the ‘new institutionalism’ and political analysis

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Review article by Grahame Thompson

The 'new institutionalism' and political analysis

Text reviewed

Joel Krieger, Reagan, Thatcher and the Politics of Decline, Polity Press, 1986. Peter Hall, Governing the Economy: The Politics ofstate Intewen- tion in Britain and France, Polity Press, 1986.

Anyone familiar with American political culture must have noted its peculiar isolationist tendency. Despite America's position as the orchestrator of 'Western democracy' its citizens have remained fundamentally uninterested in, and ignorant of, the detailed 'habits and politics' of those foreign nations over which America's influence has cast both a light and a shadow during much of this century. Perhaps this is to be expected, and indeed what country could say different of its own political culture's relationship to foreign affairs? But in America's case this indifference has not been confined just to the voting public or political leadership. It has tended to pervade American academia as well. An intellectual interest in the contemporary social and political formation of foreign countries - even within Europe - is also something lacking in America's academic culture. Any sustained scholarly fascination or endeavour with respect to Europe, for instance, tends to treat it more as an historical object of enquiry than something of contemporary import. Even the little genuine interest shown in internal European affairs over the post-war period is now tending to evaporate as America's international 'gaze' is refocused away from the North Atlantic and towards the Pacific Rim.

Of course these general comments need to be qualified a good deal. A serious academic concern with Europe has emerged amongst a few American institutions and authors. Britain's economy, for instance, has been the subject of two important and influential studies conducted by the Brookings Institution.' One

Economy and Society Volume 16 Number 2 May 1987 O RKP 1987 0308-5147/87/1602-0252 82

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The 'new institutionalism' and political analysis 253

can also point to the reaent work by political scientists such as Theda Skocpol and her a~sociates.~ Peter Kat~enstein,~ Michael Piore and Charles Sable,4 and John Zy~man .~ Indeed these latter authors have produced substantial commentaries and critical reflec- tions on post-war Eurowan political developments from which useful theoretical conceptualizations have emerged. It is within the tradition set by Katzenstein, Zysman and Skocpol in particular that the two books u n d e ~ review are set, though they represent a distinct position within it. Broadly speaking Krieger and Hall occupy the 'new institutionalist' wing of American political science and both are, or have recently been, associated with the Center for European Studies at Hamard Universitye6 A review of these books provides us, then, with an opportunity to look not only at the substantive concerns indicated by the titles of the two volumes but also at the more progravatic (or 'methodological', with a small 'm') concerns that go to help organise the material presented. In addition it gives us a welcome chance to discuss two books that one might hope indicate a growing concern with European political and economic adjustments by serious American scholarship.

Both of these books adopt a 'comparative perspective'. While Hall confines this to a comparison between the UK and France in the main, he adds spme additional contrasting material on Germany. Krieger's comparison involves the UK and the US. I will come back to this idea of a 'comparative perspective' near the end of this review but given the concerns of both books, and the focus of this review on Europe and the UK in particular, I discuss Hall's substantive analysis first. Subsequently I move on to the volume by Krieger. In discussing these substantive concerns, however, issues associated with the authors' more 'programmatic' positions are also highlighted and these are taken up more explicitly in the final sections of this review.

By 'governing the economy' Peter Hall means to discuss the typical patterns of state intervention with respect to 'mixed' capi- talist economies and the policy formation that is concomitant upon them. To begin with, his first chapter sets out the 'theoretical wares' of the book by reviewing and criticising existing approaches that have been deployed to analyse these relationships. To this end functionalist models, cultural analysis, public choice theory, group theory and state-centric approaches are briefly reviewed and found wanting, while the rudiments of his favoured institutional approach are more positively assessed.

The functionalist emphasis on political life being an organic

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254 Grahame Thompson

whole in which institutions function to re-produce that whole is thought to be both too robust and perhaps, at another level, not quite robust enough to specify the manner in which economic policy is derived. It makes too robust a claim, it is argued, in that the outcomes of state intervention have been variable between countries and not necessarily successful in re-producing the economy. This rather than being 'all of a kind' and deemed successful in the task, as would be implied by functionalist theory. Secondly it has not been quite robust enough, it is suggested, in that its 'dys-functional' variant can only specify an ad hoc, tran- sitory relationship between economic problems and the adequate means brought to bear on them by the state, in which the social system or structure causes the institutional adaption and agent behaviour rather than the reverse. Cultural analysis, which empha- sises the 'style' and typical behavioural patterns of political actors that go to produce a collective set of attitudes and informal ways of 'doing things', is criticised for being on the one hand too sweep ing to pinpoint and conceptually circumscribe the differences in economic policy making between nations, and on the other hand not able to explain any real differences that it might in fact identify. Public choice theory is criticised for ignoring the obvious importance of variable institutional contexts to the framing of the individualised calculus presumed to determine choices and policy.' Group theory stresses the way social groups (classes, fractions) or coalition formations work to determine policy via the expression of their collective interests. Again this is criticised on two counts. Firstly on the basis on the capacity of such groups to determine policy - it may just not be there - and secondly on the way institutional organization itself partly determines those groups and the interests they may wish to promote. Finally state-centric theories, which posit something of a unified state apparatus confronting a civil society, do not in fact explain much about the actual behaviour of the state, it is claimed. This is because of the way the organization of civil society itself constrains and limits the state's action. Thus once again, in Hall's view, we are thrown back upon the particular characteristics and importance of that wider net- work of ancillary institutions associated with the economic system and society for an explanation of both the form and effectiveness of state intervention in the economy. 'Contemporary states do not seem to be as automonous from societal influence as state - centric theorists imply' (p. 17).' It is then a reciprocal interac-

tion between the state and civil society, where both of these are seen as involving an historically contingent and disparate set of institutional structures and practices, that propels Hall's own emphasis on that institutional matrix. He sums this up as follows:

