A BICS-VARIETY OF CAPITALISM? THE EMERGENCE OF STATE-PERMEATED MARKET ECONOMIES IN LARGE EMERGING COUNTRIES Objective The project ‘A BICS-Variety of Capitalism? The Emergence of State-permeated Mar-ket Economies in large Emerging Countries’ compares basic socio-economic institu-tions in Brazil, India, China and South Africa (BICS). It is funded by the German Re-search Foundation (DFG, GZ: NO 855/3-1) during 2012 to 2014. The project attempts to come to grips with the causes and effects of the economic rise of large emerging countries. In this research, we review theoretical models for the varieties of socio-economic development in emerging markets and select the model of ‘state-permeated market economies’ to study the large emerging economies of Brazil, India, China and South Africa. By employing a broader, socioeconomic perspective, we do not only point towards the "success" of this type of capitalism, but also to-wards the gross inequalities that (still) exist. Research perspective On the one hand, this project covers conventional fields of the comparative political economy literature to identify the determinants of economic development and effi-ciency in the BICS – such as corporate governance, industrial relations, transfer of innovations and technology, vocational training and education. To be able to analyze the specific institutional complementarities of the BICS, on the other hand, we add a ‘Global Political Economy’ perspective to the ‘Comparative Capitalism’ (CC) ap-proach. We thus integrate forms of international economic embedding, state steer-ing capacities as well as the development of the domestic market. Our approach focuses on the comparison of the institutional architecture in the BICS economies. Hence, this project is broadly located within the realm of Comparative Capitalism, where institutional approaches are widespread. Yet, CC concentrated on the countries of the OECD, juxtaposing liberal market economies (LME) – illustrated with the case of the US – and coordinated market economies (CME) – illustrated with the case of Germany. This project extends the CC perspective to Brazil, India, China and South Africa. Particularly in the context of the rise of the ‘BRICs’, the question of the nature of capitalism in these countries has gained considerable importance, also for the development of the world economy as a whole. The core question is whether these economies develop into a similar direction as those of the triad or diverge in fundamentally different ways.

We will try to give a preliminary answer to this question, by developing a rough sketch of a “BICS” model of capitalism. On the one hand, the focus is on the classical questions of CC, i.e. the determinants of eco-nomic development. On the other hand the focus is on differences to alternative types of capitalism. In contrast to the dominant school, which focuses on explaining business practices by means of models derived from institutional economics, this project takes the historical and politico-economic development of large emerging countries seriously and adds insights from sociology, social theory and global political economy to established approaches. Furthermore, we put more emphasis on previously neglected institutions such as the state, domestic markets and international integration. Unlike the well-known approaches, our project analyses institutions not solely with respect to their functional efficiency but also to their distributional effects in society. Central analytical concepts Institutions and institutional spheres Institutions are classical units of analysis in the CC approach. Usually, institutions constitute complex figurations that can be understood as institutional "domains", "dimensions" or "spheres". The basic assumption of this theoretical programme is that specific institutional complementarities inherent to each variety are able to explain the divergent development patterns of the leading sectors within liberal and coordinated market economies. Contemporary research focused on five institutional spheres: Corporate governance Financing of investments Industrial relations Regimes of education and training Transfer of innovation within and among enterprises We extend this scheme by adding the role of (large) domestic markets as well as the particular form of international embeddedness of these economies, in particular the role of foreign direct investments. We assume that these institutions develop complemen-tarities which bring about comparative advantages for

Project Team Prof. Andreas Nölke

Principal Investigator, Professor for Political Science with focus on International Relations and International Politi-cal Economy, Goethe-University Frank-furt/Main Dr. Tobias ten Brink

Researcher at the Insti-tute for Political Scien-ce, Goethe-University Frankfurt/Main

