This book makes an incisive contribution to a central debate in comparative political economy (CPE) research about the extent to which contemporary market pressures such as globalization and the decline of Fordist manufacturing are driving a convergence of the institutional arrangements that regulate capitalism in Western democracies. Focusing specifically on industrial relations institutions, Baccaro and Howell primarily challenge the research tradition associated with Peter A. Hall and David Soskice’s (2001) Varieties of Capitalism, which emphasizes the persistence of distinct institutional logics and configurations among “coordinated” and “liberal” market economies; at the same time they also depart from the middle-ground position advanced in Kathleen Thelen’s (2014) Varieties of Liberalization and the New Politics of Social Solidarity, which observes liberalizing changes yet identifies continued disparities in the setup and distributional consequences of institutions across groups of countries. In contrast, Baccaro and Howell’s account of the past four decades is one of profound cross-national convergence and, specifically, convergence in a neoliberal direction to the benefit of employers at the expense of labor.
The first two chapters of the book present a well-reasoned theoretical argument about the dynamism of capitalism and the likelihood of institutional change, drawing on power resource theory and regulation theory. Importantly, the authors revive from earlier generations of CPE research a mechanical notion of institutional equilibria, which sees the institutions that regulate capitalism as “resultants of competing forces” (p. 13), as opposed to a game-theoretical notion in which institutional equilibria are states of the world in which no actor has an incentive to change. Institutions, they argue, are in fact highly malleable and—facing endless pressures from actors with conflicting interests—are more prone to change than most CPE scholars assume. Moreover, they add, not only the form of institutions may change but also their function, because the outcomes of any particular institution are contingent on the balance of power among the involved actors. Continuity in the distinct forms of industrial relations institutions across countries is thus perfectly compatible with functional convergence of these institutions, which is achieved through institutional conversion enabled by shifting power balances.
The authors’ empirical argument, correspondingly, is that industrial relations institutions in Europe have not only changed more in recent decades than commonly recognized but also that they have converged, not least functionally, and in a direction best characterized as neoliberal. Here lies a conceptual innovation in that they define neoliberal change, or liberalization, as “any policy or institutional change that has the effect of expanding employer discretion” (p. 17, emphasis in original) within three domains of employment relations: wage setting, work organization, and hiring and firing. Whereas regrettably they provide no operational definition of employer discretion, Baccaro and Howell’s theoretical definition (p. 20) is commendably precise, considering how vaguely the concept of liberalization is often invoked by CPE scholars.
Turning to the empirics, chapter 3 presents a quantitative overview of trends in institutional configurations in 15 Western democracies from the 1970s until 2011, using a selection of classic industrial relations indicators: union and employer organization density rates, centralization and coordination in wage bargaining, social pacting, and level of conflict. With a few exceptions—notably Belgium—the overall pattern is one of cross-national liberalization qua institutional deregulation, yet of little convergence: the relative distances between countries remain.
To capture convergence in how industrial relations institutions affect employer discretion, one needs to shift focus from the form of these institutions to their function. This requires historical case analysis, which is provided in the subsequent five thoroughly researched country chapters on Britain, France, Germany, Italy, and Sweden. The cases display ample variation in institutional forms at both ends of the studied period and pose a hard test for the functional convergence argument (although, judging from chapter 3, including Belgium might have made it even harder). All five countries are found to have transformed in a neoliberal direction, through different combinations of three approaches to liberalization: dismantling of institutions that limit employer discretion and support collective regulation, facilitation of derogation from existing discretion-limiting institutions, and conversion of existing institutions to perform new discretion-enhancing functions.
A ninth chapter synthesizes the findings and highlights the active roles of employers, the state, and European integration in bringing about the observed changes. The final chapter links the decline of discretion-limiting institutions to the decline of the Fordist model of wage-led growth and to the rise of new, more export-led or debt-led growth models in the five countries under consideration.
By virtue of its well-reasoned and well-corroborated analysis of institutional convergence, Baccaro and Howell’s book is undoubtedly one of major significance. Still, in my view, their work is more persuasive in documenting the decline and transformation of institutions that traditionally enabled collective regulation and union influence across Europe than in establishing conclusively that there has been “an increase in employer discretion everywhere” (p. 197).
Doing so, I would argue, would have required that employer discretion was not only theoretically defined but also operationally defined, and that its development over time was investigated in a systematic manner. However, rather than putting employer discretion as such at the center of analysis, the book’s empirical chapters take as their starting point the fate of a particular set of established industrial relations institutions, which—although clearly very important—are not the only sources of employer constraints in the three domains of employment relations. To be clear, a number of potential functional substitutes, such as employment protection legislation, work council rights, unemployment benefits, minimum wage regulations, and other individual rights, are sometimes brought up—and then mostly deemphasized— in the country chapters, but they are absent from the cross-national analysis even though for many of them long time-series data are available. Others, such as parental leave rights that may clearly affect employer discretion in employment relations, are altogether missing in the analyses.
Considering that such state interventions have been expanded across much of Europe in recent decades, readers may wonder whether a more comprehensive analysis would have reached such a clear-cut conclusion about the trajectories of employer discretion—and about the state as a liberalizing force. Relatedly, the discretion-limiting potential of nonstate, non-union actors—such as social movements, community organizations, and joint or business-driven regulatory initiatives—may also have deserved more assessment, because they are increasingly recognized by industrial relations scholars as being on the rise to fill the void left by unions.
To what extent such interventions and actors have substituted for the discretion-limiting function of traditional industrial relations institutions and whether their development follows any familiar cross-national patterns emerge as important questions for future research. Additional tasks emanating from this book, for researchers on all sides of the convergence debate, are to develop ways to operationalize and measure employer discretion and to refine some quantitative indicators of industrial relations institutions to better capture their malleable functions.
In any event, the aforementioned limitations should not detract from the fact that this book provides a powerful theoretical and empirical argument about the transformed functions of established industrial relations institutions in Europe. It is bound to become an important point of reference and source of inspiration for scholars of both CPE and industrial relations.
Open access
