Social Pacts in Europe: Emergence, Evolution, and Institutionalization

Social Pacts in Europe

This page intentionally left blank

Social Pacts in Europe Emergence, Evolution, and Institutionalization

Edited by Sabina Avdagic, Martin Rhodes, and Jelle Visser

1

3

Great Clarendon Street, Oxford ox2 6dp Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Cape Town Dar es Salaam Hong Kong Karachi Kuala Lumpur Madrid Melbourne Mexico City Nairobi New Delhi Shanghai Taipei Toronto With offices in Argentina Austria Brazil Chile Czech Republic France Greece Guatemala Hungary Italy Japan Poland Portugal Singapore South Korea Switzerland Thailand Turkey Ukraine Vietnam Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Published in the United States by Oxford University Press Inc., New York # The several contributors, 2011 The moral rights of the author have been asserted Database right Oxford University Press (maker) First published 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this book in any other binding or cover and you must impose this same condition on any acquirer British Library Cataloguing in Publication Data Data available Library of Congress Cataloging in Publication Data Data available Typeset by SPI Publisher Services, Pondicherry, India Printed in Great Britain on acid-free paper by MPG Books Group, Bodmin and King’s Lynn ISBN 978–0–19–959074–2 1 3 5 7 9 10 8 6 4 2

Table of Contents

List of Contributors

vii

Part I: Analysing Social Pacts 1. Introduction

3

Sabina Avdagic, Martin Rhodes, and Jelle Visser

2. The Conditions for Pacts: A Fuzzy-Set Analysis of the Resurgence of Tripartite Concertation

17

Sabina Avdagic

Part II: Analytical Framework 3. The Emergence of Social Pacts: Analysing Negotiation Processes and Bargaining Outcomes

45

Sabina Avdagic

4. The Evolution of Social Pacts: Trajectories and Mechanisms of Institutionalization

61

Jelle Visser and Martin Rhodes

Part III: Case Studies 5. Ireland: Two Trajectories of Institutionalization

89

Rory O’Donnell, Maura Adshead, and Damian Thomas

6. Italy: The Rise and Decline of Social Pacts

118

Marino Regini and Sabrina Colombo

7. Portugal: From Broad Strategic Pacts to Policy-Specific Agreements

147

Maria da Paz Campos Lima and Reinhard Naumann

8. Spain: From Tripartite to Bipartite Pacts

174

Oscar Molina and Martin Rhodes

9. The Netherlands: Social Pacts in a Concertation Economy

203

Jelle Visser and Marc Van der Meer

v

Table of Contents 10. Slovenia: Social Pacts and Political Exchange

232

Miroslav Stanojevic´ and Alenka Krasˇovec

Part IV: Synthesis 11. Conclusions: Reassessing the Framework

259

Sabina Avdagic, Martin Rhodes, and Jelle Visser

Bibliography Index

vi

292 313

List of Contributors

Maura Adshead, BA, MA (Limerick), PhD (Liverpool), is Senior Lecturer in Politics and Public Administration and Head of the Department of Politics and Public Administration at the University of Limerick. Prior to her appointment in Limerick, she carried out research and taught in the universities of Dundee, Liverpool, Essex, Galway and Dublin. She is author of Developing European Regions? Ashgate, 2002; co-author (with Jonathon Tonge) of Politics in Ireland, PalgraveMacmillan, 2009; and co-editor (with Michelle Millar) of Public Administration and Public Policy in Ireland: Theory and Methods, Routledge, 2003 and (with Peadar Kirby and Michelle Millar) Contesting the State: Lessons from the Irish Case, Manchester University Press, 2008. She has published a variety of articles on aspects of Irish politics and public policy and has carried out commissioned research for Combat Poverty, the Health Service Executive and the National Economic and Social Forum. Sabina Avdagic is a Research Councils UK Academic Fellow at the University of Sussex. She has held research fellowships at the Max Planck Institute in Cologne, the European University Institute in Florence, and the Hanse-Wissenschaftskolleg in Delmenhorst; and a DAAD visiting professorship at the Bremen International Graduate School of Social Sciences. She holds a PhD in Political Science from Central European University, Budapest. Her research interests include comparative labour relations and processes of institutional change in democratic capitalism. Her work has appeared in Comparative Political Studies, Socio-Economic Review and edited volumes, and she has recently completed a book on the development of tripartism and its social policy consequences in East Central Europe. Her current research, funded by the Economic and Social Research Council, examines the causes and labour market effects of national variation in employment protection legislation in Europe. Maria da Paz Campos Lima is Assistant Professor at the Lisbon University Institute (ISCTE-IUL) and a Senior Researcher at the research centre DINAMIA-CET. She has been teaching in the European Masters degree in Labour Studies at ISCTE-IUL since 2005. She also teaches on ‘Employment Relations Change and Regulation’ in the Department of Sociology at Copenhagen University. She has been coordinator of the European Industrial Relations Observatory’s National Centre in Portugal since 2006. She is a member of the Editorial Committee of the European Trade Union Institute’s journal Transfer: European Review of Labour and Research. She holds an MA

vii

List of Contributors and PhD in the Sociology of Work and a BA in Sociology from the Lisbon University Institute. Her research interests include comparative labour relations, collective bargaining and trade unionism, and more recently on welfare policies with a focus on flexicurity. Sabrina Colombo is Assistant Professor in Economic Sociology at the University of Milano, where she teaches Methodology of Social Research. She is a member of the Italian Centre for Research on Universities and Higher Education Systems (UNIRES). She holds a PhD in Sociology and the Methodology of Social Research. Her research interests include industrial relations, labour market sociology, and institutional change in higher education systems. Among her most recent publications are ‘Italy: The Uneasy Co-existence of Different Social Models’ (with Marino Regini), 2009, and ‘Occupational Outcomes of PhD Graduates in Northern Italy’ (with Gabriele Ballarino), 2010. Alenka Krasˇovec is Associate Professor at the Faculty of Social Sciences, University of Ljubljana, Slovenia. She specializes in political organizations and policy-making processes. Her recent articles have appeared in West European Politics, Journal of Communist Studies and Transition Politics, Journal of Southern Europe and the Balkans, Czech Journal of Political Science, Politics in Central Europe, and Czech Sociological ¨ llerReview. Her recent contributions to books include Jean Blondel, Ferdinand Mu Rommel, Darina Malova et al., Governing New European Democracies, PalgraveMacmillan, 2007, and ‘Slovenia: Weak Formal Position, Strong Informal Influence?’ (with Damjan Lajh) in Robert Elgie and Sophia Moestrup (eds.), SemiPresidentialism in Central and Eastern Europe, Manchester University Press, 2008. Oscar Molina Romo lectures at the Institut d’Estudis del Treball (Institute for Labour Studies), at the Autonomous University of Barcelona. In 2005–7, he was a Research Fellow at IRCHSS, the Irish Research Council for the Humanities and Social Sciences. His research interests include comparative industrial relations, comparative political economy, and varieties of capitalism. He holds a Degree in Economics from Pompeu Fabra University, Barcelona and a PhD in Political and Social Sciences from the European University Institute, Florence, Italy. Among his many articles are ‘Corporatism: The Past, Present and Future of a Concept’, Annual Review of Political Science, 5, 2002 (with Martin Rhodes); ‘Political Exchange and Bargaining Reform in Italy and Spain’, European Journal of Industrial Relations, 11 (1), 2005; and ‘Trade Union Strategies and Change in Neo-Corporatist Concertation: A New Century of Political Exchange?’, West European Politics, 29 (4), 2006. Reinhard Naumann is a member of the research centre DINAMIA-CET at the Lisbon University Institute (ISCTE-IUL). He is also Deputy-Director of the European Industrial Relations Observatory’s National Centre in Portugal and head of the Portuguese representation of the Friedrich Ebert Foundation. Before beginning his research activities in Portugal, he served as a full-time official at the headquarters of the German Anti-Apartheid Movement (1989–91). He holds a Diploma in Political Science from the Philipps University, Marburg. His research

viii

List of Contributors interests include structures and strategies of organized interests in labour relations and relations between social movements and political processes. His work at the Friedrich Ebert Foundation involves the organization of interdisciplinary debates between representatives of academia, politics, and social movements. Rory O’Donnell is Director of Ireland’s National Economic and Social Council (NESC). In his work as Economist and later Director at the NESC, he contributed to the analysis and deliberation that underpinned Ireland’s social partnership approach to economic and social policy between 1987 and 2008 and has written extensively on social partnership. He holds an MSc in economics from the University of London and a PhD from the University of Cambridge. He was previously Jean Monnet Professor of Business at University College Dublin. His publications include Adam Smith’s Theory of Value and Distribution (Macmillan, 1990); ‘Towards Post-Corporatist Concertation in Europe?’, in Helen Wallace (ed.), Interlocking Dimensions of European Integration, Pinter, 2001; and co-authorship of Europe’s Experimental Union: Rethinking Integration, Routledge, 2000. His recent work at the NESC includes Ireland’s Five Part Crisis: an Integrated National Response, 2009, and The Euro: an Irish Perspective, 2010. Marino Regini is Professor of Economic Sociology and Vice-Rector of the University of Milan. He is also the director of the Italian Centre for Research on Universities and Higher Education Systems (UNIRES). He was a graduate student in Sociology at Columbia University and the University of California in Berkeley and has been a visiting professor at several universities, including Harvard and MIT. He serves or has served on the editorial boards of the Socio-Economic Review, European Sociological Review, European Journal of Industrial Relations, among others. His current research focuses on institutional change in European higher education. Among his most recent books in English are: European Universities and the Challenge of the Market: A Comparative Analysis, Edward Elgar (2011) and (with G. Esping-Andersen), Why DeRegulate Labour Markets?, Oxford University Press (2000). Martin Rhodes is a Professor at the Josef Korbel School of International Studies, University of Denver, Colorado. Until 2006 he was Professor in Political and Social Science, European University Institute (EUI), Florence, Italy, and from 1995 to 1999 Research Professor at the EUI’s Robert Schuman Centre. He holds a DPhil from Oxford University, and a BA and MA from the University of Canterbury, New Zealand. He was co-editor (and co-founder) of South European Society and Politics (1995–9) and co-editor of European Political Science (1999–2007). His main research areas are in comparative and European-level social and labour market policies. Among his recent publications are New Modes of Governance in Europe: Governing in the Shadow of Hierarchy (with Adrienne He´ritier), Palgrave Macmillan, 2011; Italy: A Contested Polity (with Martin Bull), Routledge, 2009; and Beyond Varieties of Capitalism: Conflict, Contradiction and Complementarities in the European Economy (with Bob Hancke´ and Mark Thatcher), Oxford University Press, 2008.

ix

List of Contributors Miroslav Stanojevic´ is Professor of Industrial Relations at the Faculty of Social Sciences, University of Ljubljana. He holds a PhD in Sociology from University of Ljubljana and a BA and MA in Political Science from University of Belgrade. His research includes the sociology of work and industrial relations, the marketization of state regulated societies and the transformation of industrial relations in Slovenia. His recent publications include: ‘Workers’ Power in Transition Economies: The Cases of Serbia and Slovenia’, European Journal of Industrial Relations, 2003; ‘Avoiding Shock Therapy: Trade Unions’ Role in the Transition to a Market Economy in Slovenia’, in Dimitrina Dimitrova and Jacques Vilrokx (eds.), Trade Union Strategies in Central and Eastern Europe, ILO, 2005; and ‘Slovenia’s Integration in the European Market Economy: Gradualism and Its ‘Rigidities’’ (with Urban Vehovar), in Peter Leisink, Bram Steijn and Ulke Veersma (eds.), Industrial Relations in the New Europe, Edward Elgar, 2007. Damian Thomas is Senior Policy Analyst at the National Economic and Social Council (NESC), Dublin, Ireland. He joined the NESC in April 2010 having previously worked at the National Centre for Partnership and Performance (NCPP) since 2002. He has an interest in the areas of social partnership, employment relations, public-sector reform and organizational change. Before joining the NCPP, he worked as a Research Officer with the Association of Higher Civil and Public Servants (AHCPS). Previously, he was the Labour Court Newman Scholar at University College Dublin (1997–2000) and a Research Associate at the Centre for Urban and Regional Development Studies, Newcastle University (1993–5). He was awarded a PhD in 2003 from Newcastle University for his thesis on ‘Social Partnership in Ireland 1987–2000: An Evolving Economic and Social Governance’. Marc Van der Meer is Director of the National Centre for Expertise on Vocational Training and Education (ECBO), where he is responsible for developing a public knowledge infrastructure for VET-policies in schools and companies. Until 2009 he was associate professor at the University of Amsterdam’s Amsterdam Institute for Advanced Labour Studies, and from September 2006 also part-time project manager at the Dutch Centre for Social Innovation. He studied economics in Tilburg and Madrid and earned his PhD at the University of Amsterdam. His research covers European social policy, social pacts and collective bargaining, labour market reform, and organizational innovation. In addition to numerous articles, he has copublished Low Wage Work in the Netherlands (with Wiermer Salverda and Maarten van Klaveren), Russell Sage Foundation, 2008, and Het Hervormingsmoeras van de Verzorgingsstaat (‘The Reform Morass of the Welfare State’) (with Nicolette van Gestel and Paul de Beer), Amsterdam University Press, 2009. Jelle Visser is Professor of Empirical Sociology and Chair of the Sociology of Labour and Organization at the University of Amsterdam. From 2000 to 2010, he directed the Amsterdam Institute for Advanced Labour Studies, an interdisciplinary centre for research and graduate teaching. He holds a PhD from the University of

x

List of Contributors Amsterdam, and a BA and MA from the Free University Amsterdam. He has had teaching, research positions, and fellowships at the European University Institute, the University of Mannheim, the University of Wisconsin-Madison, Stanford University, and Oxford University, and has consulted to the OECD, the European Commission, and the ILO. His books include Governing Interests (with Wolfgang Streeck, Jurgen Grote, and Volker Schneider), Routledge, 2006, and Trade Unions in Western Europe Since 1945 (with Bernhard Ebbinghaus), Palgrave-Macmillan, 2000. He is also author of some 100 refereed articles on industrial relations, trade unions, labour markets, social policy, and welfare state development.

xi

This page intentionally left blank

Part I Analysing Social Pacts

This page intentionally left blank

1 Introduction Sabina Avdagic, Martin Rhodes, and Jelle Visser

Much scholarly debate regarding economic adjustment and institutional change in contemporary European capitalism has focused on negotiated reforms. This book contributes to that debate by analysing the logic of social pacts – formal agreements of social concertation between the state, unions, and employers that seek to facilitate adjustment in the areas of wage setting, the labour market, and welfare policies. More specifically, our analysis is focused on three interrelated questions: (a) what explains national variation in reliance on social pacts; (b) what determines the outcomes of individual pact negotiations; and (c) under what conditions are pacts repeated and become regular features of socio-economic governance? In exploring these questions, this book provides a systematic comparative analysis of the emergence, evolution, and institutionalization of social pacts in Europe since the 1980s. This introduction provides an overview of the book’s structure and its main contributions (Section 1.1), a concise summary of the core arguments (Section 1.2), and a more extended outline of the analysis presented in the respective chapters (Section 1.3).

1.1. The Structure of the Book and its Innovations This book produces the first full-length theoretical and comparative empirical study of new social pacts in Europe and seeks to bring the level of sophistication achieved in an earlier literature on neo-corporatism to the more contemporary (and usually much less well-institutionalized) phenomenon of social pacting. Hitherto, much analysis of the social pacts of the 1990s and 2000s has engaged in ad hoc theorizing and has been based on a limited number of cases. By contrast, this book brings a wide range of complementary theories to bear on the emergence, evolution, and institutionalization of pacts, compares systematically a wide range of cases from both Western and Eastern Europe, and

3

Social Pacts in Europe also – in the main body of the book – provides in-depth case studies of Ireland, Italy, Portugal, Spain, the Netherlands, and Slovenia. The book is the result of a four-year-long comparative research study centred at the European University Institute in Florence, Italy and financed by the European Commission’s Sixth Framework Programme.1 The theoretical innovations of the book are as follows: a novel application of fuzzy-set qualitative comparative analysis (fs/QCA), used to explain national differences in the adoption of social pacts; an adaptation of the neo-corporatist theorizing of the 1970s and 1980s and the application of a more contemporary game theoretic approach to understanding social pact emergence; and a reinterpretation of traditional neo-corporatist and new institutionalist theory in our endeavour to understand social pact consolidation and institutionalization. Much of the empirical material for this analysis is drawn from the in-depth country studies written by our national experts, all of whom closely follow the common analytical framework of the book. In this introductory first chapter, we undertake a critical review of existing analyses of social pacts and find them wanting in numerous respects: in particular their insufficient attention to theory, their over-concentration on structural variables (a trait they share with the original neo-corporatist literature of the 1970s and 1980s), and their tendency to focus on too few cases. This chapter also includes a short outline of our framework, surveys the main arguments, and provides a roadmap to what the different chapters do and how they are tied together. In Chapter 2, by way of setting the stage for the case-study chapters, we present an fs/QCA analysis of a much larger set of countries than those we examine in detail in this book. Chapter 2’s analysis of fourteen West European countries during the 1990s examines the necessary and sufficient conditions for pacts and helps us to answer two key questions: first, why were pacts struck in some countries but not in others; and second, is there more than one causal pathway (i.e. distinct combinations of causal factors) behind these concerted agreements? The fuzzy-set chapter also serves two additional purposes related to case selection. First, it provides us with information on a wide range of countries that either did not attempt to forge social pacts or alternatively tried to craft them but failed; and second, it helps us capture the critical differences among those countries where pacts were duly signed. By comparing the extent of government involvement and the policy scope of these agreements, the fuzzy-set analysis measures variation in the degree to which these countries relied on concertation as a mechanism of economic adjustment.

1 The social pact study was part of the ‘socio-economic governance’ section of the EU Framework 6 NEWGOV (New Modes of Governance) Integrated Project, co-directed by Martin Rhodes and Jelle Visser. For a synthesis of the section’s findings, see Rhodes and Visser (2010). For the findings of the entire NEWGOV project, see He´ritier and Rhodes.

4

Introduction The latter aspect underpins our choice of in-depth case studies, which are presented in Part II of the book. Although all of our cases have had some experience with pacts, their ‘fuzzy scores’ on the dependent variable differ markedly, suggesting significant variation in the extent of their use of social pacts. In Chapter 3, we move on to the first part of our analytical framework and examine more closely the politics of pact making, moving away from countries as units of analysis to individual negotiation episodes. Here, we seek to understand the outcomes of negotiations. Chapter 3 presents a heuristic model of pact creation, which is based on four concepts that help us understand strategic interaction during the course of negotiations: bounded rationality, contextspecific and changing preferences, the non-unitary character of actors, and perceptions of power. In specifying the model, we hypothesize the relevance of four indicators of the relative power of actors which, in turn, determine their negotiating strategies: organizational attributes, institutional resources, the degree of inter- and intra-sectional unity, and the extent of actor interdependence. Finally, we discuss our assumptions regarding actors’ time preferences and attitudes towards risk and outline our main predictions for negotiation outcomes. The second part of the analytical framework (Chapter 4) shifts the focus to the institutionalization of pacts. We begin by using quantitative evidence on the number and diffusion of social pacts over time and across countries, distinguished by type, scope, and content, before considering the difficulties involved in the institutionalization of social pacts. We compare social pacts with collective labour agreements, analyse the differences between a dyadic and triadic relationship, and the instability of discretionary as compared to rulesbased policies, and present five key hypotheses as to how, and via what kinds of mechanisms, the institutionalization of social pacts occurs. These hypotheses are inspired by the functionalist, utilitarian, normative, and power-distributive approaches found in new institutionalist analysis (Mahoney, 2000), and are taken up in the case studies of Ireland, Italy, Spain, Portugal, the Netherlands, and Slovenia in Chapters 5–10. Finally, we consider why particular combinations of mechanisms are more likely than others. The country chapters that follow begin by applying the bargaining model presented in Chapter 3 to analyse the success and failure of particular social pact negotiations. They then examine the alternative pathways of institutionalization and the hypotheses that might best explain them, as outlined in Chapter 4. In the concluding chapter, which consists of a cross-country analysis and derives conclusions from the case studies, we evaluate the utility of the bargaining model for explaining social pact outcomes and consider how best to understand the mechanisms of social pact institutionalization.

5

Social Pacts in Europe

1.2. The Broader Literature and the Core Arguments of this Book We now understand from a plethora of studies conducted in the 1990s how different the social pacts of the last ten to fifteen years are from the neocorporatist deals or varieties of political exchange that were characteristic of the Keynesian-era (for a survey, see Molina and Rhodes, 2002). These different features can be understood in terms of (a) the context in which they happen (i.e. a shift towards more liberal market policies and decentralization in industrial relations, and the presence of new exogenous shocks, such as Economic and Monetary Union (EMU)); (b) the policy content of pacts (i.e. more regulatory than redistributive); (c) their aims (most notably, greater international competitiveness); and (d) a much stronger role for government. Due to this distinctiveness, they have been characterized as ‘competitive corporatism’ (Rhodes, 1998, 2001), ‘supply-side corporatism’ (Visser and Hemerijck, 1997; Traxler et al., 2001), ‘post-corporatism’ (O’Donnell, 2001), or ‘organized decentralization’ (Traxler, 1995). The recent literature points not only to the distinctive character of the content, aims, and composition of the new social pacts but also to the fact that they appeared in rather unlikely places, that is, in countries without the organizational and institutional preconditions underlying more traditional forms of corporatism (see Regini, 1999, 2000; Rhodes, 2001, 2003; Baccaro, 2002; Hassel, 2003). The literature therefore argues that in order to understand these new social pacts, we have to shift our attention from structural factors, in particular pre-existing institutions, to actors’ strategies and the interactive games they play (see in particular, Regini, 2000; Baccaro, 2002; Molina and Rhodes, 2002). The need to strengthen the focus on interactive processes when analysing social pacts is now widely accepted. But we still lack a rigorous analytical framework to facilitate comparative analysis and generate wider ranging conclusions regarding both the determinants of actors’ behaviour (and thus the likelihood that social pacts will emerge) and the persistence and institutionalization of pacts as a specific form of governance. Creating such a framework is the central aim of this book. Our analysis is therefore guided by two broad questions. The first is that of emergence: how do social pacts come about? The second concerns their subsequent evolution: under what conditions are pacts reiterated, extended, or alternatively terminated? To provide a more complete answer to the first question, we examine not only the politico-economic conditions for pacts but also the dynamics of interaction during the negotiation of social pacts. Correspondingly, our analysis of emergence has two parts. In Part I, we focus on nations as units of analysis and try to understand why social pacts were signed in some

6

Introduction countries but not in others. In doing so, we seek to identify the necessary and sufficient conditions for the use of pacts as a key instrument of economic adjustment. In Part II, we focus our analytical lenses on processes of pact negotiation. In examining individual negotiation episodes, we seek to understand why some negotiations fail while others succeed. Thus, our analysis of emergence offers both an explanation of cross-national variation in pact adoption and a model that explains the outcomes of individual negotiations. Since the different parts of the framework address different questions, they help us produce three distinct arguments that together provide a more complete account of the emergence and evolution of social pacts in Europe than available hitherto. First, our broader cross-national analysis (Chapter 2) argues that the economic factors most often emphasized by the literature on social pacts, specifically EMU-related pressures, inflation, and high unemployment, are neither necessary nor sufficient for pacts to emerge. Instead, we demonstrate that a serious economic ‘problem load’ is causally relevant only when combined with particular political and institutional conditions, namely electorally weak governments and/or an intermediate level of union centralization (see Avdagic, 2010). As explained in more detail in the next section, when combined these factors reveal three distinct causal paths to social pacts. An important implication of this analysis is that the resurgence of concertation in European countries cannot be explained by a single factor, and that social pacts have multiple (although not idiosyncratic) causes. Second, our analysis of the process of pact negotiation (Chapter 3) challenges explanations that depict this process as an essentially cooperative game in which actors search for focal points that guarantee a mutually beneficial solution (e.g. Culpepper, 2002, 2008). Instead, we argue that the outcome of specific negotiation episodes depends on actors’ perceptions of their relative power. As elaborated below, the associated bargaining model suggests that pacts are more likely to materialize in situations where power disparities are visible but not excessively large. By contrast, where both actors believe that their respective position is strong (or alternatively weak), negotiations have a higher chance of failure. The case studies presented in the second part of the book largely confirm this argument. Third, the last part of our framework (Chapter 4) argues that the factors that account for the emergence of social pacts may not be able to explain their subsequent evolution. But rather than proposing a single model of pact institutionalization, this part of the framework identifies four distinct mechanisms that emphasize, respectively, functionalist, utilitarian, normative, and powerdistributional variables. Because there are no sufficiently strong theoretical or analytical reasons to favour any one of these mechanisms over the others, we argue that their respective relevance can only be established empirically. Although the determinants of institutionalization appear to be complex and

7

Social Pacts in Europe context-specific, our case-study chapters and the broader cross-country comparison in the conclusions (Chapter 11) suggest that on the whole powerdistributional mechanisms, often in combination with utilitarian considerations, carry most weight, both as an explanation for the ascendancy and institutionalization of social pacts and as a cause for their abandonment or deinstitutionalization. Problem loads, the focus of the functionalist account, certainly matter but cannot automatically or spontaneously trigger a social pact response. That will occur only if actors’ perceptions and bargaining strategies and the anticipated tangible benefits of concertation allow it to. Normative considerations and outcomes do play a role in social pact institutionalization, but they are never strong enough to guarantee continuation.

1.3. An Outline of the Main Arguments and Chapters 1.3.1. Explaining Cross-National Variation Why do we find social pacts in some countries but not in others? In Chapter 2, Sabina Avdagic evaluates systematically the explanatory power of some of the leading arguments regarding pact emergence. Those arguments emphasize factors such as the ‘Maastricht imbalances’ (high inflation and public deficits), unemployment, union power and centralization, governments’ electoral strength and ideological orientation, the extent of political competition, and traditions of consensus democracy. Using an fs/QCA analysis of fourteen West European countries during the 1990s, Sabina Avadagic finds little support for the argument that pacts result simply from the extent of the underlying economic problem load. Indeed, rather than one single variable explaining all cases, the analysis reveals that the emergence of pacts is a complex, multi-causal phenomenon, with three causal paths, each combining at least two different conditions. Path 1, which explains the largest part of the outcome, combines high inflation or deficits with a high proportion of minority governments and intermediate union centralization (the cases of Italy, Portugal, and Spain). Paths 2 and 3 include cases where unemployment, rather than inflation or the public deficit, is the principal economic problem, suggesting that social pacts are a viable strategy when high unemployment is combined with either minority governments (Ireland) or intermediate union centralization (Finland). This analysis also helps to explain why pacts failed to emerge in certain other countries. Where economic problems were evident, but governments were not weak, the latter either tried to correct imbalances unilaterally or threatened unilateral intervention. In Greece, for example, where Maastricht-related problems were particularly pronounced, the uninterrupted rule of single-party majority governments was one impediment, among others (Rhodes, 2008), to the pursuit of concerted agreements. In Belgium and the Netherlands, rather

8

Introduction than investing heavily in tripartite concertation, coalitions with comfortable majorities used threats of unilateral government action to convince employers and unions to craft acceptable bipartite agreements. Taken together, these findings suggest a plausible theoretical explanation for the adoption of pacts. While all countries experiencing serious economic problem loads are compelled (eventually) to undertake substantial reforms, those with predominantly minority governments are more likely to do so through formal agreements with social partners. Because of their electoral weakness, minority governments tend to seek extra-parliamentary support for reforms, and their incentives for doing so are likely to be especially strong where unions are neither strongly centralized nor decentralized. In the former case, wage moderation is likely to be more or less automatic because unions in such systems internalize the costs of their wage demands; in the latter systems, by contrast, unions are likely to be too weak to affect aggregate wage developments. In brief, a central insight from this analysis is that economic problems do matter as triggers for social pacting, but only in certain circumstances: those where unions’ bargaining power is moderate and where governments lack stable parliamentary majorities. The fuzzy-set analysis thus provides us with the broad contours of an argument about the emergence of pacts, the details of which are filled in by the country chapters. However, given its focus on countryperiods rather than individual negotiation episodes, the fs/QCA provides little insight into the process and outcomes of individual pact negotiations. That is where the bargaining model comes in.

1.3.2. The Bargaining Model What determines the outcomes of individual negotiation episodes, and particularly of first-time attempts to craft pacts? In Chapter 2, Sabina Avdagic extends the analysis of emergence by proposing a heuristic bargaining model of pact creation, which informs the analysis of social pact negotiations in the countrycase chapters that follow. The model is based on four general assumptions: 1. Actors involved in negotiations are assumed to be rational utility maximizers. But their ability to calculate the prospective pay-offs of alternative courses of action is impeded by the high degree of uncertainty that characterizes the times of economic difficulty and crisis situations that most often trigger social pact attempts; 2. Actors’ rank-order of preferences is context-specific and may change over time; 3. Unions, employers’ organizations, and governments are assumed to be nonunitary actors, rather than coherent entities with non-conflicting interests.

9

Social Pacts in Europe Their strategies may therefore be influenced by internal politics and struggles; 4. Perceptions of relative power are assumed to play a more important role in determining actors’ strategies than trust, habits, and norms. The latter might become more relevant when pacts are regularly repeated and widely perceived as successful. Absent such experience, however, strategies are assumed to reflect perceptions of relative power. The process of negotiation is then depicted as a simple bargaining game consisting of a series of proposals and counterproposals by two lead players (i.e. government versus unions, or unions versus employers). Drawing on standard bargaining theory (Rubinstein, 1982; Osborne and Rubinstein, 1990), Avdagic makes two further assumptions regarding actors’ time preferences and their attitudes towards risk. First, for the sake of simplicity, discount rates (which affect the value of future bargains) are assumed to be similar for all actors. The reasoning here is that because pact negotiations are usually initiated in periods of crisis, prolonged bargaining is costly for all actors, and hence they will all prefer to reach an agreement sooner rather than later (in game theory, an actor who wants a pay-off sooner has a higher discount rate than one prepared to delay gratification). The second assumption is that actors with ‘more abundant resources’, that is, those who perceive themselves as being in a relatively strong position, are more likely to persist in pressing for their demands – even at the cost of negotiation breakdown. In the same line of reasoning, those who see their position as weak and deteriorating should be more likely to settle for a quick solution rather than risk the costs of breakdown. These assumptions allow us to derive the following predictions regarding negotiation outcomes: 1. Negotiations are more likely to be successful (i.e. to result in pacts) when one actor perceives its position as strong or increasing and the other as weak or decreasing, and where such perceptions are mutually shared. In such cases, the content of an agreement should be more favourable to the actor who is perceived as strongest. 2. Negotiations have a higher chance of failure when both actors perceive their power as strong and increasing, or alternatively as weak and decreasing. In the first scenario, none of the actors will be willing to settle for a quick and less favourable solution. However, since prolonged bargaining is likely to result in significantly discounted payoffs, actors will eventually reach a point at which the expected benefits of prolonged bargaining will be considered too low to continue negotiations. In the second scenario, both actors might be inclined to opt for a fast agreement; but such an agreement would have a high potential for failure because the actors may lack the capacity to enforce its terms. Alternatively, mutual perceptions of extreme weakness might even prevent actors from broaching an agreement in the first place.

10

Introduction Taken together, the assumptions of the model and its general predictions regarding negotiation outcomes provide a set of propositions that we seek to evaluate both through the case-study chapters and more systematically in the concluding chapter: H1: In the absence of a history of institutionalized concertation, key actors are likely to sign pacts only if they can define such agreements as relatively beneficial to their own interests; H2: During the negotiations, actors’ strategies are likely to depend on their perceptions of their relative power (defined by organizational resources, existing institutions, internal organizational dynamics, and perceptions of interdependence or possibilities of exit); H3: In the course of negotiations, actors adjust their strategies so as to, first and foremost, optimize their responses to incentives and constraints provided by others; and second, to bring their strategies into line with their expectations about the economic situation. H4: The more a particular actor perceives its relative power to be increasing, the more likely it is to persist in negotiations and try to push its preferences through. Alternatively, the more it perceives its bargaining power to be decreasing relative to other actors, the more likely it is to settle for a quick and, from its viewpoint, less preferred solution. H5: The outcomes of negotiations are likely to reflect by and large the preferences of those actors who perceived an increase in their relative power.

1.4. The Institutionalization of Social Pacts How do pacts develop over time and what determines the degree of their institutionalization? This is the question addressed by Jelle Visser and Martin Rhodes in Chapter 4. They begin by analysing the scale and scope of pacting in Europe since the 1990s, and compare it with first wave of neo-corporatist pacts in the 1970s. In the theoretical discussion that follows, they note that contemporary social pacts are highly contingent and fragile constructions, that they tend to internalize rather than externalize conflict, and that they are also typically ‘regulative’ rather than ‘distributive’ in content, even if they do have distributive consequences, and even though certain contemporary pacts have involved wage-tax, wage-public investment, or wage-social policy bargains that resemble the pacts of the neocorporatist past. Visser and Rhodes establish that contemporary social pacts are discretionary policies as opposed to rules-based policies that have the advantage of allowing policymakers to respond quickly to contingencies, but lose their

11

Social Pacts in Europe effectiveness and credibility if used repeatedly. Deriving their argument from Simmel (1950), they point out that as triadic rather than dyadic relationships (as found in collective bargaining), social pacts are inherently unstable and only endure under particular circumstances, which the analysis of institutionalization and deinstitutionalization seeks to establish. The analysis distinguishes between two trajectories of social pact institutionalization – one based on ‘constant or increasing returns’, the other on ‘negative feedback’ – that will either succeed in bringing varying degrees of stability to these fragile constructions or render them still weaker or redundant. The first trajectory is associated with a repetition of pacting episodes and an expansion to new areas of policy concertation; the second with an interrupted pattern that corrects the outcomes of earlier pacts. The weakening or abandonment of social pacts, and therefore pact deinstitutionalization, results if correction via negative feedback fails to produce another pact, or via a process of diminishing returns when the outcomes of a pact no longer meet actors’ expectations. As argued in Chapter 4, the first trajectory of pact institutionalization is linked to broadening and expansion, or a process of increasing capabilities to meet ambitions, whereas negative feedback tends to do the opposite and adjusts ambitions to more limited capabilities. One question that arises in this regard is whether the same variables that account for the emergence of social pacts are also those that account for their differing degrees of institutionalization. Visser and Rhodes suggest that they may indeed play a role. But other variables will also come into play. Drawing on the functionalist, utilitarian, normative, and power-distributional perspectives of institutional analysis, they identify five possible mechanisms of institutionalization (see Avdagic et al., 2005 for the original formulation), which may be grounded in: 1. uncontested actions aimed at ensuring system functionality; 2. a routine or procedure which is associated with considerations of utility; 3. a pattern of interaction that has created significant interdependencies (and hence sunk costs); 4. a set of norms or beliefs that orient behaviour towards cooperation and delegitimate deviant behaviour; and 5. a particular power constellation that ensures institutional reproduction. These mechanisms suggest in turn the following exploratory hypotheses: H1: The functionalist hypothesis is that social pacts are likely to become institutionalized if their institutionalization serves ‘system needs’. Or more specifically, the likelihood of the institutionalization of pacts is higher when a large problem load coincides with the absence of solid micro-foundations for problem resolution (e.g. with regard to wage setting and skill formation)

12

Introduction or other alternatives for coordination, such as central bargaining, trendsetting, or routine consultation. Conversely, deinstitutionalization is more likely the smaller the problem load or the stronger the alternative avenues for problem resolution. H2: The utilitarian hypothesis comes in two versions. The first (H2A) is that social pacts are likely to be institutionalized if they are associated with satisfactory outcomes for the actors. Conversely, the likelihood of their institutionalization is expected to be lower (and therefore that of deinstitutionalization higher) if actors do not perceive pacts as satisfactory. The second utilitarian hypothesis (H2B) is that the likelihood of social pact institutionalization is greater when investment in supporting arrangements is significant and the stronger (and more extensive) are the associated interand intra-organizational ties and networks. Conversely, the more networks are fragmented and the weaker are investments in supporting arrangements, the less likely is social pact institutionalization. H3: The normative hypothesis is that the stronger beliefs are that the previous pact has generated just outcomes, the higher is the likelihood of social pact institutionalization. Such beliefs, in other words, are likely to strengthen the norms of pact-accommodating cooperation. Conversely, the stronger are beliefs of unjust outcomes and the weaker the norms of cooperation, the higher is the likelihood of pact deinstitutionalization. H4: The power-distributional hypothesis is that social pacts are likely to become institutionalized when actors – in particular those with more power – support their reproduction. Conversely, the deinstitutionalization of pacts is likely to occur when powerful actors lose interest in supporting their reproduction, or alternatively when power shifts towards those who do not support pacts. These four hypotheses are then evaluated empirically in our case-study chapters and in the concluding chapter, which includes a broader cross-national comparison.

1.5. Country Chapter Content and Thematic Structure Chapters 5–10 contain in-depth case studies of Ireland, Italy, Portugal, Spain, the Netherlands, and Slovenia. All of these countries have attempted social pacts in the last ten to twenty years or so but provide sufficient variation for analysis of the degree of success or failure of social pact negotiations and of more regularized political exchange. In order to maintain a strong thematic unity,

13

Social Pacts in Europe and to make the cross-country comparison in the concluding chapter more effective, each country chapter has the same structure and organization. Each chapter begins with a brief consideration of the potential drivers of pacts in different time periods. Considering the range of variables examined in Chapter 2, the authors attempt to identify the particular economic, political, and institutional conditions that were likely to instigate pacts in their countries. By using counterfactual analysis, and organizing the discussion in terms of the necessary and sufficient conditions for pacts, the findings of the case-study chapters feed into those of the more systematic fuzzy-set analysis undertaken in Chapter 2. A comparison of those conditions across different time periods assists in our overall analysis in the concluding chapter. The central part of each country-study chapter analyses individual negotiation episodes with the aim of evaluating the assumptions and predictions of the book’s bargaining model (Chapter 3). Drawing on interviews, official documents, and a wide range of secondary sources, the authors explore the relevance of those factors hypothesized in the bargaining model as indicating the relative power of actors and thus their strategies and negotiation outcomes. Overall, our country chapters confirm the relevance of the central pillars of the bargaining model and lend considerable support to its predictions. The analysis of a few specific negotiation episodes, however, provides only partial support for these predictions, thus calling for further refinements of the model, which we discuss in greater detail in the concluding chapter. The final section of each country chapter focuses on the evolution of pacts over time and the determinants of their specific degrees of institutionalization. Following the categorization of institutionalization paths presented in Chapter 4, the authors identify the form of social pact evolution in their country. Each chapter also uses a common template to analyse the evolution of pacts in terms of (a) repetition versus abandonment, (b) the integration versus disintegration of pacting institutions, and (c) the expansion versus reduction of the number of policy areas covered. Lastly, our country authors consider the relevance to their cases of the four mechanisms of institutionalization derived from the functionalist, utilitarian, normative, and power-distributional perspectives. In doing so, they discuss whether, in comparison to the negotiations of the first (or early) pacts in their country, they found any evidence that the negotiation of subsequent pacts might have been driven by a different logic. Since the hypotheses derived from these four perspectives are not mutually exclusive, the country-case findings provide at least partial support for the existence and operation of more than one mechanism. Taken together, however, the evidence seems to suggest that functionalist factors and utilitarian considerations of the benefits provided by pacts figure most prominently. This observation informs our analysis in the concluding chapter, which re-evaluates our findings.

14

Introduction

1.5.1. Reassessing the Framework The main task of the concluding chapter is to reassess the analytical framework in light of the empirical evidence presented in the case studies. We divide that discussion into two parts. In the first part, we draw on the case-study chapters – which together cover over twenty attempts to negotiate social pacts – to help provide a structured and easily accessible synthesis of our findings about negotiation episodes. This information allows us to gauge the extent to which the outcomes of these negotiations are in line with the predictions of the bargaining model. Although the empirical findings largely confirm the model, we detect a few negotiation episodes that are not fully in line with the model’s assumptions, suggesting that the empirical reality is complex and may not always be adequately captured by the model’s simple assumptions. For example, the cases of the 1984 negotiations in Spain and the 1995 negotiations in Italy show that contrary to the expectations outlined in Chapter 3, the threat of exit from negotiations can also be made by the weaker actors. In addition, the Italian, Spanish, and Dutch chapters show that some negotiations were truly three-way games that cannot be properly captured by the model, which depicts pact negotiations as a game between two leading actors. Finally, although the simple assumption that actors share similar discount rates generally does not jeopardize the models’ predictive capacity in our cases, we recognize that this assumption may not always hold and that there exists a range of circumstances where negotiating parties may have significantly different discount rates. Because time preferences (like attitudes towards risk) affect actors’ bargaining strategies, significant variation in discount rates can generate negotiation outcomes that are different from those predicted by the proposed model. Why might the discount rates of actors who negotiate pacts differ? The proposed model assumes that the discount rates are similar because all actors are likely to incur significant costs if the crisis which triggered pact negotiations is significantly prolonged. What this assumption obviously does not take into account is that first, these costs are not always distributed evenly and second, that they might ‘hit’ some actors sooner than others. For example, the expected costs of prolonging the negotiations of a pact might be especially high for a government facing new elections. Unions, at the same time, might not have the same sense of urgency. Even if a union’s leadership is concerned with broader public interests, there may be a significant time gap before it manages to muster sufficient support for the pact within its own organization. Similarly, employers’ discount rates may be particularly high when they suffer a prolonged loss of competitiveness. In such cases, they are likely to be especially keen to obtain the firm commitment of unions to wage moderation as soon as possible. Unions, at the same time, may feel that there is no need to rush into such an agreement if they are convinced that employers

15

Social Pacts in Europe will not immediately try to balance the costs of high wages by cuts in employment. We discuss the case of the 2001 negotiations in Portugal as an illustration of some of these points, for this case suggests that the differences in discount rates are responsible for the decision of one of employers’ organizations to abandon the negotiations. In the second part of the concluding chapter, we use the case-study evidence to assess our arguments regarding institutionalization. We examine how the core mechanisms of institutionalization and deinstitutionalization – increasing or constant returns and diminishing returns and negative feedback – are manifest in and provide robust accounts of these processes across the six countries of our study. We compare and contrast periods of institutionalization and deinstitutionalization, consider the institutional effects of standing committees and tripartite councils, and conclude the discussion of patterns of institutionalization by considering how repeating, broadening, and decentralizing pacts plays out across our countries in terms of increasing or reducing the vulnerability of pacting processes. Finally, we provide an assessment of our four hypotheses of institutionalization – functionalist, utilitarian, power-distributional and normative – and consider the relative strengths of the mechanisms to which they relate when found (as is typically the case) in combination. We conclude that both trajectories of social pact institutionalization – that involving repetition and expansion, the other a more interrupted and disjointed pattern – can break down, typically because of changes in power distribution, correlated with a decline in the functionality of pacts, changing levels of actor satisfaction, and perceptions of fairness. Reinforcing a key conclusion from our bargaining analysis, although we found that pacts sometimes produced cooperative norms, they were never strong enough to determine institutionalization or neutralize the effects of power shifts, severe economic setbacks, or dissatisfaction with outcomes. We conclude that, despite their frequent use in our six countries, social pacts are not ‘institutional facts’ that take on the permanence associated with other critical institutions in European polities, like parliamentary democracy or elections, and even at their strongest are easily (and frequently) called into question whenever economic conditions or power relations change. Social pacts therefore remain contingent institutional constructions, highly dependent on economic fluctuations and pressures and susceptible to social and political influences. Their flexibility as discretionary rather than rules-based policies is the source of both their strengths and considerable weaknesses. Even when accompanied by systems of mutual commitment and obligation, and/or networks of supporting arrangements, social pacts remain institutions that are difficult to both negotiate and stabilize.

16

2 The Conditions for Pacts A Fuzzy-Set Analysis of the Resurgence of Tripartite Concertation1 Sabina Avdagic

2.1. Introduction Much of the literature on economic adjustment and institutional change in comparative political economy has focused on the logic of negotiated reforms in advanced societies. Particularly prominent in this debate have been endeavours to understand the phenomenon of social pacts – formal, often multi-policy agreements between the state, unions, and employers that spread across European countries during the 1990s. As the internationalization of the economy intensified, competitive pressures and socio-demographic changes increased the costs of welfare provision, and many governments turned to organized interests to negotiate reforms of wage bargaining systems, social security, and employment protection. Unlike the corporatist agreements of the1950s–70s in Scandinavia and Austria, when wage moderation was traded for an extension of social benefits and a promise of full employment, the new social pacts were negotiated in a context that called for a combination of wage discipline, a recalibration of social policy spending and greater labour market flexibility. But what made this resurgence of concertation particularly puzzling is the fact that these agreements emerged in countries that lacked the traditional preconditions for neo-corporatism set out in an earlier literature (e.g. Schmitter, 1974, 1982), namely strong, monopolistic, and hierarchical interest organizations capable of exerting high levels of internal discipline, of bargaining with the state and implementing the agreed policies. This puzzle brought negotiated reform 1 An earlier version of this chapter was published under the title ‘When Are Concerted Reforms Feasible? Explaining the Emergence of Social Pacts in Western Europe’ in Comparative Political Studies, 2010, 43(5): 628–57.

17

Social Pacts in Europe ‘back in vogue in comparative political economy’ (Culpepper, 2002), as scholars increasingly sought to explain why and when such concerted solutions might be possible in the new political and economic environment. Although the literature on social pacts generally agrees on the virtues of concertation – specifically the potential of this process to generate broader support for necessary reforms and thus to diminish contestation and promote reform sustainability – there is little agreement on the conditions under which such concerted agreements are likely to materialize. As a consequence, we lack a consensus on one of the key questions addressed by this literature: why were social pacts forged in some countries but not in others? While some accounts emphasize national variation in the extent of the pertaining economic ‘problem load’, particularly with respect to meeting the Maastricht convergence criteria for membership of Economic and Monetary Union (EMU) (Rhodes, 1998, 2001; Fajertag and Pochet, 2000; Hancke´ and Rhodes, 2005), others highlight differences in wage bargaining institutions (Hancke´, 2002; Hassel, 2006), and still others variations in government strength, political institutions, or specific patterns of electoral pressures (Baccaro and Lim, 2007; Hamann and Kelly, 2007a). In most cases, however, these hypotheses have been derived from and assessed on a small number of in-depth case studies, and attempts to evaluate them across a larger number of country cases have been rather limited and superficial. The aim of this chapter is to assess more systematically the explanatory power of the various arguments concerning national variation in the emergence of social pacts. Relying on a fuzzy-set qualitative comparative analysis (fs/QCA) of fourteen European countries during the 1990s,2 this analysis finds little support for the dominant argument that sees pacts as a direct consequence of the extent of the underlying economic problem load, especially with regard to inflation and budget deficits. This finding is in line with other recent accounts that argue that policy concertation has been driven at least as much by the political calculations of governments as by their more general concerns with key macroeconomic challenges stemming, for example, from EMU membership criteria regarding inflation, deficits, and debt (Baccaro and Lim, 2007; Hamann and Kelly, 2007a). But whereas certain of these accounts consider that EMU-related constraints may have been a necessary if not sufficient condition for successful concertation during the 1990s (e.g. Hamann and Kelly, 2007a), the analysis presented here shows that this condition by itself has been neither necessary nor sufficient. Instead, the results of this analysis reveal three possible paths to successful pacting, each combining at least two different conditions emphasized by the various strands in the literature. These three causal configurations suggest that a high economic problem load generates pacts only when combined with 2 The fourteen countries include all ‘old’ European Union member states apart from Luxembourg.

18

The Conditions for Pacts: A Fuzzy-Set Analysis particular political and/or institutional conditions. Specifically, weak governments and intermediate union centralization seem to have been key ingredients for successful tripartite concertation during the 1990s. As far as economic variables are concerned, it is evident that even during the run-up to EMU – when we would expect the explanatory power of economic imbalances with regard to the Maastricht convergence criteria to be particularly strong – high unemployment was almost as important for the emergence of pacts. As this chapter demonstrates, the three paths identified by the fs/QCA analysis are not only empirically relevant (in that they explain all of our cases well) but also broaden our theoretical understanding of the combinations of conditions that may be conducive to successful policy concertation. In short, the findings of this analysis confirm that the resurgence of concertation cannot be explained by a single factor, and that social pacts have multiple (albeit not entirely idiosyncratic) causes. The chapter is organized as follows. Section 2.2 presents three main groups of explanations of successful social pacting emphasizing, respectively, economic, institutional, and political causes. This is followed by a consideration of several multi-causal explanations that combine these conditions into more complex conjunctural hypotheses. Section 2.3 considers the benefits of using fs/QCA to analyse cross-national variation in the reliance on pacts. Section 2.4 presents the main variables and data, while Sections 2.5 and 2.6 discuss the main steps of the analysis, model specifications, and findings. Finally, Section 2.7 summarizes the results and discusses some avenues for future research.

2.2. Explaining the Resurgence of Social Pacts: Economics, Institutions, and Politics Policy concertation is often considered an effective way to facilitate economic adjustment and produce sustainable reforms. But not all countries faced with adjustment pressures in the 1990s resorted to social pacts. Indeed, in a number of European countries, governments eschewed negotiations with social partners and pushed through their reforms unilaterally. Why did governments pursue socio-economic adjustment via concerted agreements in some countries but not in others? The literature emphasizes three sets of factors as the main explanations for such cross-national variation: the level of economic problem load, the nature of wage-setting institutions, and governments’ political calculations and electoral concerns.

2.2.1. Economic Problem Load A prominent explanation of pacts emphasizes the role of crisis or substantial economic problem load, expecting that an agreement on reforms is more likely

19

Social Pacts in Europe to occur when a country is stuck in a deep crisis that threatens its international competitiveness, or when exogenous shocks require adjustment across multiple related policy areas. Such situations of national emergency, so the argument goes, act as powerful incentives for concertation because an economic emergency may help to convince various, otherwise antagonistic actors that a cooperative game is the most appropriate course to pursue. Social pacts are often depicted in this way as functional responses to overwhelming economic challenges. There are in fact two types of argument in this group. The first maintains that the social pacts of the 1990s reflected the need of European economies to bring inflation and deficits down to the level imposed by the EMU convergence criteria (e.g. Rhodes, 1998, 2001; Fajertag and Pochet, 2000; Hancke´ and Rhodes, 2005; Hassel, 2006). Hancke´ and Rhodes, for example, argue that social pacts did not emerge in all countries because EMU-related pressures were not distributed evenly across the continent. Only where inflation and budget deficits were above the Maastricht limits (3 per cent inflation, 3 per cent annual deficits, and 60 per cent government debt) did governments rely on concertation ‘both to expedite the process of adjustment and reduce the potential social costs of rapid disinflation’ (Hancke´ and Rhodes, 2005: 201). The second set of arguments emphasizes the more general pressures associated with globalization, and in particular the loss of competitiveness and (threat of) high unemployment as the key drivers of pacts (Rhodes, 1998, 2001; Hyman, 1999; Culpepper, 2002, 2008). Rather than assuming a direct link between economic problems and concerted agreements, some of these accounts have advanced sophisticated causal arguments that demonstrate how a crisis induces cooperation by transforming actors’ understanding of feasible policy options and ultimately their initial preferences. Culpepper (2008), for example, combines rationalist and constructivist approaches to show how prolonged economic problems in the late 1980s and early 1990s in Ireland and Italy facilitated a process of ‘common knowledge creation’, which culminated in formal agreements over the transformation of wage bargaining institutions. He argues that once unions and employers became persuaded that the ‘failure to restrain wages would damage competitiveness and employment’, it was possible to shift to a cooperative ‘game in which a coordinated solution was preferred by both parties’ (Ibid.: 30). Taken together, this literature suggests two hypotheses about the emergence of pacts that stress either problems in meeting the core EMU convergence criteria or the loss of competitiveness as manifested in high unemployment. Accordingly, a higher propensity to forging pacts should be evident in those countries that encountered high inflation or government deficits (H1), or alternatively high unemployment (H2).

20

The Conditions for Pacts: A Fuzzy-Set Analysis

2.2.2. Wage Bargaining Institutions The corporatist literature has long argued that centralized and monopolistic interest organizations are the key institutional precondition for concertation (e.g. Schmitter, 1974, 1982; for a survey, see Molina and Rhodes, 2002). Although this argument was challenged during the 1990s when concerted agreements emerged in a number of countries that lacked such institutional preconditions, numerous contemporary accounts suggest that certain institutional features are nonetheless important. Unions’ organizational strength as expressed through union density and the level of wage-bargaining centralization are the two factors most commonly emphasized. Whether or not the unions mobilize a sizeable percentage of the workforce as members is seen as being relevant because governments are unlikely to engage in joint policy formulation when unions are organizationally too weak to make credible negotiating partners (Baccaro and Simoni, 2008). There is, however, no consensus on the degree of centralization of wage bargaining that may be most conducive to making pacts. While some argue that a high level of centralization is required to convince a government that unions are able to uphold their side of a bargain (Hancke´, 2002; Harcourt and Wood, 2003), others maintain that an intermediate level of centralization creates stronger incentives for engagement in pacts (Ebbinghaus and Hassel, 2000; Hassel, 2006). Drawing on Calmfors and Driffil’s curvilinear hypothesis (1988) regarding the impact of union centralization on wage demands, the latter group of authors argue that unions in highly centralized systems are able automatically to internalize the costs of excessive wage increases which renders superfluous a social pact on wage moderation. Governments should be thus more interested in gaining the cooperation of moderately centralized unions, which may have a substantial effect on nominal wages, but are unlikely to be equally concerned (or unable to do anything) about employment costs of higher wage demands for their members. The explanations above therefore suggest three different hypotheses about national variation in the use of social pacts: pacts should be more evident in countries that have more encompassing unions (H3), higher levels of union centralization (H4), or, alternatively, unions that have intermediate levels of centralization (H5).

2.2.3. Governments’ Political Calculations and Electoral Concerns Governments’ willingness to negotiate reforms and sign social pacts has also been linked to various political conditions. First, the early literature on the politics of corporatism identified Left party incumbency as a key precondition for successful concertation (Korpi, 1983; Alvarez et al., 1991; Garrett, 1998; Hicks, 1999). Left parties were thought to be especially capable of ensuring union cooperation because of their traditionally strong relationship with

21

Social Pacts in Europe unions. The unions, in turn, were thought to be willing to accept wage restraint because they could count on their long-standing political partners to deliver on commitments and ensure full employment and high levels of public investment. Although this explanation was subsequently challenged by party scholars who emphasized the weakening of union–party ties and class dealignment (Kitschelt, 1994), and by political economy scholars who argued that government partisanship was important only in the context of a Keynesian economic policy, but not in the current monetarist context (Scharpf, 1991), several accounts of new social pacts nonetheless suggest that left-wing, socialdemocratic parties are still more likely to negotiate policies with unions than their right-wing or liberal counterparts (Harcourt and Wood, 2003; Hassel, 2006; Hamann and Kelly, 2007; Baccaro and Simoni, 2008). Second, some accounts argue that the emergence of pacts depends on government strength, and specifically on whether the governing party or coalition controls a majority of parliamentary seats (Baccaro and Lim, 2007; Baccaro and Simoni, 2008). These authors suggest that governments (and government coalitions) that are either electorally weak or internally divided and therefore politically unstable are more likely to negotiate potentially unpopular reforms and sign formal agreements with social partners. This is because bolstering their strength can best be achieved by seeking support for their policies outside parliament and in the so-called ‘corporatist arena’ of unions and employers’ organizations. Following this line of reasoning, Baccaro and Lim (2007) explicitly argue that the presence of a minority or caretaker government is a key indicator that social pacts will be signed. Finally, it has also been argued that social pacts are a consequence of broader electoral pressures, manifested in fierce party competition, the emergence of new non-mainstream parties, and declining partisan loyalties to traditional political constituencies. Hamann and Kelly (2007a), for example, argue that governing parties calculate the likely electoral gains of pacts versus the unilateral imposition of policies. Governments are more likely to offer pacts, they argue, when the incumbent parties are facing such electoral pressures. In sum, this literature suggests three plausible hypotheses: pacts are more likely to emerge in countries where governments have been either electorally weak (H6), dominated by Left parties (H7), or faced with strong electoral challenges (H8).

2.2.4. Conjunctural and Multi-Causal Explanations It is important to recognize that much of the literature, including works referred to above, advance more than simple monocausal explanations of pacts. They often refer to more than one causal variable and develop conjunctural explanations in which the impact of one variable is conditioned by the level of another. Baccaro and Lim (2007), for example, argue that a combination of three

22

The Conditions for Pacts: A Fuzzy-Set Analysis variables is required for a pact: an economic crisis, a minority government, and weakened but still sufficiently powerful unions. Hamann and Kelly (2007a) suggest that pacts occur in situations where governments face not just economic challenges but also significant electoral pressures. Analyses that point to the role of government partisanship (i.e. the presence of Left-oriented executives) draw on the literature on social-democratic corporatism (Garrett, 1998; Hicks, 1999) and the power-resources approach (Korpi, 1983), and argue that negotiated compromises are more likely where there is both a high level of Left-cabinet incumbency and strong unions. Hassel (2006) develops a multi-causal argument that includes economic problems, wage bargaining institutions, the extent to which a country’s monetary regime is accommodating, and the nature of the political system. Following Iversen (1998), she argues that intermediate wage bargaining centralization produces inflationary pressures only when monetary policy is relatively loose, because unions under restrictive monetary policies will have to restrain their wage demands if they are to avoid employment losses for their members. Hassel also draws on Lijphart (1999) in arguing that consensus democracies are inclined towards negotiation given their institutional context – proportional electoral rules, multiparty systems, and corporatist networks that, to varying degrees, provide representation for a range of socio-economic interest organizations. Hassel therefore argues that although unilateral reforms by government executives are possible in majoritarian electoral systems with fewer institutional constraints, negotiations with unions and employers are often unavoidable in so-called ‘consensus democracies’. Taken together, governments, in Hassel’s view, are thus more likely to engage in pacting in countries with substantial economic problems, intermediate union centralization, less constraining monetary policies, and a tradition of consensus-based policy making. Earlier works on neo-corporatism in the 1960s–80s also advanced multi-causal arguments that may help in understanding contemporary ‘post-corporatist’ concertation. For example, Katzenstein (1985) focused on the link between competitive pressures, political institutions, and corporatist adjustment policies in small northern European states. Although social pacts in the 1990s are not strongly related to country size, the degree of economic openness and the role of consensus-based political institutions in Katzenstein’s analysis still merit our attention today.

2.3. Why Use Fuzzy-Set QCA? Fs/QCA is an especially useful technique for analysing the causes of social pacts. First, explaining cross-country variation in social pacting confronts the wellknown ‘few cases, many variables’ problem. Regression analysis is not especially useful here because the relatively small number of cases would produce

23

Social Pacts in Europe unreliable results and would not allow an inclusion of more complex interaction effects to investigate the various multi-causal hypotheses in the literature. Because fs/QCA was developed primarily for research designs with a small and medium number of cases, and for the exploration of causal interactions, rather than the net effects of individual variables, it does not suffer from the same problem. This configurational aspect of fs/QCA makes it an ideal method for assessing conjunctural causation evident in several hypotheses that link pacts to a particular combination of factors. Second, the differentiation in the literature is not only between ‘pact countries’ and ‘non-pact countries’ but also within ‘pact countries’, depending on the extent to which they rely on this mode of economic adjustment. In some countries, governments have used social pacts extensively, linking incomes policy and collective bargaining innovations with labour market and social security reforms, while in others, pacts have been primarily concerned with non-wage issues and have left collective bargaining in the hands of unions and employers. In still other countries, governments have avoided tripartite negotiations altogether and have sought to induce agreements between unions and employers by threatening unilateral government policy intervention and imposing central wage norms. This kind of variation cannot be captured by standard statistical tools such as binary choice models, or by the older variant of QCA relying on Boolean sets. Binary choice models estimate the probability of a certain state occurring, thus requiring a dichotomous dependent variable (pacts vs. no pacts). Similarly, crisp-set QCA requires a dichotomization of the outcome and all causal conditions: a country is either in or out of the set of pact countries, its problem load is either high or low, its governments are either strong or weak, etc. Fs/QCA, in contrast, allows cases to have a partial membership in both the outcome and causal conditions, as captured by fuzzy membership scores between ‘0’ (non-membership) and ‘1’ (full membership). A fuzzy-set thus corresponds to a pseudo-continuous scale on which cases are coded according to the degree to which they belong to a specific category, for example, extensive concertation, encompassing unions, high unemployment, etc. Fuzzy sets are therefore especially amenable to the analysis of social pacts where neither the outcome nor (most) causal conditions are easily dichotomized. Third, many arguments about social pacts are framed in terms of the necessary and sufficient conditions for their emergence. Fs/QCA is an obvious choice for exploring such arguments because this technique formalizes the analysis of necessity and sufficiency by drawing on the logic of set theory and the so-called ‘subset principle’. Accordingly, a condition is considered to be necessary if the degree of membership in the outcome is less than or equal to the membership in the condition (i.e. the outcome is a subset of the cause), while sufficiency is demonstrated when the degree of membership in a condition or a particular combination of conditions is less than or equal to the membership in the outcome (i.e. the cause is a subset of the outcome). Fs/QCA also allows us to

24

The Conditions for Pacts: A Fuzzy-Set Analysis move beyond rigid veristic tests, in which one non-conforming case disproves a hypothesis, to more realistic tests of ‘quasi-necessity’ and ‘quasi-sufficiency’ that can identify conditions that are ‘almost always’ or ‘usually’ necessary or sufficient (Ragin, 2000, 2006). Fourth, fs/QCA allows for equifinality, that is a possibility of multiple pathways to an outcome. This idea that the same causal ‘recipe’ may not be at work in all cases is particularly relevant for the purposes of this book because our case studies suggest that different combinations of conditions have been responsible for the emergence of social pacts in different countries. Finally, fs/QCA enables consideration of different types of solutions ranging from those that maximize complexity to those that maximize parsimony. While complex solutions capture only causal configurations that are evident empirically, parsimonious solutions incorporate the so-called ‘logical remainders’, which correspond to counterfactual combinations that are logically possible but lack empirical instances. Using fs/QCA thus allows us to engage in explicit counterfactual analysis and explore hypothetical cases more systematically than is possible using standard qualitative comparisons.

2.4. Data Undertaking the analysis requires the calibration of raw data to fuzzy scores. Fuzzy membership scores are mathematical proxies for verbal qualifiers about the extent to which cases belong to a certain set, for example a set of countries with highly centralized unions. A case with a membership score ‘1’ is considered to be ‘fully in’ the set, while a case with a score ‘0’ is ‘fully out’. Membership scores that lie between these two extremes correspond to cases that may be described as being ‘almost fully in’, ‘more in than out’, etc. Most causal conditions in this chapter are coded as six-value fuzzy-sets with membership scores 1, 0.8, 0.6, 0.4, 0.2, and 0. For reasons of empirical correspondence, the outcome is coded as a four-value fuzzy-set with the matching scores 1, 0.8, 0.2, and 0. Membership along the continuum is determined on the basis of substantive and theoretical knowledge – a method generally considered preferable to simple mathematical rescaling (Ragin, 2008). Below I elaborate in greater detail the empirical indicators used for the construction of the fuzzy-sets in this analysis.

2.4.1. Outcome The outcome of interest is the use of social pacts as a strategy of economic adjustment during the 1990s. The concern here is with successful policy concertation, that is, concertation that culminates in a social pact. In this analysis social pacts are defined as publicly announced formal policy contracts between the government and social partners on incomes, labour market or welfare

25

Social Pacts in Europe policies that identify explicit policy issues and goals, the means to achieve them, and designate the tasks and responsibilities of the signatories. This definition excludes purely declaratory agreements and general statements of intent, as well as the informal behind-the-scenes settlements that are often considered the functional equivalents of pacts, and rules out exclusively union–employer agreements, giving special attention to the role of the government. For an agreement to be considered a pact, the government has to be a signatory, or has to publicly support a union–employer agreement and provide the negotiating parties with explicit policy incentives. This restrictive definition is adopted for two reasons. Considering all agreements as pacts regardless of their formal status, substantive content and the actors involved would artificially inflate the number of pacts, and there would be hardly any cross-national variation given that almost all EU countries had some form of centralized agreement in the 1990s. Moreover, since numerous explanations of pacts include political conditions and governments’ electoral concerns among their key variables, testing those hypotheses on union–employer agreements crafted without explicit government involvement would make little sense. Because comprehensive tripartite pacts in the late 1980s were much less frequent than in the 1990s (the 1987 pact in Ireland is the most often cited example), and pacts in the 2000s are generally narrower in scope (e.g. the 2003 wage agreement in the Netherlands, the 2001 agreements on training, and health and safety in Portugal) and/or remain unimplemented (e.g. the 2002 Pact for Italy), this analysis focuses on the 1990s. This temporal focus ensures a comparability of pacts in terms of their scope, content, and practice, which enables a more precise assessment of countries’ fuzzy membership in specific pact categories than is possible over a longer time period. Table 2.1 summarizes the basic characteristics of pacts and classifies countries along a four-point scale that captures their membership in the set ‘Extensive Tripartite Concertation’. Governments in seven out of fourteen countries in the 1990s used some form of concerted agreement. Of the seven countries where

Table 2.1 Social Pacts during the 1990s: Fuzzy-Set Membership in the Outcome Countries

Characteristics

Italy, Ireland, Portugal, Finland

Broad tripartite pacts, linking incomes policy with labour market and welfare reforms

1

Spain

Narrower pacts, focus on labour market and welfare policies

0.8

The Netherlands, Belgium

Union–employer pacts under threat of government unilateralism

0.2

Austria, Denmark, France, Germany, Greece, Sweden, The United Kingdom

No major pacts

26

Fuzzy score

0

The Conditions for Pacts: A Fuzzy-Set Analysis pacts were signed, five are clearly positive cases, that is, where government was directly involved in concertation and agreements spanned several policy areas. These cases are assigned fuzzy scores 1 or 0.8 depending on the scope of agreements and the extent of government intervention. Italy, Portugal, Ireland, and Finland are all given a score of 1, denoting their full membership in the set ‘Extensive Tripartite Concertation’. Social pacts in these countries linked reforms across adjacent policy areas, and government in all of them played a central role. Italy witnessed five such pacts in the 1990s. These agreements helped secure wage restraint and allowed the abolition of the ‘scala mobile’ wage indexation mechanism, a reform of collective bargaining, a major pension reform, and the creation of many new employment programmes (Regini and Colombo, this volume). In Portugal, a series of pacts covered payrise ceilings and levels of the minimum wage, as well as reforms to labour legislation and working hours, social security and pensions, the tax system and employment policies, and occupational training (Campos Lima and Naumann, this volume). Ireland’s three-year tripartite agreements began in 1987 with the Programme for National Recovery, and three sequential pacts signed in the 1990s delivered wage moderation in exchange for tax cuts, and introduced a wide range of welfare and labour market measures aimed at minimizing social inequalities and exclusion (O’Donnell et al., this volume). Finland also relied on regular agreements linking incomes policy with policy innovations in taxation, social security, and employment. The Finnish government was rarely a formal signatory of pacts, but it did endorse them publicly and participated in their negotiation, providing explicit incentives – including tax relief, shorter working hours, earnings-related unemployment benefits, and holiday bonuses – to the negotiating parties to help secure a consensus (Kauppinen, 2000). Spain has high but not full membership (0.8) in the outcome, reflecting the narrower scope of its pacts and the role of government in wage determination, which has been limited to influencing collective bargaining indirectly by offering social partners a seat at the bargaining table on labour market and welfare reforms in exchange for wage-setting responsibility. With no grand tripartite pacts linking multiple policy areas, concertation in Spain has been pursued at separate, issue-specific, bipartite, and tripartite tables (Hancke´ and Rhodes, 2005; Molina and Rhodes, this volume), producing five agreements between the government and social partners on employment and social security (including pensions, part-time contracts, and health and safety), and eight separate inter-confederal agreements on wages and workplace industrial relations (Royo, 2006). The Netherlands and Belgium also have non-zero membership in the outcome. But their score below the 0.5 threshold indicates that they cannot be considered fully positive cases and are assigned fuzzy scores of 0.2 because their ‘pacts’ were in fact centralized union–employer agreements crafted under explicit threats of government intervention. Put simply, these two

27

Social Pacts in Europe governments used sticks rather than carrots to convince social partners to cooperate. When the social partners refused to do so, the government imposed unilateral wage ceilings via legislation. This type of ‘concertation under the shadow of hierarchy’ (Visser, 1999) dates from the well-known 1982 Wassenaar Agreement in the Netherlands, which was signed only after the government threatened to abolish wage indexation and freeze public and minimum wages and the main social transfer programmes (Ebbinghaus and Hassel, 2000). Further threats of government intervention coerced bipartite agreements on wages and working time flexibilization in 1994 and 1997. In Belgium too, the failed negotiations of the Recovery Plan in 1982 prompted the government to freeze wages and temporarily suspend wage indexation, while the subsequent biannual inter-confederal wage agreements were mostly dictated by the government (Hassel, 2006). When in the mid-1990s, the government tried to convince the social partners to engage in a tripartite pact to counter the country’s declining competitiveness, the unions refused to accept its terms, and the government introduced a wage freeze (1993) and a new legal framework for wage bargaining (1996) which limited wage increases to the levels of Belgium’s three main trading partners (Baccaro and Lim, 2007). The biannual agreements on wages and employment conditions in the late 1990s also followed from a de facto threat of further government intervention. The other seven countries are considered non-members of the ‘Extensive Tripartite Concertation’ set. Some tried to produce comprehensive pacts but failed, notably the German Alliance for Jobs (1996, 1998), a wide-ranging initiative that produced some narrow agreements but could not achieve a broad-based consensus on labour market and welfare reforms. Similarly, negotiations for a Confidence Pact in Greece (1997) resulted only in a rather general and largely declaratory agreement. The other countries did not try to produce pacts, but this category comprises two quite different groups. The first group includes countries with a strong corporatist tradition – Austria, Sweden, and Denmark – which have a number of long-established participatory institutions, with social partners often involved in the day-to-day governance of specific policy areas. This well-developed corporatist infrastructure may have made formal social pacts redundant. Indeed, these countries managed to implement (more or less consensually) some wide-ranging social security and welfare reforms in the 1990s and did not ‘package’ these reforms as formal social pacts. The second group includes two ‘non-corporatist’ countries – the United Kingdom and France – where negotiations over major reforms never took place. In the United Kingdom, the Conservative governments’ policies in the 1980s and 1990s undermined union power and contributed to the decentralization of wage bargaining structures, while in France, weak and fractious unions staged large protests (as in 1995 against the government’s proposal to reform the social security system), but lacked the capacity to mobilize their members behind a concerted agreement with the government (see Culpepper, 2002).

28

The Conditions for Pacts: A Fuzzy-Set Analysis

2.4.2. Causal Conditions Taken together, the three main groups of explanations of pacts marshal seven different, potentially relevant, causal conditions, alongside the three additional variables from the related political economy literature: the degree of accommodating monetary policy, a tradition of consensus democracy, and economic openness. Data for fourteen EU countries were compiled from various sources to evaluate these explanations. Raw data for all causal conditions were recoded as six-value fuzzy-sets, apart from intermediate centralization which was coded as a dichotomous set. Table 2.2 presents the fuzzy membership values for all variables. Note that there are eight (rather than seven) core sets because union centralization is captured by two sets constructed to explore different hypotheses: high centralization and intermediate centralization. The criteria for calibration for all variables and data sources are described in greater detail in the Appendix. Measures of economic problem load include inflation, the government deficit, and unemployment. Three-year moving averages were used to determine the degrees of countries’ membership in the set ‘High Unemployment’ (UNEM). Because average figures for inflation and deficits would mask the extent of the problem load faced by several countries at certain points, indices of EMU-related problems were created covering both the number of years in which the deficit and inflation were above the Maastricht limits, and the extent of this imbalance in each year. The resulting sets were then combined by using the ‘logical OR’ function to create the macro-variable ‘Maastricht Imbalance’ (MAAS). A membership score in this set indicates the degree to which a country experienced either considerable inflation or deficit problems. Measures to evaluate institutional explanations include union density and the centralization index, which depicts union concentration and authority in wage bargaining at multiple levels. Since these data did not vary greatly over the 1990s, decade means were used in the calibration process. Union density was used to create the set ‘Encompassing Unions’ (DENS), while the centralization index was used to construct two separate sets: ‘High Centralization’ (CENT) and ‘Intermediate Centralization’ (MEDC). To assess political hypotheses, the sets ‘High Left Cabinet Incumbency’ (LEFT), ‘Electorally Weak Governments’ (MING), and ‘High Political Competition’ (EFFP) were created. The degree of left government is measured by an index of cumulative left cabinet incumbency, which corresponds to the sum of left seats as a percentage of parliamentary seats held by all government parties during the 1990s. The number of years in which minority or caretaker governments were in power during this period is used as a measure of electorally weak executives. The average effective number of parties serves as a proxy of competition and electoral pressures. Finally, to evaluate the multi-causal hypotheses from the political economy literature, three additional fuzzy-sets were constructed: ‘Insufficiently Restrictive

29

Table 2.2 Fuzzy Membership in Causal Conditions Country

Core causal conditions Economics MAAS

Additional conditions

Institutions MEDC

LEFT

EFFP

CONS

0.8

0

0.6

1

0

0.8

0

0.6

0.6

0

Belgium

1

0.8

0.6

0.8

0

0.8

0

1

0.8

0.6

1

Denmark

0

0.6

0.8

0.6

1

0.8

1

1

1

0.6

0.8

Austria

UNEM

DENS

CENT

Politics MING*

CBDP

OPEN 0.8

Finland

0

1

0.8

0.6

1

0.4

0

1

0.8

0.8

0.6

France

1

1

0.2

0

0

0.8

0.45

0.6

0

0.6

0.4

Germany

0.2

0.6

0.4

0.8

0

0

0

0.6

0.6

0

0.6

Greece

1

0.8

0.4

0.6

1

0.8

0

0.2

0.2

0.4

0.4

Ireland

0.2

1

0.6

0.8

0

0

0.89

0.6

0.6

0.8

1

1

1

0.4

0.4

1

0.4

0.77

1

0.8

0.6

0.4

Italy The Netherlands Portugal

0.8

0.2

0.4

0.8

0

0.6

0

1

1

0.2

1

1

0.2

0.4

0.4

1

0.6

0.63

0.4

0.8

0.8

0.6

Spain

1

1

0.2

0.4

1

0.8

0.89

0.6

0.2

0.6

0.4

Sweden

1

0.6

1

0.8

0

1

1

0.8

0.8

0.6

0.6

The United Kingdom

1

0.8

0.4

0

0

0.2

0

0.2

0

0.6

0.4

* Since few countries had predominantly minority governments, this variable was recoded by calculating the square root of the original scores. This operation is called dilation (Ragin, 2000: 178), and it is commonly used to set a lower standard for membership without affecting the score of full members and non-members. In this case, the verbal qualifier ‘very’ weak governments is replaced by ‘predominantly’ weak governments.

The Conditions for Pacts: A Fuzzy-Set Analysis Monetary Regime’ (CBDP), ‘Strong Tradition of Consensus Democracy’ (CONS), and ‘High Economic Openness’ (OPEN). Indicators used in the construction of these sets include: (a) an index of central bank independence as a proxy for the degree of monetary accommodation; (b) a measure of the tradition of consensus democracy combining the index of the proportionality of electoral systems with the number of effective parties over a longer period of time; and (c) the share of exports and imports in GDP as a proxy of economic openness.

2.5. Analysis The analysis was conducted with the help of fs/QCA 2.0 – a software programme that enables a precise assessment of necessity and sufficiency, and a consideration of a range of solutions incorporating different treatment of counterfactuals. The analysis entailed running multiple models containing various combinations of the identified causal conditions. While most models included four variables, a number of five-variable models were also considered. The decision to explore multiple models, each containing a modest number of conditions, was motivated by three reasons. First, the inclusion of additional variables in a model would make each case increasingly unique, yielding largely idiosyncratic solutions that are too complex and difficult to interpret. Second, adding additional variables increases exponentially the number of logically possible causal combinations. Considering simultaneously the eight core causal conditions would yield 28 = 256 possible configurations, out of which a maximum of 14 could be empirically observable. The resulting truth table would thus contain at least 242 rows displaying configurations that lack empirical instances. The upshot of this is that a parsimonious solution, which incorporates all these so-called logical remainders, would be based largely on ‘cases that could have been’ rather than those that are empirically observable. Although counterfactual analysis is a great strength of QCA, recent experimental research has shown that a moderate ratio of variables to cases is required to ensure the validity of results, because the risk of QCA finding solutions even on random data increases with the addition of new conditions (Marx, 2006). The recommendation of this research for analyses where N = 14 is to employ models with four explanatory variables, which should ensure highly valid results. Fivevariable models entail a somewhat higher risk of error, while models with six and more variables should be avoided in this case (Ibid.: 19). Finally, specifying such multiple models allows us to compare the explanatory power of different arguments, while adding and replacing variables in core models serves to assess the robustness of solutions and minimize the risk of an omitted variable bias. Correspondingly, this analysis entailed three steps to compare the broadest range of solutions while ensuring valid results. I first specified models that

31

Social Pacts in Europe approximate prominent conjunctural arguments, some of which include variables beyond the core eight conditions emphasized by the literature on social pacts. Next, the core variables were alternated systematically so as to generate various theoretically plausible four-variable models. The final step involved a test of several five-variable models. All models were run with and without simplifying assumptions about configurations that lack empirical instances so as to generate complex and intermediate solutions. The former are based on empirically observable configurations only, while the latter incorporate the socalled ‘easy counterfactuals’ and are recommended as a good bridge between complexity and parsimony (Ragin, 2008). The assessment of causal sufficiency was based on a consistency threshold of 0.8 – a measure indicating the extent to which membership in the outcome is consistently greater than or equal to membership in a causal configuration. Effectively, this choice means that any combination of economic, political, and institutional conditions that reaches or exceeds this threshold can be considered almost always sufficient for extensive concerted agreements. As customary in small-N analyses, a higher consistency benchmark of 0.9 was used in the test of causal necessity. This test was performed prior to specifying the different models and conducting sufficiency tests in order to establish whether any of the individual causal conditions consistently appears in the cases displaying the outcome.

2.6. Findings The test of necessity revealed that none of the identified causal conditions appears to be necessary for the outcome. High unemployment has the highest consistency score of 0.84, but even this condition falls short of reaching the required threshold (0.9). Interestingly, high inflation and deficits – conditions often referred to as necessary for social pacts during the 1990s – display far lower consistency thresholds of 0.5 and 0.65 respectively, suggesting that Maastricht-related problems alone may have been a less important driver of social pacts than is often argued. The fact that no individual condition turned out to be necessary suggests that the resurgence of policy concertation is a phenomenon that is both complex and profoundly influenced by contextspecific conditions. In light of these results, it would appear to be futile to search for a single cause or even a common impetus for social pacts. The next step is therefore to search for different combinations of conditions that may be linked to the outcome in terms of causal sufficiency. For each model specification, the programme identifies all possible causal combinations and then uses the set–subset logic to analyse combinations with consistency scores of at least 0.8. This process of ‘logical minimization’ yields simplified solution sets with the associated measures of consistency and coverage, which are used to

32

The Conditions for Pacts: A Fuzzy-Set Analysis compare the explanatory power of the models. Consistency indicates how well a given solution set explains the outcome in question, while coverage indicates its empirical relevance, that is, the proportion of membership in the outcome explained by the solution. As such, solution coverage bears some resemblance to the R2 (coefficient of determination) in regression analysis. Together, these measures provide an indication of the overall goodness-of-fit of solutions. In this analysis, the test of sufficiency was first conducted on models that approximate some prominent arguments about concertation and social pacts. Five of these models turned out to be poor explanations of cross-national variation in the reliance on social pacts as none of their causal combinations passed the required consistency threshold. These include: (a) a model focusing on the economic problem load, combining inflation, deficit and/or unemployment (Fajertag and Pochet, 2000; Hancke´ and Rhodes, 2005); (b) a model combining high economic problem load with union centralization (Harcourt and Wood, 2003); (c) the power-resources model, combining high Left cabinet incumbency with encompassing and centralized unions and different measures of economic problems; (d) the classic corporatist model, focusing on institutional conditions (union encompassingness and centralization); and (e) a model combining measures of economic openness and a tradition of consensus democracy with various economic variables (Katzenstein, 1985). The remaining models in this group perform better, displaying generally high consistency scores, but insufficiently high coverage. In simple terms, this means that they explain the outcome well, but their explanation is relevant only in a small number of cases. This finding is not surprising because most of these arguments were derived from in-depth qualitative analyses involving a few country cases. These models include: (a) a model combining Maastrichtrelated problems, intermediate union centralization, insufficiently independent central bank, and a tradition of consensus democracy (Hassel, 2006); (b) a model combining economic problem load with measures of government and union strength (Baccaro and Lim, 2007); and (c) a model combining Maastrichtrelated problems with various political variables including measures of government strength, political competition, and government’s political orientation (Hamann and Kelly, 2007a, 2007b). All of these models bring about solution sets with consistency scores exceeding 0.8, but their coverage is rather low, ranging from 0.27 (the Hamann and Kelly model) to 0.46 (the Hassel model). The next two rounds of sufficiency tests were conducted on a range of fourand five-variable models including different combinations of the core eight conditions. Table 2.3 presents the top three models in terms of their explanatory potential. Both complex and intermediate solutions are reported. As evident, all three models include Maastricht-related problems, electorally weak governments, and intermediate centralization. In addition, model I includes high unemployment, model II strong political competition, while model III includes all of these variables. Although all models perform well, model I is

33

Social Pacts in Europe Table 2.3 Best Models Raw coverage

Unique coverage

Consistency

Model I SOCP = f{MAAS, UNEM, MEDC, MING} MAAS*MEDC*MING+

0.423077

0.423077

0.960699

maas*UNEM*MEDC*ming+

0.192308

0.192308

1.000000

maas*UNEM*medc*MING

0.153846

0.153846

1.000000

MAAS*MEDC*MING+

0.423077

0.423077

0.960699

maas*medc*MING*EFFP+

0.115385

0.115385

1.000000

maas*MEDC*ming*EFFP

0.192308

0.192308

1.000000

ming*MEDC*EFFP+

0.328846

0.192308

0.895288

MAAS*MEDC*MING+

0.423077

0.286538

0.960699

maas*medc*MING*EFFP

0.115385

0.115385

1.000000

1.000000

Solution coverage: 0.769231 Solution consistency: 0.977995 Model II SOCP = f{MAAS, MEDC, MING, EFFP} Complex solution

Solution coverage: 0.730769 Solution consistency: 0.976864 Intermediate solution

Solution coverage: 0.730769 Solution consistency: 0.929095 Model III SOCP = f{MAAS, UNEM, MEDC, MING, EFFP} Complex solution maas*UNEM*medc*MING*EFFP+

0.115385

0.115385

MAAS*unem*MEDC*MING*effp+

0.115385

0.076923

1.000000

maas*UNEM*MEDC*ming*EFFP+

0.192308

0.192308

1.000000

MAAS*UNEM*MEDC*MING*EFFP

0.301923

0.263461

1.000000

MAAS*MEDC*MING+

0.423077

0.319231

0.960699

UNEM*MEDC*ming*EFFP+

0.296154

0.192308

0.885057

maas*UNEM*medc*MING*EFFP

0.115385

0.115385

1.000000

Solution coverage: 0.686538 Solution consistency: 1.000000 Intermediate solution

Solution coverage: 0.730769 Solution consistency: 0.929095 Note: For Model I, complex and intermediate solutions are identical.

34

The Conditions for Pacts: A Fuzzy-Set Analysis clearly the best specification in terms of the overall consistency (0.98) and coverage (0.77). A further look reveals that this solution set contains three distinct paths or causal configurations that produce the outcome. The last three columns in the table display information on consistency and coverage for each of these paths. Raw coverage indicates the proportion of all cases covered by a particular causal configuration. Unique coverage, on the other hand, is in some ways similar to the partial regression coefficient, and it denotes the proportion of cases explained exclusively by a given causal configuration, that is net of overlaps with other solutions. Such overlaps are possible because fs/QCA permits cases to have different degrees of membership in given sets, which means that they could be explained partially by more than one causal configuration. In this case, however, raw coverage and unique coverage figures are the same, which suggests that there are no significant overlaps between the paths. The results show that the first path explains the highest portion of the outcome, as indicated by its coverage of 0.42. This path combines a high level of inflation or deficit with a high proportion of minority governments and intermediate union centralization. The other two paths, which jointly explain roughly 35 per cent of the outcome, reflect cases where unemployment, rather than inflation or the deficit, was the main economic problem. These two solutions suggest that pacts are a viable strategy when high unemployment is combined with either intermediate centralization or a high proportion of minority governments. Theoretically, these three causal configurations provide plausible explanations of governments’ reliance on pacts during the 1990s. While all countries experiencing high inflation or deficits had to undertake substantial reforms in the run-up to EMU to meet the Maastricht criteria, those that had predominantly minority governments were more likely to do so through formal agreements with social partners. Because of their electoral weaknesses, minority governments were compelled to seek extra-parliamentary support for reforms, and their incentives for doing so would have been particularly strong in cases where unions are neither strongly centralized nor decentralized. In the former case, wage moderation was likely to be more or less automatic because unions in such systems internalize the costs of their wage demands, while in the latter systems unions would likely be too weak to affect aggregate wage developments. For similar reasons it is understandable that minority governments would have been inclined to pursue pacts in cases where unemployment was the main economic problem. Moreover, since unemployment has a particularly strong impact on voters’ decisions and is always politically costly, even non-minority governments could be expected to pursue concerted solutions in cases of intermediate centralization. This is so because in such systems unemployment may be perceived to be a consequence of intermediate centralization, which encourages wage hikes that may generate further cuts in employment.

35

Social Pacts in Europe These three causal paths also seem to offer reasonable explanations for our empirical cases. Path I, which combines a high level of inflation or deficit with weak governments and intermediate centralization, explains the cases of Italy, Portugal, and Spain. During this period, all three countries struggled with inflation and deficit problems, had intermediately centralized unions and predominantly weak governments. This configuration captures perfectly the case of Italy, which for the greater part of the 1990s was governed by electorally weak and unstable governments burdened by numerous corruption scandals (Regini and Colombo, this volume). These governments pursued concertation because solving the inflation and deficit problems required comprehensive reforms that they were too weak to design and impose unilaterally. Governments in Spain faced similar incentives and were also unable to solve Maastricht-related problems on their own. This was especially evident after 1993 when the Socialist PSOE government lost its majority and was replaced by the conservative Popular Party minority government, which was additionally burdened by the need to prove its democratic credentials (Hamann and Kelly, 2007a; Molina and Rhodes, this volume). The resurgence of concertation coincided with these developments as most pacts were signed in the mid-1990s. A comparable scenario is evident in Portugal after 1995 when the PSD majority government (1987–95) was replaced by the PS minority government led by Prime Minister Guterres (1995–2001) who made concertation an explicit part of his government’s strategy of adjustment (Campos Lima and Naumann, this volume). Path II, which combines high unemployment and predominantly minority governments, fits the case of Ireland. Although the first in the series of regular pacts was signed already in 1987 under the minority Fianna Fa´il government, Irish social partnership was far from being solidly institutionalized prior to the late 1990s. While the key Maastricht indicators had been brought under control, unemployment remained stubbornly high (in the range of 10–15 per cent) for much of the 1990s. In this context, the continuation of concertation was a rational strategy for internally divided multiparty coalition governments, which apart from 1993–6 had no majority in the Da´il (O’Donnell et al., this volume). Finally, Path III, combining high unemployment with intermediate centralization, corresponds to the case of Finland. The collapse of the Soviet market drove the Finish economy into a deep recession, causing unemployment to increase rapidly from 3 per cent in 1990 to around 17 per cent in 1994, and it was not before 2000 that unemployment finally fell below 10 per cent. Simultaneously, non-binding centralized wage agreements became increasingly diluted, while the growing tendency to determine wages at industry and even company levels produced a non-negligible degree of wage drift, accounting for approximately 35 per cent of wage growth (Uusitalo and Vartiainen, 2007). This context of high unemployment and more frequent breakdowns in confederal bargaining persuaded the Lipponen government to revive tripartite concertation despite its being a stable and largely cohesive coalition. Indeed, although

36

The Conditions for Pacts: A Fuzzy-Set Analysis this so-called ‘rainbow coalition’ comprised five parties representing different parts of the political spectrum, the parties generally agreed on major policy goals (albeit for different reasons; see Jungar, 2002). Moreover, the SDP and the NCP – the two main parties that were also the principal advocates of a comprehensive programme of reforms – commanded a sufficient majority in parliament and it is unlikely that they would have had problems securing legislative approval for this programme even without the other coalition partners. However, the government considered that a negotiated compromise with the unions was essential for the successful implementation of the reforms and consequently emphasized the need for political unity and joint action in fighting unemployment and restoring the economy to health ( Jungar, 2002). Given the government’s insistence on concertation and its determination to obtain union support, we can speculate as to whether the government did in fact feel vulnerable despite its electoral strength. Ultimately, however, this question can be answered only through a more in-depth case-study analysis. Overall, the presence of minority governments appears to have been a particularly important factor for successful concertation. Indeed, this was evident in four out of our five cases of extensive pacting. A reconsideration of negative cases also confirms the importance of this variable. The data show that where economic problems were evident, but governments were not electorally weak, they either tried to correct imbalances unilaterally, or alternatively threatened unilateral intervention to convince their social partners to craft appropriate bipartite agreements. For example, the case of Greece, where Maastricht-related problems were particularly pronounced, suggests that an uninterrupted rule of single-party majority governments may have acted as an impediment to the pursuit of tangible, concerted agreements. The cases of Belgium and the Netherlands also support the argument regarding the importance of government strength. Although inflation was under control in both countries, they encountered significant problems with their deficits, debt, or unemployment at various times during the 1990s. Rather than investing heavily in tripartite concertation, governments in these countries tried indirectly to induce bipartite cooperation between unions and employers. Occasional half-hearted attempts at broad tripartite agreements were supplanted by explicit threats of unilateral government action if the social partners failed to agree on an acceptable course of adjustment. In both countries, the credibility of these threats was enhanced not only by the history of government intervention but also by the fact that all governing coalitions during this period were able to secure a majority in parliament. In the Netherlands, the Lubbers government (1989–94) controlled almost 70 per cent of seats in the parliament, and the subsequent Kok cabinets (1994–2002) held 60–65 per cent of the seats. Similarly, the Dehaene government in Belgium was a grand coalition of the Christian Democratic and Socialist parties that managed to secure an impressive 80 per cent of parliamentary seats in the first part of the 1990s, and a comfortable majority thereafter.

