Scandinavian Political Studies, Bind 19 (New Series) (1996) 2

On the Critique of Negotiated Economy

Niels Å. Andersen, Department of Social Science, Roskilde University Center

Peter Kjær, Stockholm Center for Organizational Research, Stockholm University

Ove K. Pedersen, Center for Public Organization and Management, Copenhagen Business School

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A critical debate on the concept of negotiated economy has to start from a mutual recognition of fundamental methodological and epistemological differences between the various research positions in the field. In reply to a recent critical comment by P. M. Christiansen on our use of the concept of negotiated economy, we argue that Christiansen not only mispresents our theoretical, empirical, and critical ambitions; most importantly, he also fails to grasp the basic methodological differences between our constructivist strategy of institutional analysis, and the more conventional non-constructivist approach that he propagates.

In a recent issue of Scandinavian Political Studies (1994:4), the Danish
political scientist Peter Munk Christiansen presents a critical review of our
work on the negotiated economy (Christiansen 1994).

We welcome the fact that he has taken the time to engage in an evaluation of our work, and we seriously hope that this could constitute the beginning of a broader critical debate on the potentials and limitations of the concept of negotiated economy in the Scandinavian context. Bearing this in mind, it is regrettable that Christiansen chooses a line of argumentation that not only builds on a misrepresentation of our entire project but he also avoids a more comprehensive debate on the key issues in the study of negotiated economy. We therefore feel compelled to react against the allegations put forward by Christiansen. Besides addressing a number of specific points of misunderstanding, it is hoped our reply will also bring to the forefront some of the key differences between our approach to social science and the type of inquiry that Christiansen seems to represent.

In his article, and the book on which the article is based (Christiansen 1993), Peter Munk Christiansen examines the concept of "negotiated economy" as one possible way of conceptualizing the changes that characterize the relationship between private firms and public regulation.

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Here Christiansen, correctly, distinguishes between an early version of the negotiated economy concept developed in Norway by Gudmund Hernes and others in the late 19705, and a later version developed by Klaus Nielsen, Ove K. Pedersen and others since the late 1980s, primarily in the Danish context. While the early version can be seen as a descriptive term used to characterize firm-state relations in the context of public regulation, the later version claims to be, contends Christiansen, a macro-theory of society.

On the basis of a brief presentation of what Christiansen views as key arguments in the negotiated economy debate, he deduces a limited number of propositions and contrasts them with empirical evidence drawn from a survey of approximately four hundred firms in the manufacturing sector in Denmark. However, Christiansen chooses to operationalize only elements of the early version of the negotiated economy argument on the grounds that the later macro-theoretical concept of the negotiated economy cannot be tested empirically. This does not prevent the author from drawing a number of dramatic conclusions about the implications of the "macro version", which he characterizes as both ideologically biased and theoretically flawed.

Unfortunately, Peter Munk Christiansen offers no further theoretical argumentation, methodological insights or empirical evidence that could substantiate his charges against the "second generation" negotiated economy research. This makes it somewhat difficult to respond directly to these charges. Still, to avoid further misinterpretation, we shall at least provide some general responses to the criticism.

In the following, we do this in four steps: First, we briefly outline the general project of negotiated economy that we have been part of during the past decade. We then discuss our use of the concept of negotiated economy to show how Peter Munk Christiansen has misunderstood its conceptual status in our strategy of analysis. Next, we briefly demonstrate that although the concept as such may not be tested empirically there are still good reasons to maintain it as an analytical lead. Finally, we discuss how normative problems have been dealt with in the debate on the negotiated economy, and we thus reject Christiansen's suspicions of ideological biases in our work.

The Second Generation Concept of Negotiated Economy

The Danish project on negotiated economy was developed out of an interest in studying changes in what has been called the "institutionalized class struggle" in Denmark (Pedersen 1985; Pedersen 1986). Here the term "negotiated economy" seemed appropriate for the characterization of the complex web of bargaining institutions and processes of negotiation that have emerged in the Danish labour market during the past 100 years, and in a

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number of partially related policy fields since the 19505. Initially, negotiated economy was used as a broad metaphor to capture some of the complexity and ambiguity in the organization of interest representation and integration that corporatist and Marxist theories of the state and political organization could not account for (Pedersen 1988, 1990; Nielsen & Pedersen 1988; Pedersen 1993).

