"Welfare Capitalism" and "Social Capitalism" -

Comparing the Ideals of Welfare States

of Matthias Zeylmans

I. Introduction: what is the normative function of welfare ?

In the current debate about the welfare state one can find very different ideas of the normative functions of welfare: some find the welfare state should only provide a basic framework which supports and stimulates citizens to help themselves. Others think that social security is a basic civil right and that the welfare state should provide each citizen with a minimum income.

In this paper I’m trying to find and discuss the different ideals behind the welfare states of the U.S.A, Germany and Chile.

What is a Leitbild ?

I’d like to use the German term Leitbild, a term which includes the meaning of ideal and concept: a Leitbild is an ideal picture of how reality should be; it also describes the principles, methods and specific goals to realize this ideal.

The "Three Worlds of Capitalism": analytical modell or Leitbild ?

A comparative paper of welfare systems should deal with the "Three Worlds of Welfare Capitalism" of Esping-Andersen. The basic difference of the liberal, the conservative, and the social-democratic welfare state is their degree of "decommodofication". That means the relative independance of the system towards the compulsion and risks of the capitalistic market.

But this rather serves as an analytical category than as a Leitbild. The three models of Esping-Andersen are a mixture of ideal- and existing types, where it is hard to differ between normative elements and policies as an outcome of long bargaining processes.

Nevertheless they might be helpful to understand the different systems and political cultures.

Three Analytical Questions:

1. Is there a general Leitbild behind each historically grown welfare system ?

2. If so, how do they influence the current debates on welfare reform ?

3. Are there new Leitbilder in current debates which compete with the old ones ?

At the end of this paper you can find 7 personal thesis to these questions.

II. Leitbilder in the U.S.A.: "Welfare Capitalism" and "Moral Individualism"

Welfare Capitalism is the common label for the liberal U.S. welfare system. The Leitbild behind it claims that social problems can be solved without any state intervention by the economy and society itself. It was developed in the "Golden 1920s" with economic prosperity, but was proved to be wrong by the Great Depression a few years later.

"Moral Individualism" is a feature of the private dimension of welfare, which in my opinion might be the dominant Leitbild of U.S. welfare: Every individual has a responsibility towards the "truly needy" and he’s supposed to get involved somehow in political or civil associations which care for the poor, rather than delegate his responsibility to the government.

Other Leitbilder:Apart from those two, there have been other Leitbilder in the American history, such as F.D. Roosevelts "New Deal" or L.B. Johnsons "Great Society". Other important values which shape todays Leitbilder somehow are protestant ethics, liberal values, federalism, a profound distrust in governmental bureaucracy, individual freedom and others.( See my paper about the "Historical Development of Welfare Capitalism in the U.S.A. concerning this) Behind every Leitbild probably stands the "American Dream" as the "super-Leitbild" of the American culture.

The "liberal welfare world"

Esping-Andersens model of the liberal welfare system of the U.S.A. is described by:

*a low degree of decommodification and a dominant role of the free market and the family

* little social rights, a low level of benefits, little redistribution of wealth, social stigmatization and a high degree of private welfare

*a strong institutionalized working-culture, where social insecurity is used as a motor of economical development

Todays Leitbild: What is the dominant Leitbild of today? Do the features of the liberal model determine social politics? Are there other popular Leitbilder behind the social reforms and discussions of today?

The Neo-liberal Leitbild: In the 1980s the neo-liberal politics of R. Reagan became more popular. His attempts to deconstruct and privatize the welfare sector actually failed. But the old liberal Leitbild was clearly reactivated, replacing the ideals of the "Great Society".

Although the Clinton-administration brought up goals and strategies of the "New Left" those didn’t have much of a new Leitbild. Its policies seem to follow a moderate neo-liberal path:

*flexibilisation and deregulation of labor

*the low-wages-high-employment strategy

*protecting the family as the basic moral institution

The welfare reform of 1996 is an attempt to reactivate values of the 19th century: using welfare as an instrument of social control and education rather than as an instrument of modern social work (see my paper of "Historical Developpment...).

