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From the welfare state to the competition state

Chapter · January 2004

DOI: 10.1007/978-3-322-80647-5_17

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Bob Jessop
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From the Welfare State to the Competition State
Bob Jessop

Published in in P. Bauer and H. Voelzkow, eds, Die Europäische Union – Marionette

oder Regisseur? Forschungen zur Europäischen Integration, Opdaden: Verlag für
Sozialwissenschaften, 2004, pp. 335-359.

This contribution adopts a state- and regulation-theoretical approach to the welfare

state in Europe and to the more general issue of whether the EU operates more as a
marionette or regisseur. I argue that the concepts of welfare and competition state
are too vague to provide a useful account of recent transformations in European
statehood and propose instead that a transition is now well under way from different
forms of Keynesian welfare national state to different forms of Schumpeterian
workfare postnational regime. I also reject the two competing descriptions of the
European Union and suggest another, namely, that the EU is a co-dependent co-
regisseur of the multilevel metagovernance of the contradictory and conflictual
process of Europeanization in a still emerging world society. In this context I further
argue that, while the EU is the dominant meta-governance instance in Europe in this
regard, it is only a nodal instance of multilevel metagovernance on the global stage.

State-Theoretical Considerations

Prognoses concerning the future of the state include the rise of a new global empire;
the rise of a Western hemispheric state; the re-scaling of the nation-state's powers
upwards, downwards, or sideways; a shift from state-based government to network-
based governance; a shift from a welfare state to a competition state; and a series of
incremental changes in secondary aspects of the nation-state that leave its core
intact. In addressing these prognoses in relation to the European Union, I make
some key assumptions that inform my approach to the two issues introduced above.

First, all forms of state are based on the territorialization of political power.
Nonetheless, a system of formally sovereign, mutually recognizing, mutually
legitimating national states exercising sovereign control over large and exclusive
territorial areas is only a relatively recent institutional expression of state power.

1
Other modes of territorializing political power have existed, some still co-exist with
the so-called Westphalian system (which was really strongly instituted only in a
series of steps in the nineteenth and twentieth centuries), new expressions are
emerging, and yet others can be imagined. It is an interesting question whether the
EU is a new form of state power, a rescaled ‘national’ state, or a post-sovereign form
of authority.

Second, the state does not exist in majestic isolation overseeing the rest of society
but is embedded in a wider political system, other institutional orders, and civil
society. An important aspect of state transformation is the redrawing of the multiple
'lines of difference' between the state and its environment(s) as states (and social
forces they represent) redefine their priorities, expand or reduce their activities,
recalibrate or rescale them in the light of new challenges, seek greater autonomy or
develop forms of power-sharing, and disembed or re-embed specific state
institutions and practices within the social order. This also holds for the international
as well as national dimensions of state relations. There is no reason to assume the
fixity of the state’s frontiers or temporal horizons. Instead we should expect to see
continuing attempts to redesign the institutional architecture and modes of working of
the state to enhance its capacities to achieve particular political objectives.

Third, social formations can be organized under the dominance of different axes of
societalization (e.g., economic, political, military, religious) and this will be reflected
in the state system as a crucial site where power relations can be crystallized in
different forms (Mann 1986). Thus the state can operate primarily as a capitalist
state, a military power, a theocratic regime, a representative state accountable to
civil society, etc. There are competing principles of societalization associated with
different functional systems and different identities and values anchored in civil
society or the lifeworld and, in principle, any of these could become dominant, at
least for a while. There is certainly no guarantee that the modern state will always (or
ever) be essentially capitalist in character and, even where capital accumulation
does become the dominant axis of societalization, states will typically have regard to
other functional systems and the lifeworld in order to maintain a modicum of
institutional integration and social cohesion within its territorial boundaries. But such
structural coherence and social cohesion is necessarily limited insofar as it depends

2
on the displacement and/or deferral of the effects of certain contradictions and lines
of conflict beyond its socially constituted spatio-temporal boundaries and horizons of
action. Different kinds of spatio-temporal fix are significant here (Jessop 2002).

2. Regulation-Theoretical Considerations

There are many theoretically valid ways to consider the modern state and each
would highlight different aspects of its form, functions, and activities over time and
space. My entrypoint below is the state’s role in capitalist reproduction. However,
while this certainly interprets the state from a distinctive ‘economic’ perspective, it
does so in terms of a broad view of the capitalist mode of production as imbricated in
a complex assemblage of economic and extra-economic conditions. For the capital
relation itself is inherently contradictory, conflictual, and dilemmatic and its concrete
reproduction requirements emerge only ex post, if at all. This said, we can identify
four basic dimensions of state involvement in securing the conditions for capitalist
reproduction – the specific form and content of which vary across accumulation
regimes and modes of regulation. These dimensions derive from basic features of
capitalism and comprise:
• State involvement in securing the conditions for the profitable accumulation of
private capital. This is the broad field of economic policy. It matters because
market forces alone cannot secure the conditions of capitalist reproduction.
and must be supplemented by non-market mechanisms. This insufficiency is
grounded in generic tendencies towards market failure and in the specific
contradictions and dilemmas linked with the capitalist mode of production.
• State involvement in securing the individual and collective reproduction of
labour-power as a fictitious commodity. This is the broad field of social policy
and covers interventions that range from labour power individually and
collectively from quotidian routines through the lifecycle to intergenerational
reproduction. It matters because labour power is a fictitious commodity
(Polanyi 1944; de Brunhoff 1968). For, although it is bought and sold in labour
markets and may add value in production, it is not itself directly (re)produced
in and by capitalist firms with a view to private profit. This poses economic
problems as regards its individual and collective suitability to capital's needs

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 and its own survival in the absence of a secure income or other assets. It also
involves social problems regarding social inclusion and cohesion; and political
problems regarding the legitimacy of state intervention in this area and its
relation to other identities that workers may have.
• The main scale, if any, on which economic and social policies are decided –
even if underpinned or implemented on other scales. This is important as
economic and social policies are politically mediated and the scales of political
organization may not coincide with those of economic and social life.
• The relative weight of the different mechanisms deployed in the effort to
maintain capitalist profitability and reproduce labour-power by compensating
for market failures and inadequacies. Top-down state intervention is just one
of these mechanisms and states can resort to other technologies of
governance (or governmentality) too. Moreover, as is well known, states can
fail too. This suggests the need for other supplementary mechanisms and,
insofar as these also tend to fail, for attention to the balance among them.

