We thank John Aldrich, Michael Alvarez, Michael Caldwell, David Cameron, John Ferejohn, John Freeman, Jeffry Frieden, Lloyd Gruber, Peter Hall, and Stephen Krasner for helpful comments on various aspects of this article.

^1. For classic statements of this partisan-ideological thesis, see Hibbs, Douglas, “Political Parties and Macroeconomic Policies,” American Political Science Review 71 (12 1977), pp. £1467–87CrossRefGoogle Scholar; Kirschen, Etienne Sadi, Economic Policy in Our Time (Amsterdam: North Holland, 1964)Google Scholar; and Lipset, Seymour Martin, Political Man: The Social Bases of Politics (Garden City, N.Y.: Doubleday, 1963)Google Scholar.

^2. The domestic incentives to pursue partisan strategies also have been much debated. Arguments that the exigencies of democratic political competition both in plurality two-party systems and in proportional representation systems generate strong pressures for policy convergence, rather than for partisan distinctiveness, follow from the early work of Downs, Anthony, An Economic Theory of Democracy (New York: Harper & Row, 1957)Google Scholar. For more recent studies, see Jackman, Robert, “Elections and the Democratic Class Struggle,” World Politics 39 (10 1986), pp. 123–46CrossRefGoogle Scholar; and Rose, Richard, Do Parties Make a Difference? 2d ed. (London: Chatham House, 1984)CrossRefGoogle Scholar. Others suggest that the “privileged position of business” militates heavily against partisan separation. See, for example, Block, Fred, “The Ruling Class Does Not Rule,” Socialist Revolution 33 (05–06 1977), pp. 6–28Google Scholar; Block, Fred, “Beyond Relative Autonomy: State Managers as Historical Subjects,” Socialist Register, vol. 17, 1980, pp. 227–42Google Scholar; Elkin, Stephen, “Pluralism in Its Place,” in Benjamin, Roger and Elkin, Stephen, eds., The Democratic State (Lawrence: University of Kansas Press, 1985), pp. 179–211Google Scholar; Lindblom, Charles, Politics and Markets1 (New York: Basic Books, 1977)Google Scholar; and Offe, Claus, “Theses on the Theory of the State,” in Offe, Claus, ed., Contradictions of the Welfare State (London: Huchinson, 1984), pp. 119–29Google Scholar. There is growing evidence, however, that domestic politics generates incentives for governments to pursue economic strategies that further their partisan interests so long as these are consistent with reelectable levels of macroeconomic performance. See Geoffrey Garrett, “Between Autonomy and Constraint: Government Economic Strategies in the Advanced Industrial Countries,” mimeograph, Stanford University, Stanford, Calif., 1990; and Garrett, Geoffrey and Lange, Peter, “Government Partisanship and Economic Performance: When and How Does ‘Who Governs’ Matter?” Journal of Politics 51 (08 1989), pp. 676–93CrossRefGoogle Scholar.

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^10. This was arguably even the case when unemployment rates were higher than 10 percent in many countries in the early 1980s. Whereas the costs of unemployment are narrowly targeted, those of inflation are felt throughout the whole electorate. See Hibbs, Douglas, The American Political Economy (Cambridge, Mass.: Harvard University Press, 1987)Google Scholar. Furthermore, it seems that many in secure employment came to believe that their material prosperity or at least the control of inflation was contingent upon the existence of a relatively large pool of unemployed workers. On this, see Garrett, “Between Autonomy and Constraint.”

^11. Frey, Bruno and Schneider, Friedrich, “A Politico-Economic Model of the UK,” Economic Journal 88 (06 1978), pp. 243–53CrossRefGoogle Scholar.

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^17. It is important to note that these political-institutional arrangements are often hypothesized to affect the behavior of capita! as well as that of labor. Coherent systems are argued to be more likely to foster relatively stable environments in which entrepreneurs can pursue long-term strategies based on confident expectations about future rates of return. The “fit” between the partisan preferences of dominant parties and union organization can be expected not only to generate consistencies in economic policies within individual governments but also to promote continuities between governments. In this climate, the expected return from domestic investments is likely to increase relative to other uses of capital, with salutary consequences for society over the medium term. See Geoffrey Garrett and Lloyd Gruber, “The Political Economy of Investment,” paper presented at the annual meetings of the Midwestern Political Science Association, Chicago, 1990.

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^22. Przeworski, Adam and Wallerstein, Michael, “Democratic Capitalism at the Crossroads,” Democracy 2 (07 1982), pp. 52–68Google Scholar.

