Professional Documents
Culture Documents
Political Economy
Why have neo-liberal economic ideas been so resilient since the 1980s,
despite major intellectual challenges, crippling financial and political
crises, and failure to deliver on their promises? Why do they repeatedly
return, not only to survive but to thrive? This groundbreaking book proposes five lines of analysis to explain the dynamics of both continuity and
change in neo-liberal ideas: the flexibility of neo-liberalisms core principles; the gaps between neo-liberal rhetoric and reality; the strength of
neo-liberal discourse in debates; the power of interests in the strategic use
of ideas; and the force of institutions in the embedding of neo-liberal ideas.
The books highly distinguished group of authors shows how these possible
explanations apply across the most important domains: fiscal policy; the
role of the state; welfare and labour markets; regulation of competition and
financial markets; management of the euro; and corporate governance
in the European Union and across European countries.
vivien a. schmidt is Jean Monnet Professor of European Integration
and Professor of International Relations and Political Science at Boston
University, and Founding Director of Boston Universitys Center for the
Study of Europe.
mark thatcher is Professor in Comparative and International Politics
in the Department of Government at the London School of Economics
and Political Science.
J. H. H. Weiler
European Identity edited by Jeffrey T. Checkel and Peter J. Katzenstein
Resilient Liberalism
in Europes Political
Economy
Edited by
vivien a. schmidt
AND
mark thatcher
Contents
List of figures
List of tables
page vii
viii
List of contributors
ix
Preface
xv
53
77
112
145
171
Contents
vi
201
226
257
289
313
346
374
Part IV Conclusion
14 Conclusion: Explaining the resilience of
neo-liberalism and possible pathways out
mark thatcher and vivien a. schmidt
403
Index
432
Figures
vii
Tables
viii
Contributors
ix
List of contributors
List of contributors
xi
Daniel Mugge
is a political economist in the Political Science Department at the University of Amsterdam. His research focuses on financial regulation and governance. In the EU-funded GR:EEN project on
Europes role in the world (20112015), he leads the work on finance.
In 2009, his dissertation was awarded the Jean Blondel prize for best
European political science thesis of the year. Daniel spent the first half
of 2012 at the Center for European Studies at Harvard University,
where he also wrote his chapter for this edited volume.
Mitchell A. Orenstein is Professor and Chair of the Department of
Political Science at Northeastern University in Boston. Professor Orenstein is a scholar of international politics focusing on political economy of transition in Central and Eastern Europe, pension privatization
worldwide, and the role of policy paradigms in economic reform. His
book Privatizing Pensions: The Transnational Campaign for Social
Security Reform won the 2009 Charles H. Levine Prize of the International Political Science Association for the best book in comparative public policy and administration. He is also the author of Out
of the Red: Building Capitalism and Democracy in Postcommunist
Europe.
Vivien A. Schmidt is Jean Monnet Chair of European Integration,
Professor of International Relations and Political Science at Boston
University, and founding director of BUs Center for the Study of
Europe. She has published widely on European political economy,
institutions, and democracy as well as institutional theory, with books
including Democratizing France (1990), From State to Market? (1996),
Welfare and Work in the Open Economy (co-edited with F. Scharpf,
2000), The Futures of European Capitalism (2002). Policy Change and
Discourse (co-edited with C. Radaelli 2005), Democracy in Europe
(2006), and Debating Political Identity and Legitimacy in the European Union (co-edited with S. Lucarelli and F. Cerutti 2011). In 2008
she received an honorary doctorate from the Free University of Brussels
(ULB). She is also past head of the European Union Studies Association
(EUSA).
xii
List of contributors
List of contributors
xiii
Preface
xvi
Preface
Preface
xvii
Thus, our central question is as follows: Why have neo-liberal economic ideas been so seemingly resilient in policy debates and political discourse despite powerful intellectual challenges, major economic
crises, apparent failure, and political turmoil? By resilience, we mean
the continuity of neo-liberalism over time, its dominance over competitors, and its survival against powerful challenges and rivals. To
explain this resilience, we propose five lines of analysis: first, that
neo-liberalisms tremendous ideational diversity and adaptability have
enabled it to resist challenges; second, that neo-liberal ideas have
remained dominant in policy debates despite or even because of a lack
of implementation; third, that neo-liberal ideas have been stronger in
policy debates and political discourse than their competitors; fourth,
that powerful interests have promoted neo-liberalism for their own
purposes; and fifth, that neo-liberal ideas have become so institutionally embedded that they preclude alternatives. These analyses provide a
starting point for considering whether neo-liberalisms resilience is due
to its continuous (re)invention, its constant (re)turn to past rhetoric, its
(re)framing of ideas and discourse, its (re)conceptualization of interest,
or its (re)shaping of institutional arrangements and (re)distribution of
power.
To probe these lines of analysis, the book examines a full panoply
of neo-liberal ideas from general philosophical principles, ideologies,
and paradigms to specific legal norms, regulatory models, policy programmes, and political discourse. It explores how, why, and by whom
they came to be generated, disseminated, and maintained both within
national political economies in Europe and in the EU across a wide
range of domains.
The first chapter defines neo-liberalism, traces its intellectual roots,
and theorizes about neo-liberal ideas as objects of explanation. It then
introduces five lines of analysis that can explain its resilience, illustrated
by examples from the contributors chapters in the remainder of the
book. Contributors use whichever of the five lines of analysis they find
appropriate to assess their own particular cases.
The chapters in Part I explore transversal issues. With regard to the
recurring economic philosophies at the core of neo-liberalism, Andrew
Gamble considers the ways in which the metaphor of the household
economy has been repeatedly applied to the finances of the state to
justify sound money and balanced budgets. Regarding the welfare
state, Maurizio Ferrera explores how neo-liberalism has followed a
xviii
Preface
virtually the only ideas in play but that neo-liberals are themselves
divided between laissez-faire resistance to regulatory rules and promarket enhancement through strong rules even through the current
economic crisis. In the reform of the labour markets, Cathie Jo Martin
shows that although neo-liberal ideas dominate, with the conceptualization of similar active labour-market policies across European
countries, their application is differs substantially due to different
national ideational and institutional configurations, as in the cases
of the United Kingdom and Denmark. In corporate governance, Sigurt Vitols charts a similar predominance of neo-liberal ideas via the
shareholder model, which judges corporate performance according to
shareholder value alone but, in this case, despite an alternative model
focused on stakeholder value.
The chapters in Part III provide more deeply contextualized analyses
of neo-liberalism (in its many forms) through paired comparisons of
countries. They examine countries usually categorized as part of similar varieties of capitalism. For the liberal market economies of the
United Kingdom and Ireland, Colin Hay and Nicola Smith discuss how
the neo-liberal Anglo-growth model focused on financialization has
Preface
xix
xx
Preface
Preface
xxi
When Keynes wrote these lines, he certainly had in mind the influence
of the ideas of laissez-faire economic liberalism, which he held responsible for the great boom and bust of the 1920s that led to the Great
Depression of the 1930s. Today, another form of economic liberalism, neo-liberalism, has supplanted Keyness own ideas, which had
gained dominance in the postwar era. Our task, in this theoretical
essay, is to explain how and why the ideas of neo-liberal economists
and political philosophers obtained and retained their power in European policy debates and political discourse during the past three or
four decades.
We define neo-liberalism, at its essence, as involving a commitment
to certain core principles focused on market competition and a limited
state. Our purpose is to explain the resilience of these core neo-liberal
ideas, meaning their ability to endure, recur, or adapt over time; to
predominate against rivals; and to survive despite their own many
failures. We offer five lines of analysis as potential explanations for
such resilience: first, the generality, flexibility, and mutability of neoliberal ideas themselves; second, the gap between neo-liberal rhetoric
and a reality in which they are not implemented; third, their advantages
in policy debates and political discourse compared with alternatives;
fourth, the power of interested actors who strategically adopt and
1
See, for example, Larner 2000, Cerny 2008, Mudge 2008, and Evans and
Sewell 2013.
For excellent recent studies of neo-liberal policies and their institutional
impacts, see Crouch 2011, Streeck 2011, and Grant and Wilson 2012.
Conceptualizing neo-liberalism
There is no single definition of neo-liberalism beyond the agreement
that it contains a commitment to core principles involving market competition and a limited state. Thereafter there exist important debates
and differences in defining what neo-liberalism is and in describing its
origins and development.3
Sometimes neo-liberalism is portrayed mainly as a political and economic philosophy defining a set of free-marketoriented economic
principles and political economic practices promoted in its early years
by a loose agglomeration of true believers.4 At other times, it is
cast as an ideology through which the free-market discourse of the
converted (i.e., elites in academe, business, journalism, and politics)
seeks to persuade the public of the virtues of unfettered markets guaranteeing individual freedom along with material prosperity.5 In yet
other instances, it is presented as a particular approach to governance,
in which neo-liberal principles and practices are deployed to liberalize, privatize, deregulate, and rationalize existing markets.6 However,
neo-liberalism has also been portrayed as a political project promoted
by social forces to restore capitalist class power via ideas on how to
reorganize capital and the social order.7 The variety of treatments of
neo-liberalism also links to debates about its historical context because
it emerges from a broader liberal philosophical tradition with its own
internal divisions on how to balance state and market, individual liberty and collective endeavour, and economy and society.8
3
4
5
6
7
See Peck and Tickell 2002; Harvey 2005; Mudge 2008; Brenner, Peck, and
Theodore 2010; Cerny 2008; Peck 2010; Boas and Gans-Morse 2009; and
Evans and Sewell 2013.
See, for example, Mirowski and Plehwe 2009 and Gamble 2009.
See, for example, Anderson 2000 and Freeden 2005; see also discussion in
Ferrera in this volume.
For a discussion, see Steger and Roy 2010 and Peck 2010.
See Overbeek and Apeldoorn 2012: 45; Apeldoorn, Drahokoupil, and Horn
2008; Cafruny and Magnus 2003; and Jessop 2002. See also discussion in
Schmidt and Woll in this volume.
See, for example, Audier 2012a; Nemo and Petitot 2006; Miroswki and Plehwe
2009; Harvey 2005; and Foucault 2004.
See Gamble 2009: 7084 and in this volume; see also Lehmbruch 1999.
See, for example, Foucault 2004 and Ptak 2009 and the following discussion.
See Gamble, Jones, and Schmidt and Woll, all in this volume.
See Hermann 2007; Brenner, Peck, and Theodore 2010; Peck 2001; Cerny
2008; Thatcher and Stone Sweet 2002; and Coen and Thatcher 2005.
See Hay 2004.
Macroeconomic theory has been influenced by these neo-liberal approaches
which were part of the neoclassical economics offensive of the 1970s as well
as by the new Keynesians, who responded to such approaches in the 1980s.
The synthesis has come to be known as the new neo-classical synthesis or the
new consensus that defined macroeconomic orthodoxy until the economic
crisis of the late 2000s. Our thanks go to Cornel Ban for this clarification.
15
16
See Boas and Gans-Morse 2009: 156, and Peck 2010: 1315.
See Martin and Ferrera, both in this volume.
See Schmidt 2000; see also Schmidt and Woll in this volume.
See, for example, the discussion in Harvey 2005; see also Gamble and Schmidt
and Woll, both in this volume.
In the 1920s Vienna, Ludwig von Mises held seminars with regular attendees
including Friedrich von Hayek and Fritz Machlup, along with foreign scholars
such as Lionel Robbins of the United Kingdom and Frank Knight of the United
States. Note that some date the Austrian Schools neo-liberalism to the 1880s,
with Carl Menger. See Blyth 2013b.
culminating in 1938 with the Colloque Lippmann, the Paris conference centred on Walter Lippmann that brought together a wide
range of intellectual, political, and business leaders sympathetic to his
thought.20 At this time, neo-liberalism was conceptualized mainly as a
response to the failures of classical liberalism in confronting the challenges of the Great Depression as well as to the perceived dangers from
socialist planning. It retained the classical liberal definitions of individuals as motivated by self-interest and of competition as the principle
for market functioning. However, most neo-liberals rejected classical liberalisms laissez-faire approach to market regulation,21 insisting
instead on the need for a strong state able to establish general rules for
markets. This was particularly well developed in the work of Friedrich
von Hayek (1944), who rejected both laissez-faire and state planning
for industry.22 Neo-liberalism also inverted classical liberalisms basic
tenet that political liberty ensures free markets and instead argued
that economic freedom is essential for political freedom.23 This claim
was the basis of Hayeks (1944) Road to Serfdom, as well as the
main theme of Milton Friedmans (1962) Capitalism and Freedom. By
20
21
22
23
Einaudi in 1943. See Plehwe 2009 1113. Their influence was even felt in
Spain in the mid 1940s, when a prominent ordo-liberal (right-wing) economist,
Heinrich von Stackelberg, became a visiting professor at the University of
Madrid from 1943 until his death in 1946 and, as such, influenced a future
generation of economists and policy makers; see Ban 2013. The Colloque
Lippmann gathered a wide range of neo-liberal luminaries such as Rougier,
among others, along
with attendees including von Mises, Hayek, and Ropke,
with Lippmann himself. See, for example, Denord 2007: 89122, and Audier
2012.
Or, at least, their interpretation of classical liberalism as a laissez-faire
approach to the markets. In fact, liberalism had developed in many directions,
including social liberalism and new liberalism in the late nineteenth and
early twentieth centuries. See Freeden 1978.
See Gamble 1996 and in this volume; and Wapshott 2012. See also Schmidt
and Woll in this volume.
See Foucault 2004 and Tribe 2009; see also discussion in Schmidt and Woll in
this volume.
putting the economy before the polity, neo-liberals presented the markets as the neutral solution and the state as the politicized problem.24
This also enabled neo-liberalisms founding theorists to eschew traditional social ethics and instead to view competition as the moral
standard, with competitive markets serving to define merit as well as
to justify inequalities of situation, whereas notions of collective responsibility beyond a basic minimum could be perceived as interfering with
markets.25
The inception of a self-conscious intellectual (or ideological) neoliberal movement is generally traced back to the postwar period when
ideas of state intervention and centralized planning were widespread.
An especially important organization was the Mont P`elerin Society (founded in 1947), which held regular meetings of intellectuals,
academics, business people, and political figures, particularly from
Europe.26 The Mont P`elerin Society brought together, at one time or
another, the main figures of neo-liberalism, including not only the
expected figures: Austrian thinkers such as Friedrich Hayek, located
at the London School of Economics, and one of the initial organizers of the group; US economists such as Milton Friedman, leader of
the Chicago School of Economics, and James Buchanan, founder of
the Virginia School of public-choice theory; as well as neo-classical
economists. There were also German ordo-liberal thinkers such as
Alexander Rustow
and Wilhelm Ropke,
along with politicians such
See discussions in Gamble and Schmidt and Woll, both in this volume.
See Amable 2011. See also Gamble and Schmidt and Woll, both in this volume.
27
See Plehwe 2009 and Harvey 2005: 2022.
See Plehwe 2009: 56.
10
29
30
So much so that one critic insisted when Hayeks book was first published that
it was not scholarship. It is seeing hobgoblins under every bed. Hansen 1945,
cited in Peck 2010: xii.
John Ruggie (1982) used this term to describe postwar political economies that
were liberal in their commitment to markets but embedded within the
broader values of a social community.
The concept of the social-market economy owes much to the theoretical work
on ordo-liberalism and the competitive market economy of Walter Eucken
(1950), begun in the 1930s, in addition to those mentioned previously such as
See Lehmbruch 1999 and Ptak 2009; see
and Ropke.
Erhard, Armack-Muller,
also discussions by Gamble and Schmidt and Woll, both in this volume.
11
12
of other services, especially those involved in spending and redistribution. This second neo-liberal version of the role of the state is seen in
what Mark Thatcher terms supranational neo-liberalism, in which
EU regulation whether of financial or product markets is strong,
extensive, and detailed in the way it acts to ensure competition.33 It
also appears in debates on the European Central Bank (ECB) and the
euro, which are dominated by austerity, notably with regard to lowering state deficits and debt as it does across the EU member states
but in particular in Britain and Ireland, in Southern Europe, and in
Central and Eastern European countries.34
A second route has seen neo-liberal ideas being combined with rivals
to create a synthesis. In the welfare arena, Ferrera makes clear in his
chapter that (national) state reforms of the welfare state led to a new
synthesis that he characterizes as liberal neo-welfarism because neoliberal ideas are joined with principles of social justice as the basis for
welfare provision. Similarly, Gerhard Schnyder and Gregory Jackson
find that Sweden and Denmark grafted neo-liberal ideas onto their
social democratic systems, freeing up markets without giving up their
basic values of equality and universalism.
A third route is that neo-liberal labels have been avoided or omitted
even as neo-liberal ideas have been accepted. Thus, in France, the term
neo-liberalism has been widely rejected even as neo-liberal ideas and
principles remain strong.35
Given its many different interpretations over domain, time, and
place, neo-liberalism is not easily summarized. Nevertheless, it retains a
central core of ideas despite their many permutations. In what follows,
we discuss how to analyse the nature, scope, and limits of neo-liberal
ideas before offering explanations of their resilience.
See Jones; Hay and Smith; Gualmini and Schmidt; and Orenstein, all in this
volume.
See Gualmini and Schmidt in this volume.
13
38
For recent reviews, see, for example, Beland and Cox 2011; Schmidt 2008,
2010; Campbell 2004; and Blyth 1997.
See, for example, Blyth 1997, 2002; Berman 1998; Campbell 1998; Hall 1989;
McNamara 1998; Hay 2001; Schmidt 2000, 2002, 2009; Abdelal et al. 2010;
Cafruny and Ryner 2003; Overbeek and Apeldoorn 2012; Rodrik 2011;
Rothstein 2005; Rosamond 2012; and Woll 2008.
For classic general texts, see, for example, Heclo 1974; Goldstein and Keohane
1993 and Baumgartner and Jones 1993.
14
41
15
importing the hidden assumption of a previous equilibrium, a normative bias towards the preservation of pre-existing states, and treating
pressures for change as unwelcome external threats. Most important,
resilience may depoliticize processes whereby social phenomena are
maintained.
To avoid the pitfalls and hidden assumptions in its many different
disciplinary applications, we begin by defining the concept as it is
reflected in ordinary language usage, in terms of the synonyms found in
the dictionary, including flexibility, elasticity, plasticity, adaptability,
and suppleness. We also note that the central definition in social science
is a capacity for successful adaptation in the face of disturbance,
stress, or adversity.42 When applied to neo-liberalism, however, we
go beyond the identification of these qualities of resilience to place it
explicitly in time, as a process that has taken place over several decades,
with important variations in time, place, and domain. Equally, we
identify key actors involved in creating such resilience to discuss their
interests, views, and interactions, as well as the wider institutional
framework within which they operate. We also discuss both internal
and external pressures on neo-liberalism and give special attention
to the processes or mechanisms that promote resilience, as well as
the feedback effects that serve neo-liberalism through supportive and
reinforcing processes. Finally, we do not view challenges to neo-liberal
ideas as a threat to some form of equilibrium. Rather, we perceive
such ideas and their resilience as part of political processes involving
different aspects of power, such as actor interests and institutions.
Our usage of resilience refers to ideational resilience in policy
debates and political discourse. To be more specific, we use the concept
of resilience to refer to neo-liberal ideas continuing to be the preferred
or assumed ideational approach in public discussions that is, considered the usual, standard, or conventional analytic framework, the
basic set of values or guiding principles, the main policy programme, or
the overarching discourse. Building on analyses of usage in the social
sciences,43 we specify three features of ideational resilience: (1) the
continuity of neo-liberal ideas over time, including their endurance,
recurrence, and adaptability; (2) the dominance of these ideas against
alternatives and competitors; and (3) their survival not only in the face
42
43
16
44
45
47
17
then integrated with these traditional ideas. The results were a recasting or renewal of social-democratic ideas with new neo-liberal elements, making for hybrids of corporatist-managed liberalization in
which social partners are important participants with management
in ensuring firms international competitiveness.49
Neo-liberal resilience as dominance
The second element of neo-liberal ideational resilience is dominance
in debates such that it tends to crowd out other ideas, both in existing
domains in which it predominates and in new domains. Such dominance, first and foremost, takes the form of hegemony, in which
certain core beliefs structure debates in the policy and/or the political
spheres whether we use the language of Gramsci or of paradigms
to elucidate this.50 One such hegemonic or paradigmatic belief is the
beneficial nature of competition observed in fields as diverse as regulation of commercial markets, banking, and welfare provision with
the concomitant need to reduce barriers to competition in all domains
while disregarding any damaging effects.51 Another such belief is that
the state is inherently less efficient than the private sector and that,
although necessary for markets, it is always prone to failure and unjustified expansion.52
A second form of dominance is neo-liberalisms powerful capacity to
disseminate its principles widely to new domains or places. Thus, for
instance, at the EU level, neo-liberal ideas of the value of competition
have grown from a primary focus on economic markets to areas that
were traditionally the preserve of state monopolies designed to provide public services, such as telecommunications, energy, postal services, and railways.53 Similarly, neo-liberal arguments about the dangers of state intervention that were originally focused mainly on state
planning and industrial policy have extended into areas such as regulating financial markets.54
49
50
51
52
53
54
See Schmidt and Woll, Vitols, and Hay and Smith, all in this volume.
See Thatcher 2007 and in this volume.
in this volume.
See Mugge
18
19
1980s and 1990s, they have remained.60 In the 2000s, moreover, policy makers, academics, and commentators sometimes drew on these
diverse approaches to attack neo-liberalism, in particular using the
example of the economic successes of countries farthest away from
neo-liberalism not only the Nordic countries with their continuing social-democratic traditions but also Germany, whose coordinated
market economy suffered less from the housing boom and subsequent
bust and which recovered much more strongly than, for instance, the
more neo-liberal United Kingdom.
Yet, despite the challenges, neo-liberalism has not simply survived,
it has also renewed its ideas on a continual basis so as to become and
remain dominant. That dominance has ensured that it has come to
define the terms of discussion and contestation. Such resilience can be
seen as all the more remarkable given the challenges resulting from
neo-liberalisms own apparent failures. European countries that since
the 1980s drew on neo-liberal ideas for policy reforms such as
public-spending constraints, privatization, liberalization of markets;
and regulatory, labour, and welfare reforms have (in diverse measure) suffered from economic problems: high unemployment, low or
at least uneven growth, increasing inequalities, and rising poverty.
They have also experienced major market booms and busts on a regular basis. The most recent crisis alone would have been expected
to call neo-liberal ideas into serious question. The experiences since
the 1980s make the period of Social and Christian Democrat, corporatist, and socialist idea(l)s of the 1950s and 1960s appear as a lost
halcyon period compared with the period since the 1980s. Even the
much-maligned 1970s are attractive for many in terms of economic
prosperity. Yet, despite a brief moment of apparent retreat in 2008
2009, neo-liberal ideas have not succumbed or been replaced with
alternatives.
Forms and levels of neo-liberal ideas
Analysis of neo-liberalisms ideational resilience can also benefit from
a consideration of the variety of forms at different levels of generality
in which neo-liberal ideas are cast. They may appear as ideologies or
as frames of reference that set an all-encompassing perspective, narratives about why new policies are necessary and appropriate, problem
60
20
21
63
64
22
For different views see for example Goldstein and Keohane 1993; Jobert 1989;
Onuf 1989; Hall 1993; Wendt 1999; Blyth 2002; Schmidt 2002, 2008;
Abdelal, Blyth, and Parsons 2010.
23
this volume.
See Jones and Mugge,
See Thatcher, Gamble, and Schmidt and Woll, in this volume; see also Bermeo
and Pontusson 2012.
See, for example, Habermas 1996; Sabatier and Jenkins-Smith 1993; Haas
1992; Schmidt 2000, 2002, 2008; and Campbell 2004.
See, for example, Fligstein and Mara-Drita 1996; Jobert 1989; and Muller
1995.
See, for example, Finnimore and Sikkink 1998.
See Keck and Sikkink 1998 and Epstein 2008. See also discussion in Schmidt
2008.
Mahoney and Thelen 2009 use a similar set of actor categories but define them
in terms of what they have accomplished, as befits historical institutionalist
explanation. This categorization differs somewhat because these actors are
defined by their beliefs in the ideas they promote and their discourse about
them, whether or not they later may compromise those ideas in action.
24
then in the 1950s. They have also been technocratic elites, such as
unelected officials in central banks or regulatory organizations such
as the ECB or the Commission.74 Pragmatic actors, in contrast, tend
to be bricoleurs, cobbling ideas together, without a doctrinaire commitment to an underlying philosophy.75 Thus, with regard to neoliberalism, examples include leaders of the centre-left in the late 1990s,
such as Blair and Schroder,
who often sought to merge neo-liberal
74
75
76
78
79
80
2011.
Cf. Mugge
the term bricolage, see Swidler 1986; Campbell 2004; and Fourcade and
Savelsberg 2006.
77
See Gualmini and Schmidt in this volume.
See Haas 1992.
See Wittrock, Wagner, and Wollman 1991; and Hajer 1993.
See Fleck 1980 and Plehwe 2009: 35; see also Plehwe, Walpen, and
Neunhoffer
2006.
81
See Sabatier and Jenkins-Smith 1993.
See Blyth 2013.
25
82
83
84
85
See, for example, Fourcade-Gourinchas and Babb 2002; and Campbell and
Pedersen 2010.
See Orenstein in this volume.
See, for example, Fourcade 2009; Mandelkern and Shalev 2010; and Ban 2012.
See Mackenzie 2006 and Mackenzie et al. 2007.
26
can actually be helpful to neo-liberal ideational entrepreneurs, allowing ideologues to continue to promote it as a set of principles and
values even (or perhaps especially) if its detailed policy programme
has been subject to compromise by the pragmatists or abandoned by
opportunists because of problems with the policies. A third line of
explanation focuses on discourse. This suggests that in the communication of the ideas, neo-liberal ideas can prove stronger in policy
debates than rivals, whether as a result of the seeming coherence of the
ideas, how they are framed, or how they are communicated.
The first three lines of analysis thus concern the nature of neoliberalism itself as a set of ideas; the final two concern the wider context
within which such ideas are set. The fourth line of explanation is about
the power of interests in the sense of self-interested agents who gain
from neo-liberal ideas. The fifth line of analysis concerns the force of
institutions, examining how institutional frameworks aid and support
neo-liberalism while hindering alternative ideas in ways explicable by
reference to different neo-institutionalisms.
In this section, we discuss the nature of the explanation offered by
each line of analysis and then its possible mechanisms and processes.
The concluding chapter examines how these five explanations have
played out in practice, with examples from the different empirical
chapters.
We see the five lines as distinct but complementary lines of inquiry.
It is crucial to emphasize that we do not seek to explain whether and
why policies are neo-liberal in their impact. Rather, we confine our
task to exploring the resilience of neo-liberal political economic ideas
as ideas in their different forms and at their different levels, from general worldviews and values to paradigms, to specific policy proposals as
they change or continue over time. In so doing, we also include the conflicts or contradictions in ideational processes both internal and external to neo-liberalism because, as discussed previously, we do not see it a
single, coherent set of ideas. Indeed, we find that, apparent weaknesses
or imbalances are often turned to neo-liberalisms advantage.
27
For academic critiques across several economic domains, see, for example,
Crouch 2011 and Harvey 2005.
88
See Hartwich 2009.
See Brenner, Peck, and Theodore 2010.
28
29
30
proponents are likely to conclude if implementation fails that compliance was insufficient rather than that the theory was wrong. The
result is pressure for more neo-liberalism, not less, as in the Eurozone
crisis, in which the demands from Northern Europeans included tightened enforcement and punishment of the sinners to the detriment of
their economies.89
Alternatively, proponents can be opportunistic leaders, who adopt
the policies only to win elections before then abandoning them when
they prove too controversial or unpopular. French Prime Minister
Chirac in the mid 1980s and Italian Prime Minister Berlusconi in
the early 2000s are examples.90 Furthermore, proponents can be pragmatic ideational entrepreneurs, willing to compromise in order to push
through at least some elements of their programme, as in the case of
Prime Ministers Tony Blair in the United Kingdom and Mario Monti
in Italy.91 In any of these four cases, lack of implementation could
be used to reinforce the argument that more neo-liberalism is needed,
based on a view that its proponents were inadequate (i.e., the ideological entrepreneurs) or betrayed the cause (i.e., the opportunistic and
pragmatic entrepreneurs).
More generally, lack of implementation allows neo-liberal supporters to claim that their policies have never actually been tested in practice and protects them from blame for specific policy failures. This is
significant because many neo-liberal policies such as cutting public spending, reforming welfare, and reducing regulatory protection
are difficult to implement and extremely unpopular politically. At
the same time, lack of implementation can preserve neo-liberalisms
apparent political virginity.
The implementation gap may even directly benefit neo-liberal supporters, notably in political arenas. It can divert attention from the
messy difficulties of policy making, pointing to the sunny uplands of
the future. It can also provide supporters with a simple (or even simplistic) poster child with which to contrast alternatives, which can be
painted as failed, corrupt, and old-fashioned. Indeed, the rhetoric of
neo-liberalism may be precisely designed not for implementation but
89
90
91
Our thanks go to Fritz Scharpf for this insight. See also Jones in this volume
and Scharpf 2012.
See Gualmini and Schmidt in this volume.
See discussion in Schmidt and Woll in this volume.
31
94
32
96
See Jobert and Muller 1987 and Muller 1995.
See Rein and Schon
1994.
See, for example, Denham 1996 and Plewhe 2009; on welfare in Britain and
Germany, see Pautz 2012.
33
and resonate with common sense and with deep values and (interpreted) personal experience.98 This makes them easier to communicate
than many rivals and also highly attractive to political parties, commentators, and second-hand dealers and bricoleurs of ideas, who
can combine them with other concepts or philosophies, from Social
Democracy to statism.99
Neo-liberal ideas also may serve to reconceptualize the interests and
priorities of agents. For example, with regard to labour markets, neoliberal ideas challenged the postwar ideal of organization via corporatist relations between management and unions, with a new frame in
which businesses should determine wages in decentralized labour markets, whereas labour unions were presented as damaging firms and
the economy. Multinational businesses, in particular, largely reconceptualized their interests in this way, even in corporatist countries,
as they increasingly pressured unions to agree to greater flexibility in
wages and working conditions and governments to legislate structural
reform.100
34
35
105
36
(as in the third line of analysis) serves to reinforce the power and interests of the actors using those ideas for their own strategic purposes.
This may be especially relevant in cases of what Pepper Culpepper
calls quiet politics, in which business interests enjoy more room for
influence because of the high level of technicality of the policy ideas
under discussion, as in the case of corporate governance.106
However, whatever the mechanisms of support or of feedback, selfinterested actors along with the ideas they convey all take place in
given contexts. These contexts meaning the institutional framework
within which they are played out are also significant.
108
110
37
113
114
115
117
See Goldstein 1993 and Goldstein and Keohane 1993; see also Blyth 2002.
This explanation may come close to the fourth one namely, interests.
However, there are two differences: a historical institutionalist approach
examines changes in organizations as the explanation, whereas an
interest-based approach based in rational-choice institutionalism takes them
as fixed; sociological or historical institutionalist analyses of organizations
treat them as following inherited or given behaviour rather than acting as
rational self-interested actors.
See, for example, Thatcher and Stone Sweet 2002.
and Mattli 2011.
See Kerwer 2005 and Sinclair 2005, 2010. Cf. Buthe
116
See Thatcher and Jones, both in this volume.
See Pierson 2004.
See Streeck and Thelen 2005 and Mahoney and Thelen 2009.
38
for monetary union and culminating with various pacts during the
Eurozone crisis ensure that neo-liberal ideas about fiscal consolidation, regardless of their failure to solve the crisis, have created path
dependence for the rules of EU monetary policy that will be difficult to
reverse.118 Moreover, the heavy investment in ideas about competition
and efficient markets, along with their institutionalization through legislation, constrains the espousal of ideational alternatives that could
be organizationally risky, as indicated by the contortions of the ECB
to justify exceptional measures to respond to the crisis.119
Sociological institutionalists go even further, viewing institutions
as also serving to constrain and empower actors.120 Mechanisms
of ideational influence and reproduction result from institutional
isomorphism, whether through mimetism, normative processes, or
coercion.121 Neo-liberal ideas as such may be seen as a form of fashion
to be copied or taken as a recipe to be applied, adopted, or adapted
by other countries in a wide range of domains. Institutional actors
such as the IMF, the EU Commission, and the ECB, as well as governments in most European countries, have promoted such mimetism
at one time or another. However, they also often at the same time
have cast neo-liberal ideas as norms for policies as the only right
or legitimate thing to do, whether to reform welfare by linking it to
work or by viewing all debt as unsustainable. They have equally used
coercion in imposing neo-liberal ideas as the only ones available
as in the case of EU and IMF conditionality for Central and Eastern
European countries.122 However, coercion also can come indirectly
from the perceived threats of non-conformity with neo-liberal ideas,
whether from the shadow of the law hanging over policy debates in
domains as varied as fiscal policy, regulation, and welfare or from the
markets.
Thus, a fifth explanation for neo-liberal resilience is that, since the
1980s, institutions have come to provide support and opportunities
for neo-liberal ideas while conversely constraining and disadvantaging alternatives. However, the many different ways in which such
institutional resilience operates is more dependent on the theoretical
analysis used than in the other four lines of analysis. Whereas rationalchoice institutionalists will point to how organizations or formal rules
118
119
121
39
establish the incentives that affect actors calculations, thereby constraining change and structuring opportunities, historical institutionalists may focus on either the path-dependent constraints of selfreinforcing processes or the incremental processes that add opportunities, even as they constrain the direction of change. In contrast,
sociological institutionalists will look for processes such as mimetism,
normative legitimation, and coercion to emphasize that the resilience
of neo-liberal ideas comes not from superiority in a competition for
ideas but instead because of wider legitimation and existing power
structures. Finally, discursive institutionalists will return to the role of
discourse in the embedding of neo-liberal ideas in public debates and
discussions within differing institutional contexts. They may either
underline how discourse relates to the three other institutionalisms or
take a more constructivist approach by emphasizing how institutions
are constructions of meaning, as they structure thought and action.123
Conclusion
The term neo-liberalism often evokes powerful reactions from policy
makers and the public in many European countries. Frequently, it is
associated with unpopular policies, such as accepting greater inequality, imposing market competition, fiscal austerity, and reducing the
welfare state. A (usually smaller) body of opinion disagrees strongly,
viewing neo-liberalism as liberating individuals and firms from the
deadening hand of the state or monopolists.
Academics also react strongly to neo-liberalism. Many see it as a
negative or dangerous set of ideas or even an ideology, representing
a return to the past and a rejection of scientific progress. They focus
on its internal contradictions, its adoption of theories riddled with
weaknesses, and its oversimplification of complex problems. Equally,
they underline the repercussions of policies inspired or legitimated by
neo-liberalism. Others point to the difficulties of applying a term that
is often polemical, lacks boundaries, and whose policy prescriptions
conflict with one another and are in flux.
Our approach here differs from both the normative reactions and the
academic critiques of the term. We treat the resilience of neo-liberal
ideas as a political phenomenon to be investigated. We look at the
nature of such ideas, who holds them, how they are used, and of
123
40
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part i
The present period is one of economic turbulence but ideological stability. Despite the scale of the 2008 financial crash, there has not been, so
far, much sign of the type of shift in the ideas governing economic policy that followed the economic upheaval of the 1930s and the smaller
upheaval of the 1970s. The 1930s saw the emergence of Keynesianism and Social Democracy and the 1970s saw the emergence of to
monetarism and neo-liberalism. Although challenged by recent events,
for the moment neo-liberalism appears to be retaining its ascendancy.
How should we understand this resilience? How should we understand
neo-liberalism? These are the questions with which this chapter is concerned, and it makes three main claims. First, neo-liberalism is more
than simply a contingent reaction to Keynesianism and Social Democracy. Part of its resilience as a set of ideas is that it draws on perennial
themes of classical liberal political economy, particularly concerning
the nature of commercial society and the role of the state in a market
economy. Second, neo-liberalism is not a unified doctrine but rather
has several distinct strands, which can be contradictory. Third, one of
the most striking contradictions is in regard to neo-liberal attitudes to
fiscal conservatism. In terms of the typology developed in Chapter 1,
I argue that the resilience of neo-liberalism can best be explained by
the first three explanations: (1) the ideological malleability of its core
principles, (2) the gap between rhetoric and reality, and (3) the ways
in which neo-liberal ideas achieve discourse hegemony by being translated into a form of populist economic common sense. These features
make neo-liberalism difficult to discredit and help to account for its
resilience.
An influential way of understanding neo-liberalism draws on Karl
Polanyis (1945) account of ideological development in the capitalist
era. He suggested that the liberal market economy was created through
deliberate policy and state action in the nineteenth century, which
destroyed traditional forms of economy and society and brought, as a
53
54
55
56
challenged ideologically and politically in the 1970s with the emergence of the neo-liberal project to contract and reorder this state.
However, the neo-liberal project met with only limited success, which
is why some of the most influential accounts of the 2008 crash are
neo-liberal accounts, which blame the crash on the persistence of
the Keynesian welfare state rather than on neo-liberal policies that
deregulated finance. On this view, neo-liberalism is resilient because
it remains the radical project with the most traction in this crisis. The
radical wing of neo-liberalism perceives this crisis as an opportunity to
push farther the project to contract the state, not to retreat. The next
swing of the pendulum, therefore, is not automatically away from neoliberalism. A more radical neo-liberalism is one possible outcome from
this crisis.
This chapter explores one aspect of this apparent resilience of neoliberalism by tracing its ideological roots in earlier forms of liberalism.
One of the difficulties in considering neo-liberalism is to define exactly
what the term covers. It is easy to exaggerate its unity and coherence
and group together a diverse set of ideas and policies, which have
many internal tensions. Rather than accept a monolithic account of
neo-liberalism as an all-embracing and all-conquering single ideological force, its diversity must be acknowledged.8 It is this diversity that
explains, in part, its resilience. In this chapter, I accept much of the
institutionally embedded thesis proposed by the editors but argue
that we also need to understand the genesis of neo-liberalism in a
much older set of discourses: about the market economy, the household economy, and the tax state. It is partly because neo-liberalism
draws on these much-older ideas that it is so difficult to dislodge; it
expresses certain perennial truths about the political economy that we
all inhabit, and it is this which often gives its ideas the edge. However,
it does not exhaust the truths about this political economy, and it is
not all-conquering (despite the overblown rhetoric that at times has
accompanied it) because, like its rivals, it does not have final or uncontested solutions to the dilemmas of our modern political economy.