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'The concept of institution is used here to refer to the formal rules, compliance procedures, and standard operating practices that structure the relationship between individuals in various units of the polity and the economy. . . .Throughout, the emphasis is on the relational character of institutions; that is to say, on the way in which they structure the interactions of individuals'. (p. 19)

Thus one significant preliminary point to note about Hall's approach, whatever one may think of his discussion of the positions he rejects, is that he is still concerned with the individual actor in the context of the favoured institutional approach. This is reconfirmed later, for instance, when the market as an institution is discussed (p.47). Market participants act rationally in the context of the institutional arrangements that make up particular markets and individuals respand rationally to the incentives they face there. Thus although 'the market' as an organising idea is displaced - and a multiplicity of market forms quite reasonably substituted in its place - the rather traditional rational actor reappears, but now faced with a diverse set of incentives to which he reacts. The problem is, then, whether this really escapes the model of public choice which Hall is at pains to criticise earlier.9 I return to the implications of this issue below.

After this preliminary 'throat-clearing' exercise of chapter 1 there follow four chapte* of substantive anlaysis of the UK case and three on the French experience. Two chapters in the final sec- tion sum up the strengths and weaknesses of the institutional position, and it is here that the German comparative material is briefly introduced as a contrast, All the analyses of these chapters are well researched and cleady presented, making a useful contribu- tion to an understanding of the areas of policy formation addressed. In the following few paragraphs I try to summarize Hall's analysis, hopefully without doing it an injustice in such a short space. But this will better enabld me to make a number of comments and critical remarks on its implications without having to resort to a repetition of the argument. Here I also pick out only the main threads of the analysis offered as I see it.

Britain's economic decline is attributed to the complex operation of four key institutionalized features in this analysis. The first of these is the 'induswy-finance nexus'. The early international orientation of British capital and the tradition of internal finance for investment purposes, plus the strong development of the share- form, has left the UK with only a loosely connected industrial- financial nexus. UK commercial banks, for instance, are not traditionally closely connected to industry via links of medium and

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256 Grehame Thompson

longterm lending. Secondly the traditional 'product markets and the structure of industry' have operated as an obstacle to the development of British industry in its efforts to accommodate a changing and modern pattern of demand. Firms are too small and orientated towards semi-industrialised markets. Thirdly 'firm organization and performance' in the sense of the internal control systems, management practices and the educational and training system more generally have dampened the adaptability of firms and served to establish inefficient managerial: hierarchies. Finally the 'structure of the labour market and shop floor power' has inhibited rationalisation and flexibility in meeting changed market conditions and product demand innovations.

It is the complex interaction of all these four features which is stressed as providing the context for the UK's relative economic decline. Thus instead of picking on the weakness of, say, the state or of management as holding the key t o an explanation, or placing all the blame at the hands of the trade unions, Hall quite rightly wants to situate the problem in terms of a complex of interdependent features none of which can be singled out as the culprit. Of course all this is to some extent quite familiar and con- ventional. The features highlighted are un-controversial and indeed a similar argument about the complex interaction between a set of elements not unlike the ones highlighted is provided by Williams, et a1 (1983) to explain the inability of the UK to main- tain a robust manufacturing base.1° The list clearly serves, however, as a useful pedagogic device to undermine simple unidimen- sional explanations of the problem.

When it comes to the pattern of economic policy-making itself, this is built around the four-dimensional institutional legacy just described, but with some additional features. In fact a new four- fold matrix is suggested which is now invested with the approba- tion of a 'structure'. Thus the roots of post-war macroeconomic policy and industrial policy are seen as emerging from (i) the characteristic British position within the international sphere; (ii) out of certain features associated with the organisational configuration of British society; (iii) its state structure; and finally (iv) its political system. Once again we briefly comment upon these in turn.

The first is seen as important in giving macro-economic policy, and particularly the protection of sterling, a priority over industrial policy and the growth objective. The UK was thus saddled with a higher exchange rate and more deflationary policy than might otherwise have been the case. In addition this international orientation promoted an excessive military presence overseas and the continued international orientation of British finance capital. As

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far as the 'societal structure' is concerned, the weakness noted above of financial instituaions and their relationship to industrial capital is re-emphasised, along with the organisational features of labour and employers oltganisations. Their loose configurative structure undermined any corporatist moves initiated by the state to re-generate the industrial structure. With respect to the 'structure of the British state', the division between the Bank of England and the Treasury is highlighted. The Bank represented and supported the international orientation of the City while the Treasury assumed responsibility for government spending. Thus there was no politically robust institution to attend to the needs of industry and growth in the first instance. Added to this the secrecy, political 'neutrality' and hierarchical character of the Civil Service worked against innovative approaches to policy formation. Lasqly the 'political system' - basically the way the Conservative and Labour parties have been organised - also mitigated against radical and forward-looking policy promo- tion. This is because broad alliances between the workers and peasants, say, for innovative social reform (as in Sweden) were ruled out by the major divide being between industry and finance. In addition (and by contrast) the main parties in the UK have been centrally implicated in, and indeed explicitly developed to defend, the independence of the broad divide between capital and labour, it is argued. A non-interventionist proclivity ensued where strong action to either reorganise industry on the one hand, or the labour market on the other, soon gave way under the burden of a laissez-faire sentiment or the dictates of 'free collective bargaining'.

I l l

So much for the discussion of Hall's institutionalized frameworks. These have been described at some length to give a flavour of the range of features highlighted but also to demonstrate something of how the institutional approach works. Formal institutionalised 'structures' are set up and policy possibilities and obstacles discerned from them. Thus Hall goes on to review the typical approaches of British and French macroeconomic policy and industrial policy, seen as a consequence of the differential institutional frameworks characterising the two countries and where the features highlighted above in the UK case are largely contrasted with the French case. Without getting into the detail of this, a number of comments are in order. These are organised around what might appkar as problems with an analysis with which one might otherwise agree or where a difference in emphasis arises.

