Pioneers of Paradigmatic Change? Welfare State Restructuring in Small Open Economies

Abstract

This chapter attempts to explain how the profound changes of the international political economy since the 1970s have triggered a fundamental transformation of the welfare state as a core dimension of the modern state. This is by no means a new research question. In the late 1990s and early 2000s, the impact of economic globalization on advanced welfare states was the dominant topic in macro-quantitative research. Interestingly, however, despite a large amount of research, no consensus has been achieved about whether and how economic globalization has affected national welfare states. Evidence has been presented to support virtually any theoretically plausible explanation about the globalization-welfare state nexus. Consider the following quotes:

The only evidence of a significant globalization effect to emerge anywhere in the analysis is an apparent relationship between the growth of foreign direct investment and cutbacks in existing programme spending. However, this is an effect that proves not to be statistically robust. Thus the crisis threat of globalization [...] is revealed as a ‘paper tiger’. (Castles 2004, 17)