Comparative Political Economy, Sbobinature di Politica Economica

Scarica Comparative Political Economy e più Sbobinature in PDF di Politica Economica solo su Docsity! Lecture 1 – 22/02/22 Focus: socio - economic growth/development Why we see nations able to grow socio-economically and others not? 3 ways of comparison: 1. Comparison between countries at the same time 2. Studying of the growing of the countries during the time 3. Mix the two ways. Dependent variable phenomenon we want to explain.1 In this case, socio2 – economic growth. How we measure growth? How can we explain socio-economic growth? - GDP (traditional way we calculate per-capita that indicate economic growth. It’s the capacity of the country to create wealth; the difference between the resources that a country has and what the country produces). Economic growth; - Income (PPP) purchasing power parity??? calculate how expensive is to live in a country; we compare the cost of living. Economic growth; - HDI (Human Development Index) index that take in consideration education, health, birth/death rate. - Employment rate or unemployment. Is a country able to create jobs? In history, we had society with no problem of unemployment but with problem of poverty. After industrial revolution: high economic growth, low unemployment. Today, polarized – dualized high economic growth, high unemployment. There are high skilled jobs that require high education skills + strong increase of low skilled simple jobs for which we don’t need specific education skills. Collapse of what is in the middle (blue color workers, manufacturing working, routine jobs) technologic innovation (substitution of more and more people with machines)3+ globalization. Split between: half people richer than their parents and half people that are more poor than their parents. - Inflation is a change in prices. Increase the cost of goods. Makes life more costly. It’s a nightmare both for employers and for employees. When we see income level, we have to consider inflation. Tells me a lot how to measure economic growth. Economic growth; - Supply – demand - Currency value - Gender equality people with same needs treated differently because of the gender. We refer to gender inequalities in different areas. We have also to consider other inequalities (migration, races, ethnic groups) - Graduate students/education - Poverty rate - Import/export - Health insurance - International relations - Stability of the governance - Life expectancy - Service provision 1 Example: we want to explain why In some restaurant of Macerata there are lots of people and others few people. 2 It focuses on inequalities. Wealth distributed among population. 3 It’s easier substitute a blue color in a factory with a robot than a waiter in a restaurant. 1 - GINI coefficient most common indicator of income distribution/income inequalities4. It’s an indicator that goes from 0 to 1 and measure income levels concentration. If you have 1, there are more inequalities. If is 0; there are less inequalities and income is well distributed. Socio growth. Lecture 2 – 23/02/22 INDEPENDENT VARIABLES factors we think can explain the phenomenon.5 1) POLITICS-GOVERNMENT: variables that depend in how government works: Infrastructure; Government spending; Taxation; Public debt: A) Political system : is democracy or authoritarian system good for economic growth? For empirical analysis, democracy should be better because has the same principles of the free market: competition between parties. Instead, in authoritarian regime, the risk is that who run the country could be incompetent and corrupted and there aren’t peaceful rules to remove him. B) Decision – making process  decision-making rules. One distinction among democracy: majoritarian or parliamentarian? Who do we decide? Majoritarian: UK once a party wins the elections, it rules the country and takes decisions. A president (like in US) has lots of powers. Parliamentarian: Germany and Sweden: lots of decisions are making in the parliament with different parties. C) Governance  national state + EU and international institutions6+ supranational governance (like federal states in Germany and US). D) Legal framework  economic activity is based on the rules of law. How long you need a decision from the judge to business? Are the judges corrupted? If you live in a corrupted country and you want to invest, you have to spend some money to corrupt negative factors for economic growth. The judges could be also non efficient too much time to take a decision. 2 important points for legal framework: A) how efficient the law system is B) how can you trust in your country for your property. E) Geopolitical collocation of the country and global level  there are theorists that think that the global level is the core. For example, US is a powerful country so we have to see if other countries are in the core, in the periphery, in the semi-periphery or outside related to the USA. So what relationship a country has with the main powerful county. F) Political parties and party competition (or political movements)  registrazione 10:42 (different types of parties). Politics is about finding a synthesis between different interests and idea. Religious values in politics are very important (most of all in Poland, Greek and Ireland). Factors that influence economic growth (long-term factors) + they are also indicators for socio-economic development: - Education - Health Partly an indicator and partly an outcome of socio-economic growth - Urbanization something that helps to foster socio-economic growth. Started at the end of 18th century and continue today. It is related to globalization. Cities= concentration of economic activities. Now not anymore cities but we talk about regional capitals specific regions with 4 Definition of inequality: people with same needs are treated differently. 