1

Welfare state was a response to the post world war international economic order.
This international order was maintained and directed by US hegemony and it was based on Trans
Atlantic alliance and it was liberal in nature. It was necessitated for capitalist accumulation and
Fordist mode of production growth and development strategy. Each and every developed nation
adapted a peculiar welfare state based on its social, political and economic history. However, by
1970s, the situation changed and welfare state was regarded as a burden on nation states and economic
growth as well as international economic order. The new discourse was placed upon the ‘shrinking of
the state and depoliticization of political economy’. Different schools adopted different causalities
behind the decline and the failure of the welfare state. On the one hand, Neo- liberal thinkers argued
that the increasing levels of public expenditures and inflation induced the erosion of the national
economies and the economic order. As well, they defended the cuts in public expenditures and
retrenchment and restructuring of the welfare states by relating it to market freedom and justice. On
the other, Neo- Marxists touched upon the fact that capitalist mode of production and accumulation is
crisis containment and this failure was in fact stipulated. Also, failure in Fordist mode of production
and consumption, demographic trends, family structures and social movements, changing patterns of
life styles and consumption and the inability of state in adjusting itself to these changes were regarded
as the internal key factors behind this failure.

Hence, in this paper, I will try to discuss about the neo- liberal transformation of the
welfare state. First of all, I plan to mention on the emergence of the welfare state and the
characteristics of (what Jessop called as) the ‘Keynesian Welfare National State’ (KWNS). Secondly,
I will touch upon the issue about the change in the international economic order and the erosion of
post war consensus as an external shock. Thirdly, I want to refer to the transition from Fordism to Post
Fordism. I will also deal with demographic trends, family structures and rise of social movements
which had a role in the determination of the welfare state restructuring and retrenchment. In this way, I
believe, we can have an overall outlook on how the transition within the welfare states occurred and
why this had occurred.
 2

1. The Emergence of Welfare States and Post War International Economic Order: Keynesian
Welfare National States

Welfare state was unique for post world war international economic order. It was vital for the
development of capitalist mode of production and that international economic order since it
maintained the balance in terms of social, economic and political order within the nations and among
the nation states, which is defined as the ‘embedded liberalism’ by Ruggie. Herefrom, I will try to
mention on the emergence of the welfare states, in general, in this part. I mainly refer to B. Jessop and
Keynesian Welfare National States (KWNS).

To begin with, talking about the ontology of the welfare state, Schmidt and Hersh refer to K.
Polanyi by saying that:
‘…the economic sphere of human societies was historically embedded in social relations,
while under modern industrial capitalism the market has become a separate and dominating
entity. Based on the experiences of the Great Depression and World War II, whose origins
could be traced to the generalization of the economic liberalism following World War I,
Polanyi warned against the liberal utopia of the self regulating market which if generalized
is a prescription for disaster’.1 (p.71).

In terms of the notion of welfare state, Main2 says that ‘by welfare state, we mean …political
institutions that make policies designed to manage macro social forces that go behind the control of
any private institution, for the purpose of advancing public interest’. Thus, an institution was needed in
order to manage social forces. In addition to this management, an another need had emerged, in terms
of dealing with the problem of relief for the destitution with the breakdown of traditional agricultural
economies and communities confronting the establishment of capitalist relations involving the
expropriation of people’s former livelihood.3 In this respect, the damage to the social fabric should be
cured. Hence, welfare state was vital to build up the backbone of the industrial society and curtail the
pain of transition.

1
Schmidt, J.D.& Hersh, J. (2006). ‘’Neoliberal globalisation: Worfkfare without welfare’’ in
Globalizations, Vol:3, Issue:1, pp. 69-89.

2
Main, T.J. (2006). ‘’The Future of the Welfare State and Political Theory’’ in Perspectives on
Political Science, Vol:35, No:4, pp. 219-225.

3
Schmidt& Hersh. (2006). (p.71)
 3

Welfare state is supposed to correct the market failures and inefficiencies for the well
functioning of the system. Related with it, this system and hegemonic project, that restores the
stability after World War II, is called as the ‘embedded liberalism’. Cerny 4 (p.5) indicates that
economic liberalism, associated with market capitalism, is ‘an uneasy combination of laissez faire
economics and pro- competitive economic regulation’ (p.5). Besides, international economic
liberalism is the promotion and regulation of increasingly open international trade (through GATT), an
international monetary system (IMF) and economic development (IBRD). Also, he defines embedded
liberalism as a linkage of international economic liberalism with American style- domestic liberalism
(or European style social democracy) through Keynesian macroeconomic policies, the welfare state.5
Also, Ruggie argues that, in relation to hegemonic stability and embeddedness, ‘a complex structure of
social regulations rather than market exchange determined the organization of economic activity at
home and abroad’ (p.385)6. Moreover, Swank identifies embedded liberalism as a combination of
international liberalism with substantial state intervention and social compensation.7 According to my
point of view, this brief description will pave the way for us while placing the welfare state into the
frame that is post war international economic configuration. Anyhow, we can discuss on the KWNS.

Referring to Jessop, we should denote that he refers to the French regulation school and
institutionalism. We can say that talking about the existing regimes or the change of regimes, we
mainly points out the institutional structures or changes in institutional organizations. According to
Jessop, new regimes replace with the others in terms of their role in social and economic reproduction
and institutional structures. (p.348) 8 Hence, while making an analysis of KWNS, he initially makes
the characterization of capitalist state and its role in economic and social reproduction:9
1. its role in the economy
2. its role in the social policy
4
Cerny, P. G. (2004). ‘’Mapping Varieties of Neoliberalism’’, in IPEG Papers in Global Political
Economy, No. 12, May 2004.

5
Ibid.

6
Ruggie, J. (1982). ‘’International Regimes, Transactions, and Change: Embedded Liberalism in the
Postwar Economic Order’’, in International Organization, Vol. 36, Issue 2.

