The role of the state in capitalist societies has been a bone of considerable contention among scholars. The two founding fathers of sociology held radically opposing views on this subject which were reflected in the numerous debates over subsequent decades to this day. Yet, no answer has been found to the vexing question: on whose side is the state in capitalist societies? The author examines current theories and, comparing Britain and Germany, shows that they are unable to explain the contradictory social and industrial policies in these two countries during the twentieth century. Based on in-depth archival and secondary sources the author offers an alternative theoretical framework, one that focuses on the interactions among historical contingencies, the global cultural context, and political processes.