Changes in Welfare Regimes and the Search for Flexibility and Employability

This on-line version is the pre-copyedited, preprint version. The published version can be found here: 

‘Changes in welfare regimes and the search for flexibility and employability’, in H. Overbeek, ed., The Political Economy of European Unemployment: European Integration and the Transnationalization of the Employment Question, London: Routledge, 29-50, 2003.



This chapter argues that recent changes in labour market policies in the European Union are closely related to the more general restructuring, strategic reorientation, and rescaling of welfare regimes and that this latter transformation is related in turn to fundamental changes in the form and dynamic of capitalism. Distinguishing cause and effect in these interrelations is difficult, however, because so many features of our once taken-for-granted economic, political, social, and cultural landscape are changing at the same time. My discussion of these issues will focus initially on the structural coupling of economic and political transformations without attempting to judge the relative causal weight of economic and political factors. Thus I first present a four-dimensional framework for analysing changes in welfare regimes and then identify a tendential transformation in these regimes along all four dimensions. This sort of transformation can be discerned well beyond the member-states of the European Union, which suggests that any explanation couched purely in terms of specific features of the emerging European economy and/or polity will be limited. Accordingly I will argue that these changes can be explained in part through the more general restructuring, reorientation, and rescaling of the capitalist economy and in part through the more general restructuring, reorientation, and rescaling of the principles of statehood. Within this general context we can consider the distinctive features of these changes in the European Union and how they are mediated and overdetermined by its distinctive institutional features and balance of forces.

Four dimensions of welfare regimes

As a basis for considering how unemployment policies (and labour market policies more generally) have been undergoing reorganization in the wider context of contemporary capitalist restructuring, I suggest that there are four basic dimensions to the state’s involvement in securing the conditions for capitalist reproduction. These are the state’s distinctive economic contribution to securing the conditions for profitable accumulation for private capital; its distinctive social contribution to the reproduction of labour-power as a fictitious commodity; the primary scale (if any) on which policy-making (as opposed to policy implementation) in the fields of economic and social policy is determined; and the primary means of supplementing the always more or less inadequate role of market forces in capital accumulation and social reproduction. Seen in these terms, recent changes in welfare regimes in advanced capitalist societies in Western Europe, North America, and the Antipodes can be summarized in terms of a tendential and uneven movement from some version of the Keynesian welfare national state (KWNS) to some version of a Schumpeterian workfare postnational regime (SWPR). Although the reasons for this shift are primarily grounded in responses to specific economic and social problems, such responses are always politically mediated. Thus national variations in the pace, direction, and emerging patterns of the SWPR are often rooted in their respective initial starting points, differences in modes of growth and insertion into the global economy, and the institutional specificities and distinctive balance of forces. This means that, even if certain general tendencies can be identified and grounded in the logic of contemporary capitalism, this does not justify a simple, ‘one-size-fits-all’ account of welfare restructuring. Instead proper comparative analyses are required to comprehend and explain variations as well as similarities across the advanced capitalist economies.

The four criteria proposed here derive from basic features of capitalism. The first criterion is the state’s distinctive roles in securing conditions for profitable private business. This is the broad field of economic policy. It is important because market forces alone cannot secure the conditions for capital accumulation and are always supplemented by non-market mechanisms. This insufficiency is grounded in generic tendencies towards market failure and in specific contradictions and dilemmas associated with capitalism. The second dimension refers to the state’s distinctive roles in reproducing labour power individually and collectively over various timespans from everyday routines through individual lifecycles to intergenerational reproduction. This is the broad field of social policy. It matters because labour power is a fictitious commodity (Polanyi 1957; de Brunhoff 1968). In other words, although it is bought and sold in labour markets and may add value in production, it is not itself directly (re)produced in and by capitalist firms with a view to private profit. Instead labour power enters the market economy from outside and is embodied in individuals who have other identities than as bearers of labour-power. This poses economic problems as regards its individual and collective suitability to capital’s needs and its own survival in the absence of a secure income or other assets; social problems regarding social inclusion and cohesion; and political problems regarding the legitimacy of state intervention in this area and its relation to other identities that workers may have. The third dimension refers to the main scale, assuming there is a main scale, on which economic and social policies are decided – even if underpinned or implemented on other scales. This is important as economic and social policies are politically mediated and the scales of political organization may not coincide with those of economic and social life. The fourth dimension concerns the relative weight of the mechanisms deployed in the effort to maintain capitalist profitability and reproduce labour-power by compensating for market failures and inadequacies. Top-down state intervention is just one of these mechanisms; and, as is well known, states as well as markets can fail. This suggests the need for other supplementary mechanisms and, insofar as these also tend to fail, for attention to be paid to the balance among them (Dunsire 1996; Bochel and Bochel 1998).

The ideal typical postwar welfare regime in advanced capitalist economies (apart from Japan) can be defined in these terms as a Keynesian welfare national state on the following grounds. First, in promoting the conditions for profitable accumulation, it was distinctively Keynesian insofar as it aimed to secure full employment in a relatively closed national economy and pursued this goal mainly through demand-side management. Second, in reproducing labour-power as a fictitious commodity, social policy had a distinctive welfare orientation insofar as it tried (a) to generalize norms of mass consumption beyond male workers in Fordist economic sectors earning a family wage with the declared aim of ensuring that all national citizens and their dependants might share the fruits of economic growth (and thereby also contribute to effective domestic demand); and (b) to promote forms of collective consumption favourable to the Fordist growth dynamic with its base in a virtuous national circle of mass production and mass consumption. Thus economic and social policies were linked to economic and social rights attached directly or indirectly to citizenship of a national territorial state – whether this citizenship was based on descent, acculturation, naturalization, political tests, or some other criterion (on types of national state, Jessop 1999). Third, the KWNS was national insofar as economic and social policies were pursued within the historically specific (and socially constructed) matrix of a national economy, a national state, and a society seen as comprising national citizens. Within this matrix it was the national territorial state that was mainly held responsible for developing and guiding Keynesian full employment and welfare policies (Hoffman and Hoffman 1997; de Swaan 1992). Local and regional states acted mainly as relays for policies framed at the national level; and the various international regimes established after WW2 were mainly intended to restore stability to national economies and national states. In this sense the dependence of the postwar expansion of the international economy on the presence of nationally ’embedded liberalism’ (Ruggie 1982) can be contrasted with its subsequent disembedding through globalization. And, fourth, the KWNS can be seen as statist insofar as state institutions (on different levels) were the chief supplement to market forces in securing the conditions for economic growth and social cohesion. It was the combination of market and state on different levels that prompted the use of the term ‘mixed economy’ to describe the postwar system (classically, Shonfeld 1965). Alongside its role in facilitating and correcting the operation of market forces, the state also significantly shaped civil society and thus its citizens’ identities.

