With market forces. The labour is also commodified ensuring

With many countries in Europe having different comparative
advantages (and so economies), demographics and historical culture, it is only
natural that these countries would have different social systems such as
welfare and the role of relationships in markets. European social models are
attempts to simplify and categorise the differences and similarities between
different European social models, as can be seen in Esping-Andersen’s ‘The
Three Worlds of Welfare Capitalism’ and later Hall and Soskice’s ‘Varieties of
Capitalism’.

Published in 1990 and based on data, Esping-Andersen’s Three
Worlds model tries to classify contemporary Western countries based on 2 key
features; the level of Commodification of the labour market, and the level of
social stratification within the country. Esping-Andersen ultimately classifies
the countries into 3 different groups. Liberal, Corporatist and Social
Democratic. Countries such as the US, Canada and Australia fits into the
Liberal regime, where the welfare of the population is heavily determined by
the market forces. The labour is also commodified ensuring maximum efficiency,
however there are limited redistribution in the form of means tested assistance
and a modest level of benefits. Countries such as France and Germany fit in the
Corporatist regime, which is based on the principle of decentralisation, and where
the role of family is emphasised. Finally, the Scandinavian countries fall into
the Social democratic regime. This is where market provision is crowded out by
the state; labour is decommodified and there is high redistribution, ensuring
high equality.

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Where Esping-Andersen focussed more on labour markets and
state provision in his social model, Hall and Soskice’s ‘Varieties of
Capitalism’ attempts to classify countries by more market-based comparisons,
focussing on differences in firms. It clearly sets out 2 distinct types of
economies; liberal and coordinated. In liberal economies markets are
competitive, and the forces of supply and demand allocate resources within the
economy. This implies labour markets are kept flexible, with relatively weak
employment protection and low benefits. Countries such as Italy, Spain and
France fall into this category. This contrasts to Coordinated economies, where
non-market relationships are seen as more important. This means long term trade
is more driven by networking and strategic interaction, which may not result in
market outcomes. Social policies under coordinated economies normally result in
higher redistribution and lower inequality. Germany and the Nordic countries
seem to fall into this category.

Due to the wide variety of economies of Europe, one would
expect that having more classifications within a model would be more parallel
to real life. Thus, Esping-Andersen’s model (with 3 welfare regimes) seem to
surpass Hall & Soskice’s model (with only 2 classifications). With that
being said, it must be noted that both models have the same flaw due to the
limited number of classifications.

Esping-Andersen himself recognised that countries can be
predominantly belonging in one type of welfare regime, however they may not be
free of other welfare regime’s characteristics. This brings to the question of
actually being able to classify countries within one of the welfare regimes, as
boundaries between regimes can be arbitrary, i.e. at what point does a country
stop being liberal and starts being a corporatist regime? For example, countries
in Southern Europe such as Spain and Portugal seem to not fit in any regime in
the Three Worlds model, due to the larger role of informal institutions and families.
This flaw also applies to Hall and Soskice’s model; the Mediterranean countries
seem to be ambiguous and not fit clearly in either economy.

Nevertheless, although having more classifications may
reduce the difficulty of being able to classify countries in either model, this
may complicate the models themselves, which may defeat the purpose of a model,
which is to simplify real world concepts.

Due to the ever-changing nature of countries, countries’
data may also change, restricting the validity of existing models. A major
criticism of the Three Worlds model is that it is based on outdated data (from
over 30 years ago), which means Hall & Soskice’s model may be more up to
date, and so more convincing. This idea is explored in Ebbinghaus’ ‘Comparing
Welfare State Regimes’, where he explored the idea of how the fall of communism
shortly occurred before the publication of the Three Worlds paper, causing the
CEE countries to undergo a period of transition into more liberal, free market
capitalist states, limiting the use of the Three World model in classifying
these countries due to their unstable situation. The Varieties of Capitalism
model is made over a decade after this black swan event, therefore is more
suitable in classifying contemporary countries.

To quote Esping-Andersen, “welfare states cluster, but there
is no pure case”. Although sharing a lot of similarities, the differences in
countries are so large meaning that although Hall and Soskice’s model is more
contemporary, and therefore more convincing than Esping-Andersen’s model, neither
model is fully convincing at classifying all the contemporary western states.
We must also recognise that the European social structure is not a static
structure, but rather dynamic and changes over time, therefore as time passes, existing
social models become less relevant. This idea is further developed by Andre
Sapir’s ‘Globalization and the Reform of European Social Models’ in 2006, where
he claimed that due to the wide range of models in real life, inefficient and
unsustainable models needs to be reformed. Therefore, whilst Hall and Soskice
and Esping-Andersen’s models are good at providing a general idea of the social
structure in Europe, neither model is fully convincing at classifying groups of
countries based on social and economical policies due to the complexity and
inherent differences in countries over time. For a social model to account for
every single economic and social policy of the country in a dynamic time-frame,
the social model would need to be so complicated that it defeats the whole
purpose of creating a social model.