Beruflich Dokumente
Kultur Dokumente
Bruno Amable
The current debate on the possibility of What comes out of most of these reports3 is that the
existence of a specific European socio-economic institutions that characterise the European model
model1 of a knowledge-based economy is linked to are supposed to be obstacles to the achievement of
the issue of structural reforms and the question of the Lisbon strategy. The bad performance of
the possible convergence of modern developed Europe in comparison to the US would be due to
economies towards the ‘Anglo-Saxon’, ‘market- the lack of adaptation of the European model to the
based’, ‘neo-liberal’ model of capitalism. demands of contemporary capitalism. The
According some analysts, this convergence would European model would only be the survival of a set
be more than welcome since the most advanced of institutions that may have been performing well
knowledge-based economy is considered to be the in the post-war period until the end of the 1970s,
US, and the source of its competitive and but which would be obsolete now. The stability of
innovative advantage is usually traced back to its markets dominated by large oligopolistic firms
specific institutional structure.2 enjoying stable long-term financial relationships
The most common discourse on Europe and its with banks is held to be gone forever. What is
current problems can be summarised as follows. supposed to dominate nowadays is the primacy of
Europe in general, and France and Germany in innovation and competition, demanding a rapid
particular, are held to have fallen significantly adaptation capacity to fast-changing markets, and
behind the United States, in terms of economic the importance of flexibility in all markets. In this
dynamism and innovation, because of the presence respect, the ‘indispensable reforms’ would consist
of institutions that would be not suited to the new in favouring the mobility of workers both within
forms of capitalism, and particularly the the firm and across firms and industries, to foster
‘knowledge-based society’. More generally, the education and training and thus workers’
‘new age of capitalism’, i.e. the ‘knowledge-based employability, to increase labour market flexibility,
economy’, would imply the end of the European to deregulate product markets and services, to
socio-economic model. favour financing through markets rather than
This is indeed predicted by many reports that intermediaries…
assess the ability of Europe in general, and the core This alleged necessity of structural reforms
continental countries (France and Germany) in concerns nearly all institutional areas, not just the
particular, to fulfil the objectives of the Lisbon labour and product markets. For the proponents of
summit, i.e. ‘to make Europe the most dynamic and ‘reforms’, social protection has become impossible
competitive knowledge-based economy in the world to maintain at its current level. Sky-rocketing
capable of sustainable economic growth with more medical costs would make it impossible to continue
and better jobs and greater social cohesion, and financing the social security system. The ageing of
respect for the environment’ by 2010 (Kok [2004]). the population endangers the financing of state
retirement plans, given that the pathologies unique
1
Use will be made of the term ‘model’ without any
normative implication.
2 3
OECD [2000]. See also Sapir [2003].
Actes du GERPISA n°39 8
to the European labour market are supposed to lead delay in fulfilling the requirements of the Lisbon
to a limitation of the proportion of the actively agenda can be traced back to delays in
employed population able to contribute to public implementing the ‘indispensable reforms’.
pension plans. Labour market institutions of However, some concerns are sometimes raised
Continental Europe are thus considered to prevent regarding the social implications of these reforms.
several categories of the population from accessing It is taken for granted that pursuing a development
employment: women, low-skilled workers, young path toward the knowledge-based economy
workers, workers close to retirement age…. These demands the implementation of the structural
institutions are also accused of unfairly protecting reforms mentioned above and that these will lead to
those already employed -- the insiders-- to the high economic performance in terms of growth and
detriment of those excluded from the labour market innovation. It is nevertheless sometimes feared that
-- the outsiders. Taxation, redistribution the social impact of these reforms may actually
mechanisms and labour unions' influence lead to jeopardise ‘social cohesion’. The question is
salary scale limitations. This is supposed to have therefore whether it is possible to reconcile social
the double effect of making the least productive objectives with deregulated markets and the
workers unemployable while discouraging the most generalisation of competition as the dominant
qualified ones, those with high incomes, from economic principle. More generally, the question is
supplying their labour force. that of the type of institutional forms suitable to
The flexibility of the labour market is held to be European societies, able to lead to both high
insufficient, hindering adjustments to employment. economic performance and social cohesion.
This in turn weakens companies subject to adverse This problem is that of the type of socio-
supply or demand shocks, companies which would economic model that would best fit the European
then want to decrease their workforce, countries. In order to address such a problem, it is
discouraging them ex ante from hiring, and thus necessary to possess analytical tools to characterise
from producing. Product markets are considered as the different economic models, so as to be able to
excessively regulated, slowing down the entry of position the European model(s) vis-à-vis the
new firms and, consequently, reducing industrial ‘Anglo-Saxon’ variety of capitalism. The seminal
dynamism. Such market structures would guarantee contribution of Michel Albert ([1991]) has stressed
protected income and a peaceful existence, with no the differences between the ‘Rhine model’ and its
need to innovate or improve productivity, for firms ‘neo-American’ counterpart. Many contributions
already in the market, which would have in turn have used this dichotomy, while others have
negative consequences on that sector and criticised it for being too broad. On the other hand,
employment in general. the reference to strictly national models is of little
The education system is regarded as lacking use for thinking the European socio-economic
incentives, especially at the post-secondary level. model.
Here again, the lack of competition would promote Starting from the theoretical analysis of
laziness (at the very least intellectual) in lecturer- institutional diversity and institutional
researchers and dishearten the best students…. The complementarity, this contribution will review the
same would apply to research, which is supposedly diversity of socio-economic models and isolate the
lacking both public and private funding: public main characteristics of the current socio-economic
because of heavy taxes and social spending; private models in Europe. It will then consider a series of
because of the lack of incentive to innovate, questions and problems linked with the methods of
deriving from the absence of competition in comparative capitalism.
industry, and again punitive taxes. Finally, the
organisation of financial systems in Europe would
not leave enough room for market mechanisms, THEORETICAL TOOLS FOR A COMPARATIVE
and legislation on the matter would overprotect ANALYSIS OF CAPITALISM
company managers to the detriment of
shareholders, hindering the latter from closely Institutional diversity
monitoring the former.
