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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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sion has been spurred by this research paradigm. Although it defines several types of Capitalism, they are also all based on the same (homogenous) institutions that are assumed to be essential for a capitalist system. Its models are based on new institutional economics, underscoring the effect of distinct institutional arrangements for economic performance, thereby painting a static picture of Capitalism, relying "on rather ad hoc descriptions of actual institutions and institutional forms" in the sense of a snapshot of the presence that cannot represent transformation. It thus is looking for equilibrium outcomes.589 Still, diverse structures are defined to be efficient types of Capitalism. Efficiency in this framework is understood "in terms of strategic complementarities among organizational elements".590 This approach mainly concentrates on the firm as unit of inquiry, with an emphasis on the organization of the production process.591 It goes back to a book by Hall and Soskice, published originally 2001, who created a dichotomous classification of the Varieties of Capitalism, namely the ―coordinated market economy‖ (CME) versus the ―liberal market economy‖ (LME) model.592 Since its appearance it has spurred an ongoing debate and a ―vast list of amendments, qualifications, additions, extensions, exceptions to the original formulation of the approach‖.593 The building blocks of the original analysis focus on "micro-agents such as firms, employees or shareholders, and how they organize production…describing the affinities between different institutions and the product market strategies of business firms".594 Hence, it concentrates on industrial relations, vocational training and education, corporate governance, inter-firm relations and coordination of employees, with institutional complementarities reinforcing the differences between liberal and coordinated market economies in the sense that for example ―dense networks of business associations support collaborative systems of vocational training‖.595 Those complementarities strengthen the tendency of liberal market economies to rely on markets to coordinate transactions whereas the coordinated market economies maintain institutions that support ―higher levels of non-market cooperation‖ and aim towards a specific kind of economic performance.596 Ultimately, this design leads to the conclusion that the ―change in any one institution, exogenous or endogenous‖ is, due to ―balancing changes‖, followed by a restoJackson and Deeg, 2006, p. 22ff.

Jackson and Deeg, 2006, p. 5.

Hall and Soskice, 2004, Jackson and Deeg, 2006, p. 21, 34.

Hall and Soskice, 2004.

Streeck, 2009a, p. 19.

Jackson and Deeg, 2006, p. 21+34.

Hall and Soskice, 2004, p. 17f.

Hall and Soskice, 2004, p. 18f.

ration of the ―system‘s typical performance equilibrium‖.597 Hence, VoC is basically a comparison of different institutional structures in equilibrium, thus delivering an accurate picture of the current status of a national economy but – like a snapshot photograph - has not much to say about the dynamics of the system.

This is also a feature in the amended versions of the approach which also enriched the original framework by adding the product-market competition, the wage-labor nexus and labor market institutions, the financial-intermediation sector and corporate governance, social protection and the education sector by authors like Bruno Amable.598 For example, in his book on the diversity of modern Capitalism Amable defines five types of Capitalism, including an Asian variety. His approach is much broader than that of Hall and Soskice whose dichotomous framework mainly concentrates on the firm as unit of inquiry but the basic assumptions remain the same.599 Amable regards the pressure of globalization and worldwide liberalization, particularly of financial services, to even out differences between the EU and the rest of the world in a rapid pace resulting in a ‗new global capitalism‘. However, it can also be argued that although globalization exercises pressure on all existent forms of capitalism, this need not lead to convergence. Rather, change can, dependent on existing institutional arrangements, have dissimilar influence on institutions and political structures.600 In the end, "institutions are the expression of a political compromise".601 Consequently, for Amable Capitalism is a robust environment that principally can accommodate varied institutional environments.602 Thus, also the Asian model of Capitalism that Amable introduces hinges on the collaboration of large corporations with the government. He claims that ―workers' specific investments are protected by a de facto protection of employment and possibilities of retraining and career-making within the corporation. Lack of social protection and sophisticated financial markets make risk diversification difficult and render the stability provided by the large corporation crucial to the existence of the model‖.603 Hence, it focuses on the state and collective sector and ignores the private sector and therefore also entrepreneurs and their networks, which on the other hand this work argues to be a main driving force of development. In other words, Amable's model largely neglects the importance of sociocultural institutions as well as culture (let alone an economic spirit), for the formation of a Streeck, 2009a, p. 18.

Amable, 2003, p. 93.

Hall and Soskice, 2004.

McNally, 2007a, p. 185.

Amable, 2003, p. 9.

Amable, 2003, p. 3f.

Amable, 2003, p. 107.

capitalistic system what this dissertation regards as essential for the type of Capitalism developing in China. He claims that ―plain regularities of behavior are not institutions […].

An institution must be a rule which applies to all the cases‖.604 It is important to note that ―Capitalism is a much larger and more complex entity than the market system we use as its equivalent…The market system is the principal means of binding and coordinating the whole, but markets are not the source of capitalism‘s energies nor of its distinctive bifurcation of authority‖.605 However, the extensions of the original approach of works like that of Amable merely blur the underlying fundamentals of the VoC approach, namely that, as Streeck puts it, ―social systems are politically structured to compete with each other economically; that competitive institutional arrangements tend to move and settle into a self-stabilizing equilibrium; that politics is about designing institutions that enable an efficient deployment of economic resources; that today there exist basically two variants of capitalism that are in principle equally competitive and therefore unlikely to ―converge‖; that especially employers and their firms, interested as they are in their own competitiveness, can and do instruct states and government on how optimally to organize a society as an efficient production regime; and that social systems are kept together by pressures for institutional complementarity in the service of competitive production‖.606 In other words, the VoC approach invokes that different national institutional arrangements compete with each other keeping the system dynamic, which leads rather to specialization and diversification of products as well as institutional frameworks than to convergence to a uniform system. This means that national capitalisms can be distinguished ―across both temporal and geographical axes‖. 607 However, it is probably more true to say that competition causes tendencies to converge and diverge simultaneously. Although the VoC approach rejects the idea of convergence towards a ―best practice‖ as the ―economic simplicities of neo-liberal wishful thinking‖, it is done, in Streeck‘s view, ―for the wrong reasons‖ as it explains the divergence of systems ―by the same causal factors: pressures for efficiency originating in competitive markets‖.

