Deborah Mabbett

UK Economic Policy and the Global Financial Crisis: Paradigm Lost?

The global financial crisis of 2007–08 produced a sudden change in the economic policy of the United Kingdom (UK). Prior to the crisis, the government preached the gospel of price stability, fiscal prudence and light-touch financial regulation. In the wake of the crisis, the government countenanced unconventional monetary policies, a surge in public-sector borrowing and the need for a rethink of financial supervision. This article seeks to understand the significance of these changes using Peter Halls theory of policy paradigms. Its central argument is that, contrary to appearances, the UK has not yet experienced a fundamental reordering of the instruments, institutions and aims of economic policy. Third-order change cannot be ruled out as the crisis unfolds but the economic ideas underpinning UK economic policy have, for better or worse, demonstrated remarkable resilience thus far.

Searching Under the Lamp-Post: The Evolution of Fiscal Surveillance

Fiscal surveillance was developed as a supranational regulatory process to counteract short-termism and deficit biases in government decision-making. With effective monetary policy to stabilize the economy, restraint on the fiscal discretion of national governments was seen as the key to macroeconomic stability. The financial crisis and its aftermath challenge this paradigm. Private debt caused the crisis and monetary policy is so weak that pro-cyclical fiscal retrenchment could worsen fiscal outturns. We argue, contrary to the ‘disciplinarian’ interpretation of the Stability and Growth Pact, that the regulatory process of fiscal surveillance is strongly affected by the potential perversities of fiscal restraint and is therefore resistant to the prescription of austerity. This claim is developed by tracing the technical difficulties encountered by fiscal surveillance since the financial crisis. The crisis has so destabilized expectations of the performance of the economy and the proper scope of government that the statistical and economic norms of surveillance have been undermined. We conclude that the problem with fiscal surveillance is not that the EU inflicts undue fiscal discipline on member states, but rather that the EU institutions are unable to protect member states against bond market panic, and therefore cannot coordinate stabilizing fiscal policies.

Supplementary Pensions between Social Policy and Social Regulation

The European Commission has developed an analysis of supplementary pensions which constructs the policy area as regulatory by separating ‘allocative’ issues, such as smoothing lifetime income and promoting saving, from traditional ‘redistributive’ or ‘budgetary’ welfare concerns, such as ensuring an adequate minimum income. In the allocative sphere, it promotes market-oriented values, notably ‘actuarial fairness’. However, the progress of European measures on supplementary pensions is impeded by alternative approaches. The social partners play a large role in regulating supplementary pensions, and they provide an approach to regulation that is antagonistic to the adoption of common EU rules. Member states might be expected to view EU-level regulatory activity more favourably as providing a lever for pension reforms, but several states which had already embarked on substantial changes to their pension systems did not welcome EU-led reforms.

Learning by numbers? The use of indicators in the co-ordination of social inclusion policies in Europe

ABSTRACT The indicators developed for the open method of co-ordination (OMC) in social inclusion might, according to their authors, serve to establish a common language for the discussion of social inclusion issues, set the agenda for inclusion policies, and provide benchmarks for the identification of best practices. To examine whether ‘learning by numbers’ is taking place, this paper scrutinizes the use of the indicators in the area of child poverty and exclusion. The discussion uses a theoretical account of the institutional preconditions for the transmission of OMC-based learning into the policy processes of member states which distinguishes between ‘normal policy-making’ and ‘paradigm shifts’. The indicators are designed to contribute to the advance of knowledge about normal policy-making, but it is shown that the OMC/inclusion disseminates a new policy paradigm which bears little relationship to the indicators.

The Regulatory Rescue of the Welfare State

The regulatory state and the welfare state can be described in terms of contrasting pairs of ‘types of policies’ and ‘types of politics’ following Lowi (1972). The paradigmatic regulatory type of policy is market coordination, and its type of politics is nonmajoritarian, technical and supranational. The welfare state has redistribution as its paradigmatic type of policy, and the dominant type of politics is majoritarian, party-political and national. This paper dissects these distinctions. Public sector reforms mean that regulatory types of policy can increasingly be found within welfare service provision. Different arrangements for labour market coordination are integral to different welfare state regimes, and at the same time these regulatory arrangements are concerned with combating market failure and promoting efficiency. There are abundant examples of technical, expertocratic policy-making within the welfare state and a high level of supranational policy exchange. Delegation is important to the institutionalisation of the welfare state, as are nonmajoritarian commitments to social rights, secured for example for migrants. These findings cast doubt on the characterisation of welfare state policy-making as political and partisan. It is suggested that the interpenetration of regulatory politics enhances the robustness of the welfare state in the face of international market integration, while at the same time biasing policy towards the promotion of efficiency and suppressing the importance of solidaristic political values.

