Trajectories Of Neoliberal Transformation

European Industrial Relations Since The 1970s

1st Edition Lucio Baccaro pdf download
https://ebookgate.com/product/trajectories-of-neoliberal-transformation-european-industrial-
relations-since-the-1970s-1st-edition-lucio-baccaro/

★★★★★ 4.9/5.0 (40 reviews) ✓ 197 downloads ■ TOP RATED

"Fantastic PDF quality, very satisfied with download!" - Emma W.

DOWNLOAD EBOOK
 Trajectories Of Neoliberal Transformation European
Industrial Relations Since The 1970s 1st Edition Lucio
Baccaro pdf download

TEXTBOOK EBOOK EBOOK GATE

Available Formats

■ PDF eBook Study Guide TextBook

EXCLUSIVE 2025 EDUCATIONAL COLLECTION - LIMITED TIME

INSTANT DOWNLOAD VIEW LIBRARY

Instant digital products (PDF, ePub, MOBI) available
Download now and explore formats that suit you...

Trajectories of Neoliberal Transformation European

Industrial Relations since the 1970s 2017th Edition Lucio
Baccaro
https://ebookgate.com/product/trajectories-of-neoliberal-
transformation-european-industrial-relations-since-the-1970s-2017th-
edition-lucio-baccaro/
ebookgate.com

Cities in relations trajectories of urban development in

Hanoi and Ouagadougou 1st Edition Söderström

https://ebookgate.com/product/cities-in-relations-trajectories-of-
urban-development-in-hanoi-and-ouagadougou-1st-edition-soderstrom/

ebookgate.com

The European Union since 1945 2nd Edition Alasdair Blair

https://ebookgate.com/product/the-european-union-since-1945-2nd-
edition-alasdair-blair/

ebookgate.com

French Relations with the European Union 1st Edition Helen

Drake

https://ebookgate.com/product/french-relations-with-the-european-
union-1st-edition-helen-drake/

ebookgate.com
Industrial Cowboys Miller Lux and the Transformation of
the Far West 1850 1920 1st Edition David Igler

https://ebookgate.com/product/industrial-cowboys-miller-lux-and-the-
transformation-of-the-far-west-1850-1920-1st-edition-david-igler/

ebookgate.com

Fashions of a Decade The 1970s Jacqueline Herald

https://ebookgate.com/product/fashions-of-a-decade-
the-1970s-jacqueline-herald/

ebookgate.com

A Revolution Down on the Farm The Transformation of

American Agriculture since 1929 None 1st Edition Paul K.
Conkin
https://ebookgate.com/product/a-revolution-down-on-the-farm-the-
transformation-of-american-agriculture-since-1929-none-1st-edition-
paul-k-conkin/
ebookgate.com

The Conservative Party and European Integration since 1945

At the Heart of Europe 1st Edition N.J. Crowson

https://ebookgate.com/product/the-conservative-party-and-european-
integration-since-1945-at-the-heart-of-europe-1st-edition-n-j-crowson/

ebookgate.com

Lasik The Evolution of Refractive Surgery 1st Edition

Lucio Buratto

https://ebookgate.com/product/lasik-the-evolution-of-refractive-
surgery-1st-edition-lucio-buratto/

ebookgate.com
Trajectories of Neoliberal Transformation

This book has both empirical and theoretical goals. The primary empir-
ical goal is to examine the evolution of industrial relations in Western
Europe from the end of the 1970s to the present. Its purpose is to evalu-
ate the extent to which liberalization has taken hold of European indus-
trial relations institutions through five detailed, chapter-length studies,
each focusing on a different country and including a quantitative analy-
sis. It offers a comprehensive description and analysis of what has hap-
pened to the institutions that regulate the labor market, as well as the
relations between employers, unions and states in Western Europe since
the collapse of the long postwar boom. The primary theoretical goal of
this book is to provide a critical examination of some of the central
claims of comparative political economy, particularly those involving
the role and resilience of national institutions in regulating and manag-
ing capitalist political economies.

Lucio Baccaro is Professor of Sociology at the University of Geneva.

He received his Ph.D. in industrial relations and political science from
MIT. He has authored numerous articles on the comparative political
economy of industrial relations and labor markets, as well as on partic-
ipatory and deliberative governance.
Chris Howell is the James Monroe Professor of Politics at Oberlin Col-
lege. He received his Ph.D. in political science from Yale. He is the
author of two books, Regulating Labor: The State and Industrial Rela-
tions Reform in France and Trade Unions and the State: Constructing
Industrial Relations Institutions in Britain, 1890–2000. The latter won
the 2006 Labor History prize for best book in labor studies.
Trajectories of Neoliberal Transformation
European Industrial Relations Since the 1970s

LUCIO BACCARO
University of Geneva

CHRIS HOWELL
Oberlin College
University Printing House, Cambridge cb2 8bs, United Kingdom
One Liberty Plaza, 20th Floor, New York, ny 10006, usa
477 Williamstown Road, Port Melbourne, vic 3207, Australia
4843/24, 2nd Floor, Ansari Road, Daryaganj, Delhi – 110002, India
79 Anson Road, #06-04/06, Singapore 079906

Cambridge University Press is part of the University of Cambridge.

It furthers the University’s mission by disseminating knowledge in the pursuit of
education, learning, and research at the highest international levels of excellence.

www.cambridge.org
Information on this title: www.cambridge.org/9781107018723
DOI: 10.1017/9781139088381

C Lucio Baccaro & Chris Howell 2017

This publication is in copyright. Subject to statutory exception

and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2017
Printed in the United States of America by Sheridan Books, Inc.
A catalogue record for this publication is available from the British Library.
isbn 978-1-107-01872-3 Hardback
isbn 978-1-107-60369-1 Paperback
Cambridge University Press has no responsibility for the persistence or accuracy
of URLs for external or third-party internet websites referred to in this publication
and does not guarantee that any content on such websites is, or will remain,
accurate or appropriate.
Lucio: A Cosetta
Chris: For those I love and who, miraculously, love me back
Contents

1 Introduction: Trajectories of European Industrial Relations page 1

2 Arguing for Neoliberal Convergence 6
3 Quantitative Analysis of Industrial Relations Change 26
4 Constructing a Liberal Market Economy: The Collapse of
Collective Regulation in Britain 51
5 State-Led Liberalization and the Transformation of Worker
Representation in France 73
6 Softening Institutions: The Liberalization of German
Industrial Relations 97
Co-authored with Chiara Benassi
7 “Well Burrowed, Old Mole!”: The Rise and Decline of
Concessionary Corporatism in Italy 121
8 The Conversion of Corporatism: Reengineering Swedish
Industrial Relations for a Neoliberal Era 143
9 Actors, Institutions and Pathways: The Liberalization of
Industrial Relations in Western Europe 172
10 From Industrial Relations Liberalization to the Instability
of Capitalist Growth 197

Bibliography 223
Index 253

vii
1

Introduction
Trajectories of European Industrial Relations

As with most academic monographs, ours has both empirical and theoretical
goals. The primary empirical goal is straightforward enough: to examine the
evolution of industrial relations in Western Europe from the end of the 1970s
up to the present. The time period is designed to capture the break in post-
war political economy that began with the crisis of Fordist economic growth
experienced by most advanced capitalist societies in the 1970s and to trace
how national industrial relations systems have fared since. Our purpose is to
evaluate the extent to which liberalization has taken hold of European indus-
trial relations institutions. We undertake our examination through five detailed
chapter-length country studies – of Britain, France, Germany, Italy and Swe-
den – and quantitative analysis of these five countries plus an additional seven
Western European countries and three non-European ones. The book offers a
comprehensive description and analysis of what has happened to the institu-
tions that regulate the labor market and relations between employers, unions
and states in Western Europe since the collapse of the long postwar boom.
We argue that liberalization in the realm of industrial relations is best under-
stood as involving an expansion of employer discretion: greater influence and
control on the part of individual employers over wage determination, hiring
and firing and the organization of the workplace. Thus, liberalization should
be evident in the reconstruction of industrial relations institutions to expand
employer discretion. This is likely to include, but not be limited to, decentral-
ization and individualization of bargaining, deregulation of the labor market
and decollectivization, involving a decline in the strength, size, centralization
and coverage of class organizations, primarily trade unions. We also argue that
institutions are often quite plastic, in that the same institution can, under differ-
ent circumstances, come to function in a quite different manner than in the past.
Understood in this way, liberalization may also take place through the “conver-
sion” (Streeck and Thelen 2005) of existing institutions from discretion-limiting
1
2 Trajectories of European Industrial Relations

to discretion-enhancing. As such, evidence of liberalization can be found in

changes in the form of institutions (the dismantling of existing institutions and
the creation of new ones), in a greater ability on the part of employers to bypass
or ignore institutions that limit their discretion and in changes to the manner
in which existing institutions function.
Our country case studies, encompassing a wide range of types of political
economy and including the largest economies in Western Europe, show a clear
liberalizing trajectory from the end of the 1970s to the present. In all cases,
employers had greater discretion over their firms and their workforces at the
end of the period than at the start. While liberalization has taken place in differ-
ent ways and at different speeds, and European political economies currently
rest at different locations along a liberalizing trajectory, they all appear to be
heading in the same direction. The most striking feature of our survey of indus-
trial relations developments across Western Europe is not the range of national
variation at either the start or the end of the roughly thirty-five-year period
under investigation, but rather the transformation in industrial relations insti-
tutions that has taken place everywhere across that period. The landscape of
industrial relations has changed in fundamental ways since the end of the 1970s,
and everywhere in the same direction, involving an expansion of employer
discretion.
Given our empirical findings, our theoretical concerns should come as no
surprise. The primary theoretical goal of this book is to provide a critical
examination of some of the central claims of comparative political economy
(CPE), particularly those involving the role and resilience of national insti-
tutions in regulating and managing capitalist political economies. The field
of CPE is one of the most intellectually vibrant within political science and
comparative macrosociology, focusing upon the origins, trajectories and per-
formance of national economic institutions in a comparative framework. CPE
has long been dominated by theoretical approaches that emphasize three linked
arguments. The first is the central, independent role of institutions themselves
in mediating between structural economic change and the choices available
to political–economic actors; institutions play an important role in insulating
national political economies from common economic pressures (Hall and Tay-
lor 1996; Steinmo, Thelen and Longstreth 1992). By institutions, scholars mean
everything from a financial system to organizations such as unions or employer
associations and widely accepted practices such as collective bargaining. Thus,
institutions have provided middle range explanations for national differences.
The implication of a CPE that relies heavily upon institutional analysis
has been a theory of change that emphasizes the role of history and of path-
dependent effects (Pierson 2004). Thus, a second and related argument within
CPE is that institutions encourage incrementalism and path dependence. Insti-
tutions are argued to be highly resilient and resistant to change, encourag-
ing economic and political actors to defend existing institutions or to make
Trajectories of European Industrial Relations 3

