History of Welfare State Research Paper

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1. The Origin And Use Of The Term Welfare State

The term was coined in England in the 1940s. It is to be found in Citizen and Churchman (1941) by William Temple, Archbishop of York, where it is contrasted with the Power State or Warfare State. After the publication of the Beveridge Report in 1942, the term soon came to be applied to the hopes for postwar reconstruction and by 1948 was used regularly for the postwar reforms. The meaning of ‘welfare’ had not suffered the deterioration that had afflicted the word ‘charity.’ Although Beveridge himself disliked the term for what he called its ‘Santa Claus’ connotations and preferred the older term ‘social service state,’ ‘welfare state’ normally carried a favorable meaning.

Welfare had a different set of connotations in American English. ‘Public Welfare,’ as understood in the USA then and since, excluded the elements of social insurance, with its claims to benefit as of right, which were so prominent in the British construction of the term (Lindeman 1937). ‘Welfare state,’ once imported from Britain, thus carried a stronger association of paternalism (Skocpol and Ikenberry 1983).

In that respect Germany was closer to the USA. In the early years of the Federal Republic, when many English terms were naturalized into German, it seemed natural to render ‘welfare state’ with the similar word Wohlfahrtsstaat. Such similarities can be misleading. Wohlfahrt was associated with charitable gifts, and Wohlfahrtsstaat had acquired a pejorative connotation during the crisis of the Weimar Republic, as when in 1932 Chancellor von Papen accused politicians of the early years of the Weimar Republic of attempting to turn the state into a Wohlfahrtsstaat, and thereby weakening the moral strength of the nation. The Federal Republic wished to return to the Weimar tradition in social policy without falling foul of the associations of the term Wohlfahrtsstaat. One possible course was to use the term in its positive English sense and to resort to Versorgungsstaat to convey the pejorative meaning. The alternative was to revive a nineteenth-century term, Sozialstaat (Ritter 1989). The issue has never been settled decisively, although Sozialstaat is the more usual.

If the term dates from the 1940s, its definition also owes much to the changes of that period. According to Asa Briggs, ‘A welfare state is a state in which organized power is deliberately used (through politics and administration) in an effort to modify the play of market forces in at least three directions—first by guaranteeing individuals and families a minimum of income irrespective of the market value of their work or their property; second, by narrowing the extent of insecurity by enabling individuals and families to meet certain ‘‘contingencies’’ …; and third, by ensuring that all citizens without distinction of status or class are offered … a certain agreed range of social services’ (Briggs 1961). These are usually taken to relate at least to medical treatment, housing provision, and education. Briggs added a reference to the best standards available, but it has since been generally accepted that such an aspiration is unrealistic.

2. The ‘Origins Of The Welfare State’

Such an emphasis on the 1940s leaves the historian with the task of relating these innovations to what had gone before, i.e., to consider the ‘origins of the welfare state.’ Three national examples briefly indicate how differently the origins of the welfare state have been constructed.

2.1 British Historiography

Since 1961 this has operated in terms of the transformation of old institutions by new principles, forged at moments of political crisis (Fraser 1973). The first of these institutions was the Poor Law, which established the responsibility of each local parish for the relief of the poor (1603) and was reformed in 1834 on more explicitly deterrent lines in response to population growth and agricultural change. The subsequent history has been presented in terms of new social problems caused by industrialization, the Victorian origins of collectivism in public health and factory regulation, the crisis of the Poor Law at the end of the nineteenth century, and the consequent Edwardian legislation (1905–14). This put an end to the possibility of a gradual extension of Poor Law services on a nondeterrent basis and provided for needy and deserving groups in other ways. It introduced free school-meals, a school medical service, tax-financed old age pensions for the poor, and national health and unemployment insurance, supported by a national network of labor exchanges. Alongside these measures ‘New Liberalism’ articulated a theoretical justification for state intervention in society and economy. The scope of this legislation was limited in respect of population covered and of benefits provided, but it has been regarded as having laid ‘the foundations of the British welfare state.’

