This book identifies and explores the mechanisms linking political institutions and variation
in capitalist systems. A strong correlation exists between varieties of political regimes and
varieties of capitalism: majoritarian political regimes are correlated with liberal market
economies (LMEs) and consensus political regimes are correlated with coordinated market
economies (CMEs). Still correlation is not causation. Empirical findings illustrate that
partisanship and policy legacies the number of political parties electoral rules and
constitutional constraints are significant indicators of LMEs and CMEs. Arsenault finds that
majoritarian institutions create an environment of adversarial politics and strong competition
between actors which makes credible commitment to nonmarket coordination mechanisms unlikely.
Consensus institutions on the other hand promote an atmosphere of cooperation and
coordination between actors thus encouraging credible commitment to nonmarket coordination
mechanisms. Qualitative case studies of Germany Britain and New Zealand confirm the
quantitative findings and suggest that political regimes were instrumental in shaping the
economic adjustment paths of these countries during the era of liberalization in the 1980s.
