FREE ESSAY ON ECONOMICS OF EUROPE

ECONOMICS OF EUROPE

The Effects of Post-Industrialism On the Political Economy of Western
Europe
The Decline of Corporatist Bargaining
The sustained, high economic growth in Western Europe during the post-war period until
1973 led to dramatic changes in the
region's political economy. As advances in transportation and communication extended the
reach of international trade into new
areas of the world, as technological advances allowed establishment of manufacturing
facilities overseas, and as European real
wages climbed to unprecedented heights, the industrial base that had served as the
foundation for rapid Western European growth
in the 1950's and 1960's increasingly moved to Western Europe's poorer neighbors. As the
industrial base moved, so did the jobs
of a large quantity of unskilled manufacturing workers who populated the assembly lines.

In recent years, the liberalization of international trade has clearly demonstrated that
European industry can no longer compete in
traditional, large-scale industrial sectors. European successes have increasingly come
from specialized, high value-added industry
and from intelligent, flexible companies able to shift production quickly to capitalize
on movements in world demand.
The net result of these changes has been a transition to a post-industrial society, where
the stable economic order of mass
employment in large-scale industry has given way to mass unemployment and a breakdown of
the political and social consensus
that held sway throughout the post-war period. These changes have fundamentally altered
the Western European labor market.
This paper will show how post-industrialism has dramatically reduced the ability of many
Western European countries to deliver
full employment, not simply because of changes in employment structure, but more
importantly because those structural changes
have undermined the institutional framework that allowed Western European countries to
control prices while pursuing full
employment policies, and have left Western Europeans widely dissatisfied with their
political system.
Western European countries demonstrated varying abilities to control inflation and
unemployment in the 1970's and 1980's.
Cameron argues that two variables explain much of the differences in economic
performance: 1) the presence or absence of
corporatist institutions and practices,1 and 2) the role of leftist, Social Democratic
political parties in government (Cameron: 144).
Centralization of labor representation facilitates corporatist bargaining. Conversely,
fragemented labor representation makes
agreement difficult. The greater the number of parties, the less likely that they will
find a solution palatable to all negotiators.
According to measurements of labor organizational unity by the European Yearbook,
countries with the most unified labor during
the 1970's and 1980's, Austria, Sweden, Norway, Germany, Denmark and Finland, were all
among the best in Europe at
controlling unemployment and inflation, while the countries with the most disunited
labor, Italy, France and Spain, were less
successful.
The shift to a post-industrial economy has increased the dissolution, fragmentation and
differentiation of the Western European labor market. Most countries have suffered high
and remarkably stable unemployment. Unemployment rises during economic
downturns, but no longer seems to recover in a boom economy. Many blame
post-industrialism for this phenomenon, complaining that technological improvements have
led to a 'workerless' economy. While post-industrialism is a cause of higher
unemployment,
the explanation is not that it has eliminated jobs, but that jobs have changed. New
industrial jobs have increasingly required specialized technical skill, while the service
sector has created jobs for skilled, semi-skilled and unskilled workers.
One crucial difference between the old jobs and the new are that traditional unions
played a much larger role in the labor market for industrial jobs than in the labor
market for post-industrial white collar and service jobs. Some countries, Sweden for
example,
have strong public sector unions that include large numbers of non-industrial employees,
but private employees in post-industrial sectors (professionals, managers, skilled and
semi-skilled service employees) are less likely to belong to unions than their
industrial
counterparts.
Unions face large obstacles to organizing these workers. Many of the new jobs are in
smaller enterprises, hindering communication between the unions and prospective members.
But the most serious problem is the individualization of the labor
market. The post-industrial labor market is more fragmented than the industrial labor
market. Workers increasingly organize in functionally specialized unions and collective
bargaining has shifted to the local level(Crook, Pakulski & Waters: 98). Accordingly,
interests among those responsible for negotiating on behalf of post-industrial workers
increasingly conflict. Price stability, exchange rate policy and competitiveness have
become important to large portions of workers in the post-industrial economy,
often leading them to oppose fiscally expansionary full employment policies.
Governments that value price stability face less pressure to deliver full employment in
return and fiscal restraints have decreased the political will to spend their way to full
employment. It is interesting to note that Norway, whose North Sea oil revenues have
kept it fiscally sound, has made extensive use of public sector job creation to keep
unemployment in check. A more typical Western European examples is Italy, who, in the
face of large budget deficits, gave up costly public sector industries to privatization
even during periods of high unemployment.
Economic conditions in the 1980's and 1990's also led to declining union membership.
Economic downturns and high
unemployment raise the probability of worker disorganization (Western: 194-195). Also,
the increasing volatility of world markets
calls for more flexible labor arrangements, such as those common in Northern Italy. The
informality of these labor relationships
does not mix well with traditional, industry-wide union representation. Western blames
the decline of unions on the effects of the
economic changes on the political identification of potential union members, citing the
erosion of class as an organizing principle as
a reason for lower union membership (Western: 179). Some unions remain very powerful.
Small unions populated by skilled
workers who are critical to production, such as the German metal workers, are often able
to win large concessions from
employers. But the decline in overall union membership and the decreasing ability of
different unions to agree on broad,
macroeconomic policies have hurt labor's ability to participate in formulating
corporatist solutions to economic problems.
The shift to a post-industrial economy that has fragmented unions has created parallel
fragmentation within the mass-integration political parties that have governed Western
European countries in the post-war period. Parties find their traditional membership
increasingly divided on the use of fiscal policy, maintenance of exchange rates and other
crucial areas of government policy. 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 extracted large political costs,
particularly for social democratic parties in government and 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.
Bibliography
oHans-Georg Betz, Radical Right Wing Populism in Western Europe (1994). oDavid 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). oStephen Crook, Jan Pakulski & Malcolm Waters, Postmodernization: Change in
advanced
society (1992) oBob Rowthorn and Andrew Glyn, The Diversity of Unemployment Experience
since
1973, in The Golden Age of Capitalism (S. Marglin & J. Schor eds. 1990). oBruce Western,
A
Comparative Study of Working-Class Disorganization: Union Decline in Eighteen Advanced
Capitalist Countries, American Sociological Review 60(2), 1995.