Step by step the debate on the negotiated economy has moved away from its narrow focus on class cooperation and labour-market policy, and we now attempt to examine the broader discursive and institutional preconditions for policy formation and political organization across a wide spectrum of policy areas, ranging from industrial policy and environmental policy to EU policy. In this context negotiated economy is seen as a particular way of organizing the interaction between various social actors across and beyond the formal boundaries of state and market and across the formal and substantive boundaries between policy fields. As such, negotiated economy differs both from relations based on legal-hierarchical authority and from market contracting. It therefore requires the creation not only of a particular set of institutional arrangements (discourse-, campaign-, bargaining institutions, etc.) but also of a distinct discursive ordering of political and economic space (for instance the formation of a socio-economic conception) (e.g. Nielsen & Pedersen 1991; 1995). The attempts to describe the emergence of a negotiated economy in the context of existing forms of market and mixed forms of economic organization have in turn led to an interest in describing the new and emergent politically constituted boundaries and identities and in examining the normative and cognitive challenges posed by a negotiated social order (Pedersen et al. 1992; Pedersen, Andersen & Kjær 1993; Andersen & Kjær 1993; Andersen et al. 1995).

Theory or Strategy of Analysis

Peter Munk Christiansen claims that we have promoted the concept of negotiated economy as a macro-theory of society. That is: as a theoretical proposition about the predominant form of policy-making or the nature of state-market relations in our society. We are said to have stated that the negotiated economy has replaced the mixed economy - something that Christiansen not only finds theoretically questionable but also impossible to test empirically (Christiansen 1994, 306 and 316; 1993, 32, 45f, and 166f).

In our understanding, the negotiated economy is not to be viewed as a theory in the conventional sense. We do not wish to claim that the term "negotiated economy" is a theoretical representation of a positive phenomenon (i.e. a stable, objective, and observable phenomenon), or that the Danish economy, on the whole, is a negotiated economy.

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There are two reasons for this. On the one hand, the concept of negotiated economy is an attempt to capture a particular logic of organization which we claim has emerged in a particular historical context in Denmark. This logic, which has been discursively formulated and institutionally embedded in a set of complementary institutions, constitutes a world of economic and political activity centred around various forms of associative action rather than competitive or legal-administrative action. The concept attempts to characterize a particular institutionalized order by extrapolating and reconstructing elements of public discourse and institutional arrangements that cannot be grasped by existing logics of organization. Being an institutionalized order that entails both a symbolic and an authoritative ordering of political and economic practices, the negotiated economy cannot be interpreted in the terms of alternative symbolic and authoritative orders. That is: the logic of a negotiated economy cannot be comprehended on the basis of theories informed by a logic of market or mixed economy since these two logics of organization would only view negotiated relations as dysfunctions or abnormalities. This also means, we would contend, that the importance of a particular institutional order cannot be measured simply against positive social behaviour or attitudes, since we lack means of describing behaviours or interpreting attitudes beyond the already institutionalized meanings that constitute them. Thus we are faced with some genuine theoretical and methodological problems in relation to the study of negotiated economy (see also below).

On the other hand, we have never claimed that this institutionalized logic is the only logic of organization in Danish society or even the predominant logic in state-economy relations. On the contrary, we have stressed the importance of viewing the institutional history of the negotiated economy as a cumulative process in which the negotiated economy does not replace but rather develops on top of or as a recombination of the institutions of the market economy and the mixed economy (Pedersen et al. 1992, 47, 200). Also, the negotiated economy has only developed in certain areas of Danish society, in certain industries and in certain policy fields, and even here it exists alongside with or in contest with other logics of organization, such as those we have termed "market economy" or "mixed economy".1 What we have claimed is that the negotiated economy is probably the newest and most complex of the three, and that it entails a unique way of formulating and dealing with economic and political problems, and unique challenges to our understanding of social organization and social change.

What is the point of this particular approach to conceptualization? Why not develop a more conventional theory of negotiated economy, a theory based on general and positive propositions about the existence of a negotiated economy - or for that matter a mixed economy or a market economy?

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There are both theoretical and methodological reasons for this choice of strategy of analysis. On a theoretical level, our main interest has been to develop a viable strategy of institutional analysis that makes it possible to study the historical formation and change of institutions. In our view, institutions are social constructions of reality that constitute actors, actions and fields of activity, and knowledge in our society. This definition of institutions, which is inspired by work in the field of language- and discourse analysis (Foucault 1972; Habermas 1984, 1987; MacDonell 1986; Edelman 1988; Bourdieu 1991) and by work in the field of historical institutionalism and organizational analysis (March & Olsen 1989; Powell & DiMaggio 1991; Scott & Meyer 1994; Campbell 1994), implies that institutions may not be studied in a straightforward manner. If what is perceived as social reality is in itself an institutional construction, the theoretical and methodological challenge becomes one of finding ways to observe institutions without being captured by the institutionalized constructions of what we observe (Pedersen 1989, 1991, 1995; Andersen 1995b) Thus, if we want to study the institutional construction of private enterprise, we cannot simply assume the existence of firms as bounded social organizations, since this would be to take yet another social construct at face value.

