Capitalism - global convergence

or infinite variety?

Geoffrey M Hodgson
Loughborough University London

1. Introduction
2. Capitalist variety can resist globalization
3. Varieties of capitalism – taxation
4. Varieties of capitalism – public spending
5. Varieties of capitalism – income inequality
6. Varieties of capitalism – wealth inequality
7. Varieties of capitalism – emissions control
8. Conclusion
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 Capitalism – Global Convergence or Infinite Variety?
1. Introduction
The Cold War (1948-1989) polarized political and
economic debate between socialism and capitalism.
The literature on “varieties of capitalism” took off after
the collapse of the Soviet Bloc in 1989-1991
(Albert 1991; Whitley 1992; Berger and Dore 1996 …)

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Capitalism – Global Convergence or Infinite Variety?
1. Introduction

The literature on “varieties of capitalism” …

(a) Countered a Marxist view that all capitalisms

follow a similar developmental track:

Marx followed Aristotle in presuming a “natural

state model” (Sober 1980; Hodgson 2015, 2016).

(b) Countered notions that one form of capitalism is

natural, inevitable or ideal.

“The end of history” (Fukuyama 1992).

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Capitalism – Global Convergence or Infinite Variety?
1. Introduction

A high point in the literature on “varieties of capitalism” was

Hall and Soskice (2001).
But this has been criticized, for reasons including:
(a) Its simplistic binary distinction between “liberal” and
“coordinated” market economies,
(b) Its over-emphasis on the stability of institutional
complementarities, thus neglecting the possibility of
change (e.g. Schneider and Paunescu (2012)), and
(c) Its exclusive focus on distinct national capitalisms, thus
downplaying the reality of capitalism as a globalized
system (e.g. Peck and Theodore (2007)).
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 Capitalism – Global Convergence or Infinite Variety?
1. Introduction

Further challenges to the “varieties of capitalism” literature

followed the Great Crash of 2008, and the widespread
adoption of austerity policies in different countries.

These challenges emphasized capitalism as a globalized

system and the pervasive global impact of “neoliberal” austerity.

Widespread use of term “varieties of capitalism approach” to

refer to the (criticized) Hall and Soskice (2001) work alone.

The “varieties of capitalism” issue became sidelined. 5 / 22

Capitalism – Global Convergence or Infinite Variety?
1. Introduction

The “varieties of capitalism” issue is still vital

The study of actual varieties of capitalism is important,

irrespective of the value of one book with that title.

The faults in the account of institutional

complementarities in Hall and Soskice (2001) do not
imply that institutional complementarities are non-
existent, unimportant or unalterable.

Manifest variety in actually-existing capitalism has to be

understood, irrespective of matters of global
convergence or local change.
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Capitalism – Global Convergence or Infinite Variety?
1. Introduction

The “varieties of capitalism” issue is still vital

It relates to the issue of socialism versus capitalism.

This debate has been heightened since 2008.

In a 2017 survey of American adults, 37 per cent

preferred ‘socialism’ to ‘capitalism’.

In the UK 39 per cent of adults have an unfavourable

view of ‘capitalism’, while 33 per cent were favourable.
36 per cent of this sample viewed ‘socialism’ positively,
compared to 32 per cent negatively.
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 Capitalism – Global Convergence or Infinite Variety?
1. Introduction

The “varieties of capitalism” issue is

still vital:

Socialists often compare real-world

capitalism (with all its defects) … with an
imaginary socialism (with defects absent
or diminished).

But is a humane socialism feasible?

We also must look at varieties of actual

capitalism.
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 Capitalism – Global Convergence or Infinite Variety?

2. Capitalist variety can resist globalization

Institutional complementarities: Pagano (1991), Amable

(2000), Aoki (2001), Hall and Soskice (2001), Boyer (2005),
Gagliardi (2009) etc. …

Countries are at different levels of development and are

experiencing different rates of growth  variety preserved.

Institutions that are more effective at one level of

development are often less effective in another.

