DOCSLIB.ORG

Decommodification of Financial Regulation: Some Unpleasant Lessons from the 2007 Crisis

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Decommodification of Financial Regulation: Some Unpleasant Lessons from the 2007 Crisis Decommodification of financial regulation :some unpleasant lessons from the 2007 crisis Faruk Ülgen To cite this version: Faruk Ülgen. Decommodification of financial regulation : some unpleasant lessons from the2007 crisis. ASE at ASSA annual meetings ”Commodities, commodification and alternatives to exchange”, Association for social economics, Allied social science association, Jan 2015, Boston, United States. 16 p. halshs-01111178 HAL Id: halshs-01111178 https://halshs.archives-ouvertes.fr/halshs-01111178 Submitted on 29 Jan 2015 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Allied Social Science Association (ASSA) Annual Meeting Boston, MA, January 3-5, 2015 ASSOCIATION FOR SOCIAL ECONOMICS (ASE): “COMMODITIES, COMMODIFICATION AND ALTERNATIVES TO EXCHANGE” Decommodification of financial regulation: some unpleasant lessons from the 2007 crisis Faruk ÜLGEN1 Abstract The Great Transformation of modern capitalism from the 1980s is the commodification of monetary/financial rules and related regulation. Assuming that free markets result in social optimum, financial liberalization has transformed public regulatory mechanisms into private self-regulation systems relying on market price-directed contractual schemas. In light of the 2007-08 crisis, this article seeks to question this blind faith in the market’s self-adjustment capacity. It argues that free markets and individual rationality-based economic efficiency cannot result in social harmony. It maintains that financial stability should not be entrusted to the vicissitudes of markets. It then suggests the decommodification of financial supervision through alternative public regulation that seeks social- stability and economic viability. Keywords: Crisis, decommodification, financial regulation, liberalism, social efficiency JEL Classification Codes: E61, G18, H43, P11 1 Head of the Branch Campus of Valence, Grenoble Faculty of Economics – University Grenoble Alpes Centre de Recherche en Economie de Grenoble (CREG), 1241, rue des Résidences BP47 – 38040 Grenoble Cedex 9-France (Phone: +33-(0)476 82 54 58 - Fax: +33-(0)476 82 59 95). [email protected]; [email protected]; [email protected] 1 1. Introduction Capitalist society evolves through continual cycles of commodification, exposure of human life and its dynamics to market mechanisms. The new millennium is the culminating point of this evolution since most of social rules and aims are shaped and evaluated according to decentralized free markets efficiency criteria. This is the dominance of market forces (marketization and commercial value creation process) over the whole society. In this general evolution, one specific but crucial aspect of “great transformation” of modern capitalism from the 1970s-1980s is the entire commodification of monetary and financial rules2 and related regulation through the process of financial liberalization and market friendly (de)regulation. This process has transformed public institutions-led regulatory mechanisms into private self-regulation systems (internal self-assessment and external advising and rating agencies) that rely on market price-directed contractual schemas. The main argument in favor of such a structural evolution is the belief in the efficiency of free market mechanisms to make society able to reach social optimum thanks to non-coordinated individual decisions and behavior. In this line, economic efficiency is assumed to lead to social efficiency. So, in light of the 2007-08 crisis and its catastrophic consequences for society, it seems to be relevant to recall the neo-liberal blind faith in free market’s self-adjustment capacity that let the core of capitalist society (money and financial markets) be commodified through the privatization of regulatory rules and commodification of supervision and intervention mechanisms. To deal with this issue, this article will liberally draw upon the seminal work of Karl Polanyi, The Great Transformation (1944)3. In this aim, the second section assesses the relevance of the major statements in favor of financial liberalization and of commodification of financial regulation in the working of a market economy. The third section shows that contrary to liberal axioms of market efficiency, there is no bridge between the so-called rational individual behavior efficiency and social efficiency. Free markets and individual rationality-based economic 2 Even though it belongs to the same process, the neutralization of monetary policies and central banks following the rational- expectations-based New Classical assertions of efficient and equilibrium-led markets will not be studied in this article. However, it is worth noting that Polanyi (1944: 74) remarks that “self-regulating market demands nothing less than the institutional separation of society into an economic and a political sphere. Such a dichotomy is, in effect, merely the restatement, from the point of view of society as a whole, of the existence of a self-regulating market”. 3 Kindleberger (1974: 45) notes that “Some books refuse to go away. They get shot out of the water by critics but surface again and remain afloat. The Great transformation by Karl Polanyi doesn’t exactly refuse to go away, but it was slow in arriving and it has kept on coming”. 