Employee Relations in the Periphery of Europe: The Unfolding Story of the European Social Model

Employee Relations in the Periphery of Europe The Unfolding Story of the European Social Model

Emer O’Hagan

Employee Relations in the Periphery of Europe

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Employee Relations in the Periphery of Europe The Unfolding Story of the European Social Model Emer O’Hagan

© Emer O’Hagan 2002 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted her right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2002 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 0–333–94727–4 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data O’Hagan, Emer, 1969– Employee relations in the periphery of Europe : the unfolding story of the European social model/by Emer O’Hagan. p. cm. Includes bibliographical references and index. ISBN 0–333–94727–4 1. Industrial relations—Europe. 2. Industrial relations—Europe—Case studies. 3. Personnel management—Europe. 4. Comparative industrial relations. 5. Labor policy—Europe. I. Title. HD8376.5 .O3 2002 331′.094—dc21 2002025165 10 11

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Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham and Eastbourne

To my husband Patrick Lemoine and my parents Lillian and Eddie O’Hagan

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Contents

List of Tables and Figures

x

List of Abbreviations

xi

Acknowledgements

xiv

Introduction

1

1 The Costs of Europe: Why Do Small Economically Peripheral Economies Join Europe?

6

Introduction European development studies The cost of a non-Europe: the ‘Old European Social Model’ Motivations for membership: exercises in risk-taking So why the EU-phoria? Europe reinvented Why industrial relations in the EU? Conclusion

2 Theories on European Integration: Integrating Theories Introduction Industrial relations in cores and peripheries: notions dependent on dependency? Theorising and ‘empiricising’ industrial relations within the EU Traditional EU theories Theoretical responses What’s new about new governance? Who needs a theory of the EU! Dependency theory meets the EU What dependency can bring to EU studies: tweaking with marxism A synthesis A synthesis of a synthesis: ‘institutional dependency’ Conclusion vii

6 8 11 18 19 25 31 33

34 34 35 42 43 44 48 50 53 55 59 61 63

viii Contents

3 The European Social Model in Economic Peripheries Introduction The EU as a vehicle for modernisation? Hard law and soft law: concrete models of modernisation? Soft laws: implications for governance Governing industrial relations in the European Union: the soft option? The case-study approach But why Ireland and Hungary . . .? Ireland and Hungary as a developmental trajectory Ireland–Hungary and notions of peripherality The internationalisation of peripheral economies: FDI in Ireland and Hungary Hungary’s relations with the EU Conclusion

4 The European Union and National Legal Systems Introduction EU Directives: the nature of hard initiatives and employee participation European Works Council and EU governance Employee participation in Ireland The EU as a pressure for change The European Works Council Directive: Ireland Employee participation in Hungary The EU as a pressure for change: the introduction of works councils in Hungary Assessment of information forum in Hungary Patterns of peripherality elsewhere? Conclusion

5 The European Union and National Wage Systems Introduction But the EU does not legislate for wages . . . ! Why the debate? ‘EU wage policy’ and Ireland Hungary and EU wage policy EU soft and hard wages policy in associative member states The evolution of Hungary’s wage agreements: towards a European model?

65 65 66 68 70 73 74 76 79 80 81 92 93

95 95 96 98 101 103 104 111 116 120 122 132

134 134 135 138 143 152 153 157

Contents ix

Elsewhere similar patterns emerging Conclusion

6 The European Union and National Training Systems Introduction EU training policies and the social partners Patterns of training policies throughout the EU Training policies in Ireland EU influence on Irish training system Social partners’ role in Irish training system Operational programme for human resources development: an effort to integrate social partners in response to Europe’s soft initiatives Discussion and some conclusions Training policies in Hungary EU influence on Hungarian training system Social partners’ role in Hungary’s training system Case-study: Phare social dialogue programme in Hungary Overall assessment of social partnership in Hungarian training Conclusion: EU governance and policy efficacy in Hungary Training patterns elsewhere Conclusion

7 Summary and Conclusions Introduction Theoretical innovations: institutional dependency Confirming convergence The key issue: governing the EU Social Model ‘Tightening up’ the EU Social Model?

162 168

170 170 171 176 177 178 179

182 188 189 190 192 193 197 199 202 209

211 211 212 213 217 219

Notes

223

Bibliography

230

Author Index

257

Subject Index

259

List of Tables and Figures

Tables 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 5.1 6.1 6.2 6.3 6.4

Direct investment inflows Manufacturing exports and diversification of markets Origins of employers in Ireland according to size of the labour force Issues dealt with by the European Works Council Who chairs the meetings? Is there a select committee? What is the nature of those select committees that do exist? Is the select committee accorded a continuing role in receiving information and consultation? Wage and social pacts in a selection of EU member states Operational programme for human resources development 1994–9 Development of average Hungarian monthly wages Research and development expenditure (Hungary) Patterns in training systems in a selection of European countries

85 86 91 126 128 129 129 130 164 185 201 202 204

Figures 2.1 2.2 6.1

New governance’s nexus between the supranational–state and the state–state 48 Evolutions of post-Fordism: the advanced capitalist countries 60 Area of activity of joint consultative committees/work councils 198

x

List of Abbreviations ACAS ADAPT ÁFEOSZ AMSZ AnCO APVOP ASZSZ CEC CEDEFOP CEEC CEHIC CLCs COMETT CSF DG EBRD EC ECJ EEC ECOSOC ECU EICHTU EIRI EIRR EMU ERDF ERASMUS ESF ESRI

Advisory, Conciliation and Arbitration Service Human Resource Community Initiative funded through the European Social Fund National Confederation of Consumer Co-operatives Societies Union of Agrarian Employers (An Chomhairle Oiliúna), the Industrial Training Authority Action Programme for the Implementation of a European Community Vocational Policy Autonomous Trade Union Confederation Commission of the European Communities European Centre for the Development of Vocational Training Central Eastern European Countries Confederation of Hungarian Employers’ Organizations for International Cooperation County Labour Councils Community Programme for Education and Training in Technology Community Support Framework Directorate General European Bank for Reconstruction and Development European Community European Court of Justice European Economic Community Economic and Social Committee European Currency Unit European Integration Commission of Hungarian Trade Unions Employment and Industrial Relations International European Industrial Relations Review European Monetary Union European Regional and Development Fund European Community Programme in the Field of Higher Education European Social Fund Economic and Social Research Institute xi

xii List of Abbreviations

ÉSZT ETF ETOSZ ETUC ETUI EU Euro EWC FÁS FDI FIDESZ FORCE FUE GB GDP GNP HR HRM IBEC ICTU IDA ILO IMF IPOSZ IR IRE IST IT KISOSZ Liga MGYOSZ MMSZ MNCs MPP MOSZ MSTI MSzOSz MSZP MTI

Intellectual Workers’ Trade Union European Training Foundation Interest Defence Consultancy Service European Trade Union Confederation European Trade Union Institute European Union Single European Currency European Works Council (Foras Áiseanna Saothair) Training and Employment Authority Foreign Direct Investment Federation of Young Democrats Action Programme for the Development of Continuing Vocational Training in the European Community Federated Union of Employers Great Britain Gross Domestic Product Gross National Product Human Resources Human Resource Management Irish Business and Employers Confederation Irish Congress of Trade Unions Industrial Development Authority International Labour Organisation International Monetary Fund National Association of Industrial Corporations Industrial Relations Irish Pound Institut des Sciences du Travail Information Technology National Federation of Traders and Caterers Democratic League of Independent Trade Unions Federation of Hungarian Employers and Industrialists Hungarian Employers Association Multinational Corporations Hungarian Civic Party National Federation of Workers’ Councils Main Science and Technology Indicators National Confederation of Hungarian Trade Unions Hungarian Socialist Party (Magyar Távirati Iroda Rt) Business and Financial News Service

List of Abbreviations xiii

NAFTA NAP NCC NEC NESC NGO NLC NPAA OECD OJ OP PC PCW PESP PETRA

North American Free Trade Agreement National Action Plan National Conciliation Council National Economic Council National Economic and Social Council Non-Governmental Organisation National Labour Council National Programme for the Adoption of the Acquis Organisation for Economic Co-operation and Development Official Journal Operational Programme Personal Computer Programme for Competitiveness and Work Programme for Economic and Social Progress Action Programme for the Vocational Training of Young People and their Preparation for Adult and Working Life Phare Pologne, Hongrie: Activité Pour La Restructuration Economique PMU Programme Management Unit PNR Programme for National Recovery PPF Programme for Prosperity and Fairness R&D Research and development SDP Social Dialogue Programme SNB Special Negotiating Body SP Social Partner STRATOSZ National Association of Strategic and Public Utility Companies SZEF Forum for the Co-operation of Trade Unions SZDSZ The Free Democrats SZOT Central Trade Union Council TEMPUS Trans-European Mobility Scheme for University Studies UK United Kingdom UNESCO United Nations Educational, Scientific and Cultural Organisation UNICE Union of Industrial and Employers’ Confederations of Europe US United States of America USD United States Dollar USSR Union of Socialist Soviet Republics VAT Value Added Tax VET Vocational and Educational Training VOSZ National Association of Entrepreneurs

Acknowledgements

This book is the end product of years of teamwork involving a host of generous and dynamic people. The book has been developed from my doctoral thesis and so, at the outset, I wish to thank my supervisors, Paul Teague and Denis O’Hearn. Both were enthusiastic and engaged in the project from beginning to end. I was enormously fortunate to have their complementing support and advice. I could not have anticipated undertaking this work without them. I am also very grateful to my external examiner, Wolfgang Streeck, and my internal examiner, Liam O’Dowd, for their close reading of the text and their very lucid comments on it, all of which proved crucial during redrafting. I am sincerely grateful to all those who so generously provided their time and energy during the 110 interviews on which this study is fundamentally based. Thanks, too, go to those who trusted me with their organisation’s files. Again the study would have been unimaginable without all this support. I was also fortunate to have been financially supported in my final year by the Royal Irish Academy Postgraduate Research Award and Royal Irish Academy Postgraduate Essay Prize. I greatly appreciate the awards which facilitated writing up the thesis in the final year of my postgraduate studies. Thanks are also due to the members and staff of the Department of Sociology, Queen’s University; in particular Ciaran, Emma, Roger, Deirdre and Margaret, for their warm friendship and support. I would like to also thank all the staff of the Department of Political Science and Sociology, National University of Ireland, Galway, for all their support throughout my year there and for use of their facilities during redrafting work on this study. Special thanks go to Donal for his infinite patience and help with redrafting, and Niall, Pete and Laurence for their kindness all year. I am sincerely grateful to György Lengyel of the Sociology Department in the Budapest University of Economics for the warm welcome which he, and his postgraduate students, gave me during my Hungarian fieldwork. Work on this research was greatly facilitated by the support of library staff over the years. In particular, the staff of the Main Library, Queen’s University Belfast, the library of the Budapest University of Economics and the James Hardiman Library, Galway. In particular, thanks xiv

Acknowledgements xv

go to Seamus Scanlon for his support in this research and his kindness and friendship throughout my time in Galway. Thanks also go to the members and staff of Dublin City University (DCU) Business School. They provided me with an environment in which I could update the thesis and turn it into a book through a postdoctoral research post. I also want to thank the staff of DCU Library for their help during this period. The Irish Research Council in the Humanities and Social Sciences awarded me a Government of Ireland PostDoctoral Fellowship which funded the last twelve months of my spell in DCU, for this I am very grateful. The Institute of Governance at Queen’s University Belfast provided an excellent environment in which to bring the work to completion. I am grateful to Elizabeth Meehan for giving me the freedom to pursue this study and to Alex Warleigh for his discussions on it. Also, thanks to all my colleagues at the Institute, especially Amanda and Cathal for their support and friendship. My research in Hungary was made possible by the invaluable help of György Vadgovich, who was my interpreter during the interviews and provided the necessary linguistic support in a myriad of unanticipated ways. The work was facilitated by Csilla Szabo, who helped me with Hungarian-language classes, and Zoltan Berényi, who provided useful thoughts and literature. The study was also aided by András Tóth of the Institute for Political Sciences, Budapest, and Paddy Gunnigle of Limerick University, both of whom so generously gave me access to their research findings on the Cranet Survey. I am indebted to them both. A special thanks goes to András for his support right from scratch and his insightful comments on draft chapters. Thanks also to Zelah Pengilley and Caitlin Cornish, my editors at Palgrave Macmillan for their help in editing the work and Keith Povey for his superb editorial services. I want to thank all those friends who supported me throughout this study, especially to Anne Marie, Áine, Tanya, Claire and Cathy for their constant friendship down the years. Warm thanks also go to Anna and Zoltan Szentirmai for making my spell in Budapest so delightful and full of fond memories. Thanks also to Katherine Walsh for her warm welcomes during my spell in DCU. My deepest thanks goes to all my family for the enduring interest and support which they have shown in this work over the years. A special word of thanks goes to my parents, Eddie and Lillian O’Hagan, who have always been there for me and encouraged me to pursue my interests. I want to sincerely thank Eddie, Justin, Fidelma O’Hagan and Patrick Lemoine for the help which they contributed in a very direct

xvi Acknowledgements

way, by proofreading the original thesis, and later drafts, and to Karen O’Hare and Patrick O’Hagan for their constant support down the years. Thanks also to Patrick Lemoine for advice with the ‘graphic effects’ and to Justin for his dynamic intellectual support and encouragement throughout the work. I return to my husband, Patrick Lemoine, though, for a very special word of thanks for his unlimited interest, patience and love over the years. As always, the ideas expressed and any mistakes remain my responsibility. EMER O’HAGAN Every effort has been made to contact all copyright-holders, but if any have been inadvertently omitted the publishers will be pleased to make the necessary arrangement at the earliest opportunity.

Introduction

The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing common policies or activities referred to in Article 3 and 4, to promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a high degree of competitiveness and convergence of economic performance. (Treaty establishing the European Economic Community, Part One, Article 2. Stress not in original text) (CEC, 1999e). The primary question pursued throughout this book is how employee practices in economically peripheral states are affected by accelerated European integration. Remarkably few studies in this field straddle that relatively young, once political, now only economic, frontier between Eastern and Western Europe. Most commentators claim that the two regions followed fundamentally different industrial trajectories and therefore it is not fruitful to use western models of industrial relations as reference points against which developments in employee practices may be analysed (Thirkell et al., 1995). This book has attempted to contribute to the discipline by turning this assumption on its head. A main supposition which underpins the work is that we may gain a clearer picture of the nature of the ‘European Project’ if we can locate patterns in the manner in which under-developed industrial regions integrate within the Community. It follows that this finding would be all the more significant if these patterns emerge from states which are the product of very diverse historical trajectories. 1

2 Employee Relations in the Periphery of Europe

Like all capitalist industrial states, countries in both Eastern and Western Europe experience heightened pressure to compete industrially in response to cheap imports from newly industrialising countries, new technology, and increasingly mobile capital, amongst other things. It appears that states in both Eastern and Western Europe see membership of the European Union (EU) as a vehicle in which they may weather the difficulties created by the internationalisation of production and either remain or become competitive economies. There are two main objects of this study. One is to enquire whether industrial relations systems in small, under-developed, open economies can ‘modernise’ by membership of the EU. The second objective is to understand how membership of the EU impacts on these national industrial relations (IR) systems. The book focuses on Ireland 1 and Hungary as case-studies in the attempt to address this question and the findings are compared with other peripheral European economies in an effort to assess whether the EU enables member states and associative states to modernise their systems of employee practices. The notion of economic cores and peripheries is a fairly wellestablished concept in commentaries on the European Union (Dunford, 1992; Lung, 1992; Perrons, 1992; O’Hearn, 1993). However, one theme which has not been fully researched is the implications of economic peripherality for employee practices within the EU’s sphere of influence. This study introduces the notion that peripheral economies are likely to produce sub-standard IR systems (Chase-Dunn, 1989), where the feature of peripherality is defined as dependence on attracting foreign direct investment (FDI). This premise is by no means novel: it has been widely addressed in the literature on a theoretical level (Lipietz, 1997). However, this path is retraced here for two reasons. Firstly, work which makes explicit links between economies of peripheral status and their weak IR regimes tends to be theoretical in nature. This study aims to develop some concrete empirical basis for what is otherwise a mere assumption. Secondly, returning to the subject of theory, it is all too apparent that the dominant literature which specialises in European integration as a process, fails to apply itself to relations between the European core and its industrially under-developed periphery. The study expresses dissatisfaction with prevailing theories predicting either the emergence of a federal Europe or the robust nature of sovereign states. Similarly, in the IR realm, there is an alarming tendency to limit debate to the question of whether IR systems are converging towards a common model, or whether the diversity of models is simply confirmed (Kerr et al., 1960/73; Maurice, 1995; Berger and Dore, 1996). While this

Introduction 3

tradition of literature has its place, it is important to move past this concern, and, for instance, look at the dialectic in developments between European states’ IR practices. These serious theoretical limitations were addressed in this study by developing a synthesis between a dependency-style thesis and the recently developed new governance framework. It is suggested that the confluence of these ideas provides the student with a novel freedom in methodological terms. New governance carries no end-point-determinism. It recognises that one gains insights into the nature of EU integration by locating governance in a multitude of arenas. Dependency theory, however, provides the a priori hypothesis from which one may seek to derive generalisations (Shalev, 1980: 26), a feature which new governance lacks. The hypothesis that emerges from this synthesis asks whether peripheral economies are showing a willingness and a capacity to adopt negotiated involvement (core-like employee practices), or, alternatively, whether they are keen to exploit the low-cost, low-skill, flexible labour market features they have inherited from tradition, to obtain competitiveness. The book examines the EU’s role in this decision-making. It is shown throughout the work that national legislators, policy-makers and interest groups are genuinely engaged in the notion that negotiated involvement embodies. This is reflected in Irish and Hungarian initiatives in labour law, training systems and wages. The findings indicate also that the EU is a very significant actor in these states’ efforts to implement core-like IR systems. However, it is found that these projects face grave difficulties and no successful attempt to implement negotiated involvement is located in any of the case-studies looked at. It is suggested that the key obstacles are not that national actors are unwilling to shift employee practices from the neo-Taylorist tradition; or that these economies’ peripheral status has ‘locked’ them into low-cost production. While these are valid prognoses, they do not explain the genuine efforts made to implement the negotiated involvement-style options, which were uncovered throughout this research. The study suggests that, rather, the internal nature of the European Social Model, the means by which the EU promotes negotiated involvement-style IR systems, may go some way to explaining the difficulties policy-makers face. The study shows that the EU Social Model has a definite impact on the three selected policy areas by means of ‘hard’ and ‘soft’ pressures. Despite these very real, but often intangible motivations, it is argued, the EU Social Model is inoperable because of the soft nature of governance which underpins it. It is too vague in its contents and its goals are often

4 Employee Relations in the Periphery of Europe

contradictory. The study suggests that the ‘policy map’ (Goldstein and Keohane, 1993: 13–17) which the EU presents to peripheral economies is unclear and misleading. This investigation falls into two main sections. The first half, Chapters 1, 2 and 3, introduces the conceptual tools which were used to conduct this research. Throughout the second section, Chapters 4, 5 and 6, the tools are applied and these chapters discuss the findings from the questions introduced above. The contents of Chapter 1 have already been sketched. Here, the question the study sets out to test is set up. It is argued that, contrary to the neo-liberal belief that membership of the EU will bring prosperity to all member states, membership of the Community is a risky venture for economically peripheral regions. The argument is presented that less-developed regions may join the EU primarily as a strategy for industrial modernisation. The focus is on industrial relations, and consequently it is asked whether the EU provides a vehicle by which peripheral regimes may modernise their IR systems. Chapter 2 stresses that we cannot understand developments in IR systems in the EU sphere of influence unless we recognise that employee practices tend to be organised around two different models. One model is ‘coordinated’ and tends to produce high-quality goods, and the other model is ‘uncoordinated’ and tends to produce goods cheaply (Soskice, 1990). It is argued in this chapter that these two models are broadly dictated by a state’s economic status, be it core or peripheral. The chapter explains that dominant theories on the European Union are not capable of addressing ideas of economic peripherality and employee practices. An eclectic theoretical framework is developed here which is used to test the main hypothesis, namely whether EU initiatives help peripheral economies within the Community’s sphere of influence to modernise, and upgrade systems of employee practices. This hypothesis is tested throughout the second section of the study. The final chapter in this section, Chapter 3, explains how the research was applied; it discusses the key variables which constitute the study. Here, the notion of the European Social Model and its mechanisms are explored. This chapter discusses why Ireland and Hungary provide insightful case-studies which can then be compared with other peripheral economies. The second section of the study addresses the hypothesis established. It analyses whether the European Union provides opportunities to embark on a new IR strategy. Chapter 4 does this by looking at the manner in which EU laws in the area of labour and employment are transposed into the domestic context. The subject of this chapter is

Introduction 5

limited to a discussion on employee participation. Next, Chapter 5 focuses on how Community policies and initiatives affect national wage systems. The third and final topic of industrial relations with which this study is concerned, is training systems. Chapter 6 examines this issue through its discussion on EU initiatives to involve social partners in training projects. Finally, Chapter 7 presents a résumé of the findings and focuses on a theme which permeates the entire work, the nature of the European Social Model, and the difficulties therein.

1 The Costs of Europe: Why Do Small Economically Peripheral Economies Join Europe?

The idea of ‘going to Europe’ was graced by an air of high purpose, as if the Irish were voting to promenade into continental cathedrals, not a marketplace where the going could get quite rough. (Jacobsen, 1994: 98–9)

Introduction In its infancy, it was crudely believed that the European Union (EU) would produce a convergence among its members towards a highly developed industrial society, with all the optimistic baggage which that entailed, such as internationally competitive enterprises, generous welfare and policy-making embedded in practices of ‘social dialogue’. 1 In the 1960s when the ‘golden age’ was in full swing and the EU, then the EEC, 2 was a relatively small and economically compatible group of member states, this view had some merit. But when the economic climate began to cool down in the 1970s and the EU was enlarged to incorporate less-advantaged countries like Ireland, Spain and Portugal, it became less compelling. For the first time, the EU had to deal with a periphery in harsh macroeconomic circumstances. Unsurprisingly, the virtuous scenario of European integration securing social standards and market efficiency at the same time became increasingly challenged. A critical literature emerged which suggested that membership of the Union held definite risks for less-advantaged regions. In this alternative account, European integration was seen as a zero-sum game, producing winners and losers. In this view, the danger for economically weaker member states in the 6

The Costs of Europe 7

periphery was that their interest would be secondary to those of the core. Although the argument gained a substantial following in academic circles, it has counted for little in national-policy terms. For it is the peripheral and poorer states in Europe which are clambering to join the EU, and on joining, they tend to be the ‘best’ Europeans. What are the attractions the EU presents to less-advantaged states when the potential social and economic benefits are widely considered to be inconclusive? This question is more poignant than ever before as the Community stands on the eve of its largest expansion. Membership could rise to 22 and all those queuing up are seriously economically under-developed. This book focuses on the implications that membership of the EU has for less-advantaged states on the economic periphery of Europe. The research enquires whether membership of the EU provides peripheral states with an operative model to modernise their industrial regimes. The study focuses especially on how membership of the EU impacts on systems of employee practices and industrial relations. The chapter is arranged into three main sections as follows. Section one highlights the difficulties which membership of the EU has presented for economically peripheral member states. It shows that the Community recognised the systemic problems which peripheral membership entailed and it attempted to address them through what may be labelled for this study, the ‘Old European Social Model’. This model entailed a neo-liberal economic project in which the social gaps which emerged (such as large-scale redundancies and uneven development) were addressed by limited legislation and redistribution. It is argued that the EU’s funding and legislative efforts were less than successful and the Community was forced to reassess the European Social Model which operated up to the mid-1980s. This discussion is illustrated through a review of two major policy studies commissioned by the EU. The studies were coordinated by Michael Emerson et al. (1988), and Paolo Cecchini et al. (1988).3 The analysis of this work is divided into three main sub-sections. Each sub-section discusses the study’s central arguments: macro-level competition; economies of scale; and micro-level restructuring. The chapter critically discusses each claim and shows how the Community was subsequently forced to re-evaluate the old Social Model. Section two points out that despite the challenges which membership entails, the EU is still the club to be in. The chapter rejects traditional explanations for this anomaly which focus on the security, financial support or democratic stability the EU provides. It is argued that peripheral economies and accession states are keen to partake in the risky business

8 Employee Relations in the Periphery of Europe

of EU membership because it provides them with an unofficial development policy; an opportunity to upgrade into a modern, industrial society. It is suggested in this section that this unofficial development policy, which is labelled the ‘New European Social Model’, has been growing since about 1989. It is argued that this model represents a decisive break with the old strategy which addressed economic underdevelopment on an ad-hoc basis with a policy of limited redistribution of funds and limited social legislation. The new Social Model has two distinct features which make it very attractive for the less-developed regions on Europe’s periphery. Firstly, it attempts to perform a difficult juggling act: to achieve a competitive economy as well as maintaining social cohesion. Secondly, the new Social Model is experimenting with a novel system of governance. This ‘problem-solving governance’ is lean, cheap and flat. As such it is much more accessible and attractive for peripheral economies than the system of governance which traditionally underpinned highly coordinated, successful economies, such as Germany and Sweden. It is suggested that it is this combination which is seen to provide less-developed states with a window of opportunity and a blueprint for growth. The third section of the chapter returns to the issue of governance to set up the question which is addressed throughout the book. It focuses on the manner in which the EU Social Model has been reinvented and it asks whether this new, leaner, flatter system of governance will have the wherewithal to implement the ambitious industrial policy which the Community promotes. It is suggested that the notoriously difficult combination of competitiveness and social cohesion may prove evasive in a Community in which decision-making is devolved, finances are tight and social policies unpopular. This section concludes by explaining that the book aims to answer this question by focusing on employee practices. It is shown that developments in industrial relations provide a good litmus-test in Europe’s ‘living laboratory’.

European development studies From the 1960s onwards the classical modernisation thesis was questioned by a myriad of sources unanimous in their assertion that the process of industrialisation need not follow the path experienced in the West (Badham, 1984: 26). The most vocal of these emerged from Latin American-based Dependency theorists. Their writings dismissed functionalist explanations for the region’s under-developed economies, such as incapable politicians and national psychological characteristics,

The Costs of Europe 9

arguing that the sharp inflation experienced was produced by relying on exports of primary products. They suggested that the subsequent import substitution economics that were adopted created the need for foreign direct investors to provide technological know-how and capital along with imported foods, raw material and fuel. They categorised the economic world according to those countries in the dominant and successful ‘core’ and ‘peripheral’ regions which were dependent on it (Seers, 1981: 15). Ideas such as these were confined to ‘world development studies’. It was not widely conceived that these arguments held any relevance for Europe. In 1954, a United Nations economic survey of Europe introduced the idea that the continent essentially involved an industrially dynamic ‘core’ with an under-developed rim or ‘periphery’. However, European regional studies were promptly disconnected from development studies as the Community pushed the issue of regionalism beyond economic concerns, adopting the region as a vehicle to carry a number of its cultural and technological doctrines (Despicht, 1980: 40). The European region was not addressed by critical theorists again until the early 1970s when it became apparent that regional under-development might be the crucial stumbling block to the development of a European Monetary Union and other deeper forms of European integration (Perrons, 1992). By 1978, a prominent Dependency theorist, Dudley Seers, urged social scientists in Europe’s periphery to draw on ‘Third World’ analysis, arguing that they systematically share common problems (Seers, 1978: 25–7). Later he wrote, [i]t is astonishing to see European economists groping their way to similar conclusions in the 1980s, as if their Latin American colleagues had not developed a critique of monetarism . . . two decades earlier. (Seers, 1981: 14) It was mostly political economists who were engaged in this ‘groping’ which involved a shift away from neoclassical assumptions about perfect competition, the absence of monopolies and full mobility of capital and labour. They produced theories of disequilibrium and Marxist theories of development within the European context (Perrons, 1992: 180). Although perhaps weaker and less categorical in tone, mainstream economics also developed arguments that claimed that once economies got ahead they used those better factor endowments to stay ahead. Cumulative causation theory, developed much earlier by Kaldor (1960) and Myrdal (1939: 24–8) in particular, is representative of this branch of economics. Yet neither the

10 Employee Relations in the Periphery of Europe

development economists nor the cumulative causation school had much influence in the early economic approaches to the costs and benefits of European integration. Stressing the benefits of trade creation and trade diversification processes alongside the dynamic of factor equalisation, the mainstream economic approach was that the dynamics of European integration would result in a tide which would ‘raise all boats’ and that most countries would converge upon a higher standard of living. To a large extent, it was this type of thinking that lay behind the European Commission’s Internal Market Programme in the 1980s (Grahl and Teague, 1990). But increasingly this conventional view was challenged, largely as a result of the widespread influence of new growth and strategic trade theories in economics. Building upon the older cumulative causation arguments, these new theories argued that spontaneous mechanisms towards convergence are not embedded in either international trade or economic integration. Instead, they are held to be a result of imperfect markets and limited information. Disequilibrium economic trends may emerge, with some countries capturing the benefits from integration over less-successful economies. Regional divergence, rather than convergence, may be the outcome. This new consensus in economics has affected the Community policy arena. Indeed, the Commission itself began to question the earlier ‘modernisation’ belief that economically peripheral regions of Europe will automatically converge with industrially developed economies. This shift is clearly illustrated in the Commission’s position with regard to Community social policy. We can recognise an incremental change in the Commission’s role, from a laissez-faire approach which it maintained up until the 1972 European Council of Ministers’ meeting at Paris (Hepple, 1987: 77–80) to a much more interventionist stance including the provision of aid to enable poorer regions to tread the dangerous waters in the wake of the Maastricht Treaty (Lange, 1993: 21) and the introduction of a ‘Social Chapter’ into the European Treaty under Amsterdam. This ad hoc response amounts to the ‘Old European Social Model’. Ironically, while the EU has begun to overtly recognise the risks which membership of the Community presents to less-developed regions, it is these countries which still queue up, impatient to join. In the following we will see how the EU’s dominant laissez-faire ideology impacted on Community policy-making. The focus is on how the EU made efforts to alleviate the difficulties which economically peripheral member states experienced. However, this analysis concludes that these efforts were largely ineffectual. The chapter suggests that the Community has come to recognise that membership of the EU involves

The Costs of Europe 11

enormous risk-taking on the behalf of industrially less-developed economies. It is argued that the Community was forced to reassess the social model which operated up to the mid-1980s. The following section discusses the difficulties which the old social model produced in the periphery and illustrates why it was seen to be in need of a fundamental change.

The cost of a non-Europe: the ‘Old European Social Model’ Perhaps the most expansive and accessible accounts of the traditional approach to European economic integration were Emerson et al. (1988) and Cecchini et al. (1988), considered here together under the generic title ‘The Costs of a Non-Europe’. Neither study paid specific attention to the consequences which 1992 would hold for the periphery of Europe because the idea that growth experienced in industrial Europe would ‘trickle down’ to the less-developed regions was central to these works. The absence of such an account is perhaps unsurprising, as Emerson et al.’s study was carried out using models of only five countries – Germany, France, Italy, the UK and Belgium (Bradley, 1995: 8, note 2) – and Cecchini et al.’s was conducted on the basis of the four largest EU states along with Belgium and Holland. The data was obtained by grossing up the results from these economically core countries which tended to give an inaccurate analysis for peripheral economies (Bradley, 2000: 19–20). The ‘Costs of a Non-Europe’ study argued that three key mechanisms would produce universal prosperity in the wake of the single market: heightened macro-level competition, the introduction of economies of scale, and finally, micro-level restructuring.

1.

Heightened macro-level competition: competition as an efficiency drive?

The belief that market principles would spur competitiveness underpinned the EU project from the outset. The claim that the abolition of EU trade barriers decreases the cost of raw materials, lowering the entire cost of production and making goods more competitive, may hold true for those firms which are robust enough not to be adversely affected by the dissolution of protective tariffs. But firms in industrially underdeveloped regions tend to be comparatively uncompetitive. Diane Perrons’s work shows that disparities between European regions serve to accentuate industrial development. Perrons argues that Europe is starkly divided along a core–periphery axis in terms of the scale and nature of

12 Employee Relations in the Periphery of Europe

unemployment and expenditure on research and development (Perrons, 1992). In a related study, Iain Begg points out that as integration accelerates and the relative competitiveness of regions becomes apparent, companies will consider these features of under-development when they are making locational decisions. The argument is that they are likely to regard the less-developed regions as the least attractive for industrial development (Begg, 1995: 113). In Amin and Tomaney’s analysis of the implications the free-market holds for regional firms they sum up this idea: [t]he intensification of competition as a consequence of the single market is likely to accentuate the process of cumulative causation through which established centres of innovation and competitive advantages enjoy a virtuous circle of growth, while other regions become locked into trajectories of dependent development. (Amin and Tomaney, 1995a: 22) Economists of a more traditional ilk also questioned Emerson et al.’s claims, giving substance to the critical thesis. Krugman expressly supports Europe’s movement towards a unified and integrated economy such as that of America. But he has stressed that a combination of 1992 and European Monetary Union (EMU) will produce regions of specialised production within Europe. While regional specialisation has proven successful in America, Krugman argued that there are a number of features peculiar to Europe which will create economic blackspots in peripheral regions. The key problem is that regional specialisation tends to make some regions extremely sensitive to any slumps the particular product may experience in the market. In the US, people almost immediately move to a more prosperous area when a region has experienced a market shock. But it is questionable whether this option of labour migration is open in Europe for the foreseeable future given the tiny levels of mobility across the member states. Krugman stressed that economic shocks do not force industrial managers in peripheral regions to dig their heels in and become more efficient and competitive. On the contrary, [w]hen random shocks to demand or technology benefit some regions at the expense of others, factors of production migrate to the successful regions, short-circuiting the mechanisms that might otherwise have led these regions to acquire new specialties. (Krugman, 1993: 258)

The Costs of Europe 13

Krugman’s second argument was that Europe would have to enormously increase the budgetary resources of the EU centre so that it can swiftly redistribute resources towards areas affected by negative economic shocks. In essence, the concern was that while EMU mechanisms would weaken the capacity of national administrations to use autonomous fiscal action to counteract regional shocks, the EU budget was not large enough to allow Europe to develop fiscal federalism as a major regional stabiliser, as it is in the US.

The European Union response: number 1 Arguments such as these had concrete implications on how the EU regarded economically peripheral regions. By 1991 the Commission of The European Communities (CEC) had sponsored a number of studies into the implications that European integration would hold for industries in less favoured regions or in traditional sectors (CEC, 1991a, and 1991b). The Single European Act, 1987, embodied recognition that economic and social cohesion within the EU were both essential if the internal market were to be effective. The Act introduced reform of the main instrument of regional development: the structural funds. The Maastricht Treaty further addressed the issue of regionalism. Article 2 of the treaty stated that economic and social cohesion was one of the ‘pillars of the Community structure’ (cited in Bachtler, 1995: 223). Increases in structural funding have gone some way to verify this claim. The structural and cohesion funds together accounted for over a third of the budget for Community policies (CEC, 2001a: 121). Despite these efforts, studies show that there is no sign of convergence towards a ‘level playing field’ among European Union members. Instead there appears to be overall growth which allows the lag to persist between countries (Dewhurst and Mutis-Gaitan, 1995: 34). In short, the effectiveness of the structural funds for economically peripheral regions of Europe is by no means apparent. The picture which threatened was one of an industrially dynamic core with a rust-zone on its hinterland.

2.

Economies of scale as engines for peripheral growth?

The ‘Costs of a Non-Europe’ study suggested that economies of scale would be the second major beneficial by-product of European integration. The Commission’s Economic and Financial Affairs Directorate (DG2) endorsed this belief that the internal market would expand the scope for increasing the size of business operations leading to a reduction in costs. Ramsay argued that the Commission made unrealistic assumptions. He claimed that mergers are not inherently more efficient units

14 Employee Relations in the Periphery of Europe

of production; indeed they may develop into monopolies which the Commission traditionally views as uncompetitive (Ramsay, 1990: 10). Amin studied merger and joint venture patterns throughout the 1980s and his findings indicate that while mergers are increasingly crossborder, and are undertaken with the intention of strengthening market expansion, these dynamics are likely to reflect core/peripheral relations, and ‘the reforms will decidedly favour the most advanced regions’ (Amin, 1992: 139). One could argue that while European economies of scale may threaten the autonomy of regional enterprises, they will certainly gain from the efficient production techniques which the merged firm is likely to introduce (Emerson et al., 1988: 141). O’Hearn has looked at the quality of labour techniques which have traditionally occurred in the periphery and he argues that this shift to core-style production techniques will not develop in peripheral Europe. He suggests that while wage rates, profit rates and capital intensity are good indicators of peripherality, it is the type of economic activities and subsequently the nature of labour which ‘defines’ coreness/peripherality (O’Hearn, 1994: 591). Taking the historical case-study of the developing cotton industry in the eighteenth and nineteenth centuries, O’Hearn illustrates how a peripheral region, such as Ireland, could not manage to develop innovative and efficient production techniques. Irish industries could not compete with British spinning technology and instead shifted to the less profitable, labour-intensive, weaving trade (O’Hearn, 1994: 611). Commentators have found that similar relations of production exist within the modern-day transnational corporation, a finding which refutes Emerson’s assumption relating to transfer of technology and know-how. Amin and Tomaney’s study, for example, enquires as to whether ‘performance’ plants are locating in peripheral European regions, in particular, Ireland, Spain and Portugal (Amin and Tomaney, 1995b: 205). Their research revealed that ‘Flagship’ companies with international reputations continue to locate lower-quality plants in less industrially developed regions, namely subsidiaries with little autonomy from headquarters, which undertake limited R&D and which tend to be lower down the corporate hierarchy compared with sister plants in core economies.

The European Union response: number 2 Mainstream economists have undertaken analysis of these issues in an effort to ascertain the benefits which certain Community projects have had on the economic periphery. Bradley was the leader of the HERMIN 4

The Costs of Europe 15

modelling team, a project coordinated by the Directorate General for Science, Research and Development to assess the implications which the Community Support Framework (CSF) had on peripheral economies. CSF is a regional development programme which enables countries to cooperate with the Commission in drawing up policies on development through investment in infrastructure, training and human resource development and finally through direct subsidies to the private manufacturing sector. This project was initiated in 1989; it was expanded by 50 per cent when agreements were reached on European monetary union and the CSF was renewed up to 1999 (Bradley, 1995: 201). The HERMIN model was devised as an alternative to standard neoclassical growth theory. It accounts for the special characteristics which pertain in less favoured regions such as high immigration figures, low efficiency firms and dependency on foreign direct investment (FDI). Bradley conducted a comparative study of industrial growth in Ireland and Portugal (1995). His findings challenge the ‘Costs of a Non-Europe’ assumption that economies of scale provide engines of growth. Bradley holds that the level of living standards can be assessed by private consumption per capita. He found that despite Ireland’s much greater success in attracting FDI than that of Portugal, both countries’ relative living standards had fallen between 1973 and 1991 (Bradley, 1995: 203). The study also looked at the elasticities of substitution, that is to say, the tendency to substitute capital for labour in adverse economic climates. Bradley found that Portuguese (mostly indigenous firms) were more likely to substitute capital for labour than Irish (largely FDI firms) were. He explained that while Portuguese firms would move to less-developed regions of the country in difficult periods, Irish multinationals simply left the country and sought cheap labour elsewhere. Bradley concludes by suggesting that the benefits produced by Community structural funds will be short-lived unless they are invested in externality mechanisms such as training schemes. The suggestion is that attracting FDI in and of itself is not inherently beneficial for a country; it is the external mechanisms which root FDI which may be beneficial (Bradley, 1995: 216). 5 Thus it was argued in the contemporary literature that the drive to realise greater economies of scale in European industry is not likely to have positive implications for less-developed regions. Furthermore, EU efforts to elevate the situation in peripheral areas had dubious success rates. This finding is of particular significance for countries such as Ireland and Hungary where industrial policy is pivoted around the effort to attract FDI.

16 Employee Relations in the Periphery of Europe

3.

Micro-level restructuring: vehicle for ‘best practice’?

The final main claim presented in the Emerson/Cecchini report is that the elimination of taxes on imported intermediate goods and services would provide firms with the financial leeway to introduce ‘best practice’ regimes within their enterprises, such as World Class and Just in Time manufacturing techniques (Cecchini et al., 1988: 74). The assumption that firms undergoing a heavy restructuring and, invariably, redundancy programmes will automatically employ textbook managerial and production practices is highly problematic. Once again, critical voices were raised to these arguments. Ramsay argued that if rationalisation of transnational firms did not result in the closure of far-flung plants, then peripheral subsidiaries were likely to have been maintained for strategic reasons. He cited the well-known Hoover decision to close its Dijon plant and concentrate work in its Cambuslang plant, near Glasgow. Contrary to Cecchini et al.’s claim that rationalisation is synonymous with a ‘best practice’ approach, Hoover had concluded a deal with Scottish employees on greater flexibility which included reduced wages and lower working conditions (Ramsay, 1995: 187). While it is by no means inevitable that rationalisation must necessarily take this ‘low-road’ approach to production (see, for example, Ferner and Edwards, 1995), the example does illustrate that Cecchini is misleading when he assumes new managerial techniques inherently follow in the wake of enterprise restructuring.

The European Union response: number 3 Concerns about peripherality did impact on the Commission. While the EU generally does not regard the restructuring of work organisation within enterprises as part of its remit, it has attempted to prevent the growth of lopsided patterns of work organisation throughout Europe by implementing action programmes in the field of education and training such as the Community Programme for Education, Teaching and Training in Technology (COMETT), the Action Programme for the Development of Continuing Vocational Training in the European Community (FORCE), the Action Programme for the Vocational Training of Young People (PETRA), and through the Commission’s social dialogue forum (CEC, 1993a: 39). Specific concern to introduce ‘best practice’ techniques of production in peripheral regions is reflected in special projects which are funded solely by the European Social Fund (ESF). Taking the example of Ireland, 17 million pounds (IRE) from the ESF were provided to implement a human resources initiative funded by the ESF

The Costs of Europe 17

entitled the ADAPT programme which ran 1995–9. ADAPT aims to assist the adaptation of the workforce to industrial change and to promote new forms of employment (Communicating Europe, 1995: 73). Another project entitled NOVA (article 6 of the ESF regulations) supports projects of an innovatory nature which are intended to test new approaches to the content, method and organisation of vocational training and work practices. (Communicating Europe, 1995: 73) It is questionable, however, whether short-term funding from Brussels can guarantee that economically peripheral regions of Europe will introduce efficient and inclusive new forms of work organisation. Devine has highlighted the tensions and inconsistencies inherent in the EU’s industrial policy (Devine, 1996). He points out that the Commission sought a ‘level playing field’ by restricting and harmonising national and local powers’ use of supports and policy instruments. Yet, at the same time, the Commission cooperated with national and local authorities in developing schemes designed to enhance less favoured regions. Devine highlights the irony of these tactics. He stresses that, despite this development effort, the entire project is underpinned by a belief in ‘the market’ as a principle of governance – a belief which ensures that all regions, core or peripheral, are inevitably locked in competitive loggerheads in which social dumping threatens to incrementally erode the entire project (Devine, 1996: 7–11). So far, the chapter has questioned the validity of the claims made by the ‘Costs of a Non-Europe’ documents. Many of the arguments raised against the official EU position came from mainstream economists who all but abandoned traditional approaches to explain the costs and benefits arising from countries’ deepening economic integration. It was shown that the European Commission did alter its non-interventionist approach in light of these studies. The European Social Model which operated from the mid-1970s to the early 1990s had two distinct features. Firstly, it implemented a variety of financial-aid programmes to shield peripheral regions from the competitive environment. Secondly, it entailed implementing concrete policies on industrial development and concrete legislation on employee practices. It is suggested here that these have been largely ineffectual. In all, it has been shown by the critique of ‘The Costs of a Non-Europe’ study that the economic case for peripheral regions joining the European Union is not overwhelming, if at all persuasive.

