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What is Welfare Capitalism?

Osmand Vitez
Osmand Vitez

Welfare capitalism is the economic combination of traditional free market principles mixed with laws or practices from a welfare state. A welfare state helps individuals by offering minimum wage pay, short work days, restrictions on working ages, and unemployment benefits. In some countries, this type of economy involves the use of government regulation to force businesses to pay for these items in the form of taxes. Governments may require businesses to contribute a portion of their profits to funds that will help pay for workers who are injured on the job or receive termination form the company.

The bottom line is that this type of economy provides a safety net for the individuals living and working in a society. Traditional liberal economic theory states that workers are at a severe disadvantage compared to companies. They are unable to pay for the bare minimum lifestyle needs if unemployed, and therefore require help when hard times arise. Through the payouts of government programs or transfer payments from corporations, individuals can at least maintain their lifestyle until they can find other sources of income to sustain themselves. In some ways, this is a form of socialism where common ownership is available for capital generated by organizations.

Welfare capitalism strives to assist individuals during hard times.
Welfare capitalism strives to assist individuals during hard times.

Many countries in the world today operate under some form of welfare capitalism. The governments of these nations look to provide for individuals through the redistribution of wealth caused by corporate taxes. Companies can contribute voluntarily by providing funds or services for their employees on an as-needed basis. This allows the company to hopefully avoid government regulation that creates a forced welfare state on the economy. When engaging in these voluntary actions, organizations can also place money into services that their workers will find most valuable. For example, government programs may have specific restrictions for obtaining the funds, or regional programs may not be equal throughout the nation. This results in employees who cannot obtain desired benefits.

Ideally, economies that are based on welfare capitalism should provide a social safety net for impoverished families.
Ideally, economies that are based on welfare capitalism should provide a social safety net for impoverished families.

Welfare capitalism may sometimes be mistaken for free market capitalism. Companies that offer higher wages than the current market average may be seen as engaging in welfare state principles, but in reality, the company is looking to find and retain top talent by offering higher wages. This results in the best workers who can complete tasks and activities better than other individuals. Benefit packages, such as medical, dental, vacation time or other benefits, can also help avoid the forced creation of a welfare state by the government.

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Discussion Comments


@indemnifyme - Yeah, I don't know too many people who would like to go through the experience of getting welfare. I actually know a few people that really should do it, but they are too proud.

Personally, I don't know why people talk about welfare like it's such a bad thing. There are a lot of countries in Europe with excellent social assistance and it seems to me that their citizens are much better taken care of then people here in the US.


@charred - Worrying about people abusing welfare and not trying to get work is pretty ridiculous.

First of all, do you know how difficult it is to get social assistance in this country? A friend of mine went on welfare because she really needed it due to circumstances beyond her control. The process she had to go through to get it was grueling and humiliating.

Then, when she finally got her benefits, she faces added embarrassment. All cashiers know what those welfare cards look like, and some of them haven't been all that nice to my friend.

Also, it's not that easy to live on a minimum wage job. If you've never read the book "Nickel and Dimed" I would highly recommend it. It's about a journalist that responds to welfare reforms that say people can live on minimum wage jobs and don't need welfare. She actually goes and tries to live on minimum wage. It's nearly impossible!


I'm not sure if welfare capitalism is good or bad. It seems like there is good parts about it but some down-sides too.

I like that the government cares about social welfare. Businesses and employers are always worried about profits and they have the upper hand in the employer-employee relationship. So I agree that it's easy for employees to be disadvantaged and it's nice for the government to require businesses to support their employees during hard times.

At the same time though, I think there is a very thin line between sufficient support and too much support. If all employers had great welfare programs, I think that employees would be uninterested in working and would become dependent on these programs. "Why find a job when you are being paid not to work?" sort of thing.

It seems like welfare capitalism is both good and bad in some ways.

What do you think?


@Charred - It really doesn’t matter what your political views are, whether you think we need welfare state capitalism or not.

The reality is that no welfare capitalist society can remain in place if the economy is not doing well. Where do you think the government is going to get the money to fund the welfare assistance programs?

They will get it from taxpayers; but if the tax revenue stream is not strong, then what? They could raise taxes, which will impose an additional burden on the economy, or they could sell treasury bills to the Chinese.

But the Chinese have signaled that they will not forever bankroll the United States and its deficit driven approaches to budgets.

So to sum it all up, I believe in the old adage, “A rising tide lifts all boats.” With a strong economy, you can afford to have a safety net if you want, or encourage those people to work if they can.


@fify - I think we already have that middle road that you speak of. There has been a safety net for quite some time that we’ve made available for Americans that are in need.

The real danger is that the safety net can become a crutch for some people who choose to live off the government dole without making an effort to better themselves. This was the premise behind welfare reform in the Clinton administration, which sought to get welfare recipients off of social welfare and into the workforce.

As a result of that policy, many people who were on welfare were encouraged to enter the workforce or receive job training after a certain period of time. They could not stay on welfare indefinitely, assuming that they were physically capable of working.


@fify-- I don't really agree with you because I think that welfare capitalism means something different in the US and it means something different elsewhere.

In the US, it's about the welfare that government provides to the public. In that sense, we are a welfare capitalism because we have welfare programs in place, like employment pensions in different situations, health care and food assistance and so forth.

Now it's not the same as welfare capitalism in Europe, for example, because there, it is understood as people's welfare being the responsibility of government entirely. So they have more welfare programs, higher pensions to try and get everyone in society to the same economic and social level.


I think that in the U.S., there is a lot of fear about a centralized and powerful government, which causes us to disapprove of welfare programs thinking that it's going to take us to socialism. I think this fear is coming from an all-or-nothing type of thinking about government. We tend to think that we can only be one thing- either a capitalist country or a socialist country.

Welfare capitalism shows us that there is a middle ground though. We don't need to create an all too powerful central government and lose our capitalist policies to support Americans in need. We can still provide assistance when it's due, while making sure that the government doesn't make all the decisions for us.

I really think that U.S. policy makers, the public and the media need to learn and think more about welfare capitalism. Since we are not familiar with this system enough, we are not able to take advantage of its benefits. From what I know about it, I think it would benefit America to be closer to a welfare capitalist system than a purely capitalist one.

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    • Welfare capitalism strives to assist individuals during hard times.
      By: Paolese
      Welfare capitalism strives to assist individuals during hard times.
    • Ideally, economies that are based on welfare capitalism should provide a social safety net for impoverished families.
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