Fligstein: The Architecture of Markets

Fligstein, N., 2001. The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies, Princeton University Press.

“Market society has produced more income, wealth, goods, and services than any other form of human social organization. It has done so by creating the conditions for social exchange between large groups of human beings, often separated across large geographic spaces. For most observers, the driving forces of this wealth creation have been technology and competition” (3).

“The purpose of this book is to begin to systematically understand how the dynamism of technology and competition is situated in, defined by, and structured through the production of firms, their social relations with each other, and their relations to government. Put simply, the dynamism of market society is made possible by this extensive social organization. Competition and technological change are themselves defined by market actors and governments over time. These forces are not exogenous to market society, but endogenous to these social relations” (4).

“This dependence of t5echnology and competition on social factors implies that making sense of economic growth requires we think more systematically about these factors. Economic growth depends on governments, institutions, and the social technologies by which firms are created, class struggle si routinized, and competition between firms is mediated” (5-6).

“My overall goal is to provide scholars and other persons interested in policy with analytic tools to make sense of such phenomena as globalization. Ultimately, my analysis suggests that governments and citizens are part and parcel of market processes. The evidence shows that very different systems of relations among workers, firms, and governments have produced economic growth. The frequently invoked opposition between governments and market actors, in which governments are viewed as intrusive and inefficient, and firms as efficient wealth producers, is simply wrong. Firms rely on governments and citizens for making markets. Their ability to produce stable worlds depends greatly on these relationships. The analytic frame proposed here explores when these relationships produce positive and less positive outcomes for all members of society” (6).

“Economic sociology is the study of how the material production and consumption of human populations depend on social processes for their structure and dynamics” (6).

The author then attempts to be more clear about exactly what a sociological approach to markets fully encompasses. One wants to strike a balance between being too inclusive and too exclusive in this distinction. Instead of drawing a line around the boundary of the field, the author proposes five key questions that people who work in this field should take interest:
“1. What social rules must exist for markets to function, and what types of social structures are necessary to produce stable markets?...
2. What is the relation between states and firms in the production of markets?...
3. What is a ‘social’ view of what actors seek to do in markets, as opposed to an ‘economic’ one?...
4. What are the dynamics by which markets are created, attain stability, and are transformed and how can we characterize the relations among markets?...
5. What are the implications of market dynamics for the internal structuring of firms and labor markets more generally?” (10-4).
The author then attempts to answer these questions from a framework that he refers to as the “political-cultural approach” (15).

Ch. 9: Globalization:

“The political-cultural approach implies that the relations between political and economic elites and the long histories of their interactions have created laws and informal practices that constitute distinct national systems of property rights and governance” (191). This chapter addresses the paradox between increased globalization and decreasing or stagnating convergence. “The political-cultural approach gives us analytic tools to make sense of some of the reasons why trade can grow and yet national capitalisms persist” (192). The author argues, in part, that globalization is not destroying national firm identities or levers of governmental control.

“Globalization generally refers to three economic processes. First, there has been an increase in the amount of world trade such that firms do not just compete in their won economy, but against first from economies around the world…The second meaning of globalization is that the rise of the so-called Asian tigers has come at the expense of First World jobs in Europe and North America..The final meaning of globalization is that the world financial markets for debt, equity, and particularly currency have grown substantially” (193).

The author argues that standard stories about a revolutionary transformation that resulted from increased global interaction are specious. The process of globalization has taken place over a very long period of time with gradual growth in trade and interconnections. Also, while increased usage of information technology is an important part of this story, it is often overstated. Finally, standard stories of jobs being exported from Western countries in a race to the bottom are not necessarily attributable to globalization.

There is then a discussion of finance and the changing role of central banks. Central banks have moved towards more of an emphasis on price stability, most notably after the contractionary fiscal policy of Volker produced a recession after the 70s oil crisis. Also, it is noted that finance has always relied upon governance for a framework in which to operate.

Arguments that the state is dying in the face of globalization are wrong. Some have claimed that states must choose between equity and efficiency, but this assumes that these are mutually exclusive and that the market universally emphasizes one and the state another. Others have claimed that firms will always be able to bypass the controls of states. This has not proven to be the case. The author argues that many of these views stem from those who believe that governments represent rational rent seekers, and are thus a universal ill on the function of markets.

“There is no evidence that trade has made states ‘smaller’ over the past 30 years. In fact, it is quite the opposite. There is evidence that high exposure to trade combined with organized labor has produced more social protection and larger states. There are theoretical reasons to believe that states continue to matter in producing economic growth by providing public goods, the stable rule of law, and under certain conditions, good industrial policy” (217).