CHAPTER TWENTY-TWO

Theories and Practices of N eocorporatism

Wolfgang Streeck and Lane Kenworthy

The modern territorial state and the capi- Variation among modern types of government, talist market economy superseded a political- - between the utopian extremes of anarcho- economic order that consisted of a plethora syndicalism and Rousseauian radical liberalism, of corporate communities endowed with tradi- rotates around the relationship between terri- tional rights and obligations, such as churches, torial and associative rule (Table 22.1). In the estates, cities, and guilds. Organized collectiv- Standestaat (state of estates) conceived in the ities of all sorts, more or less closely related to constitutional debates of nineteenth-century the economic division oflabar, regulated coop- Germany as a conservative alternative to liberal eration and competition among their members democracy, territorial rule is exercised by dele- and negotiated their relations with each other. gates of corporate groups, which are the princi- While themselves changing under the impact pal constituents of the state. Later, in the twen- of modernization, they often resisted the rise of tieth century, dictatorial state rule often used territorial bureaucratic rule and the spread of state-instituted corporate bodies as transmission market relations, sometimes well into the twen- belts of a governing party; this is what Schmit- tieth century. But ultimately they proved un- ter (1974) referred to as "state corporatism." In able to prevent the victory of the state form of European postwar democracies, by comparison, political organization and of the self-regulating territorial rule, which now took place through market as the dominant site of economic ex- parliamentary representation, shared the public change. Modern liberalism, both political and space with social groups organized on a more economic, in turn aimed at abolishing all forms voluntary basis and entitled to various forms of intermediary organization that intervene be- of collective participation and self-government, tween the individual and the state or the mar- provided they recognized the primacy of par- ket. In the end, however, it failed to eliminate liamentary democracy. This, in essence, is what collectivism and had to accommodate itself to the literature is called in "neocorporatism" or both political faction and economic coopera- "liberal corporatism" (Schmitter, 1974; Lehm- tion. bruch, 1977). Finally, in more strictly liberal po- Twenty-first-century political communities litical systems, organized groups are tolerated are all organized by territorial nation-states. But by the constitutional order on condition that these had to learn to incorporate organized they limit themselves to lobbying the parliament collectivities and elements of a collective-asso- and refrain from claiming rights, however cir- ciative order in their different configurations cumscribed, to authoritative decision making. of bureaucratic hierarchy and free markets. As a type of governance, this configuration of

441 442 Wolfgang Streeck and Lane Kenworthy ..

Table 22. I. Type if Government as a Result of Interaction Between 'Territorial State and Associative Order

Territorial State Type of Government Associative Order

Does not exist Anarcho-Syndicalism Prevents state formation Guild Socialism Constituted by associations Stiindestaat Controls territorial rule Controls associations State Corporatism Constituted by the state Sharing public space with Liberal Corporatism Group self-government under associations N eocorporatism parliamentary democracy Tolerates associations Pluralism Parliamentary lobby Outlaws associations Radical Liberalism Does not exist