2 efficiency cannot result in social harmony. Furthermore, it is argued that micro-relevant decisions often result in macro-catastrophic outcomes. The fourth section then advocates that in order to stabilize financial folly and put capitalist economies on a socially consistent evolution path one must stop the process of whole commodification of financial relations and then decommodify financial control and supervision mechanisms. An expected alternative direction is toward public regulatory mechanisms that could be related to collective development objectives and then seek “social-stability and economic viability” in the aim of attaining a socially satisfactory level of economic activity. The last section concludes that the lessons which could be drawn from this analysis can also hold for every area of human life, like the environment, health, education, etc. which should not be left to the vicissitudes of market-prices commodification mechanisms. 2. Commodification of financial regulation Financial liberalization is a normal evolution of market capitalism since market economy is defined according to some rules stating that the organization and working of the economy must rest on free market mechanisms. This gives a specific society: “Market economy implies a self-regulating system of markets; in slightly more technical terms, it is an economy directed by market prices and nothing but market prices. Such a system capable of organizing the whole of economic life without outside help or interference would certainly deserve to be called self-regulating. These rough indications should suffice to show the entirely unprecedented nature of such a venture in the history of the race” (Polanyi, 1944: 45). The process of financial liberalization coincides well with the process of generalized commodification of human activities and relations in market economies. Most specific societal relations (health, education, solidarity, etc.) are directly (through privatization process) or indirectly (through the withdrawal of public agencies and entrusting of their activities to non-governmental but private-initiative-related entities seeking or not direct profit) are left to no-publicly/collectively organized groups or institutions. Explicitly or implicitly, this results in marketization of decisions, strategies and related activities which were not previously in the sphere of economic activities. The commodification process is at the heart of the market economy. It is through the 3 commodification that the market subordinates everything to its rationality and efficiency criteria and gives them the veil of independence of all moral criteria: “It is with the help of the commodity concept that the mechanism of the market is geared to the various elements of industrial life. Commodities are here empirically defined as objects produced for sale on the market; markets, again, are empirically defined as actual contacts between buyers and sellers” (Polanyi, 1944: 75). Van der Zwan (2014) points to the exponential growth of financial markets and to the financialization of everyday life in the new accumulation regime of modern capitalism while Lohmann (2012) maintains that the evolution of market societies results in two major phenomena: - the increasing privatization and marketization of public goods and of the state and its functions; and – the increased economic and political dominance of finance since the 1970s. Such phenomena have been already observed in the evolution of capitalism in the last centuries by Polanyi (1944: 60) who maintains: “Ultimately, that is why the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market.
Load more

Recommended publications
  • Luxembourg Income Study Working Paper Series
    Luxembourg Income Study Working Paper Series Working Paper No. 529 How Can the Decommodified Security Ratio Assess Social Protection Systems? Georges Menahem January 2010 Luxembourg Income Study (LIS), asbl 1 ECONOMIC WELL‐BEING AND SOCIAL PROTECTION IN SOUTHERN EUROPE: CHANGING POLICIES AND TRENDS 15‐16 November 2007, Madrid How can the decommodified security ratio assess social protection systems? Georges Menahem 1 Director of research at CNRS-CEPN, Paris 13 University and IRDES With a view to better assessment of the roles played by social security and social policy in determining well‐being, this presentation introduces the ”decommodified security ratio“ (DSR), an instrument for evaluating an important duty of the social State, namely to maintain and improve peopleʹs economic security. To that end we describe the conventions for its use and analyse its main components in 24 countries in 1999‐2001, by using the wave V of Luxembourg Income Survey database. From an analysis of the sources of economic security we then distinguish five different rationales. What will tomorrowʹs social protection look like? What tools can assist us in shaping it? We may have to rethink social security when we consider the social shifts which we are currently experiencing: changing patterns of work, breakdown in the wage structure, developments associated with unemployment, precarious employment and exclusion, family instability and countless other factors which jeopardize the individualʹs security. In such context, we are more and more allowed to refer to Articles 22 and 25 of the 1948 Universal Declaration of Human Rights emphasizing the need for the individual within a society to have ”economic security”, ”social security” and, very specifically (Article 25), ”security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control”.
