Chapter 1
in the final instance, by the requirements of the hegemonic fraction of capital. However, this version of policy has no moving parts: the theory allows for results (of a rather indeterminate kind) but no action.
This resume of theories of policy shows that no 'general' theory of policy has yet been devised: different levels of analysis simply pick up and manipulate different categories of data. Private interest theories of regulation tell us that actors in political systems (both those in private firms and those in government) are motivated by a desire to maximise their personal utilities, subject to certain systemic, or
structurally given, constraints. Policy, as represented by the effective rate of assistance to industries, represents the resultant of these f o r c e s and constraints. However, private interest theories do not address the nature of the constraints with which they implicitly deal.
Systems-based theories, similarly, sire weak on structure but they do allow connections to be made between economic and political f o r c e s .
Moreover, for a small, trade-exposed economy such as Australia's, f o r c e s coming from 'outside' the domestic economy are clearly vital to the
understanding of domestic reactions.
The 'decision-based' model proposed at the beginning of this chapter appears to o f f e r a way of overcoming at least some of these problems. It is basically a systemic model which links together economic and
political forces. At the same time, by investigating particular aspects of the system in detail, it is possible to focus the analysis finely
enough to show the motivations of people in various locations within the system. In this context, structural factors are the organisational
arrangements which shape incentives to individual actors.
Implications of the analysis for the study of industry poUcy The thesis attempts to understand something called 'Australian
manufacturing industry policy' b y investigating both structure and process. Although the 'industry policy' literature is v e r y amorphous, it is worth comparing and contrasting this approach with that of
comparativists such as Zysman, Katzenstein and Castles. These writers use the different strategies adopted by countries for industrial growth
a n d adjustment as a means of illuminating underlying socio-economic and political structures a n d processes (Zysman 1983; Katzenstein 1985).
J o h n Zysman's Governments, markets and growth (1983) 'analyzes the efforts made by the governments of the larger advanced countries - the United States, Great Britain, France, West Germany, and Japan - to
respond to shifting economic conditions in the years since the Second World War'. Zysman develops an argument that 'national financial
structures can illuminate the economic strategies of these governments a n d the political conflicts that accompany industrial adjustment'
(Zysman 1983: 16).
In Zysman's account, the structure of national financial systems
(essentially, whether industrial financing is predominantly credit or equity based) shapes the capacity of the state to respond to market- place changes. More generally, each nation-state evolves a political settlement for distributing the 'gains and pain' of growth. If these
distributional settlements are not stable, political conflict will continue until a new agreement is reached.
Peter Katzenstein in Small states in world markets argues a somewhat similar case, showing how the small european states have been successful in adjusting to rapid economic change in technology and global
competition b y taking into account both the political and economic requirements of rapid change. This produces a yardstick for industrial
success which is neither strictly political nor strictly economic. Katzenstein describes this criterion as
the extent to which social conditions, political institutions and public policies facilitate or impede shifts in the factors of
Chapter 1
requirements of political legitimacy (Katzenstein 1985: 29).
F r a n k Castles has applied this general framework to the case of Australia, contrasting 'the Australian pattern of institutional and ideological response to problems of external vulnerability with that characteristic of the smaller countries of Western Europe' (Castles 1987: 15-17). Castles concludes that the Australian pattern of response to its vulnerability to the vagaries of international trade is
characteristic of a politics of domestic defence', which may be
contrasted with the 'politics of domestic compensation' employed by the small european states described by Katzenstein (Castles 1987: 23). T h e essential difference between the two, as described b y Castles, is that, in Australia, the political accommodation took a protectionist form, whereas in the smaller countries of western europe, an active labour market policy and generous welfare state facilitated (both politically and economically) the degree of flexibility required for export oriented growth.
In theoretical terms, these arguments rely on an implicit political equilibrium model: that is, states will try, through politics, to come to terms with their external economic situation in w a y s which both reflect, a n d condition, their internal functioning. Strategies which are broadly functionally equivalent will, therefore, show different
institutional patterns between states.
T h e present analysis takes a quite different approach. Firstly, the scenario is not one of 'adjustment' to external forces, but rather of reaction to them. As these forces are constantly changing, the system
will be in disequilibrium, rather than in equilibrium. To the extent that each state's economic situation is unique so, therefore, will be its behaviour. Secondly, the structural elements in the cited works are not linked to a theory of interests. We are not shown why governments or businesses behave in the w a y they do. T h e present work seeks to make these linkages clear. Finally, I am interested in the possibilities and problems inherent in the concept of policy: that is, the efforts made b y