The Creeping Disorganization of Welfare Capitalism or What Is the Future of Germany's Social Sector?

By Bode, Ingo | Review of Social Economy, September 2003 | Go to article overview

The Creeping Disorganization of Welfare Capitalism or What Is the Future of Germany's Social Sector?


Bode, Ingo, Review of Social Economy


Abstract Drawing on the debate over the destiny of the coordinated market economy versus the expanding liberal market model, this article argues that the analysis of the re-regulation of capitalism must address the embedding infrastructure of the market. Since social support sectors are an important part of this embedding infrastructure the article focuses on organizational change within Germany's social sector as a basis for a new perspective on the future of German welfare capitalism and develops a complimentary understanding of the "social sector economy." The empirical discussion focuses on organizations providing social support services in a direct or indirect way, on the changing environments in which they operate, and on their strategies for coping with change. The discussion indicates that the German model is slowly but surely evolving toward a "disorganized" welfare capitalism shaped by both formal institutional stickiness and considerable change of the social sector's service provisions. While this change leads to more heterogeneous outcomes in terms of welfare it is also conducive to social innovation.

Keywords: social economy, welfare, Germany, non-profit organizations, models of capitalism, organizational change

INTRODUCTION

For some time now, there has been a lively debate about various forms of welfare capitalism and their future prospects (Hollingsworth and Boyer 1997, Crouch and Streeck 1998, Ebbinghaus and Manow 2001, Hall and Soskice 2001, Schmidt 2002). This debate has focused on the destiny of the regulated market economy or social capitalism compared to the Anglo-American model of the more unregulated, liberal market. An important aspect of the debate focuses on the characterization of the institutional context of the market economy. Social economics, for example, views the market economy as embedded within an institutional contexts of education, social support systems, legal frameworks, political governance and social support systems. An assessment of the extent to which these and other institutions are subject to globalization-driven transformations calls attention to the particular national models that characterize the relationship between markets and their institutional and regulatory context. The Scandinavian countries and Germany are generally cited as following a "social market economy" or "social capitalism" model. The main characteristics of this model are negotiated economic policies, network-based production, co-operative management/labor relations and a strong welfare state. Germany thus can serve as a case study example for assessing the extent to which the social capitalism model is loosing in influence while the Anglo-American liberal market model is gaining.

This article seeks to describe the changing reality of Germany's social market economy by investigating a specific aspect of institutional change, namely transformations within the institutional infrastructure of German social capitalism. Examining these changes offers key insights into the future of Germany's social market economy. The definition of social economics underlying this analysis views the social economy both as a system of interrelated institutions communicating a particular societal order and as a system of concepts that shape the ideas and behaviors of economic actors who translate these concepts into organizational practice. The article thus analyzes organizational structures and relationships that form the core of the German model of social capitalism and suggests that it is the changing embeddedness of these structures and relationships into their political and civic context that underlies the transformation of the German model. What is at stake is the changing embeddedness of the embedding infrastructure of welfare capitalism.

This kind of focus on institutional change has already informed investigations of industrial relations in the German context, mainly by considering the role of organized interests. …

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