Three Worlds of Welfare Capitalism

What is Political Economy?

The study of how politics affects economic outcomes and, vice-versa, how economics affects political outcomes.

The OECD

The Welfare State

A system through which the government provides for the most basic needs of its citizens.

Examples?

Other Key Terms

• Social policy–The range of policies that governments use to promote welfare
• Social contract–Implicit agreement to give up individual rights in exchange for social rights
• Social rights–Rights to basic services like education, health care and a minimal standard of living
• Decommodification–The ability of a person to opt out of working
• Universalism–Benefits provided in such a way that everyone has an equal ability to access them

Welfare State Regimes (“Three Worlds”)

• Liberal—emphasize means tested social assistance
  • Anglo-American countries (e.g. U.S., UK, Australia)
• Corporatist—ranked system of social insurance
  • Continental European countries (e.g. Austria, Germany, Switzerland)
• Social Democratic—universalistic, emphasis on full employment and broad provisioning - Nordic countries (e.g. Denmark, Norway, Sweden)

Social Spending By Category

Means Tested Benefits

Pillars of Social Democracy

• Swedish Prime Minister Stefan Löfven video

• Three pillars of the Nordic model

  • Full Employment
  • Universal and Generous Welfare System
  • Organized Labor Market

• Think about

  • How each pillar is important
  • How they work together to support the system

Retrenchment and Convergence

• Race to the bottom hypothesis
  • Globalization induces states to drastically reduce publicly provided benefits and services
• Embedded liberalism hypothesis
  • Globalization induces states to spend more on benefits and services to cushion workers from increased labor market risks
• Convergence
  • Globalization forces states to provide similar levels and types of benefits and services

Education Spending in Three Worlds

Health Spending in Three Worlds

Reasons for Persistence

• Trade openness—induces countries to spend more to cushion workers (embedded liberalism)
• Partisan politics—Christian democratic and social Democratic parties favor welfare state (but different kinds)
• Electoral politics (voters like programs)
• Bureaucratic inertia (vested interests)
• Economic coordination (next section)

Discussion

• Why do some countries have higher levels of redistribution?

  • Iversen and Soskice

• Bernie Sanders Loves Denmark video

• Can “democratic socialism” work in the United States

  • Is it the American dream “for real”?
  • Is it possible in a U.S. context

Conclusion