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Social Democratic Labor Market Institutions: A Retrospective Analysis
Abstract
In the early 1980s, many observers, argued that powerful organized economic interests and social democratic parties created successful mixed economies promoting economic growth, full employment, and a modicum of social equality. The present book assembles scholars with formidable expertise in the study of advanced capitalist politics and political economy to reexamine this account from the vantage point of the second half of the 1990s. The authors find that the conventional wisdom no longer adequately reflects the political and economic realities. Advanced democracies have responded in path-dependent fashion to such novel challenges as technological change, intensifying international competition, new social conflict, and the erosion of established patterns of political mobilization. The book rejects, however, the currently widespread expectation that 'internationalization' makes all democracies converge on similar political and economic institutions and power relations. Diversity among capitalist democracies persists, though in a different fashion than in the 'Golden Age' of rapid economic growth after World War II.
... The backbone of this growth strategy was the strong cross-class coalition of business and labour in export-oriented manufacturing (Moene & Wallerstein 1995; Barth, Moene & Wallerstein 2003). As an alliance of ends, i.e. the highest and lowest ends of the income distribution, its functional aim of securing international competitiveness was achieved by squeezing the middle classes (ibid.). ...
... While employers in manufacturing can gain competitiveness in international product markets through access to cheap foreign labour and services and thus prefer deregulation, the same option can undermine the competitiveness of organized services employers in formerly sheltered product markets who therefore tend to prefer re-regulation (Afonso 2015). These changes challenge the " coalition of ends " that has distinguished Scandinavian coordination (Moene & Wallerstein 1995). The subject matter underlying these processes thus goes to the heart of the Scandinavian models, notably the basis for maintaining solid wage floors, compressed pay structures, and even terms of competition in the labour market that, acting as productive constraints, have served as engine for the Scandinavian model of growth and social inclusion. ...
... 55 And why should manufacturing employers engage in burdensome coordination when the market forces press down wages in domestic services anyhow? The international extension of the labour market and associated opening of domestic product markets thus seems to spur an inverse shift in the sector interests in cross-class coordination, possibly breaking up the traditional " coalition of ends " (Moene & Wallerstein 1995). Whereas organized actors in labour intensive services sectors are inclined to stick together when faced with international competition at home, the employers in export manufacturing – the backbone of Scandinavian coordination – have recently been on collision course with their unions' demand for re-regulation, as conspicuously demonstrated in the Norwegian Supreme Court case over extension in ship-yards. ...
... As a consequence, they also differ in terms of distributive outcomes and the relative positions of various social groups. As shown by the data about labor force composition, employment, unionization, social spending, poverty levels and income distribution, institutions and policies developed in the process of the creation of welfare and production regimes had a huge impact on the social composition of respective societies and the positions of different social groups within them (Esping Anderson 1999a, Huber and Stephens 2001, Iversen and Wren 1998, Kenworthy and Pontusson 2005, Pontusson and Rueda 2002, Western 1993, Wallerstein and Moene 1999). The differences in social structure produced by the variation in welfare and production regimes, do not constitute totally different patterns of social structure; but on the whole, they do lead to a significant amount of variation between societies. ...
... Social democratic parties, either in coalition or as single party minority or majority governments, increased the social protection of industrial workers through the development of universal, tax-financed benefit schemes in which trade unions had a significant role in the process of this policy development. This strategy was complemented by efforts aimed at attracting women and sections of the middle-class through the expansion of earnings-related pensions, publicly funded education and public services funded from general taxation (Esping Anderson 1985, Iversen 1998, Moene and Wallerstein 1999. ...
... Trade unions played an important part in mobilizing heavily unionized manual and non-manual working-class support for the welfare state and social democrat parties. The potential of unions to deliver support to social democrat parties was higher in countries where both manual and non-manual workers were unionized, and where union density and concentration were high (Moene and Wallerstein 1999, Western 1993. High concentration meant that union members were not divided between politically aligned confederations affiliated with different parties (Golden, Wallerstein and Lange 1999). ...
