5
The Cold War and the Welfare State
in Western Europe
Klaus Petersen, Michele Mioni, and Herbert Obinger
1 Introduction
The Cold War and the growth of the welfare state constitute two major
frameworks for understanding politics and society in post-1945 Western
Europe. That war and conflict had an impact on the development of
modern welfare states is well established (Obinger et al. 2018). So far, less
attention has been paid to the linkages between the Cold War and social
policy reform during the so-called Golden Age of the welfare state (ca.
1945–1975). In this chapter, we ask the simple question: How did the
Cold War influence the development of welfare states in selected Western
European countries in the first decades after 1945?
K. Petersen (*)
University of Southern Denmark and Danish Institute Advanced Studies
(DIAS), Odense, Denmark
e-mail: [email protected]
M. Mioni • H. Obinger
University of Bremen, Bremen, Germany
e-mail: [email protected]; [email protected]
© The Author(s) 2022 47
F. Nullmeier et al. (eds.), International Impacts on Social Policy, Global Dynamics of
Social Policy, https://doi.org/10.1007/978-3-030-86645-7_5
48 K. Petersen et al.
However, simple questions rarely have simple answers. The Cold War
was primarily a battle for the “hearts and minds” of the people (Westad
2017). The Socialist Eastern Bloc led by the Soviet Union competed with
capitalist Western democracies (Pax Americana). Key aspects of this sys-
temic competition were social reform, economic well-being and the
development of advanced welfare states offering a brighter and more
secure future for their populations. Systemic competition also positively
influenced patterns of social spending (Obinger and Schmitt 2011).
In contemporary debates, the welfare state was seen as “a compromise
between the two extremes of Communism on the one hand, and unbri-
dled Individualism on the other” (Hobman 1953, 1). However, this com-
promise could take different forms and shapes. The Cold War influenced
the development of the welfare state in multiple ways as national contexts
(political, social and institutional) varied. Due to the limited space of this
essay, we focus on two mechanisms linking the Cold War and the Western
welfare state (see Petersen 2013):
First, social policies were important for securing mass loyalty and as an
anti-communist strategy in Western Europe. Developing social security
programmes offered (market-based) alternative to communism and
secured the loyalty of the working class. Social reforms worked as a bul-
wark against communism, hand-in-hand with tougher anti-communist
measures. Second, the Cold War heavily impacted political coalition-
building in Western countries. We see the exclusion of Communists from
the decision-making process, Social Democrats moderating their ideo-
logical positions, and Conservatives, Liberals and Reformist Socialists
uniting against the common enemy of communism. There are further
impacts of the Cold War, which cannot be discussed in detail, however.
For example, the Cold War altered international alliances and networks
as well as the routes for social policy diffusion. New transnational actors
emerged (International Monetary Fund [IMF], Organisation for
Economic Co-operation and Development [OECD] and later the
European Union [EU]), and the influence of US social sciences on
European experts was significantly facilitated by channels such as the
Fulbright Program, the European Recovery Program (ERP; Marshall
Aid), and the International Labour Organization (ILO).
5 The Cold War and the Welfare State in Western Europe 49
In the following sections, we present a condensed overview of how
these mechanisms played out in countries with different welfare state
types: the Nordic countries, Italy and divided Germany.
2 The Nordic Countries
The development of the Nordic welfare states was affected by the Cold
War in multiple ways. This is hardly surprising, as the major reforms and
expansion of the Nordic welfare states coincided chronologically with the
Cold War. The historical roots of the Nordic welfare model predate the
Cold War, but it was the rivalry between the two superpowers, from the
late 1940s to the 1960s, that lay the socio-political framework for the
post-war expansion of the welfare state. Arguably, the Cold War–welfare
state nexus cannot solely explain the routes and timing of Nordic social
policy reforms, but there are clear links between ideological patterns,
political competition and security considerations.
