Varieties of Capitalism

W hile traditional VoC Research and CCC models are often considered to be competing approaches, it appears that they should be better conceptualized as complementary perspectives. This is so because fi rstly, they focus on different institutional aspects of contemporary economies (with the former focusing on extreme institutional equilibria and the latter on growth dynamics, which can be led both by domestic consumption and exports). Secondly, they do not necessarily follow the same categorization among advanced economies. Therefore, as part of the ongoing discussions on the economic governance of the Eurozone and the necessary economic policy reforms, I would argue that epistemological bridge- building between the two perspectives can signifi cantly expand our horizon of understanding the current conjuncture. Instead of construing the two approaches as mutually exclusive alternatives, for instance, further research may focus on a fruitful rapprochement between the supply side issues on the company level of VoC and the demand side emphasis of growth models. This will enable us to appreciate, on the one hand, the way that institutional asymmetries of different varieties of capitalism led the member states to adopt divergent growth strategies while participating in the same monetary union; on the other hand, we will be able to decode the proposals that different member states put forward as regards the on-going Eurozone reform effort in light of their attempt to preserve their comparative institutional advantage.

One of the key criticisms made of the Varieties of Capitalism perspective advanced by Hall and Soskice (2001) is that it is functionalist (or inductive). That is, it looks at an existing array of capitalist outcomes (particularly Germany and the United States) and then posits an explanation about why they look the way they do rather than reaching conclusions that logically follow from specific premises, as with a deductive theory. Deductive argumentation would lead to the identification of capitalist ideal-types, which real-world systems would then correspond to. While Hall and Soskice do argue that existing capitalist outcomes depend on nations’ specific historical/cultural circumstances, by basing their theory on these ill-defined attributes, we are unable to make specific predictions about other countries (another defining attribute of a deductive theory).

A closer look at Gourevitch and Shinn (2005) helps illustrate the problem. In their causal model, economic interest groups made up of owners, managers and workers are the main play- ers, while state action is limited to the political institutions which represent the “machinery that refracts the preferences and that aggregate them into outcomes” (2005, p. 8). What is missing here is state action as the product of state actors qua state actors, meaning the elected or unelect- ed public officials who may have preferences separate from the main players, for example, be- cause they are focused on the public, whether conceived of as consumers of the products pro- duced by these firms, as small shareholders whose pensions are tied up in those firms and/or as voters who will let their views be known through the ballot box if they feel threatened as con- sumers or small shareholders. Equally importantly, public officials may act alone, even without the existence of a political constituency of shareholders, in anticipation of a possible future reac- tion from voters who will become shareholders. This is the argument of Jonathan Westrup (2005) to explain similar state actions in countries from different varieties of capitalism, Ger- many and Britain, in which politicians’ concerns about voter response to the privatization of risk to the household created an incentive to challenge the regulatory status quo, leading to the move to create a strong, single financial regulator against the strong preferences of central banks. The point here is that although it is neater and easier to model ideal-typical coalition for- mations if one keeps to three main corporate governance actors, this leaves out one additional, albeit admittedly problematic, “player,” the state This is because this player not only frames the action of the other players—through the political institutional context of formal institutions— but can also reframe it through policies. And such reframing is not always a direct consequence of the bargains of the three corporate governance players but may very well be because of the separate interests of state actors acting in the public interest.

The ‘varieties of capitalism’ approach offers much in its ability to move us beyond the tendential reification of ‘the international’ as a discrete spatial scale of economic activity. It reminds us that there are particular geographies of production and consumption, which represent embedded networks of economic activity that are limited both socially and spatially. Spatial scales become more than arbitrary territorial distinctions only at those moments in which they have social significance conferred upon them by way of the human interactions that take place at those scales. From our own experiences of the world, we know that most of the economic relations in which we engage occur at spatial scales other than ‘the international’. However, there is a danger, evident in much of the comparative political economy literature on national ‘models’ of capitalism, of responding to this observation simply by replacing one reified spatial scale with another. The fact that the majority of economic activity is not conducted at the international level does not, as a consequence, obviate the need to think outside the terms of discrete and autonomously constituted national economies. It remains unclear whether such a task is possible within an analytical framework that allows each country to possess its own national variant of capitalism.

