How and why institutional advantages are preserved in a global economy: a comparison of British and Swedish multilateral preferences

Karl-Orfeo Fioretos

No FS I 96-320, Discussion Papers, Research Unit: Economic Change and Employment from WZB Berlin Social Science Center

Abstract: This paper contributes to research at the intersection of international and comparative political economy, with particular emphasis on domestic explanations ofmultilateral cooperation. It explains why members of the European Union often have strongly diverging institutional preferences with regard to the manner in which multilateral cooperation should be structured. Moreover, the paper develops anunderstanding of states' international institutional preferences based on the structureof domestic capitalist relations and demonstrates how there are distinct logics behindstates' preferences for domestic and international institutions based on how theseinstitutions can be combined to produce a situation in accord with the national regimeof production. Specifically, the paper shows how the organization of domestic interest groups along with the market profile of industries condition the aggregationof domestic interests. Furthermore, the paper specifies how and when governmentsthat operate in a global world economy with high levels of trade and capital mobilitywill adopt new policies to promote industrial competitiveness in the domestic andmultilateral spheres. The paper compares British and Swedish responses todeclining industrial competitiveness, and compares their institutional preferences inareas of industrial and social policy: the role of industrial subsidies and labor market regulation is assessed, as well as how the economic institutions that regulate theseareas have changed in the wake of an increasingly globalized and competitive world economy.Contrary to claims that globalization will force a convergence of domestic economicpolicies and multilateral institutional preferences, this paper demonstrates theimportance of how differences in domestic capitalisms condition the choice ofdivergent domestic policies and multilateral institutional preferences. I conclude that while members of the European Union have common interests in institutionalizedforms of economic integration, they prefer divergent institutional solutions dependingon their domestic production regimes. The attention to the organization of capitalismat the domestic level, it is argued, will not only help the scholars of international relations understand divergences in state preferences across issue-areas, but alsoaid in understanding outcomes of negotiations between states in the past and thefuture.

Date: 1996
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