The Political Construction of Business Interests: Coordination, Growth and Equality

Cathie Jo Martin and Duane Swank, guest bloggers

Labor market coordination is the lynchpin of high-performance societies that maximize economic growth and equality, yet why does business ever cooperate?  In a story replete with unintended consequences, The Political Construction of Business Interests recounts employers’ struggles to define their collective social identities at turning points in capitalist development, to understand why coordinated capitalism emerges in some countries but not others.  The book tells of the construction of peak employers’ associations at the beginning of the Twentieth Century, the efforts to sustain these associations at century’s end, and the impact of these institutions on employers’ preferences for the welfare state.

Politicians (with incentives shaped by party politics) took the initiative in association-building and those that created the strongest associations were motivated to evade labor radicalism and to preempt parliamentary democratization.  Employers across countries shared a desire for coordination at the dawn of the Twentieth-Century, but peak associations were formed by government party leaders for political purposes and institutional outcomes reflected the differential incentives for politicians to delegate policy-making authority to private channels for negotiation.  Party leaders had greater incentives to delegate authority in multi-party systems than in two-party systems, and this led to corporatism; the structure of business representation, in turn, influenced the evolution of other institutions for coordinated capitalism such as vocational training systems and welfare state policies.  This first half of the book offers quantitative cross-national analysis on 18 developed capitalist democracies and primary-source-based case studies of the formation of employers’ associations in Denmark, Britain, the US and Germany (based on secondary sources.)  The structure of party competition has a similar impact on efforts to preserve coordination in the transition from the industrial to the post-industrial economy.

Employers are most likely to support social investments in countries with strong peak business associations, that help members form collective preferences and realize policy goals in labor market negotiations.  Interviews with 107 randomly-selected firms in Denmark and the United States reveal that macro-corporatism makes firms more likely to participate in active labor market programs for the long-term unemployed.  Significant business involvement in the creation of the plans – and consequent construction of the programs along very pragmatic lines – bring Danish employers to participate for real economic interests, while British ones largely participate for cheap labor or PR reasons.  Moreover, Danish employers and workers participate in order to maintain their jurisdictional control over labor market policy against the threats of an intrusive state.  Cross-national quantitative analysis demonstrates that macrocorporatism enhances social spending at the cross-national.

The research has important implications for the construction of business as a social class and powerful ramifications for equality, welfare state restructuring and social solidarity.  Encompassing employers’ groups and accompanying macro-corporatist institutions allow governments to build coalitions to maintain labor market equality, significant redistribution, and economic efficiency in the face of post-industrial change.

Cathie Jo Martin is a Professor of Political Science at Boston University. Duane Swank is a Professor of Political Science at Marquette University in Wisconsin.

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