Welfare capitalism

Welfare capitalism is capitalism that ostensibly seeks to advance social welfare[1] and/or the
practice of businesses providing welfare services to their employees. Welfare capitalism in this
second sense, or industrial paternalism, was centered on industries that employed skilled labor
and peaked in the mid-20th century.

Today, welfare capitalism is most often associated with the models of capitalism found in Central
Mainland and Northern Europe, such as the Nordic model, social market economy and Rhine
capitalism. In some cases welfare capitalism exists within a mixed economy, but welfare states can
and do exist independently of policies common to mixed economies such as state interventionism
and extensive regulation.[2]

Contents
Language
History
Cooperatives and model villages
Welfare as a business model
Modern welfare capitalism
In Europe
In the United States
Anti-unionism
Efficacy
See also
Notes
References

Language
"Welfare capitalism" or "welfare corporatism" is somewhat neutral language for what, in other
contexts, might be framed as "industrial paternalism", "industrial village", "company town",
"representative plan", "industrial betterment", or "company union".[3]

History
In the 19th century, some companies—mostly manufacturers—began offering new benefits for their
employees. This began in Britain in the early 19th century and also occurred in other European
countries, including France and Germany. These companies sponsored sports teams, established
social clubs, and provided educational and cultural activities for workers. Some offered housing as
well. Welfare corporatism in the United States developed during the intense industrial development
of 1880 to 1900 which was marked by labor disputes and strikes, many violent.[4]

Cooperatives and model villages

One of the first attempts at offering philanthropic welfare to

workers was made at the New Lanark mills in Scotland by the
social reformer Robert Owen. He became manager and part
owner of the mills in 1810, and encouraged by his success in the
management of cotton mills in Manchester (see also Quarry
Bank Mill), he hoped to conduct New Lanark on higher
principles and focus less on commercial profit. The general
condition of the people was very unsatisfactory. Many of the Robert Owen was a utopian socialist
of the early 19th century, who
workers were steeped in theft and drunkenness, and other vices
introduced one of the first private
were common; education and sanitation were neglected and
systems of philanthropic welfare for
most families lived in one room. The respectable country people
his workers at the cotton mills of New
refused to submit to the long hours and demoralising drudgery of Lanark. He embarked on a scheme
the mills. Many employers also operated the truck system, in New Harmony, Indiana to create a
whereby payment to the workers was made in part or totally by model cooperative, called the New
tokens. These tokens had no value outside the mill owner's Moral World, (pictured). Owenites
"truck shop". The owners were able to supply shoddy goods to fired bricks to build it, but
the truck shop and charge top prices. A series of "Truck Acts" construction never took place.
(1831–1887) eventually stopped this abuse, by making it an
offence not to pay employees in common currency.[5]

Owen opened a store where the people could buy goods of sound quality at little more than wholesale
cost, and he placed the sale of alcohol under strict supervision. He sold quality goods and passed on
the savings from the bulk purchase of goods to the workers. These principles became the basis for the
cooperative stores in Britain that continue to operate today. Owen's schemes involved considerable
expense, which displeased his partners. Tired of the restrictions on his actions, Owen bought them
out in 1813. New Lanark soon became celebrated throughout Europe, with many leading royals,
statesmen and reformers visiting the mills. They were astonished to find a clean, healthy industrial
environment with a content, vibrant workforce and a prosperous, viable business venture all rolled
into one. Owen’s philosophy was contrary to contemporary thinking, but he was able to demonstrate
that it was not necessary for an industrial enterprise to treat its workers badly to be profitable. Owen
was able to show visitors the village’s excellent housing and amenities, and the accounts showing the
profitability of the mills.[6]

Owen and the French socialist Henri de Saint-Simon were the fathers of the utopian socialist
movement; they believed that the ills of industrial work relations could be removed by the
establishment of small cooperative communities. Boarding houses were built near the factories for
the workers' accommodation. These so-called model villages were envisioned as a self-contained
community for the factory workers. Although the villages were located close to industrial sites, they
were generally physically separated from them and generally consisted of relatively high quality
housing, with integrated community amenities and attractive physical environments.

