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West European Politics,

Vol. 28, No. 1, 33 – 60, January 2005

From Catch-all Politics to


Cartelisation: The Political Economy
of the Cartel Party
MARK BLYTH and RICHARD S. KATZ
The John Hopkins University, Baltimore, MD, USA

ABSTRACT Adaptations to coordination problems endogenous to political parties have


established the cartel party as the emerging equilibrium type in modern Western
democracies. However, these factors alone are insufficient to maintain such an
equilibrium given the threat of defection. That threat is mitigated by three factors:
historical changes in party form, systemic changes in the global economy and changed
ideas about governments. Together, these changes produce both a cartel of parties and
the cartel party organisational form, without requiring overt conspiracy. These
speculations are mapped onto actual experiences of the UK, the US and Sweden. The
theory of the cartel party is advanced by emphasis on the ‘cost of production’ of policies
and the constriction of the policy-space over which parties compete. We also explain
why a cartel of parties might be stable, notwithstanding the temptation to defection
often attributed to cartels as multi-player prisoners’ dilemmas.

The purpose of this article is to explain recent changes within the party
organisations and party systems of advanced capitalist states from one
common theoretical logic. The argument we present here is that over time a
series of adaptations to coordination problems endogenous to political
parties established the cartel party as the emerging equilibrium type of party
in modern Western democracies. However, these endogenous factors are
insufficient, in and of themselves, to maintain such an equilibrium, since the
threat of defection, especially in multi-party systems, is ever present. We
argue that such a threat is mitigated, however, by three factors: historical
changes in party form, systemic changes in the global economy, and
changed ideas about the appropriate role and function of governments.
Taken together, these endogenous and exogenous changes combine to
produce both a cartel of parties and a specific organisational form, the cartel
party, without any overt conspiracy between the players.1

Correspondence Address: Department of Political Science, The John Hopkins University,


Baltimore, MD 211218, USA

ISSN 0140-2382 Print/1743-9655 Online # 2005 Taylor & Francis Ltd


DOI: 10.1080/0140238042000297080
34 M. Blyth and Richard S. Katz

The paper is divided into four parts. The first part places the cartel party
in historical perspective by analysing the evolution of party forms as
attempts to overcome a series of coordination problems. Building upon this
discussion, the second part of the paper establishes the conditions for the
formation and maintenance of such a party form and of a cartel of parties.
The third part maps these theoretical speculations onto actual cases,
specifically the UK, the US, and Sweden. The fourth and final part expands
beyond the consideration of organisational form to ask the question, ‘if this
argument is plausible – what does it mean for electoral competition?’
Our answer is twofold. First of all, we argue that electoral competition no
longer occurs over which party can effect change to benefit its constituents,
but rather centres on ‘managerial competence’, and precisely not trying to
effect systemic change. Second, this analysis suggests a new way of viewing
the recent return of minority, protest and anti-party-system parties. Such
parties act as substitute suppliers of policy and are the only parties likely to
attempt to break the established equilibrium since their identity is
constructed in opposition to a cartel. Yet paradoxically, when they manage
to ‘break’ a cartel, they face strong imperative to act like cartel parties.
This article aims to advance the theory of the cartel party in several
respects. Supplementing the portrayal in earlier work of cartelisation as a
response to a scarcity of the material resources that parties require to remain
competitive (Katz and Mair 1995), in this paper we emphasise the ‘cost of
production’ of policies as the analogue to the products produced by firms in
a conventional economic cartel. Also extending the earlier work that took
public subventions as the primary indicator of cartelisation, in this paper we
focus primarily on constriction of the policy-space over which parties
compete. We also address the problem of defection directly, and explain
why a cartel of parties might be stable, notwithstanding the temptation to
defection often attributed to cartels as multi-player prisoner’s dilemmas.

The Evolution of Political Parties


Why Parties? Internal, External, and Network Coordination Problems
Modern political parties were ‘invented’ to address three coordination
problems in representative democracies. The first problem to arise was what
we call the ‘internal dilemma’: the problem of coordination of action within
assemblies of nominal equals. While this problem does not depend on the
members of assemblies being elected or being regarded as representatives, its
relevance in even the earliest parliaments served as a catalyst to the
development of coordinative devices that soon were recognisable as
parliamentary parties.2
The second coordination problem was what we term the ‘external
dilemma’: that of organising and coordinating large numbers of activists,
both within a given geographic area and across space. Such collective action
From catch-all politics to cartelisation 35

dynamics beset all mass actions – whether strikes or riots or spiritual


revivals – but with regard to political parties, such problems are particularly
acute in relation to elections. The need to mobilise ever greater numbers to
win elections created a new external coordination problem that served as a
further spur to party development.
Taken together, these ‘internal’ and ‘external’ coordination problems led,
in turn, to a third, ‘network’, problem: that of connecting the simulta-
neously evolving parliamentary parties and their supporting coalition of
extra-governmental political activists into a permanent and adaptive
organisational form. As we demonstrate, each of these dilemmas promoted
a particular organisational response, while each such response was itself
vulnerable to another type of dilemma. As such, analysing the sequence
‘dilemma – response – dilemma’ allows us to understand how each attempt
to overcome these endemic problems gave rise to particular party forms,
and, indeed, continues to do so today with the cartel party.

Responding to the Internal Dilemma: The Elite Party


The first step in the evolution of modern political parties was the elite or
‘cadre’ party. Particularly at the constituency level, this organisational form
was characterised by an essential fusion between the party on the ground
and the party in public office, with the former being little more than the
patron or personal supporters of the individual elected official (Duverger
1954: 63–71). Since the campaigns conducted by elite parties were primarily
local exercises in the mobilisation of clienteles, there was little need or desire
for central coordination. As the ‘party’ was essentially a voluntary alliance
of local elites, the challenge confronting national party leaders was to
establish any sort of authority over their followers in parliament. This was a
core element of the transition from monarchic to parliamentary govern-
ment, with the attendant increase in the importance of a reliable
parliamentary majority for the holders of ministerial office. Thus, the
emergence of elite parties is best understood as the organisational response
to an ‘internal’ coordination problem facing leaders in this period. In the
absence of an extended suffrage, the ‘external’ dilemma was simply not so
pressing and the elite form of party sufficed as a mode of organisation.

From Elites to Classes: the Rise of ‘External’ Problems


The second step in the evolutionary chain was the emergence of the mass
party, which arose precisely because of the increasing salience of external
over internal coordination problems. If the elite party was the archetypal
party of parliamentary origin held together by exchanges of influence or
material rewards among its leaders, then the mass party was the archetypal
party of extra-parliamentary origin. The stimuli for this new party form
were the coordination problems that arose in mounting extra-parliamentary
36 M. Blyth and Richard S. Katz

agitation for expansion of the suffrage (and for political and economic rights
more generally) and then in election campaigning under mass suffrage.
While the internal dilemma did not disappear, in that the maintenance of
regular parliamentary support was still essential for a government’s
continuance in office, the advent of mass suffrage greatly increased the
salience of the external dilemma: the extent and complexity of the
organisation required for electoral success.
The mass party was both a response and a further stimulus to the political
activation of broad elements of society (especially the working class) that had
been left outside of the ambit of the elite party. The mass party attempted to
make up in collective actions for what it lacked in individually influential
supporters, and this required overcoming the external dilemma – the
coordination of an extensive ‘party on the ground’. The mass party had three
strategies for overcoming the external dilemma that had not really been faced
by the elite party. First, it sought to solve the external coordination problem
through the provision of a range of ‘club’ goods and selective incentives.3
Second, it sought to foster a sense of collective identity through a strategy of
encapsulation. Third, it advanced a new conception of the proper nature and
role of parties in representative democracy, a conception that once accepted
further strengthened its own chances of success.
In contrast to the elite party’s claim to be a group that intends to promote
the public interest ‘upon some principle on which they are all agreed’, the
mass party represents only one segment of society, its classe garde´e, in
competition with other segments of society. This new form changed what was
presented to the electorate, from a choice among individual candidates based
on their relative claims of competence to a choice among parties based on
their identification with particular segments of society. This organisational
form proved to be far better suited to the new conditions of mass
participation than its elite competitor and, as such, furthered the elite
party’s general demise as a party form by forcing those parties to adapt. In
sum, in developing an organisational form to overcome the increasingly
salient external coordination problem, the mass party changed the nature of
elections themselves in such a way that it reinforced its position as the most
evolutionarily adapted form. However, precisely because of this evolutionary
advantage, once a mass party achieved a substantial presence in public office,
a new problem arose for the mass party: the ‘network’ problem.