The chapter begins by outlining different forms of neo-liberalism.
It then examines how neo-liberalism has imported key ideas from
nineteenth-century liberalism in its treatment of the central relationship
in political economy namely, between the market and the state.
8
57
Strands of neo-liberalism
Neo-liberalism is commonly used although not often by neo-liberals
themselves as a general term that denotes the revival of free-market
doctrines in the second half of the twentieth century, particularly since
the 1970s. There are a number of strands of neo-liberalism, of which
the most important are ordo-liberalism, the Austrian School, economic
libertarianism, the Virginia School, the Chicago School, and supplyside economics. Many of these strands were already represented at
the Mont P`elerin Society, convened by Hayek in 1947 and which
has been meeting ever since. This revival of economic doctrines celebrating the free market and seeking to limit the role of government
was regarded by some of its early critics as a misguided attempt to
revive earlier formulations of liberalism that had been superseded
and were no longer relevant to the political and economic conditions of the twentieth century. However, in the last three decades
of the twentieth century, neo-liberalism furnished a powerful set of
doctrines that became influential in many countries, particularly the
United States and Britain but also in many others, including Chile
and several other Latin American states, Australia and New Zealand,
and many countries in Eastern Europe following the opening of the
Berlin Wall and the collapse of the Soviet Union. Many international
and domestic policies were shaped by these doctrines, in particular
regarding finance and trade and the idea of what constituted good
economic practice and good governance. In this way, most economies
in the international economy were influenced by the new free-market
doctrines.
Ordo-liberalism was the first form of neo-liberalism. The German
ordo-liberals, including Alexander Rustow
and Wilhelm Ropke
in the
58
10
See Turner 2008.
See Nicholls 1994.
See Hayek 1944 and von Mises 1944.
See Nozick 1974 and Rothbard 1973.
59
14
60
the budget have a lower priority. These policies were adopted by the
Reagan administration and also by the administration of George W.
Bush, leading to a rapid increase in US debt because taxes were cut,
whereas spending particularly on defence greatly increased. The
same prescription was at the heart of the RomneyRyan campaign in
2012, as leading fiscal conservatives in the United States pointed out.
Supply-siders have been influential in neo-liberalism, but they have
been at odds with ordo-liberals, the Austrian School, and the Virginia
School, which tend to be fiscal conservatives and believe that the first
priority of government is to balance the books.
In the immediate postwar period, neo-liberalism, in its ordo-liberal
form, was mainly influential in Germany and other European countries. From the 1970s onwards, however, new strands of free-market
thinking began to emerge and neo-liberalism, particularly in Anglosphere countries, began to be identified with the clutch of doctrines
opposed to welfare states and mixed economies. Supporters of neoliberalism were determined to uproot social-democratic aspects of the
postwar political economy, which tolerated a wide variety of domestic policies. The growing fiscal burden of the state was highlighted,
together with the intractable dependency culture fostered by welfare
programmes. The political consensus that had endured since the 1940s
in many countries about the proper role of government in a market
economy came increasingly under intellectual and political attack. A
decisive moment was the endorsement of key neo-liberal doctrines by
Margaret Thatcher and by Ronald Reagan, who came into office in
1979 and 1980, respectively particularly monetarism and elements
of classical liberalism in Thatchers case and supply-side economics in
Reagans. The understanding that formed between these two political
leaders suggested that there was now a coherent neo-liberal doctrine
that defined the new economic policies spreading from the United
States and the United Kingdom.15
61
the latest manifestation of much older discourses in political economy, the eighteenth-century idea of commercial society, and the earlytwentieth-century idea of the tax state. This perspective emphasizes the
continuities in thought among different eras rather than sharp historical breaks. The idea of commercial society, for example, which came
to preoccupy so many eighteenth-century political thinkers and which
has profoundly shaped the political thinking of the modern world, is
considered an essential part of our understanding of what makes this
world modern. Istvan Hont memorably evoked its key themes in Jealousy of Trade.16 He argues that many of the ideas that were developed
in the eighteenth century still define the nature of the problems that
confront contemporary states. Many of the circumstances and contexts
may have been altered but the paradigm of commercial society has not
been transcended; it is still the intellectual horizon of our world as far
as political economy is concerned. Hont argues, for example, that the
debate on globalization that dominated the 1990s lacks conceptual
novelty because it rehearsed themes and explored dilemmas that had
first been aired more than two hundred years before.
At the root of this conception of political economy are the peculiar
character of the modern market economy and the modern state and
the lack of congruence between them. Both have practical and imaginative foundations, but they are different.17 Markets are founded on
exchange between independent owners, the stimulation and satisfaction of wants, the calculation of costs and benefits, the division of
labour, the ownership of capital, the maximization of profit, and the
drive for accumulation. They have expanded to connect the whole
world and render it interdependent. There are always many markets
but, imaginatively, the market is not complete until it is a world market and equivalence reigns. States, by contrast, are multiple; each state
claims a particular jurisdiction and relates to a particular national community. Its practical foundations include securing internal order and
external defence, raising taxes, and promoting the prosperity and welfare of its citizens. Its imaginative foundations derive from its unitary
form as a fictitious person and its indirect representation its claim to
represent its people as a community of fate.
Markets and states become locked together because the benefits
of trade are such that no state can forego them. No state can afford
to put itself outside the international trading system; however, the
16
17
62
63
present because much more than economic analysis it still captures the essential features of the political and economic context in
which economic policies are formulated and debated. Neo-liberalism
can be understood as the latest manifestation of the liberal political
economy favoured in nineteenth-century Britain. At that time, it was
distilled into a set of principles that included free trade, sound money,
and laissez-faire and which became the organizing assumptions of
British financial and economic policy and through Britains example
became the organizing assumptions of many other states as well.
64
multitude of households, but it was organized on a quite different principle from them; if this principle were infringed, then the benefits that
came from trade were at risk. For Hayek and many other economic liberals, the great problem of the modern political economy that Britain
had pioneered was that the secret of its success was not fully understood and that governments would seek to intervene to manage it as
though it were a household, with a single purpose; doing so would
eliminate the sources of prosperity and enterprise.
One reason for this problem was the continuing hold of the classical
conception of the household. Managing a household meant planning,
allocating, and distributing resources. It implied a central directing
will and the direct consideration of fairness and welfare in decision
making. The traditional household was also associated with notions
of economizing and therefore being economical, two terms still in daily
use. To economize means to cut costs, to stop doing certain things,
or to do the same with less. Managing a household is associated also
with balancing expenditure against income and a particular set of
virtues: prudence, sobriety, accuracy, thrift, and frugality. Households
like these are the foundation on which sound finance and productive
enterprise are to be built in the liberal imagination. Hayek would not
deny this, but although ideas of fairness and justice may have their
place in the family household because it is a potential arena of sharing,
altruism, friendship, love, and personal relationships, it also can be
despotic and exploitative. The contrast is with the catallaxy, characterized by impersonality, decentralization, observance of general rules,
coordination through prices, and connections across vast distances.
In this way, a utilitarian sociability is established, which becomes a
positive-sum game for all of the participants.
The family household remains an important part of contemporary
political economy although not as important as it once was because
most economic production in developed economies is no longer sited in
families. However, families are still essential in nurturing and supporting family members, through unpaid domestic labour, enabling them
to participate in labour markets, and supporting those who cannot.
Families are also a key site for consumption, not the least of which is
financial services. However, two other types of household have become
increasingly significant in contemporary liberal political economy.
The first of these is the corporation. In the eighteenth century, corporations were confined to state-created bodies (e.g., the East India
Company), which were granted a particular trading monopoly. In
65
21
22
66
67
More recently, it has expanded far beyond the limited functions that
were expected in the past. The modern expanded state Bell observed in
the 1970s threatened to absorb both the private family household and
the corporate households through the increasing scope of its regulation
and the increasing enlargement of its capacities, including the capacity
to tax. In this way, the state becomes an arena for the satisfaction of
private wants, which because they are insatiable threatens the basis
of commercial society and its separation from the state.
Together with the idea of commercial society, it is the concept of the
tax state that has been most important in shaping neo-liberalism. One
of the earliest analyses of the tax state and its implications was made by
Joseph Schumpeter at the end of the First World War. It became a common theme in much neo-liberal, libertarian, and conservative argument
from the 1970s until the present, and it underpins arguments for lower
taxes and lower spending. As the state expands under pressure from
private households both individual and corporate to consider their
interests and needs, so it increasingly intrudes on commercial society
and thereby risks restricting the freedom of the catallaxy by making
discretionary interventions rather than relying on general rules. In his
article published in 1918, The Crisis of the Tax State, Schumpeter
addressed the problem of fiscal policy in the wake of the financial,
industrial, and economic collapse of AustriaHungary at the end of
the First World War.23 He argued that the public finances are one of
the best starting points for an investigation of society, especially though
not exclusively of its political life. He quoted the socialist economist,
Rudolph Goldscheid, stating that the budget is the skeleton of the
state stripped of all misleading ideologies.24 Schumpeter argued that
the tax state had been important in the development of commercial
society but had now acquired its own momentum.25 When the state
existed as a social institution, staffed by people who identified their
interests with the state, and when it had been recognized as essential by
citizens for the services it provided, then the state could no longer be
understood solely from a fiscal standpoint. Taxes created the modern
state but, once formed, the state begins to extend its tentacles into
the flesh of the private economy. It is this intrusion into the private
economy that Schumpeter viewed as a particularly modern problem,
23
25
24
See Schumpeter 1990.
See Schumpeter 1990: 100.
See Schumpeter 1990: 125.
68
27
69
70
71
72
stimulus announced by Hank Paulson and George W. Bush and continued by Barack Obama. Many of them, particularly in the Tea Party, are
intent on rehabilitating Andrew Mellon, arguing that his supply-side
approach to taxation in the 1920s and his balanced-budget approach
to fiscal policy were correct and that the New Deal is responsible for
Americas current difficulties and ever-expanding debt by making possible the growth of big government and the culture of entitlement and
dependency. Thus far, however, no government has been elected in a
Western democracy that is prepared to balance the budget by drastically reducing the size of the state; too many people have too many
entitlements that cannot be touched.
Although many of the principles of the old sound-money policies
have been abandoned, much of the rhetoric of the older conception of
the public household remains in the new politics of austerity, which
has established itself almost everywhere. One of the most familiar
arguments is the analogy repeatedly drawn between the finances of
the public household and those of the private household. After 1931,
this argument was discredited by Keynesianism. However, Keynesian
ideas about these differences from private households have never been
easy to communicate to citizens, compared to the simple idea that
the state should balance its budget just like the individual household
must balance its budget: cutting expenditure to match income, living
within its means, and paying down the credit cards. A recent idea that
has the same lineage is the notion that the public household should be
treated as a cost centre, with its revenues and spending ring-fenced and
made to balance. What these images want to deny is that the state is a
household very different from the private household because it has the
ability to borrow, to tax, and to print money. It is these powers that the
old liberal political economy sought to restrain, and it is these powers
that Keynesian political economy is accused of unleashing. Treating
the state as if it were a private household accounts for some of the
deep hostility to Keynesianism, treated by some of its critics as speculative public finance that substituted judgement and discretion for firm
rules.
Yet, despite this, Keynesian pragmatism and discretion are still alive
and well in Britain and the United States. George Osborne, the UK
Chancellor after 2010, did not reverse the major stimulus and the
bailouts that rescued the British financial system in 2008. Barack
Obama went further in adding to the stimulus, although not by enough
73
30
74
75
76
Hall, Peter. 1993. Policy Paradigms, Social Learning, and the State: The
Case of Policy-Learning in Britain, Comparative Politics 25 (3): 275
96.
Hannah, Leslie. 1976. The Rise of the Corporate Economy. London:
Methuen.
Harvey, David. 2005. A Brief History of Neoliberalism. Oxford: Oxford
University Press.
Hayek, Friedrich von. 1944. The Road to Serfdom. Chicago: University of
Chicago Press.
Hayek, Friedrich A. 1976. Law, Legislation and Liberty. Vol. 2. London:
Routledge.
Hont, Istvan. 2005. Jealousy of Trade: International Competition and the
Nation-State in Historical Perspective. Cambridge, MA: Harvard University Press.
Krugman, Paul. 2012. End This Depression Now. New York: W. W. Norton
and Company.
Mises, Ludwig von. 1944. Omnipotent Government: The Rise of the Total
State and Total War. New Haven, CT: Yale University Press.
Nicholls, Anthony. 1994. Freedom with Responsibility: The Social Market
Economy in Germany, 19181963. Oxford: Clarendon Press.
Nozick, Robert. 1974. Anarchy, State and Utopia. Oxford: Blackwell.
Pierson, Paul. 1994. Dismantling the State? Reagan, Thatcher and the Politics of Retrenchment. Cambridge: Cambridge University Press.
Polanyi, Karl. 1945. Origins of Our Time: The Great Transformation. London: Gollancz.
Ridley, Matt. 2011. The Rational Optimist: How Prosperity Evolves. London: Fourth Estate.
Rothbard, Murray. 1973. For a New Liberty. New York: Macmillan.
Schumpeter, Joseph. 1990. The Crisis of the Tax State. In The Economics
and Sociology of Capitalism, edited by Richard Swedberg (99140).
Princeton, NJ: Princeton University Press.
Shonfield, Andrew. 1965. Modern Capitalism: The Changing Balance of
Public and Private Power. London: Oxford University Press.
Skidelsky, Robert. 1967. Politicians and the Slump. London: Macmillan.
Skidelsky, Robert. 2009. Keynes: The Return of the Master. London: Allen
Lane.
Thompson, Helen. 2008. Might, Right, Prosperity and Consent: Representative Democracy and the International Economy. Manchester, UK:
Manchester University Press.
Turner, Rachel. 2008. Neo-Liberal Ideology: History, Concepts and Policies. Edinburgh: Edinburgh University Press.
Welfare-state transformations:
From neo-liberalism to liberal
neo-welfarism?
maurizio ferrera
Introduction
What has been the influence of the neo-liberal ideology on welfarestate transformations since the 1980s? How resilient is such ideology
and what is its influence today that is, in the early 2010s? In the
context of this books themes, we would expect to find in this policy
area a high degree of influence and resilience. After all, neo-liberalism
emerged as an attack on Big Government, with a view to rescuing
individual freedom from the torments of taxation, bureaucracy, and
regulation (including in the social realm). This chapter recognizes
the high relevance (and not only rhetorical) of neo-liberalism for
welfare-state developments since the 1980s but with two decisive
qualifications. The first has to do with meanings: gauging neo-liberal
resilience requires a prior clarification of what is connoted by the
term neo-liberalism. The second qualification has to do with timing:
I argue that the influence of neo-liberalism on the welfare state has
followed a broad parabola, which reached its peak in the early 1990s
but started to decline thereafter in the wake of ideological changes
and discursive reorientations.
I start with the meaning attributed to the term neo-liberalism and,
more precisely, to both the noun (liberal) and the prefix (neo). Unfortunately, the English language conflates in the noun three connotations
that Italian (and Italys political-theory tradition) separates by using
different nouns. The Italian language, in fact, distinguishes among
liberalesimo, liberalismo, and liberismo. The first term has the widest
I express my gratitude to the volume editors and to all of the co-authors for
their valuable comments and suggestions. Previous versions of this text were
presented at Boston, Harvard, and Oxford Universities. I am grateful for all of
the comments that I received from my audiences. Special thanks go to Bea
Cantillon, Michael Freeden, Anton Hemerijck, Bruno Palier, Georg Picot, and
Frank Vandenbroucke for their focused remarks and advice for improvement.
77
78
2
3
Welfare-state transformations
79
80
on the welfare-state discourse. This is followed by an analytic interlude on the concept of ideology and how to study its adaptation and
change. The remaining sections are devoted to discussing the rise,
impact, nature, and future prospects of LNW. In the conclusion, I
relate my argument to the general lines of explanation on resilience
put forward by the volumes editors.
See Mudge 2008; Harvey 2005; and Roy, Denzau, and Willet 2006.
7
8
See Gowan 1999.
See Steger and Roy 2010.
See Taylor 2007.
Welfare-state transformations
81
ideology triumphed throughout the 1980s and early 1990s under Reagan and Thatcher (who defined themselves as neo-conservatives rather
than neo-liberals). In the first phase of their tenure, both leaders put
forward various radical proposals aimed at dismantling or, at least,
retrenching key entitlement programmes (to use Reagans jargon)
within healthcare and old-age protection. Unemployment and socialassistance benefits (e.g., Aid to Families with Dependent Children in
the United States and Income Support in the United Kingdom) were
singled out as being especially wasteful and even immoral allowing some people to live off of other peoples taxes and were thus
the object of harsh discursive attacks and, subsequently, of various
material cuts and overall institutional retrenchment. In Continental
and Nordic Europe, neo-liberal views and proposals never reached
the tsunami proportions seen in the United States or the United
Kingdom, but various countries within these areas nevertheless witnessed the spread of neo-liberal economistic orientations, as well as
the appearance of anti-tax and anti-welfare parties that were able to
attract considerable consensus (a typical example was Forza Italia,
founded by Silvio Berlusconi between 1993 and 1994).9
At the supranational level, during the 1980s and early 1990s, economic neo-liberalism (and its monetarist core as elaborated by Milton
Friedman)10 succeeded in becoming deeply rooted, especially within
the OECD and most international economic organizations, the European Commission and, later, the ECB. Price stability, fiscal discipline, undistorted competition, free trade, consumer choice, deregulation, liberalization, and privatization acquired lexicographic priority
over any other economic and social objective.11 In combination with
Treaty rules programmatically biased towards negative integration,
economic neo-liberalism became the driving force of the two biggest
European projects and achievements of the 1990s: the Single Market and the Economic and Monetary Union (EMU).12 As has been
rightly noted, in their original formulations, both projects had mixed
9
10
11
12
82
objectives: partly economic and partly political and not programmatically hostile to the social dimension.13 The fact remains, however, that
the welfare discourse (increasingly dominated by trained economists
within the most prominent institutional and public arenas, e.g., the
financial media) displayed a visible anti-socialstate flavour. The welfare state was seen mainly as a liability, a source of rents and distortions
hindering market competition as well as of programmatically irresponsible spending commitments that threatened the soundness of public
finances. Retrenchment, roll-back, cost containment, and cuts
were common expressions used to prescribe and describe reforms in
the social-protection sphere.14
During the ascending phase of the parabola, the neo-liberal discourse
had a tangible institutional impact. The most emblematic national case
is, of course, the United Kingdom, where several reforms were adopted
in the field of unemployment insurance, second-tier pensions, social
assistance, and healthcare all explicitly motivated and justified in neoliberal terms.15 Through the new provisions of the Single European Act
and then the Maastricht Treaty, supranational neo-liberalism was able,
in turn, to impose increasing budgetary and (de)regulative constraints
on the internal functioning and structure of national social-protection
systems, reorienting their agenda towards efficiency, sustainability, and
work incentives.16 However, despite its unquestionable significance
and attractive force, in its ascending phase, neo-liberalism did not succeed in affecting the institutional foundations of the welfare state (i.e.,
state-funded and state-centred compulsory social insurance). Even in
the United Kingdom, Thatcherism did not bring about the general
13
14
15
Welfare-state transformations
83
18
20
84
and market incentives but also efficacy and distributive rationalizations guided by the principles of equity (including gender), inclusion,
and cohesion. This new discourse was certainly prompted by the threat
of neo-liberal hegemony, but it cannot be seen as a mere temporary
response to it. It was, rather, the fruit of a gradual and labourious
re-elaboration (already started in the 1980s) of other classical European traditions (e.g., Social Democracy, social and democratic liberalism, and to some extent Christian solidarism), as well as the new
Anglo-American school of egalitarian liberalism, emblematically represented by Rawls. This re-elaboration was also prompted by the need
to seriously confront the new challenges posed by European integration, globalization, and the rise of the service economy. In part because
of necessity, in part because of (conditional but genuine) conviction,
the new discourse came to internalize some of the cognitive and normative elements and institutional constraints of the neo-liberal stream: for
example, financial stability, the need to regain competitiveness, organizational efficiency, individual responsibility, and work incentives.
During the 2000s, the EU was a major arena and an important actor
for the elaboration of the new welfare-state modernization discourse
and agenda. Key programmatic notions (e.g., recalibration, active
inclusion, social investment, and social quality) were developed in
(and partly by) Brussels, which provided broad inspiration and specific
insights for the Lisbon and, later, the EU 2020 agendas. A novel strand
of intellectual debate also was launched on how to rebalance economic
and social objectives within the EU supranational architecture.22
The antineo-liberal strike back has come in separate waves, with
different political colours and discursive styles in different countries.
A first wave was prompted by the return to power of centre-left par` Schroeders
ties. Blairs Third Way, Prodis Welfare delle Opportunita,
Neues Modell Deutschand, and later Zapateros Nueva Igualdad are
emblematic examples of the different symbolic packages that framed
the agenda of welfare reform under centre-left majorities in the United
Kingdom, Italy, and, later, Spain. However, ideological re-elaboration
also took place in countries where centre-left parties had to govern
jointly with Christian Democrat or liberal parties, as in the redblack
coalition in Germany during the mid 2000s and the purple coalition
in the Netherlands in the 1990s.23
22
23
See Marlier and Natali 2010 and Cantillon, Verschuren, and Ploscar 2012.
See Stjerno 2005.
Welfare-state transformations
85
25
See, for example, Mueller 2009.
See Beland and Cox 2011.
27
See Schmidt 2008.
See Freeden 1996 and 2012.
86
29
Welfare-state transformations
87
(1) the realm of philosophical debates and the practical realm of political action (including the exercise of power), and (2) policy choice in
response to social and economic transformation. Although less clearly
demarcated than philosophical theories, ideologies typically have (and
strive to maintain) a visible boundary, with a view to providing a
recognizable Gestalt to actors engaged in conflict and/or cooperation
within a given framework of institutions and processes.
The morphological approach to the study of ideologies is useful for
the analytical framing of my two questions and my argumentative line.
The rise of the neo-liberal critique of the welfare state can be seen as a
clear example of an ideological turn that (1) re-elaborated in a rather
dogmatic and overconfident style the adjacent components of classical liberismo (e.g., the importance of free markets, undistorted competition, and consumer sovereignty); (2) eliminated all of the social
peripheral components that other liberal traditions had come to include
within their perimeter during the twentieth century (e.g., cohesion and
collective responsibility versus undeserved disadvantages; opportunities for full individual development), replacing them with a mix of
libertarianism and traditionalism; and (3) adopted monetarism as an
uncontestably superior counterparadigm vis-a-vis
Keynesianism, thus
`
squarely challenging the social-democratic consensus of the Trentes
Glorieuses.
As discussed in this chapter, during the 1980s, neo-liberalism succeeded in being affirmed as a dominant ideology, reaching its peak at
the turn of the decade. In the subsequent period, its traction began
to decline and new ideological bricks began to be posed in various
national and supranational public arenas, drawing the contours of a
postneo-liberal perspective on welfare-state modernization, which
as anticipated in the Introduction to this chapter I propose to label
liberal neo-welfarism. To what extent can an ideological core be identified in this perspective and can we define it overall as liberal (i.e.,
liberale, not liberista)? Can a relatively coherent mix of adjacent components be identified and does the expression liberal neo-welfarism
capture the overall essence? Can the new perspective be considered an
ideological synthesis of different traditions (e.g., liberal, Social Democrat, and in part even Christian Democrat), drawing a perimeter of
overlapping ideological consensus that might serve as a morphological counterpart to the social-democratic consensus of the 1960s and
1970s?
88
31
32
Welfare-state transformations
89
2010.
See Ferrera 2006.
90
37
For a general review, cf. Kymlicka 2011.
See Laborde 2002.
An interesting example of consumption for ideological purposes of the
insights coming from the new Anglo-American liberal-egalitarian school is
offered by this exerpt by Frank Vandenbroucke, taken from a paper presented
at a conference on the future of the centre-left in 1998: Today, even more than
in the past, social democracy needs a moral programme . . . Some abstract
problems discussed in the framework of egalitarian philosophy over the last 20
years are highly relevant in this respect, since they provide the possibility to
develop a true social-democratic, responsibility-sensitive conception of
equality. The reconciliation of appropriate conceptions of equality with
appropriate conceptions of personal responsibiity has been a focal point of
many exchanges in the philosophical domain developed by Rawls, Sen,
Dworkin, Cohen, Arneson, Roemer, Kolm, Barry . . . The author is an
academic philosopher/social scientist who at the time was also actively
engaged in Belgian and EU politics within the Socialist Party. He became
Welfare-state transformations
91
39
40
41
42
Minister for Social Affairs and Pensions in 1999 and promoted a number of
important debate initiatives at the EU level, especially during the Belgian
Presidency of the first semester of 2001 (cf. Vandenbroucke 2001 and 2002).
See Huo 2009; Kildal and Kuhnle 2005; and Kvist, Fritzell, Hvinden, and
Kangas 2012.
See Beech 2006.
See Martin and Pettit 2010. Under Zapatero, the PSOE elaborated on an
original doctrine of citizens, socialism, combining a strong prioritarian
egalitarianism (the consolidation of a robust fourth social protection pillar
alongside universal education, healthcare, and pension targeted towards the
worst off) with an equally strong rights-based, non-discrimination agenda in
defence of individuality, minority recognition, and gender parity (see Sevilla
2002).
See Seeleib-Kaiser, Van Dyk, and Roggenkamp 2008; see also Stjerno 2005.
92
revived on the occasion of its sixtieth anniversary and has now found a
key position in Article 3 of the Lisbon Treaty.43 Secular moderate parties have been the last to move but, in the previous decade, revisionism
has been taking place at this end of the political spectrum as well. The
goal of welfare retrenchment and tax cuts has been markedly marginalized, for example, in the ideology of the Swedish Moderaterna, which
has come to support a modernization agenda based on the growth
competitivenessinclusion triad.44 Mariano Rajoy won the 2011 election in Spain with a growth-centred platform, largely devoid of those
neo-liberal proposals in the social sphere that had been endorsed by
his predecessor, Jose Mara Aznar. British Conservatism, in turn, has
gradually distanced itself from Thatcherism in an effort to incorporate
a new social dimension through the notion of welfare society or welfare community and, more recently under Cameron, the Big Society
(on this, cf. infra).
45
Welfare-state transformations
93
47
94
49
See Stone and Denham 2004.
See Ferrera and Rhodes 2001.
See Sabel and Zeitlin 2010 and Vandenbroucke 2012.
Welfare-state transformations
95
underlying ideological principles) has been mixed. Scholars positions range between moderate pessimism and moderate optimism.
According to Hemerijck, with significant country variations, without exaggeration we can . . . infer from the empirical evidence of long
run social policy change that the translation of the social investment
paradigm into new welfare provisions has been largely successful.51
In more general terms, I concur with Hemerijck and Huo (theoretically and substantively) that the emergence of a new ideological and
programmatic paradigm should not be expected to produce congruent institutional outcomes in any deterministic or semi-deterministic
way; rather, it must be seen as something that generates policy alternatives and creates options. I also concur with both authors that
the alternatives and options opened up by postneo-liberalism may
well liberate actors from the constraints of institutional inertia and
path dependence as well as the hegemonic chains of the neo-liberal
ideology.
Hemerijck 2012; 380; see also Morel, Palier, and Palme 2011; Huo 2009; and
Evers and Guillemard 2012.
96
modernization can be considered as an emerging ideological synthesis, which draws together the core values of the liberal-democratic
and social-democratic traditions (i.e., liberty and equality); de-contests
each and their relationship in a new way; and re-adapts a number
of the adjacent components of each tradition. Postneo-liberal is a
label endowed with minimal connotative power (at least, it makes
clear what the perspective is not); however, can a more effective and
appealing label be proposed? Nomina sunt omina that is, naming
something largely predetermines its fate and is, thus, a delicate operation, exposed as it is to misunderstandings and misappropriations
(as well as to the paradox of performing by this very operation a
second-order ideological act). I tentatively submit here the notion of
LNW. A true child of both traditions, the welfare state (and, more
generally, the notion of good welfare) has symbolically come to
be perceived as the achievement of Scandinavian Social Democracy:
the noun welfarism is chosen in acknowledgement of this fact.52 The
new perspective innovates from the past in both its approach and
the objects and problems approached: hence, the prefix neo. The
adjective liberal is meant to underline not only the social-liberal tradition (often labelled as welfare liberalism in histories of political
thought) but also two other normative commitments: (1) the commitment to individuality, rationality, and openness (including economic
openness functioning markets); and (2) the commitment to maintain a reasonable balance between competing values and inevitably
contrasting normative pulls.53
The LNW ideology tends to de-contest the notion of liberty in at
least three ways. First, while recognizing the lexicographic priority of
negative freedom (a` la Rawls), it views it as inextricably linked to positive freedoms and opportunities that allow for self-development and
flourishing (i.e., the Millian perspective). Second, it builds (also) on
negative freedom to strengthen the principle of non-discrimination
and, thus, to generate new types of civil rights with strong social
implications (e.g., gay marriage, gender quotas, minority rights and
52
53
Welfare-state transformations
97
98
and social protection and cohesion but, indeed, also a productive factor
that can enhance economic performance provided that it is based on
reciprocity, readiness to work, and participation in society. The fight
against poverty and the promotion of inclusion should be priorities
and should be pursued not only by passive transfers but also through
quality services and training opportunities. The counterpart of inclusion is activation that is, the expectation and requisite that recipients
engage in activities that promise to re-enable them to become economically self-sufficient. The notion of social promotion emphasizes the
importance of preparing individuals to face the manifold risks of their
life cycle rather than repairing ex-post the damages of risks. Social
investments (e.g., in early education and care, training, worklife balance, long-life learning, and active employment services) are key to
empowering individuals in the realization of their life plan (i.e., Millian
liberty); in equalizing opportunities and guaranteeing fair outcomes,
especially for the most vulnerable (i.e., prioritarian egalitarianism);
and, at the same time, upholding economic performance and financial
sustainability (i.e., social-democratic productivism). A fourth component (less explicitly debated but much taken for granted) might also be
added in the adjacent area of the new synthesis: access to subjective
rights. The emphasis on rights is meant to clarify that the institutional core of the European model of welfare (i.e., social citizenship
guaranteeing protection against the main societal risks, underpinned
by robust universal civil and political rights) should continue to be
a fundamental pillar in the reconfigured and refocused mix of entitlements and duties. A second clarification is that rights should be
individualized that is, disconnected from ascriptive conditions and
family status.
Figure 3.1 summarizes the key elements and relationships of LNW.54
In the figure, the inner diamond rests on the two core notions of equality and liberty. Their novel de-contestations also serve to reframe
54
Welfare-state transformations
99
opportunity
access to
rights
social
investment/
promotion
EQUALITY
LIBERTY
flexible/
productivist
solidarity
active
inclusion
community
100
Welfare-state transformations
101
provided by Cantillon: the logic of social investment entails a tendency to underestimate the workings of labour markets and the
strong gravitational pulls of social class, and to consequently overestimate the potentiality of activation . . . and depreciate the question of redistribution, of social protection and of care for the most
vunerable.59 Insisting on the need to safeguard the traditional acquisitions of the French model, based on the securite sociale, Francois
Hollandes manifesto in the 2012 elections can also be interpreted
as an attempt at recasting LNW in more distinctively socialist terms.
A product of the fusion of the reformist wings of the old Partito
Comunista Italiano (PCI) and the old Democrazia Cristiana (DC),
and incorporating at the same time the remains of traditional progressive liberal and secular formations, the Italian Democratic Party
(PD) constitutes, in turn, another distinctive (and highly) hybrid
variant of LNW within a single party on the centre-left, markedly
skewed towards the equalitycommunity axis shown in Figure 3.1.
To distinguish the emerging variants of LNW on the centre-right,
the debate has recently coined two other labels. The first is Liberal
Communitarianism, which is an approach that stresses the role of the
family, local communities, and voluntary associations as key actors for
responding to new risks and needs in the civil-society arena, not only
through the state arena. This vision embraces many of the elements of
LNW but seems to be bending towards a distinctive route, which can
be interpreted depending on viewpoints as either a social democratization of Christian Democracy or a Christian democratization of
Social Democracy.60 In both cases, the liberal dimension remains
in the shadows, especially concerning the individualization of rights,
gender, sexual orientation, and ethically sensitive matters regarding life and death. The second label is Progressive Conservatism,
which is intended to denote all centrist and centre-right political formations (including the German Christian Democratic Union [CDU],
the Spanish Peoples Party [PP], and the Swedish Moderaterna) that
have broken with Thatcherism and have come to espouse mild forms
of LNW.61
59
60
61
102
63
Welfare-state transformations
103
65
66
104
Communist Party of the West until the early 1990s), the radical-left
formations that splintered away from the Italian Communist Party
(PCI) after its conversion into a social democratic party in 1993 disturbed in various ways the emergence and consolidation of an LNW
agenda within the centre-left.
The rising political importance and size of populist and radical formations in most European party systems signal the emergence of new
lines of conflict concerning the issue of European integration and the
defence and reform of the welfare status quo. The presence of these
(new) electoral competitors from without is likely to generate additional (and possibly stronger) incentives for competitive ideological
differentiation from within the perimeter of LNW. Francois Hollandes
discursive strategy during the 2012 election campaign (an attempt, as
previously mentioned, at outlining a socialist-egalitarian variant or
supplement of the new paradigm) can be interpreted as a sign of this
dynamic. The rationale for differentiation also can be illustrated a contrario. Mario Montis government in Italy, supported in Parliament
by a strange-bedfellows coalition, including the Democratic Party
(centre-left), the Union of Christian and Centre Democrats (UDC)
(centre), and the People of Freedom (PDL) (i.e., Berlusconis party,
now led by Angelino Alfano), was formed in December 2011 with a
platform centred on stability, growth, and equity we could say a neoliberal fiscal agenda with all the neo-welfarism that was possible in an
emergency situation. Throughout 2012, the political consequence of
this centripetal convergence of mainstream parties was an increasing
electoral and ideological centrifugation to the benefit of neo-populist
and radical formations a dynamic that casts a shadow on the future
prospects of Italys politics and its still unbalanced welfare system. The
most emblematic example to date of the same syndrome is illustrated
by the Greek elections of June 2012. In the face of mounting neopopulist opposition at the extremes, the two mainstream traditional
parties Nea Democratia and the Pasok (which would certainly not
be included among the champions of LNW but would still be kept at
least minimally within the welfare modernization perimeter) have
found it difficult to form a postelection proEU coalition.
Despite its discursive predominance within the main political families of the European Parliament, LNW has not (yet?) been capable of generating an effective cross-party alliance. Vandenbroucke
recently evoked (and recommended, in his role of policy middleman) a
Welfare-state transformations
105
Conclusion
This chapter argues that neo-liberal ideas (in the Italian connotation of
neo-liberismo) have displayed a parabola of influence on welfare-state
transformation, which is now in its descending phase. A novel liberal
neo-welfarist ideological synthesis has gradually been affirmed, creatively combining insights from both liberalism (i.e., liberalismo) and
Social Democracy and using them to elaborate a new vision of the
nature and role of the welfare state in a globalizing and knowledgebased economy. Regarding the lines of explanation put forward by
Schmidt and Thatcher in Chapter 1 of this book, my argument can
be reframed as follows: resilience is related to liberalism rather than
neo-liberalism. As emphasized in the first chapter of this volume, liberalism has always shown a high ideational plasticity, a capacity to
adapt for example, by dropping certain peripheral aspects of its
doctrine and partly merging with other ideological traditions. Thus,
LNW maintains not only the core of liberalesimo (i.e., the protection
of negative freedom) but also key elements of various liberalismi (e.g.,
individuality, equal opportunity, non-discrimination, appreciation for
functioning markets, and a competitive, open economy). At the same
time, LNW is not only liberal because it also crucially includes various key elements of the social-democratic tradition (e.g., solidarity,
redistribution, inclusion, and universalism). Even during the heyday
of neo-liberalism, this latter tradition remains highly resilient in the
Nordic context. It has also had a prominent role in the philosophical
elaboration of the egalitarian-liberalism paradigm within Anglo-Saxon
academia.
What determined the shift from neo-liberalism to LNW? Ideologies
are symbolic artefacts that act as a bridge between the philosophical
68
106
70
Welfare-state transformations
107
and market correcting at the national level. As is well known, marketmaking pressures from Brussels have gradually overridden marketcorrecting autonomy at the national level. The chances for LNW to
take solid cultural and institutional roots are severely weakened by the
economic straitjacket and the EUs asymmetric architecture in which
it is embedded and that pose strong limitations to its delivery potential. It remains to be seen whether a solution to the euro crisis, a
new round of institutional reform at the EU level, and the elaboration
of different economic-policy paradigms will create adequate margins
of manoeuvrability to put the new social ideas into practice, thereby
defending the new synthesis from a dangerous spiral of populist and
radical centrifugation.
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Welfare-state transformations
111
Neo-liberalism has had one central message for the state: scale back,
cut back, cut out, transform.1 This brings to mind Winston Churchills
reply to an opponent who asked, How much is enough? to Churchills
repeated push to spend increasingly more on defence in the 1930s.
Churchills rejoinder came in the form of a story about a Brazilian
banker with whom he had just had lunch. The banker had received
a cable informing him of the death of his mother-in-law and asking
for instructions. He cabled back: embalm, cremate, bury at sea; leave
nothing to chance.
This take on neo-liberalism as burying the state is certainly
exaggerated because neo-liberalism comes in many different forms
with many different policy applications. Only the recommendations of
the most radical strands come close to the Brazilian bankers response
to his mother-in-laws death. Yet the story as a metaphor for neoliberal views of the state nonetheless somehow rings true. This is largely
because neo-liberals have been more anti-state in their rhetoric than in
their actions.
The state has been neo-liberalisms bete noire, as its main focus of
attack, because neo-liberals whatever their differences have viewed
the state as consistently doing too much in the wrong ways with the
worst consequences not only for the markets but also for democracy,
by endangering individual freedom through its interventions. As a
provider of public goods, the state had to be scaled back to leave
room for the market, which would assure more efficiency. However,
the state has also been neo-liberalisms greatest conquest, as its main
locus of action, because it has been primarily through the state that
neo-liberals have been able to realize their vision(s). This highlights
1
We thank all contributors to this volume and the workshops for helpful
discussion and, in particular, Mark Thatcher, Maurizio Ferrera, Gerhard
Schnyder, and Fritz Scharpf for their close reading and insightful comments.
