Globalization and the European Welfare State at the Opening and the Closing of the Twentieth Century

The twentieth century ended, as described by O’Rourke (Chapter 3 in this volume), like the nineteenth, in a marked phase of globalization. The period 1870-1914 was one of ‘rapid globalization: capital and labour flowed across national frontiers in unprecedented quantities, and commodity trade boomed as transport costs declined sharply’ (Williamson 1996:277). In the same way, the period 1970-2000 saw the closer integration of commodity and capital markets as costs of mobility fell and barriers to trade and capital movements (if not to labour mobility) were reduced. These parallel developments in the world economy make an interesting contrast with the history of the welfare state. The period of pre-1914 globalization heralded the origins of the modern welfare state. It was seen as a major social innovation. When introducing unemployment insurance in the United Kingdom (UK), Winston Churchill told the House of Commons that ‘there is no proposal in the field of politics that I care more about than this great insurance scheme’ (Hansard 25 May 1911, 5th series, volume 6, cols 493-510). Yet the globalization of the late twentieth century has been widely seen as a threat to the European welfare state. The welfare state is described as being ‘in crisis’. Even if such alarmist language is not new (see Alber 1988, and Kuhnle 1998 for references to past alarms), there now seems to be a majority view that the welfare state is unsustainable. Many economists and policy makers agree with Buchanan that ‘the “social model” that many Europeans hold as superior to the somewhat more limited welfare states elsewhere is not economically viable for the twenty-first century’ (1998:14).