Of course, this constructivist strategy of analysis involves a series of both theoretical and methodological problems that we cannot claim to have solved. One important problem is that the institutional analysis tends to emphasize the construction of institutionalized frames of meaning rather that actual behaviour. This means, on the one hand, that institutional analyses tend to become analyses of various forms of communication and articulation

- and that we, accordingly, are not able to say much about social life in a wider sense. On the other hand, this installs a healthy scepticism against more conventional forms of social and political analysis. We do not think that one can simply measure the significance of a certain institutionalized logic of organization by asking people whether they find it important. Thus, Christiansen's way of testing the concept of negotiated economy does little more than inform us about the worldviews and local interpretations of managers in the Danish manufacturing sector.

To summarize: We do not have an empirically verifiable theory of the negotiated economy. The concept "negotiated economy" is an attempt to characterize an institutional construction of political and economic reality. As such, it functions both as a preliminary diagnosis of certain discursive and institutional aspects of social organization and as a methodological lead in the study of these aspects. Our more comprehensive theoretical commitments lie elsewhere, namely in the attempt to develop theories of discourse and institutionalization that may be translated into viable strategies of institutional analysis. In these strategies of analysis, the concept of

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negotiated economy is one clue to the interpretation of Danish political
history. Other clues or leads are possible.

The Empirical Analysis of the Negotiated Economy

Peter Munk Christiansen seeks to subject the negotiated economy to an empirical test, and he uses the problem of testing as a key argument against our concept of negotiated economy (Christiansen 1994, 306f; 1993, 46,165). Against this we would argue that empirical testing can never and should never be the primary criterion for determining the validity of theoretical concepts. On the one hand, this would lead us into absurdity since most of the concepts we use to organize social experience have never been and can never be tested. This has been aptly demonstrated in the philosophy of science since the beginning of this century. On the other hand, to arrive at a position where the empirical testing of theoretical concepts is possible at all, analysts such as Peter Munk Christiansen have to assume away most of the complexity of social life and reduce complex theoretical arguments to very simple empirical propositions.

In order for Christiansen to test his version of a concept of negotiated economy, he first reduces firm-environment relations to a question of public regulation and then only accepts the importance of negotiated economy if business managers are actually able to relate strategically to public regulation. Through these reductions, Christiansen has effectively insulated himself from studying the complex changes that are taking place in the political and economic organization of Danish society, such as the emergence of private policy-making in the area of industrial policy (e.g. Pedersen, Andersen & Kjær 1993). To study this would require a less reductionist and more historically oriented strategy of analysis.

While we do not believe that the validity of a concept can be determined solely through rigorous empirical tests, we still think that empirical analysis is the key to determining the value of a particular theoretical lead or strategy of analysis. Here we subscribe to a broader concept of validity in which a central but rather pragmatic criterion is the potential of a concept for inspiring fruitful empirical analysis that yields insight into aspects of the institutional organization of society that we did not already have. Also the utility of a concept for the generation of new and interesting research problems is to be considered. In both these respects, we think that the analytical strategy that has revolved around the concept of negotiated economy has been useful.

Contrary to what Christiansen claims (Christiansen 1993, 46), there
already exists a quite substantial, and expanding, body of empirical studies
based on the second generation concept of negotiated economy (e.g. Petersen

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1989; Pedersen et al. 1992; Pedersen 1993; Andersen 1994). This research has shown how new forms of economic and political coordination are emerging in a variety of fields in Danish society. It has sensitized us to the fact that governance in today's society is not only a question of the invisible hand of market governance or the visible hand of authoritative intervention; it is also a question of formulating and institutionalizing conceptions of community and shared interests across organizational and institutional boundaries. The discursive and institutional construction of new social identities and boundaries has become part of what it means to be an economic actor in today's society. These findings resonate well with both European and American research on regional economies and economic governance, and with research in the field of organizational sociology on the institutional construction of organizational actors and organizational activity (Fliegstein 1990; Miller & Rose 1990; Sabel 1993; Dobbin 1994; Scott & Meyer 1994).

On a more general level, the analysis of negotiated economy has made it possible to formulate new research projects that examine, among other things, the possible role of public administration and policies of administrative reform in a negotiated economy environment, the processes of communication and negotiation in relation to European integration, and the complex interaction of the multiple logics of economic organization that permeates our society (Andersen 1995a; Pedersen & Pedersen 1995; Kjær 1995). In all these cases, the negotiated economy debate has sensitized us to the possibility of a complex negotiated order in which boundaries and identities are permanently in play.

