Wednesday, February 17, 2010

Putting the Political Back into Political Economy

The following are some key quotes from an article that is probably quite relevant to this blog's title.

Vivien A. Schmidt (2009) “Putting the Political Back into Political Economy by Bringing the State Back in Yet Again”, World Politics, 61(3), pp. 516–46.


HOW do we explain why some advanced capitalist countries have gone farther than others in their neoliberal reforms? Or why countries with similar capitalist systems have taken different paths to reform while countries with different systems have taken similar paths? Mainstream theoretical approaches in political economy have difficulty responding to these questions for two reasons. First, whether they theorize capitalist convergence to a single neoliberal model, divergence to two varieties of market economies, or differentiation into three coalitions of financial capitalism, such approaches tend to underestimate if not ignore the importance of one crucial player: the state. Second, their analytic frameworks reinforce this neglect of the state at the same time that they emphasize continuity over change—whether the historical institutionalist approach (HI), which reduces the state to the rules and regularities that shape political economic institutions’ path-dependent development, or the rational choice institutionalist aproach (RI), which limits the state to the incentive structures that constrain political economic actors’ rational choices. (516)

...

The state’s significance for comparative political economy can be differentiated in four basic ways.

(1) As a political economic setting ...

(2) In terms of policy, the state stands not only for the substantive content of policies, which may alter HI macrohistorical institutions and RI incentive structures but also for their effects on different varieties of capitalism. These effects do not simply move such varieties along a continuum from faire (state action) to laissez-faire (market action); rather, they also push them toward faire faire (state-setting guidelines for market action) or faire avec (state action with market actors).

(3) As a polity, the state constitutes the political institutions that frame the interactions between political and economic actors.

(4) With regard to politics, the state consists of actions resulting not just from the strategic interactions among RI actors in HI macrohistorical contexts but also from the kinds of interactions analyzed by the newest of the new institutionalisms—discursive institutionalism (DI)1—which are driven by the substantive content of ideas and the interactive processes of discourse.

By focusing on the discursive political coordination, communication, and deliberation at the basis of public action, DI offers a way into the explanation of the dynamics of institutional change. It serves to offset the highly static approaches of HI and RI by explaining the reframing of strategic action and the reshaping of institutional practices through ideas and discourse. (517)

...

Although the division of states into liberal, enabling, and influencing tells us a lot about how the state tends to deal with the market, it tells us little about the state’s actual policies, that is, about their content, their implementation, or their effect. And all of this complicates the story told so far for all three varieties of capitalism. The first complication comes from the fact that state policies in recent years seem very similar in content, as the convergence theorists would argue, since all countries have liberalized their financial markets, deregulated their businesses, and increased the flexibility of their labor markets. In fact, however, although such policies may be similar, they are not the same. Divergence scholars have pointed out, for example, the many differences in the kind and degree of liberalization of the financial markets or in the deregulation of the banking sector, differences that are also generally in keeping with their variety of capitalism. State policies also show great differences in the timing and extent of reforms in labor-market flexibility within and across varieties. (522-3)

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Another way of thinking about the unexpected policy mix of states in different VOCs is to see that although all states have become more neoliberal, moving along a continuum from faire (do) toward laissez-faire let do)—that is, from interventionist state toward hands-off state by doing less on its own and leaving more room for market actors to act on their own—this has not meant a slide all the way to laissez-faire and leaving everything up to market actors. Rather, states have largely turned to faire faire (have do) by having market actors perform functions that the state generally did in the past, with clear rules as to what that should entail [e.g. US]

...

However, many states also engage in faire avec (do with) by doing a lot in collaboration with socioeconomic actors—the pattern of cooperation most typical of CMEs—corporatism.



Figure 1 State Actions of the Three Varieties of Capitalism on a Fourfold scale from Faire to Faire avec to Faire faire to Laissez-faire

...

In short, the HI approach, which emphasizes the political institutional context, goes a long way toward helping to explain differential neoliberal reform success in countries in the same varieties of capitalism. But it does not take us far enough. We still do not know why specific policies succeeded, in particular ones that went against the traditional political economic patterns of state action, reversing long-standing policies and overcoming political institutional obstacles to change. This is because we need one more variable: politics.

...

The state, in short, not only frames the action of the other players, when it stands for political economic and political institutional context, but it can also reframe the action when it stands for politics, through the policies promoted by political actors with ideas about the public’s interests that are different from the ideas of economic actors about their own narrow self-interests.

Thus, taking ideas seriously, as well as legitimating discourse in which such ideas are embedded and through which such ideas are conveyed, can also lend insight into politics. But how does one approach questions of ideas and discourse? Some answers are provided by discursive institutionalism (DI), which takes account of the substantive content of ideas and the interactive processes by which ideas are conveyed and exchanged through discourse.

With regard to the substantive content of ideas, DI calls attention to the ways in which political actors’ ideas serve to (re)conceptualize interests and values as well as (re)shape institutions. Such ideas can be specific policy ideas, such as the varying state responses to neo-Keynesianism among LMEs, CMEs, and SMEs in the postwar years. They may be more general programmatic ideas, such as states’ radical paradigm shift from neo-Keynesianism to neoliberalism in the British LME or the French SME.57 But they may instead be underlying public philosophies.

