Embedding the 'new economy' in Europe : a study in the institutional specificities of knowledge-based growth

Aspirations for a 'new economy' currently feature prominently in the economic policy debate within the EU. So pronounced is elite interest in the 'new economy' that the issue of knowledge-based growth dominated the Special European Council organized for Lisbon in May 2000. However, the Presidential Conclusions to that Council failed to address the question of whether the European economy is institutionally compatible with knowledge-based growth. The 'new economy' is currently most developed within the United States, and the institutional specificities of the American high-tech sector suggest that it may be impossible simply to import the 'new economy' into Europe. The EU may lack both the labour market and the capital market conditions necessary for successfully embedding the 'new economy' in Europe

Rethinking capital mobility, re-regulating financial markets

The globalisation hypothesis has altered many of the common-sense ‘truths’ around which the social world is organised.* In particular, globalisation is thought to restrict the parameters of the politically and economically possible. Indeed, the notion of constrained choice is so pronounced that we are increasingly confronted with the image of globalisation’s ‘logic of no alternative’; an image which is predicated on the assumption of perfect capital mobility. Capital is considered to be sufficiently rational to take advantage of enhanced exit options from the national economy in circumstances in which its interests are served by moving off-shore. Moreover, global markets are also assumed to have exploited contemporary technological developments to such an extent that they now clear instantaneously; consequently, allowing capital to further its interests wherever in the world new profit opportunities arise. Thus, we are presented with the fundamental ‘reality’ of globalisation as currently narrated throughout much of the west: unless the market can be allowed to restore a competitive global equilibrium, capital will exit high-wage, high-cost western economies and re-locate in lower-wage, lower-cost, newly industrialising economies. Under the auspices of ever more hostile wage competition from the newly industrialising economies, globalisation is commonly presumed to act as a trigger for an ‘inevitable’ job displacement effect as capital deserts the advanced industrialised economies

Friedrich List's Adam Smith historiography and the contested origins of development theory

Friedrich List's National System of Political Economy continues to be positively received in IPE, where it is treated as a seminal text in development theory. Only a handful of IPE scholars have questioned the specific history of economic ideas through which List asserted the distinctiveness of his own position. They do so by showing that he deliberately put words into the mouths of his classical political economy predecessors to provide himself with something to argue against. His alleged authority on development issues rests in particular on purposefully caricaturing the arguments of Adam Smith. I use this article to suggest a plausible reconstruction of the route to List's Smith, one which recognises the possible intermediary influence of the early Dugald Stewart, John Ramsay McCulloch, the Earl of Lauderdale and Georg Sartorius. By following this complex trail to List's rather eccentric Smith historiography, it becomes possible to break down one of the most important oppositions in IPE pedagogy: that between List's National System and Smith's Wealth of Nations. Moreover, it also becomes necessary to engage more circumspectly with List's history of economic ideas when searching for the origins of contemporary critically-minded development theory

All at sea in a barbed wire canoe: Professor Cohen's transatlantic voyage in IPE

The following article is written as a sympathetic critique of Benjamin Cohen's recent identification in RIPE of incommensurable traditions of American and British IPE. It is also designed to engender further debate within the subject field on this most central of issues. Our argument is that scholars should beware the rigid terms in which Cohen identifies IPE's transatlantic divide, because simply by naming his two camps as polar opposites the invitation is open to others to entrench such an opposition in their own work. This would be regrettable enough had IPE already lapsed into the geographical division that Cohen describes. It is made more regrettable still by the fact that this is in any case an inaccurate account of the field which serves to marginalise much of the work that is currently at its cutting edge

Ricardian political economy and the 'varieties of capitalism' approach : specialization, trade and comparative institutional advantage

The ‘varieties of capitalism’ approach offers key insights into the institutional embeddedness of economic experiences. It performs an important function in providing a conceptual framework for empirical analyses of the way in which the economy both manifests, and itself is a manifestation of, a whole series of different experiences. However, I argue that the Ricardian themes evident in Hall and Soskice’s Varieties of Capitalism limit the potential effectiveness of the empirical analyses that the approach makes possible. Within the context of this latent Ricardianism, the economy is understood to be international, and the important differences within the economic system are those between different national ‘models’. I expose such assumptions to critical scrutiny, both analytical and empirical, before offering the outline of an alternative basis on which to ground the ‘varieties of capitalism’ approach. In contrast to the major themes of the Ricardian tradition, I argue for an approach that is sensitive to the social relations of production, the study of which requires political economists to transcend the artificial reification of ‘the national’ as a discrete unit of economic analysis

