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The Effects of Post-Industrialism On the Political Economy


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

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.
.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. 
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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