37

Social Pacts in Europe

2.7. Conclusions European economies underwent major economic adjustment during the 1990s. Although heightened international competition, sluggish growth, rising unemployment, and broader demographic pressures presented important challenges to welfare states already in the 1980s, major reforms linking welfare state recalibration with labour market deregulation gained momentum across Western Europe only during the subsequent decade. This acceleration of reforms during the 1990s was underpinned in no small part by the process of European monetary integration, which committed governments to strict antiinflationary policies and responsible fiscal spending. Yet although these reforms were broadly similar across countries in that they sought to reduce labour costs, increase competitiveness, and alleviate budgetary burdens, the national strategies of adjustment were far from uniform. While governments in some countries pursued adjustment via tripartite concertation and social pacts, others eschewed formal negotiations with social partners and introduced reforms unilaterally. This chapter has tried to understand this variation by exploring systematically the conditions that made concerted reforms possible. The findings of this analysis indicate that the dominant arguments in the literature, which emphasize the extent of economic problems associated with the run-up to EMU, or more general economic pressures, explain only part of the story. High levels of inflation, deficit, or unemployment turned out to be neither necessary nor in themselves sufficient for the extensive reliance of certain countries on social pacts. Rather, a high economic problem load appears to be causally relevant only when combined with particular political and institutional conditions, namely the prevalence of electorally weak governments and/or an intermediate level of union centralization. That the acuteness of economic problems by itself does not guarantee pacts is understandable because governments could be expected to pursue concertation only when they expect the benefits of concerted agreements to outweigh their costs. Indeed, if bargaining entailed no cost for the government, governments undertaking adjustment would always prefer pacts over unilateralism because such agreements signal a broader support for reforms. Although the social pacts of the 1990s included no major side payments reminiscent of the corporatist deals of Scandinavia and Austria in the 1960s–80s, they nonetheless demanded some important policy concessions (such as selective tax benefits, more gradual pension reforms, etc.) and procedural gains for the unions. The findings of this analysis indicate that governments are willing to pay such costs only when they believe that the resulting agreements are politically beneficial and help them to achieve their underlying goals. Apart from specific economic pressures, government’s electoral strength and expectations about the ability of wage-setting institutions to generate desirable behaviour appear to be especially important in such calculations.

38

The Conditions for Pacts: A Fuzzy-Set Analysis These findings are broadly consistent with the general thrust of certain recent accounts that question the sufficiency of economic pressures as the underlying cause of social pacts (Avdagic et al., 2005; Baccaro and Lim, 2007; Hamann and Kelly, 2007a). The analysis presented here makes two distinct contributions to this literature. First, it evaluates and compares the explanatory power of different hypotheses against a larger number of country cases, while simultaneously generating more precise assessments of the necessary and sufficient conditions for pacts. Given the consideration of a wide range of variables and the multitude of model specifications, the resulting causal configurations are unlikely to reflect spurious relationships produced by omitted variables. Second, the fs/QCA analysis presented here extends and refines existing multi-causal explanations of pacts by demonstrating that there is more than one causal pathway to concerted agreements. In examining the conjunction of multiple causal factors, this analysis has identified three distinct, theoretically and empirically relevant combinations of conditions that helped generate pacts during the 1990s. In countries where EMU-related pressures were particularly pronounced, a combination of predominantly weak governments and intermediately centralized unions was required for the adoption of pacts as a strategy of adjustment. Where unemployment, rather than Maastricht-related macroeconomic imbalances, was the main economic problem, either weak governments or intermediate union centralization was sufficient for concerted reforms. This study therefore bridges the gap between in-depth single-case studies of social pacts that emphasize context-specificity and the uniqueness of cases, and comparative accounts that search for general explanations applicable to all countries. While the analysis highlights more than one causal pathway in accounting for the resurgence of concertation among our fourteen countries, it also reveals that these explanations are not idiosyncratic and that only a limited number of relevant causal patterns exists. In certain respects, however, this analysis may be limited. Although it considers most West European countries, it focuses on a relatively short period of time in order to control for shifts in the broader economic context. While such cross-national analysis was necessary to assess some leading hypotheses about social pacts, countries may be too crude as units of analysis even if we focus on a single decade where they experienced broadly similar pressures, such as those associated with preparations for EMU. A promising avenue for further comparative research would be therefore to move away from the macro-level of analysis and to examine conditions for the emergence of different types of pacts during a longer period of time. Using individual pacts, or alternatively government cabinets, rather than countries as units of analysis would enable us to explore whether the logic of concerted agreements has changed over time. The analysis presented here could serve as a basis for such an undertaking. Since such an analysis would entail a considerably larger N, fs/QCA could be fruitfully combined with regression analysis to examine both configurational and tendential

39

Social Pacts in Europe relationships. For the purposes of this book, however, the present analysis offers useful insights about the key drivers of pacts. The case studies presented in Chapters 5–10 examine in more detail whether and how the drivers of pacts identified here matter in the individual countries and time periods.

Appendix Variable Descriptions and Data Sources

Core Causal Conditions Maastricht Imbalance (MAAS): A macrovariable joining sets ‘High Deficit’ and ‘High Inflation’ by ‘logical OR’. The sets are based on cumulative indices for 1990–9, calculated as follows. For deficit, score 1 is assigned for each year when the deficit is above the Maastricht limit of 3 per cent of GDP, but lower than 4 per cent; score 2 when it is between 4 and 5 per cent; and score 3 when it exceeds 5 per cent. For inflation, score 1 is assigned when inflation exceeds the Maastricht limit (1.5 percentage points above three lowest inflation member states) by no more than 2.5 percentage points, score 2 by up to 5 percentage points, and score 3 by more than 5 percentage points. For both sets, at least 10 on the index is required for full membership, at least 5 to be more in than out of the set, and a maximum of 1 for full non-membership. Source: OECD Economic Outlook, 2007 and IMF World Economic Outlook Dataset, 2007. High unemployment (UNEM): Three-year moving averages. To be a full member in this set, a country’s unemployment has to be at least in double digits. A crossover point is 7 per cent. Unemployment rates below 4 per cent correspond to full non-membership, as such levels are unlikely to present a significant problem for the economy. Source: OECD Main Economic Indicators, 2007. Encompassing unions (DENS): Average net union membership as a proportion of wage and salary earners in employment during the 1990s. Since no advanced democracy has fully unionized workforce, union density of at least 80 per cent is required to qualify for full membership; less than 5 per cent indicates full non-membership. Given a general fall in union membership over the past few decades 40 per cent rather than 50 per cent is chosen as a crossover point. Source: Visser (2008). High Union Centralization (CENT): Iversen’s centralization index as updated by Visser (2008), averaged over the 1990s. In theory, the index ranges from 0 to 1, with higher values indicating a higher degree of centralization. In reality, only

40

The Conditions for Pacts: A Fuzzy-Set Analysis Austria has a centralization index higher than 0.6. On the other end of the scale are the United Kingdom and France with a centralization index lower than 0.3. Correspondingly, at least 0.6 is needed for full membership in this set; figures below 0.3 indicate full non-membership; and 0.4 is considered to be a crossover point. Source: Visser (2008). Intermediate Union Centralization (MEDC): A dichotomous set based on the same data as CENT. Figures between 0.35 and 0.45 depict medium centralization and thus full membership in the set. All other figures reflect full nonmembership. High Left Cabinet Incumbency (LEFT): Cumulative index of left cabinet incumbency. This measure reflects a sum of values over 1990–9 of social-democratic and other left parties as percentage of parliamentary seats held by the governing parties weighted by the number of days the government was in office. The maximum value in any given year is 1, denoting a perfect hegemony of left parties in the cabinet. Since no country had a total hegemony of left parties over the decade, a cumulative index of at least 8 is required for full membership; 4 is a crossover point, and values below 1 reflect full non-membership. Source: Armingeon et al. (2008). Electorally Weak Governments (MING): Number of years in which minority or caretaker governments were in power during the 1990s. At least nine years of minority government reflects full membership in this set. Five years is a crossover point. A country with no minority governments during this period is considered to be fully out of the set. Source: Armingeon et al. (2008). High Political Competition (EFFP): The Laakso and Taagepera index, reflecting both the number of parties and their relative weight, averaged over the 1990s. Full membership in this set is reached when the effective number of parties is at least 4.5, while full non-membership is evident when this number does not exceed 2. An average of more than 3 effective parties is needed for a country to be considered more in than out of this set. Source: Armingeon et al. (2008). Insufficiently Restrictive Monetary Regime (CBDP): An index combining four well-known indices of central bank independence. The index ranges from 1 to 3, with higher values reflecting a lower degree of independence; 3 on this index corresponds to full membership in this set, 1 reflects full nonmembership, and 2 is a crossover point. Source: Armingeon et al. (2008). Strong Tradition of Consensus Democracy (CONS): A macrovariable joining the sets ‘Proportional Electoral Systems’ and ‘Multi-Party Systems’ (1979–96) by ‘logical AND’. The first set is based on the Gallagher disproportionality index, which ranges from 0 to 100, with lower values indicating more proportional systems. In practice, however, the index ranges from 1.3 in the Netherlands and Austria to 14.7 and 18.76 in the United Kingdom and France respectively, with the remaining countries being well below 10. Correspondingly, values below 2 correspond to full membership in the set of proportional systems; values above 10 reflect full non-membership; and 6 is a crossover point. Membership

41

Social Pacts in Europe in the second set is based on the Laakso-Taagepera index as in EFFP above. Source: Armingeon et al. (2008). High Economic Openness (OPEN): Sum of exports and imports as a percentage of GDP averaged over the 1990s. At least 100 is required for a country to qualify for full membership; at least 50 to be considered more in than out of this set; and less than 10 to be fully out of the set of highly open economies. Source: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 6.2, University of Pennsylvania, 2006.

42

Part II Analytical Framework

This page intentionally left blank

3 The Emergence of Social Pacts Analysing Negotiation Processes and Bargaining Outcomes Sabina Avdagic

3.1. Introduction How do social pacts come about? The literature on the revival of concertation and social pacts in Europe has focused predominantly on triggers of pacts. Moments of economic crisis and the need for adjustment are commonly seen as triggers that have led socio-economic actors across many European countries to consider the option of social pacts as a viable institutional solution to the problems facing their economies. While different accounts emphasize different aims of pacts – ranging from the need to fulfil the Maastricht criteria and prepare for EMU membership (Rhodes, 1998, 2001; Fajertag and Pochet, 2000; Hancke´ and Rhodes, 2005) to the more general concern of improving international competitiveness (Rhodes, 1998, 2001; Traxler, 2003) – they generally agree that similar exogenous pressures can be considered as the main catalyst of this institutional change. Correspondingly, much of this literature sees pacts as the outcome of a process of deliberation in which key actors come to a shared understanding of the economic problems and of appropriate policy solutions (Fajertag and Pochet, 1997; O’Donnell, 2001; Siegel, 2004). The reasoning here is that through deliberation actors come to an understanding that the potential longer-term benefits that a social pact may bring to the whole economy are more important than their own concentrated short-term interests. This understanding in turn facilitates cooperation and reaching an agreement. Although this precondition certainly seems important, most studies do not provide an analytically robust mechanism that would help us construct a clear explanation as to how this shared understanding is actually built, and why in some cases actors manage to build it while in others they fail. Descriptive

45

Social Pacts in Europe accounts of social pacts thus often give an impression that social pacts are a product of socio-economic actors who in critical situations somehow suddenly and miraculously turn into pragmatic problem-solvers cooperating on a range of policy issues. But a number of attempted and failed social pacts indicate that while a critical economic situation might be necessary to bring actors to the negotiating table and promote a process of ‘institutional learning’, it is certainly not sufficient. As Chapter 2 has demonstrated, economic problems alone cannot explain the reliance on pacts during the 1990s. Instead, particular combinations of political, economic, and institutional conditions needed to be in place for pacts to materialize. Specifically, situations in which electorally weak governments were faced with serious economic problems and moderately centralized unions seem to have been particularly conducive to pacts. This finding suggests that the politics of pact making is more complex than accounts that emphasize primarily the size of the economic problem load would have us believe. The conditions identified in Chapter 2, however, can also be seen as rather general impulses for pacts. Like accounts that emphasize only the size of the economic problem load, the analysis in Chapter 2 seeks to explain primarily national differences in the reliance on pacts rather than the actual process of pact making. Thus, although this analysis provides a more complete explanation of why some countries relied more on pacts than others, its focus on countries rather than on individual negotiations as units of analysis sheds little light on the process and outcomes of specific attempts to craft social pacts in particular countries. Indeed, we know that even those countries that relied extensively on social pacts to manage their economies during the 1990s have occasionally experienced unsuccessful negotiations when one or more partners has proved unwilling to compromise. To understand why, we need an actor-centred framework that enables us to analyse the reasons for particular strategies and the impact of those strategies on the process and outcomes of pact negotiations. This chapter provides such a framework. By drawing on the literature of institutional creation and standard bargaining theory, I propose a heuristic bargaining model of pact creation. Building on the findings of Chapter 2, which suggests that government and union strength are important determinants of the reliance on pacts, this model links the process and outcomes of pact negotiations to actors’ perceptions of their relative power. While the focus of this chapter is primarily theoretical, the framework developed here is evaluated empirically by the subsequent case study chapters, which analyse in detail a number of specific pact negotiations in six European countries. The chapter is organized in three sections. Section 3.2 provides a critical discussion of pertinent theories of institutional creation that offer useful insights for the analysis of social pact emergence. Drawing on this discussion, Section 3.3 presents four main assumptions about strategic interaction in the process of pact negotiation. These assumptions in turn serve as building blocks

46

The Emergence of Social Pacts: Analysing Negotiation Processes for the heuristic bargaining model of pact creation, which is presented in Section 3.4.

3.2. Different Views of Institutional Emergence Because social pacts can be seen as institutions of socio-economic governance that regulate actors’ behaviour and ensure their commitment to particular policy goals, the theoretical literature on the origins and creation of institutions presents an obvious starting point for analysing their emergence. Generally speaking, contemporary theories of institutional origins consider institutions to be a consequence of either spontaneous, evolutionary processes or of intentional design. While a number of variants exist within each of these groups (see e.g. Knight, 1992; Hall and Taylor, 1996; Thelen, 1999), the discussion here is limited to those most relevant to the central concern of this chapter – the emergence of social pacts as institutions.

3.2.1. Spontaneous, Evolutionary Emergence Most accounts of the evolutionary emergence of institutions explain institutions in terms of their ability to satisfy the functional needs of a society, most notably those of enhancing overall social efficiency. Such functionalist explanations come in different versions, but they can be broadly divided into two groups according to the mechanisms of institutional selection that they emphasize: either natural selection or social conventions. Drawing on evolutionary biology, the first group perceives institutions as the product of some sort of natural selection between different alternatives. The central explanation is that over time less efficient institutional alternatives are eliminated and those that provide a better fit with the functional needs of a society will prevail (Coleman, 1990). This idea has a certain resemblance to the concept of institutional complementarities, which figures prominently in the ‘Varieties of Capitalism’ (VoC) literature (Hall and Soskice, 2001; Hancke´ et al., 2007). Institutions in this perspective are parts of a system, the functioning of which depends on a particular institutional combination. Stable and efficient systems – in VoC liberal and coordinated market economies – require a specific combination of several institutional elements, including industrial relations, skills, and finance. Hence, a specific pattern of industrial relations institutions is in a way preselected to satisfy the requirements of systemic ‘fit’. These accounts would thus posit that a coordinated system of centralized wage bargaining is not likely in an economy that has liberal systems of finance and vocational education and training, and even if such a solution materializes, it is unlikely to persist or constitute a long-term equilibrium. Yet, the Irish case, for example, presents a challenge to this hypothesis. Not only was centralized wage

47

Social Pacts in Europe bargaining established by means of the 1987 social pact but this solution has also become a regular and stable feature of the Irish economy despite the liberal form of the other systemic components (cf. Ornston, 2004). The more general shortcoming of accounts that emphasize natural selection is that their focus on the structural properties of the system may preclude a more dynamic analysis of internal struggles, ongoing interactions, and intentional attempts to achieve policy innovation. As Regini argues, the risk of functionalist accounts is that they ‘tend to yield a static picture in which it is difficult to frame internal tensions and pressures for change and assess their importance and implications’ (2000: 8). Given the centrality of intentional action in recent attempts of several European economies to reshape socio-economic institutions by means of social pacts, the natural selection mechanism is unlikely to be very useful for explaining the emergence of such concerted solutions. The second group of explanations emphasizes social conventions and focal points. These explanations also employ the assumption of the spontaneous, rather than intentional, design of institutions, but in contrast to accounts that emphasize natural selection, this group sees institutions as the products of social conventions that facilitate coordination and enhance socially beneficial outcomes (Sugden, 1986). Conventions – defined as generally accepted customs, practices, and beliefs – are unintended consequences of repeated social interactions. Such conventions are beneficial because they shape actors’ expectations with regard to the actions of others, thus facilitating overall coordination. Hence, recognizing and developing conventions that have a potential to facilitate coordination is a key to understanding institutional emergence. The central mechanism here is that of the ‘conception of salience’ or ‘focal points’, developed by Schelling (1960). In this interpretation, actors facing a problem will try to coordinate their action by searching for clues or focal points that seem to have ‘some kind of prominence or conspicuousness’ (Schelling, 1960: 57). Once the crucial actors recognize those points, they will ‘establish a common action, a standard of behaviour that will eventually be emulated by the other members of the community’ (Knight, 1992: 100). In other words, the solution to the coordination problem (i.e. the choice between alternative equilibria) is achieved by relying on prominent environmental signals that become accepted beliefs or shared frames around which actors coordinate their expectations (Garret and Weingast, 1993). This logic has also been employed to study the emergence of social pacts. For example, Culpepper (2004) argues that the move to more coordinated institutional solutions in Italy and Ireland in the 1990s does not reflect a change in power but rather a cognitive development in which actors managed to cultivate a joint understanding of the situation by recognizing focal points that seemed credible. In Italy, this point was the government’s inflation forecast for 1992 and the clarification made by Labour Minister Gino Giugni on the impact of firm-level bargaining. In Ireland, the focal point was the 1986 report of the National Economic and Social Council (NESC)

48

The Emergence of Social Pacts: Analysing Negotiation Processes that defined wage restraint as the main precondition for improving international competitiveness. Having accepted these focal points as credible and obvious, actors coordinated their efforts to recast the existing institutions. While more plausible than the mechanism of natural selection, this argument also encounters problems of both conceptual and empirical validity. The underlining assumption is that actors’ interests ultimately coincide in that they believe that cooperation (rather than conflict) is the preferred outcome, while prominent focal points lead them to converge on one of the alternative coordination equilibria. Several problems emerge here. First, even if we assume a coincidence of interest among the actors (which is rather rare in social interactions), they might still prefer different coordination equilibria. Second, while non-cooperation might indeed make everybody worse off, it would not hurt everybody equally. Since the amount of ‘damage’ would depend on the distribution of power in a given context, it is reasonable to expect that this would have an influence on the actions of the respective actors and their willingness to engage in compromise. For instance, it has been argued that the unwillingness of German unions to make compromises during the negotiations of the ‘Alliance for Jobs’ is related to their strong secondary power resources as embodied in sectoral corporatist institutions (Traxler et al., 2001; Siegel, 2004), as well as to social insurance institutions that long concealed the costs of high unemployment (Hassel, 2003). Since the unions could rely on such resources, they had little incentive to promote macro-concertation via compromise. The focal point explanation, however, largely neglects the impact of such power distribution on strategic interaction. Third, while as in Ireland and Italy, coordination in particular cases might seem to be related to certain focal points, this argument cannot explain why in other cases actors fail to pick up on prominent signals or are unable to recognize focal points that would direct them towards a coordinated solution. Finally, if conventions that arise from focal points facilitate coordinated and efficient outcomes, it remains unclear why there have been clear shifts towards less coordinated solutions in some countries (see e.g. Hassel, 2007).

3.2.2. Intentional Design through Contracts In contrast to theories that perceive institutional selection as a consequence of spontaneous processes and mostly unintended actions, contractarian analysis puts a much greater stress on actors’ ability to intentionally design institutions. In this perspective, actors are not passive observers but active players with a capacity to learn how to increase the efficiency of institutions and thus their overall utility. Drawing on the transaction-costs theory of institutional change (North, 1990), this group of explanations perceives institutions as contractual forms that minimize costs (e.g. the costs of production and exchange) and maximize collective benefits (such as wealth). Institutions in this perspective

49

Social Pacts in Europe are the products of voluntary agreements between social actors interested in avoiding the suboptimal equilibrium of Prisoner’s Dilemma situations. By crafting contracts (i.e. institutions), actors set the rules that facilitate the achievement of a Pareto-superior, mutually beneficial outcome. But how do actors select an institutional form that ensures such a beneficial outcome? Two key selection mechanisms can be distinguished. The first selection mechanism is competition. As Axelrod put it, this explanation ‘is based on a simple principle: whatever is successful is likely to appear more often in the future’ (1984: 169). In other words, the argument is that actors will consciously choose a specific institutional alternative that proves to be the best in achieving socially beneficial outcomes. This argument would posit that if, for instance, existing wage-bargaining institutions can no longer provide beneficial outcomes, actors will introduce new rules by crafting a social pact if it is evident that such an institution has produced more beneficial outcomes in other countries, regions, or policy areas. This mechanism, therefore, has obvious similarities with intentional mimetic isomorphism or imitation that is recognized as an important mechanism of change in organizational analysis (see DiMaggio and Powell, 1991). The second selection mechanism is trial-and-error. Through a series of incremental steps, actors probe different institutional solutions, learning along the way about the drawbacks and benefits of each solution. Labelled ‘guided variation’ (Boyd and Richerson, 1985: 10), this mechanism denotes a process through which actors create new institutional alternatives by relying on information derived from their previous experience and on their expectations about the pay-offs of new institutions. Following this reasoning, social pacts do not come about through the import of ready-made solutions tried elsewhere but are rather a genuine de novo creation underpinned by knowledge accumulated during the previous experimentation with institutional alternatives. Thus, while both of these mechanisms invoke learning processes as a way through which actors select more efficient institutional alternatives, they differ with respect to the inventive capacity of actors. In contrast to interpretations about spontaneous emergence that link the formation of institutions either to the criteria of systemic fit or to conventions established through unintended salient acts, intentional design interpretations bring actors to the fore. By portraying actors as active agents of change, these interpretations seem to correspond more exactly to the recent experience of European economies with social pacts. However, due to their reliance on certain problematic assumptions, these interpretations also have their shortcomings. First, most of them explicitly or implicitly assume that in order to achieve Pareto superior outcomes, actors calculate and compare the pay-offs of alternative institutional arrangements. Yet, for this assumption to be valid, the requirement of complete information needs to be satisfied. Needless to say, in reality this is almost never the case. Periods of crisis and readjustment are always

50

The Emergence of Social Pacts: Analysing Negotiation Processes surrounded by uncertainty. In such situations, actors cannot calculate with certainty the future pay-offs of their actions because they might not know the exact preference ordering of their opponents. This is especially so because preferences in interactive processes often change in response to the new incentives and constraints provided by the actions of others. In such situations, actors modify their strategies along the way in accordance with what they believe to be feasible (rather than desirable) in a given situation. Hence, the final outcome will not necessarily be Pareto-superior. Second, explanations that rely on the competition mechanism assume the ready availability of institutional alternatives. While this may or may not be true, the problematic inference here is that such alternatives will replace the existing institutions if they do a better job of producing collectively beneficial outcomes. The empirical validity of this interpretation, however, is far from obvious. While one might argue that the positive results of the Irish model of adjustment through social pacts might have served as a reference point to social partners in Slovenia, who successfully concluded a series of social pacts a few years later, two important questions remain unanswered: why were such solutions not chosen everywhere where adjustment was needed; and how can we explain the breakdown of such solutions in certain cases, even though they are capable of achieving efficient social outcomes? Indeed, despite similar adjustment needs to those experienced by Slovenia, most countries in East Central Europe have either not attempted social pacts (the Baltic countries) or have abandoned such attempts, either after a few isolated episodes (Poland in 1993 and 2001; Hungary in 1992) or after a few years of regular and successful pacting (the Czech Republic in the early 1990s). These cases suggest that achieving a cooperative solution is often much more difficult than these theoretical arguments imply, and that actors may continue to perpetuate suboptimal outcomes. In short, the main shortcoming of the selection-by-competition interpretation is that its focus on objective efficiency criteria overlooks the impact that power asymmetries, vested interests, and established organizational practices have on the degree and direction of institutional change. Finally, the assumptions related to learning are problematic insofar as they imply that the costs of a shift to another institutional alternative are low. If the rules of interaction can be modified at low cost, what ensures that actors will further long-term, socially beneficial solutions, rather than their immediate self-interest? Cooperation, in other words, might not happen in the absence of external constraints or the ‘shadow of hierarchy’ (Scharpf, 1993) provided by the state. Thus, even though actors draw lessons from their past experience, ‘learning to cooperate’ may not be simply a positive evolutionary process but rather a response to a set of threats and incentives that actors come to face. For instance, even though policy learning and positive spillover effects between policy areas are evident in the Netherlands, it was the government’s threats and incentives that at crucial moments ensured this cooperation (see Chapter 9).

51

Social Pacts in Europe Similarly, in Ireland, a combination of government threats (austerity measures) and promises (tax cuts) influenced the actions of social partners and facilitated a move to centralized bargaining among them (see Chapter 5).

3.3. Negotiating Social Pacts: Key Assumptions about Strategic Interaction The shortcomings of the interpretations of spontaneous and intentional institutional creation discussed above allow us to derive a set of assumptions on which to base our comparative analysis of the emergence of social pacts.1 Four key assumptions are needed to develop a heuristic bargaining model of pact creation that corresponds more exactly to the empirical reality of pact making: 1. Bounded rationality. Actors involved in negotiations of pacts are assumed to be intentionally rational utility maximizers. But their ability to calculate ex ante the prospective payoffs of alternative courses of action is impeded by the high degree of uncertainty that typically characterizes the periods of economic difficulty that most often trigger attempts to negotiate social pacts. In such situations, actors may be able to gauge the general preferences of their negotiating partners, but they may be unsure about their precise preference ordering and their capacity to achieve those outcomes. Strategies are therefore unlikely to be determined ex ante. Instead, they evolve and are modified as actors reflect upon and react to a set of incentives and constraints provided by other actors and by existing institutions and practices. Put differently, the expectation is that actors will formulate their responses not on the basis of some fully available objective information but in accordance with their perception of the situation. 2. Context-specific preferences. Actors’ rank-order of preferences is contextspecific and may change over time. The exact preference order of the main actors involved in pact negotiations cannot be established deductively because their goals, identities, and cognitive frames are influenced by the respective institutional and structural–historical contexts. 3. Non-unitary actors. Unions, employers, and governments are non-unitary actors, rather than coherent entities with fixed and non-conflicting interests. The degree and nature of intra-group divisions is assumed to have a direct impact on the strategies of that group, and an indirect impact on the preferences and strategies of the other groups. Put simply, the higher the degree of divisions and conflict within a given group, the higher the likelihood that the negotiation strategies of this group are going to be less 1 These assumptions draw liberally on the four pillars of the interactionist approach to institutional development in transition proposed by Avdagic (2006).

52

The Emergence of Social Pacts: Analysing Negotiation Processes clear, unified, or determined. This, in turn, puts the other negotiating partners in an advantageous position since they are more likely to succeed in pushing through their demands when their opponents are not unified. 4. Power distribution and perceptions of power shifts. Perceptions of relative power are assumed to play a more important role in determining actors’ strategies than trust, norms, or habits. The latter may become more relevant if pacts are regularly repeated and widely perceived to be successful. Absent such experience, however, actors’ strategies are likely to reflect their perceptions of relative power at particular moments and expectations about shifts in that power as interactions proceed. It needs to be stressed, however, that the concept of power proposed here is broader than that used in the structuralist analysis of class conflict and in the neo-corporatist literature. Rather than referring only to the organizational attributes of collective actors, such as membership coverage and centralization, this concept refers more generally to the capacity to achieve desired goals. This latter capacity, while partly depending on organizational attributes, is shaped by three additional factors:  Existing institutional resources, which correspond to secondary institutions, laws, and procedures that directly or indirectly protect the interests of particular actors.2 The stronger or the more embedded these institutions and practices, the stronger the negotiating position (and the ability to obtain concessions) of the actors whose interests they protect.  Inter- and intra-sectional unity, which refers to the degree of cooperation and coordination both between sections of a group (such as different unions) and within individual sections (such as between the shop floor and the national level of a particular union). The stronger the degree of coordination between and within sections of a given group, the higher the capacity of that group to achieve its ambitions during pact negotiations.  Interdependence, which refers to the beliefs that a given actor has regarding the degree to which other actors need their cooperation (for either efficiency, legitimacy, or ‘blame-avoidance’ reasons) in the reform of a policy under negotiation, or in a related policy area. On the basis of these beliefs, actors estimate the ‘limits’ of others and gauge how willing the other actors might be in accepting their demands. If they believe that their negotiating partners need to secure their cooperation, they are likely to perceive an increase in their own bargaining power.

2 Examples of such resources include an obligation for the government to consult unions on planned changes in a particular policy area, the automatic extension of sectoral collective agreements to non-signatory companies, and the existence of sliding-scale mechanisms that prevent a significant erosion of wages.

53

Social Pacts in Europe These four assumptions – bounded rationality, context-specific and changing preferences, the degree of intra-group cohesion, and perceptions of power – are the basis on which actors make strategic choices when considering and negotiating social pacts. These assumptions also indicate that the framework proposed here differs from the straightforward ‘problem-solving’ accounts that directly link social pacts to situations of crisis or exogenous shocks, which somehow induce shared understanding among actors. While pacts are indeed more likely in times of national economic distress, this framework assumes that the process of their creation is characterized by tough bargaining, as well as deliberation, through which the understanding of the situation and preferences of the involved actors are gradually reshaped. The outcome eventually may be, but not necessarily, a shared understanding and consensus. The assumptions outlined here indicate that any signed social pact, as Lange (1984: 119) puts it, is an agreement ‘into which each of the actors enters for his own reasons and in his own interests’. Thus, shared understanding and agreements will be achieved only if actors can define such agreements as relatively beneficial to their own interests. It is important to emphasize, however, that the proposed framework defines interests in rather broad terms. This means, first, that interests are not necessarily only material but may also involve concerns about legitimacy and public standing; and second, that interests may not only be narrowly defined and short-term, but may also involve longer-term considerations about the functioning of the economy (i.e. indirect gains). Note that this broad definition of interests is not contradictory to the argument that actors will sign pacts only when they find them beneficial to their own interests. As Olson (1982: 42) explained, an organization ‘can in principle serve its members either by making the pie the society produces larger, so that its members would get larger slices even with the same shares as before, or alternatively by obtaining larger shares or slices of the social pie for its members’. Choosing the first option, which eventually may increase social efficiency, does not mean that actors do not care about self-interest. Instead, it can simply indicate the longer-term horizons of the organization. By foregoing immediate gains and accepting some sacrifices, such an organization can effectively further its own interests. However, as Olson himself notes (1982: 53), such choices are not guaranteed. In other words, sacrifices are accepted only to a point that is determined through the bargaining process. Whether and to what extent the organization will accept short-term sacrifices in this process depends on a number of factors, including the current and expected prospects of the economy, as well as the beliefs that the sacrifices would not only improve social efficiency but also have a trickle-down effect that would be beneficial for the members of the organization. Thus, interests, however defined, are at the forefront of the analysis.

54

The Emergence of Social Pacts: Analysing Negotiation Processes

3.4. A Bargaining Model of Pact Creation The assumptions concerning strategic interactions outlined in Section 3.3 provide useful building blocks for a heuristic bargaining model of social pact creation. To build such a model, we can depict pact negotiations as a simple bargaining game consisting of a series of offers and counter-offers proposed by two lead players. Although in reality pact negotiations are often a complex process involving multiple actors with different preferences, a standard twoplayer bargaining model is nonetheless useful as a heuristic device for the analysis of the process and outcomes of pact negotiations. Note that relying on such a simplified scheme does not mean that this model can only accommodate an analysis of negotiations between unions and employers, while neglecting the role of the state. Rather, the assumption is that the bargaining process, while potentially evolving more participants, is usually dominated by two key players representing labour, capital, or the state.3 Indeed, many of the recent social pacts do in fact correspond to this assumption as they essentially represent agreements either between trade unions and employers’ organizations (with the endorsement of the government) or between the unions and the state. Thus, rather than excluding the state, this model accommodates its role in the analysis of social pacts negotiations by assigning the state either a direct bargaining role or an indirect role in which it facilitates bargaining between unions and employers by providing both positive and negative incentives that seek to change their pay-off structures. Hence, although the proposed model abstracts considerably from what is going on in reality, it still provides a helpful tool for analysing the negotiation process and for deriving a set of hypotheses about bargaining outcomes that can be tested on cases of individual negotiations. The model proposed here draws on the insights of standard bargaining theory (Rubinstein, 1982; Osborne and Rubinstein, 1990) and on accounts of institutional formation that link the emergence of institutions to asymmetries of power in society (Knight, 1992) and to actors’ perceptions of shifts in the distribution of that power (Luong, 2002). Accordingly, we can assume that each actor enters the game at tn with their specific bargaining (or power) resources (). As outlined in Assumption 4 above, these resources represent a combination of institutional, organizational, and cognitive factors (the latter being beliefs about the extent to which one actor needs cooperation of another). The value tn can also be considered actors’ ‘breakdown value’ (Osborne and Rubinstein, 1990), which corresponds to the pay-offs they walk away with if no agreement is

3 It should be emphasized again that none of these collective actors are treated as unitary. Assumption 3 outlined above allows for the existence of internal disagreements and different preferences. This, in turn, influences perceptions of power and the actual capacity of actors (see Assumption 4), thus influencing the strategies and the outcomes of the bargaining captured by this model.

55

Social Pacts in Europe reached. In other words, the value of tn reflects actors’ relative bargaining advantages or disadvantages vis-a`-vis other actors and ultimately shapes their strategies in the negotiation process. Commonly, the link between the value of resources and the choice of strategies in bargaining theory is provided by actors’ attitudes towards risk and time. Actors with abundant resources are considered to be more likely to accept risks, while those with limited resources are likely to be risk-averse. Put simply, ‘a player who has less to lose from a breakdown is more likely to risk one’ (Maynard-Smith, 1982: 153). Since those with more resources have less to lose in the case of the breakdown of negotiations, they are more likely to be patient in this process and wait for a favourable bargain than to accept a quick solution. In other words, if A (tn) > B (tn), player A is more likely to wait for a favourable outcome, thus risking a breakdown in negotiations. This is in accordance with the standard view in bargaining theory that the actor with stronger bargaining power or resources gets a greater share of the pie (e.g. Maynard-Smith, 1982; Osborne and Rubinstein, 1990). For the analysis of social pact negotiations, however, two further clarifications are needed. First, as specified in Assumption 1, in the absence of complete information and under uncertainty surrounding pact negotiations, actors’ strategies will not be fixed ex ante but will rather evolve in the process of interaction as actors update their beliefs about their best responses. At the outset of negotiations at tn, actors form an opinion about their bargaining or power resources (tn) on the basis of factors outlined in Assumption 4. The value of tn, however, does not necessarily remain constant during the whole negotiation process. As the negotiations proceed, the values of  are likely to change depending on how actors perceive the overall situation. More specifically, in each subsequent round, actors will update their estimate of power by reflecting upon the specific dynamics of negotiations (i.e. incentives and constraints provided by others) and their expectations about the economic environment. Since according to the underlying assumptions, the choice of strategies is influenced by actors’ perceptions of their relative power, the fact that tn+1 6¼ tn is likely to have an impact on these strategies. Following Luong (2002), the difference between the values of perceived power at two subsequent rounds of negotiations can be captured as a shock to actors’ reservation values or their initial resources. We can therefore conceive of the difference between tn and tn+1 as a correction factor e that literally presents actors’ updated beliefs about their relative position or power at tn+1 in relation to their position at tn, so that Δtnþ1 ¼ Δtn þ e; where½1 ε 1 The correction factor can either be positive (when actors perceive their relative power to be increasing) or negative (when they believe that their bargaining position is getting weaker). If tn+1 > tn, actors are likely to persist in pressing for their demands and continue the negotiations to achieve their preferable outcome, even at the cost of a breakdown rather than to settle for a quick but

56

The Emergence of Social Pacts: Analysing Negotiation Processes less favourable solution. For example, employers might perceive their bargaining position as being strengthened at tn+1 if divisions within their group are diminishing, the government promises tax concessions as an incentive to sign an agreement, and/or economic conditions deteriorate, thus signalling to the unions that non-cooperation might be rather costly as it is likely to come at the price of higher unemployment. The larger the employers’ correction factor (provided that e > 0), the more likely they are to try to press for an outcome that would bring them the highest possible pay-offs. If in addition to such developments the government threatens to impose austerity measures unilaterally in the event of the failure of negotiations, the unions’ bargaining position is likely to weaken at tn+1 (i.e. their e < 0). In such situations, the unions might be willing to settle for a quick solution with smaller (but still positive) pay-offs rather than to risk the considerable costs of a breakdown – and most likely negative pay-offs associated with austerity measures. The second clarification is related to time preferences. In addition to attitudes towards risk, bargaining theory postulates that actors’ time preferences have an impact on their choice of strategies. Time preferences are commonly measured by a discount rate (d) that affects the value of future bargains. The higher the discount rate, the more willing the actors will be to accept a less favourable solution quickly, because bargaining is costly and the pay-offs of subsequent rounds are diminished or discounted at a high rate. Alternatively, if the discount rate is low, actors will be more willing to forego a smaller share now and wait for a possibly larger share later (Knight, 1992: 135). It follows then that if actors have different time preferences, this difference will affect their strategies and the distributional outcome of the game (see e.g. Rubinstein, 1982). For the purposes of our analysis, however, we can assume that actors share largely similar discount rates. Such a simplification is justified by the fact that the commencement of social pact negotiations usually occurs in times of economic difficulties where the discount rate for the pay-offs of prolonged bargaining is likely to be high for all actors (see also Lange, 1984). Because each actor is losing (e.g. employers from diminishing competitiveness, governments from the consequences of wage hikes, and workers from higher job insecurity), they are likely to be interested in reaching an agreement soon. This does not mean, however, that all of them will accept any agreement as soon as possible irrespective of their perceptions of relative power. As mentioned above, the correction factor e is likely to have a significant impact on actors’ strategies and their willingness to persist in pressing for an agreement that corresponds best to their preferences. However, since actors can form perceptions only about short-term changes of their bargaining power () rather than foresee this value far ahead, this uncertainty is likely to affect their general time preferences and raise the value of the discount rate, such that negotiations – while potentially lasting more than one round – are not likely to be significantly prolonged.

57

Social Pacts in Europe Given these assumptions and clarifications the proposed model departs from standard bargaining theory, where strategies and bargaining outcomes are thought to depend on asymmetries of power determined by some objective measure of resource ownership. Instead, the principal idea here pertains to the relationship between actors’ perceptions of changes in their relative power and their subsequent negotiation strategies. Hence, the outcome of negotiation might not directly depend on some ‘objective value’ of resources held by the respective actors at the beginning of the game but rather on actors’ beliefs about their bargaining resources, which evolve through the interaction process. For example, even unions that cannot be considered organizationally strong in terms of membership may have strong bargaining power during pact negotiations if such negotiations occur in a context where a weak government needs their support for the adoption of particular policies. In such situations, the unions may follow a tough negotiating strategy and the government may offer more concessions to ensure their cooperation than one would expect solely on the basis of the unions’ size or organizational capacity. In line with this reasoning, the heuristic model offers the following predictions about negotiation outcomes: in a situation in which player A perceives an increase in its relative power (i.e. eA > 0), while player B perceives a decrease in its relative power (eB < 0), the negotiation outcome is likely to favour the preferences of player A because this player would be more persistent in pushing its demands, while player B would try to avoid the risk and opt for a quick and less optimal solution. The opposite result would occur if eB > 0 and eA < 0. It is important to recognize though that while negotiations are more likely to be successful when power disparities are visible, such disparities should not be excessively large since in such situations the stronger actor may have little incentive to enter negotiations in the first place. It is, however, significantly more difficult to derive predictions about the outcome of negotiations that do not correspond to such clear-cut situations. The basic problem here is related to the fact that perceptions of the situation are subjective, rather than objective or universally given, so that in principle both actors could perceive the same direction of change in their relative power. If both actors perceive their relative power as increasing (eA > 0 and eB > 0), their persistence in pushing through their respective preferences could ultimately lead to a collapse of pact negotiations since long-drawn-out attempts to reach an agreement are punished by a high discount rate. In other words, when faced with a possibility of significantly discounted pay-offs, actors may decide to withdraw from the negotiations. In this case, reaching an agreement might only be possible if negotiations are facilitated by the active involvement and provision of incentives by a third actor. Usually, this is government, which often interferes in negotiations between unions and employers to ensure that they cooperate and reach an agreement that does not jeopardize macroeconomic stability. Without such enforcement, prospects for social pacts are unlikely to be promising in

58

The Emergence of Social Pacts: Analysing Negotiation Processes situations in which both negotiating partners perceive their bargaining position as strong.4 Similarly, external enforcement might also be needed when both actors perceive their power as decreasing. While their respective weakness may lead them to opt for a fast agreement, such an agreement might suffer from implementation problems unless propped up externally.

3.5. Conclusions The framework proposed in this chapter differs significantly from functionalist accounts that link the emergence of pacts directly to the size of the economic problem load. Specifically, the argument developed here is that economic problems alone, while important, do not guarantee cooperation and pacts. Rather than seeing pact negotiations as an essentially cooperative game in which actors search for focal points that ensure the attainment of a mutually beneficial solution, this framework depicts the emergence of pacts as a bargaining process, the outcome of which depends on actors’ perceptions of their relative power. By focusing on actors’ perceptions about their bargaining positions rather than simply on objective indicators of power such as organizational resources, this framework also differs from the more traditional power-based accounts, which have been unable to explain the process and outcomes of recent pact negotiations in traditionally non-corporatist countries. The key insights of this framework can be summarized in the form of five general propositions about the emergence of pacts: H1: Without a history of institutionalized concertation, pacts will be signed only if relevant actors can define such agreements as relatively beneficial to their own interests; H2: Actors’ strategies depend on their perceptions of their relative power or bargaining position at the time of negotiations; H3: In the course of negotiations, actors adjust their strategies in line with incentives and constraints provided by others, and with the general expectations about economic situation; H4: The more actors perceive their relative power to be increasing, the more likely they are to try to prolong negotiations to attain their preferences. Alternatively, the more they perceive their bargaining power as decreasing, the more likely they are to settle for a quick and less advantageous agreement;

4 As Streeck (2003) reminds us, the recent history of German industrial relations points to the dangers of a combination of a weak state and the traditionally strong organized interests.

59

Social Pacts in Europe H5: The outcomes of negotiations and their substantive outputs are likely to reflect by and large the preferences of those actors who perceived an increase in their relative power. Drawing on these propositions, the heuristic bargaining model of pact creation suggests two general predictions about negotiation outcomes. First, pacts are more likely to materialize in situations where disparities of power are clearly visible, but not excessively large. In such cases, the content of the resulting agreement will be more favourable to the actor who is perceived as stronger. Second, where both actors believe that their respective position is strong/ increasing or weak/decreasing, negotiations have a higher chance of failure. When the former is the case, none of the actors will be willing to settle for a quick agreement without substantial benefits. But since prolonged bargaining in conditions of crisis leads to significantly discounted pay-offs, actors will eventually reach a point at which the expected benefits of bargaining will no longer be considered sufficiently high to continue negotiations. In contrast, when both negotiating partners are perceived as weak, they may opt for a fast agreement, but such an agreement is likely to be unstable since these actors may lack the capacity to enforce its terms. In extreme cases, mutual perceptions of weakness might even prevent actors from signing the agreement in the first place. Chapters 5–10 evaluate empirically the general propositions of this framework and the specific predictions of the bargaining model on several episodes of pact negotiations in six European countries. The concluding Chapter 11 then summarizes and compares this empirical evidence in order to assess more systematically the explanatory power of the proposed bargaining framework.

60

4 The Evolution of Social Pacts Trajectories and Mechanisms of Institutionalization Jelle Visser and Martin Rhodes

4.1. Introduction The social pacts that emerged in Europe in the 1990s were highly contingent and fragile constructions (Regini, 2000). These pacts were struck in countries such as Italy, Spain, Ireland, Portugal – four of the case studies in this book – where the political and organizational underpinnings for bargained corporatism, as identified in the corporatist literature (e.g. Schmitter, 1974, 1981), seemed to be lacking or weak. This raises questions not only about the emergence of such pacts but also about their implementation and potential for repetition. Given the unpropitious environments in which these pacts developed, what made it possible for some of them to become institutionalized over time? Why and how did the more successful examples proceed from being oneshot bargains, meant to solve a specific problem at a particular point in time, to becoming a more lasting form of concertation and governance, sometimes expanding into other policy domains, beyond wage bargaining where most pacts had their origins? How can we best explain the processes of institutionalization, via repetition and expansion, or the reverse, abandonment, or diminution, of these experiences? These are the key questions addressed in this chapter. We define social pacts as tripartite bargains, or more precisely as in Chapter 2, ‘publicly announced formal policy contracts between the government and social partners over income, labour market, or welfare policies that identify policy issues and targets, the means to achieve them, and the tasks and responsibilities of the signatories’. Such bargains can take different forms, have a different content or scope in terms of issues and policy domains, and they differ in their duration or period of application and in their potential effects.

61

Social Pacts in Europe We propose to distinguish between single-issue pacts and broad pacts covering numerous issues or policy domains. Moreover, for the purpose of understanding the various trajectories towards institutionalization or deinstitutionalization, we also distinguish between wage and non-wage pacts. Following our definition, a social pact creates entitlements, responsibilities, capacities, and public exposure for the negotiating actors, things that they must or must not do and that they can or cannot expect others to do. In this sense, a social pact fulfils the crucial criteria of an institution, defined as a contract, rule, or norm (see Commons, 1968: 6; North, 1990: 3). But how stable an institution is this? Institutions are commonly understood as ‘enduring entities that cannot be changed instantaneously or easily’ (Mahoney, 2000: 512). As contracts, social pacts commit governments, unions, and employers to an exchange of favours and concessions that are limited in time and scope. This may be a oneoff, never-to-be-repeated exercise, and no further institution building may take place. But certain pacts are more than one-shot bargains – in this study the Irish, Dutch, and Slovenian cases stand out – and do become institutionalized to varying degrees over time. Institutionalization can be defined both as a process and as the outcome of a process whereby social activities become regularized and routinized as stable reference points around which actors build legitimate and sanctionable expectations (see Jarry and Jarry, 1991: 239; Jepperson, 1991: 145; Streeck and Thelen, 2005; Lepsius, 2006). Obviously, the opposite process of deinstitutionalization – in which what may once have been a ‘regularized and routinized’ process of concertation or social pacting shrinks or falls into disuse – also forms part of our research. We suggest that there are by and large two different paths of social pact institutionalization: one that is expansive and based on the reinforcement of initial patterns through a process of ‘constant or increasing returns’; and another that reveals a pattern of interrupted repetition based on the correction of earlier pacts via a process of ‘negative feedback’ (see Mahoney, 2000). If actors and their constituents attribute positive effects to a pact, the early pact may lead to an enduring pattern of cooperation. As a result, negotiators tend to adjust capabilities to ambitions, carry the social pact experience into new domains, and expand the application of tripartite concertation. The opposite happens if the trajectory of pact institutionalization is dominated by negative feedback; in that case, negotiators tend to adjust ambitions to capabilities and restrict the application of the social pact. Obviously, in the real world we should also expect cases in which such sequences are muddled and negotiators hesitate about which course to take, just as they differ on how earlier experiences should be evaluated. We proceed in three steps. First, we offer some quantitative evidence on the number and diffusion of social pacts over time and across countries, distinguished by type, scope, and content. Next, we consider the difficulties involved

62

The Evolution of Social Pacts in the institutionalization of social pacts. We compare social pacts with collective labour agreements and analyse the differences between a dyadic and triadic relationship, and the instability of discretionary as compared to rules-based policies. The third section offers five key hypotheses as to how, and by what mechanisms, the institutionalization of social pacts happens. These hypotheses find their inspiration in the functionalist, utilitarian, normative, and powerdistributive approaches to institutional analysis (Mahoney, 2000) and form the basis for the empirical case studies on Ireland, Italy, Spain, Portugal, the Netherlands, and Slovenia in Chapters 5–10. In the concluding section, we offer some reasons why particular combinations of mechanisms are more likely than others. Whether this is indeed the case, and different paths of institutionalization are associated with different mechanisms, are issues that will be addressed in our concluding Chapter 11.

4.2. Number and Diffusion of Social Pacts Chart 4.1 shows the incidence of social pact negotiations and signed pacts in twenty-six countries belonging to the OECD (Organisation for Economic Cooperation and Development).1 The maximum incidence of pacts was reached in 1996, when negotiations were started in 32 per cent of those countries and pacts were signed in 23 per cent (vertical axis). We observed a mild wave-like pattern: the first wave of incomes policy pacts, which were negotiated in response to the 1970s energy and currency crises, was followed by a ‘second generation’ of pacts in the 1990s (Acocella et al., 2007). In the 1980s, there was a lull in social pact activity. The two peaks in social pact activity are particularly visible if we focus on attempts to negotiate a pact. We define such attempts as actual negotiations that took place over a specific text or proposal irrespective of whether they eventually led to an agreement. Mere proposals or invitations to negotiate are not included here.2 There were sixty pact attempts in the first period (1972–89) compared with eighty attempts in the second (1990–2007). Since the number of countries considered in this comparison has increased (see footnote 1), this implies a nearly unchanged propensity for social pacting, that is, an average of three to four pact attempts per country in both periods. The 1 Austria (AT), Australia (AS), Belgium (BE), the Czech Republic (CZ, 1993–), Denmark (DK), Finland (FI), France (FR), Germany (DE), Greece (EL, 1978–), Hungary (HU, 1990–), Ireland (IE), Italy (IT), the Netherlands (NL), New Zealand (NZ), Norway (NO), Poland (PL, 1990–), Portugal (PT, 1978–), Sweden (SE), Slovakia (SK, 1990–), Slovenia (SI, 1990–), Spain (ES, 1978–), the United Kingdom (UK), the United States (US). Not considered are OECD members Iceland, Luxembourg, Mexico, South Korea, Turkey, and (since 2010) Chile. 2 A case in point is when Austrian president Thomas Klestil invited the cabinet and social partners in May 2003 to start negotiations over the government’s planned pension reform in order to dispel societal unrest and avert a general strike. This did lead to a meeting, as no party could ignore an invitation coming from the president, but no negotiations ensued.

63

Social Pacts in Europe 0.35 0.30 0.25 0.20 0.15 0.10 0.05

Polynoom (pact negotiations) Polynoom (pacts signed)

06

04

20

02

Pact negotiations Pacts signed

20

00

20

98

20

96

19

94

19

92

19

90

19

88

19

86

19

84

19

82

19

80

19

78

19

76

19

74

19

72

19

19

19

70

0.00

Chart 4.1. Pact Negotiations and Signed Pacts in Twenty-Six Countries, 1970–2007, by Year Source: ICTWSS Database, Visser (2009).

actual number of pacts signed went up from thirty-nine to fifty-five, which translates into an almost unchanged success rate of around 66 per cent. In other words, one in three pact negotiations fails. The average duration of social pacts increased from one year and four months to one year and ten months, with the longest pacts in Norway (five years, 1993–7), Germany (almost four, 1998– 2001), Ireland (seven three-years pacts since 1987), and Slovenia (two threeyear pacts, in 2003–5 and in 2007–9). These statistics are a bit deceptive, however. On the one hand, social pacts, as a formula for policy making based on compromises between governments and social partners, were very popular in Europe, especially in the 1970s and 1990s (Hamann and Kelly, 2007a; Baccaro and Simoni, 2008). But on the other hand, as we will see, a steady pattern of repeated pacts can be observed in only very few of these countries. Institutionalization – indicated by repetition and the emergence of a steady pattern of pacting – is rare. Chart 4.2 portrays the unequal distribution of social pacts across European states. In the 1990s, attempts to negotiate a social pact occurred in all European OECD member states except the United Kingdom and Switzerland. Most

64

The Evolution of Social Pacts 12

10

8

6

4

2

0 SI

PT

FI

IT

IE NL CZ ES SK AT PL EL BE HU DE NO DK SE FR UK SZ Failed negotiations

Pacts signed

Chart 4.2. Failed Negotiations and Pacts Signed in Twenty-Six Countries, 1990–2007, by Country Source: ICTWSS Database, Visser (2009).

countries experienced at least one failed pact attempt.3 Outside Europe, far fewer countries – notably Australia, Chile, South Africa, and South Korea – have engaged in such attempts (see Fraile, 2010). There were pact attempts but no pacts signed in Belgium and France. As for the core countries of classical ‘social corporatism’ (Pekkarinen et al., 1992), in the second wave there was only one comprehensive pact, in Norway in 1993–7, two limited pacts on budget stabilization and pensions in Austria, in 1995 and 1997, a small but faltering reform pact on active labour market policy (ALMP) in Denmark in 1998, and none in Sweden, despite one half-baked government attempt in 1998. There were several pact attempts, but only one pact signed, in Poland in 1993, Greece in 1997, Germany in 1998–2001, and Hungary in 2002, with limited implementation in each case. There were national agreements or pacts in Czechoslovakia in the early years after the fall of communism and 3 Although not revealed in Chart 4.2, this is also true for the Netherlands. In May 2004, pact negotiations failed but later in the same year a new pact was signed (see Chapter 9). In Ireland, negotiations for a crisis pact broke down in early 2009 (see Chapter 5), but this exceeds the period of observation in Chart 4.2. In Italy, Portugal and Spain some of the pacts failed to gain the support of all relevant union or employers’ federations. Although this may hamper implementation and subsequent institutionalization, in Chapter 3 we classify these pacts as successful in terms of negotiations leading to agreement.

65

Social Pacts in Europe immediately after the break-up in the Czech Republic, but this experience was not repeated in later years, except for one rather symbolic pact in Slovakia in 2006. The countries with the largest number of pacts are Portugal, Finland, Italy, Ireland, Slovenia, the Netherlands, and Spain,4 indicating a substantial shift in the geographical locus of social pacts from the 1970s to the 1990s, away from the Austro-Scandinavian ‘corporatist’ countries that formed the bedrock of centralized wage bargaining and bargained corporatism in the earlier period. With few exceptions, the social pacts of the 1970s had their locus in the domain of wage setting and most were of the classic tax-based incomes policy (TBIP) type, in which wage concessions were exchanged by trade unions for tax concessions (or, in some cases, tax penalties) and/or publicly financed employment and social security programmes provided by government. Such deals were attempted, although they were not always successful, via tripartite wage pacts, in Austria, Denmark, Finland, Ireland, Italy, the Netherlands, Norway, Sweden, and the United Kingdom. In fact, each and every pact that was signed in these countries between 1970 and 1980 (five in Finland, four in the United Kingdom, three in Norway, two in Ireland, one in Italy, Austria, Denmark, and the Netherlands) was of the TBIP type. As an instrument for gaining union support for lowering wage cost pressures in a period of high inflation, TBIP pacts became ‘a complement to, rather than a substitute for, demand management policies’ (Addison, 1981: 188). The large number of repeated attempts, some unsuccessful, to conclude such pacts suggests a degree of institutionalization. However, a rising number of failures to reach agreement in the second half of the decade – for instance in Belgium, Denmark, the Netherlands, and the well-known collapse of the Social Contract (1974–8) in Britain and the National Solidarity government (1978–9) in Italy (Regini, 1984) – indicates a process of deinstitutionalization. In their study of the European experience of stabilization and incomes policies of the 1970s, Flanagan, Soskice, and Ulman sum it up well: ‘by the end of the decade, incomes policies had lost much popular support and political appeal, while the political stock of monetarism had risen along with apparent tolerance of – or resignation to – unemployment’ (Flanagan et al., 1983: 688). The new social pacts of the 1990s take the reverse form: they substitute for rather than complement demand management policies. Most of these pacts are still about wages (see Table 4.1) and aim at wage-moderating and inflationproof wage-setting policies, but public-sector expansion is the counterpart in only a few countries. As we can see from Table 4.1, with 72.2 per cent of all pacts focusing on wages, although not necessarily exclusively so, they still account for the majority of all pacts. Within this category only about half (53.8 per cent) can be classified as TBIPs, down from 83.9 per cent in the first period, and they 4 With the exception of Finland these are the countries to which we dedicate special case studies in order to uncover the dynamics of negotiations leading to social pacts and their further evolution (Chapters 5–10).

66

Table 4.1 Social Pacts, by Type, 1972–89 and 1990–2007 All pacts

Wage pacts

Non-wage pacts

Narrow pacts

Broad pacts

Of which: TBIP 1970–89

1990–2007

1970–89

1990–2007

1970–89

1990–2007

1970–89

1990–2007

1970–89

1990–2007

1970–89

1990–2007

FI

5

7

5

7

5

7

0

0

0

0

5

7

SE

0

0

0

0

0

0

0

0

0

0

0

0

NO

3

1

3

1

3

1

0

0

1

0

2

1

DK

1

1

1

0

1

0

0

1

0

1

1

0

NL

3

5

3

4

1

0

0

1

1

2

2

3

BE

3

0

0

0

0

0

3

0

3

0

0

0

DE

1

1

1

0

0

0

0

1

0

0

1

1

AT

1

2

1

0

1

0

0

2

0

1

1

1

SZ

0

0

0

0

0

0

0

0

0

0

0

0

UK

4

0

4

0

4

0

0

0

0

0

4

0

IR

3

6

3

6

3

6

0

0

0

0

3

6

FR

0

0

0

0

0

0

0

0

0

0

0

0

IT

3

6

3

2

3

0

0

4

2

1

1

5

ES

5

2

5

0

3

0

0

2

1

2

4

0

PT

2

8

2

5

2

1

0

3

0

5

2

3

EL

0

1

0

1

0

0

0

0

0

0

0

1

PL

1

1

1

0

0

1

CZ

4

4

0

0

0

4

SK

3

2

0

1

1

2

HU

1

1

0

0

0

1

SL All

5 34

54

100%

100%

Source: ICTWSS Database, Visser (2009).

5

5

0

31

39

26

21

3

15

91.2%

72.2%

83.9%

53.8%

8.8%

27.8%

0 8 23.5%

5

13

26

41

24.1%

76.5%

75.9%

Social Pacts in Europe are now found in a much smaller subset of countries. The seven Irish pacts since 1987, as well as the Finnish and Slovenian pacts and the Norwegian Solidarity Alternative of the mid-1990s, have the characteristics of TBIPs, trading wage restraint for tax concessions and social policy investments. The Irish, Finnish, and Slovenian examples also suggest that these expansive pacts are most conducive to repetition. Apart from TBIPs, wage pacts include those that change the parameters for wage setting (the Italian pacts of 1992 and 1993, the Dutch pacts of 1982 and 1993), and those that exchange wage moderation for union influence over social security reforms, employment legislation or training (the Dutch pact of 2004; the Spanish pacts of 1997 and 2006; the Italian pacts of 1995, 1996, and 2002; the Portuguese pacts of 1996, 2001, and after 2004; and the pacts in Czechoslovakia and later the Czech Republic in 1990–4). Such pacts are sometimes categorized as ‘regulative’ rather than ‘distributive’ (Regini, 2000), but even if they do not have the specific features of a wage-tax, wage-public investment or wage-social policy bargain, they do have distributive consequences. The difference is, however, that these non-TBIP wage pacts try to reconstitute the pattern and procedures for wage setting in the private or public sector and bring about a new division of responsibilities and authority between central, sectoral, and local negotiators, and between the state and the social partners. This may justify the classification of these pacts as regulative. For obvious reasons, the pattern of institutionalization that follows from such regulative social pacts differs from that engendered by tax-based incomes pacts. If successful in its implementation, a regulative pact will not ‘need’ to be repeated – at least not in the same domain. However, implementation failure, unintended consequences, and a process of ‘negative feedback’ may propel the actors to make future corrections. A TBIP pact, on the other hand, works like a drug; if even halfway successful, the beneficiaries ask for more of the same. Non-wage pacts cover issues such as social protection and social security (unemployment insurance in particular), employment protection legislation (EPL), ALMPs, pensions and training. We have defined these non-wage pacts in such a way that they do not at the same time include commitments on wages or wage-setting procedures. Non-wage pacts make up a quarter of the total and they are a phenomenon, mostly, of the recent period (see Table 4.1). Table 4.2 portrays the shift in issues taken up by social pacts. The ‘first generation’ pacts of the 1970s dealt almost exclusively with wages in combination with budget and tax issues, supplemented by job programmes and additional union or employee rights. When pensions were involved, it meant the facilitation of early retirement. In the 1980s, we witness working hours’ reduction and job-sharing as a new issue in response to the rise of unemployment and the campaign for shorter working hours started by the European Trade Union Confederation in 1979. In the 1990s, reflecting the rise of long-term unemployment and the new emphasis on activation and flexibility in OECD

68

The Evolution of Social Pacts Table 4.2 Social Pacts, by Policy Domain or Issue Area, 1970–2007 All pacts

Wages

Working hours

Training

Union rights

1970–9

22

17

0

0

4

1980–9

15

15

8

1

1

1990–9

34

25

8

10

2000–7

20

14

3

12

Social security

Pensions

Tax budget

APLM jobs

EPL

2

2

16

4

2

0

10

5

2

8

22

8

17

19

9

5

14

7

9

8

6

0

Source: ICTWSS Database, Visser (2009).

and EU policies, we see the rise of ALMPs on the supply side, replacing the demand-side policies of job creation in the public sector that were fashionable in the 1970s or the job-sharing approach of the 1980s. The new issues on the agenda of social pact negotiators were now social security and pension reform, and attempts to change EPL, mostly by introducing and regulating a new market for temporary and part-time employment. Training, usually in relation to the entry of young workers and company training for older workers, is another issue that gained prominence. In all of this we see the influence of the OECD Jobs Study of 1994 and, later, of the EU Employment Strategy and Lisbon Agenda. These issues continued to dominate the agenda of negotiators after 2000. Whether these non-wage issues are taken up in single-issue pacts or in combination with other issues including wages is another aspect of the process of social pact institutionalization, as we will demonstrate below. Narrow or single-issue pacts dealing with one specific policy problem, for example pensions or social security or training or wage setting, constitute a quarter of all pacts and have not on average become more or less frequent (see Table 4.1).5 Broad or comprehensive pacts remain dominant; and although the share of broad pacts is unchanged, there is a tendency for these pacts to become broader over time. In fact, the average number of issues or policy domains per pact has steadily increased from two in the 1970s to nearly four after 2000. For reasons to be explained in Section 4.4, broad and narrow pacts tend to be germane to different processes of institutionalization.

4.3. Social Pact Institutionalization in Comparison with Collective Bargaining From the foregoing description and classification of social pacts, we learn that social pacts have been tried in most European countries and that two-thirds of 5 Pacts that deal with wages in combination with working time or training and do not involve a change of law of engagement of public policy, are treated as narrow or single issue ‘wage’ pacts, as they affect solely the domain of labour relations or wage bargaining.

69

Social Pacts in Europe these attempts have been successful. In Chapter 2, Avdagic explained, on the basis of a sample of fourteen countries and for the period since 1990, under what economic and political conditions these pacts emerged; and in Chapter 3, she focused on the bargaining dynamics that lead to successful pact negotiations. The key empirical question in this chapter is why some of the pacts that were signed remained single events and others were repeated. Beyond the question of mere repetition, we are interested in the pattern, that is whether repetition indicated that tripartite bargaining and social pacts became the standard operating procedure in socio-economic policy making, perhaps even branching out into different policy domains, or whether instead such repetition was interlaced with periods of inactivity or reverted to alternative policy making, such as unilateral state intervention or autonomous bargaining by the social partners alone. Recalling our definition of institutionalization at the beginning of this chapter, the question is under what conditions, and how, social pacts become regularized and routinized as stable reference points around which actors build legitimate and sanctionable expectations. Defining pacts as contracts, we can think of social pact institutionalization as a series of repeated contracts, similar to, for instance, collective labour agreements. However, while common in the case of collective labour agreements, institutionalization based on regular and routinized renewal is the exception in the case of social pacts – as our case studies demonstrate.6 The comparison is instructive. One of the hallmarks of ‘organized’ capitalism was the step taken from a single collective labour agreement or temporary truce in the conflict between capital and labour to collective bargaining as a permanent institution. In the nineteenth century, and still in many industrialized market economies in the first half of the twentieth century, the collective labour agreement remained a fragile institution, with limited coverage and continuity.7 It was not uncommon for collective labour agreements to lapse, or fall into disuse, or for employers to renege on their promises in times of crisis. It was a sign of institutionalization when negotiators began making the ‘vital distinction . . . between the making of a new bargain, and the interpretation of the terms of an existing one’ (Webb and Webb, 1920: 182). By differentiating between the lifespan of an agreement and the struggle for its renewal, they were able to dissociate distributive conflicts from regulative issues based on a joint interest

6 Ireland, with seven social pacts since 1987, each with a duration of three years, is the only example in our sample; Slovenia, with three one-year pacts in the 1990s and two three years pacts after 2003, though with an interruption, approaches this situation. 7 According to Flanders (1954: 260), in Britain, ‘(B)y the end of the nineteenth century collective bargaining had become a well-established practice, but only in certain kinds of employment’, i.e. in the ‘highly skilled trades’ in engineering, building and printing, and among ‘piece workers’ in coal mining, iron and steel, textile and shoe making. In this development, Britain was certainly ahead of other nations.

70

The Evolution of Social Pacts in implementing the contract, sharing its gains, and defending the contract against competitors. It was thus that collective bargaining became institutionalized as a ‘rule-making process’ (Flanders, 1968) or method of ‘industrial governance’ (Commons, 1968) and could develop from a ‘static’ into a ‘dynamic process’ (Kahn-Freund, 1954). There are two obvious differences between collective labour agreements and social pacts. We will argue that both differences are relevant for institutionalization. First, collective bargaining is a two-way game; the government as the third party enters only as mediator or guarantor (or it acts directly or indirectly as employer in negotiations applying to public-sector employment). Social pacts, however, involve tripartite games and the government is usually directly involved. Secondly, one of the sociological conditions for the institutionalization of a particular decision-making system is that the conflicts or problems that follow from it can be externalized (Lepsius, 2006). For example, the social and political consequences or side effects of the application of the competition principle to the labour market can be externalized to the welfare state. Similarly, collective bargaining as an institutionalized practice externalizes its consequences for competitiveness and employment to other policy domains, in particular monetary and fiscal policy. Social pacts tend to be built on the opposite principle: they internalize conflict and this may be one reason for their instability. As we will see in Section 4.4, when discussing mechanisms of social pact institutionalization, the triadic construction of social pacts is directly related to power-distributional dynamics, whereas the externalization problem is closely related to a functionalist logic.

4.3.1. The State as Mediator or Participant The difference in the stability of dyadic and triadic relationships is a wellknown argument in sociology (Simmel, 1950). In a dyadic relationship, each party knows that it has nowhere else to go, and neither party can hide what it has or has not done behind a third party. A stable dyadic relationship, though not necessarily between equals, has the features of a self-reinforcing, endogenous institution (Greif, 2006). The incentives in self-enforcing agreements require that each side receives a stream of benefits or (quasi-)rents from the relationship and will therefore hesitate to do anything that endangers its continuation. The prospect of future gains from maintaining the relationship is the basis for self-enforcement. According to Simmel (1950: 134), ‘The decisive characteristic of the dyad is that each of the two must actually accomplish something, and that in the case of failure only the other remains – not a super-individual force, as prevails in a group of even three’. He goes on to discuss several forms of such groups of three, that is, triadic relationships, only the first of which might contribute to stability. This is the case of an ‘uninterested third party’ acting as mediator. In the second

71

Social Pacts in Europe case of tertius gaudens (the ‘rejoicing third’, or ‘third who benefits’) and in the third case of divide et impera (‘divide and rule’), each participant tries to gain advantage, either by exploiting divisions between the other two or by creating such divisions itself. The non-participating mediator can contribute to the stability of the relationship between the other two by ‘depriving conflicting claims of their affective qualities because it neutrally formulates and presents these claims to the parties involved’ (Simmel, 1950: 147). Non-partisanship requires that the third party either stands above the contrasting interests or has an equal interest in both sides. Neutrality is more difficult to maintain than hierarchy; but hierarchy too can fail when put under strain. Applied to social pacts, when the government sides with one party rather than the other, there may be a pact or accord between two parties (as in the pension pacts of 1995 and 1996 in Italy and Spain, or some Portuguese pacts from which certain employers’ or union associations were absent) or the excluded party may be pressured into signing (as in the 2004 pact in the Netherlands). But these outcomes tend to be unstable, as the excluded party will seek to destabilize the result. Where the state or the law stands above the parties, its agencies may cast ‘a shadow of hierarchy’ over the bargaining table. Avoiding the threat of legislation is important not only in prompting agreement and self-regulation between social actors but also in securing the effectiveness of those agreements (He´ritier and Lehmkuhl, 2008), hence contributing to their longevity and success. This requires a degree of ‘hierarchical ordering’ or competencies on the part of the state, for instance the possibility of granting (or withdrawing) rights and resources to unions and employers in a particular policy domain, be it social security or wage formation (Rhodes and Visser, 2010). Where the state enjoys such competencies and negotiations are truly conducted in its shadow, policy choices and negotiations are likely to ‘be systematically influenced by a potential decision of the minister’ (Scharpf, 1997: 206). In such situations, the state still depends on information, preference building, solutions, and implementation techniques usually available only to private organizations and not to the government. Consequently, it may prefer agreement between or, if that turns out to be impossible, agreement with private interest organizations to a straightforward hierarchical decision. A ‘shadow of hierarchy’ offers the possibility of preventing a stalemate in the negotiations ‘by shifting the balance of bargaining power from one side to the other through relatively minor changes in the institutional setting’ (Scharpf, 1997: 207). The Dutch Wassenaar agreement of 1982 is a well-known example of such a shift (Visser and Hemerijck, 1997). The analysis of that case in Chapter 9 and of a similar pact in 1993 reveals that a skilful application of the threat of intervention to both sides, unions, and employers, can be crucial to the outcome. Repeating such threats is very difficult, however, as unions and employers will try to make the government’s intervention negotiable, and it

72

The Evolution of Social Pacts then becomes very difficult for governments to remain uninterested and equidistant from the contending parties. ‘The constellation changes when the state is itself party to negotiations, rather than a third party setting the stage for and intervening in negotiations between societal groups’ (Scharpf, 1997: 201). This is the more common situation of social pact negotiations.8 Rather than the state sanctioning two-party agreements between unions and employers, the typical social pact is based on negotiations between the government, the union(s), and employers, or just between the government and the unions with the employers standing aside. However, even where they are secondary to the negotiation of a social pact, or when they are excluded, the cooperation of the employers as the ‘third party’ is usually crucial for the success of a pact, especially where implementation depends on collective bargaining, the hiring and training decisions of employers, or the co-management of social security and pension funds. The willingness of employers to go along with and help implement the pact may be decisive for its success and the chances that it will be repeated (Baccaro and Simoni, 2008). Rather than ‘the third who enjoys’, employers often fear becoming ‘the third who pays’. This has frequently tilted their position against the continuation of social pacts and tripartite concertation.

4.3.2. Externalization and Discretionary Policies Social pacts belong to the class of discretionary policies as opposed to rules-based policies. Discretionary policies allow policymakers to respond quickly to contingencies and address the externalities of given domain-specific policies, for instance a situation in which wage increases fuel inflationary expectations or endanger competitiveness. This is the great advantage of social pacts as a template for making decisions in the face of crises and unforeseen events. But it becomes a weakness if such interventions have to be repeated. Discretionary policies such as currency devaluations or fiscal bailouts tend to be subject to two problems: dynamic inconsistency (i.e. where what is preferred at one point in time is inconsistent with what is preferred at another point in time) and moral hazard (when an actor insulated from risk may behave differently than were it fully exposed to that risk). Discretionary policies therefore tend to lose their effectiveness and credibility if used repeatedly. The 1970s stagflation crisis is

8 Although the government did not formally sign the Wassenaar agreement, it was deeply involved in its negotiation and implementation. The same applies to the seven ‘social programme’ agreements negotiated in Belgium between 1960 and 1975, which although formally bipartite agreements, were preceded by tripartite conferences and implemented through the law. In these cases, as in the seven Finnish incomes policy agreements since 1990 (see Kauppinen, 2000; Johansson, 2006), and in wage agreements in Spain since 2002, the distinction between bi- and tripartite agreements, or between agreements and pacts, is wafer-thin.

73

Social Pacts in Europe often cited as having undermined the credibility of discretionary macroeconomic policies including the TBIPs that were so popular at the time (see Flanagan et al., 1983). In their book Corporatism or Competition, Teulings and Hartog (1998) offer a defence of delegating wage negotiations to some external agent or organization outside the firm. They call any such delegation ‘corporatist’ if it is coordinated across firms in a sector or economy. Tripartite pacts are just one example; bipartite central agreements or sectoral agreements, with a trendsetting mechanism in which the export sector takes the lead, are functionally equivalent (Traxler et al., 2001). Based on MacLoad and Malcomson’s microeconomic theory (1993) of the ‘hold up’ problem in bargaining, Teulings and Hartog argue that a decision on how to rewrite nominal wage contracts in response to aggregate changes in the economy is efficient – but only if it is decoupled from decisions within firms about the distribution of wages in response to idiosyncratic changes in productivity, human capital, and local labour markets. It thus becomes possible to write long-term wage contracts and create an environment for long-term investments in production and human capital. Social pacts or macro-negotiations by unions and employers’ associations based outside the firm operate like an indexation rule; but they do so with much greater flexibility and capacity for adjustment than the automatic price compensation or cost of living clauses that caused so much trouble in the 1970s. Active corporatist intervention, they argue, is superior to mechanical adjustment rules, as these rules can never anticipate all contingencies. ‘Rules require shocks to be contractable, while for corporatist institutions shocks need only be observable’ (Teulings and Hartog, 1998: 5). We have seen that TBIPs – that is, the use of fiscal policy in exchange for union concessions on wage demands – were a common theme in the ‘firstgeneration’ social pacts of the 1970s (Armingeon, 1982; Flanagan et al., 1983; Regini, 1984; Scharpf, 1991). Although less common in the second wave, they have not disappeared. This use of fiscal instruments sits uneasily alongside the trend towards rules-based policies, the prime examples of which are the fiscal rules under the Stability and Growth Pact of Economic and Monetary Union (EMU) and the EMU-related introduction of wage bargaining (e.g. inflation + productivity) formulae in many European countries (Hancke´ and Rhodes, 2005). As a one-off adjustment to bring wages policy into line with the new parameters for monetary and fiscal policy, or as an adjustment mechanism for dealing with excessive conditions that put the rules under too great a strain, social pacts may seem to fit. But as a permanent institution for fiscal policy making, social pacts stand in contrast to the key principle of rules-based policy making. On this basis, we expect social pacts to be one-off adjustments, unless alternative external or corporatist coordinating instruments are unavailable and/or failing micro-foundations (on budgetary rules or skills- and production-related wage policies in firms) continue to frustrate rules-based adjustment

74

The Evolution of Social Pacts policies. This argument lies at the core of the functionalist explanation of social pact institutionalization discussed in the next section.

4.4. Mechanisms of Institutionalization Drawing on our earlier analysis (see Avdagic et al., 2005), we posit five mechanisms of institutional reproduction of social pacts, each related to different strands in the institutional literature (Mahoney, 2000). The continuation of social pacts (repetition) may be grounded in (a) uncontested actions aimed at ensuring system functionality, (b) a routine or procedure which is associated with considerations of utility, (c) a pattern of interaction that has created significant interdependencies (and hence sunk costs), (d) a set of norms or beliefs that orient behaviour towards cooperation and delegitimate deviant behaviour, and (e) a particular power constellation that ensures institutional reproduction. As one can see, some of these mechanisms, especially the first and in part also the last, tend to highlight exogenous forces of change. From these perspectives, pacts are repeated or disappear depending on functional requirements and external power configurations, although conceivably these power configurations may themselves be generated or eroded by social pacts. However, institutions like social pacts can also endure in spite of changing external conditions. This is the case when the parties involved ‘find it possible, necessary, and desirable to condition their behaviour on the cognitive, coordinative, normative and informational content provided by institutional elements rather than directly on the environment’ (Greif, 2006: 34). Such endogenous motivations are closely linked to utilitarian and normative (including cognitive) mechanisms of institutionalization. Although in reality all of these mechanisms may coexist and contribute to institutional development to varying degrees, we wish to separate out and render the variety of potential causal explanations distinct from one another. Drawing on the functionalist, utilitarian, normative, and power-distributional perspectives of institutional analysis (Mahoney, 2000), we introduce five major hypotheses concerning the evolution of social pacts.

4.4.1. The Functionalist Hypothesis The functionalist hypothesis holds that social pacts are likely to be reproduced if they serve a certain function for the system, even if there are clear disadvantages for one or more of the participants. In this case, the drivers of social pact formation should be exogenous and change should occur when ‘system needs’ change. Functionalist accounts explain institutions in terms of their consequences for the overall system: institutions are reproduced as long as they successfully perform particular functions for the system, for example, facilitating

75

Social Pacts in Europe its adjustment to new conditions or assisting in its survival (e.g. Wallerstein, 1974, 1980). In other words, once actors manage to coordinate their actions around a particular institutional solution that seems to solve problems or fulfil system needs, this solution is likely to become self-enforcing: actors will not have an incentive to depart from the coordination point unless external disturbances change the needs of the system, thus requiring a different kind of adjustment (Shepsle, 1986; Weingast and Marshall, 1988). From this perspective, social pacts can be seen as serving a specific function for a given national system (e.g. fulfilling the Maastricht criteria, solving the unemployment crisis, or preparing the nation’s response to ageing). Many analyses of the Western European social pacts of the 1990s interpreted them as functional responses to exogenous pressures (e.g. EMU, accentuated competition under the completion of the EU single market programme, and the liberalization of international trade), but without succeeding in explaining why they became more institutionalized in some countries than in others. Hancke´ and Rhodes (2005), for example, argue that the smaller the ‘problem load’ or required adjustment, the less likely it will be that a country will need a social pact. Referring to what they regard as EMU-related pacts, they argue that if pacts succeed in adjusting the macro- and micro-foundations for wage setting, the external political and problem-driven motivation for negotiating further pacts – and consequentially the pay-offs for social partner cooperation – will also diminish, thereby reducing the likelihood that further experimentation with pacts will occur. Borrowing an expression from Selznick’s description (1949: 260) of organizational change, having done the job, the formal social pact can and, according to Hancke´ and Rhodes, will disappear in the ‘shadowland of informal interaction’. In contrast, where such macro- and micro-foundations are failing or fragile, the motivation for such pacts is likely to remain strong and the pact experience is likely to be repeated. The introduction of ‘problem load’ as a functional determinant explaining institutional evolution allows us to develop more specific propositions about the trajectories of pacts. In the presence of strong macro- and micro-foundations for wage setting and skill formation, perhaps resulting from a specific intervention or correction due to an earlier social pact, the need for further such pacts will be reduced. A process of abandonment or shrinkage, based on negative feedback, is in this case likely. It is of course still possible that pacts, while redundant in one policy domain (e.g. wage setting), will be deployed in another policy domain (e.g. social security, pensions, etc.). Or it may be that through a process of ‘negative feedback’, finding out that it did not work as intended or that it had unfavourable consequences, the original pact is corrected through a second or third pact. The general hypothesis we derive from the functionalist approaches is:

76

The Evolution of Social Pacts [H1] Social pacts are likely to become institutionalized if their institutionalization serves system needs. More specifically, the likelihood of the institutionalization of social pacts is higher when a large problem load coincides with the absence of solid micro-foundations for problem resolution (e.g. with regard to wage setting and skill formation). Conversely, de-institutionalization is more likely the smaller the problem load or the stronger the micro-foundations for problem resolution.

We deduce from the above that pacts are likely to be repeated and become institutionalized as a tripartite method of deciding wage increases only in two circumstances: under excessive (crisis) conditions in order to preserve the rules for ‘normal times’ (in other words as a mechanism for adjusting to the new environment of rules-based policy making); or when that adjustment fails or is incomplete. Both conditions can be thought of as ‘system needs’.

4.4.2. The Utilitarian Hypotheses The utilitarian perspective posits that institutions persist because rational actors believe that their benefits outweigh the costs of their abandonment or transformation (North, 1990). While early versions of this approach in economics assumed a strong calculative capacity on the part of actors in weighing those costs and benefits, more recent studies in sociology and socio-economics are more sensitive to issues of bounded rationality and uncertainty (North, 1990; Greif et al., 1995). Indeed, they often argue that institutions persist precisely because the uncertain costs of institutional transformation make actors stick to known solutions, even if they are not the most efficient or preferred. Institutional change can be initiated either exogenously, for example by an alteration of the economic situation which changes the nature of the game (Williamson, 1993), or endogenously when the parameters of the game are stable but actors seek to alter institutions to solve new problems (Powell et al., 1996). Drawing on this perspective, there are three mechanisms of potential relevance to the institutionalization (or deinstitutionalization) of pacts. The first is based on the perceptions of costs and benefits. Once institutionalized, its actors may accept a social pact as an appropriate solution for a particular class of coordination problem (usually relating to wages, employment, and social protection). Rationally bounded actors save time and transaction costs if rather than solve social problems each time anew they can instead apply a known rule or solution to a new situation. They will do so unless and until they are unhappy with the results, or if they expect some major changes in their environment, in the power configuration, or in the strategic choices of rival actors. The ‘currency’ of political exchange will be important here: where tradeoffs between the social partners are highly salient to their respective interests, or where the compensating capacity of the state is strong (e.g. in exchanging tax concessions for wage moderation, as in TBIP pacts), the utilitarian mechanism

77

Social Pacts in Europe will be a stronger driver of institutionalization than where that currency has been ‘devalued’ or is very weak (Molina and Rhodes, 2002; Roche, 2007b). A second and related mechanism is based on the idea that the performance of institutions themselves contains information and blends some elements of the utilitarian and functionalist logics. Satisfaction in this case is based on perceptions of institutional performance. If an institution is associated with successful outcomes, this may provide information about the quality of the rules and interactions on which it is based. According to Knight (2003: 357), of all the factors contributing to the stabilization of a voluntary cooperation norm, ‘the existence of past success may be the most important, because it provides both information about past cooperation and a focal point for the type of behaviour that can produce mutual benefits in the future’. These two utilitarian mechanisms provide a basis for the following hypothesis: [H2A] Social pacts are likely to be institutionalized if they are associated with satisfactory performance and/or satisfactory outcomes for the actors. Conversely, the likelihood of their institutionalization is expected to be lower (and de-institutionalization higher) if actors do not perceive pacts to be satisfactory.

Considering that the actors in social pact negotiations are organizations that represent members or voters, it is important to add that these organizations must be able to define outcomes as satisfactory for their members or voters. If not, or if the evaluation of outcomes deviates between the negotiators and the constituent interests they represent, a representation crisis may result. This may lead to a challenge to the organization’s leadership or to the incumbent government, and directly or indirectly lead to the rejection of the pact. Such representation crises can be seen as one instance in which pacts that are seen as unsatisfactory herald a process of deinstitutionalization. A third mechanism is based on the creation of inter- and intra-organizational and interpersonal ties and networks. The parties involved may regard such ties and networks as useful investments; in fact earlier pacts may create ‘sunk costs’ that cannot be recouped unless the parties attempt to produce further pacts. Social pacts as routine strategies may include procedures and institutions such as information gathering and forecasting organizations, joint councils in which actors select and digest information together, and standard operating rules and procedures regarding representation and consultation with the government, and the implementation and monitoring of existing agreements. These organizational and procedural developments may turn social pacts into a standby governance mechanism – a kind of institutional ‘fire brigade’ that can be mobilized to address a wider set of issues (Visser, 1998; Calmfors et al., 2001). Writers in the neo-corporatist tradition who viewed ‘generalized political exchange’ as important for institutionalization highlighted precisely this type of development: while Schmitter (1983) emphasized inter-organizational

78

The Evolution of Social Pacts interdependence, Marin (1990) stressed the role of personal ties and informality. Thus, through frequent and multiple exchanges, organizations may become more willing to trust each other and better informed about each other’s intentions, commitments, and breakdown values, making it easier to avoid conflict and thereby contributing to social pact longevity. These considerations generate the following hypothesis: [H2B] The likelihood that social pacts are institutionalized is higher when investment in supporting arrangements is greater and the stronger (and more extensive) are the interand intra-organizational ties and networks between the negotiating organizations. Conversely, institutionalization is less likely when networks are weaker, when they are more fragmented and when investments in supporting arrangement are smaller.

4.4.3. The Normative Hypothesis The normative approach to institutional evolution hinges on endogenous changes in behaviour, values, and norms. According to Lepsius (2006), the institutionalization of a particular practice always involves the formation of specific dominant ideas and value orientations that guide behaviour in the domain in which that practice is applied. For example, the institutionalization of the market as the main instrument of coordination between agents is based on self-interest and competition as key values. The social pact as an institution is based on the idea of concertation or social partnership, that is, the conviction that policy decisions must be based on prior consultation and negotiation with all involved parties.9 When such ideas have gained ‘validity’ among the actors or the populations they represent – in the sense that in some appreciable way the behaviour which it inspires is considered ‘obligatory or exemplary (verbindlich oder vorbildlich)’ (Weber, 1978 [1922]: 15) – the resulting practice can be said to have ‘institutionalized’. It has become the ‘just’ and ‘appropriate’ way of acting. Borrowing from Marin’s model of ‘generalized political exchange’ (Marin, 1990), Crouch has advanced the hypothesis that the crucial element for bargained corporatism is the acceptance by the actors that their multiple exchanges are ‘stretching over time’ and that as a consequence, ‘there ceases to be a discrete calculable contract’ (Crouch, 1993: 53). Conflicts and disagreements are not absent from this model; but the actors ‘process them in such a way that unless and until something goes drastically wrong with the balance,

9 This definition is close to the definition of corporatism in Visser and Hemerijck (1997: 66) as ‘(T)he extra-parliamentary political practice of ongoing negotiations between the formal representatives of the organized interests of capital and labour, facilitated by the state and conditional upon substantial outcomes, over issue of social and economic policy making, under the primacy of the democratic constitutional state.’

79

Social Pacts in Europe the likelihood of recourse to open conflict is reduced and the actors enabled to trade gains in one area for losses in another’ (Idem.: 53–4).10 The belief in future gains can be the basis for the self-enforcement and institutionalization of social pacts. Our key hypothesis is that this will only happen – and social pacts or partnership will be endorsed as a ‘value’ – when there is a perception that previous pacts have produced not only satisfactory but also ‘just’ or ‘fairly distributed’ outcomes. We are inspired to this hypothesis by the game theoretical experiments discussed in Gintis (2000) and Fehr and Ga¨chter (2000). Thus, beyond the efficiency rationale for pacts proposed in Hypothesis 2A, here we propose that for social pacts to be reproduced they must also be seen as equitable. In contrast to the functionalist and utilitarian frameworks, institutions in this perspective persist when they embody norms and beliefs that are widely accepted, appropriate, and just. The stronger and more widespread these norms, the more stable the institution will be. Deinstitutionalization will occur when norms weaken. Institutional change can be induced either exogenously when a shift in economic conditions challenges the cooperation norm, or endogenously when actors’ subjective beliefs about the efficiency or fairness of the norm change. [H3] The likelihood of a social pact’s institutionalization is higher when beliefs that the previous pact has generated just outcomes are stronger. Such beliefs, in turn, are likely to strengthen pact-sustaining cooperation norms. Conversely, the stronger are beliefs that outcomes are unjust, and the weaker are cooperation norms, the higher is the likelihood of de-institutionalization.

Notions of trust, reciprocity, and fairness are central issues in the normative perspective. The key question is whether such properties can be produced by social pacts and thus become part of an endogenous explanation for institutional development. Experimental research has found that the following conditions are associated with the production of trust in bargaining: individual preferences regarding pay-offs and instant gratification, prior experience with ‘cooperative games’, the ability to monitor and learn about each other’s preferences, and the time needed to build reputations (Ostrom and Walker, 2003). Experience, a longer time perspective, reputation building, and opportunities for monitoring and learning may be key ingredients of repeated social pacts. The temptation of opportunism may therefore be overcome when there is a strong reciprocity norm or shared expectation that a benefit granted now will be repaid in the future. Other experimental research (Fehr and Ga¨chter, 2000) 10 The famous Coase theorem that – abstracting from transaction costs – all welfare gains achieved through ideal hierarchical coordination can also be captured through voluntary contracts between autonomous and purely self-interested agents, depends on the ability of the parties concerned to offer side-payments and change discrete projects via issue linking in package deals that achieve an overall balance of interests (see Scharpf, 1993).

80

The Evolution of Social Pacts has found that people may observe such a norm even when there is a cost to their own interests. If a strong reciprocity norm were dominant, people would clearly have an ‘incentive to acquire a reputation for keeping promises and performing actions with short-term costs but long-term benefits’ (Ostrom and Walker, 2003: 43). But how likely are strong reciprocity norms in social pacts? It has been claimed that a weaker norm of cooperation – a ‘cooperative mood of play’ – might emerge from a history of social pacts and can be reinforced both by the awareness of strong national interdependencies in a global economy (‘a common fate’) and the perception that ‘exit’ may deliver worse outcomes than ‘loyalty’ (Visser, 1998; O’Donnell, 2001). But will such a norm of cooperation survive adversity and further internationalization of the economy? Our hypothesis is backward looking and states that the erosion of a cooperative norm is especially likely when the outcomes of previous interactions are perceived as unequal or unfair. Moreover, if uncertainty about compliance increases and this uncertainty is mixed with a perception of unfairness, normmotivated compliance is likely to decline. Put differently, in the absence of major exogenous disturbances, pact-accommodating cooperation norms will be self-enforcing only if the perceived asymmetries in outcomes associated with these pacts are within accepted limits.