The interwar years saw housing provision added to the prewar measures, but social policy responded slowly and piecemeal to economic and social problems. It adapted rapidly once World War II had created new problems and a new spirit of citizenship. The postwar legislation, roughly but far from exactly based on the proposals of the Beveridge Report (1942), universalized national insurance, extended its benefits to cover a greater range of contingencies (‘from the cradle to the grave’), and established a mainly taxfinanced national health service. This was accompanied by tax-financed child allowances, the extension of housing provision, and free secondary education. Fundamental was a government commitment to a policy of full employment, based to some extent on a belief in the efficacy of Keynesian demand management that was, however, far from unequivocal. The transformation of old social services by new principles of universalism had been presented in the Beveridge report as a characteristic British revolution. Historians followed a similar line, which fitted into the then dominant ‘Whiggish’ historiography with its emphasis on the continuity of British history and the adaptability of its political leaders. In the influential view of the sociologist T. H. Marshall the welfare state had achieved the extension of citizen rights from civil rights via political rights in the past to a new body of social rights (Marshall 1950). The blueprint of the welfare state as established in the 1940s was for a long time presented as a major British contribution to postwar social reconstruction in the wider world.

2.2 German Historiography

This has located the origins not merely of its own welfare state but of the welfare state as such in the establishment of compulsory insurance for workers by the German Empire under Bismarck in the 1880s. It has both emphasized the pioneering role of Germany and the continuity of its insurance institutions despite drastic political change. This emphasis on the role of Bismarck, notorious for his hostility to the claims of the working-class movement, as the originator of the welfare state has presented historians with the problem of reconciling these two aspects of his policy. Until recently it was suggested that wooing the workers with the benefits of social policy was an intrinsic aspect of Bismarck’s attempt to suppress social democracy. This view had the merit of presenting the welfare state as the achievement of the democratic forces while recognizing that the policies usually were not what these had been demanding. The publication of documents on Bismarck’s social policy has cast doubt on this view of his aims and there is a need for re-interpretation (Tennstedt and Winter 1993, 1995).

The transition from the establishment of institutions with limited scope to the conscious acceptance of the people’s welfare as an essential object of the state is located by German historiography in the Weimar Republic. It found expression in the text of the constitution but also across a range of its institutions, several of which had developed from war-time innovations. Collective bargaining backed by compulsory arbitration, subsidized housing, the preservation of prewar social insurance for both blue and white collar workers, and unemployment insurance as part of labor market policy, all suggest that the Weimar Republic was a welfare state in deed as in word. In German history the breakthrough to the welfare state was therefore achieved not after World War II but after World War I. However, the Weimar welfare state was unable to live up to its expectations (Abelshauser 1987). The political acceptance of its new role was insufficiently broadly based. As the earlier quotation from von Papen suggests, repudiation of the Weimar Republic in the years of economic crisis was connected closely with its social policy.

Although marginalized and only just saved from drastic changes in 1942, the social insurance system survived the Nazis. In the immediate postwar years of economic ruin, forced migration, and impoverishment it faced perhaps its greatest test. All accumulated funds had been lost. In the Russian zone of occupation it was reconstructed radically along lines originally proposed by the left-wing critics of Weimar policy. It was no more sacrosanct in the West. The French quickly followed the Russian example. Drastic British proposals followed, based partly on Social Democratic ideas from the Weimar years, partly on Beveridgean lines. They involved retrenchment and thereby aroused opposition well beyond the threatened vested interests. Opposition rallied around the defense of the Bismarckian inheritance in social insurance, which was presented as one of Germany’s proud contributions at a time when the nation badly needed a boost to national self-esteem. With the onset of the Cold War the proposals were dropped as the Western occupation powers gave priority to working with German public opinion. It was left to the Federal Republic to deal with the problems of funding social security; under CDU leadership the traditional structures were almost completely reinstated. Significant reform was delayed until 1957. In that year the introduction of the ‘dynamic’ pension, linked to average wage levels, represented an imaginative response to the problems of the Federal Republic: not just the problem of inflation but that of the low pension levels which contrasted sharply with the rising standard of living enjoyed by the working population. At a time when the legitimacy of the Federal Republic was fragile, this pension reform contributed significantly to the acceptance of the regime. In 1958–61 proposals to remodel the sickness insurance system and contain its spiralling costs were defeated. The Bismarckian prototype had acquired a secure political profile.

Thus, in the German Federal Republic the 1940s were a period of defence and restoration. The emphasis on the significance of the Bismarckian reforms for the long-term development of the German welfare state and the tendency to identify it narrowly with contributory social insurance were forged in the political conflicts of those years. This emphasis was reinforced in the early 1980s by the centenary celebrations of the Bismarckian reforms. Much of the German historiography of the welfare state was created in the 1980s (Ritter 1983, 1986, 1989).

These examples indicate that the history of the welfare state has been perceived differently in different countries, in terms of periodization and of emphasis. This reflects not only its actual development in different states but certainly also the political purposes which historiography has served.