Are there any alternative Leitbilder in todays discussions?

Advocates of Communitarism propose to form small communities as a protection against the roughness of the free market and integrate social problems. State and society should recognize and support the qualities of social outsiders, rather than excluding them because of their deficits.

This progressive idea seems to fit well into a moderate neo-liberal Leitbild though, since it calls for little state activity and more private commitment to welfare.

III. Leitbilder in Germany: "Social Fairness" between subsidiarity and solidarity

The Social State: Used in a normative way the term calls for social fairness towards its citizens. The Leitbild behind it is the following: "The Social State is a state which guarantees and, if required, corrects the economically influenced proportions in a society, with the aim to offer each and everybody a life with dignity of man by giving the members of this society a minimum amount of social welfare."(...)

The roots of this Leitbild can be found in the socialistic labour movement of the 19th century constituted against the liberal "laissez-faire" capitalism. Can it thus be regarded as an "anti-Leitbild" to "Welfare Capitalism"?

After World War II the "Social State Principle" was written down in the Basic Constitutional Law which has a binding character for every government. (see the paper about "Constitutional and Institutional foundations of the German Social State").

Subsidarity and Solidarity - two competing principles

The normative social state is based on two principles and their political traditions:

The idea of Subsidarity goes back to the Catholic Social Teachings and proposes that needy citizens should only get welfare assistance if they can’t get any help from their families and friends or non-governmental organisations. It is favored by conservative representatives and enjoeyed a growing popularity since the 1980s. It correlates with the more liberal idea of little state intervention and redistribution.

The idea of Solidarity has its roots in German labor unions and is represented by "progressive movements" like the Green-parties and parts of the Socialdemocrats today. It proposes that people in Germany who can’t live on their own efforts should get welfare assistance. It favours state intervention in order to redistribute wealth. (See Pilz/Ortwein 1995:328ff).

The "Conservative Welfare State"

The conservative model of Esping-Andersen with its particular German characteristics is described by:

*a medium level of decommodification and a dominant role of conservative elites and christian-democratic parties

*social rights which are tied to class and status and offer social security in the first place to those having a stable job; it is completed though by a welfare system accesible by everybody, so that it offers a medium level of wealth-redistribution.

*other important features such as corporatism and the high degree of Politikverflechtung (linkages between the different political institutions, actors and policies).

Todays Leitbild: between subsidiarity and solidarity

The principal Leitbild of the West-German Republic since the 1950s has been to work for economical growth with increasing prosperity and public safety. Since the 1980s it has turned into a strategy of saving the status quo and rejecting basic reforms. The Leitbild of subsidarity was the basic ideal behind the social politics of the christian democratic Kohl-administration in the 1980s and 1990s. Allthough their policies seemed rather to follow a kind of strategy-mix with conservative, liberal and socialdemocratic ideas, if not to say a strategy of muddeling through (see Schmid: Eine sozialpolitische Bilanz der Ära Kohl; 1998).

In the United Federal Republic the state as the main actor of social politics is supported by the majority of the population. Only the degree of state intervention is highly controversial and tends to divide Germany in two parts: half of all West-Germans want to reduce the social budget and pay less taxes.

The majority of East-Germany - struggling with their socialistic past and structural problems - favors a strong welfare state with a higher degree of redistribution even at the expense of higher taxes (see Mau 1998:29f). Hence their Leitbild rather seems to be one of solidarity.

Alternative Leitbilder: is there an Emancipatory Leitbild ?

In the current German reform debate there are different concepts trying to face global challenges with a third way: the basic idea seems to be the reduction of welfare bureaucracy and a new flexible system with more democratic principles and pluralistic structures.

The concept of welfare mix or welfare pluralism proposes to open the welfare sector towards different competing organisations and groups, hoping that they would complement one another. Part of this discussion is inspired by the communitarism-debate of the U.S.A. and calls for less state intervention and more private forms of welfare.

