Growth, Crisis, Democracy

The Political Economy of Social Coalitions and Policy Regime Change

Hideko Magara, Bruno Amable, Hideko Magara, Bruno Amable

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781315408408
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Economic Policy
• Index: Politics & International Relations

Since the global financial crisis of 2008, advanced economies have been making various efforts to overcome the economic impasse. While the contrast between the countries that have escaped from the crisis relatively quickly and those still suffering from serious problems is becoming clearer, a new economic crisis stemming from newly emerging economies has again impacted advanced economies. In retrospect, both leftist and rightist governments in advanced economies pursued expansive macroeconomic and welfare policies from the post-WWII period to the oil shocks of the 1970s. While we recognise that the particular policy regime in this 'Golden Decades' during which the left and the right implemented similar policies cross-nationally, were characterised by outstanding economic growth in each country, the specific growth patterns varied across countries. Different social coalitions underpinned different growth models.

This book is premised on tentative conclusions that Magara and her research collaborators have reached as a result of three years of study related to our previous project on economic crises and policy regimes. Recognising the need to analyse fluid and unstable situations, we have set up a new research design in which we emphasise political variables—whether political leaders and citizens can overcome the various weaknesses inherent in democracy and escape from an economic crisis by establishing an effective social coalition. A new policy regime can be stable only if it is supported by a sufficiently large coalition of social groups whose most important policy demands are satisfied within the new policy regime.

1 Introduction

Social coalitions between equilibria and crises

Hideko Magara

Growth, crisis and social coalitions

Since the global financial crisis of 2008, advanced economies have been making various efforts to overcome the economic impasse. While the contrast between the countries that have escaped from the crisis relatively quickly and those still suffering from serious problems is becoming more evident, a new economic crisis, stemming from the emerging economies, has again affected advanced economies. In retrospect, both leftist and rightist governments in advanced economies pursued expansive macroeconomic and welfare policies from the post-WWII period to the period with oil shocks (the 1970s). While we recognise that the particular policy regime in these ‘Golden Decades’, during which the left and the right implemented similar policies in many countries (Przeworski 2001, 2014; Magara 2014), was characterised by outstanding economic growth in each country, the specific growth patterns varied. Different social coalitions underpinned different growth models.

This volume is premised on the tentative conclusions that we have reached as a result of three years of study related to our previous project on economic crises and policy regimes (Magara 2014). Recognising the need to analyse fluid and unstable situations, we have set up a new research design wherein we emphasise political variables – whether political leaders and citizens can overcome the various weaknesses inherent in democracy and escape from an economic crisis by establishing effective social coalitions. A new policy regime can be stable only if it is supported by a sufficiently large coalition of social groups whose most important policy demands are satisfied within the new policy regime (Amable 2003).

Ideology and floating socio-economic groups

One important feature of the present global crisis is the cultural orientation that has prevailed among the financial, corporate, bureaucratic and intellectual elites (Martinelli 2014). Indeed, in policy regimes, ideology plays a significant role and affects the political position of various voters. Socio-economic groups change their policy preferences when the policy regime changes.

Political demands are not necessarily a reflection of the objective economic interests of the voters. In fact, the formation of demands depends on whether particular demands are perceived as legitimate by social-political groups. This perception and the expression of political demands are formed by the dominant ideology or hegemony, which also influences how voters perceive their interests and how they form social groups. Ideology defines voters’ social identities, makes them aware that they belong to certain groups and thereby encourages them to become integrated in organisations. This process depends on the institutional structure of the economy. For instance, organising workers is easier if corporatist institutions already exist (Amable 2003: 49–50).

