Political Ideology, Globalisation and Welfare Futures in Europe

Transcription

1 Jnl Soc. Pol., 27, 1, Printed in the United Kingdom Cambridge University Press Political Ideology, Globalisation and Welfare Futures in Europe VIC GEORGE* ABSTRACT A study of elite opinion on the nature and future of the welfare state in six European countries, conducted during 1994, found that most of the traditional differences of opinion between left and right were still valid. Public opinion studies have consistently found strong support for state welfare. Yet during the past decade or so, governments in Europe have been pursuing policies that are largely similar in the sense that they are leading towards the containment and retrenchment of state welfare. The pressures of economic globalisation and of national structural factors have led to the replacement of the dominant social democratic expansionist model of welfare with the neo-liberal contractionist model. The result is that in the same way that governments of the right pursued expansionist policies of welfare during the reign of the social democratic model in the 1960s and early 1970s, governments of the left have in the past few years pursued policies of containment and contraction and they are likely to continue do to so in the foreseeable future. POLITICAL IDEOLOGY AND THE FUTURE OF WELFARE IN EUROPE The relationship between ideology and welfare provision has been explored in at least four different ways in the social policy literature: first, by examining the position of different ideological schools of thought regarding state welfare; second, national and comparative studies of public opinion on social welfare; third, comparative literature on the relationship between the party political nature of the government and the type of social policies pursued; and fourth, studies of the opinions of elite groups in society concerning welfare at the national or comparative * Vic George, Emeritus Professor of Social Policy, University of Kent at Canterbury, Kent CT2 7NY. Thanks for discussion: Peter Abrahamson, Giuliano Bonoli, Karen George, Tetty Havinga, Roger Lawson, Paul Minderhoud, Hann Warming-Nielsen, Bruno Palier, Berndt Schulte, Peter Stathopoulos, Peter Taylor-Gooby and Jan Terpstra. And acknowledged for financial support: ESRC, the Anglo- German Foundation, the European Union DGV, COSZ the Netherlands, and the University of Kent.

2 18 Vic George level. This particular project belongs to the last category, a rather underresearched area. This section of the article is based on the findings of a European study of elite opinion on the future of welfare. Interviews with 144 respondents were conducted during May to October 1994 in six member countries of the European Union Denmark, France, Germany, Greece, Netherlands and the UK with the highest number of 26 respondents in Greece and the lowest of 20 in the Netherlands. The countries were chosen to represent different social policy traditions: the social democracy of Denmark, the corporatism of Germany and France, the liberalism of the UK; different regions in Europe: northern, central and southern; varying levels of economic development and affluence in Europe; different levels of social expenditure: 28.8 per cent of GDP in the Netherlands in 1990, 27.8 per cent in Denmark, 26.5 in France, 23.5 in Germany, 22.3 in the UK and 20.9 in Greece (OECD, 1994, Table 1c, p. 60). The research team at UKC established good academic contacts in all the countries covered by the project and this proved invaluable at all the stages of the project. Respondents consisted of politicians from the main political parties, representatives of trade unions, the business community, the voluntary societies and, in some countries, a small number of journalists and civil servants. The identification of main political parties was straightforward in the UK, Germany, France and Greece but problematic in Denmark and the Netherlands where there is a multiplicity of parties. Though the size of the sample is small and conclusions must be treated with caution, many of the respondents were chosen because they represented the dominant views of their party or agency. Thus, in the UK, we interviewed the spokespersons of the three main parties in the areas of health, education, social security, personal social services and employment. Again, this was easier in some countries than in others and compromises had to be made. The division between political parties of the left, right and centre adopted in the research corresponds to the political groupings within the European Parliament. The selection of main political parties and respondents with main-stream views in their party or agency inevitably meant that minority views would not be well represented in the findings of the project. The general purpose of the project was to find out what respondents saw as the major problems facing the welfare state in the four main social services, in employment and in taxation, and what solutions they felt were necessary to deal with these problems. The theoretical underpinning of the project was the notion of squaring the welfare circle, i.e., the claim that governments in all advanced industrial societies are

