The Three Worlds of Welfare Capitalism
America is the archetype of the liberal welfare state
Post 8: 25 February 2025
America is a liberal society. We all speak in at least three political languages—liberal, conservative, and republican—but liberalism is our first. It does the most to structure how we think about public matters, and this is ultimately reflected in public policy.
The hallmarks of a liberal society include a focus on individualism, individual rights, and markets. The individualistic ethos understands people mainly as private actors. This is consistent with lower levels of civic engagement or interest in politics as well as suspicion of government or, indeed, any form of “collectivism.” It is also related to a strong belief in individual responsibility for personal (economic) success and failure and a corresponding belief in the role of merit, as both an ideal and practice. These tendencies combine in a bias towards market-based solutions to public problems, which again complements the deep suspicion of governmental ones. At the same time, the habit of framing disputes, both public and private, in terms of rights leads, among other things, to a heavy reliance on judicial rather than “political” remedies.
It is fair to ask whether these characteristics fairly describe American society, especially in contrast with other advanced economies. For this I’ll give just one piece of evidence. A 2011 international survey from the Pew Research Center found that “Americans are more individualistic and are less supportive of a strong safety net than are the publics of Britain, France, Germany and Spain.”1 Here is their table:
These attitudinal differences are directly related to national social policy. Our best guide to this is still Gøsta Esping-Andersen’s seminal 1990 study, The Three Worlds of Welfare Capitalism, with a few caveats I will add later.2 Esping-Andersen argued that, while there are no pure types, the welfare states of advanced economies can usefully be seen as primarily liberal, conservative, or social democratic. Note that he uses the terms conservative and liberal in the same sense I do; that is, not as contemporary American ideological labels but as markers of deeper philosophical approaches.
Before moving on, a word about the term welfare state is in order. The phrase refers to the configuration of programs that capitalist countries establish for social protection. The main function of these programs, regardless of their potentially different philosophical foundations, is to mitigate the worst effects of unrestrained free-market competition. Because every industrial country needs to do this, all capitalist countries are welfare states. The protections are, in part, simply humane—our societies cannot credibly commit to let people without “market value” starve—but they also serve legitimating functions (prevent revolution) and, I would argue, are more economically efficient than pure laissez faire because they preserve what Marx called the “reserve army” of workers required for later growth. Non-capitalist countries, indeed all nations at all times, have some scheme of social protections for the weakest members of society, but non-capitalist systems are not strictly speaking comparable to capitalist ones, so I will reserve the term for nations with developed industrial economies.
There is some tendency in the United States to think that “welfare” only relates to poor relief, but the term also certainly includes social insurance programs like Social Security. Public education is usually excluded from this list, but incorrectly so. Finally, the welfare state also includes any market regulatory schemes that have significant social protection functions. The boundaries for these are fuzzy. I am thinking of things as different as deposit insurance and the minimum wage that have the effect of bounding the scope of market forces, primarily with the aim of reducing individual exposure to market risk.
According to Esping-Andersen, the United States is the archetype for the liberal welfare state. Liberal welfare programs are designed to interfere with market processes as little as possible. Anti-poverty “relief” programs are means-tested to limit their applicability to the “truly needy” and often include mandatory work requirements. These restrictions can be very punitive. Eligibility and benefit levels for social insurance programs are similarly tied to prior work history and are generally characterized as earned benefits. This reflects the fact that all programs are framed as “contracts” in which benefits are somehow “earned” or justified. Only those who can prove that they cannot work are exempted from this logic. While Esping-Andersen does not emphasize this, it is clear that these structures promote labor force participation. Tying insurance for critical needs such as healthcare to work has the same effect. Consistent with this, benefit levels are comparatively low, especially for relief programs, again almost forcing people to work.
These choices reflect a general trust in the operation of markets and the ability of individuals, liberated from state interference, to succeed in a free market system. The class structures that emerge in society are, in this view, the natural results of differences in individual merit and effort. Esping-Andersen finds that the politics of liberal welfare states are marked by very weak labor movements, a divided working class, and relatively strong upper-income groups, all fair descriptions of the American political environment. Besides the U.S., he classifies Canada, Australia, and Japan as liberal welfare states.
