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MPIfG Working Paper
03/2, March 2003
From
State Weakness as Strength to State Weakness as Weakness: Welfare Corporatism
and the Private Use of the Public Interest [1]
Wolfgang Streeck
,
Max Planck Institute for the Study of Societies
Prof. Wolfgang Streeck is Director at the Max Planck
Institute for the Study of Societies, Cologne.
Abstract
The paper is a contribution to a book edited by
Simon Green and Willie Paterson, Semi-sovereignty Revisited: Governance,
Institutions and Policies in United Germany. The book will appear in 2003 or
2004. It explores to what extent Peter Katzenstein's seminal study of the
"semi-sovereign" German state in the 1980s is still valid. The paper
looks at one of the showpieces of Katzenstein's theory of beneficial
semi-sovereignty, German industrial relations, and follows their development from
the Modell Deutschland of the 1976 election campaign to Schröder's Bündnis
für Arbeit. It comes to the conclusion that as far as Germany is concerned,
the days are gone when it was an advantage for the governance of industrial
relations to have a weak state.
Zusammenfassung
Das Papier ist ein Kapitel in dem von Simon Green
und Willie Paterson herausgegebenen Buch Semi-sovereignty Revisited: Governance,
Institutions and Policies in United Germany, das 2003 oder 2004 erscheinen soll.
Das Buch untersucht, inwieweit Peter Katzensteins epochemachende Studie über
den "halbsouveränen" deutschen Staat noch Gültigkeit hat. Das Papier
behandelt eines von Katzensteins wichtigsten Beispielen für die Vorteile
begrenzter staatlicher Souveränität, die Arbeitsbeziehungen. Es verfolgt die
Entwicklung der deutschen Arbeitsbeziehungen von "Modell Deutschland"
aus dem Wahlkampf von 1976 bis hin zum Schröderschen "Bündnis für
Arbeit". Dabei kommt es zu dem Schluss, dass, zumindest was Deutschland
angeht, die Tage vorbei sind, als eine schwache Regierung für die Regulierung
der Arbeitsbeziehungen von Vorteil war.
Contents
Can being governed by a state that is not fully sovereign
be anything other than a crippling disadvantage for a country? In his seminal
analysis of post-war West Germany Peter Katzenstein suggests it can. Indeed he
argues that precisely not having command of full state capacities afforded West
Germany more effective governance than comparable countries. This was because
semi-sovereignty, according to Katzenstein, protected the West German state from
counterproductive illusions of omnipotence other states at the time still held,
and forced it to cultivate other means of public policy than direct state
control - means much better matched than traditional state intervention to the
evolving problems of governance in a changing world.
Successful semi-sovereign governance, in Katzenstein's
sense, rests on two pillars. First, a fragmented, decentralised state whose
capacities for direct intervention are limited must learn to make deals with
independent actors in civil society which command their own sort of sovereignty
that cannot be ignored or circumvented. A state of this sort must therefore be a
"co-operative state" (Willke 1983), one that governs more by
negotiation and co-optation than by legal command (Scharpf 1993). Where this
works - in a political system that has learned to build a culture and develop
techniques of indirect control - independent social organisations and
institutions with their guaranteed autonomy and power turn into agents of
publicly licensed self-government, under the roof of a negotiated public order
of which the state is just one element among others, although a pivotal one
(Streeck and Schmitter 1984). Social autonomy is thus transformed into delegated
public responsibility, and organised private groups become quasi-public agencies
of societal governance much more competent and legitimate in dealing with the
problems of their constituents than state bureaucracies could ever be.
Second, the social groups that are to become partners in
governance of a co-operative state must be organised in a way that makes them
suitable for the purpose. In Katzenstein's language, the deficiencies of the
decentralised semi-sovereign German state were compensated by a society capable
of governing itself through centralised intermediary organisations. Competition
between different organisations for the allegiance of the same group does not
normally give rise to responsible behaviour, nor does organisational instability
of any other sort. Social groups included in semi-sovereign governance should
therefore, as Olson (1982) puts it, be represented by large encompassing
organisations, externally inclusive to make it impossible for them to impose the
costs of their policies on outsiders, and internally heterogeneous to force them
to integrate divergent special interests and learn to align them behind a broad,
centrist compromise. Civil society, in other words, must be represented by a
small number of organisations that can legitimately and effectively speak for
their constituents, together covering the society as a whole and not excluding
any significant social category. Such organisations, described as
"corporatist" by the literature of the 1970s (Schmitter 1979 [1974];
Lehmbruch 1979 [1974]; Katzenstein 1984) can be expected to identify their
interests, both substantive and organisational, with those of the society as a
whole, or at least define them in such a way that they take the public interest
sufficiently into account to enable a semi-sovereign state to avoid disruptive
conflict.
One of the showpieces of Katzenstein's theory of
benevolent semi-sovereignty was industrial relations. Here the German
configuration of a weak and decentralised state and a centralised society
connected by a variety of parapublic institutions was almost ideal-typically
present. Under Tarifautonomie, the government was barred from direct
intervention in wage setting. The void was filled by encompassing trade unions
and employers associations safe in their positions and disciplined precisely by
their power, which they were both allowed and obliged to exercise, and which
could be exercised best only in co-operation with one another and with the
state. Protected by the system of semi-sovereignty from radical change - for
example in the form of a statutory income policy - unions and employers
negotiated incremental change and took responsibility for its implementation, if
only because nobody else could have done this for them. Unions in particular
were held responsible by their deep involvement in a peculiar parapublic
institution at the workplace level, co-determination (or Mitbestimmung) of
workers, which had been extended in the 1970s and to which Katzenstein devotes
much attention. The result, according to Katzenstein, was a level of
"social peace" unique among large countries at the time, in turn
supporting exceptional industrial competitiveness and enviable macro-economic
performance.
This essay deals with what became of German industrial
relations after Katzenstein. It argues that as far as Germany is concerned, the
days are gone when it was an advantage for the governance of industrial
relations to have a weak state. Katzenstein's successful politics of
private-public coordination required economic and political conditions that it
could not by itself reproduce. With hindsight it can be seen that the capacity
of the German state for effective concertation of capital and labour and the
social and economic benevolence of German-style free collective bargaining
depended on a historical background that was taken for granted even when it was
already dissolving. Among the variables that were for too long treated as
constants were high and stable export-driven economic growth making full
employment a normal condition, and the willingness and ability of trade unions
to put their political and institutional loyalties above the articulated
interests of their members. While the latter ended with the wave of worker
militancy in 1969, the former finally disappeared with the first oil crisis in
1973.
