An Examination of the Varieties of Capitalism and its Application in Essay

An Examination of the Varieties of Capitalism and its Application in USA, Sweden and Germany - Essay Example â€Å"Where social democracy is strong, the public firm was unstable and weak, and unable to dominate without difficulty; where social democracy is weak, ownership diffusion of the large firms could reign if other economic and institutional conditions prevailed...† (Roe, [Political] 21) In this definition, Roe seem to identify that nations that have strong traditions of social democracy like Germany have inefficiencies in their public institutions and structures. This include bureaucracy and some elements of inefficiency which plagues nations with strong public sector issues. However, in traditional capitalist states, dominant economic institutions and powerful corporate entities emerge to fill the gap and determine the distribution of wealth in the economy. Roe goes on to illustrate this point by examining the American model of capitalism into detail (Capital para1). He begins by recognizing that America differs from all socialist states because there is less intervention by the government. This leaves a strong vacuum for some kind of a 'moderator' to determine the distribution of income in the economy. Roe (Capital para 3) identifies that the American economy is strongly influenced by corporate entities. He goes on to state that America's laws put more power in the hands of the managers and directors of these corporate entities. This means that shareholders do not have a strong reason to push for capital oriented decisions that will solely be in the interest of their stocks and investments. This means that the people charged with governance are the actual controllers of power in America. The state's intervention is weak whilst the shareholders, who have the true capitalist interest are also kept in check by corporate governance laws which favor the managers and directors. Employees do not have much rights because these managers can hire and fire. Elsewhere in Northern Europe and Central Europe, the strength of the state is boosted because many state in stitutions act as moderators in the corporate world (Soskice 51). This means that the state has some kind of power to intervene in the distribution of wealth. Secondly, the states in these European nations have established strong negotiation systems that ensure that stakeholders like workers and shareholders negotiate to come to a consensus. This is very pronounced in Sweden. It is also quite dominant in Germany. However, what is common to all these capitalist systems is that there is debate and consensus building in all these jurisdictions. The parties involved in these debates determine the differences. On a further analysis of the American system, Roe (Capital 75) states that â€Å"for capital markets to function, political institutions must support capitalism in general and capitalism of financial markets in particular†. This means that the state must moderate in the various debates and interests of the capital markets and some elements of the society. He states that poli tical economy shapes the capital markets by economic, political and legal institutions. This creates a mechanism where the corporate entities shape policy and policy shapes the corporate entities. In a practical analysis of what happens in America, Roe (Political 104) states that capitalism in America is made up of interest groups that converge in the form of corporate entities. Thus, the Republicans and Democrats make promises based on what