Institutions that are necessary for higher growth rates are

different from those suitable for more gradual change.
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Capitalism – Global Convergence or Infinite Variety?
3. Varieties of capitalism – taxation
40

35 Denmark

30
Sweden
25 UK
France
Netherlands
20

15 Brazil
Germany/US/India/Japan
10 China

0
9 75 977 979 981 983 985 987 989 991 993 995 997 999 001 003 005 007 009 011 0 13 015
1 1 1 1 1 #REF!
1 1 1 1 #REF!
1 1 1 1 Brazil
2 2 2 #REF!
2 2 2 2China 2
Denmark #REF! France Germany #REF!
India #REF! #REF! Japan #REF!
#REF! Netherlands #REF! #REF! #REF!
#REF! Sweden #REF! #REF! United Kingdom
United States

Tax Revenue as a Percentage of GDP

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 Capitalism – Global Convergence or Infinite Variety?
3. Varieties of capitalism – taxation

1975 1980 1985 1990 1995 2000 2005 2010 2015

Mean of 24
Countries 16.1 17.2 17.8 18.0 18.4 19.8 19.6 18.6 19.4
Standard
Deviation 5.93 6.16 6.78 6.76 7.09 7.15 7.28 6.89 6.74
World Mean 13.4 14.3 14.0 14.2 14.6 15.6 14.3 13.5 15.0

Tax Revenue as a Percentage of GDP in 24 Countries

The 24 countries are: Australia, Austria, Brazil, Canada, Denmark, Finland,
France, Germany, Greece, India, Ireland, Italy, Japan, Mexico, Netherlands,
New Zealand, Norway, Portugal, South Korea, Sweden, Switzerland, Turkey,
United Kingdom, and United States. Data Source: World Bank (2017).
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Capitalism – Global Convergence or Infinite Variety?
4. Varieties of capitalism – public social spending
1980 2005 2015 changes
Australia 10.3 16.5 18.8 + +
Austria 22.4 27.1 28.0 + +
Belgium 23.5 26.5 29.2 + +
Canada 13.7 16.9 17.2 + +
Denmark 24.8 27.7 28.8 + +
Finland 18.1 26.2 30.6 + +
France 20.8 30.1 31.7 + +
Germany 22.1 27.3 25.0 + – Up then Down
Italy 18.0 24.9 28.9 + +
Japan 10.2 18.5 23.1 + +
Netherlands 24.8 20.7 22.3 – + Down then Up
Norway 16.9 21.6 23.9 + +
Portugal 9.9 23.0 24.1 + +
Spain 15.5 21.1 25.4 + +
Sweden 27.1 29.1 26.7 + – Up then Down
Switzerland 13.8 20.2 19.6 + – Up then Down
UK 16.5 20.5 21.5 + +
US 13.2 16.0 19.0 + +
Mean 17.9 23.0 24.7 + +
Standard Deviation 5.44 4.50 4.36 – – Falling Variation

Public Social Spending as Percentage of GDP 12 / 22

 Capitalism – Global Convergence or Infinite Variety?
5. Varieties of capitalism – income inequality
  Before taxes and transfers After taxes and transfers
2004 2007 2010 2013 2004 2007 2010 2013
Australia 0.42 0.42 0.42 0.42 0.31 0.32 0.32 0.32
Austria 0.41 0.42 0.43 0.43 0.27 0.28 0.28 0.28
Belgium 0.45 0.41 0.42 0.43 0.29 0.28 0.27 0.27
Canada 0.41 0.41 0.42 0.41 0.32 0.32 0.32 0.33
Chile 0.50 0.50 0.50 0.49   0.48 0.48 0.47 Weak redistribn
Denmark 0.38 0.37 0.39 0.40   0.24 0.25 0.25 Lower inequality
Finland 0.42 0.42 0.42 0.42 0.27 0.27 0.27 0.26 Lower inequality
France 0.43 0.43 0.45 0.45   0.30 0.30 0.29
Germany 0.42 0.41 0.40 0.42 0.29 0.29 0.28 0.30
Ireland 0.45 0.47 0.54 0.53 0.31 0.30 0.30 0.32
Israel 0.50 0.48 0.48 0.42   0.35 0.36 0.34
Italy 0.40 0.42 0.44 0.44 0.33 0.31 0.32 0.33
Japan 0.40 0.40 0.38   0.33 0.33 0.32
Mexico 0.46 0.45 0.47 0.45 0.45 0.44 0.46 Weak redistribn
Netherlands 0.39 0.38 0.40   0.30 0.29 0.28
New Zealand 0.43 0.41 0.40 0.42   0.32 0.31 0.33
Norway 0.40 0.37 0.38 0.38 0.29 0.26 0.26 0.26 Lower inequality
Poland 0.53 0.45 0.43 0.42 0.37 0.32 0.31 0.30
Portugal 0.45 0.46 0.46 0.50 0.38 0.35 0.34 0.34
South Korea 0.32 0.32 0.31   0.30 0.30 0.28
Spain 0.39 0.40 0.46 0.48 0.32 0.31 0.34 0.35
Sweden 0.37 0.37 0.38 0.38 0.24 0.25 0.27 0.28
Switzerland 0.33 0.33 0.33 0.34   0.28 0.28 0.29
United Kingdom 0.45 0.47 0.47 0.47 0.35 0.37 0.35 0.35
United States 0.46 0.46 0.47 0.48   0.37 0.37 0.39 High inequality
Standard Deviation 0.042 0.046 0.049   0.055 0.053 0.053
OECD Average 0.42 0.43 0.43   0.31 0.31 0.31

