Industrial Competition, Labor Relations, and Social Democracy: Controversies, Challenges, and Prospects


Contemporary economists who deal with labor relations (e.g., the analysis of wage determination and working conditions) do not explicitly discuss business investment and competitive decisions, while scholars in the industrial organization literature (who study the business firm and competition) do not deal with issues surrounding labor relations. And yet, in the real world, labor relations and industrial organization shape each other and the welfare state in complex ways. The purpose of this course is to investigate the nexus between these issues in both theoretical and historical terms and the implications for the development of the welfare state. The course has two broad parts. In the first part, we will investigate controversies regarding the nature of the business enterprise. It is part of the conventional discourse on economic policy that free-market competition is the key to bringing about national wealth creation with rising standards of living. Yet there is considerable debate in the literature on industrial organization theory regarding the nature of the capitalist firm and the environment within which it grows or dies. Drawing on the classic writings of Schumpeter, the Oxford Economists’ Research Group, the Institutionalist tradition, and others, this part of the class will introduce students to a wide variety of theoretical perspectives on the firm by contrasting the textbook neoclassical theories of the firm with other theoretical perspectives. In the second part of the course, we will investigate—from both a historical and an international perspective—the concrete institutional and political contexts that have led to particular links between business investment, labor relations, and social policy. We are particularly interested in investigating the ways in which business power and preferences have shaped social democratic (or progressive) labor and welfare state policies in the United States, Sweden, and Germany. This course requires some background in economics/social sciences and an interest in historically informed analysis.