The Political Economy of Adjustment in Mixed Market Economies: A Study of Spain and Italy

Abstract VoC theory seems to be caught in a trade-off between parsimony and explanatory capacity. It provides high heuristic value-added for analysing countries where performance-enhancing complementarities rely on clearly different patterns of actor interaction and forms of coordination. It appears more difficult to extend to ‘deviant’ cases where there is a mix of logics, a high degree of institutional incoherence and an apparent absence of complementarities. This chapter uses the tools of VoC to explain how mechanisms of market and non-market coordination work and change over time in two ‘mixed market economies’ (MMEs) — Italy and Spain. It focuses on the relationship between production regimes and welfare systems, and specifically the wage-labour nexus and employment protection. In contrast to arguments for a distinctive form of state capitalism alongside ‘market’ and ‘managed’ varieties, this chapter argues that the state's role is distinctive but not unique in the Mediterranean countries, and has also undergone considerable change in recent years. It also argues that two different trends can be perceived in these countries: the growth of ‘autonomous coordination’ in which actors seek to manage the economy via new kinds of non-market governance; and ‘market colonization’, a process whereby market modes of coordination emerge and prevail.