3 Political Ideology 19 finding it hard to raise the necessary funds to provide good quality services with the result that they are all involved in a complex political exercise of matching resources to needs in electorally acceptable ways (George and Miller, 1994). The first task was to design a questionnaire that made sense in all the countries. This proved difficult despite extensive discussions at a two-day conference attended by the academics from the participating countries. The questionnaire was piloted in the UK and France, modified slightly and then translated into the various languages by our academic colleagues in the different countries. The interviews were conducted in the national language by our collaborators and the completed questionnaires were translated into English and returned to us together with comments from each interviewer as well as notes to help us understand more fully the respondent s views. Perhaps the most difficult part of the project was the analysis and coding of the questionnaires, since we used mostly open-ended questions. We realised early on that it would not be possible to analyse the questionnaires in a meaningful way unless we had a good grasp of the welfare systems in the various countries and, therefore, we spent quite a bit of time preparing ourselves for this. After a good deal of preliminary work, a coding frame was designed and each questionnaire was coded by two members of the team at the University of Kent. Results were compared, agreed and, where necessary, questionnaires were recorded. In addition to the coding, each questionnaire was analysed in a qualitative way so as to gain an overall impression of the respondent s position on the issue of squaring the welfare circle, and the kind of welfare state envisaged. There is, however, no doubt that a good deal of the qualitative information was lost through the coding even though we tried to make up for this by using quotations from the various interviews in our reports. The preliminary findings of the study were discussed at a two-day conference attended by our academic colleagues from the participating countries and by some officials of the European Union with interests in social affairs. The general view was that the findings of the project were a good reflection of the debates on welfare issues in the various countries. What the reports did not do sufficiently well, however, was to represent accurately minority views and the details of the national debates. This may well be an impossible task in comparative studies that involve more than two countries and examine more than one issue. A thematic approach is used to compare the positions of the left and right on four major social policy issues; the appropriate boundaries between the state and the non-state sector, the level of benefits and services, the

4 20 Vic George reduction of inequalities and the issue of universality versus selectivity, and also on employment policies and on the vexed question of taxation. The boundaries between the state and the non-state sector Table 1 shows that there is no support for more private provision among politicians of the left and the centre, or among trade unions. The opposite is the case among politicians of the right and among organisations of capital, who are strong supporters of more private provision in all areas of social policy, particularly in the area of retirement pensions. The position of the two ideological groupings is reversed in relation to expansion of state provision, with the left arguing for its extension and the right pushing for its contraction. Within this overall picture there are some minor variations. The right s position towards the expansion of the state sector in education is more favourable than in other areas, because education is seen as holding the key to economic regeneration and increased levels of economic growth. Politicians of the left are marginally more favourably inclined towards private provision, both commercial and occupational, in the area of retirement pensions than in other policy areas, because they felt that occupational pensions are already well established and they feared that demographic trends are such that the state could not cope on its own. There was, in fact, almost total unanimity among the respondents on the problems posed by demographic trends both now and in the future and the difficult policy choices involved. The contrast between the views of labour and capital is more marked than between those of politicians of the left and the right, simply because the former do not have to face the electorate a fact which allows them to hold more steadfastly to their ideological beliefs. This applied, in varying degrees, to all the issues discussed in this section. There were some interesting variations between the various countries revealing the significance of institutional factors. In the two countries where state retirement pensions are paid to all on a test of residence rather than insurance contributions (Denmark and the Netherlands), there was no support whatsoever among either politicians or organisations of capital and labour for an expansion of state provision. On the other hand, there was stronger support than in the other countries for an expansion of the private sector. This suggests that the way pensions are financed and provided influences public attitudes towards both the state and the private sector. In Greece, where unemployment benefit coverage is very restricted, there was more support for the expansion of the state scheme than in other countries, with the exception of France where

5 Political Ideology 21 TABLE 1. Respondents in favour of (a) more state provision (b) more private provision* and (c) status quo Health Ret/Pensions U/Benefit Education Politician, left Politician, centre Politician, right Labour organisation Capital organisation N = * The term private is used here to mean both commercial/profit making and occupational provision. TABLE 2. The role of the state and of the family in welfare in the future State more Family more Status quo Politicians, left Politicians, centre Politicians, right Labour organisations Capital organisations N = support for such an expansion was also strong even among right-wing politicians, perhaps because of the high levels of unemployment in France, particularly among the young, who are not so well covered at present. Table 2 shows that there is a connection between political ideology and family responsibilities, with the left supporting increased state support to the family and the right expecting the family to take on more responsibilities on its own. This relationship, however, is not as strong as it was in the case of private provision. Those who supported an increased role of the state were not arguing for the abandonment of family responsibilities, but rather for more state support to enable the family to survive the turbulent waters of contemporary and future societies. Opposition to greater state support to the family was based mainly on the new right belief in limited government. There were, however, a few who opposed it on gender grounds i.e., that increased emphasis on the family to care for its own members, even with state help, would in practical terms mean to send women home to look after the elderly and the children, as a British respondent put it. The level of benefits and services Table 3 looks at the responses on retirement pensions and unemploy-