18 Employee Relations in the Periphery of Europe

Motivations for membership: exercises in risk-taking Given that the major EU institutions recognised that membership of the Community entailed risk-taking for economically peripheral countries, the question arises as to what motivates these countries to apply for membership. A number of explanations for this paradox have been promoted, many of which are unconvincing. The first of these is that peripheral countries are keen to join the EU because it tends to consolidate democracy. This argument was initially made with regard to Spanish and Greek membership (Featherstone, 1988) and it is currently promoted with reference to Eastern European associative member states (Fitzmaurice, 1995: 76). However, the notion that the EU per se can secure democracy in member states is misleading. It may be more correct to note that when fledgling democracies join the Community their economic structures are reshaped by their relations with other member states. Williams writes:

[a]s non-democratic governments could not remain members of the EC, there would be intense economic pressures to prevent any reversion to dictatorial governments. (Williams, 1994: 77. Stress not in original text)

It appears that the economic ties that membership entailed secured democracy, rather than membership itself acting as the cement for democracy. The second reason commonly given to explain industrially ‘underdeveloped’ regions’ interest in EU membership is that it provides these countries with attractive financial packages and grants. In his assessment of how the Structural Funds impacted on cohesion countries, Bradley suggests that it is not so much the amount received that was significant so much as the manner in which the funds were utilised. He shows that Greece received more funding in terms of GDP per head than Ireland. But the policies which Ireland introduced in combination with the funding meant that the Structural Funds bore more fruit there in terms of creating investment and, eventually, employment than has emerged in Greece (Bradley, 2000: 21–2). The third explanation given as to why economically peripheral countries apply for membership is that it provides a definite alliance to a geopolitical bloc for countries which are in militarily unstable regions.

The Costs of Europe 19

Baldwin points out that the desire for military stability in Eastern Europe is felt Europe-wide. He writes: The incumbent EU members that favour an early Eastern enlargement are also motivated chiefly by political and security matters. Germany, for instance, is very concerned about the consequences of serious political and/or economic turmoil on its eastern border. (Baldwin, 1994: 158) Yet, the military concern does not adequately explain why less-developed regions are eager to join the EU. Even taking account of the ‘Rapid Reaction Force’ established under the Treaty of Nice, the Community simply does not yet constitute a consolidated military bloc. Although the 60,000-strong EU force amounts to an unprecedented move by EU member states towards a military policy, as yet its functions and crucially its autonomy, are still unclear (Shrimsley, 2001). To date the EU member states have failed to agree on any joint military action. Some argue that this absence was conspicuous during the Bosnian crisis and the Gulf ‘war’ (Bildt, 1997). Certainly, Andor’s account of Hungary’s decision to join NATO suggests that NATO membership was regarded as a stepping-stone towards acceptance within and membership of the EU, rather than as a strategic end in itself (Andor, 2000: 120–4). The notion that the EU is developing a certain regulatory role which challenges the nation-state as the seat of governance may be correct (Majone, 1994). But this regulatory Community does not possess the wherewithal to guarantee civil society and democracy, to act as a redistributive state, or to finance a continent-wide security system. Mann argues that, in essence, the EU amounts to an economic planning agency, a ‘largely toothless’ regulator of capitalist activity in the region (Mann, 1993).

So why the EU-phoria? The picture depicted so far is a rather curious one. Peripheral economies make EU membership a primary policy, yet as we have seen, up to the 1980s the EU record on social and regional policies is far from impressive. On the contrary, it was suggested that the EU’s rather inadequate regional policies make membership a risky option for less-developed states. The overall dominant thrust of the EU is neo-liberal – it is not concerned with redistribution and its budget is not big enough to fund the democracy and security projects which are pressing in certain peripheral states (Krugman, 1993). Taking this as given, a more

20 Employee Relations in the Periphery of Europe

convincing explanation as to why economically peripheral regions engage in the risk-taking which membership of the EU involves, is the idea that the Community provides peripheral regions with an achievable model of economic and industrial development within an internationally competitive economy – an opportunity for economic stablisation and industrial modernisation. The EU promotes this model of economic and industrial development through what is commonly called the European Social Model. This model is frequently referred to in European Commission publications and rhetoric, but in none of its literature has the Community spelt out exactly what this model entails. The EU Social Model is of relatively recent origin: its conception can be dated back to the 1972 Paris Summit. However, it is possible to locate a distinct shift in the model from this early variant. Throughout the 1970s and 1980s the EU Social Model was premised on two projects: firstly, an effort to develop a convergence towards a high-road model of production through redistribution of very limited funds, and secondly an effort to harmonise national social policy systems by use of binding legislation based on a limited number of principles such as gender, free movement of goods, people and services (Hepple, 1987). As the first half of this chapter has pointed out, the results of this model had dubious implications for peripheral economies. It is possible to locate a definite shift in EU policy objectives. From the early 1990s onwards it is clear that a decision was made to step back from this earlier interventive approach. It is unclear whether this change is a result of an effort on the Community’s part to devise some sort of a ‘third way’ as an alternative to the market, statist or socialist vision of society (Pollack, 1998). Alternatively, it may be a less abstract response to a recognition that a community of 22 or more member states will simply not function under the current rules (Majone, 1998: 31). Either way, the EU now operates a New Social Model. The novel aspect of this model comprises two key components. Firstly, the substance of the social model has changed. The EU has made a strategic decision to strive to obtain competitiveness alongside social cohesion. Secondly, the system of governance in which the model is embedded is new. The EU is experimenting with a ‘problem-solving governance’6.

1.

Juggling competitiveness with social cohesion

It was not until the late 1980s that the EU adopted a coherent approach to social policy. By 1989, the Community had fully digested the policy debate which had been simmering away since the inception of ‘Social

The Costs of Europe 21

Europe’ in 1972. On the one hand there was the neo-liberal, noninterventionist school which argued that the Community’s raison d’être was to strive for economic competitiveness and that this was achievable under the Single Europe project (Baldwin, 1989). As we have seen, this was clearly articulated in the ‘The Costs of a Non-Europe’ literature. It was claimed that a broad plinth of social policies including workingtime arrangements, industrial democracy and welfare provisions would merely act as obstacles in the drive for competitiveness. On the other hand, the alternative argument was that as national economies became liberalised it was necessary to develop Community-level policies to regulate Europe’s labour market (Streeck, 1995) and to prevent a rust-belt from emerging on the continent’s economic periphery. As discussed, a breadth of literature emerged in this vein in response to the establishment of a Single Europe (Krugman, 1993; O’Hearn, 1993). By 1989 a number of Community developments indicated that the EU was boldly rejecting both theses and was opting for a ‘third way’ which aimed to achieve both competitiveness and cohesion simultaneously. The first example of this ‘third way’ strategy was the 1989 Social Charter. Teague claims that this development is a clear indication that Europe rejected both the neo-liberal and the interventionist model and that the Community was attempting to tread ‘a middle course between too few regulations and over-regulation’ (Teague, 1991: 2). The Madrid Summit of that same year reflects this effort to balance both pressures. It was declared: in the course of the construction of the single European market, social aspects should be given the same importance as the economic aspects and should accordingly be developed in a balanced fashioned. (Madrid Summit ‘Conclusions’, 26/27 June 1989, Point 2, cited in Neal, 1995: 4) The interest in mastering this elusive balancing act (Fitoussi, 1997: 155) was reiterated most clearly in the 1994 White Paper on European Social Policy – A Way Forward for the Union (CEC, 1994c). The Paper is underpinned by the idea that economic competitiveness and social law may not only be compatible but the latter might stop developing if no concern is given to social issues (Sciarra, 1995: 73). The Extraordinary European Council Summit in Lisbon, March 2000, was perhaps the most ambitious effort to promote the European ‘third way’ to date. The explicit object of the Summit, spelt out in the Presidency Conclusions (CEC, 2000a), was to address the key issues of economic reform and social cohesion along with employment within the framework of

22 Employee Relations in the Periphery of Europe

a knowledge-based economy. The Summit set out a ten-year plan to achieve ‘a radical transformation of the European economy’ (CEC, 2000a: I.1). The plan presented in the Presidency Conclusions is significant in two respects. Firstly, it set a precedent in that it contained specific target dates for reforming national welfare systems, addressing social exclusion and coordinating training and education systems. The establishment of deadlines indicates that the EU is serious about the need to shake up national regulatory systems. As such, Lisbon constituted a landmark in the Community’s effort to modernise (Barber, 2001). Secondly, the Presidency Conclusions hinged on the notion that European education and training systems need to speedily readjust into the digital age. This idea nicely embraces both competitiveness and social issues. Within this framework the Conclusions underlined the need to strengthen the EU’s research capacity; introduce e-commerce in small and medium-sized enterprises; invest in human resources and education systems, alongside the need to modernise social protection by ensuring that ‘work pays’ (CEC, 2000a: I.31). In short, Lisbon brought competition and social cohesion to the top of Europe’s agenda and it highlighted areas in which the two pressures complement each other. The Summit steered clear of fields in which one compromises the other, such as labour market modernisation and the extension of workers’ rights to information and consultation (Eironline, 2000a). Although the EU is rarely described as an agency of internal EU development, it clearly does fulfil this role. Just as most states have national development agencies, likewise the Community guides development alongside its responsibilities as a political, economic and trading entity. EU development policy stretches from R&D to unemployment policy, from industrial development to environmental policy. The effort to balance competitiveness with social cohesion runs right through these development projects. The Community aims to develop an industrial zone which competes on the basis of quality goods. It aspires to shape competitive industrial sectors while addressing marginalised populations and ensuring development is socially sustainable. While the Lisbon Summit set deadlines for projects and established an annual review of member states’ progress in areas discussed, just as any national development agency would do, it differs from a national agency in one key respect: its system of regulation is very different. Lisbon established a ‘new open method of coordination’ which confirmed and strengthened the Community’s role as a ‘nanny-style’ institution (CEC, 2000a: I. 37). It would benchmark developments, record them and facilitate social learning between states, but it would not be able to place sanctions in

The Costs of Europe 23

the event of deadlines not being met. This leads to the next issue, the nature of the EU governance.

2.

‘Problem-solving governance’

The administrative framework in which the EU coordinates this juggling act has also changed since the late 1980s. The use of governance here refers to the traditions, institutions and processes which determine how power is exercised and how decisions are made on issues of public concern. 7 The notion that the Community’s system of governance is undergoing constant and incremental development is a generally accepted and well-documented one (Mény et al., 1996; Richardson, 1996; Wallace and Wallace, 1996). Indeed, the debate involved in the Community’s current transformation was quite publicly aired during the Intergovernmental Conference and its Nice 2000 Summit (see, for example, Norman and Smith, 2000; Norman, 2000). Despite general consensus that the EU’s system of governance is in a state of flux, there is little agreement as to what direction change is taking. Some commentators hold that the Community is increasing its regulatory capacity. Majone refers to ‘the seemingly unstoppable growth of European regulation’ (Majone, 1998: 27) and he aims to develop a theory to explain this growth. Hix also argues that the Community’s regulatory capacity increases with the years. Indeed, he argues that the EU’s polity is so well developed that it is comparable to a nation-state (Hix, 1998). Likewise, Jeremy Richardson holds that the EU-level has usurped the national-level as the location for policy-making over a host of fields (Richardson, 1996). While he stresses that it is not possible to locate one model of policy-making operating in the EU, he sees the Community as an increasingly important venue for policy development. Others argue that contrary to evolving into a supranational regulator, the EU is producing a deregulatory drive, in particular in the area of employment relations (Streeck, 1995). Streeck argues that the economic openness which the EU has introduced has created enormous competitiveness between member states. He claims that this pressure results inevitably in regime competition as states introduce more flexible employment measures in order to manufacture and provide services more cheaply (Streeck, 1997b). In Streeck’s bleak interpretation, systems of regulation which have been in place throughout the postwar period are eroding at the national-level and they are not being replaced in the supranational arena. Another take on the issue of European governance rejects both these scenarios and argues instead that a wholly novel form of regulation is emerging within the EU (Schmitter, 1996).

24 Employee Relations in the Periphery of Europe

A new interest in governance has tended to produce a very optimistic analysis of the possibilities which being ‘on board’ the EU may present. It is premised on a central idea entitled associative democracy. This perspective assumes that social democracy is in decline. Cohen and Rogers8 (1998) argue that certain key characteristics which underpinned social democracy have eroded. For example, they suggest that the state is no longer capable of controlling the national economic environment. Additionally, they suggest that mass production has given way to small and medium-sized firms, which has ended the blue-collar/white-collar homogeneity of the class structure. As a result, Cohen and Rogers conclude that the mechanisms of governance, involving a large redistributive state administered by a strong government elected on class lines, is no longer suitable. They suggest that certain responsibilities which the state traditionally oversaw should be devolved. In particular, they stress that collective problem-solving responsibilities should be passed down to ‘associative arenas of civil society’ (Cohen and Rogers, 1998: 5). A number of proponents of this idea have pointed to Europe as an example of associative democracy in progress. Gerstenberg and Sabel (2000) claim that the EU is engaging in an exciting and progressive form of administrative experimentalism which enables the Community to overcome the challenges of democratic deficit and administrative overload. They focus on the comitology committee system for decisionmaking and the European employment policy of National Action Plans, and suggest ‘the possibility that there is in [the] core of the “new” Europe a distinctive institutional architecture’ (Gerstenberg and Sabel, 2000: 73). They claim that a key potential weakness of the EU project, namely the wholly diverse nature of its membership, has become its forte. Gerstenberg and Sabel argue that the bricks-and-mortar of this new architecture comprises the diversity of interest groups, experts and national politicians which make up the personnel involved in EU decision-making. Crucial, they say, is the fact that EU decision-making mechanisms encourages these technocrats to bring their bias to the table, engage in mutual learning and eventually devise a shared interpretation (Gerstenberg and Sabel, 2000: 53). Some EU commentators have reached a similar conclusion. Laffan, O’Donnell and Smith’s analysis of the EU depicts an innovative, policymaking institution, responsive to changing geopolitics (Laffan et al., 2000: 201). In short, they depict a haven for weary administrators on Europe’s periphery. They describe the characteristics of the EU’s emerging governance in effusive terms, hinting that the search for ‘collective

The Costs of Europe 25

solution’ is the crux to all the EU’s – as they see it – many achievements (Laffan et al., 2000: 199–200). Paul Teague’s analysis is more sombre than that of Laffan et al., as he maps out a European economic and social model in which problematic ‘fault lines’ are emerging. Teague’s thesis resembles that of Gerstenberg and Sabel in that he underlines the tensions that national labour markets face as the big socio-economic institutions erode with the fading of ‘golden Fordism’. While Teague is more cautious regarding the EU’s ability to step in and patch up these problems, he does argue that certain action on the Community’s behalf could go some way to alleviate the difficulties (Teague, 2000: 198). He argues that the proposal of a strong supra state at either the EU level or the national level is both unlikely and unhelpful in the search for a new model of economic governance. Rather, he foresees that the EU will be limited to a more subtle system of governance which confines itself to adopting a facilitatory role by monitoring social policies and promoting their outcomes Europe-wide, setting budgetary targets which countries feel a moral pressure to adhere to, and facilitating forums for developing shared solutions to labour market problems (Teague, 2000: 190–210).

Europe reinvented9 Empirical evidence can certainly be found to substantiate the first two theses, and both Majone and Streeck do provide data to verify their respective arguments. However, on the whole, both scholars focus on different policy areas. While Streeck concentrates on employee relations, Majone tends to write about environmental and health policies. It appears, as Scharpf argues, that European regulation varies in intensity according to the policy field (Scharpf, 1997a). Scharpf explains that one can expect a stronger regulatory Europe governing issues such as product standards, where stringent standards may present a sale point and where there is a commitment to a harmonisation of national production regulations as this results in a larger market for the goods (Scharpf, 1997a: 527–8). However, such pressures for harmonisation are unlikely in the area of industrial relations where institutional differences ensure that harmonisation would result in a major administrative upheaval (Scharpf, 1997a: 530–1). The third thesis is interesting because there is evidence that European governance is unfolding in the manner described by Gerstenberg and Sabel, and crucially, this appears to be a universal trend, regardless of the policy area. The notion of a novel problem-solving approach to governance is not without substance. The OECD’s Public Management Service Newsletter,

26 Employee Relations in the Periphery of Europe

Focus, 10 gives accounts of how national administrations are re-evaluating and restructuring their roles in industrialised societies. The OECD reports on member countries suggest that a sea-change is under way within national administrations. The argument is that countries are developing information and consultation mechanisms which encourage the active participation of citizens in setting public policies.11 The overall message is that these reforms enable states to greatly increase their problem-solving capacity in the face of an increasingly complex society. At the EU-level, changes certainly are afoot which in many respects reflect developments which the OECD describes at the national-level. These modifications include three areas: a shrinking budget, reluctance to introduce expansive social policy and the decentralisation of administration. In terms of these key areas, it does appear that the EU resembles national administrations in its effort to shift from a Keynesian-style, centralised bureaucracy to a decentralised regulator.

Shrinking budget The EU’s budget is not large by any standards; it amounts to less than 4 per cent of all the central government spending of the member states (Majone, 1998: 19). But over one-third of the coffers were committed to social funds with the aim of achieving social cohesion (CEC, 2001a: 121). As we have seen, these funds were of certain significance for Objective 1 regions.12 It is natural that these states, in particular, were deeply concerned by the implications that expansion eastwards would hold for the budgetary arrangements. After much haggling and negotiation, the Community has come up with a financial budget bringing it up to 2006. The Berlin Council took some decisive steps, in light of enlargement, to decrease overall funding to current Objective 1 regions but to concentrate support in outstandingly needy areas within those regions. Subsequently, the amount allocated to cohesion policy in the present member states will be reduced by 2006 back to the level of 1992. This entails a drop from 0.46 per cent of the EU GDP to 0.31 per cent (CEC, 2001b: Part III). Simultaneously, funding to accession states will increase. The overall amount of pre-accession aid will total some ECU 3,000 million a year for the period 2000–6. This is more than double the amount available in 1999 (CEC, 1998b). In so far as the EU has an incredibly tight budget, and has had to axe key public spending in the face of accession plans, it closely resembles its own member states which have been under pressure to cut public expenditure and decrease national debt.

The Costs of Europe 27

Reluctance to introduce expansive social policy We have seen that Majone underscores regulatory growth within the Community. He points out that in 1970 the EU produced 25 Directives and 600 Regulations, and by 1985 it produced annually, on average, 80 Directives and 1,500 Regulations (Majone, 1998: 16). It is unfortunate that Majone fails to categorise this regulatory growth. Instead he lumps policies on the environment, education and research, tourism, telecommunications, civil protection and health-and-safety at work under the same title: social policies (Majone, 1998: 16–17, 30). If one unpacks this regulatory growth a little, it is clear that the stream of policies covering labour law, or social and employment protection, which is of interest to this book, have begun to dry up. It is generally recognised now that the host of social policies which were introduced in the 1970s and 1980s were to become the exception, rather than the norm (Hepple, 1987; Teague, 1989). Neal describes this shift in policy-making: While the current policy objectives are now expressed in terms of ‘job creation’, rather than ‘employment protection’, this does not, of itself, herald an abrupt halt to legislative activity or an obstacle to the further introduction of initiatives designed to improve the working environment and conditions of work within the Community. What, instead, may be emerging in the more recent policy documents issued by the Commission is a recognition that one can no longer take for granted the political will of the Member States to act in the social field, any more than one can assume that sharply-spiralling public expenditure is an acceptable means for addressing poverty, unemployment, or poor standards of public health. (Neal, 1995: 10) Blanpain believes that any opportunity to develop a European system of labour law, social security or industrial relations has been thwarted by a lack of consensus among the member states (Blanpain, 1995: 15). He points to a number of developments which, he says, illustrate this absence of consensus regarding social Europe. These include the UK ‘opt out’ from the ‘Social Chapter’, the divergence of views between the social partners at European level, the White Paper of June 1994 in which the Social Affairs Commissioner effectively announced the end of the European social legislative agenda and the Lisbon Summit of 1994 where the EU set objects on employment, which were left for the national governments to implement (Blanpain, 1995: 16). While these

28 Employee Relations in the Periphery of Europe

events do indicate a lack of consensus among member states in EU social policy, equally they illustrate that the EU Commission has adopted a new policy strategy which abandons the effort to develop an homogeneous European social policy bloc. The Community has established a pattern for overseeing social innovations, and facilitating information exchanges, rather than pushing through binding regulations (Teague, 2001). The National Action Plans (NAPs) reflect this development whereby the Commission examines members states’ NAPs, drawn up in response to Employment Guidelines adopted in 1997 as part of the ‘Luxembourg’ European employment strategy (Eironline, 1998, for comparison of NAPs). A more recent confirmation that the EU has opted for less interventionist mechanisms of governance can be read in the Lisbon European Council Presidency Conclusions which refer to the Community’s ‘new open method of coordination’. It is explained that this involves fixing guidelines, establishing quantitative and qualitative indicators and benchmarks against the best in the world, and periodic monitoring (CEC, 2000a: para 37). Overall, the social policy field is witnessing a shift from the use of ‘hard law’ (or legally binding mechanisms of regulation such as Directives) to the use of ‘soft law’ by which the EU regulates by non-binding instruments such as recommendations, opinions and publications.

Decentralisation of administration Industrialised nation-states appear to be searching for a new method of administration to replace the centralised, parliamentary-based system which complemented Keynesian macroeconomic policies. Some commentators suggest that a centralised ‘big state’ is no longer tenable in a period when manufacturing has shrunk, public ownership is in decline and society is multicultural and pluralised (Piore and Sabel, 1984; Hirst, 1994; Boyer, 1995a). There is some evidence that the EU is also searching for a new mechanism of regulation. This may be a response to the common critique of the EU’s ‘democratic deficit’ as much as a response to the pressures which are effecting the national-level trends; either way, one can locate clear patterns of decentralisation within the Community. Examples here include the principle of subsidiarity which was officially endorsed by the EU in the Single European Act and was clarified in the Treaty on the European Union. The Maastricht Treaty introduced a new role for EU-level social partners, Article 4 enables employers and unions to conclude agreements through ‘social dialogue’ (Gold, 1998: 107–8). In July 1987 the EU Council adopted the ‘Comitology

The Costs of Europe 29

decision’ which lay down procedures for extending the use of Comitology Committees (CEC, 1997f). Additionally, EU structural funding procedures reflect an effort to adopt a bottom-up approach (CEC, 2001a: 143). The EU recommends that the Structural Funds should be processed according to a partnership ethos. As such, the implementation of programmes often involves local and regional participants, social partners and cross-border actors (CEC, 2001a: 146).

Effective governance? The key question in a nutshell The argument presented so far is that the EU has reinvented itself since 1989. The New European Social Model endeavours to achieve both competitiveness and social cohesion and the Community has devised a blueprint for member states to this end. In addition, the New European Social Model embodies a novel, potentially progressive, problem-solving system of governance. Overall, the Community’s administrative institutions are financially leaner. They have a propensity to introduce nonbinding proposals or ‘soft law’ rather than extensive binding legislation. And it has a flatter hierarchy than that operating in the mid-1980s. All in all, the message is that the EU is a progressive institution which is experimenting and growing and provides countries, at all levels of development, with a window of opportunity. These developments may go some way to explaining why EU membership is held as a vital interest by European peripheral economies, against all the odds that membership entails, as discussed in the first half of this chapter. The question is, can this lean model of governance carry through such an ambitious industrial policy? While, as we saw, some hold that associative democracy provides an opportunity to re-evaluate policy-making within the globalising context, others argue that the associative democracy project holds ominous implications for society. The flip side of this new mean, lean Europe may be an ungoverned bloc. In his critique of the notion, Ash Amin claims that ‘there is no intrinsic merit in the argument that the state detracts from economic efficiency’ (Amin, 1996: 309). Rather than dumping the state as an economic actor, he urges that its role be ‘reimagined’ (Amin, 1996: 313). He highlights the tension which exists in the associative democracy literature. On the one hand there are those who call for a reflexive state. Amin argues that an ‘over-pluralised’ state may become embroiled in policy-groups conflict and subsequently lose its strategic direction (Amin, 1996: 320–1). On the other hand there are those who conceive of the state within a ‘dialogic’ framework. In this scenario the state is essentially an apolitical entity which facilitates networks of governance between interest groups

30 Employee Relations in the Periphery of Europe

(Amin, 1996: 321–2). Amin points out that while the former compromises organisational capacity, the latter challenges democracy. On a less abstract note, Trevor Colling has analysed the implications that a lean state holds for the state’s infrastructure (Colling, 1995). In a recent study with Linda Dickens, Colling examined British Gas to assess the implications that privatisation has had on gender equality within the enterprise (Colling and Dickens, 1998). They found that as the state has withdrawn from this utility the gender issue has become privatised. They argue that equality has become a managerial prerogative within British Gas rather than a statutory right within the UK. Paul Teague (2001) also urges those who pin high hopes on the associative democracy-type model to be cautious. Teague does hold that the EU systems of governance and policy-making are undergoing incremental changes which have resulted in progressive, unintended outcomes such as problem-solving policy-making, social learning and benchmarking. He suggests that these are ‘pragmatic’ responses to the adverse political climate which exists for European policy-makers. Examples here include diverse and stubborn national socio-economic systems which are unwilling to converge to a Euro-standard and a reluctance among member states to introduce further EU social policy initiatives. However, while Teague holds that this incremental policy process may have far-reaching potential in Europe he cautions that it will always be hampered by a legitimacy crisis. He points out that European policies are the result of ‘administrative agencies which are more or less independent of representative political structures’ (Teague, 2001: 24), while European citizens still operate the ‘majoritarian’ system traditional in parliamentary democracies. He concludes that the EU’s incremental, new policy-style will not be able to replace eroding, national-level, economic citizenship. All these concerns are perhaps amplified in a peripheral economic environment for two reasons. Firstly, in this scenario, member and associative member states are likely to be keen to employ the EU’s ambitious blueprint to modernise their economies (Kosztolányi, 2000). However, less-developed economies may not have the institutions, traditions and wherewithal to implement the EU’s industrial model. For example, the Lisbon Conclusions encourages social partners to negotiate agreements on innovation and lifelong learning, yet industrial interest groups are not fully developed in many European states. This is particularly the case in Central and East European states where trade unions are still addressing the legacy of state socialism in which trade unions were merely an arm of the state until 1989 (MacShane, 1994). Secondly,

The Costs of Europe 31

administrations in peripheral economies may certainly strive for a competitive, modern industrial complex, such as that promoted by Europe. However, administrators in these less-favoured regions may hold that the straightest road which they could take to industrial modernity may be via the ‘low-road’ route. Alain Lipietz claims that we are entering into the ‘third international division of labour’. In this environment, peripheral economies hold ‘adjusted Ricardian advantages’ such as a low-skilled, low-paid labour force which is willing to work in flexible conditions (Lipietz, 1997). Lipietz holds that peripheral states will use these advantages to compete. This prognosis is certainly credible in a Europe in which a flat, lean, under-financed Community tends to use non-binding recommendations rather than supporting well-funded obligations. The concern which underpins this book is that in the absence of a stable, strong system of governance, the EU’s showpiece blueprint will fail to be coherently implemented at the national-level. It argues that well-conceived EU industrial projects may degenerate into dysfunctional policy-making within member and associative member states. The book sets out to examine whether the New European Social Model can deliver on its promises to peripheral economies. It focuses on that window of opportunity which membership of the EU appears to offer less-developed regions. It attempts to concretely analyse how models of development in economically peripheral countries are influenced by membership and pending membership of the Community. The study enquires as to whether the EU provides a feasible model of development for enabling its industrially underdeveloped members to ‘catch up’ with its economic core. The work focuses on systems of industrial relations and asks whether (associative) membership of the EU provides states with the capacity to modernise their industrial relations systems, subsequently increasing their industrial competitiveness. In short, the book examines whether a European social model of industrial relations is being nurtured throughout the member states and associative member states.

Why industrial relations in the EU? A focus on industrial relations (IR) and employee practices provides an insight into models of industrial development which national administrations undertake, and changes therein. Industrial relations systems provide us with a handle of analysis on two counts. Firstly, industrial relations and systems of employee practices have acquired an unprecedented importance in the current environment

32 Employee Relations in the Periphery of Europe

where capital is mobile (Lecher and Platzer, 1998: 2). Employee practices have become a key variable in the competition between regions to attract economic activity. Scharpf discusses the enormous pressures which states are under to compete on the basis of their industrial relations, in particular in those states with industrial sectors involving a high labour input where competitiveness is based on labour costs. He explains: the pressure to reduce existing levels of protection will be strongest in internationally exposed industries and in areas where regulation adds significantly to the total costs of production. In other industries, these pressures may be much lower. (Scharpf, 1997b: 524) Aside from the significance that IR systems have been given by strategically minded mobile investment, research suggests that employee practices have gained an enormous significance in management’s eyes universally. Scholars in the field widely agree that global competitiveness has forced management to re-evaluate industrial relations systems. The manner in which employee practices are organised is now regarded as providing the potential ingredient for competitiveness through the ‘flexibilisation’ of the shop floor. Streeck describes IR systems as having become ‘a crucial parameter of economic adaptation’ (Streeck, 1987). It is clear that industrial relations are a key feature in any effort of industrial modernisation. Therefore IR practices provide an illuminating nexus of analysis for this study. The second reason for confining analysis to industrial relations is that IR systems is one of the few domains of macroeconomic governance which EU member states still have the opportunity to influence. Harrop indicates the limitations which membership of the EU involves when he writes: Member states are increasingly interdependent and therefore completely independent national economic policies are being surrendered within the EU. (Harrop, 1998: 25) National administrations within the EU have lost governance over key mechanisms of macroeconomic control which were frequently utilised in the past to address national economic difficulties. For example, the removal of internal trade barriers, the establishment of a common

The Costs of Europe 33

external trade policy and the endorsement of EU competition policy leaves few means by which the state can address ailing indigenous industries and sectors (Menon and Hayward, 1996: 269). Member states’ fiscal policies have also been limited by legislation on indirect taxation which was introduced in the Single European Act. Subsequently there are limitations in the variation of value added tax (VAT) which a state can impose on goods (Harrop, 1998: 26). Finally, those countries which have joined the EMU will no longer be capable of adjusting their exchange rates to changes in the global economy. Therefore a focus on IR systems provides the student with an excellent mirror reflecting any efforts which the national administration may be making to modernise their industrial model – virtually all other mechanisms besides employee practices being out of bounds.

Conclusion The main idea presented in this introductory chapter is that the European Union Social Model has undergone a fundamental makeover since about 1989. The chapter showed that from the outset the Community was driven by a belief in mainstream economics which held that the dynamics of European integration would benefit all member states. It was shown that this neo-liberal credo was challenged by the growth of uneven development within the Community’s economic periphery and the EU responded by devising a social model in an ad hoc manner. The model had two objectives: to develop a convergence towards a high-road model of production through redistribution of very limited funds, and to harmonise national social policy systems by use of binding legislation based on a limited number of principles. It was shown in this chapter that this response was largely ineffectual and the EU was forced to re-evaluate its approach to less-developed regions within the Community. It is argued that the establishment of a ‘New Social Model’ marks a clear break from the earlier Community development strategy. This model has been evolving since 1989 and it entails two key features: firstly, an industrial policy which aims to keep on board both competitiveness and social cohesion and, secondly, a new problem-solving system of governance. It is argued that this combination provides peripheral states with a very attractive blueprint for modernisation. However, this dual combination raises the question as to whether the new, experimental system of governance will be robust enough to carry through the competitiveness/cohesion goals established.

2 Theories on European Integration: Integrating Theories

Understanding the EU will not be improved by sub-disciplinary squabbles. (Hurrell and Menon, 1996: 386)

Introduction The primary interest in industrial relations as a vehicle for modernisation within the EU member states dictates the nature of the present study to a very significant degree. It necessitates that the book takes account of the EU as a region of extreme uneven development. It is crucial for a study of this nature to conceptualise European integration in terms of the relations between its economic cores and less-developed member states. These concerns involving the relationship between cores and peripheries within the EU have produced a fruitful theoretical synthesis which provides the theoretical backdrop for this book, involving a merger between ideas from classical dependency theory and new governance studies in industrial relations (IR). This confluence of ideas is introduced in this chapter. The synthesis is then adopted in the remaining chapters. The chapter is organised around three main sections. The first part of the discussion illustrates how central the notion of cores and peripheries is to any understanding of the manner in which social and employment policy is developing in Europe. Here, the tensions between those countries which have adopted a flexible strategy to obtain competitiveness and those which have adopted a high-cost, high-quality approach are introduced. The second part of the chapter establishes that three potential scenarios may emerge for IR practices within the EU. The purpose of this study is to assess which scenario is unfolding. Section three of the 34

Theories on European Integration: Integrating Theories 35

discussion introduces the theoretical framework which underpins this research. It is shown that the theory grew out of a synthesis from the new governance tradition in the EU literature and the dependencyoriented thesis.

Industrial relations in cores and peripheries: notions dependent on dependency? It is commonplace to claim that industrial relations systems are currently undergoing an enormous sea-change (Piore and Sabel, 1984; Atkinson and Meager, 1986; Windolf, 1994). To understand the nature of these changes within Europe and how IR changes materialise in the various EU member states, it is crucial to spend time looking at the relationship between economic cores and peripheries in the region.

Industrial relations: relations to ‘social dumping’ The EU has traditionally declined from governing issues directly relating to industrial relations.1 While the Community made some effort to ensure that multinational companies should restructure and, if necessary, withdraw, in a manner which takes social cohesion into account (Teague, 1989: 314), overall the EU is reluctant to engage in issues of industrial relations. 2 Two pointers reflect this demarcation of responsibilities most clearly. Firstly, those areas which were covered by qualified majority voting under the Single European Act, and, more significantly, the areas which were left to unanimous voting, indicate that the EU believed that governance of industrial relations should be left to the national level. Article 100A, introduced by the Single European Act, enables qualified majority voting by the Council of Ministers in respect of measures ‘which have as their object the establishment and functioning of the internal market’. It specifically excludes provisions ‘relating to the rights and interests of employed persons’ (Hall, 1994: 289). Another new Article introduced by the Single European Act, Article 118A, brought a hint of ambiguity to the situation. This Article enabled qualified majority voting for Directives related to ‘encouraging improvements, especially in the working environment, as regards the health and safety of workers’ (Hall, 1994: 290–1). Interestingly, this Article provided the legal basis for a number of declarations included in the Social Charter Action Programme, which later materialised as Directives on maternity rights and working-time arrangements. The range of issues which the Council could adopt by qualified majority voting was extended by the Maastricht Treaty to include health and safety, working conditions,

36 Employee Relations in the Periphery of Europe

information and consultation and equal opportunities. However, unanimity is still required for matters which lie at the heart of any system of industrial relations – namely, issues relating to the termination of employment, and the collective representation of workers and employers, including co-determination and social security. Other matters which are central to how IR systems operate are entirely excluded from the EU’s legislative scope – namely, the question of wages; the right to association, to strike and to impose lock-outs (Hall, 1994: 303) – and this non-interventionist stance has been confirmed by the Amsterdam Treaty (Teague, 2001: 10). Secondly, some insight is provided by those aspects of the ‘Action Programme’ mentioned above which were left as mere declaratory aspirations without any legal binding. Of the forty-seven initiatives included in the Action Programme only 6 clauses were developed into major social policy Directives (Nielsen and Szyszczak, 1997: 37). Once again, it is those issues which are the substance of industrial relations that remain merely principled aspirations, as Mark Hall’s comment indicates: No legislative commitments were made in respect of some of the central principles of the charter. This was the case, for example, in respect of the right to fair remuneration and the right to freedom of association – aspects of the charter which the action programme specifically stated were the responsibility of member states. (Hall, 1994: 297) But the EU could no longer avoid engaging with this issue having implemented the Single European Act. The importance of IR systems was reflected in the Belgium presidency’s response to the previous British presidency’s Action Programme for Employment and Growth (Teague, 1989: 320–6). Britain had used the opportunity of its EU presidency to stall the harmonisation of labour law. The UK Conservative government’s ideology held that extensive Community social policy would damage that country’s competitiveness (see Hindley and Howe, 1996). The Action Programme reflected the UK’s particular domestic labour market agenda whereby competitiveness in manufacturing and services is obtained by a highly flexible, deregulated labour force. The main thrust of the programme aimed to remove labour market rigidities and to promote flexible employment patterns (Nielsen and Szyszczak, 1997: 30). However, the Belgians succeeded to the presidency in 1987 and their response to the UK’s Action Programme

Theories on European Integration: Integrating Theories 37

illustrates the tension which had developed within the Community regarding social policy law. The Belgium presidency, along with other EU ‘coordinated’ economies (Soskice, 1990), were concerned that if the Community should fail to oversee a minimum floor of employment rights and should actively endorse a flexible labour market, then peripheral member states may gain competitive advantage. Teague explains that this scenario was believed to threaten not only the social fabric of Europe’s core economies, but also the EU’s competitive position globally. He writes: In particular, [EU peripheral economies] may attempt artificially to restrain the future growth of wages and other social benefits, either to increase exports or to reduce import penetration of their home market . . . . . . [T]hen the rational response of the richer countries would be to try and reduce their labour and social costs . . . and the much needed drive to upgrade the quality of existing products, develop new products and master new production processes might be hindered as managers and governments became more concerned with obtaining competitiveness through cost reductions. (Teague, 1989: 322) This issue is known as ‘social dumping’, or regulatory competition, and it was this threat which forced the Belgian presidency to bring employee relations to the centre stage of the EU. During its presidency the Belgians introduced a plinth of social rights entitled ‘The Adaptability of the European Economy’ (Teague, 1989: 321). This document contained the embryo for what was later known as the 1989 Charter of Fundamental Social Rights of Workers. This snapshot of developments in EU diplomacy illustrates that two polar opposite strategies to obtain competitiveness in Europe are being played out on the Community stage. It is clear that the UK aims to be competitive through cost effectiveness, while countries like Belgium strive to achieve competitiveness through high-quality production. 3 Scharpf takes up this issue. He suggests that the choice between corelike or peripheral-like IR regimes is decided by very concrete factors. He maintains that industrially under-developed states sustain sub-standard IR regimes for two reasons: one is the weakness of important IR institutions found in peripheral economies; the second is the tendency for peripheral regions to depend on foreign direct investment (FDI). Scharpf argues that economically peripheral states are less likely to institutionalise

38 Employee Relations in the Periphery of Europe

sophisticated mechanisms of industrial relations because of the time and money this type of system requires in terms of redundancy pay, maternity pay, training leave, holiday pay, etc. Scharpf looks at the implications which economies’ well-being have on national welfare systems, environmental policies and industrial relations systems (Scharpf, 1997b: 526, 530). In an earlier study he explains: in order to compete in the European internal market, Portuguese firms must be able to pay not only much lower wages than are paid in Denmark, but non-wage labour costs, taxes and the costs of environmental and other regulations must be much lower as well . . . In short, the economically less developed member states simply could not afford to burden their firms, their workers or their consumers with the same level of welfare costs or, for that matter, environmental costs that citizens in the highly developed member states have come to demand and to accept. (Scharpf, 1997a: 24) The second major source of peripheral-style IR regimes is that of dependency on foreign direct investment. Scharpf argues that those economies which are most dependent on foreign direct investment are the regimes which are the most likely to jettison whatever systems of employee protection they may have, or aspire to have, in order to secure inward investment (Scharpf, 1997b: 524). The impact which mobile investment has on national economies is by no means a new issue but the Single European Act and the drive to produce European economies of scale, has rejuvenated this question (Ramsay, 1990).

European cores and peripheries: options for industrial regimes Scharpf stresses that the EU has ushered in the internationalisation of the European economy and industry. He asks whether European integration is likely to cause strong industrial regimes to compete with weaker regimes found largely in the periphery. Crucially, he asks whether competition between the two ‘blocks’ is likely to result in the erosion of employee practices which are traditional to Europe, such as high skills, innovation and productivity and a relatively generous system of social security (Vobruba, 1998: 132). In Scharpf’s terminology, the outstanding question is, will the regulatory competition which a Single Europe created result in the ‘Delaware effect’ and its inevitable ‘race to the bottom’ or, alternatively, will it produce the more prosperous ‘California effect’ – the ‘race to the top’ of

Theories on European Integration: Integrating Theories 39

the regulatory hierarchy?4 (Scharpf, 1997b: 521). As we saw in Chapter 1, Scharpf stresses that neither the erosion of national regulations nor their upgrading is inevitable. Instead, he suggests that international regulatory competition is likely to lead to separate policy areas being treated differently. He draws up a typology indicating which policy areas are likely to remain under national capacity and which regulations are likely to shift up to the European capacity of decision-making and, finally, which may slip through both levels and face an unregulated future. For example, Scharpf looks at environmental and health-andsafety policies which are regulated by national capacities and also, increasingly, European capacities. He states that these areas are regulated because their standards are not subject to enormous conflicts of interest. Conversely, he points out, policy areas covering industrial relations are not universally regulated by national or European capacities. He explains that is so because industrial relations is a policy area where national capacities are economically constrained by the severe downward pressures of regulatory competition while European action remains blocked by severe conflicts of interest among national governments. (Scharpf, 1997b: 533) From Scharpf’s analysis, then, it is not possible to categorise EU member states according to core- and peripheral-style social welfare regimes, as only certain policy areas will come under immense pressures to ‘race to the bottom’ Europe-wide. Scharpf’s approach is useful but it fails to recognise the interconnectedness of policy areas. For example, wages, a key IR question, arranged according to national IR policies (or lack of them) are directly effected by the national taxation system. Similarly, the amount of hours employees work, once again a sub-section of the state’s IR regime, is organised according to regulations on industrial health and safety. But Scharpf does pose the right questions and he is justifiably perplexed by the variety of contradictory responses he finds. This question has been far from satisfactorily answered to date. There are three main responses to it. A synopsis of the three diverse prognoses follows.

Scenario 1: On the fast lane – to the bottom? Streeck takes a decisive stance on this subject. He appears to argue that the starting-shot has already been fired in the ‘race to the bottom’. In a recent work Streeck focuses on the European Works Council Directive

40 Employee Relations in the Periphery of Europe

to illustrate that when an economy is no longer coordinated at the national-level, sophisticated national versions of industrial citizenship become redundant (Streeck, 1997b). The study analyses the Directive from the perspective of Germany’s IR system and concludes that ‘strong’ industrial relations regimes will become a liability in the drive to achieve competitiveness and attract inward investment (Streeck, 1997b: 658). He explains this could occur on three counts. First, for those countries which have a tradition of institutionalised employee representation, the Directive produces an alternative system. Streeck argues that this may have dangerous implications for the traditional national system whereby firms could divide into transnational ‘holdings’ and national businesses. He fears that this strategic move could ensure that the majority of the companies’ operations were conducted within a slacker information and participation system (1997b: 656). Secondly, it is stressed that the Directive is nationally implemented and that, consequently, national participation systems tend to heavily influence the shape of the transposition. Streeck claims that this ensures that regulatory competition still persists Europe-wide. Finally, it is explained that the Directive may be seen as an opportunity for management to practice Europe-wide human resource management (HRM) or ‘efficiencyenhancing’ (Streeck, 1997b: 655).5 Streeck seems to conclude that countries with a tradition of heavily institutionalised IR systems such as Germany and Holland will be forced to slip down towards ‘Delaware’ standards (Streeck, 1997b: 658).

