Study Guide: Comparative Political Economy (CPE), North
Final Exam in Comparative Regional Studies (SIS 700)
Fall 2010
Author names in bold. Key concepts underlined.
Major Theories under CPE North
Varieties of Capitalism
Neo-Corporatism
Pluralism
Welfare State / Welfare Capitalism
Types of Questions
Strengths and weaknesses of Varieties of Capitalism approach
Compare Varieties of Capitalism to other CPE theories
Relating Varieties of Capitalism to forms of the state (use the State study guide to help with this)
Implications of Varieties of Capitalism and Welfare State for certain states, e.g. those in financial crisis
Compare and contrast Neo-Corporatism and Pluralism
Authors: November 22, 2010
Peter J. Williamson (1989) Corporatism, Neo-Corporatism and Pluralism: a review of corporatism
Esping-Andersen (1990) Welfare Capitalism, a new model based on social democracy
Hall and Soskice (2001) Varieties of Capitalism (VoC), introducing the model
Jackson and Deeg (2008) A review of comparative capitalism with special emphasis on VoC
Mark Zachery Taylor (2004) Critique of Varieties of Capitalism in regard to technology
Hall and Gingerich (2009) Testing VoC to see macroeconomic differences between states
Two Additional CPE Authors (from class notes)
Professor Silvia introduced theories by Polanyi and Gerschencron as important foundations for contemporary CPE. Polanyi’s Great Transformation (1944) argues that scholars must consider the social impact of markets. Markets that are not embedded in society can be disruptive. He supports his point using a history study of the creation of national markets. A quick internet search shows this theory is known as the Market Society. Gerschencron wrote in the 50s and 60s and studied late industrialization. He sparked a debate among scholars about whether industrialization occurs in a linear or whether late industrializers (Poland) can skip steps taken by early industrializers (Britain). He also debated whether subsequent experiences with industrialization were state-led or not.
Pluralism
Pluralism is described here because of its failures which led to the rise of Corporatism and Neo-Corporatism as ideas for explaining inter-group politics within and with a state. Pluralism is the idea that there are many interest groups representing different citizen views in negotiations with the state. Writing mid century, Lindblom (class notes) considered the competition between interest groups as important in determining policy outcomes, but recognized the privilege that businesses have in capitalized democracies. Williamson critiques the pluralist approach as such:
· Assumes “rough equivalence” among individuals and their ability to organize their interests
· Assumes that group leaders represent their group interests
· Assumes the state is democratic and acts as the “referee” among groups rather than dictator
· Assumes equal expertise and access to decision-making circles (pg. 2)
Williamson refers to Schmitter to further define pluralism as a free-for-all of interest groups with no monitoring. Pluralism is an ideal-type at the extreme end of a spectrum opposed to corporatism (pg. 11).
Corporatism and Neo-Corporatism

Background: Some background on corporatism will give some context when comparing/contrasting neo-corporatism and pluralism. Corporatism is the idea that groups in society naturally develop functional roles that become part of explicit or implicit contracts. Corporatism usually has a political science connotation, but is related to theories of group interaction in sociology (e.g. functional roles in kinship groups), in the study of animal behavior (e.g. functional roles in animal families), and religion (e.g. world views of how society should interact). Corporatism in political science is an idea that is used to describe relations between groups within a state. Here the term ‘corporate’ means that groups together form the working bodily functions of a state. Corporatism was a useful concept for political theorists during the Industrial Revolution in Europe in trying to limit class warfare and give the major groups of labor and capital a voice in the state. This idea spilled over into the US economic recovery of the 1930s, but then faded after WWII. Neo-Corporatism arose after the economic crises of the 1970s in the form of negotiations between labor unions, employers and the state. Corporatist systems dealt with the oil shock better than other systems of government. Neo-corporatism is an ideal type and countries can fall along a spectrum of corporatism and pluralism. (Class notes and Wikipedia)

What is Neo-Corporatism: Williamson was the only assigned author to give us the main tenets of neo-corporatism.[[#_ftn1|[1]]] Neo-corporatism is an extension of corporatism and that criticizes of both “corporatist social thought”[[#_ftn2|[2]]] and authoritarianism (fascism) that are associated with corporatism (pg. 4). Schmitter coined the term in 1974 (class notes). Williamson uses corporatism and neo-corporatism interchangeably. Corporatism is a way of looking at group-government relations in a variety of contexts. Like any theory empirical studies are major part of the literature. Therefore corporatism is theory, or ideal-type, and state relations can either adhere or diverge from this model. Scholars can debate whether a given phenomenon of interaction between groups and the state is corporatist or pluralist (pg. 6-7).
