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SASE 26th Annual Conference Theme

The Institutional Foundations of Capitalism

July 10-12, 2014 - Northwestern University and the University of Chicago


What makes a market economy possible? Through multiple crises and recoveries, capitalism has proven to be an extraordinarily dynamic, durable and adaptive economic system. Market-allocation of goods and services has spread globally, encompassing developed and emerging economies alike, and subjecting the life-chances of billions of people to the logic of capitalism. Scholars recognize that this is not a monolithic economic system, for it is fraught with internal tensions and marked by complex heterogeneity. And yet, all this economic activity rests upon a set of core institutional foundations.

Some preconditions have long been recognized. Adam Smith noted that markets required property rights, a set of legally enforceable rules that governed claims and control over valuable assets. And unless these property rights are also alienable, market exchange is not possible. Early modern rulers promulgated standardized weights and measures as a way to create accurate market information and facilitate exchange. Sovereigns have long minted coins and regulated paper money to help monetize economic transactions. Max Weber underscored the importance of “rational capital accounting” and “calculable law,” backed by the coercive power of the state, for a capitalist economy. Governments even institutionalize economic failure and enforce hard budget constraints by creating a legal apparatus for corporate and individual bankruptcy. One key issue therefore concerns the linkage between political and economic structures, and whether representative democracies have a particular affinity with market economies.

Neither functional necessity nor performativity ensures the automatic satisfaction of these preconditions. On the contrary, Karl Polanyi argued that unrestrainedly competitive markets tended to erode their own foundations, but that public policy could mitigate this problem through a strategy of decommodification. The reproduction of labor power, for example, was supported by policies that protected household earnings from market instabilities and which socialized the costs of creating an educated workforce. Groups and organizations that constitute “civil society” may also play a role in this connection, either by shaping public policy or helping to remedy the problem directly. And larger problems than those envisioned by Polanyi now loom as societies face the market externalities that produce global climate change.

The establishment, maintenance and erosion of institutional foundations are contingent and conflicted processes that can move forward or backward, by design or accident, but always producing unintended consequences. Furthermore, establishment is a costly undertaking that requires dedicated resources (known sometimes as taxes). When these institutions malfunction, drama can ensue. Various regulatory and informational failures contributed to the financial crisis of 2008, and the ambiguities of intellectual property continue to generate conflict in the pharmaceutical and computer software industries, both nationally and internationally. The current failure of European labor markets to create adequate employment, especially among young adults, poses thorny political problems that will only grow.

Institutional foundations are traditionally located at the national level, but in the modern era they are increasingly pitched at regional or even global levels. The neo-liberal project of building markets now animates the European Union, WTO, and World Bank as much as it does nation states. Although the monetary base remains a largely national responsibility, the eurozone shows that multi-national arrangements are possible. And the articulation and protection of intellectual property is now shared between national patent, trademark and copyright laws and global agreements like TRIPS. Self-consciously theorized global models diffuse around the world, although implementation frequently reinserts significant local variability, and institutional convergence can be a remarkably inharmonious process.

Institutional foundations can also shift between public, quasi-public and private spheres, with important implications for democratic accountability and control. Consider the central role that ISDA plays in the massive over-the-counter derivatives market by creating standardized contractual language for swaps agreements, the importance of private credit rating agencies like Moody’s and S&P in governing global capital flows, the part of the Basel Committee in setting international bank capital standards, or the role of ISO in setting a host of product and process standards. Private regulation abounds. They also vary in formalization, with laws and official treaties at one extreme, and informal social arrangements (such as underpin the New York City diamond market) at the other.

The 2014 SASE Annual Meeting seeks contributions that explore the different social and institutional bases of modern capitalism, and how these are variably established locally, nationally, regionally, and globally. Historical and/or comparative research designs are especially welcome, as are projects that deploy a range of quantitative and qualitative methodologies.

Program Director: Gary Herrigel (g-herrigel@uchicago.edu)

Local Organizers: Bruce G. Carruthers, Jeannette Colyvas, Gary Herrigel, and Klaus Weber