In this section, the focus shifts from a tentative theorizing about institutional arrangements for coordinating economic activity to an analysis of the contemporary transformations in social systems of production. In the previous chapters, we have touched on the following issues. Boyer has argued that societies with more market oriented firms have not enhanced their structural competitiveness (i.e., the ability to innovate and obtain market shares), contrary to the expectations of the early 1980s (Chapter 2). Similarly, networking, joint ventures, and alliances have increased to unprecedented levels, and this is not unrelated to the complexity and uncertainty associated with innovation and restructuring of production methods (Chapter 3). Furthermore, states as well as business associations may deploy contrasted strategies when facing the internationalization of economic activity: One of the most promising avenues is no longer to rely on the demand-type strategies reflected in Keynesian economics but to anticipate the challenge for national competitiveness and to develop policies on the production side of the economy (Chapter 4).

Obviously, how production is organized is an important issue for social scientists to address. Is not the long-run performance of capitalist economies largely shaped by their varying abilities to use, direct, or foster organizational and technical change? Did not Soviet-type economies collapse in large part due to their inability to raise standards of living and to promote a minimum democratic order? Since most observers probably respond positively to all these questions, the challenge is to make some progress in comprehending at a theoretical level the sources of success in production and innovativeness.

The growth of international competition and trade in the postwar period, at first blush, would not appear to provide a context especially favorable for the assumption of governance roles in the economy by interest associations. In many capitalist states, neoliberal ideologies that favor the globalization of economic relations have gained significant influence within the classe politique. These ideologies celebrate the virtues of markets as the preeminent governing mechanisms, laud their efficiency, and postulate their capacity to increase the general good of all. Championed as extraordinary, “natural” allocative instruments, markets, it is suggested, must be left free to weave their magic. Consistent with this neoliberal ideology are policies that promote markets at the expense of other governing structures and that seek to dismantle alternative governance arrangements when they exist. The ideologically committed dismiss all attempts by the state to approach economic policy in an anticipatory fashion. The idea of state intervention is attacked as protectionist, inefficient, and self-serving for backward private interests.

Interest associations might not be expected to fare well as governance mechanisms in this neoliberal world. At the sectoral level, neoliberals perceive them to be the servants of corrupt special interests that refuse to face the bracing world of international competition. At the macro level, they are branded disdainfully as “corporatist,” a term that hints at market interference and at collusion among the state, big capital, and big labor. The reactive approach to policy favored by neoliberal governments has little room for associations. Willis and Grant's (1987) concept of the “company state” underlines these implications.

In the last three chapters, I have focused on the nature of strategic voting equilibria in the three electoral systems that featured in Duverger's original propositions: SMSP, single-tier PR, and majority runoff. The main conclusion has been that all three systems obey the M + 1 rule, according to which the number of viable candidates or lists in each system cannot exceed M + 1 (where M refers to the district magnitude for SMSP and PR, and to the number of first-round competitors who can advance to the second round for majority runoff). I have also considered three broad theoretical limits on the M + 1 result: First, if the electoral institutions do not correspond to one of those specified above, then nonstandard varieties of strategic voting may arise, that do not systematically concentrate the distribution of votes; second, even if one considers one of the electoral systems listed above, there are still a number of key assumptions about voters that must be met in order for strategic voting to have a strong effect; third, even if the electoral institutions are “right” and the voters obey all the model's assumptions, only an upper bound is imposed in Duvergerian equilibria. In this chapter, I consider the first and third of these hitherto subsidiary issues in greater detail. I make two main points. First, the fact that strategic voting only imposes an upper bound on the effective number of competitors, when it has any reductive impact at all, has some clear consequences for how we think about doing electoral research.

Economists have succeeded in persuading most people that the performance of an economy improves as social constraints on self-interested rational action are removed. In this essay I wish to argue that, to the contrary, socially institutionalized constraints on the rational voluntarism of interest-maximizing behavior may be economically beneficial, and that systematic recognition of this must have far-reaching implications for both economic theory and the conduct of economic policy.

Note that I am referring not to social but to economic benefits of social constraints, and to constraint rather than choice. In other words, I am not discussing whether or not societies may or should impose constraints on economic behavior for moral reasons; even most economists agree that people should not be allowed to sell and buy babies, regardless of whether this was the free will and perceived rational interest of all parties involved. And I am arguing for the economic benevolence not of individual freedom, but of limitations on individual volition and the pursuit of self-interest. To support high economic performance, I am claiming, a society requires a capacity to prevent advantage-maximizing rational individuals from doing things that they would prefer to do, or to force them to do things that they would prefer not to do.

The suggestion that social institutions constraining the rational voluntarist pursuit of economic advantage, and thereby interfering with the spread and operation of markets, may be economically beneficial directly contests the leading premises of mainstream economics with its laissez-faire conceptual heritage, and strikes right into the heart of darkness of liberal individualism.