7
Swank, D. H. (2002). ‘’Globalisation, Democracy, and Welfare State’, Chapter 2 in his Global
Capital, Political Institutions and Policy Change in Developed Welfare States, Cambridge University,
Port Chester:NY.

8
Jessop, B. (1999). ‘’The Changing Governance of Welfare: Recent Trends in its Primary Functions,
Scale, and Modes of Coordination’’ in Social Policy and Administration, Vol:33, No:4, December. pp.
348- 359.

9
Ibid.
 4

3. the scale on which these roles are performed

4. the modes of governance with which they are associated.

As we have mentioned above, the capitalist state in the form of governance of welfare state
was the basis for post war international economic order. In this respect, Jessop (p.55) identifies this era
as a construction of a stylized model of the postwar state in the economies of Atlantic Fordism,
namely the USA, and Canada, Northwestern Europe, Australia and New Zealand10. Also, he asserts
that despite the auto centric (or domestically based) growth dynamic, the diffusion of the American
industrial paradigm to Northwestern Europe resulted in the spread of Fordist accumulation regime.11
As well, because of the support of various transatlantic international regimes, this era was called as
Atlantic Fordism12. Moreover, this regime is mainly based on ‘mass production and mass consumption
secured through a distinctive mode of regulation that was discursively, institutionally and practically
materialized in the Keynesian welfare national state13. That’s why; we can say that KWNS is vital for
capitalist accumulation.

Before talking about the KWNS, I want to refer to the Fordist growth dynamic in order to
make the subject clearer. Jessop analyses this regime in 5 categories:

1. It was the labor process viewed as a particular configuration of the technical and
social division of labour, which is mainly described as Fordist mode of production. (In this
respect, it reproduces labour power as a fictitious commodity.)14

2. It was an accumulation regime, which comprises a macroeconomic regime sustaining

a structurally coherent pattern of growth in capitalist production and consumption. It
can be conceptualized as a stable mode of macroeconomic growth. That’s why; this
era is called as post war consensus: consensus between state and trade unions for

10
Jessop, B. (2002). ‘’The Keynesian Welfare National State’’ in The Future of the Capitalist State,
Cambridge: Polity Pres, pp. 55-95

11
Jessop. (2002). (p. 55).

12
Ibid.

13
Ibid. (p.52).

14
Jessop. (1999). (p.349).
 5

demand management. (In this way, citizens would be able to share the fruits of the
Fordist growth). 15

3. It is a mode of regulation, defined as an ensemble of norms, institutions,

organizational forms, social networks and pattern of conduct that sustain and guide a
given accumulation regime. It mainly gives emphasis upon securing effective
aggregate demand in national economies and socializing losses and debts in an
expansionary but mildly inflationary environment. That’s why; full employment, the
wage levels as well as demand side management are very important in order not to fall
into the traps of under-consumption (and in order to sustain economic growth
(p.125))16.

4. It is a mode of societalization or pattern of social organization, that is a pattern of

institutional integration and social cohesion that complements the dominant
accumulation regime and its mode of economic regulation, thereby securing the
conditions for its dominance in the wider society. That’s to say that; workers are
dependent on an individual or social wage to satisfy their needs. Also, the
consumption is standardized and bureaucracy gains importance. Related with it, we
face with collective consumption and emergence of an urban- industrial, middle mass,
wage earning society.

5. It is a social formation characterized by a contingent correspondence among all four of

the preceding referents.17

6. It is based on the conditions for capitalist profitability. That’s why; demand is

important.

7. It is an economic and social policy that is historically specific and socially constructed
which is matrix of a national economy and a national state and national society composed of
national citizens. So KWNS is a national territorial state.18

15
Jessop. (1999). ( p.349)

16
Pierson, C. (1991). ‘’Origins and Development of Welfare State, 1880-1975’’, in C. Pierson,
Beyond the Welfare State, Pennsylvania: Pennsylvania State University Press, pp. 102-140.

17
Jessop. (2002). (p.52).

18
Jessop. (1999). ( p.349)
 6

In relation to the Fordist growth dynamic, Jessop19 argues that KWNS are based on:
1. States distinctive role in securing conditions for profitable private business. According
to this basis, market forces can not alone secure these conditions. So, intervention into the
market is perceived as ‘just’.
2. Social democracy for the reproduction of labor power individually and collectively
over various time spans from quotidian routines via individual circles to
intergenerational reproduction. This is mainly about the field of social policy. In this
respect, labour power is created as a fictitious commodity which is bought and sold in
the market, add value to the production but not directly reproduced in the market or
capitalist firms. Then, labour power enters the market from outside. That’s why; it is a
fictitious commodity.
3. Scale on which economic and social policies are decided.
4. Maintenance of capitalist profitability and reproduction of labour power by
compensating for market failures and inadequacies.
However, we can not talk about a pure form of KWNS but specific, path dependent and national
variable ones.

To summarize, Esping Andersen (p.20)20 indicates that welfare state involves the state
responsibility in the secure of some basic modicum of welfare for its citizens21 (based on citizenship
rights which are civil, political and social rights)22. According to him, the nation building process
necessitates the extension of full citizenship rights such as social rights23. He asserts that welfare state
emerged with the rise of modern bureaucracy as a rational, universalistic and efficient form of
organization. Also, it is related with the rise of nation states, industrialization, urbanization, decline of
traditional support mechanisms and a need for high living standards or a decent life. According to him,
‘the welfare state is an inevitable product of the capitalist mode of production’ since ‘capitalist
accumulation creates contradictions that compel social reform’24. In addition to that argument,

19
Jessop. (1999). (p.349)

20
Esping- Andersen, G. (1989). ‘’The Three Political Economies of the Welfare State’’ in the
Canadian Review of Sociology and Anthropology, Vol:26:2.