112
The state: The bete noire of neo-liberalism or its greatest conquest? 113
114
The state: The bete noire of neo-liberalism or its greatest conquest? 115
public of their legitimacy, and winning the elections that enabled them
to put their neo-liberal ideas into practice. In combination with the
work and insistence of professional economists to apply the principles
of economic theory to policy decisions, these policy entrepreneurs have
sustained a tool box for political intervention.
The fourth line of analysis, about the strategic use of neo-liberal
ideas by various interests, also holds because such ideas have served
to empower a range of economic actors. Rising inequalities in which
the rich have only gotten richer while the working classes have seen
little or no real wage growth can be directly traced to neo-liberal
policy ideas focused on limiting state regulation, lowering taxes, and
cutting welfare spending.
Moreover, whereas the power of institutions the fifth line of
analysis can be used to explain resistance to neo-liberal ideas and
the slowness of some states adoption of neo-liberal policies, it can
also explain the resilience and staying power of neo-liberalism, once
state institutions have been converted. It is important to recognize,
however, that the differences in national responses result not only
from the presence or absence of receptive formal institutions but also
institutionalized ideas about appropriate government action. As John
Zysman noted many years ago, whereas in Britain the debates allow
for only two choices state control or the free market in France,
such debates consider three choices: faire (the state does), faire faire
(the state incites others to do), and laissez-faire (the state lets private actors do which does not always mean the free market because
the state may allow for private-marketcircumventing arrangements).4
Germany and other smaller Continental and Scandinavian countries
actually offered a fourth choice in debates about government economic
policy making, which Vivien Schmidt (2009) calls, adding to the previously mentioned French terms, faire avec (state does with private
actors). This is at the heart of corporatist concertation.
The first part of this chapter is a discussion of neo-liberal philosophies of the state. The second part considers entrepreneurial political actors neo-liberal ideas that led to the actual transformation of
the state, from ordo-liberal compromise of the state in the 1950s
to conservative neo-liberal roll-back of the state in the 1990s to
social-democratic neo-liberal roll-out of the state from the late 1990s
4
116
The state: The bete noire of neo-liberalism or its greatest conquest? 117
and Rousseau. However, they also take a more radical view of the
relationship between state and market than the older liberal tradition
of Thomas Hobbes and John Stuart Mill.6
In the Republican tradition, the polity comes prior to the individual,
with the common good for all the product of virtuous government
underpinned by citizen participation and debate in the public space. In
this tradition, individual economic activity is necessarily evaluated in
relation to conceptions about what is good for the polity as a whole,
as agreed to by the citizens and judged by elected political leaders. In
the liberal tradition, the order of the relationship between polity and
individual is the reverse of the Republican tradition because, here, the
individual comes prior to the polity. This naturally reduces the scope
for state action, especially given the greater emphasis in liberal thought
on the protection of individuals rights via their negative freedom
from interference (i.e., to guard against the tyranny of the majority)
than on their positive freedom to provide for public goods. The
polity, however, still comes before the economy, with political liberty a
sine qua non for economic freedom. This was the case even for classical
liberals, for whom laissez-faire economics nevertheless allowed for
almost no role for the state. Such a conceptualization of democracy
as prior to the economy made it possible for politically liberal critics
of classical liberalism to argue for an expanded role for the state (i.e.,
freedom to) as long as the citizens generally favoured it and it did not
impinge on individual rights.7
The neo-liberals reversed the traditional liberal relationship between
polity and economy by insisting that economic freedom was a prerequisite for political freedom. Moreover, most were even more radically
individualist than traditional liberals in their assumption that individuals acting in their own narrow, rational self-interest were all that was
necessary to produce the best outcomes for the polity. For the neoliberals, the state needed to be constrained as much as possible to give
free reign to individuals economic freedom and political freedom
would follow.
6
7
118
This position had evolved over time from an initial support for state
intervention to fight private monopolies. See Siems and Schnyder 2014.
9
10
See Buchanan 1986b.
See Schmidt and Thatcher, and Gamble, both in
this volume.
11
12
See Buchanan 1986a.
See Hayek 1944/2007: 856.
13
14
See Hayek 1944/2007: 114.
See Mirowski and Plehwe 2009.
15
See Schmidt and Thatcher, Martin, and Ferrera, all in this volume.
The state: The bete noire of neo-liberalism or its greatest conquest? 119
120
22
23
The state: The bete noire of neo-liberalism or its greatest conquest? 121
public actors need incentives to act against their self-interest, neoliberalism undermined the very altruism and trust on which public
bureaucracies have long depended. Studies show that by assuming
that the only rewards were economic, NPM produced the very rationally self-interested actors it was trying to control while undermining
many non-economic contributions of public service.24
A more fundamental critique comes from Foucault , who views the
underlying assumptions of this neo-liberal approach to governing as
involving a type of engineering of souls.25 It seeks to shape individuals as governable, self-disciplined, enterprising subjects not directly,
through state intervention, but rather indirectly, via the creation of
structures of incentives. He labelled these rationalities used to steer
societies as governmentalities.
If we were to take Karl Polanyis (1945) thesis of great transformation one step farther, as the neo-liberal Mont P`elerin Societys own
in-house interpretation of Polanyi did,26 we could suggest that neoliberalism served as a renewed market movement in response to the
social countermovement. As such, it was undoing what Ruggie (1983)
calls the embedded liberalism of the postwar period that had served
to counter the market movement of classical laissez-faire liberalism,
by dis-embedding market actors from the institutions of the postwar
liberal consensus.27 The ensuing volatility weighing on the weakest
parts of society that Polanyi predicted can now be observed in the
context of the financial crisis. Polanyis analysis leaves little room for
optimism that a solution for the angry protest movements can be found
peacefully within the framework of the current neo-liberal paradigm.
25
See Pollitt and Bouckaert 2011.
See Foucault 2004.
Hartwell 1995: 195, cited in Peck 2010.
See, for example, Esping Andersen 1990 and Blyth 2002.
122
28
29
The state: The bete noire of neo-liberalism or its greatest conquest? 123
See, for example, Albert 1990, Hall and Soskice 2001, Streeck and Yamamura
2001. See also discussion in Peck 2010: 67.
32
See Scharpf 2000.
See Quack and Djelic 2005.
124
The state: The bete noire of neo-liberalism or its greatest conquest? 125
126
The state: The bete noire of neo-liberalism or its greatest conquest? 127
Although the economic process of creative destruction was experienced across the CEECs as privatization, deregulation, and liberalization became the watchwords for reform, states again proceeded in
different ways at different paces.44 Some countries, such as Poland,
engendered a big bang in political economic reform by rapidly liberalizing prices and shifting macroeconomic policy, whereas other countries were slower some so slow, in fact, that they experienced an
anti-democratic backlash, as in Bulgaria.45 Here, too, much depended
on the ideational entrepreneurs who ran the reform efforts. Thus, the
architect of Polands radical shock therapy, Leszek Balcerowicz, was
an ideological entrepreneur of the purest kind. However, although
Vaclav Klaus of Czechoslovakia was similarly ideological, he did not
engineer the same type of rapid, radical liberalization.46
Across Europe, neo-liberalism took hold between the early 1980s
and the early 1990s. Despite widespread resistance to neo-liberal programmes and the patent failure of many its initiatives, neo-liberalism
remained largely resilient. This was due, in part, to the fact that its
opponents did not seem to have any new ideas; were not electable;
or, when elected, seemed to operate in the same way as previous
neo-liberal governments. With the demise of the Soviet Union, moreover, the left found itself without an alternative ideological extreme to
invoke. More important, however, is that resilience came from neoliberalisms own capacity for reinvention, often by attracting new converts to the cause on the left rather than on the right in particular,
with the renewal of neo-liberalism spearheaded by the left beginning
in the mid to late 1990s.
45
46
128
1980s and early 1990s that focused on state roll-back fitted well with
the ideological legacy of the 1930s, the next stage from the mid to late
1990s onwards, which was focused on state roll-out, fitted less well.
At this time, the state began to move from neo-liberalisms main
target of attack to get the state out of the markets to its primary
tool of attack in the markets. From a haphazard process of reactive
state reregulation in response to the deleterious effects of freeing up
the markets, we find a considered process of active state engagement
to create and reinforce liberalised markets.
This is when new forms of state interventionism were invented
that were certainly still neo-liberal in their underlying philosophy but
were much more proactive in their attempts at market-shaping and
market-complementing reforms. This is also when the vocabulary of
governance came to be substituted for government to indicate that
governing without government was not only possible but also desirable. For the public sector, it was when new public management was
replaced by joined up governance along with inter-service coordination and e-governance.47 For labour, it was about flexibility or even
flexicurity and active labour markets;48 for welfare, it was no longer
only about getting people off the rolls but also about getting them into
work through youth employment and welfare-to-work programmes.49
Moreover, as subsequent country chapters demonstrate, this involved
new social-democratic forms of neo-liberalism.
In the United Kingdom, Thatchers neo-liberalism set the ideational
path that the Labour Party could not and, ultimately, did not ignore in
order to regain power as New Labour in 1997.50 As New Labour,
the Party was differentiated not only from the old (Marxian) left but
also from the old (social-democratic) left in order to create a Third
Way, which adopted many of the fundamental premises of Thatcherite
neo-liberalism while insisting that this incorporated the main goals of
Social Democracy. With regard to the public sector, moreover, Blairs
government created what Moran called the steering state, which was
actively involved in developing joined up government and encouraging participation through networks even as it became increasingly
intrusive in peoples lives, particularly on issues of public order and
welfare.51
47
48
50
51
The state: The bete noire of neo-liberalism or its greatest conquest? 129
until the early to mid 2000s. It was only with the recommendations of
the Hartz IV Commission that Schroder
clearly acting as an oppor
tunistic entrepreneur pushed through the most significant reforms
of pensions ever. However, he did so without a legitimating discourse
that explained why it was appropriate to change a pension system
that Germans had come to see as their property rights.54 The absence
of a cohesive set of ideas or frame helps to explain the tenuousness of the reform and its subsequent partial reversal.55 However,
Schroders
persistence in the face of plummeting popularity ratings
130
The state: The bete noire of neo-liberalism or its greatest conquest? 131
63
132
66
See Vernon 1971.
See Clift and Woll 2012.
See Kranke and Lutz
2010.
See Armstrong 2002 and Greenwood 2007.
The state: The bete noire of neo-liberalism or its greatest conquest? 133
134
Growth Pact followed by the Six Pack and the most recent Fiscal
Compact.
Moreover, decision-making processes have become excessively intergovernmental as the joint decision processes of the Community
Method which would include the European Parliament as well as
the EU Commission have been sidelined. Instead, the Franco-German
couple or is it only Germany? make the major decisions. Thus, what
appears to be the resilience of neo-liberalism in European relations is
more precisely the conviction carried by one country in particular.
Furthermore, it is because of the weight and political capacity of the
German state that this vision influences the debate so fundamentally.
The Eurocrisis therefore illustrates that neo-liberal ideas continue and
prevail not because states have withdrawn from politics and delegated
authority to neutral institutions. On the contrary: powerful states are
central to assuring the survival of neo-liberalism in the international
realm.
Conclusion
However we consider the question, it becomes clear that neo-liberalism
does not imply the demise and burial of the state. To be sure, the doctrine maintains that political authority must be insulated from interestgroup pressures and that the market is a better provider of public goods
than the state. To impose reforms, to create and shape the relevant markets, and to negotiate and revise neo-liberal principles in international
cooperation all require strong states, both domestically and externally.
Moreover, the adoption of neo-liberal convictions, even in their purest
form, has never led to a complete disregard for political objectives and
the defence of economic interests: states simply reinvent the intervention they deem necessary and find new ways to protect their interests in
ways compatible with their liberal ambitions. The ways in which such
choices are made depend on the historical legacies and the institutional
and ideational entrepreneurship of the policy makers and elites in each
respective country.
More generally speaking, we can observe different types of neoliberal conquests of the state; all are indicative of the degree to which
neo-liberalism needs to build on and expand political authority and
institutions. In the United Kingdom, the most comprehensive changes
The state: The bete noire of neo-liberalism or its greatest conquest? 135
brought about by neo-liberalism are the instruments accepted as admissible in policy making: the rise of the NPM and the development
of a large controlling bureaucracy that organized the operation of
the market in numerous policy areas.69 In Germany, the imprint of
neo-liberal ideas was much stronger in organizing principles affecting policy discourse and political legitimacy, even if it appeared to
be less neo-liberal than Britain at the level of policy processes and
instruments. France, in turn, has an ambivalent relationship to neoliberalism, which never gained much ground as an ideology in public
opinion. Politicians in France use neo-liberal constraints in an opportunistic manner and apply its principles whenever it advances their
policy agenda. However, they are equally quick to push back or even
develop legitimacy claims based on the arguments of their neo-liberal
opponents throughout the party spectrum. In Scandinavia, neo-liberal
instruments have become part and parcel of the countries adaptation
to economic openness. However, the use of such instruments did not
change the nature of policy programmes or of their normative commitments to the same degree as elsewhere. Central and Eastern Europe,
finally, has an entirely different relationship with neo-liberal reforms,
which were applied with a much greater degree of ideological commitment than elsewhere. Especially in the early years after the fall of
communism, neo-liberal ideas appeared as a matter of national identity (e.g., in the Baltic countries) because it helped to clearly distinguish
their present from their own historical legacies and Russia.70 Yet, the
relationship between neo-liberalism and their communist past was a
matter of intensive debate and interpretation in Eastern and Central
Europe and, similar to other countries that experienced neo-liberalism
as an ideology, it created significant backlashes.
All of this discussion suggests that neo-liberal ideas may have
renewed the state, leading to a new synthesis of what we call liberal
neo-statism. If anything, the state has become more active in managing
the market much more so than anticipated by neo-liberal philosophies and ideologies. This is the basis of its liberal neo-statism, but the
state has also become more liberal in its approach. That liberalism,
however, is not the narrowly construed liberalism of the ideological
conservative neo-liberalism of the 1980s and early 1990s. Rather, it
is a liberalism that is more fully liberal in the widest sense of the
69
70
136
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part ii
Neo-liberalism in major
policy domains
2
4
145
146
147
efficiency gains on the one hand and policy constraints on the other.
However, there is no compelling economic case either way. The decision to create a common currency was at its core political. In turn,
that political decision contained a number of strong ideational commitments that together create an interlocking framework of norms and
beliefs that guide policy making.
The first commitment is to price stability. This commitment derives
its justification from the recognition among economists that inflation
has significant redistributive consequences, that it tends to accelerate
as actors revise their expectations and contractual relationships over
time, and that it has no positive net effect on the level of activity
in the long run. Beyond that intellectual rationale, the commitment
to price stability also reflects the attitudes of the German negotiators
involved in working out the initial designs for the single currency
and who sought to bring along their own central bankers as reluctant
supporters.7 As if that were not enough, soon after the Maastricht
Treaty was ratified, German constitutional lawyers argued successfully
that European price stability is an essential part of the package accepted
by the German parliament. Therefore, any failure to deliver on that
commitment would violate the sacred democratic relationship between
Germanys elected representatives and their voters.
The political commitment to price stability is bound up with the
decision to grant independence to the ECB and its corresponding
national central banks. Here again, there is an economic and a political rationale. The economic argument for central-bank independence
derives from the fact that the incentives for policy makers involved in
monetary-policy decision making are time-inconsistent and therefore
should be governed by rules rather than discretion. The political argument reflects concern that there would be many non-German voting
members on the governing council, which is the body responsible for
making monetary-policy decisions. The only way to ensure that the
governing council gives priority to price stability is to insulate it from
the political control of the member states over their national centralbank governors.
The advantage of the price-stability rule from an economic perspective is that it underscores the neutrality of money by eliminating
price inflation as a source of uncertainty. Hence, although the ECB is
charged with supporting the broader economic goals of the member
7
148
149
accountable for their own excesses; otherwise, they will face adverse
incentives to break the sound-finances commitment in the knowledge
that others will absorb the consequences.
What is telling about the sound-finances rule is that it applies to
the difference between revenues and expenditures and not the broader
relationship between states and markets. This is an example in which
the distinction between an encompassing policy paradigm and a more
partial framework of ideas is important. The BrusselsFrankfurt consensus never extended to fiscal integration and neither did it imply
constraints on the scope of national-welfare states. Instead, it focuses
much more tightly on the market distortions caused by government
borrowing. In this sense, the prescriptions it contains are embedded
in different national statemarket traditions. The parallels with the
compromise of embedded liberalism that described the early postwar
international economic system are close.9 The idea of fiscal responsibility was socially embedded in very different national contexts.
This is not to say that welfare-state structures were insulated from
the BrusselsFrankfurt consensus. Rather, the point is that any influence was indirect rather than explicit. Once member-state governments signed up for irrevocably fixed exchange rates, stable money,
and sound finances, they had few remaining instruments for macroeconomic adjustment. Some of the smaller, corporatist countries could rely
on price-incomes policies. However, the larger or less corporatist member states could only hope that domestic-market adjustments would be
macroeconomically efficient meaning that prices and wages would
be flexible and unemployment would be temporary.
The emphasis on the domestic dimension of market adjustments
was implicit. Although the European Treaties openly celebrate the
free movement of labour, Europes heads of state and government
did not aspire to create the conditions for mass migrations of unemployed workers to move from one member state to the next in search
of employment. Even labour migration within countries was open to
question. Hence, the goal was to create efficient local-factor markets so
that workers could move from one job to another without necessarily
changing their place of residence.10
This emphasis on improving the efficiency of local labour (or
factor) markets is a recurrent theme in European welfare-statereform debates. The usual rhetorical device is competitiveness. The
9
10
150
12
151
152
153
14
154
Stable money
The problem was that Europes new single currency did not play by the
rules. Consider the case of monetary stability. The challenges emerged
almost immediately and concerned the link between monetary growth
and price movements, the divergence of inflation rates across countries, the gap between actual and expected inflation, and the value of
the euro relative to other currencies, particularly the dollar. It is worth
discussing each of these challenges in turn because each displays a different dimension of the underlying problem: monetary stability is many
things, many of which are interconnected in ways that are mutually
destabilizing.
The gap between monetary growth and price movements is a good
place to start the discussion. The basic presumption is that price movements are somehow a function of the volume of money in circulation.
Therefore, any change in the supply of money to the economy should
have an impact on prices. From the outset, the ECB built this notion
into its policy regime as one of the two pillars of its decision-making
process. When setting policy, the governing council looked at both the
expected rate of inflation over the medium term and the actual growth
in the broad money supply (i.e., M3) relative to a reference value
initially set at an annualized growth rate of 4.5 per cent. The problem was that the relationship between M3 growth and price inflation
appeared unstable: M3 growth would move far ahead of the reference
value with little impact on prices. This created confusion within the
market, in which participants were trying to use the relative growth
of M3 as a means of predicting monetary-policy changes. Eventually,
market participants began to speculate on a change in the reference
value. However, changing the reference value makes little sense if the
underlying relationship between monetary growth and price inflation
is unstable. Hence, the ECB decided first to make the reference value
permanent and then to push this aspect of monetary analysis into the
background of its decision-making process.
When the ECB put less weight on monetary analysis, it necessarily
had to put more weight on inflation-targeting. However, inflationtargeting suffered from two other problems. The first is that the
relevant measure of inflation for monetary-policy marking refers to
the aggregate price movements across the entire Eurozone. Within
that aggregate, national price movements were expected to converge
155
around a common norm; however, they did not. Instead, price inflation
accelerated in some countries and decelerated in others along diverging trajectories. This explains why the ECB revised its price-stability
target from open-ended below 2 per cent per annum to more narrowly defined below but close to 2 per cent. Given the wide variation
in national-price performance, monetary policy makers hoped that a
consistently higher target would ensure that countries did not fall into
deflation. Moreover, these divergences in inflation rates proved to be
persistent over time. As a result, countries ended up with very different price levels. This is important when the discussion returns to the
notion of competitiveness.
The second problem with inflation targeting is that actual rates of
inflation are not always expected. The ECB can set policy to ensure
that expectations about inflation remain stable, but it has little control
over energy or commodity price shocks that might distort actual performance. This problem is primarily one of perception: contemporary
observers see that actual inflation in the Eurozone exceeds its target
more often than not, even as the ECB lauds its ability to hold prices
stable. It is not surprising that this creates cognitive dissonance. The
response was for the ECB to make its assessment of expectations more
transparent, revealing both the sources of its information and the modelling assumptions it uses when anticipating future price increases. In
turn, this made the ECBs own actions more predictable and therefore
more prone to speculation in the markets. Hence, the ECB had to learn
to clearly telegraph its intentions to avoid the unnecessary volatility
that might arise when market actors make inaccurate guesses about
the banks next policy moves.
The euro as an internationally traded currency was prone to speculation as well, which was clear from the outset. The euro launched
in January 1999 at a relatively strong $1.17 exchange rate and then
fell like a stone. By September 2000, it was down to around $0.82.
Efforts by the then ECB President Wim Duisenberg to engineer a coordinated intervention with the United States Treasury failed to restore
confidence; instead, those efforts underscored the ECBs weakness in
influencing the euros external value. Subsequent movements in the
eurodollar relationship have repeatedly reinforced this lesson. Worse,
they have shown that different European countries are affected asymmetrically by sharp oscillations in the dollar value of the euro. Energy
and commodity prices are affected differently as well. In this way,
156
157
Sound finances
Member-state efforts to enforce fiscal moderation were no less straightforward than the struggle for monetary stability. Three dilemmas are
particularly salient: the quality of the measurements, the effectiveness
of the enforcement mechanisms, and the consequences of getting things
wrong. As with the monetary part of the framework, these are distinct
problems but they are also at least potentially reinforcing.
Of the three, the measurement issue is the most complex. The bottom line is that there is no meaningful and absolute definition of what
constitutes a fiscal deficit.16 The theoretical principle is straightforward: a deficit is the difference between revenues and expenditures. The
accounting practice is not. Here again is confirmation of the notion
that ideas persist more in rhetoric than in reality and that they are
more viable in theory than in practice. The rules for what goes onto
the governments balances and how they are recorded rest on a host
of assumptions and judgements that are not easily communicated or
transposed from one accounting system to the next. Hence, all measures are relative to the accounting practices that underpin them.
Moreover, not all accounting practices convey the same meaning
in economic terms. Different rules give priority to different models
and causal mechanisms. The cyclically adjusted structural balance is
a good example. The idea is to show the net impact that a government has across the business cycle. The practice rests on a number of
assumptions about how government accounts would perform under
counterfactual economic circumstances. There is a logic to making
this adjustment: by changing the accounting rules, what the deficit
means also changes. Nevertheless, the implication is that meaning is
always relative to the system of accounts.
This presumes, of course, that governments follow the rules when
assembling their accounts. They do not. Sometimes governments break
the rules because they want to highlight particular achievements or
avoid particular complaints. Other times, they simply do not have
the administrative capacity to ensure accounting compliance. In both
respects, the problems that Greece has had are qualitatively worse and
yet not categorically different from those experienced elsewhere.
Deciding whether a government is actually running an excessive
deficit is essentially a political choice. Deciding what to do about that
16
158
159
aramo
2012.
See Gonzalez-P
160
banking system and the banks would provide essentially the same service for the member states. If so, the policy succeeded beyond expectations; long-term government bonds declined across Europe during
the first quarter of 2012 as a consequence. Unfortunately, that success
came only as a consequence of tying the financing of governments ever
more tightly to the solvency of domestic banks. When losses became
apparent in the banking system, the markets turned on the governments as well, which is what happened in Spain.
161
arrangements during the past two decades is a better measure of success. This is a rare instance when the rhetoric of the BrusselsFrankfurt
consensus and the reality of underlying policy measures overlapped
precisely and with positive effect. Consider the historical contrasts.
During the 1970s, most governments used welfare-state institutions
to hide macroeconomic problems. During the 1980s and early 1990s,
they engaged in welfare-state reform despite the macroeconomic consequences. By the end of the 1990s, however, it became clear that
welfare-state reform and macroeconomic performance had to move in
tandem. It was not enough to hollow out and harden the state against
conflicting societal interests or pluralistic stagnation. Politicians had to
find ways to make welfare-state institutions work better to encourage
employment while also creating incentives for innovation. This is what
the drive to make European local-factor markets more efficient has to
offer.
The distinction between theory and practice nevertheless remains
important in explaining the persistence of the idea. Europes success
in achieving greater factor-market efficiency is limited in two important respects. The first is related to conflicting national priorities; the
second is more akin to a capabilitiesexpectations gap. The conflicting priorities have been evident at least as far back as Jacques Delors
original white paper on jobs, growth, competitiveness. In that early
document, the tension was between employment and environmental
protection. During the late 1990s, the tension manifested as a competition among different reform processes that is, Luxembourg, Cardiff,
and Cologne. Under the overarching Lisbon strategy, it metastasized
in a host of competing benchmarks and targets. The effect has been to
diffuse political energy and thereby reduce the momentum for reform.
The consequences of this shortcoming have been significant. When former Dutch Prime Minister Wim Kok published his mid-term report on
the Lisbon strategy in November 2004, he made it clear that the stakes
concerned the survival of Europes social model and not the assertion
of European economic predominance.
Koks rhetoric was dramatic but not in the context of the strategic
objectives set out by the March 2000 Lisbon European Council. On the
contrary, the Kok report helped to deflate some of the hyperbole that
shaped European expectations about the advantages of welfare-state
reform. This is where the rhetoric about competitiveness becomes
important. The basic idea is to facilitate adjustment in the context of
162
stable money and sound finances. There will always be winners and
losers from market dynamics, but a competitive national economy
should perform better overall. This is a fairly subtle argument, and
it is made even more subtle by the fact that different countries have
different traditions for statemarket relations. Competitiveness is not
a straightforward trade-off between equity and efficiency; it is a matter
of engineering combinations of both.19
Such a subtle argument is impossible to sell to the general public.
Hence, Europes politicians have made it simpler. Competitiveness is
efficiency, period. With greater market efficiency, Europeans will have
less reason to fear unemployment. This argument started in the mid
1990s and has continued to gain traction ever since. The dichotomy
it provides is simple: competitiveness or unemployment, reform or
decline.20
This dichotomy is not inaccurate, only exaggerated. Although it has
proven convincing for many, it has also resulted in mismanaged expectations. When the results of welfare-state reform turn out to be less
than expected, the potential for disappointment is high. Disappointment is also acute among those groups that bear the greatest costs
of adjustment in response to competition. The result is that popular support for European integration demonstrates a strong negative
correlation with labour-market performance. Meanwhile, right-wing
populists use welfare chauvinism to appeal to groups most at risk from
competitive adjustment, and they often combine that message with
attacks on European integration. Indeed, this programmatic combination is one of the most significant factors that groups as diverse as the
Austrian Freedom Party, the Italian Lega Nord, the French National
Front, and the Dutch Party of Freedom have in common.
Such criticism should not be taken too seriously. The push for efficient local-factor markets and welfare-state reform did not give rise to
right-wing extremism, even if the mismanagement of expectations did
give right-wing populists an open goal. Moreover, it is striking that
both welfare-state reform and the competitiveness that lies behind it
have emerged as a new European norm. This is true particularly for
those countries hardest hit by the sovereign-debt crisis. Greece has been
slow to implement many necessary measures, but it has been faster
and more resolute than ever before. The same is true for Spain and
Italy. Such efforts will never totally eliminate unemployment in these
19
20
163
Interdependence
The problem with Europes new competitiveness norm is not that it
has failed to make European national labour markets more efficient.
They did become more efficient, albeit perhaps only marginally in
some cases. Rather, the problem is that the equation of competitiveness
and efficiency has created a vacuum around notions of solidarity and
interdependence that can have a powerful influence on macroeconomic
performance. Here is where we begin to see signs of this volumes
editors third line of analysis for explaining ideational persistence
that is, the lack of a compelling alternative.
This vacuum around notions of solidarity and interdependence is
obvious in the context of intra-European macroeconomic imbalances.
The BrusselsFrankfurt consensus offers only one virtuous policy combination: stable money, sound finances, and efficient local-factor markets. This combination is easiest to merge with a surplus of exports
over imports; the alternative is more challenging. Countries that import
more than they export tend to have higher rates of inflation and to borrow more than they save. Over time, and assuming that they do not
have a flexible exchange rate, they will also experience relatively rapid
increases in domestic wages relative to their competitors and perhaps
also higher levels of unemployment. This appears anything but virtuous viewed through the lens of the BrusselsFrankfurt consensus. The
reality, however, is that the two different sets of experiences are opposite sides of the same coin. Moreover, the same dualism operates within
as well as across countries. The coreperiphery divide in the euro area
parallels the northsouth divide in Italy, the southnorth divide in
the United Kingdom, the eastwest divide in Germany, and a host of
other cases. Hence, it is worth considering why the BrusselsFrankfurt
consensus did not give way to a more pliable policy framework. The
answer lies in the editors fourth line of explanation: that is, the power
of interests.
164
The rapid convergence of long-term nominal interest rates provides the starting point for this analysis. That convergence took
place because financial institutions with excess savings in northern or
core European countries sought higher returns on their investments
in southern or peripheral countries. These investments took many
forms, ranging from sovereign-debt purchases to interbank lending
and cross-border deposits. No matter what the situation, the dynamic
was the same. The borrowers on the periphery made a market in which
the lenders from the core participated. The results were the same as
well. Financial institutions on the periphery progressively found themselves holding onto surplus financial resources because they were
priced out of their domestic sovereign-debt markets, because they purchased an interbank loan, or because they accepted a cross-border
deposit.
These peripheral financial institutions faced very different incentives
from their counterparts in the European core. They did not confront
saturated domestic markets for lending and therefore did not need to
go abroad to hunt for yield. Instead, they displayed a typical home
bias in booking new assets, with the result that credit use increased
domestically on the back of financing made available from abroad.
The uses of that credit varied among countries but always involved
a mix of new assets, some productive and others purely speculative.
Over time and with continued expansion of lending, the volume of
bad assets accumulated. As long as domestic firms continued to make
profits, however, this accumulation of bad assets had little net impact.
The expansion of credit in the periphery (from the core) did affect
domestic prices. As more money flowed into the economy than could
be generated through domestic income, the price for domestic output
(including wages) was certain to increase. This explains at least part of
the divergence in inflation rates across countries. Current account balances also diverged sharply. Although the peripheral countries maintained their export-market shares until the beginning of the crisis, the
inflow of credit from the core necessarily entailed an increase in imports
over exports as well. In this way, the current account accommodated
the pattern of capital flows.
Then the crisis struck and capital flows shifted into reverse, moving
from Europes periphery back to the core. New credit suddenly ceased
to be available for the banks on the periphery and the bad assets they
had accumulated were no longer manageable. Worse, banks began
165
166
167
Alternative arrangements
The elements of a new arrangement are starting to emerge, and they all
respond to the problem of interdependence with an increasing emphasis on solidarity. This emphasis goes well beyond the minimal contours
of the BrusselsFrankfurt consensus. It demands a much higher level of
cooperation across countries and a much greater trust as well. Neither
of those factors appears sufficiently abundant; as a result, there is little
prospect that these alternatives will find widespread acceptance.
The most obvious alternative is to push forward with a more
comprehensive discretionary framework, which encompasses the
debate concerning fiscal federalism and economic government. The
idea would be to either empower the ECB to act as lender of last resort
for member-state governments or endow another European institution
with sufficient resources to play that role. So far, that argument has
only attracted theoretical support often using the United States as an
example. That illustration is somewhat incongruous given the inability
of the US Congress to exercise its fiscal authority. This suggests that
the whole debate about fiscal federalism is more cynical than real.
If anything, a re-nationalization of fiscal and monetary policy seems
more likely.
A more modest prospect would build new institutions to manage interdependence such as an emergency bailout mechanism,
a common-deposit-insurance provision, and jointly issued sovereign
Eurobonds. In other words, the idea is to expand the Brussels
Frankfurt consensus to include financial union as well as monetary
union, thus eliminating an important gap in the policy framework.
168
These proposals are gaining traction. The European Council has agreed
to bring the permanent European Stability Mechanism forward, even
if it remains unwilling to provide that facility with sufficient resources
to do the job. Common-deposit insurance is not yet on the table but
the arguments are widely mooted. As for the Eurobond proposal, the
EC has issued a green paper to argue that such instruments should be
considered stability bonds. There is considerable merit to the argument: not only would such a common instrument lower incentives for
peripheral savers to seek a financial safe haven in the European core;
they would also sever the tight coupling between national banking
systems and their home-government finances.
These proposals are also driving a wedge into the BrusselsFrankfurt
consensus, with much of Europe on one side and much of Germany
on the other. French President Francois Hollande, Italian Prime Minister Mario Monti, and Luxembourg Finance Minister Jean-Claude
Juncker have emerged as the greatest supporters of the Eurobond proposal, whereas German Chancellor Angela Merkel and Finance Minister Wolfgang Schauble
appear to be the staunchest opponents. That
said, Germany is hardly alone in this argument; Finland, the Netherlands, and Slovakia are also openly reluctant.
The challenge is to reassure political actors in these countries
that these new institutions can be made compatible with preexisting
values stable money, sound finances, and efficient local-factor markets. So far, that argument is proving difficult to sell. Hollande, Monti,
and Juncker tend to argue that Europe will get there eventually, but
only Hollande seems willing to push harder now. Meanwhile, the existing institutions for European decision making provide numerous veto
points that slow the efforts to define these alternative institutions. If the
BrusselsFrankfurt consensus appears resilient as a policy framework
in this context, it is because of this institutional inertia.
Long after the BrusselsFrankfurt policy framework ceases to inspire
consensus, the institutions it brought forward will remain in place.
Politicians will continue to pay lip service to the virtues of stable
money, sound finances, and efficient local-factor markets because they
recognize that the cost of pulling a national economy out of the Eurozone would be unacceptable. Realization of that fact already seems
widespread if not exactly welcome. In that sense, muddling through
may have paid off as a strategy for managing the crisis.
Then again, the end of the current crisis may only set the stage for an
even bigger crisis to follow. As long as Europeans continue to adhere
169
21
170
171
172
Supranational neo-liberalization
173
174
Moreover, the EU legal framework was able to accommodate different models of regulating markets. As surprising as it may seem today,
however, when ECJ decisions and EU legislation are used to justify
the focus on competition, EU Treaties are, in fact, broadly worded.
Competition is not one of the EUs objectives under the 1957 Treaty
of Rome; instead, according to the Preamble, fair competition is a
means to achieve a common market in pursuit of the essential objective
of . . . constant improvements of the living and working conditions of
their people.8 Moreover, there are Treaty provisions that permit the
pursuit of aims other than competition. Thus, for instance, although
member states may not introduce prohibiting measures with effects
equivalent to customs duties,9 this is counterbalanced by their ability
to take measures that restrict imports from other member states on
several broad grounds (e.g., public morality, policy, security, health,
and cultural heritage).10 Equally, there is a strong doctrine of services
of general interest recognized by the European Commission (and the
ECJ).11 It involves pursuing non-economic aims and objectives such
as universal service (usually defined as ensuring essential services at
reasonable cost to all citizens) or other minimum rights, and it is linked
with well-established national legal, economic, and political doctrines
of public service.
Even Treaty provisions relating directly to competition in economic markets seemed open to non-neo-liberal interpretations. There
appeared to be wide scope for using public-sector organizations to
avoid competitive markets. The important Article 10612 states that
competition rules apply to undertakings entrusted with the operation
of services of general economic interest . . . in so far as the application
of such rules does not obstruct the performance, in law or in fact, of
the particular tasks assigned to them. Even general-competition law
includes aims other than competition. A perhaps surprising example
is state aid, which can be permitted for a series of purposes that are
not only social but also economic for example, for development or
to remedy a serious disturbance in the economy of a Member State
8
9
10
12
Supranational neo-liberalization
175
Article 107(2) and (3). For policy analyses of state aid, see Zahariadis 2010
and Smith 1998.
For a legal history, see, notably, Hancher and Larouche 2011 for regulation
and Maher 2011 for competition law.
Notably, the Cassis de Dijon case of 1979 and the Dassonville decision of
1974. For a discussion, see Stone Sweet 2004.
See, for instance, the 1985 British Telecommunications (BT) case, [1985] ECR
873.
See Smith 2005, Jabko 2006, and Armstrong and Bulmer 1998.
176
linked to being a (or, rather, the) means of achieving European integration. Moreover, the single European market was interpreted as the
removal of all barriers to trade, not only cross-border trade but increasingly domestic exchange as well. Equally, the scope of its application
was widened to include parts of previously excluded sectors, such
as telecommunications, energy, air transport, and financial services.
General-competition policy also took a more decisive turn towards
ideas of allowing market forces to operate, notably under the Irish
Commissioner Peter Sutherland (19851989) and especially the British
Commissioner Sir Leon Brittan (19891993).
Nevertheless, during this phase, rival conceptions of EU regulation
remained. One view was that the EU should seek the rapid extension
of competition across markets and remove constraints on firms. This
was often advanced by a more liberal coalition of certain member
states (led by Britain but often including Germany and other Northern member states) and parts of the European Commission (especially
Directorate General [DG] Competition, then called DGIV). The coalition was generally supported by rulings of the ECJ, which became a key
player in supporting additional EU powers to extend competition.18 In
contrast, a rival view was that the extension of competition should be
slow and limited to services purchased by large firms that had the ability to change suppliers and that faced international competitive pressures to lower their costs. Moreover, liberalization was to be counterbalanced by re-regulation to shape markets through setting standards
and rules to ensure that competition did not damage collective benefits
(e.g., universal service). This conception also favoured EU promotion
of large European champion firms that would receive active EU support (i.e., financial and regulatory) to take advantage of the new large
European market, thereby representing a form of EU industrial policy
or even grand projet. This approach received support from more statist
or Southern member states, usually led by France, many of their
national-champion firms, and parts of the European Commission
(often sectoral-industry DGs, DG for industry, and DG for regional
policy). The differences between the two conceptions should not be
overemphasized both accepted the extension of competition through
18
For instance, by applying Article 106 (ex Article 90) (3) to oblige member
states to end legal monopolies. See, for instance, European Court of Justice
1991 and 1992.
Supranational neo-liberalization
177
178
24
25
22
Cf. Smith 2005.
Cf. Schmidt 2007.
These may take the form of provisions about conditions for access by
competitors to infrastructure networks, unfair pricing or terms and conditions,
or provision of information.
Available at http://ec.europa.eu/competition/state aid/overview/public
services en.html, accessed 8 February 2013. For a discussion, see Hancher and
Larouche 2011.
