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Welfare Capitalism: Definition & History

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  • 0:01 Definition of Welfare…
  • 0:51 Early Welfare Capitalism
  • 2:56 Welfare Capitalism &…
  • 5:24 Lesson Summary
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Lesson Transcript
Instructor: Matthew Helmer

Matt is an upcoming Ph.D. graduate and archaeologist. He has taught Anthropology, Geography, and Art History at the university level.

Welfare capitalism is an important but controversial aspect of today's economic politics. In this lesson, you'll learn what welfare capitalism is, how it has operated in the U.S. and elsewhere, as well as arguments for and against the practice.

Definition of Welfare Capitalism

How do we provide worker's rights at the same time as we try to develop economically? There are no clear answers, and balances can be hard to find. Welfare and capitalism are usually two words that don't go together, and both words come loaded with meanings. Welfare capitalism, one of the possible solutions to worker's rights and economic development, is a leading idea. At a basic level, welfare capitalism is a business-favored policy that believes the private sector can provide social welfare programs more effectively than the federal government. Welfare capitalism is usually seen as the opposite of the welfare state. The welfare state involves heavy government regulation and labor unions providing social welfare policies.

Early Welfare Capitalism

As with modern capitalism, welfare capitalism began in the United Kingdom during the late 19th century at the height of the Industrial Revolution. Private sector employers needed programs that increased worker production through social welfare incentives. For example, in England company towns developed where employers provided housing and other benefits for their workers. Welfare capitalism was also the birth of employee pensions that encouraged workers to stay loyal to a company through retirement benefits.

World War II was a landmark event for welfare policies. As soldiers returned from years of brutal war, they demanded social welfare programs as compensation for their service. In Western Europe, social welfare programs became mandated at the state level, which included heavy labor unions, socialized medicine, and government pensions. These policies made the welfare state stronger in Europe as opposed to welfare capitalism, and the welfare state continues to dominate European economic policies today.

In the United States, however, welfare policies were more divided between the public and private sector, and they have often shifted as conservative and liberal politics battle back and forth. Here, the New Deal policies of President Franklin Deleanor Roosevelt enacted government social welfare policies, the most significant of which was social security. New Deal politics strengthened labor unions, which led to push backs by corporations for the ability to control the rights of workers.

The greatest weapon companies had to combat the welfare state and unions was the Red Scare. Conservative lawmakers and large businesses were able to dismantle unions by portraying them as communist groups who would undermine freedom, democracy, and open markets. As an alternative, companies promoted merit-based promotions, private retirement funds, and healthcare to boost production and worker welfare. The battle between government and union worker programs versus corporate welfare programs led to a lot of protest.

Welfare Capitalism and Globalization

After the Cold War, capitalism quickly spread as the dominant economic policy, which now controls global markets. As a result, different forms of welfare capitalism and welfare states have developed around the world. In Europe, for instance, many countries still pride themselves on strong unions and federally mandated social welfare programs. In these areas, the welfare state is seen as a positive aspect of their national identities. With the recent economic recession of 2008, however, conservative European lawmakers and businesses have pushed for decreased federal welfare programs to help with increasing debts and to boost economic development.

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