21
Ibid.

22
Esping Anderson, G. (1996). ‘’After the Golden Age: Welfare State Dilemmas in a Global
Economy’’ in G. Esping Anderson (ed.) (1996) WElfare State in Transition: National Adaptations in
Global Economies. , pp. 1-31. Sage Publications

23
Esping- Andersen. (1989). (p.15).
 7

Pierson25 asserts that when capitalism and the nation state were both well established, the welfare state
had a tendency to emerge. As well, he argues that welfare state emerges as a result of imitation of
welfare state innovators as like Britain imitated Germany.

As I have tried to summarize above, KWNS had emerged as a response to the post war
international economic order. It relied on demand management for economic growth (in relation to
military power) and social citizenship rights for the national state construction after World War II. As
well, it was needed by the system to maintain the balance and sustain the hegemonic power as against
Communism and Fascism. That’s why; it has the characteristics of that period and it was unique in that
sense. However, as both the international and domestic order and conditions changed, whether it is a
shift in mode of production or the demographic transition, there arose a need to restructuring of the
welfare state.

2. Change in the International Economic Order and the Erosion of post war Consensus:
Schumpeterian Workfare Post National Regimes

By 1970s, the system under US hegemony had threatened by OPEC Oil Crises. Also, the
system of payments based on US dollar was threatened as a result of oil crisis and the rising levels of
public expenditures. Then, the era of embedded liberalism came to an end. Hence, in this part, I will
try to deal with the issue of the transformation of welfare state and the emergence of neo- liberal
economic orthodoxy as well as neo- liberal globalization even there are various forms of welfare state
and restructuring . The main emphasis will be on Schumpeterian Workfare Post National state.

First of all, Schmidt and Hersh designates that ‘globalization is used by critical theory to
describe the intensification of universalization process of capitalist relations associated with neo-
liberalism as its ideological discourse’.26 Then, universalization of neo- liberalism and neo- liberal
capitalism is critical and vital. Dean (p.49) asserts that ‘…Not until the elections of Margaret Thatcher
in the UK in 1979 and Ronald Reagan in the USA in 1980 did neoliberal ideology come to dominate
economic policy.’27 Foucault characterizes neo- liberalism as (1) a departure form the state

24
Esping- Andersen. (1989). (p.14).

25
Pierson. (1991). (p. 100).

26
Schmidt& Hersh. (2006). (p. 69)

27
Dean, J. (2008). ‘’Enjoying Neoliberalism’’ in Cultural Politics, Vol:4, Issue:1, pp. 47-72.
 8

supervising and regulating the market and (2) a framework depends on notion of individual or subject
that is active, rational and responsible.28 Furthermore, neo- liberalism is supposed to be based upon
maximization of human well- being through entrepreneurial freedoms within an institutional
framework (by active role of the state)29 characterized by private property rights, individual liberty,
free markets and free trade (p.145).30 In this framework, state is needed to secure the private property
rights and to support the free functioning of the markets.31 In other words, it is believed that, without
the inference of state, market has the appropriate mechanisms to provide justice in the society 32 [which
seems as a shift from embedded liberalism]. So, everyone will win in the free market.33 Also, human
freedom can be achieved through the operation of markets.34 Because, market is the best efficient way
of ensuring that everyone does that for which they are best suited and gets what they want’ and benefit
in an unfettered market.35 Then, competitiveness should be diffused throughout the society to remain
in the market and benefit from it. Hence, technological developments, the international financial
facilities and globalization and internalization of neo- liberal orthodox hegemony should be treated in
this manner.

As it can be seen above, there is a significant shift in the assumed role of the state and
approach to the free market. That’s why; I want to benefit from the conceptualization on governance in
order to see the shift within the organization of the state. Jessop describes it as any form of
coordination of interdependent social relations.36 He argues that governance enables us to classify
regimes in terms of their typical combinations of modes of coordination.37 He identifies 3 forms of
coordination:38
28
Ibid. (p.48).

29
Ibid.

30
Havey, D. (2006). ‘’Neo- liberalism as creative destruction’’ in Geografiska Annaler Series B:
Human Geography; 2006, Vol. 88 Issue 2, p145-158.

31
Ibid.

32
Ibid.

33
Dean. (2008). (p.48)

34
Ibid.

35
Ibid. (p.54).

36
Jessop. (1999). (p.351)

37
Jessop. (1999). (p.352)

38
Ibid.
 9

1. Anarchy of exchange: market forces

2. Hierarchy of command: imperative coordination by state
3. Heterarchy of self organization: based on networks and governance.

Governance in welfare state was basically developed by the development of formally free labor
and markets and the market forces became the chief mode of capitalist economic coordination.39 In
addition to invisible hand, the governance in welfare states was based on the interpersonal and inter-
organizational coordination.40 Thus, it mainly emphasizes the collective goals and welfare regimes to
secure the conditions for capitalist accumulation.

While talking about the various welfare regimes, governance practices in welfare regimes aim
at creation and reproduction of the subjects needed for governance to operate effectively. Then,
welfare regimes are not only responses to pre given economic and social problems but they are the
constitutive of their objects of governance. So, changing governance depends on new problem and
new solutions. 41 In this respect, the failure of KWNS mainly depends on the search for new forms of
governance. It began to fail as a mode of governance when its coherence as an institution ensemble
became inconsistent with its objects. The question raises form the fact that whether the objects of
42
governance will remain as passive subjects of KWNS or identities and interests of active agents.
Then, new governance should be capable of dealing with the new problems posed by its own objects.