In the mid-1980s when Katzenstein wrote, the specifically
German configuration in industrial relations of a weak state and strong
organised interests was already in crisis. The combination of institutionalised
monetarism, as imposed by the Bundesbank from 1974 onwards, with an unchanged
collective bargaining regime - and specially a metalworkers union sworn never to
forget the "lessons of 1969" - was generating rising unemployment that
presented increasingly intractable political problems to the government. For a
while the German political economy managed to respond to its institutionally
imposed condition of low inflation and high wages with structural change towards
an internationally highly competitive production pattern that came to be
referred to as "diversified quality production" (Streeck 1991).
Moreover, between the first and the second oil crisis, fiscal reflation helped
hide the trilemma between free collective bargaining, monetary stability and
employment - a trilemma that given German institutions could be resolved only at
the expense of the latter. However, when this had run its course, the very
opportunity structure of semi-sovereignty and the same close intertwining of
state and organised civil society that Katzenstein had celebrated, both
constrained and enabled the social partners and the government, dependent as
they were on social peace, to cover up the country's employment problem by
diverting the welfare state to the purpose of a defensive management of the
labour supply. In the process the endemic pressures of a permanently unbalanced
labour market incrementally but fundamentally recast the relationship between
labour, business and the state, and in the end placed the issue of state
sovereignty - of the state's capacity to govern - firmly back on the economic
agenda.
Context: The Rise of Welfare Corporatism
Katzenstein's semi-sovereignty thesis described a weak
state successfully holding well-organised interest groups accountable to
national economic objectives. But in Germany in the 1980s and 1990s, less
encompassing though still firmly entrenched "social partners" learned
to use their privileged political status to take advantage of the condition of
semi-sovereignty and utilise core public institutions for the purpose of
subsidising an increasingly untenable labour market regime. Step by step, the
public use of private organised interests, as described by Katzenstein and
others, turned into a private use of the public interest. By the late 1990s at
the latest, in the Bündnis für Arbeit of the Schröder government, the decay
of Modell Deutschland became visible in a lasting political deadlock over labour
market reform, as corporatism in the sense of responsible group self-government
gave way to something like corporatism in the French or Italian meaning: the
pursuit of special group interests in the public realm at public expense, first
in collusion with the government and later against its - reluctant - resistance.
How could this have happened? Economic semi-sovereignty -
and in particular the lack of control of the federal government over the money
supply - had protected both unions and the government from Keynesian
temptations. As unions could not expect the state to underwrite excessive wage
increases, they found it in their interest to moderate their wage demands in the
light of their predictable macro-economic effects. This, however, changed to a
significant degree in 1969 when in particular IG Metall attributed the
unofficial strikes to its co-operation with the economic policy of the
government, and with its Konzertierte Aktion in particular. In subsequent years
union wage policies became more responsive to the demands of a growing and more
interest-conscious membership. In 1974, in the wake of the first oil shock, the
Brandt government was forced to settle for a public sector wage increase of
above ten per cent; a few months later it resigned. Having lost the confidence
that the government would ever be able to reign in the unions, the Bundesbank
unilaterally switched to a monetarist policy that was non-negotiable for both
unions and government. Immediately thereafter, mass unemployment became the
critical problem of the German political economy, which it remained until the
present day (Scharpf 1991).
The government of Helmut Schmidt, who became the chief
propagandist of tripartite Modell Deutschland, depended on the political support
of the unions and could therefore not afford politically to intervene in
collective bargaining. [2] Nor was it within its powers to adjust the money supply
to what would have been required for a return to full employment. Indeed faced
with the unrelenting monetarism of the Bundesbank, the unions in 1978 formally
walked out of Konzertierte Aktion. In the same year the government, trying
desperately to find a way back to full employment, started an attempt at
internationally concerted fiscal reflation. This failed when in 1979 the United
States, in violation of the Bonn summit agreements, unilaterally switched to a
policy of tight money while almost simultaneously the world economy was hit by
the second oil shock. With unions bent on defending the high wage and low wage
dispersion labour market regime that had served them and their members well, the
result was rising public debt coincident with rising unemployment, which in turn
caused the demise of social-liberal coalition in 1982.
Already in the late 1970s, then, semi-sovereignty had begun
to turn into a liability. While it continued to prevent the government from
using monetary policies to shore up the labour market, it also forced it under
Tarifautonomie to leave the regulation of the labour market to unions and
employers. Early attempts by Kohl to undercut union strength never got anywhere
near what happened during the period in Britain, probably also for lack of
trying, as Kohl understood only too well the political constraints of
semi-sovereignty. Conflicts in industrial relations and between government and
unions did rise. Soon, however, unions and employers learned to use the
Bismarckian welfare state as a functional equivalent to Keynesianism -
compensating the adverse employment effects of free collective bargaining, not
by increasing aggregate demand, but by retiring excess labour and taking it out
of the market (Streeck 1997, 2001b). As the government given its limited powers
had nothing better to offer to contain the number of unemployed, it more or less
willingly acquiesced.
In subsequent years successive Kohl governments, under
electoral pressure to do something about unemployment but unable effectively to
intervene in the labour market, were happy to allow the social partners to
proceed with industrial restructuring under a high-wage and high-productivity
labour market regime by having the social security system absorb the victims, to
a point where the costs of defensive labour supply management themselves began
to contribute to unemployment. This culminated in the period after unification
when Kohl had to mend his fences with the unions to shore up national unity for
a consensual Institutionentransfer from West to East (Lehmbruch 1998) and to
prevent "radicalisation" in the East. In the process the
productivistic consensus that Katzenstein had described as characteristic of
German industrial relations was gradually replaced with a welfare state
consensus, underpinned by the institutional entrenchment of unions and employers
associations in the self-government of the social security system, until that
consensus, too, began to crumble under its rising economic costs in the
mid-1990s.
Agenda: Combating Unemployment
When Kohl became Chancellor in 1982, the last attempt at
fiscal Keynesianism had failed, unemployment continued to rise, and public debt
was at a record high. Both government and unions were aware that economically,
Bundesbank monetarism had become the only game in town. More than Thatcher,
however, Kohl had to fear negative electoral consequences of high unemployment.
And while the unions were strong enough to resist government intervention in Tarifautonomie, they were also afraid of letting unemployment grow further.
Their answer was a strategy of redistribution of work through reduction of
working time.
How exactly work redistribution was to be accomplished
became a matter of divisive contention among unions. For a time the metal
workers union, IGM, wavered between early retirement at no loss of pension and
cuts in weekly hours at no loss of pay, until in early 1984 it settled for the
latter and started a campaign for a 35 hours week (Wochenarbeitszeitverkürzung). Five other unions, under the leadership of the
chemical workers, instead opted for what came to be called reduction of lifetime
working hours (Lebensarbeitszeitverkürzung). In part this reflected the
traditional antagonism between "left" and "right" unions.
But a different age structure may also have played a role: as IGM members at the
time were younger on average, an equal reduction of hours for all may have been
more popular with them. For their leadership, member support was central as they
had concluded early on that working time reduction was not to be had without a
long strike. [3]
On the employers side preferences were clear. Employers
feared the cost increases and the organisational rigidities they expected from a
35 hours week, and massively urged the new government to come to their help.