5 Independent variables: verdecaffè more vegan food, or better food, etc. 6 Ex. Italy has to follow EU rules. 2 and Latin American countries. It focused on the Asian countries, which exhibited remarkable economic dynamism. It uses different explanations. The first one is: 3.1. SOCIAL CAPITAL  for an economic growth we need: economic capital, human capital (education, etc.) and social capital= Social networks + Social and Institutional trust. Families changes in order of their expectations for each member of the family; families are different all around the world in order to the composition of family (if it’s a nuclear with few people or a large family of many people). It is important to know the duty of the people to the members of their family. In nuclear family: obligation only to parents. In other society with large family, more obligations but also more members that can take care of you. In culture like in Africa when families are large, it’s difficult for an entrepreneur to be successful because you can’t reinvest your money in other activities because you feel obliged to help your relatives. Instead in China, the members of family help you but there is not the moral duties.13 Lecture 4 – 01/03/22  Social networks  how people in a given society are connected each other: family, communities, friends, etc. Social networks are important for: economic resources, economic growth (help people to connect each other), information. In social network we have to distinguish in: - Bonding social networks (ex. Ku Klux Klan) participate people with homogeneous characteristics economic result only in the shorter on the base of bonds and not on the base of performance (problems in Russia with oligarchs). - Bridging social networks (ex. Save the Children) participate people heterogeneous and different background they are effective for economic growth.  Social and institutional trust  o Social trust= how much trust you have in people of you community or people in general. o Institutional trust= Trust that people have in institutions (parties, judicial system, etc.). If a country has high social and institutional trust, it will have more economic growth).The bank financial system is based on trust. Associations people stranger start to cooperate. Optimistic studies say that the social trust can be built helping people joining in associations. Associations as “school of trust” (through interaction and collaboration) or “pool of people who already trust”. B) CULTURE/IDEOLOGY/RELIGION Differences in economic growth based on differences in religion (such as Lutherans and Catholic). From the religion depends the behavior and how people think in the society (for example, Lutherans= capitalistic way to have freedom of speech). C) POLITICAL ELITES Taken from modernization theory. Socio-economic groups leading a country (not only ministers but also trade companies, banks, etc.). The elites could be able to manage the transformation of the society. D) BUREAUCRACY 13 UK agencies critic Italy because there are too much relatives in companies. Relatives chosen for a moral duty and not for their skills and performance. 5 For example, in Italy the bureaucracy supposed to control people pay taxes doesn’t work well. In fact Italy is the country in Europe and Northern America with the higher tax evasion. An efficient bureaucracy is one of the best indicator of economic growth. The bureaucracy efficiency depends on: - Rule enforcement - Culture and institutional trust - Bureaucratic organization (Kafka) - Logistics and support - Motivations level of punishment - Economic resources available - Political dimension of bureaucracy you hire people that will help you to win election. Because every party needs the bureaucracy support. People that can thank the party to have a job. They are not hired in order of their skills in applying laws but in order to their loyalty. And this is difficult to change. E) ROLE AND FUNCTIONING OF INSTITUTIONS Most important institutions:  Financial system can be based on banks, stockage change market, private individual own, etc.  Social protection (welfare state) pensions, health care, support for people unemployed, education, etc.  Skills formation and education how you draft young people in order to provide them with skills that can be used in an efficient way in the labor market. The growth of an economic system depend on the possibility of the companies to hire skilled people to work. 14  Industrial relations/ trade union-employers’ relationships it’s important to understand how those representatives of workers and those representative of employers find an agreement. The risk is being in conflict. The alternative is that trade unions claim strikes and stop the production that causes and industrial conflict. Basic point in comparative political economy: there is not a capitalism but capitalisms many different types of capitalism (or socialisms). Variety of ways of doing capitalism that depends on how these institutions work. For example, Italy has a different type of capitalism from Russia or UK, etc. 2 kind of methodologies to study these issues: 1) Qualitative (comparative historical) methodology; 2) Quantitative methodology (databases) comparative and historical data time-series). We have a different databases: statista, world bank (useful to study state capacity and bureaucracy), international trade center, OECD data, Eurostat, WTO, world values survey (useful if I want to study the relationship between values + culture + economic growth and make large comparison around the world). 