Theories

Question 1

What are the differences between VoC and a Neo-liberal transformation?

Answer 1

VoC: Classifies states according to ‘production regime’ (LME, CME, MME, DME)
- Core issue: how firms coordinate with other economic agents in order to gain the inputs needed to produce output.

Neo-liberal transition: What happened with the establishment of the EU and European integration.
- Different types of capitalism were forced to be alike, moving in a more neoliberal direction than what some countries had on a national level
- ‘supranational form of neo-liberal governance’, clashing with national VoC’s

Question 2

Describe neo-liberalism.

Answer 2

It emphasises:
- Labour and capital (production factors) get paid what they are worth through supply/demand.
- The free market will not waste production factors, as prices will adjust to ensure demand and thereby labour is ensured as well.
- The economy will naturally return to full employment, but fiscal and monetary policy will stabilize fluctuations.

Question 3

Briefly explain the Variaties of Capitalism framework.

Answer 3

Classifies states according to ‘production regime’ and how firms coordinate with economic agents.

Looks at 5 different spheres:
* Primary source of corporate finance
* Labour markets
* Industrial Relations
* Welfare support
* Employee representation on governing company board

Can be:
Liberal-, coordinated-, mixed-, or dependent market economy.

Question 4

Describe an LME.

Answer 4

Liberal market economy:
E.g.: UK, Ireland

=> security markets as primary source of corporate finance

=> flexible labour markets with limited employment protection

=> fragmented unions and decentralized bargaining in industrial relations

=> welfare support is ‘last resort’ assistance

=> no employee representation rights on company boards

Question 5

Describe a CME

Answer 5

Coordinated market economy
E.g.: Germany

=> domestically owned banks as primary source of corporate finance

=> coordinated labour markets with moderate level of employment protection

=> centralized trade unions and employers’ associations with coordinated bargaining

=> employment based welfare support

=> up to 50% employee representation on company boards

Question 6

Describe an MME.

Answer 6

Mixed market economy:
E.g.: France, Italy, Spain

=> mostly domestically owned banks af source of corporate finance

=> highly regulated labour markets with high employment protection

=> fragmented trade unions and decentralized bargaining (with ad hoc interventions)

=> high segmentation of welfare support benefits, patchy coverage

=> no employee representation rights

Question 7

Describe a DME.

Answer 7

Dependent market economy:
E.g.: Estonia, Latvia, Hungary

=> mostly internationally owned banks do corporate finance

=> flexible labour markets with declining employment protection

=> weak trade unions, decentralized bargaining in industrial relations

=> mostly employment based welfare support

=> no compulsory employee representation rights on boards

Question 8

What are the differences between classical and neoclassical economic theory?

Answer 8

Classical economics (18th - mid. 19th centuries - Adam Smith) =>
the value of goods and services are determined by manufacturing costs. Equilibrium: savings = investment.

Neoclassical economics (1950-1970 ish) => The value of goods and services are determined by supply/demand. Equilibrium: supply = demand.

<- neo-classicals believe that fiscal policy will only create inflation, because in the short term, if the supply is changed to follow the aggregate demand, then the price level will increase, and thereby inflation will increase. There would not be an effect from the changes in supply fast enough.

<- neo-classical = supply side policies (will make changes in supply)

Question 9

Briefly explain Keynesianism.

Answer 9

Keynesianism (1945-70):
* concern is the total consumption rather than individual profit maximization

• Demand is determines the market.
  Supply > demand = people are laid off => decrease in output.
• Wages and prices are inflexible due to factors as minimum wage and unions => instead of cutting wages people are laid off, and same thing goes for the price level (output is decreased rather than lowering price)
• The use of active monetary and fiscal policies => In combatting recessions governments should either reduce taxes or increase spending. It should increase the money supply to drive down interest rates. Vice versa in combatting inflation. => goal is to change demand.

Question 10

Explain the third wave of VoC.

Answer 10

Export-led or consumption-oriented growth models.

“conceptualise the EU as a union of two different growth models:

• those that prioritise export growth (be it manufacturing, high-tech firms, tradable services, or foreign and direct investment),
• and those that prioritise domestic-consumption (be it the public sector, small family firms, construction, real estate and other non-tradable services).”

Question 11

Explain stakeholder theory.

Answer 11

‘The essence of the corporation is the competitive claims made on it by diverse stakeholders’ - the firm must manage relations between suppliers, employees, costumers, providers of finance, community actors, etc.

• Value creation => resolving conflicts and satisfying stakeholders demands - if sustained must all stakeholders benefit from growth
• contrasts neoclassical view/ bank-based financial system => the price of a product is reflecting all information on its features and performance and firms rely on retained earnings and bank borrowing for investments.
• a firm is about a series of market relations => minimize costs/maximize profits
• emphasizes imperfect nature of markets and moral element in relations between stakeholders

Question 12

Explain shareholder theory.

Answer 12

Shareholder theory/shareholder oriented governance:

The company owners must protect and advance shareholders’ interest => increase dividends and share values

• linked to the securities-based financial system.
• value and performance is determined by the general financial indicators
• if shareholders threat to ‘exit’/sell their shares, can the value of the other shareholders decrease
• shareholder oriented governance is significantly vulnerable to hostile takeovers
• The logic of this type of governance is underpinned by the mobility and liquidity of investment facilitated by the securities market

Question 13

What is ‘supply-side economics’?

