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Przeworski and Wallerstein: The structure of class conflict in democratic capitalist societies

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Przeworski and Wallerstein. 1982. The structure of class conflict in democratic capitalist societies. American Political Science Review 75: 215-38.

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In Brief

"This article presents a theory of class conflict between workers and capitalists who pursse their material interests under a form of societal organization that combines private ownership of instruments of production with representative political institutions. There exist economic and political conditions under which both classes would simultaneously choose courses of action that constitute a compromise: workers consent to the institution of profit and capitalists to democratic institutions through which workers can effectively press claims for material gains. When these conditions hold and a compromise is in force, the role of the state consists in institutionalizing, coordinating, and enforcing the terms of a compromise that represents the preferences of workers as well as capitalists."

Arguing contra to Marx, Przeworski and Wallerstein claim that the interests of workers and capitalists are not necessarily irreconcilable. Instead, certain political and economic conditions may encourage compromise between the two classes in which capitalists agree to democratic institutions and workers agree to institutions of profit. Once a compromise is reached between the two classes, the role of the state is to institutionalize, enforce, and coordinate the terms of the compromise in order to reduce risk.

The key point:

  • The model shows that a compromise is possible. (The compromise: workers let capitalists keep profits, capitalists let workers have claim to a share of the profits.) The main X: uncertainty (and discount rates). Do you trust the other party to keep the compromise?
  • Implication of the model: the government can change your certainty about what the other class will do. Democracy allows both parties to credibly commit to the other.
  • Another key X: bilateral monopolies. Labor must be monopolistically organized (unionized), and capital must be monopolistically organized. Both sides must be unitary actors. Democracy helps here, too: in democracy, workers can unionize or vote as a bloc.
  • Y = a compromise (or not). Y does NOT equal democracy. Democracy is not in the formal model. The authors discuss it only when discussing the implications of the model. Democracy, they say, can affect the level of certainty and the degree of bilateral monopoly.

Details of the Argument

In a capitalist system:

  1. Private profits are a necessary condition of continued economic growth (they are necessary for future investment).
  2. But they are not a sufficient condition for improvements in workers' conditions.
  3. So workers adopt some strategy. Either they appropriate all capital (socialism), capitalists claim all profits (militancy), or they all come to some compromise that capitalists may retain profits (for reinvestment) as long as they channel some profits towards improving worker's material conditions.

The compromise may not explicitly state that, but that is the purpose it must serve. Basically, workers will agree not to expropriate all the capital (they agree to private profits), and capitalists agree to allow unions, parties, and an autonomous state (they agree to democracy) so workers can get their share.

Making this compromise requries three conditions. (1) The "degree of bilateral monopoly." How cohesive is labor? Would other (e.g. non-unionized) firms be able to drive compromising firms out of business? Labor must be cohesive. This is the "degree of bilateral monopoly." (2) Enforcement: Whose needs will the state respond to? Will it uphold claims made by both sides? (3) Discount rates: [will there be lots of inflation? If so, workers want everything now, rather than waiting for capital to give returns]. Also, the usual investment-related domestic and international risks.

Key conditions for the compromise to hold (the three conditions above) determine the certainty of the compromise. If both workers and capitalists are certain the compromise will hold, compromise is possible. (Workers' level of militancy will remain low, and capitalists will not divest). If one party is certain, or both are moderately certain, compromise is also possible (pages 230-1).

Three other possible outcomes (non-compromise outcomes): workers take over the capital and eliminate profit as an economic reality [socialism]; capitalists repress workers with force [dictatorial capitalism--common in Latin America when the military steps in]; neither party has power to win, and the stalement continues without compromise [democratic capitalism without compromise--the US is here; decentralized unions, thus militancy (strikes) for every gain, etc.] (233).

Comments and Criticisms

  • Role of state: If enforcing the compromise requires a state, where does the state come from? Isn't its origin based on one or both of the classes? Przeworski seems to mean that the prior form of the state is irrelevant--and the form of the state seems to be endogenous to the bargain--its form is an expression of the compromise (236). The compromise requires some sort of democratic structure to enforce it. They are NOT trying to explain the origin of regime types, though--this is not fully an explanation of the origins of democracy. To the extent that it does, compare with Collier, Paths Toward Democracy.


Please Merge into the Above

An editor has submitted the following summary, which should be merged into the notes above.

Summary: Arguing contra to Marx, Przeworski and Wallerstein claim that the interests of workers and capitalists are not necessarily irreconcilable. Instead, certain political and economic conditions may encourage compromise between the two classes in which capitalists agree to democratic institutions and workers agree to institutions of profit. Once a compromise is reached between the two classes, the role of the state is to institutionalize, enforce, and coordinate the terms of the compromise in order to reduce risk.

Definition of Compromise:

"...a situation in which workers pursue strategies that entail positive profits, and capitalists consent to institutions that enable workers to pursue their claims with reasonable chance of success." (p. 232)

Determinants of Risk/Certainty:

1)Degree of bilateral monopoly

2)Institutionalization of labor-capital relations and the likelihood that a compromise would be enforced by the state

3)Ordinary risks inherent in investment as a result of domestic and international economic fluctuations

Possible Outcomes: When workers become uncertain, they become more militant, and when capitalists become uncertain, they disinvest. This leads to four possible outcomes:

1)Both classes are highly uncertain � Workers become highly militant and capitalists disinvest regardless of level of militancy.

2)Workers are highly uncertain and capitalists are relatively certain � a compromise can be established in which workers are kept from raising their level of militancy by capitalists' threat to disinvest.

3)Workers are relatively certain and capitalists are uncertain � a compromise can be established in which capitalists are forced to invest by threat of militancy and workers' optimal level of militancy is low.

4)Both classes are relatively certain � Both types of compromise from 2 and 3 are possible.

Questions:

1)Przeworski and Wallerstein note that a major limitation to their model is that they assume that risk-levels and discount rates are exogenously determined. What difference does it make if these become endogenous components? (i.e. What if the opposing parties can also compromise over levels of certainty?)

2)How do transaction costs fit into this model? (i.e. P&W note that anytime change takes place, the two groups must renegotiate, but doesn't account for the costs of this process. Does accounting for transaction costs change the model?