Welfare expansion revisited: policy routines and their mediation by party, class and crisis,...

European Journal of Political Research 17: 401-430, 1989. 0 1989 Kluwer Academic Publishers. Printed in the Netherlands.

Welfare expansion revisited: policy routines and their mediation by party, class and crisis, 1957-1982

ALEXANDER HICKS1, DUANE H. SWANK2 & MARTIN AMBUHL3 ‘Emory University, U X A . ; Marquette University, U.S.A.; ’Northwestern University, U.S.A.

Abstract. Post-war welfare effort (i.e., welfare spending as a share of national income) in advanced capitalist political democracies is proposed to result from policy routines emphasized in the traditional academic literatures complemented and mediated by class-linked factors stressed in the ‘new political economy’ literature. Both sets of factors are integrated into a single conception of state policy-making. In this, self-interested elite and administrative state personnel respond to their environments by means of relatively discretionary and relatively automatic policy routines, respectively. Left and non-Left governments mediate these routines and do so differently in different long-term institutional (strong-union versus weak-union) and macroeconomic (expansionary versus crisis) contexts. Welfare expansion is found to be amply explained by the proposed processes, differentiated by context. Left parties and militants are found to matter primarily in contexts marked by ‘Left corporatism’ (or strong unions) and/or by relatively ‘expansionary economic climates’. Ironically, Left-party governments in Left corporatist contexts are found to be particularly sensitive to inflation where transfer spending is concerned. Where unions are strong, policy making is generally less incremental and more flexible. After 1973, policy sensitivity to real economic growth or decline looms large, and working-class-linked politics are muted where unions are weak, most especially where they are decentralized.

The magnitude and importance of the post-war expansion of the welfare state in industrialized capitalist democracies is broadly appreciated. Spending for cash transfer programmes aimed at income maintenance - a core but by no means exhaustive set of welfare state programmes - more than doubled as a percentage of gross national product between the early 1950s and the early 1980s.’ Increases in socioeconomic security and equality, extensions of citizen rights, and stabilization of macroeconomic cycles and political systems have been amply attributed to the expansion of welfare spending for at least two decades (Galbraith, 1969; Schonfield, 1966; Wilensky, 1975). More recently, market distortions, stagflation and anti-statisvfree-market movements have also been traced to welfare expansion (e.g., Gough, 1979; Flora and Heiden- heimer, 1981). Not surprisingly, a large body of literature has developed on the emergence and growth of the welfare state, much of it devoted to explaining quantitative variations in welfare outlays over recent decades (see, e.g., Jackman, 1975; Wilensky, 1975; Cameron, 1978; Stephens, 1979; Castles,

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1982a; Griffin et al., 1983; Hicks and Swank, 1948a, 1984b; Myles, 1984; Pampel and Williamson, 1985,1988; Friedland and Sanders, 1986).

If stress is placed upon those portions of the welfare state supported by notable systematic quantitative evidence, two principal literatures on post-war welfare expansion can be distinguished. One may be termed the ‘industrial society’ or ‘developmental’ literature, while the other may be termed the ‘new political economy’ literature (see Myles, 1984, and Pampel and Williamson, 1988 for similar classifications).

From the industrial society perspective of Wilensky (1973, Jackman (1975), Pampel and Williamson (1985, 1988) and others, master processes of social, economic and political differentiation tend to generate three key conditions for the expansion of transfer spending. First, they generate socioeconomic needs for public spending among the economically dislocated, the aged and so on.2 Secondly, they generate economic and, in turn, fiscal capabilities for financing the satisfaction of these needs. Thirdly, they generate political institutions - voluntary associations, party competition, budgeting routines, and the like - for transforming needs and capabilities into concrete policies for meeting the needs. Closely paralleling main segments of the industrial society literature are two others. One is the macroeconomic modelling literature, which stresses routine or ‘automatic’ responses of extant transfer program statutes (reliably administered) to fluctuations in such need indicators and ‘entitlement triggers’ as unemployment rates (Fair, 1974-5). The second is the ‘organizational decision-making’ literature from political science, which stresses the facilitating effects of fiscal slack (and through it economic growth) upon government spending, as well as automatic or ‘relatively uncontrollable’ spending pressures exerted by need (Fischer and Creche, 1981; Fischer and Kamlet, 1984). Principal concrete, indeed operational, factors proposed and empirically indicated to cause welfare expansion from this perspective are unemployment rates and rates of elderly population, economic growth and fiscal slack, and budgeting bases (or ‘incrementalism’).

From the ‘new political economy’ perspective class-linked collective action drives welfare expansion. The principal actors are party and ‘political economic’ organizations (e.g., unions), engaging in institutionalized modes of politics (e.g., Korpi, 1980; Hicks and Swank, 1984a). However less organized actors and/or actors primarily employing sporadic, relatively uninstitutionalized and disruptive tactics are also granted occasional relevance (see Hicks and Swank, 1984a; and, in a more neo-Marxist vein, Griffin et al., 1983, and Griffin and Leicht, 1986). Most of the propositions and findings concerning welfare expansion that have been generated by the ‘new political economy literature’, as well as some of those that have been generated by the ‘industrial society’ literature, can be found integrated in Hicks and Swank’s (1984a): this paper can serve as a useful halfway house for the presentation of ‘new political economic’ proposi-

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tions. Accordingly, its framework, principal propositions and findings are outlined in Table 1.

As regards relatively organized, institutionalized politics, Hicks and Swank (1984a) found, following Castles and McKinley (1979) among others, that conservative party control of government inhibited welfare expansion while Left-Center control advanced it.3 They also found that the extent of capitalist and working class organization (i.e., of capitalist conglomoration and union scope and centralization) advanced welfare expansion. To the extent that Conservative parties control governments, their ideological goals and constit- uency pressures were argued to slow the pace (if not reverse the direction) of welfare expansion relative to non-Conservative goals and constituencies (see also Castles, 1982b, 1986). Unions were argued to manipulate their various lobbying, campaign, and productive resources to effect realizations of their

Table 1. Types of class-linked capacities for collective actions to influence state welfare policies and measures of these capacities in Hicks and Swank (1984a), plus hypotheses and (where results were statistically significant) results.

‘Institutional’ action ‘Extra-institutional’ action

Political Economic Political Economic

Capitalist Class Link

Measure

Hypothesis Finding

Working Class Link

Measure

Hypothesis Finding

Right Party Control of Government

Right Party proportion of vote for parties in gov’t coalitions - -

Left Party Control of Government

Left Party proportion of vote for parties in gov’t coalitions + + (with control for all non-Right parties, also +)

Corporate Organisational Resources

Assetts of top loo0 m c s headquartered in nation as YO GDP +/- +

Union Organizational Resources

Union density (members/C.L.F.) weighted by union centralization + +

Political Protest on Economic Issues by Capitalist and Petty Bourgeois Groups Man-days of such protest per 1OOOOO non-ag. C.L.F.

-

0

Political Protest on Economic Issues by Working Class Groups Man-days of such protest per 1OOOOO non-ag. C.L.F.

+ +

Capitalist Investment/ Disinvestment

Change in gross domestic investment as % GDP + + Economic Strikes by Workers

Man-days of such strikes per 1OOOOO non-ag. C.L.F.

+ +

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UNION ORGANIZATIONAL STR!lNGTH (Inclusiveness and centralization of union confederation)

MACROECONOMIC CLIMATE (Pre-OPECIpost-OPEC epochs of economic performance, theory and expectations)

I I

FACTORS IN STATE ENVIRONMENT ~ _ _ _ _ _ _ _ _ _ _ _ _ _ I I (SEE CLASS-LINKED Table 1 ) , [ I I I I - _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ I MACROECONOMIC I I (Short-term) I I I DD4OGRAPHIC - - _ _ _ _ _ _ _ _ _ _ _ _

INTRASTATE POLICY PROCESSES AND (MAIN) ACTORS - - - - - _ - _ _ _ _ _ _ : ELITE FACET I

l “Discretionary“ Policy I , Processes of Partisan I I Governmental Elites I L - - - - - - - - - - - J

I ORGANIZATIONAL FACET I I “Automatic“ Policy I Processes; Administrators

- - - - - - - - - - _ _ _ _ _

L - - - - - - - - - - - - - - I

a8 Proportion of GDP

Figure 1. Theoretical model of state, state environments and post-war expansion of welfare- transfer effort.

interests in a relatively high ‘social wage’; and multivariate empirical evidence was found for these views for the first time. In addition, relatively ‘monopolistic’ corporations were argued to support increased welfare effort in order to socialize the costs of reproducing their work forces and maintaining social order (Hicks and Swank, 1984a, pp. 87-9) .4 As regards extra-institutional disruptive politics, strikers and political protestors were found, following Swank (1983), to successfully pressure governments for concessionary side payments in the form of transfer programme outlays. Finally, capital investment and economic growth rounded out principal propositions and findings - and linked them to central themes of such ‘industrial society’ theorists as Wilensky (1975). Economic growth was argued to augment the expansion of welfare effort because it facilitates its financing; while, more originally, capital investment was argued to augment welfare effort because it augers well for future growth. The ‘Welfare Expansion’ models fit the data very well. Correct- ed ‘R squares’ were high for models of change (circa 0.90). Moreover, param- eter estimates were very robust in the face of tests for (small-sample) param- eter stability.

