Introduction

Many scholars have observed that the politics of redistribution in the US is intertwined with the politics of race. Writing in the 1950s, Lipset and Bendix (1959) argued that the “social and economic cleavage” created by discrimination against blacks and Hispanics “diminishes the chances for the development of solidarity along class lines” (1959: 106). Myrdal (1960), Quadagno (1994) and, most recently, Gilens (1999) claim that racial animosity in the US is the single most important reason for the limited growth of welfare expenditures in the US relative to the nations of Western Europe. According to Quadagno (1994), political support for Johnson's War on Poverty was undermined by the racial conflicts that erupted over job training and housing programs. Alesina et al. (1999) find that localities in the US with high levels of racial fragmentation redistribute less and provide fewer public goods than localities that are racially homogeneous. Alesina and Glaeser (2004) conclude that racial conflict is one of the most important reasons for the low level of redistribution in the US compared to Europe.

The dominant approach in studies of race and redistributive politics in the US is to focus on the manner in which race affects voters' preferences regarding redistributive policies. Kinder and Sanders (1996) and Alesina and La Ferrara (2000) find that the sharpest contrast in preferences for redistributive policies in the US today is not between rich and poor or between men and women, but between whites and blacks.

The previous chapter suggests that voters are attentive to economic fluctuations in a manner consistent with our competency theory. In this chapter, we explore whether there are features of the political-economic context that affect these competency signals in a systematic fashion and, hence, account for the contextual variation in economic voting that we saw in Chapter 3. For example, the evidence presented in the previous chapter suggests that voters understand the extent to which their domestic economy is subject to the influence of global economic factors. Does this help account for the contextual variation in economic voting? Although there has been speculation in the economic-voting literature about the links between these features of the policy-making context and the economic vote (Lewis-Beck, 1988; Powell and Whitten, 1993), the results have been mixed. Improving our understanding of this link requires a more developed theoretical understanding of how individuals use information regarding the political economic context to inform their vote choice.

Our competency theory provides an explanation for why, and how, fluctuations in the magnitude of the economic vote are related to these variations in political and economic contexts. Recall from the theoretical discussion in Chapter 5 that context matters because it influences the number of electorally versus nonelectorally dependent decision makers (or, using our abbreviations, EDDs versus NEDDs) associated with macro-economic policy outcomes, which in turn shapes the size of the incumbent's competency signal.

Michael Wallerstein had a long-term research interest in social democracy in the Nordic countries, a theme that we worked on together for many years. Our first paper on the topic praised the Nordic achievements, but claimed that social democracy was in retreat. As we saw it, “both the egalitarian distribution of income and the security of income that distinguished social democratic societies from other capitalist democracies are declining” (Moene and Wallerstein 1993a: 231–232). As time went on and we continued our work, we became less certain that the era of social democracy was actually over, and more certain that whatever the future of the social democracy in Europe, the Nordic lessons were highly relevant for social reformers in other parts of the world, including developing countries.

The societal model of northern Europe goes under many names. While the Swedes call the system the “Swedish model,” the Danes and Norwegians insist on the “Scandinavian model.” More recently, representatives of the European Union have started to use “Nordic model,” which now seems to be the most popular term. Outside Europe the model is best known simply as “social democracy,” a term that most Europeans associate with specific political parties and ideologies rather than with an economic and political system.

Social democracy in the Nordic countries is strong evidence for the achievements of unions as opposed to workers' ownership.

Introduction

During recent years extensive research has centered on corporatist patterns of interest representation and centralized systems of collective bargaining. This research has associated corporatism and centralized bargaining with “labor quiescence,” to use David Cameron's (1984) label for the combination of low strike rates and wage restraint. Labor quiescence, in turn, is claimed to contribute to successful economic performance: lower rates of inflation and unemployment, higher rates of investment, and a less pronounced slowdown of growth following the oil crises of the 1970s.

Union cooperation with government policies to curb the growth of wages has been a central theme in the research on corporatism in Western Europe. In one of the first contributions to a burgeoning literature, Gerhard Lehmbruch (1977) observed: “Incomes policies appear to constitute a core domain of liberal corporatism” (96). Similarly, Leo Panitch (1977) argued that in “virtually every” corporatist society, policies “designed to abate the wage pressure of trade unions was the frontpiece of corporatist development” (74). Cross-national studies by Bruce Headey (1970) and Gary Marks (1986) have verified the existence of a close empirical relationship between union centralization and the successful implementation of voluntary incomes policies.

More recently, union centralization or corporatism has attracted the attention of economists seeking to account for the divergence in macroeconomic performance among advanced industrial societies since the mid-1970s.

