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Economic Welfare, International Business and Global Institutional Change

Edited by Ram Mudambi, Pietro Maria Navarra and Giuseppe Sobbrio

The distinguished authors in this volume address the fundamental causes for such heterogeneous international experiences, placing particular emphasis on the role of institutions. They demonstrate how the study of economic development is increasingly linked to the development of institutions, which allow for more complex exchanges to occur in markets and societies. Institutions can be understood as rules or constraints that channel individuals' actions in specific directions, and can be formal or informal depending on their genesis. The book highlights the connection between institutions and economic welfare by examining countries at different stages of development. Although the authors' study material effects, they also look at individual well-being which is more strongly influenced by the non-material products of institutions such as opportunity, freedom and relationships. They move on to highlight the role of institutions in global business, in terms of innovation, entrepreneurship and foreign direct investment. In the concluding chapters they focus on the actual process of transition from one institutional framework to another. Amongst other examples, they examine reforms to international financial institutions and constitutional adjustments in transition countries.
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Chapter 9: Corporate Governance and Capital Markets in the Two Capitalisms

Martin Ricketts


Martin Ricketts 1. BASIC FEATURES OF THE TWO CAPITALISMS Political events in the 1980s seem, at least for the foreseeable future, to have resolved arguments about the relative merits of centrally planned compared with market systems. The fall of the Berlin Wall and the retreat of the Soviet Empire were outward physical and political signs of a parallel intellectual collapse in support for state planning. Debate about the role of markets in economic life did not diminish in the 1990s, however, but changed its focus. In place of a crude bifurcation between ‘plan’ and ‘market’ there is now a more subtle division of the economic world into ‘communitarian’ and ‘AngloAmerican’ capitalism. Albert (1993) provided a celebrated exposition of this division between types of capitalism contrasting the German or ‘Rhineland’ model with Anglo-Saxon norms. Similarly Williams (1994) investigated Japanese economic and political development. He argued that Japanese institutions have decisive advantages over the Anglo-American competition. The intervening years since the mid-1990s have seen Japan struggling to escape recession and Germany facing the continuing problems of reunification. Meanwhile, a long period of Anglo-American growth up to 2001 has made the work of Albert and Williams less fashionable. Nevertheless, discussion of ‘the third way’ has been a feature of British politics since the Labour administration came to power in 1997 and controversy is likely to revolve around the efficiency of differing ‘varieties of capitalism’ for the foreseeable future. This chapter aims to unravel and examine the main arguments in the debate. All markets...

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