Answer 13

a theory that maintains that increasing the supply of goods and services is the engine for economic growth.

Question 14

What is the ‘New Economic Geography School’?

Answer 14

a theory that emphasizes the role of clustering forces in generating an uneven distribution of economic activity and income across space

Question 15

What is ‘dominant social block’?

Answer 15

The “dominant social bloc” refers to the dominant social groups that have significant economic and political power in a society.

Question 16

Explain the ‘liberalization thesis’?

Answer 16

The liberalization thesis refers to the idea that economic liberalization, such as deregulation and privatization, leads to increased economic growth and efficiency.

In relation to France, the liberalization thesis has been a topic of debate in recent years, as the French government has implemented a number of economic reforms, such as labor market reform and the reduction of state involvement in the economy. Supporters of the liberalization thesis argue that these reforms have led to increased economic growth and efficiency, while critics argue that they have led to increased inequality and reduced social protections.

Question 17

What is a ‘developmental state’?

Answer 17

a government with sufficient organization and power to achieve its development goals. There must be a state with the ability to prove consistent economic guidance and rational and efficient organization, and the power to back up its long-range economic policies.

Question 18

Explain ‘dependent capitalism’

Answer 18

Dependent capitalism meant that the driver for economic growth comes from inward investment by multinational companies (MNCs). Domestically owned businesses failed when faced with international competition, and their agenda hampers policies supporting an active role from the state.

Question 19

What is the neoclassical view of labour markets?

Answer 19

The neoclassical theory says that employees with the same abilities and in the positions with the same characteristics should be remunerated with the same wage. If it was not so, the employees with lower wage would migrate to better paid jobs, and the wages would gradually reach equilibrium.

Question 20

Explain ‘economic institutionalism’.

Answer 20

• It viewed the evolution of economic institutions as part of the broader process of cultural development.
• economists seeking to explain economic problems from a perspective that incorporates social and cultural phenomena.

*useful in analyzing the problems of developing countries, where modernization of social institutions can be a requirement for industrial progress.

Question 21

Organizational Embeddedness approaches to economic dynamism

Answer 21

economic policies that emphasize the role of socio-economic institutions, such as unions and employers’ associations, in creating economic growth and development.

This includes promoting collective bargaining and creating a more equitable distribution of wealth. The institutionalist approach is seen as a way to modernize the economy and increase living standards.

Question 22

What are the four facets of the liberal state?

Answer 22

A state posses the following main characteristics:
* Territory
* Legitimacy (right to govern people & other states)
* internal and external sovereignty
* Bureaucracy

When facing immigration trends with the liberal state respond in one of 4 ways:
as a democratic, constitutional, nation or capitalist state.

Question 23

Describe ‘the liberal state as a democratic state’.

Answer 23

A democratic state is one in which the government is chosen by the people through free and fair elections.

• citizens elect political representatives and therefore the public opinion matters.
• Voters opinion on immigration matters in this state
• Media will influence the debates and tone of the political agenda
• Immigration policies can be a product of intense political conflict
• Immigration policies will often be political rather than coming from a functional outcome (economic or demographic)

Question 24

Describe ‘the liberal state as a constitutional state’.

Answer 24

A constitutional state is one in which the government is bound by the rule of law and limited by a written constitution.

3 Distinctive features:

• A codified constitution (governmental architecture, roles, power, etc.)
• The constitution determines the citizens basic rights
• judicial review

These features set the frame for the governments policy making and they are thereby limiting the process, but grounds the governments legitimacy in the observations of those limits

These states are founded on universalistic liberal principles (freedom of speech, equal human rights) and this is expected to be uphold

Politicians attempts to stop unwanted immigration, can and will be challenged in courts if they are breeching the constitutional human rights

Question 25

Describe ‘the liberal state as a nation state’.

Answer 25

A nation state is an independent political entity with a unified government and a strong sense of national identity.

Parts of the population of the state believes that they share common history, values, territory, etc.
This gives them the feeling of nationhood.

“then THEY come here and THEY take all of our jobs and money and…” => their fault

• Profound implications for immigration - restrictions based on national/origin giving a way to a selection criteria in terms of ‘human capital’

Question 26

Describe ‘the liberal state as a capitalist state’.

Answer 26

A capitalist state is one in which the economy is based on free-market principles and private ownership of the means of production.

Immigration policies and their variations can partly be explained by variations in political economic systems (industrial relations and labour market structures)

Immigration is an integral part of the capitalist system

Demand for immigrant labour:
More states wants high skilled e.g., IT and finance specialists, were the demand for low skilled is high for the jobs that local population does not want to take (the 3 D’s jobs - dirty, dangerous and degrading).

Question 27

Describe ‘embedded neoliberalism’.

Answer 27

Mainstream scholars generally describe embedded liberalism as involving a compromise between two desirable but partially conflicting objectives. (The Spanish case from week 48)

Question 28

Describe ‘developmentalism’.

Answer 28

Developmentalism is an economic theory which states that the best way for developing economies to promote growth is through fostering a strong and varied internal market and imposing high tariffs on imported goods.