The first such villages were built in the late 18th century, and they proliferated in England in the early
19th century with the establishment of Trowse, Norfolk in 1805 and Blaise Hamlet, Bristol in 1811. In
America, boarding houses were built for textile workers in Lowell, Massachusetts in the 1820s.[7] The
motive behind these offerings was paternalistic—owners were providing for workers in ways they felt
was good for them. These programs did not address the problems of long work hours, unsafe
conditions, and employment insecurity that plagued industrial workers during that period, however.
Indeed, employers who provided housing in company towns (communities established by employers
where stores and housing were run by companies) often faced resentment from workers who chafed
at the control owners had over their housing and commercial opportunities. A noted example was
Pullman, Illinois—a site of a strike that destroyed the town in 1894. During these years, disputes
between employers and workers often turned violent and led to government intervention.

Welfare as a business model

In the early years of the 20th century, however, business leaders

began embracing a different approach.[8] The Cadbury family of
philanthropists and business entrepreneurs set up the model
village at Bournville, England in 1879 for their chocolate making
factory. Loyal and hard-working workers were treated with great
respect and relatively high wages and good working conditions;
Cadbury pioneered pension schemes, joint works committees
and a full staff medical service. By 1900, the estate included 313
The Cadbury factory at Bournville,
'Arts and Crafts' cottages and houses; traditional in design but
c.1903, where workers worked in
with large gardens and modern interiors, they were designed by
conditions that were very good for
the resident architect William Alexander Harvey.
the time
The Cadburys were also concerned with the health and fitness of
their workforce, incorporating park and recreation areas into the
Bournville village plans and encouraging swimming, walking and indeed all forms of outdoor
sports.[9] In the early 1920s, extensive football and hockey pitches were opened together with a
grassed running track. Rowheath Pavilion served as the clubhouse and changing rooms for the acres
of sports playing fields, several bowling greens, a fishing lake and an outdoor swimming lido, a
natural mineral spring forming the source for the lido's healthy waters. The whole area was
specifically for the benefit of the Cadbury workers and their families with no charges for the use of
any of the sporting facilities by Cadbury employees or their families.

Port Sunlight in Wirral, England was built by the Lever Brothers to accommodate workers in its soap
factory in 1888. By 1914, the model village could house a population of 3,500. The garden village had
allotments and public buildings including the Lady Lever Art Gallery, a cottage hospital, schools, a
concert hall, open air swimming pool, church, and a temperance hotel. Lever introduced welfare
schemes, and provided for the education and entertainment of his workforce, encouraging recreation
and organisations which promoted art, literature, science or music.

Lever's aims were "to socialise and Christianise business relations and get back to that close family
brotherhood that existed in the good old days of hand labour." He claimed that Port Sunlight was an
exercise in profit sharing, but rather than share profits directly, he invested them in the village. He
said, "It would not do you much good if you send it down your throats in the form of bottles of
whisky, bags of sweets, or fat geese at Christmas. On the other hand, if you leave the money with me,
I shall use it to provide for you everything that makes life pleasant—nice houses, comfortable homes,
and healthy recreation."[10]

In America in the early 20th century, businessmen like George F. Johnson and Henry B. Endicott
began to seek new relations with their labor by offering the workers wage incentives and other
benefits. The point was to
increase productivity by
creating good will with
employees. When Henry
Ford introduced his $5-a-
day pay rate in 1914 (when
most workers made $11 a
week), his goal was to reduce
turnover and build a long-
term loyal labor force that
An example of the workers' housing would have higher
at Port Sunlight, built by the Lever productivity. [11] Turnover in
Brothers in 1888 manufacturing plants in the
U.S. from 1910 to 1919
averaged 100%. Wage The Seaside Institute, designed by
incentives and internal promotion opportunities were intended Warren R. Briggs in 1887 for the
to encourage good attendance and loyalty. [12] This would reduce benefit of the female employees of
turnover and improve productivity. The combination of high pay, the Warner Brothers Corset
Company
high efficiency and cheap consumer goods was known as
Fordism, and was widely discussed throughout the world.

Led by the railroads and the largest industrial corporations such as the Pullman Car Company,
Standard Oil, International Harvester, Ford Motor Company and United States Steel, businesses
provided numerous services to its employees, including paid vacations, medical benefits, pensions,
recreational facilities, sex education and the like. The railroads, in order to provide places for
itinerant trainmen to rest, strongly supported YMCA hotels, and built railroad YMCAs. The Pullman
Car Company built an entire model town, Pullman, Illinois.[13] The Seaside Institute is an example of
a social club built for the particular benefit of women workers.[8] Most of these programs proliferated
after World War I—in the 1920s.[14]

The economic upheaval of the Great Depression in the 1930s brought many of these programs to a
halt. Employers cut cultural activities and stopped building recreational facilities as they struggled to
stay solvent. It wasn't until after World War II that many of these programs reappeared—and
expanded to include more blue-collar workers. Since this time, programs like on-site child care and
substance abuse treatment have waxed and waned in use/popularity, but other welfare capitalism
components remain. Indeed, in the U.S., the health care system is largely built around employer-
sponsored plans.

