Can Political Parties Reform the Welfare State in the EMU?

One of the most important theories in the study of the welfare state argues that what matters for policy change is the strength and weakness of left and right wing parties in government. This is often referred to as the power resource theory (Korpi, 2003). Low income groups in the economy mobilise in support of left leaning political parties because they implement policies that are re-distributive. Low income groups use their market power (i.e. sheer weight of numbers) to mobilise behind socialist oriented political parties, who use this market power to implement political reform.

This theory was challenged by Pierson (1999) who argued that partisanship no longer matters. Political parties in government have converged their policies in response to the fiscal constraints of the state, in a global market economy. The new politics of the welfare state is about market management and generating support for unpopular reform. Partisanship in the neoliberal era does not matter. There is undoubtedly truth in this perspective, and reflected in the convergence of policy choices across Eurozone member states in response to the banking cum sovereign debt crisis.

But what both of these perspectives ignores is the difference between what parties are (i.e. historical identity) and what they actually do (the policies they implement). Parties may make rhetorical appeals to specific socio-economic groups but often implement policies that are not in the economic interest of these groups. The relationship between policy outcome and electoral choice rarely reflects the formal model of political scientists (working from an economistic rational choice framework). This assumes a direct causal relationship between voter interests, party choice and policy outcomes. But public policy decisions are nested in a network of elite relationships between politicians and those with the mobilising capacity to influence government ministers (not least the media).

A lot of research seems to indicate that partisanship still matters for voter choice (Korpi, 2009). Lower income groups continue to support political parties with more redistributive programs. But this ‘class politics’ produces a variety of political coalitions, given the muliti-layered cleavages in a post-industrial society. For class-based electoral outcomes to translate into policy, political parties have to encourage a class based identity amongst the electorate in low to middle-income groups. That is, they have to encourage citizens to vote in their economic self-interest. But this assumes these interests exist?

Most social democratic parties have done the opposite over the past twenty years. They do not encourage people to vote in their economic self-interest on the reasonable assumption that they have limited capacity to implement a re-distributive public policy regime. Hence, they focus on encouraging people to become more employable, to get a better job, and earn their income in the labour market. It is about adaptability and flexibilisation to ‘external’ market forces. But the institutional coordination of this depends on the formal electoral-political system. In the US, low-income groups don’t vote and most economic policy decisions reflect the interests of high income groups (i.e. aggressive tax cutting). It is a center-right two-party state. Most European countries are multi-party systems.

Political party partisanship only matters (i.e. gets translated into policy) to the extent that there is an ideological difference between the political parties. Partisanship will not get reflected in economic policy if there is no difference between competing governments. The smaller the ideological polarisation the less difference in public policy outcomes. This is applicable to countries with minimal support for left-leaning parties in Europe, such as Ireland. It also reflects the shit toward variants of the Third Way (UK, Netherlands) .

Clearly, under a given set of conditions, the capacity of political parties to implement egalitarian policy diminishes. A country that no longer has economic sovereignty and under the control of a foreign power (or Troika adjustment program) is a clear case in point. In a capitalist society, the market economy must be growing if the resources for redistribution and employment are to be produced. But few countries operate at the level of the nation-state. They are part of a much large international and mulit-level governance regime – such as the European Union. Therefore they have to take into consideration external demands as well as internal demands, and the crux of the Eurozone crisis.

Domestic policy choices matter when there is a real ideological difference between political parties operating within a democratic system. The further the difference between parties, the more likely they will be able to make their ideology count. But if this democratic choice is shut off, at the level of the nation-state, by the constraints of the EMU, then we no longer live in a democratic capitalist society.

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