The Politics of Economic Policy

Policy requires politics. Ideas for solving economic problems are

plentiful, but if an idea is to prevail as the actual policy of a particular

government, it must obtain support from those who have political

power. Economic theory can tell us a lot about policy alternatives, but

unless our economics contains an understanding of power, it will not

tell us enough to understand the choices actually made.

In prosperous times it is easy to forget the importance of power in

the making of policy. Social systems appear stable, and the economy

works with sufficient regularity that its rules can be modeled as if they

functioned without social referent. In difficult economic times this

comfortable illusion disintegrates. Patterns unravel, economic models

come into conflict, and policy prescriptions diverge. Prosperity blurs a

truth that hard times make clearer: the choice made among conflicting policy proposals emerges out of politics. The victorious interpretation will be the one whose adherents have the power to translate their opinion into the force of law.

The 1970s and 198os have been difficult years, years in which

economic problems have made visible the importance of politics in

shaping economic policy. Records have been broken. The early 198os

saw the most severe business-cycle depression in fifty years, the late

1970s the worst inflation in thirty years and the most persistent unemployment in the countries of Western Europe for two generations.

The 1970s also gave us the most severe shock from a single source in

the international economy since the banking collapse of 193 1, in the

OPEC price boost of 1973-74, and the unraveling of the monetary

regime created in the 1 940s, starting with the American dollar drop

of 1971. As I was finishing this book in the mid-1g8os, the American

economy had, to the envy of Europeans, created millions of jobs, but

THE POLITlCS OF POLICY CHOICE

the halcyon days of the fifties, when it seemed that economic growth,

price stability, and full employment might be realized collectively, had

not returned. Over the international economy of the latter tg8os

hang the tremendous U.S. budget deficit, sucking in huge amounts of

foreign capital, the gigantic debts owed by certain foreign governments. severe international competition, and massive reductions in

manufacturing employment-outward signs of acute policy problems.

With economic dislocations have come significant political changes

as well. The late 1970s and the tg8os have produced some of the

largest swings in partisan politics since the 1930s. In tgSt, for the first

time in its history, France gave an absolute electoral majority to the

Socialists in the National Assembly and elected the first Socialist president ever chosen directly by universal suffrage. In the United Kingdom the two-party system crumbled as Margaret Thatcher and the

British Conservatives beat Labour twice while social democrats broke

away to form a new party. In 1976 the Swedish social democrats lost

power for the first time in over forty years, but in 1982, with commentators predicting a rightward shift in Europe, they came back under

Olof Palme to win. In West Germany the governing coalition fell

apart when the Free Democrats switched alliance partners. In the

United States, Ronald Reagan led the Republicans to strong victories

at the presidential level and to strong gains in voter identification at

all levels. In Portugal, Spain. and Greece dictatorships fell, and in the

latter two countries socialist governments took office.

These political shifts have been accompanied by major changes in

economic policy debate. Out of the traumas of the Qepression of the

1930s and of World War II the countries of Western Europe and

North America had forged a "historic compromise." Bitter enemies

had worked out a truce built around a mixed economy, a kind of

bounded capitalism, where private enterprise remained the dynamo

but operated within a system of rules that provided stability, both

economic and political. Demand management to promote full employment, the welfare state, an extensive system of economic regulation, institutionalized industrial relations. free trade-these were the

policy approaches of this bounded capitalism, and they departed

strongly from the market orthodoxy of pre-Depression days. Political

power was shared as well, and to a far greater degree than before the

war. 1

With the crisis of the 1970s this compromise has come undone. As

the economy turned sour, so discord grew about causes and remedies,

and the policy debate widened. Older interpretations, thought dead,

The Politics of Economic Policy

have come back to life, sometimes in new language, while the doctrines of the sixties, once challengers to orthodoxy and then its successor, lost their intellectual predominance. Challenges to the historic

compromise-among them nationalization of industry, industrial democracy, protectionism, and industrial policy-have returned to the

policy agenda in recent years, and some have been tried in practice.

In the first year of Fram;ois Mitterrand's government, for example,

France nationalized more industry than any Western country had

done since 1945. Reagan slashed taxes and domestic spending more

drastically than any U.S. president in generations and increased military spending dramatically for a nation not at war. In international

trade a widespread return to protectionism has pierced the worn

fabric of the General Agreement on Tariffs and Trade.

Economic crisis, policy debate, and political experimentation are

surely somehow connected, and their connections are the subject of

this book. Economic crisis leads to policy debate and political controversy; out of conflict, policies emerge. Policies, whether innovative or

traditional, require politics: that is, the responses to the economic

crisis require political support. To understand policy choices, therefore, we must understand the politics that produces them.

In this book I wish to gain an understanding of the politics of policy

choice through a "political sociology of political economy"-that is, by

looking at the politics of support for different economic policies in

response to large changes in the international economy. When national economies are interdependent, crises are international. No

country escapes, for a crisis is a stimulus to which all must respond. By

examining what countries do, by looking at how their responses vary,

we can learn something about the countries themselves and about the

factors that lead them to choose particular policies.

Comparison is particularly useful for such an enterprise. The current crisis of the international economy is not the first, and two earlier

experiences seem especially telling for our era. In the crisis of 1873-

96 prices plummeted, levels of employment gyrated widely, production soared, profits were squeezed, some businesses exploded in size

while great numbers of others collapsed, millions emigrated from

Europe. new parts of the world entered the industrial economy, and

countries wrangled over what to do. The crisis of 1929-49, beginning

with the Great Crash, occurred in the context of deep problems in the

system of payments (with German war debt and reparations for

World War I) and that of trade and production (with the emergence

of new products and new techniques). Much can be learned by comparing the current crisis to these earlier ones.

THE PoLITICS oF Poucv CHOICE

The three crises can be seen both as distinct historical periods and

as recurrences of similar events. Each crisis combines three properties: a major downturn in a regular investment/business cycle, a major

change in the geographical distribution of production, and a significant growth of new products and new productive processes. These

three properties operate at an international level that deeply implicates domestic economies and so link conflicts over national policy

within each country to international trends.

This book analyzes the response to the three international crises in

the choices made by five countries: France, Gennany, Sweden, the

United States, and the United Kingdom. For at least a century, all five

countries have had complex economies, part modern, part backward;

part industrial, part agrarian; part oriented toward aggressive competition on a world scene, part oriented toward sheltered home markets. All five have at times converged, at times diverged, in their

policy choices; all five have been capitalist through the period that

interests me. And, with the conspicuous exception of the Nazi years,

all five have had politics at least partly shaped by constitutional

procedures.

From a comparison of the choices among policy alternatives which

these countries have made, something can be learned about the importance of power in shaping policy. Ultimately, policy choices are

made by politicians, by individuals who occupy institutional positions;

power comes from the formal authority of those institutions. But

somehow political leaders have to get into those institutional positions

and hold on to them. And whatever they decide, their policies, to take

effect, require compliance or even enthusiasm from countless individuals who work or invest or buy. When politicians make choices,

therefore, their choices are constrained by the need to mobilize or

retain support. Politicians have to construct agreement from among

officeholders, civil servants, party and interest group leaders, and

economic actors in society. My goal is to map out the patterns of

support which have formed around the various programs of economic policy that countries have adopted in response to severe dis·

ruptions in the international economy.

Many accounts of these crisis periods make reference to coalitions

that formed in conjunction with policy packages: the marriage of iron

and rye. the Weimar coalition, the Populist revolt and the Gold Dem·

ocrats; the New Deal coalition, the French Popular Front, the Swedish

••cow trade" of the 193os. These coalitions provided the support

needed to get policies adopted and implemented. Our understanding

of policy choices requires a political sociology of these historical coalitions: Who was in them? Around what substantive terms of trade did

Tlu Politics of Economic Policy

they form? How were they put together; that is, to what degree were

they assembled by political figures, to what degree did self-motivated

individuals converge out of panicularistic calculations? Were other

combinations possible; that is, could the same coalitions have sustained different policies, could different coalitions have produced the

same policies? How loosely or tightly do coalition, political formula,

and policy package fit together?

Unpacking what was involved in the formation of past coalitions

tells us something about the political sources of policy choice. Several

factors interact to bring such coalitions about and to cause their collapse. In an economic crisis social actors, affected by their situation,

evaluate alternative policies in relation to the likely benefits or costs.

One major analytical tradition of political economy therefore examines policy suppon by examining the placement of social actors in the

economy itself.2

Economic conditions rarely operate directly on policy disputes.

Other· factors mediate them. Those factors include, first, the mecha·

nisms of representation-political parties and interest group associations that try to manage the linkage of economic actors to the state.

Second, politics is affected by the organization of the state itself: the

system of rules (electoral laws, balance between legislature and executive, legal powers, and so on) and institutions which comprises the

bureaucracy. Third, economic actors are influenced by ideology,

which provides models of the economy and of the economic motives

of other actors. Finally, coalition politics is influenced by a country's

placement in the international state system of political·military

rivalries. 3

Each of these factors influences the interaction of societal actors.

Each has also acted as a focus for important theoretical traditions of

explaining policy and politics, some of them in strong conflict with my

own concern for the economic situation and preferences of economic

actors. It is, I believe, important to explore these traditions of interpretation to see where they can take us and where they are limited.

This book attempts a description of policy choices which evaluates the

connections among different arguments currently used to link the

international economic environment lO national politics.

THE ARGUMENT IN BRIEF

Each crisis involves a sequence of events which can be summarized

quickly. In the prosperous years preceding the crisis, a policy approach and support coalition developed. Then came crisis, challeng·

THE Pouncs oF Poucv CHOicE

ing both policy and coalition. Crisis opened the system of relationships, making politics and policy more fluid. Finally a resolution

was reached, closing the system for a time. until the next crisis.i

TM Crisis of 1873-96

When the first crisis began, free trade had been spreading across

Europe's industrializing countries. Buoyed by growth. those countries

had accepted the concept of comparative advantage, which promised

greater aggregate wealth if countries specialized according to world

market conditions. In 1873, however, prices slumped; they would

continue falling for years. Many producers, sorely pressed by new

conditions, began clamoring for tariffs and other forms of aid. Of our

five countries, only the United Kingdom continued with its free-trade

orientation, which dated from the celebrated repeal of the Corn Laws

in 1846. Elsewhere protectionism prevailed, and with it the reshuffling or reinforcement of particular alliances among societal actors. In

Germany, France, and Sweden both industry and agriculture were

sheltered. Agricultural tariffs would have been meaningless in a

United States whose farm production was swamping Europe. so in

America only industry received protection.

The simplest explanation of these outcomes lies with the way that

the new economic environment affected the major groups of industry, agriculture, and labor in each country. As the first ·industrial

nation, the United Kingdom led the world in most industrial products. It pioneered large-scale manufacturing first of textiles, then of

iron and steel. With the profits from those industries the United

Kingdom developed a very large financial/trading sector deeply attached to world trade. British agriculture had already begun adapting

to the pressures of international specialization. Labor, employed by

some of the world's leading industries, worried about the cost of food,

but after the repeal of the Corn Laws, labor also came to support free

trade. When prices fell after 1873, some farmers and some steel producers fought for protection. They were defeated by the larger

coalition.

The sharpest contrast to the British case is that of Germany. As a

later industrializer, Germany (its industries) faced stiff competition

from the British; its banks were linked not to international finance

and trade but to industries; and much of its agriculture was quite

uncompetitive and poorly structured for adaptation. Industry, led by

heavy industries of iron and steel, and agriculture, led by the

grain-growing Junkers, came together in the famous coalition of iron

The Polilics of Ecunomic Policy

and rye in support of tariffs. An alternative alliance preferred free

trade; it brought together export-oriented, high-technology industries such as chemicals and electrical equipment, farmers seeking

cheaper grains to feed dairy and meat herds, and labor concerned

about the price of food. The free traders lost.

This divergence in outcomes between the United Kingdom and

Germany was reinforced by other factors as well. The well-developed

Prussian-German state favored protectionist interests, for example,

and the system of interest groups and political parties disadvantaged

the free-trade coalition there. The German states had a stronger tradition of protection and a weaker tradition of free trade than the

United Kingdom. Moreover, Germany's geopolitical situation on the

European landmass, without extensive colonies or dominions, made it

more vulnerable than the United Kingdom to dependence on the

international division of labor.

When we bring the other countries into the comparison, however,

we diminish the importance of these factors. France and Sweden had

their equivalents of the iron-rye coalition, with industry and agriculture both facing stiff foreign competition and seeking protection.