Theoretical framework

The findings of ‘Welfare Expansion’ were rooted in a model of state policy determination in which state personnel - both leading state authorities uti-

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lizing the state as an administrative apparatus and lower-level state personnel implementing authoritative mandates and administrative routines - were the proximate sources of policy outputs. However, in ‘Welfare Expansion’, the role played by state authorities was insufficiently detailed. A more thorough conception of state actors’ parts in the generation of welfare policies is sketched in the ‘Intra-State’ portion of Figure 1, as part of a larger depiction of this paper’s explanatory framework. This is reflected in the treatment of ‘Intra-State Policy Processes and Actors’ in Figure 1.

In this framework, state authorities (or elites) are assumed to possess substantial autonomy and to use this to act in their own interest. Such self- interested behavior is regarded as fundamental to state policy decisions. However, for a number of reasons it is also viewed as consistent with the operation of causes of welfare expansion emanating from outside the state. First, the interests of governmental authorities are to a considerable extent interests of parties with ‘societal’ as well as ‘state’ existances (leaders, members, constituents, etc). For this reason ‘Partisan [italics added] Governmental Elites’ are stressed in the specification of the ‘Elite Facet’ of ‘Intra-State Policy Processes’ in Figure 1. Secondly, the interests of governmental authorities are shaped by others and their interests, for example, by colleagues, friends, neighbours, and allies, past and present. Thirdly, governing authorities in the pursuit of their own (distinctive and shared) interests will be obliged to pursue interests of others insofar as these (e.g., interests of sectors of the electorate in income security) condition realizations of authorities’s self-interest. As Figure 1 indicates, ‘Intra-State’ policy processes are regarded as a central, intervening causal factors in the determination of ‘welfare expansion’; and an ‘elite’ facet of these processes is singled out.

State organization and lower-level state personnel are argued not only to serve as conduits for authoritive directives but also as agents of administrative routine^.^ In particular, administrative routines are regarded as proximate causes of spending, as in administrators’ routine translations of unemployment levels into benefit levels in the implementation of unemployment compensation statutes. In addition, administrative routines are important constraints on government policy makers, as in the case of administrators’ implementations of extant tax statutes (and, thus, in effect, of ‘automatic revenues’).6 In short, organizational as well as decision-making (or ‘actor’) facets of the state’s policy determination are stressed here. (See Figure 1.) These processes are viewed as the principal mechanisms whereby class-linked, macroeconomic and demographic factors from the state’s environment act upon its policy outputs.

Finally, ‘Union Organizational Strength’ and ‘Macroeconomic Climate’ are conceived as relatively long-term features of the state’s environment that shape its policy-making processes or, in other words, mediate environmental effects on policy outputs.

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Revisions

In terms of its theoretical origins, the Figure 1 framework is at once Marxian or class analytic (in its delineation of the state’s class and other societal constraints), Weberian or elitist (with its emphasis on the social action of state and class organizations and elites), and pluralist in a rational actor vein (with its emphasis on the interests and strategies of elite individuals and on the cen- trality of associational resources for class power).

Specification of the framework retains nine class-linked propositions from Hicks and Swank (1984a), which are listed as hypotheses 1-9 in the first panel of Table 2. However, it also involves a number of revisions, principally: (1) new propositions involving explanatory factors neglected or downplayed not only in ‘Welfare Expansion’ but in the earlier literature; (2) analytical proce- dures that address some typically neglected problems of causal inference from cross-sectional data; (3) further propositions reflecting ways in which differing political, economic and ideological contexts for policy making differentially shape - in statistical jargon, ‘interact with’ - processes generating welfare expansion. These three new thrusts are further developed below, involving explanatory factors neglected or downplayed in the literature or, at least, in ‘Welfare Expansion’.

The underevaluation of ‘need’. Need-related factors like unemployment rates and elderly proportions of populations have by no means been entirely slight- ed in the literature on welfare spending. Indeed, ‘the proportion of a population over 65 years of age’ is theoretically prominent, indeed empirically substantiated, in various studies done from the ‘industrial society’ perspective (e.g., Wilensky, 1975; Pampel and Williamson, 1985,1988). Moreover, unemployment rates figures importantly in the massive macroeconomic modelling literature (see, e.g., Fair, 1974-75) as well as in the conclusions of a number of the ‘industrialism’ studies (e.g., Pampel and Williamson, 1988). Nevertheless, need factors typically have been downplayed in the ‘new political economy’ literature on the welfare state (see e.g., Cameron, 1978,1974; Castles, 1982a), especially prior to the new shift toward time-series analyses (Domke et al., 1983; Hibbs, 1988) and ‘large-sample’ pooled-data studies (e.g., Friedland and Sanders, 1986).

Increased attention to possible need effects seems required not only if we are to move toward more conclusive evidence but also if we are to better square evidence with logic. This is so because arguments for automatic, if not discretionary, need effects upon welfare spending are inexorable. As a matter of fact, entitlement programmes exist. As one of logic, for any unchanged set of statutory rights to program benefits, increases in the size of entitled populations musr somewhat augment programme benefit outlays if the entitled

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seek their benefits, if administrators reliably dispense them and if policy makers do not alter statutes to offset increases in entitled populations.

Here, we will renew attention to possible need effects aided by pooling cross-sections of time series. Such data arrays should provide sufficient observations, variance in need measures and opportunity for the examination of sub-populations to identify ‘need’ effects on welfare expansion. Our principal need hypotheses will be that unemployment rates and proportions of populations over 65 years of age positively affect welfare effort, (i.e., welfare spending as a proportion of GDP). Our principal need hypotheses, then, are that changes in unemployment rates positively affect welfare expansion and that changes in persons over 65 as proportions of labour forces positively affect welfare expansion. These hypotheses are presented in Table 2 as hypotheses 10-11. Measures used to investigate our propositions are described in Table 3.

Keynesian demand management and automatic revenues. By ‘Keynesian’ factors, we mean ones affecting welfare spending because of policy makers’ uses of Keynesian prescriptions for macroeconomic stabilization. The operation of various ‘automatic stabilizer’ programmes, preeminently unemployment compensation, entails the kind of ‘automatic’ responsiveness of programme benefits to demographic conditions already discussed. However, policy makers’s ongoing ‘discretionary’ manipulations of spending in response to economic fluctuations have been neglected in the welfare spending literature (see Griffin et al., 1983, and Griffin and Leicht, 1986, for a partial exception). Indeed, counter-cyclical manipulations of transfer spending in response to economic growth and price inflation has been entirely ignored in the cross-sectional

Table 2. Variables and hypotheses for new research.

Hypotheses drawn from Hicks and Swank (1984~) I. 2. 3. 4. 5. 6. 7. 8.

