Domestic welfare reform throughout the 1990s mark distinctive, and sometimes successful, responses to the massive policy challenges ahead, and we would expect the momentum to continue. In contrast to the view of Europe as ‘sclerotic’, this chapter has highlighted a dynamic and distinctly “European” type of reform process. It is a process that continues to adhere to deep-seated commitments to equity and solidarity, to the belief that social protection enhances efficiency, and to institutional preferences for negotiated rather than imposed change.
The self-transformation of the European social model has never been guided by some grand master plan, from which policy then ensued. The European reform model is replete with contingencies, policy failures, co-ordination and implementation problems and, obviously, shifts in the balance of political and economic power.
The ‘trial and error’ nature of European social reform means that attempts to solve problems in one particular policy area may, through a dynamic of spill-over effects, create problems in neighbouring policy areas. New problems trigger yet another search for new solutions, both horizontally (across policy areas) and vertically (between different layers of governance). Since the mid-1970s, macroeconomic instability stimulated a learning process through which the hard currency EMU was established. The imperatives of monetary integration put pressure on systems of industrial relations, leading to new adaptations in wage bargaining. New bargaining procedures, in turn, encouraged a search for more active labour market policies, as well as ‘activating’ social security provisions. And with the rise of services and female employment occurred a reorientation of policy. Last but not least, steps are being taken to make pension systems fair and sustainable in the face of population ageing. Politically, most of these sequential stages of bounded policy innovation were outcomes of lengthy processes of (re-)negotiation between political parties, governments and often also the social partners.
Policy innovation at the national level has shaped the employment and social policy agenda of the European Union. Persistently high unemployment in the run-up to the EMU raised the urgency of a common European strategy. In the second half of the 1990s, aided by the presence of centre-left governments, we see a deepening of Social Europe. The success of the European Employment Strategy provided a window of opportunity for European employment and social policy which, in turn, catapulted the open method of co-ordination. OMC may very well unleash a process of ‘hybridisation’
43in welfare and labour market policy. This could lead to new policy mixes, something which is already apparent in small countries like Denmark, Ireland, the Netherlands, and Portugal. Welfare reform in the first decade of the 21st century will increasingly involve a combination of domestic learning, learning from and with others, and hopefully also a learning ahead of failure.