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Welfare Services in Times of Austerity

This book started with the—somewhat gloomy—observations on the effects of the recent financial crisis on welfare services (or SGI) to suggest that, in order to understand how we got there, we need to look at the trends towards the recommodification of welfare services which have been ongoing over the past two decades. This chapter reiterates the idea that, indeed, marketization and austerity are two sides of the same coin: as public resources have become increasingly scarce, marketiza- tion is seen as an alternative in order to curtail public expenditure by shifting costs from the government to users recast as consumers. It is also widely believed that marketization results in more efficient management of such services hence allowing for cost containment. A consensus among European decision makers on austerity—that is, fundamentally, the ‘reduction of public spending’ (Blyth 2013)—prevailed long before the financial crisis hit USA and unfolded as a crisis of sovereign debt in Europe. This is because a central principle of the Economic and Monetary Union (EMU) as it was conceived in 1992 is that ‘sound’ public finance is the cornerstone of monetary integration. The so-called Maastricht

© The Editor(s) (if applicable) and The Author(s) 2016 A. Crespy, Welfare Markets in Europe, Palgrave Studies in European Political Sociology, DOI 10.1057/978-1-137-57104-5_6

convergence criteria enshrined in the Stability and Growth Pact of 1997 limits government deficit to 3 % of GDP and public debt to 60 % of GDP Hence, the ‘Brussels-Washington’ consensus existed long before it became the ‘Berlin-Washington’ consensus on the need for austerity policies (Fitoussi and Saraceno 2013). More or less explicitly, and along with labour market reforms, cuts in welfare services have been understood as part of ‘structural reforms’. In a study from 2002 on public sector reforms in ten European countries, Hemereijck and Huiskamp (2002) found that the road to EMU put public finance under pressure for future member countries (as well as for those which had not yet decided). This translated into the stabilization or slow, but steady, decrease of expenditure for the public sector in a context characterized by increased needs in numerous sectors, not least education and healthcare. While decentralization allowed for change in employment regimes and industrial relations, internal and external privatizations were meant to raise efficiency (for the former) and generate state revenue rapidly (for the latter) in a context where capital mobility has increasingly brought about fiscal competition and the decline of tax revenue. The crisis which has affected the EU as a result of the global financial crisis originating in the USA in 2008 has only reinforced the ideational and institutional strength of austerity, thus putting welfare services in the eye of the storm.

This chapter first presents data showing the impact of the crisis on welfare services across Europe, and reflects on the consequences thereof. In the second section, the new governance framework for macro-economic governance in the EU is presented with an emphasis on the increasing subordination of social policy objectives to fiscal discipline. A main argument here is that EU institutions, through the European Semester, leave national governments facing contradictory objectives, aiming at quality welfare services with reduced financial resources. Finally, the last section turns to the issue of contestation with observations that contestation against austerity in general, and cuts in welfare services in particular, have been unequally distributed across Europe but, more importantly, it has been weakly coordinated at the European scale. Consequently, austerity remains the dominant ideational frame for this crisis. For welfare services, this means that marketization is, more than ever, the sole alternative in the face of rapidly rising inequalities within European societies.

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