In order to analyse a socio-economic model, it
The conclusions from the above appear almost
is necessary to go beyond the simple evidence of
inevitable: the new age of capitalism demands a
the existence of national differences in various
new institutional model for Europe, and the new
institutional forms. The labour market may be more
model should very much resemble the neo-liberal
‘regulated’ in France than in the US in the sense
model such as the United States’. Therefore, any
that the rights and duties of each side of the
Actes du GERPISA n°39 9
employment relationship are more precisely to the employment level and would facilitate work
defined in the former than in the latter country; the reorganisation. Thus, the more centralised wage
German financial system may be considered more bargaining is, the higher employment and the lower
centralised than the US financial system, i.e. its inflation should be. Calmfors and Driffill [1988]
structure relies more on financial intermediaries proposed to take into account a non-monotonic,
such as banks than on financial markets; and the hump-shaped relationship between centralisation of
Swedish welfare state is probably more universal wage bargaining and wage levels. Organised
and generous than its Italian counterpart. But one interests are harmful when they are powerful
may wonder on what basis the observation of enough to cause major disruptions but not
‘differences’ allow the analysis of their importance. sufficiently encompassing to internalise the costs of
Institutions may be different and yet these their actions. In this perspective, wage moderation
differences could be disregarded if institutions had can be achieved either through decentralisation of
no influence on the economic evolution of nations. wage bargaining or through all-encompassing trade
If one believes that institutions have some unions. In the former case, bargaining units would
importance for the economy, there is a need for a be too small to have significant price or wage
theory linking institutional differences and the setting power; in the latter case, unions would
existence of differentiated socio-economic models. recognise the possible adverse effects of wage
The theory of institutional complementarity offers increases on inflation and employment. In the
a platform for the analysis of the role of institutions intermediate case, unions would be strong enough
in the economy and for explaining why to exert wage pressure but would neglect the
institutional differences lead to more or less macroeconomic consequences on inflation and
‘coherent’ models of capitalism. unemployment.
The role of institutions in the economy is This last example raises a problem concerning
nowadays largely accepted. Many academic the number of possible ‘varieties of capitalism’. If,
contributions, theoretical or empirical, have following Calmfors & Driffill [1998], there are two
analysed how the features of the education and possible institutional configurations delivering
training systems, either public or private, as well as ‘good performance’ in terms of employment, this
firms’ internal training systems or more generally leaves open the possibility for two possible socio-
any institutions that affect education and training economic models, one with centralised wage
decisions of individuals will matter for growth. In bargaining, the other with decentralised bargaining.
empirical work, such effects are usually accounted If one observes the same phenomenon in every
for by the inclusion of one or more schooling institutional domain, i.e. the existence of two
variables in growth regressions.1 Not only the level markedly different set of institutions that lead to
of development of financial systems2, but also the good performance, this means that the number of
type of financial system,3 have an influence on the possible varieties of capitalism is 2n, n being the
level of investment, the rate of growth, the number of institutional domains. Even if one
characteristics of financing relationship or considers a restricted number of such domains, this
corporate governance. Also, the links between opens the possibility of many different models. A
wage-setting institutions and employment consequence would be that it would make little
performance have been a major topic for research sense to analyse models rather than simply national
in economics since the 1980s at least. The cases. However, there are strong theoretical reasons
traditional view is that real wage levels will be to believe that the possible diversity of capitalism
higher the farther wage-setting institutions are from is much more limited than what the combination of
perfect competition, i.e. the more centralised wage- possible ‘local’ institutional forms would lead us to
setting is. This institutional arrangement would believe.
lead to less than full employment, and presumably
high inflation. The literature on corporatism Institutional complementarity (based on
opposed this view and argued that centralisation of Amable [2003])
wage bargaining would be a guarantee that wage The basic idea behind every theory of the
setters would take into account broader interests. It diversity of capitalism is that different models of
would also favour the emergence of a consensus capitalism are not random collections of economic
among social partners, which would be beneficial institutions. In other words, there are structural
reasons opposing the simple idea that in order to
1
See Barro and Sala-i-Martin [1995] for instance. achieve the best economic performance, it would
2
Levine [1997]. suffice to take the ‘best’ institutional forms in
3
Allen & Gale [2000].
Actes du GERPISA n°39 10
every area (labour markets, financial systems, therefore how institutional forms in different areas
education and training…) and combine them. complement each other.
Supposing that an optimal solution exists in each The notion of institutional complementarity was
these areas, independently of the institutional first formulated by Aoki [1994], following an idea
configurations that are present in any of the other found in Migrom and Roberts [1990] about
areas. The best institutional configuration for an organisational complementarity within a firm. The
economy is therefore the one that is closest to the common definition of complementarity in
sum total of these optimal local configurations. economics demands a ‘performance’ or an output
This conception is very probably the driver behind function, F(.,.). We consider two institutional
benchmarking efforts - and the basis of domains X and Y (labour market and financial
international comparisons such as those that have system for instance), respectively associated with
been carried out by the World Economic Forum specific institutional forms x and y. If x and y are
(Davos) or more recently by Lehman Brothers.1 continuous variables, and F is differentiable, the
The purpose of such studies is usually to classify definition of complementarity in economics is that:
countries in terms of their competitiveness.
