The welfare state in the global economy: the politics of social insurance retrenchment in Sweden, 1990-1998

Abstract

This dissertation analyzes the relative success of retrenchment in four cases of social insurance in Sweden: old age pensions, unemployment insurance, work injury insurance, and sickness cash benefits. Retrenchment was most successful in the sickness and work injury cash benefit system and least successful in the unemployment insurance system. Pensions represent a case of moderately successful retrenchment.In order to explain this pattern of outcomes, I argue that internationalization---the enhanced mobility of both productive and financial capital---influences the policy preferences of domestic political actors. The stronger the link between the financing and operational features of an individual program and the conditions affecting production, the greater the likelihood of retrenchment.The mobility of financial capital influences the capacity of governments to generate revenues needed to fund social welfare programs. Integrated bond markets tend to punish governments which follow policies resulting in high inflation and large budget deficits. Retrenchment is more likely when program structures permit political actors to identify the extent to which specific welfare programs contribute to budget deficits.European integration subjects national social insurance schemes to reform pressures arising from the mobility of both capital and labor within the EU. Capital mobility may create limits on the level of taxation needed to finance benefits. The level of program vulnerability to beneficiary mobility depends on the extent to which benefits must be earned by labor force participation or whether benefits are available to all residents.The effects of internationalization and Europeanization on welfare state politics are mediated by domestic political factors. The structure of individual programs creates different patterns of interest group organization and channels retrenchment strategies in particular ways. The relative strength and policy priorities of social democratic parties shape the extent to which different welfare constituencies bear the burden of budget cutbacks and efforts to enhance competitiveness. In sum, retrenchment is most likely when a policy sector is linked to concerns about competitiveness, when its contribution to budget deficits is clear, and when the labor movement supports reform. All three of these variables are the result of the feedback effects of existing welfare state programs.