How to Study Contemporary Capitalism?

Wolfgang Streeck (2012).


The paper argues that contemporary capitalism must be studied as a society rather than an economy, and contemporary society as capitalist society. Capitalism is defined as a specific institutionalization of economic action in the form of a specifically dynamic system of social action, with a tendency to expand into, impose itself on and consume its non-economic and non-capitalist social and institutional context, unless contained by political resistance and regulation. The paper illustrates its perspective by four brief sketches, depicting contemporary capitalism as a historically dynamic social order, a culture, a polity, and a way of life. All four examples, it is claimed, demonstrate the superiority of a longitudinal-historical approach over static cross-sectional comparisons, and of focusing on the commonalities of national versions of capitalisms rather than their “varieties”

European Journal of Sociology, Volume 53, Issue 01, April 2012 pp 1-28

Education reduces gender inequality through its employment effect

Women’s employment, education,and the gender gap in 17 countries 

“Data from the Luxembourg Income Study show that, among married or cohabiting mothers, better educated women are more likely to be employed; gender inequality in annual earnings is thus less extreme among the well educated than among those with less education, driven largely by educated women’s higher employment” (Monthly Labor Review, April 2012, Vol. 135, Number )

Flex Work Research Centre – New publications April

Please find below the latest reports that have been posted on the Flex Work Research website:

Part-time unemployment and optimal employment insurance. (S. Ek & B. Holmlund).
A significant fraction of the labor force consists of employed workers who are part-time unemployed (underemployed) in the… read more.

Push or Pull? Drivers of Female Labor Force Participation during India’s Economic Boom. (S. Klasen & J. Pieters).
In the past twenty years, India’s economy has grown at increasing rates and now belongs to the fastest-growing economies in… read more.

Part-Time Work, Fixed-Term Contracts, and the Returns to Experience. (D. Fernández-Kranz, M. Paul & N. Rodríguez-Planas).
Using data from Spanish Social Security records, we investigate the returns to experience in different flexible work… read more.

The impact of migrant labour in the workforce. (Saksvik, P.).
The objective of the present study was to explore presence factors and examine what psychosocial factors differentiate the… read more.

A re-examination of flexible employment practices in Japan. (J. MacVaugha & J. Evans).
This article re-examines commonly held perspectives on flexible employment practices used in Japanese organisations. Recent… read more.

Managing lean capabilities through flexible workforce development: a process and framework. (Kim Hua Tana, Paul Denton, Rosalind Rae & Leanne Chung).
Many firms today are employing temporary contractual workers in order to help them to stay lean and flexible. The benefit… read more.

World ranking in Unemployment Benefit replacement rates

In times of crisis, the ability of workers who lose their jobs to retain their purchasing power has important social and economic implications. A high replacement rate (ratio of unemployment benefits a worker receives relative to the worker’s last gross earning) ensures that the negative effects of rising unemployment on aggregate demand are mitigated. It also prevents workers from falling into poverty when they lose their jobs.
The table below shows the gross replacement rate in the first year of unemployment for as many countries as is available. The data is taken from a recent IMF working paper (see end of post for full reference). I have ranked countries from highest to lowest (restricting the sample to those countries which replacement rate is superior to 0). 

An interesting finding is that European countries did not have the monopoly of high replacement rates in 2000. This challenges the notion that high economic development is a necessary or sufficient condition for protection fo workers to be high. Indeed, workers who have unemployment insurance in non-EU countries sometimes score higher. For instance, in the top 10 one finds Ukraine, Algeria, and Taiwan, while Russia, Tunisia, Romania and Hong Kong make it into the top 20.
The Anglo Saxon countries rank poorly: UK (46th), Australia (43rd) and Ireland (39th); US (31st) i.e.: coming after Venezuala, Azerbaijan, Egypt, Belarus… The picture for Eastern European countries is more mixed with Bulgaria (16th), Romania (18th), Ukraine (9th) doing ok, whereas others do not do so well: Estonia (48th), Poland (41st), Czech Republic (42nd).

Country  Gross Replacement Rate, year 1   Ranking
Netherlands 0.7 1
Switzerland 0.687 2
Sweden 0.685 3
Portugal 0.65 4
Spain 0.635 5
Norway 0.624 6
Algeria 0.612 7
Taiwan 0.6 8
Ukraine 0.56 9
Italy 0.527 10
Denmark 0.521 11
Russia 0.505 12
Tunisia 0.5 13
Finland 0.494 14
France 0.479 15
Bulgaria 0.473 16
Canada 0.459 17
Romania 0.45 18
Hong Kong 0.41 19
Austria 0.398 20
Belgium 0.373 21
Argentina 0.354 22
Germany 0.353 23
Greece 0.346 24
Azerbaijan 0.338 25
Egypt 0.329 26
Venezuela 0.325 27
Belarus 0.313 28
Israel 0.307 29
Japan 0.289 30
United States 0.275 31
Kyrgyzstan 0.255 32
New Zealand 0.254 33
Latvia 0.253 34
India 0.25 38
Korea, South 0.25 37
Uruguay 0.25 36
Uzbekistan 0.25 35
Ireland 0.238 39
Hungary 0.235 40
Poland 0.226 41
Czech Republic 0.225 42
Australia 0.21 43
Turkey 0.206 44
Albania 0.202 45
United Kingdom 0.189 46
Brazil 0.152 47
Estonia 0.132 48
Lithuania 0.117 49
Chile 0.115 50
Georgia 0.09 51

