Sasha Wasserstrom
Department of Politics, University of California, Santa Cruz

Varieties of Capitalism (VoC) is a framework coined by scholars Peter Hall and David Soskice, which posits that there are two principle variations in the structure of market economies in capitalist societies (Hall and Soskice 2001, 1). Hall and Soskice claim that these two systems form the basis of the interplay between actors working within the market, whether that be the state, private enterprise, public institutions, trade unions, etc, and thus create a sort of framework for interaction and decision-making that can be categorized and analyzed (2). This body of literature seeks to provide an alternative structure for interpreting the ways in which social entities interact and the reasons for why, as Hall clarifies, “at the heart of these inquiries are questions, not only about how political economies differ but also why ensembles of institutions cohere” (2).

In his article, “Varieties of Capitalism”, Hall focuses on a specific entity in the system, in this case, the role of firms, and investigates the ways in which firms themselves coordinate in the two principle variations of capitalist systems (Hall and Soskice 2001, 3). They call these two systems liberal market economies (LME) and coordinated market economies (CME) (3). The LME system is one in which firms are generally more competitive and coordinate via hierarchies, contracts and formal, distanced agreements (8). This system relies on market mechanisms, such as price, to dictate the behavior of firms that engage within it and is exemplified in an economy such as the United States (4). Conversely, CMEs are more explicitly coordinated in nature, both by the state and by the entities that interact within it as exemplified in the economies of East Asia and northern Europe (in fact, Hall states that there are numerous variations of both system types that inform the dynamics he describes) (4). However it is not as simple as just being centrally coordinated by state interventions and institutions; Hall distinguishes the CME market economy as one in which different firms work hand-in-hand in an informal manner. In this way the environment is more collaborative and less competitive, relying more on relational correspondence, rather than formal contracts for cohesion (8). Thus, the power dynamic and the way in which firms balance or coordinate their behavior in order to either maintain or disrupt this balance is what distinguishes these two types of economies (5). Hall indicates that by being able to dissect and analyze the dynamics at play and the way in which the economies in question are designed, we are better able to understand the reasoning behind the actions that are being taken, particularly in the case of producer groups, i.e. firms that are supplying commodities to the market (8).

In his article “Corporate Codes in the Varieties of Capitalism” (2017), Teubner  provides an interesting intervention into the discussion of varieties of capitalism by engaging with the problems that have arisen due to globalization. Teubner intervenes by defining a new conception of the organization that occurs within market economies underneath the umbrella of varieties of capitalism, as well as seeks to address the question of how globalization has impacted regulation and law enforcement when territorial boundaries of the national market economy have been diminished (82). However, let’s begin with Teubner’s addition to the conceptualization of varieties of capital. In the aforementioned article, Teubner emphasizes the importance of understanding what he calls, production regimes, which he defines to be the specific rules of a particular market economy as they “ are the structure of the production of goods and services by way of markets and market-related institutions… the incentives and constraints of economic transactions, [are] formulated through an ensemble of institutions in which economic activity is embedded” (84). Teubner asserts that the idea of production regimes is important to understand when thinking about globalization as, unlike the varieties of capitalism described by Hall and Soskice, production regimes are able to transcend territorial borders and still dictate the ways in which firms do business in an international context. This is a troubling issue for the regulation of multinational corporations that act both outside of one particular market economy and production regime. Teubner brings attention to the difficulties in regulation and application of law when, due to the transnational nature of globalized economy, there is no centralized authority to create or apply it, particularly when differing varieties of capital and production regimes dictate relationships and responses among institutions and participating actors.

Bibliography

Hall, Peter A., and David Soskice. “Varieties of Capitalism.” Annual Review of Political Science 4, no. 1 (2001): 11-43.

Teubner, Gunther. “Corporate Codes in the Varieties of Capitalism: How Their Enforcement Depends on the Differences Among Production Regimes.” Indiana Journal of Global Legal Studies 24, no. 1 (2017): 81-97.