Sozialalmanach - Caritas Luxembourg

moving away from the breadwinner/caregiver model to a dual-earner norm. Moreover,
most welfare reform endeavours have remained deeply embedded in normative notions
of equity and solidarity, shared cognitive understandings of the efficiency-enhancing
effects of well-designed social and labour market policies. And while many reforms were
unpopular, it is important to highlight that a fair amount occurred with the consent of
parties in opposition, trade unions and employer organizations.
5. Conjecturing Regime Change under Low Growth Prospects
In democratic systems, it is ultimately politics that decides over matters of social and
economic governance. Once again, the current economic crisis is fundamentally redrawing
the boundaries between states and markets, calling into question many issues of economic
policy, ranging from central banking, fiscal policy, financial regulation, global trade, welfare
provision, economic governance and assumptions about human behaviour and rationality.
Many observers, experts, and policymakers are seeking new answers, and looking for
solutions to the new questions posed by the crisis.
Thus far, intellectual and policy attention has focused on immediate crisis management,
especially with respect to financial sector risk management. Little systematic thinking has
been devoted to the question of whether and to what extent the crisis creates momentum for
more fundamental welfare regime change. To be sure, it is still too soon to draw conclusions
about the future economic, social, cultural, and political consequences of this momentous
economic shock. On the other hand, these questions are among the most politically and
intellectually pressing of our times.
Any tentative exploration of these questions has to start with a diagnosis of the crisis.
Does the current credit crunch bear any similarity to the Great Depression or is it
more similar to the 1980s crisis of stagflation? The current downturn was triggered by a
financial crisis, not by a ‘real’ economy crisis, and in this regard, it is more similar to the
Great Depression than to the 1970s crisis of stagflation. Barry Eichengreen and Kevin H.
O’Rourke 32 have concluded that today’s crisis is surely as bad as the Great Depression.
In 2008, industrial production, trade, and stock markets plummeted even faster than in
1929-30. However, whereas after the 1929 crash, the world economy continued to shrink
for three successive years, in the wake of the 2007 crisis, policy responses were much better,
and led to a swift upswing in trade and stock markets in the first half of 2009. This suggests
that the biggest difference between this crisis and the one in the 1930s was timely, effective
and coordinated crisis management to arrest economic collapse. Monetary expansion
32 Eichengreen & O’Rourke (2009).
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