Switzerland v Austria - economy

 

Review of Katzenstein, P. 1985. ‘Small States in an Open International Economy: The Converging Balance of State and Society in Switzerland and Austria’ in Evans, P.,  Rueschemeryer, D. and Skocpol, T. (eds) Bringing the State Back In. Cambridge University Press: Cambridge.

 

The research problem is a general one, with a long history: how can we better understand the concept of state capacity?  This problem intrinsically requires an understanding of the relationship between the state and civil society. This is a very complex relationship and the case study method is ideal for studying it closely. Studying states on an individual or multi-case basis allows fine analysis of the various exchanges and interaction of the state and various particular actors in society. Katzenstein does not explicitly or clearly identify a specific research question. He also does not clearly explain his method of investigation.

 

Jessop (1982) and Weiss & Hobson (1995) argue that analyses of the state must recognise that all states are different and operate differently. This is why simple surveys or collecting data on a large range of countries is inadequate, at least on its own. Collecting data in this fashion implies that you are looking for trends and generalisable relationships. Jessop has explicitly argued for caution against such generalisation. Case studies are more adequate in this situation as a way of analysing data in greater depth especially given the long history of the data and its qualitative nature. Katzenstein has appropriately chosen a multi-case study method.

 

The qualitative data consists of:

           

1.      The types of relationships between the state and other actors

2.      The actual state capacities that have been developed

3.      The historical economic circumstances that have inspired development of state capacities

 

 

Boreham, Dow and Leet (1999: 166) classify OECD states into four main economic groups, based upon the overall size of government (relative to the market economy) and economic performance in recent decades. Switzerland and Austria are two examples or governments with good economic performance and well-developed capacities, examples of ‘corporatism’. They are ideal examples to study the theorised relationship between corporatist or co-ordinating structures and good economic outcomes. Switzerland has a very small state (‘corporatism without labour’) and Austria a very large state (‘social democratic corporatism’), leading to analysis of the different types of co-ordinating government (Boreham, Dow and Leet. 1999: 166).

 

Katzenstein’s method is to compare the two countries and their different histories in great detail. He thus describes how different states, with different structures can develop capacities. In particular he contrasts the size of the two governments and their respective bureaucratic abilities. He also contrasts the centralised Austrian government with the de-centralised Swiss government, with its federal division of powers. Katzenstein further investigates the legal / constitutional dimensions of state policy formation.

 

Katzenstein goes into depth in analysing the relationship between the state and specific other actors in society, ie. more specific than ‘labour’ and ‘capital’. He does this in a comparative fashion. He analyses, in a systematic way, the relationship between the state and the banking sector, the bureaucracy, the defence department in particular, the role of individual Swiss cantons, and other various actors.

 

Katzenstein privileges class conflict over conflict over other forms of structured inequality. This is common; it is probably fair enough too, otherwise the analysis would become too complicated.

 

The choice of two small countries is appropriate. Austria and Switzerland, because of their size, are committed to an open economy. It is common for neo-liberal, ‘third way’ or ‘globalisation’ literature to argue that growing internationalisation of economies limits the development of state capacity. Choosing Switzerland and Austria, therefore is a way to test this hypothesis. They are therefore appropriate choices to study how states can develop capacities even in an internationalising economic environment.

 

The method is to show how the dependence in both countries on exports, since about the 1930s, has actually lead to the opposite need for a co-ordinating, influential government. The historical decision to promote stability in economic relations and consensus in political decision making has been a key element in the international competitiveness of both economies. He argues that the reason that the system of social partnership developed ‘lies in the pressure that an increasingly liberal international economy exerts on domestic political arrangements in small European democracies’ (p236).

 

Katzenstein traces the history of the development of the consensus style of politics in both countries. This is a sort of hermeneutic approach, where Katzenstein investigates and tries to explain the development of a consensus-style of politics. The formation of the ‘peace agreement’ in Switzerland between business and the metalworkers’ union was an acknowledgement by both sides of the ‘risks of escalating industrial militance’ (p235). Katzenstein specifically analyses the relationship between the liberalising of the Austrian and Swiss economies and corporatism.

 

Katzenstein does not discuss the role of international actors in domestic policy in any detailed way. He does briefly mention domestic policy reaction to the rise of protectionism in Eastern Europe, and elsewhere. However, the article basically ignores any detailed analysis of international actors and effects. This has the possible effect of overemphasising the strength of domestic political capacity, because he constantly reasserts the things that the state can do. He does not discuss the limitations on state policy. This is possibly a methodological error – it is certainly a point which neo-liberals would validly want to criticise.

 

The article does discuss state foreign policy but only in terms of how it is formulated. To be fair, the argument is that co-operation between the government, labour, business and others has become crucial in the development of policy because of the economic circumstances imposed by international (European) actors. Katzenstein still fails to adequately discuss the power of international business and its relationship to domestic policy. This is, admittedly, a criticism that I can easily make in 2005, where it is common to stress the power of multinational corporations. In 1985, writers may not yet have been so conscious of this criticism.

