Welfare Capitalism

Welfare capitalism is a term that social scientists employ to define a specific form of regulating industrial relations and of controlling class struggles. With the onset of industrialization, advanced economies faced several problems and restrictions. At a more general level, constant revolutionizing of production and increasing degrees of urbanization and proletarianization undermined the previous socioeconomic foundations of these societies and led to social unrest, uncertainty, and poverty. Proletarianization refers to a social process by which an increasing number of the population, who were previously small producers or self-employed, lose their control over the means of production and become absorbed into the working class; that is, they have to sell their labor power to an employer. Deteriorating work conditions, increasing exploitation, and alienation caused dissatisfaction at work; these things in turn resulted in high turnover rates, absenteeism, indifference, drunkenness, violence, strikes, militancy among workers, and unionization, [Page 1025]followed by a significant decline in productivity. While the Western European response to these consequences of industrialization was to develop government-operated welfare programs and to establish a corporatist form of collective bargaining, in the United States the private sector took the lead. The main motive behind the American approach was to regulate social problems, and thus industrial conflict, without any state intervention and without the mediation of trade unions. In this regard, welfare capitalism evolved as a generic label for the liberal U.S. welfare system; more concretely, it refers to a collection of ideas and methods designed to improve capital-labor relations in the United States at a particular period, extending from the 1880s until the 1930s.

Welfare capitalism had five main components. At first, it aimed at maximizing surplus value production through reducing the reproduction cost of labor power. During a period when reproduction conditions were scarce, welfare capitalists employed various tools, ranging from company-sponsored housing, well-lit cafeterias, and company stores to schools, theaters, churches, libraries, recreational facilities, and musical groups; from profit sharing and stock ownership plans, to insurance programs, medical care, pensions, and social work. Companies also supported interaction between workers and village-level administrators (i.e., teachers, welfare workers, medical personnel) and encouraged religious ties in worker communities. The classic example of this is the first company-town led by Pullman Palace Car Company. Built within the city limits of Chicago in 1880, Pullman Village hosted 6,000 company employees and their dependents. The residents were required to live along the lines set by the company, which rested on thrift, neatness, cleanliness, family values, sobriety, good morals, and the like. This model town survived until 1894 when a bitter strike ended its existence.

On the other hand, company-led residences also facilitated the transformation of a rural population into an urban industrial workforce. In this relation, the existence of a high number of agrarian and craft-oriented workers within the labor force allowed employers to utilize various motifs such as noblesse oblige, paternalism, and moral individualism. In other words, they emphasized that every individual has a responsibility toward the needy and the poor, so that the large corporation could become a home of solidarity. Then, it was the moral duty of employers to share some of the profits with workers in the pursuit of common goals. Stripped of its dominant paternalistic veneer, these provisions extensively addressed the organization of the workers' lives outside as well as inside the workplace. These measures also dealt with the second and third problems; that is, how to bind workers to the jobs in order to increase efficiency and how to socialize and integrate foreign workers—many of whom had only recently immigrated from Southern and Eastern Europe—into the disciplined and Americanized labor force.

...