1) Socio-economic explanation in voters: 14 If we want to measure the economic growth of a country, we have to see the average level of education especially of the young people. And also how the type of education fixes with the economic structure. 6 - Radical right: unskilled and skilled manual older workers15 (when they were the first voter of left), farmers and rural areas, older people. Part of the explanation is the welfare state (social protection) - Centre-left wing: high educated middle and upper classes in urban areas. 2) Socio-cultural explanation (diversity and identity, migration and religion). The level of education is the best predictor of what people think. 3) Labor market polarized high educated jobs + low skilled jobs. 15 Too young to loose job and too old to find another one. 7 All of these risks are called “old social risks” any society has faced these social risks. New social risks how societies changed in thirty years: - Care and reconciliation more women in the job market. Before there was the male breadwinner model (the family relied only in the husband salary) and women stayed at home taking care of children, elderly people, people with disabilities. New social risk: how to balance women need and want to work and care work? - Education skills obsolescence (skills not useful in the labor market). There could be a welfare that helps people to have skills useful in the labor market and not to become unemployed. - Frail elderly you become old and disabled too (like Alzheimer). Before, there was less expectative of life so there weren’t so many sicknesses. - Technological change happened in any societies in any time but now is something we have never seen in centuries. There are many people that risk to lose their job because of their replaces or obsolesced skills. - Environment fair transition= Eu commission language that recognize that we have to stop to use carbon (but there are lots of people that work in minors). We want a better environmental policies but it includes losses of jobs.21  Record 10:34. 3 different models to provide social protection taken by the countries: 1. Residual welfare state (liberal welfare state) the state intervene just to cover some risks/worst situation and focus on the very poor. USA, partially Australia. 2. Corporatist welfare state (meritocratic) the intention is to help everybody and face to all social risks but you do it with the employment criteria. You are helped according to the job you have. Everybody is helped but the level of help is different according to the income of the job. The state provide welfare with compulsory social contribution (the state takes money from the salaries). Germany, France, partially Italy22 and Spain, central eastern European countries. 3. Universalist welfare state (citizenship/residency) it doesn’t make any discrimination on income. Everybody has the same level of income support. Everybody has access. Originally it was based only on citizenship; since the 19080s and 90s was affected by immigration (people without citizenship) so citizenship was transformed in residency to include migrants. (Progressive taxation -but it is high - to make the society more equal). Nordic countries (includes also Finland, instead Scandinavian excludes Finland). Welfare chauvinist radical right the criteria of citizenship/residency to give welfare state to the insiders. Lecture 8 – 14/03/22 Positive and negative outcomes, why do we need welfare state. 21 Book: Strangers in their own land. 22 This type of system exists only in pension but not in healthcare. 10 1. Social protection (politicians need to take care of people that risks unemployment also for their legitimation otherwise they will lose next elections). It could be seen as a way to let the population survive but also to strengthen the population23 a state need a healthy population to grow.24 2. Economic growth: education (that provide skills to use in the labor market). Depending on how welfare state works, you have consequences: 3. Social inequalities: they can increase or decrease depending on how welfare state works. What inequalities? a) Gender b) Social class c) Ethnic/migrant background.25 The welfare state costs a lot of money. Someone thinks that it could be better having lower taxation and less social contribution and let just the market work. It would be easier, instead of taxing people and then provide them income, taxing less people and companies hoping you’ll have more economic growth and therefore everybody could be happier. This counter argument is partially true but economy has to create growth and find solutions to social inequalities. So market can create growth and, at the same time, inequalities. Now the income is too polarized and the economic growth has more problems to be sustainable. But currently, striking a balance in how much you should tax and put tributes is highly debated. Who are those who fight in favor of social protection and expanding welfare state? Supporters of the welfare state: - Socialist/social democratic/centre-left parties - Trade unions - Poor people - Well-educated (but not necessary rich) people - Non profit civic society organisations - Diaspora/war veterans organisations Antagonists of the welfare state: - Conservative and (far) right wing parties - (Big) Business (companies)26 - Rich people - Conservative think tanks. 