A deeper look at the varieties of capitalism approach
Our brief introduction to the varieties of capitalism approach set out the three core ideas. We have summarised in a fairly simple way some quite complex issues. In writing this summary we have drawn heavily on a book by Peter Hall and David Soskice ‘Varieties of capitalism: the institutional foundations of comparative advantage’ (2001).
The table below sets out the principle differences Soskice and Hall describe between liberal market and coordinated market economies.
Table 1 The characteristics of different market economies
|Liberal market economy||Coordinated market economy|
|Firms coordinate mostly through markets||Industry associations and cross-ownership are influential|
|Employment relationship mostly mediated through markets||Employment security and conditions highly regulated|
|Individual/workplace level pay negotiation||Sector level pay bargaining|
|Strong emphasis on rights of shareholders||Emphasis on rights of multiple stakeholders|
|Finance mostly raised through markets||Finance less dependent on markets|