6 22 Vic George TABLE 3. Level of benefits: increase, decrease, remain the same Retirement pensions Unemployment benefit Politician, left Politician, centre Politician, right Labour organisation Capital organisation N = ment benefits only. If one ignores replies supporting the status quo, then clearly there is an association between political ideology and whether to increase or reduce the level of retirement pensions and unemployment benefit. The left argues for a rise in benefits in the future, while the right feels that they should be reduced. It is also clear from the replies that the polarisation of views is more pronounced in the case of unemployment benefit than in retirement pensions. In the area of health care, the differences between left and right are less pronounced, though still present, while in the area of education, political differences disappear because education is seen by all groups as a form of human capital that is essential to the economic health of the country. Indeed, in many European countries, education is not seen as a social service but rather as a public service. Concern about the quality of services varied substantially between countries. In the case of education, a total of only two respondents from Germany and from the Netherlands expressed concern about the quality of education and the need for its improvement. In the case of health, least concern was expressed in France, Germany and the Netherlands while all respondents in Greece and a sizeable section in the UK were concerned about different aspects of medical care. Though there is a modest relationship between this concern and the proportion of GDP spent on health, it is by no means perfect and other factors intervene to influence public perceptions of the adequacy of the services. Reduction of inequalities As expected, Table 4 shows that there are differences between left and right on the desirability of reducing inequalities through state services in the areas of health and retirement pensions. What was unexpected, however, was the very low interest expressed by all respondents of the left in the issue of education inequalities. It is not simply the low numbers but, equally important, the fact that reading through the replies one could

7 Political Ideology 23 TABLE 4. Reduction of inequalities Health Education Pensions Politicians, left 9 (18)* 6 (13) 13 (20) Politicians, centre 1 (5) 1 (5) 1 (5) Politicians, right 5 (18) 4 (14) 7 (18) Labour organisations 10 (16) 1 (15) 8 (18) Capital organisations 1 (12) 0 (9) 2 (13) N = * Numbers in brackets refer to the number of respondents who answered the particular question. not detect any passion about this issue. The dominant and unifying theme of the replies on education was the desire to make education more relevant to the needs of the labour market in order to reduce unemployment, raise productivity and achieve higher rates of economic growth. Economic rather than social goals were uppermost in most of the replies. Concern about reducing inequalities was, however, generally greater in the case of retirement pensions, mainly because of the recent and future growth of occupational and private pensions. Finally, the very low concern shown concerning gender inequalities related exclusively to retirement pensions. Universality versus selectivity The rather heated debates of the past on selectivity and universalism are not that much reflected in the views of our respondents. There was little enthusiasm for more means-testing and, concerning what little there was, it was only marginally influenced by political ideology in the case of politicians. Organisations of labour and capital, however, are still very much divided on the issue, with the former strongly opposed to more means-testing and the latter being the most enthusiastic. There is a very clear difference between left and right on the rationale for more meanstesting. While the right sees it primarily as a method of reducing public expenditure, the left supports it mainly as a means of providing higher benefits to those in greatest need or, in the case of health care, as a means of raising more revenues to pay for better services for all. Right-wing respondents based their support of universality on the implications of the insurance principle. They stressed the fact that since people paid insurance contributions, it would be unfair not to provide them with the service or the benefit. Others on the right supported universality because more means-testing in benefits could threaten individual saving. As a British respondent put it in relation to retirement

8 24 Vic George pensions, means testing sets up an obvious free-rider problem, where people may be reluctant to save for their old age because they lose out on the benefit. So there may be an argument for giving something to everybody. The support of universality from the left was based primarily on the grounds of social cohesion, the creation of a unified society and the reduction of social conflict. ECONOMIC POLICY For almost three decades after the end of the second world war, supporters of welfare provision took it for granted that the resources necessary to meet public needs in welfare were available, with the result that they paid little attention to economic policy. Today, there is not only universal recognition of the inter-relationship between the two but also of the need to pursue social protection policies that encourage economic growth. The emerging consensus is for an active rather than a passive role for social protection measures the provision of trampolines rather than safety nets (McFate, 1995, p. 657). It is within this new conception of social protection that one must view the positive support that the EC and the OECD are offering to social policy (EC, 1993; OECD, 1994). They both see social and economic policy as inseparable and as equal partners in the overall goal of improving living standards in society, but on condition that social policy adapts so as not to undermine economic growth. Table 5 shows first that there is a relationship between political ideology and choice of labour market policy. All politicians of the left and all trade union leaders supported active labour market policies though a few accepted minor features of deregulation. Politicians of the right were divided equally between the two types of policy, while the majority of capital organisations favoured deregulation policies. The second conclusion from Table 5 is that while in social policy it is respondents of the left who veer into right-wing territory, in the case of labour market policies it is right-wing respondents who veer in the opposite direction. Yet this tendency is very much country bound. Of the ten respondents of the right who supported active labour market policies in preference to deregulation, four were from France, evidence of the fact that Gaullist parties take a more positive attitude towards government intervention in social and economic affairs than some other parties of the right, such as the Conservative Party in the UK. This support of active labour market policies was based on the rationale of the long-standing human capital thesis but reinforced by the current globalised economic system. As a British respondent of the political centre put it:

9 Political Ideology 25 TABLE 5. Choice of labour market policy Deregulation Active Labour Market Politicians, left 0 18 Politicians, centre 1 4 Politicians, right Labour organisations 0 14 Capital organisations 9 2 N = We can only move forwards by being a high-wage, high-tech, high-skill economy because we can t compete with the low-wage economies of the Pacific. So, we ve got to add value to our products, to achieve through high standards, high technology, good education. The support of deregulation among the right was based on the comparatively high labour costs in Europe vis-à-vis, again, those of the newly industrialising countries of South East Asia. As a result it was felt that high social security benefits and active labour market policies are counter-productive, for they either destroy jobs or they make it difficult for employers to expand their labour force. There was negligible support, even among the right, for American style workfare programmes they were seen as either impractical or expensive or both. Similarly, ideas such as work-sharing or state creation of jobs for social care or environmental protection received very little support, even among the left. The majority of respondents were fairly confident that full employment was possible if only governments pursued the right kinds of industrial and employment policies, as they saw them. FISCAL POLICIES There was unanimous all-party agreement that the cost of welfare will rise in the future because of rising public demands for more and better services. Labour market factors, demographic trends, family changes, rising public aspirations and the arrival of technological medicine all combine to boost the demand for welfare. Interestingly enough, very few of our respondents referred to the fact that technological advances may reduce costs in some areas in medicine or that healthier styles of living may reduce disability in old age, or any other factors which reduce demand for welfare. Respondents were preoccupied with the factors making for increased demand in welfare. There was substantial all-party consensus, too, that governments were faced with a serious balancing problem of how to raise the necessary

10 26 Vic George resources to pay for the rising cost of welfare. Only a small minority felt that governments had enough resources at their disposal and that no such problem existed. There was, thus, general recognition of the difficulty of the task, expressed with wit and perception by one of the Conservative Members of Parliament in the UK. The task facing governments is how to keep the country solvent in the global market while meeting public expectations. The government that can solve this problem can patent the idea and run the world!! Almost all our respondents felt that the best and electorally most secure way of meeting this increased cost of welfare is through higher rates of economic growth. Economic growth rather than political will was the best way to safeguard the future of the welfare state for respondents of both political ideologies. But what if economic growth rates did not rise in the future a possibility that some respondents acknowledged. A second line of defence set of replies emerged, searching for other electorally painless methods of raising more funds. Governments should improve the efficiency of the services so as to reduce costs a method favoured more by the right than the left. Expenditure from other public services should be directed towards welfare a method favoured more by the left. Governments should either organise a national debate on welfare or should make funding and spending on services more transparent to the public, in the hope that the public would realise and accept that more services can mean more higher taxes. What if all such government efforts failed? Table 6 shows the two opposing solutions to the dilemma. It is clear that reduction of state expenditure is exclusively a right-wing solution, while raising more funds is almost exclusively a reply of the left. But what is equally significant is the refusal of the overwhelming majority of the left to grasp the fiscal nettle. The right was nowhere near as reluctant to verbalise their ideological solution for reductions in social expenditure. The other major method of funding rising levels of public expenditure when economic growth rates are not too healthy i.e., government borrowing, was even less popular only one respondent referred to it and even he distinguished between borrowing for investment that was acceptable and borrowing for consumption that was not. Table 7 provides part of the explanation of why respondents felt unable to support more state fund raising through taxation. Many right-wing respondents were not only ideologically opposed to such a welfare future but they were overwhelmingly convinced that the public was not willing to pay more in taxes. Left-wing respondents were ideologically commit-

11 TABLE 6. Government fiscal responses to rising cost of welfare Political Ideology 27 Reduce state Raise more Total number expenditure state funds of Respondents Politicians, left Politicians, centre Politicians, right Labour organisations Capital organisations N = TABLE 7. Public willingness to pay more in taxes Willing Not willing Inconsistent Depends Politicians, left Politicians, centre Politicians, right Labour organisations Capital organisations N = ted to an expanded welfare state but they, too, were suspicious of the public s willingness to pay more in taxes. Thus, only half of them felt that the general public is willing to pay more in taxes in order to finance more and better services. The other half gave replies which stood for different shades of public unwillingness, i.e., straight unwillingness or the public may be saying to pollsters that it is willing to pay higher taxes but it votes against parties that raise taxes, or the public would be willing to pay taxes if it was confident that tax fraud was controlled and taxes are paid by all who can afford them. Again, some interesting country-specific variations emerged. No politician of the left or the right in the UK, Netherlands or Greece felt that the public is willing to pay more in taxes. Most of the respondents who considered the public as inconsistent came from the UK, a reflection perhaps of the outcome of the general election, where it is generally felt that the tax proposals of the Labour Party cost it the election. Almost all those who said that the public would be willing to pay taxes if it considered them fair came from Greece, where tax evasion is generally acknowledged as a national scandal. Finally, the vast majority of those who said the public is willing to pay more in taxes came from Denmark, France and Germany all countries where taxes take up a high proportion of GDP (OECD 1994a, Table 3). This was another illustration of the importance of institutional

