chapter  1
7 Pages

Introduction

ByFRANZ TRAXLER

Since internationalization and deregulation of markets have gathered momentum from the early 1980s onwards, business interests have gained ever-growing importance as a key factor of the economic and political development of capitalist societies. Despite this general trend towards market liberalization there is overwhelming evidence from comparative studies that differences in the institutional set-up of countries still prevail and also have a signifi cant impact on the direction of a country’s development and its performance (e.g. Crouch and Streeck 1997; Hollingsworth et al. 1994; Kitschelt et al. 1999; Traxler et al. 2001). Refl ecting the growing relevance of business, recent work on comparative political economy has adopted a fi rm-centred approach that intends to explain the impact of institutions by reference to their potential to help fi rms develop and exploit core competences in several fi elds of operation (Hall and Soskice 2001). In line with this, the special role of business associations in supporting and guiding the operations of fi rms has been highlighted, as far as the governance of ‘coordinated market economies’ is concerned (Hall and Soskice 2001:4). In this respect, the approach devotes attention primarily to the functional requirements that combine with this role, rather than to the actual capacity of business associations to assume it.1 However, functional requirements do not explain their fulfi lment (Elster 1982). Therefore it is important to fi nd out what induces and enables business associations to assume publicpolicy tasks and thus to participate in socioeconomic governance. There is good reason to believe that the general trend towards market liberalization thwarts rather than promotes any such participation. This is mainly because the market is the focal place in which businesses pursue their interests. The power to control investment equips business with a strategic advantage in relation to other actors, when it comes to allocating and distributing resources through the market. As the importance of the market has increased in comparison to political and negotiated modes of governance, business may see less need to realize its interests via associations.2 In particular, it is the internationalization of markets that threatens to devalue the benefi ts of associations whose scope of activities is still limited to the nation state. Tendencies of market liberalization are likely to erode the willingness of

businesses to associate, but also their ability to do so. Market liberalization magnifi es the well-known problems of collective action that burden interest associations, because market-led competition for the sake of self-interest is at odds with the principles of solidarity and cooperation on which associations must rest. Similar effects emanate from changes within the company itself, namely from recent developments of fi nance and corporate governance, such as the tendency towards the principles of shareholder value: They include the rise of short-termism, declining investment in training, and the challenge to multi-employer bargaining and other forms of employer cooperation (e.g. Gospel and Pendleton 2003). In addition, they are likely to put strain also on the relationship between the companies and their interest associations.