For Schmitter originally (in Williamson) corporatism is less about policy making and more about organizational structure. In corporatist structures interest groups are pared down to the most basic types, are not in competition with each other, and are assigned functional roles within a state (pg. 10). Corporatism can be observed in both democratic and authoritarian regimes and can be either spontaneous or enforced (e.g. Sweden, the Netherlands, Denmark, Portugal, Brazil and Peru) (pg. 11). Later Schmitter changed his tune to argue that corporatism could indeed be used to explain policy outcomes. Other scholars (e.g. Cawson and Saunders, Offe in Williamson) studied how variation in the type of interest groups produces variation in the politics and that corporatism is most associated with intervention in production, than say, pluralism (pg. 16). Others debated the idea that corporatism is both the result and cause of interest formation, and debated corporatism at the substate level (pg. 17). More recently scholars have debated the economic level of a state necessary for allowing corporatism, and whether corporatism is useful in explaining interest group relations in neo-liberal, decentralized governments and have found it useful (pg. 18).
Williamson’s basic tenets of neo-corporatist theory are:
· Restructuring relations between producers, producer employers and the state, in favor of the state, about interventions into production
· States moderate interest group behavior by licensing them to have state functions.
· Hierarchy of interest groups, with the leader enforcing agreements made with the state.
· Limiting competition between multiple groups by giving a group a monopoly and requiring membership.
· Enforcing compliance with agreements is the responsibility of both the state and the groups.
· Having groups do more for the state than just enforce compliance of their agreements, but need the authority of the state to reach both members and non-members.
· Sometimes encouraging producers as a group to disband their associations so as to limit opposition to other groups assigned to carry out state work or enforce compliance
· Corporatism can take place at different levels of analysis, e.g. the whole national economy, within a specific sector, or within a specific firm
· Corporatism describes situations negotiations are uneven, whereby certain groups have more access to negotiations than others and thus comply with interventions at a price, and whereby elections of representatives are less meaningful (pg. 222).
Welfare State / Welfare Capitalism
Esping-Andersen is the only assigned author to discuss the welfare state. He gives overviews of classical PE, liberal PE, and Marxist PE to show that the study of states, markets and social welfare are not new. Then he summarizes the contemporary study of the welfare state. To start with the summary of the WS, there are three types of welfare states:
· Liberal WS: US, Canada, Australia; mostly for low-income workers; minimizes de-commodification of the services provided;
· Corporatist WS: Austria, France, Germany, Italy; upholds class and status; the state is more important than the market in providing benefits;
· Social democratic WS: Scandinavia; the market here is the least important of the three models; pro-work, pro-family; does not worry about de-commodification; minimizes social class strata;
Classical PE (Smith) was against state intervention and saw the market as the way to social equality (pg. 9). Liberal PE (Mill; Nassau) also promoted markets and wanted to limit state intervention because it was corrupt and pro-mercantilist. Liberal PE supported some state intervention, was but was against democracy as a destabilizing factor for markets (Mill). To navigate the problem of suffrage, conservative liberal PE advocated that markets operate within patriarchy, monarchy, absolutism (pg. 10). Marxist PE contested the claim that markets lead to social equality, and indeed lead to class cleavages (Dobb). Marxists as well as the contemporary debate about the welfare state wonder how parliamentary democracy can avoid the class inequality of markets and capital accumulation (pg. 11). Social democracy defended itself against socialists by claiming workers require benefits in order to attain balance of class power (Heiman), and against liberals by claiming happy workers are efficient workers (Myrdal). Social democracy is the foundation for the welfare state (pg. 12). Marshall talks about the welfare state and de-commodification of labor as the end of a progression from the expansion civil and political rights from the 1700s (in Esping-Andersen and class notes). This process towards a welfare state has been thwarted by globalization (not on final) and the re-commodification of labor (class notes). Pearson asks why the welfare state is still in place despite the politics of Regan and Thatcher, and attributes the persistence of the WS to interests groups that formed to keep it in place (class notes).