4.4.4. The Power-Distributional Hypothesis Finally, in the power-distributional approach social pacts are likely to become institutionalized when elite actors – in particular those with most power – support their reproduction. Conversely, the deinstitutionalization of pacts is likely to occur when powerful actors lose interest in supporting their reproduction, or alternatively when power shifts towards those actors who do not support pacts. The distributional perspective on institutions was developed as a critique of both the functionalist and the utilitarian approaches. Advocates of this perspective criticize functionalist analyses for their neglect of power relations (Knight, 1992). Institutions in this case are the outcomes of political games between differently endowed actors who strive to secure institutions most favourable to their interests (Tsebelis, 1990; Knight, 1992). While the distributional approach also incorporates cost–benefit calculations, it departs from the utilitarian perspective in claiming that institutions distribute costs and benefits unevenly, thus generating conflicting interests over institutional reproduction (Mahoney, 2000). Hence, institutions are reproduced when supported by actors who have an interest in preserving them and are strong enough to be able to do so. Institutional change will be induced either exogenously when external shocks change power constellations or endogenously when the preferences of the most powerful actors change or when prolonged interactions change the accepted balance of power.

81

Social Pacts in Europe Designed to overcome or attenuate social conflict, social pacts can also be its source and locus. Thus, where the institution of a social pact and the rules, values, and compromises it embodies remain deeply contested, it is hard to see how a social pact might become a routine affair. Moreover, the institutionalization of social pacts often fails to fully reflect the voluntary choices of its parties, but rather their respective reactions to what they perceive as credible threats, constraints, or inducements provided by each other and by the state. The role of the state – either as a participant actor or external enforcer – can be extremely important in power games, influencing the persistence of social pacts or their demise. Indeed, cooperation may not happen at all in the absence of external constraints or a ‘shadow of hierarchy’ (Scharpf, 1993) provided by the state. The continuation and reiteration of social pacts, especially during periods of prolonged recession, is likely to benefit from state intervention that ‘rewards’ cooperation and makes alternative strategies costly. In this way, the state may alter the original power configuration and directly or indirectly enforce institutional reproduction. However, as repeated state intervention is generally perceived to be incompatible with independent neo-corporatist bargaining (Crouch, 1993), it is important to draw a distinction between direct state intervention and a shadow of hierarchy, and between pacts that depend on employers and those that do not. Drawing on the power-distributional approach, we advance the following general hypothesis: [H4] Social pacts are likely to become institutionalized when powerful actors – especially the state or employers, whichever is dominant in the particular case – support their reproduction, and/or when union-employer cooperation is secured by the state. Conversely, de-institutionalization is likely to occur when powerful (and dominant) actors lose interest in pact reproduction, when power shifts towards those who do not support pacts and/or when the state is unable to secure cooperative behaviour.

4.5. Conclusion In the first part of this chapter, we referred to the inherent instability of social pacts as institutional constructions: they tend to internalize rather than externalize conflict (by contrast with collective bargaining, which externalizes its consequences for competitiveness and employment to other policy domains); they are discretionary policies as opposed to rules-based policies, well-suited to rapid policymaker responses but tend to lose effectiveness and credibility when used repeatedly; and as triadic rather than dyadic relationships their stability is constantly imperilled unless a third actor (i.e. government) acts as an uninterested mediator – perhaps the least likely form of third-party behaviour – rather than taking sides with one of the other two. We also noted that even if they have distributive consequences, they are ‘regulative’ rather than

82

The Evolution of Social Pacts ‘distributive’ mechanisms and therefore typically lack the ‘addictive qualities’ of TBIPs (even if some contemporary pacts are in fact TBIP-based) where actors are strongly induced to ‘come back for more’. We concluded that social pacts are most likely to be one-shot adjustment mechanisms unless two general sets of conditions pertain: when alternative coordinating policy coordination instruments are unavailable and/or failing microfoundations (on budgetary rules or skills- and production-related wage policies in firms) continue to frustrate more stable rules-based adjustment policies (a functionalist argument); or when endogenous motivations for pact continuation drive power-based, utilitarian, and/or normative (including cognitive) mechanisms of institutionalization. Since the hypotheses derived from these perspectives are not mutually exclusive, we may find that actual processes of institutionalization or deinstitutionalization are based on a combination of mechanisms. Our key expectation is that the most probable mechanism of social pact institutionalization – understood as a pattern of behaviour that attains a certain degree of regularity or persistence – cannot be sustained by utilitarian elements alone (as in Hypothesis 2A), and that institutionalization driven by functional considerations (Hypothesis 1) will follow a pattern of contraction rather than expansion. If social pacts are to move beyond mere ad hoc or contingent contracts from which the parties can walk away if they wish, they must have generated norms and commitments that are motivationally credible or they must have their backing in a particular power configuration, most likely involving the state (i.e. Hypotheses 3 and 4, possibly in combination with 2B). If they are selfenforcing through a mix of utilitarian and normative mechanisms, pacts will be compatible with the incentives and motivations of the signatory parties rather than being imposed upon them (North, 1990; Greif, 2006). This requires that the outcomes satisfy the actors, or yield more benefits than costs, and do not raise critical distributional issues. Greif and Laitin (2004) suggest that only when institutions have such self-enforcing properties, will they be self-reinforcing. Consistent with this expectation is that social pacts, the existence of which derives from system needs or a particular power distribution, will be less stable and discontinue once those needs are met or the power distribution changes.11 Also, given the instability of triads discussed above, we do not expect a continuation of pacts based on the dominance of one actor or actor coalition. We hypothesize, moreover, that concertation as the result of elite cooperation, as in the consociational polities analysed by Lijphart (1968), has also become less

11 For instance, Fiorito (2003: 294) claims that the ‘paradox of corporatism’ is that once it has done the job of driving inflation from the expectations of economic agents, centralized bargaining and neo-corporatist concertation become unnecessary and their costs more conspicuous.

83

Social Pacts in Europe likely unless it is strongly rooted in popular consent based on utilitarian and normative motivations. Taking these considerations into account, and anticipating the insights of the country case studies presented in subsequent chapters, we can make a preliminary categorization of pacts as follows, ranging from stronger to weaker on the spectrum of institutionalization: 1. Pacts that are based on powerful utilitarian considerations (e.g. including a strong ‘currency’ of exchange, where TBIP still prevails), as well as on shared understandings regarding the procedures and policy areas for concertation (in this case, they may be multiple and interlinked). Such pacts will be backed up by a particular power configuration and, at critical junctures, driven by ‘system needs’. Although breakdowns may still occur, especially under the pressure of strong exogenous shocks, such pacts are more likely than those discussed below to become institutionalized over time and may assume some characteristics of a ‘consensus society’. Social pacts of this type seem to be associated with consecutive and broadening policy deals, but only when growth can offset concessions on taxes and spending (and indeed when subject to exogenous shocks). This tends to set pacts of type 1 apart from the more disjointed and ad hoc approach, targeting particular single issues (e.g. wages, pensions, social security, labour market reform, and training) that are, in different ways, characteristic of types 2–4. 2. Pacts that renegotiate (and reinstitutionalize) a particular package or framework for concertation in response to exogenous or endogenous changes, for example, political or economic crisis, changes in the balance of power, and so forth. Reiteration of such pacts may occur from time to time, but utilitarian and power-distributional considerations will prevail over normative commitment in redefining its architecture, although a general commitment to the value of pacting will probably be important. Such reiterative (and reinstitutionalizing) pacts will, by definition, not happen too often lest they destabilize the system altogether, and there is no inbuilt tendency to broaden and concatenate the policy issues from one pact to the next. 3. Pacts that are based on sporadic agreements on specific policy issues as well as on procedures, but which are only very loosely interrelated and institutionalized. In this case, utilitarian calculations will ultimately prevail, based in a particular distribution of power, ‘system’ need, or challenge. Utilitarian and power calculations regarding the value of pacting, in terms of process and results, may contribute to a flexible system of pacting – typically on a narrow, policy-specific rather than broad all-encompassing basis – that endures without a strong underpinning institutional architecture or strong normative commitments. Contestation will be reduced, although certainly not eliminated, by common perceptions of certain functionalist ‘system needs’.

84

The Evolution of Social Pacts 4. Pacts that are one-shot solutions to a small range of policy problems and that occur in moments of extreme policy turbulence and government weakness, and when certain kinds of problem load exert sufficient pressures to reconcile otherwise highly antagonistic actors. In these cases, no stable institutional structure develops and there is little agreement, or utilitarian cost–benefit support, as to when and where (i.e. in which policy areas) further concertation should occur–even when no satisfactory solution can be found to ongoing socio-economic problems, in the industrial relations system or in social and labour market policy.

85

This page intentionally left blank

Part III Case Studies

This page intentionally left blank

5 Ireland: Two Trajectories of Institutionalization Rory O’Donnell, Maura Adshead, and Damian Thomas

5.1. Introduction Between 1987 and 2008, the Irish government entered eight social pacts with peak functional interest organizations representing labour, capital, and farming and selected civil society interest groups, thus establishing over two decades of negotiated economic and social governance. This was a notable development for two reasons. First, Ireland has traditionally had a voluntarist and adversarial system of industrial relations and its political parties do not have the class alignment seen as important in classical neo-corporatist theory. Second, while many EU member states entered social pacts in response to economic difficulties in the 1980s and/or the 1990s, Ireland stands out in its continued use of national pacts both in times of rapid growth and after the creation of the euro. These eight social pacts took the form of published ‘social partnership programmes’ agreed between the government, trade unions, employers, farming bodies, and civil society organizations.1 The first three programmes, covering the period 1987–96, were with the trade unions, the employers, and organizations representing farmers. From 1996, the process was widened to include a range of social NGOs known as the ‘community and voluntary (C&V) pillar’. All eight pacts included agreement between employers, unions, and government on the rate of wage increase in both the private and public sector for a three-year period (though shorter in the 2006 and 2008 pacts). The pacts linked the pay deal to other economic and social policies, and the range of such issues widened considerably over time. These included fiscal policy, tax, unemployment, monetary union, enterprise-level partnership, welfare, social exclusion,

1 The texts of the social partnership programmes are available on the Irish Government website. The NESC Strategy reports are available on the NESC website (www.nesc.ie).

89

Social Pacts in Europe literacy, drugs, disability, and many more. While the early social pacts addressed problems of economic failure, later ones focused on the pressures created by Ireland’s economic success. These included issues of housing, transport and childcare, and the tendency for Irish prices and costs to rise faster than those across the eurozone. As the booming Irish labour market attracted an increasing number of migrant workers in the years from 2003 to 2008, issues of employment rights and labour standards figured increasingly in the pact negotiations. In 2006, the government and the partners agreed a ten-year framework agreement, entitled Towards 2016. In the next section, we describe the economic, political, and organizational drivers and triggers that prompted the emergence of social pacts and provided the necessary and/or sufficient conditions for their subsequent repetition, expansion, and institutionalization. This is followed by a description and analysis of the key bargaining dynamics in the negotiation of three of the most important social pacts: the Programme for National Recovery in 1986–7; Partnership 2000 in 1996 and the protracted negotiation of Towards 2016 in 2005–6. This analysis allows an assessment of the five bargaining hypotheses outlined in Chapter 2. In the second part we describe and analyse the institutionalization of social pacts in Ireland. In the conclusion, we summarize our argument and give a brief account of the failure to agree a crisis pact in 2009.

5.2. Drivers and Triggers 5.2.1. Economic Conditions In the late 1970s, Ireland experienced increased economic difficulties, both structural and macroeconomic. The economy faced an adjustment to free trade, just as rising expectations at home increased demands for social spending. Seeking disinflation, Ireland joined the European Exchange Rate Mechanism (ERM) on its establishment in 1979, thereby breaking its 150-year-old link with sterling. But the government simultaneously attempted to pump-prime the economy, and as a result, disinflation was delayed, wage pressures were not contained, competitiveness was lost, unemployment increased, and public finances deteriorated sharply. Many of the Ireland’s manufacturing firms, built behind protective tariffs prior to 1965, collapsed. Unemployment soared, living standards fell, the historic problem of emigration returned and, despite cuts in spending and increased taxation, public deficits and debt increased. This was the context in which Ireland’s first social pact was negotiated in 1987. Economic conditions from 1980 to 2009 are summarized in Figures 5.1–5.6. The trends in debt, gross national product (GNP) growth, employment, unemployment, and real take-home pay illustrate Ireland’s remarkable turnaround in the early 1990s, and sustained growth until 2008, with only a short interruption

90

Ireland: Two Trajectories of Institutionalization 120.00%

200 180

100.00%

160 140

80.00%

120 60.00%

100 80

40.00%

60 40

20.00%

20 0

19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08

0.00%

Total government expenditure % of GNP

National debt % of GNP

Total tax % of GNP

Total employment

Figure 5.1. Public Finances and Employment, 1980–2009 Source: Department of Finance Budgetary and Economic Statistics.

18 16 14 12 10 % 8 6 4 2

19

8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 00 20 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 06 20 0 20 7 0 20 8 09

0

Figure 5.2. Unemployment Rate, 1980–2009 Source: ESRI (ILO Standardized Rate).

in 2000–1 (see Figures 5.1–5.4). The data on inflation show that, despite participation in the ERM and then Economic and Monetary Union (EMU), strong growth and the low interest rates induced by EMU membership pushed Irish inflation above the eurozone average, creating pressures for wage increases (see Figure 5.3). The data on tax and public spending as a percentage of GNP show that, long after the fiscal correction of the 1990s, Fianna Fail–Progressive Democrats (PD) governments had a tendency to reduce taxes and the share of public spending, even though spending increased strongly in absolute terms (see Figure 5.1).

91

Social Pacts in Europe 25% 20% 15% 10% 5%

19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 8 19 7 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 0 20 2 03 20 04 20 05 20 06 20 07 20 08 20 09

0% –5% –10% –15% –20% –25% Inflation

GNP (real percentage change)

Exchequer balance

Figure 5.3. Percentage Change in Annual Inflation, GNP, and Exchequer Balance, 1980–2009 Source: Department of Finance Budgetary and Economic Statistics.

10.0 8.0 6.0 4.0 2.0 2007

2002 2003 2004 2005 2006

–2.0

1981 1982 1983 1984 1985 1986 1987 1988 1989 1980 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

0.0

–4.0 –6.0 Figure 5.4. Percentage Change in Real Take-Home Pay for Single Person on Average Industrial Earnings, 1981–2007

Finally, the data on real take-home pay and GDP growth reveal that after 2001, the construction boom and inward migration meant that Irish growth became more employment generating and labour intensive, yielding smaller increases in real take-home pay (see Figure 5.4).2 2 More detailed accounts of the Irish economy can be found in Barry (1999), Nolan et al. (2000), and NESC (1996, 2006, 2008, 2009).

92

Ireland: Two Trajectories of Institutionalization 70% 60% 50% 40% 30% 20% 10%

1930 1935 1940 1945 1955 1965 1975 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0%

Figure 5.5. The Long-Run Trend of Trade Union Employment Density, 1930–2006 Source: Roche (2008: 18–19).

700,000 600,000 500,000 400,000 300,000 200,000 100,000

06

05

04

03

02

01

07 20

20

20

20

20

20

00

20

99

20

98

19

97

19

96

19

95

19

94

19

93

19

s 80

19

70 19

19

s

0

Figure 5.6. Annual Days Lost due to Industrial Action in Ireland, 1970–2007 Source: Labour Relations Commission Annual Report 2009.

5.2.2. Political Institutions Ireland is sometimes described as having a two-and-a-half party system. The two dominant parties, Fianna Fa´il and Fine Gael, emerged from the opposing sides in the civil war that followed Irish independence in 1922. With its wide class base, Fianna Fa´il has been one of the most successful political parties in

93

Social Pacts in Europe Europe since the 1930s. It was in government, and provided the prime minister, for sixty-five out of the eighty-seven years since independence. The most common alternative has been a coalition of Fine Gael and Labour. Fine Gael, despite its conservative tradition, was a reforming party in the 1970s and 1980s. The Labour Party, formally allied to the trade unions, has typically attracted between 10 and 15 per cent of the popular vote. In recent decades, several smaller parties – the centre-right PD and the Green Party – have attracted a sufficient share of the vote to be coalition partners, and the nationalist Sinn Fein has become yet another political player. A number of factors have made Ireland more of a ‘consensus democracy’ than a ‘majoritarian democracy’ in recent decades. The electoral system – proportional representation with multi-seat constituencies – generates intra-party as well as inter-party competition and tends to yield brokerage politics with a focus on local issues (Adshead and McInerney, 2010). A second factor is the absence of strong ideological or ethnic cleavages. In considering the political context for the emergence and repetition of social pacts, it is important to note that Ireland experienced a period of political instability between 1979 and 1982. Three elections were held in an eighteenmonth period. Since 1977, no party has won an overall majority and since the late 1980s Ireland has had coalition government (see Table 5.1). During this period, the most prevalent coalition has been that involving the Fianna Fail and the centre-right PD (see Table 5.1).

5.2.3. Institutional and Organizational Conditions The Irish industrial relations system inherited at independence was based on the UK model. Quite a number of Irish unions were sections of UK unions. Management–union relationships were voluntarist and adversarial. Wage bargaining was decentralized and largely uncoordinated. As a consensus-based rather than an authoritative peak federation, the influence of the Irish Congress of Trade Unions (ICTU) within this system was fairly limited. Attempts at reform focused on the centralization of wage bargaining and the creation of new national institutions (Roche, 1997). The National Industrial Economic Council was established in 1963 and was succeeded in 1973 by the National Economic and Social Council (NESC). Between 1970 and 1980, seven National Wage Agreements were negotiated, followed by two ‘National Understandings’ (Hardiman, 1988) which saw increased government involvement in pay setting. These efforts were undermined, however, by the macroeconomic context and prevailing attitudes and behaviour. The currency link with sterling meant that Ireland imported Britain’s high inflation. Ireland also imported the intense industrial conflict that prevailed in Britain in the 1960s and 1970s. In the face of increased economic difficulties, efforts at centralized bargaining broke down in 1980. Company-level bargaining prevailed until 1987.

94

Ireland: Two Trajectories of Institutionalization In entering negotiations on a national pact in 1987, Irish unions were adopting their traditional pragmatic approach to engagement with government. Given that they could not rely on Labour Party participation in government, their strategy since the 1960s has been to engage in economic and social policy with whatever government was in power (Appendix A: Interviews). After 1987, there was a process of union merger and consolidation, in part funded by government and also arguably encouraged by the dynamics of peak level concertation. This significantly reduced the number of unions and led to the emergence of several extremely large and influential unions, particularly the Services, Industrial, Professional and Technical Union (SIPTU) that currently represents over 200,000 workers. With eight social pacts between 1987 and 2008, this chapter cannot provide a detailed account of the drivers and triggers for each individual pact. Nevertheless, the data presented in Figures 5.1–5.6 and the overview of political and union structures allow a summary account. Pacts were signed both in periods of heavy problem load (1987–93), and in times of strong economic performance (1994–2000 and 2003–8). What is strikingly constant over the entire period is the prevalence of relatively weak coalition governments. An intermediate level of union centralization in comparative terms, the limited formal power of ICTU, and falling union membership density did not prevent national pacts from succeeding.

5.3. Bargaining Dynamics in Three Social Pacts As outlined in Chapter 2, we adopt a broad formulation of interests, encompassing bounded rationality, context-specific preferences, non-unitary actors, and actors’ perceptions of power shifts. This implies that interests may extend beyond the material, to include legitimacy and public standing; and beyond narrow and short-term concerns, to include longer-term considerations about the functioning of the economy. The evidence reported below – derived from a set of interviews with key actors,3 secondary sources, the data reported above, and the policy experience of two of the authors4 – allows us to assess the

3

As part of the research for the paper on which this chapter is based, interviews were conducted with both current and former senior civil servants, trade union officials, and employer representatives, who would have been central to the negotiation of individual social pacts during this current era of social partnership including the three that we focus on in this chapter. In the text of the chapter, the individual interviewees are referred to as Interviewees A.1–A.14. A full list of interviewees is provided in Appendix A. Where necessary, interviewees were recontacted to clarify specific points that they or other interviewees had raised. 4 Rory O’Donnell is Director of the National Economic and Social Council of Ireland (NESC) and Chief Officer of the National Economic and Social Development Office (NESDO). In his work as Economist and later Director at NESC, he has prepared the NESC analyses that precede negotiations on several of the social pacts. Damian Thomas worked at the National Centre for Partnership and Performance (NCPP) from 2002 to 2010 and is currently a member of the NESC Secretariat.

95

Social Pacts in Europe relevance of the bargaining model and hypotheses outlined in Chapter 2. We focus on three bargaining episodes in the twenty-year history of Irish social pacts: the Programme for National Recovery (1987–90), Partnership 2000 (1997– 2000), and Towards 2016 (2006–16). The negotiation of the PNR agreement reestablished national level social partnership in Ireland at a time of deep-seated economic and fiscal difficulty and provided the basis for the subsequent two decades of negotiated economic and social governance. In contrast, the 1997 agreement Partnership 2000 was negotiated at a time of considerable economic and labour market buoyancy, and the external environment was very different to that of the previous three agreements in this phase of social partnership (see Figures 5.1–5.4 and Table 5.1). Finally, we selected Towards 2016 (2006–16) due to the fact that its negotiation and subsequent content was heavily influenced by both the increased salience of labour market and employment standard issues and the start of economic difficulties that were to intensify by 2008. The negotiation of all pacts took place in the prime minister’s department and were chaired by the Secretary General of that department, who is both the country’s most senior civil servant and NESC Chairman. The prime minister’s department was the guardian of the partnership programme and process.

5.3.1. The 1986–7 Negotiation of Programme for National Recovery The context and negotiation of Ireland’s first social pact has been the subject of a number of studies (Hardiman, 1992; Sheehan, 1996; Roche, 1997; Thomas, 2003; Culpepper, 2007; Hastings et al., 2007). In November 1986, the NESC Table 5.1 Social Pacts and Governments in Office 1987–2008 Social partnership programme

Party composition of government

Programme for National Recovery (PNR) (1987–90)

Fianna Fa´il minority government (elected 1987)

Programme for Economic and Social Progress (PESP) (1991–3)

Fianna Fail/Progressive Democrat coalition

Programme for Competitiveness and Work (PCW) (1994–6)

Fianna Fa´il/Labour coalition (collapsed 1994)

Partnership 2000 (P2K) (1997–2000)

Fine Gael/Labour/Democratic Left coalition

Fianna Fa´il/Progressive Democrat coalition (elected 1989) Fianna Fail/Labour coalition (elected 1992) Fine Gael/Labour/Democratic Left coalition (government change without election, 1994) Fianna Fa´il/Progressive Democrat coalition (elected 1997)

Programme for Prosperity and Fairness (PPF) (2000–2)

Fianna Fa´il/Progressive Democrat coalition (re-elected 2002)

Sustaining Progress (2003–5)

Fianna Fail/Progressive Democrat coalition

Towards 2016 (T16) (2006–16)

Fianna Fail/Progressive Democrat coalition

Towards 2016: Review and Transitional Agreement 2008–9

Fianna Fa´il/Progressive Democrats/Green Party coalition (elected 2007)

96

Ireland: Two Trajectories of Institutionalization published A Strategy for Development, which outlined the nature and urgency of Ireland’s economic and fiscal predicament. It reframed the economic problem in a way that facilitated joint exploration of a new approach to policy making. First, the report switched the focus from the annual deficit to the debt–GNP ratio. Second, it showed that the public finances were weak not only because of fiscal policy and interest rates but also because Irish growth was low. It argued that this was not only a macroeconomic phenomenon but also a reflection of developmental weaknesses. Importantly, this reformulation allowed the trade unions to draw the attention of their members to longer-term issues of economic growth and development, and not just fiscal austerity, as a route to reducing the debt–GNP ratio. The NESC’s report, while signed by the social partners, did not recommend a return to centralized wage bargaining, nor did it suggest a formal social pact. To understand how the drivers and triggers, described above, and the new cognitive frame created by the NESC report led to a formal social pact, we need to consider both the outcome of the 1987 election and the bargaining dynamics of the subsequent negotiations. Having regained power after a period of political upheaval and instability in the early 1980s, Fianna Fa´il’s leader, Charles Haughey, knew that his government had to perform on this occasion. His intention in seeking an agreement with the social partners was to create an environment in which a fiscal correction could be implemented without severe conflict (A.3; A.5). Despite his weak parliamentary position, he had a reputation for strong leadership and was supported by a strong Minister for Finance and ‘a Minister for Labour who had all of the creative powers to keep the people at the table’ (A.3). In an important move, the main opposition party, Fine Gael, offered to support fiscal correction, given that the government fell short of a parliamentary majority. The government’s overtures met with a more positive initial response from trade unions than employers. Bilateral talks with the unions proceeded for some time, with employers kept informed. The unions were certainly in a weak position when negotiations opened. Their close familiarity with the United Kingdom helped them understand that unions could be cast as ‘part of the problem’ if they did not make themselves ‘part of the solution’ (A.1). Entering into negotiations and possible partnership with government seemed the most feasible way of maintaining their influence and position in Irish society. In 1987, the decision to enter into talks was taken by union leaders who acted without an explicit mandate from the membership. The programme negotiated was put to a special delegate conference, where the majority in favour was slim. The votes in favour of subsequent agreements were more decisive, though never overwhelming. Once agreement between government and the unions was in prospect, the employers had a strong incentive to participate (A.2). Nevertheless, a return to centralized pay bargaining was an about-turn on the part of Ireland’s main

97

Social Pacts in Europe employers’ organization, the Federated Union of Employers (FUE), and its members (Quirke, 1992). Farm organizations were not central players in the 1987 pact nor, indeed, in the subsequent agreements (A.2; A.7). Indeed, farm organizations had long dealt with government on a largely bilateral basis, since the most salient issues concerned the EU’s Common Agricultural Policy. All actors had a common interest in stopping the vicious circle of economic stagnation, rising taxes, and exploding debt. On wages, the preferences of unions and employers were somewhat similar, for context-specific reasons (A.1; A.2). With unions willing to settle for a virtual wage freeze, the ‘deal clincher’ was an agreement to reduce the basic working week from 40 to 39 hours. In return, the employers sought assurance that the economy would be managed in a prudent and low-inflationary manner. A critical factor for both employers and unions was the signal that, as public finances improved, taxes on earnings would be reduced. This was seen by unions as a route to increased take-home pay, and by employers as a way of underpinning moderate pay increases (A.2). The primary status of government in the negotiations was never in doubt and it was clearly willing to push for and broker a deal (A.3).

5.3.2. The 1996 Negotiation of Partnership 2000 Several aspects of the background to the negotiation of the Partnership 2000 pact should be noted. The government contained two parties – Fine Gael and the Democratic Left – that had not been involved in the first three pacts. Both were keen to disprove the idea that Fianna Fail was the natural party of power and social partnership. A second factor was the increasing difficulty of maintaining order in public-sector pay determination. The 1994–6 pact (PCW) had attempted to improve the public pay setting system through the provision of additional pay awards to groups who participated in restructuring. The implementation of this restructuring clause however had unintentional consequences, reinforcing relativity pay bargaining and generating considerable industrial relations unrest to the extent that the government’s public pay policy effectively unravelled. Consequently, public service pay setting would become a major factor not only for this but also for subsequent pacts. A third was the gradual emergence of prominent NGOs alongside the traditional social partners, such as the Irish National Organisation of the Unemployed (INOU), which was formed in 1987, and the Conference of Religious of Ireland (CORI), founded in 1983, both claiming to speak for marginalized groups not included in Ireland’s partnership system. From the early 1990s, there was a complex relationship between the INOU and the trade union movement, since the unions claimed to speak for unemployed workers and were deeply involved in unemployment centres. On occasion, the two held divergent views regarding government job creation and local initiatives. By the time negotiations opened in 1996, there had been some

98

Ireland: Two Trajectories of Institutionalization rapprochement, and the General Secretary of ICTU, Peter Cassells, had indicated that he would not stand in the way of the INOU entering the social partnership process (Hastings et al., 2007: 151). In addition, the creation of local partnership structures in the years 1990–6 and establishment of the National Economic and Social Forum (NESF) in 19935 had allowed C&V groups to gain experience in relating to statutory bodies and government departments. Overall, it no longer seemed possible to exclude C&V organizations from the national partnership negotiations. Nevertheless, the terms on which they would enter the process, and their ability to perform in it, remained in doubt and such issues became part of the new bargaining dynamics. The 1996 negotiations were complex. The unions were seeking to balance three main issues: the desire of workers to increase real take-home pay after a period of considerable discipline from 1987 to 1996; the status of unions in the enterprise in a context of no statutory union recognition; and the future of public service pay determination, after a period of considerable conflict. Finding and delivering a common union position on any one of these issues was extremely difficult for the ICTU and the leaders of its main affiliates. However, the fact that both employers and government were disposed towards finding agreement (A.1) may have reduced the complexity of the strategic and tactical calculations to more manageable proportions. The unions had to adjust their strategy in response to the employers’ and government’s resistance to legally enforced union recognition. After intense discussion of enterprise-level partnership in the NESC, the unions settled for progress on a number of fronts. The pact established a High Level Group to find a formula for dealing with situations where employers invoke their legal right not to recognize a union – which eventually led to the 2001 and 2004 Industrial Relations Acts. The national agreement created the National Centre for Partnership (NCP), which became the National Centre for Partnership and Performance (NCPP). This partnership body, attached to the prime minister’s department, was to research and promote partnership in enterprises, both private and public. Enterprise-level ‘partnership’ was defined broadly, so as to include not only formal union–management arrangements but a range of other forms of employee involvement. In return for this approach, the unions achieved a local bargaining clause, which was not to the liking of the employers. As the final deal was put to the union delegate conference in early 1997, there were fears that it might be rejected. The membership ballot within the largest union, SIPTU, registered 65,000 votes for the pact and 49,000 against (Industrial Relations News, 1997).

5 The NESF was created with aim of building a wider national consensus on social and economic policy initiatives, particularly in relation to unemployment, inequality, and social exclusion.

99

Social Pacts in Europe A significant part of the bargaining dynamics in 1996–7 revolved around the widening of partnership. Although selected representatives had been on the NESC in the previous few years, only in October 1996 did the government create the new Community & Voluntary (C &V) ‘pillar’ as a partner to pact negotiations. The INOU resented the fact that, despite its highly visible campaign to have the voice of the unemployed heard, the government invited a wide range of organizations into the pillar. The two best organized groups, INOU and CORI, initially had divergent perspectives and policy priorities on unemployment – the former favouring a vigorous policy to eliminate long-term unemployment, the latter advocating a basic income scheme. These two actors united diverse C&V organizations around the goal of maximizing the government’s financial commitment, particularly towards meeting the rates of social welfare payment recommended by the earlier Commission on Social Welfare and other ‘social inclusion’ measures. After an initial plenary, the government created four ‘rooms’ – with government officials mediating drafts and offers between them. Two features of this institutional arrangement seem significant. It limited the ability of the C&V pillar to act as the moral conscience of the process (Thomas, 2003: 260), and it excluded the C&V pillar from involvement in the negotiations of the pay and tax elements of the pact, which was reserved for the government, the unions, and the two key business groups – the Irish Business and Employers Confederation (IBEC) and the Construction Industry Federation (CIF). The social pillar resented this approach since, in the words of the main INOU negotiator, Mike Allen, it ‘precluded any substantive three-way negotiation of the distribution of resources between pay, tax and measures to tackle social exclusion’ (Thomas, 2003: 257). With the agreement almost finalized, and the finance minister announcing the overall cost, the INOU delegation walked out of the talks on 19 December 1996 announcing that it was rejecting the pact. While the Minister for Social Welfare was willing to provide more money, he wanted to target it differently. With the INOU about to publicly denounce the pact on national radio, the government capitulated. Interestingly, the author of the walkout, Mike Allen of the INOU, reflected subsequently that the Minster might have been correct on the need to restructure welfare payments but added ‘there’s negotiation and there’s policy. And you had to walk out of the negotiations with some totems as well as with a policy’ (Hastings et al., 2007: 161).

5.3.3. The 2006 Pact ‘Towards 2016’ There was a long delay in starting formal talks on the negotiation of a successor to the 2003–6 pact as the parties tussled over high-profile employment relations issues. Indeed, when formal talks did begin, they proved to be difficult and protracted. It seems appropriate to treat the pre-talk stand-off and the formal negotiations as a single bargaining episode. Taken together, these phases were a reflection of both the increased salience of labour market and employment

100

Ireland: Two Trajectories of Institutionalization standards issues and, to some degree, the start of economic difficulties that were to become acute in 2008. The unions were increasingly concerned that the opening of the Irish labour market after EU enlargement in 2004 was facilitating the exploitation of migrant workers and undermining existing employment rights and standards. Two high-profile cases – Gama Construction and Irish Ferries – seemed to confirm for trade unions the reality of these concerns. In the former case, Gama Construction were found to have been exploiting Turkish employees working in Ireland, by retaining the balance between their low wages and the Irish state contract wages awarded to them in Dutch bank accounts. An even more important dispute for the union movement emerged at Irish Ferries in 2005. This dispute concerned the company’s plans to replace its directly employed Irish unionized workforce with lower paid agency staff from Eastern Europe (Hastings et al., 2007). Although legal, SIPTU and the ICTU considered this form of ‘job displacement’ as symptomatic of a ‘race to bottom’ in employment standards. The ICTU refused to enter negotiations on a new pact until the dispute was resolved and organized a high-profile campaign on the issue, which itself could be seen as phase of the overall pact negotiations. With public opinion significantly mobilized, a combination of high-level government involvement and work by the Labour Relations Commission resolved the dispute in a manner that enabled the unions to enter the national talks. Once negotiations opened, complex issues and strategies emerged. Increased divergence in earnings growth across sectors, reflecting migration, made pay issues difficult. Pension coverage and security became critical contested issues. The NESC’s report ‘The Developmental Welfare State’ had sketched an ambitious agenda for welfare reform and improved services to provide tailored ‘participation packages’ (NESC, 2005a). In this context, the government proposed a tenyear framework programme. Within this programme, the initial pay deal was for twenty-seven months. While struggling on the pay front, the unions did achieve a new approach to employment rights and labour standards, including the creation of the National Employment Rights Authority (NERA), which was established on an interim basis by the Government in February 2007 with a mission to secure compliance with employment rights legislation. It was this innovation that union leaders emphasized in seeking a mandate from their members for the ‘Towards 2016’ pact (Hastings et al., 1987).

5.4. Relating the Irish Narrative to the Bargaining Hypotheses Our account lends strong support for hypothesis 1 that pacts serve the interest of organizational actors who face bounds on rational calculation, form preferences in specific contexts, are constrained by internal politics and struggles, and who, in devising strategies, give greater weight to their assessment of relative

101

Social Pacts in Europe power than to established routines and norms, especially when the latter are weak. In 1986–7, the economic, political, power, and cognitive constellation meant that earlier union uncertainty about government’s resolve in making a fiscal correction to Ireland’s large public deficit and debt evaporated. Preferences were reshaped by the immediate context – a severe crisis affecting most layers of society, in which the dominant party was, for the first time in its history, a minority government and there was, after a decade of wrangling, a shared focus on the debt–GNP ratio. Although all the key actors remained non-unitary, the internal divisions that undermined earlier efforts at concertation and fiscal correction were less salient. Finally, the Irish unions’ awareness of their weak position led them to see that their medium-term interest lay in a pact, even if their gains from a short-term deal were meagre. To explore the relative significance of changes in relative bargaining power, and the nature of the shared analysis of economic conditions that emerged, we interviewed several of the key actors involved in the 1986–7 negotiations. Their answers underline the complex interdependence of the power and cognitive dimensions. First, they distinguish between the shared view of the debt-crisis on the one hand, and the agreement on a national pact – encompassing wage developments, fiscal policy, taxation, and other policies – on the other. The latter was not part of the shared understanding stated in the 1986 NESC report but the outcome of a bargaining process in early 1987. Indeed, both of these should be distinguished from the deeper and wider shared understanding that subsequently emerged as an outcome of further deliberation, interaction, and bargaining as partnership became institutionalized. Second, the shared analysis of the economic problem itself influenced preferences and the bargaining process, including the way relative power was used. The analysis gave the government ‘a sense of objective grounding’ (A.7) and added a ‘moral authority’ to its weak electoral mandate (A.3). Union leaders involved at the time remain ‘in no doubt that the first partnership agreement would not have happened without the 1986 NESC report’. They believe that the NESC analysis provided a framework within which they were able to achieve an agreement that they could sell to their membership; in particular the idea that economic and employment growth would, in the medium term, be the main mechanism to reduce the debt ratio (A.1; A.3; A.5). They could therefore risk communicating the idea to workers that ‘nominal wage growth below the expected rate of inflation could be compensated for by reduced tax rates and an easing of the fiscal crisis’ (A.3). The other two bargaining episodes discussed above are also consistent with the first hypothesis. In 1996, the government had a strong interest in realizing a pact. Although the strengthening labour market might have given unions an exit option, they had to manage an unstable public pay bargaining regime and they wanted to achieve something on enterprise-level partnership. Employers wanted continued wage discipline and predictability, so long as they did not

102

Ireland: Two Trajectories of Institutionalization have to concede on statutory union recognition. The interests and strategy of the new C&V pillar were perhaps the least predictable. The C&V organizations wanted to show that they could play the partnership game as well. They quickly defined their joint interest by reference to the size of the social inclusion budget. But there remained differences among them on what precisely defined a good bargaining performance, perhaps reflecting the different time horizons and discount rates of these groups. Although the bargaining dynamics were much more complex and protracted in 2005–6 (as we discuss below), our analytical approach allows us to see why the actors defined the ‘Towards 2016’ pact as in their mutual interest. In particular, despite a booming labour market, much of what the unions wanted to achieve on labour standards and bargaining rights was dependent on government policy, new legislation, and improved public institutions. The Irish case confirms that social pacts involve intense internal consultation and negotiations. This was particularly so in the union movement. In 2005–6, public-sector unions had done well in the first Public Service Benchmarking exercise, under which pay for public service jobs were benchmarked against comparative positions in the private sector, and continued to see pacts as in their interest; this allowed key actors in the biggest union, SIPTU, which has a large membership in both the public and private sectors, to place the greatest emphasis on private-sector bargaining and labour standards issues. Given its size, it could also influence ICTU’s strategy in that direction. In adopting this strategy, and holding out for a better deal, the unions knew that the government had a strong interest in the continuation of the pacts, particularly with an election pending in 2007, and was willing to deploy budgetary and other resources to achieve a deal. The second hypothesis is that during the negotiation of social pacts, actors’ strategies are likely to depend on their perceptions of their relative power. We saw that, in 1986–7, unions were acutely aware of their limited relative power, given the economic and political situation. But, as our account illustrates, the employers also found themselves pressured by government to join in. The role of perceived power in the bargaining dynamics in 1986–7 should be understood in the context of our findings on bounded rationality, context-specific preferences, and the degree of unity of actors. Those factors had all inclined actors towards the view that they shared a highly negative situation and could all gain from a correction of the public finances. This positive-sum perception of the objective situation is confirmed by one participant, who says ‘there was a strong sense that everyone at the table, with the possible exception of the farmers, had something of value to put into the pot and that if they all did it together then everybody would be better off’ (A.3). In our view, this perception of interdependence, itself one of the determinants of power (as explained in Chapter 3), is important for understanding the interaction between the relatively powerful actors, the government and employers, and the relatively weak actor, the trade unions.

103

Social Pacts in Europe In 1996, the employers’ strong concern to continue with the wage discipline of the early partnership years made them receptive to union initiatives on enterprise-level partnership, but only within limits set by the powerful group of non-union US firms within IBEC. In 2005–6, unions were able to press the government for commitments on bargaining rights and a range of employment relations issues. Although these issues moved to centre stage largely because of migration, with its implied threat to union representation, a strong labour market and the perception that the government, and maybe even the employers, had limited exit options allowed the unions to adopt a vigorous bargaining strategy. Likewise, the impact of internal organizational dynamics on the relative power of actors varied. In 1987, the depth of the crisis muted divisions within the unions and within the government. Later, significant tensions within the union movement (between the public and private sectors) would seem to have strengthened the unions’ perception of their relative power. In particular, with a perception that public-sector unions had done relatively well, and a buoyant labour market delivering employment and earnings growth, SIPTU was able to place issues of labour standards and private-sector bargaining rights at the centre of overall union strategy. Public concerns arising from the Gama and Irish Ferries cases, and the perceived effect of large-scale immigration on working conditions, allowed these intra-union tensions to be leveraged in the unions’ favour. The third hypothesis is that in the course of negotiations, actors adjust their strategies so as to, first and foremost, optimize their responses to incentives and constraints provided by others; and second, to bring their strategies into line with their expectations about the economic situation. The bargaining dynamics of 1986–7 are strongly supportive of this hypothesis, in a fairly obvious way. It is worth adding that the ability of unions and employers to respond to incentives and constraints provided by others was strongly shaped by the tripartite nature of the core pacts. Government played a critical role. It could facilitate both unions and, indirectly, employers with the promise of income tax reductions. It could meet union concerns with policy and legislative measures, subject to certain limits. Once the social pillar joined the process, unions could rely on it to bargain hard on welfare issues, although there were sharp differences on some of these. In the 1996 bargaining episode, unions adjusted their strategic stance on enterprise-level partnership, backing away from statutory union recognition or co-determination, as the positions of government and employers became clear. In the long bargaining episode of 2005–6, government and the employers adjusted their strategies on labour standards issues, recognizing the need for legislative and institutional reform, in response to popular, political and union pressure generated by the high-profile Gama and Irish Ferries cases and anxieties about the impact of immigration.

104

Ireland: Two Trajectories of Institutionalization The fourth hypothesis is that the more a particular actor perceives its relative power to be increasing, the more likely it is to persist in negotiations and try to push its preferences, even at the cost of a breakdown. Of the three episodes discussed above, the one that lends most support is the 2005–6 negotiation of the ‘Towards 2016’ pact, given the unions’ delay in entering formal pact talks and the protracted negotiations. The brinksmanship of the INOU in the 1996 negotiations might also be read as evidence of pressing demands even at the risk of breakdown. But there is limited general evidence that the more powerful party seeks to push its preferences through, even at the cost of breakdown. This seems true both in the 1986–7 episode and when the process had become institutionalized. The presence of three or more parties to the pact negotiations made it less likely that a power advantage would be pressed to the limit. Not only were both unions and employers happy to encourage government to lubricate a deal with financial or other commitments, but pressing a power advantage to the limit would often require the collusion of the third party, something that is not generally forthcoming. Neither can the breakdown of crisis talks in early 2009 really be read as an example of that dynamic, as will be discussed in our concluding section. The final hypothesis is that the outcomes of negotiations, and their substantive outputs, are likely to reflect by and large the preferences of those actors who perceived an increase in their relative power. While the three sets of negotiations we have described lend some support to this hypothesis, a number of qualifications are warranted. In 1987, the weakest party, the trade unions, clearly settled for wage and fiscal policies that were painful. But, pressed by government, the employers conceded a one-hour reduction in the working week that shocked some firms. Such concessions could, of course, be common in pacts that still, overall, reflect the preferences of the powerful actor. But our interviews suggest that the cognitive frame, influenced by various factors, including deliberation and analysis in NESC, had a role not only in shaping initial dispositions but also in explaining the play of power in the negotiation of the first social pact. Both union and government actors say that shared analysis in the NESC meant that, despite big differences in bargaining power, an agreement was possible. A key union leader puts it as follows: ‘because of the NESC analysis we had a wide enough canvas to act, despite our weak position. Without that broad canvas, our weakness would have showed more. We came up with all sorts of ways of covering the cracks’ (A.1). The new account of the economic situation ‘enabled us to convince our members that the partnership agreement was creating a process that would allow union concerns to be addressed eventually, even if the immediate deal was extremely modest’ (A.1). Indeed, some see that broad canvas as also being critical for those actors which enjoyed a strong bargaining position. ‘The stronger party has to find a shortterm victory that can also yield long-term benefits. Sometimes this means that they have to help the weaker party out of a corner – but in such a way that the

105

Social Pacts in Europe weaker party know they have been let out of a corner’ (A.1). As one key actor put it, ‘In all cases, it is power and ideas’ (A.1). In later pacts, somewhat different qualifications arise. As the pacts become more encompassing and more institutionalized, it becomes harder to identify which actor’s preferences are most reflected in the agreement and, in any case, each institutional actor has interests in a range of areas. In addition, the repeated nature of the pacts, and the intense interaction of the actors (especially employer, unions, and government officials) between pact negotiations, meant that pushing to have a temporary advantage fully reflected in a pact might actually be counterproductive. This is not to deny that certain groups have managed to have their interests fully served by Ireland’s social pacts. Public-sector unions are the group that most obviously springs to mind. But, interestingly, this would not seem to turn on the kind of increases and decreases in relative power that occur at the time of pact negotiations. It seems more likely to be a longer run factor and, in that respect, one that should be discussed under institutionalization, rather than bargaining dynamics.

5.5. Institutionalization As pointed out in Chapter 4, ‘institution’ means a social order or pattern of behaviour that has attained a certain persistence or regularity; ‘institutionalization’ denotes the process by which this occurs. Visser and Rhodes (Chapter 4) identify several dimensions of institutionalization or deinstitutionalization: (a) repetition versus abandonment, (b) integration versus disintegration of pacting institutions, and (c) expansion versus reduction of the number of policy areas covered by the pact. The evidence suggests that there were two broad trajectories of institutionalization in Ireland’s twenty-year experience with social pacts. First, a ‘governance’ trajectory, that is the institutionalization of a ‘partnership’ approach to public policy and governance in an increased number of policy spheres; and second, an ‘employment relations’ trajectory, that is the transition to a new pattern of wage bargaining and employment relations. We describe each of these here, before discussing the mechanisms of institutionalization.

5.5.1. The Governance Trajectory The governance trajectory contained a number of strands: (a) repetition and initial expansion; (b) the emergence of institutions, processes, and norms for a partnership approach to public policy in a wide range of areas; (c) widening to include the C&V pillar; (d) the creation of partnership institutions and processes at local level; and (e) the partnership approach to the EU Structural Funds. We briefly describe each of these.

106

Ireland: Two Trajectories of Institutionalization In 1990, when the 1987 pact expired, repetition was by no means automatic. But the drivers and triggers that prompted the 1987 pact largely applied in 1990 as well. The NESC’s 1990 analysis made the case for continued national-level negotiation of wages and other distributive parameters. The ICTU balloted the union membership on entering talks and, although the mandate in 1990 was slim, as one union official explains ‘if we chose to revert to type and exit the process, we ran the risk of being crucified over the issue of unemployment’ (A.3). The most important strand of the governance trajectory was the gradual creation of institutions, processes, and norms for a ‘partnership’ approach to public policy in a wide range of policy areas. The first pact created a Central Review Committee which met quarterly to review implementation. As the policy scope developed, government and the partners created other specialized committees, working groups, and task forces. Changes in the way public policy was made and implemented are noted by many of those who have studied Irish social partnership. Many authors identify elements of ‘networked’ and ‘participatory’ governance.6 Reviewing the evolution of social partnership since 1987, O’Donnell argues that there is a real sense in which partnership was not just about changing but also building a public system (O’Donnell, 2008). Thus, partnership involved efforts to create systems of policy making, monitoring, and delivery in areas where the Irish state was both weak and thin, including local development, regional planning, training, and many areas of social policy, particularly childcare, elderly-care, health, and disability. This point will be taken up in the conclusion. Institutionalization along the governance trajectory is underlined by the strong desire on the part of new groups to attain ‘social partner status’. As we have seen, in 1996 the pacts were widened to include a ‘C&V pillar’.7 Participation in partnership was contested among the social NGOs (McCashin et al., 2002; CWC, 2004). In 2003, the National Women’s Council and the Community Platform voted to reject the negotiated pact. In response, the government decided that only organizations that partake in partnership can participate in public bodies, and these groups were not reappointed to the NESC and the NESF. Over time, the C&V pillar built strong relationships with civil servants, especially in the prime minister’s department, and they enjoyed growing influence over the social policy elements of the partnership programmes. Clearly, the triad of unions, employers, and government remained the key component of the partnership process in Ireland, or, as one senior participant observes: ‘At the end of the day, the core relationships are between government, employers and unions. You could have a social partnership agreement with just them, but if any one of them were missing, it wouldn’t be a social partnership agreement 6

See for example Adshead and McInerney (2008), Hardiman (2006), and O’Donnell (2008). Larragy (2006) describes the ‘pillar’ and documents the process by which the C&V sector acquired social partner status (see also CORI, 1999; Connolly, 2007). 7

107

Social Pacts in Europe [–] that’s the power axis’ (A.10; see also Roche, 2007b). While this is clearly true, it may still be the case that partnership was reconstitutive for the C&V organizations (Baccaro and Simoni, 2008). That is, their acquisition of social partner status allowed them to achieve influence on a number of key policies that they would not have had as pure lobby groups. The fourth strand of the ‘governance’ trajectory of institutionalization was the creation of partnership institutions and processes at the local level. Starting in 1990, the government established local partnership companies to seek innovative and multidimensional approaches to long-term unemployment and social exclusion (Sabel, 1996; Adshead and Quinn, 1998). Over time, the government sought to create closer links between these entities and local government. A final strand of the governance trajectory of institutionalization were the new structures designed to involve the social partners, as well as a range of regional and local actors, in the planning and monitoring of the EU’s Structural Funds (Adshead and Quinn, 1998).

5.5.2. The Employment Relations Trajectory A second trajectory of institutionalization of social pacts was a gradual, multifaceted change in employment relations. At its centre lay a new system of joint analysis, centralized pay bargaining, encompassing agreements between employers, unions, and government and the creation of a range of new institutions to handle industrial relations conflicts. These distinctly institutional developments both created and responded to a set of changes in the economic and employment relations landscape, including transition to ERM and EMU, the EU internal market, a decline in conflict, a dramatic increase in total employment, especially of women, technological and occupational upgrading, a fall in union density (see Figure 5.5), and a growth in the volume and scope of labour legislation, much of it prompted by EU directives. While some of these changes – such as the reduction in days lost to industrial disputes (see Figure 5.6), EU legislation, and increased female participation – may have occurred without social partnership, and are observed in other countries, we believe that these and other changes in the context and content of Irish employment relations should be seen as a part of the institutionalization of social pacts in the period 1987–2007. The fact that social pacts managed and responded to this significant departure from the earlier employment relations regime meant that Irish employers and unions had a strong incentive to negotiate further pacts, if they wished to continue their joint handling of ongoing issues. To see the role of Ireland’s pacts, consider the contrast with, for example, the Netherlands – where there was a default set of relations between employers and unions, and pacts were reserved for crisis contexts or step changes in the regime (see Chapter 9). In Ireland in the period 1987–2007, effective handling of employment relations seemed linked to pacts; in the Netherlands, it existed more or less independent of pacts.

108

Ireland: Two Trajectories of Institutionalization The net effect was that employment relations in 2007 looked quite different from thirty years earlier. A range of developments characterize the gradual move away from an adversarial and decentralized system of industrial relations. The most striking was the establishment of a system of centralized pay determination in the three-yearly social pacts. The actors describe the national wage deal as the ‘glue’ that held partnership together (Sheehan, 1996; Roche, 1997). Secondly, the period 1987–2008 witnessed the gradual emergence of a more robust and flexible network of public labour market institutions concerned with the management of employment relations issues. To the long-standing, Labour Court was added the Labour Relations Commission (LRC), the National Implementation Body (NIB), and the NERA. In their work, these bodies placed emphasis on adhering to the terms, and indeed spirit, of the various social pacts. This institutionalized the social pacts, by implementing and extending their terms and processes across enterprises and organizations, and legitimized the centralized collective bargaining regime. Thirdly, from Partnership 2000 onwards, there was a series of joint union– employer–government initiatives designed to promote a more cooperative, partnership-based, employment relations culture. In 2001, the NCPP was established, while in 2005 the government launched a National Workplace Strategy to foster partnership-led change and innovation in Ireland’s workplaces. Although the success and coverage of these initiatives is debated, they did constitute a new approach to workplace development (Roche and Geary, 2001; Roche, 2007a). Fourthly, there has been an exponential growth in the volume and scope of employment legislation. New laws and codes of conduct now cover almost every aspect of the workplace relationship, including redundancy, consultation, information, contracts, occupational sick pay schemes, pregnancy, age and sex discrimination, maternity/paternity leave, health and safety, and working time (Mulvey, 2006). This has created a stronger rights-based dimension in Irish employment relations (Teague, 2005). The impetus for much of this legislation emanated from the EU, though consultative and, at times, delegated approaches to the transposition of various EU Directives into Irish law were incorporated into relevant social partner agreements. Towards 2016 also contained a broad range of legislative and policy commitments designed to develop a new approach to employment rights and labour standards. Fifthly, there was a dramatic decline in industrial disputes to historically low levels (Teague and Thomas, 2008). Although a decline in strike activity in the private sector has been a trend in all European countries, securing relative labour market peace in both the public and private sectors was strongly associated with the activities of the state’s public dispute resolution agencies – the LRC, Labour Court, and the NIB – and various formal and informal agreed social pact mechanisms (see Figure 5.6; Teague, 2005; Mulvey, 2006; Roche, 2007a).

109

Social Pacts in Europe Sixthly, the economic context and content of employment relations was transformed, with the move away from sterling, through the EMS, to the euro and the implementations of the EU’s single market – which were themselves the subject of successive pacts. A seventh aspect was change in the labour market itself, with increases in total employment, female participation, the proportion of non-national workers, levels of educational attainment and flexibility in working hours. During this period, total union membership increased, but due to a failure to keep pace with the level of employment growth overall density declined between 1987 and 2007, from approximately 55.8 to 35.3 per cent overall (Roche, 2008). This decline was particularly acute in the private sector where density is estimated to be approximately 25 per cent. Finally, there was some change in employment relations in the public sector. The most notable development was the move away from internal relativity-based bargaining towards a new system of pay determination based on benchmarking public service jobs against comparator groups in the private sector. The first round of this approach, in 2003, awarded relatively large increases. It was strongly challenged by the secondary teachers’ union ASTI, while the second Benchmarking exercise faced opposition from the Irish nurses unions, the INO. The government’s capacity to resist both challenges was enhanced by support from other unions and the ICTU. The willingness and ability to jointly achieve a degree of discipline over traditionally powerful public-sector unions is further evidence of institutionalization (Roche, 2007b). There is less evidence of the embedding of a new approach to change, modernization, and higher performance within the Irish public sector (O’Donnell and Teague, 2000; NCPP, 2003, 2004; OECD, 2008). In addition, in the context of deteriorating economic conditions, many argued that public pay exceeded private pay and it became a focus of budgetary retrenchment. In describing this ‘employment relations trajectory’ of institutionalization, we are aware that, as in other advanced economies, what emerged in the years from 1987 to 2007 was a complex environment comprised of diverse, dynamic, competing, and hybrid employment relations patterns in which it is increasingly unlikely that any one change process will come to dominate (Katz and Darbyshire, 2000). Nevertheless, we believe that the accumulation of interlinked changes in institutions, practice, context, and relationships – involving unions, employers, and government – should be seen as part of the institutionalization of social pacts. Like all institutions, it is not immune to deinstitutionalization, arising from changes in context or interests, as we discuss in the conclusion.

5.5.3. Synergies and Tensions between the Two Trajectories of Institutionalization Did these two trajectories of institutionalization help or frustrate each other? It seems clear that in the early years, there were synergies between the two. Some

110

Ireland: Two Trajectories of Institutionalization key developments on the policy side, both substantive and procedural, supported the partnership approach on the employment relations side. For example, enhanced active labour market policies and the commitment to income tax reductions made it easier for unions and employers to agree on and comply with wage discipline and facilitate industrial peace. Yet major potential synergies between public policy and employment relations were not realized, for example in training and pensions. Furthermore, many actors were disappointed with progress in policy areas that may indirectly support business and employment, including childcare, welfare reform, improved public services, educational inequality, housing, and other dimensions of the social wage, despite significant increases in public expenditure (NESC, 2005). While the attitude of public servants and ministers explains limited reform in these areas, it also seems likely that in the past decade the employers and unions gave higher priority to core industrial relations issues, such as pay, tax, bargaining procedures, and employments rights. Furthermore, the fact that, overall, there was much less change in the public policy system than in the labour market and in private-sector employment relations was, in large part, a result of the overall settlement within the national pacts – in two ways. First, within an otherwise dynamic system of social partnership, dealing with a society undergoing profound change, the public-sector unions managed to preserve the core elements of their traditional reward system and, most of all, their virtual veto on change. Second, the overall settlement contained an increasingly corrosive contradiction – the use of tax reductions to lubricate national wage agreements – which somewhat limited the ambition to build a system of public services suited to a high-participation, high-value-added, small European society and economy. It should be said that the policy of continuing to reduce taxes after 2000 was determined primarily by government and shaped by electoral considerations rather than in negotiations within the partnership process (NESC, 1999, 2009a).

5.6. Mechanisms of Institutionalization Chapter 4 identifies four conceptual approaches to understanding the mechanisms of institutionalization: functionalist, utilitarian, normative, and power distribution. These are not mutually exclusive and in the Irish case it is very difficult to reject any of them entirely. The institutionalization process described above would seem to have been driven to a degree by the functional requirements of the economy and political system, by utilitarian considerations, and by the interests of powerful actors in continuing partnership. The normative force of the partnership approach was more qualified. There is some evidence that the repetition and institutionalization of social pacts in Ireland met system needs, in two ways. First, our respondents see the

111

Social Pacts in Europe pacts as helping Ireland to solve a high problem load between 1987 and 1993 and to conform to the disciplines of the ERM, the EMU Maastricht membership criteria, the internal market, and EMU itself (A.1; A.2; A.8; NESC, 1996; O’Donnell and O’Reardon, 2000; O’Donnell, 2008). Second, the agreement of eight successive pacts – in both crisis conditions and growth and involving a range of parties in government – might suggest that pacts served a functional requirement of Irish politics and government in the entire period from 1987 to 2008. This hypothesis should be considered if utilitarian, normative and power factors cannot provide an adequate explanation for the continuation of pacts in such varied economic and political conditions. Hancke´ and Rhodes (2005) argue that the continuation of social pacts in Ireland and some other countries is explained by the absence of solid ‘microfoundations’ for wage bargaining and training; if they existed and worked effectively, they suggest, then national social pacts might not be necessary. To the degree that the Irish ‘employment relations trajectory’ as we describe it displays ‘weak micro-foundations’, we affirm their argument. But a feature of this new regime in Ireland – and, we posit, not only in Ireland – is a somewhat increased role for the state in underpinning employee rights and benefits and in dealing with new industrial relations challenges that are not easily addressed by unions and employees at the micro or even national level. An example of the former is the increased salience of individual employee rights, defined in EU and national law. An example of the latter is the challenge thrown up by increased labour migration, which cannot be easily addressed without government (and maybe even EU) involvement, let alone at the enterprise level (NESC, 2006: 169). We do not claim that the steps taken by the Irish actors constitute ‘vertical integration’ of the industrial relations system, of the type described by Hancke´ and Rhodes. But it does seem sensible to view such joint action as institutionalization and, perhaps, integration. In addition, if our account of the governance trajectory is valid, viewing Irish social partnership exclusively through the lens of the labour–capital relationship, though important, may be incomplete. The utilitarian perspective posits that institutions persist because rational actors believe that their investment in them yields benefits that outweigh the costs of abandoning or transforming them. Social pacts in Ireland were undoubtedly associated with satisfactory overall economic and associational outcomes from 1987 to 2008, and this is one of the reasons why they were repeated (Thomas, 2003; Roche, 2007b). Having mentioned the advantages as perceived by government and the employers, it is worth summarizing union’s assessment of the benefits of social pacts. Since 1987, the majority of public service unions – in conjunction with the highly influential ‘super’ general union SIPTU (which has members in both the public and private sectors) – have functioned as the core foundations of the intra-associational coalition that has supported social pacting. The increased influence of the public service unions

112

Ireland: Two Trajectories of Institutionalization within the ICTU over the 1990s also afforded an important structural push in favour of continued engagement in peak level concertation. Despite this, a number of public service unions – for example, the Civil and Public Service Unions (CPSU), the Prison Officers Association (POA), and two of the main teaching unions, the Association of Secondary School Teachers (ASTI) and the Teachers Union of Ireland (TUI) – have voted against certain agreements (see our discussion further below). A core of British-based unions and several of the Irish craft unions retained their traditional opposition to centralized pay determination, with the Amalgamated Transport and General Workers Union (ATGWU) in particular acting as the main fulcrum of opposition. Over time, this dichotomy weakened as several of the ‘British-based’ unions – such as the Manufacturing, Science and Finance Union (MSF, which subsequently became Amicus), the Union of Construction; Allied Trades and Technicians (UCATT), and the National Union of Journalists (NUJ) – and the influential Irish craft union Technical Engineering and Electrical Union (TEEU) have supported various agreements, albeit signalling that their support was ‘conditional’. Despite tangible and periodic differences in the bargaining postures of unions during the twenty years of social partnership, intra-organizational divisions have never evolved into full-blown schisms capable of weakening the ICTU’s capacity to engage in centralized concertation. In part, this reflects a failure of opponents of individual pacts to articulate a viable alternative to peak level concertation. It is also reflective of the democratic legitimacy afforded to the various social pacts within the ICTU. Overall, the voting preference of most unions remained inherently pragmatic and was strongly influenced by their consideration of the relative balance of advantage accruing from a ‘negotiated agreement’ rather than any explicit ideological or philosophical stance in relation to social partnership (Roche and Ashmore, 2002; Thomas, 2003). A further utilitarian factor driving institutionalization was investment in inter- and intra-organizational ties and networks. In part, this reflected the challenge of implementing overarching agreements. An important feature of the Irish pacts was that the government and its agencies remained the key actor in most of these institutions and networks. A normative perspective suggests that institutions persist when they embody norms and beliefs that are shared, widely accepted, and seen as appropriate and just. Among many, the ‘partnership’ approach acquired what March and Olsen (1995) call a ‘logic of appropriateness’. This was reinforced by the mandate the unions achieved through membership ballots which lent social pacts a strong degree of democratic legitimacy (Baccaro, 2000). While the normative power of social pacts – in which the partnership approach was seen as both appropriate and legitimate – was considerable, it was, of course, disputed by some. Unions representing lower paid workers – Mandate (the Union of Retail, Bar and Administrative Workers) in the private sector and CPSU in the public sector –

113

Social Pacts in Europe have mostly voted against the pacts because of the emphasis on uniform percentage wage increases. In addition, while social NGOs became keen participants, they maintained their ethical critique of the distributive outcomes of pacts. Community groups, even those involved in the pacts, consistently argued that they produced unjust outcomes, since welfare rates, though rising consistently, increased more slowly than median real take-home pay. The power-distributional approach suggests that social pacts are likely to become institutionalized when powerful actors support their reproduction. The Irish case is consistent with this hypothesis. Taking all the evidence into account, we would consider that the organizations that most desired the repetition of social pacts were government and unions representing public-sector workers. The central union organization, ICTU, was a lead actor in favour of pacts and its effective power increased due to partnership, despite little change in its formal powers or position vis-a`-vis affiliate members (Thomas, 2003; Roche, 2007b). Another powerful actor, the central employers’ organization IBEC, was also generally supportive of partnership, as long as the terms of the pay agreements could be sold to firms and statutory union recognition was not conceded. Once it attained social partner status, the less-powerful C&V pillar was strongly in favour, although some organizations opted out. The least enthusiastic organizations were the old British-based unions, several of the Irish craft unions, and unions representing low-paid workers. The most striking aspect of this ranking is that government is identified as the actor that most consistently wanted a continuation of social pacts. Although government was not a unitary actor, the social democratic, technocratic, populist, and neo-liberal elements within it each saw advantages in partnership in the period 1987–2007.

5.7. Conclusion Our analysis supports the argument advanced in Chapter 3 that the existence of a serious problem load does matter as a trigger for social pacting, but only in certain circumstances – specifically, where unions have a certain degree of strength and where government is relatively weak. The Irish case suggests that the institutional and organizational ‘prerequisites’ for pacts should be seen as partly endogenous. Thus, while standard measures would not show Irish unions or ICTU as ‘strong’, and union density fell over the period 1987–2008, the effective authority of the ICTU and the larger unions increased over time, largely because of social partnership. The three bargaining episodes analysed above confirm the relevance of the broad formulation of interests and power set out in Chapter 2. For a variety of reasons, Irish governments wanted social pacts throughout the period 1987–2008. In different ways in 1987, 1996, and 2005–6, unions and employers saw a further pact as being in their interest. Indeed, the strategies adopted

114

Ireland: Two Trajectories of Institutionalization certainly depended on perceptions of relative power – where power is defined by organizational resources and dynamics, existing institutions, and perceptions of interdependence. As regards the adjustment of strategies in response to other actors, as in hypothesis 3, it is harder to make do with a two-party bargaining model. From 1987 to 2008, government played a critical role in reconciling the positions of employers, unions, and others. The increasing length and difficulty of pact negotiations is a notable feature of the Irish story. It coincided with the increased salience of issues concerning private-sector labour standards, bargaining rights, and worker representation. But the Irish case lends little support to the hypothesis that the more powerful party seeks to push its preferences even at the cost of breakdown. This also means that the evidence cannot provide general support for the fifth hypothesis on bargaining dynamics, that the outcome and output of pact negotiation will reflect the preferences of the actors that have perceived an increase in their relative power. Repeated pacts, and intense ongoing dealings between employers, unions and government, meant that pressing a temporary power advantage to the limit was unlikely to serve an organization’s wider or longerterm interest. This is not to deny either the role of power as a key mechanism driving the institutionalization of social pacts or that powerful actors use the pacts to pursue their particular interests. The institutionalization of pacts in Ireland would seem to have been driven to some degree by the functional requirements of the economy and political system, by the return on investments in pacts and networks, and by the interests of powerful actors in continuing partnership. The normative force of the partnership approach was more qualified. Government and public-sector unions emerge as the actors that probably had the greatest desire to see the institutionalization of social pacts. We do not see this as contrary to the fuzzy set analysis of Chapter 3. Even a ‘weak’ government will generally be a very powerful actor in a stable European democracy. In analysing the Irish case, it is tempting to invoke a ‘small-country effect’. We suggest that it is necessary to distinguish three dimensions of the small-country effect, often conflated: the obvious familiarity of actors in a small country, the focus of small countries on supply-side policies which require cooperation and engagement of actors, and the shared commitment to a national project – economic, political, social, or cultural. In the period 1987–2007, all three were evident in Ireland to a significant degree. And yet the special characteristics of the Irish case make it different from both the ideal-type of deliberative, consensus societies and the traditional small-country ‘neo-corporatism’ of Scandinavia and Austria. Our analysis of the emergence, evolution, and institutionalization of pacts allows clarification of the role and nature of ‘shared understanding’, which frequently figures in accounts of Irish partnership. As noted in our account of the 1986–7 bargaining episode, it reaffirms the long-held view that shared understanding is not the starting point or precondition of pacts but an outcome

115

Social Pacts in Europe of a process characterized by tough bargaining (NESF, 1997; O’Donnell, 2001; Avadigic et al., 2005). But our interviews also show that Irish actors believe that the shared analysis of the economic situation shaped the bargaining dynamics and even the play of power. Overall, the analysis confirms the value of the broad conception of interests and power – encompassing bounded rationality, context-dependent preferences, non-unitary actors, institutions and perceptions of independence. This broad conception of interests and power allows for the possibility that informational, cognitive, and discursive factors and capacities within unions, employers’ organizations, and NGOs shape their willingness and ability to make social pacts and the government’s reliance on them in seeking its objectives (Culpepper, 2002). When applied to rich contextual data, this broad approach yields an understanding of social pacts in a given country in a given period, if not an explanation of their emergence and institutionalization (March and Olsen, 1995; NESF, 1997: 35; O’Donnell, 2001: 312). In Chapter 4, Visser and Rhodes argue that pacts based on shared understandings regarding procedures and policy areas for concertation are likely to become institutionalized over time and assume some of the characteristics of a ‘consensus society’, approximating the traditional neo-corporatism found in Scandinavia and Austria from the 1950s to the 1990s. The Irish case should be distinguished from those examples. If the Irish system seems less stable and selfcontained than traditional neo-corporatism – given the absence of compulsory membership of interest organizations, the prevalence of high-technology US firms, and their high level of involvement in global networks – the form taken by social solidarity also seems to be rather different. It should be noted that our identification of a ‘governance trajectory’ does not imply that Ireland has created effective systems of ‘new’, ‘reflexive’, ‘deliberative’, or ‘participatory’ governance. Despite significant social partner influence on economic and social policy there was continuity in many aspects of Ireland’s public system. This had both public policy and industrial relations dimensions. While the policy scope of the pacts increased, participants noted the tendency of government to write existing policy initiatives and statements of intent into the three-yearly partnership agreements. In other cases, the lack of an ambitious government reform agenda set limits to what the partnership approach to public policy could achieve. The degree of departure from existing policy processes (hierarchical and clientelist) – and adoption of participative, deliberative, and problem-solving modes – differed considerably from one area to another. Across different policy areas – and even within them – Ireland would seem to have created a mixture of four modes of policy making: centralized bureaucracy, corporatist political exchange, political decision-making (itself reflecting various combinations of policy goals, electoral calculation, and clientelism) and, it is true, some elements of ‘new governance’. Social pacts, and

116

Ireland: Two Trajectories of Institutionalization their institutionalization, were one important factor in the evolution of this complex, highly imperfect, and contested public governance system. The global crisis of 2008–10 had a profound effect on the Irish economy and, through that, on a social partnership system with the characteristics described in this chapter. A pact was agreed in September 2008, but rendered near redundant, as the collapse of Lehman Brothers pitched the global financial system into crisis. In the ensuing global recession, Ireland experienced a greater contraction than almost any other EU or OECD member state and, most importantly, an acute fiscal crisis. In late 2008 and throughout 2009, the partners analysed the crisis in the NESC and the Fianna Fail–Green Party coalition invested much political capital in seeking a partnership response (NESC, 2009a, 2009b). Both NESC deliberations and government-led negotiations hit disagreement on fiscal policy and the role of wage reductions. Unable to get union agreement, government unilaterally increased taxation and reduced public pay. The suspension of partnership in 2009 was certainly a major event in the evolution of social pacts in Ireland. There are indications that employers and unions wish to continue the institutional pattern of joint management of employment relations built in the institutionalization of pacts over twenty years. The depth of public policy challenges, and the critical need to achieve improved public services with less resources, means that a return to a partnership approach – embodying a new relationship between the public policy and industrial relations agendas – is possible. This depends primarily on the willingness and ability of the government to identify institutional arrangements for the transformation of Ireland’s public system.

Appendix A: Interviews A.1 A.2 A.3 A.4 A.5 A.6 A.7 A.8 A.9 A.10 A.11 A.12 A.13 A.14

Former General Secretary, Irish Congress of Trade Unions Former General Secretary, Irish Business Employers Confederation Secretary General, Department of the Taoiseach General Secretary, Construction Industry Federation Former General Secretary, Irish Farmer’s Association General Secretary, Irish Cooperative Society General Secretary, Irish Creamary Milk Suppliers Association National Women’s Council Chambers of Commerce of Ireland, Small Firms Association Irish Congress of Trade Unions Negotiator, Irish National Organisation of the Unemployed Former Director General, Irish Business Employers Confederation National Youth Council

117

6 Italy: The Rise and Decline of Social Pacts Marino Regini and Sabrina Colombo

6.1. Introduction This chapter discusses the emergence and the partly failed institutionalization of social pacts in Italy since the end of the 1970s. Prior to that date, conditions in Italy did not make concertation feasible. Italian social pacts were signed in periods characterized by quite different structural and institutional conditions, but we can highlight some general features. First, a sentiment of national economic emergency has characterized all social pacts, with the exception of that in 1998 which was, in fact, more a case of symbolic negotiation than a genuine example of policy concertation. A second general feature has been the weakness of the governmental coalitions that look to social pacts as an instrument for enhancing their legitimacy. A third feature has been the presence of moderately strong unions, capable of coordinating both industry-level and decentralized bargaining, and also permanently challenged by the risk (and often the reality) of internal divisions. The negotiation process in Italy has been strongly influenced by these features and, as we will see below, to a large extent confirms the assumptions of the bargaining model presented in Chapter 3. Since the first Italian experiences with concertation, the maximization of actors’ rational utility has been limited by the high degree of uncertainty related to the economic situation. Moreover, the perception by actors of their relative power has affected the negotiation process not only in terms of duration and the pressure to negotiate but also regarding the adoption of ‘exit’ options. While the first feature is strongly present in the pacts signed in 1983–4, 1992, 1993, and 2007, the second was pertinent for the pacts signed in 1995 (the pensions reform), 1996, 2002, and, to some extent, 1998. The third characteristic – the centrality of the degree of organizational unity as an important variable affecting the perception of actors’ relative power – is also widely confirmed by the experience of Italian social pacting.

118

Italy: The Rise and Decline of Social Pacts The second part of this chapter will discuss why frequent recourse to social pacting did not eventually turn into a stabilized process of concertation, as most observers expected in the 1990s. The four hypotheses presented in Chapter 4 to account for the institutionalization of social pacts, or for the lack of it, will be assessed against the actual evolution of Italian concertation over the last three decades. Overall, the evolution of Italian social pacts seems to suggest that the utilitarian and normative hypotheses are not especially useful as explanations, for reasons that may have to do with the way such hypotheses are constructed, as we will discuss in Section 6.3.2. The functionalist hypothesis may help explain the path towards institutionalization that Italian social pacts entered in the 1990s but cannot account for their decline in the 2000s, when system ‘problem load’ was still quite heavy and yet social pacts were no longer chosen as the preferred method to deal with it. The power-distributional hypothesis may, however, be more helpful in accounting for the weak institutionalization of social pacts in Italy. In fact, whenever power shifted to governments and employers for either structural reasons or due to trade union divisions, social pacts entered a path of deinstitutionalization. The chapter consists of three parts. Part I outlines the most significant aspects – the structural drivers of change and the negotiation process – behind the emergence of the social pacts considered, while Part II analyses their evolution, and in particular their degrees of institutionalization. Part III concludes.

6.2. The Emergence of Social Pacts 6.2.1. The Drivers of Pacts in Different Periods The first experiences of social concertation in Italy (the bargained legislation of the late 1970s and the 1983–4 tripartite pacts) were driven by three main structural factors: economic crisis, weak governments, and the social partners’ internal tensions, combined with a rather high level of centralization of union and employers’ organizations and their links with political parties. Between the mid-1970s and the late 1980s, the economic crisis in Italy generated first high rates of inflation and then rising unemployment (see Figure 6.1). Italy’s entry into the European Monetary System and inflationary pressures obliged governments to adopt measures contrary to those they had imposed independently (involving a shift from loose to much tighter monetary and fiscal policies) in earlier years (Salvati, 2001). It became increasingly necessary for Italian governments to negotiate economic policy – especially incomes policy – with the social partners. Until the end of the 1970s, Italian governments were formed by unstable majorities consisting mainly of ‘centre-left-oriented’ coalitions composed of parties with strong affiliations to the unions. In the early 1980s, the political

119

Social Pacts in Europe 140 20.0

120 100

15.0

80 10.0

60 40

5.0

20

06

04

20

02

20

00

20

98

Unemployment rate

20

96

94

19

19

19

90

92 19

88

Inflation rate

19

86

19

19

19

19

84

0

80 19 82

0.0

Public debt as % of GDP

Figure 6.1. Trade Union Density 1960–2005 Sources: OECD (various years)

situation changed and there ensued a phase of much more stable and powerful coalition government. This also changed the context for concertation. Tripartite negotiations were advocated by the stronger and more stable governments and by the CISL (Confederazione Italiana Sindacati Lavoratori) and UIL (Unione Italiana del Lavoro) union confederations.1 The trade unions experienced internal tensions related to the egalitarian wage strategy they had pursued, and the lack of formal and clear rules on firm-level workers’ representation. Apart from the so-called ‘rally of the forty thousand’,2 the main reaction against the egalitarian wages policies of the union confederations arose in the public sector, whereas in the private sector the effect of egalitarian wage increases was partially offset by bonuses for skilled workers. At the end of the 1970s, several so-called ‘autonomous unions’ were formed in the air transport, banking, insurance, health care, and school sectors. During the 1980s, this rank-and-file movement became more stable, giving rise to new confederations3 (Baccaro and Locke, 1998). The other factor responsible for tensions internal to the unions was the lack of proper 1

Italy has three major union confederations: the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, CGIL), the Italian Confederation of Workers’ Unions (Confederazione Italiana Sindacati Lavoratori, CISL), and the Union of Italian Workers (Unione Italiana del Lavoro, UIL). While the CGIL has traditionally been closer to the Italian Communist Party, CISL close to the Christian Democrats, and the UIL close to the more liberal and social-democratic parties, the profound restructuring of the Italian party system after 1992 introduced a period of greater political fluidity, not to mention disorientation, among the trade unions. 2 A demonstration by middle managers and white collar workers in 1980 in protest against the strategies pursued by the union confederations. 3 The most important of which was the radical Cobas (Comitati di base) established by previous members of the CGIL.

120

Italy: The Rise and Decline of Social Pacts mechanisms linking their grass-roots membership with their national leaderships. The forms of workplace representation established during the 1970s – the Rappresentanze Sindacali Aziendali (RSA) and Consigli di fabbrica (‘Factory Councils’ which consisted of both union members and non-members elected by the workforce) – did not rectify the lack of coordination between union central and plant levels because they did not institutionalize rules and responsibilities. In the mid-1980s, union density began to decline (see Figure 6.2). The largest employers’ association (Confindustria) was also internally fragmented during the 1970s and 1980s. Although its actions and strategies were formally highly centralized, difficulties of coordination arose at the local and individual firm levels. The 1970s saw a significant decrease in associational density: while there was an increase in Confindustria membership among firms with more than 100 employees, small firms (especially the smallest) left the confederation in large numbers. In the early 1990s, Italy’s economic situation was characterized by high rates of unemployment, high real wages unmatched by parallel increases in productivity, high growth in public spending and public debt (see Figure 6.1), and difficulties for Italian companies in international markets. In 1991, exports declined by 2.1 per cent (Mascini, 2000). In February 1992, the Maastricht Treaty was signed which increased the pressure on Italy to reduce its public deficit and debt and its inflation rate. This economic emergency lasted until March 1998, when the European Commission officially announced that Italy had fulfilled the conditions necessary for adoption of the single currency (Lavoro e informazione, 1998). In the same period, the political system grew increasingly unstable and a series of so-called ‘technocratic’ governments were installed after a swathe of political and economic leaders were indicted for corruption as a result of the Mani Pulite (Clean Hands) anti-corruption investigations. These ‘technocratic’

60 50 40 30 20 10

20 05

02 20

19 99

3

19 96

19 9

19 90

19 87

19 84

19 81

19 78

2

19 75

19 7

66

19 69

19

19 63

19 60

0

Figure 6.2. Inflation, Public Debt, and Unemployment Trends (1980–2007) Source: OECD (various years); ISTAT (2004–6)

121

Social Pacts in Europe governments did not have a parliamentary base and consequently had considerable need of support from the social partners, not only to tackle the economic crisis but also to gain political legitimacy. They consequently negotiated two of the most important social pacts – in July 1992 and 1993. The political situation changed in 1994 with the first elections held under the new electoral system. The elections were won by a centre-right coalition, and the businessman Silvio Berlusconi took over as prime minister, but with a weak parliamentary majority. Berlusconi tried to implement a number of economic policies unilaterally, but had to resign in December 1994, and was succeeded by another technocratic government led by Prime Minister Lamberto Dini. This government negotiated a significant pension reform with the social partners. The elections of April 1996 were won by a centre-left coalition headed by Romano Prodi, with a weak parliamentary majority dependent on the support of the Communist Reconstruction Party (Rifondazione Comunista). The government sought a dialogue with the social partners and in September 1996 signed the ‘Pact for Employment’ to help deal with both the economic emergency (high unemployment and compliance with the Maastricht parameters) and the government’s parliamentary weakness. However, in September 1998 the leader of Communist Reconstruction, Fausto Bertinotti, harshly criticized the budget law enacted by the government, and in October the Parliament voted a motion of no confidence in Prodi. The new centre-left government that succeeded Prodi’s was headed by Massimo D’Alema. The government was weak, but the end of the Maastricht pressures – once Italy had fulfilled the parameters of EMU membership – meant that the new social pact (the so-called ‘Christmas Pact’ of 1998) was largely symbolic and did not produce any reforms. To summarize, the political and economic situation during the 1990s was not very different from the 1980s, but the trade unions needed to reduce the gap between their national and firm levels, and after the 1992–3 pacts they embarked on a period of greater organizational unity. Threatening this unity, however, were divergences among the confederations on their relationships with the political parties. However, the three confederal union leaders approved a document which set out the principles on which trade union autonomy should be based, citing the July 1993 agreement as the framework (Mascini, 2000). The Pact of July 1993 was a turning point for union organizational unity as it created a more institutionalized form of works’ councils, in the Rappresentanza sindacale unitaria, or unitary union workplace representation (RSU). The 1994 RSU elections demonstrated that the relationship between the three union confederations and the rank-and-file had been revitalized: the former obtained the large majority of votes and representatives (Regalia and Regini, 1998). Tension and fragmentation decreased among the employers’ associations as well. Confindustria was involved in the Mani Pulite corruption scandal and this, as we will see, weakened its negotiating power. But later in the 1990s, a series of

122

Italy: The Rise and Decline of Social Pacts organizational innovations reduced the level of internal fragmentation. The privatization of several state-owned enterprises led to the merger of their associations with Confindustria, and hence to the internalization within the organization of divergent positions among employers. After the 1993 agreement, the aims pursued by the new ‘Grande Confindustria’ were those of coordinating and harmonizing the action of the industry federations (Ibid.). In the 2000s, the social pacts signed were driven by yet another economic emergency. The political landscape was quite stable from 2001 to the beginning of 2006, but it became unstable again after the 2006 elections. The social partners were still internally integrated, but unity between the unions turned out to be much weaker. As regards the economic scenario, the Italian economy entered a new period of crisis. After 2001, it was affected by the crisis of the international financial markets and by the exacerbation of geopolitical tensions. From 2001 to 2007, Italian GDP growth was quite low compared to the European average which was around 3 per cent, and export growth fell, in part because of the appreciation of the euro. The general elections of 2001 were won by the centre-right coalition and Silvio Berlusconi regained the premiership. This time, however, the government had a stronger parliamentary majority. To adopt the labour market reform proposed by the Ministry of Labour, a new social pact was signed in July 2002 with the two smaller unions, the CISL and the UIL, when the CGIL refused to sign. Indeed, the distinctive feature of this period was the breakdown of union unity. From 1999 onwards, divisions among the three union confederations widened, and the difficulty of achieving union unity increased until the ‘breakdown’ of the early 2000s. The 2006 general elections were won by a centre-left coalition. The new government, headed by Romano Prodi, was based on a very narrow parliamentary majority. It immediately announced that it was favourable to dialogue with the social partners and emphasized the importance of industrial relations for reviving the Italian economy. A new social pact was consequently signed in July 2007. During this period, the social partners were able to maintain a moderate level of internal unity. However, with the return to a context more favourable to dialogue (in large part because of the new centre-left government), the most radical factions of the CGIL adopted a more militant stance. Some industry federations (including the metalworkers) participated in the demonstration held by the radical left in November 2006 against the socio-economic policy of the government (EIRO, 2007).

6.2.2. Negotiation Process and Actor Preferences In this section we analyse the emergence of Italian social pacts by focusing on actors’ interactions and preferences before, during, and after negotiations.

123

Social Pacts in Europe 6 . 2. 2. 1 . BARGAINED LEGISLATION IN THE LATE 1970S AND THE 1983–4 TRIPARTITE PACTS The beginning of concertation in Italy fits the first assumption of the bargaining model developed in Chapter 3. Despite their internal tensions, after the mid-1970s the social partners began to consider concertation as a means of dealing with the country’s economic crisis, although they regarded it as very much a second-best solution. In reality, they realized that there were not many alternatives for achieving their own interests. The trade unions understood that further improvements in wages and working conditions could not be achieved by collective bargaining alone, despite their substantial powers of mobilization. Italy’s employers also found it increasingly difficult to pass higher labour costs on to consumers and were willing to accept union participation in economic policy in order to reduce union opposition (Regalia and Regini, 1998). Second, the economic situation and actors’ perception of interdependence also increased their propensity for making agreements on the main socio-economic issues. By the mid-1970s, the unions were focusing their action on the central policy-making level in the hope of tackling high unemployment and a high rate of inflation4 (Ibid.). For traditionally adversarial unions, it was difficult to expect a more radical shift towards cooperation. The ‘national solidarity’ government in office at the time supported the policy of wage moderation, and union strategies shifted from conflict to cooperation after the so-called ‘EUR turning point’5 in 1978, in exchange for which they expected a more prominent role in national policy making. The unions came to consider wage moderation the best strategy given the political and economic conditions of the time (Molina Romo, 2004). The affiliation of unions with major political parties (the Communists, the Socialists, and Christian Democrats) played an important part in increasing their interest in concertation. During this period, a number of laws concerning the reduction of labour costs were negotiated with the social partners. Other ‘bargained laws’ were enacted with the aim of reducing unemployment and supporting employment creation (see Table A.1, Appendix). The unions committed themselves to moderate plant-level militancy and mobilization,6 while the government pledged its support for job creation rather than simply cutting labour costs. This tradeoff, however, was not enough to reduce inflation to any marked extent. Despite 4 However, union action continued at plant level as well: over 32,000 factory councils represented around 5 million workers in the early 1980s (Regalia and Regini, 1998). 5 This turning point was taken in line with the so-called EUR document, in which unions committed to making their demands more compatible with the objective of achieving full employment and agreed to engage in a process of political exchange with the ‘national solidarity’ government based on an incomes policy and some flexibilization of the labour market. 6 In fact, from the second half of the 1970s onwards, conflict in the private sector tended to diminish, while in the public sector it increased (Regalia and Regini, 1998).

124

Italy: The Rise and Decline of Social Pacts the ‘EUR turning point’, the unions still enjoyed considerable powers of mobilization and were opposed to measures that would radically contradict their past claims. Italian governments were not powerful enough to ‘impose’ drastic measures on the unions, given that they were unstable and supported by a parliamentary majority in which the parties that were traditionally closely linked with the unions predominated (Salvati, 2001). As predicted by the fourth assumption of this book’s bargaining model, the actors’ perceptions of their relative power led to this result. In 1983, a tripartite agreement (the so-called ‘Lodo Scotti’) was signed by all three union confederations, Confindustria, and the government (see Table A.1, Appendix). The CGIL signed the agreement reluctantly, adjusting its strategies to the context in order to maintain trade union unity of action, and only after the government had threatened that it would act unilaterally. The ‘exit’ option of the government increased its relative power and thus employers and unions obtained very few concessions from the deal, apart from a certain amount of relief on social security contributions for employers and some family income support measures for the unions (Mascini, 2000). In 1984, the government proposed a new tripartite agreement, on the grounds that the ‘Lodo Scotti’ had proved ineffective in combating inflation, and asked the unions to make further concessions. The political situation was more stable than in the previous year and the government had a strong perception of its negotiating power. The government’s proposals were set out in a decree which exacerbated disputes among the unions on what precisely they should pursue via negotiation. The CGIL refused to sign the agreement. The unions’ internal tensions provoked mobilization by factory councils in Northern Italy during negotiations on the pact. The so-called ‘autoconvocati’ (shop stewards not supported by official unions) protested against the wage restraint policy adopted by the confederal unions (Baccaro, 2001). Nonetheless, the government went ahead and enacted a decree which contained all of the agreement’s clauses. This partially failed social pact (the ‘San Valentino Pact’) was the first to introduce greater flexibility (part-time contracts and contratti di formazione lavoro – training contracts for young people) in the Italian labour market. The relatively rapid negotiation process and signature of the agreements by the social partners apart from the CGIL was due to government pressure, as well as to the perception of unions and employers that their bargaining power had diminished. Both mutually antagonistic and internally fragmented, the union confederations had insufficient power to carry the negotiations forward and direct them towards more concrete gains than those they had already achieved. The lack of coordination between the two levels of the unions weakened their action at the central level because they were unable to use their mobilization power to apply pressure on the government and employers. Hence, these pacts largely confirm the assumptions of the bargaining model.

125

Social Pacts in Europe 6 . 2. 2. 2 . THE PACT OF JULY 1992 Despite the halt in concertation after 1984, throughout the late 1980s and early 1990s, bipartite negotiation kept dialogue between the social partners alive, and two agreements were signed on the cost of labour and the wage-bargaining system. Negotiations continued on these issues during 1990 and 1991, but the social partners failed to reach an agreement and explicitly requested mediation by the government (Mascini, 2000; Negrelli, 2000). New negotiations began in June 1992. Such mediation adds an important feature to the bargaining model: if the social partners fail to reach an agreement and they are relatively weak (as they were in that period due to internal fragmentation), they may prefer to ‘exit’. In these circumstances, the intervention of a third actor can mediate among divergent interests and increase the possibility of a successful and effective agreement. Moreover, the maximization of actors’ pay-offs is affected by the socio-economic context. In our interviews, the union leaders involved in such negotiations highlighted the difficulty of meeting their double objective, namely confronting the deep economic crisis while at the same time sustaining a reasonable level of protection of wages. We thought it necessary to sign a pact with the objective of decreasing the inflation rate and controlling the public budget, but also to get a more stable collective bargaining system in order to protect wages in exchange, in the event of changes to the wage indexation system. (Int. no. 1)

The social partners were split on the matters to be covered by the agreement. Confindustria preferred a short-term agreement on measures that would deal rapidly with the economic crisis. The employers’ association pressed for a single level of wage bargaining so as to avoid overlaps between levels. The union confederations instead wanted a long-term structural agreement and they argued for two levels of collective bargaining (Mascini, 2000; Molina Romo, 2004). Given the diversity of these positions and the likely impossibility of reaching an agreement, at the end of July 1992, the then Prime Minister Giuliano Amato submitted an ‘unmodifiable’ proposal to the social partners. This did not resolve all of the issues at stake, and regarding the bargaining structure it only made vague commitments to resolving the question in the near future. Nevertheless, crucially Amato’s proposal did envisage abolition of the scala mobile wage indexation mechanism. The risk of a political crisis in a period of deep economic crisis has been used as a major weapon by weak governments to increase their relative power during negotiation and to force the social partners to adjust their strategies. But the government’s power in 1992 was not enough to lead the social partners towards a major agreement on collective bargaining reform, and it was postponed.

