**2. Path dependence**

The literature on path dependency emphasizes multiple pathways of national development, the persistence of institutional arrangements and continuity. In simple terms, path dependence means as time progresses meaningful change becomes more difficult to implement. In the political science literature, path dependence is used to refer to political trajectories that are resistant to change due to the self-enforcing nature of institutions [1]. In comparative political economy, path dependence is usually a reference to the persistence (inertia) of historically entrenched institutions, or the idea that variations in the size, structure and outcomes of welfare regimes are a consequence of the individual paths each one follows. In such a context, welfare states are viewed as diverse and resistant to change. Their development trajectories have become 'locked-in' over time making shifts away from them difficult, even in the face of common external pressures, which others view as driving all countries toward the same practices and outcomes. This has led to a debate over whether welfare and production systems are converging toward a similar model due to common pressures, or whether the path-dependent nature of institutional development continues to exist and reinforce the diversity of national trajectories. In general, support for the latter argument can be found in comparative studies based on typologies of the welfare state and market economy, which are reviewed below.

## **3. Worlds of welfare**

Esping-Andersen's three worlds of welfare capitalism model is perhaps the most famous typology of welfare states [2]. For many years, comparative welfare scholarship has used his typology to categorize the welfare state according to three

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*The Political Economy of Crisis Recovery DOI: http://dx.doi.org/10.5772/intechopen.92586*

social democratic welfare regime-types.

the conservatist-corporatist welfare regime.

welfare regime [3].

dimensions: decommodification (or the extent to which market dependency is reduced through state entitlements), the modes of social stratification (the idea that regime types manifest variable degrees of inequality) and the relationship between the state, market and/or family in the production and management of social wellbeing (a balance that typically varies across countries). This classification scheme is supposed to allow us to identify dimensions of variation within welfare regimes, dimensions that are explicit and narrow enough to be operationalized in an assessment of three ideal welfare cases—the typical liberal, conservative-corporatist and

The liberal welfare state provides a minimum level of social protections for its citizens. This is done in order to maximize market forces. Liberal regimes emphasize personal responsibility in welfare provision and deservingness for market relief. As a result, benefits are set low, social assistance is means-tested, and wage bargaining systems are decentralized so that the private sector can expand to its full potential. Liberal regimes try to ensure all who can work do so and obtain their income through participation in the free market. Social policy is therefore aimed at maximizing the market and individual independence. In such a model, a system of administrative surveillance monitors and enforces eligibility determinations for social assistance. Consequently, less than those who are eligible for relief end up receiving benefits. In general, liberal welfare states are said to have lower levels of public sector employment, direct job creation, social protection expenditures, long-term unemployment, union density and collective bargaining and higher levels of involuntary part-time work, marginally attached workers and short-term job tenure. The United States is considered the prototypical example of the liberal

The conservative-corporatist welfare regime is based on two different kinds of fragmentation in the provision of welfare. The first one entitles narrowly defined groups with their own specific benefits, with occupational and employment status playing an important role in the type or level of services provided. The second one provides welfare provision according to a perceived need for assistance using a measurable criterion. In general, traditional families are the main targets of welfare services, as social policy rewards breadwinners, and provides greater benefits to larger families. In this way, the conservative-corporatist welfare state promotes and sustains the position of the traditional family in society. Both types of fragmentation (occupation/employment and family) aim to preserve existing social structures and hierarchies. In this way, social benefits are not universal (equal for all), they tend to depend on past employment contributions, and financing is made possible through employer-employee payroll taxes rather than general tax revenues. Market forces are constrained to the extent that firms consider the interests of different shareholders in their business calculations. This helps maintain the 'social market' (diverse stakeholder economy). Conservative-corporatist welfare regimes generally feature medium levels of public sector employment, direct job creation, social protection expenditures, long term unemployment, union density and collective bargaining and lower levels of involuntary part-time work, marginally attached workers and short-term job tenure [3]. Germany is considered a primary example of

