The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism

Rawi  Abdelal; John  G. Ruggie

Chapter | New Perspectives on Regulation | 2009

The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism

by Rawi Abdelal and John G. Ruggie

Abstract

In this essay we revisit the principles of “embedded liberalism” and argue for their relevance to the contemporary global economy. The most essential principle is the need for markets to enjoy social legitimacy, because their political sustainability ultimately depends on it. From this principle we analyze three current sets of practices and institutions in which ongoing crises of legitimacy demonstrate the need for a renewal of embedded liberalism and a revitalization of global governance. They are as follows: the activities of transnational corporations, particularly with regard to core standards in labor and human rights; the organization of the international financial architecture; and the formal rules and informal norms of international organizations.

Keywords: Economic Systems; Ethics; International Finance; Globalization; Multinational Firms and Management; Corporate Governance; Governing Rules, Regulations, and Reforms; Labor;

Format: Print

Citation:

Abdelal, Rawi, and John G. Ruggie. "The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism." In New Perspectives on Regulation, edited by David Moss and John Cisternino, 151–162. Cambridge, MA: Tobin Project, 2009.

The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique and comprehensive dataset from the U.S. daily deal market, where merchants offer deals to generate revenues and attract new customers. We specify and estimate a two-stage supply-side model in which platforms and merchants bargain on the wholesale price of deals. Based on Nash bargaining solutions, our model generates insights into how bargaining and competition jointly determine the price and firm profits. Our results show that there is systematic variation in bargaining power between platforms and merchants with different characteristics. By working with a bigger platform, merchants enjoy a larger customer base, but they are subject to lower margins due to less bargaining power during negotiations. Our counterfactual results quantify the value of platforms for merchants and show that merchants with lower bargaining power benefit more by working with a smaller platform. Regarding the impact of price negotiations on platform competition, we estimate that roughly 11% of the deals on a smaller platform are attributable to the platform’s lower level of revenue sharing.

Case | HBS Case Collection | October 2018 (Revised August 2019)

Everybody Knows: Russia and the Election

Rawi Abdelal, Rafael Di Tella and Galit Goldstein

Following a contentious presidential race, Donald Trump’s 2016 election destabilized America’s status quo. Academics, journalists, politicians and the public at large examined why Trump had won. Many Americans, inside and outside the government, asserted that a state-led Russian disinformation campaign had influenced the election’s outcome. The leaders of major social media companies, including Twitter and Facebook, also conceded that state actors had gamed their platforms to influence American politics. Trump himself made conflicting statements, while Russian politicians asserted that American elites had rhetorically weaponized the issue of election interference to justify an unwillingness to work with their country internationally. It was hard to parse where reality ended and political rhetoric began. Post-election, the future of U.S.-Russia relations remained unclear, and the United States grappled with how to regulate cyberspace. Analyzing the 2016 election and its aftershocks helps students confront interrelated questions about business regulation, international relations, cultural identity, strategic communications, political will and the Internet. The case encourages students to consider the boundary between narrative and reality, and examine subjectivity, objectivity and power in the public and private sectors.

Keywords: Strategic industry; strategic alliances (business); Business and Government; business and public policy; business and society; Media Businesses; media content; media slant; media regulation; social media; internet of everything; government policy; politics; political campaigns; political strategy; political turmoil; government; Government Regulation; Security; international business; International Relations; National Security; Political Elections; News; Media; Internet; Rights; Problems and Challenges; Globalization; Business and Community Relations; Business and Government Relations; Government Legislation; Risk and Uncertainty; Cognition and Thinking; Conflict and Resolution; Identity; Civil Society or Community; Culture; Public Opinion; Social Issues; War; Online Technology; Public Administration Industry; United States; Russia;

Citation:

Abdelal, Rawi, Rafael Di Tella, and Galit Goldstein. "Everybody Knows: Russia and the Election." Harvard Business School Case 719-012, October 2018. (Revised August 2019.) View Details

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Though the shale revolution transformed the U.S. into the largest producer of petroleum products, it was unclear how much success American exporters would find selling liquefied natural gas on the European energy market. Gazprom, the state-controlled Russian energy company, provided Europe with the majority of its natural gas. Many voices discussed European energy needs in terms of security or politics, but buyers and sellers of natural gas in the private sector approached the question from a somewhat different angle. This case, built around unique calculations that model the prices different European customers pay for gas, analyzes the strategic considerations and pricing decisions of Russian and American natural gas suppliers, and pushes students to consider the broader political context of energy in Europe.

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The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism

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