German technology policy, innovation, and national institutional frameworks

The pattern of innovation in Germany is substantially different from that in the US and the UK. It is argued that German patterns of innovation - incremental innovation in high quality products especially in engineering and chemicals - require long-term capital, highly cooperative unions and powerful employer associations, effective vocational training systems and close long-term cooperation between companies and with research institutes and university departments. (The more radical high-technology innovation typical of the US and the UK benefits by contrast from less regulated market conditions.) These conditions are met by the incentives and constraints of the institutional framework in which companies located in Germany are embedded. It is suggested that German technology policy is appropriate to and important for this pattern of high-quality incremental innovation. Moreover, the institutional framework - especially the role of powerful business associations - can solve the collective action problems to which German-type technology policy would normally be exposed. -- Die Entwicklungsvoraussetzungen für Innovationen in Deutschland unterscheiden sich substantiell von dem entsprechenden Muster in den USA oder in Großbritannien. In dem Papier wird die Meinung vertreten, daß die in Deutschland vorherrschenden Formen von Innovationen - Entwicklungen in kleinen Schritten bei technischen und chemischen Spitzenprodukten - langfristiges Kapital, sehr kooperative Gewerkschaften und mächtige Arbeitgeberverbände, ein effizientes Berufsausbildungssystem und eine enge langfristige Zusammenarbeit zwischen Unternehmen einerseits und Forschungsinstituten bzw. Universitätseinrichtungen andererseits voraussetzt. (Den für die USA und Großbritannien typischen hochtechnologischen Basisinnovationen sind im Gegensatz dazu geringer regulierte Marktbedingungen förderlich.) Diese Bedingungen werden durch die Anreize und Beschränkungen des Institutionengefüges, in dessen Rahmen die Unternehmen in Deutschland arbeiten, erfüllt. Es wird in dem Papier die These vertreten, daß die Technologiepolitik in Deutschland angemessen und wichtig für den beschriebenen Innovationstyp ist. Darüber hinaus kann das Institutionengefüge - vor allem die mächtigen Unternehmensverbände - die collective-action- Probleme lösen, denen die in Deutschland vorherrschende Technologiepolitik normalerweise ausgesetzt wäre.

The political economy of EMU: rethinking the effects of monetary integration on Europe

"Wie wird die europäische Währungsunion die europäische politische Ökonomie beeinflussen? Aus Sicht der vorliegenden Arbeit sind die meisten der sich abzeichnenden Alternativen zumindest für einige der potentiellen Mitgliedsstaaten der EWU politisch nicht tragbar. Die Wahrscheinlichkeit ist groß, daß solche Vereinbarungen, darunter auch der vom ehemaligen Finanzminister Waigel eingebrachte Stabilitätspakt, von den Mitgliedern der EWU abgelehnt wird. Andererseits wird eine neu ausgehandelte Währungsunion wahrscheinlich ernsthafte Folgen für das Kräftegleichgewicht innerhalb der deutschen politischen Ökonomie haben und könnte die grundsätzlichen Verständigungen von Arbeit und Kapital, die die Exporterfolge der deutschen Wirtschaft in den letzten Jahren ermöglichten, zu Fall bringen." (Autorenreferat)"How will EMU influence the European political economy? This paper argues that most of the likely alternatives are unsustainable for at least some of the EMU member-states. As a result, the stability pact imposed by the Kohl government and the Bundesbank is likely to be rejected by other member-states. Additionally, will most likely also have an effect an the relations within the German political economy, by unsettling the basic compromise between employers and labour unions that was at the basis of German export successes in recent decades." (author's abstract

Capital in the twenty-first century: a critique

I set out and explain Piketty's model of the dynamics of capitalism based on two equations and the r > g inequality (his central contradiction of capitalism). I then take issue with Piketty's analysis of the rebuilding of inequality from the 1970s to the present on three grounds: First, his model is based on the (neo-classical) assumption that companies are essentially passive actors who invest the amount savers choose to accumulate at equilibrium output – leading to the counterintuitive result that companies respond to the secular fall in growth (and hence their product markets) from the 1970s on by increasing their investment relative to output; this does indeed imply increased inequality on Piketty's β measure, the ratio of capital to output. I suggest a more realistic model in which businesses determine investment growth based on their expectations of output growth, with monetary policy bringing savings into line with business-determined investment; the implication of this model is that β does not change at all. And in fact as other recent empirical work which I reference has noted, β has not changed significantly over these recent decades. Hence Piketty's central analysis of the growth of contemporary inequality requires rethinking. Second, despite many references to the need for political economic analysis, Piketty's analysis of the growth of inequality in the period from the 1970s to the present is almost devoid of it, his explanatory framework being purely mathematical. I sketch what a political economic framework might look like during a period when politics was central to inequality. Third, inequality in fact rose on a variety of dimensions apart from β (including poverty which Piketty virtually makes no reference to in this period), but it is unclear what might explain why inequality rose in these other dimensions

The technological revolution, segregation and populism - a long-term strategic response

