Transatlantic Tensions. From Conflicts of Interests to Conflict of Values?

Colloquium, CERI/GMF, February 2-3, 2004

CAPITALISM AND SOCIETY

Vivien Schmidt
Department of International Relations Boston University

Most of the talk of late with regard to the US and European economies is about conflict of interests. It is about the value of the dollar versus the value of the euro; about trade disputes by the US against the EU on GMOs or the EU against the US on export subsidies; and whether the US and Europe are moving toward greater balance or imbalance as economic powers. Moreover, while the EU has been looking toward the US, wanting to catch up in terms of productivity, employment, and growth, the US has been looking away from Europe, toward Asia. This is because, as Max Boot (2003) argues: Europe is in long-term decline, economically, militarily, and demographically, while the United States continues to grow. What hasnt been

talked about is whether such conflict of interests also reflects a conflict of values regarding capitalism and society. In what follows, I focus on comparing and contrasting what brings the US and the EU together, what sets them apart in terms of values. To do so, I first look at the trends

tendences regarding change in capitalism and society, which suggests a convergence of values. Second, I consider the effects of such trends generally on US and European systems as apparent in national varieties of capitalism and families of welfare states, which shows continued divergence in values not just between the US and Europe but also within Europe. I also

examine their effects more specifically on the different elements that constitute these systems, such as the role of state, the organization of business and finance, the nature of labor and production systems, the provision of welfare benefits and services, which in turn suggests
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increasing variation between countries within systems and growing confluence between countries in different systems. I conclude that the values of capitalism may very well in the future be coming together, but not necessarily converging on an ideal-typical neo-liberal, AngloSaxon model. Rather, differences in industrial sectors may make for the most salient future differences within both the US and the EU, which means that the two systems are likely increasingly to resemble one another in their diversity. However, I also conclude that the values of welfare states remain divided, even though the divisions are still much more than a simple duality between the US and Europe, and are as significant between European countries as between the US and the EU. Trends When examining the general tendences, or trends in capitalism, we are initially struck by the seeming convergence, as all countries move toward greater market orientation. This convergence is related to a number of pressures: economic, institutional, and ideational. The economic pressures, whether we call them globalization, Americanization, or Europeanization,. result from increasing international competition in capital and product markets and the move from manufacturingas jobs go southto services. These bring change to national capitalisms, which in turn also affect welfare states, although the pressures here also come from changing demographics. On top of the economic pressures, there are also institutional ones from supranational organizations such as IMF, the World Bank, the WTO, and the EU (arguably a greater force for change than globalization among member-states). These organizations have prescriptions for monetarist monetary policies, demands for level playing fields that reduce subsidies, models for corporate governance, and recommendations to diminish the role of state intervention. Finally, there is also the pressure of ideas and discourse, in particular neo-liberal ideas of what is to be done, as evidenced by the OECD, the World Bank, the Washington consensus, and the spirit of capitalism as it is taught in business schools (Boltanski and Chiapello 1999). These pressures have clearly cleared affected state policies, leading to liberalization of the financial markets and trade, deregulation of business and labor, and privatization of stateowned enterprises. Moreover, everyone has become nominally monetarist, with a bit of neo-neoKeynesianism that dare not speak its name coming back, as seen in U.S. spending policies after 9/11, or in France and Germanys resistance of the deficit limits of EMU. Finally, proactive or interventionist industrial policies are being replaced by policies that at most seek to improve the

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environment of business through infra-structural projects, education and training for workers, and the promotion of research and development. Such changes in state policies have also promoted change in finance, where the financial markets have become increasingly important as the source of capital for firms, replacing the banks and the state. Shareholder value is the word on every CEOs lips, and there are new rules and regulations increasing transparency and demanding better accounting standardsalthough this does not necessarily protect from major corporate scandals (as in the cases of Enron ot Parmalat). In business, there is a greater focus on profits, productivity, and innovation. There are much higher CEO salaries, with stock options for all. Businesses are turning to the financial markets for capital, increasing the market capitalization for firms in the U.S. and Europe, and institutional investors (especially Anglo-Saxon pension funds) are gaining increasing influence. The size and scope of multinationals (MNCs) is growing, largely through joint ventures, crossborder mergers, promoting their statelessness while also increasing the economic interdependence between the U.S. and Europe. This level of interdependence ensures that the U.S. could not punish France economically even though it wanted to during the divergence in policies toward Iraq. In labor, the key word is flexibility, with a move to part-time and temporary employment and the decentralization of the labor markets. Wage inequalities have been on the rise, in particular between the highly skilled and less skilled workers. But there is also active labor market policy, with the emphasis on training, reducing unemployment, increasing workforce participation, and promoting female employment. Finally, with the welfare state, everyone has been trying to rationalize expenditures. This has led to the introduction of user fees, cutbacks in the generosity of benefits; means-testing benefits, reducing pension costs by extending working life, partially privatizing pensions, and welfare-to-work programs.. Do all of these trends suggest convergence? The policies may be similar, but are they the same? Even though the words themselves may be the same, are they part of a common language and a common understanding? It is important to see that despite common trends, new policies and practices are embedded in different contexts informed by different histories, cultures and institutional realities. These underpin longstanding differences in capitalisms and welfare states in the US and Europe.