23 For instance, those who study public health care say that it started in the 19 th century when kingdoms realized that a healthy military force was the first thing you needed to win a war. 24 Example: fertility rates= if you have an aging population, you can’t grow. So the welfare state provide money and services to allow people to have children. 25 Usually you can find social protection through taxes and social contribution. People are entitled to receive support according to their social contribution. It’s a kind of hierarchically system within the core person is one receiving support and the others (wives, children, etc., that are linked to the core person). It’s different from the social support based on taxation with which everyone contribute (and not based on if a person work and which kind of job has). 26 In Germany they support Angela Merkel in family policies because half of workers are women and they couldn’t agree to the fact that they leave their job to take care of children. At the same time, the future of the country is based on children. So the conservative parties support an higher taxation if the states provide families to allow women to have high skilled jobs and more babies. 11 If you come from a Marxist state, the welfare state is another form of classist trouble. On one hand you have capitalists that try not to spend money for people and on the other hand workers and their representative (trade unions). Capitalists are supported by right wing parties instead workers by socialist/left wing parties and trade unions. This idea of is partially correct in North America, Anglo-Saxon countries and Western Europe until the 1980s. From the 1990s is not totally correct. But even before the 1980s was complicated: of course trade unions and left-wing parties were in favor of expanding welfare state but sometimes companies and conservative parties might be interested in expanding the welfare state like in Germany, France and Sweden. In these countries, the expansion of welfare state wasn’t a fight between right and left but a collaboration because: - Also rich people become older so they need pensions; - Also rich people could be sick and they need insurance and the public one is cheaper than the private one. LIFE RISKS VS EMPLOYMENT-RELATED RISKS A) Life risks things can affect everybody (rich and poor). When these things happen, is better being in the larger group where there is a such redistribution of support. In lot of societies, an increasing number of people is asking for health care by the state. We might have also conservative parties and not only socio-democratic parties asking for pensions. B) Employment-related risks - The risk to become unemployed most of all for low skilled people, women, migrants. Here there is the difference between left and right wing. - Having a job with a very low salary - Not to be able to find a new job in absence of the right skills. It is a distributed risk because currently, in every country, you can have the probability to become poor. Otto Von Bismark (a conservative Prussian) introduced public pensions for everyone in Germany for several reasons: one of them, the risk of becoming poor when you are old or sick (risk that paradoxically affords more rich people because they are used to live in better conditions). Currently: - Every party wants the more coverage of life risks - The distinction between left and right is in employment-related risks/ social housing-related risks (not having a house is a group of a group of people in society).27 Usually, until the 1990s there was a huge expansion of the welfare state in many European and Anglo- Saxon countries and there was a big debate on what is called “welfare state retreatment”. Ronald Reagan in the USA firstly started to say: capitalist countries can’t afford so costly welfare state a need to retreat and cut it. But politicians are very careful to cut on traditional welfare state programs (pensions and health care) because they can loose voters. If you want to cut you have to find complicated strategies not so explicit. For example: decentralization of welfare state to the regions/local government and then you cut the transfers to the national government to the local ones. The region is the responsible of the quality of the health care. It is called blame-avoidance. 27 It’s hard to find a conservative party if favor of public social housing programs because their electorates are all house-owners. 12 For gender the situation is quite different and more complicated. The biggest problem for women, is fighting gender stereotypes of families and teachers. Different kind of stereotypes: - Women don’t need to study; - Women are better in certain tasks (especially in humanities studies). 