Building Political Consensus and Distributing Resources: A Trade-Off or a Compatible Choice?

In recent years, the rationale of most welfare programs has been the subject of intense political debate, not only in the United States but also in European countries (e.g., Germany, Sweden, and France) with well-established welfare systems. New global economic challenges and grim demographic trends present political leaders and workers with the difficult task of balancing government budgets while maintaining elaborate welfare programs. The prevailing opinion is that welfare has a negative impact on economic growth because of the disincentives it creates for the working population. Nevertheless, social scientists have often overlooked the political ramifications of welfare spending and its impacts on a country's income distribution. In this article, we argue that the level of welfare spending is fundamentally a political decision and, therefore, conditional on the sociopolitical and demographic structures prevailing within a country.