In this context, observing how voters react to changes in the dominant ideology is important. We assume that a policy regime shift does not occur simply because the combination of members within the dominant coalition changes. Rather, it occurs when the distribution of voters as a whole moves in a new direction when the centre of gravity among the entire body of voters itself moves. Thus, a hegemonic change that leads to a policy regime change also involves positional changes in socio-economic groups in response to structural and contextual changes. Under the neoliberal policy regime, voters in advantageous sectors have moved to the upper right, that is, in more libertarian and market-oriented directions, leaving behind popular-sector voters, who have become more susceptible to xenophobic mobilisation by the new right. The stability of the policy regime thus derives from a peculiar combination of support from a small number of voters in the most competitive international sector and a large number of voters in the isolated popular sector.

Problems with the delegation of power

However, drastic policy regime change is rare because the state partially delegates its power and authority to dominant social groups, who in turn attempt to solidify their power for the long term. The state can reduce the administrative costs of economic management by handing over some of its power to leading groups (Schmitter 1974). Unlike the social democratic policy regime, which persisted from the post-war period until the rise of Thatcherism, the hegemonic coalition under the neoliberal policy regime represents an extremely limited segment of the entire population. Why is this small group so strong and why has the neoliberal policy regime persisted, even after the collapse of the growth model based on financial technology? The answer is that the state has delegated one of its most crucial powers to the dominant social group that manages the economy. A distinctive feature of the neoliberal policy regime is that the state has approved the ‘self-policing’ of institutions of international finance. The agency in charge of policing the most important part of the economic system has effectively decided to allow global financiers to police themselves (Chinn and Frieden 2011).

Not-quite-so-neutral aspects of international institutions

In addition to the critical impact of international financiers, multinational corporations also play a significant role. Within the ever-growing field of international competition, they constantly seek the lowest possible labour costs and the weakest worker protections (Chinn and Frieden 2011: 172). Our volume also examines ways in which international institutions could develop more balanced policies. There has been a notable increase in regulatory activity by international agencies composed of national governments that have delegated domestic authority to the international level (Crouch 2013). In our new project, we underscore this crucial role played by international institutions, which can take various forms and is not limited to the European Union (EU). From a policy regime perspective, the behaviours of international organisations may be the dimension in which the global trends of policy regimes, or hegemonic global ideologies, are most directly represented. Are changes in the quality of global pacts, such as EU conditionality, the Free Trade Agreement (FTA) and the Economic Partnership Agreement (EPA), destroying the diversity of capitalism? Or are they leading to the further evolution of different varieties of capitalism?

Notable policy switches in advanced economies

Over three decades ago, Przeworski (1985) indicated one limit of social democratic parties, namely, the trade-off they face between class-only and supra-class strategies. Then, came the fall of the Berlin Wall. Various researchers, including Kitschelt (1993) and Boix (1998), called for the reinstatement of social democratic parties.

Schmitter, in his pioneering article ‘Still the Century of Corporatism?’ (1974), predicted that the twenty-first century would witness a rise of syndicalism rather than corporatism, in which ever more fragmented interests would collide with each other.

Although we have not yet discovered a political-economic model that can replace the social democracy and corporatism of the twentieth century, a social coalition between economic elites, chief executives and skilled white-collar employees – what Amable and Palombarini (2014) call the ‘bloc bourgeois’ – seems to have become a transitional pattern charactering the political economy of advanced countries. Chapters 2–5 of this volume analyse notable policy switches that have recently occurred in France, Japan, Germany and Sweden.

France

France is faced with a political crisis. Amable and Palombarini (Chapter 2) argue that the two major social blocs that comprised the Fifth Republic are broken: one was the leftist bloc comprising public sector employees and blue-collar workers, who were represented politically by the Socialist Party (PS) and the Communist Party, whereas the other was the rightist bloc, comprising private sector firms, the self-employed, professionals and farmers, who were politically represented by centrist, liberal and Gaullist parties.

In the 1980s, the right split into two groups: a radical neoliberal core seeking drastic market reform and moderates promoting the importance of the welfare state. The ultra-right Front National has been expanding its influence, taking advantage of this rift.

