Friedrich-Schiller-University Jena, Institute of Sociology
HS Management and Labour in Europe
Summer-term 2005

European tradition of ′Voice′

by

Oliver Heiden

Table of contents

1. Introduction  3

2. Hirschman’s concept of Exit and Voice  5

3. American vs. European Ideology and Practice  8

4. Exit and Voice in Liberal and Coordinated Market Economies  12

5. Innovation and the Value of diversity 17

6. Conclusions with regard to the German case 20

7. References  21

1. Introduction

Since the Rhine-model of capitalism seems to have worldwide launched into a gradual disintegration there emerged an unending discussion in social sciences offering different predictions with regard to the future direction coordinated national economies (CME) may take. In this debate the German case attracted an outstanding amount of attention due to two facts. Firstly, because the German economy has repeatedly served as a prime example of CMEs, not least due to its high-performance not only compared with other CMEs but also with liberal market economies (LME).¹ Secondly, because the structure of Germany’s market economy has encountered radical change since the early 1990s at the latest.² The expected outcomes of the German economy’s distinct move towards a much more market-orientated coordination of its activities vary widely. At first glance analyses presuming complete convergence to liberal market capitalism seem to be just as well founded as investigations amounting to partial adjustment of the old system – including ‘functional conversion’ or the evolution of a ‘new complementarity’ – or examinations suggesting the emergence of a hybrid model merging CME and LME elements.³ While carefully analysing the impacts of globalisation, new financial markets, changed ownership structures, transformed labour relations, the altered role of industry associations or novel management styles etc. most of those studies base their predictions on contemporary economical and political features influencing the German capitalism and disregard deep-rooted historical traditions. However, traditional German ideology and practice may have an affect on national economical behaviour. What is even more, it may have had determined the type of capitalism that prevailed at the apogee of German economy.

The first purpose of the present paper is to complement existing studies with the general idea that new findings may emerge by tracing back diverse models of capitalist organisation to nations’ varying traditional patterns of behaviour. The assumption is that distinct traditional attitudinal preferences in societies have promoted market minded behaviour differently across nations and have inspired, thus, different types of market economies. The second goal is to reject significant convergence of the German economy to the Anglo-American sort of liberal market capitalism based. The rejection is founded on the one hand, on the general results of the first part of the paper, on the other hand, on throwing light on additional particular phenomena that motivate the continuing existence of diverse capitalist structures. This second step is necessary because, we not only claim that traditional ideology played a crucial role in the evolution of capitalist models but we also argue that traditions only persist to have influence on the society if their necessity is repetitively confirmed. In other words, traditions will simply be cast aside if they lose their useful functions in a society. Therefore, we will finally identify at least one key situation where traditional CMEs sustain to have a vital function for global purpose.

In order to define fundamental differences in national ideology and practice we will refer to Hirschman’s concept of exit and voice. The core distinction between liberal and coordinated market economies will constitute an appropriate opposition with regard to capitalist organisation; here Hall and Soskice’s contribution serves as theoretical background. Finally, we will briefly refer to Tushman and Anderson’s innovationtheory when pointing out the role of traditional CME values in the global economy.

2. Hirschman’s concept of Exit and Voice

Hirschman’s theory is based on the observation that “human societies are marked by the existence of a surplus above subsistence”.⁴ However, the surplus is not only the origin of increasing economic progress and welfare but is also the source of the “society’s ability to take considerable deterioration in its stride”.⁵ In other words, social or economical progress is by no means a one-way development. Slack with regard to the performance of firms or organisations is, according to Hirschman, a natural phenomenon in surplus-producing societies. He “assumes not only that slack has somehow come into the world and exists in given amounts, but that it is continuously being generated as a result of some sort of entropy characteristic of human (…) societies”.⁶ At a first glance, such reasoning considerably challenges classical economics, in which slack is defined as a failure of a system caused by deflection from the model of perfect competition, rather than as a natural phenomenon that is inherent to the system. However, precisely stated, Hirschman’s theory rather complements classical theories. For Hirschman does not doubt that the incentives of perfect competition lead to a taut economy; where every individual is motivated to perform at the top of his form. Instead, he tries to investigate the wide ranges of economy and society where the model of perfect competition does not apply. This is very much justified, considering that perfect competition is “a purely theoretical construct with little reality-content”.⁷ Once it has been accepted that there is some latitude for deterioration, it is also evident that some sort of recuperation mechanism ought to exist in order to bar decline as well as to initiate recovery. According to Hirschman: “[The] radical pessimism, which views decay as an ever-present force constantly on the attack, generates its own cure: for as long as decay (…) is hardly in undisputed command everywhere and at all times, it is likely that the very process of decline activates certain counterforces”.⁸

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1 cf. Streeck (1995:6)

2 For encompassing reviews of the history of German economics in the 1990s see Beyer et al.(2003), Streeck (1995).

3 Those predictions are exhaustively described by Lane. cf. Lane (2004)

4 Hirschman (1970:6)

5 ibid.

6 Hirschman (1970:15) Italics according to the original wording.

7 Hirschman (1970:9)

8 Hirschman (1970:15)