The point of intellectual departure for this volume is the end of the postwar period of rapid growth and the breakdown of postwar social contracts and institutional arrangements that were the central topics of comparative political economy from the 1960s to the 1980s. In the two decades following World War II, advanced capitalist democracies were characterized by rapid economic growth, expanding welfare state entitlements, apparently frozen party systems, class- and religion-based voter alignments, highly institutionalized systems of industrial relations, and a stable, if tense, system of international relations. Many, perhaps most, social scientists regarded these as permanent features of modern society. Not one of these features survived the decades of the 1970s and 1980s. The initial expression of the transformation that took place was “stagflation,” a phenomenon that stimulated several academic conferences and a host of papers that concluded that countries with social democratic governments and highly centralized systems of national collective bargaining – in short, “neocorporatist” societies – were the most successful in producing low levels of unemployment, modest inflation, and economic growth, and could best defend welfare state entitlements (Goldthorpe 1984; Lindberg and Maier 1985). However, it later became clear that the early 1980s represented merely a temporary holding pattern. In the intervening years we have witnessed a transformation not only of the economies of advanced capitalist democracies, but also of their systems of labor relations, party systems, and voter alignments.

This chapter starts from an intriguing observation: the historical fate of the Christian democratic parties of continental western Europe does not seem to be determined solely or linearly by the declining impact of religion on social and political attitudes. The survival of Christian democratic parties in the 1970s, their capacity to adapt to the changing conditions of the 1980s and their diverging electoral paths in the 1990s indicate that – contrary to expectations – the impact of the transformation of the religious structure on the appeal of Christian democratic parties has been neither straightforward nor immediate. The anticipated association between secularization and the decline of religiously motivated social and political movements is variable and puzzling.

The questions that govern this chapter originate from this ostensible incongruity between social structural changes and diverging political outcomes. How has Christian democracy been able to survive politically in a social context marked by mounting secularization? What kinds of social coalitions has Christian democracy fostered in the 1980s that help explain its electoral endurance? What kind of political economy have the parties attempted to nourish and to what extent has a specific set of social and economic policies helped sustain their electoral appeal? Can the contemporary diverging electoral paths and governmental records of national parties, with the Italian Democrazia Cristiana (DC) (remodeled as the Partito Popolare Italiano, PPI) at the low end, the German Christlich- Demokratische Union/Christlich-Soziale Union (CDU/CSU) at the high end, and the Dutch Christen Democratisch Appèl (CDA) somewhere in between, be explained in terms of the different ways in which these parties are located in their political economies?

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 systematic analysis of advanced capitalist economies has had two main focuses. One has been the welfare state: this owes much to the work of Esping-Andersen in distinguishing three welfare state patterns in advanced economies (Esping-Andersen, this volume; Stephens, Huber, and Ray this volume). His distinctions have been widely accepted. There is less agreement in the analysis of the other main focus – and the focus of this chapter – production regimes; Hall (this volume) relates the discussion in this chapter to other approaches, notably of Sabel and of Hollingsworth and Streeck. The concluding section of this book sketches links between the classification of production regimes advanced here and that of welfare states (Kitschelt, Marks, and Stephens, this volume).

By a production regime is meant the organization of production through markets and market-related institutions. It analyzes the ways in which the microagents of capitalist systems – companies, customers, employees, owners of capital – organize and structure their interrelationships, within a framework of incentives and constraints or “rules of the game” set by a range of market-related institutions within which the microagents are embedded. These framework incentives and constraints are sometimes summarized as the “institutional framework” of the production side of the economy. The most important of the institutions contributing to the institutional framework are the financial system, the industrial relations system, the education and training system, and the intercompany system (the latter governing relations between companies – competition policy, technology transfer, standard setting, and so on).

INTRODUCTION

In the past two decades two concurrent sociological changes have redefined the working class in many advanced industrialized countries. The first is the mobilization of women as workers. The second is the contraction of the manufacturing sector and the concomitant rise of the service sector. The combined effect of these changes has been to shrink the blue-collar working class of male breadwinners, which postwar trade unionism and social democracy took as its core constituency. In place of a homogenized male and blue-collar, unionized working class, unions are now facing a constituency consisting of a heterogeneous group of part-time, flex-time, and full-time workers comprising increasingly women and service-sector workers, mostly male post-Fordist industrial workers adapted to the computer revolution, and the remnants of traditional constituencies of male industrial workers and workers in crafts-oriented skilled occupations. With sociological diversity comes also diversity of interests and often increased conflict over strategy, aims, and style of interest representation.