Yet the French state after the early 187os was a rather weak republic

open to social pressures, and Sweden lacked the powerful army and

bureaucracy that made the German state so distinctive. In France and

Sweden, indeed in all the countries including Germany, economic

ideology appeared to shift rather rapidly with changes in economic

conditions. In all could be found a range of viewpoints about policy,

each view struggling for political primacy. In the United States, state

structure, economic ideology, mechanisms of representation, and international situation were all quite different from their Continental

counterparts. Nonetheless, protectionist groups in all four countries

managed to prevail; in the United Kingdom they lost.

The influence of societal actors in this period appears to have been

relatively naked and raw. To win policy debates, societal actors certainly had to operate through parties, the state, and ideology, and

they cenainly had to deal with international military considerations.

But in this period these appear to have been instruments used as the

societal actors saw fit. Whatever the system in which they

producer groups seem to have been able to get their way. It seems

likely that even a republican Germany with a weak state, or an authoritarian France with stronger leadership, would have adopted the

same policy. What makes the United Kingdom different from the rest

is the profile of its national groups and their views; that is, sectors

convinced that an open world economy operated to their advantage.

THE POUTICS OF POUCY CHOICE

From these various policy battles emerged certain patterns in the

interrelationships among societal actors. Though all industrialists had

their conflicts with labor over wages, unionization, and other issues of

property and power, some industries showed a higher propensity

than others to make alliances with labor. High-technology sectors, for

example, well placed in international competition, forged alliances

with cheap-food-oriented labor groups. Heavy industry, faced with

massive capital requiremenlS and a need for stabilization of demand,

as well as other industries facing stiff foreign competition, opposed

free trade. They were more hostile to labor and to progressive political demands. Agriculture split between commodity crop producers

and the growers of high-quality foodstuffs who used grain and other

commodity crops as inputs. In Europe the latter had sympathy for

free trade and industrial development, the former were protectionist.

In America the commodity producers were anti protectionist and also

mistrustful of industry; the high-quality food producers were sympathetic to industry and accepted protection. Labor was a passive

though not useless ally in these agreements. Unionized labor tended

to be concerned with keeping down the cOst of food; in Europe it

tended to oppose tariffs. but in America, where food was cheap. it

supported industrial protection. Nearly everywhere agriculture and

labor found it difficult to cooperate.

In this first crisis, therefore, the international economy played a

considerable role in shaping domestic politics. It did so by working

through domestic actors, shaping their policy preferences and their

propensities to conflict and to align with other groups. Elements of

the national political system were the instruments through which

group pressures made themselves felt.

The Crisis of 1929-49: The Depression

The crisis that began with the Great Crash of 1929 produced a

massive attack, even greater than its predecessor's, on the classical

economic views that dominated policy, and it led to the construction

of new political formulas for supporting changes in policy. Longstanding relationships among social forces crumbled. Cut loose from

their moorings, economic actors floated on a sea of confusing incentives, opportunities, and dangers. Policy and political experiments

were tried, and some combinations, in particular that of Nazi Germany,led to disaster. Others produced a formula that became generally adopted around Europe and North America, though only after

the cataclysms of totalitarianism, war, and occupation.

When economic depression spread after 1929, the universal policy

The Politics of Economic Policy

response was the orthodox, classical prescription of deflation: cut aU

costs to encourage sales and investment, which meant cutting

taxes, and spending. But deflation failed to produce the desired result. Many alternatives were tried, among them socialization, protection, fiscal stimulus, and mercantilism. Every country gave up on

deflation, but the degree of departure from orthodoxy varied.

The United Kingdom reversed its historic devotion to the classical

line by devaluing the pound, reviving tariffs, developing subsidies

and market regulation for agriculture, and granting some limited aid

to industry. But the United Kingdom did not experiment directly or

even rhetorically with demand stimulus. Sweden, Germany, and the

V nited States adopted all of these measures, but they also began

experiments with demand stimulus and macroeconomic management. Nazi Germany went farthest with deficit-led stimulus; Sweden

and the United States experimented with it more loosely. France,

after pursuing deflation much later than the others, tried fiscal stimulus under the Popular Front. When that collapsed, the country

moved toward a less dramatic break with classical onhodoxy. InGermany political repression altered economic relations, because the destruction of labor unions changed the functioning of labor markets.

The shift to military spending in the mid-1930s led to a much greater

nationalization, albeit hardly of the kind desired by the left. Corporatist market regulation was tried in many countries; in Germany it

became highly authoritarian.

Even in the horrors of the Nazi regime, then, it is possible to see

some resemblances to the trajectories of other countries. The classical

position held that deflation produces the best result in the long run.

The willingness to sustain the long run varied, however. Agriculture

everywhere turned desperate early, seeking some kind of substantial

state aid. So did labor, both union and nonunion. Fairly soon, business fragmented in its attitudes: some stuck to orthodoxy. others

agitated frantically for state action.

As the collapsing international economy disrupted older relationships among economic actors, new combinations became possible.

Mass discontent created new opportunities for some elites, new constraints for others. Some capitalists wanted to abandon the deflationary prescriptions of the classical school but met strong resistance from

their orthodox brethren. This resistance could be overcome by using

the support of labor and the discontent of agriculture. By linking the

various instruments of mass power (ballot box, workplace, street) with

the various instruments of business (capital, ownership. legitimacy).

coalitions formed which had considerable potential for action.

Such coalitions were also polymorphous-there were different

THE POLITICS OF POLICY CHOICE

ways they could come together and different uses to which they could

be put. The three experimenters with demand stimulus-Nazi Germany, Sweden, and the United States-were able to experiment because politicians fashioned new suppon coalitions. But the three experiments linked fiscal stimulus to different types of economic policy

instruments and to different types of mass support.

It was in Sweden that the bargaining among social forces was most

explicit. The Agrarian party and the Social Democrats formed the

cow trade: subsidies for the countryside while retaining levels of unemployment compensation for the cities. Business groups were

shocked by the deal, but when the election of 1936 demonstrated the

failure of efforts to break it up, the high-tech, internationally oriented

business groups struck a deal. In the Saltsjobaden Accord of 1938

labor gave up its demands for socialization and agreed not to strike;

business accepted high wages. labor union rights, and labor power in

government; agriculture kept its subsidies. The whole accord was

oriented toward international markets, whose discipline would be allowed to enforce concern for productivity and profitability. Macroeconomic policy would keep demand at levels high enough to prevent unemployment, and retraining would move labor from declining

to growing companies.

In the United States the bargaining was far less clear and much

more contorted. Labor and agriculmre joined together around the

Democrats. but the relationship of these two groups to business shifted. The first New Deal drove the internationalists out of their historic

linkage to these groups. while their old enemies. the more nationalist

industries that served domestic markets, combined with agriculture

and labor to create the corporatism of the National Recovery Administration (NRA). Within two years that approach had disintegrated

over its various internal tensions: business resistance to corporatist

controls, antipathy to labor claims, tensions over foreign economic

policy. The second New Deal put the pieces back together in a different way. It gave bigger concessions to labor in the Wagner Act, which

helped promote and institutionalize trade unions, and Social Security,

and it salvaged the agricultural programs from the wreck of the NRA.

For business. it moved back toward internationalist foreign economic

policy, stabilized markets through various regulatory devices, and

contained radical agitation for the socialization of ownership. When

the effort to balance the budget produced the severe slump of 1937,

this new coalition provided support for an economic experimentthe first deliberate deficit, in the demand stimulus budget of 1938.

The Nazi coalition also broke with economic orthodoxy, and it also

TilL Politics of Economic Po!Wj

drew for support on the intense discontent to be found in agriculture.

labor, and business. But it drew on a sharply different type of labor

support, and that difference was important to the gigantic difference

in political formulas and program used to stitch the coalition together. Where in the constitutional countries the reformist coalitions

used the existing representative organizations of union labor, in Germany the Nazis turned to the unorganized masses, to a wide range of

groups including numbers of people working for wages. As an

grative ideology the Nazis used instead of social democracy a vol/Usch

populism laden with racism and nationalism. Business was drawn in

not as a part of a compromise among existing social categories but

around a program of nationalism and imperialism. The new policy

departures of demand stimulus and corporatism were thus linked to a

very different political base and an authoritarian structure. Where in

the United States and Sweden the need of governments for mass

support led to a strengthening of trade unions, in Nazi Germany the

need for mass support was used to destroy unions. A different political formula gave the Nazis not only the freedom to experiment with

economic policy, including coercive corporatism, state enterprises,

and strict control of foreign economic relations, but also the freedom

to destroy peoples and countries.

In this crisis, as in the first, the policy preferences and coalitional

proclivities of economic actors were strongly affected by their situation in the international economy. By contrast, the role of associations

in mediating relations among social forces appears to have grown. In

response to the first crisis a mass of organizations developed to handle

the representation and governance of societal actors. As the organizational space of society "filled up," these organizations came to shape

the way their members understood options and the way in which

these options were expressed through politics. Specific decisions by

organizational leaders loom large in the politics of the second crisis

period: the willingness of the Swedish Agrarians to ally themselves

with the SAP, the rejection by German and British labor parties of the

deficit-financed public works proposed by the unions, the willingness

of American and Swedish business groups to make alliances with

labor and the rejection of such projects by their German coumerparts. In some cases existing associations proved durable and adaptive, in others they were brittle and weak. New organizations rose up

able to mobilize people in new directions; the Nazi party and its

organs are the most spectacular example.

Differences in state structure also affected policy debates. The German case shows this most conspicuously: the weakness of the Weimar

THE PoLITics oF Poucv CHoiCE

Republic in the army, the judiciary, and other elements of the state

bureaucracy contributed to the failure of constitutionalist accommodations. The weakness of the Weimar and Third Republic cabinets

contributed to policy stalemates that ultimately favored the far right

in both Germany and France. American federalism and loose party

organizations weakened the labor-reform elements of the New Deal,

facilitating the formation of a South-agriculture-Republican coalition

that limited change.

Associations and state structure both played important roles; we

can conceive of them as prisms through which the pressures of societal actors were refracted. It is hard to understand the policy debates

without reference to them. Yet it also seems clear that their effects

were not independent of the societal context in which they operated.

There seem to be no characteristics of associations or state structure

that can stand independently of social factors in explaining policy

outputs. It is not the formal attributes of institutions which account

for the outcomes, but the way in which formal structures interact with

the objectives of societal actors and group leaders. Political context

also strongly affected the differences in economic ideology and relationship to the international system which can be found among these

countries during the Depression.

In crucial ways, then, policy and its political context turned on the

accommodations that societal actors did or did not work out. Response to organized labor appears to have been pivotal. Where laborallied parties and trade unions were drawn into coalitions, economic

policy innovation could take place, and in a constitutionalist context.

Where organized labor was repressed but another source of mass

support was tapped, policy innovations occurred, but under fascist

dictatorship. Where organized labor was excluded but not repressed,

as in the United Kingdom and in France before and after the Popular

Front, policy changes were more limited. This much is description.

The explanatory problem arises in sorting out how different elements

contribute to the packages of policy, and organization which

prevail.

The Crisis of 1929-49: The Postwar Reconstruction

The Depression of the 1930s contributed to World War II by shaping the coalitions that took power in dealing with it. The war then

reopened issues of political economy by shaking loose the political

settlements of the 1930s. In the postwar years the policy debate resumed, augmented by the titanic consequences of the war itself. This

The Politics of Economic Policy

time the countries of Western Europe and North America converged

in their approaches to politics and economic policy, building in effect

a compromise to end the battles of the thirties. They built accommodations, de facto or de jure, among societal actors.

Labor accepted capitalist management of an economy run on the

basis of market incentives (even for nationalized industries) in exchange for a welfare system, high wages, employment-oriented macroeconomic policy, and constitutional protection of organizing rights.

Agriculture kept the extensive system of market stabilization in exchange for its support of broad programs for labor and business.

Business accepted these policy shifts in exchange for maimenance of

many of the regulatory mechanisms that stabilized markets and control over investment and management. Under American leadership

the compromise was attained in the context of an open world

economy.

The path to this accommodation differs. In Sweden and the United

States it came from internal political debates about the international

system; in Germany it depended upon massive foreign interventions

to restructure the society. But the end point was roughly similar.

Studies of the postwar period usually pit the United States and Sweden against each other as polar opposites. Yet compared to the era

before 1929, these two countries (and the others examined in this

book) dearly appear after 1945 to be part of this historic compromise.

Although policy mixes vary substantially, the character of state activism in economic management from 1945 onward diverges strongly

from both the classical and the protectionist policy patterns that predominated in earlier decades. The system produced by this compromise sustained prodigious economic growth, and successes strength·

ened the accommodation-until things began to go sour.