Gini Coefficients for Distributions of Income 2004-13 13 / 22

 Capitalism – Global Convergence or Infinite Variety?
5. Varieties of capitalism – income inequality

Branko Milanovic (2011) showed that level of global income

inequality has increased since the early 19th century, reaching
a high level in about 1950, with slower growth since.

In the early 19th century, most global income inequality was

due to differences within countries.

By the early 21st century most global income inequality was

due to differences between countries.

Much of the change in global inequality in the next few

decades could result from economic growth in large and
lower-income countries – eg. China, India, and Brazil.
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 Capitalism – Global Convergence or Infinite Variety?

5. Varieties of capitalism – income inequality

It is possible for inequality to increase

within every country while global inequality
decreases (Milanovic 2005).
- Simpson’s Paradox (Yule-Simpson
Effect)

Globalisation does not necessarily

generate greater inequality.
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 Capitalism – Global Convergence or Infinite Variety?
5. Varieties of capitalism – income inequality

Global Income Distribution 1988-2011 16 / 22

 Capitalism – Global Convergence or Infinite Variety?
6. Varieties of capitalism – wealth inequality
  Share of top  
Year (for
Unit (for
share
  share data) 20% 10% 5% 2% 1% Gini
data)

Australia 2010 household 61.8 0.622 High

Brazil               0.784
China 2002 person 59.3 41.4 0.550
France 2010 adult 62.0 24.0 0.730
Germany 2007 household 61.1         0.667
India 2002 household 69.9 52.9 38.3 15.7 0.669
Italy 2010 household 62.6 45.7 32.9 21.0 14.8 0.609
Lower
Japan 1999 household 57.7 39.3   0.547
Netherlands 2008 household 78.5 62.7   0.650
Norway 2004 household 80.1 65.3   0.633
Russia               0.699
Spain 2008 household 61.3 45.0 32.6 21.7 16.5 0.570
Sweden 2007 adult 67.0 49.0 24.0 0.742
Switzerland 1997 family 71.3 58.0 34.8 0.803 High
UK 2008 adult 62.8 44.3 30.5 12.5 0.697
USA 2010 family 86.7 74.4 60.9 44.8 34.1 0.801
High

Distributions of Wealth in Selected Countries 17 / 22

 Capitalism – Global Convergence or Infinite Variety?
7. Varieties of capitalism – emissions control
1980 2018 change
 Brazil 1.5 2.4 60%
 Canada 18.0 16.1 -11%
 Chile 2.2 5.0 127%
 China 1.5 8.0 433%
 Denmark 11.8 5.8 -51%
 Finland 12.2 8.8 -28%
 France 9.1 5.0 -45%
Germany 10.6 9.1 -14%
 Japan 8.1 9.4 16%
South Korea 3.5 13.6 289%
 Norway 9.3 9.4 1%
 Sweden 8.6 4.5 -48%
 United Kingdom 10.3 5.6 -46%
 United States 20.8 16.1 -23%
 Vietnam 0.3 2.8 833%

Annual carbon dioxide emissions [tons] per capita

Source: EU 18 / 22
Capitalism – Global Convergence or Infinite Variety?

8. Conclusion
The evidence of convergence among leading
capitalisms is patchy. Variety persists.

Post-1975 convergence due to so-called

“neoliberalism” is less than often alleged.

Comparative evidence suggests that

redistributive and welfare measures within
capitalism can work.

Arguably, they need to work much better. 19 / 22

Capitalism – Global Convergence or Infinite Variety?

8. Conclusion

Danger of relying on imaginary

socialist solutions ...

… which are simply presumed to

work “next time” …

… despite the failure of every

previous socialist experiment ...
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Capitalism – Global Convergence or Infinite Variety?

8. Conclusion

We need to learn
from the best variants
within actually
existing capitalism,
and try to improve
upon them.
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Capitalism – Global Convergence or Infinite Variety?

Thank you!

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