    [Show full text]
  • Incomplete Decommodification: Art, State Subsidy and Welfare Economics
    15 Incomplete Decommodification: Art, State Subsidy and Welfare Economics DAVE BEECH Dave Beech is PARSE Professor of Art at Valand Academy, University of London. He is the author of Art and Value: Art’s Economic Exceptionalism in Gothenburg. He is an artist in the collective Freee (with Andy Hewitt and Classical, Neoclassical and Marxist Economics, (2015). He has written widely Mel Jordan), as well as a writer and curator. His work has been exhibited at on the politics of art, including The Philistine Controversy (2002, co-authored the Istanbul Biennial; the Liverpool Biennial; BAK, Utrecht; Wysing Arts, with John Roberts) and Art and Text (2011). He is a founding co-editor of the Cambridge; SMART Project Space, Amsterdam; the ICA, London; Centro journal Art and the Public Sphere (2011-). He also curated the exhibition We Are Cultural, Montehermoso, Vitoria, Spain; the Collective Gallery, Edinburgh; Grammar at the Pratt Institute, New York 2011 (co-curator Paul O’Neill) and International Project Space, Birmingham; and at 1000000mph Gallery, edited a special edition of Third Text on “Art, Politics, Resistance?” (2010). 16 PARSE JOURNAL HE DEVELOPMENT OF WELFARE ECONOMICS socialist movement by guaranteeing national health between 19121 and 19592 not only propelled insurance, a pension, a minimum wage, workplace T unrivalled social reforms that had been regulation, vacation and unemployment insurance, sporadically underway since the 1880s, and not together comprise the historical origin of the welfare only reimagined the state as an economic
    [Show full text]
  • A Capitalist Road to Communism,” Theory and Society 15 (5), Pp
    COMMENT Basic Income as a Socialist Project Erik Olin Wright University of Wisconsin, Madison In the seminal paper that launched the contemporary discussion of basic income, “The Capitalist Road to Communism” (1986), Robert van der Veen and Philippe Van Parijs argue that socialism is an unnecessary stage between capitalism and communism. Following Marx, they defined “socialism” as …a society in which workers collectively own the means of production – and in which therefore they collectively decide what these should be used for and how the resulting product should be distributed, namely according to the principle “to each according to his labor”. Communism, in contrast, …is defined by the distribution principle “from each according to his abilities to each according to needs” – which implies at least that the social product is distributed in such a way (1) that everyone’s basic needs are adequately met, and (2) that each individual’s share is entirely independent of his or her (freely provided) labor contribution. (Van der Veen and Van Parijs, 1986, pp. 636–637). The central principles of communism, they argue, can be constructed inside of capitalism through the institution of a generous basic income grant that distributes a significant part of the social product on the basis of need, and that frees people from the obligation to perform labor in order to receive a reward. Collective ownership of the means of production is an unnecessary detour. In this paper I will explore a complementary problem: in what ways might Basic Income be seen as a structural reform of capitalism that would facilitate a movement in the direction of socialism? It may be that to a meaningful degree the distributional principles of communism could be instituted within capitalism in the form of a generous unconditional basic income, and thus socialism may not be a necessary condition for significant advance on these principles.
    [Show full text]
  • Decommodification and Self-Organization in Housing
    Resources Ivo Balmer, Tobias Bernet Housing as a Common Resource? Decommodification and Self-Organization in Housing – Examples from Germany and Switzerland 1 Introduction Housing is something intimate. One could say that our homes represent a ‘third skin’ after clothing. Like clothes, shelter is regarded as a basic human need. Since this does not automatically translate into universal access in a less-than-perfect | downloaded: 28.9.2021 world, the provision of such basic goods is a fundamental political issue. A wide range of answers to the housing question have been developed in different times and places depending on the economic conditions and political hegemony. Both the market and the state have been hailed as the primary provider of housing and, even though the ‘third sector’ has mostly played a rather marginal role, there are noteworthy traditions of philanthropic and especially of self-help (cooperative) ini- tiatives in housing. The latter are certainly worth discussion in the context of the current ‘rediscov- ery’ of the commons, as is the field of public housing. In this chapter, we will attempt to sketch a typology of housing tenure and provision from a ‘commons per- spective,’ examining to what extent housing can be seen as a common resource within different institutional arrangements. We will do this by analyzing a number of contemporary examples from Germany and Switzerland, two countries that are known as ‘tenants’ nations’ by virtue of having some of the lowest rates of own- https://doi.org/10.7892/boris.70441 er-occupied homes among industrialized countries,1 and which thus represent a specific arena of marked contestations within the housing sector.
