Another world is possible - if only we knew how to get there: The Political Economy of the Service Transition.

Author:Wren, Anne
Position:Reviews

Imagine deleting more than a quarter of Britain's jobs and replacing them with roles requiring different skills, and with entirely different economic and social significance, and you have a sense of what is entailed in the rise of the service economy. From 1951 to 2011, the share of Britain's workforce employed in manufacturing fell from 36 per cent to 9 per cent. In the same period, the share employed in services rose from 46 per cent to 81 per cent. This shift has been associated with many of the major social and economic upheavals of the last fifty years, from soaring inequality to the rise of female employment, and today it remains far from complete. It is not an exaggeration to say that managing this change is one of the main roles of government in the early twenty-first century.

The book under review helps us think about this task. Its ten essays explore why the rise of employment in services, and the related decline of manufacturing, is playing out so differently across the world's mature economies. As Anne Wren argues in her excellent introduction, the book's central thesis is that these differences are explained by differences in domestic institutions. Even if common forces are ultimately driving the rise of service sector jobs, the domestic institutions that a country builds - from the way it governs wage-setting to the way skills are formed in the workforce - mediate these forces, leading to sharply different results. The lesson for policy-makers is clear: if you want to manage the service transition, you must master the craft of institution-building (Wren recently summarised some of the key findings of the book in Renewal: Wren, 2013).

To anyone who has read the varieties of capitalism (VoC) literature, these arguments will sound familiar. Indeed, before assessing the book's contribution, it is useful to remind ourselves of the basic tenets of that approach. Its motivating idea, popularised by Hall and Soskice's seminal 2001 book, is that different types of capitalism can be successful and sustainable, even as common global forces bear down on economies. Countries might not be able to stop the tides of globalisation or of new technologies, but they can build institutions that redirect these tides or that harness them in useful ways. Moreover, these institutions, from vocational training systems to the laws of employment protection, have a habit of clustering into stable formations. Far from being temporary defensive structures...

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