Worlds of Capitalism

Institutions, Economic Performance and Governance in the Era of Globalization

Max Miller

• Publisher: Routledge
• Year: 2012
• ISBN:
  9781134274017
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Efforts to combine the outstanding economic performance in the decades following the Second World War with social security appear to be endangered half way through the first decade of the 21st century. This book draws together an international team of contributors, including Douglass North, Harold Demsetz and Michael Piore to assess the current world order.

1 Introduction

Max Miller

It is characteristic of our time that all over the world proponents and opponents of globalization are confronting each other and fighting for the right path of future global development. Whereas one side commends the actual process of globalization and its megatrends of technological development, internationalization and the deterritorialization of competition as the biggest welfare programme of all times (and thus tries to revitalize the perspective of liberal capitalism in a so-called neoliberal way), the other side claims that a different kind of globalization is possible, involving less social inequality and injustice worldwide and more ecological sustainability, more democratic participation, less suppression of cultural diversity and more political and institutional regulation of economics on a worldwide scale. At one extreme, advocates of globalization basically endorse a kind of market fundamentalism and laissez-faire economic globalization; at the other extreme critics of globalization call for more than only a restructuring of the political and legal foundation of economic globalization – the big anti-globalization demonstrations in Seattle in 1999 and in Genoa in 2002 were driven by the slogan that ‘a different world is possible’. But what is the real global world like right now?

Since the breakdown of communism at the close of the twentieth century, capitalist economy and society consider themselves as unrivalled models of economy and society, models that seem to lack any substantial alternative – a conviction deeply rooted in Western culture. Alternative structures of economy and society are sought no longer outside capitalism but within its own frame of reference. Of course, there has never been only one brand of capitalism, one unified world of capitalism; however, with the ideological antipodes fading away, contemporary capitalism appears to be enforcing a process of generating differences and alternatives within itself – opening up an array of different worlds of capitalism. There are not only the differences between the three most advanced capitalist regions: North America, Western Europe and East Asia. There are many more varieties of capitalism that have been observed by a recently developed branch of research called comparative capitalism,¹ which looks especially at differences in the social organization, the institutional embeddedness and the governance of capitalist economies in different societies and analyses the effects of such differences on economic performance in a competitive world market.

Many questions arise at this point. What for example explains national differences in social and economic policy? Is globalization forcing nations to diverge or to converge (e.g. on an Anglo-American model), or to do both at the same time but in different respects? To what extent are differences the outcomes of different historical paths of development leading to empirical varieties of contemporary capitalism? To what extent is the gap between winners and losers of globalization a consequence of worldwide economic competition, and to what extent is that worldwide competition hampered and distorted by unequal distribution of political power?

Or there are questions of a rather different kind. What for example are the consequences of different forms of capitalism on non-economic social fields such as education, the public media, the arts and even personal relationships? Where is the market out of place and why? To what extent are real developments and critical reflections of capitalism interdependent aspects of capitalist evolution? And what future developments on a worldwide scale can be realistically expected?

These are central questions not only for a number of scientific disciplines (especially economics, political science and sociology) and for a comprehensive diagnosis of our time but also for concrete economics and applied politics. The chapters of this book are intended to substantially increase our present knowledge regarding these questions, especially as they extend into the various problem areas that have already been characterized in the preface: continuity and change in the formation of an all-powerful and truly global expansion of capitalist economies, risks and chances of the ever-increasing importance of financial markets, the relation between economics and politics, and legitimacy problems of contemporary capitalism.

However, underlying all these different problem areas and topics there is a fundamental question: how are economy and society related to each other in capitalism? Or, to put it differently: to what extent is society determined by economic forces and/or to what extent is an economy determined by society? And how does the meaning of capitalism change if the direction of control changes from economy to society (or non-economic social systems) or vice versa? This fundamental question and the different ways in which it can be answered decisively affect the manner in which differences between different worlds of capitalism and in which potentialities for an economic (and eventually also societal) critique and change of contemporary forms of capitalism can be understood. There is already quite a long and rich history of ideas and theoretical reflections regarding the relation between capitalist economy and capitalist society. In the following some milestones of that theoretical discourse will be briefly recapitulated, followed by a brief preview of how this discourse is continued in the chapters of this book and what answers arise from that discourse in regard to the two central questions of this volume: where do varieties of capitalism come from and how can they change?