    [Show full text]
  • Assessing the Complex Relation Between the Welfare State and Social Capital
    LIEPP Working Paper Decembre 2015, nº43 Axe “Politiques socio-fiscales” A Matter of Size and Generosity: Assessing the Complex Relation between the Welfare State and Social Capital Emanuele Ferragina Sciences Po (OSC-CNRS et LIEPP) [email protected] www.sciencespo.fr/liepp © 2015 by the authors. All rights reserved. LIEPP Working Paper nº43 A Matter of Size and Generosity: Assessing the Complex Relation between the Welfare State and Social Capital * Emanuele Ferragina Sciences Po (OSC-CNRS et LIEPP) Abstract Using confirmatory factor analysis and several regression models, this paper assesses the relation between different welfare state configurations and social capital in 19 European countries over two decades. The results suggest that welfare state configurations characterized by high degrees of decommodification and restrained levels of social spending are associated with higher social capital scores. Moreover, the positive relation between decommodification and social capital is stronger than the negative association observed with social spending. At the theoretical level, on the one hand, the findings seem to partially confirm the concern of neoclassical and communitarian theorists for the negative correlation between large size welfare states and social capital. On the other hand, they support the contention of institutional theorists that there is a strong positive association between high degrees of welfare state generosity and social capital. * This work is supported by a public grant overseen by the French National Research Agency (ANR) as part of the ―Investissements d‘Avenir‖ program LIEPP (reference: ANR-11-LABX-0091, ANR-11-IDEX-0005-02). 1 12/2015 Introduction The article investigates the association between different welfare state configurations and social capital over two decades.
    [Show full text]
  • After the New Social Democracy Offers a Distinctive Contribution to Political Ideas
    fitzpatrick cvr 8/8/03 11:10 AM Page 1 Social democracy has made a political comeback in recent years, After thenewsocialdemocracy especially under the influence of the Third Way. However, not everyone is convinced that this ‘new social democracy’ is the best means of reviving the Left’s social project. This book explains why and offers an alternative approach. Bringing together a range of social and political theories After the After the new new social democracy engages with some of the most important contemporary debates regarding the present direction and future of the Left. Drawing upon egalitarian, feminist and environmental social democracy ideas it proposes that the social democratic tradition can be renewed but only if the dominance of conservative ideas is challenged more effectively. It explores a number of issues with this aim in mind, including justice, the state, democracy, welfare reform, new technologies, future generations and the new genetics. Employing a lively and authoritative style After the new social democracy offers a distinctive contribution to political ideas. It will appeal to all of those interested in politics, philosophy, social policy and social studies. Social welfare for the Tony Fitzpatrick is a Senior Lecturer in the School of Sociology and Social twenty-first century Policy, University of Nottingham. FITZPATRICK TONY FITZPATRICK TZPPR 4/25/2005 4:45 PM Page i After the new social democracy TZPPR 4/25/2005 4:45 PM Page ii For my parents TZPPR 4/25/2005 4:45 PM Page iii After the new social democracy Social welfare for the twenty-first century TONY FITZPATRICK Manchester University Press Manchester and New York distributed exclusively in the USA by Palgrave TZPPR 4/25/2005 4:45 PM Page iv Copyright © Tony Fitzpatrick 2003 The right of Tony Fitzpatrick to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.
    [Show full text]
  • Different Types of Welfare States? a Methodological Deconstruction of Comparative Research
    The Journal of Sociology & Social Welfare Volume 29 Issue 4 December Article 2 December 2002 Different Types of Welfare States? A Methodological Deconstruction of Comparative Research Rebecca A. Van Voorhis California State University Follow this and additional works at: https://scholarworks.wmich.edu/jssw Part of the Social Welfare Commons, and the Social Work Commons Recommended Citation Van Voorhis, Rebecca A. (2002) "Different Types of Welfare States? A Methodological Deconstruction of Comparative Research," The Journal of Sociology & Social Welfare: Vol. 29 : Iss. 4 , Article 2. Available at: https://scholarworks.wmich.edu/jssw/vol29/iss4/2 This Article is brought to you by the Western Michigan University School of Social Work. For more information, please contact [email protected]. Different Types of Welfare States? A Methodological Deconstruction of Comparative Research REBECCA A. VAN VOORHIS California State University Department of Sociology & Social Services Research on modern welfare states has been strongly influenced by the the- ory that they develop accordingto patterns,which form distinct regimes- liberal, corporatist,and social democratic. These regimes are characterized by several key variables, among which the decommodification of labor is heavily weighted. This article examines the operational assumptions, measures, and calculations used in the most widely cited empirical study around which distinct regime theory has developed over the last decade. The findings reveal critical methodological weaknesses in the conceptual- ization and quantificationof decommodification measures, which form the empirical cornerstone of distinct regime theory. Theory and research on the development of the modern welfare states tend to be concentrated around two lines of anal- ysis which emphasize either impersonal forces of structural- functional change or the socio-political forces of contending group interests.
