employment relationship and the institutional context within which they operate.
The discussion in the next section focuses on elements in national business
systems – and the broader framework of social and economic regulation – which
are more extensive than those discussed in the earlier chapter. In Section 3, we
then discuss the conceptual distinctions that most writers on cross-national
economic differences have used in their analyses: status and contract, exit and
voice and liberal versus organised market economies.
In Europe it has become common to speak of a distinctive ‘social model’
of labour market regulation: but it is also widely assumed that ‘social Europe’
may not withstand the challenges of ‘globalisation’ – another issue examined
in Chapter 5. It is important to explore the different (to some extent nation-
ally specific) meanings of social Europe and their implications for employment
regulation, and this is done briefly in Section 4. The final sections of this
chapter attempt to disentangle the challenges inherent in globalisation, and
consider whether they imply convergence towards a more market-driven
model, or whether distinctive forms of social regulation are likely to persist.
2 ONE CAPITALISM OR MANY?
What do we mean by ‘capitalism’? More often than not, the term is used as a
polemical slogan rather than as a ‘scientific’ category. One definition would
point to three inter-related features of the economic order: productive resources
are in private ownership; work takes the form of waged employment; and
goods and services are allocated through market mechanisms. When the term
came into common use in the mid-nineteenth century, capitalism was an
emergent and contested system, widely regarded as a bizarre social experiment
unlikely to endure. The word ‘capitalism’ was itself mainly used by critics of the
system, in particular Marxists; its defenders usually preferred more anodyne
substitutes. For much of the twentieth century, capitalism was challenged by
the existence in eastern Europe (and later in China) of a ‘communist’ alter-
native, with state ownership of the means of production and resource alloca-
tion by central planning rather than the market.
The confrontation between systems often encouraged both opponents and
defenders of capitalism to treat it as an undifferentiated socio-economic
regime. In the twenty-first century, with the collapse of the Soviet Union and
its satellites and the turn to the market in China, the existence of capitalism is
now hegemonic. Partly in consequence, there is growing emphasis on the
diversity of types of capitalism, linked to a recognition that markets are rule-
governed institutions and that rules can vary.
In terms of the definition above, ‘pure’ capitalism should be understood as
an ideal type which nowhere matches empirical reality. In all societies,
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