How Have European Welfare States Responded To The Challenges Posed By Globalization?
Although globalization has varied meanings and definitions, we can describe it as a process of closer transnational cooperation resulting in free capital movement, increased trade, and free movement of people. Academicians and policymakers more often use the concept to describe the substantial growth of international trade and financial markets (Mewes, J., &Mau, S. (2013). Accordingly, one could argue that among the major challenges posed by globalization to the welfare states lies in the very differing extent to which labor forces and capital can move across borders. Globalization has had a significant effect on most welfare states worldwide that some people have come to argue that it is the cause of the crisis of European welfare states (Glatzer, W., 2012). How these states have responded to the challenges of globalization forms the basis of this paper. More specifically, the paper seeks to answer the question “How have European countries responded to the challenges posed by globalization?”
The Challenges of Globalization to the European Welfare States
Examining the response of European welfare states to the challenges posed by globalization would, first of all, require an understanding of the impact of globalization on these states and the challenges that stem from this phenomenon. Globalization and its implications became the objects of concern in the final years of the last century. Journalists, academicians, and politicians shared this concern, every so often expressing it as a requirement for more market and less state in the new-fangled global world. However, most of them did not reinforce their arguments with evidence. More recently, though, social scientists have endeavoredto expose the phenomenon of globalization and the concern of its implications to an analysis that is more balanced and supported by empirical research (Palier, B., & Sykes, R., 2001). As such, challenges that globalization pose to welfare states, particularly those in Europe, have become more apparent.
The range of challenges that stem from globalization is wide. In the case of welfare states in Europe, globalization acts as a process impacting on the internationalization of Northern European companies within the international market and the incorporation of the financial markets of Northern European countries into the international system. In those welfare states to the South of Europe as well as Bismarckian states, globalization acts as process affecting labor markets, impacting on, in particular, the existing rigidities in occupational structures and competitiveness. Also, in Bismarckian welfare states, globalization creates problems for the existing patterns of employment and the gender balance in the labor force. The Eastern and Central European welfare states have liked globalization to the process by which the Bretton Woods Institutions have been able to enforce an entirely new ideology regarding welfare and fundamental streamlining of the provision of welfare along drasticlines of neo-liberalism (Palier, B., & Sykes, R., 2001).
For the past five decades, different dimensions of globalization have weakened both the political and economic bases of generous welfare states in Europe. The deregulation of the flow of international capital and of national capital markets, which are fundamental elements of globalization, have had a substantial impact on production regimes in Europe. More specifically, they have eroded some of the traditional policies and institutions that allowed European countries to keep interest rates below the rates of the global market. Additionally, they have tattered traditional policies that allowed countries in Europe to provide investment capital on preferential terms to business enterprises. Accordingly, globalization has contributed to lower investment rates in a majority of European welfare states (Meinhard, S., & Potrafke, N., 2012).
Given that high rates of investment were an essential component of the policy configurations of full employment-generous European welfare states, globalization has made the maintenance of this configuration more difficult. Another important dimension of globalization is the internationalization of production, which has altered the political power balances underpinning generous European welfare states. The growth in transnational production networks has made capital to exist easier in Europe (Smith, A., 2015). Accordingly, globalization has given capital more leverage compared with governments and labor.
Technological changes and economic integration are also dimensions of globalization that pose challenges to European welfare states. Through these dimensions, globalization has pushed the welfare states in the direction of greater conformity and adoption. Intrinsically, it has led to the collapse of the autonomy of European stat
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