On this basis, I suggest that recent changes in the state in those advanced ‘Western’
capitalist societies1 that were integrated into the circuits of Atlantic Fordism during
the 1950s and 1960s can be summarized in terms of a tendential and uneven
movement from some version of Keynesian Welfare National State (KWNS) to some
version of Schumpeterian workfare postnational regime (SWPR). I will explain below
why this formulation is preferable to the more common proposition that the welfare
state is giving way to the competition state.

The distinctive2 features of the postwar welfare regime in advanced capitalist

economies (apart from Japan) on these dimensions can be defined in stylized terms
as a Keynesian welfare national state. For, first, in promoting the conditions for
profitable accumulation, it was distinctively Keynesian insofar as it aimed to secure
full employment in a relatively closed national economy and pursued this goal mainly
through demand-side management. Second, in reproducing labour-power as a
fictitious commodity, social policy had a distinctive welfare orientation insofar as it
tried (a) to generalize norms of mass consumption beyond male workers in Fordist
economic sectors earning a family wage with the declared aim of ensuring that all

4
national citizens and their dependants might share the fruits of economic growth
(and thereby also contribute to effective domestic demand); and (b) to promote forms
of collective consumption favourable to the Fordist growth dynamic with its base in a
virtuous national circle of mass production and mass consumption. Thus economic
and social policies were linked to economic and social rights attached directly or
indirectly to citizenship of a national territorial state – whether this citizenship was
based on descent, acculturation, naturalization, political tests, or some other criterion
(on types of nation-state, Jessop 2002). Third, the KWNS was national insofar as
economic and social policies were pursued within the historically specific (and
socially constructed) matrix of a national economy, a national state, and a society
seen as comprising national citizens. Within this matrix it was the national territorial
state that was mainly held responsible for developing and guiding Keynesian full
employment and welfare policies. Local and regional states acted mainly as relays
for policies framed at the national level; and the various postwar international
regimes were intended mainly to restore stability to national economies and national
states. And, fourth, the KWNS was statist insofar as it was state institutions (on
different levels) that were the chief supplement to market forces in securing
economic growth and social cohesion. It was the combination of market and state on
different levels that prompted the use of the term 'mixed economy' to describe the
postwar system (classically, Shonfield 1965). In tandem with its role in facilitating
and correcting the operation of market forces, the state was also a significant actor in
shaping civil society and thus its citizens' identities.

There was never a pure KWNS. Instead it had different hybrid national forms within
the broader international economic and political framework of Atlantic Fordism.
These combined features from variants or sub-types of KWNS with other economic
and social policy functions, scales of action, or modes of governance. There are four
commonly cited forms of welfare regimes – market liberal (sometimes subdivided,
and justifiably so, into North Atlantic and Antipodean variants), social democratic,
conservative-corporativist (or christian democratic), and Mediterranean (or Southern
European) (cf. Esping-Andersen 1985). But this typology mainly captures the second
dimension of the schema outlined above and must be supplemented by other work
on the varieties of capitalism. Moreover, just as there was no generic KWNS, so, too,
no generic crisis of Atlantic Fordism emerged to affect all such states identically.

5
Nonetheless, all advanced capitalist states have faced similar pressures from recent
changes and this has been reflected in specific, path-dependent, nationally variable
crises of the KWNS emerging in the mid-1970s and worsening in the 1980s.

3. Crisis in the KWNS

The KWNS began to fail as a mode of regularizing-governing Atlantic Fordism when

its institutional coherence became inconsistent with the objects it was governing, the
practices deployed to govern them, and the identities and interests of the active
agents and/or 'passive' subjects of the KWNS regime. Thus, taking its four
dimensions in turn, I would identify the following crisis-tendencies. First, the primary
object of economic governance in the KWNS was the national economy. The
emergence and consolidation of Keynesian practices had helped to delimit and
reproduce the national economy (Shonfeld 1975; Tomlinson 1985). But Keynesian
economic management became increasingly problematic and generated
stagflationary tendencies (stagnation plus inflation) that fuelled the emerging crisis of
the Atlantic Fordist economy that the KWNS was supposed to manage (Boyer 1991).
At the same time different forms of economic internationalization and the operations
of multinational companies undermined the national economy as an object of
economic management. States could no longer act as if national economies were
more or less closed and their growth dynamics were primarily domestic. These
problems were complicated by the crisis-mediated emergence of a new long wave of
economic growth based on the new information and communication technologies
and the resulting uneven development as local, regional, national, and global centres
of economic dynamism shifted. After an extended search process, the national
economy has since been replaced as the primary object of economic governance by
the knowledge-based economy in an era of globalization. This does not mean that
efforts at macro-economic management have stopped but their success is now said
to depend on a remarkably different set of conditions (see below).

Second, the generic object of social governance in the KWNS (as in other forms of
national state) was a national population divided initially into national citizens and
resident aliens. But this population was categorized and governed in distinctive ways
suited to Atlantic Fordism and its mode of regulation and social relations were

6
stabilized around a class compromise between organized labour and organized
business in which responsible unionism and collective bargaining permitted
managers to manage and workers to benefit from rising productivity as wage earners
and welfare recipients. In addition, social policy was premised on conditions of full or
near-full employment, on lifelong employment – albeit not necessarily with the same
employer – with a family wage for male workers, and on the patriarchal nuclear
family as the basic unit of civil society (Esping-Andersen 1994). Although this regime
is sometimes considered as the ‘golden age’ of the welfare state, it was associated
with significant, if often unacknowledged, forms of economic, social, and political
exclusion and/or oppression on gender, ethnic, and other lines. Nonetheless, the
crisis of Atlantic Fordism undermined the assumptions of full employment, the family
wage, and the gendered division of labour; and also increasingly prompted
employers and state managers to see the social wage as a cost of international
production rather than as a source of domestic demand. A further tension arose from
the combination of encouragement to immigration for economic purposes with
growing concern to police the boundaries of national citizenship and its associated
welfare rights. More generally, KWNSs in Europe were also affected (admittedly to
different degrees) by a weakening of the national identity and solidarity that shaped it
in its formative period and helped sustain the coalition behind it. This is reflected in
changes in the values, social identities, and interests associated with the welfare
state. These shifts have fragmented the KWNS coalition of forces, led to demands
for more differentiated and flexible forms of economic and social policy, and led to
concern with problems of social exclusion.

