Content uploaded by Waltraud Schelkle
Author content
All content in this area was uploaded by Waltraud Schelkle on Aug 03, 2014
Content may be subject to copyright.
A preview of the PDF is not available
In the Spotlight of Crisis How Social Policies Create, Correct, and Compensate Financial Markets
Abstract
This special issue of Politics & Society explores the relationship between social policy and financial markets, which was thrown into sharp relief by the financial crisis of 2007-09. The research asks how particular social policies underpin and even create financial markets, specifically mass markets for consumer finance, mortgages, and pensions.
... recession and interest rate changes) and personal factors such as illness, divorce, lack of financial literacy and over-spending (Betti et al., 2007;Disney et al., 2008). Studies have also described the type of national household insolvency system adopted in developed countries (Niemi-Kiesilä inen, 1999;Levine, 2002;Heuer, 2014;Ramsay, 2017) and the interplay between household insolvency systems and credit supply (Schelkle, 2012). The findings suggest that countries that encourage credit, such as the USA, use the household insolvency system to compensate households for the increased risk of becoming over-indebted due to the increased risk of irresponsible lending practices. ...
... When policymakers view debt as detrimental, they implement debt mitigation policies, including strict lending practices on personal loans and strict credit history checking for credit card applications, that serve to reduce the supply of debt available to households (Bezemer et al., 2021). For example, European policymakers typically strive to reduce mortgage risk for households, and hence financial regulation is more restrictive (Schelkle, 2012). The EU's Mortgage Credit Directive (2014), which applies to all member states, regulates interest calculations and requires the inclusion of worst-case scenarios in mortgage information sheets (Eurofound, 2020). ...
... The responsibility for household over-indebtedness is also impacted on by the government approach to income risk. Government interventions that reduce income risk and guarantee a minimum standard of living, as in stylized Environments 2 and 4, make money management easier and as a result the risk of becoming over-indebted is lower (Schelkle, 2012;Rowlingson et al., 2016). In this environment, individual characteristics and lifestyle choices are more likely to contribute to the household's precarious position (Niemi-Kiesilä inen 1999; Oksanen et al., 2015). ...
Lessons learned in the aftermath of the Financial Crisis of 2008 include that long, punitive household insolvency regimes have a negative societal impact, increase the potential for financial instability and hamper national economic recovery. We propose the Socio-Economic Framework for Household Insolvency System Design as a regulatory mechanism that aims to control national household debt and productivity levels. The system facilitates an informal resolution of the conflict between over-indebted households and their creditors. When this is not possible, the system grants immediate relief to no-income, no-assets and ‘honest’ households, that experienced over-indebtedness because of an external negative shock, such as a medical emergency. Finally, when the household does not qualify for immediate relief, the system allocates the costs of insolvency between the household and creditors, based on responsibility for the over-indebtedness. This reduces the moral hazard.
... Baumgartner, 2013;Burns et al., 2018). Crises that have a nationwide financial impact often lead governments to enact policies aimed at curbing economic downturn (Helleiner, 2011;Schelkle, 2012). Such policies may come in the form of either increases or decreases in spending as a means of stabilizing markets or preserving previously entrenched economic orders (see Ban, 2015 for a review). ...
Purpose
Crises precipitate strong fiscal responses by government – sometimes toward austerity, other times toward renewed social spending. This variation in approaches to crisis handling has the potential to highlight factors that drive public opinion toward government interventions that may be quite different from those in non-crisis times. This study aims to discuss the aforementioned issues.
Design/methodology/approach
This article brings together theories of government policymaking in crises, policy responsiveness and economic voting to assess how personal financial (egocentric) concerns and/or national financial (sociotropic) concerns may influence opinions toward government handling of direct financial supports in a crisis and, more generally, opinions toward social policy interventions. The authors assess this dynamic in the Canadian context using original national survey data collected in the initial stage of the pandemic-based crisis in June and July of 2020 ( N = 1290).
Findings
The authors find strong evidence in support of sociotropic concerns shaping government approval and support for greater social policy interventions, but limited evidence to support egocentric concerns, suggesting that social policy attitudes may be more insulated from personal factors than anticipated.
Research limitations/implications
The authors’ findings suggest that crises may prompt enhanced support for interventionist social policy measures that may lack broad-based support in non-crisis times.
Originality/value
The authors’ findings speak to the ongoing discussion around the possibility for crises to function as policy windows for enhanced social spending and for entrenching targeted financial supports for vulnerable individuals.
... 84 WRR (2016: Chap. 4) 85 WRR (2016: 96-100) 86 Schelkle (2012) household debt, from 27% of GDP in 1982 to 106% of GDP in 2011. 87 Increased lending and rising house prices reinforced one another, with increased borrowing pushing up property prices which in turn contributed to increased borrowing, and so on. ...