Amable and Palombarini (2014) proposed a new analytical notion, ‘the bloc bourgeois’, which is a social coalition comprising the middle class with higher education and is based on the mainstream of the centre-left and centre-right (Amable and Palombarini 2014). There has also emerged an ‘anti-bloc bourgeois’, a social group mainly comprising the working class, who have been excluded from the bloc bourgeois. Their political representation is still uncertain.

In elections, each individual’s position in the social structure forms policy expectations, which then determines her/his vote. The recognition of a risk stemming from income loss should be highly effective as a factor determining the vote. According to Amable and Palombarini, votes for President François Hollande were not affected by cultural dimensions, such as authoritarian values and approval of homosexuals, excluding the impact of immigrant problems.

Individuals in non-skilled and low-income strata believe that they can find a job if they seriously seek one. Youth and skilled workers do not respond negatively to immigrants. The expectation of a traditional social base for the left was directed to leftist economic policies. Hollande’s victory was brought about by the expectations of the leftist electorate for the leftist economic policies that Hollande had promised. However, most of these policies were ignored after the election – a policy switch occurred.

Value Added Tax (VAT) was raised to 21.2 percent from 19.2 percent to cover social expenditures of firms to the amount of 13 billion euros. A ‘competitiveness pact’ was intended to promote employment by reducing labour costs. The enhanced competitiveness of firms, it was thought, would eventually lead to the enlargement of employment. However, the competitiveness pact did not produce the expected impact on employment. Thus, the government needed to alter the purpose of the competitiveness pact. Tax cuts then became considered as a link to increases corporate profits for further investment rather than for job creation.

The Hollande government further promoted supply-side economic policies, led by austerity measures. After the three ministers resigned, the left-socialist group stopped participating in the government. The new economic minister, Emmanuel Macron, who wrote the neoliberal reform plan under the Sarkozy government, came from an investment bank.

A spiral of budget cuts led to an economic downturn and eventually to a recession. The government could not achieve deficit reduction. It simply demanded further austerity and ‘structural reform’.

Hollande’s economic direction can be seen as a new political strategy of the left, concurring with a long-term project of the PS. The party has been attempting to redefine its social base and political coalition. After 1971, the natural coalition partner of the ‘second left’ was centrist. However, after the 1990s the main theme of the French second left corresponds with the ‘third way’ advocated by the mainstream European social democratic left. Hollande’s victory meant a late victory of the second left within the PS and an end to the French exceptionalism.

The Hollande strategy can be understood as a new political attempt to build a social coalition – the bloc bourgeois. This attempt has two characteristics: supporting further European integration centred on central banks and financial conservatism and promoting neoliberal structural reforms.

The social base of the bloc bourgeois comprises the most favoured social groups in the income distribution (entrepreneurs, managers, skilled workers in both the public and private sectors and professionals). The strata opposed to the bloc bourgeois project comprise the popular class, workers, temporary workers, craftsmen, shopkeepers and small firms.

Until the 1980s, the traditional two blocs (left and right) persisted. The political supply fitted the expectations of both sides. Each bloc embraced sub-groups of the working class. However, political crisis (rifts within traditional blocs) strengthened the bloc-bourgeois project. At the same time, it also provided new opportunities for the anti-bloc-bourgeois project.

The neoliberal and pro-European strategy of the government gave rise to dissatisfaction among a large number of voters, the popular class in particular, who once had been integrated into each political camp. This opened a new political space for a strategy against the bloc bourgeois. Neither leftist leaders nor the traditional right have been successful in protecting their sovereignty and maintaining the French model; this political space has not yet been filled.

Front National leader Marine Le Pen’s strategic shift should be understood in this context. It was the liberal and pro-European line that won, though there was friction among the traditional social blocs, which led to the bloc-bourgeois project. Marine Le Pen is attempting to represent the most popular groups, craftsmen, shopkeepers and small firms on the right, as well as workers and non-qualified employees on the left, whose interests were sacrificed due to these frictions.

Voters seem to be attracted by the ‘new’ Front National’s pro-public service attitude and support of income redistribution. The support of craftsmen and shopkeepers is the strongest. These groups used to be the core of traditional electoral support.

