National Collective Action and Economic Performance: A Review Article

National Collective Action and Economic Performance: A Review ArticleAuthor(s): Alexander HicksSource: International Studies Quarterly, Vol. 32, No. 2 (Jun., 1988), pp. 131-153Published by: Wiley on behalf of The International Studies AssociationStable URL: http://www.jstor.org/stable/2600624 .Accessed: 17/06/2014 17:00

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact [email protected].

.

Wiley and The International Studies Association are collaborating with JSTOR to digitize, preserve and extendaccess to International Studies Quarterly.

http://www.jstor.org

This content downloaded from 195.34.79.223 on Tue, 17 Jun 2014 17:00:11 PMAll use subject to JSTOR Terms and Conditions

http://www.jstor.org/action/showPublisher?publisherCode=blackhttp://www.jstor.org/action/showPublisher?publisherCode=isahttp://www.jstor.org/stable/2600624?origin=JSTOR-pdfhttp://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsp

International Studies Quarterly (1988) 32, 131-153

National Collective Action and Economic Performance: A Review Article

ALEXANDER HICKS

Emory University

This review article summarizes and criticizes two recent books by Peter J. Katzenstein and one by John Zysman on politics, industrial policy, and political economic performance in postwar industrialized capitalist democracies. Drawing some elements from these books and forging others from their criticism, the paper proposes a preliminary framework for the study of political economic policy and performance that stresses structures of interests, of state organization, and of interrelations among these.

Peter J. Katzenstein, Corporatism and Change: Austria, Switzerland and the Politics of Industry. Cornell University Press, 1984, 263 pages.

Peter J. Katzenstein, Small States in World Markets: Industrial Policy in Europe. Cornell University Press, 1985, 263 pages.

John Zysman, Governments, Markets and Growth: Financial Systems and the Politics of Industrial Change. Cornell University Press, 1983, 373 pages.

The industrialized capitalist democracies have suffered through a continuing crisis in the related areas of macroeconomic performance, policy, and theory since the 1973 OPEC oil shock. One scholarly response to the crisis has been a surge of attention to the political conditions for successful economic performance in a highly interdependent and imperfectly functioning world economy. This response appears to have peaked circa 1984 with the appearance of a spate of books on the topic, three of the best of which are reviewed here.'

These books, two by Peter J. Katzenstein on the smaller capitalist states and the third byJohn Zysman on larger advanced capitalist states, should be of major interest to readers of ISQ. Each addresses the same major question in international political economy: "What are the political conditions for the economic success of advanced capitalist political democracies in today's global Economy?" Each does so from a comparative perspective. As for "political conditions," each emphasizes political structure as much as policy strategy. Katzenstein stresses "democratic corporatist"

Among those not reviewed here are Gosta Espiig-Ainderseni's (1984) Pohltic Vevsu.s Markets: The So(al Demllocratu Road to Power; MichaelJ. Piore and Charles F. Sabel's (1984) The Second Industrial Divide; RobertJ. Flanagan, David W. Soskice and Lloyd Ulman's (1983) Unionism, Economic Stabilization and Income Policies; Gourevitch et al.'s (1984) Unions and Economic Crisis; and Robert Z. Lawrence's (1984) Can America Compete?

Authors note: The author wishes to thank Martin Ambuhl, Valerie Bunce, Richard Doner, Christopher Jencks, John Stephens, Michael Wallerstein, the editors of ISQ, and several anonymous reviewers for their helpful criticisms.

C 1988 International Studies Association


http://www.jstor.org/page/info/about/policies/terms.jsp

132 National Collective Action and Economic Performance

structures of economic interest organization and of interest-state linkages (along with "ideologies of social partnership') as sources of laudable strategic flexibility vis-a-vis volatile world markets. Zysman stresses varied structures of industrial financing, state-banking linkages and state centralization as sources of different developmental strategies. Each author's emphasis is original: Katzenstein's for the range of the political economic outcomes viewed and concepts employed from a corporatist perspective; Zysman's for its conceptions of financial structure and state-finance linkages. Indeed, taken together, the three books suggest a conception of political structures as collective action structures: a conception of interest organization, state organization, and structured interrelations among interests and the state as crucial conditions for group and societal public action. As this conception of political structures can encompass economic as well as political actors and institutions, and accomodate rational actor theorizing about the foundations and functions of structures, it may prove useful to a wide range of students of international and comparative political economy. But let us turn for the moment from the books to some background.

The Comparative Literature on Politics, Markets and Economic Growth

Besides diagnosing specifically economic ills, mainstream economists and rational choice theorists outside the economics profession have tended to conclude that politicians, bureaucrats, and lobbyists take collective actions which neglect market incentives, debase allocative efficiency, and downgrade economic performance (Nordhaus, 1975; Olson, 1982). These rational choice theorists have tended to prescribe full-fledged restorations of "market forces" as the solution to the post-1973 crisis (Piore and Sabel, 1984:297-98).2

Less orthodox political economists have tended to place greater emphasis on the merits of political rather than market forces and collective rather than individual actors. These "collectivists" have tended to highlight underlying organizational, ideological, and coalitional conditions for effective economic performance. In particular, they have stressed policy actions that offset market failures, enhance market operations, and obviate disruptions of markets by the victims of market- induced change. On the Left, writers influenced by neo-Marxist and Social Demo- cratic intellectual traditions have emphasized union and working-class party pursuit of societal as well as class collective gain (e.g., Korpi, 1983). They have argued, echoing Mancur Olson (1982), that where union membership is sufficiently encompassing, union interests approach societal ones: "special" interests approximate "public" ones for groups so large that the negative externalities of their collective action are internalized and, thus, minimized. Furthermore, where centralized union confederations and strong Left parties pursue union interest, policies of collective gain have politically capable advocates. If these also prove technically able and redistributively restrained, they may, in fact, achieve collective economic gains (Cameron, 1978; Lange and Garrett, 1985). For example, they may, via wage restraint, help improve savings, price stability, and with appropriate cooperation from business, investment. Other collectivists more rooted in pluralist rather than class traditions have emphasized economic functions of intergroup consensus rather than working-class mobilization and unity (e.g., Schmitter, 1974, 1981). These "corporatist" authors have stressed "tripartite" negotiation and compromise among governments and "peak" associations of business as well as labor (Schmidt, 1983; Lehmbruch, 1984). In contrast to the "Left mobilization" theorists, they have rooted

2 Here, rational choice theorists are formal theorists of individual optimizing behavior, not simply "rational actor" theorists.



A. HICKS 133

collective gain more in accommodative arrangements per se than in their class foundations.

Nearly all scholars interested in political and sociological theories of economic performance regard the world market as a source of indispensable economic discipline as well as thorny economic problems. Most regard economic smallness as a summary indicator of openness to world market disciplines (Cameron, 1978; Katzenstein, 1979; Olson, 1982). This view is held because small states must achieve specialized niches in the world economy if they are to thrive and because productive specialization requires ample free trade both to obviate consumer shortages and to avert risks of crippling foreign tariff retaliations that might be provoked by protectionism. Finally, Left and corporate theorists trace strong union and corporatist institutions to openness for a variety of reasons. For one, political stability requires that citizens be buffered against and compensated for the instabilities of open economies (Cameron, 1978). Also, in small open economies, economies of scale promote industrial specialization and concentration, which are conducive to the formation of peak associations (Stephens, 1979). Finally, to draw on two of Lowi's (1964) famous policy types, protectionist "distributive" politics are largely foreclosed in open economies; union political efforts thus focus on "redistributive" policies; and this focus creates pressure for centralized union structure and representation (Wallerstein, 1987a, 1987b). In short, rational choice, Left mobilization, and corporatist theorists recognize similar implications of world markets for national economic performance.

Each of the books reviewed here notably extends at least one of the above perspectives. Linkages to the Left mobilization and corporatist perspectives are quite direct for Peter Katzenstein's Corporatism and Change and Small States in World Markets. To provide readers with a quick overview of these linkages, two diagrams are provided. A composite schematization of both collectivist perspectives (or a Left/ Corporatism perspective) is provided in figure 1, panel A. A sketch of Katzenstein's model of political economic performance in small states is provided in figure 1, panel B.