4. Social inclusion increasing diversity in society. High risk to drop out (=not finish school). So education is interrelated to social inclusion (linked to the welfare state). Groups and individuals live the risk of social exclusion for different situations: disability, integration, etc. Lecture 10 – 16/03/2022 Education: long-term factor influencing long-term growth. Workers are more productive because more acknowledged. During the 20th the gap of education was reduced between Italy, Spain, Ukraine, Russia (where a big part of the population was not acknowledged) and USA where there was a minimum level of education. TRADE UNIONS AND EMPLOY ASSOCIATIONS XX century and party of XXI century 4 key actors: 1. Governments 2. Political parties (R;L) 3. Employer associations (+ corporations -such as multinationals) 4. Trade unions - Especially after WWII, in many countries a lot of economic and social decisions made by governments were made in agreement with employer associations and trade unions= NEOCORPORATIVISM/MACRO-CORPORATIVISM decision made together formally shared. Medium role of the government; strong role of trade unions and employers associations. Why this approach? Cohesion and integration. After WWII, there were strong trade unions. The majority of workers joined trade unions so they had lot of power. Tripartite agreement= FORDIST FACT. At the national level, trade unions promised to limit strikes (collaboration with the enterprises); employers accepted higher taxation to have a better welfare state; the state promised to invest more. Nobody could exaggerated in its demand. (09:48). The state had to balance these opposed interests. Disadvantages/problem of representation: - Fragmentation (in representatives of employers and workers and also in their categories internally)29 - Representation. Not respecting completely voters. Partially delegating power to bodies that are outside the idea of liberal democracy works. The party I vote (so its idea also and platform) has to bargain with trade unions so my right is. Weakening the main principles of liberal democracy my vote counts less. 29 Example in Italy, employers want to profit exporting abroad. But there are many other employers that base their profit internally. If you want to strengthen export, you have to reduce producing costs to be more competitive in the global market interest in not let the salaries grow. 15 Neo-corporativism is just one of the models to run the market in a liberal democracy. The opposite of Neo-corporativism: - PLURALISM in USA you have lobbies. 10:20. Competition not only in parties but also in… the government takes responsibility of a decision after having listened all the lobbies and having being pressured by them. Lobbies try to influence senators. When you have neo-corporativism but you have fragmentation, the solutions could be: - SECTORAL/MESO CORPORATISM Germany and Sweden. National decision that applies with all economic sectors. A light version of corporativism. The last model: - “GOVERNMENT BY DECREE” or INTERVENTIONISM the government itself runs itself without listening too much employers and trade unions. By decree = by law the government decides. The government intervenes a lot directly in economy. 4 main types of government in liberal democracy: 1. Neo-corporativism; 2. Pluralism; 3. Sectoral corporativism; 4. Interventionism. In 16th and 17th, employers couldn’t decide where to produce (no globalization). One thing that changed a lot comparing to 17th and 18th, in first 18th and 19th= globalization had a huge impact in these models. With globalization, not just people can move but also capitals. For lots of companies, was easier produce in Albania, Romania, etc. (re-industrialization of Eastern Europe) instead of rise salaries. It’s not the end of industrialization in Northern Europe and North America (only partially). It’s easier to share basic production but for high skills in technologies is harder to replace in other countries because it’s difficult to find high skilled people, professional workers. The old issue of representation is changing. Lecture 11 – 21/03/22 TRADE UNIONS AND EMPLOYER ASSOCIATIONS EMPLOYER A EMPLOYER B 1. Direct interaction/bargaining between A and B 2. Collective bargaining between employer A and all employees in company (including employe B) 3. The state defines some of the basic salaries and working conditions Many differences in Europe: - Nordic countries where we usually have lots of collective bargaining, strong trade unions and employer associations. - Continental Europe (such as Germany, Austria) where you have sectoral bargaining, government by decree (like in France). - In USA individual bargaining Why in certain countries you have a model and in other countries other models? 16 1. Culture Anglo-Saxon countries like USA = liberal cultural where free market enterprise means individual bargaining. Also in Central East Europe when, with the decline of socialism, there was skepticism of everything was collective. 2. Strength of trade union and left - wing parties how many employees or workers decide to become a member of a trade union. Usually trade unions have left-wing parties as partners. So, more people vote a left-wing parties, there are more possibilities that those people become members of trade unions. If you are a member of a trade unions, more likely you have a strong collective bargaining. 