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Marina Whitman
  Marina Whitman

American-style Capitalism Overshadows Competing Forms in Europe and Asia

7/6/2004 --

Globalization pressures increasingly push industrialized nations to converge toward U.S. brand of capitalism.

ANN ARBOR, Mich.–The pressures of globalization are pushing industrialized nations with their own indigenous forms of capitalism toward a U.S. style of capitalism, says a University of Michigan Business School researcher.

This change–which has been accelerated by intensified worldwide competition in both product and financial markets–is most evident in the areas of capital markets, corporate governance and labor relations, but less so in traded goods and services, says Marina Whitman in her paper "American Capitalism and Global Convergence."

"Despite America's fall from grace in a number of economic, social and political dimensions since 2000, American or Anglo-Saxon investor capitalism continues to be the dominant model where capital markets and corporate governance are concerned," says Whitman, professor of business administration and public policy at the Michigan Business School. "Various pressures continue to push the labor markets of industrialized nations in that direction as well, although embedded social customs and institutions are likely to continue to play a more significant role."

However, when the focus shifts to what firms sell to customers, convergence pressures veer in a different direction, she says.

"Today, the requirements imposed on products, services and production processes by the stringent regulations of the European Union's social-market capitalism are increasingly dominating the global arena, just as the lean-production methods developed in the crucible of Japan's export-oriented capitalism became a global model for the factory floor in the 1980s and 1990s," Whitman says.

Social-market capitalism is characterized by stronger, more pervasive economic and social regulations, which offer greater protection of consumers and the environment than America's more laissez-faire style of capitalism, she says. Rather than customizing products to meet different rules and standards, companies that compete, or hope to compete, in the global marketplace are designing and manufacturing all of their products to conform to the EU's more rigorous requirements.

Although America's form of capitalism appears to be most consonant with the pressures created by the global integration of markets, Whitman sees three challenges confronting the nation in the future: 1) restoring public trust in the economic virtues for which the United States traditionally has been recognized, namely, the transparency of financial information and accountability to the interests of shareholders; 2) continuing to integrate the focus of American investor capitalism with attention to the demands of other stakeholders, including customers, workers, host communities (at home and abroad) and the environment; and 3) forging a cooperative relationship among businesses, labor unions and government in order to enhance workers' employability security in the face of continuing job instability and income inequality.

"Countries like the United States, Japan and Germany, all with different styles of capitalism, are playing a role in global convergence and undergoing significant changes in the process as they search for effective ways to combine these pressures with national economic objectives appropriate to the social attitudes and institutions of their citizenry," Whitman says.

Whitman's paper was published by The Group of Thirty, a private consultative group on international economic and monetary affairs, on which she serves. Established in 1978, The Group of Thirty is a nonprofit international body composed of very senior representatives of the private and public sectors and academia.

For more information, contact:
Bernie DeGroat
Phone: (734) 936-1015 or 647-1847