Comparative and International Labor Studies Assignment
Explanation of LME, CME, and VOC
The varieties of Capitalism (VOC) approach is a unique business approach that compares capitalism and production regimes. It mainly captures the subtle aspects of the employees, firms, and shareholders and their ability to organize the production process. It is, therefore, a way of offering an institutionalized approach to explain the institutional system of cross-national differences that is bounded by the four elements of an institution, namely the financial system, cooperate governance, industrial relations, education and training systems, and more importantly, the inter-company systems that entail the governance of relations between companies (Jackson and Deeg 22). For this reason, Liberal Markets and Economies LMEs) and Coordinated Market Economies (CMEs) are capitalist systems that can help explain varieties of capitalism by approaching each of the four elements of various capitalist approaches.
LME argues that firms tend to solve coordination problems through hierarchies and markets. It must capture arm’s arms and a high degree of competition. In this case, the comparative advantage is based on the flexibility of the coordination arrangements. Under this type of coordination, the management holds the ultimate power in all aspects of the operation of the company. For instance, under industrial relations, the organization lacks a strong union, which makes it a decentralized wage-paying system that is decentralized and that which the employer has no power to negotiate their wages. Their job security could be better as the terms of employment are hire and fire. The control of the corporation as a whole is based on the shareholders’ earnings. The more shareholders there are, the more governance and control they have over others. Therefore, it depends on how many shareholders exist in the cooperation, leaving the rest of the power to the remaining individuals, which, again, the one with the most holds the power. Since the employment terms of the cooperation tend to be on a hire and fire basis and that it’s not permanent, the same effect is observed when it comes to employer and employee relations. It is normally short-term, and their relations are only on a market basis. However, some form of vocational training is based on general skills. The LME demands that any form of inter-firm relation is based on contracts and subcontracts to maintain their interactions. Under LME, nothing seems permanent, and nothing is resolved in a democratic manner in which the voices of others are heard.
On the other hand, CME demands that the key features of VOC be based on cross-sharing holding and that the organization’s management be based on network reputation monitoring. No central person or shareholder holds the ultimate power. The same is seen when it comes to employee relations. It is on a long-term basis, and any decisions that involve the employee or the operation of the cooperation are based on the participation and contribution of opinion from the employee. The decision-making management’s decision-making process must also cooperate with the employees’ consensus agreement (Streeck 40). Vocational training is an elaborated industry-based training system in which the employee is trained with highly industry-specific and firm-specific skills. The organization’s relations with other firms are based on a collaborated network and cooperation among the involved firms in joining their technologies to achieve the end goal of each of the cooperate plans. Therefore, CME can be considered to be a democratic approach to the cooperative problem-solving approach of the VOC.
Problems with the Capitalist System
Streeck (35) points out three long-term problems long-term problems associated with capitalism in countries. The first is a consistent decline in the economic growth rate, mostly after 2008. The second issue is the persistent rise in the overall indebtedness in the capitalist leading countries in which the relevant governments, private, public, and financial agencies have piled up turns of debts over the years. Lastly, economic inequality is observed between rich states and those with low economic abilities. These factors make capitalism experience problems that, for many years, have been hard to resolve. They are also the cause of the declining economy and the reason why there is an increasing burden of debts.
Reflection on the Capitalist system
The LME and CME are the best systems systems that help describe capitalism based on the key elements of the VOC. The best way to determine the ability of governance is by assessing the four key aspects: the financial system, cooperate governance, industrial relations, education and training systems, and inter-corporation relations. The main reason is that these elements capture all aspects of the organization’s operation and, for that reason, all states. A clear understanding of the factors helps provide a clear conclusion on the type of systems that determine why capitalism has failed in other countries while it flourishes in others. For instance, as illustrated in LME, management decision-making will have different effects than all-around decision-making, as indicated in the CME. The same applies to the involvement of employees. It also determines an organization’s ability to handle or accumulate debts and the determination to choose between decentralized and centralized systems of operations.
Works Cited
Jackson, Gregory and Deeg, Richard. How many Varieties of Capitalism? 2006.
Streeck, Wolfgang. How will capitalism End?