territorial state and associative order is here re- illegal any intermediary organization that repre- ferred to as "pluralism" (Schmitter, 1974).I sented subsections of the citizenry and thereby Our discussion is divided into five sections. interfered with its direct relationship with the The first describes the origins of neocorpo- state. ratism and its conceptualization in political In the spirit of thinkers such as Rousseau thought, and the second does the same for the (1964) and Madison (1973), nineteenth-century early post-World War II period. The third sec- liberalism remained suspicious of collective or- tion addresses the distinction between corpo- ganization below the nation-state, holding on ratism and pluralism and then discusses corpo- to an atomistic image of political life in which ratist organizational structure, concertation, and autonomous individuals were the only legiti- private-interest government. Section 4 reviews mate constituents of the political order. Sub- theory and research on the impact of corpo- national collectivism of all sorts, including re- ratism on economic performance. In the fifth ligious organization, was suspected of diverting section we address current tendencies that un- loyalty £rom the national state and was seen as a dermine democratic corporatism. threat to both political unity and individual lib- erty. Similarly in the emerging capitalist market economy, collective organization and coopera- CORPORATISM AND THE POLITICAL tion were perceived as conspiracy against free CONSTITUTION OF MODERN SOCIETY competition. Not surprisingly, the political and economic strands ofliberal anticollectivism eas- In the French Revolution, modern politics be- ily blended into each other. gan as a revolt against a political order that rec- When faced with political or economic or- ognized people, not as individuals, but only as ganization among its citizenry, the liberal state members of established social groups. The revo- felt called upon to suppress factionalism or con- lution abolished the estates and postulated a di- spiracy in restraint of trade. However, state inter- rect, unmediated relationship between citizens vention in the name of political unity, individual and a state conceived as a republic of individuals. freedom and economic liberty, to safeguard the A law passed by the Assembly in 179 I - the Loi proper individualism of the republic and of the Ie Chapelier, named after its author - declared marketplace, may have paradoxical implications. A political doctrine that relies on a strong state to make society fit its premises borders on to- J For a differing use of "pluralism" that encompasses talitarianism. In societies in which collectivism corporatism and specifies the above type of pluralism as "hyperpluralism," see Dahl (I982:chap. 4). On "organi- and factionalism are deeply rooted, enforce- zational pluralism," see Hicks and Lechner (this volume). ment by a strong state of a liberal political and Theories and Practices of Neocorporatism 443 economic constitution may require considerable Korporationen - as the "second moral root" of repression. Not only may this infringe on the the state alongside the family, was read by some very liberty it is claimed to protect, but it may as a call for a return from egalitarian parliamen- also become too demanding on the state and re- tar ism to a corporatist state of estates.Thus Adam sult in an overturn not just of the government, Mueller (1922 [1809]) developed for Metter- but of the republic as well. nich the concept of a Klassenstaat (class state) The paradoxes of liberalism become partic- in which organized groups would jointly reg- ularly obvious where collective organization is ulate production and coordinate their interests related to social class. Working class collectivism through negotiations, in ways radically differ- in nineteenth-century Europe was partly a rem- ent from French liberalism and Adam Smith's nant of premodern feudal society. But it also of- market economy. Although this never became fered protection against a liberal economy that more than a constitutional blueprint, it later pro- subjected sellers oflabor power to the same self- vided the background for a search for a synthe- regulating markets as owners of capital. Trade sis between liberal and traditional elements of unions and mass parties enabled the working political order. Given that countries like Ger- class to take advantage of freedom of contract many had not gone through a radical-liberal and of democracy and share in the benefits of Jacobine revolution, the inclusion in the mod- the new order (Marshall, 1964). That they in- ern state of group-based forms of nonmajori- terfered with the free play of market forces and tarian governance seemed less paradoxical there intervened between the individual and the state than in France, where this required the over- mattered less for them. throw of a revolutionary tradition (Lehmbruch, A state attacking working class organization 2001). in the name of either political individualism or By the end of the nineteenth century, the free labor markets risked being perceived by liberal program was challenged by various sorts a sizeable number of its citizens as an instru- of collectivism in the name of a need for so- ment of class rule. As the nineteenth century cial reconstruction after what was widely re- went on, then, the question became how to garded as a failure of the "liberal experiment" accommodate organized collectivities in a lib- (Polanyi, 1944). To the European Right, a cor- eral polity and free-market economy. Appar- poratist Standestaat remained an alternative to ently national societies were too large and too liberal democracy well into the interwar period heterogeneous for the state to be their only focus of the twentieth century. Corporatist thinking of social integration and political loyalty - just deplored the disorder and social conflict brought as the market was too anonymous and unpre- about by party competition and the market dictable for individuals, especially those who economy. Catholic social doctrine, in its attempt had nothing to sell but their labor power, to have to limit the power of the national state with confidence in it without additional protection. its liberal-secular tendencies in general, and its The stubborn persistence of collectivism inside antagonism toward Roman Catholic "interna- the nation-state and the market indicated that tionalism" in particular, favored political rep- the Rousseauian program of atomistic republi- resentation on the basis of professional groups, canism was in need of amendment. sometimes with and sometimes without inde- If factions were unavoidable, and rooting pendent trade unions. It also insisted on the them out was either impossible or possible "natural" right of subnational, or prenational, only at the price of liberty or domestic peace, social groups to an autonomous conduct of their what status to assign to them in a modern affairs, mainly in defense of Catholic charities political order? In Germany and the coun- and schools against being absorbed in compul- tries where German intellectual influence was sory national social security and educational sys- strong, Hegel's Philosophy of Right (1983 [1820]), tems. In countries with a significant Catholic which described corporate associations - community, this issued in a constitutional 444 Wolfgang Streeck and Lane Kenworthy principle of "subsidiarity," under which the sensually adjusting production to the needs of state must refrain from activities that smaller so- society, end the extraction of surplus value, and cial entities can perform by themselves and in- as a result make organized repression by a bu- deed is obliged to help them independently to reaucratic state apparatus unnecessary. Left syn- govern their affairs. dicalist corporatism shared with the corporatism More radical corporatists proposed to resolve of the Right its collectivism and its rejection the social and economic crises of modernity by of the liberal state and the market economy, compulsory organization of society along the while it differed from it in its anticapitalism, lines of industrial sectors and producer groups, antinationalism, and antistatism, as well as in its which were to serve as the modern equivalents progressive culture and politics (Korsch, 1969 of the guilds and estates of the past. Joint organi- [1922]). zation of workers and employers as "producers" Why did both Left and Right versions of in "vertical" sectoral corporations was to put an a corporatist political order fail to become a end to class conflict and replace it with coopera- viable alternative to the modern nation-state? tion in production. Represented by hierarchical One reason was that a polity based on orga- organizational structures, the relations of coop- nized producer groups tended to be incompat- eration, competition, and exchange that made ible with the social and economic dynamism up the industrial economy were to be returned of a modern economy and society. As Max to political control. Mussolini in Italy, Franco in Weber (1964:221 ff.; 2002 [1918]) had already Spain, and Salazar in Portugal conceived of the pointed out, a Standestaat presupposes a static so- political organization of the corporatist state as cial structure that makes it possible to assign each reflecting the organic structure of society and its individual to one of a small number of broad economic organization, thus providing for supe- but still internally homogeneous social cate- rior governability in the national interest com- gories. The more dynamic a society becomes, pared to the conflict and disorder caused by the Weber argued, the more frequently individuals abstract formalism of parliamentary democracy have to be reassigned, new categories created and by the vagaries of free markets. Whereas tra- and others abolished, while the total number of ditional corporatists had called upon organized groups would be continuously rising with grow- groups to limit the power of the modern state, ing functional differentiation. A polity modeled the state corporatism of the twentieth century after the group structure of a modern society tried to use corporatist organization as an in- would therefore be ultimately unmanageable. strument of state rule. Similarly, economic corporatism, such as syn- Antiparliamentarism was not confined to the dicalism or any other form of "producer-based Right, and neither was the idea of a political and democracy," would be governed by producer economic order based on corporate associations conservatism resisting adjustment of production instead of individuals (Table 22.1). Syndical- to changing demand. Ultimately it must amount ism, anarcho-syndicalism, guild socialism and to a dictatorship of producers over consumers, similar movements, which survived in different acceptable only in a world of stable technol- strength in a number of countries until World ogy and static, traditionalist demand for a nar- War II, strove for a polity of self-governing "pro- row range of elementary products and services. ducer groups" that had neither place nor need Indeed in the real world, no corporatist or- for capitalists, state bureaucrats, parliaments, and der, whether rightist or leftist, ever survived for political parties. Workers councils - Rate in more than a few years. In the Soviet Union as German and Soviets in Russian - freely elected well as in the right-wing corporatist regimes of and easily recalled by their constituents, the "as- the interwar period, the councils and syndicates sociated producers," were to take the place of that were supposed to be the ultimate author- both the market and the state. Councils were to ity soon came under the control of a dictato- plan the economy democratically from below, rial state party sufficiently detached from the overcome the "anarchy of the market" by con- social structure to override static group interests Theories and Practices of Neocorporatism 445 in the name of economic progress or military eral parliamentary democracy and the market mobilization. What on the surface remained a economy reached its high point in a number of corporatist constitution soon became a facade European countries after World War II. In the for dictatorial state rule. 1970s, it came to be referred to as neocorpo- An alternative to liberalism on the one ratism or liberal corporatism. hand and syndicalism, the Stdndestaat, and state One of the first to provide a coherent ra- corporatism on the other were attempts to ac- tionale for a liberal corporatist political order commodate organized groups in liberal demo- was the French sociologist Emile Durkheim cratic polities and find some form of coex- (1858-1917). In the Preface to the 1902 second istence of territorially and functionally based edition of his Division of Labor in Society (1893) - political representation. In the United States in titled "Some Notes on Occupational Groups" - particular, but to differing degrees also in the Durkheim reminded the reader of the main other Anglo-American countries, this involved result of his investigation, namely that the pro- recognition of organized collectivities as inter- gressive functional differentiation of modern so- est groups, with constitutional rights to lobby ciety is a source of both disorder and order, of the democratically elected parliament. "Plural- anarchy and anomy as well as of social integra- ist" admission of organized interests was con- tion. Anomy, according to Durkheim, is caused ditional on acceptance by the latter of a strict by the rise of "industrial society" and the in- division between themselves and state author- creasing importance in social life of a highly dif- ity. To prevent organized interests from "captur- ferentiated economy, whereas integration may ing" the state, membership in them had to be result from mutual interdependence of actors strictly voluntary and their organizations prefer- specializing on different activities. For inter- ably small, specialized, internally homogeneous, dependence to result in cooperation, however, democratic, and in constant competition with mutual trust is required, which in turn pre- each other and with other organizations under- supposes reliable rules. These a liberal state taking to represent the same interests (Truman, cannot on its own provide: "Economic life, 1951) . because it is specialized and grows more special- In Continental Europe by comparison, Ro- ized every day, escapes (the state's) competence man Catholic and social democratic traditions and... action" (Durkheim, 1964 [1893]:5). merged to give rise to various forms of "sharing This is no longer so if "professional associations" public spaces" between states and organized so- organized to reflect the structure of economic cial groups (Crouch, 1993). Subnational com- relations are charged with elaborating the gen- munities that the rising nation-state had been eral rules made by the state to fit their special cir- unable or unwilling to break up were con- cumstances (Durkheim, 1964 [1893]:25). Cor- ceded semipublic authority to make binding ci- porate associations are also optimally suited to sions for and enter into commitments on behalf enforce professional codes of conduct, provide of their members, in exchange for coordinat- mutual assistance, regulate professional training, ing their core activities with the government. and so on. "A society," Durkheim concluded, Social groups that were allowed various forms "composed of an infinite number of unorga- of self-government in the public domain, typi- nized individuals, that a hypertrophied state is cally under de facto obligatory if not compul- forced to oppress and contain, constitutes a ver- sory membership, included churches, farmers, itable sociological monstrosity. .. A nation can unions, employers, small business, and the lib- be maintained only if, between the state and the eral professions. The resulting blurring of the individual, there is intercalated a whole series of boundary between the state and civil society in- secondary groups near enough to the individ- volved a delicate balance between individualism uals to attract them strongly in their sphere of and collectivism, individual rights and group action and, in this way, drag them into the gen- rights, and competition and cooperation. The eral torrent of social life . . . " (Durkheim, 1964 integration of organized groups into both lib- [1893]:28). Wolfgang Streeck and Lane Kenworthy

