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Power Resources and Employer-Centered Approaches in Explanations of Welfare States and Varieties of Capitalism: Protagonists, Consenters, and Antagonists

  • Walter Korpi (a1)
Abstract

The power resources approach, underlining the relevance of socioeconomic class and partisan politics in distributive conflict within capitalist economies, is challenged by employer-centered approaches claiming employers and cross-class alliances to have been crucial in advancing the development of welfare states and varieties of capitalism. Theoretically and empirically these claims are problematic. In welfare state expansion, employers have often been antagonists, under specific conditions consenters, but very rarely protagonists. Well-developed welfare states and coordinated market economies have emerged in countries with strong left parties in long-term cabinet participation or in countries with state corporatist institutional traditions and confessional parties in intensive competition with left parties.

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1 Kerr, Clark, Dunlop, John, Harbison, Frederich, and Myers, Charles, Industrialism and Industrial Man (Cambridge: Harvard University Press, 1960).

2 PRA'S theoretical background was outlined in Korpi, Walter, “Conflict, Power and Relative Deprivation,” American Political Science Review 68 (December 1974); and idem, “Power Resources Approach vs. Action and Conflict,” Sociological Theory 3, no. 2 (1985). Macrolevel empirical applications are discussed in Korpi, Walter, The Working Class in Welfare Capitalism (London: Routledge & Kegan Paul, 1978); Stephens, John D., The Transition from Capitalism to Socialism (London: Macmillan, 1979); Korpi, Walter, The Democratic Class Struggle (London: Routledge and Kegan Paul, 1983); Myles, John, Old Age in the Welfare State (Boston: Little Brown, 1984); Esping-Andersen, Gesta, Politics against Markets (Princeton: Princeton University Press, 1985); idem, The Three Worlds of Welfare Capitalism (Cambridge, U.K.: Polity Press, 1990); Palme, Joakim, Pension Rights in Welfare Capitalism (Stockholm: Stockholm University, 1990); Kangas, Olli, The Politics of Social Rights (Stockholm: Stockholm University, 1991).

3 Marshall, Thomas H., Citizenship and Social Class and Other Essays (Cambridge: Cambridge University Press, 1950).

4 Swenson, Peter, “Bringing Capital Back In, or Social Democracy Reconsidered: Employer Power, Cross-Class Alliances, and Centralization of Industrial Relations in Denmark and Sweden,” World Politics 43 (July 1991); idem, Capitalists against Markets. The Making of Labor Markets and Welfare States in the United States and Sweden (New York: Oxford University Press, 2002).

5 Hall, Peter A. and Soskice, David, eds., Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford: Oxford University Press, 2001); Margarita Estevez-Abe, Torben Iversen, and David Soskice, “Social Protection and the Formation of Skills: A Reinterpretation of the Welfare State,” in Hall and Soskice, Varieties of Capitalism; Peter A. Hall and Daniel W. Gingerich, “Varieties of Capitalism and Institutional Complementarities in the Macroeconomy: An Empirical Analysis” (Paper presented at the annual meeting of the American Political Science Association, San Francisco, 2001); Soskice, David, “Reinterpreting Corporatism and Explaining Unemployment: Coordinated and Non-co-ordinated Market Economies,” in Brunetta, R. and Dell'Aringa, C., eds., Labour Relations and Economic Performance (London: Macmillan., 1990); Mares, Isabela, The Politics of Social Risk: Business and Welfare State Development (Cambridge: Cambridge University Press, 2003); Iversen, Torben, Capitalism, Democracy, and Welfare (Cambridge: Cambridge University Press, 2005).

6 Hall and Soskice (fn. 5), 6.

7 Estevez-Abe, Iversen, and Soskice (fn. 5), 181.

8 Ibid., 146.

9 Hall and Soskice (fn. 5), 2.

10 Iversen (fn. 5), chap. 1.

11 For an early statement on the assumption of primarily positive-sum conflicts between employers and employees in the power resources approach, cf. for example Korpi (fn. 2,1978), 83. Negative-sum conflict is exemplified by strikes and lockouts; zero-sum conflict may appear, for example, in the absence of productivity growth.

