By Arnold Kling
An informal cross-country analysis of those economies that I have conducted with Gylfi Zoega examined three measures of economic performance: the employment rate (relative to the working-age population), the unemployment rate (relative to labor force), and labor productivity – the first two of these measures being observable proxies for job satisfaction, personal development for work, etc. Taking one institution at a time, we found that university education improves all three measures of economic performance: employment, unemployment and productivity too. Another institution, the “red tape” impeding innovators, as measured by the OECD index of barriers to entrepreneurs, is bad for all three elements of performance. Finally, legislation providing a high level of job protection is bad for productivity but does not have a clear effect on either employment rate or unemployment rate.
His focus is on Europe, and why some economies are less dynamic than others. He mentions the phenomenon of corporatism.
The fundamental corporatist idea was to retain the private income, private wealth and private ownership of firms that was so central to capitalism (and found in avant-garde examples of market socialism too) but to remove the brain of capitalism – to curtail and to modify the mechanism of experiments and discoveries undertaken by unorganized entrepreneurs and financiers on which capitalism relied upon for its direction(s) – and to replace it with a selection mechanism governing investment and innovation that would require a consensus of key social groups. The main allocative decisions, such as the start-up of a firm or its close, is to have the approval of the designated groups constituting the society. Corporatism sought to interpose the interests of the whole society in a range of decisions affecting the directions taken in the business sector.