How Parties of Corporatist-Conservative Welfare States Respond to the International Economy -

How Parties of Corporatist-How Parties of Corporatist-Conservative Welfare States Conservative Welfare States

Respond to the Respond to the International Economy -International Economy -

A Comparison of A Comparison of Austria & GermanyAustria & Germany

Andrea B. HauptAndrea B. Haupt

University of California Santa BarbaraUniversity of California Santa Barbara

Globalization and Political Globalization and Political Parties- Research Questions:Parties- Research Questions:

How does rising international economic openness influence How does rising international economic openness influence parties’ ideological positioning on economic issues? Do we parties’ ideological positioning on economic issues? Do we observe policy convergence? Divergence? Neither? A shift in observe policy convergence? Divergence? Neither? A shift in policy regime?policy regime?

Have social democratic parties embraced neoliberalism in light Have social democratic parties embraced neoliberalism in light

of systemic economic pressures? Has neoliberalism become of systemic economic pressures? Has neoliberalism become their new policy paradigm and is social democracy facing a their new policy paradigm and is social democracy facing a crisis?crisis?

Do the neoliberal pressures associated with economic openness Do the neoliberal pressures associated with economic openness allow Christian-democratic and/or mainstream conservative allow Christian-democratic and/or mainstream conservative parties to shift further to the right? parties to shift further to the right?

If parties change their ideological positioning, how does this If parties change their ideological positioning, how does this affect intra-party relations? Inter-party relations?affect intra-party relations? Inter-party relations?

If parties are in government, how does this affect their If parties are in government, how does this affect their policy moves?policy moves?

The Effect of Globalization The Effect of Globalization on the Welfare State: on the Welfare State: Conflicting PredictionsConflicting Predictions

ConvergenceConvergence globalization entails a loss of state power over markets globalization entails a loss of state power over markets

because it increase the influence of capital vis-à-vis labor, because it increase the influence of capital vis-à-vis labor, capital mobility undermines politics of intervention, of capital mobility undermines politics of intervention, of redistribution and a large public sector redistribution and a large public sector (e.g. Berger 2000; (e.g. Berger 2000; Glyn 2001; Rodrik 1997)Glyn 2001; Rodrik 1997)

vs.vs.

DivergenceDivergence Empirical evidence of welfare state expenditureEmpirical evidence of welfare state expenditure The role of institutionsThe role of institutions Popular demands for compensationPopular demands for compensation

Globalization & Political Globalization & Political PartiesPartiesConvergenceConvergence

Some believe that the pervasive influence of transnational Some believe that the pervasive influence of transnational actors and financial flows undermines parties’ ability to actors and financial flows undermines parties’ ability to satisfy local interests, which in turn undermines party’s satisfy local interests, which in turn undermines party’s legitimacy (Mair 1995)legitimacy (Mair 1995)

Partisan-decline thesis: based on the logic of convergence, Partisan-decline thesis: based on the logic of convergence, it will become inconsequential “whether the left or the it will become inconsequential “whether the left or the right wins the election, [as] the constraints of the right wins the election, [as] the constraints of the internationalized economy will oblige either party to follow internationalized economy will oblige either party to follow the same monetary and fiscal policies” (Berger 2000:51). the same monetary and fiscal policies” (Berger 2000:51).

Globalization and Social Globalization and Social DemocracyDemocracy

The future of social democracy has sparked especially wide The future of social democracy has sparked especially wide interest in the scholarly community (Callaghan 2003; interest in the scholarly community (Callaghan 2003; Garrett 1998; Glyn 2001; Kitschelt 1994; Kuhnle 2000; Garrett 1998; Glyn 2001; Kitschelt 1994; Kuhnle 2000; Ladrech 2000; Lordon 2001; Luther and Müller-Rommel Ladrech 2000; Lordon 2001; Luther and Müller-Rommel 2002; Mishra 1999; Notermans 2001; Pierson 1995, 1999; 2002; Mishra 1999; Notermans 2001; Pierson 1995, 1999; Przeworski 1985; Roder 2003; Scharpf 1999, 2001; Schmitt Przeworski 1985; Roder 2003; Scharpf 1999, 2001; Schmitt 2002; Thompson 2000 )2002; Thompson 2000 )

Electoral dilemma: social democracy Electoral dilemma: social democracy caught in a “catch-caught in a “catch-22:”22:” they must either scale down their commitments, or they must either scale down their commitments, or promise what they are unable to deliver to their electorate promise what they are unable to deliver to their electorate (Heywood et.al. 2002)(Heywood et.al. 2002)

Globalization and Globalization and Mainstream Rightwing Mainstream Rightwing PartiesParties Christian democratic parties have played an important role Christian democratic parties have played an important role

in the development of the welfare state (Kalyvas 1996). in the development of the welfare state (Kalyvas 1996). However, their role in welfare state retrenchment or their However, their role in welfare state retrenchment or their reaction to globalization has not been explored widelyreaction to globalization has not been explored widely

Few theories to explain the behavior of Christian-Few theories to explain the behavior of Christian-democratic or mainstream conservative parties to democratic or mainstream conservative parties to globalization (but see Kaiser and Gehler 2004)globalization (but see Kaiser and Gehler 2004)

Convergence argument: implies that right-wing parties are Convergence argument: implies that right-wing parties are more static on the left-right ideological spectrum? more static on the left-right ideological spectrum?