2.3 The Swedish Model

These points must be made more briefly for the influential Swedish model of the welfare state. There, it was developments in the 1930s that had the significant long-term effects that they singularly failed to have in Britain or Germany. The expansion of the earlier limited social security provisions took a significantly different form. Unlike Germany, where insurance contributions and benefits differed according to levels of income, Swedish benefits were paid, as in Britain, at a flat rate for all. But they differed from both the German and the British provisions in that retirement pensions and sickness insurance were financed from general taxation. They were set at a level that provided pensioners with an adequate income, something that the British pensions, tied to contributions that even the lowest-paid could afford, entirely failed to do. Significant differences between the policies of these three welfare states also extended to industrial relations and taxation.

The Swedish welfare state has been presented as the achievement of class mobilization and labor solidarity. Standard accounts have stressed the long period of Socialist-dominated government and cooperation between government and labor organizations in the shaping of labor market policies (Baldwin 1990).

3. A General History Of ‘The Welfare State’

If it exists at all, the history of the welfare state, as distinct from the history of individual welfare states, must be sought on a higher level of generalization. A welfare state is a state of a certain kind, distinguished from earlier kinds by the addition of a new set of objectives and institutions. Its history must be sought within the wider context of the history of the state. It presupposes the unification of law across the state territory, the establishment of bureaucracies, and the elimination or control of intermediate forms of authority. It is, however, also characterized by new systems of domination, consisting of distributing elites, service bureaucracies, and social clienteles. The process by which these objectives were both established and extended to include the whole nation has been driven by the advent of representative democracy, but it also drew on older concerns to maximize the human resources of the state. In addition, these new state objectives have been connected intimately with the development of modern industrial capitalism.

The state became a welfare state because it dealt increasingly with the social consequences of the particular way in which modern industrial capitalism was established. These consequences, often described as externalities, resulted from the narrow definition of the legal obligations of capitalist entrepreneurs, which contrasted greatly with the obligations imposed on entrepreneurs in the older corporatist economy. This emancipation of the entrepreneur was a deliberate act of state policy, undertaken in the interest of increasing ‘the wealth of nations’ and thus the power of states over against other states. It undoubtedly had that effect. Enterprise took new and unforeseen forms once it was freed from old regulations. To limit obligations towards workers to the short-term purchase of their labor power, towards the community to the payment of local taxes, and to resort to competition without responsibility for those driven out of the market, all this encouraged innovation and facilitated capital accumulation. But it created problems that resulted from economic decisions while being external to the economic process.

3.1 Combinations And/Or Transfer Payments

These problems could be dealt with in at least two ways. (a) By combination, intended to limit free competition over wages, or to pool the economic resources of individuals, or both (trade unions and mutual aid societies). To what extent that was possible depended on the attitude of the state and on the capacity of individuals for organization. (b) By state action in whatever territorial units—national, provincial, or local—it exercised its power. That meant taxation and a limited redistribution of the resources originally distributed by the market. The administrative capacity that made it possible to introduce graduated taxes and differential tax allowances as instruments of redistribution is an important aspect of this history.

The legalization of combinations to increase wages in turn made it increasingly possible for individuals to satisfy their needs through the market, thereby creating opportunities for new kinds of enterprise. The legalization of mutual aid associations created structures of redistribution, which could operate as alternatives to the bureaucratic structures of the state. In countries in which the development of bureaucracy had not advanced far, or where it was viewed with mistrust, subsidies from taxes became a way of making mutual associations more effective. Such subsidies were not unconditional but subjected the association to a greater or lesser degree of control. An extreme example of such control was the compulsory establishment of combinations on the order of the state, such as the German sickness funds and trade associations to administer accident insurance. The higher the level in the administrative hierarchy on which the state operated to redistribute resources, the greater the degree of uniformity it could impose.

3.2 Goods And Services

So far the focus has been mainly on the redistributive role of the welfare state. The problem of externalities has also been addressed by the public provision of goods and services, which the market supplied only in ways deemed politically unacceptable. Such goods and services, considered necessary for the common good as politically defined, have included the infrastructure of public health, the provision of healthy and environmentally approved housing, of medical treatment, and of schools, but this list is far from exhaustive. Here, too, subsidies could take the place of full state provision, e.g., in respect of houses, food, or schools.

