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Re-theorizing the welfare state and the political economy of neoliberalism's war against it

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  • Thomas I. Palley

Abstract

This paper argues neoliberalism is engaged in a war against the welfare state. At issue are competing views regarding the size of the welfare state and how it should be organized. In waging this war, neoliberalism seeks to politically discredit the traditional welfare state and change the economic structure so that the latter becomes unviable. The paper presents a new theoretical framework that distinguishes between modes of production and financing of the welfare estate. Neoliberalism's war rests on ideologically grounded criticisms drawn from mainstream economics; implementation of policies that undermine social solidarity toward the welfare state; exploiting pressures fostered by neoliberal globalization; and misrepresentations about affordability. The welfare state was critical in saving capitalism from itself after World War II. It is a way of embedding the market system so as to produce socially acceptable outcomes that are politically stable. Neoliberalism's war promises a body blow against shared prosperity. More ominously, it may so dis-embed the market system as to recreate conditions Polyani (1944) blamed for the rise of fascism in the 1930s.

Suggested Citation

  • Thomas I. Palley, 2018. "Re-theorizing the welfare state and the political economy of neoliberalism's war against it," FMM Working Paper 16-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:fmmpap:16-2018
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    File URL: http://www.boeckler.de/pdf/p_fmm_imk_wp_16_2018.pdf
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    References listed on IDEAS

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    7. Burgin, Angus, 2012. "The Great Persuasion: Reinventing Free Markets since the Depression," Economics Books, Harvard University Press, number 9780674058132, Spring.
    8. Andrea Schaechter & Carlo Cottarelli, 2010. "Long-Term Trends in Public Finances in the G-7 Economies," IMF Staff Position Notes 2010/13, International Monetary Fund.
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    Cited by:

    1. Thomas Palley, 2018. "Government Spending and the Income-Expenditure Model: The Multiplier, Spending Composition, and Job Guarantee Programs," FMM Working Paper 30-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. Heise, Arne & Serfraz Khan, Ayesha, 2018. "The welfare state and liberal democracy: A political economy approach," ZÖSS-Discussion Papers 71, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    3. Mark Setterfield, 2020. "Managing the discontent of the losers," Review of Social Economy, Taylor & Francis Journals, vol. 78(1), pages 77-97, January.
    4. Javier Bilbao-Ubillos, 2021. "The Crisis of the European Social Model in the Adverse Environment of Globalization," Review of Radical Political Economics, Union for Radical Political Economics, vol. 53(3), pages 478-500, September.

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    More about this item

    Keywords

    Welfare state; neoliberalism; mode of production; mode of financing;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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