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Unlocking the Dependent Model of Capitalism

Interview with Jan Drahokoupil
Sortir du modèle de capitalisme dépendant. Un entretien avec Jan Drahokoupil
Jan Drahokoupil, Violaine Delteil, Julien Vercueil et Éric Magnin

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Jan Drahokoupil is Senior Researcher on multinational corporations at the European Trade Union Institute (ETUI). His book publications outside of ETUI include Transition economies: political economy in Russia, Eastern Europe, and Central Asia (with Martin Myant), Wiley-Blackwell, 2011, and Globalization and the state in Eastern Europe: The politics of foreign direct investment, Routledge, 2009.

RR: To introduce this interview, could you describe your academic and professional curriculum, as well as your main avenues of research?

JD: I obtained my PhD at the Central European University in Budapest in 2007. My dissertation, later published as ‘Globalization and the state in Central and Eastern Europe: The politics of foreign direct investment’ (Routledge, 2009), analysed the changing approach of east European states towards foreign direct investment, a shift from promoting national capitalisms in the 1990s towards facilitating the foreign-led growth in the 2000s. In the context of my post-doctoral research conducted at the Max Planck Institute for the Study of Societies in Cologne and at the University of Mannheim (Mannheim Centre for European Social Research, MZES), I developed further my interest in political economy of transition, broadening somewhat the focus thematically as well as geographically. Together with Martin Myant, I worked on the monograph ‘Transition economies: Political economy in Russia, Eastern Europe, and Central Asia’ (Wiley-Blackwell, 2011). At MZES, I also directed a research project on the transformation of the welfare state in Eastern Europe. In this context, I also developed interest in the study of multinational corporations and their strategies as well as the sociology and economics of labour – some of my work focused on the intersection of these two strands of research, studying labour relations in multinational corporations. This line of research then brought me to the European Trade Union Institute, which I joined from 2012.

Institutions, Multinational Companies and Dependent Capitalism

RR: Let us start with the main stages of your intellectual journey: what were your most influential readings and scientific mentoring? How do you assess the importance of institutionalist approaches in your own analysis?

JD: During my PhD, I read a lot of regulation theory and the Gramscian political analysis, largely influenced by Bob Jessop, one of my supervisors. I was also influenced by Colin Hay’s translation of that work into more mainstream political economy. I was fortunate to work with Colin during my stay at the University of Birmingham. My later research on transition economics took a less theory-driven and more contextual and historical approach. In this respect, I learned a lot from Martin Myant with whom I collaborated on a number of projects. My approach to the economy can definitely be characterized as institutionalist, recognizing the key role of social institutions in constituting economic action.

RR: How do you theoretically approach the role of institutions in the economy? Is the Gramscian approach that you mention still relevant? How is it likely to complement other approaches that are now called “neo-institutionalism”?

JD: It seems to me, that the general understanding of the economic role of institutions in neo-institutionalism is rather similar, or at least compatible, to that of the regulation theory. What I mean is the notion of economic action governed by situated rationality. Markets are thus embedded in institutional arrangements that condition information available to actors and shape their cognitive abilities. Regulation theory then offers a wider theory that sees these institutional arrangements as a part of a mode of régulation that co-constitutes an accumulation regime. It also includes a distinct theory of their evolution with a dynamic driven by endogenous contradictions that ultimately lead to crisis. The neo-institutionalist theory is less ambitious in this respect. Bob Jessop and Colin Hay theorised the role of the state and politics in the co-evolution of a mode of regulation, drawing on a Gramscian approach among others. My early work was embedded in the theoretical ambitions of the regulation approach and Gramscian state theory. More recently, I have taken a less ambitious approach, using more general concepts that are largely common to the regulation theory and neo-institutionalism.

RR. Could you explain your choice of working in a research centre linked to a European group of trade unions (ETUI)? Does it imply specific methods?

JD: I find it attractive to be able to connect academic research with more policy-related work and consulting. I felt somewhat isolated from the real world when working at academic research institutes. Ideologically, I also feel comfortable supporting the trade union movement through research.

I found the institutional and contextual approach to political economy quite compatible with the policy-linked research that we conduct to support the European trade union movement. Our audiences have less patience for jargon and more abstract concepts. This can be a challenge, but it also helps to concentrate the mind and focus on the actual message without much space for being overly complex.

RR: Let us talk of your research field: starting from the question of industrial relations – drawing upon an inquiry into multinational companies – you propose a study of the global structures of central European capitalism. Could you give us some explanations of this generalizing path?

