Bringing the State Back Into the Varieties of Capitalism And Discourse Back Into the Explanation of Change. CES Germany & Europe Working Papers, no. 07.3,

The Varieties of Capitalism (VoC) literature’s difficulties in accounting for the full diversity of na-tional capitalisms and in explaining institutional change result at least in part from its tendency to downplay state action and from its rather static, binary division of capitalism into two overall systems. This paper argues first of all that by taking state action—used as shorthand for govern-ment policy forged by the political interactions of public and private actors in given institutional contexts—as a significant factor, national capitalisms can be seen to come in at least three varie-ties: liberal, coordinated, and state-influenced market economies. But more importantly, by bring-ing the state back in, we also put the political back into political economy—in terms of policies, political institutional structures, and politics. Secondly, the paper shows that although recent re-visions to VoC that account for change by invoking open systems or historical institutionalist incrementalism have gone a long way toward remedying the original problem with regard to sta-sis, they still fail to explain institutional change fully. It is not enough to turn to rational choice in-stitutionalist explanations focused on the micro-foundations of action, as some do, since this does not get at the dynamics behind changing preferences and innovative actions. For this, I argue, it is necessary to add discursive institutionalist explanations focused on the role of ideas and dis-course. Bringing the state back into the substantive account of capitalism actually promotes this methodological approach, since an important part of politics is political communication and de-liberation on the choice of policies within given institutional contexts, economic as well as political