21st Century Capitalisms in Europe and Asia: Towards Convergence, Collision or Mitigation of Development Paradigms?
" A little over a decade ago, the American model of capitalism was triumphant… For the many developing and transition economies in search of a model, there was only one prescription : Liberalize, privatize and copy the Anglo-American institutions of legal, financial and corporate governance…Today there is less certainty… A standardized policy prescription that ignores social and institutional diversities or the complexities of a particular society is a recipe for failure…The advocates of capitalism should try to protect it from the enthusiasts for any variety of capitalism "
(Pranab Bardhan, Professor of Ecomics, University of California, Berkeley, and Chief Editor of the Journal of Development Economics, quoted from YaleGlobal Online and International Herald Tribune, 9 January 2007)
Conceptual Argumentation
Capitalism is a set of institutions, which has departed from the evolution of the late 18th-early 19th century mode and organization of economic and social transactions in Western Europe, and this led to its gradual theorization and ideologization. Beyond the so-called end of history (1989), the model of " pure capitalism " or " perfect market economy " is probably not the central problem. The core difficulty lies in the assumption that "pure capitalism " exists (in America ?) or could exist and be implemented. Therefore its normative if not imperalistic application is highly debatable.
The controversy is amplified by the observation of a wide diversity of capitalist experiences since the 19th century until the beginnings of the 21st century. Before and after the end of the Cold War, both Asia and Europe have contributed to new frontiers of capitalism, first with the emergence of new developmental state models (Japan and the other Asian then with the transition of former planned or semi-planned economies (China/Indochina, Russia and Eastern Europe, India).
Divergence versus Convergence
There is wide evidence of the complexity of contemporary capitalism. Despite predictions by mainstream theory about economic and institutional convergence, contemporary capitalist countries do not converge toward a unique model. A great variety of production structures, socio-economic relations and patterns of resource distribution has been found to co-exist and persist, both in the developed and developing world. While after the end of the Cold War (1989) capitalism has been identified as the dominant mode of world production and the driver of accelerated globalisation, evidence suggests that diversity of socio-economic organisation is the major trait of contemporary market economies despite the increasing interdependence, integration and interaction among people and corporations across borders. Divergence rather than convergence could even be the outcome of globalisation, and could lead to various development imbalances and crises or tensions of an unsustainable development nature.
The divergence of contemporary socio-economic systems raises a number of issues that refer, on the one hand, to the performance of different systems and their trajectories of change, and, on the other hand, to the roots and implications of divergence in itself as it matters for future global governance. In the last two decades, these issues have been addressed by a vast literature in the field of comparative political economy, that has led to a revival of interest in the analysis of capitalism. This literature - under the theme of Varieties of capitalism - has two major aims:
- to sytematise the evidence on divergence,
- and to assess the processes leading to it (Jackson and Deeg, 2006),
- to finally analyse the effects of divergence on the international political economy.
Intellectual Antecedents
The very existence of different typologies of capitalism undermines the classical and the neoclassical analyses of capitalism, both focusing on a single typology in which the market is the single molder of organisation and rational agents respond to market signals (Hodgson, 2001). Relying on the market and on optimal behaviour, the capitalist economy ensures efficient allocation of resources in the short run and growth in the long term. These are general principles that apply in every situation, regardless of historical and geographical differences. In other words, they are ' universal laws of change ' that allow every economy to reach the status of ' pure capitalist economy ', in which all initial differences are assimilated and social relations converge towards a common pattern.
The suggested varieties of capitalism differs with this view. It assumes that different typologies of capitalist systems should be a starting point for socio-economic analysis. It rejects the view that a pure capitalist system exists as a model for all countries, and explores instead the differences among ' real ' capitalist systems illustrated by their institutional features.
The literature stresses few major antecedents related to the varieties of capitalism (Jackson and Deeg 2006, Sanchez Anchorea 2006, Basile 2005).
Key concepts
The literature on varieties of capitalism cannot be merged into a single theory of capitalism. Rather, it includes a family of multidisciplinary approaches, which, despite significant differences share basic key concepts. In this sense, it defines an analytical framework that cuts across theoretical and empirical work, and rejects the concept of pure capitalism.
On the nature of capitalism: One can only refer to a wide and substantial literature on this subject.
On individual behaviour: Due to human self-limitations and various external constraints and uncertainties, individuals are not always rational and optimal. They are socially determined by means of institutions providing the cognitive framework for human action. But what is rationality or irrationality ? Rational behaviour can be regarded as the most effective and efficient choice out of a set of alternatives and under consideration of all known constraints and facts. From this perspective, individuals can be considered as rational most of the time, but limited and sometimes irrational due to the availability or non-availability of relevant informations and institutional constraints.
On institutions: Institutions can be defined as ' formal and informal social rules widely accepted (Delorme, 1994, p 8). They can be distinguished according to their nature and function(s), and the concept includes formal organisations, but also patterns of behaviour (social conventions, ethical codes) and norms and prescriptions (formal and informal rules) (Cories and Dosi 2002, Hollingsworth and Boyer 1997).