In the late 19th and early 20th centuries, Germany and Britain created "safety nets" for their citizens,
including public welfare and unemployment insurance. These government-operated welfare systems
is the sense in which the term 'welfare capitalism' is generally understood today.
Modern welfare capitalism
The 19th century German economist, Gustav von Schmoller, defined welfare capitalism as
government provision for the welfare of workers and the public via social legislation. Western
Europe, Scandinavia, Canada and Australasia are regions noted for their welfare state provisions,
though other countries have publicly financed universal healthcare and other elements of the welfare
state as well.

Esping-Andersen categorised three different traditions of welfare

provision in his 1990 book The Three Worlds of Welfare
Capitalism; social democracy, Christian democracy
(conservatism) and liberalism. 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.

In Europe A sample Medicare card

European welfare capitalism is typically endorsed by Christian

democrats and social democrats. In contrast to social welfare
provisions found in other industrialized countries (especially
countries with the Anglo-Saxon model of capitalism), European
welfare states provide universal services that benefit all citizens
(social democratic welfare state) as opposed to a minimalist
model that only caters to the needs of the poor.

In Northern European countries, welfare capitalism is often

combined with social corporatism and national-level collective
bargaining arrangements aimed at balancing the power between The Volkswagen factory in Wolfsburg
labor and business. The most prominent example of this system
is the Nordic model, which features free and open markets with
limited regulation, high concentrations of private ownership in industry, and tax-funded universal
welfare benefits for all citizens.

An alternative model of welfare exists in Continental European countries, known as the social market
economy or German model, which includes a greater role for government interventionism into the
macro-economy but features a less generous welfare state than is found in the Nordic countries.

In France, the welfare state exists alongside a dirigiste mixed economy.

In the United States

Welfare capitalism in the United States refers to industrial relations policies of large, usually non-
unionised, companies that have developed internal welfare systems for their employees.[15] Welfare
capitalism first developed in the United States in the 1880s and gained prominence in the 1920s.[16]
Promoted by business leaders during a period marked by widespread economic insecurity, social
reform activism, and labor unrest, it was based on the idea that Americans should look not to the
government or to labor unions but to the workplace benefits provided by private-sector employers for
protection against the fluctuations of the market economy.[17] Companies employed these types of
welfare policies to encourage worker loyalty, productivity and dedication. Owners feared government
intrusion in the Progressive Era, and labor uprisings from 1917 to 1919—including strikes against
"benevolent" employers—showed the limits of paternalistic efforts.[18] For owners, the corporation
was the most responsible social institution and it was better suited, in their minds, to promoting the
welfare of employees than government.[19] Welfare capitalism was their way of heading off
radicalism and regulation then.

The benefits offered by welfare capitalist employers were often inconsistent and varied widely from
firm to firm. They included minimal benefits such as cafeteria plans, company-sponsored sports
teams, lunchrooms and water fountains in plants, and company newsletters/magazines—as well as
more extensive plans providing retirement benefits, health care, and employee profit-sharing.[20]
Examples of companies that have practiced welfare capitalism include Kodak, Sears, and IBM, with
the main elements of the employment system in these companies including permanent employment,
internal labor markets, extensive security and fringe benefits, and sophisticated communications and
employee involvement.[15]

Anti-unionism
Welfare capitalism was also used as a way to resist government regulation of markets, independent
labor union organizing, and the emergence of a welfare state. Welfare capitalists went to great
lengths to quash independent trade union organizing, strikes, and other expressions of labor
collectivism—through a combination of violent suppression, worker sanctions, and benefits in
exchange for loyalty.[17] Also, employee stock-ownership programs meant to tie workers to the
success of companies (and accordingly to management). Workers would then be actual partners with
owners—and capitalists themselves. Owners intended these programs to ward off the threat of
"Bolshevism" and undermine the appeal of unions.[21]

The least popular of the welfare capitalism programs were the company unions created to stave off
labor activism. By offering employees a say in company policies and practices and a means for
appealing disputes internally, employers hoped to reduce the lure of unions. They dubbed these
employee representation plans "industrial democracy."[22]

