Bound by Gravity or Living in a ‘Post Geography Trading World’?* Expert Knowledge and Affective Spatial Imaginaries in the Construction of the UK’s Post-Brexit Trade Policy

A key battle has been fought within the UK cabinet on the direction of post-Brexit trade policy. The opposing sides have favoured either continued alignment or a ‘hard’ break with the European Union’s (EU’s) regulatory and customs regime, in the latter case to allow the UK to pursue an independent and ambitious trade policy agenda. Contrary to much commentary on ‘post-truth’ politics, both sides have relied on rival forms of expertise to support their claims. I argue for the need to not only re-emphasise the malleability and political nature of expert knowledge, but also appreciate its emotional bases. The Treasury has led the charge in favour of a softer Brexit by drawing on econometric (‘gravity’) models that emphasise the economic costs of looser association with the EU. In contrast to this attempt at technocratic legitimation, the specific legal expertise drawn upon by cabinet advocates of ‘hard’ Brexit has appealed to an emotive political economy of bringing the UK, and its (in this imaginary) overly regulated economy, closer to its ‘kith and kin’ in the Anglosphere, deepening the UK ‘national business model’. I conclude by calling for more explicitly emotive and values-based argumentation in the public debate on the UK’s future trade policy to improve the quality of democratic deliberation.     

The Political Economy of Brexit and the Future of British Capitalism First Symposium

The political economy of Brexit generates new challenges for the UK’s national business model and for European capitalism more broadly. Two symposia examine the implications of the UK’s withdrawal from the EU in key economic policy areas. These symposia contribute to two main bodies of academic literature: the political economy literature on varieties of capitalism, with a specific focus on the UK, and the political economy literature on key economic policy areas of the EU. This short introduction to the first symposium first outlines the key features of the British variety of capitalism and highlight the main questions raised by Brexit in that respect. It then summarises the main findings of the papers of the first symposium and tease out some common themes.     

Politics of Intra-firm Trade: Corporate Price Planning and the Double Role of the Arm’s Length Principle

Intra-firm trade is an emerging issue. One of its key elements is the international shifting of profits, for example, through transfer pricing that big enterprises use to cross-subsidise their subsidiaries, often to avoid taxes. Accounting rules conceal much of the information about transfer pricing, reproducing secrecy and facilitating the use of administered prices. Given the prevalence of administered price setting, a significant amount of international trade cannot be meaningfully analysed as market transactions. This provokes questions about the validity of market assumptions in research on trade in particular and global capitalism more generally. Our specific contribution focuses on the role of the arm’s length principle and the significance of cross-subsidisation and other forms of corporate planning in intra-firm trade. Under certain conditions, price planning by private corporations should be analysed as political rule within the economic sphere. Since the politics of the world economy is not merely related to governmental intervention, corporations should also be theorised as potentially political entities. Crossing the disciplinary boundaries between political economy and normative political theory, we suggest that the politicisation of intra-firm trade opens possibilities for creating more effective responses to price administration and for creating more democratic ways of governing the global economy.     

German Finance Capitalism: The Paradigm Shift Underlying Financial Diversification

This article is concerned with the genesis of German financial liberalisation. A refined inventory of financial system change – including new meso-level data on finance pattern and the marketisation of banking – reveals a varied pattern of change across German finance. It is argued that this financial diversification can only be understood with careful reference to the underlying ideational factors. An analytical narrative traces how technocratic ideas of financial modernisation during the 1980s began to open up space for the political program of finance capitalism to absorb liberal and leftist discontents with insider control and bank dominance. Upon reaching a tipping point of discursive dominance, the program was distinctly adopted across the political economy as the result of compartmentally different political, ideational and structural factors; creating a non-hegemonic financial paradigm that became identifiable in the face of recent crises. By developing analytical steps that link incremental and dynamic theories of institutional change in a conceptual framework of belief shifts, the paper contributes to efforts of adapting existing models of change to complex domains and accounting for the dynamic nature of the paradigm-generating process. The findings inform the larger debate about internal capitalist diversity and the coherence of national economic models.     

Introduction: Is the European Union Capable of Integrating Diverse Models of Capitalism?

