“The economic recession that began in 2008 has shown that the Varieties of Capitalism approach has paid far too little attention to the common features of all capitalist economies.” Discuss.

Introduction

The purpose of this essay is to look at the Varieties of Capitalism (VoC) approach, and whether since the recession this approach has paid little attention to the common features of all capitalist economies. I am looking to provide an overview of the VoC approach and framework, and deliberate more on the two types of capitalist models, and to what extent these differentiate in terms of the economic coordination. I will also look at the common features of capitalist economies, i.e. neo-liberal policies, and how these compare with the continuing variance in organisations, e.g. policies and outcomes. I will cover strengths and weaknesses for both liberal and coordinated market approach to employment relations during the recession. I will then investigate the correlation between the recession and VoC approach. As an example, I will take collective bargaining. Both capitalist economies have a strong bound cross-shareholding arrangements.

Hall and Soskice (2001) in their publication identified ways of organising a capitalist economy, two types of economies, which are distinguished by certain set of institutions. One of them being a liberal market economy (LME) and second one being a coordinated market economy (CME). The CME module makes up the core Eurozone e.g. Denmark, Sweden and Germany, where the LME style economy is similar to the US and also present in the UK, Canada and Australia, to name a few. Both authors formed the general idea that characteristics of these two economic models differ, focusing on the power of the three main players in the economy – the state, labour market and businesses (Kostova, T., & Ph, D). Following the VoC claims, CMEs rely heavily on non-market relationships to manage their ventures with the main actors, building on their core expertise. The relationship between organisations in CME countries are collaborative, both because of the ability of creating institutional infrastructure e.g. collective bargaining, vocational training and wages, and having high-confidence dealings among large organisations.