As World War II ended and the Cold War dawned, the Nordic coun-
tries found themselves in a new situation. As established liberal democra-
cies and market economies, they ideologically oriented towards the
US-dominated West, while the region was geographically close to the
Soviet Union and consequently of great geostrategic importance.
However, plans for a Scandinavian defence union very soon faltered and
the Nordic countries chose different national security strategies. Sweden
remained formally neutral backed by a strong military defence. Finland
also opted for neutrality but the proximity to Russia meant that Finnish
politics continuously had to maintain a positive relation and dialogue
with the Soviet superpower. Denmark, on the other hand, together with
Norway, joined the US-led North Atlantic Treaty Organization (NATO)
alliance in 1949.
Even with this variation in national security strategies, the develop-
ment of the national welfare state systems in the Nordic region followed
quite similar paths (Christiansen et al. 2006), which was facilitated by
close social policy cooperation in the region based on the idea of a Nordic
“middle way” between US-style capitalism and socialism. The successful
development of comprehensive welfare states combined free market
50 K. Petersen et al.
capitalism with state regulation and widespread public social security,
which allowed the Nordic countries to take a special position within the
Western bloc. The progressive (Social Democratic) market economy
brand attracted international attention as a way of transcending the black
and white logic of the Cold War. According to the book Freedom and
Welfare (Nelson 1953), published jointly by the Nordic ministries of
social affairs, the Nordic societies were successful precisely because they
combined freedom with welfare—and Nordic ministers did not shy away
from portraying this as a model for the rest of the world. Consequently,
the Nordic countries successfully entered the systemic competition of the
Cold War by defining a “middle way” that legitimised the development
of comprehensive welfare states.
The “middle way” approach also served its purpose in domestic poli-
tics. Systemic competition not only played out on the international scene
between rivalling nations, but also on the domestic level. In all Nordic
countries, we find heated conflicts between Social Democrats and
Communists over the hearts and minds of the working class. Social
reforms were at the forefront of this battle for the loyalty of the masses in
many ways.
First, social expenditure rose dramatically in post-war Nordic societies,
triggering a trade-off between military and social spending. Neutral
Sweden came out of World War II with a strong economy and turned
military production into a profitable export venture during the Cold
War. Denmark, on the other hand, found itself under dual pressure. The
US and NATO were demanding higher military spending at the same
time as Social Democratic governments were planning to expand the wel-
fare state. The Danish Communists actively used this guns-butter trade-
off, advocating that NATO was not only a threat to world peace but also
to the social welfare of the Danes. In 1952, the then Minister of Defence,
Poul Sørensen (from the Conservative Party) spent a full radio address
downplaying the conflict between social security and NATO member-
ship (Petersen 2013, 229–30). From the late 1950s onwards, when the
Nordic countries entered a period with strong economic growth, the
guns-butter trade-off became less important.
Second, social reforms were actively used in Social Democratic pro-
paganda against the Communists (Petersen 2013). The combination of
5 The Cold War and the Welfare State in Western Europe 51
growing affluence and increasing social security meant that Nordic
societies compared favourably to socialist societies east of the Iron
Curtain. Such systemic competition on the domestic level played a key
role for the success of Nordic Social Democratic labour movements
vis-à-vis their Communist opponents in the quest for loyalty of the
national workers.
Third, the “middle way” also served as a platform for political alliances
between Social Democrats and the Centre Right. Emphasising the divides
between the revolutionary and reformist left allowed Social Democracy
to become the main representative of the establishment while also gradu-
ally making the Centre Right accept the potential welfare reforms as a
bulwark against communism. Whereas this way proved successful in
excluding Communists politically through social reforms in Denmark,
Sweden and Norway, the Finnish case was far more complex (Rainio-
Niemi 2014). Finnish Communists mobilised an electoral base of around
twenty percent. Parliamentary strength in combination with support
from neighbouring USSR gave the Communists a more prominent role
in Finnish politics. Also, Finland was the latecomer among the Nordic
welfare states, and the so-called “popular front” government of
1966–1970, which included Social Democrats, the Agrarian Centre
Party and the Communists, is often hailed in popular historiography for
the breakthrough of the Finnish welfare state (Kettunen 2018).
