Globalization and the Welfare State

by

Marius R. Busemeyer, Tobias Tober

• LAST REVIEWED: 18 March 2021
• LAST MODIFIED: 27 October 2021
• DOI: 10.1093/obo/9780199756223-0094

Introduction

The association between globalization and the welfare state is highly complex, and understanding the implications of the ongoing process of economic internationalization for the long-term sustainability of welfare states is a highly relevant topic. Not surprisingly, therefore, there is a huge and ever-growing scholarly literature in the field, which to the unsuspecting newcomer may be frustrating to read in the beginning, because it is full of conflicting and contradictory findings. This article aims to clarify some of the theoretical and empirical contradictions and also to point out a simple fact that is, arguably, not always acknowledged in the pertinent literature: The association between globalization and the welfare state is highly contingent and dynamic, i.e., it changes over time. Depending on which countries and which time periods are studied, scholars might come up with different findings. Also, both globalization and the welfare state are multidimensional. Certain aspects of economic internationalization (trade openness, financial liberalization, or foreign direct investments to name a few) may be more important than others with regard to welfare state policies. Similarly, the “welfare state” nowadays encompasses and connects a large number of policy fields, and some parts of the welfare state are likely to be affected differently by globalization from others. To provide an overview on the remainder of this bibliographic article: there are listed a number of literature reviews and overview articles on the topic. Three schools of thought that have dominated the scholarly debate in the past decades are introduced: first, the compensation thesis, which claims a positive association between globalization and the expansion of the welfare state, which is juxtaposed to the so-called efficiency thesis, which posits a negative relationship. A third school of thought can be called the globalization skeptics, who claim that effects of globalization on welfare states are weak or even nonexistent, because domestic politics and institutions are more influential. Two brief sections discuss the implications of the Varieties of Capitalism (VoC) debate for the future of welfare states in a globalized economy and the relationship between globalization and inequality. More recent debates in the literature concern the topic of policy convergence and diffusion of social policies and the extent to which convergence might be caused by globalization. Furthermore, because the classical literature is concerned with the macro level, recent work studies the implications of globalization on the micro level of individual preferences and attitudes. Finally, although most of the work introduced in this article focuses on advanced industrial democracies, important contributions on the relationship between globalization and the welfare state in the developing world are discussed.

Review Articles

Studying the linkage between globalization and the welfare state has become an interdisciplinary enterprise at the intersection between political science, sociology, and economics. There are several good and relatively recent review articles that introduce the reader to the core issues from slightly different perspectives. Genschel 2004; Swank 2005; Swank 2021; and Zohlnhöfer, et al. 2017 represent the classical perspective of comparative political science and public policy. Brady, et al. 2007 adopts a more sociological approach, and Ursprung 2008 reviews scholarship by economists. Obinger, et al. 2013 introduces readers to the more specialized literature on diffusion and policy transfer, which has become a growing field of research in recent years.

• Brady, D., J. Beckfield, and W. Zhao. “The Consequences of Economic Globalization for Affluent Democracies.” Annual Review of Sociology 33 (2007): 313–334.

  DOI: 10.1146/annurev.soc.33.040406.131636

  Provides a good overview of the debate on globalization and the welfare state with a focus on advanced democracies. The paper puts a certain emphasis on sociological work, e.g., how globalization is perceived in public discourses and what its effect on civil society is.

• Genschel, P. “Globalization and the Welfare State: A Retrospective.” Journal of European Public Policy 11.4 (2004): 613–636.

  DOI: 10.1080/1350176042000248052

  Genschel’s paper is a broad introduction to the debate, although it may by now be considered to be somewhat dated. The paper also nicely links early-21st-century debates about globalization to the crisis literature of the 1970s. To illustrate the different viewpoints on globalization, the paper relies on descriptive statistics and directly juxtaposes the arguments of the different schools of thought; it is therefore suitable as introductory background reading.

• Obinger, H., C. Schmitt, and P. Starke. “Policy Diffusion and Policy Transfer in Comparative Welfare State Research.” Social Policy & Administration 47.1 (2013): 111–129.

  DOI: 10.1111/spol.12003

  This paper presents a nice overview of the recent debate about policy diffusion and policy transfer applied to the case of comparative welfare state research, challenging the latter’s traditional focus on the nation-state as the dominant unit of analysis. The focus is on horizontal interdependencies between nation-states rather than vertical interdependency in multilevel governance structures.

• Swank, D. “Globalisation, Domestic Politics, and Welfare State Retrenchment in Capitalist Democracies.” Social Policy and Society 4 (2005): 183–195.

  DOI: 10.1017/S1474746404002337

  This article is a short and succinct overview of the most important topics in the globalization debate, although it remains a bit on the superficial level. Swank also presents the results of a brief empirical analysis that shows that openness does not have a strong effect on social spending (in line with the globalization skeptics; see Globalization Skeptics and Institutionalists).

• Swank, D. “Globalization.” In The Oxford Handbook of the Welfare State. 2d ed. Edited by D. Béland, K. J. Morgan, H. Obinger, and C. Pierson, 433–450. Oxford: Oxford University Press, 2021.

  DOI: 10.1093/oxfordhb/9780199579396.001.0001

  A very good overview on the debate from the perspective of comparative political science from one of the leading scholars in the field. Also includes a section on differences between advanced industrial democracies and the developing world.

• Ursprung, H. W. “Globalization and the Welfare State.” In The New Palgrave Dictionary of Economics Online. Edited by M. Vernengo, E. P. Caldentey, and B. J. Rosser Jr. London: Palgrave Macmillan, 2008.

  This short overview article introduces the reader to the globalization debate from the perspective of (political) economists.

• Zohlnhöfer, R., F. Engler, and K. Dümig. “Review Article: The Retreat of the Interventionist State in Advanced Democracies.” British Journal of Political Science 48.2 (2017): 535–562.

  DOI: 10.1017/S0007123416000454

  An extensive review article (and online appendix) that covers not only globalization, but also other determinants of welfare state policy like Europeanization and political parties. Includes a thoughtful discussion of why the empirical literature produces mixed results and provides interesting suggestions for future research.