12 28 Vic George factors as well as of the argument that it is the perception of facts, rather than the facts themselves, that shape public opinion in welfare. GLOBALISATION AND THE EUROPEAN WELFARE STATE Studies of public opinion, national and comparative, have shown strong support for the welfare state in Europe. Summarising recent comparative evidence in Europe, Taylor-Gooby concludes as follows: Most people want more welfare spending. They give high priority to the maintenance of the services needed to support the demographic challenge of an ageing population health care and pensions. (Taylor-Gooby, 1995, p. 33) Similarly, Sihvo and Uusitalo analysing the evidence during the period conclude: Irrespective of time and society, these studies have consistently shown that the welfare state has the support of the large majority of the population (Sihvo and Uusitalo, 1995, p. 251). Despite this strong public support for the welfare state and the clear differences of opinion on the nature of the welfare state between the political left and right discussed above, there is now considerable evidence that during the past decade governments in Europe have, almost irrespective of their party political ideology, pursued policies that were primarily designed to constrain and reduce the scope and generosity of state welfare. Very few reforms were introduced that were expansionist in nature. Muller s examination of social and economic policies in the UK, France, Germany, Sweden, Spain and Australia concluded that the differences between parties or governments of the left and right were so minor that it requires close looking and sometimes even a magnifier to pin down these differences (Muller, 1994, p. 48). Eight main types of reforms have been brought into play across Europe that have had a contractionist aim. First, the provision of tax incentives in order to encourage more people to rely, either partly or wholly, on private rather than on state services. As a result, the scope of not only voluntary non-profit-making agencies, but also of the private profit-making variety, has expanded at the expense of the state sector. Second, in some countries, sections of state welfare have been made the responsibility of employers, as in the case of sickness benefits in the UK. Third, all countries have stiffened the eligibility criteria for the payment of social security benefits to unemployed people in recent years, including such traditionally pro-welfare countries as Sweden. Fourth, most countries have reduced the generosity of benefits not only for unemployed people but also for the retired population, in an effort to control or reduce expenditure. Retirement pension ages have also been raised for the same purpose

13 Political Ideology 29 in many countries. Fifth, charges for the use of state health services have been increased in all countries, either through the payment of higher prescription charges or, in the case of insurance based systems, through a higher proportion of the medical fee falling on the user of the service rather than the insurance agency (for a review of the above changes, see EC 1994, ch. 2; Talos and Falkner, 1994; Ploug, 1995; George and Taylor-Gooby, 1996). Sixth, in all countries the salaries of state employees have been increased at a much lower rate than those in the private sector (Oxley and Martin, 1991). Seventh, all countries have embarked on a series of privatisation of public utilities in an effort to raise much needed public revenues and also reduce public expenditure (Bos, 1993). Finally, almost every government in Europe has introduced such management techniques as annual budgets for some services, quasi-markets in the health and the personal social services and constant auditing, in an effort not only to get better value for money but to reduce the use of services and hence expenditure itself (Ormond, 1993; Wright, 1994). There is no disagreement on the contractionist nature of recent social legislation in Europe but there are differences of opinion on the implications of this legislation. After a detailed examination of social policy changes during the 1980s and early 1990s in Germany, Sweden, the UK and USA, Pierson concludes that even in the UK, reform has been incremental rather than revolutionary, leaving the British welfare state largely intact. In most other countries the evidence of continuity is even more apparent (Pierson, 1996, p. 173). Similarly, Ploug and Kvist in their latest account of changes in social security in Europe conclude as follows: The main finding is that while many changes have occurred, none have been fundamental. Thus the overall conclusion is that reforms which have actually been implemented reflect current adaptations of the social security system to the economic situation. (Ploug and Kvist, 1996, p. 4) It is certainly true that social policy changes have been gradual. But then this was to be expected because welfare programmes have strong support from either the whole community or certain sections of the community. Reductionist policies in welfare are not electorally popular. Any government that wishes to reduce the scope and generosity of social policies must tread carefully. It is also true that social expenditure as a proportion of GDP has increased in the vast majority of European countries during the years (OECD, 1995, Table 13, p. 25), but this is due to the rise in the number of beneficiaries and the very low rates of economic growth rather than to an improvement in benefits. It is thus possible to interpret the long-term effects of social policy changes in Europe more pessimistically than the two quotations above imply.