... According to the OECD (2011), technological change and globalization do not alone explain the higher levels of income inequality. Scholars have extensively studied voters' preferences for income redistribution (Alesina, Giuliano, Bisin, & Benhabib, 2011;Barnes, 2015;Beramendi & Rehm, 2016;Gingrich & Ansell, 2012), the role of labour market institutions (Moene & Wallerstein, 1999;Western & Rosenfeld, 2011), as well as party ideology and party competition (Alt & Iversen, 2017;Gingrich & Häusermann, 2015;Iversen & Soskice, 2006, 2015Korpi & Palme, 2003;Roemer, 2005). Income distribution is the outcome of a complex process broken down to multiple interactions between personal income, income and employment risk, the progressivity of the tax and welfare state and party competition, which itself is affected directly by the electoral system. ...
... As control variables I also include the following: First Past The Post electoral system (Bormann & Golder, 2013), Pro-Market Electoral Pledges as coded by the Comparative Manifesto Project (Klingemann, Volkens, Bara, Budge, & McDonald, 2006), whether the cabinet minister is appointed by a right of centre party, the average number of ministers with a graduate degree in the government (based on the eight portfolios I code in my dataset), and finally whether the government is multiparty or single party. Finally I include a control variable on wage bargaining coordination to control for the role of economic institutions (Moene & Wallerstein, 1999). ...
Do politicians act in their voters' or in their personal interests? Representative democracy rests on the assumption that voters elect members of parliament, who in turn elect the government to represent them. Yet, recent research indicates that the preferences of individual politicians can have important policy effects beyond and above the party agenda. In this paper we utilize new data on the professional careers of finance ministers before and after their ministerial tenure in 18 parliamentary democracies over forty years to test the revolving-door politics hypothesis. We investigate whether the rise in income inequality can be partly explained by the policy preferences of finance ministers. We hypothesize that ministers' policy preferences are influenced by their professional experience as well as by their future career plans, such as staying in politics or moving to the corporate sector. This paper is one of the first to study cross-nationally the revolving-door hypothesis, the movement of policy-makers between private and public sectors, and its effects on policy outcomes.
... The German model has been defined as one with "sectoral coordination", because most of the interactions among firms and between firms and workers have taken place at the sectoral and regional levels. In the Scandinavian countries (discussed with more detail below), national wage bargaining was a vital component of the productive structure until the mid-1980s, forcing companies in lowproductivity sectors to modernize and generating a surplus for the leading, exporting firms (Moene and Wallerstein, 1999). ...
... The centralization of wage setting contributed to the consolidation of the unions' policy of 'equal wages for equal work', and reduced the dispersion of real wages among sectors. In Sweden, for example, the variance of hourly real wages for blue collar workers decreased by 50% between 1970and 1983(Moene and Wallerstein, 1999. Centralized bargaining also avoided tensions between workers in different sectors and secured solidarity between all (Coates, 2000). ...
This paper reviews the main elements of the literature on varieties or models of capitalism and evaluates its usefulness for the study of small Latin American countries. It makes three basic arguments. First, the models of capitalism approach (MCA) can make a substantial contribution to our understanding of small Latin American countries, by identifying key variables and hypotheses to explain patterns of economic growth and income distribution. Second, a broad approach that incorporates the interrelations between the state, business and labor may be more relevant than one that concentrates only on the institutional analysis of the firm and the production process. Third, the application of the MCA to small Latin American countries should incorporate some unique features of developing countries such as their structural heterogeneity and their weak external insertion. These three claims are illustrated through a short comparative discussion of the models of capitalism in Costa Rica and the Dominican Republic during the period 1950-1980
... A abundância de recursos naturais gera vantagens comparativas para o país que os possui, levando-o a se especializar na produção desses bens e a não se industrializar ou mesmo a se desindustrializar -o que, a longo prazo, inibe o processo de desenvolvimento econômico (BRESSER, 2010). pressões competitivas do que os do setor público (MOENE & WALLERSTEIN, 1999). Figura 4.14 -Crédito bancário ao setor privado por atividade econômica (1995 -2000) Fonte: BoG (1992 apud Pagoulatos (2003). ...
... 7 The Rehn-Meidner model was at the basis of the system that regulated the Swedish economy from the 1950s until at least the 1980s. Geared towards macroeconomic stability and efficiency rather than equality, it rested on Schumpeterian 'creative destruction' premises ( Moene and Wallerstein, 1999), and was actually based on a restrictive macroeconomic policy coupled with a solidaristic bargaining policy and mobility-enhancing labour market policies ( Erixon, 2010). It is in this context that active labour market policies were introduced, aimed at facilitating the re-employment of workers dismissed due to obsolete plants being shut down and to less competitive firms being pushed out of the market ( Swenson, 1989). ...