From Classes to Masses: the Rise of ‘Network’ Problems


In general terms, the mass party’s solution to the problem of external
coordination took two forms. The first was the reinforcement of corporate
identity from the top to the bottom. Here the support of the mass party was
constitutive of the member’s identity within a well-delineated group, most
likely driven or reinforced by the perception of opposition, or even
persecution, from some other well defined group. The other solution was
From catch-all politics to cartelisation 37

policy, either in the form of support for particular political positions or in


the form of actual delivery of public services (e.g., state provision of health
care or public support of church schools) that are of particular value to the
members of the party’s clientele.4 Pursuit of the second strategy, which was
not possible until there was a substantial party in public office, requires the
coordination of the party in public office with the party on the ground. The
problem of network coordination thus stems directly from the very success
of the mass party.
Part of the mass party’s solution to the network problem lies in its
conception of parties in democratic governance. If party was the political
arm of a particular social segment, then it followed that the party on the
ground should control and direct the party in public office which is in effect
its delegate. However, since the party congress (or equivalent body) cannot
be in continuous session, it needs to elect an executive committee to act in its
place. This executive then becomes the core of a central office that, though
nominally subordinate to the party on the ground, in fact solves the
coordination problem of networking leaders, members and constituents by
effectively rising above all of them. Though providing an elegant solution to
the network dilemma that the rise of the mass party engendered, over the
long run this was paradoxically to prove its undoing as it laid the ground for
its successor: the catch-all party.

The Universal Church? The Growth of Catch-all Politics


As Katz and Mair (1995: 12) suggest, the catch-all party was both an
adaptive response by the elite parties to the mass parties’ electoral success
and a response by the mass party to the persistence of network problems
under the mass party form. For the elite party, this involved the acceptance
of many of the elements of the mass party’s understanding of democracy. In
particular, ‘catch-all politics’ meant adopting a form of party membership
organised in branches and represented in a party congress, but not the
substance of control of the party in public office by the membership
organisation.5 Moreover, the potential clientele groups for ex-elite parties
were too small for an electoral strategy based on identity to be successful,
and in general too well-off for provision of club goods to be a productive
strategy. Thus, rather than marking a simple emulation, the shift from elite
to catch-all party constituted the development of a qualitatively new party
form that aimed at the development of a permanent networked party
without giving up much, if anything, to the ‘party on the ground’.
At the same time, the mass parties confronted a twofold problem of their
own. On the one hand, the success of their efforts to expand state welfare
provision had converted many of their club goods into general public
entitlements, thus blurring many of the social boundaries vital to a politics
of identity and segmentalism. On the other hand, their leaders in
government tended to chafe under their subordinate position within the
38 M. Blyth and Richard S. Katz

party hierarchy. The response was a movement towards catch-all politics,


with its abandonment of appeals to core constituencies, its emphasis on the
provision of public goods and its freeing of the party in public office from
the control of the party on the ground.
There were however limits to such a strategy in that by not appealing to
core constituencies, the solidary effect of identity continued to decline. As a
consequence, such parties needed to distribute goods ever more widely since
the party had literally to ‘catch-all’ in order to win. As party form converged
on the catch-all model, each catch-all party sought to encompass an ever
bigger coalition in the hope of stabilising its vote share in the face of
diminishing returns to policy distributions. As such, catch-all parties became
increasingly unstable, as network coordination problems arose once again,
while they suffered diminishing returns to the provision of the goods that
such parties relied upon. Given these dilemmas, a new party form emerged
that solved the network dilemma in such a way that it did not depend upon
an ever-expanding supply of public goods: the cartel party.
To summarise, political parties developed in order to solve problems of
coordination that are inherent in liberal democratic polities, namely
internal, external and networking dilemmas. The problem confronted was
determined by the environment of electoral competition in a given period,
and as this changed, so did the prevalent party type. Some of these changes
(e.g., industrialisation and growth) were largely exogenous. Other changes
(e.g., expansion of the suffrage, assumption by the state of responsibility for
economic management and social welfare) were endogenous to party politics
and were often themselves part and parcel of party attempts to wrestle with
their various coordination problems. These changes allowed for the
development, persistence and success of specific party forms that were
more advantageous under changed conditions, while these changes also
required that the existing parties adapt, if they were not to be ‘selected out’
by the new circumstances.
Given this shift from elite to mass to catch-all, we hypothesise that the
cartel party is merely the latest organisational response to the same set of
problems. However, in order to understand why this new party form is
qualitatively different than its forerunners a brief discussion of the political
economy of cartels is essential. For while we do not wish to ‘stretch’ the
concept too far, nor to ‘over-analogise’ the oligopolistic similarities of the
market for votes and the market for goods, we do feel that for the concept of
the cartel party to move beyond that of ‘descriptive ideal type’ some
discussion of the logic of cartels and the applicability of this to the political
world is necessary.

The Political Economy of the Cartel Party


The basic purpose of a cartel is to maximise joint profits of oligopolistic
firms through the restriction of competition. Firms are able to collude by
From catch-all politics to cartelisation 39

varying either prices or quantities or both. The cartel is, as Stigler (1964) put
it, a ‘joint sales agency’. Being large enough that market price is not simply a
structural fact that firms have to accept, such firms’ price decisions are
‘strategically interdependent’ on one another’s choices. That is, market price
can be set by the firms themselves rather than being dictated by competition,
so long as they cooperate. And therein lies the rub.
While joint maximisation would maximise profits, such collusion has the
character of a multi-person prisoner’s dilemma in that while it may be
objectively rational to cooperate, the dominant strategy in such a situation is
to defect and go for market share at the other firms’ expense. However,
realising this, all firms should then defect on the first round. Assuming that
market demand is short-run elastic, cartels thus should be very difficult to
get started, and very costly to maintain; and, indeed, experience shows that
stable cartels have in fact been few and far between.6 There is, however, a
possible solution to such defection dynamics.
Oligopolistic markets typically create Cournot–Nash rather than compe-
titive equilibria. Such equilibria are stable outcomes that result from each
firm simultaneously choosing a production quantity in relation to other
firms’ decisions. Given that such decisions take place in an environment of
public knowledge of each player’s cost structures, each firm effectively
knows the market demand curve facing all firms. Dynamically, this means
each firm takes any other firm’s choice of output level as fixed, and then sets
its own production quantities. The net effect of this is, however, not to create
a cartel, at least initially, since it increases production by all firms to a point
greater than that where joint maximisation would occur. Nonetheless, such
behaviour opens up cartelistic possibilities. By announcing a price rise (or a
quantity cut), one firm can act as price leader and ‘signal’ to the others their
own revised demand schedules. In such circumstances other firms can join
in, thus limiting their own outputs and achieving higher profits than would
be achieved by unilateral defection. Such a situation is a Nash equilibrium in
that once such tacit restriction has taken place, no firm has an incentive to
defect given the others’ choices.7 The question we have to answer now is
what any of this has to do with party politics?
In order to understand why post-catch-all politics mimics cartel dynamics
we need to find political analogues for firms and for quantities. First of all, if
competitive party systems tend to have less than ten members with power
usually being held by less than five out of the ten players, then it is hardly a
stretch to see such a system as oligopolistic and parties as the equivalent of
firms.8 However, establishing this does not make it a cartel. To make this
further claim we need to find analogues for quantities. If we assume that,
economically speaking, quantities represent outputs, and that the outputs of
parties in government are policies, then we can further assume that policies
are the functional equivalent of quantities. If this follows, then the key
question is how parties set quantities, that is, cartelise the market for votes
through the ‘fixing’ of the policies they produce. And, indeed, why would
40 M. Blyth and Richard S. Katz

parties do this rather than compete? We argue that two key changes have
occurred that have effectively turned parties from maximising competitors
into risk averse colluders: the limits of catch-all politics, and the rhetoric and
reality of globalisation.9 In turn, these changes have themselves encouraged
new adaptive strategies, including the deployment of a discourse of
‘downsizing’ expectations and the externalisation of policy commitments
that have together increasingly cartelised party systems and helped create
cartel parties.10