12 Power resources refer to capabilities of actors to reward or to punish other actors.

13 Power relations between employers and employees are of course also affected by factors outside the employment relationship, factors such as business cycles, trade regulations, and economic policies.

14 In this context we must of course keep in mind the problems for collective action once outlined by Olson, Mancur, The Logic of Collective Action (Cambridge: Harvard University Press, 1965).

15 Iversen (fn. 5), 8.

16 Goldthorpe, John H., On Sociology: Numbers, Narratives, and the Integration of Research and Theory (Oxford: Oxford University Press, 2000); Erikson, Robert and Goldthorpe, John H., The Constant Flux (Oxford: Clarendon Press, 1992). It should be noted that a number of subcategories are distinguished within these three very broad categories.

17 I owe the “logic of the situation” term to Goldthorpe (fn. 16), who points to its origin in works of Karl Popper.

18 Bounded rationality assumes that actors are satisfying rather than maximizing, have limited information and information-processing capability, and may also consider nonmaterial values.

19 The terms employers and employees are here used as analytic rather than empirically descriptive categories. As noted below, such categories are internally relatively heterogeneous; the assumption here is that within-category variance is lower than variance between categories.

20 Swenson (fn. 4, 2002) is thus wrong in ascribing the power-resources approach an “equivalence premise,” according to which playing out conflicts of interest between employers and employees will be similar in all countries and at all times (pp. 7–8).

21 For a discussion, see Korpi, Walter, “Contentious Institutions: An Augmented Rational-Action Analysis of the Origins and Path Dependency of Welfare State Institutions in Western Countries,” Rationality and Society 13, no. 2 (2001).

22 On early corporatist thinking, cf. Durkheim, Emile, The Division of Labor in Society (Glencoe, Ill.: Free Press, [1902] 1964); Bowen, Ralph H., German Theories of the Corporative State (New York: Whittelsey House, 1947); Messner, Johannes, Die Soziale Frage in Blickfeld der Irrwege von Gestern, die Sozialkämpfe von Heute, die Weltanschaungen von Morgen (The social question in perspective of yesterday's wrong tracks, today's social struggles and tomorrow's world views) (Innsbruck: Tyrolia, 1964); Kersbergen, Kees van, Social Capitalism: A Study of Christian Democracy and the Welfare State (New York: Routledge, 1995). To avoid misunderstanding I here refer to this strand of thought as state corporatism.

23 Thelen, Kathleen, How Institutions Evolve: The PoliticalEconomy of Skills in Germany, Britain, the United States, and Japan (Cambridge: Cambridge University Press, 2004), 43.

24 In several countries the founding of confessional parties was also motivated by their role in conflicts between the Catholic Church and the state over control over education.

25 Cf. Walter Korpi, “Changing Class Structures and the Origins of Welfare States: The Breakthrough of Social Insurance, 1860–1940” (Paper presented at the ESPAnet conference on European Social Policy, University of Oxford, 2004). In some European countries the creation of confessional parties was also motivated as a defense of churches in conflicts with the state for control over education.

26 Mares (fn. 5) writes that the PRA “is premised on a zero-sum conflict between capital and labor” (p. 5); and Swenson (fn. 4,1991) writes that it assumes changes to occur “to the overall benefit of one at the expense of the other” (p. 526).

27 Korpi (fn. 2,1983), 50; also Korpi (fn. 2, 1978), 83.

28 Iversen (fn. 5), 13, italics in original.

29 Ibid., 24

30 Ibid., 18 and 13.

31 Ibid., 12.

32 For example, Korpi, Walter and Palme, Joakim, “The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries,” American Sociological Review 63 (October 1998); idem, “New Politics and Class Politics in the Context of Austerity and Globalization: Welfare State Regress in 18 Countries, 1975–1995,” American Political Science Review 97 (August 2003).