The economic crisis has revealed the dark side of deregulation in the labour market: rising unemployment, limited access to social security and, due to low wages, no savings to count upon in bad times. This book casts light on the empirical relationship between labour market deregulation through non-standard contracts and the three main dimensions of worker security: employment, income and social security. Focusing on individual work histories, it looks at how labour market dynamics interact with the social protection system in bringing about inequality and insecurity. In this context Italy is put forward as the epitome of flexibility through non-standard work and compared with three similar countries: Germany, Spain and Japan. Results show that when flexibility is carried out as a mere cost-reduction device and social security only relies on insurance principles, deregulation leads to insecurity. 'The political economy of work security and flexibility' is essential reading for academics, students, practitioners and policy makers interested in the outcomes of labour market developments in advanced economies over the past twenty years.
... 7 The Rehn-Meidner model was at the basis of the system that regulated the Swedish economy from the 1950s until at least the 1980s. Geared towards macroeconomic stability and efficiency rather than equality, it rested on Schumpeterian 'creative destruction' premises (Moene and Wallerstein, 1999), and was actually based on a restrictive macroeconomic policy coupled with a solidaristic bargaining policy and mobility-enhancing labour market policies (Erixon, 2010). It is in this context that active labour market policies were introduced, aimed at facilitating the re-employment of workers dismissed due to obsolete plants being shut down and to less competitive firms being pushed out of the market (Swenson, 1989). ...
... Western demonstrated that this model explained unionization from World War II into the 1980s, across individual workers nested in countries in the 1980s, and even the pattern of decline in the 1980s. Other institutional accounts have a great deal in common with Western's model (Ebbinghaus & Visser, 1999;Moene & Wallerstein, 1999;Rothstein, 1992). Reflecting the popularity of institutional explanations of economic phenomena (Polanyi, 1957), recent research has been broadly supportive of this explanation (Wallerstein & Western, 2000). ...
This study assesses three explanations for cross-national differences in unionization: Western’s (1997) institutional model, economic explanations based on the business cycle or globalization, and Hechter’s (2004) solidaristic theory. This study features a multilevel analysis of employed workers with the late 1990s World Values surveys of 18 affluent democracies. The analyses generally support the institutional model. Left parties and ghent systems remain influential, though ghent is less robust. Neo-corporatism and wage coordination are insignificant whereas workplace access is the more salient indicator of centralization. Beyond Western’s model, right cabinet significantly weakens unionization. Refuting economic explanations, inflation, unemployment, and economic growth, as well as international trade and investment, do not influence unionization. Consistent with Hechter’s claims, the welfare state reduces unionization but, contradicting his claims, immigration does not undermine unions. Ultimately, this study supports a revised institutional model that supplements Western’s model with right cabinet and the welfare state.
In the last 35 years, Norway has changed from a rather frugal, mid-income northern European social democracy into one of the world’s most prosperous countries. This is reflected in its purchasing power parity (PPP)-adjusted GDP per capita, where Norway usually ranks first among the ‘real’ states and only lags tax heavens and even more oil rich Qatar, ‘and in the size of its sovereign wealth funds (SWF), which as of December 2009 was valued at just below 2600 billion Norwegian krone (NOK), an equivalent of roughly US$450 billion.1 Financial strength has not, however, placed Norwegian technocrats in a carefree position. Since the early 1970s when it became clear that Norway’s oil and gas resources would bring hitherto untold riches, transforming resource assets into income has been recognised as a potential force for destruction; that it can also be a blessing has been more of an afterthought.
Many have argued that the increased international mobility of both capital and labor witnessed in recent years will force advanced capitalist democracies to cut taxes and, thus, ultimately roll back their welfare states. This analysis tests this hypothesis through an examination of policy developments in Sweden, the country with the world's heaviest tax burden and largest social welfare state. The analysis focuses on the history and structure of taxation policy (the policy arena predicted to be most directly affected by globalization). The findings reveal that there have been very important changes in the Swedish welfare state: The tax and spending regimes have been changed less than the globalization thesis predicts. This analysis argues that Sweden has indeed adapted and changed in recent years but finds little support for the more dire thesis that countries like Sweden must abandon their high-tax regimes and/or their generous social welfare systems.