Conservative welfare states design social protections around the goal of preserving social stability and existing status differences in society. More broadly, programs are intended to resist the expansion of markets and market-based thinking, since these can undermine traditional family and gender roles, among other things. Conservative programs can be very generous but are often paternalistic. Their focus is on the preservation of existing social stratifications, not on, say, promoting work. An apprenticeship program might help preserve a longstanding occupation, for example, while a child or family benefit might be designed to promote the traditional family structure, perhaps by discouraging work.
The earliest modern welfare state programs often have a conservative origin. This reflects both the elite social position of their advocates and the fact that their purpose was to preemptively block market-based expansions. In some cases, social protections were explicitly designed to check the excesses of liberal policies. For example, Tory reforms in 1840s Britain tried to protect women and children from the most onerous work rules in the (liberal) Whig reforms of the 1830s. The U.S. evinces a similar conservative-first pattern, with programs designed to protect women and children passing early tests of constitutionality (this doesn’t last, but I’ll leave that for another time).3 One hallmark of conservative welfare state politics, Esping-Andersen says, is the relatively strong position of Catholic parties. Another is that political negotiations often take a “corporatist” form in which competing social interests are represented by intermediary groups organized by occupation or sector. Conservative states include Austria, France, Germany, and Italy.
The Scandinavian countries are the model social democratic welfare states in Esping-Andersen’s schema. The programs of these states are marked by universalism, with few if any benefits means-tested or tied to work history. The divide between “relief” and “social insurance” programs, very evident in the United States, is minimized, and benefit levels are comparatively high. Not coincidentally, overall economic inequality is also lower in these countries. The social democratic programs resist markets by providing people with real incomes that are not related to the market value of their labor. This posture is neutral with respect to labor force participation but, when combined with universalism, promotes broad workforce participation and social mobility.
Overall, people living in the social democratic nations are closest to enjoying the kinds of social rights that I advocate in this publication. This may not be the best news for Americans. The politics of these countries is marked by strong left parties as well as fairly unified labor parties and working classes. It is unlikely that the United States can replicate this path to social citizenship; we have to find our own way.
The three model welfare state regimes differ in their orientation towards labor, with liberal states allowing market forces to have the greatest influence on compensation. The term of art for this is “commodification” (literally, to what degree is labor bought and sold like a commodity, like wheat). Both conservative and social democratic regimes resist commodification, but in different ways. Since conservative states attempt to block the advance of expanding markets, Esping-Andersen describes what they do as “pre-commodification.” Social democratic systems work to correct or ameliorate the effects of market forces, so their efforts are labeled “decommodification.” The sheer number of syllables here is daunting. The key difference is that conservative programs resist markets in order to preserve existing social stratifications while social democratic programs act to equalize or flatten these strata after the fact. In contrast to both, liberal systems allow market forces to create social stratifications (they embrace commodification) even as they, in theory at least, corrode any social stratifications not based on markets.
Esping-Andersen’s effort at categorization is helpful, but we need to keep in mind that there are no pure types. Conservative influences, for example, are evident in all welfare states, especially in the early stages of their development. More important, all welfare states are embedded in a single global market economy within which the world-wide reach of market-based thinking continues to expand (for more on this, see the postscript). Since 1990, I suspect that every welfare regime has become more “liberal” in its orientation; that is, every system probably allows for a greater degree of “commodification” and a greater scope for material inequality driven by market forces. I hope to take a closer look at this question sometime over the next year.
Next Post: Civic Republicanism I: Citizenship (4 March 2025)
<All of the posts in On Social Citizenship connect. I recommend that readers go back and read the first entry in the series.>
Post-script: Alternative Views
Since not everyone agrees that America is a liberal society, I thought this was worth a postscript. [I promise not to do this too often!]
There are two kinds of counterarguments to the proposition. The first holds that conservative influences are actually the dominant ones. As evidence, consider, for example, the small matter of slavery. That’s not a very liberal institution. Deeper examination also shows that, historically, most labor practices were based on traditional relations of status even in the supposedly classless American society.4 It is also true that religion is much more important in the lives of Americans than it is for, say, Europeans.
