10.1177/0010414003256111 ARTICLE COMPARATIVE POLITICAL STUDIES / October 2003 Thelen, van Wijnbergen / THE PARADOX OF GLOBALIZATION THE PARADOX OF GLOBALIZATION Labor Relations in Germany and Beyond KATHLEEN THELEN Northwestern University CHRISTA VAN WIJNBERGEN Ohio State University What is the impact of globalization on labor in the advanced industrial countries? One body of work holds that globalization pushes all countries toward neoliberalism; another argues that the impact of globalization will vary according to prevailing institutional arrangements and predicts continued divergence between the so-called liberal and coordinated market economies. In an analysis of the German case that combines case-study and formal-modeling methods, we refute the first, neoliberal convergence, theory, showing that globalization in some ways empowers unions by rendering employers extremely vulnerable to industrial unrest. Furthermore, we sug- gest some revisions to the second, varieties of capitalism, perspective. We show that, in Ger- many, employers’ increased vulnerability to conflict has shored up centralized bargaining arrangements in the short run, but at the same time, has also set in motion feedback effects that are deeply destabilizing to the system in the longer term. Keywords: globalization; industrial relations; labor politics; advanced industrial countries; Germany; analytic narrative W hat is the impact of globalization on labor in the advanced industrial countries? There are conflicting views. One body of work holds that globalization pushes all countries toward neoliberalism and deregulation, encouraging firms to lower labor costs and increase labor market flexibility while undermining the power of unions to prevent these (Kapstein, 1996; Katz & Darbishire, 1999; Ross & Martin, 1999). Another literature argues that the impact of globalization will vary considerably according to the insti- 859 AUTHORS’NOTE: We thank Luis Garicano, Peter Gourevitch, Anke Hassel, David Lake, Mar- garet Levi, Ken Shotts, David Soskice, Peter Swenson, Michael Wallerstein, and the anonymous reviewers for their comments and suggestions. COMPARATIVE POLITICAL STUDIES, Vol. 36 No. 8, October 2003 859-880 DOI: 10.1177/0010414003256111 © 2003 Sage Publications