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Varieties of Capitalism, Competitiveness, and Labor


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A lecture delivered on Febrary 26, 2013, at Indiana University in Bloomington, Indiana.

A lecture delivered on Febrary 26, 2013, at Indiana University in Bloomington, Indiana.

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  • 1. Varieties of Capitalism,Competitiveness, and Labor Jeffrey Hart February 26, 2013
  • 2. Books on Varieties of Capitalism Andrew Shonfeld, Modern Capitalism (1966) John Zysman, Government, Markets and Growth (1978) Peter Katzenstein, ed., Between Power and Plenty (1978) Peter Gourevitch, Politics in Hard Times (1986) Herbert Kitschelt, Continuity and Change in Contemporary Capitalism (1999) Peter Hall and David Soskice, eds., Varieties of Capitalism (2001) Kathleen Thelen, How Institutions Evolve (2004)
  • 3. My books on this topic: Rival Capitalists (1992) Managing New Industry Creation (2002) Technology, Television, and Competition (2004)
  • 4. Key Questions in Varieties of Capitalism Literature Identifying variance in the organization of capitalist systems Explaining the variance Demonstrating the impact of variance on important outcomes (such as international competitiveness)
  • 5. Examples of Types of Variance Strong vs. weak states  Countries with centralized governments and relatively weak business and labor are called “strong states” (e.g. Japan and France) Coordinated vs. liberal market economies  coordinated market economies may also be called “corporatist” or “neo-corporatist”  coordination is sometimes called concertation or tripartite (government, business, and labor) concertation  Germany and the Scandinavian countries are in this group In my work, I use the concept of “state-societal arrangements”
  • 6. State-Societal Arrangements
  • 7. Typical Causal ModelExternal shocks Variance in types of capitalism Variance in Outcomes
  • 8. Key questions in the study ofinternational competiveness: What is the role of varieties of capitalism relative to other factors in industrial growth and international competitiveness? Is it possible for governments to promote the growth and development of high-tech industries? If so, when and where, and under what conditions?
  • 9. Link between varieties ofcapitalism and industrial policies  The types of industrial policies available to the government of a given country depend strongly on the variety of capitalism  In general, liberal market economies tend to avoid industrial policies other than those associated with macroeconomic policies (spending, taxation, and subsidization of infrastructures and R&D)  Coordinated market economies and strong states have a wider array of options for industrial policies
  • 10. Industrial Policies Includes a wide variety of policy instruments that are intended to advance the international competitiveness of “national champion” firms, such as:  Investment subsidies  Public R&D expenditures  Science parks and free trade zones  Export incentives
  • 11. Causal Argument of Rival Capitalists Possible Feedback Loop
  • 12. What is an industry? A set of firms that compete in the same market for goods and/or services May or may not include upstream/downstream activities Boundaries with other industries may be fuzzy and may change over time Often self-identified via lobbying efforts and the formation of industry associations
  • 13. Sectors vs. Industries Sectors are at a higher level of aggregation In economics, primary=extractive, secondary=manufacturing, tertiary=services capital-intensive vs. labor-intensive import competing vs. noncompeting Industry studies provide more information about differences within “sectors” or similarities across “sectors”
  • 14. Key industry variables: Size, growth rate, market share, no. employed, exports, imports, etc. Concentration of ownership/control Regulated vs. self-regulated vs. unregulated High-tech vs. low-tech Kitschelt: loosely vs. tightly coupled; simple vs. complex; specific vs. general assets Extent or type of globalization
  • 15. Methods Collection of empirical and especially quantitative data on key variables Elite interviews with managers and public policy officials Site visits to major facilities Archival research
  • 16. GlobalMarketShare Data
  • 17. Figure 4. Production Shares of TFT LCDs by Location, 1993-2005, in percentages Source: Thomas Murtha, Stefanie Lenway and Jeffrey Hart, Managing New Industry Creation (Stanford, Calif.: Stanford University Press, 2001) updated.
  • 18. Generations 1-7 of Glass SubstratesSource: Samsung Corning Precision,
  • 19. Generation 7-8 TFT LCD Plant in Paju, S. Korea (LG)
  • 20. Tianma LCD Factory inShanghai (formerly SVA-NEC)
  • 21. Theoretical approaches: Neoclassical (industrial policy is bad and counterproductive) Regulatory State (regulation necessary for markets to work properly, but industrial policy is still bad) Developmental State (industrial policy is useful for catching up) Competition State (industrial policy has to take globalization into account)
  • 22. The Developmental State vs. the Regulatory State Developmental RegulatoryType of Elite, Insulated Transparent,Bureaucracy AccountableSupport for New Extensive LimitedIndustriesUse of State- Extensive LimitedControlled BanksStance w/regard Tutellary Regulatoryto Private Firms
  • 23. The Impact of Globalization on National Economic Strategies Greater volatility in global financial markets requires changes in financial market regulations in all countries To remain internationally competitive, firms have adopted global production strategies Even regulatory states have to compete for inflows of foreign direct investment Developmental states cannot succeed with pure national champion strategies
  • 24. Example of GM in China 2010 sales of 2.3 million vehicles in China World-class production facilities (joint venture with SAIC) Modified Buick as a chauffeur-driven luxury car Not competing with low-end national champions like Geely
  • 25. Example of LG LCD Production Joint venture with Philips Only major competitors globally are Samsung and Sharp Production facilities use best materials and tools from global suppliers (e.g. Corning and Canon) Have to worry about China
  • 26. Important findings: Major impact of globalization of the world economy on manufacturing location decision in high-tech industries Changing view on what needs to be studied: e.g. industries vs. “value chains” Role of government policy varies over time and across industries as technologies change Creation and diffusion of technology is a key variable in determining shifts in international competitiveness
  • 27. Problems: Research is costly and difficult Difficulty of aggregating across industries Possible selection biases in industries studied Confusing/complex nature of the role of the state