How Do Business Interest Groups Respond to Political Challenges?: A Study of the Politics of German Employers

New Political Economy, 2017

19 Pages Posted: 10 Nov 2017 Last revised: 18 Feb 2018

Date Written: October 16, 2017


Social scientists dealing with business and politics have tended to focus mostly on the power of business and less on the political challenges and constraints that business interest groups face. This paper analyses how business interest groups respond to political initiatives that challenge their interests, using four episodes of political conflict in Germany. The paper elaborates a model of response strategies and their likely impact on political outcomes. The model suggests that business interest groups can respond to political challenges in two ways: by seeking confrontation or by pursuing adaptation. The paper illustrates these two response strategies with four episodes of political conflict in the political-economic history of Germany: (i) the adoption of social insurance under Bismarck, (ii) the adoption of unemployment insurance in the 1920s, (iii) the adoption of board-level codetermination in the early 1950s, (iv) and the Agenda 2010 labour market reforms of the early 2000s. These four case studies show that adaptation facilitates social compromise, while confrontation results in a bifurcated outcome, producing either dominance or defeat of business interests, depending on what side government takes. Furthermore, the analysis finds that confrontation tends to be associated with unity of interests within the business community, while adaptation tends to be associated with fragmentation of interests. The discussion emphasises that the role of business in politics should not be seen solely in terms of business ‘influencing’ politics, but also as potentially adaptive.

Keywords: business and politics, welfare state politics, political economy of entrepreneurship, history of economic ideas

JEL Classification: P12, P16, H50, H70, J58

Suggested Citation

Paster, Thomas, How Do Business Interest Groups Respond to Political Challenges?: A Study of the Politics of German Employers (October 16, 2017). New Political Economy, 2017 , Available at SSRN:

Thomas Paster (Contact Author)

Roskilde University ( email )

Universitetsvej 1
P.O. Box 260
Roskilde, DK-4000


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