Katzenstein

Peter Katzenstein's corporatist elaboration of the collectivist perspective on political economic performance applauds Austria, Belgium, Denmark, the Netherlands, Norway, Sweden, and Switzerland for their particularly flexible adjustments to internationally compelled change. For Katzenstein, "flexible adjustment" involves riding markets approximately where they, in their wisdom, lead. Such adjustments, which result from the exigencies of openness and the capabilities of "democratic corporatism," bring about happy mixes of efficiency, equity and domestic stability. For nations like the United States, which have only recently encountered major shocks from world markets, Katzenstein views the flexibility of his seven small democracies as a possible cause for more extensive optimism.3 In Small States in World Markets, he outlines and details his general argument. In Corporatism and Change, he elaborates the argument and documents it in depth for the contrasting cases of Austria and Switzerland.

Katzenstein's two-volume account of the political economic success of small European states is the most comprehensive and richly documented contribution to comparative politics and political economy yet to appear from a corporatist perspective. Certainly, few recent works from any relevant literature or perspective can compare with the more abstractly pitched Small States, 1986 winner of the Woodrow Wilson Award, for tropical ambition, substantive scope, and scholarly virtuosity.

3I say "his" small states because some (e.g., Finland, Portugal) are ignored.




Smallness Left/corporatist Political economic and strength performance openness -Union organizational

strength -Growth -Left versus -Employment

right party -Stable prices strength -Equality

-Tripartite -State legitimacy bargaining -Etcetera

-Accommodative ideology

(A)

|Economic liberalism -I(free trade) -

Smallness/\ and\ openness\\X,

Deorai cororais Com pensatio n Pol iticalI econo mic \ (Deociali orlibral)s x-Public performance*

-Ideology of partership -Private a-Inteestgy cetaiartinesi -Social -Growth

aIntees conentra lztio n -Flexi bl e -E m ploym ent -and concentration industrial -Stable prices -Interest policy network adjustment -Equality

-Domestic -State legitimacy H-istory/G l o ba I-Etcetera

History -Proportional

representation -Weak fragmented Right -Intersectoral links

(B) * Political economic adjustment is the adaptiveness of political economic performance to democratic corporatist institutions and compensatory and industrial adjustment strategies, all in response to internationally generated economic change.

FIG. 1. Two models of political economic performance. Panel A: composite left mobilization and corporatism model or left/corporatism model. Panel B: model of political economic performance and adjustment imputed to Katzenstein.

Nevertheless, Small States' account of political economic performance strikes me as more provocative than definitive, as I will argue below.

Katzenstein's General Argument

The general argument of the two volumes is that political economic success results from a narrowing of inequalities among political actors, which permits a national consensus on fair compensation of the victims of economic change and sustained commitment to flexible (market) adjustment to such change (Katzenstein, 1985:31). More specifically, Katzenstein attributes the successful adjustments of his small states to three factors: (1) "compensation" for the victims of economic change, (2) "flexible industrial adjustment" to market-induced changes (as opposed to protectionist efforts to escape change or "planning" efforts to dictate its course), and (3) economic liberalism or free trade.



A. HICKS 135

In Small States, Katzenstein's precise yardstick for the political economic success of the small European states is rather specialized and requires special attention. It is not, we are told, simply economic performance (Katzenstein, 1985:28), even though Katzenstein does state that his preferred yardstick is "related indirectly to the commonsensical but problematic measures of economic performance" (Katzenstein, 1985:30), and even though he conspicuously devotes his first table in Corporatism and Change and his last table in Small States to documenting the superior economic performance of small states relative to large ones (Katzenstein, 1984:21; 1985:194). Neither is Katzenstein's yardstick for political performance simply small-state maintenance of "the legitimacy of the political arrangements governing their societies"-a nearly useless criterion for distinguishing among the uniformly democratic postwar nations considered by Katzenstein (1985:24). Rather, the preferred yardstick "measures the extent to which social coalitions, political institutions and public policies facilitate or impede shifts in the factors of production that increase economic efficiency with due regard to the requirements of political legitimacy" (Katzenstein, 1985:29). This "regard to the requirements of political legitimacy" refers to "compensation for instabilities of investment and employment" (Katzenstein, 1985:48), including employment compensation, "manpower," and "incomes" policies (Katzenstein, 1985:48-50).

This, at least, is Katzenstein's ideal explanandum. It is a somewhat curious one, for it includes "coalitions," "institutions," and "policies" that many readers will view as elements of Katzenstein's explanans. Despite Katzenstein's proclamation of this elusive yardstick, most of his explanatory sentences appear to bear upon some happy mix of economic performance and political legitimacy termed "political economic performance."4

Katzenstein proposes explanations for each of his three sources of political economic performance. The emergence and maintenance of economic liberalism is traced back to economic smallness on the basis of a few mechanisms noted above: pressures for heavy foreign trade exerted by productive specialization and a smallness imperative for productive specialization. Flexible industrial adjustment is explained in terms of the enforcement of market discipline via free trade policies and sustained support for such exacting policies via conscientious compensation policies. Compensation, encompassing for Katzenstein economic stabilization and growth policies as well as narrowly ameliorative ones, is explained in terms of human needs for compensatory policies and democratic corporatist capabilities for realizing them (see figure 1, panel B).

Democratic corporatism has three defining traits. One is a national "ideology of social partnership" that is deemed necessary for mitigating class conflict and averting policy-making logjams (Katzenstein, 1985:32). A second is a relatively encompassing system of interest group organizations in which the main organizations are centralized "peak" associations and in which all these organizations taken together include "a very large proportion of producers and workers," yet in which the principal actors are few enough in number to engage in fruitful negotiations. The third trait is a "voluntary and informal coordination of conflicting objectives involving continuous political bargaining among interest groups, bureaucracies and political parties" (Katzenstein, 1985:32-33).

Katzenstein makes two attempts to explain democratic corporatism, one aimed at

4 More subtly, it is the presence in small states alone of the happy combination of effects of corporatist coalitions, institutions, and policies upon Katzenstein's "political economic performance" that constitutes his yardstick for small state success. Thus, it is only in light of his propositions about small states that their "success" can be evaluated; and it is only by shifting one's focus from success to what I have termed "political economic performance" that these propositions can be evaluated.




explaining its maintenance or reproduction, the other aimed at explaining its origins. His explanation of corporatist reproduction is functional: democratic corporatism is maintained over time as a result of its happy consequences. His explanation of its genesis involves a variety of historically specific factors-prin- cipally, tensions associated with the Great Depression and two World Wars and compensatory social "pacts"-plus intense pressures from what might be termed a "cooperation or catastrophe" imperative of smallness. However, like most functional "explanations," Katzenstein's reproductive model at best suggests a full-fledged explanation (see Elster, 1979, on functionalist explanation). The genetic explanation, as we shall see, is better detailed but focuses upon a rather extreme simplification of democratic corporatism.

Katzenstein complicates his general argument by splitting the corporatist nations into "social" and "liberal" ones. The former are characterized by a heavily "public" provision of compensation for the costs of change, by a relatively strong Left, and by a relatively domestic business response to international challenge (i.e., a relatively noninternational business response, excluding major recourse to foreign investment, export promotion, and so on). They boil down to three cases: Austria, Denmark, and Norway. Conversely, the liberal coporatist states are marked by substantially more "private" compensation. This includes, for example, Swiss collectively bargained retirement insurance and Belgian receptivity to direct foreign investment (Katzen- stein, 1984:107-12; 1985:115-25). Liberal "flexible industrial adjustment" involves less aggressive state macroeconomic policy and industrial intervention in the domestic economy plus more aggressive and globally oriented responses (via overseas investment, plant relocation, export drives, and the like) to international challenges. Finally, liberal labor movements and business confederations are less centralized than social ones (Katzenstein, 1985:122-33). Katzenstein's liberal cases are the classic consociational states: Switzerland, Belgium, and the Netherlands (e.g., see Lijphart, 1984). The six social and liberal cases are complemented by a seventh, Sweden, which straddles the social/liberal divide. This is said to combine an "internationally oriented business community" with a "strong and centralized labor movement," "strength of labor" with no coterminous "weakness of capital" (Katzen- stein, 1985: 104-24).5

The highly schematized model in panel B of figure 1 outlines Katzenstein's main explanatory conclusions, and comparison of this panel with panel A should highlight their innovativeness. One of the innovations is Katzenstein's coupling of the "smallness-openness" and "openness-liberalism" linkages of earlier writings to an economic "liberalism-efficiency" linkage (see figure 1, panel B). This coupling adds a composite "smallness-efficiency" linkage to the literature on small states. Another innovation is Katzenstein's complex conception of democratic corporatism with its ideological as well as behavioral criteria and its social/liberal bifurcation of corporatist states. Finally, Katzenstein's richly textured historical accounts of the emergence of democratic corporatism nicely complement the more nomothetic explanations of other authors (Cameron, 1978; Wallerstein, 1987b).