Cf. Sauter 2008 and Hancher and Larouche 2011.
Supranational neo-liberalization
179
such as soft-law instruments and deliberation through experimentalist governance, from forums to advisory committees and codes of
practice.26 To address cross-national disparities in implementation,
EU-level bodies can be established to coordinate national regulators (e.g., the recently created European agencies in fields such as
finance and network industries) and, in a few fields, certain decisions at taken by EU bodies, including the European Commission
(notably parts of competition policy). Hence, there is considerable
institutional flexibility in pursuit of the principle of a single European
market.
The neo-liberal regulatory model exhibits all three elements of
resilience: continuity and adaptation, dominance, and survival.27 Thus,
the principle of competition has been extended across many sectors.
Equally, re-regulation has been increasingly focused on promoting
competition (as opposed to counterbalancing competition). The principle of competition has also gained a predominant place in much
of the EUs debates and discourse about its regulation of markets,
in both general-competition policy and individual economic sectors.28
It overshadows other policy objectives, whereas industrial policy has
increasingly become marginalized or excluded as illegitimate (notably
on grounds of constituting state aid and an impediment to fair competition).
The focus on competition has survived in the face of critiques and
problems that arose before and after the economic crisis of 2007
2008. Despite the ending of legal monopolies, tariffs have failed to fall
or have even risen in markets such as energy. Key industries including telecommunications, banking, and energy remain dominated by
incumbent suppliers but also face difficulties in ensuring sufficient
long-term investment. State aid to national firms remains, as seen most
clearly in banking after 2008 but also in other industries.29 Indeed,
implementation has often proved difficult and the principles of the
neo-liberal model have often not been followed in terms of national
26
27
28
29
180
See, for example, Smith 2005 on state aid and Nicoladis and Schmidt 2007 on
services liberalization.
See Grossman and Woll 2011, Nicoladis and Schmidt 2007, and Crespy 2010.
Cf. Kingdon 1984 and Culpepper 2011.
See, for instance, European Commission 2012, which examines state aid being
permitted for broadband networks.
Supranational neo-liberalization
181
and state bailouts of banks have been permitted. Equally, the Lisbon
Treaty has included several articles that point to greater emphasis on
social and economic objectives.34 Yet, no serious alternative models
in the sense of coherent frameworks have been proposed. Competition continues to be the dominant norm that is progressively extended;
a recent example in 2013 was when the European Commission adopted
plans to liberalize the domestic railway services and insist that operation of the track and services be separated.35 This has occurred despite
the multiple difficulties that such changes have created in the United
Kingdom. Far from reversing direction, the EU has given considerable
attention to institutionalizing competitive markets by strengthening
EU regulatory agencies charged with ensuring greater implementation
of EU law.36 It has even given responsibility for implementation of
regulation directly to EU bodies for instance, supervision of large
banks being placed with the ECB. Despite the crisis, EU regulation
remains dominated by the objective of competition, with debates on
how to achieve it (especially the degree of integration and institutional
arrangements) rather than whether to seek other policy objectives, let
alone alternative forms of market organization.
35
36
182
The growth of EU economic regulation has been subject to extensive study. Many analyses have focused on the issue of European
integration37 or processes of EU policy making.38 These are useful
in pointing to the intermingling of two distinct processes: European
integration and neo-liberalization. Moreover, they specify key actors
and processes through which integration occurs. Of particular interest
is neo-functionalisms identification of key coalitions notably, the
European Commission, the ECJ, and large firms and the feedback or
spill-over processes that bind their coalitions together as cross-border
trade grows. However, studies are mostly focused on explaining the
expansion of EU powers rather than the content and resilience of neoliberal regulatory ideas at the EU level.
The most direct analysis is that of the regulatory state.39 This provides a descriptive argument of a change in the nature of regulation away from (re)distribution and towards rule-making. It sets out
explanatory factors lying in broad developments, notably the decline
of Keynesianism. Nevertheless, it says too little about the neo-liberal
content of EU regulation and about alternatives; it is not clear why a
move towards rule-making should be neo-liberal.
Thus, to respond to the questions, the present analysis begins by
examining the features of neo-liberalism that were particularly attractive to key supporters in the policy process of the neo-liberal regulatory model. Thereafter, it looks at the ways in which key actors in
EU decision making were able to benefit from those ideas as well as
self-reinforcing processes that increased the attraction and power of
neo-liberalism, drawing on other frameworks to explain EU regulation
and integration.
The EUs regulatory model is broad and marked by significant ambiguities. The first, linked to a general ambiguity in neo-liberalism, concerns the role of the state and the nature of a free market. The model
envisages that regulation should promote competition by allowing
firms freedom from state restrictions and by regulating firms to allow
others to compete fairly. The central concept of the market is highly
plastic and open to interpretation and reconfiguration40 ; indeed, it
may be appropriate to refer to neo-liberalisms. At one end of the
37
38
39
40
See, for example, Sandholtz and Stone Sweet 1998 and S. Schmidt 1996.
See Bulmer et al. 2007 and Armstrong and Bulmer 1998.
See Majone 1994, 1996; McGowan and Wallace 1996; and Moran 2002.
Cf. Jabko 2006.
Supranational neo-liberalization
183
184
development of the EUs regulatory model.41 The Commission is usually viewed as seeking to both extend its powers and deepen European
integration. However, it suffers from major constraints: it is internally
divided, both at the level of Commissioners (who are nominated by
national governments) and organizationally among different DGs; it
faces powerful member states that have diverse policy preferences; it is
unelected and lacks wider popular legitimacy; and, contrary to popular myth, it remains a remarkably small organization, relative to both
national governments and the tasks of regulating complex markets.
Several features of neo-liberalism aid the European Commission
in circumventing these constraints and pursuing its objectives. Neoliberalisms breadth and ambiguities allow the Commission great flexibility in seeking to satisfy diverse internal and external preferences.
Thus, for instance, regulation to open up markets to competition can
satisfy countries (e.g., the United Kingdom) that are seeking freer
markets in the sense of fewer constraints on firms. Regulation to
end monopolies and re-regulation for competition to prevent the market power and privileges of incumbent firms meet the views of more
ordo-liberal actors (often led by Germany). The combination of liberalization and re-regulation also aids the Commission in reconciling the
preferences of economic liberals with more statist views (often put
forward by countries such as France and Italy). Such re-regulation can
be presented as shaping markets and especially as protecting wider
policy objectives (under the heading of services of general interest).
Finally, the apparently legal and technical nature of neo-liberal regulation avoids explicit redistribution, which could pose difficult legitimacy issues for an unelected body such as the European Commission,
as well as problems of resource constraints.42 Instead, the model allows
the Commission to focus on apparently non-distributional issues such
as entry to markets, non-discrimination among suppliers, and barriers
to competition.
The model gives rise to incremental but powerful self-reinforcing
processes that make it especially attractive to the European Commission. Although early Commission initiatives to establish regulation
in new domains were frequently limited in scope, the Commission
can set out far-reaching purposes and ambitions. Thus, for instance,
41
42
Supranational neo-liberalization
185
43
45
48
44
See Thatcher 2007.
See, for instance, Goodman 2006: chaps. 7 and 8.
46
47
Cf. Bulmer et al. 2007.
See Scharpf 1996.
See Vogel 1996.
The strongest examples concern the right of the European Commission to issue
its own directives under Article 106 (ex Article 86(3) and before ex Article
186
as the Cassis de Dijon judgement in 1979, which prohibited nontariff barriers to trade, provided the impetus for Commission action
in a neo-liberal direction in at least three ways: (1) substantively, they
have strengthened the neo-liberal model centred on competition; (2)
politically, they have encouraged and aided the European Commission
in extending its regulatory model; and (3) institutionally, they have
affected the European Commissions powers.
The ECJ also has gained power and an enlarged role from the neoliberal regulatory model. The development of legal regulation has aided
the growth of Euro-legalism, in which policy is increasingly made by
adversarial legal cases.49 These combine substantive issues about competition with constitutional questions about the allocation of powers
within the EU.50 Hence, the ECJ can issue rulings that extend European integration. The breadth and ambiguities of the regulatory model
allow the ECJ considerable discretion in its rulings. Thus, it has been
able to support the extension of competition into the core networks
of telecommunications and energy from the 1980s onward and place
limits on competition in other sectors such as social insurance and
support for services of general economic interest.51 Hence, the ECJ
enjoys a central role in defining, developing, and applying the regulatory model.
Member states might seem to be unlikely allies for the Commission.
Yet, the EU regulatory model has often gained the support of, or at least
acceptance of, most national governments. The preferences of governments about the degree of neo-liberalism and its form vary. However,
the EU neo-liberal model is well equipped to accommodate such diversity as a result of its ambiguities, flexibility, and variety of elements.
It can offer the opening of markets to more neo-liberal countries (e.g.,
Britain), whereas more statist countries (e.g., France) can look to
re-regulation that organizes markets. The accommodative capacity of
the EUs model is enhanced by the separation of rule-making at the
EU level from implementation of those rules by member states, which
allows national governments considerable discretion. In addition, the
model permits frequent reliance on soft law and several modes of
49
51
Supranational neo-liberalization
187
53
Cf. Fioretos 2011, S. Schmidt 2002, and Hall 2007.
Cf. Putnam 1988.
Cf. Clifton, Comn, and Daz-Fuentes 2006; Thatcher 2007.
56
See Coen 2010.
See Coen and Richardson 2009.
188
the direct influence and impact of electoral and popular pressure. The
neo-liberal nature of the EU regulatory model further limits the mobilizing capacities of both groups it is based on dry legal texts that
are often complex (especially re-regulatory texts) and that provide few
direct, politically salient consequences for consumers (e.g., redistribution and price changes). Instead, it is presented in a depoliticized
manner as arising from the legal framework of the EU and involving
achievement of a politically neutral aim, notably competition, which
will offer benefits to consumers. Moreover, because implementation of
EU regulation is generally left to member states, it is difficult for trade
unions, employees, and consumers to mobilize against the EU.
Cf. Cini and McGowan 2009, McGowan and Wilks 1995, and Wilks 2010.
Wilks 2010: 753.
For debates in law and economics, see, for instance, Gerber 2001; Van den
Bergh and Camesasca 2006: chap. 3; and Monti 2007.
For discussions and overviews, see, for instance, Gerber 2001 and Van den
Bergh and Camesasca 2006.
Supranational neo-liberalization
189
190
is usually perceived as highly neo-liberal, in fact, the ECMR represented a compromise among the different actors. It is broadly worded
and contains objectives other than promoting competition, reflecting
the diverse views and interests in its passage. It represented a move
towards greater European integration. Thus, it gave sole authority to
the Commission to approve, prohibit, or impose conditions for large
mergers (i.e., concentrations).65 The Commission examines mergers
to determine whether they are compatible with the common market.66
The most formal and imperative criteria in the 1989 ECMR stated that
Commission decisions are to be based on whether a merger creates a
dominant position in the relevant market.67 This test was changed in
2004 to a significant impediment of effective competition, although
dominance was retained as the core criterion for accepting or prohibiting a merger.68
The EU merger regime established in 1989 provided considerable
scope for interpretation. The ECMR did not define the key concept
used to judge a merger namely, a dominant position. Moreover,
the criteria to be taken into account by the Commission are broad
and extend beyond the need to maintain and develop effective competition to other factors relating to both the market power of firms
and industrial policy and welfare objectives. Hence, it includes objectives about market competition but also the interests of consumers and
technical and economic progress.69
65
66
67
68
69
Supranational neo-liberalization
191
Although the wording of the 1989 ECMR left ample room for
diverse ideas, a neo-liberal discourse has developed for merger control. The central focus is on greater competition, which is viewed as
the sole policy objective because it, in turn, offers other benefits, such as
maximizing consumer welfare.70 Thus, successive competition Commissioners including Sir Leon Brittan, Mario Monti, and Nellie Kroes
(usually presented as neo-liberals)71 have repeatedly emphasized their
belief in competition and rejection of national protectionism.72
A detailed and complex model for merger regulation was developed
after 1989, composed of the ECMR, legal cases, European Commission
documents, and many commentaries.73 The model is neo-liberal in the
sense of being centred on competition, which is understood to be
almost the sole criterion for decisions. The European Commission,
together with the ECJ, developed detailed norms for analysing effects
on competition, notably about crucial matters such as relevant markets
and what constitutes acceptable market shares.74 Those norms are
often favourable to mergers. Thus, for instance, relatively high market
shares are often acceptable (e.g., even more than 30 per cent), and
Sir Leon Brittan argued that as a rule markets are dynamic and selfcorrecting and only mergers resulting in unacceptable market power
should be prohibited.75
Overall, the central norm has been to accept many mergers, especially cross-border mergers, on the grounds that they do not damage
competition. Indeed, between the start of the regulation in 1990 and
the end 2009, the European Commission approved more than 94 per
70
71
72
73
74
75
their access to suppliers or markets, any legal or other barriers to entry, supply
and demand trends for the relevant goods and services, the interests of the
intermediate and ultimate consumers, and the development of technical and
economic progress provided that it is to consumers advantage and does not
form an obstacle to competition. Article 2(1) (a) and then (b).
See Buch-Hansen and Wigger 2010, 2011; cf. Wilks 2010; Cini and McGowan
2009.
See Buch-Hansen and Wigger 2011.
See, for example, Brittan 1992: 1926; and Kroes 2006.
For legal analyses, see Whish and Bailey 2012, Cook and Kerse 2009, and
Monti 2007.
Notably, the Commission Guidelines on horizontal and vertical mergers:
European Commission 2004, 2008. For detailed legal analyses, see, for
instance, Whish and Bailey 2012, Schwalbe and Zimmer 2009, and Cook and
Kerse 2009.
Brittan 1992: 2021.
192
cent of the 4,274 cases notified to it; there were only 20 prohibitions,
which represent less than 1 per cent of the total.76 In key sectors such as
energy, telecommunications, and finance, the European Commission
has allowed or even encouraged mergers, especially cross-border mergers. Therefore, between 1990 and 2009, not one of the 187 mergers
of banks was prohibited or even subjected to a detailed second-phase
investigation under the ECMR. Despite the financial crisis of 2007,
the regulatory model for mergers has continued and includes sectors
such as banking, in which mergers resulted in the creation of complex
cross-border groups that lacked one strong regulator, were overexposed across multiple national markets, and had to seek bailouts from
several governments.77 Thus, for instance, the fifty-three mergers in
banking in 2008 and 2009 were all approved. Although European
Commission prohibitions attract great attention, they remain a small
minority of cases.
The EUs merger model has obtained the support of a wide and
heterogeneous coalition: diverse member states, the Commission the
ECJ, and large firms. However, it emerged over time rather than being
established by the legislation and it was shaped by the interests of key
actors. As a result of the flexibility of neo-liberalism, the model was
able to satisfy the diverse interests of different actors and its neo-liberal
content could be linked with the process of European integration.
The model has empowered the Commission to pursue integration in
the name of creating the single European market. The Commission
and especially DG Competition obtained increased legal powers
under the ECMR and a monopoly of decision over the largest mergers,
which the member states therefore no longer regulated. Thus, legal
integration was advanced. By aiding cross-border mergers, the model
also promoted economic integration, another of the Commissions
objectives. Within the Commission, DG Competition safeguarded its
position as a result of additional powers. Moreover, the model provides
considerable discretion because the Commission exercises judgement:
it discusses mergers informally with firms before formal notification; it
76
77
Supranational neo-liberalization
193
enjoys significant discretion about whether to pursue detailed secondphase investigations and remedies; and even a vitally important matter
such as market definition is said to be more of an art than a science.78
The model also permits the ECJ to play a central role. Because it
is broad and allows for considerable interpretation, ECJ rulings can
strongly influence decision making. Moreover, Commission merger
decisions are subject to judicial review. Thus, for instance, ECJ decisions have been important in questions from market definition to
procedures.79 Not only affected parties but also third parties can turn
to the Court, allowing many opportunities to review cases.
Although the merger model is focused on competition, its permissive
stance allows approval of mergers that create international champion
firms, whether privately owned or state-owned. Indeed, it is notable
that even when a self-avowed economic liberal such as Sir Leon Brittan
declared his approach of prohibiting mergers only on competition
grounds (i.e., preventing excessive market power) did not conflict with
EU industrial policy.80 Neelie Kroes emphasized the opportunities for
cross-border mergers for European companies by stating, Im all for
champions European champions who can go out and win on global
markets.81
This combination of applying competition principles while permitting mergers enables the EU, through the neo-liberal regulatory model,
to satisfy the diverse preferences held by different member states when
passing the ECMR. On the one hand, it gives overriding importance to
competition criteria. This satisfies countries such as the United Kingdom and Germany, which seek to make depoliticized mergers through
decisions based on competition and to prevent other member states or
the Commission from deciding mergers on industrial-policy or political grounds. On the other hand, these norms favour mergers, even
for firms with high market shares, such as national-champion incumbent suppliers. This meets the preferences of other member states, such
as France, for the development of larger Euro-champion firms. Over
time, such statist countries have largely ceased their attempts to have
78
79
80
194
Conclusion
The EU has developed a regulatory model that is centred on the extension and promotion of competition in the name of creating a single
European market. Its rise was not legally inevitable, given that the
treaties are broadly worded. Indeed, it appeared unlikely before the
1980s: strong traditions of mercantilism, public service, and protection
of domestic firms existed within member states. There were alternative
models at the European level of intergovernmental cooperation and
82
Cf. Cini and McGowan 2009: 14059; Buch-Hansen and Wigger 2011:
98100, 11417.
Supranational neo-liberalization
195
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Introduction
It is difficult to find an account of the neo-liberal decades since 1980
that does not reserve a special place for unshackled financial markets.1
This is true not only for the United States but also for the European
economies that are the focus of this volume and chapter. Critics commonly portray globalized and deregulated finance as the lynchpin of the
neo-liberal economic order.2 International capital mobility has shifted
the balance of power in favour of capital at the expense of labour,
so the argument goes. Furthermore, credit institutions let loose have
eased the pain of growing income inequality by showering unsustainable credit on households across the OECD world.3 These policies have
been inspired or, at least, justified by neo-liberal ideas about financial
markets and their regulation: that markets can ensure an efficient distribution of capital and financial services and that governments should
either promote such efficiency through market-enhancing regulation
and the enforcement of competition or take a hands-off approach
altogether.
In the panoply of ideas about statemarket relations, ideas about
finance occupy a special place. Textbooks in the field emphasize individual rationality and efficiency and portray wholesale finance as
quintessential markets: liquidity is high, information asymmetries and
transaction costs are low, and equal assets have equal prices around
the world.4 Because of their virtual character, contemporary financial
markets have lent themselves to the practical application of abstract
economic ideas more than other societal domains. That makes neoliberal ideas powerful in contemporary finance but also vulnerable: in
the event of a crisis, we can expect these ideas to attract much of the
1
2
4
201
202
203
(i.e., hypothesis five) and the way European policy making has been
reformed in the past two decades. With regulatory competences clustered at the supranational level, financial regulation has effectively been
disembedded from its previous positive coordination7 with other policies; public micromanagement of financial markets to attain specific
ends is no longer a plausible alternative to hands-off market facilitation. The putatively neutral neo-liberal policy goals (e.g., market
efficiency) form a lowest common denominator of otherwise divergent policy preferences of EU member states. In this vein, the EU
has installed both nationally and supranationally a new breed of
financial supervisors and regulators as market guardians. More than
financial firms, these public actors have emerged as the true defenders
of neo-liberal regulatory ideas.
Second, their mission has been facilitated by a surprising resilience
of neo-liberal ideas and the weakness of their contenders (i.e., hypothesis three). Pro-market thought in financial regulation is a broad
church, reaching from laissez-faire and doctrinaire non-intervention
to a market-enhancing liberalism, under which public agencies seek
to fine-tune markets to raise efficiency. For this reason, actual policy
failures can rarely be pinned on neo-liberalism as a whole. Laissezfaire adherents can claim that excessive government distortions had
spawned market failure; market enhancers retort that their project of
rooting out these failures through regulation had remained unfinished.
Both positions can be framed as pro-market ideas. The vagueness of
neo-liberalism apparently a sign of weakness is ultimately a source
of strength. Whatever arguments are hurled at pro-market thinking,
there always is a strain that emerges unscathed.
Despite widespread criticism of neo-liberal ideas, no coherent contending paradigm has emerged. Critics have exposed the intellectual weaknesses of market-enhancing financial regulation. They have
failed, however, to table an alternative that could take neo-liberalisms
place. The financial crisis has shattered hopes that left to their
own devices financial markets could achieve stability and efficiency
of capital allocation. It does not follow, however, that governments can be trusted to do a better job through intrusive intervention. History is replete with examples of governments mismanaging financial markets or hijacking them for their short-term benefit.8
7
8
204
The fact that markets are the problem does not mean that governments
are the solution.
Indeed, the specific challenges to neo-liberal ideas in finance that
have gained prominence imply that financial markets may be inherently unstable, such that their control through public policy is necessarily elusive. Instead of offering regulatory alternatives, radical critics
have excelled at exposing why those might not exist. The beliefs in
the possibility of efficient financial markets and effective public regulation are two sides of the same coin: both presuppose the existence
of rational market activity that if market structures are appropriately furnished can let markets function as desired. Critics who deny
(the possibility of) rational action in financial markets also leave little
hope that barring straightforward financial repression public policy could mend financial markets defects. Taken together, neo-liberal
ideas in financial regulation survive because they still have answers to
new regulatory challenges and because an alternative set of ideas that
could take neo-liberalisms place has failed to materialize.
The following section outlines how neo-liberalism is understood
when applied to financial regulation. The two main sections of this
chapter then describe the primary pillars of the argument: (1) the
institutional embeddedness of such ideas in European policy-making
institutions, and (2) the continued dominance of neo-liberal regulatory
ideas over potential contending paradigms.
205
The two emphasized roles for states are in tension: What, if anything, should governments do about markets that fail to operate efficiently? Non-intervention implies leaving market participants alone;
facilitation and custody of market mechanisms implies intervention.
Both strategies can be and have been advocated in the name of a promarket worldview, one that favours capital allocation by markets,
not governments.10 We can label the two versions of neo-liberalism
the laissez-faire and its market-enhancing variants.
To understand the regulatory debates, and thereby make sense of
the resilience of neo-liberal ideas in European financial regulation, it
is useful to contrast both positions. Neo-liberals agree that the goal of
government policy is capital allocation by well-functioning markets,
but they disagree about whether that is achieved by leaving market participants alone (i.e., deregulation) or by forcing them to act such that
market failures are minimized (i.e., market-enhancing re-regulation).
Three arguments continually surface in favour of laissez-faire. The
first argument is moral in essence and holds that governments have no
business infringing the liberty of individuals more than absolutely necessary. For example, if citizens are eager to invest their savings in risky
and non-transparent enterprises, what gives a government the right to
stop them? Second, laissez-faire liberals distrust governments as impartial arbiters in economic affairs. They suspect that when governments
do intervene, they do so not to serve the public interest in efficient
markets but rather to benefit either their particular constituency or,
even worse, the officeholders and regulators themselves. Third, even if
governments had only the public interest in mind, laissez-faire liberals
doubt that they could easily improve market functioning by secondguessing the collective sentiment of myriad market participants. If the
key to efficiency is the discovery of equilibrium prices, by which means
could governments achieve what markets cannot?11
In contrast to the moral basis of laissez-faire neo-liberalism, its
market-enhancing variant has more scientific roots: it asks for an
10
11
206
identification of market failures through meticulous analysis (commonly, quantitative research by economists) and proposes policy remedies. Market imperfections such as information asymmetries abound
in financial markets, so the scope for potential regulatory fixes to market malfunctioning is nearly endless. Market enhancement lends itself
to the application of expertise to regulation rather than the nods and
winks that have long dominated regulation (e.g., in the City of London). Market enhancement views markets as imperfect, measurable,
and amenable to improvement. Policy goals, in their focus on such
improvement, are largely one-dimensional. Arbitration between competing policy goals is not needed; hence, politicians can stay out of
regulation.
12
207
ideas that was widely supported and consistently implemented.13 Neoliberal policies came in many guises, and their champions had divergent
motives. In the late 1980s, France, for example, was very selective in
its implementation of neo-liberal ideas when it modernized Pariss
financial markets. Germany dragged its feet even more, implementing regulation against insider trading only to earn Frankfurt international acceptance, not because of putative virtues of truly competitive
markets. Also, the EU-level reforms were largely shaped by domestic
financial-sector interests, institutional constraints, and international
competition. The European Single Market Programme, which in the
mid 1980s jump-started the development of coherent EU financialmarket policy, was justified in strongly normative terms: completion
of the single market would allow industry consolidation and thereby
boost competitiveness of European firms facing Japanese and American competition.14 In contrast to the framing of the single-market programme, the detailed negotiations that followed for financial markets
were everything but driven by neo-liberal ideas. Concerns about the
competitiveness of national financial industries prevailed.15 Appeals
to concepts such as free markets, open competition, and level playing
fields were highly selective. In the early days of EU financial-market
integration, neo-liberal ideas were not a real driving force, let alone
sufficiently deeply entrenched to explain their eventual resilience in the
face of crisis.
However, the largely interest-driven overhaul of financial regulation in Europe had two important institutional effects that did cement
neo-liberal ideas. The supranational integration of financial regulation
disembedded it from the top-down governance of national economies
at large. Previously, political agencies had to balance competing regulatory objectives in policy design because financial markets had been
governed with an eye to the linkages among finance and other facets of
national economies.16 The dawn of negative coordination in the second half of the 1990s drastically changed the perspective. From a facet
of an integrated national economy, finance became a business sector to
be regulated competently. The polyarchic character of the European
institutions has been compatible with hands-off, market-enhancing
regulation, but not with policy designed to attain specific outcomes.17
13
14
16
17
See Lutz
2010, and Thatcher 2007.
2002, Mugge
15
See Cecchini 1988.
See Underhill 1997.
See Deeg 1999, Loriaux et al. 1997, and Zysman 1983.
2013.
Cf. Holman 2004, Scharpf 2009, and Mugge
208
209
22
210
2011.
For the examples that follow, see Mugge
24
211
26
See Lo 2012.
See MacKenzie 2006.
28
See Jensen and Meckling 1976.
See Shleifer 1999.
212
least because its insights could be expected to apply much less to professional investors who used quantitative tools to guide their decisions
than to retail investors.29
Scholarship rooted in the efficient-market hypothesis was powerful
because it aimed not so much at providing an encompassing guide to
economic reality as a template for optimizing market design in search
for economic efficiency and, hence, societal welfare. However, the
depiction of unfettered financial markets as agents of allocative efficiency has suffered enormously since the onset of the subprime crisis
in 2007. The efficient-market hypothesis had too many ifs built in to
be a useful guide to real-world finance: it would hold if investors were
rational, if transaction costs were negligible, if relevant information
was widely available at little or no cost, if there was effective competition, and so on. Different strands of economic-crisis analysis showed
not only that these conditions had not been met before the crisis but
also that there was no reason to think that they would hold eventually.
Orthodox theories about financial markets efficiency thus lost their
grip in public debates.
Indeed, the criticism often attacked the fundaments of neo-liberal
ideas, and the work of Hyman Minsky (especially 2008 [1986]) experienced an unexpected renaissance.30 Critics lambasted a false sense
of trust in the market and contrasted Wild West finance, with no
rules, to public sovereignty over financial markets. With market sceptics winning new converts by the day, the time seemed ripe for a new
approach to financial regulation to replace the neo-liberal approach.
Even if neo-liberal ideas about financial regulation do not constitute
a (policy) paradigm in the narrow sense, Kuhns work on paradigm
shifts is still instructive. He identified two necessary conditions for
shifting from one paradigm to another: (1) the old paradigm must have
reached its limits in attempts to explain real-world observations;31 and
(2) an alternative paradigm must be available that can do a better job.
In financial regulation, neither condition has been fulfilled. Despite
its defects, a neo-liberal view of financial regulation has still been
able to provide plausible answers to the regulatory challenges that
the crisis exposed. For all of its merits, the fundamental criticism of
29
30
31
213
neo-liberal thought that has (re)surfaced after the crisis has not proposed wholesale regulatory alternatives but rather suggested that the
hope of taming financial instability through government intervention
might be in vain.
33
See Allison 2012.
See Arner 2011.
See Murphy and Jensen 2011; co-authored by the Jensen whose work had
inspired bonuses as a management tool in the first place.
214
37
215
39
40
216
42
43
217
45
The two basic approaches to accounting practice are fair value accounting
(FVA) and historical cost accounting (HCA). FVA requires that balance sheets
of entities list their assets and liabilities at (estimated) current market prices;
HCA lists assets and liabilities at the prices paid or received for them at the
time of acquisition or sale.
2006.
See Barlev and Haddad 2003; Perry and Nolke
218
219
in both academic and policy-making circles, about where financialmarket governance had gone wrong; for many, the time was right
for governments to reclaim control.47 Once the Eurocrisis set in, the
lesson to be learned changed completely: now, the narrative was not
about economists having failed governments with their myopic advice
but rather about EU member states having failed to heed straightforward warnings from economists against the dangers of a currency
union.48 Political imperatives had trumped orthodox economic advice,
and it cost Europe dearly. Governments had not listened too much to
economists but rather too little. The idea that good government intentions were sufficient to generate a propitious financial climate took a
serious drubbing.
Considering these points together, it is clear that the ideational map
on which neo-liberalism is commonly pinned is a poor guide to financial regulation. Discussions about neo-liberalism commonly construe it
as the antithesis either to complete government control (i.e., socialism
of some type) or a much more social market democracy associated
with coordinated market economies or the trentes glorieuses. Either
way, neo-liberalism is one of two, or perhaps three, alternative models and typically not the preferred one.
This map fails to capture the evolution of ideas about financial
regulation. Recent decades have clearly witnessed the emergence of
a relatively well-codified regulatory orthodoxy, which I label market
enhancement. However, it would be wrong to conclude that before its
rise, financial regulation had been dominated by an equally coherent
but somehow more social alternative which might now provide the
model to which to return after the failures of market-enhancing regulation. The evolution of pre-crisis regulatory ideas in recent decades
is better understood as moving from a pragmatic approach to a more
dogmatic, ideas-guided approach than as a shift from one regulatory
paradigm to another.49 Since the crisis, we have returned to a more
humble approach to regulation.50 Viewed that way, the second reason for the resilience of neo-liberal ideas in financial regulation is that
there is no wholesale alternative approach. There are valid criticisms
that lower our expectations of what regulation can achieve and there
47
48
See Alexander et al. 2007, Blackburn 2008, Financial Services Authority 2009,
and Hellwig 2008.
50
49
2011.
See Borio 2010.
See, e.g., Feldstein 1997.
See Mugge
220
are pragmatic policy tweaks and additions to the tool box, but there
is no coherent alternative that can serve as the anchor for regulatory
debates. Neo-liberal thinking remains the default approach with or
against which actual policy is developed.
221
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Introduction
Liberalism in Jane Austins day was the great path for escape from
the strictures of the British class system and for reward for individual
effort and merit. Jane Austins Persuasion is the ultimate ode to neoliberalism: the wealthy heroine and the poor but ambitious hero are
forced by her family to abort a youthful engagement. Yet, his later
bourgeois success as a sea captain and consequent wealth permit love
to triumph at last. Liberalism in this context is a revolutionary concept
that empowers bourgeois strivers to challenge aristocratic prerogatives
and to achieve by individual merit those goals denied to them by
class constraints. More recently, liberalism as a political philosophy
dubbed neo-liberalism has had very different implications for social
class: policies inspired by neo-liberal goals are frequently viewed as
mechanisms to release individuals from the constrictions imposed by
government rather than by class structure. These recent neo-liberal
reforms often advantage actors in the marketplace who by virtue of
their class position or inherent capabilities hold superior resources
in exchange transactions. Whereas liberalism was once celebrated as
a vehicle for levelling class inequities, policies of a neo-liberal hue (at
least in some countries) have now become a driver of inequality.
This chapter reflects on the flexibility and ambiguity embedded in
the neo-liberal ideal, and it comments on two questions and related
lines of explanation raised in the first chapter of this volume. First,
I ponder the utility of neo-liberalism as an independent variable and
query whether the flexible, multifaceted nature of liberal political ideology contributes to its resilience or whether this inherent flexibility
constrains its capacity for causal impact. Second, I reflect on neoliberalism as a dependent variable by probing the factors that shape
the diverse manifestations of this set of ideas across time and national
settings.
226
227
228
2
See Martin and Swank 2012.
See Scharpf and Schmidt 2000.
See Cox 1997, Schmidt 2005, and Blyth 2001.
229
230
For example, liberalism is associated with equal rights, yet equality is a many-splendored thing: this may guarantee uniform political
treatment regardless of individuals socioeconomic station or redistribution to equalize the socioeconomic base. Initial revolutionary treatises on liberalism endorsed equal political rights. Individuals (existing
in the state of nature) entered into a social contract to create governing
institutions, and the legitimacy of these institutions demanded that all
enjoy equal political rights. Laws should be universally applicable
developed as if their creators were behind a veil of ignorance about the
impact of these laws on their own specific circumstance.4 Philosophers
of liberalism extended liberal ideals to the economic sphere by promising to eliminate restrictive class constraints on economic achievement
and to reward individual effort and merit. This economic liberalism
was rooted in the opposition to state-granted economic privileges for
selective classes or groups, and this distrust of politically based selective benefits has been a feature of liberalism dating back to Adam
Smith. James Madison and the Founding Fathers sought to use the
Constitution to unleash the market from the abuses of state-granted
economic privileges.5
Moreover, liberalism is associated with individual freedom. Yet, two
freedoms comprise a more accurate description of the liberal tenet, and
the liberal notion of freedom to has an uneasy relationship with liberalism as freedom from. Freedom to entails the right of individuals
living in the state of nature to enter into the political arrangements
previously discussed that guarantee equal rights and achieve collective
goods. Freedom from allows individuals to resist political institutional arrangements that they view as illegitimate or as threatening to
their personal liberty. These conceptions of the positive and negative
liberties may well come into conflict.6
4
6
5
See Locke 1689 and Rawls 1970.
See Smith 2009 and Hardin 2002.
See Berlin 1969. It is worth noting that Social Democracy the predominant
alternative to liberalism and itself a response to more doctrinaire forms of
socialism embodies a similar elasticity in its myriad forms: the Swedish Social
Democratic Workers Party (SAP), for example, is noteworthy for its
consummate pragmatism. Yet, Social Democracy as political philosophy can be
contrasted with liberalism in bas relief in its endorsement of fundamental social
rights (thereby moving beyond the political rights of liberalism); its deep
historical connections to the working class (whereas liberalism was initially a
movement of the bourgeoisie but claimed to transcend class biases in its equal
treatment of all citizens); its commitment to the essential legitimacy of
231
Over the years, liberalism has steered an uneasy course among these
conflicting ideals. Initially, liberalism offered freedom from the rules of
behaviour set by accidents of birth but also embodied an individuals
freedom to make a significant contribution to the broader collective
good by realizing his or her fullest economic potential. This was closely
linked conceptually to the freedom to enter into a social contract to
forge political structures for achieving collective goods and governing
social interactions. Both markets and governments were institutions
to spur individual excellence and to enable people to achieve together
what they could never hope to gain alone.
Although liberalism originally was a major part of the bourgeois
revolution, the liberation from the shackles of class could pertain to
any social segment. The use of the term liberal came to be viewed in
the United States as a synonym for progressive politics in the postwar
era. Eliminating illegitimate prerogatives granted to special groups or
classes had the added effect of permitting energetic have-nots to achieve
greater labour-market successes and enabling individual economic selfactualization. Therefore, liberal social policies were those that entailed
governmental support for the betterment of the lower classes. In this
regard, labour-market policies that nurtured individual talents could
enable workers to make a non-incremental shift in employment status.7
In the past three decades, a new variant of liberal thought has developed in the form of neo-liberalism. Neo-liberalism encompasses a
smaller subset of the ideas embedded in liberalism and elevates freemarket exchange above state controls. It affirms the superior efficiency
of markets for allocating resources, seeks to greatly curb state interference in markets, and restricts state intervention to the essential provision of goods that may not be distributed through markets. Efforts
to nurture markets and dampen states include rejecting Keynesian
stabilization policies, augmenting supply over demand, scaling back
market-distorting social benefits and labour-market regulations, promoting labour-market flexibility, and introducing the outsourcing of
state functions to private-sector intermediaries.8
Neo-liberalism has given preference to negative over positive freedoms and, somewhat paradoxically, expressions of freedom from often
232
233
deindustrialization in the 1980s ushered in a new era of zero-sum conflicts and rattled the class compromise. Neo-liberal reforms sought to
deregulate labour markets, to decentralize collective bargaining, and to
scale back contractual relations between employers and workers. This
first wave of neo-liberal reforms expressed most vividly, perhaps,
in the punishing policies of Margaret Thatcher became an object
of contention: whereas the policies successfully reduced the costs of
labour by rolling back union power, they did little to expand worker
skills in preparation for the postindustrial economy. A restatement of
the liberal ideal was needed to balance the waning economic prosperity
with the waxing knowledge society.
A second wave of neo-liberal reforms, embodied in the concept of
ALMP, appealed to the compelling requisites of the age and further
transformed the policy area of social protections against unemployment. Gaining popularity in the 1990s, active-labour-market reforms
promised to address the stark institutional changes in labour markets with deindustrialization: they included shifting skills requirements, decoupling high- and low-skilled workers (who worked closely
together in manufacturing production but who largely toiled in different sectors in services), and reducing the growing gap between labourmarket insiders and outsiders (who were increasingly excluded from
employment).
The ALMP concept drew philosophically from both the right and
the left and, in this way, was not inspired only by neo-liberalism.10
Nonetheless, it offers a fine example of the multifaceted nature of
liberalism and constitutes a good arena in which to study liberalism
because it became the central policy intervention for fighting unemployment. ALMP was targeted to a number of sometimes conflicting
goals: its central mandate was to (1) reintegrate beneficiaries of public assistance or insurance back into the core economy; and (2) prevent individuals from relying excessively and over the longer term on
public assistance, unemployment, or disability insurance. To this end,
programmes shifted emphasis from income maintenance to employment promotion and from full employment to individual employability. Within this central mandate, national plans borrowed conceptually from different welfare-state regimes to achieve a broad group of
goals: to enhance incentives to work, to aid in job seeking, to keep the
10
234
unemployed occupied, and to develop the human capital of the longterm unemployed. Policies included both sticks in the form of rules
about the duration of benefits and carrots in the form of access to
training or subsidized jobs.11
There was tension among the diverse aims of the active-labourmarket agenda. Putting people to work, for example, could be accomplished by several methods, such as simply increasing the number of
short-term, low-skilled jobs. However, the policies, at least in some
settings, also sought to improve the productivity of the labour market
by expanding skills and better utilizing the assets of the unemployed.