14 30 Vic George Theoretical explanations of the development of state welfare have been based on national, endogenous factors: class conflict, elite dominance, pluralist distribution of power, technological imperatives, corporatism, the force of existing institutions and regime theory. All these approaches have seen the development of the welfare state in different countries as the result of the interplay between forces of a national character. Moreover, they have all tried to explain the growth and the expansion of welfare states. It is, however, doubtful whether these can explain the contraction of welfare states in the new globalised trade system. An attempt is made here to sketch out a new approach to welfare developments in advanced industrial societies today, with the globalisation thesis as the central explanatory notion. As with other social science concepts, there is no agreement on its definition. Some use it in restrictive terms to refer to the internationalisation of economic competition while others see it in much broader terms as action at distance concerned with the transformation of space and time (Giddens, 1994, p. 4). It is the restrictive sense that the discussion here adopts. There are at least three closely related aspects of the globalisation thesis that are of relevance to this debate. First, European industry is being increasingly threatened by industrial production in the Newly Industrialising Countries (NICs) of South East Asia. It is true that most of the world trade is still from and to the advanced industrial countries. The proportion of exports from the NICs of South East Asia to the advanced industrial nations has increased only slightly over recent years from 6.6 per cent of their exports in 1980 to 9.8 per cent in 1992 (United Nations, 1994, Table A.15, p. 170). The rise, however, of imports of new manufactures (automatic data processing, telecommunications equipment, semi-conductor devices and electronic microcircuits) has increased more rapidly with the result that in the USA, for example, Over one half of all United States imports of semiconductors now came from Asia (United Nations, 1995, p. 176). Moreover, the NICs of South East Asia have taken over from Europe the role of the main exporter to other countries in Asia which, with their huge populations, are likely to become the major centres of trade in the future. Thus, in 1992 only 38.7 per cent of the imports of the rest of Asia came from the advanced industrial countries compared to 63.2 per cent in 1980; the corresponding proportions of imports from SE Asia were 52.4 and 11.7 per cent respectively (United Nations, 1994, Table A.16, p. 271). Finally, the rate of GDP growth in SE Asia during averaged to 5.7 per cent per year and in China 9.7 per cent compared to a mere 1.5 per cent in the advanced industrial countries (United Nations, 1994, Table A.3, p. 261).

15 Political Ideology 31 The second threat to European industry and trade comes from the fact that European firms are transferring some of their activities to countries with lower labour costs in central Europe, Asia and elsewhere. Bannister describes the ease with which modern communications systems enable business to transfer certain kind of jobs anywhere in the world and wonders whether we are on the way to creating electronic sweatshops in the third world (Bannister, 1994). Gray attributes the current economic insecurity in the UK to the relentless pressure of these new cheap-labour sweatshop competitors in a global freemarket (Gray, 1994) and recommends selective trade barriers as a method of coping with the problem. In brief, whatever the ideological position of different writers, there is general agreement that an increasing number of jobs are being exported from the high-cost countries into regions where labour costs are only a small fragment of those normally paid in advanced industrial countries (Kasvio, 1995, p. 1). Third, changes in legislation and technology have made it far easier than before for multinational companies to move capital on a global scale swiftly and thus frustrate, if necessary, the taxation policies and other demands of national governments (Dunning, 1993). It is, therefore, not unexpected that international capital can choose where to invest and where not to depending on the benefits it can secure from governments. The effects of globalisation on the future development of the welfare state are therefore serious in a variety of ways which can only be summarised here. First, the economies of advanced industrial societies are vulnerable to the threat posed by the NICs with their cheaper labour costs. If such economies are vulnerable, their welfare systems will also suffer sooner or later. Second, globalisation has encouraged some advanced industrial countries to adopt social policies that reduce labour costs and this not only poses a threat to other industrial societies but it may also encourage some of them to follow suit. The UK with its deregulation policies and low social security benefits is far more attractive to foreign investors than other European countries. Third, globalisation has resulted in the internationalisation of capital but not of labour, a process which has given capital the upper hand and thus undermined the forces that traditionally defended state welfare. Fourth, the overall effect has been that governments are no longer total masters in their own countries and welfare developments are, to some extent at the mercy of the globalising influences. It may be, as Hutton argues, that this threat to national governments is more rhetorical than real and that it could be averted if governments treated it as such (Hutton, 1996, p. 17). Others,