Despite these innovations and much scholarly virtuosity, I do not find Katzen- stein's accounts definitive. Indeed, I find Katzenstein's treatment of small-state flexible adjustment too celebratory; his reconception of corporatism internally and externally inconsistent; his historical account of corporatist origins ill-focused; and both his virtual equation of smallness with corporatism and his related try at a unified (if differentiated) account of political economic performance in all of his small states, strained.

5 Katzenstein indicates that associational strength of business and labor are mutually reinforcing but that business internationalization where labor is strongly organized is distinctively Swedish (1985: 125).



A. HICKS 137

Katzenstein's Explanation of Political Economic Performance

Part of Katzenstein's explanation of political economic performance is comprised of a causal chain from smallness and openness to liberal free trade and from this to political economic performance (see figure 1, panel B). Katzenstein (1985) argues the first linkage well; and subsequent work by Wallerstein (1987a, 1987b) provides very strong theoretical and empirical support for a variant of it stressing nonagricultural export dependence as a cause of free trade. Katzenstein also mobilizes orthodox economic arguments well in support of a liberalism-efficiency linkage. Yet here his case is somewhat blunted by the superior economic growth of the relatively large and protectionist French and Japanese states, Lehmbruch's (1984:165-66) cases of "concertation without labor." This anomaly jumps out of 1960-83 real percentage gross domestic product (GDP) growth figures for the set of countries that is quantitatively examined by Katzenstein in Small States: Japan has 7.2 percent growth, France 4.1 percent, Katzenstein's corporatist nations 3.6 percent, and his remaining cases (the United States, the U.K., and West Germany) 2.8 percent (OECD, 1985:44).6 For readers like this one who perceive a major "growth" component in Katzenstein's conception of political economic performance, the French and Japa- nese cases complicate acceptance of Katzenstein's liberalism-performance connec- tion: if free trade does not promote growth, then it might be more rational to direct policy toward regulating it rather than toward "compensating" citizens for its costs. More important, Katzenstein's theoretically central conception of democratic corporatism is problematic. It produces a categorization of corporatist nations that is inconsistent with the categorizations of others, inconsistent with Katzenstein's own claims for superior corporatist economic growth and, arguably, inconsistent with its own standards for identifying corporatism. In other words, it produces a conception with poor "face," "criterion," and "construct" validity. I will argue that it does so because its "ideological" criterion is redundant and misleading. However, before doing that, I will delineate three facets of the miscategorization.

First, Katzenstein's inclusion of Switzerland among his industrialized corporatist democracies is inconsistent with Stephens' (1979:119) categorization of economywide collective bargaining, with Schmitter's (1981:294, 297) rankings of Western European nations in terms of corporatism, with Lehmbruch's (1984:65-67) corporatist categorization, and with Cameron's (1984:164-66) measures of labor union structure (see table 1.) So too is Katzenstein's exclusion of Finland.7

Second, Katzenstein's "democratic corporatist" categorization provides weak support for Katzenstein's central claims regarding superior corporatist economic

6 We turn to more detailed quantitative comparisons below. Readers who wish an immediate taste of these might jump ahead to table 2 now.

7 True, Katzenstein's exclusion of Finland is implicit, a by-product of his neglect of Finland. In turn, neglect of Finland might seem justified by Katzenstein's (1985:21) disclaimer that his "group of seven small states is "large enough" and is related to the international economy in a "distinctive manner" with a distinctive history "relative to other small states on the European periphery." However, the "large enough" argument loses force when one -ealizes that Finland is the only small case with a stronig claim to democr-atic cor-por-atist statuLs that Katzensteiin (loes niot study and that conisideration of Finlanid would neither- have implied mor-e extensive attentioni to it thani that already given most of the selected small states, nor have implied neglect of Switzerland as a small state. (That a major stress on Switzerland as a small noncorporatist state, and Finland as a small corporatist one, might have undercut the credibility of Katzenstein's extensive [liberal as well as social] conception of democratic corporatism [as argued later in this section] militates against that conception, notfor Katzenstein's treatment of Switzerland and Finland.) Further, it is entirely unclear that the international situation and history of Finland is sufficiently distinctive to warrant its omission from Katzenstein's small states. Although plausible corporatist claims might seem possible for Germany (GFR), I am persuaded by Zysman (1983) and Scharpf (1984) that the autonomy of German finance entails a fourth peak that sets off Germany. Regarding table 1, Schmitter's (1981) measurement of corporatism draws directly on information solely concerning union centralization on the (common) assumption that union and employer confederations develop in tandem.



138 Nati'onal Collective Acti'on andK Economi'c Performance

00 Z

x p i ) D Q Q Q 4 U' r- ?0 ?0 O) Oq n

E }Z0>>> ZZ:v?o

za~~~~~b "s bD c; bD E 3 C UAV



A. HICKS 139

performance (Katzenstein, 1985:19-23; 1984:194-95; but see 1984:27-30). In particular, Switzerland's economic growth over the last quarter century has been slower than that of any other OECD nation: average Swiss real per capita growth in GDP was a mere 2.6 percent between 1960 and 1983; and it was less than 0.4 percent for 1973-83. In contrast, Finnish growth was 4.0 percent during the 1960-83 period and 2.8 percent during the difficult 1969-84 period (OECD, 1985:44). Moreover, real GDP growth for a set of corporatist nations including Finland exceeds that for a set including Switzerland (see table 2). True, Swiss performance figures for 1960-83 unemployment and inflation rates outshone those of most other OECD nations, including Finland (see table 2). However, the excellent Swiss figures for jobs and prices are deceptive indicators of economic health. They are largely attributable to Switzerland's now vanishing ability to evade mounting domestic unemployment by exporting displaced foreign workers. Indeed, Katzenstein acknowledges this limita- tion in Swiss performance, albeit without compromising his laudatory Swiss conclusions (1984:20). Katzenstein (1984:131) states that "without the option of sending home a quarter of a million workers, Switzerland in the 1970s would have experienced an unemployment rate in excess of 10 percent and a political crisis of very large proportions." and that "on the question of employment, in particular, Switzerland today has a thinner cushion to absorb future economic shocks than it did in the early 1970s. The few systematic studies dealing with Switzerland's future view unemployment as a major problem in the next two decades" (1984:250). Clearly, Switzerland's "success" with unemployment has recently depended on exporting it. Furthermore, Switzerland's price stability has depended since the early 1970s on "fiscal frugality and deliberate deflation" policies that would have courted political bankruptcy had they been paid for with the jobs of native Swiss workers (Katzen- stein, 1985:104-8). Ironically, Swiss stagnation may result largely from the Swiss strategy of "global adjustment" that Katzenstein applauds (1985:104-25). If this involves "exports first and the internationalization of production later" (1985:104-8; but also see 1984:86-88), and if the latter, in turn, involves the systematic export of jobs, then it is possible that Swiss "global industrial adjustment" is not simply a corporate solution but also a national problem. In short, growth figures provide more reliable aggregate performance indicators than unemployment and inflation figures; and they dampen Katzenstein's Swiss celebration. (See Barry [1985] on the relative unimportance of inflation.)

Figures on the distributive side of political economic performance indicate that Switzerland is less egalitarian than Katzenstein's other small states as well as than Finland: apparently Swiss transfer payments and taxes are less distributionally progressive, and Swiss posttransfer distributions of (household) income are more unequal (see table 2).8 Thus, corporatist nations evidence better distributive as well as growth performance if they are categorized to include Finland instead of Swit- zerland. Indeed, the growth and distributional figures in table 2 indicate that

8 True, the measures of redistribution and of final post-fisc inequality used here are for circa 1970 (see table 2). They also involve proxy values for some cases. The redistribution measure involves estimates for Austria, Belgium, Denmark, and Switzerland. These were generated as predicted values from a regression. First, governmental redistribution scor-es fromi Hicks and Swank (1984) were r-egressed on 1971 i-ecomputationis of Hewitt's (1977) redistribution index, thirteen cases for which data were available for both variables. (The regression had an R-square of .48.) Once parameterized, the equation was used in combination with values on the Hewitt index for cases without direct redistribution scores to generate estimated values of these scores. A similar procedure involved a thirteen-case regression of a measure of post-fisc inequality upon the measure of redistribution and a measure of household inequality of personal disposable income. (Data again were from Hicks and Swank (1984), and from the just mentioned procedure; R-square equaled .55.) Again, estimates for missing cases were generated from this equation. Note that redistribution and inequality appear to be inert over time, except across major and fundamental program innovations. Although present measures of them should not be regarded as very precise, they and their rankings do appear to me to have good face validity (see table 2).