3.3 Regulation

Since externalities had been allowed to arise because the state had regulated the conditions of production in minimal ways, it also began to introduce new regulations. Under such regulations the market was permitted to supply goods and services only on conditions acceptable to the state. Instead of providing housing, the state regulated the conditions of tenancies. Instead of running its own schools, it regulated and inspected those provided by other bodies. And, as in Thatcherite Britain, it regulated the sanitary infrastructure while relying on the market to provide it. Such regulation could be accompanied by subsidies. However, such regulation suffers from the same considerations that applied to the general conditions of production in the first place. By regulating the actions of the market, the state is liable to hinder innovation and to make the market an inefficient mechanism for economic growth.

Finally, the state has been able to regulate the economy itself in such a way as to minimize externalities. Examples are the state regulation of wages and the regulation of the economy so as to reduce cyclical fluctuations. At all stages of this process, the question has to be faced whether the object is being achieved at the cost of economic innovation and efficiency. For that reason there are limits to what regulation can achieve.

A radical alternative has been for the state to take over the running of the total economy. That rules out a welfare state, defined as a state that modifies the play of market forces, and it creates a state so different that it is better not to describe it as a welfare state. That is not to deny, however, that ‘communist’ states provide social services and organize transfer payments in the interest of social security. This research paper does not deal with the history of states with a command economy, confining itself to the history of what is sometimes called the liberal welfare state.

Even there the importance of the welfare elements of the state can vary according to the extent to which entrepreneurs did in practice externalize their costs. Where company welfare was built into the entrepreneurial ethic, as in Japan, state expenditure on social security has been restricted compared with other advanced industrial countries.

4. The History Of Welfare States Since 1945

Despite this attempt and others (Flora and Heidenheimer 1982) to construct explanatory models of the welfare state as a general phenomenon of European and subsequently extra-European history, the established tradition of nation–state history has led historians to study developments both before and after 1945 in terms of individual states. They have given prominence to the political circumstances under which social policy was constructed and emphasized the importance of national traditions.

Some few generalizations across countries are feasible. Thus, the experience of the 1930s had demonstrated that institutions of social security were seriously vulnerable to periods of mass unemployment. Such periods greatly increased the demands for transfer payments, while also reducing the income from which these were made. This was particularly true of contributory insurance, but it also applied to finance from general taxation. This lesson had been learned, and in the 1940s macro-economic policy became a policy component of every state, whether it had passed through the experience of a war economy or, like Sweden, had not. In some countries this period saw major reforms and extensions in social security, as in Britain, France, and Sweden. In others, major reforms had to wait until the 1960s and early 1970s after the restructuring of the economy had yielded its rewards, as in The Netherlands and Italy.

Even where significant legislative innovation occurred in the immediate postwar years, subsequent expansion of the economy provided the setting for a period of further change in the 1960s and 1970s. Indeed, the most convincing historical generalizations that can be made about the welfare states since 1945 refer to the effect of major changes in the international economy. A long period of economic recovery in Europe led by the 1960s to a remarkable growth in national income. This in turn both raised expectations and facilitated the introduction of more generous provisions. Levels of benefits were raised, flat-rate pensions complemented by graduated ones that mirrored differences in original earnings and appealed to the better off, while those disadvantaged by or excluded from earnings-based insurance systems received compensatory entitlements.

By contrast, the setback to economic expansion in the mid-1970s, triggered by the oil-price crisis, caused a fall in employment, except where special measures for job creation had been implemented (as in Sweden). This, in turn, led to rises in social security payments and falls in the revenue available for the purpose. Steady increases in the gross national product, which had spurred ambitious changes in entitlements in the previous decade and a half, could no longer be assumed. Nor had recent rapid growth in social expenditure been due only to deliberate changes in entitlement. It had also been caused by such demographic, cultural, and technological changes as an increase in the proportion of the elderly, a rise in single-parent families, and the growing cost of medical treatment. To the fiscal crisis that occurred in every country sooner or later, even in Sweden, was added a crisis of belief in the assumptions on which welfare states had been based. Yet these assumptions had been deeply implanted in the citizens, and many vested interests created. Measured by the radical debate that broke out, the actual changes in welfare states were not great, even in Great Britain, where the call for the rolling back of the state had been loudest.

5. Historiography Of Welfare States

There are several ways in which the original traditions of welfare state history have been modified.

