Whether or not we are living in the end times, it is clear that now more than ever the very core of our economic system is being questioned. The global protest movement, fast gaining momentum in Europe following the Euro-crisis, is putting neo-liberal ideals and the dynamics and incentives of capitalism as an economic system at the centre of their critique, claiming, among other things that the system produces inequalities and unfair societies. Also, in the face of the global economic downturn and the prolonged negative effects of the Euro-crisis, it is clear that the already stretched welfare states of European countries will face increasing challenges. In light of this, now is an opportune moment to consider the advance of the European welfare state (if there is such a thing), which has increasingly become aligned with the ideals of neo-liberal economics. Do the issues raised in the protests also apply to the more regulated variety of competition prevalent in many European welfare states?

The role of the EU in this is questionable; while some consider it decisive under a “European consumer choice agenda” others consider the impact of the EU to be modest at best. In any case, market incentives, through individual choice and reimbursement systems inducing competition between providers, are thought to bring efficiency and increased quality to public services as diverse as health, education and employment services – all of which fits neatly with the EU’s promotion of free competition. For some, particularly in the UK, choice and competition is seen as promoting equity since the policies offer choice to everyone, rather than just wealthy individuals capable of operating in the private sector.

Increasingly, interest among academics has centred on the evaluation of the effects of choice policies, mainly in the UK, but also across Europe. There is some evidence for efficiency and quality improvements but hardly any (at least reliable) for equity effects. At issue here is the imperfect information available in many public services – something that has particularly strong implications for equity. It is well established that access to information and the capacity to process it is better among more educated individuals. Compared to other social groups, the well-educated tend to be high-income earners, more capable of “gaming the system” and better at gaining access to the services they desire. Yet surveys suggest that lower social groups actually demand more choice than do higher ones. The implications for the equity of welfare provision are unclear, and in the end we need to question whether a market solution is likely to lead to an equitable outcome, or whether certain groups are likely to monopolise the benefits.

On the other hand, there is a key difference between private markets and competition in public services: the level of regulation and political accountability. It is clear that the structure of the financial system incentivises behaviour has ramifications for the global economy, and many argue that lack of regulation is to blame. Still, at the centre of this argument is the question of whether something that enters into an imperfect system, without a primary objective to be equitable, can create the correct incentives for an allocation that will result in an equitable outcome. This, the protest movement argues, is the key problem with the capitalist economic system. So, with this in mind, might we want to apply the same logic to the reform of European welfare states? If the incentives of the market provide a poor structure for the development of fair societies, should we believe they will do the trick for public services?