A snapshot of the EU's capitalist diversity between the two recent major economic crises.

• Author: Nadoban, Zoltan

1. Introduction

   Comparative economics deals with the comparative study of different economy systems in defined space and time. Two perspectives exist whether the emphasis is on differences or similarities when comparing countries. While country specialists consider each country as a different, separate model; macro-regime scholars, on the other hand, believe that a group of countries can be classified into types, so that its members are similar but simultaneously differ from other groups of countries (Schroder, 2019). Irrespective of whether an incontestable position should be taken in this respect, the monitoring of the development of cluster properties over time can provide useful information (Hay & Wincott, 2012). Among the economic strands within Comparative Capitalism literature, Varieties of Capitalism (VoC) is one paradigm that argues in favour of the clustering of national systems, meaning that capitalism exist in variations (Hall & Sosckice, 2001). While a one-dimensional comparison helps identify bottlenecks in a single area, multi-dimensional approaches with their systematic view (such as VoC) give insight into the operating pattern that distinguishes capitalist models from each other, hence it enables to create taxonomies of the capitalist system.

   From the European Union's point of view, as a research agenda it is a subject of constructive discussion whether different models can co-exist within an economic integration (or even more so within the Eurozone), how much disparateness jeopardize sustainability (Farkas, 2016; Johnston & Regan, 2018; Vermeiren, 2017). Two of the most comprehensive studies about the EU's capitalist models were conducted by Amable (2003) and later by Farkas (2016) as a continuation who examined a later period between 2004 and 2007. An added value of her study was that it included at that time newly joined post-socialist Central Eastern European (CEE) countries hence enlarging the taxonomy of the EU's capitalist diversity.

   Around the 2008 Global Financial Crisis (GFC) it was not yet possible to know its concrete effects on EU's capitalist sub-systems. It was expected that significant changes would follow, as should be the case after any major crisis. When the subsequent recession period ended in the EU, it became timely to update the mapping of its capitalist diversity and its change, which was partly reflected on by Rapacki et al. (2020). However, the former study compared the pre- and post-crisis stages based on annual data instead of using time intervals (1); furthermore, the next major crisis-phase (i.e. Covid pandemic in 2020 and then the Russian-Ukrainian conflict) has assigned the time period to which this research agenda should give focus. In this regard, therefore, there is room for an up-to-date and partially revised empirical analysis.

   Given that the topic is too large to present a comprehensive analysis within one article, this paper should be considered as an initial step where cluster analysis is performed. By synthesizing the strengths of the two major VoC literature mentioned above, the article seeks to provide a more general and defensible framework. In addition, by exceeding the sole enumeration of the supply (institutional) side, the demand side (growth regimes) have also been integrated during the creation of the taxonomy in order to get a better picture about the EU's capitalist heterogeneity.

   To sum up, the aim of this article is to see which capitalist clusters can be identified during the post-GFC period in the European Union compared to the pre-GFC grouping? Also, by involving the demand side into the scope of the analysis beside the institutional focus, to get a general picture how much the division along the former matches with the institutional division? The empirical results for the 2010s affirm path dependent nature of the existing division. Additionally, results as starting point can appoint several research directions such as any difference within a sub-dimension could start a path creation process within the same capitalist cluster?

   The article is structured as the followings: after the introduction a short literature review describes the theoretical and empirical background (Section 2), followed by a presentation of the applied methodology (Section 3). Section 4 consists of the cluster analyses performed, finally Section 5 concludes.