The social democratic welfare state tends to provide entitlements that are more universal in scope, egalitarian in their distributive goals and generous in their benefit levels. In this regime type, social rights provide high levels of decommodification and defamilialization in order to sustain social solidarity rather than reinforce hierarchical divisions or market forces. As the ideal welfare model, it supports the individual and family over the life course in order to make it easier for people to transition between life roles while dealing with challenges associated with

#### *The Political Economy of Crisis Recovery DOI: http://dx.doi.org/10.5772/intechopen.92586*

dimensions: decommodification (or the extent to which market dependency is reduced through state entitlements), the modes of social stratification (the idea that regime types manifest variable degrees of inequality) and the relationship between the state, market and/or family in the production and management of social wellbeing (a balance that typically varies across countries). This classification scheme is supposed to allow us to identify dimensions of variation within welfare regimes, dimensions that are explicit and narrow enough to be operationalized in an assessment of three ideal welfare cases—the typical liberal, conservative-corporatist and social democratic welfare regime-types.

The liberal welfare state provides a minimum level of social protections for its citizens. This is done in order to maximize market forces. Liberal regimes emphasize personal responsibility in welfare provision and deservingness for market relief. As a result, benefits are set low, social assistance is means-tested, and wage bargaining systems are decentralized so that the private sector can expand to its full potential. Liberal regimes try to ensure all who can work do so and obtain their income through participation in the free market. Social policy is therefore aimed at maximizing the market and individual independence. In such a model, a system of administrative surveillance monitors and enforces eligibility determinations for social assistance. Consequently, less than those who are eligible for relief end up receiving benefits. In general, liberal welfare states are said to have lower levels of public sector employment, direct job creation, social protection expenditures, long-term unemployment, union density and collective bargaining and higher levels of involuntary part-time work, marginally attached workers and short-term job tenure. The United States is considered the prototypical example of the liberal welfare regime [3].

The conservative-corporatist welfare regime is based on two different kinds of fragmentation in the provision of welfare. The first one entitles narrowly defined groups with their own specific benefits, with occupational and employment status playing an important role in the type or level of services provided. The second one provides welfare provision according to a perceived need for assistance using a measurable criterion. In general, traditional families are the main targets of welfare services, as social policy rewards breadwinners, and provides greater benefits to larger families. In this way, the conservative-corporatist welfare state promotes and sustains the position of the traditional family in society. Both types of fragmentation (occupation/employment and family) aim to preserve existing social structures and hierarchies. In this way, social benefits are not universal (equal for all), they tend to depend on past employment contributions, and financing is made possible through employer-employee payroll taxes rather than general tax revenues. Market forces are constrained to the extent that firms consider the interests of different shareholders in their business calculations. This helps maintain the 'social market' (diverse stakeholder economy). Conservative-corporatist welfare regimes generally feature medium levels of public sector employment, direct job creation, social protection expenditures, long term unemployment, union density and collective bargaining and lower levels of involuntary part-time work, marginally attached workers and short-term job tenure [3]. Germany is considered a primary example of the conservatist-corporatist welfare regime.

The social democratic welfare state tends to provide entitlements that are more universal in scope, egalitarian in their distributive goals and generous in their benefit levels. In this regime type, social rights provide high levels of decommodification and defamilialization in order to sustain social solidarity rather than reinforce hierarchical divisions or market forces. As the ideal welfare model, it supports the individual and family over the life course in order to make it easier for people to transition between life roles while dealing with challenges associated with work and/or parenthood. Such welfare states provide a range of cradle-to-grave protections for their citizens, including such things as child allowances, early childhood education, training policies, job protection, paid maternity leave, day care for preschoolers, wage replacement benefits, retirement pensions and home care for seniors. Social expenditures are typically financed through higher rates of taxation, with redistribution of additional income achieved via wealth taxation. Social democratic welfare states are said to have the highest levels of public employment, direct job creation, social protection expenditures, long-term unemployment (due to generous benefits), union density and collective bargaining and the lowest levels of involuntary part-time work, marginally attached work and short-term job tenure. Sweden is viewed as the main example of a social democratic welfare regime [3].