These could be foundational political ideas about the role of the state in the French SME as opposed to the U.S. LME, which ensured that the development of the railway system in the former was state led and in the latter was led by private actors;58 foundational economic ideas at moments of “great transformation” that resulted in states embedding liberalism in the 1930s and then disembedding it beginning in the 1970s in the Swedish CME and the U.S. LME; or collective memories that are generated at critical moments, as in the state-framed agreements in the 1930s establishing the collaborative institutions of wage bargaining in Sweden, which have persisted with only incremental changes until today.

With regard to the discursive processes by which ideas are conveyed, DI encompasses a coordinative discourse consisting of the individuals and groups at the center of policy construction who are involved in the creation, elaboration, and justification of policy and programmatic ideas; and a communicative discourse that consists of the individuals and groups at the center of political communication involved in the public presentation, deliberation, and legitimization of policy, programmatic, and philosophical ideas.

By contrast, the communicative discourse consists of political actors engaged in a mass process of public persuasion, in which political leaders, government spokespeople, party activists, spin doctors, and others communicate the ideas developed in the coordinative discourse to the public for discussion, deliberation, and modification of the ideas in question. These political actors are engaging broadly—with members of opposition parties, the media, pundits, community leaders, social activists, public intellectuals, experts, think tanks, organized interests, and social movements, as well as, naturally, with the electorate. (531-2)

...

[O]ne of the reasons for turning to discursive institutionalism is to use ideas and discourse to help explain the dynamics of change (as well as continuity) in political economy. What distinguishes DI from HI to begin with is that instead of treating critical junctures as unexplainable times when the HI rules and regularities shift, DI makes these moments its objects of explanation by closely examining sentient agents’ changing ideas about their actions in response to material events. Moreover, instead of mainly describing the incremental processes of change in the rules, as in HI, DI explains those processes of change through the ideas and discourse of the agents who reproduce those rules—and change them—in everyday practice. (532)

...

Conveying good policy ideas through a persuasive discourse helps political actors win elections and gives policy actors a mandate to implement their ideas. (533)

...

Our main question is: when do ideas and discourse matter for institutional change. That is, when do they exert a causal influence for change as opposed to continuity (since ideas in a deeper sense always matter)? ...

[DIs investigate institutional change over time]

—through process tracing of ideas held by different actors that lead to different policy choices in social democracy;

—through matched pairs of country cases where everything is controlled for except the discourse to show its impact on welfare adjustment;

—through speeches and debates of political elites that then lead to political action on railroad policy;

—through opinion polls and surveys to measure the impact of the communicative discourse;

—through interviews and network analysis to gauge the significance of the coordinative discourse, and more. (534)

Finally, they often also show that ideas and discourse matter by demonstrating that no other structural factors can account for the clear changes (or continuities) in interests, paths, or norms signaled by political actors’ expressed ideas and intended actions. (535)

...
RI approaches to political economy can easily make convergence to a neoliberal model look inevitable by focusing on the pressures of economic forces and the logics of political incentives that (necessarily) lead all rational economic actors to respond (rationally) in one way alone—for better or for worse. For those in favor of a neoliberal model but also for those opposed, this provides a set of ideas for a normative discursive strategy focused on getting people to accept or revolt against the model.

HI approaches to political economy do not make things look inevitable— they make them appear inexorable, with divergence into liberal market economies or coordinated market economies the result of countries subject to very different historical rules and regularities for a very long time. Inserting an RI logic of interaction into this hi framework only adds the inevitable to the inexorable. ...

So what does bringing the state back in do? First, in pointing to the continued existence of a third, state-influenced variety (or “nonvariety”) of capitalism using the same ri/hi mix of methodologies, it shows that there is nothing inevitable about the neoliberal model; nor is anything inexorable about the split into two varieties. And second, by pointing to at least three varieties, it saves France, Italy, and Spain—not to mention the Asian Tigers and the bulk of developing capitalist democracies— from the dustbin of history.

...

DI puts real politics, the politics of leadership and opposition, back into the mix and shows how policies within particular polities and political economies are the result of politics that reduce RI inevitability and HI inexorability. (540)

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In so doing, DI thereby demonstrates that the shape of all market economies depends upon public choices resulting not only from the power clash among interests but also from the battle of ideas throughdiscourse and deliberation. It also shows, however, that institutional context matters and that such battles of ideas follow different patterns of discursive interaction in different countries, given the greater need for a coordinative discourse in Germany (where the state needs to bring interest groups into agreement), a communicative discourse in the U.K. (where the state needs to persuade the public), and both coordinative and communicative discourses in France (where both interest groups and the public need to be brought on board in order to avoid the veto of the streets). Putting across this particular set of ideas—that we need to put the political back into political economy by bringing the state back in yet again—constitutes the normative discursive strategy of this article. (541)

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