In addition to the changes in governance, transition occurs as a radical reform of postwar

welfare states and the weakening of their governance structures as well as their policy effectiveness by
the interaction of various economic, social and political factors that leads to system crisis. 43 In this
respect, Jessop refers to Claus Offe’s crises management and crises solution. 44 Offe asserts that
capitalism can not coexist with neither can exist without the welfare state.45 On the one hand, liberal
capitalism can not exist without the management of the post war welfare state due to inefficiencies to

39
Ibid.

40
Ibıd.

41
Ibid.

42
Ibid.

43
Jessop. (1999). (p.348)

44
Ibid.

45
Ibid.
 10

remedy the market failures. On the other, even the capitalism relies on welfare state; this will become
a burden for itself due to the intrusion into the free market. That’s why; a crisis, crisis in the
accumulation process, emerges which forces for a shift in the mode of capitalist accumulation. Also,
Pierson gives reference to Offe while defining the crisis of welfare state whether it was a result of
sporadic crisis as an external shock or a problem of funding for the welfare state (p.137-138).46
Referring to O’Connor’s fiscal crisis of the welfare state, the crisis was originated from the tension
between the accumulation and the legitimation responsibility of the welfare state. 47 In other words, we
should question that whether the crisis was originated from the failure of embedded liberalism as an
international hegemonic project or it was originated from the fabric of the welfare state itself.

KWNS was based upon the means of measuring national economic performance and of
controlling economic flows across national borders. Inflation, employment and growth were regarded
as goals for national economic management. However, the main crisis arose from the national state
and capitalist mode of production and accumulation. By 1970s, Keynesian consensus eroded due to
the structural crisis in the world economy.48 Diminished growth rates, cumulative inflation and a wave
of unemployment were supposed as the main aspects of the crisis; but unemployment was utilized for
a way for employers to control costs.49 Related with KWNS, stagflations (and inflation) that fueled the
Atlantic Fordist economy and economic internationalization are supposed to be the drives for changes
in governance.50 This was associated with the collapse of the Bretton Woods Agreement in 1973, the
dramatic increases in the price of oil brought about by OPEC in 1973 and 1979 and the failure of
Keynesianism ‘‘to develop public understandings of the economy which could compete with the neo-
liberal rhetoric of ‘free market’ ‘’.51
Also, Swank argues that the erosion of the welfare state is the self destruction of liberal
representative democracy.52 First of all, it is argued that the generation of excessive expectations and
the disruptive effects of the pursuit of group self interest in the market place were the main causes of

46
Pierson, C. (1998). ‘’After the Golden Age: From Crisis through Containment to Structural
Adjustment’’ in Beyond the Welfare State, Polity Pres. Chapter Five, pp. 136-166.

47
Ibid.
48
Dean, J. (2008). (p.50).

49
Ibid.

50
Jessop. (1999). (p.353).

51
Dean. (2008). (p.50).

52
Swank. (2002).
 11

this self construction. Besides, the process of political competition resulted in unrealistic expectations
and the growth of well organized sectional interests and their willingness to use this power to achieve
sectional ends. This caused increase in public employment and ungovernability, inefficiencies in
public management, high taxes and shortfall of resources that fund further growth. In this respect, UK
can be given as an example which was treated as English disease with overload, ungovernability and
welfare state malaise.53 In fact, this is what O’Connor called as the fiscal crisis of the state. On the one
hand, state should sustain the appropriate conditions for capitalist accumulation since it depends on it.
On the other hand, state should be able to maintain its legitimization in the eyes of people in order to
hold the office. Swank calls this conflict of interests as prisoner’s dilemma.54

As I have tried to touch upon above, KWNS was viable and effective for a closed national
economy which was based upon mass consumption and production. In other words, demand
management was the drive behind the economic growth and Fordist mode of production. This was
necessary for the capitalist accumulation and that’s why; KWNS was viable for capitalist
accumulation and mode of production in the post war period. In relation to inflation and overburden
thesis and Offe’s crisis management thesis, the crisis was within the KWNS and the main problem was
the welfare state. So, governance comes into the picture and a change in governance could be given as
a solution to the system crisis. In this respect, Swank asserts that transition can be summarized as
retrenchment and neo- liberal restructuring of the welfare state.55 In other words, state became less
active in some aspects and more active in some others. Regulatory state or s strong state has emerged
as a result as oppose to the KWNS. This is highly bound to the emergence of new actors, such as
international mobile capital, international organizations, technocrats, central bank governors and civil
society etc. Thus, due to the economic internationalization, what is necessitated now is not the
domestic and closed economy restricted by territoriality. In stead, national economies replaced with
the knowledge driven economies and flexibility. In this sense, national demand replaced with
international economic competition and supply side intervention.56 What is more, as Schmidt and
Hersh say, ‘the past high economic growth rates have given way to mediocre productivity increases,
price competition, and relatively low profit margins on productive capital’.57

53
Ibid.

54
Ibid.

55
Ibid.

56
Swank. (2002).

57
Schmidt.& Hersh. (2006). (p.79.)
 12

Related with competition, flexibility and rise of new actors, such as international mobile
capital, international organizations etc., ‘internationalization of state’ arose related to the growth of
capital mobility, relaxation in controls and trade openness. With respect to competition, corporate
capital has become the determiner of the production and allocation of the resources.58 International
mobile capital had the freedom to choose between the countries to invest for the most profitable rate of
return mainly due to the financial integration (due to convergence between the domestic and world
economies), remove of barriers, liberalization of capital controls and deregulation.59 Hence,
governments are forced to choose between the achievements of a better wage bargain or threaten to
relocate of capital where conditions for surplus extraction are more favorable as well as with fewer
environmental regulations to attract foreign capital foreign direct investment.60 So, good economic
performance is necessary for approval and re- election of policy makers and extraction of the essential
revenues that support the government personnel and program 61 if we assume the structural dependence
of state on capital and the power of financial capital over the process of investment decisions and
priorities and development in a specific country.62 Dean indicates that increasing numbers of states
have embraced ‘neoliberal policies of privatization, deregulation and financialization’ depending on
pressures from ruling financial elites seeking to restore their class power. 63 Also, international
institutions such as WB and IMF compel the states to remove price controls, accept inferior terms of
trade, and dismantle their public sectors [related with new public management]. This has become as a
condition for loan and aid in accordance with Washington Consensus and structural adjustment
policies involving cuts to state budgets and programs for poor throughout the Second and Third World
to encourage development of markets for the flow of capitals to these countries as more profitable
investment sites.64 In other words, all these have been done, as Pollin argues, for ‘…eliminating
government deficits and inflation, cutting back government spending, deregulating labour and

58
Swank. (2002).

59
Ibid.

60
Schmidt.& Hersh. (2006). (p.79).

61
Swank. (2002).

62
İ. Eren Vural, ADM 551 Lecture, Novermber 21, 2008.