Towards this end, a certain number of categories ∂ 2 F ( x, y )
are defined, and countries are marked for their ≥0
∂x∂y
performance in a given category. An overall mark
is then obtained by adding up the scores from each
area. The best model is the one that is closest to The notion of complementarity is not limited to
the profile that has been defined as being the best continuous variables. Complementarity in this
local configuration. Their findings can be situation is associated with the notion of
interpreted as follows: the ideal economy possesses supermodularity.2 The performance matrix of
Denmark's educational system; Sweden's Table 1 shows that x and y are complementary.
technology and employment policy: the Moving from an institutional equilibrium
competitive environment of Finland's high-tech characterised by decentralisation and a low
sector; and the entrepreneurial environment, wage influence of banks to an institutional configuration
flexibility, (non)-protection of employment, fiscal where one institutional form only is modified is
system, competitive environment, economies of costly in terms of performance; the same
scale and productivity of the United States. It conclusion applies to the case where the initial
remains to be seen whether this mixture of situation is wage bargaining decentralisation and a
American and Scandinavian institutions would be large influence of banks.
viable. The answer is yes if one believes that it is Table 1. - The performance matrix
possible to play ‘institutional lego’. If one adapts a
view that encompasses inter-institutional Institutions x2 x1
interactions, nothing is less certain.
y2 3
Institutions’ influence on the economy should
not be considered independently from one another; y1 2 3
they exert a joint influence on the economy. Source: Amable [2003]
Institutions affecting one area of the economy (e.g.
the labour market) will have consequences beyond
Institutions and politics
that particular area, if only because of general
equilibrium effects. We can take the simple Institutions are defined in Amable [2003] as
example of wage bargaining: the outcome depends political economy equilibriums. Agents’ positions
on each party’s outside options. These outside in society are differentiated, which generates a
options are in turn dependent on the institutions divergence of interests. Conflict of interests is
affecting other areas than the labour market. It can necessary for the existence of political constraints
be the alternative job for the worker, which may and the effect of politics on economics stems from
depend on its skill level and hence on the the mechanisms with which conflicts are resolved.
institutions concerning the education and training Institutions, by fixing the ‘rules of the game’ are
system; the alternative option for the firm may one way of settling fundamental conflicts of
depend on its relocation possibilities, i.e. on the interest between agents. But institutional design
regulatory environment, the liquidity of the emerging out of an upper-tier or ‘meta’ game does
financial market… What is to be considered is not abolish conflict in the sense that they would
1 2
Edwards & Schanz [2001]. Topkis [1998].
Actes du GERPISA n°39 11
make the sources of interests’ divergence the political sphere, where agents will express a
disappear. For instance, employed workers may be demand for the implementation of a policy that
content with a certain wage-bargaining structure affects the payoffs to their benefit. There is thus
which gives market power to trade unions. It may scope for a policy intervention, even within a fixed
be a guarantee of high real wages or employment institutional frame, modifying the payoffs
stability. The unemployed on the other hand might associated with one or the other strategy. Policy
prefer another wage bargaining structure, which choices are also the equilibrium strategy of a
would be favourable to employment growth, even particular agent, the government, seeking political
at the expense of lower wages. Employers might support; implementing a particular policy must thus
also prefer a more decentralised bargaining constitute an equilibrium strategy for the
structure, which would give them a larger government. This theoretical framework is
bargaining power. If they are unable to change the represented in Figure 1. To a relative proximity of
bargaining rules, they may still express their interests corresponds a clustering of agents in
discontent and try to obtain some compensation. different social groups: workers, firms’ managers,
Divergences in economic interests are conveyed in farmers, pensioners
Political coalition
Polity
Ideas
Incentives
Agents with heterogeneous interests
Organisations
Strategies Strategies
Economic dynamics
These groups correspond to an expression of for the expression of a common political goal.
individual interests under a collective form. This Their formation is made under the influence of the
expression depends on the perception of agents political process. They are political constructions,
with respect to their own interests, their situation in and at this stage, institutional rules governing
society and their relation with other ‘similar’ polity influence the gathering process of actors,
agents. This perception is mediated by the system their mode of interaction and the form of their
of representations that individuals have, i.e. by representation. The representation of social and
ideas and theories about the state of society.1 socio-political groups with respect to state
Socio-political groups represent a collective action decision-making, either policy choices or
institutional change, can take several forms: formal
negotiation among and formal representation of
1
Palombarini and Théret [2001].
Actes du GERPISA n°39 12
If y = y1 (banks) If y = y2 (markets)
managers managers
strategies 1 2 strategies 1 2
workers 1 4, 3 2, 1 workers 1 1, 1 1, 2
2 1, 2 1, 1 2 2, 1 2, 3
Regarding the other game, the outcomes are that markets-based system otherwise. There is a
agents opt for a bank-based system if there is symmetric complementarity between financial
centralised wage bargaining and a financial systems and wage-bargaining procedures.
Actes du GERPISA n°39 13
investors investors
strategies 1 2 strategies 1 2
savers 1 1, 1 1, 0 savers 1 0, 0 0, 1
2 0, 1 0, 0 2 1, 0 2, 2
The game structure exposed above gives two institutional design in one area depends on the
possibilities for the overall institutional institutions prevailing in other areas. This leaves
arrangements: {x1,y1} and {x2,y2}, i.e. the the possibility of considering a hierarchy among
combination of a bank-based financial system with institutions. Institutions reflect the socio-political
centralised wage bargaining and a combination of a equilibrium of a society, and the costs and benefits
financial markets-based system with decentralised associated with institutional change affect
wage bargaining. In the numerical example above, individuals differently. A political coalition will
the two institutional equilibriums are not Pareto- seek to stay in power by finding support with the
comparable. The bank-centralisation configuration dominant social bloc; to that effect, it will seek to
is more favourable to workers whereas the implement those institutional changes that favour
markets-decentralisation arrangement favours some or all of the socio-political groups that
savers and investors, managers are indifferent constitute the dominant bloc and try to prevent
between the two equilibriums. change that is detrimental to the bloc,1 in response
From the example above, different political to the political demands addressed by the different
coalitions would lead to different institutional socio-political groups.
equilibriums. A coalition of workers and managers Therefore, the areas where institutional change
could support the ‘centralised-banks’ equilibrium. will be implemented more easily are where the
A coalition of savers and investors would prefer the groups of the dominant bloc have little interest. On
other equilibrium. the other hand, change will be implemented more
cautiously in domains where the most powerful
Institutional hierarchy socio-political groups have vested interests. This
The institutional configuration of an economy definition of institutional hierarchy is therefore
depends on the formation of a stable dominant made with reference to a specific socio-political
social bloc coalescing different socio-political equilibrium and a specific dominant bloc. Changes
groups prone to support a coalition with a certain in the institutional structure of the economy can
political strategy. Implementing this strategy will then be related to political changes and
lead to institutional change in a direction that is modifications of the dominant bloc.