On the interplay between agency and structure: There is a double interplay, first between individuals and their physical and social environment producing institutions, then institutions themselves govern or at least influence individual behaviour.
On economic diversity: The variety of contemporary capitalisms worldwide procedes from the diversity of institutional organisation and structures in different contexts.
On the embeddedness of capitalist change: Capitalist change does not occur in a vacuum, but procedes from socio-economic behaviours taking place in cultural contexts and mediated by institutions (Polanyi 1945, Granovetter 1985, Zukin and DiMaggio 1990).
On interdepence of socio-economic processes: As economic processes are interlinked and as institutions are interdependent, capitalist change is a complex, adaptive and holistic process. Its analysis requires linkages, interdependences and feedback loops to be taken into account (Dugger and Sherman, 2000 ; Forster, 2005).
Institutions and culture
The origin of diversity in socio-economic forms is found in the institutional setting, which is country-specific. But the variability of settings point to culture and area studies (European studies, Asian studies,…). Culture can be defined as the product of ' specific interaction of man and environment through time ' and it evolves ' not according to a some rigid universal scheme, but according to a logic peculiar to each culture (Mayhew, 1989, p 321). First, culture is the answer to the needs of human being, ' a way of life through which communities survive and adapt " (Hodgson, 2001a, p 292). Second, the variability among cultures relates to the interplay between human beings and their physical and social environment, which differs according to geographical and historical context.
Through institutions, the variability among cultures determines the varieties of socio-economic systems, therefore the diversity of capitalisms.
Historical Specificity and Path Dependency
Two major features of capitalism follow from the previous observations. First, the institutional structure, both formally and informally, is country-specific in any given geographical and historical context. Second, any country moves along a path defined by its own culture and history.
Historical specificity and path dependency are strictly related concepts as both are built around the concepts of culture and institutions. Historical specificity results from the interplay between culture and institutions, itself related to the interplay between individuals and environment in a country-specific context. Path dependency derives from choices and decisions of the past concealed in the institutions of today, while institutions are rooted themselves in culture.
The End of "Pure Capitalism"
Historical specificity and path dependency explain why capitalist systems do not converge toward a single model. History is not replicable, while cultural and institutional features cannot be assimilated in the process of change that is itself, by contrast, institutionnally determined.
If this is correct, then it is also true that a model of ' pure capitalism 'does not exist. As any capitalist system is historically specific and path dependent, its features are derived from contextualized culture and institutions.
There is a variety of capitalisms and it is impossible to determine which one defines an ideal-type. While it is possible and also legitimate to identify a number of basic features defining the essence of the capitalist system (for instance the commoditisation of labour and the accumulation of capital) it is possible that other non-essential aspects of capitalism may show great variability. Analytical features such as pre-capitalism, development backwardness or governance anomalies are frequently referred to the very abstrat concept of pure capitalism, whereas they should relate to context-specific culture and institutions. Such ' impurities ' of real capitalist systems (Hodgson 2001) may also play a major role in explaining growth and change in specific situations, as it has occured for institutions such as family and religion in some Asian capitalisms (Basile 2005).
Implications for Research
The working group could assign to itself several orientations:
- To review, document and test a general conceptual framework, derived from the existing literature on the varieties of capitalism, which would facilitate comparative analysis on the different manifestations, causes and effects of contemporary Asian and European capitalisms.
- To combine different and multidisciplinary approaches in the study of Asian and European capitalisms in retrospective and prospective terms.
- To include a multi-layer analysis, meaning the adoption of an inclusive concept of institutions shaping or not Asian and European capitalist systems, in terms of structured or informal social capital, patterns of behaviour, norms and prescriptions…, and with a focus not only on macro-, but also meso- and micro-level modes of transactions among institutions and stakeholders.
Europe and Asia
Both capitalism and socialism have been borrowed from Europe during Asian colonial and post-colonial development history. Especially during the post-independence era, Asian cultures and institutions have shown a remarkable ability for a syncretic combination of new concepts and institutions in order to stimulate with more or less success their economic development and social change. Apart from the Asian least developed countries, the newly industrialised economies and the more recently emerging and/or transition economies have shown specific hybridation of State and market forces. This has led to specific modes of State capitalism, developmental capitalism, etc…
While British capitalism has moved in the meantime inbetween the frontiers of free market and welfare, continental Europe has experienced various types of capitalism from so-called Protestant type capitalism or social capitalism (Germany, Scandinavia) to State capitalism (France, Spain) or small enterpreneurship and network capitalism (Italy) and transition capitalism (Eastern Europe). The European Union, while coping with traditional American competitiveness and the new challenging and hybrid forms of Asian capitalism, has not been able to create strong economic and social convergence among all member-countries into one single integrated model, whether copied from the American one, or inspired from the various specific European experiences.
