The Political Economy of Social Pacts: ‘Competitive Corporatism’ and European Welfare Reform

One of the most important, but until now neglected, aspects of the new politics of welfare in western Europe concerns new nationally-negotiated social pacts, referred to in a previous article as ‘competitive corporatism’ (Rhodes 1998) to distinguish them from traditional forms of social corporatism and to signal their competitiveness rationale. These pacts, which have proliferated since the late 1980s, have major implications for welfare states by bridging, and innovating in linkages, between the informal and formal welfare states, that is between social security systems and labour market rules and regulations. All of them consist of new market conforming policy mixes. But they are also far from being the vehicles for neo-liberal hegemony in social and employment policymaking. The essential argument of this paper is that the emergence of social pacts is linked to common domestic and external pressures for reform across Europe. But contrary to the expectations of many commentators, these pressures have bolstered efforts at co-ordination via bargaining rather than fragmenting political-economic structures. Underpinning these pacts are various degrees of associational cohesion and, perhaps most importantly, the development of two types of coalition distributional coalitions and productivity coalitions with complex links and overlaps between them. ‘Competitive corporatism’ is successfully achieved if underpinned by a close but flexible linking of the two.