Partisan DeclinePartisan DeclineIs there evidence for convergence? Is there evidence for convergence?

Glyn (2001) finds that in the time period between 1980 and Glyn (2001) finds that in the time period between 1980 and 2000, numerous leftist governments accepted orthodox 2000, numerous leftist governments accepted orthodox policiespolicies

Ladrech finds that following support for European Ladrech finds that following support for European integration, European social democrats were faced with integration, European social democrats were faced with “the loss of a critical area of programmatic distinction and “the loss of a critical area of programmatic distinction and identity from…. right of center parties” (Ladrech 200:4).identity from…. right of center parties” (Ladrech 200:4).

Huber and Stephens (2001) confirm a decline of partisan Huber and Stephens (2001) confirm a decline of partisan political effects, while the economic agenda “is by and political effects, while the economic agenda “is by and large either a defense or retrenchment of the welfare large either a defense or retrenchment of the welfare state. Expansion is off the agenda” (2001:6)state. Expansion is off the agenda” (2001:6)

Przeworski states “the major policy innovation of social Przeworski states “the major policy innovation of social democrats was the very idea that capitalist economies can democrats was the very idea that capitalist economies can be regulated and the effects of markets can be corrected” be regulated and the effects of markets can be corrected” (Przworski, 2001, p. 327). Przeworski concludes that “[t]he (Przworski, 2001, p. 327). Przeworski concludes that “[t]he policy regimes are converging again, this time to the right” policy regimes are converging again, this time to the right” (Przeworksi 2001:325). (Przeworksi 2001:325).

Why Convergence might not Why Convergence might not be as Likely as Predictedbe as Likely as Predicted Social democratic parties have traditionally been more Social democratic parties have traditionally been more

policy-seekingpolicy-seeking than their conservative parties. Przeworski than their conservative parties. Przeworski and Sprague (1986) argue that socialist parties sought to and Sprague (1986) argue that socialist parties sought to transformtransform society and society and shape public opinionshape public opinion, which renders , which renders them them ideologically less flexibleideologically less flexible than their right-wing parties than their right-wing parties which typically defend the status quowhich typically defend the status quo

Organizational ties to unions arguably also contribute to Organizational ties to unions arguably also contribute to ideological inflexibility, as these ties uphold an association ideological inflexibility, as these ties uphold an association with the working class even when social-democratic parties with the working class even when social-democratic parties pursued cross-class electoral strategies (Adams, Haupt, pursued cross-class electoral strategies (Adams, Haupt, Stoll 2006, forthcoming). Stoll 2006, forthcoming).

public opinion public opinion has consistently supported existing national has consistently supported existing national welfare state structures and has arguably become welfare state structures and has arguably become disenchanted with neoliberalism (Przeworksi 2001). disenchanted with neoliberalism (Przeworksi 2001).

**Right-wing parties might have an incentive to shift further **Right-wing parties might have an incentive to shift further rightright

The HypothesesThe Hypotheses Based on the assumption that parties simultaneously seek Based on the assumption that parties simultaneously seek

votes, office and policies (Müller and Strom 1999) , I argue votes, office and policies (Müller and Strom 1999) , I argue that neoliberal convergence is not an inevitable outcome of that neoliberal convergence is not an inevitable outcome of economic openness (Hypothesis 1). economic openness (Hypothesis 1). First, though leftist parties are pressured to adopt “third First, though leftist parties are pressured to adopt “third

ways,” their traditional policy-seeking orientations, their quest ways,” their traditional policy-seeking orientations, their quest to shape public opinion, as well as their organizational links to to shape public opinion, as well as their organizational links to unions limit their ideological flexibility and their responses to unions limit their ideological flexibility and their responses to neoliberal pressures (Sub-Hypothesis 1a). neoliberal pressures (Sub-Hypothesis 1a).

By contrast, rightist parties are expected to benefit from By contrast, rightist parties are expected to benefit from economic openness, as market oriented policies complement economic openness, as market oriented policies complement their economic policy approach. While rightist parties face their economic policy approach. While rightist parties face incentives to move further to the right, they continue to be incentives to move further to the right, they continue to be office seekersoffice seekers and, thus, move to the right and, thus, move to the right only ifonly if this move is this move is electorally advantageous (Sub-Hypothesis 1b).electorally advantageous (Sub-Hypothesis 1b).

