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 |