The Economist Free Exchange recently ran an article looking at the various taxonomies that are used to categorise models of capitalism. The book entitled “Varieties of Capitalism” (2001), distinguished between liberal market economies (LMEs) and co-ordinated market economies (CMEs).
LMEs’ rely on market mechanisms to allocate resources and determine wages, and on financial markets to allocate capital. E.G. America, Britain and Canada
CMEs, like social organisations such as trade unions, and of bank finance. E.G. Germany, Sweden, Austria and the Netherlands
Western economies tend to sit on a continuum between these two models – below is a table outlining the main criteria each:
Which system is better during a pandemic?
During the pandemic, CMEs have generally had a more sound strategy for containing the spread of the virus. This may be generated by unity and consistency than by the strength of the intervention that is chosen. Some countries, e.g. Sweden, avoided lockdowns completely but seemed to get a lot of public support and relied on voluntary social distancing. New Zealand implemented a lockdown policy from the outset and relied a lot on contract tracing as well as strict system of managed isolation. LMEs such as the USA and the UK have had a policy which have been on the whole disorganised and not taken the virus seriously.
However in such situations and because of their innovative nature LMEs are more likely to focus on treatments and vaccines.
Of 34 vaccine candidates tracked by the World Health Organisation
CMEs = 4
LMEs = 13
(AstraZeneca, an Anglo-Swedish drugmaker working with Oxford University, straddles both categories).
CMEs are likely to have a lower death count but LMEs seem to hold the upper hand with regard to a vaccines. Maybe a global coalition and co-ordination is needed in future to get the best of both systems.
Source: The Economist – Which is the best market model? 12th September 2020