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258 Graheme Thompson

As a starting point let us take the way macro-economic policy is argued to have worked. This is discussed in the UK case very much in terms of a 'Keynesian revolution' experience and the problems of reconciling a multiplicity of objectives given the severe structural limitations set by a weakening economy and the institutional parameters mentioned above. While all this seems eminently sensible at one level, it can lead to a glossing over of the real way in which the hierarchy of competing objectives emerged and changed over the post-war period.

To take a rather unfashionable example - the objective of economic growth - this tends to be relegated to a very secon- dary position in these accounts. Thus it is the relationship between the employment objective and the inflation objective that traditionally holds centre stage, with the balance of pay- mentslexchange rate objective strongly hovering in the wings. Indeed this latter objective can also appear on centre stage at times, as it tends to in Hall's own account where the maintenance of a high exchange rate for the pound is seen as leading to a more deflationary stance for the economy than might have otherwise been the case over much of the post-war period, and hence also to sacrificing economic growth.

By contrast it is argued that the French have not let macro- economic constraints of this kind dictate an emphasis away from economic growth to such an extent. Rather they have sacrificed their exchange rate on numerous occasions, thereby reflating the economy and securing a more favourable growth environment. Added to this is the way the organisation of the French state and of the financial system in France has served to provide a more sustained flow of finance for industrial investment, and allowed the picking of possible 'national champions'. This has all been organised around an emphasis on state initiated 'indicative planning' with a central role being played by the Ministry of Finance and the Bank of France. There is clearly a lot to agree with here but I open up just one oi- two objections.

Notwithstanding the fact that Hall is somewhat more sanguine about the success of French 'indicative planning' than are, say, Estrin and Holmes (1983)' economic growth has in fact appeared as the predominant objective in the UK at times over the post- war period. This has been particularly so when the constraints set by competing objectives have either been ignored or rendered non-binding by explicit policy action. For instance, it has been argued that economic growth emerged as a definite political objective on three separate occasions.ll The first of these was with the immediate post-war Labour Government in 1945-50, organised around successive versions of the Economic Survey; the second

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encompassed the brief pqriod between 1964 and 1967 when the National Plan was formulated in the context of the DEA and NEDO; finally the Conqervatives' 'dash for growth' associated with the Barber Boom of 1972-73 took growth as its main objective in an attempt to lo~sen other economic constraints in the long-term. The fact that these attempts did not last long and eventually foundered as other more pressing problems emerged should not deflect from a recognition of them for what they were. In the first two instances definite institutional backing was given, and in the latter case the, exchange-rate constraint had been lifted by the decision to float the pound in 1972. The important point to note is that each of these involved a definite political commitment to go for growth.

Secondly, we should p~rhaps be wary of accounts that suggest the UK, in contrast to ather European countries, has not had a relatively consistent industrial policy over much of the post-war period. Hall for instance underemphasises the impact of nationali- sation as a surrogate for industrial policy, and the use made of the nationalised industries as a way of conducting such an industrial policy (by both Labour and Conservative governments of the pre- and post-1980s periods). He also underemphasises the surrogate nature of British (and French for that matter) defence policy operating as an industrial policy. Elsewhere it is suggested that UK defence policy has been one of the mainstays of its industrial policy during much of the post-war period (Thompson 1987a). The emphasis given in the UK to avionics, aircraft building and to the nuclear power programme by government funding has been intimately tied up with the 'industrial policy - defence policy' nexus. This may not have been a very successful policy but it has consistently been followeQ even so.

Thirdly, one might point to certain features of the labour- market which are at least more ambiguous than might at first appear. It is clear for ingtance that French labour market conditions are organised in a different way to the UK's. Hall argues, for instance, that labour is not as powerful in France as in the UK. It is organisationally split at a national level and there is no close liaison between the political and economic wings of the labour movement, in contrast to the UK. This has allowed the French state a greater leeway to devalue its currency and more easily pass any inflationary consequences on to a relatively un- organised labour force - thereby further helping establish more favourable macro-economic conditions for growth.

By contrast in the UK such an option has been largely ruled out and 'incomes policies' have had to be promoted instead. These have largely failed in their intention precisely because of

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the structural features and constraints mentioned above when discussing labour market conditions more generally. Now, there is a lot of truth in this but it raises some difficult political problems. For instance might it not be better to have a unified labour organisation with close ties to a national political party? This has been the case in Sweden for instance, with satisfactory results. Thus there could be, at least potentially, an 'institutional' strength in the UK system on one set of calculations. The real issue here is one of centralised versus decentralised bargaining. Similarly, have incomes policies quite so obviously 'failed' in the UK? This is cer- tainly something both the Left and Right insist upon arguing. But taking the Social Contract period between (roughly) 1974 and 1978 as an example, this produced some important legisla- tive reform which gave workers extended rights against unfair dismissal, compensation in cases of redundancy, plus other equality of opportunity advantages, and ACAS was set up, amongst other things. These advantages have proved of considerable benefit to workers during the recent period of recession and job loss. Thus with respect to a different kind of political calculation this period may not have been quite such a failure as is often made out.12

It is here that we reach the crux of the matter, since failure or success, strength or weakness, advantage or disadvantage, etc., are evaluative criteria dependent upon a definite political calculation. They are not analytically abstract or neutral. In addition this serves to raise a systematic ambiguity in Hall's overall approach, which concerns the manner in which 'politics' - in terms of political argument and struggle - intervenes in his analysis. To antici- pate a point developed at greater length below a specification of the institutional matrix and its rules and regulations cannot ex- haust social analysis, and in particular adequately characterise the nature of the 'politics' that emerge within that institutional complex. This should be clear from the comments developed immediately above where it depends upon what political calculations are made and what operating practices exist within any institutional context that determines the conce tion of its characteristics and the outcomes concomitant upon it. P3