 

One of the particular strengths in choosing Austria and Switzerland, with their different political systems, is analysing how class forces affect state policies. In his historical analysis of the two countries, Katzenstein argues that Austrian labour has historically been overwhelmingly dominant; in Switzerland by contrast the peak business association has been historically overwhelmingly dominant.

 

Katzenstein does not specifically go in a Marxist direction. However, he argues that the historical balance of class forces is the reason for the policy divergence between the state systems of the two countries. The units of analysis therefore include the goals and relationships between opposing class forces.

 

Katzenstein seems to have correctly chosen units of analysis that include the role of opposing class forces. This is despite the temptation to downplay class forces, particularly when looking at two countries with a tradition of consensus politics, where it might seem that class rivalry is an unimportant or minor issue. There is also usually a gross negligence in underestimating the role of class amongst neo-Weberian writers, including many authors in the same book from which this article is taken, eg.  Skocpol. Katzenstein has avoided this temptation.

 

This prompted me to revisit a draft of some work I have been doing for my thesis on Marxist and Weberian theories of state capacity. I initially tried to over-generalise by arguing that capital usually wants to limit state capacity. I failed to take into account the different historical (and geographic) context in different countries. Katzenstein has argued that both capital and labour in Switzerland and Austria have, for historical reasons, shared a common goal of maximising defence capacity. This is a result, he argues, of both the Austrian civil war and particularly World War 2. 

 

This particular choice of units of analysis means that Katzenstein avoids the usual Marxist tendency to generalise. It means that he can analyse the historical policy differences in different state departments, such as defence policy vs. taxation policy, with reference of class. He indirectly dismisses theories that imply policy convergence because of the purported omnipresent dominance of the capitalist class. His method is to look for historical explanations of these dichotomies.

 

This historical, hermeneutic approach has highlighted an issue that I personally underestimated. There are instances where capital actually wants to increase state capacity, even if does not support state economic capacity to interfere with managerial prerogatives. Therefore, Katzenstein argues that there is no class struggle over state defence policy, because opposing class forces share common goals. This contrasts with the class warfare over economic policy. Katzenstein insists that ‘Austria’s Conservative People’s party (OVP) have persistently disagreed on the role of the public sector in the economy’ (p237). This has not meant, in either country, that the state cannot ever develop various capacities, even where they are opposed by “dominant” class forces; it does, however, add another significant dimension to the process, which Katzenstein has done well to explore.

 

Overall, it is a very good article. The case-study approach allowed Katzenstein to study various aspects of the policy process in great detail and in historical perspective. I personally need to look at my own research and decide to what extent I want to discuss the issue of ‘globalistion’ and the ‘new economic environment’. Because of the large number and complexity of issues, it would almost be ideal if I could treat the globalisation argument as strictly beyond my purview. I feel that this may be what Katzenstein has done. However, seeing this omission in his report, I now think that this may need to be balanced with a necessary rebuttal of the neo-liberal, “globalisation” argument…

 

 

 

 

 

BIBLIOGRAPHY AND REFERENCES

 

Antal, A., Dierkes, M. and Weiler, H. 1996. ‘Cross-National Policy Research: Traditions, Achievements, and Challenges’ in Hantrais, L and Mangen, S (eds), Cross National Research Methods in the Social Sciences. Pinter: London.

 

Boreham, P.,  Dow, G. and Leet, M. 1999. Room to Manoeuvre: Political Aspects of Unemployment. Melbourne University Press: Carlton.

 

Evans, P.,  Rueschemeyer, D. and Skocpol, T. (eds). 1985. Bringing the State Back In. Cambridge University Press: Cambridge.

 

Jessop, B. 1982. The Capitalist State: Marxist Theories and Methods. Martin Robertson: Oxford.

 

Marsh, D. and Stoker, G (eds). 2002. Theory and Methods in Political Science 2^nd Ed. Palgrave: New York.

 

McNabb, D.E. 2004. Research Methods for Political Science: Quantitative and Qualitative Methods. M.E. Sharpe: New York.

 

Neuman, W. 2003. Social Research Methods: Qualitative and Quantitative Approaches. 5^th Ed. Allyn and Bacon: Boston.

 

Rokkan, S. 1996. ‘Cross-Cultural, Cross-Societal, and Cross-National Research’ in Hantrais, L and Mangen, S (eds), Cross National Research Methods in the Social Sciences. Pinter: London.

 

Taylor, Stevens. 1998. Introduction to Qualitative Research Methods: a Guidebook and Resource. 3^rd Ed. Wiley: New York.

 

Weiss, L. and Hobson, J. 1985. States and Economic Development: a Comparative Historical Analysis. Polity Press: Cambridge.