This it did by trying to influence the debate among the unions in favour of the
so-called "Gang of Five", by legislation under which the social
security system would cover part of the costs of early retirement if a
replacement was hired. Still, in the summer of 1984 the metal workers went on a
six week strike for the 35 hours week. The strike ended in arbitration giving
the union a reduction of weekly working time at full pay to 38.5 hours, with the
prospect of a later reduction to 35 hours. [4]
As it turned out, if ever there was a Pyrrhic victory, it
was that of IGM in 1984 Streeck 2001b). To get a settlement the union had to
accept extensive provisions for working time flexibility. Subsequently these
became the major productivity tool of German employers, who became adroit at
uncovering the productivity reserves in working time arrangements. As a result
unions and works councils lost control of the wage-effort bargain. This made it
easy for employers, especially in large firms, to compensate high wage
settlements with productivity improvements that made part of the workforce
redundant. Consequently the resistance of the large firms that dominate the
employers associations to wage increases declined since, unlike the losses in
international market share resulting from industrial conflict, rising labour
costs could easily be made up internally. The indirect effect was a crisis of
solidarity within the employers camp that began to undermine the organisational
basis of tripartism.
Moreover, as the details of working time flexibility have
to be negotiated at the workplace between employers and works councils, the 1984
agreement set in motion a substantial decentralisation of industrial relations
that is still continuing. Furthermore, growing work intensity as a result of
productivity-enhancing reorganisation dampened the enthusiasm of IGM members for
further reductions of hours, and in the 1990s the leadership gradually switched
to the position of the dissenters of the early 1980s until, under Schröder, it
called for a general retirement age of 60 (Rente mit 60). Finally, employers had
agreed to the arbitration award only after Kohl had promised their leaders in a
telephone conversation to pass a law prohibiting unemployment benefits being
paid to workers laid off due to indirect effects of an industrial dispute. The
intended outcome was to make it less easy for a large union like IGM to call a
strike, and indeed since 1984 there has not been any strike of national
significance in the metal sector. [5]
In subsequent years the political countermeasures taken by
government and employers against hourly working time reductions, together with
the long-term effects of the 1984 strike settlement, issued in joint reliance of
unions, employers and the government on the welfare state to reduce the labour
supply through a variety of forms of early retirement. Metal industry firms used
the various legal opportunities to thin out and rejuvenate their workforces as
extensively as firms in the chemical and other sectors, and with no less support
from their works councils. [6] In the course of the 1980s the public pension system
developed into a safety valve for a labour market regime that generated
employment risks for ever larger segments of the workforce. It also allowed
firms to restructure in response to pressures for "lean production"
and "downsizing", without having to face the resistance of works
councils and local unions. Absorbing through publicly funded early retirement
and other provisions the surplus labour created by high wages, low wage
dispersion and strong employment protection, the German welfare state of the
1980s slowly turned into a functional equivalent of the Keynesian reflation
state. [7] The price was both a growing need of the social security funds for
government subsidies and, in the contribution-based German welfare state, rising
statutory non-wage labour costs. Removing surplus labour from the market to
fight unemployment thus made labour even more expensive, requiring the labour
supply to be cut further - a downward spiral in which the method of choice to
fight unemployment became another, potent contributor to it.
Roughly the same as to the pension system applied to
labour market policy in a narrow sense, in particular short-term work, job
creation measures and further training. Conceived as temporary devices to
protect and upgrade the skills of unemployed workers until the restoration of
full employment, labour market programs over the years became permanent stopgaps
for a low employment labour market regime. Especially after unification, labour
market policy came to support a giant "second labour market" hiding
away large numbers of unemployed in make-believe jobs before they were sent back
to social assistance or unemployment benefit, or went into early retirement. The
Bundesanstalt für Arbeit, which administers labour market policy and is
governed on a tripartite basis by the state and the social partners, today
collects a hefty 6.5 per cent of payroll from all workers up to an indexed upper
income limit. In 2002 it had a staff of 90,000 and a budget of Euro 50bn, around
40 per cent of which it spends on so-called "active labour market
policies". [8] (The entire public university system in Germany costs about Euro
27bn per year.)
By the late 1980s the economic burden of early retirement
became so heavy that the Kohl government undertook first attempts at
retrenchment. Some measures, like a slow increase in the legal age of
retirement, even gained the support of the Social Democrats. But then
unification arrested reform and indeed turned back the wheel. The irritations of
the 1980s between the Kohl government and the unions receded as the challenge of
unification pulled government, employers and unions closely together. In
particular, to keep East Germans from migrating to the West, the West German
welfare state, with the support of all parties, was early on extended wholesale
to the Neue Länder, together with the currency, the market economy, the legal,
educational and health care systems and, of course, the collective bargaining
regime.
When economic disaster struck, in part predictably and in
part following the unexpected breakdown of East European export markets, mass
unemployment caused the tools of defensive labour supply management that had
been developed in the 1980s being used on an unprecedented scale. In effect this
amounted to West German workers and employers shouldering the lion's share part
of the costs of unification through rising social security contributions. After
the end of the short post-unification boom in 1993, high non-wage labour costs
began to depress employment in the West. They also were perceived by employers
as impairing their competitiveness at a time of economic internationalisation
and of the completion of the European Internal Market. This set the stage for
the conflicts of the mid-1990s, which contributed to the defeat of Kohl in 1998,
which in turn issued in the Schröder government's attempt to forge an
"Alliance for Jobs" with the unions.
Funding the unexpectedly high and growing costs of
unification through the social security system must have been convenient to a
government that had promised not to raise taxes while being constrained by
approaching Monetary Union to cut public deficits. That high social security
contributions themselves increased unemployment and eroded employer confidence
in the governing coalition posed a political dilemma that the government
eventually tried to address by attacking other, non-statutory non-wage labour
costs, especially employer-paid sickness benefits. In the early summer of 1996
this caused the breakdown of the hitherto amicable relations between Kohl and
the unions, which from then on put their entire political capital on an SPD
election victory in 1998. Among employers, high payroll taxes drove a wedge
between small and medium-sized employers on the one hand and large, increasingly
multinational companies on the other. While the former suffered from what was
for them a crippling cost squeeze, the latter were able to use flexibility
provisions in collective agreements to pay for high labour costs out of
productivity improvements, in the same way as they had learned to respond to
high wage settlements. Failing this, they could always and with growing ease
relocate production abroad, buying works council support with liberal
supplements to early retirement public pensions.
For the unions the matter was less straightforward. High
social security contributions meant losses in employment and in real wages for
union members. On the other side of the scale was, however, the interest of an
aging membership in high and early pensions. Of particular importance here is
that the Bismarckian German welfare state, organised on an "insurance
principle", not only emphasises cash transfers over services but also
tailors benefits to a worker's skill level and previous wage, to protect his or
her social status. The result is long spells of benefit-supported unemployment,
due among other things to numerous legal possibilities to reject job offers on
the ground that they are unsuitable ("unzumutbar"), combined with lax
enforcement of willingness to work rules by the employment office.