Covid-19 is a threat, but it also creates opportunities for serious thought about the future. Given deep structural problems which have enabled populism to become embedded in England, there is a need to think of a longer-term transformation: not whether but how and where the state comes back in, and how relations between state, markets and planning, city-regions, innovation and universities are reconfigured. Historically, the two major populist movements in the advanced world (American in the late C19th and Germany et al in the 1930s) occurred as a consequence of massive technological changes; the movements were not primarily located in the big cities, and they involved those in previously established but now declining occupations. Populism only disappeared as those populations reduced in size and as those areas changed function or declined much further. Responding to the ICT revolution, populism in England (the subject of this paper) locates today in Rodriguez-Pose’s ‘places that don’t matter’ (PDMs), and is reinforced by the deep educational/residential segregation of contemporary society with 50% higher education participation and graduate-intensive big cities. But England seems stuck here and major ‘pathologies’ in the neo-liberal framework are responsible. These include higher education as a competitive market, the separation of cycles and growth in macroeconomic policy, and the reliance on markets with arms-length regulation and de facto absence of government from a shareholder-value maximising private sector. Policy is still short-term and largely made in Westminster despite city-regions. A long-term policy transformation is necessary to restart the ‘transmission belt’ of the ICT revolution. We need developing long-term plans based on city-regional agglomerations, into which core city networks linking knowledge-based companies, research universities and city-regional administrations are integrated; with expanding travel-to-work areas incorporating the ‘places that don’t matter’; and supported by a research-oriented economic policy

Growth models, varieties of capitalism and macroeconomics

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

Economic interests and the origins of electoral systems

Die gängige Begründung – basierend auf der bahnbrechenden Arbeit Rokkans – dafür, dass ein spezifisches Wahlsystem bevorzugt wird, ist, dass die Verhältniswahl („proportional respresentation“ oder „PR“) von einer zersplitterten Rechte eingeführt wurde, um ihre Klasseninteressen gegenüber denen einer wachsenden Linken zu verteidigen. Neue Erkenntnisse zeigen jedoch, dass PR tatsächlich die Linke und das Konzept der Umverteilung stärkt. Wir behaupten daher, dass die allgemein akzeptierte Sichtweise historisch, analytisch und empirisch falsch ist. Unsere Erklärung für die Einführung der PR ist eine grundlegend andere: Durch die Integration zweier gegensätzlicher Interpretationen von PR – das Konzept der minimal erfolgreichen Koalitionen [minimum winning coalition] gegenüber dem Konzept des Konsens – gehen wir davon aus, dass die Rechte PR übernommen hat, als ihre Unterstützung für konsensuelle rechtliche Rahmenbedingungen (besonders im Arbeitsmarkt und in der Ausbildung neuer Arbeitskräfte, wo spezifische Investitionen wichtig waren) wichtiger wurde als ihre Abneigung gegen die Umverteilungsauswirkungen; dies passierte in den Ländern, die vorher eine eng organisierte kommunale Wirtschaft hatten. In Ländern mit relativ schlechten Arbeitgeber- Arbeitnehmer-Beziehungen und einer schwach ausgeprägten Koordination zwischen Wirtschaft und Gewerkschaften hatte die Beibehaltung von Mehrheitssystemen die Funktion, die Linke in Schach zu halten. Diese Tatsache erklärt die enge Beziehung zwischen den bestehenden Varianten von Kapitalismus und Wahlsystemen und warum diese weiterhin fortbestehen. -- The standard explanation for the choice of electoral institutions, building on Rokkan’s seminal work, is that proportional representation (PR) was adopted by a divided right to defend its class interests against a rising left. But new evidence shows that PR strengthens the left and redistribution, and we argue the standard view is wrong historically, analytically, and empirically. We offer a radically different explanation. Integrating two opposed interpretations of PR – minimum winning coalitions versus consensus – we propose that the right adopted PR when their support for consensual regulatory frameworks, especially of labor markets and skill formation where co-specific investments were important, outweighed their opposition to the redistributive consequences; this occurred in countries with previously densely organized local economies. In countries with adversarial industrial relations, and weak coordination of business and unions, keeping majoritarian institutions helped contain the left. This explains the close association between current varieties of capitalism and electoral institutions, and why they persist over time.Economic Models of Political Processes,Government,War,Law,and Regulation (Comparative),Political Economy of Capitalism

Crime, punishment and segregation in the United States: the paradox of local democracy

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

Stagnant productivity and low unemployment: stuck in a Keynesian equilibrium

A major challenge is to build simple intuitive macroeconomic models for policy-makers and professional economists as well as students. A specific contemporary challenge is to account for the prolonged slow growth and stagnant productivity that has followed the post-financial crisis recession, along with low inflation despite low unemployment (notably in the UK). We set out a simple three-equation model, which extends the core model in our two recent books (Carlin and Soskice, 2006, 2015) to one with two equilibria and two associated macroeconomic policy regimes. One is the standard inflation-targeting policy regime with equilibrium associated with central bank inflation targeting through monetary policy. It is joined by a second, Keynesian policy regime and equilibrium, with a zero lower bound (ZLB) in the nominal interest rate and a ZLB in inflation in which only fiscal policy is effective (Ragot, 2015). Our approach is related to the Benigno and Fornaro (2016) Keynesian–Wicksellian model of growth with business cycles. It diverges from New Keynesian models because although we attribute model-consistent expectations to the policy-maker, we do not assume that these are the basis for inflation and growth expectations of workers and firms. We compare our approach to Ravn and Sterk’s related multiple equilibrium New Keynesian model (Ravn and Sterk, 2016)