Tlu Crisis of 1971 to the Present

The very successes of the postwar boom sowed the seeds of subsequent difficulties. The revival of the West European and Japanese

economies, the spread of industrial capacity to developing countries,

and the emergence of new products and new processes, all paved the

way for a wide-reaching crisis of international competition which can

be dated to the early 1970s. This crisis has destroyed the compromise

forged after World War II. Labor, agriculture, and business are having an increasingly hard time managing the terms of their accommodation. More precisely, those elements which forged the compromise are losing ground within each category to elements that dislike it.

THE POLITICS OF POLICY CHOICE

The policy mix of demand management, regulation, and corporatism

is no longer dominant either in rhetoric or in reality. Even where

labor continues to participate in governing, policy has shifted toward

the neoclassical. State intervention remains extensive, but the policy

mix is changing. The interventions espoused by labor and stabilization-oriented industries are under challenge. Countries continue to

vary widely in policy, but market considerations are pressing all of

them to adapt in ways contrary to the patterns built up over several

decades.

In the present crisis labor has lost its historic allies within business

and agriculture. Business collaborated with labor in the postwar reconstruction to promote stabilization mechanisms and an open international economy, against the opposition of protectionists and nationalists. Now all business groups have accepted the interpretation

that their international problems are caused very largely by labor

costs, labor behavior, and the regulatory instruments that labor has

supported. The principal way to modernize and rationalize national

economies, business groups argue, is to improve profitability; hence

they urge lower taxes, lower social charges, less regulation. The internationalization of production has thus reduced the link between domestic producers and domestic labor while at the same time it has

moved international industry away from labor.

To agricultural interests, similarly, labor support is no longer necessary. Business no longer contests the system created in the 1930s.

Instead, business now is willing to compete with labor in buying agrarian support with all sorts of subsidies. If it allies itself with business,

agriculture can get these subsidies without having to pay for subsidies

for labor. In the thirties, agriculture provided the fight against the

classical approach not only with numbers but also with legitimacy:

farmers are property owners. Without the farmers, labor has to fight

against the core principles of the capitalist economy from its weakest

ground, the claims of wage earners. Farmer support in the 1930s

provided a populist base, not a socialist one. Today, as it was in the

first crisis, the populist sensibility is quite antilabor.

Without these allies, labor has become defensive. Its policy ap--

proach seeks to defend existing positions in wages, social services, and

jobs. But labor has difficulty in formulating a vision of how best to

modernize a national economy in the face of new international economic conditions so as to allow it to mobilize broader support while

retaining its own internal solidarity.

All social categories face the same general problem in devising political strategies-each has to balance the task of managing the econoJO

The Politics of Economic Polic)'

my as a whole against the task of asserting the particularities of its own

situation. When business solidarity fragments under such conditions,

as happened in the 1930s and 1940s, labor, agriculture, and other

social fragments are able to play a considerable role in shaping policy.

In the 1970s and 1g8os, however, business strategies have converged

on a neoclassical revival, and it is labor that has fragmented. This is

likely to remain the case until policy problems in the international

economy draw out intra- and interbusiness conflicts.

These changes in political relationships operate to constrain governments and to limit policy experimentation. The French Socialists

under Mitterrand shifted away from nationalization, equalization,

and fiscal stimulus, and toward austerity in state spending and the

importance of market cues. These same pressures have constrained

the Swedish Socialists and have contributed to fragmentation in the

British Labour party, the Democratic party in the United States, and

West Germany's SPD. At the same time the realities of contemporary

electoral politics set limits to the application of market principles.

Ronald Reagan and Margaret Thatcher have both drawn back from

cutting the welfare state below levels that are considerably higher

than prewar norms. Both countries continue to use considerable government intervention in the economy, albeit in untraditional forms.

Policy has fluctuated between the neoclassical revival on one side

and market regulation and social welfare on the other. Between those

two extremes there exists a considerable range in country responses.

Sweden, though accepting the cues of the international market, intervenes far more than the United States does in labor markets and

industrial restructuring, and it uses mechanisms of consultation to

help along the process of adjustment. The West European systems of

social services and labor-market restrictions remain far more highly

developed than those in America. France uses industrial policy far

more than the United States and the United Kingdom. The United

States under Reagan has used far more than the Europeans the fiscal

stimulus of massive deficits and the industrial policy of military

procurement.

These differences can be partially understood in terms of the different relationships among societal actors country by country. By a

number of measures the Swedish labor movement is far more powerful than its American counterpart. American financial, trading, and

manufacturing groups, with the world's largest economy and the

world's reserve currency, have resources and face incentives that differ from those of most of their European counterparts.

But we cannot understand the different relationships among sodJl

THE POLITICS OF POLICY CHOICE

etal actors without examining the organizations that represent these

societal actors, the state structures, and the ideology. The strength of

Swedish labor is intimately linked to its organizational forms, in particular the centralization of the Swedish trade-union org-dnization and

its links to the Swedish Social Democrats; participating in the government provides resources and incentives that then, in an interactive

process, reinforce governing. In France the· importance of nationalization as a policy option is linked to the position of the Communist and Socialist parties and trade-union movements; the absence of

such parties and movements contributes to a different definition of

alternatives in the United States. Thus the forms and the ideologies of

the organizations themselves shape the ways in which societal actors

choose options.

The strategies of societal actors are also shaped by the institutional

frameworks created out of the second crisis. The five countries examined here differ considerably in the pattern of corporatist linkages

which they developed to manage relationships among functional

groups. Sweden may be less corporatist than Austria, but it is considerably more so than the United States. And the five countries differ

considerably in the powers and mechanisms of intervention available

to the state: France and the United States are the two extremes. The

mere existence of these mechanisms does not serve to explain their

use, of course, but it does affect the politics of policy alternatives

involving their use.

In all three crises the military rivalries among states played a role in

economic policy debates. In every case considerable increases in military spending accompanied certain policy approaches. And each time

there has heen a linkage hetween the advocacy of military spending

and the advocacy of conservative political goals at home. The international system thus contributes to domestic debates about policy and

politics. Rarely, however, has it been able by itself to explain the

victory of one perspective or another.

CONCLUSION

Over the course of three crises in the international economy one

can observe relationships changing among societal actors within

countries and among the factors that shape economic policy. Societal

actors divide and combine over time in ways that relate to their

changing situations in the international division of labor. Critical

The Politics of Economic Policy

realignments occur during crises, not only in the electoral arena but

in the terms of trade among various economic actors.

In the first crisis, three types of coalition developed: an anti-cornlaw pattern, typified by the United Kingdom, in which productive

forces from industry, finance, agriculture, and labor sustained a policy of liberal adaptation to the international economy; the iron-rye

pattern, exemplified by Germany, in which elements of industry and

agriculture combined to interpose a stratum of protection against the

international economy; and the anti populist coalition, exemplified by

the United States, in which industry and labor combined against commodity agriculture and traders.

In the second crisis, realignments took place. The social democratic

pattern brought together labor, agriculture, and elements of business

around the constitutionalist historic compromise through policies of

demand management, welfare, and stabilization. The fascist pattern,

by contrast, involved a different mixture of mass support, agriculture,

and business which excluded organized labor and led to a savagely

repressive regime. In its early days, nonetheless, the fascist variant

pioneered policies that would spread to other countries after the war.

Military intervention eventually destroyed the fascist pattern, opening the way to the spread of the sociaJ democratic model.

In the third crisis, tension has grown between the partners of the

historic compromise. Business groups have drawn together in opposition to labor costs and extensive services, social agriculture finds little

need for labor support, and pressure has built up to curtail state

spending and interventions. Whatever the differences in partisan outcomes, all governments have been pressed in the same general direction. The differences in policy response have been strongly affected

by differences in the mediating institutions, through which societal

actors mobilize and apply power.

The descriptive element of these trajectories can be charted by

following these relationships over time. More difficult is judging

among alternative explanations of why these bargains occurred

rather than some others and of the status of various factors in explaining the different bargains. Through all three periods, it appears,

we must have some understanding of the impact that international

and domestic economic situations have upon groups and their policy

preferences. This need is surely constant. At the same time the relationship of economic situation to mediating institutions and ideologies does not appear constant. In the late nineteenth century parties and interest groups were relatively unformed. They congealed

THE PouTrcs oF Poucv CHOICE

around that crisis, and they became forever after part of what societal

actors had to pass through. The second crisis both challenged these

structures and considerably expanded them. State and society penetrated each other in exceedingly complex ways, making it difficult to

judge how each shaped policy. When the third crisis began, the arrangements brought about during the second were in place to influence policy conflicts. Because these arrangements differed considerably across countries, however, their impact on politics varies as well.

The relationship among causal factors thus varies across countries

and within time periods.

The historically careful appreciation of contingency and balance

specific to each case thus conflicts to some extent with the search for

generalizations. Nonetheless, with careful pairings or triangulations

of cases it is possible to explore some of the strengths and difficulties

of the various analytical approaches. One can find limiting examples,

comparisons that bring out a linkage, others that point another way.

And so the tension between parsimony and elegance on the one side,

accuracy on the other, remains powerful.

My epistemological claims, I stress, are limited. I have a healthy

appreciation of the contingent. My mode of presentation, therefore,

is the theoretically guided historical account. Systematic accounts of

policy debates and choices allow the presentation of a story in such a

way that the informed reader can evaluate the understandings of

reality that lie behind broader generalizations.

I prefer to study crises rather than stable periods because I am

interested more in comprehending the open moments when systemcreating choices are made than in unraveling the internal workings of

systems themselves. This book is intended to help us understand the

range of choices, present and past, from which new systems emerge.

CHAPTER Two

Explaining Policy Choices

In each crisis countries "choose" a policy or a sequence of policies.

This is an anthropomorphic way to put it. The notion of choice implies consciousness, and the notion of policy implies coherence. Frequently in decision making we find neither consciousness nor coherence, though for the purpose of analysis we must use both notions.

To compare what countries do, to find similarities or differences in

their behavior, we need two sorts of frameworks: a typology of policy

alternatives, and a set of explanations for interpreting choice among

policy alternatives. These are constructs that we, the observers, impose. Policy options are generally messy, with fuzzy boundaries, and

the same is true of explanatory modes. Only when options and explanations are made orderly can we chart disorderly reality, describe

what h.appened, and then attempt to interpret it.

DEFINING PoLICY OPTIONS

The goal of this book is to examine how and why countries chose

particular policies in response to major disruptions of the international economy. Policy options must be defined, therefore, in ways

that encourage comparisons across countries and across time periods.

In looking at several countries, we need to conceive of the policy

options in a general manner, as a set of possibilities from which any

country might choose. In looking at several time periods, we need to

pose the policy options in ways that make them, at least analytically,

options for any of the periods. So we cannot define the policies in

specific periods contextually, as orthodoxy versus radicalism, because

the meaning of these descriptive labels may change from one period

THE PoLITics oF PoLicY ·cHorcE

to another: the radicalism of demand stimulus in the thirties, for

instance, may become the orthodoxy of the eighties, when radicalism

may come to mean the free-market ideas of the era preceding 1929.

Finally, we need to recognize that comparison requires some clear

sense of the object to be compared, the outcome or the endpoint or

what positivistic discourse would call the dependent variable. Without

at least a rough sense o.f the object of comparison, we will find it

impossible to engage in debate over explanations of policy choices. It

is necessary therefore to simplify-brutally, deliberately, and at the

cost of distortion.

There are two ways of constructing a typology of policy alternatives

so as to meet the needs of comparison: deduction and induction. The

deductive approach derives from economic theory a tightly formulated set of alternatives. This is the ideal method: theory permits

precision in the determination of categories and their boundaries.

Unfortunately, the deductive approach generates too many possibilities. Economic policy has many dimensions (fiscal, monetary,

commercial, industrial, and labor are only the most obvious), and

within each a number of alternative positions can be taken. These

elements can be combined in so many ways as to make impossible any

meaningful comparisons.

The number of combinations can be reduced to some degree by

identifying theoretical contradictions: a free-trade commercial policy

conflicts with intense government planning and nationalization in

industrial policy; an encouragement of investment through low taxes

conflicts with a need for high taxes to finance social insurance programs. But the conceptual limits are rather less strict than one might

imagine-in Western Europe, for instance, free-trade countries in

recent times also practice high degrees of corporatistic management

of employment, investment, pricing, and marketing, and the private

economies of some small democracies there also have very high taxes

for welfare.

