Welfare State Building and Coordinated Capitalism in Japan and Germany

Abstract

A comparison of early social policy in Germany & Japan argues that the welfare state is an important but often overlooked factor that helps to explain the varied performance & different institutions of contemporary market economies. It is maintained that the "ways & means" of economic coordination (based in the firm in Japan & in the industrial sector in Germany) correspond to key institutional features of each nation's welfare state. State intervention in Japan was intended to address problems of high employee turnover & the scarcity of skilled labor without interfering with market forces, while Germany's social legislation was aimed primarily at controlling the worker movement & lessening worker-employer conflicts. In spite of some differences, the welfare states of Germany & Japan integrated labor & capital & targeted welfare entitlements, especially for the industrial workforce. Both welfare states became more unified & universal over time & have helped to achieve a productivity coalition between workers & employers, as well as a trusting, long-term cooperation between economic agents. J. Lindroth