Pepper D. Culpepper

Institutional Change in Contemporary Capitalism: Coordinated Financial Systems since 1990

What happens when the unstoppable force of liberalization collides with the immovable object of national financial institutions in the advanced industrial democracies? To answer this question and evaluate alternative mechanisms to explain institutional change, this article examines the cases of the three large European economies with concentrated share ownership—France, Germany, and Italy. In the formal legal mechanism, interest coalitions adopt new laws, leading actors to deviate from formerly stable patterns of behavior in shareholding. In the joint belief shift mechanism, collective actors use a triggering event to jointly reevaluate their views of how the world works and thus how their interests can best be pursued. Using the metric of patient capital, this article shows that institutional change took place in France but not in Germany or Italy, despite the fact that Germany and Italy experienced significant regulatory change in the area of corporate governance while France did not. This evidence fits joint belief shift and is inconsistent with the formal legal mechanism. It is likely that the importance of the two mechanisms of institutional change depends on the degree of strategic interdependence among institutional actors: where it is high, the joint belief shift mechanism is likely to precipitate change; and where it is low, the formal legal mechanism is likely to precipitate change.

The Politics of Common Knowledge: Ideas and Institutional Change in Wage Bargaining

Domestic economic institutions change through processes of conflict and bargaining. Why do the strongest groups in such conflicts ever change their minds about the acceptability of institutional arrangements they once opposed? Drawing on the cases of Ireland in 1986–87 and Italy in 1989–93, this article demonstrates how the process of common knowledge creation between employers and unions changed the course of negotiations over national wage bargaining institutions. Common knowledge creation happens when existing institutions are in crisis. The institutional experimentation that follows such crises, characterized by deep uncertainty, places a premium on persuasive argument. The ideas most likely to serve as the basis for newly common knowledge will have analytical and distributive appeal to both unions and employers, and they must be ratified in public agreements, which I call common knowledge events. Common knowledge events establish new social facts, which can change the payoffs associated with different institutional outcomes. This can lead even powerful actors to accept institutions they had previously opposed.The author thanks Marius Busemeyer, Mary Louise Culpepper, Keith Darden, Orfeo Fioretos, Archon Fung, Peter Hall, Andrew Martin, Cathie Jo Martin, Victoria Murillo, Kathleen Thelen, and Gunnar Trumbull, along with three anonymous reviewers and the editors of IO, for comments and conversations that improved this article. Ben Ansell and Vikram Siddarth provided valuable research assistance. Financial support from the John F. Kennedy School of Government and the Weatherhead Center for International Affairs at Harvard University is gratefully acknowledged. Any remaining errors are my own.

Small States and Skill Specificity Austria, Switzerland, and Interemployer Cleavages in Coordinated Capitalism

The varieties of capitalism literature has put skill systems at the center of comparative politics. Yet its claims about skill specificity are driven by two large coordinated economies, Germany and Japan. This article examines political change of skills in two small coordinated economies. Switzerland has expanded its general skills orientation, whereas Austria retains a highly specific skills system. The cause of this divergence is the different interests of small and large employers: Small employers are more cost sensitive than are large employers, which leads them to oppose the introduction of more general education. The study also shows that the primary measure of skill specificity used in quantitative work—vocational training share—is unreliable. It fails to distinguish between secondary and tertiary vocational training, which have opposite effects on skill specificity. The article develops and justifies an alternative measure—tertiary vocational training—that better predicts the skills clusters observed in advanced capitalism.

Structural Power and Bank Bailouts in the United Kingdom and the United States

The 2008 bailout is often taken as evidence of the domination of the US political system by large financial institutions. In fact, the bailout demonstrated the vulnerability of US banks to government pressure. Large banks in the United States could not defy regulators, because their future income depended on the US market. In Britain, by contrast, one bank succeeded in scuttling the preferred governmental solution of an industry-wide recapitalization, because most of its revenue came from outside the United Kingdom. This was an exercise of structural power, but one that most contemporary scholarship on business power ignores or misclassifies, since it limits structural power to the automatic adjustment of policy to the possibility of disinvestment. We show that structural power can be exercised strategically, that it is distinct from instrumental power based on lobbying, and that it explains consequential variations in bailout design in the United Kingdom, the United States, France, and Germany.

