Political Institutions and Varieties of Capitalism

Abstract

A strong correlation exists between political regime and the liberal market economy (LME) and coordinated market economy (CME) dichotomy posed by the varieties of capitalism (VOC) framework (Gourevitch, 2003). However, debate continues regarding the connection between political institutions and VOC. The purpose of this book is to open the proverbial " black box " and identify the causal mechanisms linking political institu-tions and variation in capitalist systems. Capitalism Adam Smith's The Wealth of Nations is perhaps the most widely cited study of capitalism to be published in the past 240 years (1991 [1776]). Smith's conception of capitalism is characterized by privately held property and the unrestricted accumulation of additional wealth. Human beings, driven by self-interest, are motivated to maximize personal profit through the pro-ductive use of accumulated property (Sargent, 1999, p. 80). The inborn desire to pursue and maximize individual interest is the driving force of the capitalist system. For Smith, competition is structured within a system of free markets in which buyers and sellers enter commercial transactions free from coercion and government interference. The system of competition regulates the types and quantities of goods produced and the prices at which they are sold. The quantities of goods and services are then efficiently produced