ABSTRACT
This chapter discusses theoretical issue that is the extent to different forms of capitalism within the current epoch of globalisation. It also discusses the political issue that is the development of a more European version of capitalism, and ultimately the continuation of the European social model (ESM). These issues can be addressed through a political economy approach. The chapter outlines the global changes and national specificities since the 1970s, and focuses on the role of the state, the relationship between firms and the national financial system, the fragmentation of the labour market. Within the varieties of capitalism literature, the financial system is the keystone of a country's interlocking institutional system. Changes in the financial system therefore should be expected to unlock movement elsewhere. In the case of co-ordinated market economies as exemplified by Germany, changes in the financial system could be expected therefore to involve a new convergence towards an Anglo-American system.