Deregulating labour markets served an ambition to reduce government involvement in job markets, but this action did not necessarily
increase employment or expand skills.12 Moreover, in some countries
(e.g., the United States), policies to make social-assistance recipients
enter the workforce were associated with the removal of an entitlement
to protections against unemployment and poverty. Thus, ALMP held
the potential of dramatically changing peoples perceptions of a social
right that had been in place in most countries throughout the twentieth
century.
Permutations of ALMP combined these diverse goals in a variegated manner across countries. In the Danish social-democratic welfare regime, most training historically was provided by the state;
yet, the active approach significantly increased firm-based training.
In corporatist-statist welfare regimes, the government left training to
private firms but began to micromanage supply and demand through
one-stop job centres. In the British liberal-market regime, training
choices were largely left to private-sector markets, and labour-market
strategies focused on reducing social benefits, yet ALMP sought to
shift greater responsibility for ensuring adequate training to the state.13
Thus, whereas some observers interpreted the active strategy as reducing social insurance and assistance benefits, others emphasized the
strategys deviation from the liberal belief in letting markets manage employment, and they hailed the approach as a mechanism for
recognizing a right to work among the economically and socially
excluded.14
11
13
14
12
See Layard et al. 1991 and Bonoli 2012.
See Bonoli 2012.
See Layard et al. 1991, OECD 1994, and Rhodes 2001.
See Cox 1997 and Madsen 2002, respectively.
235
236
euro-inspired constraints on monetary policy. In this context, countries pursued economic patriotism motivated by competition for scarce
international-market share.
In the immediate wake of the crisis, unemployment increased dramatically across the world, and neo-liberalism as a political philosophy
experienced a setback as countries responded with economic-stimulus
policies and expanded social protections to mitigate the treacherous
impacts of the disaster. Government intervention and Keynesian stimulus policy suddenly gained greater acceptance with the wide-ranging
view that market deregulation was to blame and that recovery required
fiscal stimulus. In a moment reminiscent of Nixons famous declaration We are all Keynesians now, Sarkozy remarked, Have I become
a socialist? . . . Perhaps.18 Virtually all countries engaged in Keynesian demand-side stimulus and expansionary fiscal policies. A European Union Commission proposed a 200 billion euro-recovery programme for 20092010 (i.e., 1.5 per cent of the GDP) and the United
States passed a $787 billion fiscal stimulus in spending and tax cuts
thereafter.19 The International Labour Office (ILO) calculated that
automatic stabilizers would create 5.2 million jobs in 2009 within the
G20 countries.20
However, despite this ideological resurgence of Keynesian macroeconomic intervention, countries pursued rather different strategies
for economic recovery and neo-liberal ideas continued to be important. Pursuant to our interests, ALMPs (together with other marketenhancing interventions) continued to be important instruments in the
tool kit of national responses to the crisis as a way to expand employment without placing undue burdens on public coffers.21
Recovery strategies were partially predicated on the budgetary
capacities of countries to sustain high levels of social investment and,
rather paradoxically, the Scandinavian countries with the largest public sectors had the lowest post-crisis budgetary problems. High support
for the tax state meant that these countries largely enjoyed budget surpluses before the crisis, and the budgetary implications of their stimulus
packages were less severe than in countries with pre-crisis fiscal deficits.
Thus, contrary to our image of a bloated state crowding out private
investment, after the crisis, the most energetic economies had a large
18
20
19
See The Economist 2008.
See Cameron 2012.
21
See International Labour Office 2009: 48.
See World Bank 2009.
237
23
See Cameron 2012.
See Cameron 2012.
See Schelkle 2012 and International Monetary Fund 2010.
26
See Cameron 2012.
See Tripartite Social Summit 2012.
See Niklausson 2011.
238
29
239
32
240
general policy concerns. As discussed previously, liberalism sets a priority on both positive and negative liberties. Freedom from entails
preserving the uniform treatment of individuals, protecting them from
violations of their liberty: neo-liberalisms emphasis on an individuals
right to maximize self-interest is also associated with this negative
liberty. These types of freedoms do not necessarily entail collective
action but may be pursued through individual autonomous effort. In
contrast, freedom to entails the empowerment of a group of individuals to achieve collectively beneficial goals, which presupposes group
action. Therefore, institutional structures for political discourse clearly
have bearing on capacities of individuals and groups to achieve these
common goals.33 Institutional structures for collective political engagement should mediate the impact of liberal policies on social class, distributive outcomes, and the expression of the revolutionary potential
embedded in the liberal ideal.
Party-system characteristics are crucial to the political expression
of neo-liberal ideas because they shape the preferences of participants
in political debates and their capacities for negotiated collective outcomes. Participants in proportional-representation (PR) party systems
behave differently from those in majoritarian systems. Politicians in
PR party systems represent well-organized economic interests, do not
poach voters from other parties, and participate in coalition governments; therefore, they have a less acute need to focus solely on shortterm electoral interests and are better positioned to work towards
longer-term goals. In short, PR systems have stronger institutional
capacities than majoritarian systems to express and to implement policies oriented towards the freedom to goals of liberalism.
In like manner, characteristics of industrial-relations systems influence the articulation and implementation of neo-liberal ideas because
they shape the preferences of both business and labour. High levels of
organization (especially macro-corporatist forms) make employers and
workers more likely to support public social policies because highly
organized groups have political-economic, collective-action, and cognitive effects on members.34 The macro-corporatist forms of association have political-economic effects because centralized collective
bargaining between highly organized employer and labour associations produces wage compression and the motivation for employers
33
34
241
242
Embedded ALMPs
The impact of the institutional context on the expression of neo-liberal
ideas is evidenced in the case of ALMP, as industrial-relations systems
had a major impact on the interpretation and realization of the activelabour-market concept within countries and on the political coalitions
available to the state to make the plans a success. National plans
were motivated by a rather congruent set of ideas and, on paper, were
remarkably similar. Yet, the realization, implementation, and impacts
41
243
43
See Martin 2004.
See Campbell and Pedersen 2007.
45
See Madsen 2002.
See Goul Andersen 2007: 7375.
See La Porte and Jacobsson 2012.
244
Countries
Passive
1985
Passive
2007
Active
1985
Active
2000
Active
2007
Denmark
Netherlands
Germany
Austria
United Kingdom
United States
4.8% GDP
1.6
0.5
0.4
1.2
0.7
1.9%
1.1
1.4
0.9
0.2
0.3
0.8%
1.3
0.5
0.3
0.7
0.3
1.9%
1.5
1.2
0.5
0.2
0.2
1.3%
1.1
0.7
0.7
0.3
0.1
245
and active labour-market spending; the United States and the United
Kingdom reduced both active and passive labour-market spending.
Employer participation in the plans was also stronger in Scandinavia,
as shown in my study of 107 randomly selected firms in Denmark and
Britain. The higher participation rates by Danish employers worked
against the logic of social-democratic welfare regimes because, historically, there was virtually no implementation of social-assistance
programmes by private employers, and efforts to expand employment were largely concentrated in the public sector. British firms, in
comparison, played an important role in social provision for some
time because state social benefits were supplemented with privateemploymentbased benefits. Yet, Danish employers participated more
in the programmes, primarily because they were attracted to the socialinvestment aspects of ALMPs. Thus, 68 per cent of Danish firms participated in some degree, whereas only 40 per cent of British firms
signed up for the New Deal programmes, and the social-democratic
aspects of the policies were the clear draw for employers.49
Diverse capacities of the industrial-relations systems had a sharp
impact on the programmatic manifestations of the active-labourmarket concepts because different institutions gave varying support
to the somewhat conflicting goals of ALMPs (e.g., greater investments
in human capital versus greater constraints on social assistance). In
particular, active social policies that uplift the economic potential and
contribution of the unemployed (or low-skilled) must be shown to
offer tangible benefits for employers as well as for the unemployed.
Therefore, and somewhat surprisingly, the policies were most successful in social-democratic countries because the institutions of collective
political engagement allowed participants to work together to achieve
their common interests in social programmes to enhance skills.
For example, Denmark created a set of ALMPs and social policies
that both improved skills and attracted widespread support from a
cross section of society: employers and unions sought an expanded
skilled-labour pool and their corporatist associations wanted to preserve their privileged status as decision makers in matters of public
policy. Municipal employers were made responsible for the social problems and were motivated to find solutions to improve the employability of their most fragile populations. Consequently, the succession of
49
246
reforms implemented by successive (and ideologically diverse) administrations since 1982 was marked less by change than by continuity.
When the bourgeois coalition led by Anders Fogh Rasmussen (i.e., a
member of the neo-liberal-right party, Venstre, in conjunction with
the Conservative Party and smaller partisan allies) threatened to cut
back active-labour-market spending, it met with resistance from both
business and labour.50
The participation of Danish employers in the active-labour-market
campaign reveals both the social-democratic cast to ALMP and the
importance of institutions in mediating conceptions of liberalism. The
Danish plans were tailored to real economic needs, and the devices to
end long-term unemployment were linked to the up-skilling of the
general population. For example, job-rotation schemes allow firms to
hire with state subsidies the long-term unemployed while their own
employees receive skills training.51 The plans also created protected
jobs for disabled people with reduced working capacities in an effort
to bring everyone into an encompassing labour market; these positions allowed firms to fill unproductive jobs with disabled workers
(who received part of their wage from the state). This kept workers
off the welfare rolls but restrained company labour costs. Within my
firm study, Danish companies with blue-collar workers at all skills levels were significantly more likely to participate to fill real skills needs
(unlike British firms discussed herein, which participated in order to
obtain cheap labour). Of the Danish firms, 31 per cent cited labour
shortages as a reason for participating, compared with 22 per cent of
the British firms; whereas British firms participated in the programme
for political reasons, Danish firms viewed the programmes as meeting
real economic needs. One firm reported using job rotation to reduce
the barriers between production workers and the skilled mechanics
who fix the machines so that production could move more seamlessly
on the shop floor.52
The macro-corporatist institutions mediated employers perceptions
of ALMP and expanded their participation. The Danish Federation
of Employers (Dansk Arbejdgiversforening [DA]) and its major member, Danish Industry, sponsored consciousness-raising activities and
offered a vehicle for the state to build awareness of the programmes
50
51
52
247
among employers. Many Danish firms identified the corporatist associations as their primary source of information, and membership in
the corporatist association was a significant determinant of company
participation in the programmes. The associations allowed the social
partners to have enormous input in the development of the ALMPs
through tripartite processes that allowed business and labour to tailor
the programmes to real employment needs. At the municipal level, the
DA chose company participants to sit on local Social Coordination
Committees, which were crucial to local firms involvement. The state
also threatened to appeal directly to firms if the associations did not
engage in the campaign to end long-term unemployment. Both the
employers associations and labour unions participated to retain their
jurisdictional control over labour relations. As one business respondent told me, DA and LO were like Siamese twins in their need to
retain their credibility as willing participants in the political dialogue.53
The DA also joined LO in resisting a proposal by the Danish government (then controlled by bourgeois parties) to liberalize part-time
work. Both unions and employers associations perceived the legislative
initiative as an attack on the social partners jurisdictional authority to
negotiate collective agreements and as a probable limit on social rights
guaranteed to part-time employees.54
In comparison, the British New Labour plans mechanisms for skills
development were considerably more limited than those of their Danish counterparts, and the residual programme to reduce unemployment
did little to enhance skills. Therefore, although British political leaders considered employers essential for supporting and implementing
their social project, efforts to bring British firms into the business of
implementing the welfare state met with less success than the parallel
campaign in Denmark. Although employers signed up in high numbers (especially for the New Deal for Youth Unemployed People), they
stopped short of actually creating jobs for this constituency.55
The constraints of the pluralist system of business organization contributed greatly to the lack of corporate action. Employers had a limited organizational base to bring them into the policy-making process,
and they lacked tripartite institutions that would help them to tailor
the programmes to real economic need. In my firm study, the British
53
55
54
See Martin and Swank 2012.
See LO Aktuelt 2002a and 2002b.
See Department for Education and Employment 2000.
248
companies (unlike the Danish companies) engaged with the programmes to secure cheap labour and to appease the Blair government
rather than to derive real skills. Thus, whereas 31 per cent of British
companies credited their participation to strong pressure from government and a desire to appease the new administration, only 9 per cent
of the Danish firms reported such incentives.
The Confederation of British Industry (CBI) failed to be a source of
information or connection to the state. The CBI did little to introduce
firms to the benefits of innovation in low-skilled workers or to advertise
the Blair programmes. Whereas membership in the Danish corporatist
associations was highly determinant of participation in the ALMP
programmes, membership in the British employer associations failed
to encourage participation: 32 per cent of Danes identified an employers association as their major source of information, as opposed to 14
per cent of the British firms and British companies were more likely
to learn through the press (i.e., 34 per cent). The CBI took a somewhat
schizophrenic approach towards the New Labour government, with
Sir Clive Thompson being less enthusiastic than his predecessor, Adair
Turner.56 Because the peak employers organization lacked the collective capacity to make an imprint on the policy and to encourage its
members to participate in the outcomes, Blair appealed to individual
firms and developed market-based inducements to entice employers to
join in his campaign to expand the skills of the British people. With
much fanfare, Blair breakfasted with 3,500 business leaders across
Britain; however, efforts to mobilize individual firms did not add up
to an institutional commitment to the programmes.
Institutions for industrial relations had a similar impact on the attitudes of organized labour towards ALMPs. For example, in highly
coordinated Denmark, the peak LO fully supported the evolution of
ALMP, in large part because it was an active participant in the development of the programmes. LO has the responsibility to represent workers in tripartite committees and to set the framework for collectivebargaining rounds; therefore, even though Danish craft unions are
somewhat fragmented, the encompassing mechanisms by which these
groups engage in policy making tend to reduce the potential economic
cleavages among segments of labour.57 LO was just as involved as the
DA in the evolution of ALMPs; for example, both sat on a Labour
56
57
249
Market Commission (i.e., the Zeuthen Udvalg), which had the task
of bringing a more active approach to the delivery of unemployment
insurance, and the bulk of its recommendations were incorporated
into the Social Democrats first labour-market reform in 1994.58 A
parallel Social Commission issued a series of recommendations for
changing the public-benefits structure, and perhaps 80 per cent of its
recommendations subsequently became regulations.59
In the wake of the global economic crisis, institutional settings have
continued to mediate the interpretations and impacts of the neo-liberal
ALMPs, and the policies have continued to have somewhat diverse
implications for social classes. Countries learned lessons from the crisis
but different regime types have taken away diverse messages. Liberalism remains embedded and, once again, the capacity of the reforms to
address new labour-market requisites and their implications for class
relations depended on the institutional context.
Northern Europe has exhibited stronger continuing commitment to
ALMPs since the crisis than the liberal countries, and the crisis has even
strengthened the social-democratic component of the programmes
in some countries. The ETUI found that in Denmark, compared to
Germany and the United Kingdom, long-term unemployment was
lower and spending on ALMP was much higher. Whereas 51 per cent
of job seekers participated in activation measures in 2010 in Denmark,
only 28.5 per cent participated in Germany and only 1.5 per cent did
so in the United Kingdom.60
In the years leading up to the crisis, the Danish and Swedish bourgeois governments flirted with the privatization, decentralization,
and scaling back of ALMP programmes; however, since the crisis,
the Swedish government has centralized the programmes again and
reduced the role for private-sector intermediaries. In Denmark, flexicurity as a labour-market concept included expectations that workers
would be laid off during downturns and reemployed during booms.
Therefore, there has been limited use of ALMP simply to keep individuals in employment but relatively more investment in retraining
workers for the new economy. Although there was some job sharing
for current workers, training continued to be an option for the unemployed. However, although employment declined, there has been less
58
60
59
See Mailand 2000.
See Martin and Swank 2012.
European Trade Union Institute 2012.
250
pain than might have been predicted because the Danish model of
flexicurity was intended to work precisely as macroeconomic events
have predicted. In a flexible labour market with few labour-market
regulations, firms can hire and fire at will: this flexibility tends to
elevate employment during periods of rapid economic growth but
depresses employment more rapidly during recessions. Steen Bocian,
Chief Economist of Den Danske Bank, noted that, whereas employment in Denmark fell more rapidly than the EU average in 2009,
production levels fell in other countries at a similar rate, but labourmarket rigidities prevented layoffs.61
In Germany before the crisis, governments sought to delegate
ALMPs for the long-term unemployed to the social partners; however,
with Hartz IV, proponents recognized that the social partners were
not up to the job. Since the crisis, this more Scandinavian approach to
ALMP has continued to bolster German workers through the difficult
economic times. At the same time, many beneficiaries of the German
work programmes have been those already in the workplace because
short-term jobs have been used to keep labour in current positions.
In the Liberal countries such as the United Kingdom, active labourmarket spending has been reduced along with many other types of
social expenditure. The Labour Party recently demanded a more targeted approach to the crisis that combines economic patriotism, a
targeted industrial policy, and expanded spending on education and
training. Moreover, Ed Miliband recognized the historical institutional
limitations on British manufacturing to secure what it wanted from the
government:62
In my view, a thriving and diverse manufacturing sector is central to the challenges revealed by that crisis . . . Economic patriotism is what governments
reach for when they dont believe firms can compete. And we will never
return to those days. But too often opposition to protectionism became
an excuse for believing that the best way to help British business was to
stand aside entirely. Opposition to protectionism was right. But opposition
to industrial activism was wrong. From our government to our culture, we
need pride and patriotism if our British firms are to succeed. Patriotism is
about an active government using all the means at its disposal to give competitive British firms every chance to succeed . . . Above all, it is about having a
61
62
251
shared, long-term vision between public and private sectors, involving every
department.
Conclusion
This chapter suggests that the essential endurance of neo-liberalism is
embedded in its capacity for reinvention. The multifaceted nature of
liberalism accounts for both its ambiguity and its enduring salience,
and this has enabled the perpetuation of neo-liberal ideas through the
most earth-shattering moment of economic upheaval since the Great
Depression. In the case of ALMP, the concept took hold in the 1990s
because of both its political utility and its revolutionary promise. In
diverse iterations, it threatened to make labour markets more flexible
and insecure for low-skilled workers and to release those workers from
the trap of underemployment. Since the global financial crisis, ALMP
has sustained its appeal as a mechanism for economic patriotism and
for targeted economic stimulus.
Policies inspired by liberal ideals can have diverse impacts on social
class, and the institutional environment alters the balance of power
among the social partners. Thus, ALMPs held the potential to both
correct some inequalities among organized labour and to erode the
power of the working class. Older forums for industrial relations
although enhancing the power of the working class could foster
sharp subclass divisions. Particularly in the Continental countries,
these structures favoured the interests of core manufacturing workers in the export sectors over those employees with marginal skills.
Therefore, ALMPs with an emphasis on increasing the employability
of the individual even while reducing worker protections could either
erode worker security with the reduction of passive welfare-state benefits or improve the skills of marginal workers and adjust the power
balance between the higher-skilled and lower-skilled members of the
working class.
The diverse consummation of neo-liberal ideas and their varied class
impacts across countries reflect the institutional context. The Nordic
countries with macro-corporatist structures for labour-market negotiations were better able to realize the revolutionary promise of this
neo-liberal idea: policy makers and their social partners focused collective attention on the skill needs of marginal workers, articulated as
a guiding principle the individuals right to work, and used ALMPs to
252
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Introduction
One of the most significant developments in economic theory in recent
decades is the emergence of a neo-liberal approach to governing the
firm, which has become commonly known as the shareholder or the
shareholder-value model. This approach, which is based on the conceptionalization of the firm as a set of contracts between principals
and agents, has achieved a dominant position in academic thinking
and policy making in the field of corporate governance at the EU level.
Most advocates of this approach do not explicitly identify themselves
as neo-liberals; nevertheless, the tenets of this approach clearly fit the
definition of neo-liberalism offered in the first chapter of this book.
The shareholder model is based on a strong faith in the efficiency of
markets because it claims that a properly functioning stock market can
best measure the value of firms and efficiently allocate capital to the
most profitable investment projects. Furthermore, the stock market
is a key element in creating a market for corporate control, which
allows ownership and management of underperforming firms to be
transferred if necessary, against the will of incumbent managers
and employees to actors that will restructure the firm to increase
efficiency. The shareholder model of governance, it is argued, has positive welfare effects for stakeholders in the firm (including employees)
and, therefore, for society as a whole.
In contrast with laissez-faire approaches to corporate governance,
the shareholder model accepts the need for a strong state role in setting
and enforcing rules to enable the stock market to function properly.
The author would like to acknowledge his indebtedness to Laura Horn and Jan
Cremers for their analyses of the shift in EU policy making on company law and
corporate governance, and to Johannes Heuschmid for his analysis of worker
participation in Europe. Special thanks to Daniel Kinderman for extensive
comments and presenting this paper on my behalf at a workshop in Paris.
257
258
In particular, so-called minority shareholders (i.e., those shareholders holding relatively small proportions of stock in a company) must
be protected from a host of actors that might exploit information or
power advantages to extract value from the firm in their own interests.
The shareholder model also contrasts with the broad class of stakeholder theories, which value worker participation, state-led industrial policy, and (more recently) environmental protection. Whereas
advocates of the shareholder model prefer to grant shareholders a
decision-making monopoly in company governance, stakeholder theories generally support the sharing of power with other actors, such
as employees, non-governmental organizations (NGOs), and the community (as represented by the state).
This chapter focuses on the emergence and persistence of a neoliberal approach to governing the firm at the European level. This
approach achieved a dominant position in the EU relatively recently.
The 1970s, 1980s, and 1990s can be characterized, for the most part,
as a standoff among different national conceptions of the firm, particularly between the United Kingdom and Continental Europe. Most
substantial proposals for company law at the European level were
blocked during this period. However, the shareholder model gained
the advantage in the new millennium. A key event was the European
Commissions appointment in 2001 of an expert group with a decidedly neo-liberal philosophy to come up with recommendations for
legislative action in the company-law and corporate-governance areas.
Most of this groups recommendations were endorsed by the Commission in the 2003 Action Plan on Company Law and Corporate
Governance. In the years leading up to the financial crisis, a surprising
number of directives proposed in the Action Plan were passed, most
of them with a clear neo-liberal thrust. Following the onset of the
financial crisis in 2008, criticism of the EUs approach has increased,
not only from the stakeholder camp which includes trade unions
and NGOs and their academic allies. Nevertheless, the resilience of
this paradigm can be seen in the neo-liberal orientation of recent proposals made by European institutions, particularly a new Action Plan
published by the Commission in December 2012, which prioritizes a
further strengthening of the rights of minority shareholders.
The persistence of the neo-liberal approach can be explained by a
combination of some of the theses advanced in the first chapter of this
book. On the one hand, at an ideational level, the shareholder model
remains stronger than its alternatives because the principalagent
259
260
261
262
Companies Act in 1844; in the United States, this took place shortly
thereafter, starting in New Jersey, because company law is regulated
at the state level. The passage of such legislation typically ushered in
a laissez-faire era for corporations in those countries because there
was typically a lack of regulation in other areas, such as financial
reporting, competition policy, financial markets, and labour law. The
behaviour of firms during this laissez-faire period became increasingly
problematic, as many corporations abused their market power in a
variety of ways. Corporations also frequently exploited investors for
example, in the use of funds for personal purposes by managers and
in not reporting the true financial state of the company. The weak
capitalization of many corporations led to mass bankruptcies during
economic downturns, which were exacerbated by the fragility of early
financial systems.
A major discrediting of the laissez-faire model occurred during the
Great Depression of the 1930s, which led to increasing regulation
of corporations in the public interest. However, national responses
varied quite differently, driven not only by the need to recover from
the Depression but also by mobilization for World War II and, in
many countries, postwar reconstruction. Universally, major steps were
taken away from the laissez-faire approach, justified by the need for
greater regulation of corporations in the public interest and, in many
countries, steps towards a greater state role in economic planning, at
least in key sectors.
The postwar-stakeholder model is a stylized characterization of the
type of corporate-governance system that was introduced after World
War II, primarily in but not limited to the Continental European countries. Ownership was dominated by long-term patient investors with
controlling interests in the firm (i.e., with majority voting rights), such
as founders/families, the state, banks, and other companies. The market for corporate control could be characterized as closed because
various formal and informal mechanisms (e.g., multiple voting rights
for dominant shareholders) made it difficult or impossible for outside
investors to gain control of the firm. At least in large firms, workers
had a medium to strong degree of voice in running the firm through
mechanisms such as works councils, collective bargaining, and boardlevel employee representation. Top managers tended to be paid a fixed
salary, perhaps with a small bonus for good performance. Transparency to outsiders tended to be low and, for the most part, limited
to past financial performance.
263
2011.
See Lutz
264
265
corporate-governance systems typically allowed or did not explicity forbid a number of mechanisms that insider owners would use
to control a greater proportion of votes in the company than their
actual capital investment (e.g., multiple votes for A class shares,
pyramids, and cross-shareholdings). The motto of minority shareholders in this respect is one share, one vote; that is, voting rights
should be proportional to shareholders actual investments in the
firm.
r The creation of open markets for corporate control, which allows
activist shareholders to acquire control in underperforming companies and to oust underperforming managers.
r Liquid and fair markets that is, the ability to buy and sell shares in
companies quickly with as little impact as possible on market price.
This requires a whole set of changes in the way that financial markets
are organized and share price is set, prohibition of insider trading,
and other measures.
r A reorientation of the way top managers are paid so that they have
a strong incentive to take actions that are in the interests of shareholders. The most direct way to do this is to pay top managers with
shares and stock options, to make bonuses conditional on increasing
share price, and other ways.
These changes do not occur automatically with the shift to a minority
shareholding structure because existing practices and regulations need
to be changed or new regulations need to be created in previously
unregulated areas.
266
Directives approved
Year
passed
2007
2007
2009
Directive 2009/102/EC
2009
Directive 2009/109/EC
2009
Directive 2010/76/EU
2010
Directive 2011/35/EU
2011
1968
1977
1978
Brief description
Registration/power of
organs/nullity
Formation/capital
1978
1982
Division of companies
1983
Accounting
1984
Auditing
1989
1989
2001
2003
2004
2005
2006
SE directive
Registration/disclosure
Rules for takeover bids
Rules on cross-border mergers
Formation/capital public limiteds
(amends second directive)
Shareholder rights
Independent expert report
Registration/power of
organs/nullity (replaces first
directive)
Codification of twelfth directive
(single-person private limiteds)
Reporting/documentation in
divisions and mergers
Capital requirements/remuneration
in financial institutions
Mergers of public limited liability
cost (amends third directive)
267
1979
1984
1989
1994
1999
2004
2009
%
10
20
30
40
50
60
70
80
90
CDI or TGI
CD / EPP
National Conservatives
Socialist Group
Non-Inscrits
Forza Europa
Far Right
Liberal Democrats
Conservatives
Greens
Eurosceptics
100
269
20
Liberals
10
Christian Democrats
0
Left
10
20
30
1960
1970
1980
1990
2000
270
271
Table 9.2. Members of the High Level Expert Group on Company Law
Name
Affiliation
Max-Planck-Institut, Germany
Consultant for the Department of Trade and
Industry, United Kingdom
Former President of the Italian stock exchange
supervisory body CONSOB, Italy
Professor at the University of Copenhagen,
Denmark (previously a practicing attorney)
Legal Affairs Director, Employers Federation
(MEDEF), France
Source: Single Market News No. 29 (June 2002), DG Internal Market, Brussels.
The High Level Group also criticized the highly uneven situation within
Europe, where it was much easier to execute a takeover in countries
such as the United Kingdom but virtually impossible in other countries. According to the group, this would justify a directive requiring countries to create a clear framework for takeovers and to discourage the use of takeover defences by incumbent management. For
example:
In the event of a takeover bid, the ultimate decision must be with the shareholders . . . It is sometimes argued that allowing the board to frustrate a
takeover bid can be justified as a means to help take into consideration the
interests of shareholders and other stakeholders in the company, notably the
employees. The Group rejects these views.10
10
272
On the basis of this approach, the High Level Group made a series of
specific recommendations, including the encouragement of a greater
degree of competition among different national company-law regimes
in Europe, as well as creating an alternative for smaller companies to
incorporate at the European level (specifically through the European
Private Company).
The further use of experts was institutionalized through the establishment of two advisory groups that meet on a semi-annual basis.
The first group, the European Corporate Governance Forum, was first
set up at the end of 2004 and its mandate was renewed in 2008. It
included one trade-unionnominated representative, but the remainder
were representatives of business or academics inspired by the law-andeconomics approach. Parallelling this group was the Advisory Group
on Corporate Governance and Company Law.
Although there was a certain diversity of opinion among these
experts, there nevertheless was a certain homogeneity in the view of
the appropriate shape and proper functioning of company law. This
was a major influence in political discourse and on policy making in
the EU.
273
12
11
No. of Directives
10
8
5
6
3
4
2
1
0
0
1960s
1970s
1980s
1990s
Decade
2000s
2010s
and codes. Second, due to its focus on strategic decision making, corporate governance overlaps more with labour law in particular, with
securities law than with company law. However, company law also
addresses structural aspects of the firm that do not fall under common
definitions of corporate governance.
In addition to public support from the High Level Group for expanding its activities to corporate governance, the Commission also experienced pressure from national governments. In September 2002, the
Competitiveness Council requested the EC to organize an in-depth
discussion on its forthcoming report and to develop in coordination
with member states an Action Plan for Company Law, Including
Corporate Governance. The Competitiveness Council is composed of
ministers from EU member states that are concerned with competition
policy, industrial policy, and research.
An example of a definition fitting this narrow view is the following,
used by the Commission in 2003 in its action plan on company-law
corporate governance:
Corporate Governance is usually understood as the system by which companies are directed and controlled.12 Corporate governance essentially focuses
12
274
on the problems that result from the separation of ownership and control,
and addresses in particular the principalagent relationship between shareholders and directors13 (emphasis added).
This has turned out to be a very significant document because it outlined the new approach of the European Commission and its priorities
for action on new directives and other initiatives in the years ahead.
13
14
275
IS
FI
NO SE
EE
LV
LT
DK
IE
UK
NL
BE
LU
PT
ES
PL
DE
CZ
AT
SI
FR
SK
HU
IT
RO
BG
LI
GR
MT
CY
276
16
277
Total
Academics/Individuals
Public Authorities/Standard Setters
Accountants and Auditors
NGOs/Other
Users
Companies/Preparers
0%
20%
40%
60%
80%
100%
at least sufficient
economy. Whereas the shareholder-value/principalagent model discussed previously defines the key problem of corporate governance as
making management work in the interests of shareholders, an alternative approach proposes a much broader definition of the term. This
approach has, for the most part, used the terms stakeholder and
stakeholder model to provide a contrast to the shareholder firm and
shareholder value. Perhaps not coincidentally, these terms apparently
originated in the Anglo-Saxon countries; the major proponents in the
United States were Freeman and Blair and, in the United Kingdom,
Hutton and the Parkinson/Gamble/Kelly group.17
The Freeman analysis focused on the contribution of a broad range
of stakeholders to the firm and the normative need for the firm to
consider the interests of these stakeholders.18 This approach, in fact,
has been adopted not only by some businesses but also by government agencies; for example, the World Bank formalized guidelines on
the identification and consultation of stakeholders affected by specific
policies.
Blair focused in particular on the role of employees in value creation
in the firm and the need for them to be assured that their investments
17
18
278
20
See Blair 1995.
See OECD 1999.
See German Corporate Governance Code, as amended on May 26, 2010,
p. 6.
279
is, with a touch of paternalism and not as antagonistic to state intervention and worker participation. A number of broad-ranging public
consultations on company law and corporate governance suggested
that a new approach might be taken in this area. However, the new
action plan announced by Barnier in December 2012 fell short of these
expectations because the plan can be described as incremental adjustment to the shareholder-value approach rather than a radically new
stakeholder approach.22
However, the major question faced by critics of neo-liberalism is:
What type of approach and what type of specific measures would
be needed to support an alternative to neo-liberalism in corporate
governance at the EU level?
To date, perhaps the most far-reaching effort has been made by
trade-union experts and academics closely affiliated with the tradeunion movement. Specifically, the GOODCORP network of experts
recently published a collection of essays entitled The Sustainable Company: An Alternative Approach to Corporate Governance.23 This book
coincided with the European Commission consultation on a European corporate-governance framework. This new approach draws
on both traditional postwar pluralist models of the firm and newer
concerns with sustainability. Key themes in the book include the
need for workers voice in corporate governance and for a binding legislative framework to promote sustainability. Individual chapters address the issues of worker involvement, employee shareholding,
sustainability-oriented remuneration, international framework agreements, NGOtrade-union relationships, reforming financial regulation
and carbon taxes, and emissions-trading schemes. The book has been
positively received by both the European Commission and European
trade unions.24
Given the importance of worker participation within the firm for
a new approach, the ETUC has also started working on a global
approach to this question in EU regulation. Until recently, the question has been addressed in a fragmented way, in the context of specific
22
23
24
See European Commission 2012, Vitols and Heuschmid 2012, and Vitols
2012.
See Vitols and Kluge 2011.
See, for example, the ETUC resolution, The Future of European Company
Law: Towards Sustainable Governance, adopted by the Executive Committee
on 67 March 2012.
280
26
281
Conclusion
The emergence of a neo-liberal EU model of corporate governance in
the past decade is a complex phenomenon. Probably the most crucial
single driving factor is the shift in the pattern of share ownership,
away from long-term insider owners towards dispersed ownership
by minority shareholders. These types of owners have very different interests than insider owners, and they have an extensive agenda
for regulatory changes that they pursue actively through lobbying and
coalition-building. In particular, coalitions with other powerful actors
(i.e., investment banks and large law firms) and with the law-andeconomics school of academics have been important in providing both
resources and the ideas supporting a sea change in the EUs approach
to corporate governance.
The Commissions emphasis on increasing the role of the market
in corporate governance, the explicit expansion of activity from company law to other areas of corporate governance (including the use
of soft-law instruments), and the shift from harmonization to encouraging competition among national regulatory regimes are the main
elements of a neo-liberal approach to corporate governance. The success of this approach is evident in a burst of legislative activity in the
2000s (i.e., eleven company-law directives were passed and a variety of
other measures, such as recommendations, were taken). This success
is attributable to not only material factors (particularly the interests
of many financial and other companies in the new model) but also
ideational factors; the shareholder-value model of the firm witnessed
great acceptance in the fields most relevant to corporate-governance
policy making (i.e., economics and law).
Nevertheless, this neo-liberal approach has not been implemented
to the same extent at the EU level that it has in some countries, particularly the Anglo-Saxon countries. Although trade unions and socialdemocratic parties have become much weaker, at the same time, they
have not totally lost influence in the EU. Furthermore, not all conservative parties have had undivided enthusiasm for the neo-liberal model.
282
283
Berliner
Integration: Eine akteursbezogene Erklarung,
europaischen
284
Jensen, Michael C., and William H. Meckling. 1976. Theory of the Firm:
Managerial Behavior, Agency Costs and Ownership Structure, Journal
of Financial Economics, 3 (4): 30560.
Jensen, Michael C., and William H. Meckling. 1983. Corporate Governance and Economic Democracy: An Attack on Freedom. In Corporate Governance: A Definite Exploration of the Issues, edited
by C. J. Huizenga Harvard Business School NOM Unit Working
Paper No. 1983. Available at http://ssrn.com/abstract=321521 or
http://dx.doi.org/10.2139/ssrn.321521.
Johnston, A. 2009. EC Regulation of Corporate Governance. Cambridge:
Cambridge University Press.
Lutz,
Susanne. 2002. Der Staat und die Globalisierung von Finanzmarkten.
Regulative Politik in Deutschland, Grobritannien und den USA.
Frankfurt am Main: Campus.
Manow, Philip, Armin Schafer,
and Hendrik Zorn. 2004. European
Rechsform wachst,
WSI Mitteilungen 1/2011: 3440.
Beate. 2009. Towards a Sustainable European Company Law: A
Sjafjell,
285
Vitols, Sigurt, and Norbert Kluge (eds.). 2011. The Sustainable Company:
An Alternative Approach to Corporate Governance. Brussels: European
Trade Union Institute.
Warntjen, Andreas, Simon Hix, and Christophe Crombez. 2008. The Party
Political Make-Up of EU Institutions, Journal of European Public Policy, 15 (8): 124353.
part iii
Neo-liberalism in comparative
perspective
10
Introduction
This chapter examines the origins, sustenance, and puncturing of the
growth dynamic enjoyed by the United Kingdom and Ireland since
the early 1990s. Often classified as liberal market economies, these
two economies are particularly well matched for purposes of comparative analysis.1 They share not only a common legacy but also key
structural similarities, such as their high levels of trade openness, their
dependence on foreign direct investment, their membership in the EU
(both since 1973), their flexible labour-market regimes (at least by
European standards), their shared liberal welfare tradition, and of
course their common language.2 Yet, there are also notable differences between the two countries not only in terms of their economic
size and relative influence on the international stage but also their
rather different and distinctive political traditions. For example, from
1987 onwards, Irish macroeconomic policy has been guided by socialpartnership agreements between the government and key social and
economic interests, which have stood in stark contrast to the British
system of free-collective bargaining.3 Given these differences and the
path-dependent nature of political discourse, there might be strong reasons for anticipating divergent ideational and institutional responses
even to common pressures and imperatives. Yet, as discussed in this
chapter, there are striking similarities between the two countries in the
development of political discourse and public policy in response to the
crisis in recent years.
More specifically, the chapter identifies what might be termed an
Anglo-liberal growth model in both the United Kingdom and Ireland.
We use this term primarily as a heuristic device: that is, we do not mean
1
2
289
290
291
292
2010.
293
294
set interest rates (as well as the remit it gave to the Banks Monetary
Policy Committee), and prior even to that the decision to liberalize
UK financial markets in the 1980s. In ideational terms, what all of these
decisions share is a profound confidence in the superiority all things
being equal of private, market, or quasi-market mechanisms over
collective, public, or state action or intervention. In other words, they
are all neo-liberal. In this respect, the Anglo-liberal growth model is
irredeemably neo-liberal although it is by no means the only growth
model that a neo-liberal disposition might countenance.
