I started the research for this book several years ago because I was curious about the effects of “globalization” on democratic welfare states. I was puzzled by the fact that, despite the enormous competitive pressures facing rich democracies, there was almost no evidence of the oft-predicted “race to the bottom.” I began this study with an analysis of the politics of taxation in four countries (Sweden, Germany, the United States, and Japan). I had some expertise in the political economy of taxation and thought that tax policy ought to be a good test of the various globalization hypotheses. It was, after all, rather obvious that taxes should be more sensitive to international competition than any other policy arena.
The deeper I looked into the relationship between tax policy and international competition, however, the more I realized that a nation's tax policies are so deeply intertwined with the structure of the national political economy and welfare state that I could not answer my original puzzle by looking at taxes alone. In other words, to really understand how and why tax systems were changing, I needed to examine how they related to other policy systems. This is fine as a general proposition, of course, but analytically and practically it presented rather significant problems: Trying to understand how different parts of a tax system affect other parts of the tax system is difficult enough – trying to understand their relationship to the broader political economy can be mind-bogglingly complex.
The deeper I looked at each of these countries, the more I came to see each of them as remarkably different systems.