126

Italy: The Rise and Decline of Social Pacts The agreement was eventually signed in order to prevent the economic damage that a government vacuum would cause (see Table A.1, Appendix). An extremely narrow majority of the CGIL secretariat decided to sign the agreement when its leader Bruno Trentin cast his vote in favour (Mascini, 2000). For the unions, the social pact of 1992 provoked the same reactions as the pact of 1984, with internal opposition (mainly within the CGIL) and demonstrations against the trade union leaders by the autoconvocati movement (Baccaro, 2001). The unions received no substantial economic pay-off in return for their cooperation. As the bargaining model suggests, the turn taken by negotiations revealed that none of the three actors was in a position to prolong matters for very long, or to adopt ‘exit’ strategies (despite CGIL’s opposition to the agreement) to influence outcomes. Strong awareness of interdependence among the actors consequently developed during the negotiations: the interest organizations accepted the government’s proposal because they felt it necessary to intervene in the economic system. In fact, our interviewees emphasize two points: the CGIL felt obliged to sign the pact against its own first-order preferences, and none of the social partners had any real alternative but to cooperate with a government firmly determined to reach an agreement. The objectives of the pact changed during the negotiation process. The initial goal was to produce an incomes policy via changes to the wage bargaining system; but then discussion moved on to the role of the indexation mechanism in fuelling inflation. The difficult economic situation and the absolute necessity of intervening [to deal with it] rapidly changed power relations by weakening the unions’ resistance and compelling the CGIL to sign a controversial agreement. Had the CGIL not signed, the economic crisis would have further deepened and CGIL would have been held responsible for it. (Int. no. 1) The dramatic economic situation obviously shaped unions’ strategies, forcing them to deal with the crisis as an absolute priority. The CGIL wanted to retain both the indexation system and collective bargaining autonomy. Neither commitment was part of the pact, however, and this led to heated internal discussion, including the resignation of CGIL’s general secretary. Eventually the CGIL signed as well because considerations of general interest prevailed, but with a feeling of having its signature ‘coerced’ by the government, which gave it a ‘take-it-or-leave-it’ ultimatum. (Int. no. 2)

6. 2 . 2. 3. THE PACT OF JULY 1993 The initiative to resume negotiations was taken by Prime Minister Amato, and – except for the CGIL – the interest organizations gave him their backing. The economic crisis required a further policy response, and although the Amato government took unilateral and drastic action on public expenditure, it also sought the agreement of the social partners to curbing inflation. Measures to reduce the cost of labour and wage increases were priorities for Confindustria, and they were also on the agenda of the union confederations. The unions wanted not only to achieve closer coordination across the various levels of wage bargaining but also to institutionalize their participation in policy making.

127

Social Pacts in Europe In terms of the bargaining model, what happened next is quite clear: both the government and the social partners perceived their power as being relatively low, making it essential for them to resume negotiation as soon as possible. The unions also considered new negotiations to be essential for the achievement of their own objectives and reversing their relative ‘defeat’ in 1992. That was at least the position of the CGIL. While internally divided on the strategies to be adopted, the CGIL saw a new pact as a chance to advance once again its own proposals on the collective bargaining system. The 1992 pact had been a delicate issue for CGIL, which signed it in spite of its opposition to abolishing the scala mobile. It was now necessary to find a solution to the problem of the wage bargaining system. The CGIL saw the new accord as a way of repairing the damage of the previous year. The reform of collective bargaining was a ‘union’ objective, unlike in 1992, when general interest goals prevailed. (Int. no. 1) In 1993 we began negotiation with very clear ideas about incomes policies and the autonomy of collective bargaining: we felt it necessary to make up our failure in the previous year, when we accepted the suspension of firm-level bargaining. (Int. no. 2)

During the first month of negotiations, the Mani Pulite corruption scandal continued to undermine the stability of the government, which eventually resigned. The negotiations were taken over by a new technocratic government led by Carlo Azeglio Ciampi, under the new Minister of Labour, Gino Giugni, the most prestigious labour law scholar in Italy (Mascini, 2000). The union confederations and Confindustria still adhered to the conflicting positions they had assumed the previous year and the mediation of the Labour Minister was therefore especially important for reaching agreement. As described above, two conflicting weak actors needed a third actor to bring them to a consensus, giving the government the possibility of negotiating alternative pay-offs as a means of securing its own objectives. Interviews with several actors emphasized the importance of the Minister’s role during the negotiation. The Prime Minister and the Minister of Labour played a strong role as guarantors. They were fully and directly involved in designing and cementing a deal. Their competence and authoritativeness made them ideal mediators among our different positions, and their proposals were capable of taking all viewpoints into account. (Int.no. 2)

Compared to the pact of the previous year, the outcomes of the July 1993 agreement were decidedly more advantageous to the unions, as their relative power was growing. The unions’ internal divisions certainly abated during this period, although dissent was not completely eliminated. The period between the pacts of 1992 and 1993 also saw greater efforts by the confederations to forge trade union unity: ‘The unions had found more common ground in their demands and therefore perceived themselves as wielding greater negotiating power’ (Int. no. 1). For the first time in the history of Italian trade unionism, the

128

Italy: The Rise and Decline of Social Pacts agreement was signed only after it had been approved by workplace referenda. The autoconvocati did not mobilize, possibly because they appreciated a key innovation in the proposal: more precise rules on the relationship between the rank-and-file and the confederations (Baccaro, 2001). Confindustria, by contrast, was in an uneasy and weaker position during the negotiations. Because of its internal fragmentation, it was very difficult for it to present strong and internally accepted arguments. Besides, the impact of the Tangentopoli scandal continued to undermine the organization, and internal disputes on how to deal with the economic crisis had grown more intense between small-firm and medium-to-large company employers (Bellardi, 1995). This pact took place amidst a new awareness by the parties that they were mutually interdependent, especially if a solution was to be found to the profound crisis afflicting the national economy. Thus, despite the different degrees of negotiating power, it was necessary to reconcile the social partners’ positions and this was difficult to achieve without the exercise of external authority. So, the first and the second assumptions of the bargaining model are partially confirmed. 6. 2 . 2. 4. THE NEGOTIATED PENSIONS REFORM OF MAY 1995 In 1994, the social partners sought to keep concertation ‘alive’, for fear that the election of a centre-right government would gainsay the provisions of the July 1993 agreement (Giugni, 2003). However, the new centre-right government refrained from giving any immediate assurances on concertation. In the autumn of 1994, the new government unilaterally enacted a series of drastic financial measures, among them a reform of the pensions’ system. The purpose of the reform was to solve the pensions’ problem by changing the criteria for calculating benefits. This conflicted with the acquired rights of numerous categories of workers (Regalia and Regini, 1998). The events surrounding reform of the pensions system were accompanied by a major shift in the balance of power. While the interest organizations were still aware of the precarity of their role in the management of economic and social policies, they had renewed their own strategies. Both sides of industry were therefore better able to deploy exit options during negotiations to achieve outcomes in line with their interests. Negotiations on the ‘financial manoeuvre’ (i.e. the Italian budgetary process) began in the autumn of 1994. There ensued a series of trade union rallies and general strikes demanding the withdrawal of the proposed pensions’ reform. The government withdrew the bill (both because its parliamentary coalition was collapsing and to avoid further social conflict) and deferred social security to a general provision on pensions system reform (Giugni, 2003). Immediately on his appointment as prime minister of a new ‘technocratic government’, Lamberto Dini announced the resumption of dialogue with the

129

Social Pacts in Europe social partners on the basis of the July 1993 agreement. The negotiation process was very long; in fact, as suggested by the bargaining model, the more actors perceived their relative power to be increasing – as was the case for the unions, due to the success of the general strikes earlier that year – the more they sought to prolong the negotiations so as to have more time and greater opportunity to press their demands. In the background to the agreement, the union confederations organized a referendum on the reform which received substantial support from workers. This was because the consolidation of workplace representation in 1993 had empowered various groups (public-sector workers, service-sector workers, and the employees of small firms) which opposed the militant bargaining style of the metalworkers (Baccaro, 2001). The agreement was reached in May 1995 and then converted into law. It introduced stricter rules on eligibility and less generous criteria for the calculation of pension benefits. Confindustria did not sign the agreement. Despite the tighter rules and diminished benefits for new workers in the system, the outcome was a relative success for the unions because they managed to keep the existing pensions system for older workers – who accounted for the greater part of their membership – largely intact (Regalia and Regini, 1998). The new power balance between the parties therefore gave greater negotiating leverage to the unions. Confindustria was weakened, however, and abandoned the negotiations because it could not obtain the more radical reform that it wanted. 6 . 2. 2. 5 . THE PACT OF SEPTEMBER 1996 (‘PACT FOR EMPLOYMENT’) The dialogue with the social partners was resumed in 1996 by the new Prodi government, which found itself forced to take action on negative trends in the labour market while also complying with the Maastricht criteria (Giugni, 2003). Even if the negotiating position of the government did not differ significantly from that of previous governments, that of the social partners had by now changed. Within the CGIL, new divergent positions emerged after the reform of the pensions system and in the union’s congresses in 1996. The metalworkers’ federation (Fiom) within CGIL reiterated its view that a strategy of conflict rather than negotiation was needed to consolidate past union gains. But there were strong factions in the CGIL, as well as within the CISL, which opposed the Fiom and argued instead for dialogue and participation (Mascini, 2000). The employers were keen to obtain better results in any new reform of the labour market than they had managed with the pensions’ reform. But Confindustria was not entirely in favour of concertation at the time; for in 1996, Giorgio Fossa, a small businessman who was less concerned with industrial relations issues and concertation than his predecessors, was elected to head the organization.

130

Italy: The Rise and Decline of Social Pacts The need to intervene in the labour market was not disputed during the negotiations. What was ruled out of discussion, mainly by the CGIL, was incomes policy (Giugni, 2003). The risk of greatest concern to the government (probably because it feared losing legitimacy in the eyes of its left constituency) was further industrial action by the CGIL, which strengthened that union’s hand regarding the incomes policy option. The government consequently agreed not to negotiate incomes policy issues. In exchange for employment creation measures, the government asked employers to accept tax increases if necessary, and Confindustria reacted positively (Molina Romo, 2004). The bargaining model (especially the second assumption) helps us to understand the meaning of this reaction: the specific socio-economic context obliged Confindustria to adapt its preferences and to accept an outcome – a rather limited level of labour market flexibility – that diverged significantly from them. The agreement was signed by the government, the trade union confederations, Confindustria (and other employer organizations) in September 1996. As a result of effective pressure by the unions, a rather minimal form of ‘controlled’ labour market flexibility was therefore introduced (Regini, 2000). In 1997, the new ‘Pact for Employment’ was incorporated into the ‘Treu Law’ which introduced various provisions regarding labour flexibility. These were, however, considered insufficient by firms because of their limits and the numerous controls required by the legislation (Salvati, 2001). The agreement did not formally institutionalize the rules on concertation established by the 1993 agreement either – once again in line with the more militant union’s preferences. 6. 2 . 2. 6. THE PACT OF DECEMBER 1998 (‘CHRISTMAS PACT’) At the end of 1997, the centre-left Prodi government was forced by the Communist Reconstruction Party (Rifondazione comunista, or RC) to present a bill to reduce working time to 35 hours a week in return for its continued support for the coalition. Despite its small size, RC had considerable leverage within the fragile coalition government. Both the union confederations and Confindustria protested against this arrangement. Support for further concertation by the trade unions and Confindustria can be read as confirmation of the bargaining model’s assumptions. The situation was similar to that of the pension reform: the government seemed willing to act unilaterally and the social partners, even if not completely convinced of the potential of concertation, wanted to maintain their strategic position in policy making. They could rely on their negotiation power (especially in the case of the unions, given their relative unity) and on the Parliamentary weakness of the governing coalition. After the political crisis of 1998 which led to Prodi’s resignation, negotiations were carried on by the new centre-left ‘Olive Tree’ coalition government headed

131

Social Pacts in Europe by Massimo D’Alema, who strongly supported the resumption of dialogue between the social partners. The climate was no longer one of economic emergency, and the main objective of the new pact was to reaffirm and strengthen relations between the government and the social partners. The actors were therefore able to maximize their utility, but no detailed reforms were debated. Discussions on incomes policy (a possible revision of the two-tier bargaining system established in the 1993 agreement) encountered conflicting positions and the issue was set aside (Mascini, 2000). Given that the principal purpose of the negotiation itself was to reaffirm the validity of the concertation method, it was not necessary to prolong the negotiations unduly. Moreover, many new actors were invited by the government to the negotiation table (such as representatives of small firms, of the non-profit sector, of local governments), and this seriously reduced the opportunity for the three main union confederations and Confindustria to secure substantial pay-offs. The agreement was signed in January 1999. There were numerous signatories: the government on the one hand and thirty-two interest associations on the other, and the unions agreed to continue with a policy of wage moderation. As emerged from our interviews, the ‘Christmas Pact’ was symbolic in nature, one in which the actors sought to consolidate their mutual spheres of influence, rather than a pact for negotiating detailed reforms. The fact that the ‘economic emergency’ was now over also seems to have reduced the demand for an incisive reform pact at this stage. 6 . 2. 2. 7 . THE PACT OF JULY 2002 (‘PACT FOR ITALY’) At the beginning of the 2000s, the social partners entered a period of more problematic interaction. Confindustria, with Antonio D’Amato (another small businessman) as president, began progressively to distance itself from social dialogue. It could not be taken for granted that there would be further concertation on economic issues. As has subsequently become clear, a shift had occurred in Italian concertation from a period of actor interdependence – due to a combination of economic and political crisis and the actors’ internal fragmentation and weakness – to one in which actors were increasingly aware of their growing independent power. This shift affected and sometimes limited the actors’ propensity to negotiate, even in new periods of crisis. This was especially the case in the months before the ‘Pact for Italy’, during which Confindustria and the government, both confident of their relative strengths, began to develop a coalition against concertation. Confindustria was pressing the government to adopt measures unilaterally to deal with the Italian economic crisis (Rassegna sindacale, no. 23, 2001). But it was also trying to obtain the unions’ consent, and to this end it proposed a ‘Pact for Competitiveness’ targeted mainly at greater labour market flexibility, in

132

Italy: The Rise and Decline of Social Pacts particular a reduction of constraints on hiring and dismissals. The CGIL was once again highly critical and did not sign the agreement (Molina Romo, 2004). The new president of Confindustria stated his organization’s willingness to sign a separate agreement with CISL and the UIL and was backed by the Minister of Industry (Il Sole 24 ore, 10 February 2001). The government did not consider concertation a successful method of policy making, a position it stated in a White Paper on labour market reform (Giugni, 2003). The government, with the support of Confindustria, saw its relative power as increasing and it proposed a number of laws on labour market reform, the pensions system and taxation. The CGIL reacted to the White Paper by rallying against the policies proposed, while CISL and the UIL remained open to dialogue. The government and Confindustria considered CGIL’s behaviour to be driven by its political bias against the centre-right coalition: The CGIL had a clear political bias, while the two other confederations were interested in political exchange. Our objective was not to isolate the CGIL, but to have the largest possible number of social actors converge on this exchange. Clearly, in Italy, reforms can only succeed if the unions cooperate: not even the Berlusconi government, in spite of its clear parliamentary majority, had the political strength to act unilaterally. This unwritten rule had virtuous effects when emergencies had to be faced, but its outcomes could never be fully satisfactory. (Int. no. 4) During the negotiation of the pact, CGIL’s position was to sit at the table but be ready to leave it at any point. This was dictated by its political bias, and article 18 (on dismissals) was used as an excuse. (Int. no. 3)

During the negotiations, CISL and the UIL walked out of the talks in reaction to the government’s refusal to consider their demands. They then organized a successful general strike jointly with the CGIL. The protest centred on the government’s fiscal policy and reform of article 18 of the Workers’ Statute (which provides protection against dismissal for workers in firms with more than fifteen employees). The unions’ negotiating power was boosted by the success of the general strike, and the government was forced to reconsider its position: A social pact was not necessary per se; the main reason to pursue it was to find some agreement with the unions on article 18 and to speed up labour market reform. Not all of Confindustria was in favour of new negotiations with the unions (we could have acted directly by pressuring the government), but the unions’ consent was necessary to speed up reforms. (Int. no. 3)

Talks resumed in May 2002, but the CGIL did not consider the government’s decision to be a genuine retraction and refused to take part in the negotiations (EIRO, 2002). The benefit gained from the general strike in terms of negotiating power was vitiated by CGIL’s exit from the negotiations, which signalled deep divisions inside the trade unions. The Pact for Italy was therefore signed on 5 July 2002 (see Table A.1, Appendix) without the CGIL. The implementation of

133

Social Pacts in Europe the Pact was almost entirely consigned to future legislation. The outcomes of the negotiation were oriented towards the positions of the government and Confindustria (L’imprenditore, 2002) and this was perhaps a consequence of the breakdown in inter-union unity; the return of inter-organizational fragmentation diminished the unions’ negotiating power. 6 . 2. 2. 8 . PACT FOR WELFARE (2007) During the previous government, social dialogue had suffered a setback. The basic contrast between the social partners and government was over reforms to the labour market, the wage-bargaining system, and pensions. Especially in 2002–3, social conflict became quite intense. The labour market reform envisaged in the Pact for Italy became law in 2003 with the strongest opposition from the CGIL which proposed a referendum on labour market policies. However, it failed because only 25.7 per cent of the Italian electorate went to the polls, while a turnout of more than 50 per cent was needed to validate the referendum (EIRO, 2003). The social partners also had different views and strategies regarding the wagebargaining system. In 2004, the new president of Confindustria, Luca Cordero di Montezemolo, sought a dialogue with trade unions on this issue, but it proved to be impossible due to the CGIL’s view that the system was not in need of reform (CNEL, 2006). The pensions’ issue, however, was an area of rapprochement for the three trade union confederations. The pensions’ reform in 2005 was the first step in the resumption of social dialogue, even if this dialogue developed not so much with the government, but between union confederations themselves (which opted again for a unitary general strike against this reform) and between the latter and the employers’ associations (which held an almost neutral position). This unitary and bilateral social partners’ initiative was targeted against the economic policy of the government. Thus, as the fourth assumption of the bargaining model suggests, trade unions and Confindustria started once again to consider negotiation as a successful method. They both wanted to influence policy making after a period of difficult relations, especially with the government. They were powerful enough to press for their own interests. The social dialogue, then, continued bilaterally. Union unity helped to increase the confederations’ awareness of their relative power – although not at the levels achieved in the past. Indicators of this perception were both the use of general strikes and the joint signature of the metalworkers’ contract. As Carrieri (2007) stressed, recourse to conflict in the period 2001–6 was more important for the reconstruction of collective identities than for its influence on policies. With the victory of another Prodi-led coalition in the 2006 elections, both social partners had strong expectations. On the one hand, the unions and

134

Italy: The Rise and Decline of Social Pacts Confindustria were aware of their power to pressure the government. On the other, they were aware of their interdependence in a climate of economic emergency. The government was politically weak but favourable to social dialogue. As the first and the second assumptions of the bargaining model suggest, this awareness affected and limited actors’ strategies. The unions and Confindustria had considerable negotiating power, but during the negotiations they changed their rank-order of preferences and the pact was signed in just a few months, given the deteriorating economic climate and the social partners’ concern to restore a positive climate for concertation. The negotiations took place in a rather auspicious context, and the agreement was signed on 23 July 2007 (the same date of the historic agreement of 1993) by the government, CGIL, CISL, UIL, and Confindustria (see Table A.1, Appendix). But the CGIL and Confindustria also criticized the agreement. The CGIL considered the pensions’ reform to be inadequate given that it would not improve the pensions’ eligibility criteria for workers (which had been restricted by the previous government’s 2005 reform), whereas Confindustria considered it too costly for the economy (Rassegna Sindacale, July 2007). In the autumn of 2007, a referendum among workers and pensioners was held, in which over 80 per cent of voters endorsed the July agreement. Dissent was concentrated mainly in metalworkers’ factories and call centres.

6.3. The Evolution of Social Pacts: A Partly Failed Institutionalization? In this section, we consider the evolution of the content of social pacts and their degree of institutionalization.

6.3.1. Changing Issues of Tripartite Negotiation Table A.1 in the Appendix sets out the various issues negotiated in each pact, so that their changes over time can be directly observed. Three main features emerge from this table. 1. The relatively constant presence of issues concerning incomes policy and employment policies. However, the negotiation of incomes policy issues is incremental until the July 1993 Pact and becomes simply confirmatory of previous agreements thereafter. In the recent (2007) Pact for Welfare, commitments to foster company-level bargaining reveal a renewed attention to incomes policy by the social partners. On the other hand, employment policies, while limited to general pledges in the early 1990s, move to centre stage with the 1996 Pact for Employment, the 2002 Pact for Italy, and the 2007 Pact for Welfare.

135

Social Pacts in Europe 2. Also to be noted is a tendency for the issues negotiated to increase – as shown by the cells in the row ‘other issues’. These concern support for firms, undertakings relative to tax reform, and policies on infrastructures and investment in the South of Italy. But the only two really critical issues in these cells are the creation of a new works councils system (the RSU) in 1993 and the reforms of the pensions system in 1995 and 2007. 3. All the tripartite pacts contain commitments by the government to involve the social partners in policy making, and a specific timetable for the negotiation of economic policy issues and for the joint assessment of the pacts’ outcomes. In analysing change over time, however, one should also consider that the overall range of issues subjected to tripartite negotiation increased dramatically in the second half of the 1990s due to the diffusion alongside the national social pacts of ‘territorial pacts’. Territorial pacts, based on formal agreements between local governments, unions and employers’ organizations, and other important local actors – such as banks, universities, and various private participants – are innovative forms of decentralized social dialogue or concertation, aimed at the consensual planning of local initiatives for economic and occupational development. Another form of territorial pacts introduced subsequently by legislation were the so-called ‘area agreements’, targeted especially at less-developed areas with higher unemployment, primarily though not exclusively in Southern Italy. While intended to mobilize local resources, these latter agreements should have involved greater wage and labour market flexibility as well; however, sharp divisions among the trade unions predictably emerged over this sensitive issue.7 The record of these forms of decentralized bargaining at the territorial level is less impressive than was originally expected. While numerous case studies (Bolocan et al., 2000; Ballarino et al., 2001; Barbera, 2001; Regalia, 2003) have presented stories of success, the overall attempt to decentralize tripartism and broaden its scope has been hampered – and not just by divisions among unions and insufficient resources provided by local institutions. More importantly, employers have in most cases been lukewarm participants and have generally not cooperated actively to ensure their success. The main reason is that they have in most cases seen territorial tripartism as yet another level of bargaining, at a time when they were already becoming increasingly unhappy about the two levels of collective bargaining set up by the tripartite agreement of 1993.

7 The CGIL has always been especially concerned that acceptance of substandard conditions regarding wages and employment conditions, even if targeted at less developed areas, and conceived as experiments of limited duration and subject to monitoring and possible revocation, could end up being a ‘Trojan horse’ fostering wider deregulation.

136

Italy: The Rise and Decline of Social Pacts In fact, employers became convinced that the apparently careful distinction drawn by the 1993 agreement between issues to be negotiated at the industry level and those left to firm-level bargaining was not enough to avoid confusion and overlaps. Curiously enough, in a period in which average real wages in Italy were growing less than in the other EU countries (largely an outcome of the incomes policy established by the 1993 agreement), shifting to a system of ‘one level of bargaining only’8 became the most pressing demand by employers, together with that of greater labour market flexibility. The rationale was that the sharp drop in the inflation rate deprived industry-level bargaining of its main content, while distributional demands stemming from increases in productivity could be more appropriately dealt with by decentralized bargaining. While employers’ associations demanded a shift to a ‘one-level-bargaining’ system, not all employers could agree on which level was to be retained. Some of them favoured decentralized bargaining (at the firm level for large and medium companies, or at the territorial level for the small-firm districts), while others seemed to prefer industry-level bargaining only. More generally, the main lesson stemming from the more recent attempts at social pacts seems to be that, as their scope has broadened – not just in terms of levels of operation (national, regional, and even local) but also issues covered – their effectiveness has appeared to decrease. In fact, such objectives as employment creation, training, labour market, and welfare reform are far more complex and difficult to pursue in a concerted way than traditional incomes policies. In some cases, enlarging the number of actors involved in political bargaining and increasing the levels of negotiation (as happened to an extent with ‘territorial pacts’) may be a tentative solution to this difficulty. But this solution may (and often does) bring new problems with it, since a game with several actors is much harder to play and the outcome is more difficult to monitor. The contribution of each actor to the common goal may be less clear to the others, and so too its responsibility for failure or its ability to advocate success and to capitalize on it. The outcome of these trends has been a growing loss of enthusiasm by policymakers and especially employers with social pacts. It has not been especially difficult, therefore, for the centre-right Berlusconi government to capitalize on this widespread scepticism and to state that, although tripartite ‘social dialogue’ remains the preferred method for reforming Italian industrial relations, the ‘modernization’ of the latter must continue, even in the absence of trade union agreement.

8 Namely, allowing for either industry-level collective bargaining or decentralized negotiation, but not both.

137

Social Pacts in Europe

6.3.2. The Conditions for Institutionalization and its Failure A cursory look at Table A.1 (Appendix) reveals that tripartite negotiation in Italy has been widely used over the last thirty years, with a peak, however, in the early-to-mid 1990s. During this period, ten major national pacts were agreed to, in addition to numerous territorial pacts: one in the late 1970s, two in the 1980s, five in the 1990s, and two in the 2000s. The 1990s peak was preceded by a long period of difficult concertation and was followed by an equally long period in which social pacts were openly called into question and became either political instruments of consensus creation among the social partners or means of providing governments with extra legitimacy. Is the frequency of pacts an indicator of the success or weakness of concertation in Italy; of the institutionalization of this mode of governance or its absence? The distribution of social pacts over time shows that the initial experiences of the late 1970s and early 1980s were disappointing. The two tripartite agreements of 1992 and 1993, however, were generally greeted as highly successful in reaching their stated goals as well as in their latent function of institutionalizing a highly voluntarist system of industrial relations. The very success of the ‘method’ of concertation in the early 1990s accounts for all of the actors’ greater willingness to rely upon it as a consensual and rather effective mode of governance later in the decade. In 1995, 1996, and 1998, social pacts were tried again in different policy areas. But their effectiveness declined, and they slowly became little more than a symbolic form of action, simply signalling the general willingness of actors to cooperate in producing public goods. But even this symbolic value was seriously diminished by the CGIL’s withdrawal from the 2002 Pact. How can we explain this cycle in terms of the different hypotheses regarding the mechanisms of institutionalization set out in Chapter 4? First, the Italian experience seems to challenge the utilitarian hypothesis. In fact, the reorganization of the bargaining system undertaken by the July 1993 agreement appears to have been successful and largely satisfactory for all the actors involved. At the level of the system’s general performance, a study of wage dynamics and various macroeconomic indicators (Birindelli and D’Aloia, 2001) has pointed to the July agreement’s contribution to wage restraint, while also defending the purchasing power of wages9 and reducing the pay differential between the manufacturing sector and the sheltered public services and public utilities (electricity, gas, water). At the same time, business profitability tended to increase in the 1990s and was particularly high in 1998 and 1999, in part

9 Or at least it did so until 2000, when the resumption of inflation widened the gap between the real and planned inflation rates on the basis of which wage increases had been fixed by industry-level collective bargaining since the 1993 agreement.

138

Italy: The Rise and Decline of Social Pacts because of modest increases in the cost of labour, which rose less than productivity. Finally, wage restraint contributed to the stability of employment during the first half of the 1990s and subsequently to its growth. According to ISTAT, the National Statistics Institute, after March 2001, the unemployment rate went below 10 per cent for the first time in many years. In spite of these largely satisfactory outcomes, social concertation gradually lost its attractiveness in the late 1990s and was questioned again by both employers and the government in the 2000s. The functionalist hypothesis does not seem to go a long way towards explaining this outcome either. According to this hypothesis, social pacts are likely to become institutionalized if their institutionalization serves system needs. In the recent history of labour relations in Italy, the revival of concertation in the 1990s, and in particular the tripartite agreement of 1993, were undoubtedly major steps towards overcoming some of the most negative features of the previous period: the low level of regulation and formalization of procedures and of relations among highly organized actors; the consequent instability and unpredictability of industrial relations practices; the frequent recourse to conflict to redefine power relations and bolster support for the interest organizations; the frequent and haphazard oscillation between the centralization and decentralization of labour relations and collective bargaining; and the difficulty of rationalization and reform. As a result of the tripartite agreements of the 1990s, labour relations for a while seemed to be moving in the direction of a greater formalization and explicit definition of shared criteria, with clearer rules and procedures for representation and the joint resolution of distributive conflict, mainly over incomes policy. A greater predictability of industrial relations practices and a close coordination of objectives and outcomes also seemed possible, with a substantial reduction of industrial conflict, the definition of a more stable and more orderly two-tier wage-bargaining system, as evidenced by a series of significant reforms – of public-sector employment, of the pensions system and the labour market – and often with the full participation of the social partners. However, as already noted, these effects only lasted for a while. The lessening of the ‘problem load’ proved to be only temporary. And yet, when ‘system needs’ resurfaced again in the first decade of the new millennium, due to another economic emergency (see Section 6.2.1), social pacts were either dismissed or only reluctantly accepted as the proper method to deal with them. The normative hypothesis (the stronger beliefs are that the previous pact has generated just outcomes, the higher is the likelihood of the institutionalization of a social pact) to some extent explains the acceptance of concertation in the trade union camp, as well as the gradual distancing of employers from it. In fact, the tripartite agreements of the late 1970s and early 1980s had been made highly unstable by, among other factors, the excessive distance between the unions’ top leadership and its local officials and the rank-and-file (Golden,

139

Social Pacts in Europe 1988). However, the agreement signed in 1993 as well as the negotiation of the pension reform in 1994–5 and the Pact for Employment in 1996 were accompanied by the creation of a new system of representation in the workplaces. This made it easier for the unions to consult their rank-and-file before signing, a consultation which crucially contributed to their legitimacy (Baccaro, 2001). In this way, the potential crisis of representation has been channelled and controlled – not by securing a legal monopoly of representation but by creating mechanisms for the articulation of voices within, rather than outside, the trade unions. Also, the elections of workplace representatives held during this period produced an unexpected and overwhelming consensus for the confederal unions engaged in concertation, and this indirectly reinforced their legitimacy to proceed further along those lines. In a sense, then, we might say that these pacts had generated ‘procedurally just’ outcomes for labour. However, this feeling was far from widespread among employers, and this may explain why it was in the employers’ camp that disaffection towards concertation grew to the point where its stability was seriously undermined. In a wider perspective, this may show a major shortcoming of both the utilitarian and the normative hypotheses in accounting for the institutionalization of social pacts. In fact, it is rather unlikely that the outcomes of previous pacts are perceived as ‘satisfactory’ or ‘just’ by all the parties involved. Since both the interests and the values of labour and employers are often contradictory, any outcomes are likely to fit the expectations of one of the camps better than the others. It is only when the outcomes are perceived as ‘public goods’ by all parties, and therefore overwhelmingly more important than the private gains they could achieve, that the utilitarian and/or normative hypotheses may actually explain institutionalization. However, we do know how unstable the pursuit of public goods is made by the ‘free-rider problem’ (Olson, 1965). Hence, we are left with the power-distributional hypothesis, which states that social pacts are likely to become institutionalized when actors – in particular those with more power – support their reproduction. Conversely, the deinstitutionalization of pacts is likely to occur when powerful actors lose interest in supporting their reproduction, or alternatively when power shifts towards those who do not support pacts. This was to a large extent what happened in Italy both in the late 1980s and then again in the 2000s, in each case after a long period of relatively successful concertation. Especially in the last decade, the electoral victory of a centre-right government (in 2001 and then again in 2008) prompted a reappraisal of many of the elements on which the previous equilibrium had been based. The employers’ association took advantage of this to try and redress to its advantage some key outcomes of social pacting in the 1990s. And the deepening divisions within the trade union camp were at the same time both a cause and an effect of this new power configuration, in that they reinforced the shift of initiative towards those actors determined to renegotiate the terms of the pacts signed in the previous decade.

140

Italy: The Rise and Decline of Social Pacts

6.4. Conclusions Social pacts in Italy were reached in situations featuring: 1. rather poor economic conditions: however, they were stronger, and the urgency of responding to them was more widely shared, during negotiations leading to the 1992 and the 1993 pacts; 2. weak governments: either unstable coalitions or technocratic, that is, nonelectorally legitimated, cabinets, the exceptions being the 1983–4 and the 2002 pacts, which, however, were not signed by the major trade union confederation; and 3. intermediate union centralization and moderately strong unions (union density steadily declined from 49 per cent in 1977 to 33 per cent in 2005, but unions have remained moderately strong in comparative perspective): in fact, centralization (and insulation from rank-and-file pressures) was rather high up until 1993, since when unitary works councils have been established, decentralized bargaining has been given an official role, and consultations or referenda on pacts have often been used. The negotiation process was affected by these three features and, as we have seen, the assumptions of the bargaining model presented in Chapter 3 are largely confirmed. The Italian experience suggests, however, that one factor can be crucially important: the willingness of governments to mediate and therefore make negotiation possible. This mediation role may be decisive when the social partners, being relatively weak, are neither able to reach an agreement nor willing to adopt alternative strategies to pursue their interests. Also, we have seen that the bargaining pattern changed over time due to the social partners’ increased perception of their own relative powers. This change affected and sometimes limited the negotiation propensity of actors – even in a period of crisis. In spite of the widely recognized success that social pacts in Italy had in the 1990s, it is still unclear to what extent all actors are now willing to regard concertation as an institutionalized fact, one not to be called into question whenever the economic situation or power relations change. In this sense, none of the five categories of possible evolution of social pacts proposed in Chapter 4 to account for the possible mechanisms of institutionalization seems to fit the Italian case completely. To begin with, although extremely important, the tripartite agreement of 1993 – the high point of the long series of social pacts – did not institutionalize concertation in Italy to the extent that most actors and observers had predicted. This was because it was basically an agreement on rules rather than a pact which committed the parties to shared views on economic development and its priorities. To be sure, agreement on the rules may then foster the development

141

Social Pacts in Europe of such views and encourage the emergence of a shared plan of action. Nevertheless, an agreement on rules only provides a framework; it is not enough on its own to change the pattern of industrial relations. And there is the risk that it will deteriorate unless it is constantly filled with new content. By ‘common views on economic development and its priorities’, we do not mean the old trade-off between employment and productivity; we refer instead to a largely shared conception of national competitiveness which gives rise to a joint effort for the full development of the economy and of human resources. Despite the success of social pacts in the 1990s and their potential importance for all the actors, relationships between employers, unions, and the state in Italy are still a long way from accomplishing this goal. Seen from this perspective, the evolution of social pacts in Italy may have followed different routes in different periods, which is one reason why a categorization like that proposed in Chapter 4 does not seem entirely satisfactory. After the first attempts at concertation in the late 1970s and early 1980s, the two key tripartite agreements of 1992–3 might well be seen as belonging to the second type of the categorization proposed, namely as pacts that have basically renegotiated the framework of Italian employment relations and have tried to institutionalize them. However, as discussed above, such institutionalization largely failed. Several new agreements had to be signed in the second half of the 1990s and in the 2000s on specific policy areas (pensions, labour market, and income protection). This brought the Italian situation closer to the third type of categorization proposed, namely pacts based on sporadic agreements in individual policy areas, often preceded by intense conflict and leading to a very loose degree of institutionalization. In spite of the lip service paid by all the actors involved, this evolution reveals that a culture of social concertation did not actually take root in Italy. It did not become a routine but rather had to be reinvented each time by actors who tried to redefine it in terms more favourable to themselves. On several occasions, they were more prepared to give it symbolic meaning than endow it with actual policy clout. In hindsight, we can reinterpret even the two key agreements of 1992–3. Rather than fundamental turning points, they can now be seen as one-shot solutions to the range of policy problems involved in meeting the Maastricht parameters, and therefore closer to the fifth type of pact in the categorization set out in Chapter 4. Why are social pacts being questioned, and why have they become increasingly ineffective in the 2000s in Italy? Probably the main reason is that the goal of meeting the Maastricht convergence criteria has been achieved, and as a consequence the Italian policymakers’ ability to mobilize the social partners in pursuit of shared objectives requiring mutual restraint has decreased. This answer would seem to support the functionalist hypothesis, in that the lessening of the ‘problem load’ led to a reduced need for social pacts. However, this hypothesis cannot account for the fact that all actors were far less inclined to

142

Italy: The Rise and Decline of Social Pacts face the new acute economic emergency of the 2000s by resorting to social pacts again. In this decade, Italian GDP growth was quite low compared to the European average, competitiveness was constantly declining, and export growth fell. Yet, none of the social pact actors were willing to translate the imperative to increase the competitiveness of the Italian economy in globalized markets into a new national emergency that again required cooperative efforts. This is because in the meanwhile the power balance had deeply changed. Governments and employers, that were very weak actors in the 1990s, now tried to face the new emergencies in unilateral ways or by involving some trade unions while excluding others. Although social pacting did serve system needs for a long time, it could not in the end acquire the stability and institutionalization that numerous observers had predicted. On the basis of the Italian experience of the 1980s and the 2000s, the powerdistributional hypothesis seems to go a much longer way towards accounting for the weak institutionalization of social pacts. It was especially in these two decades, when power shifted to governments and employers due to both structural reasons and trade union divisions, that social pacts failed to become institutionalized.

143

144

Appendix

Table A.1 Issues Covered by Pacts

Incomes policy

Bargained laws 1977–9

1983 Pact and 1984 ‘San Valentino’ Pact

July 1992 Pact

July 1993 Pact

February 1977. Elimination of ‘anomalous wage indexation mechanisms’ and of part of the cost-ofliving increment included in the end-ofservice allowance.

Cuts to the wage indexation mechanism; wage ceilings introduced in industry-level collective bargaining; eighteenmonth suspension of firm-level bargaining.

Abolition of the ‘scala mobile’ mechanism; suspension of firm-level bargaining until December 1993; commitment to a second round of negotiations on reform of the wagebargaining system.

Wage increases pegged to the expected inflation rate (and subsequent adjustment to the real inflation rate). New bargaining structure: two levels (industryand firm- or territorial-level).

Introduction of training/ work contracts.

Pledges on employment creation measures.

Pledges on measures to deal with the employment crisis; youth employment, active training policies.

Employment 1978 law on policies vocational training; 1979 law on youth employment.

Pensions system reform 1995

Pact for Employment 1996

Employment creation: introduction of temporary agency work; reform of the job placement system; pledges on the

‘Christmas Pact’ 1998

‘Pact for Italy’ 2002

Pact for Welfare 2007

Expected inflation rate fixed at the average European inflation rate. The bargaining system established by the July 1993 Pact confirmed.

Continuation of the July 1992 and 1993 pacts.

Incentives for second-level bargaining (contributory tax relief for production bonuses).

Measures and undertakings to create employment: public investments, relief on contributions to reduce the

‘Workfare’: reorganization of the job placement system; pledges to reform the social shock absorbers;

Reform of social shock absorbers: universal protection system (regardless of company size, contract,

Involvement of the social partners in policy making

145

Pledge to involve the social partners in the drafting of the budget law.

Provision for two annual rounds of discussion with the social partners on incomes policy

regularization of ‘hidden’ workers; relief on contributions and tax to reduce cost of labour.

cost of labour and training.

introduction of new forms of temporary work; undertaking to reform further training; temporary and experimental measures to promote regular employment and the growth of firms.

sector). Interventions to promote employment of specific occupational categories: women (fiscal incentives for part-time and flexible working hours); young people (measures giving access to credit; social security measures to increase social contributions for pensions). Abolition of some atypical contracts; constraints on the duration of fixed-term contracts.

Introduction of the Area Contract (locally negotiated instrument for

Recognition of the importance of involving the social partners in economic

Recognition by the government of the importance of concertation.

Commitment to establish a place where the social partners can meet and

(Continued )

146

Table A.1 Continued Bargained laws 1977–9

1983 Pact and 1984 ‘San Valentino’ Pact

July 1992 Pact

July 1993 Pact

Pensions system reform 1995

(budget law). Provision for assessment of pact implementation.

Other issues 1977 law on company restructuring.

Referral to a second round of negotiation on prices and tariffs.

Creation of the unitary workplace union representation structures (RSU).

Introduction of stricter rules on pension eligibility and calculation.

Pact for Employment 1996

‘Christmas Pact’ 1998

‘Pact for Italy’ 2002

Pact for Welfare 2007

economically depressed areas).

policy making and the transposition of European directives. Commitment by the government to giving greater importance to assessment (budget law but also the national action plan for employment).

Pledge to negotiate the budget law with the social partners.

discuss the reform of the social shock absorbers.

Guidelines on tax reform; pledges on investments in the South (infrastructure, fight against crime, simplification of access to credit).

Pensions’ reform. Eligibility criteria more flexible and higher benefits (including for pensions of a charitable nature).

Pledges on infrastructures and public services.

7 Portugal: From Broad Strategic Pacts to Policy-Specific Agreements Maria da Paz Campos Lima and Reinhard Naumann

7.1. Introduction Industrial relations in Portugal were shaped in the 1974 democratic revolution, which overturned the longest lasting authoritarian corporatist regime in Europe (Wiarda, 1977; Barreto and Naumann, 1998; Schmitter, 1999). Until the beginning of the 1980s, industrial relations were characterized by strong adversarial relations between employers and trade unions, by the central role played by the state in labour regulation, through legislation and administrative intervention, and by the predominance of collective bargaining at branch level, reflecting a balance of power mostly favourable to the trade unions (Campos Lima and Naumann, 1997, 2000, 2005). The strategy of the state to work towards ‘contractual normalization’ at the beginning of the 1980s played a central role in the emergence of social pacts. This strategy ran parallel to the emergence of liberalization and privatization, aimed at improving the conditions for capital accumulation (Santos, 1993). In Portugal, the emergence and development of social pacts took place without the normal neo-corporatist preconditions – as in the case of the other countries studied in this book (Campos Lima and Naumann, 1997, 2000; Royo, 2002). But in Portugal, social pact implementation has been partially compromised by the lack of such preconditions – in particular the vertical and horizontal articulation of industrial relations – as well as by the absence of involvement in most of the pacts by the CGTP (the Communist Party-linked General Confederation of Portuguese Workers), the largest Portuguese trade union confederation (Campos Lima and Naumann, 1997, 2000). External challenges, beginning with membership of the European Economic Community (EEC) in 1985, and continuing with membership of the Eurozone

147

Social Pacts in Europe after 1999, have certainly played a role in the formation of social pacts in Portugal, adopted in part as a means of improving the governments’ legitimacy and capacity to promote economic and political convergence with the EU (Sousa Franco, 1994; Marques, 2004). Exogenous factors induced the key actors to review their strategies in relation to their previous experiences, the ideology of the organizations’ leaders and ruling coalitions, and the economic and political situation (Royo, 2002). However, as certain other European countries faced similar challenges, but did not develop social pacts, we have to assume that in addition to these common factors, other domestic factors were involved in the Portuguese case. The literature on social pacts in Portugal has principally focused on power relations and on actors’ orientations and practices as an expression of class struggle for power resources (e.g. Stoleroff, 1990). Trade union strategies have received special attention. In particular, it has been suggested that trade unions that relied more on institutional power than on the power of mobilization (Visser, 1993) were more likely to seek agreements with employers and governments (Campos Lima, 2004). Other contributions have emphasized the trade unions’ ideological divisions and their dependency on political parties to explain their positions with regard to pacting (Royo, 2002). Over the last twenty-five years (1984–2009), Portugal has produced seventeen tripartite social pacts. All of them were signed by the UGT (the social-liberal General Union of Workers) and two employers’ confederations – the Confederation of Portuguese Farmers (CAP) and the Confederation of Commerce and Services (CCP). The manufacturers’ confederation – the Confederation of Portuguese Industry (CIP) – which can be considered the political leader of the employers’ camp, signed all pacts except two. The larger trade union confederation, the CGTP, signed only six. The pacts have varied in scope (ranging from the comprehensive to the narrow) and in the effectiveness of their enforcement. With the exception of the 2002–5 governing coalition – composed of the centre-right PSD (Social Democratic Party, which in reality is a right-wing party similar to the German CDU) and the conservative CDS (Democratic and Centre Social Party) – all types of government, left and right, majority and minority, have launched social pacts. In this chapter we reassess the Portuguese experience of social pacts in line with the general framework of this book. Section 7.2 deals with the emergence of social pacts and assesses the relevance of economic, political, and institutional conditions as potential triggers for social pact emergence (Section 7.3). Section 7.4 analyses the institutionalization of social pacts and considers the relevance of the different mechanisms underlying that process. Section 7.5 presents the main conclusions and considers alternative arguments.

148

Portugal: From Broad Strategic Pacts to Policy

7.2. The Emergence of Social Pacts The broader cross-national analysis in this book has concluded that economic factors – specifically EMU (Economic and Monetary Union)-related pressures and high unemployment – are not sufficient for social pacts to materialize. Instead, a large economic ‘problem load’ is causally relevant only when combined with particular political and institutional conditions, namely the presence of electorally weak governments and/or an intermediate level of trade union centralization (see Chapter 3). In Portugal, an intermediate level of trade union centralization has been a major characteristic of industrial relations in the period examined. Collective bargaining does not take place at the cross-sector national level but is the prerogative of branch or occupational/professional trade unions and employers’ associations, or even single employers. Branch agreements have predominated vis-a`-vis company agreements since the late 1970s (Campos Lima, 2001, 2004; Leita˜o, 2001; Stoleroff, 2009). A large economic problem load, combined with electorally weak governments, drove social pacts in 1986 and in 1996. In 1986, one year after Portugal’s entry into the EEC and on the eve of the 1987 Single European Act, the centreright PSD minority government launched the first social pact on incomes policy; and a decade later in 1996, at the time of the country’s final push for membership of EMU, the Socialist minority government launched two social pacts. After the second stage of EMU, in 2001 the Socialist minority government negotiated further social pacts, but none of them involving incomes policy. But the case of Portugal seems to be particular insofar as majority governments have also negotiated social pacts when facing a significant economic ‘problem load’. This was the case, before EMU integration, of the PSD majority government that negotiated four social pacts during its first mandate (1987–91). After EMU entry, this has also been the case of the Socialist majority government (2005–9) which negotiated five social pacts during its mandate. This suggests one of two conclusions: that in Portugal a serious economic problem load has been the major driver of social pacts, irrespective of government electoral strength; or that regardless of their electoral strength, governments have had a perception of weakness at key moments, due to the growing power of unions, increasing public protest, or their declining popularity, especially on the eve of elections, when the problem load has been large. We argue that this perception has been a driver of social pacts under majority governments, beginning with the majority PSD government which negotiated the first truly broad social pact in Portugal, The Economic and Social Agreement (AES) of 1990.

149

Social Pacts in Europe In the third stage of EMU membership, the ‘problem load’ was of a different nature. For the pacts negotiated in 2001 by the Socialist minority government dealt with issues which were not directly economic, in that they aimed to improve workers’ qualifications and health and safety at work, and to secure the sustainability and universality of social protection. Following a period of economic recession and increasing unemployment, the Socialist majority government, which came to power in 2005, launched an ambitious programme of reforms with the aim of increasing competitiveness and reducing public expenses. The government launched radical reforms regarding employment regulation in the public and private sectors in order to increase flexibility, and took further steps to secure social protection system sustainability, while also challenging the existing rights of a large number of workers. Despite having a strong parliamentary majority, these goals encountered what can be considered a serious political ‘problem load’ and government policy unilateralism was seen to be a highly risky option, which could compromise the success of the envisaged reforms. The negotiation of pacts in 2006, 2007, and 2008 reflected this perception. Below, we argue that organizational attributes, institutional resources, the degree of intra-sectional unity, and actor interdependence are four key indicators of the relative power of actors which are of critical importance for their negotiating strategies. A particular feature of the Portuguese case is that unanimity among the actors is neither a necessary nor sufficient condition for producing a pact. Trade union unanimity has been rare: eleven pacts were created without the signature of CGTP, the larger of the trade union confederations, which has frequently exercised its exit option, in contrast to the UGT, whose identity is strongly tied to social pacts, and whose workplace influence and capacity for worker mobilization is weaker. We hypothesize that the relative organizational power (and perceived power) of the trade union confederations has been a major driver of social pacts, and that especially in 1984, 1986, 1996, and 2008, it is likely that an implicit objective of these social pacts was to neutralize CGTP resistance. A final word on bargaining dynamics. The UGT, as the much smaller trade union confederation, is not especially powerful, has never represented more than a quarter of the unionized workforce, and is limited to certain sectors – financial services and parts of transport, utilities, and public services.1 It can, however, reduce the CGTP’s chances of organizing a successful strike if it opposes it. Moreover, the UGT’s bargaining weight is much greater than its organizational strength suggests, because faced with the CGTP’s strong exit option, governments always need the cooperation of the UGT if they wish to 1 At the end of the 1970s, in the aftermath of the revolutionary period, the two major parties (the PS and PSD) had agreed on the terms for creating a new trade union confederation, the UGT, designed to be a social partner and to combat the CGTP (Optenho¨gel, 1988).

150

Portugal: From Broad Strategic Pacts to Policy secure a pact. The CGTP therefore always plays for high stakes and the UGT’s more moderate strategy helps lower the price the government and its allies have to pay for agreement. The shadow cast by the CGTP thus motivates governments and employers to make concessions to the UGT that are disproportionally high in comparison to that confederation’s own power. In terms of the bargaining model (see Chapter 3), this means that the highly visible disparities of power that would otherwise limit the likelihood of pacts are mitigated in the Portuguese case by the role of the UGT, which uses concertation to boost its own power resources vis-a`-vis its stronger labour movement competitor.

7.3. Negotiation Processes and Actor Preferences 7.3.1. Social Pacts (1984–98) 7. 3 . 1. 1. THE FORMATION OF THE CPCS (1984) In Portugal, the emergence of social pacts was preceded by the creation, in 1984, of the Standing Committee for Social Concertation (CPCS), which was the outcome of an ‘informal social pact’ resulting from previous informal negotiations between the government and the CIP and the UGT. Previous attempts at social dialogue at the national level had failed, and at the time one could not predict with any certainty what the outcome of the creation of the CPCS would be. The creation of the CPCS was a decision of the ‘Grand Coalition’ government, under the leadership of Prime Minister Mario Soares, which had the strong parliamentary support of the two largest parties, the centre-left Socialist Party (PS) and the conservative PSD. The enormous ‘problem load’ the government had to face was certainly a driver behind the creation of the CPCS. The economic and financial crisis was rather dramatic, combining very high inflation with a large public deficit and negative GDP growth over two successive years. Social crisis followed with increasing unemployment, real wage decline, and the emergence of an informal economy. The ‘Grand Coalition’ government was simultaneously engaged with negotiating a new programme of financial stabilization with the IMF, as well as concluding the final phase of negotiations for EEC entry.2 The UGT was the only union organization ideologically predisposed towards social concertation. Created in 1978, the UGT comprised both ‘socialist’ and ‘social-democratic’ unions. The emergence of the socialist/social-democratic governmental coalition was a rare opportunity and a once-in-a-lifetime chance for the UGT to pursue its goals. The CGTP, by contrast, was influenced by strong communist as well as progressive catholic and left-socialist ideas. It opposed 2

Interview with Vitor Ramalho, Secretary of State for Labour Affairs (1984–5), 2005.

151

Social Pacts in Europe any form of institutionalized cooperation with employers, which was seen as subordination to capital and a threat to trade union autonomy, and it was equally strongly opposed to the government’s plans for austerity, privatization, and economic liberalization. The three employers’ confederations, the CIP, the CAP, and the CCP, supported the CPCS as a way of gaining greater political power and influence – which had been undermined by the wave of nationalizations during the revolutionary period – and as an opportunity to advance their claims for liberalization and privatization, even if the CIP, the most powerful employers’ organization, was rather sceptical about their chances of doing so. As for the government, the secretary of state for labour in the PS/PSD government emphasized that: ( . . . ) the government had to be part of the CPCS because it was the government which needed the CPCS and because the potential partners (the employers and the UGT) were weak. Employers’ organizations were only embryonic and the UGT, which was only created in 1978, had to deal with the hegemony and hostility of the CGTP. ( . . . ) The government sought to stabilise the employers and the UGT in the short run, and later integrate both within the CPCS and into the concertation game.3

Aware of this interdependence, the UGT saw access to the CPCS – and thus to national-level policy making – as a positive power shift favouring its further growth and influence. Although facing membership decline at the time, the CGTP was undoubtedly the most representative union, comprising in 1985 around 760,000 workers, whereas UGT membership stood at around 210,000 workers. The CGTP refused to take part in the CPCS on the grounds that exercising its own exit option was a more effective strategy: The social dynamics and bargaining initiative from the labour side were powerful at the time and we valued above all collective bargaining. Collective bargaining was in our view the privileged tool of union action. We believed we had the strength and the tools to guarantee that labour rights were respected and to influence developments regarding those rights and general labour conditions. Given that context we decided not to participate.4

In this initial bargain, therefore, all parties, with the exception of the CGTP, felt relatively weak and believed that concertation would produce mutual gains. The ‘Grand Coalition’ was unstable, employers had been weakened, and the UGT felt that participation in concertation would provide it with unique access to decision-making, thereby bolstering the strength of this otherwise relatively weak organization.

3 4

152

Ibid. Interview with Ernesto Cartaxo, CGTP (Executive Board of the CGTP), 2005.

Portugal: From Broad Strategic Pacts to Policy 7. 3 . 1. 2. THE 1986 SOCIAL PACT ON INCOMES POLICY The unstable ‘Grand Coalition’ of the PS and PSD fell apart after signing the 1985 agreement with the IMF. The conservative PSD won the subsequent elections, with 29.9 per cent of the votes, and formed a minority government with weak parliamentary support under the leadership of Prime Minister Anibal Cavaco Silva. Despite the fact that the opposition was deeply divided and fragmented, the government needed additional support and legitimacy in order to respond to the challenges stemming from Portugal’s recent EEC entry. Inflation was high according to European standards and the unemployment rate also remained at a high level. The minority government identified the fight against inflation as one of its main priorities, and launched negotiations on an incomes policy at the CPCS. In July 1986, the first formal social pact – The Agreement on Incomes and Prices for 1987 (APR 87) – was signed. The forecast inflation rate was used as the reference criterion for future wage increases, while nominal wages were to increase in line with productivity gains and company competitiveness. The agreement represented an important – and unanticipated – change in the role played by the peak-level confederations in relation to wage policy. Until then, the lower level trade union and employers’ associations had been relatively autonomous in wage bargaining from their respective confederations, even if the latter might provide guidelines. By signing the agreement, the confederations committed themselves to following and influencing the collective bargaining process much more closely than in the past. Two features of Portuguese industrial relations (which are still in place) were certainly taken into consideration in the actors’ ‘calculations’: the right to engage in collective bargaining did not depend on trade union representativeness, and collective agreements could be extended by decree if requested by the signing parties (Campos Lima, 2001, 2004; Royo, 2002). Against this background, employers could sign collective agreements with minority unions, which could later be extended, and block negotiations with majority unions. This was clearly the case with the UGT unions and collective agreements in the textile, metal, and printing industries on the eve of the first social pact in the early 1980s (Campos Lima, 2001, 2004). Restrictive wage policy was not a UGT preference and it was a challenge for its constituency to accept it in a number of sectors, for example the FETESE (the Federation of Commerce Workers and Administrative Staff), which considered the inflation clause to be a threat to independent collective bargaining.5 However, by signing the agreement, the UGT was able to assume a more prominent role in social concertation, and envisaged participation in broader processes of ‘generalized political exchange’. This was confirmed when later that year the

5

Interview with Torres Couto (Secretary General of UGT at the time), 2005.

153

Social Pacts in Europe UGT presented a proposal for an encompassing social pact, the Social Contract for Modernisation. The CGTP, however, strongly criticized the agreement, arguing that it would reduce real wages because actual inflation would be always superior to the projected reference rate. It was convinced it could secure more substantial gains by holding out: ‘In the collective bargaining rounds we proposed other criteria combining past and predicted inflation and productivity gains and an approximation with European wages. The balance of power was favourable to us and we achieved some results ( . . . ).’6 Wage moderation would affect more CGTP constituencies than it would in the case of the UGT, because the former had a much stronger influence in the traditional sectors of industry, where workers also had lower wages. Furthermore, the CGTP was clearly more powerful than the UGT at the company level and especially in public-sector companies where CGTP unions feared that the predicted inflation reference point for bargaining would undermine positive wage increases linked to companies’ productivity levels. All employers’ confederations signed the agreement, following the CIP which played a leading role. According to the CIP leader at the time, Ferraz da Costa, it was necessary to sign the agreement to support the minority government of Prime Minister Cavaco Silva and to convince workers and employees to moderate their wage demands. In terms of the bargaining model (Chapter 3), disparities of power between the potential partners to the bargain were clearly visible, but not especially large: the UGT was weak relative to the CGTP but saw the incomes policy deal as opening up a new phase of influence via concertation. The employers were also relatively weak but sought greater strength via alignment with the preferences of a minority centre-right government. Neither the economic situation nor perceptions of power on the part of any of the parties to the deal encouraged delaying agreement, and Portugal’s first formal social pact was quickly signed. 7 . 3. 1. 3 . SOCIAL PACTS UNDER CENTRE-RIGHT MAJORITY GOVERNMENTS (1987–92) In 1987, the centre-right PSD scored a landslide victory (50.2 per cent of the votes) and took power. The CGTP subsequently decided to join the CPCS, a strategy based on the perception of the power shift induced by this political change. According to a CGTP leader: ( . . . ) the CGTP had to occupy all possible spaces. It was impossible not to be in the CPCS. Even if we considered that the main goal was to promote collective bargaining as our first priority, we had to be part of the tripartite body where the main policies were under

6

154

Interview with Ernesto Cartaxo, 2005.

Portugal: From Broad Strategic Pacts to Policy discussion and where the actions substituting macro-concertation for traditional collective bargaining were taken.7

In 1988, the government was confronted with the strong opposition of the trade union confederations and experienced two clear failures. The first was the failure of the 1988 social pact on incomes policy. This pact was not signed by the more important employers’ confederation, the CIP, and was strongly opposed by the CGTP. The second was the massive general strike, organized by both the CGTP and the UGT (which went on strike together for the first time), against a government revision of labour law to facilitate redundancies. The PSD government launched the process of labour law reform at the CPCS, but without success. The employers considered it more efficient to implement the law without the unions, once the PSD had an absolute majority in the parliament. As for the trade unions, the proposed revision triggered sufficient opposition from their various constituencies to justify the mobilization of both the CGTP and UGT against it. The social pact that year (APR 88) provides evidence of a change in the key actors’ rank-order of preferences. The change of CIP strategy from supporting APR 87 to opposing APR 88 was clearly linked to their perception of a shift in power relations. According to the CIP leader at the time, Ferraz da Costa, the need to sign an agreement had ceased to exist after Prime Minister Cavaco Silva’s landslide victory in the general elections (now the government was stronger, the employers did not see the need to make concession with the unions in order to support it), and because the first agreement – APR 87 – had already been successful in convincing workers and employees to moderate their wage demands. The UGT did sign the agreement but later demanded its revision in line with an increased inflation forecast. At the end of 1988, inflation increased, as predicted by the UGT, and the pact failed in the double sense of not achieving its aims and being abandoned by the only trade union that had signed it. At the beginning of the 1990s, the UGT was at the peak of its organizational capacity and political influence, and relations between the two trade union confederations had improved following the general strike. The majority PSD government was losing popularity in the run-up to the forthcoming elections. It also had a compressed timetable for achieving real and nominal convergence prior to participation in EMU, and had to consider the competitive threat of the gradual opening of European trade, both to third countries arising from the ‘Uruguay Round’ negotiations and to the central and eastern European countries which had begun accession talks with the EU. It was in this context that the government decided to launch a new process of concertation. The proposal presented by the government went well beyond industrial relations as

7

Interview with Ernesto Cartaxo, 2005.

155

Social Pacts in Europe such to early retirement, labour legislation (individual dismissals on the grounds of failure to adapt to restructuring or modernization processes), working time duration, and flexibility to be implemented through collective agreements. The 1990 Economic and Social Agreement (AES 90) was signed by all the social partners, with the exception of the CGTP. Two of the issues included in the pact – wage moderation and working time flexibility – ran against CGTP policy. The CGTP was certainly also aware that its signature might give the government and the PSD a boost in the forthcoming elections and would amount to support for PSD government policy in general. The UGT, by contrast, had a particular interest in re-establishing the centrality of social concertation in the eyes of its constituencies with a highly visible broad strategic pact, and the new government proposal met with the union’s long-standing desire to negotiate such a pact. The UGT also had a strong interest in stimulating its member union’s efforts in collective bargaining by opening the way to flexibility ‘deals’ on working hours. AES 90 included a commitment to negotiate further specific thematic agreements, leading to two agreements signed by all of the social partners in 1991: one on vocational training, the other on health and safety at work. The CGTP signed both agreements on the grounds that they were in line with its own policy concerns. But the perception of power relations certainly played a role. The CGTP was aware that employers had to be committed to these two issues in order to change conditions in the workplace, and it wanted a strong degree of participation in the institutional framework set up to deal with them. In 1991, the PSD received an absolute majority in parliament for the second time. A decline in GDP that year signalled new weakness in the economy, and the PSD government proposed another social pact on incomes policy, pointing to the growing challenges coming from Portugal’s integration into the EU. In February 1992, the government, the UGT, the CAP, the CCP, as well as the CIP signed a new incomes policy agreement (APR 1992). In terms of the bargaining model, the late 1980s and the early 1990s saw some key changes in the balance of power between the major actors. The post1987 centre-right government was stronger than its predecessor, and therefore its power increased. But the trade unions also saw their power as increasing – the UGT especially as it had gained confidence from the influence it was already exerting within the CPCS – and acting in concert they managed to resist an incomes policy pact and revision of labour law that their constituencies were united in opposition to. As the bargaining model suggests, an agreement is unlikely if all parties perceive their respective power to be increasing. By the turn of the decade, however, the government was weakening, and the UGT was at its peak of organizational capacity and political influence, while also benefitting from unity of action with the CGTP. As the government needed the UGT as

156

Portugal: From Broad Strategic Pacts to Policy the only union willing to reach an agreement, the UGT could be confident in extracting the concessions it needed in AES 90. APR 1992 was negotiated by a strong government that had recently been re-elected. From this point of view, the model would suggest a minor governmental interest in reaching an agreement. The same applies to the employers who were happy with the PSD’s victory. But in the eyes of Prime Minister Cavaco Silva, the UGT’s leadership (dominated by Socialists) had rendered an important service by signing the AES 90 against the explicit will of the Socialist Party, thus contributing to his second triumph at the polls. (The pictures of Cavaco Silva and UGT’s General Secretary Torres Couto clinking Port glasses sent a tremendous signal to the PS constituency.) After having settled his debt with the UGT by making the APR 1992 happen, Cavaco made no further serious attempts to get another tripartite agreement. 7. 3 . 1. 4. THE SOCIAL PACTS OF 1996 In 1995, the PS won the elections with 43.9 per cent of the vote and formed a minority government which had to deal with the final challenges related to EMU entry – notably the reduction of both inflation and the public deficit. Due to fragile parliamentary support, the PS government launched a social pacting strategy with two proposals: a short-term agreement, the ACSCP (Acordo de Concertac¸a˜o Social de Curto Prazo) of 1996, which was signed at the beginning of 1996 and, at the end of the same year, a long-term agreement, the ACE (Acordo de Concertac¸a˜o Estrate´gica) for 1996–9. Among other issues, the ACSCP included an incomes policy that, similar to a draft law, envisaged detailed rules under which the reduction of working time (down to 40 hours) was linked to working time flexibility, a condition which collective bargaining was obliged to follow. This constraint on collective bargaining was a major threat to the CGTP, insofar as it was more representative than other unions in the sectors most affected. At that time, the CGTP was also engaged in negotiations to reduce working hours without any flexibility requirement, some of which had been successful. Therefore, the agreement was signed by all the actors, with the exception of CGTP. Negotiations on the ACE in 1996 occurred in the midst of the conflict over the implementation of the ACSCP, and the CGTP was able to mobilize considerable resistance to it. Within the Socialist group in parliament, divergences appeared over the idea of being a mere executer of the controversial measures negotiated at the CPCS. As a result, government weakness increased. ACE 1996 was a broad social pact, including general principles and goals in almost all policy areas, following closely the government’s programme. All actors had a good reason to sign up, with the exception of the CGTP, which pulled out of the negotiations. For the minority government, the content of the agreement created only limited commitments. For the UGT, the agreement was in line with its overall strategy of transforming social concertation into an

157

Social Pacts in Europe effective mechanism of governance which would enhance its political influence. As difficulties in the implementation of the ACSCP increased the need for the UGT to serve up a success in the CPCS, its exit options were severely limited. The employers also had a strong interest in a strategic pact that would provide them with a platform for negotiating different political issues with the government. Although a minority government, it was realistic to expect that the Socialist government would govern for one or two parliamentary terms, and thus it was important for employers to use concertation as a means of channelling their demands to the executive. Perceptions of weakening power at a time of economic policy imperatives (EMU convergence), and a realization that sustaining that power required mutual concessions among the actors, both contributed to a rather rapid and conflict-free conclusion of an agreement on ACE 1996.

7.3.2. Social Pacts in Stage Three of EMU 7 . 3. 2. 1 . THE SOCIAL PACTS OF 2001 The 1999 elections strengthened the Socialist government’s legitimacy. But after Portugal’s entry into the Eurozone in 2000, the consensus between the PS and the PSD on budgetary policy ended and the government faced serious problems in securing the majority required for its annual budget. Against this background of government weakness, a recovery in the strength of the CGTP in the early 2000s, and crisis and stagnation in the UGT, the labour ministry launched negotiations on four specific agreements which focused on employment policy, the labour market, and education and training; working conditions, hygiene and safety at work; social protection; and work organization, productivity, and wages. The separate negotiation of these areas did not exclude ‘crossover’ compromises, as concessions made by one partner in one area could be exchanged for greater flexibility with regard to that partner at another negotiating table. By demanding greater responsibility by the social partners themselves in the resolution of problems, this new form of pact also aimed to strengthen the micro-foundations of the industrial relations system, and create the conditions for effectively ‘embedding’ future pacts. The two tripartite agreements on health and safety (AHST, 2001) and on occupational training (APFP, 2001) were signed by all of the social partners. They included a comprehensive and detailed catalogue of measures to be taken by government, parliament, and public bodies in the different domains of policy in line with an explicit schedule; created or activated tripartite bodies (with parity in the number of representatives) with extensive competencies in terms of information, consultation, and effective participation in decisionmaking; stipulated the reform of existing consultative bodies to make them more effective; and recommended to the social partners that they include the stipulations of the two tripartite agreements in collective bargaining.

158

Portugal: From Broad Strategic Pacts to Policy There was an additional agreement on the reform of social protection (AMPS, 2001). This agreement included two parts, one with a new calculation formula for pensions to guarantee the solvency and universality of the social protection system, and the other defining options outside the public system. The CIP was opposed to both parts given its support for an expansion of private schemes. Besides, when this pact was signed, the Socialist government was in open crisis, facilitating the choice of exit on the part of the CIP which had a lower discount rate in this regard. The CGTP signed the first part but not the second which enabled employees to choose to pay their pension contributions, up to a certain limit, into private schemes, which was contrary to CGTP opposition to private social protection. It is worth noting that economic conditions were rather tough in 2000–1 when the new social security framework was bargained. In 1999, Portugal enjoyed good economic growth, falling interest rates, and low unemployment, and having qualified for EMU in 1998, joined (with the ten others) on 1 January 1999. Portugal’s inflation rate in 1999, at 2.4 per cent, was low. But household debt had been expanding rapidly and Portugal’s public deficit exceeded 3 per cent of GDP in 2001, leading the European Commission, the OECD, and others to advise the Portuguese Government to exercise more fiscal restraint. The overall rate of growth then slowed in late 2001 and into 2002, making fiscal austerity that much more painful to effect. In 2002, the Socialist minority government fell, in large part because the centre-right parties successfully exploited the Socialist’s failure to deal effectively with the country’s public finances. Politically, the Socialist minority government (elected in 1999 when it fell just one MP short of a majority) badly needed the social partners. Its main concern was to legitimize changes and pre-empt any widespread protest following the passage of the 2001 social security framework law which put in place the background legislation to the negotiations of 2001 and the November 2001 accord with the social partners. Such protest would have been organized by the CGTP had it not been on board (note that even then the latter did not support or sign that part of the accord on contributions to private schemes). The UGT was also able to wield considerable influence regarding the reform, it seems, given its counterweight role in negotiations vis-a`-vis the CGTP. This was a classic case, then, of government power decreasing, and union power relatively increasing, fostering agreement as the bargaining model suggests. The importance of opposition party and union support for social security reform is illustrated by what happened next. A new centre-right government under Jose´ Manuel Barroso elected in 2002 reviewed the 2000 pension framework and replaced it with another in which pension privatization was given greater emphasis. But the two centre-right coalition – PSD and People’s Party (CDS-PP) – governments in power thereafter (and until 2005 when the Socialists returned with an overall majority) failed to implement the new framework – most likely out of fear of popular protest.

159

Social Pacts in Europe It is not until July 2006 that the 2001 framework was revived under the new majority Socialist (PS) government, and in 2007–8 the government moved forward with legislation and decrees and – with the support of accords involving employers and the UGT, but not the CGTP – gradually managed to put the framework into effect. The 2006 reform of social security introduced a sustainability adjustment factor in the calculation of future pensions in relation to life expectancy and accelerated the transition to the new pension formula by aiming to conclude the transition period by 2007, instead of the previous deadline of 2017. Even a majority Socialist government required social partner support for such a reform; most likely because the original framework was put in place by a minority Socialist government with union backing, making it impossible for it to proceed without them, regardless of its new majority, five years later. 7 . 3. 2. 2 . SOCIAL PACTS UNDER THE SOCIALIST MAJORITY GOVERNMENT (2006–8) In October 2005, a spectacular electoral turn to the left gave the PS an absolute majority of votes for the first time in history, and the centre-right parties went into a deep crisis. Thus, the PS government under the leadership of Prime Minister Jose´ So´crates did not in theory need social pacts to reinforce its legitimacy. However, in the period of its first mandate, five tripartite social pacts were signed (in 2009, the So´crates-led Socialist Party won a second mandate but did not secure the overall majority gained in 2005). In 2006–7, the government proposed four social pacts on specific issues: two pacts on the social protection system, and one each on the statutory minimum wage and vocational training. The emergence of these social pacts is certainly related to the economic ‘problem load’ the government had to address at the time, namely combating high unemployment and reducing the public deficit in line with EMU requirements. Additionally, given its powerful parliamentary position, the government decided to make deep changes in the legal provisions regarding labour relations and working conditions in both the public and private sectors to increase labour market flexibility. It therefore anticipated considerable resistance. In December 2006, the government and all the social partners signed a Framework Agreement on the Definition and Evolution of the Statutory Minimum Wage (ARMMG, 2006) defining the increase in the statutory minimum wage (RMMG) for the period 2007–11 at an annual rate of about 5.3 per cent. The agreement matched the demands of trade unions but not those of the employers’ organizations, especially the CIP. Nevertheless, the employers’ confederations signed the agreement. Their concern was to maintain their political role in social concertation at a time when their right-wing and centre-right party allies were in deep crisis, and when they also sought to secure counter-concessions

160

Portugal: From Broad Strategic Pacts to Policy from the government and unions in labour law reform. In this case, then, the employers were boxed into a deal with the Socialist government and the social partners because of the detrimental impact on their own influence of the decline of the parties to which they were linked. On 14 March 2007, the PS government and the social partners, with the exception of CGTP, signed an agreement on the reform of vocational training. This was the first time that the CGTP had not subscribed to an agreement on vocational training, declaring that ‘the commitments for the implementation and the guarantees were insufficient’. According to the CGTP, to sign the agreement was to contribute to ‘the institutionalization of a “carrot and stick” policy in the country’, meaning by ‘stick’ the ongoing reforms in the public sector and the revision of the labour code. The shift in CGTP strategy was also probably due to its perception of a growing capacity to mobilize workers, in both the public and private sectors. On 25 June 2008, the PS government and the social partners, again with the exception of CGTP, signed the Agreement on the Reform of Labour Relations, Employment Policy, and Social Protection. This was the first social pact signed in Portugal that centred on a global reform of industrial relations, including the revision of the Labour Code of 2003. The 2003 Labour Code represented a serious rupture with several key principles of the labour legislation put in place since the democratic transition of 1974–5 (Pernot, 2003): by abolishing the principle of more favourable treatment of workers (favor laboris) and in particular by establishing that collective agreements could contain less favourable rights for workers (via derogations) than those defined by law. Furthermore, the Code of 2003 introduced the so-called ‘caducity’ of collective agreements, that is, the possibility for employers (or unions) to withdraw unilaterally from collective agreements. From the outset, the Socialist government announced its intention to negotiate a revision of the Labour Code in the CPCS. This was a true innovation: neither Prime Minister Cavaco Silva in 1987/8 nor Prime Minister Dura˜o Barroso in 2002 had achieved such a pact. It was also a highly ambitious project, bearing in mind that general strikes had been launched both in 1988 (by the CGTP and the UGT) and in 2002 (by the CGTP alone) against the proposed reforms of labour legislation. The government strategy for the reform of labour relations was launched in three phases. The first two phases took place outside the CPCS. The Socialist government began by inviting experts to produce an analysis of Portuguese employment relations (Phase 1) and to issue recommendations (Phase 2), the results of which were published and open to public debate. The results of the second phase were published in the White Paper on Labour Relations in December 2007. During both phases, the social partners expressed their positions on the proposals and took action to influence the direction of the reform. While the trade union confederations reacted rather negatively to the White

161

Social Pacts in Europe Paper’s first draft recommendations (the CGTP strongly and the UGT more cautiously), the employers’ confederations were more positive. The third phase started in the CPCS with discussion of the White Paper. Then, in April 2008, the Minister of Labour presented to the social partners the document ‘Proposals for a New Consensus on the Regulation of the Labour Relations System, Social Protection and Employment’. The CGTP was strongly opposed and called a national demonstration to protest against the proposals, leading to a large demonstration involving some 200,000 people on 5 June 2008. On 25 June, three days after presenting a final proposal at the CPCS, the government reached an agreement with all the employers’ confederations and the UGT. The employers signed the agreement despite the fact that the measures envisaged fell short of their main demands, including those regarding individual dismissals, because they felt that the measures on working time flexibility would help improve competitiveness. The employers’ discount rate was higher and they were interested in signing an agreement quickly. The UGT signed the agreement, after a long period of cautious opposition to the proposed reforms. This tripartite agreement clearly influenced the design of the new Labour Code, which came into force in February 2009. The social pact introduced important and controversial changes with a considerable impact on industrial relations. Among the most controversial issues were those related to the legal system governing individual dismissals, working time flexibility, the articulation of the law with collective agreements, and the expiration of collective agreements (Campos Lima, 2008, 2009; Pernot, 2009). In this regard it must be borne in mind that the 2009 reform retained some of the controversial norms launched by the Labour Code of 2003 by not reviving the principle of workers’ more favourable treatment by collective agreements than in law, and by reinforcing the regulations on the ‘caducity’ of collective agreements. The 2006–8 pacts illustrate the complex dynamics of pact negotiations in Portugal. The majority Socialist government, despite its strength, used social partner support (above all that of the UGT) to legitimize controversial reforms across multiple policy areas – social protection, the statutory minimum wage and vocational training, labour relations, and working conditions – against the background of worsening economic conditions: GDP growth in 2006, at 1.3 per cent, was the lowest in all of Europe, and having risen steadily since 2002, the unemployment rate rose further between 2006 and 2007 from 7.7 to 8.4 per cent. Clearly, the PS government perceived both the need and opportunity to introduce quite radical reforms, especially in increasing labour market flexibility. The CGTP acted as a powerful antagonist outside the CPCS during this period, whereas the UGT mobilized against the government in a more calculated manner.

162

Portugal: From Broad Strategic Pacts to Policy In 2006–8, the CGTP unions and several UGT branch organizations jointly organized numerous strikes, including those over reform of the public administration in July 2006, and against public-sector wage restraint related to Maastricht-linked budgetary austerity in November 2007. They also jointly mobilized their members over public-sector pay in November the following year, and in January 2008 in reaction to the government’s labour market flexibility measures. But the CGTP was on its own in calling a strike in March 2007 against the reform of public-sector contracts and the new EU ‘flexicurity agenda’; and it was explicitly opposed by the UGT and most independent unions when it called the 30 May 2007 strike against public-sector reform and other Socialist government policies. It encountered similar opposition in October 2007 when it mobilized its workers for a more ‘social’ Europe. The UGT’s selective use of protest – allying with the CGTP when it wanted to pressurize the government, but holding back when it wanted to secure its role in concertation – was accompanied by its deep engagement with the government and employers over both public-sector and private-sector labour market reform, allowing agreements to be forged on both of these issues, respectively, in May and June 2008. The result was a far-reaching reform fostering greater working time adaptability, reinforcing the caducity of collective agreements, facilitating redundancies by simplifying and speeding up disciplinary procedures, and redefining the articulation of law and collective agreements through the submission to workplace negotiation of numerous aspects of working time regulation previously enshrined in the labour code. At a time when both the government and unions perceived their strength to be increasing, the UGT’s more moderate and pragmatic strategy not only helped lower the price the government and employers had to pay for agreement; it actually allowed agreements to be achieved at a time when the circumstances laid out in the bargaining model would suggest they should have floundered.

7.4. The Institutionalization of Social Pacts During the twenty-five years since the creation of the CPCS (in 1984), social concertation has become an important element of governance in Portugal. At present, political exchange between governments and the peak level organizations of employers and unions normally takes the form of tripartite macro-level negotiations inside the CPCS. Today, all involved parties recognize to a certain extent that social concertation has a positive function in the system and that it is useful for them. This applies also (even if to a lower degree) to the major trade union confederation, the CGTP, which initially refused to participate in the process, criticizing it as part of an attack on the major ‘achievements of the revolution’ of 1974–5. The CPCS has become an arena in which all actors engage in order to maintain or increase their power positions in the industrial

163

Social Pacts in Europe relations system as a whole. Despite several setbacks, pacts in Portugal have attained a considerable degree of institutionalization.

7.4.1. Institutionalization Paths The first decade of concertation was marked by the repetition of narrow pacts on income policies (1986, 1988, 1990, and 1992), and by their extension to other issues in the form of the broad AES 90 and two narrow agreements on vocational training and health and safety (1991). The agreements on incomes policy had an important impact on wage bargaining. The AES tried to articulate macro-concertation with collective bargaining, and the specific agreements of 1991 opened the way for an active role of the social partners in these policy areas. The AES failed to initiate a negotiated change in working time regulation at the level of collective bargaining, and after 1992 concertation stagnated. Nevertheless, there had already been a considerable degree of pact institutionalization. The CGTP entered the CPCS in 1987, participated actively in the negotiations on the AES, and signed the two specific agreements on vocational training and health and safety. All of the agreements signed in 1990–1 had at least some impact in their respective areas. The Short-Term Agreement (ACSCP) of 1996 was specifically designed to resolve the problem of working time regulation by law, but its implementation created serious problems for the new Socialist minority government and damaged the trust of all parties involved in the process. In comparison with the AES 90, the Agreement for Strategic Concertation (ACE) of 1996 was much broader but at the same time significantly more shallow. Further negotiations were effectively reserved for the signatories of the ACSCP and ACE, thus excluding the CGTP de facto from concertation. This change put the entire institutional architecture of pacting under severe tension, and the process entered into profound crisis. This crisis revealed that there was only a limited level of agreement on policy concertation and its procedures. The precarious consensus on the basic architecture and ambitions of concertation was eroding under the pressure of contestation from the CGTP. None of the parties left the CPCS, but concertation as a process was severely weakened. Making pacts broader or shallower in order to get macro-negotiations back on track had only proven to be counterproductive. In 2000–1, tripartite negotiations made a strong comeback. At the end of the 1990s, several factors produced an important power shift inside the trade union camp which increased the CGTP’s weight at the negotiation table, and thus the union camp’s weight as a whole, because the CGTP has a strong organization and therefore more substantial bargaining power and implementation capacity than the UGT. This allowed the government in 2000 to renegotiate the set-up for concertation with the CGTP. This recalibration, and the four pacts on specific issues signed in 2001 (three with the CGTP), represented a

164

Portugal: From Broad Strategic Pacts to Policy re-institutionalization of tripartite negotiations based on a new compromise. While income agreements with reference values for collective bargaining and broad agreements were abandoned (the CGTP had always refused to sign that kind of pact), narrow agreements on non-wage issues were continued. The agreements on vocational training and health and safety deepened the pacts on these issues signed ten years earlier, and the double-pact on social protection (one part signed by the CGTP, but neither part by the manufacturing employers’ confederation, the CIP) opened up a new area for macro-concertation. This short period, which was interrupted by the fall of the Socialist government at the end of 2001, can be seen as a turning point away from the concrete threat of deinstitutionalization of concertation and towards its relaunch under new conditions. One of the top priorities of the right-wing coalition that ruled during 2002–5 was a thorough-going revision of labour legislation. In this context, the government considered tripartite negotiations to be low in priority or even counterproductive because they carried the risk of delays beyond the end of the election period. No tripartite pacts were signed; but on the brink of the return of the Socialist party to government, all employers’ and unions’ confederations with a seat at the CPCS signed the first bilateral agreement between the social partners in the history of concertation. A year later (2006), they agreed on a second bilateral pact. In the first agreement, the social partners declared their will to revive collective bargaining which had entered a crisis in 2004, and in the second they formulated their positions in relation to vocational training policies. Both bilateral pacts can be seen as signals from the unions and employers that all of them sought a return to concertation, and that each wanted to be recognized as a fully fledged partner in the process. Between 2002 and 2005, the government had abandoned macro-concertation as an ineffective system of governance. But informally negotiations had continued, no organization left the CPCS, and information and consultation in specific areas such as vocational training and health and safety continued. Deinstitutionalization took the form of a temporary freezing of the process (as in 1993–5 and 1997–9), with the potential for a thaw after the revision of labour legislation. The Socialist majority government responded positively to the social partners’ challenge and opened a new period of concertation. Concertation was re-institutionalized following the principle of parallel negotiations across various specific areas, some repeating and developing earlier agreements, others introducing new issues. In continuing the strategy of narrow pacts on specific issues, five agreements were signed, three of them referring to the earlier agreements on vocational training and social protection, and two on new issues, namely the national minimum wage and the revision of labour legislation. Each of the latter had a high potential for discord and conflict, but for each party involved three or four out of the five agreements brought considerable benefits and on these grounds no one abandoned ship. The CGTP did not sign the agreement

165

Social Pacts in Europe on the revision of labour law and organized massive protests against it, but it did not leave the CPCS. The pact on the revision of labour law was a decisive step towards the re-regulation of core issues in the industrial relations system via tripartite macro-concertation. This pact does not aim at articulation with other negotiation levels; instead, it changes the rules of the game, particularly in collective bargaining, and will have an important impact on the industrial relations system as a whole. The most recent series of pacts indicates that the actors concerned (and primarily the government) have found a way to consolidate tripartite macronegotiations in the context of a limited level of agreement on policy concertation. Outcomes may be subject to strong contestation, but the basic architecture of pacts as created in 2000–1 (i.e. ‘bundles’ or ‘package deals’ of narrow agreements with varying degrees of depth and different balances of interest) is currently not questioned. With regard to the actors’ roles, we may conclude (a) that there were no tripartite pacts if the government was not interested in having one, and (b) that there was a pact if the government considered it useful and if a ‘critical mass’ of the social partners (but not necessarily all of them) was ready to come to an agreement. Thus, the degree of institutionalization of Portuguese concertation proved to be largely dependent on the agenda of successive governments and their capacity to define an architecture for pacts adequate for getting (or keeping) unions and employers on board.

7.4.2. Mechanisms of Institutionalization The CPCS was created in a period of a profound economic and social crisis. The problem load was huge. For the government (and for the employers who were interested in the continuation of capitalist normalization), it was extremely important to bring social unrest under control and to stabilize the political system which was under permanent pressure from the CGTP. The creation of the CPCS in 1984 responded to these system needs in a multiple sense: it increased the political legitimacy of the government’s strategy, it calmed social discontent, and it was decisive for the construction of the UGT as a counterpart to the CGTP inside the union camp. The repeated pacts on incomes policy helped to get inflation down to European standards (1986–92) and to qualify for EMU membership. Thus, the incomes policy agreements responded successfully to system needs. The end of income agreements after 1999 can be seen as a ‘natural death’ because inflation was no longer a problem and the country had become a founding member of the Euro. There was therefore a strong ‘functionalist’ element in the rise and demise of incomes policy-centred pacts (see Hancke´ and Rhodes, 2005). The AES (1990) extended concertation to a broad set of issues and tried (without success) to introduce the logic of negotiated change into collective

166

Portugal: From Broad Strategic Pacts to Policy bargaining. This would have made an important contribution to the modernization of collective work relations. Six years later, the ACE, as shallow as it was, was symbolic and had little concrete impact on the economy or industrial relations. This second broad agreement failed to make a significant contribution to the solution of system needs, not even in the sense of legitimizing the policies of the government. The iterated specific agreements on vocational training (in 1991, 2001, and 2007) dealt with a core problem of Portuguese companies’ competitiveness and from this point of view they also represented a response to a relevant system need. The same applies to the two agreements on health and safety (1991 and 2001) which dealt with salient socio-economic problems and opened the way for the creation of micro-foundations for their solution. These specific and narrow agreements created a broad and deepening tripartite consensus on the nature of the problems facing the country as well as on feasible solutions. In contrast, consensus was much weaker on the two double agreements on the reform of social protection (2001 and 2006) and the agreements on a minimum wage (2006) and labour legislation (2008). The financial consolidation of social protection was a system ‘need’, but the solution agreed upon largely complied with the trade unions’ positions. The increase in the national minimum wage, which can be seen as an incentive for companies to accelerate the shift from their traditional reliance on low wages to a modernized form of competitiveness, was also a clear concession to unions’ demands. The revision of labour legislation, on the other hand, followed principally the strategy employers had argued for. To sum up, income agreements were useful during a certain period, and they ceased after their initial mission had been accomplished. Broad agreements like the AES and the ACE proved to be relatively inefficient in responding to system needs and were abandoned. Narrow agreements on issues other than wage bargaining responded successfully to specific socio-economic problems, and with the final package of agreements signed between 2006 and 2008, concertation reached the core of the industrial relations system. This confirms the functionalist hypothesis that social pacts are likely to become institutionalized if their institutionalization serves system needs. Concertation was institutionalized when a large problem load coincided with the absence of solid microfoundations for problem resolution, as in the income agreements and other narrow pacts (Hancke´ and Rhodes, 2005). As argued above, the conclusion of pacts depended in the first place on the governments’ assessment of their utility. This applied in particular to the conservation of power by signing agreements before elections (1986 and 1990–1), by creating legitimacy for the programme of a weak government (ACE, 1996), or by involving social partners in decision-making on controversial issues such as social protection reform, minimum wage increases, and labour legislation. Conversely, governments did not commit themselves to concertation if

167

Social Pacts in Europe negotiations put at risk the achievement of their priority objectives. This was the case of the Socialist minority government under Prime Minister Guterres (1997–9) who froze concertation in order to avoid further trouble as had occurred in the aftermath of the ACSCP, and of the conservative coalition under Jose´ Manuel Barroso (2002–4) who pushed through the changes to the Labour Code in 2003–4 outside the CPCS. Unions and employers’ confederations are more stable than changing governments in their definition of what is useful and what is not, although there may be some evolution in their assessments. Inside the trade union camp, we can distinguish during the first period (1984–7) two antagonistic positions, with the UGT as an enthusiastic advocate of concertation and the CGTP as its intransigent opponent. Social partnership is part of the UGT’s genetic code and strategy. This confederation has signed all pacts and considers them to have been useful in several respects, such as responding to system needs, promoting social progress, and increasing its own power. The CGTP, on the other hand, was and continues to be an avowedly anti-capitalist organization in open struggle against the process of capitalist normalization, and has always had a fundamental problem with tripartite macro-negotiations. But its position has nevertheless evolved from open hostility to gradual involvement. The CGTP’s participation in concertation is marked by tension between (a) its recognition that it may be useful if it produces solutions to certain concrete problems facing workers, and/or if it delivers instruments that enhance the union’s influence; and (b) the problem that concertation also contradicts the principles of open class struggle. While the UGT considers almost any agreement as useful and is strongly dependent on the existence of pacts (hence its weak exit option), the CGTP needs particularly strong incentives to come to the same conclusion, and this is certainly one of the major reasons why this confederation has only signed on to one-third of the concluded agreements (in other words, it has a weak ‘entry option’). Employers seem to have a much more pragmatic or utilitarian approach to concertation, particularly the manufacturers’ confederation CIP which can be considered the political leader of the employers’ camp. The CIP signed the incomes policy agreement in 1986, but once the immediate goals of this move were achieved (a PSD victory in 1987 and the introduction of a new method of collective bargaining), it did not sign APS 1988. Prime Minister Barroso’s government could count on the CIP’s support during the revision of labour legislation without a pact, but in the face of an imminent change in power, the CIP signed the first bilateral agreement at the CPCS. CIP’s agreement with the reform of social protection in 2006 (after having rejected the project in 2001) and its signature of the agreement on a sustained increase in the national minimum wage (2007) must be seen in the context of the simultaneous negotiations of a revision to labour legislation. By making these concessions, the CIP

168

Portugal: From Broad Strategic Pacts to Policy improved its position in the struggle over labour law, and the pact signed in 2008 met, in fact, this confederation’s essential demands. The first series of income agreements (1986–92) and the narrow agreements on specific issues after 1991 demonstrate that social pacts are likely to be institutionalized if they are associated with satisfactory outcomes for the actors. Conversely, the failed implementation (i.e. the perceived uselessness) of a central part of the AES of 1990 and of the ACE of 1996 was followed by periods of stagnation and deinstitutionalization, and the anticipated counterproductive role of concerted engagement with the conservative government’s project of revising labour legislation that resulted in the freezing of the process in 2002–5. In the course of the repetition and extension of agreements, all actors made considerable and growing investments in supporting arrangements for concertation. The government extended mechanisms of information and consultation to a large number of bodies in several areas such as vocational training, health and safety, social protection, the utilization of European funds, and others. About one-third of the total number (nearly 100) of such bodies belongs to the Labour Ministry. The representatives of social partners are appointed by the peak-level organizations with access to the CPCS. This wide opening of opportunities for intervention in public policies demands a considerable investment on the part of unions and employers’ organizations as well. The CGTP is a good example of this. In 2005, the CGTP created a Specific Permanent Committee for vocational training, composed of CGTP representatives in public bodies in this area, as a source for the union’s Executive Committee’s reflection on training and as a coordinating centre for its numerous representatives. The CGTP also made a systematic effort to elect representatives for health and safety in the workplace, a new legal possibility created by the agreement on health and safety in 2001 (CGTP, 2004, 2008). This level of active involvement on the part of all confederations in the CPCS automatically created stronger and more extensive inter- and intra-organizational ties and networks and reflected all actors’ confidence in the continuity of the process, and has underpinned the process of pact institutionalization. This mechanism also works the other way around. The multiple forms taken by CPCS members’ involvement in public policies are not only supporting arrangements for pacts but also result from pacts. Due to their CPCS membership and their participation in pacts, unions and employers’ confederations are entitled to appoint representatives to other consultative bodies. This opens the way for intervention in numerous areas and gives peak-level organizations a particularly strong position in relation to sectoral associations to whom confederations may delegate their representative powers in specific bodies. This means that leaving the CPCS would have very high costs for any of the confederations. From this perspective, we may turn the hypothesis around: the higher the investment in supporting arrangements, the higher the likelihood of the social pact institutionalization.

