Liberal Market Economy or Composite Regime? Institutional Legacies and Labor Market Policy in the United States

In comparative political economy the United States is denominated a “liberal market economy” characterized by market-based labor policy, but American political development studies suggest that national-level comparisons, which assume government institutions are a coherent package, may be misguided. In the decentralized American polity, many combinations of state-market relationships have emerged as state governments invest in labor market performance and economic agents adjust their market strategies. Analyses that conceive regimes as sets of complementary institutions that constrain individuals and government officials have difficulty explaining changing patterns of policy and market organization. This article investigates these policy developments to make a constructionist argument that departures from historical paths are possible because institutional agents can reflect on performance and adjust strategies. Building on the political development insight about the complexity of governing authority as well as the comparativists' critique of economic convergence, the article argues that innovation in America's composite regime is best understood against the institutional legacies of labor and race relations regulation. The argument is illustrated by evidence of the diversity of labor market policies in the states during the 1990s.