Category Archives: Welfare state

Studying the plurality of Capitalism types in political economies

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Capitalism is not singular but plural because there are many different types in comparative (European) societies. For this reason, Hall and Soskice (2001) explained that the concept is useful for understanding different functionalities and mechanisms of capitalistic countries’ political economies. Hence, the different types of capitalism in country`s political economy approaches are suitable concepts to study and understand (young people’s) school-to-employment transition process. However, the core actors are firms with emphasis on capitalist economies to adjust economic shock, competitiveness, and inflation (Hall and Soskice 2001). During this process, firms, individuals, employers and other actors play an important role in adjusting changes, competing globally, and sustaining countries’ performances (Hall and Soskice 2001)

In the study of Ebbinghaus and Manow (2001), the authors explained that in the core of country’s political economy, the differences in approaches of capitalism show that coordinated market economies work differently from liberal market economies. As a matter of fact, the proponents of the numerous types of capitalist approach are to investigate the cross-national variation and linkage in their respective fields of the social production system (ibid). In this paper, the social welfare production system on the labour market and the education system are taken into consideration. In addition, the different capitalism perspectives involve an aggregate parameter of the national political economies (Rhodes et al. (2007). Nevertheless, it also shows a micro-foundation view of cross-national capitalistic organisation and adjustment. Hence, at the centre of the model complementarities of institutions and coordination of systems are very important (Rhodes et al 2007; Kang, 2006). In this case, institutional subsystems that control capital and labour form a capitalist regime that mutually reinforce each other (Rhodes et al 2007; Kang 2006). Similarly, Kang (2006) emphases that the plural types of capitalism contain a solid coordinating and cooperative subsystem that guarantees firm`s competitive performances. Correspondingly, several authors like Hall and Soskice (2001) and Kang (2006), show the basic principles as the result of institutional governance where firms are remitted with comparative advantages according to their activities. These advantages deliberately increase the competitiveness of the system, generate, and enable adjustment paths to adjust economic pressures and societal change (Kang, 2006; Rhodes et al). In this case, the variety of capitalism show firms competitive linkage and the advantage of institutions during competition of national economies. (Rhodes et al (2007:5). However, the latter is an important aspect to the complementarities that exist between the institutions such as industrial relations, training system liaisons, corporate governances and intercompany relations (ibid). Hence, these features determined the core relationship of the political economy and it`s interplays/interconnections to geared (young people) school to employment transition process.

Despite that, Kang (2006) emphases that at the centre of the different types of capitalism, there are two distinctive capitalist models distinguished by a coordinated or uncoordinated market economy. With this in mind, specific variations still exist between the coordinated market economies which distinguished the governance of the transition process (Ebbinghaus and Manow, 2001). Also, these distinctions represent an ideal-typical model of economic governance that shows the peculiarity of different countries capitalism regimes with different institutional governance throughout the existing sub-systems (Ebbinghaus and Manow, 2001). However, if a distinct national models competing in a global economy remains dominant, a solid institutional cooperation and coordination remains the most suitable approach to regulate and effectively steer the transition process (ibid). As a result, several case studies across countries national economies show the differences and distinction of coordinated market economies and liberal market economies (Soskice, 1991; 1999). Thus, the subsystem diversifications are the modalities that geared young people transition path.
Likewise, Blossfeld et al. (2005) explained that coordinated market economies are characterised by strong commitments, corporation, and intensive collective ties among the prevailing actors. These attributes and commitments are manifested in the interrelation and corporate governance of the institutions, firms, and social system of production such as the labour market system and education regimes. Hence, (young) people`s transition path is systematically coordinated. Equally, is the dependency of inter-firms relationship to produce competency for competitiveness. In effect, the core competency is to incorporate skills and ability that are challenging and huge task for disadvantaged (young) people. Henceforth, the transition path is exposed to social risk and uncertainties. As a matter of fact, the political economies of Coordinated Market Economy coordinate the transition routes through extensive relationships and strong network that is monitored with the exchange of information (Klimplova 2007).