ABSTRACT

The causes and consequences of the Euro crisis have led comparative political economy scholars to question whether European integration can accommodate diverse models of capitalism. This special issue addresses two important questions about the compatibility of diverse growth models within the European Union (EU): Are some growth regimes better suited to European integration than others? and does the EU favour a particular constellation of domestic institutions? Contributions within this special issue provide a qualified yes to these questions, concluding that the EU favours export-led growth models whilst it penalises and discourages domestic consumption-oriented growth paths, particularly those that are financed by debt accumulation. While recent comparative capitalism literature highlights that European monetary integration has favoured export-led growth regimes, contributions in this special issue outline that the EU’s prioritisation of export-led growth over domestic demand-led growth is present in other facets of integration, including EU accession, financial integration, the free movement of people, fiscal governance and the Europe 2020 growth strategy. Findings here provide important insights for both the European integration and comparative capitalism literature, highlighting that the unique economic ties being forged within the European project may be problematic for those countries outside northwestern Europe and for workers in low-wage domestic sectors.     

Banks as Continuous Reinvention

Of the several debates that revolve around the work of the economic historian and political economist Karl Polanyi, one that continues to exercise minds concerns his analysis of, and political attitudes toward, post-war capitalism and the welfare state. Simplified a little, it is a debate with two sides. To borrow Iván Szelényi's terms, one side constructs a ‘hard’ Karl Polanyi, the other a ‘soft’ one. The former advocated a socialist mixed economy dominated by redistributive mechanisms. He was a radical socialist for whom the market should never be the dominant mechanism of economic coordination. His ‘soft’ alter ego insisted that the market system remain essentially intact but be complemented by redistributive mechanisms. The ‘double movement’ – the central thesis of his ‘Great Transformation’ – acts, in this reading, as a self-correcting mechanism that moderates the excesses of market fundamentalism; its author was positioned within the social-democratic mainstream for which the only realistic desirable goal is a regulated form of capitalism. In terms of textual evidence there is much to be said for both interpretations. In this article I suggest a different approach, one that focuses upon the meaning of Polanyi's concepts in relation to their socio-political and intellectual environment.     

Does Europe need neoliberal reforms?

This paper examines the neoliberal claim that the only way toachieve sustainable growth and full employment is to abandonKeynesian macroeconomic management and the welfare state andbring back ‘flexible labour market policies’. Itsummarises the conditions required for neoliberal policies toproduce such an outcome and their relevance to contemporaryeconomic, social and political realities. This is followed byan empirical comparison of the economic performance and socialwell-being of seven advanced economies, widely regarded as leadingproponents of the three models of capitalism: liberal, corporatistand social democratic. Contrary to the claim, the model thatperforms best is the one that has least in common with the neoliberaleconomic orthodoxy – a conclusion that is likely to beof particular relevance in the present century.     

Stock Market Capitalism vs. Welfare Capitalism

This is the first in what we hope will be a new series of debates on important themes in political economy. Ronald Dore has long been known for his pioneering work on the Japanese economy and his contribution to the debate on different models and varieties of capitalism. He has recently published a major reappraisal and restatement of his approach, Stock Market Capitalism: Welfare Capitalism‐Japan and Germany vs. the Anglo-Saxons. In this book he focuses in particular on the challenges to the Japanese model in the 1990s, and the pressures for it to change. We invited him to summarise the argument of his book, and then asked three commentators, Gregory Jackson, Yutaka Kosai and Franz Waldenberger, to respond.     

A Monstrous Hybrid: The Political Economy of Housing in Early Twenty-first Century Sweden

In the leftist Western political imagination, Sweden continues, for many, to represent a vision of a ‘better’, more egalitarian political-economic model than the neoliberal capitalism that has come to dominate the Anglo-American world in particular; and its housing system is widely regarded as an integral component of this alternative, social-democratic model. The present paper argues that this envisioning of the political economy of Swedish housing is thoroughly outdated. Yet it insists, equally, that the competing envisioning of Swedish housing advanced by prominent scholars within Sweden – of a radically (neo)liberalised domestic housing system – is not accurate either. Rather, Swedish housing in the early twenty-first century constitutes a complex hybrid of legacy regulated elements on the one hand and neoliberalised elements on the other. Recognising this hybridity is essential, the paper submits, to understanding the nature and source of the most pressing issues facing the Swedish housing sector today. The system's hybridity, moreover, is ‘monstrous’ – following Jane Jacobs's coining of the term – in the sense that those issues reveal the pivotal role currently played by the Swedish housing system in the creation, reproduction and intensification of socio-economic inequality.     

Capitalism Unleashed: Finance,Globalization, and Welfare

Andrew Glyn, who died from a brain tumour in December 2007, aged 64, had been a key figure in socialist political economy since the 1970s. His seminal book with Bob Sutcliffe, British Capitalism, Workers and the Profits Squeeze, published in 1972, inspired a generation of political economists. It offered an arresting empirical analysis of the predicament of British capitalism, and occasioned a fierce and wide-ranging debate among socialist economists over its empirical accuracy, its theoretical approach and its political implications. It was one of the first and most important expressions of Ricardian Marxism in the 1970s, emphasising the importance of distributional struggles for the future economic and political development of capitalism.