Defining policy packages by deduction (the logical combination of

policy alternatives) thus will not work for our purposes here. We need

to supplement deduction by induction, by looking at actual debates to

find the limited number of combinations around which activity

focuses. The clustering of options into policy packages, we find, derives from political circumstances. From the historical record, we can

identify policy packages of a general sort which appear to form the

focuses of political and intellectual debate. Countries, again speaking

anthropomorphically, have usually argued about a specific set of policy responses to sharp changes in the international economy. Within

Explaining Policy Choices

each of these options are many nuances of detail, and the broadness

of the following categories does not capture them-nor will the explanations pursued necessarily do well in explaining variance within the

categories. Nonetheless, the important policy packages have been

rather limited in number, both across countries and across time periods. There have been few identifiable schools, few lines of reasoning,

few interpretations of what is wrong and what is to be done. Relative

strength may rise and fall across countries and time periods, but the

options themselves have some uniformity.

We may identify five major policy alternatives: liberalism or neoclassicism, socialization of ownership and planning, protectionism,

demand stimulus, and mercantilism. Each is a general approach to

the problems of political economy, dealing with a large range of questions under a diverse set of circumstances. Our interest here is with

the policy prescriptions with which these approaches respond to a

severe disruption in the international economy-what to do when

profits fall and international competition becomes especially severe,

how to allocate resources to cope with severe shifts in the international division of labor. For some approaches, the formula for bad

times follows the same logic as that for good times. For others, the two

circumstances are quite different.

Option I: Classical Liberalism or the "Neoclassical Option"

Classical liberalism holds that the untrammeled free market-decentralized decision making in response to the incentive for private

gain-yields the greatest output and hence the greatest total wealth.

Because the greatest efficiency comes from private calculations, the

task of the government is to leave the market alone. The government

provides, at most, some services that are necessary for the market to

function properly but are in no one's private interest to supply. Defense, security, education, infrastructure, indeed a rather extensive

array of government services can plausibly be claimed as necessary for

the market, but by and large those who use the language of Adam

Smith seek instead to curtail the role of government action. 1

In good times or bad the neoclassical solution to international distress is to allow the market to reallocate resources, and to allow it to do

so cheerfully. While the market destroys, it also creates. It knocks out

the inefficient but rewards the competitive. The revolutions in technology which drop prices, wipe out production lines, reorganize the

structure and the location of production-these are positive contributions to the creation of wealth. They are changes that contribute to

THE PoLITICS oF Poucv CHOICE

increased productivity, which means more output per unit of input,

and hence more for everybody. The manufacture of buggies collapses

because the manufacture of automobiles increases; slide rules give

way to pocket computers, dial watches to digital ones, and so on. The

decline of one use of resources happens because another one grows.

A contraction of employment here leads to an increase in employment there.

Any effort to interfere with this process restricts the capacity of

wealth, defined as the aggregate output of goods and services, to

grow. If one protects the manufacture of phaetons and landaus, then

one locks up resources, raising the cost of those resources to other

uses that would produce more and absorbing a larger share of consumer purchasing power which could otherwise go to other goods.

The story is easily told for new products. For existing ones made by

the same technology, the logic is the same: the shift in the geography

of production from high-cost to low-cost areas. High-cost areas may

feel a loss of jobs, say of shoes and clothing from New England to the

South, but New England will be better off if it can shift its productive

resources into products that the South still needs, such as education,

computers, and research. Letting the South manufacture some products raises its income, so that it can indeed purchase goods and services in which New England remains competitive.

The rise and diffusion of a product follows a pattern modeled as

the product cycle. A product is developed in a particular place that

has the complex skills and markets to sustain it. Dominating the technology, manufacturers capture the market in their home country,

then begin to export. Next the originating manufacturers begin to

locate production in other countries, providing local substitutes for

imports from their own core plants; other companies in other countries may also take up manufacturing. As the technology becomes

standardized, requiring lesser skills, so it becomes easier to copy and

diffuse. Production spreads widely, and the originating country

ceases to be the cheapest producer.2 Technological improvements

may recapture the product, or the originating country withdraws

from production, leaving the product to the developing countries and

shifting resources into new products.

This is the concept of comparative advantage: everyone benefits

from specialization. The classical formulation took two countries, A

and B, and two products, wheat and wine. Country A may be more

efficient than country B in producting both, but it will still be more

productive with one than the other. The welfare of both countries

Explaining Policy Choices

would therefore be maximized if A agreed to specialize in one product and import some of the other from B. It is to the advantage of

prosperous, technologically advanced countries to import products

from less developed countries: buying goods from abroad puts money in the pockets of foreigners, who are then able to buy more domestic goods. The exclusion of imports deprives domestic exporters of

potential markets and reduces the total output of the nation. To

interfere with international specialization is thus to lose optimality.

This concept was developed by the Bdtish during the first part of

the nineteenth century, when the United Kingdom was the world's

dominant industrial economy. It has come to be used as a theoretical

standard for all countries: developed and developing countries (and

all the different kinds of each), agrarian and industrial, first-generation industrial and third-, fourth-, or n-generation, large and small.

It is also a standard used for all situations, good times and bad. The

problem to be solved, it will be recalled, is how to absorb factors of

production which have been dislocated by competition. In good times

the message is clear: in a growing economy the expanding production

of goods and services offered by efficient, competitive producers will

absorb unemployed resources. Workers and capitalists can both find

new employment because expansion creates demand for their resources. Ceding the production of some goods to foreigners (shoes,

clothes, even cars and radios) helps promote the happy cycle, sending

ways to generate revenue to those who are thereby enabled to buy

more advanced products in which they have no particular advantage.

Under these conditions the unemployment caused by foreign competition.should be not feared and resisted but applauded and accepted as part of the intensification of the international division of labor,

which, like all specialization, increases wealth.

What should be done, according to this model of political economy,

in bad times? The classical answer is to let the market do its work, to

let competition force readjustment even at the cost of unemployment

and business failures. Bad times are part of the process that produces

good times. From fruit trees, next year's crop can be increased by

skillful pruning this year, and so too from the economy. In good times

money and labor are drawn into creating a capacity for production

which eventually outstrips demand, but in the meantime the inefficient are rewarded along with the strong. Business cycles knock out

the weak and force factor prices back down.

Unemployment caused by shifts in the international division of

labor is to the classicists no different from that of business-cycle shifts:

THE POLITICS OF POLICY CHOICE

if another country or region can produce goods more cheaply, it can

do so because its factor prices are lower, which means that the first

country's prices have gone too high. Wage earners and the owners of

capital in the first country are expecting too much: if they wish to

regain markets, their prices have to come down.

The classical school thus has a policy prescription for a depression:

deflation, helping the mar)<et force down factor prices. In periods of

unemployment government should cut spending and cut taxes. It

should balance the budget, and at the lowest possible level, to cut costs

to business, because when business has fewer taxes to pay, it can allow

prices to fall. Resources flow into private hands, and private actors

can then respond to the incentives of lower factor costs. The pressure

of unemployment will force wages to respond to market forces, and

wages will go down. Prices fall to the point where the demand, by

investors as well as by consumers, is revived, and the economy starts

up again out of its downward spiral.

In commercial policy there can be no question of protectionism, for

protection would interfere with the ability of international market

forces to increase world efficiency. Currency values, however, must

be preserved. For exchange rates, there can be no pure market, because a pure market would eliminate the discipline that avoids inflation. Government must intervene to sustain a fixed parity with gold or

other currencies, guaranteeing the predictability of values needed to

sustain international trade. With this single exception, interference

with market forces, such as industrial policy or socialization, is of

course excluded.

This policy stance is procyclical. It requires that government move

with the business cycle, not against it, and that the disciplinary effects

of falling demand be encouraged, not resisted. It admits of no government effort to provide compensation or to smoothe out the extremes of the downturn. Any such effort, it is presumed, will eventually have to be paid for, because it hinders efficiency. Surely deflation

exacts costs, in unemployment and forgone profit, but these costs are

necessary because the alternatives would cost more. Any reallocation

of resources necessarily imposes costs, but it is the market that provides the best cues.

The interaction of many private, self-regarding actions thus produces a collective benefit greater than any that may be fashioned out

of efforts to interfere with the market. To allow the market to regulate itself, to avoid using public policy to bring about alternative outcomes, such is the essence of the classical option.

Explaining Policy Choices

Option II: Socialization and Planning

The classical socialist alternative to the classical liberal position proposes to replace private control of investment by public control and to

replace the market by planning. The socialists reject classical liberalism on two grounds, its cost in noneconomic values and its suboptimal economic outcomes.

Capitalism is costly in social terms, the socialists argue, because it

rewards only what is profitable to the investor. Other values, including community stability, family, solidarity of work and social relationships, aesthetic goals-a cluster of values that may be summarized

as "organic"-are shunted to one side. Capitalism transforms human

labor into a commodity. It treats each individual as an object whose

social situation depends entirely on whatever he or she is able to sell in

the labor market. Individuals must accept whatever wages the market

offers for their skills, however weak the demand, however low the

sum.

The second line of the socialist critique of capitalism turns against

classical liberalism its own prime criterion, that of efficiency. The

market, the socialists argue, is wasteful. The sum of particular, private

decisions is a range of collective irrationalities: overinvestment chasing the lure of the big financial kill, financial manipulation, advertising. The logic of uncapped rewards to investors produces waste, in

luxury goods, in pollution, in waste of natural resources. The privatization of profits goes hand in hand with the socialization of costs;

so taxpayers pay for education, roads, and research, while investors

get the profits from inventions produced and marketed by their companies: It is difficult to get done those things (health and education

services, for instance) which all actors require for the system to work

but which are not profitable for any one of them.

The socialist solution to the ills of waste and the damage caused to

organic values is nationalization and planning. Nationalization gives

the state power; the plan tells it what to do. If the state tries to plan

without nationalization, it leaves private investors free to make other

decisions. Nationalization without the plan, conversely, may lead to a

different version of the market, one where only the identity of the

shareholders has changed. In practice, socialized industries can be

forced to operate under market conditions, and privately held companies can be forced to operate in a highly planned environment.

These are relatively recent nuances, however, for historically planning and nationalization have gone hand in hand, paired features of a

THE PoLITICS oF PoLICY ·CHOicE

thorough rejection of the application of market principles to society,

collective decisions, and the operation of the political economy.3

Socialism, like capitalism, has changed considerably in the postwar

era. The power of the Bolshevik model-centralization in the economic sphere, authoritarianism in the political sphere-has weakened greatly among the socialist parties of Europe. To many socialists

now, nationalization and.the plan are no longer enough, nor, indeed,

are they necessarily primary concerns any more. These democratic

socialist reformers argue for democratization in both the economy

and politics. In the economy they support industrial democracy, the

active participation of workers in the governance of factory and firm

combined with decentralization of decision making. In politics these

reformers believe in constitutionalist political forms.

What unites the supporters of the socialist option is criticism of the

unrestrained free market. Compared to other advocates of government intervention, the socialists support a greater degree of public

ownership (especially of the "commanding heights" of the economy)

and of centralized planning. Although the market has important

functions, it should operate, the socialists believe, within redefined

patterns of power and incentives.

Classical Liberalism vs. Socialization and Planning

Nationalization and planning have been socialist orthodoxy and an

exact mirror of bourgeois orthodoxy since the last third of the nineteenth century. Where the latter urges that all social arrangements

follow the logic of the market conceived as private accumulation,

rewarding the decisions of private investors, the former wants to subordinate the market to objectives determined by constitutionally elected governments and, for one branch of socialists, workers' councils.

Each orthodoxy rejects the other, and each economic analysis (and,

as we shall see, its political ramifications) requires sacrifices from the

other. Both analyses are, in this respect, zero-sum. In times of crisis

the bourgeois orthodoxy of deflation insists that the high wages and

welfare benefits of the working class threaten profits .. Owners of capital are discouraged from investing or even producing because wages

and taxes eat up profits and prevent national production from competing with foreign goods. Wages and taxes must therefore be cut.

Conversely, the socialist orthodoxy calls for the elimination of the

owners of capital. If capitalists are unwilling to raise employment, or

keep investment at home, or produce socially useful products, they

must be replaced by decision makers who will.

Explaining Policy Choices

Each position has political implications. In extreme cases, to attain

the desired economic objective, it may be necessary to destroy the

constitutional system. The deflationists may be tempted to try authoritarian government as a way of destroying labor's ability to resist

wage cuts through strikes and its ability to resist reductions in welfare

benefits through the ballot box. Conversely, the socializers may seek

authoritarian government as a way of breaking private capital's hold

on the economy (in particular, its ability to engage in a "capital

strike") and of forestalling political moves by capital against labor

organizations.

Economic ideologies, in short, carry with them considerable political meaning. They frame the sketch map of political objectives and

requirements, of political friends and enemies, of political alliances

and coalitions. As we see, political goals produce a need for

economic ideas that induce coalitions to form in support of them,

while economic ideas generate a need for political ideas to produce

support. The two may, of course, be in tension.

