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

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. In 1960, the average expenditure on social payments was 7.5 percent of gross domestic product in the affluent countries of Western Europe, as compared to 6 percent being spent in the United States. Already by 1980, though, the average expenditure on social payments in Europe had doubled and reached a level of 14 percent of GDP, while the United States was spending only 9.75 percent. The differencial between the USA and European countries was growing (Myles and Quadagno 2002: 34). As a result the social agenda of the eighties and nineties changed radically: after the policies of the golden age of expansion, European welfare states have been shaped by the (Paul Pierson’s) “politics of austerity”. Consequently, the rhetoric of a “crisis” in the welfare state has been with us since the 1970s. From the 1970s, various theorists have claimed a fiscal crisis, a crisis of government overload, a crisis of liberal democracy or, as Jürgen Habermas called it, a “crisis of legitimacy”.