140 National Collective Acti'on and Economi'c Performance

r D 83 qa < r r GM 00 GM r r ~O oo in It cn r- 0o ) 't r n = z W O O O > t % < _in 00_C.0 00 O _ t in 7

I. 7 ; o

Q * t | tt oo oo t- M) M) s M) _ G>lI 00 C) t M) G 00 00 O 00 =Q X * * s O >4 n - - O O n O GM GM - ~00 GMII 00 C GI - rO ,

W0 a .t n n n n N n CnI I II 00 i n C" cn nnn ; S QO

= O . = Q~~~~~~~~~~~~~~~~~~~~~~~~~~~~~c

Y~~~~~f 0 in oII o CII o0 Qc O cn C" IC G - c

_ x 0 't 0 Cq 'tC Q 0 zd~ ~ ~~~~~~C cl cl t4 U~ cli C=c~c~

Q X < % %t~~~~~Q 00 cn 0) O 0 GMc--G n c5 ) r- 2 5 5

CS Ct Q 4

u t crE.i

u zt 4- 0 Z LSt = t? > 4 % _ _ o t < s O N N N ~ , s % s t ztO

.5 ~ ~ ~ ~~c C? Ct r. - @. E -. - :? o ? :i2C[ 2

e I o I U t U ;; U = c ? =t 0 ;

.2 E s = D ~~~~~~~~~~~~~~~~~~~~~~~~c ?2S?4t =E3



A. HICKS 141

corporatist nations do better, on balance, on both growth and equality than other types of affluent capitalist democracies.

Third, Katzenstein's corporatist categorization of Switzerland is doubtful in its own terms. In particular, on two of his three criteria Switzerland appears less corporatist than any of the other small nations included in the analysis or Finland. On "interest organization," Katzenstein (1984:114, 125) himself ranks Switzerland as the least eligible of his small states, while providing no decision rule for judging Swiss interests sufficiently "centralized and concentrated" to qualify Switzerland as corporatist. On a second double-edged criterion, that of "bargaining" or "policy network," indicators are less accessible. However, if available information on the scope of collective bargaining and on consensual incomes policies is examined, corporatist eligibility fails to unambiguously emerge (see table 1). Perhaps the most relevant reference on a policy network criterion is Kreisi (1982), whom Katzenstein leans on for his corporatist conception of Switzerland. However, Kreisi (1982:159) concludes: "Although the highly integrated core model presented here clearly resembles a 'corporatist' structure, it is not identical to it. The Swiss political system can therefore be structured along lines of an integrated core without being a good case for 'corporatism.' "

Kreisi comes to this conclusion because there is too little "equivalence of power" and too much "capitalist bias" in the Swiss system. Indeed, "Not only are the units representing the interests of capital and the bourgeoisie much more numerous than ones representing labor and the left; they also outweigh by far the latter and are more integrated into the system" (Kreisi, 1982:156).

While admitting that unions and Left parties are integrated into a core policy-making network, Kreisi (1982:150-57) stresses union and Left-party marginalization within this score. He regards Switzerland with its highly differentiated structure of Swiss peaks as a relatively extensively and centrally organized "pluralist" system rather than a corporatist one (Kreisi, 1982:140-48, 155-60).9 Inclusion of Switzerland is clearly consistent with the organizational and policy network criteria only if both of these are relaxed so that weak labor organization and marginal incorporation of labor into policy networks suffice for a corporatist designation. In contrast, inclusion of Finland would be consistent only if the "ideology of social partnership" criterion were relaxed to admit nations marked by notable levels of class antagonism-albeit nations marked by ample policy bargaining and agreement (Helander, 1982:163-87; Schmitter, 1981:302-7; Marks, 1986).1' In summary, Katzenstein's dubious corporatist categorizations are largely attributable to his choice of an ideological criterion for democratic corporatism. Both the Swiss inclusion and the Finnish omission gain what legitimacy they have from the ideological criterion (see Katzenstein, 1985:87-90; Helander, 1982).

However, this criterion is both redundant and, as a prop for the social/liberal distinction, misleading. It is redundant because Katzenstein's policy network criterion with its "voluntary and informal coordination of conflicting objectives through continuous political bargaining between interest groups, state bureaucracies and political parties" (Katzenstein, 1985:32) and his interest organization criterion with its stress on "centralized," "encompassing" organization together suffice to capture the behavioral reality of corporatist cooperation (Katzenstein, 1985:32-33, 87-93).

9 Indeed, Kreisi's Swiss model is most simply read as a halfway house between the relatively spotty, disperse interest organization of pluralism and the relatively inclusive, centralized organization of corporatism.

`3 Belgium, with its relatively high strike rates, is also a dubious candidate for corporatism on the ideological criterion (see Schmitter 1981:302-6).




The ideological criterion lends credibility to the notion of coequal social and liberal variants of corporatism for a number of reasons. First, the ideological criterion facilitates what might be called the "Swiss-Finnish switch," which results in three (rather than two) cases of liberal corporatist states. Second, Katzenstein eccentrically marks Sweden as a special hybrid case of corporatism rather than as a social case because of the strength and internationalism of Swedish capital (Katzenstein, 1985:124). Together, these two moves result in a conveniently symmetrical three-one- three or "social-Swedish-liberal" distribution of small states. This distribution is very different from the five-to-two grouping of so-called social (Austrian, Norwegian, Danish, Finnish, and Swedish) to liberal (Dutch and Belgian) states that would result without the Swiss-Finnish switch and Swedish "exceptionalism." In particular, the five-to-two grouping immediately suggests that the liberal corporatist pair of Belgium and the Netherlands might better be considered a marginally corporatist pair. This, in turn, suggests that democratic corporatist states are coterminously social democratic states.

Belgian and Dutch marginality with respect to postwar democratic corporatism is suggested by much more than Katzenstein's treatment of Switzerland, Finland, and Sweden. First, if we look at table 1, we see that Belgium and the Netherlands each ranks sixth and/or seventh in that table's three corporatist rankings: that is, they rank at the margins of our seven corporate cases. Second, we see that these marginally corporatist states are, together with Switzerland (and possibly Austria), the most consistently regarded "consociational" states (Lijphart, 1984). Third, contem- poraneous corporatist status for the Netherlands is doubtful because of a secular erosion of Dutch consensual incomes policies and economy-wide central bargaining that began with the Dutch Labor party's 1959 exclusion from regularized governmental participation and accelerated with a late 1970s liberalization of Dutch political opinion (Marks, 1986:263; Windmuller and Gladstone, 1984). Fourth, corporatist status for Belgium is not clearly sanctioned by the union-centralization (or the social democratic) criterion until the past decade (see Windmuller and Gladstone, 1984; Katzenstein, 1985:9 1). In addition, Belgian and Dutch Left parties have been among the very weakest in our pool of eight small nations for several decades (Marks, 1986). With Belgian and Dutch corporatist marginality, all strong candidates for democratic corporatism are characterized by governmentally strong social democratic parties (see, for example, Katzenstein, 1985:114) and the presence of such parties emerges as a very plausible criterion for democratic corporatism.

In fact, I favor a simply social conception of democratic corporatism for which Katzenstein's interest organization and policy networks criteria are retained but for which a criterion of strong Left (i.e., social democratic, labor, or democratic socialist) party participation in government replaces ideologies of social partnership as a third criterion.

Much recent theorizing and research suppbrt selection of such a Left-party criterion. First, recent studies indicate that Left governments and centralized unions tend to successfully avert high unemployment rates (Cameron, 1984; Esping- Andersen, 1984). Second, Marks (1986) finds that Left-party governmental participation, as well as union centralization, is strongly associated with the extent of consensual incomes policies, a characteristic neocorporatist policy; and others have recently found that such policies tend to moderate prices (e.g., Flanagan et al., 1983:685). Third, Hicks and Swank (1984) and Muller (1986) find evidence that Left governments and strong unions promote progressive governmental redistribution of income, while Hicks, Swank, and Ambuhl (1986) find that union centralization reinforces Left-party effects upon welfare spending effort, a prominent source of such redistributive policy. Fourth, Lange and Garrett (1985) find evidence that union centralization has been conducive to post-1973 growth in real economic



A. HICKS 143

output insofar as Left-party participation in government has been strong. " Fifth, Wallerstein (1987a) adduces strong arguments and evidence in support of the view that Left-party strength contributes to as well as benefits from centralized union confederation.

