New Institutionalism and Varieties of Capitalism

Essay by EssaySwap ContributorUniversity, Master's February 2008

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According to the two readings, “State, Institutions and Structural change” and “An Introduction to Varieties of Capitalism” , New Institutionalism Theory tries to show that the characteristics of the market economies of each county is mainly built up in the historical institutions which is developed rather from each country’s specific historical condition than functional assimilation. The element that maintains the model of ‘varieties of the capitalism’ operates by the politics inside the border of country. Hall and Sockice insist: “To the extent allowed by transport costs and the efficiency of international markets, there should be national patterns of specialization in specific kinds of activities and products based, not on random agglomeration, but on rational responses to the institutional frameworks identified here.” (Hall and Soskice: 2003) Through New Institutionalism Theorist explaining the institutional model principally based on the concept of the ‘comparative institutional advantages’ between LME(liberal market economies) and CME(coordinated market economies)and also between countries with in the same market economy group, they put emphasis on the diversities and varieties of development.

Though they criticize the government by highlighting the part of the enterprises or the coordinated organizations, they ignore the restrictions to capitalism implied by the developing countries’ governments that brings the difference in development in reality. Also, examples of diversities and varieties of countries are small and limited in some countries in Europe or Japan. It is hard to clearly standardize the measure of varieties and development.