1. European Economics
European integration and various models of capitalism – the institutional economics perspective

2. 1. Institutional Economics and different models of capitalism
European Economics – European integration and various models of capitalism
1. Institutional Economics and different models of capitalism
2. From the Comparative Economic Studies to the „Varieties of Capitalism” Approach.
3. European Union – did it produce convergence towards some European institutional norm?
4. „Varieties of Capitalism” – is it really the complete choice?

3. European Economics – European integration and various models of capitalism
Classical and neo-classical model vs. Institutional Economics perspective
Institutions were then, and still are, fundamental to the subject. Economic institutions, are social arrangements that regulate economic behavior in ways that may not coincide with short-run individual preferences; they are based on shared expectations derived from custom, trust and law; they are best understood if economic activity is seen as a repeated game. Effective institutions require that the rules of the game are not constantly amended to fit particular individuals, in other words, that they entail anonymity.
Hanson, 2007

4. Comparative Economic Studies during the Cold War age
European Economics – European integration and various models of capitalism
Comparative Economic Studies during the Cold War age
Theoretical models of different kinds of economic system:
Free-market capitalism (USA, Hong-Kong);
Capitalism with indicative planning (France, Japan, Germany);
Soviet-style central planning (USSR);
Market socialism (Hungary);
Workers’ self-management (Yugoslavia).

5. Varieties of Capitalism Approach
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach
One key idea in the varieties of capitalism approach is that different capitalist countries can survive and thrive with somewhat different sets of social arrangements for coordinating production.

6. European Economics – European integration and various models of capitalism
Different mechanism of social coordination which ensure (enforce) cooperation in favor of common interests
ethic (voluntary),
market (voluntary),
family (mixed),
self-governing (compulsory),
bureaucratic (compulsory).
see. Kornai J. „The Socialist System”

7. European Economics – European integration and various models of capitalism
Five spheres in which firms must develop successful relationship to resolve coordination problems crucial to their core competencies – microeconomic level
industrial relations (the problem enterprises are facing is how to coordinate bargaining over wages and working conditions with their labor force, the organizations that represent labor, and other employers),
vocational training and education (firms face the problem of securing a workforce with suitable skills, while workers face the problem of deciding how much to invest in what skills),

8. European Economics – European integration and various models of capitalism
Five spheres in which firms must develop successful relationship to resolve coordination problems crucial to their core competencies – microeconomic level
corporate governance (to which firms turn for access to finance and in which investors seek assurances of returns on their investments),
inter-firm relations (the relationships a company forms with other enterprises and notably its suppliers or clients, with a view to securing a stable demand for its products, appropriate supplies of inputs, and access to technology),
relations with employees (to ensure that employees have the requisite competencies and cooperate well with others to advance the objectives of the firm – labor market institutions).

9. European Economics – European integration and various models of capitalism
Macroeconomic level
It is possible to compare the performance of the possible models of capitalism in terms of meeting three objectives of social policies:
reduction of income inequality and poverty;
protection against uninsurable labor market risk;
reward to labor market participation.

10. European Economics – European integration and various models of capitalism
Macroeconomic level
European welfare regimes can be categorized into three groups:
High income inequality countries (Portugal, Greece, Great Britain and Spain) which have inequalities over the EU-15 average.
Medium income inequality countries (Ireland, Italy, Belgium, France, Netherlands and Luxembourg). These groups followed the
EU average in the terms of income inequalities.
Low income inequality countries (Denmark, Austria, Finland, Sweden and Denmark). They have achieved the best results in the
filed of reducing income inequalities.

11. Varieties of Capitalism Approach
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach
Liberal market economies;
Approximates to the neo-classical model of a competitive economy. Labor can be hired and fired fairly easily. There is a market for corporate control in the form of a large and liquid stock-market, and stock-market performance (“shareholder value”) is very important for managerial decisions in quoted companies. Other things equal, income inequality will tend to be high.

12. Varieties of Capitalism Approach
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach
„Coordinated” market economies;
Operates with a greater element of strategic cooperation, both between firms and between banks and firms and between unions and firms. Investment finance depends more heavily on the banks; wage- bargaining may be coordinated at a national level; employees have greater job security, personal and income taxes are likely to be more progressive and income inequality, other things equal, somewhat less.

13. Varieties of Capitalism Approach
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach
Shareholder capitalism vs. Stakeholder capitalism
What is the purpose of the enterprises activity and in favor of which group should the management act?

14. Varieties of Capitalism Approach
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach
„I do not work for the shareholder, to be honest; I work for the consumer, the customer”
"I discovered a long time ago that if I focus on doing the right thing for the long term to improve the lives of consumers and customers all over the world, the business results will come … I'm not driven and I don't drive this business model by driving shareholder value. I drive this business model by focusing on the consumer and customer in a responsible way, and I know that shareholder value can come."
Ron Polman,
Chief Executive at Unilever in his interview to „Financial Times”
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15. Varieties of Capitalism Approach and different Models of capitalism
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach and different Models of capitalism
Varieties of Capitalism Approach corresponds, roughly, to the familiar distinction between Anglo-Saxon and Continental models. Other classifications are possible, such as a four-way split between:
Continental model;
Anglo-Saxon model;
Mediterranean model;
Nordic model.
(e.g., Sapir, 2005).

16. Varieties of Capitalism Approach and different Models of capitalism
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach and different Models of capitalism
Models of Capitalism way of thinking is much more connected to macro level than Varieties of Capitalism Approach which is mostly connected to enterprises behavior.

17. Varieties of Capitalism Approach - China
European Economics – European integration and various models of capitalism
Varieties of Capitalism Approach - China
large state sector and a large private sector co-exist;
property rights are unclear;
a single party of power still presides in an authoritarian polity.
Washington Consensus vs. Beijing Consensus

18. Convergence towards some European institutional norm
European Economics – European integration and various models of capitalism
Convergence towards some European institutional norm
Tobin tax and Flexicurity – is it the one and only future of European model?
Flexibility of the labor market
Greece, Spain, Portugal
Denmark, Sweden, Finland,
Social safety net