Scenario 2: Core economies – abreast in the race? However, there is still a lot to play for in Europe and, not surprisingly, there are a host of responses to the ‘Delaware’ versus ‘California’ question. Soskice presents the polar opposite conclusion to that provided by Streeck. While he recognises that the drive for a free-market approach threatens what he calls ‘coordinated economies’, such as Germany, he believes that those institutions will be maintained because of the wealth of assets which they provide for quality production (Soskice, 1990). He claims that the evidence shows that coordinated economies, which have institutional structures and understandings governing wage restraint and vocational training systems, have fared better in terms of low unemployment rates during slowdowns in the economy than uncoordinated countries (Soskice, 1990: 172). He dwells on a number of areas in an attempt to explain this phenomenon. This section looks at his ideas on training systems only. Soskice asserts that the level of skill

Theories on European Integration: Integrating Theories 41

formation in uncoordinated economies, or competitive market economies, is low because either the employees are expected to finance their own training individually, or the firm provides firm-specific skills. The difficulty here is that banks are reluctant to supply employees with loans for training. Additionally, along with problems arising from an isolated firm attempting to coordinate a comprehensive training scheme, the problem of poaching between firms arises (Soskice, 1990: 182–3). Soskice recognises that all industrial regimes are under immense pressure to produce quality at a low cost (Soskice, 1990: 195). He stresses that the centripetal forces which operate to reproduce the system are stronger. He believes that ‘strong’ regulatory regimes such as those of Germany, Sweden and Austria will not degenerate into ‘disorganised capitalisms’ (1990: 195–6). This is described as a virtuous circle of innovation, retraining and employment; whereby co-ordinated training systems and permanent employees foster an innovative environment. Subsequently, an innovative company can guarantee secure jobs and employees willing to take part in teamwork. (Soskice, 1990: 196) He stresses that not all environments can superimpose the characteristics which underpin a coordinated economy, and countries such as Germany are not likely to let this environment disintegrate under regulatory competition.

Scenario 3: The EU – the main vehicle on the road to modernisation? However, it is by no means inevitable that the EU will either usher in the ‘Delaware effect’, or facilitate coordinated economies in its core. Grahl and Teague argue that alternative trajectories do exist. Their study is very critical of the European Union’s recent integration which, they argue, is a wholly neo-liberal project, but they emphasise that the Community has the potential to act beneficially within the global economy which member states would have faced individually were the EU not established (Grahl and Teague, 1990: 324). The authors are hopeful that embryonic institutions such as monetary union, subsidiarity, the European Social Charter and, above all, the public awareness of transnational issues, will nurture a European-level civil society which may insist that the EU develops functions which temper the drive for competitiveness (Grahl and Teague, 1990: 324–7). In a later work the two authors caution against the black-and-white analysis presented by

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Streeck and Soskice. Teague and Grahl assert that the internationalisation of the competitive economy need not result in either polaropposite scenario: the erosion of the ‘European Social Model’ or the retention of ‘strong social regimes’. It is argued that a much more complex and messy social model may emerge which attempts to combine competitiveness with the European tradition of securing social cohesion. What Teague and Grahl label ‘organised decentralisation’ would involve the shift of decision-making downwards to the local and enterprise level. This would include decisions over productivity strategies as well as social integration (Grahl and Teague, 1997: 137).

Theorising and ‘empiricising’ industrial relations within the EU Each postulate holds implications which are of interest to this study; namely, whether membership and associative membership of the EU provides economically peripheral states in Europe with an opportunity to modernise their economies through innovations in their systems of industrial relations. Streeck’s thesis suggests that the Community will only enable less-developed economies to compete in terms of their lowcost strategies, hardly the road to a ‘modern’ industrial relations system. Soskice’s argument implies that Europe will facilitate a duality of industrial relations systems; whereby both ‘Delaware’ and ‘California’ may co-exist. The final perspective presented by Teague and Grahl proposes that membership of the EU may present industrially under-developed member states with an opportunity to compete globally on the basis of quality production rather than costs alone. Each of the three scenarios is convincing; however, they are mutually exclusive and only one is likely to unfold in Europe. While it is useful to locate these three end-points as three different roads which IR systems may go down in Europe, this triplex typology only provides us with a starting point for analysis. The three theses entail two problems. Firstly, all three are discussions based on institutional detail, and none of the three attempts to provide any theoretical content or a universal hypothesis which may be used to further our understanding of industrial relations within Europe overall. Secondly, none focuses on the implications that developments in the core have for the economic periphery. No attempt is made to explicitly examine the relations that exist between the core and peripheral regions of Europe and the wholly interconnected nature of these ‘blocks’. The remainder of the chapter attempts to show how both issues may be addressed.

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Traditional EU theories Traditional literature on the European integration is wholly unsatisfactory for industrial relations students. The two dominant theories provide little insight into IR developments. Neofunctionalism and its counter-argument intergovernmentalism, were, until recently, the two primary theories which had been developed to understand the manner in which the EU was integrating. In a nutshell, neofunctionalism, the older thesis which fuelled the European project at the outset, holds that member states will be prepared to relinquish their sovereign power to a supranational powerhouse in Brussels (Haas, 1958; Tranholm-Mikkelsen, 1991). Intergovernmentalsim argues that member states may be willing to enter into a community pact on the condition that it reflects the nation’s interest, but they will leave as soon as the EU’s actions jeopardise states’ individual interests. In short, intergovernmentalism differs from neofunctionalism by claiming that member states hold jealously to power and consistently utilise it in the national interest, regardless of European interests (Hoffman, 1966). Remarkably, scholars from all disciplines have leaned on this dichotomy and have affiliated themselves exclusively to one school or the other, at pains to point out that one thesis is superior while the counter-theory is fundamentally flawed (Hix, 1999a: 71). Critiques of these two dominant literatures tend to emphasise the key differences which, it is argued, pertain between these two interpretations of European integration, but in an effort to highlight their limitations it may be more useful to underscore three key weaknesses which both approaches share. Firstly, both theories emerged from an international relational tradition which has left them ill-equipped to analyse internal state relations (Hix, 1994: 11). The dichotomy is simply unsuitable for the breadth of disciplines to which it has been applied over the years, including public policy (Sbragia, 1996), legal studies (Garrett, 1995), human resource management (Brewster and Hegewisch, 1994) and economics (Rosamond, 1997: 476).6 Secondly, both neofunctionalism and intergovernmentalism are dogged by a limited definition of power. It is clear that both schools interpret the seat of power differently, but their conception of power is identical in the sense that both assume that member states hold power in the first place (Lodge, 1993: xix–xxiii). To assume that states make decisions with the notion of a ‘greater European good’ in mind, as neofunctionalists argue, or that states make decisions with solely the state’s

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interest in mind, as intergovernmentalists do, reflects modernisation theorists’ belief that states are airtight compartments without significant interrelations between them, with complete power over decisionmaking in the jurisdiction (Roxborough, 1979: 17). This assumption, which both schools share, has become increasingly unsatisfactory as societies internationalise, if not globalise. Finally, both theories hold the teleological belief that EU member states progress inevitably through a single, fixed evolutionary mapping. Respective trajectories are predicted to take very different routes and end their journey in very different locations, but nevertheless, both approaches share this evolutionary telos. Neofunctionalism recognises that the integration process would not be a conflict-free journey (Schmitter, 1996: 7); however, it holds that the end point, EU integration, was inevitable. It is interesting, considering that Hoffman criticised Haas’s notion of linear progress (Hoffmann, 1966: 884), that intergovernmentalism assumes that the nation state is here to stay whatever may pass (Hoffmann, 1966: 868). By failing to account for internal developments and under-developments, both neofunctionalism and intergovernmentalism have rendered themselves redundant in a Community in which development is clearly neither linear nor progressive, which has certainly not reached an end point and which is badgered by unexpected discontinuities and reversals, rather than pat inevitabilities.

Theoretical responses These two dominant theories reduced the complexities of EU integration down to a question of ‘too much or too little integration?’. It is perhaps unsurprising, therefore, that this debate reached a stalemate and neither of the two dominant theories developed are adequate as stand-alone explanations of the EU (Webb, 1977: 28). However, the theoretical crisis provoked a number of interesting responses. Transgovernmentalists, also hailing from the international relations school, went some way in addressing the issue of autonomy. They argued that the EU cannot be fully understood until the seat of power has been located. They suggested that power may lie neither with the nation-state, nor with Brussels, but it may lurk more ominously at a transnational level embodied in multinational corporations, international interest groups or transnational financial organisations (Nye and Keohane, 1977). Scholars from a comparative studies background had grown dissatisfied with the abstract leaning which the European debate had taken. Keen to bring a nitty-gritty discussion of the internal mechanisms of the state

Theories on European Integration: Integrating Theories 45

back in, they focused on describing and comparing institutional developments in areas of policy-making, lobbying and decision-taking (Richardson, 1982; Bulmer and Paterson, 1987; Wallace and Wallace, 1996). Both the transgovernmentalist and the institutionalist literature are significant because each moves the debate away from the strict determinism of the neofunctionalist/intergovernmentalist dichotomy. However, both schools provide limited insights to the European process. Those from the international relations school focus on ‘history making’ developments within the EU while the institutionalists dwell on the detail of micro-level policy-making (Cram, 1996: 51–5). A neat analogy may be drawn for the chasm which exists between the international relations and the institutional approaches. This chasm resembles a puppet show. In the case of the transgovernmentalists’ school, we can see the puppeteers. We are shown how they work and cooperate, how they are frenetically busy behind the scenes. But we are not given the opportunity to see the play they are presenting. In the institutionalists’ case, we are presented with very detailed, colourful puppets. We see the story they enact; how they dance together and sing together. But we have no indication that puppeteers are operating them – we do not know who is pulling the strings. The absurdity of such a puppet show, one with no puppets, the other with no puppeteers, has not gone unnoticed by the audience.

Emerging syntheses Andrew Moravcsik was one of the first to shout from the audience. His liberal intergovernmentalist approach pulled on all the perspectives developed to date. He was keen to take account of the fortes and criticisms of the major international relations perspectives on the EU and integrate them with the insights which the institutionalist’s analysis of domestic politics within the Community had highlighted. He aimed to synthesise these notions with ‘current theories of international political economy’ (Moravcsik, 1993: 480). Moravcsik’s synthesis marks certain progress in an understanding of the complexity of EU developments. It argues that the Community should be understood as an international regime in which states are the key actors. Their actions are dictated by two key pressures: firstly, traditional political domestic constraints and secondly international strategic forces. This more convincing approach has the advantage of addressing macro pressures while taking account of micro issues such as national policy-development (Moravcsik, 1994). However, liberal intergovernmentalism fails to adequately stress that inter-state relations also determine EU decisions.

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In particular Moravcsik makes no reference to the implications that economic coreness or peripherality has on member state decisionmaking within the EU. A host of voices arose from the audience in similar tones to those of Moravcsik.7 They included others who have attempted to graft a synthetic thesis from the key attributes that intergovernmentalism and neofunctionalism present. Scholars such as Tranholm-Mikkelsen (1991) argued that the Community could be most accurately understood as an integration process which embodies forces for both integration and disintegration simultaneously. Similarly, Keohane and Hoffmann (1991) aim to combine their earlier neo-realist approach with a neo-functionalist perspective. It is argued that this fusion is a necessary, more sophisticated tool with which to analyse the post-Cold War period. The many syntheses which burgeoned throughout the 1990s faced fundamental difficulties. Alex Warleigh (1998) holds that none of these works has achieved a true synthesis to date. He holds that each thesis essentially embodies a dominant core, be it neofunctionalism or intergovermentalism, according to the theorist’s bias, with a cosmetic veneer of the other. He claims that both schools are so diametrically opposed in their perspective that a genuine synthesis would entail the emasculation of both (Warleigh, 1998: 9).

New governance Another excited voice from the audience was raised about the stalemate that EU theories had reached. This perspective has come to be known as ‘new governance’ (Hix, 1998). It is composed of commentators who (initially, at least) unwittingly arrived at similar conclusions on EU theory. Central to new governance is a drive not only to overcome the persistence of the supranational–intergovernmental dichotomy, but also to integrate approaches from the international relations school with those from the institutionalist or political science background. It is keen to display the puppet show as a whole. It suggests that the EU is gradually developing into a very different type of animal from that examined by the early international relations scholars, primarily because the Community now governs policy domains which were previously unanticipated (Branch and Øhrgaard, 1999). This perspective claims that a fundamental shift in the nature of governance is under way in the EU and the ‘old dichotomy’ is unequipped to discuss it. Caporaso argues that EU governance is a product of external and indigenous pressures, which renders the theoretical division between international relations and political science redundant. He asks:

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[w]hy does the gap between scholars of comparative and international politics persist when boundaries between domestic and international politics have crumbled? (Caporaso, 1989: 8) But Hurrell and Menon claim that such a synthesis involves definite theoretical obstacles. For those who hold the state as central, as IR scholars do, analysis of domestic processes such as policy-making and interest groups, tend to be given less attention. It is difficult to hold both images in focus at once. Hurrell and Menon explain: Although not easy to operationalise there is no fundamental contradiction between accepting the centrality of the state in EU policymaking and the need to open up the state and enquire into the domestic processes through which interests and identities are shaped and determined. (Hurrell and Menon, 1996: 393) Contrary to seeing IR literature and institutional approaches as mutually exclusive areas of research, Hurrell and Menon argue that they complement each other. They stress the importance of this synthesis, but they fail to indicate how it could be concretely put into operation. Rather, they throw down the gauntlet for scholars to take the debate forward by devising methodologies which could juggle the two theoretical paradigms. Others have taken up this challenge. An interesting body of this literature has pulled on the notion of governance as a means of straddling between international relations and comparative disciplines. The focus on governance involves analysing how political regions, sectors of production and administrative units are regulated. As such, governance broadens the agenda far beyond the question of ‘integration or not’ and ‘international relations or comparative studies’. It facilitates the theoretical synthesis which New Governance scholars are pushing for in particular as it implies a system of rules without assuming a state structure. It is a notion which is flexible in the sense that governance can be located at any level – the supranational or the regional. Therefore, the nature of the discussion shifts away from the question of where power lies, to questions regarding the implications that powerful actions and agents have on policies, etc. The term ‘governance’ has slipped into many fields of analysis. This may be explained by the currently fashionable policy of shrinking state

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functions or ‘destatization’ (Jessop, 1997: 573–6). Studies in this tack within EU literature analyse ‘institutional decision rules’ (Pollack, 1994) or ‘policy outcomes’ (Dogan, 1997), in an effort to knit developments in international political economy to events within domestic administrations. Research in this vein strives to explore the metanature of the EU by means of incremental, policy-specific innovations rather than by reference to a deterministic, hypothetical end-point (Jordan, 1997).

What’s new about new governance? The new governance framework contains three innovative features which provide the student with a methodological flexibility which is crucial for analysing the EU.

1.

Nexus between the supranational–state and the state– state

The fluidity of analysis that new governance embodies provides an insight into an important nexus of tension and power relations which the earlier theories were independently incapable of covering. New governance recognises the significance of the nexus between international actors and the domestic level and simultaneously, the relations/tensions between states in and associated to the EU (see Figure 2.1). Hurrell and Menon illustrate that we can only fully comprehend developments in

Supranational Level *

* State A

* State B

Figure 2.1 New governance’s nexus between the supranational–state and the state–state

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the EU by transcending the blinkered nature of earlier theories and engaging in that nexus between the international–domestic and, interstate relations (Hurrell and Menon, 1996: 391).

2.

Flexible notion of governance

New governance analysis operates within a fluid framework. It does not regard any one level of governance as being dominant in EU affairs. It recognises that significant nodules of governance are located at the supranational level, for example within the Commission. Likewise, it acknowledges that important actors, institutions and pressure groups operate at the national level. Similarly, new governance takes the local or regional level into account as a domain which impacts on policy outcomes by means of lobbying, financing and organisational capacity (Hurrell and Menon, 1996).

3.

Takes institutions seriously

Those who work within the new governance framework stress the importance of combining an institutional analysis (adopted from traditional studies of the nation-state) with an international perspective (Hurrell and Menon, 1996: 398). In short, new governance takes institutions seriously. It becomes necessary to turn to institutions to get ‘a balanced and inclusive “reading” of European integration’ in the absence of a government (Bulmer, 1998: 382). Not only does new governance use institutions to reflect changes in the EU but it bolsters institutional studies by bringing the question of power into a body of research which traditionally underplays power-related issues (Webb, 1977: 28; Richardson, 1982; Wallace and Wallace, 1996).

But . . . the limits to new governance Yet, new governance has been hoist on its own petard. Its wholly flexible nature, which is its chief asset, has been developed at the cost of theoretical content. By locating decision-making and loci of power throughout the Community in ‘multi-level governance’ (Marks, 1993), this perspective fails to present any insights on a hierarchy of power and competence. This amounts to an essentially apolitical analysis (Hix, 1998: 38–41). Subsequently, we are left with a mid-range framework, rather than a theory, whereby ‘theory’ involves speculative, substantive arguments which can be utilised for explanatory purposes. Theories or ‘general lawlike sentences’ (Przeworski and Teune, 1970: 30) are necessary if we are to locate patterns in EU developments and if we aim to understand empirical findings that are gathered (Wind, 1997: 17).

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The lack of theoretical content in the new governance literature is entirely unsatisfactory. It has resulted in the conundrum whereby those proponents of new governance, so keen to shift from the theoretical impasse created by the dominant theories developed to date, have had to resort to the worn neofunctionalist–intergovernmentalist debate in their studies. For example, both Pollack (1994) and Dogan (1997) adopt new governance in their studies as exciting new analytical frameworks to hang their research on. However, both authors return to the neofunctionalist/intergovernmental cleavage when they discuss the theoretical implications of their work. Pollack attempts to develop a theory which explains the EU’s policy agenda. He clearly adopts a new governance perspective throughout his research, but he concludes, somewhat ironically, by referring to neofunctionalist and intergovernmentalist theories as benchmarks to indicate how he has developed away from this dichotomy! He states: Returning to the various theories of European integration in section 1, we see that the argument presented above neither accepts nor rejects the conflicting claims of neofunctionalist or intergovernmentalist theories; rather it specifies the domain within which the claims of each theory apply. (Pollack, 1994: 139; stress in original text) Likewise, Dogan presents a new governance framework when he analyses comitology committees. Dogan argues that the growth of comitology cannot be adequately understood under older EU theories, and therefore, he contends, new governance provides a crucial tool of analysis. However, Dogan also reverts to the neofunctionalist/intergovernmentalist dichotomy to try to indicate that he has broken new theoretical ground (Dogan, 1997: 49–51). Commentators are limited to discussing research conducted in the new governance perspective by making reference to these early theories on EU integration because new governance lacks any theoretical substance in and of itself which can be pulled on to develop a theoretical literature.

Who needs a theory of the EU! New governance has not come to fruition; however, it has prodded the EU literature a little further in a new direction and it has precipitated a useful debate. The key proponent in this debate is Simon Hix. 8 He is critical of new governance primarily because, he argues, it implies that

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a wholly new system of governance is emerging in Europe. This suggests, Hix claims, that the tools traditionally used to analyse political systems within nation-states are now redundant. He argues that if one accepts that decision-making has been systematically devolved to independent committees rather than politically elected actors, then the established discipline of electoral analysis is no longer insightful. Likewise, if these decision-makers are plucked from a host of backgrounds according to their expertise and are temporarily involved in policymaking through the comitology system, without toeing any particular party line, then, we can imagine, the conventional right–left cleavage in EU politics will be less significant. Hix claims that these arguments are implicit in the new governance literature and he objects to these assumptions. Consequently, Hix claims to have uncovered another EU dichotomy: on the one hand, the new governance school, which holds that the EU’s novel nature renders conventional political science concepts and methodologies redundant, and on the other, those from the traditional political science perspective. He argues that new governance’s concern with the novel system of administration which is unfolding in the EU has blinded its proponents to the good-old-fashioned questions that political scientists traditionally concerned themselves with, such as ‘who gets what, when and how’ (Hix, 1999a: 70). In particular, Hix claims that parallel to the integration/non-integration dimension, the right–left cleavage is still a very pertinent one in the EU. He attempts to illustrate this by analysing electoral results of European Parliamentary elections 1976–94. This effort to pull a right–left analysis into EU studies is a compelling one and it has been articulated in an illuminating manner by Pollack (1998: 6). He argues that one can clearly see the left–right battle being played out at the Community-level and that developments such as the Amsterdam Treaty reflect this traditional European political cleavage. He claims that the Treaty modestly increases the EU’s regulatory capacity over areas such as employment conditions, embodying leftist interests, but it fails to introduce initiatives which develop economic and social cohesion, thereby upholding right-wing interests. Contrary to Hix’s articulation of this development as another EU dichotomy (the new governance school versus the traditional analysis school (Hix, 1998), this debate is wholly compatible with the main thesis behind new governance literature, namely that one needs to weave international relations with a comparative analysis. As such, both positions point to the ‘normalisation’ of EU studies (McNamara,

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1998: 2). This is significant as it means that EU scholars are set to address a host of areas within EU politics and understand them within the context of the international political and economic system (Hurrell and Menon, 1996: 397). While both new governance and the traditional school map out the need for a development of this nature, neither succeeds in reading the map and walking down that road themselves. One explanation for this may be that both approaches are theoretically void. As discussed above, new governance appears to be ‘unwittingly theoryless’. For Hix, this is a conscious stance. He boldly states, ‘[w]e have no general theory of American or German government, so why should there be a general theory of the EU?’ (Hix, 1998: 46). Hix finds ‘grand theories’ which aim to explain everything about the EU unhelpful in his endeavour to establish a conceptual framework that links the study of the EU political system to the study of government, and politics in all political systems (Hix, 1999b: 14).

. . . But we do need a theory of the EU ! It is puzzling that Hix should be at pains to point out the insights provided by analysing the EU from traditional left–right perspectives, yet he denounces meta-theories as ‘thankfully’ having died ‘in the 1960s’ (Hix, 1999b: 14). If he finds that class and territorialism remain powerful determinants of political and ideological drives (Hix, 1999a: 74–8), then surely that suggests that theories which address the right– left debate are equally valid. It seems logical that theories established to assess the production, distribution and consumption of wealth might have something to offer an analysis of the world’s biggest market place – the EU. The Community is simultaneously fragmenting and integrating in a messy manner, partaking in inter-state conflict and cooperation, experimenting with unprecedented legal development, developing a monetary capacity, engaging in social policies and addressing regional disparities. And it is natural that corresponding literatures should reflect these developments. But the EU is above all else a market; a bloc engaged in production, competition and trade. The Treaty of Rome spelt this out unequivocally in 1957 and each of the key milestones in Community development has merely bolstered the market-dimension of the EU. The Single European Act, for example, was a purely economic strategy involving the removal of barriers to free private exchange (Grahl and Teague, 1990: 29). Likewise, one of the main purposes of the Maastricht Treaty was to kick-start European monetary union. Even the Amsterdam Treaty, which was vaunted as a vehicle for social innovation, with its

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Employment Chapter, Commission reform and expansion of Community powers, does not temper the EU’s drive for competitiveness (Pollack, 1998). Commentators have shown the intimate networks which exist between the EU and industry, stressing that while the EU is a Mecca for a multitude of lobby groups, industry is the one which is courted there; given an ear and precious time (Balanyá et al., 2000). The scarcity of studies which analyse the EU as a unit of production (Rosamond, 2000: 81–5) is perhaps even all the more surprising when one considers that changes in the organisation of production has fundamentally altered our understanding of the international political economy. Yet this understanding has failed to permeate into the realm of EU studies. Susan Strange argues that unless international relations scholars take on board the enormous implications that production changes have on inter-state relations, they may as well become rather blinkered historians. She writes: Technology is a major factor – I would say the major factor – behind the internationalisation of production, i.e. the production of goods and services in more than one country and according to a global strategy for selling on a world market. And the internationalisation of production is making more rapid changes than anything else in the relative wealth of national economies, and thus in the stability of national political systems and governments, and in their power and influence in relations with other governments. (Strange, 1994: 210; stress in original text) What is missing from the EU debate is a systematic analysis of unfolding developments within the Community which gives primary attention to the social relations of production. In short, European studies would benefit by borrowing from the key tenets which underpin a marxist analysis, in particular, the now much neglected dependency theory.

Dependency theory meets the EU Dependency theory has been roundly anathematised and it has failed to permeate into the dominant EU literature. Its limited influence may be explained by a number of means. As stressed above, EU studies were dominated by international relations theories.9 They tended to highlight the struggle over the means of domination, and they held little interest to those involved in development studies which was traditionally concerned with struggles over the means of production (Mouzelis, 1988: 39).

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Blaney believes that dependency theory was regarded as too statist by the burgeoning academic interest in civil society and democracy which emerged in the post-1989 period. He admits that dependency was challenged by the emergence of newly industrialising economies and the theory’s internal contradictions, but above all, he believes that it died of neglect rather than a sustained intellectual offensive. He urges that the legacy of dependency remains to be claimed (Blaney, 1996: 46). Certainly, the language of dependency has a lot to offer those interested in developments in European industrial relations; its notion of core and periphery are analogous with the issue of regulatory competition discussed at the outset of this chapter. Crucially, dependency is underpinned by a marxist perspective, which may be currently unfashionable but it is the only theory which examines the bargains between social groups, which maintains governments in power (much in line with neofunctionalists’ interest in elites), investigates interstate relations (very much in the style of intergovernmentalism) and, finally, pulls into this analysis the mode of production which it sees as a distinctive feature of capitalism. Indeed, the dependency perspective addresses the three weakness which, as was shown above, both neofunctionalism and intergovernmentalism share: the question of state autonomy; evolutionary development; and internal state politics.

State autonomy Dependency theory emerged as a revisionist explanation for persistent international inequality. It argued that industrial development is interdependent and latecomers to the industrial model engage in industrial development as unequal partners. The argument was that the lack of economic growth in the periphery was a necessary and continuing aspect of the expanding global division of labour and wealth accumulation in the ‘core’. Dependency theorists scrutinise the notion of state autonomy, which, as we saw, international relations studies took for granted. The dependency approach focuses on the manner in which global capitalism frustrates the aspirations of third world states for selfdetermination (Blaney, 1996: 461). By analysing state autonomy in this manner, dependency theory invites the student to consider the influence of FDI on state decision-making; the pressures which indigenous interest groups create; the pressures which the EU presents states with.

Evolutionary development Dependency was conceived primarily in an effort to address modernisation theory’s stand that peripheral economies inevitably go through

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the same developmental stages as early European industrialisers went through. Dependency theorists argued that development in the periphery is critically different in several respects. They objected to the ahistorical, contextless manner in which moderisation theorists assumed capital, technology and culture would be diffused from core to peripheral societies (Mouzelis, 1988: 26). Dependency’s anti-evolutionary position provides EU students with a means to examine EU development policies: competition directives, technology and social cohesion projects.

Internal state politics Dependency is steeped in the marxist-style, conscious effort to combine the political with the economic, which contrasts sharply with the decompartmentalisation which international relations theories entail. This political-economy approach aims to look inside the state’s mechanisms at class relations and conflicts, at how international lobby groups operate through local actors, and it subsequently catches issues such as the organisation of production, changes in technology, the feminisation of the labour market, and new managerial techniques. All of these are lost on contemporary IR theories.

What dependency can bring to EU studies: tweaking with marxism This summary would suggest that dependency provides the optimum theory for analysing industrial relations within the EU. It suggests that its departure from the academic stage was a grave mistake, and it ought to be pulled out of the grave and resuscitated. However, in its traditional form, dependency presented a number of deep contradictions which have been widely recognised. Despite its demise, however, a number of commentators propose suggestions as to how its theoretical contradictions may be overcome. The following section introduces a synopsis of these problems and it presents the solutions which have been offered. Note all three areas discussed are interconnected, so the division into three sections is artificial but it was devised in an effort to address each issue coherently.

Determinism It is commonplace to assert that marxism is deterministic. Marx’s original text certainly did map out the future of capitalism as he believed it would unfold.10 ‘Really Existing Communist’ states stuck doggedly to this interpretation of marxism. More recently, dependency theorists

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have mirrored this strict determinism. Commentators have frequently pointed to Gunder Frank’s early work which argued that it was inevitable for peripheral economies to experience underdevelopment when they began to produce for the global economy (Frank, 1969). Ironically, while aiming to supplant modernisation theories’ deep-seated teleology, dependency itself embodies a fundamental determinism. Burnham addresses this irony. His comments are restricted to the writings of Marx; however, his discussion is insightful for all the theoretical heirs to marxism. He recognises that while there are elements of determinism in Marx’s writing, he boldly refuses to be hand-tied by pedantic Marxologists (Burnham, 1994: 224). He calls for an ‘open Marxism’ in which determinism is rejected. He claims this is possible if one highlights important aspects of Marx’s writing which have not received the air-time that ‘Really Existing Communism’ gave to Marx’s more deterministic ideas. Burnham argues that critical here is the notion that relations within capitalism are essentially conflictual. He claims that if we understand the world in terms of struggles, then deterministic outcomes are untenable and the future is an open one. 11 Additionally, he dismisses the base/structure metaphor which Marx devised, as being useful only for limited analytical purposes. Burnham suggests that the dominant theme, which was central to Marx’s writing but which has been marginalised, is the ‘social relations of production’. He urges that heirs to the marxist legacy should concern themselves with this issue rather than giving primacy to the economic side of the historical process, as is traditional to marxism (Burnham, 1994: 226).

Economic reductionism The primacy which has typically been given to economic considerations has meant that political phenomena tend to be interpreted by marxists as either reproduction requirements of capitalism or mechanisms to reproduce economically dominant classes. It has often been pointed out that this economic reductionism means that marxism fails to consider complex organisational and institutional realities. Mouzelis, for example, argues that dependency is based on an extremely schematic idea of a chain of exploitation which involves resources being transferred from the periphery to the economic core. This amounts to equating peripheral regions with exploitation and the core with domination in a blanket fashion, without giving any account of the internal struggles within each region. Mouzelis sees a need to create new structures within the marxistoriented approach which would involve conceptualising the political

Theories on European Integration: Integrating Theories 57

sphere as well as the economic (Mouzelis, 1986). He argues that it is important to distinguish between the holders of the means of production and holders of the means of domination. He believes that these are not likely to be the same, especially in the periphery where, he suggests, societal transformations often pivot around struggles over the means of domination, rather than the means of production (Mouzelis, 1988: 39). Certainly, he stresses, all political activity is not necessarily connected to economic considerations, and to assume so is unsatisfactory. Mouzelis presents a suggestion as to how economic determinism may be dropped without rejecting Marx’s conceptual framework. He calls for the construction of ‘developmental trajectories’, which comprises comparative analysis of different types of underdeveloped case-studies, taking on board their historical profiles, the role of the state, the role of elites, civil society and exogenous pressures. Mouzelis’s suggestion amounts to a case-by-case approach with the aim of locating patterns by attempting to combine Marx’s holistic, political economy orientation with a Weberian interest in internal state relations.

Problematic analysis of the state As a direct result of the marxist failure to analyse the political, the role of the state remains entirely under-analysed in the dependency literature. This is especially important as the state plays such a central role in peripheral political economies. Blaney highlights a resulting contradiction inherent in the dependency school. He shows that state sovereignty is presented as an unobtainable aim for economically dependent economies due to the interconnected nature of capitalism, yet dependency writers commonly argue that states can shift from their dependent relations through nationalistic-style economic development policies – policies which depend on a robust sovereignty (Sunkel, 1973). Blaney explains: On the one hand, sovereignty stands as a possible defense of autonomy . . . against the homogenizing and destructive forces of global capitalism . . . On the other hand, . . . these strong claims are equally crucial to constituting and legitimating inequality within international society. (Blaney, 1996: 470) Blaney suggests that this contradiction is more than simply a theoretical paradox inherent in the dependency tradition. He argues that it reflects a very real tension which exists in the international political economy.

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Blaney writes that development theorists need to recognise that some issues are governed simultaneously by global and national forces. He labels this understanding of sovereignty ‘relational autonomy’ and he claims that the use of sovereign boundaries as demarcations of selfproducing units is futile. Blaney argues that development students need to conceptually blur the conventional notion of ‘inside’ and ‘outside’ states and recognise that political regions are interdependent as a result of their integration into the global system of production and consumption (Blaney, 1996: 473–5). Theorists from the regulation school take up this issue and elaborate on it. They argue that capitalism is no longer organised along the lines of the postwar ‘Atlantic Fordism’ in which economic growth was hinged on a system of mass production, welfare and a compromise reached between labour and employers (Lipietz, 1997). Regulation theorists argue that the effort to establish a new, stable accumulation regime is a very difficult one (Jessop, 1997: 573). Bob Jessop, for one, appears to agree with Blaney’s main contention. He argues that contemporary capitalism is witnessing a transfer of power away from the nation-state, where it was based, in the postwar period. This power has become displaced to various territorial scales and across a host of functional domains. According to Jessop this amounts to a ‘denationalisation’ of the state, whereby the state is not so much occupied with government as with governance or coordination of interest groups, networks, pressures and responsibilities in an effort to establish a new economic order and to secure its position within the global relations of production (Jessop, 1997: 573–4). Jessop writes: Governments have always relied on other agencies to aid them in realizing state objectives or projecting state power beyond the formal state apparatus. But this reliance has been reordered and increased. The relative weight of governance has increased on all levels – including not only at the supranational and local or regional levels but also in the transterritorial and inter-local fields. ( Jessop, 1997: 575) The notion of governance is a useful one for EU students who are keen to examine the manner in which the Community is engaging in this search for a new form of regulation which fits with the current system of international production and consumption. The flexible, multi-levelled positioning of power which the notion of governance implies is also a useful one in the EU context, where power is dissipated

Theories on European Integration: Integrating Theories 59

across the depth and breadth of Community and national structures and it is lumpy according to policy area. We have seen that the new governance school does rely heavily on this notion and that it is conceptually useful for them.

A synthesis These comments have been synthesised into the following research agenda. It is believed that it may be useful to undertake an investigative analysis of the social relations of production within the EU from an ‘open’ perspective, without assuming any inevitabilities. It is advisable to organise the research into comparative studies to locate different ‘developmental trajectories’. Finally, it may prove useful to examine the social relations of production in terms of the organisation and effectiveness of governance within the EU, rather than solely in terms of economic explanations for action. Some commentators have attempted a synthesis of this nature. In particular, Alain Lipietz of the regulation school has made most progress on this front. He places adjustments in labour organisation centre-stage in his explanation of how states deal with what he sees as the decline of Fordism. Lipietz is concerned to explain how IR regimes have altered to cope with the supply-side crisis, drawing on the characteristics of Fordist labour relations. Taking external aspects, such as wage relations and recruitment conditions, Lipietz argues that employers can achieve profitability via one of two strategies: rigidity or flexibility. He claims competitiveness can be obtained through ‘internal’ features such as the form of organisation, cooperation and hierarchy inside the firm. He suggests that by analysing external and internal employment relations we can see clearly the production models which regimes (usually on a countrywide basis) have adopted to respond to the current environment. Essentially, this gives us two polar paradigms: ‘external flexibility’ which involves direct hierarchical control without the social benefits of ‘high Fordism’, and the alternative approach, ‘external rigidity’, which Lipietz describes as ‘Kalmarism’. Here the labour contract is associated with negotiated involvement and flatter enterprise hierarchies. Lipietz concludes from his paradigm that Europe currently facilitates a two-tier IR system, one which embodies what he calls ‘neo-Taylorism’, involving a flexible, substandard employment contract and a hierarchical organisation. The alternative model he discusses is essentially composed of strong structures of ‘negotiated involvement’ and is complemented

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by a strong labour law base. Lipietz’s thoughts are interesting because he argues that this two-tier IR regime is organised around continents’ core/periphery relations, whereby it is most likely that economically peripheral regions will adopt the ‘neo-Taylorist’ stance while the more core regimes will implement a ‘negotiated involvement’ approach (see Figure 2.2). Lipietz locates the motivations to opt for either the neo-Taylorist or negotiated involvement strategy in two pressures: inherited socioeconomic institutional traditions, and what he calls a ‘transposed Ricardian theorem’ (Lipietz, 1997: 12). This latter notion means that we can no longer assume, as did the Ricardian theory of comparative advantage, that the division of labour is dictated by the initial endowments of various factors of production that a country possesses (Lipietz, 1997: 12). The ‘transposed Ricardian theorem’ suggests that policy-makers recognise those features which make them competitive and they develop them in a strategic manner. For example, Lipietz places a strong emphasis on the advantage that core economies hold by being privileged with institutions which nurture trust, security and productivity in the workplace (Lipietz, 1997: 16). Similarly, he stresses that countries that obtain competitiveness through flexible working practices (the neo-Taylorist

Taylorism Negotiated involvement Rigidity Sweden

West Germany

United Kingdom (Neo-Taylorism) Incompatible Flexibility

Figure 2.2

Evolutions of post-Fordism: the advanced capitalist countries

Source: Adapted from Lipietz (1997: 6).

Theories on European Integration: Integrating Theories 61

option) tend to consolidate this ‘low-road’ strategy by attracting FDI on the basis of these flexible features (Lipietz, 1997: 17).

Problem number one: theoretical gaps Lipietz looks at Europe along with the other continents when he introduces his ‘third division of labour’. Unfortunately and unforgivably though, Lipietz’s work fails to take account of that supranational institution which operates in Europe and which differentiates it fundamentally from all the other continents – the EU. The notion that industries opt for either ‘negotiated involvement’ or ‘neo-Taylorism’ in their efforts to compete in the post-Fordist order may hold true for the continent of America which operates an almost wholly market-oriented international pact, coordinated by the North American Free Trade Agreement (NAFTA). However, the limited strategic options of either negotiated involvement or neo-Taylorism is tempered in the continent of Europe by the EU. The Community is clearly primarily an economic bloc, but it has developed a significant social role and, unlike NAFTA, it is directly politically responsible. Indeed, Lowell Turner goes so far as to suggest that the EU facilitates a more coordinated trade union movement than was ever experienced by Europe’s labour force (Turner, 1996: 328). Lipietz’s theory fails to conceptualise the implications that European integration has on his bipolar model. He fails to embed his work within an analysis of the EU, and he therefore overlooks the thick institutional processes and mechanisms which are being played out in Europe and which, crucially, go some way to shaping the issues he is interested in, namely production processes.

Problem number two: empirical vacuums Lipietz’s work is wholly theoretical in orientation. This attempt to understand post-Fordist Europe in terms of universals is certainly a progressive shift from the purely institutionalist studies presented by the tripology of scenarios discussed at the outset of the chapter.12 However, Lipietz fails to substantiate any of his ideas with empirical data. His theory is seriously undermined by this omission.

A synthesis of a synthesis: ‘institutional dependency’ Contrary to Hix, this book suggests not only that a theory of the EU is possible, but, if the aim is to establish a general pattern of social change, that it is absolutely vital. The theoretical framework which underpins the study is composed of a synthesis between (altered) dependency

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theory and (adjusted) new governance which may be labelled ‘institutional dependency’. The book uses an exploratory, open-ended approach to examine how the EU is making an effort to establish a new economic order within the Community and secure its position within the global relations of production. Institutional dependency shares Lipietz’s premise that the social relations of production differ according to whether they occur in Europe’s core or in her economic periphery. It agrees with Lipietz that a two-tier industrial relations system operates in Europe which reflects the continent’s core/peripheral regions. However, institutional dependency does not take it as given, as Lipietz does, that administrators in peripheral economies will universally adopt a ‘low-road’ system of industrial relations in order to compete, while administrators in core states implement a ‘high-road’ approach to industrial relations to obtain competitiveness. While there may be evidence to show that states have engaged in this strategy on occasions, it does not embody the universality which underpins any robust theory. This assumption suffers from a determinism which ultimately disempowers national actors. Therefore, institutional dependency departs from Lipietz’s thesis at this point. It argues that a theory of the EU must be premised on the role which EU governance plays in developments. It must ask how the EU governs the matter. What is missing is a discussion of the nature of EU governance within the social relations of production, based on national IR data. It is assumed that the EU is an entity concerned with reproducing the requirements of capitalism, but it is a lot more as well. The EU is seen to simultaneously embody a myriad of interest groups, beliefs, traditions and economic and political objectives. The Community is a lot messier than deterministic marxist theory sees it. Therefore, rather than looking at developments which unfold in the EU as being solely a product of the social relations of production, this study analyses developments by asking what impact they have for the social relations of production. This examination is organised by focusing on EU activity in three key areas of industrial relations: employee participation, training arrangements and wage agreements. The study is confined to a discussion of EU governance in these three areas and an examination of the impact which developments have on all the relations of production: the employees, the employers, the state. Finally, the study is limited to two key peripheral economies: Ireland and Hungary. The main findings are then compared to developments in

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other European peripheral states in an effort to ascertain whether developmental trajectories are emerging in Europe.

Conclusion Two key ideas are presented in this chapter. The first is that the dominant theories on European integration, neofunctionalism and intergovernmentalism, which have been developed to date are inadequate. The chapter shows that they do not provide a framework for understanding developments in industrial relations and they cannot engage in the relations between economically core states and their peripheral neighbours. Second, the chapter addresses this problem by introducing a novel theoretical synthesis, entitled institutional dependency, which is applied throughout the remainder of the book. Institutional dependency combines ideas presented by those writing in the classical dependency tradition with notions presented by a newly emerging literature in EU studies, the new governance perspective. New governance was developed in an effort to by-pass the ossifying neofunctionalist/intergovernmentalist debate on European integration. It provides a useful framework for analysing industrial relations because, unlike the two major theories in European integration studies, it takes institutions seriously and it presents a flexible notion of governance which prevents it from focusing exclusively on the supranational or national level. However, it is shown that while new governance enabled European studies to shift out of the stalemate it had reached, it did so at the cost of theoretical content. It is primarily a mid-range framework. It does not provide any testable universals or theories. It is necessary to ‘pad out’ the new governance framework with theoretical meat. The dependency school has been roundly critiqued for failing to recognise the complex social fabric which constitutes regions; they traditionally assign a class label to entire regional blocks in a blanket manner. The chapter shows that European studies can gain an understanding of core and peripheral relations by borrowing from dependency theory. And likewise, the dependency school has a lot to gain from the methodological principles which new governance provides. Institutional dependency is particularly influenced by the work of Alan Lipietz who argues that Europe’s two-tier industrial relations regime reflects the continent’s core/peripheral regions. The book takes Lipietz’s key idea and develops it considerably by ‘hanging it on’ new governance’s methodological framework. This synthesis between the

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traditional dependency-style analysis and new governance’s methodological framework shapes the perspective adopted in the book; it analyses institutional developments in industrial relations systems throughout Europe’s periphery and examines how effective the EU’s efforts are in counteracting the polarisation of IR systems.