In brief, postwar social democratic government appears to be crucial for the provision of a characteristically corporatist policy package: "Keyne-plus" high- employment policies to buoy worker security and aggregate income growth; consensual incomes policies to dampen capitalist concern for inflationary risks of high- employment policies; and generous social wages to grease worker compliance with income policies (see Hicks, 1988). Social democratic governments also appear to be crucial for sustaining corporatist interest organization and policy networks com- ponents-at least where labor interests and labor-market policies, respectively, are concerned (see Lehmbruch, 1984, for a similar view). Accordingly, social democratic governmental strength is an appropriate addition to the organizational and network definiens for democratic corporatism, or what, for clarity, I will henceforth call "social democratic corporatism."'12

Social democratic corporatism is consistent with conventional "neocorporatist" usage. Specifically, if we allow the Dutch, Belgian, and Danish cases (each marked by relatively weak social democracy) within its margins, we get the seven conventional neocorporatist cases of table 1: Austria, Norway, Sweden, Finland, and the preced- ing three cases (see Marks, 1986, on these and social democracy). If we exclude those three cases, we merely exclude commonly regarded marginal cases. In addition, social democratic corporatism meets economic performance criteria well (see Lange and Garrett, 1985; Muller, 1986; and table 2), and its interest organization, policy network, and social democratic facets are closely correlated.'3 In short, social democratic corporatism, unlike plain democratic corporatism, has good face, criterion, and construct validity.

Corporatist Origins, Compensatory Policies, and Their Implications

Katzenstein's "The Historical Origins of Corporatism" is one of the most original and informative parts of his two recent volumes (see 1985: chapter 4). Here, Katzenstein focuses on the emergence of "cross-class collaborations" in the 1930s and 1940s, admittedly simplifying democratic corporatist origins in the process (Katzenstein, 1985:136). He first identifies corporatist collaborations, or compromises, and traces them to precipitating crises during the Great Depression and Second World War. He then relates the compromises back to three more distal causes: to proportional

" The Lange and Garrett (1985) argument is that Left governmental strength is helpful for realization of the societal gain policies that tend to be favored by unions so encompassing that their special interests and societal ones merge. Actually, the argument is somewhat more complex: not orily do Left governments aid in the realization of strong union growth goals, weak unions are also disruptive of economic performance under non-Left governments. For example, situations of non-Left government in the context of relatively strong unions appear to be the least conducive to growth (see Lange and Garrett [1985] and for indication of the robustness of these 1973-80 and 1973-82 findings, Hicks [1988]). Note that a roughly post-1970 deterioration of the corporatist model has been argued by some, especially for the case of Sweden (see, e.g., Lundberg [1985]).

12 Relevant periods for application of the Left-government criterion seem best designed to vary (by analytical uses) from one to three decades. Again, the social democratic conception is elaborated in Hicks (1988).

13 Centralized/encompassing interest organization and encompassing policy networks are broadly perceived as so empirically similar that they and labor centralization are often measured as a single phenomenon, as in Schmitter (1981). If (for the thirteen nations of table 1) the Schmitter measure is correlated with Marks's (1986) measure of "socialist government participation," the measures correlate 0.76. If Marks's consensual incomes policy is used as a policy network measure, it also correlates 0.76 with his social demccratic government measure. These correlations, which include Japan, given a rank of 13 for all three measures, drop to .694 if Japan is excluded. (Also, they all vary by less than .005 if Spearman's rho is substituted for Pearson's r.)




representation systems and the electoral "bargains" manifested by proportional representation systems; to weak and compromising upper classes and Right parties; and to intersectoral ties resulting from export specialization that are conducive to integrative cross-class coalition making (Katzenstein, 1985:150-70). The chapter provides rich historical insights into the emergence of particular class compromises (e.g., revelation of a remarkably precise correlation between predepression proportional representation and "subsequent collaborations.") Yet, all too often, Katzen- stein's particular historical materials do not fit his general concepts and propositions. For example, his "inter-sectoral linkages" are too disparate to sum up into a general explanation of "inter-class collaborations" (Katzenstein, 1985:165-69).14

The chapter's principal problem is that "cross-class collaborations" are vaguely conceived and tenuously linked to democratic corporatism. For one thing, these collaborations appear to be comprised of incipient ideologies of social partnership and policy networks but any connections that they might have to these are left implicit by Katzenstein.'5 Second, the actual durability of what Katzenstein presents as durable inter-class collaborations is not determinable apart from information on the absolute and relative organization (union, employer confederation, party) of the class collaborators or on the degree to which their collaborations have been institutionalized as policy networks. In isolation from information on these organizational and network aspects of corporatism, the collaborations might be mere precursors to "The Origins of Democratic Corporatism." Their implications for Katzenstein's full-fledged conception of corporatism are very inexact.

The discussion of industrial and compensatory responses to change, though finely detailed, also lacks focus. Treatment of varied public and private, political and economic, domestic and global, macroscopic and (especially in Corporatism and Change) industry-level responses to change shows exemplary and interdisciplinary breadth. However, this breadth results from too "bird's eye" a view and results in a lack of definition. In a crucial middle area between very general (say, public versus private) strategies and finely detailed ones (Swedish investment stabilization funds), the discussion lacks definition. Systematic generalizations about strategic responses at, for example, the level of conventional policy-instrument distinctions (e.g., macro/micro, fiscal/monetary) is lacking. A reader can absorb both volumes without gaining insight into such key policy questions as "To what extent are growth, employment and inflation differentials among European nations the result of income- and labor-market augmented Keynesian high-employment policy?" (Scharpf, 1984).

In his conclusion to Small States, Katzenstein suggests some "lessons" that the United States might draw from the experience of small states in an increasingly interdependent world economy. He stresses the need for visions of more diverse "possible futures" than are provided by the current fixation on the Japanese example; and he goes on to review some of the principal appeals of democratic corporatist adjustments to change. However, he soon notes that "in many ways corporatism is antithetical to the core of American politics" (Katzenstein, 1985:209). For one thing, American political decision making "encourages a litigational style of

14 Some causes for frustration are a shortage of clear 1930s capital-labor compromises (e.g., for Norway as well as AuLstria) and an incoherent variety of intersectoral linkages (Katzenstein, 1985:165-76).

15 This collapse of democratic corporatist origins into "events," like the earlier expansion of democratic corporatist institutions into "ideologies of social partner-ship" suggests a quintessentially pluralist mode of theorizing. (See Alford and Friedland, 1985:22-26, on the pluralist methodological penchant for narrative historiography and the theoretical penchant for "cultural" explanation.) It would be interesting to elaborate an interpretation of Katzenstein's work on small European states as a pluralist reworking of a preponderantly elitist and class-analytic tradition of neocorporatist investigations.



A. HICKS 145

politics and an emphasis on procedural fairness that is at odds with the requirements of corporatist bargaining" (Katzenstein, 1985:209). For another, the weakness of U.S. labor and the fragmentation of social interests and movements imply that any U.S. corporatism would be marked by relatively great "exclusion" (Katzenstein, 1985:209). In the end, cases of "concertation without labor" like the Japanese case appear no more inconsistent with U.S. circumstance than the cheerier corporatist ones. This is an implication that emerges more clearly from John Zysman's (1983) recent study of large states in world markets, to which we shall turn shortly.

Two Prolegomena to Political Economic Theories of Small States? So what exactly do Small States in World Markets and Corporatism and Change contribute to the study of national political economic performance? For one thing, they forcefully state the claim that the openness of small states may assist economic performance. For another, they expand our appreciation of the range of national responses to economic change: henceforth, we must consider private as well as public and global as well as domestic responses to economic change. They enrich our understanding of cross-class political accommodations influencing or presaging the emergence of corporatist arrangements. They extend the factual foundations for (and constraints upon) future attempts to explain political and social conditions for successful political economic performance.

Nevertheless, it perhaps is better to view Katzenstein's democratic corporatism as an organizational device than as a theoretical concept. As a conceptualization of an institutional complex for bridging national smallness and national economic policy, democratic corporatism helps organize the presentation of a great deal of material at each side of the causal divide; yet its institutional reality is too theoretically disparate to actually bridge the two sides. As a conception used to join Katzenstein's pre-1950 interclass collaborations to his post-1950 policy adjustments, these collaborations are too indistinctly and tenuously linked to the intervening "democratic corporatism." Democratic corporatism, like intersectoral linkages and flexible adjustment, helps order informative inquiries into the past and current histories of Katzenstein's small states. However, it does so more as a scaffolding to be discarded once the historical facts arrayed with its assistance have been assimilated than as a theoretical edifice to be preserved and extended. It identifies no single institutional complex in the six small states that can bear the name "democratic corporatism" and unify understanding of their disparate (if flexible) strategies. Rather, it distracts attention from an institutional complex that can do so for most of the small capitalist democracies: social democratic corporatism.