Why Cartelise? The Fiscal Limits of Catch-all Politics


For illustration, assume a party system that is dominated by two catch-all
parties and that each catch-all party has indeed attempted to maximise
support through its expansion of public goods provisions. As noted above, if
all such parties pursue the same strategy then voters will become increasingly
indifferent to party choice.11 If we further assume that voters would prefer
more public goods to less, but also assume that there is a defined fiscal limit
beyond which such provisions cannot be made without creating at least the
perception of ‘fiscal irresponsibility’, then the catch-all strategy runs into a
structural limit that may be both welfare decreasing and election losing.
If this is the case then two consequences follow. First, the space for policy
competition becomes essentially ‘maxed-out’. Given the perception of an
impending ‘fiscal crisis’, states cannot squeeze any more resources out of
their societies for the production of public goods without being seen to harm
growth itself: the elixir of catch-all politics. As such, active policy
competition, in terms of providing more and more public goods in order
to overcome networking problems, comes to be seen as a less feasible
strategy. Second, at the same time as reaching such limits (both perceived
and real), as many states arguably did in the late 1970s and early 1980s, a
new form of network problem arose that put another nail in the coffin of the
catch-all party: members and constituencies actually became less relevant to
the problem of governing.
Specifically, at the same time as policy competition reached its limits, the
technology of elections moved away from mass participation to media
marketing (Butler and Ranney 1992). Organisations that could provide
volunteer labour (e.g., unions) became less valuable than public relations
expertise and the money to pay for it. Indicatively, estimated campaign
expenditure for both the British Labour and Conservative parties more than
tripled between 1964 and 1983, more than quadrupled for the Swedish
Socialists between 1960 and 1976, roughly quadrupled for the Norwegian
Labour Party between 1961 and 1981 (all in nominal terms, see Katz and
Mair 1992). Thus, on the one hand, the costs of providing public goods
began to exceed the capacity of states to provide, while, on the other hand,
the costs of running electoral campaigns increased beyond the capacity and
willingness of the party on the ground to provide. As such, catch-all politics
From catch-all politics to cartelisation 41

reached its limits as a strategy that would promote party success and
stability.

Why Cartelise? The Rhetoric and Reality of Globalisation


Concomitant with these changes were the ideational and material changes
associated with globalisation, that is the progressive disembedding of
market transactions from regulation such that the role of the state – and
thus of party – has diminished. For the sake of brevity we will highlight
three aspects of globalisation that are of particular salience for our analysis
of parties: first, increasing export dependence and flows of foreign direct
investment (FDI) relative to domestic investment; second, an increasing
inability to regulate the domestic political economy unilaterally due to open
capital accounts; third, by becoming dependent upon such external sources
of growth, states become subject to financial market beauty pageant
dynamics, whereby they must appeal to market sentiment rather than rely
upon growth as a function of their domestic market fundamentals (Keynes
1964: 152–64).
Taking the issue of openness first, it is a commonplace to state that since
the 1970s the export dependence of advanced capitalist societies has
increased dramatically. At one extreme, openness for the USA increased
from 11.85 per cent in 1970 to 21.9 per cent by 1992.12 More modestly, but
still significantly, average European trade openness in the same period
increased by around eight to ten percentage points across all states.13 The
salience of this observation for political parties’ strategies is twofold. If
openness is growing and exports are becoming an increasingly important
component of GDP, then the ability to hold domestic costs closer to world
market prices becomes paramount. As such, parties’ ability to finance public
goods provision through taxation declines (Rodrik 1997).
Related to this is the issue of the greater mobility of FDI. As openness
increases, capital mobility rises and FDI becomes a more important source
of growth. As a result, the ability to practise differential taxation regimes,
and thus fund welfarist policies, declines as states seek to encourage capital
inflows and discourage outflows (Rodrik 1997). Any state still practising
capital controls when its neighbour does not is effectively taxing their
investment at a higher rate. In such an environment the incentive for firms is
to avoid such taxation by moving beyond controls, while the incentive for
the state is to ‘deregulate first’ and catch the mobile capital rather than to be
left as the rather expensive hold-out (Helleiner 1994). Given such ‘tipping
game’ dynamics, states as a group give up on capital controls (as practically
all European states did during the 1980s and 1990s).
The upshot of such a policy is that it exacerbates the well known
Mundell–Fleming problem (Mundell 1960). States with full convertibility
(open capital markets) cannot have an independent monetary policy (the
ability independently to determine the rate of interest) and stable exchange
42 M. Blyth and Richard S. Katz

rates at the same time. Parties in deregulated and open states are further
constrained in that while giving up controls signals credibility and may
encourage capital inflows, it also makes fiscal expansion (and hence public
goods production) all the more difficult as exit by capital is made ever more
possible.14 A further consequence of this is as much ideational as material.
As states open up to finance, they become increasingly dependent upon
market opinion as to the state of their economy rather than the state of the
fundamentals per se (Keynes 1964: 156–8). In large part this is due to a shift
in ideas that paralleled, but is not wholly related to, the material aspects of
globalisation.
In brief, catch-all parties were creatures of the Keynesian era. States were
assumed to have primary responsibility for ensuring jobs and growth and
were also assumed to be able to marshal fiscal instruments to those ends.
Unfortunately for the practice of catch-all politics, in addition to the
material changes noted above, a reformation in the way policy-makers and
their economic advisors thought about the economy occurred over the same
period.15 In contrast to basing policy upon Keynesian models that assumed
that ‘people had no knowledge of the economic system and did not perceive
any interrelationships between the (hypothesised) variables’ (Bleaney 1985:
142), policy became increasingly dominated by new theories such as rational
expectations, which argued that people do indeed invest in being correct – to
the point that ‘economic agents are assumed [to be] completely aware of the
‘‘true’’ structure of the economy, that is, the form of the equation and the
size of the coefficients in the econometric model which govern it, and make
full use of this in forming their expectations’ (Bleaney 1985: 143). The policy
consequences of such an ideational shift are dramatic, for it argues that
while we can expect individual market participants to make mistakes,
systematic mistakes by markets are impossible because the structure of the
market itself is seen as invariant and known to all agents.
In such a world, catch-all parties and their attendant policies become
counter-productive. For if they accept this logic, as governing ‘left of centre’
parties increasingly did during the 1990s, then any intervention into the
market, whether for the private interest of controlling their coalition or for
the public interest of boosting the economy with the public good of growth,
can only end in disaster. States, and by extension parties, should then
abandon such strategies. Given such an unfriendly environment, catch-all
parties engaged in three survival strategies: downsizing constituent
expectations, externalising policy commitments, and separating themselves
ever further from any defined constituency. The end result of this was to
‘reform’ catch-all politics: or, more appropriately, to cartelise it.

Cartelising the Party System: The Discourse of Downsizing Expectations


In an environment where catch-all strategies were obviated, parties had to
find a new set of strategies to survive. The first was to downsize voters’
From catch-all politics to cartelisation 43

expectations. This occurred because all parties had an interest in reducing


the policy commitments that had over-extended them in the first place.
Regardless of their political complexion, none of them could satisfy
traditional demands for ever-increasing public goods provision given the
changed economic context. Once the limits of catch-all politics were reached
and globalisation, or, perhaps better, ideas about globalisation, restructured
the context in which states operated, party elites embraced these new ideas
about the economy as a way of ratcheting down constituent expectations
(Rosamond 2002, 2003; Rosamond and Hay 2002). In cartel terms, they
were signalling other players that they were limiting quantities and
encouraging joint maximisation. And, if other parties did the same, they
could cartelise the market and get more profit (hold on to office) and
security (minimal cost of electoral defeat) for less (in terms of policy
commitments). How then does one ratchet down expectations?
The first way, particularly apparent in the UK, the US and Sweden, was
discursive. Catch-all parties of the left proclaimed their newly found
devotion to the free market and the global economy, despite all its
drawbacks for their traditional constituencies. They did this because they
had discovered a ‘third way’ or ‘die neue Mitte’ or ‘den enda vågens politik’,
which in effect said states should not produce the public goods they had in
the past because the market could do it better. Whether the market could in
fact do it better was a moot point. What was important was that the
deployment of such a discursive strategy got states ‘off the hook’ for the
production of such goods in the first place. While parties of the right with all
their traditional distrust of the state had never been too comfortable with
the production of public goods on an ever-broadening basis and had simply
jumped on the ‘neo-liberal’ bandwagon for ideological reasons, parties of
the nominal left needed a justification for doing the same thing. Thus, in
order to survive in a post-catch-all environment the rhetoric of globalisation
and various ‘third ways’ were employed (Hay and Watson 1999; Hay 1997).

