Session 1: Introduction Competition in the Digital Global Economy (8:45 – 9:45)
The central recommendation concerns a new pact for research and innovation that requires heavy commitment from political, business and social leaders. The experts stress the necessity of providing three factors to increase European innovation. First, they stress developing an innovation-friendly market predicated on the reduction of impediments to research and technological developments. Second, they propose an increase in resources in an effort to strengthen links in the science-industry nexus. Third, they suggest strategies to increase the mobility of human resources, finances for venture capital in the knowledge-based economy, and mobility in organization and knowledge. In general, the report advocates rethinking resources for R&D and innovation in which European values are preserved in a new social structure.
In a digital era, companies and countries must determine whether manufacturing capacity is a strategic asset or a vulnerable commodity. For companies, the relevant issues are: When does production serve to generate and maintain advantage? Under what circumstances is a lack of in-house world-class manufacturing skills a strategic vulnerability? When is it simpler and easier to buy production as a commodity service? For a country or region, the relevant issue is: What can be done to make this country/region an attractive location for world-class manufacturing, that is, an attractive place for companies to use production in order to create strategic advantage?
This paper develops three arguments. First, the argument about product in a digital age is set in the context of the argument that a service economy will follow on a manufacturing economy. The author demonstrates there is in fact an evolution and reorganization of production hidden within the statistics. Second, the emergence of the digital era is put into a historical context. Third, the place of production in value creation and market position is considered for three different types of sectors.
The increasing importance of computers, software, and electronics-related technologies is only the most prominent feature of an all-encompassing realignment of the cutting-edge of capitalism to emphasize information and knowledge creation. The expenditure of human energy in physical activity is becoming less and less important as a source of value. As a result, business must try to increase profits by harnessing the enormous value-added that results from the creativity of human beings working in groups. This value is created, not only by researchers and designers, but also by technicians and even operators at manufacturing sites or, more properly, at ‘systemofacture’ sites (Hoffman and Kaplinsky 1988).
This essay builds on earlier work by authors such as Morris-Suzuki (1984) in an effort to untangle current thinking about the nature of value-creation in the late twentieth century. With the collapse of Fordism, previously accepted norms of nature of work and the source of value are being fundamentally disrupted. These changes, which are extremely complicated and global, are puzzling to the managers and theoreticians of capitalism. At the same time, they have provoked remarkably little interest on what remains in the Left. However, if there is to be a new radical agenda, it will once again have to return to the nature of production or, put somewhat differently, the question of value creation.
These documents show the variety of government perspectives toward the challenges and opportunities of a modern global digital economy. They range from the smallest state in the United States ( Rhode Island) to larger nations such as the United Kingdom. They provide not only a sense of how different political bodies situate themselves in the challenges of the world but also their perceived capacity for response. Since our conference is as much about the political economic environment of regions as it is about business opportunities, understanding the framework in which firms work and its potential for change is essential.
Session 2: National Responses – What Do Governments Do? ( 10:00 – 1:00)
This paper provides a discussion of key issues which emerged from a review of the debate on offshoring and outsourcing. Although offshoring is not a new phenomenon, the current phase of offshoring is marked by the increased tradability of services enabled by ICT. The paper puts forward a clear definition of offshoring – defined as a combination of trade flows, FDI, and employment shifts -- before doing three things. First, official statistics on international trade and FDI were examined to gauge the extent of offshoring in services. Second, the paper analyses the causes and consequences of different types of outsourcing seen as strategies for corporate restructuring. Third, the impact of outsourcing on jobs and professions is assessed in terms of the repackaging of tasks, skills and knowledge. This paper provides pointers to answer such questions as: Why is outsourcing and offshoring happening now? What is the impact of outsourcing/offshoring on home and host economies? What policies should be devised to address the causes and consequences of offshoring? The key points raised in this paper are as follows.