JD: I have always found it important to be able to link, and when possible, to integrate the macro and micro perspectives. In Globalization and the State, which focused on reorientation of macro-economic policies, I also included case studies of conflictual cases of attracting investors into specific regions, showing the implication of macro-level changes on the micro level, and vice versa. In the same spirit, Transition Economies included chapters on enterprise restructuring as well the macro-level analysis. Currently, I continue to work both on macro and micro level topics.

RR: Here you are touching a major topic for the Régulation school – namely, bridging micro – and macro – approaches. Some scholars address this topic by proposing intermediary categories, industry-centred or focused on political analysis. What are your own conceptions about this theoretical challenge?

JD: It is, indeed, one of the strengths of the regulation school that it is able to integrate, in its research programme, comparative historical research, sectoral analyses, and the analysis on the level of the firm. What is more, it offers a conceptual framework, including its five institutional forms, that is able to link all these levels of analysis. In this way, it bridges the micro and macro-level both in research practice and on the theoretical level. Neo-institutionalism has seen similar attempts, such as the contributions emphasizing the importance of the sectoral level of analysis. In a way, my work has been consistently régulationist in spirit in so far as I have attempted to bridge these levels of analysis, but it has been less consistent in pursuing a theoretical system that would integrate these levels.

RR: In you work, you insist on the external regime and the role of the State, two central institutional forms of the Régulation approach. At the same time, you consider that the Régulation analytical framework of the diversity of Capitalisms (Robert Boyer or Bruno Amable, for instance), is not adapted to the institutional context of the Central and Eastern European Economies. Could you precise your conceptions about this question?

JD: One of the problems for FDI-based economies like eastern European ones is that institutional forms defined by the TR – such as the finance system, the system of corporate governance, training and the labour regulations – had a less important role for key economic actors, the multinational corporations. The latter were more concerned by the general institutional properties, such as the rule of law as embedded in the EU membership, and did not need to rely on domestic institutions to address the coordination problems, as the institutional theory would have it, to give one example.

However, I do not want to do injustice to Robert Boyer here – I actually would not be surprised at all if he developed, among many other things he has been able to cover, also a classification that covers also eastern Europe, which we might have missed.

RR: In the current schemes trying to explain the structuring process of eastern-European capitalisms, MNCs play a prominent role. On your side, you contend that “MNC play a central economic role, but prefer to accept the institutional and legal environment as given, with relatively minor direct pressures for change” (p. 42, 2016). Does it mean that institutional change is relatively insensible to MNCs? Or, rather, that new institutions usually integrate MNC’s needs in order to attract them?

JD: We have argued that MNCs have been less concerned about specificities of local regulations, or the domestic institutions. That applies both to investment decisions and to participation in domestic politics once they were present in a country. There were some exceptions: automotive MNCs actively lobbied for flexible work accounts in many countries and were actually very effective in getting the regulation they desired. Automotive multinationals have often also pressed for changes in vocational training and there are cases of educational reforms to meet their demands.

In general, however, what investors need from the states, apart from the rule of law and EU membership, boils down to a welcoming approach in general. We can see it these days in Hungary where Orban leaves German car makers in no doubt that they are welcome in the country that otherwise claims to build a national capitalism.

I would also think that, rather than internalizing actual functional needs, policies towards investors rather tend to offer investors sweeteners that may please them, but may not be functionally necessary at all. The investment subsidies are a case in point. Had eastern European state lobbied Brussels to actually ban state aid rather than give them exception they so much valued, billions of Euros would be saved on the mad investment subsidy race and the countries in eastern Europe would still receive the same amount of investment.

RR: In this dimension, you point out the exceptional character of the automotive sector’s behaviour. Here, according to you, the MNCs seem to have been more aggressive in shaping the institutional frameworks of the region. What are the reasons of this peculiarity? Did other sectors (mobile network companies, the financial sector, retail trade, energy for instance) really fail to influence policy making and institutional design?

JD: The automotive is the dominant economic sector in these countries. The company and sectoral-level institutions in the automotive thus have an important role in the overall institutional mix. On the other hand, it actually strikes me that the degree to which the automotive firms shaped the national level policies and institutions is relatively minor. The flexible work accounts I mentioned above is not such a big deal in the overall policy mix. Moreover, one should concede, that automotive has been in a way over-researched in the institutionalist research at the expense of non-tradeable sectors, given the theoretical interest in the institutional constitution of the comparative advantage. Finally, the interest of automotive companies in vocational training is long term. The recent labour shortages have given rise for calls for liberalizing access for workers from outside of the EU, but that is by no means limited to the automotive or to the MNCs.

The structure of dependent capitalisms and their vulnerabilities

RR: Central and East-European economies are illustrative of a characteristic segmentation in dependent capitalisms between, on the one hand, a productive sub-system largely integrated in the international value-added chains and a more inward-oriented, traditional domestic productive apparatus, on the other hand. In your mind, what kind of analytical proposals would be able to gasp both the articulation of these two sub-systems and the long-term viability of the accumulation regime they help to compose?

