The previous chapter argued that political parties use markets as tools to reshape welfare structures in ways favorable to their long-run ideological and electoral interests. This claim raises a prior set of questions – why do policymakers use markets in the first place? Why have different political parties, particularly those on the Left, introduced markets? This chapter answers these questions by placing markets within the changing strategic setting for parties in the 1980s.

The rise of the market agenda in social services was by no means obvious. Through much of the post-war period there was broad political consensus that markets were inappropriate in much of the public sector (Lowery 1999). Public involvement in these areas arose because they were prone to market failure, creating uncertainty over the operation of markets. Although some argue that in some contexts citizens demanded neo-liberal policies (Prasad, 2006), when it came to the public services, citizens rarely demanded, and often resisted, markets. Yet, beginning in the 1980s, policymakers began to introduce competition into, and later privatize, public utilities and state-owned enterprises, raising nearly one trillion dollars globally by the late 1990s (Megginson and Netter 2001). Reformers in New Zealand brought this agenda to services like health and education, and by the late 1980s, it had diffused far beyond New Zealand: to the more market-oriented UK, the seemingly inhospitable terrain of Sweden's expansive public service sector, and the historically private, but not competitively managed, Dutch welfare state.