Globalisation
And the crisis of the welfare state
The end of the golden age
• From late 1970s, post-war settlements break down (series of severe crises)
• Three main factors– End of the post-war boom– Globalisation of world economies– Inflation provokes shift in economic policy
(from full employment to controlling inflation)
• Common result: welfare states thrown into question
Structure of lecture
• Whatever happened to full employment?
• What is ‘globalisation’?
• What major problems have recently emerged?
• How has EMU (European Monetary Union) affected this situation?
Introduction: End of 30 years economic growth in Europe
• Collapse of the post-war Bretton Woods settlement (Vietnam & oil crises)– Floating exchange rates– Recalibration of trade policy
• Rise of ‘little tiger’ economies• Keynesian economic management (‘stagflation’)
– Import penetration– Balance of payment & exchange rate crisis– Inflation
1990s: emergence of global economy
• IT revolution lowers costs of trade• International firms restructure (flexibility) =
competition to attract investment• 1980s: deregulation of capital markets. Growth
of speculation: eg– dot-com bubble [1990s]– [housing market and sub-prime mortgages [2000s]]
• 1989 collapse of Soviet Block• Transition from GATT to WTO: global regulation
of trade
Political consequences
• Globalisation of financial markets = constraints on public expenditure– Currency speculation– ‘Glocalisation’ strategies used by major firms (plant
and personnel in cheaper locations) + supply chains
• Downward pressure on wages and welfare– Centralisation of budgetary controls– Decentralisation of welfare obligations– ‘Social dumping’ (the risk)
• Rising youth and long-term unemployment (with ‘flexibilisation’ as the solution)
Demographic factors
• Rising life expectancy
• Strain on pension and health budgets
• Rising levels of female labour market activity (lower fertility)
• Lower replacement ratios (i.e. fewer active tax-payers/contributors and more social dependents) = more strain on social budgets
European Monetary Union I
• Creation of single European market (EEC transformed into EU in 1987)
• To facilitate trade, European currencies already linked (‘the snake’)
• 1989-91 Maastricht Treaty commits to EMU (realised 2001)
European Monetary Union II
• EMU: Growth and Stability Pact restrict public expenditure
• Convergence criteria– Public expenditure must not exceed 3% GDP– Size of National Debt subject to constraints
• Pressure of social expenditure• Shift from ‘passive’ to ‘active’ welfare
(‘bad’ passive versus ‘good’ active welfare spending)
Globalization: welfare futures?
• Economic imperatives v. social rights?• The fate of participatory democracy ?• The threat of the ‘drive to the bottom’?• Current welfare = visible shifts:
– away from social welfare as economic constraint – towards enabling market participation ( EES /
securing livelihoods)– Social protection as security against future risk (social
risk management)
New worlds of welfare?
Esping Andersen’s analysis (2002)
• Corrosion of traditional family = threat to children (‘homogamy’)
• Economic transformation: stress on learning ability
• Threat of social bifurcation (dual labour market)
Esping Andersen’s social investment strategy
• Bias to prevention, not cure• Incorporate Rawl’s concept of social justice• Recast welfare towards safeguarding child
development (pro-family)• Harmonise motherhood and employment• Social inclusion via employment• Shift pensions towards defined contribution• Reconfigure 3 welfare pillars (market, state,
family)
Conclusions I
• Neo-liberal responses: ‘you cannot buck the market’– External flexibilities (market imperatives)– Competition on price– Widening income disparities – Residual welfare
• A ‘drive to the bottom’ of competition between districts & EU member states
Conclusion II
• European Social Model– Negotiated flexibilities– More investment in training– Compete on product quality– Positive welfare (to enable participation)
Conclusion III: the need for new governance?
• Welfare states born of nation - building• Globalization corrodes national sovereignty,
national economies, national laws– Will political defence by electorate allow state welfare
to survive?– Or will shift to individual protection continue?
• The problem: no collective responsibility to define common rules and collective obligations
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