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Economic Integration, democracy and the welfare state

by Fritz W. Scharpf
Journal of European Public Policy ()
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The article examines the dif of European welfare states in the face of European economic integration. Taking a clue from the experience of territorial sub-units in economically integrated federal nation states, the implication seems to be that economic competition impedes welfare state regulations that impose unequal burdens on capital incomes and mobile business, and that effective welfare state policies depend on the powers of central governments. By analogy, that would suggest a need for the Europeanization of social policy. At the European level, however, welfare state policies are impeded not only by the European democratic de but also by deep-rooted con of economic interest among member states, and by the widely divergent structural characteristics of national welfare states. The article examines the implications of this constellation for democratic legitimacy. In the concluding section, discussion focuses on social policy options that may still be viable at the national level, and on European-level strategies that might be able to reduce economic competition among national welfare states. The current dif culties of democratic welfare states in Europe are often ascribed to economic 'globalization', that is to the world-wide integration of markets for capital, goods and services which has eliminated national control over boundary-crossing economic transactions, and which therefore exposes national producers to world-wide competition. In fact, however, globalization in the strict sense of the word is completely realized only for speculative capital transactions. It is true that in all other areas of economic activity the intensity of international competition has increased as well, and that rms have much greater opportunities to relocate production world wide. Nevertheless, even under the liberal regimes of the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO), governments have not abdicated their capacity for boundary control, and the freedom of world trade is still constrained by a wide variety of tariffs, quotas, 'voluntary' restrictions and non-tariff barriers.

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