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Comparing Capitalism in the US and Europe How do we compare the U.S. and Europe? As economic blocks, they bear great

resemblance. They are similar in terms of the size of their economies, as large, reasonably autonomous units. Extra-E.U. trade has been comparatively low, at 9% in 1990, which was about the same as the US at the time, and was only up to around 12% to 13% for both by 2000. The U.S. and the E.U. are also each others largest trading partners. In 2000, the E.U. monetary system was responsible for 67%, or $770 billion, of world FDI outflows (largely as a part of the fact that intra-European investment attracted 50% , or $617 billion, of world FDI outflows). Outside of the E.U., the primary target for the FDI of European firms is the U.S. In 2001, the E.U. was the primary target of the U.S., having received 40% of the U.S. FDI outflows. But the U.S. is a nation-state with a highly integrated economy (despite subnational regional differences). The European Union is not. Instead, the E.U. is what I call a regional state, or a regional union of nation-states, where despite increasing monetary and market integration, there is continuing differentiation in national economies following differences in national capitalisms and welfare states. This also has implications for governance and democracy, but that is another topic (see Schmidt 2004) . Whereas the trends discussed above on the surface suggest convergence toward one model of capitalism, the liberal variety of capitalism of Anglo-Saxon countries, a closer look suggests tremendous differences not just between the U.S. and Europe but also within the E.U., where we find not one or even two but at least three varieties of capitalism: not only the liberal capitalism of the U.S and the U.K. but also the coordinated capitalism of countries such as Germany, the Netherlands, Sweden, and Denmark; and the state-enhanced capitalism of France, Italy, and Spain. These differences are related to variations in firms levels of exposure to the financial markets, the bases of firm ownership and control, the nature of inter-firm relations, the organization of labor-management relations, the patterns of production and innovation, and the role of the state in the economy. Complicating matters even further,

however, is that countries within varieties have themselves become increasingly differentiated as some have reformed more radically than others or as they have adopted reforms more in keeping with other varieties of capitalism. Beyond this there are the hybrid capitalisms of

Central and Eastern Europe that mix elements of all three varieties; but these are beyond our remit here.

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Liberal Capitalism Typically, those scholars most focused on global trends assume the long-term victory of a neo-liberal or Anglo-Saxon model of capitalism, in particular as firms turn to the financial markets for capital in place of the banks or the state (Cerny 1994) and as multinationals become increasingly stateless through the internationalization of their operations (Stopford and Strange 1991). But in fact, the Anglo-Saxon variety of capitalism, sometimes also called liberal market economies (Hall and Soskice 2001), remains largely characteristic mainly of the US, the UK, Ireland, and other Anglo-Saxon countries such as Australia, New Zealand, and Canada. In such countries, the traditionally liberal hands-off state that in the postwar years sought to ensure market-driven inter-firm relations and market-reliant management-labor relations has since the 1980s become even more liberal through the privatization of state-owned firms, the liberalization of the financial markets, and the deregulation of business and of the labor markets. The state now acts primarily as an agent of market preservation by providing framework legislation to locate decision-making power in companies and limit the power of organized labor (King and Wood 1999). Moreover, business has become even more market driven as financial markets with impatient capital push firms to pay greater attention to profits in the short term or risk takeover. And labor relations have become even more market reliant as governments have acted to reduce union power, leading to the radical decentralization of wage-bargaining. All of these elements, added to an employment system with low levels of employment protection, comparatively short-term employment, a bifurcated wage structure between high and low wages, and individual responsibility for education and training, have tended to promote high responsiveness to changing market conditions and a comparative advantage in two very different kinds of areas. Liberal market economies tend to excel in such areas as bio-

technology, the new economy, and high-end financial services, where radical innovation is the key to market dominance; but they also do well in low end services and low-tech industries in which workers low wages, low skills, and little vocational training makes for competition on the basis of price rather than quality (Hall and Soskice 2001; Lane 1998). For all this, however, countries that have traditionally conformed to liberal capitalism have adjusted somewhat differently. Although the state in all such countries has become more liberal or hands-off with regard to business and labor, the UK has instituted more stringent oversight rules than the US in the financial markets and more restrictive laws with regard to organized labor. Ireland, by contrast, has actually promoted labor-management cooperation in wage-bargaining somewhat akin to the corporatism of coordinated capitalism.

