Inclusion and Exclusion in the Liberal Competition State

The Cult of the Individual

Richard Münch

• Publisher: Routledge
• Year: 2012
• Print ISBN: 9780415671538
• eBook ISBN: 9781136504310
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Globalizzazione

This book examines the increasingly international division of labour, which promotes transnational integration. It analyses the change in worker solidarity as it moves from collective national welfare to a transnational inclusion of workers from various links in the production chain.

Examining three types of welfare regimes within the USA, Germany, Denmark and Sweden, the author addresses how and why globalization is furthering the change from the welfare state to the competition state. The book considers in particular the change to solidarity taking place because of the internationalization of labour division; a change away from the segmented and differentiated system of nation states with strong internal national solidarity to broader, more inclusive and cross-border labour identity and inclusion. Analysing the deeper moral consequences of a globalised labour society, such as the paradigms of inclusion and justice, this book considers the implications of transnational labour on national welfare politics, and looks at the increasing significance of the transnational and national politics of inclusion in social policy, education, minority rights, immigration and gender equality.

Inclusion and Exclusion in the Liberal Competition State will be of interest to scholars and students of political science, sociology and social policy studying welfare state change.

1
Economic change

From incremental to radical innovation

According to an analysis by Hall and Soskice (2001), “liberal” market economies differ from “coordinated” and/or “social” ones not by their generally better capacity for innovation, but merely by a different type of innovation (cf. also Albert 1992; O’Sullivan 2000: 11–40). While liberal market economies tend to support more radical innovations involving profound change, the special quality of coordinated market economies rests in incremental innovations of the permanent refinement of products and processes without any profound change. This contrast can be assessed when taking into account that the quota of openings and closures of companies in the research-intensive industry in coordinated market economies like Germany, Japan, Switzerland, Sweden and Finland is clearly lower than in liberal market economies such as the UK and the USA. A similar trend can be discerned for knowledge-intensive services, where coordinated market economies like Denmark, the Netherlands and France display nevertheless high levels of openings and closure (EFI 2008: 58). Each of these two types of market economy possesses its very special qualities with regard to its capacity for innovation. Hence, according to Hall and Soskice, both types can assert themselves only with their own specific policies strengthening their own qualities against competition, which has been aggravated by globalization. From this point of view, the type of coordinated market economy has good opportunities to cope with the challenges of globalization. We are going to discuss this thesis in this chapter.

First of all, the two contrasting innovation models differ due to their technological specialization. Germany is specialized in incremental innovation, which originates from the perfection of high-quality, established technology in automotive construction, machinery construction, electrical engineering and chemistry and is based on knowledge gained by experience. It is geared towards patenting inventions designed to secure the technological lead for existing products. The USA, in contrast, is specialized in radical innovation resulting from the production of top technology in micro-electronics and biotechnology, which originates from scientific knowledge and concerns the patenting of inventions designed to create new markets.

In Germany, the organization of innovations includes the tight entanglement of innovations and production inside established enterprises. Innovations are controlled by production. Applied research dominates, which is not linked with basic research. Stable, long-term production and innovation networks, which are regionally concentrated and closely entwined, and which are frequently organized by associations, dominate the field. Innovations are a matter of traditional small, medium-sized and large enterprises with a vast potential of accumulated technical knowledge. In the top technologies developed by the USA, innovations occur outside production through independent fields of research and development and newly established businesses. They trigger new products and innovation-controlled production. Applied research is closely linked with basic research at university research centres. The innovation networks are free, short-term cooperations that are not organized by associations; they are targeted towards marketable inventions and may also include international alliances. Newly established start-up businesses act as pioneers being taken over by the large enterprises if they are successful.

The contrasting innovation patterns of coordinated and liberal market economies

Summarizing, we can say that the German model of coordinated market economy and the American model of liberal market economy differ through contrasting innovation patterns: incremental versus radical innovations. One side is strong exactly where the other side is weak. This is underlined by an assessment of patents for 1983/1984 and 1993/1994 in a detailed comparison of Germany and the United States. Both sides behave inversely with a clear increase in differences recognizable during the period of ten years under scrutiny. The same result is achieved by an examination of the patent specialization in Germany and the USA from 1986 to 2000 (Legler 2004: 80). Up until the present time, no fundamental changes have been made in Germany’s patent specialization (EFI 2008: 54) (Figure 1.1).

Germany has increased in strength in all established technologies of the old industries such as structural and civil engineering; consumer goods; arms; nuclear energy; transport; agricultural machinery; mechanical parts; machinery; machine tools; environmental technology; thermal engineering; material processes; coatings; production engineering; chemical elements; and electrical energy. In contrast, weaknesses can be discerned in agriculture and foodstuff; new materials; biotechnology; polymers; organic chemistry; medical technology; optics; semiconductors; information technology; telecommunication; and audio-visual technologies. Pharmaceutical products have remained unvaried on a medium level. A slight improvement can be discerned for control systems. In the United States, the picture is mirror-inverted (Hall and Soskice 2001: 42–43, figures 1.5 and 1.6; cf. also O’Sullivan 2000: 135–144). The prevailing strategies for defying competition on the market correspond to these different innovation patterns. In Germany, the strategy of diversified quality production prevails (Streeck 1991), while in the United States innovations dominate the growth markets and price struggles the stagnating markets. In Germany, the established industry attempts to assert its world market position in automotive construction, machine tool construction and in chemistry through the diversification and perfecting of established products. In the United States, a new industry in micro-electronics, biotechnology, medical technology and information technology has developed within a very short time, while the old-established industry has chosen the path of price competition, above all facing goods from Japan (Casper 2001).