These comments have raised points of criticism. It now remains to discuss one of the strengths of the institutional approach. Here the German case-material can serve the purposes of illustra- tion. The hallmark of German macroeconomic policy, Hall suggests, has been twofold; namely the maintenance of an undervalued deutschmark on the one hand and a consistent bias in favour of a deflationary fiscal and monetary stance on the other. To some extent these might be seen as in conflict since the undervalued currency leads to a vulnerability to imported inflation. But in

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The 'new Institutionalism' and political analysis 261

fact they have emerged as complementary policies in the context of a twinned institutiohd arrangement somewhat peculiar to Germany. The commitment to deflation is often put down to the supposed hypersensitivity of the German people to the risk of inflation, i e . to a 'cultural' attribute broadly speaking, arising from fairly obvious historical experience. But Hall argues that far from this longscanding commitment being the consequences of a ~ ~ l t u r d mechanism, it is better seen as determined by a particular and convergent institutional arrangement unique to Germany. On the one hand the well-known organisational relationships between banks and industrial conaerns in Germany has secured a financial sector that is committed to the 'health and welfare' (i.e. profit levels) of industrial capital. Under-valuation has produced an ex- port-led capacity for German industry to secure these advantages which the banks strongly support because of their direct material interest in the equity of such industrial concerns (unlike in the UK). A political alliance has been built up here to promote the policy of a continued undervalued currency. In addition to this, and on the other hand, the power of the Bundersbank - a highly autonomous institution Within the structure of the Federal Repub- lic - has served to counter any laxity in government fiscal and monetary policy, and keep periodic inflationary tendencies in check, Thus it is this twin institutional context that has secured the German emphasis an an under-valued currency and non- inflationary conditions rather than any 'cultural' mechanism.

As the title of Joel Krieger's book suggests, he is above all concerned with a 'politics of decline'. Two immediate issues are posed by this formulation. In the first place it raises the ques- tion of a decline from what? Secondly, it involves the issue of the nature of the polidics operating in his account of such a decline.

The 'decline' is conceived as a process of the undermining and eventual dissolution of what is variously called a 'post-war settle- ment' (PWS) and/or the 'Keynesian - welfare state' (KWS). Both of these - and particularly the latter - are seen as exercises in liberal coalition building conducted and consolidated during and immediately after the Second World War in the US, and in the UK. In the American case it involved 'the political integra- tion of previously marginal social groups and the harmonization of diverse constituencies' (p. 118) - this organised around a broad national 'weak' Keynesian consensus. In the UK case it refers to 'a set of implicit and explicit arrangements made by repre-

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sentatives of labour and capital under the tutelage of the state which changed the balance between private and public power. . .' (p. 38); roughly equivalent to the notion of an 'interventionist state' (but, it might be added, not a 'corporatist' one) - this organized much more aggressively than in the US via political parties.

Krieger charts the progressive disintegration of this 'PWSI KWS' in both the UK and the US culminating in the election of Margaret Thatcher in the UK and Ronald Reagan in the USA. It is the contrasting ways these two political leaders transformed the political systems in which they operated, and consolidated their own organisational power base, that forms the bulk of what is at times a fascinating account. Although Krieger is concerned with the institutional background to this process - indeed he demonstrates the deft way in which both leaders made use of the strengths and weaknesses of the institutional structures in which they found themselves, and very much to their own advantage - his analysis is pitched rather at the level of the political arguments, programmes and practices engaged in within the two countries. In a way, then, this account complements Peter Hall's more formalistic approach with a definite feel for the character of the politics in operation and the way they changed over the period dealt with. Thus where Hall would highlight 'the institutional complex', Krieger would highlight the 'nature of its politics' in their various accounts of European and American political developments.

Let us take Krieger's analysis of the way Ronald Reagan first instituted himself within the American political system and then progressively established his seeming dominance over it as an example of how this more political technique works. 'Above all else Reagan is the electoral expression of a culture of defeat . . . economic stagnation and declining global influence broke a thirty- year consensus' (p. 131). Reagan capitalised on the fear and uncertainty associated with a range of threats perceived to result from the collapse of the US'S imperial dominance, the declining dollar, renewed unemployment, stagflation, sexual liberation, family disintegration, and so on. In this context he both helped insert, but also capitalised on, a new range of ideological appeals - populist anti-statism, anti-welfarism, a Manichean cast of foreign policy and the 'non-pain' promises a supply-side economics.

But this response was consciously analytical, it is claimed. These ideologically inspired responses represented a disintegra- tive strategy on his part - carefully separating each disillusioned constituency into their component parts and appealing to them in turn. 'Each of his appeals - tax cuts, reduced social spending,

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a balanced budget, an end of the federal support for civil rights initiatives, defence of the family and opposition to abortion, expanded military spending, reduced environmental constraints on business - was intended to mobilise support in a specific constituency' (p. 150). In this it was decisively effective and polar- ising, he suggests. Supply-side economics in particular offered a new alternative to the discredited assertions of Keynesianism - growth without pain - and a new 'Sun-Belt' consensus seemed to offer the wider alternative to the 'KWS'.

It is important in this to see how Reagan and his closest advisors kept a discrete distanae from the radical 'New RightIMoral Majority', Krieger notes. Their support was important - but moral crusaders do not necessarily make good political thinkers, and Reagan has kept them well away from the White House 'door' whilst he has been in office, thereby maintaining his appeal within the much broader neo-conservative coalition. Many of these are quite sceptical of what they see as the decidedly non-libertarian bent of many of the moral crusaders.

