There has recently been a groundswell of opinion among economists that the scale of the Welfare State is one of the elements responsible for slower economic growth and that a retrenchment in state spending on social security is necessary if growth is to be revived in Europe. The Welfare State is indicted with the charge of being a barrier to economic growth.

Two widely discussed documents are illustrative of this view. The Swedish Economics Commission, chaired by Assar Lindbeck and including distinguished economists from other Nordic countries, has referred to ‘the crisis of the Swedish model’, arguing that it has

The social security system is one area which they seek to reform. In order that ‘the social-security (or social insurance) system should not overburden the economy through distorted incentives or large deficits’ (Lindbeck et al., 1993, p. 238), they say that ‘cuts in benefit levels constitute an important step in this direction’ (Lindbeck et al., 1993, p. 238) leading to a ‘mandatory benefit level, which is low enough for large groups to find it attractive to acquire additional insurance by themselves’ (Lindbeck et al, 1994, p. 106.