(meant to be) beneficial to the dominant social Palombarini [2004] elaborates further this
bloc. However, this bloc itself is a coalition of concept of institutional hierarchy by distinguishing
different and sometimes diverging interests; the two notions. The first hierarchy is that of the
institutional structure that will result from the government, which aggregates the dominant social
political strategy that it supports will therefore be a bloc. On top of the hierarchy are those institutions
compromise. Because social actors do not generally which stabilise the most the social bloc which
possess a perfect vision of all interdependencies provides political support to the government. One
and complementarities between institutions, the may also consider the hierarchy stemming from the
compromise does not apply to all the institutions of demands addressed by the groups that form the
an economy, but has to be re-established as bloc itself. These groups do not necessarily
changes in the economic environment modify integrate the preservation of the bloc in their own
agents’ options and strategies. strategies, contrary to the government. Therefore,
Institutional change may jeopardise the interests
of some groups within the dominant bloc. Because
of the complementarity between institutions, 1
All this is conditioned by agents’ rationality!
Actes du GERPISA n°39 14
the demands that the groups address may reflect a whole institutional structure of an economy. It is
different hierarchy. therefore related to the stability of the political
coalition supporting the model. A model defined by
complementarity, compatibility, and its institutional structure (x, y, z) is coherent if
coherence there is a stable political equilibrium supporting it.
Given the above notions of complementarity Once again, coherence should be thought totally
and hierarchy, what can be said about the notions independently form ‘common principles’ or
frequently associated with complementarity? ‘identical logics’. In most cases, there is no single
Complementarity is by no means synonymous with ‘logic’ that is able to reflect the set of institutional
institutional isomorphism, i.e. the fact that one complementarities and hierarchy of a given
finds ‘common principles’ in every institutional economic model.
area. Institutional isomorphism and With the help of these theoretical elements, one
complementarity are totally independent notions, may now turn to the issue of the observable
which may or may not coincide given the case diversity of economic models.
considered. Overemphasis on ‘common principles’
presumably comes from a generalisation of the
mechanisms found in some models: the State was COMPARATIVE ANALYSIS OF CAPITALISM
supposed to be active in every institutional area in
France, hence France was considered as a ‘Statist’
The Rhine model /
model; free markets and competition (are supposed
to) prevail everywhere in the US, hence the ‘logic’ neo-American model dichotomy
of the US model is a free markets logic and so on. From a European point of view, the most
These particular configurations are not the general interesting opposition between two types of socio-
pattern of institutional complementarity. There may economic models is found in Michel Albert’s
exist cases of complementarity where very [1991] book. M. Albert’s concern is the type of
different ‘logics’ are applied according to the economic model that could be implemented in the
institutional area. One could envisage for instance a European Union. The EU is characterised by
free market logic on the labour market coupled institutional diversity and it could be
with a very comprehensive and de-commodified understandable to think in terms of national
social protection, together with some other specificities or national socio-economic models.
‘complementary’ institutions. The apparent lack of Indeed, many institutional economic papers are
‘coherence’ is no weakness, except for the social keen to emphasise the differences between France
scientist who believes that agents would be so and Germany, two core European countries (Boyer
disturbed by the coexistence of free market logic [2004] for instance).
on labour markets and a logic of de- But Albert’s point of view is to take seriously
commodification for social protection that they the objective of a European Union as a political
would become schizophrenic. In fact, imposing entity. The aim is to make the European Union
isomorphism could very well destabilise a model. more than just a large free trade area. It must have
The notion of compatibility is more rarely used its specific set of institutions. This raises the
but may appear in discussions related to question of which set of institutions could be suited
hybridisation of models. The question is then to Europe. The model that would be close to what
whether some changes to an institutional form will Albert thinks is the European model is the so-called
be possible when one considers the rest of the ‘Rhine’ model of capitalism, opposed to the ‘neo-
institutional structure. Institutions x and y can be American’ model. The first model characterises of
said to be compatible when their coexistence does course Germany, but also other non-European
not set in a process of institutional change such countries such as Japan. The neo-American model
some political forces would like to keep x and represents mostly Anglo-Saxon countries, the US
change y or the other way round. Therefore, and, within Europe, the UK. This model is
institutions x and y are not compatible when there characterised by several features: an emphasis on
is no stable (and this does not mean eternal!) individual achievement, the importance of short-
institutional equilibrium including both x and y. term financial benefits, or reversibility and
When one looks at the whole institutional set-up flexibility of commitment. The Rhine model rests
of a country (or model), the idea of coherence can on long-term commitments, collective
be used. Whereas compatibility is a concept achievements and consensus.
relating some institutions, coherence concerns the Although Albert thinks the Rhine model is on
many counts ‘superior’ to the neo-American model
Actes du GERPISA n°39 15
and in any case better suited to European societies, favouring investment in transferable assets. In a
he does not believe that it will win in a free CME, it is mainly achieved through non-market
competition among varieties of capitalism, where means −the so-called strategic coordination−,
superior forms of organisation would just win favouring investment in specific assets. LMEs are
partisans over by the sheer power of their thus characterised by short-term finance,
attractiveness. If the most appealing aspects of the deregulated labour markets, an emphasis on
Rhine model are to spread across Europe, it will be general education, and strong product market
through a political process of European integration. competition. CMEs are characterised by long-term
For Albert [1991], there exists no strictly finance, cooperative industrial relations, high levels
‘European’ model because of the diversity of of vocational training, weakened product market
countries within the Union. For instance, Italy is competition, and strong information exchanges
considered nearer to the Chinese model than to the through more or less formal professional
Rhine model. But, as Albert [1991] (p.23) points it associations favouring the establishment of
out, the terminology ‘Anglo-Saxon model’ versus common industrial standards. The differences
‘German-Japanese model’ is only useful when one extend to the patterns of innovation and
looks at things from a distance. Indeed, to assess technological change as well as industrial
what the ‘right’ distance to look at socio-economic specialisation, the so-called comparative
models is is not so obvious. To large a distance institutional advantage. LMEs have a comparative
makes every country belong to a general category advantage in industries where radical innovation
of ‘market economies’. Looking at models at too leads to market stealing benefits and where
close a distance makes it appear that each country competitiveness stems from a fast adaptation to
is ‘different’ and even ‘very different’ from another changing market conditions. CMEs are competitive
country. This trite observation is of course of no in industries where competitiveness is based on
help to analyse the problem we are faced with. All cumulative accumulation of knowledge and
the more that the search for differences has no end, company-specific skills and where incremental
within each country, regions or industries are ‘very innovation matters.
