Pathways to Neoliberalism: The institutional logic of a welfare state reform

Babb and Fourcade used the term “pragmatic” to refer to the adoption of neoliberal policy tools as practical solutions to economic problems. This chapter shows that the pragmatic path to neoliberalism can have a tactical dimension. Neoliberal rhetoric and practices may be applied by specific state agencies as a means to gain institutional power and autonomy over other state agencies. The study is based on detailed process-tracing of a social insurance financing reform initiated by Israel’s Ministry of Finance which virtually eliminated employer contributions to social insurance. This chapter shows how intrastate conflicts of interest were central in motivating a neoliberal reform, as well as in driving changes in the institutional architecture which later played an indispensable role in paving the way to the neoliberal welfare state.