The dominance of deposit money means commercial banks play a leading role in money creation. This chapter puts this situation in a historical context. The functioning of our financial monetary system and the role of banks have changed fundamentally over time. The chapter reveals that what we take for granted today was often far from self-evident yesterday. We focus on the Netherlands and discuss four periods in turn: (1) the ‘long nineteenth century’ up to the First World War, with an emphasis on the 1870−1914 period, (2) the interwar period (1918−1939), (3) the Bretton Woods period (1944−1973) and (4) the decades leading up to the latest financial crisis (1973−2008).
The literature has often presented European healthcare systems as being less exposed to the growing dependencies on global finance observed in other areas of social policy. This article explores the sources and dynamics of a regulatory path to healthcare systems’ financialization that challenges this depiction. Building on analogies with the case of pension policy, we show that the integration of the private health insurance sector into the European Union financial regulation framework has resulted in perceptible processes of financialization. Notably this manifested in the growing role of financial firms, in non-profit health insurers’ adoption of ‘financialized’ business practices and eventually in a noticeable change of these actors' positioning in domestic healthcare reform. After having discussed the theoretical implications, the article provides an empirical illustration of this argument by documenting the implementation of the Solvency II insurance directive by health insurers in France, and describes its more general consequences and implications beyond this case study.
This dissertation examines the politics of contemporary welfare provision in the United States through the lens of the social impact bond (SIB, also called “Pay for Success” (PFS)), a novel market-based policy tool that harnesses private dollars to fund local public programs. In a SIB agreement, the government borrows funds from private banks or philanthropies to pay for program implementation, and government borrowers repay the loan, with interest, only if the program achieves certain desired outcomes (e.g., a 10% reduction in recidivism). The SIB provides much-needed funding for resource-strapped governments, but it also infuses financial logics into processes of social service provision. SIBs ask local governments to meet the needs of vulnerable individuals, reduce social ills and save money on program costs as a result, and produce a program evaluation as evidence that said outcomes have been reached. In other words, SIBs ask governments not only to meet citizen needs but also to create capital in doing so, be it in terms of cost savings or knowledge gained. The rise of the SIB inspires three interrelated questions: What happens when financial logics organize activity within the social service sector? How do financial logics fare in processes of local service provision? And why do these logics fail to take hold fully in this space, even though they appear to find solid footing as organizing discourses in many other social domains? To answer these questions, I conducted a comparative case study of SIB projects in Cuyahoga County, Ohio; Massachusetts; and Washington, D.C. My data stems from 47 in-depth interviews with actors party to the SIB process, supplemented by public documents and records detailing the parameters of my three cases, the characteristics of other SIB projects, and the structure of the SIB field. The dissertation presents three broad findings. First, I argue that SIBs catalyzed the creativity and skill of local policymakers, who made adaptations to entrenched processes and responded nimbly to unexpected obstacles, first in applying the SIB model to their specific service provision contexts and later in pushing back against the financial logic of the SIB when it compromised their mandate to do no harm to the communities they served. Second, I demonstrate that the SIB movement is a rare case in which a specific financial logic moved into a space, failed to gain secure footing, and ultimately retreated. This occurred, I argue, because the range of hazards that arise in the implementation, measurement, and evaluation of social service interventions is exceedingly difficult to anticipate. Financial models hinge on successful risk management, and risk management is very hard in this setting. Third, I show that a rigid focus on social outcomes, like that which is built into the SIB model, masks meaningful differences in the work that goes into these projects: the politics of implementation, the variance in expertise and flexibility among actors within this space, and the difficulty of evaluating the efficacy of social interventions in a causally rigorous way. Taken together, these findings demonstrate that though the SIB failed as a financial tool, it succeeded as a political project. The movement’s trajectory demonstrates that novel tools of governance can spark creative problem solving among local political actors and disrupt institutionalized practices, setting into relief the power of political agents to embody, navigate, and recombine competing logics of action.
The rent cap (Mietendeckel) in Berlin was short-lived, but it constituted the first
serious attempt to restructure flows of income away from
capital towards the productive economy. This paper assesses
Berlin’s rental housing market through financialization theory.
Income effects for renters and effects for regional actors of
financialization are confronted to conceptualize the rent cap in
its potential to definancialize Berlin’s rental housing market.
Housing tenure has often been taken-for-granted as consisting of dichotomous tenure types of owning and renting. This article critiques the owning-renting dichotomy through the lens of housing finance. It critically engages with three housing research programs wherein the owning-renting dichotomy is deep-seated: (a) the bundle of rights thesis, (b) comparative housing and welfare research, and (c) the ideology of housing. For each of them, the article first provides a brief recapitulation of the literature. It then explicates how they are constrained by the owning-renting dichotomy and why abandoning this dichotomy is necessary to transcend their limitations. Based on this, the article reveals a dialectical relation between owning and renting - the binary-oppositional attributes of owning and renting can be resolved with the changing relation of the occupant to financial markets. The article further proposes to re-conceptualize housing tenure as a relation of the occupant to financial markets and discusses the implications for reframing housing studies.
