The Welfare State as Crisis Manager? Comparing Social Policy Responses to Three Major Economic Crises

This paper aims to describe and explain different welfare state responses to three major economic crises: the Oil Shocks of the 1970s, the worldwide recession of the 1990s and the current Financial Crisis. Policy developments in three small open economies – Sweden, the Netherlands and Australia – are compared in order to show why the welfare state is sometimes actively used as a crisis manager in the aftermath of a crisis while, at other times, it is mainly seen as a fiscal burden. We develop a typology of policy responses to crisis and assess three working hypotheses. Through process tracing and systematic comparison we find, first; that political parties shape crisis responses (albeit mediated by political institutions); second, that the size of the existing welfare state affects policy responses and, third, that crises do not lead to policy innovation in a way that could be expected against the background of the historical institutionalist and ideational literature on policy change