Economy and society: a short history of theories of capitalism

Until the latter part of the nineteenth century the term capitalism hardly existed. The Oxford English Dictionary indicates the first English use of the term as that of William Makepeace Thackeray in his novel The Newcomes (1853–1855). Karl Marx wrote about capital, but he did not use the term capitalism before the late 1870s, when, in his draft letters to Vera Zasulich (cf. Marx 1983), he discussed whether Russia could bypass the capitalist stage of development. It was Werner Sombart who finally coined the term capitalism and introduced it into economic and societal discourse in his 1902 classic, Modern Capitalism. Since then there has been much debate over how to define capitalism. But most definitions have in common that they refer to economic practices that became institutionalized in Europe between the sixteenth and nineteenth centuries and which entail that the means of production and distribution are privately or corporately owned (which necessitates individual rights, specifically property rights), that goods and services are traded in markets (including a labour market), and that economic development decisively depends on a continuous transformation of the process of production through technology and on the accumulation and reinvestment of profits gained in a free market. However, not only definitions of capitalism but also theories referring to the economic and societal phenomena later called capitalism changed as these phenomena themselves changed, especially from the second half of the eighteenth century until the beginning of the twenty-first century.

The first version of modern capitalism, the emergence especially in Great Britain of an agricultural and commercial capitalism in the eighteenth century and of an early industrial capitalism in the first half of the nineteenth century, became the subject of two great competing theory projects, the political economy of a market society developed by Adam Smith and subsequently the critique of political economy by Karl Marx and Friedrich Engels, which assumes the form of a historical-materialist analysis of capital and classes.

At the transition from the nineteenth century to the twentieth, and increasingly during the 1920s, structures of capitalist economy changed pervasively. In the wake of the second industrial revolution large bureaucratic corporations emerged, mass consumption was created by mass production, and mechanisms of political control of economies became firmly established – all this is reflected by new theories of capitalism. Max Weber (1922), Josef Schumpeter (1912), Werner Sombart (1902) and later John Maynard Keynes (1936) and Karl Polanyi (1944) present different analyses of those institutional structures of capitalist economy which Rudolf Hilferding (1910) labelled organized capitalism. Finally, after the Second World War efforts were made, e.g. by Raymond Aron (1964), to replace the concept ‘capitalism’ altogether by the concept ‘industrial society’.

The ongoing transformation of capitalism, especially since the 1970s, the transition to flexible forms of the organization of labour and production, the microelectronic revolution, the collapse of a state-socialist alternative, the progressing globalization of capitalism, the reduction of state intervention even in Western societies, the further expansion and pluralization of consumption as a basic prerequisite of highly modern mass culture – all these recent developments have been accompanied by new adjustments in theories of capitalism during the last two decades, such as theories of post-Fordism and of post-industrial society, theories of networked and project-team-like structures of labour, theories which emphasize the dependence of late capitalism on the creation of needs and symbols regarding consumption and, last but not least, theories of cultural and institutional differences between regional variants of global capitalism – theories which are especially important for this book. It may be helpful here to add a few more remarks regarding these three phases of capitalist development.

The view that modernity is based not only on a specific political order (as assumed for example in the political philosophies of Hobbes, 1651, and Locke, 1690) and on a specific intellectual and spiritual grounding (as assumed by the philosophy of the Enlightenment) but, above all, on a specific economic structure has since the end of the eighteenth century inspired those perennially influential grand theories of society which are shaped around political economy. Here only the two grand and competing theory projects of Adam Smith and Marx/Engels will be briefly analysed in order to show that there are not just basic differences but also a basic commonality regarding the mode in which the relation between economy and society is conceived.