How, then, has Reagan fared in office? Reagan has always pre sented himself as an outsider to the party organisation and traditional political structures. He is just an ordinary citizen trying to make the system work better, but not really part of it - not a pro- fessional politician imbued with ruthless ambition, and so on. This has worked well, Krieger suggests, largely because of the institutional framework of American economic and political policy making which has allowed Reagan to play off parts of this framework against others and use this as an explanation for the policy defeats and setbacks he has suffered. The fostered insularity from tradition pressure groups and special interests also renders economic problems more amenable to political manipulation. This is all en- hanced by the executive's remarkable independence within the US system. It has enabled qbe president to politicise and manoeuvre the Treasury, the Federal Reserve Board, Congress, the Office of the Management of the' Budget, and so on. Krieger argues that Reagan has orchestrated this system remarkably well to his own advantage, explaining away the growing Federal deficit, for instance, as a consequence on the one hand of the profligacy of Congress and its lack of resolve, and on the other of internal disputes between the Federal Reserve Board and the Treasury over which he had little control. However he quickly capitalised on these when it suited him, astutely claiming credit for the growth initiated by deficit-inspired reflation of the economy, but also using the continued existence of the deficit to argue for reduced welfare expenditures while military expenditure remained sacrosanct. All in all, Krieger argues, Reagan has pursued a very clever statist

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264 Graheme Thompson

and displacement strategy to thoroughly rework the politics of the post-war era and remould the political system into one which would perhaps better fit the notion advanced by Hirst (1986) as moving towards 'antagonistic pluralism' (though this is not a term used by Krieger). Krieger similarly casts Margaret Thatcher in this mould - uniting these two leaders almost in their own self-image as radically transforming politicians bent on a crusade of radical change and reform.

Suggestive though this account is - and clearly, as with Hall's analysis earlier, there is a lot to agree with here - it raises one or two issues of interpretation and emphasis which are worth taking up in general terms. Perhaps the main problem for a 'new- institutionalist' inspired analysis presented by Krieger's account is the lack of explicit discussion of the actual institutional changes wrought by 'Reaganism' (and 'Thatcherism' for that matter). While both he and particularly Peter Hall (among many others) analyse the policies pursued by Reagan and. Thatcher in some detail, and present them in terms of a shattering break with previous consensuses or coalitions, reworking the ground of economic policy-making in a completely new image, and so on, it is in fact difficult to point to any explicit and major institutional change that has accompanied these political manoeuvres. I have argued elsewhere that continuities are stronger than discontinui- ties in economic policy making between the pre- and post- Thatcher, era, than might at first meet the eye (Thompson, 1986). This is not to suggest that nothing has changed between these periods. Clearly there have been quite dramatic changes in the style and in the calculations and practices of politics as between what these authors would call the pre-1980s 'KWS period' and the post-1980s 'Monetarist-supply side period.' But what particular dramatic institutional change can be appealed to?

In the field of macro-economic policy making I would suggest very little in the UK case. Perhaps the most important would involve changes at an international level rather than at a domestic one, notably the evolution of international financial institutions and markets in the wake of the era of floating exchange rates, OPEC surpluses, LDC debts, Euro-dollar and international bond markets and so on. But it is difficult to judge exactly what differ ential impact these have had, or indeed will have, on the particular policies pursued by the individual governments that are subject to them and constrained by them. If we turn now to internal conditions then clearly some more obvious institutional change can be discerned. With the Conservatives in the UK probably the most distinctive, and with the most impact, would be (a) the abolition of the Metropolitan Councils and (b) the privatisation

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of some of the Nationalised Industries. Both of these have signifi- cantly affected the bouhdaries of the state and its action with respect to centraliseddecentralised decision-making. Other areas, like the removal of various 'quango' seem less important. However, this does pose the further issue as to how effective these very limited institutional changes have been in redirecting the politics of contemporary Britain or 'governing its economy'. It would seem not unreasonable to be sceptical of their impact.

In general the programme of denationalisation has rather changed the forms of ecronomic intervention with respect to the industrial sectors involved rather than represented a simple with- drawal of such interventibn. The managements of the nationalised industries have fought a long and hard battle for their organisa- tions to; remain 'intact' when denationalised, and indeed on a number of counts made this a condition of their cooperation with the process. As a result what has tended to happen is the transfor- mation of what were a number of public monopolies into private monopolies - or on occasions private duopolies. In relation to these, regulatory bodies have been created to publically 'govern' these enterprises, but at a distance. This will involve new measures of intervention. Private monopolies, or duopolies, are as notorious for inefficiency and malpractices as are public ones, hence the perceived need for a regulatory structure. But the argument about 'more competition' and market discipline is thereby rendered at least partly redundant.

With respect to the LacalICentral government initiatives taken by the Conservatives what is perhaps surprising is the way the remaining local government bodies have been allowed to con- tinue much as before in deciding their own spending priorities. While the level of their block-grants from central government may have been cut, there has been no-earmarking of expenditures by central government for instance. The other pressures put upon local governments to respond to central directives have been done very much within the existing institutional framework which has remained relatively untouched by the Conservatives.

Given these are about the only specifically institutional initiatives that have so far been taken by Mrs Thatcher's governments in the UK, it should make us wary about investing too much in the effects of purely institutional change to the conduct of politics. In addition, if continuities in economic policy-making are still as strong as suggested in Thompson (1986) this would seem to ques- tion the tight periodisation of a 'Keynesian-welfare state' consensus of the pre-1980 period versus a new 'monetarist-supply side' consensus of the post-1980, that both Hall and Krieger tend to make. Again while there is some purchase to be had from these

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266 Grehame Thom'pson

kinds of formulations they need to be heavily qualified if they are not to overwhelm the more ambiguous character of actual political and economic practice.

v I Another area around which much interest has been centred in the UK, associated with the changed political climate of the post- 1970s period, concerns the role of the police and particularly the way this institution is subject to political control. It is worth ask- ing, then, if there has been a significant shift in the institutional parameters characterising this sphere and what the consequence of any such shift might have been. This will also enable us to 'tease out' the precisc nature of the institutional constraint on politics more generally.

