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Lucio Baccaro and Jonas Pontusson make a significant contribution to comparative political economy with their approach to analyzing growth in advanced economies, which focuses on the demand side of the economy and distributive conflict. In contrast to Baccaro and Pontusson, however, we view their approach as reinforcing recent developments in varieties of capitalism rather than undermining them. We also believe that the type of modern macroeconomics used by (for instance) Carlin and Soskice is better placed than their post-Keynesian framework to analyze growth models, and that their approach is not inconsistent with it. Modern macroeconomic models incorporate, as they do not, a role for the state—including monetary and fiscal policy—and provide a coherent framework within which to analyze both the supply and demand sides of the economy; they also enable us to understand the interactions between economies and hence the role of growth models in global imbalances.

Patterns of crime and punishment in the USA greatly magnify corresponding developments in other liberal market economies – Australia, Canada, New Zealand and the UK – faced with similar broad macro-technological transformations, namely the collapse of Fordism in the 1970s and 1980s and the development of knowledge economies in the 1990s and 2000s. In this article, we set out the case for seeing these differences as largely the product of dynamics shaped by the institutional structure of the US political system. We focus on the exceptional direct and indirect role of local democracy in key policy areas including law and order and beyond that in residential zoning, in public education and in incorporation of suburbs, which has no parallel in the other Anglo-Saxon polities, and which magnifies through residential and educational segregation and concentrated poverty the social problems caused by socio-economic developments.

Growing polarization in the American Congress is closely related to rising income inequality. Yet there has been no corresponding polarization of the U.S. electorate, and across advanced democracies, mass polarization is negatively related to income inequality. To explain this puzzle, we propose a comparative political economy model of mass polarization in which the same institutional factors that generate income inequality also undermine political information. We explain why more voters then place themselves in the ideological center, hence generating a negative correlation between mass polarization and inequality. We confirm these conjectures on individual-level data for 20 democracies, and we then show that democracies cluster into two types: one with high inequality, low mass polarization, and polarized and right-shifted elites (e.g., the United States); and the other with low inequality and high mass polarization with left-shifted elites (e.g., Sweden). This division reflects long-standing differences in educational systems, the role of unions, and social networks.

The knowledge economy, deindustrialization, and the decline of Fordism have undermined the economic complementarities that once existed between skilled and semiskilled workers. The result has everywhere been a decline in coordinated wage bargaining and unionization and a notable rise in labor market inequality. Yet, the political responses have been very different across advanced democracies. While labor markets for part-time and temporary employment have been deregulated across the board, some countries have compensated losers through increased cash transfers and active labor market programs and others have allowed inequality and insider-outsider divisions to grow deeper. The article argues that the divergent government responses reflect differences in underlying electoral coalitions, and that these in turn mirror the structure of party and electoral systems. The authors support their argument with evidence for government responses to economic shocks in the period 1980 to 2010.

We argue that the welfare state operates very differently in the advanced sectors of modern economies and in the low-skill sectors. Governments are concerned to promote the advanced sectors of their economies in which they have comparative advantage. This is a valence issue not a partisan one. Where companies and employees in advanced sectors co-invest heavily in company-specific skills, then governments will be concerned to maintain insurance infrastructures to underwrite these investments. Hence, in advanced sectors, we see politics for markets in maintaining insurance-based welfare states. In low-skill sectors, redistribution and active labour market policies are partisan issues for legislatures, so here our analysis is in line with Politics against Markets. Effective welfare state policies depend on political coalitions in which the low-skilled are represented. We suggest that those coalitions may be less available just as low-skilled workers are increasingly excluded from post-Fordist collective bargaining coverage.

Résumé Cet article explique la persistance de disparités dans les niveaux d'inégalité et de protection sociale au sein des économies développées en termes de variétés de capitalismes et de systèmes politiques. Là où le capitalisme est coordonné, comme en Europe du Nord, les systèmes politiques sont fondés sur le consensus et les élections se font à la proportionnelle ; la politique de consensus et le capitalisme coordonné se renforcent mutuellement pour engendrer un niveau d'inégalité relativement faible et un haut niveau de protection sociale. Là où le capitalisme est libéral, dans les pays anglo-saxons, les systèmes politiques sont concurrentiels avec un système électoral majoritaire : le renforcement mutuel du système politique et du type de capitalisme produit une relative inégalité de revenu et une protection sociale réduite à un filet de sécurité. Les deux systèmes peuvent soutenir des économies potentiellement compétitives au plan international, avec différents avantages comparatifs institutionnels et des succès dans différents secteurs du marché mondial. JEL Code: H2, H5, P16, P51, J5

A major puzzle in the open economy literature is why some countries have persistently higher real exchange rates than others. Even more puzzling is the fact that countries with high real exchange rates are strong export performers. We solve both puzzles with a model that integrates two central debates in the comparative political economy of advanced economies: one linking wage bargaining, incomes policy, and competitiveness, and the other linking partisanship, political institutions, and redistribution. We bring the two together by emphasizing the role of skill formation. We argue that union centralization is necessary for wage restraint and training on a large scale, but this in turn requires a political coalition that subsidizes such training. When both are present, wage restraint generates external competitiveness, whereas wage compression pushes up sheltered prices and hence the real exchange rate, and vice versa. We test the argument on data on export performance and real exchange rates.

The authors present an alternative to power resource theory as an approach to the study of distribution and redistribution. While they agree that partisanship and union power are important, they argue that both are endogenous to more fundamental differences in the organization of capitalist democracies. specifically, center-left governments result from pr consensus political systems (as opposed to majoritarian systems), while strong unions have their origins in coordinated (as opposed to liberal) capitalism. These differences in political representation and in the organization of production developed jointly in the early twentieth century and explain the cross-national pattern of distribution and redistribution. The clusters have their origins in two distinct political economic conditions in the second half of the nineteenth century: one in which locally coordinated economies were coupled with strong guild traditions and heavy investment in cospecific assets and one in which market-based economies were coupled with liberal states and more mobile assets.

Since unification, the debate about Germany's poor economic performance has focused on supply-side weaknesses, & the associated reform agenda sought to make low-skill labor markets more flexible. We question this diagnosis using three lines of argument. First, effective restructuring of the supply side in the core advanced industries was carried out by the private sector using institutions of the coordinated economy, including unions, works councils & blockholder owners. Second, the implementation of orthodox labor market & welfare state reforms created a flexible labor market at the lower end. Third, low growth & high unemployment are largely accounted for by the persistent weakness of domestic aggregate demand, rather than by the failure to reform the supply side. Strong growth in recent years reflects the successful restructuring of the core economy. To explain these developments, we identify the external pressures on companies in the context of increased global competition, the continuing value of the institutions of the coordinated market economy to the private sector & the constraints imposed on the use of stabilizing macroeconomic policy by these institutions. We also suggest how changes in political coalitions allowed orthodox labor market reforms to be implemented in a consensus political system. Tables, Figures, References. Adapted from the source document.