III. WELFARE CAPITALISM IN THE
UNITED STATES: POLICIES, PRACTICES,
AND POSSIBILITIES

DISCUSSION

Jonathan Rees
University of Southern Colorado

     The combination of two private companies, one industry, and a failed state government program is an interesting mix of subject matter that cuts across different types of welfare. This offers me an opportunity to suggest some good areas for analysis that really can help us assess the history of welfare capitalism in the United States. I'll start by listing three broad questions, and then answer them for each paper on this panel in turn as they apply:

     1. Why did these employers start their welfare capitalism programs?

     2. Did these programs make a difference in the lives of employees?

     3. How did these private welfare efforts relate to the creation of government welfare programs later in the century?

     For this last question I'll use part of Colin Gordon's argument from his book, New Deals (Gordon 1994). Gordon suggests that many firms folded their welfare programs in the 1930s because these programs no longer worked and/or they could no longer afford them. Therefore, many businesses were all too happy to let states and, even more so, the federal government take over the function of private welfare capitalism. This broad thesis has more holes in it than Gordon admits, but I think it will be useful here in order to relate Earl Warren's health insurance plans to earlier, private welfare efforts.

     Scholarly works on welfare capitalism tend to assume that managers enacted these programs out of economic self-interest. Consider Howard Stanger's argument that Larkin's "welfare practices were very successful in creating and maintaining a strong corporate 'family' culture that unified a geographically dispersed employee and customer base." Michael Hilliard quotes paper magnate S. D. Warren to the same effect: "I have always felt my interest consisted in taking good care of the help." Hugh Hindman's thesis that welfare capitalism essentially gave Southern mill owners cover to use low-wage child labor suggests the same motive.

     I have no doubt that all these businesses believed their welfare capitalism programs were ultimately profitable, but this does not mean they actually were. To judge the value and significance of such policies, it is necessary to look closely at their effect on workers. Welfare work was often expensive and controversial. If workers did not feel that they benefited from these programs, long-run profitability cannot be assumed.

     There are hints in these papers that these private welfare programs were not as effective as their practitioners claimed. For example, the Larkin Company abolished its stock-purchase plan in part because of tepid employee response. Despite the existence of extensive welfare and paternalism, S. D. Warren faced a 12-day strike for union recognition as early as 1916. Hugh Hindman tells us that, from the beginning, mill towns were established in order to control workers. This fact, not to mention wages bad enough to force children into the mills, presumably canceled out whatever positive effect on industrial relations that these villages provided.

     Government welfare came about for different reasons and often had a more positive impact on workers' lives than these private efforts. One might assume that Earl Warren's state health insurance plans would have helped California workers or else these plans would not have helped Warren advance his political career. Daniel Mitchell tells us that the business community fiercely opposed Warren's plan. Certainly, no business likes being taxed, but Mitchell also cites the existence of employer-based health care as an alternative. I don't know how many workers were covered in this way, but, applying Gordon's thesis, the ability of employers to affordably take care of their workers already might be a key reason to oppose the state government taking over this function.

     The kinds of efforts covered in the other papers here were not as viable as private health insurance. Larkin's welfare program disappeared during the Depression. The Southern textile mills lost their reason for child labor before the Depression began. Therefore, they had no need to continue welfare capitalism as a smokescreen. Michael Hilliard suggests that welfare and paternalism survived the Depression at S. D. Warren, but to me these are two distinct, time-defined ideas. With the possible exception of health insurance created "by the 1940s," I see no post-Depression welfare programs at S. D. Warren that resembled the welfare capitalism of pre-Depression America.

     Sanford Jacoby tells us that welfare capitalism "did not die in the 1930s but instead went underground" (Jacoby 1997:5). The firms Jacoby examines were big. The firms that fought Earl Warren's insurance plans would likely have been big enough to start and maintain employer-based insurance of their own.

     The less-successful welfare capitalists covered in the other papers here are comparatively small. They would probably be the ones who would willingly let the government take on the cost of protecting their workers' welfare for them. To me, this panel suggests that firm size is a key determinant of why some employers ended welfare capitalism in the 1930s and others expanded it.

References

Gordon, Colin. 1994. New Deals. New York: Cambridge University Press.

Jacoby, Sanford. 1997. Modern Manors. Princeton, NJ: Princeton University Press.