There was never a pure form of KWNS. At best one finds particular welfare regimes that combine features of several possible variants or sub-types of KWNS with other economic and social policy functions, scales of action, or modes of governance. There are four commonly cited forms of welfare regimes – market liberal (sometimes subdivided, and justifiably so, into North Atlantic and Antipodean variants), social democratic, conservative-corporativist (or christian democratic),[1] and Mediterranean (or Southern European). This schema builds on the well-known threefold typology of liberal, social democratic, and conservative welfare regimes that was first proposed by Esping-Andersen (1985). His typology was mainly based on just one aspect of just one of the four dimensions presented above, namely, the state’s role in decommodifying men’s waged labour. He did not consider the state’s roles in relation to women’s waged and unwaged labour nor did he examine other dimensions of the state’s involvement in social reproduction (e.g., education, health, or housing). But he did give a secondary role to a related aspect of the fourth dimension, i.e., the governance mechanisms used in the social reproduction of labour power. In particular, in addition to liberal market forces, he referred to corporativist insurance schemes, formally rational state redistribution, and, in later work, clientelism and the family. We should also note that his typology was initially developed to explore how the balance of social forces at the founding moments of welfare regimes in different societies led to different types of welfare regime and then continued through its path-dependent effects to shape in large measure their subsequent development. Esping-Andersen and others have since deployed the resulting taxonomy for many other purposes but it still bears the path-dependent imprint of his initial research question. This makes it less relevant for showing how different welfare regimes have come to be integrated into broader modes of economic regulation and/or distinctive ‘historical blocs’ (i.e., mutually implicated, structurally coupled, and historically co-evolving ensembles of economic, political, and socio-cultural relations). It is also said to be less useful for analysing the quite distinctive features of the recent politics of welfare retrenchment (as opposed to expansion) in response to the emerging crisis of welfare regimes (cf. Pierson 1995).

This suggests that one could usefully extend Esping-Andersen’s typology to take account of cases excluded from his original study, to reflect the most incisive criticisms of its theoretical and empirical foundations,[2] and to integrate the other dimensions of welfare regimes noted above. In particular the typology should be modified to include modes of economic intervention – previously ignored – and modes of governance – previously treated rather perfunctorily. This should permit a more sophisticated analysis of the path-dependent structural coupling among modes of economic growth, modes of regulation, and the nature of welfare regimes. The political economy of scale is less germane to Esping-Andersen’s typology because, during the relevant time period, his cases were all marked by the primacy of the national scale. Nonetheless the issue of scale should still be incorporated in the revised typology in order to facilitate comparisons with earlier and later periods. The earlier period is particularly relevant to the origins and development of welfare regimes because local state capacities and the forms of domestic politics affected the balance of economic and political forces during the formative period of welfare regimes. For example, strong localist and/or regionalist tendencies tend to be associated with corporativist or southern European regimes rather than with liberal or universalist, social democratic regimes. The later period is significant because the diversity of contemporary welfare regimes at the national scale has affected (and still does) attempts to promote economic integration and build a Social Europe.

Regarding the relations among modes of economic growth, modes of regulation, and welfare regimes, there seems to be a close relationship between the liberal welfare regime and finance-based, market-regulated capitalist regimes; between social democratic welfare regimes and small open economies with strong, niche market-oriented, high-skill, high-productivity, high-wage, flexibly specialized export-sectors; between more conservative, corporativist welfare regimes and larger economies, open or closed, with close coordination between industry and finance as well as close coordination between large industrial concerns and small and medium enterprises; and, finally, between the southern European welfare model and late developing, peripheral Fordist economies with large agrarian sectors, traditional social structures, and family capitalism. Such correlations need to be explained, of course, rather than merely posited. Fortunately there is a growing body of work that is concerned with this question from various institutionalist perspectives (e.g., Hall and Soskice 2001; Huber and Stephens 2001; Ebbinghaus and Manow 2000). The approach adopted here is premised on the heuristic and explanatory power to be expected from combining a regulationist approach to modes of growth and their regulation with a state-theoretical approach to the political mediation of pressures for economic and social policy intervention.

An explanation in regulationist terms would examine at least three variables. First, it would examine how different patterns of finance-industry relations are connected to the relative dominance of a ‘money-capital’ or a ‘productive-capital’ concept of the economic process on the part of the leading fraction(s) of capital. The former concept is more liberal (and, often, internationalist) in its concern with formally free circulation and exchange; the latter is more sensitive to the substantive interdependence (or socialization) of the productive forces and more interventionist (and, perhaps, protectionist) in its concern with securing the substantive conditions for the production of surplus value (van der Pijl 1984: 8-34; Overbeek 1990: 25-29). This has obvious implications not only for economic policy, including modes of intervention, capacities for state planning or economic guidance, the levels and incidence of taxation, and education and training policy, but also for the relative weight of market forces and state provision in social policy (cf. Polanyi 1957; Boyer 1997; Hall and Soskice 2001; Soskice 1998; Huber and Stephens 1999, 2001). Second, it would consider the timing of the emergence of formally free labour markets in relation to the onset and development of industrialization, the timing of the breakdown of guild supervision of urban labour, and the timing of the abolition of feudal labour dues (Crouch 1993; Biernacki 1995). For, as Biernacki has shown, these affect the prevailing cultural conceptions of labour power, especially whether it is regarded primarily as one substitutable factor of production among others or as a distinctive set of creative capacities with attached rights and duties. These cultural perceptions not only affect the organization of production, labour market institutions, industrial relations, and the propensity for corporatist cooperation but also influence the more general economic and political demands raised by the labour movement (Biernacki 1995).[3] The coupling between labour market organization and welfare regimes has also recently been explored in work on unemployment policies by Visser (2000) and on production regimes and welfare by Huber and Stephens (1999, 2001). Third, it would examine how different modes of inter-firm competition and/or cooperation lead to the relative dominance of formal market exchange or networking in securing the conditions of valorization, innovation, etc.[4] These sets of factors operate initially at the level of branches and sectors (e.g., the organization of the labour process, the structure of labour markets, training regimes, or the differential development of paternalism and occupational welfare) but, depending on the relative structural dominance and hegemonic capacities of specific economic sectors and fractions of capital, their specific effects can become more general (or even universal) within particular regional or national formations. This dominance is typically mediated through the strategic selectivity of state forms, which make it harder or easier to promote universal welfare, and the changing balance of political forces. The relative weight of different factors also varies with stages of capitalism. Thus, to take one highly topical example, the money concept of capital had a reduced significance during the period of Atlantic Fordism compared with the current period of neo-liberal globalization (van der Pijl 1984; Apeldoorn 1998).