JD: They key issue these days seems to be the question if the production systems organized by MNCs can meet the expectation from the political systems that the FDI-based economies can sustain the convergence process through which the living standards should catch up with those in western Europe. While there seems to be space for further wage increases in the current economic fundamentals. A sustained convergence, I would argue, would require a less autonomous functioning of the institutional and productive systems. What I mean is a shift from a situation where innovations are typically imported to the region towards a mode of growth based on innovations supported by domestic institutions. A sustained convergence thus needs underpinning in good-quality domestic institutional structures. In a way, the domestic institutions would need to matter, as much as the institutional theory would expect them to do so.

RR: Don’t you think that FDI, after having played a positive role in the technological upgrading of the productive systems in CEEC, could have been on the contrary detrimental to these productive systems after the last crisis, in accelerating the transmission of exogenous shocks to these economies? You seem to insist on the contrary on the stabilizing role of FDI. Could you precise the meaning of this term in your analysis? Should we differentiate between diverse types of dependent capitalisms in CEEC?

JD: The reliance on the FDI-based export model made countries vulnerable to the fall in export demand that came in 2009. At the same time, FDI turned out to be a stabilizing factor. The main vulnerability was a reliance on credit from abroad, which was present only in some counties, notably in the Baltic States but also in Hungary. Such financialization had little to do with the FDI-based model. This indeed shows a considerable diversity in the types of growth in the region. I would still think that it makes sense to use ideal types to characterize different degree of reliance on the FDI-based, or financialized models.

The contemporary evolution of the wage-labour nexus in dependent European capitalisms

RR: A related question is the social and labour-related component of dependent capitalisms. On this side, MNCs seem to have benefited from the fact that large social protests have barely occurred in the region, at least on wage grounds. In this context, how can we assess the role of trade unions? What lessons can be derived for the future of trade union actions, at the national and European levels?

JD: There was a lost decade in wage convergence after 2008. Recently, we have seen wage convergence pick up again a bit, with countries such as Hungary and Romania recording impressive wage increases. I think that there is a considerable scope for further wage increases in these dependent economies, but a sustained convergence would require a more autonomous economic model. Trade unions have an important role to play in this process. Many of trade union leaders in the region are well aware of these challenges. In some countries they are at the forefront of the debates on the prospect of convergence. In some cases, they really put the topic on the agenda on the national level. They have also introduced it on the agenda of the European Trade Union Confederation.

Unfortunately, the propensity for people to address problems through collective action, be it through participation in the trade union or through political parties, is low in eastern Europe. However, the strengths or union differ across the countries. We have also seen cases of trade union revitalization in countries such Czechia or Slovakia. I find it also interesting that trade union leaders are one of the most Europeanized social forces on the left. The degree of international contacts and understanding of the sometimes conflicting positions is much higher than it is the case of party leaders.

RR: Along the same line, how do you interpret the current evolution of what some call the “European social model”? Is it merely the outcome of some form of “race to the bottom” or does it bring some improvements in the social rights of workers? What are the respective influences of MNCs and inner socio-political factors in this evolution?

JD: The integration of the low-wage, low-income countries has certainty transformed the dynamics on the European level, including the politics and political economy of the European Social Model. However, when it comes to social rights, there are many more divisions that between east and west. Nordic countries, for example, tend to see introduction of social standards on the European level as a threat to their model and the autonomy of social partners there. We could also see that, in the end, east European countries were not unified in the opposition to the revision of the posting directive. Trade unions in most east European countries, including also in Poland, supported the revision of the posting directive and in some countries played an important role in shaping, or even reversing, the position of the governments. In fact, many in eastern Europe, trade unions in particular, look at the European level for new rights to improve their social models. This contrasts with the approach in the west, which tends to look to EU for protecting the rights that exist on the national level. Finally, some in the trade union movement look at bargaining in MNCs as a way forward in introducing international wage coordination. This could help the process of convergence.

The future of dependent capitalisms: whither trajectories in relation to the European Union?

RR: In a recent ETUI report (2017), you propose a typology of FDI, including in the criteria their potential of inducing technological upgrading, that could help CEECs to exit from their current dependency. One of the implications of this report is to renew the reflection on the European governance. Do you think that this reflection might induce a rebalancing between the current trends that we observe in the political (the rise of nationalisms) and the social (the rise of income discrepancies) grounds in CEECs?

