Hay and Wincott have produced a wide-ranging and insightful contribution to the analysis of European welfare states. They demonstrate the dynamic and complex relationship between social policies and economic structures that characterise European welfare capitalism. They interrogate and challenge the conventional narrative of the European welfare state in several areas, in particular they challenge the idea and timing of a ‘golden age’ of welfare state development from the 1945 to mid-1970s, the taken for granted premises on globalisation and its impact and the idea of the welfare state as a damper on competitiveness and an impediment to economic performance. They effectively deploy an extensive array of empirical data in this reassessment and present a compelling historically grounded comparative analysis illustrating the social and economic contribution of a well-structured welfare state.

Following their opening historical chapter focussing on the common history of the welfare state across Europe, they present a wide-ranging analysis of the varieties of European Welfare Capitalism which interrogates the basis of welfare regime analysis as developed by Esping-Andersen (Reference Esping-Andersen1990), in particular its empirical foundation, while acknowledging that he had not made claims for the existence of ‘pure types’ (p. 58). Hay and Wincott favour analysis on two dimensions: conservative–liberal and egalitarian, resulting in four clusters. Based on data from Scruggs and Pontusson (Reference Scruggs and Pontussan2008) they present clusters for the 1980s and 2000s. While there are some differences from the Esping-Andersen welfare regimes, there are similarities and clearly a more convincing empirical foundation. They argue that these clusters emerged relatively late, from the 1970s onwards, and that recent retrenchment has increased their distinctiveness.

The chapter on ‘Globalisation, Europeanisation and the Welfare State’ is particularly useful in pointing to the importance of an exacting definition of globalisation, which all too frequently is lacking when that term is used – openness of the economy is often equated with globalisation. Hay and Wincott adopt and adapt the definition of globalisation proposed by Held et al. (Reference Held, McGrew, Goldblatt and Perraton1999: 16) as ‘a process (or set of processes) that embodies a transformation in the spatial organisation of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction and power’ (emphasis added by Hay and Wincott, p. 80).This allows for a clear differentiation between globalisation and regionalisation with the latter being more significant for European integration as measured by trade, foreign direct investment, finance and labour migration. Regional economic integration is also a better explanation of European welfare state transformation and augurs better for sustainability than does globalisation. Even if globalisation and the pressure of market competition were operating as conventionally implied, the impact on the welfare state depends on the sources of competitiveness on which countries rely. If competing, regionally or globally, on the basis of cost alone, the welfare state is likely to be a burden on competitiveness, but if competing more on the basis of quality and innovation of the goods traded, the welfare state may be a source of competitiveness. This point is developed in chapter 4, which unpacks the complex relationship between the welfare state, economic efficiency and competitiveness. Examination of an extensive range of evidence does not support the view that the welfare state has a ‘competitiveness-corrosive impact’, which underlies much of the argument for retrenchment

Chapter 5 analyses European integration in the context of the conventional wisdom of the EU as a site for the imposition of disciplinary neo-liberalism and the undermining of EU welfare states. This is not dismissed by Hay and Wincott, but in considering enlargement, the European Social Model, which is acknowledged to be exceedingly weak, and European Monetary Union (EMU), they present a complex story of challenges and advances by economic and socially oriented interests and suggest ‘it may be premature’ to regard the EU as ‘having a settled economic or social regime’ (p. 152).

Convergence is the subject of chapter 6, where its often imprecise usage is noted and a lengthy exposition of its qualitative and quantitative use is presented. Using the term to refer to the reduced dispersion of a number of cases with respect to a specific variable, Hay and Wincottt argue that ‘the identification of a common trajectory of change (such as neoliberalisation or retrenchment) is neither a sufficient nor even a necessary condition of convergence’ (p. 192). Based on welfare effort and measures of welfare generosity, they conclude that there was convergence amongst European welfare regimes up to 1985 and divergence in the period since 1985. This fits with the argument that 1985 not mid-1970s was the year of transition from expansion to retrenchment. Their argument, which is consistent with some convergence studies, is that catch-up by laggards on leaders leads to convergence whereas retrenchment tends to cause divergence – likely because less developed welfare states are more vulnerable to neo-liberal prescriptions. Significantly, the pattern of increasing divergence of clusters is accompanied by convergence within clusters.

In addressing the pressures faced due to the global financial crisis, Hay and Wincott point to the fact that while all European economies face challenges, different welfare states face different prospects which may reinforce the existing patterns; in particular, they point to a bleaker picture for less generous welfare states. As has been widely acknowledged for some countries – those impacted earliest and for whom the crisis was driven by internal problems, reflected in high house price inflation and personal debt – the prospects for growth and welfare state development look bleak. Other EU states, including Germany and the Nordic countries, which experienced contagion rather than internal financial problems, have better prospects. Austerity is not entrenched in these economies so they are likely to be able to rebalance their public finances without drastic public sector cuts, provided world demand holds up. If this scenario holds, Hay and Wincott conclude that divergence of welfare clusters within the EU will continue. In conclusion, their analysis provides strong support for the view that political context and past policy choices always matter and this holds true in good times and bad, in growth and retrenchment.

This book is an important contribution to welfare state analysis. It brings together a wide range of analyses and presents the big picture without losing sight of the relevant details of individual countries or policies but weaves them into a convincing narrative. It is relevant to a wide range of audiences, particularly those interested in the European Union and EU welfare states but also those interested in comparative social policy analysis.