Privatisation in Greece represented a reversal of the entire post-war and post-authoritarian interventionist policy paradigm. The privatisation decision resulted from pressures associated with the EC/EU and globalisation in general. The Simitis governments reactivated a privatisation programme comparable to that of ND in the early 1990s, but distinctly pragmatic in its reasoning, gradualist in its pace, and nonconflictual though unilateralist in its policy implementation. A central feature of the 'Simitis privatisations' was the flotation of successive minority stakes in public enterprises leading to retention of public control even though the government kept only a minority, stake in the privatised enterprises. Privatisation was most far-reaching in the banking sector, with important broader implications for the entire economy. Despite the remarkably more favourable overall conditions under which the Simitis governments implemented privatisation as compared to the ND government in the early 1990s, privatisation policies continued to provide ad hoe opportunities for considerable sociopolitical opposition.
Norway's “Government Pension Fund” – Global (GPF-G) is large (around $400b), portfolio oriented and transparent. It tries to be ethical and has been mooted as a role model for other SWFs. The way the GPF-G is set up undergirds the US vision of a financialised world economy and it even indirectly supports US warfare in Iraq by buying treasury bills. It is also a leader in ethical investments – more than 20 private funds piggyback any divestment decision the GPF-G makes. Understanding the international implications of the GPF-G does not, however, amount to an explanation of why this vehicle was created. This article puts forward the argument that if we want to understand why and how these diverse behaviours cohere into a larger strategic whole, the fund must be interpreted as the continuation and technocratisation of a long established corporatist tradition of foreign economic policy that Peter Katzenstein more than 25 years ago labelled a strategy of flexible adjustment and domestic compensation.
The conventional wisdom of domestic politics in the global economy holds that that the globalization of the market economy has spelled the imminent collapse of corporatist bargaining institutions and the corporatist goal of economic equality. This conventional wisdom, however, highlights an interesting puzzle: it was the process of internationalization and economic openness itself that generated corporatist institutions. This study examines whether corporatist institutions are still effective in ensuring the corporatist goal of equality in the ‘global’ economy. Income inequality from the early 1980s to the middle 1990s is used as a measure of institutional effectiveness. It is argued that corporatism, as a form of interest mediation, is a path-dependent institution that generates increasing returns in terms of equality in the most internationalized economies. Results of a panel study of 17 Organization for Economic Cooperation and Development (OECD) countries indicate that corporatism reduces income inequality and, contrary to the conventional wisdom, income inequality is lowest in the most ‘global’ national economies.
This article assesses the contributions of studies in the rational choice (RC) tradition to scholarly understanding of Latin American politics. It groups some representative works according to their use of RC assumptions, and also reviews some of the major works in the institutionalist tradition. It argues that works in the RC tradition have neither forced a major rethinking of established theories nor filled major lacunae, although they have illuminated some phenomena that were only partly understood. The RC approach works best for narrow questions in which power relations and structural constraints are stable, whereas its essential assumptions become untenable in questions that involve shifting power relations among social groups and the state over time.
Purpose
The purpose of this paper is to find out if there is any convergence between the Third Way in Europe and the Conservative Democracy in Turkey in their politico‐economic strategies for dealing with the social question with the thought that both the political identities have come into existence as a consequence of a similar initiative to reformulate their egalitarian cores according to the realpolitik of contemporary capitalism, and uncover the consequences of the so‐called strategies specifically in the realm of welfare and labour policies.
Design/methodology/approach
This inquiry has been contextualised into the evolutionary cycles of the socialism → social democracy → the Third Way in Europe and the Just Order → Conservative Democracy in the Ottoman‐Turkish territory. Initially focusing on the first cycle, the paper then turns to examine the second cycle in a comparative and synchorised perspective with the first.
Findings
It is concluded that the Conservative Democracy and the Third way have an unmistakable convergence in terms not only of their evolution but also of their strategic policy options to deal with the social question. Their convergence originates in the initiative to find a middle ground between the contemporary capitalism and their egalitarian cores. Such a reconciliative attempt by the both models ends up in a stalemate that triggers recurring conciliative initiatives rather than yield to stable and sustainable policy options which enable their practitioners to deal with the social question in an efficient way.
Research limitations/implications
The paper touches on the general points of convergence between the Conservative Democracy and the Third Way in the political economy of social question. The next step should, hence, be to further this argument by means of specifically dealing with the welfare and labour policies in separate in‐depth research.
Originality/value
This paper is the first in its inquiry as stated above in the purpose and its comparative methodology to deal with this inquiry.
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