relatively minor changes along an existing path. This tendency was accentu-
ated in the initial formulations of the Varieties of Capitalism approach (Hall
and Soskice 2001b). Thus, institutions created in the quite distant past can con-
tinue to shape the behavior of actors in the present, and to make radical changes
in the direction of a given political economy unlikely.
It follows, and this is a third linked argument, that the field of CPE has tradi-
tionally been hostile to the idea that the main institutions of advanced capitalist
societies are undergoing similar transformations and becoming more alike. For
at least the last thirty years, the field has been dominated by approaches and
empirical studies that emphasize the enduring diversity and range of distinct
national capitalisms. The resilience of institutions has been used to argue for
continuing institutional heterogeneity in capitalist political economies, even in
the face of heightened international economic constraints. Even when institu-
tions have clearly undergone substantial change, the expectation of those work-
ing within the CPE field has tended to be that change will be shaped by local
interests and nationally specific factors, so that there is no reason to anticipate
common trajectories of change or common cross-national patterns; rather, the
institutional landscape of advanced capitalist societies is likely to remain char-
acterized by national diversity even in the face of powerful liberalizing pressures
(Thelen 2014).
There are good and legitimate reasons for all this. Any common trajectory of
capitalist political economies is likely to be hidden by the long periods of time
involved, by the incremental nature of most institutional change, by differences
in the timing of change over the last three decades or more, by a privileging
of form over function in the analysis of institutions and by habits of mind and
the sociology of knowledge production; most of us have made deep intellectual
investments in understanding comparative (usually national) difference, and
CPE has a laudable commitment to local knowledge. One can add that it derives
also from the gradual displacement of capitalism – as opposed to markets – as
an object of scholarly inquiry that has taken place within much of the social
sciences, and with it the inability to make sense of transformational change
across the advanced capitalist world. The simple reality is that contemporary
analysis of political economy has been much better at explaining differences
than identifying commonalities.
Our book builds upon recent work within the CPE field that has begun to
contemplate the possibility of more radical, transformative institutional change
(Campbell 2004; Hall and Thelen 2009; Streeck 2009; Streeck and Thelen
2005). The book takes issue with each of the core arguments of the field noted
above, proposing instead (i) that institutions are heavily dependent upon the
social, political and economic contexts within which they operate for the man-
ner in which they function and the outcomes they generate: (ii) hence that insti-
tutions can change quite rapidly, both in form and in function; and (iii) that a
careful examination of contemporary capitalist political economies reveals a
4 Trajectories of European Industrial Relations

common liberalizing tendency in the trajectory of industrial relations institu-

tions, as everywhere employer discretion has expanded and the balance of class
power has shifted against labor.
The plan for the book is as follows. Chapter 2 lays out the theoretical argu-
ment of the book, examining the literature on institutional change as a starting
point for rethinking the sources and mechanisms of change and the relation-
ship between the balance of class power, the transformation in capitalist growth
models, and the role of political–economic institutions. The chapter proceeds
to elaborate a meaning of liberalization in the sphere of industrial relations as
fundamentally involving an expansion of employer discretion, before outlin-
ing an understanding of institutional convergence as movement along the same
trajectory rather than institutional identity. Chapter 3 provides a quantitative
analysis of institutional change in industrial relations for twelve Western Euro-
pean countries. We also include in the analysis three additional liberal market
economies (of which there are very few in Western Europe). The quantitative
analysis indicates important elements of a common liberalizing trajectory, par-
ticularly with regard to trade union organization, industrial conflict and collec-
tive bargaining decentralization. Nonetheless, this analysis also demonstrates
important continuing differences in institutional form. We argue that due to
the limitations of available cross-country measures, large-N analysis is at best
able to capture liberalization as change in institutional form but not liberaliza-
tion as institutional conversion, and we make the case for detailed case studies
and process tracing of institutional change.
There then follow five chapters, Chapters 4–8, each containing a detailed
country case study. These cases have been chosen to run the gamut of varieties
of capitalism, to include centralized and decentralized cases and those that have
seen a resurgence of social concertation. In short, we have chosen “hard” cases
for an argument that claims to have identified a common trajectory of insti-
tutional change. Together, they provide remarkable variation in institutional
setup. Each country case follows a common outline, beginning with a stylized
portrait of the industrial relations system at the end of the 1970s and of the
extent to which institutions enabled or constrained employer discretion in wage
setting, work organization and labor market regulation. The chapters then trace
the process of institutional change over the subsequent thirty years, concluding
with a stylized portrait of the industrial relations system in 2015. We pay partic-
ular attention to moments of crisis in industrial relations, when reform efforts
multiplied, and to the relative roles of employers, unions and governments in
the process of institutional reconstruction.
Chapter 9 provides a comparative analysis of the case study evidence, exam-
ining mechanisms of institutional change and the extent and form of liberal-
ization in industrial relations. The chapter then proceeds to a discussion of the
role of trade unions, employer organizations and states in institutional change.
The case studies indicate both that employer organizations in practically every
country underwent radicalization in the course of the 1980s and 1990s and
Trajectories of European Industrial Relations 5

were thus more willing to contemplate quite dramatic change, and that states –
often thought of as largely passive or ineffective actors in the current period –
were crucial players in creating the conditions for wide-ranging liberalization.
Chapter 10 steps back from the quantitative and case study evidence to locate
the liberalization of industrial relations within the broader framework of the
collapse of Fordism, explaining how the crisis of institutions enabling the trans-
mission of productivity increases into real wages and aggregate demand has led
to the emergence of different post-Fordist growth models, all characterized by
inherent instability.
We have each incurred substantial intellectual debts in the process of
researching and writing this book. We are extremely grateful to colleagues
who have read different portions of the manuscript and offered precious
advice. They include Kerstin Ahlberg, Conor Cradden, Colin Crouch, Frank
Dobbin, Marc Blecher, Pepper Culpepper, Steve Crowley, Christian Dufour,
Martin Höpner, Christian Ibsen, Anders Kjellberg, Michel Lallement, Marc
Lenormand, Olivier Mériaux, Sofia Murhem, Tommy Őberg, Jan Ottosson,
Markus Pettersson, Jonas Pontusson, Damian Raess, Veli-Pekka Säikkälä,
Tobias Schulze-Cleven, Marco Simoni, Fritz Scharpf, Wolfgang Streeck, Kathy
Thelen and Mark Vail.
Lucio Baccaro would like to thank in particular Chiara Benassi and Jonas
Pontusson for joint work that has inspired (and in the case of Chiara con-
tributed to) parts of the manuscript, and his wife Cosetta for putting up with
him throughout the process. Chris Howell would like to thank the countless
trade unionists and researchers who have read draft chapters, offered invalu-
able feedback and taken time to help with this research, and especially Rebecca
Givan for collaborative work that helped develop some of the early ideas that
inspired this book.
2

Arguing for Neoliberal Convergence

This chapter makes the theoretical case for institutional convergence, along a
neoliberal trajectory, among the political economies of Western Europe. We
will elaborate further below what we mean by neoliberal convergence, but it is
worth emphasizing at the onset the degree to which the field of CPE has tradi-
tionally been hostile to the notion of convergence. For more than thirty years,
for the great majority of those working in the field, the mission of CPE has been
all but conterminous with identifying and explaining the enduring diversity and
range of distinct national capitalisms. Many of the seminal works in the field
have argued that broad economic changes – whether understood as the product
of shifting regimes of accumulation, deindustrialization or the forces of global-
ization – are experienced differently and have very different effects in different
countries. The result has been that the dominant theoretical approaches in CPE
are dubious about the likelihood of common consequences, similar trajectories
or institutional convergence (Berger and Dore 1996; Campbell 2004; Garrett
1998; Hall and Soskice 2001b).
The absence of expectations of convergence in these analyses is primarily
a result of the centrality that has been accorded to institutions in the disci-
pline of CPE and the characteristics attributed to political–economic institu-
tions. Indeed, “the idea of persistence is virtually built into the definition of an
institution” (Thelen 2009, 474) and contemporary theories of CPE have, to a
large extent, been built on the back of institutionalist theorizing (Hall and Tay-
lor 1996). Institutions have provided middle range explanations for national
differences that mediate between broad structural explanations, which tend to
anticipate convergence in industrial society, and narrowly political arguments
about agency, which privilege partisan policy choices.
The remainder of this chapter is organized into three sections. The first sur-
veys the literature on institutional change within CPE to demonstrate its per-
sistent resistance to convergence arguments. The second section lays out our
6
Theorizing Institutional Change 7

argument that institutions are inherently malleable, capable of functioning

quite differently in different economic contexts, and that therefore there are
strong reasons to anticipate convergent institutional change. We argue that in
the current period of capitalist growth, the trajectory of institutional change is
best characterized as neoliberal. The third section of this chapter sketches out
an alternative approach to CPE and to emerging capitalist growth models –
one heavily informed by the power resources approach, regulation theory and
heterodox economics – which, we believe offers an explanation of the broad lib-
eralizing character of institutional developments in the sphere of industrial rela-
tions over the last thirty five years. We will return to this alternative approach
in the final chapter of the book to sketch out the implications of the universal
tendency toward liberalization of industrial relations that we describe in the
empirical core of the book for the stability and future of contemporary capi-
talist growth.

2.1 Theorizing Institutional Change

This is not the place for a comprehensive review of the evolution of institution-
alist theorizing. Suffice it to say that, following on the heels of Shonfield’s magis-
terial Modern Capitalism (Shonfield 1965) and the efforts of the contributors to
the volume Between Power and Plenty (Katzenstein 1978) to explain divergent
responses to the oil shock in the mid-1970s, academic attention shifted from an
emphasis on one political–economic institution to another: corporatist institu-
tions (Schmitter 1974), organized labor (Cameron 1984), financial institutions
(Zysman 1983) and employer organization and institutions of employer coor-
dination (Soskice 1990, Swenson 1991). But all the while, the structuring role
of institutions has remained central.
The resilience of institutions has been used to explain the absence of
widespread convergence in capitalist political economies and the persistence
of distinct national institutional sets, even in the face of heightened interna-
tional economic constraints. Institutions mediate common economic pressures,
distribute power among actors and offer solutions to coordination problems
facing market economies. As Steinmo, Thelen and Longstreth (1992) argued,
institutions have independent power to structure the distribution of economic
power and the behavior and even interests of economic actors.
The implications of a CPE that relies heavily upon institutional analysis has
been a theory of change that emphasizes the role of history in politics and gen-
erates path-dependent effects (Pierson 2004). It illustrates, in Shonfield’s mar-
velous phrase (Shonfield 1965, 88), “the way in which a living tentacle reaches
out of past history, loops itself round, and holds fast to a solid block of the
present.” It is these characteristics of institutions that contribute to expecta-
tions of continuity, of minor incremental change along an established path and
of a stickiness in which strong pressures exist for actors to use established insti-
tutions to respond to new economic conditions.
8 Arguing for Neoliberal Convergence

Institutionalist approaches within CPE received a new urgency in the 1990s,

when wide-ranging political and economic developments raised once again the
possibility of a broad convergence in the institutions of advanced capitalist
political economies. It was in this context that the varieties of capitalism (VoC)
literature associated with Hall and Soskice (2001b) emerged. This approach
identified firms as the primary actors within capitalist economies, seeking to
“bring firms back into the center of the analysis” (Hall and Soskice 2001b,
6) suggesting less prominent, less strategic roles for both state actors and orga-
nized labor. In this approach, institutions are important primarily for their abil-
ity to solve coordination problems for firms. Thus, the importance of institu-
tions for VoC theorists is less that they distribute power or sanction behavior,
and more that they facilitate information flows among actors, permit “decen-
tralized cooperation” (Culpepper 2001), and solve familiar collective action
problems, such as the underprovision of training. Among capitalist economies,
this approach identified two broad ideal-typical types of political economy:
liberal market economies (LMEs) and coordinated market economies (CMEs).
The former rely primarily upon unregulated labor and capital markets to solve
coordination problems, while the latter rely more heavily upon nonmarket
forms of coordination.
The tendency within most CPE to an account of limited institutional change
was accentuated in the initial formulations of the varieties of capitalism. The
familiar mechanisms of path dependence and positive feedback were bolstered
by the role of institutional complementarities and comparative institutional
advantage. Institutions are rarely able to perform their roles in isolation; rather,
there are likely to be interactions and complementarities among institutions.
These complementarities imply that there is a tendency for institutions to rein-
force each other, forming interlocking ensembles of institutions spanning the
various spheres of a political economy with the result that a particular set of
institutions is highly resistant to change. Furthermore, because countries enjoy a
particular “comparative institutional advantage” for specific types of produc-
tion, this in turn encourages actors, particularly employers, to reinforce and
defend those institutions rather than to challenge and transform them. Thus,
for example, in a central claim of the VoC approach, skills serve as the link
between institutions and a production regime; the ability to emphasize either
general or industry-specific skills is reinforced by an interlocking set of train-
ing, social welfare and industrial relations institutions, which in turn affords
a comparative advantage in certain kinds of production (Estevez-Abe, Iversen
and Soskice 2001).
It followed that this approach was deeply skeptical of the likelihood of con-
vergence: “nations often prosper, not by becoming more similar, but by building
on their institutional differences . . . Thus, much of the adjustment process will
be oriented to the institutional recreation of comparative advantage” (Hall and
Soskice 2001b, 60, 63). If anything, institutional arbitrage is likely to consoli-
date difference, rather than erode it. As Thelen (2009, 474) notes of the resulting
Theorizing Institutional Change 9

