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

Social scientists dealing with business and politics have tended to focusmostly on the power of business and less on the political challenges andconstraints that business interest groups face. This paper analyses howbusiness interest groups respond to political initiatives that challengetheir interests, using four episodes of political conflict in Germany. Thepaper elaborates a model of response strategies and their likely impacton political outcomes. The model suggests that business interest groupscan respond to political challenges in two ways: by seekingconfrontation or by pursuing adaptation. The paper illustrates these tworesponse strategies with four episodes of political conflict in thepolitical-economic history of Germany: (i) the adoption of socialinsurance under Bismarck, (ii) the adoption of unemployment insurancein the 1920s, (iii) the adoption of board-level codetermination in the early 1950s, (iv) and the Agenda 2010 labour market reforms of the early2000s. These four case studies show that adaptation facilitates socialcompromise, while confrontation results in a bifurcated outcome,producing either dominance or defeat of business interests, dependingon what side government takes. Furthermore, the analysis finds thatconfrontation tends to be associated with a unity of interests within thebusiness community, while adaptation tends to be associated with afragmentation of interests. The discussion emphasises that the role ofbusiness in politics should not be seen solely in terms of business‘influencing’politics, but also as potentially adaptive.