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The US, in addition, is more of a duality than generally admitted in the literature, since it also has elements of coordinated capitalism in high-end manufacturing (Martin 2000). In

production, it has shown productivity gains on the shop floor, such as upgrades to process technologies; and it has implemented quality improvements such as quality circles and computer technologies. In labor, although the U.S. does have a lot of low skill and low wage labor, it also has a lot of high skill and high paid labor, with high productivity gains in high-end manufacturing as well as in high-end services. Most significantly, a large percentage of the biggest employers dont necessarily want low-skilled workers; but they often cant find high-skilled workers because of poor education and training systems. Federal government attempts to remedy this situation, such as Clintons proposals to institute active labor markets policies similar to those of Scandinavian countries, have generally failed, due to the opposition of the small business lobby, which is better organized in Washington D.C. than the big employers. So big firms have tried to make up for this with measures of their own, such as generous pensions, daycare facilities, longer-term contracts, in-house training programs, and other perks that seek to promote greater worker trust and loyalty. But at the end of the day, all of this occurs within a liberal capitalist environment, putting the larger US firms that compete in high-end manufacturing with firms in other varieties of capitalism at something of a disadvantage. Coordinated Capitalism The liberal variety of capitalism has in recent years been contrasted with another, very different variety, often called the coordinated market economy (Hall and Soskice 2001) or Rhinish model of capitalism (Michel Albert 1990), typical of countries such as Germany, the Netherlands, Austria, Sweden, and Denmark. In this variety of capitalism, the traditionally

enabling state which in the postwar period facilitated collaborative inter-firm relations and cooperative labor management relations has retained its overall outlines, despite changes at the edges. Reforms involving the negotiated liberalization of the financial markets and the

privatization and deregulation of monopolistic public enterprise have fit well with the states efforts to promote greater economic competitiveness without jeopardising the countrys nonmarket coordinating institutions, in particular the cooperative relations between

employersassociations and unions (Wood 2001). Moreover, even with the turn to the financial markets, firms tend to be less exposed to financial market pressures than firms in liberal market economies. Because providers of finance still take a more long-term view on return on investment, and because there is a higher concentration of share-ownership through strategic investors (by contrast with the high

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dispersion of share-ownership through portfolio and household investors in liberal market economies), firms are more protected against takeover and more insulated against pressures to make short-term profits to the detriment of more long-term goals such as firm value or marketshare. In addition, firms tend to retain their close, mutually-reinforcing relations with suppliers, subcontractors, and customers despite the greater squeeze on prices, while labor-management relations tend to remain trust-based and cooperative, despite the greater squeeze on wages. As a result, corporate governance tends to continue to be more driven by stakeholder values than only shareholder ones. All of this, added to an employment system with high wage labor, high levels of employment protection, long-term employment, and high investment in vocational training by firms and the state, leads to a comparative advantage for coordinated market economies in sectors such as high-precision engineering and high value-added manufacturing, which depend upon a more stable, long-term investment environment where highly paid, technically skilled workers ensure the incremental innovation necessary to the production of high-quality products with high value-added (Soskice 1999). The main problem here is that firms are typically slower to respond to market changes because of rigidities in labor markets, thus making for less radical innovation than in liberal capitalism. In coordinated capitalism too, however, there are significant differences among countries that fit this ideal type. The greatest contrast is arguably between the Netherlands and Germany in labor policy. While Germany continues to struggle with significant labor market rigidities and high unemployment, the Dutch miracle beginning in the 1980s produced great flexibility in labor markets through the negotiation of a massive increase in part-time and temporary jobs (Visser and Hemerijck 1997). In Sweden and Denmark, moreover, while Sweden decentralized wagebargaining to the sectoral level, Denmark continues to have a more centralized national wagebargaining, but one which nonetheless allows for a high degree of decentralization to sectoral and firm level. State-Enhanced Capitalism Although the binary division of capitalism into liberal and coordinated market economies is very useful for explaining large dichotomies among countries, it pushes to the margins a number of countries with equally distinctive patterns, but in which the state has traditionally played a larger role in the economy. There are in fact at least three varieties of capitalism which are differentiable along lines of development from the original three postwar models (as identified by Shonfield 1966): liberal capitalism, coordinated capitalism, and state-enhanced

