Foundations of Political Economy and Social Welfare

Political economy examines the interplay of politics, markets, and institutions that shape the production and distribution of welfare.

Core Concepts

• Political economy: how political power and economic allocation jointly determine outcomes.
• State power: the state's capacity to tax, regulate, and redistribute.
• Resource allocation: the mechanisms (markets, states, households) that channel welfare goods.
• Welfare equity: fairness in who gets what and the social determinants of distribution.

Three Perspectives

• Neoclassical/liberal: welfare best delivered through well-functioning markets; the state corrects market failures.
• Keynesian/state-centred: the state stabilises demand and provisions security.
• Marxist/critical: welfare state reproduces or challenges class and gender inequality.

The State, Markets and Civil Society

A balanced political economy distributes roles among the state (redistribution), the market (efficiency),

and civil society (solidarity and communities).

Study Points

1. Distinguish the liberal, Keynesian, and Marxist views of welfare.
2. How does state power convert resources into equity-provision?

Welfare State Models and Fiscalisation

Welfare provision is a political contest over who benefits from the social budget and who bears its cost.

Welfare State Typologies

• Liberal: modest, means-tested, residual protections (USA/UK).
• Conservative/Corporatist: status-oriented, insurance-based (Germany).
• Social-Democratic: universal, generous, redistributive (Nordic states).
• Developing/hybrid: fragmented fiscal capacity, informal protection, donor dependence.

Public Finance of Welfare

• Resource allocation: how tax revenue is allocated between cash programmes, health, education, housing, and administration.
• Progressivity and incidence: who the welfare state absorbs from and benefits.
• Deficit vs sustainability: how demographic ageing and labour markets constrain welfare fiscalisation.

Diminution of the Welfare State

Privatisation, means-testing (targeting), promotion of labour activation (workfare), and austerity reshape the equity profile of the welfare budget.

Review Points

1. Compare competing welfare state models by redistributive outcome.
2. How does fiscal policy allocate resources for social welfare provision?
3. What are the distributional effects of targeting?"

Power, Policy and Equity in Welfare Provision

Power — of elites, interest groups, workers, and citizens — determines whose needs the welfare system privileges.

Power and Policy-Making

• Interest groups and corporatism: unions, employer and professional associations shape welfare concessions.
• Path dependency: earlier seats of policy investment constrain later reforms.
• Regulatory capture: welfare innovations can be captured by the funded.

Equity Consequences

• Vertical equity: reducing inequalities between rich and poor.
• Horizontal equity: equal treatment of equals.
• Structured inequality: gendered, racialized, and regional gaps in coverage.

Social Workers as Political Actors

Mainstream approaches train practitioners in macro-level policy practice: evidence generation,

political education, and advocacy for fairer resource allocation and social equity.

The Capability/wellbeing approach

Amartya Sen's capability approach centres welfare on people's real freedoms to be and do what they

value, identifying the role of institutions in a society's capability-friendly fabric.

Review Questions

1. How do power asymmetries skew the allocation of welfare?
2. Explain vertical and horizontal equity in social provision.
3. Give a nationality macro-policy example of welfare reform.