In a recent assessment of the problem of police governance which touches on some of these issues Laurence Lustgarten (1986) shows how in fact very little dramatic institutional change can be attributed solely to the arrival of the Conservative Government in 1979. He points rather to the major long-term trends of the steady flow of power to central government, the growing importance, stature and political prominance of chief constables, and the diminution of the police authority as the context for institutional reorganisation over the past twenty years (since 1964 roughly). It is these trends that have served to shape the so-called 'tripartate structure' of police accountability involving the Government, the police forces and the police authorities. But these have been trends operating for over two decades and it is difficult to see what major redirection can be directly attributed to the Conservative admini- strations alone. They have merely served to consolidate, and in one case perhaps hasten these trends - with respect to the centrali- sation of control - rather than initiate them or re-orientate them. Indeed if one looks at purely institutional change over the period since 1964, it is only the development of the Association of Chief Police Officers (ACPO) that represents a clear institutional change with significant operational consequences (namely the organisational direction of 'mutual aid' between forces and in particular the setting up and direction of the so-called National Reporting Centre so controversial during the Coal Dispute of 1984/5), but this also emerged before the Conservatives came to power. In purely institutional terms very little else has changed since the Home Office, the police authorities and the police forceslchief constables have remained more or less set in their institutional configuration over the period. This is not, however, to suggest that their own internal operations have remained unaltered or that

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the relationships between these institutions have remained un- affected. These have b e ~ n subject to the long-term trends mentioned above. In addition there has also been some reorganisation of the police forces theinselves so as to generate larger forces in terms of geographical area, manpower, resources, etc. But again this process is a long-ter~ one, beginning well before the Conser- vatives came to power zind nor has it materially altered the 'tripartate structure'. No new element has entered here to disrupt its function and working.

What this points to then is the limits of the institutional approach per se to an analysis of the nature of both political forces and the substantive outcomes of their struggles. But nor is it to suggest the unimportance of this. Quite the reverse in fact - the institutional aomplex is crucial. But it remains a secon- dary feature to both the modes of internal operation and mechanisms of calculation that inhabit such institutions and perhaps more importantly to those external political calculations that help frame this operational and organisational mechanism itself. Here then is the crucial point at which 'politics' broadly conceived, intervenes within the institutional context largely to motivate it in its operation and determine its parameters.

Let us take an instance of this - namely the Police and Criminal Evidence Act ~f 1984 - also discussed by Lustgarten. This controversial Act sets out what is often thought to be a very permissive standard of reasonable suspicion and general power of search by constables, which might serve to further undermine the 'civil liberties' of the ordinary citizen. In addition, it is often suggested that it is likely to inflame minority groups in particular, since in a period of heightening political tensions, these are the ones most likely to be adversely affected by such powers. Now as Lustgarten notes (1986, pp. 128-9) and as is shown at greater length in Zander (1985) the prerequisite concept for a stop and search - 'reasonable suqpicion' - is very thoroughly spelt out in the Act. Amongst the five paragraphs devoted to this in the Act can be found the following:

'Reasonable suspicion cannot be supported on the basis simply of a higher than averagle chance that the person has committed or is committing an offence, for example, because he belongs to a group within which dffenders of a certain kind are relatively common, or because of a combination of factors such as these. For example, a person:^ colour of itself can never be a reasonable ground for suspicion. The mere fact that a person is carry- ing a particular kind of property or is dressed in a certain way or has a certain hairsty'le is likewise not of itself sufficient. Nor

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is the fact that a person is known to have a previous conviction for unlawful possession of an article.' (Zander, 1985 p. 304)

Lustgarten's comments on this are appropriate:

'Clearly the intention of this instruction is to warn officers against stops and searches based on racial bigotry or a general- ized hostility to street people. It, and many provisions like it in the Codes, are a major improvement in the rules governing the treatment of people subject to police control. The key issue is whether these rules will remain paper pronouncements only.' (Lusgarten, 1986 p. 129)

Here it is the Act's handling of the matter of enforcement that is critical. There are three elements involved here. One concerns the actual rules layed down in the Act to identify and discipline errant officers. The second concerns other measures available for aggrieved citizens to prosecute or seek redress in cases of wrong- ful arrest andlor violent injury or death occasioned at the hands of the police. Each of these are subject to institutionally formulated rules and regulations. But the third element concerns something not so easily specifiable in these terms, namely the informal manner and practice of how the police force and the judicial process actually work, i.e. the practices of 'discretion' broadly speaking. Whilst Lustgarten, amongst others, is critical of the first two elements described above, in that, in his view, these do not provide an altogether adequate means of redress, it is recognised that the third element is a crucial - even the crucial - constituent of a system in which real public confidence in its operation can be invested. Thus without a commitment by police officers of all ranks and members of the judiciary to the formal procedures laid down by the first two elements, such confidence is unlikely to emerge, it is suggested. Even with a more adequate rule based and formally institutionalised ser of procedures, if those in control of such procedures are not prepared to operate them diligently, carefully and effectively, public confidence is still likely to remain in doubt. Thus once again we are thrown back to the real operational practices and modes of calculation and assessment installed within institutional arrangements (their 'ethos' broadly speaking) as being a crucial element in their overall character and effectiveness. A thoroughgoing administrative overhaul of police procedures and the police complaints apparatus, for instance, may thus be a more useful longterm remedy for the 'loss of confidence in the police by the public' than a further round of more elaborated rules and codes.14 In fact, of course, such an administrative reform might itself have to be at least in part codified and elaborated, and

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even rendered into substmtive law, but the point is to place the determinant emphasis on the 'political struggle' involved, in the first instance, to establish this rather than upon the rules and codes as such. Thus from this point of view the institutional complex - crucial though it is - is the consequential outcome of 'politics' or 'political struggle', while at the same time, of course, it interacts with and partly conditions that struggle. This means that 'institutions' are over-determined by politics in this approach. Thus, while institutions may 'dominate', they need not 'determine', or in a different formulation they provide only one of the conditions of existence of 'political practice'. However, the 'decisive moment' should be given to political argument and practice, narrowly conceived.

