Abstract
The social investment (SI) paradigm is slowly conquering the thinking about social policy around the world. The notion that social policy can and does serve economic growth by strengthening the human productive factor has gained supporters even in the former bastions of neoliberal thought from the World Bank to the OECD. In 2013, the European Union officially joined the fray with the launch of the Social Investment Package to stimulate investment in human capital and increase labour market participation in the EU Member States.
It is easy to see why the SI paradigm would capture the imaginations of policy-makers and social scientists alike. On the one hand, it provides a comprehensive defence of social policy against the neoliberal, efficiency-centred critique of the 1990s. Mounting evidence shows that public involvement in the development of human capital is superior to market-based private incentives, as the latter depend on high levels of inequality which are detrimental to aggregate growth. Investment-oriented spending also harbours the promise of lowering public expenditure in the long run, or at least making it more bearable: increasing the human capital stock and facilitating a return to work for a broader section of the population and for longer periods should reduce the need for welfare benefits and increase the ‘carrying capacity of the welfare state’ (Hemerijck, 2013). On the other hand, social investment also offers ways to defend the welfare state against the rising criticism on the left, which bemoans its failure to extend protection to those facing the new social risks arising from the rise of the service and knowledge-based economy, growing female participation, the shift towards atypical employment, and ageing (Esping-Andersen et al., 2002). But the critical voices have also been on the rise, and many cast doubt on the ability of social investment to deliver on its multiple promises of building a new welfare state that is both equitable and efficient.
The Uses of Social Investment is that rare example of academic courage in which Anton Hemerijck – one of the foremost theorists and proponents of the social investment paradigm – invites the critics in and throws open the debate about the promises and achievements of the social investment approach. The introduction sets the stage for discussion by recalling arguments laid out in the 2002 social investment manifesto Why We Need a New Welfare State (Esping-Andersen et al.) and by sketching out a simple but effective analytical framework for the analysis of welfare state recalibration. The framework also doubles as a working definition of the social investment approach, whereby SI is understood to incorporate all three functions of development (through education), employment (through active labour market policies) and protection (through income support) of human capital. The three functions, aptly captured by the metaphors of stock, flow and buffer, are distinct but interrelated and their effective implementation demands coordination of interventions across institutional domains and over an individual’s life cycle (Hemerijck, 2017: 19–28). Hemerijck’s argument is as bold as it is straightforward: the changing economy and demographics have created new social risks, and the social investment paradigm provides, if not a complete set of answers, a coherent and novel lens through which to assess the capacity of various policies to address them.
The criticisms, applications and extensions of this argument collected in the next 33 chapters are divided into six sections. The first deals with social investment as a paradigm: its assumptions, ability to produce distinct and operationalisable analytical concepts, relate policies and outcomes, and consistently inform policy practices. The questions raised in this section bear repeating, as they constitute the reflexive core of the book. First, can we meaningfully distinguish between ‘investment’ or ‘capacitating’ policies of the welfare state and those that are of merely ‘consumption’ or remedial value? Second – provided that we can – is it right to prioritise the ‘productivist’ investment-based spending over a ‘decommodifying’ kind? Third, is there enough evidence for the effect of these policies on employment, poverty and inequality, in the direction theorised by social investment proponents? Does a social investment welfare state truly support the most vulnerable groups, or does its focus on services instead of income transfers bias SI towards the wealthier classes, further adding to growing inequality? Fifth, if the social investment state is indeed preoccupied above all with the new risks befalling the most vulnerable groups, can it muster enough political support for anything other than just ‘fair-weather’ policies?
These questions re-emerge with varying degrees of vehemence throughout the next five sections of the book. Section 3, ‘Social Investment Endowment and Extensions’, showcases the difficulty of translating the notion of social investment into concrete policies that would produce consistent effects across national contexts. In Chapter 9, Günther Schmid heroically defends a proposal for extension of (un)employment insurance, often looked upon as a prime example of non-investment policy as a possible, and indeed superior, form of social investment. In Chapter 10, Margarita León shows how evidence for effectiveness of even the most widely accepted investment-based policy, such as early childhood education and care (ECEC), is difficult to establish due to the bewildering variation in policy legacies and institutional provision across countries. These themes are elaborated further in Section 4, ‘Social Investment Assessment: Conceptualization and Methods’, which sheds light on the complexity of measuring the impact of an approach that relies on integrating policies across different areas to address risks whose combination and intensity vary across different target groups, when the pay-offs may be deferred by many years.