Left Party Government Control (Left Party Gov’t (1- I ) ) ---- ++ Conservative Party Gov’t Control (Right Party Gov’t ( t - I ) ) - - - ++ Employers Association Centralization (Emp. Cent) - - - - - - - ++I

+ +

+ Union Centralization (Union Cohesion) - - - - - - - - - - - - ++ -+

Working Class Protest (WC Protest) - - - - - - - - - - - - - - ++ + Strike Man- Days per Workday (Strikes) - - - - - - - - - - - - ++ + Prop A Real C D P (Prop A RGDP) ------------- ++ + Transfer PaymentslGDP(t - I ) (TransferslGDP(t - I ) - - - - - -++ +

Welfare Welfare Welfare Welfare Welfare Welfare Welfare Welfare

Hypotheses Newly Posed or Revised 9. Persons over 65 years as Prop. of C.L.F. ------------++ + Welfare

10. A Unemployment Rate (A Unemployment t,t - 1) -------++ + Welfare 11. Government Automatic RevslGDP (AutorevslGDP) - - - - - - ++ + Welfare 12. Prop A RGDP, controlling for AutorevsIGDP (t,t - 1) ----- +- + Welfare 13. Prop A GDP Price Deflator (t, t - 1) (Inflation) -------- ++ + Welfare

literature. Yet if policy makers merely act in rough conformity to Keynesian fiscal policy prescriptions, economic growth and price inflation will negatively (or ‘counter-cyclically’) affect welfare expansion (Kamlet and Fischer, 1984; Kiewet and McCubbins, 1985).8

To test these propositions, especially the former, it is necessary to take account of the seemingly contrary one that economic growth positively (or ‘procyclically’) affects welfare expansion (Cameron, 1978; Hicks and Swank,

Table 3. Variables, measures and data sources.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12. 13.

Welfare Effort (Welfare). Equal to total governmental spending for transfers to households as as proportion of Gross Domestic Product. Spending figures are from OECD National Accounts of OECD Nations. GDP figures from OECD Economic Indicator Volumes. Left Parry Gov’t (Left). Equal to 1 if Left Parties, as defined in Hicks and Swank (1984a) (a) participate in government, (b) have more than 45% of those seats in lower legislative house that are held by parties participating in government and (c) have more seats than Center or Right participants in government; otherwise equal to 0. W. C. (Working Class) Protest (Protests). Natural logarithm of Man-days of politically oriented working class protest on economic issues as a proportion of population. Protest information is from Gurr (1978) and New York Times Indexes. They were gathered by Duane H. Swank for 1950-1959 and 1971-1982. Strikes. Man-days of strikes as a proportion of workdays (1OOOs). Work stoppages man-days are from volumes of ILO. Workdays defined as 250 x civilian labor forces (looOS, from OECD volumes). Prop A Real Gross Domestic Product (Growth Real GDP): Conventional proportional change transformation of Gross Domestic Product divided by GDP deflator (Data from IMF, International Financial Statistics. ) A Unemployment Rare (Unemp). Year-to-year difference in Unemployment Rate as computed from data on unemployment and civilian labor force in OECD. Accounts of OECD Nations. Aged. Persons over 65 years of age as proportion of Labor Force from OECD, Accounts of OECD Nations. AurorevenueslGDP (ARevs). Autorevenues is defined as last year’s aggregate tax rate adjusted for current year ‘bracket creep’ multiplied times current year GDP (Revenues (t - l)/GDPt) * GDP(t)), then standardized on GDP to parallel measure of transfers as proportion of GDP. This, of course, leaves last year’s aggregate tax rate as the measure of this year’s share of automatic revenues in GDP. Revenues are for all levels of government and taken from volumes of OECD Accounts. Inflation (Inf). This is the proportional change in the GDP price deflator as recorded in the IMF’s International Financial Statistics. Union Strength (or ‘Corporatism’). Coded 1 for Austria, Belgium, Finland, The Netherlands, Norway, and Sweden and 0 for Australia, Canada, France, West Germany, Ireland, Italy, Japan, Switzerland, the United Kingdom, and the United States. (See Stephens, 1979; Hicks, 1988a). Union Weakness (or “on-Corporatism’) is the obverse of Union Strength: 1 where that is 0, 0 where it’s 1. Economic Expansion. Coded 1 for 1957-73,O for 1974-1982. Economic Crisis. Coded 0 for 1957-1973, 1 for 1974-1982.

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1984a). Contrary propositions like these ‘pro-’ and ‘counter-’ cyclical growth ones may be reconciled if they can be shown to operate via distinct mechanisms. And this can be done where economic growth is concerned: positive growth effects are most likely to obtain because economic growth expands the tax base and, thus, loosens fiscal budgetary constraints on spending (see Hicks, 1984, on growth-revenue effects and Griffin, et al., 1983, on counter- cyclical effects). Thus, we should be able to identify negative, ‘counter- cyclical’ effects of economic growth once we control for revenues. In order to avoid confounding revenue effects on transfer spending with possible transfer effects on tax rates and, thus, revenues, we control for a measure of ‘automatic’ revenues. This measures the revenues that would obtain for year ‘t’ if its aggregate tax rate was identical to that for ‘t-l’, unaltered by changes in tax law. We use such a measure here not only to control away positive (revenue) components of growth effects but also to test the hypothesis that automatic revenues positively affect welfare expansion. (For elaboration of these hypotheses and information on the operational definitions to be used in testing them, see Table 2, hypotheses 12-14, and Table 3.)

Longitudinal and cross-sectional causal inference

Our second major type of revision goes to the heart of much comparative research: making causal inferences from cross-sectional data.

In our view social science theory and research should foremostly seek to illuminate causal processes. These are commonly thought to necessarily involve, among other things, covariation between variables that is occurring over time. Accordingly, primarily cross-sectional estimates are mainly interesting insofar as they get at causal processes unfolding over time - or, more specifically, insofar as they serve as reasonable proxies for actual time-series estimates of causal processes. Unfortunately, the preconditions for accurate cross-sectional estimates of over-time processes are stringent (Christ, 1966).

First, the underlying time-series process of interest must be in equilibrium. That is, it must be stable with respect to time: a single process must contin- uously generate one’s explanadum as it moves over time. Secondly, theoretical modelling and empirical operationalizations must, respectively, articulate and capture the underlying causal process in equilibrium. Theoretically, for example, if X and Y are specified for times t - 1 and t, respectively, effects changes in X at t - 1 upon Y must, in fact, impact entirely at (or during) t: continuing effects of the change in X upon Y at t + 1, t + 2, etc., will not do. Moreover, operationally, we must have measures for X at t - 1 and Y at t - not at t, or at t + 5 , or for t through t + 5.

Regrettably, it is rather difficult to meet these conditions - indeed, it is

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difficult even to know when they are met. Worse, in some cases an even greater difficulty than that of meeting the above conditions arises. Namely, variation in some explanatory variable - say, ‘neo-corporatism’ in fact, or as crudely measured - may be so limited over time, so thoroughly cross-sectional, that there is no actual longitudinal process to infer to from cross-sectional estimates.

In such cases two interpretations of cross-sectionally derived effects are possible. One is a counter-factual or quasi-experimental one. This, in a nut- shell, asserts that covariation in the cross-section reveals processes that would occur over time if the explanatory variable(s) in question did vary over time. (They do not.) The second is a mediation interpretation. This says that temporally inert cross-sectional factors may shape or mediate processes unfolding over time. In other words, it points to statistical ‘interactions’ between longitudinal processes and temporally quasi-invariant ‘cross-sectional’ factors as underlying sources of cross-sectionally observed relations involving ‘temporally quasi-invariant’ variables.’

Interactions, it may be useful to note, are formulations within linear models that posit relations between pairs of variable (some regressor and some regres- sand) as functions of one or more other variables. Earnings returns to educa- tion that vary with work place authority; roll call effects of ideology that vary with party discipline; welfare effects of Left party government that vary with union centralization - these may serve as examples of ‘interactions’.

But what can we say of the relative merits of the counter-factual and mediation interpretations of estimates involving a ‘cross-sectional’ regressor - with or without reference to interactions?

The counter-factual interpretation has a disadvantage. It requires that one infer empirically unobserved - indeed, non-existent - over-time relations from cross-sectional data. A bit more formally, let us define the subscript ‘cv’ to denote variables whose variation is preponderantly cross-sectional; and ‘lv’ to denote other (notably ‘longitudinal’) variables. In these terms, use of the counter-factual interpretation requires that one infer relations like (Zlv+=Ylv) from estimates of relations like (Zw+Ylv) or, more commonly, (Zw+Yw). In short, it entails indirect, counter-factual inferences. The mediation interpretation has an advantage, we think. It merely asks one to impute observed cross-sectional variations in relations ‘Rw’ (where R,, indexes ‘Xlv+Ylv’ relations between temporally lively variables in each cross-section) to observed cross-sectional variations in some Z. It largely stresses theoretical and operational relations that both are of the form ‘Xlv+Ylv’ or both of the form ‘Zcv+Rlv’. It eschew inferential jumps from operational relations of the form ‘Xw+Yw’ (or containing major components of this form) to theoretical propositions of the form ‘Xlv+Ylv.’