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capitalism, which emerged from the postwar state-led capitalism of countries like France and Italy (Schmidt 2000, 2002). A comparable transformation can also be found in what used to be known as the developmental states such as Taiwan and Korea (Weiss 1998; Woo-Cumings 1999). In this variety of capitalism, the interventionist state that in the postwar period sought to organize inter-firm collaboration, direct business investment, and impose management-labor cooperation has given up its past leadership for a more market-oriented, enhancing role. Although the state now also seeks to create and preserve market institutions much as in liberal market economies, this does not stop it from continuing to intervene strategically where it sees the need, mainly to protect business and/or labour from the worst effects of the markets whether this means bailing out firms in difficulty, moralizing the labor markets through the 35 hour work week, as in France, or engineering corporatist agreements in wage-bargaining and pension reform, as in Italy. Firms, moreover, are much more autonomous than in the past, as the state has loosened its ownership and control through privatization and deregulation. But whereas privatization in a liberal capitalist country like the UK entailed selling off firms to all comers in the stock market, without restrictions, in France it involved choosing a noyau dur (or hard-core) of strategic investors to lend greater stability and to protect from takeover, as in coordinated capitalism. This pattern was also subsequently followed by Italy and Spain. The dominant patterns of ownership and control, as a result, are now either strategic share-holdings or the family, especially in Italy, with state ownership on the decline because of continuing privatization. Only in France, however, has this dual pattern of share ownership been accompanied by a very high level of foreign equity holdings. This has mainly been a consequence of North American institutional investors having bought up shares from strategic investors as the noyaux durs began loosening in the late 1990s (Morin 1998). But this Anglo-Saxon predominance in equity holdings has not therefore made the financial markets the driver of corporate strategy, as in Britain. French CEOs remain much more autonomous than British CEOs, because more concentrated share-ownership reduces takeover risks; than Germans CEOs, because they are less constrained by boards of directors, networked relationships, or employees; and even than French CEOs of the past, because of the retreat of the state (Schmidt 2002). For France, all of this, added to an employment system that sits somewhere between those of Germany and Britain in terms of worker pay, job protections, skills, and training, makes it better than Germany but behind Britain on radical innovation and better than Britain but behind Germany on incremental innovation. However, France has also done well in traditionally state-

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dominated sectors such as telecommunications, electricity, rail transport, and aerospace, where radical innovation has come from state-financed, high profile grands projets (Amable and Hanck 2001) Comparing Welfare States in the US and Europe Welfare states, like capitalisms, also typically divide into at least three familiesliberal, conservative, and social-democratic (see Esping-Anderson 1990)with the US again characterized by one main type and the EU by all three. The European Social Model, a popular invocation among E.U. and national officials, does not in fact describe any common reality but rather demonstrates a commitment among countries to common goals with regard to basic social benefits and services, such as ensuring that all citizens have access to social assistance, pensions, employment, education and health care. Since the 1980s, moreover, although the US and EU member-states have all reformed their welfare systems, they remain highly differentiated, having developed along lines from their original postwar configurations, and continue to face different challenges (Scharpf and Schmidt 2000). Liberal Welfare States In the US as well as the UK, liberal capitalism goes hand in hand with the liberal welfare state, in which welfare has traditionally been assumed to be a matter of individual responsibility, distinguishable according to need, provided by the state for the poor, with a comparatively low level of benefits and services (with the exception of health and education in the U.K.). While reforms in the 1960s signaled a move toward greater equality not just of opportunity but also of results through redistributive policies and the expansion of the welfare state, in particular in the US, the reforms of the 1980s made both countries much more liberal. Reforms involved cutting social assistance, unemployment compensation, and housing allowances while reinforcing individual responsibility for future welfare provision through the partial privatization of pensions above a basic minimum. This was accompanied by a discourse of us vs. them, directed in particular at welfare cheaters by Reagan in the US and at the feckless and the idle as opposed to the worthy poor by Thatcher in the UK. In the 1990s, reform continued, but in this case

