Part 1 - AL-Tax

International Taxation Handbookelaborated, implies capital mobility and trade integration could (if internationaltax competition remains sufficiently muted: see below) spur institutional andpolicy specialization, which would imply persistent welfare/tax-system variationor even divergence rather than convergence or global retrenchment. These threeviews fundamentally question whether international economic integration actuallycreates economic pressures to retreat from welfare/tax-state commitments (orat least whether all aspects of globalization do so, so strongly: see below).Swank’s (2002) argument that the institutional structures of the polity and of thewelfare system itself shape the domestic policy response to integration representsa fourth basis for challenge. His view does not fundamentally challenge claims ofthe exclusively superior macroeconomic efficiency of neoliberal minimalism but,rather, stresses the primacy of domestic political conditions – the policymakingaccess, cohesion and organization, and relative power of contending pro- and antiwelfare/taxinterests – in determining the direction and magnitude of welfare/tax-policy reactions to economic integration. Specifically, he argued and found thatinclusive electoral institutions, social-corporatist interest representation and policymaking,centralized political authority, and universal welfare systems relativelyfavor the political access and potency of pro-welfare/public-policy interests andbolster supportive social norms in the domestic political struggle over the policyresponse to integration. The opposite conditions favor anti-tax/welfare interestsand norms in this struggle. Capital mobility and globalization therefore induceincreased welfare/tax-state largesse in previously generous states and retrenchmentin tight ones – i.e. divergence rather than convergence. Swank’s approachis, thus, the most directly and thoroughly political of these critiques. It is alsoperhaps the most thoroughly explored empirically, offering comparative-historicalstatistical and qualitative analyses of six alternative versions of the globalizationinduces-retrenchmentthesis: A simple version (a regression including one of fivecapital-openness measures), and five others he terms the run-to-the-bottom (capitalopenness times lagged welfare-policy), convergence (capital openness timesthe gap from own to cross-country mean welfare-policy), nonlinear (capital opennessand its square), trade-and-capital-openness (their product), capital-opennesstimes-fiscal-stress(deficits times capital openness), and capital-flight (net foreigndirect investment) versions. He found little support for any globalizationinduces-retrenchmentargument and, indeed, some indications that capital mobilitytends on average to enhance welfare effort (perhaps supporting those stressingits effect in increasing popular demand for social insurance against global risks). 3Basinger and Hallerberg (2004), in a sense, take the implied next step of Swank’scentral point. Swank stressed the domestic political and political–economic48