In short, estimates based upon analysis of cross-sectional variation in data

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must meet conditions that are difficult to ascertain, much worse meet, if they are to support causal inferences about actually occurring causal processes. In addition, they require relatively problematic counter-factual inferences if they are to be meaningful in the absence of such actually occurring causal processes. True, cross-sectionally covariations have often been given reputable causal interpretations (e.g. , Stinchcombe, 1973); and, furthermore, cross-sectional designs often often provide useful extensions of observed variability. More- over, long-term processes that operate without precise or reliable lags may sometimes be captured best by aggregating observations into big chunks of time, as when Monetarists turn to cross-sectional comparisons of decennial data to estimate long-term (equilibrium) effects of monetary expansion upon real growth (e.g., Chenery and Syrquin, 1975; Hibbs, 1978). Nevertheless, in the present research, we minimize problematic cross-sectional grounds for inference by stressing analyses (so called Dummy Variable Generalized Least Squares regression) in which all additive, between-nation variance in the nations analyzed is soaked up by a set of dummy variable for the nations. We proceed for now as it - in Analysis of Variance terms - only over-time variance ‘within’ cases and variance due to ‘interaction’ can support causal inferences about relations between temporally inert variables and more temporally lively ones. (For example, we hypothesize the interaction that welfare effects of Left rule vary with the presence or absence of union strength across nations.)

Mediating contexts

The third revision, like the first, is principally theoretical. It is that previous theorizing about transfer spending lacks reasoning and propositions about mediation (or interaction) processes whereby causal relations are differentially shaped. This failing, which results largely from degree-of-freedom, multi- collinearity and other statistical impediments to researching mediations in small samples, is compounded by a real paucity of theorizing about the causes of causal relations themselves. Fortunately, with our shift to relatively ‘large-” pools of observations these impediments to the development of ‘mediation’ propositions fall away.

The mediating factors considered here are Left-party control of government, union organizational strength and macroeconomic climate. Some delineation of the second and third of these factors is necessary before we can precisely state our mediation hypotheses.

Conceptualization and hypotheses. Union organizational strength is used here to refer to the extent to which labor union membership constitutes a high proportion of a nation’s labour force and to which the structure of union

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confederations is centralized and monopolistic (see Cameron, 1984). Clearly, union strength so described denotes capabilities for pursuing union interests via lobbying, electoral and other conventional means. Furthermore, such unions are closely associated empirically with what scholars have recently termed ‘liberal’, ‘democratic’ or ‘neo-’ ‘corporatism’ (see, Schmidt, 1982; Lehmbruch, 1984; Katzenstein, 1984; and, for very similar views, Stephens, 1979, and Hicks, 1988a, 1988b). Not only are union strength indicators (e.g., union labour-force shares, centralization, monopolization) commonly used to index ‘neo-corporatism’. They are so used on the assumption that union strength and business-confederation strength move in tandem, as do the density of bargaining and negotiation relations between unions and labour (and between them and government). Indeed, these assumptions are consistent with available data.’” Moreover, they are also consistent with our conception of neo-corporatist arrangements as the institutional equilibrium reached in capitalist polyarchies when labour movements, although non-revolution- ary, are organizationally strong. When this is the case, business depends upon unions for wage (and work-stoppage) restraint to sustain desireable profits rates. Unions, in turn, depend on business for productive investment (from profits) and long-term income growth and job creation. Also, governments depend upon the kind of business-union cooperation or ‘compromise’ just implied for economic prosperity and, more to the point, for the revenue and electoral supports that it provides. Accordingly, governments underwrite this cooperation in ways that include increases in the social wage aimed at greasing union cooperation (agreement to wage restraint, etc.). Thus, the strong union’s commonplace incorporation into neo-corporatist policy networks augments the ability of centralized, inclusive union confederations to obtain welfare expansion. Very likely, the resources of centralized, inclusive neo- corporatist union confederations also refine government sensitivity to sundry pressures and opportunities for welfare expansion - especially when Left parties rule.

Specific political economic periods may be marked by constellations of factors conditioning policy processes. This claim has been made with particular precision (and an unusual degree of documentation) for welfare spending in the decades preceeding and the decades following the 1973 OPEC oil shock (see Schmidt, 1982; Swank, 1983; Swank, 1988). Following 1973 economic growth slowed down, retracting resources available for financing welfare expansion. Moreover, stagflation and other relatively novel phenomena com- plicated the economic opinion of policy makers, not to speak of citizens more generally. Theoretically, consensus on the efficacy of Keynesian stabilization tools broke down, weakening the Keynesian foundations for automatic-stabilizer , balanced-budget-multiplier , demand-management and other macroeconomic rationales for welfare expansion. Politically, anti-transfer-spending

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orientations of conservative parties were (accordingly) sharpened, while the pro-transfer orientations of Left parties were blunted. Beliefs in trade-offs between equality and efficiency, redistribution and growth apparently increased (Swank, 1988). In this theoretically as well as materially new ‘economic climate’, it appears likely that political (i.e., union, party, and, perhaps, protest) pressures for welfare expansion weakened, while responsiveness to need and to Keynesian fiscal-policy cues slackened as well.

By ‘Left’ parties we mean principally Social Democratic, Socialist and Labour parties. (Operationally we will include those Communist parties that have been able to enter into governmental coalitions in the years and nations studied.)”

Overall, our expectations about contextual mediations of policy processes driving welfare expansion are imprecise. Our theory is not powerful and discriminating enough to make logically necessary or rhetorically compelling predictions about each of its hypothesized determinants of welfare expansion. Moreover, in lieu of such fine grained prediction, it would only tax the reader’s patience to specify, estimate and interpret all possible parameters involved in all possible interactions among Lefthon-Left, strong-uniodweak-union and expansionarykrisis contexts and our other explanatory factors (see hypotheses 1-13, Table 2). Instead we choose to explore differences in effects of these other factors across eight contexts defined by some combinations of the three contextual contrasts, as well as to suggest some very general, tentative predictions. The eight contexts are strong-uniodexpansionary (both Left and non-Left) , strong-uniodcrisis (Left and non-Left) , Weak-uniodexpansionary (Left and Non-Left), and weak-uniodcrisis (Left and non-Left). Although our expectations about mediating effects of these contexts upon processes determining welfare expansion are imprecise, it may help prepare the reader for the interpretation of actual context-specific findings, the sketch out some of our more salient expectations now.

In strong-labour contexkF during eras of economic expansion (here 1957 through 1973 specifically), processes generating welfare expansion should tend to be intensified. We expect particularly intense Left party effects on welfare expansion and we expect particularly intense responses to need and working class protest. However, we expect no welfare concessions to industrial militancy. Pressures from striking workers for expansions of the social wage may not be indulged as macroeconomic policies in strong-union contexts are often thrashed out by means of bargains proscribing worker militancy (Pzreworski and Wallerstein, 1982a). We have no clear-cut expectations regarding ‘stabilization’ effects either. Regarding unemployment rates and income growth, stubbornly high regard for Keynesian instruments in this context augurs relative strong responsiveness of welfare expansion to unemployment and income change; however, the obstacles to utilization of Keynesian instruments in the

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(typically) small strong-union economies should notably dampen Keynesian instrument-use in this context. l2 Regarding inflation, Left governments in strong-union contexts are particularly well situated to manage coherent anti- inflation policies because of their leverage over their union allies (see Marks, 1986); and because expansionary contexts limit the short-term costs (e.g., wage restraint) of anti-inflationary policies. Thus, a particularly sensitive responsiveness to inflationary pressures might be expected in a strong-union, expansionary context, especially under Left Government. However, an even greater stress on anti-inflationary policy might be expected from Conservative governments, especially in the context of accellerating prices and weak unions (unable to resist deflationary action) - that is, in our immediate weak-union/ crisis context. Accordingly, we refrain from predictions concerning budgetary responses to inflation as well. As for policy-making incrementalism and the spending opportunities served up by ample automatic revenues, we do not anticipate notable breaks in patterns of incremental policy making or of utilization of automatically generated revenues across any contexts.

