In your opinion, how many capitalisms are there in the global system?

Anglo-Saxon capitalism is often referred to as ‘Market Oriented’ or ‘Stock-Market Capitalism’. This is because it’s main features are market-related. Its main aim is the maximisation of individual wealth, rather than the distribution of that wealth. Under the Anglo-Saxon model, the market is the main forum for economic activity. Through its inherently competitive nature, the market, it is argued, is the most efficient way of allowing individuals to maximise their wealth. There is often an uneasy relationship between finance and industry due to the pressures exerted by investors. The state, in economies after the Anglo-Saxon Model, intervenes as little as possible and then only to encourage competitiveness, create and protect markets, and to provide the most basic level of welfare to its citizens. This leads to national economies like those in America and Britain (hence the label of ‘Anglo-Saxon Capitalism’) that are, especially in America, largely de-regulated, and where, again more so in the United States, which is the archetypal Anglo-Saxon national economy, the welfare state is of little importance in comparison to wealth maximisation and shareholder value. As the market is seen as the prime vehicle for that wealth maximisation, the one area in which the state has intervened is to create the legal framework in which corporations and their executive officers are bound in law to maximise their ‘shareholder value’ at the pain of legal consequences.

In the German Capitalism, Gilpin’s ‘”Social Market” Capitalism’, the focus is far more on the welfare system than on the primacy of the individual or market as the vehicle for economic activity. Competition, while, as in any capitalist economy (and we must of course remember that despite their differences, these models are all fundamentally capitalist), still important, is less so than in the Anglo-Saxon system. The stakeholder, rather than just the shareholder is valued. In Germany especially, major banks play a key role in providing the industrial sector with capital to expand. These banks have large reserves and intimate acquaintance with the businesses concerned. It is this trust that leads to the name of ‘trust-based capitalism’. German Capitalism is, in Gilpin’s words, a ‘“corporatist” or “welfare state capitalism”’. The state plays a far more central strategic role in German capitalist systems (which include the majority of the continental Europe west of the former Iron Curtain) than in the Britain or America.

Japanese Capitalism shares similarities with the German Model, which, as earlier noted, has lead to them being grouped together under the term of ‘trust-based’ capitalism. Yet there are major cultural and structural differences. Japanese capitalism is marked by the need to reconcile rapid development with existing social structures. The needs and objectives of the society are given preference over the needs of the individual, and the stakeholder valued over the shareholder. Jobs for life are common, and ‘downsizing’, at least to the scale of some western corporations, which make thousands of employees redundant, is something many Japanese companies are highly reluctant to do. The ‘society over individual approach’ has led to Japanese Capitalism being called ‘competitive communism’ by some, among many other terms used to try and describe the unusual phenomena of Japanese capitalism.

Having thus identified the three models of capitalism and their features, we must look at their differences, and how these differences came about.

“The key difference lies in History.” writes Hodgson, of the differences between the Japanese and Anglo-Saxon models of capitalism. History is both how and why the models of capitalism are different from each other. It is the History of the development of Capitalism in the national economies concerned that has created the differences between them.

Anglo-Saxon capitalism is the direct descendent of the capitalism that developed in England in the late 17th and early 18th Century, of which all the other forms are variations to a lesser or sometimes very much greater extent. Capitalism here developed organically from the existing social and economic structures, which had been in existence since the end of medieval feudalism two centuries before. Hodgson calls this the ‘long period of gestation’. This natural development meant that the economic system that developed meant that it was uniquely suitable to the British environment at the time, socially, politically and economically. However, Anglo-Saxon capitalism developed in a time in which the concept of the welfare state and labour rights were unheard of. The upper classes of the British oligarchy were those who benefited from the transition to capitalist modes of production. This focus on maximising the profits of those who own companies – the modern day shareholders – rather than all involved in the company – the modern stakeholders – can be taken to account for the lack of emphasis on social cohesion, welfare provision and the distribution of wealth in modern Anglo-Saxon Capitalism.

In contrast to the natural development of capitalism in Britain and what were then still her American colonies, the development of capitalism in the rest of the world generally happened later and against a background of other capitalised nations and state-led industrialisation. This led to a number of key differences. In Japan, capitalism did not begin to develop until the Meiji Restoration in 1867, but it did so very quickly, and without an intermediate period between a fully feudalist society and a modern capitalist one. This means that in Japan, economic culture is heavily influenced by the social structures that existed when it began to industrialise and capitalise. These being more rigid than they were in the west, there are still elements of Asian feudal social structure in Japanese capitalist culture. Loyalty, where once given to the samurai is now claimed by the corporation, which in turn feels a duty to provide for its employees. The influence of Japanese Confucianism at the time of the capitalisation and beyond is also felt in the priority of society over individual.

