In the early 1990s it was de rigueur to argue that the challenge of competitiveness in an age of ever greater economic interdependence was likely to put pay to the institutional diversity of capitalism itself, certainly in the western world. Globalisation , in other words, was an agent of convergence like no otherâdriving down taxation, regulation and welfare spending. Lumped together, as it so often was, with the end of the Cold Warâs ideological battle, this prompted the liberal Right to herald proudly the âend of historyâ with the global triumph of both Anglo-liberal capitalism and Anglo-liberal democracy (Fukuyama 1989). It political-economic terms, it was argued that the (largely) exogenous and (seemingly) agentless forces of globalisation compelled states to engageâand, ultimately, to succeed inâthe interstate competition for internationally-mobile capital if they were not to endure a profound loss in economic performance. In short, they had no alternative other than to adapt their political economies to the (perceived) needs of global finance . This, it was posited, would necessitate a form of state transformation characterised by fiscal restraint, supply-side rather than demand-side forms of intervention, the prioritisation of low inflation over full employment, and the re-moulding and re-purposing of existing welfare state institutions to suit the goals of national strategies for attaining and sustaining competitiveness. The âcompetition state â, as it was termed (by critics as well as admirers), was thus identified as the successor to the Keynesian welfare state of les trente glorieuses, the model around which the contemporary nation-states would henceforth crystallise (Cerny 1997).
Yet despite this claim, hypothesis, hunch or conjectureâand perhaps unremarkably to students of the longue durĂ©eâcapitalist diversity persisted. In 2001, Peter Hall and David Soskice published their now seminal text, Varieties of Capitalism . Based, as it was, on a fusion of rational choice and historical variants of the new institutionalism, it sought to demonstrate that the political economies of the advanced capitalism worlds were in fact clustering around not one but two models. These twin Pareto optima were, in effect predicated on, and sustained by, different institutional foundations of national competitiveness . The first of these model capitalisms they termed the Liberal Market Economy (LME). It was characterised by flexible labour markets, stratified wages, and mobile capital with a typically short-term focus. LMEs, thus understood, were seen as innovative, flexible, adaptive and responsive to changing competitive circumstances, a process lubricated by a liberalised financial sector allocating resources between opportunities as they presented themselves. Hall and Soskiceâs exemplary LME cases were the Anglophone economiesâthe USA, the UK, Ireland and Australia. The liberal character of their market governance was seen to be mirrored in the more individualistic character of their cultural tendencies. The second model capitalism identified and described by Hall and Soskice was the Coordinated Market Economy (CME) model. Here we find a more densely institutionalist configurationâa corporatist model in which non-market relations take on a far more important role. This model involves by a less arms-length role for the stateâa coordinator and not just a regulator. CMEs are characterised by more tightly and actively regulated labour markets, a greater degree of social protection, and a virtuous self-reinforcing cycle of patient capital, long-term investment in skills and training, and collaborative rather than conflictual industrial relations in which employer organisations and trade unions play a central role alongside the state. The CME model is most commonly used to denote the economies of Germany, Sweden, Finland, Switzerland, Norway and the Netherlands.
Hall and Soskiceâs approach has proved phenomenally influential. Its central premise is that the variety of capitalism to which an economy belongs shapes profoundly the types of corporate strategy to be found within it, influencing in turn levels of productivity, domestic disposable income and so forth. The theoretical and conceptual tools proffered by Hall and Soskice are a touchstone for comparative political economists seeking to understand the role of national institutional configurations in shaping economic practices and strategies of competitiveness âwith their broader implications for the distributional patterns, systemic risks and political contestation pertaining to national capitalist systems (Schmidt 2002; Hay 2004, 2005; Rhodes 2005; Hall and Gingerich 2009; Hall 2014; Soskice et al. 2016).