The previous chapter established that voters condition their economic vote on the current distribution of policy-making responsibility among parties competing for election. In this chapter, we examine whether the data also support our theoretical proposition that voters condition their economic vote on the extent to which parties are “in contention” for policy-making responsibility in the future. Our theory assumes that voters know the extent to which different parties and coalitions of parties contend for significant shares of policy-making responsibility. We support this assumption with survey evidence from three countries that shows that voters are surprisingly well informed about the pattern of cabinet contention, even in very complex coalitional systems. With this assurance that, in the few cases for which we have direct evidence, our information assumptions are plausible, we next propose two different methods for measuring beliefs about cabinet contention in the larger number of cases in our sample (for which direct survey data about beliefs are not available). Finally, in the rest of the chapter, we use these measures to test three general hypotheses (all implied by the theory in Chapter 8) about how the pattern of contention for policy-making responsibility conditions economic voting.

VOTER BELIEFS ABOUT THE PATTERN OF CONTENTION

Our model of economic voting assumes that voters have knowledge about which parties or coalitions of parties are likely to form the government or otherwise participate in policy making.

The combination of private ownership of the instruments of production with representative political institutions based on widespread suffrage constitutes a compromise between workers, who consent to the private appropriation of profit by owners of capital, and capitalists, who accept the democratic institutions through which workers can make effective claims for an improvement of their material conditions.

This form of societal organization was considered to be inherently unstable by Marx, who believed that capitalist democracy is “only the political form of revolution of bourgeois society and not its conservative form of life,” (1934, p. 18) “only a spasmodic, exceptional state of things … impossible as the normal form of society.” (1972, p. 198) Once introduced, Marx thought, political democracy would either be extended to the “social realm” by workers nationalizing the means of production or subverted by capitalists using the ownership of capital to restore their political power. Yet in many countries, capitalist democracy has persisted over long periods of time.

Marx's predictions may have been false for at least two distinct reasons. His followers have tended to accept a model of conflict in which interests of classes are irreconcilably opposed to each other, a model that implies that workers should always be hostile to capitalism and capitalists. If this model is correct and if capitalism nevertheless survives in its democratic form, it must be the result of the activities of some institutions, typically thought to be the state, which provide physical repression, ideological domination, cooptation of workers' leaders, or whatever else is necessary to perpetuate capitalism in the face of the permanent threat posed by workers.

This book was initially motivated by a simple concern with understanding contextual variation in the economic vote. Accordingly, we set out first to describe the extent of contextual variation in the economic vote across countries, over time, and across parties. To explain this contextual variation, we develop a theoretical explanation rooted in the long tradition of rational-choice explanations of economic voting. These explanations provide a set of plausible (and testable) empirical hypotheses about the kinds of political and economic contexts that are likely to condition the economic vote. Finally, we leverage the evidence from our map of economic voting, along with measures of variation in political and economic context, to test these hypotheses. In this concluding chapter, we first summarize our results and evaluate the extent to which we have fulfilled these goals and ask what work remains to be done. Furthermore, we discuss how the lessons we have learned about economic voting in this project might speak to researchers interested in comparative political behavior more generally.

SUMMARY AND EVALUATION

Variation in the Economic Vote

Part I provides the most comprehensive and comparable description of contextual variation in individual economic voting yet available to political scientists. Our estimates of the economic vote are consistent with the limited comparative evidence already available in the literature. We also produce quite reasonable estimates of economic voting for those parties, countries, and time periods in which previous comparative work has not been available.

Two theoretical propositions come out of the discussion of administrative responsibility in the last chapter, each of which produces a straightforward hypothesis. The first concerns the distribution of the economic vote across parties. Parties with a greater share of the status quo distribution of administrative responsibility will receive a greater share of the economic vote than parties with a smaller share. The second concerns the overall size of the economic vote across all parties in an election. As the status quo distribution of administrative responsibility over parties becomes more equal, the overall economic vote declines.

The main task in testing these empirical hypotheses is the measurement of voters' beliefs about the share of administrative responsibility that each party holds. A variety of indicators of the status quo distribution of policy-making responsibility has been discussed in the literature: the current distribution of cabinet membership, the current distribution of cabinet portfolios, the coalition status of the government, the majority status of the government, the influence of the opposition on the government, the extent of collective cabinet responsibility, the distribution of legislative seats, the distribution of ministries specifically dealing with economic matters, and the role of the president. Furthermore, the values of these variables are so widely reported and so well known that we can assume voters' beliefs about them closely mirror the empirical reality, at least on average.