The split personality of prudence in the unfolding political economy of New Labour

This article focuses on the economic ideas which underpin New Labour's two very different appeals to the notion of prudence. The first treats prudence as a macroeconomic phenomenon, drawing upon the work of the 'time consistency' theorists of the 1970s. It dominated the Party's economic policy-making until the end of the first term in Government, emphasising the need for extreme vigilance on matters of public spending. The second treats prudence as a microeconomic phenomenon, drawing upon the eighteenth-century work of Adam Smith. It has become dominant since the start of the second term, emphasising the need to encourage the savings habit more widely within society. The shift in priority from the macroeconomic to the microeconomic understanding comes on the back of New Labour's own growing imprudence in time consistency terms. The Government has incentivised private savings at the same time as it has become increasingly reluctant to be a saver itself

Britain's financial system

Two years have now elapsed since the tech-stock share bubble burst – most notably on the NASDAQ in New York, but engulfing other high-tech markets as well. In Britain, as in other countries, the overall stock market environment has been relatively bearish in the intervening period. The two events are not causally linked, in that the subsequent decline in established and blue-chip markets is not directly attributable to contagion spreading from the high-tech sector. Yet, taken together, these events have served to divert the attention of both the academic and the policy communities from the wider implications of the ‘new economy’. The ‘new economy’ became so associated with the image of an ever more bullish stock market that the mere presence of falling share prices has stalled the debate about what the ‘new economy’ is, what benefits it could bring, and how it could be integrated into existing economic structures. I suggest that the time is now right to revisit that debate and, in so doing, to reclaim the discussion of the ‘new economy’ from the share price bubble with which it has been popularly linked

What makes a market economy? : Schumpeter, Smith and Walras on the coordination problem

The tradition of modern political economy is founded upon attempts to show how a market economy of autonomous individuals can function smoothly in the absence of a central authority to coordinate economic activity. This has become known, for obvious reasons, as the coordination problem. As suggested by the title of this article, to confront the coordination problem is to focus upon the question, ‘what makes a market economy?’. In the pages that follow, I argue that the answer to such a question lies not, as we might expect, in the realm of economics, but in that of moral philosophy. In order to sustain this argument, I revisit debates about the essence of the market economy which are to be found in the history of economic thought literature, but which are almost entirely ignored by modern economists

'Habitation vs. improvement' and a Polanyian perspective on bank bail-outs

The bank bail-outs enacted by the Brown government in the wake of the 2007 credit crunch have had a distinctive political character. Despite the government's pronouncements on the merits of swift and decisive interventions, I argue that this does not amount to a return to the interventionist regulatory form associated with post-war British welfare capitalism. The Polanyian distinction between 'habitation' and 'improvement' is used to show that the bail-outs were designed by contrast to defend the underlying deregulatory logic of the existing financial regime. The only real change of note was to uncover forcibly the often hidden influence of the state in the making and regulation of an ostensibly market-led neoliberalism and the creation instead of a much more overt state-led neoliberalism. Habitation strategies were incorporated into a structure of financial deregulation, making it more rather than less difficult to rejuvenate state capacities consistent with enhancing societal welfare. The bank bail-outs offered short-term salvation for distressed firms within the financial sector without providing the state with socialised control over the conduct of banking business in order to promote forms of social policy consistent with post-war British welfare capitalism

Off the leash : understanding the dynamics of capital mobility in IPE

In this paper I seek to extend much of the writing on capital mobility to be found in the IPE literature by arguing that there are two distinct types of mobility which need to be treated as analytically separable. The tendency in IPE is to think only in terms of ‘international’ capital mobility, which immediately creates the impression that for capital to be mobile it has to move from one country to another. This image conforms to what I call the spatial mobility of capital. However, capital should also be thought of as mobile in those instances in which it is deliberately reinvested in an alternative financial instrument. This is what I call the functional mobility of capital. Recent increases in capital mobility are linked to the institutionalisation of rentier interests within the financial economy, with subsequent implications for the distribution of life chances globally. In order to gain a full understanding of these implications it is necessary to be working with a perspective that recognises the dynamics of both the spatial and the functional mobility of capital