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1 Analyzing the role of business in welfare state development
Dennie Oude Nijhuis
The involvement of business in the development of public policy has long been an area of particular interest ā and concern ā to scholars. Since the mid-nineteenth century at the least, when Karl Marx and Friedrich Engels famously declared that āt[he] power of the modern state is merely a device for administering the common affairs of the whole bourgeois classā (Marx and Engels [1848]1971: 486), scholars have warned of the disproportionate influence of business over the development of public policy. At the same time, they have been engaged in an at times fierce debate over whether and to what extent this power has presented an obstacle to attempts to advance the common good, and whether business power can also bolster the introduction and expansion of progressive policies. This volume engages with this debate by assessing the role of business in the development of public social policies that serve to meet human needs for security, education, health, work and general wellbeing ā a subset of public policy that is of particular importance to the āorganization and stratification of modern economiesā (Esping-Andersen 1990: 159). In other words, it aims to assess the relationship between business interest formation and the development of the modern welfare state.
After a long period in which scholarly attention had tilted towards labor and its political allies to explain variation in welfare outcomes, the role of business has now returned to the forefront of academic analysis on the welfare state. This resurgance in scholarly interest has been fueled by an intense debate over the nature and magnitude of business influence over the development of public social policies. While most scholars agree that business interest groups have played an important role in the development of modern institutions of social insurance and other social programs, there continues to be much disagreement over the extent to which and how they affected the development of these programs exactly. The key source of contention in this debate, and the main topic of inquiry of this volume, is the claim that business groups have played a much more important and benevolent role in the expansion of the welfare state than the existing scholarship on welfare reform has realized, and often displayed a genuine interest in the introduction and expansion of public welfare programs.
By challenging traditional class-based understandings of the welfare state and illustrating that businesses do not constitute a homogeneous group with similar interests and views, the proponents of this claim have greatly advanced our understanding of business preference formation and the policies that unite and divide the business community (Swenson 2002; Mares 2003; Martin and Swank 2012). As a result, we now also have a much clearer understanding of the mechanisms that structure welfare reform. The emphasis of this new business-oriented literature on the many ways in which social policies may āimprove the operation of marketsā (Hall and Soskice 2001: 50) has also resonated widely among scholars. In recent years, they have consequently put much effort into investigating how particular welfare models may be connected to specific production regimes (Ebbinghaus and Manow 2001; Iversen 2005; Schrƶder 2013). These writings have in turn inspired new research avenues in areas ranging from skill formation to electoral representation (Cusack, Iversen and Soskice 2007; Dobbins and Busemeyer 2015).
At the same time, however, there continues to be much disagreement over one of the key theoretical claims of this literature, which is that public social policies provide direct and tangible benefits to businesses that have been sufficiently important to them to warrant active business support for their introduction, expansion and preservation. While skeptics of this claim do not dispute that certain social policies may facilitate the operation of markets or otherwise provide competitive benefits to particular groups of firms, they have raised doubts as to whether this has resulted in powerful business support for their development. They have done so by questioning to what extent businesses appreciated these benefits and by pointing out that the costs of social policies to businesses are generally so severe that business groups are likely to oppose their development even when these also provide certain advantages to their members (Hacker and Pierson 2002; Korpi 2006; Paster 2012).
As will be illustrated below, disagreement also persists over the degree of business involvement in progressive (i.e., expansive or solidaristic) welfare reform and the extent to which such reform depends on business support in order to be successful. Whereas the new business-oriented literature views business groups as central actors in welfare reform and argues that the fundamentals of durable welfare states include broad class agreement on and consequently business support for their basic structures and principles (Swenson 1991, 2002), others continue to attribute a more essential role to organized labor and other ātraditionalā pro-welfare actors. According to many of these skeptics, major instances of welfare reform are generally the result of shifts in the balance of power between organized labor and business groups rather than an outcome of cross-class alliances that are based on shared interests between important segments of labor and capital (Hacker and Pierson 2002; Leimgruber 2008; Emmenegger 2014).