DEMOCRATIC STATE BUILDING, FREE under legal immunities, protection, and even COLLECTIVE BARGAINING, AND facilitation. As T. H. Marshall (1964) pointed NEOCORPORATISM AFTER 1945 out, collective industrial agreements could be regarded by governments as economic contracts The "postwar settlement" in the European negotiated in the market, and thus as an outflow countries under American influence after 1945 of civil rights rather than as coercion by illegit- was a successful attempt to reconcile a capi- imate political force. Whereas private compul- talist economy with mass democracy and pre- sion would have challenged the territorial state's vent a return of the political and social divi- monopoly of force, private contracts were in a sions that had destabilized Europe in the inter- liberal order properly left to themselves. war period. Central to it was the neocorporatist Free collective bargaining became widely es- inclusion of worker collectivism in the liber- tablished immediately after World War I, only alized political economies of the reconstructed to be eliminated again in the 1920S and 1930S in European nation-states. Like in World War I, many countries in the name of national unity, labor inclusion was prefigured by wartime poli- individual liberty, free competition, economic cies of national unity. It was also a consequence planning, or all of the above. Its worldwide of the leading role of the Left in antifascist re- return after 1945 was part of the complex po- sistance movements, the collaboration of tradi- litical compromise that was the postwar settle- tional elites with right-wing governments or the ment. Using different legal instruments, demo- German occupation, and the presence of a com- cratic states exempted unions from conspiracy munist alternative to capitalism in Eastern Eu- and anticartel laws and accepted national col- rope. Where the institutionalization of national lective wage bargaining as a major element of systems of industrial relations involved the ex- the machinery of public economic policy. In tension of collective rights to organized labor return, unions in the tradition of social demo- at the level of the national polity, it followed cratic reformism recognized private property, the model of other nonmajoritarian constitu- free markets and the primacy of parliamentary tional provisions in countries whose cohesion democracy, limiting themselves to the direct depended on protection of ethnic or religious pursuit of economic goals through collective groups from being overruled by natural ma- bargaining and to the indirect pursuit of political jorities ("consociational democracies"; Lehm- goals through lobbying the parliament and sup- bruch, 1974; Lijphart, 1984; Rokkan, 1966). porting sympathetic political parties. Whereas The incorporation oflabor in postwar demo- government refrained from direct intervention cratic capitalism as a separately organized in wage setting - let alone enforcing free price group - unlike the vertical corporations of state formation in the labor market - unions gave corporatism that also included capitalists - had up previous ambitions to put themselves in the developed out of the institution of "free collec- place of the government or the state, in ex- tive bargaining." Rooted in nineteenth-century change for being recognized as legitimate co- Britain, free collective bargaining emerged governors of the emerging postwar democratic where states recognized their inability to sup- welfare state. The successful integration of the press the collective action and organization of trade union movement in the liberal political workers, short of civil war with uncertain event. order was indicated by its gradual abandonment Where trade unions, like British craft unions in of the political strike and its more or less explicit the mid-eighteenth century, were prepared to concession to use the strike only for economic pursue their interests primarily in the economic purposes. sphere, governments were happy to abstain from Although the legal and political forms in direct intervention in a class conflict they found which free collective bargaining became insti- difficult if not impossible to pacify. Instead tutionalized differed between countries, from they let unions and employers set the terms of the perspective of the state the new group employment between themselves, increasingly rights were granted on condition that they were Theories and Practices of Neocorporatism 447 responsibly exercised. Unions, for their part, with the abortive general strike of 1949 and insisted that their autonomy in representing the firm establishment of enterprise unionism their members was not derived from the state, in the 1950S, Japanese trade unionism had be- but reflected rights that preceded the modern come effectively eliminated as a national po- state and its constitution. Even for more re- litical force. Second, inclusion of labor at the formist unions, conceiving of free collective enterprise level only, although it is inclusion in bargaining as a conditional privilege granted "corporations" and may also give rise to exten- by the state was no more than legal fiction. In sive labor-management cooperation, is not cor- their view, collective bargaining ultimately re- poratism as it is not based on associations capable sulted, not from the state, but from the capacity of suspending market competition. It is there- of workers collectively to withdraw their labor fore better referred to as enterprise paternalism and bring the economy to a halt. Generally in (Streeck, 200 I). neocorporatist arrangements, whether collec- In Western postwar democracies, unions that tive rights are original or delegated by the state used their autonomy responsibly became recog- often was deliberately left open to avoid conflict. nized, in practice if not in law, as performing a What exactly the status of unions was in the public function that the liberal democratic state postwar settlement - part of the state, or "state found difficult to perform: the creation of so- in the state" - was not just a legal subtlety. In cial order and the provision of social peace at most European countries, responsible behavior the workplace. With time, what had originally of unions in collective bargaining could not ef- been a struggle for power between workers as- fectively be enforced on them by hierarchical sociations and the modern state could thus be means. As states had to respect free collective redefined, in a Durkheimian way, as a matter of bargaining - for constitutional reasons, for rea- an efficient allocation of functions between pri- sons of political expediency, or both - union re- vate and public organizations together govern- sponsiveness to the needs of national economic ing the public domain. To compensate unions policy became a matter, not of authority, but for wage and political moderation, states granted of political exchange (Pizzorno, 1978), in which them legal privileges and institutional guaran- government paid for union cooperation with a tees, again to different degrees and in different wide range of political side payments. The sta- ways in different countries. Unions were also bility of the postwar political economy thus de- invited to share in a wide range of economic pended on a precarious give-and-take between policies in tripartite arrangements that included government, business, and the organized eco- them together with employers and the govern- nomic interests of the working class, in which ment, making trade unionism part of the public social and political integration were purchased policy machinery and of the implicit constitu- by the provision of material benefits rather than tion of postwar democracy. In this way, the orga- enforced by coercive state authority. nized collectivism of the working class became Postwar democratic corporatism involved the integrated in liberal democracy and the mar- inclusion of organized labor not only at the ket economy, conditional on its political and workplace, but also in national politics. Also, economic moderation as well as on the abil- the "corporations" on which neocorporatism ity of the reconstituted nation-state to provide is based are not large firms - as the concept for material prosperity and organizational sup- might suggest especially to speakers of Ameri- port. can English - but intermediary associations of groups of individuals or firms in similar posi- tions and, as a consequence, potentially com- NEOCORPORATISM: ORGANIZATIONAL peting with one another. Reference to the STRUCTURE AND POLITICAL FUNCTIONS Japanese case as one of" corporatism without labor" (Pempel and Tsunakawa, 1979) is there- In the 1970s, political science and sociology dis- fore to be qualified in two respects at least. First, covered neocorporatism as a European anomaly Wolfgang Streeck and Lane Kenworthy from the perspective of what had in the mean- state authority and the voluntary organization time become a predominantly American, plu- of civil society, corporatist theory and practice ralist theory of interest politics. Authoritarian blur the boundary between state and society state corporatism of the Portuguese and Spanish as the state shares authority with private sort, and various Latin American dictatorships interest associations, using the latter as agents modeled after it, were still around. They of public policy by coordinating their behavior provided the backdrop for the observation that or delegating public functions and decisions in many, now perfectly democratic, European to them. In a corporatist context, private countries, interest groups were organized and interest representation thus shades into public behaved in ways reminiscent of corporatist sys- governance. In the pluralist view, organized tems. Research on interest-group corporatism interests are relegated to the input side of the in liberal democratic polities centered on two political process, where they may have a right subjects in particular: on the organizational to be heard before decisions are made. Under structure of interest groups and on the way corporatism, by comparison, social interests these were made to act in line with more participate not only in the making of binding general, public interests. A central topic became decisions but also in their implementation. As the relationship between, on the one hand, the corporatist associations assume responsibility organization of group interests in established for the compliance of their members with intermediary associations (the structuralaspect of public policies, they help the state overcome neocorporatism) and, on the other, the political inherent limits of legal regulation and direct coordination between interest associations and intervention. the state (the functional aspect; Lehmbruch and The pluralism-corporatism distinction may Schmitter, 1982). be read either as one between two types of gov- As a system of interest organization, demo- ernment or between the ideal world of liberal cratic neocorporatism has been conveniently theory and the real world. It is often taken to sig- described in relation to interest-group pluralism, nify the extreme ends of a continuum on which sometimes as its polar, ideal-typical opposite and extant regimes of interest politics in liberal sometimes as a variant of it (Hicks and Esping- democracies can be located. Whereas originally Andersen, this volume). In structural terms, there was a tendency to classify entire societies, pluralist theory most commonly conceives of or polities, in terms of their being more or less interest politics as free competition among a corporatist, later on the discussion became more variety of organizations in a market for political subtle and allowed for different sectors in a soci- representation, whereas in corporatist systems ety to be differently corporatist in their organi- selected organizations enjoy a representational zation and policy making ("macro" vs. "meso" monopoly. Organizational autonomy under corporatism; Cawson, 1985). The same applied pluralism contrasts with direct or indirect state at the regional level where corporatist gover- intervention in the internal affairs and the struc- nance arrangements and practices were claimed tural makeup of interest organizations under to have emerged without the support of the corporatism, favoring members over leaders or national state. Moreover, in addition to the co- leaders over members depending on who is ex- existence of different types of state-society re- pected to be more reasonable from the perspec- lations in a given country, it was realized that tive of state policy. even interest groups that were organized in a With respect to function, under pluralism corporatist fashion sometimes relied on pluralist organized interests are tamed by competition pressure tactics in pursuit of their objectives, or and the primacy of public legislation, whereas used pluralist and corporatist strategies simulta- corporatism depends on political incentives and neously. Vice versa, interest groups were found sanctions to make interest groups cooperate with to behave responsibly and cooperate with state public purposes. Unlike the sharp division in policies even in the absence of corporatist or- liberal democratic theory between hierarchical ganizational structures. Over time, research also Theories and Practices of N eocorporatism 449 began to extend to organized groups represent- themselves