Towards a Social Investment Welfare State? Ideas, policies and challenges, by Nathalie Morel, Bruno Palier and Joakim Palme (eds)

Policy Press, 2012, xiv + 386 pp, pbk, 1 847 42925 4, £19.99, hbk, 1 847 42924 7, £70

Is the welfare state a cost or an investment? To take two examples: unemployment benefit is a cost; training for employment is an investment.

The 2009 conference and subsequent research project which gave birth to this most interesting book worked with a simple presupposition: that the welfare state of the twentieth century was a social cost welfare state, but that the welfare state of this century will be a production factor, investing in order to reap economic and social benefits for a world very different from that of the last century: hence active labour market policies and a greater emphasis on early years care.

The first chapter charts the early history of the investment welfare state in Sweden during the 1930s, the submergence of that idea by the Keynesian and neo-liberal welfare states, and the more recent resurgence in the form of widespread social investment policy trajectories. The second chapter discusses in depth the evolution of the welfare state from expansion, through retrenchment, and into the new ‘investment’ paradigm, and shows how countries which have taken this route have found the investment welfare state to be both positive for economic growth and coherent with the emerging knowledge economy. Chapter 3 studies the mix of state, market, family and community in Keynesian, neo-liberal and investment welfare states, and finds the investment welfare state to be both flexible and usefully ambiguous politically.

Chapter 4 asks to what extent OECD countries are developing investment welfare states (Scandinavian countries are, and English-speaking countries are developing cheaper versions), and chapter 5 shows how budgetary constraints have led to cost-cutting and to a market-based welfare state rather than to a social investment one.

The authors then tackle particular policy areas. Chapter 6 discusses such family-friendly policies as parental leave. Chapter 7 examines such different active labour market policies as the availability of training and benefits reduction for non-compliance, and identifies the problem that what the economy needs is upskilling, whereas what it gets is low-skill and no-skill employment and employees. Chapter 8 finds that social investment policies such as education improve both employment rates and the proportion of skilled employment. Chapter 9 shows how important both academic and experience-based learning are going to be, and how important it is that they should connect with each other.

The final chapters look to the future. An ageing population requires investment in intergenerational redistribution; the upheaval of the financial crisis might facilitate an unfreezing of welfare states and a resultant more consistent European social investment welfare state. Climate change requires social policy which promotes sustainability; social cohesion needs to be seen as ‘the necessary foundation for the learning economy’ (p.347), rather than as a burden; and we need a new economic model to match the emerging social investment welfare state.

The book provides a wide-ranging and intelligent discussion at the European level of an important new paradigm, with an occasional focus on particular countries – usually Scandinavian ones. What we need now is discussion focused on each European country in turn. The UK will provide an interesting case study. Here, social insurance characterised the Keynesian welfare state, and means-tested benefits the neo-liberal one: but what will characterise the social investment welfare state? One possibility of course is universal provision. Take Child Benefit as an example: It is a family-friendly policy; it promotes a flexible labour market (as it doesn’t change as employment status or earnings change), and it provides a secure base for family finances in a turbulent economic and social situation. An extension of universal benefits to working-age adults would facilitate learning (because lower marginal deduction rates would make it more worthwhile to seek further training in order to increase one’s family’s financial position), and it would be family-friendly because it would offer to couples more choice over employment patterns.

The book’s direction is the right one. It’s a European social investment welfare state that we need: or rather, a global one. So why not a European Citizen’s Income? Or even a global one? It’s not beyond our capability, and it would be remarkably helpful to an investment welfare state.