focused less on dismantling equality of results programs than on improving equality of opportunity and getting welfare recipients off the welfare rolls and into jobs. This was

accomplished mainly through welfare to work programs because, as Blair insisted, welfare is not a hammock but a trampoline, not a hand out but a hand up (Schmidt 2000). For liberal capitalism, the reformed liberal welfare state has ensured that the low level of benefits and services fuels low wage, service economies; that the privatization of pensions
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above a basic minimum fuels the financial markets ; and welfare to work programs take people off the welfare rolls to put them into the service economy. Such reforms have resulted in welfare states that are much more sustainable overall in the face of demographic pressures ; but poverty remains a real problem, in particular because social transfers do not bring poverty level down sufficiently. Despite these similarities, however, liberal welfare state have differed in their approaches to reform, in particular from the mid to late 1990s in the US, from the late 1990s on in the UK. The UK took a more centralized approach to reform, as the New Labor government sought to attack poverty and to improve services, in particular in health care. The US, by contrast, took a decentralized approach, by devolving most social assistance functions to the fifty states. The result has been tremendous variety and experimentation, but also generally less generosity with the move from entitlement programs (AFDCaid to families with dependent children) where every eligible person was funded by the federal government to block grants (Temporary Assistance for Needy Families) where states could choose to allocate the fixed sum as they saw fit. The problem goes beyond an abdication by the federal

government of responsibility for poor children. The block grants also contribute to disparity and inequalities among states, with some states spending less, others spending differently, for example, on roads, schools, training programs (as in Michigan), abuse programs (as in Kansas), extra cash to welfare beneficiaries for working (as in Minnesota), or anti-fraud measures (as in Texas) (Martin 2003). Ironically, the decentralization of welfare in the US may actually be a boon to big firms in some states, e.g., Michigan, where its training focus is a way of responding to firms needs in hi-end manufacturing. Generally speaking, however, welfare reform in the US in particular may contribute rather than reduce the problems of liberal capitalism as well as deepen the divide between the US and Europe. While the UK is continuing to try to strengthen the universalistic aspects of its welfare state, through improvements in education and health services as well as by providing welfare-towork programs to increase social equality, the US reforms risk increasing the social inequalities. This is not only because of the decentralization of welfare but also because in the US reform, federal law emphasized the coercive aspects of the welfare to work programs by forcing beneficiaries back into the workforce while minimizing training and day care and making them ineligible for state-provided health care insurance once off the rolls. In addition, the failure to create a universal health care system greatly limits worker mobility and often means that the working poor go uninsured, given the high costs of individual insurance. The result is that poverty and inequality remain a major problem for the US, with no solution in sight in particular

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because the job gains in the US over the past decade have been in high wage, high skilled jobs, with little progress for the most precarious, where low wage, unskilled jobs spell poverty and social exclusion (Martin 2003). Social-Democratic Welfare States In the social-democratic welfare state of Scandinavian countries, which developed in tandem with coordinated capitalism, the history has been very different from Anglo-Saxon liberalism in capitalism and welfare. Welfare has traditionally been assumed to be a matter of collective responsibility, equally accessible to all citizens, and provided by the state for all at the highest level of social benefits and public services. Reforms beginning incrementally in the 1980s in Denmark and all at once in the early 1990s in Sweden in response to economic crisis resulted in modest cuts in benefits and/or services as well as in the introduction of new user fees. But these did little to jeopardize the basic commitment to equality and universality of access, with benefits and services maintained at a very high level of generosity, despite the cuts. Moreover, in both countries, the universality of welfare provision ensured against any divisive discourses of us vs. them. Legitimizing discourses were instead focused on reassuring the public that equality would be maintained even though cuts had to be instituted, as in Sweden, or that they had to cut the welfare state in order to save it, as in Denmark (Schmidt 2000). For Scandinavian coordinated capitalism, the reformed social-democratic welfare state ensured that the high level of benefits and public services would continue to fuel a high wage economy in hi-end manufacturing and services, and that job losses in the exposed sector of the economy would be absorbed by the sheltered sector of public services. Female workforce participation remained very highhigher than in liberal, state-enhanced, or other coordinated capitalist economiesmainly because of the public provision of caring services. And

