Inequality and Prosperity: Social Europe Vs. Liberal America, Jonas Pontusson, Cornell University Press, 2005
This is a terrific book, filled with relevant information and skilled analysis. A number of terms have been used to describe economies that mix capitalist with socialist features, e.g., mixed economy, welfare state, social democracy, Third Way, market socialism, social market economy. Jonas Pontusson in this book, Inequality and Prosperity, delineates two types of mixed economies and names them Social Market Economies (SMEs) and Liberal Market Economies (LMEs). His analysis and comparisons of these types is extremely useful for understanding the differences in mixed economies. (Nordic SMEs = Denmark, Finland, Norway, Sweden; Continental SMEs = Austria, Belgium, Germany, Netherlands, Switzerland; LMEs = Australia, Canada, Ireland, New Zealand, UK, US. Other countries are not categorized.)
"The SMEs are distinguished by densely organized business communities...coordinated business. Second, they are distinguished by strong unions and by highly institutionalized bargaining systems. Third, the social market economies are distinguished by extensive public provision of social welfare and employment protection. In the SMEs, worker participation in management decision making is prescribed by law...institutionalized economy-wide bargaining between unions and employers is a distinctive feature of the SMEs. Relative to the continental SMEs, the Nordic SMEs are distinguished by higher levels of union density, more universalistic welfare states, and greater reliance on the public sector (services) in the provision of social welfare." (p17)
Pontusson shows that SMEs are clearly superior in terms of more equitable income distribution and that economic performance is not inferior to the LMEs. The conventional comparison of unemployment rates is flawed because it treats the EU as a proxy for "Social Europe" (SMEs). Also, in some comparisons, the exceptional circumstances of German unification need to be taken into account. The growth of civilian employment is lower in SMEs. However, Pontusson argues that this is due to higher growth in the LME labor force, larger youth cohorts, more immigration, more female participation, and smaller decreases in labor force participation, not to different social policies.
Many people tend to lump together all countries that have any social welfare. Pontusson demonstrates that this does not make sense. Social democracy is qualitatively different from liberal democracy and the importance and role of unions is one of the important factors in this difference.
From Amazon:
Book Description
What are the relative merits of the American and European socioeconomic systems? Longstanding debates have heated up in recent years with the expansion of the European Union and increasingly sharp political and cultural differences between the United States and Europe. In Inequality and Prosperity, Jonas Pontusson provides a comparative overview of the two major models of labor markets and welfare systems in the advanced industrial world: the "liberal capitalist" system of the United States and Britain, and the "social market" capitalism of northern Europe. These two models balance concerns of efficiency and equity in fundamentally different ways. In the 1990s the much-heralded forces of globalization (together with demographic changes and attendant political pressures) seemed to threaten the very existence of the social-market economies of Europe. Were the social compacts of Sweden and Germany outmoded? Would varieties of capitalism remain possible, or were labor-market and social-welfare arrangements converging on the U.S. norm? Pontusson opposes the notion of inevitable convergence: he believes that social-market economies can survive and indeed flourish in the contemporary world economy. He bases his argument on an enormous amount of highly specialized research on eighteen countries, using national-level data for the last thirty years. Among the areas he explores are labor-market dynamics, income distribution, employment performance, wage bargaining, firm-level performance, and the changing possibilities for the welfare state.
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