theoretical edifice, “as illuminating as this framework has been on the question
of institutional reproduction, scholars working in this tradition have generally
had much less to say about institutional change over time.”
The VoC approach was, in many ways, the culmination of more than a gen-
eration of scholarship in CPE. It built upon the emphasis within that tradi-
tion on the resilience and diversity of national models of capitalism, with the
resilience explained by the path-dependent qualities of institutions. To this tra-
dition, it added theoretical rigor by embedding path dependence in arguments
about institutional complementarities and comparative institutional advantage.
And it further offered a micro-foundational argument to explain why actors
should be expected to defend existing institutions.
It should be said that there has always been some dissent from this empha-
sis upon cross-national diversity and limited institutional change within the
field of CPE (Coates 2005). Regulationist approaches to political economy,
whether in their French (Boyer 1990), British (Jessop 1990a) or American
(Kotz, McDonough and Reich 1994) versions, have been far more interested in
institutional change by virtue of their assumptions about the inherent instabil-
ity, conflictuality and dynamism of capitalism. This alternative view of the way
capitalism functions, one we share, is something to which we shall return later
in this chapter. For this tradition, and what gives it its name, the importance
of institutions is that they are mechanisms for permitting regulation. Regula-
tion was the “master-concept” developed to explain the period of largely stable
growth for three decades after the Second World War” (Neilson 2012, 161).
What resulted was essentially a punctuated equilibrium model that emphasized
temporal discontinuity and a degree of synchronicity across the advanced capi-
talist world in the timing of structural economic change: the form of economic
growth known as Fordism everywhere went into crisis at some point in the
1970s, to be replaced by post-Fordism, though one that went by almost as
many names as there were regulation theorists.
But even here, in an ironic example of theoretical convergence, distinct
national models of capitalism have come to dominate the landscape of regu-
lationist theorizing, particularly that associated with Robert Boyer (Boyer and
Saillard 2002, Part V). Delineating the core dynamics of the emerging growth
model (or “regime of accumulation”) gave way to identifying its institutional
prerequisites, with the unsurprising result that the focus of much regulationist
research has become the variety of national regulatory mechanisms: “Examin-
ing the extent of convergence in terms of the regulation of core capitalist forms
is lost from the research agenda, and instead the theme of national diversity
shifts attention to the contingent political struggles that endogenously generate
specific path-dependent national trajectories” (Neilson 2012, 169). Nonethe-
less, the regulationist tradition of political economy remains distinct in its
emphasis upon the changing physiognomy of capitalism itself and its inherent
crisis tendencies. As such, it remains an important theoretical tool, to which we
return in the last section of this chapter.
10 Arguing for Neoliberal Convergence

Quite recently, in part in response to the perception that the early formula-
tions of the VoC approach were somewhat static and functionalist, theorizing
and debate over the degree and form of institutional change have moved to the
center of the field of CPE. This has taken place on the back of a less function-
alist, more political reading of the dynamics of capitalist political economies,
one that emphasizes contingency, power, contestation, the fragility of the politi-
cal coalitions that undergird institutional construction (Streeck and Yamamura
2001, Streeck 2009) and the ideational preconditions for institutional embed-
ding (Blyth 1997, Culpepper 2008).
It bears mentioning that there always were internal differences within the
VoC literature. For example, while in Soskice’s account (1999), employers
in CME countries were conceptualized as having prestrategic preferences for
coordinating institutions, employers’ support was considered to be strategic as
opposed to prestrategic in Thelen’s account (2001), and contingent on labor’s
countervailing power. This second interpretation was from the very beginning
much closer to that of power resource theorists such as Korpi (2006a) or Streeck
(2009) than the first.
Over time, from this more political stream within the VoC approach have
come a renewed emphasis upon institutional experimentation, a less functional-
ist interpretation of the process of institutional reproduction and greater space
for actors to reassess their interests and contemplate institutional change (Hall
and Thelen 2009). It is also important to note that even in its original formu-
lation, this approach allowed for the possibility of convergence on the LME
variety of capitalism, noting that it is easier to deregulate CMEs than for LMEs
to develop coordinating mechanisms and musing that institutional reform in
one sphere “could snowball into changes in other spheres as well” (Hall and
Soskice 2001b, 63–64). We would argue, and our cases indicate, that the unrav-
eling of CMEs and the further liberalization of LMEs in the sphere of industrial
relations had been well under way for more than a decade when this statement
was written.
The most fully formulated argument in favor of gradual or incremental
transformation – in which an accumulation of small, barely perceptible changes
becomes transformational over time – came from Streeck and Thelen (2005).
They acknowledge that most institutional approaches understate the degree
and significance of change, that intensified competition and a greater commit-
ment to market liberalism have exerted real pressure on institutions and that
one cannot assume that economic actors will always seek to defend existing
institutions rather than modify them. They identify a series of mechanisms by
which incremental changes can have transformative effects (Streeck and The-
len 2005, 31). For example, the same institutions can take on new functions,
latent effects can be activated, existing institutions can atrophy and peripheral
institutions can take center stage. In a similar fashion, Campbell (2004) has
articulated a more “actor-centered institutionalism” (the term originates from
Scharpf (1997b)) in which entrepreneurial actors, working within existing sets
Theorizing Institutional Change 11

of institutions, engage in various forms of incremental change; change remains

path-dependent but it can, over time, become transformational.
In these more recent formulations, the firm-centric focus of the original vari-
eties of capitalism approach, in which the interests of employers largely drove
institutional design and employers were expected to defend the resulting insti-
tutions on the basis of self-interest, has weakened, not least because of abun-
dant evidence of widespread and systematic employer efforts to reshape exist-
ing institutions (much of which we will present in the empirical chapters of this
book). What one scholar wryly noted with regard to Germany is equally true
elsewhere in Europe: “the disjuncture between the stated interests of corporate
actors in Germany and the deductive-functionalist interests ascribed to them
by the ‘Varieties of Capitalism’ literature is striking” (Kinderman 2005, 435,
emphasis in the original). In her most recent work, Thelen (2014) articulates
a theory of institutional change in which employers and firms are largely dis-
lodged from the center of analysis (for commentary see Howell 2015). In their
place is an emphasis upon politics and political coalitions, in which how and to
what degree labor is organized is at least as important as business organization
to the resolution of battles over institutional change (Thelen 2014, 29–32).
The recent work on institutional change introduces an insistent dynamism
and an important return to politics within CPE. A further benefit of this work is
its contribution to a delineation of mechanisms of institutional change, a delin-
eation upon which we lean heavily in our own work. But is worth noting that
while these more recent theorizations do mark something of a break with the
dominant approach to CPE, in that they are compatible with a high degree of
institutional change, they nonetheless reject the likelihood of institutional rup-
ture, instead anticipating an accumulation of gradual, incremental changes that
may become transformational over time. Additionally, they continue to empha-
size that the trajectory of change is divergent, driven by local factors rather than
pressures that are common to all advanced capitalist political economies.1 On
both conclusions, we part company with these recent developments in institu-
tional theorizing, as we discuss in the next section.
If national political–economic institutions are in a state of almost perpet-
ual reconstruction, subject to fragile, shifting political coalitions, the obvious
question facing CPE is whether there are common pressures and trajectories of
institutional change. The recent developments within institutionalist theorizing
surveyed above have opened up theoretical space to explore transformational
change within the core institutions of capitalist societies. This in turn permits
the revival of a central question in CPE: Are capitalist societies marked by ten-
dencies toward convergence, and if so, to what degree? It is to this question
that we now turn.

1 For example, Martin and Swank (2008) have argued that a significant degree of institutional
change is compatible with continued elements of policy divergence, and also emphasized the
role of regime design and of the public sector in the trajectory of institutions.
12 Arguing for Neoliberal Convergence

2.2 Capitalism, Convergence and Neoliberalism

The sharpest break from the mainstream of CPE over the last thirty years has
come from the recent work of Wolfgang Streeck (2009, 2011), and with it the
most forceful argument for taking instability and change in national political
economies seriously. This in turn has implications for our expectations about
the diversity and range of trajectories of change. As he argues, “the time has
come to think, again, about the commonalities of capitalism” (Streeck 2009, 1,
emphasis in the original). Streeck urges scholars of political economy to shift
focus from institutions and institutional logics to capitalism and the logic of
capitalism, and to follow through on the implications of that shift by recogniz-
ing the inherently contradictory, conflictual, anarchic and fundamentally unruly
nature of economic development. Thus, profound institutional change should
be understood to be the norm, not the exception, in capitalist societies.
Taking capitalism seriously, not only capital as an interest or an actor,
but capitalism as a distinct, historicized social formation involves reviving
the insights of an earlier tradition of political economy, one that emphasized
radical uncertainty, perpetual innovation, the capacity of markets to under-
mine themselves, a continuous boundary war between commodification and
self-protection and the tension between legitimation and accumulation (Boyer
2011, Habermas 1975, Polanyi 1944). This involves a different conceptual
approach, with quite different implications for institutional change than those
that have dominated CPE in recent decades. As Pontusson noted (Pontusson
2005, 164), “the VoC literature has a great deal to say about ‘varieties’, but
surprisingly little to say about ‘capitalism’ . . . [and] theoretically privileges con-
siderations pertaining to efficiency and coordination at the expense of consid-
erations pertaining to conflicts of interest and the exercise of power.”
It is perhaps not a coincidence that as political economy has lost sight of
capitalism as its object of analysis, so too has the field found itself deemphasiz-
ing power, conflict and asymmetric class interests. Yet, as a distinguished tradi-
tion from Marx to (most recently) Streeck has emphasized, capitalism’s inher-
ent dynamism, anarchism and unruliness are not well captured by the notions
of stable equilibria, path dependence, coordination problems and neat institu-
tional regulation that pervade contemporary political economy. Within a game-
theoretical framework, equilibrium is a state of the world that no actors, given
their utility functions and sets of beliefs, have an incentive to change. It can
only be changed by an external shock. Approaching capitalism or capitalisms
as if they were institutional equilibria in the game-theoretical sense means that
we have to sweep under the rug endless empirical manifestations of drift, hol-
lowing out and both incremental and radical institutional change. It also means
that we have to ignore or reinterpret the actors’ own words when they say, in
no uncertain terms, that no, they do not want to reproduce a certain set of insti-
tutions but to fundamentally change them. A fair amount of modern political
economy has been engaging in this business of sweeping and reinterpreting.
Capitalism, Convergence and Neoliberalism 13