In the 1990s the Bundesanstalt für Arbeit in particular
became the focal institution of welfare corporatism, a relationship between
government, unions and employers different from the demand and supply-side
versions of neo-corporatism that prevailed in the 1970s and part of the 1980s.
Welfare corporatism is a response to lasting unemployment untreatable, for
economic or political reasons, by Keynesian demand-side management as well as
both neo-liberal and "left" supply-side policies. Under welfare
corporatism, industrial relations and social policy become densely intertwined,
with the continued operation of the industrial relations system depending on
subsidisation by the social security system. Jointly using the public social
security system to compensate core categories of the victims of an exclusive
labour market regime - so as to make reform of that regime less politically
pressing - unions, employers and the government together sustain a "low
activity, high equality" employment system (Streeck 2001a) by obliging each
other in complex ways that include consensual co-management of economic change
at the workplace, toleration of labour market rigidities, a modicum of wage
moderation, the use of social security contributions to fund core government
activities (Trampusch 2003), and a strong role of unions and employers
associations in the government of the social security system.
Process: Less Encompassing Organisation
The failed attempt of the unions to fight unemployment by
redistribution of work and the subsequent defence of extant labour market
institutions by social security undermined the encompassing organisation of
business and labour and of the industrial relations system as a whole and gave
rise to progressive decentralisation of the regulation of employment conditions.
Over time the social partners of semi-sovereign governance corresponded
increasingly less to Katzenstein's image of stable, centralised, publicly
responsible private governments. Instead, forced to become more attentive to
demands of their members that they found difficult both to ignore and to change,
they became resistant to government efforts to make them take changing needs of
public policy into account.
New divisions arose in the employers camp that were
reinforced by the internationalisation of product markets and production
systems. As pointed out above, small firms were less able to take advantage of
the flexibility provisions of the 1984 settlement than large firms; for them
working time reduction was simply an increase in costs. The same applied to
early retirement and the rise in social security contributions it required;
while small firms had to pay the same contributions as large firms, they often
could not afford letting their more experienced workers retire. Large
multinational German firms, facing unprecedented price competition in domestic
and international markets, responded to rising labour costs by asking their
domestic suppliers for price reductions. Sometimes this directly followed wage
rises conceded by the large firms, in their capacity as leaders of the employers
association, also on behalf of their suppliers. Declining resistance of large
firms to wage demands, due to both foreign competition for market share and the
new opportunities to compensate wage rises by productivity increases, convinced
Mittelstand employers that the large companies used their dominance within the
employers associations to secure labour peace for themselves, at their expense.
By the mid-1990s, after the end of the unification boom,
an unprecedented revolt was under way inside the system of business
associations. In the 1970s Hanns-Martin Schleyer, the President of BDA, the
national association of employers associations, had been elected in personal
union President of the BDI, the confederation of trade associations. During his
double presidency, which coincided with the Schmidt government, the corporatist
centralisation of German business associations reached its peak, and so did the
relative influence of employers associations as compared to trade associations.
One-and-a-half decades later the situation had almost reversed. After the short
interlude of national unity in the wake of unification, the more specialised and
less encompassing trade associations came to serve as representatives of the
interests of Mittelstand firms, and their most forceful and militant spokesman
became the President of the BDI, Hans-Olaf Henkel. Using neo-liberal rhetoric
hitherto unheard from a German business leader, Henkel became highly visible by
publicly confronting his counterparts at the BDA, first Klaus Murmann and then,
after he had caused Murmann's resignation, Dieter Hundt.
Henkel's favourite themes, which were outside his formal
jurisdiction as President of BDI, were a reform of collective bargaining,
especially its decentralisation, and a substantial reduction in social benefits
and non-wage labour costs. While some leaders of German industry distanced
themselves from his firebrand rhetoric, Henkel was re-elected several times as
his public pronouncements reflected growing disenchantment among his
constituents with the Kohl government's close relations with the unions in the
early 1990s. After the introduction in 1995 of compulsory old age care
insurance, again to be paid for by a payroll tax, a large segment of the German
business class lost confidence in Kohl's ability and willingness to accomplish
the social retrenchments they considered necessary in a period of economic
internationalisation.
Discontent with Kohl expressed itself in the Standort
Deutschland debate started by organised business, which emphasised the alleged
economic disadvantages of Germany as a production site and reached its peak
after Kohl's re-election in 1994. Henkel's call for radical changes in
industrial relations and for cutbacks in social costs took up the interests of
smaller firms that could not easily relocate production abroad, and thus helped
the BDI shed its traditional image as a representative of large industry. Later
the new concerns of the Mittelstand were taken up, in addition to the leaders of
various powerful trade associations, by politicians in the FDP as well as by the
floor leader of the CDU/CSU, Wolfgang Schäuble, who aspired to succeed Kohl in
1998. As the cleavage between BDI and BDA deepened, many employers associations
began to lose members, especially after IGM had gained a high wage settlement in
1995 when the leading large firms had, again, caved in to the union for fear of
a loss of international market share (Schroeder and Ruppert 1996).
Pressures for decentralisation of collective bargaining
were exacerbated by the situation in East Germany. Very few firms there had
joined the employers associations in the first place. Of those that were covered
by industrial agreements, a large number paid less than the official wage, often
with the consent of works councils desperate to protect employment in their
workplace (Schroeder 2000). Paying unter Tarif soon spread to firms in distress
in the West, and so did the practice of more or less tacit concession bargaining
between employers and works councils even though these are charged by law to
enforce adherence to industrial agreements (Bispinck 1997). Unions often looked
the other way, in the hope for better times somehow to return. Especially IGM
observed helplessly the growing de facto decentralisation of collective
bargaining, sometimes trying to prevent it, sometimes condoning it under
pressure from the membership. With time, unions learned to insert clauses in
industrial agreements that allowed individual employers, with the consent of the
works council or of the parties to the industrial agreement, to suspend wage
increases, extend working hours, or cut working time at reduced pay (so-called
Härteklauseln or Öffnungsklauseln).