However, there is a further complexity here in effect, a form of
ideational feedback. The Anglo-liberal growth model may not ever
have been consciously designed there is no evidence in either case that
it was; indeed, there is ample evidence that it was not. However, this did
not prevent it from becoming, in time, part of the self-understanding
of political elites of the economy that they were responsible for governing. The UK case is again very interesting. From about 2000 and
particularly in the 2001 budget, there is clear evidence that UK policy
makers notably in the Treasury were consciously aware of the role
played by private debt secured against rising property (and other assetclass) prices in the growth dynamic of the economy. The conscious,
planned, and strategic turn to a programme of asset-based welfare
and the rationale offered for it demonstrate a clear understanding of the
Anglo-liberal growth model (if not, alas, its fragility) in terms similar
to those we present in this chapter. Similarly, that the Bank of England from 2006 onwards chose, in effect, to ignore its anti-inflationary
mandate in its anxiety to sustain house-price inflation (at the expense
of consumer-price inflation) is a clear indication of its awareness at
least at this stage of the centrality of the housing market to growth in
the UK economy.6 As this suggests, although the Anglo-liberal growth
model was never consciously planned, since 2000 or 2001 (at least in
the United Kingdom), it has been consciously sustained in the face
of its own inherent fragility.
295
here is what can be understood by the term crisis. Does crisis refer
only to a material fact an economic and exogenous reality that
policy makers respond to politically, or can crisis be understood as
a discursive construction through which certain political projects are
forged? Stated another way, is it that we should treat discourse (liberal ideas) and material reality (the crisis) as separable variables (such
that we may use one to explain the other?), or can we instead see discourse as constitutive of material reality? In other words, are liberal
ideas separable from the crisis (i.e., to explain or be explained by it),
or are liberal ideas internal to the crisis itself, a part of the way in
which the crisis becomes articulated and understood indeed, a language through which crisis becomes recognized as such? We argue
that liberal ideas are resilient despite the crisis because it is precisely
through liberal ideas that the crisis has been constructed politically.
This is why the crisis has proved to be not paradigm-challenging but
rather paradigm-reinforcing, for it has been constituted politically in
both Ireland and the United Kingdom as a crisis of debt rather than
as a crisis of growth. The response to a crisis of debt is, of course,
austerity and deficit reduction. From an ideational perspective, this
should not be surprising paradigm shifts are rare and, in order for
one to arise, there must be a credible alternative paradigm on offer.
There is, in effect, a problem of ideational under-supply here; the old
(neo-liberal) paradigm must be more seriously discredited before any
genuine alternative (even the reversion to an earlier Keynesianism) is
considered credible. The historical parallels suggest that when such
paradigm shifts arise, they often take at least a decade to occur. To
explore this discursive continuity further, it is useful to consider the
historical context of the current Anglo-liberal paradigm in both countries.
Constructing Anglo-liberalism
In the United Kingdom, the ascendancy of neo-liberalism in the
late 1970s and 1980s was predicated on the success of the New
Right in mobilizing widespread perceptions of a crisis of overload
and ungovernability.7 This paved the way for a neo-liberal offensive
296
informed, to varying degrees, by monetarism and supply-side economics. With the mid to late 1970s constructed as a period of persistent
and increasingly acknowledged state and economic failure, the success
of Thatcherism lay in its ability to construct the moment of the 1970s
as a moment of crisis. This was achieved by selectively narrating the
symptoms of state and economic failure into a coherent and simple
discourse of crisis. The crisis of the 1970s as constructed, and lived,
in Thatcherisms terms was a crisis of ungovernability and overload,
a crisis of an overextended state. Yet, the Thatcherite state project
was not so much a response to the actual contradictions and failures
of the British variant of the Keynesian welfare state as a response to
the opportunistic and simplistic construction placed on such failures
by the New Right. Consecutive Thatcherite governments consistently
failed to address the enduring structural weakness of the British economy while stripping the state of the strategic capacity for economic
intervention.8
Yet, despite such contradictions in the Thatcherite project, the 1980s
and early 1990s also witnessed a profound ideological transformation
in the British Labour Party, which came to accept and, under Tony
Blairs leadership, actively to promote the terms of a postThatcher
yet nonetheless Thatcherite settlement.9 This was also forged through
a narrative of crisis the crisis of the Old Left in order to establish
the need for the modernization of the party to legitimate the content
of the ensuing process. As we argue in detail elsewhere, central to
this new paradigm was globalization as a (discursive) logic of external
economic compulsion.10 New Labours political economy, in opposition and then in government, was consistently situated with respect to
globalization as a pragmatic response to the constraints it imposes.
Globalization, then, became a (rare) unifying theme of New Labours
discourse. The non-negotiable character of this external imperative
was effectively summoned to establish the need for modernization. In
office, it was deployed to similar effect with respect to a range of British
institutions and to establish the necessity of a wholesale rejuvenation of
the European social model. Indeed, a key theme of this discourse was
the notion that globalization exposes all institutions, from the local to
the EU level, to an exacting competitive audit. Consequently, globalization was invariably presented as the context with respect to which
8
10
297
the success of a succession of modernization initiatives, at various levels, should be adjudicated. Thus, neo-liberal economics were, in effect,
normalized and necessitated by New Labour, for an ongoing agenda
of neo-liberal reform was articulated as a condition of sustained economic growth and competitiveness in an economically interdependent
world.
The Irish case is subtly different because stark liberalism has never
characterized Irish policy discourse, even during the 1980s.11 Indeed,
the abandonment of indicative economic planning notwithstanding,12
Irish public policy remained explicitly informed by Keynesian ideas
into the late 1970s and early 1980s. Both in government and in opposition, Fianna Fail
had explicitly rejected the monetarist agenda adopted
by the Fine Gael coalition (and, indeed, the British government) at
this time. As Charles Haughey argued to the Dail
in 1981: Monetarism takes no account of the social degradation, of the waste of
human talent and potential, of the hardship and misery that unemployment involves. On the contrary . . . monetarism uses unemployment as a weapon of economic management.13 This commitment to
Keynesian ideas which had characterized Irish public policy since
the late 1950s was not to last, however. Rather, the 1980s represented a period of ideational shift. The political climate witnessed
something of a transformation in 19811982, as worries about unemployment gave way to alarm about the rate of public borrowing.14
Yet, there was little in the way of a consensus between the two main
parties, Fianna Fail
and Fine Gael, about how to tackle this concern.15
Although both emphasized budgetary targets, little progress was made
in reducing the current budget deficit.16 Yet, some new thinking had
been occurring behind the scenes. The role of the National Economic
and Social Council (NESC) is identified as particularly significant.17 In
its 1986 report, A Strategy for Development, the NESC identified the
11
12
13
15
16
17
298
national debt as the central policy issue but also pointed to the need
to create a broad-based consensus in order to address it.18 This report
provided both the momentum and the theoretical foundations for a
return to macroeconomic bargaining.19 After the collapse of the Fine
Gael/Labour coalition in 1987, Fianna Fail
secured a minority government under Charles Haughey, who articulated the need for consensus
in terms of a narrative of crisis. As he told the Dail
in 1986: The
present crisis is . . . comprehensive and total. It is felt everywhere. It
permeates every sector of our national life.20 The embedding of this
discursive project into a political programme that is, the negotiation of social partnership leading to the Programme for National
Recovery marked both the beginning of the end of crisis in Ireland
and the start of a new era of Irish politics.21
It is within this context that ideas about competitiveness (and, with
them, a set of submerged neo-liberal premises about the efficiency
of deregulated labour markets and the attractiveness of tax havens)
increasingly came to the fore in Ireland.22 In A Strategy for Development, the NESC identified the fundamental problem with Irelands
economy to be the low level of national output.23 Only by achieving
economic growth, it was argued, could Ireland address its high unemployment levels. Crucially, the NESC emphasized the need to enhance
Irelands international competitiveness in order to achieve economic
growth. As the report stated: It is the internationally traded sectors,
embracing enterprises which compete on overseas markets and those
which compete with imports on the home market, which comprise
the locomotive of growth.24 This emphasis on competitiveness was
embraced in all subsequent social-partnership agreements. In a vein
similar to New Labour, this did not entail a normative commitment to
neo-liberal ideology indeed, Irish policy makers would frequently and
explicitly reject this and yet neo-liberal economics became, in effect,
normalized and necessitated in Irish public-policy discourse. Although
a need for social justice was explicitly and consistently articulated, this
was ultimately presented as contingent on and subordinate to competitiveness. Competitiveness was the more urgent priority and, indeed,
the means to the end of social justice a precondition for the pursuit of
18
20
22
23
19
See NESC 1986.
See ODonnell and Thomas 2002.
21
See Haughey 1986a: 1162.
See Taylor 2005.
On neo-liberal premises in competitiveness discourse, see Hay 2012.
24
See NESC 1986.
See NESC 1986: 147.
299
all other economic and social goals.25 As we argue elsewhere, this elevation of competitiveness as the principal objective of economic policy,
to which all else must be rendered accountable, was intimately associated with the appeal to the external economic imperatives unleashed by
globalization.26 During the height of the Celtic Tiger in the 1990s
and, indeed, once economic growth began to lessen globalization was
consistently articulated as an intransigent force that must be harnessed
to fulfill Irelands full potential. For instance, as Bertie Ahern argued
at an international conference in 2007: The profile we now enjoy in
this globalisation era is a dynamic, prosperous and high-participation
economy . . . Competition for foreign direct investment is relentless and
global . . . while we have come a long way and are proud of what we
have achieved, we have no plans for resting on our laurels any time
soon.27
26
See Government of Ireland 1997.
See Hay and Smith 2005.
28
See Ahern 2007.
See, for instance, King 2009 and 2010.
Although, for instance, see Marsh 2009.
300
301
Such developments took place against a backdrop of mounting criticism of and opposition to the government on a variety of fronts,
including massive public outcry over the welfare and wage cuts and
serious breakdowns in party discipline.37 Although it is no surprise
that the cuts proved enormously unpopular, the government undoubtedly compounded matters by failing to offer a convincing narrative of
the crisis and a clear attribution of responsibility. For, despite Fianna
Fails
claims to have taken bold, decisive and innovative steps to man
age our way through the crisis, it sought to consolidate, rather than
challenge, the existing model and the paradigm underpinning it.38 The
Celtic Tiger had been constructed in terms of Irelands ability to compete under conditions of neo-liberal globalization, and the response
to the crisis was in and through this lens. As Taioseach Brian Cowen
argued in May 2010: The lesson we need to take from [the recession]
is that we are in a competitive global marketplace and soft option solutions are not going to provide the basis for sustainable growth and the
improvement of living standards.39 As such, the crisis and the response
to it were couched in terms of the preexisting growth model the very
growth model over which Fianna Fail
had presided. As the ICTU rather
aptly stated in its document, Shifting the Burden: Why the Government Wants to Load the Cost of the Collapse onto the Less Well Off
and Why Their Plan Will Just Make Things Worse: Like disciplines
of a dead faith, they cling grimly to the wreckage instead of starting
over with a new vision.40
38
See, for instance, Irish Times, 27 March 2010.
See Fianna Fail
2010.
40
See Cowen 2010.
See Irish Congress of Trade Unions 2009.
See Reuters, 26 February 2011.
302
42
303
economic crisis. They cannot be the source of sustainable growth for the
future.43
At some level, this was almost certainly correct, but there was and
remains more than three years on no clear sense of what is to
be done. It is clear that the United Kingdom must make the transition to a new growth model based on saving rather than borrowing,
investment rather than consumption, a balance-of-trade surplus rather
than the existing deficit, and a reduced role for financial services. Yet,
how this is to be achieved remains unspecified. There is, in effect,
an open disavowal of Anglo-liberal capitalism in favour of something
more closely resembling Modell Deutschland.44 Restated in such terms,
the stark disparity between the extent of the transformation implied
and the policy instruments required to achieve it (i.e., almost exclusively tax incentives) is cruelly exposed. The problem, in the end, is
simple: the Conservatives and their coalition partners disavowed, then
as now, the type of intervention (and, indeed, public investment) necessary to secure any such transformation.
The same might be said for Ireland. Both in opposition and in government with the Labour Party, Fine Gael has sought to use the crisis
as a means to distance itself as much as possible from Fianna Fail
an
obvious step to take, perhaps, but it is something that Fine Gael has
struggled to achieve throughout the history of the Irish party system.45
Certainly, Fine Gael has lost few opportunities to criticize Fianna Fails
growth or, indeed, the foundations of the Celtic Tiger itself. Of course,
this is perhaps unremarkable, given that Fine Gael was in power during
the early years of the economic boom (i.e., 1994 to 1997). However,
despite its claims to be the bearers of genuine change, Fine Gael continues to offer precious little in the way of an alternative economic
paradigm. To the contrary: the solution for recovery, it seems, is more
of the same: that is, further adaptation to the forces of neo-liberal
43
44
45
304
Conclusion
In conclusion, it is important to return to the issue with which we
began the viability, sustainability, and long-term stability of the liberal market economies. Although the term is as we endeavour to
demonstrate something of a misnomer (in that the crisis we have
experienced, although it has ultimately proved globally contagious,
had more endogenously Anglo-liberal origins), the global financial
crisis invites and requires a thorough reappraisal of the institutional
durability of the liberal market economic order. The analysis developed
herein suggests that contrary to the pervasive varieties of capitalism
perspective, comparative advantages are not institutionally given.49
Rather, they are better seen as the product of the dynamic and politically contingent interaction between the specific institutional configurations that characterize a political economic regime (e.g., a variety of
capitalism), on the one hand, and the growth model or models with
which it is aligned, on the other hand.
Such interactions, as the preceding analysis demonstrates, are rather
more fluid, dynamic, and potentially volatile than was previously
assumed. Moreover, it is credible, we suggest, to think that the
same basic institutional architecture (such as would be seen conventionally to define a variety of capitalism) might be aligned with a
great variety of different and potentially incompatible growth models. Growth models, in other words, may vary among cases of
a common variety of capitalism with the stability of the case
in question relating less to the variety to which it belongs (and
the institutional complementarities that underpin it) than to the
47
48
49
305
306
(2) to steer such credit lines away from the housing market and the
consumer economy towards those export-oriented sectors of the economy targeted to form the basis of a pared-down growth model. This
involves cleansing the existing hybrid growth dynamic of its Angloliberal elements rather than devising and managing the transition to
an entirely new growth model. What makes this a more difficult task
is that it entails a more regulatory, developmental, and coordinating
role for the Irish state. This, of course, will be no easy task particularly in light of the constraints posed by membership of the Eurozone.
However, this suggests a seemingly perverse conclusion. For Ireland, at
least, the solution to the demise of Anglo-liberal growth may well be to
supplant Anglo-liberalism in favour of a more coordinated approach
to export-led economic growth. In other words, now may very well be
a good time for Ireland to reposition itself as a coordinated market
economy. That would indeed entail a paradigm shift.
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11
Introduction
Within the literature on comparative capitalisms, Germany and Sweden are often perceived as paradigmatic cases of coordinated market economies, in which economic success has rested on non-market
forms of organization.1 At the same time, coordination in the two
countries is achieved in different ways through the Bismarkian or
Nordic welfare-state traditions and the differential importance of sector versus national-level industrial relations. Likewise, both countries have undergone substantial liberalization in recent decades,
reflecting attempts to open markets and transform the role of the
state away from intervention and towards a neutral regulator of
markets.
Neo-liberal ideas and discourse have had a role in these transformations in both countries despite the fact that both could be considered
as least-likely cases for liberalization due to strong non-liberal institutions. In Sweden, neo-liberal ideas have obtained a surprising level
of dominance in public debates;2 similarly, German policy makers
have promoted the virtues of more liberal capital markets and emphasis on shareholder value.3 However, the recent financial crisis could
be expected to shatter the relative strength of neo-liberal ideas and
discourses, prompting a return to non-liberal forms of economic policy. This chapter argues that such a return to non-liberalism has not
taken place so far. Rather, neo-liberal ideas and discourse demonstrate
a surprising resilience in the face of real-world problems that could
be understood to seriously challenge neo-liberal theories about the
1
3
313
314
315
5
7
316
infrastructure investment and education: 0.5 per cent of GDP in infrastructure, which compares to 0.27 per cent in Sweden, and 0.6 per cent
of GDP in education, which compares to 0.016 per cent in Sweden.
In addition to economic stimulus, different policy measures were
adopted in other areas. Sweden pursued income-tax reductions and
increased central-government grants to local governments. Also, the
Swedish government reversed some of the extensive changes made
to the unemployment insurance (UI) system in 2007. Indeed, the
2007 reform had increased UI contributions by a factor of three for
some employees, leading to large numbers exiting the UI system (i.e.,
as many as 500,000 between 2007 and 2008).8 Moreover, following a clearly neo-liberally inspired work-first principle, the centreright governments reform had strongly limited the eligibility criteria,
reduced the coverage rate to 70 per cent of the last salary after two
hundred days, and shortened the coverage period to a maximum of
three hundred days. In reaction to the crisis, some of these reforms
were attenuated in 2009 to alleviate pressure on the unemployed. For
example, certain rules were abandoned, including the length of time a
person had to work before being eligible for unemployment benefits.9
German policies, by contrast, focused more strongly on maintaining
employment. Germanys unemployment rate increased by only 0.7 per
cent (i.e., from 7.1 per cent in 2008 to 7.8 per cent in 2009), compared
to an OECD average of 3 per cent, and it fell to 5.5 per cent in 2012.10
Although the strength and rapid recovery of German exports can help
to explain this result, the positive development of the labour market
must also be explained by measures adopted to favour the retention of
labour by companies, such as subsidies for working on a short-term
contract. The number of employees in short-term arrangements was
approximately 100,000 in 2008 but increased to 1,144,000 in 2009,
before gradually shrinking to approximately 502,000 in 2010 and
147,000 in 2011.11 Company surveys from 2009 reveal that 42 per
cent of firms adjusted employment through hiring freezes, 31 per
cent reduced working time, and 24 per cent used short-term work.
Along with other measures, only 13 per cent of firms reduced their
8
10
11
9
See Anxo 2011: 462.
See Anxo 2011.
See Eurostat, available at http://epp.eurostat.ec.europa.eu/statistics explained/
index.php/Impact of the economic crisis on unemployment, accessed on
23 September 2012.
Available at http://de.statista.com/statistik/daten/studie/2603/umfrage/
entwicklung-des-bestands-an-kurzarbeitern, accessed on 23 September 2012.
317
12
13
15
17
Available at http://de.statista.com/statistik/daten/studie/72808/umfrage/
massnahmen-von-unternehmen-in-der-wirtschaftskrise, accessed on 23
September 2012.
14
See also www.oecd.org/germany/44855721.pdf.
See Anxo 2011.
16
See Anxo 2011: 453.
See Anxo 2011.
See, for example, Pontusson 1992.
318
markets, although the legislation of the 1970s has not (yet) been formally amended.18
Also, tellingly, contrary to previous phases of low growth,
the Swedish government did not react to the strong increase in
unemployment by creating public-sector jobs. On the contrary,
Swedish public-sector employment further decreased during the crisis and reveals the emergence of a more liberal approach and departure from the past social-democratic model of using public-sector
job creation for achieving the goal of full employment.19 Similarly,
Germany broke with its past Christian Democrat model of labourmarket adjustment based on externalization, whereby publicly funded
early-retirement schemes were heavily used to protect core employees.
Although the state continues to have an important role in adjustment
policies through short-term work, post-crisis policies reflect a more liberal focus on pursuing higher levels of employment and flexibility for
firms on the basis of extensive deregulation of atypical employment,
wage restraint, and growing wage inequality. Whereas post-crisis commentators praised the pragmatic interventions of the government, the
dominant discourse recast the crisis as a re-normalization of market
forces, portrayed government intervention as antithetical to freedom,
and even increasingly refocused blame on rising public debt.20 Similarly, critics of the neo-liberal strands of the German economics profession became more vocal but have yet to widely influence change
within the economic discourse.21
Despite deep slumps in 2009, both countries emerged from the crisis
as relative winners. They recovered more quickly than many other
countries and did so without a major reform of economic policy,
let alone a Polanyian-like turn towards re-regulation. In 2010, Germany and Sweden had growth rates of 3.63 and 5.54 per cent, respectively, whereas the United Kingdom grew by only 1.25 per cent and
the United States by 2.85 per cent. During the decade before 2009,
Germanys growth was sluggish at, on average, 1.10 per cent annually
but increased every year between 2003 and 2009. Sweden grew, on
average, by 2.28 per cent per annum between 2000 and 2009 and
hence grew faster than the United Kingdom (i.e., 1.65 per cent), the
18
19
20
21
319
United States (i.e., 1.91 per cent), and the average OECD country (i.e.,
1.79 per cent).22 Although there is not necessarily a causal link between
the relatively good performance during the 2000s or quick recovery
and neo-liberal policies,23 the temporal coincidence of the two may at
least lead to a positive perception of such policies.
In summary, reactions to the crisis in both countries reveal a complex
mixture of neo-liberal measures (e.g., tax cuts to stimulate domestic
consumption) and more interventionist measures (e.g., making access
to UI easier and subsidizing short-term work). The following two
sections analyse the longer-term trajectory of institutional change in
Sweden and Germany and discuss how the mixing of neo-liberal and
non-liberal policy elements has been a hallmark of reforms in both
countries.
Sweden
The politics of (neo-)liberalism in Sweden: Business power and
social-democratic volte-face
Sweden is undoubtedly the paradigmatic case of social-democratic capitalism, with a strong political continuity since the 1930s and extensive
social engineering to counterbalance the private economy and market mechanisms through a developed welfare state and strong role for
trade unions. This model is often associated with the ideas of Gosta
Rehn and Rudolf Meidner in the late 1940s and 1950s, but it goes back
to earlier attempts to reconcile a reformist branch of Social Democracy with quasi-Keynesian (but, in reality, Wicksellian) economic ideas,
notably associated with Gunnar Myrdal and Bertil Ohlin.24
Despite the strong institutionalization of non-liberal ideas of economic and social policy, liberalism has witnessed a strong resurgence since the late 1970s. Two groups of actors were crucial:
22
23
24
320
Foreningen
[SAF], now SvensktNaringsliv
[SNS]); and (2) the
reformist wing of the Social Democratic Party, notably around the
1980s Finance Minister, Kjell-Olof Feldt, and Ingmar Carlsson, who
became Prime Minister after Olof Palmes assassination in 1986. The
SAF began an extensive publicity campaign to promote neo-liberal
ideas among the Swedish population. This campaign mainly used the
SAF think tanks, SNS and Timbro, and aimed at influencing public opinion through the quality media and the academic discipline
of economics.25 Academic economists in Sweden also experienced a
neo-classical turn after the late 1970s. The influential economist
Assar Lindbeck changed his stance from a Keynesian approach to
monetarism and rational-expectations theory by the early 1980s.
The new generation of young economists followed Lindbeck and
pushed this transformation even further towards fully neo-classical
economics.26 The two developments dovetailed because the SNS also
had an important role in giving the new generation of economists an
effective platform for their ideas. In particular, SNS Chief Economist
Hans Tson Soderstr
om
26
See Blyth 2002 and Ryner 2004.
See Blyth 2002: 216.
28
29
See Blyth 2002.
See Ryner 2004.
See Boreus 1997.
Cf. Pontusson 1992 and Swenson 1989.
321
However, the employers offensive would not have created any real
results in terms of policy outcomes in a context of social-democratic
hegemony without some support from the governing party. Here, the
31
34
36
32
Cf. Schnyder 2012a.
Cf. Blyth 2002.
35
2005.
See Ryner 2004.
Cf. Hogfeldt
33
322
role of the reformist wing of the SAP is crucial. Since the late 1960s, a
new type of thinking has evolved within the SAP. Although the ideas
remained, at first, close to the precepts of the RehnMeidner Model
(RMM), the social-democratic politicians in particular, the younger
generation within the ministry of finance began to justify their arguments in a more utilitarian way than previously.37 During the 1980s,
this emerging utilitarianism went together with a change in the content
of ideas as well and led to leading Social Democrats embracing neoliberal ideas (notably Deputy Prime Minister and then Prime Minister
Ingvar Carlsson, Finance Minister Feldt, and Undersecretary of State
in the MoF Klas Eklund).
It therefore would seem that Sweden has experienced a remarkable
and sweeping neo-liberalization, which did not even stop at the socialdemocratic party. However, despite this remarkable evolution, actual
policy changes are more ambiguous than this ideological dominance
of neo-liberal ideas would suggest. We argue that this can be explained
by the existence of certain countervailing powers within the Swedish
polity. Indeed, at least two important collective actors resisted, to some
extent, the spread of neo-liberal ideas and rhetoric. First, parts of the
trade-union movement remained opposed to much of the neo-liberal
agenda despite increasing acceptance during the 1990s. Indeed, since
the adoption by the SAP of the neo-liberally inspired so-called Third
Way policies in the 1980s, tensions between the SAP and the trade
unions (notably, the LO) have increased.38 The SAP started to adopt
quasi-monetarist policies and promoted the liberalization of financial markets as well as tax reforms in favour of business. The SAPs
pro-business turn led to an increasing divide with trade unions. Second, the Swedish electorate posed another barrier to full-fledged neoliberalization. Popular support for the tax-financed universal welfare
state has remained high and has forced both SAP and centre-right governments to maintain rhetorical support for the welfare state.39 It is
remarkable that the SAP-led Persson government lost the elections in
2006 to a centre-right alliance, mainly due to its bad record in terms of
unemployment and because the bourgeois Alliance for Sweden managed to define itself as the defenders of the welfare state.40 Indeed,
neo-liberal policies do not seem to have been rewarded by the Swedish
37
39
38
See Ryner 2004.
See, for example, Belfrage and Ryner 2009.
40
See Blyth 2002: 246; cf. Steinmo 2010.
See Agius 2007.
323
electorate, at least until the most recent election in 2010. Thus, the
Carlsson government lost the elections in 1991 with an historically
low percentage (i.e., below 40) after what arguably had been the most
clearly neo-liberal era in Swedish history.41 Certainly, the context of an
acute financial and monetary crisis between 1990 and 1994 which,
incidentally, was mainly caused by the quick liberalization of financial
markets since 1985 may explain the Carlsson governments downfall. However, even the decidedly neo-liberal policies of the centre-right
Carl Bildt government that came to power in 1991 led to an electoral
defeat in 1994. Again, the Bildt governments neo-liberal programme
was not translated into policies in any pure form. Indeed, the socialdemocratic opposition at the time put pressure on the government
by defining itself as defenders of the welfare state in opposition. This
led to tensions between centrist and more right-wing elements in the
bourgeois coalition, which had the effect of diluting the more radical
neo-liberal reform proposals.42
Therefore, Swedish governments that followed relatively radical
neo-liberal policies were rarely rewarded by the Swedish electorate.
On returning to power in 1994, the SAP continued many of the neoliberally inspired liberalization policies of its predecessors but focused
rhetorically on reassuring the population that the welfare state would
remain untouched.43 According to this interpretation, Sweden during the second half of the 1990s is an interesting case in which neoliberalism was stronger in actual policies than in public discourse. In
this respect, Sweden does not fit the second line of explanation or
neo-liberal resilience in Chapter 1 of this volume, whereby a radical neo-liberal discourse is combined with more pragmatic policies. In Sweden, due to the still relatively strong public support
for certain features of the traditional system, neo-liberal public discourse was rather more muted, but policies remained clearly neoliberal in nature. A somewhat different interpretation, however, is
that neo-liberal reforms albeit important were more limited
in certain sectors of the Swedish model than in others. Regardless, this situation appears to have changed in recent years. Steinmo
quotes survey data showing that solidaristic welfare provision through
tax-funded universal welfare services has lost support among the
41
43
42
See Ryner 2004.
See Belfrage and Ryner 2009: 270.
See Blyth 2002: 236.
324
Swedish population for the first time.44 This suggests that the
neo-liberal publicity campaign that began in the 1970s and was carried by the SAF/Svenskt Naringsliv has started to reach the population, not only the elite. If so, the Swedish model may become less
stable, thereby opening the door for more radical reforms and electoral strategies focusing on neo-liberal programmes. Indeed, the era
of the centre-right coalition Alliance for Sweden governments led by
leader of the centre-right Moderate Party Fredrick Reinfeldt seems
to indicate, in different respects, a new level of neo-liberalization in
Sweden. Reinfeldt first came to power in 2006 and was re-elected in
2010. Both discourse and actual policies have become more blatantly
neo-liberal during this period than was the case, for instance, during
the late 1990s.45 The privatization of state-owned companies even
in times of depressed share prices is a case in point; other examples
include far-reaching privatization programmes in the health system.
To be sure, these are not necessarily new, but the discourse around
them seems increasingly open to focusing on the neo-liberal credos of
choice and competition than previously. Even during and after the
crisis, neo-liberal ideas seem remarkably resilient, as discussed herein.
It is also interesting that in Sweden, there is a relatively recent precedent regarding the resilience of neo-liberal ideas after a major crisis.
Thus, the crisis of 19911994, which was the result of the rapid liberalization (notably, of credit markets) during the second half of the
1980s, did not lead to any questioning of such neo-liberal ideas. On
the contrary, the power shift from the Social Democrats to the centreright Bildt government had reinforced the strength of neo-liberal ideas
and rhetoric.46
Hamilton and Rolander attributed this resilience in the 1990s to
the strong dominance of neo-liberal ideas within the community of
academic economists.47 Indeed, they argued that in Sweden by the
early 1990s, there was no alternative to neo-liberal ideas. Yet, the
following subsection shows that the resilience also must be viewed
not only in a context of hegemony of neo-liberalism. Alternatives
albeit increasingly marginalized continued to exist (e.g., among tradeunion economists). However, one of the strengths of neo-liberal ideas
is precisely how they blended with other ideas and were implemented
44
46
45
See Steinmo 2010.
Cf. Schnyder 2012a.
47
Cf. Hamilton and Rolander 1993.
See Hamilton and Rolander 1993.
325
49
Cf., for example, Belfrage and Ryner 2009.
Cf. Reiter 2003.
51
See Bergh and Erlingsson 2009.
See Henrekson and Jakobsson 2012.
53
See Schnyder 2012b.
See Pontusson 1992.
Sphere
Typology
Financial systems
Corporate governance
Industrial policy
Timing
19831989
19932005
1990s
Industrial relations
Welfare state
State-dominated Limited
retrenchment but extensive
privatizations and abolishing of
state monopoly
19741976
1990s
1990s
328
55
329
one of the trade unions main power sources. This process of mediation and compromising contributed to the legitimacy and acceptance
of such ideas and, hence, their resilience.
Germany56
The postwar German model has always been underpinned by a compromise between liberal and non-liberal elements, often captured by
the notion of a social-market economy. The early postwar understanding of liberalism was quite different from contemporary neoliberalism in emphasizing strong anti-monopoly policies, some paternalistic role of the welfare state, and even promotion of ideas such
as unlimited liability for debt.57 The highly consensual nature of
German political institutions, including its federal structure, has prevented adversarial swings across the political spectrum and brought
parties closer to blended versions of liberal and various non-liberal
elements.58 In this way, German economic policy has evolved along
a broad trajectory of liberalization but in which neo-liberal reforms
often go hand in hand with a re-embedding of these compromises
in ways that also seek to stabilize or defend a core of non-liberal
institutions.
330
the mid 1990s. These debates turned disaffection with control and
oversight failures ascribed to uncritical and cozy personal networks
into an interest in Anglo-American corporate governance through
59
60
331
2006.
See Cioffi and Hopner
332
63
333
Typology
Financial systems
Bank-oriented Banks
and markets
Corporate
governance
Stakeholder-oriented Some
elements of shareholder
value
Industrial relations
Corporatism Increasing
segmentation
Associational governance of
apprenticeship
Welfare state
Conservative Limited
introduction of market
elements, some
retrenchment
Timing of Major
Reforms
1990s
19982002
2001, 2003
1990, 2000
Early 2000s
335
new listing requirements and by allowing companies to adopt international accounting standards. Finally, the 2002 reforms allowed the
tax-free sale of long-term equity stakes held by banks and corporations. Whereas these reforms shifted Germany away from its bankbased financial system and towards more market-oriented finance, the
large savings-bank and cooperative-banking sector maintained a more
traditional banking-relationship model, albeit in an evolving form. It
is important that the weak demand for private pensions has left capital
markets relatively underdeveloped relative to the highly financialized
economies, such as the United States or the United Kingdom. Reforms
have operated by institutional layering, whereby new practices are
facilitated through incentives and rules are placed alongside preexisting practices.
Corporate-governance reforms increased the orientation of corporations towards shareholder value. The 1998 reform (i.e., KonTrag)
limited the influence of large shareholders and banks, increased auditor independence, and removed restrictions on share buybacks and
stock options. This reform mixed different political motivations the
desire by the CDU to increase transparency of capital markets, the aim
of the SPD to limit the power of big banks in Germany, and new
USinspired debates about corporate governance.64 Other liberal
reforms streamlined the process of shareholder lawsuits (i.e., 2005),
mandated disclosure of executive pay (i.e., 2005), and streamlined the
process for exercising proxy votes (i.e., 2009). Taken together, legal
reform has increased the salience of shareholder interests, while often
remaining below the radar of public debate.65 However, Germany
did not fully liberalize the market for corporate control.66 A central
issue opposed by German industry was the requirement for board
neutrality during hostile bids, which allowed an option for defensive actions given prior shareholder approval.67 Although the scope
for defensive actions has become relatively constrained, the number of
hostile takeover bids has remained low.68 Little stakeholder-focused
legislation has been passed, other than recent regulation of executive
compensation (i.e., 2009), which demonstrates more caution towards
64
66
68
65
See Ziegler 2000.
See Klages 2012 and Culpepper 2010.
67
See Callaghan and Hopner
2005.
See Culpepper 2010.
336
stock options and reasonable levels of total remuneration. Nonetheless, unions have succeeded in stopping reforms that would directly
endanger the role of co-determination.69
As a result of German unification and long-term declines in tradeunion membership, as well as the growth of service-sector economies,
German employment and industrial-relations institutions have undergone slow erosion in recent decades. Comparing East and West
in 2009, collective-bargaining coverage is lower (i.e., 34 versus
52 per cent) and works councils represent fewer employees (i.e., 38 versus 44 per cent), so that only 18 per cent of the East German workforce
is covered by these two key institutions.70 In this context, labourlaw reform liberalized new patterns of atypical employment. Restrictions on the use of agency work were loosened in 1997 and abolished in 2003. The duration of fixed-term employment contracts was
also extended to twenty-four months in 1996. The effect of liberalization has been a growing dualism in the German labour market.71
However, despite liberalization, several reforms have sought at least
partially to counterbalance existing erosion of German industrial
relations. First, works councils were modernized in 2001 in ways
that rendered their structure less bureaucratic and more adaptable to
the diverse needs of small and medium-sized complex network forms
of organization, and different categories of outsourced or temporary
employees. Second, the state sought to support social protection by
passing a minimum wage for the construction industry as a way to
prevent social dumping given the vast increase of migrant labour
in the industry. Similarly, institutions offering training and skills have
remained largely stable and sought to protect and upgrade the dual system of training in various ways, such as moving away from specialized
and towards broader occupational profiles.72 The state also intervened
to support social partners in ensuring or increasing the supply of occupational training through new funding schemes in 2004 and 2008.
In terms of the welfare state, economic pressures facing UI, social
benefits, and the pension system have grown. Concerning pensions,
the Riester reforms in 2000 reduced state benefits from 70 to 67 per
cent of salary and created new incentives for private pension savings.
69
71
72
70
See Faust 2012 and Jackson 2005.
See Hans-Boeckler Foundation 2012.
See Palier and Thelen 2010 and Hall and Ludwig 2010.
See Busemeyer 2009a and 2009b.
337
73
74
338
75
76
339
would take.77 Two effects result from this situation. First, the legitimacy of neo-liberal policies was increased by giving different actors
a chance to influence the content of the reforms and to prevent the
most radical neo-liberal ideas from being implemented. German political institutions create many veto points for different stakeholders and
make compromises necessary, which also explains their relative slowness (i.e., Reformstau) and incremental nature, as well as their content
(i.e., mixing market-creating measures with non-market coordination).
In Sweden, although the political structures are more majoritarian,
the strength of trade unions and the persistence of certain corporatist
structures still create incentives to engage in negotiated policy making.
Although compromises in both countries are increasingly skewed
towards employer interests, the fact remains that such compromises
constituted a form of coordination similar to traditional corporatist
arrangements. In that sense, both models still rely on institutions
of extra-market coordination. Moreover, reforms were successful in
attaining cross-class compromises that combined liberalization with
strategies of economic adjustment with a clear core of high-skilled
employment.
The inclusive nature of policy making also implied that many actors
got their hands dirty and therefore share responsibility for the neoliberal reform course. Thus, leftist parties are unable to mount virulent
attacks on neo-liberal reforms; this task is restricted to relatively minor
political movements, such as the German Links Partei or the Swedish
extreme right, Sverige Demokraterna, and the Pirate Party movement,
which originated in Sweden in 2006. The emergence of new and radical political parties may reflect dissatisfaction with the hegemonic
consensus of established centre-right and centre-left parties around
various forms of neo-liberal ideas. However, the electorate has recently
shown relatively strong support for the particular path of incremental and socially tamed forms of neo-liberal reforms, as reflected in
the election victories of Merkels governing CDU in 2009 and Reinfeldts coalition in 2010. This political continuity is partly explained
by important weaknesses of the centre-left among other reasons,
due to their own ideological reorientation towards quasi-neo-liberal
Third Way policies during the 1980s and 1990s and, hence, the
77
340
341
seem limited at first glance but they still have the potential to develop
unintended and unanticipated effects farther down the road.
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12
346
347
348
11
349
14
350
351
18
352
See Dyson and Featherstone 1999 and Ferrera and Gualmini 2004.
See Regonini and Giuliani 1994.
353
354
23
See Regonini and Giuliani 1994.
See Schmidt and Woll in this volume.
See Ferrera and Gualmini 2004.
See Radaelli 2002, Ferrera and Gualmini 2004, and Schmidt 2006.
See Locke and Baccaro 1999.
See Ferrera and Gualmini 2004 and Schmidt 2000.
355
356
28
30
29
357
358
359
38
360
40
See Levy 1999 and Howell 2009.
See Howell 2009.
See Schmidt and Woll in this volume; see also Jones in this volume.