INTRODUCTION

“Globalization” has become an increasingly fashionable concept in the social sciences. It is widely supposed that the process of economic “globalization” has taken place or is taking place, leading to a situation in which most economic activities have been internationalized and the nation-state has lost its capacity as a locus of economic governance. A truly “global” economy would thus be a new stage in economic relationships, qualitatively different from previous structures of the international economy. This paper asks whether there is such a thing as a globalized economy. It further asks, if not, then how are we to characterize the present state of the world economy?

In the first place, we set out to examine whether such a process of globalization can be specified with some degree of rigor and assessed against the available evidence of international economic trends, thus enabling us to determine whether this phenomenon is taking place or not. To do this we have constructed two contrasting economic types: a fully globalized economy and an open international economy that is still fundamentally determined by processes occurring at the level of national economies. These types enable us to clarify the issues, and conceptually to specify the difference between a potentially new global economy and merely extensive and intensive international economic relations. Too often evidence of the latter is used to substantiate the former.

Second, having specified the ideal types, we go on to consider the main trends in the international economy and how they fit with the ideal type of globalization.

For many years, social scientists have had a division of labor in studying the key institutions constituting a modern economy. Political scientists have given privileged attention to power and have focused major attention on the state as the key institution for coordinating or coercing individual behavior. For them and for many other social scientists, the market was the basic coordinating mechanism of an economy and should be investigated by an economist. In the case of market failure, some public intervention was supposed to occur in order to restore the optimality of an equilibrium, and ideally this should be one of the functions of the state, along with the enforcement of property rights. This issue too drew the attention of political scientists. However, the concerns of political scientists and the economists were generally quite different. In contrast with both, many sociologists argued that the nature, role, and emergence of social norms was the starting point of any investigation about the viability of any political and/or economic system.

In recent years, however, social scientists have begun to challenge this division of labor (Coleman, 1991). First, a few theoreticians have applied rational choice axioms to some basic issues in political science, thus developing some of the same methods as have many economists. Other political scientists, using different theoretical tools and methods, have argued that variation in the mobilization of interest groups explains divergences in macroeconomic performances among industrialized countries (Hollingsworth and Hanneman, 1982).

In a world without transaction costs, democratic politics is inherently unstable. There is always another deal that might be offered to a majority coalition comprising some current winners and some current losers, which makes all members of that coalition better off. But typically there are lots of new deals that can beat the old deal, and people will differ over which of them is best. If only a few voters “defect” from the current political equilibrium and vote for a new party or policy, the old equilibrium will be undisturbed. In order for a new deal to come about, it takes the coordinated actions of large numbers of politicians and voters. Thus, the inherent instability of politics implies that coordination problems will be omnipresent.

One way to think of the problem of democratic coordination dealt with in this book is in terms of a sequence of choices whereby a government is chosen from the mass of citizens. In a stylized parliamentary system, the sequence includes a procedure to decide which citizens will appear on the ballot as candidates, then a procedure to decide which candidates will be elected to serve in parliament, then a procedure to decide which MPs will form the government. At each of these stages, there may be more people of a given ideology or type seeking a spot on the ballot, a seat in the legislature, or a portfolio in the government than there are spots, seats, or portfolios to be had.

HIERARCHIES, MARKETS, AND CONSTITUTIONAL ORDERS

To capture what is theoretically distinctive about the commonalties of the new organizational forms in the public and private sectors, and to understand why current theories are blind to this distinctiveness, it is helpful to contrast more familiar governance structures – markets and hierarchies – with a third. I will call this type of governance structure a constitutional order. In introducing this category, however, I do not mean to attempt to supply the missing member of an exhaustive, three-part typology of governance structures. On the contrary, it seems in principle unlikely that the set of these structures is closed. Just as firms operate in markets defined by other firms, governance structures are at bottom strategic responses to competitive environments composed of other governance structures. Under highly restrictive assumptions it is conceivable that the mix of institutional strategies embodying the current governance structures will arrive at a stable equilibrium. But unless the context in which existing governance structures operate is frozen, so long as it is impossible to invent a new strategy that takes advantage of rigidities created by the self-reinforcing mesh of the current ones, equilibrium seems unlikely. In any case, the arguments here for a third governance structure of particular substantive moment are meant to encourage consideration of a class of trust-based coordination mechanisms that parallel the dichotomy of markets and hierarchies. In what follows, I reproduce only as much of the conventional account of this latter dichotomy as needed to create a backdrop for a discussion of an alternative category.

In this brief chapter I provide some district-level evidence pertinent to Taagepera and Shugart's Law of Conservation of Disproportionality, a proposition articulated at the system level that hinges on rational entry decisions. Both Taagepera and Shugart (1989:123) and Lijphart (1994:97), among others, have noted that the bivariate correlation between a system's proportionality and its number of parties reflects a reciprocal causal mechanism at work. Increasing the number of contestants (beyond some threshold determined by the electoral system's capacity to dispense seats proportionally, and holding all else constant) decreases measured proportionality. Anticipated deviations from proportionality, however, tend to depress the number of parties. For, if everyone anticipates a disproportional outcome, and everyone agrees that party A will be on the short end of this disproportional outcome, then party A has reason to drop out of the race. But if A does drop out, then the correspondence between votes and seats actually obtained will be less distorted than had been anticipated.