Still, the account of past and current history arrayed from the conceptual scaffoldings of Small States and Corporatism and Change wili provide indispensable insights and information to those seeking understanding of the postwar political economies and economic policies of advanced democratic capitalism. Accordingly, these books are recommended to all serious students of the comparative and international political economy, public policy, political sociology, and welfare states. The latter volume is somewhat more strongly recommended to those with Austrian, Swiss, or case study interests; the former, rather more to those with generalizing aspirations.

Economic Growth and Zysman's Financial Fulcrum

John Zysman's Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change examines the industrial strategies of large advanced industrial states during the postwar period. More specifically, it focuses on roles played by different




financial systems in shaping industrial policies that may affect a nation's comparative advantage in world markets.'6

Zysman stresses the importance of a nation's opportunities for using industrial policies to improve its competitive and comparative advantage, that is, to improve the export strength of particular firms in one country relative to that of firms in other countries selling in the same international sector. He asserts that policy-induced advantages accumulate over time "as when abundant capital and protection allowed the investment in steel development which made Japanese producers preeminent" (1983:39). He adds: "Over time, shifts in competitive advantage for particular firms in particular industries can accumulate into a change in national comparative advantage. We must understand that comparative advantage rests on the accumu- lation of investments, and that a longterm strategy can slowly alter a country's comparative advantage by altering its investment stock. The main point, again, is that accumulated investment. . . is crucial in determining both competitive advantage at the moment and comparative advantage over time" (Zysman, 1983:39-40). Unlike most economists, Zysman is more impressed by the prospects for effective national use of such policy opportunities than he is by their dangers as siren calls for purely ameliorative protectionism. This relative optimism seems to follow from his posses- sion of a theory, or at least a thesis, of national and, in turn, government capacities for different types of industrial policies. This thesis can hardly pinpoint what industrial policies industrialized (capitalist) nations will use or when they will use them effectively. However, it seems to me to be useful for some ballpark estimates, as well as some very original, perhaps seminal, explanatory propositions.

Zysman's thesis states that differential corporate reliance upon capital markets, as opposed to bank loans, for external financing of investment systematically shapes the industrial policies whereby nations adjust to the pressures of the world economy. Three pairs of models of financial industry organization and of industrial adjustment strategies are presented. The first is comprised of a capital-market-based financial model and a company-led adjustment or development model. The second consists of a credit-based financial model with government-administered prices and a state-led development model. The final pair contains a second credit-based model, this one dominated by autonomous financial institutions rather than the state and by a negotiated or "bargained" model of adjustment.

In nations where well-developed capital markets exist for the buying and selling of security issues, of stocks and bonds, the external financing of business will, it is argued, be realized preponderantly in such markets. Operation of these markets will tend to "place banks, firms and governments in distinct spheres from which they venture forth to meet as autonomous partners" (Zysman, 1983:70).

These market arrangements will tend to limit both the influence of financial institutions on (nonfinancial) firms and the influence of government on the details of the lending activity of banks. . . . first, government will not have natural handles in the market system by which it can selectively influence the allocation decisions of financial institutions; second, financial institutions will not routinely have influence inside corporations. Government intervention in corporate affairs will require specific legislative authorization and will operate outside routine market operations. Consequently, individual interventions by government may be broadly opposed by the financial community . . . because of the threat that interventionist policies pose to the integrity of market arrange- ment. (Zysman, 1983:7 1)

16 It might be argued that Zysman's explanatory framework puts greater stress on state structure than on financial structure, but his major contribution to the state-structural analysis seems overwhelmingly to be his partial reduction of some of its key attributes to financial factors.



A. HICKS 147

A model of industrial policy results in which manufacturing, financial, and especially government institutions are kept at arm's length from each other. This capital-market-based model of finance tends, Zysman argues, to sustain a company- led model of industrial development. Among nations studied by Zysman, the United States and Great Britain fit this capital-market-based model. The United States does so unambiguously, while Great Britain does so only intermittently because of occasional state efforts to move in other sometimes state-centered and sometimes negotiated directions.

Where business is more dependent for external financing on long-term loans from financial intermediaries than on capital markets, strong and frequently personalized ties link businesses' nonfinancial firms to such intermediaries. Indeed, banks interfere in the operations of the nonfinancial firms as a condition for the latter's continued access to bank loans (Zysman, 1983:62-63). In their lending activity, banks assess and seek to influence the prospects of their corporate borrowers. Governments are drawn into the system to underpin bank lending, facilitate money creation, and participate in (or usurp) financiers' administrative decisions. This government involvement in bank administration of loans is fostered by government's capacity for legitimating and enforcing inevitably controversial financial decisions and its interest in utilizing financial means for accomplishing its particular purposes (Zysman, 1983:61-72). Crucially, "the borderline between public and private blurs, not simply because of political arrangements but because of the very structure of financial markets" (Zysman, 1983:72). There arises a credit-based financial system with government-administered prices and a state-led model of industrial development in which

the government bureaucracy attempts to orient the adjustment of the economy by explicitly influencing the position of particular sectors, even of individual companies, and by imposing solutions on the weaker groups in the polity. The state seeks to select the terms on which sectors and companies confront the market, either by explicitly providing resources to favored groups or by creating conditions that will force the recalcitrant to adjust . . . Finance acts as an instrument of such efforts, permitting bureaucrats to intervene in the affairs of particular firms and to allocate capital between competing uses (Zysman, 1983:91).

State-led adjustment "politicizes and centralizes" the process of industrial change (1983:91). Indeed, it enhances as well as exploits the policy-making capabilities of strong states. In Zysman's study, aggressive "labor exclusive" interventions (or "planning") of the sort illuminated by Shonfield two decades ago characterize state-led adjustment. This, according to Zysman, appears to be the strategy in Japan and France.'7

Finally, there is at least one nation, West Germany, in which credit-based financial systems dominate the external financing of nonfinancial firms, but in which government "does not have the apparatus to dictate allocative choices to financial institutions and, consequently, has no independent instruments in the financial system with which to influence companies" (Zysman, 1983:72). In such credit-based, bank-dominated (or state-autonomous) financial systems, banks can serve as political allies for governments on terms negotiated between governments and finance (Zysman, 1983:72). Such systems entail a negotiated or bargained system or model of industrial development. They provide at least one route to bargained systems and

17 Accelerating growth, internationalization, and liberalization of Japan's major firms and capital markets have eroded its state-led strategy since the late 1960s (Pempel and Tsunekawa, 1979). Indeed, recently, it may have dissolved it (Smith, 1987). But for excessive clientelism, Italian state-bank fusion might suffice to define a third state-led case (Zysman in conversation.)




include conventionally regarded corporatist ones in which actors other than finance negotiate industrial policy with each other and the state (Zysman, 1983:92-93). Distinct routes are presumably facilitated by security/credit systems insofar as the development of either private security markets or state-banking fusion and financial dominance of industry is extreme.

This bargained model and its credit-based, bank-dominated financial foundation are well established for the German case. The financial model goes far toward illuminating Germany's deviation from conventional tripartite business-labor-state corporatism (see Scharpf, 1984:282-83). However, the generalizability of the credit-based, bank-dominated financial model beyond Germany is not established. Indeed, as far as one can tell from Zysman's analysis, the autonomy of German finance capital is historically contingent and unique (Zysman, 1983:251-65). Yet the German model indicates that the organization and autonomy of industrial investment finance may be important for the structure and strategy of small states, as well as of large ones. If the powerful autonomy of German finance can substantially explain Germany's single-minded resistance to expansionary monetary policy during the 1970s, (above and beyond any cultural inflation phobia) then less dramatic degrees of financial and industrial influence/neutrality, of state autonomy/dependence, and so on, may illuminate differences in political economic policy among small corporatist nations. For example, the strong peak organization of Swiss finance might prove a key factor in comprehending the Swiss enigma (Kreisi, 1982).

Of course, the political economic prominence of finance in Germany has been noted before, most notably perhaps in Hilferding's Finanzekapital (1910). However, in turn, Zysman's rooting of financially and industrially dominant investment banks, state-bank fusion, and state-led development in the development of stock and security markets provides a promising insight for theorists in the ongoing Finanze- kapital tradition (e.g., Mintz and Schwartz, 1985).

