By contrast, VoC’s overarching message is institutional diversity and resilience. Rather than accepting the Thatcherite teleology, Hall and Soskice suggested that contemporary capitalism had stabilized around distinct institutional models — Liberal Market Economies (LMES) such as the United States and the United Kingdom on the one hand, and Coordinated Market Economies (CMES) such as Germany and Sweden on the other. In each VoC, national-level institutions shape firm-level strategy, promoting market coordination in LMES and nonmarket coordination in CMES. While each of these models shared certain structural features, they were nonetheless appreciably different in their institutional features, and in how they faced market pressures. In addition, coordinated market economies were able to sustain the redistributive and egalitarian thrust of the welfare states. Finally, the VoC framework implied that each model had an obduracy, a staying power, because each one generated stable political coalitions around it. So while CMES and LMES generate comparable levels of economic performance, the kinder, gentler, more egalitarian versions of capitalism were capable of resisting the drift toward the neoliberal American model.

Different countries have different “Trajectories of Neoliberal Transformation.” Liberalization takes place as institutional deregulation, institutional derogation, and institutional conversion, and in each country, we find a different mix of these mechanisms. Yet in all countries, liberalization involves an expansion of employer discretion. Employer discretion has three interrelated dimensions: discretion in wage determination, discretion in personnel management and work organization, and discretion in hiring and firing. In each of these areas across a wide variety of different countries, owners and managers have much more freedom to run their businesses and “manage” their employees as they please than they had a few decades ago. VoC’s focus on institutional form draws our attention away from these developments.

Baccaro and Howell place class actors and class power at the center of their argument. Since the end of the 1970s, we have witnessed “a marked shift in the balance of class power,” as “weakened and divided trade unions face resurgent and radicalized employers.”13 In making this case, Baccaro and Howell draw on the power-resources approach, which stresses the importance of the strategic context within which actors operate. Employers are fundamentally unruly, and they will seek an expansion of their discretion at the firm level and a liberalization of industrial relations institutions “unless they are constrained by the power of trade unions or the state. The pace, scale, and scope of liberalization will reflect the relative balance of power between labor and capital.” To recall, VoC scholars portray employers as both rational and strategic as well as cooperative and prosocial in their support of traditional institutions. For Baccaro and Howell, this is misleading: more often, employers play hardball with traditional institutions, transforming them from within. The state, they stress, is far from neutral in this process. On the contrary, it is “the most important agent of liberalization.” They stress that neoliberalism is “not about limiting state intervention …. It is instead about using state power to bring about (and institutionalize) a market order.”15 As Polanyi argued, interventionist states are indispensable for this project.