Showing papers in "Socio-economic Review in 2008"

Institutional change in varieties of capitalism

Abstract: Contemporary approaches to varieties to capitalism are often criticized for neglecting issues of institutional change. This paper develops an approach to institutional change more extended than the one provided in Hall and Soskice (in Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford, Oxford University Press, 2001) but congruent with its varieties-of-capitalism perspective. It begins by outlining an approach to institutional stability, which suggests that the persistence of institutions depends not only on their aggregate welfare effects but also on the distributive benefits that they provide to the underlying social or political coalitions; and not only on the Pareto-optimal quality of such equilibria but also on continuous processes of mobilization through which the actors test the limits of the existing institutions. It then develops an analysis of institutional change that emphasizes the ways in which defection, reinterpretation and reform emerge out of such contestation and assesses the accuracy of this account against recent developments in the political economies of Europe. The paper concludes by outlining the implications of this perspective for contemporary analyses of liberalization in the political economy.

What is neo-liberalism?

Abstract: Neo-liberalism is an oft-invoked but ill-defined concept in the social sciences. This article conceptualizes neo-liberalism as a sui generis ideological system born of struggle and collaboration in three worlds: intellectual, bureaucratic and political. Emphasizing neo-liberalism’s third ‘face’, it argues that a failure to grasp neo-liberalism as a political form imposes two limitations on understanding its effects: (i) fostering an implicit assumption that European political elites are ‘naturally’ opposed to the implementation of neo-liberal policies; and (ii) tending to preempt inquiry into an unsettling fact—namely, that the most effective advocates of policies understood as neo-liberal in Western Europe (and beyond) have often been elites who are sympathetic to, or are representatives of, the left and centre-left. Given that social democratic politics were uniquely powerful in Western Europe for much of the post-war period, neo-liberalism within the mainstream parties of the European left deserves particular attention.

German economic performance: disentangling the role of supply-side reforms, macroeconomic policy and coordinated economy institutions

Abstract: Since unification, the debate about Germany's poor economic performance has focused on supply-side weaknesses, and the associated reform agenda sought to make low-skill labour markets more flexible. We question this diagnosis using three lines of argument. First, effective restructuring of the supply side in the core advanced industries was carried out by the private sector using institutions of the coordinated economy, including unions, works councils and blockholder owners. Second, the implementation of orthodox labour market and welfare state reforms created a flexible labour market at the lower end. Third, low growth and high unemployment are largely accounted for by the persistent weakness of domestic aggregate demand, rather than by the failure to reform the supply side. Strong growth in recent years reflects the successful restructuring of the core economy. To explain these developments, we identify the external pressures on companies in the context of increased global competition, the continuing value of the institutions of the coordinated market economy to the private sector and the constraints imposed on the use of stabilizing macroeconomic policy by these institutions. We also suggest how changes in political coalitions allowed orthodox labour market reforms to be implemented in a consensus political system.

Flexicurity and welfare reform: a review

Abstract: The notion of ‘flexicurity’ has recently become a buzzword in European labour market reform. It promises to deliver a magic formula to overcome the tensions between labour market flexibility on the one hand and social security on the other hand by offering ‘the best of both worlds’. This article gives a state-of-the-art review on flexicurity. The development of the concept is set against the background of changed economic circumstances in the last two decades. The components of flexicurity are presented in more detail, followed by a review of ‘real worlds of flexicurity’ in selected European countries, with Denmark and the Netherlands as the most prominent examples. The third section considers the transferability of flexicurity policies across borders. Finally, we concentrate on collective actors involved in promoting the idea of flexicurity at European, supra-national and national levels. We conclude with a discussion of some tensions within and criticisms of the concept.

