The Politics of Containment: How Business Interests Shaped the German Welfare State

The expansion of social protection in advanced capitalist societies in the 20th century is often attributed to the rise of new economic insecurities created by the expansion of markets or to political mobilization by the labor movement and leftist parties. However, newer research focuses on the contributions of employers and other business interest groups instead. Yet, scholars differ greatly in their assessment of the impact of business on the adoption and expansion of social programs.

In this presentation I will address two questions using historical evidence from Germany: (1) How much influence did business interest groups have on the adoption and expansion of social programs and (2) what were their attitudes toward these programs?

I will argue that business attitudes toward social protection are ambivalent. From an economic perspective, business perceives social protection often as negative, because social protection erodes work incentives (the perverse incentives argument). From a political perspective, however, business sometimes sees protective social policies as necessary to contain other, more threatening, political challenges (the politics of containment). Thus, while an economic logic makes business interest groups the natural opponents of social protection, a political logic sometimes compels them to back some forms of social protection. I will draw on my recent book about the history of the German welfare state to illustrate this argument.

Thomas Paster is a political scientist and works on welfare state development, labor relations, and the role of business in politics. He is the author of The Role of Business in the Development of the Welfare State and Labor Markets in Germany (Routledge). His relevant articles include Why did Austrian Business Oppose Welfare Cuts? Comparative Political Studies, 2014, Vol. 47(7); Business and Welfare State Development: Why Did Employers Accept Social Reforms? World Politics, 2013, Vol. 65(3); and Do German Employers Support Board-level Codetermination? Socio-Economic Review, 2012, Vol. 10(3). Currently he is a research fellow at the CEU Institute for Advanced Study (IAS). Before joining the IAS, he was a senior research fellow at the Max Planck Institute for the Study of Societies in Cologne, Germany. He received his PhD in Social and Political Sciences from the European University Institute (EUI) in Florence, Italy, and was awarded the 2010 Erwin Wenzl Prize for his PhD thesis.