In the last decade Austria has successfully coped with extraordinary political and economic changes; most important among these was the accession to the European single market. Contrary to widespread expectation, Austro-corporatism did not continue to decline but made an astonishing comeback. This was accomplished despite no longer being able to rely on the government's traditional policy of explicit demand management. Left without a fiscal stimulus, and having to cope with the twin effects of economic internationalization and modernization, it was necessary to develop a new basis for the legitimacy of Austro-corporatism. This was made possible by a transition to supply-side corporatism, which appears uniquely suited to complement and take advantage of market liberalization, modernization, and economic integration. Under supply-side corporatism, corporatist actors function primarily as producers of collective goods not provided by an opportunistic market or by a political system constrained by a loss of economic competencies and political fragmentation. The competitive advantage of supply-side corporatism lies in achieving organized ‘flexibilization’ and decentralization; upgrading, that is, succeeding in market segments of high value-added products; macro-level coordination; and by rendering vital public policy support. A high level of macro-level coordination and concerted effort continues to be necessary to channel infrastructure development, investment in human capital, skill formation, and public investments into those niche segments of the industry in which Austria enjoys a natural advantage over its competitors.
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