An explanation in terms of the strategic selectivity of the state would focus on various factors. These include modes of representation, the articulation of the state apparatus across different branches, functional domains, and territorial scales, and modes of intervention; and, for the wider political system, the way in which party systems and patterns of industrial relations have been shaped by extra-economic as well as economic factors (e.g., Rokkan 1978, 1999; Crouch 1993; Martin 1995). What is interesting here is how the strategic selectivity of the state system on different scales, but especially at the national level, involves a more or less systematic configuration of constraints and opportunities on corporate strategies not only regarding their immediate market situation but also many other aspects of production and welfare regimes (for recent analyses of these configurations and their implications for institutional complementarities, see the various contributions to Hall and Soskice 2001; on the link between state traditions, trade unionism, and industrial relations, see Crouch 1993).

Just as there is no pure KWNS, so there is no pure crisis of the KWNS – only specific, path-dependent, nationally variable crises. In some cases there has been greater continuity, linked to the dominance of the view that there was a crisis in the welfare state, with largely incremental shifts towards the new welfare regime (e.g., Denmark); in others there has been greater discontinuity – admittedly more marked in declared policy changes than actual policy outcomes – linked to a discursively-constructed crisis of the welfare state (e.g., Britain). There are two complicating factors in this regard, especially in distinguishing the North American and Antipodean cases from those in Continental Europe. The first such factor is, of course, the development and intervention of the European Union as a strongly institutionalized form of supranational coordination of responses to the economic and social problems associated with the crisis of Atlantic Fordism. And the second is the more recent movement towards a globalizing, knowledge-based economy (on these issues, see Jessop 2000a, 2000b).

Crisis in the KWNS

The KWNS began to fail as a mode of securing the reproduction-regulation of Atlantic Fordism when its instititutional coherence became inconsistent with the objects it was governing, the practices being deployed to govern them, and the identities and interests of the active agents and/or ‘passive’ subjects of the KWNS regime. Thus, taking its four dimensions in turn, I would identify the following crisis-tendencies. First, the primary object of economic governance in the KWNS was the national economy. The emergence and consolidation of Keynesian practices had helped to delimit and reproduce the national economy (Tomlinson 1985). They provided the means of measuring national economic performance, controlling economic flows across national borders, setting economic aggregates such as inflation, employment, and growth as goals of national economic management, and creating the infrastructure for national economic development. But Keynesian economic management became increasingly problematic and generated stagflationary tendencies (stagnation plus inflation) that fuelled the emerging crisis of the Atlantic Fordist economy that the KWNS was supposed to manage (Boyer 1991). Economic internationalization exacerbated these problems. It undermined the national economy as an object of economic management and led to quite different conceptions of the economy and, a fortiori, its mechanisms of economic and social governance. States could no longer act as if national economies were more or less closed and their growth dynamics were primarily domestic (Teeple 1995). Replacing the national economy as the primary object of economic governance is the knowledge-driven economy in an era of globalization (Castells 1996). Its growth dynamic depends on how effectively a given economic space – not necessarily a national economy – is inserted into the changing global division of labour. This in turn has prompted concern with international economic competitiveness and supply-side intervention – initially to supplement national demand management, later as the primary objective and means of economic intervention.


The imagined scope and inclusiveness of the economy that needs governing have also expanded. This is no longer interpreted in narrow terms but has been extended to include many additional factors, deemed ‘non-economic’ under the KWNS regime, that affect economic performance. This expansion is reflected in concepts such as ‘structural competitiveness’ (Chesnais 1986) or ‘systemic competitiveness’ (Messner 1997) – concepts that highlight the combined impact of diverse societal factors on competitiveness. State managers therefore intervene in a growing range of economically relevant practices, institutions, functional systems, and domains of the lifeworld to enhance competitiveness. This has two interesting and paradoxical effects on the state. First, whilst it expands the potential scope of state intervention for economic purposes, the resulting complexity renders postwar top-down intervention less effective – requiring that the state retreat from some areas of intervention and re-invent itself as a condition for more effective intervention in others (Messner 1997). And, second, whilst it increases the range of stakeholders whose cooperation is required for successful state intervention, it also increases pressures within the state to create new subjects to act as its partners. Thus states are now trying to transform the identities, interests, capacities, rights, and responsibilities of economic and social forces so that they become more flexible, capable, and reliable agents of the state’s new economic strategies – whether in partnership with the state and/or with each other or as autonomous entrepreneurial subjects in the new knowledge-driven economy (Barry et al., 1996; Deakin and Edwards 1993; Finer 1997; Jones 1999).