Definitions: Offshoring happens when private firms or governments decide to import i ntermediate goods or services from overseas that they had previously obtained domestically. It is therefore about sourcing decisions which involve (a) imports, (b) displacement of domestic production and associated jobs, and sometimes (c) foreign direct investment (FDI) outflows if sourcing happens from overseas affiliates. It is difficult to combine three separate sources of data to measure the precise extent of offshoring defined in this way.
Trade and FDI: Bearing in mind the limitations to official statistics, they indicate that offshoring of services is quite small, relative to that in manufacturing.
Corporate Strategies: Growth in outsourcing and offshoring of business services depends on the nature of corporate strategy and business models.
Jobs and Professions: The movement of service jobs from developed economies to low cost emerging market locations is being accompanied by significant repackaging of tasks, skills, and knowledge into a job, occupation, or profession. This is leading to changes in occupational and professional identity, and is creating new challenges for governments formulating their policies for education and training, and for professional associations thinking about the upgrading of capabilities.
Denmark features a unique political-economic organization, widely distinguished from the liberal Anglo-Saxon model. Though categorized according to varieties of capitalism literature as a coordinated market economy, Denmark differs significantly from Germany, the exemplar coordinated economy, both in terms of the level of institutional formalization (low in Denmark, high in Germany) and in economic performance during the 90’s (Denmark scoring high on growth and employment benchmarks, Germany low on both). This paper examines Denmark’s dynamism and unique economic path through an analysis of its training regime.
The training regime emerges out of the craft tradition, buttressed by the evolution of programs developed jointly with the state to allow unskilled works to skill up through extra training. Further, firms are organized so as to allow entry by highest-skill workers into the leadership/managerial group. This produces firms built around their skilled labor, with competition for workers based on providing stimulating and rewarding job processes, with workers and entrepreneurial management driven to refine and evolve the core skilled labor group – the skill container – rather than grow the business as such. These firms are linked to broader supply chains either through specialized Danish firms – project coordinators – or through sub-contractor/subsidiary relationships with foreign multi-nationals. Training schemes also served as a solution to problems of factory organization and unemployment produced by the oil shocks, giving firms freedom to reconfigure factories and shift labor costs.
The combination of these characteristics – continual training schemes, flexible organization between firms, and labor flexibility – have allowed Denmark to become an “experimentalist industrial laboratory,” with a very high level of continuous innovation. However, the decentralization of economic institutions poses a potential problem – learning undergone in one sector, region or firm cannot easily be transferred to the economy as a whole. The lack of centralized institutions with the ability to impose schema onto the whole economy dampens the possibility of establishing self-reinforcing developmental complementarities.
As Germany has suffered stagnation and malaise in the recent decade, calls for reform – sometimes radical – have been pervasive in German political and domestic circles. Social acceptance of reform has become such that defenders of the status quo are stuck on the defensive, playing more of an obstructive than constructive role. In international discussions of reform, however, this has led to an excessive emphasis on dynamism and liberalization, features never characteristic of the German political economy, even at its most successful. Instead this paper situates the reform process in a “German” historical and institutional context, finding sources for growth and progress in the traditional configuration of the German economy. Some of conclusions are:
In the 1990’s, German banks and industrial firms have autonomously reformed, generating Anglo-Saxon style practices alongside traditional German ones. This has included the disentanglement of long-standing financing relationships, the adoption of transparency and international accounting standards, the use of takeovers and listing on foreign stock exchanges.
High unemployment and declining union membership has eroded the strength of unions, decentralizing the labor bargaining process. This has allowed firms to water down, or sometimes circumvent entirely, centrally negotiated commitments.
The cost of the traditionally generous unemployment packages has forced the Schroeder government to reduce the level of benefits in its Agenda 2010 reforms. Gone are the long-term, wage-indexed benefits of the traditional welfare state, replaced instead by means-tested welfare tied closely to job-seeking efforts by the unemployed.
These changes in German political-economy have not been noticed by many international observers, but taken together they amount to a significant, autonomous response to ongoing economic malaise. Far from being “unreformable,” Germany has already taken steps to transform itself.
