Rediscovering social investment in developmental welfare state ...

R E D I S C O V E R I N G S O C I A L I N V E S T M E N T I N D E V E L O P M E N T A L W E L F A R E S T A T E P O L I C I E S :
B A C K T O T H E F U T U R E
Rediscovering Social Investment
in Developmental Welfare State Policies:
Back to the Future
The recent stress on the productive potential of social policy provides a new economic rationale for social policy provision.
However, it is a mistaken perception that the majority of social policies need to be radically adjusted to changes in the
economic and social order. Rather, this paper argues that we need to better understand the ways in which long-standing
policies have enabled and continue to facilitate adaptation to ongoing social and economic changes. To fail to do so risks
severing or otherwise upsetting vital social policy synergies. The paper is based on a dissertation that developed a
conceptual framework for thinking about social policies in the welfare state that may be both protective and productive;
that is, that reduce posttax/transfer poverty without decreasing pretax/transfer (market) earnings. Observing that
some countries with expensive social policies appear to be able to achieve high poverty reduction without adverse effects
on economic performance, the study argued that theoretical explanations for this pattern are lacking. Applying social
developmentalist ideas to the welfare state literature, it argued that the severity of the tradeoff between efficiency and
equality may vary by the types and combinations of social policies that countries employ. The study offered a theoretical
explanation for how and why different types of conventional social policy that occur across welfare states might be
expected to produce outcomes that are simultaneously protective and productive. This paper describes the logic
underlying the effects of what the author defines as developmental welfare state policies (DWSPs).
Key words: Social investment, social development, social policy, welfare states, poverty.
Background and Overview
Research has begun to examine the effect of a range of welfare state policies on alternative concepts
of well-being and measures of poverty. However, a review of the literature suggests that there
remains a need for a theoretically coherent framework to develop systematic expectations about how
different aspects of welfare state effort interact and relate to various outcomes, including, but not
limited to those associated with income distribution. The dissertation on which this paper is based
aimed to make several conceptual contributions. First, it synthesized the relevant literature and
argued for a new perspective and research direction. Second, it clarified a perspective that supported
alternative hypotheses—about the positive economic implications of social policy—than those
offered by mainstream economic theory, based on an older political economic tradition that is
largely distinct from Keynesianism and that I believe informs developmentalist ideas. 1 Third, it
identified broad characteristics associated with developmental welfare state policies (DWSPs) and
developed predictions about the way they interact and impact both poverty and labor market
activity. Fourth, it bridged the welfare state and developmentalist literatures with the intent of
1 Keynesianism became the guiding theoretical framework for understanding the role and impact of social policy, and its
association with passive, countercyclical, demand-side policies has obscured the simultaneous investment function of
these same policies, a point raised long ago by Garrett (1998). See Johnson (2010), especially p. 27, footnote 24 and p.
72, footnote 63) for further discussion.
C E N T E R F O R S O C I A L D E V E L O P M E N T
W A S H I N G T O N U N I V E R S I T Y I N S T . L O U I S
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