361
right or even the far right, which had the power and position to put
these ideas into action around or even against the fractious political
elites.42 It was at the inception of the Fifth Republic, however, that they
consolidated their control, which is also when the ideal-typical model
of state capitalism as such came into being.43 This type of control,
however, did not entail the same type of corruption and rent seeking
as in Italy because Frances public enterprises were led by state-trained
elite public servants who were granted a high degree of autonomy
from the state and were imbued with an ideology of the state and
their special role within it to promote the public interest not party
interests, as in Italy.44
Although neo-liberalism as an ideology remained largely marginal
during this period, there nevertheless were a number of neo-liberal
thinkers actively opposed to Frances dirigiste approach to governing.
Some of the neo-liberals of the prewar years retained influence and
access, specifically those who had been active in the resistance and part
of the technocratic elite. Jacques Rueff, in particular, who had been
part of the 1930s technocratic neo-liberal networks (and a member
of the influential group of graduates of Polytechnique, X-Crise), had
an impact, especially when he was brought in under De Gaulle to
advise on economic policy.45 Others, however, such as Louis Rougier,
who had organized the Colloque Lippman in 1938 and sought to
redynamize the movement during the war from the United States, had
little impact, particularly because he propounded nationalist ideas,
opposed the Free French, and sought reconciliation with the Vichy
government.46 The Mont P`elerin Society, moreover, was at pains to
recruit top-level French intellectuals and officials, unlike the interwar
period when it had few such officials, with a few notable exceptions
(e.g., Rueff). It was, in fact, only as the French dirigiste approach was
beginning to demonstrate its limits in the 1970s, as the economy began
to slow, the state-owned national champions became lame ducks,
and unemployment began to increase, that neo-liberalism in France,
as elsewhere, came into its own.47
From the mid 1970s through the mid 1980s, France witnessed a
major burgeoning of neo-liberal thought through growing epistemic
42
44
45
46
43
See Nord 2010.
See Hayward 1973, 1986; and Schmidt 1996.
See Burdeau 1970 and Hayward 1986.
See Chivvis 2010 and Denord 2007: 26264.
47
See Denord 2007: 16062.
See Schmidt 1996.
362
50
363
52
See Schmidt 1996: 13337.
See Jobert and Theret 1994: 5861.
See Zinsou 1985: 61, cited in Schmidt 2002: 274.
For interviews with author, see Schmidt 1996: 311.
364
365
However, whereas the Socialists backed into implementing neoliberal policy ideas without necessarily believing in them or articulating
any discourse of legitimation, the right had not only the rhetoric but
also the reality of implementation for a short period. The Chirac
government elected in 1986 had a strong campaign discourse that
embraced a moderate version of neo-liberalism, promising to restore
liberties with a major shift to privatization, extensive financial-market
liberalization, and business deregulation.59 Chirac, however, was an
opportunistic entrepreneur, as is evident from the fact that when he
lost the 1988 presidential election he was successfully portrayed as
too radical by Mitterrand during the campaign he also lost his neoliberal enthusiasm. That said, certain of Chiracs ministers were committed neo-liberal ideologues, including Alain Madelin in the Ministry
of Industry, who all but destroyed it.
More generally, however, the countrys state-centred traditions of
economic thought prevailed even during this period. Thus, despite the
proclaimed end to dirigisme, or perhaps because of it, the privatization process was a highly dirigiste and not very neo-liberal affair: The
government hand-picked a noyau dur, or hard core, of industrial and
financial investors determined as it was to provide privatized firms
with stable leadership and protection against hostile takeovers and
foreign acquirers.60 Subsequently, moreover, whether under governments of the left or the right, although the post-dirigiste state was
engaged in implementing neo-liberal ideas focused on privatization
and deregulation, it did not entirely give up on seeking to influence
business indirectly where it saw fit. The state continued to seek strategic areas in which it could reinforce business competitiveness including by using privatization strategically, bailing out failing industries,
and providing state aid to others in need albeit under the increasingly watchful eye of the EU Commission. Frances economic patriotism was equally pronounced, such as designating yogurt a strategic sector to ward off a hostile takeover of Danone61 or interfering
with the attempted takeovers of banks. However, with regard to the
banking sector, the French state took a highly laissez-faire neo-liberal
approach to its regulation. As such, the sector has been controlled
not by the markets but rather by the bankers through their oligarchic
59
61
60
366
63
See Jabko 2013.
See Vail 2010: 64.
66
See Howell 2009.
See Levy 2008.
2010.
See Palier 2006 and Hausermann
64
67
367
after forty years of employment (rather than at age fifty for railroad
conductors).69
70
See Schmidt 2009.
See Levy 2011, Clift 2012, and Jabko 2013.
72
See Jabko 2013 and Clift 2012.
See Hardie and Howarth 2009.
See Levy 2011.
368
See Schmidt and Thatcher, Schmidt and Woll, and Jones, all in this volume.
See Crespy and Schmidt 2012.
369
reduction and belt-tightening, as agreed in the fiscal compact. Ironically, this course of action has not only made him unpopular with
the French public, but also the contraction in the economy as a result
of these very policies is likely to make France less rather than more
credible with both the markets and with Germany.
370
maintaining a highly activist state. Both Italian and French elites, political as well as technocratic, remain voluntarist and committed to the
idea (if not always the practice) of a highly efficient and powerful
state, even if not as interventionist as in the non-liberal period. This
statist liberalism paradoxically violates in its aspirations as much as
in its actions not only the classical neo-liberal ideals of laissez-faire
but also the ordo-liberal ideas of rules-based state action. This further
demonstrates that there are many liberalisms, some more neo-liberal
than others, but all for the moment at least highly resilient.
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373
13
From the point of view of many participants and observers, the breakthrough of 1989 was nothing else but the historical victory of liberalism
over socialism.
(Szacki 1995 [1994]: 34)
The standard stabilization principles apply here: fiscal deficits must be
eliminated, money creation controlled.
(Blanchard et al. 1993: xii)
Developments outside Slovakia have been exceptionally turbulent since
2008, which makes the need to provide certainty for our citizens ever
more pressing. The Government . . . will guarantee sound and sustainable
economic growth . . . which is not based predominantly on cheap labour,
uncertainty in industrial relations, impaired health and safety at work,
agency work, speculation and fraud.
(Government of the Slovak Republic 2012)
Introduction
Central and Eastern European countries were global leaders in the
adoption of neo-liberal ideas and policies during the 1990s and 2000s.
After being ruled for decades by communist political regimes that
rejected free-market economics, Central and Eastern European countries were among the least liberal societies in the world in 1989. The
following two decades witnessed a dramatic catch-up with and popularization of Western liberal norms. Estonia, for instance, which was
part of the Soviet Union for almost fifty years, transformed into one
of the most liberal economies in the world and a Eurozone member
in the twenty years between 1991 and 2011. Its economic liberalism
374
375
now exceeds that of most Western European countries. Other countries moved at their own pace, in their own way, and with greater or
lesser trouble, but nearly all Central and Eastern European countries
adopted neo-liberal ideas and policies at a dramatic rate for the better
part of two decades.
The phase of revolutionary liberalism has now ceased.1 Whereas
neo-liberal ideas have shown resilience in some Central and Eastern
European countries, a trend towards greater statism is clearly visible
in others. Alternatives to neo-liberalism are being advanced and considered in significant parts of the region, including among the member
states of the EU.
Central and Eastern European countries are no longer breaking
world records as they sprint to adopt neo-liberal ideas. To the contrary, the dependent-market economies (DMEs) of Central and Eastern Europe are struggling with how to resuscitate growth in small, open
economies when global financial flows have dried up and promises of
increased standards of living have been disappointing for many.2 The
DMEs of Central and Eastern Europe are characterized by extreme
dependence on outside forces. Central and Eastern European countries do not fit easily into other well-known varieties of capitalism
because the locus of economic decision making does not lie within
their own borders. These economies are radically open more open
still than the small, open economies of Western Europe and thus
dependent on trade to an even greater extent. Although the DMEs
benefited greatly from a massive inflow of capital in the 2000s, they
also suffered disproportionately from the bust after the 2008 collapse
of Lehman Brothers. This experience of being buffeted by the economic
winds and the sense that the effects were increased by the extreme
openness generated by the adoption of neo-liberal policies has forced
a reassessment of neo-liberal ideas in some parts of the region.
In todays Central and Eastern Europe, an alternative set of economic ideas is on the march, specifically the more interventionist statecapitalist ideas championed by China in the past several decades and by
Russia under President Vladimir Putin. To distinguish it from Western liberalism, Prime Minister Viktor Orban
of Hungary called his
approach adopted after his 2010 election victory the Eastern winds
approach to economic policy. Some countries, such as post-Socialist
Belarus, have been so far behind in the adoption of liberal economic
1
376
policies that they now find themselves in the avant-garde of this new
state-capitalist trend. Yet, even in those countries that rapidly adopted
neo-liberal ideas, alternative models of economic policy are gaining
momentum. Russia, for instance, which embraced neo-liberalism in
the 1990s, reversed course in the 2000s and moved towards a stateowned and state-directed market economy, jailing or exiling a number
of uncooperative oligarchs who refused to make the shift. Hungary
has taken the lead among EU member states in Central and Eastern Europe in adopting a more statist approach to economic policy.
Yet, other countries in the broader region are following suit, especially those that never quite made neo-liberal ideas work. Ukraine (not
an EU member state but a country that has been in negotiations for
associate status) rejected IMF prescriptions and adopted a more statecontrolled capitalism. Romania and Bulgaria, which never quite fitted
into the neo-liberal mainstream, have created a crony capitalism with
party, state, or Mafia control. It seems that in Central and Eastern
Europe, neo-liberalism is resilient only in a narrow sense. It is true that
countries have not backed far away from the neo-liberal policies they
adopted in the past; however, further progress has halted, and current
trends point in many countries towards a more statist future.
This chapter focuses primarily on the EU-10 (eleven including
Croatia), which are those countries from Central and Eastern Europe
that have joined the EU in 2004 or later, with particular emphasis
on Poland and Hungary two contrasting cases that illustrate factors
that have made neo-liberal ideas more resilient or challenged. The
EU-10 countries were deeply in the thrall of socialist ideology for
more than forty years, and that experience shaped their approach to
neo-liberal ideas. Many policy makers in the region wanted to reject
socialism in its entirety and apply its purest antidote, one that would
make Karl Marx and Vladimir Lenin turn over in their Highgate grave
and Red Square mausoleum. The adoption of neo-liberal ideas was an
ideological reaction or over-reaction in a heavily ideological region
of the world. I often wonder why Central and Eastern European
policy makers seem to implement radical new ideas more completely
than their counterparts in the West would dare or desire. Do they
love ideas more? Do they adopt radical ideas out of a burning desire
to catch up with the West? Or are they more vulnerable to influence
from leading powers? Whatever the reason, it is notable that Central
and Eastern European countries exited communism and adopted
neo-liberalism with remarkable alacrity.
377
One thing that this penchant for radical economic ideas does for
Central and Eastern European countries is to make the region more
central to global theoretical debates about economic policy. Central
and Eastern Europe comprises a vast region of twenty-eight countries
with subregions including the Baltic States, the western states of the
former Soviet Union, the so-called Visegrad states of Central Europe,
and the Balkans. The battle of economic ideologies in Europe during the late twentieth century was fought out largely in Central and
Eastern Europe. What this region does, for good or for ill, seems to
presage or determine history to a remarkable extent. Because Central
and Eastern European countries have been set up as testing grounds for
neo-liberal ideas, the disillusionment with these policies in the region
could prove to be a great blow to the ideology itself, with far-reaching
consequences. As with the armies of Napoleon or Hitler, many innovations of the West have died a painful death on the Eastern steppes
before collapsing in the centre of Europe.
378
379
380
381
11
382
through subsidies, they believed, would only delay the markets ability
to provide the goods that people needed. However, the extent of the
transitional recession was truly catastrophic and much deeper than
initially expected. Although there is an extensive debate over the depth
of the economic collapse, which differed significantly among countries
and among regions, life-expectancy figures show a frightening and
incontrovertible truth: average male life expectancy in Russia dropped
from sixty-six to fifty-seven, despite a rapid increase in the ownership
of televisions, automobiles, and washing machines.12 Populations of
most countries in the region declined in some countries by as much
as 5 to 10 per cent due to early mortality, decreased family formation,
lower fertility, and out-migration. Moreover, these damaging effects
persisted much longer than economists had predicted as long as
twenty years or more in some countries such as Ukraine. Although
other countries in Central Europe did not suffer such a catastrophic
fate, rebounding within a few years, the post-communist transition
still caused the largest collapse in life expectancy recorded in modern
history outside of wartime. Neo-liberal policies, such as the decision
to eliminate food subsidies which at least one prominent neo-liberal
economist later judged to be unnecessary certainly contributed to
this misery.13
It is often argued that this suffering could not have been avoided. Yet,
social policy was not a major preoccupation of neo-liberal economists
or reform programmes. Neo-liberal policies launched what became
an economically induced Darwinian struggle in which the young, the
strong, and the well educated won out. The old, the ill trained, and the
ethnic minorities lost, particularly the Roma (i.e., gypsy people), seven
million to nine million of whom live in Central and Eastern Europe.
The Roma had benefited from economic subsidies and affirmativeaction programmes during the communist era. After the collapse of
communism, many found that their jobs, their housing, and their benefits had been stripped away and affirmative action was replaced by
racial discrimination.14
The most innovative and controversial neo-liberal reform, that
which truly set Central Europe apart from other recipients of the
Washington consensus, was mass privatization. Because neo-liberal
12
13
383
16
19
384
22
385
basis, the amount into similar small developing countries in Asia and
Latin America.
The boom, however, proved short-lived and ended in the global
bust of 2008. Then, it seemed that Central and Eastern Europe had
over-heated, pumped up by a wave of inward investment channelled
largely by banks into starved markets for consumer finance. There was
another anomaly: it was not only the countries that had embraced neoliberal reforms that benefited. Countries such as Belarus, which had
done the least reforming, also boomed in the 2000s. Russia, which had
rejected neo-liberal policies in favour of state capitalism including the
creation of a dominant state sector of the economy through the de facto
renationalization of major companies also grew rapidly. Therefore,
as the responsibility of neo-liberal economists for the debacle of the
1990s can be debated, so also can their responsibility for the growth
of the 2000s which appears to have had much to do with the revival
of Russia after the chaos of the 1990s.23
After the wild ride of the past two decades, Central and Eastern
Europeans are split on the results of neo-liberal economic reforms.
On the one hand, these countries have rapidly caught up in aggregate
income with the countries of Western Europe. They enjoyed rapid
economic growth in the mid 2000s as Central and Eastern Europe
became a major target for inward investment, with billions of dollars
flowing into the banking sectors of these countries to finance mortgage and credit-card debt. Yet, on the other hand, the economic bust
that followed was equally radical. Latvia lost 17 per cent of GDP in
2009. Since the crisis, Central and Eastern Europe has had the longest
recessions and the weakest recoveries of any developing region in the
world. As Asia and Latin America quickly took off, Central and Eastern Europe continued to stagnate while European investors took care
of problems at home.
Then, there are the effects of inequality. While aggregate living
standards have increased, the returns have been shared unequally.
Many people have been left behind. One particular problem is the
low employment rate in Central European countries. Whereas people working in the transformed and Western-oriented sectors have
great jobs, a large share of the workforce has no employment at
all. Employment rates in Central Europe hover at approximately
23
386
387
26
388
389
390
391
392
393
394
395
396
35
397
imprinted with their two-decade-long experiment with neo-liberal policies and ideas. Central and Eastern European countries are among
the most liberal in the world; they are perhaps the most open small
economies on the planet. They have the highest rates of foreign-bank
ownership of any developing or developed set of countries. Many are
now members of the EU, with all that membership implies in terms of
free markets and openness to trade. In many of these countries, liberal
parties espousing neo-liberal economic platforms continue to be successful notably in Poland, where the Citizens Platform Party of Donald Tusk has proven to be a durable force, at least for the time being.
Yet, discontent with the results of the neo-liberal development model
has risen. Other alternative programmes have been launched, and the
era of neo-liberal revolution appears to have ended in Central and Eastern Europe. Some countries have rolled back important neo-liberal
reforms (e.g., the flat tax and pension privatization) and imposed
a more heavy-handed form of regulation, as in Hungary. Countries
are again promoting national champions in economic competition
and experimenting at the margins with nationalist economic
policies.
In the end, it depends on how we judge resilience. Is a set of ideas
resilient because no one can formulate, for the moment, a better
alternative? Is a set of ideas resilient because it has endured a crisis
without collapsing? I find this to be a thin notion of the concept of
resilience. Instead, from the perspective of Central and Eastern Europe
or the European Central Bank, it appears that neo-liberalism is in midcrisis. It has been seriously challenged, found wanting, but not yet
replaced. Tempers have cooled. Advocates of radical neo-liberalism
have changed over to more commonsense approaches. The future will
not be the same. As the editors of this volume have indicated, Europe
is muddling through. That is also true in Central and Eastern Europe:
lands where great new ideas are readily embraced and then angrily
rejected. Liberalism has gained a certain constituency in these countries, but this is not a majority coalition.36 At the very least, it will
have to be tempered by combination with other economic approaches
emanating first of all from the conservative right but also the statesocialist left of the political spectrum. This may allow neo-liberalism
to persist, according to the editors of this volume. However, the
36
398
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Yale University Press.
Appel, Hilary. 2000. The Ideological Determinants of Liberal Economic
Reform: The Case of Privatization, World Politics 52 (4): 52049.
Appel, Hilary, and Mitchell A. Orenstein. 2013. Ideas versus Resources:
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Balcerowicz, Leszek. 1994. Understanding Postcommunist Transitions,
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Blanchard, Olivier. 1999. The Economics of Post-Communist Transition.
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Blanchard, Olivier, Rudiger Dornbusch, Paul Krugman, Richard Layard,
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MA: MIT Press.
Bockman, Johanna. 2011. Markets in the Name of Socialism: The Left-Wing
Origins of Neoliberalism. Stanford, CA: Stanford University Press.
Bockman, Johanna, and Gil Eyal. 2002. Eastern Europe as a Laboratory
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between States and Corporations? New York: Penguin Books.
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Scandalous Statements at a
Free Hungary. 2012. Hungary PM Orbans
400
Philipov, Dimitur,
Dorbritz. 2003. Demographic Consequences
and Jurgen
part iv
Conclusion
14
404
Conclusion
405
generality, diversity, and mutability. Although the generality of neoliberalism makes it difficult to pin down, its diversity enables it to
encompass many different and even contradictory ideas while its mutability enhances its capacity to adapt to changing and even hostile terrains. The mechanisms of this type of resilience, as discussed in Chapter
1, encompass processes of metamorphosis, absorption, and hybridization.
The resilience of neo-liberal ideas is witnessed in the continued presence or recurrence of certain very general core principles or themes
over time. These include certain holy grails, such as the centrality
of market allocation, the value of competition, and the importance
of individual responsibility. It also involves certain broad orientations,
such as the primacy of negative freedom (especially from state interference) over positive freedom, the priority accorded to sound money,
and the suspicion of collectively provided rights especially in the welfare domain. All of these orientations remain present even as policies
and programmes are revised over time to changing realities.
Neo-liberalisms adaptability is apparent in its ability to encompass
evolving and sometimes conflicting ideas. One key example concerns
ideas about the limited role of the state. Conflict and contradiction in
this core idea have led to conceptual expansion, not retreat. Initially,
reducing the role of the state went hand in hand with the idea of deregulating markets in the financial and network utilities sectors in the
1970s, which was also intended to promote the other core ideal of
market competition. However, critiques (and experience) then rapidly
showed that without re-regulation, market competition was ineffective
or corrupted. Instead of acknowledging defeat, proponents of neoliberalism subsequently theorized the state as market enhancing, as if
such activity were different from other (undesirable) state action. The
result has been a process seen in much of regulation namely, freer
markets, more rules1 as well as the move from roll-back to roll-out
of the state.2 Similar conflicts are replicated in the labour and welfare
arenas, with the move to active (meaning more state involvement in)
labour-market policies, to make workers employable, away from an
earlier assumption that deregulating the labour market would on its
own be enough to put people back to work.3 The result is not only an
extension of neo-liberal ideas into areas of labour and welfare policy
1
2
3
See Schmidt and Woll in this volume.
See Martin in this volume.
406
Conclusion
407
to questions of social justice. A similar process characterizes the development of active labour market policies, in which traditional Social
or Christian Democrat ideas of state support for the unemployed have
been joined to (and perhaps thereby undermined by) neo-liberal principles of individual rather than collective responsibility for employment
and principles of enhancing competition and employability.6
The hybridization of neo-liberalism, which explains its capacity for
diffusion and translation in diverse national contexts, can be witnessed
even in countries seemingly most resistant to neo-liberal ideas. For
example, despite their traditional social-democratic and corporatist
ideals, both Germany and Sweden integrated key principles of neoliberalism (e.g., use of markets to allocate resources or competition),
thereby producing hybrids of corporatist-managed liberalization in
which social partners are important participants in ensuring internationally competitive firms.7 However, as they adopted neo-liberal
ideas, they adapted them to national specificities. In Germany, ideas
about liberalization focused on seeking competitiveness through low
wage and welfare costs without undermining key beliefs about matters such as co-determination in core parts of the labour market.
In Sweden, liberalizing ideas have centred on aiding the rise of hightechnology sectors and risk-venture capital. Even in countries with
strong statist traditions, neo-liberal ideas have experienced a degree
of integration as a result of hybridization. They have made inroads
in Italy, where their supporters (including in centre-left political parties) have presented neo-liberal ideas as part of a programme to modernize the state and reduce its inefficiency and nepotism.8 In France,
although neo-liberalism is perceived as an attack on the state and the
term has been largely rejected, both the political left and the right have
used key neo-liberal policy ideas (e.g., the promotion of international
competitiveness by reducing domestic burdens) in similar efforts to
modernize the state and its relationship with business.
The mutability of neo-liberalism via adaptive processes of metamorphosis, absorption, and hybridization offers a heady cocktail for policy makers and ideational entrepreneurs who can draw on neo-liberal
intellectual traditions and lineage dating to at least the nineteenth century in order to legitimate contemporary programmes, policies, and
6
8
7
See Martin in this volume.
See Schnyder and Jackson in this volume.
See Gualmini and Schmidt in this volume.
408
instruments. British policy makers (usually from the right) can refer to
thinkers such as Adam Smith, Milton Friedman, and Friedrich Hayek
or successful Victorian values, whereas German neo-liberals can refer
to ordo-liberal thinkers. They can also use those traditions, however,
to adapt policies and policy aims to contemporary circumstances. As
Cathy Martin (see her chapter in this volume) shows, whereas liberalism in the nineteenth century often meant upward social mobility for
the able but lowly born set within a context of social class, today its
application to active labour market policies involves freeing individuals
from state shackles.
Thus, the nature of neo-liberalism as an overall orientation characterized by a core set of first principles rather than a specific and falsifiable set of theories or doctrines or proposals is a key part of an analysis of its resilience. However, this is insufficient alone because explanation also requires identification of political processes and actors,
as well as the context within which they operate. Hence, the nature
of neo-liberalism invites consideration of further explanatory factors,
namely, policies, rival ideas and discourses, interests, and institutions
that are considered in the other lines of analysis.
Conclusion
409
410
Moreover, neo-liberal ideas may be designed not for implementation but rather to alter the terms of political debate. Although much
austerity is unachievable in practice, the central questions in political
debate have become how fast to cut rather than whether to do so.
Responses to the crisis beginning in 20072008 focused on state debt
and deficits, despite the crisis being caused in large measure by private
debt in countries such as Ireland and Spain.11 Thus, the dogmas of fiscal conservatism that were subject to devastating critiques by Keynes
and others have returned.12 In welfare and labour-market policies as
well, the rhetoric of cutting back has contributed to debates in which
pensions or welfare payments are viewed as wasteful burdens more
than the earned rights of citizens.13
This second line of analysis offers a powerful response to arguments that neo-liberalism does not exist because many of its specific
policies have not been implemented. Indeed, the ideational breadth
and inclusion of contradictory elements make it particularly likely to
benefit from the gap between rhetoric and policy reality. However,
this explanation also raises a number of important questions. First,
why have policy makers not taken up alternative ideas that are more
practicable? This draws attention to the political value of neo-liberal
ideas in political debate. A second question concerns the uses made
of neo-liberal ideas for instance, by political parties or firms and
hence points to the role of interests in sustaining debates centred on
impracticable policy objectives. A third issue is why the political system
permits impossible ideas that resemble fairy tales to be told and re-told,
despite contrary experiences which again suggests that interests and
institutions are at work.
See Hay and Smith and also Jones in this volume. See also Grant and Wilson
2012.
See Gamble in this volume.
See Schmidt and Thatcher, Martin, and Ferrera, all in this volume.
Conclusion
411
15
See Jones in this volume.
See Krugman 2012 and Stiglitz 2010.
See Mugge
in this volume.
412
Conclusion
413
Another reason that neo-liberal ideas predominate is that their simplicity and apparent good sense provide cognitive power and normative resonance in policy debates and political discourse. Thus, the
neo-liberal conception of the state budget as analogous to that of a
household budget is cognitively powerful at the same time that, it resonates normatively with individual personal experiences; conveying a
neo-Keynesian argument about the differences in nature between state
and individual budgets is more difficult.24 More generally, Keynesian
policies of supporting demand through fiscal policy face commonsense claims that states cannot continue to spend more than they earn
a position taken up even in France, which has not run a budget surplus for almost forty years.25 In elections, moreover, the state always
makes an easy target, and campaigning against opponents in power
or even ones neo-liberal predecessors is aided by the argument that
the state needs to be scaled back and reformed to meet the neo-liberal
ideal. Similarly, normatively portraying welfare spending as wasteful
or pointing to unsustainable rising costs due to longevity risks is easy
to convey in political discourse. Conversely, alternative ideas that such
spending supports the competitive economy or reflects changing social
preferences about collectively provided benefits are difficult to explain
and communicate simply and quickly. Even notions of solidarity have
shifted through neo-liberal reframing as the term has become synonymous with economic loan bailouts rather than mutually advantageous
support mechanisms.26
Yet another factor responsible for the ability of neo-liberal ideas
to beat ideational competitors has been the effectiveness of communication by neo-liberal ideational entrepreneurs in policy debates
and political discourse. Such entrepreneurs include political elites
and entrepreneurs such as Reagan in the United States, Thatcher
in the United Kingdom, Balcerowicz in Poland, and Klaus in the
Czech Republic. However, the group of ideational entrepreneurs
extends to technocratic elites such as members of the European
Commission, whose authority results from their expertise, and also
to academic elites, mainly economists such as Friedman, Hayek,
and contemporary economists whose simple models embed neoliberal assumptions about rational actors in free markets and
24
25
26
414
Conclusion
415
to the production or popularization of neo-liberal ideas by establishing, supporting, and financing neo-liberal societies, think tanks, and
research institutes (e.g., the Mont P`elerin Society and the Institute of
Economic Affairs)27 or by participating in the shaping of policy agendas or the creation of specific policy ideas.
It is important to note that firms generally do not act on their own
but rather form broad coalitions to promote their interests. They have
needed vital accomplices not only elected politicians and political parties but also unelected officials. Coalitional influence is visible
in EU debates about regulation of financial markets, mergers, and
corporate governance, in which large firms and their managers have
coalesced with EU and national government officials to form advocacy coalitions behind neo-liberal ideas of expanding and protecting
competition.28 At the national level as well, alliances have formed
among large firms, unelected officials, and political parties to promote
neo-liberal ideas, not only in Britain and Ireland but also in coordinated market economies such as Germany and Sweden.29
Such coalitions also benefit from feedback mechanisms that enable
them to grow as other self-interested actors join or become more integrated in a type of band-wagon effect. This has happened in many
different areas, including EU competition policy, in which initial opponents particularly from statist countries such as France and Italy
subsequently redefined their policy preferences.30 However, it may also
be the result of rationally self-interested calculations, in which actors
may decide that they must be within the winning coalition of the
battles for ideas a dilemma faced by many parties of the centre-left
from the 1990s onwards.31
Among political actors, parties are naturally the most important
set of interests in the strategic use of ideas. Those on the political
right have used and propagated neo-liberal ideas in efforts to re-centre
political debate around themes that offer favourable terrain, such as
reducing the size and scope of the state, replacing rights to welfare
27
28
29
30
31
See Mirowki and Plehwe 2009; for Britain, see Denham 1996. See also
Schmidt and Thatcher, Schmidt and Woll, and Gamble, all in this volume.
Thatcher, and Vitols, all in this volume. Cf. Coen 1997; Coen and
See Mugge,
416
with duties to prepare for the labour market, and creating labourmarket flexibility.32 However, neo-liberal ideas have also been used by
centre-left Social Democrats (not only the now ill-starred Third Way
Blairites but also parts of the Italian left) and centrist parties that are
liberal socially and economically (e.g., the FDP in Germany) to gain or
retain power. Neo-liberal ideas have also served as weapons against
their opponents. Thus, for instance, ideas about obstacles to efficient
labour markets leading to higher unemployment or state spending as
wasteful have helped in such actors attacks on trade unions and
public employees or to portray social-democratic parties in France and
Italy as conservative (i.e., anti-progressive).33
Senior unelected public officials in organizations such as the European Commission, ECB, and national governments have also been both
producers and beneficiaries of neo-liberal policy ideas and agendas.
This has been most evident through their membership in the epistemic
communities and advocacy coalitions formed to promote financialmarket liberalization, competition policy, and liberalization of services
in the Single Market, as well as to push the austerity agenda for the
EMU over time. At first glance, the support of senior officials may
appear odd, given neo-liberalisms hostility to collective state benefits;
however, as noted previously, it favours a strong state for certain functions. Hence, senior public officials can use neo-liberalism to increase
their powers in certain domains and to avoid unwanted tasks and
responsibilities in others notably, the often difficult and expensive
task of updating the collective provision of services, a process suggested
by a bureau-shaping model of policy.34
An interest-based explanation is valuable because it brings to the fore
those who gain and lose from neo-liberalism. However, actor interests
do not always simply map onto ideational preferences. Thus, the chapters in this volume also suggest that institutional actors such as firms
may not always have simple interests in supporting neo-liberalism but
can support hybrids that incorporate elements of alternative paradigms
such as corporatism and Social Democracy.35 Moreover, an interestbased explanation cannot account for how and why labour and the
32
33
34
35
Conclusion
417
beneficiaries of a wide range of social policies have lost in the policy debates or reversed their views. This is especially puzzling because
these actors are more numerous than large firms and their managers.
Whereas part of the answer may rest in the difficulties of collective
action or theories about capture by interest groups that highlight
the costs of organizing numerous actors with limited stakes, as compared with a small number of large firms,36 another part relates to
the (re)construction of actors ideas, which refers to the previous three
lines of analysis about neo-liberal ideas. Attributes such as flexibility,
high levels of generality, and appeals to common sense and personal
experience also help to explain why neo-liberal ideas may be particularly suitable for rewarding powerful supporters, creating coalitions,
and selling them to the public.
The strongest objection to interest-based explanations is internal,
however. Frequently, neo-liberal policies damage their supporters.
Rarely have political parties and politicians espousing radically neoliberal ideas successfully weathered the transition into political office.
Thus, for example, the German FDP is struggling to survive, at the
same time that, in France, the economic liberals headed by Alain
Madelin have been conspicuous by their failures whereas mainstream politicians such as Sarkozy and Berlusconi soon dropped their
neo-liberal rhetoric.37 Ideas of reducing collective benefits such as
healthcare, pensions, and education are vote-losers. Even in Britain
the most favourable micro-climate for neo-liberalism in Western
Europe the evidence suggests strong popular support for collective provision of welfare services such as the National Health Service and pensions, whereas in Central and Eastern Europe, the initial popularity of neo-liberalism has given way to disillusionment
with perceived results such as increased poverty and inequality.38
Hence, the most penetrating questions may concern how and why
those interests are constructed and especially why actors find neoliberal ideas to be the best way to serve those interests. This returns
us to the other explanatory factors but also takes us forward to
the role of institutions in shaping incentives or in constraining
action.
36
37
See Olson 1965, Peltzman 1976, Stigler 1971, and Wilson 1980.
38
See Gualmini and Schmidt in this volume.
See Orenstein in this volume.
418
40
See Thatcher and Stone Sweet 2002.
See Jones in this volume.
42
in this volume.
See Thatcher in this volume.
See Mugge
Conclusion
419
420
Conclusion
421
56
See Thatcher and Jones in this volume.
See Ferrera in this volume.
See Vitols, Ferrera, and Thatcher, all in this volume.
Cf. Lieberman 2002 on sources of change of existing ideas.
422
So, our final question is: How could such neo-liberal resilience end?
Stated another way, is there any hope for those who may have long
opposed neo-liberalism and long decried what they have perceived as
its ideational slipperiness, its broken (and unfulfillable) promises, its
sleights of hand in debates, the cynical support of powerful interests,
and the bias in choices due to its institutional embeddedness?
As a preliminary response to this multifaceted question, we return
to each line of analysis to discuss how it could be reversed. We draw
on the chapters that offer variations in neo-liberal resilience and on the
exceptions to the general picture of neo-liberal dominance in political
and policy debates.
59
Conclusion
423
See Ferrera and Martin, both in this volume; cf. King 1999.
See Schnyder and Jackson and also Gualmini and Schmidt in this volume.
For a discussion of growing governance challenges to neo-liberalism after the
crisis, see, for instance, Calhoun and Derluguian 2011; or, for a possible
breakdown due to the misguided pursuit of austerity, see Blyth 2013. For the
effect of implementation failures leading neo-liberalism to hit a wall and
thereby enabling the rise of new ideas in social policy, see Jensen 2010; and for
the possible effects of self-induced crisis, see Peck, Theodore, and Brenner
2010.
424
Conclusion
425
68
69
70
72
73
For new ideas in Latin America, see Grugel and Riggirozzi 2012; for diffusion
of rival ideas to neo-liberalism from Latin America in social policy, see Jenson
2010.
See Schmidt and Woll in this volume; see also Scharpf 2012.
71
both in this volume.
See Ferrera in this volume.
See Vitols and Mugge,
See Schmidt and Woll in this volume; see also Pollitt and Boukaert 2011.
426
Traditional alternatives to liberalism may also be renewed and reinvigorated. Thus, social-democratic ideas remain strong and appear
more successful in countries such as Germany and Scandinavia, sometimes enhanced by having added elements of neo-liberalism concerning competitiveness.74 However, powerful extremist alternatives are
also on the rise especially nationalist alternatives, whether based
in nation-states or regions, which promote xenophobic, statist, and
protectionist ideas. The extreme right-wing nationalist government in
Hungary provides a powerful example, but similar ideas promoted by
extremist right-wing parties have achieved popularity in other countries, such as France, Italy, Greece, and even the United Kingdom.75
Although Socialist ideas appear to remain marginal, they too have
achieved some return in many countries.
Conclusion
427
neo-liberalism, such as in France,79 whereas social-democratic parties have been winning elections in the Netherlands, France, and Italy
with arguments favouring growth and questioning neo-liberal orthodoxy. At the same time, new radical actors have also emerged, from
the Grillo movement in Italy to the extreme nationalists in Eastern
Europe.80 Populists on the right have also seen the gains from abandoning neo-liberal ideas, including the embodiment of an opportunistic
politician, Silvio Berlusconi.
Even if rarely implemented by governments thus far, the new discourse suggests the potential for self-interested actors to modify their
calculations or for new actors to put forward substitutes for neoliberal ideas. If current policies continue to allow or cause increasing
unemployment, slow growth, extreme inequalities, and rising poverty,
that potential is likely to expand, and new coalitions may form that
challenge and win against the neo-liberal status quo.
80
See Gualmini and Schmidt in this volume.
See Orenstein in this volume.
See, for instance, Streeck and Thelen 2005, Hall and Thelen 2009, Pierson
2004, Baumgartner and Jones 1993, and Krasner 1984.
428
mandates, thereby promoting ideational conversion. Some modifications are surprising. Thus, the ECBs formal and informal responsibilities have been extended, from stabilizing the Eurozone economy via
injections of liquidity to rescuing euro member states and their banking systems. In turn, this has created pressures for the ECB to find new
ideas about the role of central banks and the operation of economies.82
In addition, regulatory institutions have seen significant reforms that
point to a modified environment for neo-liberal ideas, notably the new
provisions under the Treaty of Lisbon and legal rulings on the importance of services of general interest.83
Conclusion
Neo-liberal ideas have been at the centre of debates about economic
policy since the 1980s. Despite the successes of Social and Christian
Democracy after 1945, the strength of the embedded liberalism in
which state action sought to offset or limit market competition, and
the presence of powerful alternative traditions, neo-liberal ideas have
spread across countries, beginning with the United Kingdom but also
reaching across Continental Europe to the north, south, and east, as
well as to the EU. Equally, they have stretched from welfare to regulation and from fiscal and monetary policy to labour markets and
corporate governance. Moreover, neo-liberal ideas have continued to
dominate through (small) booms and (big) busts; even the crises of the
2000s have not ended their predominance.
Political scientists are notoriously poor at predicting the future.84 It
may be that It is always darkest just before the Day dawneth,85 and
just as we are writing a book about the resilience of neo-liberalism,
those ideas collapse. Yet, it is also very possible that neo-liberalism
will remain strong and central in debates for many years to come as
a result of its own ideational characteristics, combined with support
from interests and institutions.
Regardless of the future, the resilience of neo-liberalism is worthy
of analysis due to its importance and the puzzle it provides. It also
offers a major example for the study of policy ideas as phenomena in
82
84
85
83
See Jones in this volume.
See Thatcher in this volume.
See Blyth 2006.
See Thomas Fuller, A Pisgah-Sight of Palestine and the Confines Thereof,
1650.
Conclusion
429
themselves, just as institutions, interests, and discourse have been subjects of investigation. As Keynes argued, ideas are central to political
debates and choices; understanding when, how, and why some ideas
endure despite multiple challenges is a fascinating and essential task.
