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Written by Bruce Headey, Principal Fellow, Melbourne Institute of Applied Economic and Social Research, University of Melbourne, Australia.

Capitalism is not uniform and welfare states are not all the same. Far from becoming more alike, Western governments continue to deliver widely differing policies that greatly influence the living standards, quality of life and satisfaction of their citizens.

This book focusses on policy outcomes in the four types of welfare-capitalist regime found in the Western world: the Scandinavian social democracies, the liberal, market-oriented democracies (the English-speaking countries plus Switzerland), the European corporatist regimes (Germany, Austria, Belgium, France, the Netherlands) and the Southern European neo-corporatist regimes (Italy, Greece, Portugal, Spain).

The Scandinavian social democracies have lower levels of poverty, income inequality and gender inequality than the other regimes. Life satisfaction is higher than elsewhere, and gaps in satisfaction between higher and lower income people are smaller. A huge but not publicly appreciated benefit that all Western governments provide for their citizens is in reducing the instability of family incomes. The market incomes of families unavoidably fluctuate widely from year to year, but income support programs and other welfare state interventions greatly reduce these fluctuations…by more than 30 per cent in the social democracies and the European corporatist regimes.

Wealth inequality is a glaring exception to most welfare state trends. Far from diminishing over time, wealth inequality (that is, net worth – assets minus debts) appears to be increasing and is actually higher in the Scandinavian social democracies than other regimes. In general, wealth inequality tends to be lower where homeownership is widespread and higher where financial assets (shares etc) are the main form of wealth ownership.

It is sometimes suggested that the more market-oriented liberal regimes perform best in delivering economic growth and rising living standards, and that more generous welfare regimes sacrifice efficiency for equity. We find little or no support for this trade-off proposition. Rates of economic growth in the four types of regime have been quite similar, both in the recent and the more distant past. There is evidence of economic catch-up – that is faster growth in poorer than rich countries – but not of clear differences in regime performance.

Convergence? Many social scientists and commentators have claimed that Western regimes are gradually becoming more similar to each other by converging towards a liberal regime approach to governance. The evidence in this book provides no support for this convergence hypothesis. On the contrary, the four types of regime remain distinctive in the outcomes they deliver. Convergence is occurring only in the domain of gender equality.

European Union Statistics Conditions: EU-SILC of Income and Living Conditions

The book is based mainly on a remarkably rich set of surveys collected by the European Union from 2004 onwards. The annual EU-SILC surveys now include about 270000 individuals in 13000 households in each wave of interviews. Most respondents continue providing interviews for four consecutive years (and are then released!). The four-year panels enable researchers to assess how policy changes directly affect people’s social and economic circumstances. In each survey respondents provide detailed information about their incomes, welfare payments, housing and labour force participation.

Western Welfare Capitalisms in Good Times and Bad
Bruce Headey, University of Melbourne, Australia, Ruud Muffels, Tilburg School of Social and Behavioral Sciences and Tranzo, Scientific Center for Care and Wellbeing, the Netherlands and John Quiggin, University of Queensland, Australia.

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