For the unions, redefining their role in collective
bargaining to allow for greater local autonomy was difficult as the new
challenge coincided with a rapid decline of their institutional position and
organisational strength. Katzenstein had still been able to point to "an
increasing membership in a shrinking workforce", which he took as showing
"that in its organisational structure and political presence West German
labour is a model of strength for the unions in all of the major industrial
societies, except for Sweden" (1987, p. 28). But between the mid-1980s and
the mid-1990s, coverage of private sector employees by works councils fell from
51.4 to 41.6 per cent (Hassel 1999). [9] In addition and partly for the same
reasons, union density declined dramatically. Hardly ten years after
unification, the number of union members in Germany had returned to what it had
been in West Germany by the late 1980s. Low union membership reflected low
employment as much as, especially in East Germany, high unemployment. It was
also related to the growth of the informal economy and of non-standard forms of
employment, caused not least by the high costs of labour. In addition, general
demographic change and reluctance of younger workers to join unions - caused by
different employment situations, work experiences and career expectations -
resulted in a rapid increase in the average age of union members. Early
retirement further raised the proportion of pensioners among the membership. By
the late 1990s, pensioners accounted for 19 per cent of those organised in DGB
unions. Disregarding the retired and the unemployed, overall union density in
the private sector of the German economy fell from 27.3 per cent in 1980 to no
more than 18.6 per cent in 1999 (Ebbinghaus 2002a).
While the decentralisation of collective bargaining and
several moderate wage rounds in the second half of the 1990s [10] brought the
membership losses of employers associations to a halt, unions watched their own
organisational crisis in helpless bewilderment. The transformation of the
Flächentarifvertrag proceeded against their passive resistance, driven by
individual employers and works councils and beyond the control of a union
movement uncertain and divided over its response (Hassel and Rehder 2001).
Several union mergers were accomplished, but the bleeding was not stopped.
Mergers also seem to have weakened the peak association, the DGB, which now
represents a very small number of large and basically self-sufficient
affiliates. Although the cleavage between the metal workers and the chemical
workers in particular is not new, the DGB today seems to find it harder than
ever to build a united front for tripartite national negotiations.
Welfare corporatism divided the employers and did not
prevent the decentralisation of industrial relations and its encapsulation in a
shrinking segment of the German economy. But by the late 1990s, it had become
one of the last strongholds of a union movement no longer able to gain for its
members growing wages or secure employment. Today, involvement in the running of
the social security system, with its huge parafiscal budgets, assures industrial
unions a national role at a time when wage setting is becoming more
decentralised. Indeed welfare corporatism seems like a strange travesty of the
gesamtwirtschaftliche Mitbestimmung that German unions had envisaged in the
immediate post-war years. Workplace co-determination, to which Katzenstein
rightly pays so much attention, was by and large accepted by employers during
the 1980s (Kommission Mitbestimmung 1998), the more so as it became in practice
increasingly driven by the needs and concerns of individual firms. Very much in
Katzenstein's sense, Mitbestimmung continued to function as a parapublic
infrastructure of co-operation between labour and capital, but in a way he could
not have foreseen: by providing an institutional framework for the managements
and workforces of large companies within which to negotiate the externalisation
of the social costs of competitive restructuring to the public. In its 1979
ruling on co-determination, which Katzenstein quotes (1987, p. 162), the
Constitutional Court still defended the presence of trade union representatives
on the supervisory boards of large firms as a way of "preventing or at
least diluting the 'enterprise egoism' expected in the wake of expanded
co-determination". Clearly this was expecting too much.
Already Katzenstein had noted that German unions were
"on the defensive both politically and economically" (p. 28). However,
he failed to anticipate the looming disaster of the policy of work
redistribution that unions adopted precisely to overcome that crisis. He also
believed that somehow, expanded co-determination would spawn new union goals and
activities, like "qualitative growth and the deliberate steering of
technological change", not to mention "humanisation of work",
rivalling and pushing back more traditional trade union concerns (p. 135). But
as the years passed successive attempts at redefining the interests of the
membership came to nothing. Unable to set new goals for themselves that would
have given them a universalistic mission at a time when stable unemployment
rendered the defence of high wages and social benefits increasingly
particularistic, unions found themselves forced to operate as mere "wage
machines" whose claim, which Katzenstein found still widely accepted, to
"represent the interests of organized and unorganized workers" (p. 28)
was rapidly losing credibility.
Today, having lost much of their industrial power,
German unions must rely on their political power - from electoral pressure to
influence inside the SPD - to secure for their members, if not employment, then
an early exit from employment, and if not rising wages, then high pensions and
unemployment benefits. Unlike its monetary policy, the social policy of post-war
Germany's semi-sovereign state had turned out wide open to capture by safely
established "social partners". During the 1990s it was above all their
hold on the welfare state that enabled German unions to defend the standard
employment relationship and resist labour market reform without having to worry
much about the consequences. In fact given their shrinking and ageing core
membership as well as the failure of all alternative programs, they also had
good organisational reasons for taking the side of the recipients of benefits
against those paying for them, who are mostly young and not organised. [11]
Process: Even Less Sovereignty
By the mid-1990s, less centralised and encompassing
organisations of business and labour faced a state whose sovereign capacity had
further declined. In Katzenstein's time, semi-sovereignty had taught the German
state to make a virtue out of necessity and become adept at co-operation with
what once were well-organised interest groups. Now, not only had German society
become less organised, but the ability of the state to align the interests of
unions and employers with its political needs had further diminished.
As already shown by the fate of Konzertierte Aktion, the
German state was never particularly good at formal tripartite negotiations with
business and labour. Indeed the same condition of semi-sovereignty that,
according to Katzenstein, stands in the way of unilateral state action, also
seems to obstruct hard bargaining with interest groups. Corporatist political
exchange requires a unified position on the part of the government. But as
Katzenstein has shown in impressive detail, the capacity of the Chancellery to
control the ministries has always been low; coalition government further weakens
the authority of the Chancellor; federalism requires the government to seek the
support of a majority of Länder governments for major legislation, which limits
the concessions it can offer to organised groups; the budgets of Bund, Länder
and local communities are so intertwined that even minor changes in the tax
system cause enormous technical and political complications; independently
scheduled elections at Länder level result in an almost permanent election
campaign, especially as their outcome may change the composition of the Bundesrat; and a whole panoply of courts, most importantly the Constitutional
Court, can be called upon to defend established groups rights like
Tarifautonomie or the social insurance principle. All of this can offer
disaffected interest groups or rivalling parties and party factions ample
opportunity to prevent or undo tripartite agreement.
While this had been so for some time, in the 1990s the
capacity of the German federal government to impose its will on organised
interests further declined. With unification, the heterogeneity of interests in
the federal system as well as the number of Länder elections during a federal
government's period in office have increased. Moreover, European integration,
and especially budget consolidation under the Stability Pact, has ruled out
rewarding union co-operation with increases in public spending of whatever sort.
(Other concessions, like extended rights to workplace representation or further
increases in employment protection, have become difficult to make for other
reasons, in particular resistance from smaller firms that employers associations
can no longer ignore.) European integration also made the government more
dependent on union wage moderation, both because budget consolidation requires
public sector wages to remain under control, and because wage moderation
represents the main short-term protection for the government against even higher
unemployment, with all the fiscal and electoral risks this involves. Aggressive
wage bargaining has thus become a potential weapon in the hands of unions
threatened by social policy or labour market reform.
