Think Out Loud

"We do not learn from experience, we learn from reflecting on experience." -John Dewey

Conflating Social and Economic Policy

Harold Wilensky in Rich Democracies (2002) describes the varieties of capitalism in these nations as falling somewhere on a spectrum from most to least corporatist.  “Corporatism” is a condition in which special interests play a key role in shaping a state’s political economy (how the government interacts with the market).  According to Wilensky, the most corporatist democracies in the world are Sweden, Norway, Austria, the Netherlands, Belgium, and Finland.  These countries govern their economies largely through the participation of labor unions, employer lobbies, and professional associations.

The rise of corporatism in rich democracies signals some important changes in political economy, especially as it relates to social policy matters.  For one, corporatist decision-making tends to result in the blurring of private and public sectors.  For instance, labor unions might be so strongly affiliated with specific government bureaus and ministries that their “private” status is debatable.

This is an especially prominent feature of the political economy of Japan, in which operates the so-called “Iron Triangle” of big business, government bureaucracy, and the Liberal Democratic Party.  Japan is not included on Wilensky’s list of most corporatist rich democracies because it has no strong labor interest group.

Yet another important feature of wealthy corporatist democracies is the conflating of economic and social policy.  Wilensky notes that governments not only make economic policies with heavy consideration of their social implications, but also private-public entities are more likely to see the economic implications of their demand for social services.  We can see this especially clearly during the worldwide economic downturn, where smart economic policies are seen as the principle solution to unemployment and the concurrent rise in social services demand.  Similarly, Wilensky notes that “labor, interested in wages, job protection, and social security, is forced to take account of inflation, productivity, and the need for investment.”

Wilensky only speaks of wealthy democracies, but it’s exceedingly clear that conflating economic and social policy has been a key aspect of developing nations under authoritarian governments.  Mainland China under Deng Xiaoping and successors, Taiwan under Chiang Kai-shek, South Korea under Park Chung-hee, Indonesia under Suharto, all these nations centered their efforts around rigidly focused economic policies.  Not only has the idea been that sustained economic development ensures the legitimacy of the dominant regime, but also that it provides the raw capital and infrastructure to raise the living standards of the people.

I do not yet have the background to conduct an historical or comparative contemporary analysis of national social policy programs.  My tentative hypothesis thus far, however, is that governments throughout the course of history cannot help but to frame all social policy issues into their larger economic context (after all, we’re mostly talking about providing the support necessary for a working and soon-to-be working population to participate fully for the economic betterment of a nation [social services for the aged will be discussed in a future post]).  The bottom line of social policy, from a government standpoint, will always be the resources, infrastructure, and capital necessary to run them; they simply cannot afford to be impractical idealists.

So perhaps the idea of conflating social and economic policy is only innovative for members of the private sector.  That special interests groups in wealthy democracies are increasingly capable of weighing their demands against the economic capacity of governments could signify a smarter, more effective collaboration for public welfare.  On the other hand, if these private-public groups are too enmeshed in state thinking and strategy, society might also begin to suffer from the loss of imagination that this entails.

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