16 32 Vic George however, feel that the erosion of national control is undeniable (Muller and Wright, 1994, p. 5). The globalisation pressures raise the fundamental question of what kind of policies governments of advanced industrial societies should adopt in order not only to increase economic growth but also to square the circle of wealth creation, social cohesion and political freedom (Dahrendorf, 1995, p. 37). It is a question of huge significance to the welfare states of Europe and there is no agreed response to it. The current international economic environment is hostile to the expansion of the welfare state in advanced industrial societies and it is likely that this will continue for the foreseeable future. It is within this wider hostile international trade environment that one has to place the national factors that influence welfare developments in Europe. The first of these national factors is the equation between demands and resources in the social field. There is general acceptance that demand for social services has been rising at a rate that is faster than the rise of economic growth during recent years and that this is likely to continue into the foreseeable future (Alber, 1988; OECD, 1988; EC, 1993). Though there are different interpretations of the policy implications of these trends, none can be described as optimistic. Rather they range from the alarmist to the cautious; from those which argue that though the implications of these trends are problematic, they can be contained, to those which consider them unsustainable and argue for a reduction in state welfare. Governments in Europe have increasingly moved towards the second position. Second, we have recently witnessed the revival of social science theories claiming that generous welfare provisions are detrimental to economic growth and they should be curbed irrespective of whether they could be afforded in the short term. This is not the place to examine such theories in any detail but suffice it to say that they are not new and they have ranged from notions of the underclass, the dependency culture through to the destruction of incentives to work hard, to save and to invest. The results of empirical studies are inevitably conflicting and inconclusive, for they have adopted different definitions of welfare, they have covered different periods, they have examined different countries and they have used different methodological approaches (Castles and Dowrick, 1990; Dean, 1991; EC, 1994, ch. 6; Atkinson, 1995; Gough, 1996). Esping- Andersen s conclusion that the impact of welfare on industrial competitiveness will vary according to the level of welfare provision and the type of welfare regime is probably true, but it provides ammunition for both the retrenchment and the protection of state welfare. In his words:

17 Political Ideology 33 There may exist a trade-off between equality and efficiency in countries where the welfare state is large and very redistributive but in which the collective bargaining system is incapable of assuring wage moderation and stable, nonconflictual industrial relations. Thus in concrete terms, a Swedish, Norwegian or Austrian welfare state will not harm growth, while a British one will (even if it is smaller). (Esping-Andersen, 1994, p. 725) The third internal factor that has encouraged contractionist policies is the shift in the dominant ideological paradigm concerning the role of government in social and economic affairs away from the Keynesian social democratic model to the monetarist neo-liberal paradigm. Market forms of provision, finance and administration are seen as superior to those of the state. It may be true that this shift is the result of several socio-economic changes (some of which are discussed above) but, once established, the dominant ideology acquires an independent force of its own. Governments tend to see the solution, if not the cause, of economic and social problems in ways that are compatible with a reductionist role of government in welfare. They are aided and abetted in this by such international bodies as the World Bank, the International Monetary Fund and the OECD, which press the case for policies that stress greater labour flexibility and a freer role of the market. It is true that neo-liberal ideas are stronger in the UK than in other European countries but the recent contractionist welfare changes in Sweden, France and Germany suggest that these ideas are infiltrating traditional pro-welfare ideologies in both corporatist and social demographic regimes. Fourth, the pro-welfare institutional lobby is losing ground as the number of people covered by various forms of private welfare increases. Both recipients and administrators of state welfare services have been natural supporters of the welfare state and as their number declines their political strength also suffers. Vice versa, as the private welfare constituency expands, its political power also rises. In brief, the theoretical argument presented here is that, during the past decade, the forces of globalisation have exerted constraining pressures on the welfare states of Europe. Internal factors have combined to reinforce these external pressures with the result that state welfare provision is being curtailed in different ways and varying degrees in all European countries. The type of responses adopted by different governments in Europe during the past decade varied for a while but in due course they all resorted to varying types of reductionist policies. First adopted in the UK with a weak economy, a majoritarian political system and a strong neo-liberal government, contractionist policies spread to other countries with Sweden, France and Germany being the latest examples.

