In the spring of 1994, President Bill Clinton unveiled a plan to overhaul the Aid to Families with Dependent Children (AFDC) program. According to Kathleen Thelen, author of the excellent new book Varieties of Liberalization and the New Politics of Social Solidarity, Clinton’s proposal looked “very much like what we now call flexicurity,” combining strict time limits with a job guarantee and a substantial investment in training (p. 126). The legislation sought to activate the labor market while providing protections and opportunities to workers. In so doing, it would counter the nation’s trend toward disequalizing liberalism, a model of capitalism that combined liberal economic reforms with inegalitarian outcomes. By the time Clinton’s welfare plan wound its way through Congress, all that remained were the strict time limits and reduced assistance to the nation’s most needy. The United States would continue on a trajectory of growing inequality.
Recently, many scholars argue that all of the advanced economies are converging toward such a liberalizing model, not simply the United States. The overarching question that Thelen seeks to answer in this book is whether the convergence theory is correct. Countering varieties of capitalism scholars who stress institutional stability, she answers with a qualified “yes.” The countries she investigates—each one broadly representative of a distinct variety of capitalism—have all liberalized in crucial ways over the past decades. Germany, Thelen’s ideal-typical conservative Christian Democratic case, has experienced a growing secondary labor market defined by precarious employment, comparatively low pay, and few benefits. Denmark, representative of the Scandinavian Social Democratic states, famously embraced sweeping labor market reforms to promote labor mobility while decentralizing bargaining structures. And then there is the United States, which is, as usual, leading the way among its fellow liberal market economies in deregulating industries, decentralizing bargaining, and individualizing risk. Since liberalization is the dominant trend, should we expect inequality to follow similar trajectories in these nations over time?
Not necessarily. And here is Thelen’s important qualification: Not all forms of liberalization are disequalizing, and coordination, she argues, does not necessarily lead to egalitarian outcomes. In the postwar Golden Age, highly coordinated economies coincided with greater economic equality. But these are “analytically distinct” phenomena (p. 8), and their separation has grown with the rise of the service sector in all advanced economies. Distinguishing coordination from equality moves scholars beyond existing typologies in comparative politics, and opens up promising new avenues for exploring contemporary developments in the advanced economies.
Thelen thus distinguishes between varieties of liberalization. Instead of viewing all liberalizing tendencies as the same—and as similarly disequalizing—she distinguishes three liberalizing trajectories, each one spurred on by a separate set of institutional configurations that map onto the varieties of capitalism. For Germany and its fellow corporatist countries, strong coordination and other supports for manufacturing firms and workers has propped up a stable, highly protected set of insiders. Meanwhile, the outsiders have grown as a share of the labor force, and lack the stability, regular hours, and generous pay of the organized manufacturing base. As a result, Germany’s “dualization” combines a highly coordinated sector with growing inequality. Thelen might have gone further here, by tracking how the insider/outsider dichotomy matches household dynamics: After all, if every household pairs a protected manufacturing worker with a precariously employed service worker, pooling resources might mitigate dualization’s disequalizing tendency. On the other hand, the growth of assortative mating alongside the rise of single parenthood only reinforces insider/outsider cleavages, deepening inequality (see Gøsta Esping-Andersen, “Sociological Explanations of Changing Income Distributions,” American Behavioral Scientist 50 [2007]: 639–58 for an analysis of assortative mating and inequality).
Denmark’s liberalization, meanwhile, assumes the form of “embedded flexibilization” that emphasizes good jobs for all workers—not simply insiders (pp. 59–60). Robust initial and continuing training provides the linchpin that unites all types of employees in a framework that combines mobility with strong social protections. The United States and other liberal market economies embody the traditional liberalizing route: increased flexibility without security through “deregulation.” Deregulation, in turn, allows for the introduction of various forms of employment “fissuring,” to use David Weil’s terminology (in The Fissured Workplace, 2014), which displace traditional employment relationships, shifting risk downward to the individual employee.
Thelen traces these developments across three institutional domains common in the varieties of capitalism literature: industrial relations, vocational education and training, and labor market policy. How governments, alongside business and labor representatives, have transformed these domains (or not) in the face of the rise of the service sector and globalization helps us understand whether a particular liberalizing trajectory leads to egalitarian outcomes. Three variables stand out as crucial: employer coordination, which, Thelen stresses, “may be necessary but is by no means sufficient to secure the survival of egalitarian capitalism” (p. 203), state capacity, and labor movements characterized by high density and unity across occupations.
In Denmark, for example, a labor coalition comprised of representatives of salaried white-collar professionals, low-skill service workers, and the traditional manufacturing base partnered with peak employer associations at the strong and credible urging of the state to help usher in a new set of policies—key among them an integrated, comprehensive, and continuing training regime—that tempered the disequalizing tendencies of liberalization. Germany, by contrast, lacks such state power, and its labor movement remains dominated by manufacturing interests. As a result, vocational training was not expanded to incorporate the growing service sector, while labor market policy emphasized protecting core manufacturing jobs during economic downturns, further exacerbating dualization. In the United States, employer coordination helped to destroy an already weak and fractured labor movement, removing a key counterweight to deregulation and a key proponent of training and active labor market policies.
The good news, in Thelen’s view, is that pivoting away from the dominant perspective that sees liberalization as necessarily disequalizing means that further liberalizing tendencies can proceed in an egalitarian direction. And by pivoting away from varieties of capitalism scholars’ emphasis on institutional stability, significant change can occur that counteracts inequality, even in the most liberal of the liberal market economies. But then there is the bad news, which brings us back to the United States. Its labor movement in 1994 lacked both the density and political power necessary to retain those elements of Clinton’s original welfare reform plan that collectivized risk. Two decades later, union density has fallen further still, with unions now representing just one out of every 20 private-sector workers. As a result, the disequalizing path of liberalization continues. If, as Thelen argues, egalitarian capitalism rests in part on “high levels of organization and unity on the labor side” (p. 204) we should not expect a turnaround anytime soon.
