The great economic crisis of 2008–2009 undermined popular beliefs in the omnipotence of neoliberal economic concepts. The abrupt end of the “Great Moderation” was a signal that despite the seeming perfection and fine-tuning of market institutions, business will always evolve and innovate so as to keep one step ahead of regulators. In cases where regulators are unable to control market developments (as has been the case in many areas currently being transformed by the process of globalization), emergency situations often require direct state intervention into the economy, which measures may be imposed despite their distortions of market mechanisms.
In fact, governments were already expanding their roles in their economies even before the outbreak of the crisis. For example, active structural policies were suggested by various multilateral organizations (the OECD, the European Commission) and implemented by numerous governments (Warwick 2013; Stiglitz et al. 2013). In other cases, growing international competition (mainly from emerging market economies) induced governments to take measures either to improve their national firms’ competitiveness or to increase barriers to entry for foreign companies. These steps were taken alongside liberalization measures promoted mainly within the framework of the World Trade Organization. This new combination of various types of policies was to serve the “national interest”; however, this term was defined or understood in different countries. The new, rather eclectic set of practices which evolved during the 2000s came to be called “economic patriotism” (Clift and Woll 2012).
The declining trust in neoliberal policy solutions and empirical facts of increasing statism has influenced comparative economic research. Parallel with the time of the “Great Moderation” much of the efforts in comparative economics was devoted to the research of varieties of fundamentally liberal market economic systems. The varieties of capitalism (VoC) literature dealt mainly with the economic systems of developed market economies enriching the original typology of liberal and coordinated market economies (Hall and Soskice 2001) with finer nuances (e.g. Lane and Myant 2007; Farkas 2016; and others) but still working in the same, rather static cross-sectional research framework. Empirical facts of the 2008–2009 crisis bound mainly to increased state involvement called for more dynamic approach and also for the treatment of economic systems fundamentally different from the archetype VoC models.
Increase in the direct economic involvement of the state has provided fertile soil for economic research. The Institute of World Economics at the Hungarian Academy of Sciences was one of the institutions which launched major research programmes on this topic, and among its efforts, special attention should be paid to a series of conferences entitled, “The Role of State in Varieties of Capitalism”. These annual SVOC conferences have attracted scholars from many different countries; they have used the discussions to identify several major topics related to the different patterns of direct state involvement in various types of economies. The present volume introduces a few of the key trends which define this very rich research agenda.
The cornerstone of the chapters in the first part of this book is the concept of “economic patriotism”, as elaborated by Ben Clift. It is important to differentiate this notion from classic economic nationalism and protectionism, though the aims of such measures are similar: they favour national businesses over foreign (or, today, multinational) competition. Advocates of economic patriotism propose measures which will create larger, more competitive domestic firms or temporarily minimize the local effects of international competition so as to make domestic players more able to withstand international competition in the future. Very similar elements were at work in classic economic nationalism, the ideological justification for which was provided by the concept of the developmental state; such measures are frequently adopted by transition economies and codified into multilateral regulations to protect infant industries. One new feature of economic patriotism is its extensive toolkit, which includes selective liberalization and reregulation. Another feature of this concept is a flexible understanding of the term “patrie”, which—unlike in classical theories of economic nationalism—can include subnational, national, and/or supranational communities in its definition of “insiders”. For example, economic patriotism, in the form of “common European interests”, motivates many of the measures adopted by the EU.
However, the term is also frequently misused as a label for non-patriotic movements. Eurosceptics regularly argue that in practice “common European interests” are often merely the interests of the multinational firms from larger and richer European countries, which argument reflects the classic core-periphery conflict. In other cases, mainly in transition economies, economic patriotism and the concept of the developmental state are simply used as cover for political rent-seeking. Both of these deviations from the original concept are discussed in this book.
The core-periphery hierarchy is reflected in many of the current conflicts between liberal and more statist approaches to development in countries with very diverse economic, social, and cultural backgrounds. In fact, the divide between these two concepts and the central developmental dilemma—that is, whether to follow Western liberal or Eastern feudal (authoritarian) patterns—can be traced back to the Age of Enlightenment and enlightened absolutism. The intensification of bourgeois development led to greater economic growth but was rather fragile politically, especially for feudal rentiers. Traditional feudal societies did not provide education or freedom of enterprise for the majority of their members; hence, their economic potential was much more limited. On the other hand, the system was politically more secure for traditional rentiers. This dilemma hindered the development of the European (semi)periphery and, after some delay, other peripheries of the capitalist world -system as well. This volume includes case studies of Iran’s resistance economy and Brazil’s post-developmental state, which contextualize this dilemma within the special circumstances of Muslim tradition and the historical heritage of Latin America. Every peripheral region exhibits frequent shuttling between these two poles—liberalism and authoritarianism.
The conflict between the two developmental concepts is often complicated by rent-seeking. In this volume, we have used the broader, Weberian definition of this term suggested by Mihályi and Szelényi: rents are created when “closed groups monopolize advantages by occupying scarce and desirable positions”. We have paid special attention to political monopolies as sources of rents; the economies of traditional authoritarian political regimes are organized around these types of rents. The current Central European followers of this model have been creating institutional frameworks suitable for systematic rent-seeking. Several of the chapters herein deal with various sides of this issue using mainly—though not exclusively—Hungarian evidence. Varju and Papp have described the ways in which these new institutional settings can (or cannot) be harmonized with the liberal multilateral regulations of the EU. Mihályi and Szelényi have provided a systemic overview of the various types and sources of rents characteristic of post-communist economies’ transition processes. My own chapter deals with the selective application of business laws to multinational firms in Hungary.
Peripheral regions’ oscillations between liberal and authoritarian approaches can be attributed to cyclical ruptures in their development. Long waves of economic growth (as elaborated by Kondratieff) and technological cycles (within the framework of evolutionary economics) are among the theories which explain cyclical movements in capitalist development and the resulting shifts between liberal and statist economic policy regimes. And though conceptual comparisons of the two regimes have proved to be difficult, we can still find some parallels which corroborate these theories. Using Polányi’s concepts, May and Nölke (2015) have differentiated liberal and organized phases of capitalist development over the course of the late nineteenth and twentieth centuries. The time frames of these institutional changes coincide with the inflection points of the economic and technological long waves of the twentieth and early twenty-first centuries. These turning points were marked by the three major crises of this period (1929–1933, 1974–1978, and 2008–2009). The last turning point is of particular interest, since it can be regarded as the starting point of the current developmental phase.
Foresight into the various aspects of development is rather difficult and often vague. We have very little idea what these new business models will look like. How will typical transactions be organized? How will the legal and institutional framework change in order to serve these new business models? Nevertheless, basic findings can be articulated. Nölke contends that the current period of capitalist development is an organized phase marked by increased direct state intervention. Nölke also suggests that large, emerging market economies like China and India will dominate the world economy not only in terms of output and economic potential, but also by imposing their institutional pattern, which he calls the “state-permeated market economy” (Nölke 2012). Despite big differences in these countries’ political systems and cultural heritage, their various modes of state involvement exhibit certain common elements: a kind of government planning and steering of markets (familiar from the developmental state concept), the marked role of state-owned companies in fulfilling developmental targets, and a weak separation of business and politics, latter fea...