13 - Constrained Partisanship and Economic Outcomes

Summary

The relative autonomy of politics, to use an expression slightly out of fashion, as a determinant of social and economic outcomes is yet again in the eye of the beholder. While some see processes such as globalization, deindustrialization, and more recently the Great Recession as a sign of structural factors overruling the ability of incumbents to pursue their agenda and shape the distribution of winners and losers across society, others see the responses to the financial crisis as reflecting the differences among well-oiled and persistent institutional organizations of capitalism. In the former tale, which we refer to in this volume as economic structuralism, incumbents quickly turn into irrelevant witnesses of a process of convergence in economic and distributive outcomes. In the latter tale, visible in various forms in the literature on varieties of capitalism, incumbents adjust their strategy to preserve coalitions articulated around the needs of organized interests, both producers and labor. Economic outcomes are affected by policies that reflect divergent distributions of interests among producers and workers stratified by skill level. Earlier contributions to the volume have already discussed how our approach relates to these accounts. This chapter focuses on the evolution of economic outcomes in advanced industrial democracies and assesses whether the model of constrained partisanship developed in this book lends any analytical power to understand them.

In what follows, I make four points. First, while there is some empirical basis to substantiate the notion of relative convergence in economic outcomes among advanced industrial societies, a careful scrutiny reveals deep-rooted differences in terms of economic inequality and labor market opportunities. Second, these differences reflect to a large extent the balance between investment and consumption policies: Investment oriented economies generate in the long run more egalitarian societies and better labor markets. Third, those parties ideologically inclined to pursue these goals are constrained by two institutional features largely overlooked by previous explanations: the level of revenue collection by the state and the ability of organized labor to capture a large share of the budget via consumption policy.