Depending on the reader’s disposition, one can find the intellectual honesty with which these chapters grapple with the difficulties of articulating and measuring social investment either bewildering or refreshing. The lack of clear policy prescriptions is certainly frustrating, but there are enough examples here of creative policy recalibration and methodological innovation to inspire research and policy for years to come. In a particularly encouraging chapter on bottom-up policy innovation (Chapter 12) Charles Sabel, Jonathan Zeitlin and Sigrid Quack describe, for example, the way in which localised initiatives have been used in Germany and Netherlands to test and evaluate new approaches to poverty alleviation and active ageing. Section 5 offers further lessons from recent experiences with social investment in a variety of national contexts, from the Scandinavian cradle of SI to the one time strongholds of conservative welfare policies such as Germany, the Netherlands, and Quebec, to the less likely suspects such as Ireland and Italy, and even the relative newcomers to the world of public welfare in East Asia and Latin America.
In addition to showcasing individual examples of successes and failures the chapters in this section also shed light on the politics of social investment funding. Probably the most notable lesson is that while the SI policies do not easily mobilise support coalitions ex ante – being by their nature focused on the more vulnerable ‘outsider’ groups and bringing benefits over the long run – they do create own constituencies and can in the process transform the political landscape of the country, as demonstrated by Johan Sandberg and Moira Nelson in their chapter on social investment in Latin America (Chapter 25). This insight comes with a word of warning from Scandinavia, that to cement public support the SI policies must be widely available: according to Kees van Kersbergen and Jonas Kraft (Chapter 19), de-universalisation of benefits has been eroding the popularity that the Nordic welfare states have enjoyed for decades.
Sections 5 and 6 return to this problem more explicitly. Section 5 discusses the conflicted nature of the social turn at the level of European Union. The European institutions have to some extent been at the forefront of promoting social investment through policy discourse of the Europe 2020 Strategy and Social Investment Package, adaptation of EU structural funds, and policy coordination and monitoring via new instruments such as the ‘Social scoreboard’. At the same time, the imperative of fiscal restraint embedded in the Stability and Growth Pact and the Macroeconomic Imbalance Procedure has destroyed incipient efforts at social investment precisely in the countries that would need it the most (Hemerijck, Chapter 35). The austerity imperative also brings back the question of trade-offs, and the difficult politics of prioritising some social risks over others. Hemerijck is careful to defend social investment against the accusations commonly levied against the Third Way – that the focus on investment and activation has served to crowd out social protection. This is why he insists in this volume that ‘buffers’ are an integral part of SI alongside stock and flow, foregoing his own earlier distinction between ‘compensating’ and ‘capacitating’ spending (Hemerijck, 2013). If there is a single take-away from this book, it is that ‘investment’-oriented policies can achieve the goal of reducing poverty and inequality and raising the overall quality of the human capital stock only when they are accompanied by solid income support, when they address, in other words, what Colin Crouch (Chapter 34) calls ‘consolidated’ new and old social risks. This may also be essential to ensure their political feasibility: a representative survey by Marius Busemayer (Chapter 33) shows that citizens broadly support social investment policies, and are even willing to fund them with higher taxes, but turn against them if these are perceived to come at the expense of more traditional welfare. And yet choices have to be made, and not only because the current climate of permanent austerity demands them. In their incisive analysis of the child-care policy in Germany, Switzerland, and France, Silja Häusermann and Bruno Palier (Chapter 31) show that other factors, such as institutional legacies and coalitional politics of individual countries determine the policy mix and outcomes. While a comprehensive, universal SI may be the only one that is right, a more restrictive, piecemeal one is probably the only one that is possible, with all the risks to efficiency, equality, and political stability that this may entail.
It is important to remember that The Uses of Social Investment is not a primer. Those looking for a coherent summary of the social investment paradigm or clear-cut policy prescriptions should probably look elsewhere. What it is is an open, honest debate about the difficulties of reforming the welfare state to deal with new risks posed by demographic and economic changes of the 21st century, and find a path between the two worse alternatives of knee-jerk austerity and the rising spectre of welfare chauvinism. At times, even the most enthusiastic reader will find the debate a little too open, and wish for some more editorial intervention to guide the discussion. With 35 chapters some repetition is inevitable and space is precious, and as a consequence what is gained in variety is sometimes lost in depth. Most importantly, while most chapters refer to the overall framework of ‘stocks’, ‘flows’ and ‘buffers’ they rarely speak directly to one another, even when they deal with the same empirical material. To be fair, Hemerijck’s ambition was never to provide the final word on the state of the SI, but rather to move beyond arguments for and against social investment as such and invite a more nuanced and empirically grounded discussion of ways to bring about a more just, efficient, and inclusive social policy for all. This volume ensures that the invitation remains open.