63
Dean. (2008). (p.51).

64
Dean. (2008). (p.51).
 13

financial markets, and opening national economies to free trade and multinational capital
investment’.65

This indicates the intensified competition between different industrial groups, different
working classes, not only at the national level, but at the international plane. 66 Hence, the neo- liberal
discourse as competitiveness is to be internalized by different sections of the society such as
competition among the workers.67 In this way, the supremacy of capital over labour was re- established
after the Golden Age of the capitalism. Also, the spread of keeping the wage increases below
productivity growth and pushing down domestic costs, among the capitalist bloc, led to an ‘unstable
vicious circle of competitive austerity’, a global demand crisis and the growth of surplus capacity
across the business cycle.68 In accordance with the neo- liberal orthodox ideology, Thatcher and
Reagan reacted to rising unemployment and inflation by tightening the money supply, reducing the
power and influence of trade unions, deregulating the economy and pursuing privatization strategies.69

Furthermore, comparative advantage, systematic competitiveness and structural

competitiveness have adopted as a way of development strategy as oppose to the closed national
economy based on the development strategy related to the compromise between the state, capital and
labour.70 In terms of their implications on welfare states, the former US capital- labour accord, the
specific Japanese life-long employment system, and the European welfare state have all been at risk.71
So, ‘frozen or decreasing real wage levels, increasing job insecurity, and intensification of work
process’ have become among the similar fallouts from the implementations of neo- liberal policies. 72
Also, depending on the political balance of power in specific countries, welfare entitlements and social
rights have been eroded.73 In relation to the fragmentation in welfare state program alliances and

65
Ibid.

66
Schmidt& Hersh. (2006). (p.79.)

67
Swank. (2002).

68
Schmidt& Hersh. (2006). ( p.79).

69
Dean. (2008). (p.50).

70
Swank. (2002).

71
Schmidt& Hersh. (2006). (p.80).

72
Ibid.

73
Ibid.
 14

coalitions, such as organized and centralized labour power or trade unions, new alliances has
emerged.74 For an instance, traditional and mobile manufacturing financial enterprises, right parties,
upper income groups and bureaucracy supported an exit option for welfare state. They resisted the
redistribution aims of welfare states, income taxes, corporate taxation etc. This resulted in the
expansion of tax basis and indirect taxation. Moreover, they supported the privatization of social
services and freedom from the taxes related with these services.75

As a result, a new hybrid of social policy making has emerged within the Western social
democratic paradigm which is called as the Third Way between the welfare state and market
fundamentalism.76 According to this new paradigm, ‘unchecked laissez- faire capitalism increases
disorder, criminality, poverty and inequality, demanding some form of state intervention.’ 77 This was
originated from the Baskerville Agreement between the Conservative and Labour Party in 1970s.78
This can be accepted as the convergence of the programs of political parties as A. Giddens suggested
due to the inability do democratically elected governments in opposing the agreements made on
international arena.79 ‘…axiom of individual responsibility and the idea that rights involve duties’ and
the obligations on the recipients of benefits have been emphasized with regards to the regulation of
welfare benefits.80 In addition to the changes in welfare benefits, upskilling the labour force in the
most productive sectors by investment in human capital formation and technological research, with the
aim of achieving a shaped advantage in trading relations with other economies, have placed among the
development strategies.81 Besides, in terms of competitive austerity, a race to bottom, as a proposed
strategy of progressive competitiveness, came into the considerations and question.82 Moreover, while

74
Swank. (2002).

75
Ibid.

76
Schmidt& Hersh. (2006). (p.80).

77
Ibid.

78
Pierson, C. (1998).

79
Giddens, A. (2002). ‘’Sağ ve solun Ötesinde Radikal Politikaların Geleceği’’.İstanbul: Metis
Yayıncılık.
80
Schmidt.& Hersh. (2006). (p.80).

81
Schmidt& Hersh. (2006). (p.80).

82
Ibid.
 15

the economic strategy after the Great Depression was ‘beggar- thy- neighbor’, the current defensive
adjustment to the impact of globalization was based on ‘beggar- thy- working- class’’ strategy.83

To sum up, if the post war international economic order was called as the embedded liberalism,
the era after 1970s can be called as the disembedded neo- liberalism. Pierson84 characterizes this era as
following:
1. It is a break with the political consensus for a managed economy and welfare state.
2. It is a shift in support for collective solutions to probable social needs to a preference for
market provision to satisfy individual needs.
3. It is a way for cuts in welfare entitlements and a restructuring of public welfare provisions.
4. In this era, potential scope of state intervention increased despite the postwar top down
intervention decreased. There experienced a form of retreat from some areas of intervention and
re- invent of intervention on more effective intervention in others. We face with the independence
of central banks, rise of finance ministries, depoliticization and technocratization.
5. There experienced a fall in compromise for full employment, lifelong employment, family
wage, and family ties. Changes in values, identities and interest associated with changing patterns
in welfare state were in line with neo- liberal reforms such as freedom to various identities, work
ethic and individual responsibility in stead of community responsibility.
6. National identity and solidarity diminished related to decentralization and reemergence of
locality.
7. Bureaucratic state was replaced with flexibility and convergence in international social policy
configuration. There emerged resentment about bureaucratization and inflexibility.
8. So large scale, top down and hierarchal structures and states’ role were challenged by new
network paradigms and partnerships, self regulation, informal sector and decentralization. There
experienced a shift form imperative coordination to an emphasis on interdependence, division of
knowledge, reflexive negotiations and mutual learning. It means a shift from governments to
governance.
9. Social corporatism and inclusive electoral institutions replaced by majority rules and neo
conservative or new right understanding. As well, dispersion of policy making reinforces the
competition and conflict of pluralist policies that are among the sub national citizens, rich and poor
etc. [As a result, the solidarity and universality in welfare state replaced with conflict, competition