Despite high taxes, a large state budget and welfare state, much economic regulation, and a very open economy, Denmark continues to compete successfully against the other advanced capitalist economies. Hence, Denmark presents a paradox for neoliberalism, which predicts that these policies will hurt national competitiveness under conditions of economic globalization. Following the varieties of capitalism literature, this paper argues that Denmark’s success has been based in large part on its institutional competitiveness - its capacity to achieve socioeconomic success as a result of the competitive advantages that firms derive from operating within a particular set of political and economic institutions. The institutional basis for successfully coordinating labor markets, vocational training and skill formation programs, and industrial policy are examined for Denmark and the United States - two countries that are very different institutionally. The analysis shows that there is no one best way to achieve success in today’s global economy, except perhaps for reducing socioeconomic inequality; that the type of capitalism known as coordinated market economies are oversimplified in the literature; and that high taxes, state spending, and economic regulation can actually enhance socioeconomic performance.
Session 3: Markets and Social Protection – Policies for Flexibility and Innovation ( 2:00 - 5:00)
This essay explores the European challenge of how to stay wealthy in a rapidly evolving and ever more competitive global economy. In the process, it makes two main arguments. First, countries and companies face an ever more volatile competitive marketplace. They have to maneuver in a competitive environment, in which the “sweet spots” for corporate success are constantly changing as company internal functions become products, products become commodities, and the sources of differentiation for products and processes are constantly evolving. This new “formula” for corporate success requires a social capacity for flexibility and adaptation. Second, social protections often serve as essential sources of social capacity for adaptation and change. There is not an inherent contradiction between social protections and market flexibility. The essential issues are how those protections are organized and delivered. The dilemma of many continental European countries to provide “welfare without work” after a history of “adjusting badly” is only one possible outcome. To the contrary, if adapted rather than abandoned, European traditions can be the basis of continued growth and productivity in a competitive marketplace. In their discussion, the authors invoke the recent Danish experience as potentially having valuable lessons to offer how for successful adaptation in the digital era.
To what extent does the new economy change the rules of the game in the labor market? Perhaps not as much as some think. Yet both firms and workers have to become more adaptable and flexible – the onus is on both partners in the employment marriage. Many workers would accept changes in pay practices and working conditions so long as they had a voice in these decisions. They already often accept the routine and not-so-routine pressures employers ask of them so that the firm can compete and grow. Employers, in turn, need to deal with specific problems that workers have, such as child-care and other family-related issues. In short, the rule goes for the new economy as much as it did for the old: to get on, firms need to win the hearts and (increasingly skilled) minds of their workers.
This article deals with the new policy concept of ‘flexicurity’ in light of the emerging flexibility-security nexus currently faced by the European Union, national governments, sectors of industry, individual companies and workers. It identifies a fundamental tension. On the one hand there is a strong demand to make labor markets, employment and work organization more flexible. At same time, an equally strong demand exists for providing security to employees – especially vulnerable groups – and for preserving social cohesion in our societies. This article discusses the origins, conditions and potential of ‘flexicurity’ as policy or strategy at various levels of industrial relations and outlines a research agenda for the future.
The authors argue that social protection aids the market by helping economic actors overcome market failures in skill formation. Employers who rely on specific skills to compete effectively in international markets need to institutionalize some sort of guarantee to ensure workers against potential risks. Without implicit agreements for long-term employment and real wage stability, their specific skills will be undersupplied, leading to a market failure problem in the provision of skills. Employers’ promises of employment protection lack sufficient credibility, causing social protectionism as government policy to become critical. They consider the welfare state as a complement in national production systems, and the authors identify the main varieties of what they call “welfare production regimes” and their consequences for distribution and economic outcomes. They develop a model of micro-links between skills and social protection which predicts what types of political alliances are likely to emerge in support of a particular type of social protection. Rejecting the “power-resources” explanation of the welfare state, they argue that employment and income protection can be seen as efforts to increase workers’ dependence on particular employers, as well as their exposure to labor market risks. The contend that different types of social protection are complementary to different skill equilibria, where employment protection increases the propensity of workers to invest in firm-specific skills, and unemployment protection facilitates investment in industry-specific skills.
