Categorizing Ideological Varieties of Capitalism
     
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Introduction

  

          In this paper, I will argue that varieties of capitalism are institutional manifestations of a taxonomy of political philosophies.  The paper begins with the premises that politics is driven by ideology and is concerned with the use of coercion.  It then deduces a general categorization of political philosophies and defends their explanatory value: First, it critiques the view that, because differing ideologies generate divergent political behavior, universal laws of politics cannot exist.  Next, the paper argues that such laws should describe how ideologies, rather than more concrete variables such as institutions, shape political activity through processes of path dependence.  It concludes with an appeal for future research along these theoretical lines.

  

Premises

 

          We might preface any discussion of politics by stating two premises.  First,

“[h]uman action is directed by ideologies.”  Animals of other species act on their instincts; humans, whose “particular and characteristic feature” is their capacity for reason, cannot act without thinking, or without “a definite idea about causal relations.”  Ludwig von Mises puts it simply: “Action is always directed by ideas; it realizes what previous thinking has designed.”  And ideologies – ideas about

“individual conduct and social relations” – animate every “existing state of social affairs,” whether they are made explicit or remain unarticulated.[1]  Frank Dobbin argues that actions become “social practices” only when actors endow them with a common “meaning,” or “collective understandings of their purposes.”  Once they are grouped into “institutionalized meaning system[s],” these differing conceptions of “how the world works” dictate differing “policy solutions and individual behavior.”[2]

 

          Yet Dobbin finds that, instead of examining how variation in political cultures leads to policy divergence – for example, among states’ “industrial and economic strategies”[3] – social scientists too often study the behavior of actors who already share modern institutionalized beliefs about politics or economics.  The seemingly universal “social and economic laws” they derive from their observations, however, are only the “products of social life” specific to a particular modern or rationalized “institutionalized meaning system.”[4]  “Instrumental social institutions such as government [and] markets,” contends Dobbin, should not be “cordoned off” from other cultural institutions such as “the arts [and] religion”; the two are equally “meaning-laden.”[5]

 

          A second premise is that politics complements economics.  Economics explains the uncoerced exchanges that individuals make; politics explains the use of coercion to constrain individual action.  So long as the state holds a Weberian monopoly on the legitimate use of coercion, the fundamental question inherent in political activity is: When should the state employ coercion against the individual?  Yet even in a stateless world, humans would have to decide on the circumstances that warrant the use of coercion.  This necessity for politics is inherent in their capacity for violence, just as a need for ideology results from their capacity for reason.

  

A Deduction Concerning Economics

 

          Using these two premises, we can evaluate Dobbin’s model of national policymaking.  First, our ideologies or “meaning system[s]” are indeed the source of all our wants.  Yet to the extent that we participate in an economy – i.e., to the degree that government rules out the use of physical coercion – we can get what we want from others only voluntarily, in exchange for helping to satisfy their wants.  Therefore, we should seek to accumulate a common medium of exchange (money), regardless of the specific content of our ideologies.  But how do we – individuals who are (a) endowed with the capacity for reason and (b) forbidden to use coercion against others – seek to maximize our wealth?  Insofar as economists can answer this question, they do indeed discover what Dobbin mockingly terms “the universe’s transcendental economic laws.”[6]

 

Deductions Concerning Politics in General

  

          Does the existence of these universal laws justify the liberal “intellectual monoculture” that Kathleen McNamara and others observe in the study of international political economy (IPE)?[7]  McNamara writes that “if one reads current work in the field of IPE, one finds that power is strangely absent, and that economic motives often substitute for political ones.”  Contemporary syllabi for “IPE doctoral classes at major research universities” also omit works that study “the role of ideas, perceptions, or social institutions”; instead, many assigned authors are trained economists who “work solidly within” their discipline’s “microeconomic rationalist traditions.”[8]

 

          Yet while rationalism may be the appropriate ontology with which to study the politics of reason-endowed beings, liberalism offers an incomplete characterization of their motives.  If government completely rules out violence, then individuals indeed will be left with only economic motives – but if, in any sphere of human activity, government allows us to contest the use of coercion, then we first must fight over our differing political philosophies (our differing beliefs about the circumstances that legitimate coercion).  In sum, the prime mover in politics is individuals’ ideas about coercion, rather than about money, because politics is conceptually prior to economics: The institutionalization of coercion structures our incentives for acquiring a medium of exchange.[9]  Even Peter Hall and David Soskice, who downplay the role of ideas, “contend that differences in the institutional framework of the political economy generate systematic differences in corporate strategy across [different types of political economies].”[10]

 

Deductions Concerning Particular Political Philosophies

  