Thus institutions or the institutional complex are not enough to specify the characteristies of political (or any other) outcomes. These must be supplemehted by the actual policies pursued in the context of that institutional complex. It is these two aspects working in hand that will determine the effects and outcomes in terms of agent behaviour - and as recognised in note 14 these actual policies might be technical and administrative rather than 'political' in an overt sense. Clearly this is also to say that the 'actual policy pursued' is itself partly conditioned by that institutional complex - it react$ back upon the policy formulation possibilities to help mould them. But it does this only in part. It is a necessary condition but not a sufficient one to specify the range of political and managerial outcomes resulting.

Now it might be objected that in fact this is exactly what Hall's formulation of his 'institutional approach', as reported on page 255 above and as developed in his final two chapters, suggests. To be fair, to a large extent this is exactly the case. Hall conducts a more sophisticated and nuanced elaboration of the case for the 'new institutionalism' than I have been able to detail here. In this a lot of the poinxs made above could surely be accommo- dated (despite some ambiguity about the importance of the 'political system' in determining policy - see note 13). Krieger of course (as again noted above) invests a good deal more in the detail of 'political argument and struggle' to formulate his view of institutional effectiveness and change, and the importance of this in the pre- and post-Reagan/Thatcher policy regimes. But independently of this, and of the critical remarks made as to whether such a sharp institutional break can as yet be discerned between the pre1970s 'Keynesian-welfarist' period and the post- 1980s 'monetarist-supply side' period as is implied by both authors, there still remains at heart a theoretical difference between the position being advanced by this review and the Krieger-Hall

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270 Greheme Thompson

approach. Here we return to a point raised earlier about the importance attributed to the individual rational actor within institutionalised structures (see Hall p. 277, in particular). The burden of this review has been to argue for the displacement of this importance and for the substitution in its place of a range of non-per- sonalised attributes and capacities as dictated by a complex social articulation of decisions, choices and calculations. It is precisely these that go to produce 'agents' and their 'actions', here conceived in a manner that is not hegemonized by a 'rationality' (or indeed by an 'irrationality' for that matter) in its ontological sense. Deci- sions, choices and so on are made by people as a consequence of thinking and because of a range of reasons (or because of a range of rationalities) not because they are inherently 'rational' beings.

Here we can point to one final consequence of this position which might help to clarify the argument further. There may be a better way of dealing with the relationship between institutions on the one hand and those policies, mechanisms of calculation, management practices of operation (or whatever one likes to call them) on the other. This is to specify 'politics' as being that domain or set of practices that precisely cuts through or across this dualism. There would seem to be some advantages in trying to dissolve a strict dichotomy between institutions on the one hand and the policieslmechanisms of calculation that inhabit them on the other, since this formulation seems always to open up a somewhat artificial separation between the two. It would then remain for the conception of 'politics' to be that which specifies not the process of articulation of those two separate aspects, but rather one that undermines them as two separate elements. It uni- fies the field of political operation around friendlenemy distinc- tions for instance,15 and in so doing provides the means by which one can understand the role of institutions as constraints upon, say, economic policy formation andlor practices of calculation. In fact these are just that which comprise 'politics' as a set of arguments in their institutionalised manifestation. Here then is a way of foregrounding 'political argument', around the friend-enemy distinction, in its central place as the initiator of political struggles and of 'politics'.

To sum up then, we can welcome these books as being sensible and useful contributions to an analysis of contemporary Euro- pean (and American) political developments. They provide com- prehensive and effective discussions of the issues signalled by their titles. It is of course always possible to point to short-

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The 'new Institutionalism' and political analysis 27 1

comings and provide criticisms of any substantive analyses offered. This temptation I have not been able to resist here. But the books should also provide an opportunity to reassess the role of 'institutions' within political analysis. This review has concentrated on the later issue and has suggested a slightly different emphasis as to how it might be approached. But this is itself very much in- debted to the concerns of the 'new-institutionalism', which are refreshingly represented in these books.

Faculty of Social Sciences The Open University

Milton Keynes MK7 6AA

Notes

1 Caves (1968) and Caves and Krause (1980). 2 Weir and Skocpol (1983), Orloff and Skocpol (1984), and Weir and

Skocpol(1985) amongst others. 3 Kanenstein (1984) and (1985). 4 Piore and Sable (1984). 5 Zysman (1983). 6 This along with a similar centre at Columbia University, New York are

the only two centres conctrned exclusively with Europe in the US. The two books reviewed here, originally arising in the context of the Harvard Center's work, are part of a new series being offered by Polity Press, edited by Krieger and titled Europe and the International Order. 7 Barry Hindess has recently discussed the inadequacies of the public

choice approach in this journal. See Hindess (1984). 8 For an influential American discussion of the usefulness of state-centric

approaches to political analysis, see Krasner (1984). However, despite generally endorsing the importance of the state in this article a close reading dii- plays something of Krasner's ambiguity and uncertainty with respect to the concept and its analytical deployment. 9 See Hindess (1984) on this issue. The tension between the 'new-institu-

tionalist' critique of traditional public choice rationally yet their retention of at least some elements of its foundations within a broader defence of 'rational-action' but now in ,the context of variable institutional constraints1 determinants, is well illustraxed in March and Olsen (1984). (See also March and Olsen, 1976.) Perhaps these authors can be cited as the intellectual 'fathers' of the new-institutignalism as applied to political science. 10 In as much as one can mount a critique of Hall's approach on this score, as is done below in the text to some extent, then this applies to Williams et a1 (1983) as well. In fact even a cursory reading of these two texts will reveal significant difference between the list of features highlighted. But the point of this review is not so much to contrast and criticise either of these lists of features but rather to highlight some inadequacies in the manner in which these two broadly 'institutionalist approaches' operate more generally.

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11 See Budd (1978)' Tomlinson (1985) and Thompson (1987b) for the genesis of the argument made in this part of the text. 12 I make this point at greater length in Thompson (1984). 13 The way Hall tends to down-play what I would like to call 'politics' can be judged from the following quotation:

'Turning to the organization of the political system in these nations, we find that it seems to have played only a subsidiary role in economic policy-making for much of the post-war period. . . . British governments tended to follow broadly similar policies, regardless of their partisan complexion, in such a way as to suggest that the organization of labour, capital and the state was more important to the overall shape of policy' (p. 256).

