The Effects of Post-industrialism on the Political Economy of Western Europe
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).
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