The southern European welfare regime was added to the three-fold typology above due to some developed countries exhibiting characteristics that distinguished them from other regime types [4, 5]. The distinctive regime properties of the southern welfare state include familism, strong kindship networks, Catholicism, agricultural production and a fragmented system of welfare provision. Generally, the southern welfare state is said to have medium or lower levels of public employment, direct job creation, social protection expenditures, long-term unemployment, involuntary part-time work, marginally attached work, short job tenure, union density and collective bargaining. Spain is conventionally regarded as an example of the southern European welfare regime [3].

Significant debate has occurred over the extent to which countries actually fit into one of the ideal typical welfare regime models. Supporters of the typology view it as a valid and reliable methodological approach for categorizing mature welfare states and explaining cross-national similarities and differences between them. Others are much more skeptical. They criticize the typology [6] for its alleged inexhaustiveness (may be more than three or four ideal types), inexclusiveness (more anomalous cases than admitted), methodological soundness (wrong criteria and unsuitable operationalizations, variables and methods), lack of explanatory power [7] and usefulness in comparative analysis [8]. More sympathetic critics, however, admit significant differences in national political contexts exist among countries, particularly variations in institutional configurations, societal cleavage patterns, pressure of socio-economic forces, actor-constellations and degree of dependence on the state, market and family. These recognitions are generally based on contributions that delineate differences in government expenditures, ideological orientations, institutions, and formal policy elements [9, 10]. The issue is that these aspects of welfare development fail to capture the outcomes of policies and institutions in practice. It is therefore important to take into account socio-economic effects in order to show how people fare under different welfare regimes and where regimes-types diverge and overlap in terms of real-life impacts [11]. While difficulties certain exist in making causal connections between different welfare arrangements and social outcomes, an outcome-centred approach nevertheless offers a unique vantage point to examine similarities and differences both between and within welfare regimes, which policy-focused and state-centred research has so far failed to adequately capture [12].

This is not to deny, of course, there may be a deep and important connection between policy, institutions and socio-economic outcomes. For instance, it may be that variations in social policy and levels of expenditure and the way institutional arrangements have developed in different countries are directly correlated with noticeable differences in their welfare outcomes and that countries, with highly diverse and unique configurations of capitalist political-economic institutions, cluster around a range of redistributive effects. In this way, variations in the socioeconomic outcomes observed, then, should be explainable with reference to the

**25**

differences [18].

**4. Varieties of capitalism**

*The Political Economy of Crisis Recovery DOI: http://dx.doi.org/10.5772/intechopen.92586*

restructure their welfare states [13, 14].

already suffering from an economic downturn [13, 14].

an under-researched area.

development paths.

characteristics of the regime type in question. Moreover, countries associated with a particular regime-type should all exhibit similar outcomes and follow similar

Still, the question of whether and to what extent measures of socio-economic outcomes between different countries vary significantly with the regime-type has been relatively under researched in the literature. The little research that does exist has tended to focus on the micro level, the pre-crisis period and few cases and indicators. What is needed is an empirical assessment of outcomes across a large number of country cases during a period of external shock like the 2007–2008 crisis, which put intense pressure on public budgets, forcing many countries to

External and internal pressures do not necessarily determine the trajectories of welfare states, neither do they dictate their capacities to achieve desired goals in a uniform way. But they can restrict the possibilities and choices welfare states have at their disposal. Such modifying pressures toward conformity can include demographic changes, changing household and family patterns, the growth of non-standard employment arrangements, structural unemployment, technological changes, international competition, mobility of capital, international trade, participation in a common currency, globalization and economic crises [15]. These pressures can come in different forms and welfare states may react to them differently. But exactly how they affect the socio-economic outcomes of different welfare regimes remains

