The Corporate State, the Welfare State, and John Steinbeck

The public-private welfare state.


In 1957, John Steinbeck wrote a slim satiric novel called The Short Reign of Pippin IV. It isn't one of his finest works of literature, but there's a passage in it that has stayed with me in the three decades since I read the book, even as I forgot the plot developments that led to it:

"You take a big corporation in America, say like General Motors or Du Pont or US Steel. The thing they're most afraid of is socialism, and at the same time they themselves are socialist states."

The king sat bolt upright. "Please?" he said.

"Well, just look at it, sir. They've got medical care for employees and their families and accident insurance and retirement pensions, paid vacations–even vacation places–and they're beginning to get guaranteed pay over the year. The employees have representation in pretty nearly everything, even the colour they paint their factories. As a matter of fact, the've got socialism that makes the USSR look silly. Our corporations make the US government seem like an absolute monarchy. Why, if the US government tried to do one-tenth of what General Motors does, General Motors would go into armed revolt. It's what you might call a paradox, sir."

Set aside that semi-syndicalist bit about the employees having representation in "pretty nearly everything"—there may have been some truth to that in Germany at the time, but it's a stretch to say it about America. Think instead about this 1957-vintage vision of America's biggest corporations as private welfare states. This was a real trend, and while part of it was a simple matter of employers in a growing economy offering amenities to attract workers, there was an element of public policy to it too. In particular, there were the tax incentives introduced in the 1940s and '50s that played a major role in making employer-provided benefits the dominant means of receiving health insurance—and, more important still, in making insurance the dominant means of paying for health care. This was one face of the corporate state after the dust had settled from World War II: a public-private partnership where the government set the parameters and big businesses delivered the goods.

It wasn't an ideological compromise so much as it was a jerry-rigged accident. The limits of the vision—particularly when it comes to health insurance — soon became clear.

Decades later, Steinbeck's passage feels less like a description of an emerging social order and more like a glimpse back at the discarded hopes of another time. But where it comes to health insurance, we're still living in a system erected in that era. Obamacare is the latest, clumsiest attempt to put some patches on the leaks.