Efficacy
In the end, welfare capitalism programs benefited white-collar workers far more than those on the
factory floor in the early 20th century. The average annual bonus payouts at U.S. Steel Corporation
from 1929 to 1931 were approximately $2,500,000; however, in 1929, $1,623,753 of that went to the
president of the company.[23][24] Real wages for unskilled and low-skilled workers grew little in the
1920s, while long hours in unsafe conditions continued to be the norm. Further, employment
instability due to layoffs remained a reality of work life. Welfare capitalism programs rarely worked
as intended, company unions only reinforced that authority of management over the terms of
employment.[25]
Wage incentives (merit raises and bonuses) often led to a speed-up in production for factory lines.[26]
As much as these programs meant to encourage loyalty to the company, this effort was often
undermined by continued layoffs and frustrations with working conditions. Employees soured on
employee representation plans and cultural activities, but they were eager for opportunities to
improve their pay with good work and attendance and to gain benefits like medical care. These
programs gave workers new expectations for their employers. They were often disappointed in the
execution of them but supported their aims.[27] The post-World War II era saw an expansion of these
programs for all workers, and today, these benefits remain part of employment relations in many
countries. Recently, however, there has been a trend away from this 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.

See also
Big Society
Chavismo
Christian democracy
Company store
Company town
Criticisms of welfare
Economic interventionism
German model
Humanistic capitalism
Involuntary unemployment
Nordic model
Rhine capitalism
Social capital
Social democracy
Social market economy
Social safety net
Social welfare
Socialism of the 21st century
Types of capitalism
Welfare state
Workplace democracy

Notes
1. "Welfare capitalism – Definition" (http://www.merriam-webster.com/dictionary/welfare%20capitalis
m). Merriam-webster.com. Merriam-Webster Dictionary. Retrieved 2014-04-20.
2. "The surprising ingredients of Swedish success – free markets and social cohesion" (http://www.i
ea.org.uk/sites/default/files/publications/files/Sweden%20Paper.pdf) (PDF). International
Economic Association. June 25, 2013. Retrieved January 15, 2014.
3. Stuart D. Brandes (1984). American Welfare Corporatism, 1880–1940. The University of Chicago
 3. Stuart D. Brandes (1984). American Welfare Corporatism, 1880–1940. The University of Chicago
Press. ISBN 0226071227. Preface.
4. Stuart D. Brandes (1976). American Welfare Corporatism, 1880–1940 (Paperback edition
1984 ed.). University of Chicago Press. pp. 1–7. ISBN 0226071227.
5. Robert Owen: Pioneer of Social Reforms (https://books.google.com/books?id=nuspAAAAYAAJ&l
pg=PA43&ots=x2fIRmQvqi&dq=%22a%20heterogeneous%20collection%20of%20radicals%22&
pg=PA43#v=onepage&q=%22a%20heterogeneous%20collection%20of%20radicals%22&f=false)
by Joseph Clayton, 1908, A.C. Fifield, London
6. A. L. Morton. The Life and Ideas of Robert Owen (London, Lawrence & Wishart, 1962)
7. Barbara Tucker (1991). Eric Foner and John Garraty (ed.). Reader's Companion to American
History. Boston: Houghton Mifflin Co. p. 1068.
8. Nicholas Paine Gilman (1899). A Dividend to Labor: A Study of Employers' Welfare Institutions (ht
tps://archive.org/details/adividendtolabo00gilmgoog). Houghton, Mifflin and Company. pp. 66 (htt
ps://archive.org/details/adividendtolabo00gilmgoog/page/n74)–67, 124–25, 177–78 262–64.
9. Tolman, W. H. (July 1901). "A "Trust" For Social Betterment" (https://books.google.com/books?id
=IF6tNZnhO7wC&pg=PA924). The World's Work. New York, NY: Doubleday, Page & Co. II (3):
924–28. Retrieved 29 April 2012.
10. William Hesketh Lever: Port Sunlight and Port Fishlight (http://www.dta.org.uk/resources/history/h
istorycontentsummary/industrial/), Development Trust Association, retrieved 17 November 2007
11. John Steele Gordon (1991). Eric Foner and John Garraty (ed.). Reader's Companion to
American History. Boston: Houghton Mifflin Co. p. 410.
12. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 170 (https://archive.org/details/makingnewdealind0
000cohe/page/170).
13. Stuart D. Brandes (1976). American Welfare Corporatism, 1880–1940 (Paperback edition
1984 ed.). The University of Chicago Press. pp. 10–19. ISBN 0226071227.
14. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 164 (https://archive.org/details/makingnewdealind0
000cohe/page/164).
15. Oxford Reference Online
16. Tone, Andrea. The Business of Benevolence: Industrial Paternalism in Progressive America.
Ithaca, N.Y.: Cornell University Press, 1997
17. O'Connor, Alice. "Welfare Capitalism." Dictionary of American History. The Gale Group Inc. 2003.
Encyclopedia.com. 3 Oct. 2009
18. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. pp. 160 (https://archive.org/details/makingnewdealind
0000cohe/page/160)–61.
19. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 181 (https://archive.org/details/makingnewdealind0
000cohe/page/181).
20. Gordon, Colin. New Deals: Business, Labor, and Politics in America, 1920–1935. Cambridge,
U.K.: Cambridge University Press, 1994.
21. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 175 (https://archive.org/details/makingnewdealind0
000cohe/page/175).
22. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 171 (https://archive.org/details/makingnewdealind0
000cohe/page/171).
23. "Peace in Bethlehem". The Literary Digest: 46. August 1, 1931.
24. Mickelsen, Gunnar (September 2, 1934). "The Kohler Myth Dies". The Nation. 139: 187–88.
25. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. pp. 186 (https://archive.org/details/makingnewdealind
0000cohe/page/186)–87.
26. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. pp. 192 (https://archive.org/details/makingnewdealind
0000cohe/page/192)–93.
27. Cohen, Lizabeth (1990). Making a New Deal (https://archive.org/details/makingnewdealind0000c
ohe). Boston: Cambridge University Press. p. 206 (https://archive.org/details/makingnewdealind0
000cohe/page/206).