Moreover, as Roland Czada (2003) has pointed out, party
competition in the German political system has intensified, voting became more
volatile, and the electoral majorities of governments have shrunk. International
comparison shows that political agreement between the major parties and
broad-based and stable national governments may neutralise institutional veto
points and make for effective governance even where organised interests have
numerous opportunities to intervene. Germany, however, according to Czada, is
not only the OECD country with the largest number of veto points, but it is also
least likely to produce electoral-parliamentary majorities broad enough to
override group interests. As declining majorities in a more volatile electorate
lead to intensified party competition, governments become more vulnerable to
interest group pressures.
The entrenched centrism of the two big parties that
Katzenstein praised as a pillar of political stability has not helped.
Regardless of whether the Christian Democrats or the Social Democrats are in
power, cuts in social entitlements are always likely to be challenged by the
opposition in the next election, whether at federal or at Länder level, making
it impossible for the SPD in government to corner the unions on social policy
reform. Also, declining ideological coherence of the large parties seems to have
reinforced the factionalism bred by a federal system that gives regional party
organisations their own electoral base supporting independent leaders with a
national role and, often, national ambitions. Similar reasons account for the
growing independence of the parliamentary groups of governing parties from their
party leaders in government, making it likely that tripartite agreements are
reopened by the Bundestag and giving interest groups forced to make concessions
in corporatist negotiations a chance to have them undone in the parliament.
Perhaps most importantly, there were irresistible
temptations for the federal government to make its peace with welfare
corporatism, regardless of the spiral of high non-wage labour costs and
unemployment that it entailed (Trampusch 2002). In the 1990s a tacit deal had
evolved under which the social partners tolerated the government drawing on the
parafisci of the social security system to cover part of the unexpectedly high
costs of unification, enabling it to avoid raising taxes or further increasing
the public debt. In return for being allowed to collect what in effect was a
hidden tax, the state confirmed its commitment to both the extension of the
exclusionary West German labour market regime to East Germany and its public
subsidisation. It also continued to acquiesce in the colonisation of its social
policy by unions and employers. However, while undoubtedly public-private
co-operation of this sort contributed to "social peace", it also
appears to have compromised government authority and the state's residual
sovereignty to an extent that made them even less effective when the skeleton of
low employment in the joint welfare-corporatist closet could no longer be
ignored. When tax competition in an internationalising economy required cutting
corporate taxes while simultaneously Monetary Union demanded budget
consolidation, the funding of the welfare state by social security contributions
became more safely enshrined than ever, even disregarding the intricacies of the
German Finanzverfassung and the indispensability of the welfare state for social
peace and government political support in the East.
From the Kohl Failure to the Schröder Deadlock
In the mid-1990s business discontent with declining
economic conditions forced the Kohl government to address the issue of high
non-wage labour costs. Since incremental change in line with the logic of
semi-sovereignty had caused the problem, and would in any case no longer satisfy
business and key political allies, Kohl tried to get the unions in tripartite
negotiations to agree to a comprehensive reform package. Although IG Metall and
DGB in late 1995 came to his assistance with their offer of a national Bündnis
für Arbeit, and an understanding was reached in principle to cut non-wage
labour costs to less than 40 per cent, Kohl's consensual approach failed and the
government in the end resorted to unilateral legislation. This, too, failed when
the CDU/CSU lost the 1998 election.
Why did the Kohl Bündnis fall apart? Among business,
Mittelstand pressure undermined the position of the traditional leadership.
Hans-Olaf Henkel in particular, the chief of the BDI and self-appointed
representative of all those dissatisfied with German corporatism, demanded that
the government act on its own to reverse the trend of the past decade. With
business divided, Henkel and his followers managed to win the support of the
FDP, the small liberal coalition party, which was still chafing from its defeat
on several social policy issues in the Kohl era. Three Länder elections in the
spring of 1996, in which the FDP was unexpectedly successful and the opposition
parties gained no ground, seemed to suggest that the electoral risks of
unilateral reform were smaller than thought. Within the CDU, Schäuble began to
champion a platform of painful social policy reforms, distancing himself from
Kohl's policy of habitual compromise. In the end, Kohl was constrained to
include in the government position for the Bündnis talks demands that the
unions could not but reject or accept political humiliation. As was to be
expected, they walked out and the Alliance never materialised.
When tripartite negotiations had come to naught, the
government embarked on unilateral measures for labour market flexibility and
lower non-wage labour costs. More important than its content, the proposed
legislation signalled a departure from Germany's normal politics of consensus
and might have opened a political space for further government unilateralism. In
addition to a first step towards pension reform and several changes in social
benefits, the government catered to Mittelstand sentiments by cutting sick pay,
which is paid by employers directly and outside the public social insurance
system, for six weeks at hundred per cent of a worker's wage. Sick pay, however,
may be regulated not just by law but also by collective agreement. Legislative
intervention was therefore bound to cause a conflict of principle over the right
of unions to collective bargaining and the proper role of the state. Moreover,
as the high level of sick pay was the result of a historical strike victory of
the metal workers in the 1950s, it was of symbolic significance for the unions
and considered non-negotiable by them.
Immediately after the breakdown of the Alliance, the
unions in June, 1996, organised the largest protest rally in the history of
post-war Germany. Unfazed, the Bundestag passed the reform package. Shortly
thereafter the conflict over sick pay escalated. In October, large firms in the
metal industry, like Siemens and Daimler-Chrysler, came under pressure from
their works councils, broke ranks with their associations and refused to
implement the cuts. The event left employers associations in disarray,
intensified conflict in the business camp, and caused bitter mutual
recrimination between government and business.
It is today widely accepted that Kohl's unilaterally
enacted social policy and labour market reforms contributed to the outcome of
the 1998 election. During the campaign, in which it received unprecedented
political and financial support from the unions, the SPD promised to rescind the
reform legislation. Moreover, Schröder committed himself to a revival of
tripartism and to creating the Bündnis für Arbeit that Kohl had not been able
to bring about. For the unions this meant that any future changes in social
policy or in the labour market regime were to be conditional on their agreement,
although for Schröder it may not have been much more than a convenient device
to avoid questions for the details of his unemployment strategy. When the SPD
had won, its left wing under the then party chairman and Finance Minister, Oskar
Lafontaine, insisted that it kept its election promises and scrapped the Kohl
reforms immediately. While a Bündnis für Arbeit was established in December,
1998, the legislative changes were never discussed there and were delivered to
the unions without anything in exchange.
During Schröder's entire first term, the Bündnis für
Arbeit, which started with tremendous publicity, remained deadlocked. Hard
bargaining on employment-enhancing labour market and social insurance reforms
never happened, perhaps because the government could not agree on its own
strategy, perhaps because it had nothing much to offer in exchange. While the
government hung on to the Alliance for the photo opportunities it offered an
embattled Chancellor, both business and labour seem to have kept it alive
basically to be able to threaten the government and each other with their exit.