Second, the generic object of social governance in the KWNS (as in other forms of national state) was a national population divided in the first instance into citizens of the national state and resident aliens. But this population was categorized and governed in distinctive ways suited to Atlantic Fordism and its mode of regulation. Above all, social policy was premised on conditions of full or near-full employment, on lifelong employment – albeit not necessarily with the same employer – with a family wage for male workers, and on the patriarchal nuclear family as the basic unit of civil society (Esping-Andersen 1994). The KWNS was also premised on a class compromise between organized labour and organized business in which responsible unionism and collective bargaining permitted managers to manage and workers to benefit from rising productivity as wage earners and welfare recipients. There were nonetheless some marginalized or overburdened social groups. The most notable of these groups were women as housewives, mothers, and secondary participants in the labour force; and immigrants or other workers (and their families) who worked in disadvantaged segments of the labour market (Lewis 1998). This pattern was undermined both economically and socially. The crisis of Atlantic Fordism undermined the assumptions of full employment, the family wage, and the gendered division of labour; and also led state managers to see the social wage increasingly as a cost of international production rather than as a source of domestic demand. There was also a growing contradiction in the field of social reproduction with encouragement to immigration for economic purposes being accompanied by increasing concern to police the boundaries of national citizenship and its associated welfare rights. In particular, whereas the European states of Atlantic Fordism had previously been seen largely as countries of emigration and/or, in the wake of postwar decolonization, return of nationals to their homelands, the 1970s witnessed the construction of immigration as a threat to national cohesion, full employment, and the welfare state (cf. Kofman 1995; also Bieling 1993). More generally, KWNSs in Europe were also affected (admittedly to different degrees) by a weakening of the national identity and solidarity that shaped it in its formative period and helped sustain the coalition behind it. This is reflected in changes in the values, social identities, and interests associated with the welfare state. Indicators of this included rejection of the social democratic and/or Atlantic Fordist commitment to a class-based redistributive politics; a pluralistic identity politics and ‘politics of difference’ that emphasizes mutual respect, authenticity, and autonomy; increased concern for personal empowerment rather than for the bureaucratic administration of legal rights, monetized entitlements, and uniform public services; and expansion of the so-called ‘third’ sector, which supposedly operates flexibly outside of the framework of pure markets and the bureaucratic state (but often in close conjunction with them as a ‘shadow market’ and ‘shadow state’). These shifts have fragmented the KWNS coalition of forces, led to demands for more differentiated and flexible forms of economic and social policy, and led to concern with problems of social exclusion and ensuring life-time access to the benefits of a restructured welfare regime (e.g., lifelong learning).

Third, the primacy of the national scale of economic and social governance depended on the coincidence of national economy, national state, national society and the survival of the national state as a sovereign body. This structured coherence has also been weakened. The national economy has been undermined by internationalization, the growth of multi-tiered global city networks, the formation of triad economies (such as the European Union), and the re-emergence of regional and local economies in national states. This complex articulation of global-regional-national-local economies is related to the ‘hollowing out’ of the national state as its powers are delegated upwards to supra-regional or international bodies, downwards to regional or local states, or outwards to relatively autonomous cross-national alliances among local metropolitan or regional states with complementary interests. There are also growing attempts to internationalize (or, at least, in the case of the EU, to Europeanize) social policy. And, third, the unity of the nation-state has been weakened by the (admittedly uneven) growth of multi-ethnic and multi-cultural societies and of divided political loyalties (with the resurgence of regionalism and nationalism as the rise of European identities, diasporic networks, cosmopolitan patriotism, etc.) (Jessop 1999). Thus we see a proliferation of scales on which economic and social policy is pursued as well as of competing projects to re-unify inter-scalar articulation around a new primary level – whether this be the industrial district, the city-region, wider sub-national regions, cross-border regions, the triads, or the global level. In this context, the European Union is only one among many such projects to find a new scale on which the conditions for economic expansion can be secured once again.

Finally, the state’s role in the mixed economy was undermined by several factors. These include: growing political resistance to taxation and an emerging pattern of stagnation-inflation (or ‘stagflation’); crisis in postwar compromises between industrial capital and organized labour; new economic and social conditions and attendant problems that could not be managed or resolved readily, if at all, through continuing reliance on top-down state planning and/or simple market forces; growing resentment about the bureaucratism, inflexibility, and cost of the welfare state as it continued to expand during the late 1960s and 1970s; and the rise of new social movements which did not fit easily into the postwar compromise. Moreover, as society became more complex and as new economic and social conditions emerged that could not be managed or resolved readily, if at all, through the market and state as modes of governance, increasing reliance came to be placed on networks and partnerships as modes of coordination. Organizationally, the Fordist period was one of large scale, top-down hierarchical structures and this model spread to the state’s economic and welfare roles. This paradigm has since been challenged by a new ‘network paradigm’ that emphasizes partnership, regulated self-regulation, the informal sector, the facilitation of self-organization, and decentralized context-steering (Messner 1997). Overall this involves a tendential shift from imperative coordination by the sovereign state to an emphasis on interdependence, divisions of knowledge, reflexive negotiation, and mutual learning. In short, there is a shift from government to governance in the narrow sense.

The Schumpeterian Workfare Postnational Regime

These changes are reflected in four general trends in the restructuring of the KWNS. The first is a shift from Keynesian aims and modes of intervention to Schumpeterian ones; the second is a shift from a welfarist mode of reproduction of labour-power to a workfarist mode; the third is a shift from the primacy of the national scale to a post-national framework in which no scale is predominant; the fourth is a shift from the primacy of the state in compensating for market failures to an emphasis on networked, partnership-based economic, political, and social governance mechanisms. These trends can be considered separately. Indeed, both severally and in combination, they have developed in quite different ways in the various Atlantic Fordist economies. They can nonetheless be summarized in terms of the suggestion that the Keynesian welfare national state (KWNS) is giving way to a Schumpeterian workfare post-national regime (SWPR). Moreover, whether viewed individually or in aggregate, these four changes are closely connected to the search for solutions to the Atlantic Fordist crisis.

The ideal-typical SWPR can be described as follows. First, regarding its functions for private capital, it is Schumpeterian insofar as it tries to promote permanent innovation and flexibility in relatively open economies by intervening on the supply-side and to strengthen as far as possible their structural and/or systemic competitiveness. The Schumpeterian moment is sometimes termed the ‘competition state’ (Cerny 1989; Hirsch 1995). This correctly identifies the increased importance of competition in the state’s economic policy role but, since there are many forms of competition, it fails to specify what is distinctive about the state’s contribution in promoting new forms of competition. Of particular importance here is the emphasis on innovation and enterprise linked with the widespread belief that a new long wave of technological change is occurring. Thus, just as Keynes was the emblematic economist for the postwar welfare state, Schumpeter has been posthumously invoked as the emblematic economist for today’s restructuring. This is reflected in a broadening of the scope of economics, economic calculation, and economic intervention to include a whole range of activities previously regarded as extra-economic. This is partly related to the growing importance attached to international competition and the way in which this turns the general institutional features of societies into stakes in the new competitive race. Previous discussions of the ‘competition state’ have also tended to confine it to the level of the local or national state and thus to ignore the re-scaling of state intervention upwards as well.