Analyzing the vocational education in advanced industrial countries, the authors share the consensus that the advanced countries must secure competitive advantage in a global economy by developing a highly-skilled workforce. However, the authors draw attention to certain awkward aspects of this approach that are often glossed over in general debate: First, the employment-generating power of improvements in skill levels is limited. The internationally traded sectors which use truly advanced skills are small in size and number and become even less labor intensive as their skill levels increase. In turn, employment policy cannot depend fully on education policies. Second, while acquisition of skills has become a major public need, there is increasing dependence for the provision on individual firms. Left to themselves, firms will engage in a large amount of vocational training, but it will be targeted on selected groups of employees. There are no inherent tendencies for firms’ market-driven search for improved skills also to supply a strategy for skill maximization for a society as a whole. In particular there is a danger that, as governments gradually privatize expertise in this field and defer to the private sector’s priorities, they will lose the capacity to sustain collective, public concerns. Third, this process leads in turn to government action being restricted to residual care for the unemployed, which then limits even further the capacity of public agencies to contribute at the leading edge of advanced-skills policy. Fourth, government action without extensive co-operation with firms is ill-informed and becomes rapidly outdated but moving too far to accept firms’ own agendas incapacitates public policy.
Europe ’s labor and social institutions need urgent reform if we are to grasp the opportunities offered by globalization and avoid the threats. But the notion of a single “European Social Model” is largely unhelpful for thinking about reforms. Of the four main models operating, the “Nordic” and the “Anglo-Saxon” models are both efficient, but only the former manages to combine both equity and efficiency. Critically, the “Continental” and “ Mediterranean” models, which together account for two-thirds of the GDP of the entire EU-25 and 90 per cent of the GDP of the 12-member eurozone, are inefficient and unsustainable. These models must therefore be reformed, probably by adopting features of the two more efficient models. These reforms may also involve changes towards more or less equity.
The overall impression of the accomplishments of the Danish employment system in recent years is that of a genuine upturn, which reflects a strong increase in private and public employment. Furthermore, these results were obtained without deficits on the external balance of payments and with rising surpluses for public budgets. Not surprisingly, these favorable developments have caused international interest and made Denmark a member of the group of small successful European economies. The term flexicurity is often used to characterize Denmark’s successful combination of adaptability to a changing international environment and a solidaristic welfare system. In this article, the author presents an analysis of the three factors behind the Danish version of a ‘flexicurity model’. Firstly, one can identify a high level of worker mobility (external numerical flexibility) as a structural characteristic of the Danish labor market. An important explaining factor for this situation is the liberal regime of employment protection found in the Danish labor market. Secondly, the high level of numerical flexibility is made acceptable for the trade unions and more broadly within the framework of the traditional value system of a Scandinavian type welfare state by the development of a state supported unemployment insurance system supplemented by cash benefits for the uninsured unemployed. These two elements constitute the basic flexibility-security nexus. Thirdly during the 1990s, a more ambitious active labor market policy added both stronger motivation and qualification effects to stimulate the flows of workers between employment and unemployment.
This article relates the concept of ‘flexicurity’ to the institutional arrangements in Germany and discusses it as an alternative to pure flexibilization. The discussion of the concept of ‘flexicurity’ proceeds by looking at the concept’s constitutive elements, i.e. the four related and deeply interlinked (sub-)concepts of ‘transitional labor markets’, ‘employment-protection collective bargaining and working-time policies’, ‘lifelong learning’ and ‘provisions for old age’. These are discussed in turn. The article closes with an application of the concept of ‘flexicurity’ to different forms of atypical employment.
The level of part-time employment in Spain tripled during the period of 1984-93. This increased prevalence of part-time work reflected an employment policy during that period and beyond that aimed to establish maximum flexibility in the use of fixed-term contracts, whether full-time or part-time. Part-time work was, and still is to some extent, associated with a high degree of employment-related precariousness. This article examines the successive and not always consistent measures which have been adopted by the social partners and the government since April 1994 in order to improve the quality and security of part-time work. It assesses to what extent these measures have achieved their objectives.