Third, the primacy of the national scale of economic and social governance
depended on the politically-constituted coincidence of national economy, national
state, national society. This structured coherence has also been weakened in each
of its components: (a) the national economy has been undermined by
internationalization, the growth of multi-tiered global city networks, the formation of
triad economies (such as the European Union), and the re-emergence of regional
and local economies in national states; (b) there has been a 'hollowing out' of the
national state as its powers are delegated upwards to supra-regional or international
bodies, downwards to regional or local states, or outwards to relatively autonomous
cross-national alliances among local metropolitan or regional states with

7
complementary interests; (c) the unity of nation-states has been weakened by the
(admittedly uneven) growth of multi-ethnic and multi-cultural societies and of divided
political loyalties (with the resurgence of regionalism and nationalism as the rise of
European identities, diasporic networks, cosmopolitan patriotism, etc.) (Jessop
2002). This has been accompanied by a proliferation of scales on which economic
and social policies are pursued as well as by alternative projects to re-establish a
primary scale at which these policies can be rendered more coherent and consistent.
The widening and deepening of the European Union and the reorientation of its
economic and social functions is only one among many such projects.

Finally, the state's role in the mixed economy was undermined by several factors.
These include: growing political resistance to taxation and an emerging pattern of
stagnation-inflation (or 'stagflation'); crisis in postwar compromises between
industrial capital and organized labour; new economic and social conditions and
attendant problems that could not be managed or resolved readily, if at all, through
continuing reliance on top-down state planning and/or simple market forces; growing
resentment about the bureaucratism, inflexibility, and cost of the welfare state as it
continued to expand during the late 1960s and 1970s; and the rise of new social
movements which did not fit easily into the postwar compromise. Moreover, as
society became more complex and as new economic and social conditions emerged
that could not be managed or resolved readily, if at all, through the market and state
as modes of governance, increasing reliance came to be placed on networks and
partnerships as modes of coordination. Organizationally, the Fordist period was one
of large scale, top-down hierarchical structures and this model spread to the state's
economic and welfare roles. This paradigm has since been challenged by a new
'network paradigm' that emphasizes partnership, regulated self-regulation, the
informal sector, the facilitation of self-organization, and decentralized context-
steering (Messner 1997). Overall this involves a tendential shift from imperative
coordination by the sovereign state to an emphasis on interdependence, divisions of
knowledge, reflexive negotiation, and mutual learning. In short, there is a shift from
government to governance in the narrow sense.

8
4. The Schumpeterian Workfare Postnational Regime

Although the restructuring of the state may be grounded mainly in responses to

specific economic and social problems, such responses are always politically
mediated. This involves political struggles to interpret the crisis and the strategically
selective institutional mediations of responses to the crisis. Thus national variations
in the pace, direction, and emerging patterns of the SWPR are often rooted in their
respective initial starting points, differences in modes of growth and insertion into the
global economy, and the institutional specificities and distinctive balance of forces.
This means that, even if certain general tendencies can be identified and grounded
in the logic of contemporary capitalism, this does not justify a simple, 'one-size-fits-
all' account of welfare restructuring. Instead we must undertake comparative
analyses to comprehend and explain observable variations as well as similarities.

The prevailing response to these crisis-tendencies is reflected in four general trends

in the restructuring of the KWNS. The first is a shift from Keynesian aims and modes
of intervention to Schumpeterian ones; the second is a shift from a welfarist mode of
reproduction of labour-power to a workfarist mode; the third is a shift from the
primacy of the national scale to a post-national framework in which no scale is
predominant; the fourth is a shift from the primacy of the state in compensating for
market failures to an emphasis on networked, partnership-based economic, political,
and social governance mechanisms. Both severally and in combination, these trends
have developed in quite different ways in the various Atlantic Fordist economies. But
the overall trend is that of the tendential rise of a Schumpeterian workfare post-
national regime (SWPR). This can be described in ideal typical terms as follows.

First, regarding its functions for private capital, it is Schumpeterian insofar as it tries
to promote permanent innovation and flexibility in relatively open economies by
intervening on the supply-side and to strengthen as far as possible their structural
and/or systemic competitiveness (Chesnais 1986; Messner 1997). This shift is
sometimes described in terms of the rise of the 'competition state' (Cerny 1989;
Altvater 1994, 1998; Hirsch 1995). This correctly identifies the increased importance
of competition in the state's economic policy role but fails to specify what is
distinctive about the state's contribution in promoting new forms of competition in the

9
current situation For there are many forms of competition and competitiveness and
many ways in which states can regulate or promote competition and get involved in
securing the conditions for enhanced competitiveness. It is therefore important to
specify which are the prevailing concepts of competition and competitiveness that
guide state intervention and the relative importance of the different sites and scales
on which such competition is deemed to occur. There have been important material
and discursive changes in these respects related to the relative exhaustion of the
Fordist growth dynamic and the increasing re-scaling and integration of the world
market. In addition, the imagined scope and inclusiveness of the economy that
needs governing have also expanded. This is no longer interpreted in narrow terms
but has been extended to include many additional factors, deemed 'non-economic'
under the KWNS regime, that affect economic performance. Innovation and
enterprise have a key role here tied to the widespread belief in a new long wave of
technological change. This is associated with a tendency to subsume the general
institutional features of societies under the new competitive race and is also reflected
in new international benchmarks to assess the capacity of supranational blocs such
as the EU, national states, regions, and cities to compete successfully in an
emerging, globalizing, knowledge-based economy.3

This expansion of economic intervention has two interesting and paradoxical effects
on the state. First, whilst it expands the potential scope of state intervention for
economic purposes, the resulting complexity renders postwar top-down intervention
less effective – requiring that the state retreat from some areas of intervention and
re-invent itself as a condition for more effective intervention in others (Messner
1997). And, second, whilst it increases the range of stakeholders whose cooperation
is required for successful state intervention, it also increases pressures within the
state to create new subjects to act as its partners. Thus states are now trying to
transform the identities, interests, capacities, rights, and responsibilities of economic
and social forces so that they become more flexible, capable, and reliable agents of
the state's new economic strategies – whether in partnership with the state and/or
with each other or as autonomous entrepreneurial subjects in the innovative,
knowledge-driven, entrepreneurial, flexible economy (Barry et al., 1996; Deakin and
Edwards 1993; Jones 1999; and, for a political statement, Blair and Schröder 1999).

