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Institutions, politics and models of capitalism
A summary of the 2020 “Stato e Mercato” special section: an in-depth debate about “Institutions, politics and models of capitalism”
07 agosto 2020

A special section of “Stato e Mercato” contains articles and comments from the 2019 seminar of the journal: they are devoted to how economies and welfare systems have been adapted to the common challenges of post-industrialization, financialization, ICT revolution and the knowledge economy.

The special section that opens the first issue of 2020 of “Stato e Mercato” is devoted to a central topic, “institutions, politics and models of capitalism”, and contains three articles and two comments from the annual seminar organized every year by the journal.


The ICT Revolution and Neo-liberalism: the pathologies of the neoliberal agenda and the withdrawal of the State

The first article, by David Soskice, “The ICT Revolution and Neo-liberalism: Its Major Pathologies and a Polanyian Secondo Movement” focuses on the US (and the UK in minor key) as the driver of radical innovation. Over time major problematic pathologies have emerged in the neoliberal agenda. According to Soskice, these pathologies are responsible, directly and indirectly, for most of our contemporary problems: for deep segregation in British and American society, especially between large successful cities and smaller urban areas, between graduates and non-graduates, and in public services, in the growth of inequality, for the steep slowdown in innovation, productivity and real wage growth (especially in the UK), for development of populism, and for the current nervousness over AI. The author stresses how the core problems stem from the withdrawal of the State and the over-reliance on markets and he discusses the possibility of a Polanyian double movement and the (ambivalent) role that democracy may play.


Growth strategies and welfare reforms in advanced capitalist economies: welfare policies as facilitators for growth

In the second article - “The Pursuit of Growth. Growth Regimes, Growth Strategies and Welfare Reforms in Advanced Capitalist Economies” – Anke Hassel, Bruno Palier e Sonja Avlijas develop an analytical framework to study how economies and welfare systems have been adapted to the common challenges of post-industrialization, financialization, and the knowledge economy. They show that, despite the global interconnectedness of modern economies, national trajectories of growth and policy-making remain distinct. Their explanation focuses on the pursuit of different growth strategies in contemporary advanced capitalist economies. Growth strategies are, in large parts, welfare reforms. Governments use the policy tools of the welfare state such as employment policy, housing policy, pensions, minimum wages, and education as facilitators for growth. They pursue them in different ways depending on the growth regime their economies are embedded in. The article uses two key concepts: the complementary relationship between national growth and welfare regimes and the growth strategies through which growth and welfare regimes are reformed. It then depicts five main ideal-typical growth regimes that have developed in advanced capitalist economies and identifies five main types of welfare state reforms strategies: dualization of welfare, social investment, fiscal and social attractiveness, commodification of welfare, and social protectionism. Within the Eurozone, because of external pressure, the latter strategy has been transformed into a “competitive impoverishment” strategy for Southern European countries.


South European capitalism: how do South European countries face the challenges of globalization?

The third article focuses exactly on South European countries. Luigi Burroni, Emmanuele Pavolini e Marino Regini, in their “Southern European Political Economies: In Search of a Road to Development”, discuss the features and prospects of Southern European (SE) economies as a specific type of capitalism. Some early works in the Varieties of Capitalism literature maintained that such features as the high proportion of SMEs in the production system, a wide diffusion of the hidden economy, a strong role of the family in welfare provision, a trade union division along political-ideological lines, the distinctive role of the State, characterized a type of political economy, or model of capitalism, which was typical of Southern Europe. But more recent literature has shown that Italy, Spain, Portugal, and Greece started to diverge on most of these dimensions already in the mid-1990s and that they have continued to do so even during the Great Recession. One aspect that has made these SE economies look similar, however, was their inability to provide viable answers to the challenge of globalization. The article shows that Mediterranean countries lacked instead the institutional conditions to follow the high road of Nordic Europe or the low road of Central and Eastern Europe consistently: their political economies were too heavily regulated to successfully compete on price with Eastern Europe and with the developing economies, but, on the other hand, they were not equipped for a type of growth based on highly-skilled human capital, innovation and high social cohesion as in the Nordic model. The authors show that this low capability to grow is related to a low degree of investment in R&D and highly skilled human capital, which hinders the ability to innovate and to follow a «high road» to competitiveness.


How much growth advanced capitalist democracies actually need to sustain inclusive welfare states?

The special section is closed by the comments of Anton Hemerijck and Guglielmo Meardi. The first - Growth Models, Family Demography, Standing Welfare Commitment and Social Investment Reform - on the one hand, explores two queries: a theoretical probe and an empirical inference. First, there is the acknowledgment that the growth model literature, being substantive in orientation, allows for a fruitful intellectual engagement with comparative welfare research. Especially welcome is the effort of bringing macroeconomic demand and the redistributive struggles behind macro-economic management back into the welfare-work equation. Surprisingly, Hemerijck states that the growth-regime literature is silent on the macroeconomic importance of family demography. For the argument’s sake, an alternative conjecture is envisioned. On this score, the fiscal weight of standing welfare commitments conjures up a «productive constraint» for social investment welfare reform, potentially affecting growth strategies in path-shifting ways across a widening number of EU welfare democracies, not merely the Nordics. Finally, from the perspective of 21st century welfare provision in a knowledge economy for an ageing society, the author would reframe the nostalgic lament of low growth and secular stagnation in terms of the question of «how much» growth advanced capitalist democracies actually need to sustain inclusive welfare states? According to the author, two percent will do.
 
 
E Pluribus Unum? Capitalism and Democracy Dilemmas 
 
The article by Guglielmo Meardi - E Pluribus Unum? Capitalism and Democracy Dilemmas -, on the other hand, highlights how the specific problems of competitiveness and democracy detected by Soskice in liberal market economies and by Burroni, Pavolini and Regini in Southern Europe stand in a theoretical tension with theories of models’ complementarity and of advanced democratic capitalism. Meardi, through a review of the arguments with regard to the role of education and innovation for capitalism and democracy, points at the importance of testing trends across models, and of investigating the mutual dependencies between winning and left-behind places not only within models but also among them.
 


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