Yet it is important to note that the analytic distinction between LMEs and CMEs is an ideal-typical one. As many scholars have argued, the theoretical categories and empirical claims posited by the framework are highly contestable (Pontusson 2005; Bruff and Horn 2012; Bruff and Ebenau 2014; Bailey and Shibata 2014; Coates 2015). As such, and as Hall and Soskice themselves made clear, no country can be expected to conform to either model in its entirety. The specificities of institutional change interact with relatively distinctive national growth models which incentivise the privileging of particular sectors in economic governance (such as the City of London or the Bavarian manufacturing industry) resulting in idiosyncratic paths of economic development (Hall and Thelen 2009; Hay and Wincott 2012). However, the categorisation did succeed in emphasising the different strategies capable of achieving competitiveness . In so doing, it came to serve as an important corrective to the expectation, typical of the literature of the time, of a globalisation -engendered process of convergence . In place of this simple convergence thesis Hall and Soskice substituted a more complex and institutionally-differentiated dual convergence thesis.
That was then. Since the 2008 financial crash the world has changed significantlyâand so has how we think about it. With the benefit of the hindsight the crisis affords, some of the limits of convergence theses (whether simple or dual) are more starkly exposed. Put bluntly, to understand the developmental trajectories of contemporary capitalism it now seems rather more important to focus on sources of disequilibrium and crisis, rather than to work with equilibrium models. In a world in which it is acknowledged that crises are possible, there are limits to the value of ideal-typical reflections on stylised models of capitalism. For such approaches, however well they might describe a current situation, fail to anticipate, and lack the conceptual resources to make even retrospective sense of, crises.
Arguably, then, one of the casualties of the crisis is our current understanding of the dynamic variability of capitalism institutionally. This volume is a contribution to the debate such a reflection presages.
An initial point of departure is the acknowledgment that the political attempts to navigate low levels of economic growth since the crisis do not lend themselves readily to a story of convergence (whether simple or more variegated). The 2008 crash was followed by the European sovereign debt crisis , increasingly fractious relations between the Eurozone âs creditor and debtor countries, prompting attempts at capitalist restructuring intended to instigate national economic recoveries. The 2010s have thus seen European economies implement differing levels and types of fiscal austerity , monetary activism (within and beyond the Eurozone), welfare retrenchment and labour market reform. Simultaneously, the discontent fostered by low growth and the political attempts to navigate it have contributed to the rise in popularity of right-wing and Eurosceptic populist figures and parties particularly amongst unskilled or semi-skilled workers in deindustrialised regions (the so-called âleft behindâ). Although it is an identifiable trend across Europe, the most conspicuous manifestation of the populist ascendancy so far is âBrexit â itself; the withdrawal of the UK from the European Union and (it now seems clear) the Single European Market. The exact terms of the UKâs withdrawal are subject to intense on-going negotiations. It is on the outcome of these negotiations that arguably the very feasibility of the UKâs existing growth model will rest.
But the uncertainty that Brexit has prompted is not contained domestically; it has certainly heightened the sense of political indeterminacy (albeit to differing degrees) within European economies. The strategic disorientation within the UK created by Brexit itself suggests further bouts of fragmentation and capitalist re-structuring in the near future, matched in all likelihood by political-economic change within the EU now that its erstwhile âawkward partnerâ is set on a different course (whatever that turns out to be).
For some, particularly the Conservative Party âs âBrexiteersâ, Brexit represents an opportunity for a further radical liberalisation of the UK economy. No longer bound by supra-national âred tapeâ and the EUâs regulatory disposition, the UK in such a conception might re-fashion itself as a European Singapore, paring back still further the vestiges of its labour market regulation whilst cutting taxation and reducing further welfare eligibility and generosity. Competitiveness would be achieved in this model through the offer of a âgood business environmentâ to internationally mobile capital, at the expense of hard-won workersâ rights, environmental protections and the scope of the stateâs existing welfare policies. Central to this strategy would be the swift negotiation of trade deals with the emerging economies of Asia and South America, in particular, a precondition of which is that the UK cannot remain a member of the Customs Union . In the short term, the UK would fall back to the trade terms of the WTO, or would take the advice of the group formerly known as âEconomists for Brexitâ (now rebranded âEconomists for Free Tradeâ) to declare a unilateral strategy of trade liberalisation by eliminating any and all tariff and non-tariff barriers. This would represent a drastic deepening of the Thatcherite project (or at least its neoliberal elements) in the UK. It is at present by no means widely supported. But if no trade agreement has been reached between the EU and the UK at the point of withdrawal...