Cartelising the Party System: The Externalisation of Policy Commitments


If the answer to the problems facing the catch-all party was to compete over
less, then such parties had to find a way to signal their resolve. The way to
do this was through the creation of binding institutional fixes to the problem
of policy quantity reduction, thus credibly committing to cartelisation of the
political market as a whole (Wickham Jones 1995). The logic of central bank
independence illustrates this nicely. According to the economic ideas
developed to justify state rollback, politicians – through their over-
production of public goods – tended to mesh the electoral cycle to the
business cycle in order to get re-elected (Nordhaus 1975; Hibbs 1977; for the
classic rejoinder, see Barry 1985). As such, the equilibrium rate of domestic
inflation was always going to be higher than what it would counterfactually
be in the absence of such political ‘interference’. As the electoral cycle was a
44 M. Blyth and Richard S. Katz

recurrent fact, although politicians may proclaim that they will reduce
inflation once they are in office, it is held that they cannot actually do so in
practice since their inflation preferences are said to be ‘time inconsistent’
(Kykland and Prescott 1977; Persson 1988). Given this, politicians should
not be given the instruments to reflate the economy in the first place. The
best way of assuring this was to devolve monetary policy to unelected
central bankers with long time horizons, since only such a group would have
preferences that would produce low inflation and thus safeguard growth
(Forder 1998; Posen 1998).
The relevance of these policy externalisations and exercises in diminishing
expectations is that these logics have been embraced by ex-catch-all parties
across Europe and beyond as the optimal cross-party solution to economic
governance and development. Again, such a move only makes sense as a
part of a cartelisation strategy. By devolving policy to those who are not
directly responsible to their electorate, parties are able institutionally to fix
policy quantities and thus cartelise the market by reducing the policy space
over which parties could conceivably compete. (A similar argument could be
made for the EU, see e.g., Smith 1997.) Seen in this way, such institutional
fixes are the equivalent of binding quotas on policy production. Having an
independent central bank means that politicians are no longer responsible
for either creating or managing a large number of economic outcomes, and
such externalisation to independent institutions insulates politicians from
voters’ preferences and effectively curtails the supply curve of policy, thus
cartelising the party system.
What really makes this stick, however, is what these combined changes do
to the traditional relationships of parties and voters. Previously we noted
how exogenous technological and other changes have transformed the
business of elections. As such, the institutional changes wrought by
globalisation are compounded by the fact that the network dilemma, whose
solution was so critical for catch-all parties, has simply become less pressing.
The result of this is to catalyse a third set of changes in the relationships
between parties and voters in this new reduced policy space that leads not
merely to the creation of a cartelised system (as we saw above) but to the
creation of cartel parties themselves.

Cartelising the Party: Principals, Agents, Voters


The consequences of these ‘market/institutional’ changes for the form of
party itself is twofold. First, by institutionally truncating the supply curve
for policy, parties are encouraged to maintain the status quo rather than
promote change. Seen within this context, defection, even in the short run,
would make no sense for a vote-maximising party as the competitive policy
space has been reduced in such a way that policy commitments beyond what
other parties were offering (given public knowledge of other parties’
outputs) would be literally ‘incredible’. Second, such a mutual ratcheting
From catch-all politics to cartelisation 45

down of expectations and policies by parties creates conditions of greater


certainty over the other parties’ likely moves in the future and thus creates
equilibrial stability without overt collusion by the players.
By cartelising the system through institutional and discursive strategies of
narrowing the policy space (limiting what is in fact demandable) and
externalising commitments (truncating supply) these new conditions have
increasingly facilitated the transformation of the catch-all party into a cartel
party. After all, if electoral conditions have changed in such a way as to
make the network dilemma less pressing, why bother with the network?
Indeed, we argue that parties have begun this transformation by
restructuring party funding and commitments away from their catch-all
bases towards sources of support that would drastically reduce the costs
both of losing elections and of not providing traditional goods to
constituents. This has occurred precisely because a post-catch-all party
operating in a cartelised policy space is uniquely placed to exploit its
constituents using a reversal of traditional principal/agent (PA) problems.
Traditionally, voters as principals are understood to hire politicians as
agents to perform the tasks of governance for them, in line with their
preferences, subject to re-election. Failure of this relationship is con-
ventionally attributed to incomplete information between agents and
principals, allowing agents to ‘hide and rent-seek’ from their principals.
Basically, parties can misrepresent their intentions and, once placed in
power by their principals (voters), they (as agents) can act as they wish and
exploit the informational asymmetries to their own advantage.
The positing of a cartelised environment, where the policy space is
reduced and parties have tacitly agreed not to compete over certain issue
areas, suggests not simple failure, but a more profound reversal of this
conventional PA relationship.16 Given the declining relevance of the mass
base, politicians (this time seen as principals) can effectively ‘hire’ agents
(voters) to vote for them at election time.17 After the election, voters have no
effective power over the politicians since their sources of funding, and thus
re-election, lie away from traditional mass organisations, while their
traditional institutions of ‘voice’, party membership organisations, have
been ‘reformed’ to the point of redundancy. If one adds these changes to the
restriction of the supply curve for policy facing parties discussed above, then
we find that these three interrelated strategies; downsizing constituent
expectations, externalising policy commitments and separating the party
from any defined constituency, have the net result of moving party
organisation into a post-catch-all period where the most likely outcome will
be an increasing cartelisation of the political marketplace and increasingly
cartel-like organisational innovation by parties themselves.
In sum, this argument suggests several empirical hypotheses concerning
both internal party arrangements and inter-party relations and policy. First,
we expect to see decreasing dependence on resources generated by the party
on the ground in favour of funds raised by the central party organisation.
46 M. Blyth and Richard S. Katz

Second, we expect to see organisational changes designed to free central


party leaders from control by active elements of the party on the ground.18
Third, we expect to see policy convergence among oligopolistic parties
coming from two angles: from the deployment of policy rhetoric designed to
downsize expectations and free oligopolistic parties from traditional policy
responsibilities and constituencies, and from the increasing institutional
externalisation of such commitments.19 Fourth, we expect an ‘ideology’ of
managerial competence to replace the various ideologies of principle, even at
the rhetorical level, as the basis for choice among parties. In the next section,
we examine these four hypotheses with regard to three cases: the UK, the
US and Sweden.