The varieties of capitalism approach, stemming from institutional theory assumptions, has become a very prominent approach when it comes to analyzing comparative capitalism over the last decade, thereby becoming the general fixture of the recent capitalism debates (Bieling, 2009). The VOC approach has often been criticized for its simplicity or the wrong way of terming the two types of market economies (LMEs and CMEs), and thus it has been labeled as an approach of limited validity by various authors (Ahrens & Jünemann, 2007; Crouch, 2009; Hancké, Rhodes, & Thatcher, 2009; Howell, 2003; Jackson & Deeg, 2006; Kenworthy, 2009; Taylor, 2009; Watson, 2003). Especially the wording in respect of ‘liberal’ is debatable, as it cannot necessarily be put into direct reference to economic liberalism. As shall be seen in the forthcoming elaborations, LMEs naturally comprise several characteristics of economic liberalism, but there are those additional dimensions included in which LMEs might potentially deviate from or extend the original economic liberalist perspective, such as the relationships between employers and employees with regard to vocational training and education. While economic liberalism can be said to be concerned with the overall market conditions, the ‘liberal’ in LMEs is also strongly focused on internal corporate facets.

Stakeholder protection in corporate governance and in the legal system, the varieties of capitalism, and long term unemployment Chilosi, Alberto Department of Economics - University of P[r]

The differences among political economists on how many varieties of capitalism there are can be seen as depending mainly upon whether, as Colin Crouch puts it, one takes a “label- ing” approach to create country groupings for the purpose of theoretical comparison or an “analyzing” approach concerned more with empirical realities (Crouch 2005). Another way of looking at it would be to differentiate between those who prefer parsimony, which makes for ideal-typical models and difficulties in applying to specific cases, and those who accept com- plexity, which may be more empirically valid but, naturally, suffers from its specificities (see discussion in Deeg and Jackson 2006, p. 21). Yet another way to explain the differences in ap- proach, and the one used here, is to take note of how political economists preference a particu- lar set of features in arriving at their ideal-typical models and country ideals. Convergence theorists tend to take finance and globalization as defining factors—with all that that means in terms of the internationalizing trends in capital ownership, corporate governance, and the em- phasis on profits—making for convergence to a neo-liberal model, epitomized by the United States and the United Kingdom (e.g., Lane 2005, Strange 1996). Divergence theorists in the V o C

Finally, one of the key findings of this study, leveraging the varieties of capitalism analytical framework, is that corporate stakeholder salience patterns are reflections of series of complex interactions between national institutional frameworks and (trans-national) industry influences on firms. This finding is not limited to the understanding of corporate stakeholder salience but also has implications for current debates and efforts to fine-tune comparative business models – particularly the varieties of capitalism model. In this regard, the varieties of capitalism model as an analytical ‘agenda’ (Hancke et al., 2007) for understanding variations of political economies could be theorised as a reflection of the dynamism between interdependent layers of influences – one at specific (trans-national) sector levels, and the other arising from interactions between different (trans-national) sectors within a particular national context to generate national patterns of corporate stakeholder salience. Although the varieties of capitalism model is often presented as a firm centred approach (Hancke et al., 2007:5) – in which “[I]t is assumed that firms behave according to the rules provided for them by the specific institutional arrangements, which thus co-ordinate and ‘govern’ them” (Crouch et al., forthcoming) – it appears to abstract from these emergent interactive patterns of corporate stakeholder salience at the micro-level to typify national political economies, while at the same time paying less or minimal attention to possible heterogeneity within same national political economies and or influences from trans-national social spaces (Morgan, 2001, 2006).