The theoretical arguments sketched out above are presented in the contexts of theories of economic growth, comparative advantage, and finance in chapters 1 and 2 of Governments, Markets, and Growth. Much case detail and evidence are then presented in Zysman's third, fourth, and fifth chapters. In conclusion, Zysman somewhat mechanically situates his core financial-structure and industrial-strategy models among a number of lines of argument on government-business interrelations. He especially emphasizes industrial backwardness and international shocks on the one hand, and state centralization of political authority and administration on the other as factors conducive to state-led development. Strong insights enrich the somewhat abbreviated attempt at a comprehensive model of development strategies (Zysman, 1983: chapter 6). For example, some either broadly negotiated, or hierarchically imposed, resolution of distributive conflict is viewed as a requirement for the success of any strategy; and imposition (with impurity) of political victory (and losses) on diverse social groups, most inevitably organized labor, is viewed as essential to a successful state-led strategy. (So is a centralized state, as well as the state policy arm provided by credit-based financial institutions.)

Like Katzenstein, Zysman directs much of his attention toward questions of political economic policy responses to the global economy. However, Zysman focuses his attention on adaptive policies and on "statist countries such as Japan [which] are endowed with the means and institutions to preempt the costs of change through policies that pursue the structural transformations of their economies" (Katzenstein, 1985:23) rather than the small European states that "lack the power demanded" by the statist strategies. Unlike Katzenstein, Zysman roots his explanation in financial organizations rather than in interest organizations and networks. Zysman's financial emphasis, I believe, provides less broadly ranged insights than Katzenstein's stress on interests. However, it provides very original and suggestive insights as well.



A. HICKS 149

Indeed, Zysman's financial focus suggests many paths too little explored in Governments, Markets, and Growth. Zysman's account of differences in developmental strategy that are shaped by economic structure could be nicely supplemented by more direct attention to possible differences in economic performance that are shaped by strategy. Patterns of financial structure and industrial strategy not only merit further study across larger nations; they also merit a first look at smaller ones. Potential relations between financial and union institutions relevant to industrial policy rush to mind as they never would have without Zysman's stimulus. For example, one wonders to what extent the system of French finance may have inspired, and to what extent it may have frustrated, the plannist orientation of the French Left. As regards social democratic corporatism, Zysman's financial focus raises further questions. For example, what balance between capital-market and bank external financing (if any) optimizes the political economic performance and adaptiveness of social democratic corporatism? Has state-autonomous investment banking undermined corporatism in Germany, Switzerland, or the Netherlands? Has state-bank fusion arisen in Sweden or Austria, known for their strong states, to strengthen (or undercut) corporatism there?

For those interested in such questions, or in the comparative political economy, politics, and policy of advanced industrial nations, or in the possibility of a discipline of comparative financial institutions, Governments, Markets, and Growth is strongly recommended.

Political Configurations and Political Economic Performance Readers can draw a good many useful formulations and leads from Zysman's recent tome on economic change in the large capitalist democracies and from Katzenstein's two recent volumes on economic change in the small ones. Most notably, democratic corporatist organization of and relations among major economic interests and the state appear to help political economic performance. These corporatist characteris- tics appear to engender relatively large distributive advantages for the nations they characterize. Yet they are also associated with modest advantages in economic growth relative to industrialized democracies that possess neither corporatist nor more labor-exlusive forms of political economic concertation. (This, at least, appears to be the case for recent decades insofar as a relatively social conception of corporatism that emphasizes organizational, interorganizational and labor movement critieria is concerned.) There are two interrelated reasons for these "growth" advantages. Relatively encompassing and centralized labor unions have combined unique sets of incentives and capacities for pursuing policies of redistributive and collective gain. The strength of Left parties relative to Right ones in government and in the electorate appears to have been integral to the relatively efficient and egalitarian corporatist performance. However, almost paradoxically, it is where unionization has been limited, fragmented, and excluded from policy-making prominence, as in France and Japan, that sheer economic growth appears to have been most rapid over the past quarter century.'8 There, success may be linked to the developmental leadership of strong centralized states. There, more particularly, growth appears also to have been aided by such states' leverage over systems of industrial financing that stress the use of bank loans instead of stock and security sales. At the same time, the predominance of capital-market mechanisms for the external financing of industry appears to have reinforced company-led strategies in

18 It should be noted that whereas Japanese real GDP growth has maintained a leading rate among the OECD nations since 1973 (c. 3.9 percen-t), French growth dropped to a mediocre rate (1.1 percen-t as compared to a 0.6 percen-t OECD average).




the less dynamic large states of advanced capitalism. In addition, a credit-based system of industrial financing independent of state control appears to distinguish inflation-shy West Germany from corporatist bargained systems, as well as from state-led and company-led systems.

Organizational and interorganizational features of the state (centralization), of finance (state-autonomy), and of industrial capital and labor (confederational centralization) appear, together with Left-party government, to be fundamental elements in the political economic chemistry of advanced capitalism. In one case, organizational fusion of state and finance, facilitated by credit-based financial arrangements, seems to enhance the political economic capacity of centralized capitalist states to effectively direct economic development relatively unhampered by the distributive demands of weak capitalists and weaker workers. In a second social democratic corporatist case, inclusive centralized peak organizations of capital and labor, reinforced by Left-party government, tend toward policy bargains conducive to effective aggregate and distributional performance-especially where powerful private sector financial institutions strengthened by credit leverage over industry have not weighed in as a second capitalist actor in the corporatist network. In a third consociational case, less inclusive and centralized business and labor organizations, facilitated by proportional representation, historic class collaborations, and the like, pursue liberalized, erratic versions of corporatist policy packages. (These have been more tolerant of recession and wary of inflation, and, on average, less egalitarian.)'9 In a final, loosely pluralist case, disorganization of the state and of economic constituencies-multibranch federal government, dispersed capital markets, fragmented structures of business and labor association-seems to have entailed at once relatively inegalitarian and stagnant company-led development strategies.20

The four principal types generated from consideration of state centralization, peak interest organizations and networks, and social democratic governmental strength are presented, linked to these three criteria, in table 3. So is a fourth criterion, strong and state-autonomous finance, and, in turn, a fifth type that may be termed "quadripartite corporatism" (tripartite corporatism plus a powerful financial actor, clearly a German phenomenon). The table helps summarize the types, cases (from the table 2 pool of candidates), and political economic outcomes (for 1960-83) associated with each type. In the table, equivocal judgments are conveyed in parentheses, with indeterminable ones denoted by a question mark. For simplicity's sake, it is assumed that no unresolved judgments (for example, on consociationalism or state-autonomous banking) would, if completed, require specification of an additional type. That they might is an indication of the importance of future research on financial systems in industrialized capitalist democracies.

The organizational and interorganizational forms seemingly favorable to distributive progressivity and/or economic expansion all involve macrosocietal means for overcoming disincentives to rational engagement in collective action by very large

19 In the social democratic corporatist case, unions, as the most encompassing of interests, are perhaps most important for representing broad public interests; in the consociational case, it may be the intertwined set of bargaining actors that constitutes the principal voice for collective gain.

20 In analyses of post-1973 growth, Lange and Garrett (1985) and Hicks (1988) suggest that two constraining and "mLtually exclusive political economic con-figurations" tie as the most condtucive configulration-s for economic growth: one consists of str-ong cases of social democr-atic cor-por-atism, an-d the other- con-sists (almost con-tr-ar-ily) of both the statist nations an-d str-ong cases of pluralism (with little or nlo uLnion cohesion- and Left gover-i-inen-t). In particular, the studies in quLestion indicate that the statist cases may have had good gr-owth r-ecor-ds because of their- fragmented unionis and pr-incipally oppositional Left par-ties r-ather than- becaulse of state cen-tralization-, state-bank fusion, and the like. However-, the "str-ong state" is not dir-ectly addr-essed. I agr-ee with Zysinan that is has tenlded (particular-ly durin-g the 1960-73 per-iod) to aid growth; an-d I r-egar-d state stren-gth as a imajor focus fol- futulr-e r-esearch on- the politics of growth.