Building on hypothesis, I argue that the whether social Building on hypothesis, I argue that the whether social democratic parties are in government or in opposition democratic parties are in government or in opposition should influence the severity of their “electoral dilemma.” should influence the severity of their “electoral dilemma.” Thus, social democratic parties in office should be more Thus, social democratic parties in office should be more responsive to neoliberalism than social democratic parties responsive to neoliberalism than social democratic parties in opposition (Hypothesis 2). in opposition (Hypothesis 2).

MethodologyMethodology

My analysis of the parties’ economic policy evolution My analysis of the parties’ economic policy evolution is primarily based on qualitative research (e.g. interviews is primarily based on qualitative research (e.g. interviews

with policy actors) conducted during field workwith policy actors) conducted during field work the study of parties’ programs the study of parties’ programs the extant literature on Austria’s and Germany’s parties the extant literature on Austria’s and Germany’s parties data published by the Comparative Manifesto Research data published by the Comparative Manifesto Research

GroupGroup

Austria’s vs. Germany’s Social Austria’s vs. Germany’s Social DemocratsDemocrats

‘‘Alive and well’ vs. ‘divided and in a crisis’Alive and well’ vs. ‘divided and in a crisis’ both parties embraced neoliberalism – the both parties embraced neoliberalism – the

Austrian Social Democrats (SPÖ) Austrian Social Democrats (SPÖ) temporarily during the 1990s, the German temporarily during the 1990s, the German Social Democrats half-heartedly since Social Democrats half-heartedly since 19981998

both parties embraced the market while in both parties embraced the market while in governmentgovernment

Austria’s vs. Germany’s Austria’s vs. Germany’s Christian DemocratsChristian Democrats

‘‘alive and well’ vs. in a crisisalive and well’ vs. in a crisis both parties have oriented themselves both parties have oriented themselves

toward the market, the Austrian ÖVP to a toward the market, the Austrian ÖVP to a greater degree than the German CDUgreater degree than the German CDU

the Austrian ÖVP has aggressively pursued the Austrian ÖVP has aggressively pursued welfare state reform while in office since welfare state reform while in office since 20002000

Convergence, Divergence or Convergence, Divergence or Neither?Neither?

Austria: divergence/polarization and Austria: divergence/polarization and important break in consensus-oriented important break in consensus-oriented politicspolitics

Germany: no convergence, some Germany: no convergence, some polarization. both parties internally polarization. both parties internally divideddivided

Comparison of Germany & Comparison of Germany & AustriaAustria

Social DemocracySocial Democracy Christian Democracy/Christian Democracy/

ConservativeConservative

AustriaAustria 1970s:1970s:

in government,in government,

+ Keynesianism+ Keynesianism

1980-90s:1980-90s:

in government,in government,

+ market+ market

2000-2006:2000-2006:

in opposition,in opposition,

- market, + Keynesianism - market, + Keynesianism

1970s1970s: :

in opposition, in opposition,

+ Keynesianism+ Keynesianism

1980-1990s:1980-1990s:

in government,in government,

+ market+ market

2000:2000:

in government, in government,

+ market + market

GermanyGermany 1970s:1970s:

in government, in government,

+ Keynesianism then – Keynesianism+ Keynesianism then – Keynesianism

1980-98:1980-98:

in opposition: in opposition:

disorientation, Keynesianismdisorientation, Keynesianism

1998-2005:1998-2005:

in government, + marketin government, + market

1970s:1970s:

in opposition, in opposition,

social-market economy with somesocial-market economy with some

KeynesianismKeynesianism

1982-1998:1982-1998:

in government: + market (EU), in government: + market (EU),

1998-2005:1998-2005:

in opposition, in opposition,

+market+market

The ArgumentThe ArgumentBased on a study of Austria’s and Germany’s catch-all parties, I Based on a study of Austria’s and Germany’s catch-all parties, I

present three central findings: present three central findings:

1. Systemic constraints stemming from the 1. Systemic constraints stemming from the internationalization of the economy have entailed an upsurge internationalization of the economy have entailed an upsurge of market-oriented policies - however, this has NOT led to of market-oriented policies - however, this has NOT led to neoliberal policy convergence nor is there sufficient evidence neoliberal policy convergence nor is there sufficient evidence to claim that neoliberalism has become dominant policy to claim that neoliberalism has become dominant policy regime regime

2. Economic openness entailed increased policy 2. Economic openness entailed increased policy divergence, divergence, as economic openness has opened a window of opportunity as economic openness has opened a window of opportunity for conservative parties to pursue market-oriented structural for conservative parties to pursue market-oriented structural reforms, while social democratic parties remain reluctant to reforms, while social democratic parties remain reluctant to commit to ‘third ways.’ Along with divergence, a rise in both commit to ‘third ways.’ Along with divergence, a rise in both intra-party and inter-party tensions can be observed. intra-party and inter-party tensions can be observed.

