Inequality and Prosperity: Social Europe vs. Liberal America

By Agartan, Kaan | Capital & Class, Spring 2008 | Go to article overview

Inequality and Prosperity: Social Europe vs. Liberal America


Agartan, Kaan, Capital & Class


Jonas Pontusson Inequality and Prosperity: Social Europe vs. Liberal America Cornell University Press, 2005, 242 pp. isbn: 0-8014-8970-9 (pbk) $19.95 isbn: 0-8014-4351-0 (hbk) $52.50

Reviewed by Kaan Agartan

Social issues related to the welfare of society have always attracted attention, not only from the academic world but also from policy circles, due to their direct impact on the livelihoods of individuals. For decades, social scientists and policy experts have been crafting typologies based on various labour market models and welfare provision systems in different parts of the world. In this endeavour, they have especially focused their attention on the advanced economies of Europe and the usa. In longstanding debates on the basic characteristics of these different welfare systems, analysts have reflected not only on the strengths and weaknesses of each model, but also on their prospective trajectories. What, then, does Pontusson's Inequality and Prosperity add to the mature discussion on European and us welfare systems that has already produced a massive body of literature on the issue?

Following an analytical review of the existing literature that specialises in 'varieties of capitalism', Pontusson lays out the basic characteristics of what he terms Nordic and continental European social market economies (smes) on the one hand, and liberal market economies (lmes) on the other, by distinguishing the ways in which various welfare benefits are provided and dispersed. In order to do so, he prefers an approach that undertakes a comparative analysis of several oecd (Organization for Economic Cooperation and Development) countries, and organises his discussion around his own typology of market economies. Among the major areas explored in the book are labour-market dynamics and income distribution, employment performance, macroeconomic management and wage bargaining, redistribution and economic growth, and directions for progressive reform for the welfare systems of social market economies.

The most striking theme in the book is Pontusson's opposition to the notion of an inevitable convergence towards the market-liberal version of welfare provision. He is strongly of the opinion that European social market economies can survive under the less favourable environment for employment relations created by the forces of globalisation. In the effort to prove his claim he provides convincing evidence that the main tenets of the market-liberal discourse-that the institutional arrangements for more equal distribution of income and consumption lead to slower growth and economic efficiency-are questionable, if not refutable. He skilfully argues that the major source of income inequality originates from the institutional settings that shape employment and wage relations, and that the LMES are more severely affected than the SMES due to their lack of arrangements to offset the impacts of an intensified global economy, demographic changes, and the political pressures accompanied by them.

While Pontusson challenges the myth that the institutional arrangements of the SMES hamper economic development, he also provides counter-arguments, supported by rich empirical data, against the supposed trade-off between inequality and economic efficiency. Doing so, he refutes the conventional view that regards publicly provided welfare services as inefficient, and draws attention to the positive implications of the more egalitarian distributional policies in the SMES. The empirically rich and detailed analysis he presents in the book illustrates that it is not the economic growth but rather job creation that constitutes the major problem for the SMES. Accepting the fact that LMES produce more job opportunities for the unemployed, Pontusson questions the quality of jobs created by these LMES as far as the unstable nature and the number of hours worked in those jobs are concerned. In that respect, Pontusson contends that the employment growth achieved by lmes could not automatically translate into relative employment gains for the unskilled workers, and could not eliminate the problem of long-term unemployment. …

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