The evolution of the Dutch CME and different political coalitions

In this excellent book on the postwar evolution of the Dutch political economy, Jeroen Touwen deals with a question that has long puzzled political economists: how is it possible that small, open economies like the Netherlands have been able to develop and maintain such strong non-market institutions without an apparent loss in competitiveness? This question, which first put forward in a systematic manner in David Cameron’s late 1970s study on the relationship between trade openness and social spending levels, has received new urgency following the rise to prominence of the so-called Varieties of Capitalism approach to the study of comparative capitalism during the first decade of the twenty-first century. In Coordination in Transition, Touwen builds on and critically engages with this approach. By doing so, he seeks to explore whether the institutional structures of the Dutch economy have undergone major changes during the postwar period. And he has done so for good reason. Following the rather enthusiastic reception of Peter Hall and David Soskice’s Varieties of Capitalism: The Institutional Foundations of Comparative Advantage during the early 2000s, there has recently been much criticism of this approach’ static nature. The main thrust of this criticism is that it is rather unclear how various institutions in different domains of the economy can emerge and change (which they evidently do) when they rely on socalled ‘institutional complementarities’ between different subsystems. At first sight at least, these complementarities seem to prevent the coming about of path-breaking change. In response to those criticisms, various prominent adherent of the Varieties of Capitalism have recently set their attention to explaining the emergence of so-called coordinated market economies (CME’s), in which firms rely heavily on non-market solutions to solve coordination problems, and more market-oriented liberal market economies (LME’s) during the first half of the twentieth century. In Coordination in Transition, Touwen instead explores to what extent the