Small Welfare States in Motion

In the highly original and path-breaking study Small States in World Markets from 1985, Peter Katzenstein revealed how the small open economies of Wetern Europe have, since World War II, mustered highly effective proactive strategies of policy adjustment to intensifying external economic pressures, and how generous welfare provision played a key role in the economic success of the small open economies of Western Europe, strongly supported by social partnership concertation with the state. Now, thirty years later, far-reaching external economic changes and dramatic social transformations, critically changing the nature of social risks, call into question the proficiency of Katzenstein’s instutional balancing act of ‘economic versality’ and ‘internal social resilience’ in the 21st century knowledge based economy.

This paper explores whether and to what extent a new balance or policy mix of external economic responsiveness and domestic social policy resilience has emerged in the small open political economies of Belgium, Denmark, Sweden, Ireland, and the Netherlands. We aim to contribute to a better understanding of institutional change, including the evolution to capacitating services and the decentralization of employment relations, alongside social security buffers. What new balance have emerged? What outcomes have so far been produced in terms of economic and social performance for specific risks groups and age cohorts? What barriers are faced in the search for a new balance and how can these be overcome, even in times of intrusive fiscal austerity?