Peter Swenson has written a thought-provoking and edifying work of comparative political economy that examines the causal relationship between national differences in capitalist interests and divergent welfare state development. Given Swenson's ambitious challenge to many existing accounts of welfare developments and his detailed historical analysis, this book should attract some well-deserved attention.

The book seeks to explain how the United States raced ahead of Sweden in developing national welfare state programs in the 1930s, despite the fact that Sweden enjoyed a strong labor movement, a dominant labor-based party, and a highly centralized parliamentary system. This “historical puzzle” is compounded by the fact that Sweden then slowly but surely built an exemplary comprehensive welfare state while the U.S. welfare state never fully followed through on its earlier and more substantive beginnings. Swenson finds lacking the standard explanations by institutionalists (led by Theda Skocpol) and power resource theorists (led by Gosta Esping-Andersen) because they ignore the key supportive role played by capitalists. To bring capitalists into the explanation means rejecting the “equivalency premise” that class interests are fixed across national boundaries and that all capitalists oppose reform. In fact, Swenson finds that capitalists, as employers, are very interested in social reform as another way to steer and control labor market developments. And they often join with responsible labor leaders in “cross-class alliances” to support reformers developing social legislation.

The author argues that capitalists in different nations organize their labor markets differently, and this helps explain divergent welfare state developments. Using concepts borrowed from labor economics, he traces divergent Swedish and American labor market strategies over the course of the last century. He finds that Sweden, with its chronic labor shortages, developed a system of employer “solidarism” in which leading elements of Swedish capital supported low-wage compression by preventing individual employers from using higher wages and benefits to coax job-hopping by employees. Sweden's organized labor leaders cooperated with this strategy because of the benefits they gained in return—greater job security for members, greater unity, and more stable leadership. And Swedish Social Democrats were all too willing to help stabilize and support this cross-class alliance with new types of governmental interventions designed to underwrite the stable low-wage compression demands of Swedish capital.

American capitalists, on the other hand, relied upon two completely different labor market strategies. In the excessively competitive sectors of the economy (coal mining, for example), capitalists developed “cartelism,” encouraging unions and later government social policies as devices to control and counter low-wage “chiselers” who exploited low-wage labor to gain market advantage. Monopoly-sector capitalists (automotive firms, for example), by contrast, developed “segmentalism,” utilizing high “efficiency” wages and company-based benefits (“welfare capitalism”) to keep unions at bay, create goodwill, and so increase labor productivity to match their higher investments in cutting-edge technologies. Segmentalists, too, supported social legislation during the 1930s to counter the Great Depression era's cutthroat competition.

For Swenson, these divergent labor market systems greatly influenced the type of welfare state reforms that were subsequently pursued by reformers in each nation, as reformers listened to capitalists, and as capitalists supported reform efforts that fit their labor markets needs. The role of capitalists also explains the puzzling divergent timing of welfare state developments in each nation. During the 1930s, American employers proved more willing than their Swedish counterparts to support new forms of governmental interventions because of the unruly cutthroat competition unleashed by the Depression. Later, in the 1950s, Swedes and Americans reversed roles as Swedish capitalists supported expanding comprehensive government benefits to undermine the growing use of private company–based social benefits to poach labor from the majority of low-wage employers. Meanwhile, American capitalists resisted expansive new social policies by increasing company-based private benefits.

These conclusions are much more startling with regards to the Swedish case, where scholars have focused on the great strength of organized labor and the labor-based Social Democratic Party. By putting capitalists at the heart of the story about Sweden's comprehensive welfare state, Swenson turns much conventional thinking on its head. Nonetheless, his account only tweaks the scholarly understanding of the less universalistic U.S. welfare state. While institutionalists have assumed “monolithic capitalist opposition” (p. 222), other scholars from whom Swenson directly draws—including Gabriel Kolko, G. William Domhoff, and Colin Gordon—specifically examine the diverse sentiments among American capitalists and how these interests intersected with reform efforts.

Swenson, though, seeks to steer a course between an institutionalism that ignores capitalists and an instrumentalism that makes too much of capitalist input. He seeks a theory that “neither ignores nor exaggerates capitalist influence” (p. 238), and so opts for an “institutionalism open to the notion that capitalists are a force to be reckoned with in capitalist society” (p. 244). He does this by focusing on the key role of reformers who build on existing cross-class alliances to orchestrate reform legislation that will survive postcrisis rollbacks. Capitalists signal to reformers what measures they will accept, and reformers in turn build these preferences into reform legislation. His evidence for this is much stronger in the Swedish case, but still, to the extent that he shows capitalist preferences dictating the direction and pace of even welfare state development, he reveals a rather powerful version of capitalist input into, and leverage over, politics. In fact, as he notes, his account counters Esping-Andersen's commonly accepted view that welfare policies are “de-commodifying” by sheltering workers from market forces. Since capitalists often support many successful types of social reform, welfare states do not embody clear victories by workers over capitalists.

Swenson's analysis, however compelling, leaves some broader issues untheorized and unexamined. He seems to have absorbed the perspective of labor economics so well that he continually blames labor militancy when cross-class alliances fail to form or when they fall apart. Real issues of power and class struggle—certainly of importance when discussing capitalist relations with labor and with government—are simply overlooked or discussed functionally in terms of the technical difficulties of solving labor market disequilibria. And by arguing that the American head start over Sweden in the area of social reform “derived from profound differences in employers' regulatory interests” (p. 12), Swenson simply overlooks the far more unruly and disruptive social movement experience in the United States.

Swenson also begins and ends Capitalists Against Markets with references to Karl Polanyi. But for Polanyi, welfare and environmental measures do represent a countermovement against commodification and a power loss for capitalists. Hence, however conducive at times to capitalist interests, reform measures do engender a real tension between commodification and de-commodification and a real ambivalence on the part of many American capitalists in particular, a tension and ambivalence that have become all too obvious of late.