The Decline of
Corporatist Bargaining
The sustained,
high economic growth in Western Europe during the post-war period until 1973
led to dramatic changes in the region's political economy. As advances in
transportation and communication extended the reach of international trade into
new areas of the world, as technological advances allowed establishment of
manufacturing facilities overseas, and as European real wages climbed to
unprecedented heights, the industrial base that had served as the foundation
for rapid Western European growth in the 1950's and 1960's increasingly moved
to Western Europe's poorer neighbors. As the industrial base moved, so did the
jobs of a large quantity of unskilled manufacturing workers who populated the
assembly lines.
In recent years,
the liberalization of international trade has clearly demonstrated that
European industry can no longer compete in traditional, large-scale industrial
sectors. European successes have increasingly come from specialized, high
value-added industry and from intelligent, flexible companies able to shift
production quickly to capitalize on movements in world demand.
The net result of
these changes has been a transition to a post-industrial society, where the
stable economic order of mass employment in large-scale industry has given way
to mass unemployment and a breakdown of the political and social consensus that
held sway throughout the post-war period. These changes have fundamentally
altered the Western European labor market. This paper will show how
post-industrialism has dramatically reduced the ability of many Western
European countries to deliver full employment, not simply because of changes in
employment structure, but more importantly because those structural changes
have undermined the institutional framework that allowed Western European
countries to control prices while pursuing full employment policies, and have
left Western Europeans widely dissatisfied with their political system.
Western European
countries demonstrated varying abilities to control inflation and unemployment
in the 1970's and 1980's. Cameron argues that two variables explain much of the
differences in economic performance: 1) the presence or absence of corporatist
institutions and practices,1 and 2) the role of leftist, Social Democratic
political parties in government (Cameron: 144). Centralization of labor
representation facilitates corporatist bargaining. Conversely, fragemented
labor representation makes agreement difficult. The greater the number of
parties, the less likely that they will find a solution palatable to all
negotiators. According to measurements of labor organizational unity by the
European Yearbook, countries with the most unified labor during the 1970's and
1980's, Austria, Sweden, Norway, Germany, Denmark and Finland, were all among
the best in Europe at controlling unemployment and inflation, while the
countries with the most disunited labor, Italy, France and Spain, were less
successful.
The shift to a
post-industrial economy has increased the dissolution, fragmentation and
differentiation of the Western European labor market. Most countries have
suffered high and remarkably stable unemployment. Unemployment rises during
economic downturns, but no longer seems to recover in a boom economy. Many
blame post-industrialism for this phenomenon, complaining that technological
improvements have led to a 'workerless' economy. While post-industrialism is a
cause of higher unemployment, the explanation is not that it has eliminated
jobs, but that jobs have changed. New industrial jobs have increasingly
required specialized technical skill, while the service sector has created jobs
for skilled, semi-skilled and unskilled workers.
One crucial
difference between the old jobs and the new are that traditional unions played
a much larger role in the labor market for industrial jobs than in the labor
market for post-industrial white collar and service jobs. Some countries,
Sweden for example, have strong public sector unions that include large numbers
of non-industrial employees, but private employees in post-industrial sectors
(professionals, managers, skilled and semi-skilled service employees) are less
likely to belong to unions than their industrial counterparts.
Unions face large
obstacles to organizing these workers. Many of the new jobs are in smaller
enterprises, hindering communication between the unions and prospective
members. But the most serious problem is the individualization of the labor
market. The post-industrial labor market is more fragmented than the industrial
labor market. Workers increasingly organize in functionally specialized unions
and collective bargaining has shifted to the local level(Crook, Pakulski &
Waters: 98). Accordingly, interests among those responsible for negotiating on
behalf of post-industrial workers increasingly conflict. Price stability,
exchange rate policy and competitiveness have become important to large
portions of workers in the post-industrial economy, often leading them to
oppose fiscally expansionary full employment policies.
Governments that
value price stability face less pressure to deliver full employment in return
and fiscal restraints have decreased the political will to spend their way to
full employment. It is interesting to note that Norway, whose North Sea oil
revenues have kept it fiscally sound, has made extensive use of public sector
job creation to keep unemployment in check. A more typical Western European
examples is Italy, who, in the face of large budget deficits, gave up costly
public sector industries to privatization even during periods of high
unemployment.
Economic
conditions in the 1980's and 1990's also led to declining union membership.