169

Social Pacts in Europe Testing the normative hypothesis (i.e. ‘that the stronger beliefs are that the previous pact has generated just outcomes, the higher is the likelihood of the institutionalization of a social pact’) is particularly difficult because it is almost impossible to distinguish between the actors’ perception of what is ‘useful’ and what is ‘just’. The ‘justice’ of an outcome is closely linked to (or even determined by) its perceived utility. Another factor is the ideology and strategy of the actor. The UGT has the strong belief that pacts tend per se to produce ‘just outcomes’ and this belief strengthens its norms of pact-accommodating cooperation. This is one factor underlying the UGT’s permanent struggle for the institutionalization of pacts. The CGTP’s anti-capitalism, by contrast, results in the opposite perception: that social pacts cannot be ‘just’ because they are rooted in an unjust system. The CIP has a much less ideological approach, and from its pragmatic position the ‘justice’ of an outcome depends above all on the compliance of the signatories with the agreement and the balancing of losses and gains for each party. In the view of this employers’ confederation, the reversal in 2008 of essential aspects of revisions made to the Labour Code in 2003–4 would not have been acceptable and would have seriously weakened its commitment to the norms of cooperation. It might even have provoked CIP’s exit from the CPCS. Regarding the power-distributional hypothesis, as stated above, it was in the first place the government as the most powerful actor which determined whether there would be a pact or not, thereby confirming that social pacts are likely to become institutionalized when actors – in particular those with more power – support their reproduction. Employers and unions (alone or in coalition) are not strong enough to force the government to make a pact; but nor is the government able to obtain a pact without the support of at least some of the social partners. Portuguese pacts do not require unanimity. But a pact without the signature (and support) of at least one of the major ‘antagonists’ of the industrial relations system, that is the CIP or the CGTP, runs the risk of having very little political and practical impact. The 1988 incomes agreement was the only pact without CIP and CGTP involvement and it failed. The articulation of the AES 90 with collective bargaining did not succeed because the CGTP (which did not sign the pact) mobilized against it and because the CIP (which had signed) was not in fact committed to the implementation of this part of the agreement. The UGT, as the smaller trade union confederation, is not a particularly powerful actor. Despite all its efforts, it has never represented more than 20–25 per cent of the unionized workforce, and its social basis is largely concentrated in financial services and parts of transport, utilities, and public services. The UGT alone is unable to organize broad protests or a general strike, but the CGTP’s chances of successfully mobilizing are strongly limited if the UGT is opposed. The UGT’s weight at the negotiation table is greater than its weakness as an organization would suggest because in the face of the CGTP’s

170

Portugal: From Broad Strategic Pacts to Policy particularly strong exit option, the government needs the UGT’s cooperation. In negotiations, therefore, the CGTP always plays for high stakes and the UGT’s more moderate strategy helps to lower the price the government and its allies have to pay for a pact. The threat of CGTP hostility in the case of failing negotiations can be reduced if the UGT signs an agreement and helps to reduce the impact of the CGTP’s mobilization against it. The CGTP’s ‘shadow’ in this way motivates government and employers to make concessions to the UGT that are disproportionally high given its actual power resources. The UGT thus ‘borrows’ part of its bargaining power from the CGTP, but its organizational power resources are not sufficient to exert effective influence on enforcement. Portugal’s pacts may therefore look good on paper; but without the other signatories’ support, the UGT is unable to secure a balanced and far-reaching implementation. The irony in this game is that this strategy contributes to a weakening of CGTP’s mobilization capacity, and this means in the long run that the UGT’s weight at the negotiation table will shrink because it will become steadily less useful for its partners. The example of the UGT indicates that actors with less power support the institutionalization of pacts in order to gain more power. This applies also to the two employers’ confederations which have signed all agreements since 1986. The agricultural confederation, CAP, is limited to a small sector of the economy and its main function is that of an entrepreneurial association. The CCP has a larger domain (commerce and services), but its role in the industrial relations system is secondary. The Confederation of Portuguese Tourism, CTP, was admitted to the CPCS in 2004 and has signed all agreements since, but it is too early to make an assessment of this organization’s strategy in concertation. From a power-distributional and utilitarian perspective, the CGTP clearly profited by joining the CPCS and signing certain agreements. This strengthened its position inside the trade union camp and vis-a`-vis the government and employers. By signing agreements, the CGTP was able to convert its organizational power into concrete gains in various areas. But the decision on each constructive step in concertation had to overcome this confederation’s anticapitalist principles and its open political opposition to all constitutional governments since 1976 (with the single exception of the July 1979–January 1980 government of Prime Minister Lurdes Pintassilgo). The CGTP’s reasons for not signing incomes policy agreements had a strong unionist basis (i.e. no restraints on wage bargaining), but its reluctance to sign broad agreements was politically motivated. The UGT’s support of such agreements was, by contrast, entirely consistent with its own strategy and had the convenient side effect that the CGTP would not sign these pacts, thereby making the UGT the exclusive union partner of governments and employers. The CGTP’s behaviour challenges the notion that actors are rational utilitymaximizers. The explanation may be found in interference from the political system. The influence of the orthodox Communist Party (PCP) among the

171

Social Pacts in Europe CGTP’s cadres is very strong and in many sectors even hegemonic. This strengthens both the functionalist and normative reasons for not pacting inside the confederation (the need to combat the system and its governments, the need to resist all class-compromises that ‘betray’ anti-capitalist values and struggle) which underpinned the continuous political mobilization of the CGTP against all constitutional governments in the first decade after the revolution. At the end of the 1980s, however, the CGTP’s leadership began to understand that by politicizing trade union struggles it had overstretched its capacities. The new approach to concertation was embedded in a broader process of organizational recovery at all levels, and during the 1990s the CGTP acquired a new vigour and growing liberty of action vis-a`-vis the PCP. The confederation gained a major influence in the political debate, and the ‘pact on pacting’ negotiated in 2000–1 was a result of this gain in power. The new leadership of the Communist Party (since 2004) has tried to tighten its grip on the CGTP. This, in combination with the tensions between the Socialist government and the unions in various key areas, explains why the CGTP did not sign the most recent pact on vocational training in 2007.

7.5. Conclusions Since the creation of the CPCS and the first Portuguese pacts, the socioeconomic and political drivers for pacting have changed profoundly. Concertation emerged in a context of enormous economic and social problems and serious political instability that demanded immediate answers (austerity and the fight against inflation, political, and social appeasement). In the course of the following two decades of capitalist ‘normalization’, with greater political stability and European integration (including enlargement), new challenges emerged that demanded more complex solutions. It was no longer the struggle for survival, but rather the effective modernization of companies and the state – in a context of strong economic competition inside the EU and at a global level – that now determined the agenda. Socio-economic challenges have been strong drivers of concertation and are in part responsible for the fact that all governments except one have signed social pacts, independent of their political orientation or their electoral strength. This leads us to the conclusion that in Portugal (and perhaps more so than in other countries), governments need to take resort to institutional resources beyond the political system in order to organize consent. The existence of a strong and orthodox Communist Party and its strong influence over the largest trade union confederation, the CGTP, is certainly one of the major reasons for this Portuguese particularity. That said, we wish to emphasize that we do not agree with certain common interpretations that attribute the attitudes and actions of actors under

172

Portugal: From Broad Strategic Pacts to Policy concertation mainly to the strategies and tactics of political parties. On the contrary, we are convinced that unions and employers’ associations function according to their own logic as bounded ‘intentionally rational utilitymaximizers’, and our findings support this view. The relationship of the CGTP, the UGT, or the CIP with certain political parties is certainly relevant; but as key actors in collective labour relations, each one of them has its particular mix of power resources and is forced to develop its own specific strategy within the industrial relations system. The CGTP’s strong (but always reversible) move from open hostility to concertation towards active intervention and conditioned commitment (in the context of the Communist Party’s unchanged orthodoxy) is a striking example of this fact. In the beginning of social concertation, the enormous problem load with which actors were confronted, and the strong politicization of social and economic life (two reasons for profound uncertainty), favour both the functionalist and normative arguments for social pacts. Governments, employers, and the UGT wanted stability (while the CGTP did not, and consequently remained apart); but in the course of economic, social, and political normalization (as Portugal swung into the European mainstream), these factors lost their relative importance in relation to more utilitarian and power-distributional reasons for concertation. Utilitarian and power-distributional factors were always present of course, but as at the beginning of the process actors had no experience with concertation, these factors were rather weak. Having gained, in the light of the experience of successive pacts, a clearer notion of the risks and opportunities of the process, actors’ utilitarian and power-distributional motivations became stronger and more concrete and tended to dominate their strategies and tactics. Once again, the change in the CGTP’s attitude and position may be seen as an example. With ongoing capitalist normalization, this confederation was forced to abandon both its outright open revolt against the system and its heavy ideological opposition to concertation, and adopted a more pragmatic approach grounded in utilitarian and power-distributional concerns. The trajectory of concertation accompanied the qualitative changes in the socio-economic drivers. The attempt to respond to the growing complexity of problems with broad pacts led the process of concertation into a cul-de-sac and to its erosion under the pressure of contestation. After a short period of stagnation, a new architecture was created based on ‘bundles’ or ‘package deals’ of narrow agreements with varying degrees of depth and different balances of interest. This opened the way to two periods of successful pacting (in 2001 and in 2006–8) and allowed the CGTP to play a more constructive role. In the 2008 agreement, concertation achieved for the first time a central role in the re-regulation of key issues in industrial relations and collective labour relations. The outcomes may be subject to strong contestation, but the basic architecture of agreements as created in 2000–1 has proved to be the most amenable to the institutionalization of pacts.

173

8 Spain: From Tripartite to Bipartite Pacts Oscar Molina and Martin Rhodes

8.1. Introduction The history of social pacts in Spain is one of success in the early 1980s, dramatic failures ten years later, and the consolidation of peak concertation and bipartite pacts after the late 1990s. This changing and irregular pattern poses numerous challenges to scholars interested in social pact emergence and institutionalization. Among explanations in the literature on Spain, functionalist and neoinstitutionalist arguments have predominated. According to the functionalist approach, social pacts respond to the time-specific needs of the economy and/ or political context. Hence, the economic and political crisis that accompanied Spain’s transition to democracy was for many a sufficient explanation for its negotiated character (Estefanı´a and Serrano, 1990; Zaragoza and Varela, 1990; Roca, 1993; Trulle´n, 1993; Heywood, 1995). But this argument cannot explain on its own why there was no social pact in the first half of the 1990s, when unemployment reached record levels and economic imbalances jeopardized Spain’s membership of Economic and Monetary Union (EMU). Nor does it fully account for the revival of concertation in the second half of the 1990s. The second approach – neo-institutionalism – focuses on interest representation and intermediation, and attributes pacts in the transition years to a neo-corporatist pattern of policy making, notwithstanding the weakness of such institutions in Spain. According to this argument, neo-corporatist innovations – including the centralization of decision-making and tripartite bargaining – occurred under the pressure of socio-economic circumstances (Pe´rez-Diaz, 1984; Espina, 1999). Others contest this view, claiming that the abandonment of pacts after the mid-1980s was precisely due to social partner weakness and the absence of supporting institutions (Foweraker, 1987; Martı´nez Lucio, 1989; Maravall, 1997; Pe´rez, 2000; Royo, 2002).

174

Spain: From Tripartite to Bipartite Pacts This chapter presents a different account. In line with the general argument of this book, we reject the explanatory capacity of single-variable analyses. While taking political and economic contexts and institutions into account, we focus on changing perceptions of relative power and interaction between social actors and governments. Problem loads are important in shaping those perceptions and clearly affect the dynamics and outcomes of negotiations. Political and organizational factors are also important, and one of our more robust conclusions is that government weakness is the best predictor of successful pacting, alongside relations between and within the Spanish unions. The success of unions as social and political actors depends on their ability to strike a balance between their logics of influence and membership or representation (Streeck and Schmitter, 1999). Their context-specific perception of how concertation will affect that balance helps determine whether a pact is signed. We argue similarly that no single variable can explain the evolution of Spanish social pacts. Broad or encompassing tripartite social pacts were abandoned after the mid-1980s, with the single exception of the 1997 April Agreements. But concertation has remained alive and well, and has become to some extent institutionalized, via policy-specific bipartite agreements, notably the annual inter-confederal wage agreements, in place since 2002. Functionalist arguments contribute much to our understanding at critical junctures, especially regarding the problem load of high unemployment and the massive expansion of fixed-term labour contracts. But utilitarian, power-distributional, and normative theories provide valuable insights into the timing, character, successes, and failures of Spain’s social pact responses to economic challenges.

8.2. The Emergence of Social Pacts 8.2.1. Political and Organizational Variables Social pacts in Spain have been signed under very different circumstances. While providing rich evidence for analysis, this diversity of contexts makes it difficult to single out sufficient or necessary conditions. Pacts have been signed in periods of recession and declining competitiveness as well as in periods of growth and employment creation. It could be argued that political institutions have been an obstacle to pacting in Spain. There are no strong, institutionalized mechanisms for social partner participation in policy making, except for the Economic and Social Council (ESC), created in 1990, in which unions and employers have a purely advisory role. Indeed, the Spanish political system has little tradition of consensual politics, apart from the years of democratic transition, and relations between ˜ol) the two main political parties – the PSOE (Partido Socialista Obrero Espan and the PP (Partido Popular) – are confrontational. Nevertheless, the Moncloa

175

Social Pacts in Europe Pact of 1978 on economic management and the Toledo Pact of 1995 on pensions between the political parties, both supported by the social partners, provided the basis for significant consensus-based policy making in the years that followed; and the period since 1997 has witnessed a strengthening of the ESC, as well as the institutionalization of union–employer commissions on employment and collective bargaining issues. The colour of government – a precondition of social pacts in neo-corporatist theory – appears to explain little: the years of majority Socialist rule (1986–92) saw a high level of social unrest and conflict between the unions and the government (Astudillo, 2001), while the resurgence of tripartite concertation after 1996 occurred under the centre-right PP. But although Spain has almost perfect party-system bipolarism, regionalist (e.g. the Catalan and Basque) parties play an important role in helping stabilize governments without ample majorities – a rather frequent occurrence and the first clue as to why Spanish governments turn to pacts. Thus, social pacts have most often been signed when governments are weak and dependent on support from regionalist parties, even if this does not guarantee success, as revealed by the failure of pacting under a Socialist-led minority government in 1993 and 1994. Governments also tend to rely on pacts more so during their first terms in office. The first mandates of both major parties – the PSOE (1982–6 and 2004–8) and the PP (1996–2000) – were periods of intense tripartite bargaining and pacting. Those years – except for the PSOE’s 2004–8 incumbency – were followed by similarly intense periods of social and political conflict, coinciding with their consolidation or attainment of parliamentary majorities (the PSOE in 1986–90; the PP in 2000–4). This suggests that typically social pacts have been used strategically and instrumentally by governments, rather than as a dependable tool of socio-economic governance, although, as we discuss below, that may have begun to change in the early 2000s. As for organizational factors, only unity of action between the two major unions – the UGT (Unio´n General de Trabajadores) and the CC.OO (Comisiones Obreras) – seems to increase the probability that a pact will be signed. When inter-confederal unity was achieved in the early 1990s, social pacts re-emerged; and enduring unity of action after the mid-1990s has underpinned their subsequent stability and gradual institutionalization. Union centralization and membership, by contrast, explain little. Both have remained almost unchanged since the early 1980s, the first at high levels, the second very low. But the low density levels of Spanish unions have never impeded their participation in pacts, for they derive their strength and legitimacy primarily from workplace elections rather than membership. Also important is the power conferred on unions by the state through official ‘most representative status’ and the erga omnes extension clause of legally regulated collective agreements that increases their bargaining coverage to high levels (Nonell et al., 2006).

176

Spain: From Tripartite to Bipartite Pacts The unions’ political roles and capacity for mobilization therefore far exceed their meagre organizational resources.

8.2.2. Negotiation Processes and Actor Preferences In the following, four episodes of pacting are subject to close scrutiny: the early 1980s pacts, the failed negotiations of the early 1990s, the social pact of 1997, and pacting in 2000–10 (see Appendix A for the full range of social pacts signed in Spain between 1976 and 2010). 8. 2 . 2. 1. THE TRANSITION TO DEMOCRACY AND SOCIAL PACTS (1978–85) The negotiation of social pacts in the early 1980s occurred against a backdrop of democratic transition, a deep economic crisis, and the consolidation of unions and employers’ organizations. Balancing the demands of different actors at a time when political and social institutions were also being reconfigured required self-restraint and a search for consensus. Fears of democratic reversal, especially after the failed coup d’e´tat of February 1981, reinforced incentives for cooperation. The weakness of the Union de Centre Democra´tico (UCD) coalition government led by Adolfo Sua´rez (1978–82) – which combined Christian Democrats, Liberals, and former Spanish National Movement leaders – helped bolster the appeal of the political left to voters demanding a stronger departure from Francoism. A critical legacy of forty years of dictatorship was the weakness of civil society and the social partners. The different ideological and associational traditions of the two main union confederations, the CC.OO and the UGT, produced divergent strategies. The CC.OO enjoyed much stronger roots at the company level, a more decentralized organization and a relatively strong capacity for mobilization. The UGT, by contrast, looked to state support for building organizational strength, making it more supportive of pacting than its rival, at least until the late 1980s. Its close links with the Socialist Party also made it more inclined to cooperate via pacts, whereas the most powerful influence within the CC.OO, although declining after the late 1980s, was the Spanish Communist Party (PCE). Inter-union competition for members and votes in workplace elections prevented strong labour movement unity until the mid-1990s. Organizational weakness was even more pronounced among employers. The ˜ola de Organizaciones Empresariales (CEOE), created in Confederacio´n Espan June 1977, had a highly fragmented membership and lacked disciplinary control over its constituency. Its organizational structure has always been highly complex, with 114 sectoral associations and 50 territorial associations in 1985 (firms are usually affiliated to these organizations rather than the peak CEOE), both growing in number in subsequent years (EIRO, 1999). As a result, the CEOE has had an ambivalent view of concertation. If organizational weakness

177

Social Pacts in Europe has obliged it to take a critical position towards pacts, from which employers expect to obtain less than the unions, participation can also provide it with influence. Several months after the failed coup d’e´tat of February 1981, the UCD government initiated pact negotiations with the aim of building political and economic confidence. Even though all actors agreed on the need for a pact to strengthen democratic stability, and wage moderation as necessary for relaunching the economy, the communist CC.OO opposed any agreement that would moderate its industrial militancy. Initial contacts between the unions, the government, and the CEOE were accordingly difficult. Both unions feared that participation would legitimize government policies at the expense of workers. Because of the political context, the pact signed in June 1981 – the ANE (Acuerdo Nacional sobre el Empleo) – is popularly known as the ‘Pacto del miedo’ (‘Pact of Fear’). In order to secure the commitment of a reluctant labour movement, the government struck a number of ‘parallel pacts’, providing organizational and financial compensation to break down union resistance. Thus, the participation of the CC.OO was secured in part by the new roles given to the social partners in regulatory bodies, the National Social Security Institute (INSS), the National Employment Institute (INEM), the National Health Institute (INSALUD), and the National Institute of Social Services (INSERSO), as well as by a government commitment to create 350,000 publicsector jobs (Estefanı´a and Serrano, 1990; Encarnacio´n, 1999). But CC.OO agreement was also a response to competition from the UGT. The AMI – Acuerdo Marco Interconfederal (National Multi-Industry Framework Agreement) – signed by the UGT and the CEOE in January 1980, and renewed in 1981 – rapidly increased the number of workers covered by national bargaining agreements and drove a wedge between the two unions.1 Opposed by the CC.OO, these agreements strengthened the UGT which made important gains in workplace elections as a reward for its participation, and convinced the CC.OO that it was better off joining the ANE than opposing it. Both unions saw their bargaining position as strong vis-a`-vis the fragile centre-right government and the fragmented CEOE, whose leaders regarded any pact as better than no pact at all, or the social conflict that failure might foment. But as predicted by the bargaining model, gaining union consent to a moderation of wage demands and militancy required the active involvement of a third partner – the state.

1 The AMI established guidelines for collective agreements with the aim of restraining wages, reducing working hours, and raising productivity. It also created a framework for the new industrial relations system by regulating collective agreements and the role of trade unions in the workplace.

178

Spain: From Tripartite to Bipartite Pacts The second important social pact of the period was the 1984 AES (Acuerdo Econo´mico y Social). The context for negotiations was now quite different. The 1982 elections gave the new Socialist government a comfortable majority, and fears of democratic instability were subsiding. The economy, however, was in crisis: inflation was at 14 per cent, domestic demand contracted by 1 per cent in real terms in 1984, and the unemployment rate was rising, reaching 21.7 per cent by the end of that year (Figure 8.1). This situation, plus the prospect of European Community membership, and a commitment to join the European Monetary System (EMS) in June 1989, increased the government’s desire for an agreement. The AES and the wage moderation it secured, combined with a tight monetary policy, would allow the government to bring inflation down to 8 per cent in 1985 and 6 per cent by 1986. In this context, the government initiated a new round of talks. The unions reacted positively, although they imposed some a priori conditions: they would only accept wage moderation in exchange for an increase in social spending and an extension of welfare entitlements. But as both CC.OO and UGT officials

25

Success: ANE

Success: AES

Failure: Social Pact For Employment Failure: Solidarity Pact

Success: April Agreements

20 Unemployment Rate

15

10 Inflation

5

0 Fiscal Deficit

–5

19 79 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05

–10

Centre-RightUCD Government -Relative Majority

Left PSOE Government -Absolute Majority

Left PSOE Government -Absolute Majority

Left PSOE Government -Absolute Majority

Left PSOE Government -Relative Majority (coalition)

Right PP Government -Relative Majority (coalition)

Right PP Government -Absolute Majority

Left PSOE Government -Relative Majority

Figure 8.1. Social Pacts, Governments, and the Macro-Economy in Spain, 1979–2005 Note: The unemployment data in this figure are the national data current at the time, rather than those in the new OECD historical series which have been revised downwards due to a methodological discrepancy between national data and OECD/Eurostat data that produced an overestimation of Spanish unemployment figures hitherto.

179

Social Pacts in Europe point out, they did not know if the government was willing to accept significant changes to its economic policy, or how much compensation they would be awarded in return for their support (El Pais, 17 July 1984). This uncertainty made the initial meetings difficult, as the unions struggled to articulate their bargaining strategies. The unions’ responses differed significantly. While the weaker UGT kept negotiations alive by making parallel deals with the government, the CC.OO’s leaders abandoned the talks when they realized that the government’s commitment to economic austerity might alienate their base. According to a leading CC.OO official: ( . . . ) contrary to the practice today of signing wage agreements that establish guidelines for negotiations at lower levels, the early 1980s were real bi-partite or tri-partite incomes policy pacts. These pacts established bargaining limits for the actors. Accordingly, they were a permanent source of conflict. But the most worrying aspect of these pacts was that they limited the possibilities for the participation of the grass-roots in bargaining processes. This weakened the links between grass-roots and peak officials, thereby potentially affecting the representative capacity of the union.2

The pact was therefore negotiated by the UGT, the government, and the CEOE. The employers, who feared a strong alliance between the Socialist government and the UGT, pursued a strategy of desgaste (‘wear and tear’) and threatened several times to abandon negotiations if their demands were not met. This strategy was particularly threatening to the UGT whose reliance on concertation left it vulnerable to an employer-biased pact entailing too many costs for its constituency. The outcomes of the pact are in line with the bargaining model’s predictions. The government perceived itself to be in a strong bargaining position thanks to its solid electoral mandate and the external constraint of securing EMS membership. By contrast, the CC.OO perceived itself as weaker than the Socialist government and its trade union ally, which explains its exit from the talks. The UGT had become increasingly critical of some of the government’s policies, but believed that participation would deliver positive results. Securing the UGT’s agreement to wage moderation required government commitment to a new social-democratic demand- and supply-side policy. This meant considerable policy innovation, including a loosening of the tight monetary policy the previous government had introduced to bring down inflation in 1982, and an agreement to increase spending on public investment, public employment, education and training, and unemployment benefits, as well as making the tax system more progressive. The support of the employers was secured by allowing for an easier use of temporary contracts (a concession that would lead to a profound segmentation of the Spanish labour market), part2

180

Interview with Ignacio Fernandez Toxo, Madrid, 16 April 2005.

Spain: From Tripartite to Bipartite Pacts time and seasonal employment, and by a modification of minimum wage standards for workers under 18. The 1984 pact would be the last for over a decade. The demise of tripartite concertation and pacting can be attributed to several factors: the disappointment of the unions with the results of the ANE and AES, the neo-liberal turn of the Socialist government, and its embrace of economic austerity, and the view of the employers that wage moderation could now be secured by high unemployment and the expansion of low-paid temporary work contracts. Internal dissent and contestation within each union was weak in the early 1980s, but increased after the 1984 pact, especially in the UGT whose members began to link their union to Socialist government policies and blamed their leaders for the strong moderation of wage increases, the continuing job crisis (unemployment reached 21 per cent in 1985–6), as well as for the weaker regulation of temporary contracts due to the AES and a revision of the Workers’ Statute in 1984. Some CC.OO workers also criticized their officials for not cooperating. Eventually, these developments would lead to a convergence of the UGT and CC.OO on a common model of trade union action, based on a revitalization of collective bargaining (Molina, 2006). Initially, however, the unions converged on a joint rejection of concertation as such. The UGT joined the CC.OO in a new phase of industrial militancy to recoup some of the concessions made in the 1980s pacts and to re-establish its reputation with workers, having lost some 40 per cent of its members between 1978 and 1985.3 The unions were not alone in rejecting concertation. The Socialist government had taken a firm neo-liberal turn under Miguel Boyer and Carlos Solchaga, the ministers of finance and industry respectively, who oversaw the introduction of fiscal austerity and a new commitment to labour market flexibility (Recio and Roca, 1998). The government continued to solicit pacts in the late 1980s (especially after the anti-government UGT–CC.OO-led strike of 1988) but without much conviction: it walked away from negotiations with the UGT in 1987 after the union requested an upper wage band two points above the government’s inflation forecast (Pe´rez, 1999: 673), and a growing budget deficit (at 7 per cent of GDP in 1985) ruled out further compensation for wage moderation through public spending. In any case, the government now believed it had an alternative to incomes policy: the rapid spread of temporary contracts moderated wage costs (in 1988 temporary workers’ wages were barely more than half those of permanent contract workers), while from 1987 the exchange rate of the peseta in the EMS began, for a while at least, to work as an anchor for the government’s anti-inflation policy (Ferreiro and Gomez, 2005).

3 The outcomes of those pacts had been well below union expectations. Although in 1980–5 both public spending and social spending increased (the latter from 21.6 to 25.2 per cent of GDP), real wages fell by 9 percentage points between 1977 and 1986, and inflation targets were only met in one year out of seven (Ferreiro and Gomez, 2005).

181

Social Pacts in Europe Spain’s employers, who had never been keen on concertation, also believed they could now avoid commitments and concessions to labour given the role of high unemployment and the expansion of fixed-term contracts, not just in moderating wage demands (real wages would rise by a marginal 0.9 per cent between 1984 and 1989) but also in weakening the influence of the unions (Rhodes, 1997; Encarnacio´n, 1999; Ferreiro and Serrano, 2001). 8 . 2. 2. 2 . FAILED NEGOTIATIONS UNDER THE THREAT OF MAASTRICHT (1990–6) After six years of sustained growth, the 1990s began with a deep economic recession. The Socialist government’s strategy of substituting a restrictive monetary policy and an overvalued currency for bargained wage moderation had failed to control wage growth and inflation (Pe´rez, 1999; Royo, 2001). In 1992, a large and increasing budget deficit, together with high inflation and external disequilibria, led to speculative attacks against the Peseta, and its devaluation within the ERM. The real costs of the crisis were skyrocketing unemployment (which rose to 23 per cent in 1993) and a further increase in the budget deficit. The political situation also deteriorated significantly for the Socialists. Although the 1989 elections allowed them to stay in government, their performance was far from the substantial victory achieved in 1986: the PSOE government won half the seats and only the absence from parliament of the Herri Batasuna deputies (the political arm of ETA) gave it a working majority (Lancaster, 1994). The severe recession, and a series of corruption scandals, further weakened the government over the next few years. In the 1993 elections, the PSOE remained Spain’s largest party, but was forced to form a minority government when coalition talks with regionalist parties broke down. The economic and political circumstances should have been conducive to a pact, especially given the problem load of high unemployment and government infirmity. But perceptions of mutual weakness – on the part of the unions, employers, and the government – worked against it. After a decade of organizational development and consolidation, the UGT, CC.OO, and CEOE were ostensibly in a stronger position. In December 1988, the UGT and CC.OO led a successful 24-hour general strike against government plans for new weakly regulated contracts to boost youth employment, which led to the withdrawal of the proposals and government agreement to boost spending on social services. But union representation remained weak at the firm level and was mostly limited to large companies. Concertation, and its associated benefits, had strengthened the unions as political actors, but not in terms of membership or bargaining power. As CEOE President Jose´ Marı´a Cuevas put it: ‘notwithstanding the enormous influence the unions have on public opinion and political decisions, the presence of unions at firm level has

182

Spain: From Tripartite to Bipartite Pacts been weakening in recent years. Why? Because their strategy has been focused on lobbying governments’.4 The unions had become increasingly aware of this problem. Consequently, they shifted away from building sociopolitical strength towards improving their own internal channels of communication and extending their presence in the business system. When unity of action became stronger in the early 1990s – assisted by the collapse of support for the Communist PCE, and the diminution of its influence over the CC.OO – inter-confederal competition was replaced by intra-organizational concerns. But the unions still perceived themselves to be weaker vis-a`-vis employers and the government than a decade earlier, the success of the 1988 general strike notwithstanding. As both the government and employers were aware, the deterioration of the economy, rising unemployment (at 21 per cent in 1997), and an increasingly large proportion of employees under fixed-term contracts had all reduced the capacity of the unions to attract and mobilize members. Economic and political conditions in 1993 favoured new attempts at pact negotiation: GDP fell by 1 per cent that year, caused by falling public investment, an adverse reaction of private investment to higher interest rates, and a substantial decline in private consumption as unemployment rose. This created something of an emergency and bolstered the perceived need for social partner cooperation. Employment conditions not only reduced the unions’ bargaining power but also made the abandonment of negotiations more costly for them. Given the prospect of worsening electoral performance, the government proposed a ‘Solidarity Pact’ consisting of wage moderation and labour market reform. The unions declared – for the first time in eight years – that ‘the inclusion of wage moderation in the agenda for negotiations would not in itself constitute an obstacle in the path towards a social pact’.5 The UGT’s willingness to negotiate stemmed in part from a financial scandal, and it sought the support and financial assistance of the government to hold off bankruptcy. Unity of action with the UGT made the CC.OO more inclined to negotiate certain policies. And both unions reacted pragmatically to the government’s call for a catch-all pact, although they called for a revision of its economic policy and for key issues to be negotiated at separate tables. But the government strongly defended its Plan de convergencia for economic adjustment to EMU, involving a tight fiscal policy, a reduction in inflation and interest rates, a control of nominal wage increases, and the deregulation and flexibilization of capital and labour markets. This stance, and the employer’s refusal to help the troubled Socialist party, sunk the negotiations. 4 Diario de Sesiones del Senado, Comisio´n de Trabajo y Seguridad Social, no. 95, 19 April 1994, p. 152. 5 European Industrial Relations Review and Report, 1993, 235: 14.

183

Social Pacts in Europe This episode reveals how under perceptions of mutual weakness the successful negotiation of a social pact becomes more difficult, as predicted by our bargaining model. In 1993, the unions and the government were both negotiating from weak positions that made a pact more costly for all involved. The government was in a minority in parliament and under pressure from other parties to stick with austerity. The unions were dealing with internal problems and disagreements, and the employers had no intention of boosting the ailing Socialist government. All parties had negative expectations as to what they could obtain. Politics and perceptions overrode the problem load. The same occurred in 1994 when the government initiated further talks on a ‘Social Pact for Employment’. Asked about the government’s strategy, Prime Minister Felipe Gonza´lez replied that it had the greatest interest in a pact but little scope for providing an acceptable quid pro quo. The fact that the Socialists could only govern with the tacit support of the centre-right Catalan CiU (Converge`ncia i Unio´) diminished the unions’ expectations as to adequate compensation. This perception, together with the stronger bargaining position of the employers, made failure even more likely. For the general secretary of the UGT, ‘the government was more interested in reaching a political pact with other parties than in signing one with the unions and employers’.6 For the CC.OO, however, other factors were important, ‘in particular, the bad relationship between the leaders of the PSOE and UGT’7 (Royo, 2001). The CEOE blamed the government’s ‘take-it-orleave-it’ strategy8 and the instability in union–government relations created by an excessive use of strike tactics.9 As the bargaining model suggests, had the government been in a position to compensate union involvement, these impediments might have been overcome. Some months after their exit from the talks, the unions agreed to return to negotiations on two issues: employment regulation and incomes policy. The unions rejected the government’s plans for mandatory wage moderation, and both they and the employers rejected the proposed labour market reform. In response, the government implemented the changes (which allowed for a more flexible use of working hours and greater flexibility in company pay scales) unilaterally, provoking a general strike in January 1994. Looking back at their 1988 success, the unions expected to improve their bargaining position and force the government to reconsider. But the new strike had nothing like the same impact – either on government policies, which sought to foster a greater use of part-time contracts, allow for private employment agencies, and 6 Comisio´n de Economı´a y Hacienda, testimony of Nicola´s Redondo (UGT), no. 57, 29 October 1993, p. 1615. 7 Interview with Salvador Bangueses, Madrid, 14 April 2005. 8 Comisio´n de Economı´a y Hacienda, testimony of Jose´ Marı´a Cuevas (CEOE), no. 57, 29 October 1993, p. 1647. 9 Interview with CEOE leader Gabriela Uriarte, Madrid, 13 April 2005.

184

Spain: From Tripartite to Bipartite Pacts decentralize collective bargaining, or on public opinion which favoured a negotiated solution to the crisis. 8. 2 . 2. 3. THE REVITALIZATION OF CONCERTATION IN 1997 By 1997, the political context had changed significantly: the centre-right PP led by Jose´ Marı´a Aznar won the 1996 elections and formed a coalition with three right-wing regionalist parties – the Basque Nationalists, the Catalan CiU, and the Canary Coalition. But the economy was still sick and perilous for the new minority government: inflation and the fiscal deficit were improving, but unemployment had peaked at 24 per cent in 1994, and almost all new jobs created in 1995 and 1996 were on temporary contracts. The government was also highly apprehensive of the unions’ reaction to its policies – the PSOE, in opposition for the first time since 1982, warned that social rights were now under attack – and sought a dialogue with them and the employers to build a consensus on its proposed agenda. The unions and employers had shifted to a pro-pact position. Both believed that the change of government opened up new opportunities for concertation but at a lower cost than hitherto, and both were moving towards a common understanding of the country’s growing predicament (if not the solution), as a low value-added, low-productivity economy, one over-reliant on cheap and insecure employment contracts and price-based competition. Pressure on the unions was especially strong. A majority of their members now supported dialogue and concertation, especially given the failure of the 1994 strike, as did their leaders whose reputation had been damaged by the rapid increase in unemployment and their experiment with wage militancy (Royo, 1996; Pe´rez, 2010). Not only had they been losing the battle for public opinion, but critically, support had haemorrhaged in workplace elections, their main source of strength. In the 1994–5 elections, both unions lost votes to independent candidates and company representatives, especially in large firms. And for the first time since 1982, the UGT took second place to the CC.OO, now led by moderates after the defeat of its more militant wing in 1991 (Hamann, 2001; Royo, 2006). The strength of the unions had been sapped by the segmentation of the labour market, and they had failed to recruit temporary workers in significant numbers: in 1994, the membership rate of permanent workers was 19 per cent against only 8 per cent for temporary workers (Polavieja, 2001; Llorente Sanchez, 2007). Concertation to restore political influence now seemed much more attractive than when they rejected it in the mid-1980s, precisely to prevent a loss of worker support. A month after his election, Prime Minister Aznar held a meeting with the unions. As they remained opposed to ‘catch-all’ pacts spanning numerous policy areas, the social partners and the government agreed to seven separate negotiating tables. Even though the government respected the social partners’

185

Social Pacts in Europe bargaining autonomy, it threatened on several occasions to act unilaterally if they failed to reach an agreement. The first step was the negotiation of social security reforms, as outlined in the 1996 Toledo Pact among the political parties,10 and an agreement on the ‘Consolidation and Rationalization of the Social Security System’ was signed in October. The government then launched talks on labour market reform. An agreement was signed in 1997, consisting of two collective bargaining reforms – the AINC (Acuerdo Interconfederal sobre Negotiation Colectiva) and the AICV (Acuerdo Interconfederal de Cobertura de Vacios) – and a reform of the labour market, the AIEE (Acuerdo Interconfederal para la Estabilidad del Empleo).11 A quid pro quo secured the pact. In the labour market reform, the unions – presenting themselves for the first time as defenders of ‘outsider’ as well as ‘insider’ workers – obtained the introduction of new ‘permanent employment promotion contracts’ to help counter the expansion of fixed-term work, with lower dismissal costs than for other such contracts. Employers received a reduction in social security charges as their part of the deal. In the collective bargaining agreement, the unions achieved a degree of re-centralization in collective bargaining. The AINC was especially important in this regard, in aiming to reduce the number of collective agreements and prioritize national industriallevel agreements. Although bipartite deals, endorsed by the government, and then passed into law, the 1997 ‘April Agreements’ have nonetheless had the significance and effect of a fully fledged social pact.12 Not only did they create a new paradigm for peak negotiations and social dialogue going forward, but they also established the quality of employment as a priority, and sought to enhance the articulation of collective bargaining with concertation. How do we explain the successful return to pacting? The problem load, combined with critical organizational and political factors, provides the answer. The economy was beginning to improve, but still very high unemployment (at 21.5 per cent in 1997) and a massive expansion of atypical contracts helped 10 The Toledo Pact involved a commitment by all political parties to maintain and reform the public pension system on a consensual basis. In 1996, the trade unions gave it their support, thereby ensuring that in principle pension reform would be subject to social dialogue. The consensual spirit of the pact was reinforced by the creation of a monitoring commission to secure the input of social and economic actors. 11 The AINC clarified the roles of different levels of collective bargaining and expanded the issues to be dealt with through collective bargaining, which enhanced the influence of the social partners in the policy debate on labour market reforms; the AICV aimed to extend the coverage of collective bargaining to those sectors lacking collective agreements; and the AIEE introduced incentives for employers to transform temporary contracts into indefinite ones, as well as financial incentives to hire on permanent basis. The reform also removed some of the protections for employees with indefinite contracts. 12 See Diario de Sesiones del Congreso de los Diputados, Comisio´n de Polı´tica Social y Empleo, no. 225–6, 19–20 May 1997, for parliamentary testimony by union and employer leaders regarding the success of the 1997 Agreements.

186

Spain: From Tripartite to Bipartite Pacts induce all three actors to sign. In terms of the bargaining model, they all saw themselves as relatively weak, but all were under pressure to reach agreement quickly. This was especially true for the unions, given declining workplace support and accusations of defending permanent workers while neglecting the now very large temporary workforce, comprised mainly of younger people and women (Richards and Polavieja, 1997).13 The employers had also come to acknowledge the problems created by the very high level of fixed-term work: in the view of manufacturing companies, it had begun to damage productivity while failing to weaken the bargaining power of permanent employees14 (Serrano et al., 1998; Royo, 2006). As for the government, its weak parliamentary position made it the perfect partner in a positive-sum pact. 8. 2 . 2. 4. SOCIAL PACTING IN THE 2000S

The Shift to Bipartite Pacting, 2000–4 Developments in the 2000s reveal the vitality and vulnerability of Spanish concertation as well as the strengths and weaknesses of its institutionalization. When the PP was re-elected with an absolute majority in 2000, it agreed again to dialogue with the social partners over the four years of its mandate. At the top of its agenda for reform were the labour market, collective bargaining, pensions, and unemployment benefits. The government preferred to respect the autonomy of unions and employers, and it asked them to follow the pattern of the 1997 agreements and negotiate a pact as the basis for legislation. It also had a strong interest in securing agreements to legitimize its policies. But given its new parliamentary majority, the Aznar government could afford to play a double game – sponsoring agreements when the social partners could achieve them, but making policy unilaterally, and largely ignoring them, when they could not. The unions and employers had quite different objectives, even if their diagnosis of the country’s economic ills was similar. The unions’ ‘Common Proposal for Social Dialogue’ focused on job creation and a reduction in the use of temporary contracts. The 1997 agreements had delivered some positive results

13

The segmentation of the Spanish labour market, which had commenced in the mid1980s, had become fully entrenched by 1997: that year, 34 per cent of the active labour force were employed on temporary contracts, which also accounted for 85 per cent of flows into and out of employment (the annual transition between the two segments was only 1 per cent). Moreover, the average tenure of a temporary worker was twelve months, compared with twelve years for workers on permanent contracts, and 34 per cent of temporary workers were unemployed, compared to only 6 per cent of permanent ones. All evidence suggests that temporary employment in Spain is predominantly involuntary and non-transitional (Amuedo-Dorantes, 2000; Polavieja, 2003). 14 Between 1992 and 1995, years of deep recession, temporary workers lost 25 per cent of their purchasing power, while the earnings of permanent workers increased by 4 per cent in real terms (Ferreiro and Serrano, 2001; Ferreiro and Gomez, 2005).

187

Social Pacts in Europe (mainly due to government incentives) in increasing the percentage of permanent contracts. But while unemployment fell to around 13 per cent in 2000 from 21 per cent three years earlier, the proportion of temporary contracts remained unchanged at around one-third. The employers’ ‘Approaches to the New Stage of Social Dialogue’ prioritized the reform of collective bargaining, a reduction in dismissals costs, greater flexibility for part-time contracts, and a reduction in employers’ social charges. Common to both proposals was a preference for more flexible forms of social dialogue and concertation over allencompassing social pacts. In fact, talks at separate tables had already been institutionalized, and consisted of three ‘negotiating commissions’: on the social protection of the unemployed, on increasing secure employment, and on part-time employment. In the late 1990s, negotiations in the first two were deadlocked, with employers and the government seeking more resources for active employment policy against union calls for higher unemployment benefit and job promotion via working-hours reduction. This discord did not prevent success, however, in the third commission where an agreement on improving the social security entitlements of part-time workers was reached (the employers abstained) in November 1998 (EIRO, 1998a, 1998b). This more flexible strategy produced further results, regardless of a surge in industrial conflict in 2000–4, and the government’s predilection for breaking with concertation on many critical reforms. In March 2001, following union– employer failure to reach agreement on replacing the expiring 1997 agreements, the government unilaterally reformed the labour market, extending the categories of worker who could be hired on open-ended contracts with employer social security reductions, and providing limited compensation for the dismissal of temporary workers. In May 2002, the government also unilaterally reformed unemployment benefits, removing certain categories of workers – for example, those on seasonal work contracts – from entitlement, and abolishing the ‘interim wages’ employers had to pay workers waiting for rulings on unfair dismissals claims. The breakdown in social dialogue and union opposition to these changes led to a general strike in June 2002, which, alongside a precipitous decline in government opinion poll support, forced the resignation of the labour minister and a repeal of most of the benefit reform package. Surprisingly, none of this prevented a pensions’ agreement in April 2001, which was supported by the CC.OO but not the UGT,15 or government–union agreement in November 2002 on the ‘modernization and improvement’ of the

15 The reform allowed workers to take early retirement if they had not paid contributions before 1967, created a reserve fund, improved widows’ pensions, allowed flexible work and retirement beyond 65, and ensured the ongoing participation of unions in the management of the social security system.

188

Spain: From Tripartite to Bipartite Pacts public administration.16 Indeed, the UGT claimed that the 2002 strike had strengthened the unions and forced the government to concede more than it wanted to secure their support. What we see, then, across this period is a process in which both unions and employers engaged in concertation to preserve an influence over social and labour market policy (using this strategy, as in the past, to compensate for associational weaknesses), while the government used the social dialogue instrumentally, exerting a strong ‘shadow of hierarchy’ via the threat (and reality) of unilateral policy making. A government with a strong majority could afford to embrace a ‘take-it-or-leave-it’ strategy, more often than not to the disadvantage of the unions, for whom an abandonment of social dialogue promised marginalization from the policy process, with no guarantee that militancy and social movement opposition would deliver better results. Perhaps the most important innovation in this period was the return in late 2001 to an incomes policy agreement (the first since 1984) on a union–employer bipartite basis, but once again under the shadow of state hierarchy. It would be renewed every year until 2009, when it broke down amidst the financial and economic crisis, but was reprieved in early 2010 – a development made all the more remarkable by open conflict at the time between the unions and the government over its anti-crisis measures.17 The pattern for the rest of the decade was set in December 2001, when the unions and employers concluded an ‘Acuerdo para la Negociacio´n Colectiva’, or ANC, for 2002. The ANC established guidelines and set out criteria for lower level bargaining, linked pay rises to inflation and productivity gains, and also included a general commitment to employment stability and quality. It even recommended the creation of national sectoral ‘observatories’ to analyse economic and employment trends (EIRO, 2002), and a monitoring commission was created in 2003 to promote their implementation. Subsequent ANCs have often been beset by stormy negotiations, as well as by opposition from critics in both employer and union camps. But the system has now endured for nearly a decade, making it the most persistent of reiterated wages pacts in the EU, apart from Ireland’s incomes policy (see Chapter 5). It is worth considering briefly the reasons for the institutional success of this implicit incomes policy pact in terms of the bargaining model, prior to an extended discussion of its institutionalization in the next section.

16 This reform sought to rationalize the public workforce and increase its efficiency in return for above-inflation pay increases, a 35-hour week, and measures to improve employment stability. 17 Pe´rez (2000) presents evidence that the unions began unilaterally to restrain their wage demands from the mid-1990s onwards, once they had prioritized lowering unemployment and reducing the number of non-standard contracts. According to Ferreiro and Gomez (2005), the UGT and the CC.OO signed joint documents laying out joint wage-setting criteria every year between 1997 and 2001.

189

Social Pacts in Europe A review of almost a decade of ANC agreements reveals the following features. The central concern has been wage moderation on the part of both employers and unions, driven in part by their shared view that containing real unit labour costs will promote employment (and a diminution of temporary employment) and enhance the competitiveness of Spanish firms. The results have been decidedly mixed. Job creation proceeded apace in the 2000s on the back of a booming economy (only to collapse precipitously in the recent crisis) and while the expansion of temporary contract workers in the private sector fell significantly, they began to grow in the public sector. Nominal wage growth has been contained and real unit labour costs have fallen – although wage moderation only accounts for part of this trend; immigration and an ongoing expansion of low-cost labour have also contributed – as has declining purchasing power (wage drift has been negative for most of the period) in a tighter labour market. But productivity growth has been low and relative unit labour costs have risen well above the Euro average: wage moderation alone cannot cure Spain’s multifactor productivity problem. If we think of the ANCs as an implicit incomes policy pact instead of a series of annual ad hoc wage agreements (for they have depoliticized pacting and created a stable system for trade-offs and exchange between employers and unions), then we can more readily understand the power balance underpinning this structure. The unions entered the ANC process from a rather weak position given the failure of either pacting in the 1980s or militancy in the 1990s to counter an erosion of workers’ rights and security, or provide them with greater influence over collective bargaining and the workforce. By the mid-1990s, even the power derived from workplace elections was under threat. Their political influence was restored to some extent by the 1997 Agreements, and their adoption of job promotion as a primary goal led them to ‘internalize’ wage moderation even before the ANC formally committed them to it. At the same time, both Socialist and centre-right governments had sought to flexibilize the labour market in response to the employment crisis and persistent demands from employers, and experience had proven that the unions’ only real means of slowing or blocking that process was concertation. Although a second-best option for the unions – especially after 2000 when a growing economy, much lower unemployment, and rapid job creation might have backed a more militant stance – concertation on wages and work-related issues under the ANCs has allowed for a mutually reinforcing relationship between the exercise of political influence and a strengthening of the unions’ organizational powers.

The Problems of Pacting under the New Socialist Government The minority government led by Prime Minister Jose´ Luis Rodriguez Zapatero elected in March 2004 and supported in parliament by two small left-wing parties – the Republican Left of Catalonia and United Left – revealed a strong

190

Spain: From Tripartite to Bipartite Pacts determination to engage in social dialogue, and to make its mark across a range of other policy areas (Kennedy, 2007). In May, the government announced that it would target four major imbalances in the Spanish employment system: a model of flexibility based on a high rate of temporary employment, the weakness of employment policies, the low level of human capital, and inflexible working hours. The protocol for social dialogue signed in July with the trade unions and employers pinpointed active labour market policy, training, the minimum wage, employee involvement, and the reform of collective bargaining as major areas for discussion. But following the pattern established since 1997, neither the new government nor the social partners revealed any inclination for tripartite pacts. Instead, the protocol identified a series of issues for parallel rather than overlapping negotiations. Several agreements signed in this period are noteworthy: the 2006 agreement on labour market reform, which represented a new attempt to limit the incidence of temporary employment but – like previous such initiatives – has disappointed the unions with its meagre results;18 the so-called Ley de Dependencia (39/2006) designed to provide social assistance to those unable to care for themselves, and one of the most important pieces of social legislation since the return to democracy; and law 40/2007 that established new provisions for retirement after 65 as well as disability and widower’s pensions. Also important was the June 2005 Royal Decree which established a new procedure for extending collective agreements to areas of employment without coverage due to the absence of one of the parties authorized to bargain. Based on employer–union agreements in the joint commission that implements the 1997 ‘AICV’, the aim of the new procedure was to counter a decline in collective bargaining coverage that fell from almost 71 per cent of workers in 2002 to just over 60 per cent in 2004 (EIRO, 2005). In terms of the bargaining model, a reforming government dependent on smaller left-wing parties for support embraced pacting to legitimize its forays into social policy reform. The strong growth of the economy may have facilitated employer support for these changes, for many of their own demands were unmet, especially regarding dismissals costs. Nevertheless, like the unions, relative weakness seems to have spurred engagement with concertation: the employers apparently believed that it was better to work with the system, and try to extract concessions from it, rather than oppose it and risk losing political leverage and legitimacy. The re-election of the Socialist government (once again without a clear majority) in 2008 coincided with the first symptoms of economic recession,

18 The total proportion of temporary contracts in the labour force fell from 33.5 per cent in 1997 to 31.8 per cent a decade later, while the proportion in the private sector fell from 39 to 33 per cent. But that improvement was countered by an increase in public-sector temporary contracts from 16 to 25 per cent over the same period.

191

Social Pacts in Europe and the intensity and duration of the crisis have severely eroded the process of social dialogue. Despite a tripartite agreement in July 2008 on a ‘Declaration of principles for the promotion of the economy, employment, competitiveness, and social progress’, the trade unions and employers failed to renew the ANC in 2009 (but would succeed in 2010), and negotiations that year on new labour market reform proposals also broke down. New attempts in late 2009 and early 2010 failed due to the opposition of trade unions to a government pension reform proposal to increase the pensionable age to 67. The rapid growth in social spending propitiated by high unemployment as well as an ad hoc extension in unemployment benefit duration added further elements of financial stress and uncertainty and significantly reduced the government’s room for manoeuvre in finding an agreement. The government’s policy package of May 2010 to reduce the deficit included a freeze of some pensions, cuts in public employees’ salaries, and reductions in some family programmes, and reopened conflict with the unions. In June 2010, the government passed its labour market reform unilaterally, leading to calls for a new general strike. There are striking similarities between the most recent episode of failure to negotiate a social pact and those of the early 1990s. In both cases, a minority Socialist government, weakened by high unemployment and economic recession, tried to negotiate a social pact under heavy pressure to reduce the public deficit. As predicted by the bargaining model, reaching a pact under these circumstances becomes more difficult as the perception of mutual weakness deters the actors from negotiating when the expected pay-offs are low. This situation could only be reversed by the provision of incentives by the government, ruled out, however, in 2010 by a high government deficit and the risk of debt default.

8.3. Institutionalization 8.3.1. Institutionalization Paths The character of Spanish social pacts changed significantly between the early 1980s and the 2000s. The 1980s pacts were one-shot responses to acute social, political, and economic problems in periods of government weakness, increasing unemployment, and democratic consolidation. As developments thereafter confirmed, those pacts were weakly institutionalized – a ‘strategy’ rather than a ‘system’ (Martı´nez Lucio and Blyton, 1995) – and their procedures and substance strongly criticized. The unions were especially critical of the pacts and their outcomes, and the industrial relations conflict that followed in the late 1980s and early 1990s made it clear that change was required to the model of social pacting. This led after the mid-1990s to a new pattern of pacting based on sporadic and narrower agreements on a range of issue areas that excluded an explicit incomes policy. Even though initially only weakly institutionalized, the

192

Spain: From Tripartite to Bipartite Pacts apparent effectiveness of those agreements has been conducive to repetition and a slow process of institutionalization. There was also a trend, beginning in 1997, towards the integration and articulation of concertation with the wider industrial relations system. As pointed out by a CC.OO official, ‘concertation today in Spain does not enter into conflict with negotiations at lower levels, nor with the micro-dynamics of the Spanish economy. Instead, these agreements serve to channel lower level negotiations upwards rather than simply impose decisions from the top down’.19 The practice of permanent bipartite social dialogue after 1997 significantly improved cooperation among the social partners, and created the conditions under which further pacts could be signed. Under the new paradigm, social pacts are limited to providing guidelines for lower levels of bargaining and road maps for social dialogue in the years ahead. The key example of the former are the ANC agreements signed each year (with the exception of 2009) by unions and employers that provide guidelines for collective bargaining on pay. These peak bipartite agreements have no legal character, but have nonetheless been quite effective. The road maps include the 2004 ‘Declaration for Social Dialogue’ and the 2008 ‘Declaration for Economic Growth, Employment, Competitiveness, and Social Progress’. Overall, the crisis of 2009–10 notwithstanding, these agreements point towards a qualitative and perhaps irreversible shift towards pacting on a leaner, more regulatory basis. How can we explain the overall dynamics of social pact evolution in Spain? The Spanish experience can be summarized as a three-step process: the abandonment of early post-democratization pacting in the second half of the 1980s; a reduction of the number of issues negotiated as well as bargaining partners in the early 1990s; and a process of integration (i.e. a greater focus on implementation) in more recent years (see Figure 8.2). The Spanish case demonstrates that a reduction in scale and complexity does not necessarily imply deinstitutionalization but rather a slow process of institutionalization of mainly bipartite pacts, alongside a small number of tripartite agreements on labour market policy, whereby a focus on fewer issues has minimized the scope for conflict and integrated pacts more closely with policy making and execution. The distributive function of earlier social pacts has given way to a series of regulatory and coordination procedures since 1997 (although they have produced policies with important distributive consequences) which have strengthened the articulation of collective bargaining and opened a new era for concertation. The new peak agreements seem much better suited to the diversity of contexts and conditions in the Spanish industrial relations system, given its regional and sectoral heterogeneity, than the earlier, more centralized pacts. Since 1997, the unions have stressed the importance of greater articulation in the

19

Interview with Salvador Bangueses, Madrid, 14 April 2005.

193

Social Pacts in Europe Reduction (Narrow Pacts)

Emergence

Success: ANE

Success: AES

1982

1984

Abandonment

+

Failure: Solidarity Pact

Failure: Social Pact For Employment

1993 1994

Integration Success: April Agreements

(Focus on Articulation and Implementation)

1997

Figure 8.2. The Evolution of Concertation and Social Pacts in Spain

collective bargaining system as a precondition for successful social dialogue, and more recent narrow agreements contain specific clauses regarding lower level implementation. Although narrower, Spanish pacts today are much more integrated vertically than in the past.

8.3.2. Mechanisms of Institutionalization How can we best account for these changes? Regarding the functionalist approach, Spanish employers do in fact use a functionalist discourse to explain the transformation of concertation. As one CEOE official has put it: ( . . . ) the 1980s social pacts were aimed at achieving macroeconomic stability. The difference with the situation nowadays is not so much the existence of bi-partite negotiations. Nor is the existence of a new bi-partite equilibrium a direct consequence of the unions’ change of strategy. The main explanation for the change in the pattern of social dialogue is the change in macroeconomic conditions, as the need to ensure macroeconomic stability forced actors to include numerous issues in pacts. Now that Spain has achieved a sufficient macroeconomic equilibrium, the agreements can be more focused and bi-partite.20

That argument is contested, however, by the unions who argue – in utilitarian fashion – that concertation has evolved because they altered their strategies when earlier pacts failed to meet their expectations. Both explanations have a degree of validity. ‘System needs’ and ‘problem loads’ have clearly been important background factors: the political and economic emergency of the democratic transition years, the ongoing unemployment crisis of the 1980s and 1990s, and the combination of EMU and Spain’s competitive problems from the late 1990s onwards. But utilitarian, ‘cost–benefit’ considerations and power politics have been critical in determining the timing and nature of the country’s social pact responses. The early 1980s pacts were clearly a reaction to the twofold problem of economic crisis and democratic stabilization. The failed attempts at pacting in 20

194

Interview with CEOE official Gabriela Uriarte, Madrid, 13 April 2005.

Spain: From Tripartite to Bipartite Pacts the late 1980s and early 1990s have therefore been explained by some (e.g. Boix, 1996) by the lack of a political catalyst (i.e. the risk of democratic failure) coinciding with an expansionary phase of the economic cycle until 1992. But even when crisis hit the economy again in 1992–4, pushing unemployment up to 24 per cent, no pact was achieved – in spite of a large problem load and weak micro-foundations in the collective bargaining system, which ostensibly demanded a wages pact, as well as the loss, by the Socialists, of their parliamentary majority. Attempts by the Socialist government to put pacts in place at that time nevertheless failed: the costs of legitimizing austerity measures and wage moderation far outweighed the benefits unions could obtain from a government determined to pursue its EMU-convergence programme and opposed to an expensive process of political exchange. For the unions, this looked much too much like the experience of the early 1980s when the 1984 AES imposed high costs on labour without sufficient compensating benefits. It was not until 1997 that new political and organizational circumstances allowed a concerted policy response when the ongoing problem of high unemployment and expansion of insecure jobs pressured the unions in particular to return to pacting. Looking beyond the functionalist explanation, evidence from pact negotiations therefore suggests that power politics, specifically tensions within the unions, and between the latter and governments, have been critical in both social pact failures and successes, as have the cost–benefit calculations of all actors. A utilitarian argument is especially useful in explaining the chequered history of incomes policies. The pacts of the early 1980s exerted top-down control over wages, compensating for a lack of strong micro-foundations in the bargaining due to the firmlevel weaknesses of both unions and employers (Hancke´ and Rhodes, 2005). As the unions managed to improve their political and organizational capacities, due in large part to the rewards of their participation in pacts, they gradually developed a greater ability to govern the collective bargaining system and took greater account of the likely economic impact of excessive wage demands (Nonell et al., 2006). Yet they remained poorly rooted in firms and organizationally weak compared to most of their European counterparts. Precisely because of this, Spanish unions have fiercely opposed since the late 1980s any pact containing mandatory pay bands, lest a loss of control of wage bargaining weakens them further. The peak negotiation of wage guidelines after 2002, however, allowed the unions to minimize that problem. For although functionally equivalent to an incomes policy pact, the ANCs have not entailed the same political commitments and costs, and remain formally in the arena of autonomous collective bargaining. In the 2000s, although strictly bipartite, the annual ANC negotiations and agreements have become the core of the concertation process, even if the collective bargaining system remains fragmented, and if wage moderation can only make a small contribution to improving Spain’s overall competitiveness.

195

Social Pacts in Europe But despite these mixed results, employers and unions have stuck with the system, creating a system of mutual commitments, and a degree of de facto institutionalization – even if the unions could have used lower unemployment and the rapid growth of the economy after the late 1990s to push for higher wage claims, and the employers might have been more successful without a wages pact in working for a decentralization of bargaining which, at least rhetorically, they still support. A series of cost–benefit calculations underpin their respective strategies. First, concertation has allowed employers to avoid greater union wage militancy: in a number of the ANCs, employers have moderated union demands for higher annual wage targets with concessions such as the preservation of wage clauses in collective bargains. These allow wages to ‘catch up’ with the Retail Price Index if it increases faster than the agreed wage norm: such clauses affected 77 per cent of the workers covered by collective bargaining in 2006. The CEOE has even backed the resurrection of such clauses where sectoral employers – as in banking – had already abolished them. Second, unions have been able to exchange wage moderation for the reluctant agreement of the employers (and the PP government) to moderate their demands for still greater external labour market flexibility (i.e. lighter dismissals regulations; the unions have supported enhanced internal company flexibility instead, including flexible working time as a ‘soft adjustment variable’) as well as their calls for a further decentralization of bargaining. The CEOE has been split on the latter issue between large firms who seek the reduction in transaction costs that a degree of centralization can bring (Nonell et al., 2006) and smaller employers who seek greater decentralization. The two main union confederations, however, have always sought to prioritize national industry-level bargaining, first to prevent decentralization to firms in which their presence is, at best, very weak, and second to enhance their positions as ‘most representative unions’ while marginalizing the role of small and regional competitor unions. Third, both unions and employers have been keen to reduce the fragmentation of bargaining that in the past allowed the sheltered sector to set pay increases that wage agreements in the exposed sector would seek to emulate, thereby reducing the competitiveness of export-oriented firms. In that respect, the annual ANCs have attempted to complete the process of collective bargaining rationalization that began with the agreements of April 1997, while new legislation (the Royal Decree of 2005) has bolstered the coverage of collective agreements21 (Pe´rez, 2000; Ferreiro and Gomez, 2005). In recent statements,

21 In 2005, sectoral and provincial collective agreements accounted for 21 per cent of all agreements but covered 55 per cent of workers; national collective agreements accounted for only 1.5 per cent of the total but covered 27.4 per cent of workers; while company-level agreements accounted for 75 per cent of the total but covered only 10 per cent of the workforce (EIRO, 2007).

196

Spain: From Tripartite to Bipartite Pacts both employers and unions agree that overall results of the social dialogue have been positive, even if the unions have been more critical about the levels of execution (Eurofound, 2008). To that effect, the 2010 ANC included the creation of a new bipartite monitoring commission (to sit alongside the existing tripartite National Advisory Board on Collective Agreements), with three representatives from each of the signatory organizations, to apply and monitor the implementation of the annual accords. The power-distributional argument also provides insights into the Spanish experience. For governments, the 1980s pacts were instruments for the control of industrial conflict and moderating wage demands, but for workers they had an uneven distributive impact to the benefit of capital. The unions accepted these sacrifices in the early 1980s, not only because they wanted to help consolidate democracy but also because they obtained significant compensation. But the costs soon began to outweigh the benefits, leading them to reject any social pact with a wages component after 1984. The shadow of hierarchy of state intervention has also played a crucial role – both directly, as in the 1980s when the state solicited union participation with financial rewards, and indirectly, as in the late 1990s and early 2000s, when it threatened to make policy unilaterally if the unions and employers failed to reach agreement. After the late 1980s, the Socialist government became reluctant to compensate the unions, partly because of a neo-liberal policy shift under Pedro Solbes, the minister of economic affairs from 1993 to 1996, but also lest they challenge its electoral power from the left, especially after the breakdown of relations between the PSOE and the UGT in 1986 and their subsequent ‘divorce’. It follows that the abandonment of pacts was not so much a consequence of the government’s loss of interest – it still sought social partner legitimization of its policies – but of its inability or unwillingness to provide the resources required for their reproduction. Along with union opposition to incomes policy agreements, this explains from a power-distributional perspective the abandonment of pacts between 1984 and 1997. What of the normative argument? It was precisely the lack of consensus on the costs and benefits of pacts in Spain that explains the low level of institutionalization before the late 1990s. Conversely, a stronger degree of consensus, both within the labour movement and between unions and employers, has contributed to a consolidation of concertation in the 2000s. The 1980s pacts institutionalized union involvement in managing a number of welfare state institutions, but there were no significant efforts to create a stable forum for communication or deliberation. The Social and Economic Council was only created in 1991 and its role until the 2000s was quite limited. Accordingly, horizontal actor networks remained weak, and pacts relied on ad hoc exchanges between actors, making them highly unstable, and a shared perception of the appropriate role for pacting in the economic system was lacking.

197

Social Pacts in Europe All actors now agree that the most recent decade or so of social dialogue has been necessary and valuable, but this shared belief has long been accompanied by opposition to encompassing pacts. Governments of both left and right have had a positive view of social pacts, albeit dependent on economic and political circumstances. Employers’ organizations were initially sceptical of pacts in the early 1980s, but more openly supportive thereafter. As for the unions, the CC.OO was initially strongly opposed to social pacts and the UGT in favour, so the 1980s pacts did not embody equally shared norms and beliefs. As the CC.OO General Secretary stated in 1993, ‘Given the lack of consensus around common ideas, an equitable exchange of goods among actors becomes indispensable. This exchange does not become so necessary when there is consensus on some basic ideas’.22 A degree of consensus along those lines seems to have developed since the late 1990s. The norms underlying the 1980s pacts were so weak, and the outcomes delivered so criticized by the unions, that when the first signs of economic downturn appeared in the early 1990s, they preferred to reject cooperation altogether. But rejection of a specific form of negotiation did not imply a rejection of social dialogue as such. As the 1993 negotiations made clear, the unions were not even completely opposed to ‘catch-all’ negotiations, but they did oppose the inclusion of wage moderation – for power-distributional reasons. Equally important for the failures of the early 1990s, however, was the lack of a common diagnosis of the problems affecting the economy: in all of those attempts, the social partners presented quite distinct alternatives to government plans, the unions demanding re-regulation, the employers deregulation, of the labour market. By the 2000s, however, not only did unions and employers share a diagnosis of the economy’s ills (its drift towards a low-productivity, price competition-based equilibrium), even if they differed on some of the solutions required, but they also believed that a new era of concertation had begun, one that could deliver desirable outcomes. This helped to institutionalize the new modus operandi, even when governments broke with their own commitment to social dialogue.

8.4. Conclusions A number of conclusions can be drawn from the above analysis. First, a full understanding of social pacting in Spain needs to pay attention to a combination of variables – not just the ‘problem load’, although it is of undeniable importance, but the institutional and political variables that allow a concerted response to economic problems at particular junctures. In the above, we have 22 Diario de Sesiones del Congreso de los Diputados, Comisio´n de Polı´tica Social y Empleo, no. 57, 29 October 1993, p. 1626.

198

Spain: From Tripartite to Bipartite Pacts pointed to the importance of government fragility, trade union ‘unity of action’, and social partners’ perceptions of their respective strengths. Economic and political conditions are both important explanatory factors, but primarily because they shape those perceptions. Our analysis reveals that social pact success was more likely when power perceptions were asymmetrical (in the early 1980s and 1997), while failure was more likely when actors had similar perceptions of weakness (as in the early 1990s) and the government was unable or unwilling to compensate for that weakness with political exchange. If organizational factors seem to tell us little about the proclivity of actors to engage in pacting (the associational strengths of unions and employers have been rather consistent over the entire period), political conditions are important, but not in the way suggested by traditional neo-corporatist theory, with its focus on left-of-centre governments. It is rather the peculiarities of governmental strength and weakness in Spain’s system of modified bipolarism, and especially the dependence of minority governments on small regional parties, that explain a great deal of the variation in pacting, although not all of it: for a minority Socialist government in the early 1990s was unable to solicit a pact, and a centre-right majority government in the early 2000s supported pacting unless unions and employers were unable to agree. Especially interesting in the Spanish case is the issue of institutionalization. Although our negotiation episodes indicate that social pacts in Spain have often been used instrumentally by governments, from the late 1990s onwards, pacting was depoliticized: the social partners began to converge on a common diagnosis of what was wrong with the Spanish economy and even majority governments took advantage of concertation as a tool for shaping, legitimizing, and implementing reforms. Undoubtedly, competitive challenges under the constraints of EMU membership played a role in inducing the support of actors for an ongoing process of socio-economic reform, making Spain an exemplary case of ‘competitive corporatism’ (Rhodes, 1998). However, underpinning concertation since 1997, and the new supporting institutions such as the bargaining and monitoring commissions that have sprung up around it, was a particular balance of power in which unions, employers, and governments all decided that cooperation delivered higher dividends than conflict. The pattern of bargaining and pacting that resulted began to acquire the characteristics of a system once utilitarian concerns, including a reduction of uncertainty for the actors involved, were accompanied by a sense of normative commitment. It is difficult to explain the ongoing support of employers and unions for regular pacting on wages and employment issues in the face of considerable difficulty and disagreement in any other way. But this degree of institutionalization does not mean stability and survival regardless of the circumstances. The return to peak wage bargaining in 2010 was remarkable given the state of the economy and the almost total breakdown of relations between the unions and the Socialist government of Jose´ Zapatero

199

Social Pacts in Europe (Royo, 2009). But there are numerous challenges to the system that are structural rather than conjunctural and that may defy the capacities of Spain to find consensus (Molina and Rhodes, 2007). One is the fact that wage moderation has not been able to reduce inflation to the European average and that relative unit labour costs continue to disadvantage Spanish firms, as revealed in the country’s growing current account deficit since the late 1990s. Nor has it made much impact on the Spanish model of competitiveness more generally. For although unions seem to be exchanging wage moderation for a pledge on the part of employers to help build a different kind of economy, one in which an enhanced quality of work is valued as part of a high-price, high-productivity competitive strategy, the economic crisis has revealed the extent to which the country’s recent growth has been built on low-cost labour and employment on insecure contracts, in highly volatile sectors such as construction and tourism. And thirdly, wage moderation appears to be benefiting employers rather than workers and employees, with a considerable redistribution in favour of capital income and profits alongside negative wage drift and diminished purchasing power for the unions’ constituency. It may only be a matter of time until the labour movement begins to view the present system as it once saw the social pacts of the 1980s: a source of sacrifice and costs rather than redemption and gains.

Appendix A: Social Pacts and Concertation in Spain: 1976–2010

Year

Pact/agreement

Actors

Character

Content

1979

Acuerdo Ba´sico Interconfederal (ABI)

Bipartite: CEOE + UGT

Narrow

Incomes policy; industrial relations

1980

Acuerdo Marco Interconfederal (AMI)

Bipartite: CEOE + UGT + USO

Narrow

Industrial relations; collective bargaining

1981

Acuerdo Nacional de Empleo (ANE)

Tripartite: Government + CEOE + UGT + CC.OO

Broad

Incomes policy; labour market

1983

Acuerdo Interconfederal (AI)

Bipartite: CEOE + UGT + CC.OO

Narrow

Incomes policy; industrial relations

1984–6

Acuerdo Econo´mico y Social (AES)

Tripartite: Government + CEOE + UGT

Broad

Incomes policy; labour market; welfare state

1992

Inter-confederal Agreement on Life-Long Learning

Tripartite: Government + CEOE + CC.OO + UGT

Narrow

Labour market; industrial relations

1994

Inter-confederal Agreement on Labour Ordinances

Bipartite: CEOE + CC. OO + UGT

Narrow

Industrial relations

200

Spain: From Tripartite to Bipartite Pacts

1996

Agreement for Risk Prevention at the Workplace

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

1996

Agreement for Protection of Rural Employment

Bipartite: CEOE + UGT + CC.OO

Narrow

Labour market

1996

Agreement for Extrajudicial Mechanisms of Conflict Resolution

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

1996

Agreement on the Rationalization and Consolidation of the Pension System

Bipartite: Government + UGT + CC.OO

Narrow

Pensions

1997*

Inter-confederal Agreement for Employment Stability (AIEE)

Bipartite: CEOE + UGT + CC.OO

Broad

Labour market

1997*

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Broad

Industrial relations; collective bargaining

1997*

Inter-confederal Agreement on Coverage of Bargaining Gaps

Bipartite: CEOE + UGT + CC.OO

Broad

Industrial relations; collective bargaining

1997

Agreement on Part-time Work

Bipartite: Government + UGT + CC.OO

Narrow

Labour market

1998

Agreement on the Stabilization of Temporary and Part-time Employment

Bipartite: Government + CC. OO

Narrow

Labour market

1999

Agreement to Increase Minimum Pensions

Bipartite: Government + UGT + CC.OO

Narrow

Welfare state; pensions

1999

Agreement on Tripartite Foundation for the Prevention of Labour Risks

Tripartite: Government + CEOE + UGT + CC.OO

Narrow

Labour market; industrial relations

2000

Third Agreement on Life-Long Learning

Tripartite: Government + CEOE + UGT + CC.OO

Narrow

Labour market

2001

Second Agreement on Extrajudicial Mechanisms of Conflict Resolution

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2001

Agreement on Pensions and Social Protection

Tripartite: Government + CEOE + CC.OO

Narrow

Social protection; pensions

2002

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2003

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2004

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2005

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2006

Agreement for Enhancing the Quality of Growth and Employment

Tripartite: Government + CEOE + UGT + CC.OO

Narrow

Labour market

2006

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

(Continued )

201

Social Pacts in Europe

Year

Pact/agreement

Actors

Character

Content

2006

Agreement to Reform the Social Security System

Tripartite: Government + CEOE + UGT + CC.OO

Narrow

Social security

2007

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2007

Agreement to Reform the Social Security Reserve Funds

Tripartite: Government + CEOE + UGT + CC.OO

Narrow

Social security

2008

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

2010

Inter-confederal Agreement on Collective Bargaining

Bipartite: CEOE + UGT + CC.OO

Narrow

Industrial relations

Note: *Negotiated simultaneously, these three agreements are considered part of the same broad pact.

202

9 The Netherlands: Social Pacts in a Concertation Economy Jelle Visser, and Marc van der Meer

9.1. Introduction1 Between 1980 and 2009, there were eight social pacts in the Netherlands. All but one pact (in 1996) were about wage moderation; many were about other issues as well, such as welfare and labour market reform (2003, 2004) and employment (2009) (see Table 9.1). Three pacts – in 1982, 1993, and 1996 – were bilateral agreements negotiated under a ‘shadow of hierarchy’ (Scharpf, 1993) with the government directly and indirectly involved in the negotiations. In 1982 and 1993, the agreement prevented government intervention in wage setting; the 1996 agreement deflected government action and committed a divided government to legislation written by the social partners. The pacts of 1989 and 2002–4 were initiated by coalition governments, which wanted to enlist support for austerity policies and welfare reform. The 2009 pact was based on pressures and promises from the social partners to extract public resources for helping firms and workers to survive the deep recession. The significance of these pacts differs. Wassenaar, New Course, and probably also Flexicurity may be dubbed ‘reconstitutive pacts’: they rearranged the power relationships and capabilities of the actors concerned. Although it became only apparent much later, Wassenaar (1982) reaffirmed the co-responsibility of unions and employers for wage setting and ended the era of government intervention in wage negotiations (Visser and Hemerijck, 1997). New Course (1993) marked the shift from centralized to coordinated bargaining over wages and working hours, with greater freedom for negotiators in sectors and firms, and a

1 The authors thank Nynke Wiekenkamp, who assisted with the interviews and made transcripts.

203

Social Pacts in Europe Table 9.1 Social Pacts 1980–2009 Year

Name

Issues

Economic cycle

Governing coalition

Year*

Initiative**

1982

‘Wassenaar’ Agreement

Wages, working hours

Recession

Centre-right

1

U, E

1989

Joint Policy Framework

Indexation (benefits), social security, budget

Boom

Centre-left

1

G

1993

‘New Course’ Agreement

Wages, decentralization

Downturn

Centre-left

4

U, E

1996

‘Flexicurity’ Agreement

Regulation of temporary agency work

Growth

Left-right

3

U

2002

‘Mini-Pact’

Wages, job subsidies

Downturn

Centre-right

1

G

2003

‘Demi-Pact’

Wages, negotiated reform

Downturn

Centre-right

1

G

2004

‘Museum Square Pact’

Wages, early retirement, disability pensions

Downturn

Centre-right

2

G

2009

‘Crisis-Pact’

Wages, part-time unemployment, public investment, pensions

Recession

Centre-left

2–3

U, E

Notes: * Year refers to the electoral cycle (usually four years); thus, the Wassenaar agreement was concluded in the first year in office of the centre-right government, etc. ** Initiative refers to the actor(s) that started the negotiations of the pact (U = unions, E = employers, G = government). The texts of these pacts and agreements are published in StAr (2005); the texts of the 2009 pact, and the 2008 declaration, are published on www.star.nl.

widening of the bargaining agenda to non-wage issues (Hemerijck et al., 2000). Following on from New Course, Flexicurity (1996) reaffirmed the central value of corporatism in Dutch politics and the prominence of social partnership. The 2002–4 and 2009 pacts altered the distribution of the costs of particular policy measures, but did not change the capabilities or competencies of the actors. The 1989 pact was probably least significant and was soon abandoned by employers and had little impact on the distribution of either power or costs. This chapter analyses the negotiation dynamics of the Wassenaar, New Course, Flexicurity, and Museum Square (2004) agreements. In the conclusion, we will briefly discuss the recent Crisis (2009) pact. We deem these the most important ones, although none stands on its own. Wassenaar is analysed against the background of a prior failure, the ‘Almost-Agreement’ of 1979. New Course comes after the implementation failure of the Joint Policy Framework of 1989 and the political attack on corporatism in the early 1990s. Flexicurity owes much to New Course and shares the same political background. The Museum Square pact was preceded by two earlier, limited, and unfinished deals, and a huge conflict, which gave this pact its name.2 In the analysis of how these pacts were negotiated and came about, we draw on interviews with the 2 On Museum Square, in Amsterdam, the unions organized a large demonstration on 2 October 2004 forcing the government back to the negotiating table.

204

The Netherlands: Social Pacts in a Concertation Economy main actors involved in negotiating and preparing these pacts (Appendix A), as well as on documents, secondary sources, published interviews, and (auto) biographical material (Appendix B). Before analysing these pacts and evaluating the main hypotheses of Chapters 3 and 4, we discuss the main economic and political issues and try to identify the main drivers of Dutch social pacts. In this part, we also present the actors, describe the rules of the game, and analyse the changing economic, social, and political context. Social pacts are not isolated phenomena but one among various coordination devices in a (‘neo-corporatist’) coordinated market economy. In years without pacts, wage bargaining is coordinated via the central recommendations and internal controls of the central organizations of the unions and employers, without government involvement. Moreover, the Labour Foundation (Stichting van de Arbeid, StAr) and the central organizations of the unions and employers routinely issue opinions, declarations, and recommendations on many issues. The Foundation meets twice yearly with a delegation of the Cabinet to discuss the budget in the spring and wage negotiations in the autumn. These are occasions for information exchange, coordination, and, if need be, negotiating a pact. Through membership in the tripartite Social and Economic Council (Sociaal-Economische Raad, SER), the same organizations are involved in the preparation of government policies. In the final part of this chapter, we analyse social pacts as a specific institutionalized response to the particular problems and challenges facing the Dutch political economy.

9.2. Rules of the Game and the Drivers of Social Pacts Table 9.1 reveals that all but two pacts were reached under conditions of an economic downturn or recession. The 1989 pact and the Flexicurity agreement are exceptions to the rule that social pacts address the consequences of a downturn by recommending a slowdown in wages in the next bargaining round. Beyond issues of labour costs and competitiveness, deemed vital for a small and open economy, the government’s stake in these deals is to secure lower wage growth and less unemployment in order to halt the rise of publicsector wages and social expenditure. No Dutch government can afford not to be interested in the outcome of private-sector wage negotiations.

9.2.1. Politics The Netherlands is one of four consociational European democracies – alongside Belgium, Luxembourg, and Switzerland – ‘that has never experienced either a wholesale alteration in government or the development of bipolar competition during the later post-war period’ (Mair, 2008: 43). Majority coalitions always combine two or three parties and almost inevitably include one or

205

Social Pacts in Europe two that lost votes in the previous elections. Consequently, there is never a complete change of government. The electorate has remarkably little influence on actual coalition building, which has remained in the hands of negotiating party elites. Freed from the constraint to elect a government, and denied real influence on outcomes, the electorate is increasingly moody and volatile. The share of the three ‘peoples’ parties – Social Democrats (PvdA), Christian Democrats (CDA), and Liberals (VVD) – has decreased from 118 (out of 150 seats in parliament) in the 1981 elections to 96 in 2007. Parties to the right and left have gained, and swings between elections have become much larger. Before the 1970s, the electorate was organized in religious and class-related segments, but this constraint disappeared when in the 1970s Catholics no longer voted exclusively for the Catholic Peoples party and, later, CDA (Christen Democratisch Appe`l – Christian Democratic Appeal), and when a decade later working-class support for the PvdA (the social-democratic Labour Party) also eroded (Andeweg and Irwin, 1993). Without these constraints – segmentation and government selection – and with an open system of party competition with no electoral thresholds and a single national district in which all parties compete, the Dutch electorate is now among the most volatile in Western Europe (Mair, 2008). This state of affairs has several implications for social pacts. First, even when they have an absolute majority in Parliament, internal divisions drive governments towards finding solutions outside the political arena. This has a long tradition in the Netherlands (Hemerijck, 1993). Second, Dutch coalition governments are always seeking ‘supermajorities’ outside parliament, in particular by soliciting the support of the unions. This is particularly true for the two largest and competing ‘peoples’ parties, the CDA and PvdA, which have historical and ideological ties with the unions. Thatcher-like liberal approaches are rare in the Netherlands, although there is a parallel with the ‘no-nonsense’ approach taken by the two centre-right governments led by Prime Minister Ruud Lubbers (of the CDA) in the 1980s. Third, under media pressure and challenged by populism, political parties have sought a new type of parliamentary representation, substituting popular appeal for experience or knowledge. In several interviews (E2,5; U1,5), the professionals of Dutch corporatism responded by claiming the role of the custodians of long-term interests and policies. Van den Toren (2007) has argued that with the social-democratic PvdA in office, social pacts are less likely, since the FNV (Federatie Nederlandse Vakbeweging, Dutch Labour Federation), the largest and most left-leaning union grouping (which was founded in 1976 as a federation of two unions, the Catholic NKV and the social-democratic NVV, which then officially merged in 1982), tends to rely on the political Left rather than seeking compromises with employers. There is little evidence for this, however, as three pacts have been concluded with governments that included the PvdA. Since the Left has never

206

The Netherlands: Social Pacts in a Concertation Economy been close to a majority, the political hand of the unions is never very strong.3 Similarly, with Liberals in the government, employers may find their position strengthened, especially on welfare reform, but they cannot ignore the longterm relationships with the unions. Opportunism and power games happen on both sides, as examples in this chapter will show, but the main rule remains that neither of the social partners, and none of the main political parties, can afford to place all their eggs in one basket. In short, unions, employers, political parties, and governments always negotiate in two arenas – the political and the corporatist.

9.2.2. Economics Social pacts in the Netherlands are driven by conditions of economic adversity rather than party political conditions. That is the shortest possible summary of Chart 9.1. Economic downturns, indicated by a decline in real output growth and a rise in unemployment, have always been followed by a social pact over the past twenty-five years. An economic downturn is an almost always sufficient but not a necessary condition for social pacts; in 1989 and 1996 pacts were signed when the economy was growing; and in 1979 there was no pact, although the signs of a decline were clearly there and unemployment was making inroads into private-sector union membership (Visser, 1990).

9.2.3. Institutions and Rules of the Game It would be premature to conclude that no political or institutional factors are needed to explain the existence of social pacts in the Netherlands. Institutional conditions matter for the timing of social pacts. Governments that wanted to overcome internal distrust and discord solicited the pacts of 1989 and 1996. From Chart 9.1, we draw the observation that it takes roughly one or two years, until unemployment numbers rise fast, from the first signs of a downturn to the conclusion of a pact. It is a well-known fact that when the downturn begins and uncertainty about its further course prevails, employers hoard labour. The costs and delays in obtaining permission for dismissals under existing Dutch labour law are one reason for this, together with the attempt by employers to protect and retain firm- or sector-specific skilled labour. These restrictions on the adjustment of the quantity of labour increase the demand for price adjustment or wage restraint. However, with many collective agreements written for up to two

3 The three left parties – PvdA, the Green-Left (GL), and the Socialist Party (SP) – gained sixtyfive seats in the 2006 elections, their highest score in thirty years. The PvdA’s number dropped from fifty-three in 1977 to thirty-three in 2006, and the SP advanced from two in 1994 to twenty-five in 2006. GL reached its maximum of eleven seats in 1998.

207

Social Pacts in Europe 10 8 6 4 2

19

7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 85 19 8 19 6 8 19 7 8 19 8 8 19 9 90 19 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 99 20 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 08 20 0 20 9 10

0 -2 -4 -6 CDA+VVD (Lubbers I + II)

CDA+PvdA (Lubbers III)

PvdA+VVD+D66 (Kok I + II)

Real GDP growth

CDA+VVD+LPF/D66 (Balkenende I+II)

CDA+PvdA+CU (Balkenende III)

Unemployment rate

Chart 9.1. Social Pacts, Government Coalitions, GDP Growth, and Unemployment

years, there is an obvious time lag. The opening up of existing contracts rarely happens: the last and only nationwide example occurred in the months following the Wassenaar agreement; the only other examples are in particular firms facing bankruptcy. As a rule, the view of unions and employers is that ‘pacta sunt servanda’ (‘agreements must be kept’). Negotiating a social pact takes time. Arguably, governments are in the best position to exert pressure on the unions in their first year, directly after the election. Four of the eight pacts were actually negotiated by a newly formed government (Table 9.1). However, electoral cycles need not and do not fit the rhythm of economic cycles. In 1982, 2002, and 2003 they did so, and incoming centre-right governments were immediately challenged by a sharply deteriorating economy. The two centre-left governments formed in 1989 and 2007 faced deteriorating conditions later in their tenure.4 The two left-right coalition governments led by Prime Minister Wim Kok (1994–2002) enjoyed mostly benign conditions, with a downturn just before the dramatic 2002 elections when Kok’s PvdA lost many votes to the anti-immigrant Pim Fortuyn List (LPF). Delay is also caused by the rules of the game in negotiations with the social partners. There is one unwritten rule, unanimity, from which others follow: keep communication lines open; never boast or claim victory; always offer some

4 Another factor causing delay is that it usually takes a long time to negotiate a coalition with a parliamentary majority: three months in 2002, five in 2003, and four in 2007 (Andeweg, 2008: 261).

208

The Netherlands: Social Pacts in a Concertation Economy compensation for losses. In an environment characterized by multiple organizations representing labour and capital, each organized on a federal basis with internal differences and limited authority, the unanimity rule means that finding a compromise requires inter- and intra-organizational bargaining and ‘joint decision traps’ (Scharpf, 1988) are common. In 1982, there were nine organizations – six on the side of capital and three for labour. After the amalgamation of the Christian and general federations, the number of central employers’ organizations has been reduced since 1995 to three: the Organisation of Dutch Enterprises-Christian Employers’ Association (VNO-NCW), the Federation for SME’s (MKB), and the Organisation for Agriculture and Horticulture (LTO). The Federation of Dutch Trade Unions (FNV) is the dominant union federation, followed by the Christian federation (CNV) and a federation for higher salaried staff (MHP). VNO-NCW and FNV are the leading organizations, co-chairing the Labour Foundation, and there has never been a pact or central agreement without them. Occasionally, MHP is sidelined or excuses itself. Often, CNV is ready to sign a compromise solution long before FNV (Hazenbosch, 2009); but neither employers nor governments have ever contemplated an agreement or pact without the FNV, even when that organization appears isolated (G3, E3; Braak, 2005, 2006). Central agreements or pacts without FNV support have no value in actual wage negotiations, since FNV represents about two-thirds of all union members, and is the leading organization in 90 per cent of all collective agreements, applying to 86 per cent of employees. The CNV and MHP represent 18 and 10 per cent of total membership respectively.5 FNV’s veto position only applies at the central level. In company and sectoral bargaining, there are occasionally agreements signed by MHP or some other ‘willing’ union without FNV (and CNV). Such agreements are valid and can be applied to all workers within the domain. The excluded union is not bound by these agreements and can lawfully strike against its terms, but this rarely happens, since employers will be careful enough to exclude the majority union only when that union is isolated. The possibility of excluding the most radical union favours compromise and prevents negotiations from becoming deadlocked (Rojer, 1996a). The absence of a similar possibility at the national level, for political rather than legal reasons, has the opposite effect – it allows the FNV to stick longer to its preferences. In the downturns of 1981–2 and again in 1992–3 and 2001–2, wage adjustments took considerable time. Economists, among them the director of the CPB (Netherlands Bureau for Economic Policy Analysis) and later Finance Minister, Gerrit Zalm and the president of the DNB (De Nederlandsche Bank) Nout

5 These relative shares are unchanged since the early 1980s. The bargaining coverage rate is far ‘in excess’ of the union density rate (20–25 per cent), and, having hardly changed in recent decades, reflects the high level of affiliation of Dutch firms to employers’ associations as well as continued political support for collective bargaining.

