Growth Strategies and Welfare Reforms in Europe

This chapter shows that welfare reforms are institutionally and politically linked to countries' growth strategies, i.e. the policies implemented by governments to boost growth and jobs creation since the 1980s. The chapter starts by identifying five growth strategies according to the engine of growth chosen and the type of welfare reform: export of dynamic services; export of high-quality manufacturing products; FDI-financed exports; domestic consumption driven by financialization; and domestic consumption driven by wages and welfare spending (which has transformed into "competitiveness through impoverishment" under pressure from the EU). We show that these five growth strategies can be associated with five types of welfare state reform: dualization of welfare, social investment, fiscal and social attractiveness, commodification of welfare, and social protectionism. The detailed account of the cases of the UK, Germany, Sweden, Denmark, Baltic and Visegrád Eastern European countries, Italy and France underlines the actual connections between growth strategies and welfare reforms. The cases reveal that these strategies are not mutually exclusive and that more than one strategy might be pursued in a country. The chapter contributes to an understanding of how countries' growth regimes change, by identifying the transformative feedback effect that the implementation of growth strategies has on them. The chapter concludes on the politics of growth strategies and welfare state reforms and the respective roles of producer coalitions and electoral politics.