5.1 A Gender-Conscious Historiography

Just as the feminist movement has since the 1960s exerted a political influence on the agenda of policy making itself, so it has also changed historical perceptions. Feminist historians have highlighted the way in which social policies were shaped by assumptions about the gender divisions of labor, power, and social responsibility. They have shown how little the basic assumption that each adult woman was dependent on a male earner was borne out in reality. Contributory insurance, with entitlements dependent on the performance of waged labor over most of the adult life span, had been at the center of welfare state history. It looked very different through the eyes of feminist historians, but these have not merely confined themselves to criticism. By drawing attention to policies in support of motherhood, they have reconstructed the outlines of welfare state history (Pedersen 1993, Koven and Michel 1993). By making historians more aware of the implications of gender, this emphasis has yet unrealized potentials. Male roles, once so taken for granted as to be largely invisible to historians, have in turn become objects of historical study.

5.2 Welfare State History ‘From Below’

The history of social policy traditionally has been written through the eyes of ‘policy-makers’ and administrators, and occasionally of political philosophers, trade union officials, and radical politicians, authority figures all. Welfare state history has been particularly resistant to the search for history as experienced by those without power and influence. Yet the construction of social policy and its administration is that of a relationship, in which the recipients of ‘benefits’ are at least half the story. Like all forms of history from below, attempts to recreate their experience has been hindered by their inarticulacy, at least in forms that have survived as records. But once historians search, they are able to find evidence, not merely for recent times but at least in England going back well into the past (Lees 1998, Vincent 1991).

5.3 Studying The ‘Mixed Economy Of Welfare’

One result of paying more attention to the lives of the poor has been to downgrade the importance of state provisions and to draw attention to the mixture of resources that made up the economy of the poor. Since public authorities frequently did not intend to provide those in need with a full subsistence—and, when they did, were not good at judging the amount required— this should be unsurprising. It has made this history less state-centered (Katz and Sachsse 1996, Thane 2000). This trend has been reinforced by a change of social policy in several countries in the 1980s, Britain and the USA in particular. The replacement of direct state provision of services by contractual relationships with charities and profit-making providers has given prominence to the concept of the ‘mixed economy of welfare.’

Third, at a time when the clients of the welfare state are drawn from all citizens, contemporary studies of social policies have come to pay attention to the mixture of resources at the disposal of citizens, particularly of the elderly, whether these were from public, occupational, or commercial sources. Since that mixture differs in different countries, comparative studies have moved from an exclusive preoccupation with state provision towards a concept of welfare regimes more broadly defined (Esping-Andersen 1990). The influence of comparative studies by social scientists on historiography is the final issue to be considered.

5.4 Comparative Studies

The historical study of welfare states was for a long time overparticularized. Attempts to identify categories suited for generalizations were left to social scientists specializing in the quantitative analysis of policy outcomes. This has been a dynamic field of study since the 1970s, but it developed in a particularly ahistorical form. One reason was its dependence on information provided by such international agencies as the United Nations and the Organization for Economic Co-operation and Development. Little of this went further back than the 1960s, so that the historical perspective was limited. Second, the questions asked and the explanatory power of the answers provided were constrained by the availability of such quantitative evidence, which was at first largely limited to figures of expenditure. The narrowness of these comparative studies was only slowly overcome as new evidence became available, e.g., the Luxembourg Income Study in the 1980s, which provided internationally comparable income-distribution data at microlevel, and as researchers began to approach national governments and other agencies directly to construct their own database. Third, the choice of appropriate categories for comparison across different national contexts is notoriously difficult and not always successful.

Evidence of this kind was, in any case, unable to provide explanations that advanced beyond the discovery of correlations. Intentions were ignored, because unsuited to standardization, and important dimensions of history were thereby ruled out of court. The most important result of these correlations was to group welfare state regimes into three main types: liberal, corporatist, and social democratic. It is more obvious that these describe ideal types than that they describe clearly differentiated clusters of indicators. Australians have demurred at the inclusion of their country in the same category as the USA; Germans have felt unhappy at being grouped with Italy and France; and the case of Britain is recognized widely as a hybrid. It is certainly not possible to write anything like a common history of the several welfare states grouped into any one of these types, with the possible exception of the four social democratic ones, who all happen to be Scandinavian.

Yet, by their very limitations, comparative empirical studies have helped to identify so-called anomalies and to encourage the intensive historical investigations of individual cases (Castles 1989, which includes Japan and Israel). The gulf between the social scientific and the historical study of welfare states has narrowed, as indicated by sharply focused comparative histories of pensions and of public health or by a five-volume history of individual welfare states addressing similar questions and written on a common editorial plan (Baldwin 1990, 1999, Flora 1986 2000).


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