Varieties of capitalism in light of the euro crisis

ABSTRACT

This article examines the implications of the euro crisis for theories of political economy associated with ‘varieties of capitalism’, considering how those theories help explain the origins of the crisis and how developments during it mandate revisions in such theories. Efforts to understand the crisis have extended these theories in four directions. They have inspired an emerging literature on growth models that integrates the demand side of the economy into theories once oriented to its supply side. They have led to more intensive investigation of the political economies of East Central Europe and Southern Europe. The crisis has drawn attention to the international dimensions of varieties of capitalism and to problems of adjustment, injecting an element of dynamism into varieties of capitalism analyses and underlining that adjustment is a political as well as an economic problem.

KEYWORDS:

• Adjustment
• capitalism
• crisis
• euro
• macroeconomic
• varieties

Acknowledgements

For comments on earlier versions of this article, I am grateful to Dorothee Bohle, Martin Höpner, Torben Iversen, Vytautas Kuokstis, Gary Marks, Waltraud Schelkle, David Soskice, Mark Thatcher and two insightful reviewers.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Peter A. Hall is Krupp Foundation Professor of European Studies at Harvard University.

Notes

1 Other works often use the term ‘mixed market economies’ to describe these political economies.

2 Note that this tendency does not preclude episodes of fiscal expansion at some moments in time, for instance, in response to German reunification or in the immediate aftermath of the 2008–2009 financial crisis; and, as Baccaro and Pontusson (2016) note, institutional structures and macroeconomic policies may not always be tightly coupled. They argue, for instance, that there is more room for expansionary fiscal policy when the price elasticity of demand for exports is low.

3 Needless to say, there are some important differences among these countries not discussed here; and I leave aside the case of France, although it now bears a strong resemblance to the MMEs of Southern Europe.

4 Note that there are exceptions to this rule, as when the Thatcher government took an austere policy stance in the UK during the 1980s in order to weaken the trade union movement.

5 The notable exception is Italy, where growth has been stagnant for more than a decade.

6 It should be noted that this liberal export model did not preclude a serious social pact in Ireland or neocorporatist arrangements in Slovenia (Bohle and Greskovits 2012; Regan 2012).

7 There is a parallel symbiosis between the liberal American economy and the mercantilist policies of some emerging market economies such as that of China.