Comparative political economy (CPE) studies how political determinants influence socioeconomic outcomes and how economic determinants shape political behavior. The political economy of the welfare state is a particularly interesting area for illustrating CPE, as it both shapes socioeconomic outcomes and is shaped by them.
Modernization And The Origin Of The Welfare State
Without the presence of socioeconomic influences, the welfare state in today’s advanced, industrialized democracies would probably not have emerged. Modernization—encompassing industrialization and democratization, and specifically involving rapidly changing working conditions and the emergence of the free labor contract—is the central factor here, as it led to the loss of income security among weak groups and to unemployment. Since neither the market nor the family provided the collective goods to cope with these new insecurities, large parts of population turned to the state to demand social protection. The increasing concentration of people in factories and cities and the extended means of communication enabled the population to mobilize itself through protest or establishing social and political organizations. In a nutshell, industrialization dislodged masses of people and made them dependent on the whims of the labor market. In turn, they demanded more socioeconomic security, to which the welfare state is a response.
A socioeconomic factor (modernization, or more specifically the establishment of a full-fledged labor market) thus shapes a political outcome (welfare state development), illustrating why a political economy perspective is so helpful for studying welfare state development. Interestingly, the common experience of modernization did lead to different outcomes.
It is here where comparative enters political economy. A comparative political economic analysis examines to what extent socioeconomic factors relate to political ones in different cases, and vice versa.
Various Models Of The Welfare State
Due to modernization, all advanced, industrialized democracies introduced social security programs such as sickness insurance, old age pensions, and accident insurance during the nineteenth or twentieth century. However, the countries differ substantially in the degree to which the different insecurities are covered and who is eligible for a benefit. Welfare states come, so to speak, in different flavors.
In the 1950s, Richard M. Titmuss proposed a typology of welfare state models or regimes. First, there is the residual welfare model, which offers social protection only once the private market and the family fail to fulfill the needs. The welfare states in Anglo-Saxon countries are an empirical example of this model. Second, there is the industrial achievement-performance model, which links welfare rights and benefits to the employment relation. The continental European “male-breadwinner” countries such as Germany and the Netherlands in the last century typify this model. Finally, there is the institutional redistributive model, in which social welfare institutions are integral parts of society and which offer universalist services outside the market when needed. The Scandinavian countries exemplify this model.
There is a considerable overlap between this typology and the one proposed by Gøsta Esping-Andersen in The Three Worlds of Welfare Capitalism (1990). In this seminal book, Esping-Andersen distinguishes three welfare state regimes—liberal, conservative, and social-democratic—and these correspond largely to Titmuss’s residual welfare, industrial achievement performance, and institutional redistributive models.
A particular type of welfare state regime or model emerged because the socioeconomic changes of modernization depended, among other factors, on whether or not the middle class was included in the pro–welfare state coalition and, if the middle class was included, how this came about and was arranged politically. A comparative political economy perspective —one that examines the interplay between socioeconomic determinants and political ones—is thus crucial for understanding the origin and subsequent development of the different types of welfare states.
Variation In Poverty And Equality
Comparative political economy also proves valuable for understanding the variation across countries or types of welfare states in socioeconomic outcomes, such as poverty and equality. Many recent empirical studies, for example, show that the type of welfare state regime matters for the level of poverty and equality in a country. There seems to be a consensus that the most pronounced effect derives from the degree of universalism. The mechanisms behind this are manifold. For instance, good benefits and services—especially education and health care—that tailor to the standards of the better off rather than to the poor are good for the poor and help to increase social mobility. Moreover, fragmented, targeted, or particularistic systems (i.e., separate systems for separate groups) reinforce inequality rather than reduce it. How universal social programs are varies across the types of welfare state regimes. A political determinant—how the welfare state is organized—affects the socioeconomic outcomes of poverty and equality.
The welfare state is but one of the topics upon which comparative political economy focuses; other topics include voting behavior and the relation between economic development and democracy. Regarding voting behavior, comparative political economic analysis assesses to what extent economic considerations influence election results. Why, for instance, did the economy have such a large effect on the 1980 presidential election in the United States but hardly an influence twenty years later? With respect to economic development and democracy, comparative political economic analysis studies to what extent economic development fosters, or hinders, democracy and to what extent the reverse may be occurring (i.e., democracy stimulating or retarding economic development).
- Duch, Raymond M., and Randolph T. Stevenson. The Economic Vote: How Political and Economic Institutions Condition Election Results. Cambridge: Cambridge University Press, 2008.
- Esping-Andersen, Gøsta. The Three Worlds of Welfare Capitalism. Cambridge: Polity Press, 1990.
- Hill, Michael. Social Policy in the Modern World: A Comparative Text. Malden, Mass.: Blackwell, 2006.
- Polanyi, Karl. The Great Transformation: The Political and Economic Origins of Our Time. Boston: Beacon Press, 1957.
- Rueschemeyer, Dietrich, Evelyne Huber Stephens, and John D. Stephens. Capitalist Development and Democracy. Chicago: University of Chicago Press, 1992.
- Scruggs, Lyle, and James P. Allan. “The Material Consequences of Welfare States: Benefit Generosity and Absolute Poverty in 16 OECD Countries.” Comparative Political Studies 39, no. 7 (2006): 880–904.
- Titmuss, Richard M. Essays on “the Welfare State.” London: Allen and Unwin, 1958.
- Van Kersbergen, Kees, and Philip Manow, eds. Religion, Class Coalitions, and Welfare States. Cambridge: Cambridge University Press, 2009.
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