Liberal Market Economy (LME) examples:
UK, USA, Canada, Australia, other developed English-speaking economies
Coordinated Market Economy (CME) examples:
Germany, Japan, Scandinavian economies, Netherlands, Austria, Switzerland
LME: Equity-based, large stock markets. Easy for investors to switch assets - this leads to strong pressures for short-term profits
CME: Credit-based, i.e. important role for banks. These often take a direct role in corporate decision-making, through representation at board-level and take a longer term view of corporate success.
Relationship between firms
LME: Competitive and contract based, e.g. subcontracting tends to be based on price competition and be relatively low-trust.
CME: Collaborative, both in terms of creating institutional infrastructure (wage, bargaining, training etc.) and in terms of long-term, high-trust relations across the supply chains of large firms.
Vocational training & education
LME: General education provided by state. Vocational training systems unstable, as large firms prefer to develop their own systems rather than contribute to sectoral/occupational systems.
CME: Firms pool resources into highly developed vocational training systems, usually at sectoral level (not Japan).
LME: Workplace or firm level.
CME: More centralised (sectoral or national level)
LME: Hire and fire’ principles lead to low-trust relationships between employers and employees. Reliance on numerical flexibility.
CME: Long-term, higher trust relationships between co-workers. Reliance on functional flexibility.
LME: Primarily occupational.
CME: Primarily Sectoral (not Japan).
Role of the state
LME: To ensure ‘free and fair’ markets, but otherwise to intervene as little as possible.
CME: To establish a framework by which authority can be delegated to corporate actors, e.g. employers’ organisations and trade unions.
Human Resource Management
LME: Attempts to increase cooperation from employees historically made difficult by conflictive industrial relations, more recently by low levels of employment security creating difficulties in obtaining commitment. Individualisation of HR (individualised pay and career development, decline of trade unions).
CME: More collectively oriented HRM (higher levels of collective employee involvement, greater prevalence of autonomous teams, less individualised pay).
Areas of competitive strength
LME: Sectors involving radical innovation (IT, Science).
CME: Sectors involving incremental innovation (engineering)