The Effects of Post-industrialism on the Political Economy of Western Europe

The Decline of Corporatist Bargaining

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

In recent years, the liberalization of international trade has clearly
demonstrated that European industry can no longer compete in traditional, large-
scale industrial sectors. European successes have increasingly come from
specialized, high value-added industry and from intelligent, flexible companies
able to shift production quickly to capitalize on movements in world demand.

The net result of these changes has been a transition to a post-industrial
society, where the stable economic order of mass employment in large-scale
industry has given way to mass unemployment and a breakdown of the political and
social consensus that held sway throughout the post-war period. These changes
have fundamentally altered the Western European labor market. This paper will
show how post-industrialism has dramatically reduced the ability of many Western
European countries to deliver full employment, not simply because of changes in
employment structure, but more importantly because those structural changes have
undermined the institutional framework that allowed Western European countries
to control prices while pursuing full employment policies, and have left Western
Europeans widely dissatisfied with their political system.

Western European countries demonstrated varying abilities to control inflation
and unemployment in the 1970's and 1980's. Cameron argues that two variables
explain much of the differences in economic performance: 1) the presence or
absence of corporatist institutions and practices,1 and 2) the role of leftist,
Social Democratic political parties in government (Cameron: 144). Centralization
of labor representation facilitates corporatist bargaining. Conversely,
fragemented labor representation makes agreement difficult. The greater the
number of parties, the less likely that they will find a solution palatable to
all negotiators. According to measurements of labor organizational unity by the
European Yearbook, countries with the most unified labor during the 1970's and
1980's, Austria, Sweden, Norway, Germany, Denmark and Finland, were all among
the best in Europe at controlling unemployment and inflation, while the
countries with the most disunited labor, Italy, France and Spain, were less

The shift to a post-industrial economy has increased the dissolution,
fragmentation and differentiation of the Western European labor market. Most
countries have suffered high and remarkably stable unemployment. Unemployment
rises during economic downturns, but no longer seems to recover in a boom
economy. Many blame post-industrialism for this phenomenon, complaining that
technological improvements have led to a 'workerless' economy. While post-
industrialism is a cause of higher unemployment, the explanation is not that it
has eliminated jobs, but that jobs have changed. New industrial jobs have
increasingly required specialized technical skill, while the service sector has
created jobs for skilled, semi-skilled and unskilled workers.

One crucial difference between the old jobs and the new are that traditional
unions played a much larger role in the labor market for industrial jobs than in
the labor market for post-industrial white collar and service jobs. Some
countries, Sweden for example, have strong public sector unions that include
large numbers of non-industrial employees, but private employees in post-
industrial sectors (professionals, managers, skilled and semi-skilled service
employees) are less likely to belong to unions than their industrial

Unions face large obstacles to organizing these workers. Many of the new jobs
are in smaller enterprises, hindering communication between the unions and
prospective members. But the most serious problem is the individualization of
the labor market. The post-industrial labor market is more fragmented than the
industrial labor market. Workers increasingly organize in functionally
specialized unions and collective bargaining has shifted to the local
level(Crook, Pakulski & Waters: 98). Accordingly, interests among those
responsible for negotiating on behalf of post-industrial workers increasingly
conflict. Price stability, exchange rate policy and competitiveness have become
important to large portions of workers in the post-industrial economy, often
leading them to oppose fiscally expansionary full employment policies.

Governments that value price stability face less pressure to deliver full
employment in return and fiscal restraints have decreased the political will to
spend their way to full employment. It is interesting to note that Norway, whose
North Sea oil revenues have kept it fiscally sound, has made extensive use of
public sector job creation to keep unemployment in check. A more typical Western
European examples is Italy, who, in the face of