Arguably, periods of economic crisis impose challenges and constraints that are somewhat different and perhaps more important than some of the other pressures on the welfare state. However, economic crises also tend to affect countries differently because of the diverse political-economic capacities and varied vulnerabilities of welfare regimes to such external shocks. Certainly, the global financial crisis of 2007 marked a 'stress test' for many welfare states [16] as more than ever before policymakers were forced to consider cuts in welfare provision and enact flexibilityenhancing measures in order to improve financial solvency and economic performance [17]. Adding to this challenge was the fact that the recent financial crisis, much like the recession of the early 1990s, occurred when many countries were

Given the significant pressures the recent crisis placed on many welfare states, it is worth examining whether the boundaries between them have been fundamentally redrawn. For instance, did the crisis produce similar socio-economic outcomes in different regime types? Or, have there been notable and systematic differences in outcomes and patterns of continuity across welfare models in the years following the worst moments of the crisis? To what extent do the levels and distribution of welfare, as measured by certain outcomes, separate countries from each other? Countries within a regime cluster should not only be different enough as a regimetype to distinguish them from other countries, but also have outcomes in common. In this sense, within-regime coherence is just as important as between-regime

Similar to the typology of welfare states, the varieties of capitalism framework

popularized by Hall and Soskice [19] highlights systematic differences in the structural characteristics of countries. However, unlike welfare regime theory, it uses market and strategic coordination to differentiate national systems. According to the varieties of capitalism theory, domestic business coordinating capacity is a

#### *The Political Economy of Crisis Recovery DOI: http://dx.doi.org/10.5772/intechopen.92586*

characteristics of the regime type in question. Moreover, countries associated with a particular regime-type should all exhibit similar outcomes and follow similar development paths.

Still, the question of whether and to what extent measures of socio-economic outcomes between different countries vary significantly with the regime-type has been relatively under researched in the literature. The little research that does exist has tended to focus on the micro level, the pre-crisis period and few cases and indicators. What is needed is an empirical assessment of outcomes across a large number of country cases during a period of external shock like the 2007–2008 crisis, which put intense pressure on public budgets, forcing many countries to restructure their welfare states [13, 14].

External and internal pressures do not necessarily determine the trajectories of welfare states, neither do they dictate their capacities to achieve desired goals in a uniform way. But they can restrict the possibilities and choices welfare states have at their disposal. Such modifying pressures toward conformity can include demographic changes, changing household and family patterns, the growth of non-standard employment arrangements, structural unemployment, technological changes, international competition, mobility of capital, international trade, participation in a common currency, globalization and economic crises [15]. These pressures can come in different forms and welfare states may react to them differently. But exactly how they affect the socio-economic outcomes of different welfare regimes remains an under-researched area.

Arguably, periods of economic crisis impose challenges and constraints that are somewhat different and perhaps more important than some of the other pressures on the welfare state. However, economic crises also tend to affect countries differently because of the diverse political-economic capacities and varied vulnerabilities of welfare regimes to such external shocks. Certainly, the global financial crisis of 2007 marked a 'stress test' for many welfare states [16] as more than ever before policymakers were forced to consider cuts in welfare provision and enact flexibilityenhancing measures in order to improve financial solvency and economic performance [17]. Adding to this challenge was the fact that the recent financial crisis, much like the recession of the early 1990s, occurred when many countries were already suffering from an economic downturn [13, 14].

Given the significant pressures the recent crisis placed on many welfare states, it is worth examining whether the boundaries between them have been fundamentally redrawn. For instance, did the crisis produce similar socio-economic outcomes in different regime types? Or, have there been notable and systematic differences in outcomes and patterns of continuity across welfare models in the years following the worst moments of the crisis? To what extent do the levels and distribution of welfare, as measured by certain outcomes, separate countries from each other? Countries within a regime cluster should not only be different enough as a regimetype to distinguish them from other countries, but also have outcomes in common. In this sense, within-regime coherence is just as important as between-regime differences [18].