Second, regarding social reproduction, the SWPR can be described (at the risk of some misunderstanding) as a workfare regime insofar as it subordinates social policy to the demands of labour market flexibility and employability and to the demands of structural or systemic competitiveness. In this sense, social policy is now modelled on human capital theory and becomes a form of human resources management. Complementing these new strategic concerns in economic and social policy has been the demotion or rejection of other, earlier policy objectives. Thus, whilst the KWNS established full employment as one of the main goals of state action, in the SWPR it is regarded more as a desirable by-product of the successful promotion of structural or systemic competitiveness. Likewise, whereas the KWNS had a qualified commitment to redistributive politics to promote social equality and to even out regional development, the SWPR accepts increasing economic, social, and regional inequalities and compensates for this through more limited policies aimed at combating social exclusion. Similarly, whilst the KWNS tried to extend the social rights of its national citizens, the SWPR is more concerned to provide welfare services that benefit business and thus tends to demote individual needs to second place. This includes putting downward pressure on the social wage qua cost of international production. Even where there appears to be strong continuities with the KWNS, the SWPR gives the inherited features a new inflection. Thus, although concern with training and labour market functioning has long been a feature of state involvement in the social reproduction of labour-power, the SWPR puts more weight on flexibility and gives it new connotations (Ainley 1997). This is also why there is a major reorientation on the part of the state to the making and re-making of the subjects who are expected to serve as partners in the innovative, knowledge-driven, entrepreneurial, flexible economy and its accompanying self-reliant, autonomous, empowered workfare regime (for a recent illustration, Blair and Schröder 1999).

Third, compared with the earlier primacy of the national scale, the SWPR is ‘postnational‘ insofar as the increased significance of other spatial scales and horizons of action (or ‘relativization of scale’, see Collinge 1996) makes the national territory less important as a ‘power container’. This is associated with a transfer of economic and social policy-making functions upwards, downwards, and sideways. On a global level, this can be seen in the growing concern of a growing number of international agencies (such as the IMF, World Bank, OECD, and ILO) and intergovernmental forums (such as the G8) with the shaping of current social as well as economic policy agendas. In part, the European Union acts as a relay for these agenda-shaping efforts and, in part, it has itself played an active role in developing its own agenda for countries outside its borders. This is most clear in the case of the post-socialist economies, especially those in the front ranks of new candidate member-states; but can also be seen in its interest in social as well as economic policy in associate member-states and North Africa (cf. de Swaan 1992; Deacon 1995, 1996; Leibfried, 1993; Wilding 1997). The EU level is also imposing more numerous and tighter restrictions on national economic and social governance, especially through the norms of the Single Market, the Maastricht criteria for economic convergence, and the requirements of the EMU. This is reflected in the tendential Europeanization of labour market policies, in the transformation of national corporatist and bargaining arrangements, and in the development of ‘social pacts’. What is emerging in this context is a series of multi-level government and/or governance regimes oriented to issues of the inter-scalar re-articulation of the economic and political — with the European Union just one among many such emerging regimes (Poulantzas 1978; Jessop 2000b). At the same time there are tendencies to devolve some economic and social policy-making to the regional, urban, and local levels on the grounds that policies intended to influence the micro-economic supply-side and social regeneration are best designed close to their sites of implementation. In some cases this also involves cross-border cooperation among regional, urban, or local spaces. In all three regards welfare regimes have become more postnational. Yet, paradoxically, as we will see below, this often leads to an enhanced role for national states in controlling the interscalar transfer of these powers – suggesting a shift from sovereignty to a primus inter pares role in intergovernmental relations.

The post-national moment of economic and social policy restructuring is complex because of the proliferation of scales and the relativization of scale with which it is associated. There are clear differences among the triads here. NAFTA is primarily a continental trading system based on America’s dominance as a quasi-continental economy (itself comprising many different regional economies with different levels of economic performance) with Canada and Mexico being increasingly obliged to internalize US production and consumption norms as well as to find their place as best they can within an emerging continental division of labour. The East Asian triad has developed an increasingly important regional division of labour organized primarily under Japanese regional hegemony but it has no coherent institutional mechanisms to ensure effective co-ordination and is weakened by Japan’s continuing inability to break out of its political impasse as well as by the residual bitterness felt by significant social forces in countries occupied by Japan in the 1930s and 1940s. The European Union provides the only example among the three triad regions of a clear commitment to economic, political, and social integration and, more ambivalently, to the development of supranational state structures. Nonetheless all three regions/triads linked to internationalization of policy regimes not only in economic but also in juridical, political and social fields, etc.. This excludes any easy generalization from the EU case to the other two triads — or vice versa; this is itself a sign that one should not push globalization too far as a general explanatory framework of recent changes.

Finally, regarding the mode of delivery of economic and social policies, the SWPR has become more regime-like relative to the statism of the KWNS. This is reflected in the increased importance of non-state mechanisms in compensating for market failures and inadequacies and the delivery of state-sponsored economic and social policies. One aspect of this is the increased importance of private-public networks to state activities on all levels – from local partnerships to supranational neo-corporatist arrangements (e.g., Clarke and Gaile 1998; Falkner 1998). The often remarked shift from government towards ‘governance’ (from imperative coordination to networking and other forms of self-organization) means that traditional forms of intervention now play a lesser role in economic and social policy. This does not mean that law and money have disappeared, of course; instead, active economic and social steering now tends to run more through soft regulation and reflexive law, additionality and private-public partnerships, organizational intelligence and information-sharing, etc.. A key role is also played by ‘meta-steering’ (which I have described elsewhere as ‘meta-governance’), i.e., the organization of the institutional framework and rules for individual modes of governance and the ‘collibration’ (or re-balancing) of different modes of governance (see Dunsire 1996; Jessop 1998). This can be seen at the European level, where EU institutions typically operate less in the manner of a re-scaled, supranational sovereign state apparatus than as a nodal point in an extensive web of meta-governance operations. Thus they have a central role in orchestrating economic and social policy in and across many different scales of action involving a wide range of official, quasi-official, private economic, and civil interests (i.e., a supranational sovereign state) (Tömmel 1994, 1998; Ekengreen 1997; Willke, 1992, 1996; Sbragia 2000).