3 The European Social Model in Economic Peripheries

For the Greeks and the Romans, as for us, all political science was in a sense comparative politics. Political science has its beginning when an observer notes that another people is not governed as we are. Why? (Mackenzie, cited in Rose, 1991: 446)

Introduction This chapter examines the notion that the EU devises and promotes an unofficial development policy through the vehicle of the European Social Model. While this model is frequently referred to in European Commission publications, it has never been concretely defined by the EU. Some commentators define it as including features of the European welfare state and social democracy (Lange, 1992: 230–1). Others suggest that it involves the attempt to create a competitive economic bloc while maintaining the socially cohesive fabric which underpins social order in Europe (Vobruba, 1998: 119). Some literature suggests that this specific combination of competitiveness and cohesion, which flourished in the postwar Fordist period, is no longer compatible in the current global market (Fitoussi, 1997: 155). The Community, however, does not seem to regard this as an insoluble problem, or as an inherent conflict. On the contrary, EU policies and innovations clearly hold that competitiveness and social progress can flourish together. If we look at EU legislation, policies and literature in those areas that affect domestic IR systems, we can clearly see attempts to address these two challenges simultaneously, attempts to juggle with both pressures. Chapter 2 introduced the notion that a synthesis between dependency theory and new governance, labelled institutional dependency, 65

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may provide a useful vehicle for studying the development of industrial relations throughout Europe. This chapter employs institutional dependency to address the question established at the outset of this study, namely, does the EU act as an agent of modernisation for economically peripheral countries? Institutional dependency is primarily interested in the social relations of production and its focus on governance provides a means of analysing the impact which EU hard and soft laws have in peripheral economies. Chapter 2 stressed that this impact can be examined fruitfully by a comparative analysis of case studies. The chapter is organised into three main parts. Firstly, the notion of the European Social Model is introduced. The chapter attempts to unpack the model. The second part of the chapter introduces the means by which the European Social Model operates. It is argued that the model is presented via ‘hard’ and ‘soft’ laws. It is shown that ‘soft’ laws are particularly noteworthy as the Community asserts influence over policy areas and regions in which it officially has no jurisdiction. The chapter highlights the idea that the predominant use of soft laws to promote the European Social Model may pose challenges for good policy-making at the national level. Finally, part three focuses on the main case-studies chosen, Ireland and Hungary. It explains that both countries, while coming from diverse socio-political traditions, share three important features: both economies are dependent on FDI; both are keen to be ‘good Europeans’; and both come from traditionally economically peripheral positions in relation to the global market.

The EU as a vehicle for modernisation? The EU has reached a crossroads. Up to this point commentators have asked whether it may be defined as a social animal at all (Nielsen and Szyszczak, 1997). Analysts scrutinised Community powers contained in EU activities and Treaties in an effort to disclose whether Europe genuinely amounts to something more than a common market (Neal, 1999: 12). But by the turn of the millennium the body of EU social law indicated that Europe has a social dimension which is more than a mere annex to the economic project (Kassim and Hine, 1998: 212; Hix, 1999a: 70). The European third way is now a generally recognised entity (Kenner, 2000: 113). Although the EU is rarely described as an agency of internal EU development, it clearly does fulfil this role. Just as most states have national development agencies, likewise the Community guides development alongside its responsibilities as a political, economic and trading entity.

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EU development policy stretches from R&D, to unemployment policy, to industrial development. The effort to balance competitiveness with social cohesion runs right through these development projects, as the following brief review of them illustrates. The Community aims to develop an industrial zone which competes on the basis of quality goods. It aspires to shape competitive industrial sectors while addressing marginalised populations and ensuring development is socially sustainable.

R&D The Community’s interest in R&D has a relatively recent origin. This is to be expected since, as Peterson points out, industrial policy has displaced the traditional notion of security in the Cold War period (Peterson, 1996: 227). While R&D’s raison d’être is to achieve competitiveness, the EU clearly sees it also as a vehicle for developing social cohesion. The EU has greatly increased the percentage of its budgetary spending which goes towards R&D, from 2.6 per cent in 1988 up to 3.8 per cent in 1993. It is clear that the Community is bent on catching up with the USA and Japan which spend 2.9 per cent and 3 per cent of total GDP respectively (Peterson, 1996: 230). While 90 per cent of the EU’s R&D budget went to the four largest member states – Germany, France, the UK and Italy (Peterson, 1996: 231) – the Community’s structural policy and cohesion funds aimed to address the smaller, less-developed industrial regions. The Commission was concerned that peripheral economies would experience heightened hardship with the mergers and rationalisation which the Single European Act encouraged (CEC, 1991b). Subsequently, the Structural Funds were reformed and increased so that the funds were directed to regions with GDP per capita values less than 75 per cent of the EU average. The Maastricht Treaty consolidated the regional focus by establishing the Committee of the Regions. The treaty established five areas in which the Commission and the Council are obliged to consult with the Committee before taking measures in those areas. They include economic and social cohesion, trans-European infrastructure networks, health, education and culture. The Treaty of Amsterdam extended compulsory consultation to another five areas: employment policy, social policy, the environment, vocational training and transport.

Industrial development The juggling act between competition and cohesion is very evident in Community industrial policy. On the one hand the EU introduced a host of projects aiming to optimise the Community’s competitiveness. The Single European Act marked the cornerstone in this effort (Grahl

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and Teague, 1990) but it was fortified later by the Amsterdam Summit which approved the Single Market Action Plan. The plan opened a number of new fields to full EU-wide competition before 1999, such as energy, transport, telecommunications and patent protection for biotechnology products (Balanyá et al., 2000: 63). On the other hand, the EU has introduced a number of Directives which some commentators may hold as obstacles to competitiveness, such as Directives on information of employees on the transfer of undertakings and company solvency, Directives on works councils and working-time arrangements, on employees’ rights to a contract, and on parental leave rights. On the whole, EU industrial policies can be seen as an effort to strike a balance between the polar opposite approaches of neo-liberal competition policy and protectionist regional policies (Bradley, 2000: 19).

Employment policy EU employment policy also embodies an attempt to address dual pressures of competitiveness and cohesion. Unemployment in the Community is dramatically higher than that found in major industrial nations outside the EU. Recent Community employment initiatives indicate that the EU recognises that it has a responsibility in addressing high unemployment within the member states (Jackman, 1998: 60). The Community has subsequently become engaged in an active labour market programme. The Essen Summit flagged up the need to develop labour market strategies. More recent efforts on this front include the insertion of the ‘Employment Chapter’ into the Amsterdam Treaty which enables the Community to monitor and benchmark national initiatives in job creation. Yet the EU has failed to address this and other key issues by means of regulation. Teague points out that the Community drive for monetary union threatens the labour market projectionist rules, as states may dispense of these regulations as one of the few mechanisms left to them, in the event of macroeconomic shocks (Teague, 1999: 190–1). It is clearly member states’ concern with their national competitiveness which prevents the EU from developing a Europe-wide coordinated reflation programme to address unemployment (Teague, 1999: 191).

Hard law and soft law: concrete models of modernisation? The Community does mobilise considerable resources and energies to promote a ‘high-road’ strategy of industrial development, built around a well-paid, skilled labour force with participative roles in decision-making at the enterprise- and national-level. As such, the principles which

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underpin the EU Social Model resemble the high-road strategy discussed in Chapter 2. The Community promotes, implements and governs this ‘high-road’ model by two means: ‘hard’ and ‘soft’ laws or pressures. Both types of ‘laws’ have been instrumental in the changes in industrial relations which European economies have recently introduced.

Hard law in the EU Taking the ‘hard’ pressures initially, the EU has implemented a plethora of legislative codes which are not in the IR realm themselves but which clearly have an impact on how employee practices are organised. The notion of ‘hard’ pressures is quite self-explanatory. It involves the use of EU legal mechanisms, 1 constitutional innovations,2 or financial packages.3 ‘Hard’ pressures provide a clear explanation for national-level policy changes in that, in most situations, the member state has little choice but to implement EU policy. Checkel goes so far as to label these pressures ‘coercion mechanism[s]’, whereby ‘a dominant power imposes its value on weaker states’4 (Checkel, 1997: 480). There is little need to dwell on the notion of ‘hard’ pressures here. However, the idea of ‘soft’ pressures for developing a European social model is a little more nebulous and it is worth introducing how this EU pressure operates.

Soft Laws in the EU The development of soft law is not confined to the EU Court. All EU institutions may devise these ‘laws’ which amount to a means of Community guidance that member states may feel a moral pressure to adhere to. Soft laws do not entail any legal obligation on the member state’s part whatsoever. Kenner explains that the multitude of soft laws may be categorised into four main functional boxes. These include: introducing new periods of social activity; reminding the policy community of unfulfilled ambitions; supplementing hard law; and finally referring to policy in which there is no genuine prospect of legislative developments (Kenner, 1995a: 311–12). An analysis of soft laws is paramount for any study of EU social policy. Unlike the domain of competition policy for industry and commerce, the EU lacks a central regulatory function in the area of social policy. Subsequently, the Community is bound ‘to establish a moral and didactic leadership in the social policy sector’ (Kassim and Hine, 1998: 213). Soft law is the crucial ingredient in the EU’s current ‘third way’ strategy. Soft laws are particularly significant because they provide an insight into an area of governance, which has deep implications on national-level

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policy-making, but which remains under-researched. For example, soft laws affect those developments which are occurring in policy-fields over which the EU has no legal responsibility, such as wage negotiation in member states. Also, they impact on national administrations over which the EU has no official jurisdiction, such as associative member states. Kenner stresses that the growth of a social Europe has gone hand in hand with the emergence of soft law. He points out that aspirational and declamatory soft laws permeated the Community’s first Social Action Programme in the mid-1970s (Kenner, 1995a: 311). However, a crucial difference between current use of soft laws and those adopted in the earlier Social Action Programmes is that the earlier declarations were devised with the intention of them metamorphosing into hard laws. As such, they were merely a means to an end. Today, the Community introduces soft laws as an end in itself.

Soft laws: implications for governance The recent flourishing of soft laws has provoked a debate on the implications they hold for a social Europe. Some commentators adopt an optimistic approach, claiming that soft laws may produce the political context which will enable the principle behind them to permeate into decision-making structures within the EU (Sciarra, 1995). Scholars from this perspective argue that because political consensus is absent in certain areas, such as in industrial relations, there is often no realistic alternative to soft laws (Weiss, 2002). The counter-argument holds that in the short term, soft law may satisfactorily address outstanding gaps where a lack of political consensus on a subject precludes the development of hard law. But it should not be adopted as a substitute for binding legislation (Kenner, 1995b). This perspective dismisses the soft mechanism as a long-term policy-making mechanism, arguing that it can potentially deny people’s fundamental rights (Neal, 1997: 17). While that is an interesting debate, it is not so helpful for those who are concerned with the social relations of production throughout Europe. Driven by this interest, the question becomes not so much whether soft laws are adequate for developing a robust social Europe as why states voluntarily adopt soft laws at all.

Unpacking ‘soft’ pressures Wallace stresses the key role that ideas play in European integration. She asserts that intangibles such as beliefs, values and normative preferences

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should be pulled into any understanding of the European project (Wallace, 1996: 22–3). Checkel points out that discussion on these less quantifiable mechanisms has been under-developed in the EU literature: Missing is a thick institutional argument, derived from sociology, that demonstrates how European institutions can constitute the identities and interests of member states and groups within them. (Checkel, 1998: 7) Those who argue that ‘ideas matter’ tend to come from two different camps. Firstly, some students suggest that administrators change policy perspectives if they see it as rational to do so. In this scenario, actors reassess their strategy having calculated what policies would be in their interest as an end goal. This notion is most commonly presented by the rational choice school (Checkel, 1997: 475). The alternative explanation assumes that policy-makers are not so interested in the ‘means ends calculation’, but rather their behaviour is the product of social norms which are held to be ‘appropriate’. This perspective is presented by the reflectivist school (Checkel, 1997: 475). However, a body of literature is emerging which argues that the traditional divide between ‘rationalists’ and ‘reflectivists’ is unsuitable when analysing why states make decisions within the EU context in particular. Garrett and Weingast (1993) argue that a ‘means ends’ calculation is unsuitable in the Community where unprecedented situations frequently arise and member states lack either information or foresight to assess what policy choice would be in their interest. They point out that the ‘appropriate norms’ model is also unhelpful in explaining choices which decision-makers take in unparalleled, previously unexperienced, situations. They claim that it is necessary to integrate both variables: interests and ideas, if we are to understand decision-making mechanisms within the EU. Jeffery Checkel also argues that states which have a corporatist or statist model operate under two cognitive drives when making decisions. They are motivated both by a notion of what is rational and by what is deemed to be appropriate or acceptable. 5 Checkel’s notion of a dual diffusion mechanism in national policy development is useful in particular for explaining policy innovations in weaker member states. While France and Germany may have a more central role in devising policy, and consequently be more enthusiastic in enforcing these policies, smaller states such as Ireland and Benelux clearly play a less dominant role in EU policy-making – making it difficult to understand

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why these smaller states tend to voluntarily adopt policy-styles and projects which are traditionally foreign to them (Harrop, 1998: 12). The mechanisms the EU uses to introduce policy changes in member states via rational means-ends calculations can be quite easily identified. They include the pressures which member states felt to join the European Monetary Union (EMU) in the first round (Teague, 1995a). Other rationally motivated ‘soft pressures’ include the tendency for small states to cooperate with Commission Green and White Papers or with EU recommendations or declaratory statements due to the pressure to be recognised in Brussels as a ‘Good European’. Once again this ‘title’ carries no binding bonuses, but an informal recognition in Brussels of small member states’ support for the EU project may hold future unanticipated advantages. A good example of these unspoken rational-style mechanisms may be reflected in the Irish administration’s discomfort about the relatively low corporation tax which Ireland imposes on manufactured goods and certain internationally traded services. 6 Checkel suggests that the second type of cognitive mechanism, the ‘appropriate norm’ motivation, filters down to national administrations through a process of social learning. This involves elites being exposed to new values and interests. Their behaviour is governed by a new understanding of what is appropriate which has been learned through interaction at an international level (Checkel, 1997: 477). Literature in this vein argues that administrators are likely to be more sensitive to new ideas that are at large when they are in unprecedented environments where negotiators cannot agree on institutional arrangements (Garrett and Weingast, 1993: 177). It is suggested that in the absence of a traditional code of conduct or agreed practices amongst the negotiators, actors search for new mechanisms around which they can renegotiate (Weingast, 1995: 454–5). Ideas, in this context, act as a ‘glue’ or a ‘focal point’, around which negotiators locate commonalties and begin to make progress from an earlier stalemate. Garrett and Weingast stress that in the event of conflict or indecisiveness the European Court of Justice is a recognised, respected institution which is capable of devising ‘focal solutions’ (1993: 199–202). 7 In short, they argue that decisions are reached by the following procedures: (a) A shared belief system is developed between member states in the event of complex, unprecedented environments. (b) Institutions play a key role in devising and upholding these belief systems or ‘focal points’.

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(c) In the case of Europe, the European Court of Justice facilitates cooperation by helping to construct ‘focal solutions’ to whatever dilemmas may arise. Some commentators have integrated these ideas within the field of European industrial relations. Paul Teague suggests that the shift towards pay coordination, which is under way Europe-wide, can be accounted for by the social learning properties that European integration entails. Teague also locates a dual-diffusion mechanism operating in the EU project. He believes that states pursue cooperative relations in a selfinterested drive to keep the EU project on board. However, he argues that this has triggered informal interactive rules which have been internalised by national actors and are employed to address novel, unanticipated difficulties. Teague points to wage bargaining to illustrate this point. He argues that European economies are coordinating and restraining wage determination in an effort to fulfil the tight fiscal policies which pertain in Euroland. However, this rational, self-interested motivation is being guided by a socially learned process of emulation which the Community nurtures. Therefore, very rational wage determination is being moulded by cooperative exchanges of information between trade unions searching for appropriate solutions to integration pressures (Teague, 2000: 437).

Governing industrial relations in the European Union: the soft option? Clearly, these notions of ‘social learning’ and ‘focal points’ are crucial ingredients in European integration which are often unaccounted for (Teague, 2000: 442). This literature does go some way to explaining why states within the EU’s sphere of influence would take soft laws on board at all. However, soft laws differ from Garrett and Weingast’s ‘focal points’ in one key respect: their ‘focal points’ have recourse to hard law or courts. In sharp contrast, EU soft laws are not underpinned by this system of governance. Therefore the opportunity exists for states to endorse or ignore soft laws as the situation arises. It was pointed out in Chapter 2 that a theory of the EU must be premised on the role that EU governance plays in developments. This book attempts to initiate a discussion on the nature of EU governance within the social relations of production. Checkel noted that states’ propensity to internalise appropriate norms depended on the structure of their domestic institutions. It is suggested throughout this book that

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economic stability is likely to influence states’ tendency to embrace or ignore EU soft laws. It is argued that while administrators throughout member states and associative member states are likely to undertake a genuine effort to implement the EU Social Model ‘high-road’ approach to industrial competitiveness, the soft nature of governance which underpins the model is likely to act as an enormous disincentive. Administrators who have traditionally competed on the basis of the ‘low-road’ strategy are under no pressure to comply with the development aspirations embodied in the EU Social Model. This book examines how soft policy-making at the EU level pans out at the national level. Does it incrementally produce the appropriate political climate in which progressive decisions are eventually made, as some argue? (Sciarra, 1995). Alternatively, does it simply provide an opportunity to fudge on implementing fundamental employment rights, as others suggest? (Neal, 1997: 17). Finally, soft law presents Social Europe with a new challenge. In the absence of binding laws and concrete Directives, soft law’s suggestive, nebulous nature may result in misunderstandings resulting in contradictory or dysfunctional policymaking at the national level. In summary, the question is: is the EU’s social model for high-road IR strategies effective in peripheral states which are increasingly becoming dependent on FDI and which traditionally compete on an industrial strategy based on the low-road approach?

The case-study approach It was pointed out in Chapter 2 that a more coherent understanding of IR systems within the EU could be obtained by constructing development trajectories. It was suggested that by focusing on different trajectories of development one could locate how trends at the global level pan out at the national level in the form of institutional arrangements, group antagonisms and class formations (Mouzelis, 1988: 34). A comparative approach is certainly an insightful methodological tool for industrial relations students. Indeed, Hyman argues that comparative cross-national analysis is indispensable for IR studies (Hyman, 1995: 42). However, it is problem-laden. Firstly, quite straightforward methodological difficulties may arise from a cross-country comparison of IR systems, such as assuming that institutions with similar names have similar functions, or difficulties arising from linguistic differences (Schregle, 1981; Bean, 1985: ii). But the comparative approach is also dogged with more abstract difficulties.

The European Social Model in Economic Peripheries 75

World systems theorists, such as Wallerstein, have pointed out that cross-national comparisons embody two problematic assumptions. Firstly, it entails the notion that national societies are self-contained blocs which share a common trajectory. This belief has been inherited by the nineteenth-century evolutionist notion that societies pass through stages of development from traditional to modern and therefore can be mapped on this trajectory and provide valid material for comparison. Secondly, a comparative method assumes that nation-states are insulated, self-contained units. Traditionally, comparative research explains differences that societies throw up by means of their indigenous characteristics (Wallerstein, 1974: 391). From a world system’s perspective the comparative method inherently embodies deterministic tenets such as those which Mouzelis is at pains to avoid. In response to this value-laden methodology, Wallerstein has urged students to recognise that nation-states are merely subsections of the broader, singular unit, the global economy (Wallerstein, 1983: 133). By shifting the unit of analysis from the national to the world economy as an historical social system, Wallerstein has rejected the evolutionary and insulated nature of traditional comparative studies. However, McMichael objects to this shift, suggesting that it disempowers the state as a significant actor on the world stage. World system theory demotes the state to the status of a pawn. He writes: But the shift in levels of analysis is not simply an enlargement of view. The world system is not merely the site of social change, it is more the fundamental source of social change. (McMichael, 1990: 390; stress in original text) McMichael attempts to overcome the abstract generality that world system theory employs by a method of ‘incorporated comparison’. This approach holds that while one might agree that society is organised around a global, interconnected system of industrial capitalism, one need not adopt this system wholesale as the unit of analysis. Instead, incorporated comparison highlights parts of this system that reveal insights into the world system. McMichael introduces studies which have adopted this method. Such studies look, for example, at food regimes in different countries and wage-labour regimes across a number of countries. These works focus on specific topics but they are analysed as products of international capitalism mediated by state and local actors. McMichael summaries the method: ‘The point is to try to perceive the unity in diversity without reifying either’ (McMichael, 1990: 395).

76 Employee Relations in the Periphery of Europe

What has this discourse to offer students of industrial relations? As opposed to regarding national systems of industrial relations as comparable units, it suggests that it is useful to pull out components of industrial relations systems and to analyse the patterns they present as products of global capitalism mediated by state, local actors and the European Union. These patterns may enable the student to locate developmental trajectories as recommended by Mouzelis. This book is limited to three key components of industrial relations systems: employee participation, training systems and wage agreements. These three institutions do not provide a complete insight into developments in industrial relations practices, they merely act as a litmus-test into how EU integration impacts on national IR models. These three institutions are core pillars in any IR system. They are the three main areas monitored annually by the EU Commission’s Tableau de Bord: Employment Observatory which aims to evaluate the nature of employment conditions throughout the Community (CEC, 1994–96). The notion of developmental trajectories is a vague one which deserves a little attention. In his endeavour to move away from the crude, blanket concept of core vs. periphery, Mouzelis constructs different developmental trajectories. He groups together ‘countries which, although geographically apart or culturally different, do show fundamental similarities in their patterns of long-term socioeconomic transformation’ (Mouzelis, 1988: 34). The principle of developmental trajectories is a particularly useful one for a study such as this which aims to assess whether the EU Social Model can reform systems of industrial relations in peripheral economies. The book examines this question in a two-step approach. Firstly, it focuses on the three core components of industrial relations mentioned above within the context of two case studies: Ireland and Hungary. Secondly, the findings are examined and compared with other peripheral European economies to assess whether trends and patterns emerge. In short, the aim is to inquire whether a European IR developmental trajectory exists, or whether EU projects are contributing to a convergence within IR systems towards the high-road strategy.

But why Ireland and Hungary . . . ? It may seem peculiar to focus on Ireland and Hungary as examples of peripheral economies in Europe. The recent good news emanating from both countries could lead one to believe that there is no space for them in any study of less-developed European economies. Certainly, all the

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statistics suggest that after facing economic doldrums throughout the 1980s and early 1990s, both Ireland and Hungary appear to be currently enjoying prolonged economic success. Taking Ireland first, it is true that the country is experiencing unprecedented growth. Between 1960 and 1990 Ireland’s economic position stagnated at a GNP per head of around 66 per cent of the EU average. By 2000 this figure had increased to well over 90 per cent of the EU average and it is estimated that it will reach the average standard of living in the EU by 2005 (Fitz Gerald, 2000: 54). This increased average living standard is a result of exceptional growth that Ireland has experienced. Annual average GNP growth approximated 8 per cent between 1995 and 2000. This is over three times the EU average (Forfás, 2000a). This growth has addressed stubborn problems which have dogged the Irish economy throughout earlier decades; the national debt was down to 50 per cent of GDP in 1998 and dropped to 47 per cent in 1999. Additionally, unemployment declined rapidly from just over 10 per cent in 1997 to 5.5 per cent in 1999 (Forfás, 2000a). In many respects, Hungary’s economic reports mirror Ireland’s success. Hungary’s GDP growth was 6.2 per cent for the first half of 2000. Government deficits are falling and are on track for the targeted 35 per cent of GDP. Unemployment is now approximately 6.5 per cent, down from a peak of 12.5 per cent in 1993 (Wright, 2000). Plans for EU accession are also steaming ahead. Michael Lake, the Head of the Delegation of the European Commission in Hungary, stated, ‘Generally speaking, Hungary’s progress towards (EU) accession has been on track, with some delays’ (cited in Eddy and Wright, 2000).

Models to be emulated While both the Irish and Hungarian economies provide interesting case-studies of growth in and of themselves, their significance is amplified because they provide lessons which go beyond the case-studies (Nolan et al., 2000: 341). Both countries are regarded as models to be emulated so their development is significant for many other countries. A number of commentators have stressed that Ireland’s experience is a lesson particularly for Central and Eastern European economies and that Ireland now constitutes a role model of development (Bradley, 2000: 22–4; Fitz Gerald, 2000: 55–6; Nolan et al., 2000: 341). Certainly, Hungary appears to be keenly watching Ireland’s industrial strategy with an eye to emulation (Némedi-Varga, 1997). The Hungarian Foreign Minister, János Martonyi, indicated this was so when he welcomed the Irish President, Mary McAleese, to Hungary. He stated

78 Employee Relations in the Periphery of Europe

that what Hungary has to do over the next 25 years is quite simple: ‘We have to do exactly what Ireland has done in the last 25 years’ (cited in Holohan, 2000). However, Hungary itself is also held up as a role model by its eastern neighbours. Willem Buiter, chief economist for the European Bank for Reconstruction and Development (EBRD), stated that former Communist bloc countries are becoming increasingly diverse with Hungary standing out as the most advanced and reformed of all the transition economies. Hungary currently manufactures the highest level of private-sector production in the region and as such it also stands out as a role model for states on its southern and eastern borders (Ostrovsky, 2001). Perhaps we should not be so surprised by the similarities in the Irish and Hungarian case-studies. As the following section points out, Ireland and Hungary share a number of key features. They both share economically peripheral traditions, they are both seeking to develop their economies through FDI and export-led growth and, finally, both states regard their relations with the EU as being of primary importance for future economic development. In short, both Ireland and Hungary may be on similar developmental trajectories.8 All the statistics and economic indicators show definite evidence of growth in both the Irish and Hungarian cases – evidence of a convergence towards or catch-up with the EU average (Nolan et al., 2000). There seems little controversy on this point. However, this book is interested in looking past the statistics. It is not so clear that these economies are making any fundamental institutional shifts. This book looks at three institutions in particular: employee participation, training systems and wage agreements. While it recognises that economies which emerge from peripheral traditions are producing GNP, national debt and employment figures which resemble core economies, it enquires whether they are also introducing institutional changes which resemble core economies. The following section shows that throughout the 1990s both Hungary and Ireland’s economic success was premised on the ‘lowroad’ strategy to competitiveness; a low-skilled labour force, low wages and a labour market deeply dependent on FDI. The notion that ‘institutions matter’ has been widely discussed in economics since the 1930s (Commons, 1931). It is now generally accepted by new institutional economists and neo-institutionalists that, as Lipietz (1997) argues, the institutions which underpin the employment contract shape the nature of growth in any country (see Chapter 2 for a discussion here).9 He argues that as long as economic development is underpinned by

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peripheral-style institutions which compete on the basis of a flexible, low-paid, unskilled labour market then growth will be short-lived as investment will move onwards to other regions which prove able to compete more aggressively on this basis.

Ireland and Hungary as a developmental trajectory Ireland and Hungary comprise a developmental trajectory because their long-term socio-economic transformation displays fundamental similarities in three critical respects: traditions of peripherality, dependence on foreign direct investment (FDI) and relations with the EU. Ireland and Hungary are only two examples from a host which share these features. Despite the universality of the EU’s pressures it would not be useful to randomly compare any IR systems within or associated to the EU. For example, a comparison between Ireland and Germany is not likely to be informative, the two states being so historically, institutionally and demographically different. Przeworski and Teune introduce a research method entitled ‘concomitant variation’ (Przeworski and Teune, 1970: 32). This research strategy is based on the belief that systems as similar as possible with respect to as many features as possible constitute the optimal samples for comparative inquiry. By adopting this approach, it is argued, the variables which influence those differences that do occur will be more easily identifiable. This study holds that the influencing variables are three independent forces: economic peripherality; the integrating EU; and FDI. The historical and diverse differences between Ireland and Hungary’s IR systems provide the litmus-test. By analysing whether divergence persists or convergence develops we can test the degree of influence these three ‘controlled’ forces hold over peripheral IR systems. Przeworski and Teune explain the rational involved in this type of test: Although these designs rarely have been formulated rigorously, their logic is fairly clear. Common systemic characteristics are conceived of as ‘controlled for’, whereas intersystemic differences are viewed as explanatory variables. (Przeworski and Teune, 1970: 33) What follows is a discussion of the nature of the three ‘controlled for’ characteristics in the case-studies: dependence on FDI; economic peripherality; and relations to Europe. The discussion explains why Ireland and Hungary were deemed to provide suitable case-studies.

80 Employee Relations in the Periphery of Europe

Ireland–Hungary and notions of peripherality Ireland and Hungary both traditionally sit in economically and politically peripheral positions in relation to the global economy. Firstly, it is useful to explain how the term ‘peripheral’ has been defined throughout this book. Chase-Dunn argues that core/periphery relations involve a hierarchy, ‘a system-wide dimension of structured inequality’ (1989: 209). He goes on to suggest that peripheral regions are those areas in which peripheral economic activities are being carried out and reproduced. Such activities are usually labour intensive, rather than technologically sophisticated, and produce smaller rates of return. Chase-Dunn comes from the world system perspective: he understands cores and peripheries as two environments which are part of a continuum rather than as two dichotomous states. He discusses multinational corporations (MNCs) to illustrate this point. He claims that it is crucial for MNCs to combine both core and periphery types of production under one organisation (Chase-Dunn, 1989:207). Chase-Dunn’s description, unlike other discussions of cores and peripheries, is production-centric (Chase-Dunn, 1989: ch. 10). Ireland’s economy comes from a semi-peripheral tradition but it is usually referred to as ‘peripheral’ to Europe (Seers, 1978). It is not within the remit of this study to explain the source of this peripheral position.10 Suffice to say that Ireland had developed into a peripheral economy by the 1970s, which is reflected in its deep dependence on foreign direct investment (O’Malley, 1989: 236–47), huge public debt (Breen et al., 1990: 221), and persistent high rates of unemployment and subsequent emigration (Lee, 1993: 374–87). Central to this work is the notion that Irish manufacturing involves largely peripheral-type production – production which requires relatively labour-intensive commodities, employing relatively unskilled labour, and relatively low-paid labour (Chase-Dunn, 1989: 207). As this chapter shows, Irish production fits this description. Hungary’s peripherality results from its historic position in the Austro-Hungarian Empire (János, 1982), and later in its status as a Soviet satellite. Hungary was known as ‘Eastern Europe’s Garage’ as it specialised in producing buses, trains and trams for the entire Eastern bloc (Heinrich, 1986:178). Returning again to Chase-Dunn’s definition of peripherality, Hungary’s peripheral-like production techniques are reflected in a number of features. Looking firstly at working hours, in the USSR 28 per cent of the agricultural employees worked on agricultural plots in the second economy in 1984. In Yugoslavia, 24 per cent of

The European Social Model in Economic Peripheries 81

families had at least one member working in the second economy in the 1980s. In Hungary, 41.5 per cent of the total adult population worked part-time in the second economy in 1985 (Köllö, 1995: 295). Secondly, Hungary was technologically under-developed within the Soviet bloc. East Germany had almost 49,000 industrial robots in 1985, Czechoslovakia and Bulgaria had about 2,000 and Hungary had only 80 at this time (Köllö, 1995: 300).

Miscellaneous diversities While both Ireland and Hungary are peripheral according to ChaseDunn’s production-oriented definition, their historic, geographic and cultural peripheral nature is of course very different. Ireland was always a Western economy while Hungary’s relations with the West were traditionally uncertain (Navracsics, 1997). Additionally, Ireland has engaged in export-oriented economics for over forty years, while Hungary is very new to this game. Finally, Hungary’s peripheral nature is accentuated by the enormous flux experienced. As MacShane puts it: The changes in Eastern Europe and the former Soviet Union are unprecedented in the history of employment and labour organisation anywhere in the world. In the space of two years, a huge world region with a centrally planned and closely interlinked economic system largely cut off from the world was turned upside down. (MacShane, 1994: 337) In comparison, Ireland’s peripherality is a wholly stable one. However, these very different institutional structures do not weaken the choice of Ireland and Hungary as comparative case-studies. Indeed, if the study can locate that both regions develop similar IR patterns, despite these differences, one can assume that changes are not likely to result from their diverse institutional and cultural traditions, but are more likely to be a product of exogenous world-systemic forces.

The internationalisation of peripheral economies: FDI in Ireland and Hungary To recap, the study tests the ‘Costs of a Non-Europe’ literature (Emerson et al., 1988; Cecchini et al., 1988), which assumes that the EU acts as vehicle of modernisation for economically peripheral countries. The

82 Employee Relations in the Periphery of Europe

counter-argument was introduced in Chapter 2 whereby Lipietz claims that trade blocs, for example the EU, become sharply polarised, in the post-Fordist global market, into those who compete on the basis of a negotiated involvement strategy and those who are competitive by neo-Taylorist policies. Somewhat ironically, the internationalisation of the economy, in particular the role played by FDI, is a central variable in both the Lipietzian and the ‘Cost of a non-Europe’ literatures. As introduced in Chapter 1, the ‘Costs of a Non-Europe’ school argues that the development of European economies of scale, a product of mergers induced by the Single European Act, would create a prosperous Community through heightened efficiency at the macro- (Cecchini et al., 1988: 78) and micro-levels (Cecchini et al., 1988: 87): Taking just manufacturing industries, the calculations show that the cost savings to be had from economies of scale for production would be around ECU 60 billion. The vast majority of these savings (80%) would derive from restructuring. (Cecchini et al., 1988: 78) It is assumed that these larger and more competitive economic units would eradicate regional disparities. Lipietz, on the other hand, holds that post-Fordist competitiveness between the US, Europe and Japan, which resulted in the search for economies of scale and created the internationalisation of production (Lipietz, 1997: 3), is the force behind his ‘third internationalisation of labour’. By this he means the reconfigurations of trading blocs into centre–peripheral relations according to the manner in which goods are produced and the type of FDI which a country can attract. In short, Lipietz suggests that FDI reproduces uneven development in Europe: Let’s be precise: it is not a question of producing, in different ways, very different products, as in the first international division of labour, nor of specializing, as in the second international division of labour, in different types of tasks within the same Taylorist paradigm and converging in the same sector, but of producing similar products, in a different manner. (Lipietz, 1997: 16; stress in original text) The two conflicting theses see FDI as having a pivotal role in any changes which European IR systems undergo. For this reason, the role

The European Social Model in Economic Peripheries 83

of FDI is analysed as a central variable throughout the study. So that, as suggested by Przeworski and Teune (1970), in ‘controlling for’ FDI, the nature of variation on other dimensions will be exposed. It is noteworthy that while Ireland and Hungary both have very similar dependent relations to FDI, multinationals tend to organise differently in the two case-studies. Different national investors are attracted, the nature of investment is different and the type or stage of production conducted in the two countries is also quite different. The diversity of relations between the case-studies and FDI is important because it will indicate that any patterns of convergence located may be a product of the variables ‘controlled for’, namely relations with the EU or economic peripherality.

Success in attracting FDI: Ireland and Hungary Both Irish and Hungarian administrations hold similar expectations for the role which they believe FDI has for the success of their economies. Both administrations see FDI as crucial for a robust economy. Secondly, Ireland and Hungary both systematically attract FDI on the basis of access to the EU market and access to a relatively well-skilled, low-paid labour force. Despite these key similarities, the manner in which FDI organises in Ireland is very different from Hungary. Ireland has systematically set out to attract FDI since 1958 when the first Programme for Economic Expansion was signed (O’Malley, 1992: 33). The state has unstintingly followed this policy in the subsequent forty years ( Jacobsen, 1994). This industrial policy has resulted in Ireland being remarkably dependent on FDI (Telesis, 1982: 231). In 1994 FDI made 54.6 per cent of total sales in the manufacturing and international services industry while Irish-owned companies only totalled 43.4 per cent of total sales (Forfás, 1995: 22). More recently, the Irish Industrial Development Authority (IDA) strategically began to set out to attract certain key sectors, in particular computer software and pharmaceuticals (Irish Times, Commercial Supplement, 20 August 1997, page 7). When the IDA succeeded in attracting huge mobile companies such as Intel to Ireland, a significant number of subsidiary hardware clients and software companies came in its wake (O’Hearn, 1998: 75). Subsequently, there was a high trade in information technology (IT) products and Ireland was the seventh largest importer and exporter of computing equipment of all OECD countries by 1993. It is estimated that 40 per cent of all personal computers (PC) package software sold in Europe is now produced in Ireland (National Competitiveness Council, 1998: 49). O’Hearn’s study

84 Employee Relations in the Periphery of Europe

summarises in stark terms the significance of and deepening dependence on FDI in the Irish economy: These three manufacturing sectors [chemicals, computers, electrical engineering] have dominated Irish economic growth in the 1990s, accounting for more than 50 per cent of GDP growth in these three sectors – predominantly American corporations – accounted for nearly 40 per cent of Irish economic growth! . . . It is barely an exaggeration, then, to say that the Irish tiger economy boils down to a few American corporations in computers and pharmaceuticals. (O’Hearn, 1998: 73). Somewhat like Ireland, Hungary was well equipped to attract FDI by the time the Berlin Wall collapsed. The Hungarian government was one of the most economically market-oriented of all the countries in the Eastern Bloc even prior to the disintegration of the Soviet Union in 1989. Kaikati explains Hungary’s ‘head start’ in attracting international investment, claiming that Hungary, had adopted ‘Goulash communism’ which permitted small-scale experiments in privatization in exchange for staying in the Warsaw Pact and following the Moscow line on foreign policy. (Kaikati, cited in Zeira et al., 1997). Hungary is also similar to Ireland in that Hungarian regimes, regardless of their political colour, appear to have pegged their industrial policies on attracting FDI since 199011 (Government of Hungary, 1995: 12; Török, 1995: 41). This strategy is clear from the following excerpt from a policy paper published by the Hungarian Ministry of Industry and Trade for the ILO: Private ownership will become decisive in industrial production, and in the cases of those fields where state ownership is either permanent or temporary, property management, property use and property operation will be placed on new foundations. (Government of Hungary, 1996c: Clause 90) In Hungary, ‘privatisation’ meant the sale of industry to foreign investors. A new Privatisation Law was implemented in June 1995 as a catalyst to the stalled sale of state property. The Prime Minister, Gyula Horn, stated that he did not want ‘foreigners’ running the national

The European Social Model in Economic Peripheries 85

energy sector; however, having sacked László Pál, a minister who spoke out against majority foreign ownership of utilities in June 1995, he appointed a new minister (Imre Dunai) who stated ‘we should sell to foreign investors whatever we can’ (Grey, 1995: 31–3). Hungary’s success in this regard is reflected in the high FDI inflows to the country. In 1999, Hungary received net FDI inflows amounting to 1.8 billion euro. This represented 4.1 per cent of the GDP. Between 1989 and 1999, Hungary has received FDI inflows amounting to 15.2 billion euro. By 2000, production by FDI companies in custom-free zones accounted for 43 per cent of total exports and 70 per cent of exports in machinery (CEC, 2000c: 29–30). The success is even more apparent when Hungary is compared with its neighbours. By 1995 Hungary had attracted 37 per cent of all the direct foreign capital investment which has been sunk into Central and Eastern Europe since 1989, totalling $22.7bn (Grey, 1995: 30). Clearly, while other European countries battle to attract FDI and have been very successful, Hungary and Ireland stand out in Europe alongside the UK and Poland as key locations for investment as Table 3.1 indicates.

Small open economies The almost singular focus on obtaining FDI as an industrial strategy is not Ireland and Hungary’s only commonality. They also share key features regarding the manner in which FDI organises when invested. In both states, FDI operates export-oriented enterprises. This is not surprising as both countries offer small markets to producers: Ireland’s population is 3.6 million and Hungary’s is 10.2 million (OECD, 1997a: Demographic Statistics Section), and therefore they are not attractive in terms of the number of consumers they provide. Export-oriented manufacturing can also be explained by both countries’ extremely open economies. The Central Committee of the Hungarian Socialist Workers’ Party began to liberalise imports as early as January 1989. This policy was followed by the administration which operated after the regime Table 3.1 Direct investment inflows as percentage of GDP for selected European Countries Germany Denmark France Austria UK Ireland Hungary Poland % of GDP 1996

–0.14

0.79

1.33

1.63

2.84

2.44

3.71

Source: International Direct Investment Yearbook, 1997, OECD, 1998, copyright OECD.

3.35

86 Employee Relations in the Periphery of Europe Table 3.2

Manufacturing exports and diversification of markets, 1990 and 1996 1990 (% of exports)

Irish-owned manufacturing companies Foreign-owned manufacturing companies

1996 (% of exports)

To UK

To rest of EU

To UK

To rest of EU

42.8

23.8

42.2

32.2

22.6

49.4

22.6

50.0

Source: Forfás (2000a: 30, taken from: Central Statistics Office, 1998: 93).

change. Within a period of three years, 80 per cent of total imports were liberalised (Hoen, 1998: 96). Trade liberalisation was further extended by the EU Association Agreement implemented in March 1992 (Inotai: 1995). Ireland is commonly labelled a ‘small open economy’. This label is justified by the three key industrial strategies that were adopted in 1958 and sustained thereafter: the offer of substantial grants and tax concessions to encourage export-oriented manufacturing; the extension to export-oriented FDI of the same subsidies as those offered to indigenous industries; and the removal of tariff barriers (O’Sullivan, 1995: 365). Quotas were dismantled in the 1950s therefore, but it was not until Ireland joined the EU in 1973 that a timetable of tariff removal against other Community manufactures was established (O’Sullivan, 1995: 365). All these factors enabled the National Competitiveness Council to state that Ireland, ‘is one of the most open economies in the world at position 2 out of 26 with trade openness at 152.8 per cent of GNP’ (National Competitiveness Council, 1998: 56). Another similarity between the patterns of FDI in the two case-studies is that enterprises which invest in Ireland and Hungary tend to export primarily into the EU market. The vast bulk of Hungarian exports are with the EU (62.8 per cent) (Robinson, 1997) while Irish indigenous industries are most likely to export to the UK; FDI based in Ireland predominantly exports to the EU, as Table 3.2 indicates. These exports are largely produced in US-owned enterprises in both countries.

Low wages: patterns emerging FDI organisation throws up two key patterns in both Ireland and Hungary which are central to this study. Firstly, relative to their colleagues in the EU (their primary exporting block), employees in Irish and Hungarian firms are low paid. Taking Hungary initially, this claim

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needs to be qualified. Hungarian employees wages are low relative to EU wages, but they are the highest in the region with the exception of Slovenia (Török, 1995: 44). Another qualification is necessary here. While Hungarian wages are low relative to those in the EU, non-wage labour costs are very high indeed. Hungary is exceptional in that employers pay 50 per cent social insurance on top of salaries (Grey, 1995: 33). These figures are only 25 per cent in Austria, Germany and Slovenia and they are between 40 per cent and 50 per cent in Poland while they are as low as 25 per cent in the Czech Republic (Török, 1995: 44–5). There are clear methodological problems with cross-national comparisons of wage labour costs but the following extract indicates that while Hungary does provide a relatively low wage labour region, it appears to be true on this occasion that far away (Eastern) fields are greener for investors. Hungary’s Eastern neighbours are employed for much less. Citing a Hungarian popular economic journal, Török states:12 According to one comparison, average hourly labor costs in Hungary are USD 1.82, as compared with USD 24.87 in West Germany, USD 19.26 in Austria, and USD 17.30 in East Germany on the one hand, and USD 1.40 in Poland, USD 1.14 in the Czech Republic, and USD 0.71 in Thailand on the other. (Török, 1995: 44) A clear anomaly emerges from the Hungarian wage system whereby the share of direct wages within labour costs is relatively lower in Hungary than in EU countries, yet the proportion of costs of social security is relatively higher than in most EU countries (Berki and Ladó, 1997: 205). Hungary, however, has an important asset which prevents FDI investing next-door: it has a relatively highly skilled labour force. Ireland resembles Hungary in these two key respects. Focusing firstly on the low wages, by the time Ireland joined the EU the wage rate was lower than the Community average, as Lee indicates: Ireland recorded the slowest growth of per capita income between 1910 and 1970 of any European country except the United Kingdom . . . Ireland slid from being a reasonably representative Western European economy, in terms of income per head, at the time of Independence, to a position far below the Western European average in 1970. (Lee, 1993: 514)

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Low income was a persistent feature throughout the 1980s. Indeed, Ireland’s low average income can be illustrated by comparing rates of poverty in Ireland with elsewhere in the EU. In 1985, 26 per cent of the Irish population had incomes below a poverty threshold which was recognised to be 40 per cent of EU average income. This figure compares with 16 per cent as an overall EU average (Haughton, 1995: 42). O’Hearn shows that despite much rhetoric with regard to the ‘Celtic Tiger’, Irish wages have remained low relative to the EU. Irish employees receiving less than 60 per cent of the average EU income rose from 25 per cent to 33 per cent of the labour force between 1973 and 1994 (O’Hearn, 1998: 135). Indeed, many government advisory boards point to low Irish incomes as a feature which contributed to the ‘boom’ (Forfás, 1996: 10; ESRI, 1997a: 99).