The two economic orthodoxies of political economy which emerged

in the nineteenth century polarized intellectual, political, and social

relationships. Proponents of both argued that their view was not

group-specific, that society as a whole would be better off if their view

prevailed. But both perceived the economy in class terms-the socialists explicitly, the bourgeois theorists de facto. Capitalists and

workers formed the group basis of the economy, and investing and

selling labor power were the economy's key functions. It was not easy

in the nineteenth century, nor is it easy in the twentieth century, for

either group to mobilize mass support in a democracy around a pure

version ·of its approach.

Other conceptions of policy posed the economic problem differently and thereby changed quite drastically the political implications

of policy solutions. These other views called for "mixed games" instead of games that were zero-sum in relation to class; instead of

pitting workers against capitalist, they allowed for compromises and

conflicts across the boundaries of class.

Option III: Protectionism

Although liberalism came to embody the essence of nineteenthcentury capitalist thinking, it was by no means able to preclude the

development of other ideas, and even when intellectually hegemonic,

it could not prevent the political triumph of other policies. Protectionism was an older idea, one that had preceded the liberalism devel43

THE POLITICS OF POLICY £HOICE

oped by Adam Smith and the utilitarians. It had been policy everywhere until the middle of the nineteenth century, when first Britain

and then other countries adopted free trade. When the international

economy turned sour, in the last third of the century, nearly everybody abandoned free trade; of the large countries, only Britain adhered to free-trade principles, along with a handful of smaller producers such as Denmark. Most nations experienced a revival of

economic nationalism that led to the erection of rather high national

tariff barriers. So prevalent was protectionism, so willing were the

staunch supporters of capitalism to adopt it, that we may call it neoorthodoxy-the orthodox deviation from free-market orthodoxy

which is permitted in times of severe distress.

Protectionism operates most obviously through tariffs, though in

the twentieth century countries have been ingenious in finding nontariff forms of protection as well. Tariffs raise the price of foreign

goods in relation to domestic ones. For some domestic manufacturers,

those which are high-cost producers in relation to international competition, the tariff prevents bankruptcy. For others, even highly efficient and internationally competitive manufacturers, the tariff provides the stability of a larger, more assured domestic market against

which the amortization of extremely expensive investment can be

planned.4

The boundary between tariffs and other forms of aid is often unclear. Tariffs and quotas both raise the price of foreign goods; so does

devaluation of the currency, but it is not usually analyzed as a form of

protection. In the thirties, for example, John Maynard Keynes argued that governments could choose one of three options-devaluation, protection, and demand stimulus-and each one would have

much the same effects. The same is also true, we might add, of various forms of mercantilism, among them overt subsidies, marketing

arrangements, regulation, sponsored research programs, and the

building of new infrastructure. 5

Devaluation was a heresy to the classical liberals, as bad as tariffs if

not worse. The market could not operate well, the marketeers argued, without a strong confidence on the part of iQvestors in the

stability of economic values (profits and costs). Because these relationships are measured through an exchange medium, that medium

must above all else be maintained at a fixed parity. This argument

speaks against inflation at home, just as it opposes any cheapening of

money in the international sphere, where the greater uncertainties of

trade require a greater stability of currency values.

Protectionists need not necessarily be advocates of devaluation or of

fixed exchange rates. Examples can be found in the case studies that

Explaining Policy Choices

follow of protectionists who supported devaluation and those who

opposed it. Devaluation is nonetheless a break with orthodox market

doctrine, a type of intervention which arises alongside of tariff protection, and for that reason I have placed it within this typology of policy

alternatives.

Another boundary problem in defining these alternatives arises

with cartelization. Tariffs and devaluation both provide shields

against unstable prices and foreign competition. Cartels provide another, as producers combine to fix prices, share out production by

allotting quotas to each company, coordinate sales by means of marketing boards, and make other, similar arrangements, either by direct

collaboration among producers or through the medium of government sponsorship. The latter has the disadvantage of allowing government intrusion but the large advantage of providing the authority

of the state to enforce rules against those who are tempted to break

the agreement (the constant problem of cartels). Mild forms of private cartelization and loosely corporatistic government arrangements

may be seen as an extension of the logic of protectionism to the

domestic market. More intense versions involve something elsemercantilism, or industrial policy. or corporatism, addressed below.

Protectionism, like any economic policy, gets its justification partly

out of formal intellectual arguments, partly out of particularistic selfadvantage. Advocacy of the latter often fuels the creative imagination,

leading to the articulation of the former. Those who are threatened

by foreign competition, for instance, argue that without protection

they will be ruined, and often that argument is sufficient-avoiding

the ruin of business is widely seen as a legitimate end of government,

requiring no further apologia. If this defense is challenged-as it is

likely to be by those who are threatened by economic barriers-then

other arguments will be necessary.

These come in two main varieties: arguments that work within the

framework of economic efficiency, and those which turn to other

values. Market theorists have always accepted that some conditions

can justify protection. One obvious instance is the situation of infant

industries-companies that are just opening their doors and launching the domestic production of certain goods. Start-up costs may

create some period of time during which such firms cannot be competitive with older foreign producers, but after that period ends they

will indeed be free-standing enterprises, needing assistance no longer. The wider policy implication of this line of reasoning is that selective protectionism may be legitimate if it is for specific products and

for limited periods of time.

This line of reasoning has been expanded into a general argument

THE PoLITics oF PoLICY t:HOICE

about the special situation of whole countries that are seeking to industrialize in an environment where more advanced economies are

already operating. Classical market theorists argue that specialization

allows any country to develop its economy fully. Theorists of what was

called nationalist economics in the nineteenth century and dependencia in the twentieth argue instead that the environment of the international economic system in which newly industrializing.countries operate differs so profoundly from that of the earlier industrializers as to

change drastically the character of development. If the newcomers

throw themselves open to the world market, they run the risk of their

development pattern becoming badly skewed. They may finish by

exporting raw or basic materials and importing finished goods without their ever developing the capability to sustain industrial growth. 6

Several policies may be derived from such reasoning, one of which

is protectionism. For the newcomer to advance broadly, in a diversified manner, toward "self-sustained" growth, it needs some period of

general autonomy from international market forces. Broad tariffs

across a wide range of goods help by promoting the development of a

dense network of forward and backward linkages within the national

economy. After some considerable period of time the economy may

develop the internal strength necessary to compete in a more open

world market.

An extension of this argument focuses more explicitly on values

other than those of economic efficiency: national strength, national

power, national security. Because military strength is related to economic strength, the national economy must provide those capabilities

which military strength needs, even at some cost to economic efficiency. In the late nineteenth century it was clear that military power

required a great iron- and steel-making capacity, able to build weapons, railroads, and navies. Countries had to have this capacity even if

foreign iron and steel were cheaper and could be delivered faster

than the domestic market could provide them (whence stemmed the

mercantilist justification of a state role even more active than sheer

protectionism). :\lore generally, imports might become difficult in

times of war, and military planning therefore requirec;l advance consideration of which products should receive state policy directives in

order to guarantee self-sufficiency for the nation. 7

Military arguments were also made in support of agricultural protectionism. Food in wartime would surely be one of the most vital

products in which to be self-sufficient. To many, moreover, and particularly to political conservatives, peasants and agricultural laborers

made better soldiers-more suited to obedience and discipline, less

Explaining Policy Choices

ridden by disease and malnourishment, and radical political ideas,

than their urban, industrial brethren. Agriculture could also draw

strongly upon nationalist sentiment that defined the collective identity in attachment to the soil, to a specific, traditional, pastoral way of

life.

One important characteristic of protectionism, vital to our understanding of the politics surrounding it, is that protectionism keeps the

state's involvement in the economy at a distance: although the purity

of the market has given way to government interference, that interference still works directly through tne marketplace. Government

action changes the structure of incentives through action on prices,

but the state does not seek to change the way that economic actors

respond to incentives. And though the market is affected by tariffs

and devaluation, the government itself adheres to the traditional standards of household management: a balanced budget, a limited state,

and restricted powers.

The relationship of protectionism to classical liberalism as a policy

alternative is thus double-edged. Of the various policy alternatives

available, protectionism is the most legitimate, the most orthodox in

relation to the capitalist ideal. Though it deviates from that ideal, it

does so less than other possibilities do. It can be understood as a

second-best option, one for which a logic and theoretical underpinnings can be elaborated, without too much difficulty, inside the

framework of capitalist economics. At the same time, of course, it

does interfere with the market, and hence with the centerpiece of

capitalist thinking. And the political-emotional charge of orthodoxy

has been very intense, particularly, as we shall see, in the interwar

period. Deviation from the ideal was understandable but a sign of

weakness, of underdevelopment, of lack of maturity-it was something that only banana republics and emerging economies did.

The second interesting political element of protectionism is that it

avoids a zero-sum political game with respect to the class divisions of

society. In economic terms it pits domestically oriented producers

against internationally oriented ones, and this is by no means a cleavage that brings capitalists and workers to confront each other. Rather,

it joins the two groups together in conflict against another cross-class

coalition. As an argument with a noneconomic base, moreover, protectionism is also able to appeal to ideals and emotions such as nationalism and national defense, which cut across class and other economic cleavages. Protectionism is not unique in this respect, but as an

argument it combines the smallest deviation from capitalist orthodoxy

with a substantial degree of collective, nationalist appeal. It is an argu47

THE PoLITICS oF PoLicY CHOICE

ment that can be taken up by people at different points on the political spectrum, and it can be advanced in many different political

contexts.

Option IV: Demarul Stimulus

The fourth policy package, demand stimulus, is the most recent to

have been theoretically elaborated, as it was worked out in the 1930s.8

After World War II demand stimulus became so prevalent that it

replaced classical market doctrines as the reigning orthodoxy of political economy among political decision makers, though perhaps not

among managers and owners in the private sector. This political prevalence is what made demand stimulus vulnerable to the various economic shocks of the seventies and eighties; the doctrine now is paying

the price of incumbency, being blamed for whatever goes wrong.

Demand stimulus consists of deficit spending by the government in

order to prime the pump of a stagnating economy. Keynes's theoretical formulation stressed the insufficiency of the attention that

market orthodoxy paid to the problem of demand. Keynes argued

that equilibrium could be reached at a point considerably below the

full employment of resources. In a deep business-cycle downturn,

unused capacity grows. New investment is discouraged no matter how

cheap money becomes (that is, no matter how far interest rates fall),

because there is little point in building new capacity when so much old

capacity is still available. The problem is thus not too little capital, as

the classical school argues, but too much capital and too little demand.

Keynes saw savings as plentiful, not scarce. The dearth was on the

demand side: those who were willing to buy goods had no money. In

this liquidity trap the economy could stagnate for many years. In the

long run, as the classicists said, the economy would right itself, but, as

Keynes's celebrated riposte noted, "In the long run we are all dead."

The proper response to severe stagnation was to reflate the economy by means of government deficits. Spending in excess of receipts

would pour currency into the economy, increasing the demand for

goods. Through a multiplier effect this spending would work its way

through the economy, raising the overall level of demand, thereby

triggering a beneficial, upward spiral of demand, leading to sales,

leading to profits, leading to new incentives to invest. If this increased

government debt, then so be it: the critical indicator was not a fixed

policy norm but wealth, wealth defined as growth of gross national

product (GNP), fall in unemployment, greater use of resources. Keynes "desanctified" policy instruments, turning them back into mere

Explaining Policy Choices

instruments again, into tools to be used to achieve economic goals

rather than ends in themselves. Against the charge that their tactics

would cause inflation, the demand stimulus theorists stressed the tremendous underuse of capacity in the economy. Not until full employment arrived would government budget deficits cause inflation

or bottlenecks in production.

In some versions of demand stimulus, such as the ideas developed

in Sweden during the 1920s, the notion of budget balancing was

retained as a virtue but was "stretched out" -budgets were to be

balanced over a longer period of time, in essence the rise and fall of

the business cycle. In prosperous periods the government would run

a surplus, building up reserves; in the downswing those reserves

would be tapped for public works, thereby combining the production

of useful public goods with the stimulus of deficit financing. Over the

whole cycle the budget would be in balance. In practice, however,

hardly any governments build a surplus during the good times.

