Rethinking the Effects of Neoliberal Retrenchment and Deeply Divided Societies On Welfare States: The Politics of “Loyalty Benefits” in Israel

Concept and case study: In Israel over the last decade income entitlements were cut and sometimes transformed by explicitly neoliberal reforms. However, we conceptualize many key transfer programs as “loyalty benefits”: they are segmented, generous and legitimated by service to the state. Fiscal bureaucrats seeking to cut costs and maximize their autonomy oppose such Republican privileges and promote alternative universal benefits. Many such battles were lost and loyalty benefits have generally escaped cuts or were improved in the era of retrenchment. To explain why, we unravel the politics of two contrasting struggles for benefit increases, on behalf of military reservists and Holocaust survivors.

Wider contributions: (1)“Loyalty benefits” are not exotica, but an unacknowledged type of  social right (e.g. veterans’ benefits). They are especially prominent in countries deeply divided along ethnic and/or cultural lines (e.g. Belgium) and are acquiring renewed prominence as some welfare states seek to segment insider and outsider entitlements (e.g. Denmark). (2)Welfare state scholars frame diversity as a challenge to solidarity and therefore to diffuse risk-sharing and redistribution. We shift the focus to divided societies in which states and social sectors have an interest in promoting selective benefits based on particularistic identities. (3)Scholarship in political economy presents neoliberal reformers as promoting  selective social rights for the disadvantaged and protecting the market as a playground for the privileged. Our findings paint a different picture, challenging the assumption that neoliberalism is driven by a sacred ideological program rather than by profane institutional interests.