Is this a new Leitbild or the one of subsidiarity in a new outfit ?

Another concept, promoted especially by "green politicians" calls for a fundamental change into a system of basic pensions: a guaranteed minimum wage of the state for everybody living in Germany could replace all the other social programs and provide more flexibility and fairness towards people who are not in "regular working conditions" (such as most women, longterm unemployeds a.s.o.)

Indeed this seems to be a new concept based on the Leitbild of solidarity.

Both concepts could fit together quite well, but so far they are discussed on the periphery of the political system, and it doesn’t seem like they could reach its core in the next decades (see Schmidt: Herkunft und Zukunft der Wohlfahrt, 1998:14ff)

The new government: does it have a social Leitbild at all ?

Looking at the "basic goals and principles" of "social security and the modernization of the welfare state" (Koalitionsvereinbarung von SPD und Bündnis 90/Die Grünen, 1998:23) one finds a nice mixture of traditional principles: "solidarity", "equality of chances" and "distribution of benefits and burdens" to "prevent poverty" on the one hand are reminiscence of the solidarity Leitbild.

On the other hand there are principles like "social autonomy and private responsibility", "modernization of the welfare state" to focus on needy population and the hope that the "churches will keep their social promise", which seem to be based on the Leitbild of subsidiarity.

Is this the new Leitbild of social capitalism which finally combines solidarity and subsidiarity ? Or is the old Leitbild lost between empty principles and strategies of "muddling through"?

IV. The Chilean case: The Neo-Liberal Leitbild in a post-authoritarien regime

Historical Background: Clientelism and Corporatism

The Chilean welfare state has been one of the most progressive systems in Latin America, providing a wide coverage for all social risks to more than 75% of its population in the 1970s. It was also a highly decentralized and fragmented system with strong clientelistic and corporatistic features. This led to high unefficiency and pressure for reform in the 1960s.

The Leitbild of the "Socialist Experiment"

Between 1970 and 1973 the democratic elected president Allende tried to reform the political system into a socialist one. The generel Leitbild of Allende’s government can be labelled the "Chilean Path to Socialism". It included ideals such as pluralism, democracy and liberty and promoted equality and better acessability to welfare programs. (see the paper "From the Socialist Experiment" to the Military Regime...").

Although the "Socialist Experiment" took only three years, Allende’s ideals where kept alive in the opposition-movement during the Pinochets military regime and they still might shape social debates and policies of today...

Pinochets Leitbild: Consolidation of Power

The basic ("privat") Leitbild of the military government under Pinochet (1973-’89) probably was to gain and consolidate its power by weakening the social base of labour and the left: "The government sought to construct an atomized, depoliticized society where there would be no basis for collective action..." (Evelyne Huber in Esping-Andersen 1997:164). Therefor Pinochet choose a radical neoliberal strategy to restructure the Chilean economy and society.

The public Leitbild of Neo-Liberalism

The neo-liberal reforms of the mid-1970s and early 1980s could be described as the "official" Leitbild of military government. Influenced by the so-called "Chicago Boys" (their economic "gurus") they imposed a shock programme of austerity and adjustment measures with the goal of efficient allocation of each ressource on the market. The two major instruments where liberalization of regulations and prices and privatization of state owned companies. Efficiency, competitiveness and price stability where the basic values of the neo-liberal Leitbild.

Social security was privatized and the welfare budget was reduced to a minimum leaving the old privileges only to the military and the police. (see the paper on "Macroeconomic stabilization as the ground of structural reforms in Chile").

The Leitbild of the Democratic Government: "Growth with Equity"

The "leftist" democratic coalition, in power since 1990 has tried to discharge the "social debt" of the military regime through moderate reform programs. The neo-liberal politics have been rethought, but the basic principles have stayed untouched: the existing hegemonic position of large capital poses clear limits to redistributional politics.