different’ from each other when one looks close Hall and Soskice’s binary classification of
enough. economies between Liberal Market Economies and
Albert [1991] does not propose a fully-fledged Coordinated Market Economies leaves a certain
typology of capitalism as such, but his ideas have number of national cases occupying ambiguous
been used in this direction. The Germany-USA positions since they do not clearly rest on market-
dichotomy has become a classic feature of based coordination principles nor possess strong
comparative analysis of capitalism and is and organised interest groups upon which non
analytically presented in the various works of market coordination could be based. France and
David Soskice and Peter Hall.1 The starting point Italy are examples of such intermediate countries.
of their analyses is the relational firm, defined as an Not being clearly identified as belonging to any
actor seeking to develop dynamic capabilities, and type, these countries are considered as somewhat
the institutional framework within which it deficient and are expected to have lower
operates. They use five spheres in which firms macroeconomic performance.
develop relationships to resolve coordination One is then facing a double-problem. Forcing
problems central to their core competencies: countries into one or the other category is running
industrial relations, vocational training and the risk of ignoring fundamental differences
education, corporate governance, interfirm between them, thereby emptying the classification
relations and the coordination problems firms have of its meaning. Too broad categories tell very little
with their own employees, i.e. ‘internal’ about what brings countries together in a specific
coordination. They compare two different group. On the other hand, having as many types of
production regimes, the liberal market economies capitalism as there are countries is little more than
(LMEs) and the coordinated market economies performing a series of country case studies, and
(CMEs). This dichotomy is the basis for the cannot represent a comparative analysis of
consideration of one fundamental dimension capitalism.
separating the different national production
systems, namely coordination. In a LME,
coordination is based on market mechanisms,
1
The most recent contribution is Hall and Soskice
(Eds) [2001].
Actes du GERPISA n°39 16
1 2
Schmidt [2002]. Jackson [2002].
Actes du GERPISA n°39 17
main types of “capitalism” or Social Systems of the so-called Anglo-Saxon countries. The problem
Innovation and Production (SSIP): with this labelling is that it is not very explicit
9 the market-based SSIP (the United States, about whatever it is that the countries in this model
Great Britain, Australia and Canada); share; and it does not express any economic theory
9 the social-democratic SSIP (the for this model. It does however infer a number of
Scandinavian countries) things: the role of history, a common culture, etc.
9 the mesocorporatist SSIP (Japan); These inferences need to be rendered explicit and
9 the “European” SSIP (France, Germany, justified at a theoretical level - after all, "culture" is
Italy and the Netherlands). utilised as a last resort argument in many
comparative studies.
SSIP’s should be seen as ideal-types, instead of New analyses were made in Amable and Petit
as more or less stylised descriptions of the main [2001] which led to a refined typology of SSIP.
characteristics of a given country. This obviates the Extending the empirical analysis to 21 countries2
need to come up with an exact identikit creating a and updating it to consider the end of the 1990s, six
match between a given SSIP and the group of SSIP were distinguished:
countries that best embodies it. Identifying SSIP 9 the market-based SSIP
involves both theoretical elements (i.e., an 9 the social-democratic SSIP. The
expression of the institutional complementarities mesocorporatist SSIP, with Korea now
that are at work in the countries comprising these joining Japan.
SSIP) and empirical elements (through the 9 The “European integration” (or “public”)
processing of a large base of statistical indicators SSIP. This includes the countries that
covering these 12 countries – the data being already belonged to this SSIP (France,
analysed in such a way as to identify country Germany, the Netherlands), minus Italy, but
typologies). Devising a theoretical underpinning now including Belgium and Ireland.
for the typologies derived from this empirical 9 An “Alpine” variant of the preceding SSIP,
analysis1 is not necessarily the same thing as comprising Austria and Switzerland.
“naming” the model or SSIP that has been 9 A “Mediterranean” variant of the European
discovered. It is not always possible to come up SSIP, comprising Spain, Italy, Greece and
with a name that can correctly summarise the SSIP. Portugal.
Take for example the “market-oriented” SSIP that
is linked to the Anglo-Saxon countries. The Besides the differentiation of the European
descriptor “market-oriented” does not at first SSIP into three variants, the main results reported
glance appear to cause any conflicts with in Amable and Petit [2001] were that there did not
traditional writings in this field. It is an indication seem to be any general pattern of convergence
that the basic principle underlying the SSIP in toward the market-based SSIP, but the advance of
question is a ‘market’ logic, characterised by the some market mechanisms in specific areas (mostly
significance of price-driven regulation, by the financial system), and that ‘globalisation’
competition between the agents, by flexible affected SSIPs in a differentiated manner. The
arrangements, by speedy reactions to price signals, market-based and ‘Mediterranean’ SSIPs were
etc. It is however generally difficult to see a model unaffected as a grouping of countries by the
as nothing more than the expression of a single empirical analyses on data related to the new
logic - especially when this logic has to be pattern of internationalisation.3 Other groupings of
expressed with simplicity. Several interrelated countries were reshuffled, indicating that a process
logics are involved in the coherency of any given of recomposition of the variety of SSIP could be
model. These logics are sometimes local inasmuch taking place.
as the mechanisms involved only affect a limited
number of institutions and areas. This does not 2
the United States, Japan, the United Kingdom,
necessarily infer the existence of a single unifying Canada, Australia, Italy, Spain, Portugal, Greece,
principle, active throughout the economic model in France, Belgium, Denmark, Norway, Sweden, Finland,
question. Describing one and the same model as Germany, Austria, Switzerland, the Netherlands,
‘Anglo-Saxon’ might be less risky than using the Ireland, and Korea. The empirical data considered
related to scientific and technological fields, economic
term "market-oriented". One can always contest
structure, the educational system and the labour market.
the pre-eminence of market mechanisms in these As such, this is an extended innovation system
economies, but it is difficult to deny that these are conception.