Expanding financialisation of the economy and society represents a constitutive feature of the neoliberal regime. This process is also underway in various domains of state action, including the welfare state. This article uses a case study of financialisation of a cash transfer programme – the establishment of the Israeli ‘Saving for Every Child’ programme – to tackle two main questions: Which political constellations are likely to promote financialisation in social policy? And, what are the ramifications of financialisation for the politics of the welfare state? The study suggests that in a context of conflict between redistributive demands and opposition to the decommodifying effects of universal cash benefits, financialisation provides a political solution which satisfies the former while subordinating it to principles of commodifying social investment. The study further indicates that the financialisation of redistributive policies changes the politics of the welfare state by making financial market actors and considerations an integral part of welfare policy-making processes
Over the last decade, students of the welfare state have produced an impressive body of research on retrenchment, the dominant thrust of which is that remarkably few welfare states have experienced fundamental shifts. This article questions this now-conventional wisdom by reconsidering the post-1970s trajectory of the American welfare state, long considered the quintessential case of social policy stability. I demonstrate that although most programs have indeed resisted retrenchment, U.S. social policy has also offered increasingly incomplete risk protection in an era of dramatic social change. Although some of this disjuncture is inadvertent-an unintended consequence of the very political stickiness that has stymied retrenchment-I argue that the declining scope of risk protection also reflects deliberate and theoretically explicable strategies of reform adopted by welfare state opponents in the face of popular and change-resistant policies, a finding that has significant implications for the study of institutional change more broadly.
O ver the last decade, students of the welfare state have produced an impressive body of research on retrenchment, the dominant thrust of which is that remarkably few welfare states have experienced fundamental shifts. This article questions this now-conventional wisdom by reconsidering the post-1970s trajectory of the American welfare state, long considered the quintessential case of social policy stability. I demonstrate that although most programs have indeed resisted retrenchment, U.S. social policy has also offered increasingly incomplete risk protection in an era of dramatic social change. Although some of this disjuncture is inadvertent—an unintended consequence of the very political stickiness that has stymied retrenchment—I argue that the declining scope of risk protection also reflects deliberate and theoretically explicable strategies of reform adopted by welfare state opponents in the face of popular and change-resistant policies, a finding that has significant implications for the study of institutional change more broadly. H as the welfare state continued to provide the inclusive social protection that defined its goals and operations in the immediate decades after World War II? According to much received scholarly wisdom, the answer is yes. As Paul Pierson writes in one of the earliest and most influential assessments, "Economic, political, and social pressures have fos-tered an image of welfare states under siege. Yet if one turns from abstract discussions of social transformation to an examination of actual policy, it becomes diffi-cult to sustain the proposition that these strains have generated fundamental shifts" (Pierson 1996, 173). A wave of research, relying on both large-scale statistical modeling and detailed historical analysis, has largely ratified this evaluation (see, e.g., Bonoli, George, and Taylor-Gooby 2000; Esping-Andersen 1999; Huber and Stephens 2001; Pierson 1994, 2001; and Weaver 1998). In this now-conventional view, welfare states are under strain, cuts have occurred, but social policy frameworks remain secure, anchored by their enduring popular-ity, their powerful constituencies, and their centrality within the postwar order. This article challenges this conventional wisdom and presents an alternative interpretation based on a com-paratively informed historical analysis of the post-1970s trajectory of the American welfare state—long consid-ered the quintessential example of welfare state stabil-ity in the face of fiscal and political challenge (see, e.g., provided able research and editorial assistance; Nigar Nargis helped develop the index of income volatility; and David Jesuit, Vincent Mahler, and Timothy Smeeding kindly gave me unpublished comparative data on income redistribution. Finally, I thank the Peter Strauss Fund, Yale Institu-tion for Social and Policy Studies, and the William Milton Fund of the Harvard Medical School for financial support.
But he is bound to see a paradox (92) in the concomitant growth of public and private pensions. His conception of social rights as ensuring living standards independent of market forces (3) cannot make theoretical sense of the historical fact that
- Gösta Esping-Andersen
Esping-Andersen, Gösta, Three Worlds of Welfare Capitalism (Princeton: Princeton University Press, 1990) admits that much in his chapter 4 on state and market in pension regimes.
But he is bound to see a paradox (92) in the concomitant growth of public and private pensions. His conception of social rights as ensuring living standards independent of market
forces (3) cannot make theoretical sense of the historical fact that "[p]ublic policy was decisive in nourishing market expansion" in pensions (94).