He was actively engaged in politics and he was always ready to put his intellectual skills to practical use, as during the British miners' strike in 1984–5, when he provided a detailed critical analysis of the economic case being advanced by the employers and the Government against the union. At the same time he sought to understand the trends that were shaping the development of capitalism, and wrote two very influential books, Capitalism Since World War II: the Making and Breakup of the Great Boom (1984, with Philip Armstrong and John Harrison), and Capital Unleashed (2006), his analysis of the recent neoliberal phase of capitalist development.

He will be remembered for his skills as a teacher, his humane and tolerant approach to intellectual debate, and his lasting contributions to our understanding of contemporary capitalism.     

Institutions,human capital,and growth: The institutional mechanism

This paper contributes to the debate on the relationship between human capital, institutions, and economic growth. The paper first develops a micro-foundation model linking institutions to human capital. The advantage of our modeling strategy is that the human capital accumulation function is derived from an endogenous process. The theoretical model shows that improvements in the quality of institutions foster human capital accumulation, decrease income inequality and change the historical development path. The paper uses cross-country panel data from 1965 to 2005 to test some of the model's propositions and finds that deep structures or structural institutions – which are very persistent and rooted on the historical development path of an economy – affect long-term economic performance, while political institutions are uncorrelated with productivity and long-term economic growth. The empirical estimates also show that growth of physical and human capital – instead of levels – determines long-run economic growth.     

Paying Our Way in the World? Visible and Invisible Dangers of Brexit

The UK economy has long been associated with a weak balance of payments, reflecting an underlying growth model reliant on private household consumption. A deficit in goods trade, chiefly with the EU, has been offset by surpluses in services trade and foreign investment earnings. The Single Market provided wider markets for the UK, but did not fundamentally alter Britain's structural weaknesses. The Brexit vote took place against the background of Britain running its largest peacetime current account deficit. Financing Britain's external position represents a key challenge post-Brexit. Post-Brexit models for Britain partially address this. Any emergent model will critically depend on the nature of the Brexit deal with the EU, not least in terms of the impact on financial services and on supply chains. This paper sets out the recent evolution of the UK's current account position, particularly in relation to the EU. It then highlights particular areas of potential disruption from Brexit and sketches out scenarios of possible evolution of the Britain's external position in response to this.     

The organisation for economic cooperation and development

The global financial and economic crisis has prompted some scholars to suggest that a fundamental regulatory shift away from neoliberalism will take place – both in general and in the field of EU competition regulation. This paper shows that so far no radical break with the neoliberal type of competition regulation is heaving into sight. It sets out to explain this from the vantage point of a critical political economy perspective, which identifies the circumstances under which a crisis can result in a regulatory paradigm shift. Contrasting the current situation with the shift in EC/EU competition regulation after the crisis in the 1970s, the paper argues that the preconditions for a fundamental shift in this issue area are not present this time around. Several reasons account for this: the current crisis has been construed by economic and political elites as a crisis within and not of neoliberal capitalism; the social power configuration underpinning the neoliberal order remains unaltered; no clear counter-project has surfaced; the European Commission has been (and remains) in a position to oppose radical changes; and finally, there are no signs of a wider paradigm shift in the EU's regulatory architecture.     

The Democratic Efficiency Debate and Definitions of Political Equilibrium

An ongoing debate has been occurring within public choice for over a decade concerning the efficiency of democracy. Virginia Political Economy holds that political markets perform very differently from traditional markets. Chicago Political Economy, exemplified by the work of Becker and Wittman, maintains that political equilibrium, properly defined, is relatively efficient. I argue that the debate can be understood at least partially in methodological terms: Chicago views politics exclusively within the equilibrium framework of traditional economics, while Virginia draws at least implicitly on Austrian economics' view of the economy as a disequilibrium process. I contend that the factors which public choice scholarship has identified as distinguishing politics from markets—rational ignorance, majority rule, collective outcomes—affect the performance of politics as a process even if political equilibrium is relatively efficient.     

