Growing popularity of welfare policies after the Second World War but opposition to them continued by pro-market economists, such as Milton Friedman, Robert Lucas, and economists at the Chicago School. Others strongly supported redistributive policies, including Amartya Sen. There was important work by John Rawls, a philosopher. He introduced two popular redistributive principles. Rawls’ “second principle” justified some income inequality if it made the market more efficient, and if it helped those at the bottom of the income distribution by creating good jobs for them. Still, redistribution of income remained controversial and continued to be strongly opposed by some. Skepticism vis-a-vis a large government role remained strong among some groups, and it would lead to market fundamentalism in the 1980s. There was debate as to how well the market was performing. Some harmony between the market and government role was approached only rarely, and for short periods.

The concern in this chapter is the “principle” of solidarity in the context of “state” action at EU level. The role of the “state” in promoting solidarity is twofold: first to support and encourage solidarity through autonomous institutions (trade unions) and processes (collective bargaining, collective action, and social dialogue); and second to initiate and develop through “state” institutions its own solidarity measures and programs. The concern has also been to explore and examine that “principle” of solidarity in the context of proposals for renewing the “social contract,” highlighting different conceptions of the social contract, but focusing mainly on that proposed by the ETUC. It is argued, however, that there are both constitutional and institutional problems in relation to EU support for a social contract of this kind, these problems relating to an over-rigid economically liberal constitution and a weak political program in the form of the Social Pillar, both of which predate COVID-19, and both of which seem ill-equipped to meet the challenges presented by the pandemic.

The role of government has evolved significantly over the past 150 years. In the late nineteenth century, only about 10% of GDP passed through the hands of government. This was consistent with the prevailing view that government should only be minimally involved in the economy. By 1960, public spending had increased to 25–30% of GDP as governments focussed on delivering their core tasks: rules of the game, public goods and services and basic safety nets. Private choice still predominated and safeguarded both economic and financial freedom. The Keynesian ‘revolution’ from 1960 to about 1980 saw government grow to 50% and 60% of GDP in some countries and to over 40% on average. Over the next two decades, the classical ‘counter-revolution’ propagated smaller states. Many countries began fiscal reform and rules-based policy-making gained prominence. Spending growth came to a halt, and in some cases reversed. The years since 2000 have seen a revival of Keynesian thinking. Countries engaged in expansionary policies before the global financial crisis and experienced new record highs in public expenditure and debt thereafter. Another wave of reforms brought spending down in some crisis countries in the 2010s. However, public spending ratios on average rose well above the level of 2000.