A. HICKS 151

in It 06

OC) OC) C14

ct

V) ct u

ct ct ct

biD 92 b,O ct lci

ct ct Ct E c/) 7 7

ct 7 bID UN ct CL ct

ct

b-0

b-0

7

ct

u

ct

ct

u C-

u ct 0

;> u ;>

u u ct

u

u Ct

ct

ct

4

ct ct

ct

ct ct

ct bO g2 N .- Ct

ct 4-i bO CS -t ct u ct Ct ct ct 7 0 E - u ct .4-? ct 4-i

ct .0. - ct 0. 4-i

Ct ct ct

C/) ou




constituencies (as in the case of economywide association of business or labor), or institutional levers for collective actors (as in the case of Japanese and French finance), or possibly both (for Sweden or Austria?). In cases of less organized societies such as the United States, such macroinstitutional means are lacking. In these societies, to the extent that the above patterns hold, neither state-led nor corporatist nor more dispersely bargained strategies appear to be available. In lieu of surges of political economic organization (for example, of unionization) that go far beyond extant precedents, pluralist nations appear largely limited to rejuvenations of free-market structures and macroeconomic instruments in their quests for improved economic performance.2' True, rational choice and New Right prophets of the free-market fountain of youth tell quite another tale from that told here (see, for example, Gilder, 1981). However, theirs has recently been a familiar political economic message in the United States and so needs no recounting here. This message's critics are right to compare international track records. Yet, like Katzen- stein and Zysman, they should also consider how compelling reliance upon free-market ideals, monetarism, and "business" Keynesianism might be where conventional grounds for negotiated and state-led strategies are almost entirely lacking.

21 Of coulrse, iapiti an-d major ilnstituLtion-al chalniges suLch as the Un-ited States' Great Depression- suLrge in ulnlion-ization ar-e niot necessarily thin-gs of the past.

References

ALFORD, R. AND R. FRIEDLAND. (1985) Powers of Theory: Capitalism, the State and Democracy. New York: Cambridge University Press.

BARRY, B. (1985) Does Democracy Cause Inflation? Political Ideas of Some Economists. In The Politics of Inflation and Economic Stagnation, edited by L. N. Lindberg and C. S. Maier, pp. 280-317. Washington, D.C.: Brookings Institution.

CAMERON, D. R. (1978) The Expansion of the Public Economy: A Comparative Analysis. American Political Science Review 72: 1243-61.

CAMERON, D. R. (1984) Social Democracy, Corporatism and Labor Quiescence: The Representation of Economic Interests in Advanced Capitalist Societies. In Order and Conflict in Comtemporary Capitalism, edited by J. H. Goldthorpe, pp. 143-78. New York: Oxford University Press.

ELSTER, J. (1979) Ulysses and the Sirens. New York: Cambridge University Press. ESPING-ANDERSEN, G. (1984) Politics Versus Markets: The Social Democratic Road to Power. Princeton, N.J.:

Princeton University Press. FLANAGAN, R. J., D. W. SOSKICE AND L. ULMAN. (1983) Unionism, Economic Stabilization and Income

Policies: European Experience. Washington D.C.: Brookings Institution. GILDER, G. (1981) Wealth and Power. New York: Basic Books. GOUREVITCH, P., A. MARTIN, G. Ross, C. ALLEN, S. BORNSTEIN AND A. MAROKENTS. (1984) Unions and

Economic Crisis: Britain, West Germany and Sweden. London: George Allen and Unwin. HELANDER, V. (1982) A Liberal Corporatist Sub-System in Action. In Patterns of Corporatist

Policy-Making, edited by G. Lehmbruch and P. C. Schmitter, pp. 163-88. Beverly Hills: Sage. HEWITT, C. (1977) The Effects of Political Democracy and Social Democracy on Equality in Industrial

Societies: A Cross-National Comparison. American Sociological Review. 42: 450-64. HICKS, A. (1988) Social Democratic Corporatism and Economic Growth. Journal of Politics. HICKS, A. AND D. H. SWANK (1984) Governmental Redistribution in Rich Capitalist Democracies.

Policy Studies Journal 13: 265-86. HICKS, A., D. H. SWANK AND M. AMBUHL. (1986) Welfare Expansion Revisited: Party, Class and Epochal

Mediations of Policy Routines- 1957, 1982. Paper presented at 1986 American Political Science Association Annual Meeting, Washington, D.C.

HILFERDING, R. (1910) Finance Capital. Paris: Minoit, 1981 translation. London: Routledge and Kegan Paul.

KATZENSTEIN, P. J. (1979) Power and Plenty. Madison: University of Wisconsin Press.



A. HICKS 153

KATZENSTEIN, P. J. (1984) Corporatism and Change: Austria, Switzerland and the Politics of Industry. Ithaca: Cornell University Press.

KATZENSTEIN, P. J. (1985) Small States in World Markets: Industrial Policy in Europe. Ithaca: Cornell University Press.

KREISI, H. (1982) The Structure of the Swiss Political System in Finland. In Patterns of Corporatist Policy Making, edited by G. Lehmbruch and P. C. Schmitter, pp. 133-62. Beverly Hills: Sage.

KORPI, W. (1983) The Democratic Class Struggle. London: Routledge and Keagan Paul. LANGE, P. AND G. GARRETT. (1985) The Politics of Growth. Journal of Politics 47: 792-827. LAWRENCE, R. Z. (1984) Can America Compete? Washington, D.C.: Brookings Institution. LEHMBRUCH, G. (1984) Concertation and the Structure of Corporatist Networks. In Order and Conflict

in Contemporary Capitalism, edited by J. H. Goldthorpe, pp. 60-80. New York: Cambridge University Press.

LIJPHART, A. (1984) Democracies: Patterns of Majoritarian and Consensus Government in Twenty-One Countries. New Haven: Yale University Press.

Lowi, T. (1964) American Business: Public Policy Case Studies and Political Theory. World Politics 16: 677-715.

LUNDBERG, E. (1985) The Rise and Fall of the Swedish Model. Journal of Economic Literature 23: 37-56.

MARKS, G. (1986) Neocorporatism and Incomes Policy in Western Europe and North America. Comparative Politics 18: 253-77.

MINTZ, B. AND M. SCHWARTZ. (1985) The Power Structure of American Business. Chicago: Chicago University Press.

MULLER, E. N. (1986) Distribution of Income in Advanced Capitalist Societies: Parties, Labor Unions and the International Economy. Paper prepared for presentation at the Annual Meetings of the American Political Science Association, Washington, D.C.

NORDHAUS, W. D. (1975) The Political Business Cycle. Review of Economic Studies 42: 169-90. OLSON, M. (1982) The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities. New

Haven: Yale University Press. ORGANIZATION FOR EUROPEAN COOPERATION AND DEVELOPMENT. (1985) Economic Outlook: Histori-

cal Statistics, 1960-1983. Paris: Organization for European Cooperation and Development. PEMPEL, T. J. AND K. TSUNEKAWA. (1979) Corporatism without Labor: the Japanese Anomaly. In

Trends toward Corporatist Intermediation, edited by P. C. Schmitter and G. Lehmbruch, pp. 231-71. Beverly Hills: Sage.

PIORE, M. J. AND C. F. SABEL. (1984) The Second Industrial Divide: Possibilities for Prosperity. New York: Basic Books.

SCHARPF, F. W. (1984) Economic and Institutional Constraints of Full Employment: Sweden, Austria and W. Germany. In Order and Conflict in Contemporary Capitalism, edited by J. H. Goldthorpe, pp. 257-314. New York: Oxford University Press.

SCHMIDT, M. G. (1983) The Welfare State and the Economy in Periods of Economic Crisis: A Comparative Study of OECD Nations. European Journal of Political Research 11: 1-26.

SCHMITTER, P. C. (1974) Still the Century of Corporatism? Review of Politics 36: 85-13 1. SCHMITTER, P. C. (1981) Interest Intermediation and Regime Governability in Contemporary

Western Europe and North America. In Organizing Interests in Western Europe, edited by S. Berger, pp. 285-327. New York: Cambridge University Press.

SMITH, C. (1987) Discounting the Fears. Far Eastern Economic Review (8 October): 116. STEPHENS, J. D. (1979) The Transition from Capitalism to Socialism. London: Macmillan. WALLERSTEIN, M. (1987a) Union Centralization and Trade Dependence: The Origins of Democratic

Corporatism. No. 26, Working Paper Series, Institute of Industrial Relations, University of California, Los Angeles.

WALLERSTEIN, M. (1987b) Union Growth from the Union's Perspective: Why Smaller Countries Are More Highly Organized. Paper prepared for presentation at the Annual Meetings of the American Political Science Association, Chicago, Ill.

WINDMULLER, J. P. AND A. GLADSTONE, EDS. (1984) Employer Associations and Industrial Relations. New York: Oxford University Press.

ZYSMAN, J. (1983) Governments, Mar

National Collective Action and Economic Performance: A Review Article

Documents

Transcript of National Collective Action and Economic Performance: A Review Article