ABSTRACT
There is an ongoing tension – some would argue contradiction – that goes to the heart of capitalist welfare states. On the one hand, states face ever-growing demands to provide more and better services. Some of these demands are made by citizens who desire better schools, hospitals, roads, and rail services. Some of these demands come from the corporate sector: for better educated workers; better funded public research facilities; more generous subsidies; public bailouts; and increased injections of public spending to increase macro economic demand. Few, however, appear to want to pay higher taxes to fund all this. Citizens of ordinary means are resistant to paying more, especially when the super-rich appear to be so reluctant to pay their fair share. Politicians also appear to have little appetite to tax the wealthy for fear of dampening their entrepreneurial spirit and causing them to flee to less punitive tax regimes, while increases in corporation tax are largely unthinkable. In any case, the wealthy and large corporations can employ various means to avoid paying even the tax levels laid down by law. Governments, meanwhile, are caught in an uncompromising bind. Better services are vote
winners, higher taxes are vote losers. They also face sophisticated and well-funded lobbyists, employed by the wealthy to represent their particular interests. And they are confronted by an overwhelming reality that, if they fail to create the right economic conditions to encourage new corporate investment and boost corporate profits, the revenues on which they depend will rapidly be depleted while demands on benefits systems and welfare services will rapidly increase as unemployment goes up. This, in a nutshell, describes the roots of the fiscal crisis of welfare states. This chapter begins
with a more detailed review of the nature and scope of fiscal crisis which is followed by a discussion of how economic globalisation, and more particularly its neoliberal transformation has contributed to shaping the conditions for the most recent financial crisis. The final section analyses the impact of the variety of crises evolving from the financial collapse and the implications for welfare states.