Relatively high skills: patterns emerging In any comparative study Hungary’s indicators present quite a highly educated, skilled labour force (Szanyi, 1995:13). The 1996 Investment Climate Statement for Hungary, which the US Embassy in Budapest published, indicates the level of the education in the labour force: Hungary’s civilian labour force of 4.5 million women and men is highly educated and highly skilled. The literacy rate in Hungary tops 98%. About two-thirds of the work force has completed some form of secondary, technical, or vocational education. Hungary is particularly strong in engineering, medicine, economics, and the sciences. (US Embassy to Hungary: 1996: 15) International research substantiates this upbeat perspective on the Hungarian labour force. The OECD reports that 76.5 per cent of Hungarians have obtained at least secondary-school education while the OECD mean is 79.6 per cent. Similarly, it was found that 17.7 per cent of Hungarians had graduated from university, and again, the OECD mean is 20.3 per cent (OECD, 1997a). Despite their relatively high educational attainments, however, only a small proportion of Hungary’s labour force is engaged in R&D; only 26 per 10,000 labour force when the EU average is 46 per 10,000 (source: MSTI data base, OECD web site 13). Research conducted by Radosevic and Auriol based on OECD data, found that only Hungary out of all the Central European countries

The European Social Model in Economic Peripheries 89

seems to be fully integrated into international patenting activities with a rate of diffusion (3.40 in 1995) comparable to the EU average. (Radosevic and Auriol 1999: 365) Radosevic and Auriol point out that R&D in Hungary is similar to market economies in the sense that it is financed by the state, private business and educational institutions. However, its weakness lies in budgetary constraints which necessitate general downsizing of R&D (Radosevic and Auriol 1999: 375). It is clear that Hungary has a relatively well-educated labour force and that the skill level in the population is just slightly lower than the average in the EU, but the labour force has the capacity to conduct more R&D work than its Eastern neighbours. Turning now to look at how Ireland reflects Hungary’s relatively skilled labour force, skill and training levels amongst the Irish labour force are higher than those found in Hungary, but both countries are located at the low-to-medium range on any Euro-barometer. Ireland has managed to attract high-tech industries to its shores, but it appears that the majority of those employed there undertake work with a low-skill content and little R&D is carried out in Irish subsidiaries (O’Hearn, 1998:76). A Forfás report illustrated the problem, stating: The R&D intensitities of indigenous and foreign-owned manufacturing are a cause for concern because these represent half of the OECD average (2.4 per cent) . . . The largest gaps in R&D intensity in manufacturing are in pharmaceuticals, electronics, instruments and chemicals. Despite the fact that Ireland has a strong orientation towards ‘high-tech’ sectors, it is clear that these sectors are not underpinned by R&D activity based in Ireland. (Forfás, 1999: 21) There are a number of explanations for this lack of R&D in Irish plants (see Ó Riain, 1997: 16) but a central reason located by Irish governmental advisory bodies is the lack of training facilities available to increase the general skill level of the labour force. Ireland fares better than Hungary in terms of classical education; OECD results indicate that 93.8 per cent of the population have obtained at least secondary education (we saw that the OECD average is 79.6 per cent), and 20.5 per cent of Irish people have at least one university degree (the OECD average is 20.3 per cent.) Indeed, it appears that Ireland is leading the world in the production of technical graduates, ahead of Japan in this respect (OECD, 1996). However, Ireland mirrors Hungary’s lack of

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embedded institutions (Soskice, 1990) that produce a skilled labour force. A Forfás report summarises this point: There have only been very limited funds (less than £3m (EUR 3.8m) per year) made available in Ireland up to now for fundamental (basic) research projects selected by competitive tendering and a rigorous peer review system. In addition, the scale of the projects has been relatively small, less than £25,000 (EUR 31,743) per year for three years. This has not been sufficient to enable strong research groups to be developed or to build up a world class research capability. Other countries have formal mechanisms in place to develop a high quality research environment. (Forfás, 2000c: ch. 9)

FDI in Ireland and Hungary: key differences These two crucial similarities aside, FDI does organise within Ireland and Hungary quite differently in some important respects. Some sectors tend to invest in Ireland rather than in Hungary. As we saw above, Ireland has attracted computers and information technology manufactures as primary investors. Indeed, Irish exports are highly concentrated in two sectors: electronic equipment and machinery and food products. It scores a very low 22 out of the 24 OECD countries on the diversification of exports indices (National Competitiveness Council, 1998: 53). This concentration makes the Irish economy very vulnerable to fluctuations in those two markets. An analogy could be made between Irish dependence on these two sectors with Honduras’ dependence on bananas. In contrast, Hungary attracts a more diverse range of investors. By 1993, 23.4 per cent of the FDI invested was in engineering, but other significant sectors included the food industry (13.1 per cent), light industry (10.0 per cent), building materials (9.3 per cent), and the chemical industry (9.3 per cent) (Török, 1995: 49). A large component of FDI involves engineering, and a number of key auto-industries have established subsidiaries in Hungary. However, a wider diversity of FDI industrial sectors are operating in Hungary. 14 Furthermore, the two countries attract FDI from different countries of origin. As Table 3.3 shows, the biggest single investor in Ireland is US manufacturing. The majority of Hungarian FDI is also from the US (38 per cent of total), but, unlike Ireland, Hungary attracts considerable FDI from its neighbouring countries: 20 per cent from Austria, 18 per cent from Germany, 8 per cent from France, 8 per cent from Italy (Szanyi, 1995: 10). The significance here is that the bulk of FDI in Hungary is

The European Social Model in Economic Peripheries 91 Table 3.3

Origins of employers in Ireland according to size of the labour force

US

UK

63.8%*

8.4%*

Germany

EU

Asia/Pacific

Rest of world

9 %*

11.6%*

4.4%*

2.7%*

*Percentage of total employment 1997 in IDA-supported companies. Source: Calculated from figures in IDA Annual Report 1997, page 5.

from countries which do not practise Anglo-Saxon adversarial-style IR. In contrast, as Table 3.3 indicates, Ireland predominately hosts US FDI, which has little tradition of negotiated involvement-style IR (see Gunnigle et al., 1997c, and Roche and Geary, 1994, for a discussion of the implications this has in the Irish context). Only 20 per cent of the FDI attracted to Ireland originates in countries with a consensual tradition in IR practices. There are two other crucial differences in the manner in which FDI is organised within the two countries. The first is that investors in Hungary primarily buy out old, previously state-owned, established firms while in Ireland the majority of investment goes into greenfield sites. Swain notes that in 1993, 35 per cent of FDI in Hungary was in the form of acquisitions, while 36 per cent were joint ventures, and only 29 per cent were greenfield investments (Swain, 1998: 658). To illustrate this we can point to General Electric which bought over state-owned Tungsram, or General Motors which bought over Raba, a state owned auto-industry. Ireland is currently selling off state-owned companies on a large scale (Sunday Tribune, 25 April 1999, pp: 4–5). However, traditionally, FDI investment in Ireland sinks capital into greenfield sites, as Ireland, unlike Hungary, was a very under-industrialised economy up until the mid-1970s (Haughton, 1995: 28–38). This is an important point because investors who buy over firms tend to buy the company culture, IR traditions and practices (see Whitley et al., 1996 for discussion in Hungarian context). However, greenfield sites with inexperienced labour tend to afford management more opportunity to shape the corporate culture (see Harris, 1984 and Gunnigle, 1995, for a study in the Irish context). Despite these very significant differences it is important to stress the two similarities pointed out: relatively low-wage economies and relatively skilled labour force. While these are not the key factors which attract FDI,15 these two features provide a very significant pattern for this study when testing for institutional shifts from neo-Taylorist-style employee practices to EU-style negotiated involvement in economically peripheral regions of Europe.

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Hungary’s relations with the EU The third ‘control’ factor is the relationship these states have with the EU. Unlike Ireland, which joined the Community in 1973, Hungary is not a full member of the EU. There are two issues arising here. Firstly, it is methodologically illuminating to compare a member state with an associative member state when asking what role the EU plays in the modernisation of industrial regimes. By analysing the rapid and dynamic ‘Europeanisation’ of Hungary, we gain a sharper insight into the influence the EU has on a country than if we looked at another member state of long standing. It is difficult to recognise which practices, policies and strategies are from Brussels and which are indigenous pressures in established member states (von Prondzynski, 1990). In Hungary, a country which had minimal relations with the Community until 1989 (Heinrich, 1986: 178), Brussels’ fingerprints can be clearly located. Methodologically, therefore, Hungary provides an excellent case-study. It is a living laboratory in which ‘Europeanisation’ can be identified and, frequently, is publicly highlighted by an administration which is keen to be seen to be fulfilling membership criteria (Moorhouse, 1996: 374). Secondly, Hungary as a non-EU member is a sovereign state and is under no obligation to implement EU law or policies. That said, there are three ‘hard pressures’ which are causing Hungary to frenetically ‘Europeanise’. The first pressure was established by the Copenhagen European Council in 1993. The Council was the first occasion when the goal of full integration was confirmed and criteria for membership were established. The list covers a wide but vague range of political, legal and economic conditions, including readiness to adopt the acquis communautaire and adoption of the convergence aims under the Maastricht Treaty (Inotai, 1995: 6). It is very clear that Hungary needs to have the capacity to implement all Community laws to date on membership of the EU alongside enormous ‘restructuring’ of its economy. The second pressure for ‘Europeanisation’ comes in the form of the Phare aid package to Hungary. Phare is the EU’s aid programme designed to support the processes of reform in Central and Eastern Europe. Recipient countries only obtain the aid under the provisions established by the EU. These provisions include wholly ‘European’ features such as regionalisation of administrations and the involvement of social partners in decision-making (Langewiesche, 1995: 415). By this process Hungary may be ‘Europeanising’ by default. The third pressure entails the contents of the Association Agreements between the EU and Hungary. This trade

The European Social Model in Economic Peripheries 93

agreement, signed in 1993, envisages the complete elimination of trade barriers, except in agriculture, within 10 years of its endorsement. However, the agreement included: in parallel with its process of global tariff reduction a highly efficient second line of defense: a jungle of technical standards, environmental, veterinary and sanitary regulations and so on, of a kind that hardly exists in any of the CEECs. (Inotai, 1995: 10; stress in original text) These social clauses do place a legal pressure on Hungary to emulate Western European infrastructures (Kramer, 1993: 229–31). In addition the Association Agreements provide FDI with access to the EU market, a factor which places Hungarian IR systems under immense pressure to ‘Europeanise’ (see Ellingstad, 1997, for a discussion of Japanese firms in the region). Ellingstad notes the shift to modernise in greenfield sites: the car manufacturing plants in Hungary are no less technologically advanced than similar plants in the West. In many ways, because they were built recently, they are even more advanced. (Ellingstad, 1997: 13)

Conclusion Three main ideas were discussed throughout this chapter. Firstly, the notion that the Community may be viewed as a vehicle for modernisation was introduced. It was suggested that the EU acts as an agent for industrial development by using both hard and soft laws to straddle a European third way. The second point presented in the chapter is that the predominant use of soft laws in the development of EU social policy poses a new challenge for national-level policy-making. It was argued that while the non-binding nature of soft laws may usher in a novel and dynamic era for EU social policy founded on social learning, it may alternatively result in sub-standard national-level policies or simply misunderstood, incoherent, dysfunctional policy-making. Finally, the third section of the chapter suggested that despite the conventional tendency to divide Europe into neat blocs – East/West, or North/South – for analytical purposes (Thirkell et al., 1995), it may prove more useful to analyse countries according to the exogenous variables that affect them. The discussion indicated that one can gain insightful information on the EU as an agent for modernisation by comparing two traditionally

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economically peripheral countries, both of which are deeply dependent on attracting FDI. The chapter introduced Ireland and Hungary and argued that while both countries are currently experiencing an economic boom, it is crucial to assess whether key institutions which underpin employment relations are also being transformed. It is argued that unless these institutions shift from a ‘low-road’ industrial strategy they will not sustain long-term, stable economic success.

4 The European Union and National Legal Systems

A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods. (Article 189, Treaty of Rome. Stress not in original text) Hungary shall act to ensure that future legislation is as compatible with Community legislation as possible. (Article 67 of the Association Agreement with Hungary ( JL347/2, 1993. Stress not in original text)

Introduction The subject of employee representation perhaps illustrates most clearly the EU’s effort to juggle both competitiveness and social cohesion at the same time. The Community first developed legislation in this area in the 1970s. This body of legislation stipulates that employee representatives must be informed of corporate plans in the event of the transfer of undertakings, collective redundancies and protection of workers in cases of insolvency. More recent developments in this field include the European Works Council Directive. The Community has supplemented this list of legally binding initiatives with a host of soft developments such as the Green Paper on corporate responsibility (CEC, 2001f ). The message from the Community is that ‘corporate responsibility’ is synonymous with competitive, modern production. It is quite clear that the Community sees mechanisms for employee representation as a boon, as the recent agreement on a national-level work council Directive indicates (CEC, 2001g). This chapter shows, however, that regardless of the amount of goodwill and support the Community provides in a policy 95

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area, it is the nature of governance which is employed to implement these initiatives which is absolutely crucial. When it comes to developing and implementing initiatives in the field of employment policies and, indeed, social policy more generally, the Community tends to use two main mechanisms – either Directives or soft laws. Both mechanisms are deemed suitable for developing social policy because, unlike Regulations, Directives and soft laws provide leeway for member states and even local-level actors to implement the initiative in a manner which complements the national or local legal systems, conventions and traditions. The chapter introduces these two main mechanisms the EU has adopted to promote systems of employee participation. It argues that it is important to develop a contextual approach to policy-making in the EU; that both hard and soft initiatives pan out differently according to the social, economic, political and cultural environments in which they are implemented (Snyder, 1994: 198). The chapter shows that while both Directives’ and soft laws’ flexible characteristics make them the most convenient mechanism by which to develop employment policies, they may not be the most efficient means. It is shown that in some circumstances, particularly in economically peripheral environments, the EU’s choice of flexible methods of governance can result in ineffectual or dysfunctional policy-making at the national level. It is suggested that the EU should re-evaluate the manner in which it governs such initiatives. The chapter is organised into four parts. The first introduces the Directive as a legal mechanism. It looks at the European Works Council Directive in particular. Secondly, the chapter assesses the manner in which this Directive was transposed in the Irish context. The third part discusses how Hungarian labour law has been influenced by Hungary’s relations with the EU. It examines Hungary’s efforts to establish industrial democracy. Finally the chapter looks at research which has been undertaken on the operation of European Works Council Europe-wide.

EU Directives: the nature of hard initiatives and employee participation Regulations are EU laws which are directly applicable in member states. They involve laws which must be applied exactly as stipulated in the legal text. As such, Regulations are useful for implementing, for example, health and safety initiatives. The essence of Directives, however, is that they stipulate the ends to be achieved and member states are free to adopt whichever means they see as most suitable to achieve these ends (Snyder, 1993: 40).

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Snyder explains that Directives are a highly problematic component of Community law. Central to this, he claims, has been the failure of member states to transpose Community Directives into national law (Snyder, 1993: 40). He points out that Directives were originally intended to encourage, facilitate or permit decentralised decision-making (Snyder, 1993: 52). Snyder stresses that the Directive was designed as a tool by which national law could be harmonised rather than made absolutely uniform. Subsequently, national transposition of legislation may differ from member state to member state. Given their ambiguous nature, the Community has mooted whether Directives should be replaced as a Community legal tool. In 1991 the Commission presented a proposal to the Intergovernmental Conference on Political Union which suggested that Article 189 of the Treaty should be revised and a ‘Community law’ should be incorporated into the Treaty. The idea was that a ‘Community law’ would reform the Community legal order and establish a hierarchy of norms similar to that found in national legal systems. It was held that this reform might clear up the ambiguities which surround Directives’ mechanisms (Snyder, 1993: 41, note 127). The proposal was rejected. In its place a ‘Declaration on the Hierarchy of Community Acts’ was annexed to the Maastricht Treaty. In this Declaration, it was agreed that the member states would review the classification of Community acts at the forthcoming Intergovernmental Conference in 1996, and that ‘it might be possible to review the classification of Community acts with a view to establishing an appropriate hierarchy between the different categories of act’ (Declaration no. 16, Treaty of Maastricht). However, the issue was not raised in the negotiations at the 1996–97 Intergovernmental Conference and it appears that the Directive is likely to remain the most frequently used type of Community act (Snyder, 1993: 41). Some commentators suggest that not only is the Directive here to stay, but its ambiguous nature make it a highly favourable instrument in post-Maastricht Europe. Laffan et al. hold that the Community cannot afford to be anything but ambiguous due to its complexity. They argue that the EU’s incremental style of governance is its chief asset (Laffan et al., 2000: 199). In this context, it is possible to view the Directive as a highly appropriate instrument for the new Europe, facilitating the decentralisation of Community administration, embodying a sensitivity to national and cultural differences and securing a host of diverse and pluralistic legal patchworks within the one Community (Streeck, 1997a: 15). Indeed, three legal innovations which have been introduced throughout the Community in recent years have served to ‘soften’ the

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Directive as a legal mechanism and make it more flexible in nature. Firstly, the principle of ‘mutual recognition’, agreed by the ‘Cassis de Dijon’ 1 judgement in 1979, stated that national standards and systems need not harmonise to an EU administrative norm, but that it can be taken that the national standard or system is sufficient and should be recognised as such by fellow member states. The principle was devised in relation to the sale of goods but it has subsequently become a key principle in the establishment of the single market (Nicolaodis, 1997: 1). The second legal innovation is the principle of subsidiarity which was initially endorsed by the EU in the Single European Act and was later clarified in the Treaty on the European Union. As a result, the Commission is obliged to explain why EU intervention is preferable to national action when addressing a matter. It must show that the proposed action is proportional to the problem that is being addressed. The third innovation may be labelled ‘negative legislating’. This means that a Directive lies dormant until it is activated by the parties involved rather than being established as an omnipresent right. An example here is the European Works Council Directive whereby employers who do not voluntarily introduce the legislation have to be approached by their employees before they are required to comply (Hayes, 2000: 17). All these mechanisms prioritise the local level. Teague claims that this overt preference for the local as an arena of decision-making ‘gives legal force to the preservation of national identities and political flexibility’ (Teague, 1999: 192). Streeck’s analysis of the European Works Council Directive maps a shift from the goal of harmonisation in the 1970s to coordination as the goal at the turn of the century (Streeck, 1997a: 10–18). He stresses the flexible nature of the Directive and argues that the European Works Councils ‘can therefore be expected to vary widely, making worker access to participation highly unequal in different countries, sectors and companies’ (Streeck, 1997a: 18). It appears that in contrast to the Europeanisation of national social policies, Directives facilitate the nationalisation of European social policies.

European Works Council and EU governance Martínez Lucio and Weston (2000) argue that the European Works Council (EWC) Directive is one example of the many areas of regulatory activity in which the EU is engaging in an effort to establish a new economic order with the Community and to secure itself within global relations of production (Martínez Lucio and Weston, 2000: 206). They suggest that the Directive embodies an effort to regulate worker representation,

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rather than leave it open to the unfettered market. The Directive connects the supranational level of coordination with the local level of production in a highly flexible manner which virtually writes the state out of the picture. In this sense, they claim, it constitutes a wholly novel system of regulation. Overall Martínez Lucio and Weston adopt an upbeat tone. They argue that the EWC Directive amounts to a new form of regulation which fits with the current system of international production and consumption and which leaves dysfunctional, Fordist models of labour regulation far behind (Teague, 2000: 56–61). They stress, however, that the EWC Directive will only function effectively if it is securely embedded in a network of robust interconnections, which, they argue, are currently emerging, such as international ideological projects, state support and EU-level corporatist-style institutions (Martínez Lucio and Weston, 2000: 211–12). The EU articulates clearly that it is heading up a search for suitable systems of governance, perhaps mostly clearly reflected in the EU’s Intergovernmental Conference, 2000. As Martínez Lucio and Weston point out, the Community has indicated that industrial democracy is a principal pillar in this effort to build a new system of regulation within a global economy. The Commission has spelt out that having ushered in an open economy with the Single European Act and the Maastricht Treaty and having encouraged a flexible labour market as the European Council in Luxembourg did, a vacuum in governance ensued (CEC, 1998a). The EU Green Paper, Partnership for a new Organisation of Work, adopted by the Commission in April 1997, argues that a flexible, adaptable workforce should be developed within an environment of information and consultation which allows employees to anticipate change. The Commission sees industrial democracy as having additional value in the strive for competitiveness. It states: [D]ifferent reports transmitted to the Commission, as well as good practices in companies, allows us to conclude that information and consultation are factors for productivity as they contribute to the creation of a highly skilled and committed workforce. (CEC, 1998a: 2) This conviction has been backed up with concrete action. Several Community laws have secured the principle of information and consultation. These include the Directive on collective redundancies, the Directive on the safeguarding of employees’ rights in the event of transfers of undertakings, and the Directive on the establishment of a European Works

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Council. It is clear the EU has put effort, energy and resources into supporting this principle and it is envisaged that a competitive, flexible labour force can co-exist with high-road models of industrial democracy in a symbiotic relationship. The EWC Directive has attracted a lot of interest and research. Some studies focus on the influence which the company’s country of origin has on the EWC. Streeck, for example, suggests that industrial relations (IR) systems in the company’s home country will dominate the EWC’s shape due to the employees’ likely numerical dominance and their established relations with headquarters’ management (Streeck, 1997c). Similarly, Lecher and Rüb (1999) suggest that three categories of EWCs will emerge: those in which employee representatives hold a national perspective on issues; those which have a supranational ethos but which are driven by representatives from the company’s home country; and those which practise a ‘collective European identity’. Likewise, Pedersini and Seveso place their explanation for how EWCs are developing at the national-level. They claim that four categories of EWC are emerging: countries which have been unaffected by the Directive due to delays in transposition; countries which are unaffected because the supranational system fits seamlessly onto the indigenous system of representation; countries in which there is a ‘relatively tight fit’ between the EWC and the indigenous system; and Ireland and the UK, where the EWC has the potential to have a substantial impact due to the traditional absence of such structures (Pedersini and Seveso, 1998: iv). Even those studies which are keen to challenge the notion that EWCs are influenced primarily by national industrial relations arrangements, tend to recognise the importance of the national IR backdrop. Fitzgerald and Stirling (2001) suggest that the nature of the multinational company itself is a key underestimated variable in EWC developments. Additionally, Hoffmann et al. (2001) stress that it is important to look at the ‘host country effect’, that is, to discuss EWCs that are, for example, of US origin and are based in countries with weak employee participation traditions. Yet both these studies do contextualise their work. Both are based in the UK and subsequently they highlight the role that FDI plays in the economy, the voluntaristic, adversarial IR traditions and the absence of a tradition of works councils. Despite both studies’ aim to underscore the important role that management and the MNC play in EWCs, national IR systems still provide a primary influence in these works. Some commentators have suggested that the EWC could become a forum in which national delegates are pitted against each other in an effort to present company headquarters with the most attractive regime

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(Schulten, 1996). Another concern has been that national systems of industrial relations will be challenged by the new system as cuttingedge companies engage in the EU’s supranational structure, leaving the national domain to IR laggards such as state-owned companies or sunset industries (Streeck, 1997b). Finally, Mark Hall has pointed out that the Directive could be transposed into domestic legislation so as to be qualitatively different in nature from state to state (Hall, 1992: 8–9). This suggests that the member states are likely to have transposed the Directive in a manner which is appropriate for their industrial strategy and traditions. These three notions indicate that instead of providing a novel system of regulation which may secure industrial democracy for MNC employees in a universal, homogenous manner, the EWC Directive may operate in a more divisive manner. All three of these pessimistic scenarios highlight the importance that core/peripheral relations hold in production throughout the EU, be it in terms of core/peripheral subsidiaries, core/peripheral sectors, or core/peripheral states.

Employee participation in Ireland Trade union membership in Ireland is relatively high, standing at roughly 45 per cent of the workforce (Lecher and Naumann, 1994: 51). But Ireland stands out, alongside the UK, as one of the few countries in Europe with no tradition of institutionalised employee participation. However, employee participation appears to be emerging in an ad hoc and voluntarist manner. Research conducted by the European Foundation for the Improvement of Living and Working Conditions (1999) has shown that 82 per cent of enterprises in Ireland do undertake some form of employee participation, placing Ireland at the EU average. These findings are corroborated by other surveys.2 A review of these studies shows that direct communication of some nature between individual workers and their managers is almost universal (O’Donnell and Teague, 2000: 16). It is clear from research that Irish firms are readily experimenting with employee participation, but most of the studies caution that it is a very broad term which needs to be defined. Geary (1996: 47), for example, makes a distinction between consultative and delegative teamworking. In the latter, employees are encouraged to make their views known but management retains the veto on decisions. This is often labelled ‘indirect participation’ (Kelly and Hourihan, 1997: 409–11). In the former, however, employees are empowered to decide on the best course of action in work-related matters. This is referred to as ‘direct participation’.

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Ambiguous patterns The ambiguous nature of the term ‘employee participation’ and the distinction that has been drawn between ‘direct’ and ‘indirect participation’ has fuelled a debate on how deep participation actually is. This literature may be summarised down to those who see the glass as half-full and those who see it as half-empty. O’Donnell and Teague (2000) review the data gathered to date and conclude that enterprise-level partnership is ‘spreading rapidly in Ireland’ (2000: 3). They suggest that the data underestimates the extent to which partnership arrangements operate in Irish firms (2000: 17). Gunnigle (1998), on the other hand, is less sanguine. Having reviewed survey material similar to that reviewed by O’Donnell and Teague, he concludes that while a sea-change is under way in Irish industrial relations, it does not amount to robust enterprise-level partnership throughout Ireland3 (Gunnigle et al., 1997b: 119–26; Gunnigle, 1998: 197).

A new hybrid? An interesting alternative to the half-full, half-empty thesis was presented initially by McKersie (1996). He argued that the Irish environment provided the opportunity for a progressive and profitable ‘hybrid’ style industrial relations to develop. McKersie claimed that two dominant IR tracks operate in Ireland. One track, practised mostly in US-owned FDI firms, involved human resource management (HRM) techniques and high-performance systems in a non-union context. The second track, found mostly in indigenous companies, integrated trade unions as key players in more traditional labour–management relations. McKersie claimed that both tracks could merge, combining the best features of the non-union plants with the main assets of the traditional labour– management relations. He suggested that this opportunity is a unique one to Ireland, as other countries that have adopted the HRM strategy, such as the US, lack the tolerance towards trade unions found in Irishowned firms (McKersie, 1996: 11).

Ireland: a prototype for small open economies? Another perspective has suggested that rather than seeing the Irish model of employee practices as a unique and exceptional environment, it is possible that the pattern emerging in Ireland is simply ‘“prototypical” of the future trajectory of European industrial relations systems in general’ (Roche, 1998). Roche suggests that Ireland’s relatively long experience as an open economy and its dependence on FDI may display

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the effects of an economic strategy which many other European economies may be pressurised into adopting in future years within a single market with increasingly mobile investment.

The EU as a pressure for change In terms of hard pressure for change, the EU was a key source of legislation on employee participation in a context such as Ireland, which had no tradition of this nature (Kelly and Hourihan, 1997: 419). There is a catalogue of measures that the Irish administration has been obliged to implement, a number of which directly relate to the issue of employee participation. Early examples include the Directive on collective redundancies and the Directive on protection of employees’ rights in the event of transfers of undertakings. Regarding that other important hard pressure, funding, Hourihan suggests that labour market reforms which were undertaken between 1994 and 1999 were unambiguously tied to EU-funding and were largely ‘imported from Brussels’ (Hourihan, 1994: 416). In terms of soft laws, the Commission has actively promoted the idea of employee participation since 1974 when the Council of Ministers adopted a Programme of 36 measures which was underpinned by three main objectives, one of which was the increasing participation of management and labour in economic and social decision-making and greater participation of workers in the running of companies (Hourihan, 1994: 403–4). More recently, the Community commissioned a study which undertook an analysis of employee participation and stimulated debate on the subject (Sisson, 1997). The Commission’s Green Paper, entitled Partnership for a New Organisation of Work, urges the social partners to develop a more trusting relationship at the enterprise-level to achieve a more competitive environment (CEC, 1997b: 5). It is, of course, immensely difficult to trace and assess the manner in which EU soft activities have influenced Irish industrial relations (McCarthy and von Prondzynski, 1984: 243–4), but some commentators have stressed that these intangible influences have weighed heavily on policy-making within Ireland’s administration (G. Mangan, 1993), and within its industrial lobby groups (Teague, 1995a; Teague, 2000). However, others suggest that it is inaccurate to assume that the Community has bolstered employee participation in Ireland’s industrial life. Von Prondzynski examines the EU Directives on collective redundancies and the transfer of employment which were transposed respectively as the Protection of Employment Act No. 7 (1977) and the Safeguarding of

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Employee Rights on Transfer of Undertakings. He argues that their effectiveness is doubtful, regardless of their hard, binding nature, because they were implemented as a statutory instrument which amounted to a verbatim copy of the relevant parts of the Directive. Von Prondzynski suggests that this superimposition of the European civil law model, in which the spirit of the law is paramount, onto Ireland’s common law model, in which the letter of the law is key, is wholly inappropriate (von Prondzynski, 1990: 504–6). 4 Gunnigle argues that these soft efforts are weak because the EU’s Green Paper on Partnership for a New Organisation of Work (CEC, 1997b), for example, promotes the general notion of enterprise-level partnership but it fails to define exactly what industrial relations partnerships involve. He shows that this contingency approach to policy-making has been adopted within Ireland’s administration. He suggests that this experimental-style policy-making has weakened the partnership project throughout Ireland’s enterprises (Gunnigle, 1998: 182–4). Examples of hard initiatives include the Directive on collective redundancies and the Directive on protection of employees’ rights in the event of transfers of undertakings. However, some doubts have been raised about how effective these measures have been in practice (von Prondzynski, 1990: 504). They have both undergone significant amendments as a result of communication from the European Commission, pointing out that the legislation was defective and asking for it to be brought into line (EIRI Review, 2001: 3–4).

The European Works Council Directive: Ireland The Directive was adopted under the terms of the Maastricht Social Policy.5 It establishes an EWC or an information and consultation framework in every multinational enterprise which has a thousand employees or more within those states signed up to the Directive and with at least 150 in each of two or more of these countries. Decisions such as whether an EWC or, rather an information and consultation procedure should be established is decided at the enterprise-level by management and a specially established ‘special negotiating body’ (SNB) of employee representatives. If after three years both parties fail to reach an agreement then an EWC must be institutionalised as is described in the Directive’s annex. One can make two uncontentious claims regarding the EWC Directive. Firstly, it displays a certain commitment to employee involvement, within multinational corporations (MNCs). In terms of historical

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developments in industrial relations, the EWC is unprecedented. Nearly 600 multinational enterprises have already signed EWC agreements with potentially over 10,000 employee participants (EIRR, 2000: 3). The second claim, which can be safely made, is that the Directive is flexible in nature (Scorey, 1997: 185); it embodies the principle of subsidiarity. This principle, which was written into the Maastricht Treaty, prevents EU-level involvement in policy development when it is believed that the local or national level could intervene more effectively (Bermann, 1994: 453). Hall claims that the EWC Directive embodies subsidiarity because, firstly, it does not cover national undertakings; secondly, by drafting a Directive rather than a Regulation, the Community has left considerable scope for member states to shape the overall legal framework; thirdly the Directive places the responsibility for determining the details of the EWC on management and employee representatives at the enterprise level (Hall, 1992: 556–8). There is some contention regarding the implications that subsidiarity holds for EU social policy (Teague, 1999: 192–4). However, the Commission itself seems to suggest that this trend towards decentralisation presents a serious threat to the European social dimension. It highlights this threat, with regard to the EWC Directive in particular, in a report which it presented to the European Parliament and Council on the application of the Directive throughout the Community. It states: The Directive is based on the principle of quasi-absolute priority and the freedom of the social partners to negotiate appropriate agreements. This approach has proved effective and is the reason why so many agreements have been signed. However, some of these agreements seem to guarantee only a very low level of transnational consultation and information. (CEC, 2000b: paragraph 2.2.2a; stress in original text) Therefore, while EWCs were established in certain European MNCs through a ‘hard’ mechanism, namely a Directive, because the Directive is underpinned by subsidiarity and was bent on ensuring that ‘the EWC would not override the rights of existing, lower-tier bodies established by national laws and practices’ (Hall, 1992: 557), the legislation amounts to a ‘soft’ mechanism.

Directive in the Irish context The transposition of the EWC Directive is of particular interest in the Irish context for three reasons. Firstly, there is no tradition of works

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councils in Irish industrial relations. Secondly, Ireland’s working practices and traditions are historically ‘voluntaristic’ (Geary, 1996: 52). Thirdly, the Irish economy is fiercely dependent on overseas investment, especially American, and these US plants tend not to be sympathetic to mechanisms of consultation and participation (Gunnigle, 1995). Therefore, the Irish government was in a dilemma when faced with the EWC Directive. It was torn between fulfilling its role as a ‘good European’ and presenting the region as an attractive site for overseas investment. A senior civil servant, who was centrally involved in drafting the Irish transposition, voiced this dilemma. He explained that the legislation was influenced by three main policy guidelines: promotion of information and consultation as a means of improving competitiveness; as an investment in employment retention and creation; and respecting the tradition of voluntarism in Irish industrial relations (European Works Council Report, 1995: 3). A balancing act was performed while drafting the Bill and there was much consultation between the Irish trade unions, employers’ representatives and a number of MNCs. 6 The Act, which was finally agreed, entitled Transnational Information and Consultation of Employees Act, 1996, strives to fulfil the spirit of the Directive within the context of a very flexible framework. Scorey points out that the Act not only attempts to address these tensions between EU stipulations and MNC pressures, but the domestic law also had to implement a ‘continental-style’ civil law into Ireland’s voluntarist IR system and common law traditions (Scorey, 1997: 192). Scorey claims that Irish legislators handled these difficulties in an admirable fashion and took the Directive seriously. When Irish legislators were faced with the task of transposing this Directive into national law, they had the option of either introducing a formal body on information and consultation or introducing a procedure on information and consultation. The former would require a major overhaul of Ireland’s IR system, not to mention its systems of production and its industrial ethos. It would involve introducing institutionalising statutory enterprise-level channels for employee representation and information. The latter option would involve introducing an information and consultation procedure, or an employee forum which would be coordinated within the enterprises rather than being subject to detailed prescriptive rules established at the national level. It was eventually decided that a procedure would be appropriate for the Irish context. At the parliamentary debate, during the second reading of the Bill, the then Minister for Enterprise and Employment, Eithne Fitzgerald, stressed that it was important that the ‘European Employees’

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Forum’ should be tailored within each enterprise, rather than institutionalised with Ireland’s IR system (Díospóireachtaí Parlaiminte Dáil Éireann Tuarise Ofigiúil for 19 June 1996 at 588–9, cited in Scorey, 1997: 189). It was believed that an institutionalised mechanism would be incompatible with Ireland’s voluntarist IR traditions, and as the notion of works councils is unprecedented in common law jurisdictions, it may not have been possible to transplant it in Ireland (Scorey, 1997: 189). The principle, which guided the transposition, was the attempt to leave more flexibility to employees and management to agree arrangements at the enterprise-level. A senior civil servant involved in the Irish legislation explained, [I]n principle, what we sought to do was to leave more flexibility to management and to employees to agree things in Ireland, than we thought might be the case in other member states. Of course, we could only do that to the extent that the Directive allowed us to. Because we felt that approach was consistent with the voluntarist tradition that there is in Irish industrial relations . . . That was a conscious decision. 7 When negotiations on the transposition were on-going, a number of commentaries highlighted the difficulties which the absence of a national works council system involved. The difficulty in Ireland was perceived as being twofold. Having no national works council system, the EWC, which introduced employee representation within enterprises as opposed to regions or sectors, was alien to Ireland. Secondly, while the constitution supported the individual’s right to join a trade union, employers in Ireland are not obliged to recognise them and negotiate with them. Consequently, there are many largely US-owned subsidaries in Ireland which do not operate a trade union structure and therefore autonomous channels for employee information and consultation are absent in these plants (Gunnigle, 1995). The difficulty arose as to how this institutional vacuum could be plugged in Ireland. The Act attempted to do this by two key clauses, each of which is discussed in turn.

Definition of employee representative The Transnational Information and Consultation of Employees Act (1996) defines who may be involved in the special negotiating body (SNB), the short-term committee which negotiates with management at the outset to establish the EWC. The Act explains the SNB may be

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composed of ‘persons elected or appointed to that body’ including either employees or trade unions officials of a recognised body whether or not they are employees (Part I, Section 3, para. 40–45). By including both trade unions and elected employees, the Act went some way to addressing the institutional vacuum. However, Browne argues that the definition of both ‘trade union’ and ‘representative’ presented in the Act poses problems. The Act defines ‘trade union official’ as An official of a trade union licensed under the Trade Union Acts, 1871 to 1990, which is already recognised for collective bargaining or information and consultation purposes by the business units of the Community-scale undertaking or group of undertakings located in the State. (Part I, Section 3, para. 35) Additionally, the term ‘representatives’ is defined as Those employees’ representatives already recognised by the undertaking or group of undertakings for collective bargaining or information and consultation purposes. (Part II, Section 10.2) When the Bill was being drafted these definitions were highlighted. Labour lawyers and the Irish Congress of Trade Unions (ICTU, 1996) voiced similar concerns. It was argued that by insisting that employee representatives must be already recognised by the undertaking or group of undertakings for collective bargaining or information and consultation purposes, the Act resembles the law-case Commission v. The United Kingdom. This was a case dealing with the safeguarding of workers’ rights in the event of transfers of undertakings and collective redundancies, in which it was found that the UK failed to fulfil its obligations under the Directive because the UK transposition limits the obligations to inform and to consult representatives of trade unions already recognised by employers, thus leaving trade-union-free enterprises outside this obligation. The Advocate General for the case stated (2 March 1994): By making recognition of representatives dependent on the will of employers, the obligations set out in those articles (of the two Directives) are undermined. (cited in Browne, 1996: 33)

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Browne argued that the Irish transposition of the EWC Directive embodies the same shortfalls as the UK’s legislation on employee rights in the event of the transfer of undertakings and redundancies. It was her opinion that if the final Act were to contain these definitions then Ireland would be likely to face challenges based on the UK judgement. John Daly, the senior civil servant involved with the Directive, explained that the administration had not sought to replicate the approach taken in the UK. He stressed that no Irish-based MNCS lacking employee representives had concluded that the 1996 Act did not apply to them simply because of the definitions of employee representive. However, the clauses in the Bill, which Browne discussed, were included in the final Act. It is significant that although, to date, there has been no case law challenging the Irish transposition of the Directive, as mentioned above, the Commission has written to the Irish administration asking them to amend the transposition of the Directives on the transfer of undertakings and redundancies. This request was made in light of the outcome of the Commission v. UK case and it would appear to hold certain implications for the manner in which the EWC has been transposed in Ireland.

Information and consultation feedback mechanism In a second effort to address the institutional vacuum which resulted from the absence of a national works council system in Ireland, the legislators went beyond the Directive and stipulated that in order to be valid a EWC agreement must state By what method the information conveyed to employees’ representatives shall be conveyed to employees in the State and the opinion of employees given on the information so conveyed shall be recorded, irrespective of the Member State in which the central management is located. (Part II, section 12.3c) During negotiations on the Bill this clause also attracted a lot of attention. Trade unionists argued that it could not guarantee that information would be relayed back to employees on the shop floor by establishing information channels in an ad hoc, unstructured manner. They called for the introduction of a national works council system (Geraghty, 1996). Other commentators raised concerns about the flexible nature of this clause. Hayes suggests that the decision to opt for an information and consultation procedure, rather than an institutionalised mechanism involving prescriptive rules, is insufficient to fulfil section 12(3), ‘The opinion of employees given on the information so conveyed shall be recorded’. Hayes argues that a structured mechanism is necessary to enable employee representatives

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both to report back to employees and to obtain employees’ opinions in preparation for the next EWC meeting (1996: 29). When the Bill was passed into law, Scorey also raised concerns that the Irish transposition failed to provide robust feedback mechanisms inherent in any effective system of European-level information and consultation (Scorey, 1997: 189–90). A recent study on the agreements made under Article 13 of the Directive, has shown that the EWCs which operate in countries with established national structures for employee information and consultation tend to have the most effective of works councils (Marginson et al., 1998: 74). In a report which the Commission presented to the European Parliament and Council, on the application of the Directive throughout the Community, similar concerns are highlighted. It points out that these institutional gaps act as obstacles to the effective operation of the EWC Directive: In order to exchange information and be consulted effectively at Community level, it is necessary for efficient information and consultation systems to exist at national level and for the different levels of worker representation within undertakings or groups of undertakings to be linked with each other. (CEC, 2000b: para 2.2.2.f ) The European Foundation for the Improvement of Living and Working Conditions has gathered and made publicly available the contents of EWCs.8 The texts of only 16 of the Irish agreement are available on the database. Of those 16, nine are agreements established before 22 September 1996. Under Article 13 of the Directive, agreements concluded before this date which cover the entire workforce with transnational information and consultation systems are recognised as valid. The remaining seven agreements were agreed under the obligations set out in the Directive. In total, two of the agreements violate the Transnational Information and Consultation of Employees Act as they fail to give any indication of how information obtained at the forum will be relayed down to the enterprise level. One of these agreements was an Article 13 agreement and therefore need not discuss the mechanism, but the other was concluded under the Act. Eight of the agreements do state that information gathered at the European level will be relayed back to employees but they fail to stipulate the mechanisms used. It is common for agreements of this nature to state simply ‘established and existing mechanisms will be used for information and consultation purposes’. 9 Of these eight, three are Article 13 agreements and five have been concluded under the

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Act. Six of the agreements do spell out clearly the exact mechanism by which information will be relayed down to employees. Perhaps surprisingly, five of this nature are Article 13 agreements and only one was concluded under the Act. Only one of the 16 agreements included made any reference to the bottom-up mechanism stipulated in Part II, Section 12. 3c to record the opinion of employees on the information received: ‘the opinion of employees given on the information so conveyed shall be recorded’. Research has shown that there are no straight implications between the formal quality of agreements and the practical work developed by the EWC representatives (Kerckhofs, 2001). 10 However, an expert involved in negotiating Irish agreements since 1996 found that this slack approach to feedback mechanisms in the agreements concluded under Irish legislation is often reflected in the manner in which these agreements operate. He explained that while e-mails, websites and notice boards were often used to relay information back to the employee at the enterprise-level, this was not satisfactory. It was found that ‘quite often in the Irish/UK context EWC is divorced from local structures’. 11

Employee participation in Hungary The Communist Party of Hungary established an authoritarian regime under the command of the Soviet Union in 1947. This had clear implications for the pattern of industrial relations which developed. Trade unions with diverse ideological or Christian underpinnings were dissolved in July 1946 and the remaining Central Trade Union Council (SZOT) became a branch of the party and the state. In 1989, economic, political and social transformation resulted in a radical restructuring of Hungary’s trade unions (Andor, 1996). Employee representation was subject to a number of very powerful countervailing pressures. Some commentators underscore the continuity which pertained from the old system, while others highlight the manner in which forces for change impacted on Hungarian employee representation. It is possible to locate the sources for changes in Hungary’s IR system within both pressures (Makó, 1996: 11; Cox and Mason, 2000).