The Cases
Cartelisation in the United Kingdom
Catch-all behaviour was evident in British politics by the 1960s with the
general acceptance of the welfare state and Keynesian economics that came
to be known as ‘Butskillism’ and internally with the dominance of both
major parties by the party in public office (McKenzie 1963). This
development was short-circuited, however, in the late 1970s by both parties’
inability to deliver sufficient material benefits due to a variety of exogenous
shocks (Blinder 1998). This culminated in the Conservatives’ defeat at the
hands of the Miners Union in 1974 and Labour’s fabled ‘winter of
discontent’ and defeat in the 1979 general election. These events led initially
to the victory of the left within the Labour Party and further electoral
disaster. Being faced with an unelectable opponent, the Conservative Party
had no incentive to behave like an oligopolist and behaved as an policy
monopolist, effectively closing Labour out of the market. Given this, the last
15 years of British party politics has been the story of the Labour Party’s
attempt to re-establish its position within a cartel, and in order to do so it
had to create an oligopoly out of a monopoly. This involved several
elements, all of which accord with our main thesis.
By 1992, the Labour leader Neil Kinnock had re-established some control
over the party manifesto and the party accepted many of the policies of the
Thatcher government; although generally described as a move to the centre,
it was rather more, given that Thatcher had moved the Conservative Party
itself sharply to the right (see Blyth 1997). Internally, in 1993 the Labour
Party adopted the one-man one-vote principle for choosing both
parliamentary candidates and members of the national executive, thus
eliminating the unions’ block vote and changing, in line with our theory, the
PA relationship party leaders faced. Under Tony Blair, this process has gone
even farther. ‘New’ Labour has actively courted and successfully solicited
funds from business groups, while emphasising that the trade unions no
longer have any special relationship with the party. Moreover, the policy
From catch-all politics to cartelisation 47

role of the conference was reduced in favour of the more easily managed
Policy Forum, and, as we have suggested should be the case, ‘Blair has
increasingly relied on ballots of ordinary members to outflank the delegates
and activists’ (Jones et al. 2001: 247).
Evidence of the strategy of downsizing expectations and thereby
curtailing the policy space facing parties is famously indicated in the joint
statement by Tony Blair and Gerhard Schröder entitled ‘Europe: The Third
Way/Die Neue Mitte’. Instead of class- or catch-all-inspired analyses of
social problems, the analysis rests upon supply-side ideas such as: ‘corporate
tax cuts raise profitability and strengthen the incentives to invest . . . It helps
create a virtuous circle of growth’; ‘the taxation of companies should be
simplified and corporation tax rates cut’; ‘companies must . . . not be gagged
by rules and regulations’, all of which signals a cartelisation of the space for
possible policy competition. Similarly, if one looks to the 1997 Labour Party
election manifesto, class is mentioned only once – and that is to say that it is
an obsolete term; in the ‘Third Way/Neue Mitte’ statement, the word ‘class’
does not appear at all.20 Regardless of the truth or virtue of such policy
statements, they are hardly what one traditionally would have associated
with the European left.21 However, what this does signal is the triumph of
managerial competence over delivering ‘goods’ to specific constituencies.
In terms of actual policy we see further evidence of cartelisation through
the strategy of the externalisation of policy commitments. In May 1997, the
new Labour government gave the Bank of England effective independence
to set interest rates, subject only to the advice of an eight-member Monetary
Policy Committee appointed by the government. This major shedding of
economic power/responsibility on the part of the government had not been
even mentioned in the party’s election manifesto, and was judged to have
been unthinkable by previous governments of either party.22 Meanwhile, the
deepening of the European Union, in particular the commitment to join
European Monetary Union (EMU) in the near future, represents a further
externalisation of policy commitments as the government’s failure to take
responsibility for economic policy can be blamed on the European Central
Bank or on Brussels. Similarly, the institution of a Scottish parliament and a
directly elected executive mayor for London allow the central government to
shift responsibility for outcomes in these arenas as well.
Similar to New Labour’s internal reforms, the former leader of the
Conservative Party in the United Kingdom, William Hague, effectively by-
passed the middle levels of the party by creating a centralised membership
list and direct membership ballots. Hague also reformed other aspects of the
party’s organisation so as to increase central control while giving the
appearance of membership consultation. Moreover, having experienced the
rapid increase in the costs of media-oriented campaigning without a
corresponding increase in income from individual and corporate donations
(between them, about 90 per cent of central party income – the balance
coming from fees levied on constituency associations), there are at least
48 M. Blyth and Richard S. Katz

suggestions that the party may reverse its long-standing opposition to state
subventions.
Given this, we can conclude that the UK party system has cartelised to the
extent that two consequences follow. First, the majority of the (opposition)
party in parliament at any given point, given such a lack of policy
differentiation, stands less risk of failure. While one cannot rule out such
factors as one party being seen as inherently ‘unelectable’ for a variety of
reasons, we would predict that such oligopolistic producers of policy do not
drive each other out of business since ‘cartelised’ policy demand is inelastic
and policy-goods are near perfect substitutes. Second, such opposition
parties are virtually guaranteed ‘their’ chance to govern (with the same
policies as the present incumbent) so long as they can effectively ‘stay in the
race’ – hence the importance of securing state, and other non-accountable,
subventions.

Cartelisation in the United States


The political parties of the United States were once famously described as
two bottles on a shelf, one labelled ‘milk’ and the other ‘whisky’ – but both
empty. Given this, a cartel of sorts might seem always to have been in
operation. However, though the degree of policy competition between the
Democrats and the Republicans may be small in comparative perspective,
real policy differences were manifest until relatively recently.23 Indeed, cartel
dynamics have only come about, as our theory would predict, over the last
20 or so years because of the abeyance of the network problem and the
effects of globalisation – albeit globalisation more as rhetoric than reality.
Similar to the situation in the UK, the perceived limits of catch-all politics
became apparent in the mid-1970s. Congress had historically tried to
appease all groups with growth, and when growth slowed there seemed to be
a price to be paid in terms of higher inflation and unemployment.
When American catch-all politics seemed to reach its limits, both the state
and citizen groups portrayed business interests as the villains of the piece
(Blyth 2002: 132–5). In response, the Campaign Finance Reform Act of
1971 sought to limit private money in politics. However, there were
exceptions to the Act, the most important of which was a provision that
allowed ‘solicitation of contributions to a separate segregated fund to be
utilized for political purposes by a corporation or a labor organization’
(Clawson et al. 1992: 30). The original idea was that these exceptions would
put business and labour on the same level playing field. However, Sun Oil
challenged the interpretation of this exception by arguing in the courts that
the act did not preclude business from soliciting funds from anyone, and
that it contained no restrictions on the number of such funds a corporation
could set up. Although any one such political action committee (PAC) was
limited to a donation of $5,000, the act effectively ended all restrictions on
corporate donations as the number of PACs could be multiplied
From catch-all politics to cartelisation 49

exponentially (Clawson et al. 1992: 32; Vogel 1989: 119–23). In 1974 there
were 89 corporate PACs that contributed $4.4 million to the 1974
campaigns, with Democrats and Republicans receiving almost equal shares.
By 1976 the number of PACs had risen to 433, which together contributed a
total of $10 million to the 1976 presidential election race. In 1972 labour
PACs spent $8 million and corporate PACs spent $8.2 million. By 1978
corporate PACs spent $39 million in comparison to labour’s $18.6 million
(Edsall 1984: 131).
What is of most significance, however, is how the distribution of funds
changed over time, thus encouraging a cartel strategy among the
Democrats. By October 1978 Democratic incumbents received only 29 per
cent of available PAC money (Vogel 1989: 209). In the 1980 campaign
Democratic challengers received less than 1.5 per cent of available PAC
money (Clawson et al. 1992: 143). In the 1982 Senate races, Democratic
challengers received 6.8 per cent of available PAC money whereas
Republican challengers received 21.8 per cent (Edsall 1984: 133). These
changes sent a clear signal to the Democrats that their traditional catch-all
strategy was exhausted, and that if they were to remain a viable party then
funds would have to be solicited from these new sources. These changes in
sources of financing consequently altered the relationship among party
leaders, voters and their traditional constituents in a manner similar to what
we saw in the British case. Since traditional constituencies, particularly
unions, were less important to the process of winning (or at least raising
enough to win) they had to be effectively disempowered. The question was
how?
Similar to Labour’s experience in the UK, the 1980s were a period of
electoral disaster for the Democrats where each defeat was met by a
narrowing of the policy space as the Democrats moved further to the right.
In response to such defeats a variety of discursive strategies ranging from
the need for an ‘industrial’ or ‘strategic trade’ policy were deployed by the
Democrats as an alternative ‘supply-side’ answer to the fiscal downsizing of
the Republicans (Graham 1992). All of them failed. Realising that the only
way to beat the Republican monopoly was to become a duopoly, and that
this meant competing over the same policy space, the Clinton campaign
discovered the global economy and further cartelised the system.
Throughout the 1992 and 1996 presidential campaigns Clinton repeatedly
invoked the image of the US as a large corporation ‘competing’ in the global
economy – despite the fact that such a concept is economic nonsense, since
the US in the 1990s was the least globalised economy in the developed
world.24 Despite having little evidence for making such a claim, Clinton
repeatedly stressed that reducing the budget deficit was the sine qua non of
better economic performance (Blyth 2002: 195). One might excuse these
gaps between rhetoric and reality as simple electoral posturing. To do so,
however, would be short-sighted since deploying such rhetorical strategies
had two effects that further cartelised US politics.
50 M. Blyth and Richard S. Katz