BICS economies. This contribution will thus enlarge the spatial confines of comparative capitalism, ask for the existence of additional basic types beyond LME and CME, analyze the role of transnational influences (in particular of multinational enterprises) and highlight the role of the state for the establishment of particular types of capitalism outside of the triad. State-permeated market economies Until now, research on comparative capitalism has been concentrated on the OECD countries. Accordingly, two ideal-types have been constructed: liberal and coordi-nated market economies. An extension has come about through the identification of dependent market economies (for many Central and East European countries) and hierarchical market economies (for Latin American capitalisms). We claim the existence of a distinct BICS-variety of capitalism that can be labeled as ‘State-permeated Market Economy (SMEs). SMEs are dominated by a particularly close co-operation between public and business actors that is at least indirectly based on informal personal relations – partially even family ties – supported by common values and a shared social background. This is, we assume, the central coordinating mechanism that pervades all institutional spheres in SMEs. A close cooperation between public authorities and companies can also be found within other modes of capitalism, but in no case this is equally predominant, and strongly based on personal relations and common values (but rather on formal contracts or laws). A particular focus is on the role of the state – a state that is cooperating closely with national elites and does not have to give in to the demands of multinational enterprises, but is able to impose certain conditions onto the latter. State permeation does not necessarily entail the existence of a “strong”, centralized state, a dominance of public enterprises and centralized economic planning, but rather an omnipresence of public authorities that may also follow their particular concerns. At the same time, these authorities – and their cooperating companies that are tempted to pursue rent-seeking activities – are largely kept in balance by a relatively autonomous role of private capital, thereby preventing the comprehensive capture of public policies by private interests as witnessed in patrimonial regimes.

Project Team Simone Claar

Researcher at the Insti-tute for Political Scien-ce, Goethe-University Frankfurt/Main Christian May

Researcher at the Insti-tute for Political Scien-ce, Goethe-University Frankfurt/Main

Methods and Data In order to analyse central socio-economic institutions in the BICS, their commonal-ities and differences, we will combine qualitative research methods (e.g. interviews with experts in the respective disciplines of sociology, political science, economics and relevant enterprises) with in-depth statistical research (with a focus on the years 2000 until 2011). We identify a number of indicators for the respective institutional dimensions and these will be evaluated and compared by way of multiple statistical databases. Furthermore we will conduct empirical case studies in Brazil, India, China and South Africa to test and broaden our instruments. They will also help us to iden-tify typical forms of enterprises and bureaucracies. The focus is on the modern sectors of the economy, in particular on large enter-prises. To be sure, there is internal variation within SMEs, given the strong fragmen-tation between, e.g., urban and rural areas. Moreover, the historical evolution of capitalism in these economies was very different. Still, we can highlight some obvious parallels by using the model developed above. The focus clearly is on depicting commonalities between the economies in question, not on their differences. Detailed information as well as a selection of publications on the BICS can be found on the project website: http://www.bics.uni-frankfurt.de Contact: Andreas Nölke Goethe-University Frankfurt am Main Institute for Political Science AfE 1824 Robert-Mayer-Straße 5 60325 Frankfurt am Main Tel.: 069/798 - 22075 (direct) Tel.: 069/798 - 22877 (Secretary) Fax: 069/798 - 28460 a.noelke@soz.uni-frankfurt.de

Tobias ten Brink Goethe-University Frankfurt am Main Institute for Political Science AfE 1631 Robert-Mayer-Straße 5 60325 Frankfurt am Main Tel.: 069/798 - 22038 (direct) Tel.: 069/798 - 22877 (Secretary) Fax: 069/798 - 28460 tobias.ten.brink(at)em.uni-frankfurt.de

Simone Claar Goethe-University Frankfurt am Main Institute for Political Science AfE 2022 Robert-Mayer-Straße 5 60325 Frankfurt am Main Tel.: 069/798 - 22042 (direct) Tel.: 069/798 - 22877 (Secretary) Fax: 069/798 - 28460 claar@soz.uni-frankfurt.de

Christian May Goethe-University Frankfurt am Main Institute for Political Science AfE 1825 Robert-Mayer-Straße 5 60325 Frankfurt am Main Tel.: 069/798 - 22057 (direct) Tel.: 069/798 - 22877 (Secretary) Fax: 069/798 - 28460 may@soz.uni-frankfurt.de