In strong-union contexts marked by stagflationary crisis (concretely, the 1973-1982 era), yet less distinctive patterns are anticipated. Left governments are still expected to be relatively pro-transfer. However, economic climates marked by intensified concern about possible negative by-products of welfare expansion are likely to attenuate Left- and union-related effects on welfare expansion. We do not expect any notable welfare concessions to working class protestors or industrial militants in a context in which excessive welfare expansion is broadly attributed to militant, acquisitive special interests. How- ever, protest or strike effects are more likely during crisis climates in the context of strong unions than of weak ones.

In weak-union nations during eras of economic expansion unions are expected to shift from the use of well institutionalized levers for exerting political influence to the use of the strike; and Left governments are expected to play a merely diminished version of the role that they play in strong-union nations during expansion. True, Left parties’s societal supports are less in weak-union nations: Left-party programmes have narrower and thinner public support - in part because unions are weaker. Still, these programmes embrace income maintenance and supplementation programs; and Left parties do sometimes assume the reigns of government. Thus, Left governments are expected to boost welfare expansion. Unlike other governments, they are expected to be responsive to fluctuations in the need variables. They are also expected to be responsive to union militancy as well as to working class protest. For one thing, the strike is a key union tool where union movements are not centralized enough to control militancy and trade it off in economy-wide bargains. For another, unions are not much less essential to Left party coalition in non- corporatist context just because Left coalitions are weaker there.

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Finally, in weak-union nations following the fall into economic crisis, we have few predictions. We have none that contrast Left and non-Left governments, for we expect the Lefts of nations with relatively weak and poorly integrated labour movements to be virtually incapacitated by the anti-transfer climate of 1974-82 (especially after the intensified automatic pressures on benefit rolls are accounted for). We expect no dramatic increase in responsiveness to ‘need’. (Indeed, cuts in rolls and real per-recipient benefits seem more likely than increases.) We do expect a heightened sensitivity of welfare effort to inflation. However, we do so only tentatively for the Keynesian logics which would presumably underpin such anti-inflationary budgetary shifts have lost much credibility in the nations in question while any monetary-policy measures taken against inflation are irrelevant to the hypothesis (Przeworski and Wallerstein, 1982b). Still, we do so, for macroeconomic policy makers appear to have remained substantially Keynesian and most monetarist are inclined to cut spending in inflationary times, albeit not to any refined counter- cyclical rhythm.

A few very general expectation can be abstracted or culled from the preceding discussion of expectations. We clearly expect the welfare effects of Left governments (via mediations or otherwise) to be strongest and most prevalent in expansionary contexts that are marked by strong unions, to be weakest in ‘crisis’ contexts marked by weak unions and to be intermediate in ‘mixed’ contexts marked by either strong unions or expansionary macroeconomic climates but not both (see Table 4). In addition, we principally expect strike effects when and where the macroeconomic climate is expansionary but unions are organizationally weak. We do not expect notable protest effects in the context of crisis and weak unions.

Models, data and methods

The basic model is one of changes in current welfare effort around a base provided by the previous year’s welfare effort. To model changes, we simply regress the welfare effort for a particular year ‘t’ on our explanatory (or X) variables while controlling for welfare effort at the previous year ‘t - 1’. This permits estimates of budgetary incrementalism or, more loosely, inertia in the form of the slope estimates for the lagged dependent variable (see Davis, et al., 1973; Hannan, 1978: Ch. 2; Markus, 1980; or, for a partial adjustment formulation of inertia, Johnston, 1985). It also yields regressions with estimates for the X variables that are identical to what would be obtained for an explicit model of the period-to-period change scores for welfare effort (i.e., a model for welfare (t) minus welfare (t - 1)) that controlled for ‘catch up’ effects with inclusion of lagged welfare effort (welfare t - 1) among the

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regressors (see Hannan, 1978: Ch. 2; also Markus, 1980). Thus, our model in its most rudimentary form is

W,= c + aW,-,+ XB+ e,, (1)

where c stands for a constant, X for the matrix of explanatory variables, B for a vector of slopes for the variables in X, a for the vector of slopes for WtT1 and e for an error vector.

Estimation is done by means of Instrumental Variable Dummy Variable Generalized Least Squares, or IV-DVGLS (see Judge et al., 1980; Fair, 1978). Here an instrumental variable version of a Cochrane-Orcutt AR(1) error model is run on the stacked time series, which include G - 1 number of 1-0 coded dummies (for the G nations in any regression) to soak up all (additive) between-nation variance for the series in the regression. The dummy variables in such ‘fixed effect’ models leave only between-year variance and variance due to interaction to be tapped by estimates. They, thus, focus attention upon over-time processes within nations and differences in parameters mapping these processes across nations (and sub-periods) .13

IV-DVGLS estimates are computed for four sets of nations: strong-union ones during the 1957-1973 era of general economic expansion (i.e., for strong- union/expansion) ; strong-union ones during the 1974-1982 era (strong-union/ crisis); weak-union ones, 1957-73 (weak-union/expansion); and weak- union ones, 1973-1982 (weak-unionkrisis). The nations studied are listed in item 10 of Table 3. The end of December, 1973, the onset of the first OPEC oil shock and, in effect, of the 1974-76 world recession is used as the dividing line between the two periods. Observations begin with 1957. Although 1950-56 data for many key variables are available for most of the relatively large and prosperous industrialized political democracies typically included in studies of advanced capitalist welfare states, they are also missing for some. (Indeed,

Table 4. Anticipated frequency of effects of left-party governmental participation (interactive effects as well as additive effects) on welfare expansion (changes in transfer spending as a proportion of GDP) in four contexts. (Contexts are generated from combinations of four cate- gories of nations - strong-uniodweak-union, expansionary macroeconomic climatelcrisis macroeconomic climate).

Union organizational Macroeconomic climate strength

Expansionary Crisis

Strong-union Weak-union

High frequency Intermediate frequency Intermediate frequency Low frequency

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New Zealand had to be dropped from the routine 18 nations because of extensive missing data problems extending well into the 1960s.)

Although measures and data are described in Table 3, some additional discussion of these may be useful. For example, it bears noting that the OECD data on transfer payments expenditures used here omit spending for health programmes and in-kind benefits of virtually all kinds and also preclude interesting disaggregations of welfare effort.I4

Welfare effort, or spending as a proportion of GDP, was selected as a dependent variable. Income transfer payments to households was selected as a core, frequently researched component of welfare effort. GDP is used here to standardize welfare spending because it is less subject to instability due to trade-balance and exchange-rate fluctuations than is GNP, as well as because it is a fairly frequent choice for the standardization of welfare effort (see, also, Castles, 1982a; Hicks and Swank, 1984a; and Friedland and Sanders, 1986).15

Because our analyses are, given specification of a lagged value of welfare effort among regressors, interpretable as models of change, explanatory variables are specified as change measures - with two general exceptions: (1) categorical state variables like the contextual ones are not measured as changes; and (2) neither are the protest and strike variables. Values of these variables are so extremely dissimilar for most years that high values of them virtually are changes; and they are so extremely high in some years that change scores for them would be remarkably skewed. Otherwise, we specify change measures: growth in real GDP, growth in unemployment, inflation (i.e., growth in prices), and so on.16 Changes are measured as change scores (or simple differences) for proportions like unemployment rates but as proportional changes for large trending numbers like gross domestic product .17

In general, variables thought to principally capture automatic policy processes (i.e., automatic revenues, aged, changes in unemployment rates) are unlagged. Business cycle indicators are also unlagged, even when responses to them are thought to be substantially discretionary. This is done on the grounds that (1) fiscal policy is made on the basis of macroeconomic forecasts and that (2) direct indicators of target variables at year ‘t’ are more closely associated with forecasts of the targets at ‘t’ than with themselves at ‘t - 1’. Left government dummies are lagged a year on the assumption that policy outputs in a given year more closely reflect the discretionary policy actions of a previous year’s government than of the current year’s. On the assumption that the policy (output) responses of governments to protestors and strikers take at least as long (few forecasts here), protest and strike rates also are lagged one year. Further detail on measures is presented in Table 3.

Analyses are conducted as follows. Regressions are first run for each of the four contexts defined by combinations of strong-union natiodweak-union

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Table 5. Multiple (IV-DVGLS) regressions for models of welfare expansion in (1) Corporatist/ expansionary, (2) Corporatist/crisis, (3) Non-corporatist/expansionary, and (3) Non-corporatist/ crisis contexts for Left and Non-Left governments (after deletion with l t lC1.0 criterion; raw metric slopes with unsigned t-statistics below them in parentheses.)