Contrary, uncoordinated market economy is composed of competitiveness and competition among actors (Kang, 2006; Hall and Soskice, 2001; Rhodes et al. 2007). Similarly, in response to such a market, actors react with regards to their want to demand, supply of goods or services that are often based on neo-classical economics (Halls and Soskice, 2001). As a result, the different types of capitalist approach show that different institutional governance and complementarities regulate and connect different types of companies’ rational attitude and models of investment (Kang, 2006). Also, this takes place in the investments of skills and the interplays of vital actors (Ebbinghaus and Manow, 2001). Therefore, due to rational behaviour, industrial workers often gain a specific skill that is valuable in the long run (ibid). Contrarily, when it is not the case employees can find employment with another company on same wages. However, strong unemployment protection via labour market law and collective agreements in coordinated market economies may convince employees to stay employed even in difficult times.

Nevertheless, the proponents of the liberal market economies, state that its labour market is viable to profit making capital that pave way for firms to radically innovate new products (Kang, 2006). In addition, Kang (2006) argues that the motives of this economic type composed of “switchable assets” that is valuable and can be converted for manifold goals and objectives. In this case, firms rely heavily on the market relation of employees and employers to decide the labour force (Hall and Soskice 2001). That is to say, they rely on a competitive market and global economic perspective for wage regulation and economy adjustment (Hall and Soskice 2001). Thus, they have a highly fluid labour market structure that enables a relative easy perspective to dismiss workers (ibid). These strategies encourage people to invest in general skills that are transferable across plants and not company-specific skills (ibid.). Furthermore, the education and training governance are typically complementary with the immensely irregular labour market system. In addition, vocational education is an entity of formal education institution that focuses on general education because firms are reluctant to invest in apprenticeship trainings (Hall and Soskice 2001). For this reason, the emphasis is laid on “certificate” in general skill and not specialized competencies (ibid). General education is considered to be high and low cost of supplementary training exist that enable firms to embark on an approach of in-house training (ibid). As a result of that, further training is insured to the employee’s expectation that lead to a general skills labour force suitable for growth in the service sector(ibid). Couple with that the inter-firm skills are influenced by market relation and formal contracts that plays fewer roles in technological transfer (ibid). Apparently, there are different models of institutional complementarities existing on the sub-spheres of this market regime (ibid). Thereupon, companies that cut down costs are complementary to financial market agreement within the flexibility to render profitability (ibid). On the other hand, educational arrangements that prefer general skills are complementary to highly irregular labour market (ibid).

Contrarily, in Coordinated Market Economies there are strong intercompany ties, long run employment measures, and strong behavioural rules (Kang, 2006: 5). Therefore, the logic of the coordinated market economies rotates on specific skills or assets that depend on active inter corporation among actors (Kang, 2006; Hall and Soskice 2001a; 2001b). Firms resolve problems with inter-company strategic interaction that geared (young) people`s school-to-work transition process (Hall and Soskice 2001). In addition, the process depends on supportive institutions that function as actors in the transition process (ibid). Hence, in this economy governance the financial system is coordinated that offer firm with financial access known as patient capital to enable company keep a skilled workforce during economic downturn and lucrative project investment (ibid). Moreover, there are high network systems that link the managers and technical staff to enable information flows and to check the progress of business affiliations (ibid). Also, they have a highly regulated labour force and strong industrial relationship that shaped the transition process (Gould et al. 2015). Similarly, Halls and Soskice (2011) claim that the labour market of this economy governance markedly relies on high industry and specific skills that depend on education and training governance that offer such workers. With this in mind, the coordination of strategic interaction among the actors pose a significant problem as employees need job’s assurance after apprenticeship, and firms investing in training need compensation with skills employees (ibid). For this reason, there are strong employers’ associations and trade unions that subsidised and monitored the training system, and companies that nurture an “inter-company relations” to support a number of institutions (ibid). Moreover, there are effective vocational training schemes in support of industrial-relations system to give high level of industry-specific skills.

Author:
Eddy Bruno is Political Economist, Sociologist, and Labour Market Policy Researcher
office@hiba.at

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