Economic downturns and high unemployment raise the probability of worker
disorganization (Western: 194-195). Also, the increasing volatility of world
markets calls for more flexible labor arrangements, such as those common in
Northern Italy. The informality of these labor relationships does not mix well
with traditional, industry-wide union representation. Western blames the
decline of unions on the effects of the economic changes on the political identification
of potential union members, citing the erosion of class as an organizing
principle as a reason for lower union membership (Western: 179). Some unions
remain very powerful. Small unions populated by skilled workers who are
critical to production, such as the German metal workers, are often able to win
large concessions from employers. But the decline in overall union membership
and the decreasing ability of different unions to agree on broad, macroeconomic
policies have hurt labor's ability to participate in formulating corporatist
solutions to economic problems.
The shift to a
post-industrial economy that has fragmented unions has created parallel
fragmentation within the mass-integration political parties that have governed
Western European countries in the post-war period. Parties find their
traditional membership increasingly divided on the use of fiscal policy,
maintenance of exchange rates and other crucial areas of government policy.2
The internationalization of markets has also diminished the State's capacity
for intervention in the economic sphere. Thus not only labor, but also
government finds itself handicapped in its efforts to continue the strategy of
corporatist bargaining.
Unable to control
both unemployment and inflation without labor cooperation, governments have
limited their efforts to one or the other. Due to external constraints such as
large fiscal deficits and the Maastricht criteria for participation in the
European Monetary Union, most Western European countries have chosen to control
prices at the cost of high unemployment. The resulting joblessness has exacted
large political costs. Particularly for social democratic parties in
government, abandonment of full-employment as a primary policy goal has
alienated a large portion of their constituencies, undermining their support.
Social democratic parties are currently on the run even in countries where they
delivered the best economic results, such as Sweden and Austria.
Without the means
to increase employment, many countries have tried instead to discourage
participation in the labor market. Germany has called for a shorter work week,
France has made extensive use of early retirement, and almost all European
countries have cut back on legal immigration in an effort to lower unemployment
figures and reduce the perceived social cost of their price control policies.
The ascension of
right-wing or right-center parties in many Western European countries, such as
Austria, Italy, France and Sweden, creates two additional, significant barriers
to a return to the corporatist solutions of the past. First, most of these
parties display a clear policy preference for price control over full
employment. Even Jacques Chirac, who campaigned on a platform of job creation,
quickly reaffirmed his commitment to the franc fort immediately after he won
the election. Second, recall that Cameron argued that both corporatism and
leftist government contributed to economic success in Western Europe. Trust
between strong unions and their allies in leftist governments formed an
important basis for making and enforcing wage restraint agreements under
corporatist bargaining. Unions have less faith that neo-liberal governments
will take the necessary steps to protect employment and are accordingly less
likely to compromise in wage negotiations.
To conclude,
post-industrialism has led to dramatic changes in Western European labor
markets and Western European politics. These changes have severely undermined
the usefulness of the most successful Western European macroeconomic strategy
of the 1970's and 1980's--corporatist bargaining. The current levels of high
unemployment will continue so long as European society is able to support, both
economically and philosophically, a large, marginalized class of unemployed
people. Eventually, Western Europe will have to develop a new mechanism of
reaching societal consensus on wage restraint. This might happen in response to
even larger levels of unemployment or a to breakdown in the government's fiscal
ability to support the current levels of unemployed.
References
Hans-Georg Betz,
Radical Right Wing Populism in Western Europe (1994).
David Cameron,
"Social Democracy, Labour Quiescence, and the Representation of Economic
Interest in Advanced Capitalist Society," in Order and Conflict in
Contemporary Capitalism (J. Goldthorpe, ed. 1984).
Stephen Crook,
Jan Pakulski & Malcolm Waters, Postmodernization: Change in advanced
society (1992)
Bob Rowthorn and
Andrew Glyn, "The Diversity of Unemployment Experience since 1973,"
in The Golden Age of Capitalism (S. Marglin & J. Schor eds. 1990).
Bruce Western,
"A Comparative Study of Working-Class Disorganization: Union Decline in
Eighteen Advanced Capitalist Countries," American Sociological Review
60(2), 1995.
Endnotes
1.When I refer to
corporatism, I refer to a distinctive pattern of state-controlled interest
mediation.
2.Additionally,
governments controlled by weakened traditional parties are less capable of
playing the strong interventionist role in the economy prescribed by some as
the key to successful economic performance (see Rowthorn & Glyn: 254).
.
1995 Craig JacobyLast updated - February 22,
1996.
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