Variables Corporatist/expansionary slopes Corporatistkrisis slopes

Common Left Non-Left Partisan Common Left Non-Left Partisan Diff Diff

Intercept -0.064 - Welfare/GDP (t - 1) 0.455 -

(2.746) -

- 0.042 0.472

0.246 (3.032)

(3.339)

- -

0.307 (3.138)

- 0.445

ARevs( t)

Aged/CLF( t)

AUnemp(t,t -1)

Growth Real GDP (t,t- 1)

Inflation(t)

Protests (t - 1)

Strikes ( t - 1) Left (t- 1)

adj. R2 (D.W.) N (d.f.)

- - - 0.665

0.239 - (1.427) -

-0.076 -

- (4.228)

- - 0.585 (1.280) 0.024 (3.056) - - - - - - -

(2.197) - - - 0.251

- 0.025 - (1.486)

- (2.213) - -

0.213 - (2.309) - 0.999 - (1.663) -

56 - 41 -

(2.142) - - -0.585

- 0.024 - (1 280)

- (3.056) - - 0.148 - (2.505) - 0.982 - (2.341) -

105 - 90 -

- - - - 0.251

- 0.025 - (1.486)

- (2.213) - -

- -

Variables Non-Corporatist/expansionary slopes Non-Corporatistkrisis slopes

Common Left Non-Left Partisan Common Left Non-Left Partisan Diff Diff

Intercept 0.003 Welfare/GDP (t - 1) 1.017

ARevs(t) -

Aged/CLF( t) -

AUnemp (t,t - 1) 0.307

(7.983)

-

-

(3.138) Growth Real - 0.044 GDP (t,t - 1)

(2.197) Inflation (t) - Protests (t - 1) - Strikes (t- 1) -

Left ( t - 1) adj. R2 0.997 (D.W.) (1.948) N 150 (d.f.) 134

-

0.009 0.965 (4.766) -

- -

- 0.326 (3.138) 0.409 (1.395) -

- - 0.326 (3.138) 0.409 (1.395) -

-

0.387 (6.101)

-0.142

(4.142) -

- - - 2.331 (1.342)

- 2.331 (1.342)

0.999 (1.706) -

86 72

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nation, and expansionhisis. Within each of these contexts, product terms are entered to test for each of the possible interactions with Left-party government. Then terms so statistically insignificant that they have t-statistics with absolute values less than 1.0 are deleted (in ‘true stepwise’ fashion) one at a time in inverse proportion to the absolute magnitudes of the t-statistics (and with reestimations of parameters and tests after any and each deletion). Post-deletion estimates are emphasized in the findings section. (See Johnston, 1985, on ‘backward’ specification searches.)

Although potential Left-government interactions are tested for statistical

Table 6. Context-specific results of regression analyses in eight contexts: strong-union expansion, strong-union crisis, weak-union expansion, and weak-union crisis, each for both Left (L) and Non-Left (R) Governments.

Interest system Vars Economic climate

Expansion Crisis

Left Non-Left Left Non-Left

Strong union Welf (t - 1) + + (‘Corporatist’) ARev 0 0

Aged +++ ++ A Unemp + +

- - Growth 0 Inf

Protests ++ 0 Strikes 0 0 Left ++ irrel

_ _

+ + + 0 0 0 + +

0 ++ 0 0 0 ++ irrel

_ _ _ _ _ _

Vars Expansion Crisis

Left Non-Left Left Non-Left

Weak-union Welf (t - 1 (“on-corporatist’) ARev

Aged A Unemp Growth Inf Protests Strikes Left

+ -

++ ++ 0 0 ++ 0

-

+ 0 ++

-

0 0 0 irrel

+ 0 0 ++

+ 0 0 ++ 0 0 0 irrel

Notes: Single signs (+ ;-) indicate direction and ‘normal’ strength of expected relation. Paired signs (++;--), reversed signs (given variable), or zeros (0) indicate distinctive relation for context, or interaction. All expected interactions are encircled. Question marks indicate very tentative or conflicting expectations. Key to variables in Table 3.

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significance within the pivotal four contexts, interactions involving the strong- uniodweak-union and expansiodcrisis distinctions are not statistically tested. The fact that a high proportion of differences across contexts turn out to involve either clear-cut presences or clear-cut absences of non-trivial estimates simplifies comparisons across contexts.'s

Findings

Overall, the regression models fit the data well, besides yielding a wealth of interesting findings. Coefficients of determination corrected for degrees of freedom are consistently around 0.99.19 The Durbin-Watson d-statistics (appropriate after use of instruments to estimate slopes for lagged dependent variables) consistently exceed the upper threshold of d needed to accept null hypotheses that errors do not suffer from first-order autocorrelation. The models are less uniform across contexts than was predicted. However, the signs of slope estimates, with a couple of exceptions that we shall soon discuss, are consistent with expectations and across contexts. Three variables have quite uniform effects across contexts. These are the lagged value of welfare effort, real GDP growth and changes in unemployment rates - all consistently significant in every context at the one-tailed 0.05 test level.

Still, the model shows surprisingly variable results across contexts. For example, variables such as automatic revenues, the proportion of elderly over 65, and inflation that we expected to be universally significant are not; and even the 'uniform' incrementalism, real growth and unemployment variables show notable quantitative variation across contexts. Statistical results bearing on these and other matters are presented in Table 5. A more qualitative display of results parallelling is presented in Table 6.

Now, to more detailed findings: first, to need factors; next, to party and other political ones; then, to the Keynesian variables; and, finally, to automatic revenues and to lagged welfare effort or incrementalism.

Both increasing unemployment rates and high proportions of elderly turn out to pressure welfare expansion more in some contexts than in others. As expected, changes in unemployment rates upwardly pressure welfare expansion in all contexts. However, they do so to a lesser extent (and with lesser statistical significance) where unions are organizationally strong. In the latter nations, unemployment slopes are about 0.24 and 0.30 for pre-1974 and post-1973 contexts, respectively; in the weak-union nations, analogous slopes rise to about 0.31 and 0.39. So, responsiveness to unemployment (perpropor- tion unemployed) does not vary much across any of the contexts considered. Insofar as it does vary, crisis increases direct responsiveness, not economic expansion; and the absence of strong unions (perhaps because of relatively low

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initial benefit levels) augments direct responsiveness, not its presence. Per- haps because Left parties provide a more varied set of safety nets as well as less unemployment, Left parties are no more responsive to short-term fluctuation in unemployment rates than non-Left parties; or, perhaps, differences in responsiveness to unemployment are ‘artifacts’ of differences in variation in unemployment rates, which may be insufficient in strong-union nations to permit detection of welfare responses to unemployment rates.

Unexpectedly, the effects of proportions of elderly are entirely confined to the pre-OPECperiod and, during it, to largely Left governments. For strong-union nations, slope estimates are 0.495 and 0.665 for non-Left and Left governments, respectively. For weak-Union nations, ‘aged’ slopes are about zero for non-Left governments and 0.409 for Left governments. Context is powerfully consequential here. In the context of Left government, strong unions and a bright economic climate, a one unit increase in the proportion of persons over 65 yields a 0.665 unit increase in welfare expansion. (Thus, for example, a welfare expansion of 0.100 before a unit increase in ‘Aged’, would accelerate to 1.665 after it.) Now, shift to non-Left government and the ‘Aged’ effect drops to 0.495. Shift to weak-union nations and it drops to 0.409 for Left governments and to zero for non-Left governments. Shift to the post-1973 period as well and responsiveness to fluctuations in the proportion of elderly ceases altogether. Left government mediation of processes determining welfare expansion

extends well beyond effects of the elderly as a proportion of a nation’s labour force. Left government welfare concessions to working class protest are mani- fest in strong-union contexts alone; and they are present within them regardless of economic climate. Thus, contrary to prediction, Left government concessions to protestors did not emerge in expansionary weak-union contexts; and propitious economic climates for welfare expansion appear not to have provided sufficient support for vigorous Left-government pursuit of welfare expansion where strong labor union confederations are lacking.*O

True to prediction, Left government concessions to industrial strikes do emerge inpre-1973 weak-union nations and nowhere else. So the strike appears to function as a tool for augmenting the ‘social wage’ primarily where long- term macroeconomic prospects are relatively good, labour is relatively weak, yet the Left is in power - for example, in mid-1960s and 1970s Great Britain. Presumably, strong unions are sufficiently encompassing and centralized to prefer to and to be able to forego the aggregate economic costs of work stoppages, while Left governments confronting less encompassing and centralized unions make spending concessions to more militant weaker unions in the effort to moderate their militancy see Lange and Garrett, 1985; Hicks, 1988b).

