Essay/Term paper: The effects of post-industrialism on the political economy of western europe

Essay, term paper, research paper:  Political Science

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
policieshave 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 Jacoby Last updated - February 22, 1996.