Challengers, Incumbents, and the Political Dynamics of Capitalist Development: Feedback Effects of Market-Enabling and Market-Restraining Rules Compared

Friday, 3 July 2015: 4:00 PM-5:30 PM
CLM.2.04 (Clement House)
Helen Callaghan, Max Planck Institute for the Study of Societies, Cologne, Germany
How does endogenous policy feedback affect the dynamics of coalition-formation among beneficiaries and victims of market-enabling rules? Previous research on institutional change shows that public policies can nurture their own clienteles or engender growing opposition, and thereby reshape subsequent rounds of policy conflict. The paper explores the conditions under which these various feedback effects are likely to operate. Based on a comparison  of political struggles surrounding the commodification of corporate control in Britain and Germany from the 1870s onward, it identifies four mechanisms. First, competition opens up niches for service providers who  come to depend on a market for their survival and prosperity and devote increasing resources to keeping it alive. Second, competition undermines the social bases of solidarity within and across groups of victims, because unilateral attempts to exit are penalised by “market forces”. Third, those who survive the disciplinary effects of competitive markets become increasingly battle-hardened, while the beneficiaries of special protections grow into increasingly irresistable targets for cartel-busters. Fourth, domestic challengers can easily form alliances with foreign incumbents while the reverse does not apply.  These mechanisms help explain why, politically, market containment is often an uphill struggle, while market expansion becomes easier with time.