Varieties of Capitalism Flashcards
Who came up with the theory
Hall and Soskice
Outline the theory
Political economy theory in which it looks at how firms respond to five spheres.
- Industrial relations - trade unions
- Inter-firm relations - against other firms in the industry
- Employees - relationship of employees in firm, cooperative or competitive.
- Education/training - Industry specific skills or general skills
- Corporate governance - whether assessts are in fluid or restricted system.
What are the two types of economices
Liberal Market Economies - LME’s
Co-ordinated market economies - CME’s
What countries are examples of both types
LME’s - USA, UK, Canada, Australia, New Zealand and Ireland
CME’s - Japan, Germany, Austria and Ireland
What does the theory do?
It is a way in which two very distinguishable and different economies can be identified. They also came up with the heirarchical and dependent models
Explain how wages are determined
LME’s - the firm determine wages
CME’s - cooperation between governments, trade unions and firms to determine wages so that an industry level is set, meaning that wages are more equal.
What is at the centre of the theory
Firms are at the centre and it is how they interact with these key spheres that determine what type of economy it is
Explain corporate strategies
If business costs were to rise, in an LME companies would be able to pass on the costs onto the consumer, so they are still prioritising profitability, if demand drops then staff can be easily removed as it is more flexible than CME’s.
In a CME it is more difficult to change to sudden business costs, so profit is reduced, it is harder for them to lay off staff and change to output changes.
What criticisms are there of the model
Phelps and Eichengreen argue that non market cooperation leads to extensive growth. While intensive growth is achieved by market coordination. So in a LME if they need economic growth it is more easily achieveable as they can get intensive growth. Globalisation has led to markets becoming more intergrated.
Fails to consider what goes on at local and state level, all bundled together.
Streeck questions whether Germany is a CME as instituional changes have made it less of a coordinated market economy.
Hancke argued that it functionalist and reductionalist, too focused on path dependency.
What does Hancke argue?
That in LME’s assests are more fluid and workers skills are more general which means that they want a fluid and open market that is deregulated.
In CME’s the market is more coordinated which means that they have more specific skills and assests that are co-specific so are against the idea of deregulation
How is change achieved?
Path dependency
What do Hall and Gingerich argue
These results suggest that the varieties-of-capitalism approach to institutional com plementarities, built on the distinction between market and strategic co-ordination, has real merit.
What is complementarities
When it brings out the best qualities in a partnership.
Why are CME’s have less inequality
There workforce is better trained recieve better eduction which makes them more specialised, there is also better investment in their societies in health care. Whereas in LME’s too short term profit focused, workers are generally trained not as specialised thus meaning that there is greater inequality between rich and poor
What is the inequality state
OECD Inequality report in 2013, Germany on 0.29, USA 0.39
