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Threats to neocorporatism

A second threat to neocorporatism came from class decomposition. Neocorporatism rested on the belief that there was one major divide in society, between employers and employees. Such a division, though–possibly profound, could be compromised. The neocorporatist vision of societies dominated by two interests that could forge agreements with government was threatened in the 1980s by the fragmentation of interests. Some industries did well throughout the 1980s; others, such as shipbuilding in almost every European country, were devastated. Nearly all the developed countries reduced steel production, while the service sectors expanded. In short, success and failure were distributed sufficiently unequally among employers and workers to accentuate potential conflicts of interest not between but among the `social partners’. In Sweden, for example, the annual, economy-wide wage bargain between the union federation (the LO) and the Swedish Employers Federation that had been at the heart of neocorporatism was not made for most of the 1980s. Certain industries and unions — notably the Metalworkers — concluded that they could promote their interests better outside an economy-wide framework than inside it. Some saw in this emergence of narrower self interest an irony. The very success of neocorporatist systems had produced standards of living that were so high that they encouraged ‘class decomposition’. The affluent worker no longer felt the same sort of solidarity with other workers that had allowed unions to speak with one voice to employers and government.

A further factor threatening neocorporatism was the regained intellectual confidence in markets in the 1980s. After the deep recession of the early 1980s, the American economy displayed a capacity to grow and generate new jobs that was much admired, even envied, in Europe. Whereas the more organised capitalism of neocorporatist countries had seemed to facilitate change in the 1970s, the less-organised capitalism of the United States seemed better able to cope with change in the 1980s. The apparent economic successes of President Reagan and Prime Minister Thatcher gave credence to their arguments that allowing market forces to operate without government or neocorporatist committees getting in the way maximised growth. However, the triumph of the `neoconservative’ faith in markets in the 1980s was not merely based on pragmatism. It also reflected a strengthening in the acceptance of the moral legitimacy of market forces that was felt even in neoconservative countries. In Austria, something of a revival in liberal thought threatened both the proportz system of allocating government posts and the legitimacy of neocorporatist bargaining. Although modest by Thatcherian standards, a programme of privatising part of the vast Austrian nationalised sector was undertaken.

Further, a number of issues arose that could not be contained within the neocorporatist framework. The most famous of these was the conflict in Sweden over the creation of wage earner funds linked to unions that would acquire increasing proportions of the stock of Swedish corporations. Although in the end the issue was compromised, conflict was sufficiently intense to impede the normal operation of neocorporatism. In Austria environmental issues, especially debates about building a hydroelectric power project in a sensitive environmental location on the Danube, reminded politicians of the increasing importance of interests (here environmentalists) not part of the neocorporatist system. In Norway, the issue of whether or not the country should join the European Community broke apart neocorporatist alliances.

Finally, and probably most importantly, it ceased to be the case that neocorporatist economic systems performed noticeably better than others. We have noted earlier the massive public debt in Austria — equivalent to 5 per cent of GNP — that represented the continued need for government expenditures and subsidies to the large nationalised sector to grease the machinery of neocorporatism. Unemployment also rose in Austria to the unusually high level of 5.2 per cent by 1986, low by the standards of the worst of the years of recession in the United States, Britain or even West Germany, but regarded as serious in Austria. Perhaps most importantly, the growth rates in neocorporatist countries such as Sweden or Norway were very disappointing throughout the 1980s. Austria averaged less than 2 per cent growth per annum throughout the 1980s. The neocorporatist countries had achieved a more even performance than, for example, the United States, failing to achieve the same growth rates of the United States at its strongest but also avoiding the worst levels of inflation or unemployment in the USA or Britain in the 1980s.

Is there anything inherent in neocorporatism that might produce comparatively poor economic performances in the future? Two criticisms are often made. The first is that the high levels of government expenditure, particularly on the welfare that neocorporatist bargaining encourages, reduce competitiveness. The second is that neocorporatist economies will be characterised by greater ‘rigidities’ than less

neocorporatist countries such as the USA. Neither criticism is conclusive. Many of the costs of the welfare state are costs that society would presumably have to pay in some form even if the welfare state did not exist. So long as voters are prepared to pay sufficient tax to finance the welfare state, it need not reduce competitiveness. Take health care as an example. Health care costs are a significant element of the total costs of any welfare state. It is true that taxes to finance health care contribute to the total costs of corporations. Yet in the United States health care costs for health insurance for employees are a major cost for employers; Mr Lee Iacoca of Chrysler has argued that major corporations should support national health insurance in order to rid themselves of the costs of health insurance that add up to $600 to the cost of an American car. In short, private sector alternatives to the welfare state can reduce competitiveness as much as taxes to support the welfare state.

Neither is it clear that neocorporatism builds in rigidities to economies that must, like all others, adapt ever more quickly to changes in demand and technology. It is true that Austria has faced the same difficulty that faced Britain in connection with its nationalised industries; painful adaptation can always be avoided so long as the government is willing to foot the bill for large losses in the industries it owns. Yet Sweden, where the Social Democrats have avoided extensive nationalisation, has proved as adaptive to change as any economy. The active labour market policy might be seen as sharing the costs of adaptation more widely than in countries such as the USA, where the costs of change fall almost entirely on those in declining industries. But the main effect of an active labour market policy is to facilitate change by retraining workers and assisting movement from depressed to prospering regions. It is arguable that the general sense of fairness and security that neocorporatist systems encourage among their citizens also facilitates change by reducing the fear that any change in technology or employment will result in long-term unemployment and loss of income.

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