Capitalism, Democracy, and the Welfare State

Abstract

This review essay focuses on the intimate, yet contingent, historical relationships between capitalism, democracy and the welfare state in the OECD region. Six landmark studies, published over the past decade, are reviewed: Daron Acemoglu and James A. Robinson’s Why Nations Fail: The Origins of Power, Prosperity and Poverty and The Narrow Corridor: How Nations Struggle for Liberty; Thomas Piketty’s Capital and Ideology; Torben Iversen and David Soskice’s Democracy and Prosperity: Reinventing Capitalism through a Turbulent Century; Peter H. Lindert’s Making Social Spending Work; and Ayşe Buğra’s Social Policy in Capitalist History. All these books reveal the independent effect of historical political factors on the rise of the welfare state across advanced capitalist democracies. Contrary to received wisdom, the central argument put forward is that there is no trade-off between capitalism and democracy and, more importantly, that the welfare state has become an existentially important lubricant buttressing both advanced capitalism and liberal democracy.