Francis G. Castles, The Future of the Welfare State: Crisis Myths and Crisis Realities.

Francis G. Castles, The Future of the Welfare State: Crisis Myths and Crisis Realities. New York: Oxford University Press, 2004. $99.0 hardcover, $35.00 papercover.

The abundant literature on the future of the welfare state seems dominated by predictions of its imminent--or at least eventual--demise. Discussions range from mournful to gleeful at the prospect that national social expenditures will decline and may disappear in the foreseeable future. A balanced discussion such as this book provides is not easy to find.

Francis Castles examines three key issues in the debate: the impact of globalization on welfare state economies; the problem of their aging populations; and their decline in fertility. These issues have profound implications for the ability of welfare states to sustain social programs. The issues are addressed jointly and severally. Castles avoids ideology, instead using empirical evidence. He compares past predictions to what actually happened and projects trends to posit possible futures in the twenty one member states of the Organization for Economic Cooperation and Development, relying OECD data and comparable information from other sources.

Castles begins his analysis by outlining main points in arguments describing what he calls "crisis myths": (1) Globalization of the economy puts welfare states in competition with countries where industry does not carry a social spending tax burden. In order to compete, welfare states must slash or eliminate social commitments. Other states must match or surpass these moves, leading to a "race to the bottom". (2) All industrial nations are aging; for most, their major social welfare expense is in programs for the aged. As a greater proportion of the population ages, the burden on the rest will become too great to sustain. (3) Industrial countries have undergone sharp declines in fertility; only the United States has retained a replacement rate. The economic consequences of this trend are calamitous in terms of support for social welfare programs.

Having outlined the main arguments on each of the issues, Castles provides an analysis of what has happened in each area during two periods. The first is 1960-1980; the second, 1980-1998. Castles claims that the decades 1960-1980 were a "golden age" followed by slower expansion in established welfare states, but compensated by rapid expansion in newer ones. He sees the slowing as a correction for "overshoot" and the acceleration as "catch-up". He finds no significant diminution in aggregate social spending and hypothesizes that the slowdown is a normal part of welfare state "maturing" after exuberant growth and diversification in early stages, leading to a kind of "steady state". Growth does not stop, but becomes more deliberate as welfare states approach the outer limits of feasible welfare generosity. They have not reduced overall spending but have shifted priorities. "How much countries spend and what they spend it on are quite different matters", he observes (p. 68). Overall, he finds no credible evidence of general reductions in the standards of protection provided by welfare states.

Castles claims that alarms about the impact of population aging on welfare spending are overstated and are based on spurious assumptions. In addition to his statistical analyses, Castles points to history, noting that aging in industrial countries is not a recent phenomenon but has been in process for over 100 years without any negative effects on social program provision. Despite some major differences among countries, Castles concludes that an aging population "has had no discernible effect on the growth of social expenditure or total outlays" (p. 122). To claim that an "aging crisis" will destroy the ability to fund social programs involves, he says, a "serious distortion" of the facts. It is a claim usually made by the most wealthy but least generous countries, which are well-suited to deal with any impact of aging for many decades to come.

In examining the precipitous fertility decline in OECD countries, Castles makes his most explicit claims for the place of social policy as the legitimate resource for addressing these problems. Fertility rates in industrial nations have declined sharply since 1960, mostly in Catholic countries with the lowest divorce rates. Scandinavia and the United States, with the highest rates of divorce and extramarital births have higher replacement rates than Southern Europe, with its emphasis on the traditional family. Where fertility is lowest, it cannot be offset by immigration and anyhow, heavy immigration carries risks of political tensions and potential social instability. Castles notes that "reversals" in declining fertility rates have also been recorded for example in Scandinavia. He attributes this to Swedish social policy initiatives that made it possible for women to work and also raise children; initiatives that are absent in Southern Europe. He concludes that problems of infertility can be addressed effectively through adoption of a few well-chosen social policies, although they would be expensive.

The book ends with optimism about the ability of welfare states to deal with their problems, providing they have the will to do so and do not adopt "a renewed emphasis on the external security function of the state ... occasioned by a real or imagined threat" leading to expensive wars, since big deficits reduce resources for social welfare spending. Throughout the book, specific exception is made for the United States which is not considered a true welfare state, lacking the "partisan incumbency" or the "legacy of the Left" found elsewhere. However, in all the twenty-one nations studied, including the United States, Castles considers the welfare future to be subject to intervention through specific social policies rather than the inexorable laws of economics. The future of the welfare state, he concludes, is a matter of political will.

Charles Guzetta

Hunter College, City University of New York