This volume investigates the role of business in the development of policies that serve to promote human needs for security, education, health, work and general wellbeing in a large number of advanced industrial societies since the late nineteenth century. Its concern is with both business preference formation and the influence of business organization on the development of social programs. While various historically oriented studies have empirically investigated the role of business in welfare state development in recent years, their findings on the views and impact of business groups on welfare reform are often either inconclusive or remain contested. Whereas some studies have, for instance, attributed instances of business support for the introduction and expansion of particular social programs to a genuine interest in these programs (Swenson 2002; Martin and Swank 2012), others have argued that such instances often reflected a strategic response to political challenges (Hacker and Pierson 2002; Broockman 2012; Paster 2013).
One of the volumeās main empirical goals is consequently to explain to what extent and for what reasons businesses in advanced industrial societies have supported the introduction and expansion of social policies since the late nineteenth century. As various studies have noted the possibility that business groups may also gradually become more appreciative of (particular features of) social programs over time through a process of institutional adaption and preference change (Wood 2001; Thelen 2004; Hall 2007; Hall and Thelen 2009; Van den Berg 2014), the concern will not only be with the introduction of such reform; of importance is also whether businesses eventually came to support policies that they initially may have opposed, or even came to defend these policies against retrenchment and dismantling. This longitudinal view fits in well with the volumeās main theoretical concern, which is to assess how business preferences develop over time and across countries, and what role business organization, the political context in which these business groups operate, and the exact nature of welfare demands play in structuring business attitudes towards progressive welfare reform.
A major problem with establishing business preferences on welfare reform, and an important reason for the continuation of strong scholarly disagreement over the nature of these preferences, is that business representativesā claims about their preferences do not necessarily reflect their genuine views. After all, and like many other political actors, businesses have a strong incentive to strategically misrepresent their preferences. Business opponents of welfare state expansion may for instance feign support in order to gain access to negotiations and shape the details of policy reform when they realize that this reform has solid parliamentary support (Hacker and Pierson 2002; Broockman 2012; Grumbach 2015). Alternatively, they may overstate their opposition to reform in order to pressure parliament into making concessions (Swenson 2018). Finally, business proponents may feign opposition to attractive reform out of reluctance to stir the ire of other businessmen, because reform already looks fairly certain and little can be gained from expressing support, or because they do not want to embolden progressive reformers to go further than what is suitable to them (Martin 2000; Swenson 2004, 2018).
The problem of how to identify actorsā true preferences when they may be acting strategically is a difficult one that has led to much scholarly discussion over how to distinguish between āgenuineā (which are sometimes also called āpre-strategicā or āfirst-orderā) preferences and āstrategicā (which are sometimes also called āsecond-orderā) preferences (Mares 2003; Korpi 2006). One of the most promising ways of doing so is by analyzing and comparing businessā stated preferences and actions across different strategic contexts. After all, in order to determine businessā true interests and preferences one also has to look at its ability to shape events, which is another major concern of this volume. As a result of its comparative-historical approach, this volume is able to investigate the impact of two types of differences in strategic context. The first of these are changes in the context in which businesses operate over time. The second are differences in strategic context among different countries.
Of course, business preferences can sometimes also be observed directly ā especially when scholars have access to the minutes of meetings, internal memos, and other internal documents of major business groups. Where possible, the contributions to this volume are consequently based on a thorough analysis of internal sources of the main business groups in the countries covered by them. In addition, many of the contributions to this volume are based on an analysis of internal sources from other actors and platforms, including government agencies, corporatist advisory bodies, and labor union organizations. Moreover, while we acknowledge that individual firms have at times held considerable sway over the political process in some of the countries investigated in this volume, we emphasize that in the area of welfare politics, the involvement of business has mainly taken the form of organized business group interference. During most of the period investigated in this volume, and as we will see, nationally organized employer associations were the most influential representatives of business in this field. As a result, the terms āemployerā and ābusinessā groups will often be used interchangeably.
This introductory chapter is divided into four sections. As the study of businessā involvement in the development of public policy has such a long pedigree, the following section first provides an overview of the scholarly debate on this involvement, which includes an outline of the extent to which a consensus has emerged on the nature and extent of business influence over social policy development in recent years. In two separate sections, we then turn to the main factors that affect these two aspects of business influence over social policy development, and present the main insights and findings that link the various contributions to this volume. The final section explains how these aspects will be explored in this volume, and again points to different chapters in this book.