Varieties of Capitalism

Overview: VoC analyzes the institutions that shape strategic interaction between firms and other economic actors using game theory (Hall and Soskice, pg. 5). Hall and Soskice introduce the idea, critiqued in other readings by Jackson and Deeg, Taylor, and tested by Hall and Gingerich. The VoC approach goes against convention, which argued that there is only one type of capitalism and one way to modernize. VoC argues that markets don’t necessary converge towards greater liberalization. VoC goes beyond modernization, neo-corporatism, and “social systems of production” theories (pg. 2-3).
The main actor is the single firm. Of particular interest are dominant firms, but other actors include individuals, producer groups, suppliers, production associations, employees, trade unions, clients, and governments. Firms have their self interest at heart in terms of how well they can produce goods and services. Their interaction with other actors, more than any other factor, determines the environment for their economic success (pg. 6). In particular the approach is interested in the working methods in the areas of industry relations, training, corporate governance, inter-firm relations, and employee relations.
There are two ideal-types of capitalist countries.
· Liberal market economy (US): Equilibria are based on the market forces and on hierarchical relations among actors.
· Coordinated market economy (Germany): Equilibria are based on direct relations between firms and other actors.
Whether a country fits either type is an outcome of institutional set-ups (e.g. norms, organizations, culture). These institutions include information flow among actors, monitoring of firm activity, and deliberation among actors (pg. 12). The institutions form structures which influence corporate strategy. Corporate strategy can vary at both national and cross-national levels (pg. 16). Because VoC is interested broadly in actors, strategic interaction and institutions, the approach can be used to even analyze countries that do not fit either ideal type. VoC approach can also be used to analyze the development of a welfare state (pg. 51).
Critique in Jackson and Deeg: Jackson and Deeg review 20 years of literature on comparative capitalism and pay extra attention to Varieties of Capitalism. In their review they note the importance of institutions, comparative institutional advantage, and institutional path dependence for the determination of capitalist system type. Generally, the comparative study of capitalism includes social, not just economic influences, observes complementarity or configurations among institutions, and sees forms of capitalism as path dependent (pg 683). VoC is useful because it simplifies the number of varieties of capitalism to only two, but includes a wide range of actors and institutions (pg. 691). VoC does not address well the circumstances around multinational corporations (pg. 692) nor does it describe macroeconomic performance well perhaps because it is easier to test firm and industry level performance better than national performance (pg. 693). Perhaps because of its reaction against convergence theory (see Hall and Soskice above), VoC is not good at explaining institutional change (pg. 694).
Critique by Taylor: Jackson and Deeg and Hall and Soskice provide limited empirical evidence for their review and theory, respectively. Taylor seeks to test the contention that liberal market economies tend towards rapid technological advancement, while coordinated market economies will tend towards slow technological change. Taylor’s evidence does not confirm Hall and Soskice’s theory of innovation. Hall and Soskice used only four years of patent data to make their point, and included the US which would have skewed the findings towards the conclusion that liberal market economies have more innovation. This study (2009) indicates more broadly that VoC is a new theory that needs testing.
Empirical test by Hall and Gingerich (2004): Hall and Gingerich test VoC broadly rather than a specific aspect like Taylor. They test the degree of coordination, variation in factors that relate to coordination type; if it is possible to distinguish liberal from coordinated market economies; if economy type can be linked to institutional frameworks; variation in economic growth between economy types; They conclude in ways that generally supports their original thesis, but the analysis was shallow and leaves from for further testing. However, their results suggest that scholars must analyze institutions across all economic spheres, not just one individually. The implication for policy making is that deregulation of markets will only bring economic benefits when other conditions are present, e.g. financial and labor markets (pg. 480).


[[#_ftnref|[1]]] In Esping-Andersen’s piece on welfare state, he uses “corporatist welfare state” to describe one type (see below). Hall and Soskice use neo-corporatism as one of three building blocks in the Varieties of Capitalism approach (pg. 3)
[[#_ftnref|[2]]] Prof. Silvia called this social democracy.