Welfare Capitalism in Post-Industrial Times: Trilemma or Power Over Rents?

Abstract

ABSTRACTThe structure of ‘post-industrial’ economies is widely held to be problematic for welfare capitalism, because of inherent limits to productivity growth in services compared to manufacturing. The so-called post-industrial trilemma is suggested to allow only two of relative earnings equality, high levels of employment and fiscal balance, and has resulted in the widespread policy belief that greater earnings inequality and welfare state retrenchment are unavoidable. This article challenges the micro foundations of this understanding, that the production of economic value is technologically determined by the physical properties inherent in goods and services. In contrast, we argue theoretically, and demonstrate empirically, that production, allocation and distribution are contingent processes better conceived in terms of ‘power over rents’ with associated externalities between sectors. Our analysis suggests that the post-industrial trilemma thesis may have unduly distracted research from the potential for redistributive politics to achieve sustainable levels of productivity growth, fiscal balance and higher levels of earnings equality.