Employee representation: forces for continuity There is evidence that the ‘command economy’ left a definite legacy on Hungary’s system of employee representation (Tóth, 1994; Whitley et al., 1996). Firstly, research shows that despite the strong position which enterprise-level trade unions possessed on paper in the Communist

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period, they were quite weak vehicles for employee representation. Managers tended to dominate the enterprise-level trade union committees, and workers were reluctant to raise issues due to the large numbers present at such meetings, which were felt to be intimidating, and fear of attracting negative attention from management (Swain, 1992: 160–1). Trade unions failed to commit themselves to employee protection in the manner which is traditional in Western Europe (Tóth, 1994: 95). As a result, enterprise-level bargaining became highly individualised (Burawoy, 1985: 50). Informal negotiations on working conditions took place either between management and an informal group (Tóth, 1994: 94–5) or between management and individuals (Köllö, 1993: 280). Tóth looks to the legacy of this period to explain the current IR system. He argues that even in the post-Communist period when the Central Trade Union Council (SZOT) obtained autonomy from the state and reformulated itself under the renamed Confederation of Hungarian Trade Unions (MSzOSz) it was unable to adopt a truly pluralistic role at enterprise level. Tóth explains that this is a result of a number of factors: worker apathy towards trade unions; inter-trade-union fragmentation; and the strength of the old traditions and customs and the persistence of personal relationships at enterprise-level (Tóth, 1994; Frege, 2000). The current IR system is coordinated by a Labour Code, another norm inherited from the Communist period. The code was reformed in 1992 so Hungary has maintained a legalistic approach to industrial relations. The right to associate is upheld in the Labour Code and the monopoly of the transmission-belt-style trade union began to break down in 1988 so that Hungary now boasts a plurality of industrial interest groups (Kollonay and Ladó, 1996: 103).

Employee representation: forces for change Some commentators stress that 1989 introduced a period of extreme flux and change (MacShane, 1994) and indeed, significant factors did emerge in this period which affected Hungary’s system of employee representation. The following includes a synopsis of three of them: privatisation, FDI and the EU. The influence of the latter is discussed in a little more depth.

Privatisation Privatisation presented two key problems for Hungary’s weak and fragmented trade union movement (Standing, 1997). Firstly, employees were largely uninformed about the transformation their organisation was undergoing. The sale of companies was often undertaken without

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employees’ knowledge. Workers and trade unions were informed of future plans for the company when it was a fait accompli (Neumann, 1991: 323). Frequently, trade union participation was completely omitted and Neumann explains that this often was the sole motivation for the establishment of new trade unions in the enterprise (Neumann, 1991: 324; Neumann, 1998: 7). A second problem involved the enormous redundancies which privatisation normally entails. Neumann points out that when the (mostly foreign investors) took over, they conducted their restructuring programme on a unilateral basis without consulting with the local trade union, and dealing with redundancies in a consensual manner by distributing generous pay-offs, thus marginalising the local trade union (Neumann, 1998: 6–7).

FDI Research on the impact that MNCs have on traditions of employee representation in Hungary is somewhat ambiguous, and no one clear finding emerges (Héthy, 1995b: 102–3). Some research indicates that trade union experiences in MNCs are more difficult than those in indigenous companies throughout the Central and Eastern European economies. A survey conducted by the European Trade Union Institute on enterprises in Bulgaria, Czech Republic, Hungary, Poland and Slovakia found that trade unions are weaker in multinationals and in the metal sector than in indigenous companies and the food and beverages sector (Repo, 1996: 53). It was found that subsidiaries of MNCs disclosed information much less often than the domestically owned companies (1996: 55). However, those MNCs which did recognise trade unions tended to present a better bargaining atmosphere than existed in indigenous companies (1996: 59). Case-studies that have examined employee representation within Hungarian-based MNCs reflect similar ambiguities. The research shows that factors such as MNC country of origin (Makó and Novoszáth, 1994: 145–6) and sector do tend to shape the nature of employee representation to a degree. Yet Pollert suggests that during the type of radical restructuring which the Hungarian economy is undergoing, a company’s home practice tends to be of little relevance (Pollert, 1999: 128). She found that industrial relations practised ‘at home’ fade in significance when companies operate in FDI-dependent, low-wage, labour-abundant economies.

EU law and employee practices in associative member states The Europe Agreement signed in December 1991 between Hungary and the EU is mostly a trade agreement and it contains only very general

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clauses on the subject of obligations which have been placed on Hungary to approximate its legal system to EU law. With the exception of the area of competition law and the protection of intellectual and industrial property, the agreement does not include any details or deadlines on this subject (Müller-Graff, 1997: 32). The Europe Agreements did not bind on Hungary in the manner in which law harmonisation places certain obligations on member states, as spelt out in the Treaty of Rome (Article 3 sub-section b and article 10 subsection a and b). The Europe Agreement with Hungary under the so-called ‘Approximation of Laws’ chapter (article 67, 68, 69) talks about legal approximation. However, law harmonisation differs from legal approximation in the sense that if Hungary fails to comply with the legal approximation of the Europe Agreement no sanctions can be placed against it since the European Court of Justice has no jurisdiction over Hungary. Furthermore, association countries such as Hungary are not signatories of the founding treaties of the EU. Community regulations, which directly affect the member states, have no direct applicability over association countries. 12 Despite the de jure autonomy highlighted, it was clear, from discussions with senior civil servants, that Hungary is under de facto obligations to approximate domestic law to that of the EU (Czuczai, 1998: 58). Articles 67 and 68 of the Europe Agreement signed with Hungary concerns harmonisation. Article 67 states that the provisions on legal harmonisation belong to the ‘soft’ part of the Agreement by stating, Hungary shall act to ensure that future legislation is compatible with Community as far as possible. (Art. 67 of the Association Agreement with Hungary, JL347/2, 1993. Stress not in original text) Article 68 of the Agreement explains that the Approximation extends in particular to certain areas, such as customs law, company law, banking law, protection of workers at the workplace, transport and environment. However, Kecskés claims that Hungary’s clear desire to join the EU meant that it was understood by the Hungarian administration that harmonisation would have to be greater than those requirements stipulated in Article 68 of the Europe Agreement (Kecskés, 1997: 59). It is widely recognised that the Visegrád states were enthusiastic to follow the EU’s political, economic and legal order even before formal agreements were established to facilitate that effort (Müller-Graff, 1997: 33; Inglis, 2000: note 9).

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Hungary began to ‘overfulfil’ its obligations on legal harmonisation at a very early stage (Kecskés, 1997: 60). By 1990 a Government Decision was passed ‘on the harmonisation procedure with the law of the European Community’ (No. 2006/1990) which designated the Minister of Justice to be primarily responsible for the consideration of the relevant rules of Community law when national laws were being codified. Although harmonisation did not come into force until February 1994 when the Europe Agreement commenced, the Act on Companies was amended in 1991, and an Act on Product Liability and an Act on the Prevention of Money Laundering were all harmonised with EU law before this date (Kecskés, 1997: 60). In 1998, 500 judges, out of a total of approximately 2500 Hungarian judges participated in training programmes on European integration and Community law and judges have been invited to attend courses on EU law at their local universities (CEC, 1999b: 12). The EU Progress Report of 2001 states that a further 670 judges have been trained in EU laws (CEC, 2001d: 17). Finally, amendments to the labour law which came into force in July 2001 further align Hungarian legislation with the acquis on issues including collective redundancies, working time, young people and the posting of workers (CEC, 2001d: 60). The other main hard pressure for the Europeanisation of Eastern European institutions is embodied in Phare funding. The Phare instrument was established in 1989 and it provided non-refundable financial assistance with the aim of sustaining economic reconstruction and establishing a market economy.13 Phare was initially an autonomous instrument of the EU which pre-dated the Europe Agreements and was distinct from them (Inglis, 2000: 1175). At the outset Phare was ‘demand driven’, meaning recipient countries identified how the money should be spent. By 1993 it had fundamentally changed in nature. The Copenhagen European Council allocated 15 per cent of the total Phare funds for specific infrastructure projects. By 1998 the Community went further to control and shape the funding for restructuring within associative states. Regulation 622/98 provided the Council with a legal basis to take ‘appropriate steps with regard to any pre-accession assistance granted to an applicant State’. 14 Essentially, this regulation provides the Community with a legal stick in the form of sanctions should a candidate country fail to respect pre-accession commitments embodied in the Europe Agreement, or fail to fulfil the Copenhagen criteria (Inglis, 2000: 1185–6). Inglis stresses that while the content of Europe Agreements has changed very little, and while the provisions on legal harmonisation are very limited, the increasing intensity of the relations between the EU and associative states has resulted in cases being brought before member states’ national courts on the provisions of the Europe Agreements

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(Inglis, 2000: 1201–7). It is clear that EU relations with associative states are evolving in such a manner as to produce obligations.

The EU as a pressure for change: the introduction of works councils in Hungary In 1992 Hungary reformed its Labour Code. One of the big innovations included in this reform was the introduction of a system of works councils. With the exception of workers’ councils that were briefly established during the 1956 uprising, Hungary has no works council tradition. Therefore, the system was superimposed on top of the enterprise-level trade union which was the traditional site of negotiation (Köllö, 1995: 284). The 1992 Labour Code stipulates that those enterprises employing more than 50 must establish a works council if the management wish, or if the employees request it. On paper, the Hungarian works council resembles the German dual system in that it represents the employees’ individual interests and is confined to the shop-floor with a no-strike guarantee, while collective bargaining is left to the trade unions. However, the similarities end there: trade unions in the German model are situated at the sectoral and national level; and Germany’s works councils enjoy powerful co-determination rights which are absent in the Hungarian model (Tóth, 1997a). The Hungarian works council is a consultative-informative body. It does not have the authorisation to conclude agreements on terms and conditions of employment. The trade unions have retained the exclusive right to bargain at the enterprise-level but have lost earlier rights to consultation and information, which they held under the Communist regime. The Code also included complex provisions that authorised which trade unions should have the right to initiate and conclude collective agreements as the 1992 environment saw a flourishing of new, independent trade unions (Ladó, 1994).

The influence of focal points/soft laws It would be inaccurate to suggest that Hungary introduced a system of works councils with the sole intent of harmonising its industrial relations with those practised throughout the EU. The new system was designed to address a number of problematic issues in Hungary’s labour market (Ladó, 1994: 38). Commentators have highlighted four areas in particular: 1. It was believed that works councils could provide those who were disillusioned and had left trade unions with a representative structure (Kollonay and Ladó, 1996: 128).

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2. When the old ‘state trade union’ lost its monopoly in 1989 a host of alternative trade unions emerged. It was hoped that a works Council election could provide an opportunity to gauge the popularity of the various trade unions which made up the fragmented IR system, and would put an end to the inter-union ‘warfare’ which had broken out (Tóth, 1997b). 3. Hungary’s trade union muscle lay at the enterprise level; hence, wage negotiations were also decentralised in nature and this was a cause for concern for legislators who hoped to regulate and monitor wage determination (Berki and Ladó, 1997: 217–18). It was expected works councils would replace the trade union at the enterprise level and that trade unions would focus on bargaining at the sectoral and national level (Kollonay and Ladó, 1996: 133). 4. While being an instrument of employees’ representation, the works council had the potential to develop into a mechanism of cooperative communication between employers and employees (Kollonay and Ladó, 1996: 131). It was hoped that works councils would not threaten overseas investors but would be regarded as a means of selecting a bargaining partner from the fragmented unions operating at the workplace level.15 The Hungarian administration had a choice. It could have dealt with these diverse pressures in a number of ways. For example, the administration could have decided that it had no role in shaping mechanisms for industrial relations, entrusting developments to individual firms, managers and trade unionism, as Polish legislation had done (Hausner, 1996: 111). Alternatively, it could have reinforced the system of representation which was traditional to Hungary, namely trade unions. The administration could have attempted to overcome trade union fragmentation by giving strong trade unions a voice at the national level, as was attempted in France (Van Ruysseveldt and Visser, 1996: 115–19). It is clear that the Hungarian administration was keen to establish a strong civil society, befitting a democratic country which was seeking membership of the EU and establishing a market economy (Tóth, 1997b). The EU provided multiple focus points for Hungarian civil servants in the shape of hard and soft pressures.

Hungarian works councils and EU hard pressures At first glance it appears unlikely that the EU had any influence on Hungary’s new works council system. In 1991, when the works council legislation was devised, Hungary had not even obtained ‘associative’

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status. Furthermore, Europe did not manage to introduce its Directive on transnational works Councils until 1994. Finally, the ‘Europe Agreement’ between Hungary and the EU, which did contain a clause on law harmonisation, did not enter into force until 1, February 1994. The establishment of the Hungarian works councils may, at first glance, seem to be unrelated to developments within the EU. A closer analysis of the events indicates that the administrators responsible for reforming Hungary’s IR system undertook this task with a keen eye on how compatible their new legislation was with EU initiatives. The EU proposed the idea of an Association Agreement with the Visegrád states at the Dublin summit in April 1990. Hungary reacted quickly to this opportunity. By July 1990 Prime Minister Antall made his first visit to Delors, then President of the Commission in Brussels. Antall declared during this meeting that Hungary intended to associate itself with the EU by 1 January 1992 and that by 1995 Hungary would have gained full membership of the Community (Dienes-Oehm, 1997: 63). After over twelve months of negotiations, the EU initiated the Association with Hungary in November 1991. Certain points of the Association Agreement entered into force by March 1991. The Agreement itself did not enter into force until February 1994, following the ratification process; however, the Hungarian administration was very familiar with its contents having been involved in its negotiation since mid-1990. The EU did not overtly regard Hungary as a potential future member until the general criteria for accession was declared by the European Council at the Copenhagen summit in June 1993 (Müller-Graff, 1997: 17). However, the post-1989 Hungarian administration always regarded itself as a potential future member (Financial Times, 1990: p.2). As such, it took the Association Agreement seriously (Müller-Graff, 1997: 16). Two clauses of the Agreement have particular pertinence to Hungary’s IR system. Firstly, chapter three, Article 68 stipulates that the approximation of laws should include, among other areas, ‘protection of workers in the work place’. In her analysis of Hungary’s efforts to gain membership of the EU, Hargita (1997: 78) notes that Hungary’s reform of the Labour Code in 1992 was one of a number of legislative innovations undertaken aimed at European integration. Certainly, works councils embody the notion of industrial democracy in an institution which is peculiar to the continent of Europe. In 1991, when the Hungarian Ministry of Labour published a proposal for a new Labour Code containing novel initiatives on works councils (Tóth, 1997a: 165–6), the EU was in the throes of debate on the social charter action programme, the most

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far-reaching component of which included the proposal on a European Works Council (Hall, 1994: 297–9). It is not likely that the debates presented during the two inter-governmental conferences on ‘economic and monetary union’ and on ‘political union’ were lost on Eastern European observers. The inter-governmental conferences began in 1990 and, significantly, they tied economic competitiveness and increased political transparency to the social charters (Hall, 1994: 297). Certainly, by 1996, when Hungary was responding to a questionnaire which Brussels distributed to associative member states to assess the state of their public policies, the Hungarian Ministry of Labour responded to the question on the framework for social dialogue which existed at the enterprise level by spelling out in detail the mechanism of the works council system (Government of Hungary, 1996a: chapter four 5.c.). The second clause of the Association Agreement which had implications for Hungary’s IR system was the reference made to the progressive strengthening of Hungary’s democracy (Neumann, 2000: 122). The preamble to the Agreement reflects the Treaty of Rome’s stipulation that all member states must be democratic when it states: Reaffirming their commitment to pluralist democracy based on the rule of law, human rights and fundamental freedoms, a multiparty system involving free and democratic elections, to the principles of a market economy and to social justice, which constitute the base for the association. As early as November 1989, the EU was taking some practical moves to bolster developments towards the establishment of democracy in Eastern Europe. The hastily convened extraordinary Paris Summit concluded that Eastern European economies deserved Community financial support – provided they continued to move towards democracy. This meeting saw the conception of the Phare project (Owen and Dynes, 1989: 231). As mentioned above, Phare has been in operation since 1990 and at the outset it focused mostly on economic reform in Eastern Europe (Langewiesche, 1995: 416–17). By 1992 the Commission began to encourage recipient states to include social partners in the reform process and integrate social dialogue into Phare initiatives (Langewiesche, 1995: 417). The Commission began to argue that the prerequisites established in the Association Agreement such as democracy, rule of law, protection for minorities and a functioning market economy, all required a stable IR framework involving representatives of business and labour in political decision-making (Weber, 1998).

120 Employee Relations in the Periphery of Europe

Assessment of information forum in Hungary The following section returns to the four key functions which administrators believed the works councils would fulfil. It assesses how successfully they addressed these issues.

Works councils: provision of representative structure It is doubtful whether the works council provides those who have left trade unions with a representative structure. A study by Ladó and Kollonay demonstrates that a bias of representation exists in the detailed works council rules. They explain that consensus is institutionalised into the 1992 code: Art 3(1) of the Code imposes an express duty on the employer and the works council to co-operate in faith when exercising their rights and fulfilling duties. (Kollonay and Ladó, 1996: 130) The rather extensive rights which Hungarian law had bestowed upon trade unions during the Communist period were withdrawn after 1989 and they were not, as some had expected, given to the works council under the 1992 Labour Code. Works councils entitlements were limited to insignificant matters, and its main function amounts to merely expressing an opinion (Ladó, 1994: 40).

Works councils: gauging trade unions’ legitimacy The works council election proved to be quite an effective means of measuring the support which was left for trade unions in the wake of the regime change. The results indicated that the descendants of the old ‘state trade union’ (the MSzOSz) gained the majority of the votes (Cox and Vass, 1995: 165–9). As a result, the MSzOSz has claimed legitimacy and was clearly the dominant representative organ at the enterprise-level (Héthy, 1995a: 373). Ironically, therefore, because of the landslide support for the old system of representation, this election may have gone some way to discrediting the new works council structure before it began to operate. Case studies conducted by Neumann show that trade unions can therefore dominate the works council, and the employers’ de facto bargaining partner becomes the trade union which renders the works council defunct as an institution (Neumann, 1997).

The European Union and National Legal Systems 121

Works councils: shifting trade unions up to the sectoral level Genuine efforts were made to secure sectoral-level bargaining. Central wage determination was abolished and the legal framework was reformed. However, Berki and Ladó conclude that progress was slow due to the difficult economic climate and the inexperience of the social partners. They estimate that by 1994 only 11 per cent of employees in the competitive sector were covered by sectoral wage agreements. They state ‘The decline accelerated in 1995, rendering intermediate level wage agreements merely symbolic . . . ’ (Berki and Ladó, 1997: 225).

A mechanism for consensus There is some doubt as to how effective works councils are within the corporate culture. Tóth points out that many enterprises now host two systems of representation and he argues that this superimposition of works councils on top of the traditional trade union structure has been far from harmonious. He makes the point that this dual system involves a duplication and wastes time and effort, resources which are precious in particular in lean-production style manufacturing (Tóth, 1997a). Tóth does note in a later study that this dual system appears to strengthen the employers’ position within the enterprise as trade unions and works councils tend to compete, often leading to acrimonious and competitive relationships between the two institutions (Tóth, 2000). While this conflict may go some way to empowering employers it is not likely to produce the mechanism for consensus which policymakers envisaged.

Hungarian works councils: dysfunctional policymaking? The confluence of these four tensions resulted in a labour code which seems to have ‘fallen between two stools’, in the sense that novel, effective structures for negotiation were not established and more traditional (trade union) structures for bargaining were weakened (Tóth, 1997a: 169–71). In summary, legislators and policy teams had a range of expectations from the works council system, none of which were fully successful. It was seen that these expectations were often contradictory – namely, to provide employees with representation and provide a mechanism for developing corporate culture. The European Social Model on which the new system was clearly based may explain these key contradictions which permeate the Hungarian works council system. The European model is problematic in the sense that it has never been clearly defined.

122 Employee Relations in the Periphery of Europe

It does not spell out whether social dialogue’s primary role is to protect employees, or to generate a competitive corporation. Subsequently, the Commission’s soft laws send out contradictory messages to attentive policy-makers who, unsurprisingly, reflect these contradictions in national legislation. The absence of governance from EU soft laws accentuates this confusion. As with the Irish case-study, very distinctive notions on the Europeanisation of IR systems penetrate down to the national level without being underpinned by regulations such as a body of laws on works councils’ rights, functions and relations with trade unions, etc. In the absence of this governance, member states are able to ‘cherry pick’: to adopt ‘EU-ish’ institutions such as works councils to gain credence from the EU without bestowing on them the kinds of rights they normally have in order to function effectively. By so doing the Hungarian administration has not compromised its image as an attractive site for foreign direct investment. Ironically, as EU membership seems closer, Hungary’s trade unions feel they are being progressively marginalised and the social dialogue component of the Acquis appears less significant. The most recent modernisation of the Labour Code gives the works council the right to negotiate and conclude collective agreements in companies where trade unions are not present (Draus, 2001: 31). The Commission’s 2001 Regular Report on Hungary pointed to the European Works Council Directive as an area which required further legislative effort (CEC, 2001d: 61).

Patterns of peripherality elsewhere? The main findings from the two case-studies are that the EWC Directive is a potentially far-reaching piece of legislation. It was seen that it introduced a new system of employee information and representation into environments which have no tradition of fora of this nature. Secondly, it was shown that the Directive had resonance in states outside the jurisdiction of the EU. However, the picture which is emerging suggests that, contrary to regarding the Directive as a strategy to introduce a ‘high-road’ model of production, Ireland and Hungary found themselves on the horns of a dilemma. While implementing works councils was in line with both countries’ desire to fulfil the EU project, the Directive challenged their respective industrial strategies. Chapter 3 pointed out that Ireland and Hungary’s industrial strategies share a number of key features. They are both uncoordinated (Soskice, 1990) in the sense that they operate on a relatively low-cost, relatively unskilled manufacturing base. Neither state has a robust, institutionalised tradition of employee

The European Union and National Legal Systems 123

information and consultation. Furthermore, both economies are very dependent on FDI and indeed, as Chapter 3 pointed out, the bulk of both states’ industrial capacity is supported by FDI. The case-studies suggest that administrators in both Ireland and Hungary have introduced works councils in a manner which does not contravene this strategy. Both states superimposed flexible procedures onto their established systems rather than overhaul their traditional FDI-friendly IR regimes. The remainder of the chapter introduces research which has been conducted on the EWCs to date to assess whether Ireland and Hungary are exceptional in this respect. The following compares core and peripheral economies and looks at case-studies to examine the notion of developmental trajectories.

‘Negotiating the European Works Council’ Carley and Marginson undertook a study on the operation of EWCs. The data they gathered provide interesting insights into the issue of peripheral IR systems throughout Europe.16 It codes the contents of 386 agreements established under Article 13 of the Directive, and as of October 1999, 71 agreements which were established under Article 6 of the Directive. As such, it is possible to pull out the contents of agreements according to the national legislation under which they were concluded. Before looking at the findings it is worth highlighting a number of points about the database. Firstly, it is unfortunate, because of this book’s interest in peripheral economies, that there is paucity in the data on information from southern European economies. Carley and Marginson comment that this ‘may reflect data-gathering problems as well as an absence of agreements’ (2000: 5). Additionally, the majority of countries in the database only account for a small proportion of the total number of agreements. This raises methodological problems with trying to establish country patterns based on the results of only one or two MNCs. In the case of Article 6, in three cases the company is based in more than one country, which distorts the results slightly as the same company ethos is duplicated on these occasions (Carley and Marginson, 2000: 5). Furthermore, the results do not always equal 100 per cent. This is because the details of the agreements vary to some extent from country to country and not all agreements address the questions posed in detail, which leaves a gap in the data. Finally, Carley and Marginson caution that it is not possible to assess ‘national EWC patterns’ from the data (Carley and Marginson, 2000: 10). However, the following figures suggest that distinct ‘national EWC patterns’ do emerge. 17

124 Employee Relations in the Periphery of Europe

Carley and Marginson explain that the research, which they conducted on Article 13 agreements, enabled them to distinguish between two types of agreement: those which were largely formal or symbolic in nature, and those EWCs which were established with the potential to develop a genuine active role. These EWCs can be distinguished on issues such as the degree of management unilateralism in the area of agenda setting, drawing up of minutes and convening extraordinary meetings (Carley and Marginson, 2000: 50). They point out that the incidence of select committees also portrays the nature of the institution. They specify that those select committees, which have been granted a ‘continuing role in receiving information and consultation’, provide a particularly good litmus-test to the authenticity of the EWC (Carley and Marginson, 2000: 50). The following section presents the results which emerge from pulling out these indicators and analysing them.

1. Issues dealt with by the EWC Table 4.1 shows that those countries in which a tradition of strong social partners has been knitted into the industrial and social fabric of the state have developed EWC legislation which deals with different issues from those of countries with traditionally ‘uncoordinated’ social partners. EWC established under German, Swedish, Belgian and Dutch legislation are more likely to address areas which are typically issues to which employee representatives in Nordic and North European countries are commonly privy. So, for example, 88 per cent of agreements signed under German legislation, 96 per cent signed under Swedish, 96 per cent signed under Belgian and 93 per cent signed under Dutch discuss the issue of company economics. In Ireland, this amounts to 79 per cent. It is interesting that agreements signed under Irish legislation are more likely to address areas which are not traditional industrial issues, such as equal opportunities, health and safety and training.

2. Chairing meetings Table 4.2 shows that those countries with strong social partner traditions tend to have EWCs in which management is less likely to chair meetings. This is the case in only 7 per cent of agreements established under German legislation and 36 per cent of those established under Swedish, while management chair EWCs in 77 per cent of those established under Belgium legislation, 50 per cent of those established under Dutch and 73 per cent of those established under Irish legislation. Likewise, agreements concluded under German and Swedish legislation are most likely to have EWCs chaired by employees, with 48 per cent

The European Union and National Legal Systems 125

and 14 per cent respectively. This is least likely in the Irish context (5 per cent).

3. Quality of information and consultation The majority of the agreements discussed here do have a provision for a select committee. Table 4.3 shows that the presence of select committees is overwhelmingly the case, right across the spectrum of countries looked at, which verifies Carley and Marginson’s finding that implementing the Directive has resulted in the spreading of ‘good practice’ across negotiators (2000: 49).

4. Nature of select committees Evidence of the social learning of ‘good practices’ is portrayed in Table 4.4. Here, the majority of select committees that are established tend to be employee-only institutions, rather than joint bodies (with the exception of Spain whose small figures make it an unreliable case-study). However, within this trend another pattern is discernible. Those EWCs established under German, Swedish and Dutch legislation are much more likely to have employee-only joint committees than EWCs established under Irish and Belgian legislation. The lower propensity for employee-only select committees in Belgium and Ireland may reflect their national IR traditions. Employers tend to be the stronger partners in the Belgian case (Van Ruysseveldt and Visser, 1996), and the Irish voluntarist tradition means that employees do not tend to be systematically involved in any information or consultation bodies.18

5. Committee accorded a continuing role in receiving information and consultation It is notable that of those agreements which do allow for select committees, only the minority accorded the committee a role in receiving information and consultation on an ongoing basis. This is a role which Carley and Marginson regard as underpinning genuine EWCs. The EWC concluded in the countries discussed here only attributed this role to works councils in the minority of cases, never in more than a quarter of the national cases (see Table 4.5). Overall, then a picture of conflicting trends emerges. On the one hand, the data show that ‘good practice’ is being spread and the EWC Directive has clearly acted as a catalyst for social learning between negotiators involved in drafting EWC constitutions within MNCs. The Irish data reveal this most clearly. As we have seen, Ireland has no tradition in works council systems, yet the majority of agreements

126

Table 4.1

Issues dealt with by the European Works Council; percentage and number of companies which address each issue Ireland Art. 13

Total %

Art. 6

Spain Total

Art. 13

Art. 6

Germany Total

Art. 13

Art. 6

Sweden

Total

Art. 13

Art. 6

Belgium Total

Art. 13

Art. 6

Netherlands Total

Art. 13

Art. 6

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 7

19

4

Total no.

12

3

Busines and production

67% 8

86% 6

74% 14

Economic and financial

67% 100% 8 7

79% 15

Employment/ social isses

58% 100% 7 7

74% 100% 14 3

–

Investment

50% 6

57% 4

53% 10

66% 2

Organisation

50% 6

71% 5

58% 11

66% 2

33% 100% 1 1 1 3

89

6

95

22

6

73% 100% 16 6

28

17

78% 22

82% 14

9

Total

100%

26

18

13

31

89% 8

85% 22

83% 15

92% 12

87% 27

96% 100% 27 17

89% 8

96% 25

89% 100% 16 13

93% 29

50% 2

76% 68

50% 3

75% 71

100% 100% 1 4

91% 81

50% 3

88% 100% 84 22

75% 3

91% 81

50% 3

88% 84

82% 100% 18 6

86% 24

94% 16

78% 7

88% 23

94% 17

92% 12

93% 29

–

50% 2

82% 73

67% 4

81% 77

50% 11

67% 4

54% 15

88% 100% 15 9

92% 24

89% 16

92% 12

90% 28

–

50% 2

74% 66

83% 5

75% 71

54% 12

50% 3

54% 15

71% 12

73% 19

89% 15

92% 12

87% 27

83% 5

78% 7

Technology, new work methods . . .

42% 5

71% 5

53% 100% 10 3

–

75% 3

70% 63

67% 4

70% 67

50% 11

17% 1

43% 12

88% 15

78% 7

85% 22

78% 100% 14 13

87% 27

Mergers, cut back closures . . .

33% 4

86% 6

53% 100% 10 3

–

75% 3

66% 59

83% 5

67% 64

50% 11

50% 3

50% 14

71% 12

78% 7

73% 19

67% 12

92% 12

77% 24

Training

42% 5

43% 3

42% 8

66% 2

–

50% 2

20% 18

–

19% 18

23% 5

18% 5

24% 4

56% 5

35% 9

11% 2

31% 4

19% 6

Health and Safety

58% 7

43% 3

53% 10

66% 2

–

50% 2

36% 32

–

34% 32

9% 2

33% 2

14% 4

53% 9

33% 3

46% 12

28% 5

46% 6

35% 11

Environment

25% 4

28% 2

31% 6

36% 32

–

34% 32

18% 4

50% 3

25% 7

65% 11

11% 1

46% 12

28% 5

62% 8

42% 13

Equal opportunities

17% 2

43% 3

26% 5

16% 1

4% 1

–

22% 2

8% 2

23% 3

10% 3

4% 1

–

11% 1

4% 1

–

Working hours/ conditions

–

–

–

Trade union rights

8% 1

–

5% 1

R&D

8% 1

–

5% 1

–

–

–

33% 1

–

25% 1

4% 4

17% 1

5% 5

33% 1

–

25% 1

11% 10

16% 1

12% 11

– 33% 1

– –

– 25% 1

– 2% 2

– 33% 2

– 4% 1

–

–

–

–

16% 1

4% 1

4% 4

4%

50% 3

14% 4

6% 1

– 22% 2

– 12% 3

– 11% 2 – 6% 1

–

6% 2

–

–

15% 2

10% 3

127

128

Table 4.2

Who chairs the meetings? Percentage and number of companies Ireland Art. 13

Total %

Art. 6

Spain Total

Art. 13

Art. 6

Germany Total

Art. 13

Art. 6

Sweden

Total

Art. 13

Art. 6

Belgium Total

Art. 13

Art. 6

Netherlands

Total

Art. 13

Art. 6

Total

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Total no.

12

19

3

1

4

28

17

26

18

13

30

Management

75% 9

71% 5

73% 14

–

–

–

8% 7

–

7% 7

41% 9

17% 1

36% 10

76% 13

78% 7

77% 20

44% 8

54% 7

50% 15

Employee

8% 1

–

5% 1

–

–

–

52% 46

–

48% 46

18% 4

–

14% 4

18% 3

–

11% 3

17% 3

Joint/Rotatory

8% 1

14% 1

10% 2

–

–

–

3% 3

17% 1

4% 4

–

–

–

Not specified

8% 1

14% 1

10% 2

–

100% 1

36% 32

83% 5

39% 37

36% 8

83% 5

46% 13

7

25% 1

89

6

95

22

6

– 6% 1

9

–

–

33% 5

22% 2

11% 3

6% 1

– 46% 6 –

10% 3 37% 11 3% 1

Table 4.3

Is there a select committee? Percentage and number of companies Ireland Art. 13

Total %

Art. 6

Spain Total

Art. 13

Art. 6

Germany Total

Art. 13

Art. 6

Sweden

Total

Art. 13

Art. 6

Belgium Total

Art. 13

Art. 6

Netherlands Total

Art. 13

Art. 6

Total

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 7

19

6

3

1

4

74% 14

33% 1

–

25% 1

56% 50

26% 5

67% 100% 2 1

75% 3

44% 39

95

22

33% 2

55% 52

91% 100% 20 6

67% 4

45% 43

28

17

93% 26

53% 9

7% 2

47% 8

26

18

13

31

89% 8

65% 17

67% 12

92% 12

77% 24

11% 1

35% 9

33% 6

8% 1

23% 7

9

12

Yes

67% 8

86% 6

No

33% 4

14% 1

Table 4.4

What is the nature of those select committees that do exist? Percentage and number of companies Ireland Art. 13

Art. 6

89

6

Total no.

Spain Total

Art. 13

Art. 6

9% 2

Germany Total

Art. 13

–

Sweden

Art. Total 6

Art. 13

Belgium

Art. Total 6

Art. 13

Netherlands

Art. Total 6

Art. 13

Art. 6

Total

Total % & no. 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% with committee 8 6 14 1 0 1 50 2 52 20 6 26 9 8 17 12 12 24 Joint Body

25% 2

33% 2

29% 4

–

Employee Only Body

62% 5

67% 4

64% 100% 9 1

–

–

14% 7

50% 1

15% 8

20% 4

–

100% 1

84% 42

50% 1

83% 75% 43 15

– 83% 5

56% 5

25% 2

41% 7

17% 2

17% 2

17% 4

77% 20

44% 4

75% 6

59% 10

83% 10

83% 10

83% 20

129

Note that not all companies which have joint committees specified the nature of the committees.

15% 4

130 Table 4.5 Is the select committee accorded a continuing role in receiving information and consultation? Percentage and number of companies Ireland Art. 13 Total % & no. with

Art. 6

Spain Total

Art. 13

Art. 6

Germany Total

Art. 6

Art. 6

Sweden

Total

Art. 13

Art. 6

Belgium Total

Art. 13

Art. 6

Netherlands Total

Art. 13

Art. 6

Total

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

8

6

–

50% 3

14

1

0

1

50

21% 3

–

–

–

16% 8

2

52

20

17% 9

10% 2

6

26

9

8

17

23% 6

–

–

–

12

13

25

23% 3

16% 4

committee Yes

50% 1

67% 4

8% 1

The European Union and National Legal Systems 131

established under Irish legislation include select committees, a provision which goes beyond the minimum obligations stipulated in the EU Directive. Similarly, while Irish-based agreements are less likely to cover areas which are established in European traditions of corporatist bargaining, they do embrace ‘new’ issues such as equal opportunities, etc. However, another pattern is discernible and that is that the agreements tend to reflect the national industrial relations practices within those jurisdictions in which they are established. Therefore, the Irish and Belgian agreements tend to empower management more than the others, reflecting their voluntarist and pro-management traditions respectively. Similarly, German and Swedish-based agreements are more likely to empower the employee, a trait which reflects their national IR institutions. It appears, therefore, that the EWC Directive has resulted in institutions for employee information and consultation where they previously did not exist. However, rather than challenging the national IR traditions and provoking a re-evaluation of notions of industrial democracy at the national level, the Directive has been transposed in a manner which reproduces national power relations between employees and employers.

Information from case-studies in the UK A number of case-studies have been conducted which are useful because they largely discuss the EWC in the UK context. The combination of weak, uncoordinated social partners and dependence on high FDI inflows in the UK (OECD, 2000a) makes it comparable with the Irish case and hence enables us to locate trajectories of development. A number of the studies confirm the findings presented above. Jane Wills recognises that the EWC is a new and significant institution, especially in a voluntaristic environment such as that of the UK. But above all, her research indicates that Europe’s bipolar IR traditions were reflected in and perpetuated by the EWC. Wills found that those representing the UK employees in the EWC were ill-equipped. They were unsure of the employees’ mandate, as the UK shared Ireland’s institutional vacuum discussed above, and the representatives had no mechanisms with which to explore the views of their colleagues in other UK plants (Wills, 2000: 99). British representatives were conscious of their weak performance in the EWC and subsequently retreated into parochial issues concerning their local plants (2000: 97). Whittall’s discussion of the BMW EWC showed that difficulties faced by employees throughout the UK could only be effectively handled by their German colleagues whose strong national works council system

132 Employee Relations in the Periphery of Europe

enabled them to shape policies made by the German headquarters (Whittall, 2000). While Whittall does suggest that transnational cooperation and solidarity may blossom with the EWCs, he points out that ‘strongly defined national industrial relations systems “are a precondition for the operations of the European Works Councils”’ (Whittall, 2000: 69). Hancké ’ s discussion of the European motor industry argues that rather than protecting employees in the face of naked competition, EWCs may become instruments in the race for heightened competition. He found that even in core sectors with strong IR traditions and core states with coordinated IR traditions, the EWC may be used by unions’ representatives to strengthen the position of their own plants in the implicit regime competition which exists between plants (Hancké, 2000: 53–4). Probably less surprisingly, an analysis of the service sector reveals a similarly bleak scenario. Royle studied McDonald’s EWC and found that EWCs established in countries with strong works councils systems did not manage to organise themselves any better than those from uncoordinated economies (Royle, 1999). Royle concludes that the EWC Directive is far too flexible to be of any significance in those sectors and companies where they are not welcome.

Conclusion To summarise, the chapter focused on the Irish and Hungarian context and argued that the European Works Council Directive has made little progress in challenging the core/peripheral patterns of employee practices which are traditional throughout Europe. On the contrary, it was suggested that by using flexible tools to introduce this initiative, the EU facilitated the reproduction of this pattern. The Community is walking a very thin tightrope: the goal is to achieve a harmonisation of national remedies sufficient to ensure effective enforcement of Community rights, while simultaneously respecting the traditional differences among member states (Snyder, 1993: 51). It was shown that the EU aims to undertake this challenge by implementing social policy initiatives using two main mechanisms: Directives and soft laws. While Directives are legally binding instruments they tend to be used in such a flexible manner as to result in the nationalisation of European social policies. The second key instrument, soft laws, are not legally binding, but it is shown that they can have hard implications. Even Eastern European countries, currently outside the jurisdiction of the EU, appear to take on board Community soft laws. While clearly it

The European Union and National Legal Systems 133

is important that member states are given room for manoeuvre when implementing EU laws, the chapter questions whether Directives and soft laws provide adequate mechanisms of governance to introduce mechanisms for employee participation in Europe’s multinational enterprises. Streeck (1996: 88) argues that the national and the EU level are not comparable. The national maintains the reins of power and in comparison the EU ‘has developed into a polity sui generis’ which requires different theoretical apparatus from those used to study the traditional state. That this is so is very apparent from the case-studies looked at in this chapter. They showed that the EU governs employee practices by soft laws. The state simply does not have the ‘soft law’ option – it either governs over an area or the area is left ungoverned. This perspective suggests that the situation is not so black and white in Europe. The Community can exercise governance across a broad spectrum ranging from ‘soft’ to ‘hard’. Teague hints at this notion when he suggests that Europe has the potential to firm up its regulatory powers. He points out that the Community could employ more visionary means of policymaking such as obliging member states to establish policy-supporting agencies, for example equality agencies, or by providing member states with a limited menu of legislative proposals from which they may choose (Teague, 1999: 194–5). In the face of emerging dysfunctional policies at the national level, discussed at the start of the chapter, there may be room for Europe to firm up its system of governance, so that the demands of social cohesion are reflected in a more balanced manner, without seriously challenging the current EU/member state power relations. Taking the policy area discussed, the Community could legislate for national-level works councils. Indeed, this idea was proposed by the Commission in November 1998 and it has subsequently been accepted by the Council (CEC, 2001g) – a development which indicates that the EU may step in more in the future when the cracks begin to show in national-level systems of governance.

5 The European Union and National Wage Systems

Pay is, of course, at the heart of the contract between employers and workers. But some of the pay systems in use today were developed 40 or 50 years ago. Frequently they provided only for payment for a specific job in a hierarchical organization with a rigid division of labour. Such wage systems are now proving an obstacle to the introduction of more flexible company structures. (CEC, 1997b: para. 46)

Introduction This chapter enquires whether economies which have little or no tradition in corporatist-style wage agreements are able to modernise and reform their wage systems in line with the European model. In short, are economies which lack the institutional traditions of strong social partners able to integrate industrial interest groups successfully into decision-making over wage agreements? With an eye to the study’s primary theme, this analysis enquires into the EU’s role in changing wage systems and asks whether the EU acts as a significant actor in any changes which may be occurring. The chapter is organised into four parts. Firstly, the question of whether the Community affects wage systems in member and associative member states is examined. It is shown that while the EU has no capacity to develop legislation on member states’, let alone associative member states’ wage systems, it has profoundly affected wage organisation in these countries through ‘soft’ methods and indirectly through ‘hard’ 134

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measures in other policy fields. The chapter argues that only by considering the EU as a significant actor in national-level wage developments can we understand the neo-corporatist-type agreements which are emerging Europe-wide (Rhodes, 1998). It is argued that a crucial influential factor in the EU-isation of wage systems is the social dialogue model the Community has developed and in which it encourages interest groups in member states and associative member states to partake. However, the chapter stresses that the Community has failed to underpin this key idea of social dialogue with any legislative support. The rest of the chapter looks at the implication this has for models of social partnership. The second section investigates the manner in which Irish interest groups engage in the ‘European Social Model on Wages’. It is shown that while national-level partnership has been crucial for the country’s economic success and has been vaunted in Europe as the Community’s success story, the notion has failed to permeate down to the enterprise level. The third part of the chapter focuses on Hungary’s national tripartite arrangements. It shows that these institutions have been eroded over the last decade despite much EU support. Finally, the remainder of the chapter examines how wage agreements are organised Europe-wide. While these agreements clearly hold potential for exciting future dialogue on social policy development, it is shown that they are currently producing moderate wage increases and higher productivity, as countries are keen to contain wage hikes below those of neighbouring states. It is suggested that this combination could produce deflationary pressures and therefore these partnerships should be governed by the Community in a stronger fashion.

