The social democratic predicament and global economic integration
A capital dilemma *
Jonathon W. Moses
Whereas there is much agreement among economists and political scientists about the efficiency-gains associated with a unified market in tangible goods, the internationalization of capital markets has received fewer words of praise. Recent tensions within the European Monetary System (EMS) might even suggest that capital market integration has brought with it a new international economic regime which governs by an iron law of policy. This chapter addresses the constraints placed by this particular aspect of global and regional economic integration (financial capital mobility) on a particular regional form of capitalist development (northern European social democracies). This problem of the Nordic countries carries with it considerable implications for welfare state arrangements in a number of European countries (see Chapter 5 by Rhodes in this volume).
The social democracies of northern Europe, until recently, were able and willing to pursue relative policy autonomy, maintaining full employment as a primary objective of economic policy. For these countries, at this time, the distinction between national and international concerns was clear-cut. Today, Nordic unemployment rates and policy objectives are approaching those on the rest of the continent. Efforts to maintain national policy objectives are being challenged by forces at two overlapping levels: one global, the other regional. As a result, solutions to once national dilemmas are now being sought at both of these levels.
The most important global factor, financial capital mobility (henceforth, just capital mobility), is challenging national policy autonomy in all of its variants. To the extent that Nordic social democracies had a distinct policy line that varied from other developed nations, their conformity under global pressure is an interesting subject of study. This chapter argues that social democratic governments want to maintain full employment, but are handicapped by changes in the international economy. Its intent is to ask whether the traditional policy mixes of these countries can be maintained in the new international economic environment, and if so—how? In this way, the story told here is similar to those told in other areas (e.g., Japan): global capital mobility challenges heretofore unique regional modes of development (cf. Chapter 3 by Stubbs in this volume).