with collective goods, or where - ing less vested interests than unions and business like at the regional level - hierarchical state au- associations, such as charities and social move- thority is not present. Generally, whereas con- ments concerned with issues like the environ- certation regulates the relationship - the terms ment. These, too, were studied in terms of the of exchange - between economic groups differ- more or less pluralist or corporatist character of ently located in the economic division oflabor, their structures and relations with the state. self-government involves cooperation between As to the functional aspects of corporatist competitors in pursuit of common objectives, arrangements, it is helpful to distinguish be- sometimes on the basis of explicit bipartite tween concertation and self-government. Concer- agreements with the state. Whereas concerta- tation refers to efforts by national governments tion serves to contain distributional conflict, to make unions and employers exercise their self-government mobilizes the economic ben- right to free collective bargaining in such a way efits of cooperation. that it is not at odds with national economic Unlike pluralism, democratic corporatism objectives; it turns collective bargaining and lacks a coherent normative justification. The its agents into instruments of macroeconomic memories of antidemocratic, authoritarian state management coordinated between the state and corporatism linger on and make corporatist organized social groups that command indepen- ideas suspect. Catholic advocacy of the sub- dent political capacities. The principal example sidiarity principle carries with it a traditional is tripartite incomes policies, first under Keyne- communitarianism that conflicts with the mod- sianism and, in the 1990S, in national employ- ernist and statist tradition of social democracy. ment pacts. Concertation achieves moderation Leftist support for collective bargaining, in turn, of wage demands through extended or "gen- is often accompanied by fears of loss of union eralized" political exchange, offering unions in autonomy due to incorporation in government particular a variety of material or institutional economic policy, and by rejection of "class col- concessions to make them behave "in concert" laboration." Social democratic hopes for state with government policies. intervention to bring about greater equality also Self-government, by comparison, involves stand in the way of unambiguous support for diverse forms of collective participation of or- corporatism. Liberals eschew corporatism for its ganized groups in public policy at the national anticompetitive, monopolistic institutions and or subnationallevel. It may result from accom- its inherent collectivism. Conservatives, often modation by the state of powerful group in- together with the republican Left, fear for the terests or from technically expedient devolu- unity and integrity of the state. Whereas the for- tion of state functions to organized civil society. mer associate corporatism with a "trade union It may also result from social groups cooper- state," the latter are afraid of state capture by atively producing collective goods for them- special sectoral or business interests using priv- selves that state and market fail to provide, or ileged institutional positions to block majority from any mixture of the above. Collective self- decisions. Democratic theory warns of a "cartel government, with varying degrees of state fa- of elites" rendering the parliament power- cilitation and legal formalization, may relieve less, while economic theory deplores the rent- the state from demands for regulation or ser- seeking and the allocative inefficiency allegedly vices that it would find difficult to satisfY, but caused by suspension of competitive markets. it also may amount to particularistic capture of Fears of a totalitarian state takeover of civil soci- public authority. It can therefore be analyzed ety exist alongside fears of the conflicts inherent from both a power and a problem-solving per- in the latter tearing apart the state or making it spective. Self-government is often found in the subservient to democratically illegitimate spe- cooperative - "third" - sector of the economy cial interests. where groups operating between the hierarchy In the following subsections we first discuss of the state and commercial markets provide neocorporatist organization, that is, the structural 450 Wolfgang Streeck and Lane Kenworthy dimension of corporatism. Following this we bution. This enables associations to enter into turn to the functional aspects of neocorporatism, stable relations of "generalized political ex- addressing concertation and self-government in change," where present concessions may be turn. traded for as yet undetermined and legally not enforceable future rewards. It is these and similar processes of interest definition and adjustment Structure: Organization that distinguish corporatist interest intermediation from pluralist interest representation and indicate Regarding structure, neocorporatist interest or- the transformation of a pluralist interest group ganization differs from its pluralist counterpart into an intermediary organization. in that collective interests are organized in few The rise of interest intermediation may in rather than many organizations, which are broad part be attributed to internalfactors, such as the instead of narrow in their domain and central- interests of professional staff in safe jobs, ca- ized and broadly based instead of specialized and reer advancement, and acceptance by a larger fragmented (Schmitter, 1974). Interest differ- professional community. This mechanism fig- ences between constituent groups are as much ures prominently already in the writings of Max as possible internalized in encompassing orga- Weber (1964:841ff.) and Robert Michels (1989 nizations, and the management of interest di- [19II 1r92 5]). Staff interests represent the eco- versity becomes in large part a matter of the nomics of organization, such as the need to internal politics of associations instead of the protect past investment in collective action public political process. Charging associational capacities by regularizing the existence of the leaders with the aggregation and transformation organization. In addition, the literature on neo- of diverse special interests into more broadly de- corporatism also points to external factors con- fined common, adjusted interests, corporatist or- tributing to what Schmitter and Streeck (1999 ganization allows them considerable discretion [I982]) call organizational development, in par- in selecting which interests to represent and act ticular incentives held out and supports pro- upon as those of their members. Corporatist as- vided by the state and other interlocutors. The sociations can therefore be seen as active pro- reason why the latter might favor corporatist ducers instead of mere purveyors of collective intermediation over pluralist representation is interests. the political moderation they can expect to come Corporatist organizational form affects the with large size, encompassingness, professional- substance of collective interests in a variety of ization, organizational continuity, and central- ways. The higher discretion enjoyed by the lead- ization. Large and stable organizations not only ers of encompassing associations enables them develop powerful interests in their own sur- to observe technical considerations in addition vival that militate against political adventures, to political ones. Technical perspectives are in- but they can also negotiate on a broader range jected in the internal deliberations of associa- of issues, which increases the variety of possi- tions, especially by professional experts based in ble package deals. Moreover, as Mancur Olson staff departments that smaller organizations can- (1982) has explained, encompassing organiza- not afford. Experts are crucial in defining col- tions internalize not only a diversity of special lective goals more instrumentally, making them interests but also much of the damage they do if more acceptable to the organization's interlocu- they stray too far from the general interest. tors (more "moderate") and thus more likely There are several inducements and supports to be accomplished (more "realistic"). Leader- the state and other actors can offer interest ship autonomy also makes it possible for cor- groups to persuade them to assume corpo- poratist associations to take a long-term view ratist organizational forms. To help overcome of collective goals and postpone the gratifi- pluralist fragmentation, interlocutors may talk cation of demands, for example, in the hope only to organizations that exceed a certain size of expanding the resources available for distri- or qualifY as majority representative of their Theories and Practices of N eocorporatism 451 constituency. Privileged access strengthens the interest organization and its constituents is shaped position of the leadership in relation to the by the interest perceptions and demands of the members, as these cannot hope to be effec- latter, by the willingness of the members to tively represented if they join a competing orga- comply with decisions made on their behalf, nization. Elimination of competition may also by the means available to the organization for contribute to political moderation as it relieves controlling its members, and by the collective leaders of the need to outbid each other in benefits and outside inducements the organiza- militant demands potentially more appealing to tion has to offer. Together these constitute an the membership than moderate policies. Inter- organization's logic if membership. The interac- locutors furthermore may provide associations tion between an interest organization and its in- with material support, to enable them to build terlocutors is governed by the demands the orga- a strong bureaucracy and offer their members nization makes on the latter, the support it has "outside inducements" (Olson, 1971) - services to offer to them, the compromises it is willing that unlike their political achievements they and able to negotiate, and the extent to which can withhold from nonmembers to increase the it can "deliver" its constituents - as well as by appeal of membership. the constraints and opportunities inherent in the External support for organizational develop- relevant political institutions, especially for the ment and political moderation may include tacit establishment oflasting relations of political ex- or open assistance in recruiting or retaining change, the concessions offered to the organi- members, which can take a variety of forms zation, and the degree to which the organiza- from moral suasion to compulsory membership tion is granted privileged access and status. This (like in Chambers of Commerce and Indus- interaction reflects the organization's logic if in- try in some Continental European countries). fluence. Assistance with recruitment helps associations As the demands made on intermediary or- deal with the "free rider" problems that increase ganizations by their members and interlocutors as their policies become more compatible with may be contradictory, their leaders typically general, public policies. Here in particular neo- confront difficult choices. Interest representa- corporatist interest organization becomes rem- tion in a pluralist mode is controlled by the iniscent of traditional corporatism, also because logic of membership and emphasizes the au- organizational assistance may be accompanied thentic representation of members' interest per- by - more or less subtle - intervention in an ceptions and articulated demands. Political in- association's internal process, in the name of as- fluence, however, often depends on a capacity to sociational democracy or political moderation. moderate and compromise member demands, Unlike state corporatism, however, intermedi- and so may a stable supply of organizational re- ary organizations in liberal democracies remain sources. However, if interest associations adapt ultimately tree to refuse cooperation with the to the logic of influence, they are drawn away government, regardless of the extent to which from their members and into their target en- the state may help them with their organiza- vironment, in the process assuming corporatist tional problems. traits. For example, whereas the logic of mem- In a simplified model, the organizational dy- bership speaks for the formation of homoge- namics of intermediary organizations derives neous and, by implication, small ("pluralist") from their simultaneous involvement in two organizations, the logic of influence tends to environments, the social group from which place a premium on interest organizations being they draw their members (membership environ- broadly based and representing more general in- ment) and the collective actors in relation to stead of higWy special interests. To build lasting which they represent these (influenceenvironment; relations of political exchange with their inter- Figure 22.1). The two environments are gov- locutors and thereby enhance their own stability erned by different "logics" (Schmitter and and security, interest organizations may have to Streeck, 1999 [1982)). Interaction between an acquire organizational characteristics that make 452 Wolfgang Streeck and Lane Kenworthy