The temporalities of capitalism

Abstract: The temporalities of capitalism are in certain respects unique. The temporalities of social life in general are 'eventful', i.e. irreversible, contingent, uneven, discon- tinuous and transformational. Although capitalist social processes are in certain respects super-eventful, the extreme abstraction that is a signature of capitalist development enables core processes of capitalism to escape from the irreversibil- ity of time and to sustain a recurrent logic at their core. This means that the tem- porality of capitalism is composite and contradictory, simultaneously still and hyper-eventful. Recognizing this contradiction at the core of capitalism poses important conceptual and methodological challenges for those who study it. Mainline quantitative American social scientists, the economists foremost among them, have tended to see time as a kind of neutral Newtonian grid in which social processes are determined by variables that act upon each other by a smooth, predictable, gradual and linear social gravity (Abbott, 1988). An eventful temporality—the kind of temporality taken for granted by most historians— would imply that social processes are, instead, lumpy, unpredictable, uneven and discontinuous. Although historians are generally reticent about engaging in explicit theoretical discourse, they have a highly sophisticated and nuanced implicit conceptualization of temporality. They see time as fateful, as irreversible in the sense that a significant action, once taken, or an event, once experienced, irrevocably alters the situation in which it occurs. The conceptual vehicle histor- ians use to construct or analyse the temporal fatefulness and contingency of social life is the event. Historians see the flow of social life as being punctuated by sig- nificant happenings, by complexes of social action that somehow change the † This paper will be part of the SYMPOSIUM: How History Matters.

A neorealist approach to institutional change and the diversity of capitalism

Abstract: This article proposes a theoretical approach to the political economy of institutional change and comparative capitalism. It argues that the firm-based approach of the Varieties of Capitalism literature cannot satisfactorily integrate the political aspects of institutional change and must in one way or another rely on some type of economic functionalism. By linking explicitly political strategies and demands for institutional change, a neorealist approach can exploit the concepts of complementarity and hierarchy of institutions. Different types of institutional change may take place in situations of political equilibrium, political crisis or systemic crisis.

Electoral rules, class coalitions and welfare state regimes, or how to explain Esping-Andersen with Stein Rokkan

Abstract: It has been recognized since the publication of Esping-Andersen’s Three Worlds of Welfare Capitalism that the advanced Western welfare state comes in—at least— three variants: as a Nordic social-democratic regime, a conservative regime on the European continent or as a liberal welfare state regime in the Anglo-Saxon countries. Why exactly welfare states fit into this three-regime typology remains controversial, however. This article presents an argument which provides the three-regime heuristic with a historical foundation. The argument combines insights into the importance of electoral rules for the representation of socioeconomic interests (of the lower and middle classes) with insights about the different cleavage structures which left their imprint on the party systems of Western Europe. This article’s central claim is that a majoritarian electoral system leads to a residual-liberal welfare state, whereas in countries with proportional representation, either a red–green coalition between Social Democracy and agrarian parties (Scandinavia) or a red–black coalition between Social Democracy and Christian Democracy (on the European continent) was responsible for the build-up of the Nordic and continental welfare state, respectively.

The politics of employment-friendly welfare reforms in post-industrial economies

Abstract: The transition to post-industrialism has generated a range of new tensions between welfare arrangements and labour market performance, which confront today's welfare states with new challenges for employment-friendly recalibration, such as flexicurity, activation and work-care conciliation. Hence, the question of whether, how and to what extent current welfare states are able to adapt to the conditions and needs of post-industrial labour markets has become a major issue in recent welfare state research. This article identifies and discusses key debates in this literature on the politics of employment-friendly reforms. It first focuses on the general capacity for reform in mature welfare states and then discusses regime-specific reform politics, since post-industrialism confronts different welfare regimes with very different challenges. For each regime, the article proposes a range of research frontiers and open debates which we consider particularly relevant and fruitful avenues for future theorizing and research.

Connecting the dots in social entrepreneurship through the capabilities approach

Abstract: Social entrepreneurship has received substantial general attention, though formal research interest in the concept has been more limited. I propose using the capabilities approach as a unifying theoretical framework in comprehending the concept. This approach is useful in evaluating and then linking the causal, motivational, behavioural and directive dimensions of social entrepreneurship. Consequently, an illustrative theoretical framework is developed to guide future research that is cognizant of the similarities and differences between conventional and social entrepreneurship.