But the EU does not legislate for wages . . . ! It may seem misplaced for any analysis on how the EU impacts on national IR systems to include a chapter on wages. The Community states explicitly that it does not govern wage systems (Kenner, 1995b: 323). This is indicated by the failure to include key issues on wages from the scope of the Maastricht protocol and the subsequent Amsterdam Treaty. The EU Treaty states that wages are the responsibility of the member states (Martin, 1999: 20). Indeed, the closest the EU has come to devising policy directly on the issue of wages is the Charter of the Fundamental Social Rights of Workers. This non-binding, purely aspirational document states:

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All employment shall be fairly remunerated. To this end, in accordance with arrangements applying in each country: – workers shall be assured of an equitable wage, i.e. a wage sufficient to enable them to have a decent standard of living. (CEC, 1992: 8) On paper, the Community has made it clear that it does not attempt to intervene in the organisation of national wage systems. Despite this, research has shown that countries within the EU’s sphere of influence have, over the last decade, tended to converge towards coordinated wage policies in which wage agreements are hammered out between social partners (Rhodes, 1998, IST, 2000: 17). This coordination often entails an institutionalisation of decentralised procedures. Traxler refers to this as ‘organised decentralisation’ (1995), whereby regulating procedures such as training opportunities, number of hours worked, and wage standards are negotiated as a general framework by national-level actors while companies have been left room to manoeuvre and to exploit the flexibility which the broad frameworks involve. This ‘flexible regulation of the labour market’ (IST, 2000: 53), has been fairly stable since the beginning of the 1990s (Eironline, 2000b). The EU actively supports the tripartite project and encourages social partner involvement at all levels of decision-making. Indeed, Casey and Gold claim that EUlevel social dialogue has arguably made greater progress in recent years than Community political activity (Casey and Gold, 2000: 118–19). The EU has not implemented any hard laws on national-level tripartism, yet research clearly shows that this issue has been placed on member states’ agendas. Europe has witnessed a flourishing of tripartite wage agreements in the last decade (Teague, 2000) and employee representation within the enterprise is being reassessed even by those member states which have traditionally shunned the notion, the most prominent example here being the UK’s ‘Fairness at Work’ legislation. This trend has fired a debate which asks whether the EU played a central role in the emergence of national social pacts throughout the 1990s. Some commentators hold that the Community is almost entirely responsible for the flourishing of national tripartite agreements which has been witnessed in the last decade. Goetschy argues that these pacts amount to more than simply member states attempting to face ‘external’ pressures in a defensive manner. Rather, she contends, it demonstrates that states have a real desire to Europeanise their industrial relations systems. She believes they are attempting to assimilate the new supranational rules of the game which are embodied in the Maastricht criteria

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(Goetschy, 2000: 45). Teague’s analysis of this development also points to the EU as a main catalyst. He explains that the decision to introduce the European monetary union (EMU) produced an unprecedented, highly uncertain environment which forced member states to reorganise their systems of wage determination in line with the new demands which monetary union presented. Teague suggests that this largely involved (re)introducing national or sectoral pay bargaining arrangements to control wage increases (1998: 120–2). He shows that some form of wage agreement is in operation right across Europe and argues that this is the combined result of states acting in a self-interested effort to join the single currency and states imitating each other as a result of the ‘socialization mechanism’ or ‘social learning’ which European integration drives (Teague, 2000: 441). Various research undertaken on national case-studies agrees that the flourishing of state-sponsored wage coordination that has been witnessed over the last ten years is a result of national efforts to prepare for the single market and European Monetary Union (Ferner and Hyman, 1992; Fajertag and Pochet, 1997; Fajertag, 2000; Fajertag and Pochet, 2000: 28). Indeed, some go so far as to argue that a Euro-corporatism is emerging. Certainly, there is evidence of a plethora of ‘well resourced and coherent’ interest groups (Greenwood, 1997: 266) which inform and lobby the social partners, providing the life-blood to a Euro-corporatist system (Falkner, 1996). Others disagree. Researchers from the Institut des Sciences du Travail (IST, 2000) at the Catholic University of Louvain, claim that it is by no means certain that EU initiatives such as the EMU are the key source for the emergence of this decentralised coordination of wages with which states across the continent of Europe are experimenting. They argue that certain initiatives are unfolding at the national level which appear to resemble the Europeanisation of IR systems, namely an effort to address stubborn unemployment figures; to tie the flexibilisation of working patterns with the reform of social safety-nets; to restrain wage increases. However, they argue that these projects are by no means inherently European. Rather, the IST sees these developments as the product of policy-makers’ concern with industrial growth. They suggest that if states endorsed EU employment policies in a top-down manner, then national pacts would give the same attention to issues such as the gender gap and reconciling work and family life as is currently given to wage negotiations (IST, 2000: 48–54). Grote and Schmitter (1999) are also unconvinced that EU member states are keen to throw their lot in behind the Community and Europeanise their IR systems in order to be players in the EU game as Goetschy suggests. They hold that the

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pendulous return of tripartite pacts can be more accurately described as a ‘re-nationalisation’ than a super-nationalisation. The claim is that the pressures which the single market and EMU present for national competitiveness have driven national-level social partners to experiment with voluntary, consensual-style pacts in order to tread water in Europe’s sea of competitiveness. As such, they argue that the EU has fostered social pacts in spite of itself, rather than as a result of its many initiatives, projects and recommendations promoting tripartism (Grote and Schmitter, 1999).

Why the debate? It appears that experts in European industrial relations are unable to reach consensus on the role that the EU has played in the growth of social pacts Europe-wide. The disparity of opinion may, perhaps, be explained by the manner in which the Community has governed the issue of wages. As mentioned above, the EU has not developed any hard legislation on wage policy at all; however, it has generated a range of soft policies on wage arrangements. Additionally, the Community has introduced hard legislation in a number of fields, which has influenced how wages are organised at the national level. What follows is a review of these initiatives, both soft and hard.

EU soft mechanisms on wage policy Partnership has been deeply integrated into the Community’s executive structure and the EU actively promotes the notion in the area of wage policy. It is argued in this chapter that the EU has shaped national wage systems implicitly and in an unofficial ‘soft’ manner via two key channels: firstly by the institutional and procedural examples which the EU exercises; and secondly by the provision of policy ‘focal points’ through Communications, Green and White Papers, etc.

Influence through EU tripartite structures The Community began to set this ‘institutional and procedural example’ at its inception in 1957. The Economic and Social Committee (ECOSOC), a tripartite committee, was founded by the Treaty of Rome in order to involve economic and social interest groups in the establishment of the common market and to provide institutional machinery for briefing the European Commission and the Council of Ministers on European Union issues. The 222 members of the ECOSOC are drawn from economic and social interest groups in Europe. The Single European Act and the Maastricht Treaty extended the range of issues that must be

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referred to the Committee. The Amsterdam Treaty further broadens the areas for referral to the Committee, and allows consultation with the European Parliament. The EU-level social partners are also involved in the advisory committees in various areas of Community social policy such as health and safety at work, freedom of movement of workers, and the European social fund. They also work on joint committees and informal working parties at sectoral level such as the European Coal and Steel Community, agriculture, transport and telecommunications. Many commentators stress the limited role social partners play in these institutions where they act as individual advisors, rather than engaging in mandated dialogue (Buda, 1998: 22–3). However, since the early 1970s the Community has tried to establish dialogue between the social partners’ umbrella organisations by creating the Standing Committee on Employment. This ambitious attempt to introduce joint action between employers, trade unions and governments ended unsuccessfully in the mid-1970s (Buda, 1998: 23). The more recent effort to introduce EU-level social dialogue, which was undertaken by the Delors Commission in the early 1980s, has been well catalogued (Hall, 1994: 295–9). The social partners initially met (reluctantly, on the employers’ side) and agreed to engage in a very lame style of social dialogue. This initiative was embodied in a new Article 118B, a Treaty revision which was introduced by the Single European Act. The meetings which resulted were informal, without any new institutional structures and lacking the ability to draft proposals for future policy or legislation (Buda, 1998: 24). Social dialogue was strengthened by the Maastricht Treaty. Employers realised that the qualified majority voting system was likely to be introduced for social policy legislation, thus ending the veto system which had blocked extensive developments in social policy to date. Being keen to be involved in whatever social policy may emerge they agreed that European social dialogue should be strengthened (Hall, 1994: 295–9). Article 4 of the Maastricht Treaty’s agreement on social policy allows the employers and unions at EU level to conclude agreements through ‘social dialogue’ and the Commission is now obliged to consult with the social partners regarding proposed social policy Directives (Gold, 1998: 107–8). More recently, the social partners have been given a greater role in the creation and evaluation of European Social Fund projects (CEC, 1996b). In short, partnership has been deeply integrated into the Community’s executive structure. While EU-level social partners do not currently negotiate on wages, the EU has been dynamic in promoting the notion of tripartism through example.

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Influence through ‘focal points’ The EU has published numerous non-binding documents which encourage tripartism as a means of organising national wage systems. For example, the Charter of Fundamental Social Rights of Workers states that governments should promote machinery for voluntary negotiations between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements. (Article 6 (2)) Other documents advise that corporatist-style wage agreements at the national and enterprise levels is key for a competitive economy (CEC, 1990: 17) and that macro- and micro-level tripartism are inherently complementary (CEC, 1997b: para. 46). Another example includes the guidelines presented to the Vienna Summit in December 1998 as a proposal for updating guidelines on employment. One of the four main objectives was to promote and encourage the adaptability of firms and their workers through negotiated agreements at sectoral and company level (CEC, 1997d, cited in Goetschy, 1999: 127).

EU hard mechanisms in areas related to wage policy A number of hard initiatives which the EU has introduced in areas outside that of wages have profoundly affected wage systems in states within the EU’s sphere of influence. These hard influences can be divided into two categories: those which result from social policy and those which are the result of monetary policy.

Influences from social policy While the EU does not regard wages as part of its remit, the Community does address the concept of pay. Article 119 EC states that pay is a complex concept in the modern employment contract and is not confined to wages but includes any other form of remuneration whether in cash or in kind which a worker receives, directly or indirectly, resulting from employment (Nielsen and Szyszczak, 1997: 156). As such, the EU has made many laws and the European Court of Justice (ECJ) has concluded numerous rulings on pay under a number of headings. The concept of equal pay was contained in Article 119 EC. The 1975–76 Social Action

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Programme provided the springboard for further initiatives in the area which supplemented the rather narrow Article (Nielsen and Szyszczak, 1997: 155). These included an Equal Pay Directive, 1 which was later complemented by a Directive on equal treatment regarding access to employment, vocational training, promotion and working conditions. 2 Matters relating to equality in social security rights obtained during retirement were addressed in Article 7(1)(a) Directive 79/7 EEC and Article 9(a) Directive 86/378/EEC; the EU implemented binding legislation for the principle of non-discrimination in areas covering sick pay, survivors’ benefits, bridging pensions, travel concessions, additional statutory redundancies payments, special bonus payments, pay to attend training courses and rules governing the classification of salary grades (Nielsen and Szyszczak, 1997: 157). Article 118A of the EU Treaty deals with health and safety. It states, ‘Member States shall pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers . . . ’. Community provisions on information, consultation and worker participation have been introduced under this Article, including the Directive on collective redundancies,3 the Directive on the safeguarding of employees’ rights in the event of the transfer of undertakings,4 Works Council Directive (discussed in Chapter 4)5 and the proposed Directive on national information and consultation rules which is likely to be adopted in the near future.6 While these initiatives do not place obligations on how wages should be negotiated, they do establish social dialogue as a mechanism for negotiation between employees and employers on key business matters. Indeed, some commentators suggest that the European Works Council Directive in particular may reorganise the manner in which wages are negotiated in MNCs throughout Europe through the development of indirect, arm’slength negotiation (Marginson and Sisson, 1998). Finally, EU employment policy is another field in which the Community has devised hard initiatives which have impacted on how wages are organised across Europe. The new employment chapter introduced in the Amsterdam Treaty in 1997 established a mechanism for coordinating employment policies at Community level. Each year the European Council acting by a qualified majority on a proposal from the Commission and, after consulting the European Parliament, the ECOSOC, the Committee of the Regions and the Employment Committee, draws up guidelines which member states take into account in their employment policies. Subsequently, the Council annually examines the measures taken by member states, known as National Action Plans (NAPs)

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(IST, 2000: 17–21). The Council Resolution on the 1999 Employment Guidelines states that: the social partners at all levels will be involved in all stages of this approach and will make an important contribution to the implementation of these guidelines and the promotion of a high level of employment. (CEC, 1999d: Section 2, part 5) Research has shown that as a direct result of this initiative, which has been labelled the ‘Cologne Process’, social partner involvement in drafting NAPs has increased (Goetschy, 1999: 134), although it may not be entirely satisfactory in all states (IST, 2000). NAPs do not address the subject of wages, but the European Council meeting in Cologne, 1999, adopted a Resolution on a ‘European employment pact’, which aims at the coordination of economic policy and improvement of mutually supportive interaction between wage developments and monetary, budgetary and fiscal policy through macroeconomic dialogue aimed at achieving a non-inflationary growth dynamic. This development engages EU-level social partners in a joint forum along with representatives of member states’ governments, the Commission, the EU Parliament and the European Central Bank in ‘macroeconomic dialogue’ (Eironline, 2000b).

Influence of monetary policy EU monetary policy has been implemented in a hard manner which indirectly effects wage systems within the EU sphere of influence. While EMU is a wholly economic project, it has had definite implications on member states’ social systems. Teague maps out member states’ efforts to reduce public expenditure in order to fulfil EMU criteria. He stresses that member states began to reorganise their systems of wage determination in line with the new demands which monetary union entailed. Teague argues that this largely involved (re)introducing national or sectoral pay bargaining arrangements to control wage increases (1998: 120–2). As mentioned, a strong consensus appears to be emerging from the research which indicates that the effort to grapple with EMU is forcing the social partners and the governments into negotiations because the new macroeconomic conditions have deprived member states of exchange rate mechanisms and interest rates as techniques for adjusting to imbalances in economic performance (Rhodes, 1998; Teague and Grahl, 1998: 6; Eironline, 2000b; 54). Wage policy

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remains one of the few tools left which can compensate for such imbalances. This aside, it is central in controlling inflationary pressures. Since the start of stage two of EMU in 1994, the Commission and the European Council have adopted annual Broad Economic Policy Guidelines which lay out recommendations on what it sees as ‘appropriate wage developments’ for members of Euroland. The 2001 Broad Economic Policy Guidelines stressed, amongst other things, the central role which social partners should play in ‘invigorating labour markets’. It recommended that member states should promote, in dialogue with social partners, increased participation of marginal groups in the labour market such as women, disabled, ethnic minorities and migrants. It recommended that the social partners should aim to facilitate occupational mobility through educational policies. Finally, it urged that the social partners should promote more flexible work organisation through negotiating reform of regulatory frameworks (CEC, 2001c: 18). While the Economic Policy Guidelines are not binding, it is clear from the Commission’s reaction to the 2001 Irish budget, which was claimed to breach the guidelines, that the EU takes these recommendations very seriously (CEC, 2001c: 44). While having no sanctions over the guidelines, the EU can highlight what they regard as macroeconomic risk-taking, which weakens an economy’s credibility, a crucial assest for an economy which is dependent on inward investment (Teague, 2000: 430–2; Staunton and Brennock, 2001). While the EU provided clear focal points to guide member states, contrary to Garrett and Weingast’s analysis (1993) discussed in Chapter 3 the European Court of Justice has no role in these developments and cannot provide ‘focal solutions’ in the event of indecisiveness or conflict. Indeed, this present chapter argues that the Community not only fails to substantiate this wage model with concrete policies and legislation, but its policies in other domains actually contradict the model depicted. An example of this contradiction is the failure to include key issues on wages from the scope of the Maastricht protocol and the subsequent Amsterdam Treaty. Such issues include pay, the right to association, the right to strike, and the right to impose lockouts (Hall, 1994: 301). Consequently, key ideas on managing wage agreements penetrate down to the national level in the absence of any legislative framework. What follows is an analysis of the implications this approach has at the national level.

‘EU wage policy’ and Ireland A debate has emerged within Ireland, reflecting the international literature, which enquires why tripartite-style institutions are currently flourishing in

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Ireland, once an arid region in corporatist terms. Some commentators stress that Irish partnership has an indigenous genesis and that tripartite-style institutions operated long before the recent round of wage negotiations commenced in 1987, such as the National Economic and Social Council, Labour Court, Employer Labour Conference and Joint Labour Committees (Hassel, 1998, cited in Grote and Schmitter, 1999). Certainly, the following extract from the government’s Second Programme for Economic Expansion, which was laid before the Parliament in 1964, could, with its emphasis on problem-solving (O’Donnell and O’Reardon, 2000), easily be mistaken for a preamble in any of the recent partnership agreements: If the programme is not to be retarded by recurrent industrial disputes, satisfactory labour-management relations are essential. In our democratic system of free negotiation this depends, primarily, on the willingness of both labour and management to discuss and settle their mutual problems in an enlightened and progressive spirit of co-operation with full regard to the national interest . . . It is the Government’s policy to promote such co-operation and to encourage and assist the interests concerned in resolving their mutual problems. (Government of Ireland, 1964: 13) A number of key ICTU trade unionists stressed in interviews that Irish Partnership was indigenous in origin. 7 However, other commentators have suggested that contrary to being the product of indigenous characteristics, partnership emerged in Ireland in response to heightened economic competitiveness globally. Teague focused on the two agreements concluded between 1987–91 and 1991–4 and suggested that it is erroneous to regard the national agreements as evidence of an evolution towards European-style neo-corporatism. He suggested that the agreements could be more accurately described as a mechanism which the government adopted to ensure the support of key interest groups behind austerity programmes which could otherwise provoke civil unrest (Teague, 1995b: 254).

Context of Ireland’s first national partnership agreement Significantly, when the Fianna Fáil Party came to power in 1987 it was as a minority government and it was felt that its minority position in parliament could be strengthened if it had the social partners behind its radical strategy of economic policies (MacSharry, 2000a: 61). The opposition parties were reluctant to oppose any new policies and topple the

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government as the country had gone to the polls three times in the last eighteen months and another general election would have been very unpopular. The final factor which contributed to Ireland’s adoption of a national social pact was the trade unions’ willingness to take this road having witnessed what appeared to be the alternative, neo-liberal option. Irish trade unions had looked fearfully on as their British counterparts were emasculated under the Thatcher Government (von Prondzynski and Richards, 1994: 147). The National Economic and Social Council (NESC), the advisory body composed of employers, trade unions, farmers and senior civil servants, published its seminal paper, Strategy for Development, in 1986. This was a significant paper in that, for the first time in Ireland’s administrative history, a strategy was presented based on a continental European-style model of corporation, to address serious economic stagnation. By 1986 the national debt had soared to (IRE) £22 billion, producing an annual interest alone of almost (IRE) £2 billion (MacSharry, 2000a: 62–3). The debt/GNP ratio had peaked during this period to a high of 129 per cent (MacSharry, 2000a: 60). The crisis was amplified by growing unemployment. In 1985, 28 per cent of all school leavers failed to get jobs. In 1980 this figure was only 7 per cent (Murphy, 1986). ICTU responded positively to the publication of the NESC paper and its central idea involving negotiating ‘a meaningful national economic and social plan with the Government and employers’ (Irish Times, 4 December 1986: 4). Irish employers were more reticent about tripartite forums.8 The Federated Union of Employers (FUE) was very reluctant to engage in social partnership. While they were prepared to devise proposals for social and economic policy they were opposed to discussing pay in such a forum (FUE, 1987). They argued for a neo-liberal strategy in the face of the economic crisis (FUE, 1988a). When the FUE entered the talks they had initially hoped to exclude pay from the agenda (MacSharry, 2000b: 126–7). During the 1987 electoral campaign all the main parties, across the political spectrum, referred to the need to develop a social partner-style framework in order to address the economic crisis. Fine Gael, the main opposition party, was hinting at a neo-liberal solution to the economic crisis in a possible coalition with the right-wing Progressive Democrats (Coghlan, 1987b). Their policy proposals entailed priviatisation of stateowned companies, a reduction of labour costs at the point of entry to employment and (Coghlan, 1987a) and weakening trade union rights during industrial action (Irish Times, 1987: p. 9). The Labour Party, had held power in a coalition arrangement with Fine Gael, and had brought the Government down as they regarded proposed

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budgetary cutbacks as being too harsh. However, in the 1987 pre-election build up, the Labour Party also clearly stipulated that a social partnershipstyle approach would be crucial to achieve economic security (Irish Times, 1987: p. 9; Coghlan, 1987b). Indeed, it was Fianna Fáil, the party that eventually gained power and successfully concluded the first Irish social partnership agreement, which remained reticent on this and indeed on all its economic policies in the run up to the 1987 election (Coghlan, 1987a; Coghlan, 1987b).

Explanations for the tripartite strategy The economic crisis in itself however does not explain why a tripartite pathway was adopted. The Irish administration could have opted for UK/US-style neo-liberalism or for French-style neo-Keynesianism through increased borrowing. It is not within the remit of this chapter to assess which features of the Irish environment in the mid-1980s resulted in the precipitation of a robust social partnership which was to produce at least five threeyear partnership agreements.9 Suffice to say that while a number of commentators deny that the EU had any influence in the choice of a tripartite strategy as a solution for the Irish economic crisis (Grote and Schmitter, 1999), some others point to the Community as an influential guideline during the rocky mid-1980s. Article 118 of the Treaty of Rome indicates that the Community itself thought that harmonisation would occur through a process of consultation and research (G. Mangan, 1993: 90–3). Ita Mangan asserts that while it is difficult to estimate the effects that Community membership had on Irish social policy, thinking on social policy and policy expectations have been affected by EU membership. She argues that nationallevel policy-makers and lobby groups have, since 1973, been exposed to Community influences either at official level or through international lobbying organisations. Some scholars suggest that this influence is arguably more important than much of the hard legislation (Hourihan, 1994: 416). Mangan writes: The Commission has set up a huge range of committees, working groups and observatories to monitor policies, collect information and exchange experiences. These involve people from government, academic life, pressure groups, trade unions and employers . . . Ireland partakes fully in these activities and policies must be affected by what is learned there. (I. Mangan, 1993: 80)

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Mary Harney, Deputy Prime Minister of the coalition government which came to power in 1997 and leader of the conservative Progressive Democratic Party, stressed that ‘the most important benefit that Ireland derived from EU membership was that it opened the minds and broadened the vision of our politicians, public servants and private-sector decision-makers’ (Harney, 2000). Certainly, in the years leading up to the establishment of Ireland’s first social pact, all the social partners had commissioned research to analyse how wage agreements are conducted in other small, open, neighbouring economies. The employers commissioned their own study (MacSharry, 2000b: 122–3). The NESC document A Strategy for Development, which became the blueprint for the partnership agreement, highlighted the case of Denmark as a model case-study for economic and social development (NESC, 1986: 145–6). In 1992 the NESC published a commissioned study comparing Ireland’s economy to that of other small European economies (NESC, 1992).

Ireland: locked into social partnership Having tentatively chosen the social partnership option, Ireland very quickly consolidated this approach. Consolidation was speeded along by the support which the 1987 partnership pact received in the media (MacSharry, 2000b: 133–4). When the agreement was perceived to be more successful than had been anticipated even the reluctant employers began to overtly support the partnership process (FUE, 1988b; FUE, 1989; FIE, 1991). The Community played a key role in the consolidation of Ireland’s tripartite strategy. Initially it did this through European funding schemes. Since 1989 Ireland has received (IRE) £17 billion in total EU support, and over half of that sum came from Structural and Cohesion Funds. MacSharry and White (2000) cite EU funding as a cornerstone for Ireland’s recent economic boom. They suggest that it bolstered the partnership model in two ways. Firstly, the funding linked the Commission, the member states and the regional or local authorities. As such it underpinned and extended the social partnership which had just been established in the Programme for National Recovery (PNR) (MacSharry, 2000c: 166). Secondly, financial support went some way to warding off the social tensions which were generated by the tough austerity programme which the administration introduced (MacSharry 2000c: 168). The EU Commission bolstered the Irish strategy by citing Ireland’s fourth national agreement, Partnership 2000 (Government of Ireland, 1996), as a ‘Best Practice Example’ (CEC, 1997a: 15). The Community was particularly interested in the Area Based Partnerships which were introduced in the second programme, the Programme for Economic

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and Social Progress (PESP), to tackle long-term unemployment. The EU was so impressed by the model that it adapted it and launched it on a broader basis under an initiative called the European Territorial Pacts.10 By the turn of the twenty-first century, the Irish administration was truly locked into the European consensual model of wage agreements. This position was clearly stated when a national debate was sparked on whether Ireland is spiritually closer to Boston than to Berlin. The Deputy Prime-Minister, Mary Harney, and the Minister for the Arts, Heritage, Gaeltach and The Islands, Minister de Valera, suggested that Ireland’s economic success owed more to ‘American Liberalism than European Leftism’ (Harney, 2000). The comments ignited a cross-party and cross-societal reaction (Brennock, 2000) which served to indicate that the country regarded itself as firmly embedded within the European social family. Indeed, Harney and de Valera both qualified their remarks in later statements in which they expressed unambiguous support for Ireland’s relationship with the EU. What is remarkable is that these critical comments were very tame compared with British Conservative Party members’ position on Europe and, crucially, they amount to the only public critical comments which any Irish politician has yet made on the European Social Model (de Bréadún, 2001). As such, the debate illustrated the degree to which Ireland is now ‘locked into’ the European project, be it in relation to funding, hard legislation, or soft recommendations in wages. At the end of the day it is not so important how the national wage agreements were initiated in the mid-1980s. The point is that the EU certainly supports the current framework for establishing national wage agreements. Ireland has opted for this approach despite the pressures to adopt a neo-liberal path, which, due to the high presence of US FDI, discussed in Chapter 3, may be felt more deeply than in most other EU countries.

Key contradictions In certain respects Ireland now embodies the ‘European Social Model on Wages’. However, there is one aspect of Irish partnership agreements which suggests that Irish industrial lobby groups are not engaged in a genuine, robust social partnership: employers in Ireland are under no obligation to recognise trade unions. The right to association has been established in The Irish Constitution (Article 40.6.1 (iii) (Government of Ireland, 1987)). However, the constitution does not stipulate that employers are bound to recognise trade unions, or negotiate with them (McGinley and Filby, 1997). This approach was established in case-law by a High Court judgement

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known as the Abbott and Whelan case.11 Abbott and Whelan were workers for the Southern Health Board and when they changed trade unions the Southern Health Board refused to recognise the union they had joined. The employees took the case to the High Court asking the court to compel the Health Board to enter into negotiations with them through their new union. Justice McWilliams who presided over the case concluded: The suggestion . . . that there is a constitutional right to be represented by a union in the conduct of negotiations with employers . . . in my opinion could not be sustained. There is no duty placed on an employer to negotiate with any particular citizen or body of citizens. (cited in McGinley and Filby, 1997: 22) Subsequently, the situation has arisen whereby the economy’s success depends on social partnership yet trade unions have not been granted any statutory recognition at the enterprise level. This irony did not go unnoticed by trade unions. The number of recognition disputes which have been brought to the Labour Court increased dramatically from 1985 (McGinley and Filby, 1997). Trade union recognition was not the source of major industrial unrest in Ireland. Only 2 per cent of the disputes which were referred to the Labour Relations Commission Conciliation Service in 1999 were caused by the issue of representation or trade union recognition, compared with 35 per cent which were caused by the issue of pay and 35 per cent caused by conditions of employment (Labour Relations Commission, 1999: 19).12 Roche found that over the last two decades the nature of recognition disputes has changed. It appears that recognition strikes have become concentrated among smaller employers and their resistance to conceding recognition has increased. Therefore, while recognition strikes involved less employees throughout the 1990s, they have tended to last more working days than throughout the 1980s (Roche, 2001: note no. 1). Trade union recognition became a burning political issue, and in its Annual Report the Labour Relations Commission discussed it alongside the subject of pay, describing it as ‘the other principal industrial relations concern in 1999’ (Labour Relations Commission, 1999: 9). The subject gained public significance for two primary reasons. Firstly, as already mentioned, there was a public consciousness that the much-vaunted national-level social partnership was an institutional irony in the absence of recognition legislation. Politicians, academics and trade unionists alike pointed to this anomaly and the trade unions

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threatened to withdraw from national-level partnership unless the issue was addressed (Roche, 2001: 38). Secondly, the recognition issue grew in importance because research had consistently shown that since the mid-1980s non-recognition is most likely to occur in US-owned plants which have established in Ireland (Gunnigle et al., 1997b: 124; Roche, 1998; Roche, 2001). This was a worrying feature for Irish partnership because US-owned firms are the fastest growing industries in the country. By 1998, US-owned companies in Ireland were responsible for 70 per cent of Irish industrial exports. In 1999, US companies invested over $3.4 billion in Ireland. This is equivalent to over 6 per cent of total US FDI flows into the EU in that year (Forfás, 2000b). Of the 1,278 Industrial Development Authority (IDA)-supported overseas companies in Ireland, the vast majority, 524, are of US origin13 (IDA, 2000: 10). Recent research by Roche has shown that this dominance of US companies is very significant for Irish industrial relations. During 1985–97, 85.2 per cent of US-owned companies failed to recognise a trade union; this compares with 65.7 per cent of Irish-owned companies and 31 per cent of other foreign-owned companies (Roche, 2001: 44). In the face of these concerns it was agreed during Partnership 2000 negotiations that proposals for dispute resolution on the issue of trade union recognition would be examined by a High-Level Working Group (Government of Ireland, 1996: 65). The Group, which comprised of senior civil servants and representatives of business and labour, devised a report which provided the basis for a Bill which passed both houses of parliament with amendments made by the Lower House approved by the Upper House in May 2001. The Industrial Relations (Amendment) Act, 2001, which came into law in June 2001, was initially drafted with the intention of addressing non-recognition in Ireland. Indeed, the Minister of State at the Department of Enterprise, Trade and Employment, Tom Kitt, stressed during the parliamentary debate on the Bill, that those drafting it took account of a private members’ bill which had been presented by the Labour Party in 1998 on trade union recognition (Díospóireachtaí Parlaiminte Dáil Éireann Tuarise Ofigiúl, 2000a: 813–14). However, the purpose of the Bill shifted throughout the negotiations the High-Level Group undertook. The final Bill focused on extending existing legislation to give the Labour Court new dispute-settling powers in circumstances where no negotiating arrangements are in place or where collective bargaining fails to take place.14 The Act stipulates that in the event of a dispute in an establishment which refuses to recognise trade unions two mechanisms operate.

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Firstly, the parties can seek assistance in a voluntary capacity from the Labour Relations Commission over issues such as pay and conditions. Should the dispute continue, either of the parties may return to the Labour Court and the court may then draft a recommendation on the issue. If the recommendation fails to end the dispute, the second mechanism may operate, which means that the Labour Court obtains special fallback powers. Should a trade union request Labour Court intervention in these circumstances, the Court has the power to issue a binding determination on certain matters. The determination may relate to issues such as conditions of employment but not to ‘arrangements for industrial relations’ (Section 6, 2). In short, the Act does not give the Labour Court the capacity to regulate over the issue of trade union recognition; it expressly denies regulation over trade union recognition and arrangements for collective bargaining (Section 2, 5. 2A and Section 2, 6. 2A). Instead, it obliges employers to negotiate on conditions of employment using the court as a medium. The Minister emphasised that the arrangement had been agreed by the national-level social partners. He stated: The new dispute settling power for the court is an agreement between the parties primarily concerned, ICTU and IBEC. Social partnership is rooted in the principle of free collective bargaining. I am pleased that the high level group was able to come up with and agree proposals for dealing with this sensitive issue. The proposals demonstrate that free collective bargaining in a spirit of social partnership can achieve real results. (Díospóireachtaí Parlaiminte Seanad Éireann Tuarise Ofigiúl, 2000b: 744) Yet the Act appears to indicate just the opposite. It suggests that the social partners could not agree on a means of addressing the issue of trade union recognition and hence the subject was side-stepped. As such, Ireland is the only country in Europe which fails to provide any statutory obligation on employers to negotiate or consult with employees (European Industrial Relations Intelligence, 1997/8: 2).

Irish partnership: dysfunctional policy-making? The ‘European Wage Model’ is presented and promoted by ‘soft’, indirect pressures such as the EMU, focal points and EU social dialogue. Consequently, a very specific notion of tripartite-style wage agreements permeates down to the national level but it is not substantiated by a system of governance such as a body of laws on the right to association and the right to strike would provide. In the absence of governance,

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member states are able to ‘mix ’n match’: to secure trade unions’ place at national-level wage agreements in order to fulfil EMU criteria, while failing to recognise trade unions at the enterprise level. Subsequently, Ireland had adopted a very ‘European-like’ system of wage agreements which relies on social partner cooperation. However, this cooperation is lopsided or ‘truncated’ (Roche, 1998), as it is not underpinned by a code of rights to guarantee social partner engagement at the enterprise level. The absence of statutory regulations on trade union recognition in Ireland is the result of a number of issues including an opposition on trade unions’ behalf to juridify the industrial relations system (Browne, 1997). It is noteworthy, though, that the Report the High-Level Group produced refers to the potential impact which statutory trade union recognition would have on ‘prospective foreign investment in Ireland, on small indigenous enterprises and on the broad area of competitiveness’ (High-Level Group, 1997/8: 3). By failing to substantiate the EU wage model with hard laws, the Community has sanctioned such contradictory policy-making at the national level.

Hungary and EU wage policy Pluralist-style lobby groups began to form in Hungary well before there were clear indications that the Berlin Wall was crumbling. During the 1980s a dissenting group within the Hungarian Chamber of Commerce broke away and established an association representing the enterprises in the black economy (Ingleby, 1996: 105). By 1988 the first alternative trade union had emerged followed by the mushrooming of ‘independent’ and ‘democratic’ unions dissatisfied with the totalitarian regime (Kollonay and Ladó, 1996: 103). In December 1988 the Hungarian Communist leader, Miklos Németh, convened the country’s first tripartite council, the National Conciliation Council (NCC). This action indicated that the state recognised that a multiplicity of interests existed in Hungary outside that of ‘The Party’. The NCC survived the transition from the Soviet era and until recently it provided a forum for industrial interest groups to feed into the policy-making process. However, the vitality of Hungary’s civil society which, as this chapter shows, was bolstered by EU support, is still strongly contested despite far-reaching progress towards genuine democratisation of Hungarian society (Pogany, 1993: 354). Cox and Vass point out that Hungary’s informal civil groups have ‘assumed the role of a new ruling group-in-waiting’ (1995: 162). The dominant picture is one of a young

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and relatively unstable civil society in Hungary (Héthy, 1995a: 373; Ingleby, 1996; Berényi, 1999).

EU soft and hard wages policy in associative member states As with Ireland, it is difficult to ascertain the source of administrative choices. It would be incorrect to argue that the neighbouring EU was the sole reason why Hungary adopted a tripartite council in the wake of the transformation. However, it is possible to locate a number of certain mechanisms by which the Community bolstered this tripartite strategy in the wake of its establishment. These include hard pressures such as fulfilling the acquis and funding, and soft pressures such as EU literature and institutional linkages between the Community and Hungarian industrial interest groups.

Hard pressures: fulfilling the acquis Vaughan-Whitehead (2000: 397) claims that social dialogue is a valid and ‘substantial’ part of the acquis communautaire which associative member states have committed themselves to implementing. He recognises that social dialogue has caused considerable confusion for administrators in associative states because, on the one hand, it is an element of social policy and, on the other hand, it has become a means of making social policy within the EU framework (Vaughan-Whitehead, 2000: 389). However, he argues, over the years social dialogue has become part of the EU’s legal and institutional acquis and, as such, must be adopted by associative states as stipulated in the Europe Agreements. Boda and Neumann are a little more cautious on this subject and they suggest that social dialogue may not be a ‘hard core’ element of the acquis. Instead, they regard social dialogue and collective agreement systems as ‘soft’ elements (Boda and Neumann, 2000: 419). This ambiguity is a product of what Volkai describes as the ‘mixed and complex’ nature of the Associative Agreements (Volkai, 1999: 3). By this Volkai is referring to the extensive scope of the Agreement, discussed in Chapter 4, which covers fields that the European Communities do not have the legal competence to negotiate and contract over (Volkai, 1999: 3). Examples of less-ambiguous hard pressures to implement social dialogue come in the shape of EU funding initiatives. Participation by the social partners in regional social dialogue is a precondition for receiving structural funds (Boda and Neumann, 2000: 423). Additionally,

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projects which emerge from social dialogue such as those geared towards regional, structural development can gain funding from the Agenda 2000 project or from Phare (Langewiesche, 1995; Kohl et al., 2000: 411).

Soft pressures: EU documentation Associative member states are subject to all the same soft pressures as member states. In addition, the EU has introduced a number of initiatives which are specific to associative states in its drive to promote tripartism as a means of organising governance generally, and arranging wages, in particular. Kohl et al., write that the tripartite system of social dialogue which operates in the EU serves as a role model for the creation of tripartite bodies throughout Central and Eastern Europe (Kohl et al., 2000: 414). This model has been publicised in numerous ways over the years. For example, the White Paper on the Preparation of the Associated Countries of Central and Eastern Europe for Integration into the Internal Market of the Union (CEC, 1995a) highlights the involvement of the social partner organisations in the evolving legislative process. The concluding chapter stressed the importance of developing a strong civil society and the need to introduce effective institutions rather than simply legal facades. In 1997 Pádraig Flynn, the Commissioner for Employment and Social Affairs, visited the capitals of the associative states. He raised the issue of social dialogue, amongst others, and met with representatives of social partner organisations (Weber, 1998). The Regular Reports, in which the Commission assesses the progress associative states have made towards integration, include a chapter on ‘Social Policy and Employment’ which analyses social partnership mechanisms in the respective states. In May 1998, the Commission published a decision on the creation of sectoral dialogue committees (CEC, 1998c) which provided social partners with a new platform for sectoral social dialogue and implied that associative states also need to set up similar structures to facilitate sectoral social dialogue (Vaughan-Whitehead, 2000: 391). Vaughan-Whitehead, a member of the Directorate General (DG) for Employment and Social Affairs responsible for social dialogue in the process of EU enlargement, has stressed that while screening the accession states in preparation for Chapter 13 of the Commission Regular Reports, the subject of social dialogue was thoroughly explained and introduced alongside other aspects of the acquis (Vaughan-Whitehead, 2000: 391–2).

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Soft pressures: institutional linkages ECOSOC The Economic and Social Committee (ECOSOC), the EU’s broadly consultative tripartite forum (Gold, 1998: 117), formed its first joint Consultative Committee with Hungarian interest groups in 1996. Its goal was to help develop ‘structured dialogue’ (Langewiesche and Aintila, 1997: 162). The National Confederation of Hungarian Trade Unions (MSzOSz), Hungary’s largest trade union, and heir of the Communistbacked Central Trade Union Council, (the SZOT), seemed most integrated within the ECOSOC. However, it appears to be the exception among the interest groups. Although the ECOSOC does arrange meetings between the Hungarian trade union movement and Hungary’s main employers association’s, most of Hungary’s trade unions had only scant knowledge of how the EU operated in 1996 15 (Borbély, 2000). However, the ECOSOC established a social and economic sub-committee which contained three representatives from ECOSOC in Brussels and three representatives of the Hungarian National Conciliation Council (NCC). This committee has provided increased familiarity between the Hungarian interest groups and the mechanisms involved in EU social dialogue (Boda and Neumann, 2000: 421–2).

Delegation of the European Commission The Delegation of the European Commission to Hungary acted as a ‘mediator’ in the event of blockages in negotiations on Hungarian integration within the EU. 16 The Delegation has proved to be a very accessible institution for Hungarian interest groups. The MSzOSz, for example, frequently uses this channel, as the Head of the International Department explained: Here in Hungary, we have really very positive working relations with the EU Mission, with the Ambassador and his experts and it really helps when we need some kind of expert opinions or consultations. It is good to have expert information for ourselves, but it is also good to channel our opinion towards the Brussels decision-making procedures. (See footnote no. 18). Similarly, the employers’ association had a comfortable relationship with the Delegation. When the Association Agreement was being negotiated between the Hungarian government and the EU, the employers’

156 Employee Relations in the Periphery of Europe

association was the only interest group who were informed on developments via the Chamber of Commerce.

ETUC Six of Hungary’s trade unions are members of the European Trade Union Confederation (ETUC).17 It is not surprising that the biggest trade union, the MSzOSz, should have the most extensive network in Brussels. The MSzOSz has been a full member of the ETUC since December 1995. Previous to this the trade union had ‘Observer’ status for two years. Earlier still, the MSzOSz were ‘Partners in the European Forum’ and they managed to establish stronger links with EU networks than any other Hungarian industrial interest group, be it employee or employer representative. Yet, despite official full membership, a lot of progress still needs to be made before the MSzOSz is fully integrated into the ETUC’s fabric. For example, information flows were not very effective and the MSzOSz has had problems processing information that they do receive. 18 Borbély points out that all six trade unions have failed to develop an analytical stance on EU integration. It was only in early 2000 that they commissioned their own National European Integration Commission to prepare a strategy on the issue on behalf of all six (Borbély, 2000: 98).

UNICE Employers in Hungary tend to focus on the national level to mobilise and lobby rather than the EU arena. Only one of Hungary’s nine employers’ associations had applied for membership of the Union of Industrial and Employers’ Confederations of Europe UNICE by December 1997. The Confederation of Hungarian Employers’ Organizations for International Cooperation (CEHIC) was created in 1999 and subsequently gained membership of UNICE. It comprises an umbrella organisation which includes all the main Hungarian employers’ associations. 19

European Integration Council When the Socialist-Liberal coalition came to power in 1994, social dialogue structures were developed which focused on EU integration. The International Committee of the NCC was established to this end. During the Socialist-Liberal government the Minister for Foreign Affairs published information regarding the negotiations and social partners were invited to events which the European Integration Parliamentary Committee had organised (Boda and Neumann, 2000: 421).

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These structures were abolished by Fidesz-MPP, the conservative coalition government which came to power in 1998. They were replaced by the European Integration Council which is made up of the Minister of Foreign Affairs, the social partners and guests (Boda and Neumann, 2000: 422).

The evolution of Hungary’s wage agreements: towards a European model? The National Conciliation Council (NCC) annually negotiated a national minimum wage, general turnover and personal income taxation and recommendations for wage increases in private enterprises and public services (Héthy, 1995a: 362). It comprised the single institution for social dialogue at the national level and it is the oldest framework for interest reconciliation in Eastern Europe (Ladó and Tóth, 1995b: 6). Lajos Héthy explains that the NCC was restructured and consolidated in the post-communist period for four primary reasons. Hungarian administrators were impressed by how tripartite dialogue reduced social tensions in postwar Western Europe and after Franco’s regime in Spain. Second, the country had some experience of ‘forced tripartite’ cooperation during communism. Third, Hungary experienced pressures from the EU, the ILO and the World Bank to establish corporatist structures. Finally, tripartism promised to reinforce the legitimacy of the social partners and mapped a place for them in the administrative framework at a time when their membership was declining (Héthy, 1994: 315–16). The NCC comprised six employee representatives and nine employer associations. The government was obliged to negotiate with this body on social and economic policy, including the minimum wage, social and labour market policies and unemployment benefit. The NCC drafted the basis of employment and collective bargaining legislation for the new 1992 Labour Code (Pollert, 1999: 141). While internal conflict was rife within the social partners’ groups, all representatives interviewed stressed that they cooperated very fruitfully within the NCC.20 The main forum for ‘social dialogue’ took place within the NCC Committees. There were nine standing committees21 which developed different functions over the years. The committees prepared proposals which were then discussed during the plenary sessions. A narrow self-selected number from each association could attend the plenary sessions as observers but it was the associations’ presidents who represented the interest groups around the negotiating table and who had a vote during these plenary sessions.