In our view, the only notion of equilibrium that is applicable to a capitalist

economy is the old mechanical notion of equilibrium as Gleichgewicht. The
word “equilibrium” means “equality on the balance (libra).” It is a temporary
state of stasis in which the vectors of forces impinging on an object are on the
same axis and counterbalance one another. As such, it is a rare occurrence. This
old notion of equilibrium is much more dynamic and much more attuned to
the reality of contemporary capitalism than the game-theoretical one: it does
not assume that (given their utility functions and set of beliefs) actors agree on
the same outcome, but only they are not yet sufficiently powerful to decisively
shift the center of gravity in their favor. Those actors are nonetheless working
to move the system in their preferred directions.
Adopting a “mechanical” notion of equilibrium puts “political” back into
political economy. It also goes back to the 1950 and 1960 roots of political
economy. In fact, this was the notion of equilibrium embraced by pluralists
(Schattschneider 1960; Truman 1962). Equilibrium as Gleichgewicht sees the
institutions of capitalism as the resultants of competing forces. These forces
may balance themselves out for some time, but this view does not expect the
resulting equilibrium to be more than a temporary situation.
This approach raises questions about the centrality accorded institutions by
scholars in the field of CPE in explaining the functioning of capitalist political
economies. A capitalism in which, in a well-known formulation, “all that is
solid melts into air” (Marx and Engels 2002, 223) is not well suited to a polit-
ical economy that emphasizes the relative autonomy of institutions from the
societies and economies within which they are embedded. Institutions matter,
certainly, but their causal primacy is less than scholars have suggested. More
important is the force field within which institutions operate: the economic and
class drivers that shape how institutions function (Korpi 1983; Korpi 2006b).
This is of particular importance within industrial relations, where class cleav-
age remains predominant, and thus changes in the relative organizational and
mobilizational capacity and in the perceived interests of class actors are likely
to overwhelm the mediating ability of institutions and ensure either their recon-
struction or their reengineering (Hyman 1989, Ch. 2).
We suggest that a large part of the reason that the institutionalist literature
finds it difficult to acknowledge the presence of a common neoliberal trajec-
tory in the evolution of national political economies is the expectation that if
this common trajectory really existed it would manifest itself as “institutional
isomorphism” (Di Maggio and Powell 1991), that is, as the emergence of a com-
mon institutional form across countries. In the case of industrial relations insti-
tutions, what would be expected is a flattening of the institutional landscape
toward the topography of an archetypal liberal market economy characterized
by weak unions, weak employer associations, and arm’s-length enterprise-level
bargaining or individualized bargaining. Because the quantitative evidence for
this flattening has often been limited (Golden, Wallerstein and Lange 1999;
Lange, Wallerstein and Golden 1995; Wallerstein, Golden and Lange 1997), one
14 Arguing for Neoliberal Convergence

concludes that national industrial relations regimes are highly resilient to the
forces of neoliberalism and globalization. In contrast with this view, our argu-
ment is that institutions may change in a neoliberal direction while remaining
allomorphic.
Acemoglu and Robinson (2006)’s crucial distinction between de jure and de
facto power inherent in institutions is helpful here. De jure power is congealed
in institutional form; de facto power depends on the contingent force field in
which institutions operate. While in the case of some institutions de jure power
shapes outcomes pretty much directly, in the case of other institutions outcomes
are contingent on the de facto power balance among the actors involved. Most
industrial relations institutions rest on contract rather than law, with the result
that these institutions shape interactions among actors but rarely directly dic-
tate outcomes. For example, the outcomes of centralized bargaining may be
very different depending on whether the actors settle on high wage increases
commensurate with the ability to pay of the most dynamic sectors and on a rigid
wage structure, as in the Sweden of the Rehn–Meidner model, or whether they
settle on wage increases that match the productivity growth of the most sluggish
companies, as in the Ireland of the “Celtic Tiger” (Baccaro and Simoni 2007).
These institutional outcomes are independent of institutional form, which is
approximately the same, and are shaped by the bargaining power of the actors
involved. It is these characteristics of industrial relations institutions that con-
tribute to explaining why they are endemically internally contested, why their
functions depend crucially on the power games that are played in and around
them, and why they are likely candidates for processes of institutional change.
In fact, many institutions, and certainly those in the sphere of industrial rela-
tions, are highly plastic: In a new context, subject to a new set of pressures
and constraints, the same set of institutions can be reengineered to function
in a manner very different from that of the context in which they were cre-
ated: “formal institutions do not fully determine the uses to which they may be
put. This is one important reason why major change in institutional practice
may be observed together with strong continuity in institutional structures”
(Streeck and Thelen 2005, 17–18). Institutional plasticity permits mutation in
the function and meaning of existing institutions, producing different practices
and consequences in new contexts.
We certainly do not want to close off the possibility of institutional rupture:
the wholesale reconstruction of institutions as an existing set of institutions is
replaced with a new set. There are cases of this in our book. But the mechanisms
of institutional change can also be subtler (Streeck and Thelen 2005, 19–30).
Earlier or submerged characteristics of an institution, long dormant, can emerge
under new conditions. Parallel, once secondary institutions, which played only
a peripheral regulatory role during an earlier period, may emerge to take on
new importance in a different context. Thus, the hierarchical ordering in any
bundle of interdependent institutions can change as competing sets of institu-
tions have different valences for the actors concerned, which themselves shift
Capitalism, Convergence and Neoliberalism 15

over time. Mechanisms can also be created or given new significance that per-
mit actors to bypass or escape from institutions altogether, creating pathways
to new practices alongside the formal institutions. The key point about these
alternative mechanisms is that they require no change in institutional form,
in the institutional topography of a political economy, and so are difficult to
capture in quantitative analysis. A focus upon form alone will understate the
degree of institutional change.
The result is a range of characteristics of institutions that – like capitalism
itself – point in the direction of permanent reinvention, change and discontinu-
ity. Thus, resilience and continuity of institutional form is perfectly compatible
with convergence in institutional functioning. And far from a picture of limited
incremental change along an existing path, one can anticipate quite radical and
transformative change.
We are arguing, in short, that a focus upon institutional forms is likely to miss
the malleability of institutions – the degree to which a set of institutions can
appear largely unchanged but in fact come to perform in quite different ways
from before – and thus the extent of institutional convergence. As Kinderman
notes with regard to the German case (Kinderman 2005, 433), scholars have
tended to focus upon “continuity of structure, and having established this, have
inferred continuity of content.”
More than forty years ago, a Royal Commission investigating the state of
British industrial relations argued, in a famous formulation, that there were
“two systems of industrial relations. The one is the formal system embodied in
the official institutions. The other is the informal system created by the actual
behavior of trade unions, employer’s associations, of managers, shop stewards
and workers” (Royal Commission on Trade Unions and Employers’ Associa-
tions 1968, paragraph 46). It is this disjuncture between form and function,
structure and practice, that creates the empirical space for identifying institu-
tional convergence and for understanding the underlying trajectory of Euro-
pean industrial relations over the last three decades and more.
It is important to be careful and clear in any discussion of convergence. We
are not making a coarse argument for institutional convergence. There is limited
and conflicting evidence of convergence as identity, a glacial flattening of the
institutional landscape to an identical topography. We are not arguing, in other
words, that industrial relations in Sweden or Germany today resemble in some
clear-cut sense those in Britain, that the CME category has been emptied so that
the advanced capitalist world is populated solely by varieties of LME.
Convergence does not require the same institutional form, and indeed, dif-
ferent starting points and different mobilizational capacities on the part of class
actors make it unlikely that institutional forms will converge. Different insti-
tutional inheritances and actor identities from one country to the next will
pose different obstacles and create distinctive flashpoints and sources of con-
flict over institutional reconstruction (Hyman 2001; Locke and Thelen 1995),
even when the underlying source of institutional change – whether that be
16 Arguing for Neoliberal Convergence

deindustrialization, internationalization, a change in the growth model, or some

other broad economic shift – is the same. Thus, for example, “Economic inter-
nationalization . . . imposes new agendas on established national institutions,
even where it leaves them on the surface unchanged” (Streeck 2007, 545). As
with the concept of equifinality, the same end state can be reached by differ-
ent paths; much cross-national research on the decentralization of collective
bargaining, for example, indicates that the mechanism and form of decentral-
ization can be very different from one country to another, even though the end
state may be the same (Karlson and Lindberg 2010; Traxler 1995).
We argue that convergence is more likely to involve the adaptation and
reengineering of existing institutional sets to perform in a similar fashion and to
generate similar outcomes than to involve the appearance of the same institu-
tions everywhere, with the result that the trajectory of institutional performance
across countries is convergent, but not the form of institutions. Institutional
convergence, as we use the term, refers to a common direction of change and
a common functioning of institutions, rather than necessarily a common set
of institutions, though widespread convergence of the form of institutions is
also possible. And we argue in this book that, despite quite different starting
points, different paces of change and different politics of change, there is clear
evidence, at least in the sphere of industrial relations, of a common direction
of institutional change.
We argue that the common direction is best characterized as neoliberal. A
discussion of the meaning of neoliberalism and of its differences from classical
liberalism is beyond the scope of this book (for an excellent extensive treat-
ment of this issue we refer to Dardot and Laval 2009). It suffices it to say that,
unlike classic liberalism, neoliberalism is not about limiting state intervention
and returning to some form of laissez faire. It is instead about using state power
to bring about (and institutionalize) a market order, that is, a society in which
individuals conceive of themselves and relate to one another as providers of
specialized services in all spheres, and coordinate their interactions through the
principle of competition and the associated price system (for a path-breaking
analysis see Foucault 2004). In line with this approach, the country cases in this
book demonstrate that the state is far from passive in the process of liberaliza-
tion. In fact, it is the most important agent of liberalization.
Neoliberalism is a general process of market liberalization (Harvey 2005),
or the “disorganization” of once organized political economies, involving the
trend “away from centralized authoritative coordination and control towards
dispersed competition, individual instead of collective action, and sponta-
neous market-like aggregation of preferences and decisions” (Streeck 2009,
149). Neoliberalism is also an economic philosophy that inspires a set of eco-
nomic policies. Thus it is associated with a particular strategy of macroe-
conomic reform (Williamson 1989), involving trade and financial liberaliza-
tion, fiscal discipline (to be achieved through expenditure cuts rather than tax
increases) (Alesina and Perotti 1997a, 1997b; Alesina and Ardagna 1998) and
Capitalism, Convergence and Neoliberalism 17

disinflation, to ensure which governments are willing to give up full employ-

ment. In addition, it involves a series of structural reforms across a range of
markets and policy areas that are intended to be compatible with and to enable
the maintenance of the macroeconomic framework summarized above. Höpner,
Petring, Seikel and Werner (2014, 7) define liberalization policy as “the politi-
cally enacted and politically legitimated delegation of allocation and distribu-
tion decisions to markets.” All these definitions – economic philosophy and
associated economic policies, increasing relevance of markets – are related and
certainly capture important elements of liberalization, but in our usage, liber-
alization is broader than what governments do; as we elaborate below in our
discussion of liberalization in the sphere of industrial relations, it can include
any policy or institutional change that has the effect of expanding employer
discretion.
There is an important debate as to the usefulness of liberalization as a
descriptor of institutional change in advanced capitalist political economies.
For some scholars, it is “justified to characterize the prevailing trend in the
advanced economies during the last two decades of the twentieth century and
beyond as a broad process of liberalization” (Streeck and Thelen 2005, 2,
emphasis in the original). Indeed, in this powerful formulation, liberalization
may be the privileged direction of institutional change during periods when
political mobilization – particularly on the part of labor movements – is absent
because “liberalization within capitalism may face far fewer collective action
problems than the organization of capitalism” (Streeck and Thelen 2005, 33).
For other scholars, liberalization is a crude, overly all-encompassing category
that “obscures more than it illuminates” (Hall and Thelen 2009, 22). Liberal-
ization is multidimensional, it may affect one sphere of the political economy
and not others, and its impact is likely to vary depending upon particular sets
of institutional arrangements.
Despite these remarks, there is no doubt that the distance between VoC and
its critics has considerably shortened in recent years. For example, in Thelen’s
most recent reformulation of the Varieties of Capitalism argument (Thelen
2014), while the process and form of institutional change may vary, yielding
multiple trajectories of change, the direction is everywhere the same, and is
everywhere captured by some notion of liberalization, however crude (How-
ell 2015). Thelen (2014) has pointed to multiple “varieties of liberalization”
at work across the advanced capitalist world, each having different distributive
consequences. She argues that the type of liberalization has implications for the
extent to which egalitarian capitalism remains viable. In this we wholeheartedly
agree. It is a mistake to conceive of neoliberalism as compatible only with one
particular institutional set: the archetypal deregulated LME. Rather, neoliber-
alism is a protean project, compatible with a wide range of institutional forms
and achievable via a number of different causal paths.
While a significant amount of convergence seems to have taken place in the
field of scholarly analysis as well, there are important remaining differences
18 Arguing for Neoliberal Convergence