In An Inquiry into the Nature and Causes of the Wealth of Nations (1776) Adam Smith unfolds his concepts of a ‘market economy’ and ‘commercial society’. He describes a model of societal evolution in which modernity appears as based on advanced forms of the division of labour and on a specific economic logic: an exchange-and-market economy. In Adam Smith’s model that logic of economic action presupposes actors who are rational and self-interested by nature and whose behaviour is balanced by moral sentiments and a civil morality they are also naturally inclined to develop. In this sense, it is essentially the individual subject that counts. This basic assumption of the liberal political economy of Adam Smith and his equilibrium theory of market formation (which reconstructs the conditions under which the pursuit of individual interests generates collective goods) laid the foundations of neoclassical economics more than a century later.

The liberal equilibrium theory of market formation is countered by Karl Marx with his crisis theory of capitalism. In Capital (1867) Marx also clearly goes beyond a purely economic analysis and reveals the basic structure of bourgeois or capitalist society, in which social labour takes the form of a generalized production of commodities. Marx argues that this mode of production has a rationale that goes beyond the interests of individual subjects (no matter whether they belong to the bourgeois or to the proletarian class) and gathers a supra-individual momentum. The permanent transformation of labour, commodity and value appears as a self-reproducing and expanding social system which not only obscures the mechanism by which a surplus product is generated and appropriated (so that exploitation is less apparent in a bourgeois society than in a slave society) but also transcends any institutional rules.

Hence, in spite of their vast differences, liberal political economy and Marx’s critique of political economy share the basic view that capitalism at the core appears as a non-institutionalized and non-regulated form of economy. Whereas, for the one, individual interests competing in the market are conceived as being prior to any social or institutional norms and rules, for the other it is the unintended dynamics of capital that either breaks existing rules or shapes appropriate political and other social institutions and the cultural sphere. In both great theory traditions of liberalism and Marxism, economy determines society and not the other way round.

In this respect a pervasive paradigm change regarding theories of capitalism occurred at the transition from the nineteenth century to the twentieth and continued until the second half of the twentieth century – a change that parallels the real transformations of Western capitalism: the emergence of large corporations, accompanied by an increase in state intervention and a progressive strengthening of the welfare state at least in certain regions of the Western world. Against the background of these experiences the defining features of capitalism have been increasingly related to its institutionalization and regulation, implying some leeway for planning and control that ranges from single corporations to whole societies. In many interpretations, from Max Weber until the present, this character of an organized capitalism appears to imply both an increase of social or collective rationality and a loss of individual autonomy, and in this sense conveys a fundamental ambivalence of modernity.

Max Weber’s theory of the specific and peculiar rationalism of Western civilization provides the initial ignition for an institutionalist perspective on economy. In Economy and Society (1922) Weber presents economic action in a capitalist society as a distinctive example for the ‘rationality’ of modern organizations (e.g. rational specialization and combination of labour, bureaucratic administration and a pervasive calculating attitude); and in General Economic History (1923) he shows that the social preconditions for the development of rational capitalism include the creation of institutional systems for property, law and finance. Moreover, in Die Wirtschaftsethik der Weltreligionen (1920) Weber reconstructs the highly specific cultural foundation of Western capitalism and concludes that rational capitalism presupposes specific structures of personality such as self-control and asceticism. It is the spirit of capitalism drawing heavily on cultural and psychological factors and on a rationalization of social institutions which, in Weber’s highly influential account, explains capitalist economy.

From Max Weber’s account until the 1960s the theoretical discourse on capitalism, as already indicated, follows a strong tendency to reverse the direc...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Notes on contributors
• Preface
• 1 Introduction
• Part I: Social institutions, governance and economic performance
• Part II: Varieties of contemporary capitalism
• Part III: Capitalism and social critique in the era of globalization
• Author index
• Subject index