83
Ibid.

84
Pierson. (1998).
 16

and residual benefits. In other words, fragmentation in interests and interest groups resulted in
weakness for welfare state program alliances and coalitions.]85
10. Primacy of national scale social and economic governance replaced with
internationalization of the state. Growth of multi- tiered global networks and formation of triad
economies such as EU fuelled this process. This is the hollowing out of the state and rise of
supranational or regional bodies.
11. In terms of internationalization, growth of capital flows and trade openness affected this
process. However, it will be useful to say that the trade openness and the capital mobility can be
perceived as a way of legitimizing the cuts in public expenditures, austerity polices, tightening the
eligibility criteria for welfare entitlements etc. in order to attract more capital and provide suitable
basis for the best rate of return. In relation to the decrease in the profitability of productive capital,
financial capital became preferential for the most profitable rate of return with the minimum cost.
That’s why; monetarism and anti- inflationary policies based on austerity politics have placed on
the top of governments’ priorities. Besides, Swank argues that the rate of trade in-between the
years of 1880 and 1910 is higher than the 1980-1990s. However, the rate of mobile capital in GDP
increases.86 But, it is still useful to say that most of the investors are home country biased and
choose to invest in developed countries.
12. We face with new economic problems. Economic performance of monetarism resulted in
cuts in benefits and tightening of eligibility. In this respect, competition for investment results in
social dumping, reduction in social costs and a race to bottom or in other words a race for lowest
common denominator based on residualism and Schumpeterian workfare post national state with
means tested benefits.87 As an example, through the systematic neo- liberal restructuring of state in
Britain, working with low wages became much more preferable than having unemployment
benefit. Also, with introduction of Job Seekers Allowance, people are encouraged to find a job and
to work.88

To say a few words on transition to Schumpeterian Workfare post national regime, it is a shift
from Keynesian aims to mode of intervention to Schumpeterian ones.89 It promotes innovation and

85
Swank, D. H. (2002).

86
Ibid.

87
Jessop. (1999). (p.356).

88
Pierson. (1998).

89
Jessop. (1999). (p.356).
 17

flexibility in relatively open economies by intervening on the supply side to strengthen their structural
or systematic competitiveness. In addition, it is a shift from welfarist mode of reproduction of labour
power to a workfarist mode. In other words, it prefers labour market flexibility and employability. So,
under this regime, social wage is to be put under pressure for reducing the cost of knowledge driven,
flexible international production. Moreover, primacy of nation scale replaces with a post national
scale. Then, national territorial state becomes less important as a power container. But international
organizations, such as IMF, WTO, WB and EU have more determinative roles in social and economic
policy making agenda that influence the micro economic supply side and social regeneration.90 Lastly,
primacy of state in compensating for market failures lost its influence while an emphasis on a
networked partnership based on economic, political and social governance mechanisms. It is mainly
about the mode of delivery of social and economic policies. In this respect, private public networks
have become more influential on all levels of delivery from local partnerships to supra national neo-
corporatist arrangements91 [such as the role of the UNICE and ETUC on setting the agenda for ESM].

KWNS was necessary for Fordist mode of capitalist accumulation after World War II. With the
changes in the international economic order and fall of US hegemonic project in addition to the high
levels of inflation and stagflation, there remained no need for the survival of KWNS. So, we face with
a change in the institutional structure and the values of individual in accordance with the neo- liberal
economic orthodoxy. But also, we experience a shift in the mode of production, demographic trends,
family structures and rise of social movements that affect the neo- liberal restructuring of the welfare
state.

3. Rise of Social Movements, Transition form Fordism to Post Fordism, Demographic Trends,
and Family Structures

Welfare state established in the Golden Age of capitalism had taken its roots from the Fordist
mode of production and economic growth. However, as the system collapsed in 1970s, the mode of
production and the economic development strategy became infertile. Then, there arose a need for the
system change. Hence, we experience the collapse of Fordist mode of production and rise of Post
90
Ibid. (p.357).

91
Ibid. (p.358).
 18

Fordist mode of production related with technological improvements and needs of capitalist class. In
this part, I will mention on the transition from Fordism to Post- Fordism. As well, related to the
transition from Fordism to Post- Fordism, I will touch upon the demographic trends, family structures
and rise of social movements which are seen as pressures for welfare state restructuring. All these are
relate with globalization, the transition from an industrial to service economy, changing gender roles,
and a broad reconfiguration of state and civil society in Europe and North America etc.

To begin with, Kautto indicates that, most industrialized countries have faced with changes
in employment, age and family structures that cause a rapid transformation of more or different social
needs and risks.92 Mainly, distorted market, badly functioning labour markets, population ageing,
defamilization and de- traditionalization are the main causes of internal crisis of the welfare state. 93
There arose a disjuncture between the existing social protection schemes and evolving risks and
needs.94 Also, changes in economic conditions, such as slower growth and deindustrialization, and
demographic trends led to welfare state crisis.95 That’s why; this change in social structure demands
welfare state change.96 What is more important, those changes in related areas caused a need for the
fragmentation of the welfare state policies that weaken the welfare program alliances.

