Social partnership: a changing role for the state in a neo-liberal economy within a context of ‘post-democracy’

Social partnership, initiated by a populist political party (Fianna Fáil) and state-managers in the Prime Ministers Department, is the outcome of weak political democracy. It is not weak government but a poorly functioning parliament that provided an incentive for state managers to craft a new corporatist policy paradigm with civic and economic actors outside the political-party system. It is a very peculiar (hybrid) intermediation between the industrial relations and parliamentary system. Combined we can say it is a form of socio-economic governance; an attempt at embedded neo-liberalism. It is an institutional strategy for the political system to manage the constraints of globalisation.  A national response (to decreasing political autonomy) to increase the strategic capacity of the state to govern conflicting interests in a small open market economy. It is a form of governance but not one based on fluid, open or deliberative networks but real power relations. It is not negative power (i.e. based on non co-operation or zero sum gain) but communicative power (i.e. based on give and take material gains within a process of structured social dialogue). Thus, the Irish political economy is ‘neo-liberal’ at its core but it is ‘embedded’ in the sense that the state accomodated the interests of organised labour via consultative processes of communicative action.

It is important to explain why, how and under what conditions this particular form of economic governance was constructed. The form of governance (reflected in national social-wage pacts) can be conceptualised as an institution of labour relations. It is a re-regulatory response to liberalised Europeanisation. In this regard ‘neo-liberal’ or ‘competitive’ corporatism’ as a national mode of governance is the dependent variable that requires explanation. We need to explain why and how it emerged, institutionalised over time and subsequently fell apart. It is an empirical question as to whether all of this was caused by domestic (endogenous) political choices or international (exogenous) forces of globalisation.

The explanatory variables can be broken down into a debate on institutional requirements v’ organisational power of actors (economics v’ politics). As a form of centralised wage bargaining, macro-corporatism contributes to overall economic performance if it contains inflation and ensures economic growth. However, it is more interesting to observe its impact upon the distribution of income and wage inequality. Centralised wage setting as opposed to enterprise bargaining generally contains or improves wage inequality amongst workers even if it is premised on generating surplus profit for employers. In return for this collectivism at national level, government must offer something in return for trade union moderation. In the Irish case, it was a reduction in taxation, active measures to improve employment, increases in social welfare spending and an attempt to improve employment rights.

As an institution the factors that explain its emergence are not the same factors that explain its consolidation or decline. The primary actor is the government of the state. Thus, my contribution is to show that the evolution of social pacting in Irish national governance (political and industrial relations) reflects a shift in how the state operates in a liberal market economy. Politically, it reflected (for a period) a move from a liberal to a corporatist form of government in the process of capitalist development. Why these organised (and conflicting) interests of labour, capital and government choose this strategy, the conditions under which it was constructed, its impact upon wage inequality and the policy tradeoffs involved are the central questions guiding my doctoral thesis.

The consolidation of this national system of governance was not the result of political weakness but strategic coalition building. This in turn was built through political bargaining and the establishment of a cross-class coalition premised on wage-tax relations. Thus, the observations of political bargaining can be found in the politics of distribution; who got what, when and how in wage-income, labour market and social welfare. As an institution of governance it structured the intermediation of organised socio-economic interests with the government of the state. It was an experiment in associational democracy, to embed and generate the strategic capacity of the national political and industrial relations system in response to neo-liberal capitalism. It was an attempt by the state to establish new political tools of macro-governance to compensate for a weak political, administrative and public policy system. In turn, however, it legitimated neo-liberal capitalism. Organised labour provided the economic legitimacy for government policy. In return it received access to political power, to compensate for its weak economic resources.

Thus, it is about new state activities and policy coordination in a given political economy. Whilst it began as a mechanism to coordinate wage relations it evolved into a political process of governance within the core executive of the state. The management of wage-relations was the core political exchange that enabled the continued re-negotiation of social pacts over time and a necessary factor in consolidating the input of labour and capital. However, in practice it was much more about power and access to political government than it was about wage-income. It did have an impact upon income inequality, labour market growth, employment relations, social welfare spending and economic performance. All of these observations are important and fall under the broad rubric of ‘labour relations’. But, ultimately, the factors that explain its emergence, institutionalisation and decline as a national system of governance is ‘power’ and the strategic interest of the actors involved (operationalised in a much more nuanced way than most political science explanations allow, hence the need to borrow from sociology an understanding of ‘communication’ in the process of social interaction).

