Business and Welfare State Development: Why Did Employers Accept Social Reforms?

Abstract

In recent years, employer-centered explanations of welfare state development have begun to challenge conventional labor-centered and state-centered explanations. These new explanations suggest that sector-specific business interests and cross-class alliances propelled the adoption and expansion of social programs (the business interests thesis). This article presents a novel explanation of differences in business support for welfare state expansion based on a diachronic analysis of the German case and shadow case studies of Sweden and the United States. The article suggests that when looking at changes in employers’ positions across time rather than across sectors, political constraints turn out to be the central factor explaining variation in employers’ support for social reforms (the political accommodation thesis). The article identifies two goals of business intervention in welfare state development: pacification and containment. In the case of pacification, business interests propel social policy expansion; in the case of containment, they constrain it. Business chooses pacification when revolutionary forces challenge capitalism and political stabilization thus becomes a priority. Business chooses containment when reformist forces appear likely to succeed in expanding social protection and no revolutionary challenge exists. The article shows that changes over time in the type of political challenges that business interests confront best explain the variation in business support for labor-friendly social reforms.