Rising social movements affected the welfare restructuring. These social movements
emerged in 1960s demanded ‘something qualitatively different from the remorseless standardization
and commodification of work, culture and leisure time’.97 Also, variable working practices affect the
variations in other areas, such as consumer goods and leisure pursuits.98 They fragmented the

92
Kautto, M. (1999). ‘’Chapter 3: Changes in sge structure, familiy stability and dependency’’ in
Nordic Social Policy, pp.54-78.

93
Esping Anderson. (1996).

94
Ibid.

95
Ibid.

96
Kautto. (1999).

97
Bowring, F. (2001). Post- Fordism and the end of work. Retrieved on November 24, 2008, from
the World Wide Web:

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V65-44JD4VR-
1&_user=691352&_coverDate=03%2F31%2F2002&_rdoc=1&_fmt=&_orig=search&_sort
=d&view=c&_acct=C000038698&_version=1&_urlVersion=0&_userid=691352&md5=c0
5972d03755878326ef292b57b5121a
98
Jackson, W. W. (2006). ‘’Post- Fordism and Population Agening’’ in International Revies of Applied
Agening, Vol:20, No:4, pp. 449- 467. (p.454).
 19

framework of Keynesian capitalism. The revolt against mass society threatened the ‘cultural fabric of
civil society, its system of values, patterns of collective allegiance, established forms of political
identification and traditional definitions of normality and need.’99 Even social diversity is accepted as
positive in terms of a symbol of individual choice letting everyone select their way of life, previous
social cohesion is threatened by deep social divisions and inequalities.100 In this respect, capitalism
‘quickly began to exploit as the opportunity for a new, ‘flexible’ regime of growth, in which the
undisputed and insurmountable demand for ‘competitiveness’ became the ultimate alibi for sweeping
away the remaining institutions and bonds of social solidarity’.101

First of all, Jackson defines Post- Fordism as a set of ‘changes in the labour process such as
flexible employment, greater variety of employment contracts, flatter organizational structures and less
standardized production.’102 These changes are related to new technologies, such as microelectronics
and computing etc. Hence, these changes demand ‘diverse production and consumption, increased job
mobility, a shift away from collective bargaining, an orientation towards privatization policies, a
retreat from Keynesian to a smaller welfare state’103 and deindustrialization.104 So, as oppose to the
Fordism, deindustrialization, declining jobs, and jobless growth led to new risks for welfare state and
citizens.105 Related to the Post- Fordist growth dynamic, it is accepted that public sector has been less
efficient and supple than the private sector and it has gone to privatization, declining employment and
relative deterioration of pay and working conditions.106 In other words, full and standardized
employment, which was a compromise of Keynesian welfare state, is expected to replace with
atypical, precarious, part time, homework and flexible employment as well as irregular employment
and underemployment. Further, workfare schemes, training programmers and other measure designed
to increase employability have been preferred to the tax financed cash benefits. Moreover, delayed
benefit indexation, diminished income replacement benefits, and return to contribution based benefits

99
Bowring. (2001).

100
Jackson. (2006). (p.454).

101
Bowring. (2001).

102
Jackson. (2006). (p.450).

103
Ibid.

104
Esping Anderson. (1996).

105
Ibid.

106
Jackson. (2006). (p.454).
 20

are designed to increase the employment rate and lighten the burden on welfare state.107 Now and then;
social policy is adjusted to the flexible labour markets and competitiveness as a public goal.108 Related
with it, social policy is directed towards the active labour market programs that put people back to
work, help people normalize family and work obligations and train the population in the kinds of skills
that post- industrial society demands.109 In this respect, the adopted social policy strategy has been the
human capital investment.110 That’s why; rather than standardized ones, education policy was revised
for higher value added production. As a result, professional and skilled occupations have become
much more preferable than unskilled or semi skilled ones.111 Then, there is no more a homogeneous
working class anymore; but a heterogeneous one.112

In the Post- Fordist period, full employment and income equalization promises were
abandoned with respect to flexible and active labour market policies associated with wage
flexibilization.113 Deregulated and freed markets made up the new system. Moreover, global wage
competition triggered the welfare state crisis. Also, the gap between the social need and financial
means caused informalization of employment. That’s why; tax base has been eroded. Furthermore, in
some regions, such as East Asia, massive migration to urban industrial centers led to a population
without appropriate social protection since the traditional forms of social protection has been eroded.114
As a result, rising wage and household income inequalities resulted in growing poverty rates and
underclass.115 Due to that fact, welfare state aims at targeted social services, such as poverty
alleviation, social exclusion etc., .for high risk groups. However, greater selectivity means testing,
gradual erosion of benefits or coverage in line with workfarizm exacerbates the situation. 116 So, as a
result, in the Post Fordist era, we face with the rise of service economy, jobless growth,
deindustrialization related to the fall in profitability of productive capital and rise of financial capital,
107
Esping Anderson. (1996).

108
Jackson. (2006). (p.454).

109
Esping Anderson. (1996).

110
Ibid.

111
Ibid.

112
Ibid.

113
Ibid.

114
Esping Anderson. (1996).

115
Ibid.

116
Ibid.
 21

and massive migrations to urban and industrial centers, erosion of traditional social protection
mechanisms, and erosion of lifelong, standardized and full employment and eradication of social
benefits. Rather, there have emerged workfarist policies, an emphasis on high quality education, and a
rise in employment in private sector and rise of atypical, precarious, non- standardized, part- time jobs.
In this manner, welfare state is expected to restructure itself in order not to engender social dumping
and social conflict.