10
Second, regarding social reproduction, the SWPR can be described (at the risk of
some misunderstanding) as a workfare regime insofar as it subordinates social
policy to the demands of labour market flexibility and employability and to the
demands of structural or systemic competitiveness. In this sense, social policy is
now modelled on human capital theory and becomes a form of human resources
management. This also leads to the demotion of other, earlier policy objectives.
Thus, whilst the KWNS established full employment as one of the main goals of state
action, this is now regarded as a desirable by-product of the successful promotion of
structural or systemic competitiveness. Likewise, whereas the KWNS pursued a
redistributive politics to promote social equality and even out regional development,
the SWPR accepts increasing economic, social, and regional inequalities and seeks
to compensate for this through more limited policies aimed at combating social
exclusion. Similarly, whilst the KWNS tried to extend the social rights of its national
citizens, the SWPR is more concerned to provide welfare services that benefit
business and thus tends to demote individual needs to second place. This includes
putting downward pressure on the social wage qua cost of international production.
Even where there appears to be strong continuities with the KWNS, the SWPR gives
the inherited features a new inflection tied to the new growth dynamics.

Third, compared with the earlier primacy of the national scale, the SWPR is
'postnational' insofar as the increased significance of other spatial scales and
horizons of action makes the national territory less important as a 'power container'.
This is associated with a transfer of economic and social policy-making functions
upwards, downwards, and sideways. On a global level, this can be seen in the
growing concern of a growing number of international agencies (such as the IMF,
World Bank, OECD, and ILO) and intergovernmental forums (such as the G8) with
the shaping of current social as well as economic policy agendas. In part, the EU
serves to relay these agenda-shaping efforts and, in part, it actively promotes its own
agenda for other countries. This is especially clear for the first wave of candidate
member-states among the post-socialist economies, associate member states, and
North Africa. This is in addition, of course, to its efforts to steer national economic
and social governance, especially through the Single Market, the Maastricht criteria
for economic convergence, and the growth and stability pact. At the same time,
some aspects of economic and social policy-making are being devolved to the

11
regional, urban, and local levels on the grounds that policies intended to influence
the micro-economic supply-side and social regeneration are best designed close to
their sites of implementation. This sometimes involves cross-border cooperation
among regional, urban, or local spaces. In short, in various respects and on various
scales, the primacy of the national in economic and social policy is being weakened
in favour of a more complex pattern of post-national politics. Nonetheless, as we
shall see below, this is accompanied by an enhanced effort by national states to
control the interscalar transfer and articulation of these powers – suggesting a shift
from sovereignty to a primus inter pares role in intergovernmental relations.
However, since the formal equality of sovereign states is clearly contradicted by their
continuing substantive technological, economic, military, political, and cultural
inequalities, not all states are equally successful in this regard. The role of the USA
is especially strong in this regard – as it was in the construction of Atlantic Fordism.

The post-national moment of economic and social policy restructuring is complex

because of the proliferation of scales and the relativization of scale with which it is
associated. There are clear differences among the triads here. NAFTA is primarily a
continental trading system based on America's dominance as a quasi-continental
economy (itself comprising many different regional economies with different levels of
economic performance) with Canada and Mexico being increasingly obliged to
internalize US production and consumption norms as well as to find their place as
best they can within an emerging continental division of labour. The East Asian triad
has developed an increasingly important regional division of labour organized
primarily under Japanese regional hegemony but it has no coherent institutional
mechanisms to ensure effective co-ordination and is weakened by Japan's
continuing inability to break out of its political impasse as well as by the residual
bitterness felt by significant social forces in countries occupied by Japan in the 1930s
and 1940s. The European Union provides the only example among the three triad
regions of a clear commitment to economic, political, and social integration and,
more ambivalently, to the development of supranational state structures.
Nonetheless all three regions/triads linked to internationalization of policy regimes
not only in economic but also in juridical, political and social fields, etc. This excludes
any easy generalization from the EU case to the other two triads -- or vice versa; this
indicates that globalization is far from the sole cause of recent changes.

12
Finally, regarding the mode of delivery of economic and social policies, the SWPR
has become more regime-like relative to the statism of the KWNS. This is reflected in
the increased importance of non-state mechanisms in compensating for market
failures and inadequacies and the delivery of state-sponsored economic and social
policies. One aspect of this is the increased importance of private-public networks to
state activities on all levels – from local partnerships to supranational neo-corporatist
arrangements (e.g., Clarke and Gaile 1998; Falkner 1998). The often remarked shift
from government towards 'governance' (from imperative coordination to networking
and other forms of self-organization) means that traditional forms of intervention now
play a lesser role in economic and social policy. This does not mean that law and
money have disappeared, of course; instead, active economic and social steering
now tends to run more through soft regulation and reflexive law, additionality and
private-public partnerships, organizational intelligence and information-sharing, etc.
A key role is played here by 'meta-governance’, i.e., the organization of the
institutional framework and rules for individual modes of governance and the re-
balancing (collibration) of different modes of governance (Dunsire 1996).

5. How does this relate to the European Union?

Given Professor Tömmel’s research interests, we must ask how these trends relate,
if at all, to the European Union. Each of these four shifts can be found there. This is
hardly surprising because the hypothesized transition from the KWNS to the SWPR
derives from theoretical analysis of developmental tendencies in capitalism
combined with careful empirical observation of national economies within the circuits
of Atlantic Fordism. But, since the preceding account derives from the North
American and Antipodean cases as well as from Northwestern Europe and also took
the national economy and national state in Atlantic Fordism as its theoretical and
historical starting point, it is worth asking whether these national tendencies are also
found at the European level.