Data taken from: Mariya Aleksynska and Martin Schindler (2011) Labor Market Regulations in Low-, Middle- and High-Income Countries: A New Panel Database. IMF Working Paper.

Unions and democracy

Recent paper by Patrick Flavin and Benjamin Radcliff shows that (1) union members are more likely to vote than non-members and (2) people are more likely to vote in high union density countries…
Despite a large literature on voter turnout around the world, our understanding of the role of labor union membership remains muddled. In this paper, we examine the relationship between union membership and voting. Using individual level International Social Science Program (ISSP) data from thirty-two countries, we find that union members are more likely to vote and that the substantive effect rivals that of other common predictors of voting. This relationship is also largely invariant across an array of demographic factors, indicating that unions tend to be “equal opportunity mobilizers.” We also find that unions have “spillover” effects: controlling for a variety of other factors, even non-union members are more likely to turn out to vote in countries with higher union densities. In sum, we find that labor unions have a consistent political influence across a wide set of countries.

EU responses to the crisis: From inadequate explanations to inefficient policy solutions?

The debt crisis saga continues, further demonstrating the inability of the European Union and its leaders to come to grip with solutions that could put an end to the devastating consequences it is having on the European Economy and by implication on workers’ welfare. In the second quarter of 2011, overall unemployment stood at 10.3% for the Eurozone while it reached a staggering 21.7% for 15-24 years old [1]. This country average hides important cross national disparities with Greece’s overall unemployment rate being at 18.8%, Ireland 14.6%, Portugal 12.8% and Spain 22.5% in September 2011 [2].

In October 2011, 23.5 million workers were unemployed in EU27. Yet we are told that the way forward is more contractionary fiscal policy, both through cutbacks in the Public sector, curtailment of existing welfare state benefits, and additional moderation of wages throughout Europe. This despite mounting evidence that the current strategy has not worked. Indeed, it will come as no surprise that against this backdrop the debt picture has not improved. While the Euro area inflation rate [3] stayed stable at 3% in November 2011, general government deficit as a % of GDP for the Euro area in 2010 had reached 6.2% compared with 2.1% in 2008.
Now the IMF itself believes that the continuous declines of Greek GDP means initial debt reduction targets agreed with the Troika will not work.[4] Somewhat ironically, this follows the entry into force on the 13th of December of the so-called ‘six-pack’ portrayed as a reinforcement of the Stability and Growth Pact. This will entail the possibilities to impose financial penalties on Member States who fail to realign their budget deficits[5].