Ten years ago, when the volume Order and Conflict in Contemporary Capitalism (Goldthorpe 1984) was published, conventional academic wisdom regarding the future of trade unions and corporatism in western Europe was optimistic. As numerous contributors to that earlier volume emphasized, systems of industrial relations involving encompassing unions, in which authority was concentrated in either a small number of large industrial unions or in national confederations, had performed remarkably well in the decade after the first oil price shock of 1973. Most contributors to the Goldthorpe volume shared the view articulated by Peter Lange (1984) that unions could be thought of as playing an n-person prisoner's dilemma in which decentralized action among organizations resulted in collectively suboptimal outcomes. Unions would accept greater wage restraint collectively, the argument went, but not willingly concede acting individually. The prisoner's dilemma analogy suggested that the more encompassing the union movement, the greater the concentration among unions, and the more centralized the authority of the peak associations, the more likely it was that the collectively optimal cooperative solution could be obtained. David Cameron (1984), among others, provided support for this view with evidence showing that corporatism was associated with wage restraint and low strike rates, as well as with lower inflation and less unemployment than in noncorporatist OECD countries.

The concern with how the organizational features of trade unionism affect economic performance and the optimism about the relative merits of corporatism were premised on an important if often inexplicit assumption: that unions themselves would remain effective agents for the promotion of the economic interests of workers.

Introduction

The central dilemma of social democratic thought today concerns the promise and the threat of freer markets. In the social democratic view, markets are mechanisms that simultaneously generate an efficient allocation of resources and an inegalitarian distribution of rewards. Of course, market outcomes are efficient only under restrictive conditions that rule out externalities, significant increasing returns to scale, monopoly power, and so forth. Nevertheless, the current consensus on the advantages of freer markets in ever-broader realms that encompasses most of the political spectrum from Right to Left belies the qualifications of economic theory. It is relatively easy for parties without egalitarian commitments to embrace policies of market liberalization. Social democrats are more conflicted. In order to reap the efficiency gains that markets make possible, must social democrats abandon their traditional commitment to mitigating the inequalities of wealth and income that markets engender?

This paper addresses this general question in the context of the taxation of income from capital and the liberalization of financial markets. The increased international integration of financial markets is commonly perceived as one of the most important changes in the world economy over the past twenty years. Exports and imports of capital have grown at twice the rate of trade in goods since 1980. During the past decade, financial markets have been liberalized in Japan, Italy, France, New Zealand, Norway, Sweden and Denmark, i.e. in most of the advanced industrial societies that had significant regulatory controls over capital flows (OECD, 1989).

Empirical work on trade unions and organized labor in advanced nations underwent a resurgence beginning in the 1970s. The initial impetus was twofold: first, the strike wave that in the closing years of the 1960s swept across the European countries – most markedly France and Italy, but elsewhere as well (Crouch and Pizzorno 1978) – and second, the growing recognition in the years following the first oil shock in the winter of 1973 that wage militancy was a potentially important factor affecting inflation, unemployment, and ultimately economic growth (Bruno and Sachs 1985; Olson 1982). These two sets of events sparked new interest in problems of comparative trade unions, industrial relations, and wage militancy, problems that had lain largely outside the purview of political science in the preceding decades. Unions were now seen as political organizations, both in the sense that their internal organization exhibited political features and in the sense that their activities carried with them consequences of significance for the political realm.

This part includes four of Michael Wallerstein's most important contributions to the study of trade unions in advanced industrial economies. Although the papers display a range of analytic strategies, they are all concerned with understanding variations in union strength and organization, as well as the possible effects of these variations on wage outcomes. A central thread connecting all four essays concerns the centralization of collective bargaining, a core topic of Wallerstein's (1985) doctoral dissertation, to which he returned many times thereafter.

Introduction

Governments collect and spend on average around 45 percent of GDP in advanced industrial societies, and about half of government spending goes to fund the various expenditures on transfer payments and services that constitute what is commonly called the welfare state. Perhaps the most common view of welfare spending is that these policies are the outcome of a long political struggle in which workers and their allies used the power of the ballot box to obtain some redress for the inequalities generated by the market. In the words of Huber and Stephens: “The struggle of welfare states is a struggle of distribution, and thus the organizational power of those standing to benefit from redistribution, the working and lower middle classes, is crucial.” Other scholars have emphasized the political influence of the beneficiaries of welfare spending who are outside the labor market, such as the elderly. But whether the key groups are defined by class position, income, or age, most scholars have viewed welfare policies in redistributive terms.

The redistributive view of welfare policy, as formalized in a series of papers by Romer, Roberts, and Meltzer and Richard, implies that higher inequality of market incomes generates higher levels of political support for redistributive policies. The basic intuition is that low-income earners have more to gain and less to lose than do persons with high incomes from expansions of welfare spending. Thus, the poorer the majority of voters relative to the average income, the greater the expected support for welfare expenditures.