Demand stimulus in the postwar era has been associated with the

name of Keynes, but it has a healthy range of forebears; indeed, it was

tried as public policy before Keynes published his famous theoretical

elaboration, The General Theory, in 1936. A number of intellectual and

popular traditions in Europe included notions of "underconsumption," an idea that stressed the maldistribution of income. Concentration of wealth left the mass of population unable to buy the output

that modern production techniques made possible. Tremendous poverty limited consumption to basics (food, clothing, and housing). No

income was left for products of higher quality, for newer products, or

for the range of consumption goods that the factories of the industrial

world \Vere pouring onto national and international markets. Poverty

was thus a limit on profits. If the poor could not buy, they would not

stimulate the flow of profits leading to the incentive to invest, leading

to employment, leading to the ability to buy goods which contributed

further to the happy spiral. Some observers, John Hobson notable

among them, believed that this tension led to imperialism, as the

capitalists sought profits abroad instead of granting the higher mass

purchasing power that would develop growth at home. 9

Other ideas supported not only the redistribution of income but the

notion of government spending to promote employment, public

goods, and the general welfare. On the side of conservatives, European countries had long traditions of noblesse oblige, of elite responsibility for the welfare of the community, even its least important members. Bismarck and Disraeli represent two politically different versions of this notion, and their counterparts can be found in a wide

THE PoLITICS or PoLICY CHOICE

range of doctrines and political contexts. On the side of radicals and

liberals were other traditions that proclaimed the equality of all belie,·ers, the democracy of the primal community, the rights of the

individual. the nobility of the worker, the claims of class and group.

Public spending for socially useful projects. which also helped generate employment. has existed since the beginning of recorded history.

Like other policy packages. demand stimulus comes in many versions. Spending can go· in quite different directions, to military or

consumer goods, to government purchases or transfer payments .

.-\nd budget deficits can be more or less intentional, more or less

managed.

In contrast with both orthodoxies, classical liberalism and classical

socialism, but similar to protectionism and mercantilism, demand

stimulus has the capability to slice across class boundaries. It defmes a

collecti,·e game between labor and capital. Like all the options except

mercantilism, it shies away from microeconomic issues. It does not call

for interference with or even consideration of the internal organization of firms, markets. or industries. Demand stimulus at its core is a

broad instrument, focusing attention on !nels of aggregate

demand.

Option i ·_. .\I ercantilism

''.\fercantilism," as I use it here, means state action in aid of specific

industries or e,·en specific firms. 10 Such action can take ,·arious

forms: subsidies for indi,·idual firms, legal regulation of markets

(through production quotas, price fLxing. manufacturing standards,

price supports, or marketing boards), reorganization of companies or

industries. regulatory agencies for companies or industries, credit

allocation, foreign marketing arrangements, and go,·ernment purchases. C nlike other policy options, mercantilism can inten·ene at the

microeconomic level. the level of the specific firm. The other policies

operate at the le,·el of the market; mercantilist policy. by contrast,

concerns itself with problems of organization and of industrial

structure. .

.\fercantilism is an old label \\;th a historically specific meaning that

is more restrictive than its usage here. In the seventeenth century it

was linked to a bullion ,;ew of wealth. There was a fixed amount of

wealth in the world, the argument went. states sought to get as much

of that wealth as they could, and acti,·e state policy to create producti,·e capacity as well as military capability was the best way to do so .

.\fercantilism thus predates laissez-faire capitalism as a theory of polit50

Explaining Policy Choices

ical economy. Indeed, it was mercantilism against which the theorists

of the market economy, Adam Smith among them, railed in the eighteenth and nineteenth centuries; it provided the focal point for their

arguments against the costs to optimality of the favoritism, corruption, and mistaken self-confidence to which they thought mercantilism inevitably led.

Despite their criticism, however, the policy has never disappeared.

It began in association with luxury goods such as Dresden china,

French tapestries, silks, and other and with military goods

such as firearms, cannon, uniforms, and either war-related products.

It continued through the nineteenth century as a way of doing important things quickly. British and some French railways may have been

built privately, but most Continental railroad construction resulted

from an act of state, eitl>er indirectly through financing or directly

through government-owned companies. Military production has generally taken this form everywhere.

In the twentieth century mercantilism has taken other forms and

other labels. Wartime production boards sprang up everywhere during both world wars. In the interwar period many countries tried a

sort of mercantilist corporatism; the American National Recovery Administration, for example, sought to fix prices, standards, and production quotas, and industries have been regulated everywhere. Since

1945 the government's policies toward the condition of specific industries have increasingly come to be called industrial policy. The French

distinguish between indicative planning, referring to informational

elements, and industrial policy, referring to more explicit financial

subsidies and organizational interventions. Japan has become famous

for industrial policy, to which many ascribe the Japanese postwar

boom. In the United States public and private officials deny that an

industrial policy exists, yet to foreign and domestic observers alike it is

plain to see in numerous mechanisms, from defense contracts to regulated industries, tax breaks, and research grants. It has existed since

the days of public works at the beginning of the Republic, through the

massive land grants to private railroad companies in the nineteenth

century, to the research and defense contracts of the present day.

The concept of mercantilist policy need not be restricted to industry. In the 1930s nearly all countries adopted for agriculture such

measures as price supports, production quotas, marketing boards,

storage schemes, and education, training, and research programs.

Some of these measures predate the 1930s (one thinks especially of

land grants to agriculturally oriented universities, agricultural extension services, and health-related inspection schemes), and nearly all

THE PoLITICS OF PoLICY .CHOICE

countries continue them down to the present. Even the budget-slashing British and U.S. governments of the tg8os have touched agriculture least of any interest.

The rationale for mercantilist policy is that the market by itself is

inadequate to the economic task at hand. The reasons for this inadequacy vary. They include highly complex, expensive, perhaps unstable technology, carrying too much uncertainty abol\_t profits to support investment; a neea for speed, as with defense production;

structural inadequacies, where the rationality of individual gain leads

to outcomes insufficient for the collectivity; and individual or cultural

inadequacies, where private decision makers lack the skills or the

intellectual outlook to make effective decisions.

The last point is often raised when it is argued that national capitalism is somehow defective. Entrepreneurs, the class of capitalists,

may hold a set of ideas derived from earlier experiences, ideas that

are no longer suited to contemporary economic needs. In France, for

example, it has been argued that traditions derived from the aristocracy, the importance of land, and the mercantilism of Louis XIV and

Colbert together produced an economic culture highly averse to risk,

highly concerned with stability of market share and survival of the

family firm, a culture in conflict with twentieth-century needs for

rationalization of production and management, for the virtues of

growth, for mass production on a high volume and low markup.

What enabled the French economy to do so well after 1945 was the

active intervention of the state in reorganizing the economic structure

of several industries and replacing individuals who dominated the

major economic levers of society with growth-oriented, dynamic modern managers. II

A recurrent theme in the justification of mercantilism is the specific

problems of capitalism in different national situations. In Japan, for

instance, mercantilism is seen as a response to Japan's acute backwardness at the time of its insertion into the world economy. In general, the argument holds, the later the industrialization in relation to

others and the more backward the society when industrialization begins, the more inadequate are private forces or society as a whole to

achieve modernization and the greater is the need for the state to play

an active role. (Alexander Gerschenkron, Immanuel Wallerstein, and

others have developed for us a set of propositions about this historical

relationship among the timing of industrialization, the evolution of

the international economy, the degree of backwardness of civil society, and the institutional and political base of the state.) Entering the

game rather late, Japanese elites used the state to promote growth in

Explaining Policy Choices

ways that the market or straight protectionism could not have done.

With a careful, complex policy that mixed the pressures and inducements of market forces with state planning, analysis, incentives, and

penalties, Japan built up a highly diverse, advanced economy. In the

twentieth century the country has come to exemplify the practice of

contemporary mercantilism. 12

Mercantilism requires very complex institutional mechanisms compared to the other policies (with the exception of the socialist alternative). The selective targeting of rewards and constraints requires an

institutional machinery capable of making"discriminations. If they are

to reward winners and compensate losers, governments need to be

able to figure out which are which. If government is to avoid conflict

by organizing prior agreements, it must have the consultative mechanisms needed to do so. A:1d if it is to enforce agreements, it must have

regulatory powers. As the literature on democratic corporatism

shows, the institutions devised to perform these tasks differ considerably from country to country.

In mercantilism, as in the other options, both form and substance

affect the politics of policy quarrels. Policy alternatives stimulate controversy over their immediate content, that is, over who is helped or

hurt. They also stimulate controversy over the effects of the mechanisms of implementation on the distribution of power in society, that

is, over how they are to be carried out.

The Five Policy Options

To permit comparison across countries and across time periods, I

have outiined five policy packages: (neo)classicalliberalism, socialization and planning, protectionism, demand stimulus, and (neo)mercantilism. These packages differ in the policy prescriptions that they

make for dealing with major stresses in the international economy,

and they provide different answers to a common set of questions.

What is the source of the problem, and what can be done about it?

Who wins and loses from each policy, and who are thus potential allies

and opponents? What institutional requirements are there for the

implementation of the policy, and which patterns will thus be rewarded and which will cause controversy? These questions and

themes that they raise have helped organize the case studies in subsequent chapters.

During any of the three crisis periods countries were, from an

analytical point of view, free to adopt any one of these policy alternatives. As we shall see, however, countries, like individual decision

THE PoLITICS oF Poucy·CHOICE

makers, rarely canvassed all five possibilities at each moment of

choice. Debates generally focus on two or three options in each period, although in each period all five positions had their advocates

everywhere. To explain the choices that were actually made, then, we

need to know something about power, about the resources available

to advocates in the policy debates. The second section of this chapter

examines the varying explanatory approaches available to us for exploring the linkage between policy position and power.

ExPLAII\H\G PoLicY CHOICEs: SociAL CoALITIOI\s, REPRESEI\TATIOI\,

AI\D THE STATE

There is a famous story about the Hawley-Smoot Tariff Act of 1930

which bears repeating. About a thousand economists, virtually the

entire American community of professional economists at the time,

signed a petition opposing the tariff on the grounds that it violated

the principle of comparative advantage and thus hurt the general

welfare. Congress ignored their advice. Hawley-Smoot raised tariffs

on virtually everything manufactured within the United States, and a

distinguished political scientist, E. E. Schattschneider, wrote an

important book on role of interest groups in bringing the act about. 13

Economic theories prevail, the story tells us, only when they have

mobilized political authority, that is, only if those who believe the

theories get the resources that enable them to take authoritative

action.

To explain economic policy choices, we need to link policy outcomes to politics. Our explanatory approaches must have some way of

accounting for the connection between policy and choice-between

what could be done and the various factors that shape what decision

makers actually choose to do. I have simplified the vast universe of

theories provided by modern social science into fi,·e families of argument. The production profile explanation stresses the preferences of

societal actors as shaped by their situation in the international economy and the domestic economy. 14 The intermediate assoriations explanation stresses the role of such organizations as political parties and

interest groups in linking social preferences to state institutions. 15

The state structure explanation stresses the role of formal institutions,

bureaucracies, and rules in mediating interests and, indeed, in defining both interests and intermediate associations. 16 The economic ideology explanation stresses the role of perceptions, models, and values

in shaping the understandings of economic situation and political

Explaining Policy Choices

circumstance which influence preferences and behavior. 17 Finally,

the international system explanation stresses the impact of war, security

issues, military procurement, and other elements of the state system

in shaping economic policy. 18

Each of these families of argument is sketched out briefly in this

chapter, and together they shape the later presentation of material on

the three crisis periods and structure the explanatory debate. At this

point some readers may want a full elaboration of each theoretical

approach. I have not provided one, however, partly because the relationships among the arguments are histor'ically grounded and change

from period to period, situation to situation; and partly because I

believe that too much attention to theory before exposure to at least

one case distorts the interactive way in which most people absorb and

reflect on material. Thns I present a short version of the different

explanatory approaches here and later probe their characteristic

strengths and weaknesses in historical context.

The Production Profile Explanation

The production profile explanation concentrates on the preferences of societal actors as shaped by the actors' situation in the international and domestic economy. In an interpretation of policy

making centered on interest groups, economic actors, whose preferences are shaped by their economic situation, apply pressures on

governments. Desirous of a particular policy outcome, these actors

form coalitions, involving bargains and tradeoffs, to mobilize the consent needed to prevail. Politicians act as the brokers of such coalitions,

thereby having some impact on the shaping of the outcome. The

options available to politicians turn on the pattern of social wants, and

so to understand these options, it is vital to have a social "map" of the

society with which politicians deal.

This mode of reasoning is a venerable tradition of political economy, and it exists in many versions. Between social pressures and policy outcomes are many steps dealing with the way these various traditions conceptualize society and the connection between societal actors

and power. Where much of the literature examines pressure groups,

I consider societal actors first and come to pressure groups after.