Influence Environment

Political demands Constrainls and Political and technical opportunities for support political exchange; Moderation Substantive concessions Logic of Influence

Member discipline Organizational privileges

Intermediary Organization

Compliance Private Governance Logic of Membership

Articulated interest Collective benefits. perceptions and outside inducements member demands

Membership Environment

Figure 22. I. The Logics of Membership and Influence.

it more difficult for them to procure legitimacy be seen as arbitrage between markets for mem- for themselves under the logic of membership. bership and influence. Pluralist interest repre- In fact, intermediary organizations that become sentation transforms the interest perceptions of too distant from their members and too closely its clients into political demands and extracts involved in the logic of influence may turn into concessions from its interlocutors to provide extended arms of the government (i.e., into its constituents with collective benefits (Figure quasi-governmental agencies) or become repre- 22. r). Neocorporatist interest intermediation in sentatives of interests opposed to those of their addition exchanges member discipline for orga- constituents ("yellow unions"). nizational privileges under the logic of influ- Striking a balance between member-res- ence, and private governance for member com- ponsive but weakly organized, fragmented, and pliance under the logic of membership. In this competitive pluralism on the one hand and cor- it uses the compliance of its members as a re- poratist institutionalization in their target en- source in its dealings with its interlocutors, just vironment on the other is the central political as it relies on its organizational privileges in and organizational problem of neocorporatist turning its constituents into members, trying interest intermediation. Successful intermedia- to keep an equal distance between the differ- tion requires stable relations of exchange with ent dictates of the logics of membership and environments subject to different and sometimes influence by drawing on one to stay clear of the contradictory logics of action; in a sense it may other.