Capitalist Convergence? European (dis?)Integration and the Post-crash Restructuring of French and European Capitalisms

ABSTRACT

This article critiques and builds upon first-wave (Höpner and Schäfer 2010. A new phase of European integration: organised capitalisms in post-Ricardian Europe. West European Politics, 33 (2), 344–368) and second-wave (Johnston and Regan 2018. Introduction: is the European Union capable of integrating diverse models of capitalism? New Political Economy, 23 (2), 145–159) European Integration and comparative capitalisms literatures which posit convergence towards a single model of capitalism or growth. It utilises the case study of France to explore the impact of European integration and disintegration on national models of capitalism in the post-crisis era. The article focuses on the impact of integrative and disintegrative dynamics on France’s ‘state-industry-finance nexus’, putting forward three core claims. First, French capitalism is not accurately captured by the above frameworks and remains better characterised by the concept of post-dirigisme. Indeed, comparative capitalisms debates must move beyond a simple bifurcation of capitalist types. Second, European integrative pressures must be viewed as fragmented, differentiating, mediated by domestic state actors and producing capitalist variegation and hybridisation. Countering functionalist tendencies within this literature, it shows how different conceptions of state-market relations crucially mediate the relationship between national capitalisms and European integration. Finally, in the context of Brexit, the dynamics of European disintegration – an issue not discussed so far in these debates – is contributing to a variegated and multi-directional process of capitalist restructuring in post-crisis France.     

生产政治理论及其争论——企业管理权力与工人权利研究综述

生产政治指涉的是企业内部管理权力与工人权利之间的不同关系的经验过程,管理权力与工人权利之间的关系一旦结构化而定型,就形成了一定的生产政体,即生产领域中的政治和意识形态机构。社会主义市场经济发展过程中的企业变革是一个深刻的制度变迁过程,这就意味着中国具有丰富多样的实践经验,依托发轫于西方的生产政治理论和各自不同的经验观察,海内外学者围绕生产政体模式和生产政治的经验过程展开了一场持续的对话,这不仅意味着对中国经验认识的深入,而且意味着生产政治理论发展的契机。     

Skill Formation,Immigration and European Integration: The Politics of the UK Growth Model

ABSTRACT

While a reluctant European player now heading for the Exit, the UK was also an enthusiastic adopter of several key EU economic policies – namely, the skills and technology policies of Agenda 2020 and labour mobility. These initiatives worked with existing British policy, and structural biases, to exacerbate the already bifurcated structure of UK capitalism – between the high-paid technology and financial services sector on the one hand, and low-cost, low-wage sectors on the other hand. In particular, and central to the argument of this paper, immigration from Eastern and Central Europe after 2004 helped to sustain low-cost manufacturing and services industries by undermining firms’ incentives to invest in training. This combined with endemic failures in the UK’s skills system, which is heavily geared towards producing graduates with general skills but neglects the needs of mid and lower segments of the labour market. EU integration, therefore, exacerbated cleavages over skills between high- and low-productivity sectors and may have contributed to social divisions that led to Brexit.     

A South African Variety of Capitalism?

This paper explores the South African political economy through the lens of a variety of capitalism (VoC) approach. It argues that attempts were made in the early post-apartheid period to forge a more social-democratic and co-ordinated variety of capitalism, but that this floundered as the government adopted neoliberal macroeconomic policies against the wishes of organised labour, and as black economic empowerment policies further undermined an already racially-fraught business sector. Organised labour was able to push for, and maintain, protective labour market policies – but this came at the cost of growing policy inconsistency notably with regard to trade liberalisation which, in the presence of growing labour-market protection, has exacerbated South Africa's unemployment crisis. Unemployment remains intractable (and with it inequality) and corruption/patrimonialism appears to be a growing problem.     

The New Comparative Political Economy

With the collapse of communism in the late 1980s the field of comparative political economy has undergone major revision. Socialism is no longer considered the viable alternative to capitalism it once was. We now recognize that the choice is between alternative institutional arrangements of capitalism. Progress in the field of comparative political economy is achieved by examining how different legal, political and social institutions shape economic behavior and impact economic performance. In this paper we survey the new learning in comparative political economy and suggest how this learning should redirect our attention in economic development.JEL classification: B53, O10, O20, P0     

Depoliticisation,the Management of Money and the Renewal of Social Democracy: New Labour's Keynesianism and the Political Economy of ‘Discretionary Constraint’

Pointing to its radical underpinnings in so-called ‘Open Marxism’ and its theory of the state (one that subsumes the state in the capital relation), this article critically scrutinises Peter Burnham's thesis of ‘depoliticisation’ as a dominant accumulation strategy and regime. The article identifies ambiguities around Burnham's depiction of New Labour in power as committed to depoliticisation. It addresses these by drawing a distinction between regime of accumulation and mode of regulation, characterising New Labour's political economy in terms of the latter as a form of depoliticised Keynesianism framed by ‘discretionary constraint’. Contra-Burnham, the article points to the continued efficacy of Keynesian and social democratic political agency in the context of a dialectic of depoliticisation and repoliticisation focused on the role and power of the state. This dialectic is symptomatic of the contested regulation of capitalism around the defence of the value of money, on the one hand, and its broader management and redistribution, on the other.