          Yet Dobbin, who does emphasize the role of ideas, does not recognize the fundamental distinction between politics and economics.[11]  Not only does this oversight lead him to reject the existence of universal economic laws (as argued above); it therefore also precludes him from acknowledging that one particular political philosophy might best accommodate or complement those economic laws, i.e., that while all political cultures are “meaning-laden,” only one type can reflect the true “nature of rationality and the instrumental means to accumulation.”[12]  Put differently, Dobbin’s failure to theoretically isolate politics as the sphere of human activity concerned with coercion obscures a critical reality: Any political philosophy – any ideology prescribing when the state should employ coercion against the individual – must first decide whether the state may initiate coercion against the individual,[13] i.e., it must choose whether to give full scope to economic (or other non-coerced) behavior or to constrain such instrumental activity for the sake of higher goals.  Thus it must take its place on a continuum of ideologies.  At one end is the political philosophy that prescribes truly “instrumentally rational institutions,” or political institutions that physically safeguard individual rationality.  At the other end are philosophies that subordinate that rationality to other political goals, and whose versions of “instrumentally rational institutions” are distorted by other “cultural” beliefs and therefore are imperfect representations of what Dobbin derides as “the ‘true’ nature of reality”[14] (or at least the reality of instrumentality).

  

          Dobbin misses this dichotomy of political philosophies, arguing not just that “differences in rationalized meaning systems explain broad cross-national policy differences,” but also that “rationality is essentially cultural” – that it may “take markedly different forms” in response to “particular social contexts”[15] (e.g., in the United States, Britain, and France).  He therefore precludes the possibility of a distinct rationality that is grounded in human ontology and that lies at one end of a natural continuum of political philosophies.  Thus he is wrong to reject the question: “What are the universal, rational laws of social reality?”[16]  Such laws need not describe only how “competing interest groups” decide among “given policy alternatives”[17] – they also can characterize the political impact of different ideologies, whether on the level of foreign policy making, institution building, or electoral outcomes.  But they presuppose a universal taxonomy of political ideologies – beginning with the rationality-culture dichotomy – that Dobbin rejects on principle (namely, on the converse of this paper’s second premise).

  

          In practice, however, we might categorize the political cultures of the U.S., France, and Britain according to their positions along this ideological continuum.  None achieves the fully instrumental institutions that constitute the ‘rational’ endpoint of that continuum, although the U.S. comes closest: Dobbin writes that it “entered the twentieth century with industrial policies designed to guard economic liberties by preventing restraints of trade and enforcing price competition.”  Thus, the U.S. chose Millean rule utilitarianism over Lockean absolute rights, but it based its economic rules on the utility of those rights – it defined progress in terms of the practices (namely the “efficiency”) encouraged by Lockean economic rights.[18]  By contrast, France “aimed to guide major manufacturing and infrastructural sectors from above, on the principle that only the state can prevent self-interested entrepreneurs and market irrationalities from disrupting progress.”  Thus France rejected Millean rule utilitarianism (“the early twentieth century found state technocrats experimenting with mixed public-private enterprises…”)[19] in favor of a more Benthamite act utilitarianism – it identified ‘progress’ with particular economic outcomes preferred by the state, rather than with the individual behaviors that generally accompany the protection of Lockean rights.[20]  Finally, Britain falls somewhere between these two: “The notion that the entrepreneurial spirit of the small firm was the mainspring of growth survived to shape [its] policy in the twentieth century.”  Accordingly, Britain appears to have applied rule utilitarianism in order to protect some Lockean economic rights (as has the U.S.): It “has guarded private initiative against interference from…politics.”  Yet Britain also has imitated France in identifying “economic dynamism” with a particular preferred outcome – in this case, the survival of small firms.  Therefore it has weakened Lockean rights (more than has the U.S.) by simultaneously “guard[ing] private initiative against inference from markets” – often via bailouts or other forms of state intervention in the market.[21]

 

Conclusions: The Primacy of Ideological over Institutional Path Dependency

  

          Of course, it is only a coincidence that Locke, Mill, and Bentham lie in that order along the ideological continuum hypothesized above; more than one political philosophy can occupy the same point on that spectrum.  For example, the continuum’s other endpoint is totalitarianism, which regulates the totality of the individual’s life and leaves no activity free from coercion.  Yet this ideology is incomplete – and each additional question that it must answer (e.g., regarding distributional principles or eligibility to rule) forces it to take a position on some other ideological continuum.  Thus, the more totalitarian is an ideology (i.e., the more spheres of human life it undertakes to control), the longer the chain of philosophical decisions it must make.  And at each new juncture, its prior ideological choices constrain future ones by restricting the number and type of continua on which it must place itself.  Accordingly, because ideologies animate politics, any country that seeks to decide a political matter will be constrained in seeking policy solutions by its previous ideological choices.  In fact, it will resemble the tree-climber in Margaret Levi’s metaphor for path dependence:

  

From the same trunk, there are many different branches and smaller branches.  Although it is possible to turn around or to clamber from one to the other – and essential if the chosen branch dies – the branch on which a climber begins is the one she tends to follow.[22]

 

          Therefore, politics is path-dependent in the most meaningful sense of that term: “[P]receding steps in a particular direction induce further movement in the same direction.”[23]  Differing varieties of capitalism may start from the same branch (i.e., they are clustered toward the ‘rational’ endpoint of the original ideological continuum), but they diverge at forks in the smaller branches, thereby forcing them to further distinguish themselves at even slighter branches.

