Abstract: Why Did Early Industrial Capitalists suggest Minimum Wages and Social Insurance?

Alfred Reckendrees

Abstract

The industrial district of Aachen (Prussian Rhineprovince) was the economically most advanced region in Prussia in the early nineteenth century, leading in terms of industrial employment, technology, and modern industrial organization. Surprisingly, regional entrepreneurs proposed elements of a modern welfare economy. In 1830, they suggested the introduction of collective labor rules regulating working hours and payment, and about 1860—more than twenty years before Bismarck—they proposed a pension system with equal mandatory contributions from employers and employees. The proposals did not gain support from the Prussian authorities, who argued that collective agreements would violate the freedom of contracting. The view of entrepreneurs defending economic liberalism and demanding social institutions in order to stabilize the social environment and to integrate labor into the capitalist society and the Prussian state somehow contradicts the dominant perception of the development of the Bismarckian welfare state as a means to reconcile labor with the new German state. The motivation of the industrialists' suggestions was based on economic reasoning and self-interest rather than on philanthropic ideas. While analyzing social policy as an entrepreneurial aim, the paper puts the German welfare state in a new perspective.