Overall, ―VoC allows for just one possibility of convergence, which is capital marketdriven convergence of CME towards LME models‖, which for him ―looks like defensive ad hoc addition in response to uncomfortable empirical observations‖ to keep the theoretical framework of strict nonconvergence of two dichotomous but nevertheless independent, Amable, 2003, p. 37 Heilbroner, 1993, p. 96.

Streeck, 2009a, p. 20.

McNally, 2007a, p. 185.

Streeck, 2009a, p. 161ff.

equally efficient capitalist institutional setups which reproduce themselves continuously.609 In some later extended versions of the VoC the ―attempt is made to represent the distinction between ‗liberal‘ and ‗coordinated‘ ‗market economies‘ as continuous rather than dichotomous‖, which for Streeck is not plausible because then a convergence to the nearer of the two types would occur.610 Also, the VoC-approach does not incorporate the dynamics happening in the economies of developing or transition countries.611 Not least, because its models take a democratic polity as given and "fail to account for the political dynamics of post-socialist economies".612 Consequently, research in the VoC line is primarily focused on Western Europe, North America and Japan and thus "post-industrial economies".613 These advanced industrial economies differ considerably from the political structure of China which as developmental and transitional economy still is far from having an established institutional framework. In contrast, its institutions are still constantly changing and defy the possibility to be described in a ‗snapshot‘ analysis like that of the VoC or even compared to already existing ‗snapshots‘.614 However, VoC and all similar modern comparative approaches have in common that they try to give an insight to the ―dynamics and contradictions‖ of Capitalism. Beside understanding, this might, at least in the view of Victor D. Lippit, help to enhance ―its positive features and ameliorate its most destructive and socially reprehensible ones‖ as ―there is no viable alternative to capitalism… the capitalist system is likely to be with us for several more centuries at least‖.615 4.5.2. Other typologies of economic systems The Varieties of Capitalism approach is merely one of many ways to categorize economic systems. Another major branch of literature comes from comparative economics, which has its origins in the study of different forms of socialism, which became after 1989 the analysis of the transformation of socialism to capitalism and is concentrating mainly on transition countries. It is thus also mainly concerned with institutions, and especially instiStreeck, 2009a, p. 165.

Streeck, 2009a, p. 166.

Lane, 2005, p. 228.

Wilson, 2007, p. 253.

Wilson, 2007, p. 24.

McNally, 2007a, p. 178.

Lippit, 2005, p. 4.

tutional change, but it is less occupied with scrutinizing different types of capitalistic systems.616 Beside those more recent approaches, there have been earlier efforts to classify different economic orders. In this seminal work Die Grundlagen der Nationalökonomie also Walter Eucken did overcome the question if, or if not, an economy is capitalistic in creating another classification of economic systems in comparing market and planned economies.617 He defined two basic types (or ‗orders‘ in Eucken‘s terms), which are differentiated into a multitude of system specifications, which are mainly characterized by market forms and monetary system.618 Coming from the Freiburg School and as founder of Ordoliberalism, he believed that the state, in contrast to ‗laissez-faire‘, should provide a stable framework for the economy, but not interfere as an economic actor in economic processes.

The state has to guarantee the ‗constituent principles‘ of a market economy, such as monetary stability, free entry, private ownership, freedom of contract, liability, a functioning price mechanism, consistency in economic policy and maintaining competition. These principles are supplemented by ‗regulatory principles‘ such as monopoly regulation, social policy and process stabilization policy. In a centrally planned economy, the state dominates both. This reflects the distribution of economic power, not necessarily the degree of economic activity by the state. For Eucken, the antipode of the planned economy is not the laissez-faire state, but perfect competition which guarantees every economic actor a share within the economic process, without giving one group, be it state, large corporations or lobbyists, too much influence.620 His theory therefore deals with the relationship between the state and the economy. Economic orders are the ―legal and institutional framework of economic activity, and the economic process, the daily transactions of economic agents‖.621 In his work he formulates an interdependence of orders, both of the economy and the state, collaborating within the order of competition.622 He prefers to use the term The ―Aims and Scope‖ of the Journal of Comparative Economics, one of the journals of the Association of Comparative Economics states that ―in recent years, mostly as a result of the transition experience, a new orientation of comparative economics has emerged that focuses on the comparison of the economic effects of the various institutions of capitalism, be it in the legal sphere (common law versus civil law), in the political sphere (different types of democracies and electoral regimes) or in the sphere of culture, social norms, etc.

This new orientation is a natural development following the very diverse experience of transitions from socialism to capitalism. The transition experience has indeed shown with a vengeance the importance of institutions in the process of economic development‖. Taken from http://ees.elsevier.com/jcec/, accessed on 12 August 2010. See also Djankov; Glaeser; La Porta; López de Silanes and Shleifer, 2003, p. 1ff.

See Eucken, 1947. Translated as Eucken, 1992.

Schefold, 1994a, p. 94.

Hagemann, 2008, and Molsberger, 2008, accessed August 12, 2010.

Eucken, 1947, p. 513.

Molsberger, 2008, accessed 12 August 2010.

Eucken and Eucken, 1975, p. 338, 345.

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