In the United States, it is widely assumed that businesses do not and should not cooperate with one another, let alone with unions or governments, to provide public goods such as education or worker training. Yet in many of the world’s most competitive economies, notably Denmark, Germany, and other northern European countries, most businesses reject the pure free-market ideal and band together to support government interventions of this kind in order to promote national competitiveness. In this detailed analysis, Martin and Swank trace this cooperative attitude to the existence of centralized business associations able to discipline their members in support of common projects. Such associations emerged nearly a century ago and have survived not because business leaders in northern Europe are intrinsically socialist but because in multiparty parliamentary systems, businesspeople struck a mutually beneficial bargain with politicians. They accepted the institutional constraints of robust government regulation in exchange for a seat at the policymaking table. There is a fundamental lesson here: the preferences of private companies are determined by social choices, not by the disembodied logic of markets. With a sound constitutional structure and proper leadership, a government can help shape how markets work, along with businesses and citizens -- to the benefit of all.
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