In short, the welfare state was a successful anti-communist strategy
which secured the loyalty of the masses to the Nordic welfare state. This
played out on the domestic level as well as the trans-Nordic level, which
is rooted in the Nordic region’s strong historical tradition for coopera-
tion. Even though the Cold War set limits to cooperation due to the dif-
ferent national geostrategic positions, we find increased social policy
cooperation driven not least by the strong Social Democratic labour
movements. This also included anti-communist cooperation—such as
the exchange of information and propaganda, cooperation with intelli-
gence services, coordination—which reinforced the strategic choice of a
soft version of anti-communism using social reforms and social progress
as the main bulwark against local communism. Countering a genuine
pressure for tougher repercussions against Communists from US actors
(at embassies and international organisations), Scandinavian Social
52 K. Petersen et al.
Democrats and trade unionists maintained their preference for a soft
anti-communism as the most efficient bulwark against communism
(Petersen and Schmidt 2001; Misgeld 1997).
3 Italy
In Italy, both mechanisms discussed in this chapter affected the evolution
of the welfare state and its political use during the Cold War. The 1948
general elections marked the end of the National Unity Government and
the beginning of almost fifty years of uninterrupted government by the
Christian Democracy (DC), while the Italian Communist Party (Partito
Comunista Italiano [PCI]) took the lead of the left spectrum. The year
before, the third Italian party (Partito Socialista Italiano di Unita Proletaria
[PSIUP]) split on the issue of international alliances into the anti-
communist Social Democratic Party (Partito Socialista Democratico
Italiano [PSDI]), which would become the most loyal ally of the DC for
decades, and the left-wing PSI—Partito Socialista Italiano. The divide in
international positioning vis-à-vis the two bloc’s cleavages was mirrored
in the domestic socio-economic debates and conflicts, at least during the
early Cold War.
Until the early 1970s, the welfare state was a bone of contention
between the government bloc, led by the DC, and the Communists. In
1947, Ludovico D’Aragona, a former anti-communist trade unionist
who joined the PSDI and the centrist government alliance, chaired a
commission that was appointed to prepare a comprehensive reform of
social security. In the related debates, social security was fiercely contested
between anti-communist and pro-Soviet parties. While the left-wing fac-
tion within the DC and the PSDI supported the social security reforms,
the Communists criticised them because they would weaken the class
struggle and divide the working class (Mioni 2016).
At the end of the 1940s, DC-led governments passed important social
reforms on housing and land. A prospective reform of social insurance
targeting salaried and industrial workers was not enforced but played an
important role in the strategy of the DC (in charge of the Minister of
5 The Cold War and the Welfare State in Western Europe 53
Social Security) to “liberate” the workers from their links with the com-
munist movement through social welfare (Pavan 2015). The DC’s inter-
class, corporatist social views were reflected in a strategy that tried to
integrate rural and industrial working classes and soften class antagonism
through social reforms.
Against the backdrop of a still semi-industrial country, land reform
and the development of public works and infrastructure were motivated
by anti-communist goals, especially in Southern Italy. This strategy was
influenced by the US plans for the economic recovery of Europe includ-
ing the Marshall Plan (Bernardi 2006). The idea was to disconnect the
rural masses from agitation by social-communist organisations by pro-
moting economic growth. The reform served to hamper the workers’
quests for land collectivisation, and at the same time aimed to create a
new class of small landowners, loyal to the governing parties. Welfare
benefits were used by the government parties to attract votes, strengthen
political loyalty and to undercut popular support for the Communists.
This political dynamic shaped structures and practices of the Italian wel-
fare state in the longer run (Ferrera 1996; Manow 2009).