3
Data on foreign direct investment, international
1
Principal components and cluster analyses. trade and the evolution of the financial systems.
Actes du GERPISA n°39 18
Other characteristics
Public Fragmented in a series Furnishes collective Important public Many forms of public
Intervention of agencies and services and acts as a co- intervention (central intervention with
monitoring institutions. ordinator. Small size but state or local financial transfers
Strong limits to public significant role authorities): firms, and extensive
intervention, political regulation, public regulation
competition spending, social
security,…
Importance of large No large public programs Large variability Largely open
public research of the ‘mission’ type among the different economies
programmes countries concerned
(defence,…) which
supplements private
research
International Adherence to free trade Economic development Regionalism (EU) Small countries,
regime principles. Status and conditions all choices in favoured over strong external
autonomy of nations terms of international multilateralism. constraint
depends on size (US vs. trade Political will for
UK…) european integration
conditions economic
integration
Consequences for
Innovation Schumpeterian waves of Ability to imitate, Both ‘mission’-type Innovation linked to
(radical) innovations. transfer and transform projects of large size solutions to social or
Importance of patents technology starting with and incremental, economic problems
and individual rewards incremental innovation quality innovation
to innovation
Industrial Sectors linked to Sectors where Sectors linked to Sectors linked to
specialisation ‘radical’ innovations: coordination is necessary public infrastructures social demand
information technology, and where competence is (France,…) and/or (health, security,
aerospace, localised and cumulative where competence environment) or
pharmaceuticals, : automobile, electronics, rests on a skilled exploiting natural
finance… robotics labour force: resources
aerospace,
mechanics,
automobile
Source: Amable [2000]
.
Five types of capitalism of a socio-economic model is not so much the
The previously exposed mechanisms suggest institutional forms than the complementarities
that a variety of institutional complementarities is between them. The institutional complementarities
possible, generating a diversity of models of of each ideal-type of capitalism are given in Table
capitalism. Based on previous results on the 6.
diversity of SSIPs and other contributions to the Product market competition is an important
literature surveyed in this chapter, the possible element of the market-based model. Intense
existence of five different models of capitalism product market competition makes firms more
may be taken into account: sensitive to adverse demand or supply shocks.
9 the market-based economies a.k.a. liberal When price adjustments cannot fully absorb
market economies or the Anglo-Saxon shocks, quantity adjustments matter, particularly
model; concerning the labour force. Therefore, product
9 social-democratic economies; market competition leads to a de facto flexibility of
9 Asian capitalism; employment. Competitive market pressure
9 Continental European capitalism; demands that firms react quickly to changing
9 South-European capitalism market conditions and modify their business
strategies. This is made possible by quickly
It is possible to associate institutional reacting financial markets, which favour a fast
specificities to each type, but what forms the basis restructuring, itself facilitated by flexible labour
Actes du GERPISA n°39 20
markets. This economic model favours fast protection than the Continental European model.
adjustment and structural change and therefore Employment protection is made possible by a
entails a high degree of risk for specific relatively low level of product market competition
investments. Risk-diversification for financial and the absence of short term profit constraints due
investments is guaranteed by sophisticated to the centralisation of the financial system.
financial markets, but specific investments are However, a workforce with limited skills and
particularly at risk in this model since social education level does not allow for the
protection is underdeveloped. Therefore there is implementation of a high wages and high skills
little incentive to invest in specific skills since industrial strategy. Increased product market
these skills would not be protected either by the competition may pressure for an increase in the
welfare state or by job security and a rapid flexibility of the labour market, for instance by a
structural change would devalue them. Competition marked dualism of the workforce. Employees of
extends to the education system. A non large firm would still benefit from job security
homogenised secondary education system makes while young workers or employees of small firms
competition among universities for attracting the would have more flexible labour contracts.
best students and among students for entering the The Asian model of capitalism hinges upon the
best universities more crucial. business strategies of the large corporations in
The social democratic model is organised collaboration with the state and a centralised
according to very different complementarities. A financial system, which enables the development of
strong external competitive pressure requires some long term strategies. Workers’ specific investments
flexibility of the labour force. But flexibility is not are protected by a de facto rather than de jure
simply achieved through lay-offs and market protection of employment and possibilities of
adjustments; retraining of a highly-skilled retraining within the corporation. Lack of social
workforce plays a crucial role in the adaptability of protection and sophisticated financial markets
workers. Protection of specific investments of make risk diversification difficult and render the
employees is realised through a mix of moderate stability provided by the large corporation crucial
employment protection, a high level of social to the solidity of the model. No single developed
protection, and an easy access to retraining thanks economy is accurately described by any of the five
to active labour market policies. A coordinated models of capitalism, which are comparable to
wage bargaining system enables a solidaristic wage ideal-types. They may possess characteristics
setting which favours innovation and productivity. which makes them close to one or the other model,
A centralised financial system enables firms to without being fully identifiable with the model
develop long-term strategies. itself. For instance, a strict market-based economy
The Continental European model possesses organised following the institutional
some features in common with the social complementarities documented in Table 6 may
democratic model. The latter combines a high never exist. It is nevertheless useful to keep the
degree of social protection with a moderate reference of these ideal-types in order to
employment protection, the former is based on a understand the institutional mechanisms upon
higher degree of employment protection and a less which the coherence of the various developed
developed welfare state. Here again, a centralised economies is based. Moreover, the models of
financial system facilitates long-term strategies and capitalism allow us to go beyond the apparent
does not compel firms to respect short term profit dissimilarities between two economies and to
constraints. Wage bargaining is coordinated and a identify their common structural traits.
solidaristic wage policy is developed, but not to the It is worth emphasising the difference between
same extent as in the social democratic model. this representation of the diversity of capitalism
Retraining of the work force is not possible to the and the ‘variety of capitalism’ approach of Hall and
same extent as in the social democratic model, Soskice [2001]. As mentioned before, the latter
which limits the possibilities for an ‘offensive’ approach is based on a distinction between two
flexibility of the workforce and fast restructuring of basic types of capitalism: liberal market economies
industries. Productivity gains are obtained by (LME) and coordinated market economies (CME).1
labour-shedding strategies elaborated in The coordination dimension is crucial for
complementarity with social protection, as with the understanding the pattern of differentiation among
early-retirement policy. The South European or
Mediterranean model of capitalism is based on 1
Recent contributions (Hall [2004]) seem to open
more employment protection and less social the door for a third type, close to what is the South-
European model in Amable [2003].
