Liberalization by Exhaustion: Transformative Change in the German Welfare State and Vocational Training System*

This article argues that two core domains of the German coordinated market economy have undergone transformative institutional change: the welfare stale and the vocational training system. We argue that this process is best described as a process of liberalization resulting from the exhaustion of traditional institutions. Exhaustion describes a mechanism of institutional change in which endogenous negative feedback effects, caused by the over extension of resources, lead to a transformation of the formerly symmetrical and consensual relationship between the state, employers and unions into an asymmetrical and conflictual one. The article contributes to the analysis of institutional change and applies the comparative method of the “parallel demonstration of theory”.