The last remaining ‘party’ finding involves the first of two ‘Keynesian’ ones.

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It is that only Left corporatist governments seem to heed inflationary risks where transfer spending is concerned. Left governments in corporatist nations appear to have the inclination as well as the capability to combat inflation; and they, indeed, appear to bring a counter-cyclical modulation of transfer spending into their policy making.*l Contrary to other interaction hypotheses that we posed above, non-Left governments do not appear to be particularly sensitive to inflation in any context; and non-corporatist governments do not appear to have been sensitive to it where unions are weak. (Of course, many fiscal levers and all monetarist ones are excluded from the present focus on transfer spending.)

As anticipated, Left-government impacts on welfare expansion are strongest and most prevalent in the context of organizationally strong unions and expansionary macroeconomic climates, weakest and least prevalent where there is macroeconomic crises and unions are weak. For example, tallying up the numbers of Left-government effects (both additive and interactive) in Table 5 the following pattern emerges. Stressing all effects in that table (or effects with absolute values of t-statistics that are greater than l.O), there are four Left- government effects in strong-uniodexpansion contexts, three in each of the two ‘mixed’ contexts and none in the weak-uniodcrisis context.22

Although we had anticipated pervasive facilitating effects of automatic revenues (generated by income fluctuations without change in tax law) upon welfare spending, these were only found in the strong-union nations during economic crisis when recourse to tax hikes must be inhibited.

No striking patterns involving the aggregate of need, or Keynesian, effects appear across contexts (although a number of more specific contrasts involving union strength or economic expansion do emerge to which we shall return). However, a surprising pattern does appear for a specific ‘Keynesian’ variable. All governmena - regardless of contexts - appear to have practiced counter- cyclical adjustment of welfare effort in response to real economic growth and increased unemployment rates. Indeed, counter-cyclical responsiveness to these variables increases as we move from weak to strong unions and expansion to crisis, contrary to assertions of a general decline in the use of Keynesian macroeconomic instruments. Finally, an interesting strong-uniodweak-union contrast enlivens the otherwise predictable ‘incrementalism’ findings. Al- though welfare effort is in all cases significantly autoregressive, the slope estimates indexing autoregressiveness are close to the modal incrementalist value of 1.0 only for the weak-union nations (1.02 for these nations in the pre-1974 period, 0.96 for them in the post-1973 period). The estimates hover about an uncharacteristic 0.46 in the ‘strong-union’ nations (0.45 for 1957-73; 0.47 for 1974-82). In corporatist nations transfer spending for a given year appears to be much less closely tied to transfer spending in the previous year, suggesting that policy processes tend to generate more large, abrupt policy changes in

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such nations, This might be so because corporatism’s more socioeconomically extensive and organizationally centralized articulation of interests permits policy makers to practice a less bounded, more synoptic form of rational decision making (Lindblom, 1959).

Conclusion

Consistent with the ‘industrial society’ and orthodox economic and political science literatures on welfare policy, the welfare effort of post-war capitalist democracies appears to have been consistently constrained by policy-making inertia and driven by relatively ‘automatic’ responses to unemployment as well as by (relatively routine) counter-cyclical demand management policy. This, at least, appears to have been the case for the growth of income-transfer effort in the 1957-1982 period. However, these and other processes generating welfare expansion appear to have varied substantially with Lefthon-Left differences in government partisanship, with strong-union/weak-union differences in the institutions of interest intermediation, and with the 1973-74 shift from a climate of fairly sustained and stable economic expansion to one of stagflationary difficulties (or ‘crisis’). These relatively routine and automatic processes also appear to have been complemented by class-linked protest as well as shaped by government partisanship, by interest structure and by economic climate.

Returning to the processes most presistently affecting welfare expansion, policy-making inertia seemed to characterized all of the contexts examined, yet to be too weak for a conventional ‘incrementalism’ interpretation where unions are not both highly inclusive and highly centralized.

Persistently counter-cyclical responses of welfare expansion to real economic growth, indicate widespread imposition of Keynesian discipline upon transfer spending. However, further inquiry is needed to specify the mix of discretionary and/or automatic policy processes involved.

Welfare expansion was affected by a second pair of need and macroeconomic variables: a nation’s elderly as a proportion of its economically lively population and the inflation rate. However, results on these factors were considerably more contingent on political economic context than those on unemployment and economic growth. These factors appear to have primarily been operative where and when Left government, strong unions and/or economic expansion prevailed. More specifically, pre-1974 responsiveness of welfare effort to short-term movements in the ‘Aged’ was greater under Left than under non-Left governments in strong-union nations; it required Left governments in weak-union nations; and it was not perceptibly continued in

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either context after 1973. In addition, inflation constrained welfare effort only under Left governments and in ‘Left corporatist’ contexts.

Consistent with the ‘new political economic’ literature, forms of political capabilities and collective action involving class-linked actors proved highly relevant to welfare expansion. More specifically, the responsiveness of welfare expansion to movements in socioeconomic need and in targets of macroeco- nomics stabilization policy was intensified under conditions of Left government and/or union organizational strength - often in combination with long- run economic conditions and prospects. However, Left rule and strong labour organization shift ‘uncontrollable’ and ‘Keynesian’ policy routines prominent in traditional academic literatures: indeed, expansionary effects of increases in the elderly and contractionary effects of price inflation are confined to corporatist governments of the Left. Ceferis paribus, Left governments also boost welfare expansion directly, given contexts marked by strong unions. This is so irrespective of macroeconomic climate. Furthermore, politically oriented working class protest over economic issues appears to extract welfare concessions from Left governments in strong-union contexts, even in adverse economic eras. However, such protest appears inconsequential for welfare expansion in contexts bereft of Left governments or strong unions. Finally, industrial work stoppages also appear to elicit welfare concessions from some Left governments: specifically in those expansionary, strong-union contexts that are conducive to welfare concessions, perhaps because Left parties in these contexts are relative likely to accept the strike as a routine instrument of unions.23 The limits of political explanations of welfare expansion suggested by these Left-party and union findings should be viewed cautiously. Significantly, the statutory conditions for automatic policy processes (e.g., unemployment- compensation statutes) like the intellectual conditions for much other policy routine (e.g., Keynesian stabilization theory) may have been more notably political at their origins in distant decades than in their more current year-to- year implementation. Thus, the somewhat greater relative importance of policy routines than of politics that is evident here may result from a bias toward the ‘routine’ aspects of policy development in this relatively short-term (quarter-century , annual) inquiry.

Politically, the class-linked and more manifestly ‘political’ conclusions drawn here suggest some bifurcation of processes generating welfare expansion, expecially when, as for most of the post-1973 period, economic crisis tends to inhibit welfare expansion. In nations where labour unions are organizationally strong (e.g., centralized and monopolistic as well as extensive), political actions of Left parties evidently can still affect welfare policy fairly directly. In nations where unions are organizationally weak aspirations for greater welfare effort are perhaps better directed toward unionization, more centralization of union confederations, party reform and innovation, and the

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emergence of a new era of economic expansion. However, historical devel- opments may modify or complicate causal regularities gleaned from a relatively brief segment of history. Thus, for example, economic recovery might take forms that discredit pro-welfare state politics; or economic depression might promote working class formation and political mobilization, at least where democratic institutions are robust. Furthermore, class formation and political mobilization may not be unaffected by welfare policies. These, after all, proved essential to the crystalization of several union-centric political coalitions in the years just preceding and following the Second World War (Burnham, 1970; Esping-Andersen, 1985).

Notes

1. On these matters see Hicks and Swank (1984a: 108) and Swank and Hicks (1985: 115-117). 2. Although the ‘industrial society’ perspective asserts general importance for ‘demands’, for-

mulations concerning particular demands and welfare expansion are seldom specified (but see Pampel and Williamson, 1988).

3. Institutional action is defined in terms of types of political activity that are clearly sanctioned by prevailing political institutions and norms (e.g., lobbying, electoral competition). Extra- institutional action is defined in terms of the use of strategies and tactics that lay outside the range of such sanctioned activities (e.g., protests, riots, politically targetted strikes). Political institutional action is defined as action taken by formally autonomous political organizations, principally political parties; political variants of extra-institutional action are those oriented toward political targets and goals. Economic variants of extrainstitutional action involve actions with primarily (and explicitly) economic goals and targets (e.g., most strikes and investment flights).