3. Fragmentation of trade unions and left-wing parties in many countries you have just one trade union that could be stronger and put more pressure on employers. There is a new phenomenon in lots countries: fake trade unions are created in order to help employers to bargaining.30 4. Globalization and technological innovation are changing the change of having collective bargaining. If you live in a country where employers can just produce when they are, they are forced to sign bargaining with trade unions and employees. But, if it is possible for a company to move the production somewhere else, then trade unions’ strengths decrease. 5. The type of skills employers need if you are an employer and you need skilled workers, you are the first one interested in collective bargaining to attract workers and improve their working conditions. If you use low skilled workers, you are not interested in collective bargaining because the collective bargaining usually increase salaries and improve workers’ conditions. You want to pay them as few as possible. 6. Authoritarian regimes if you live in a democracy you have bargaining: you can organize strike against enterprise, you can vote parties that could put pressure on employers. But if you live in an authoritarian regime, employers have the support of the regime, so you don’t have trade unions or free trade unions.31 Trade unions were stronger in the Western Europe in the 60s – 70s (when industrialization was strong and more people worked in manufacturing and manufacturing was national) and there were different collective bargaining. But from 1980s and 1990s, at the end of Fordism, the situation changed for several reasons. Fordist economy: A) Based on large manufacturing companies B) Firms were vertically integrated different productive stages are previously carried out by different firms C) Firms were committed to mass production production of standardized goods through special- purpose machines32. This allowed them to lower their costs. D) It needs semi-skilled labor, highly fragmented. Work divided into simple and repetitive tasks, limiting workers’ autonomy. E) Small organizations used by larger ones to cover cyclical variations in demand. F) Fordism has to be considered as an ideal type that in real economies shared the market with other differently organized sectors – or parts of the same sector- and with a large number of small and medium-sized enterprises run on a traditional basis (personal entrepreneurship, machines used for multiple products, non-Taylorist organization of labor, or more skilled labor). 30 For example, it is compulsory for employers sign a bargaining but it is not explicit with who. So fake trade unions are created to sign these bargaining only in favor of employers. 31 For example, during fascism in Italy there were fake trade unions and whatever they bargained with the enterprise was decided by the regime that was working together with the enterprise. 32 Machineries that cut iron and steel. 17 Lecture 12 – 22/03/22 Globalization and diversity of capitalism Fordism: was successful from the 1950s to the 1970s/80s. was based on a mechanism of growth quite simple: Taylorist manufacturing mass production + mass consumption an increase in demand for taylorist manufacturing. A kind of virtue circle. Then, in 1970-1980s there is the crisis of Taylorism and we have 6 different models to organize economy and to take over Taylorism. 2 main ways producing economic growth: 1. LME Liberal market economy  high general skills’ in education + stocks + individual bargaining + low social protection + market as the way companies have relationship each other they go to radical innovation/change (USA=ideal type). 2. CME coordinate market economy  specific skills’ + banks + collective bargaining + high social protection + networks incremental innovation/change (Germany and Sweden). These are 2 kind of capitalism. Both models have strengths and weaknesses. How can we grow? - Innovation (enterprise innovation) how different countries try to innovate their economies? How to foster innovation how reducing the cost for who loose. In innovation there is destruction. 09:26. What kind of innovation we need:  Technology  Organization of innovation (how you organize workers to make them more productive)  Education – skills’ formation (capacity building)  Marketing innovation 2 kind of innovation: 1. Radical innovation Tesla, telecommunication and informatic in a given country you create a new product/service that it cannot exist before. You create something totally new. You need something more in order to introduce radical innovation. USA is the example of economic growth through radical innovation. 2. Incremental innovation: gradual change (as car industry). In any country you have incremental innovation. (Germany, Italy, France when they find a good economic sector that grows they increment this sector). A) Countries developing radical innovation need specific and different institutions than countries developing incremental innovation (institutions= a set of rules). B) Five types of institutions for economic growth and innovation: 1. Skills’ formation and education: (specific skills VS high general skills). For radical innovation you need high general skills because in this way you can be flexible and invent something new. Instead, if a country has specific skills’ education systems usually they have an incremental innovation. 