i.._ Theories and Practices of N eocorporatism 453

Function: Concertation to specify the conditions under which tripartite deals were achieved, such as the political com- The literature on national neocorporatist "con- plexion of the national government, the degree certation" reached a first peak in the late 1970S of independence of the central bank, or the size and early 1980s. It focused on the management of the country. Much attention was paid to the of national economies after the wave of worker organizational structure of unions and employer militancy in the late 1960s and the oil shocks of associations, especially whether they conformed 1973 and 1979 (Cameron, 1984; Crouch, 1985; to a corporatist pattern or not and whether con- Katzenstein, 1985; Lange and Garrett, 1985; certation and cooperation between the state and Pizzorno, 1979; Scharpf, 1987; Schmidt, 1982). organized groups was possible also with a more The issue was what government and employ- fragmented and pluralist structure of industrial ers could do to make unions that had become relations. stronger than ever moderate their wage demands For a while, neocorporatist concertation in the context of a negotiated incomes policy, seemed a generally applicable recipe for the joint where statutory incomes policies were impossi- management of a Keynesian political economy ble for constitutional, technical, or political rea- by a democratic state and independently orga- sons. Tripartite national policies agreed between nized social interests. It soon turned out, how- government, employers, and unions were to ever, that concertation was difficult to trans- safeguard macroeconomic objectives such as low port to countries like the United Kingdom with inflation, low unemployment, a stable exchange traditionally fragmented and adversarial inter- rate, and high growth while respecting the right est groups. Moreover, the concessions that had of unions and employers to free collective bar- to be made to unions became more expensive gaining. Neocorporatist concertation efforts re- with time and more often than not only moved flected a Keynesian political economy in which inflation forward into the future or caused an full employment was a responsibility of the gov- accumulation of public debt. Not least, unions ernment that it had to live up to if it wanted frequently failed to deliver on their promises of to survive politically, and for which it had in wage moderation as they came under pressure principle the necessary tools available in the from their members. In other cases, cooperative form of fiscal and monetary intervention. Po- unions suffered a loss of confidence on the part litically guaranteed full employment, however, of their constituents, which ultimately forced increased union bargaining power and thereby them to withdraw from concertation. gave rise to inflation, unless unions could be In the early 1980s, the neoconservative gov- persuaded not to use their bargaining power to ernments of the United States and Great Britain the fullest. proved that labor-exclusive monetarist methods The neocorporatist literature of the time of bringing down inflation were not only effec- identified a variety of concessions govern- tive but also politically sustainable, even though ments and employers offered to unions in they involved high rates of unemployment. As tripartite package deals, including tax relief inflation rates in OECD countries declined and for low-income earners, more progressive in- converged at a historic low, research on corpo- come taxes, improved pension benefits, ac- ratism shifted from incomes policy and demand tive labor market policies, increased educational management to collective infrastructures, like spending, growth-promoting infrastructural in- support for vocational training and technologi- vestment, expanded rights to workplace rep- cal innovation, that both free markets and state resentation, and organizational security. Com- hierarchies seemed to have difficulty providing parative research explored whether countries on their own. Again the question was whether that succeeded in negotiating tripartite national corporatist organization of social groups and co- agreements performed better economically than operation between them and the state resulted liberal or pluralist countries with more adversar- in better economic performance than a plural- ial institutions and practices. Research also tried ist separation of state and society that left the 454 Wolfgang Streeck and Lane Kenworthy economy to the free play of market forces. Al- political planning - the end of the "planning though requisite organizational forms remained euphoria" of the 1960s and 1970S - that debates an issue, most of the research on "supply-side began to revolve around a need for Staatsentlas- corporatism" looked at subnational regional, tung, or relief of the state from an overgrown sectoral, or workplace-level institutions pro- policy agenda (Scharpf, 1992). moting cooperation between state and society Perceptions of state failure coincided with a or between competitors, rather than the national tendency in Western societies at the time toward arrangements and macroeconomic policies that privatization of state activities and deregulation had been at the center of early research on cor- of markets. The latter was based on an emerg- poratism (Streeck, 1984, 1992). ing presumption that a free play of market forces Research on national incomes policies re- was better suited to resolve complex issues of vived in the 1990S in the context of efforts of allocation and production than state interven- European governments to bring down persis- tion. There were also, however, attempts to de- tent unemployment and meet the strict crite- velop an alternative response to the deficiencies ria for accession to European Monetary Union of state intervention, one that avoided the risk (Pochet and Fajertag, 2000). National employ- of market failure succeeding state failure. In this ment and stability pacts were proposed and ne- context, a variety of forms of collective par- gotiated that aimed at bringing union wage- ticipation in policy making were rediscovered setting behavior in line with the imperatives that extended far beyond collective bargaining of a monetarist macroeconomic policy and the and the concertation of incomes policies. Some need, resulting not least from the neocorpo- involved an explicit delegation of governance ratist bargaining of the 1970s, to consolidate functions to parapublic institutions and agencies public budgets (Ebbinghaus and Hassel, 2000). offering opportunities for participation to af- Pacts also involved sometimes far-reaching re- fected social groups. Others licensed organized forms of social security (Baccaro, 2002). Union groups to regulate matters of common interest cooperation with governments seemed to de- themselves and free from state interference. pend on a variety of factors. Unlike in the Like incomes policy, the incorporation of 1970s, however, governments of the Left were interest groups in public policy making may not significantly more successful than conserva- be explained in terms of both power politics tive governments in negotiating national pacts. and functional expediency. From the former Moreover, whether the organizational structure perspective, institutions of self-government are of national unions was corporatist or not seemed a concession of the state to the independent to be largely irrelevant (Regini, 2000). power of social groups and are therefore liable to turn into private bridgeheads in the public sphere. From a functional or policy perspective, Function: Self-Government self-government increases a society's problem- solving capacity as it makes for a better interface Much of the political science literature of the and more efficient cooperation between state 1980s was concerned with the limits of state in- and civil society - in a Durkheimian sense draw- tervention and of the problem-solving capacity ing on subgroup solidarity as a public resource of governments. Whereas traditionally attention and mobilizing the productivity advantages of had focused on the input side of political sys- cooperation between competitors. Rather than tems, it now shifted to the technical difficulties imposing its policies on society from above or facing legislators and state bureaucracies on the turning them over to the market, a state in a output side: for example, in fine-tuning policies neocorporatist system governs in part through to meet increasingly differentiated needs and in negotiations with and devolution to organized ensuring that programs were correctly imple- social groups, using them for public policy func- mented. In Europe it was in the context of rising tions they are better able to perform than a pub- disillusion with social democratic pretensions at lic bureaucracy. Theories and Practices of N eocorporatism 455

Taking off from the literature on concerta- ations achieve institutionalization in the public tion, the writings in the 1980s on neocorpo- sphere and gain in status and security. They and ratist devolution of governance to organized their members may also prefer self-regulation civil society emphasized the potential contri- over potentially heavy-handed state interven- bution of interest associations to social order tion. Groups may furthermore be afraid of in- (Streeck and Schmitter, 1985). Especially in competence on the part of state bureaucracies, European countries with corporatist or Catholic making it unpredictably more costly to be po- traditions, interest associations were observed to liced by them than by themselves. Governments, share in public responsibility in policy sectors for their part, must be able to identifY situations such as product standardization, quality control when the organized private interest of a social and certification, vocational training, environ- group can be made compatible with the pub- mental regulation, research and development, lic interest of society. They also must have at and welfare provision. Here, group interests their disposal organizational incentives and ma- as defined and acted upon by firmly institu- terial compensations by which to move group tionalized associations seemed to be compatible interests close enough to the public interest for with general, public interests, so that associa- the independent pursuit of the former to con- tions could be given both autonomy and au- tribute to the latter. In particular, states must thority. Arrangements of this sort were often find ways to prevent a decay of self-government bilateral, involving the state and a particular or- through "agency capture" by rent-seeking in- ganized group; they involved groups with ideal terest groups and to ensure that the power of interests, such as churches or new social move- organized interests can for the practical purposes ments, no less than economic interests like those of public policy be treated as devolved and del- of farmers or of firms in particular sectors; and egated public power, even if it is in fact not they tended to be concerned with market regu- derived from the state. Domesticating group in- lation or the supply of services or infrastructural terests in this way requires, among other things, facilities, rather than with the management of reserve state capacity enabling the government demand. credibly to threaten direct intervention in case Group self-government through associa- self-government fails to meet its public respon- tions - the "public use of private organized sibilities. interests" (Streeck and Schmitter, 1985) - en- Moving beyond narrower concepts of pri- riches the repertoire of the state and expands the vate interest government through associations, toolkit of governance. Public recognition and the mainly American literature on "associative organizational support are to transform pluralist democracy" explores decentralization of deci- interest groups into disciplined "private inter- sion making to local actors and facilitation of est governments," both inducing and enabling cooperation between them as an alternative them to define the interests of their members to centralized state intervention (Cohen and with a view to their compatibility with the pub- Rogers, 1995; Cohen and Sabel, 1997). With lic interest. By enlisting the support of associ- corporatist theory, this literature shares an em- ational self-interest, the state mobilizes expert phasis on self-organization below and within the information that it would be unable to build state performing functions of rule making and and maintain itself. As association members usu- collective goods production that liberal states ally have more confidence in their representa- cannot satisfactorily perform. Informed mainly tives than in state bureaucrats, private interest by research on regional economies drawing on government also tends to have fewer problems informal social capital for better economic per- of legitimacy and greater powers of persuasion formance (Trigilia, 1990), theories of associative than direct state regulation. democracy attribute less significance than the Self-governance also benefits the involved corporatist literature to formal organizational associations. By assuming responsibility for reg- structures. Instead they rely mostly on the cul- ulating the behavior of their members, associ- tivation of informal social relations between a Wolfgang Streeck and Lane Kenworthy

