Introduction

Austria is nowadays widely seen as possessing a highly developed, albeit mainly employment-related, social security system strongly based on the idea of status preservation of wage earners (Obinger and Tálos 2006). The foundations of this model date back to the late 19th and early 20th century when core branches of social insurance such as accident insurance (1887), health insurance (1888) and old-age pensions for white-collar workers (1906) were introduced in the Austrian-Hungarian Empire in an attempt to settle the ‘labor question’ (Arbeiterfrage). The basic objectives of public intervention in social affairs, the organizational principles (self-administration ), the mode of financing (social security contributions), and the structural make-up of the welfare system laid down at that time provided the guiding principles that underpinned the expansion of the welfare system in the 20th century (Hofmeister 1981; Tálos 1982). Benefits are tied to labor market participation , while the legacy of paternalist authoritarian policies is mirrored in occupationally fragmented and mandatory social insurance. Status preservation via earnings-related transfer payments, a lack of social services and the preservation of the male breadwinner model are core elements of the Austrian social security system giving rise to strong stratification effects in terms of gender and occupational status. With few exceptions, social insurance related benefits are financed entirely through social security contributions. Social assistance, by contrast, is a social safety net of the last resort based on subsidiarity and tied to a means-test.

Given this structural make-up, the standard account in the comparative welfare state literature depicts the Austrian welfare state as a prototypical Bismarckian or corporatist -Conservative welfare regime (Esp ing-Andersen 1990). The expansion of the Austrian welfare state during the trente glorieuses mainly affected the personal coverage and the level and spectrum of benefits offered by the various programs. Based on a Keynesian post-war consensus and building on the inherited Bismarckian system of social security, the goal of income support was universalized during the post-war period. A duopoly of pro-welfare state parties, consociational democracy and corporatism , as well as a Federal Constitution lacking institutional veto points, provided a political configuration highly conducive to welfare state expansion in the aftermath of World War II.

INTRODUCTION

Switzerland is not only the oldest democratic nation-state but also the oldest federal polity in Europe. Given deep-rooted societal cleavages of language, ethnicity, and religion and a strong divide between rural areas and urban agglomerations, the formation of a multicultural nation-state in 1848 was a truly revolutionary venture. Leading representatives of the Swiss labor movement pinned their hopes on the democratic institutions to overcome the widespread pauperization of the working class that had emerged in the wake of the early industrialization of the northeastern parts of the country. But the dreams of ameliorating the living standard of workers by means of social policy were dashed. The formation of a national welfare state faced many obstacles and took longer than in most continental countries. This is particularly true for social security: neither a public pension scheme nor unemployment insurance was adopted prior to 1945.

Why did this hope prove to be an illusion? This chapter examines the driving and braking forces that have shaped Swiss social policy from 1848 to 1945. Special attention is paid to the impact of religion on early welfare state formation. Given the cultural modernization and the decline in religiosity in the postwar period, the impact of religion on social policy should be most pronounced during the formative period of the welfare state. Nevertheless, the fierce state–church conflict of the 19th centuryand the resulting establishment of parties of religious defense had much more long-lasting consequences for welfare state building in Switzerland.

We examine whether a fundamental change in the core dimension of modern 20th century statehood, the welfare state, has become evident in response to changed exogenous and endogenous challenges. By combining quantitative and qualitative approaches we take stock of social policy development in four advanced welfare states – Austria, Denmark, New Zealand and Switzerland – over the last 30 years. Neither spending patterns nor structural changes support a ‘race to the bottom thesis’, according to which the changed environment of welfare state policies has led to a downward spiral in benefit provision. On the contrary, we show that social spending levels have risen, mainly due to a catch-up of former welfare state laggards. In structural terms, a blurring of welfare regimes can be observed. This twofold process can be described as dual convergence.

Introduction

The welfare state is intrinsic to statehood in contemporary advanced democracies. However, rising unemployment, increasing public debt, declining economic growth, an ever more competitive economic environment and changing demographics have increased the pressure on advanced welfare states over the last decades. How have welfare states responded to these changing conditions? What patterns of welfare state adaptation can we observe and what are their causes? Does politics still matter for social policy-making or is there a market-driven development towards a residual welfare state model?

Introduction

Swiss federalism shares attributes with both United States and German federalism. As in the United States, an essential goal of the federalist project is to allow for differences in living conditions among the constituent territorial units. When the Swiss cantons formed a federal state in 1848, they did so on the basis of a constitutional structure that was designed to allow for diversity of social, economic and political organization at the cantonal level. On the other hand, Swiss federalism is hardly competitive. As in Germany, cantons co-operate with each other, and above all the federal government co-operates with the cantons because it relies on their administration for the implementation of most policies. Finally, as in both the US and Germany, the emergence of national social security systems has shifted power and resources from the local and the state to the federal level.

Unsurprisingly, this peculiar institutional context has contributed to the shaping of social policy over the years. Overall, we can identify three different forces underlying the territorial dimension of the Swiss welfare state and working in different directions: first, a unifying and centralizing force related to the rise of the national welfare state in response to the imperatives of industrialization and societal modernization in the nineteenth and twentieth centuries; second, a unifying – but not centralizing – force arising from the co-operation of cantonal and local administrations with a fiscally and politically weak central government; and, third, a force of diversity and decentralization stemming from the combination of cantonal competencies with different resources, polities, politics and policies.

The idea for this volume stems from the observation that, somewhere between the literatures of political science and social policy, there is an unexplored territory where federalism and the welfare state meet, a no man's land without even a conceptual map to guide us. Hic sunt leones! is the warning etched on the uncharted regions of ancient maps, but for us it serves as enticement, an invitation to explore the unknown.

In some OECD federal nations almost one-third of the GDP is tied up in the welfare state, but scholars of the state and federalism typically ignore the welfare constituent of this spending and focus their attention almost entirely on non-welfare public agendas. For these political scientists, the state is always spelled with a capital S, and welfare, if mentioned at all, with lower-case w. As the majority shareholder of public expenditures at the federal level, the welfare state is not just a passive recipient of federalism's multi-tiered policy-making, but a key player in shaping those policies and, indeed, in shaping the functioning of the federal structure itself. Its size, its indispensability, and the large segment of the voting population it affects make the welfare state a force to be reckoned with. In many instances, it also provides a mechanism for coping with problems the normal federal process has no means of dealing with, as was so clearly demonstrated in the process of German reunification.

We began by questioning the widely held premise of econometric research that federalism is generally inimical to the growth of the welfare state in all countries and in all eras. Employing a qualitative comparative approach that Peter Hall calls ‘systematic process analysis’, we derived our hypotheses concerning federalism's effects on welfare state development from theories of fiscal federalism and political institutionalism. According to theories of actor-centred institutionalism, institutions create opportunity structures for political action by shaping actor constellations, actor preferences and the modes of their interaction. Exploiting these institutionally pre-configured opportunities for public policy-making, then, depends on a number of contextual variables. We have used middle-range theories of the determinants of welfare state development to predict the power of these contextual factors to impede or enhance our eight hypothesized effects (table 1.8).

We have also argued that the time dependence of institutional effects should be taken into account. The reasons were several. First, as shown in the path dependency literature, iterative political decision-making involves a sequential process in which earlier decisions strongly influence the trajectory of subsequent policy development. Second, the impact of federalism on social policy is contingent upon the stage of welfare state development, that is, whether social policy is in the process of initiation and expansion, or whether it is undergoing retrenchment.