This chapter examines some aspects of union responses to the changing composition of labor markets. The question of how unions have adjusted to growing diversity is linked to some core issues about the transformation of social democracy. The social democratic axiom that the individual rises with his or her group can only be true if the labor movement is inclusive enough to represent disadvantaged groups, among them women.

The upheaval of the late 1960s constitutes the background for the mobilization of what came to be the most important social movements in western Europe during the 1970s and 1980s: the so-called new social movements. This cluster of social movements includes the ecology movement (with its antinuclear branch), the peace movement, the solidarity movement (solidarity with the Third World), the women's movement, the squatters' (or urban autonomous) movement, as well as various other movements mobilizing for the rights of disadvantaged minorities (such as the gay movement). On the one hand, these movements go back to the new left, the new generation of radicals who were the protagonists of the antiauthoritarian revolt of the late 1960s. On the other hand, they are an offspring of the citizens' action committees that had started to articulate more specific grievances of local or regional populations in the early 1970s. These citizens' action committees were much more pragmatic and at the same time much broader in scope than the new left proper. Thanks to their dual political roots, the new social movements have managed to achieve what the new left has never been able to do on its own – the political mobilization of masses of citizens on behalf of their emancipatory goals.

The new social movements have dominated the social movement sector in many western European countries since the end of the “golden age.” More recently, another type of movement has risen that is associated not with the left but with the radical right.

By now it is generally agreed that the markets for goods and services of most nations of the world, particularly the advanced capitalist nations, are more closely connected to and affected by the global economy than they ever have been. If openness is measured in the simplest way, by the ratio of imports to gross domestic product, then in general the openness of the advanced capitalist states surpassed that of 1914 during the early 1970s; since then world trade has grown twice as fast as world income, and trade in manufactures three times the rate (McKeown 1991; GATT 1993). For the developed countries, this change is particularly important, because they historically have specialized in the export of manufactured goods. Measured in terms of the value of goods shipped, in 1992 manufactures comprised 73 percent of world trade (GATT 1993: 2). While the collapse of oil prices in the early 1980s partly accounts for this statistic, the succession of post–World War II multilateral tariff reductions that concentrated on lowering tariffs on manufactures also led to greatly increased intraindustry trade among the Organization for Economic Cooperation and Development (OECD) countries (see Table 1.1).

In this chapter I first outline the consequences of changes in the international trading system for the economies of advanced capitalist states, with particular reference to the “post-Fordist” thesis that the industrial structure of these countries is evolving away from the mid-twentieth-century pattern dominated by the employment of large numbers of workers in assembly line production systems driven largely by economies of scale.

Introduction

For much of the century between the end of the Civil War and the 1960s, paternalism was an important aspect of the rural way of life in the American South. In fact, the clearest difference between labor markets in the South and those in the rest of the United States was the elaborate system of paternalism that shaped most of the South's agricultural labor arrangements. We imply no value judgments by our use of the term “paternalism.” By paternalism – or the term “patron-client relationship” which we use synonymously – we simply mean the exchange of goods such as protection for dependable labor services. Paternalism is a relationship involving employer provision of a wide range of goods and services in exchange for loyal service – a long-term commitment to an employer that transcends the textbook impersonal exchange of labor services for cash – and a measure of deference.

The benefits planters provided to their loyal tenants varied and depended on the specific relationship between landlord and tenant. They included old-age assistance, unemployment insurance of a sort (carrying the tenant through a poor season), medical care, intercession with legal authorities, recreational amenities, housing, garden plots, fuel, hunting privileges, general advice, credit, donations to schools and churches, and aid in times of emergencies, among others.

These patron–client relationships have existed over time in various cultures. Similar benefits have been provided by large planters in the regions of South America dominated by plantation agriculture: in both the Brazilian Sertaõ, a cotton-producing region, and the sugar-producing regions of northeastern Brazil, for example.

In the 1980s and 1990s, social democratic parties have experienced unprecedented difficulties in choosing and implementing economic policies. At the same time, they have found it harder to frame electoral appeals in an increasingly complex environment of party competition. The pressure to make choices in innovative ways, in turn, has generated strains in social democratic party organizations and has affected the loyalty of party members and activists. Explaining the diverse trajectories of European social democratic parties in these decades requires a substantive and a theoretical departure from conventional accounts of social democratic success that worked well for the post–World War II era labeled by some contributions to this volume the “golden age” of social democracy.

In substantive terms, if social democracy has the fundamental objective of moderating wage earners' exposure to market risks (due to sickness, old age, unemployment) and engineering significant income redistribution toward the less fortunate in society, while promoting economic growth, then the strategic opportunities for such policies have dramatically changed since the 1950s and 1960s. In those decades, high postwar economic growth rates, a stable proportion of the population in retirement, national controls over financial markets, and the absence of competition from newly industrializing countries allowed social democrats to expand the welfare state and create full employment while maintaining balanced budgets.