^23. King, Mervyn and Fullerton, Don, The Taxation of Income from Capital: A Comparative Study of the US, UK, Sweden and West Germany (Chicago: University of Chicago Press, 1984)CrossRefGoogle Scholar.

^24. While this strategy may not be “ideal” from the standpoint of capital, the stable economic environment it engenders may nonetheless be preferred by business to a climate in which expectations about the behavior of government and labor are less certain. Thus, entrepreneurs can be expected to invest in the national economy, where long-term rates of return are relatively certain, rather than to export capital for more risky foreign ventures.

^25. Friedman, Milton, Capitalism and Freedom (Chicago: University of Chicago Press, 1962)Google Scholar.

^26. This is well illustrated by the Thatcher government's extensive bailouts during the 1980–82 recession. See Keegan, William, Mrs. Thatcher's Economic Experiment (London: Allen Lane, 1984)Google Scholar; and Riddell, Peter, The Thatcher Government (Oxford: Basil Blackwell, 1985)Google Scholar.

^27. Schott, Policy, Power and Order.

^28. See Dalton, Russell, Flanagan, Scott, and Beck, Paul Allen, Electoral Change in Advanced Industrial Democracies: Realignment or Dealignment? (Princeton, N.J.: Princeton University Press, 1984)Google Scholar; and Crewe, Ivor and Denver, David, eds., Electoral Change in Western Democracies: Patterns and Sources of Electoral Volatility (New York: St. Martin's Press, 1985)Google Scholar.

^29. Our typology is similar to that found in other more qualitative evaluations of political economic regimes. See Lehmbruch, Gerhard, “Liberal Corporatism and Party Government,” in Schmitter, Philippe and Lehmbruch, Gerhard, eds., Trends Toward Corporatist Intermediation (Beverly Hills, Calif.: Sage, 1979), pp. 147–83Google Scholar; Lehmbruch, Gerhard, “Introduction: New Corporatism in Comparative Perspective,” in Lehmbruch, Gerhard and Schmitter, Philippe, eds., Patterns of Corporatist Policy-Making (Beverly Hills, Calif.: Sage, 1982), pp. 1–28Google Scholar; and Schmitter, hilippe, “Interest Intermediation and Regime Governability in Contemporary Western Europe and North America,” in Berger, Suzanne, ed.,Organizing Interests in Western Europe (New York: Cambridge University Press, 1981), pp. 285–327Google Scholar. Our typology differs in some respects, however, from that found in studies focusing on the processes of government or firm decision making, rather than on the constellation of political power and organizational conditions. According to these studies, France and Japan are examples of “corporatism without labor” or can be considered “coordinated market economies.” See Pempel, T. J. and Tsunekawa, Keiichi, “Corporatism Without Labor? The Japanese Anomaly,” in Schmitter and Lehmbruch, Trends Toward Corporatist Intermediation, pp. 231–70Google Scholar; and Soskice, David, “Providing the Infrastructure for International Competitiveness: A Comparative Institutional Perspective,” mimeograph, Wissenschaftszentrum für Sozialforschung, Berlin, 10 1990Google Scholar.

^30. The significance tests reported here are derived from one-way analyses of variance, comparing the differences in the means between the two types of political economy with dispersion within them.

^31. For detailed discussions of the economic effects of oil wealth, see Garrett, and a, “Performance in a Hostile World”; and Alt, James, “Crude Politics: Oil and the Political Economy of Unemployment in Britain and Norway, 1970–1985,” British Journal of Political Science 17 (04 1987), pp. 149–99Google Scholar.

^32. Here again, the impact of North Sea oil wealth on Norwegian policies should be noted. The budget deficit of Norway, in contrast with that of the other countries, did not substantially increase over the period, while the real money supply in Norway grew considerably (even though the government greatly increased real interest rates to stem this expansion).

^33. Pe is a multiplicative index of standardized scores for labor movement encompassment and the participation of leftist parties in cabinet government. Thus, higher scores on the index are indicative of more corporatist systems, while lower scores reflect weak labor systems.

^34. Only those economic variables which had statistically significant associations with the various economic policy indicators or which improved the specification of the models are reported.

^35. This type of model is most appropriate for the analysis of time series data. Nonetheless, controls for the effects of aggregate economic conditions are still significant in the context of the aggregated time periods used in this article. For a detailed discussion of political economic reaction models, see Alt, James and Chrystal, K. Alec, Political Economics (Berkeley: University of California Press, 1983)Google Scholar, chap. 6.

^36. When macroeconomic outcomes were controlled, the impact of oil dependence or wealth on fiscal and monetary policies was not significant. With respect to Norway, this does not mean that the country's oil bounty had little effect on macroeconomic policy but, rather, that its growth and inflation performance were more proximate determinants of economic policy.