    [Show full text]
  • What's Left of the Left: Democrats and Social Democrats in Challenging
    What’s Left of the Left What’s Left of the Left Democrats and Social Democrats in Challenging Times Edited by James Cronin, George Ross, and James Shoch Duke University Press Durham and London 2011 © 2011 Duke University Press All rights reserved. Printed in the United States of America on acid- free paper ♾ Typeset in Charis by Tseng Information Systems, Inc. Library of Congress Cataloging- in- Publication Data appear on the last printed page of this book. Contents Acknowledgments vii Introduction: The New World of the Center-Left 1 James Cronin, George Ross, and James Shoch Part I: Ideas, Projects, and Electoral Realities Social Democracy’s Past and Potential Future 29 Sheri Berman Historical Decline or Change of Scale? 50 The Electoral Dynamics of European Social Democratic Parties, 1950–2009 Gerassimos Moschonas Part II: Varieties of Social Democracy and Liberalism Once Again a Model: 89 Nordic Social Democracy in a Globalized World Jonas Pontusson Embracing Markets, Bonding with America, Trying to Do Good: 116 The Ironies of New Labour James Cronin Reluctantly Center- Left? 141 The French Case Arthur Goldhammer and George Ross The Evolving Democratic Coalition: 162 Prospects and Problems Ruy Teixeira Party Politics and the American Welfare State 188 Christopher Howard Grappling with Globalization: 210 The Democratic Party’s Struggles over International Market Integration James Shoch Part III: New Risks, New Challenges, New Possibilities European Center- Left Parties and New Social Risks: 241 Facing Up to New Policy Challenges Jane Jenson Immigration and the European Left 265 Sofía A. Pérez The Central and Eastern European Left: 290 A Political Family under Construction Jean- Michel De Waele and Sorina Soare European Center- Lefts and the Mazes of European Integration 319 George Ross Conclusion: Progressive Politics in Tough Times 343 James Cronin, George Ross, and James Shoch Bibliography 363 About the Contributors 395 Index 399 Acknowledgments The editors of this book have a long and interconnected history, and the book itself has been long in the making.
    [Show full text]
  • Still a Future for the European Social Model?
    Still a Future for the European Social Model? Christoph Hermann, University of Vienna Birgit Mahnkopf, Berlin School of Economics and Law ABSTRACT The 2008/9 financial and economic crisis has discredited the neoliberal narrative which claims that the market is self-correcting and that private enterprise is superior to the public sector. In Europe, it turned out that the crisis highlighted the social and the democratic (as well as the ecological) deficits which have arisen over the past 30 years and which finally had eroded some of the most distinctive features of the European Social Model (ESM). However, the crisis has at least opened up space in the political discourse for alternative ideas concerning the creation of a more socially sustainable economy. In the essay it is argued that a renewed ESM is indispensable for a type of European integration based on social equality and environmental responsibility. After a short reference to Polanyi´s concepts of decommodification and disembedded capitalism the paper summarises the debate about the ESM and tries to capture its essence as it developed during the postwar decades. In the next section, the erosion of the ESM is described and important drivers of neoliberal restructuring in the EU are identified. The following part outlines major objectives in a possible revitalisation of the ESM based on three major projects: the renewal of the European welfare states, the reconstruction and expansion of the public sector and the democratisation of the EU and of European societies. KEYWORDS decommodification, democracy, equality, public services, welfare states 1. Introduction For a brief moment during the 2008/9 financial crisis it looked as if the European Social Model could experience a revival.