18 34 Vic George The implication of this theoretical approach for the future is that state welfare provision will not expand and may contract further in all European countries, leaving more room for non-state forms of welfare. The extent and form of contraction will depend on both the external pressures of globalisation and the balance between the pro- and antistate welfare internal factors prevalent in individual countries. The claim is not that all European welfare states will become residual in the next couple of decades, but rather that they will be moving in that direction. Clearly, the balance of power within the internal economic, political and institutional factors and the relationship of this to the external forces of globalisation will affect this process but it will not stop it, let alone reverse it. This new approach to state welfare developments is different from the early convergence thesis (Wilensky, 1975) in the sense that it does not claim that all European welfare states will become the same, since they start from a different welfare base and they possess different internal forces that exert their own pressures on welfare developments. It is also different from the more recent divergent approaches to welfare state development (Mishra, 1990; Esping-Andersen, 1990), in the sense that it attributes more influence to the convergent forces of globalisation, which were less apparent when these approaches were put forward. It comes as no surprise, therefore, that the first section of this article identified clear party political differences of opinion on the future of the welfare state, while the second section concludes that contractionist policies have been dominant in the past decade and will continue to be so during the foreseeable future. It is a good example of structural forces overriding ideological influences. Moreover, the sample consisted of politicians rather than government ministers and there is a tapering process that reduces ideological differences as one moves from the views of politicians to the manifestos of political parties and to the actual policies pursued by governments. CONCLUSION Five main conclusions emerge from this paper. First, differences of opinion on the future of the welfare state between respondents of the left and right are still considerable despite the fact that the left has modified its stance on some of its traditional welfare state views. These differences are wider in the case of labour versus capital organisations than in the case of left-wing and right-wing politicians. Secondly, the vision of the left for an expanding and generous welfare state in the future relies solely on the achievement of higher rates of economic growth. Its refusal to back

19 Political Ideology 35 higher taxes, if these become necessary, will push it closer to the rightwing view of the welfare state in the future Thirdly, debates on the welfare state are conducted within the new neo-liberal paradigm of state welfare provision with the result that even governments of the left are pursuing reductionist welfare policies. A new political convergence has emerged, even though it is inevitably mediated through each individual country s economic, political and institutional arrangements. Fourthly, the current and future contraction of state welfare provision in Europe is best understood within a broad theoretical framework that gives primacy to the effects of globalisation on the economies of Europe. The operation of internal factors should be seen within this broader and hostile economic environment. Finally, an incoming government of the left will find it impossible to reverse the trend of retrenchment in state welfare, though it may be able to modify it. REFERENCES J. Alber (1988), Is there a crisis of the welfare state? Cross-national evidence from Europe, North America, and Japan, European Sociological Review, 4: 3, A. B. Atkinson (1995), The Welfare State and Economic Performance, Suntory-Toyota International Centre for Economics and Related Disciplines, Discussion Paper WSP/109, London School of Economics. N. Bannister (1994), Networks tap into low wages, The Guardian, 15 Oct D. Boss (1993), Privatisation in Europe: a comparison of approaches, Oxford Economic Policy Review, 9: 1, F. G. Castles and S. Dowrick (1990), The impact of government spending levels on medium-term economic growth in the OECD, Journal of Theoretical Politics, 2: R. Dahrendorf (1995), Preserving prosperity, New Statesman and Society, 15/29, DEC., H. Dean (1991), Social Security and Social Control, Routledge, London. J. Dunning (1993), Multinational Enterprises and the Global Economy, Addison-Wesley, Wokingham. G. Esping-Andersen (1990), The Three Worlds of Welfare Capitalism, Polity Press, Cambridge. G. Esping-Andersen (1994), Welfare states and the economy, in The Handbook of Economic Sociology, J. N. Smelser, and R. Swedberg (eds.), Princeton University Press, Princeton. European Commission (1993), European Social Policy: Options for the Union, Brussels. European Commission (1994), Social Protection in Europe, Brussels. V. George and S. Miller (eds.) (1994), Social Policy Towards 2000: Squaring the Welfare Circle, Routledge, London. V. George and P. Taylor-Gooby (eds.) (1996), European Welfare Policy, Macmillan, London. I. Gough, Social welfare and competitiveness, in Social Welfare Systems: Towards a Research Agenda, University of Bath. A. Giddens (1994), Beyond Left and Right: The Future of Radical Politics, Polity Press, Oxford. J. Gray (1994), Into the abyss?, The Sunday Times, 30 Oct W. Hutton (1996), Tory story in a hall of mirrors, The Guardian, 19 Feb., p. 17. A. Kasvio (1995), Reinventing the Nordic Model: Can the Nordic Countries Succeed in the 21st Century Global Competition?, University of Tampere, Finland. K. McFate (1995), Trampolines, safety nets or free fall? in K. McFate, R. Lawson and W. J. Wilson (eds.), Poverty, Equality and the Future of Social Policy, Russell Sage, New York. R. Mishra (1990), The Welfare State in Capitalist Society, Harvester Wheatsheaf, Hemel Hempstead. W. C. Muller (1994), Political traditions and the role of the state, West European Politics, 17: 3,