One may wonder why political scientists would bother about the analysis of questions relating to rates of unemployment. In effect, should not this be part of economic science? Economists are generally seen as better equipped with theories on the micro and macro level to deal with issues regarding labour market performance, the development of employment and the explanation of volatile rates of unemployment and inflation. This view is held by the majority of the economic science guild and by many policy-makers.

The paper aims at a more complete, yet still parsimonious, explanation of macro-economic policy failure and success during the ‘stagflation’ period of the 1970s. Focusing on four countries, Austria, Great Britain, Sweden and West Germany, it is shown that both runaway inflation and rising unemployment could be avoided whenever it was possible to achieve a Keynesian concertation between fiscal and monetary expansion on the one hand and union wage restraint on the other. The actual policy experiences of the four countries are then explained in terms of the linkage between a ‘coordination game’ played between the government and the unions in which macro-economic outcomes are determined, and a politics game in which the government tries to anticipate the electoral responses of different voter strata to these outcomes.

In spite of a recently growing interest in corporatism as a political explanation of cross-national variations of economic performance and as a device for successful crisis management, there is little evidence that corporatism matters as a determinant of economic outcomes. Two kinds of corporatism – as a pattern of interest intermediation or industrial relations, and as a system of concerted public policy-making – are distinguished and tested with OECD data from the 1973 – 85 crisis. Little or no support for either corporatist explanation was found. Alternative perspectives of industrial relations, labour organisations, public policy concertation, state administration, and politico-economic institutions are discussed as offering more promising explanations of differences in governments’ responses to economic crisis.

Because employment is a problem of public policy, it involves elected politicians as well as economists designing policy instruments. The political appraisal of economic policies is necessary and often decisive in the selection of government policies. It first considers what we mean by saying that employment is a public policy problem. Secondly, it considers two attributes for appraising policies: political desirability, and economic effectiveness. In the third section alternative models of choice in conditions of uncertainty are presented, depending upon whether or not there is consensus among politicians about political desirability, and whether or not there is consensus among economists about the effectiveness of a policy. The concluding section considers conditions for integrating political and economic appraisals in government decision making.

A political-institutional explanation of the deteriorating labour market performance of the Netherlands during the economic crisis of the 1970s is suggested. By comparing the macroeconomic and labour market strategies of the Netherlands and full employment countries the economic feasibility of Dutch solutions to the unemployment problem is estimated. Dutch strategies turn out to have been of a fragile and contradictory character, while full employment countries could rely on rather coherent and consistent strategies. This difference in strategy-building is very likely a result of differences in the political-institutional structures of countries. The policy-making process in the Netherlands has been subject to political immobilism. Institutional ineffectiveness after the first oilcrisis, a balance-of-power situation, concertation without consensus and internal contradictions within the Christian Democratic party have resulted in the failure to control the labour market.