First of all, by deploying such rhetoric and policies, traditional


constituencies’ expectations could be downsized as necessary sacrifices on
the altar of global competitiveness. Trade policies opposed by traditional
constituencies, such as The North American Free Trade Area (NAFTA)
and the World Trade Organization (WTO) agreements, were passed by the
Democrats. Second, traditional Democratic policy commitments on
progressive taxation, non-means-tested welfare benefits and using the
budget to balance the trade cycle could similarly be abandoned in the face
of the ‘new global economy’ and the ‘crushing deficit’. Clinton’s ambitious
‘Health Security’ proposal was dropped in part because it was seen to make
American corporations globally ‘uncompetitive’. Similarly, Democratic tax
reforms from 1992 to 2000 repeatedly raised consumption (and some
income) taxes rather than capital taxes, thus converging to the Republican
policy agenda under the rhetoric of the limits of globalisation. And to cap it
all off, Clinton signed a de facto balanced budget amendment into law in
1997 while simultaneously ending ‘welfare as we know it’.
The upshot of all of this was to create a party system where the supply
curve of possible policy had been narrowed to such an extent that the 2000
election offered the voters a choice between ‘practical idealism’ and
‘compassionate conservatism’ – a distinction without a difference. Conse-
quently, congressional discussion of macroeconomic policy options differs
only over the size, and not the merit, of tax cuts, while the actual policies of
the two parties, except for the single issues of abortion and school prayer,
are now practically indistinguishable.25 Again, we see a situation similar to
what occurred in the UK. With the two parties engaged in ‘non-competition’
over the same limited policy space, the choice facing voters is over near-
perfect substitutes with inelastic demand produced by a duopoly. Both
parties, especially the Democrats, have insulated themselves from demands
from their core supporters by producing policies that enable them both to
stay in power, despite the economic outcomes that are produced.26
In sum, then, the US party system also shows evidence of cartelisation.
The dependence of both parties on traditional sources of support has
decreased, policy convergence, expectation reduction and policy externalisa-
tion have all occurred, and, finally, a common discourse of ‘competence’ has
replaced any notion of real policy alternatives. All of which suggests the
emergence of a cartel.

Cases: Cartelisation in Sweden


In contrast to the deflationary policies enacted by catch-all parties in the UK
and the US in the late 1970s and early 1980s, the Swedish Social Democrats
(SAP) attempted a reflationary strategy, also called the ‘third way’.
Sweden’s ‘original’ third way was effectively a large devaluation aimed at
giving Sweden a one-time terms of trade boost in exports. In this regard it
was rather successful, with Swedish economic performance throughout the
From catch-all politics to cartelisation 51

early to mid-1980s being far superior in terms of employment and output to


those of the UK and the US (Bosworth and Rivlin 1985). In fact, there are
grounds for claiming it was almost ‘too successful’ insofar as it actually
encouraged import inflation and an economic overheating in the mid to late
1980s (Martin 1996). In response to these developments, and similar to what
we saw in the US case, Swedish business groups inadvertently promoted a
cartelisation of the Swedish party system.
Still hurting after the so-called Wage Earners Funds debacle in the mid-
1970s, where the Swedish state and the blue-collar union confederation (LO)
attempted a leveraged buy-out of Swedish capital with their own funds,
Swedish business went on an ideological counter-offensive (Steinmo 1988;
Pestoff 1991). The Swedish Employers’ Federation (SAF) spent heavily on
reinvigorating pro-market think-tanks such as SNS and Timbro, and
influencing the public debate through lavish campaigns (Blyth 2002: 213–
14). Simultaneously, the Swedish economics profession underwent the same
neo-classical reformation that had already occurred in the US and the UK
(Blyth 2002: 214–19). The upshot was the transformation of the ideational
context within which policy was made, particularly financial policy.
The Swedish finance ministry of the mid to late 1980s was an important
receptacle for these new ideas about the costs of welfare institutions on
growth, the need for ‘competitiveness’ in the ‘new global economy’, and the
costs of high taxation and capital controls. Indeed, tax reform and financial
deregulation became a crusade within the SAP’s finance ministry (Blyth
2002: 223–4). Unfortunately, the tax reform enacted was under-funded and
financial deregulation took place with external capital controls in place.
Taken together this merely succeeded in creating a real estate bubble that,
when it burst, increased unemployment to 12 per cent – its highest level since
the 1930s. Unsurprisingly, the SAP lost the election and the bourgeois block
came to power for the first time in 40 years. Given the influence of these new
ideas on both the SAP and the newly empowered bourgeois parties, the
Conservatives engineered a deflation after the real estate bubble burst that
turned the deflation into a collapse of economic activity (Blyth 2002: 225–7).
However, rather than capitalising on this error, the SAP took it as evidence
that, in the words of the head of the Swedish Employers’ Federation, ‘after a
long illness, the Swedish Model is dead’ and they too sought to reform
catch-all politics (Ulf Laurin, quoted in SAF-Tidningen, 16 Feb. 1990: 11,
translated and quoted in Pestoff 1991: 160).
Our four hypotheses – the deployment of the discourse of downsizing, the
externalisation of policy commitments, the truncation of the policy supply
curve, and the cartelisation of the system – receive partial confirmation in
the Swedish case. Partial in the sense that since the late 1980s the first three
have occurred but, surprisingly, the fourth has not followed. The reasons for
this tell us a great deal about the limits of cartelised systems.
As noted above, the discourse of downsizing has been a recurrent feature
of Swedish public debate since the early 1980s, so much so that by the 1998
52 M. Blyth and Richard S. Katz

elections both major parties’ policy proposals had converged to the extent
that neo-liberal restructuring was universally ‘in’ while the defence of the
welfare state was very much ‘out’. In terms of policy, both parties targeted
inflation fighting over employment creation. Sick-pay and other welfare
benefits were reduced, and a host of other ‘neo-liberal’ policy reforms were
being considered by both the major parties. Moreover, policy externalisa-
tion has proceeded apace. Sweden joined the EU in the early 1990s in order,
as the then Conservative prime minister put it, to make ‘tax cuts (and hence
welfare reductions) more or less inevitable’ (Carl Bildt, quoted in Kurzer
1993). Similarly, the Swedish central bank was made independent in the
same period and the traditionally close relationship between SAP and LO
has become increasingly distant during the 1990s.
Comparatively, we see the same dynamics in Sweden as we saw in the US
and the UK. As the catch-all strategy ran into trouble (or at least was
perceived or portrayed to have run into trouble) parties ‘shorted’ their
policy positions and externalised their commitments. Overall, both parties,
but especially the SAP, attempted to ‘drop’ their core constituencies and
truncate the policy supply curve such that, in an echo of Thatcher’s rhetoric
of ‘there is no alternative’, the Bildt government could declare ‘Den enda
vågens politik’ (the only way policy) and get support from the SAP for it.
However, although the major parties behaved like cartel parties, they did
not succeed in cartelising the system because of the one factor that limits the
success of all cartels: the availability of substitutes.27
Despite the SAP and the Conservatives insisting that ‘there was no other
way’, and that policy convergence to a neo-liberal agenda of diminished
expectations and reduced commitments was the only choice on the menu,
the Swedish public forgot to listen.28 The presentation of a cartelised set of
policies by the two major parties in the 1998 elections resulted in a drop of
support for the governing SAP from 45.4 per cent of the vote in 1994 to 36.5
per cent. However, this was not translated into support for the bourgeois
parties as their share of the vote also plummeted, thus allowing the SAP to
remain in office as a minority government, but only with the support of the
Left Party – which gained 5.8 per cent over 1994. In sum, cartelisation
reached its limits in that despite both sides’ cartelised policy agendas, the
SAP was forced by a popular demand for ‘restoration’ of the welfare state to
promise more money for health care and social services. As the New York
Times noted, ‘the most repeated claim in this election was not the dynamic
pledge to bring about change common to campaigns elsewhere in Europe
but a stolid promise to restore what was’ (Hoge 1998). Substitutes, in the
form of the Greens and the former Communists allowed the Swedish public
to desert the cartel and signal that while there may be only one choice on the
menu, they may be prepared to eat elsewhere, thus exposing the limits of any
cartelisation strategy.
Yet this is not to say that such cartels necessarily become unstable because
of the availability of substitutes. In the Austrian case, for example, the
From catch-all politics to cartelisation 53