A response to this would surely be 'well yes', but also 'well no'. Clearly this demonstrates the formalistic tendency inherent in any 'structuralist' account. The 'political system' understood in terms of the programmes, arguments and practices of political parties and their electoral strategy and parliamentary tactics, underscores any institutional structure however deeply it may be embedded. 14 This raises then an important general point about 'managerial practices', broadly speaking, in connection to institutional arrangement and politics. There may be a case for treating a lot of the internal mechanisms of institutional operations as 'non-political' in an overt sense. Certain rather more technical and administrative matters might thus be better treated as just that, and divorced from political disputes that could otherwise overwhelm them. This is a reservation that needs to be borne in mind in the analysis and discussion conducted below in the main text. 15 The 'friend-enemy' distinction is one introduced by Schmitt (1976) to distinguish the political domain from other social arenas.

References

Budd, A (1978) The Politics of Econo mic Planning, London: Fontana. Coves R. E. et a1 (ed.) (1968) Britain's Economic Prospects, Washington, D. C.: The Brookings Institution. Coves, R E. and Krnuse. L. B. (eds) (1980) Britain's Economic Perfor- mance, Washington, D. C.: The Brook- ings Institution. Estrin, S. and Holmes, P. (1983) French Plannmg in Theo*y and in Prac tice, London: Allen and Unwin. Hindess, B. (1984) 'Rational Choice Theory and the Analysis of Political Action', Economy and Society, Vol. 13, No. 3, pp. 255-77. Hirst, P. Q. (1986) Law, Socialism and Democracy, London: Allen and Unwin. Katzenstein, P. J. (1984) Corpora- tism and Change: Austria, Switzerland

and the Politics of Industry, Ithaca, N. Y.: Cornell University Press. Katzenstein, P. J. (1985) Small States in World Markets: Industrial Policy in Europe, Ithaca, N. Y.: Cornell University Press. Krasner, S. D. (1984) 'Approaches to to the State: Alternative Conceptions and Historical Dynamics', Compara- tive Politics, Vol. 16, No. 2, January, pp. 223-46. Lustgarten, L (1986) The Govern- ance of Police, London: Sweet and Maxwell. March, J. G. and Olsen, J. P. (1976) Ambiguity and Choice in Organiza- tions, Bergen: Universiteaforlaget. March, J. G. and Olsen, J. P. (1984) 'The New Institutionalism: Organiza- tional Factors in Political Life', Ameri-

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The 'new institutionalism' and political analysis

can Political Science Review, Vol78, Sept. No. 3, pp. 734-49. Orloff, A. S. and Skocpol, T. (1984) 'Why Not Equal Protection? Ex- plaining the Politics of Public Soaial Spending in Britain, 1900-191 1, and the United States, 1880s-1920', American Sociological Review, Vol. 49, December, pp. 726-50. Piore, M. J. and Sabel, C. F. (1984) The Second Industrial Divide, N. Y.: Basic Books. Schmitt, C (1976) The Concept pf the Po l i t i d , New Bmnswick, N . J.: Rutgers University Press. Thompson, G. F. (1984) 'Economic Intervention in the Post-War Economy'. in McLennan, G., Held, D. and Hall, S. (eds) State and Society in Contem- porary ~ d t a i n . Cambridge: Polity Press. Thompson, G. F. (1986) The Conser- vatives' Economic Policy, London: Croom Helm. Thompson, G. F. (1987a) 'The American Industrial Policy Debate: Any lessolls for the UK?' Economy and Society, Vol. 16, No. 1, pp. 1- 71. Thompson, G. F. (1987b) 'Objeo tives and Instruments of Economic

Management', in Thompson, G. F., Brown, V., and Leva&(., R. (eds), Managing the UK Economy: Cuwent Controversies, Cambridge: Polity Press. Tomlinwn, J. (1985) British Macro- economic Policy Since 1940, London: Croom Helm. Weir. M. and Skocpol, T. (1983) 'State Structures and Social Keynesian- ism', International Journal of Compara- tive Sociology, Vol. XXIV, 1-2 pp. 4- 29. Weir, M. and Skocpol, T. (1985) 'State Structures and the Possibilities for "Keynesian" Responses to the Great Depression in Sweden, Britain and the United States', in Skocpo1,T. (ed.) Bringing the State Back In, (Cambridge University Press, London): pp. 107-49. Williams, K., Williams, J. andThomas, D. (1983) Why are the British Bad at Manufacturing?, London: Routledge and Kegan Paul. Zander, M. (1985) The Police and Criminal Evidence Act 1984. London: Sweet and Maxwell. Zysman. J. (1983) Governments, Markets and Growth: Financial Sys- tems and the Politics of Industrial Change, Oxford: Martin Robertson.

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Notes on contributors

Tala1 Asad is Senior Lecturer in the department of Sociology and Anthropology, University of Hull. His recent interests include theoretical social anthropology, Middle East studies, and genealogy of Christian discipline and ritual.

Paul Hirst studied at Leicester and Sussex Universities and has taught sociology at Birkbeck College, London University since 1969, where he is now Professor of Social Theory. His most recent publications include Marxism and Historical Writing (1985) and Law, Socialism and Democracy (1986).

George Salemohammed is Lecturer in European Studies at the University of Loughborough. Educated at Keele and Paris Univer- sities, his main interests are in language and phenomenology.

Grahame Thompson is Senior Lecturer in Economics at the Open University and is a member of the editorial board of Economy and Society. He is author of The Conservatives' Economic Policy (Croom Helm 1986), Economic Calculation and Policy Formation (RKP 1986) and editor of Managing the UK Economy (Polity Press 1987).

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the ‘new institutionalism’ and political analysis

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