Employers, Public Policy, and the Politics of Decentralized Cooperation in Germany and France

The analytical framework of varieties of capitalism can be grim reading for public policymakers. If their countries lack the institutional framework necessary for sustaining non-market coordination, then the counsel of many of the chapters in this volume is simple: stick with the policies that are compatible with the existing institutional framework of your country, even if that means abandoning goals that could improve both the competitiveness of firms and the wages of workers. In this chapter I argue that the diagnosis generated by the varieties of capitalism framework is indeed compelling; many modern problems of economic and social policymaking are in fact problems of coordination among companies, such that the goals of state policymakers will frequently involve convincing actors to act in concert to achieve desirable social ends. Yet the prognosis of this chapter is rather more hopeful than others in this volume for political initiatives that aspire to create coordination in policy areas where it has previously not existed. Such initiatives can succeed, even when countries lacking the framework of a coordinated market economy attempt to create non-market coordination de novo.

Changing France : the politics that markets make

Figures Tables Notes on the Contributors Introduction: The Politics of Social Change in France P.A.Hall PART ONE Capitalism, Coordination, and Economic Change: The French Political Economy since 1985 P.D.Culpepper New Patterns of Industrial Relations and Political Action since the 1980s M.Lallement The Transformation of Corporate Governance in France M.Goyer PART TWO The Long Good Bye to Bismarck? Changes in the French Welfare State B.Palier Different Nation, Same Nationhood: The Challenges of Immigrant Policy V.Guiraudon Social Generations, Life Changes and Welfare Regime Sustainability L.Chauvel PART THREE The Government of the European Union and a Changing France A.Smith The Ongoing March of Decentralization within the Post Jacobin State P.Le Gales PART FOUR The French Party System and the Crisis of Representation G.Grunberg Convergence, Fragmentation and Majority-Cycling in French Opinion R.Balme

Eppure, non si muove: Legal change, institutional stability and Italian corporate governance

Prevailing theories in political economy hold that a coalition or political party, acting through parliament, can break down institutions of stable shareholding. In spite of extremely favourable conditions in the late 1990s – the election and durable rule of a leftist government supported by a transparency coalition, a bureaucratic elite that favoured institutional change, and substantial state shareholdings which the government could privatise in pursuit of its objectives – these reforms failed to affect the concentration of shareholdings among the largest private companies in Italy. This disjuncture between legal change and actual practice in Italian corporate governance suggests that current theories of institutional change in corporate governance systems are incomplete. The focus of inquiry needs to turn to the political resources of those who support the existing system: managers and large shareholders.

Capitalism, Coordination, and Economic Change: the French Political Economy since 1985

France is no longer a statist political economy; but what sort of political economy is it? In this chapter I show how the major institutions of the French economy have changed since 1985 and consider the character of the current political economy in light of the key actors in this process of change. Many scholars argue that the limits of statism were abundantly clear after the failure of Francois Mitterrand’s experiment with “Keynesianism in one country” in 1983, but the analysis in this chapter shows that the withdrawal of the state from the economy was only consummated in the 1990s. The period between the mid-1980s and 1990 saw French governments attempt to empower various actors in civil society, especially employers and unions (Howell 1992; Schmidt 1996; Levy 1999). These initial policies, which attempted to develop a coherent model for the post-statist political economy, set in motion a process in which national politicians and bureaucrats exercised ever-decreasing influence over the choices of companies and individuals. State signals still matter in the French economy, as they do in all the advanced capitalist countries. The 1990s, though, witnessed the transformation of that economy largely through the uncoordinated action of individual economic actors, in a process made possible by policy choices but neither directed nor fully anticipated by governments. Markets and market power now set expectations in a wide array of fields, while French governments on the left and the right continue to assert their distaste for the market society.

Organisational competition and the neo‐corporatist fallacy in French agriculture

This article challenges the neo‐corporatist paradigms explanation of agricultural interest group politics in France. It offers an alternative model that can better comprehend the relevant attributes of this interest group system, a system based on the muffled competition among groups with different policy preferences, all of which participate in a collaborative arrangement with the state. Empirical verification is drawn from the experiences of the 1980s, when the system came under stress after the election of a government of the Left and the reform of the European Common Agricultural Policy.

The Sources of Policy Innovation: Sub-National Constraints on Negotiated Reform

This paper argues that the principal avenue of policy innovation in the areas of economic and social policy in the advanced industrial countries is a function of the sub-national capacity of interest organizations. In policy areas where these organizations exercise high deliberative capacity, they have access to private information which allows them to be the most likely authors of reforms which many of their members may oppose. They also enjoy a capacity to mobilize their members around policy proposals, using both grassroots organizational strength and considerations of legitimacy, to convince their members to support (or not to obstruct) the reform. In policy areas in which groups possess these organizational strengths, then, the groups themselves (rather than political parties or bureaucrats) will be the most likely source of policy innovation. Where groups lack this capacity, the political system rather than interest groups will be the most likely source of policy innovation. This argument is supported by evidence from recent episodes of pension reform in Italy and France and of vocational training finance reform in Germany and France.