1. Introduction
1. Crisis of Welfare State
At the end of the 1970’s, the welfare state moved into crisis (OECD, 1981; Rosanvallon, 1981). As the period of high economic growth ended and stagflation appeared, governments couldn’t afford the social expenditure which had been expanded before. Fiscal deficit appeared and unemployment rate started to increase with economic depression.
The idea shared by neo-Marxists and neoliberals was that the redistributive logic of the welfare state was contradicted by the logic of capitalism and that the welfare activities of the state would have to be rolled back or reconfigured so as to conform to the needs of capitalism.[1]
2. What does Welfare State Retrenchment mean?
Similar to the neo-Marxists’ and neoliberals’ insistence, since the economic crisis of the mid-70s, governments have seemed concerned above all to reduce spending levels and implement retrenchment policies.[2]
Retrenchment is defined "to include policy changes that either cut social expenditure, restructure welfare state programs to conform more closely to the residual welfare state model, or alter the political environment in ways that enhance the probability of such outcomes in the future".[3]
A number of comparative studies on welfare-state development have used the size of social expenditures to the GDP, "the welfare state effort" indictor, as their central dependent variable. However, while this indicator is relevant, as is widely recognized, it has some limits for explanation of the welfare state effort.
2. Has ‘Welfare State Retrenchment’ happened?
As noted above, the expenditure-based welfare-state effort indicator used in most studies of retrenchment is associated with serious problems, which are aggravated in the context of retrenchment. For example, rising unemployment levels have tended to raise
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