Transcending the competition state/welfare state dichotomy

As we noted at the outset of the book, Cerny’s (1990) much-cited competition state thesis – and, specifically, his suggestion (with Evans: see Cerny and Evans, 1999; 2004) that the intensification of global economic competition would sound the death knell of the welfare state – provided the immediate impetus for our text. That was directly so for us as editors of the text, for we have worked for some time on exploring the veracity of their argument. Some of our colleagues included in this collection have been less concerned with directly examining the competition state thesis but have instead been engaged in detailed empirical examination of key processes or trends that Cerny and Evans placed at the core of their thesis.

In bringing together these theoretical and empirical research agendas our aim has been, firstly, to address major theoretical debates in the social sciences about how the intensification of global competition has influenced the direction of welfare state reform processes across the OECD in recent decades and, secondly, to offer empirically rooted alternatives to the ‘competition state thesis’ that can better account for how welfare states have responded to competition imperatives in reality. In this chapter we synthesise key arguments from across the book in order to set out an integrated agenda for future research and to underline the value added to these debates when they are approached from a perspective that fuses the applied empirical concerns of traditional social policy scholarship with the broader theoretical perspectives found in comparative political economy and macro-sociology.

As we noted in Chapter One, with the benefit of hindsight we can say that Cerny and Evans over-estimated the threat to the welfare state, but few dispute their central argument that welfare states across the OECD have been subjected to reform agendas that have stressed economic competitiveness. Our task here, therefore, is neither to praise nor to bury the competition state thesis, but instead to articulate a new research agenda addressing the implications of intensified global economic competition for social policy that transcends the welfare state and competition state dichotomy.

The rise of the social investment model in the OECD?

The notion of a ‘social investment welfare state’ has gained increasing ground over recent years (Morel et al, 2012a), playing an important role in the discourse of international organisations such as the OECD and EU (Mahon, 2013; Deeming and Smyth, 2015). As Taylor-Gooby et al (2015, pp 83–4) note, it forms of one a number of concepts – others include ‘active social welfare’, the ‘new welfare state’ and ‘new risk welfare’ – that might be grouped under the label ‘new welfare’. All are based around a shared view that developed welfare states have begun to place less emphasis on income protection and more emphasis on investing in human capital. Put differently, they stress the growing importance of the ‘productive’ (as opposed to ‘protective’) elements of social policy (compare Hudson and Kuhner, 2009), chiefly on the basis that this may square the circle of maintaining social expenditures while responding to increased economic competition. Indeed, as Deeming and Smyth (2015, p 298) put it ‘“Social investment” arguably represents the very latest justification for social policy to guide the development of the economy and society in the twenty-first century.’

Jenson (2010, p 62) argues that the social investment perspective breaks with past understandings, ‘represent[ing] an approach to social policy different from the social protection logic of post-1945 welfare regimes as well as the safety-net stance of neoliberals’, but notes rather different models have been advocated and implemented in practice, such as Giddens’ (1998) Third Way-rooted ‘social investment state’ and Esping-Andersen's (2002) more expansive Nordic child-centred social investment model. Other scholars have made similar observations. For instance: Deeming and Smyth (2015) draw a distinction between a liberal ‘light’ and Nordic ‘heavy’ social investment strategy; Morel et al (2012c) differentiate between social investment strategies that are matched with strong social protection and those that are not; and Mahon (2103) identifies a ‘neoliberal variant’ along with ‘inclusive liberal’ and ‘social democratic’ versions of social investment.

The competition state thesis and beyond

A quarter of a century ago Cerny (1990) outlined his ‘competition state thesis’, in which he suggested that neoliberal reform agendas, gaining traction because of the intensification of global economic competition, were sounding the death knell of the welfare state and the birth of the ‘competition state’, in which social policy is subjugated to the needs of economic competitiveness (Cerny, 1990; 1997; Cerny and Evans, 1999). With the benefit of hindsight we can say that Cerny’s claim exaggerated the threat to the welfare state, but few dispute the central idea that welfare states across the Organisation for Economic Co-operation and Development (OECD) have been subjected to reform agendas that have stressed economic competitiveness (Horsfall, 2010).