Institutional embeddedness and the strategic leeway of actors: the case of the German therapeutical biotech industry

Abstract: This article aims at examining the strategic leeway of firms pursuing business strategies incompatible with the dominant institutional environment in a given market economy. In order to evaluate this question, we focus on the therapeutic biotech industry and draw a German–British comparison. Proponents of the varieties-of-capitalism (VoC) approach assume that German firms underperform in this industrial sector in comparison to British firms due to the institutional framework in which German firms operate; this framework is assumed to provide them with hardly any strategic latitude. The VoC approach is challenged by two alternative perspectives, in both of which it is believed that firms can have a high level of strategic leeway; in the first approach this is possible due to institutional heterogeneity within national market economies; and in the second approach, the above can be seen as the result of economic internationalization. Our empirical findings show that British firms are indeed more competitive in the therapeutical biotech industry, but only to a limited extent. German firms perform better than projected by the VoC approach because they operate in an institutionally heterogeneous environment and due to the impact of internationalization. Thus, we argue for the integration of these three perspectives in one explanatory approach.

Rethinking the Link between Labour Market Flexibility and Corporate Competitiveness: A Critique of the Institutionalist Literature

Abstract: Firms in the same political economy specialize in the pursuit of the same competitive strategy—so the argument of the competitiveness literature. The reason is that national institutions provide specific input factors which, in turn, are required for that strategy. To test this chain of reasoning, I identify the strategy of pharmaceutical firms in Germany, Italy, and the UK. Contrary to the expectations of the literature, I find that the firms in each economy pursue the same strategy variety. Seeking to understand how deviant firms can compete despite comparative institutional disadvantages, I analyse the importance of diverse labour-market institutions for the provision of particular skill types which, in turn, are needed for these strategies. These analyses show that firms succeed in circumventing institutional constraints at the national level by relying on two functionally equivalent institutions: open international labour markets and atypical contracts.

Transforming socio-economics with a new epistemology

Abstract: This paper argues that a new scientific framework (Science II) has been slowly emerging, rivaling the Descartes-Newtonian perspective (Science I) dominant for several hundred years. The Science II framework places a great deal of emphasis on evolution, dynamism, chance and/or pattern recognition. As both cause and effect of the new perspective, scholars in the physical, biological and social sciences are increasingly addressing common problems, borrowing insights from and interacting with each other. The epistemology of Science II has enormous potential for understanding problems of fundamental interest to socio-economists. The paper focuses on five useful concepts in the framework of Science II: self-organizing processes, complex networks, power-law distributions, the general binding problem and multi-level analysis.

Sociological studies of diffusion: is history relevant?

Abstract: The question of increasing similarity of forms and ideas is an important one in the social sciences in general. There are two main—and strikingly different—ways to account for increasing social similarity. The first is through an evolutionary or modernization type of argument, where increasing similarity reveals parallel but discrete processes of fit and adaptation. The second is through a diffusionist kind of argument, where forms and ideas circulate and spread across many different kinds of borders. Comparing three variants of the diffusionist argument, this article explores the different notions of time and history that these three variants reveal and express. While history always seems relevant, the way in which it is understood and plays out clearly varies across types. In conclusion, we suggest that recent developments in sociological studies of diffusion call, beyond history, to genealogical or archaeological research strategies.

Economic objects as cultural objects: discourse on foreign investment in post-socialist Europe

Abstract: Bringing together perspectives from economic sociology and cultural sociology, this paper proposes that because economic phenomena are imbued with meaning they can be studied as cultural objects. This approach includes first identifying the content of people's understanding of economic phenomena and then tracing out what is it that structures their interpretations. The paper applies the cultural objects analysis to the public debates surrounding foreign investment in post-socialist Slovenia. Actors interpret economic phenomena so they can provide justifications for the positions they adopt in public debates and assess possible strategies of action. The content analysis of newspaper texts shows that foreign globalization pressures are mostly framed in a binary relation to national interests. But because economic consequences are uncertain, the particular understandings of how foreign investment affects national interests are multiple, even contradictory. They are shaped by the social identities of actors and historical and macro-structural conditions of post-socialism that make salient different, often contradictory, institutional orders.

The rise of activist investors and patterns of political responses: lessons on agency

Abstract: *This paper ventures an institutional explanation for distinct patterns of political contestation over the rise of activist investors such as private equity and hedge funds in Europe and North America. Taking issue with the dichotomous nature of the literature on varieties of capitalism (VoC) and the homogenizing assumptions of the literature on financialization, we argue that the specific patterns of politicization in the US, Germany and the Netherlands over the rise of activist investors result from the different institutional structurings of these countries’ political economies. Although our observations fit the current (re)discovery of agency in the VoC debate, we argue that they point in the direction of a less voluntaristic view of agency than seems fashionable today.