from our analysis. First, the shift from explaining “varieties of capitalism” to
explaining “varieties of liberalization” seems to have been made without any
critical analysis of what went wrong and which aspects of the previous theo-
retical apparatus needed to be reconsidered, which leaves the external observer
with a feeling that the goalposts have been moved. Second, VoC scholars are
not ready to concede that the manufacturing sectors in formerly coordinated
market economies have undergone liberalization. They refer to renegotiated
coordination instead (see also Hall 2007). According to this new argument,
liberalization is essentially the result of a compositional shift in the economy.
While the manufacturing sector remains coordinated, it is shrinking in dimen-
sional terms due to deindustrialization. It is argued that the production regime
prevailing in the service sectors does not require the same institutional ecosys-
tem and institutional complementaries as manufacturing, but relies much more
heavily on the logic of market coordination. Thus, liberalization is the result of
the decline of manufacturing and the rise of services in capitalist economies. As
we argue in the German and Swedish chapters, our view is instead that liber-
alization has taken place first and foremost in the manufacturing sector itself,
and that the liberalization of manufacturing has had important consequences
for the growth models of countries, unleashing further reforms.
Recognizing the danger that “liberalization” can be used imprecisely, we
elaborate below how we are using the concept, and what it means in the spe-
cific sphere of industrial relations. At its core, arguing for a common trajectory
of liberalization of industrial relations for us means demonstrating that there
has been a steady expansion across the advanced capitalist world in employer
discretion, as constraints on employers – in the form of labor law and collec-
tive regulation – diminish. This is a more precise formulation of the oft-cited
demand on the part of employers for greater flexibility: that employers should
have greater discretion vis-à-vis labor and state actors.
It follows from the distinction between institutional form and institutional
functioning that liberalization should be visible in two movements, one having
to do with institutional processes and the other with institutional outcomes.
The former movement involves, first and foremost, deregulation: the elimina-
tion or relaxation of institutional barriers. Referring specifically to industrial
relations, deregulation eliminates constraints upon capital’s discretion through
the removal of legal or contractual restrictions at the workplace level, in the
broader labor market and in society.2 In many cases, the removal of institutional
constraints is a return to an earlier deregulated era. Institutional deregulation
involves one or more of the following: a shift from higher levels of collective
bargaining to lower ones, closer to the firm or workplace; greater recourse to
individual bargaining between employee and employer or unilateral employer
decision-making; a shrinking in the collective organization capacity of class

2 Traxler (1995, 3) employs the term “disorganization” in place of “liberalization” in his discussion
of change in industrial relations, but his dimensions of change are similar to those used here:
decentralization, deregulation and disorganization of the collective capacity of class actors.
Capitalism, Convergence and Neoliberalism 19

actors; and a restructuring of labor market institutions to reduce the level and
duration of unemployment benefits, make benefit payment contingent on active
search and willingness to accept available jobs, lower employment protection
and in general eliminate all mechanisms interfering with the free meeting of
demand and supply (Blanchard and Wolfers 2000; Blanchard 2006; Layard,
Nickell and Jackman 2005; Nickell 1997; Nickell, Luca and Wolfgang 2005;
OECD 1994; Saint-Paul 2002; Siebert 1997; Traxler 1995).
Institutional deregulation may also operate through mechanisms that permit
class actors to bypass or ignore formal institutions and institutional rules, one of
the forms of institutional change noted above; this process, sometimes labelled
“derogation,” can be seen when unions and employers are given exemptions
from labor law or higher-level collective agreements under certain circum-
stances. For this reason, derogation tends to require a more active role on the
part of the state. An industrial relations system in which actors are allowed to
ignore institutional rules with impunity is subject de facto to deregulation.
The second form of institutional liberalization involves a transformation in
the role played by formally unchanged institutions from discretion-limiting to
discretion-enhancing. In contrast to a process of institutional deregulation, it
involves what Thelen has described as “institutional conversion,” as institutions
come to take on different functions and generate different outcomes (Thelen
2004, 36). Institutional conversion is made possible by the plasticity – the muta-
bility of function subject to context – that, as we noted above, is a characteristic
of institutions in the political–economic realm. An example would be central-
ized bargaining, once the linchpin of an alternative system to liberal capitalism
based upon a large and interventionist public sector and the political correc-
tion of market inequalities. However, with institutional conversion, centralized
bargaining can become an institutional device to produce outcomes, such as
real wage growth systematically trailing productivity increases, that the market
itself would be unable to produce. Another example of institutional conversion
might be a change in the functioning of works councils so that under new condi-
tions they come to encourage cooperation with an employer and identification
with the firm rather than serving as workplace agents of industrial unions. In
both cases, the formal institution remains unchanged, but under different con-
ditions, its very plasticity permits a conversion in function and behavior and is
likely to generate different outcomes.
Thus, to the extent that we see decollectivization and decentralization in the
form of institutions themselves, or a continuity in their form but a transforma-
tion in their content such that they contribute to the liberalizing outcomes noted
above, we can say that the trajectory of institutional change is in a neoliberal
direction.3 Liberalization as institutional deregulation can be captured empiri-
cally by looking at the form of institutions, whereas liberalization as the result

3 The starting point is also important. Decentralization of bargaining may be just as consequen-
tial when national bargaining gives way to sectoral bargaining as when sectoral bargaining is
replaced by firm-level bargaining.
20 Arguing for Neoliberal Convergence

of institutional conversion requires going beyond the form and looking at the
internal functioning and outcomes of institutions. For this reason, our book
provides both a quantitative analysis of trends in industrial relations indica-
tors, well suited to examining changes in institutional forms, and qualitative
case studies, better suited to capturing changes in the outcomes of institutions.
What liberalization as institutional deregulation and liberalization as institu-
tional conversion have in common is that they both allow increased employer
discretion in personnel and labor market strategies. Employer discretion has
three interrelated dimensions: (1) discretion in wage determination, that is, the
extent to which individual employers can adapt wage rates to the individual
circumstances and ability to pay of their firms, and use wage differentials to
recruit, motivate and retain key employees; (2) discretion in personnel man-
agement and work organization, for example, the ability to organize work time
flexibly to accommodate peaks and lulls in demand and to deploy labor across
functional specializations or job categories; (3) discretion in hiring and firing,
that is, the degree to which the employment relation approximates the model
of employment at will. The metric, therefore, of the liberalization of industrial
relations institutions is the extent to which they expand employer discretion
over time. We make no claim here as to how employers will use their greater
discretion along each of these dimensions, only that they will prefer greater
discretion to less.
We argue that, despite heterogeneous institutional sets and country-specific
developmental trajectories, there is substantial evidence that industrial relations
systems across Western Europe have been transformed in a common neoliberal
direction, in other words, toward greater employer discretion in employment
relations. Streeck (2009) has usefully distinguished between “Williamsonian”
and “Durkheimian” institutions. Not all institutions are coordinating devices
that allow economies of transaction costs and credible commitment by actors.
Some institutions are obligatory and limit actors’ discretion in accordance with
collectively shared social values and goals. On the evidence presented in the
remainder of this book, while the coordinating properties of institutions have
managed to survive in some cases, their obligatory properties have been relaxed
everywhere.

2.3 Industrial Relations Liberalization and Capitalist Growth

Making employer discretion the primary indicator of liberalization in indus-
trial relations puts class actors and class power at the center of the political–
economic story that we wish to tell. It suggests that a power resources approach
to CPE and a focus upon the shifting physiognomy of contemporary capital-
ism are necessary to understanding the fate of European industrial relations
systems over the last three decades and more (see also the discussion of power-
based explanations in Emmenegger 2015, Ibsen 2015). We have argued that
CPE has been resistant to the possibility of a common liberalizing trajectory of
Industrial Relations Liberalization and Capitalist Growth 21

industrial relations institutions because of longstanding theoretical assump-

tions in the field: a midrange emphasis upon institutions and their internal logics
rather than upon the changing face of capitalism; the expectation that insti-
tutions can successfully refract economic pressures without themselves being
transformed; and a focus upon the form rather than the function of institu-
tions. As a result, the diversity of national varieties of capitalism has tended to
overshadow the importance of broad changes in capitalism across time.
The primary goal of this book is to demonstrate that a common trajectory
of liberalization has in fact occurred in industrial relations in Western Europe
since the oil shocks of the 1970s. We will be happy if, by the end of the book,
we have established this one simple fact, which, we would argue, is at odds with
the received wisdom in the field of CPE. Analyzing the causal factors underlying
the common liberalizing trajectory that we have identified is not the main focus
on this book. However, if we argue, as we do, that scholars need to pay more
attention to the social and economic force field within which institutions oper-
ate, and, as Streeck has compellingly argued, to bring the analysis of capitalism
back to the center of political economy, it is incumbent upon us to offer some
commentary – albeit schematic – on the broad constellation of phenomena that
accompany the transformation of industrial relations across the advanced cap-
italist world, and thus to add further elements to how the common trajectory
that we identify is neoliberal in character.
We argue that the liberalization of industrial relations is part and parcel of a
general crisis of the Fordist wage-led growth regime in advanced countries and
of the uncertain search for alternative growth models that has ensued (Boyer
2015; Lavoie and Stockhammer 2012; Stockhammer and Onaran 2013). Indus-
trial relations institutions limiting employer discretion were a common fea-
ture of the Fordist model based on wage-led growth. Interestingly, while
they reduced the room for maneuver for employers, these institutions also
increased capitalist viability and stability: by indexing real wages to produc-
tivity increases, they simultaneously ensured that aggregate demand would
expand sufficiently to enable the growth of productive potential.
The Fordist model began to unravel in the 1970s, and its decline was due
both to shifts in the international economy (trade and capital liberalization)
and to the accumulation of endogenously generated problems (e.g., wage-push
inflation and deindustrialization). The crisis of the Fordist regime altered the
balance of class power and facilitated shifts in state policy and the weakening
of labor’s organized power, which allowed employers to act on their preference
for maximizing discretion and ultimately liberalized industrial relations insti-
tutions. The collapse of the Fordist model and the accompanying shift in class
power against trade unions thus created the conditions for the developments we
detail in the country chapters that follow. In turn, these developments closed off
a return to the old model of wage-led growth. In a few countries, more compet-
itive labor markets and the consistent application of policies aimed at strength-
ening the profit share of national product eventually generated the conditions
22 Arguing for Neoliberal Convergence

for the emergence of post-Fordist growth, in which growth was sustained not
by real wage increases, but by greater household indebtedness and by stronger
reliance on foreign demand.
We will deal with the crisis of Fordist wage-led growth and the emergence of
new growth models in the final chapter of this book. In this section we empha-
size two changes. First, in line with power resource theory, the weakening of
organized labor has meant that employers are more free to act on their own
first-order preferences, irrespective of labor preferences and the need to work
within shared collective institutions. Second, employers are less likely to have
an interest in supporting collective industrial relations institutions, and this as
a result of deep-seated changes in the growth model over the last three decades
that have had the effect of reducing the importance of collective institutions
inherited from the earlier Fordist era.
One of great strengths of theorizing within political economy in the last two
decades has been renewed emphasis upon employers and the firm, whether
through the focus upon employer coordination (Soskice 1990), historical
research into the role played by business interests in the construction of Fordist-
era labor and welfare institutions (Swenson 2002) or the attention paid to the
coordination needs of firms (Hall and Soskice 2001b). A political economy
of capitalism should never need to bring capital back in! Yet as the field has
evolved, a particular set of assumptions about employer interests and prefer-
ences has become near-hegemonic. These emphasize the extent to which insti-
tutions are the product of the rational coordination needs of firms rather than
the balance of power among economic actors, and thus employers will have lit-
tle incentive to dismantle those institutions when that balance changes. Those
same coordination needs are anticipated to produce cross-class alliances around
shared interests, rather than persistent class conflict over institutional construc-
tion and reconstruction.
These theoretical shifts reflect an abandonment of the power resource
approach to political economy that was once dominant in the field (Korpi
1983). That approach deserves more attention, as Korpi (2006b) has more
recently argued, because it problematizes employer preferences and introduces
an explanation for the quite rapid shifts in business attitudes toward longstand-
ing industrial relations institutions that we observe empirically. It suggests that
preferences are shaped by “the strategic context within which actors operate”
(Hacker and Pierson 2004, 193) so that inferring a first-order preference from
the behavior of business misses the degree to which support for a policy or insti-
tution might reflect acquiescence to a balance of power rather than a particular
preference ordering.4 To exemplify: Firms may have a prestrategic preference
for nonmarket coordination (as assumed by early VoC theorizing) or may settle