References
Arts, Wil and Gelissen John; "Three Worlds of Welfare Capitalism or More? A State-of-the-art
report"; Journal of European Social Policy, vol. 12 (2), pp. 137–58 (2002).
Brandes, Stuart D. American Welfare Capitalism, 1880–1940 (University of Chicago Press, 1976)
Crawford, Margaret. Building the Workingman's Paradise: The Design of American Company
Towns (1996)
Dixon, John, and Robert P. Scheurell, eds. The State of Social Welfare: The Twentieth Century in
Cross-National Review Praeger. 2002.
Ebbinghaus, Bernhard, and Philip Manow; Comparing Welfare Capitalism: Social Policy and
Political Economy in Europe, Japan and the USA Routledge, 2001
Esping-Andersen, Gosta; Politics against markets, Princeton, NJ: Princeton University Press
(1985).
Esping-Andersen, Gosta; "The Three Worlds of Welfare Capitalism", Princeton NJ: Princeton
University Press (1990).
Ferragina, Emanuele and Seeleib-Kaiser, Martin; Welfare Regime Debate: Past, Present,
Futures?; Policy & Politics, Vol. 39 (4), pp. 583–611 (2011). (http://www.ingentaconnect.com/cont
ent/tpp/pap/2011/00000039/00000004/art00010)
Fraser, Derek. The Evolution of the British Welfare State: A History of the British Welfare State
(2003)
Gilman, Nicholas Paine (1899). A Dividend to Labor: A Study of Employers' Welfare Institutions (h
ttps://archive.org/details/adividendtolabo00gilmgoog). Houghton, Mifflin and Company.
Hicks, Alexander. Social Democracy & Welfare Capitalism (1999)
Jacoby, Sanford M. Modern Manors: Welfare Capitalism since the New Deal (1997)
Korpi, Walter; "The Democratic Class Struggle"; London: Routledge (1983).
O'Connor, Alice. "Welfare Capitalism." Dictionary of American History. The Gale Group Inc. 2003.
Encyclopedia.com. 3 Oct. 2009
M. Ramesh; "Welfare Capitalism in East Asia: Social Policy in the Tiger Economies" in Journal of
Contemporary Asia, Vol. 35, 2005
Stein Kuhnle, ed, Survival of the European Welfare State Routledge 2000.
Stephens, John D. "The Transition from Capitalism to Socialism"; Urbana, IL: University of Illinois
 Press (1979).
Tone, Andrea. The Business of Benevolence: Industrial Paternalism in Progressive America
(1997)
Tratter, Walter I. From Poor Law to Welfare State: A History of Social Welfare in America (1994)
Van Kesbergen "Social Capitalism"; London: Routledge (1995).

Retrieved from "https://en.wikipedia.org/w/index.php?title=Welfare_capitalism&oldid=1026415804"

This page was last edited on 2 June 2021, at 04:25 (UTC).

Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. By using this site,
you agree to the Terms of Use and Privacy Policy. Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc.,
a non-profit organization.