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Re-Embedding the Market: Governing the Economy After World War II

Re-Embedding the Market: Governing the Economy After World War II . Darius Ornston February 19, 2009. The Agenda. The Great Depression The Liberal Response The Social Democratic Response The Conservative (Communitarian) Response. 1. The Great Depression.

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Re-Embedding the Market: Governing the Economy After World War II

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  1. Re-Embedding the Market: Governing the Economy After World War II Darius Ornston February 19, 2009

  2. The Agenda The Great Depression The Liberal Response The Social Democratic Response The Conservative (Communitarian) Response

  3. 1. The Great Depression

  4. Capitalism in Crisis: The Great Depression

  5. The Russian Revolution

  6. Domestic Demagogues

  7. From Popular Front

  8. To Conservative Reaction

  9. And Fascist Dictatorship

  10. Rebuilding Postwar Capitalism

  11. 2. The Liberal Response

  12. John Maynard Keynes

  13. Keynes and the Limits of the Market • Wages are sticky, the price of labor may not adjust to changes in demand • Any reduction in supply decreases quantity (employment) rather than prices (wages) • Falling employment depresses demand even further, markets do not necessarily correct • Requires government intervention to increase demand, restore state of full employment

  14. The Welfare State • Social insurance: Insures against inability to work, whether from unemployment, disability or old age • Health insurance: Universal health insurance or access to health care • Education: Free primary, secondary and university education or access to training and continuing education • Child care: Child care before primary school to support labor market entry

  15. The Liberal World of Welfare • Low benefits: Relatively meager unemployment and retirement benefits • Unequal benefits: Poor rely on (low) public benefits, middle-class rely on (higher) private benefits • Private sector priority: Pension, health care supplied by employer, requires participation in the market

  16. 3. The Social Democratic Response

  17. The Social Democratic World of Welfare • High benefits: Generous unemployment insurance, retirement pensions • Equal benefits: Both lower and middle classes rely on the same social policies • Public sector administration: Many benefits (child care, health care) are administered by the state

  18. The Consequences of the Social Democratic Welfare State • A source of solidarity: Workers (and the middle class) rely on the same welfare state • Labor power resources: The welfare state creates jobs (health care, child care) and a solid voting bloc • Contesting corporate control?: Pension funds as significant actors in Scandinavian financial markets

  19. The Dark Side of the Socialist Welfare State • Limited choice: Very little discretionary income in Denmark, Norway and Sweden • Limited democracy: Trade union influence is not always democratic

  20. Swedish Socialism at Work: The Smoke-Filled Room

  21. The Dark Side of the Socialist Welfare State • Limited Choice: Very little discretionary income in Denmark, Norway and Sweden • Limited Democracy: Trade union influence is not always democratic • Challenging Conservative Beliefs: Non-traditional role for women and mothers

  22. 4. The Conservative (Communitarian) Response

  23. The Conservative (Communitarian) World of Welfare • High benefits: Generous unemployment insurance, retirement pensions • Unequal benefits: Unequally distributed depending on occupation and contributions • Corporatist administration: Delegated to new or traditional social organizations (trade unions, industry associations)

  24. The Consequences of the Conservative (Communitarian) Welfare State • Reinforces traditional gender roles: Emphasis on contribution history punishes labor market exit • Reinforces occupational distinctions: More generous benefits for some occupations, civil servants

  25. The Developmental State: Another Communitarian Response • Forced savings: Require workers to save in private or public institutions • Subsidized credit: Channel subsidized credit to domestic industry • Credit rationing: Delegated to new or traditional social organizations (trade unions, industry associations)

  26. Explaining The Rise of the Developmental State • The Great Depression: Crisis of capitalism undermined faith in market institutions • World War II: The state proved relatively effective at allocating resources, planning • National security: Developmental state often a response to serious security concerns (France, Finland, Austria)

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