The ANNALS of the American Academy of Political and Social Science

The analytical, policy, and ethical issues raised by the contemporary crises of economic performance in the United States and the attendant crisis in economic theory might well serve as a critical catalyst for consummating a marriage of political science and institutional economics. Besides generally compatible modes of reasoning about economy and polity, political scientists and institutionalists share two essential perspectives on the problems of explaining economic performance and prescribing government roles in the economy which suggest a common research agenda: (1) a similar dissatisfaction with the epistemological and ideological characteristics of the mainstream economic debate about the policy and performance failures of the 1970s; and (2) some initial distinctive propositions about the institutional, structural, and political determinants of contemporary economic performance in the United States that can be empirically tested and that may serve as an entry point into the academic and policy debates of the 1980s.

Focusing on France, Great Britain, Sweden, and the United States, this study attempts to answer two basic questions. First, how does one explain the variation across these countries in the organizational structure and the power of the working class? Second, for the period since 1950 how does variation in the organizational structure, the power of the working class, and the structure of the state influence such economic performances as inequality in the distribution of income and rates of change in economic productivity? Whereas the discipline of economics generally explains these performances with economic variables, this article is distinctive in demonstrating that political variables are also important. The findings indicate that the encompassing group structure of Swedish labor unions has maximized equality in income distribution and high rates of change in economic productivity while the fragmented and nonencompassing group structure of American labor has had the opposite effect. Sweden and the United States are polar opposites, with the British and French cases falling between the two extremes on most variables.

This article examines the validity of the assertion that low growth, high unemployment, and increasing inflation were all produced by excessively high levels and large increases in public spending. The article presents a systematic analysis of the relationships among 19 nations between increases in spending and lower rates of economic growth, higher unemployment, increases in deficits, and inflation. The article concludes that, contrary to the conventional macroeconomic wisdom, high levels of spending and large increases in spending have not caused stagflation—the obvious implication therefore being that fiscal conservatism will have little beneficial effect on the economy. And the article concludes that, again contrary to conventional wisdom, a large and expanding welfare state may be compatible with, and beneficial to, a capitalist economy.

In countries characterized by a tradition of an active rather than a passive state, such as Sweden and West Germany, politics constitutes an important autonomous factor in determining policy choices and hence economic and social outcomes over time. The key actors in this context are political parties and their aligned or affiliated interest groups. During the postwar period the Social Democrats initiated a policy shift toward neo-Keynesian expansionist economic measures in an effort to sustain growth and minimize unemployment in both countries, whereas the more conservative Christian Democrats were responsible for implementing a less interventionist policy based on social market economic principles during the formative years of the Federal Republic. As a result of these policy similarities and differences—buttressed by the contrasting role of organized labor in the two countries—Sweden and West Germany have experienced both convergence and continued divergence with respect to their economic and social performance. An important consequence is that they appear to have evolved different types of corporatism—with concomitant implications for both the comparative study of advanced industrial societies and democratic theory.

Traditionally the problem of macroeconomic coordination has been discussed as being best done by either free-market competition or controlled planning. Such a formulation ignores several alternatives that societies can employ to encourage growth. Usually the argument for or against free-market competition has been fought on ideological grounds rather than by ascertaining whether it is most appropriate in some sectors of the economy rather than in others. To do this requires some way of conceptualizing economic sectors that breaks away from traditional thinking. This article suggests a four-sector model and then argues that there are four styles of coordination, each of which is most appropriate in a particular sector. It is argued that there is no single way to maximize growth in an economy and that different coordination mechanisms should be employed in different market contexts.

This article addresses the question of whether political decentralization is compatible with economic growth. Although the so-called causes of economic growth are indeterminant, governmental centralization has clearly been associated with it for more than a century in industrialized Western democracies. Arguments have been made for the functions of government in facilitating and integrating national markets. The position of this article is that beginning in the 1960s governmental centralization began to shift its role from a contributing to a dampening factor in the processes of economic growth. In fact most of the Western democracies are attempting to reverse the long-term trend of central governmental concentration, whether or not this fosters economic growth.

The emergence of a group of newly industrializing countries has received considerable attention in the scholarly literature today. However, most of the attention has focused on the economic aspects of this phenomenon, for example, changing comparative advantages, utilization of cheap labor markets, and tariff structures. The role of the state in this process of industrial growth has been neglected. The state plays a role in economic growth in various ways: supplying infrastructural needs—transportation and communication—subsidizing development in areas of high growth potential, and entering the economy directly in the form of state enterprises. These forms of state economic activity, as well as an argument for state involvement in the economy, are examined in this article.

The performance of the American economy during the 1970s was distinctly inferior to the record of the previous decade. A prominent hypothesis is that oppressive government regulation was largely responsible for the poor performance of the 1970s. This article examines that hypothesis with respect to a key marcoeconomic indicator: the rate of productivity growth.

Trends in the tax revenues of five Western nations from 1900 to 1978 are examined. As tax revenues have increased from 10 to 40 percent of gross national product (GNP), indirect taxes have proportionately declined, displaced by social insurance and direct taxes. More of the tax burden is being paid by employers; sales and value-added taxes have become more important among indirect taxes; income taxes have displaced wealth taxes among the direct tax forms. Changes in tax administration, economic impact, and the politics of taxation are examined as possible limitations on the further growth of taxation and economic management by taxation. It is argued that the marked increase in the tax/GNP ratio cannot be regarded as having a proportionate impact on the ability of governments to manage economic performance by taxes.

This examination of the French experience with public-private or mixed-economy corporations in the area of urban renewal and housing explores the advantages and disadvantages of involving private capital on a for-profit basis in the financing and implementation of certain types of public service. Although urban mixed-economy corporations initially helped the French to address their postwar housing crisis, the private partners to such arrangements have increasingly turned from low-income housing to more profitable ventures. The French case suggests the difficulty of sustaining a social housing program underwritten by private capital.

Monetarist economists appear to have achieved a high level of success in having their policy ideas put into practice. The monetarists are analyzed here as a political group. They are characterized as a loosely organized group offering distinct policy prescriptions, closely aligned with neoliberal political forces. The supply of monetarists is discussed in terms of their relative numbers and shared socialization experiences. The demand for monetarist analysis stems from needs for policy prescriptions, from self-interest, and from need for ideological reassurance. This article concludes with the argument that monetarists' success depends on their ability to convince policymakers outside the Federal Reserve to adopt a monetarist line.