Thus, while Estevez-Abe (2005, 2006) suggests that cross-national differences in gender segrega- tion among advanced economies may be due in part to variations in investment in male skill regimes, explaining that the lack of progress in Japan is due to multiple institutional factors (Estevez-Abe, 2013), Mandel and Shalev (2009) argue that social class is an important explanatory variable. Neither, however, analyse the entrenched cultural influences that feed the deep-seated prejudices that might encourage subjective bias towards investment in male career advancement and which would, in turn, institutionalize gender segregation in the workplace and contribute towards its persistence. Although Rubery (2009) concedes that a broader perspective is needed from scholars working in the varieties of capitalism literature, she does not advocate examining the role of culture in reproducing spatial variability in institutional values and preferences. Indeed, Soskice (2005) acknowledges these weak- nesses in comparative political economy by stating that, despite its purpose being to analyse spatial variation in political-economic institutions among capitalist regimes, the varieties of capitalism lit- erature does not do enough to explain geographical differences in gender equality in the workplace. Consequently, in choosing Japan, popular culture, manga and workplace gendering as our discursive territory, we take up the challenge laid down by Czarniawska in this journal (2006, p. 235), who states that ‘the silent actions that form the core of gendering practices in society are taken for granted to such a great extent’ that empirical studies ‘cannot easily be conducted by following the traditional research design’ and that fiction is therefore ‘one possible underexploited venue for research’. And we concur with Lipschutz, who argues for the cultural geographic analysis of comparative political economy by stating that popular culture serves recursively ‘to reproduce social being and associated beliefs, contexts, and social practices since these products draw on and mirror those societies and times for which they are produced’ (2010, p. 2). Popular culture, in other words, plays a substantial role in framing, legitimizing and reproducing cultural norms or institutions that are central to the varieties of capitalism and national business systems discourses in comparative political economy.

30 lead to transformative results. Nonetheless the findings provide insights into the interaction between the supranational actors in the EU that drive towards integration and hence convergence towards the LME model, and their interaction with competing preferences in the MSs. Here transnational actors play a pivotal role towards liberalisation, nonetheless as it has been shown, locally embedded actors actively constrain the power of exit that the former have. The supranational actors can open up windows of policy opportunity for transnational actors, but locally embedded actors retain power of voice with their MS governments. In the end It is ultimately the bargaining positions and power of MSs that defend or undermine national varieties of capitalism institutional complementarities. As regards further policy, the findings of this thesis hint towards the recommendation in favour of a diverse financial system with a mix of commercial, cooperative and public banks. The sectoral division between different types of banks pursuing different profit strategies furthermore suggests that financial diversity provides an additional layer of financial stability, since financial products like securitisation don’t spread across the financial system. Securitisation on the other hand should be constrained however, as the beneficial effects on credit easing don’t flow into sustainable real investment without governmental subsidies. Overall, the strategy of targeting growth through the channel of financial markets has limited effect if not complementary measures that increase the wage share in the macroeconomy are taken. Securitisation can actually run contrary to this, as it increases the availability of credit for consumption first, before enabling investment in firms. These recommendations are also shared by the ILO.

Stakeholder protection in corporate governance and in the legal system, the founders’ perspective, and the varieties of capitalism Chilosi, Alberto Department of Economics - University o[r]

Varieties of Capitalism theory. In addition, Campbell and Pederson (2001) have already argued that at the practical level neo-liberalism has not been the monolith that both its advocates and opponents set it up to be. Within neo-liberal nation-states a wide diversity of practices that are sometimes not coherent with each other can be identified. Furthermore, the defense related sector in CME countries is also strongly influenced by states. The German state (a typical CME), for example, is a large shareholder of Airbus Germany. In this case the US filled a complaint against the EU and its member states in which the US accused the EU of giving WTO inconsistent subsidies to Airbus (The United States of America 2007 ) . The fact that states actively participate and support and protect companies, as can be seen in these examples, has implications for the innovative capacities of these companies.

While the distinguishing features of alternative national political and economic systems have been identified and described, insufficient attention has been paid to the co-existence and endurance of these alternative and competing forms within an increasingly global system; and the process by which different national systems extend and reproduce themselves both at home and abroad has not been effectively explained. This is in part because most studies are descriptive in nature and do not go below the surface to open up and examine more closely the ‘black box’ of production, the dynamics of productive system relationships within and among national systems and the interrelationships between production and market requirements and outcomes. Using the cases of Wal-Mart and IKEA, this paper takes a productive systems approach to examine ‘varieties of capitalism’ from the perspective of the ways by which production and market relations are structured and prioritised. It considers the nature of these relations and their interaction within the domestic economy and the ways that firms and national systems interact with each other in the global economy. It examines the processes by which trading standards are transported via supply chain relationships, which ultimately become embedded in products and recognized by consumers at various stages, from the supply chain through to the end consumer. In this analysis, the cases of Wal-Mart and IKEA provide insight into the ways by which national systems extend themselves globally, their contrasting effects on the business environments in host localities, and the impact of the resulting supply chain relations on organizational performance.