On pension reform, the CDU retaliated for the SPD election campaign of 1998,
opposed the government's proposals, sided with the pensioners, and won several
Länder elections in 1999. At the end of that year, Schröder and the SPD were
pronounced dead and were rescued only by the Kohl party finance scandal. After
the experience, unilateralism was out of the question for Schröder, and even
more so for the SPD and its parliamentary party. To mend fences with the unions,
which continued to refuse to co-operate on institutional reform, they were
handed various improvements in co-determination, outside the Bündnis and again
without explicit concessions in return.
The only major success the Schröder government achieved
in the context of the Alliance was the two-year moderate wage settlement of
early 2000, after pent-up demand and the Keynesian rhetoric of Lafontaine as
Finance Minister had produced a high wage rise immediately after the change of
government in early 1999. Indeed during its entire term, the government spent
most of its political capital with the unions on wage moderation - an issue that
formally never came on the Alliance agenda due to union insistence on
Tarifautonomie - not least because the employers and the public expected it.
Wage moderation being as important as it was to the government for domestic as
well as European reasons, the unions seem to have extracted in return a promise
from the Chancellor to forego unilateral labour market or social security
reform. Given the logic of electoral competition and the strong position of the
SPD parliamentary party, that promise may not have been difficult to make.
By the middle of Schröder's first term at the latest, the
Bündnis für Arbeit was mired in deadlock. Schröder knew that Kohl's attempt
to achieve non-incremental change by tripartite agreement had failed, due to
unbridgeable differences between what the government felt was necessary and what
the unions were willing to accept. But having himself brought upon Kohl the
punishment by the voters for his subsequent turn to unilateral reform, Schröder
saw no alternative but to try again for a consensual solution. Unfortunately for
him, what the unions had learned from the events was that they had no rational
reason to co-operate. If corporatist concertation, as has often been pointed
out, depends on the government being able credibly to threaten unilateral
action, then it was even less likely to happen in Germany after 1998 than
before. A state unable to overcome resistance is very likely also unable to make
divergent interests pull together. Consensus politics, if it is to accomplish
more than the sort of change that would happen anyway, requires not a weak but a
strong state. This was interestingly reflected in the frequent German debates at
the time of the "Dutch model", which moved from the notion of a
solidaristic "Polder society" to the observation that unlike in
Germany, there is no Tarifautonomie in the Netherlands, enabling the government
to take wage-setting out of the hands of unions and employers if they are
unwilling to take government policy into account.
As far as the unions were concerned, neither did Schröder
know what to offer them to entice them into co-operation, nor did they know what
to ask for, except that everything basically remained the way it was. By the
1990s German governments could no longer count on the gentle push and pull of
parapublic institutions bringing organised social interests in line with public
interests, as in Katzenstein's world. Instead major parapublic institutions had
turned into bridgeheads inside the state of increasingly particularistic
interest groups that the government needed to take back in order to regain its
freedom of manoeuvre. Growing economic and societal dualism, a tendency that
already Katzenstein had observed (p. 147), was not a major concern for a union
movement safely entrenched in its encapsulated domain and catering to the
interests of an ageing core membership. Nor was it as such a problem for a
government that had been more than willing to absorb the external costs of
social peace at public expense. It was only when the costs of mutual
exploitation for the state exceeded its benefits that governments began to make
half-hearted attempts to extricate themselves from welfare corporatism,
reasserting as public interest their own institutional interest in stopping the
downward spiral of high social expenditures and low employment. But then, the
congenital weakness of the semi-sovereign German state made it difficult if not
impossible for any government to move unions out of their passive and active
resistance that had given up any political ambition beyond the hard-headed
economistic defence of their Besitzstand. Nor could the employers associations,
forced to take into account the concerns of small and medium-sized firms, be
relied upon on any more to help the government buy time. Never having really
started, German tripartism had run its course.
Now a Strong State?
Tight interdependence between the state and organised
social groups in Germany, according to Katzenstein, makes "large-scale
departure from established policies an improbable occurrence" (1978, p.
35). Unable to accomplish radical change, German politics learned to cultivate
consensual incremental adjustment, which for a time served the country well as
it protected political trust and provided stable conditions for investment and
consumption.
Nowhere was it written, however, that incrementalism would
always proceed in the direction of economic and political sustainability. Social
dysfunctions, especially those that are deeply rooted in stable institutional
structures, may take time to accumulate before they become acute. Incrementalism
continued in the 1980s in the face of persistent unemployment and growing social
dualism, responding to the evolving structural problems with a series of
stopgaps that only added to the drift. Imperceptibly but nevertheless
fundamentally the underlying logic of interdependence changed, while the
economic foundations of the social peace that incrementalism was dedicated to
preserving dwindled away.
By the second half of the 1990s the radical changes that
had one last time been delayed by the Institutionentransfer to East Germany had
become imperative for any government interested in its capacity to govern. But
turning around a long-term evolutionary trend exceeded the capacities of a
semi-sovereign state whose principal achievement had been smooth co-operation
with organised civil society in the very incremental adjustment that had now
become obsolete. Both Kohl and Schröder had to learn that not only was there no
incremental solution to the economic and political problems facing their
governments, but there also was no prospect of consensual radical change. Some
incremental change there was, in the right direction and even under Schröder.
Labour market policy was cut back somewhat; part of the costs of early
retirement was internalised in collective agreements; changes in the practice of
collective bargaining allowed individual firms more space for customised
workplace agreements; and a funded supplementary pension scheme was introduced
to alleviate the pressure on the public pension system. But none of this did
anything significant to break the spiral of high payroll taxes and low
employment, or more than to prevent the economic burden of the welfare state on
the labour market from growing even faster.
Incrementalism being capable no longer to align the
interests of state, unions and employers - not to mention attacking the root
causes of endemic under-employment - state weakness in the 1990s became exactly
that: a weakness that spelt stagnation and decline. The semi-sovereign German
state had fitted in surprisingly well with the managed capitalism after 1945,
when the task was to embed a liberal market economy in the post-war settlement.
In the high time of semi-sovereignty, an organised and disciplined society kept a
weak state in check while compensating for its disabilities. But to discipline
interest groups that used their political privileges to provide for their
members at public expense, a weak state is not strong enough.
Today the favourite means of governments trying to
discipline rent-seeking interest groups is liberalisation. But paradoxically,
liberalisation seems to require a strong state, particularly in a well-organised
civil society. In this respect semi-sovereignty is both too much and too little.
It is too much in that it involves deep public intervention, by the state in
co-operation with organised social groups, in the functioning of the market
economy. But it is also too little in that a liberal economy requires a state
capable of overriding organised interests that refuse to internalise the costs
of their behaviour and thus have ceased to be responsive to public interests. If
the taming of organised interests requires less state sovereignty over the
economy, it also seems to require more state sovereignty over the society.
