DEMOCRATIC AUSTERITY? SOCIAL CONCERTATION IN THE NEOLIBERAL STATE #

By Bryan Evans, Stephen McBride and James Watson

The myth of austerity dealt with here is that the working class and trade unions were simply crushed in the process of the global financial crisis and the following deep recession—that workers and their organizations had no role in the shaping and implementation of austerity. The reality is more nuanced than this formulation. A demobilized and relatively powerless working class had few options but to retreat and attempt to save what could be saved.

In the years following World War II, the so-called golden age of capitalism, the working class in much of western Europe and north America was able to exercise a serious degree of political agency to win an array of reforms. Among the mechanisms of working-class influence were neo-corporatist institutions (typically tripartite, representing the state, capital and labor). Precise arrangements differed but, as neoliberalism evolved, its project became, as David Harvey suggested in his work A Brief History of Neoliberalism, one of reconfiguring the state’s relationship to non-state forces. The result is that neo-corporatist mechanisms have largely been transformed from interest representation or intermediation into vehicles of neoliberal hegemony (or transformation?).

From social to competitive corporatism

Establishing political mechanisms to redistribute wealth, through the expansion of public services and social bargaining, in a way that would not undermine the economic dynamic responsible for growth, was the contribution of social democracy. It provided the institutional arrangements that seemed to ensure economic expansion would lift all boats—or, more narrowly, those of the organized working class.

As Philippe Schmitter noted in his 1974 article ‘Still the century of corporatism?’, the neo-corporatist mechanisms linked elements of civil society to the state’s policy-setting institutions. Of central importance was the concertation of goals and objectives of the state, business and labor. The most developed neo-corporatist institutions gave labor voice and influence in policy areas previously beyond its reach. As competition intensified through the 1980s, however, the negotiated bargains came to be redefined to ensure profitability. By the 1990s, dialogue within neo-corporatist structures had been transformed. This ‘competitive corporatism’ was one where the state co-ordinated the compromises necessary to protect profitability as a primary goal.

Through these decades, neo-corporatism was unable to address the new realities and consequently declined. Market forces were now singularly capable of imposing discipline on labor. In her work Business and Banking, Paulette Kurzer notes that, in the EU in particular, integration required governments to dismantle or restructure institutions and political arrangements which were not acceptable to capital. Corporatism was thus not abandoned but rather reformed to meet a newly emerging dynamic, where wage restraint was exchanged for employment security.

Austerity corporatism

Through and following the 2008 financial crisis, a third period in the history of neo-corporatism is discernible. In some cases these institutions were bypassed entirely, as governments imposed unilateral measures. But, where they survived, a crisis corporatism emerged, which turned to social partnerships and social pacts in negotiating the terms of austerity, after aggressive fiscal consolidation followed the short-lived, pragmatic, Keynesian revival. Social dialogue in several European countries enabled a negotiated response to the crisis, where trade unions often agreed to reduced working time and flexibilization of pay. In his article ‘European labor: the ideological legacy of the social pact’, Asbjørn Wahl describes trade union participation in such neoliberal corporatist structures as a ‘policy of powerless social dialogue’.

Austerity social partnerships were mechanisms for concession bargaining, as well as labor-market and social policy reforms, in exchange for reduced taxes and a commitment to employment security. The goal was to meet the inflation and deficit targets of the economic and monetary union. The consequence of austerity corporatism has been to reinforce the declining share of wages as a proportion of GDP.

More than defensive bargaining, the ‘social partnership’ approach of the European labor movement marked a further loss of working-class agency and capacity to mobilize against the crisis. In 2008, Italian workers declared ‘We are not paying for the crisis’, a slogan soon taken up by workers across the EU. The renewed militancy across Europe was marked by large mobilizations in several capitals. German unions organized a ‘Capitalism Congress’ to initiate an ideological challenge of the social-market economy which served to gloss over the fact that capitalism was premised on basic inequality between labor and capital. The Irish Congress of Trade Unions, which had, to this point, had eagerly participated in a social pact with business and government for 20 years, called for a campaign of opposition. But such militancy was for the most part short-lived, as unions returned to allocating priority to social dialogue over militancy.

Since the 2008 crisis, the institutions of social partnership have increasingly been used as a means to implement and legitimise austerity measures—or they have been bypassed through unilateral state action. That these mechanisms have proved so effective in implementing austerity speaks to the weakness of the organized working class. As such, austerity corporatism is significantly different from either social or competitive variants.

Conclusion

The refashioning of neo-corporatist structures as a mechanism for negotiated austerity expresses the profound shift in class power relations. This perspective punches a very large hole in the rationale that social pacts, partnerships and coalitions for work served to protect workers from the worst of the crisis. The result was concessions which served the international competitiveness imperatives of capital under the guise of a socially inclusive framework. The neoliberal status quo is thus preserved while simultaneously deflecting any mobilization for paradigm change.

In this sense, austerity is the latest in a series of measures which hollow out democratic decision-making and lock in place asymmetrical relations between social classes. Obviously, the remnants of democratic government remain and neo-corporatist institutions continue. Increasingly, however, significant areas—including all the major levers of economic policy—are rendered remote from the public and unaccountable to democratic processes. And institutions formerly used to advance working-class interests are converted into top-down legitimation devices.