2. Theoretical framework

   The (mainly) capitalist world system is characterized by dynamically changing diversity wherein one or more countries adhere to a theoretical capitalist variety as an ideal type. The existing distance is caused by the fact that nations are socio-economic formations that we can consider as open systems (Becker, 2017). Within these systems the model-like functioning is influenced by internal (via lobby of social groups (Amable, 2003)) and external (via interdependence in non-autarkic economies) forces. Thus, through the activity of actors a national system (2) can be moved further relative to the theoretical ideal type as reference point. Clearly globalization and regionalization have an impact towards convergence (corporate law, finance, etc.) (e.g. Hansmann & Kraakman, 2001) while governments have the power to give different responses for the same external shocks thereby increasing divergence between clusters and/or within a certain cluster. Taking time into account, both the emergence and development of capitalist models are influenced either by the past (history, culture) and the future (opportunities, threats, individuals' visions) in the present. While capitalist economies on their own would show variations, social peculiarities are responsible for the greater complexity and the dynamic, not timeless feature of capitalist socio-economic models. One consequence is that every taxonomy is a snapshot that capture the taxonomy of capitalist diversity for a specific territory and time.

   Within comparative economics during the previous century, and especially in the 1990s, several new trends appeared addressing the classification of countries such as Regulation Theory by Robert Boyer, or the Business Systems branch where Richard Whitley must be cited (Wood et al., 2013). Of course, there are also categorizations addressing single dimensions (e.g. the grouping made by Esping-Andersen (1990) based on welfare regimes, varieties of entrepreneurship (Chowdhury et al., 2015)). The greatest impact on Comparative Capitalism, however, originated from Hall and Sosckice (2001) giving birth to the institutional approached Varieties of Capitalism paradigm, and its extension by Amable (2003) called Diversity of Capitalism (DoC) (Rapacki et al., 2020). These initial pioneering works were followed by many confirmatory or corrective studies (Hancke et al., 2007; Hall et al., 2009; Meelen et al., 2017, etc.). For some of the criticisms against VoC (3) were reflected on by the so-called post-VoC authors who expanded the geographical coverage and integrated more dynamic, historical, sociological and dependency perspectives (Nolke, 2016). Adding these aspects helps to uncover transitions of national capitalist systems or the lack of their resilience by integrating social and political aspects in addition to economic ones. The involvement of the dependency perspective is necessary due to the inclusion of semi-peripheral countries, namely Central Easter Europe (CEE), as they are characterized by, among others, different funding structures or weaker institutional quality compared to core countries (Farkas, 2019; Nolke & Vliegenthart, 2009). Also, they can be characterised by different informal environment (i.e. culture) which can result in different outputs of institutions compared to core EU countries whilst the input side is relatively similar (Rapacki et al., 2020). This implies that the transplantation of institutions without taking into account unique, local-specific informal institutions, is leading to non-complementary settings overall that hinder efficient functioning. VoC theory phrases it generally that policy-makers should be aware when implementing a new element to the existing national system as it can be incoherent with the capitalist model's system logic by discouraging institutional complementarity. In empirical works the usage of both input and output measures of institutional architecture have appeared already at Amable (2003), the former notion denotes determinants (e.g. regulatory framework, received funding) that affect the contours of the institutional functioning whilst the latter measures the outcome of institutional performance.

   In contrast to the supply-side branches of Comparative Capitalism such as VoC, growth regimes theory examines the demand side factors. By using a post-Keynesian framework focusing on macroeconomic drivers of aggregate demand (consumption, investment, government spending, and net exports), we can talk about, for example, debt-financed consumption-driven and export-driven regimes (Stockhammer et al., 2016; Baccaro & Pontusson, 2016, etc. (4)). The analyses of the supply and demand sides can be viewed together in order to obtain a more complex insight of capitalist diversity and growth trajectories, not to mention the research direction that emerges to investigate the interaction effects between the two sides and hence to better understand alteration of a capitalist model (Hope & Soskice, 2016). Growth regimes theory has been given a boost by the euro crisis as a research topic, and it can show several advantages over VoC, for example, change and the interactions of different capitalist types can be better examined (Hall, 2012; Hall, 2018; Nolke, 2016). In addition to the versatile nature of both VoC and growth regimes theory (as they can be combined with other research paradigms), the joint consideration of demand and supply sides can bring us closer to understanding both core and emerging countries (see Bohle (2018) regarding Central Europe and Nolke et...