Can new technology firms succeed in coordinated market economies? A response to Herrmann and Lange

Abstract: The performance of the therapeutics segment of the German biotechnology industry has become a focal case for debate over the usefulness of the varieties of capitalism (henceforth VOC) perspective in helping to explain cross-national variation in the organization and strategy of companies (Hall and Soskice, 2001) Articles in a recent and the current volume of SER by Herrmann (2008) and Lange (2009) draw on the existence of numerous German biotechnology firms focused on therapeutics discovery to contest the saliency of one of the VOC approach’s core claims: that patterns of comparative institutional advantage structure patterns of national specialization across different types of innovation focused industries Both authors present evidence that German firms in recent years have come close to matching the performance of those in the United Kingdom, once Europe’s clear leader in biotechnology and an ideal-typical liberal market economy, in inventing new drug therapies Lange also demonstrates that between 2001 and 2007, German biotechnology firms have narrowed a once large gap between the two countries in the drug development pipeline The apparent success of German firms in a radically innovative industry such as biotechnology clearly runs counter to the key claim made by VOC proponents, including myself, that coordinated market economies should perform poorly in radically innovative industries

The organizational governance of work relationships between employment and self-employment

Abstract: This paper analyses work relationships on the border between employment and self-employment and the consequences of making use of these new forms of work, especially on the side of firms. We study the complexity and variety of dependent forms of outsourcing by comparing the firm-internal solutions adopted to solve the arising control-flexibility dilemma in two industries (insurance, business services) embedded in two different institutional contexts (Italy, Austria). This paper shows that employers have established informal relational contracts that, in combination with formal contracts, reduce the threat of opportunism while simultaneously allowing a certain amount of control over the worker. We highlight the fact that a hierarchal structure returns to the relationship between worker and employer through the mechanisms of control and dependency. Finally, we stress that social relationships complement the market mechanism through the creation of assurance and trust as well as the development of specific configurations of social networks (i.e. network and temporal embeddedness).

Legal origin, juridical form and industrialization in historical perspective: the case of the employment contract and the joint-stock company†

Abstract: The timing and nature of industrialization in Britain and continental Europe had significant consequences for the growth and development of labour market institutions, effects which are still felt today and which are visible in the conceptual structure of labour law and company law in different countries. However, contrary to the claims of the legal origin hypothesis, a liberal model of contract was more influential in the civilian systems of the continent than in the English common law, where the consequences of early industrialization included the lingering influence of master-servant legislation and the weak institutionalization of the juridical form of the contract of employment. Claims for a strong-form legal origin effect, which is time invariant and resistant to pressures for legal convergence, are not borne out by a growing body of historical evidence and time-series data. The idea that legal cultures can influence the long-run path of economic development is worthy of closer empirical investigation, but it is premature to use legal origin theory as a basis for policy initiatives.

The downside of participatory-deliberative public administration

Abstract: This article provides an empirically grounded critique of ‘Participatory-Deliberative Public Administration’, based on an in-depth study of three participatory fora in South Africa: the National Economic Development and Labour Council, the Child Labour Intersectoral Group and the South African National AIDS Council. Drawing freely on Habermas’ Between Facts and Norms, the article argues that coordination through deliberation is unlikely to occur in formal settings, where discourses are mostly about the accommodation of existing interests, and is more likely to be found in the informal public sphere, where the preferences of citizens are still malleable and where it is possible for civil society groups to build communicative power by articulating moral arguments that motivate and mobilize the public. This form of power can then be used by civil society groups to counterbalance other forms of (non-communicative) power that impinge on the formal decision-making sphere.

The contested institutionalization of policy paradigm shifts: the adoption of inflation targeting in Israel

Abstract: This article explores the political dynamics that have led to the adoption of inflation targeting in Israel, within the context of a broader process of policy paradigm shift. We consider inflation targeting as an institutional arrangement with far reaching consequences for the distribution of power between different state agencies. Therefore, like other processes of institutional change, its adoption is not the simple outcome of smooth processes of learning and acceptance of more rational and efficient practices. Rather, it is the result of political conflicts among state actors seeking to improve their positions in the political-economic field. On the basis of a detailed study of the political conflicts that emerged around the adoption of inflation targeting in Israel between the central bank and the Ministry of Finance, we illustrate the contested character of the institutionalization of the neo-liberal policy paradigm and highlight the actions of local political actors as a major mechanism through which worldwide diffusion of institutional practices takes place.