First, it is quite clear that the EU's overall economic policy has been reoriented in the
direction of a Schumpeterian strategy from an earlier period when it was more suited
to Atlantic Fordism. The origins of European integration can be found in postwar
reconstruction that prepared the ground for Atlantic Fordism in Europe (for details,

13
see van der Pijl 1984; Ziltener 2001). Thus, in addition to their initial postwar role in
restructuring iron, steel, and coal in this context, the European communities also
emphasized the creation of an integrated market so that industrial enterprises could
realize optimal economies of scale. This involved an essentially liberal
Ordnungspolitik to create a single market and was an important supplement to the
pursuit of national Keynesian policies -- especially as the Treaty of Rome left official
responsibility for employment policy at the national level. Indeed, as Sbragia notes,
the EU's basic constitutional framework structurally privileges liberal economic
strategies: ‘the norm of economic liberalization, embedded in the Treaty of Rome,
was reinforced and elaborated in the Single European Act and the Treaty of
Maastricht’ (Sbragia 2000: 224). Thus even when the EU, under Delors' presidency
(1985-1995), began to develop a more active employment policy and to plan for a
Social Europe and then attempted to institutionalize these twin responsibilities for the
first time in the Maastricht Treaty (1991), this occurred in an institutional context that
was already biased in favour of liberalism and in an ideological climate that was
dominated by neo-liberalism. Whether this would lead only to neo-liberal policy
adjustments or to a more radical neo-liberal regime shift, however, would depend on
the struggles between economic, political, and social forces rather than having been
pre-scripted by the logic of the post-Fordism knowledge-based economy.

It is worth noting in this context that the six initial members of the EEC had modes of
growth and modes of regulation belonging to one or other of the regulated varieties
of capitalism and either had one or other form of conservative-corporativist welfare
regime or, in Italy's case, a clientelist mediterranean welfare regime (cf. Ruigrok and
van Tulder 1996; Hantrais 2000). This suggests that the institutionalized commitment
to economic liberalism might initially have provided the basis for the integration and
consolidation of regulated capitalism on a wider scale rather than the means to push
through a far-reaching liberal programme. The situation changed, however, as new
members with different modes of growth, modes of regulation, and welfare regimes
joined the European Community. This introduced greater economic and social
heterogeneity into the European economy and helped to shift the balance of forces
in a neo-liberal direction. The Eastwards expansion of the European Union has had
a key role here – and one that is by no means accidental. It has been
correspondingly more difficult to establish the conditions for re-scaling state planning

14
from the national to the European level or to establish Euro-corporatism (on Euro-
corporatism, see Falkner 1998 and Vobruba 1995; and on its limits, Streeck 1995).
Likewise, rather than seeing a re-scaling of the welfare state upwards to the
European Union, EU social policy largely takes the form of social regulation. For, as
Majone notes,

measures proposed by the Commission in the social field must be

compatible with the ‘economic constitution’ of the Community, that is,
with the principle of a liberal economic order. This requirement creates
an ideological climate quite unlike that which made possible the
development of the welfare state in the Member States ... The
economic liberalism that pervades the Founding Treaty and its
subsequent revisions gives priority to the allocation of public policy
over distributional objectives. Hence the best rationale for social
initiatives at Community level is one which stresses the efficiency-
improving aspects of the proposed measures (Majone 1993: 156).

These difficulties have been reinforced through the manner in which the EMU has
been instituted. The Maastricht convergence criteria make it harder for member
states to break out of the neo-liberal framework and the limited EU budget prevents it
from financing a major expansion of a European welfare regime. In addition, the
growth and stability pact has served as a new 'gold standard', requiring conformity to
relatively rigid norms of economic and political conduct favourable to a liberal
(money) conception of economic stability and growth. In particular, the Maastricht
criteria and the growth and stability pact together require public spending cuts or
constraints, social security and welfare reforms, and more or less significant
privatization of state-owned enterprises and commercialization of public services.
Nonetheless, even in this context, we can observe growing concern with active
involvement in promoting competitiveness, innovation, and enterprise in line with
Schumpeterian perspectives. Although the main thrust of this involvement accords
well with neo-liberal strategy, it is nonetheless flanked by neo-statist and neo-
corporatist strategies, illustrated by key features of EU technology policies and social
policy respectively (for a brief summary of the distinctions between neo-liberal, neo-
statist, and neo-corporatist variants of the SWPR, see figure 1; for some elaboration,

15
 Neo-Liberalism

Liberalization – promote free competition

De-regulation – reduce role of law and state
Privatization – sell off public sector
Market proxies in residual public sector
Internationalization – free inward and outward flows
Lower direct taxes – increase consumer choice

Neo-statism

Government as agenda-setter rather planner

Guidance of national economic strategy
Auditing performance of private and public sectors
Public-private partnerships under state guidance
Neo-mercantilist protection of core economy
Expanding role for new collective resources

Neo-corporatism

Re-balance competition and cooperation

De-centralized 'regulated self-regulation'
Widen range of private, public, and other 'stakeholders'
Expand role of public-private partnerships
Protect core economic sectors in open economy
High taxation to finance social investment

Neo-communitarianism

De-Liberalization – limit free competition

Empowerment – enhance role of third sector
Socialization – expand the social economy
Emphasis on social use-value and social cohesion
Fair trade not Free trade, Think Global, Act Local
Redirect taxes – citizens' wage, carers' allowances

Figure 1. Variant Forms of the SWPR

see Jessop 2002; see also Gottfried 1995). A very interesting development in this
area is, of course, the resurgence of corporatism in a new guise -- social pacts
oriented to wage restraint, social security reform, supply-side competitiveness, and
general conformity to the logic of the new monetary system (see Regini 2000; Grote

16
and Schmitter 1999; Rhodes 1998).

Second, welfare and social policy was retained as a national competence in the
founding treaties of the European Community and policy-making at the European
level in these fields has systematically lagged behind macro-economic, industrial and
technology policies. Thus, as Kuhnle notes, '[t]here exists as of today no European
social law on the basis of which individual citizens can claim benefits from Brussels;
no direct taxation or social contributions to EU which can finance social welfare; and
there hardly exists any welfare bureaucracy in the EU' (Kuhnle 1999: 6).
Nonetheless there is increasing evidence of a complex and complicated reorientation
of welfare policy at the European level. This involves two apparently contradictory
tendencies. On the one hand, some welfare policies (such as equal pay, equal
opportunities, portable welfare benefits, minimum standards for health and security
at work, and rules on working hours) have been gradually re-scaled to the EU level
to supplement the more traditional nationally-scaled welfare measures; and some
structural policies have also been re-scaled at a European level to facilitate industrial
restructuring, compensate for uneven regional development, support agriculture, and
help to regenerate declining communities. On the other hand, the emergence of
social policy at the European level tends to assume a workfare rather than welfare
orientation. Thus 'the political point of reference [of such economic and social policy
initiatives] is not so much social integration but rather the instrumentalization of
policy as a resource for competition oriented structural change' (Deppe, Felder, and
Tidow 2000: 20). This is reflected in the tendential Europeanization of labour market
policies, in the transformation of national corporatist and bargaining arrangements,
and in the development of 'social pacts'. In short, there is a growing mix of welfare
and workfare strategies at the European level; but they are unified around the
concern to create the conditions for an effective single market in post-Fordist rather
than Fordist conditions.

