Contributors vii 1 Introduction: Politics in the Age of Austerity 1 Armin Schafer and Wolfgang Streeck 2 Public Finance and the Decline of State Capacity in Democratic Capitalism 26 Wolfgang Streeck and Daniel Mertens 3 Tax Competition and Fiscal Democracy 59 Philipp Genschel and Peter Schwarz 4 Governing as an Engineering Problem: The Political Economy of Swedish Success 84 Sven Steinmo 5 Monetary Union, Fiscal Crisis and the Disabling of Democratic Accountability 108 Fritz W. Scharpf 6 Smaghi versus the Parties: Representative Government and Institutional Constraints 143 Peter Mair 7 Liberalization, Inequality and Democracy s Discontent 169 Armin Schafer 8 Participatory Inequality in the Austerity State: A Supply-Side Approach 196 Claus Offe 9 From Markets versus States to Corporations versus Civil Society? 219 Colin Crouch 10 The Normalization of the Right in Post-Security Europe 239 Mabel Berezin 11 The Crisis in Context: Democratic Capitalism and its Contradictions 262 Wolfgang Streeck Notes 287 Index 303

Politics in the Age of Austerity

How do new business models emerge? Neoinstitltionalists argue that the process often begins when a policy shift undermines the status quo; groups then vie to define the best alternative. The authors explore the role of power in selecting between two alternative business models available to railroads from 1897, when antitrust laws banned the cartel the prevailing model for managing competition. Predatory railroads prescribed several methods for destroying rivals. Financiers prescribed amicable mergers instead, and fought predation by threatening to withhold capital from predators. An analysis of the 167 rail acquisitions in Massachusetts between 1825 and 1922 confirms that the financiers succeeded. After antitrust laws were enforced, railroads left cartels to follow the business model of financiers rather than that of predators. This can be seen in the conditional variables that predict buying and selling. Thus public policy and power can shape key market features. It is ironic that this market, built by antitrust, became the prototype for the neoliberal ideal of the unregulated economy.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2412180_code372921.pdf?abstractid=2412180&mirid=1

The Market that Antitrust Built: Public Policy, Private Coercion, and RailroadAcquisitions, 1825 to 1922

Production and marketing contracts govern 36 percent of the value of U.S. agricultural production, up from 12 percent in 1969. Contracts are now the primary method of handling sales of many livestock commodities, including milk, hogs, and broilers, and of major crops such as sugar beets, fruit, and processing tomatoes. Use of contracts is closely related to farm size; farms with $1 million or more in sales have nearly half their production under contract. For producers, contracting can reduce income risks of price and production variability, ensure market access, and provide higher returns for differentiated farm products. For processors and other buyers, vertical coordination through contracting is a way to ensure the flow of products and to obtain differentiated products, ensure traceability for health concerns, and guarantee certain methods of production. The traditional spot market— though it still governs nearly 60 percent of the value of agricultural production—has difficulty providing accurate price signals for products geared to new consumer demands (such as produce raised and certified as organic or identity-preserved crops modified for special attributes). We are likely to see a continuing shift to more explicit forms of vertical coordination, through contracts and processor ownership, as a means to ensure more consistent product quantity and quality.

/pdf/contracts-markets-and-prices-organizing-the-production-and-2ah22143yx.pdf

Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities

The paper develops an economic framework for network neutrality regulation. Network neutrality rules forbid network operators to discriminate against third-party applications, content or portals or to exclude them from their network. The analysis shows that calls for network neutrality regulation are justified: In the absence of network neutrality regulation, there is a real threat that network providers will discriminate against independent producers of applications, content or portals or exclude them from their network. This threat reduces the amount of innovation in the markets for applications, content and portals at significant costs to society. While network neutrality rules remove this threat, they are not without costs. Due to the potentially enormous benefits of application-level innovation for economic growth, however, increasing the amount of application-level innovation through network neutrality regulation is more important than the costs associated with it. Apart from advancing the debate over network neutrality, the paper highlights important limitations of the 'one monopoly rent' argument: It shows that there are more exceptions to the 'one monopoly rent' argument than have previously been identified and that these new exceptions may be quite common in the Internet context. It shows that exclusion may be a profitable strategy, even if the excluding actor does not manage to drive its competitors from the complementary market. It also shows that competition in the primary market may not always be sufficient to remove the ability and incentive to engage in exclusionary conduct.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1019669_code523473.pdf?abstractid=812991&rulid=75544&mirid=3

Towards an Economic Framework for Network Neutrality Regulation

The article presents a unique regression analysis of social-science estimates of the size of cartel overcharges. More than 800 overcharge rates were collected from a variety of published sources that have appeared in the literature during the last 125 years. A meta-analysis of overcharges from 395 cartel episodes finds that duration, legal environment, and organizational characteristics of cartels explain the variation on overcharge rates to a greater extent than the type of publication or the method of overcharge analysis. In particular, overcharges are significantly higher for durable international cartels and are declining as antitrust enforcement regimes have stiffened. Historical case studies and government reports calculate lower overcharges, whereas antitrust authorities arrive at relatively high rates.

Cartel Overcharges: Survey and Meta-Analysis

Antitrust law consists primarily of three federal laws: The Sherman Act (1890) prohibits conspiracies to create monopolies and anticompetitive conduct. The Clayton Act (1914) regulates mergers (Hylton). The Federal Trade Commission Act (1914) created the Federal Trade Commission and regulates advertising and other interstate competition (DOJ). Cases related to these laws are either decided using the “reasonable rule” which requires the plaintiff prove that defendants’ actions created an “unreasonable” restriction of competition in the market; or by the per se rule which infers the conduct and intent of the defendant based on their actions’ result (Hovenkamp).

James T. Winkler

Papers

I. Antitrust Law