2. Funding: how find money to work. 2 different systems: A. Banking system  you remain the owner but you have debts. banks are useful for incremental innovation because they work is a very radical way. Banks work in a very simple way: people put money in banks because they trust that banks manage them in a careful way. B. Join ventures/venture capital/stock markets (Wall Street) you share the ownership of your company in order to attract funding. There are companies specialized in providing you 20 resources to lunch your company. It is better for radical innovation. These companies calculate also the possibility that some funding could be lost. 3. Social protection: 3 different models: a) Light residual public social protection b) Social democratic/universalist or corporatist social protection. Providing protection is costly. So we have: - Countries with institutions that prescribe social protection - Countries 10:23. In this case is difficult to know what is better for radical or incremental innovation. 4. The relationship between employees and employers. 2 models: - Individual bargaining direct negotiation for salaries and working conditions between an employer and his/her employee. More useful for radical innovation you decide which are the workers who fit best for your ideas. The bad side is that, if for some reason (crisis or you are not so good) you lose the job you’re out. - Collective bargaining you have on one hand an association of enterprise or an enterprise and on the other hand a trade union. Here you have incremental innovation but you have always someone who protects you. Trade unions have to accept the companies’ goals. For example in Germany in very big companies there are bodies made up of representatives of workers and representative of entrepreneurs who co-decide strategies for the developing of the company. 5. The relationship between companies work. Different models: - Networks stable relationship between organizations. Independent companies have long-term contracts and relationships. In this case is more difficult change partners even if in the short term better occasion come up (for example a company offers the same thing in a lower price). Better for incremental innovation. - Markets short-term efficiency criteria for guiding contractual relationship. I have contract with who offers the best quality in the lower price. It is better for radical innovation. Another important institution is: 6. Military expenditure  strong relationship between scientific new discovery and how much money you spend in military expenditure (military innovation). These military discoveries turn into civic discoveries. For example, the original idea of a net comes from the strategy on how communicate faster for a missile defense in case of a Soviet nuclear attack. So the Minister of Defense started to spend more in military expenditure. Indirect spin over effect of military expenditure. 21 Lecture 13 – 23/03/22 VARIETIES OF CAPITALISM BUREAUCRACY – THE STATE 1. What about the rest of Europe and the world? 2. Bureaucracy – the state? 3. Trends Studying varieties of capitalism Bureaucracy more or less efficient. The role of the state in economy and social protection is very important. - In CMEs (Germany and Sweden): strong role of the state in the economy and social protection. - In LMEs (USA): weak state role in economy and social protection but strong in military. The big research questions: after WWII we have to varieties of capitalism (CME and LME), is it possible have one single capitalism? IS it possible a convergence of them? A. Convergence: neo-liberal trend around the world (including CMEs). Reducing of collective bargaining vs increase of individual bargaining; improve of high general skills; cut the welfare state; companies have started to build worldwide business contracts. Many countries started to change their regulations; for example, in Italy there was the moving from open-ended contracts to fix-term contracts. So two issues in the convergence: - Flexibility in the labor market possibility for the companies to dismiss workers or sign short term contracts. - Replacement of long local partners to other new ones that are cheaper. - Reducing of importance of collective bargaining, especially in Italy and Germany. For example, in Italy FIAT decided to need no more the action of the major Italian employee associations (created by FIAT) - Limitations in social protection. OECD reports on pensions. Until the 1990s: higher pensions and higher coverage of people in pension. From the 1990s reduce generosity of pensions and increase the number of average of people in pension. B. Is it really so? (another system) still two models (or 3). - Germany: one of the most big transformation. You cannot define Germany in a liberal economy. It’s a DUALISATION/DUALISED ECONOMY not a liberalization of the whole economy: in some segments liberalization, in other ones CME is maintained. In every society there are:  Strong economic sectors: high productivity medium-high tech manufacturing; finance; research; energy transformation. Here workers have better conditions. Here there are insiders.  Weak economic sectors: low productivity (the prices) agriculture (you need lot of work); forestry; tourism; trade/commerce; personal services (cleaning). Germany liberalized this part of the economy: low salaries; fixed-term contracts; no collective bargaining. Here there are outsiders. A dualization economy depends also on demographic and cultural characteristics of society. For example, is more probable to find women in tourism, trade/commers and personal services sectors, as the migrants. INFLATION the reason to dualize. Inflation= higher prices of goods. You pay more for exactly for the same good from a year to another. Countries are really careful to take inflation down. Energy and products costs + salaries. But inflation comes mostly from salaries when 22 Lecture 16 – 30/03/22 Higher transaction costs affect economic 0. High transaction cost (the companies have not enough money to hire workers or to buy other companies= no business exchange) the worst situation. 