Freedom Party managed to shatter the cartel of the Social Democrat Party
of Austria (SPÖ) and Austrian People’s Party (ÖVP). Having entered
government as a junior partner of the ÖVP, it now faces the choice of
returning to marginality and effectively forcing the resurrection of the old
cartel or effectively becoming a cartel party itself. Similarly, the German
Green Party, which began as an anti-cartel alternative, has apparently
chosen admission to the cartel, with all that implies about the range of
allowable policy proposals, over principled but permanent opposition.

Conclusions and Theoretical Reflections


In the original cartel party article, Katz and Mair (1995: 17) suggested that
Sweden was a very likely case for cartelisation, given its tradition of inter-
party cooperation and abundant state support for parties, while the UK,
with a tradition of adversary politics and relatively limited state support,
was an unlikely candidate. In this article, however, we find that cartelisation
has proceeded farther in the UK than in Sweden. The appearance of a
contradiction may be illusory, however.
First, Katz and Mair focused heavily on the availability of state
subventions as a means through which party leaders could both satisfy
their need for financial resources and free themselves from policy constraints
imposed by dependence on the party on the ground for those resources.
While it is certainly true that Swedish parties are the beneficiaries of far
more lavish public support than are British (or American – at least relative
to their self-defined needs) parties, the introduction of significant state
support of parties in Britain now appears more likely than it did ten years
ago; while this part of the process is, indeed, less developed in Britain, it is
nonetheless developing. More importantly, in the original version of the
cartel argument, state subventions were stressed as the primary mechanism
driving cartelisation. In contrast, in this article a broader claim is being
made for the importance of reducing the policy space as a means of
cartelisation. Cartelisation is a multi-dimensional process and progress
along the dimensions need not proceed in lock-step.
Second, when the primary attention shifts from the internal dynamics of
party life (type of party) to the dynamics of inter-party competition (party
system), British (and American) soil may be more congenial to cartelisation
– and particularly to the maintenance of a cartel – than originally thought.
Katz and Mair (1995: n.4) attributed the unlikelihood of cartelisation in
Britain to Labour’s ‘apparent inability ever to get back into office’. But
ultimately, as we have suggested above, it was precisely this inability that
spurred Labour (the social democratic mass or catch-all party) to transform
itself into New Labour (the cartel party). If cartelisation is furthered by
market concentration, then clearly the British and American party systems
with effective numbers of parties of 3.1 and under two (and two ‘relevant’)
parties are stronger candidates for cartelisation than the Swedish, with 4.3
54 M. Blyth and Richard S. Katz

effective parties (Gallagher et al. 2001: 322). Moreover, with their first-past-
the-post electoral systems, both the UK and the US present far higher
barriers to entry for potential cartel-breakers than in Sweden – which helps
to explain why the Left Party was able to undermine the cartelisation of the
Swedish policy space in a way that no counterpart in Britain or the United
States has.
In broader theoretical terms, one of the problems with the Downsian
model of party competition is that the policy proposals of two vote-
maximising parties ought to converge on the first preference of the median
voter – with the result that the voter’s party differential would become zero.
Militating against this, however, is said to be the dependence of each party
on the interests that provide its resources, and these interests are segregated
with respect to policy, forcing each party to balance between vote
maximising and resource satisficing strategies, and thus limiting policy
convergence. In this paper, however, we have suggested that once the
dependence of parties on their core constituencies is broken, cartelisation
becomes a rational strategy.29
Party organisations were developed in order to solve problems of
coordination faced by competitors for political office. Under the re´gimes
censitaires of the nineteenth century and even before that, the primary
problem of coordination was the marshalling of supporters in parliament
behind those who held or aspired to ministerial office. The solution was the
cadre or elite party. With the mobilisation of the working classes, the
problem of organising large numbers of activists became important, and the
response was the development of the mass party, the very success of which in
winning seats in parliament created the additional problem of networking
between the mass party’s extra-parliamentary organisation and its repre-
sentatives in the parliamentary party. Attempts to manage these problems
led to the catch-all party, with its strategy of providing public goods in
exchange for electoral support. Ultimately, however, this strategy ran into
limits that forced parties to adapt yet again in order to remain viable.
This most recent adaptation is to form a cartel, in which all participants
tacitly agree to restrict policy competition. This agreement has been lent
credibility through the externalisation of responsibilities (privatised services;
independent central banks; devolution; the EU). It has been supported by an
ideational shift towards neo-liberal economics and the associated rhetoric of
globalisation. This has allowed parties to downsize the expectations of the
electorate and to free themselves from dependence on their traditional
constituencies. The result has been to reorient electoral competition towards
questions of managerial competence, and to identify democracy with the
mere holding of elections, no matter how minimal the substantive choice
offered the voters may be.
In a sense, however, the modern democracies have been here before. At
least from the perspective of those who were excluded from it, the political
market of elite parties under the re´gimes censitaires must have looked very
From catch-all politics to cartelisation 55

much like a cartel rather than real competition. But just as the breaking of
the cartel of the re´gimes censitaires meant a redefinition, not the demise, of
liberal democracy, so the breaking of the current cartelised system by pro-
democratic anti-party-system parties could represent a further reconceptua-
lisation of democracy. In some ways, anti-party-system parties are
analogous to the newly rising mass parties of the late nineteenth century,
for example, with their emphasis on internal democracy, even when it is the
‘democracy’ of a charismatic leader rather than of equal deliberation, or the
idea of party as the organised political part of a way of life rather than just
an expression of political opinions.30 For these parties to redefine the
political space they will have to solve their own external coordination
problem. However, with a clientele of cognitively mobilised voters who are
not amenable to the bureaucratic, hierarchical, mass-party approach, such a
possibility of ‘keeping democracy competitive’ may require both organisa-
tional creativity (a new party type) and an external shock to the existing
system that has not yet occurred.
In the meantime, the balance of play rests with the cartelisers. That this
should be the case is hardly a surprise given that anti-party-system parties
can exist only to the extent that they perceive themselves to be excluded from
a cartel and for such a perception to hold (paranoia aside) there must in fact
be a cartel present. We have suggested three very different environments
where such cartel dynamics already exist: the US, the UK and, in part,
Sweden. This occurs due to the absence of serious network coordination
problems and the presence of downsized expectations and commitments.
Post-catch-all parties no longer need concern themselves with transformation
of the status quo in order to get elected. Rather, maintenance of the status
quo has become an end in itself: an end to which even some would-be ‘cartel
breaking’ parties, as suggested above, end up accommodating.

Notes
We would like to thank Jonathan Hopkin, Brian Burgoon, Phineas Baxandall, and participants
at the 2001 ECPR annual meeting in Grenoble.