Stakeholder Protection, Varieties of Capitalism, and Long-Term Unemployment Chilosi, Alberto Department of Economics - University of Pisa.[r]

Varieties of capitalism theory would predict that, provided the West German institutions had been appropriately transferred, an East German region would soon start to operate as part of a co-ordinated economy, and would therefore succeed at the motor industry. It is not clear that the theory has anything to say about Hungary, as its protagonists have not yet classified the former communist countries according to their typology. However, it might be expected to conclude that, given that post-Communist Hungary has not had time to establish deeply embedded institutions of the kind required for a co-ordinated market economy, this industry should not thrive there. It would be reasonable for varieties of capitalism theory also to conclude that Hungary has probably not had time to develop the preconditions for a sophisticated liberal market economy either. It might therefore predict that neither up-market DQP nor radical innovation would be likely to take hold there, or in the rest of central and eastern Europe, expecting instead low quality mass production. In general, that is the case with these economies. National innovation systems theory would similarly see eastern Germany now following the general (western) German path, and would have to remain silent about Hungary until it had analysed its institutions. From our perspective an important issue is whether eastern German Länder simply inherited West German institutions, or whether deviations in the transfer have imported certain novelties. Hungary we see as a meeting point of many institutional fragments: some national historical residues; some path-independent new approaches; some regional specificities; institutional borrowings; and not least the organisational preferences of VW-Audi itself - which may or may not be simple transfers of their practices in Germany and other Western European economies.

Indeed, there are several viable models to succeed in the global economy. In the last few years there has been a growing body of literature outlining different models of capitalism. The Varieties of Capitalism (VoC) literature explains differences and similarities in economic policies and economic performance. 37 It focuses on the institutional frameworks of market economies and identifies complementarities between institutional arrangements. The VoC approach looks at the role that institutions play and how they condition policy, and it seeks to address questions such as what features distinguish one type of policy from another? How are the main VoC constructed? It takes as a starting point the neoclassical view, which uses as a reference the economic success of the Anglo-Saxon countries during the past decade and contends that competitive market relations are the best way to assure strong economic performance. Yet it disputes this conclusion and argues that there is more than one route to economic success. This literature has examined whether a liberal direction can be identified or whether countries are more or less locked into already developed paths because of the complementary character of their institutional framework. It has also analyzed the forces and mechanisms that make institutional change possible. 38

In this triangular relationship between the individual, the market and the state, applied to the theme of housing consumption, the thesis outlines the deeply political features not only [r]

The path of India contrasts that of Brazil, whose institutional structures seem to have left the country in a stasis. Chapter six will more fully detail Brazil's typological trajectory, but the scatter plots that traced India and Brazil's complement structures over time (figure 1.1 and figure 1.2) demonstrate a clear contrast. While both countries began their capitalist evolution at the origin with a heavily coordinated capital and labour market structure, we find that the variety of capitalism has since diverged. Indian labour markets demonstrate many of the same "mixed" characteristics, but we have seen that much of this is actually because of high informality that results from legacy regulation that is commonly avoided in market practice (a contrast to Brazil). India does not have an organised syndicate structure or collective bargaining arrangement and demonstrates fragmentation in its labour market structures. These characteristics suggest that collectivisation would not survive de-regulation. The capital market more clearly distinguishes India from Brazil. The Indian domestic capital market has been de- regulated and espoused liberal market norms. Relatively transparent equity capital markets and minority shareholder rights both developed normative bases. Indian companies are building on liberal market foundations to become globally competitive, and the state is being pressured to withdraw public coordination (most clearly manifested by government plans to privatise SOEs as discussed in section 4.2). The behaviour of top firms from the leading sector in the next chapter will provide further clarity on patterns of corporate governance and how the market is changing.

environmental well-being NAP sent to Brussels aiming for 15,2% cut in emissions 1990-2010 CBI worried that other MS will not present as ambitious plans EEF criticises government for sett[r]

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