The golden age of social democracy in western Europe in terms of both political prominence and economic performance might be dated as beginning in 1966, when the social democrats entered government in West Germany for the first time since 1930, and ending in 1974–1975, with the first serious slump of the postwar period. The high point of social democracy in terms of its academic reputation, however, was just beginning in 1974. During the 1960s and early 1970s, all of western Europe experienced steady growth and low levels of unemployment. Only after the first oil shock did dramatic cross-national differences in macroeconomic performance appear. In comparison to the steady rise of unemployment within the European Community in the late 1970s and 1980s, the maintenance of full employment in the European Free Trade Association (EFTA) countries – Norway, Sweden, Finland, Austria, and Switzerland – was striking. If Switzerland is removed from the list of good performers on the grounds that the Swiss maintained full employment by expelling guest workers, the correlation between any reasonable measure of social democratic strength and macroeconomic permanence was almost perfect. If one adds the impressive achievements in terms of comprehensive social insurance and, in Norway and Sweden, the extraordinary reduction of wage inequalities, the academic respect that social democracy enjoyed is easy to understand.

We have used the methodology of the new institutional economics to understand paternalism and the forces that shaped it. Our work, then, is a case study in institutional analysis, an area in which the literature is still longer on theory than on empirical work. We believe that theoretical development in this area will come through the insights provided by the aggregation of case studies such as ours. We hope that our work will be a methodological aid to other scholars in the empirical analysis of institutions and institutional change. In conclusion, we offer a recapitulation of the main argument, a brief discussion of the lessons we learned that may be of use in the study of other cases, and an analysis of how our argument meshes with the existing literature on the growth of the welfare state in the twentieth-century United States.

In the Introduction, we provided a general framework for analyzing the interaction between institutions and contracting. In the remaining chapters, we used that framework to help us understand the economics and politics associated with paternalism in Southern agriculture. The framework highlights the importance of transaction costs in motivating the development of contractual relations. In our case study, we focus on the transactions costs associated with the use of labor in premechanized cotton production. We analyze the steps that landowners in the South took that reduced the supervision and turnover costs associated with premechanized cotton production after the abolition of slavery. They negotiated sharecrop and tenant contracts, provided paternalism to some workers, and maintained the value of paternalism by maintaining a discriminatory class and racial climate through their political agents.

Introduction

The system of labor relations in the South that we described in Chapter 1 was a dominant force in the region's economy, but it was fragile in at least one important sense. The relationship between planters and their dependent laborers would have been undermined by government or private sector provision of goods and services that workers viewed as substitutes for paternalistic benefits. With the onset of the Depression, there was little danger of new private sector investment in the South that would have provided workers with an alternative source of jobs and benefits. With the entire U.S. economy flat on its back, there was also little that the individual state governments could do. The only credion threat came from the federal government, particularly the system of social insurance that resulted from the Social Security Act of 1935. The threat posed by the Social Security system and the Southern rural elite's response to it reveal a great deal about the South's system of paternalism and the political strength of the forces arrayed in defense of it.

Before the Social Security system was conceived, the federal government had more immediate needs to address. High levels of unemployment across the nation since 1930 had strained the system of providing poor relief. Before long-term structural change could occur, the government had to find ways of making sure the unemployed would simply survive to see that new system. New systems of relief provision had to be established.

The value of paternalism to the Southern rural elite depended on the availability of substitutes for paternalism. The appearance of substitutes provided by the government – programs providing old-age security, unemployment insurance, medical care, or greater security in commercial and legal dealings – would have raised the cost of monitoring labor and reduced the elite's ability to keep labor dependable and cheap. Substitutes for paternalism provided by the private sector – the provision of farming supplies and household goods on favorable terms from local merchants, the opportunity for Southern workers to migrate to jobs outside the South, or the appearance of new employment opportunities within the South created by inflows of capital from outside the South – would have raised reservation wages. The Southern planter elite worked to prevent any of these developments in order to limit the threat to their form of labor relations.

Southern landowners did not operate directly in politics but instead used Congressmen as their political agents. The Democratic party in the South dominated politics after Reconstruction and was controlled by landowners and merchants in the counties dominated by plantation agriculture – the black belt elites. In the early 1870s the commitment to Reconstruction by the North began to wane due to allegations of corruption and the economic recession of the 1870s. In the South the fall in agricultural prices hurt all farmers, and poor white farmers reacted more favorably to the racist rhetoric of the Redeemer (Democratic) governments than if times had been good.