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Conclusion
431
Index
absorption
neo-liberalism, 406, 4078
paradigm change, 422
plasticity, 25
resilience, 405
welfare, 406
welfare reform, 28
accounting, fair value, 21718
accounting practices, 157
Action Plan on Company Law and
Corporate Governance, 258,
2734, 278
active inclusion, social promotion,
978
active labour-market policy, 2278
agenda, tensions, 2334
alterations in power, social classes,
235
austerity, 238
diverse goals, 234
evolving neo-liberal positions,
267
flexible labour markets, 2278
incentives, 238
institutional context, 229
institutional influences,
implementation, 2289
investment in marginal workers,
237
multidimensional, ideological
appeals, 227
new direction, 235
policy intervention, unemployment,
2336
social benefits, 235
supply-side policies, 317
Sweden, 237, 317
win-win alternative, 238
active labour-market spending, 2445,
246, 250
432
Index
European Central Bank, 1512,
1667
European Monetary Union, 106,
354
financial, monetary, 83
fiscal, 74
fiscal consolidation, 1512
France, 368
Germany, 1334, 3312, 337
Greek bailout, 368
growth versus appropriate balance,
1512
Ireland, 1589
Italy, 3567
member-state compliance, 368
the Netherlands, 158
new ideology of Europe, 3567
pension reform, 1334
Poland, automatic stabilizers,
38990
before recovery established, 300
reduced benefits, 126
reduction of, 74
severe policies, 1334
Sweden, Social Democrats, 126
UK economy, 300
universalistic welfare state, 126
austerity packages, 71
Austin, Jane, 227
Austrian School, 58, 59
inflation, 58
market order, 58
state intervention, 58
automatic stabilizers, 237
balanced budget, 59, 72, 3801
Balcerowicz, Leszek, 1267, 390
Balcerowitz plan, 3789
Bank of Italy, 350, 3512
banking-sector liabilities (bailouts)
Belgium, 1589
Ireland, 1589
banks
credit, low fixed rates, 15960
credit available to, 1645
European Central Bank (ECB),
15960
failing, 18
government bonds, purchase of,
15960
433
internal-risk models, 21011
investment decisions of, 59
liquidity, 15960
recapitalization of, 305
refinancing, 15960
regulation, Poland, 38990
strategies of, 264
takeover of, 18
Barnier, Michel, 2789
Basel II, 21011
Beckert, Jens, 25
Bell, Daniel, 657
Berlin Wall, 14, 57
Berlusconi, Silvio, 24, 30, 3557,
417
Bernanke, Ben, 74
Big Government, 77
Big Society, 92, 102
Blair, Tony, 67, 24, 30, 84, 1289,
2434, 2967
Bolkestein, Frits, 267
Bolkestein directive, 180
bourgeois revolution, 231
Bretton Woods, exchange rates, 10
bricolage, 406
British Conservatism, 92
British East India Company, 261
British Financial Services Authority,
21011
Brittan, Leon, 1757
BrusselsFrankfurt consensus, 18, 21,
145, 1512, 160, 163
alternatives, proposals, 1679
collapse, 1456
efficient local factor markets, 1603
fiscal consolidation, 152
fiscal stimulus, 152
ideas, ideologies, paradigms, 1513
ideological differences, 152
inflation rates, Eurozone, 145
interdependence, 163
intra-European macroeconomic
imbalances, 163
price inflation, 1478
price stability, 147
resilience, institutional inertia, 168
rule-based framework, 14651
sound finances, 15760
sound-finances rule, 1489
stable money, 1546
434
BrusselsFrankfurt consensus (cont.)
virtuous policy combination,
163
welfare-state structures, 1489
bubble, recession, political
implications, 3012
Buchanan, James, 9, 118
Bulgaria, austerity, flexicurity,
238
Bundesbank, 165
inflation, 1334
monetary policy, 123
Bush, George, 712
Bush, George W., 5960
business cycle, 157
Callaghan, Jim, 299
Camdessus, Michel, 131
Cameron, David, 92, 102,
3023
Cantillon, Bea, 1001
capabilitiesexpectations gap,
161
capital allocation, 2045,
21112
capitalism, state-led, 347
postwar, non-liberal, dirigisme,
dirigiste, 347, 3601
Capitalism and Freedom (Friedman),
89
capitalist era, ideological development,
534
Carlsson, Igmar, 31920
catallaxy, 634
private economy, 68
Cato Institute, 380
Central and Eastern European
countries
alternatives, 393
boom and bust, 3845
corruption, 3867
criminal organizations, 3867
dependent market economies,
3879
deregulation, 3812
development model, 393
global financial crisis, 388
mass privatization, 3823
orderly markets, 3867
Poland, shock therapy, 389
Index
popular discontent, 3867
recession, 3812
right-wing nationalists, 3834
Central and European countries
central to theoretical economic
debates, 377
dependent market economies,
3756
international influence, 37980
revolutionary liberalism, 3745
shift from socialism to free market,
377
change, rates of, 212
Charter of Fundamental Rights,
83
Chicago School, 1201, 1823
economic model, 59
mathematical model, 59
monetarist critique, Keynesianism,
59
Chicago School of Economics, 9,
59
China, style of reform, 396
Chirac, Jacques, 30, 125, 365
Chirac government, 125
chrematistics, 656
Churchill, Winston, 112
Ciampi, Carlo, 3512
civil rights, 967
class mobility, 2312
classical Christian solidarism, 912
coalitions
neo-liberal ideas, 1712
promotion of ideas, 35
coalitions, discursive, 122
Colloque Lippman conference, 78
commercial society, 601, 66
Committee on Banking Supervision,
208
communicative discourse, 323
Communism, fall of, 130, 135
Communitarian thinkers, 912
Community Method, 134
competition, 14950
criteria, mergers, 1934
domestic exchange, 1757
European integration, 1757
law, 1745
policy, excessive market power of
firms, 173
Index
competitiveness, 1612
equity and efficiency, 1612
market efficiency, 162
Competitiveness Council, 2734
conservative neo-liberalism, 1356
Conservatives, disavowed intervention,
303
Constant, Benjamin, 362
constructivism, 23
continuity, 16
historical institutionalism, 378
contructivism, 225
coordinated market economies,
313
coordinative discourse, 94
corporate governance
company law, 2724
corporate failures, 26970
employees as key stakeholders,
2778
environmental disclosure, 2789
exploitation of investors, 2612
flexibility,
2756
growth of multinational companies,
2634
harmonization philosophy, 2756
High Level Group, company law,
2712
High Level Group, takeover
directive, 2701
interest groups, support, 263
laissez-faire model, 262
management remuneration, 276
market-based view of firm,
2657
minority shareholders, 2645,
2812
postwar stakeholder model, 262
privatization, 2634
reforms, 3356
separation, ownership, control,
260
shareholderdirector relationship,
269
shifts in financial savings and
regulation, 2634
social disclosure, 2789
stakeholder model, 2767,
2812
435
state intervention, 2789
term, 260
trade unions, 2812
worker involvement, 2745
worker participation, 267, 2789
corporations
eighteenth-century, 645
fair-value accounting, 21718
history, laissez-faire, 2612
modern, strategic market actors,
65
origins of, 261
corporatist management, 122
creative destruction, 1267
credit
bad-asset accumulation, 164
banks, unlimited credit, 15960
effect on domestic prices, 164
European Central Bank, 15960
expansion of, peripheral, 164
explosion of credit, 74, 15960
income inequality, unsustainable
credit, 201
unsustainable credit, 201
credit cycles, 21617
credit-rating agencies, 202,
21011
The Crisis of the Tax State
(Schumpeter), 678
Croce, Benedetto, 349, 350,
369
cross-border deposits, 164
Cross-Border Mergers Directive,
2745
cross-border trade, 175
Crouch, Colin, 55
Czechoslovak state bank, 3789
de Tocqueville, Alexis, 362
deficits, excessive, 148
deficits, political choice, 1578
deficits, rule enforcement, 1578
dependency culture, 1245
deposit insurance, 153
deregulation, 556
derivatives, 214
desert-based liberalism, 8990
Difference Principle, 8990
Director of the Internal Market
Directorate, 267
436
Directorate General Competition,
1845
discourse
discursive coalitions, 122
economic crisis, 132
ideational entrepreneurs, 22,
11415
middle path, 129
morals plus the market, 103
New Labour, 2967
right-wing populism, 103
social investment, 1001
discourse coalitions, 24
discretionary spending, 237
discursive coalitions, 122
discursive institutionalism
ideological acts, 923
individual agents, 923
multiplicity of arenas, 923
discursive institutionalists, 39
discursive neo-institutionalism, 85
discursive struggles, 31
dissemination, 1718
dominance, hegemony, 1718
Draghi, Mario, 1656
e-governance, 128
East European economists, 1267
economic activity, individual,
11617
economic crisis
neo-Keynesian stimulus, 11314
economic efficiency, 212
Economic Europe, 1067
economic freedom, 11617
economic libertarianism, 58
anarcho-capitalists, 58
individual rights, 58
economic orthodoxy, 1301
economic patriotism, 356
economic performance, reciprocity,
978
economic policies, Keynesian, 3601
economics, capital allocation,
efficiency, 206
economists
American, 1267
East European, 1267
economists, training of, 245
efficiency, local labour, 14950
Index
efficiency, public management,
1201
efficient local factor markets, 1512,
160
efficient market hypothesis, 59
egalitarian liberalism, 834
egalitarian redistribution, 978
Einaudi, Luigi, 9, 3501, 369
electoral promises, 11
embedded liberalism, 54, 121
empirical evidence, welfare-state
change, 945
Employment and Social Affairs
Directorate, 83
The Employment and Social Chapter
of the Amsterdam Treaty, 83
entrepreneurs, ideational, 22
epistemic communities, 24, 323
equal rights, 230
equality, 97, 126
equity, principles of, 834
Erhard, Ludwig, 9, 122
euro
inviolability of, 166
speculation, 1556
Eurobarometer, 106
Eurobonds
European Commission, stability
bonds, 1678
issuing of, 74
ordo-liberal theory, 1334
quantitative easing, 74
Europe
labour-market performance, 1601
market efficiency, 161
unemployment, 160
Europe, social structures, 88
Europe, unemployment, 160
Europe of Freedom and Democracy,
103
Europe Unified Left, 103
European anti-trust policy, 123
European Bank for Reconstruction and
Development (EBRD), 383
European Central Bank (ECB)
austerity, 1512
credibility, 156
credit, 15960
inflation, 1512
lender of last resort, 159, 167
Index
liquidity, 159
long-term refinancing operations,
15960
monetary stimulus, 1667
securities market program, 159
sovereign debt, purchase, 159
European champion firms, 173
European Coal and Steel Community,
123
European Commission
actors, institutionally disadvantaged,
1867
member states, allies, 1867
European Company Directive, 2745
European Cooperative Society
Directive, 2745
European Corporate Governance
Forum, 2712
European Corporate Governance
Institute, 270
European Court of Justice, 171, 174,
175, 1856
European Employment Strategy, 83
European integration, 834, 104, 175
competition, 1757
key actors, 1812
European monetary integration, 145
European Monetary Union (EMU),
812
austerity, 354
fiscal austerity, 1067
labor and pension reforms, 354
monetarism, 1067
European Popular Party, 102
European Single Market Programme,
2067
European social model, 2967
European Stability Mechanism, 1678
European Trade Union Confederation
(ETUC), 237
European Treaties, 149
European Union (EU)
competition, 177
decision making, 183
force for liberalization, France, 348
force for liberalization, Italy, 348
legal restrictions on entry, 177
member states, competitive markets,
178
neo-liberal ideas, 177
437
European Union Commission, 1312
European Union regulation, 1757
focus on competition, 17980
implementation, difficulties, 17980
law and politics, roles of, 183
policy disagreements, 180
worker participation, 27980
European Union regulatory model
large firms, 1878
market making, market protection,
183
Eurozone
fiscal problems, structural level,
159
interest rates, 159
Stability and Growth Pact, 378
Eurozone crisis, 21, 114
Eurozone inflation rates, 145
evolutionary change, 20
excess capacity, 152
experimentalist governance, 1789
Fabian socialism, 91
fair-value accounting (FVA), 21718
faire avec, 115, 125
familialism, 912
feedback mechanisms, 356
Ferrera, Maurizio, 7, 406
Fianna Fail,
297, 300
foul-weather Keynesianism, 300
Fico, Joseph, 3956
fictionality, 225
Fifth Republic, 3601
financial crash, 545
explosion of credit, 74
financial crisis, 2034, 31415
neo-liberal finance ideas, defeat of,
202
stabilization attempts, 299
financial markets
economic efficiency, 212
liberalization, 131
regulation of, 41112
financial media, anti-social state, 812
financial regulation
debate, 202
delegation of, 208
socio-economic effects, 208
Financial Stability Board, 208
financial sustainability, 978
438
Fine Gael, 297
corporation tax, 3034
firms
interests, coalitions, feedback
mechanisms, 415
shareholder model, 258
First World War, 612, 678
fiscal conservatism, economic crisis,
6975
fiscal consolidation, 152
fiscal deficit, 157
fiscal moderation, 157
fiscal stimulus, 152
flexibility, 1301
flexible labour markets, 128,
2278
flexible solidarity, 978
flexicurity, 128
Bulgaria, 238
Denmark, 24950
labor markets, 128
Scandinavian countries, 243
Fordist
middle mass, 889
welfare state, 88
forecasting models, 156
foreign direct investment, 289
Forza Italia, 81, 889
Foucault, Michel, 20, 120
Founding Treaties, European Union,
123
frame of analysis, 32
framing, dissemination, 323
France
austerity, 368
central role of the state, 35962
credibility with the markets,
368
dirigisme, 3601
dirigiste approach, 361
dirigiste economics, 3612
double-digit inflation, 364
entrepreneurial state, 35962
Euro-champion firms, 1934
Fifth Republic, 3601
French national champions, 3678
gouvernance e conomique, 368
interventionism, 35962
Keynesian economic policies, 3601
Keynesian reflation, 363
Index
labor markets, 366
market liberalism, 3678
National Front, 3623
neo-capitalism, 3601
neo-liberal monetary policy, 364
non-liberal discourse, 368
ordo-liberal economic philosophy,
368
post-dirigisme, 3678
pragmatic neo-liberalism, 347
pro-market ideas, 360
selective neo-liberal implementation,
207
state-centrered traditions, economic,
3656
state-influenced market economy,
3467
state-trained technocratic elite,
3601
voluntarist, efficient state, 36970
welfare state, aspects of change,
3623
free-collective bargaining, 289
free market(s)
choices regarding, 115
doctrines, 57
inefficiency, 1278
liberty, guarantee of, 1245
regulation, ambiguity, 1823
rules-based approach, 11819
self-regulating capacity of, 801
Free to Choose (Friedman), 118
free trade, 62, 1034
Britain, 62
policy, 612
freedoms, positive, negative, 967,
2312
French Colbertism, 1301
Friedman, Milton, 9, 59, 355, 4078
Fukuyama, Francis, 55
Geithner, Tim, 74
gender equality, 912
German Corporate Governance Code,
278
German corporatism, 123
German Free Democratic Party (FDP),
417
German ordo-liberals, 9, 57, 4078
German social-market economy, 122
Index
Germany
anti-monopoly strategies, 329
austerity, 1334, 3312
corporate governance, 3301
corporate governance reforms,
3356
corporate tax cuts, 331
decentralization of power,
333
employment, 336
Federalism, 333
financial crisis, 31415
Hartz Reforms, 244, 3378
industrial relations institutions,
336
liberalization, 31314, 3301
liberalization, financial markets,
3335
managed austerity, 337
non-market forms of organization,
313
ordo-liberal theory, 1334
pension reform, 1334
policy priorities, 31617
policy response to crisis, 317
policy making, inclusive, 33940
political compromises, 3389
post-crisis policy, 31718
protection, non-market mechanisms,
3389
recovery, 31819
reform, 314
role of welfare state, 329
shareholder value model, 313
social-market economy, 329
SPDGreen coalition, welfare state
cuts, 331
unemployment, 331
unemployment insurance, 336
unification, 330
welfare state, unification costs,
3367
Giddens social theory, 91
globalization, 290, 2967
gold standard, 62
Golden Age, 889, 1067
Goldscheid, Rudolph, 678
governance
EU, politically neutral, technical
mode of, 183, 195
439
experimentalist, 1789
governing without government,
128
government policy entrepreneurs,
2412
grand projet, alternative European
model, 173
Great Transformation, 21, 121
Greece, bailout, 368
Greek elections, 104
Greens-Free European Alliance, 102
growth, price movements, 154
growth-competitiveness-inclusion
triad, 912
growth dynamic, puncturing of, 289
Hall, Peter, 367, 54
harmonization philosophy, 2756
Hartz Reforms, 244, 337
Haughey, Charles, 2989
Hay, Colin, 56, 201, 2045
Hayek, Friedrich, 9, 57, 58, 634,
11819, 1723
Hayekian strand of neo-liberalism,
74
hedge funds, 21011
hegemonic belief, 1718
Hemerijck, Anton, 945
Heritage Foundation, 9, 380
historical institutionalism, 378
Hobbes, Thomas, 11617
Hollande, Francois, 1001, 1512,
368
election campaign, 3689
Hont, Istvan, 601
Hoover, Herbert, 6970
household
classiclal conception of, 64
corporation, 645
public, 656
household economy, metaphor, 312
households, types of, 634
Hungarian Constitutional Court,
3945
Hungary
crisis, 391
currency devaluation, 391
economic mismanagement, 3945
goulash communism, 390
government spending, 3901
440
Hungary (cont.)
mixed-ballot election system,
392
reform communism, 378
hybridization, 25
paradigm change, 422
resilience, 405
ideational
entrepreneurs, 22, 1312
shifts, 21
ideological
campaigning, 934
consensus, 87
synthesis, 85, 95
internal differentiations, 99100
ideologues, 93
ideology
dogmatic, 867
morphology, 86
philosophy, versus, 856
plastic, 867
revisionism, 91
implementation, lack of, 301
imports, restriction, member states,
174
income polarization, 88
individual, role of, 7
individual freedom, 11819
individualism, 20
industrial policy, state-led, 173
industrial-relation systems, 2401
inequality, policies enhancing, 34
inequality, rising, 115
inflation
European Central Bank,
1512
Eurozone, 145
rates, divergence, 154
reducing public debts, 148
unpredictable rates, 155
Institute of Economic Affairs, 9
institutional isomorphism, 38
institutional retrenchment, 81
institutional structures, 239
institutionalist analysis, 367
institutions, non-majoritarian, 37
inter-paradigm borrowing, 299
inter-service coordination, 128
interbank lending, 164
Index
interdependence, 1637
BrusselsFrankfurt consensus, 163
solidarity, 167
interest-based analysis, 334
interest-driven financial overhaul, 207
interest rates
long-term, 164
low, long-term refinancing
operations, 15960
International Monetary Fund (IMF),
71, 37980
managed globalization, 131
Paris consensus, 131
regulation of financial capital, 131
international trading system, 612
interventionism, state, 132, 352
France, 125
market-shaping reforms, 128
intra-European macroeconomic
imbalances, 163
investment banks, behaviour, 656
Ireland
Anglo-liberal growth model, 306
Anglo-liberalism, 306
austerity, 158
banking-sector liabilities (bailouts),
1589
collapse of social partnership, 300
international competitiveness,
national output, 2989
Keynesian techniques, 300
pared-down growth model., 3056
regulation, 3045
unemployment, 2989
Irish Congress of Trade Unions, 300
Italian Democratic Party, 1001
Italy
academic neo-liberals, policy
leadership, 3534
austerity, 3567
authoritarian reform, 3567
authoritarian reform process, 357
economic leadership, crisis, 356
economic miracle, liberal ideas,
350
entry, European Monetary System,
3512
European integration, 354
European Monetary System, entry,
3512
Index
Grow Italy decree, 358
Keynesian ideas, 3512
Montism, 3589
Mussolinis authoritarian fascism,
349
neo-capitalism, 349
neo-liberal ideas, politics, 34950
opportunistic politics, 356
policy paradigm, 3589
political theory tradition, 778
postwar reform, 3523
pragmatic neo-liberalism, 347
pro-market ideas, 34950
public trust in policies, 359
rescue of the nation-state, 354
Save Italy decree, 358
Second Republic, 3523
sound monetary policy, 354
state-assisted capitalism, 349
state-influenced market economy,
3467
voluntarist, efficient state, 36970
Jackson, Gregory, 12
Jealousy of Trade (Hont), 601
Job Securities Councils, 317
Jones, Erik, 18, 21, 123
Jospin, Lionel, 129
Juncker, Jean-Claude, 168
Juppe, Alain, 3667
Kant, Immanuel, contractual tradition,
8990
Keynes, John Maynard, 1, 545,
119
Keynesian
economic policies, 3601
macroeconomic intervention, 236
paradigm, 54
policies, 1245
pragmatism, 723
stimulus policy, market
deregulation, 236
welfare state, 556, 88
Keynesianism, 1067
in recession, 300
King, Mervyn, 74
3789
Klaus, Vaclav,
441
Kok, Wim, 1612
Krugman, Paul, 723, 202
Kuhn, Thomas, 1523, 21113
analysis, paradigm change, 422
Kuhns view of change, 21
Kuhnian normal science, 1523
Laborde, C., 90
labour costs, 246, 330, 332
labour market flexibility, 6
ALMP reforms, 227
neo-liberal ideas, 41516
labour market performance, Europe,
1601
laissez-faire, 121
arguments, 2056
economics, 11617
liberalism, 121
Lamy, Pascal, 131
large firms, European-wide markets,
1878
laws, universally applicable, 230
left-wing radicalism, 1034
Liberal Communitarianism, 101
liberal market economy, 534
liberal neo-welfarism (LNW), 12, 79,
406
austerity, 1067
community, 989
emergence from revisionist efforts,
99100
equality, 97
hybridization, 99100
ideology, positive, negative
freedoms, 967
innovation, 99100
meritocracy, 989
naming, ideological act, 956
non-discrimination, 967
opportunity, 989
redistribution, 989
tax-transfer system, 97
Third Way, 99100
transformative potential, 106,
107
liberalesimo, 7, 778, 79
liberalism
embedded, 121
nineteenth-century, 4078
liberalismo, 7, 779
442
liberalization
Germany, 31314
Sweden, 31314
liberismo, 778, 79
libertarians, economic, 58
liberty, 97
fundamental rights, 967
limited liability, 645
Lindbeck, Assar, 31920
liquidity, 202
banks, 15960
Lisbon
European Council, 1612
Strategy, 160
Treaty, 912, 1801
List, Friedrich, 62
Locke, John, 778
Loedel, Peter, 147
London School of Economics, 9
Lubbers, Ruud, 1256
Lucas, Robert, 59
Ludwig Erhard, 9, 24
Maastricht agreement, 153
Maastricht criteria, 148, 38990
Maastricht Process, 83
Maastricht Treaty, 82, 83, 147,
148
macro-prudential regulation, 215
Madelin, Alain, 125, 417
majoritarian political institutions,
124
marginalist economics, 778
market-correcting autonomy,
1067
market deregulation, Keynesian
stimulus policy, 236
market economies, state-influenced,
369
market efficiency
Europe, 161
unemployment, 162
market enhancement, 217
market globalization, 889
market instability, 21819
market intervention, 214
market liberalism, state, 120
marketism, 350
Martin, Kathy, 4078
Martino, Antonio, 355
Index
Marx, Karl, 612
mass migrations, unemployed workers,
149
media, pro-neo-liberal interests, 35
Meidner, Rudolf, 319
Mellon, Andrew, 6970, 72
merger control, 18894
merger model, 1923
Merkel, Angela, 1512, 168, 368
metamorphosis, 25
paradigm change, 422
resilience, 405
Miliband, Ed, 1001
Mill, John Stuart, 11617
Millian liberty, 978
the Millian perspective, flourishing,
967
Mitterrand, Francois, 363
monetarism, 60, 123, 1245
monetary analysis, 1545
monetary and financial union,
connection, 153
monetary stimulus, ECB, 1667
money supply, 154
Mont P`elerin Society, 9, 57, 121
Monti, Mario, 30, 104, 152, 3578
moral conservatism, 801
moral vocabulary, 20
Moran, Mick, 1289
morphological approach, 87
path dependencies, 92
national debt, British
Napoleonic Wars, First World War,
69
National Economic and Social
Council, 297
National Health Service
Forza Italia, 823
privatization, 823
national priorities, conflicting, 161
Nea Democratia, 104
negative integration, 812, 208
neo-capitalism, 356, 369
France, 3601
Italy, 349
public, 3467
neo-conservatism, Thatcherite, 1001
neo-conservatives, 80, 102
neo-functionalism, 1812
Index
neo-Keynesian stimulus, 11314
neo-liberal
agents, 2
democracy, 1312
finance, critics, 216
labels, 12
think-tanks, 380
neo-liberal ideas
challenges to, 204
coalitions, 1712
constructivist, 2
crisis, 2945
criticisms of institutional analysis,
421
designed for debate, 410
dominance, 4212
economic-policy debate, central,
428
European political economy, 2
finance, 204
firms, interests, coalitions, 415
force of institutions, 418
future of, 4289
ideational entrepreneurs, 41314
individual states interests, versus,
133
institutional analysis, 420
institutional breakdown, 427
institutionalized, 175
interests, power of, 41415
interests, pressing for new ideas,
4267
internal conflicts, 4223
Iron Curtain, marginal impact,
3778
key actors, institutional frameworks,
414
merged with social-democratic ideas,
24
neo-institutionalism, 418
non-implementation, political
benefits, 2931, 408, 409
normative resonance, policy, 413
paradigm change, 4212
policy debates, 41112
policy ideas, study of as
phenomenon, 4289
political parties, politicians, 417
positivist, 2
re-use of, policy debates, 409
443
resilience, 1316, 41011 (see also
resilience)
rhetoric, reality, 2931, 4234
rules, coercive, 419
rules, path-dependence, 41920
strategic use of, 115
strength in political dialogue, 316,
41011
stronger alternatives, 4245
Sweden, 31920, 3245
traditional alternatives, 426
neo-liberalism
absorption, 4078
adaptability, 4056
agents of, 225
ambiguity, 226
ascending phase, 823
benefits of non-implementation,
269
burying the state, 11213
and classical liberalism, 603
continuity, 1415, 314
core principles, 3, 25, 408
corporate governance, 25962
corporate governance, role of the
market, 2812
critique of, 11921
definition of, 1, 2, 3
deregulation, 1201
descriptions of, 3
dissemination, 1718
dominance, 1718
early decades, European Union,
1725
economy, the solution, 1201
embedded market labour policies,
24251
employment policies, 2328
endurance, reinvention, 251
endurance of crisis, 3978
engineering of souls, 121
equal rights, 230
Eurozone crisis, 1334
failure to meet expectations, 1056
financial crisis, 2034
financial regulation, 2046
financial regulation, future of, 220
flexible framework, 28
forms, levels of, 1922
forms of, 11213
444
neo-liberalism (cont.)
fundamental contradiction within,
11213
generality, diversity, mutability,
269
hybridization, 4078
ideals of the founders, 1212
ideological program, 124
ideological renewal, 11314
ideological roots, 567
impact of actors, 925
impossible targets, 409
independent authority, delegation,
132
individual freedom, 11213,
2301
institutional base, 23942
institutional structures, 239
institutionalization, European
finance, 20611
institutions, force of, 369
intellectual traditions, 4078
key elements of, 56
liberal neo-statism, 113
liberal neo-welfarism, variants,
99105
liberalism, negative freedoms,
22932
liberalization pressure,
supranational, 1303
lines of analysis, 4045
malleability, 25
merger control, 18894
metamorphosis, 406, 4078
moderate, 1279
morphological approach, 858
mutability, 4078
neo-liberal order, 11819
neo-statism, discursive struggle,
1346
neo-welfarism, ideological synthesis,
959
non-implementation, benefits,
408
paradigm change, 422
philosophy, historical perspective,
11619
plasticity, 25
political freedom, 117
political phenomenon, 3940
Index
poor guide to financial regulation,
21920
portrayal of, 3
positivist, constructivist views, 22,
23
post-crisis resilience, 21113
postneo-liberalism, rise of, 8892
privatization, 1201
putting ideas into action, 1214
radical conservatism, 1247
rational self-interest, 117
re-regulation for competition,
1778
reactions to term, 39
redefinition of the state, 116
regulatory alternatives, search for,
21520
regulatory debate, schools of
thought, 21315
regulatory model, analysis, 1818
regulatory model, development,
17581
renewal of the state, 1356
resilience, 12, 3967
resilience as process, 4034
rhetoric, reality, 2931, 114
shareholder model, European Union
level, 26576
shareholder model, interests
supporting, 2635
stakeholder model, corporate
governance, 27681
state, focus of attack, locus of
action, 11213
state, the problem, 1201
strength, in political discourse, 269
strong state, 118
survival of, 1819
Treaty provisions, 1745
welfare-state transformation, 1057
neo-statism, 1356, 404
neo-welfarism, liberal, 956, 4034,
406
historical compromise, 1045
supranational arenas, 1045
the Netherlands, austerity, 158
New Deal, 72
New Labour, 1289, 2967
new paradigm, 104
new public management, 1345, 354
Index
new risks agendas, 912
New York Times, 202
nineteenth century
liberal political economy, 623
liberalism, 4078
social mobility, 4078
Nixon, Richard, 236
non-discrimination, 967
non-implementation, 2931, 408,
409
Normpolitik, 31920
Nozick, Robert, 58, 11920
Obama, Barack, 713
Official Settlements Account, 165
open method of coordination, 1301
Orban,
Victor, 3945
Ordnungspolitik, 150
ordo-liberal theory
Eurobonds, 1334
Germany, 1334
inflation, 1334
ordo-liberalism
EU policy, 123
foundations, 123
German neo-liberals, 4078
liberalism, first form, 57
neo-liberalism, first form, 57
position of dominance, 123
state role, 578
Organization for Economic
Co-operation and Development,
71, 81, 201, 278
organizational design, 37
organizational power, 34
Original Position, 8990
Osborne, George, 723, 74
parabola, neo-liberal
alternative ideological positions,
8990
ascending phase, 823
centre-left parties, 84
counter-arguments, 834
crisis rhetoric, 801
critique of welfare state, 834
ideological re-elaboration, 84
individuals rational pursuit of
wealth, 801
of influence, 105
445
institutional retrenchment, 81
moral conservatism, 801
neo-conservatives, 801
phases of, 80
principles of equity, 834
redefining social justice, 8990
social-assistance benefits, 81
paradigm shifts, 54
paradigmatic belief, 1718
Paris consensus, 131
Party of Freedom, 158
Pasok, 104
passive transfer, 978
paternalism, 1245
path dependence, 378
Paulson, Hank, 712
pension
reform, 129
systems, 2012
persuasion, 31
Persuasion (Austen), 226
philosophical contractualism, 778
philosophical principles, 20
philosophy, ideology versus, 856
phlilosophical liberalism, 8990
Poland
avoidance of recession, 38990
bank regulation, 38990
Maastricht criteria, 38990
proportional representation, 392
reform communism, 378
shock therapy, 1267, 389
Polanyi, Karl, 534, 121
policy entrepreneurs, 22, 11415
political economies, international,
116
political economy, liberal, 634
political expression, party systems,
240
political ideas, influences of, 1213
political liberty, 11617
polity, prior to individual, 11617
Popper, Karl, 9
population, aging, 88
positivism, 22
post-dirigisme, 347, 349, 369
postneo-liberalism
impact on reforms, 945
label, liberal neo-welfarism, 956
poverty, 978
446
pre-crisis regulation, 20910
price stability, importance of, 152
principalagent concept, 2589
Principles of Corporate Governance,
278
prioritarian egalitarianism, 978
private economy
catallaxy, 68
foundation of public economy,
68
privatized Keynesian model, 291
pro-market regulation, 2067
Prodi, Romano, 84
productivist solidarity, 978
programmatic ideas, 20
ideologies, 856
Progressive Alliance of Socialists and
Democrats, 102
Progressive Conservatism, 101
property rights, reform of, 645
protectionism, 132
public debt
deficit financing, 3023
deficit financing, excessive, 148
excessive deficits, inflation, 148
public household, US, key
developments, 66
public management, 1201
public officials, narrow self-interest,
118
public philosophy, 1056
public service, non-economic
contributions, 1201
Putin, Vladimir, 3934
quantitative easing, Eurobonds, 74
radical neo-liberals, 125
Rajoy, Mariano, 912
rating agencies, criticisms of, 218
rational self-interest, 117
Rawls, John, 834
re-regulation
for competition, 177
competitors, newly-permitted,
discrimination, 185
Reagan, Ronald, 45, 5960, 801,
362
reception theorists, 8990
recovery strategies, 2367
Index
Red Toryism, 103
referentiel, frame of analysis, 32
reform
active labour-market policies,
2356
budgetary, 352
Central and Eastern Europe, 3856
Denmark, 126
entrenched interests, 10
equality, 126
EU regulation, 187
Germany, 314
incremental, 33941, 366
institutional context, 228
Lisbon strategy, 160
majoritarian political institutions,
124
market-complementing, 128
market-creating, 31314
market efficiency, 2023
market-structural, 152
new labour market, 249
pension, 129
radical, communist to capitalist,
1267
strong states, 134
supply-side, 71
Sweden, 314
tax cuts, 71
Thatcher, 233
universalism, 126
unpopular, 187
welfare, 28
regulation
Ireland, 3045
market-enhancing, 21415
pre-crisis failings, 21314
stakeholders, 209
regulatory model
legal institutions, range of, 1789
neo-liberal, challenges to, 1801
promotion of competition, 1945
Rehn, Gosta,
319
Index
lines of analysis, 256
metamorphosis, 405
origins of term, 323
survival, 1819
understanding of, 53
usage in social sciences, 1516
resource-based egalitarianism, 8990
resource complaints, 1834
Rhinish capitalism, 123
right-wing populism, 103
Road to Serfdom (Hayek), 89, 119
Romney, Mitt, 5960
Wilhelm, 9, 57
Ropke,
Rothbard, Murray, 58
Rougier, Louis, 361
Rousseau, Jean-Jacques, 11617
Rueff, Jacques, 361
Ruggie, John, 121
Russia
national champions, 3934
oligarchs, 3934
state control, 3934
Alexander, 9, 57
Rustow,
447
Smith, Adam, 645, 4078
social-democratic consensus, 95
social-democratic productivism, 978
social-democratic tradition, key
elements, 105
Social Inclusion OMC, 83
social investment, 945
social justice, 97
social-partnership agreements, 289
social protection, Europe, 1056
Social Protocol, Maastricht Treaty,
83
socialism, opposition to, 910
sociological institutionalists, 38
solidarity, interdependence, 167
sound finances rule, 1489
sound monetary policy, 354
Spain, austerity, 238
Stability and Growth Pact, 1334
stakeholder approach, 259
stakeholders, regulation, 209
starting-gate egalitarianism, 8990
state
capacity to build coalitions, 241
conservative roll-back, 114
definition of, 116
deregulation, 1201
distributional justice, 11920
economic activity, 11819
efficient markets, 11819
expanded, 667
extended, 556, 74
freedoms, negative, positive,
11617
German ordo-liberal, 114
individual freedom, 11819
industrial policy, state-led, 173
inequality, 11920
influence of neo-liberalism, 114
interests of individual states, 133
intervention, dismantling, 1011
interventionism, 125, 128
intrinsic defects, 120
laissez-faire economics, 11617
market-enabling arbiter, 130
market liberalism, 120
market relations, 2012
nanny, 88
national preferences, 1312
negative income tax, 11819
448
state (cont.)
neo-liberalism with rules, 122
planning, serfdom, 11819
political driver for change, 116
privatization, 1201
regulatory function, 182
roll-back, unanticipated problems,
11314
scope of action, 11617
social anesthesia, 366
Social Democrats, roll-out, 114
social protection, 11819
social solidarity, 241
steering state, 1289
strong, neo-liberalism, 118
tax state, 658, 74
state-influenced market economy,
3467
state-led capitalism. 347. See also
dirigisme
statemarket relationship, 120
state-trained technocratic elite, France,
3601
statism, 11
stock exchanges, 20910
Streeck, Wolfgang, 1234
strong egalitarianism, 91
structural reform
market, 152
productivity, growth, 71
reconceptualized business interests,
33
supply-side economics, 5960
cutting taxes, 5960
increase in debt, 5960
supra-national
neo-liberalism, 1112, 823
policy, 1301
Sustainable Companies Project,
27980
Sutherland, Peter, 1757
Swank, Duane, 2412
Sweden
active labour-market policies, 237,
317
austerity, 126
corporate governance, 3258
financial crisis, 31415
institutional change, 3258
legislative measures, 321
Index
liberalization, 31314
liberalization policies, 3204
non-market forms of organization,
313
Palme government, 321
policy priorities, 31516
policy reform, 3258
policy response to crisis, 317
political discourse, 3223
promotion of neo-liberal ideas,
31920
recovery, 31819
reform, 314
reform, limitations, 3223
resilience of neo-liberal ideas, 3245
Swedish model, transformation, 3289
systemic internalization, 20910
Takeover Directive, 2756
tax state, 601
earliest analysis, 678
Tea Party, 545, 72, 103
technocratic elites, state-trained,
3601
technocrats, 1201
Thatcher, Margaret, 67, 1011,
801, 123, 1245
Thatcher, Mark, 1112, 2023
Thatcherism, 92, 102
Thatcherite state project, 2956
Theory of Justice (Rawls), 8990
think-tanks, 24, 934
Third Way, 91, 1001
Third World internationalism, 1034
trade
cross-border, 1757, 1812
openness, 289
traditional corporatist Swedish model,
317
transgovernmental networks, 208
Treaty of Rome, 174
Treaty provisions, 1745
Tripartite Social Summit, 237
Tusk, Donald, 390
unemployed workers, mass migrations,
149
unemployment
Europe, 160
Ireland, 2989
Index
market efficiency, 162
Sweden, 31718
wage and price distortions, 150
universal service, 174
universalism, 126
US Congress, 167
Vandenbroucke, Frank, 1001
Veil of Ignorance, 8990
Victorian values, 4078
Virginia School, 9, 589
balanced-budget rule, 59
policy makers, altruism, 589
public sector, inefficiency, 589
virtue, appeal to, 312
von Mises, Ludwig, 58
Walter Lippmann, 78
Warsaw School of Economics, 3789
Washington consensus, 130
Weidmann, Jens, 1656
Weir, Margaret, 367
welfare
absorption, 406
European model, 978
gurus, 934
449
reform, absorption, 28
reform, centre-left parties, 84
reform, unemployment, 1667
system, rationalization, 1234
welfare regimes
composite, 99100
spending patterns, 99100
welfare state
encroachment on liberty, 1245
modernization, 87
neo-liberal criticism, Germany,
123
opposition to, 60
recalibration, 94
transformation, 105
Wicksellian economic ideas, 319
Wolf, Martin, 202
World Bank, 71, 130, 277,
37980
world market, equivalence, 61
World Trade Organization, 130
Yeltsin, Boris, 3934
Zapatero, Jose, 84
Zysman, John, 115