1.1. Business interests and the development of the modern welfare state
As is the case with all research areas that have long received much scholarly attention, the literature on the role of business in the development of public policy is quite diverse in terms of its aims, research methods, and theoretical questions. At the risk of simplifying matters, it is, however, possible to divide this literature into two main subfields, with one mainly focusing on business power and the other primarily concentrating on business preferences (Paster 2015a). The first strand of this literature is primarily interested in the capacity of business groups to affect political choices and policy outcomes, and has put much effort into analyzing the sources and mechanisms of business power and influence over government. The second strand primarily focuses on the interests and policy preferences of individual firms and business groups. Over the years, the interest of scholars in these two aspects of business involvement in the development of public policy has fluctuated wildly.
Up to recent decades, the academic debate over the relationship between business and government mostly focused on the extent of its influence over the development of public policy. This debate was probably most intense during the 1970s and early 1980s, when scholars like Charles Lindblom came to question pluralist views on the distribution of power in society. According to these dissenters, business occupies a uniquely privileged position in society and is able to influence policy outcomes to a degree that other social groups are unable to do as a result of the structural dependence of government on business investment and the related need to maintain business confidence (Lindblom 1977; Block 1977; Offe and Wiesenthal 1980; Cohen and Rogers 1983; Elkin 1985). They consequently concluded that public policy was to a large extent an extension of, or at least could not deviate greatly, from business interests and that public policies often addressed deficiencies in the market, supporting the interests of businesses. While this structural dependence thesis has never gone unchallenged, it continues to be quite influential up to the present day. Indeed, the contemporary literature continues to pay much attention to the structural sources of business power (Bernhagen 2008; Culpepper 2010).
In conjunction with Marxist accounts that long viewed the state as an instrument of capitalist interests, the structural dependence thesis also inspired various business-centered explanations of welfare state development. According to these explanations, social insurance programs and other worker-friendly policies were introduced by the state in an attempt to stabilize and legitimize capitalism, and often followed a distinct regulatory logic. As such, they were crucially supported by dominant sections of the business community. While these studies did not necessarily reject the importance of other actors, they emphasized the role of business in the development of these policies, and argued that they often benefited important segments of the business community (OāConnor 1973; Kolko 1977; Quadagno 1984; Levine 1988). As is the case with the more recent business-oriented literature on the welfare state, other studies proved skeptical of the claims of this literature for both empirical and theoretical reasons (Skocpol and Amenta 1985; Jenkin and Brents 1989; Hooks 1990; Amentha and Parikh 1991).
This early debate on the role of business in the development of the welfare state was never truly settled. Part of the reason for this lay in the growing popularity of what became known as the Power Resources Approach (PRA) on welfare state development, which through its emphasis on the importance of working class mobilization for welfare state outcomes tilted the scholarly focus away from business towards left parties and labor unions. The adherents of this approach paid little attention to business preference formation and simply assumed that the costs, distributional consequences, and decommodification effects (i.e., their ability to reduce the market dependency of workers) of social programs resulted in business hostility to their introduction and expansion (Esping-Andersen 1990). They consequently attributed welfare state advances to increases in the organizational strength of labor, or to exogenous political shocks such as wars and depressions that weakened the capacity of business and its bourgeois allies to oppose progressive welfare reform (Korpi 1983, 2006; Hicks 1999; Huber and Stephens 2001).
The PRAās preoccupation with distributive conflict between labor and capital (Shalev 1983), its tendency to view workers and businesses as homogeneous groups with similar interests and views (Korpi 2006), and its portrayal of the welfare state as a product of āpolitics against marketsā (Esping-Andersen 1985) have all been the subject of much criticism since the late 1990s ā including from a bourgeoning new scholarship that focuses on the role of business in welfare state development. This new business-centered scholarship has rightly pointed out that the assumption of business hostility to welfare state expansion has largely remained untested (Mares 2003). In addition, it has put forward a much larger, more complex, and more far-reaching set of motive...
