The Future of the Welfare State and Democracy: the Effects of Globalization from a European Perspective

Abstract

The post-war Keynesian welfare state in Europe was sustainable as long as post-war European economies were growing and were relatively closed; however, over the years, as entitlements grew ever bigger and coverage became ever more universal, the proportion of GDP spent on public services rose considerably. With economies becoming more open, the stagnation which started in the second half of the seventies in Europe, following the oil crisis, was perhaps the first symptom that the welfare system in the form designed for one period (the post-war reconstruction of Europe) might be not be working in a different period. There is no major disagreement, broadly speaking, about the future of the welfare state in its current European postwar form: its foundations, for a variety of internal and external reasons and due to a variety of international and domestic pressures, are under siege today. Major differences are based on different explanations about what has been happening to the European welfare state since the mid-1970s until now, about different variations of restructuring in different European countries, and different degrees of emphasis concerning the scope of welfare state downsizing in particular countries in the future. The question debated today is not whether welfare retrenchment has come to be seen as necessary by the governments of most affluent Western democracies, international organizations, global organizations and development agencies, and the European Commission; it is rather why.