^37. See Cameron, David, “The Expansion of the Political Economy,” American Political Science Review 72 (12 1978), pp. 1243–61CrossRefGoogle Scholar; and Katzenstein, Small States in World Markets.

^38. The correlation between the PE index and openness is only.43. Thus, the estimates and standard errors generated by the regression models are unlikely to be perturbed by the effects of multicollinearity.

^39. The exclusion of Norway from the regression analysis did not alter this finding. There was still a statistically significant positive association between the political and organizational power of labor and national budget balances.

^40. Openness may not be a very precise indicator of integration into the international economy. Measures of international economic interactions other than trade—such as capital and investment flows—may provide more detailed information on the vulnerability of national political economies to international change. Nonetheless, we consider openness to be a representative indicator, and we expect that the pattern of results reported here would not be unduly affected by better specification of the extent of national vulnerability.

^41. Furthermore, the results may also reflect the historical relationships between open political economies and the power of labor in both politics and the markets. See Cameron, “The Expansion of the Political Economy.”

^42. See Reich, Robert, The Next American Frontier (New York: Times Books, 1983)Google Scholar; and Zysman, John and Tyson, Laura, American Industry in International Competition (Ithaca, N.Y.: Cornell University Press, 1983)Google Scholar.

^43. Milner, Helen, Resisting Protectionism: Global Industries and the Politics of International Trade (Princeton, N.J.: Princeton University Press, 1988)Google Scholar.

^44. It is also important to note that while Japan was the least interventionist case on most supply-side indicators, investment by government was greater in Japan than in any other country. For discussions of the role of government planning in the Japanese economy, see Johnson, Chalmers, MITI and the Japanese Miracle (Stanford, Calif.: Stanford University Press, 1982)Google Scholar; and Okimoto, Daniel, Between MITI and the Market (Stanford, Calif.: Stanford University Press, 1989)Google Scholar.

^45. This is consistent with the work of others on the effects of the strength of Christian democratic parties on welfare provisions. See Hicks, Alexander and Swank, Duane, “On the Political Economy of Welfare Expansion,” Comparative Political Studies 17 (04 1984), pp. 81–118CrossRefGoogle Scholar; and Wilensky, Harold, “Leftism, Catholicism and Democratic Corporatism: The Role of Political Parties in Recent Welfare State Development,” in Flora, Peter and Heidenheimer, Arnold, eds., The Development of Welfare States in Europe and America (New Brunswick, N.J.: Transaction Books, 1981), pp. 345–82Google Scholar.

^46. It could be argued, however, that this trend set the stage for a backlash against the welfare state at the end of the 1980s. There is some suggestive evidence in support of this proposition, especially with respect to Sweden, the country in which government intervention grew most rapidly between the early 1970s and the mid-1980s (public spending increased by fully 20 percentage points).

^47. Norway's large corporate taxation score and, more particularly, the growth in Norwegian corporate taxation during the period were largely the product of the country's oil wealth.

^48. The evidence is much more mixed with respect to the effects of integration into the international economy. On some policy indicators, openness was negatively associated with the extent of government intervention. But on many others, the relationships were positive. These data do not allow for definitive conclusions with respect to the historical and functional effects of economic integration on domestic strategies. For a theoretical analysis of these relationships, see Frieden, “Invested Interests.”

^49. See Cameron, “The Expansion of the Political Economy”; Korpi, Walter and Esping-Andersen, Gφsta, “Social Policy as Class Politics in Post-War Capitalism: Scandinavia, Austria, and Germany,” in Goldthorpe, Order and Conflict in Contemporary Capitalism, pp. 179–208Google Scholar.

^50. See Hicks and Swank, “On the Political Economy of Welfare Expansion”; and Wilensky, “Leftism, Catholicism and Democratic Corporatism.”

^51. It is difficult to derive accurate cross-national quantitative measures for these policies, since figures delineating final policy outcomes (in terms of monies spent or received) may conceal important details about the structure of policy instruments. With respect to investment policy, for instance, the structure of corporate taxation (the relationships between nominal rates, depreciation allowances, investment tax credits, and the like) may not necessarily be well reflected in the final tax revenue figures. Nonetheless, the policy indicators discussed here provide useful, albeit imperfect, comparative information on government strategies.

^52. See Przeworski and Wallerstein, “Structural Dependence of the State on Capitalism” and “Democratic Capitalism at the Crossroads.”

^53. Pontusson, “Austerity, Government Crisis, and Political Realignment in Sweden, 1989–1990.”