Models of Economic Growth in the Post-recession Era

Are all advanced capitalist economies alike? Or is each unique?

That question is asked by a branch of political economy known as "comparative political economy," or CPE. Before the 2008 recession, the general consensus was that each capitalist economy was different. But since the recession, that consensus has fallen apart. Some scholars now hold that all capitalist economies, far from differing from country to country, are essentially alike, insofar as they are all socially regressive. 

But could both camps be right? Do advanced capitalist economies share many features in common while still retaining important differences?

A 2016 article in Politics & Society says yes. The article presents a new framework or way of understanding capitalist economies that incorporates the important elements of capitalist economies in their full complexity. 

The main contribution of the framework is the addition of certain insights that are neglected by CPE scholars. Those insights stem from the work of two twentieth-century economists: John Maynard Keynes and Michał Kalecki. The insights emphasize the demand side of the economy and place the distribution of income, among households and between labor and capital, at the center. 

To understand the new framework, consider that until around the 1970s, most capitalist economies were driven by growth in wages. But wages have been largely flat since then. As a result, countries such as Germany and the UK have looked for other ways to expand their economies. Countries that have been successful in that regard have relied on increases in household spending or on increases in exports.

But the two--consumption and exports--should not be seen as equivalent. Each, for example, will affect the income distribution in different ways.

The 2016 article, which is titled "Rethinking Comparative Political Economy: The Growth Model Perspective," is by Lucio Baccaro, a professor of sociology at the University of Geneva, and Jonas Pontusson, a political scientist also at the University of Geneva. It appears in the June issue of Politics & Society.