Actes du GERPISA n°39 21
countries. In LME, coordination among actors is account previously. A cluster analysis broadly
made primarily through market signals whereas confirms the existence of five to six types of
non-market relationships dominate in CME. Thus, capitalism, according to whether one distinguishes
countries can be arrayed along a continuum Switzerland and the Netherlands as a separate
reflecting the extent of non-market coordination. group apart from the rest of Continental European
This dimension is present in many areas of the countries. The outcome of the cluster analysis can
economy: wage bargaining, financial system… be represented as in Figure 1, where two
Being one-dimensional, the partition of dimensions describe the most fundamental
countries of Hall and Soskice cannot easily oppositions between the different models.
distinguish more than two models of capitalism. A first basic dimension is that of the regulation
Also, if the distinction between some blatant LME of markets. On one end of the spectrum, one has
such as the US or the UK and some typical CME deregulated markets and few obstacles to
such as Sweden or Germany is clear, the position competition, and regulated markets and limited
of some other countries is more ambiguous. France competition on the other end. This dimension does
and Italy for instance cannot clearly be identified as not so much oppose LME to CME as Hall and
either CME or LME by Hall and Soskice [2001]. Soskice [2001], but rather LME (or market-based
Being intermediate cases, they are also assumed to economies, or ‘North-Atlantic’ capitalism) to
be less competitive than any of the pure types, and South-European capitalism.
thus condemned to join one or the other club The second dimension is that of social
sooner or later. protection, and separates Social-democratic
The consideration of more than two types of countries from Asian capitalism. Continental
capitalism is possible if one considers more than capitalism might be considered as intermediate
one dimension for differentiation, as is made between market-based capitalism and South-
possible by the institutional complementarities European capitalism when one considers the
between the various institutional forms of Table 6. dimension of competition and regulation of
In order to check the empirical relevance of the 5- markets. Continental capitalism also possesses
type partition, an empirical analysis is performed in some features of the social-democratic model,
Amable [forthcoming], using variables particularly a less extensive social protection
characterising the institutional areas taken into system, as is shown in Figure 1.
Asian
Capitalism
South-
Market-based European
capitalism capitalism
Deregulated
markets Continental European capitalism
Social-democratic
economies Social
protection
Figure 1. - The five types of capitalism in two dimensions. Source: Amable [2004]
Actes du GERPISA n°39 22
The introduction of a market-based corporate demand for social protection at the time when
governance is likely to threaten current reforms are leading to a welfare state
codetermination retrenchment. It will then be up to individuals to
This point is a subject of controversy regarding turn to private insurance schemes. The
the case of Germany. As mentioned before, a larger development of insurance activities should also
importance given to the interests of shareholders favour the development of markets-based finance.
should lead to a decrease in the role of
stakeholders. Therefore, the association of Decreasing tax rates threatens the financing of
employees to the management of the firm, as in the welfare state
German codetermination, should be questioned by The decrease in tax rates may be due to the
the evolution of corporate governance. On the other implementation of policies decided independently
hand, increased ‘transparency’, a demand of at the local or national level, following the
external capital owners, could also benefit non demands of the social base of the coalition in
managing stakeholders such as employees and power, or be the result of the intensifying of fiscal
unions. The prominence of the managing board, to competition in Europe. In any case, the outcome is
the detriment of the supervisory board, could then sill a shrinking of the tax receipts and an increase
be attenuated by the application of transparency in the difficulty to finance welfare state spendings
principles (Höpner [200x]). However, the validity and redistribution.1
of this interpretation of the consequences of the
evolution of corporate governance in Germany Labour market flexibility discourages
depends crucially on the recognition, not only de investment in specific assets
facto but also de jure, of the role of stakeholders
Labour market flexibility makes workers more
such as firms’ employees.
dependent on individual abilities to find a job. If
the choice is between the acquisition of specific or
Increasing product market competition leads general competences, the increase in labour market
to labour market flexibilisation flexibility biases the choice toward the former type
This complementarity is now acknowledged in of competence. The same applies to every type of
the ‘standard’ economics literature but is almost assets specific to a particular employment
always presented in the following way. Increasing relationship.
product market competition should shift out the
labour demand curve and raise the benefits brought Structure versus actors’ freedom
by labour market deregulation, making the latter
more acceptable politically. This is why both Informal versus formal institutions
recommendations for deregulation are presented as Effective institutions depending on informal
complementary. This complementarity is held to practices rather than formal institutions (laws), then
influence positively the level of employment, the politics of institutional change plays out in
which is not certain if the increase in product other places than legislations and elections
market competition makes firms’ labour demand (Culpepper [2005]): ‘This was certainly the case of
more sensitive to the business cycle, thereby the radical changes that took place in the French
raising employment insecurity for workers, and if financial system during the 1990s. While French
labour markets possess characteristics that make governments made important policies that
workers lower their work effort when job attempted to shape institutions of industrial
insecurity is increased and the real wage stays relations and education, the incremental changes
constant. Maintaining a competitive level of effort that we observe in those institutions in the end
will thus imply a raise in real wage which will resulted less from public policy than from the
ceteris paribus lower labour demand (Amable et choices of, and negotiations among, private actors.’
Gatti [2004a]).
A political view of institutional
Increased job insecurity raises demand for complementarities rather than a mere
social protection ‘technical’ view
The combination of a decrease in job security As stressed in Section 2 the definition of
following the increase in product market institutional complementarities adopted in our
competition and a dismantling of legal employment approach is based on political equilibriums and not
protection is likely to increase the level of ‘social
insecurity’. This should provoke an increase in the 1
Amable et Gatti [2004b].