variety oflocal actors united in a search for com- have an adverse short-term effect on employ- parative advantage in competition with other ment or inflation-adjusted wages, which are the regional economies. principal concerns of union negotiators. For in- stance, if a firm raises prices, this is likely to have little impact on the living standard of its workers. THE ECONOMIC EFFECTS OF CORPORATISM Even if the firm chooses to reduce employment, those laid off should be able to find work else- A substantial part of the empirical research on where as long as wage increases and layoffs are neocorporatism since the late I970S has con- not generalized throughout the economy. Thus, sisted of quantitative comparative analysis of where bargaining is decentralized and uncoordi- corporatism's economic impact. Numerous at- nated, there is an incentive for unions to pursue tempts have been made to score the eighteen or a strategy of wage militancy. so most affluent OECD countries on a corpo- By contrast, if wage negotiations cover a large ratism scale (for detailed discussion see Kenwor- share of the workforce, union bargainers can thy, 2001; Kenworthy and Kittel, 2002). Early be reasonably sure that a large wage increase measures focused on interest group structure, of will have an adverse impact on their mem- which there are three chief dimensions: repre- bers. When firms representing a sizable share of sentational coverage (e.g., union density), or- the economy raise prices, the resulting inflation ganizational centralization, and organizational offsets or nullifies the wage gains of most concentration. Since roughly the mid-I980s, workers. Similarly, if layoffs are economy- measures of concertation have played a more wide, employment opportunities will diminish. prominent role. These have focused primarily Centralized or coordinated wage setting thus on the degree of centralization or coordination generates an incentive for wage moderation, as of wage setting. Fewer attempts have been made interest groups are forced by their size and struc- to measure interest-group participation in pub- ture to internalize the negative impact of aggres- lic policy in general - that is, apart from wage sive bargaining. setting. Many researchers have created compos- Many researchers have assumed a linear rela- ite corporatism measures that combine infor- tionship between wage-setting centralization or mation about various aspects of interest-group coordination and wage restraint. However, some structure and/or concertation. have proposed that the effect is hump-shaped, Research on the economic effects of corpo- with high and low levels of centralization best ratism has focused chiefly on macroeconomic at generating labor cost restraint (Calmfors and performance, especially unemployment and in- Driffill, 1988). Others contend that corporatist flation. Most heavily studied has been the im- wage setting yields superior performance out- pact of centralized or coordinated wage setting. comes only in combination with particular types Three causal mechanisms have been hypothe- or levels of central bank independence (Hall and sized. Franzese, 1998), leftist government (Lange and First, centralized or coordinated wage set- Garrett, 1985), unionization (Kittel, 1999), or ting may yield low unemployment or inflation public sector unionization (Garrett and Way, by engendering wage restraint. The general logic 1999). Still others hypothesize that the effect is simple, although specific applications can be is both hump-shaped and interactive with cen- complex (Franzese, 1999; OECD, 1997). If em- tral bank independence or the monetary regime ployees bargain aggressively for high wage in- (Cukierman and Lippi, 1999; Iversen, 1999). creases, employers can do five main things in One glaring weakness of research in this area response: raise productivity, raise prices, reduce is the limited empirical investigation of the as- profits paid out to investors, reduce investment, sumed causal mechanism. Only a handful of and/ or reduce the number of employees. When studies have actually examined the relationship wages are bargained separately for individual between wage setting and labor cost devel- firms, none of these responses will necessarily opments (Bruno and Sachs, 1985; Kenworthy, Theories and Practices of N eocorporatism 457

1996, 2002; Layard et al., 1991; OECD, 1997; an association between corporatist wage set- Traxler et aI., 2001; Traxler and Kittel, 2000). ting and low unemployment or inflation in the Most have looked only at the statistical correla- 1970S and 1980s (Bruno and Sachs, 1985; Calm- tion between wage setting and macroeconomic fors and Driffill, 1988; Cameron, 1984; Garrett, performance and have simply presumed that the 1998; Hall and Franzese, 1998; Hicks and Ken- link between wage setting and labor cost re- worthy, 1998; Iversen, 1999; Janoski, McGill, straint, and also between labor cost restraint and and Tinsley, 1997; Kenworthy, 1996, 2002; La- performance outcomes, is as hypothesized. yard, Nickell, and Jackman, 1991; Scharpf, 1991 A second potential link between corporatist [1987]; Soskice, 1990; Traxler et aI., 2001). In wage setting and unemployment is economic the 1990S, however, inflation rates converged growth. One of the outcomes of centralized or across affluent OECD nations, and restrictive coordinated wage determination, achieved ei- monetary policy coupled with growing em- ther informally or explicitly in corporatist pacts, ployer leverage led to substantial wage restraint may be greater investment, which in turn tends in traditionally noncentralized and uncoordi- to spur more rapid growth of economic out- nated countries such as Canada, France, the put (Lange and Garrett, 1985). Faster growth, United Kingdom, and the United States. Con- in turn, increases employment. sequently, at least one recent study finds no A third hypothesized link is government policy. effect of corporatist wage arrangements on un- Policy orientations are seen as a key determinant employment in the 1990S (Kenworthy, 2002). of cross-country differences in unemployment. Empirical analyses of the macroeconomic im- Policy makers in countries with centralized or pact of interest-group participation in policy coordinated wage setting are likely to feel more making have been considerably less common, confident than their counterparts in countries but findings have tended to be favorable, even with fragmented bargaining that labor cost in- into the 1990S (Compston, 1997; Kenworthy, creases will be moderate. Thus, they should tend 2002; Traxler et aI., 2001). to worry less about wage-push inflation. This The bulk of research on the effects of cor- may increase their willingness to adopt an ex- poratism has dealt with macroeconomic perfor- pansive monetary or fiscal policy, an active labor mance, but a number of studies suggest that its market policy, or other policies that reduce un- impact may be no less important, and perhaps employment. By contrast, policy makers in na- more so, for the distribution and redistribution tions with less coordinated wage arrangements of income. Unions tend to prefer smaller pay dif- may feel compelled to resort to higher levels ferentials, and centralized or coordinated wage of unemployment in order to keep inflation setting increases unions' leverage over the wage in check (Hall and Franzese, 1998; Kenworthy, structure. Because differentials are more trans- 1996; Soskice, 1990). parent if wages are set simultaneously and collec- Although much of the research on the im- tively for a large share of the workforce, central- pact of corporatism on economic performance ization may reinforce union preferences for low centers on wage setting, some studies have em- pay differentials. Furthermore, low pay inequal- phasized union participation in economic pol- ity may be one of the things unions ask from icy making. Unions desire low unemployment. employers in exchange for pay restraint. Empir- The more input unions have in economic pol- ical findings have tended to yield strong support icy decisions, the more likely it would seem that for the hypothesis that corporatist wage setting government policies will give priority to fight- is associated with lower pay inequality (Alder- ing unemployment (Compston, 1997). To the son and Nielsen, 2002; Iversen, 1999; OECD, extent that the respective policies are effective, 1997; Rowthorn, 1992; Rueda and Pontusson, the result should be lower rates of joblessness. 2000; Wallerstein, 1999). Although there are some dissenting findings There also is reason to expect a link be- (OECD, 1997; Smith, 1992; Therborn, 1987; tween corporatism and the redistributive ef- Western, 2001), most studies have discovered forts of government. Unions may demand more Wolfgang Streeck and Lane Kenworthy generous redistributive programs in exchange women or immigrants, who are not well rep- for wage moderation, and regularized partici- resented within traditional corporatist arrange- pation by unions in the policy-making process ments. may heighten their influence. Here, too, there The nation-state, once the opponent and is empirical support in the literature (Hicks, later the sponsor of organized group interests, is 1999:chap. 6; Hicks and Kenworthy, 1998; being transformed by economic and social inter- Hicks and Swank, 1992; Swank and Martin, nationalization. Exactly to what effect is, how- 2001), though it is difficult to disentangle the ever, far from clear. Heightened capital mobility impact of concertation from that of related fac- has rendered firms less dependent on the domes- tors such as social democratic government. tic institutions of anyone country, increased the desire of employers for flexibility of labor and labor costs, and impaired the capacity of govern- THE FUTURE OF NEOCORPORATISM ments to deliver on political deals. The break- down of centralized wage bargaining in Sweden In the span of two decades, corporatism was in the early 198os, and the elimination of for- hailed as an effective model of governance in af- mal interest-group representation on the boards fluent countries (Katzenstein, 1985; Schmitter, of several public agencies in the early 1990S, 1981), dismissed as irrelevant in an era of in- are frequently cited as an example for the de- ternationalization and restructuring (Ferner and cline oflabor-inclusive democratic corporatism Hyman, 1998:xii), and rediscovered by policy in its historical connection with Keynesianism makers and scholars as a potentially superior and the social democratic welfare state. way of managing rapid economic and politi- On the other hand, observers have expressed cal change (Auer, 2000; Hassel and Ebbinghaus, skepticism about the degree to which globaliza- 2000; Pochet and Fajertag, 1997; Regini, tion is likely to alter national institutional struc- 2000; Visser and Hemerijck, 1997). What lies tures and policy choices (Berger and Dore, 1996; ahead? Garrett, 1998; Hollingsworth and Streeck, 1994; The future of neocorporatism is bound up Kitschelt et aI., 1999). Nonmarket institutions with the ongoing transformation of social struc- can offer competitive advantages to firms that ture on the one hand and of the nation-state on may outweigh their costs. Quantitative analyses the other. Social groups in advanced societies, by Traxler et al. (2001) suggest little if any con- certainly the producer groups of the industrial vergence in interest-group organization, wage- age, have become less cohesive and more diffi- setting arrangements, and interest-group partic- cult to organize into centralized, monopolistic, ipation through the late 1990S. However, they and hierarchical associations. For example, with do find evidence of a trend toward "organized the decline ofFordist industrial organization and decentralization" of wage bargaining, whereby Keynesian economic policy and the growing wages are set largely at the sectoral level but prominence of the service sector, unionization coordinated informally across sectors (see also has fallen almost everywhere and the degree of Iversen, 1999; Thelen, 2001). Meanwhile, neo- union centralization has declined in many coun- corporatist pacts dealing with issues such as wage tries (Traxler et aI., 2001; Western, 1997). Gen- restraint and labor market and social security erally social structures today seem to generate reform have played a prominent role in the less stable group identities and give rise to more Netherlands and Ireland - two countries widely individualistic perceptions of interest that may viewed as European economic success stories make an encompassing association's "logic of over the past decade. Similar pacts have been membership" intractable. Moreover, the pro- forged or renewed in Norway, Finland, Bel- ducer groups that formed the principal con- gium, and Italy (Auer, 2000; Hassel and Ebbing- stituency of postwar democratic corporatism are haus, 2000; Molina and Rhodes, 2002; Pochet shrinking in size while other groups with dis- and Fajertag, 1997; Regini, 2000; Visser and tinct political interests have emerged, such as Hemerijck, 1997). Theories and Practices of Neocorporatism 459