Where much of the literature considers either very large aggregations

(labor and capital) or very small ones (individuals or firms), I focus on

a middling disaggregation (or aggregation), sectors or branches. Where

many look at organizational forms of groups, I consider the content of

the situation and preferences of groups. And where many look at the

THE POLITICS OF POLICY CHOICE

domestic situation of economic actors, I focus on the international

context of their situation.

When questions of public policy arise, the people affected by the

decision to be made surely ask of any alternative, Qui bono?-Who

benefits, and how will it affect my own situation? The answer to that

question has a powerful effect on the policies that people prefer.

What people want depends on where they sit, as theorists have argued

since long before the time of Bentley and Marx. 19

My ii·lterest here is in how countries respond to changes in the

international economy. If we are looking at the policy positions that

domestic actors take toward the international environment, then it

makes sense for us to consider the situation of actors in that economy.

Society may be disaggregated in two steps: first, between business,

agriculture, and labor; and then, within each of those three broad

categories, among sectors or product families (for the first two) and

type of employment (for the third).20

For business, five main considerations appear relevant in shaping

attitudes toward economic policy. The first is competitiveness in the

international economy. Economic actors at the cutting edge of international competition are likely to support policies that promote open

trading, not only for their own products but more generally for intensified specialization in international trade. Actors less well placed in

international competition are more likely to support protection or

modes of shelter or subsidy. 21 The second is vulnerability to fluctuations of demand. Economic actors exposed to wide and wild gyrations

in market conditions are likely to want policies that shelter them from

such swings. Companies with massive capital requirements, such as

steel in the late nineteenth century, or oil in the 1930s, or massproduction industries in recent decades, may support tariffs or other

government interventions that stabilize markets and allow more orderly planning of debt amortization.22

The third main point for business to consider is the role and character of labor needs. Industries requiring large numbers of relatively

low-skilled workers will have intense conflicts with l:ibor over wages,

union rights, and social services. Industries that need fewer workers

or a more diversified labor force may have an easier time accommodating labor demands. 23 The fourth point is the source of demand. The producers of mass-consumption goods have a concern for

macroeconomic conditions, in their case the ability of the public to

buy, quite different from that of the producers of capital goods who

sell to other companies or to governments. 24 Finally, the structure of

capital markets is important. Banking is an industry with its own

Explaining Poiicy Choices

sources of profit. Bankers' situation varies according to type: banking

systems oriented toward commerce, capital flows, and reserve currency management are likely to be strongly internationalist, while industrial bankers are likely to split according to the situation of the industry to which each bank is allied.25

These various considerations do not necessarily converge to define

a business situation in the economy: high labor costs may push one

way, a desire for strong purchasing power for labor another. Other

variables may have relevance; one need think only of industrial organization and marketing systems, for instance. Nor are these factors

easy to operationalize. Nonetheless, to bear these considerations in

mind will be of some use when we observe the preferences and political behavior of business in policy debates.

If the business category embraces manufacturing, trade, marketing, and finance, then the land embraces the rest. Like business, agriculture can be disaggregated, and two dimensions are important for

our purposes. One is the market for products in terms of the buyers.

A distinction can be noted between the world market for commodities

(such as grains, cotton, tobacco) and more localized, urban industrial

markets for high-value-added products of direct consumption (meat,

dairy products, fruit, vegetables). Commodity producers conflict with

the industrial economy over the terms of trade for their products;

consumption producers do best as rising industrial incomes allow

more people to consume more of more expensive products. The

other dimension concerns the organization of production and adaptability to market changes. Between the agriculture of large estates

(landowners with masses of laborers) and the agriculture of the family

farm (owner-proprietors) lie many possible combinations. Some

prove to be more rigid than others, less adaptable when swift changes

in the international economy threaten organizational forms. 26

The third term, labor, the sellers oflabor power in the marketplace,

can also be divided up. Two considerations are particularly noteworthy. The first is the scale and character of the enterprise and workplace. Those who work in large-scale, relatively standardized industries, on the one hand, and those who work in highly particularized,

fragmented industries, on the other, appear to have different proclivities. Usually, the former are more likely to unionize, and as we

shall see, the presence or absence of labor unions makes a considerable difference to behavior. 27 The second consideration for labor is

the situation of the enterprise in the international economy. Wm·kers

employed in sectors at the cutting edge of international competition

are likely to have attitudes toward policy issues different from those

THE PoLITics oF PoLicY CHOICE

of employees in factories whose competitive position is deteriorating.

All of the factors that influence business policy preferences are likely

to affect those of labor as well.

Business, agriculture, labor-the definitions of these three elements can spread to embrace all of society. Of servic.es, retailing, and

the professions modern social theories have made much, but for our

purposes, these are likely to resemble banking in that their situation is

a function of how they relate to other elements of the economy. This

treatment is surely unsatisfactory, but it will have to serve, because for

analytical purposes, the modern economy could be disaggregated

endlessly.

Our interest here is in policy preferences and political alliances.

The behavior of economic actors is affected by preferences, and these

in turn are affected by situation. The interaction of preferences and

situation involves reciprocal effects as well as direct ones: tariffs on

grains raise costs for industrial producers because they are then

pressed to raise wages, which hurts the producers' competitive position. Agricultural producers buy industrial products and so prefer

cheap goods, but they sell on industrial markets that need income to

buy agricultural produce. Thus identically situated actors may adopt

different policies depending on the preferences of other actors in the

political system of which they are a part-workers in cheap-food

countries and those in high-cost-food countries may think differently

about tariffs.

So far, we have identified some categories of societal actors and

some characteristics of their situation in the international economy

which are likely to affect their policy preferences. These distinctions

will allow in the historical case studies a systematic approach to sketching out the trajectories of alliance formation and the policy packages

that go with them. Between sketching these trajectories and accounting for policy choices, however, quite a number of steps remain.

Knowing preferences and coalitions is not the sa]ne as knowing

power. Controversies turn on this point. After all, reductionism, by

which I mean the reducing of politics to something else (here societal

preferences), is at heart the overlooking of the question of transformation, of how preference through power becomes policy. Circularity

is easy: advocates of the successful policy had the power because they

won, and we know that because if they had not had the power, they

would not have won.28

Where does power come from? In a significant way power is linked

to economiC situation; it is empirically circular. Economic situation

Explaining Policy Choices

arises from the functions that groups play in the economy. The economy operates by means of these functions-investment, management, labor, buying, professional services. Individuals and groups

perform these functions, and power depends on the importance of

the function to the economy and the resources that control of the

function provides. Thus transportation workers and employees in

power plants have far greater power over certain matters than do

unskilled laborers, button makers, or dry' cleaners. Control of capital,

management of large corporations, practice of vital professional services such as medicine, all involve distinctive and considerable forms

of power. Governments may chose a policy only to have economic

actors reject it in the marketplace, thereby forcing a change in policy

direction. The experience of the French Socialists, described in Chapter 5, provides one recent example of this process.

The people who actually perform each of these functions, vital to

the economy, can be called societal actors. 29 I use this label in preference to the more frequent "interest group" or "class." Interest group

generally refers to the associations that represent the functions

(unions, business associations), but functions and institutions (or

structures) are not the same. Capital, for instance, is a force independent of any association of investors; it does not take an association of

investors or of speculators for capital to flee a currency when devaluation is feared. Although organization certainly does matter, it is not

the same as function. Class directly expresses a type of function; the

simplest formulation distinguishes between owning and managing

capital on the one side, selling labor power on the other. This distinction is real but too general; there are too many conflicts among members of one side of the term, too many intraclass conflicts, for class to

be analytically useful in many situations.

In sum, then, to explain a country's policy choice requires us to do

some mapping of the country's production profile: the situation of

the societal actors in the international economy, the actors' policy

preferences, their potential bases of alliance or conflict with other

forces, and the coalitions that emerge. When countries converge (or

diverge) on economic policy, they are likely to do so because of the

similarity (or difference) in the pattern of preferences among societal

actors.

This line of reasoning has great power, because it calls our attention

to an obviously important element in the political sociology of economic policy-the preferences of major societal actors in the economy itself. Yet the production profile approach also has difficulties.

The danger of circularity has already been noted. The ambiguity of

THE PoLITics OF PoLICY CHOICE

interests causes problems: preferences may derive from situations,

but what if situations are unclear? Also troublesome are the roles of

organizations (interest groups) and institutions (state structures): who

or what connects preferences to actual policy outcomes, and how do

these organizations and institutions mediate the process of "aggregation"? Finally, in the international sphere, alongside economic factors

are political-military ones, the problems of security and rivalry. The

problems of the economic interest approach thus lead to several other

types of argument, which may solve many of the problems that the

approach poses.

The Intermediate Associations Explanation

Functional position in society confers considerable power on societal actors, but position alone is often too blunt an instrument to

achieve results. There are many other ways of shaping decisions,

from influencing elections to lobbying, and these take organization.

Between politicians and societal actors lies a vast network of associations designed to represent societal actors and to handle the linkages

between government and society.30 Political parties manage the presentation of choices to the electorate and the translation of those

choices into policy. Interest groups manage the evaluation of options,

the articulation of opinions, the mobilization of collective action, and

a variety of functional tasks, some in the economy. some conferred by

the state.

Such organizations have an effect upon policy which can be understood as autonomous from the individuals, groups, or forces that they

represent. As Michels and other theorists have observed, parties and

interest groups, in mediating the preferences of societal actors, acquire their own identity, their own existence, interests, perspectives,

and concerns; they thus have their own impact on policy. Another

problem is the ambiguity of interests. In Weimar Germany, for example, the fragmentation of the party system contributed to policy stalemate. In contemporary France the influence of the Communist party

among trade unions contributed to l\fitterrand's decision to

nationalize industry.

Countries differ in a variety of ways concerning their representative associations, and these differences have been used to devise whole

theories of policy and politics. Particularly important are the linkages

between interest groups and parties, the degree of centralization or

dispersion of policy networks, the intensity of corporatist structures,

and the internal organization of parties and interest groups. Other

differences pertain less to systems than to the particularities of each

Explaining Policy Choices

party or group; they focus around ideology, leaders, and specific

historical experiences.

The strength of the argument based on intermediate associations

lies in the importance of organization for translating preferences into

effective action. Associations obviously warrant our close attention.

The difficulty for the argument is the problem for any mediating

variable-its effects require linkage to the terms on either side, to

society and to the state.

The State Structure Explanation

Societal forces and representative associations must act through the

state to attain policy objectives. The structure of the state, its rules and

institutions, can therefore have a very substantial effect on outcomes. 31 Rules shape the process of aggregation, and different rules

favor different mixes. In fighting for tariffs, for example, the Junkers

were favored by the three-class voting system of Prussia. Proportional

representation in Weimar Germany, federalism and the separation of

powers in the United States, the dual executive of the French Fifth

Republic are all examples of rules that can affect the distribution of

power. The institutions of the state-the bureaucracy, instruments of

coercion and intervention, the judiciary, and so on-all affect the

possibility of authoritative action. The powers and skills of the officials who occupy positions in these institutions allow them to aid one

side or another in policy quarrels and to take the lead in mobilizing

pressure and shaping opinion.

Countries obviously differ in the character of state structure, and

policy similarities (or differences) among them derive from the similarities (or differences) among their state institutions. Arguments of

this sort draw our attention to the differences between authoritarian

and constitutional regimes, between centralized and dispersed systems, between highly developed bureaucracies with wide-ranging instruments of intervention and poorly developed or loosely integrated

bureaucracies with limited modes of intervention, and, eventually,

between "strong" states and "weak" ones.32

In pursuing the politics of policy formation, we began with a portrait of societal actors, then moved to the associations that rep1·esent

them, then to the state institutions through which they work. The

three elements clearly interact. Institutions and policy shape organizations, as the laws governing industrial •·elations indicate. Associations may shape the understanding that societal actors have of their

own economic situation, and they may also play an important role in

THE Pouncs or Poucv CHOICE

defining options. !'v[any analyses collapse the three elements into

two-a pattern of societal forces, and a pattern of associations or

policy networks that mediate between state and society. Such simplification has virtues, but it has its costs as well. In constitutionalist

systems, and in most authoritarian ones, society and the state have

some autonomy from each other, and there must always be mechanisms for linking the two. These mechanisms remain distinct. State

institutions, intermediate associations, and societal actors move somewhat separately. At times societal actors abandon the intermediate

associations that seek to represent them; at times state officials bypass

intermediate associations and turn directly to societal actors for support, while at other times they may use the associations to control

society; at times social revolts run roughshod over both state institutions and longstanding intermediate associations. There is, therefore,

some analytic utility in keeping the three as distinct categories.