209

Social Pacts in Europe Wellink, have criticized corporatism for delaying decisions (Wellink and Cavelaars, 2002; Zalm, 2009: 76–7). Their remedy is to withdraw protection from collective bargaining by abolishing the mandatory extension of collective agreements to non-organized employers; encourage the decentralization of pay bargaining, preferably to the level of firms; and allow more flexible or fixed-term contracts.6 However, the advantage of central agreements is that their reach is large if the central actors that issue them have moral authority and organizational control over negotiators. Moreover, for reasons of fairness, workers and unions will only accept wage cuts if they are sufficiently assured that this applies to everyone (Keynes, 1936: 264). Central agreements are one way to offer such assurances. Christiaan Van Veen, the VNO-NCW’s first professional chairman, wrote that after the decentralized wage rounds of 1977 and 1978, he ‘was certain that the system of full and automatic price compensation could only be abolished by means of a central agreement’ (Veen, 1987: 298; our italics). The Wassenaar agreement, which according to Kok (Bottenburg, 1995: 192) came two years too late, vindicated him (Visser and Hemerijck, 1997: 101–2). Their important effects, repeated in 1993 and 2003, show the advantage of social pacts and must be set against the costs of decision-making delays.

9.3. Four Social Pacts: How Did They Happen? Having presented the main political, economic, and institutional conditions under which social pacts are negotiated, we now turn to the dynamics of these pacts: how were they reached and why were they signed? Following Chapter 2 we focus on the (shifting) perceptions of power, the internal divisions within the negotiating organizations, and the interests and goals that each tried to secure. We conclude this section by testing our hypotheses.

9.3.1. Wassenaar (1982) and the ‘Almost-Agreement’ of 1979 The negotiations of these agreements reveal more than anything else the importance of internal divisions. They also demonstrate that institutional interests are no less important than material ones. In both cases, the issue was wage moderation in times of economic decline; in both cases, the government applied pressure. So, why was Wassenaar signed and the 1979 pact not? On 29 November 1979, FNV chairman Wim Kok reached a draft-agreement with employers’ leader Christiaan Van Veen. They proposed that in the 1980

6 Some of these recommendations have been implemented, fewer collective agreements set standard pay rates, and the share of fixed-term employment has risen from 12 per cent in 1992 to 18 per cent in 2004 (www.CBS-statline). Unions and employers have, however, skilfully defended the mandatory extension of collective agreements (Rojer, 1996b; Visser, 1998).

210

The Netherlands: Social Pacts in a Concertation Economy wage round, contractual wages would rise by no more than 1 per cent in compensation for price inflation, with an additional 1 per cent for those working in heavy and dirty jobs.7 In exchange, employers conceded an extra holiday, early retirement, and training, whereas the government promised measures to stem the rise in unemployment and leave the social partners a free hand in wage bargaining.8 Van Veen, facing opposition from the powerful Metal Engineering Federation – Federatie Voor de Metaal- en Electrotechnische Industrie (FME) – and the three small- and medium-sized enterprise federations, made clear that this was his final offer (Bottenburg, 1995: 190). However, a coalition of FNV unions (dockers, printers, food workers, and public-sector employees) wrecked the deal by sending Kok back to the negotiating table. Negotiations broke off and the government invoked the 1970 Wage Act to impose a moratorium on wage increases until March 1980, hoping that some agreement would be reached. When that did not happen, Minister Wil Albeda (CDA) imposed a partial freeze for 1980, a measure he repeated for 1981. The FNV organized a massive campaign, but could not prevent parliamentary approval for the government’s restraints on wage negotiations. All of the actors in this story are weak and divided. Within the centre-right government, ministers were locked into a battle about how to lower the government’s wage bill. The finance minister (CDA) did not believe that anything but a government-imposed wage freeze would work. He resigned in frustration in early 1980 when Albeda, also CDA and responsible for Social Affairs, did not immediately impose a wage stop for the entire year. Albeda, with a background in the Christian labour federation, CNV, was convinced that intervention would sour labour relations (Albeda, 2004: 203–5); yet, later in 1980, and again in 1981, he did what he had said he would not do. He blamed this on the divisions in the unions (Albeda, 1987: 310) and the lack of courage of Wim Kok (Bottenburg, 1995: 191–2). The real problem was the linkage between public- and private-sector wages and the rivalry between public- and private-sector unions. Until the system was changed in 1992, public-sector wages were not determined through collective bargaining, but were indexed to private-sector agreements. The same technique was used for mandatory minimum wages and social security benefits. At the end of the 1970s, about three-quarters of the rise in government spending was determined by private-sector wage rises (Visser, 1990). To finance the growing public-sector wage bill, taxes had to rise, which increased the cost pressures on firms and workers, and crowded out private-sector employment. Both the

7 The ‘Almost-Agreement’ is printed in SER (1995: 180–3) and cites the resolution of the European Trade Union Confederation (ETUC) of May 1979 to reduce working hours by 10 per cent over four years. Wim Kok was elected ETUC president. 8 The Netherlands has a post-war history of state intervention in wage bargaining, which intensified in the 1970s (Windmuller, 1969; Visser/Hemerijck, 1997).

211

Social Pacts in Europe private sector and the government needed fiscal restraint. Employers campaigned for austerity, and industrial unions grew frustrated about being held hostage by public-sector unions (Akkermans, 1999: 162; Hazenbosch, 2009: 460–4). Wim Kok was in a weak position. The FNV labour federation had only just been formed from a merger between the Catholic NKV and the social-democratic NVV unions, employment in industry had fallen by thousands, and union membership began to decline. Uneasy with the socialist rhetoric of the industrial unions, and being snubbed by their leaders, ABVAKabo, the public employee union and FNV’s largest affiliate, broached the possibility of secession (Akkermans, 1999). The leaders of the private-sector unions, in turn, were frustrated by the ‘freeriding’ behaviour of public-sector employees, who did not have to fear for their jobs or risk going on strike.9 Kok’s choice not to press the 1979 agreement against the opposition of a vocal minority was motivated by his fear for FNV’s unity (Nijpels and Tamboer, 1985; Lunshof, 2004: 212). The employers were divided too. The failed campaign to abolish automatic price indexation clauses in 1977 had left deep scars. A number of smaller federations rebelled against the VNO and its domination by large firms. Within the VNO and its Christian sister organization, the NCW, some preferred government intervention over agreement with the unions (Nobelen, 1987: 187; Bruggeman and Camijn, 1999: 265). Kok knew this and it added to his distrust in the VNO (Rooy and Velde, 2005: 22). Powerful players like Philips (the electronics conglomerate) and the FME were set against any concessions on working time (Braak, 1992). In 1982, the economic situation dramatically worsened (Visser and Hemerijck, 1997). All actors felt the impact of the crisis: many long-established Dutch firms went bankrupt (Sluyterman, 2003: 245–54), unemployment numbers rose by thousands every week, youth unemployment exploded, and the unions faced severe losses of membership and bargaining power (see Chart 9.2). New elections in September 1982, following the disintegration of a hapless centreleft coalition formed only a year earlier, brought a centre-right coalition to power, which was now determined to reduce public spending. The new Christian-Liberal CDA–VVD coalition, led by Ruud Lubbers, was sworn in on 2 November 1982 and was due to present its plans to Parliament on 22 November. This provided a very small window of opportunity for the social partners. On 16 November, Minister Jan De Koning (Social Affairs, CDA) made his first move by proposing a wage freeze for the first three months of 1983, while inviting the social partners to tripartite talks. At the same time, he leaked

9 As a matter of fact, they did not have the right to strike (under a law of 1903). Consequently, public-sector unions did not pay into FNV’s central strike fund. All this changed in the 1980s, when Dutch courts, citing the European Social Charter, acknowledged the right to strike of public-sector employees, who gradually acquired negotiating rights while losing their privileged status. This process was completed in 1992.

212

The Netherlands: Social Pacts in a Concertation Economy 2,200.0

38.0

2,100.0

36.0

2,000.0 34.0

1,900.0 1,800.0

32.0

1,700.0

30.0

1,600.0 28.0

1,500.0 1,400.0

26.0

1,300.0

24.0

1,200.0 22.0

1,100.0

20.0

19

7 19 9 8 19 0 8 19 1 8 19 2 8 19 3 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 90 19 9 19 1 9 19 2 93 19 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 07

1,000.0

All union members

Employed union members

Union density

Chart 9.2. Union Membership and Union Density, 1979–2007

plans to freeze public-sector wages, mandatory minimum wages and benefits. This put great pressure on labour leader Kok. A day later, the social partners met with the new cabinet, without any sign of agreement but with the impression that the government had its mind set on a prolonged intervention in wage setting (Hazenbosch, 2009: 476). Kok realized that the tripartite talks were a public opinion exercise and knew that only a deal with the employers could prevent a repetition of 1980 and further marginalization of the unions (Bottenburg, 1995: 193). Without mandates from their organizations, and only the Prime Minister’s word that a deal would be honoured,10 Kok and Van Veen, who had been talking to each other since the summer, started serious negotiations, seconded by only two aides – Social Affairs director Rob Dortland (VNO) and wage coordinator Frans Drabbe (FNV). They reached an agreement in two days. Within hours, the social partners met with government officials and government intervention was avoided. Signed by all social partners in the Labour Foundation on 24 November, the agreement cancelled two vetoes: the unions gave up on automatic price compensation and the employers conceded working time reduction. On 12 December, parliament approved a special ‘umbrella law’ allowing the suspension of the automatic price escalators due to take effect

10 According to Lubbers’ account at the presentation of ‘A Dutch Miracle’, Amsterdam, 15 October 1997.

213

Social Pacts in Europe in January (Visser and Hemerijck, 1997: 101). Within months, all agreements were renegotiated for a two-year period.11 Wassenaar is a bilateral agreement negotiated under a ‘shadow of hierarchy’ if ever there was one. According to Dortland, ‘we verified through informal channels that the Cabinet would say, if you do this, we will trust you and not intervene’ (Bottenburg, 1995: 196). In signing the agreement, the two leaders of the FNV and VNO gambled that their organizations would follow them. This was by no means certain. There was fierce opposition within the VNO: when the agreement was leaked to the press before becoming official, Van Veen had the greatest difficulty in keeping the ranks of his organization closed. The FME threatened to boycott the agreement and many employers did not see the point of an agreement with the unions. They believed that unemployment and a tough government would be enough to teach the unions moderation (Braak, 1992). According to Kok, nobody in the FNV rejoiced in the agreement (Rooy and Velde, 2005: 22), but only the FNV’s Food-processing Union and some lower ranking officials openly voiced opposition. The public employees’ union, ABVAKabo, where a change of leadership had taken place, also acquiesced. Its protest came a year later, when the government announced a 3.5 per cent cut in public-sector pay (later lowered to 3 per cent) and unions in the private sector stood by to watch how public-sector strikes ended in failure. According to Wim Kok, the dramatic rise in youth unemployment and the powerless protest against the government’s intervention in 1980 had convinced him that wage concessions were needed and that only a deal with employers could ‘rescue’ some influence for the unions (Rooy and Velde, 2005: 22). According to Dortland, Van Veen became convinced that Kok wanted the deal and, hence, offered a unique opportunity to get the government out of wage negotiations (Bottenburg, 1995: 194). The centralizing effects of government interventions had frustrated the VNO’s long-term goals of decentralization. Both leaders overcame distrust in a series of talks in which they had informed each other about the difficulties they faced within their organizations; they were not personally close in the way FNV and VNO leaders were a decade later, but they knew each other very well (Rooy and Velde, 2005: 25).

9.3.2. New Course (1993) The agreement of 16 December 1993 marks a shift from a ‘single-issue’ (wage moderation versus work sharing) approach to a ‘multi-issue’ approach to wage bargaining and from a centralized to a coordinated response (Meer et al., 2000). The direct reason for the agreement (and its immediate impact) was to slow 11 Van de Toren (2007) suggests that the choice of two-year contracts was motivated by the desire to limit the effects of a statutory intervention, should the government change its mind.

214

The Netherlands: Social Pacts in a Concertation Economy down contractual wage increases. As in 1982, the government had cast a ‘shadow of hierarchy’ over the negotiations. Already in August, Social Affairs Minister Bert De Vries (CDA) had informed parliament and the social partners that he intended to impose a wage freeze, invoking his powers under the Wage Act. The legality of this threat was doubtful; after the amendment of 1987, the Act had severely limited the conditions for such interventions. But there were other pressures, like the government’s decision not to raise the statutory minimum wage and suspend the indexation mechanism that linked minimum wages and social benefits to wage rises. The restoration of that mechanism had been one of the concessions to the PvdA, now led by Wim Kok, who had joined the government coalition led by Ruud Lubbers in 1989. In informal talks with Kok, who doubled as Finance Minister, FNV chairman Johan Stekelenburg and chief pay negotiator Lodewijk De Waal found out that the government was serious about the choice between wage moderation and curtailments in social security spending (U2). The FNV negotiators decide to play up the intervention threat as a means of achieving an agreement with employers. Employers badly wanted a freeze on wages and had started a campaign of ‘zero is necessary; zero is enough’. But they feared government intervention; in fact, in 1991 they had killed the Joint Policy Framework, and boycotted consultations with the government when the Minister announced that he would punish wage increases with extra levies on employers (Bruggeman and Camijn,1999: 287–8). In contrast with 1982, in 1993 the VNO rank-and-file also wanted an agreement (Braak, 2006: 164), possibly because they felt that the unions had honoured the central agreement of 1992 to limit their wage increases to 2.5 per cent (Visser and Hemerijck, 1997: 105–6). In three weeks of negotiations, the deal was done and government intervention prevented. In addition to wage moderation and working time reduction, to be negotiated on a case-by-case basis, New Course contained a side-agreement on union involvement in decentralized labour relations (StAr, 2005: 198–9). The smallest union federation, the Federation of Managerial and Professional Staff Unions (MHP), was successful in framing the negotiations as a once-in-ageneration occasion (‘Now or Never’) for creating modern labour relations based on choice. This may have convinced the VNO to drop its veto on working time reduction (E2; U8). For some unions – in the public sector, banking, and industry – the sticking point was the introduction of a 36-hour working week (U3,4,7). The New Course agreement was reached because the employers feared the government, with the PvdA as a key coalition partner, more than the unions with whom, eleven years after Wassenaar, they had learned to do business. Although negotiations could be tough, employers found the unions more predictable than parliament; moreover, relationships at the leadership level, especially between FNV chair Johan Stekelenburg and VNO chair Alexander Rinnooy Kan, were excellent (U2; J2; Braak, 2006: 163).

215

Social Pacts in Europe

9.3.3. Flexicurity (1996) The agreement of April 1996 is a direct consequence of the new relationships forged between the social partners after New Course. Its background lies in the inability of the left–right ‘purple’ coalition, led by Wim Kok (1994–8), to agree on how to regulate a flexible market for labour. Initially, employers and unions each lobbied different Ministries. Based on a strong lobby of work agency firms, employers sought the support of the liberal Economics Minister for further liberalization of the market for temporary work. The unions turned up the heat on Social Affairs Minister Ad Melkert, the most powerful figure in the PvdA after Kok. Locked in a battle with his liberal colleagues in the Cabinet, Melkert sought to strengthen the hand of the unions without alienating employers too much (U2). Having inherited a ‘poisoned heritage’ (U2) from his predecessor at Social Affairs, with policy measures announcing the abolition of preventive dismissal protection, the repeal of the 1937 extension law for collective bargaining, the flexibilization of working time regulation, and a deregulation of agency work, Melkert must have realized that he had walked into a minefield. He chose to shelve the issue of dismissal protection, relied on the social partners’ capacities for self-restraint on the issue of extension, crafted a new law with elements of self-regulation and flexibility on working hours, and delegated the work agency issue to the social partners by asking advice from the Social and Economic Council of the Netherlands, the SER. The unions took this as an opportunity to take the issue away from politics by sidelining the government-appointed SER members and negotiating directly with employers. FNV pay negotiator Lodewijk De Waal has described these negotiations as ‘a kind of three-dimensional chess’ (U2), in which each side had to deal with each other, with different parts of the government, and with internally opposed constituencies, that is, firms that ‘sell’ or ‘buy’ agency workers on the employer side, and workers with standard and agency work contracts in the unions. A complicating factor was that in parallel negotiations the FNV’s Industry Union tried to win a contract for agency workers with the employers’ association representing work agencies, and had made it clear that no central deal would be supported without the employers signing a collective agreement. In the end, the employers gave way to political pressure from Minister Melkert and the FNV’s offer of cooperation. The compromise was that the market for work agencies and temporary work was liberalized, but the employment, training, and social security of agency and temporary workers were improved. In essence, the employers conceded income security, whereas the unions conceded employment flexibility. With enhanced possibilities to regulate these issues by collective agreement, both employers and unions hailed the compromise as an illustration of their ‘new course’ towards coordinated decentralization and a step forward in their agenda of prioritizing employability rather than job protection (E2,3; U1,2,5; Braak, 2006: 163).

216

The Netherlands: Social Pacts in a Concertation Economy

9.3.4. The Museum Square Pact On 5 November 2004, unions, employers, and the government signed a new social pact. As usual, there were two documents: a joint declaration of the social partners and a government letter to parliament. The latter was negotiated point by point between the unions and the government. Unlike earlier pacts, employers were excluded from the final negotiations and were only brought in to sign the result. More than any other pact, this one had a tumultuous history of power play, changing coalitions, broken relationships, and conflict. In order to understand its provenance, we must begin with the elections of May 2002. The 2002 elections, days after the murder of the populist politician Pim Fortuyn, produced a victory for his upstart party, the Pim Fortuyn List (LPF), and the CDA, ending eight years of opposition. Under its new and untested leader Jan Peter Balkenende, the CDA formed a coalition with the Liberal VVD and the LPF. This coalition fell apart almost before it started; the government tendered its resignation in mid-October after only eighty-six days in office. New elections were scheduled for January 2003. Meanwhile, the economy deteriorated under the impact of the bursting of the Dot-com bubble and the fallout from the 9/11 terrorist attacks in the United States. Determined to do everything differently, the Balkenende government adopted a rather shrill ideological tone in confrontation with the unions, and after some initial courting even managed to antagonize the leaders of The National Federation of Christian Trade Unions – Christelijk Nationaal Vakverbond (CNV) (U6; Hazenbosch, 2009: 686). In the Budget for 2003, the government scrapped all subsidies for ‘assisted jobs’ in local public services – the flagship programme of the Kok governments. Most unions and many local governments protested. The customary meeting between the Cabinet and the Labour Foundation was ill-prepared and FNV leader De Waal had the impression that Social Affairs Minister Aart Jan De Geus (CDA), an ex-CNV official, acted dishonestly by offering, and then retracting, two versions of a compromise agreement (U2). In the end, the unions conceded a 2.5 per cent wage norm for 2003, and the government promised to keep some of the assisted jobs programmes. With this Mini-Pact of December 2002, the FNV and CNV were biding their time, with the FNV’s largest union in deep trouble,12 elections one month away, the polls predicting a recovery for the PvdA, and union leaders hopeful of a centre-left coalition (U2,6). In the January elections, the PvdA regained most of what it lost in 2002, but ended up behind the Christian Democratic CDA to which it had to leave the initiative in coalition building. After four months of fruitless negotiations, the

12 At the end of 2002, FNV-Allies (Bondgenoten), a merger of four large unions in industry and services, went through a severe financial and organizational crisis, renewed its leadership, and began to distance itself from social partnership.

217

Social Pacts in Europe CDA returned to its Liberal partner VVD and successfully courted another centrist party, the social-liberal and radical democratic D66 (Democrats 66). Under pressure from Finance Minister Gerrit Zalm (VVD), the new Cabinet decided to push for €1.8 billion in extra savings to balance the budget and meet the EMU (Economic and Monetary Union) deficit criteria. It was difficult to see how this aggressive approach could help enlist union support for wage moderation, which had again become a key issue for employers. Negotiations turned out to be more difficult than a year before. On every issue, there was disagreement. The Budget left no room for compromise and Social Affairs Minister De Geus enjoyed little goodwill from FNV negotiators (U2,4; Braak, 2006). The pact of 18 November 2003 was therefore a complete surprise. The unions promised zero wage increases in 2004 and increases ‘approaching zero’ in 2005. In return, the government conceded that it would negotiate the announced reforms on early retirement, disability and unemployment benefits. A timetable was set for April 2004. Shrewdly, FNV leader Lodewijk De Waal made his signature conditional on a referendum of FNV members, the first ever in the organization’s history. Knowing that there was strong resistance to another central deal, he went over the head of his affiliates and officials. His gamble worked; with a turnout of 20 per cent, 56 per cent of members voted in favour, and 42 per cent against the pact. Although the referendum was not binding, it was impossible for the FNV’s federal council not to approve the result. Citing the Lisbon Agenda, the government had announced that all fiscal advantages for early retirement, that is, before the statutory pension age of 65, would be abolished. Instead, a new ‘life course leave scheme’ for young families would be phased in, partly by using the ‘wage savings funds’ inherited from the Kok governments. Unusually, the government sidestepped the customary procedure of asking advice from the SER (J2). This surprised the hardened negotiators in the Dutch consultation economy (J1), many of whom derided the new scheme – a pet project of the new CDA leadership – as elitist and not fit for the average worker. To many negotiators, it seemed a folly to disturb an ongoing process with a new, untested idea (E5). In the first months of 2004, all six central organizations except the VNONCW presented alternative plans as a compromise between the old regime and the government’s proposals. The issues were fiscal advantages; how much of it could be used for early retirement and whether the schemes should be collective in the same way as existing sectoral or company-based funds for (early) retirement pensions. The government wanted no advantages for retirement, no exemptions and individual opt outs from collective funds. The FNV staked out a maximalist position by defending the existing fiscal possibility for early retirement at 60. The two smaller employers’ associations joined the two minority union federations in a coalition defending retirement at the age of 62. The small- and medium-size firm employers clearly preferred early

218

The Netherlands: Social Pacts in a Concertation Economy retirement over mid-career leave arrangements (E3,6,7). The government failed to ‘reward’ this coalition and use it as a possible focal point for negotiations (G1). In late April, the government conceded retirement at age 63½, but this offer was undermined by its simultaneous insistence on individual opt outs. The unions suspected a double agenda and feared that opt outs would effectively undermine collective funding for early retirement (U1,5). The fact that the government offered nothing for older workers above the age of 50 who had not had enough time to building up an individual fund for themselves also soured the negotiations. In early May, the FNV joined the coalition of four, but that did not move the government or the main employers’ federation. Closest to the government’s position, though scornful of its poor negotiating skills, the VNO-NCW decided not to commit itself (E3). At the same time, the FNV and VNO leaders met secretly, but neither side believed in the desire of the other to compromise (U2; Braak, 2006). Just days before the final negotiations on 18 May, the VNO-NCW succeeded in prying the smaller employers’ federations away from the coalition with the unions. Reunited, the employers proposed a compromise: retirement at 62½ and individual opt outs. They believed that this was the limit of what the government would concede, but feared that it would not be enough for the FNV (Braak, 2006). And they were right: relations had now deteriorated to such a degree that the unions, led by the FNV but united in their rejection of individual opt outs, were no longer prepared for compromise. Reconciliation attempts on the part of CNV chairman Doekle Terpstra general employers’ association AWVN (Algemene Werkgeversverening, which is affiliated to the VNO-NCW) went nowhere (U6; E1). It was now time for mobilization. Followed by the two smaller confederations, the FNV declared the ‘Demi-Pact’ of 2003 dead and felt no longer committed to wage moderation. Minister De Geus retaliated by threatening that he would not extend collective agreements that included pay rises and would implement his original proposals, with punitive taxes to discourage existing early retirement packages. There were divisions between public- and private-sector unions, and between the FNV and CNV, but together the unions were sufficiently disaffected by the approach of the government to stand together in their mobilization against it. In the second referendum of FNV members, after the failed negotiations of May, 97 per cent rejected the government’s proposals. The FNV leadership interpreted this as a mandate for mobilization, but there was much uncertainty about their actual capacity to bring workers out on strike (U2). The FNV’s coalition partners – the CNV and the white-collar union MHP – shared these concerns (U6,8). VNO-NCW chairman Jacques Schraven made a tactical mistake when in a newspaper interview he suggested that trade unions were becoming

219

Social Pacts in Europe irrelevant.13 Just in case they needed reminding, this convinced union leaders that the prestige of their organizations was at stake. Even the CNV’s Executive, which was usually very reluctant in engaging in direct action, especially when directed against an elected government, realized ‘that if in the coming months we do not mobilize, we will be marginalized for many years’ (Hazenbosch, 2009: 697). During the summer, Minister De Geus blundered by sending a Bill to parliament in which he claimed the competence to extend agreements only when they conformed to government policy. This infuriated not only the unions but also employers who feared the return of wage bargaining under state control (E2; Braak, 2006). The government clearly overplayed its hand and with the prime minister absent due to illness there was no coordination (G1). Several official advisory bodies criticized or ridiculed the government’s plans. The unions were handed a moral boost when the Council of State, which scrutinizes all legislation, severely criticized the Draft Act on Early Retirement, something it rarely does (U6). This was all fodder for the unions, who slowly began their campaign after the summer break. In mid-August, the unions broke off regular contact with the government and employers’ associations, resulting in a complete standstill of consultations in the SER and the Labour Foundation, StAr. Rather than a full-blown mobilization, which might easily have backfired if not immediately successful, the unions began with small demonstrations and work interruptions around the country. Soon, and most importantly at a militant demonstration in Rotterdam, they realized that they enjoyed greater support than expected. Some employers’ federations, most visibly the FME, began to distance themselves from the government (U5). The government’s popularity ratings were at an all-time low. On 2 October, the unions brought 300,000 members to Amsterdam’s Museum Square, which turned out to be the second largest union demonstration against the government since the Second World War. This earned the united leadership of the FNV, CNV, and MHP the respect of the country and their adversaries (Braak, 2006; Zalm, 2009). Now they could no longer be ignored. The government began to backtrack almost immediately and in two seemingly uncoordinated missions Finance Minister Zalm and Social Affairs Minister De Geus sent ‘spies’ to the unions. Zalm’s mission led to a secret dinner ‘a` deux’ with De Waal on 15 October. A week later, at another dinner, the two agreed that a deal was possible (Zalm, 2009: 182–4). Meanwhile, the other mission revived technical negotiations at a secret place. When the press discovered this, FNV negotiator Agnes Jongerius accused the VNO-NCW of leaking information and used the opportunity to exclude the employers from the negotiations. A 13 ‘De vakbeweging dreigt irrelevant te worden’, interview with J. Schraven, Financie¨el Dagblad, 10 June 2004.

220

The Netherlands: Social Pacts in a Concertation Economy compromise was reached in early November, which only needed the approval of the Cabinet. This was provided on 5 November, three days after the brutal murder of film director Theo Van Gogh by an Islamic terrorist (Buruma, 2006). In the social unrest, which swept the country, all sides but foremost the government had a sudden urge to put the social conflict behind them. Very worried about being kept in the dark, the employers’ association had no option but to lend their signature to the pact (U2,6). Having gained a number of concessions and fighting back from the brink, the unions claimed victory. In the following membership ballot, 91 per cent of the FNV rank-and-file voted in favour of the agreement. The outcome is that fiscal advantages for early retirement will end in 2006 and a small life course savings scheme will be introduced. However, employees can accumulate savings for early retirement from 62, at 70 per cent of their wages. For those working forty years or longer, who can retire at 63, the arrangement allows retirement at 60. For workers over 55, there will be a transition regime until 2022. In contrast to earlier government proposals, there need not be an individual opt out from collective schemes and social partners may arrange provisions by collective agreement. On the two smaller sticking points in the negotiations – disability pensions and unemployment insurance – the government made a complete volte-face. To the great irritation of all negotiators, the government had rejected the compromise hammered out in the SER. In most interviews, this was mentioned as an extra obstacle for reaching agreement on early retirement. In October, the government retreated and the compromise between the social partners became the basis for a change of the law in 2006. On unemployment insurance, the government had wanted to reduce unemployment benefits by the amount of severance payments received in case of voluntary dismissals or awarded by the courts. Employers opposed this for fear that it would make company restructuring more difficult. In the end, the government rescinded its plan and deferred to the SER, which in 2005 produced unanimous advice that became the basis for two minor adjustments in unemployment insurance.

9.3.5. Testing Our Hypotheses The assumptions of our bargaining model clearly pertain to pact negotiations in the Netherlands. Crises generate uncertainty and actors cannot, and do not, rationally calculate far ahead; they adjust to strategies and incentives offered by others; and though the preferences of unions and employers seem reasonably fixed, those of governments seem more volatile. Clearly, unions, parties, and, in the Dutch case, coalition governments negotiate as much internally as with each other. Finally, not just power but also perceptions of power, and of competence and trustworthy behaviour, matter a great deal. In an institutionalized

221

Social Pacts in Europe context where people meet each other frequently, habits and routines and personal relationships and qualities are highly relevant. The failed agreement of 1979 fits closest to our prediction that a pact is improbable when all actors are weak or their powers are decreasing. Without any actor seeing its power increasing in the short run and each held hostage to powerful internal interests, the likely result is a stalemate. In all other cases, we see one actor or coalition dominating. In 1982, this was the government; in 2004, this might have been the government if it had not squandered its resources. In 1993 and 1996, the government pushed one or both social partners towards agreement in order to produce a solution to its own internal divisions. Although complicating our theoretical model, the Dutch case reveals that social pact negotiations are three-way games. Usually, the government, even when it feels close to one side, tries to position itself in the middle, allowing itself to apply equal pressure, or give equal help, to both sides. The negotiations of 1982, 1993, and 1996 are cases in point. Outside pressure can be a powerful means to overcome internal opposition and is sometimes welcomed by the social partners (E2; U1). Unusually, in 2004 the government positioned itself to the right of the employers. As VNO-NCW’s chief negotiator admits, this was exceptional (Braak, 2006). The organization did not know how to handle this luxury; it leaned back on the government and was subsequently pushed out of the negotiations. There was no situation in which all parties saw their power waning or rising. The ‘Almost-Pact’ of 1979 may be the closest example of the first situation; the 1989 pact that was not implemented may be an illustration of the second. The observation that perceptions of weakness prevent actors from signing a pact applies in the Netherlands to minority organizations and ensures that the FNV and VNO-NCW continue to dominate. Turning to our hypotheses, we conclude that even in a country with institutionalized concertation like the Netherlands, actors will only sign agreements that they can define as beneficial to their members (Hypothesis 1). This may have been different in the 1950s and 1960s, when Dutch unions and employers’ organizations were more hierarchically organized and readily consented to central wage controls dictated by the government at the cost of membership losses (Windmuller, 1969). A great deal of time is now spent on internal negotiations and information exchange. The FNV has for this reason introduced membership ballots; the employers’ association invests a great deal in communication with its members (Visser and Wilts, 2006). Social partners spend much time predicting the distributional effects of policies. For this, they rely on the analysis of the Central Planning Bureau and organize working parties with officials from the Finance and Social Affairs Ministries. In 2004, this did not work, despite thirty-three meetings of the ‘coordination group’ of social partner experts and government officials between January and May. It took a very long time to get precise quantitative evidence

222

The Netherlands: Social Pacts in a Concertation Economy about the distributional consequences of the government’s plans; another issue was the technical problem of integrating the reforms in existing pension and retirement schemes (G1; E3; U1). Nearly all our interviewees agree that, given more time and more professional leadership from the Ministry, agreement might have been possible. In the end, it was not the issue of early retirement at the age of 62, 62½, or 63 that was the sticking point but whether ‘life course savings schemes’ should be organized collectively and individual employees be given the possibility of an opt out. Institutional interests are often imponderable and non-negotiable. The government wanted individualization; the unions saw it as an attack on solidarity and feared that younger workers would no longer share in the costs of the more expensive insurance costs for older workers who had fewer years left for saving. Perceptions of relative power can change during negotiations (Hypothesis 2). In 1982, a skilful Social Affairs Minister applied pressure on employers and unions, suggesting a wage freeze. We will never know whether he actually planned such a freeze, but the impression created was enough to push employers and unions towards seeking an agreement. The 2004 pact negotiations offer a spectacular case of misperception. The government and its retinue of employers overestimated the FNV’s weakness and had to pay for it. In most other cases, the actors’ perceptions were correct, as is to be expected in a small concertation economy in which all actors are connected through multiple ties and extremely well informed about each other’s preferences and capabilities. Hypothesis 3 posits that in the course of negotiations, actors adjust their strategies in such a way that, first, they optimize their responses to incentives and constraints provided by others, and, second, bring their strategies in line with their expectations about the economic situation. In 2004, the problem was that the government never set incentives that might have allowed the unions to adjust their strategy; it never rewarded the ‘coalition of four’ but kept pushing its own preferences. This is unusual; on all other occasions, the government offered institutional guarantees and incentives enabling one or both sides to move. The reverse is, of course, that the unions typically offer economic incentives for employers and governments to accept their offer. Their main ‘currency’ is wage moderation and labour peace. According to De Waal, the value of wage moderation is often overestimated. This, in his view, was the case in November 2003, when the FNV needed a truce, because of rising unemployment, a struggling affiliate (FNV-Allies), and opinion polls showing that the time was not ripe for industrial action (U2). The weakness of the unions’ bargaining position in most sectors and firms was such that they would not have been able to get much more than the zero increases recommended by the pact; yet, in exchange for conceding something which they did not have, the union got a ‘foot in the door’ on the government’s reform plans. The negotiations of 2004 are a confirmation of the hypothesis that when actors see their relative power as increasing, they tend to push for more, even if

223

Social Pacts in Europe that wrecks the negotiations (Hypothesis 4). This is what the government did, to its peril. Our study provides no other cases of such maximalism. In 1982, some segments among employers were tempted, but a leadership that had received sufficient incentives from the government and assurances from the unions was able to overcome the temptation. Finally, the outcomes of negotiations tend to reflect the preferences of the most powerful actor or coalition (Hypothesis 5). In 1982, the government got what it wanted for almost no price. In 1993, from a weaker position and with its power resources waning half a year before the elections, the government had to defer to the social partners, who achieved their aims: decentralization, working time reduction, and no government intervention. As in the Flexicurity case, this is a good illustration of a three-way deal: the power balance between unions and employers, however, might have produced a stalemate if the government had not increased the institutional reasons for employers to seek cooperation with the unions (1993) or had not helped the unions with legislative blockage (1996). On the main issue of early retirement, the outcome of the 2004 pact splits the difference between the unions and government, reflecting the improved power balance achieved by the unions during the negotiations.

9.4. The Institutionalization of Social Pacts Coming after more than a decade of discord and polarization, the 1982 Wassenaar agreement has been characterized as ‘corporatism regained’ (Visser and Hemerijck, 1997). As this chapter has shown, it was not the product of consensus but produced a consensus among employers and between employers’ organizations and trade unions that they should manage wage setting together rather than letting the state do it for them. The Wassenaar ‘pact’ itself was narrow and consensus was certainly not immediately available. Some employers rebelled against concessions on working time reduction, and many unions were dismayed when the recovery of profits did not immediately translate into a recovery of employment. Public-sector wages and (youth) minimum wages were lowered in spite of angry union protests. The unions opposed and were not really given a chance to negotiate the 1987 reforms of social security, which limited eligibility and lowered benefits. They did have a chance to negotiate the overhaul of the disability pension system in 1991, but lacking agreement, the government imposed the reform against massive protests by the unions (Weezel, 1996; Visser and Hemerijck, 1997). It was only after 1993, when New Course saw the will of the social partners to work together increase, that the agenda of social pacts broadened. Each pact stands on the shoulders of its predecessor. New Course would probably not have been possible without Wassenaar. In the early 1990s, with various aspects of corporatism under attack from liberal or social-democratic

224

The Netherlands: Social Pacts in a Concertation Economy politicians who claimed the ‘primacy of politics’, the social partners deepened their relationship with one another. In 1993, the Cabinet decided to remove the social partners from the administrative councils deciding on disability pensions and Parliament voted to reduce the number of advisory bodies. This so-called ‘desert law’ had negative financial consequences for the unions and many employers’ associations. According to Hazenbosch (2009: 604), the attack on corporatism reinforced the social partners’ resolve to unite behind a common approach. They jointly defended the mandatory extension of collective agreements, and in 1992 the SER produced an ‘agreement to agree’ on (EMU) Convergence and Consultation, which according to VNO chairman Rinnooy Kan became ‘the mother of all advice’ for the rest of the decade (Braak, 2006: 162). In this document, the social partners praised the blessings of a well-functioning consultation system based on a division of roles with social partner autonomy in labour relations at its core. This was in essence a reaffirmation of the new relationship that had emerged among them after Wassenaar. The tripartite Joint Policy Framework of 1989–91 was seen as a disturbance of that pattern, which had bipartism at its core. The remainder of the 1990s were a validation of the new ‘peace’ between employers and unions. That peace and the bipartite relationship on which it rested were broken before and during the 2004 negotiations. The reasons for that eruption – and the process of de- and re-institutionalization that followed – were the greaterthan-usual economic and political volatility that emerged after 2000, expressed in conflicts over immigration and Islam, and doubts over European integration (Buruma, 2006). Especially in the government, this created instability and uncertainty, even recklessness. Rather than the end of social pacts, and of corporatism, the result was that the unions reasserted their position, and both the government and the employers learned the lesson ‘that it is best to do things together with the unions’, to cite the same VNO chairman – J. H. Schraven – who in 2004 opined that unions might become irrelevant.14 Of the two paths to social pact institutionalization discussed in Chapter 4, the Netherlands follows the first, with some qualifications. Institutionalization, or the recurrence of social pacts, is based on a process of ‘increasing returns’. Through the positive effects attributed to the pact – on the economy, the negotiating organizations and their members, their mutual relationships, and the creation of some intangible goods like trust – the first pact reinforced the pattern of concertation which was set in motion. The 1982 Wassenaar agreement is a very clear illustration, with widely acknowledged effects even into the 1990s (Visser and Hemerijck, 1997; den Butter and Mosch, 2003). However, when the political conditions dramatically change, as they did after 2000, then a process of increasing returns is not sufficient and tends to be countered by 14 ‘Het is beter dingen samen met de vakbeweging te doen’, afscheidsinterview met J.H. Schraven, SER Bulletin, May 2005.

225

Social Pacts in Europe powerful forces which seek adjustment or lead the pacting experience into new domains. The Dutch case furthermore illustrates how different and difficult pact negotiations become when the government changes its position from facilitator and enforcer of bipartite deals and becomes the main target and protagonist of the pact. As was argued in Chapter 4, negotiations by three parties are much more unstable, and much harder to institutionalize, than those between two. The Dutch case confirms our theoretical argument and expectation that social pacts are fragile institutions, and not easy to repeat through time in the same form or on the same issues. Social pacts may be different each time, but actors do not start from scratch. As we have seen, they carry the experience of previous pacts or failures with them and they act within specific institutional rules and routines. These rules and routines are very elaborate in the Dutch case and have been discussed in the first part of this chapter. In the remainder of this section, we want to focus on how the experience of pacts was carried over time in the evaluation of the principal actors and may have contributed to the (re-)institutionalization of social pacts. Below, we follow the four mechanisms or hypotheses elaborated in Chapter 4. The functionalist hypothesis posits that social pacts are reproduced if they serve a function for the system even if there are disadvantages for the participants. The drivers of social pact formation should in this case be exogenous and change should occur when ‘system needs’ change. This partly applies to the Dutch case, in which crisis conditions each time seemed to serve as a wake-up call, and changes in the pacts themselves are motivated by new system challenges, varying from external adjustment (1982), via flexibility and globalization (1993), to welfare reform and ageing (2004). However, the fact that many pacts address the internal difficulties of coalition governments and all pacts require hard bargaining about particular interests tends to disconfirm Hypothesis 1. If Hypothesis 1 were true, we should have seen more pacts, their easier acceptance, less delay, a smoother evolution of issues and actors, even beyond the traditional actors that now dominate the game (e.g. young workers, environmental interests, and the flexible workforce). Finally, it is remarkable that none of our respondents, not even those representing the joint institutions ( J1,2), describe the pact experience of recent times in terms of ‘public’ or ‘general’ interests, let alone ‘system needs’, but rather all refer to hard bargaining and special interests. This makes us feel more at home with Hypothesis 2, relating the reproduction of social pacts to the cost–benefit assessment of the actors. Beyond tangible goods like jobs, wage growth, and profits, this includes less tangible investments in labour peace, mutual trust, and good working relations. Both types of goods and investments are present in the Dutch case and most actors acknowledge that, after Wassenaar, it became easier to reach an agreement. This applies

226

The Netherlands: Social Pacts in a Concertation Economy also to the internal divisions of organizations, which due to the change in government wage setting and owing to the decentralization process of New Course, or thanks to the referendums in later years, no longer obstruct macrolevel pacts. We see these changes as institutional effects of the pact process itself and as a contribution to their continuation. Did Dutch social pacts engender the belief that they produce just and fair outcomes, and should therefore be continued, as stated in Hypothesis 3? Pressed on this issue, our respondents have remarkably little to say, although some (U1,6; E2; G2; J1) did refer to notions of fairness and equal sharing. But this refers much more to the right of participation – to be consulted on major policy changes – than to outcomes. In fact, the evaluation of outcomes is done in very general terms and balances many issues (wages, employment, membership gains, and earnings equality). The opponents of social pacts – presently in FNV-Allies – do however use arguments of fairness, or rather unfairness, when they distance themselves from pacts, whereas the advocates of pacts more often invoke utilitarian reasons or argue that the alternative to rejecting negotiations with the government implies (self-) exclusion and impotence. Opponents among employers, currently the AWVN, which is the main bargaining partner of FNV-Allies, typically invoke utilitarian arguments when they state that recent pacts are too broad and centralizing (E2). Our conclusion is that Hypothesis 3 should be rejected. The Dutch case approximates best to Hypothesis 4, which states that social pacts are likely to become institutionalized when powerful elites support their reproduction. Clearly, there is, or was, more support for social pacts among the top leaderships of the peak federations than among the officials of their affiliate organizations. In the 1990s, there was broader grass-roots support, probably as a consequence of the results and benefits of the earlier social pacts, and of economic and employment growth generally. After 2000, this support waned and the top leaders had to go over the head of their affiliates or create faits accomplis. Thus far, the leadership support for social pacts and central coordination among unions and employers seems unbroken. This is much less true for the government, where neo-liberal, technocratic, and corporatist tendencies fight for predominance, and moods can be much more aggressive (G4) and volatile (G1). Elite cooperation is a standard feature of Dutch politics (Lijphart, 1968), but populist tendencies and the loss of representation by parties and interest groups like trade unions suggest that we are once again, as in the polarizing 1970s, facing a period of destabilization of corporatist policies.

9.5. Conclusion This chapter has shown that in the Netherlands, social pacts are the standard operating procedures in times of crisis. After the Wassenaar agreement, they

227

Social Pacts in Europe became the institutional alternative to state intervention. Taking into account that many pacts affect bargaining rounds for two years, we calculate that eleven of the thirty years since 1980 were covered by pacts on wage moderation. In non-pact years, there is also a fair amount of coordination. This confirms the picture of the Netherlands as a coordinated market economy of the corporatist variant, characterized by a high degree of mutual cooperation between unions and employers, and regular consultations with the government. However, this chapter has also shown that coordination and consultation cannot be taken for granted, but are occasionally rewired to meet new conditions via conflict and tough bargaining over diverse interests. The four major pacts discussed in this chapter reveal continuity and change. Wage moderation and the defence of competitiveness and employment seem to be a constant. The dynamic of pact negotiations and the reconfiguration of power indicate change, with the government again becoming the main target and protagonist. With regard to the emergence of pacts, our analysis conforms rather well to our theoretical predictions, revealing emphatically the relevance of power shifts and subjective perceptions. We find that the institutionalization of these pacts owes most to the tangible and intangible benefits they generate, and to continued elite cooperation. Developments after the conflict and pact of 2004 confirm these conclusions. After 2004, relations between the government and the social partners returned to a state of calm. All major organizations elected new leaders and in early 2007, a new centre-left government was formed. A new conflict emerged when Bernard Wientjes, the new chairman of VNO-NCW, insisted on a reform of dismissal protection, which the unions flatly rejected. The new Minister of Social Affairs Piet Hein Donner (CDA) took the side of employers, but ran into the opposition of the PvdA and nearly caused the government’s downfall. Following a well-established routine in Dutch politics, the issue was transferred to a ‘committee of experts’ which produced a number of interesting ideas but no solution to the conflict. In September 2008, Wientjes and the FNV’s new chairwoman Agnes Jongerius surprised everybody with a deal in which the system was left unchanged but the severance costs were capped. Just in time, because the financial crisis needed their full attention and cooperation. The truce on dismissal protection allowed the social partners to put pressure on the government to help them. In October, they signed a tripartite declaration with the lofty title ‘Doing Together What Is Possible’. The government promised some extra measures, and abandoned the announced rise in value-added tax; the employers promised labour hoarding through part-time unemployment schemes, and the union federations pledged to resist pressures to exceed their 3.5 per cent wage claim for 2009. This was clearly not enough, and with the economy falling in a deep recession, the social partners lobbied the government for more. The unions conceded a 1 per cent wage norm and employers pressed for more help with partial

228

The Netherlands: Social Pacts in a Concertation Economy unemployment schemes and public investment. It took the government nearly two months of internal negotiations before they were ready to sign a pact on 23 March 2009, which was ratified in an FNV referendum. The real sticking point in this pact was the government’s decision, reached after hard internal bargaining, to raise the retirement age for state pensions from 65 to 67. The FNV was opposed and gained the concession that the SER has until October 2009 to find an alternative for raising the €4 billion which the government hopes to save with this measure. These recent events show that crises and pacts still go together, but also that the issues increasingly shift from the domain of labour relations proper to welfare state politics. Beyond the current problems of fiscal imbalance, the real challenge is how the poor employment prospects and limited human resources of workers over the age of 50 can be improved and made compatible with an increasingly unpredictable and demanding economy in which cognitive skills are key. In this problem, all of the contentious issues of recent pacts – (early) retirement, (dis)ability, unemployment insurance, and dismissal protection – come together. A ‘grand bargain’ is not in view, however. By comparison, and with the benefit of hindsight, the problem solved by Wassenaar looks small, but in 1982 the formula ‘less wage growth, more profits, more investment, more jobs’ was not commonplace either. We end with the conclusion that the emergence and (re-)institutionalization of pacts is not only a matter of power, bargaining, and elite cooperation but also of inventing and accepting key ideas that become drivers of change and compromise.

Appendix A: Interviews

Employers E1

AWVN (general employers, affiliate VNO-NCW): Mr. Geert de Bruin, senior policy advisor, 24-6-2005

E2

AWVN (Idem.): Mr. Ronald de Leij, chief policy advisor and negotiator, 24-6-2005

E3

VNO-NCW (main peak association): Mrs. Guusje Dolsma, chief policy advisor and negotiator, 29-7-2005

E4

MKB (peak association for SME’s): Mr. Alfred van Delft, chair and negotiator, 1-8-2005

E5

FME (metalengineering employers, aff. VNO-NCW): Mr Arie Kraaijeveld, chair and negotiator, 22-9-2005

E6

Metaalunie (SME’s in metalengineering): Mr. Alphons Vaas, 2-12-2005

E7

FWM (SME’s in metalengineering, affiliated with FME): Mr. Van Luunen, 2-12-2005

E8

VNG (association local government employers): Mrs. Ina Sjerps, chief negotiator, 15-12-2006

(Continued )

229

Social Pacts in Europe

Employers Trade unions U1

FNV: Mr. Chris Driessen, chief policy advisor, 8-7-2005

U2

FNV: Lodewijk de Waal, chair and negotiator, 21-12-2005

U3

FNV-Allies: Hans van de Wind, chief negotiator, 11-7-2005

U4

FNV AbvaKabo: Ronald Paping, executive officer and treasurer, 3-8-2005

U5

CNV: Rienk van Splunder, chief negotiator, 20-7-2005

U6

CNV: Doekle Terpstra, chair and negotiator, 15-12-2005

U7

CNV Public Sector: Paul Koeslag, Ron Reijsbergen, chair and policy advisor, 13-12-2005

U8

MHP: Wolter Muller, Frits van Schaik, chair and negotiator, 14-7-2005

Government G1

Dept of Social Affairs and Employment: Ruud Korporaal, policy advisor Minister, 8-9-2005

G2

Dept of Social Affairs and Employment: Jan Veringa, DirectorLabour Relations, 16-3-2006

G3

Dept of General Affairs: Jan Peter van den Toren, policy advisor Prime Minister, 3-8-2005

G4

Dept of Finance: Laura van Geest, Mr. Flohil, negotiator and policy advisor, 6-12-2005

Joint Committees J1

SER (Social-Economic Council): Mr. A. Devreeze, Director advice social affairs, 27-11-2008

J2

StAr (Labour Foundation): Mrs. J. Mooren, Secretary General, 5-12-2008

Appendix B: Sources 1979 and 1982: The story of the negotiations is told in: Arnoldus (2007), Bottenberg (1995), van den Braak (1992), and Visser and Hemerijck (1997). Bottenberg includes interviews with key negotiator: Albeda (minister 1979), Lubbers (prime minister 1982), Kok and Drabbe (chair and chief negotiator FNV), Van Veen and Dortland (chair and chief negotiator VNO); Van de Braak joined VNO in 1979 and participated in the negotiations. (He later became the VNO’s director for social affairs and chief negotiator). We also rely on (auto) biographical accounts and published interviews on Albeda (1987, 2004); De Koning (minister in 1982): Broertjes (1989), Kroeger and Stam (1998); Kok: Steenhuis (1995), Nijpels and Tamboer (1985), Klein and Kooistra (1998), De Rooy and te Velde (2005), Van Veen (1987). We further rely on the richly documented histories, and analysis of internal politics, for the FNV: Akkermans, (1999); CNV: Hazenbosch, 2009; and VNO: Bruggeman and Camijn (1999), Nobelen (1987). The government’s position and predicament is documented in Wellink, (1987) (at that time chief treasurer at Finance, Wellink later became director and is since 1999 president of the Dutch Central Bank).

230

The Netherlands: Social Pacts in a Concertation Economy For the 1993 and 1996 pact negotiations and the history leading up to these pacts, we have largely relied on the interviews in Appendix A. In addition, the senior author has benefitted from many personal conversations with Mr. Hans Borstlap, policy adviser for PM Lubbers until 1994 and director for Labour Relations at SZW (1994–2002); Mr G.H. de Vries, senior policy advisor at SZW for wage negotiations; the late Johan Stekelenburg (FNV, chair 1986–97); the late Henk Krul, from 1988–97 wage coordinator for the FNV’s Industry Union and first chair of FNV Allies (1998–2001); and wage coordinator Waleson of FNV-Allies (1998–2003). On Stekelenburg also: Catz and Linder (1997), and on the negotiations from the employers’ perspective: van de Braak (2005, 2006: 154 ff.). For the 2004 pact, we have mostly relied on interviews with the main contenders, on the detailed reconstructions in the press (NRC, 6-11-2004; Volkskrant, 11-11-2004; Trouw, 13-11-2004), the dairy published by Van den Braak (2006) and Hazenbosch (2009) for the CNV. For the Finance Ministry, which held a key position in the 2004 negotiations: the autobiography of Zalm (2009), who was Finance Minister from 1994–2002 to 2003–7.

231

10 Slovenia: Social Pacts and Political Exchange Miroslav Stanojevic´ and Alenka Krasˇovec

10.1. Introduction Slovenia is the only post-communist society where social pacts have been concluded systematically since the mid-1990s and have also been relatively influential and efficient mechanisms in the formation (and legitimization) of public policies. These pacts have been a key component of Slovenia’s specific, very gradual (Mrak et al., 2004; Sˇusˇtersˇicˇ, 2004), and strongly socially oriented transformation to a market economy. As in other Central European post-communist countries, this transformation also overlapped with the Europeanization process. The country’s entire shift to a market economy was carried out smoothly, without any major disturbances. In 2007, three years after it had joined the EU, Slovenia entered the eurozone. It was the first country to do so among the states of the 2004 wave of EU enlargement. This relatively short, twenty-year-long transformation of Slovenian society can be broken down into four periods: (a) the state establishment period (1988–92), involving a divorce from the Yugoslav federation and the formation of an independent nation state; (b) a period of relative stabilization and the beginning of economic growth (1992–6); (c) accommodation to the EU and then EMU regime (1996–2007); and (d) the period after inclusion in the eurozone (2007–). In Slovenia, social pacts began to emerge during the period of relative stabilization and growth. Since then, there has been an almost continuous chain of annual and two- or three-year pacts, that is, tripartite agreements on incomes policies. These were extended to broader social pacts. There was an absence of pacts in Slovenia only at the very beginning of the transformation, during the relatively short and extremely turbulent state establishment period (1988–92) when Slovenia separated from the Yugoslav federation.

232

Slovenia: Social Pacts and Political Exchange In the following analysis, we aim to explain this extremely atypical continuity of social pacts in a post-communist country. Our thesis is that the Slovenian case reveals that the specific structures and constellations formed during the state establishment period – when pacts did not occur – strongly influenced the formation of social pacts that followed. Slovenia had industrialized rapidly in the former socialist Yugoslav federation, due to its initial developmental head start and favourable geographical location. The country inherited a relatively concentrated and strongly exportoriented economy from the period of Yugoslav socialism which contained the federation’s most advanced, capital-intensive companies in the engineering and chemical sectors with strong connections to Western markets. Slovenia also had a large sector of traditional labour-intensive, Fordist companies primarily oriented to the protected and less-demanding domestic Yugoslav market. During the great transformation of the system, i.e. the establishment period, this industrial structure was radically reorganized. The export sector, being vitally important for the new nation’s survival, became even more important and influential than before. On the other hand, the large labourintensive and strongly protected sector, which lost its former domestic Yugoslav market within a few years, started to contract and sought to reorient itself towards Western markets. This radical change was followed by mass redundancies which created increasing social uncertainty and an escalation of workers’ discontent (Lukan, 1992; Stanojevic and Vrhovec, 2001). Against this background, a strong trade union movement emerged in Slovenia in the early 1990s. During the early phase of the establishment period, a proportional electoral system was adopted in Slovenia. The electoral body split into two almost equal camps of ‘new’ centre-right and the ‘old’ centre-left parties, leading to the formation of the first, highly unstable government which already began to disintegrate by late 1991. Thus early on, Slovenia was marked by the growing importance of its most advanced, Western-market-oriented companies, a strong trade union movement and the formation of the first unstable coalition government. We argue that in these circumstances, systematic social pact-making was the only mode of coordination able to ensure a relatively efficient regulation and resolution of the key economic, social, and political problems Slovenia faced during its ‘Europeanization’ process. The following analysis has five parts. First, we focus on the interest constellations formed during the state establishment period. Next, we analyse the first three annual pacts and reconstruct their negotiating processes. In Part III, we provide an overview of the pacts and political exchanges of the country’s EU accession and post-accession periods. In Part IV, we identify the mechanisms of institutionalization and (de)institutionalization of pacts during those two periods. Part V concludes with a summary of the key factors that explain the particularities of Slovenian social pacting.

233

Social Pacts in Europe

10.2. The Emergence of Social Pacts 10.2.1. The State Establishment Period, 1988–92 During the state establishment period, Slovenia experienced a deep depression caused by the disintegration of the Yugoslav federation and a corresponding dramatic contraction and then disappearance of the domestic Yugoslav market. For several years (1990–2), GDP growth rates were consistently negative. At the end of that period, when the depression had bottomed out, the annual inflation rate was approximately 200 per cent. The unemployment rate, measured by ILO standards, was close to 10 per cent. Despite these major problems, the depression in Slovenia was relatively moderate. Compared to other contemporary post-communist societies, Slovenia did not experience massive budget deficit and debt problems. Change to the political scene, involving the formation of a multiparty system, overlapped with the disintegration of the former federation and creation of the Slovenian nation state (Fink-Hafner, 2006). Despite the deep cleavage between the ‘old’ and ‘new’ parties, all key political actors united behind the priority of forming the new nation state. In that early period, national independence, which was based on a form of basic social contract, was established as a reference point for all later attempts to create a national consensus on the country’s main social and economic problems and major developmental issues. A centre-right coalition called Demos – composed of new, anti-communist parties embracing a mix of conservative, nationalist, centre-liberal, and socialdemocratic ideologies – won the first parliamentary elections in 1990, in spite of the relative majority achieved by the former (strongly reform-oriented) communists. Although Demos disintegrated in late 1991 in line with the achievement of its principal goal – national independence – the Demos government operated until May 1992 and tried to adopt and implement measures it considered an appropriate response to the dramatic escalation of the crisis. It was then substituted by a caretaker government until the elections of late 1992, when centre-left parties from the ‘old’ camp won. In that period, trade union divisions mirrored the political cleavages. They were sharply divided into different, mutually opposing ideological and political camps. The ‘old-reformed’ union (Zveza svobodnih sindikatov Slovenije – ZSSS), which had the main infrastructural and organizational resources at its disposal (Vehovar, 1994), was pushed into opposition during the time of Demos’ prevalence, while the new ‘anti-communist’ Konfederacija neodvisnih sindikatov Slovenije (KNSS), which was closely connected to the newly established and anticommunist Socialdemokratska stranka Slovenije (SDSS), began to thrive (Krasˇovec, 1996). But despite these divisions, the power of the unions grew considerably,

234

Slovenia: Social Pacts and Political Exchange fuelled by growing workers’ discontent concerning the disintegrating sheltered sector, and further multiplied and radicalized by inter-union rivalry. In spring 1992, just before the formation of the caretaker government, the Demos government which was about to leave office announced a general wage freeze. The ‘old-reformed’ union ZSSS immediately provided a radical response – a mass general warning strike that paralysed the entire country for a few hours, forcing the government to withdraw the austerity measures. This episode of powerful union opposition clearly demonstrated that a unilateral government policy of wage restraint was unachievable in Slovenia. The warning general strike also had some immediate effects. It accelerated the decline of the Demos coalition, significantly influencing the balance of power within society and imparting a corresponding change to the political scene. Employers – previous company directors who had been socialized within Yugoslav market socialism – were engaged in a major strategic reorientation towards Western markets. Top-performing, capital-intensive companies tried to preserve and improve their current positions in those markets, while directors of labour-intensive companies mostly acted as ‘crisis managers’, trying to find their own place in these new and highly competitive markets. The business strategies of these two groups of managers were qualitatively different, yet according to the law, both were obliged to be members of the same employers’ federation – Gospodarska Zbornica Slovenije (GZS), an institution with a long tradition under the former regime (Luksˇicˇ, 1996). The restructuring of the economy and corresponding reorganization of the large domestic, protected sector (Traxler, 2008), the growth of trade unions, and disintegration of the Demos coalition set the context for the adoption of the Law on Privatisation in 1992. The highly polarized debate on privatization corresponded to the deep cleavage between the ‘old’ and ‘new’ party clusters. The ‘new’ political camp supported the ‘shock therapy’ approach promoting a privatization process which they understood as a sort of radical, revolutionary, historical break with the past led by the state. The ‘old-reformed’ political camp emphasized gradual reforms, which basically leaned on those actors and resources already in place under the former regime of ‘market socialism’. The conflict between these two approaches was resolved by a compromise that strongly supported the role of the state as well as the role of the main insiders – managers and workers/employees. According to the Law, the state would acquire critical ownership shares of the most important, large, capital-intensive, export-oriented companies. Workers received shares in all companies, but most significantly in those from the labour-intensive sector where the situation was generally critical. Managers were promoted as co-owners in both groups of companies. The Law on Privatisation strongly protected internal elites and simultaneously hindered FDI inflows into Slovenia. In addition to this long-term side effect, thanks to its employee ownership orientation, the Law almost immediately

235

Social Pacts in Europe produced a decrease in tensions and conflicts within the most critical, labourintensive sectors and companies, inducing workers and trade unions to integrate into the emerging system. After the Law was adopted, the wave of strikes which had peaked in 1992, when the depression was in its most critical phase, began to subside, declining significantly already in 1993 (Stanojevic, 2003). This side effect of the privatization compromise suggests that the Law on Privatisation had the characteristics of a large-scale political exchange – the first and a most important one in the new, independent Slovenia. This exchange defined and consolidated the major inter-class compromise which then ‘crystallized’ and shaped the later development and transformation of the Slovenian political economy. After that initial major political exchange, the ‘old-reformed’ centre-left parties won the elections of late 1992 and formed a broad coalition that also included two major ‘new’ conservative parties. The leading party was the ‘old’ centre-left Liberalna demokracija Slovenije (LDS) which emerged from the former youth organization that had provided an institutional opposition to the League of Communists in the former regime. Immediately after the elections, this broad coalition faced strong internal tensions and crises. From then on, this first centreleft government was marked by highly divisive internal disputes. Slovenia began to emerge from its economic crisis at the end of the state establishment period, although high inflation was still a serious problem, especially for macroeconomic regulation and for the export sector and the trade unions’ principal worker constituency. Given the trade unions’ rapidly growing power and their vehement reaction to the proposed wage freeze, it was obvious that the inflation problem could not be resolved without their cooperation. Thus, at the end of this period, two key conditions for the formation of social pacts were already in place in Slovenia: the serious problem of high inflation and the presence of a moderately strong union movement. The broad coalition government constituted after the second general election of late 1992 was even more fragile than the Demos coalition that preceded it, providing the third condition for the pact-making process: its instability forced it to cooperate with unions. Slovenia’s most important comparative particularity is the prevalence of centre-left coalition governments over more than a decade (1992–2004). Three centre-left coalition governments coordinated the entire Europeanization process, and presided over the adjustment of Slovenia to the EU and EMU (Fink-Hafner and Krasˇovec, 2006). In 2004, when Slovenia joined the EU, the electorate moved to the right, but at the last elections in 2008 it returned once again to the left.

10.2.2. The First Series of Social Pacts after the mid-1990s The first signs of economic recovery began to appear in 1993 during the first year of the new centre-left government’s mandate. Inflation was still a serious

236

Slovenia: Social Pacts and Political Exchange problem at 32 per cent. The unemployment rate, which all actors considered an equally serious social and political problem, never actually exceeded 10 per cent, and began to decline after 1994. The electoral success of the centre-left parties (and their supremacy within the new governmental coalition) hastened changes among the trade unions. The ‘old-reformed’ union (ZSSS), which had already revealed an exceptional capacity for mobilization, strengthened its leading position to become the most important trade union organization in Slovenia, while the anti-communist KNSS, which was closely connected to one of the parties of the ‘new’ camp, went into decline. Coinciding with the beginning of economic growth, this shift produced a noticeable diminution of political cleavages and tensions within the union movement. The trade unions had already been included in the wider debates on social problems under the 1992 caretaker government and agreed that the high inflation problem could be resolved by a restrictive incomes policy. They accepted the argument that this policy could have positive (mid- and long-term) economic and developmental effects (in terms of the national economy’s competitiveness as well as controlling and lowering the unemployment rate). But this general acceptance was not a sufficient condition for the policy’s implementation. In order to assure full support for wage restraint policies, the unions needed some persuasive and adequate form of compensation. In the first tripartite pact – an annual agreement on incomes policy from 1994 – the unions (and employers) were awarded an Economic and Social Council (Ekonomsko-socialni svet, or ESS) and direct access to the policy-making process in exchange for their support. After this first pact, there followed two new and slightly widened annual pacts prior to the elections of 1996. The ‘hard core’, common denominator of all these pacts was incomes policy – the support of all partners for systematic wage restraint. At the time, it seemed as if union cooperation had been based on a significant degree of naive trust given their acceptance of a restrictive incomes policy in exchange for a government promise to include them in decision-making on future reforms, in particular pension and labour law reform. 10 . 2. 2. 1 . THE NEGOTIATION PROCESS AND ACTOR PREFERENCES: EVALUATING THE BARGAINING MODEL

The 1994 Social Pact on Incomes Policy Discussions concerning the government’s proposal for a wider social pact began under the caretaker government and continued throughout 1993 (the first year of the broad coalition). At the end of 1993, the negotiators found that they were unable to conclude the pact. The key actors in this unsuccessful negotiation were the government, which was relatively strong immediately after the elections, and the trade unions, whose negotiating position began to improve

237

Social Pacts in Europe because of the stabilized economic situation and changed political context. Therefore, it was a situation in which both actors were strong, and perceived their respective power to be increasing – a scenario for which the bargaining model in Chapter 3 indeed predicts a high risk of failure of pact negotiations. Parallel to this failure, early tensions between the coalition parties had occurred in 1993, when the ‘economic wing’ of the government sharply criticized the policies of the Ministry of Labour (led by former communist party Zdruzˇena lista socialnih demokratov, ZLSD) that enabled quite radical pay improvements in the public sector. Almost immediately, at the beginning of 1994, the first major governmental crisis occurred when the SDSS, one of the two coalition parties of the new (conservative) cluster, left the coalition.1 After the withdrawal of the SDSS from the coalition, the negotiating position of the new Independent (KNSS) union further worsened, while the position of the ‘old-reformed’ union improved. It enjoyed strong membership support, which grew significantly after the general strike of 1992, and all other actors perceived it as a key partner on the trade union side. The power of trade unions was, generally speaking, growing. The negotiating positions of the government and trade unions therefore significantly changed at the beginning of 1994. Because of the first major governmental crisis, the government needed support; the high inflation and rapid pay increase in 1993 presented real problems that had to be solved. According to previous experience (the failed unilateral wage freeze), the inclusion of the unions was therefore simply unavoidable if the government was to improve its seriously damaged public image and opinion poll rating. In these circumstances, a minimalist, narrow version of the social pact which would be focused exclusively on incomes policy became the government’s priority. In April 1994, the social partners (four major confederations on the trade unions’ side, the Prime Minister on behalf of the government, and three major employers’ organizations) signed the social pact on incomes policy – the Agreement on Incomes Policy in the Private Sector for 1994, Dogovor o politiki placˇ v gospodarstvu za leto 1994 (Official Gazette of the Republic of Slovenia, no. 23, pp. 1436–7). Simultaneously, the trade unions and employers concluded the tariff supplement to the general collective agreement for the private sector for 1994 (Ibid., pp. 1437–9). The 1994 pact was based on a brief document, containing only eleven paragraphs. Most of them deal with incomes policy measures limiting pay increases. Paragraph 9 of the agreement determines the

1 At the beginning of 1994, the president of the state clashed with the defence minister, then leader of the SDSS, who had started to become the informal leader of the centre-right political camp. The conflict escalated into a clash between the military intelligence service and the civil intelligence service, together with some police units (Prunk, 1998). The Prime Minister proposed the defence minister’s dismissal to the parliament. When parliament voted for the dismissal, the SDSS left the coalition.

238

Slovenia: Social Pacts and Political Exchange establishment of the tripartite ESS. The Council was to have fifteen members (five representing each partner) and would be concerned with social and economic issues and policies. This outcome confirms the expectations of the book’s analytical framework presented in Chapter 3. The government was willing to cede to the unions’ demands about the establishment of a corporatist infrastructure for policy making only when it became clear that its position (because of the internal struggles and policy disagreements within the coalition) had eroded significantly. In the meantime, the unions – who had managed to bolster their position and secure a considerable public support for their actions – took a tough stance during the first round of pact negotiations. With the government offering no tangible concessions during the 1993 negotiations, the relatively strong unions had no reason to accept wage ceilings without anything in return. Refusing the proposed pact in 1993 proved to be the right strategy for the unions, since in the subsequent negotiations the government presented a much more appealing offer that was broadly in line with the demands put forward by the unions.

The 1995 Social Pact By 1994, it was clear that the depression had ended. All macroeconomic indicators had significantly improved: GDP was growing at 5 per cent, the rate of inflation had been reduced, even if at 20 per cent it was still high, and the relatively high unemployment rate of 9 per cent (by ILO standards) had ceased climbing (Slovenian Economic Mirror 1/2002). Relations between the two ‘old cluster’ parties – the LDS and the ZSLD – significantly changed in 1994. When the pact on incomes policy was concluded, the Minister of Labour from the ZLSD, who had held office from the beginning of the system’s change, was replaced by a new minister from the same party. The main cause of this substitution was her support for a salary increase in the public sector. After this change, the position of the Ministry of Labour within the government became weaker. The power of the government’s ‘economic’ wing, which was dominated by the LDS, was growing. At the time, the government still had a safe majority in parliament. In addition, taking the positive economic results and these changes in internal power relations into account, the government in general, and especially its leading party the LDS, most likely perceived its own position as stable and favourable vis-a`-vis the social partners. But in the autumn of 1994, the coalition faced a new major crisis. This time a conflict occurred between the leading ‘old’ party and the new conservative SKD, which controlled the Ministry of Foreign Affairs. The Minister, who was also the leader of the SKD, signed a kind of preliminary contract concerning future relations between Italy and Slovenia, making some concessions in exchange for support in the accession process (Prunk, 1998). The result was the resignation of the Minister, yet the SKD did not leave the coalition.

239

Social Pacts in Europe The trade unions, meanwhile, were experiencing their own problems. According to public opinion polls (PORC, 1989–2005), trade unions lost some 10 per cent of their total membership in 1994 and 1995, a heavy loss, comparable only to that experienced during the early phase of the transition in 1990 and 1991. Despite their ability to secure the establishment of a corporatist-type institutional framework for policy making, the density rate fell from 58.6 per cent in 1994 to 48.8 per cent in 1995, a decline that clearly overlapped with the beginning of economic growth. All unions experienced this decline and were fully aware of it, but it appears to have been caused by de-unionization among those categories of employees who did not identify strongly with the unions. The unions’ core workers, on the other hand, did not abandon them (Stanojevic, 2005). In the context of economic growth and the gradual easing of tensions between the main opponent organizations (ZSSS and KNSS), one can say that the negative impact of the membership decline on the trade unions’ negotiating power was not as important as it might appear. Nevertheless, their negotiating power was weakened by the marginalization of the ‘social faction’ (i.e. the Ministry of Labour) within the government. Against this background, it was not the employers who posed a threat to the new social partnership but the government. The employers’ position remained basically unchanged. The most active among them was the new voluntary employers’ association Zdruzˇenje delodajalcev Slovenije (ZDS) which was connected to the retail sector, but was strongly financially dependent on the Chamber of Commerce (Gospodarska zbornica, GZ), which was based on obligatory membership. But within the government, the growing influence of its economistic faction caused problems and obstructed the work of the new ESS. Immediately after its formation the ESS was hit by a serious crisis. Trade unions and employers were fully engaged in the ESS’s work, but government representatives began to avoid it. Although leading officials from the trade unions and employers’ organizations regularly participated in ESS sessions, the government side was frequently underrepresented; indeed, the government’s top officials normally did not attend sessions in the early period of the ESS’s existence. The former president of the ZDS employers’ association described this crisis: ‘They [the government] accepted us as unavoidable intruders. I can’t prove that now, but that was a very obvious fact at the sessions then’ (Gosar, 2005). In these circumstances, the ZDS initiated a round table on the ESS and the role of social partnership in Slovenia in November 1994. Representatives of employers’ organizations, trade unions, experts, academics, and journalists discussed the issue and almost unanimously supported the development of social partnership (Luksˇicˇ, 1996: 198). At the end of 1994, the government prepared a proposal making some changes to the law on employees’ participation and sent this document to parliament (Luksˇicˇ, 1996: 197–8). But parliament rejected the proposed changes to the law, demanding that this and all

240

Slovenia: Social Pacts and Political Exchange similar proposals must first be discussed by the ESS2 (Kavcˇicˇ, 2004: 27). The government therefore found itself in uncomfortable isolation. The result was a letter from the Prime Minister in late December to the social partners in which he apologized for the procedural mistakes and offered his clear support to a role for the ESS in policy formulation (Luksˇicˇ, 1996: 198). After the intervention of parliament in late 1994, which was combined with wide public support for the ESS, relative negotiating positions among the partners began to change. Unions now perceived their position to be strong and increasing, and the government found that it could not bypass the unions and the ESS in policy making without the risk of losing public support. In this new context, in December 1994, the ESS discussed the initial version of the new social pact. This document basically built on the social pact proposal discussed at the end of 1993, but which had been ‘postponed’ and substituted by the less exhaustive pact on incomes policy. The real negotiations began in February 1995 when the government offered a pure ‘economistic’ proposal focusing on some elements of incomes and economic policies demanding support from the trade unions and employers (Luksˇicˇ, 1996:199). In response, the employers formulated a series of proposals which focused on the ESS’s functions and the stabilization of its work (a more precise definition of the issues and obligations of the partners in the negotiation process). The unions called for proposals which directly referred to the protection of employees’ interests, such as the introduction of a minimum wage, better legal security, payment of a lunch allowance, holiday, and travel costs (Luksˇicˇ, 1996: 199; Kavcˇicˇ, 2004: 29). In March 1995, a year after the conclusion of the first pact, the partners signed the 1995 Social Pact (Official Gazette of the Republic of Slovenia, no. 22, pp. 1692–5). Two weeks later, they adopted the Agreement on Incomes Policy for the period from 1 April 1995 to 31 March 1996 and the Tariff Annex to the General Collective Agreement for the same period. Compared to the 1994 Pact, the 1995 Social Pact was a relatively extensive document consisting of eight chapters. In the chapter dealing with economic and social policies, the central issue was incomes policy measures. The pact defined collective bargaining as ‘the basic instrument for pay determination’; it introduced uniform sliding-scale mechanisms for all payments (including those defined by the law) and declared that the partners would strive for smaller differences between the payments (pp. 1693). The pact defined minimum wages at the level of 40 per cent of average gross pay in 1995. It also proclaimed that minimum wages would be regulated by law; before the adoption of the law, the issue would be regulated by an agreement on incomes policy.

2 A discussion on the ESS followed where employers argued for changes to the law. The proposed changes were not accepted. Instead, the ESS ordered an expert analysis of the law’s implementation and its impacts on the micro-level.

241

Social Pacts in Europe As expected by the bargaining model, this agreement was reached because the power constellation between the two key actors – the government and the unions – was favourable to a concerted deal. The previous attempts of the government’s neo-liberal camp to bypass the ESS had backfired, as evident in the opinion polls and increasing public support for the unions. Consequently, Prime Minister’s official apology to the unions and the relaunch of concertation signalled that the government was willing to offer certain policy concessions to secure union support for further reforms. Given this situation, the unions knew that their bargaining position was solid, and insisted on several concessions for their support for wage moderation, which the government agreed to grant in the end. Thus, the outcome of these negotiations generally confirms the expectations of the model: to secure wage moderation, the government had to cede to a number of union demands, including a request for an elaborate indexation mechanism, adequate minimum wages, and other compensation measures involving social policy benefits that were to ensure adequate social protection and prevent a large increase in inequality.

The 1996 Social Pact In 1995, relatively favourable conditions and (macroeconomic) trends continued to prevail. The growth rate was still relatively high. For the first time since the system’s change, the rate of inflation fell slightly below 10 per cent. The unemployment rate also began to drop. Towards the end of 1995, the broad coalition (which had already lost one coalition partner) faced a third major crisis. Due to dissent concerning state (financial) support for the largescale industrial restructuring taking place in north-east Slovenia, in January 1996, the ZLSD (reformed communists) left the coalition.3 After this withdrawal, the government’s negotiating position significantly worsened just a year before the new elections. The relative negotiating power of the government was rapidly declining. By contrast, the trade unions were gaining power. The sharp decline in union membership had stopped and would stabilize at around 40 per cent over the next decade. After the agreement on the role of the ESS, and in the context of approaching elections and the governmental crisis, the unions’ relative bargaining power was improving significantly. The same

3 In mid-1995, the government adopted a law which supported the subsidy for the region, but at the beginning of the 1996, it changed its policy towards this region significantly. This change, together with measures directed at pensions (the pensioners’ party participated in the elections of 1992, together with former communists), caused the withdrawal of the ZLSD from the coalition. After this change, the ministry of labour, which had been continuously controlled by the ZLSD from the beginning of the transition, was coordinated by the LDS. The coalition was henceforth reduced to two parties (the LDS and the SKD), with a minority (46.5 per cent) of votes in parliament. Interactions among different parties of the ‘grand coalition’ of 1992–6 were frequently difficult. Members of parliament belonging to parties of the governmental coalitions quite frequently opposed the government’s proposals.

242

Slovenia: Social Pacts and Political Exchange developments improved the negotiating position of the employers. In October 1995, FIDES, the union of medical doctors, organized a strike committee demanding a salary increase. In spring (March–April 1996), it organized a threeweek strike which blocked the whole health system. The FIDES achieved vital improvements for doctors and caused a major unintended side effect – a series of new protests by other groups of employees in the public sector. It was pre-election time when the government together with employers prepared an analysis of the 1995 pact’s implementation, suggesting that pay growth had surpassed the agreed level in 1995. In line with this finding, they demanded that any new agreements, if they materialize, would need to be focused more than earlier pacts on wage control mechanisms (Kavcˇicˇ, 2004: 31). During the new pact’s negotiations (at the beginning of May 1996), the biggest trade union confederation (ZSSS) announced that it was preparing for a general warning strike. The planned action was explained by the unions as an answer to the government’s and employers’ reluctance to enter ‘proper negotiations’ of a new social pact, and their overall ‘take-it-or-leave-it’ negotiating stance. The unions argued for the implementation of a minimum wage and a stricter consideration and implementation of negotiated collective agreements, the adjustment of pay to increases in the cost of living, and a separate account of workers’ and managers’ payments (Kavcˇicˇ, 2004: 31). Facing the threat of a general strike, the government proposed a new pact where it announced the further lowering of contributions for the social insurance system (to 38 per cent of gross wages/salaries) to be compensated for by the introduction of a progressive tax on a ‘payment list’ (Kavcˇicˇ, 2004: 32). This proposal led to an increase in employees’ net incomes. After this accommodation of union demands (and given the interest of employers in lowering labour costs), the planned strike was abandoned. The negotiating power of the government was thus evidently decreasing, while that of the trade unions was growing. And due to the proximity of parliamentary elections, the government was inclined to conclude the social pact as quickly as possible at the end of May 1996 – coinciding with the formal beginning of Slovenia’s EU accession. The new pact was much broader than its predecessor (Official Gazette of the Republic of Slovenia, no. 29, pp. 2439–43). It basically repeated and extended numerous articles from the former pact defining (again) most precisely and extensively the incomes policies measures. The social partners agreed that real wage growth would be 2 per cent lower than GDP growth. They also determined a new gross level of the minimum wage. The most visible change in the content of the new pact was the strong accent on accommodating EU standards, and it was supplemented by a relatively extensive document concerning employment policy, which included a range of active employment measures and a relatively solid employment protection demanded by the unions (Separat o zaposlovanju). The role of the ESS was also more precisely defined. The social

243

Social Pacts in Europe partners placed still greater emphasis on its importance, and agreed that it should be institutionalized in a separate law. But a few months before the elections, a vigorous conflict between the employers and unions broke out. It was provoked by the employers’ announcement on the general collective agreement in September 1996 in which they proposed a new, but more disadvantageous and unacceptable agreement for the unions. The unions started to organize public protests which culminated in a general warning strike in the second half of October 1996. As an employers’ representative has stated, ‘This was more like a provocation, we wanted to provoke unions . . . But we really didn’t expect that trade unions would react so vehemently. When we gave the notice we formulated our demands on abandoning mostly different bonuses that workers had. These bonuses were not directly connected to the work process and all together presented quite important expenses for employers. Well, the reaction was unexpectedly vehement. In short, unions were sensitive to every detail, be it additional payment for holidays or other bonuses of that kind, and it was impossible to make any change in it. This is the basic union stance, and they strongly stick to it’ (Gosar, 2005). In this conflict, the government supported the trade unions, and in the end, the changes sought by the employers’ organizations were not implemented (Gosar, 2005). The cancelled agreement was restored, and the partners agreed to enter a new bargaining round concerning the new collective agreement as well as a new social pact after the elections. Once again, the bargaining model developed in Chapter 3 seems to offer useful insights for our understanding of the course and outcome of these negotiations. Facing simultaneously imminent elections and a threat of a general strike by the unions who evidently had a strong mobilizational capacity, the government knew that a continuation of its ‘take-it-or-leave-it’ strategy in the negotiations would probably lead to heavy electoral losses. Thus, despite the employers’ support for its intended policies and the report indicating that the pay growth agreed in the previous pact had been surpassed, the government found it hard to ignore union demands because of the potential political costs.

10.3. Social Pacts and Political Exchange: Accommodation to the EU and EMU and the ‘Post-Euro’ Phase 10.3.1. The EU and EMU: Pacts on Incomes Policies, Pension Reform, and the Social Pact of 2003–5 In 1996, when Slovenia signed the European Association Agreement, inflation had been reduced to slightly below 10 per cent but was still a serious problem. But Slovenia still did not have any major difficulties concerning the budget

244

Slovenia: Social Pacts and Political Exchange deficit and debt. The privatization process as defined in the 1992 law was in its concluding phase. The state kept decisive ownership shares in the most important large export-oriented companies; and in all companies, managers as well as employees were ‘promoted’ to co-owners. In many of the most problematic labour-intensive companies, a large part and often the majority portion of shares was awarded to the workers. The result of the whole process was some sort of state-managerial capitalism, combined with high and then gradually declining workers’ participation in ownership. After the elections of 1996, the balance of political power changed again. Altogether, the ‘new’ centre-right parties slightly prevailed over the ‘old’ centreleft parties, but the relative winner was the ‘old’, centre-left LDS. This party was the only one from the former broad coalition which was systematically and most directly involved in the pact-making processes during 1992–6. In the pacts from that period, it promised the trade unions that they would gain access to the political process and in the last, pre-electoral pact of 1996, it also explicitly stated that the unions would be included in the policy-making processes concerning forthcoming reforms. The LDS was also the only party which legitimized itself, among other processes, through systematic pact-making, that is, interaction with the social partners, as a sufficiently competent coordinator of the coming EU and EMU accession processes. After the elections, this ‘old’, centre-left party formed a governmental coalition with a major ‘new’, conservative people’s party (Slovenska ljudska stranka – SLS) and the small pensioners’ party. The government had a small majority of seats in parliament from the beginning of its mandate; compared to the previous government, this one was significantly more centre-oriented. The ZLSD (former communists), as well as the second largest centre-right party, stayed in opposition. At the beginning of its mandate, the new centre-left government adopted a law on incomes policy – a unilateral measure – for a two-year period.4 Without the formal support of the unions, the key parameters of future incomes policies were redefined, laying the foundations for policies which enabled, on condition of strict implementation, an even more efficient curbing of inflation and congruent improvement of the economy’s competitiveness than in the previous period. In the second part of its mandate, the government then invited unions to support the new, improved system of wage restraint and simultaneously offered to include them in the debate on its first proposal for pension reform. The proposal was based on World Bank doctrine and envisaged the radical privatization of pension funds. The trade unions agreed to sign the pact on

4 It was the enactment of a chapter on incomes policy which was part of the then intended wider social pact. The chapter was confirmed by all social partners and the wider social pact was almost concluded, but at the last moment, employers – disagreeing with the draft budget – walked away from the pact. After that, the trade unions did not want to sign the already accepted chapter, that is, the agreement on incomes policy, and the government enacted it.

245

Social Pacts in Europe incomes policy, effectively supporting the earlier unilaterally installed system of wage restraint, and focused instead on advocating a soft version of the pension system reform in opposition to the prescriptions of the World Bank (Stanovnik, 2002). As the unions’ counterproposal regarding pensions was supported by mass rallies, the government had in its ‘pocket’ trade union support for wage restraint, but trade union street opposition to pension reform. Rejection of the soft version of the pension reform would have had an extremely negative impact on the leading government party – the LDS – at the upcoming parliamentary elections. Due to the constructive union stance concerning wage policy and because of the proximity of elections, the government (LDS) accepted the moderate pension reform. In line with the bargaining model, this agreement was reached because the government could not afford to push simultaneously its unilaterally defined wage ceilings and the World Bank blueprint for the pension reform. The unions’ smart strategy of accepting without arguing the imposed wage controls and to concentrate instead on the contentious pension reform, where they could count on wider public support, weakened the government’s bargaining position and opened the way for the productive negotiations that resulted in a social pact. Following this exchange, the centre-left parties secured office and were subsequently in a solid position to coordinate the final stage of accession to the EU. During the 2000–4 mandate period, the last before the country’s formal inclusion in the EU, Slovenia’s economy performed well. Except for still relatively high inflation, it fulfilled all the other Maastricht criteria. The centre-left government proceeded with the implementation of wage restraint policies, which were routinely adopted in the form of tripartite pacts. In that period, a new labour law, labelled a ‘small workers’ constitution’, was also consensually adopted. The law preserved all major rights of employees and their unions within organizations, but simultaneously enabled more flexibility for employers. In implementing some of the new articles of this law, managers started to increase the numerical flexibility of employment in their companies, especially in 2003 and 2004 when they dismissed a significant number of workers (whom they had identified as being ‘false sick leave users’). After more than ten years of active accommodation to the EU, integration of the Slovenian economy into European markets, and the corresponding gradual and systematic escalation of work intensity and working time flexibility, especially in the export sector of the economy, significant imbalances and disturbances started to occur at the level of everyday life within the core group of the employed population. The incomes policies had also been in place for approximately a decade: incomes were growing incrementally and workloads rapidly, up to the limit of the capabilities of machines and workers (Cranet, 2001, 2004; FEWC, 2007). During the final period of the accession process, the leading LDS party underwent important internal changes. At the end of 2002, its charismatic leader, who had been Prime Minister for ten years, was elected President of the

246

Slovenia: Social Pacts and Political Exchange Republic and, accordingly, resigned from all his other functions. After this change, the government encountered additional internal tensions and struggles which overlapped with the pre-election period. In addition, it was systematically exposed to a series of referendums and formal parliamentary questions triggered by the parliamentary opposition of the time. In these circumstances, in April 2003, the social partners adopted a new social pact, this time for a three-year period. This ‘concluding’ pre-EU social pact covered many new European issues and compared to the earlier pacts, was the most extensive, most complex, and also the most precisely structured. It had three main parts. In the economic part, it strongly emphasized the EU context, suggesting that low inflation was a key condition of the integration process, especially concerning EMU. Slovenia’s inclusion in EMU was explained as a necessary condition for the realization of its basic developmental aim – socially balanced and sustainable development – which was unanimously approved by all the social partners. For the first time, a future tax reform was announced. But similar to earlier pacts, it also defined a general framework for pay determination: the growth of gross wages had to lag behind productivity by 1 per cent per year. The economic orientation of the pact (as with all of its predecessors) was therefore a search for compromise solutions between the two extremes. Incomes policy could not have been too restrictive because that would have caused social dissatisfaction and deflation; but simultaneously some restrictions were unavoidable as they would lower inflation and assure the competitiveness of the Slovenian economy in international markets (Dimovski, 2005; Hribar Milicˇ, 2005; Lombar, 2005). The second part of the pact concerned aims and measures supporting employment growth, social security, pensions, and health insurance, and these were defined in a quite precise and detailed manner. Similar to taxes, the pact defined the starting points of the health insurance system reform. Some completely new issues were also included in the pact, including equal opportunities, family and housing policies. Finally, in Part III, the agreement emphasized the legal security of employment and elaborated more clearly than in previous pacts the relevant provisions affecting employment security. According to the comments collected through interviews conducted in 2005 with representatives of all social partners, in the case of the 2003–5 social pact, the government negotiators were ready to accept its practically unlimited extension in exchange for the one thing they were most interested in: inflation reduction via restraints on wage growth (Lombar, 2005; Mazalin, 2005). Together with the employers, the government was interested in macroeconomic and social stability and was ready ‘to pay a certain price for that’ (Dimovski, 2005). In short, along with the unavoidable chapter on incomes policy, the 2003–5 pact covered all topics which had to appear at the moment Slovenia became a full member of the EU. Given that this was a pre-election period, and that the governing coalition was burdened simultaneously with internal

247

Social Pacts in Europe divisions and the attacks of the political opposition who initiated a series of referendums and formal parliamentary questions, it is not surprising that the government was willing to accommodate most union demands as long as they agreed to support strict wage moderation. In such a political climate, any other strategy would have been counterproductive as the already weakened government was in no position to insist on anything else but responsible wage behaviour. After more than a decade of the political prevalence of the centre-left coalitions that included some of the communist successor parties, the autumn 2004 parliamentary elections brought to power a liberal, centre-right coalition. In terms of social pacting processes, this was a new, almost experimental, situation. Until then, the key basis for social pacts had been union-backed wage moderation as part of anti-inflation policy in exchange for influence concerning labour market and welfare state adjustment, such as reforms to labour law and the pension system. This political exchange was facilitated by the continuity of relatively unstable centre-left coalition governments, which – being weak – were relatively open to the pact-making process and negotiation with the unions.

10.3.2. The ‘Post-Euro’ Phase: The 2007–9 Social Pact After the 2004 elections, inflation remained a problem. During the last phase of Slovenia’s preparation for the eurozone, inflation was temporarily suppressed by the agreed policies, but soon after the country’s adoption of the euro (in 2007), it started to increase again. Alongside the reappearance of that old problem, other aspects of the pact-making processes significantly changed. If the first change was the formation of a new, centre-right coalition government, the second was a sudden, relatively steep decline in the trade unions’ density rate and a major trade union reorganization. Soon after the 2004 elections, probably due to its relatively convincing electoral victory, the new government announced a package of neo-liberal reforms, including further labour market flexibilization. The new agenda almost immediately triggered the deinstitutionalization of existing social pacting practices and procedures. The government’s cooperation with the trade unions evaporated, and the ESS practically ceased operating. The proposed reforms were radical: they threatened the foundations of the welfare state and corresponding levels of wage and employment security. The government’s radicalism pushed all trade unions into opposition and united them behind a programme of social equality and justice. In November 2005, a mass union protest occurred, an outburst of worker anger comparable only to that of the 1992 general strike. After the protest, the government faced for the first time after the elections a significant decline in public support. As a consequence, the planned reforms were slowed down or cancelled.

248

Slovenia: Social Pacts and Political Exchange Parallel to this attempt, the centre-right government proceeded with implementing the formerly already installed incomes policies, successfully concluding the inclusion of the economy in the eurozone. But in the second half of 2007, only half a year after the euro’s adoption, inflation began to rise again, soon reaching 6 per cent – the highest level in the eurozone. In these circumstances, the renewal of the former agreements concerning wage restraint became relevant again. The government, which had already significantly softened its initial neo-liberal programme, was partially reorganized. Faced with upcoming elections, it became strongly interested in the formation of a new pact. But at the same time, the trade unions began to lose members. In only five years, from 2003 to 2008, their membership declined by almost a third. They joined the government’s new pact-forming ‘round’ a year before the elections and agreed to a new, broad three-year social pact, but soon after began openly questioning the effects of the newly signed restrictive incomes policies’ agreements. Two years after the massive November rally of 2005, they organized new protests where they demanded changes to collective agreements. Again, these developments are in line with the predictions of the bargaining model: in a context where the position of both negotiating parties seems to be weakening, an agreement (if reached) may face serious implementation problems. This is precisely what happened in Slovenia when the unions abandoned their commitment to the wage guidelines agreed as part of the 2007–9 social pact. In this climate, the electoral impact of the last broad social pact was insignificant. At the 2008 elections, its main initiators – the centre-right governmental parties – were defeated. The relative winner this time was the Socialni demokrati (SD), the former communists (ZLSD).