Secondly, demographic trends mainly address the ageing of the population and low fertility
rates. It is bound to the demographic transition that is ‘a long term passage from one demographic
steady state (high fertility, high mortality, few elderly people) to a new steady state (low fertility, low
mortality, many elderly people) during industrialization’.117 Ageing results in more demands for
income support, health care, long- term care and other services118 depending on the detraditionalization
of family, women’s economic independence and their retreat from elderly care.119 As the percentage of
inactive elderly people increase and the workers decrease, a heavier economic burden with rising
dependency ratio and a falling support ratio is likely to emerge. Also, as the population ages, resources
are inhered to be transferred from the active young to the inactive elderly. In terms of pay- as- you- go
pension schemes, taxpayers finance the retirement pension and the retired is subsidized by the worker.
Even the rising productivity lightens the burden on the working population, since taxes are likely to
rise, the productivity gains will be transferred from young population to the older one. Besides, this
creates anxiety about the reduced labour supply, discouragement in savings and decrease in economic
growth.120 In this respect, both international organizations, such as IMF, WB, OECD, and national
governments seek to reduce reliance on PAYG pension systems and to promote alternative, private
arrangements and multipillar approaches that embrace personal saving, private pensions and part time
work in later life.121 As oppose to the expansive KWNS social services, ‘ageing crisis’ results in ‘cuts
in public pensions and welfare benefits, later retirement, and the encouragement of private saving and
pensions’ in order to not tax the whole population and increase the load on the state. 122 Besides, as a
response to ageing, the retirement age is risen to maximize the employment rate and lower the

117
Jackson. (2006). (p.450).

118
Kautto. (1999).. (p.54).

119
Esping Anderson. (1996).

120
Jackson. (2006). (p.451).

121
Ibid. (p.454).

122
Ibid.
 22

dependency ratio.123 This is perceived as a shift from Keynesian Welfare state to the Schumpeterian
workfare state or competition state.124 On the basis there lies the maintenance of the international
competitiveness in a global laissez faire economy due to the fact that Fordist high tax and high
spending policies can damage a country’s ability to compete.125

Thirdly, another factor that affects the welfare state restructuring is the changes in the family
structures and new risks. It is accepted that traditional family structures have been changing. 126 Family
structures have diversified since 1960s. They have become smaller, there are few marriages and the
number of co- habilitation, children born outside marriage, divorces and people living on their own
increased.127 These family trends pose challenges for the welfare state in terms of social needs.128
Single parenthood, and especially women’s economic independence, have increased and demanded
support for housing, income and care and they are more vulnerable to social problems.129 In addition,
male breadwinner model of KWNS has eroded and the rate of employment among women has risen. 130
This mainly resulted in a decrease in the fertility rates. 131 So, families, and especially women, need
welfare state to harmonize work and family life whereas welfare state needs children to survive.132 In
this manner, social security schemes should be revised and adjusted to lately changes. 133 In other
words, detraditionalization of family, eradication of traditional social protection mechanism,
defamilization, and women’s participation to labour market and low fertility rates creates new areas
for welfare state restructuring.

As I have tried to summarize above, shift in the mode of production that is transition from
Fordism to Post Fordism, demographic trends, changes in family structures and rise of social
123
Esping Anderson. (1996).

124
Jackson. (2006). (p.454).

125
Ibid.

126
Kautto. (1999). (p.54).

127
Ibid.

128
Kautto. (1999). (p.74).

129
Ibid.

130
Esping Anderson. (1996).

131
Ibid.

132
Ibid.

133
Ibid.
 23

movements are above the internal shocks for welfare state. That’s why; in addition to the shift in
international economic order, these factors forced policy makers for welfare state restructuring- and
retrenchment in accordance with fragmentation in welfare state policies and social benefits.

4. Conclusion

As Offe asserted, capitalist mode of production can not coexist with neither can exist without
the welfare state. Thus, in the post war period- the period of nation building- welfare states emerged in
order to complement the market and maintain capitalist accumulation in a definite territory. This type
of welfare stare is conceptualized as KWNS by Jessop. Main development and economic growth
dynamic was based on Fordist mass production and consumption that was sustained by demand
management. In this respect, social policy measures were arranged In order to sustain the cycle of
production and consumption. People were provided expanded social rights and welfare benefits. Also,
there was a balance and agreement/ social contract between the organized labour and capital.

However, by 1970s, people encountered with the end of Fordist mode of capitalist
accumulation and production and the crisis of welfare state as well as the crisis of international
hegemonic project. On the one hand, right thinkers, such as Hayek and Friedman, argued that the crisis
was the result of high public expenditures- which were the result of excessive expectations and the
disruptive effects of the pursuit of group self interest and liberal democracy. On the other, Marxists
argue that the crisis was the result of capitalist mode of production and accumulation or the welfare
state itself. Welfare state is regarded as crisis containment referring to Offe and O’Connor- the fiscal
crisis of the state. On the one hand, state should provide the appropriate conditions for capitalist
accumulation. On the other hand, state should maintain its legitimacy to hold the office. Besides, it
was argued that welfare state collapsed because of transition to Post- Fordist mode of production,
demographic trends, changes in family structures and social movements.

With the dominance of neo- liberal economic policy, welfare state was restructured and
retrenched in accordance with the social, political and economic peculiarities of each state.
International mobile capital and international institutions have become much more influential that
threatens the liberal democracy. As well, deregulation, privatization and financialization fitted with
Schumpeterian Workfare Post National State. Welfare benefits were cut in accordance with the rise of
mobile capital and people were encouraged to work. Universalistic benefits were reduced to
residualistic ones, such as alleviation of poverty etc. that resulted in fragmentation in welfare benefits.
 24

Also there opened up new markets for private sector. The old consensus between the organized labour
and capital replaced with the hegemonic power of capitalist class.

At the end, we can not talk about the future of the welfare state and an ideal type; there is
convergence between the welfare policies due to the financial integration, but each state has adopted
different paths and patterns. As well, taking the modernization school in consideration, we can not
propose the 3rd World Countries to follow the developed ones since KWNS is time and space related
and each of them related to neo- liberal globalization depending on their political power and societal
relations.134

134
Esping Anderson. (1996).