33 Iversen (fn. 5), 112.

34 Ibid., chap. 3.

35 Ibid., 163.

36 Class voting is debated, for example, in Evans, Geoffrey, The End of Class Politics? Class Voting in a Comparative Context (Oxford: Oxford University Press, 1999).

37 For example, Svallfors, Stefan, “Worlds of Welfare and Attitudes to Redistribution: A Comparison of Eight Western Nations,” European Sociological Review 13 (1996); idem, “Welfare Regimes and Welfare Opinions: A Comparison of Six Western Countries,” Social Indicators Research 64, no. 3 (2003).

38 For similar observations, cf. Hacker, Jacob S. and Pierson, Paul. “Business Power and Social Policy: Employers and the Formation of the American Welfare State,” Politics & Society 30, no. 2 (2002); idem, “Varieties of Capitalist Interests and Capitalist Power: A Response to Swenson,” Studies in American Political Development 18 (Fall 2004); Skocpol, Theda and Amenta, Edwin, “States and Social Policies,” Annual Review of Sociology 12 (1986).

39 In formulating policy proposals, protagonists are also of course likely to consider anticipated reactions from others parties.

40 Mares (fn. 5); Swenson (fn. 4,2002).

41 Mares (fn. 5), 251.

42 Ibid., 3.

43 Ibid., 259, italics added. Mares identifies one exception to this conclusion, that is, employers' support for disability insurance in Germany in the 1880s. As discussed below, work accident insurance was the branch of insurance most easily accepted by employers.

44 Ibid., 128.

45 Ibid., 128–29.

46 Korpi, Walter, “Un État-Providence Contesté et Fragmenté,” Revue Française de Science Politique 45, no. 4 (1995); this fact has also been independently noted by Shalev, Michael, “The Politics of Elective Affinity,” in Ebbinghaus, Bernhard and Manow, Philip, eds., Varieties of Welfare Capitalism (London: Routledge, 1991).

47 In this context Mares includes firm-based programs initiated by employers, as indicators of their positive interest in social reform. However such programs are parts of firms'wage and personnel management policies and do not constitute social citizenship rights.

48 Mares (fn. 5), 251.

49 Ibid., 249–50.

50 In France employers instead stuck with the voluntary Ghent program, which up to the Second World War had only a minuscule coverage (2–3 percent) among employees. In Germany unemployment aid was means tested.

51 Swenson (fn. 4, 2002), 10.

52 Ibid., 12.

53 Esping-Andersen (fn. 2, 1990); Hicks, Alexander, Social Democracy and Welfare Capitalism: A Century of Income Security Politics (Ithaca, N.Y.: Cornell University Press, 1999); Huber, Evelyn and Stephens, John D., Development and Crises of the Welfare State: Parties and Policies in Global Markets (Chicago: University of Chicago Press, 2001); Kangas (fn. 2); Korpi, Walter, “Power, Politics, and State Autonomy in the Development of Social Citizenship: Social Rights during Sickness in 18 OECD Countries since 1930,” American Sociological Review 54 (June 1989); Palme (fn. 2).

54 Swenson (fn. 4,1991), 13,12, italics added.

55 Hacker and Pierson have taken Swenson to task for his interpretations of the proactive role of business interests in American welfare state development; Hacker and Pierson (fn. 38,2002 and 2004).

56 Swenson (fn. 4,1991), 513, 514.

57 Ibid., 515, 543.

58 Korpi (fn. 2, 1983), 14.

59 Ibid., 43–45.

60 Downs, Anthony, An Economic Theory of Democracy (New York: Harper and Row, 1957); Rabinowitz, G. and Macdonald, S. E., “A Directional Theory of Issue Voting,” American Political Science Review 89 (March 1989). The debate on spatial theories on voting and its directional alternative has primarily concerned their capacity to predict votes. Of major relevance in this context is that directional theories can provide endogenous explanations of differences in the aggregate distribution of preferences among countries and over time.

