Welfare capitalism

Welfare capitalism

Welfare capitalism, started in the 19th century, refers either to the combination of a capitalist economic system with a welfare state or in a strictly American context to the practice of businesses providing welfare-like services to employees. Welfare capitalism in this second sense was centered in high wage industries (not in the industries characterized by low pay, high turnover, child labor, or dangerous working conditions.) Many companies started offering higher pay and non-monetary compensation such as health care, housing, and pensions, as well as employment bureaus, in-house training, sports teams and social clubs. In the United States it was pioneered by George F. Johnson and Henry B. Endicott, with high wages and subsidized housing. These coincided with state laws of the Progressive Era that outlawed child labour, imposed minimum wages and maximum hours; women received special protections and restrictions.

Two important goals, articulated by Ford with the $5 dollar daily pay rate, were to reduce turnover and build a long-term loyal labour force that would have higher productivity. The combination of high pay, high efficiency and cheap consumer goods was known as Fordism, and was widely discussed throughout the world.

Led by the rail roads and the largest industrial corporations such as the Pullman Car Company, Standard Oil, International Harvester, Ford Motor Company and United States Steel, business provided numerous services to its employees, including paid vacations, medical benefits, pensions, recreation facilities and the like. (Brandes 1976) George Pullman built the most famous company town (Pullman, Chicago) as a paternalistic experiment - one ruined by the 1894 Pullman strike. For other company housing projects see (Crawford 1996)

By contrast Europe built government operated welfare systems i.e. welfare capitalism in the sense the term is generally understood. In the late 19th and early 20th centuries, Germany and Britain created "safety nets" for the citizens, including public welfare and unemployment insurance.

Western Europe, Scandinavia, Canada and Australasia are regions noted for their welfare state provisions, though other countries have socialized medicine and other elements of the welfare state as well. The United States, despite its Medicare, Medicaid and Social Security provisions, is not generally considered to have enough of a social safety net to properly be called a welfare-state; businesses provide more of these services.

Esping-Andersen categorised three different types of welfare states in the 1990 book 'The Three Worlds of Welfare Capitalism'. Though increasingly criticised, these classifications remain the most commonly used in distinguishing types of modern welfare states, and offer a solid starting point in such analysis.

The three different types are the 'Social Democratic' Model, as exemplified by the Scandinavian countries and particularly Sweden; the 'Liberal' Model, often related to the USA, Canada, Australia and increasingly the United Kingdom; and thirdly, the 'Conservative' Model, which is indicative of Germany, as well as France, Austria and Italy.

Recently in the US there has been a trend away from its form of welfare capitalism, as corporations have reduced the portion of compensation paid with health care, and shifted from defined benefit pensions to employee-funded defined contribution plans such as 401(k)s. Fact|date=February 2007

It should be noted that the original definition of welfare capitalism, as used by the 19th century German economist, Gustav Schmoller, called for government to provide for the welfare of workers and the public, via social legislation, among other means. (And not to rely on business to do this.) While Schmoller's work is little available in English, his influence can be seen in the modern European welfare states.


* Stuart D. Brandes, "American Welfare Capitalism, 1880-1940" (University of Chicago Press, 1976)
* Margaret Crawford. "Building the Workingman's Paradise: The Design of American Company Towns" (1996)
* John Dixon and Robert P. Scheurell, eds. "The State of Social Welfare: The Twentieth Century in Cross-National Review" Praeger. 2002.
* Bernhard Ebbinghaus and Philip Manow; "Comparing Welfare Capitalism: Social Policy and Political Economy in Europe, Japan and the USA" Routledge, 2001
* Derek Fraser. "The Evolution of the British Welfare State: A History of the British Welfare State" (2003)
* Alexander Hicks. "Social Democracy & Welfare Capitalism" (1999)
* Sanford M. Jacoby; "Modern Manors: Welfare Capitalism since the New Deal" Princeton University Press, 1997
* Stein Kuhnle, ed, "Survival of the European Welfare State" Routledge 2000.
* M. Ramesh; "Welfare Capitalism in East Asia: Social Policy in the Tiger Economies" in "Journal of Contemporary Asia", Vol. 35, 2005
* Andrea Tone. "The Business of Benevolence: Industrial Paternalism in Progressive America" (1997)
* Walter I. Trattner. "From Poor Law to Welfare State: A History of Social Welfare in America" (1994)

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