1. In part, this essay can be seen as an attempt to overcome the ‘conspiracy’ charge against the
existing cartel literature that has so vexed some analysts (see e.g., Kitschelt 2000: 149–79).
2. In the English case, for example, there were patterns of faction and alliance in both the
House of Lords and the House of Commons virtually from the inception of those bodies,
but even by a more rigorous definition of parties, it is easy to trace their English
parliamentary history at least to the mid-seventeenth century (Stout 1953: 162).
3. Club goods can be thought of as targeted benefits to a defined constituency such as a
minimum wage or health insurance for industrial workers in contrast to public goods such
as free universal education.
4. The problem of confounding policy goals identified as ideological purity with policy goals
identified as impact on state policy is at the core of the question of whether the cases
analysed in Müller and Strøm (1999) really do represent ‘hard decisions’ – in particular
raising the question of whether office and policy are conflicting or complementary goals.
56 M. Blyth and Richard S. Katz

5. It also meant integrating ancillary organisations into the party ‘family’ without accepting
the idea that the party represented only one social segment.
6. The most famous example of all, Organization of Petroleum Exporting Countries (OPEC),
was partially successful precisely because it was not a cartel at all. That is, OPEC was
underwritten by Saudi Arabia, which controlled such a disproportionate share of
production that it could lower its own supply and thus control price irrespective of the
pricing decisions of others. OPEC ran into trouble when the other members realised this
and began to free-ride on Saudi quantity restrictions. On the other hand, in a set of cases
that is perhaps even more clearly analogous to a cartel of parties – a league of professional
sports teams – cartels have been both relatively common and relatively stable (see Krause
1997).
7. For a ‘real world’ example, consider airline fare pricing. Airlines do not price their seats
according to market demand. Rather, they release a certain quantity of seats at a given
price, with that price being set by the quantity released by the other players. This can of
course result in instabilities and fare wars, but if one carrier emerges as the price leader then
a stable market equilibrium quite often results. Think of all the times one logs on to the
Web to look for a fare and finds so little difference in price differences between carriers. Is
this really because the cost structures of these firms are so similar?
8. One can note that during the 1980s, the effective number of parties in European parliaments
exceeded five only in Finland (5.1), Italy (6.9), the Netherlands (5.1), Belgium (8.5) and
Switzerland (5.8) (Gallagher et al. 2001: 322). Moreover, given the effective ‘pairing’ of
Belgian parties, one can ask whether the mechanically computed effective number of parties
is not too high (see Lijphart 1999: 69–71). Similarly, although there may be an effective 5.8
parties in the Swiss parliament, in fact government office has been monopolised
(‘oligopolised’) since 1959 by the four-party ‘golden formula’. As this last example
illustrates, the ‘effective number of parties’ is not necessarily the same as the number of
relevant parties. We cite it here, however, particularly because it is the equivalent (literally,
the inverse) of the Herfindahl–Hirschman index, conventionally used to measure the
concentration of markets.
9. Another significant cause of risk aversion which we do not emphasise here is
professionalisation of political careers, which increases the personal risk for party leaders
who increasingly depend upon politics for their livelihoods.
10. Which can perhaps also be thought of as ‘Downs-izing’, if you pardon the pun. We thank
Peter Mair for this observation.
11. This is, of course, the ‘down-side’ of Downsian convergence on the Condorcet choice.
12. Openness is measured as the sum of exports plus imports divided by the share of gross
domestic product that goes towards consumption. O = (X + M/CGDP).
13. Authors’ calculations from the Penn World Tables 5.6 sourced from http://datacentre.-
chass.utoronto.ca/pwt (16 March 2001). Average relates to UK, France, Sweden, Germany,
Italy, Austria. Yet while European trade has become more open, it has to a large extent ‘de-
globalised’ in that while intra-European trade has increased, trade between Europe and the
rest of the world has actually decreased (see Hay 2001).
14. Moreover, by embracing open capital flows and full convertibility, the ability to fix the
exchange rate and thus avoid domestic deflation when adjusting to external cost differences
is similarly reduced in scope.
15. This is not to say that the latter is fully reducible to the former. For a full discussion of the
relationship between ideal and material changes and their impacts on economic policy
making, see Blyth 2002.
16. Although here we only suggest the reversal of the conventional PA theory with respect to
post-catch-all or cartel parties, it is equally possible to understand the elite party as the
hired (primarily with patronage) agent of the ministry that it nominally supports, or the
leadership of the mass party as having ‘hired’ the party on the ground as its agent in
exchange for particularistic benefits and club goods (much as auto clubs hire the members
they claim to represent with maps and emergency road service).
From catch-all politics to cartelisation 57

17. As was beautifully demonstrated in the 2000 election in the US where the Republican Party,
through tax cuts that took the form of post-election cheques, effectively hired voters to vote
for them! The same could also be said for Thatcher’s policies of ‘fire-sale privatisations’ and
council house sales (in this regard see Schamis 2002).
18. This could take place by formal centralisation of decision, by ‘empowering’ party members
as isolated individuals in a way that by-passes local or group activists, or by weakening
representation of ancillary organisations, especially trade unions. Among other manifesta-
tions of this might be use of postal membership ballots in place of decisions by
representatives or at meetings.
19. Examples would include the privatisation of welfare services, independence (from elected
officials) of central banks, and the transfer of responsibilities either upward (e.g., to the EU
or the WTO) or downward (i.e., devolution).
20. More accurately, the word ‘class’ appears many times in the 1997 Labour manifesto, but in
all but the one case in which class is relegated to the ash-heap of political history, it is to
promise small class sizes in schools.
21. Nor is this because constituents no longer want such publicly produced goods. Far from the
vision of a post-modern voter who values autonomy and individualism emerging out of the
social democratic heartland, actual surveys of what people want from government show not
just a sustained preference for publicly produced goods, but an increase over time in voters
preferences for such goods (see Pelizzo 2003).
22. One can point to the considerable ‘redistribution by stealth’ that has taken place under New
Labour in the form of tax increases, negative income tax credits targeted on the poor such
as child and working persons’ tax credits. However, rather than constituting ‘left politics by
other means’ these policies are problematic on two fronts. First of all, such redistributions
have not reversed the income inequality trends of the past two decades. As Andrew
Shephard (2003: 4) put it, ‘Since Labor came to power the GINI coefficient has increased
once more . . . Income inequality over the past two years [2000–2002] has been higher than
in any other period covered by our data [1979–2002]’. Second, Labour’s tax increases,
which have been largely concentrated on fuel, cigarettes, alcohol etc. are disproportionately
paid for by the very people who are being redistributed to, which is probably why the
government’s own recent surveys of inequality find, at best, ‘no consistent trend since the
start of the 1990s’ in income inequality (Lakin 2004: 2).
23. Which is not to underestimate the real differences that do exist between these parties on
single issues such as abortion and school prayer. However, while ‘attention getting’, such
issues, and their resultant policies, have little impact upon the political economy of
governance.
24. On the foibles of the notion of competitiveness and the exaggerated claims made for the
need for competitiveness in the ‘new global economy’, see Krugman 1994.
25. This is not to deny the partisanship that brought us Gingrich, the Contract for America,
and the current struggle over gay marriage. However, it is telling that such politics, which
take up an ever-increasing amount of the legislative calendar, are largely symbolic struggles
over social issues that appeal to core constituencies and cost little or nothing to implement.
The politics of distraction has taken the place of the politics of substance at far less risk to
either of the parties involved. The impeachment of President Clinton, and the politics of
personal attack that drove Speakers of the House of Representatives Jim Wright and Newt
Gingrich himself from office are additional examples of the displacement of politics away
from the substance of policy and into the realm of theatricality. They are analogous to the
much-hyped personal rivalries often found in professional sports, rivalries that may
increase public interest but do nothing to threaten the underlying cartel that is a sports
league, or that we argue here is increasingly typical of inter-party politics.
26. Witness how during the bursting of the stock-market bubble both parties passed the buck to
Alan Greenspan rather than blaming one another for past policies.
27. This part of our argument also pertains to the critique of cartels offered by Kitschelt 2000
(see n.1, above).
58 M. Blyth and Richard S. Katz

28. As they also forgot to listen on the 2003 Euro referendum that was supported by parties of
all sides. A ‘convergence’ that would have externalised all sorts of policy commitments.
29. It should be noted that the firms/parties competing in the whole line of theory from
Hotelling to Smithies to Downs and beyond are perfect competitors only by assumption. In
fact, the scenarios of these theories are precisely those in which an economist might expect a
cartel to form.
30. An obvious example, at least at the rhetorical level, is the Belgian Flemish ecology party,
Anders Gaan Leven, literally ‘to live differently’.

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