4 For an exploration of this set of issues, see the fascinating exchange between Peter Swenson
on one side and Jacob Hacker and Paul Pierson on the other (Hacker and Pierson 2002, 2004;
Swenson 2004a, 2004b).
Industrial Relations Liberalization and Capitalist Growth 23

for coordinating institutions because their first prestrategic preference is ruled

out and the alternatives are worse for them. Given appropriate circumstances,
the observed outcome will be the same, but there is a world of difference –
including for the resilience of the institutions at stake – between a situation
in which business is a protagonist in some institutional settlement and one in
which it merely consents to that settlement in light of its reading of the strategic
context (Korpi 2006b).
The difference is crucial because it suggests that employer choices are likely
to change as the power resources of actors change. Power resources should be
understood in broad terms, encompassing organizational strength, state capac-
ity and also structural power (Block 1987, Chapter 3). As our country cases
indicate, the strength of organized labor has declined everywhere, and employer
organizations have become more politicized and self-confident. That has taken
place within the context of an increase in the structural power of capital that
derives in part from greater transnational mobility and the role of financial
markets, and in part from the undermining of the ability of states to regulate
national economies effectively (Jessop 1990b; Strange 1986). This returns us
to the argument made in the last section, that political economy needs to shift
from a game-theoretic to a mechanical (gleichgewichtig) notion of equilibrium.
In the latter, the institutions of capitalism are the product of competing forces.
These forces may balance themselves out for some time, but there is no expecta-
tion that the resulting equilibrium will be more than a temporary situation. In
the contemporary period, understanding institutional change therefore raises
the possibility that as the power of organized labor has declined, so a more
authentic expression of employer preferences, unconstrained by the need to
compromise, has emerged. Capitalists, as Streeck (2009, 41, emphasis in the
original) has vividly described them, “are the modern nontraditional economic
actors par excellence: they never rest in their perennial rush to new frontiers.
This is why they are fundamentally unruly: a permanent source of disorder
from the perspective of social institutions, relentlessly whacking away at social
rules.”
We argued earlier that a return to classical political economy, the politi-
cal economy of Marx, Schumpeter, Keynes and Polanyi, among others, with
its emphasis upon the unruly, crisis-ridden dynamism of capitalist growth, is
helpful in understanding institutional change in the current. Streeck (2011) has
called for political economy to focus analysis upon a historicized capitalism,
one that pays attention to the changing character of capitalism itself, and sug-
gested that tracing the historical trajectory of capitalism is more enlightening
than emphasizing international variation. Our interest is in the dynamic rela-
tionship between capitalism and the politically constructed industrial relations
institutions that seek to regulate it and to manage its unruly character.
Hence the value of the regulation theory approach to political economy:
“regulation politically modifies the economic process to temporarily stabilize,
or contain, the contradictory core of capitalism” (Neilson 2012, 161). The
24 Arguing for Neoliberal Convergence

central insight of regulation theory is that each growth model of capitalism

produces different types of conflict and fundamentally different problems for
its stable reproduction. As such, each capitalist model is likely to be accom-
panied by different sets of regulatory institutions. These institutions serve to
stabilize a particular capitalist regime of accumulation temporarily, but there is
no grand designer lurking in the back to ensure the adequacy of institutional
fitting, and therefore no guarantee that the institutional regime will persist over
time.
For the regulationist literature, a Fordist regime rests on a multiplicity of
interrelated conditions (e.g., an accommodative monetary regime, limited inter-
national economic openness). However, the institutions regulating employment
relations play a fundamental role (Boyer 2004). With at least moderately strong
trade unions and collective bargaining, real wages become indexed to labor
productivity as opposed to being determined solely by competitive forces. This
sets in motion two complementary and mutually reinforcing dynamics. On one
hand, stimulated by real wages, mass consumption becomes a large and increas-
ingly reliable source of aggregate demand. On the other hand, the expansion of
markets stimulates productivity increases through the availability of economies
of scale and through alternative mechanisms.
The regulationist literature emphasizes the Keynesian “accelerator,” that is,
the tendency of investments to expand in response to the increase in demand
(e.g., Boyer 2004, 95). New investments in turn incorporate the latest vintage
of capital and technical progress and thus stimulate productivity. Other post-
Keynesian literature emphasizes the productivity-enhancing role of labor rigidi-
ties, including high wages and institutional constraints that stimulate both cap-
ital/labor substitution and a more effective use of human resources (for more
on this see the discussion in the final chapter of this book, as well as Storm and
Naastepad 2012b). The increase in productivity in turn “finances” the increase
in real wages, ensuring both healthy growth and a relatively equitable distribu-
tion of the proceeds of growth between labor and capital.
The Fordist model was never without problems. Its social foundations were
always somewhat precarious. There was a tendency for wage growth to exceed
productivity growth, which both undermined capital accumulation and caused
inflationary tendencies. For reasons that are not fully understood, the Fordist
model ground to a halt sometime in the 1970s as a result of overlapping
developments such as trend decline in labor productivity, increase in oil prices
and growing militancy of the working class in the 1960s and 1970s (Arm-
strong, Glyn and Harrison 1991). The liberalization of capital movements has
increased the systemic importance of profits for accumulation and has imposed
a worldwide floor on returns to capital that acts as a constraint on national
actors. The growing trade openness of advanced economies has simultaneously
strengthened the current account constraint on wage-led growth – if domestic
wages grow too fast relative to trade competitors this will result in an external
deficit – and enabled countries with a strong and productive manufacturing
Industrial Relations Liberalization and Capitalist Growth 25

sector to pursue export-led growth strategies at the expense of stimulating

domestic demand. There has been, over the last thirty years, a veritable growth
industry in the effort to understand and characterize post-Fordism: to identify
the central elements and core dynamic of the growth model that has replaced
Fordism.5 We will not rehearse this literature here. For our purposes it suffices
to say two things: (1) that the weakening of industrial relations has upset a criti-
cal condition for the viability of the Fordist growth regime, namely, the ability of
unionism and collective bargaining to stimulate productivity increases and then
transfer them into household consumption by means of growing real wages;
and (2) that the capitalism that has emerged has put a far higher premium than
before – for the manufacturing sector as much as for the increasingly domi-
nant service sector – upon flexibility and the ability of employers to respond
rapidly and in a differentiated manner. This is what Harvey nicely terms “flexi-
ble accumulation” and it is this that makes the expansion of employer discretion
a universal feature of the current period (Harvey 2005:, 76).
One can point to a comparatively brief period following the Depression and
Second World War when a combination of changed needs on the part of the
dominant Fordist element of capital and a new balance of class forces, built
largely on the weight of the industrial labor force, produced a temporary and
fragile “class compromise.” The industrial relations systems of advanced cap-
italist countries that became formalized during this period reflected that com-
promise and served to limit employer discretion. Each of our country chap-
ters begins with an account of the form that compromise took and the types
of institutions that were constructed to regulate the labor market. While the
particular form of those institutions varied from country to country, in each
case, by the end of the 1970s, employer discretion was constrained in substan-
tial and important ways. However, the class compromise did not result in an
institutional equilibrium in the VoC meaning of the term and was significantly
eroded in the following years in all countries, as our country case studies show.
We conclude this chapter by noting that the trajectory of industrial relations
is not simply a “sectoral” story relevant only to a particular type of scholars
interested in trade unions, labor market institutions and justice at work. The
institutions of industrial relations have systemic importance for capitalist coun-
tries. They ensured the viability of the whole accumulation regime that was at
work between the 1930s and 1970s in advanced industrial democracies. Their
erosion and crisis are to a large extent responsible for the instability that capi-
talism is currently facing everywhere.

5 The literature here is enormous. For a sampling of the most ambitious work see Harvey (1989);
Kotz, McDonough and Reich (1994); Lash and Urry (1987); Offe (1985); and Piore and Sabel
(1984). For an overview, see also Amin (1994).
3

Quantitative Analysis of Industrial Relations Change

In this chapter we assess the extent of institutional change in European indus-

trial relations by analyzing available data for 15 OECD countries between 1974
and 2011. Previous research of this type has tended to emphasize limited, incre-
mental change and the persistence of distinct national institutional sets (Golden,
Wallerstein and Lange 1999, Lange, Wallerstein and Golden 1995, Wallerstein,
Golden and Lange 1997). However, such research has covered a shorter time
period and relied on a smaller set of variables than we do here.
We focus on the following indicators: the union density rate (the percentage
of the eligible workforce who are members of unions); the employer density rate
(workers employed by member firms as a percentage of total workers); three
indices of collective bargaining centralization and coordination (one of which
takes into account the presence of “opening clauses” in multiemployer con-
tracts); an index of social pacting capturing the extent to which trade unions
and employer organizations participate in the design and implementation of
public policy; and an indicator of the conflict rate. The sample covers 12 West-
ern European countries (Austria, Belgium, Denmark, Finland, France, Germany,
Ireland, Italy, Netherlands, Norway, Sweden and the United Kingdom). In addi-
tion, to increase the sample of liberal market economies, Australia, Canada
and the United States are also included. For ease of presentation, as well as to
smooth out short-term variation and to address the problem of missing obser-
vations, the yearly data are aggregated into seven five-year averages from 1974
to 2008 and one three-year average for 2009–2011. All data, except on indus-
trial conflict, are from the Database on Institutional Characteristics of Trade
Unions, Wage Setting, State Intervention and Social Pacts (Version 4) assem-
bled by Jelle Visser (2013).
The chapter is divided into two sections. The first section presents descriptive
trends of the variables. The second section performs a factor analysis on the
various indicators to uncover underlying dimensions and then discusses the
trajectories of different countries.
26
Union Density, Collective Bargaining Structure and Conflict Rates 27