61 Korpi, Walter and Shalev, Michael, “Strikes, Power and Politics in the Western Nations, 1900–1976,” PoliticalPower and Social Theory 1 (1980); Korpi (fn. 2,1983), chap. 8.

62 Korpi (fn. 2,1978), 80–85; Korpi (fn. 2,1983), 46–50.

63 For the relevance of long-term left cabinet presence, see Korpi (fn. 2,1978), 80–86; Korpi (fn. 2, 1983), 46–50,168–83; Korpi (fn. 53), 316; and Huber and Stephens (fn. 53), chap. 1.

64 Levels of industrial conflict show relatively much short-term variation, and in Sweden just before 1932, partly because of the onset of the Great Depression, they were relatively low. The discussion here, however, is based on the major differences in industrial conflicts before and after the Second World War.

65 Swenson, Peter, Fair Shares: Unions, Pay and Politics in Sweden and West Germany (London: Ad-mantine Press, 1989), 50; Swenson (fn. 4, 1991), 525. Swenson takes their reaction to wage developments in the building sector and the building workers' strike of 1933–34 as his prime evidence for such cross-class coalitions.

66 Korpi and Shalev (fn. 61,1980); Korpi (fn. 2,1983), chap. 8.

67 Swenson (fn. 4, 1991), 536.

68 S. Söderpalm, A., Direktörsklubben (The directors' club) (Stockholm: Rabén och Sjögren, 1976).

69 Swenson (fn. 4,1991), 539.

70 Swenson (fn. 4,2002), 295.

71 Edström chaired the engineering employers association (1906–39) and the SAF (1931–43), and directed the multinational ASEA, one of the most important firms in the industrial and financialempire of the Wallenberg family. In approaching Edstrom for financial support, Arvid Lindman, Conservative prime minister in 1928–30, argued that his party had always supported lowering of taxation and opposed solutions inimical to industry “such as the eight-hour working [and] unemployment insurance” and that in his view there was not a single question “where we have not stood on the side of industry”; www.anders.lif.se/index.html-edstrombrev.html.

72 Stenlås, Niklas, Den inre kretsen (The inner circle) (Lund: Arkiv, 1998). One of the key participants in this circle was Sigfrid Edström.

73 Ibid., chaps. 5–6.

74 Swenson (fn. 4,1991), 10–11.

75 Elmér, Åke, Folkpensioneringen i Sverige (Old-age pensions in Sweden) (Lund: Gleerups, 1960), chap. 4. In 1947, just before changes legislated in 1946 came into force, 97 percent of persons above pension age received some public pension benefits.

76 In his discussion of the 1946 pension reform in Sweden, Peter Baldwin, too, has overlooked problems in imputing first-order preferences to employers on the basis of their standpoint in the final stage of policy-making without considering processes leading up to this decision; , Baldwin, The Politics of Social Solidarity: Class Bases of the European Welfare State, 1875–1975 (Cambridge: Cambridge University Press, 1990). For a critique of Baldwin, see Olsson, Sven E., “Working-Class Power and the 1946 Pension Reform in Sweden,” International Review of Social History 34 (1989).

77 Mares (fn. 5), 52, italics in original.

78 For information on SAF'S involvement in the campaign against the ATP reform, cf. Molin, Björn, Tjänstepensionsfrågan: En studie i svensk partipolitik (Superannuation: A study in Swedish party politics) (Göteborg; Scandinavian University Books, 1965); Hadenius, Stig, Molin, Björn, and Wieslander, Hans, Sverige efter 1900 (Sweden after 1900) (Stockholm: Aldus, 1993), 202–25. Swenson (fn. 4,2002) considers the ATP reform as “the one exception” to the rule that employers favored legislation over no legislation (p. 11).

79 Cf. Korpi (fn. 2, 1983), 92–93; and Svensson, Torsten, Socialdemokratins dominans (Social democracy's dominance) (Uppsala: Acta Universitatis Uppsaliensis, 1994).