Yet Hall and Soskice, as well as Paul Pierson, treat political path dependence as a sequence of institutional, rather than ideological, constraints on polities.  Hall and Soskice introduce the notion of “institutional complementarities”: “[T]wo institutions can be said to be complementary if the presence (or efficiency) of one increases the returns from (or efficiency of) the other.”  Thus states should “converge on complementary practices across different spheres,” and “we should see some clustering along the dimensions that divide” different varieties of capitalism.[24]  “Path dependent processes,” adds Pierson, therefore “will often be most powerful not at the level of individual organizations…but at a more macro level that involves complementary configurations of organizations and institutions.”  One institutional form will “induce complementary organization[s], which in turn may generate new complementary institutions.”[25]  Yet an ideology-based approach subsumes this institutional account for two reasons.  First, actors’ political philosophies will underlie their initial choice of institutions in differing social spheres.  Second, the worth that those ideologies assign to economic returns or efficiency will determine the extent to which actors avail themselves of possible “institutional complementarities.”  An ideology that places no value on economic wealth is unlikely to support such an institutional configuration.  Accordingly, “institutional complementarities” merely reflect some combination of a state’s philosophical decisions at various junctures.  Like other spheres of human behavior, politics is an idea-driven activity.

  

          Finally, this paper concludes with an appeal for the type of scholarship that is beyond its own scope.  It has attempted to portray politics as a struggle among differing ideologies, but if this theoretical portrait is to culminate in any useful predictions, it must be supplemented with a thorough categorization of political philosophies along the lines proposed here.  Fruitful avenues for future research may include the demarcation of specific points along the primary ideological continuum discussed above, and the mapping of additional continua into which philosophies may branch.

 
 


[1] Ludwig von Mises, Human Action: A Treatise on Economics (New Haven: Yale University Press, 1949), pp. 176-178, p. 188.

[2] Frank Dobbin, Forging Industrial Policy (Cambridge: Cambridge University Press, 1994), pp. 12-13.

[3] Ibid., pp. 19-20.

[4] Ibid., p. 16.

[5] Ibid., p. 13.

[6] Ibid., p. 11.  Of course, the above discussion implies not that these laws are transcendental or universal in a supernatural sense, but only that certain microeconomic tendencies are inherent in human nature rather than specific to one ideology or political culture.

[7] Kathleen R. McNamara, “Of Intellectual Monocultures and the Study of IPE,” Review of International Political Economy 16:1 (February 2009), p. 72.  See also Daniel Maliniak and Michael J. Tierney, “The American School of IPE,” Review of International Political Economy 16:1 (February 2009), pp. 6-33.

[8] Ibid., pp. 74-76.

[9] One might object to this argument on the grounds that economic interests determine our political beliefs – but this objection presupposes that individuals hold political beliefs that (a) entail an economy and (b) justify the use of coercion to maximize their economic self-interest.

[10] Of course, Hall and Soskice therefore presume that individuals react in specific ways to particular forms of political interference in the economy (i.e., they imply the existence of general economic laws).  For example, “British firms must sustain their profitability because the structure of financial markets in [Britain’s political] economy links the firm’s access to capital…to its current profitability”; conversely, “German firms can sustain a decline in returns because the financial system of [Germany’s political] economy provides firms with access to capital independent of current profitability” [Peter A. Hall and David Soskice, “An Introduction to Varieties of Capitalism,” in Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, ed. Peter A. Hall and David Soskice (Oxford: Oxford University Press, 2001), p. 16].  This is the view that Dobbin seeks to discredit, wherein “[institutional] context is thought of as a set of conditional variables that have predictable effects under a general theory of the economic universe” (p. 7).

[11] Dobbin (a) fails to separate the realms of coercive and non-coercive action and therefore (b) cannot differentiate between the respective significance of ideas for politics (i.e., ideas animate various differing political institutions) and for economics (i.e., ideas animate a single, maximizing economic motive).

[12] Dobbin, p. 12.

[13] I use the word “initiate” here because “employ” is too weak to describe the character of this decision: A state must employ violence in order to monopolize violence; it next must decide whether to go beyond monopolizing coercion – whether to initiate any coercion.

[14] Ibid., p. 13.

[15] Ibid., pp. 12-13.

[16] Ibid., p. 12.

[17] Ibid., p. 6.

[18] Ibid., p. 3.

[19] Ibid., pp. 3-4.

[20] Again, neither American nor French conceptions of ‘progress’ or ‘instrumentality’ conform to the totally ‘rational’ endpoint of the ideological continuum, but Dobbin employs these terms in discussing their political cultures, and such words are useful in determining where these cultures diverge from strictly rational philosophies.

[21] Ibid., p. 4.

[22] Paul Pierson, “Increasing Returns, Path Dependence, and the Study of Politics,” The American Political Science Review 94, no. 2 (June 2000), p. 252.

[23] Ibid., p. 252.

[24] Hall and Soskice, pp. 17-18.

[25] Pierson, p. 255.


  

 
 
(c) 2008 Jacob Jaffe