The state is crucial to the politics of adjustment when economies are faced with a crisis. In Ireland a negotiated ‘macro-corporatist’ response was adopted in 1987 but a market led adjustment was adopted in 2008. Why? Because the peak level actor of labour did not encompass enough of the labour market (density) to provide it with sufficient deterrent power despite its high level of centralisation (as a peak negotiator). It simply did not represent enough of the labour market and thus the state responded to the needs of non-union capital to improve wage competitiveness. Wage bargaining was centralised but not coordinated across sectors. Coverage was minimal. Thus, the voluntary nature of Ireland’s industrial relations system enabled the emergence of macro-corporatism (i.e. a flexible labour market) and its demise. The outcome was an end to structured political access to the public policy process. Government choose to end the national alliance with organised labour, illustrating the centrality of government, represented by strategic political parties, as the central actor in the process.

The industrial relations literature in Ireland focuses on why national macro-coordination was not evolved down to the enterprise level. This completely misses the point on why social partnership is a national form of governance. The politics of industrial relations in the Irish case was about the state crafting a new form of political governance within the interests of the administrative-political system. Thus, the main actor; government and state officials, were not directly concerned with enterprise coordination (beyond an acceptance that good HRM is positive for the economy). The main voice (representing employers and the Dept of Enterprise) was that of non-union MNCs who favour ‘union substitution’ strategies’. Furthermore, even after 23 years of national macro-corporatist arrangements government never conceded on the issue of union recognition. Trade unions still do not have the right to collective bargaining. The rules of social partnership (and wage setting) were always designed to embed a liberal market economy premised on foreign direct investment.

Social partnership was a political process and must be analysed as such. New forms of industrial-labour relations governed by issues of national-economic (government) policies that ultimately aimed to satisfy a particular model of capitalist development. In this regard, one is right to ask why the state bothered to invite and provide political access to unions at all. Why did they not just adopt a pure neo-liberal approach? Given their weak labour market position, decreasing power and the shift in accumulation structures of capital it is understandable why trade unions wanted to substitute economic for political power (given the absence of a strong parliamentary labour party). The answer to why the state provided access is to be found in the ‘politics’ of government and ‘strategic interest’ of populist political parties in government.

Thus, whilst the industrial relations literature fails to examine the politics of partnership as a structured  corporatist process providing political access to government for trade unions (and hence shifts collectivism away from the enterprise-labour market and into the political domain) the ‘political science’ literature fails to examine ‘social partnership’ as an empirical complexity of shifting forms of economic governance. Political ‘institutional’ science focuses purely on the formal properties of the political system (administration, committees, parliament, and elections) and ignores the role of organised interests in the political system. Parliament rubber stamps decisions made within executive government and partnership was a tool for the core executive to coordinate departmental interests. It enabled the ‘system’ to interact with civil society and organised economic interests. The main beneficiary is organised labour as without such structured paths to influence policy it is voiceless. Big business and corporate power will always be able to access politics. Labour cannot. Social partnership reflects a changing role for the state in a market economy within a context of ‘post-democracy’.

In short, macro-corporatism is a political artefact premised on managing distributional conflict through cross-class coalitions, crafted by state and trade union elites, and has to be analysed as such by both comparative industrial relations and comparative politics literature. Combined (politics and industrial relations within a context of capitalist-market development) they constitute comparative political economy.  To capture the nuances of shifting national modes of governance within state-economy relations requires a configurational case study analysis. This can be either descriptive or premised on causal inference. Given that I want to explain how this system of governance became instituted as the default position of Irish politics and industrial relations I aim for causal inference through historical-analytic process tracing. The core question, therefore, is why Ireland with no institutional pre-conditions for neo-corporatist political bargaining, in a context of liberalising political and economic trends, opted for a national system of economic governance (premised on centralised wage bargaining) when every other country was opting for ‘organised decentralisation’. Politics, it will be argued, in a context of declining parliamentary democracy, is as much about communicative power as it is strategic power; particularly when trying to explain the dynamics of institutional change in contemporary capitalism.

Case study

Three questions guiding the historical case study on the emergence (1987-1995), consolidation (1995-2002) and decline (2002-present) of Irish (neo)-liberal corporatism.

What are the dynamics of Irish wage-tax relations and how does this impact upon actor strategies and outcomes at a national macro-corporatist level?

What are the dynamics of the Irish labour market and how does this impact upon actor strategies and outcomes at a national macro-corporatist level?

What are the dynamics of the Irish social welfare system and how does this impact upon actor strategies and outcomes at a national macro-corporatist level?

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