Generally, changes in the capacities of the interest groups and replace self-government nation-state in the course of internationaliza- with more publicly accountable state control. tion seem to have different and partly contradic- In this they have followed a spreading lib- tory consequences for neocorporatism. Where eral discourse that suspects any form of orga- national states lose control to international mar- nized collectivism of particularistic rent-seeking kets, they become unable to underwrite tripar- and places its hope on a strong state recreat- tite bargains, in which case a decline in state ing free markets and defending them against in- capacities is associated with a decline in asso- terference by "distributional coalitions" (Olson, ciational capacities. At the same time, where 1982). governments can no longer keep capital captive, Although internationalization may make na- they may depend on organized groups to cre- tional states part with neocorporatism, it may ate institutional conditions and infrastructures simultaneously open up new opportunities for attractive to investors. Also, states that come un- group self-government by "nongovernmental der international pressure to balance their bud- organizations" in state-free international set- gets, like the member states of the European tings. Prospects for a transnational renaissance Union, may need the cooperation of still pow- of prenational corporatism are, however, uncer-

J erful trade unions for institutional reform and tain. Group cohesion beyond the nation-state

:1 wage restraint. In such instances, state weakness tends to be weak. Also, the very absence of ~i .! may enhance rather than diminish the role and state authority that might empower organized power of associations. groups deprives them of institutional support. On the other hand, most nation-states to- (In addition it makes it impossible to hold them day have embarked on a strategy of liberaliz- accountable to a public interest.) Internation- ing their economies. Liberalization implies a ally there are only few organized groups ca- greater role for markets and regulatory author-- pable of making binding rules for themselves, ities, at the expense of both discretionary state not to mention correcting international market intervention and corporatist bargaining. In part outcomes by negotiated redistribution. Other liberalization responds to pressures exerted by than competing states, the main actors in the internationalization for increased competitive- international arena are large firms, increasingly ness and openness of national economies; the transnational in character, with ample resources latter may require replacement of corporatist to pursue their interests individually, uncon- self-government, for example of financial mar- strained by union or government pressure forc- kets, with more transparent and internation- ing them into international class solidarity, and ally accountable state regulation. There also, indeed with a growing capacity to extricate however, may be domestic reasons for liberal- themselves from associative governance at the ization, among them certain long-term effects national level (Streeck, 1997). of neocorporatism after its peak twenty years Where there is something resembling neo- ago. These include overblown social security corporatist interest intermediation above the systems, rigid labor markets, high and persis- nation-state, it seems heavily dependent on the tent unemployment, a widening gap between sponsorship of international organizations like a shrinking group of well-represented insiders the European Union. In its effort to develop and a growing group of disenfranchised out- statelike properties, the European Union has siders, and the defense by trade unions of a so- long cultivated a substructure of organized in- cial policy and labor market regime that reflects terests from which it hopes to draw increased the social structures and economic conditions legitimacy. But although the European Union of the 1970S rather than of the present. Es- attracts a great deal of lobbying, this is far from pecially in countries where trade unions and, congealing in a corporatist system. Most of it to an extent, employers use their institutional continues to be nationally based, as national in- position to veto change, governments have felt terest organizations hesitate to transfer authority challenged to limit the influence of corporatist to their European peak associations. Although Wolfgang Streeck and Lane Kenworthy the European Commission relies and indeed making in pursuit of those interests. Yet the depends greatly on information and expertise long-term sustainability of such arrangements furnished by organized interests, devolution of is open to question. Regions, not being states, decision-making powers to organized interests is are unable to insert coercive power in the vol- rare. Nor has the "social dialogue" between the untary relations between their citizens. In par- Commission, the European trade union con- ticular, they may lack the capacity to provide federation, and European business developed the kind of support required to transform unsta- into tripartite concertation, mostly because na- ble, voluntaristic, pluralistic interest groups into tional actors, including national governments, mature ones capable of attending to the larger jealously defend their autonomy. All in all, even sectoral, regional, or national interest. For ex- in the European Union international interest- ample, regionally based unionism would have group politics is as a rule far more pluralist to do without external sources of associational than in national systems (Streeck and Schmit- monopoly, without authoritative stabilization of ter, 1991). bargaining arenas, and without recourse to a The same holds for corporatist arrangements public sphere balancing the manifold advantages at the regional level within and, sometimes, employers enjoy in the marketplace. across national borders. Much of the literature If the twentieth century that witnessed the I on "industrial districts" stresses the commonal- ascendancy of the modern nation-state was "still ity of interests held by workers, employers and the century of corporatism" (Schmitter, 1974), J policy makers in a number of subnational ar- the same may not be true for the postnational eas, and the advantages of negotiated decision twenty-first century. fI. The Handbook of Political Sociology STATES, CIVIL SOCIETIES, AND

GLOBALIZATION

Edited by THOMAS JANOSKI University of Kentucky

ROBERT R. ALFORD

ALEXANDER M. HICKS Emory University

MILDRED A. SCHWARTZ University of Illinois, Chicago

CAMBRIDGE :.: UNIVERSITY PRESS