Indeed, there is an increasing consensus that welfare states have been recalibrated and restructured in significant ways, with many arguing that neoliberal competition imperatives have permeated the fabric of welfare state institutions and altered perceptions of social rights (Bonoli and Natali, 2012). However, contributions to this debate are scattered across a wide range of literatures and, moreover, overlapping arguments in different disciplines are too often debated in isolation. This text fuses key insights from theoretical political economy, macrosociology and empirical social policy analysis in order to shed new light on the ways in which global competition is reshaping welfare states in practice. Moreover, it does so from a cross-national and international perspective, on the basis that contemporary welfare reform processes must be located in a broader global context in order to be fully understood.

Much of Cerny’s work on the competition state thesis was completed while he was based in the Department of Politics at the University of York between 1970 and 1995 and/or in collaboration with Mark Evans who was based in the same department from 1993 to 2009, eight of those years as its Head of Department. Their key works on the ‘competition state thesis’ have triggered international debates of some significance; for instance, Google Scholar records over 1,000 citations for Cerny's (1997) ‘Paradoxes of the competition state’ article and around 1,000 citations for his 1990 book The Changing Architecture of Politics.

Introduction

The competition state thesis describes a product of globalisation and as such has not remained static since its conception some 25 years ago. The core ideals have held, although the emphasis placed by the authors on certain aspects of the competition state thesis has strengthened over time while other aspects have become comparatively muted. In part this is a natural consequence of the passage of time and increasing understanding of globalisation, as well as the perhaps unexpected level of complexity that has marked an increasingly interconnected world.

This chapter seeks to introduce the competition state thesis, serving the dual purpose of framing the chapter and providing an overall context for the remainder of the book. It then summarises and subsequently extends previous empirical work undertaken using the competition state framework in order to assess the extent to which the core thesis is still relevant today. The competition state may appear a little dated now and its more contentious assertion can be dismissed. However, the core processes identified by Cerny and Evans have clearly influenced welfare policies and ultimately played a part in reshaping welfare states, if not killing them off completely.

The competition state thesis

The key pressures that first Cerny (1990; 1997) and, later, Cerny and Evans (1999; 2003; 2004) and others such as Jessop (2000; 2002) and Fougner (2006) insisted were being faced by national welfare states have indeed come to pass. And yet, many of the assumptions made with regard to the consequences of globalisation, so contentious when first given voice, now seem a little dated. Despite this, many of the predictions made by Cerny and Evans, while both bold and controversial at the time are now taken for granted to such an extent that, with the benefit of hindsight, they appear as statements of the obvious rather than as prescient observations about the evolving nature of the political economy of welfare states.

Globalisation, the decline of the Fordist model of production and the rise of the global knowledge economy have all played their role in producing a more competitive environment in which welfare states operate. As Lunt notes in this collection (Chapter Six), there is an acceptance that not only has competition grown within welfare states but welfare states themselves now compete.

Introduction

The last 30 years have been a time of profound change in China. The shift from a planned to a market economy has gathered pace, and from being considered an economically poor country just three decades ago, China now boasts the second-biggest economy in the world (IMF, 2011). This Chinese miracle of huge and rapid economic growth has brought China along with many other Asian nations into focus, with recent predictions suggesting that within the next 40 years, over half of global Gross Domestic Product (GDP) will be concentrated within the region (ADB, 2011). With attention focusing on China's stellar economic performance, many have sought to explain its economic success and understand the consequences that this is having, and is set to have, on social policies in the country (Wilding, 2008, p 18).

It is noted that China faces many key social policy dilemmas, which are thrown into even sharper relief given the attention China's economic performance has garnered. In particular, commentators have written extensively on the key question of the distribution of the benefits of growth beyond key cities/regions and beyond key elites (Guan, 2001, p 243; Kwon, 2005a, p 479; Redding and Witt, 2007, p 128; Zhang, 2009, p 227; OECD, 2010a, p 131; Yang et al, 2010, p 237). Similarly, there has been much commentary regarding the huge differential between both the resources apportioned to and the welfare outcomes experienced in rural and urban areas (Guan, 2001, p 245; OECD, 2010b, p 113; Yin, 2004; Zhang, 2009, p 230). Added to this are discussions around China's increasingly ageing and dependent population and the burden this is likely to place on the state (Zhang, 2009, p 227; ADB, 2011, p 20; OECD, 2011a, p 10; 2011b, pp 45, 51). It has been argued that this ageing of the Chinese population represents the key challenge for any programme of social welfare; the existence of large numbers of retirees is in fact a relatively recent phenomenon for a country with a historically young population (Kwon, 1997, p 475; Ramesh, 2004, p 324; Vodopivec and Hahn Tong, 2008, p 31; Glenn, 2009, p 38).