10.4. Institutionalization 10.4.1. Mechanisms of Institutionalization In the Slovenian case, social pacts represented an important instrument of the national system’s accommodation to the EU and EMU regimes. At the beginning, critical and then relatively serious problem burdens – high inflation and a relatively high unemployment rate – were gradually reduced by policy mixes systematically supported by means of narrow, instrumental social pacts (Traxler, 2008) – that is, tripartite agreements on restrictive incomes policies. For Slovenia, which never had any serious problems with deficits and debt, the policy of systematic wage restraint could be combined with soft labour market policies and moderate pension reform. During the accession process, room for this type of political exchange between actors existed in Slovenia.

249

Social Pacts in Europe The key factor which enabled and triggered the formation of social pacts was a robust trade union movement that emerged at the beginning of the transition process. As explained above, the workers’ discontent that arose within the then disintegrating sheltered sector of the economy took the form of a powerful wave of strikes in 1992. It culminated in a general warning strike which prevented implementation of the then intended governmental wage freeze. This large-scale union action persuaded the centre-left government, which was elected later in the same year, to adopt the alternative process of consensually agreed policies of wage restraint. When the government adopted this policy, the process of institutionalizing social pacts began. This type of explanation, which clearly fits the power-distributional thesis, works well for the beginning of the institutionalization of social pacts in Slovenia. It offers a similarly persuasive explanation for the re-institutionalization of social pacts during the first years of the post-accession period. According to the functionalist explanation, social pacts become institutionalized when such institutionalization serves system needs. Institutionalization will emerge when ‘a large problem load coincides with the absence of solid micro-foundations for problem resolution’ (Avdagic et al., 2005: 24), or as Hancke´ and Rhodes (2005) put it, the smaller the ‘problem load’, the less likely the emergence of social pacts will be (and vice versa). This type of argumentation has a significant explanatory capacity but also has some problems when applied to the very beginning of the institutionalization process in Slovenia. The linkage between the high ‘problem load’ and pact-making processes generally works well when applied to the Slovenian case. At the start of the process, Slovenia faced high inflation – a large problem load – and it did not then have the micro-foundations to enable an efficient resolution of that problem. The early pact negotiations, primarily focused on the incomes policy issue, led to the construction of its main implementation mechanism – a centrally coordinated collective bargaining system with a relatively well-developed articulation of its different levels. Basically, this system was institutionalized in the mid-1990s, and was then used as an instrument of anti-inflationary incomes policy implementation, which extended to an almost decade-long pact-making process and achieved a very gradual curbing of inflation. The same type of functionalist argument can be equally persuasively applied to the final stage of the EMU accession process. When at the time of adopting the euro the inflation problem was seemingly resolved, a deinstitutionalization of the social pacts began, only to be reversed soon thereafter when the inflation problem began to emerge again. But there is one major problem with this approach. At the time of the disintegration of ‘real socialist’ systems, there were many societies undergoing intensive economic transformation, including Croatia and Serbia, with backgrounds very similar to that of Slovenia, that faced the same problem overload.

250

Slovenia: Social Pacts and Political Exchange Yet, none of them developed comparable social pacting structures. It seems that the essential difference, that is, the key Slovenian peculiarity, was the relatively strong trade union movement and, more specifically, the general strike which was triggered at one of the most critical developmental points in the early state establishment period, rendering impossible unilateral government policies of wage regulation. Hence, an alternative policy-making process had to be constructed. The functionalist notion of ‘system needs’ also prevents a full understanding of the very beginning of the institutionalization process. At the beginning of the transition, there was an inflation problem and the government’s attempt to solve that problem. But strictly speaking, the ‘system’, which was in formation at that time, did not have clearly articulated system-level needs at all. There was the government’s attempt to solve the problem and the unions’ response to that attempt. This conflicting interaction triggered the institutionalization of social pacts and the simultaneous construction of the system’s ‘needs’. Put another way, later on, during the accession process, the pacts served the system needs which the social pacting (actors) had helped to construct. The needs were those which were defined, that is, understood, as the system’s needs by the main actors of the time: as they explicitly expressed in one of the social pacts, low inflation was a key condition for the country’s inclusion in EMU, which was also understood as a necessary condition for the socially balanced and sustainable development of the country. Thus, when applied to the very start of the institutionalization process, the functionalist interpretation appears insufficient and somewhat weaker than the power-distributional approach. In addition to the power-distributional and functional approaches, the normative and utilitarian perspectives also partly explain some aspects of the institutionalization of social pacts in Slovenia. First, it seems that the general acceptance of social pacts during the accession process was a powerful source of their institutionalization in that period. Before the country’s inclusion in the EU and eurozone, the pacts were actually legitimized by their success in controlling inflation and unemployment. They were part of the ‘success story’, that is, the successful transformation and efficient inclusion of Slovenia in the EU system. Second, the process of creating the pacts led to the formation of dense social-partnership networks which were being reproduced through the everyday functioning of the ESS. They were structured around and within the debates on incomes policy issues which soon started to materialize in the tripartite agreements. As these debates and results were vertically articulated by the relatively centralized collective bargaining system, they included the microlevel that stabilized the entire system of social pact formation. In general, after the formation of the early social pacts, all actors were strongly involved in partnership networks and different supporting arrangements which, in accordance with the utilitarian thesis, also induced the continuing institutionalization of the pacts.

251

Social Pacts in Europe

10.4.2. Institutionalization Paths Alongside incomes policy as the axis of the entire institutionalization process, the content of the social pacts expanded over time. The new wider pacts included a growing number of fresh issues. The last two (2003–5 and 2007–9) cover almost all social and economic issues. In Slovenia’s case, all of these wider pacts (1995, 1996, 2003–5, and 2007–9) systematically occurred in the second half of electoral mandates, suggesting that their formation was strongly induced by the shrinking negotiation power and corresponding growing legitimization needs of coalition governments before elections. During the early phase of the institutionalization process, from the mid1990s, the key actors reached a common understanding concerning the effects of wage restraint policies and recognized them as a potentially useful instrument of macroeconomic regulation as well as of wider political exchange. Later, the ESS functioned as a meeting place where the systematic repetition of pactforming procedures continued. Later in the 1990s, in the context of the EU accession-related requirements and under the relatively long hegemony of centre-left governments, the pactmaking processes further generated a common frame of reference in Slovenia. Within that framework, the main actors shared the basic norms and interpretations of the key problems they faced, and gradually developed relations of mutual trust and reciprocity. The essential integrative force of that shared framework was accession to EU and EMU which all actors perceived as a key ‘system need’ – that is, a decisive condition of further development which, as they expected, should be congruent with their core interests. This national priority, which contextualized and de-prioritized the actors’ own particular interests, was in terms of its strong integrative effects quite similar to the period of the nation state’s formation, which also induced a strong degree of national integration. In the case of Slovenia, this subordination of particularistic interests to common strategic goals enabled a relatively systematic formation of consensual policies. At the time, these policies normally ensured a more or less efficient process of policy implementation and problem solution during the country’s accommodation to the EU and EMU. It seems that recently, in the new ‘post’-EU and euro contexts, when all of these above-mentioned grand (national) goals have already been fulfilled, the entire situation has been changing rapidly. After the country’s inclusion in the EU, the first, already mentioned signs of the pacts’ deinstitutionalization occurred. Along with the continuity of restrictive incomes policies, the new conservative government, by announcing its neo-liberal reforms, pushed unions into opposition and caused a total blockage in the pact-forming process, most visibly manifested in the first serious discontinuity in the work of the ESS since 1994.

252

Slovenia: Social Pacts and Political Exchange Similar to the earlier conflict, marked by the general warning strike of 1992, which triggered the institutionalization of social pacts, the latter’s re-institutionalization was also triggered by trade union action on a comparable scale – the rally against the proposed neo-liberal reforms in 2005. After that rally, in the second period of the government’s electoral mandate, the ESS began to function again. The result was the adoption of the social pact for 2007–9. These processes of declining and then restored social pacting practices clearly overlapped not only with the electoral cycle but also with the decline and then reappearance of inflation – the traditional ‘problem load’ labelled by the aforementioned functionalist approach as a crucial determinant of the formation of such pacts.

10.5. Conclusions The three main drivers of Slovenian social pacts – relatively high inflation, moderately strong unions, and relatively unstable centre-left coalition governments, combined with the weakening legacy of national integration, and the growing importance of the demands of EU and EMU membership – remained practically unchanged during the more than decade-long period of stabilization and accommodation to the EU and EMU. After 2004, when Slovenia became a full EU member state, not only did the constraining effects of EU and EMU demands vanish but the main drivers also started to change rapidly, causing a transformation of the nature and regulative capacity of pacts in the recent post-accession period. The first pact, which defined the incomes policy parameters for 1994, also defined the focus of all later pacts in Slovenia. It emerged at a time when more or less all actors understood that unilateral governmental measures to resolve the inflation problem in Slovenia were simply impossible. As a result, the inclusion of unions in formulating and implementing wage restraint policies was unavoidable. From then on, the major periods of the Slovenian transformation and accommodation to the EU have been marked by consensually adopted tripartite policies of wage restraint. All wider social pacts involved extensions of this core component. The analysis of Slovenia’s episodes of social pact negotiation clearly confirms the main propositions of the heuristic bargaining model of pact creation presented in Chapter 3. In particular, the general assumption concerning the nonunitary nature of the main actors offers a useful, highly productive approach to pact-making processes in Slovenia. Within this approach, the competition between unions is revealed as a factor which, in the context of the disintegration of the sheltered sector, was strongly connected to an increase in the strike rate, including the 1992 general strike. The approach also suggests that factional conflicts in the first centre-left government definitely accelerated the conclusion of the first pact in 1994. In accordance with another general

253

Social Pacts in Europe assumption concerning perceived power relations, the early strategies of the main Slovenian actors were strongly based on the mutual perception of their relative power: faced by massive social discontent, the early governments accommodated their strategies to the unions’ demands, and the unions learned to be defensive immediately after the elections, systematically escalating their demands in the second parts of government’s electoral mandates. This fits the predictions concerning negotiation outcomes: social pacts and/or their substitutes were systematically concluded during the second part of mandates when unions perceived the governments’ position to be decreasing and their own position as relatively strong and increasing. In the case of Slovenian pactmaking processes, such timing has had a strong influence. The mechanisms and paths of institutionalization outlined above suggest that at the beginning of the formation of social pacts, the power of the trade unions was decisive. According to this crucial factor, which in combination with the inflation problem and weak centre-left government induced the formation of the first pacts, it seems that the power-distributional interpretation is the most convincing for that early period, and that it can also be applied partially to the re-institutionalization process after the trade unions’ rally of 2005. When the early institutionalization process was triggered, the functionalist interpretation with its focus on system needs, and the utilitarian accentuation of satisfactory results which strengthen the social pacting institutions, work rather well. In accordance with the additional utilitarian argument, social pacts were developed in Slovenia because they suited the interests of the key actors: they met the legitimization needs of the relatively unstable coalition governments, the relatively strong unions needed them as an instrument of wider political exchange with a basic aim – workers’ protection within rapidly changing conditions in the labour market and the economy in general – and they also suited the employers in their requirements for a stabilization of the system and a gradual increase in their share of the national product. The established institutions of social pact-making – a continuous series of tripartite incomes policy agreements, as well as the ESS as the venue where pact-making took place – have met the (short- and medium-term) interests of all of these actors. Since 2004, when Slovenia became a full EU member state, the signs of deinstitutionalization have begun to appear. The first visible change was the election of a centre-right government after twelve years of left-centre party dominance. Social pacting became paralysed at the beginning of the centreright electorate mandate, and was partially revived in the second part. The main cause of the initial blockage was the government’s radical neo-liberal reform package. The unions’ vehement response unblocked the negotiations, but was combined with and followed by a serious union membership decline and growing union doubts concerning the country’s wage moderation policies. In

254

Slovenia: Social Pacts and Political Exchange such a situation, no actor seemed to have enough strength to ensure a proper implementation of the social pact. Finally, after the 2008 elections, the combination of the main drivers of future pacts has significantly changed. In the context of the global financial crisis and declining demand, inflation – the main driver of the former pacts – is no longer a problem. New problems like growing unemployment and the growth of debt have begun to emerge. On the other hand, if in terms of membership the unions are significantly weaker than only a few years ago, the formation of a new public union confederation has been a significant development. Obviously, two of the three main determinants of social pacting are undergoing a considerable change. The condition from the pre-accession period – a more union-friendly centre-left government, which since late 2008 is in power again – is now combined with these significantly changing social pact drivers. We have again arrived at a completely new, experimental situation which will reveal just how much the already institutionalized social pacts really matter.

Appendix

Interviews: Dimovski Vlado, 2005, Minister of Labour in the 2000–4 period Goslar Miran, 2005, first President of the ZDS Hribar Milicˇ Samo, 2005, former Vice President of GZS and current secretary’ of the ZDS Lombar Drago, 2005, President of the KNSS Mazalin Boris, 2005, President of the KS 90 Penko-Natlacˇen Metka, representative of the GZS Puhar Jozˇica, 2005, first Minister of Labour Semolicˇ Dusˇan, 2005, President of the ZSSS Sˇtoka Debevec Metka, 2005, representative of the Ministry of Labour Tomsˇicˇ France, 2005, first President of the SDS and KNSS Drobnicˇ Janez, Minister of Labour, interviews in the newspapers DELO (10 September 2005) and Dnevnik (18 June 2005) Semolicˇ Dusˇan, interview in the newspaper DELO (25 August 2005)

Documents: Agreement on Incomes Policy in the Private Sector for 1994, Dogovor o politiki placˇ v gospodarstvu za leto 1994 (Official Gazette of the Republic of Slovenia, no. 23, pp. 1436–7)

255

Social Pacts in Europe Social Agreement for 1995, Socialni sporazum za 1995 (Official Gazette of the Republic of Slovenia, no. 22, pp. 1692–5) Social Agreement for 1996, Socialni sporazum za 1996 (Official Gazette of the Republic of Slovenia, no. 29, pp. 2439–43). Social Agreement for the Period 2003–5, Ljubljana: Ministry of Labour, Family and Social Affairs Social Agreement for the Period 2007–9, Ljubljana 2007

Other sources: ˇ V – Upravljanje cˇlovesˇkih virov 2001), Mednarodna primerjalna Cranet 2001; 2004 (UC sˇtudija, Tabelarni pregled podatkov, Center za proucˇevanje organizacij in cˇlovesˇkih virov, FDV, Ljubljana 2001 FEWC – Fourth European Working Condition Survey 2007, European Foundation for the Improvement of Living and Working Conditions, Dublin; Luxemburg: Office for Official Publications of the European Communities PORC – The Public Opinion Research Centre, Faculty of Social Sciences, University of Ljubljana Slovenian Economic Mirror 1/2002, Ljubljana: IMAD

Abbreviations: ESS – Ekonomsko-socialni Svet, Economic and Social Council GZS – Gospodarska zbornica Slovenije, Chamber of Commerce of Slovenia K’90 – Konfederacija sindikatov 90, Trade Union Confederation 90 KNSS – Konfederacija novih sindikatov Slovenije, Independence, Confederation of New Slovenian Trade Unions LDS – Liberalna demokracija Slovenije, Liberal Democracy of Slovenia PORC – Public Opinion Research Centre, Faculty of Social Sciences, University of Ljubljana SDSS – Socialdemokratska stranka Slovenije, sedaj Slovenska demokratska stranka, Social Democratic Party of Slovenia, now the Slovenian Democratic Party ZDS – Zdruzˇenje delodajalcev Slovenije, Employers’ Association of Slovenia ZLSD – Zdruzˇena lista socialnih demokratov, sedaj Socialni demokrati, United List of Social Democrats, now Social Democrats ZSSS – Zveza sobodnih sindikatov Slovenije, Association of Free Trade Unions of Slovenia

256

Part IV Synthesis

This page intentionally left blank

11 Conclusions: Reassessing the Framework Sabina Avdagic, Martin Rhodes, and Jelle Visser

11.1. Introduction This chapter provides an assessment of our analytical framework. Section 11.2 evaluates that part of the framework that deals with the emergence of pacts, and Section 11.3 the institutionalization of pacts.

11.2. Explaining the Emergence of Social Pacts The case studies in this book provide ample support for the argument in Chapter 2 that links the resurgence of pacts in the 1990s to the specific combinations of economic, political, and institutional conditions then pertaining. In line with that argument, Chapters 5–10 demonstrate that most social pacts in these countries were indeed crafted in situations characterized by (a) high economic problem loads, (b) generally weak governments which needed social partner support to adopt reforms or enhance their legitimacy, and (c) moderately centralized unions that were neither too strong to be directly concerned about the potential costs of their resistance to reforms, nor too weak to be credible negotiating partners. But as indicated in Chapter 3, the case studies also show that while these factors may be the triggers for most pact negotiations, they do not necessarily guarantee their successful conclusion. Indeed, in some cases we found that pact negotiations faltered in one year and succeeded shortly thereafter, despite the fact that these three general conditions remained largely the same. The reason, as explained in Chapter 3, is that these conditions by themselves are too general to account for the processes and outcomes of individual pact negotiations.

259

Social Pacts in Europe In other words, while these conditions are valuable for explaining national differences in the reliance on pacts over a longer period, a focus on individual negotiations shifts our attention to factors that affect power balances between negotiating partners in the short term: the proximity of elections, internal divisions within the government, changes in government approval ratings, and the specific dynamics of interaction between and within unions and employers’ organizations. The particular constellation of these factors influences both the likelihood of success of individual negotiations and the content of agreements. The heuristic bargaining model developed in Chapter 3 allows an examination of the impact of such factors on the outcomes of negotiations. In what follows we draw on the empirical evidence presented in Chapters 5–10 to provide a more systematic evaluation of that model. Section 11.2.1 provides a general assessment of the relevance of the four core assumptions of the bargaining model, while Section 11.2.2 provides a more explicit test of the model’s predictions through a structured overview of the empirical evidence.

11.2.1. Evaluating the Assumptions of the Bargaining Model The heuristic bargaining model of pact creation presented in Chapter 3 is based on four general assumptions about strategic interaction in the course of pact negotiations. These assumptions involve the concepts of bounded rationality, context-specific and changing preferences, non-unitary actors, and perceptions of power. 1. The first assumption is that actors involved in crafting social pacts are intentionally rational utility maximizers. Rather than having full information and being ‘perfect maximizers’, this assumption posits that actors’ ability to calculate correctly the pay-offs of alternative courses of action is impeded by the high degree of uncertainty characteristic of times of economic difficulty and crisis – precisely the situations that most often trigger attempts to negotiate pacts. Overall, empirical evidence from the case studies supports this assumption of bounded rationality. We find that in all our cases, actors sought to advance their interests, but due to high situational uncertainty often could not determine easily the best strategies to achieve that goal. Interviews by our authors suggest that government officials and union and employers’ leaders often could not predict others’ strategies with a satisfactory degree of certainty, and could not calculate the best responses in a simple and straightforward way. Instead, they navigated through this uncertainty by observing carefully their environment, relying on previous experience and picking up new clues, which then allowed them to gauge the likely pay-offs from alternative courses of action. Such

260

Conclusions: Reassessing the Framework ‘informed guesses’ most often proved correct in that they allowed them to choose what turned out to be appropriate, and even effective, strategies. But we also detect some cases of apparent misperception when actors’ strategies generated outcomes that were not intended and sometimes went against their interests. One example of misperception is that of the Dutch unions in 1979, shortly before the Wassenaar agreement. The unions at the time refused the terms of a pact proposed by an evidently unpopular government. They did so because they were convinced that they could secure more substantial gains by holding out. As it turned out they were wrong: the government opted to act unilaterally, which brought about a drop in real wages, reductions in public-sector employment, and higher unemployment rates. The 2004 negotiations in the Netherlands provide another example, this time from the government’s side. In threatening punitive taxes to discourage early retirement packages, the government (backed by employers) rejected the unions’ proposals that sought a compromise between the government’s aims and the old regime. Key figures in the government believed that union divisions made them too weak to respond in a coordinated way and present a credible threat. The unions then joined forces to organize a series of small protests and demonstrations followed by one of the largest protests in Dutch history, bringing 300,000 union members to Amsterdam’s Museum Square. These actions took the government’s popularity to an all-time low, forcing it to backtrack almost immediately and concede on numerous points to the unions. Another example of misperception comes from the Spanish unions, whose call for a general strike in January 1994 was later described by the union leadership as a ‘relative failure’. Hoping to repeat the success of the 1988 general strike and force the government to reconsider its policies, the union leadership perceived wrongly both the government’s likely response and the level of support they could expect from their own rank-and-file. In all of these cases, the strategies adopted by the actors were not irrational but were rather what they believed at the time to be the optimal response. Finally, actors’ definition of their interests was by no means simple and straightforward, in several instances because this involved balancing mutually conflicting concerns. This was the case, for example, in Spain in 1981/2 and Italy in 1992, when unions faced the dilemma of whether to prioritize their short-term (narrow) or long-term (broader public) interests. Although as unions they had an interest in meeting the material demands of their members, they were also interested in a strong and growing economy, which required accepting wage moderation and some of the unpopular reforms proposed by the government. As a result, the unions in both countries put the long-term interests of the economy above the immediate concerns of their members and signed pacts initiated by the government.

261

Social Pacts in Europe 2. The second assumption is that actors’ rank-order of preferences often cannot be established deductively because actors’ evaluation of different policy options depends on the structural and historical contexts in which they operate. This assumption implies, for example, that union preferences may not be shaped solely by the sector to which they belong (e.g. public/private, exposed/sheltered) but also by their experiences and organizational principles. Our case studies point to the considerable importance of historical–structural contexts in preference formation. In the Italian case, the main reason why traditionally adversarial unions did not stick to the terms of the 1978 agreement is that they could not accept measures that would radically contradict their past claims. Similarly, the different pacting strategies of the two main union confederations in Portugal in the 1980s and 1990s were influenced heavily by their different ideological positions and roles during the earlier transition to democracy. In Spain, union preferences regarding pacts reflected not only ideological but also organizational traditions. Because of its traditionally strong roots at the company level, decentralized structure, and a class ideology of industrial unionism, the CC.OO was initially unfavourable to national-level pacts. The UGT, by contrast, had a more centralized structure and a weaker presence in firms. It was therefore more favourable towards pacts, at least until the end of the 1980s, seeing them as a way to compete with its rival union and gain access to national policy making. Our case studies also reveal that union preferences do not always correspond neatly to often taken-for-granted assumptions regarding the impact of sectors on unions’ preferences and strategies. This was true of Spain, where unions have been organized along both sectoral and territorial lines, and where inter-union rivalry has undermined attempts to define common sectoral interests and build sector-based alliances. Our case studies also show that union preferences are not stable. The Slovenian study shows how union preferences change through a process of learning and a gradual crystallization of interests. The preferences of the unions in the early transition reflected their respective ideological and political positions. But as they learned that such divisions were counterproductive and would weaken their ability to influence government policies, those preferences changed and the unions adopted a more pragmatic, coordinated approach to bargaining with governments and employers. 3. The third assumption is that governments, unions, and employers’ organizations are non-unitary actors. Rather than coherent entities with clearly identifiable and stable interests and preferences, these actors often comprise different and even conflicting interests. We should not therefore try to explain actors’ strategies as simple responses to shifts in the external

262

Conclusions: Reassessing the Framework environment and/or in other actors’ strategies. Instead, the strategies these actors settle on reflect to a great extent their internal politics and struggles. Chapter 3 therefore posits that the greater the internal divisions, the less predictable and stable actors’ negotiation strategies will be. This focus on internal dynamics also draws attention to the procedures that trade unions and employers’ organizations use to aggregate internal preferences. When organizations rely on centralized decision-making, their strategies may prove less stable and resolute than when organizations rely on procedures that take account of different sections’ preferences. The latter approach better facilitates two-way communication between central and lower levels, which in turn minimizes the likelihood that decisions taken by organizational leaders will be challenged by their base. Our case study chapters provide many examples of the impact of internal politics on the strategies of governments, unions, and employers. Unsurprisingly, internal struggles and divisions were particularly visible in coalition governments whose member parties often had quite different preferences as to the desirability and content of pacts. The empirical evidence presented in these chapters also clearly shows that the strategies of unions and employers’ organizations cannot be understood without a deeper knowledge of their internal politics. For example, the 1996 negotiations in Ireland reveal how union divisions over real take-home pay, statutory union recognition, and the future of public service pay determination made a common union strategy extremely difficult, which in turn weakened their bargaining position vis-a`-vis the government and employers. In Portugal, the two main unions had different policy preferences in most pact negotiations, making union strategies somewhat erratic, resulting in partial pacts that were often signed by only one union. Similarly, the strategies of employers’ organizations often reflected internal conflicts, such as those in Italy in 1993 where large and small firms clashed over the desirability of entering into pact negotiations, and in Spain where employers have frequently been split between the interests of smaller and larger firms, producing ambivalence in their attitude towards pacts and incomes policy agreements. In addition, our studies confirm our expectations concerning the impact of different methods of preference aggregation on the resoluteness of negotiating strategies. Procedures such as referenda and membership ballots generated more determined and stable strategies, for they minimized the uncertainty facing union leaders and helped them pursue negotiating tactics which they knew would draw sufficient support from their members. It is well known that referenda played an important role during the negotiations of the 1993 pact in Italy, which was overwhelmingly supported by union members. Apart from securing support for the pact, this institutional innovation helped to mitigate a crisis of representation and reduce the internal tensions that had long beset the Italian unions. The Dutch case also confirms the importance of referenda for

263

Social Pacts in Europe the decisiveness of union strategies. In less than a year, the Dutch unions relied on this instrument three times. They first used a referendum in 2003 to test the support of their members for a far-reaching and potentially costly pact proposed by the government. Once those negotiations reached a deadlock, the unions used the same method to secure support for mobilization against the government, and the final referendum secured approval for the November 2004 pact. By contrast, unions in Spain and Portugal have relied on more centralized decision-making procedures, even if they have made some attempts to improve connections between their different levels. As a result, union leaders in these countries faced greater uncertainty in that they had to decide to accept or reject governments’ and employers’ offers without knowing fully if those decisions would be supported by their members. In Spain, the decisions of both the UGT and CC.OO have frequently been challenged and heavily criticized by members, as expressed through workplace elections, eventually inducing a change of heart and strategy. Given this uncertainty, it is not surprising that the strategies of centralized unions often appear less resolute, with leaders sometimes leaving negotiations at the last moment, after sending earlier positive signals to the government. 4. The final assumption is that perceptions of relative power are more decisive in shaping actors’ strategies than trust, habits, and norms. The latter may become more relevant if pacts are regularly repeated and widely perceived as successful. Absent such experience, however, the strategies of governments, unions, and employers should largely reflect their perceptions of relative power, defined as the capacity to achieve desired goals. Chapter 3 suggested that this capacity depends on general organizational and institutional resources, the degree of internal unity, and the extent to which actor A needs the cooperation of actor B. Some of these components are not easily measurable and depend on subjective evaluations or perceptions. One purpose of our empirical investigation was to clarify this broad conceptualization of power by documenting how actors gauge their relative power and what indicators they rely on. All our cases confirm the strong impact of relative power perceptions on actors’ strategies. Interviews by our contributors clearly indicate that such perceptions shape actors’ decisions on whether to enter negotiations or not, as well as their evaluation of which deals are acceptable. The empirical evidence also clarifies and corroborates the importance of the general indicators of power proposed in Chapter 3. The three most commonly used indicators of relative power are: organizational attributes, notably the electoral strength of the government, and the size or encompassingness of unions and employers’ organizations; internal unity, or the absence of visible internal conflicts and divisions within the government and social partner organizations; and the ability to present a credible

264

Conclusions: Reassessing the Framework threat of exit, which in the case of government means the capacity to act unilaterally, and in the case of unions and employers the ability to bear the costs of abandoning talks. As suggested above, some of these indicators can be easily measured or directly observed, and can be treated as objective measures of power. Others, such as the credible exit threat, reflect largely subjective evaluations. While subjective indicators are more difficult to quantify, they have played a significant role in most attempts to build pacts. Sometimes, they served to reinforce objective indicators of power, as in Italy in the late 1970s and again in 1992 when the inability of electorally weak governments and internally divided social partners to present credible exit threats shaped their perceptions of interdependence, thus increasing their propensity to pact. As for the impact of objective measures of power, we find that minority governments and fragile or internally divided coalitions were keener to sign social pacts than single-party majority governments. But we also find that occasionally subjective evaluations of relative power are more important than objective measures. In Spain, the Socialist government went to great lengths to sign an agreement with the UGT and the employers in 1984, even though it was in an electorally strong position facing what at least in objective terms seemed to be relatively weak social partners. This favourable power position notwithstanding, the government insisted on signing the pact primarily because of its subjective evaluation of the situation. Because it had already introduced some unpopular reforms, the government was convinced that its legitimacy would be eroded if it introduced further reforms on its own. It also believed that a tripartite agreement on wage moderation would reassure foreign investors that this new European Community member was worthy of more substantial investment. Similarly, in 2003 the Dutch government had a strong electoral mandate and united coalitional base but believed that signing a pact with unions and employers would improve its rather poor standing in opinion polls and strengthen support for its policy reform agenda. Put differently, these governments’ subjective evaluation of their capacity to achieve policy goals was evidently lower than the objective indicators of their power would suggest.

11.2.2. Testing the Bargaining Model of Pact Creation We argued earlier that the creation of pacts may be usefully conceptualized as a process of institutional emergence, the outcome of which is influenced considerably by actors’ perceptions of relative power. Following this proposition and the four assumptions regarding strategic interaction, Chapter 3 developed a heuristic bargaining model that predicts the outcomes of pact negotiations on the basis of different constellations of power. The model depicts pact negotiations as a simple bargaining game consisting of a series of offers and counteroffers proposed by two lead players (i.e. government and unions, or unions and

265

Social Pacts in Europe

Strong/ increasing Weak/ decreasing

Relative power of B

Relative power of A Strong/ increasing

Weak/ decreasing

Failure

Outcome benefits B

Outcome benefits A

Potential for failure

Figure 11.1. Predictions of Negotiation Outcomes

employers). Drawing on standard bargaining theory, the model incorporates two simple propositions concerning actors’ attitudes towards risk and their time preferences. First, it posits that actors who perceive themselves as being in a relatively strong position are more likely to persist in pressing their demands, even at the cost of breakdown, while those who see their position as weak and deteriorating should be more likely to settle for a quick solution rather than risk the costs of breakdown. Second, for reasons of simplicity, this model assumes that discount rates (which affect the value of future bargains) are similar for all actors. This simplifying assumption is based on the fact that pact negotiations are usually initiated in periods of crisis or serious economic problem loads. In such situations, prolonged bargaining is likely to be costly for all actors, and they may therefore prefer to reach an agreement sooner rather than later. Based on these assumptions, the bargaining model suggests the following predictions about the outcomes of pact negotiations (see Figure 11.1):  Negotiations are more likely to be successful when power disparities are clearly evident, albeit not excessively large. Situations most conducive to the conclusion of pacts are those when one actor perceives its bargaining power as strong or increasing and the other as weak or decreasing, and when such perceptions are mutually shared. In such cases, the content of the resulting agreement should be more favourable to the actor perceived as stronger.  Negotiations have a higher chance of failure when both actors perceive their power as strong/increasing, or weak/decreasing. In the first scenario, none of the actors should be willing to settle for a quick and less favourable solution. However, since prolonged bargaining is likely to result in significantly discounted pay-offs, actors will eventually reach a point where the expected benefits of prolonged bargaining are considered insufficiently high to

266

Conclusions: Reassessing the Framework continue negotiations. In the second scenario, both actors may be inclined to opt for a fast agreement, but such an agreement will have a high potential for failure because the actors will most likely lack the capacity to enforce it. And mutual perceptions of extreme weakness may prevent actors from signing any agreement at all. In what follows, we assess the predictions of this model against the evidence from Chapters 5–10. To facilitate this test, we focus on the most relevant instances of pact negotiation in our six countries since the 1980s. Table 11.1 presents a synthesis of the empirical findings for twenty-seven negotiation episodes that were particularly important in terms of substantive impact. These negotiations encompass different types of pacts, ranging from those that focus on a single policy, such as incomes policy or pension reforms, to broad multi-policy pacts. For reasons of space, we do not provide details of each actor’s policy demands or the policy content of the resulting agreements. Instead, for each negotiation episode, we provide brief information on the state of the economy, actors’ perceptions of power, and negotiation outcomes, which indicate whether the negotiations were successful or not and whose interests or preferences were best reflected in the resulting agreements. As can be seen from Table 11.1, these instances of negotiation provide strong support for the model. In all cases of successful negotiation, power disparities were clearly evident and the outcomes largely corresponded to the preferences of the stronger actor. Furthermore, as expected by the model, when both leading actors were perceived as weak (as in the Netherlands in 1979 and Spain in 1993) or strong (as in Slovenia in 1993), negotiation failed to reach tangible agreements. This simple bargaining model therefore performs rather well in explaining the general outcomes of pact negotiations. But although the information in this table confirms the predictions of the model, a closer reading of our case studies reveals more nuanced information and suggests certain modifications that would make the model more consistent with reality. Three issues in particular deserve to be mentioned. First, while the model emphasizes that the threat of exit is used by relatively strong actors to achieve more favourable outcomes, some case studies suggest it was also used by weaker actors, albeit in different form. Rather than threatening to walk away in an attempt to improve their bargaining positions, weak actors sometimes simply abandoned talks when it became clear that they would be unable to push their preferences through. Abandoning negotiations in such cases was judged to be preferable to signing a pact that contained no substantial concessions, because their constituents could blame them for agreeing to such terms. For example, the case study of Spain suggests that the exit of the CC.OO from the 1984 negotiations was driven by perceptions of its weakening position. In view of recent poor results in workplace elections, and the alliance between its main competitor union and the Socialist government, CC.OO

267

268

Table 11.1 Power Perceptions and Outcomes of Pact Negotiations Country/ negotiations

Power perceptions

Economic problem load

Outcome of negotiations

Unions

Employers

Government

The Netherlands ‘Almost Agreement’, 1979

High

Weakened and internally divided

Internal divisions

Internal divisions, insecure majority, low public approval

Failure

Wassenaar, 1982

Very high

Weakened and internally divided; public pressure to cooperate with G and E

Divided over pact, but stronger than unions

Strong, internally united, and resolved to act unilaterally if no agreement

Agreement, more favourable to G and E

New Course, 1993

High

Stable but aware of their inability to achieve wage concessions

Stable; keen to avoid government intervention

Threatening unilateral intervention, but vulnerable due to imminent elections

Agreement, generally balanced but mostly in line with E preferences

Flexicurity, 1996

Moderate

Stable but having to balance internally opposed constituencies

Stable, but having to balance internally opposed constituencies

Stable, but internal divisions over policy and hence heavy reliance on consultation

Bilateral (U–E) agreement, generally balanced outcome

Museum Square, 2004

High

Increasingly strong, bolstered by successful mobilization

Internal divisions over policy proposals

Internal divisions, declining public support, and eroding support from employers

Agreement, most favourable to U

Programme for National Recovery, 1987

Very high

Generally weak; aware that wage increases were unrealistic

Generally united and stronger than unions

Minority government, but its position strengthened by the main opposition party supporting its policy proposals

Agreement, mostly in line with G and E preferences

Partnership 2000, 1996

Moderate

Internal divisions between public and private-sector unions

United against unions’ demands for statutory recognition and real wage growth

Majority coalition, but keen to reach a pact due to EMU deadline; preference to include broader civil society to enhance its legitimacy

Agreement, mostly in line with E and G preferences

Ireland

Low

Relatively strong due to previous pacts, booming labour market, recent successful mobilization in industrial disputes, and supportive public opinion

Stable

Majority coalition, but due to forthcoming elections reluctant to reject public-sector pay demands

Agreement, generally balanced, but overall more in line with U preferences

Lodo Scotti and San Valentino, 1983–4

High

Internally divided and antagonistic; lacking coordination between the central level and rank-and-file

Weakened by internal divisions and inability to pass higher labour costs onto consumers

Stable coalition government

Agreements (the 1984 pact without one union confederation), mostly in line with G preferences

The 1992 pact

Very high

Internally divided, but general sense of responsibility to solve the crisis

Somewhat stronger than unions, but also divided and reluctant to use exit strategies

Technocratic government without parliamentary base but its bargaining position relatively strong due to economic crisis

Agreement, mostly in line with G preferences

The 1993 pact

Very high

More united than in 1992; better coordination between central and lower levels

Weakened by internal divisions and the Tangentopoli scandal

Two technocratic governments, lacking parliamentary base but able to exercise external authority due to economic crisis

Primarily U–E agreement with government’s backing, more in line with U preferences

Pact for Italy, 2002

High

Divided despite attempts to use joint mobilization to boost their negotiating position

United, strong position due to business-friendly government

Majority government with close links to business

Agreement, in line with G and E preferences

Pact for Welfare, 2007

High

United and in a relatively strong position

United and stable

Coalition government with a very narrow parliamentary majority

Agreement, balanced albeit criticized by E and one union confederation

Very high

Ideologically divided and competing for members, but their bargaining position solid due to one union having strong capacity for mobilization and the other having links with the

Weak and fragmented membership; not a major player in the negotiations

Fragile coalition, weakened by internal divisions and increasing public support for opposition parties

Agreement, generally in line with G preferences regarding wage moderation, but with rather significant concessions to U

Towards 2016, 2006

Italy

Spain ANE, 1981

269

(Continued )

270

Table 11.1

Continued

Country/ negotiations

Power perceptions

Economic problem load Unions

Outcome of negotiations

Employers

Government

increasingly strong opposition party AES, 1984

High

Inter-confederal competition and divisions over potential benefits of pact

Stable, but still in a weaker position than unions

Strong majority and solid internal support for austerity measures

Agreement without one union confederation; mostly in line with G preferences

Solidarity Pact, 1993

Very high

More inter-confederal unity than before, but both confederations weakened considerably at the firm level

Stable

Narrow majority, internally divided coalition; further weakened by corruption scandals and concerned about forthcoming elections

Failure

April Agreements, 1997

High

Weakened by recent unsuccessful mobilization and declining public approval of their labour market strategies

Strong position due to public opinion being in favour of radical labour market reforms

Minority coalition, apprehensive to proceed unilaterally with labour market reforms

Bilateral U–E agreement endorsed by G; mostly in line with E preferences

Pact on Incomes and Prices, 1986

High

Weak and divided over benefits of pact

More united than unions and sharing policy goals with government

Minority government, but supported by employers

Agreement without main union confederation; in line with G and E preferences

AES, 1990

High

Strengthened by recently successful joint mobilization, but still divided over policy goals

Stable, supportive of government policy proposals

Majority government, but low popularity and concerned about upcoming elections

Agreement without main union confederation; in line with G and E preferences

ACE, 1996

High

Divided over benefits of concertation; organizationally, one confederation getting stronger and the other weaker

Stable; policy preferences close to government’s proposals

Minority government, but able to push through its preferences due to exit of the main union confederation and employers’ general support

Programmatic agreement without main union confederation; in line with G preferences

Portugal

Social security reform, 2001

Moderate

Relatively strong position given political context; though some divisions over specific policy issues

Divided over reform proposals

Minority coalition, fearing popular protest and keen to obtain social partners’ support

Agreement without one employer association; generally in line with U preferences

Labour code reform, 2008

Moderate/ high

Divided over policy proposals; the larger confederation in an organizationally stronger position

United, but their bargaining position weakened by the decline of centre-right parties

Strong parliamentary majority, weak opposition

Agreement without main union confederation; mostly in line with G preferences

The 1993 pact

High

Strong position due to recent successful mobilization and signals about the end of transitional recession

Relatively weak and still in the phase of oganization building

Majority coalition, relatively strong position immediately after elections

Failure

The 1995 pact

Moderate/ high

Membership decline, but relatively strong position due to improving economic conditions and being more united than at the onset of transition

Stable, albeit relatively new actors

Majority coalition, but weakened by internal struggles and declining public support

Agreement, relatively more in line with U preferences

The 1996 pact

Moderate/ high

Stable position, relatively united, and evident capacity to mobilize if not included properly in policy making

Stable; supporting government’s policy proposals

Weak due to withdrawal of a major coalition partner, imminent elections, and protests in the public sector

Agreement, generally balanced but with strong concessions to U

The 1999 pension reform

Moderate/ high

Strong and united; not challenging government’s unilaterally imposed incomes policy, but effective mobilization against its proposal about pension reform

Stable, but not a major player in negotiations

Coalition with a small majority; weak position due to imminent elections and unions’ pragmatic position regarding incomes policy

Agreement, in line with U preferences

The 2003–5 pact

Moderate

Relatively strong and united; solid bargaining position given political situation

Stable

Majority coalition, but internally divided and facing imminent elections and strong challenge by opposition

Agreement, generally balanced but with considerable concessions to U

Slovenia

271

Social Pacts in Europe leaders decided to opt out of the pact lest support for the government’s adjustment plans further damaged their position. Similarly, during the 1995 pension reform negotiations in Italy, the employers decided not to sign the pact when it became clear that the unions’ relatively strong position vis-a`-vis the technocratic government made it impossible for them to achieve the more radical reform they had hoped for. Second, the bargaining model focuses on two leading negotiating partners, a simplification that works well in most cases, because two actors – the government and unions – usually dominate, even in tripartite negotiations when employers typically participate without playing a leading role. In other cases, unions and employers negotiate, and the government simply endorses their agreements. But this approach may not be sufficient for understanding the process and outcomes of certain episodes. For example, the study of Italy shows how failure to reach an agreement when both partners are weak, and therefore prefer to abandon talks, may be avoided through the intervention of a third actor. In 1990 and 1991, unions and employers, both relatively weak, called on the government to mediate, which paved the way for the 1992 pact. The role of government as mediator and compensator for participation is also revealed in the Dutch and Spanish chapters, both of which suggest that some negotiation episodes are truly three-way games. Third, the bargaining model is based on the simple assumption that negotiating partners have similar discount rates. Judging by the empirical evidence, this simplification does not seem greatly to impair the predictive capacity of the model. But it is reasonable to expect that in certain situations, negotiating partners may have different discount rates which, in turn, would influence the content of the resulting agreements and the extent to which actors are able to extract concessions. For example, a government facing imminent elections may be more pressed than unions to reach an agreement, and may therefore be willing to offer more concessions than one might expect from objective measures of its relative power. Substantial differences in discount rates may even influence the likelihood of pacts and lead to different outcomes than those predicted by the model. For example, if one negotiating partner has significantly lower discount rates than the other, negotiations may even fail in cases where the power constellation alone would seem to be conducive to a pact, because that actor may feel no need to reach an agreement quickly and persist in pushing its demands to the point where negotiations break down. In a way, substantial differences in discount rates may be seen as yet another indicator of power because they influence actors’ bargaining positions and the willingness to compromise. But substantial differences in discount rates are more likely in situations that are not characterized by crisis or severe economic problem loads. While a serious crisis is likely to lead all actors to prefer an agreement sooner rather than later, less dramatic circumstances do not create such common incentives.

272

Conclusions: Reassessing the Framework Portugal provides one such example. In 2001, the minority Socialist government found itself in a weak position and was unable to pass its annual budget. Given the time pressure and its inability to obtain sufficient parliamentary support, it was keen to secure the social partners’ agreement to its planned social security reform. Yet, the employers’ organization (CIP) insisted that the government’s proposals did not go far enough and demanded a greater emphasis on pension privatization. CIP left the negotiations only when it became clear that the other employers’ organizations (CCP and CAP) and the unions were willing to compromise, which effectively allowed the government to proceed with its plans. CIP’s exit can be explained by its significantly lower discount rates. Given the growing support for centre-right parties, CIP was interested in prolonging the negotiations, hoping that a more radical reform could be achieved either by the current government closer to the elections or by the new centre-right government that was likely to replace it, and the absence of a clear economic emergency meant that there were few incentives to reach a quick agreement. Although certain refinements to our bargaining model may be desirable, our case studies suggest that it performs rather well as a heuristic device for examining the process and outcomes of pact negotiations. Most importantly, the empirical evidence provides overwhelming support for our central argument that the creation of pacts is ultimately a political process, driven more by interests and power than by ideas or spontaneous coordination. Even in cases of very serious economic problems, our case studies suggest that the relevant actors do not generally come to a shared understanding of the appropriate course of action if the distribution of power between them is not conducive.

11.3. Explaining Social Pact Institutionalization In Chapter 4, we noted that social pacts are highly contingent and fragile constructions, that they tend to internalize rather than externalize conflict, and that they tend to be ‘regulative’ rather than ‘distributive’, even if they typically do have distributive consequences, and even though certain contemporary pacts have involved wage-tax, wage-public investment, or wage-social policy bargains that resemble the pacts of the neo-corporatist ‘golden age’. We also noted that social pacts are discretionary policies as opposed to rules-based policies that allow policymakers to respond quickly to contingencies, but that pacts tend to lose their effectiveness and credibility if used repeatedly. As triadic rather than dyadic relationships, stability is more likely to be ensured when an ‘uninterested third party’ acts as mediator than when it takes sides, as occurs when governments forge agreements with a second party in opposition to a third. We concluded that, in theory, therefore, social pacts are inherently unstable.

273

Social Pacts in Europe We then distinguished between two trajectories of social pact institutionalization – one based on ‘constant or increasing returns’, the other on ‘negative feedback’ – that can either bring varying degrees of stability to these fragile constructions or render them redundant. The first trajectory is associated with repetition and expansion; the second with an interrupted pattern that corrects the operation and outcomes of earlier pacts. The abandonment of social pacts, and therefore pact deinstitutionalization, results if correction via negative feedback fails to produce another pact, or via a process of diminishing returns when pact outcomes no longer meet actors’ expectations. As argued in Chapter 4, the first trajectory of pact institutionalization is linked to broadening and expansion, or increasing capabilities to meet ambitions, whereas negative feedback tends to do the opposite, and adjusts ambitions to more limited capabilities.

11.3.1. Increasing or Constant Returns Under constant or increasing returns, the fact that a pact was reached in the past provides an additional reason for the actors to negotiate and conclude a new one. Thus, the benefits of power distribution generated by the earlier pact may make it costlier for actors to refuse negotiations over a new pact; or earlier pacts may have revealed a focal point to the actors around which they can successfully coordinate their future activities. In the limit case, the new pact is adopted because of the earlier pact if that pact, for instance, has become associated with resolving past conflicts and solving problems that threaten the nation or the system and on which actors base their resources and raison d’eˆtre. Earlier pacts may have helped actors solve their own problems and deliver policies their constituents care about; they may have established a norm of appropriate behaviour in settling distributive conflicts; or they may have become the preferred choice of the most powerful actor or actor coalition. Rather than wearing thinner as time goes by, in the case of increasing returns, social pacts tend to expand into more and new areas, and become accepted as an established policy making method (‘concertation’). An expansive path of this kind tends to go beyond the mere repetition of pacts, although it is quite possible that pact institutionalization amounts to nothing more than ‘doing the same thing again’, as when the negotiation of wage pacts responds to economic downturns to defend profits, export shares, and jobs. The Dutch case, with six pacts of this type since 1982, is our closest example – one of apparent constant returns – and Spain’s annual wage pacts since 2002 begin to approach this style of pacting. Ireland and Slovenia exemplify social pact institutionalization along an expansive track, branching out from industrial relations to other areas of public policy.

274

Conclusions: Reassessing the Framework

11.3.2. Diminishing Returns and Negative Feedback In the case of diminishing returns and negative feedback, the experience of prior pacts makes the actors wary of entering a new one. In this case, having reached a pact before is an additional reason not to conclude another, or at least not a similar one. Under diminishing returns, social pacts lose their effectiveness or usefulness for some if not all actors with the passing of time. As explained in Chapter 4, the reasons for this may be exogenous. For example, EMU membership, once secured, may change the incentives and costs of social pacts that helped to make participation possible. Chapter 6 on Italy, which describes how that country’s pacts in the 1990s failed to institutionalize beyond that decade’s political crisis and challenge of EMU membership, provides a case in point. The outcomes of the important pacts of 1992 and 1993, which provided the basis for further pacts later in the decade, were, according to Regini and Colombo, ‘initially satisfactory’. But doubts concerning the outcomes soon set in among employers and some sections of the labour movement, making it difficult to continue along the same path. The source of decline may also be endogenous, for instance, when prior pacts generate outcomes and behaviour that undermine the incentives that originally motivated actors’ support. An earlier pact may be associated with a particular power distribution that no longer holds. This can happen when governments faced with electoral challenges negotiate a pact to raise public support and legitimacy, but once they win the elections lose the incentive to share power. Examples are found in the attempted abandonment of concertation by the Slovenian government in 1994, as well as in Portugal where the instability that plagued that country’s early social pacts (1986–92) was caused by similar reasons. In Spain, governments have often modified their approach to pacting once parliamentary majorities and second terms have been secured. Another example of diminishing (or even negative) returns is when a pact signed by several unions creates divisions between them when it is implemented. This has occurred in Italy, Spain, and Portugal, where trade unions are often divided over the preferred bargaining system and by the ties that link them to parties in government. Negative feedback, based on disappointment with the results of a previous pact, can trigger readjustment or, when that fails, abandonment. In Chapter 4, we suggested that institutionalization via negative feedback will be manifest in a repeated, but interrupted, pattern of pacting or in a somewhat erratic pattern of single-issue pacts, with newer pacts ‘correcting’ the implementation failures of the past. Negative feedback can have different origins; for instance, prior pacts may have failed to deliver on their promises, or may become associated with unacceptable outcomes for some actors. In cases of negative feedback, actors will raise the price for entering a new pact and/or they will seek to limit the number of issues and policy domains affected. An example comes from Portugal in relation to the multi-annual pacts of 1996. When the government

275

Social Pacts in Europe failed to deliver on its promises, the ‘Strategic Concertation Agreement 1996–99’ increasingly angered employers and, according to Da Paz and Naumann (this volume), discredited the concertation process. After a period of deinstitutionalization and delegitimatization, the pacts that followed after 2000 took a completely different approach. A similar pattern was revealed in Spain where after a long pacting hiatus of twelve years from 1985 to 1997, the former model of broad tripartite pacting, which had produced high costs for the unions, was replaced by policy-specific bipartite deals forged under the shadow of state hierarchy.

11.3.3. Periods of Institutionalization and DeInstitutionalization Table 11.2 shows that in most countries, periods of social pact reinstitutionalization alternate with periods of deinstitutionalization. According to Regini and Colombo, the Italian pacts of the 1990s were ‘preceded by a long period of difficult concertation and followed by an equally long period in which social pacts were either openly called into question or turned into purely political instruments ( . . . )’. The first part of that assessment also applies to Ireland, Spain, and the Netherlands: in all three cases, social pacts and incomes policy agreements were contested before the ‘breakthrough’ agreements of 1982, 1997, and 1987 respectively. It was only after these ‘emergency pacts’ that a new approach could be developed, although not immediately. The ‘institutional effects’ became apparent much later: with the 1994 and 1997 pacts in Ireland, where governments of different political persuasions continued with what now seemed to be a beneficial institution to most participants (and attracted new ones, in addition); in Spain, where the 1997 agreement led to a period of pact consolidation in the 2000s around annual bipartite wage agreements; and in the 1990s in the Netherlands, where the value of the 1982 Wassenaar pact was revealed when, under political pressure, the social partners intensified their mutual cooperation. Slovenia, too, before moving towards a long series of tripartite agreements after 1994, began with three to four years of contentious politics following its separation from the Yugoslav Federation (see Chapter 10). In Italy and the Netherlands, social pacts and concerted policies peaked in the 1990s and declined after 2001 or 2002; in Ireland, the challenge came in the current recession, with the breakdown of negotiations over a drastic programme of cutbacks in 2009. With the Social Pact for 2007–9 expiring, 2010 is a critical year for Slovenia. Two peaks rather than one characterize the Portuguese and Spanish stories. In Portugal, the first phase ran from 1986 to 1992 following the formation of the Standing Commission for Social Concertation (CPCS) in 1984, and the pacts of that time (opposed by the largest unions, and sometimes also by employers) targeted high levels of inflation and industrial conflict. The second phase began in 2001 with a series of specialized, singleissue pacts on non-wage policies, and was backed by the main union that had opposed previous pacts. After an interruption of two years, this approach was

276

Conclusions: Reassessing the Framework Table 11.2 Periods of (Re)institutionalization and Deinstitutionalization of Pacts

NL

Institutionalization (re-enactment, repetition, expansion)

Deinstitutionalization (abandonment, contraction, challenge)





 IT

 

IR



Post-Wassenaar (1982), but mostly in 1990s (U + E, in response to G) New attempt after 2004 (U), but unstable Post-1992/3 pacts, until about 1998 (U + E, with support from G) New attempt in 2007, but unstable (G), divided (U, E) Post-1987 pact, through until 2007–8; main driver G, plus support U and E

   

Late 1970s (U divided/opposed, E ambiguous) Early 2000s (change of G, supported by E) Post 1978–9 and 1983–4 pacts (U divided, E withdrawn, G divided or indifferent) 2000s (change of G, E less interested or vying for change, U divided)



Late 1970s, 1980–6 (U unable to deliver, E opposed) 2008–10 (public sector U opposes cuts, then E abandons wage deal)

SL

 

Post 1994 pact (U, then E, then G) Reinstitutionalization in 2006–7 (U, then G)



2004–5, after inclusion in EU, change of G

PT



Post-1986 pact and formation of CPCS, until 1992 (part U, G, part E) New start in mid-1990s (G, part U), but failure Reinstitutionalization in 2000/1 (G, all U) 2004–8: reissuing of social pacts, stronger bilateral (E + U) elements, support G



Second half 1990s (implementation failure G, withdrawal E, U divided) 2002–4 (change of G, abandoning pacts G and E)

   SP

  

Post-Moncloa Pact (1977) – 1984 AES (G, split U, then E) New start (tripartite) 1997 (G, then all U and E) 2000–10 consolidation (G, then all U and E): bipartite, separate table bargains



 

Second half 1980s (U withdrawal, then G and E) 1993, failure (G solicits, all U reject)

Note: G (for government), E (for employers), and U (for unions) indicate the main actor(s) driving the process of (re) institutionalization or deinstitutionalization.

continued after the Socialist victory in 2005. In Spain, social pacts peaked first in the first decade after the transition to democracy, and then again in 1997, when a series of tripartite agreements were reached. They were followed from 2002 by a decade of union–employer bipartite wage bargains – amounting to an implicit incomes policy pact given their dependence on government inflation forecasts and cooperation (or threats) in some years.

11.3.4. The Institutional Effects of Standing Committees and Tripartite Councils Among the six countries, the Netherlands was the only one to enter the 1980s with established corporatist credentials. In international rankings, the Netherlands immediately follows the top three (Austria, Norway, and Sweden), whereas Ireland, Italy, Spain, and Portugal are near the bottom of the league

277

Social Pacts in Europe (Siaroff, 1999; Kenworthy, 2001). However, institutions like the post-war Labour Foundation (FoL) and the Social Economic Council (SER) were already in decline in the 1970s, and between 1964 and 1982 neither bipartism nor tripartism worked very well. The Wassenaar agreement rehabilitated the FoL and, in its wake, the tripartite SER (Visser and Hemerijck, 1997). The role of the National Economic and Social Council (NESC) in Ireland in preparing the ground for the first National Recovery pact of 1987 as well as subsequent pacts is well known and highlighted in Chapter 5. The importance of Portugal’s Standing Commission for Social Concertation is probably best gauged by the fact that the opposing communist union confederation CGTP (General Confederation of Portuguese Workers) could not afford to remain outside it, and that the bilateral agreement on collective bargaining, meant to repair the damage created by the reforms of the centre-right Barroso government (2002–4), was prepared and negotiated in the CPCS. Stanojevic´ and Krasˇovec note that in 1994, the Slovenian Economic and Social Council (ESS) received broad public support against a government trying to circumvent its functions, and became a platform from which the social partners pressed the government into signing a second pact, thus contributing to the institutionalization of the pact as an instrument of governance. The absence of an authoritative tripartite institution may have made it more difficult to continue negotiating social pacts in Spain, although the Economic and Social Council (ESC), established in 1991, assumed greater importance, alongside a number of bargaining and monitoring commissions, as peak wage concertation was consolidated in the 2000s. There is no mention of the Consiglio Nazionale di Economia e Lavoro (CNEL) in the Italian chapter, and that is probably indicative of the low status of that institution. The conclusion can be drawn that such permanent councils, while not decisive in the emergence of social pacts, create occasions, networks, and procedures for further negotiations and may thus contribute to institutionalization. However, rather than being exogenous, the status of such institutions is itself explained by successful prior pacts, as revealed by the Dutch and Irish cases in particular.

11.3.5. Repetition, Broadening, and Decentralization In the foundation paper for this research project, we speculated that, rather than mere repetition, the institutionalization of social pacts is likely to be accompanied by a broadening of issues and domains, and/or changes in decision-making processes at the micro-level, within firms, local labour market institutions, and in the public service (Avdagic et al., 2005). The reasoning behind this speculation, reiterated in Chapter 4, is that the expansion of bargaining agendas to a larger number of issues creates more opportunities for exchange, trade-offs, and compromise. However, we also suggested that broad social pacts complicate pact governance and tend to widen the gap between policy promises and implementation.

278

Conclusions: Reassessing the Framework The two countries that come closest to institutionalizing social pacts as a routine method of socio-economic governance, Ireland and Slovenia, both followed a path of broad and broadening social pacts built around incomes policy deals. A similar approach misfired in Portugal and Italy, and was opposed by employers in the Netherlands who walked away from the Tripartite Policy Framework of 1989, fearing a muddling of responsibilities and that they would have to pay for expensive social policies conceded to the unions. The evolution of pacting in Spain has similarly seen an abandonment of broad, encompassing agreements in favour of more focused, policy-specific bargains. In short, as we speculated in our conclusion to Chapter 4, there seem to be two main tracks towards institutionalization, one based on consecutive and perhaps broadening policy deals (but only when growth can offset concessions on taxes and spending) and a second (with different variants) based on a much more disjointed and ad hoc approach, targeting particular single issues (e.g. wages, pensions, social security, labour market reform and training). Decentralization, too, is Janus-faced. If properly articulated, macro-coordination of policies may facilitate partnership and cooperation in firms, bureaucracies, and local labour markets, but following an argument proposed by Hancke´ and Rhodes (2005), successful coordination on the basis of decentralized decisions may render macro-pacts less useful. Contrary to that view, however, Stanojevic´ and Krasˇovec, in Chapter 10, argue that in Slovenia the ‘debates and results’ of tripartite incomes policy pacts based on a relatively centralized collective-bargaining system ‘included the micro-level that stabilized the entire system of social pact formation’. In Italy and Spain, as the largest and internally most diverse countries in our sample, territorial tripartism may seem to be a ‘logical’ extension of national social pacts. However, in Italy the rapid diffusion of territorial pacts alongside national pacts disappointed early expectations that this process would inject extra energy and support into concertation in general. With unions divided over wage flexibility and territorial differentials, and employers fearing that territorial tripartism might produce ‘yet another level of bargaining’, the development of territorial social pacts has been ‘less impressive than originally expected’, despite several well-documented local success stories. The apparent lack of articulation of Italy’s pacts on wage bargaining with regional and local pacts, with employers as ‘lukewarm participants’ and unions divided, further weakened the new system founded by the 1992–3 pacts. The same problem has been encountered in Spain, where territorial pacts proliferated in the 1990s – promoted by the national unions as complementary to their overall efforts to extend their influence – but with very uneven results. As Fraile (2003) argues, they have only been successful in very few regions, notably Catalonia where a strong regional identity has helped (although nationalism has hindered the development of a strong regional pact in the Basque country) and where local trade union action has been much more connected than elsewhere (e.g. in

279

Social Pacts in Europe Andalusia) with formal collective bargaining. Given this unevenness, it has proven very difficult for the confederal unions to coordinate regional efforts and articulate them with national pacts.

11.3.6. Testing our Hypotheses In Chapter 4, we proposed five hypotheses regarding the mechanisms that drive the institutionalization of social pacts, drawing on the functionalist, utilitarian, normative, and power-distributional perspectives. Here, we draw some comparative conclusions from our country case studies and assess the utility of our framework. 1 1. 3 .6 . 1. THE FUNCTIONALIST HYPOTHESIS This hypothesis claims that social pacts are likely to become institutionalized if they serve ‘system needs’. More specifically, the likelihood of institutionalization is higher when a large ‘problem load’ coincides with the absence of solid micro-foundations for problem resolution and when alternatives for coordination across actors, such as central bargaining and trendsetting sectoral bargaining, are also unavailable. Conversely, deinstitutionalization is likely the smaller the problem load or the stronger are alternative avenues for problem resolution. The strongest evidence in favour of this hypothesis comes from Ireland. Guaranteeing Ireland’s success in the Single European Market and place in the EMU, social pacts ‘seem to have been driven to a degree by the functional requirements of the economy and political system’, and it is significant that pacts were seen as a ‘helpful tool’ by governments in addressing problems ‘in times of crises and growth’ (Chapter 5). Both the adversarial nature of Irish industrial relations and clientelistic tendencies in Irish politics suggest that alternative solutions for controlling inflation and ensuring macroeconomic stability are not readily available (see Hancke´ and Rhodes, 2005). The strong interest of all actors in keeping Ireland attractive to foreign investors – with stable macroeconomic policies and peaceful industrial relations – is presented as a functional requirement for social pact cooperation; and the perennial problem of controlling public-sector wage pressures in a tight labour market has been a strong incentive for pacting for both governments and unions organizing public- and private-sector workers. The Programme for National Recovery (1987–9), the first of seven pacts, is regarded as having been instrumental in reversing Ireland’s decline, rather than simply serving the interests of one of the actors, and has powerful discursive value for those who have sought to defend the wisdom and utility of social pacting going forward. The institutionalization of social pacts in Slovenia also has a functional dimension. Stanojevic´ and Krasˇovec write that social pacts ‘were part of the “success story”, that is, the successful transformation and efficient inclusion in

280

Conclusions: Reassessing the Framework the EU system’. In particular, finding a solution to continued inflationary pressures required some kind of central control. With strong unions, an economy still largely influenced by government, and employers who have yet to find their place (and organization), broad social pacts negotiated by the government and unions seemed to be the best solution. But surely this cannot explain how pacts emerged (or failed to emerge) in countries with similar problems. Moreover, Stanojevic´ and Krasˇovec do well to remind us that in a transition economy the actors and rules are under construction, and that functionalist accounts may be too static. Functionalist explanations only account for part of the story at best in the Netherlands, Italy, Portugal, and Spain, and together suggest that in comparable cases like Ireland too, problem loads must be articulated and communicated in a fertile context for a concerted response to be found. In the Netherlands, the Wassenaar agreement of 1982 was initially negotiated for two years (1983–4) and had no follow-up until 1993, when another pact was negotiated under pressure from what appeared to be a sharp (but turned out to be a mild) economic reversal. Dutch social pacts, and in particular general across-theboard wage moderation, are crisis instruments and as repeated measures they can claim a degree of institutionalization and functionality. But beyond the rhetoric of ‘wage moderation’ as the dominant ‘storyline’ in Dutch social pacts (Hendriks, 2011), Visser and Van der Meer (this volume) argue that their evolution is mostly shaped by the relative power of state actors and the utilitarian concerns of employers and unions. Regini and Colombo tend to reject the functionalist hypothesis in their chapter on Italy. Although the pacts of 1992–3 undoubtedly helped in ‘overcoming some of the most negative features distinctive of the previous period’, they did not lead to consolidation based on a ‘largely shared conception of national competitiveness’. The point seems to be that problem loads in Italy, although substantial, have generally been insufficient to induce cooperation among fiercely divided actors. Providing some support for the analysis of Hancke´ and Rhodes (2005), they argue, however, that with the defeat of inflation and accomplishment of EMU membership, there were no further ‘system’ interests shared by actors, in spite of ‘the absence of solid micro-foundations for problem solutions in employment relations’, in particular relating to productivity, training, and human resource allocation. The Portuguese case, too, tends only partly to support the functionalist hypothesis. Although helpful in the 1980s, when Portugal was forced to call in the IMF, as in Italy there was never the beginning of a shared understanding of which ‘system’ would be desirable or needed defending. Although there were enough big problems to be resolved and no alternative solutions or microfoundations for conflict resolution, this rarely convinced actors to work for social pact consolidation. In Spain, problem loads have certainly mattered in shaping the perceptions of actors, as illustrated by the pacts of the early 1980s

281

Social Pacts in Europe and the 2000s. But a severe economic crisis was not sufficient to secure a pact in the early 1990s, and in all of these instances, of both success and failure, power balances, utilitarian cost–benefit calculations – and ultimately ‘shared perceptions’ – were critical in generating (or preventing) social pact responses. 1 1. 3 .6 . 2. THE UTILITARIAN HYPOTHESIS The utilitarian hypothesis comes in two versions. The first states that the institutionalization of pacts is more likely if associated with satisfactory outcomes. The second proposes that the likelihood of institutionalization increases with investments in supporting arrangements and networks. This hypothesis receives strong support in our case studies. In particular, the Irish, Slovenian, and Dutch studies mention ‘legitimation through success’ as a mechanism of institutionalization. O’Donnell, Adshead, and Thomas conclude that ‘social pacts in Ireland were undoubtedly associated with satisfactory overall economic and associational outcomes from 1987 to 2008 and this is one of the reasons why they were repeated’. A ‘further utilitarian factor driving institutionalization’, they continue, ‘was investment in inter- and intra-organizational ties and networks. In part, this reflected the challenge of implementing overarching agreements’. In Slovenia, too, pointing to a mix of functionalist and utilitarian mechanisms, the authors conclude that ‘the pacts were actually legitimized by their success in controlling inflation and unemployment’ and ‘the general acceptance of social pacts during the accession process was a powerful source of their institutionalisation’. Moreover, social pacts themselves created ‘dense socialpartnership networks which were being reproduced through the everyday functioning of the ESS (the Economic and Social Council)’. Visser and Van der Meer claim that ‘beyond tangible benefits like jobs, wage growth and profits’, social pacts in the Netherlands produced, and were reproduced by ‘nontangible investments in labour peace, mutual trust and social partner autonomy’. Employers realized their long-term goal of greater autonomy from the state in wage bargaining, which was a precondition for decentralization, whereas unions derived satisfaction from job growth, the defence of purchasing power, and increased influence over the pace and nature of welfare and labour market reforms in the 1990s. When after 2004 the actors grew dissatisfied with what could not be negotiated (e.g. dismissals protection) or felt that they had to pay too high a price (in wage moderation and pensions reform), utilitarian motivations appeared to be exhausted. The likelihood of institutionalization is expected to be lower (and deinstitutionalization higher) if actors grow dissatisfied with outcomes or are sharply divided over them. Also, the lower the rate of investment in supporting arrangements, the less likely social pact institutionalization becomes. This – the converse of Hypotheses 2a and 2b – seems to apply to Italy and to critical

282

Conclusions: Reassessing the Framework periods in Portugal and Spain. Satisfaction with social pact results tended to be different across the key actors, disputed within the unions and employers’ federations, and generally short-lived. Regini and Colombo write that the outcomes of the 1992–3 pacts in Italy were initially satisfactory and should have motivated further pact negotiations. But they also stress that the outcomes were never fully undisputed and that Italian employers were dissatisfied with one of the key outcomes of the 1993 pact – two-level bargaining – even though they could not internally agree on what the preferred level should be. Moreover, there were no major investments in supporting arrangements and networks. In Portugal, beyond the government and the UGT union that built its identity on social concertation, the main (industrial) employers and the CGTP union were rarely satisfied with the outcomes, albeit for opposite reasons, and they often believed they would be better off without a pact. Consequently, institutionalization developed haphazardly and had many false starts. In Spain, dissatisfaction with the outcomes of the two major pacts of the early-to-mid-1980s, the subsequent rejection by both the CC.OO and the UGT of pacting, and the lack of consensus on labour market regulation in particular meant that it was not until the late 1990s and early 2000s that a new model of pacting could be agreed upon. 11 . 3. 6. 3 . THE NORMATIVE HYPOTHESIS This hypothesis posits that if actors believe that prior pacts have generated just outcomes, cooperation norms tend to be stronger, increasing the likelihood of further pacting. Conversely, the stronger are perceptions of unjust outcomes, and the weaker the norms of cooperation, the higher is the likelihood of deinstitutionalization. This hypothesis, like the utilitarian hypothesis, posits that all key participants need to get something from the process and feel they are treated ‘justly’ in terms of outcomes and/or procedures.1 Regini and Colombo argue that, given different, sometimes even contradictory, interests and values, ‘it is rather unlikely that the outcomes of previous pacts are perceived as “satisfactory” or “just” by all the parties involved’. But such unlikely ‘win-win’ solutions did emerge in Ireland, Slovenia, and the Netherlands, were perceived as such, and motivated further cooperation, even if minority factions expressed doubts and felt they were treated unequally. Such internal divisions were never strong enough to threaten support from the main union and employers’ associations in Ireland and Slovenia. In the Netherlands, these divisions emerged strongly only after 2002 when the feeling of falling behind, fuelled by sharply rising income differentials and a new culture of personal enrichment on the part of managers, eroded pre-existing norms of cooperation.

1

Hypothesis 3 does not clearly distinguish between distributive and procedural justice.

283

Social Pacts in Europe In Italy, Spain, and Portugal, social pact outcomes were much more disputed and divisions were present almost from the start. Da Paz Campo and Naumann note that the industrial employers in Portugal often felt wrong-footed by the government and took a sceptical, even opportunistic, view of pacts, keeping their investments low. Similarly, Italy’s main employers’ federation often felt that it was dealt a bad hand in tripartite negotiations and that it could not get what it regarded as a ‘procedurally just’ outcome. In Spain, employers have always been lukewarm supporters of concertation, and the CC.OO and UGT unions backed away from pacting after 1985 due to perceptions that the outcomes of the early pacts were unjust. Since 1997, however, pacting on numerous social policy and labour market issues, in addition to the annual wages agreements, has led to greater support for the process by all involved. A utilitarian assessment that the alternatives to pacting would be worse has been cemented by a sense of procedural justice and that, on balance, the outcomes – at least in the medium-to-long term – will be fair. 1 1. 3 .6 . 4. THE POWER-DISTRIBUTIONAL HYPOTHESIS The power-distributional hypothesis states that social pacts are likely to become institutionalized when actors – in particular those with more power – support their reproduction. Conversely, deinstitutionalization is likely when powerful actors lose interest, or when power shifts towards actors who do not support pacts. This hypothesis finds the widest application and is recognized as an important mechanism of deinstitutionalization in five out of six case studies. Thus, in Italy the power shifts to the right in the 1980s and, again, in 2001 and 2008 ended attempts at social pact institutionalization, whereas the opening to the left in the late 1970s and the power vacuum of the early 1990s marked the beginning of a period of concertation. Similarly, right-wing electoral victories in 2002 in Portugal and the Netherlands and in 2004 in Slovenia preceded the deinstitutionalization of concertation. The disengagement from concertation by right-wing governments in Italy (Berlusconi 1994, 2001, 2008), Portugal (Barroso 2002), and the Netherlands (Balkenende 2002) capitalized on employers’ fatigue with pacts, although in Slovenia the role of employers is less clear. In Italy and Portugal, the new centre-right exit strategy was made less costly by deep divisions among the unions. But attempts at deinstitutionalization proved short-lived due to the strength of union opposition in Slovenia, government miscalculation and union resilience in the Netherlands, and the misfiring of employment and collective bargaining reforms which brought employers back to the bargaining table in Portugal. In Italy too, the initial enthusiasm of employers for the government’s stance in 2001 waned thereafter and was never supported by all factions; but the lack of unity of Italy’s unions clearly gave the government and employer hardliners greater latitude. The Dutch and

284

Conclusions: Reassessing the Framework Slovenian cases show that exit can become costly even for majority governments when unions are united and able to mobilize. In Spain, governments of the left and the right have always had an interest in using pacts strategically, either to shore up vulnerability during their first terms in office or to bolster them when deprived of an absolute parliamentary majority. Exit costs have been low for governments, however, when they have had ample majorities, making ‘take-it-or-leave-it’ tactics common and a prime cause of spasmodic and weak institutionalization. Since the late 1990s, both employers and unions have strengthened their commitment to pacting on a range of issues, always negotiated independently of one another, and have continued to engage in bipartite bargaining even when relations of one or the other or both with governments break down. This suggests that pragmatic pacting, Spanish-style (type 3 in Chapter 4), has taken on a logic of its own, and that unions and employers both feel strengthened by concertation, which compensates for their respective associational weaknesses, and provides each with acceptable, if not necessarily their preferred, policy trade-offs. The Irish example is instructive for two reasons. First, as O’Donnell, Adshead, and Thomas point out, political parties that were critical of social pacts when in opposition have supported social pacts when in government, almost as if they want to claim the credit for an institution associated with Ireland’s remarkable economic success. Second, in twenty years of social pacts, there was hardly any trace of employer dissatisfaction. Like most political parties and the main union confederation, the central employers’ federation ‘was also generally supportive of partnership, as long as the terms of the pay agreement could be sold to firms and statutory union recognition was not conceded’, two conditions that were apparently met and neatly reflected the distribution of power in that country.

11.3.7. The Relative Strength of Mechanisms Since the five hypotheses are not mutually exclusive, and some of them may operate conjointly, the question arises as to which mechanism or combination of mechanisms best explains the institutionalization of pacts. The few cases and the nature of the data do not allow for a rigorous measurement of relative weights through multivariate techniques. Instead, we rank each mechanism as to how well and how much it explains a particular period or trajectory of institutionalization or deinstitutionalization (see Table 11.3). Except in the case of Ireland (where institutionalization was constant until 2009), we distinguish between periods of reinstitutionalization (I) and deinstitutionalization (D). Power-distributional mechanisms, often in combination with utilitarian concerns, are most frequently cited as explanation for both institutionalization and deinstitutionalization. Thus, in the Netherlands, Ireland, Portugal, and Spain it is the government, often with allies among the unions and the consent of employers, which presses for repeated social pacts, either directly or through a

285

Social Pacts in Europe Table 11.3 Mechanisms of Institutionalization (I) and Deinstitutionalization (D) of Pacts H

I

IIa

IIb

III

IV

Functional ‘system needs’

Utilitarian (direct) benefits/ incentives

Utilitarian (indirect) access to power, networks

Normative norms, fairness

Power-distributive dominant actor, elites

1

2

4

5

3

National recovery, macro stability and competitiveness, EMU, addressing problems of crisis and growth

Pacts from 1987 to 2007 associated with satisfactory economic outcomes for G, E, and U

Investment in interand intraorganizational ties and networks; creation of new institutions related to implementation

Unclear whether new behavioural norms did develop

Powerful coalition in favour: G and (public-sector) unions; support private-sector employers. G support across party lines

2

4

4

4

1

Curbing of inflation; EMU; shared framework issues relating to EMU

Legitimation by success (inflation; unemployment); general acceptance of pact outcomes

Creation of ESS as meeting place for negotiations

Common framework for interpreting key problems

Social pacts sustained by powerful union movement, which prevents ‘go it alone’ by the government

5

2

4

3

1

EMU membership certain

Pace reform unsatisfactory for G and liberal right

ESS can be (and has been) sidelined by G

Shared framework not for issues beyond EMU

Rise to power of neoliberal government (2004)

4

2

3

5

1

National competitiveness; broad consensus, successful wage moderation

Legitimation by success, satisfactory outcomes for all actors

Organizational interdependence and personal trust; enhanced role of FoL and SER

Norms of cooperation limited

Shadow of hierarchy; employer dominance (when united) and elite preference for concertation

5

3

2

4

1

Less convincing after 2000, political discord about merits of current system

E do not get prize they want (EPL reform), challenge costs (stifling innovation) of pacts

Personal changes, breakdown in trust

After 2000: rising inequality and doubts in fairness of outcomes (part U)

Decline of G power (and hierarchy), doubts about elite cooperation

Ireland I

Slovenia I

D

The Netherlands I

D

286

Conclusions: Reassessing the Framework Italy I

D

1

2

5

5

3

Pacts of ’92–’93 and ’95–’96 save Italy’s place in Europe (EMU entry)

Outcomes ’92– ’93 pacts initially satisfactory (profits, purchasing power, jobs), outcomes never fully undisputed

No institution building

No development of behavioural norms supporting social pacts

Limited coalition defending and developing social pacts, challenged from within

5

2

4

3

1

Less convincing post-EMU; decline of effectiveness (lack of renewal,’98 pact mostly symbolic)

Outcomes early pacts (’77–8, ’83–’4) disappointing and unequal; outcomes 1993 pact challenged by part E

Organizational decentralization and link with local pact weak; no embedding in prior institutions

Procedural and material outcomes not seen as just and equal by U and E

Withdrawal of support of G in 1980s, 2001 and 2008; E use this to seek change; U divided

1

5

2

3

4

Initial pacts relate to system needs (IMF loan; later EMU);

E: attenuation inflation, conflict, U (formation UGT), G support

Formation CPCS constitutive for pact process

No acceptance of social pact as behavioural norm (except one U);

Coalition G and part U, confronted with strong opposition (part U), E divided

4

2

3

5

1

Absence of micro foundations or alternative mechanisms to deal with problems

U and E specific outcomes (training, health and safety, collective agreements)

CPCS, some institution building special domains (health and safety, training)

Weak association of pacts with fairness in outcomes

Broader support U (after 2001), pacts depend on position and strength of G

3

2

4

5

1

No clear sense of ‘system’ that needs defending

Results of pacts challenged by part E and part U

Network formation around incomes policy agreements weak and incomplete

Norm formation around social concertation weak and partial

Challenges by some G (right, absolute majority), some E (industry), U often divided

1

2

3

1

2

Early-to-mid-1980s pacts predicated on democratic transition problem resolution

G: economic stability and political legitimation, E: attenuation inflation, U: UGT strengthened, CC.OO ambivalent

U involvement in social policy institutions; influence weak

No acceptance of social pact as behavioural norm (except initially one U)

G and one U, confronted with opposition in 1984 pact (one U), E divided

Portugal Ia

Ib

D

Spain Ia

(Continued )

287

Social Pacts in Europe Table 11.3 Continued H

D

Ib

I

IIa

IIb

III

IV

Functional ‘system needs’

Utilitarian (direct) benefits/ incentives

Utilitarian (indirect) access to power, networks

Normative norms, fairness

Power-distributive dominant actor, elites

3

1

3

5

4

Late 1980s, early 1990s: tight monetary policy, high unemployment replaced need for incomes policy

U seek revival of support; G avoids compensation for wage moderation; E avoid concessions to U

No institution building; 1993 failure to revive pacting

U: very low association of pacts with fairness in outcomes

G strong, then weak; U strengthen through unity of action; E consolidate power

1

2

3

3

2

1997: unemployment crisis, temp. contract expansion, run-up to EMU; 2002 cost control under EMU

G seeks legitimacy, U seeks to restore access to policy making, E seeks to counter U influence; 2002: U and E joint wage-system governance

G, U, and E contribute to new collective bargaining system; peak U and E influence greater post-2002; new bargaining/ monitoring commissions

Norm formation begins to strengthen; U and E converge in evaluation of economic problems

G influential (though frequent minorities in parliament); U and E seek to compensate for weak associational strength through mainly bipartite deals.

Note: Ranks from 1 (= strongest) to 5 (= weakest). U – unions; E – employers; G – government. We distinguish between two periods of institutionalization in Portugal, from 1986 to 1992 (Ia) and after 2001 (Ib); and in Spain, 1981–5 (Ia) and since 1997 (Ib).

shadow of hierarchy. In Slovenia, the prime force was a union movement able to defend concertation at critical times, whereas Irish social pacts were sustained by a coalition between the government and powerful unions with a base in the public sector, and employer acquiescence. In Italy, power-distributional mechanisms seem to be at work, mostly in the deinstitutionalization of pacts and relate to power shifts in the political system and among employers. The weakness and instability of a pro-pact coalition, and the outcomes of elections, can explain the demise of social pacts, but not their institutionalization. Thus, in Italy the extraordinary energies released by the need to address the deep political crisis of 1992–3 and ensure EMU membership are better candidates for explaining a short-lived period of social pact institutionalization, which is indeed driven by functional rather than utilitarian or power-distributional mechanisms. But power-distributional or functional mechanisms rarely work alone. For obvious reasons, power is applied to achieve certain outcomes – be they analysed in functional, utilitarian, or normative terms. Our Irish authors conclude that the institutionalization of social pacts ‘seems to have been driven to a

288

Conclusions: Reassessing the Framework degree by the functional requirements of the economy and political system, by utilitarian considerations and by the interests of powerful actors in continuing partnership. The normative force of the partnership approach was more qualified.’ The Slovenian study highlights the combination of power-distributional and functional mechanisms, whereas normative and utilitarian influences were much weaker. The case of the Netherlands, with a more disjointed trajectory of pacting, often interrupted by economic crisis or the instability of government coalitions, reveals the importance of power-distributional mechanisms and the relative strength of the state as an actor, as well as the utility derived by social partners from engagement with the government. Functional and normative mechanisms play a smaller role. In Spain, having made important concessions in the early 1980s in support of democratic legitimacy and a weak economy, all three partners believed after 1985 that they were better off without the commitments and costs that pacts entailed. By 1997, with the economy in bad shape, unemployment above 20 per cent, and the deadline for Eurozone membership approaching, they had changed their minds and in 2002, employers and unions cemented their bipartite relationship with annual wage agreements. Within that process, power clearly matters: each partner alternates between compromise and contestation, and utilitarian calculations have driven the process forward. Two developments have provided normative support: ideological convergence between the two unions, which have become more moderate over time and now see concertation as strategically central and procedurally fair; and the emergence of a shared understanding between unions and employers of the problems of the Spanish economy, even if the solutions they propose are frequently at odds. The Italian study, by contrast, finds neither strong nor shared utilitarian satisfaction among unions and employers or, for that matter, any actor strong enough to make social pacts the least bad outcome for all. Normative mechanisms are simply absent in this case, affirming the argument of O’Donnell, Adshead, and Thomas that such norms are endogenous rather than exogenous to the social pact process. The Portuguese study concludes that the functionalist and normative arguments for social pacts that seemed to dominate the early years later lost their relative importance. Having gained from the experience of pacts a clearer notion of the risks and opportunities, cost–benefit and power considerations later gained greater prominence in the strategic and tactical calculations of the Portuguese actors.

11.4. Conclusions In Section 11.2 of this chapter, we first assessed the relevance of the four central assumptions of our bargaining model. Our case studies demonstrated that they were not misplaced. Regarding bounded rationality, in all of our cases, high

289

Social Pacts in Europe situational uncertainty meant that actors often could not easily determine how best to pursue their interests, and were sometimes victims of misperception, choosing strategies that contradicted their own interests. As for preferences, our cases confirm that actors often evaluate different policy options in terms of their structural and historical contexts, and that deducing preferences from their sectoral (public/private, exposed/sheltered) locations will be deceiving. The non-unitary assumption was strongly supported by the prevalence of internal actor differences and conflicts, which generate unstable interests and ambivalent preferences. The assumption that relative power perceptions are more important than trust, habits, and norms is amply demonstrated and confirmed again in our analysis of institutionalization below. Our bargaining model has allowed for a much deeper understanding of the dynamics of pact negotiations than available hitherto. Briefly stated, our model suggests that negotiations are more likely to be successful when power disparities are evident, though not large, and that pacts tend to be concluded when one actor sees its bargaining power as strong/increasing and the other its power as weak/decreasing. Negotiations tend to fail when both actors see their power as strong/increasing or as weak/decreasing. Mutual perceptions of extreme weakness will prevent actors from signing an agreement, unless a third actor (see below) intervenes. Such scenarios have been found across our cases and confirm the utility of the model. That said, our case studies also suggest the need for some nuancing. First, although in the model, the threat of exit is used by relatively strong actors seeking better outcomes, it may be used by weaker actors too. Second, depicting negotiations as bargaining games led by two actors sometimes obfuscates the three-way dynamics of negotiations, especially when a third actor sponsors or facilitates a deal. And the assumption that bargaining partners all have similar discount rates is disconfirmed by episodes in which they had different rates, although this did not appear to undermine the heuristic value of the model. Overall, the evidence supports our central argument that pacts emerge via political processes driven by interests and power, not because of the role of ideas or via spontaneous coordination in response to problem loads. In Section 11.3 of this chapter, we identified two trajectories of social pact institutionalization, one involving repetition and expansion, the other a more interrupted and disjointed pattern. We found that both can break down, usually due to changes in power distribution, correlated with a decline in the functionality of pacts, changing levels of actor satisfaction, and perceptions of fairness. Reinforcing a conclusion from our bargaining analysis, although we found that pacts sometimes produced cooperative norms, in no case were norms strong enough to determine institutionalization, or neutralize the effects of power shifts, severe economic setbacks, or dissatisfaction with outcomes. The core question of our enquiry into institutionalization is whether pacts are contingent and must be ‘reinvented each time anew’ or whether they

290

Conclusions: Reassessing the Framework become a ‘default option’ for certain occasions and policy decisions. In some of our cases – Ireland, Spain, the Netherlands, and Slovenia – there are periods in which pacting has indeed become a routine rather than ad hoc affair. But even then, these constructions remain extremely fragile, as our theoretical discussion in Chapter 4 suggests, and vulnerable to external pressures and internal reversals of fortune. Clearly, despite their frequent use in our six countries, social pacts have not become an institutional fact, like parliamentary democracy or elections, which are not called into question whenever economic conditions or power relations change. Social pacts remain contingent institutional constructions, depending on the state of the economy and highly susceptible to the push and pull of different social and political forces, their flexibility simultaneously a source of strength and sometimes of paralysing weakness. As complex, flexible, and weakly networked forms of economic governance, social pacts remain inherently unstable and unpredictable, even when endowed with a degree of hierarchical ordering and formality, established via mutual commitments and obligations, or under the shadow of state hierarchy. Even in Ireland, the country with the most consistent history of social pacts over the past two decades, and in the Netherlands, the country with the strongest corporatist credentials, social pacts have remained unstable institutions.

291

Bibliography

Acocella, N., Tirelli, F., and di Bartolomeo, A. (2007). ‘From First- to Second-Generation Social Pacts’, in: N. Acocella, and R. Leoni (eds.), Social Pacts, Employment, and Growth. Berlin: Physica-Verlag, pp. 239–51. Addison, J. T. (1981). ‘Incomes Policy: The Recent European Experience’, in: J. L. Fallick and R. F. Elliott (eds.), Incomes Policies, Inflation, and Relative Pay. London: Allen and Unwin, pp. 187–245. Adshead, M. and McInerney, C. (2010). ‘Institutionalising Partnership Governance in Ireland’, in: M. Considine and E. Sylvain (eds.), Local Government in Theory and Practice. Basingstoke: Palgrave, forthcoming. —— and Quinn, B. (1998). ‘The Move from Government to Governance: Irish Development Policy’s Paradigm Shift’, Policy & Politics, 26(2): 209–25. Akkermans, T. (1999). Redelijk bewogen. De koers van de FNV 1976–1999: van maatschappijkritiek naar zaakwaarneming, Amsterdam: Stichting FNV Pers. Albeda, W. (1987). ‘Loonvorming in the periode van neergang tot beginnend herstel 1973–1987’, in: A. Knoester (ed.), Lessen uit het verleden. 125 jaar Vereniging voor de Staathuishoudkunde. Leiden/Antwerp: Stenfert Kroese, pp. 305–18. —— (2004). Ik en de verzorgingsstaat. Herinneringen van Wil Albeda, Meppel: Boom. Alvarez, M., Garrett, G., and Lange, P. (1991). ‘Government Partisanship, Labor Organization, and Macroeconomic Performance’, American Political Science Review, 85(2): 539–56. Amuedo-Dorantes, C. (2000). ‘Work Transitions into and out of Involuntary Temporary Employment in a Segmented Market: Evidence from Spain’, Industrial and Labor Relations Review, 53(2): 309–25. Andeweg, R. B. (2008). ‘Coalition Politics in the Netherlands: From Accommodation to Politicization’, Acta Politica, 43: 254–72. —— and Irwin, G. A. (1993). Dutch Government and Politics, London: Palgrave Macmillan. Armingeon, K. (1982). Neo-korporatistiche Einkommenspolitiik: Eine vergleichende Untersuchung von Einkommenspolitiken in westeuropa¨ischen La¨ndern in den 70er Jahren, Frankfort a/M.: Haag und Herchen. Arnoldus, D. (2007). ‘The Wassenaar Agreement: the Timing of a Social Pact’, in: K. Davids, G. Devos and P. Pasture (eds.), Changing Liaisons: The Dynamics of Social Partnership in 20th Century West European Democracies. Brussels: P.I.E.-Peter Lang, pp. 191–212. Astudillo, J. (2001). ‘Without Unions, but Socialist: The Spanish Socialist Party and its Divorce from its Union Confederation’, Politics & Society, 29(2): 271–94. Avdagic, S. (2006a). ‘One Path or Several? Understanding the Varied Enactment of Tripartism in New European Capitalisms’, Discussion Paper, Max Planck Institute for the Study of Societies, Cologne, 06/5, (September), http://www.mpifg.de/pu/mpifg_dp/dp06–5.pdf

292

Bibliography —— (2006b). Institutional Emergence: Framework Evaluation Analytical Report I – Synthesis. NEWGOV Project Deliverable 18a/D08new, http://www.eu-newgov.org/ database/DELIV/D18aD08_AnalyticalReport1_Synthesis.pdf. —— (2010). ‘When are Concerted Reforms Feasible? Explaining the Emergence of Social Pacts in Western Europe’, Comparative Political Studies, 43(5): 628–57. —— Rhodes, M., and Visser, J. (2005). ‘The Emergence and Evolution of Social Pacts: A Provisional Framework for Comparative Analysis’, European Governance Papers, (N-05–01), http://www.connex-network.org/eurogov/ Axelrod, R. (1984). The Evolution of Cooperation, New York: Basic Books. Baccaro, L. (2001). ‘Union Democracy Revisited: Decision-Making Procedures in the Italian Labor Movement’, Economic and Industrial Democracy, 22(2): 183–210. —— (2002). ‘The Construction of “Democratic” Corporatism in Italy’, Politics and Society, 30(2): 327–57. —— and Lim, S.-H. (2007). ‘Social Pacts as Coalitions of the Weak and Moderate: Ireland, Italy and South Korea in Comparative Perspective’, European Journal of Industrial Relations, 13(1): 27–46. —— and Locke, R. (1998). ‘The End of Solidarity? The Decline of Egalitarian Wage Policies in Italy and Sweden’, European Journal of Industrial Relations, 4(3): 283–308. —— and Simoni, M. (2007). ‘Centralized Wage Bargaining and the “Celtic Tiger” Phenomenon’, Industrial Relations, 46(3): 426–55. —— —— (2008). ‘Policy Concertation in Europe: Understanding Government Choice’, Comparative Political Studies, 41(10): 1323–48. Ballarino, G. (2001). The Regulation of New Forms of Employment and Work in Lombardy: Between Institutionalized Concertation and Experimentation, Milano: Ires Lombardia. Barbera, F. (2001). ‘Le politiche della fiducia: Limiti e possibilita` dei patti territoriali’, PhD dissertation, University of Milan. Barreto, J. (1980). ‘Sobre a implantac¸~ao da contratac¸~ao colectiva na Europa e em Portugal’, Analise Social, 64: 699–711. —— (1992). A formac¸a~o das centrais sindicais e do sindicalismo contempora^neo em Portugal (1968–1990), Lisbon: Instituto de Ci^encias Sociais. —— and Naumann, R. (1998). ‘Portugal: Industrial Relations under Democracy’, in: R. Hyman and A. Ferner (eds.), Changing Industrial Relations in Europe, Oxford: Blackwell, pp. 395–425. Barry, F. (1999). Understanding Ireland’s Economic Growth, London: Macmillan. Bellardi, L. (1995). ‘La contrattazione collettiva nel 1993’, Giornale di diritto del lavoro e delle relazioni industriali, 65(1): 161–70. Birindelli, L. and D’Aloia, G. (2001). Retribuzioni, produttivita` e distribuzione del reddito prima e dopo il 1993, Roma: Ires Nazionale. Bolocan, M., Pasqui, G., and Perulli, P. (2000). La programmazione negoziata e la concertazione territoriale dello sviluppo in Lombardia: l’indagine empirica, Milano: Ires Lombardia. Boyd, R. and Richerson, P. J. (1985). Culture and the Evolutionary Process, Chicago: University of Chicago Press. Broertjes, P. (1989) Getoo’s in Nederland – Visies op armoede en werkloosheid, Amsterdam: Van Gennep. Bruggeman, J. and Camijn, A. (1999). Ondernemers Verbonden. 100 jaar ondrnemersorganisaties in Nederland, Wormer: Immerc.