What difference does Euro membership make to stabilization? The political economy of international monetary systems revisited

ABSTRACT For many political economists, the loss of monetary sovereignty is the major reason why the Southern periphery fared so badly in the Euro area crisis. Monetary sovereignty here means the ability of the central bank to devalue the exchange rate or to buy government debt by printing the domestic currency. We explore this diagnosis by comparing three countries – Hungary, Latvia and Greece – that received considerable amounts of external assistance under different monetary regimes. The evidence does not suggest that monetary sovereignty helped Hungary and Latvia to stabilize their economies. Rather, cooperation and external assistance made foreign banks share in the costs of stabilization. By contrast, the provision of liquidity by the European Central Bank inadvertently facilitated the reduction of foreign banks’ exposure to Greece which left the Greek sovereign even more exposed. By viewing the Euro area as a monetary system rather than an incomplete state, we see that what is needed for Euro area stabilization is cooperation over banking union, rather than a fully-fledged federal budget.

Some are More Equal Than Others: Definitions of Disability in Social Policy and Discrimination Law in Europe

This article explores the relationship between anti-discrimination policy and existing social policies directed towards disabled people. It proposes a conception of ‘spheres’ of social policy, in which different spheres advance different dimensions of equality. Within each sphere, definitions of disability are based on relevant comparisons which determine who should be recognised as disabled for the purposes of the policy. Examples of definitions are given using material from a cross-national European project. Examples are also given where social policies provide for disabled people without defining a disability category. The implications of these findings for anti-discrimination policy are drawn out, and problems in defining disability for the purposes of ‘fourth generation’ equality rights are identified. It is suggested that there are limitations to the extent that equality policy can be founded on non-discrimination principles, and that a more substantive equality policy for disabled people needs to learn from debates and experiences within social policy.

The Politics of Conflict Management in EU Regulation

This article examines how the conflicts latent in EU regulation are managed. First, it looks at how policy issues are framed as positive-sum games, party-political arenas avoided and consensual problem-solving methods of policy-making promoted. Then it addresses the puzzle of the robustness of regulatory conflict management. If challenged in its regulatory endeavour, the EU tends to respond with more regulation. Finally, the article outlines the limitations of regulatory conflict management which are to be found less in outright deadlock than in attenuation of processes, loss of focus, information overload and a tendency to solve small problems while neglecting large ones.

The Ghost in the Machine Pension Risks and Regulatory Responses in the United States and the United Kingdom

The United States has introduced automatic enrollment into retirement savings schemes, and the United Kingdom is in the throes of doing so. The financial crisis has reminded us that returns on these schemes can be poor, even negative. Behavioral economics shows that people can be “nudged” into schemes regardless, but it also implies that the liberal account of market legitimation through informed choice cannot be applied. This article examines how risks are assigned in schemes and how enrollees might seek recourse if their expectations are disappointed. Comparing the United States and the United Kingdom, it argues that enrollees are more likely to seek recourse from the government in the United Kingdom. The explanation can be found in regulatory decisions that reflect the structure of each country’s public pension scheme. This structure is conducive to private risk bearing in the United States, but not in the United Kingdom, suggesting that regulatory market liberalism is undermined by a residual approach to public provision.

Devolved Social Security Systems: Principal-agent versus multi-level governance

This paper presents an analytical framework for comparing patterns of devolution to subnational governments and autonomous social insurance institutions in social security systems. The framework has two components. One is an analysis of financial structures along the dimensions of financial autonomy (indicated by the extent to which the administering institution raises its own revenue or depends on central grants) and financial responsibility (indicated by whether marginal costs are borne by the administering institution). The other component of the framework concerns the assignment of policy-making power; in particular, we contrast the effects of competitive and cooperative modes of devolution. The discussion uses examples from Denmark, France, Germany, the Netherlands and the USA. While we looked for ‘principal-agent’ relationships between central governments and administering institutions, we found that more complex multi-level governance structures prevailed in most cases.