In early 2002, with defeat in the upcoming election almost
a certainty, Schröder exploited a minor scandal in the giant patronage machine
of the Bundesanstalt für Arbeit to dislodge its self-government and call for
fundamental labour market policy reforms. In a striking departure from the
tripartism of the by then defunct Bündnis, he appointed a commission under the
leadership of VW personnel director, Peter Hartz, to devise a plan of how to cut
unemployment by half within two years. Only two of the 15 members of the
Hartz-Kommission were representatives of trade unions, and only one represented
the established organisations of business. Under the pressure of the election
campaign, with the CDU ridiculing the Kommission as Schröder's last straw, both
the unions and the SPD were blackmailed by the chancellery into supporting the
conclusions that Hartz, under public prodding from the Chancellor, put forward
about six weeks before election date.
When against all expectations Schröder won a second term,
everybody believed the brief exercise in state unilateralism to be over. For a
while this was exactly what seemed to be coming, and once again, like in 1998,
the unions got ready to collect the rewards for their campaign support. But
then, all of a sudden Schröder effectively abolished the once so powerful
Ministry of Labour - the union stronghold inside the government machinery - and
merged its largest part into the Ministry of Economic Affairs. To this he
appointed a political heavy-weight from the right wing of the SPD, Wolfgang
Clement. Shortly thereafter, a series of incremental emergency measures
necessary to balance the state and social security budgets - measures that had
been put off not to disturb the collective amnesia and the good feelings that
had turned around the election, but that otherwise the political class rightly
considered business as usual - caused an unprecedented loss of confidence in the
government. In part this was because nothing of this sort had only been hinted
at during the campaign, but probably also because it somehow transpired that no
end to business as usual was anywhere in sight.
Apparently terrified by the prospect of an unending series
of similarly unpopular incremental changes consuming his entire second term, by
the end of 2002 Schröder and Clement pushed the Hartz recommendations through
Bundestag and Bundesrat, including the first significant measures ever taken to
improve the employment prospects of the low-skilled. Rather than allowing the
unions to veto its policy, as it had so often in his first term, the government
sided with the opposition, taking its own parliamentary party by surprise.
Simultaneously it appointed another commission, along similar lines as the
Hartz-Kommission and once again over the head of the minister in charge, to
propose fundamental reforms of the social security system. In the face of
crucial regional election, Schröder chose his New Year address to announce that
all groups in society would have to make sacrifices. Meanwhile reorganisation of
the Bundesanstalt, under its new, government-appointed leadership, was
proceeding while the unions were watching in disbelief. If Schröder continued
his course - which with him could never be certain - a battle over who was
running economic policy, the government or the unions, seemed finally to be
approaching. [12]
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Notes
1
The paper is based on a first review of information
collected in the context of joint research with Christine Trampusch on the
origins and the effects of the "Alliance for Jobs" of the Schröder
government, and more generally on the changing relations between organised
interests and the state in Germany since the 1980s. I am grateful to Christine
Trampusch, Anke Hassel and Britta Rehder for constructive criticism and valuable
suggestions.
2
Katzenstein documents a memorable article by Schmidt, published in the New York
Times in May, 1976, where he points out that, "The entire process of
setting wages and salaries is the exclusive responsibility of collective
bargaining partners. The Government and Parliament would not even dream of
changing this. In our experience, there exists no better solution"
(Katzenstein 1987, p. 156).
3
That the chemical workers looked for alternative ways to cut the labour supply
had to do with their particular experience in the late 1960s and early 1970s,
which was a lost strike. It convinced their leaders that in their industry,
successful industrial action was not possible (Schudlich 1982).
4
1984 was the same year when Thatcher crushed the miners strike, which gave rise
to much comparative comment on the outstanding strength of German unions and the
extraordinary stability of the German industrial relations system.
5
Simultaneously growing international competition and the shift to lean
production made it more difficult for employers associations to call a lock-out.
In spite of the decline in union bargaining power caused by the legal changes
after 1984, this may have reinforced the tendency of large employers to accept
high wage settlements and deal with them by driving up productivity and trimming
down workforces, thus adding to unemployment.
6
It is important to note that apart from the one piece of legislation passed in
1984, there were several other instruments of defensive labour supply management
that had been around since the 1950s and 1960s. Then, however, they had been
used only to deal with individual sectoral crises, such as in coal mining and
steel. The same was true for labour market policy which in the 1990s, when early
retirement through the pension system had reached its limits, turned into a
holding pen for the unemployed. The use of the welfare state in the 1980s and
1990s for removing excess labour from the labour market was the result of
incremental change that had not been originally intended. On early exit policies
in Germany and elsewhere, see Ebbinghaus (2002b).
7
Giving an entirely new meaning to Helmut Schmidt's statement in 1976, also in
the New York Times article quoted above, that the "social peace" for
which Germany was envied in the world was "primarily an achievement of our
well-developed system of social security, combined with the principle of
autonomy under which the labor unions and employers' associations are allowed to
pursue their interests and negotiate their differences" (quoted in
Katzenstein 1978, p. 156).
8
This compares to 3 per cent, 64,000 employees, and a budget of DM 33bn in 1985,
at Katzenstein's time (Katzenstein 1987, p. 69).
9
More recent data on works council coverage are not available as the Deutscher
Gewerkschaftsbund has not yet published aggregate information on the works
council elections of 1998.
10
Where wage moderation was partly caused by union concern for the cohesion of
employers associations, which is essential for industry-wide collective
bargaining.
11
An important yet under-researched aspect of welfare corporatism seems to be that
involvement in the management of labour market policy offers unions, and to an
extent employers associations, indirect access to financial resources enabling
them, among other things, to maintain their organisations even where, like in
the East, they have only few members. A central role in this seems to have been
played by the Bundesanstalt für Arbeit which, until its reorganisation after
the 2002 election, was basically controlled by the "social partners".
The Bundesanstalt spends billions every year on retraining and further training,
which in part go to organisations controlled by unions and employers
associations.
12
Semi-sovereignty, as Katzenstein often reminds us, was not created to support
German prosperity but to tame German power. For the outside world, its main
benefit was not its economic success but that there was no longer a strong
German state. That today Germany lacks the state capacities it would require in
a changed world to recover its economic strength need at first glance not be of
concern to other countries, especially those that in the past were at the
receiving end of Germany's extraordinary economic competitiveness. But
Schadenfreude may be expensive as the size of the German economy is such that
its decline inevitably drags down its neighbours as well. Ending the domestic
semi-sovereignty of the German state may be not just in the German interest.
Copyright © 2003
Wolfgang Streeck No part of this publication may be
reproduced or transmitted without permission in writing from the authors.
Jegliche Vervielfältigung und Verbreitung, auch auszugsweise, bedarf der
Zustimmung der Autoren.
MPI für Gesellschaftsforschung,
Paulstr. 3, 50676 Köln, Germany
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