Neoliberalism, Institutional Change and the Welfare State: The Case of Britain and France

Abstract

Neoliberal turn in economic policy involved an attack on the welfare state in some countries but not in others. This article provides an institutionalist explanation of the causes of this variation through a comparative analysis of the transformation of British and French economic policy from the end of the Second World War through the end of the 1980s. The author shows that in both nations the transition to neoliberalism accompanied the economic crisis that took place in the 1970s. However, consistent with the differences in the way the two countries came to diagnose the nature of their respective crises; the policy manifestations of neoliberalism remained different in each. In Britain, where the crisis was diagnosed as one of Keynesianism, neoliberalism emerged as a radical antiKeynesian movement that sought to dismantle major Keynesian institutions and policies.In this context, the welfare state, a fundamental Keynesian institution, was identified as a part of the ‘problem,’ and became subject to the neoliberal ‘solution.’ On the other hand, in France, where the crisis was perceived to reside in the declining competitiveness of the dirigiste policies, the neoliberal reorganization of the economy focused on industrial policy. The welfare state was not associated with the problems of dirigisme, and remained largely resilient. Through this analysis, the author attempts to develop a general theory of the relationship between neoliberalism and national policies and provide insights into the process through which paradigmatic ideas such as neoliberalism translate into concrete policy preferences in different national contexts. Data for this study come from a combination of content analysis of major government documents concerning the economy and social policy, political party election manifestos, opinion papers, OECD statistics and secondary literature.