Growth Strategies and Welfare Reforms in Europe

Abstract

This chapter shows that welfare reforms are institutionally and politically linked to countries’ growth strategies, i.e. the policies implemented by governments to boost growth and jobs creation since the 1980s. The chapter starts by identifying five growth strategies according to the engine of growth chosen and the type of welfare reform: export of dynamic services; export of high-quality manufacturing products; FDI-financed exports; domestic consumption driven by financialization; and domestic consumption driven by wages and welfare spending (which has transformed into “competitiveness through impoverishment” under pressure from the EU). We show that these five growth strategies can be associated with five types of welfare state reform: dualization of welfare, social investment, fiscal and social attractiveness, commodification of welfare, and social protectionism. The detailed account of the cases of the UK, Germany, Sweden, Denmark, Baltic and Visegrád Eastern European countries, Italy and France underlines the actual connections between growth strategies and welfare reforms. The cases reveal that these strategies are not mutually exclusive and that more than one strategy might be pursued in a country. The chapter contributes to an understanding of how countries’ growth regimes change, by identifying the transformative feedback effect that the implementation of growth strategies has on them. The chapter concludes on the politics of growth strategies and welfare state reforms and the respective roles of producer coalitions and electoral politics.

Arms-length influence: Public sector wage setting and export-led economic growth in Czechia and Slovakia

“…Growth models and their impact on PSWS-a conceptual and analytical framework A growth model refers to a centrally deployed set of techniques, encompassing policies and the institutions they support, used by the core actors in the economy-governments, firms, and organized producer groups-to secure higher rates of economic growth (Hall 2021). Particular welfare targets derive from export-led growth model (Avlijaš et al 2021). A high-quality manufacturing-based export-led model relies on wage moderation and protection of labor market insiders to maintain international competitiveness, resulting in labor market and social protection dualization (see Figure 1).…”

“…These general characteristics of PSWS evolution are embedded in broader context of political economies. Both countries are characterized as FDI-financed and export-led growth models (Avlijaš et al 2021; Bohle and Regan, 2021). In line with the analytical lens of the growth model literature, the next section develops a framework to understand the interactions between these countries’ growth models and the above PSWS procedures and outcomes.…”

“…The FDI-financed export-led growth model may follow fiscal and social attractiveness for foreign investors through low corporate tax, low labor costs, and minimizing the costs of public welfare.

Figure 1.Welfare targets in export-led growth model. Source: Avlijaš et al (2021).

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“…The paper attempts to start the currently missing debate in the region on how the priorities in public sector development may relate to the drivers of economic growth and the preferences of actors responsible for growth in both countries. Building on the growth model approach in comparative political economy (Avlijaš et al 2021;Baccaro et al 2022, Baccaro andPontusson 2021;Hope and Soskice, 2016), the paper seeks to understand whether and how the growth model in Czechia and Slovakia, with strict emphasis on foreign direct investment (FDI) in manufacturing exports (Ban and Adascalitei 2022), influences the processes and outcomes in PSWS after the 2008-2009 crisis. In addition, the paper is innovative in uncovering, both conceptually and empirically, how two types of export-led growth models (high-value and low-value) may have differing impacts on PSWS.…”

The European Semester in the North and in the South: Domestic Politics and the Salience of EU‐Induced Wage Reform in Different Growth Models*

“…These include collective actors such as trade unions, employers' associations, and government agencies, as well as institutional structures such as established frameworks for wage negotiations. Export‐led growth models assume wage moderation; domestic demand‐led growth models assume high minimum wages and public sector pay (Avlijaš et al ., 2021, p. 384). Hence, we expect trade unions and employers' organizations to support recommendations which are in line with their preferences: CSRs encouraging wage growth for unions, and CSRs encouraging wage moderation for employers.…”