The global construction of development models: the US, Japan and the East Asian miracle

Abstract: During the heyday of the ‘Washington Consensus’ in the 1980s and 1990s, the Japanese government became an increasingly vocal critic of its market-liberalizing prescriptions. Drawing on documents produced by the Japanese development bureaucracy, this paper analyses the origins of the Washington-Tokyo controversy, and suggests that it provides new insights into the nature of models of economic development. Such models are based on post hoc social constructs-interpretations of past events forged in part by development experts, but also by states, which can play a major role in selecting, interpreting and packaging development facts. Washington's ‘Anglo-Saxon’ model and Tokyo's ‘East Asian’ model were based on distinct interpretations of development facts, but were not as far apart as they seemed on the surface. We conclude that although development models may draw on local materials, they are also very much global products, constructed in the context of transnational networks and organizational fields.

Local economic governance in hard times: the shadow economy and the textile and clothing industries around Łódź and Naples†

Abstract: This papers derives from the project 'Citizens and Governance in the Knowledge-based Society', forming part of the New Modes of Governance (NewGov) Integrated Project under the European Commission’s Framework Six Programme, co-ordinated by the European University Institute, Florence, and its Robert Schuman Centre for Advanced Studies. In 2005 ca. 70 face-to-face interviews were conducted with local entrepreneurs; representatives of local authorities; representatives of the Municipality of the two case studies; representatives of regional authorities; researchers from the University; experts from regional Chamber of Commerce and Industry. The interviews were semistructured, with an interview guide based on an inventory of issues. However, the discursive nature of interviews was preserved, which allowed the interviewees to raise additional issues. Secondary sources were also extensively used in the research, using local newspaper, documents, research reports, as well as documents from local public and private institutions, such as the local government or employers associations, and a secondary analysis of quantitative data was carried out.

On Rogers Hollingsworth and Karl H. Müller ‘Transforming socio-economics with a new epistemology’, Socio-Economic Review, 6 (2008), 395–426

Abstract: References Churchland, P. S. and Sejnowski, T. J. (1992) The Computational Brain, Cambridge, MA, MIT Press. Edelman, G. M. (1987) Neural Darwinism, New York, NY, Basic Books. Edelman, G. M. (1992) The Remembered Present, New York, NY, Basic Books. Edelman, G. M. (2006) Second Nature, New Haven, CT, Yale University Press. Fell, D. (1997) Understanding the Control of Metabolism, London, Portland Press. Greenspan, R. J. (2001) ‘The Flexible Genome’, Nature Reviews Genetics, 2, 383–387. Istrail, S., De-Leon, S. B. and Davidson, E. H. (2007) ‘The Regulatory Genome and the Computer’, Developmental Biology, 310, 187–195. May, R. M. (1973) Stability and Complexity in Model Ecosystems, Princeton, NJ, Princeton University Press. Sejnowski, T. J., Koch, C. and Churchland, P. S. (1988) ‘Computational Neuroscience’, Science, 241, 1299–1306. Whitehead, A. N. (1925) Science and the Modern World, New York, NY, Macmillan.

Rationalization defeats itself: the limits to accounting's framing of economic life

Abstract: This paper argues that the development of accounting can be well described as a process of rationalization. However, this need not imply the inexorable homogenization of economic activity, because beyond a certain point, rationalization defeats itself. Highly rationalized accounting leaves its users and creators disillusioned with it and inclined to exploit it as an abstract construct rather than to sustain it as a compelling system of knowledge. The paper explores the implications of this finding both for our understanding of how accounting influences economic life and for the future of the accounting profession.

Theoretical versus practical explanation in political economy and economic sociology: the case of Tocqueville

Abstract: This article represents an attempt to show the relevance of Tocqueville’s analyses of economic phenomena to modern political economy and economic sociology. The entry point is his approach to explanation, which is midway between value neutrality (Weber) and the idea that explanations must lead to social change (Marx). Tocqueville instead argues that the analyst (here of economic phenomena) should focus on as well as encourage the actors’sense of freedom. This argument is illustrated with the help of Tocqueville’s analysis of the economy in Democracy in America, Recollections and The Old Regime and the Revolution.