This argument is not entirely wrong. Conservative influences persist. But liberal ideas have and continue to slowly erode conservative institutions. “Free labor” and slavery could not coexist forever.5 In 1972, only 5% of Americans were religiously “unaffiliated” (General Social Survey). That share rose to 29% in 2022 (Pew). A majority of Americans no longer say that religion is “very important” in their lives (Gallup).6 I could give other examples related to attitudes about race, sexual orientation, or gender. The fading of conservative influences is a big reason why fears about threats to “family values” can be mobilized as a political weapon. In this domain, we mostly welcome the advance of liberal principles: they let people be themselves and find their own best life.
But conservative principles—let’s just call it “custom” or “tradition”—also structure our economic relationships with one another and these norms are also eroding. We are less sure if these changes are really “progress.” We have all experienced the slow march of market-based thinking into new zones of exchange: setting prices for things like concert and airplane tickets dynamically, establishing new categories of property rights, generally letting supply and demand set prices where custom used to prevail. We sometimes fail to see this creep, but this trend is the very hallmark of capitalism. Eighty years ago, Karl Polanyi wrote about the devastating impact of the rise of the “fictitious commodities” of labor, land, and money triggered by the very idea of a fully self-regulating market.7 This is all about the degree to which we accept the primacy of the market mechanism, or if we push back. We often see these as bad developments (at least I do) and we sometimes resist them in small ways. Still, the march of markets seems irresistible. Short version: America has not been, and is not, a liberal monolith, that’s a strawman argument, but maybe it is still in the process of becoming one.
The second counterargument against liberal America is that liberalism itself includes and embraces structures of status, up to and including slavery, in order to exploit producers or workers to the benefit of owners of capital. I reject this argument as incommensurate with the approach I am taking here—that is, we employ mutually untranslatable languages. It explicitly rejects the idea that “conservatism” and “liberalism” can coexist in the same world system in favor of a comprehensive working ideology that rationalizes the current system of production.8 It is more useful to see the separate strands at work than to force a mélange of ideas into a uniform package; the latter error leads to baby-and-the-bath solutions.
To me, the deeper question is whether the liberal mode of economic organization, capitalism, can exist without some structure of systematic exploitation [nowadays largely the exploitation of foreign workers, some of whom work domestically]. We don’t know the answer to this question, but everything depends on it. It is a useful question, since we can envision “progress” as the steady elimination of pockets of exploitation as we strive towards a universal framework of individual opportunity. Liberal capitalism presupposes the possibility of sustainable mutually beneficial exchange, but we have never achieved a non-exploitative economic system. Honestly, I don’t think we have ever really tried. On that happy note, I’ll close.
Notes
2. Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism (Princeton University Press, 1990).
3. The Supreme Court eventually turned against paternalistic policies protecting women and children in favor of an unregulated free-for-all. This movement peaks with the seminal case of Lochner v. New York. See Joseph Fishkin and William Forbath, The Anti-Oligarchy Constitution (Harvard University Press, 2022), for more.
4. See, for example, Karen Orren, Belated Feudalism (Cambridge University Press, 1991).
5. The quotes on “free labor” are meant to evoke Eric Foner’s use of the phrase to describe the liberal ideology of the early Republican party (and related groups such as the Free Soil party). Eric Foner, Free Soil, Free Labor, Free Men (Oxford University Press, 1970).
6. Survey sources: Pew: https://www.pewresearch.org/religion/2022/09/13/how-u-s-religious-composition-has-changed-in-recent-decades/; Gallup: https://news.gallup.com/poll/1690/religion.aspx
7. Karl Polanyi, The Great Transformation (Beacon, 1944), esp 68ff. This is a truly great book. Asa Briggs writes about this as well: Asa Briggs “The Welfare State in Historical Perspective,” European J of Soc, 11.2(1961):221-258, at 236, 247.
8. You may recognize this posture as historical materialism. In its purest form, this branch of Marxism sees public philosophies, like other components of the “superstructure” (like religion), to exist entirely as rationalizations for the current system of production and exploitation. It is a powerful argument. Liberalism, like other public philosophies, was born as rationalization. Writers are trying to make sense of and justify their current political situations. But once articulated, ideas also have a creative force, helping to structure how we respond to the next situation. And most importantly, ideas are remembered, sometimes across millennia, to be applied in wildly different contexts. (Think Renaissance.)