How does this relate to the European Union?

I now argue that each of the four shifts identified above is evident in the development of economic and social policy in Europe. This is hardly surprising because the hypothesized transition from the KWNS to the SWPR derives from theoretical analysis of developmental tendencies in capitalism combined with careful empirical observation of national economies within the circuits of Atlantic Fordism. But, since the account presented above derives from the North American and Antipodean cases as well as from Northwestern Europe and also took the national economy and national state in Atlantic Fordism as its theoretical and historical starting point, it will be worth re-examining the argument from the perspective of the EU to see whether tendencies at the national level are also reflected at the level of the European Union. It is also a key part of my argument that shifts in labour market policy are related to the more general restructuring, reorientation, and rescaling of state involvement in securing the reproduction-regulation of contemporary capitalism. Thus it is important to show how shifts in the EU’s involvement in employment policy are connected to other changes in the European Union. Accordingly I will briefly summarize the ways in which these changes are reflected in the development of Social Europe.

First, it is quite clear that the EU’s overall economic policy has been reoriented in the direction of a Schumpeterian strategy from an earlier period when it was more suited to Atlantic Fordism. The origins of European integration can be found in postwar reconstruction that prepared the ground for Atlantic Fordism in Europe (for details, see van der Pijl 1984). Thus, in addition to their initial postwar role in restructuring iron, steel, and coal in this context, the European communities also emphasized the creation of an integrated market so that industrial enterprises could realize optimal economies of scale. This involved an essentially liberal Ordnungspolitik to create a single market and was an important supplement to the pursuit of national Keynesian policies — especially as the Treaty of Rome left official responsibility for employment policy at the national level. Indeed, as Sbragia notes, the EU’s basic constitutional framework structurally privileges liberal economic strategies: ‘the norm of economic liberalization, embedded in the Treaty of Rome, was reinforced and elaborated in the Single European Act and the Treaty of Maastricht’ (Sbragia 2000: 224). Thus even when the EU, under Delors’ presidency (1985-1995), began to develop a more active employment policy and to plan for a Social Europe and then attempted to institutionalize these twin responsibilities for the first time in the Maastricht Treaty (1991), this occurred in an institutional context that was already biased in favour of liberalism and in an ideological climate that was dominated by neo-liberalism. On the latter point, we should note that the collapse of Soviet bloc communism had led to a western-orchestrated neo-liberal system transformation; that neo-liberalism became hegemonic in the west with the neo-liberal regime shift in Reagan’s America and Thatcher’s Britain and with a resurgent American influence on many international institutions; and that even the more regulated national variants of capitalism began to undertaking neo-liberal policy adjustments within their traditional modes of economic and social regulation.

It is worth noting here that the six initial members of the EEC had modes of growth and modes of regulation belonging to one or other of the regulated varieties of capitalism and either had one or other form of conservative-corporativist welfare regime or, in Italy’s case, a clientelist mediterranean welfare regime (cf. Ruigrok and van Tulder 1996; Hantrais 2000). This suggests that the institutionalized commitment to economic liberalism might initially have provided the basis for the integration and consolidation of regulated capitalism on a wider scale rather than the means to push through a far-reaching liberal programme. The situation changed, however, as new members with different modes of growth, modes of regulation, and welfare regimes joined the European Community. This introduced greater economic and social heterogeneity into the European economy and helped to shift the balance of forces in a neo-liberal direction. It has been correspondingly more difficult to establish the conditions for re-scaling state planning from the national to the European level or to establish Euro-corporatism (on Euro-corporatism, see Falkner 1998 and Vobruba 1995; and on its limits, Streeck 1995). Likewise, rather than seeing a re-scaling of the welfare state upwards to the European Union, EU social policy largely takes the form of social regulation. For, as Majone notes,

measures proposed by the Commission in the social field must be compatible with the ‘economic constitution’ of the Community, that is, with the principle of a liberal economic order. This requirement creates an ideological climate quite unlike that which made possible the development of the welfare state in the Member States … The economic liberalism that pervades the Founding Treaty and its subsequent revisions gives priority to the allocation of public policy over distributional objectives. Hence the best rationale for social initiatives at Community level is one which stresses the efficiency-improving aspects of the proposed measures.

 (Majone 1993: 156).

These difficulties have been reinforced through the manner in which the EMU has been instituted. The convergence criteria established under the Maastricht Treaty have made it more difficult for member states to break out of the neo-liberal framework and the limited EU budget prevents it from financing a major expansion of a European welfare regime. Indeed, in certain respects, the EMU serves as a new ‘gold standard’, requiring conformity to relatively rigid norms of economic and political conduct favourable to a liberal (money) conception of economic stability and growth. In particular compliance with the Maastricht criteria have required public spending cuts or constraints, social security and welfare reforms, and more or less significant privatization of state-owned enterprises and commercialization of public services. Nonetheless, even in this context, we can discern a growing concern with active involvement in promoting competitiveness, innovation, and enterprise in line with Schumpeterian perspectives. Although the main thrust of this involvement accords well with neo-liberal strategy, it is nonetheless flanked by neo-statist and neo-corporatist strategies, illustrated by key features of EU technology policies and social policy respectively (for a brief summary of the distinctions between neo-liberal, neo-statist, and neo-corporatist variants of the SWPR, see figure 1; for some elaboration, see Jessop 2000c; see also Gottfried 1995). A very interesting development in this area is, of course, the resurgence of corporatism in a new guise — social pacts oriented to wage restraint, social security reform, supply-side competitiveness, and general conformity to the logic of the new monetary system (see Deppe, Felder, and Tidow, 2000; Regini 2000; Grote and Schmitter 1999; Rhodes 1998).