Further, where the state led the drive towards capitalisation and industrialisation, the aims of the state heavily influenced the outcome. In Germany, which began to industrialise in the late 19th Century, the main aim was to be able to compete with the other continental powers, both militarily and economically; the state thus led the capitalisation with loans and grants from its coffers. And while the military aims of the German economy were largely discarded after two lost wars, the beginnings of a welfare state that were laid by Bismarck in the late 19th Century meant that German capitalism after the Second World War focused on provision of welfare to its citizens.

In Japan, ‘catching up with the west’ and economic autarky was the main aim of industrial capitalisation both in the period between 1867 and 1940, when it happened militarily and after the defeat of 1945, when it was primarily economic and technological in character. The absence, as in Germany, of enough capital in private hands to start this process, meant that in both economies, the state and large banks were the primary source of capital, which can explain the larger role the state plays in these economies than in Anglo-Saxon ones.

In finance and the provision of capital lies another key difference between the capitalisms. In Anglo-Saxon capitalism, the capital is mainly provided by investors through the stock-market. The large amount of shareholders exerts a pressure on the company to turn a maximum profit, regardless of the social consequences of say, outsourcing to a lesser developed company, or laying off a large part of the workforce.

In Germany, the capital is mainly provided by large banks such as Deutsche Bank, which have strong links with the companies they have stakes in. These links are fostered by government policy, and a cultural acceptance of cartels and horizontal linkage. The linkage between finance and industry becomes even stronger in Japan, were the keiretsu, and ‘economic grouping’ incorporating finance, production and raw materials companies is current. The financing bank of a keiretsu holds shares in all its members, as do its members. They buy from each other, and co-operate to gain maximum advantage for the group. This approach causes the least friction between finance and industry, as they are effectively one entity, and companies are financed from within their keiretsu.

The state plays a differing role in the different capitalist systems. The state can, of course, influence everything about the economy. From taxes to regulation, from welfare provision to expenditure and fiscal policy, the state’s policies affect the economy throughout.

In American and Britain, where the Anglo-Saxon model of capitalism is dominant, the state’s role is limited. In Britain, it provides, through historical legacy, a strong welfare state; but in America it does not, and its prime function in both has since the 1980’s been seen as being to create the most competitive market environment possible, and to provide and protect markets for its countries goods. While there is still regulation, it is primarily in these areas.

In Germany, the state’s main function is to provide a strong welfare state to its people and strategically guide the economy with that aim in mind. In Japan, the state heavily regulates the economy in the interest of the society’s goal of social stability and self-sufficiency. The state thus plays different roles in the economies of the various capitalisms.

We can then say that the differences in the national economic systems are such that they can truly be said to be different forms of capitalism. Anglo-Saxon Capitalism, with its shareholders and wealth maximisation at the expense of distribution, is a radically different system from German capitalism, with its welfare state and corporatist system, which in turn is different, mainly culturally, from the

Japanese system of keiretsus and jobs-for-life. And while there may be other sub-systems, the main three are those posited earlier – Anglo-Saxon, German and Japanese Capitalism, whatever name they may go under. Further, it is the history of capitalist development in a national economy that creates these different systems. The defining moment is the birth of capitalism and the environment in which it happens, which has created the three capitalisms of the global system.

Bibliography

- Coates, Models of Capitalism: Growth and Stagnation in the Modern Era.  (London, Macmillan, 2000)

- Dore, Stock Market Capitalism: welfare capitalism. Japan and Germany versus the Anglo-Saxons, (Oxford, OUP 2000)

- Fukuyama, The End of History? The National Interest, No. 15 (1989)

- Hampden-Turner & Trompenaars, The Seven Cultures of Capitalism (London, Piatkus, 1994)

- Hodgson, Varieties of Capitalism and Varieties of Economic Theory, Review of International Political Economy vol. 3 No.3 (1996) 

- Gilpin, Global Political Economy. (Princeton and Oxford, Princeton University Press, 2001)

- van der Pijl, Transnational Classes and International Relations (London, Routledge, 1998)

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