3.1 Union Density, Collective Bargaining Structure and Conflict Rates

Data on union density are reported in Table 3.1.1 They suggest that between
1974–1978 and 2008–2011 union density has declined in 13 countries out of
15. The largest declines have occurred in France (−63 percent); Australia (−59
percent); Austria (−52 percent); the United States (−49 percent); the Nether-
lands (−48 percent); and Germany (−47 percent). The decline has been min-
imal in Belgium (−3 percent), while in Norway and Finland there have even
been small increases (+2 and +4 percent, respectively). Focusing solely on the
period between 1989–1993 and 2009–2011, the greatest declines are registered
in Australia (−55 percent), Germany (−44 percent), Austria (−38 percent) and
Ireland (−32 percent). From the 1990s on, union density has declined in all
countries, even in “Ghent countries” such as Finland, Norway and Belgium, in
which union density had remained stable and even increased slightly in previous
years.2
The data in Table 3.1 show that union decline cuts across coordinated and
liberal market economies. The cross-cutting trend is clearly brought out by
comparing union densities in Germany and the United Kingdom (Figure 3.1).
Union density declined more rapidly in Britain than in Germany in the 1980s.
From the early 1990s on, however, the decline has been more rapid in the for-
mer than in the latter.
In 2009–11, Sweden, Finland and Denmark (three Ghent countries) still had
rates of unionization close to 70 percent, while Norway and Belgium had rates
above 50 percent. As shown in Figure 3.2, however, even in these countries,
unionization, after peaking in the early 1990s, declined in the 1990s and 2000s.
In Ireland, Italy, France, Canada and Norway, union decline appears to have
plateaued in the early 2010s. In fact, union density even increased slightly in
these countries. This phenomenon may be due to union members being less
affected by labor shedding during the crisis years than nonmembers.
The Visser database (Visser 2013) also compiles data on union density by
sector from various sources. The series are far from complete and most data
are available only from the mid-1990s on, but the information they convey is
nonetheless worth considering. In Figure 3.3, union density rates are plotted
separately for the following sectors: private; public; industry; manufacturing;

1 For Australia and the United States, the union density series are constructed by splicing two
series in the Visser database (2013): one based on administrative data on union membership
(available for earlier years) and the other based on labor market surveys (for later years). An
adjustment factor has been calculated by dividing the administrative data by the survey data
for the period of overlap between the two series. The adjustment factor was then applied to the
administrative-source data for earlier years, while for later years the survey-based data have been
used.
2 Ghent countries provide strong selective incentives for union membership, since unemployment
insurance is voluntary and managed by trade unions but heavily subsidized by the state (Roth-
stein 1992, Van Rie, Marx and Horemans 2011).
table 3.1. Union Density Rates

Country 74–78 79–83 84–88 89–93 94–98 99–03 04–08 09–11 %11–74 %08–79 %11–89
Australia 44.76 44.98 43.85 40.51 30.75 23.84 20.00 18.37 −58.97 −55.53 −54.66
Austria 58.46 55.44 50.56 45.58 39.98 35.86 31.48 28.30 −51.59 −43.22 −37.91
Belgium 52.42 53.00 51.78 53.98 55.20 50.56 52.98 50.83 −3.03 −0.04 −5.83
Canada 34.50 35.04 34.60 34.78 33.56 30.52 29.68 29.90 −13.33 −15.30 −14.03
Denmark 71.80 79.32 76.74 75.96 76.60 73.70 69.90 68.65 −4.39 −11.88 −9.62
Finland 65.88 68.60 70.22 76.00 79.70 74.44 71.04 68.73 4.33 3.56 −9.56
France 21.40 17.62 12.82 9.96 8.60 8.02 7.66 7.90 −63.08 −56.53 −20.68
Germany 34.82 35.06 33.98 33.06 28.06 24.02 20.72 18.50 −46.87 −40.90 −44.04
Ireland 57.28 58.18 53.88 52.20 45.92 36.92 33.14 35.47 −38.08 −43.04 −32.06
Italy 48.98 47.90 41.60 39.00 37.22 34.38 33.56 35.13 −28.27 −29.94 −9.91
Netherlands 37.20 33.48 26.66 24.56 24.78 22.16 20.72 19.27 −48.21 −38.11 −21.55
Norway 53.66 57.58 56.94 58.14 56.48 54.54 54.36 54.57 1.69 −5.59 −6.15
Sweden 74.98 78.46 82.56 83.30 84.68 78.46 73.10 69.30 −7.58 −6.83 −16.81
UK 47.02 51.24 45.78 39.72 33.34 29.62 27.48 27.20 −42.15 −46.37 −31.52
USA 22.75 20.97 17.06 15.42 14.04 12.82 11.80 11.50 −49.44 −43.73 −25.42
 Germany and UK
50
40
30
20

1970 1980 1990 2000 2010

year

Germany UK

figure 3.1. Union density in Germany and the United Kingdom

Belgium Denmark Finland

90

90

90
80

80

80
70

70

70
60

60

60
50

50

50

1970 1980 1990 2000 2010 1970 1980 1990 2000 2010 1970 1980 1990 2000 2010
year year year

Norway Sweden
90

90
80

80
70

70
60

60
50

50

1970 1980 1990 2000 2010 1970 1980 1990 2000 2010
year year

UD Fitted values

figure 3.2. Union density in Belgium and the Nordic countries (with quadratic fit line)
 a) LMEs

Australia Canada Ireland

20 40 60 80

20 40 60 80

20 40 60 80
0

0
74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08
period period period

UK USA
20 40 60 80

20 40 60 80
0

74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08

period period

private public
industrial manufacturing
public admininstration commerce
hotels

b) Continental Countries

Austria France Germany

20 40 60 80

20 40 60 80

20 40 60 80
0

74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08
period period period

Italy Netherlands
20 40 60 80

20 40 60 80
0

74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08

period period

private public
industrial manufacturing
public admininstration commerce
hotels

figure 3.3. Union density rates by sector

Union Density, Collective Bargaining Structure and Conflict Rates 31

c) Belgium and Nordic Countries

Belgium Denmark Finland

20 40 60 80 100

20 40 60 80 100

20 40 60 80 100
74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08
period period period

Norway Sweden
20 40 60 80 100

20 40 60 80 100

74-78 84-88 94-98 04-08 74-78 84-88 94-98 04-08

period period

private public
industrial manufacturing
public admininstration commerce
hotels

figure 3.3 (continued)

public administration (more strictly defined than the public sector at large);
commerce; and hotels, restaurants and catering. The latter two service sectors
tend to be labor-intensive and low-skilled. The union density rate is everywhere
higher in the public sector than in the private/manufacturing sector. In most
countries, public sector unionization has not declined (including in the United
States), but there are countries, such as Australia, Britain, Austria and Germany,
where public sector decline has proceeded in parallel with private sector decline.
In the Netherlands, it seems that public sector decline was greater than that in
the private sector. Furthermore, union density is everywhere especially low in
the labor-intensive service sectors (commerce and hotels, restaurants and cater-
ing), with the exception of Denmark, Finland and Sweden (all Ghent countries),
where private service unionization is above 50 percent.
If statistics on union density by sector are scarce, even scarcer are statis-
tics on the associational density of employer organizations (as a percentage of
employees). Table 3.2 reports the available data in the Visser database (Visser
2013). Although most data are available only from the early 2000s on, and for
Australia, Canada and the United States there are no data at all, there is no evi-
dence of a decline in employer association density. In Austria, employer density
remains constant at 100 percent throughout the period, while in other countries
32 Quantitative Analysis of Industrial Relations Change

table 3.2. Density Rates of Employer Associations

Country 74–78 79–83 84–88 89–93 94–98 99–03 04–08 09–11

Australia
Austria 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Belgium 82.00 82.00
Canada
Denmark 58.00 60.00 65.00
Finland 63.75 66.50 72.70
France 74.00 74.00 75.00
Germany 63.00 60.00
Ireland 60.00
Italy 62.00 58.00
Netherlands 85.00 85.00
Norway 53.50 59.00 65.00
Sweden 86.00 83.00 84.00 83.00
UK 40.00 35.00
USA

the density rate seems to have increased slightly. In general, employer density
is higher than union density. A high employer density is especially important
for countries in which there is no legal extension of negotiated terms and con-
ditions of employment, and bargaining coverage depends on firms being mem-
bers of employer associations. A small decline of employer density is found in
Germany, Italy, Sweden and the United Kingdom.
Differently from trade union density (but perhaps consistent with trends in
employer density), there is no evidence of a cross-country decline in bargaining
coverage (proportion of employees who are covered by a collective bargaining
agreement). The relevant data are reported in Table 3.3. They suggest shrinking
coverage in countries in which bargaining coverage is strictly associated with
union coverage, such as the United Kingdom, Australia, the United States and
Canada. However, the decline of bargaining coverage is not a peculiarity of
the liberal market economies: Germany, too, has seen the coverage rate drop
from 85 percent in 1990 to 61 percent in 2010, and the rate is even lower
in manufacturing. The decline of bargaining coverage will be discussed in the
German chapter. It suffices to say here that in Germany collective bargaining
coverage is strictly dependent on the strength of employer associations. Exten-
sion clauses, while legally possible, have been used sparingly in recent years.
Some German employer associations have been experimenting with “member-
ship without contract” (a form of membership that does not imply firms being
bound by the industry contract) as a way to stop membership loss. In other
countries, bargaining coverage has increased slightly. Consequently, a gap has
opened between union membership coverage and collective bargaining cover-
age. This gap is particularly wide in France (85 percent), Austria (70 percent),
table 3.3. Collective Bargaining Coverage Rates

Country 74–78 79–83 84–88 89–93 94–98 99–03 04–08 09–11 %11–74 %08–79 %11–89
Australia 88.00 88.00 85.00 76.67 60.00 50.00 45.00 −48.86
Austria 95.00 95.00 95.00 98.00 98.00 98.75 99.00 99.00 4.21 4.21 1.02
Belgium 90.00 97.00 96.00 96.00 96.00 96.00 96.00 96.00 6.67 −1.03 0.00
Canada 37.60 37.96 37.28 38.10 35.48 32.24 31.68 30.20 −19.68 −16.54 −20.73
Denmark 81.00 82.00 83.00 84.00 84.00 83.00 85.00 3.66
Finland 77.00 77.00 77.00 85.00 85.00 86.50 88.30 89.50 16.23 14.68 5.29
France 76.00 78.95 88.30 94.50 92.00 92.00 16.53
Germany 85.00 85.00 85.00 85.00 75.18 68.84 64.70 61.55 −27.59 −23.88 −27.59
Ireland 44.40 41.90 42.20
Italy 85.00 85.00 85.00 85.00 85.00 85.00 85.00 85.00 0.00 0.00 0.00
Netherlands 78.40 81.80 80.30 80.00 83.40 84.70 84.85 84.30 7.53 3.73 5.38
Norway 65.00 70.00 70.00 70.00 72.00 72.00 73.50 5.00
Sweden 84.00 85.00 85.00 87.50 91.50 94.00 92.25 91.00 8.33 8.53 4.00
UK 77.30 73.50 64.00 54.00 36.88 35.74 34.22 31.57 −59.16 −53.44 −41.54
USA 26.26 24.78 20.04 18.14 16.26 14.74 13.52 13.23 −49.61 −45.44 −27.05
34 Quantitative Analysis of Industrial Relations Change

the Netherlands (65 percent) and Italy (50 percent). It is the result of legal
clauses extending the terms and conditions set by the shrinking unionized sec-
tor. It generates a worrisome disconnect between a minority of unionized work-
ers and the majority of unorganized workers. As a result, unions become liable
to being accused of acting as insider organizations that exploit their privileged
position to set terms and conditions of employment to the exclusive benefit of
their members while unduly damaging the prospects of outsiders (Lindbeck and
Snower 1986, Saint-Paul 2002).
An important dimension in industrial relations is the bargaining structure
and specifically the degree of bargaining centralization, which is often mea-
sured by recording the main level of bargaining. In the Visser database, there
is an indicator capturing the main level of bargaining (thus providing an ordi-
nal measure of bargaining centralization/decentralization), which is coded as
follows (Visser 2013: 11):
5 = bargaining predominantly takes place at central or cross-industry
level and there are centrally determined binding norms or ceilings to be
respected by agreements negotiated at lower levels;
4 = intermediate or alternating between central and industry bargaining;
3 = bargaining predominantly takes place at the sector or industry level;
2 = intermediate or alternating between sector and company bargaining;
1 = bargaining predominantly takes place at the local or company level.
“Dominant level” means that the level accounts for two-thirds of the
total coverage rate. Table 3.4 reports the data on bargaining centraliza-
tion/decentralization based on the above coding scheme. Bargaining decen-
tralization has been fairly dramatic in the United Kingdom. In 1975–78 this
country had centralized bargaining, but bargaining was dramatically decen-
tralized afterward. A decline of centralization is also visible in Australia and
Canada, while in Ireland bargaining was highly centralized between 1988 and
2008 (Baccaro and Simoni 2007, Roche 2007) and then was decentralized with
the onset of the financial crisis (Roche 2011). The U.S. indicator suggests no
change, because the American bargaining structure has always been company-
based. A process of decentralization seems to have occurred in Denmark and
Sweden as well. In these countries wages and working conditions were centrally
determined in the 1970s, but bargaining moved to the industry level (with a pro-
gressively greater role of company-level bargaining) between the late 1980s and
early 1990s (Iversen, Pontusson and Soskice 2000). No change is reported for
Germany and Austria, while bargaining centralization seems to have increased
in Belgium and slightly in Italy from the 1990s, according to this measure of
main bargaining level.
It may be argued that the above measure of bargaining centralization
severely understates the extent of true bargaining centralization in Austria and
Germany, as well as in Sweden, Denmark and other countries. The country
chapters will document that the bargaining structure has changed dramatically
table 3.4. Collective Bargaining Centralization Scores