80 Korpi, Walter, “Unoffical Strikes in Sweden,” British Journal of Industrial Relations 19 (March 1981).

81 Korpi (fn. 2,1983)

82 Korpi, Walter, “The Historical Compromise and Its Dissolution,” in Ryden, Bengt and Bergstrom, Villy, eds., Sweden: Choices for Economic and Social Policy in the 1980s (London: Allen and Unwin, 1982).

83 Swenson (fn. 4,1991), 537.

84 A similar conclusion is also reached by Huber and Stephens (fn. S3), chap. 5.

85 Blyth, Mark, “Same as It Never Was: Temporality and Typology in Varieties of Capitalism,” Comparative European Politics 1 (July 2003); Watson, Matthew, “Ricardian Political Economy and the ‘Varieties of Capitalism’ Approach,” Comparative European Politics 1 (July 2003).

86 Hall, Peter A. and Soskice, David, “Varieties of Capitalism and Institutional Change: A Response to Three Critics,” Comparative European Politics 1 (July 2003).

87 Korpi, Walter, “Contentious Institutions: An Augmented Rational-Actor Analysis of the Origins and Path Dependency of Welfare State Institutions in the Western Countries,” Rationality and Society 13, no. 2 (2001).

88 For the relevance of long-term left presence in cabinet, cf. works cited in fn. 63. On the problem of time inconsistency, see, for example, Iversen (fn. 5), 124–28.

89 See, for example, Cox, Gary W., Making Votes Count: Strategic Coordination in the World's Systems (Cambridge: Cambridge University Press, 1997); Iversen (fn. 5).

90 See, for example, Gourevitch, Peter A., “The Politics of Corporate Governance Regulation,” Yale Law Journal 112 (2003); Iversen (fn. 5)

91 This fact may indicate that in Europe confessional parties were influential in selecting the proportional electoral model.

92 Korpi (fn. 87); Korpi and Palme (fn. 32,1998)

93 Cf.Thelen(fn.23).

94 Left parties here include traditional social democratic parties and parties to their left, confessional parties the major ones associated with Catholicism and minor ones with Protestantism, while secular center-right parties include conservative, liberal and agrarian parties, and green parties and minor parties not otherwise classified. The 1945–90 period is likely to cover the maturation of production regimes.

95 Cabinet strength is indicated by the proportion of party representatives in each cabinet considering the duration of the cabinet. Longevity is measured as the longest period of continuous cabinet participation (with no more than two consecutive calendar years of cabinet absence) taken as a percentage of the years 1945–90.

96 This tradition partly reflects the significance of the constitution providing veto point via frequent referendums. Cf. Immergut, Ellen M., Health Politics: Interests and Institutions in Western Europe (Cambridge: Cambridge University Press, 1992), chap. 4.

97 In Finland the constitution required qualified majorities in the Eduskunta for long-term economic policy-making. Its sensitive relations to the Soviet Union during the cold war made government presence of the right party undesirable and offered a role for left participation in coalition cabinets.

98 Pempel, T. J., Regime Shift: Comparative Dynamics of the Japanese Political Economy (Ithaca, N.Y.: Cornell University Press, 1998); Thelen (fn. 23), chap. 4; Shalev, Michael, “Class Conflict, Corporatism and Comparison: A Japanese Enigma,” in Eisenstadt, S. N. and Ben-Ari, Eyal, eds., Japanese Models of Conflict Resolution (London: Kegan Paul, 1990).

99 As noted above, work accident insurance relieves employers from problematic competition based on hazardous workplaces and from ill will generated by work accidents.

100 Since Ireland inherited its social insurance programs from Britain, it is not included here. For years of first laws, cf. Social Security Administration, Social Security Programs throughout the World (Washington, D.C.: Department of Health and Welfare, 1997). For additional analyses, cf. Väisänen, Ilkka, “Conflict and Consensus in Social Policy Development: A Comparative Study of Social Insurance in 18 OECD Countries, 1930–1985,” EuropeanJournal of Political Research 22, no. 3 (1992).

101 Cross-class interest in work accident insurance reflects that for employers, work accidents may generate ill will among employees and in the community and that risky places of work constitute a problematic area for competition.

