T. Ware
Peter Hall and David Soskice, “An Introduction to Varieties of Capitalism,” in P. Hall and D. Soskice, eds., Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford UP, 2001).
1.1 Introduction
Object develop a new framework for understanding the institutional similarities and differences among the developed economies
· Differing approaches
o Varieties of capitalism (developed in the book)- focuses on the kinds of institutions that alter the outcomes of strategic interactions from key relationship in the political economy using a game theoretic approach. Seeks to connect microeconomic into an analysis of the macro economy, with business firms at the center.
o Modernization approach- devised in post-war decades, it focused on the institutional structures that gave states leverage over the private sector, such as planning systems and public influence over the flows of funds in the financial system. States categorized according to structure (France, Japan good examples) (Britain the laggard). Modernization approach tends to overstate the capacity of the state
o Neo corporatism- developed in 70’s when inflation was a problem, its associated with the capacity of the state to negotiate durable bargains with employers and trade union movement regarding wages, working conditions and social or economic policy. Measured by centralization or concentration of the trade union movement. Focuses on the organization of society
o Social systems of production- developed during 80s and 90s consists of group analysis of sectoral governance, natl innovation systems. Focused on the reorganization of production in response to technological changes and advancements
1.2 Basic Elements of the approach
· Actor centeredà political economy is made up of many actors who seeks to advance his interests in a rational way in strategic interaction with others. Companies are crucial actors
· Five spheres in which firms need to develop relationships to resolve coordination problems central to their core competencies
o Industrial relations
o Vocation training and education
o Corporate governance
o Inter-firm relations
o Employee issues
1.3 Coordinated Market Economies: the German Case
Firms depend more heavily on non-market relationships to coordinate their endeavors with other actors and to construct their core competencies
1.4 Liberal Market economies (LME)- U.S. case
Firms coordinate their activities primarily via hierarchies and competitive
Firms in LMEs rely heavily on the market relationship btwn individual worker and employer to organize relations with the labor force market arrangements
1.7 Comparative public policy making
· The principal problem facing policy makers is inducing economic actors to cooperate more effectively with one another. Economic policy will be effective only if they are complementary to the coordinating capacities embossed in the existing political economy. The varieties of capitalism approach highlights the importance of social policy firms and the role business groups played in the development of welfare states.
1.8 Dynamics of economic adjustment
· With technology and the liberalization of the international economy, globalization has created a new “set of problems” to deal with. For political economy, the primary issue is the stability of regulatory regimes and national institutions in the face of greater competitive pressure. Will institutional differences remain significant or will there be a drive toward a common market model?
o Firms will not automatically move activities abroad when offered low-cost labor abroad