Chapter

Economic Changes, Vulnerabilities, and Institutional Capabilities

Fritz W. Scharpf

in Welfare and Work in the Open Economy Volume I: From Vulnerability to Competitiveness in Comparative Perspective

Published in print November 2000 | ISBN: 9780199240883
Published online November 2003 | e-ISBN: 9780191600173 | DOI: http://dx.doi.org/10.1093/0199240884.003.0002
 Economic Changes, Vulnerabilities, and Institutional Capabilities

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The chapter examines the common pressures on employment and the welfare state that originated from changes in the international economic environment after the early 1970s, and it relates these to national economic conditions and policy legacies in order to identify differences of vulnerability and varying demands on the institutional capacity for policy adjustment. In the earlier period until the mid‐1980s, these challenges were of a macro‐economic nature, and the effectiveness of national policy responses depended primarily on institutional capabilities for effective coordination between wage policy and monetary policy. After the mid‐1980s, the dominant challenges arose from the global integration of capital markets and the increasing intensity of international competition in product markets. Now the greater or lesser vulnerability of countries was primarily determined by the structure of their welfare states – in particular by the dependence on particular sources of finance and by their effects on service employment in the sheltered sectors. What mattered was the institutional and political capacity to adopt and implement unpopular changes in the policy legacies of the welfare state.

Keywords: competition; employment; finance; institutional capability; macroeconomics; market; monetary policy; policy legacy; wage policy; welfare state

Chapter.  44623 words.  Illustrated.

Subjects: Comparative Politics

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