Actes du GERPISA n°39 24
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d’Agir, Paris. the High Level Group chaired by Wim Kok.
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Sociaux d’Innovation et de Production dans the European Communities.
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Recherche Economique (Eds) Institutions et Growth: Views and Agenda. Journal of
Innovation. Paris : Albin Michel. Economic Literature. 35, 688-726.
Aoki M. [1994] The Contingent Governance of Teams: Milgrom P. and Roberts J. [1992] Economics,
Analysis of Institutional Complementarity. Organization and Management, Englewood Cliffs,
International Economic Review 35: 657–76 NJ:Prentice Hall.
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Bruno Amable
(CEPREMAP- Paris)
Actes du GERPISA n°39 27
Product markets Labour market Financial system Social protection Education system
Product Intense product markets Competitive markets pressure Fast structural change requires
markets competition generates has firms wanting quickly- a labour force with flexible
employment flexibility reacting financial markets skills
Labour market Decentralised labour markets A flexible labour market Liquid labour markets Weak employment protection
favours firms’ adjustment to allows quick adjustment of the diminish unemployment risks and important structural
competitive pressure and make labour force and maintenance and lower the demand for change are incentives to invest
structural change less costly of short-term profits social protection in general skills
Financial Sophisticated financial markets Short-term constraints prevents A financial markets-based Shareholders’ protection, not
system enable a quick reaction to the establishment of a high system favours instantaneous stakeholders’, hence low
opening markets and favour level of employment protection risk diversification and lowers incentives to invest in specific
industrial dynamism the need for a public-funded skills
system of welfare
Social Minimal public-funded social Liberal welfare state does not Low degree of public-funded No protection for specific
protection protection, hence no need for protect against unemployment. social protection calls for skills investment, hence
high tax levels Liquid labour markets are market-based means of risk incentives for individuals to
necessary. diversification through private acquire general skills in order
Minimal safety net against insurance to move from job to job and
poverty favours the existence Pension funds provide an make retraining easier
of a low wage labour market institutionalised voice for
shareholders in a system of
corporate governance
Education Labour force with general Low specific skills A private higher education No strong demand for specific
system skills favours structural change investments, hence no hold-up system requires an easy supply skills protection
problem. less need for high of credit to students
employment protection
Actes du GERPISA n°39 28
Product markets Labour market Financial system Social protection Education system
Product markets Long-term corporate Protection against foreign Corporate and competitive Efficient Corporate training
strategies allow de facto investment does not provide structure allows a certain requires a good level of
employment stability incentives to develop highly protection for workers secondary education
sophisticated corporate without a fully-developed
governance welfare system
Labour market Corporation-based labour Corporation-based market De facto employment De facto employment
markets favour internal calls for insurance against stability lowers the need for stability enables investment
structural change short-term demands from formal social protection in specific skills
financial markets
Financial Absence of short-term No short-term constraints for Lack of sophisticated
system constraint enables long-term the large corporation allows financial markets would
strategies and intra- de facto employment stability create a demand for social
corporation restructuring protection
Social Low welfare expenditures Low levels of social Lack of public social Lack of protection deters
protection imply low taxes protection make wage-earners protection implies the from investing in too specific
more dependent on the developpment of private skills
corporation welfare funds which provide
a large volume of resources
available for the supply of
‘patient’ capital
Education A highly educated workforce An efficient secondary A workforce with general
system makes sophisticated education system provides an skills does not need so much
consumers homogeneous labour force a high level of welfare
ready to acquire specific expenditures
skills within the corporation
Actes du GERPISA n°39 30
Product markets Labour market Financial system Social protection Education system
Product markets Moderate internal Moderate competitive The quest for productivity Quality-based competition
competitive pressure enables pressure allows the gains implies labour- demands a workforce with a
a relatively high degree of establishment of stable shedding strategies which are high level of general
employment protection, but finance-industry relations politically sustainable only education.
external pressure demands with social protection Slow structural change
important productivity gains favours the acquisition for
specialised skills
Labour market Employment protection Employment protection puts Employment protection Employment protection is an
prevents fast structural a limit to the respect of a permits a moderately high incentive to invest in specific
change strict short term profit degree of social protection skills
constraint Centralisation and
coordination favour the
definition of useful specific
skills
Financial Absence of short-term Lack of short-term Weak individual risk
system constraint enables long-term constraints enables diversification possibilities;
strategies employment stability hence a need for social
protection
Social Welfare expenditures imply Social insurance schemes High welfare expenditures A relatively high level of
protection high taxes linked to occupation; lower the need for individual social protection enables
organised labour play in risk diversification specialised skills acquisition
important role in their
administration. Social
protection reinforces
differentiation across social
groups
A high level of social
protection leads to high non-
wage labour costs, which is
detrimental to employment at
the lower end of the skill
scale
Education Labour force with specialised Demand for specific High demand for specific
system skills allows to follow stable investments’ protection skills protection
industrial strategies
Actes du GERPISA n°39 31
Product markets Labour market Financial system Social protection Education system
Product markets Low competitive pressure Low competitive pressure Industrial specialisation and
allows employment stability allows the establishment of structure (small firms) do not
(large firms) stable finance-industry require a highly skilled
relations workforce
Labour market Formal employment Employment stability De facto employment Stability of employment does
protection prevents fast demands a lack of short-term stability lowers the demand not require a constant
structural change (large constraints for social protection upgrading of the competences
firms) of the workforce
Financial Underdeveloped financial Lack of short-term Weak individual risk
system markets and stable bank- constraints enables diversification possibility
industry relations slow down employment stability would imply a higher level of
structural change social protection
Social Low welfare expenditures Low welfare expenditures Low levels of social
protection imply lower tax distortions on would increase the demand protection deter from
the domestic market for individual risk investing in specific skills
diversification
Education The skill level of the work The education system does Low specific investments
system force prevents to engage in not allow a large highly- lower the demand for
high-tech activities skilled workforce protection