Summary
Varieties of capitalism provide an approach for understanding various similarities and differences in employee relations. The institutional capitalism structure was linked to compatibility with productive activities. The theory originates from a political economy discipline that seeks to explain various patterns of employee relations in different states. It was prompted by the increase in neoliberalists citing problems in the economic setup that was as a result of government interference and inaccessible market functions (Hall & Soskice, 2001). The other influence of the theory is the fall of Soviet communism and the effects realized from relative performances witnesses from Germany, Japan, and South Korea, thus raising doubts about neo-liberal claims (Jasiecki, 2018). The two scenarios outline the connection between varieties of capitalism and employee relations in various countries.
The varieties of capitalism are characterized by a central approach to the advantage of institutional comparative and coordination problems that organizations face. The challenges are experienced in industrial relations, corporate governance, employee relationship, inter-firm relation, and vocational training and education practices (Hall & Soskice, 2001). The theory argues that identifying two institutional solutions is effective for addressing the issues. The ideal forms of capitalism include liberal markets and coordinated market economies. Firms use both internal and external solutions to coordinate problems.
National institutions also play an integral role in shaping firms’ approaches to coordination challenges. For instance, liberal market economies state that firms need to solve their coordination problems through markets and hierarchies such as arm’s length relations and higher competition levels. Coordinated market economies (CME) highlight the need for firms to resolve the challenges using the market and hierarchies and through non-market institutions that help solve internal and external problems (Jasiecki, 2018). The liberal markets are characterized by well-developed capital and market mechanisms that help coordinate supplier and buyer relations. Liberal market economies (LME) are also a market-based form of industrial relations with few commitments in the long run by employers and workers.
Strengths of Varieties of Capitalism
Varieties of capitalism (VoC) approach is a source of new methodological and theoretical inspirations important in the comparative study of employee relations. The framework draws focuses on various institutions’ holistic nature in creating relatively coherent patterns of complementarity (Howell, 2019). The theory has a sizeable cognitive potential that is considered helpful in providing discussions about systematic changes and the differences between varieties of capitalism among employee relations in certain countries.
The approach has the strength of providing an analytical and conceptual framework for statistics, conceptual grids, typologies, and indicators. The theory’s inspirational uses provide a source of comparative databases and significant comprehensive literature about industrial relations (Jasiecki, 2018). Some of the reports include European industrial reports, European participation index, and research centers such as the European trade union institute and European industrial relation observatory.
In providing the comparison for employee relations, the VoC approach has the strength of drawing attention to sectoral, national, and social responses to the crisis and the globalization challenges. Therefore, it provides helpful analysis in line with how national employee interests are translated into international employee relations (Jasiecki, 2018). Providing the comparison for employee relations, the VoC approach has the strength of drawing attention to sectoral, national, and social responses to the crisis and the globalization challenges. Therefore, it provides helpful analysis in line with how national employee interests are translated into international employee relations (Jasiecki, 2018).
Weaknesses of VoC
The increased discussions on capitalism have drawn a lot of attention to critiques and weaknesses, despite its central role in providing comparative theories of economics, politics, and economic sociology. For instance, the framework does not provide enough variety apart from the CME and LME distinctions that has failed to capture all the diversities in market economies. It also makes it impossible for several Organization for Economic Co-operation and Development (OECD) countries such as India, China, and European countries such as Italy, France, Portugal, and Spain. The countries are challenging to accommodate in both categories of CME and LME (Jasiecki, 2018). The categories are also considered significant, making the framework easily ignore the crucial differences present in countries classified under the same variety. For instance, Germany and Japan are both CMEs, and therefore, essential differences in line with the foundations of their institutions have been overlooked.
The approach also suffers from the weakness of the deterministic or static conception of societies and institutions. It leads to the comparisons of two countries at an exact point in time, assuming that only two varieties of capitalism are viable and therefore change to another category is quite impossible (Jasiecki, 2018). It also makes it challenging to give explanations of where change occurs. Sometimes the theory assumes that social factor behaviors like unions and employers are determined to a more significant extent by the institution’s context (Baccaro & Howell, 2011). It implies that once the institutional order is established, the social action path is dependent. It downplays the role of conflict, power, politics, and agency. The other weaknesses of the approach include ignoring international factors. Therefore, the approach should capture more differences in market economies in social organization.
The framework for varieties of capitalism helps in understanding the similarities and different characteristics in employee relations. VoC is also characterized by a central approach to the advantage of institutional comparative and coordination problems that organizations face. The approach helps to provide an analytical and conceptual approach for statistics, conceptual grid, typologies, and indicators. However, the weakness of the framework includes the deterministic or static conception of societies and institutions. It makes it challenging to give an explanation of where change occurs. Therefore, varieties of capitalism provide helpful analysis in line with translating national interests into international employee relations.
References
Baccaro, L., & Howell, C. (2011). A common neoliberal trajectory: The transformation of industrial relations in advanced capitalism. Politics & Society, 39(4), 521-563. Web.
Hall, P. & Soskice, D. (2001) An Introduction to Varieties of Capitalism. In P. Hall and D. Soskice (Eds.), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, (pp. 1-68). Oxford University Press.
Howell, C. (2019). Neoliberalism, capitalist growth models, and the state: An agenda for industrial relations theory. Journal of Industrial Relations, 61(3), 457-474. Web.
Jasiecki, K. (2018). The strength and weaknesses of the varieties of capitalism approach: The case of Central and Eastern Europe. International Journal of Management and Economics, 54(4), 328-342. Web.