisis in social dernocracy." the "break-down of the historical compromise," the "end of the Keynesian paradigm." or "the collapse of the post-war prosperity consensus." the underlying concept of a cnsis of the welfare state has become a prominent feature in Western political discourse.' In large part. this discussion over the future of the welfare state has been fuelled by the retrenchment over the past twenty years of elements of the welfare state in most advanced industrial democracies. What exactly do we rnean by welfare state retrenchment'! To answer this, we first need to be clear as to what constitutes a welfare state. Borrowing from Davidson's comparative work on welfare States. this study considers a welfare state to be a nation in which the state uses either ( 1) the disbursement of revenues extracted fron? the economy via taxes and levies. or (2) the re-allocation of costs and benefits among groups through legislation. to moderate the inequalities generated by the market and/or circumstance within a predominantly capitalist econorny.' Hence, welfare state retrenchment refers here to reductions in activities of the state originaily designed to moderate the unequal outcomes present within a market economy. The curent debate in Western political discourse over the significanceof welfare state retrenchment for the future of the welfare state has led to a sub-debate in comparative public policy oïer the extensiveness and pervasiveness of programmes of retrenchment in industrialised democracies. heviewing '~hesefour exarnpIes can be found in Scharpf, Crisis and Choice iti Eiiropean Social Democracy; Gourevitch, Polirics in Hard Tittres; and James, New Terrirov. '~avidson.Two Models of Welfare, 1 1. the existing liierature on retrenchment. one quickiy observes that the majority of academic work on the subject focuses on the universality of retrenchment and seeks explrinations for this phenomenon. For example, Pontusson, working within the paradigm of the "new logic of industrialism." has undeden to explain social democratic policy rollback in Europe in terms of the changes in workplace organisation and employment structure that have occurred in most advanced capitalist countries.' Scharpf. seeking to explain what he sees as the "crisis" in European social democracy. points to how increased internationalisation of capital markets has crerited an economic environment which prevents social democratic governments from engineering a full ernployment econorny. piacing great stress on social welfare systems designed to operate undrr full employment." Schwartz. pushing this point even funher. contends that "international market pressures are causing not simply a shifi toward less state'but also a shift toward a different kind of tat te."^ Schwartz points to Australia, Denmark. New Zealand, and Sweden as instances where "sweeping changes occurred in the 1980'~the scale and significance [of which] malces these four worthy of ~tud~."~ In contrast to the majority of the literature on retrenchment. Paul Pierson takes exception to the generalised perception that there has been a major shake-up of the welfare state. Presenting his views in the journal World Politics, Pierson contends that Economic. political, and sociai pressures have fostered an image of welfare states under siege. Yet if one turns from absuact discussions of social transformation to an examination of actuaI policy, it becomes difîîcuIt to sustain the proposition that these strains have generated fundamental shifts ... The welfare state rernains the most resilient aspect of the postwar political economy.' Pierson bases his argument on data derived from a comparative analysis of retrenchment in Gemany. Sweden. the United Kingdorn. and the United States. In these counuies (the 1sttwo deliberately chosen because of their perception as "prototypicaI cases of neo~onservatisrn")~,Pierson finds that retrenchrnent has fu ont us son, "Expfaining the Decline of European Social Dernocracy." 'Sc harp f. Crisis arid Ciioice in Ewopearr Social Deniocracy. '~chwartz."Small States in Big Trouble," 527. "Ibid..528. 'pierson. "The New Politics of the Welfare State," 173, 179. 'lbid., 173. bsen a fragmenteci. hic-and-miss process of restricted retrenchrnents rather than a "self-reinforcing dynarnic."9 While Pierson does not dispute that there are new giobal ecooomic pressures on we!fare states to retrench. he does dispute the notion that weffare states do not possess the ability to sustain successful resistance to such pressures. Pierson asserts in his analysis that the democratic political institutions upon which the welfare state rests provide built-in mechanisms of resistance whenever radical programmes of reuenchment are attempted. Singling out Schwartz for criticism in making his case. Pierson argues chat "Schwartz's study provides rernarkably little evidence that the changes he catalogs add up to radical reform rather than the continuous tinkering cornmon in ail modem public sector~."~~On deeper reading, however. one finds that Pierson is in fact willing to concede to Schwartz one exarnple of radicai retrenchment: The evidence [for radical retrenchment] looks credib!e only for New Zealand. a tiny country on the periphery of the world economy. which clearly faced severe adjustment problems in light of its long (and unusual) tradition of protectionism. It seerns far