unemployment remained low not only because of high labor force participation but also because of labor market flexibility ensured in Sweden by active labor market policies and in Denmark also by easy hiring and firing cushioned by generous unemployment compensation (although this was reduced in the 1990s). For these Scandinavian countries, the problem is certainly not poverty, as in Anglo-Saxon countries. Rather, it is sustaining the welfare state at such a high level. Conservative Welfare States In the more conservative welfare states of Continental and Southern Europe, which are associated with either coordinated or state-enhanced capitalism, the pattern of adjustment has been even more varied. In the postwar period, welfare has been for the most part understood as
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a matter of family responsibility, differentiable according to gender and social status, based on work history, and provide by intermediary groups and the state, with a reasonably high level of benefits but not of services. France, however, had a higher level of state-provided services

while southern European countries tended to have a less generous welfare state with greater emphasis on the family, so much so that it is often seen as a fourth kind of welfare state. Reforms beginning mainly in the 1990s brought even greater variation. Countries like the Netherlands introduced sweeping, highly liberal reforms including the partial privatization of pensions while Germany and others procrastinated, stymied by their inability to negotiate increased labor market flexibility and pension reforms (although Germany did institute general cuts earliersee Manow and Seils 2000). In these latter countries, legitimizing discourses were difficult in a context in which pensions had come to be seen as a matter of property rights, and where social solidarity obviated any discourse of us vs. them. Ultimately, the most successful discourses in promoting reforms came in countries where governments of the center-left talked of balancing equity and efficiency in welfare reform, not only in the Netherlands in but also France and Italy in the mid to late 1990s. The general problem for Continental and Southern European conservative welfare states, whether they are coordinated or state-enhanced capitalist economies, is neither poverty nor sustainability but rather unemployment. This is due to much greater labor-market rigidities than in Anglo-Saxon countries, where unemployment has dropped significantly over time as a result of the rise in low wage, private sector services, or Scandinavian countries, where it has remained low over time, due to high wage, public sector services and labor market flexibility. The main problem for conservative welfare states has been the postwar male-breadwinner model which, by favoring full-time employment over a lifetime, discourages the move to services (and part-time or temporary work), which is where the growth in employment lies. Only the Netherlands has managed to overcome these problems by leading the move into services through flexicurity, by providing part-time and temporary jobs while maintaining a commitment to equality through great employment security and decent benefits for such jobs.

Looking toward the Future In short, the emerging European political economy, despite its single market and single currency, shows continuing diversity in national capitalism and welfare states along lines of development from post-war varieties of capitalism and families of welfare states. In the long term, however, some of these national differences may begin to soften as the E.U. introduces a more portable E.U.-wide pension system, as member-state governments continue to liberalize
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and privatize, and as the Europe-wide consolidation of firm activities increasingly blurs the national basis for differentiation. But while the EU member-state variability may lessen, that of the US may increase aided by growing welfare differentiation among federal states as well as the demands of competitiveness. Most importantly, new bases for similarity may stem from the fact that sectoral differentiation may come to be more important than national differences, as industrial sectors in both the US and the EU take on the characteristics of the national variety of capitalism that is most internationally competitive in that sector, aided by growing welfare state differentiation. In Europe, for example, firms in financial services, biotechnology, and the new economy are increasingly likely to operate along the U.S./U.K.s liberal capitalist lines. Firms in high-precision engineering and manufacturing are likely to adopt the techniques of Germanys coordinated capitalism, and firms in sectors such as defense, which are influenced by the priorities set by national governments and the E.U., or the railroads, which require heavy investments with low rates of return over long periods of time, are likely to follow Frances pattern of state-enhanced capitalism. In the US, the national variety of liberal capitalism may also become less significant than sectoral differentiation. For example, a more coordinated capitalism is likely to be promoted in states dominated by large firms in high-end manufacturing with a need for high skilled labor, and where state governments playing an increasingly enabling role through investment in training (e.g., Michigan). Moreover, liberal capitalism is certain to continue to flourish, as the new

economy and financial services gain from highly flexible labor markets, backed by national legislation. But equally importantly, state-enhanced capitalism may increase as the federal

government increases its investment in sectors such as defense; and maybe one day they will start rebuilding the US infrastructure, by investing in the railroads National varieties of capitalism will, however, continue to matter, even if they become less salient than sectoral varieties of capitalism. This is because, whatever the sector, traditionally liberal capitalist countries such as the US and the UK will continue to have more individualistic and competitive inter-firm relations. Traditionally coordinated capitalist countries such as Germany, the Netherlands, and Sweden will seek greater cooperation and consensus in labour-management relations. And traditionally state capitalist countries such as France and Italy will almost always have a state that seeks to influence both business and labor where it sees the need.

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References

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