Business Support and the Costs of Welfare State Development

This article offers an alternative explanation for instances of business support for the postwar expansion of the welfare state. It argues that such instances did not result from the expectation that businesses would be able to derive economic benefits from this. Similar to both traditional labor-oriented accounts and recent critics of the business-interests scholarship, it contends that businesses mainly developed their position in strategic response to demands for increased protection against labor market risks from workers. Yet it differs from those writings which have argued that their willingness to support, and ability to oppose, these demands depended primarily on the relative strength of labor and other pro-welfare actors. Instead, it argues that both depended foremost on the nature of these demands, in particular the extent to which labor unions were able to assuage business fears that their welfare demands would be costly to businesses. It shows that this in turn depended crucially on organized labor’s willingness to accept that improvements to the generosity of social insurance programs contributed to the social wage, and were therefore largely to be financed by workers themselves. Based on an analysis of the major postwar welfare initiatives put forward in the Netherlands and Britain, the article further shows that there was a great deal of variation in labor’s willingness to do so. It identifies various factors that mattered to this, and explains how this affected both business attitudes and the political efficacy of business groups in matters relating to welfare state development.