The state structure explanation derives its force from the effects

that decision-making mechanisms can be shown to have on the actual

outcome of the aggregation of societal preferences and the lobbying

of interest groups and parties: if society and associations are held

constant, then different rules and institutions produce different outcomes. The weakness of the explanation is the great role it assigns to

context. Just how rules and institutions produce varying outcomes

turns on whom they affect, on the identity of the groups, with particular preferences and resources, that seek to work through the state.

Rules and bureaucracies favor one side or another; state agents may

shape social structure and representative associations. Rules can be

changed, bureaucracies created or dismantled, authority generated

or demobilized. The same institution can be used for quite varying

purposes, as the example of German bureaucracy under the Nazis

makes clear. Thus the impact of state structure, however great, cannot be shown independently of some understanding of the society it is

meant to effect.

The Economic Ideology Explanation

Societal actors, I suggest, evaluate an economic crisis in terms of

their own situations in the international economy. But often those

situations are by no means clear. There is considerable ambiguity

about economic reality, and ambiguity permits different interpretations. Different understandings or models of a situation shape to

different ends calculations of the costs and benefits of action, its opportunities and disadvantages, and hence of behavior. Economic ide-

Explaining Policy Choices

ology may shape political calculations as well, by influencing understandings of who the actors are, what they want, and what they will

do.

Countries have varying traditions of economic analysis, not only

among specialized elites but more broadly in the population. Some

have traditions of active government involvement to promote economic development; others emphasize lais.sez-faire. In some countries

traditions of free trade are strong, unemp1oyment is feared, and social services are accepted. Other countries are protectionist, fear inflation more than employment, and dislike social service systems.

The economic ideology interpretation of economic policy choices

explains outcomes in terms of national traditions and values concerning the economy. Its strength lies in the reality of ambiguity. To the

extent that economic reality is uncertain-which in real life is nearly

always-cognitive elements affect decision making. The difficulties of

the approach lie with comparisons with the rapidity of change. To

compare countries in crisis is to suggest that similar traditions have

supported different outcomes, different traditions have supported

similar outcomes. Rapid changes within countries, moreover, such as

the Junkers' Germany from 1872 to 1879 or the United States of

Coolidge contrasted to the United States of FDR, undermine arguments that, like those of the economic ideology approach, stress constants over time.

The International System Explanation

Arguments that explain policy or politics by pointing to factors

internal to a country are, in Kenneth Waltz's apt phrase, secondimage explanations.33 It is quite clear that the effects of the international environment run in the other direction as well. The third image, that is, or the international system, has a strong influence upon

the factors that comprise the second image, or the domestic system.

Hence it is important to reverse second-image reasoning and examine

how international phenomena influence domestic ones.34

Two sorts of theorizing about the reverse of the second image can

be distinguished; one stresses economics and the impact of market

power, the other stresses political-military rivalries and the impact of

force. The work of Gerschenkron and dos Santos, Cardoso and Wallerstein, illustrates the first that of Otto Hintze provides a

classic example of the second. 3 <; The political economy school examines countries' differences in relation to their position in a sequence of

international development. Thus Gerschenkron developed the con6]

THE PoLITICS oF PoLicY CHOICE

cept of early and late development to distinguish the roles played by

the state in Britain, Germany, and Russia: the later the timing of

development, he suggested, the greater was the importance of the

state in economic development. The reason lay in the problem of

competition. Developm<int, Gerschenkron argued, is not a repetition

of the same pattern, as W. W. Rostow and many Marxists have suggested, but rather a historical sequence of cases, because the existence

of competitors changes the environment for those who follow. Development thus is like a market in that it rewards and punishes certain

economic and institutional forms according to their utility in a process

that is constantly changing.

Military theorizing at the system level examines the impact of war

and preparation for war on the distribution of power in society.

Hintze contrasts Britain and Germany, navies and armies, arguing

that because armies allow for domestic intervention in ways that

navies do not, the army tilted German development toward authoritarianism in a way inconceivable with Britain's navy. French centralization derives from the wars of Louis XIV, the Revolution, and

Napoleon; the American state emerged with the Civil War and then

World War II and the Cold War. As countries are drawn into military

rivalries, in sum, they develop military machines that alter their political systems. 37

The strong form of this type of theorizing, whether it concentrates

on political economy or the military, sees the international system as

totally constraining, leaving little as to choice for the units within it. In

the dependencia. literature, for example, country development is

tightly constrained by the country's placement in the system, and

nations have little choice over what to do. Those in the process of

developing buy and sell in markets dominated by far richer and more

powerful core countries. As a result, their development trajectories

are shaped by the core countries, not by their own choices. 38

It is not hard to find fault with the most sweeping versions of this

argument. Rarely is international situation so perfectly clear, so totally

unambiguous, as to be so completely constraining, rarely is there no

range of alternative responses. Generally, it is clear, countries do have

some choice over how to deal with their position in the international

system. They may make alliances with one country or another, promote import substitution or commodity exports, stress agriculture

over industry or vice versa, give free rein to foreign economic activity

on their soil or seek to mediate or even control it. Such decisions

require explanation that cannot come from the international system

itself. Nonetheless, the line of reasoning based on study of develop-

Explaining Policy Choices

ment patterns captures important points. Sweden's divergence from

German patterns of development, for example, was certainly affected

by the limits that its small size imposed on autarkic or imperialist

opportunities. The development of democratic corporatist elements

in the small countries of Europe since the 1930s is certainly linked to

the narrower tolerances that the international system allows those

countries.

The issue, then, is not whether the international system shapes

domestic politics but how and through what mechanisms. Unless the

international situation is completely coercive, as may be case with

foreign occupation, countries do have choices. The selection they

make from among those -:::hoices depends on domestic politics, on the

distribution of power within countries and the various factors that

influence it-societal forces, intermediate institutions, state structure,

ideology. The international economy affects national policies by acting upon domestic actors. As the international price of wheat falls, for

example, it stimulates domestic producers to seek tariff protection or

some other form of subsidy. As opportunities for export grow, on the

other hand, other producers come to favor open international regimes. The system may be international, then, but in terms of national

policy the effect of the system is felt through actors operating within

the individual nation. Foreign companies may coopt comprador

elites, but the more important point is that they have to find someone

to coopt.

This book is about the impact of international crises upon domestic

policy. To unravel that impact we must, according to the reasoning

just formulated, examine the responses of domestic actors. Effects

from the international economic system I therefore include in the

first of the types of argument examined above, that of societal actors.

International political-military effects do not appear directly in that

category, however, and I shall consider them separately as a fifth line

of analysis. As we shall see, international security concerns also operate through domestic actors and also impose some considerable objective constraints. Clearly Sweden can never defend itself in the same

manner as the United States can. Nonetheless, Norway belongs to

NATO but Sweden does not; interpretation varies by country as to

what is appropriate behavior. Thus we need to consider the effects of

international security considerations on domestic politics.

Security issues and domestic politics are linked also by the connection between military spending and economic policy. Ronald Reagan

justifies U.S. budget deficits in part through reference to the imperative of defense. Victorian Britain's support of free trade has been

THE PoLITics oF PoLicY CHOICE

explained by some through reference to the preeminence of its navy,

which provided the security that allowed the country to depend on

foreign food and markets.

Relationship among the Exjilanations

Factors that plausibly may affect policy outcomes are legion, and

the five summarized above could easily be expanded in number. The

difficulty lies in establishing the relationship among them. The testing

of alternative explanations and specifying their relative weights, a

model derived from the physical sciences, cannot be used here, because satisfying the conditions of experimentation is impossible. So

my task must be different. It is to clarify the nature of different

arguments, their logic, and their internal characteristics. Then, having gathered the sorts of evidence appropriate to each explanation, I

examine events from the arguments' points of view. At that point it

becomes possible to clarify the relationship among the arguments, by

careful patterning of comparisons among the cases. By judicious,

focused comparisons, by select pairing of country behaviors, it is possible to obtain some leverage on the choice of policy outcomes.39

The relationship among the variables is not a constant. Relationships alter with circumstances and with periods; that is, they are

not theoretical but sociological. The world changes the balance between ideology and force, between institutions and economic

interests.

Each historical case study starts with the relationship of societal

actors within countries to the international economy. Economic

changes do affect economic actors, of course, and, moreover, I found

strong support for the approach in looking at the first case, the late

nineteenth century. I then became interested both in how well the

argument would work for later cases, and in what happened to the

relationships established in that crisis as the economic environment

developed.

By giving pride of place to explanation based on international economic situation, I have both privileged and disadvantaged it. It is

privileged because the ranking suggests priority of attention, but this

priority also disadvantages it, because priority will attract criticism.

Valuable books could be written to tell the same story beginning not

with the international economy but with ideology or with the state.

Wherever the story begins, though, there the attacks will be sharpest,

for the first point can always be shown to be underdetermining.

I shall specify at the start, therefore, that ultimately all the argu66

Explaining Policy Choices

ments presented here are underdetermining. The historical reality of

each case is too open, too uncertain, too plastic to sustain the reductionism involved in tracing outcomes back to one feature or even one

combination of features of the system. Crises are particularly plasticindeed, that is what makes them interesting. It is why I have chosen to

focus on them rather than on the patterns of stable systems. Just how

the elements that shape policy choices actually combine in a given

historical situation turns on conjunctural variables-leadership, entrepreneurship, circumstance.

This book is an examination of the conditions in which political

entrepreneurship and circumstance operate. It aims to specify materials, the constraints and the opportunities, from which politicians

forge outcomes. Any political outcome involves the variables that I

consider here: the support of societal actors, the linkages among intermediate associations, state structure or organization, ideology, and

international military influences. How those variables combine turns

on what individuals in actual historical situations are able to do with

them.

The Choice of Countries and Crises

Following the usages of macrohistorical comparison, I have chosen

countries with reasonable similarities in what I wish to explore. Since

the 187os, the first crisis I examine, all five countries have had complex economies-part modern, part backward; part industrial, part

agrarian; part oriented toward aggressive competition on a world

scene, part oriented toward sheltered home markets. Thus all five

have had economic actors with rough similarities of placement in the

world economy. Countries that made similar policy choices can be

compared to see if there are similarities in the social attributes of their

winning coalitions, in their intermediate associations, in their state

structures, economic ideology, and position in the international state

system.

My choice of countries is related to these variables. Because of the

importance of international-domestic linkages that express the relationship of societal actors to the international economy, I wanted

countries that had comparable mixtures in industry, agriculture, and

labor. All, that is, had to have some industry in the late nineteenth

century involved in export, agriculture split between grains and highquality foodstuffs that consume grains, and labor involved in both

industrial production and consumption. Second, I wanted countries

that differed in outcomes during the crisis periods. Third, I wanted

THE PoLITics oF PoLICY CHOICE

differences in other variables of importance, especially state forms,

economic ideology, and international military situation. Fourth, I

wanted countries both with some openness in political process (so that

the role of societal actors, ideology, institutions, and the like could be

examined) and with ma.rket economies.

Rather few countries fit all these requirements, but others could

have been included. Japan, Italy, Spain, Canada, and Australia would

have made particularly interesting additions; I omitted them only for

reasons of economy. Several Latin American countries might also

have made for interesting comparisons, but they were primarily agricultural in the first crisis and thus lacked the diversity of societal

actors whose effects I wished to explore. I did not include Soviet-style

regimes because the distribution of economic power there makes politics so different. Interest groups and societal actors exist in those

countries, but they are so much weaker than state-party institutions in

the West as to change the pattern of political advocacy.

In the case studies that follow, the treatment of the countries within

each crisis period is not equal. Some countries get longer analysis than

others, and different one are favored for each period. This tactic is

deliberate: focusing comparisons on pairs or trios of countries allows

an accentuation of specific elements in the explanatory discussion in

order to sharpen the debate. Unequal as well is the space given to

discussing the explanatory issues in each crisis period. The character

of each type of argument is discussed at length in the context of the

first crisis period, establishing the analytical groundwork for the next

two, though the interpretative points are reexamined in the Conclusion.

Three great crises in the international economy affected these five

countries: the downturn of 1873-g6, the Depression of the 1930s,

and the economic disruption that started in 1971. These crises involve

an interaction between changes in the business cycle and changes in

the basic structure of domestic economies. The first process involves

regular swings between boom and bust following an investment cycle.

The second involves major changes in the products that countries

produce, in the organization of their production, and in the geographical distribution of efficient production within and among

countries.40 Although each crisis has its own characteristics, all three

crises saw major changes in both processes.

Five countries, three periods-we seek to know what policies these

countries selected, and that is our descriptive task. Simultaneously we

seek to understand the application of different interpretative traditions to that selection, and that is our explanatory task.

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