293

Bibliography —— and van der Houwen, P. (2005). Voorbij Wassenaar: de Stichting van de arbeid 1982–2005, The Hague: Labour Foundation. Buruma, I. (2006). Murder in Amsterdam: The Death of Theo van Gogh and the Limits of Tolerance, New York: Penguin. Calmfors, L. and Driffil, J. (1988). ‘Bargaining Structure, Corporatism and Macroeconomic Performance’, Economic Policy, 6: 14–47. —— Booth, A., Burda, M., Checchi, D., Naylor, R., and Visser, J. (2001). ‘The Role of Collective Bargaining in Europe’, in: A. Brugiavini, L. Calmfors, and T. Boeri (eds.), The Role of the Unions in the Twenty-First Century, Part 1. Oxford: Oxford University Press, pp. 1–156. Campos Lima, M. da Paz (2001). ‘A negociac¸~ao colectiva sectorial: A perda de centralidade na regulac¸~ao laboral?’, Cadernos sociedade e trabalho – Trabalho e relac¸o~es laborais, 1: 233–50. ~ es colectivas de trabalho e flexibilidade ofensiva, nos anos 90, em —— (2004). ‘Relac¸o Portugal: a configurac¸~ao e mudanc¸a das normas laborais’, PhD thesis, ISCTE, Lisbon, Portugal. —— (2008). ‘Portugal: Mixed Reaction to New Law on Employment Contracts in the Public Sector’, EIROnline, 9 (October), http://www.eurofound.europa.eu/eiro/2008/09/ articles/pt0809039i.htm —— (2009). ‘Portugal: New Labour Code Comes into Force in Wake of Controversy’, EIROnline, 11 (April), http://www.eurofound.europa.eu/eiro/2008/11/articles/ pt0811019i.htm —— and Naumann, R. (1997). ‘Social Dialogue and Social Pacts in Portugal’, in: G. Fajertag and P. Pochet (eds.), Social Pacts in Europe. Brussels: ETUI, pp. 157–79. —— —— (2000). ‘Social Pacts in Portugal: From Comprehensive Policy Programs to the Negotiation of Concrete Industrial Relations Reforms?’, in: G. Fajertag and P. Pochet (eds.), Social Pacts in Europe –New Dynamics. Brussels: European Trade Union Institute/ Observatoire Social Europe´en, pp. 321–42. —— —— (2004). ‘A concertac¸~ao social em Portugal’, in: I. Salavisa (ed.), Portugal e a sociedade do conhecimento: Dina^micas mundiais, competitividade e emprego. Oeiras: Celta Editora, pp. 145–64. —— —— (2005). ‘The Emergence and Institutional Evolution of Social Pacts in Portugal’, Report for NEWGOV, Project Deliverable 18a. European University Institute, Florence, Italy. Campos Lima, M. da Paz et al. (2000). Conteu´do das convenc¸o~es colectivas na o´ptica do emprego e da formac¸a~o, Lisbon: Din^amia-ISCTE, OEFP – Estudos e An alises. Carrieri, M. (2007). L’altalena della concertazione, Roma: Donzelli. Catz, F. and Linders, B. (1997). Een beetje boegbeeld Johan Stekelenburg: Drie decennia vakbondsleven van een aanvaller, Amsterdam: FNV Press. CGTP (2004). Relato´rio de Actividades 2000–2004, Lisbon: CGTP. —— (2008). Relato´rio de Actividades 2004–2008, Lisbon: CGTP. Cnel-Cesos (2006). Le relazioni sindacali in Italia e in Europa: Retribuzioni e costo del lavoro, Roma. Coleman, J. S. (1990). The Foundations of Social Theory, Cambridge, MA: Harvard University Press. ~ es Laborais (2007). Livro branco das relac¸o~es laborais, Comiss~ao do Livro Branco das Relac¸o Ministe´rio do Trabalho e da Solidariedade.

294

Bibliography Commons, J. R. (1968), (original 1924). Legal Foundations of Capitalism, Madison, Milwaukee, and London: University of Wisconsin Press. Community Platform (1997). Achieving Social Partnership: The Strategy and Proposals of the Community Platform at the Partnership 2000 Negotiations, Dublin: Community Platform. Compston, H. and Berger, S. (eds.) (2002). Social Partnership in the 1990s: The West European Experience in Historical Perspective, Oxford: Berghahn Books. —— and Greenwood, J. (eds.) (2001). Social Partnership in the European Union, London: Palgrave. Conselho Econo´mico e Social (1993). Os acordos de concertac¸a~o social em Portugal (II – Textos), Lisboa: CES. Costa, H. Augusto (1994). ‘A construc¸~ao do pacto social em Portugal’, Revista cr itica de cie^ncias sociais, 39: 119–46. Costa, P. Ferraz (2000). ‘Depoimento’, in: A. Dornelas and J. Madureira Pinto (eds.), A reforma do pacto social, Lisbon: Imprensa Nacional – Casa da Moeda, pp. 375–83. Crouch, C. (1993). Industrial Relations and European State Traditions, Oxford: Oxford University Press. Culpepper, P. D. (2002). ‘Powering, Puzzling, and ‘Pacting’: The Informational Logic of Negotiated Reforms’, Journal of European Public Policy, 9(5): 774–90. —— (2004). ‘Focal Points and Power Plays in Institutional Change: An Empirical Assessment’, Paper prepared for presentation at the Annual Meeting of the American Political Science Association, Chicago, IL, September 2–5. —— (2008). ‘The Politics of Common Knowledge: Ideas and Institutional Change in Wage Bargaining’, International Organization, 62 (Winter): 1–33. den Butter, F. A. G. and Mosch, R. H. J. (2003). ‘The Dutch Miracle: Institutions, Networks and Trust’, Journal of Institutional and Theoretical Economics, 159(2): 362–91. Department of Finance (2008). Budgetary and Economic Statistics, Dublin: Department of Finance. de Rooy, P. and te Velde, H. (2005). Met Kok: over veranderend Nederland, Amsterdam: Wereldbibliotheek. DiMaggio, P. J. and Powell, W. W. (1991). ‘Introduction’, in: W. W. Powell and P. J. DiMaggio (eds.), The New Institutionalism in Organizational Analysis. Chicago and London: The University of Chicago Press, pp. 1–38. Dornelas, A. (ed.) (2006). Livro Verde sobre as relac¸o~es laborais, Lisbon: Ministe´rio do Trabalho e da Solidariedade. Ebbinghaus, B. and Hassel, A. (2000). ‘Striking Deals: Concertation in the Reform of Continental European Welfare States’, Journal of European Public Policy, 7(1): 44–62. EIRO (1998a). ‘Spain: Social Dialogue Encounters Problems’, www.eurofound.europa.eu/ eiro/1998/10/inbrief/es9810286n.htm —— (1998b). ‘Spain: Agreement between Government and Unions on Part-time Contracts’, www.eurofound.europa.eu/eiro/1998/11/feature/es9811289f.htm —— (1999). ‘Employers Organizations in Spain Examined’, www.eurofound.europa.eu/ eiro/1999/10/feature/es9910257f.htm —— (2002). ‘Spain: Central Agreement on Bargaining in 2002’, http://www.eurofound. europa.eu/eiro/2002/01/feature/es0201207f.htm —— (2005). ‘Spain: New Procedure Introduced for Extending Collective Agreements’, www.eurofound.europa.eu/eiro/2005/07/feature/es0507103f.htm

295

Bibliography —— (2007). ‘Industrial Relations Developments 2006 – Spain’, http://www.eurofound.europa.eu/eiro/studies/tn0703019s/es0703019q.htm Encarnacio´n, O. G. (1999). ‘A Casualty of Unemployment: The Breakdown of Social Concertation in Spain’, South European Society and Politics, 4(3): 32–59. ˜a: de la Huelga Espina, A. (1999). ‘El guadiana de la concertacio´n neo-corporatista en Espan General de 1988 a los acuerdos de 1997’, in: F. Migue´lez and C. Prieto (eds.), Las relaciones de empleo en Espan˜a. Madrid: Siglo XXI, pp. 375–98. ˜os de relaciones industriales en Espan ˜ a’, in: Estefania, J. and Serrano, R. (1990). ‘Diez an A. Zaragoza (ed.), Pactos sociales, sindicales y patronal en Espan˜a. Madrid: Siglo XXI, pp. 17–42. Eurofound (2008). ‘Working Conditions and Social Dialogue – Spain’, http://www.eurofound.europa.eu/comparative/tn0710019s/es0710019q.htm Fajertag, G. and Pochet, P. (eds.) (1997). Social Pacts in Europe, Brussels: European Trade Union Institute/Observatoire Social Europe´en. —— —— (eds.) (2000). Social Pacts in Europe – New Dynamics, Brussels: European Trade Union Institute/Observatoire Social Europe´en. —— —— (2000). ‘A New Era for Social Pacts in Europe’, in: G. Fajertag and P. Pochet (eds.), Social Pacts in Europe – New Dynamics. Brussels: European Trade Union Institute/ Observatoire Social Europe´en, pp. 9–40. Fehr, E. and Ga¨chter, S. (2000). ‘Fairness and Retaliation: The Economics of Reciprocity’, Journal of Economic Perspectives, 14(3): 159–81. Fernandes, A. Monteiro (1993). ‘Aspectos juridicos da concertac¸~ ao social’, in: Os acordos de concertac¸a~o social em Portugal (I – Estudos). Lisbon: Conselho Econo´mico e Social. —— (2001). ‘Por um direito do trabalho competitivo’, Cadernos sociedade e trabalho – Trabalho e relac¸o~es laborais, 1: 47–61. Ferreira, A. Casimiro (1993). Contributos para uma analise sociolo´gica das formas de resoluc¸a~o de conflitos colectivos de trabalho, Coimbra: FEUC. —— (1994). ‘O estado e a resoluc¸~ao dos conflitos de trabalho’, Revista cr itica de cie^ncias sociais, 39: 89–118. —— and Marques, M. M. L. (1991). ‘A Concertac¸~ao Econo´mica e Social: A Construc¸~ ao do Dialogo Social em Portugal’, Revista critica de cie^ncias sociais, 31: 11–41. Ferreiro, J. (2004). ‘Decentralized versus Centralized Collective Bargaining: Is the Collective Bargaining Structure in Spain Efficient?’, Journal of Post Keynesian Economics, 26(4): 695–728. —— and Gomez, C. (2005). ‘New Incomes Policy in Spain’, Paper delivered to the conference on ‘Macroeconomics and Microeconomics: Alternatives to Orthodoxy’, Berlin, 28–29 October, http://www.boeckler.de/pdf/v_2005_10_28_ferreiro_gomez.pdf. —— and Serrano, F. (2001). ‘The Spanish Labour Market: Reforms and Consequences’, International Review of Applied Economics, 15(1): 31–53. Fink-Hafner, D. (2002). ‘Prevzemanje oblasti v kontinuiranem demokraticˇnem prehodu (Taking over Power in the Continually Democratic Transition)’, in: D. Fink-Hafner and T. Boh (eds.), Parlamentarne volitve 2000. Ljubljana: Fakulteta za druzˇbene vede, pp. 7–25. —— (2006). ‘Slovenia: between Bipolarity and Broad Coalition-Building’, in: S. Jungerstam-Mulders (ed.), Post-communist EU Member States: Parties and Party Systems. Aldershot, Burlington: Ashgate, pp. 203–31.

296

Bibliography —— and Krasˇovec, A. (2006). ‘Ideolosˇko-politicˇki rascjepi u Slovenskoj stranacˇkoj areni poslije 1989’ (Ideological and Political Cleavages within the Slovenian Political Arena since 1989)’, in: D. Fink-Hafner and M. Pejanovic´ (eds.), Razvoj politicˇkog pluralizma u Sloveniji I Bosni I Hercegovini. Sarajevo, Ljubljana: Promocult, pp. 71–104. Fiorito, R. (2003). ‘The Paradox of Corporatism: Italy’s Case’, in: M. Chiarini, and B. Baldassarri (eds.), Studies in Labour Markets and Industrial Relations. London: Palgrave-Macmillan, pp. 277–97. Flanagan, R. J., Soskice, D. W., and Ulman, L. (1983). Unionism, Economic Stabilisation and Incomes Policies: European Experience, Washington, DC: The Brookings Institution. Flanders, A. (1954). ‘Collective Bargaining’, in: A. Flanders and H. A. Clegg (eds.), Industrial Relations in Great Britain. Oxford: Blackwell, pp. 252–322. —— (1968). ‘Collective Bargaining: A Theoretical Analysis’, British Journal of Industrial Relations, 6(1): 1–26. —— (1970). Management and Unions: The Theory and Reform of Industrial Relations, London: Faber and Faber. Foweraker, J. (1987). ‘Corporatist Strategies in the Transition to Democracy in Spain’, Comparative Politics, 20(3): 57–72. Fraile, L. (2003). ‘The Regional Trade Union–Lessons from Spain’, Doctorate in Political Science, Massachusetts Institute of Technology, http://hdl.handle.net/1721.1/29981 —— (ed.) (2010). Blunting Neo-liberalism: Tripartism and Economic Reform in the Developing World, Geneva: ILO and Palgrave-Macmillan. Garrett, G. (1998). Partisan Politics in the Global Economy, New York: Cambridge University Press. —— and Weingast, B. R. (1993). ‘Ideas, Interests, and Institutions: Constructing the European Community’s Internal Market’, in: J. Goldstein and R. Keohane (eds.), Ideas and Foreign Policy. Ithaca, NY: Cornell University Press, pp. 173–206. Geary, J. (1999). ‘The New Workplace: Change at Work in Ireland’, International Journal of Human Resource Management, 10(5): 870–90. Gintis, H. (2000). Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Interaction, Princeton, NJ: Princeton University Press. Golden, M. (1988). Labor Divided: Incomes Policies, Trade Unions and the Italian Communist Party, Ithaca, NY: Cornell University Press. Greif, A. (2006). Institutions and the Path to the Modern Economy: Lessons from Medieval Trade, New York: Cambridge University Press. —— and Laitin, D. (2004). ‘A Theory of Endogenous Institutional Change’, American Political Science Review, 98: 633–52. —— Milgrom, P., and Weingast, B. R. (1995). ‘Coordination, Commitment and Enforcement: The Case of the Merchant Guild’, in: J. Knight and I. Sened (eds.), Explaining Social Institutions. Ann Arbor, MI: University of Michigan Press, pp. 27–56. Gunnigle, P. (2000). ‘Paradox in Policy and Practice: Trade Unions and Public Policy in the Republic of Ireland’, IBAR, 21(2): 39–54. Hall, P. A. and Soskice, D. (eds.) (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage, Oxford: Oxford University Press. —— and Taylor, R. C. R. (1996). ‘Political Science and the Three New Institutionalisms’, Political Studies, 44(5): 936–57.

297

Bibliography Hamann, K. (1997). ‘The Pacted Transition to Democracy and Labour Politics in Spain’, South European Society and Politics, 2(2): 110–38. —— (2001). ‘The Resurgence of National-Level Bargaining Union Strategies in Spain’, Industrial Relations Journal, 32(2): 154–72. —— and Kelly, J. (2007a). ‘Party Politics and the Re-emergence of Social Pacts in Western Europe’, Comparative Political Studies, 40(8): 971–94. —— —— (2007b). ‘Social Pacts in Western Europe: The Roles of European Integration and Electoral Competition’, European Union Studies Association Meeting. Montreal, May 17–19. Hancke´, B. (2002). ‘The Political Economy of Wage-Setting in the Eurozone’, in: P. Pochet (ed.), Wage Policy in the Eurozone. Brussels: Peter Lang, pp. 131–48. —— and Rhodes, M. (2005). ‘EMU and Labour Market Institutions in Europe: The Rise and Fall of National Social Pacts’, Work and Occupations, 32(2): 196–228. —— —— and Thatcher, M. (eds.) (2007). Beyond Varieties of Capitalism: Conflict, Contradiction and Complementarities in the European Economy, Oxford: Oxford University Press. Harcourt, M. and Wood, G. (2003). ‘Under What Circumstances Do Social Accords Work?’, Journal of Economic Issues, 37(3): 747–67. Hardiman, N. (1988). Pay, Politics and Economic Performance in Ireland 1970–1987, Oxford: Clarendon Press. —— (2006). ‘Politics and Social Partnership: Flexible Network Governance’, Economic and Social Review, 37(3): 343–74. Hassel, A. (2003). ‘The Politics of Social Pacts’, British Journal of Industrial Relations, 41(4): 707–26. —— (2006). Wage Setting, Social Pacts and the Euro, Amsterdam: Amsterdam University Press. —— (2007). ‘What does Business Want? Labour Market Reform in CMEs and its Problems’, in: B. Hancke´, M. Rhodes and M. Thatcher (eds.), Beyond Varieties of Capitalism: Conflict, Contradiction and Complementarities in the European Economy. Oxford: Oxford University Press, pp. 253–77. Hastings, T., Sheehan, B., and Yeates, P. (2007). Saving the Future: How Social Partnership Shaped Ireland’s Economic Success, Dublin: Blackhall Publishing. Hazenbosch, P. (2009). Voor het volk om Christus’ wil. Een geschiedenis van het CNV, Hilversum: Uitgeverij Verloren. Hemerijck, A. C. (1993). ‘The Historical Contingencies of Dutch Corporatism’, PhD dissertation, University of Oxford, Oxford. Hemerijck, A. C., van der Meer, M., and Visser, J. (2000). ‘Innovation through Co-ordination – Two Decades of Social Pacts in the Netherlands’, in: G. Fajertag and P. Pochet (eds.) Social Pacts in Europe – New Dynamics. Brussels: European Trade Union Institute/ Observatoire Social Europe´en, pp. 257–278. Hendriks, C. (2011). ‘The Story behind the Dutch Model: Consensual Politics of Wage Restraint’, PhD dissertation, University of Amsterdam. He´ritier, A. and Lehmkuhl, D. (2008). ‘The Shadow of Hierarchy and New Modes of Governance’, Journal of Public Policy, 28(1): 1–17. —— and Rhodes, M. (eds.) (2011). New Modes of Governance in Europe: Governing in the Shadow of Hierarchy. Basingstoke: Palgrave-Macmillan. Heywood, P. (1995). The Government and Politics of Spain, New York: St. Martin’s Press.

298

Bibliography Hicks, A. (1999). Social Democracy and Welfare Capitalism: A Century of Income Security Politics, Ithaca, NY: Cornell University Press. Hyman, R. (1999). ‘National Industrial Relations Systems and Transnational Challenges: An Essay in Review’, European Journal of Industrial Relations, 5(1): 89–110. —— (2002). Understanding European Trade Unionism: Between Market, Class and Society, London: Sage Publications. IBEC (1999). Partnership at Enterprise Level; Survey Results 1999, Dublin: IBEC Partnership Unit. Industrial Relations News (1997). ‘Post-Budget Votes Swung Majority in Favour of Partnership 2000’, no.6, Dublin. Iversen, T. (1998). ‘Wage Bargaining, Central Bank Independence, and the Real Effects of Money’, International Organization, 52(3): 469–504. Jarry, D. and Jarry, J. (2005). Collins Dictionary of Sociology, 4th ed., Glasgow: Collins. Jepperson, R. L. (1991). ‘Institutions, Institutional Effects, and Institutionalisation’, in: W. W. Powell, and P. J. DiMaggio (eds.), The New Institutionalism in Organizational Analysis. Chicago and London: The University of Chicago Press, pp. 143–63. Johansson, A. (2006). ‘Wage-Setting in Finland: Increasing Flexibility in Centralised Wage Agreements’, Economic Department Working Paper, Paris: OECD. Kahn-Freund, O. (1954). ‘Intergroup Conflicts and their Settlement’, British Journal of Sociology, 5(3): 193–227. Katz, H. and Darbyshire, O. (2000). Converging Divergences: Worldwide Changes in Employment Systems, Ithaca, NY: Cornell University Press. Katzenstein, P. (1985). Small States in World Markets: Industrial Policy in Europe, Ithaca, NY: Cornell University Press. Kauppinen, T. (2000). ‘Social Pacts in Finland’, in: G. Fajertag, and P. Pochet (eds.), Social Pacts in Europe–New Dynamics. Brussels: European Trade Union Institute and Observatoire Social Europe´en, pp. 161–85. Kavcˇicˇ, F. (2004). ‘Ekonomsko-socialni svet 1994–2004 (Economic and Social Council 1994–2004)’, in: F. Kavcˇicˇ (ed.), Ekonomsko-socialni svet 1994–2004. Ljubljana: RS. Kennedy, P. (2007). ‘Phoenix from the Ashes: The PSOE Government under Rodriguez Zapatero 2004–2007: A New Model for Social Democracy?’, International Journal of Iberian Studies, 20(3): 187–206. Kenworthy, L. (2001). ‘Wage-Setting Measures: A Survey and Assessment’, World Politics, 54: 57-98. Keynes, J. M. (2007), (original 1936). The General Theory of Employment, Interest and Money, London: Palgrave-Macmillan. Kitschelt, H. (1994). The Transformation of European Social Democracy, New York: Cambridge University Press. Klein, P. and Kooistra, R. (1998). Wim Kok, het taaie gevecht van een polderjongen, Amsterdam: Prometheus. Knight, J. (1992). Institutions and Social Conflict, New York: Cambridge University Press. —— (2003). ‘Social Norms and the Rule of Law: Fostering Trust in a Socially Diverse Society’, in: K. S. Cook (ed.), Trust in Society. New York: Russell Sage Foundation, pp. 354–71. Korpi, W. (1983). The Democratic Class Struggle, London: Routledge.

299

Bibliography Krasˇovec, A. (1996). ‘Socialdemokratski stranki v Sloveniji (SDSS in ZLSD) v obdobju 1989–1995 (Social-democratic parties (SDSS and ZLSD) in 1989–1995 period)’, BA thesis, Fakulteta za druzˇbene vede, Ljubljana. Kroeger, P. G. and Stam, J. (1998). De rogge staat er dun bij: Macht en verval van het CDA, 1974–1998, Amsterdam: Balans. Kropivnik, S. (2001). ‘Vsebina ideolosˇkega kontinuuma levo-desno v Sloveniji v preteklem desetletju (Content of the Ideological Left-Right Continuum in Slovenia during the Last Decade)’, in: D. Fink-Hafner and M. Hacˇek (eds.), Demokraticˇni prehodi II. Ljubljana: Fakulteta za druzˇbene vede, pp. 138–70. Laakso, M. and Taagepera, R. (1979). ‘Effective Number of Parties: A Measure with Application to West Europe’, Comparative Political Studies, 12(1): 3–27. Labour Court (2000–2006). The Labour Court Annual Report (various), Dublin: The Stationery Office. Labour Relations Commission (1997–2006). Labour Relations Commission: Annual Reports (various), Dublin: The Stationery Office. —— (2005). Migrant Workers and Access to the Statutory Dispute Resolution Agencies, Dublin: The Stationery Office. Lancaster, T. D. (1994). ‘A New Phase for Spanish Democracy? The General Election of June 1993’, West European Politics, 17(1): 183–92. Lange, P. (1984). ‘Unions, Workers, and Wage Regulation: The Rational Bases of Consent’, in: J. H. Goldthorpe (ed.), Order and Conflict in Contemporary Capitalism: Studies in the Political Economy of Western European Nations. Oxford: Oxford University Press, pp. 98–123. Larragy, J. (2006). ‘Origins and Significance of the Community-Voluntary Pillar’s Entry to Irish Social Partnership’, Economic and Social Review, 37(3): 375–98. Leit~ao, M. J. (1998). ‘Trac¸os derais da contratac¸~ao colectiva em Portugal’, Sociedade e trabalho, 2: 44–55. ~ es de trabalho Portugu^es no contexto Europeu: Algumas —— (2001). ‘O sistema de relac¸o pistas para o aumento da sua funcionalidade’, Cadernos sociedade e trabalho – Trabalho e relac¸o~es laborais, 1: 213–31. Lepsius, M. R. (2006). Il significato delle istituzioni, Bologna: Il Mulino. Lijphart, A. (1968). The Politics of Accommodation: Politics and Democracy in the Netherlands, Berkeley, CA: University of California Press. —— (1999). Patterns of Democracy: Government Forms and Performance in Thirty-Six Countries, New Haven, CT: Yale University Press. Lima, M. Pires, and Oliveira, L. (1990). ‘O sindicalismo em Portugal: A crise e as alternativas’, Organizac¸o~es e trabalho, 2: 35–47. Llorente Sanchez, D. (2007). ‘Explaining Union Membership of Temporary Workers in Spain: the Role of Local Representatives and Workers’ Participative Potential’, Industrial Relations Journal, 38(1): 51–60. ~ es de interesses Lucena, M. and Gaspar, C. (1991). ‘Metamorfoses corporativas? – Associac¸o econo´micos e institutionalizac¸~ao da democracia em Portugal’, Analise social, 114: 847–903. Lukan, A. (1992). Problemi institucionalizacije in regulacije stavk (Problems of institutionalisation and regulation of strikes), Ljubljana: Univerza v Ljubljani, Fakulteta za druzˇbene vede.

300

Bibliography Luksˇicˇ, I. (1996). ‘Social Partnership in Slovenia: How to Go Further?’, in: S. Kropivnik, I. Luksˇicˇ and D. Zajc (eds.), Conflicts and Consensus: Pluralism and Neocorporativism in the New and Old Democracies. Ljubljana: Slovenian Political Science Association, pp. 185–207. Lunshof, K. (2004). ‘Wim Kok, de afstandelijke’, in: K. Lunshof (ed.), Van polderen en polariseren. Dertig jaar Nederlandse politiek. Amsterdam: Bert Bakker, pp. 209–58. Luong, P. J. (2002). Institutional Change and Political Continuity in Post-Soviet Central Asia: Power, Perceptions, and Pacts, New York: Cambridge University Press. MacLoad, W. B. and Malcomson, J. M. (1993). ‘Investment, Holdups, and the Form of Market Contracts’, American Economic Review, 83: 811–37. MacSharry, R. and White, P. (2000). The Making of the Celtic Tiger: The Inside Story of Ireland’s Boom Economy, Cork: Mercier Press. Mahoney, J. (2000). ‘Path Dependency in Historical Sociology’, Theory and Society, 29(4): 507–48. Mair, P. (2008). ‘Electoral Volatility and the Dutch Party System: A Comparative Perspective’, Acta Politica, 43: 235–53. Maravall, J. M. (1997). Regimes, Politics and Markets: Democratization and Economic Change in Southern and Eastern Europe, Oxford: Oxford University Press. March, J. G. and Olsen, J. P. (1995). Democratic Governance, New York: The Free Press. Marin, B. (1990). ‘Generalised Political Exchange: Governance and Generalised Exchange’, in: B. Marin (ed.), Governance and Generalised Exchange: Self-Organising Policy Networks in Action. Frankfurt: Campus Verlag, pp. 13–35. Marques, F. (2004). A Negociac¸a~o colectiva no quadro da Unia~o Econo´mica e Monetaria, Study presented to the Pre´mio Manuel Lopes. Martinez Lucio, M. (1989). ‘Union-Worker Relations in a Transforming Spain’, Economic and Industrial Democracy, 10(4): 423–46. —— and Blyton, P. (1995). ‘Constructing the Post-Fordist State? The Politics of Flexibility and Labour Markets in Contemporary Spain’, West European Politics, 18(2): 340–60. Marx, A. (2006). ‘Towards More Robust Model Specification in QCA: Results from a Methodological Experiment’, Compass Working Papers, www.compasss.org Mascini, M. (2000). Profitti e salari. Vent’anni di relazioni industriali 1980–2000, Bologna: Il Mulino. Maynard-Smith, J. (1982). Evolution and the Theory of Game, Cambridge: Cambridge University Press. McCartney, J. and Teague, P. (1997b). ‘Workplace Innovations in the Republic of Ireland’, Economic and Social Review, 28(4): 381–99. McCashin, A., O’Sullivan, E., and Brennan, C. (2002). ‘The National Economic and Social Forum, Social Partnership and Policy Formulation in the Republic of Ireland’, Policy and Politics, 30(2): 263–79. Molina, O. (2004). ‘Understanding Policy Adjustment in Southern Europe: Political Exchange and Wage Bargaining Reform in Italy and Spain’, PhD thesis, Department of Political and Social Sciences, European University Institute, Florence. —— (2005). ‘Political Exchange and Bargaining Reform in Italy and Spain’, European Journal of Industrial Relations, 11(1): 7–26. —— (2006). ‘Trade Union Strategies and Change in Neo-Corporatist Concertation: A New Century of Political Exchange?’, West European Politics, 29(4): 640–64.

301

Bibliography —— (2007). ‘State and Regulation of Industrial Relations in Spain: Old Wine in a New Governance Bottle?’, South European Society and Politics, 12(4): 461–79. —— and Rhodes, M. (2002). ‘Corporatism: The Past, Present and Future of a Concept’, Annual Review of Political Science, 5: 305–31. —— —— (2007). ‘The Political Economy of Adjustment in Mixed-Market Economies: A Study of Spain and Italy’, in: B. Hancke´, M. Rhodes and M. Thatcher (eds.), Beyond Varieties of Capitalism: Conflict, Contradiction and Complementarities in the European Economy. Oxford: Oxford University Press, pp. 223–52. ~ es laborais’, Questo~es Laborais, 4(14): Moreira, V. (1999). ‘A corporativizac¸~ao das relac¸o 174–88. Mrak, M., Rojec, M., and Silva-Jauregui, C. (2004). ‘Overview: Slovenia’s Threefold Transition’, in: M. Mrak, M. Rojec and C. Silva-Jauregui (eds.), Slovenia from Yugoslavia to the European Union. Washington, DC: The World Bank, pp. xix–lvi. Mulvey, K. (2006). ‘The Regulation of Work and Labour Standards: Is there a Race to the Bottom?’, The Countess Markievicz Memorial Lecture, National University of Ireland, Galway, 29 June, http://www.lrc.ie/documents/publications/researchconference/Markievicz%20Lecture/LectureText.pdf ˜oz de Bustillo, R. (2005). ‘Employment Performance and Labour Market Institutions: Mun The Case of Spain’, in: D. R. Howell (ed.), Fighting Unemployment: The Limits of Free Market Orthodoxy. Oxford: Oxford University Press, pp. 216–61. Mutti, A. (1990). ‘The Role of Trust in Political Exchange’, in: B. Marin (ed.), Generalized Political Exchange: Antagonistic Cooperation and Integrated Policy Circuits. Frankfurt: Campus Verlag, pp. 199–213. Naumann, R. (1996). ‘Portugal’, in: Collective Bargaining in Western Europe 1995–1996. Brussels: ETUI, pp. 271–80. —— (1997). ‘Portugal’, in: Collective Bargaining in Western Europe 1996–1997. Brussels: ETUI, pp. 293–312. ~ es industriais: Proposta para um modelo de an —— (1999). ‘Pactos Sociais e relac¸o alise’, Workshop Relac¸o~es Laborais na Europa, FEG, Instituto de Ci^encias Politicas da Universidade de Marburg. —— and Campos Lima, M. da Paz (2007). ‘Portugal’, in: F. Traxler and G. Huemer (eds.), Handbook of Business Interest Associations, Firm Size and Governance. London: Routledge, pp. 258–78. NCPP/ESRI (2004). The Changing Workplace: A Survey of Employee’s Views and Experiences, Dublin: National Centre for Partnership and Performance. Negrelli, S. (2000). ‘Social Pacts in Italy and Europe: Similar Strategies and Structures, Different Models and National Stories’, in: G. Fajertag and P. Pochet (eds.), Social Pacts in Europe – New Dynamics. Brussels: European Trade Union Institute/Observatoire Social Europe´en, pp. 85–112. NESC (1986). A Strategy for Development, 1986–1990, Dublin: National Economic and Social Council. —— (1990). A Strategy for the Nineties, Dublin: National Economic and Social Council. —— (1993). A Strategy for Competitiveness, Growth and Employment, Dublin: National Economic and Social Council. —— (1996). Strategy into the 21st Century, Dublin: National Economic and Social Council.

302

Bibliography —— (1999). Opportunities, Challenges and Capacities for Choice, Dublin: National Economic and Social Council. —— (2003). An Investment in Quality: Services, Inclusion and Enterprise, Dublin: National Economic and Social Council. —— (2005a). The Developmental Welfare State, Dublin: National Economic and Social Council. —— (2005b). NESC Strategy 2006: People, Productivity and Purpose, Dublin: National Economic and Social Council. —— (2008). The Irish Economy in the Early 21st Century, Dublin: National Economic and Social Council. NESF (1997). A Framework for Partnership: Enriching Strategic Consensus through Participation, Dublin: National Economic and Social Forum. Nijpels, F. and Tamboer, K. (1985). Wim Kok. Vijftien jaar vakbeweging, Amsterdam: Arbeiderspers. Nobelen, P. W. M. (1987). ‘Ondernemers georganiseerd – Een studie van het Verbond van Nederlandse Ondernemingen in de periode 1973–1984’, Dissertation, The Hague/ Moordrecht. Nolan, B., O’Connell, P. J., and Whelan, C. T. (eds.) (2000). Bust to Boom? The Irish Experience of Growth and Inequality, Dublin: Institute of Public Administration. Nonell, R., Alo´s-Moner, R., Martin Artiles, A., and Molins, J. (2006). ‘The Governability of Collective Bargaining: The Case of Spain’, Transfer: European Review of Labour and Research, 12(3): 349–67. North, D. C. (1990). Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press. O’Connell, L. (2001). ‘Breaking the Bounds of Peripherality: Irish Business in an Era of Multi-Level Participative Internationalisation’, PhD dissertation, University College Dublin, Dublin. O’Donnell, R. (2000). ‘The New Ireland in the New Europe’, in: R. O’Donnell (ed.), Europe—The Irish Experience. Dublin: Institute of European Affairs, pp. 161–214. —— (2001b). ‘The Future of Social Partnership in Ireland’, Discussion Paper published by the National Competitiveness Council. Available at www.nesc.ie —— (2008). ‘The Partnership State’, in: M. Adshead, M. Miller and P. Kirby (eds.), Contesting the State: Lessons from the Irish Case. Manchester: Manchester University Press, pp. 73–99. —— and O’Reardon, C. (2000). ‘Social Partnership in Ireland’s Economic Transformation’, in: G. Fajertag and P. Pochet (eds.), Social Pacts in Europe – New Dynamics. Brussels: European Trade Union Institute/Observatoire Social Europe´en, pp. 237–56. —— and Teague, P. (2000). Partnership at Work in Ireland: An Evaluation of Progress under Partnership 2000, Dublin: The Stationery Office. —— and Thomas, D. (1998). ‘Partnership and Policy-Making’, in: S. Healy and B. Reynolds (eds.), Social Policy in Ireland: Principles, Practice and Problems. Dublin: Oak Tree Press, pp. 117–46. —— Cahill, N., and Thomas, D. (2001). ‘Towards Post-Corporatist Concertation in Europe’, in: H. Wallace (ed.), Interlocking Dimensions of European Integration. London: Pinter, pp. 305–22.

303

Bibliography OECD (2008). OECD Public Management Reviews: Ireland – Towards an Integrated Public Service, Paris: OECD. Olson, M. (1965). The Logic of Collective Action, Cambridge: Harvard University Press. —— (1982). The Rise and Decline of Nations: Economic Growth, Stagnation and Social Rigidities, New Haven, CT: Yale University Press. ¨ gel, U. (1988). Die Arbeiterbewegung in Portugal im Prozess Gesellschaftlichen Optenho Umbruchs: Tradition, Entstehung und Politik der Nachsalazaristischen Gewerkschaften ¨ kono(1968–1979), Hamburg, Volkswirtschaft – EURO-Wirtschaft: Studien zur o mischen Entwicklung Europas Bd. 2. O’Riain, S. and O’Connell, P. (2000). ‘The Role of the State in Growth and Welfare’, in: B. Nolan, P. J. O’Connell and C. T. Whelan (eds.), Bust to Boom? The Irish Experience of Growth and Inequality. Dublin: Institute of Public Administration, pp. 305–39. Ornston, D. (2004). ‘Tripartite Concertation and Economic Transfiguration: The Politics of Institutional Innovation in Ireland’, Paper prepared for the 14th Conference of Europeanists. Chicago, IL, 11–13 March. Osborne, M. J. and Rubinstein, A. (1990). Bargaining and Markets, San Diego, CA: Academic Press. Ostrom, E. and Walker, J. (2003). ‘Introduction’, in: E. Ostrom, and J. Walker (eds.), Trust and Reciprocity: Interdisciplinary Lessons from Experimental Research. New York: Russell Sage Foundation, pp. 3–18. Pekkarinen, J., Pohjala, M., and Rowthorn, B. (eds.) (1992). Social Corporatism: A Superior Economic System?, Oxford: Clarendon Press. Pe´rez, S. A. (1999). ‘From Labor to Finance: Understanding the Failure of Socialist Economic Policies in Spain’, Comparative Political Studies, 32(6): 659–89. —— (2000). ‘From De-Centralization to Reorganization: The Resurgence of NationalLevel Social Bargaining in Italy and Spain’, Comparative Politics, 32(4): 437–58. —— (2002). ‘Monetary Union and Wage Bargaining Institutions in the EU: Extrapolating From Some Member State Experiences’, Comparative Political Studies, 35(10): 1198–1227. —— (2010). ‘Social Pacts in Spain: From post-EMU Boom to Bust’, in: P. Pochet, M. Keune and D. Natali (eds.), After the Euro and Enlargement: Social Pacts in the EU, Brussels: European Trade Union Institute/Observatoire Social Europe´en pp. 161–90. ˜ a de la transicio´n: Pe´rez-Diaz, V. (1984). ‘Politicas econo´micas y pactas sociales en la Espan La doble cara del neocorporatismo’, in: J. Linz (ed.), Espan˜a: Un presente para el futuro. Madrid: Instituto de Estudios Econo´micos, pp. 21–55. Pernot, J. M. (2003). ‘Portugal: La re´forme du Code du Travail’, Chronique internationale de L’IRES, 81: 59–65. —— (2009). ‘Le nouveau code du travail est arrive´, la crise aussi’, Chronique internationale de l’IRES, 116: 36–42. Polavieja, J. G. (2001). Insiders and Outsiders: Structure and Consciousness Effects of Labour Market Deregulation in Spain (1984–1997), Madrid: Instituto Juan march de Estudios e Investigaciones. —— (2003). ‘Temporary Contracts in Spain: An Employment-Rent Approach’, European Sociological Review, 19(5): 501–17.

304

Bibliography Powell, W. W., Koput, K. W., and Sith-Doerr, L. (1996). ‘Inter-organizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology’, Administrative Science Quarterly, 41: 116–45. Proenc¸a, J. (2000). ‘Dialogo, negociac¸~ao e concertac¸~ao em Portugal: coment ario’, in: A. Dornelas and J. Madureira Pinto (eds.), A reforma do pacto social. Lisbon: Imprensa Nacional – Casa da Moeda, pp. 407–12. Prunk, J. (1998). Kratka zgodovina Slovenije (Short history of Slovenia), Ljubljana: Zalozˇba Grad. Quirke, D. (1992). ‘A President’s Perspective’, in: B. Chubb (ed.), Federation of Irish Employers, 1942–1992. Dublin: Gill and Macmillan, pp. 94–7. Ragin, C. (2000). Fuzzy-Set Social Science, Chicago, IL: University of Chicago Press. —— (2006). ‘Set Relations in Social Research: Evaluating Their Consistency and Coverage’, Political Analysis, 14(3): 291–310. —— (2008). ‘Calibration versus Measurement: A Set-Theoretic Approach’, in: J. BoxSteffensmeier, H. Brady and D. Collier (eds.), The Oxford Handbook of Political Methodology. Oxford: Oxford University Press, pp. 174–98. Recio, A. and Roca, J. (1998). ‘The Spanish Socialists in Power: Thirteen Years of Economic Policy’, Oxford Review of Economic Policy, 14(1): 139–58. Regalia, I. (2003). ‘Decentralizing Employment Protection in Europe: Territorial Pacts and Beyond’, in: J. Zeitlin and D. Trubek (eds.), Governing Labor and Welfare in a New Economy: European and American Experiments. Oxford: Oxford University Press, pp. 158–87. —— and Regini, M. (1998). ‘Italy: the Dual Character of Industrial Relations’, in: A. Ferner and R. Hyman (eds.), Changing Industrial Relations in Europe. Oxford: Blackwell, pp. 459–97. Regini, M. (1984). ‘The Conditions for Political Exchange: How Concertation Emerged and Collapsed in Italy and Great Britain’, in: J. H. Golthorpe (ed.), Order and Conflict in Contemporary Capitalism: Studies in the Political Economy of Western European Nations. Oxford: Clarendon Press, pp. 124–42. —— (2000). Modelli di capitalism: Le risposte europee alla sfida della globalizzazione, RomaBari: Ed. Laterz. —— (2000). ‘Between Deregulation and Social Pacts: The Responses of European Economies to Globalisation’, Politics & Society, 28(1): 5–33. Rhodes, M. (1997). ‘Spain’, in: H. Compston (ed.), The New Politics of Unemployment. London: Routledge, pp. 103–22. —— (1998). ‘Globalisation, Labour Markets and Welfare States: A Future of ‘Competitive Corporatism’?’, in: M. Rhodes and Y. Me´ny (eds.), The Future of European Welfare: A New Social Contract?. London: Macmillan, pp. 178–203. —— (2001). ‘The Political Economy of Social Pacts: Competitive Corporatism and European Welfare Reform’, in: P. Pierson (ed.), The New Politics of the Welfare State. Oxford: Oxford University Press, pp. 165–94. —— (2003). ‘National ‘Pacts’ and EU Governance in Social Policy and the Labour Market’, in: J. Zeitlin and D. Trubeck (eds.), Governing Work and Welfare in the New Economy: European and American Experiments. Oxford: Oxford University Press, pp. 129–57.

305

Bibliography —— (2008). ‘Desperately Seeking Consensus: Policy Reform in Greece in Comparative Perspective’, in: Carlos, M. (ed.), The Challenge of Social Policy Reform in the 21st Century: Towards Integrated Systems of Social Protection. Athens: Kritiki Publishing, pp. 333–61. —— and Visser, J. (2011). ‘Seeking Commitment, Effectiveness and Legitimacy: New Modes of Socio-Economic Governance in Europe’, in: A. He´ritier and M. Rhodes (eds.), New Modes of Governance in Europe: Governing in the Shadow of Hierarchy. Basingstoke: Palgraves Macmillan, pp. 104–34. Richards, A. and Polavieja, J. G. (1997). ‘Trade Unions, Unemployment and Working Class Fragmentation in Spain, CEACS Working Paper No. 112, Madrid: Fundacion Juan March. Roca, J. (1993). Pactos sociales y politica de rentas: el debate internacional y la experiencia Espan˜ola (1977–1988), Madrid: Ministerio de Trabajo y Seguridad Social. Roche, W. K. (1997). ‘Pay Determination, the State and the Politics of Industrial Relations’, in: T. V. Murphy and W. Roche (eds.), Irish Industrial Relations in Practice. Dublin: Oak Tree Press, pp. 145–226. —— (2007a). ‘Developments in Industrial Relations and Human Resource Management in Ireland’, Quarterly Economic Commentary, Spring: 62–77. —— (2007b). ‘Social Partnership in Ireland and New Social Pacts’, Industrial Relations, 46(3): 395–425. —— (2008). ‘The Trend of Unionisation in Ireland since the Mid-1990s’, in: T. Hastings (ed.), The State of the Unions: Challenges Facing Organised Labour in Ireland. Dublin: The Liffey Press, pp. 17–46. —— and Ashmore, J. (2002). ‘Irish Unions in the 1990s: Testing the Limits of Social Partnership’, in: G. Griffin (ed.), Changing Patterns of Trade Unionism. Sydney: Continuum, pp. 137–70. —— and Geary, J. (2001). ‘Collaborative Production and the Irish Boom: Work Organisation, Partnership and Direct Involvement’, Economic and Social Review, 31(1): 1–36. ~ es Dom Rodrigues, M. Jo~ao (1988). O sistema de emprego em Portugal, Lisboa: Publicac¸o Quixote. Rojer, M. (1996a). CAO-onderhandelingen: Een voorspelbaar, logisch en rationeel process, Amsterdam: Thesis Publishers. —— (1996b). ‘De Reparatie van het WAO-gat. Een dynamische snalyse van de CAOOnderhandelingen’, in: J. Visser (ed.), De Vakbeweging op de Eeuwgrens. Special issue of Mens en Maatschappij, 71: 92–117. Royo, S. (2001). ‘The Collapse of Social Concertation and the Failure of Socialist Economic Policies in Spain’, South European Society and Politics, 6(1): 27–50. —— (2002). A New Century of Corporatism? Corporatism in Southern Europe. Spain and Portugal in Comparative Perspective, Westport, CT: Praeger. —— (2006). ‘Beyond Confrontation: The Resurgence of Social Bargaining in Spain in the 1990s’, Comparative Political Studies, 40(8): 969–95. —— (2009). ‘Reforms Betrayed? Zapatero and the Continuities in Economic Policy’, South European Society and Politics, 14(4): 435–51. Rubinstein, A. (1982). ‘Perfect Equilibrium in a Bargaining Model’, Econometrica, 50: 97–109. Sa, L. (1995). ‘O discurso e a realidade. Neocorporativismo, contratualismo e os direitos de participac¸~ao’, Ve´rtice N 68, II Se´rie. Lisbon.

306

Bibliography Salvati, M. (2001). ‘Sindacato, concertazione, politica economica’, in: A. Ninni, F. Silva and S. Vacca` (eds.), Evoluzione del lavoro, crisi del sindacato e sviluppo del paese. Milano: Angeli, pp. 13–42. Santos, B. de Sousa (1985). ‘Estado e sociedade na semiperiferia do sistema mundial: O caso Portugu^es’, Analise Social, 21(3–5): 869–901. ~ es Afrontamento. —— (1990). O estado e a sociedade em Portugal (1974–1988), Porto: Edic¸o ~ es salariais e o bem estar social na semiperiferia: O caso —— (1993). ‘O estado, as relac¸o ~ es Portugu^es’, in: B. De Sousa Santos (ed.), Portugal: um retrado singular. Porto: Edic¸o Afrontamento, pp. 17–56. Santos, M. de Lurdes Lima, Pires de Lima, M., and Matias Ferreira, M. (1976). O 25 de Abril ~ es Afrontamento. e as lutas sociais nas empresas, Porto: Edic¸o Scharpf, F. W. (1988). ‘The Joint-Decision Trap: Lessons from German Federalism and European Integration’, Public Administration, 66(2): 239–78. —— (1991). Crisis and Choice in European Social Democracy, Ithaca, NY: Cornell University Press. —— (1993). ‘Positive und negative Koordinierung in Verhandlungssysteme’, in: A. He´ritier (ed.), Policy Analyse: Kritik und Neuorientierung. Special issue of Politische ¨ r Sozialwissenschaften, pp. 57–83. Vierteljahresschift, Wiesbaden: VS Verlag fu —— (1993). ‘Co-ordination in Hierarchies and Networks’, in: F. W. Scharpf (ed.), Games in Hierarchies and Networks: Analytical and Empirical Approaches to the Study of Governance Institutions. Frankfurt a/Main and Boulder, CO: Campus and Westview, pp. 125–66. —— (1997). Games Real Actors Play: Actor-Centered Institutionalism in Policy Research, Boulder, CO: Westview. Schelling, T. C. (1960). The Strategy of Conflict, Cambridge, MA: Harvard University Press. Schmitter, P. (1974). ‘Still the Century of Corporatism?’, Review of Politics, 36: 85–131. —— (1981). ‘Interest Intermediation and Regime Governability in Contemporary Western Europe and North America’, in: S. Berger (ed.), Organizing Interests in Western Europe: Pluralism, Corporatism and the Transformation of Politics. Cambridge, MA.: Cambridge University Press, pp. 287–327. —— (1982). ‘Reflections on Where the Theory of Neo-corporatism has Gone and Where the Practice of Neo-corporatism May be Going’, in: G. Lehmbruch and P. Schmitter (eds.), Patterns of Corporatist Policy Making. London: Sage, pp. 259–79. —— (1983). ‘Neo-Corporatism, Consensus, Governability and Democracy in the Management of Crisis in Contemporary Advanced Industrial-Capitalist Societies’, in: OECD (ed.), Collective Bargaining and Economic Policies: Dialogue and Consensus. Paris: Organisation for Economic Development and Cooperation. —— (1999). Portugal: Do autoritarismo a` democracia, Lisbon: Instituto de Ci^encias Sociais. Selznick, P. (1949). TVA and the Grassroots, Berkeley, CA: University of California Press. Serrano, F., Garcia del Valle, J., and Puerta, C. (1998). La Demanda de Trabajo de la Industria Manufacturera Vasca, Vitoria-Gasteiz: Gobierno Vasco. Sheehan, B. (1996). ‘Crisis, Strategic Re-evaluation and the Re-emergence of Tripartism in Ireland’, Unpublished M.Comm. thesis, Graduate School of Business, Dublin, University College Dublin. Shepsle, K. (1986). ‘Institutional Equilibrium and Equilibrium Institutions’, in: H. F. Weisberg (ed.), Political Science: The Science of Politics. New York: Agathon Press, pp. 51–81.

307

Bibliography Siaroff, A. (1999). ‘Corporatism in 24 Industrial Democracies: Meaning and Measurement’, European Journal of Political Research, 36: 175–205. Siegel, N. A. (2004). ‘Social Pacts Reconsidered: Competitive Concertation, Confirmative Action and Confirmatory Case Studies’, Paper prepared for the ECPR Joint Sessions, Uppsala, April, http://www.essex.ac.uk/ecpr/events/jointsessions/paperarchive/uppsala/ws13/siegel.pdf. Silva, M. Carvalho (2000). ‘A reforma do pacto social’, in: A. Dornelas and J. Madureira Pinto (eds.), A Reforma do Pacto Social. Lisbon: Imprensa Nacional – Casa da Moeda, pp. 397–406. —— (2007). Trabalho e sindicalismo em tempo de globalizac¸a~o – reflexo~es e propostas, Lisbon: Circulo de Leitores. Simmel, G. (1950), or (1890). The Sociology of Georg Simmel, translated, edited and introduced by Kurt H. Wolff, New York: The Free Press. Sluyterman, K. E. (2003). Kerende kansen. Het Nederlandse bedrijfsleven in de twintigste eeuw, Meppel: Boom. Sousa Franco, A. (1994). ‘A experi^encia revolucionaria (1974–1975); O tempo critico (1976–1985); O periodo europeu (1986–1993)’, in: A. Reis (ed.), Portugal 20 anos de democracia. Lisbon: Circulo de Leitores, pp. 206–93. Stanojevic, M. (2003). ‘Formation of the Slovenian Pattern: The Strike Wave and Industrial Relations “Rigidities”, SEER – South-East Europe Review for Labour and Social Affairs, 6(3): 17–30. —— (2005). ‘Avoiding Shock Therapy: Trade Unions’ Role in the Transition to a Market Economy in Slovenia’, in: D. Dimitrova and J. Vilrokx (eds.), Trade Union Strategies in Central and Eastern Europe: Towards Decent Work. Budapest: ILO, pp. 201–27. —— and Vrhovec, P. (2001). ‘Industrial Conflict in Slovenia’, SEER – South-East Europe Review for Labour and Social Affairs, 4(1): 29–37. Stanovnik, T. (2002). ‘The Political Economy of Pension Reform in Slovenia’, in: Pension Reform in Central and Eastern Europe, Vol. 2. Budapest: ILO, pp. 19–73. StAr (2005). Een schuivend domein: over de Stichting van de Arbeid, Den Haag: Stichting van de Arbeid. Steenhuis, H. (1995). ‘Een kilo interviews met Wim Kok’, HP/De Tijd, 6 January 1995. Stoleroff, A. (1989). ‘Labor and the Cavaco e Silva Governments: Wage Regulation, Class Struggle and the State’, Fourth International Meeting on Modern Portugal, Durham, New Hampshire. —— (1990). ‘Os sindicatos e o estado po´s 1974 – Neocorporativismo e a luta de classes’, in: A Sociologia e a Sociedade Portuguesa na Viragem do Se´culo, Actas do 1º Congresso Portugue^s de Sociologia, Vol. II. Lisbon: Fragmentos, pp. 129–43. ~ es industriais em Portugal’, —— (1995). ‘Elementos do padr~ao emergente das relac¸o Organizac¸o~es e Trabalho, 13: 11–42. —— (2009). ‘Company-Level Labour Relations and the Industrial Relations System in Portugal’, in: J. Viegas, M. Leite, H. Carreiras and A. Malamud (eds.), Institutions and Politics (Portugal in the European Context, vol. I). CIES, ISCTE-IUL, Lisbon: Celta Editora, pp. 213–36. —— and Naumann, R. (1993). ‘A sindicalizac¸~ao em Portugal’, Sociologia- Problemas e praticas, 14: 19–47. ¨ sseldorf. —— and Naumann, R. (1994). Der «Fall» Portugal, WSI-Mitteilungen 2/1994, Du

308

Bibliography Streeck, W. (2003). ‘From State Weakness as Strength to State Weakness as Weakness: Welfare Corporatism and the Private Use of the Public Interest’, Cologne: Max Planck Institute for the Study of Societies, Working Paper 03/2, http://www.mpifg.de/pu/workpap/wp03-2/wp03-2.html. —— and Schmitter, P. (1991). ‘From National Corporatism to Transnational Pluralism: Organized Interests in the Single European Market’, Politics and Society, 19(2): 133–64. —— and Thelen, K. (2005). ‘Introduction: Institutional Change in Advanced Political Economies’, in: W. Streeck and K. Thelen. (eds.), Beyond Continuity: Institutional Change in Advanced Political Economies. Oxford: Oxford University Press, pp. 1–39. Sugden, R. (1986). The Economics of Rights, Cooperation, and Welfare, London: Basil Blackwell. Sˇusˇtersˇicˇ, J. (2004). ‘Political Economy of Slovenia’s Transition’, in: M. Mrak, M. Rojec and C. Silva-Jauregui (eds.), Slovenia from Yugoslavia to the European Union. Washington, DC: The World Bank, pp. 399–411. Teague, P. (2005). ‘Towards Flexible Workplace Governance: Employment Rights, Dispute Resolution and Social Partnership in the Irish Republic’, Dublin: Policy Studies Institute, Trinity University College. —— and Donaghey, J. (2004). ‘The Irish Experiment in Social Partnership’, in: H. Katz, W. Lee and J. Lee (eds.), The New Structure of Labor Relations. Cornell: ILR Press, pp. 10–37. Teulings, C. N. and Hartog, J. (1998). Corporatism or Competition? Labour Contracts, Institutions and Wage Structures in International Comparison, Cambridge: Cambridge University Press. Thelen, K. (1999). ‘Historical Institutionalism in Comparative Politics’, American Review of Political Science, 2: 369–404. Thomas, D. (2003). ‘Social Partnership in Ireland 1987–2000; An Evolving Economic and Social Governance’, Unpublished PhD dissertation, University of Newcastle, Newcastle upon Tyne. Traxler, F. (1995). ‘Farewell to Labour Market Associations? Organized Versus Disorganized Decentralization as a Map for Industrial Relations’, in: C. Crouch and F. Traxler (eds.), Organized Industrial Relations in Europe: What Future? Aldershot: Avebury, pp. 3–19. —— (2003). ‘Coordinated Bargaining: A Stocktaking of its Preconditions, Practices and Performance’, Industrial Relations Journal, 34(3): 194–209. —— (2003). ‘Bargaining, State Regulation and the Trajectories of Industrial Relations’, European Journal of Industrial Relations, 9(2): 141–61. —— (2008). ‘Corporatism(s) and Pacts: Changing Functions and Structures under Rising Economic Liberalism and Declining Liberal Democracy’, Paper for the workshop on ‘Social Pacts in the EU’, University of Bologna-Forli, 10–11 October, pp. 1–35. —— Blaschke, S., and Kittel, B. (2001). National Labour Relations in Internationalized Markets: A Comparative Study of Institutions, Change and Performance, Oxford: Oxford University Press. Trulle´n, J. (1993). Fundamentos econo´micos de la transicio´n pol itica Espan˜ola, Madrid: Ministerio de Trabajo y Seguridad Social. Tsebelis, G. (1990). Nested Games: Rational Choice in Comparative Politics, Berkeley, CA: University of California Press. Uusitalo, R. and Vartiainen, J. (2007). ‘Finland: Firm Factors in Wages and Wage Changes’, Report for NBER Personnel Economics Project on Comparison of Wage Structures, http://www.nber.org/books_in_progress/wages/uusitalo-vartiainen6-7-07.pdf.

309

Bibliography van Bottenburg, M. (1995). Aan den Arbeid! In de wandelgangen van de Stichting van de Arbeid, Amsterdam: Bert Bakker. van den Braak, J.-W. (1992). Keerpunt 1982 – Enkele herinneringen aan het VNO en de crisistijd 1977–1982, Assen: Van Gorcum. —— (2005). ‘Opkomst, bloei en verval? Van de polder’, in: STAR, Een schuivend domein: over de Stichting van de Arbeid. The Hague: Labour Foundation, pp. 12–29. —— (2006). Dagboek van een poldercrisis, Assen: van Gorcum. van den Toren, J.-P. (2007). ‘Dancing with Economics: Dutch Politicians, Policies and Institutions Reacting to Economic Turnarounds (1973–2004)’, in: K. Davids, G. Devos, and P. Pasture (eds.), Changing Liaisons: The Dynamics of Social Partnership in 20th Century West European Democracies. Brussels: P.I.E.-Peter Lang, pp. 161–90. van Veen, C. (1987). ‘Meer markt, minder staat, terug naar de onderneming’, in: A. Knoester (ed.), Lessen uit het verleden: 125 jaar Vereniging voor de Staathuishoudkunde. Leiden/Antwerp: Stenfert Kroese, pp. 289–304. van Weezel, M. (1996). ‘Het WAO-drama in zeventien trieste bedrijven’, Vrij Nederland, 13 July. Vehovar, U. (1994). ‘Socialdemokracija, sindikati, korporativizem?’ (Social democracy, Trade Unions, Corporatism?), Druzˇboslovne razprave, 10(17–18): 48–63. Visser, J. (1990). ‘Continuity and Change in Dutch Industrial Relations’, in: G. Baglioni and C. Crouch (eds.), European Industrial Relations: The Challenge of Flexibility. London: Sage, pp. 199–242. —— (1992). ‘The Strength of Union Movements in Advanced Capitalist Democracies: Social and Organizational Variations’, in: M. Regini (ed.), The Future of Labour Movements. London: Sage Publications, pp. 17–54. —— (1993). ‘Syndicalisme et de´syndicalisation’, Le mouvement social, 162: 17–39. —— (1996). ‘Traditions and Transitions in Industrial Relations: A European View’, in: J. V. Ruysseveldt and J. Visser (eds.), Industrial Relations in Europe: Traditions and Transitions. London: Sage Publications, pp. 1–41. —— (1998). ‘Two Cheers for Corporatism, One for the Market’, British Journal of Industrial Relations, 36(2): 269–92. —— (1999). ‘Concertation and the Art of Making Social Pacts’, in: E. Gabaglio and R. Hoffmann (eds.), European Trade Union Yearbook. Brussels: ETUI, pp. 217–32. —— (2009). The Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts. ICTWSS Database, Amsterdam: Amsterdam institute for Advanced Labour Studies. —— and Hemerijck, A. (1997). A Dutch Miracle: Job Growth, Welfare Reform and Corporatism in the Netherlands, Amsterdam: Amsterdam University Press. —— and Wilts, A. (2006). ‘Reaching Out and Fitting In: Dutch Business Associations at Home (and) in Europe’, in: W. Streeck, J. R. Grote, V. Schneider and J. Visser (eds.), Governing Interests: Business Associations Facing Internationalisation. London: Routledge, pp. 21–48. Wallerstein, I. (1974). The Modern World System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, New York: Academic Press. —— (1980). The Modern World System II: Mercantilism and the Consolidation of the European World-Economy, 1600–1750, New York: Academic Press.

310

Bibliography Webb, S. and Webb, B. (1920). The History of Trade Unionism, Revised edition (original: 1894). New York: Longmans, Green and Co. ¨ nther Roth, Berkely, CA: Weber, M. (1978), (original 1922). Economy and Society, transl. Gu University of California Press. Weingast, B. R. and Marshall, W. J. (1988). ‘The Industrial Organization of Congress: Or, why Legislatures, like Firms, are not Organized as Markets’, Journal of Political Economy, 96: 132–63. Wellink, A. H. E. M. (1987). ‘De ontwikkeling in de jaren zeventig en tachtig en enkele daaruit te trekken lessen’, in: A. Knoester (ed.), Lessen uit het verleden: 125 jaar Vereniging voor de Staathuishoudkunde. Leiden/Antwerp: Stenfert Kroese, pp. 333–66. —— and Cavelaars, P. A. D. (2002). ‘De ontwikkeling van de Nederlandse economie: Zijn de polderinstituties klaar voor de toekomst?’, in: R. Gradus, J. Kremers and J. van Sinderen (eds.), Nederland kennisland? Groningen: Stenfert Kroese, pp. 17–34. Wiarda, H. G. (1977). Corporatism and Development: the Portuguese Experience, Amherst: The University of Massachusetts Press. Williamson, O. E. (1993). ‘Transaction Costs Economics and Organizational Theory’, Industrial and Corporate Change, 2: 107–56. Windmuller, J. P. (1969). Labour Relations in the Netherlands, Ithaca, NY: Cornell University Press. Zalm, G. (2009). De romantische boekhouder, Amsterdam: Balans. ˜ a’, in: Zaragoza, A. and Varela, J. (1990). ‘Pactos sociales y corporatismo en Espan A. Zarazoga (ed.), Pactos sociales, sindicatos y patronal en Espan˜a, 2nd ed. Madrid: Siglo ˜a Editores, pp. 43–74. XXI de Espan

311

This page intentionally left blank

Index

The letter c indicates a chart, f a figure, n a footnote, and t a table. Albeda, Wil 211 Allen, Mike 100 Amato, Giuliano 126 Austria 26t, 28, 30t, 41, 63n2, 66 Axelrod, R. 50 Aznar, Jose´ Marı´a 185 Baccaro, L., and Lim, S.-H. 22 Baccaro, L., and Simoni, M. 22 Balkenende, Jan Peter 217 Bangueses, Salvador 184, 193 bargaining 10, 11, 53, 55 collective 70–1 Barroso, Jose´ Manuel 159 Belgium 9, 26t, 27–8, 30t, 37, 66, 73n8 Berlusconi, Silvio 122 Bertinotti, Fausto 122 Boyer, Miguel 181 cabinets, high left incumbency (LEFT) 41 Calmfors, L., and Driffil, J. 21 capitalism 47, 70 Cartaxo, Ernesto 152, 154, 155 Cassells, Peter 99 Cavaco Silva, Anibal 153, 155, 157 Ciampi, Carlo Azeglio 128 Coase theorem 80n10 Colombo, S. see Regini, M., and Colobo, S competition 50 high political (EFFP) 41 competitiveness 20 concertation 17–19, 20, 21, 23, 25, 35 Extensive Tripartite Concertation 26–8 fuzzy-set qualitative comparative analysis (fs/QCA) 9, 23–5, 31 contracts: intentional design through 49–52

conventions 48 cooperation 13, 20, 48–9, 51–2 see also unity Cordero di Montezemolo, Luca 134 corporatism, paradox of 83n11 see also neo-corporatism Crouch, C.J. 79–80 Cue´vas, Jose´ Marı´a 182–3, 184 Culpepper, P. D. 20, 48 Czechoslovakia 65–6, 68 D’Alema, Massimo 122, 132 D’Amato, Antonio 132 De Geus, Aart Jan 217, 218, 219, 220 De Koning, Jan 212–13 De Vries, Bert 215 De Waal, Lodewijk 215, 216, 217, 218, 220, 223 deinstitutionalization 12, 13, 62, 66, 77, 78, 80, 81, 83, 285–8 see also institutionalization democracy, consensus (CONS) 41–2 Denmark 26t, 28, 30t, 65, 66 Dini, Lamberto 122, 129 discretionary policies 73–4 Donner, Piet Hein 228 Dortland, Rob 213, 214 Drabbe, Frans 213 Driffil, J. see Calmfors, L., and Driffil, J. dyads 71 EMU (European Monetary Union) convergence criteria 20 Netherlands 225 participation 275 Portugal 159

313

Index EMU (European Monetary Union) (cont.) Slovenia 236, 247, 249, 250, 251, 252, 254 Spain 174, 199 Stability and Growth Pact 74 employees: rights 112 employers organizations see under Italy; Netherlands; Slovenia; Spain and tripartite concertation 73 employment 68–9 see also under Ireland; Italy; Spain European monetary integration 38 European Trade Union Confederation (ETUC) 68, 211n8 European Union single market 110 Fernandez Toxo, Ignacio 180 Ferraz de Costa, Pedro 154, 155 Finland 26t, 27, 30t, 36–7, 66, 68, 73n8 Fiorito, R. 83n11 Flanagan, R. J., Soskice, D. W., and Ulman, L. 66 Flanders, A. 70n7 focal points 48 Fortuyn, Pym 217 Fossa, Giorgio 130 Fraile, L. 279–80 France 26t, 28, 30t, 41 Gallagher disproportionality index 41 Germany Alliance for Jobs 28, 49 industrial relations 59n4 social pacts 26t, 27, 30t, 64, 65 unions 49 Giugni, G. Gino 48, 128 global crisis (2008–10) 117 globalization 20 Gonza´lez, Felipe 184 governments coalition 9 electorally weak (MING) 41 Finland 36–7 Greece 8 minority 35, 37, 265

314

reform negotiations 21–2 see also under Ireland; Italy; Netherlands; Portugal; Slovenia; Spain Greece 8, 26t, 27, 28, 30t, 37, 65 Greif, A., and Laitin, D. 83 Guterres, Anto´nio 36 Hamann, K., and Kelly, J. 23 Hancke´, B., and Rhodes, M. 20, 76, 112, 250, 279, 281 Hartog, J. see Teulings, C. N., and Hartog, J. Hassel, A. 23 Haughey, Charles 96 Hazenbosch, P. 225 hierarchies 72 Hungary 65 IBEC see Irish Business and Employers Confederation ICTU see Irish Congress of Trade Unions INOU see Irish National Organisation of the Unemployed incomes policies 66 Slovenia 245, 246 institutionalization 11–13, 62, 64, 70, 71, 76–7, 77–8, 79, 80, 81–2, 83, 84–5, 139, 273–89, 290–1 and deinstitutionalization 276–7, 285–8t diminishing returns and negative feedback 275–6 hypotheses 280–5 mechanisms 285–9 repetition, broadening, and decentralization 278–80 returns, increasing or constant 274 standing committees and tripartite councils 277–8 see also under Ireland institutions 53, 62 interdependence 53, 103 Ireland business groups 100 Commission on Social Welfare 100 ‘common knowledge creation’ 20 Community & Voluntary (C &V) pillar 100, 103, 107

Index competitiveness 48–9 concertation 95, 102, 113, 116 Conference of Religious of Ireland (CORI) 98, 100 Construction Industry Federation (CIF) 100 cooperation 52 Democratic Left party 98 and ERM (European Exchange Rate Mechanism) 90, 91 economic conditions 90–3 elections 94 employment 90, 91f legislation 109 employment relations trajectories 108–10, 117 Federated Union of Employers (FUE) 98 Fianna Fa´il 93–4 Fine Gael 93, 94, 96, 98 global recession, effect on 117 governance trajectories 106–8 Green Party 94 industrial action 93f industrial relations 93f, 94–5, 109 inflation 92f labour market 110 labour migration 112 Labour Party 94 Labour Relations Commission (LRC) 109 local partnership structures 99 NGOs 98, 107, 113–14 National Centre for Partnership and Performance (NCPP) 99, 109 National Economic and Social Council (NESC) 95n4, 99, 105, 117, 278 ‘A Strategy for Development’ 96 National Economic and Social Forum (NESF) 99 National Employment Rights Authority (NERA) 101, 109 National Implementation Body (NIB) 109 National Women’s Council and the Community Platform 107 National Workplace Strategy 109 PD (Progressive Democrats) Party 94

partnerships 107, 108, 113 political institutions 93–4 public finances 91f public sector 103, 110 Sinn Fein 94 ‘small country effect’ 114 social exclusion 100 social pacts 36, 64, 66, 68, 70n6 concertation 26–7, 30t failed 65n3 functionalist hypothesis 111, 112, 280 institutionalization 89–117, 279 bargaining hypotheses 101–6 and deinstitutionalization 276, 277t, 288–9 governance trajectories 106–11 institutional and organizational conditions 94–5 mechanisms 111–14 national recovery programme (1986–7) 96–101 normative hypothesis 113–14, 115, 283 Partnership 2000 (1996) 98–100 power-distributional hypothesis 285 Programme for National Recovery (1987–90) 95, 280 ‘Towards 2016’ (2006) 95, 100–1, 108, 109 utilitarian hypothesis 112–13, 282 social partnership 106–8, 109, 111, 112, 113–14 unemployment 90, 91f, 100 unions 94, 95, 96, 98, 99, 101, 103, 104, 105, 110, 113, 263 employment density 93f public service 103, 112–13 Services, Industrial, Professional and Technical Union (SIPTU) 95, 99, 103, 104, 112 wage-bargaining 47–8, 66, 92f, 98, 113–14 Irish Business and Employers Confederation (IBEC) 100, 114 Irish Congress of Trade Unions (ICTU) 94, 99, 101, 103, 107, 114

315

Index Irish National Organisation of the Unemployed (INOU) 98–9, 100, 105 Italy Communist Reconstruction Party (RC) 131 concertation 26–7, 118, 119, 120, 124, 129, 130, 131, 132, 133, 136, 138, 139, 140, 141–2 ‘EUR’ turning-point 125 economy 118, 123, 143 employers 124, 126, 136–7, 272 organizations 263 Confindustria 121, 122–3, 126, 128, 130, 131, 132–3, 134, 135 employment 122 governments 35 coalition 118, 119, 123, 131–2 National Solidarity 66 inflation forecast (1992) 48 Mani Pulite corruption scandal 128 mediation 128, 140 negotiaton process 118 pensions 134 problem loads 281 social pacts 66 1983 (’Lodo Scotti’) 125, 144t, 146t 1984 (‘San Valentino’) 125, 144t, 146t 1992 125–7, 144t, 146t 1993 122, 127–9, 144t, 146t 1995 (Negotiated Pensions Reform) 129–30, 139, 144t, 146t 1996 (“Pact for Employment”) 129–30, 139, 144t, 146t 1998 (’Christmas Pact’) 122, 131–2, 144t, 146t 2002 (“Pact for Italy”) 123, 132–4, 144t, 146t 2007 (“Pact for Welfare”) 123, 134–5, 144t, 146t causal conditions, fuzzy membership in 30t drivers 119–23 failed 65n3 functionalist hypothesis 119, 139, 142–3, 281

316

institutionalization 138–40, 142 and deinstitutionalization 140, 276, 277t, 288, 289 negotiaton process 123–35 normative hypothesis 119, 284 power-distributional hypothesis 13, 143, 284 territorial 136 tripartite 135–7, 138, 279 utilitarian hypothesis 119, 138–9, 283 Tangentopoli scandal 128 ‘Treu Law’ 131 unemployment 139 unions 118, 120–1, 122, 123, 124–5, 126, 127–8, 130, 133, 140, 261, 262 CISL (Confederazione Italiana Sindacati Lavoratori) 120, 123, 130, 133, 135 CNEL (Confederazione Generale Italiana del Lavoro) 123, 125, 127, 128, 130, 131, 133, 134, 135, 136n7, 278 UIL (Unione Italiana del Lavoro) 120, 123, 133, 135 wage-bargaining 66, 68, 120, 126–7, 128, 137 works councils 140 Iversen’s centralization index 40 Jongerius, Agnes 220, 228 Katzenstein, P. 23 Kelly, J. see Hamann, K., and Kelly, J. Klestil, Thomas 63n2 Knight, J. 78 Kok, Wim 208, 210–11, 212, 213, 214, 215 Laakso and Taagepera index 41 labour markets: active labour market policies (ALMPs) 65, 69 Laitin, D. see Greif, A., and Laitin, D. Lange, P. 54 Lepsius, M. R. 79 Lim, S.-H. see Baccaro, L., and Lim, S.-H. Lubbers, Ruud 206, 212

Index Maastricht Imbalance (MAAS) 40 Maastricht Treaty 121 March, J. G., and Olsen, J. P. 113 Marin, B. 79 Melkert, Ad 216 monetary regimes, insufficiently restrictive (CBDP) 41 negotiaton outcomes 10–11, 58, 59, 104, 105, 266–7 neo-corporatism 23 Netherlands Catholic Peoples party 206 Central Planning Bureau 222 Christian Democrats (CDA) 206, 217, 218 Christian federation (CNV) 208, 219, 220 concertation 26t consensus 224 cooperation 51, 228 coordination 228 D66 (Democrats 66) 218 ‘desert law’ 225 EMU (European Monetary Union) 225 Economic and Social Council of the Netherlands (SER) 216, 220, 221, 225 economy 207, 217 elections 217 employers 218–19, 221, 222, 224 organizations Algemene Werkgeversvereniging (AWVN) 219, 227 Federation for SME’s (MKB) 209 Organisation for Agriculture and Horticulture (LTO) 209 Organisation of Dutch EnterprisesChristian Employers’ Association (VNO-NCW) 209, 212, 214, 215, 218, 219 governments 9, 208, 212, 222, 265 Green-Left party (GL) 207n3 institutions 207–10 Joint Policy Framework (1989–91) 225 Labour Foundation (StAr) 205, 213, 217, 220

labour market 207–8 Liberals (VVD) 206, 207, 217 politics 205–7 Pym Fortuyn List (LPF) 208, 217 retirement provision 218–21, 222, 229 Social and Economic Council (SER) 205, 228 Social Democrats (PvdA) 206, 207n3, 215, 217 social pacts 27–8, 37, 66, 108, 203–5, 223, 224–7 ‘Almost Agreement’ (1979) 211n7, 222 causal conditions, fuzzy membership in 30t Demi-Pact (2003) 219, 223 ‘Doing Together What Is Possible’ (2008) 228 Flexicurity (1996) 203, 204, 216 hypotheses 221–4, 226–7 institutionalization 224–7, 279 and deinstitutionalization 276, 277t, 285, 289 Mini-Pact (2002) 217 Museum Square Pact (2004) 204, 217–21, 223–4 negotiaton 208–9 New Course (1993) 203–4, 214–15, 223, 224 normative hypothesis 283 power-distributional hypothesis 284–5 utilitarian hypothesis 282 Wassernaar (1979) 28, 72, 73n8, 203, 210–14, 224, 225, 281 Socialist Party (SP) 207n3 standing committees 277–8 strikes 212, 214 unions 206, 209, 212, 213c, 216, 217, 218, 219–20, 222, 224, 225, 261, 263–4 ABVAKabo 212, 214 Dutch Labour Federation (FNV) 206, 217, 218, 219, 220, 222, 228

317

Index Netherlands (cont.) Federation of Dutch Trade Unions (FNV) 209, 211, 212, 214, 216, 223 Federation of Managerial and Professional Staff Unions (MHP) 208, 215, 219, 220 FNV-Allies (Bondgenoten) 217n12 National Federation of Christian Trade Unions (CNV) 217 Wage Act (1970) 211, 215 wage-bargaining 66, 68, 205, 209, 213, 214, 215, 216 networks 13, 78, 113 Norway 64, 65, 66, 68 OECD (Organization for Economic Cooperation and Development) 63 OPEN (high economic openness) 42 O’Donnell, Rory 95n4, 107 Olsen, J. P. see March, J. G., and Olsen, J. P. Olson, M. 54 partnerships 99–100 Ireland 107, 108, 113 pensions 68 Poland 65 Portugal bargaining models 26–7, 152, 154, 155–6 Confederation of Portuguese Industry (CIP) 148, 151, 152, 154, 155, 159, 273 EMU (European Monetary Union) 159 economy 149–50, 159 employers’ confederations 148, 152, 154, 160–1, 273 governments 35 centre right 154–7, 159 ‘Grand Coalition’ 151, 152, 153 PSD 153 Socialist 150, 157, 160–3 Labour Code (2003) 161 labour relations 147, 161–2 Minister of Labour: ‘Proposals for a New Consensus on the Regulation of the Labour

318

Relations System, Social Protection and Employment’ (2008) 162 negotiation 273 pensions 159–60 Social Democratic Party (PSD) 148, 149, 151, 153, 154 social pacts 66, 154–7, 163–72 Acordo de Concertac¸a˜o Estrate´gica (ACE) (1996–9) 157–8 Acordo de Concertac¸a˜o Social de Curto Prazo (ACSCP) (1996) 157 Agreement on the Reform of Labour Relations, Employment Policy, and Social Protection (2008) 161 causal conditions, fuzzy membership in 30t Economic and Social Agreement (AES 90) (1990) 156, 157 emergence 147, 149–51 failed 65n3 formation 147–8 Framework Agreement on the Definition and Evolution of the Statutory Minimum Wage (ARMMG) (2006) 160 functionalist hypothesis 281 health and safety (AHST) (2001) 158 incomes policy 153–4, 155, 156, 157, 158 institutionalization 163–72, 279 and deinstitutionalization 276–7, 285, 289 mechanisms 166–72 paths 164–6 negative feedback 275–6 negotiaton processes 151–63 normative hypothesis 284 occupational training (APF) (2001) 158 social protection (AMPS) (2001) 158 tripartite 148 utilitarian hypothesis 283 vocational training (2007) 161 wages 68 Standing Committee for Social Concertation (CPCS) 151–2, 154, 278

Index strikes 155, 163 unions 148, 149, 150, 153, 157, 262, 263, 264 Federation of Commerce Workers and Administrative Staff (FETESE) 153 General Confederation of Portuguese Workers (CGTP) 147, 148, 150, 151–2, 154–5, 156, 157, 159, 162, 163, 283 General Union of Workers (UGT) 148, 150, 151, 152, 153–4, 155, 156–7, 157–8, 159, 162, 163, 283 wage-bargaining 153–4 power 53, 55, 105 problem loads 8, 9, 76–6, 175, 266, 272, 281–2, 290 Prodi, Romano 122 Redondo, Nicola´s 184 reforms 19–20, 21, 22, 23, 27, 28, 35, 36, 37, 38, 39 Regini, M. 48 Regini, M., and Colombo, S. 275, 276, 281, 283 Rhodes, M., and Visser, J. 106, 116 see also Hancke´, B., and Rhodes, M. Rinnooy Kan, Alexander 215, 225 risk 10, 56, 266 salience see focal points Schelling, T. C. 48 Schmitter, P. 78–9 Schraven, Jacques 219–20, 225 Simmel, G. 71 Simoni, M. see Baccaro, L., and Simoni, M. Slovakia 66 Slovenia Chamber of Commerce 240 EMU (European Monetary Union) 236, 247, 249, 250, 251, 252, 254 Economic and Social Council (ESS) 237, 240, 241, 242, 243, 251, 254, 278 economy 233, 234, 244–5, 246, 250–1 elections 233, 254 employers 235, 240 employers’ organizations 235, 240

governments 234, 235, 236, 238, 242, 245, 248, 253–4 incomes policies 245, 246 and Irish model 51 labour law 246 Liberalna demokracija Slovenije (LDS) party 236, 239, 245, 246–7 Ministry of Labour 238, 239, 242n3 pension reform 246 politics 234, 245 privatization 235–6 SKD party 239 social pacts 64, 66, 68, 70n6, 232 (1988–92) 234–6 (1994) 237–9, 253 (1995) 241 (1996) 244 (2003–5) 244–9 (2007–9) 248–9 bargaining model 237–44 functionalist hypothesis 280 institutionalization 279 and deinstitutionalization 252, 254, 276, 277t, 288, 289 mechanisms 249–51, 254 paths 252–3, 254 normative hypothesis 283 power-distributional hypothesis 284–5 utilitarian hypothesis 282 social transformation, post-communist 232 strikes 235, 236, 243, 244, 251, 253 unions 233, 234–5, 238, 239, 240, 242, 243, 244, 245–6, 250, 251, 253, 254–5, 262 FIDES doctors’ union 243 Konfederacija neodvisnih sindikatov Slovenije (KNSS) 234, 238 Socialdemokratska stranka Slovenije (SDSS) 234, 238 Zveza svobodnih sindikatov Slovenije (ZSSS) 234, 235, 243 wage-bargaining 250, 279 Zdruz¡ena lista socialnih demokratov (ZLSD) 238, 239, 242, 245

319

Index social pacts actors 260–5, 290 analysis 31–2 bargaining model 9–11, 55–8 assumptions 260–5 pact creation 265–73 bipartite and tripartite 73, 74 causal conditions 29–31, 40–2 and collective bargaining compared 71 conjunctional and multi-causal explanations 22–3 cross-national variation 8–9 data 25–31 decentralization 279 definitions 25–6, 61 distribution 64–5 emergence 18, 45–6, 47–60, 61, 259–73 contracts, intentional design through 49–52 natural selection 47–8 social conventions and focal points 48–9 features 6 findings 32–7 functionalist hypothesis 12–13, 75–7, 280–2 models 32–4 negotiations 265–72, 290 non-wage 67t, 68 normative hypothesis 13, 79–81, 283–4 number and diffusion 63–9 power-distributional hypothesis 81–2, 284–5 resurgence 19–23 utilitarian hypothesis 77–9 utilitarian hypothesis 13, 282–3 see also under Germany; Ireland; Italy; Netherlands; Portugal; Slovenia; Spain Solchaga, Carlos 181 Soskice, D. W. see Flanagan, R. J., Soskice, D. W., and Ulman, L. Spain ‘Approaches to the New Stage of Social Dialogue’ (2000) 188 ‘Common Proposal for Social Dialogue’ (1997) 187

320

Communist Party (PCE) 177 competitiveness 200 concertation 182, 185–7, 188, 189, 190, 191, 192, 194f, 200–2 consensus 200 ‘Consolidation and Rationalization of the Social Security System’ (1996) 286 convergence 183 Declaration of principles for the promotion of the economy, employment, competitiveness, and social progress’ (2008) 192 and EMU (European Monetary Union) 174, 199 Economic and Social Council (ESC) 175, 176 economy 179–80, 182, 183, 185, 186–7, 195, 197 employers 182, 196, 263 organizations 198 ˜ ola de OrganizaConfederacio´n Espan ciones Empresariales (CEOE) 177–8, 182, 196 employment 185, 186, 188, 190, 191 see also unemployment governments 35, 265 coalition 177, 185 Socialist 176, 179, 190–2, 197, 265 labour market 187, 188, 190, 191n18 Ley de Dependencia (39/2006) 191 National Employment Institute (INEM) 178 National Health Institute (INSALUD) 178 National Institute of Social Services (INSERSO) 178 National Social Security Institute (INSS) 178 neo-institutionalism 174 Partido Popular (PP) 175, 176, 187 ˜ ol Partido Socialista Obrero Espan (PSOE) 175, 176, 182, 185 pensions 188 problem loads 281–2 public administration 188–9 Royal Decree on collective agreements in employment (2005) 191, 196

Index Social and Economic Council 197 social pacts 66, 194, 195, 279–80 Acuerdo Ba´sico Interconfederal (ABI) 200 Acuerdo Econo´mico y Social (AES) (1984) 178–81, 195, 200 Acuerdo Interconfederal (AI) (1983) 200 Acuerdo Interconfederal de Cobertura de Vacios (AICV) (1997) 186, 201 Acuerdo Interconfederal para la Estabilidad del Empleo (AIEE) (1997) 186, 201 Acuerdo Interconfederal sobre Negotiation Colectiva (AINC) (1997) 186, 201 Acuerdo Marco Interconfederal (AMI) (1980) 178, 200 Acuerdo Nacional sobre el Empleo (ANE) (1981) 178, 200 Acuerdo para la Negociacio´n Colectiva (ANC) (2002) 189–90, 193, 195–6, 197, 201 Agreement for Enhancing the quality and Growth of Employment (2006) 201 Agreement for Extrajudicial Mechanisms of Conflict Resolution (1996) 201 Agreement for Risk Prevention at the Workplace (1996) 201 Agreement for the Protection of Rural Employment (1996) 201 Agreement on Part-Time Work (1997) 201 Agreement on Pensions and Social Protection (2001) 201 Agreement on the Rationalization and Consolidation of the Pension System (1996) 201 Agreement on the Stabilization of Temporary and Part-Time Employment (1998) 201 Agreement on Tripartite Foundation for the Prevention of Labour Risks (1999) 201 Agreement to Increase Minimum Pensions (1999) 201

Agreement to Reform the Social Security System (2006) 202 ‘April Agreements’ (1997) 175, 186 bipartite 174, 187–92, 194 and concertation 26–7, 30t, 200–2 evolution 193 failed 65n3 functionalist hypothesis 174, 194–5, 281–2 incomes policy (2001) 189 institutionalization 192–8, 199, 279 and deinstitutionalization 276, 277, 285, 289 mechanisms 194–8 paths 192–4Inter-confederal Agreements on Collective Bargaining (1997–2005) 201 (2007–8, 2010) 202 Inter-confederal Agreement on Coverage of Bargaining Gaps (1997) 201 Inter-confederal Agreement on Labour Ordinances (1994) 200 Inter-confederal Agreement on LifeLong Learning (1992) 200 labour market reform 191, 192 Moncloa Pact (1978) 175–6 negative feedback 276 normative hypothesis 197–8, 284 policy package (2010) 192 political and organizational variables 175–7 power-distributional hypothesis 197, 285 retirement provision (40/2007) 191 Second Agreement on Extrajudicial Mechanisms of Conflict Resolution (2001) 201 ‘Social Pact for Employment’ (1994) 184 Third Agreement on Life-Long Learning (2000) 201 Toledo Pact (1995) 176, 186 tripartite 174, 176 utilitarian hypothesis 138–9, 195–7, 283 variables 198–9

321

Index Spain (cont.) wages 68 strikes 182, 184, 188, 189, 261, 262 unemployment 179f, 188 unions 176–7, 179, 181, 182–3, 184, 185, 187, 192, 193–4, 195, 196, 197, 198, 200, 261, 264 Comisiones Obreras (CC.OO) 176, 177, 178, 179, 180, 181, 182, 183, 184, 185, 197, 262, 264, 267, 272 Union de Centre Democra´tico (UCD) 177, 178 Unio´n General de Trabajadores (UGT) 176, 177, 179, 180, 181, 182, 183, 185, 189, 197, 262, 264 wage-bargaining 73n8, 186, 195–6 states: as mediators/participants 71–3 Stekelenburg, Johan 215 strategic interaction 52–9 Sweden 26t, 28, 30t, 65, 66 Terpstra, Doekle 219 Teulings, C. N., and Hartog, J.: Corporatism or Competition 74 Thomas, Damian 95n4 time preferences 57 Torres Couto, Jose´ Manuel 153 training: workers 69 Trentin, Bruno 127 triads 71–2 trial-and-error 50 Ulman, L. see Flanagan, R. J., Soskice, D. W., and Ulman, L.

322

unemployment 8, 35, 36, 39, 40 see also employment Ireland 90, 91f, 100 Italy 139 Spain 179f, 188 unions 9, 15–16, 20, 35 encompassing (DENS) 40 hierarchies 72 high centralization (CENT) 40–1 intermediate centralization (MEDC) 41 wage-bargaining 21, 22, 23, 28, 57, 66, 262, 263 see also European Trade Union Confederation United Kingdom 26t, 28, 30t, 41, 66, 70–1 unity, inter-and intra-sectional 53 Uriarte, Gabriela 184, 194 van den Toren, J.-P. 206 Van Neen, Christiaan 210–11, 213, 214 Visser, J. see Rhodes, M., and Visser, J. wage-bargaining 20, 22, 23, 27, 28, 35, 36, 66, 68 centralized 47–8 delegation 74 institutions 21 tax-based incomes policy (TBIP) 66, 68, 74 see also under Irelend; Italy; Netherlands; Portugal; Slovenia; Spain Wientjes, Bernard 228 Zalm, Gerrit 218, 220