In the 1950s, the Socialists embarked on a revisionist path with regard
to the scope and goals of social policy. The PSI revoked its alliance with
the PCI after 1956. This shift opened up the opportunity for the Socialists’
co-participation in government with the DC in 1963, which was based
on a programme that also included a “welfare state from the cradle to the
grave” (Nenni 1964). By that year, Italy had accomplished its “economic
miracle” and became a fully fledged industrial country. This second phase
of reforms was primarily confronted with increasingly conflictual indus-
trial relations. The government’s reform programme featured the exten-
sion of industrial injury and sickness benefits, and the introduction of
social pensions. In the same period, the discussions on the universalist
national health service was initiated. Such reform came into being in
1978. A major reform of the centre left government was the Workers’
Statute, passed in 1970. The PSI strongly supported this legislation,
which was fiercely opposed by the Communists. The statute resulted
from the collaboration between Catholics and Socialists and aimed to
regulate industrial strife in a period of harsh radicalisation that developed
54 K. Petersen et al.
independently from the PCI itself. After 1970, social and political
dynamics in Italy changed. However, further developments crystallised
the use of welfare for political struggles.
4 Divided Germany
System competition in the early Cold War period was particularly intense
in divided Germany. Against the backdrop of a war-torn economy and
post-war destitution, the sheer existence of a socialist alternative next
door was challenging for West Germany (Federal Republic of Germany
[FRG]), not least because the German Democratic Republic (GDR)
aggressively showcased socialism as a role model for Germany as a whole.
Likewise, the FRG was an important reference point for the GDR’s com-
munist regime. In the formative years, the GDR prioritised economic
development and industrialisation with a view to demonstrating the
superiority of socialism vis-à-vis Western capitalism. At its fifth party
conference in 1958, the Communist Party even heralded that socialism
would economically come out as the winner of regime competition. In
terms of social affairs, the communist regime praised the right to work1
and other achievements of socialism, classified unemployment as a
scourge of capitalism and blamed the Western welfare state for being a
“sickbay of capitalism” (Hockerts 1994).
The FRG’s counter-model was the Soziale Marktwirtschaft, which was
seen as a liberal and superior alternative to collectivism. It was developed
by economist Müller-Armack in the late 1940s who saw the Soziale
Marktwirtschaft as a third way between unfettered capitalism and socialist
collectivism. Influenced by Christian social ethics, the concept combined
ordo-liberal ideas in economic policy with welfare state policies designed
to cushion the negative consequences of capitalism. At the same time,
when the communist leaders in East Berlin announced the victory of
socialism, Ludwig Erhard, Minister of Economic Affairs and one of the
fathers of the Soziale Marktwirtschaft, promised that it would generate
“prosperity for all” (Erhard 1957). In contrast to the audacious
1
Which in fact was an obligation to work.
5 The Cold War and the Welfare State in Western Europe 55
announcements of the communist regime to outpace West Germany in
terms of economic performance, this promise of a “social capitalism” was
real. Accelerated by economic reconstruction and aid from the ERP, eco-
nomic growth, wages and consumption significantly increased in the
1950s, while unemployment virtually disappeared. In addition, the West
German Wirtschaftswunder laid the basis for a massive welfare state expan-
sion. While social policy in the immediate post-war period had focused
on provisions for war victims and refugees, Chancellor Adenauer
announced a comprehensive welfare reform in 1953, which was also
motivated by system competition. Specifically, he argued that West
Germany must remain attractive to people from the GDR (Kleßmann
1991, 251) and had to be immunised against communist propaganda
(Schmidt 2005, 83). Social Democrat Ludwig Preller argued in the same
year that “especially in the Cold War it is welfare state generosity that
marshals the biggest battalions”. In fact, Adenauer’s pension reform of
1957 massively increased pension generosity and tied pensions to the
dynamics of gross wages. Welfare state expansion in West Germany thus
put the GDR on the spot (Hockerts 1994, 797). However, for economic
reasons the regime in East Berlin was unable to compete with West
Germany, where the economic miracle also facilitated welfare state expan-
sion in other areas (e.g. the overhaul of social assistance in 1961). In
consequence, the GDR was not only outdistanced in terms of economic
performance but also in social policy, particularly in the field of old-age
pensions, which were the Achilles heel of the socialist welfare model
(Schmidt 2001).