The lesson that Lijphart (p. 97) draws from the reciprocal causation between the number of parties and the proportionality of the electoral outcome is that proportionality measured on the basis of actual vote shares will overestimate proportionality measured on the basis of true preferences: “Assuming that many voters cast their votes for larger parties because they do not want to waste their votes on small parties with poor chances of being elected, the parties' seat shares deviate much more from the pattern of the voters' true preferences than from the actual vote shares.”

This book is about strategic coordination – both strategic voting and strategic attempts to regulate entry – in the world's electoral systems. I assume that readers are familiar with the concept of a coordination game. Those who are not, and are not satisfied with the brief description given below, may wish to consult Lewis (1969), Schelling (1978), or other sources.

The basic idea of a coordination game is simple enough and can be conveyed by considering a classic illustrative game, the Battle of the Sexes. In this game, a man and a woman must independently choose whether to attend a prize fight or a ballet performance. The man prefers the prize fight to the ballet, while the woman has opposite preferences. Both, however, are primarily concerned with having each other's company, so that each prefers going to their dispreferred entertainment with their partner to going to their preferred entertainment alone.

Cultural stereotypes aside, this venerable example lays bare the essence of a coordination problem. The players in the game would prefer to coordinate their actions on some one of two (or more) possibilities but they disagree over which of these possibilities ought to be the one on which they coordinate. There is thus an admixture of common and divergent interests, and the possibility of both successful coordination (to the relative advantage of one or more of the players over the others) and failed coordination (to the disadvantage of all).

Thus far, this book has dealt with issues of local coordination: how voters in a given electoral district coordinate their suffrages; how candidates and parties, again at the district level, coordinate their entry decisions. Scholarly arguments about the effect of electoral systems on party systems, from Duverger onward, have not stopped with these district-level considerations. Instead, they have gone further and claimed that electoral rules also affect the larger stage of national politics, because national parties link politicians from many electoral districts together for purposes of electoral campaigning and governance.

In this chapter, I consider this appeal to the existence of national parties, and the phenomenon of cross-district linkage of legislative candidates more generally. I shall argue that the standard linkage argument, in particular, that advanced in support of Duverger's Law, fails; and that better linkage arguments entail the same kinds of social and institutional considerations encountered previously in the book. Under the heading of “institutional considerations” I stress in particular the importance of the rules determining the selection and power of the chief executive (whether president or prime minister). This discussion sets the stage for the empirical analysis presented in Chapter 11.

A second topic that I investigate in this chapter concerns how taking a multi-district view of things might affect the topics considered in the previous two parts of the book: strategic voting and strategic entry.

Thus far in this book I have considered two levels at which political actors may face incentives to coordinate their actions. First, within individual legislative constituencies, voters or parties may need to coalesce in order to convert their votes into legislative seats more efficiently. Second, within the nation as a whole, would-be legislators and would-be executives may need to cooperate in order to convert their resources into executive office more efficiently. I have also stressed two broad influences on the outcome of the electoral coordination game, whether at the district or the national level: First, the nature of the electoral procedure pertinent to each level (the local electoral system by which legislators are elected, the national electoral procedure by which executives are elected); second, the nature of the social actors and cleavages involved at each level.

Chapter 10 suggested that coordination at both levels would be pertinent to explaining the number of parties at the national level: coordination at the district level by affecting the number of parties within each district, coordination at the national level by affecting the degree to which the local party systems cumulated into a national party system.

CAPITALISM, HISTORY, AND THE RISE OF MARKET: STILL THE PARADOX OF POLANYI

For many social scientists, the capitalist system is defined primarily as a market economy. This assumes that the rise, diffusion, and maturation of market mechanisms are the key features in periodizing the history of modern economies (Attali, 1981; Braudel, 1979). Ideally, a complete marketization of economic and social life would fulfill the ideal of modernity.

The previous chapters cast severe doubts about the omnipotence and exclusivity of market mechanisms in capitalist systems. In fact, this vision is severely challenged by many recent advances in various areas of the social sciences. First, it is not true that those historical moments that have been the most market oriented have been the most successful ones in providing growth and stability in the history of capitalist societies (Sabel and Zeitlin, 1985). Second, some of the most competitive firms, regions, and nations are based on mechanisms of economic coordination that are totally different from pure market mechanisms (Gerlach, 1992; Hamilton and Biggart, 1988). Third, from a theoretical standpoint, markets are only one among various alternative and often complementary coordinating mechanisms: hierarchies, networks, associations, and states have frequently been important mechanisms for coordinating actors in capitalist societies when adequately designed and blended (Campbell, Hollingsworth, and Lindberg, 1991; Hollingsworth, Schmitter, and Streeck, 1994). Fourth, the transition to market economies in eastern European countries is beginning to provide clear insights about the necessary embeddedness of a market logic within a whole set of values, legal frameworks, and nonmarket institutions.