JD: In some east European countries, FDI has actually ceased to be the driver of economic growth after 2008. It was replaced by European funds. However, we see little evidence of these funds being used to create domestic innovative capacities that could sustain the process of convergence. In this respect, I find that the main impetus needs to come from the national level. At the same time, we should use the EU level to introduce common standards, be it the minimum wage or tax coordination. Obviously, cohesion policy should continue to play a role, but we should go beyond investment in infrastructure, towards a smarter investment in a context of an industrial policy that could indeed create an independent innovation capacity.

RR: What you are pointing at is the necessity of a change in the EU governance structures and policies. In order to orient this change, what should be the priorities? Is it possible to have a “multi-speed” Europe that could preserve solidarity? Could the German and French, but also the Central and Eastern European leaders endorse this kind of agenda? What about a trade union consensus on this matter?

JD: I am not sure that we need a major change of EU governance framework for this specific reason. It would definitely not help the prospect of convergence if we moved into a multi-speed framework. In the current settings, it seems to be a matter of how existing policies, such as the structural funds, are used in the new member states. In this respect, the member states have a considerable flexibility. They can thus shape how the funds are used. They should also be active in shaping the innovation policy. To me, it thus seems a matter of taking a more pro-active approach in European policy making and in thinking about what to do with existing programmes domestically. Unfortunately, the coordination among East European countries we see these days is not about a positive European agenda.

RR: This brings us to the question of the stability of the dependent model of capitalism. Do you think that there is a possibility for CEECs to gradually evolve toward a form of socio-democrat, European-continental, or another type of current Western European capitalism? Or, on the contrary, are they doomed to be stuck with their actual trajectory?

JD: I sometimes tend to think that the region could lock in the dependent model, with the implication that the convergence would stall at the level of, say, Spain. On the other hand, I appreciate the dynamism of capitalism, with capital looking for new ways of exploiting regional differences and expanding to new frontiers. This puts the dependent model under pressure. For instance, French car makers are now expanding in Morocco. We have already seen the collective bargaining in Renault/Dacia (in Romania) being conducted in the shadow of a credible threat of relocation to the existing facilities of Dacia in Morocco. There is also the challenge of technological change, to which the economic specialization of eastern European seems particularly vulnerable.

To address this corporate pressure, it is important to develop transnational institutions of worker representation in and around the MNCs, both on the European level and globally. These include activities in and around the European Works Councils as well as trade union alliances around MNCs, possibly leading to MNC-wide standards negotiated in transnational agreements with companies.

Beyond Central and East European Countries

RR: Your last example reminds us that MNCs are not bounded by the European Union. What kind of influence this worldwide immersion of the main companies can exert on their strategic choices concerning CEECs? More analytically, do you think that the “dependent capitalisms” category that you have elaborated for these economies could be relevant for addressing similar questions in other regions of the world?

JD: The experience of eastern Europe seems similar to other integrated peripheries – as Petr Pavlínek, who studies the automotive industry, puts it – such as that of Mexico. There we see similar strategies by the MNCs. It does not seem to me that the region would have an important role in global strategies of MNCs. Its role seems to be in the context of the European strategy. Even MNCs such as Huawei use east European operations to serve customers in Europe. Huawei’s global R&D centres are located in the innovative hubs of western Europe.

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Bibliographie

Drahokoupil J. & M. Myant (2016), “Varieties of Capitalism and Dependency: dependent and resistant labour regimes in the automotive industry”, in Delteil Violaine & Vassil Kirov (eds), Labour and Social Transformations in Central and Eastern Europe: Europeanization and Beyond, Abingdon, UK and New York, USA, Routledge, p. 42-59.

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Référence électronique

Jan Drahokoupil, Violaine Delteil, Julien Vercueil et Éric Magnin, « Unlocking the Dependent Model of Capitalism », Revue de la régulation [En ligne], 24 | 2nd semestre / Autumn 2018, mis en ligne le 18 décembre 2018, consulté le 14 octobre 2019. URL : http://journals.openedition.org/regulation/14169 ; DOI : 10.4000/regulation.14169

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Auteurs

Jan Drahokoupil

Senior Researcher on multinational corporations at the European Trade Union Institute (ETUI).

Violaine Delteil

Maître de conférences en Économie, Université Paris 3 Sorbonne Nouvelle, Laboratoire ICEE ; violaine.delteil@sorbonne-nouvelle.fr

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Julien Vercueil

Professeur d’économie, INALCO, Laboratoire CREE (EA 4513), julien.vercueil@inalco.fr

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Éric Magnin

Maître de conférences en Économie, Université Paris Diderot, Laboratoire LADYSS, eric.magnin@univ-paris-diderot.fr

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Revue de la régulation est mise à disposition selon les termes de la Licence Creative Commons Attribution - Pas d'Utilisation Commerciale - Pas de Modification 4.0 International.

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