One of the earliest signs of this reorientation was the European Commission's White
Paper on Growth, Competitiveness, Employment (1993). This reviewed a wide range
of factors affecting the competitiveness of the European economy and its capacity to
generate good jobs and sustainable economic growth; and it recommended an
equally wide range of trans-European macro-economic, environmental, infra-

17
structural, technological, educational, vocational, and social policy initiatives that
might address -- rhetorically at least -- the challenges of the coming century. In the
field of labour market policy, for example, the Commission called for a broad
'advanced training offensive' and other measures to enhance labour market
flexibility. This reorientation was taken further at the 1994 EU summit in Essen, when
it was finally recognized that effective employment policies conducted exclusively at
the national level can no longer be successfully managed under the conditions of
globalization and European integration (Hoffman and Hoffman 1997: 22). The Treaty
of Amsterdam finally embedded a commitment to full employment as a 'matter of
common concern' for the EU, translated this into the goal of reaching a 'high level of
employment' without undermining competitiveness, and established an Employment
Committee to discuss appropriate policy in this area and to monitor progress. In line
with the European Union penchant for 'meta-governance' rather than direct top-down
intervention, however, the Community's responsibility in this area is to complement
the activities of member states by developing a 'coordinated strategy', to formulate
common guidelines, to establish benchmarks and 'best practice', and to monitor the
pursuit of national action plans for employment. This penetration of the workfarist
reorientation of social policy to the EU level is also linked to the expansion of the
domain of the 'economic' into areas previously regarded as non-economic. One
aspect of this, as noted by Deppe, Felder, and Tidow (2000: 15-16), is that, for the
first time, the breadth of the EU labour market guidelines has forced the ministries of
economy, culture, finance, welfare and labour to present a joint plan and to relate the
separate policies to each other. This approach was consolidated at the Lisbon
Summit in 2000, when the European Union committed itself to becoming the most
competitive knowledge-based economy in the world whilst maintaining the European
social model.

Third, almost by definition, European economic and social policy illustrates the post-
national nature of the emerging welfare regimes. Before considering the EU's role,
however, we should note that it is itself part of a more complex internationalization of
economic and social policy. Its policies are evolving within a broader framework of
growing involvement in agenda-setting and policy-making by international
institutions, supranational apparatuses, intergovernmental organizations and forums,
transnational think tanks, and transnational interest groups and social movements

18
(cf. Deacon 1997; on policy transfer, see Dolowitz and Marsh 1996; Peck and
Theodore 2001; and Stella 2000). It is important to recognize, with Deacon and
Hulse (1997), that there is some real disagreement among these different bodies on
policy recommendations; but this should not be exaggerated since the bodies
aligned with the 'Washington consensus' have tended to be the most influential in the
internationalization of economic and social policy. In particular, they note some
convergence between EU and OECD policies as the EU has discovered the adverse
impact on competitiveness of KWNS social policy and the OECD’s Directorate of
Education, Employment, Labour and Social Affairs has come to recognize the
economic benefits of expanded income support programmes (1997: 45-58). This
development, mediated through an increasingly dense web of parallel power
networks, reflects the increased formation of a transnational capitalist class
concerned to secure the conditions for capital accumulation on a global scale. This is
associated with a 'new constitutionalism' (Gill 2001), i.e., an attempt to establish a
new articulation between the economic and the political on a global rather than
merely national scale. But it is also associated, as noted above, with attempts to re-
articulate the relationship between the economic and the extra-economic conditions
for capital accumulation in a globalizing, post-Fordist, knowledge-based economy.

The EU is a key player as well as a key site in the struggles to shape this new
constitutional settlement. It acts both as a relay for American neo-liberal pressures to
redesign the world order and as an advocate of an alternative European model. Its
central role in this regard also makes it a crucial site for contending political forces
both within and beyond the EU as they seek to shape its overall strategic direction
and/or specific economic and social policies (cf. Ziltener 2001; van Apeldoorn 2002).
This can be seen in its general commitment to the reorientation of economic and
social policy away from the primacy of the national scale in postwar ‘embedded
liberalism’ towards a post-national ‘embedded neo-liberalism’ – albeit one inflected
differently from the hegemonic American model. At the same time, however, the
tendential Europeanization of economic and social policy is closely linked, in
accordance with the principle of subsidiarity, to the increased role of subnational and
cross-national agencies, territorial and/or functional in form, in its formulation and
implementation. In this regard there is an interesting scalar division of labour
between the EU, national states, and sub-national tiers of government. For, whereas

19
national states retain significant powers in the traditional spheres of the sovereign
state (military, police) and in welfare policy (where the limited EU budget blocks a
major role in general social redistribution even if it acquired this competence), the EU
has acquired increasing influence over economic policy.

Fourth, because the EU has never acquired the characteristics of a supranational

sovereign state or even a confederation of states, it cannot be said to have
undergone a straightforward shift from supranational government to supranational
governance. Nonetheless, it has developed an increasingly wide and deep array of
both governance and meta-governance capacities that enable it to influence
economic and social policy in most areas and on most scales. In this regard, it is
plausible to speak of the growing development of multi-level meta-governance
capacities at the EU level (Jessop 2004; see below). Specific features of the EU give
it special capacities to engage in meta-governance across different tiers of
government, different functional systems, and different stakeholders: the role of
judges and litigation (which enables the EU to override national laws and to
'constitutionalize' the treaties), its location at the heart of information flows (which
gives it a relative monopoly in organizational intelligence), its fiscal poverty (which
limits its vulnerability to claims on public spending and thereby circumscribes the
political agenda) (Sbragia 2000); and the increasing adoption of European projects
and guidelines which entitle the EU to monitor national and regional state activities
and partnerships across an increasingly interconnected set of policy areas -- thereby
giving a means to steer national policy and endow it with greater coherence (Deppe,
Felder, and Tidow 2000; Majone 1993; Wallace 2000; Telò 2002).