    [Show full text]
  • Final Diss 2
    Rupture and Representation: Migrant Workers, Unions and the State in China By Eli David Friedman A dissertation submitted in partial satisfaction of the requirements of the degree of Doctor of Philosophy in Sociology in the Graduate Division of the University of California, Berkeley Committee in Charge: Professor Peter Evans, Chair Professor Kim Voss Professor Ching Kwan Lee Professor Kevin O’Brien Fall 2011 Abstract Rupture and Representation: Migrant Workers, Unions and the State in China By Eli David Friedman Doctor of Philosophy in Sociology University of California, Berkeley Professor Peter Evans, Chair This project begins with a simple observation: during the first decade of the 21st century, worker resistance in China continued to increase rapidly despite the fact that certain segments of the state began moving in a pro-labor direction. This poses a problem for the Polanyian theory of the countermovement, which conflates social resistance to the market with actual decommodification and incorporation of labor. I then pose the question, why is labor strong enough to win major legislative and policy concessions from the state, but not strong enough to significantly benefit from these policies? The “partial” nature of the countermovement can be explained with reference to the dynamics of labor politics in China, and specifically the relationship between migrant workers, unions, and the state, or what I refer to as “appropriated representation.” Because unions in China are an invention of the state, they have good access to policy makers but are highly illegitimate amongst their own membership, i.e. strong at the top, weak at the bottom. Labor’s impotence within enterprises means that pro-labor laws and collective agreements frequently go un-enforced.
    [Show full text]
  • On Rawls, Democratic Socialism, and Alternatives to Capitalism
    This is a repository copy of Social Justice and Economic Systems : On Rawls, Democratic Socialism, and Alternatives to Capitalism. White Rose Research Online URL for this paper: https://eprints.whiterose.ac.uk/165444/ Version: Accepted Version Article: O'Neill, Martin orcid.org/0000-0003-0487-0196 (Accepted: 2020) Social Justice and Economic Systems : On Rawls, Democratic Socialism, and Alternatives to Capitalism. Philosophical Topics. (In Press) Reuse Items deposited in White Rose Research Online are protected by copyright, with all rights reserved unless indicated otherwise. They may be downloaded and/or printed for private study, or other acts as permitted by national copyright laws. The publisher or other rights holders may allow further reproduction and re-use of the full text version. This is indicated by the licence information on the White Rose Research Online record for the item. Takedown If you consider content in White Rose Research Online to be in breach of UK law, please notify us by emailing [email protected] including the URL of the record and the reason for the withdrawal request. [email protected] https://eprints.whiterose.ac.uk/ Social Justice and Economic Systems: On Rawls, Democratic Socialism, and Alternatives to Capitalism Martin O’Neill University of York ABSTRACT This essay is concerned with the question of what kind of economic system would be needed in order to realise Rawls’s principles of social justice. Hitherto, debates about ‘property-owning democracy’ and ‘liberal socialism’ have been overly schematic, in various respects, and have therefore missed some of the most important issues regarding the relationships between social justice and economic institutions and systems.
    [Show full text]
  • Decommodification and Activation in Social Democratic Policy
    Decommodification and Activation in Social Democratic Policy: Resolving the Paradox Jingjing Huo, Drew University (Department of Political Science, Smith House, Drew University, Madison, NJ 07940, 973-408-3529) Moira Nelson, University of North Carolina (Lenbachstrasse 7a, Berlin 10245, [email protected], 0049-(0)178-210-1921), and John D. Stephens, University of North Carolina (Center for European Studies, University of North Carolina, Chapel Hill, NC 27599-3449, [email protected], 919-962-4634) Forthcoming in Journal of European Social Policy 18, 2008 2 Decommodification and Activation in Social Democratic Policy: Resolving the Paradox In Esping-Andersen’s influential work on three worlds of welfare capitalism, decommodification appears as the central characteristic of the welfare state, and efforts to de-commodify labor are posited to be the main goal of social democracy. Since decommodification is defined as exit from the labor market with little or no loss of income, social democrats’ emphasis on decommodification clashes with another purported goal of social democracy, high labor force participation. Drawing on research demonstrating the divergent employment effects of various decommodifying social policies, we resolve the existing paradox by showing that social democratic parties are supportive of decommodifying social policies insofar as these policies do not reduce aggregate levels of employment. Pooled time series analysis of employment-impeding policies (long-term unemployment replacement rate, social security and payroll taxes, and employment protection) suggests that they are associated with Christian democracy rather than social democracy. Instead, we find that social democracy is a key determinant of employment-friendly policies, such as active labor market spending and short-term unemployment replacement rate.
    [Show full text]