The German Trade Shock and the Rise of the Neo-Welfare State in Early Twentieth-Century Britain

Abstract

We study the international origins of the neo-welfare state in Britain during the era of globalization before World War I. We introduce a new mechanism linking trade to the expansion of the state. In addition to increasing assessments of the volatility of employment in a market economy, trade shocks changed beliefs about the deservingness of the poor. Employing a shift-share measure of local exposure to German imports, we show that rising imports caused worse labor market outcomes from 1880 to 1910. Import competition led to a decrease in support for the Conservative Party in national elections after 1900, when the Liberal Party supported welfare state reforms. We further show that rising imports increased the use in local newspapers of scientific terms like “unemployment” relative to pejorative terms like “vagrancy” to describe the poor. Political responses to globalization helped shape voter support for the modern British welfare state at its inception.

Social Ties, Migration, and Political Preferences

“…25 Though a growing literature in historical political economy documents how historical migration waves have long-run political consequences (e.g., Charnysh, 2022;Sahn, 2019;Scheve and Serlin, 2023).…”

The Effects of Import Shocks, Electoral Institutions, and Radical Party Competition on Legislator Ideology: Evidence from France

“…These demands for compensation make voters more likely to support left-leaning politicians and parties that advocate welfare state expansion and redistribution. Indeed, there is evidence that the economic insecurities created by import shocks have driven affected voters to favour compensatory policies associated with traditional parties on the left (Rommel and Walter 2018;Scheve and Serlin 2023) and left-wing parties and candidates that universally reject neoliberalism, consumerism, and globalized capitalism have become increasingly electorally successful (Bale and Dunphy 2011;Hopkin 2020). This, in turn, has led to greater government spending (Dreher, Sturm, and Ursprung 2008;Garrett 1998;Rodrik 1998) and an expansion of redistributive policies (Bergh and Nilsson 2010;Leibrecht, Klien, and Onaran 2011;Meinhard and Potrafke 2012).…”

“…Import shocks are highly localized events that impact some regions of a country while leaving others largely untouched. When representing regions hard hit by imports, mainstream legislators, whose ideology focuses primarily on economic issues, face incentives to shift economically to the left to reflect increased demands for redistribution and compensation (Ruggie 1982; Scheve and Serlin 2023). However, local competitive contexts – in the form of varying electoral institutions 1 and the extent of competition from extremist candidates on both the far right and the far left – should mediate these economic and ideological shifts and, in some cases, force mainstream politicians to adapt their cultural ideology to accommodate the core ideological appeals of their extremist competitors (Meguid 2005).…”

Without Roots: The Political Consequences of Plant Disease Epidemics

“…increase support for left-wing parties because adversely affected voters demand more government protection and spending (e.g., Scheve and Slaughter 2004;Walter 2010;Scheve and Serlin 2023). Another strand of research has linked economic shocks or declines to an increased demand for right-wing parties with authoritarian and nativist policy platforms that address identity concerns among majority group members directed at minorities (e.g., Colantone and Stanig 2018a;Carreras, Irepoglu Carreras, and Bowler 2019;Baccini and Weymouth 2021;Ballard-Rosa et al 2021).…”