4. However, the finding of pro-welfare effects of ‘monopoly capital’ ’s weight in economies undercuts arguments for anti-welfare efforts of business. Still, despite confronting such alternative arguments (or hypotheses), the finding fails to do so very decisively: it is based upon measures of the centralization o f f i m , not of the employers associations most crucial to arguments about business’ anti-redistributive politics: it may reflect diffuse consequences of economic and industrial structure more than the intentionally focused ones of organized political action.

5. It is state administrators implementing statutory directives in response to changing environmental conditions stipulated in the statutes who are the principal proximate agents of relatively ‘automatic’ and/or ‘uncontrollable’ policy processes. These administrators are also the principal mechanisms for implementation of the discretionary policy changes.

6. State administrators and their organizational constraints and routines are explicitly intro- duced to complement the earlier emphasis on state elites and their organizational resources. They are added in order to ground consideration of relatively ‘automatic’ policy processes, as when state administrators generate benefit legislation by applying fixed entitlement statutes to fluctuating caseloads. Thus, an organizational or administrative aspect of the state crucial to the situation of ‘automatic’ policy processes is added to the early emphasis on discretionary policy processes. Part of any unemployment effect may also reflect discretionary applications of Keynesian policy prescriptions. However, we expect that automatic stabilizer-effects of unemployment dominate unemployment effects, especially when unemployment is measured close to the

7.

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current year ‘t’ or for the change from ‘t - 1’ to ‘t’. Our measure of ‘Aged‘ is a proportion o labour force participants as opposed to one of total population because examination of the two very similar measures indicated the former to be more consequential for welfare expansion.

8. It should be noted that negative effects of economic growth on welfare spending may, if drawn from a multiple regression analysis which includes lagged dependent variables among regressors, be given a distinctly non-Keynesian interpretation. Specifically they might be read as support for a permanent income model (Ah and Crystal, 1983). In this, expenditures are planned as a function of anticipated long-term income.

9. Such an interaction might reveal a relationship (e.g., between elderly population and per- recipient social security benefits in political democracies) that underlies an observed cross- national relation (e.g., between democracy and such benefits).

10. Our measure of union strength correlates 0.85 with Stephen’s (1979) 1970ish measure of ‘economy-wide central bargaining’, -0.85 with Marks’ (1986) ranking of nations in terms of their utilization of consensual incomes policy and 0.65 with a tentative measure of the strength of employer conferations which we have adapted from Crouch (1985). The union strength measure (a product of measures of union labor-force share [or ‘density’], centralization and monopolization measures drawn from Cameron [ 19841 correlates similarly with the same measures: 1.0 with economy-wide bargaining, -0.81 with Marks’ ranking of incomes policies and 0.54 with the strength of employers confederations. (For more information on the measures reported here, see Table 3.)

11. Left party government (and its contrast with non-Left party government) is emphasized here, despite evidence of comparable pro-transfer policies of Center and (non-Right) Christian Democratic governments in Hicks and Swank (1984a). This is done, first, because the LefthowLeft distinction probably is still the most salient in the welfare state Literature; secondly, because preliminary analysis indicated a lack of Center and (non-Right) Christian Democratic effects in these new more longitudinally sensitive data; and, thirdly, because we shied away from the complexity of three or four category party distinctions.

12. In small economies, for example, shares of consummer spending going to imports tend to be relatively high and stimulative effects of fiscally buoyed demand may largely benefit trading partners; exports tend to be disproportionately important and competitive advantage on export markets can be very sensitive to inflationary effects of fiscal stimulation.

13. The analyses’s AR(1) adjustments are based upon estimates of a single rho for all nations in a particular analysis. The analyses do not adjust for contemporaneous cross-national correlation of errors; and the analyses do not adjust for heteroscedasticity (see Kmenta, 1971). (These missing refinements will be incorporated into follow-ups to this investigation of welfare expansion.) However, the current instrumental variable treatment (of the lagged welfare effort regressors) should eliminate the problem of inconsistency: the cross-sectional dummies should go far toward reducing error structure; and the initial AR(1) treatment of the errors is likely to go a good ways toward cutting down inefficiency and curtailing any of the upward bias in test-statistics associated with serially autocorrelated errors.

14. When more (in-kind) inclusive and more disaggraggate social welfare data from the ILO become available for 1980-1981 (and perhaps a year or two more), analyses will be replicated and refined using that data. A very recent study by Pampel and Williamson (1988) suggests that such data can make a difference.

15. It should be noted that any hypothesized negative effects of (proportional) growth in real GDP upon transfer spending as a proportion of GDP may contain and artifactual component. This is so (in brief) because the welfare effort measure contains GDP‘ in its denominator and the growth measure contains GDP in its numerator.

16. The number of persons over 65 years of age as a proportion of the civilian labor force (i.e.,

427

‘Aged’) is not specified as a change because preliminary analyses quickly revealed that changes in it were not related to welfare expansion in our regression while levels of it were. Crudely empiricist though this rationale may be, effects of this measure of the ‘Aged’ seem more likely to reflect real age effects than to be artifactual; and such effects are better accounted for (and controlled for) than neglected.

17. Several variables used in Hicks and Swank (1984a) are not used here. Upper class protest is not because of the lack of evidence for its relevance in Hicks and Swank (1984a) and Swank and Hicks (1985). Changes in gross domestic investment rates were dropped from analyses when it became evident that they were quite unrelated to welfare effort, whether in regression models or zero-order correlation matrices, whether measures of levels or changes are employ- ed. The weight of monopolistic industrial corporations in the domestic economy has been so far withheld from analyses because of virtual over-time invariance, missing data, and concep- tual inferiority to a measure of employer confederation centralization being developed. A Right-party alternative to the present focus on Left-party strength was supressed in this paper on empirical and explanatory grounds already noted (see note 11).

18. For the present, differences across the four contexts are, when in doubt, assumed to involve higher- (rather than lower-) order interactions. For example, if welfare returns to increases in the proportion of elderly in the pre-1974 ‘corporatist’ context were found to be notably greater than in other contexts, a second-order corporatist-expansion-elderly-welfare interaction would be assumed for expositional purposes, although a pair of first-order interactions might account for the observed data. In spinn-offs from this paper, efforts will be made to pinpoint interactions. Also, less highly aggregated measures of transfer spending will be examined (see note 14).

19. This fit is hardly extraordinary given specification of a lagged dependent variable, but it is good nonetheless.

20. At first sight, this finding may appear to contradict the recent preponderance of support for welfare concessions to the 1960s black riots in the United States (see, e.g., Isaac and Kelly, 1981; Griffin and Leicht, 1986). However, the protest data analyzed here have little overlap with riot data, while aspects of welfare policy examined in the studies of 1960s U.S. riots have typically been far less aggregated than total government income transfers. Furthermore, protest effects on welfare policy have scarcely been examined with time-series data outside of the United States and the United States case has not been closely scrutinized here.

21. Note that this is consistent with Mishra’s (1984) characterization of ‘integrated’ (as opposed to ‘fragmented’) welfare state policy regimes. Note also, that all governments except Left ones in strong-union contexts appear to disregard short-term fluctuations in prices where transfer outlays are concerned.

22. Stressing effects that are statistically significant at the 0.05 test-level (for one-tailed tests where appropriate) the pattern is similar. There are three effects for the Strong-union/ Expansion context, two for the Strong-uniodcrisis context, one for the Weak-unioaxpan- sion context and none for the Weak-uniodCrisis context.

23. These conclusions regarding Left governments and working class militancy are broadly consistent with earlier cross-sectional conclusions on such pressures (see, e.g., Cameron, 1978; Hicks and Swank, 1984a). The pre-1974 Left-government effects, unlike those in Hicks and Swank (1984a) and Swank and Hicks (1985), are now confined to strong-union nations. The lack of post-1973 Left effects in Swank and Hicks (1985) is at least partially reconciled with present findings in terms of the (newly-documented) ineffectiveness of the Left in weak-union contexts. The pre-1974 protest and strike effects of the earlier studies may now be specified to strong-union-Left/weak-union-Left contexts, respectively. The post-1974 protest findings in Swank and Hicks (1985) may be specified to Left-corporatist contexts.

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