Liberalization within Diversity: Welfare and Labour Market Reforms in Italy and the UK

Are advanced democracies converging on a liberalized economic model, revolving around increasing penetration of markets and the decline of egalitarian institutions? The literature has tended to polarize between proponents of convergence and scholars who emphasize of the resilience of the distinct models of welfare capitalism. This article argues that although there is no strong evidence of convergence, the distribution of income in advanced democracies is becoming more unequal, suggesting significant change in a liberalizing direction. The article develops this argument by charting changes to the political economy of labour in two large European democracies: Italy and the United Kingdom. Despite belonging to entirely distinct ‘families’ of welfare capitalism, they have both undergone extensive changes to their political economy in the past three decades. We find that Italy and the UK were very different political economies in the 1970s, and remain very different today, but they have both undertaken reforms which have weakened egalitarian institutions and led to dramatic increases in poverty and inequality. This suggests that a focus on the diversity of institutional legacies and the distinct reform paths that we observe in advanced democracies should not distract from the conclusion that marketfocused economic reforms in very different institutional contexts can still lead to the same outcome: the privatization of economic risk and increased income inequality