The paradox of American exceptionalism in the provision of the “social rights of citizenship” is that the American state makes social benefits nominally private rather than public, and ties them to employment rather than to citizenship. Dobbin argues that governmental activism has been the driving force behind the expansion of this system of private social coverage. America’s federal institutional capacities -- weak party system, her peculiar federal state structure and her weak administrative capacity in social provision -- contributed to public policies favoring corporate welfarism that depended on tax incentives and complex regulations. Furthermore, since the 1960s, new protections have been institutionalized through a process that does not depend on either strong working-class organizations or a strong state. Instead, new specialists hired by firms to help them interpret the complex of federal regulations on employment law have become an internal constituency favoring the expansion of employment-related social protections. This argument raises important questions about theoretical frameworks that pose a simple dichotomy between ‘strong’ and ‘weak’ states, as in the US case, a weak state deliberately made the private sector expand.
Weiler analyzes the Bush Administration’s 2005 proposal for reforming America’s defined benefit pension programs. He argues that the proposed changes, insofar as they intensify cyclical fluctuations in what firms owe (requiring higher contributions from firms during economic downturns), would likely hasten the demise of pension plans. The article then reviews alternative funding rules which could improve the security of benefits without increasing the burden for the Pension Benefit Guaranty Corporation (PBGC), while at the same time providing more certainty and stability for employers.
Session 5: Designing Research Projects: What is Worth Knowing and How Can We Find It Out: A Discussion of Graduate Research Plans ( 2:00 – 5:00)
The varieties of capitalism literature maintains that advanced capitalist countries whose institutions best fit either the liberal or coordinated market economy types will perform better than countries whose institutions are mixed. This is because hybrids are less likely to yield functionally beneficial institutional complementarities. The authors challenge this assertion. Denmark has performed as well as many purer cases during the 1990s. And Denmark has recently developed a more hybrid form than is generally recognized by (1) increasing the exposure of actors to market forces and (2) decentralizing collective learning and decision making. The institutional complementarities associated with such hybridization have contributed to its success, but these complementarities are based on institutional heterogeneity rather than homogeneity. This is demonstrated by analyses of three cases: Danish labor markets, vocational training, and industrial policy. The implication of this argument is that the varieties of capitalism theory is logically flawed.
Common challenges confront labor movements in all the advanced industrial states. Yet the responses by and consequences for organized labor have been remarkably varied across these different countries. The conventional approach to studying these responses and their consequences is to examine similar developments across different countries and to explain variation through an analysis of the alternative institutional arrangements found in the various nation-states. Locke and Thelen argue for a more contextualized approach to the study of comparative labor politics, one which supplements traditional institutional analyses with greater attention to the issues of identity and the political valence different issues possess in the different national settings. “Contextualized comparisons” push the core categories of institutional analyses, demonstrating that various trends are not in fact translated into common pressures in all national economies but rather are meditated by national institutional arrangements and refracted into divergent struggles over particular national practices. Then, drawing on the insights of what they call “political constructivism”, they show why, within a given country, certain issues (and not others) spark intense conflict because of the way they are connected to the foundations on which union identities themselves rest.
In this piece, Herrigel offers a review of the Streeck and Yamamura volumes, praising both volumes but also critiquing the perspective on change in Germany and Japan embodied in them. The baseline analytic choice in both volumes of adapting the national varieties of capitalism paradigm has distinct benefits, but it is also limited insofar as it focuses attention away from a wide array of other kinds of struggles over institutional alternatives that cannot be called liberal or non-liberal. Herrigel is calling for a more constructivist approach to the study of economic change. Societies, he argues, are not coherent complexes of complementary (and constraining) institutions but, rather, rich assemblages of historically accumulated dispositions and rules. Thus, theory should point to possibilities for economic recomposition that are emerging from actors’ experiences, rather than systematically blend them out through an overly-narrow focus on institutions.