Welfare States and Their Inequality as a Result of Cultural Differences Instead of Varieties of Capitalism

Abstract

Social inequality depends crucially on how welfare states and different types of capitalisms distribute and redistribute income. But why do welfare states and capitalisms differ in a way that brings about different types of inequality in the first place? Contrary to the claims of the varieties of capitalism typology, this paper shows that comparative advantage in different economic sectors does not explain why capitalist countries use the market to differing degrees, leading to different types of welfare states. Instead, religiously inspired cultural differences between countries explain types of welfare states and thus indirectly the inequality that they result in. Liberal countries have populations with market-friendly attitudes, while coordinated countries have market-sceptical populations. This chapter therefore argues that the notion of a cultural policy style explains the emergence and persistence not only of different welfare states, but also of liberal and coordinated capitalisms. Notably, Calvinism and the social values it promoted led to liberal market economies, while Catholicism and Lutheranism promoted two types of coordinated market economies, one with group-based and one with nation-based solidarity, each of which have different implications for the type of inequality that countries are willing to accept.