Neocorporatist practices would surely not have attracted the degree of academic attention they have received were the most-neocorporatist countries thought to be merely unusually small (at least in terms of population), and ethnically homogeneous countries. In practice neocorporatist countries have been the objects of much theorising because they seemed
to have solved the problems of managing the economy unusually effectively. In the later 1970s in particular, neocorporatist countries on balance had less inflation, less unemployment, fewer strikes and, reflecting the greater `governability’ of such countries, smaller government deficits than most advanced democracies. It was plausible to argue that in what Schmitter had said to be ‘still the Century of Corporatism’, larger countries and economies would follow the lead of the most-neocorporatist countries and imitate their methods for governing the economy.
Why should neocorporatism work? The most obvious reason is incomes policy. Agreement between unions, employers and government on desirable levels of wage increases allows government to operate the economy at stable levels of full employment. Policies that contain inflation at the expense of curtailing economic growth (such as high interest rates) need not be used, and investment can be planned without worry that the economy will alternate between stronger growth and government-mandated recession characteristic of the British economy. Strikes can be avoided both through negotiation, and through the feelings generated by ‘social partnership’ that all interests are being given some consideration. Economic policy is not seen as biased in favour of the more affluent. Adjustments to economic change can also be made more rapidly if government, employers and unions recognize their necessity and work to reduce the hardship they cause. Sweden has avoided both strikes to prevent modernisation and the resulting high levels of unemployment common in Britain because government, unions and industries have worked together in ‘active labour market’ policies to facilitate the retraining and, when necessary, relocation of workers who lose their jobs through changes in demand or technology. Finally, neocorporatism allows many of the benefits of indicative planning to be achieved even though as formal a structure as that in France is not employed. Close consultation between government and business or between different businesses with the strong employers’ organisations helps corporations identify future possibilities and move to exploit them.
If neocorporatism has so many advantages, why was it perceived as losing ground? A number of different factors were seen as threatening the continuance of neocorporatism in countries where it was strong and making unlikely the anticipated extensions of neocorporatist practices in countries such as West Germany or Britain which had shown some interest in them.
One threat came from doubts about the fiscal viability of neocorporatism. As we noted earlier, bargaining between employers and unions on wage restraint was often aided by government promises to increase social expenditures benefiting workers indirectly. In the 1980s, however, widespread protests against tax levels occurred even in Norway and Denmark. Rapid gains in support by new, anti-tax parties in Sweden seemed to signal an end to tolerance of the growth in the proportion of GNP spent by government. In Austria, too, the government was threatened fiscally by a very large deficit in its accounts of over 100 billion Austrian schillings, prompting the Socialist Chancellor Sinowatz, prior to his retirement, to argue that Austrian social policy now had to be guided by what was practical rather than by what was desirable. In more- as well as less-neocorporatist countries, citizens seemed unwilling to pay the taxes that would finance the increase in social expenditures that would grease the wheel of neocorporatist bargaining. Governments were constrained by the threat or reality of deficits.