The Role of Interests, Institutions, and Ideas in the Comparative Political Economy of the Industrialized Nations PDF

THE ROLE OF INTERESTS, INSTITUTIONS, AND IDEAS 175 past century but, by and large, political economy has been disting...

THE ROLE OF INTERESTS, INSTITUTIONS, AND IDEAS 175 past century but, by and large, political economy has been distinguished from IJ:I, 7 economics by a profound interest in three kinds of issues. First, political economists have been especially concerned about issues of I power. They are inclined to ask: Whose interests are being served by any given set of economic arrangements and how do the latter distribute power and re- l sources across social groups? Reflected in chis stance is a salutary skepticism about the distributive efficiency of markets that has long distinguished political , - economy from neoclassical economics, which tends to celebrate the Pareto-opti- mality of market mechanisms. THE ROLE OF INTERESTS, Second, political economists have traditionally evinced a strong interest in the institutional arrangements that underpin the operation of market mecha- INSTITUTIONS, AND IDEAS nisms. In some cases, chis inspires chem to study variation in the institutional structure of markets across nations, sectors, or time. In ochers, it leads chem co IN THE COMPARATIVE emphasize the degree co which the operation of markets is affected by nonmar- I ket institutions, including both the state and ocher sorts of social relationships. I POLITICAL ECONOMY OF THE Third, one of the long-standing strengths of political economy lies in its in- sistence that even our most basic conceptions of the economy are ultimately ar- II I! INDUSTRIALIZED NATIONS* tificial constructs, devised to model something that cannot be perceived by the naked eye. Accordingly, many political economises ask: Where do these concep- Peter A. Hall tions come from and how do they become influential? They often question what , others see as the "constraints" facing governments or the "iron laws" of econom- ics and tend co emphasize the primacy of politics in situations chat might other- wise seem co be socioeconomically determined. Such concerns are reflected in work as early as that of Adam Smith, who , wrote The Theory of Moral Sentiments alongside The Wealth of Nations. They ani- 1:i " he field of political economy was born in the late eighteenth century when mate the arguments of Karl Marx and his followers about the distributive effects Ii I T scholars such as Adam Smith began co ask how nations prosper and what_ 1 kind of policies ensure their wealth. It is surely not coincidental that the incep- of capitalist markets and the power relations underlying them (cf. Kalecki 1943). In more recent decades, they form the basis for Karl Polanyi's (1946) magisterial I tion of the field coincides with the birth of the modem state and industrial cap- analysis of the relationship between markets, states, and social institutions and I, ' Joseph Schumpeter's (1947) rumination about the effectiveness of capitalism and italism. The state and the market represent rwo different ways of organizing human endeavor, and the relationship between them has always been one of the ',democracy.Andrew Shonfield (1969) pursued similar questions in his influential central themes of political economy. investigation of the social and political conditions that underpin different vari- Ii I Initially the field was coterminous with the study of economics but, when eties of capitalism. 1,' ,, the marginalise revolution transformed economics into a discipline of its own, In the years since these scholars wrote, the body of work that examines the increasingly focused on the elaboration of neoclassical models of the economy, \ comparative political economy of the industrialized nations has grown subscan- it fell to political economists to inquire more deeply into the relationship be- tial!y.2 Like many fields of comparative politics, it encompasses analysts who ap- tween politics and economics. That inquiry has taken many turns over the· proach the world from somewhat different perspectives and, in keeping with the themes of the volume, the object of this essay is co compare several of these per- ,speccives, stressing the distinctiveness of chose that attach special importance co *While absolving them of responsibility for any of its contents, I am grateful to Barbara Geddes, Ron Rogowski, Sven Steinmo, Rosemary C. R. Taylor, the other contributors to this volume, and espe- 2Only a small portion of the literature can be discussed here since a full review of the field would re- cially to Mark Llchbach and Alan Zuckerman for comments on earlier versions of this chapter. I would also like to thank David Soskice and the Wissenschafuzentru.m in Berlin for providing a hospitable and stim- qui.re a volume in itself. Beci.use my object is to consider the way in which institutions, interests, and ideas ulating setting for its completion. ;- figure in contemporary analysis, I can touch on only a few of the many subscantial works in the field. For 1 For broader reviews, see Blaug (1983); Caldwell (1982); Roll (1956); and Staniland (1985). other reviews, see Staniland (1985) and Hall (1998). l 7-l [': 176 THEORY DEVELOPMENT IN COMPARATIVE POLITICS THE ROLE OF INTERESTS, INSTITUTIONS, AND IDEAS 177 interests, institutions, or ideas in the analysis of the political economy. In broad Building on earlier work by scholars like Schattschneider (1935), Ger- terms at least, this division reflects the three primordial questions that animate schenkron (1943), and Moore (1966), the pioneers of this approach were Goure- the field. vitch (1977, 1986), Kurth (1979), and Ferguson (1984), who argued that subsets Of course, the approaches considered here are not ironclad divisions: Some of producers in the economy were positioned quite differently relative to the in- scholars have written from more than one of them; and interests, institutions, and ternational and domestic economies and thus would have quite different interests ideas figure to some degree in all analyses of the political economy. However, chis in policies bearing on tariff levels, the stimulation of domestic demand, and the categorization is useful for illuminating some of the principal lines of inquiry in like. Moreover, these interests would shift as conditions in the international econ- the field and the issues they confront. I begin by discussing a number of works omy change or firms move into later stages of their product cycle, allowing tbat exemplify each approach with a view to revealing the insights and dilemmas politicians, operating as entrepreneurs, to put together new coalitions behind inherent in them. Then, I ask how the approaches mesh with one other, consid- particular mixtures of policy. ering both the potential for drawing more integrated insighrs from them and It should be apparent tbat the definition of the actors in these analyses usu- some differences in methodological perspective that limit the potential for full. ally follows from a more ·general theory specifying their material interests and, integration. I conclude by examining some of the developments talcing place at more precisely, how a particular kind of economic policy affects the material in- the boundaries between these schools of thought and the challenges the field as terests of groups that are differently positioned within the economy. This is a a whole confronts. process nicely described by Gourevitch (1989) as "the political sociology of po- litical economy." Subsequent work in this vein has concentrated on specifying more formally INTEREST-BASED APPROACHES TO the general theory from which the interests of producers are to be derived. Ro- POLITICAL ECONOMY gowski (1989) does so by applying a Sarnuelson-Stolper model of comparative advantage co argue that shifts in the terms of trade of a nation, of the sort gener- Interest-based approaches characterize some of the most important literature in ated by falling transport· costs or a new tariff regime, shifr the interesrs and (more the field of comparative political economy. Interests, understood as the real, ma- ambiguously) the power of large groups defined as laborers, owners of capital, terial interests of the principal actors, whether conceived as individuals or as and landowners, thereby making new coalitions possible. As cransporcation costs groups, figure in all of the work in the field. But they assume particular imper-· fell in the late nineteenth century, for instance, labor and capital in Britain ranee in two bodies of literature. gained comparative advantage on international markets and so were likely to The first of these are analyses tbat focus on "producer group coalitions." By:, form a powerful political coalition in favor of free trade against landowners, who and large, its contributors concentrate on explaining variation over time ~9-, lost comparative advantage and favored protection. Rogowski claims to be able across nations in patterns of economic policy. Their unit of analysis is usually the to explain tariff policy, the character of political coalitions, and associated regime nation-state, and the central actors are producer groups. In general, such aC-:- changes with this sort of analysis. In large measure, his is a class-oriented analy- counrs suggest that we can explain the trajectory of economic policy (and some