The Welfare State and the Economy in Periods of Economic Crisis: A Comparative Study of Twenty‐three OECD Nations

ABSTRACT While all industrial nations have been plagued by the setback to economic growth since the mid‐1970s, a wide range of variation marks the economic performance, policy outputs and policy outcomes of Western nations. The basic question addressed in this paper is the extent to which economic, socioeconomic and political variables account for the differences in economic performance, unemployment, public debt and the growth of social security expenditure. In general, the forces which shape public policies in periods of economic crisis tend to be different in character from the major determinants of policy‐making in periods of prosperity. The analysis does not support the view that bourgeois and socialist governments produce clear‐cut policy differences. It suggests that the major determinants of policies are the power relations in extra‐parliamentary arenas, the level of national economic strength prior to the crisis, the extent to which ‘solidaristic’ values characterize the political culture, and the extent to which a correspondence exists between the power relationships in the political ‘superstructure’ and in the party system and industrial arenas. An expanding capitalist order is, in theory, not incompatible with low unemployment and a developed welfare state. However, the governments’ room to manoeuvre is strongly restricted by political and technological developments. One of the major political restrictions is the ‘paradoxical’ outcome of elections.