Private Governance in International Affairs and the Erosion of Coordinated Market Economies in the European Union
The variety of capitalism-perspective is particularly well suited for an assessment of the broader political and economic effects of transnational private governance, given its focus on the interaction between the diverse economic institutions that are regulating capitalist formations. The core notion here is “institutional complementarity,” i.e. “referring to situations in which the functionality of an institutional form is conditioned by other institutions” (Martin Höpner). Thus, substantial changes in one institution may have wide-ranging consequences for other institutions and, correspondingly, for the model as a whole. Within the “variety of capitalism” (VoC)-perspective, the most sophisticated and most frequently used frame of reference is the distinction between “Liberal Market Economies/LME” and “Coordinated Market Economies/CME,” with the first “Anglo-Saxon” model usually illustrated with the case of the U.S. and the latter “Rhenish” model with Germany (Peter Hall and David Soskice). Currently, we can observe that institutions that are strongly interlinked with the LME model are being transplanted into CME type economies by means of transnational private governance, particularly within the European Union. Examples include accounting standards, rating agencies and competition policy enforcement by law firms. Together, these recent activities tend to strongly undermine the institutional complementarities inherent in CMEs.
Part Three of the Germany in Global Economic Governance Series
Mario Einaudi Center for International Studies
International Affairs; European Union; Institutional Complementarity; Liberal Market Economies; Coordinated Market Economies; Variety of Capitalism; Transnational Governance