Rediscovering social investment in developmental welfare state ...

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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 One possible consequence of not resolving the ambiguity surrounding the social investment function of welfare states is that we may see the social investment approach as a new and discontinuous paradigm where one mistakenly identifies specific or discrete social policies as singularly productive, fostering their instrumentalization as either active or passive. Such a disembedded approach overlooks the need to explain why the social policies of some countries have worked as successfully as they have for as long as they have. It is only by working out a political economic explanation for the social investment function of welfare states that social investment can be understood as fundamentally more than a new approach or pallid Third Way version of social policy (Esping-Andersen, 2002). There is a distinct need to move beyond acknowledging the possibility of market failures and vague calls for government intervention and return to affirmative engagement with both the productive possibilities of traditional social policy and the inherent limits of the market. 3 Arguably there have been three generations of crossnational welfare state research but the progress of an emerging fourth generation (as I define it below) is constrained by a lack of theoretical guidance. Ongoing research continues to remain focused on the protective effects of social policy (in terms of outcomes related to poverty and inequality), which restrains the field‘s ability to explain the—often unintended—productive or social investment function of social policies. I will suggest below that much of this inability can be traced to the fact that little dialogue has historically occurred across the division of labor between poverty research and welfare state research (De Janvry & Kanbur, 2006). 4 While the discourse pointing toward the potentially productive effects of social policy has been growing, it remains programmatically impressionistic and vague, offering little theoretical guidance for thinking predictively about social policies (not simply those that are new but especially those that are old). This ambiguity in the social investment debate has been linked to ―the welfare regime inspiration‖ and confusion about ―ensuing policy choices‖ (Antonucci, 2010, pp. 2, 1). I argue both that scholars have to relinquish their dependence on the regime typology approach and that the largest share of social investment is already being undertaken by particular types of traditional (or old) social policies, which I define below as DWSPs. 5 Regardless, Antonucci and others are correct to caution that until social investment is theoretically clarified as an empirical concept it is difficult (in addition to being unwise and risky) to use it as a basis for suggesting policy changes. Social investment remains plagued by theoretical ambiguity both in terms of what it means and how it translates into social 3 The prevailing, largely ambiguous economic position on the role of government can be thought of as the second-best position (Lipsey, 2007) that has subsumed older theoretical traditions that preceded much formal economic theory. This notion will be discussed briefly below. See Johnson (2010) for more detailed discussion. 4 As Cantillon, Van Mechelen, and Van den Bosch (2004) explain: ―Less is known about the links between welfare state arrangements and outcomes than about each of these separately. An important reason for the relative lack of studies on this issue is that studies of welfare arrangements and of well-being outcomes employ different data, very much different analytical methods, and therefore tend to be carried out by persons with little contact with one another‖ (p. 6). 5 Typologies tend to achieve generalizability by, to some degree, neglecting policy details. Arts and Gelissen (2002, p. 139) write: ―typologies are only fruitful to an empirical science that is still in its infancy.‖ They continue: ―a better formulation of the theory on which it [the welfare state typology] is based deserves priority. Only then can predictions be logically—instead of impressionistically—deduced from theory (p. 155).‖ Regime modeling has focused on what welfare states are in the context of why they emerged, expanded and persisted. The why questions pursued by researchers (Baldwin, 1996) have arguably been based on a narrow theoretical foundation (Boje, 1996) suited to a particular historical context. Reliance on functional and sociopolitical theoretical frameworks (Van Voorhis, 1998, 2002) has resulted in a focus on explaining independence from the family or market, redistributive effects, citizen attitudes, and the like. I argue that something different is needed: a developmental rationale for social benefits. 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 3
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 policy. For instance, it does not explicitly tell us when universalism or in-kind benefits make sense (i.e., under what circumstances or conditions such social policies may be a precondition or prerequisite for economic growth). Morel et al. (2012, p. 17) correctly trace this ambiguity in part to pragmatic judgments about discourse: In some ways, one could argue that just as the Myrdals had used some of the Conservatives‘ concerns with low fertility and slow growth to argue their case for an expansion of social policy in Sweden, so have social investment proponents framed their arguments in ways that can respond to neoliberals‘ critique of social spending as wasteful and a source of dependency in order to get their ideas across. However that might be, this may in fact be one of the social investment perspective‘s weakest points as it allows for much ambiguity and tensions in the goals actually assigned to the policies implemented in its name. (p. 17) Tensions and ambiguities also stem from differing intellectual roots and political influences. Morel et al. note that ―while the social investment perspective rests on a number of common themes both at the ideational level and in terms of the policy instruments put forward, different aspects are given different emphasis by different thinkers and policy makers‖ (p. 17). The result is that ―the social investment perspective…covers under the same umbrella a ‗social democratic‘ approach, inspired by the example of the Nordic welfare states, and a ‗Third Way‘ approach which represents an ‗Angloliberal‘ view of social policy‖ (p. 19) (see also Jenson, 2009, pp. 41–42, Liddle in the same volume). This paper reflects an effort to further delineate the policy logic of the former by more clearly distinguishing its political economic roots, fusing the insights of developmentalist and welfare state thinking in order to reach a broader understanding of the productive consequences of social policy. Situating social investment in a larger intellectual tradition makes it possible to begin to resolve this ambiguity and to derive a set of insights (and perhaps eventually, systematized rules) about when and why certain social policies should yield protective-productive outcomes, offering guidance on how we think about social policies as social investments. For instance, in contrast to the neoliberal view and given certain assumptions, I offer an explanation for why a small number of broad or encompassing policy instruments may be optimal for maximizing protection and production in the long term. The possibility that a potentially wide range of social protection measures can have productive economic consequences compels scholars to revisit a political economic tradition that allows for decisions about distribution to have net positive effects on production. This possibility, in turn, implies the occurrence of market failures on a comparatively extensive scale, which supports the provision of merit goods on the basis of wide-ranging information failures. In the standard economic view, market failures remain limited and second-best policy prescriptions tightly circumscribed by information limitations and the likelihood of economic distortions. Arguments for intervention due to limited market failure do not clearly indicate which types of social policies are likely to function as social investments (Greve, 2007) but rather are limited to those selective interventions that justify a residual welfare state. While the standard framework offers suggestions for human capital-enhancing initiatives directly related to education and activation, it has little to say about classic social insurance or generous universal and in-kind benefits. Adopting a social investment approach based on the standard view—rather than supplementing existing policies—could in reality portend the erosion of traditional social provision and its replacement by more circumscribed and narrowly targeted Third Way-style social policies. Avoiding this eventuality requires us to recognize the role of distribution in 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 4
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