6. Marionette or Regisseur?

These last remarks bear directly on the question of whether the EU is better seen as
a puppet of external forces or as the director of an unfolding European drama. A
strategic-relational approach to the state would invalidate both alternatives. For the
state is neither a passive instrument (hence not a ‘puppet on a string’) nor an active
subject in its own right (hence not a director that could be fully in charge of writing
and directing the new political script). Instead, as Poulantzas (1978) noted, the state
is a social relation. Put less elliptically, this means that the exercise and effects of

20
state power reflect the form-determined discursive and material condensation of a
changing balance of powers engaged in struggles to transform the state, to shape
the exercise of state capacities, and or resist that exercise. In the present context
this means that the European Union must be studied in terms of the reciprocal
interaction between two related sets of issues: first, the complex interaction between
the institutional reorganization of European statehood within a broader set of political
changes and its articulation to the reorganization of the capitalist mode of production
on a world scale; and, second, the changing balance of forces that are attempting to
shape or resist this double reorganization and to deploy the changed state capacities
to promote new accumulation strategies, state projects, and hegemonic visions.

Although the EU cannot be seen simply as a puppet or an autonomous actor, then,

this does not mean that the changing forms of the European Union have no impact.
On the contrary, I want to argue that the institutional redesign of the European Union
is part of a more general restructuring and reorientation of the capitalist type of state
and that economic and political forces operating at the EU level have been actively
involved in this redesign and reorientation to enhance the EU’s capacities to engage
in multi-level meta-governance. These new capacities conform neither to the
supranational model or the liberal intergovernmental model (a paradigmatic
dichotomy that corresponds to the Fordist phase of European integration) but involve
a new state-building strategy appropriate to the transition towards a globalizing,
knowledge-based economy and Schumpeterian workfare post-national regime. This
new model has been developing for some time. Indeed, among other students of the
European Union, Professor Tömmel herself has noted its importance. She has
described the key role of regional and local authorities and various public-private
partnerships in performing governmental roles in a complex web of cooperative
networks organized in tangled (or, more paradoxically yet, de-hierarchized)
hierarchies. And, in this more general context, she suggests that the Europe of
Regions is becoming

an indispensable element of an emergent, new open and flexible

system, in which the EC -- or the Union as a whole -- will stimulate
competitive and co-operative behaviour and performance of
decentralized -- public and private -- agents and institutions, by using

21
 open, market-oriented steering mechanisms and by institutionalizing
more complex procedures in decision-making and consensus-building
(Tömmel 1998: 75).

But this emerging model has been reinforced and, indeed, elevated into a key
operating principle (in terms of the open method of coordination) at the Lisbon
Summit. Thus EU institutions typically operate less in the manner of a re-scaled,
supranational sovereign state apparatus than as a nodal point in an extensive web of
meta-governance operations. They have a central role in orchestrating economic
and social policy in and across many different scales of action involving a wide range
of official, quasi-official, private economic, and civil interests (Tömmel 1994, 1998;
Ekengreen 1997; Willke, 1992, 1996; Sbragia 2000). The very fact that such
activities do not conform to the traditional notion of the exercise of state power has
made it hard to see their significance for the overall dynamic of state formation at the
European level. The European Employment Strategy is a particularly good example
of this approach insofar as it leaves scope for national or regional interpretations of
flexibility and employability but ensures a common strategic direction through
benchmarking, deliberation, and multi-level measures to reinforce policy
coordination.

In this context, the European Union can be seen as a major and, indeed, ever more
important, supranational instance of multilevel metagovernance in relation to a wide
range of complex and interrelated problems. While the sources and reach of these
problems go well beyond the territorial space occupied by its member states, the EU
is a crucial, if complex, point of intersection (or node) in the emerging, hypercomplex,
and chaotic system of global governance (or, better, metagovernance) and is trying
to develop its own long-term 'Grand Strategy' for Europe (Telò 2002: 266). But it is
still one node among several within this emerging system of global metagovernance
and cannot be fully understood without taking account of its complex relations with
other nodes located above, below, and transversally to the European Union.

It is clearly premature to make predictions when the future of the new European
constitution is in doubt and the emerging forms and functions of the European Union
have been challenged by the increased priority of geo-political over geo-economic

22
issues associated with the Bush administration’s self-serving insistence that the ‘war
on terrorism’ is the major problem currently confronting world society today. But
there can be little doubt that the overall movement is towards metagovernance rather
than a rescaling of the traditional form of sovereign statehood or a revamped form of
intergovernmentalism inherited from earlier rounds of European integration. As an
institutionalized form of metagovernance, emphasis falls on efforts at collibration in
an unstable equilibrium of compromise rather than on a systematic, consistent resort
to one dominant method of coordination of complex interdependence. Apparent
inconsistencies may be part of an overall self-organizing, self-adjusting practice of
metagovernance within a complex division of government and governance powers.
Seen as a form of metagovernance, the emphasis is on a combination of 'super-
vision' and 'supervision', i.e., a relative monopoly of organized intelligence and
overall monitoring of adherence to benchmarks. But in this evolving framework, there
is also a synergetic division of metagovernance labour between the European
Council, the specialized Councils, and the European Commission. The European
Council is the political metagovernance network of prime ministers that decides on
the overall political dynamic around economic and social objectives, providing a
'centripetal orientation of subsidiarity' (Telò 2002: 253), acting by qualified majority,
and playing a key intergovernmental and monitoring role. The European Commission
plays a key metagovernance role in organizing parallel power networks, providing
expertise and recommendations, developing benchmarks, monitoring progress,
exchanging best practice, promoting mutual learning, and ensuring continuity and
coherence across Presidencies. This is associated with increasing networking
across old and new policy fields at the European level as well as with a widening
range of economic, political, and social forces that are being drawn into multilevel
consultation, policy formulation, and policy implementation.