The political map of France has been redesigned by Hollande’s strategy, which has led to a dichotomy between a commitment to a renovated Europe and neoliberal structural reform on the one hand and Marine Le Pen’s strategy for a return to strong sovereignty and the French model on the other.

Hollande’s supporters are highly educated and skilled people. However, there is a huge consensus against the neoliberal Europe. The Front National is trying to compete with the bloc-bourgeois project. However, the left does not have the ability to fill the social electoral space against the bloc-bourgeois strategy because of the political and intellectual cleavages within it.

The old social blocs are no longer stable. Political volatility has increased. Mere state intervention in the economy does not create a dominant social bloc. Political frictions concerning the rules of the game, namely, social and political institutions, are becoming more serious. The project of greatly liberalising the labour market has already become an ‘old’ demand. A new demand for public protection has been emerging against this.

Japan

Ido’s chapter reminds us of a variety of populism that is emerging through the promotion of neoliberal reforms. Unlike Amable and Palombarini’s chapter, which describes a sophisticated populist strategy by the new leader of the Front National, a new rightist party opposed to the Socialist Party’s choice of neoliberal structural reform, Ido’s chapter focuses on Prime Minister Shinzo Abe, an architect of populism, who is the most elite of the elites, the leader of Japan’s predominant conservative governing party.

Ido puts Abe in the same heritage as France’s Nicolas Sarkozy, Japan’s Junichiro Koizumi and Margaret Thatcher and Ronald Reagan. He asks why conservative political leaders choose a populist political style when they are promoting neoliberal economic reforms. He suggests that they do so because neoliberal reforms damage the privileged interests of their traditional supporters who were well-established major clients of the primary parties.

The established parties that protected the old policy regime are faced with a political dilemma when they attempt to switch their economic policy from Keynesianism to neoliberalism. To overcome this dilemma and win elections, these party leaders need to secure new supporters (new clients) who can compensate for the loss of traditional supporters. Political leaders try to mobilise electorates without party identification by making the most of their populist political style.

In the neoliberal policy regime, an extremely limited number of the super-rich have come to possess a large portion of national income, while the standard of living of most people has hardly improved. Economic gaps are growing. Each country may well need to choose neoliberal policies for their survival in the globalising world. But why would political leaders introduce such unequal policies, which go against most people’s economic interests, if they are required to be accountable to the people through periodic elections? Given that established parties once created major beneficiaries under the post-war Keynesian policy regime, this must be particularly difficult.

Leaders thus rely on populism. Ido notes Schmitter’s argument (2006) that populism has some merits in the sense that it breaks loyalty to old parties, promotes the formation of new political forces, gets the issues that used to be ignored on the agenda, and urges the conjugation of the repressed cleavage structure. Viewed from this perspective, populist political leaders seem to play a similar role in introducing neoliberal policies: they weaken loyalty for traditional parties among the classes that have enjoyed the fruits of Keynesian policies, transforming the cleavage structure of politics, and attempting to reshuffle social coalitions.

According to Ido, neoliberals attempted to implement unpopular reforms, which might have gone against the interests of their voters by riding the wave of the global financial markets to obtain new supporters,...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Notes on contributors
• Acknowledgements
• 1 Introduction: social coalitions between equilibria and crises
• 2 The emergence of an anti-bourgeois bloc in France
• 3 Abenomics and Japanese politics
• 4 Who turned their back on the SPD? Electoral disaffection with the German Social Democratic Party and the Hartz reforms
• 5 The transformation of the Swedish model since the 1990s: the political aspects of institutional change
• 6 The EU neoliberal policy regime and main political alternatives
• 7 Political reformation of social coalitions for elections
• 8 Class coalitions in a new democracy: the case of Brazil
• 9 Authoritarian developmentalism, democratic neoliberalism, and economic growth in Korea: economic growth in different policy regimes
• 10 Class coalitions in a new democracy: the case of Brazil
• Index