102 Pontusson, Jonas, “Varieties and Commonalities of Capitalism,” in Coates, David, ed., Varieties of Capitalism, Varieties of Approaches (New York: Palgrave, 2005), 164.

103 Mares (fn. 5), 251, italics in the original, and 24.

104 Estevez-Abe, Iversen, and Soskice (fn. 5), 151–53.

105 Since old-age pensions pose special problems with respect to financing and benefit levels, we focus here on the three programs for short-term absences from work. Data are from the Social Citizenship Indicator Program under construction at the Swedish Institute for Social Research, Stockholm University. For details, see the Methodological Appendix, in Korpi and Palme (fn. 32, 2003).

106 et replacement rates, at average wage levels of production workers, are calculated after taxes and transfers. To avoid benefit differences related to family supplements, we here focus on single persons. Maximum replacement rates are available only for gross wages and twenty-six weeks of duration.

107 In several countries, work accident and sickness insurance have become coordinated, decreasing differences between them.

108 Korpi and Palme (fn. 32,1998); Korpi (fn. 87).

109 For example, in Sweden during recent decades some conflicts among sectors have been visible in debates related to nuclear energy and Sweden's joining the European Union and the European Monetary Union, debates where unions in export-oriented industries have joined employers in publicly supporting nuclear energy and joining.

110 On the level of firms, however, the existence of efficiency wages indicates that employers can use wage differentiation as a managerial device.

111 Iversen and Soskice show a marked positive bivariate correlation among twenty countries between the proportion of the population in vocational training and relative size of government transfers; , Iversen and , Soskice, “An Asset Theory of Social Policy Preferences,” American Political Science Review 95 (December 2001). This correlation is, however, likely to be the result of efforts by left and confessional cabinets to expand welfare states as well as to provide occupational training for youth not continuing in tertiary education.

112 Major socioeconomic differences in unemployment rates are exemplified by the finding that in Sweden in 1990, the level of unemployment among unskilled workers was more than four times higher than among higher salaried employees and twice as high as among medium and lower salaried employees; Korpi, Walter, Arbetslöshet och arbetslöshetsförsakring i Sverige (Unemployment and unemployment insurance in Sweden) (Stockholm: Department of Labor, 1995). As one piece of evidence for skill specificity driving individual demand for social protection, Iversen and Soskice (fn. Ill) use responses to the question “how difficult would it be for you to find an acceptable job,” remarking that “all else equal,” answers to this question are likely to reflect that skill specificity is associated with higher unemployment (p. 882). But in this context, for example, national and regional differences in levels of unemployment are also likely to affect responses.

113 Hall and Soskice (fn. 5), 13.

114 Thus, for example, in the basic program of unemployment insurance, during the period 1947–85 replacement rates in Italy decreased to single-digit levels; OECD, The Jobs Study, pt. 2 (Paris: OECD, 1994), chap. 8.

115 In Britain, as noted above, the Labor Party failed in successive attempts to introduce earning relatedness in flat-rate programs.

116 In this context, see also Pontusson (fn. 102).

* This research has been supported by the Bank of Sweden Tercentennial Foundation, the Swedish Council for Working Life and Social Research, and the Swedish Research Council. Earlier versions of the manuscript have been presented at the meeting of ISA Research Committee 19 in Chicago, 2005, and at seminars during 2006 in the Department of Political and Social Sciences at Universitat Pompeu Fabra, Barcelona, Department of Sociology at Stockholm University, Department of Political Science at Uppsala University, and the Swedish Institute for Social Research. For constructive and valuable comments on the manuscript, I thank participants at these occasions, as well as Klas Amark, Stefan Englund, Ingrid Esser, Tommy Ferrarini, John Goldthorpe, Olli Kangas, Ingalill Montanari, Kenneth Nelson, John Myles, Joakim Palme, Michael Shalev, Ola Sjoberg, Stefan Svallfors, and three anonymous reviewers of this journal.

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