3. The degree of polarization is less if social democratic 3. The degree of polarization is less if social democratic parties have been in office; lending support to arguments parties have been in office; lending support to arguments about social democratic parties’ electoral dilemmas about social democratic parties’ electoral dilemmas

Austria’s Parties on Economic Austria’s Parties on Economic PoliciesPolicies

Figure 1: Comparison of Social Democrat’s and People’s Party Shifts on Economic Policy Proposals and Reference to the European Union

Comparison of Social Democrats' and People's Party's Shifts of Economic and EU Policies

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

Election Years 1949 to 2002

CM

P S

cale

-100

to 1

00

SPÖ Left-Right Shifts

ÖVP Left-Right Shifts

Austria’s Parties on Social Austria’s Parties on Social JusticeJustice Figure 2: Comparison of Austrian Social Democrat’s and People’s Party References to Social

Justice

Comparison of SPÖ's and ÖVP's Emphases of "Social Justice"

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

1949

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Election Years 1949-2002

Salience

of

Issue

SPÖ Emphasis Social Justice

ÖVP Emphasis Social Justice

Germany’s Parties on Economic Germany’s Parties on Economic PoliciesPolicies

Figure 3: Comparison of Social Democrats’ and Christian Democrats’ Shift on Economic and EU Policy

Comparison of Social Democrats' and Christian Democrats' Shifts on Economic and EU Policies

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00

Elections 1949-2002

CM

P S

cale

-100 t

o 1

00

CDU Left-Right Shifts

SPD Left-Right Shifts

Germany’s Parties on Social Germany’s Parties on Social JusticeJustice

Comparison of CDU's and SPD's Emphases of "Social Justice"

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Election Years 1949-2002

Salie

nce o

f Is

sue

CDU Emphasis Social Justice

SPD Emphasis Social Justice

CMP Left--Right Measure for CMP Left--Right Measure for Position on EconomyPosition on EconomyA. Rightist Position A. Rightist Position B. Leftist Position B. Leftist Position Right-Left Index Economy (A-B)Right-Left Index Economy (A-B)

per108 EU Reference positive per108 EU Reference positive Per110 EU Reference Negative Per110 EU Reference Negative

per401 Free Enterprise per401 Free Enterprise per403 Market Regulation per403 Market Regulation

per402 Incentives per402 Incentives per404 Economic Planning per404 Economic Planning

per407 Protection Negative per407 Protection Negative per 405Corporatism per 405Corporatism

per414 Econ Orthodoxy per414 Econ Orthodoxy per406 Protec Positive per406 Protec Positive

per505 Welfare Limitation per505 Welfare Limitation per409 Keynesian Demand per409 Keynesian Demand Management Management

per412Controlled Econ per412Controlled Econ

per413Nationalizationper413Nationalization

per 415 Marxist Analysis per 415 Marxist Analysis

per416 Anti Growth per416 Anti Growth

per504 Welfare State Expansion per504 Welfare State Expansion

per702 Labour Groups negative per702 Labour Groups negative per701 Labour Groups positive per701 Labour Groups positive

Sum of Column B subtracted Sum of Column B subtracted form sum of Column B = form sum of Column B = Left_Right Index for EconomyLeft_Right Index for Economy

Austria Economic OpennessAustria Economic OpennessFigure 1: Austria Economic Openness

Austria Economic Opennss

0

20

40

60

80

100

120

1968-2001

% o

f G

DP Exports as % of GDP

Imports as % of GDPTrade as % of GDPCapital Flows as % of GDPFDI as % of GDP

Germany Economic Germany Economic OpennessOpenness

Germany Economic Openness

0

10

20

30

40

50

60

70

80

1971-2001

% o

f G

DP Export as % of GDP

Import as % of GDPTrade as % of GDPCapital Flows as % of GDPFDI as % of GDP

ContributionContributionThe findings The findings call arguments about neoliberal call arguments about neoliberal

convergence into questionconvergence into question point to the importance of right-wing point to the importance of right-wing

parties for the globalization research parties for the globalization research agendaagenda

facilitate a better understanding of the facilitate a better understanding of the policy dynamics underlying ideological policy dynamics underlying ideological change and constancy change and constancy

Remaining QuestionsRemaining Questions

The role of institutionsThe role of institutions Under what conditions – if at all, will Under what conditions – if at all, will

we observe neoliberal convergence?we observe neoliberal convergence?