Diversity reigns across Europe in approaching socio-economic development

European countries show considerable diversity in dealing with socio-economic challenges, according to preliminary results from the ICaTSEM research project. EU Member States have developed different strategies for fostering socio-economic advancement and addressing the challenges of globalisation. Noting that institutional forms mediate the synergies and trade-offs of actors with divergent interests and that this is also true in a globalised world, the project suggests that EU Member States are likely to experience a renewal of institutional diversity moving forward.

Far from indicating a convergence within Europe towards a single socio-economic model, ICaTSEM’s findings show a rich diversity of institutional frameworks in European Member States. This tendency toward ‘local adaptations’ of policies would seem to undermine the hypothesis that a convergence toward a ‘best model’ of capitalism is underway.

In its comparative effort to plot the trajectories of European capitalist models over the past few decades, ICaTSEM has helped us achieve a better understanding of what it calls the ‘inner characteristics’ of those models. The researchers paid particular attention to the ‘openness’ of socio-economic models, noting that institutions evolve in an international context as a consequence of shifting political alliances, and coalitions are not to be regarded as efficiency driven.

The project’s analysis focused on major institutional developments and legal reforms over a 30-year period between 1979 and 2009. Examining data on finance, corporate governance, industrial relations, education, industrial policy and the welfare state, the consortium says it identified “critical junctures of institutional development and turning points” in each country’s model.

Based on these case studies, the researchers report that they found no evidence of strong convergence among socio-economic models across institutional domains in Europe and observed no single overarching trajectory. Instead, their mapping exercise revealed a richly contoured European landscape.

Four main types of capitalism have been identified in Europe:

  • Market-oriented (UK).
  • Continental (Germany and France).
  • Nordic (Sweden and Denmark).
  • Southern/Mediterranean (Spain and Italy).

A fifth type, which ICaTSEM refers to as ‘transition economies’ (Hungary and Slovakia), has also been posited. For each of the five models the project developed a pair of national case studies, which at a later stage are to be contrasted with additional case studies exploring the United States and Asia (China and Japan). In their study of emerging countries the researchers extended the project’s analytical grid to include agriculture, environmental issues and international integration. A new cross-sectional qualitative database was produced in the process. The results are expected to feed in to future studies of the trajectories of emergence.

ICaTSEM observed that several socio-economic models in Europe have shown “substantial shifts toward more liberal institutions”, even though the pace of change and degree of impact vary from model to model. Nonetheless, these shifts appear to be having little effect on the models themselves: “it seems that institutional changes do not alter the fundamental distinctions among different types of capitalisms”. Instead, the consortium concluded that “globalisation renews the diversity of socio-economic models rather than driving them towards a unique national scheme”.

At the same time, the project suggests that Europe’s five socio-economic models should not be regarded as inherently static. ICaTSEM informs us that each model has intrinsic features and an internal heterogeneity that raises stability concerns. Moreover, the project reminds us that the process of building institutional complementarities is progressive.

Environmental concerns (a crucial aspect of the overarching sustainability issue) received specific attention in the project. ICaTSEM found that countries that have different socio-economic models respond to environmental challenges in different ways. The researchers suggest that this “argues in favour of considering explicitly environmental regulations as an institutional domain per se” in understanding how these models operate. Complementarities with other institutional areas, however, remain to be explored.

Finally, relating their research to the process of globalisation and the worldwide financial crisis, the ICaTSEM team say their results do not support the thesis that ‘financialisation’ of the global economy is pushing Europe towards convergence. While some observers had expected financialisation to drive a general movement toward the market-oriented (neoliberal) socio-economic model (such as that associated with Ireland and the UK), the researchers say the diversity of models has not diminished.

It seems that while Greece’s sovereign debt crisis has raised serious questions about the Mediterranean model, the continental European model (France and Germany) has proved more resilient. ICaTSEM confirms that the continental model has demonstrated high adaptability, adding that its regulation mechanisms have reduced the impact of the crisis.

ICaTSEM – Institutional changes and trajectories of socio-economic development models (duration: 1/1/2009 –31/12/2011). FP7 Socio-economic Sciences and Humanities, Activity 2 “Combining economic, social and environmental objectives in a European perspective”, Research area 2.1 “Socio-economic development trajectories”. Collaborative project (small and medium scale focused research project).

See: http://icatsem.u-bordeaux4.fr/

Contact: Dr. Yannick Lung, lung@u-bordeaux4.fr