Academic journal article CEU Political Science Journal

Dual Convergence or Hybridization? Institutional Change in Italy and Greece from the Varieties of Capitalism Perspective

Academic journal article CEU Political Science Journal

Dual Convergence or Hybridization? Institutional Change in Italy and Greece from the Varieties of Capitalism Perspective

Article excerpt

1. Introduction

For the last two decades, scholarly work in comparative political economy has been dominated by the Varieties of Capitalism (VoC) literature. Among other things, this strand of literature re-launched with vigor the debate between convergence and divergence. The essence of the convergence thesis was that countries will eventually get into a common trajectory following a single "logic of industrialism" (2). The same thesis appeared in the early 1990s within the context of the globalisation debate, foreseeing convergence to the Anglo-Saxon model of capitalism. Contributions from the VoC literature provided a counterweight to easy arguments about globalisation and refuted the idea of an imminent convergence to a single model (3). Instead, they argued that there are more than one ways to achieve high performance in the global economy. The subsequent debate was largely structured around the two successful models of capitalism: Coordinated Market Economies (CMEs) and Liberal Market Economies (LMEs).

A landmark publication by Hall and Soskice (4) elaborated on specific institutional complementarities that countries derive from the tight coupling of a set of institutions. Complementarities denote a functional interdependence between different institutional domains including the industrial relations system and the system of finance and corporate governance. Hall and Soskice argued that when these institutions cluster together in specific combinations, then they are able to produce increasing returns and contribute to high economic performance.

As a result of the above conceptualisation, VoC effectively replaced the (single) convergence thesis with a dual convergence thesis allowing for two options -rather than the no alternative type of argument. The pressures from globalisation and liberalisation are expected to accentuate the differences between LMEs and CMEs. The interesting question that this raises is what will happen to cases (countries) that lie in an ambiguous position?

Southern European countries are hard to classify as LMEs or CMEs. Later works in the literature grouped the cases of Greece, Italy, Portugal, Spain and France under a new ideal-type: Mixed Market Economies (MMEs). (5) The common thread linking these cases is that they lack the institutional cohesion of LMEs or CMEs (i.e. they are construed as hybrids) and certainly lack the crucial complementarities which are necessary for high performance. As will be argued below, these countries are "hard cases" for propositions of institutional change, and therefore, appropriate to assess the plausibility of the dual convergence hypothesis.

The main research question of this article is whether institutional change in Italy and Greece is taking place in line with the expectations of the dual convergence hypothesis. If the hypothesis is plausible, then we should expect to see these cases changing unambiguously towards the LME or the CME direction. The article shows that institutional change in the two countries is not taking place along these expectations. Despite common pressures from globalisation and liberalisation, industrial relations are becoming more coordinated and corporate governance/finance more liberal. The core insight of this paper is that different institutions may be changing in different directions, and this should be taken into account in the academic debate over institutional change. The empirical part documents this possibility with evidence from Italy and Greece, which are examined in comparative perspective vis-a-vis Germany and Britain. The latter pair provides two imperfect proxies of the CME and LME ideal-types, respectively.

The rest of the article is structured as follows. The next section discusses the main works in the convergence/divergence debate. It also substantiates the interpretation of the VoC framework as having the observable implication of the "dual convergence" thesis. …

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