Within this frame the Aylwin government (1990-’94) and the one of Frei Ruiz-Tagle (1994-’98) have shown clear commitment to politics of social fairness: With the slogan "Growth with Equity" ("Crecimiento con equidad") the former government has channeled more benefits to the poor (increased welfare pensions, housing projects, healthcare, education) financed through a progressive tax-reform. The principles of this Leitbild are equality of chances, efficience of ressources and stimulating active participation of the population.

The Frei government continued the "fight against poverty", promising to "eliminate misery by the year of 2000" (Weyland 1997:61). The basic strategy of his social investments is "help for self-help".

Chile - a "Rudimentary welfare state"?

How does Chile fit into Esping Andersen’s framework of analysis? Studying the post-authoritarean regimes of Spain and Portugal an additional model called the "Rudimentary Welfare State" has been proposed to lable systems

- with only partially-developed social security

- with existing traditional forms of private social welfare

- where the claim for welfare is not a civil right (Schmidt 1996:58)

Rather "Liberal" than "Rudimentary"

Comparing the development of social politics and policies of Chile and the U.S.A. the two systems seem to be quite similar:

- from a European point of view both systems have partially developed welfare systems dating back to the 1930s (U.S.A.) and the 1920 (Chile)

- traditional private welfare organisations are probably more important in the U.S.A. as in Chile, where the role of the welfare state until 1973 was dominating private forms.

Comparing the two political systems in the 1970s and 1980s there has of course been a significant difference ! But was there any difference concerning the economical system ? And are Chiles welfare policies of today so different from U.S.policies ?

Towards a new model of welfare capitalism ?

Comparing the Leitbilder of both welfare states, Chile rather seems to try to include more solidaristic and egalitarian features into the neo-liberal system. In the U.S.A the majority seems to favor market-determined welfare politics. Maybe some Latin American countries are moving towards an new model of welfare capitalism ?

V. Conclusion: 7 Thesis

1. Welfare capitalism is the predominant Leitbild behind American welfare politics. Alternative Leitbilder only reach the core of welfare politics if they fit into the liberal philosophy of the U.S.A.

2. Moral individualism is the general Leitbild in the American society. It keeps up the private dimension of welfare and makes Welfare Capitalism possible

3. The general Leitbild of Social Capitalism in GERMANY is shaped by the two competing concepts of subsidiarity and solidarity.

4. The new government uses principles from both concepts, but consequently there is no clear Leitbild any more.

5. Alternative Concepts seem to be based either on subsidiarity or on solidarity, but they have little chance of realisation

6. Welfare politics in CHILE have been dominated by a neo-liberal Leitbild since 1973. The "private" Leitbild of the Pinochet-regime however was to consolidate his power.

7. The socialistic tradition of Chile could have an increasing influence on neo-liberal politics and lead towards a new type of a welfare state.

VI. Selected Bibliography:

*Esping-Andersen: Welfare States in Transition 1997; esp.: Evelyne Huber: Options for Social Policy in Latin Amerika, Chap 6

*Holtfrerich,Carl-Ludwig 1991: Wirtschaft USA. Strukturen, Institutionen und Prozesse, München/Wien

*Koalitionsvereinbarung von SPD und Bündnis 90/Die Grünen; 1998

*Mau, Steffen: Zwischen Moralität und Eigeninteresse. Einstellungen zum Wohlfahrtsstaat in internationaler Perspektive; in: APuZ 34-35,1998

*Murswieck,Axel 1998: Die Sozialpolitik der USA: ein Weg für die Zukunft ? in: APuZ 19,1998

*Pilz,Frank/Ortwein,Heike 1997: Das politische System Deutschlands; München/Wien

*Schmidt,Josef 1996: Wohlfahrtsstaaten im Vergleich; Leske&Budrich

*ders. 1998:Mehrfache Desillusionierung und Ambivalenz. Eine sozialpolitische Bilanz der Ära Kohl.

*ders. 1998: Zukunft der Wohlfahrtsstaaten. In: Handbuch für Sozialarbeit, Neuwied 1998

*Weyland,Kurt 1997:"Growth with equity" in Chile’s new democracy? In:LARR 32(1)