Clearly, empirical research has also sensitized us to the limits of the concept of negotiated economy. We only find negotiated orders in some industries, in some policy sectors, and at certain periods in time. Also, negotiated orders may break down, transform or rely heavily on existing systems of authority and exchange. Finally, the particular features of the Danish negotiated economy appears to be contingent on the historical circumstances of the development of the Danish form of state; we should not expect to find identical forms of organization in other countries. At the same time there are numerous historical examples of regional and national economies that seem to subscribe to similar logics of organization (e.g. Herrigel 1989; Best 1990). These examples suggest that negotiated orders are neither exceptional features of the Nordic countries nor exclusively a product of the late welfare state era.

The Normative Problems of the Negotiated Economy

The harshest part of Peter Munk Christiansen's critique concerns the

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normative position of our research. Here Christiansen claims that "recent theory on the negotiated economy is biased by a more or less authoritarian or collectivist perception of society" and that "the concept of negotiated economy seems to be biased by a normative preference for negotiated relations between market and state actors" (Christiansen 1994, 316). This latter bias leads to a situation where "(n)egative consequences of the negotiated economy are overlooked" (ibid.; Christiansen 1993, 166).

We would prefer not to speculate on Christiansen's motivations for bringing forward these charges, and we certainly do not know the sources that allow him to make such accusations. Instead, we only briefly indicate how we have indeed dealt consciously with both the normative and critical dimensions of negotiated orders - although we do not take the liberal social ontology for granted, and also do not accept methodological individualism at face value (as Christiansen seems to do?).

It is true that we have, on several occasions, explored the implications of a negotiated order in relation to socio-economic efficiency and international competitiveness as well as in relation to problems of legitimacy and democracy. In concurrence with international research on associative forms of organization (Dore 1983; Piore & Sabel 1984; Katzenstein 1985; Best 1990; Zukin & DiMaggio 1990; Campbell, Hollingsworth & Lindberg 1991; Hamilton & Biggart 1992; Grabher 1993; Milner 1994), we have postulated that the negotiated economy has a potential for efficiency and even for securing social legitimacy during periods of intense political restructuring (Berrefjord, Nielsen & Pedersen 1989; Nielsen 1992; Jessop, Nielsen & Pedersen 1993). In relation to Danish research on business ethics, we have suggested that the negotiated economy involves more procedural ethical demands on socio-economic actors (Pedersen et al. 1992; Andersen 1992, 1993). However, we have never claimed to be in a position to determine either the actual efficiency or the legitimacy of the negotiated economy model.

Peter Munk Christiansen's accusations on this point seem particularly uninformed since it has been a pivotal interest of ours to study how new logics of economic and political organization change the public sphere in Denmark and thereby change the working conditions of the Danish democracy. This has been one of the most fundamental motivations for the entire negotiated economy project, and one that has been discussed in a number of publications since the late 1980s (e.g. Pedersen 1986; Petersen 1989; Pedersen et al. 1992, 1994; Pedersen & Raffnsøe 1994a, 1994b; Pedersen 1995). Here one central idea has been that negotiated economy challenges the foundations of representative democracy in Denmark, and that discursive underpinnings of the negotiated order severely limit the realm of possible discourse in a wide range of policy fields. Although we find no

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easy solutions to these problems of the negotiated economy, we firmly
believe that their articulation is at least a step in the right direction.

Conclusion

To some extent, the fruitfulness of a particular conceptual strategy in the social sciences can be measured by the amount of controversy it is able to stir. One prominent example of this has been the so-called Garbage Can model of decision-making. Here the controversy has led to at least some degree of introspection and re-evaluation in the field of decision theory, organization theory and policy analysis. At the same time, not all controversy is fruitful. In some cases it does little more than reflect the lack of communication between different theoretical and methodological positions, and often it just reinforces established and unquestioned disciplinary identities.

We find it difficult to see Christiansen's contribution as anything but an example of the latter. This is particularly sad since we find no general or radical discrepancy between Christiansen's research on political economy and our own. To be sure there are profound methodological and epistemological differences between our constructivist institutionalism and Christiansen's non-constructivist position, but it is difficult to see how any of these should motivate the type of criticism that is put forward by Christiansen.

Perhaps a first step towards a more balanced debate on the merits and demerits of the concept of negotiated economy (and similar new concepts) would be to debate these fundamental differences and to begin the discussion with a mutual recognition of difference. That would be a more challenging beginning than simply assuming that there is only one true story, one true way of discovering it, and one true way of telling it.



NOTE

1. In this sense, we agree with Christiansen that the concept of negotiated economy is only "useful to understand some aspects of state-market relations for some firms" (Christiansen 1994, 306).

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