1. Vertical organization (09:23-34) usually are Fordist organization, corporation. Takes place if you have high transaction costs + money to pay for hiring workers, buying technologies, etc. Medium/low control costs. 2. Network organization long-term contracts/ or relational (long-stand relationship)+ medium transaction costs. 3. Market organization you have relatively small countries + subcontracts with lot of different organization. Usually there are low transaction costs. Short term-contracts. You have you logo but all the components come from other companies. (Medium/high control costs) Usually companies prefer market organization: it’s better write contracts with other companies instead of hiring more people. Transaction costs= costs related to an economic exchange excluded production costs. They can have high, low or medium level. The level of transaction costs is determined by: - Asymmetry of information; - Small numbers (few buyers and a lor of producers and viceversa) - Frequency of the exchange Administrative costs= costs relates to workers’ control. Having people paid in your company that check upon others. From the perspective of the employer, also the action of trade unions is a cost. Control costs: - Ex-ante control costs= the whole process of hiring workers (filter costs); - Process controls= somebody supervising who works and produces; - Labor judgments and courts= if you want to dismiss a worker, the courts decides if you can fire the worker; if you have to reintegrate him/her; you can fire but you have to pay and insurance. So you need to pay a layer. Theory criticized by political sociologists. We have to relate it to 2 concepts: - Role of institutions a) State regulation: how much the state intervenes to support companies + how well the judicial system works. How complex or simple is the labor law. b) Reconciliation policies for working mothers work c) Financial institutions - Social capital social and institutional trust + social networks. Migratory chains people coming from a specific city and not just a specific country. You have higher control costs only for the first person you hire from a given ethnic community. Transaction costs has to be integrated with the impact of social networks. Business groups are made of formally independent companies but they share personal social networks or institutional social networks (example FIAT34). Lecture 17 – 04/04/22 34 Agnelli family is the owner of a bank. 25 Softening industrial relations institutions hardening growth model: 1. The transformation of German political economy - The process of Fundamental Liberalization, the transformation from wage-led to profit-led economy “Can Germany shift represent a model for other countries?” - The weakening of Industrial relations Institutions and the organizational crisis of trade unions (historical perspective). “Is this change socially desirable?” The heterodox approach= alternative to NAIRU (classic model of German economy) Non – inflation – accelerating rate of unemployment. - NAIRU= strength of organized labor with coordinated wage bargaining wage moderation and price stability. Classic model of German economy - Unemployment rate: from supply side to aggregate demand - Functional income distribution between wages and profits Wage led (based more on domestic and private consumption) vs profit led economy The growing relevance of export - The different impact on GDP - Germany as an exception - Importance of investments and exports for profit-led economy. Nowadays Germany is shifting from a wage-led economy to a profit-led economy. For this author, the answer to the question if Germany could be a leading model, is no. Importance of profit share and exports for Germany - Positive impact of profit share in German GDP - Negative impact of profit share in French and Italian GDP The core point in this approach: countries can grow with: - Export - Internal demand government expenditure + investments + consumption. Usually, a part of China and Germany, most rich economies grow through internal demand, instead if you are poor economies, usually grow through export because they don’t have a strong market. China= example of a large country is starting growing with internal demand because more Chinese are becoming richer. Germany, until 90s was growing through internal demand. Instead, during the last 25 years, is starting to grow with also export. You tend to create an economy more based to move capital toward profit keeping salaries low. Wage-labor allow people to use salary to consumption. The erosion of German industrial relations: a) The German model as it once was: 26 - Traditional accounts of the German model of production emphasized the beneficial constrains of vocational training and industrial relations institutions. - The system of pattern bargaining ensured that the benefits of high productivity in manufacturing spread across sectors: oriented its bargaining goals towards the productivity b) The liberalization process Focus on: Differences between service and manufacturing. 27