Second, welfare and social policy was retained as a national competence in the founding treaties of the European Community and policy-making at the European level in these fields has systematically lagged behind macro-economic, industrial and technology policies. Thus, as Kuhnle, notes, ‘[t]here exists as of today no European social law on basis of which individual citizens can claim benefits from Brussels; no direct taxation or social contributions to EU which can finance social welfare; and there hardly exists any welfare bureaucracy in the EU’ (Kuhnle 1999: 6). Nonetheless there is increasing evidence of a complex and complicated reorientation of welfare policy at the European level. This involves two apparently contradictory tendencies. On the one hand, some welfare policies (such as equal pay, equal opportunities, portable welfare benefits, minimum standards for health and security at work, and rules on working hours) have been gradually re-scaled to the EU level to supplement the more traditional nationally-scaled welfare measures; and some structural policies have also been re-scaled at a European level to facilitate industrial restructuring, compensate for uneven regional development, support agriculture, and help to regenerate declining communities. On the other hand, the emergence of social policy at the European level tends to assume a workfare rather than welfare orientation. Thus ‘the political point of reference [of such economic and social policy initiatives] is not so much social integration but rather the instrumentalisation of policy as a resource for competition oriented structural change’ (Deppe, Felder, and Tidow 2000: 20). In short, there is a growing mix of welfare and workfare strategies at the European level; but they are unified around the concern to create the conditions for an effective single market in post-Fordist rather than Fordist conditions.

One of the earliest signs of this reorientation can be found in the European Commission’s White Paper on Growth, Competitiveness, Employment (1993). This reviewed a wide range of factors affecting the competitiveness of the European economy and its capacity to generate good jobs and sustainable economic growth; and it recommended an equally wide range of trans-European macro-economic, environmental, infrastructural, technological, educational, vocational, and social policy initiatives that might address — rhetorically at least — the challenges of the coming century. In the field of labour market policy, for example, the Commission called for a broad ‘advanced training offensive’ and other measures to enhance labour market flexibility. This reorientation was taken further at the 1994 EU summit in Essen, when it was finally recognized that effective employment policies conducted exclusively at the national level can no longer be successfully managed under the conditions of globalization and European integration (Hoffman and Hoffman 1997: 22). The Treaty of Amsterdam finally embedded a commitment to full employment as a ‘matter of common concern’ for the EU, translated this into the goal of reaching a ‘high level of employment’ without undermining competitiveness, and established an Employment Committee to discuss appropriate policy in this area and to monitor progress. In line with the European Union penchant for ‘meta-governance’ rather than direct top-down intervention, however, the Community’s responsibility in this area is to complement the activities of member states by developing a ‘coordinated strategy’, to formulate common guidelines, to establish benchmarks and ‘best practice’, and to monitor the pursuit of national action plans for employment.

Examining the emerging practice in this area over the last three years reveals both the extent to which the workfarist reorientation of social policy has penetrated to the EU level and also how far it is linked with expansion of the domain of the ‘economic’ into areas previously regarded as non-economic. One aspect of this, as noted by Deppe, Felder, and Tidow (2000: 15-16), is that, for the first time, the breadth of the EU labour market guidelines has forced the ministries of economy, culture, finance, welfare and labour to present a joint plan and to relate the separate policies to each other. This can be interpreted as the extension of the logic of commodification or, at least, of capitalist economic calculation into the wider society. Such pressures are also incremental, building up ratchet-fashion, with each successive cycle of national employment pacts.

Third, almost by definition, European economic and social policy illustrates the post-national nature of the emerging welfare regimes. Before considering the EU’s role, however, we should note that it is itself part of a more complex internationalization of economic and social policy. Its policies are evolving within a broader framework of growing involvement in agenda-setting and policy-making by international institutions, supranational apparatuses, intergovernmental organizations and forums, transnational think tanks, and transnational interest groups and social movements (cf. Deacon 1996; on policy transfer, see Dolowitz and Marsh 1996; Peck and Theodore 2001; and Stella 2000). It is important to recognize, with Deacon (1996: 45-58), that there is some real disagreement among these different bodies on policy recommendations; but this should not be exaggerated since the bodies aligned with the ‘Washington consensus’ have tended to be the most influential in the internationalization of economic and social policy. Thus Deacon and Hulse (1997: 47) note some convergence between EU and OECD policies as the EU has discovered the adverse impact on competitiveness of KWNS social policy and the OECD’s Directorate of Education, Employment, Labour and Social Affairs has come to recognise the economic benefits of expanded income support programmes. This development, mediated through an increasingly dense web of parallel power networks, reflects the increased formation of a transnational capitalist class concerned to secure the conditions for capital accumulation on a global scale. This is associated with a ‘new constitutionalism’ (Gill 1995, 2001), i.e., an attempt to establish a new articulation between the economic and the political on a global rather than merely national scale. But it is also associated, as noted above, with attempts to re-articulate the relationship between the economic and the extra-economic conditions for capital accumulation in a globalizing, post-Fordist, knowledge-based economy.

The European Union has a key role in this new constitutional settlement. Unsurprisingly, therefore, its still emerging character as a political arena-entity is subject to pressures from well beyond its borders (especially from the USA); and it is also becoming involved in international forums on various scales to re-stabilize the conditions for economic growth and stability in the wake of the crisis of the primacy of the national scale in the postwar ’embedded liberal’ international settlement. At the same time the tendential Europeanization of economic and social policy is also closely linked, in accordance with the principle of subsidiarity, to the increased role of subnational and cross-national agencies, territorial and/or functional in form, in its formulation and implementation. In this regard there is an interesting scalar division of labour between the EU, national states, and sub-national tiers of government. For, whereas national states retain significant powers in the traditional spheres of the sovereign state (military, police) and in welfare policy (where the limited EU budget blocks a major role in general social redistribution even if it acquired this competence), the EU has acquired increasing influence over economic policy.

Fourth, although the EU has never acquired the characteristics of a supranational sovereign state or even a confederation of states and so cannot be said to have undergone a shift from supranational government to supranational governance, it has developed an increasingly wide and deep array of both governance and meta-governance capacities that enable it to influence economic and social policy in most areas and on most scales. Four specific features of the EU give it special influence here: the role of judges and litigation (which enables the EU to override national laws and to ‘constitutionalize’ the treaties), its location at the heart of information flows (which gives it a relative monopoly in organizational intelligence), and fiscal poverty (which limits its vulnerability to claims on public spending and thereby circumscribes the political agenda) (Sbragia 2000); and the increasing adoption of European projects and guidelines which entitle the EU to monitor national and regional state activities and partnerships across an increasingly interconnected set of policy areas — thereby giving a means to steer national policy and endow it with greater coherence (Deppe, Felder, and Tidow 2000; Majone 1993; Wallace 2000). The distinctive form of meta-governance in the EU, which invalidates attempts to judge its role in terms of traditional criteria associated with the sovereign national state, is well expressed by Sbragia as follows:

The European Union governs in the sense of “steering” because it is structurally designed [to keep] certain questions off the table while insisting that others be kept on the table. The use of treaties rather than a constitution, the institutionalization of the norm of economic liberalization in those treaties, the creation of a powerful court, its unusual access to information, and the lack of public funds all help the Union steer

(Sbragia 2000: 236).