From a strategic-relational perspective, this clearly implies a shift in the strategic

selectivities of the modes of governance and metagovernance in the European
Union. For, while it builds on past patterns of liberal intergovernmentalism and neo-
functionalist spillover, it has its own distinctive momentum and will weaken more
hierarchical forms of coordination (whether intergovernmental or supranational). It
also entails complementary changes in the strategic selectivities of national states
and subordinate levels of government and governance, calling for new forms of

23
strategic coordination and new forms (meta-)governance in and across a wide range
of policy fields. The pattern of multilevel metagovernance in the European Union is
still evolving and, given the inherent tendencies towards failure typical of all major
forms of governance (market, hierarchy, network, etc.) as well as metagovernance
itself, continuing experimentation, improvisation, and adaptation is only to be
expected. In this context the European Union will be neither a marionette nor a
regisseur. It has its own distinctive actors and its own distinctive capacities, even if
these are not those conventionally associated with the sovereign national state; and,
precisely because of this and the more general resort to networked forms of
governance rather than top-down government, it lacks the capacities to be a simple
regisseur. This suggests that it is more appropriate to regard the European Union as
a co-dependent co-regisseur. For, on the one hand, given the growing problems of
complex reciprocal interdependence involved in economic, social, and political
steering, the capacities of the European Union to engage in multi-level meta-
governance depend on coordinating its activities with other major interests (and vice
versa). And, on the other hand, although this means that the European Union cannot
act like a rescaled national sovereign state, it does have distinctive capacities that
enable it to be a co-regisseur in the complex and open process of coordination of
European economic and social policies in an emerging Schumpeterian workfare
postnational regime.

7. Conclusion

I was requested to address the transition from welfare state to competition state but
have interpreted this broadly in order to relate this question to the overarching theme
of our Festschrift. By way of conclusion, I want to make three brief points. First, we
can certainly observe a tendential shift in the advanced capitalist state from a welfare
state to a competition state. But these categories are imprecise insofar as all states
have addressed issues of social reproduction and all states have been involved in
shaping the conditions of economic competition. What is important, then, are the
state’s distinctive forms and functions in these regards in different stages of capitalist
development and across different varieties of capitalism. This is why I have argued
instead for a transition from the KWNS to the SWPR. This transition can be found in
most economies and regions that were once dominated by Atlantic Fordism. In these

24
terms it can be understood as a still emerging response to the crisis of the Atlantic
Fordist mode of growth (and its specific instantiations in different national and
regional models of postwar capitalism within Atlantic Fordism) and/or to the
associated crisis of the Keynesian welfare national state (again in one or other of its
variant forms). This means that, whilst there are historically specific institutional
dynamics and specific configurations of social forces in the different areas of
economic and social policy (and, indeed, their nationally specific demarcations and
sub-divisions), there are also material, social, and spatio-temporal linkages between
them that require increasing attention to the overall coherence and coordination of
these different policy areas in a post-Fordist period. This profound reorientation of
economic and social policy is also closely related to their rescaling and to shifts in
their modes of governance and delivery. This is partly due to the changing nature of
capital accumulation and partly due to the crisis of the national state as the primary
scale on which the Fordist mode of regulation was organized. This requires
increasing attention to activities above, below, and beyond national borders and to
their coordination in tangled hierarchies of networked institutions, organizations, and
individuals. This is why we can also see a shift towards multi-level meta-governance,
not only within the European Union but also in other regions and on other scales.

Second, we can expect to see continuing divergences in the nature of economic and
social policy regimes, reflecting the continuing path-dependent legacies of different
models of capitalism, different state traditions, different balances of forces, and
different accumulation strategies and hegemonic projects. In some cases there has
been greater continuity, linked to the dominance of the view that there was a crisis in
the welfare state, with largely incremental shifts towards the new welfare regime
(e.g., Denmark); in others there has been greater discontinuity – admittedly more
marked in declared policy changes than actual policy outcomes – linked to a
discursively-constructed crisis of the welfare state (e.g., Britain). There are two
complicating factors in this regard, especially in distinguishing the North American
and Antipodean cases from those in Continental Europe. The first such factor is, of
course, the development and intervention of the European Union as a strongly
institutionalized form of supranational coordination of responses to the economic and
social problems associated with the crisis of Atlantic Fordism. And the second is the
more recent movement towards a globalizing, knowledge-based economy. But these

25
divergences will develop within the framework of struggles over the future shape of
the global division of labour, the relation between the three main triad powers, and,
especially, the relation between the USA and Europe. This is another reason why it
would be too simple (and simplistic) to talk of a generalized transition from the
welfare state to the competition state.

Third, the future position and activities of the EU in securing the conditions for capital
accumulation must be explored in the context of the emerging re-territorialized, de-
statized, and internationalized Staatenwelt. What we are witnessing is the re-scaling
of the complexities of government and governance rather than the re-scaling of the
sovereign state or the emergence of just one more arena in which national states
pursue national interests. Given the strategic-relational approach to the state that
has been advocated here, it is misleading to regard the EU as a marionette or as a
regisseur. Instead it most productively understood as a co-dependent co-regisseur,
i.e., it is an institutionally-mediated condensation of the changing balance of forces
engaged in struggles to reorient the economic strategies, social policies, and
geopolitical development of a changing Europe in the context of a changing world
society. The key players involved in this process of multi-level meta-governance
extend well beyond the borders of the European Union itself and, indeed, proposals
have recently been made to include the United States as a formal (if shadowy)
partner within deliberations over the future of Europe (Bergsten 2003). In this sense,
while the European Union may be the dominant scale for multi-level meta-
governance within Europe, it is a central nodal point rather than the dominant scale
in the more general multi-level meta-governance of an emerging world society still
dominated by an imperial and imperialist American hegemon. But how long the USA
will be able to secure the support of its economic, military, and political allies in
maintaining this role remains to be seen.

Endnotes

1. More specifically, the circuit included the USA, Canada, Australia, New Zealand,
north-western Europe, and, later, as peripheral Fordist economies, the countries of
southern Europe (Portugal, Spain, Greece).

26
2. There were also generic features of the capitalist type of state that characterized
the postwar welfare regime but, for the purposes of this chapter, they will be ignored.
3. Among others, we can mention the indicators developed by the World Economic
Forum and International Institute of Management Development.

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