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This is the third of three chapters on the role of economic interests, and of systems for representing those interests, in the politics of welfare state reform; they explore the linkages between national welfare states and national economies, and examine the processes through which economic actors press their interests on policy makers. Here Rhodes explores the implications for welfare states of nationally negotiated social pacts in bridging and making innovative linkages between social security systems and employment rules and wage bargaining. The essential argument of Sect. 1 is that the emergence of social pacts is linked to common domestic and external pressures for welfare state reform in the European Union, and that contrary to the expectations of many commentators, these pressures are neither ‘disorganizing’ European capitalism nor neutralizing the power of the state; furthermore, rather than fragmenting political‐economic structures, pressures for reform have in many instances modified or even bolstered efforts at coordination via bargaining. Section 2 introduces the notion of ‘competitive corporatism’, and shows that underpinning these social pacts are varying degrees of associational cohesion, and two types of coalition — seeking distributional deals and productivity gains — which have complex linkages and overlaps. In ideal typical terms, it can be suggested that competitive corporatism is successfully achieved if underpinned by a close but flexible interlocking of these two types of coalition, although in practice it is not always possible, as has been demonstrated in various continental European countries.

This is the third of five country case studies on income inequality, and investigates the impact of financial liberalization and the rise of financial rents on income inequality in Turkey. The chapter has five sections: Introduction; Indicators of Income Distribution: The Evidence—a broad overview, and evidence on the patterns of income distribution in Turkey over the last three decades; Macroeconomic Adjustment under Financial Liberalization and the Rise of Financial Rents—a discussion of the evolution of functional categories of income that includes an account of the macroeconomic adjustment; The Rising Fiscal Gap and the Role of the State in Regulating the Distributional Structure—a detailed analysis of the rise in public sector deficits and the distributive consequences of the widening fiscal gap; and Concluding Comments and Overall Assessment. Sect. 3 looks at the inherent tensions caused by the macroeconomic disequilibria embodied in the process of integration with world markets under conditions of a poorly supervised banking system and underdeveloped and fragile domestic asset markets; here, it is found to be analytically convenient to decompose the path of Turkish liberalization after 1980 into two major subperiods partitioned by the strategic step of capital account deregulation—which took place in 1989 and was completed by the full integration of the domestic market into global financial markets. This section also studies the patterns of the wage cycle and productivity growth using quantitative filtering techniques, and reports on the disassociation of labour remunerations from the productivity gains in the real sphere of the economy.

This chapter examines the economic logic of free trade and recent empirical evidence reinforcing the case for it. It mentions Adam Smith and David Ricardo who have described the gains from trade in a systematic way many centuries that made economists of today urge for higher income that results from improved resource allocation as the main advantage of trade. It also explains how trade not only helps to improve the allocation of existing resources but also makes those resources more productive. The chapter talks about the productivity gains from trade that are sometimes neglected but appear to be substantial. It also points out the importance of welfare benefits of a greater variety of products that resulted from trade.

This chapter analyzes why inequality has increased in the United States since 1980. It discusses earnings levels and inequality, in which skill-biased technical change, globalization, and related factors function within an institutional framework, first presenting evidence that shows stagnating real wages for well-educated men. The chapter then describes the institutional arrangements that originated in the Great Depression and which helped to distribute productivity gains broadly from 1947 to 1973. It also discusses the way in which the post-1973 productivity slowdown and associated stagflation ultimately led to the collapse of institutional arrangements.

This chapter starts with an inquiry into the nature of different outcome measures that are being used in the medical literature, emphasizing an important distinction between incommensurable versus commensurable measures. The quality-adjusted life year (QALY) represents the most widely used commensurable metric. A key issue is how to value health-related quality of life (HRQoL) on a [0–1] scale by the use of health-state utility instruments. In addition to the health outcomes that are accounted for in the QALY measure, productivity gains might occur as a result of previously sick people returning to work. The chapter discusses the methodological and the equity issues involved when determining the extent to which production gains should be included in an economic evaluation. Finally, the theory behind the willingness-to-pay method is briefly explained, and contrasted with some measurement problems when applied as a way to value health benefits.

This chapter explores the links between profitability, investment, and structural change. This is examined for the case of India, using both a historical overview and regression analysis. In a Kaldorian dynamic economy, the reallocation of investment provides the driver for resource reallocation, allowing more productive and profitable activities to expand and less productive and less profitable activities to contract. Thus, investment choices drive structural change, productivity growth, technological advance, and ultimately profits. Investment in turn responds to expected profits, which are driven by technical change, related productivity gains, and shifts in demand. The relationships are thus circular and cumulative, with this chapter testing for the presence of such relationships.

This chapter traces the steps by which Adam Smith developed a new concept—the division of labor—out of a chain of terms that depended upon and followed from one another: the division of the manufacturing process, worker specialization, machines, productivity gains that are (mathematically) sublime, and time and speed as a coefficient of the cost of labor that “saves time,” among other things. It shows that what held this chain of terms together and gave Smith's interpretation of political economy its coherence was his invention of a new load-bearing concept, the concept of “the division of labor”.