Restructuring the Welfare State: Globalization and Social Policy Reform in Finland and Sweden, by Virpi Timonen

Edward Elgar, Cheltenham, 2003, ix + 222pp, hb, 1 84376 124 6, £45. Order this book

Timonen shows how the choice of countries studied determines the theory of welfare state transformation which emerges. All European economies have experienced globalisation (involving lower trade barriers, liberalised financial markets, global competition, and downward pressure on tax rates), but their welfare states have reacted in different ways. Finland and Sweden have developed ‘encompassing’ or ‘institutional’ welfare states, and these have adapted to globalisation and economic crises by taking on ‘liberal’ (or residualist) and ‘conservative’ (earnings-related insurance-based) characteristics in order to retain their basically institutional character – i.e., they have taken on characteristics long-established in Anglo-Saxon welfare states (such as that in the UK) and in Bismarckian systems (such as that in Germany) in order to remain ‘encompassing’ structures. In particular, greater reliance on means-tested benefits of last resort (which characterise social security provision in the UK), higher employees’ (rather than employers’) contributions, and greater reliance on private insurance (which mirror recent changes in the German and French insurance-based systems) have enabled the basic structure of the Scandinavian welfare states (characterised by universal pensions and by sickness and unemployment benefits to which employers make considerable contributions) to survive.

The detailed chapters on welfare state development and restructuring, on globalization and other outside pressures which have triggered welfare state restructuring, on political parties and interest groups, on power resources at work, on restructuring of public health and social services, and on the greater reliance on means-tested benefits, lead to the conclusion that particular stabilising forces (such as Trades Unions and employers’ organisations) and a structure which gave to all Scandinavian population groups an incentive to contribute to the system when it was built, have resulted in increased public approval of the system during a recession, rather than the kind of unwillingness to finance the welfare state which the UK has experienced. As Timonen puts it, “in a game of politics against markets, politics scored another victory” (p.17).

Of particular interest to those interested in social security reform is chapter 7. During the recession of the 1990s pensions ceased to be universal in Sweden and became earnings-related and means-tested, and some other benefits became more tightly work-related. As Timonen sees it, no particular organised groups were defending universal benefits – but that doesn’t mean a permanent slide away from universal and towards means-tested benefits, because the median voter is likely to favour universal benefits. It is interesting that Sweden’s child benefit has remained universal, as has the UK’s. As Timonen suggests,
“child benefits could have been taken away from high-earning families, but this option was not seriously considered at any time during the 1990s, partly because the resulting reduction in expenditure would not have been significant but more importantly because it would have undermined the support and legitimacy of the system as a whole” (p.180).

This book suggests that means-tested benefits will re-main important but also that problems of means-testing are understood and that there are parts of the benefits system where means-testing doesn’t belong – and this seems to be particularly true of benefits for children.
The author suggests that we ought to expect that universal benefits in general will be more popular and thus better-defended than means-tested ones because everyone receives universal benefits but not everyone receives means-tested benefits – but this isn’t what happens, except in relation to public services which benefit or potentially benefit everybody substantially (such as litter collection), because for increasing numbers the value of universal benefits is negligible so they wish to see as little of their taxes spent on benefits as possible – hence the drive towards means-testing.

So why has universal child benefit survived? If a benefit structure’s survival is merely the result of an emotional reflex, then the future of universal benefits might look bleak – unless, of course, organised interest groups argue for them.