The Cold War also shaped party politics and ideological realignment.
The Adenauer government accelerated Western integration and embarked
on a harsh anti-communist course. The Hallstein Doctrine and NATO
membership (1955), which were formative for international affairs, were
mirrored in domestic politics by the ban of the Communist Party
(Kommunistische Partei Deutschlands [KPD]) in 1956, which had gained
5.7 percent of the national vote in 1949. The Cold War also moderated
the Social Democrats, who accepted the market economy and national
defence in their new political programme, which was named after the city
of Bad Godesberg and passed in 1959. Irrespective of ongoing conflicts
with the Christian Democrats, this policy shift facilitated cooperation
56 K. Petersen et al.
between the largest political camps, which, however, were also required to
cooperate due to the institutional checks and balances enshrined in the
Basic Law. Electoral competition between two pro-welfare-oriented par-
ties and the informal grand coalition of Christian and Social Democrats
were, along with the Wirtschaftswunder, the key driving forces of welfare
state expansion in the FRG. In consequence, both the Western living
standard and the Western welfare state were increasingly out of reach for
the GDR from the 1960s onwards.
In retrospect, system competition had a greater impact on the GDR
and its socialist welfare system. Already in the GDR’s formative years,
almost three million people left the country. “Voting with their feet” was
brutally stopped with the building of the Berlin Wall in 1961. However,
mounting repression reinforced the legitimacy problems of the commu-
nist regime (Hockerts 2009). In an attempt to generate mass compliance
and pushed by the Soviet Union, the Honecker government considerably
expanded the socialist welfare state in the 1970s and enhanced the
regime’s consumer orientation under the slogan “unity of social and eco-
nomic policy”. However, all those efforts imposed a heavy burden on the
command economy and eventually contributed to the breakdown of the
regime in 1989 (Hockerts 2009; Schmidt 2001).
5 Conclusion
In this chapter, we offer an overview on the linkages between the Cold
War and the post-1945 development of welfare states. The idea of such
links is far from new. As early as 1946, influential pro-Soviet British his-
torian E. H. Carr argued that Soviet Russia prompted the rejuvenation of
Western democracies through economic planning and the welfare state
(Carr 1946). In our chapter, we especially emphasise the importance of
two social and political mechanisms. First, social policies were important
for securing mass loyalty and as an anti-communist strategy in Western
Europe. Second, the Cold War strongly impacted political coalition-
building in Western countries. We demonstrate the importance of the
two sets of mechanisms through case studies representing three different
types of welfare states: the Nordic Countries, Italy and divided Germany.
5 The Cold War and the Welfare State in Western Europe 57
Notably, the existence of these mechanisms was also recognised by con-
temporary academic observers. International relations scholar Klaus
Knorr argued in an article from 1951 that “it is plausible that the demo-
cratic welfare state is the most constructive defense of the free world
against Communist expansion, for it offers to many societies, rightly or
wrongly dissatisfied with the free-enterprise economy, an alternative to
the attractions of Communism” (Knorr 1951). The confrontation with
communism, indeed, affected both socio-economic agendas in the West
and the formation of political coalitions that eventually shaped welfare
states. The domestic dynamics were interconnected with the interna-
tional context, which altered international alliances and networks as well
as the routes for social policy diffusion.
Acknowledgements This chapter is a product of the research conducted in the
Collaborative Research Center “Global Dynamics of Social Policy” at the
University of Bremen. The centre is funded by the Deutsche
Forschungsgemeinschaft (DFG, German Research Foundation)—project num-
ber 374666841—SFB 1342.
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