ABSTRACT
Introduction The success of consensus democracies in West Central Europe and the Scandinavian countries cannot be fully understood without consideration of their supporting social market economies. These liberal democracies decided at an early stage to identify mechanisms to tame the worst effects of capitalism (also known as ‘Manchester capitalism’). The crisis of the 1930s was an important traumatic experience and turning point for small consensus democracies, as their political steering capabilities were revealed to be very limited in a turbulent world. In this chapter we focus on various aspects of the changing political economy of consensus democracies. We start with a discussion of the varieties of capitalism in the context of European integration and globalisation. This is followed by a section on the differences between the coordinated market economies in our five consensus democracies, concentrating primarily on the systems of industrial relations in these countries. The chapter ends by drawing a number of conclusions.
