The Sustainability of the Welfare State

role was played by non-state actors in this process. From this research, it emerges that both employers’ and employees’ organisations not only in these two countries but also in the other post-socialist countries were largely uninvolved or only moderately involved in the process of adapta-tion. Th ese organisations failed to take advantage of the EU’s social dia-logue to at least assert their preferences, even if accession did not occupy them particularly. Th e author explains this fi nding by noting that mem-bership in both trade unions and civil organisations in general is consid-erably smaller in the post-socialist countries than in the OMS, such that mediating organisations are weak and protest action is rare.

Only in Slovenia have industrial relations evolved in a way that permits integration with the models of the OMS. Here, trade unions obtained a powerful role, despite a similarly declining level of trade union density.

Alone among the post-socialist countries, Slovenia is included among the old continental member states both in the Commission’s report (Table 3.6 ) and my analysis (Table 3.5 ). Th is separate path was made possible by two factors: on the one hand, Slovenia did not carry with it signifi -cant foreign indebtedness through the change of system; on the other hand, thanks to the Yugoslav system of workers’ self-management, the workforce began from a much better position—and with much greater experience in advocating their interests—than in the other post-socialist countries (Stanojevic 2005 ).

To summarise, the examination of labour markets reveals that a high level of employment can materialise under very diff erent institutional arrangements. I discuss the signifi cance of these institutional diff erences from the point of view of social models of European capitalism in the next point.

results provided by macroeconomics to aid this comparative economic investigation. Th e questions that revolve around the welfare state and social protection present a more diffi cult task than any that has come before.

Hall and Soskice ( 2001 ) place the focus so much on the system of production and enterprise that the welfare state does not feature at all in their idealised types of liberal or coordinated market economies.

However, taking the criticisms into account, Soskice ( 2007 ) expands on these models by including the welfare state and political regime alongside the systems of production. Amable ( 2003 ) features social protection as a separate subsystem. Although the discussion of the disputed nature of the European social model cannot be elaborated here, it is beyond debate that the clearest distinguishing feature of the apparatus of European countries compared to other developed capitalist economies is a fi rmly established welfare state, making it inevitable that it will be analysed as a separate subsystem.

In the discussion of labour markets, it was previously evident that any examination of the economic context would unavoidably touch upon sensitive questions of social policy. Th e welfare state falls at least as much within the terrain of the sociologist or political scientist as within that of the economist. It is impossible to provide a picture of the arguments over the welfare state that rage within the various branches of scholarship because it would demand a book of its own. Just as with the other subsys-tems, here, only research studies that bring us closer to mapping out the types of capitalism that exist within the EU will be assessed. Some of the literature dealing with models of capitalism speaks of social protection, some of the welfare state; however, these concepts are not sharply divided.

For example, Amable ( 2003 ) writes of social protection but compares his own models with those of Esping-Andersen ( 1990 ), who defi nes welfare state regimes. It can be seen that those who approach the issue from the perspective of sociology, social policy, political science or political eco-nomics tend to use the broader term of the “welfare state”, while those who carry out statistical investigations aiding macroeconomic or com-parative economic modelling tend to opt for “social protection”. In the case of macroeconomic analysis, social protection can easily be grasped

through social expenditures; moreover, the OECD has a well-structured and defi ned database.

Th e most common explanation for the creation of the welfare state, widely put forward in the 1960s and 1970s, derives from functionalist sociology; namely, the welfare state provided an answer to the social prob-lems and opportunities that arrived with industrialisation. Th e school of confl ict theory traces it back to political factors and social movements.

Since the economic crisis of the 1970s, criticism has intensifi ed, and the most vexing question now—in the age of globalisation, in post-industrial and simultaneously ageing societies—is whether the welfare state can be sustained (Jæger and Kvist 2004 ; Kleinman 2002 ). In any event, despite every challenge, the welfare system has stubbornly survived and the aver-age level of welfare expenditures has not decreased either in the OECD countries or the EU (Arjona et al. 2001 ; Jæger and Kvist 2004 ).

Genschel ( 2004 ) considers the various viewpoints regarding the con-nection between globalisation and the welfare state in turn. Globalists regard the crisis of the welfare state and its shrinking as part of a con-vergence process as a direct and inevitable consequence of internation-alisation. Sceptics hold that no evidence supports the view that global interdependence restricts national political autonomy, observing that wel-fare states have not decreased in size and that diff erences between nations have remained. A third, so-called revisionist trend states simply that glo-balisation can help resolve the problems of the welfare state that originate in the welfare state itself. Th e disciplining power of international markets can make it easier for governments to rein in welfare expenditures that are susceptible to a dynamic increase. Taking into consideration the theoreti-cal arguments and empiritheoreti-cal research, the author determines that in the era of globalisation, there is no clear way out for the welfare state, while governments have possible choices. Iversen ( 2005 ) also refuses to hold globalisation responsible for the decline in welfare provision in developed countries. Instead, he attributes this decline to the diminishing contribu-tion of the industrial sector to GDP, which has occurred in such a way that new jobs have been created mostly in services of low added value that play no role in foreign trade.

A wealth of macroeconomic models and empirical research has been used to evaluate how economic growth relates to social protection and

income disparities. Aronja et al. ( 2001 ), besides constructing their own model, digest and process the fi ndings obtained thus far. Th e most frequent argument put forward against equality in economic theories is that sav-ings are lower in a more egalitarian society, slowing economic growth. As the income disparities between employment groups increase, people will strive more to gain qualifi cations that secure jobs with high productiv-ity and, hence, high wages. Arguing against inequalproductiv-ity, others observe that poorer households are unable to invest even from credit—particu-larly in human capital—which is detrimental from the point of view of growth. With major inequalities in place, there may be too many people among the voting populace for whom necessary, competition-enhancing economic reforms hold no interest. Th e likelihood of social and political unrest and tension is similarly detrimental to economic growth. Social protection, however, may harm growth by potentially deterring people from either saving or working for a living. If material benefi ts can be obtained more eff ectively by enforcing political interests than through economic activity, this situation might lead to the degeneration of enter-prise and innovative capacity. Th e advantage of strong social protection is fi rmer social cohesion, where it is easier to make diffi cult political and economic decisions (for example, on structural adjustments); certain social groups are not excluded from the majority of society, nor from opportunities to participate in the labour market, thus increasing eco-nomic potential; and children from poorer social strata also have a chance to secure their long-term social and intellectual development.

Aronja et al. ( 2001 ) collected 24 studies from the preceding decade and a half that examined the correlations between growth, social inequal-ity, and social protection. Based on these studies, it is not possible to determine which of the above theories are borne by reality or whether there is a trade-off between growth and social protection and equality or if the latter promote the former because the results of these studies are contradictory. According to these authors’ own research built on the OECD database, there is no reliable proof of the relationship between growth and the fi nal distribution of income (after taxes and transfers). It is proven that greater social expenditure goes hand in hand with lower economic growth; in contrast, active expenditures that help people get a job promote growth. Th ese fi ndings suggest a similar conclusion to that

reached by Genschel ( 2004 ), namely, that various institutional solutions can prove economically successful.