Economic causes of the Eurozone crisis: the analytical contribution of Comparative Capitalism

Abstract

The article discusses advances and limitations of Comparative Capitalism scholarship on the causes of the Eurozone crisis. It explains the crisis by highlighting four basic mechanisms: first, the absence of a system of coordinated wage bargaining has been made responsible for the loss of cost competitiveness. Second, the specialization in price-sensitive medium-quality goods and the corresponding loss of market shares to emerging markets has been attributed to the weak innovation systems of Southern economies. Third, the loss of competitiveness has been masked temporarily by a strong increase of public indebtedness and, fourth, private household indebtedness. These four explanations do not put the blame for the Eurozone crisis on a single government or a single type of actors, but rather highlight the systemic causes for the crisis, brought about by the construction of a common currency for institutionally very heterogeneous economies.

Mercantilist dualization: the introduction of the euro, redistribution of industry rents, and wage inequality in Germany, 1993-2008

“…During the same period the profitability of the manufacturing sector improved markedly (Carlin and Soskice, 2009;Baccaro and Pontusson, 2016) which is also reflected in an increasing export wage premium (Baumgarten, 2013;Dauth et al, 2015) and wage growth in tradable manufacturing that outstripped the nontradable sectors (Dustmann et al 2014;Baccaro and Pontusson, 2016;Baccaro and Benassi, 2017). The EMU has been instrumental to these developments (Nölke, 2016) and, I argue, has reinfored the dualistic cleavage in the German welfare state and production model.…”

“…They could anticipate that they would be repatriating their investments to a country with price stability or even deflation because the very central bank rate that was artificially low for Spain/Ireland was a prohibitive one from the perspective of Germany, the laggard with respect to inflation (Scharpf, 2011;Hancké, 2013;Nölke, 2016). The central bank rate that fed the boom in the countries with high-inflation inhibited asset price hikes in Germany, and thus provided Germans with an additional reason to transfer savings abroad.…”

Domestic Institutions and Global Value Chains: Offshoring in Germany's Core Industrial Sectors

“…Hall and Soskice's original volume has led to a plethora of studies applying, extending and amending their framework (e.g. De Ville and Vermeiren, ; Hall, ; Hancké et al., ; Johnston and Regan, ; Molina and Rhodes, ; Nölke, ; Nölke and Vliegenthart, ; Streeck and Thelen, ). Especially relevant for this article is the development of a new type of market economy called ‘dependent market economy’ (DME), to account for the institutional configuration emerging in the former communist countries of the Czech Republic, Hungary, Poland and Slovakia.…”

Annington versus Deutsche Annington: Private Equity and Housing in the Anglo-Saxon and Rhenish Contexts

“…After all, as Smith has shown -based primarily on his American experience, but also claiming relevance for Western Europe -there is limited trust in the limits that state powers place "on the landowner's control of land", which "are little more than cosmetic" (547). According to the Varieties of Capitalism thesis (Hall and Soskice 2001;Nölke 2016), differences between the relational structures by which firms are managed impact on economic organization. Therefore, it is relevant to study what happens to an asset in the Rhenish context and to compare this to what happens in the Anglo-Saxon context, in order to understand whether the German model of a social market economy can withstand certain pressures that could undermine this mode of governance.…”