Explanatory formats of the crisis
The utter failure of EU policy making process to come up with a sensible, let alone coherent, strategy to deal with the crisis is mirrored by similarly flawed readings of the crisis. Several faulty narratives underpin the current direction of policy[6].
The first emphasizes the weakness of human nature, where instincts, greed and delusion mix together to produce corruption on the part of politicians, as well as unreasonable debt exposure by public and private actors alike. This echoes the view that saw the subprime crisis as being caused by greedy and immoral bankers. In this scenario, more rules and regulations, particularly of a supranational nature, are called for. This reading partly informs the ‘six pack’.
Second, one can identify institutional failures where regulators failed in their oversight of Member States’ deficits or rating agencies provided inadequate ratings of the debt situation in EU countries. Again, this notionally equivalent to the purported inability of regulators to monitor shadow banking and the systemic risks that it generated. Thus, in this view, more thorough monitoring of Member States’ macroeconomic and budgetary imbalances’ is warranted.
These two readings both point to the role of government profligacy as the source of the problem. However, debt is either money we owe to ourselves – making a distributional issue – or stems from trade deficits which are offsets by inflows of capital often redirected into the bond market[7]. In any case, a significant amount of debt resulted from the financial crisis rather than caused it, and some of the countries currently under the spotlight (Spain, Ireland and Italy) had a sound fiscal stance before the crisis[6].
In a third reading of the crisis, some argue it is the ideological and theoretical failure such as neoliberalism or the Efficient Market Hypothesis [9] that is embedded in it, that is responsible for the situation we now fail. The more heroic among social democrats therefore advise us: Return to Keynesianism and all shall be good. But policy makers tell us that there is no scope for further fiscal expansion and neoliberal ideology rises from its ashes with economics Nobel prize winner Paul Krugman has termed the ‘confidence fairy’[10]. This refers to the faith that tightening will result in ‘expansionary austerity’ whereby the contractionary effects of austerity would be offset by increased confidence on the part of private investors. There is in fact substantial evidence that fiscal policy works [11]and could be undertaken provided the ECB takes a more pro-active role in the European primary bond markets (which is currently ruled by its statutes).
Last but not least, cultural explanations also sprang up where we were told that Southern European problem were essentially due to the intrinsic lazyness of their workers and the fiscal incontinence [12] of their governments. Not much can be done in this case, save for infusing the sinners with the virtuous culture of Northern Europe. This of course is hard to reconcile that with the fact that the numbers of hours that Greek workers dedicate to their jobs is one of the highest in Europe[13].
The missing link: Wages, coordination and the European Monetary Union
What has been almost – though not entirely – absent from the debate is the question of wages as a cause and potential solution to the crisis. The wage share as a % of GDP which measures the amount of wealth produced in a given year that is distributed in the form of wages to workers has been falling in the past three decades in the OECD. The drivers of this trend are by now well documented and include weakening union power, globalization of trade and capital, and the opening of capital accounts.
The implications of this phenomenon will not shock those acquainted with Marxian analyses of the internal contradictions of capital accumulation whereby it breeds the seeds of its own demise by undercutting the aggregate demand on which growth crucially depends. As early as the 1970s, James O’Connor emphasized the contradictory functions of the State in promoting capital accumulation by moderating wages and legitimation by expanding welfare state benefits and redistributive policies to mitigate the adverse impacts that capitalism has on workers[14]. In a world where capital mobility increases and most of the tax revenues from income, this generates an obvious contradiction in form of more expenditures but constrained revenues that can only be resolved through emitting more public debt. Indeed, social pacts emphasized in the neo-corporatist literature explicitly traded higher wage moderation for lower taxes and/or more welfare state benefits. This was followed by what Colin Crouch has called ‘privatised Keynesianism’ where public debt was replaced by individuals’ debt,with the consequences that we know.
The way forward is therefore to address imbalances but through both improved wage coordination and revalued wages at the EU level, as has been called for by the European Trade Union Confederation as early as December 2009 in its ‘Resolution on the Guidelines for the coordination of collective bargaining in 2010’75. In a recent ILO paper, Patrick Belser and Sangheon Lee have argued that a ‘wage led growth’ strategy can generate better and more sustainable economic outcomes. A starting point for such a strategy would be establish EU-wide ‘relative’ minimum wages, where the minimum wages of each member state are set as a percentage of their national median wage[16]
While ensuring that wages at the bottom, which often serve as an anchor for the other wages of an economy, are set at an appropriate, are sufficiently high, it also is consistent with the current diversity of standard of livings across the EU. Wage coordination between trade unions and employers across the European Monetary Union (EMU) is also required to tackle the fundamental imbalances that a common currency with national wage coordination systems generates. Indeed with a common EMU interest rate results in a low real interest rate in low inflation countries such as Germany and a high real interest rates in high inflation countries such as Greece. In a such a context, the differential in real interest rates of the high and low inflation countries feed inflation divergence further between EMU members[17].
The inflationary divergence that EMU generates feeds into different competitiveness levels which exacerbates trade imbalances within EMU. To the extent that trade deficits are offset – or indeed mirrored in the case of current account deficits – by capital inflows, this inflationary divergence eventually results in low inflation countries (e.g.: Germany) buying debt in high inflation countries (e.g.: Greece). Note that this result is almost structurally driven, not easily altered by the will of the countries involved in the process. Undertaking a strategy of enhanced wage coordination and higher wages has the added advantage that it has the potential to increase legitimacy of the EU through more equitable social outcomes and a stronger involvement of European Social partners. Anything short of that would fail to revive the European Project.
**This article was first published in GRASPE (Reflection Group on the Future of the European Civil Service), February 2012, pages 55-59.

[1] Eurostat
[2] OECD stats
[6] This follows loosely from David Harvey’s talk which can be accessed at:
[9] This hypothesis was most forcibly posited by Professor Eugene Farma who is
dubbed as the “father of modern finance” – for more on this, see:
[12] The term was borrowed from Willem Buiter, previously Chair in European
Political Economy at the European Institute of the London School of Economics.
[14] The Fiscal Crisis of the State (1973) New York, Saint Martin Press.
[16] This was for instance discusse in a recent European Trade Union Institute
Policy Brief which can be accessed at:
[17] For more on this and other wage bargaining dynamics induced by EMU, see:
Johnston and Hancke (2009) Wage inflation and labour unions in EMU. Journal
of European Public Policy, 16:4, pages 601-622.