Likewise, Tömmel, having noted the key role of regional and local authorities and various public-private partnerships in performing governmental roles in a complex web of cooperative networks organized in tangled (or, more paradoxically yet, de-hierarchized) hierarchies, suggests that the Europe of Regions is becoming

an indispensable element of an emergent, new open and flexible system, in which the EC — or the Union as a whole — will stimulate competitive and co-operative behaviour and performance of decentralized — public and private — agents and institutions, by using open, market-oriented steering mechanisms and by institutionalizing more complex procedures in decision-making and consensus-building.

(Tömmel 1998: 75).

In short, meta-steering is one of the most significant areas in which the EU is involved in restructuring, reorienting, and rescaling welfare. The very fact that these activities do not conform to the traditional notion of the exercise of state power has made it hard to see their significance for the overall dynamic of state formation at the European level. But they have nonetheless played a key role in the gradual rise of an EU workfare programme to promote full employment via enhancing the flexibility and employability of workers in the interests of greater competitiveness and enterprise in the transition to post-Fordism. This still leaves scope for different national or regional interpretations of flexibility and employability — ranging from the neo-liberal model promoted by Thatcherism and retained under New Labour (see my other contribution to this volume) through the neo-statist model found in France to more neo-corporatist patterns associated with the Scandinavian and other Rhenish economies. The European Employment Strategy is a particularly good example of this situation and, in this regard, as Leibfried and Pierson note, it is a key element in ‘Europe’s emerging multi-tiered system of social policy (2000: 288).


I have tried to develop five main points in this chapter. First, the changing nature of economic and social policies in the European Union cannot be regarded as a unique product of the specific dynamic of the emerging Europolity, whatever form this might eventually take. For similar changes can be found in other economies and regions that were once dominated by Atlantic Fordism and one or another form of Keynesian welfare national state. Second, there is a close connection between changes in economic and social policies in the European Union insofar as both sets of policy changes represent emerging responses to the crisis of the Atlantic Fordist mode of growth (and its specific instantiations in different national and regional models of postwar capitalism within the overall circuit of Atlantic Fordism) and/or to the associated crisis of the Keynesian welfare national state (again in one or other of its variant forms). This means that, whilst there are historically specific institutional dynamics and specific configurations of social forces in the different areas of economic and social policy (and, indeed, their nationally specific demarcations and sub-divisions), there are also material, social, and spatio-temporal linkages between them that require increasing attention in a post-Fordist period to the overall coherence and coordination of these different policy areas. Third, the reorientation of economic and social policy is also closely related to their rescaling and their modes of governance and delivery. This is partly due to the changing nature of capital accumulation and partly due to the crisis of the national state as the primary scale on which the Fordist mode of regulation was organized. This requires increasing attention to activities above, below, and beyond national borders and to their coordination in tangled hierarchies of networked institutions, organizations, and individuals. Moreover, even when one is primarily concerned with the redesign of economic and social policy at the level of the European Union, it is still essential to look at the broader international context within which this redesign is occurring as well as its implications for economies and states on its borders.

Fourth, in thinking about the Europeanization of economic and social policy as part of the general emergence of the SWPR, we must be careful not to make two common mistakes. We should not mistake Europeanization for the rise of a supranational European state when what is actually emerging (at least until now) is a complex, multi-tiered, multi-sphered, and multi-centric political space that serves to condense a changing balance of forces rather than to consolidate a new state form for its own sake. In this sense many of the ambiguities surrounding the emerging Europolity have important political functions and the tensions involved in its construction represent clear differences in economic and political strategy. Nor should we mistake the process of Europeanization for a withering away of national states. Even if the national economy-national state-national society spatio-temporal fix is no longer primary, this does not mean that the national state has ceased to be a central nodal point in the overall articulation of economic, social, and political spaces and activities. For this reason we can expect to see continuing divergences in the nature of economic and social policy regimes, reflecting the continuing path-dependent legacies of different models of capitalism, different state traditions, different balances of forces, and different accumulation strategies and hegemonic projects. But these divergences will develop within the framework of struggles over the future shape of the global division of labour, the relation between the three main triad powers, and, especially, the relation between the USA and Europe.

Fifth, and finally, I have tried to indicate that the specific shape of the emerging European SWPR was not pregiven or prescripted by the logic of the transition from Atlantic Fordism to a globalizing, knowledge-driven economy but has been moulded by the struggle for hegemony between different accumulation strategies and hegemonic projects. It is the neo-liberal project of a transnational class that has come to dominate for the moment. Whether or not this dominance continues depends on the capacity of the forces arrayed against it to develop their own counter-hegemonic project and to conduct a war of position against the entrenched positions of the dominant neo-liberal forces.



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[1] Pitruzello (1999) subjected Esping-Andersen’s typology to cluster analysis and, on this basis, developed a new fivefold typology. This not only distinguishes between antipodean and the anglo-american liberal market regimes but reclassifies the other cases into three groups: universalistic (belgium, denmark, norway, sweden), Bismarckian (Germany, Swizerland, and the Netherlands), and a new subdivision of the conservative-corporatist model (Austria, Finland, France, Italy, and Japan).

[2] Pitruzello (1999) provides a good overview of mainstream critiques; see also Abrahamson (1999) and, for feminist critiques, Daly (1994) and Bussemaker and van Keesbergen (1994).

[3] On Germany, Britain, France and northern Italy in this regard, see Biernacki 1995.

[4] Soskice includes the following elements in his notion of the production regime: the financial system, industrial relations system, education and training system, and the intercompany system (Soskice 1999: 102).

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