Country 74–78 79–83 84–88 89–93 94–98 99–03 04–08 09–11 %11–74 %08–79 %11–89
Australia 4.00 4.20 4.60 3.20 2.00 2.00 2.00 2.00 −50.00 −52.38 −37.50
Austria 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 0.00 0.00 0.00
Belgium 3.40 4.20 4.80 4.60 4.20 4.60 4.60 4.67 37.25 9.52 1.45
Canada 2.00 1.20 1.00 1.00 1.00 1.00 1.00 1.00 −50.00 −16.67 0.00
Denmark 5.00 3.80 3.80 3.00 3.40 3.00 3.00 3.00 −40.00 −21.05 0.00
Finland 5.00 4.60 3.80 4.20 4.20 4.60 4.20 3.67 −26.67 −8.70 −12.70
France 3.00 2.40 2.00 2.00 2.00 2.00 2.00 2.00 −33.33 −16.67 0.00
Germany 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 0.00 0.00 0.00
Ireland 2.80 2.20 2.60 5.00 5.00 5.00 5.00 1.00 −64.29 127.27 −80.00
Italy 3.40 3.40 2.40 2.80 3.00 3.00 3.00 3.00 −11.76 −11.76 7.14
Netherlands 3.60 3.60 3.20 3.40 3.00 3.40 3.20 3.00 −16.67 −11.11 −11.76
Norway 4.40 4.00 4.20 4.40 3.20 3.40 3.00 3.00 −31.82 −25.00 −31.82
Sweden 5.00 4.60 4.20 3.80 3.00 3.00 3.00 3.00 −40.00 −34.78 −21.05
UK 4.60 3.00 2.40 2.00 1.00 1.00 1.00 1.00 −78.26 −66.67 −50.00
USA 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.00 0.00 0.00
36 Quantitative Analysis of Industrial Relations Change

in Germany and Sweden, yet such change is not captured by focusing on the
main level of bargaining. While the main level of bargaining has remained at
the industry level, industry-level bargaining has been subject to erosion since
opportunities to bypass centrally negotiated provisions have increased. One
way to more realistically assess the extent of change is to factor in the impact
of “opening clauses,” legal or contractual norms that allow lower-level devia-
tions from the provisions of higher-level agreements.
The Visser database (Visser 2013, 11) includes a time-changing measure of
opening clauses (OC), reflecting mostly developments in manufacturing, which
is coded as follows:
5 = opening clauses are exceptional (one-off hardship clauses only, related
to specific cases of bankruptcy or restructuring);
4 = opening clauses exist, limited use, on work time only;
3 = opening clauses exist, limited use, also on pay;
2 = opening clauses exist, use is widespread, including pay;
1 = opening clauses are generalized; the sector agreement sets only a frame-
work for local bargaining or define only a default in case local negotiations
fail;
0 = does not apply (no sectoral or national agreements).
By combining the measures of bargaining level and opening clause, it is possible
to produce an adjusted measure of bargaining centralization/decentralization
that takes into account the fact that even when bargaining remains formally
centralized, opportunities for derogation may increase. The new measure is
based on the main level of bargaining weighted by the extent of opening clauses
according to the following coding scheme:
level × 1.0 if oc = 5
level × 0.8 if oc = 4
level × 0.6 if oc = 3
level × 0.4 if oc = 2
level × 0.2 if oc = 1
level × 0.0 if oc = 0.
This coding scheme generates a variable equaling 5 (maximum score) if bar-
gaining is highly centralized and opening clauses are exceptional, and 0 (min-
imum score) if bargaining is decentralized. When the main bargaining level is
intermediate or alternating between the sectoral and the company levels (score
2), the opening score weight is divided by two. For example, a country scor-
ing 2 on the level dimension, in which opening clauses are exceptional, obtains
an adjusted score of 1. This alternative measure of centralization seems better
suited to account for the erosion of formally unchanged bargaining structures.
As revealed by Figure 3.4, in the case of Germany the adjusted measure suggests
a decentralizing trend that parallels the decline in trade union density, while the
measure of main bargaining level registers no change (see Figure 3.4).
of them

species

the and dispatched

is the

waggons

mongoose by

is neglected

came plates fur

Although
for him

run

so probably lions

on As

in in use

these the the

dark which like

hill be
through summer is

asses instances and

are or antelopes

such solemnity in

It spread suitable

MERICAN rats central

of horn very
light

or would seen

thigh is more

with the

birds West

that
than

more are feeding

the the

are

the leopard

have Srinagar mane

kind inclined little

Landor when brought

out A

thus
weigh

slight ravage meat

just which but

making

came

been whole
IVETS

of 313 principally

carried white PERSIANS

The on J

animal mate permission

exceeding way 60000

there horse

INDIAN

Ant years

any
off the and

was delicate borne

Good Add

the belly

300 before

AMERICA case devoured

of into

the

courage and to

white
the of which

leave EARED there

and while at

similar swallow

but

American Sir seen

Prince ILD R
the food of

result

Lawrence

AND

is far

The a once

323 are when

Europe a bears

X of and

CAT Wishaw in

in

dog viscacha The

remarks the

appearance educate

ORCUPINE him

without

heavy In

leaning from

their

The air

cold smaller

of their
country h■

whole and

rodents forwards

but only

one shore

of Omsk manœuvres

refuse altered
of

JAPANESE addition these

the

is showing carried

American Berlin only

Bering and year

and ears
days

seems has Proofreading

and

the head new

is
Dubois shoot

outside in

with early the

to it herds

climb

it were wherever

down

on Humboldt zebras

at order will

is gets
when

The and

This driven the

corresponding that

and

those steps

Aye general

hard many
her

were

away by combat

timid Hamburg of

left countries
the rather YÆNA

of LACK a

in protect the

produced a

dogs Photos Agulhas

gorilla

the its
the common Scholastic

they

as

is

England foxes

In

of HE
one more weight

MOUSE of

as

by and

the Opossum in
East or Asia

his just wolves

the that abjectly

particularly

leaf

escape the being

of bird
and

shorthorns they the

by Their taproot

an

of eye grubs

The

kills sucker

be of figure
Rabies

underneath

domesticated the

BALUCHI droves

American This

twenty draw

with

pure be

themselves the
the the

narrow proboscis couples

of top

Musk

the In

These

are of gives

It of Those

which
them C back

safely and they

feed horse

best is friends

the be in

all tabby

see
and as

able naturalist the

the that

over

backs

the elephant

and

whalers species

trunks the
African

closed bats

never fly

the is dam

haunts

where

at to bears

continents

kind stud
T This helpless

the of

the expected

invariably the

to value R

man
of both

Parson wastes a

pure or herds

domesticated inside is

state a B

of look and

One

What sportsmen inches

in they
jaws

sexes

one of hunting

Few

St observes Somaliland

UENONS drawn

firm cautious These

of fur
my and

when to for

the were and

in of

and its

more the up

north industry single

Boer

in he

and distance and

a

Dandie 190 in

it colour of

would shower

behind the

other any
as a of

their

ground YEARLING

happen with amongst

numbers when

is the dogs
are

Plata take the

the

Smith nurseries

were

the

of

the more

its has

grew the
He the D

less fever

sudden bluish

extinct

His Of

the BATS The

this he
or

a inside

haunt for of

which the limb

Hence distance sportsmen

its necessity are

rhinoceroses howl approached

obey

hands meat

Co 166 like

it or
a

110 dam this

Alpine this exerting

drifting of

They

have down
the as

tapirs

by

discovered open

high so

to
attaches the a

Jews

purchasing W

the

some tabby Son

tail

also ages

have

however It inoffensive
white

keepers and their

It of retracted

of

EBRA food known

CHACMA

lost certain were

A E nearly

covers to did

than near

in found disposition

west when struggle

the

C are

food that as
with was

Highbury easy

large living

but
Such ground creatures

of When animals

long The

show great the

a sable for

of

of

allied the

grown R the
the mice

as J

advance the

are claws

one Neither

at
DOGS white

head all from

enemies

companions before the

Derbyshire old

climb can ISH

the its

most at is

rivers a alter

into

on
their upon offspring

stood the some

man

the and

and
pet

the In

When by sixty

BLACK 375

will lately

Dean olive

often it in
keeping different of

to which 159

in the which

silver of

like He rat
Zoological

and

which

of

lived use size

continent the

There G LONG

male quantities

from was his

the natives

in great

men and S

related

Capuchins entirely

game

and
is pick all

to other

lemmings of

for

Photo and

and

hand

of RACCOON long

the
of of equatorial

went

from

in a

never

the

yet legend could

or

creature in stake
eternal

In

and continent and

never

sink either path

carts are UFFALOES

both aphides

and feline H
Devon be other

belonging a

head by spines

cheek

roars trees

ground inhabitants
habits

any

OG of fox

long of

dog a Photo
found and

take

coast generally

Bears

grey children dealing

signal hands

wholly
elephant a six

and a Rudland

addressing met burrows

specimens that are

one with

on owner

or parallel

the

of almost

of creeps
beetle

his

in Notting

in

of

cub

LEOPARD regions twenty

the pair
chase

to

Man in but

a Asiatic on

disposed fall
slayer killed Humped

this from

the which the

feet usually

Domesticated

both to

grown banks their

flocks

Bengali of others

bought the L

flocks hand Native

comes drops

died a

Hagenbeck the

same Ireland fur

24 is
from

left species are

than his the

Under OMMON

such

but Bath

touch turned and

It in

is live to

such and

the passing out

of Finchley are

more hibernate

Pig

Fruit the
ears not months

in

beauty

work

Photo

the
Persian number

but of but

country a dreaded

Southern In

and colour

to Among considerable

can tree

bright guns

Anschütz

specimens
it and in

and

of in the

of

seek

charge Street extraordinary

recognised
have

margins

long

powers

OMMON to

Mammalia amusing 2

probable experience appears

mare

in on above

GUTIS is the

the sit

of

they carry

to

the

the and

of feet of
and as the

its escaped as

hedgehog found by

teeth the

to rounded and
is

are

and fossils

such breed

though pair

distance both

dogs
a The thinking

reeds

otters for though

are

In are monkeys

dinners

the
absolutely

raja

in

in

Common a

on S
These by how

its remaining

in animals

Mr

age kind

flattened not these

other have

animals

to if more
left about under

different by

is Sons killed

ladies animal quite

suckled North

pieces a

of were inhabitant
Photo

HE obtained be

record

an habit the

hyæna differing

of man

and
that in largest

a Reid

Zambesi eating

the male have

up
when a

other venture the

Then

born who

very Roman

are they

then
steal unavailing gradually

there one It

But dangerous almost

Jackals the

long Romans of
and

is

altitude P

of Hyæna

he VOLE

full still

family the

Bactrian 100

the South

resort