A comparison between Germany and the UK supplies similar differences in the relationship of the share of exports of certain product groups in all exports of the country in question and the share of all exports of these product groups in all

Figure 1.1 Patent specialization, Germany and USA 2006–2008 (source: Frietsch et al. 2011: 13, table 2).

industrialized countries among the OECD nations. In Germany, exports in chemistry, automotive construction and mechanical engineering rank clearly ahead of resource-intensive, labour-intensive and knowledge-based exports. In contrast, in the UK, resource- and labour-intensive exports – and even more so knowledge-based exports – attain higher shares than in Germany. The scale-intensive fields of chemistry and automotive construction along with the field of specialized mechanical engineering are ranked at an approximately equal level as resource- and labour-intensive products in the UK. Moreover, they are clearly behind the volume achieved in Germany. This pattern remained relatively stable between 1970 and 1990. The most obvious change occurred in the field of knowledge-based products whose export share in the UK continued to grow from an already higher level, while it dropped slightly in Germany. It is also striking to note that resource-intensive exports have increased but slightly in the UK, but substantially in Germany. Also, in the UK, labour-intensive products dropped from a higher level to the level of Germany, where they grew marginally. Exports of machine tools fell notably in both countries (Fiöretos 2001: 222, figure 6.1).

Differences in the weighting of general and vocational education, the protection of the workforce against dismissals and the protection of the unemployed against income cuts are correlated with the different innovation and export patterns of coordinated and liberal market economies. In the coordinated market economies, vocational education, the protection of the workforce against dismissals and the protection of the unemployed against income cuts are more important than in liberal market economies. Blatant contrast can be established between Germany, Austria, Belgium and Sweden on the side of the coordinated market economies and in the United States, the UK, Australia, New Zealand, Canada and Ireland on the side of the liberal market economies. Special cases with regard to coordinated market economies can be found in Denmark, the Netherlands and Switzerland, which offer a medium protection of employment, but a high income guarantee for the unemployed; the situation is exactly the other way round in Italy and Japan. Between these poles, we find the coordinated market economies of Norway, France and Finland offering a slightly more than average protection of employment and unemployment (Estevez-Abe et al. 2001: 173, figure 4.2).

Another obvious relationship can be established between the significance of vocational training in a country and its income differentiation, measured by the distance between the top and the bottom 10 per cent. In Germany, Finland, Denmark, Italy, Norway, Sweden, the Netherlands and Belgium, greater significance of vocational training is accompanied by lower income differences, while in the United States, Canada and Ireland – and slightly less in the UK – a reduced significance of vocational training is linked with higher income differences (Estevez-Abe et al. 2001: 173, figure 4.3). It is shown that vocational education guarantees higher incomes to the lower and medium qualification levels. An international comparison gives evidence of the fact that early school leavers achieve better results in an international test in educational systems emphasizing vocational training than early school leavers in systems attaching less importance to vocational training (Estevez-Abe et al. 2001: 173, figure 4.5).

Without any doubt, the manufacture of high-quality products in chemistry, automotive construction and mechanical engineering by a great number of highly skilled workers is a production regime making the growth in wealth a collectively supported matter. Even workforce from the medium and lower levels contribute their expertise so that they achieve a higher share in wealth than the workforce in regimes of simple mass production, where we find a wider gap between the knowledge of production managers and the knowledge of production workers. Nevertheless, these are educational and production regimes focused on male jobs in production work. Compared to the United States, in particular, it is therefore striking to see that there are fewer women in production work and in higher management, administration, technical jobs and the professions. A comparison of data from the second half of the 1980s reveals, for instance, that women account for a 22 per cent share in professions and technical jobs in the United States, but only for 15 per cent in Germany. As far as administration and management jobs are concerned, these figures are at 26 and 11 per cent respectively; for office management, they are at 70 and 59 per cent; and for production jobs at 30 and 21 per cent. In contrast, they are at 33 and 52 per cent respectively for sales activities, and at 30 and 67 per cent for simple service jobs (Estevez-Abe et al. 2001: 173, figure 4.6).

Research along the Varieties of Capitalism approach has confirmed the established connections between specific educational regimes, welfare systems and income inequality (Iversen 2005). A typological sharpening of the argument along the lines of Esping-Andersen’s (1990) three types of welfare regimes helps us to differentiate between three types of human capital formation (Iversen and Stephens 2008). The liberal regime, which supports the market, prefers high private investments in general competences, average public spending on education and little redistribution. The family-centred conservative regime is focused on moderate redistribution, a high level of social insurance, strong company- and job-specific competences and medium public spending on education. The social democratic regime, which relies on the state, represents comprehensive redistribution, high social security and high public spending on general, company-specific and job-specific education.

As we can see so far, liberal and coordinated (or social) market economies differ with regard to technological specialization, the organization of innovation, company management, education and job structure and work relationships. Figure 1.2 summarizes the essential differences in a systematic manner:

Adjustment to open markets in liberal and coor...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• Introduction: Inclusion and exclusion in the emerging world society
• 1 Economic change: From incremental to radical innovation
• 2 The change of solidarity: The causes and consequences of international labour division
• 3 Symbolic change: The new cult of the individual
• 4 Institutional change: Liberal, conservative and egalitarian adjustment to international labour division
• 5 Relative exclusion and disintegration: Convergence in the liberal competition state?
• Conclusion: The interdependent change of economy, solidarity, politics and justice
• References
• Index