Varieties of Capitalism, Neo-Liberalism and the Economic Crisis of 2008?

Abstract

During a visit to the London School of Economics in 2009, Queen Elizabeth II asked why economists had failed to foresee the economic crisis that erupted in 2008. In fact, a number of economists had predicted a financial crisis (e.g. Brenner 2004, Harvey 2005), but these individuals were typically far from the centres of power and working outside the mainstream of the economics profession. The assumption of most mainstream economists was that economic stability could be ensured more-or-less in perpetuity thanks to improvements in monetary policy that had tamed the business cycle and produced a „great moderation‟ 2 . Analyses that assumed the stability of capitalist economies were not confined to the mainstream however. The Varieties of Capitalism (VoC) analysis associated with Hall and Soskice (2001), and which has proved highly influential in the field of industrial relations, was also blind to the sources of instability developing within capitalist economies. As this paper seeks to demonstrate, a preoccupation with institutions, and an associated neglect of social agency and the dynamics of the capitalist mode of production, has left the VoC frame of analysis ill-equipped to provide insights into the causes and consequences of the current crisis. In particular, the VoC literature has little analytical purchase on the growth of the finance sector as a distinctive fraction of capital, the role of the state in promoting specific accumulation paths and shifts in capital-labour relations, all of which have influenced the causes and specific characteristics of the crisis. It also provides an inadequate guide for understanding responses of national governments to the crisis and the implications for workers.