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Attempt to establish a national social pact By the time the Socialist-dominated coalition government came to power in May 1994 it appeared that the ideals promoted in the ‘European Social Model of wage determination’ had been well advanced. The NCC was functioning and the incoming government had plans to reach a social and economic agreement between the social partners which would cover the four years of office. 22 It was proposed that this national agreement would be complemented by enterprise-level wage determination (Kollonay and Ladó, 1996: 133; Tóth, 1997). Hungary had therefore made strenuous efforts in half a decade to implement the model of wage determination which the EU had endorsed. The coalition government invited the social partners in the NCC to set a four-year social and economic agreement including a national wage agreement. After nine months of drawing up issues for inclusion in the package, drafting proposed agreements and submitting these, a draft agreement never came to fruition. In February 1995 the government announced that the talks to conclude an economic and social package had been terminated, ‘since it saw no chance “at present or in the near future” for their conclusion in line with the original intent’ (Héthy, 1995a: 369). Héthy argues that the national wage agreement collapsed largely because of internal problems with the social partners. He claims that the government was legitimate and popular at the outset of negotiations. Likewise, the trade unions had obtained enormous credibility through the workplace elections they had been obliged to take part in since 1991. The employers’ representatives, however, were a motley selection of groups without any guarantee of being representative (Héthy, 1995a: 374). This serious lack of legitimacy of this leg in the tripod made the forum very unstable. The second problem which the Hungarian effort to establish negotiated wage agreements faced was that the state itself was marginal and vacillating. Héthy argues that the government’s key weakness was its failure to produce ‘well-funded political strategies’ to present before the social partners as a framework with which to negotiate. Instead, the government asked the social partners to draw up an agenda from which, it was hoped, a draft proposal on an economic and social package would emerge (Héthy, 1995a: 369). This open-ended approach resulted in a number of problems. The social partners produced ‘wish lists’. Subsequently, the talks could never become focused or strategic in style. Secondly, by failing to present the partners with a framework, the

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government allowed an ethos of short-termism to creep into the negotiations. The social partners were solely concerned with what the government could offer them, rather than any long-term political ideal based on cooperation and sustained social peace. The state’s failure to direct and encourage the project is peculiar, as the state had initiated the effort. This weak leadership may be explained by glancing to the backdrop of the negotiations. The Socialist Party had no technical reasons to form a coalition government after its electoral victory in May 1994. However, it was keen not to develop an image of an autocratic party such as that of the now – discredited Communist Party in which many of its members began their political careers. This paranoia strongly influenced the Socialist Party and caused it to refrain from taking an interventionist stance regarding the attempted economic and social package – allowing the entire project to flounder (Ferge, 1997). Additionally, it was the same fear of appearing autocratic which prevented the government from urging employers’ associations to restructure into credible, legitimate partners, as the previous conservative government had forced the labour representatives to do by establishing the works council election system (see Chapter 4). Comments made by the government representative within the NCC’s Secretariat gives some insight into the government’s reluctance to take autonomous action regarding the social partners: [t]he Government asked the employers’ associations to state what should be the criteria of the representativeness . . . But the Government is patient on this matter, it doesn’t want to interfere aggressively with the life of these associations. It asked them actually, ‘Okay, we don’t want to do anything as a government, so tell us, what are the lines, the representativeness lines which you would draw?’, but they are not able to do it, they come up each time with a new pretext.23 Ironically, it appears that the government’s concern with acting undemocratically resulted in no decisive action and the respective institutions, bastions of pluralism, were fundamentally weakened.

Collapse of the NCC The conservative-orientated government which came to power in 1998 rejected the principle of corporatism and it promptly began to implement policy reforms to dismantle Hungary’s corporatist mechanisms. Initially, it disbanded the supervisory bodies of the social security and pension insurance funds which had cooperated with trade union and

160 Employee Relations in the Periphery of Europe

employer participation since 1993 (Boda and Neumann, 2000: 418). The government then began to transform the system of social dialogue which had been operating since Hungary’s political transformation. Despite opposition from both sides of the social partnership (MTI, 1999) the NCC was disbanded in 1999, and two separate bodies were established to replace it. One is the National Economic Council (NEC), which is concerned with macroeconomic consultation. The NEC is a much wider body than the NCC was in two respects. One is that it includes civil associations representing a broad range of areas of society. Secondly, the employers’ side is much wider. The invited organisations represent MNCs, the chambers of commerce, and other types of employers’ associations. The second newly established body is the National Labour Council (NLC). It is still tripartite in structure, but it is limited to a consultative role in the area of labour law, providing advice on bipartite bargaining and recommending increases in average wages and the annual minimum wage. A National ILO Council was established and it was envisaged that labour-related international issues would be addressed here and in the new European Integration Council (Boda and Neumann, 2000: 418). As the NCC had been split into these three forums it had become impossible to undertake the complex bargaining over wage increases, tax laws and pension and health contribution levies which until now had characterised the work of the NCC (Tóth et al., 2000). The previous Socialist government had proposed similar reforms. But it appears that the current administration, which is right-wing in orientation, was keen to use the opportunity to eliminate macroeconomic consultation. Having disbanded the NCC, the government took a number of actions which further eroded Hungary’s corporatist system. In 1999 the government submitted an amendment of the Labour Code which authorised works councils to conclude an agreement in the absence of a trade union in the workplace. This action bypasses collective agreements and it undermines trade unions’ efforts to establish in union-free enterprises (Tóth et al., 2000). This proposal was submitted in the face of extensive union protest and against the earlier practice whereby Labour Code modification only can pass to parliament if there is a consensus among social partners in the NCC. 24 In addition, the government began to set the budget for the forthcoming year well in advance of the negotiations with the NLC over the minimum wage, thereby clearly ignoring its input (MTI, 2000a and MTI, 2000b). Tension between the government and the newly established consultative bodies came to a head when the social partners in the NLC failed to reach a prompt agreement on the national minimum wage. The government

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introduced an amendment to the Labour Code which withdrew the NLC’s right to recommend a minimum wage (MTI, 2000c). Subsequently, the government itself set a figure (MTI, 2000d).

The EU’s response The EU gave a relatively favourable assessment of the NCC in early reports. The 1997 Commission Opinion, for example, noted: [s]ince the Interest Conciliation Council was set up by the Hungarian Government in 1992, the tripartite social dialogue has been working relatively well. (CEC, 1997c: 87) However, as social dialogue began to deteriorate in Hungary the EU grew more critical. In the EU’s 1999 Accession Partnership Report on Hungary, which highlights policy areas that need to be addressed in the short term, the EU pointed to the need to support social partners’ capacity building efforts to develop the acquis through bipartite projects (CEC, 1999a: 5). In March 2000 the ECOSOC stated: In practice, the Hungarian government’s new approach is to dismantle social dialogue structures and replace them with a system of separate forums . . . which, while broadly-based, have few decision-making or advisory powers. (ECOSOC, 2000, cited in Boda and Neumann, 2000: 432) The head of the European Commission’s DG for Enlargement, Eneko Landaburu, told the Hungarian national press that the system of social dialogue which Hungary had adopted is incompatible with the European practice and hinders the conclusion of accession talks on the welfare chapter (MTI, 2000e). The rather scathing review which the Commission gave of Hungarian social dialogue in the country’s Regular Report should come as no surprise therefore. It stated: the Economic Council is merely used by government to transmit information to a wide range of representatives of society, including the social partners, with no opportunity for dialogue. . . . Social dialogue is not accorded the requisite importance and this situation needs to be addressed. The new structures need to be used in a way that permits effective social dialogue. (CEC, 2000c: 52–3)

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The relatively unsuccessful history of national social partnership in Hungary reflects, and is a product of, the nature of social partnership within the EU. At the outset of the chapter, it was stressed that the EU promoted tripartite wage arrangements solely by soft means and indirectly through hard mechanisms in other policy fields such as monetary policy. Community soft governance of wage arrangements certainly affected Hungarian wage systems. In 1995 the government had made a genuine effort to establish a social pact. It failed in this endeavour for numerous reasons. Crucially, it was unable to point to a single hard EU pressure in the area to urge social partners into negotiations. In 1999 the new administration no longer supported tripartite pacts as a model and began to weaken those tripartite institutions which did exist. In this context the EU was confined to publishing critical comments in annual reports, an action which is unlikely to cause the administration to re-evaluate its strategy.

Elsewhere similar patterns emerging In both Hungary and Ireland we see tripartite institutions of questionable value. While Ireland’s is certainly effective as a macroeconomic mechanism, it does not operate at the enterprise level. In Hungary, the current institutions amount to ‘facade corporatism’ (Kohl et al., 2000: 403), which on paper resembles the style of institutions promoted by the EU but which, in reality, by-pass the social partners as decision-makers. Both states are keen to follow EU recommendations and policies in the area but both feel pressures from their respective industrial strategies which means that they resort to implementing a limited tripartite measure without putting it into operation at all levels. Both countries are willing to imitate European soft laws so long as they do not compromise indigenous strategies. Crucially, the EU can do nothing about these contradictory policies and anomalies. The following section enquires how national tripartite arrangements pan out in other countries within the EU’s sphere of influence. At the outset, this chapter pointed out that all countries within the EU have, over the last decade, adopted (or simply maintained) statesponsored wage coordination. These arrangements invariably include representatives from national employer associations, trade unions and, often, the state. They are commonly referred to as social pacts or examples of social partnership. They are given this title because these tripartite negotiations, which can take place at the national or sectoral level, address a host of issues alongside wages. For example, Table 5.1 shows

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that both national and sectoral agreements throughout the EU include working hours, job security, employment creation, part-time employment and equal opportunities. In many respects it appears that member states are taking up the challenge laid down by the EU in its Green Paper, Partnership for a New Organisation of Work (CEC, 1997b). Here the Community invited the social partners and national administrations to seek to build a new framework for the modernisation of work. Highly centralised wage agreements, which in postwar Europe were concluded and policed by strong national trade unions and employers, were sensitive to fluctuations in the labour market or inflation. The Green Paper claims these relations have changed as a result of a change in human resources, markets and technology. Despite these fractures in relations, the Green Paper points out that many member states are managing to re-coordinate their industrial infrastructures to reconcile security for employees with flexible working arrangements: In a number of Member States, the social partners have shown their readiness to adapt to profound changes taking place in organisational structures, management style and industrial relations practices in both the private and public sectors. (CEC, 1997b: Para. 83) Examples of this shift may be located in Table 5.1. A Greek sectoral agreement in banking introduced a 35-hour week without loss of pay. In exchange, opening hours were extended and flexible working hours were brought into the sector (IST, 2000: 123). However, it has been contested that these innovative developments amount to social pacts as opposed to merely economic pacts. Teague and Grahl have reviewed these developments and they conclude that, with the exception of Germany and Nordic countries, it is inaccurate to regard these partnership agreements as coordinating mechanisms. They argue that partnership agreements coordinate effectively in the German and Nordic model because strong employer organisations tie individual firms to regional or sectoral pay deals and the labour market actors agree on the rules of the game. Teague and Grahl claim that while other European governments are eagerly attempting to connect micro and macro levels through partnership bargaining in order to balance wages, with inflation, unemployment and skill demands, they fail to achieve this because trade unions and employer associations lack the internal control necessary to tie enterprise-level employees with wage agreements established at a sectoral or national level (Teague and Grahl, 1998: 4–6).

Level of negotiations2 and date of agreement

Non-wage content in agreements1

164

Table 5.1 Wage and social pacts in a selection of EU member states Real wages growth rates*

Labour productivity growth rates*

1971–80 1981–90 1991–2000 1971–80 1981–90 1991–2000 Austria

Sectoral level 1998–9

Belgium

Inter-professional/ intersectoral (which feed into sectoral agreements) 1998

Denmark

National agreement 1998

France

National interprofessional and sectoral 1998

Flexible pay system, flexible working and reduced working hours, continuing training, equal opportunities. Working conditions, social dialogue in SMEs, annual holidays’ notice periods for blue-collar workers, disabled employment, equal opportunities, part-time work. Aim to have skilled workforce during low unemployment. Quicker access for unemployed to labour market. Reform of pension scheme, reform of vocational training funds in SMEs and unemployment funds. Reorganisation of working hours.

4.2

1.6

1.1

2.9

2.2

1.6

4.7

0.4

1.4

3.2

1.8

1.6

1.6

0.5

1.7

1.6

2.0

2.2

3.6

1.1

1.1

2.9

2.1

1.6

Germany

Greece

Ireland

Italy

Regional sectoral level mostly 1998

Flexible working hours, paid sick leave, part-time employment for older workers, vocational training, job security. Decreased working hours National interin exchange for increased professional, flexibility of working hours, sectoral, national occupational 1998–9 employee information structures, family friendly policies, training. National level Changes in work organisation, 2000–3 expansion of partnership notion to enterprise level, redistribution of wealth, training and skills. Employment, vocational National intertraining and theoretical sectoral and training for apprentices, national sectoral temporary employment, 1999 overtime, rules governing strikes. Discussions over IR in transport sector.

Netherlands National and sectoral 1997

0.8

1.4

2.6

1.7

2.0

3.2

0.1

0.2

3.0

–0.3

1.5

4.2

2.1

1.4

3.7

3.8

3.2

3.0

1.0

0.1

2.6

1.6

1.5

3.0

0.2

1.0

2.7

1.6

1.2

165

Education and training, working hours, reconciliation of work and family responsibilities, policies on older workers, stress at work and working conditions.

2.9

166

Table 5.1 Continued Level of negotiations2 and date of agreement

Non-wage content in agreements1

Portugal

National and sectoral 1998

Spain

Regional, sectoral and interconfederal 1999

Vocational training and work organisation, working hours. Job security, continuing training, creating employment.

Real wages growth rates*

Labour productivity growth rates*

1971–80 1981–90 1991–2000 1971–80 1981–90 1991–2000

*

5.6

1.4

2.1

4.7

3.0

2.1

4.6

0.7

0.7

4.2

2.2

1.3

Source: Schulten and Stueckler (2000). Source: IST (2000). 2 Note that most of these countries also practise company-level negotiations. They are not discussed here. 1

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Martin Rhodes (1998) also points out that the nature of partnership agreements which are currently flourishing Europe-wide is radically different from those which underpinned Fordist Europe. He labels these modern pacts ‘competitive corporatism’ and he holds that, unlike traditional corporatist structures, they are not concerned with redistributive/ equity-linked welfare politics. Rather, they seek to increase employment through restructuring labour market regulation and labour market related welfare programmes such as pensions, unemployment benefit, and social security. He argues that member states will respond to the challenge presented in the Commission’s Green Paper on partnership by restructuring traditional welfare models and constraining wages through social pacts. There is strong evidence that ‘competitive corporatism’ is far from a futuristic model. Table 5.1 shows that European states have been shifting in this direction since the early 1990s. Average real wage growth rates show a clear trend of almost universal decline between 1991 and 2000. Notably, the increase in real wages is clearly below the increases in labour productivity. Subsequently, the trend towards wage moderation in Europe has been accompanied by a simultaneous, relative growth in productivity. Schulten and Stueckler (2000) highlight this pattern. Their research disclosed that both trade unions and employers in most EU countries take into account national macroeconomic factors, such as the development of prices and labour productivity, when setting their wage policy. Schulten and Stueckler assume that these developments are a result of states developing macro-coordination of wage policy such as partnership agreements in order to fulfil EMU criteria. They conclude that should these trends continue, it is very unlikely that wage policies will produce inflationary pressures. On the other hand, they caution that decreasing real wages accompanied by increasing productivity may produce deflationary tendencies: If more and more European countries follow a competition-driven wage policy and real wage increases continue to fall far below increases in labour productivity, this would not only lead to a further redistribution from labour income to capital income but might also undermine price stability in a deflationary direction. (Schulten and Stueckler, 2000: 19) A number of trade unions across Europe have taken some steps in an effort to stall the competitive pressure which is driving this trend. A key example includes the ‘Doorn group’, which was first established in

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September 1998, bringing together Belgian, Luxembourg, Dutch and German trade unionists to discuss coordination. The trade unionists signed a joint declaration on collective bargaining which stressed the need for closer cross-border cooperation and established common bargaining guidelines. The group met for the fifth time in September 2001 and their interest has now stretched to include employment issues outside wage policy (Eironline, 2001). Certainly, the inter-professional agreement signed in Belgium in December 1998 did include a clause which aimed to develop continuing training and employment more in line with the practices in the three neighbouring countries (IST, 2000: 102). Nevertheless, Schulten and Stueckler urge that a more transnational approach to wage coordination may be necessary if the deflationary pressure is to be contained. They suggest that EU intervention into wage coordination would be useful to this end (Schulten and Stueckler, 2000: 19).

Conclusion This chapter showed that despite the EU’s refusal to recognise wages as part of its jurisdiction, the Community has certainly influenced wage arrangements in member states and, indeed, in associative member states. Firstly, it was asked whether social partners are involved in wage determination in a negotiated-involvement-like manner in our two case-studies: Ireland and Hungary. The chapter then examined wage arrangements throughout the rest of Europe. Throughout this work, it was argued that the Community plays a central role in promoting negotiated-involvement-style wage determination throughout the EU, and further afield, by means of ‘soft’ pressures. The chapter argued that the EU has, in fact, developed an unofficial EU Social Model on wage determination, and one of the key methods for promoting these practices was located in the EU social dialogue ideal. It was seen that national interest groups have engaged in this forum, albeit to different degrees, and, crucially, they have brought some notions embodied in the forum ‘back home’. The chapter indicated that national interest groups were keen to engage in the social dialogue and the EU acted as a primary agent in promoting the EU Social Model. When the focus turned to the national level, interesting developments emerged. It was stressed that while national social partners certainly cooperated with their respective states to implement a wage system along negotiated involvement lines, thereby endorsing the EU Social Model, these efforts were largely ineffectual. The chapter argued that,

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despite the current economic buoyancy, the Irish national wage agreement is unstable and dysfunctional. It was seen that during the Socialist coalition’s administration Hungary made genuine efforts to develop a national wage agreement. However, it was shown that the administration failed to establish a social pact in a neo-corporatist framework. It was stressed that despite these flaws, and the subsequent erosion of Hungary’s tripartite structure being a point in case, the EU could take no concrete action to bolster the social dialogue ideal which it had so dynamically promoted. Finally, the chapter examined patterns in wage agreements Europe-wide and argued that partnership agreements have been utilised over the past decade to secure wage moderation and increase productivity. It was suggested that the Community should govern these agreements to prevent deflationary pressures setting in. The Irish and Hungarian case-studies may be explained by analysing the nature of the European Social Model. It was explained that the EU has never defined what ‘partnership’ involves, in terms of concrete institutional recommendations. Therefore, interest groups are at sea when they apply the EU model in their national contexts. The chapter pointed to certain contradictions which the model entails, whereby the Community promotes partnership but fails to guarantee trade union recognition. It is recommended that the Community could begin to govern the principle of social partner involvement in wage agreements by providing legislation which would underpin the ideal. Such legislation would include the right to association, the right to strike and the right to impose lock-outs.

6 The European Union and National Training Systems

Rather than seeking to impose a ‘single institutional measure’, each member state ‘will endeavour to introduce and develop such arrangements as it considers necessary’ (OJ 96/C 195/01). The Council response stressed that the usefulness of EC initiatives lay in the exchange of information and the funding of experimental projects at a time of change. (Milner, 1998: 164–5)1

Introduction This chapter analyses how the EU affects training systems in lessdeveloped societies. EU policies on training provide a useful means of assessing the effectiveness of ‘soft governance’ as a mechanism for introducing new policy strategies for two reasons. Firstly, unlike a policy area such as competition or trade, the policy outcomes are quite accessible and tangible. Secondly, training was an area in which the EU initially did have the capacity to devise hard, binding legislation. The community opted not to introduce binding training initiatives, due largely to political opposition to ‘EU interference’ at the national level. The chapter focuses solely on EU policies which aim to integrate the social partners into decision-making on training policies. It shows that the Community dynamically promoted the model of social partner involvement in training strategies and, indeed, member states and associative member states were strongly influenced by this model. However, it is shown that despite EU and national-level commitment to the ideal there is little evidence that less-developed societies have fundamentally reformed their training systems to include social partners. The chapter indicates that administrations which previously lacked social partner 170

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involvement do introduce ad hoc pilot projects. Overall, however, the EU fails to introduce the social partner model into those training systems in which social dialogue is absent. The chapter is organised into the following four sections. The first part looks at the EU policies on training and shows that the Community had the capacity to implement ‘hard’ training policies at the outset, but failed to maximise this opportunity due to national opposition. The second section introduces training systems in Ireland and shows the ‘soft’ nature of Europeanisation which occurred there. Thirdly, the chapter discusses how Hungarian training systems have been affected by EU training policies. Finally, the chapter looks at a selection of countries within the EU’s sphere of influence and shows that a major restructuring of training systems within Europe’s peripheral economies will need more than ‘soft’ tools.

EU training policies and the social partners Sellin suggests that EU training policy can be divided into two distinct eras: those that were devised before the Maastricht Treaty and those which were developed after it (Sellin, 1999: 20).

Pre-Maastricht EU training policy At the outset, Article 128 of the Treaty of Rome provided the Community with a clear legal basis for engaging in training policy. It stated that the Council of Ministers would lay down general principles for implementing a common vocational training policy capable of contributing to the harmonious development both of the national economies and of the common market. This principle was implemented in 1963 when a Council Decision established a legally binding common vocational training policy which comprised of ten principles.2 The common vocational training policy, however, was not the same as common policies which had been devised in other fields, such as competition, agriculture and transport. In these areas member states were obliged to change national systems to comply with Community initiatives. Unlike these areas, Community competence was more limited in the field of training. The principles were adopted over the years through non-legally binding policy statements (Bainbridge and Murray, 2001: 6). Rather than focusing on introducing an overhaul of national training systems as occurred in other policy areas,

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resources were limited to attempting to bring about a convergence of standards in aspects of training systems, such as qualifications systems, certifications and examinations. Responsibility for implementing the principles was divided between member states and the Commission (Bainbridge and Murray, 2001: 6). From the outset a tension existed in EU training policy; while the Commission had the legal capacity to develop hard policy initiatives, embedded in the Treaty, it confined itself to coordinating practical cooperation and monitoring developments. A dynamic interest emerged in the field of training in the mid-1980s. This interest was spearheaded by rising unemployment and the Single Market environment as heterogeneous training practices acted as an obstacle to the free movement of labour (Milner, 1998: 160). The 1988 reforms of the Structural Funds doubled resources available and the Community’s institutions came to an agreement that European funding should be sanctioned by a legal instrument based on the Treaty. Between 1986 and 1991 a number of European vocational training action programmes were established through legally binding decisions, mostly based on Article 128 of the Treaty of Rome. Each programme focused on an aspect of European vocational training policy such as the Community Programme for Education, Teaching and Training in Technology (COMETT) a project for establishing links between industry and universities, or the trans-European cooperation scheme for higher education (TEMPUS) which organises mobility between EU and Eastern European University students. These initiatives indicated that the Commission had developed a new competence in training which bypassed national governments (Milner, 1998: 160). When the Commission proposed to amend the EU Programme in the field of higher education, entitled the ERASMUS programme, in 1989 based on Article 128, the member states were uncomfortable. Legislation could be passed on Article 128 by means of a simple majority in the Council. Member states were concerned that legally binding instruments would be used to develop the common vocational training policy. They were worried that this policy would infringe on national education policies. A European Court of Justice Decision verified their concerns by concluding that Article 128 did provide for legal measures which could impose obligations on member states’ training and education systems3 (Bainbridge and Murray, 2001: 9). Concerns were heightened by the Social Charter of Fundamental Workers’ Rights which had been adopted during the French Presidency in 1989. The charter included the right of access to vocational training throughout working life. It presented the possibility that a legally binding initiative on access to vocational training could be passed by

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a simple majority in the Council of Ministers under Article 128. This prospect ignited a political debate within the Community (Bainbridge and Murray, 2001: 10).

Post-Maastricht EU training policy The Inter-Governmental Conference opened in 1991 to discuss economic and monetary union and reforms of the Treaty of Rome. It presented member states with the opportunity to revise Article 128 and they seized the occasion to make explicit what had been implicit to date: Article 127 of the Treaty on EU replaced Article 128 in 1992. As such the common vocational training policy was replaced by a training policy to support and supplement activities of the member states. The Article stated that member states were responsible for their vocational training systems. Education was defined separately from training, and harmonisation in both areas was expressly excluded (Bainbridge and Murray, 2001: 11). The Community continued to use the networks, research and agencies developed over the preceding twenty years to act as a reference point on good training practices for the member states. In short, EU training policies provide an excellent example of the new form of EU governance which bedded down in the post-Maastricht period: White Papers4 make convincing recommendations on the direction that national training initiatives should take and EU funding is available for those states who wish to implement training projects within the framework of Community programmes, although there is no obligation on them to do so (Freedland, 1996: 10).

The social partners and EU training policy As in other areas discussed in this book, the Community also seeks to promote neo-corporatism in the field of training. It does so by its internal administration, its policy documents and in its proposals (CEDEFOP, 1989: 3; Milner, 1998: 159). In 1976 the European Centre for the Development of Vocational Training (CEDEFOP) was established as an agency to advise policy-makers and practitioners of the European Commission, the member states and social partner organisations across Europe to make informed choices about vocational training. The CEDEFOP Management Board includes representatives of national employers’ organisations, national trade unions and member states’ governments. The Union of Industrial and Employers’ Confederations of Europe (UNICE) and the European Trade Union Confederation (ETUC) participate as observers. More recently, in 1995 the European Training Foundation (ETF) commenced

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its work supporting the reform of vocational training systems in the partner countries and territories, which includes Eastern Europe. The ETF’s Advisory Forum is comprised of representatives of the member states, the Foundation’s partner countries, the Commission and the social partners. The Council Decision which established an Action Programme for the Implementation of a European Community Vocational Policy (APVOP) clearly places the social partners right in the centre of training arrangements (CEC, 1994b: 9). This ideal is also presented in ‘hard’ packages. For example, the funding provided in the APVOP will only be released if proposals for funding are submitted by certain actors, including the social partners (CEC, 1994b: 23). The drive to integrate social partners in Community training policy commenced as early as 1963 when the tripartite body entitled the Advisory Committee on Vocational Training was established. The committee has contributed to EU training policy in both the pre- and post-Maastricht period. The social partners (Benedek and Luttringer, 1996: 7) decided upon seven ‘Common Opinions’ on the subjects of education and training. These Joint Opinions have not been without significance. For example, the Joint Opinion of July 1993 highlighted the role that training could play in developing the labour market and, as such, contributed to the EU vocational training policy drawn up in the Maastricht Treaty (Bainbridge and Murray, 2001: 12–13). Besides integrating the social partners into the training policy machinery at the EU level, the Community has bolstered social partners’ role in training policy at the national level. In the Commission’s 1991 Memorandum on Vocational Training and the 1995 White Paper on education and training (CEC, 1995b), the Commission invited national governments to consult with employers’ organisations and trade unions, and training providers, before compiling national reports responding to specific policy objectives (Milner, 1998: 174). Since the mid-1960s, therefore, the Community’s activities in the field of training have been consistent. Firstly, it has always promoted the notion of social partner involvement in training initiatives. Secondly, it has always limited this support to non-binding recommendations. Milner writes that the Community strategy amounts to an ‘apparently schizophrenic approach’ (1998: 160) to training policy, whereby policy aims to emulate the German high-skilled model yet it fails to operate the interventionist approach which accompanies Germany’s training system. She stresses that while the EU has over the decades established a breadth of responsibilities in the field of training, this responsibility is limited to proposing policies. Decision-making lies with the member

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states (Milner, 1998: 163). Despite the consistency of this two-pronged strategy, the motive behind it has shifted over the lifetime of the Community. In the early years Community social policies aimed to harmonise member states’ social systems. The goal was to converge on a model resembling the much-admired German ‘high-road’, negotiated involvement–style system (Hepple, 1987; Teague, 1989: 312–14; Streeck, 1997a: 10–12). Aspirations for a convergence were dispelled in the mid1980s by member states’ objections to the notion (Grahl and Teague, 1990). However, the import of social partners’ role in training initiatives was to take on a new significance. The EU is stalwart in its belief that a highly skilled labour force is critical for a competitive market. For example, the Commission has proposed in its communication on An Industrial Competitiveness Policy for the European Union (CEC, 1994a), to introduce arrangements whereby companies which have made a special effort in training can enter some of this investment in their balance sheet as part of their intangible assets (CEC, 1996a: 70). Furthermore, the argument presented at Luxembourg suggested that training is most effective when it is coordinated by the social partners and embedded in their bargaining. The social partners were advised, in the summit conclusions, to engage themselves in training responsibilities (CEC, 1997e: clause no. 70). In essence the EU presents training initiatives as being an asset that complements the flexibilisation of work. The Commission is conscious that the drive for a highly trained and re-trained labour force within a flexible environment challenges the European tradition of employee protection. In its document Employment in Europe, the Commission articulates its concern that the flip-side of life-long learning is life-long insecurity (CEC, 1996c: point no. 5). As mentioned in Chapter 1, the Commission’s political hue changed from the Keynesian-style interventionist agent, which it adopted up to the mid-1980s, to a more neo-liberal-style approach which emerged thereafter. Goetschy argues that it began to encourage a flexible, European labour market where life-long learning is the norm and permanent contracts are the exception. She argues that, as such, the Commission is uncritically endorsing a politically weighted strategy without practising the kind of analysis and caution which should accompany the introduction of a new regime within any responsible policy community (Goetschy, 1999: 135–6). Alain d’Iribarne (1996) has scrutinised the Commission’s White Paper on education and training (CEC, 1995b). He concludes that the stance taken verges on technological determinism in its argument that the flexibilisation of the labour market is inevitable

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(1996: 24). He argues that despite supporting the flexible/adaptable project, the White Paper indicates that the Commission is deeply concerned that whole sectors of Europe’s labour market will become marginalised in the flexible/adaptable environment (d’Iribarne, 1996: 27). D’Iribarne holds that that the Commission is not blind to the challenges and hazards which the new flexible labour market presents. It appears that the Commission no longer supports social partners’ involvement in training initiatives in pursuit of a social corporatist Europe, but the contemporary aim is to temper the drive for competitiveness which challenges the Commission’s much lauded ‘European social model’. Social partner involvement in training initiatives is central to the Commission’s juggling act: balancing competitiveness and social cohesion (d’Iribarne: 1996: 27).

Patterns of training policies throughout the EU Training systems throughout Europe are first and foremost notable for their diversity. Not only is each state’s training model distinctive, but also within each state, training is organised differently according to the sector and the level of involvement (i.e. national, local). This complex picture has been accentuated since the 1980s when policy-makers began to tie training policies into labour market strategies (CEDEFOP, 1999: 11). Subsequently, respective governments tend to introduce new training strategies on coming to power (CEDEFOP, 1990). That said, it is possible to recognise a number of patterns of a general nature across Europe’s training systems. For the purpose of generalisation, European countries can be divided into the following three traditional camps in relation to training systems.

Extensive executive role for social partners: Examples of countries in this category include Germany, Denmark, Belgium, Sweden, Austria, the Netherlands and Luxembourg. In these cases vocational training is regarded as a subject of public interest, rather than the economic interest of individual firms. The administration of vocational training in these countries is shared between the state and ‘the sellers and buyers of occupational qualifications as represented by their associations’ (Streeck and Hilbert, 1990: 45).

Limited advisory role for social partners: Countries within this group include France, Ireland, and UK. These countries come from highly centralised traditions, and the role of social

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partners is defined by current training rules and regulations and is dependent on the readiness of government to grant wide powers to the social partners without challenging the different principles which underpin the respective states (d’Iribarne, 1990: 93).

Very weak role for social partners: Examples here traditionally include Italy, Portugal, Greece, Spain, Hungary, Czech Republic, and Poland. Most of these countries have emerged from political dictatorships within the last twenty years. This has left a legacy on the social partners as they have a limited experience of working with institutions which are integrated into civil society (CEDEFOP, 1990: 66). In the Italian case the social partners are highly politicised and the theme of training is exploited to fight more general battles. Additionally, training in Italy is dualistic in nature: it is divided between formal, ‘institutional’ training and implicit training conducted within small firms which is not organised by the social partners (Catalano et al., 1990: 136). The above outlines the traditional model of training within European states. These systems are under constant experimentation and reform. The following section enquires whether there is any evidence that Community initiatives have caused the social partners to gain a greater role in training initiatives, as the EU clearly desires.

Training policies in Ireland Up to the late 1990s, the Irish administration saw training policies’ priority to be that of addressing the country’s long-term unemployment problem. Virtually all public active labour market policies provided for the unemployed, rather than those in work (Breen, 1991: 63; O’Connell and Lyons, 1995: 10; CEDEFOP, 2000: 9). The state implemented job creation schemes, subsidised employment and youth programmes and training to attempt to reach school-leavers and the long-term unemployed (OECD, 1995: 87). Government policies in training have recently been re-evaluated and a new strategy has been adopted for three primary reasons. Firstly, research showed that these programmes were not successfully integrating the unemployed into the labour market (Government of Ireland, 1986; Breen, 1991; ESF, 1996; ESRI, 1997b: xxvii). The government was keen to respond by developing training schemes which were tailored to individual needs. 5 Secondly, a sharp upturn in the economy, centred in the transnational electronics sector, created a shortage in skilled labour. Subsequently, the government became eager

178 Employee Relations in the Periphery of Europe

to develop linkages between the training institutions and businesses (Government of Ireland, 1997: 119). Finally, as discussed below, businesses and labour representatives themselves indicated an interest in training as a priority.

EU influence on Irish training system As with other European states, changes were under way within Ireland’s training system long before membership of the Community was mooted (Hannan and Werquin, 2001: 97). The 1966 free trade agreement which had been concluded with the UK, Ireland’s biggest trading partner at the time, provided a key motive for reform of the country’s training system (CEDEFOP, 1988: 33–4). The reform resulted in the 1967 Industrial Training Act which established the organisational framework for industrial training within the country. The Industrial Training Act promoted the social partnership notion by a number of means. Trade unions and employers, amongst others, nominated the members of the Executive Council and the social partners welded a certain influence both at policy and at implementation stage. As such, reform within Ireland’s training policy reflects the attempt to achieve a framework of consensus within the economy as a whole (CEDEFOP, 1988: 38). That said, the Community did influence the shape of Ireland’s training system. It did this in three main ways. Firstly, Ireland was influenced by ideas which were ‘floated’ from Brussels. Being a small country with a short industrial history, Irish policy-makers were keen to familiarise themselves with recommendations which were being discussed in international circles. In 1983 the Community Council on Vocational Training Policy in the Community developed a concept known as the ‘Social Guarantee’ which held that unemployed school-leavers should be guaranteed access to full-time training courses of basic training and work experience. Ireland responded by implementing the ‘Social Guarantee’ principle through a range of vocational education and training programmes (CEDEFOP, 1988: 26–7; CEDEFOP, 1994: 88). Secondly, the Community influenced Ireland’s training system through European Social Fund financing. Community contributions to Irish expenditure on initial training and training for the unemployed amounted to 44 per cent (or 60 million ECU) of the total sum spent on training the unemployed in 1998 (CEDEFOP, 2000: 61). This is a much larger contribution than those received by other member states and it indicates the crucial role the Community has played in the development of Ireland’s training

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system (CEDEFOP, 1994: 68). Finally, the EU influenced the manner in which training was administered in Ireland through the frequent interactions and exchange of ideas which Irish public authorities, individual organisations and educators involved in European projects experienced (I. Mangan: 1993: 80–1). Indeed, the system of monitoring and assessment which was peculiar to the Community, whereby the focus is on setting objectives and measuring outcomes, has been adopted by the Irish administration and is now practised in policy areas unconnected to the EU.6

Social partners’ role in Irish training system Ireland differs from most other European countries because neither employers nor employees are providers of vocational education, with the exception of the training they provide for their own staff in matters of human resources and industrial relations (IR) (CEDEFOP, 2000: 16). Therefore, analysis is confined to the roles which social partners play within structures which have been established by the state. The Vocational Education Act of 1930 established vocational education committees and vocational schools and it provided for the involvement of the social partners in vocational education in a visionary fashion. However, this opportunity was not taken up by the social partners (CEDEFOP, 1990: 114–15). The 1960s brought a lot of developments in the field of training. The Industrial Training Act 1967 set up An Chomhairle Oiliúna (AnCO), the Industrial Training Authority which was responsible for organising training for apprentices, the unemployed and those working in industry. The social partners had a representative presence on the primary policy-making forum of AnCO and they sat on various subcommittee groups within AnCO’s framework. Crucially, though, unlike many continental European training systems, this presence is of an external nature. The social partners did not have internal staff representation (CEDEFOP, 1988: 38). In 1988, AnCO was merged with two other agencies and FÁS (Foras Áiseanna Saothair), the National Training and Employment Authority, was established. FÁS provides an integrated labour market service. It uses subcontracted training providers to provide initial training and training for the unemployed as well as continuing vocational training. Social partners have seats on the board of FÁS and on its advisory bodies. They are also represented on the bodies responsible for training in the catering/tourism and agriculture sector. Furthermore, they are involved in the certification bodies which advise the government on national qualification systems (CEDEFOP,

180 Employee Relations in the Periphery of Europe

2000: 17). Over the years the social partners have established their place, in a representative capacity, within structures set up by the state, to address Ireland’s training needs (CEDEFOP, 2000: 17). Besides this representative and advisory role the social partners have become involved in more hands-on, active policy-development and implementation in recent years. Vocational training was seen as playing a key role in the tripartite social pact agreements which have been negotiated on a triannual basis since 1987. These ‘national partnership agreements’ are not legally binding, rather they act as a guide to policy development. The agreements introduced a new era in Irish economics whereby government policy-making became tied into national wage agreements. They address vocational training policy among other issues. The national partnership agreements are significant because, up to this point, social partner involvement in the field of training was confined to a representative presence in primary policy-making forums; the partnership agreements gave them ownership over certain training policies and responsibility over implementation. For example, the second national partnership agreement which ran from 1991 to 1994, entitled the Programme for Economic and Social Progress had two chapters specifically on education and training and training for the unemployed (Government of Ireland: 1991).

The new economic context: new initiatives The changed economic situation which Ireland is currently enjoying has led to a review of vocational training policies. Training is now understood as a key pillar in the national growth strategy and regarded as crucial to provide the skills demanded by the economy to ensure that skill shortages do not act as an obstacle to economic growth (Yeates, 1999a; OECD, 2001: 5). Ireland’s main employers’ association, the Irish Business and Employers Confederation (IBEC), has urged the government to make a shift in policy from funding training for the unemployed to supporting those in employment to retrain and upgrade their skills (IBEC, 2001). The buoyant economy has caused Ireland’s social partners to radically alter their perspectives on training. Traditionally, they adopted a passive role in training issues but in recent years the EU’s belief that the social partners should be involved in training policies has come to be endorsed across the board (Garvan et. al., 1995: 88–95). IBEC published a document which argued that employers needed urgently to realise that they had a training responsibility to their employees if their companies were to succeed (IBEC, 1997: 24). Ireland’s national trade

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union congress also flagged up a turning point in union attitudes to training policy when it published a paper recommending that trade unions need to shift from a defensive approach to training, embodied in formal training agreements, and embrace notions of multi-skilling (ICTU, 1993: 48–51). For its part, the government has come to recognise the fruitful role which the social partners could play in designing and administrating training policies. The notion of Industry Training Networks was introduced in a national social agreement (Government of Ireland, 1996: 39). Later, a White Paper suggested that a national training policy based around ‘Training Networks’ should be established (Government of Ireland, 1997: 116–18). A number of concrete developments have resulted from this new-found synergism on training policy. The social partners have experimented with the provision of vocational training on a pilot basis. An example here includes the Training Awareness Campaign which is run jointly by IBEC and the Irish Congress of Trade Unions (ICTU) under the EU ADAPT programme which is a human resources initiative funded by the European Social Fund. The project aimed to promote the idea of training within the workplace (CEDEFOP, 2000: 16). In 1999 the government collaborated with the EU in providing funding for a project called Skillnets Ltd, in which companies identify their shared training needs and subsequently address them. The initiative was unprecedented in Ireland because it gave enterprises full ownership of the process. Both employers and trade unions participate in the scheme (Yeates, 1999b; O’Dea, 2000). Ireland’s fifth national agreement, entitled a Programme for Prosperity and Fairness, was concluded in early 2000. One of its five chapters was devoted to training issues. It saw ‘lifelong learning as the key to a future of sustained economic growth and social development at a time of on-going change’ (Government of Ireland, 2000: Overview). The chapter presented a number of initiatives which were quickly implemented. As promised, a White Paper on Adult Education was published which presented plans to establish a National Adult Learning Council with involvement of the social partners (Irish Times, 3 August 2000 (Opinion)). Additionally, the National Training Fund Act,7 passed in December 2000, is designed to finance a National Training Advisory Committee to facilitate consultation between civil servants and the social partners (Harney, 2001). Clearly, a tradition of integrating the social partners into training policy procedures had been secured in Ireland long before the European Community promoted the strategy (CEDEFOP, 1988: 13–16). Although it has been shown that this process has accelerated since the 1970s it is

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hard to prove definitively that the growth of a partnership strategy in training policy is a consequence of EU membership. In order to assess how successful the Community has been in encouraging this policy approach in training, the following section focuses on a specific EU-supported project which promoted training initiatives with the implicit aim of etching out a role for the social partners in the field of vocational training.

Operational programme for human resources development: an effort to integrate social partners in response to Europe’s soft initiatives When the EU invested ECU 1732 8 million in implementing its Operational Programme (OP) for Human Resources Development (1994–9) it appeared that Irish administrators were presented with the opportunity to facilitate social partner involvement in training; an ideal which had been affirmed by all related parties. The following section analyses whether the EU ideal of social partner involvement in training has increased as a result of EU funding in this area. Social partnership is a difficult subject to assess in any objective sense. This analysis is drawn largely from government-commissioned evaluation reports.

Overall assessment of social partners’ involvement In order to receive EU Structural Funds, member states conclude an agreement with the Community which maps out the country’s economic development and indicates those areas which administrators have located as priorities to be co-financed by the EU. This agreement is called the Community Support Framework (CSF). The Irish government’s 1994–9 Framework identified four priority areas in need of intervention: the productive sector; economic infrastructure; human resources; and local, urban and rural development. The human resources priority amounted to the largest individual programme in the CSF. It consisted of one multi-fund programme plus a number of small human resource interventions in other OP (Goodbody, 1997: i). The OP for Human Resources Development 1994–9 contained five sub-programmes, each with specific objectives: • • • • •

Sub-Programme for Initial Education and Training Sub-Programme for Continuing Training for the Unemployed Sub-Programme for the Re-Integration of the Socially Excluded Sub-Programme for the Adaptation to Industrial Change Sub-Programme for the Improvement of the Quality of Training Provision

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It is apparent from the aims of the five sub-programmes that overall the objective for the OP for Human Resources Development 1994–9 was to restructure the training system on a long-term basis so as to locate and up-skill those who were badly equipped for the labour market in order to improve their job opportunities and simultaneously address the skillrequirements of the economy. The OP was not directly concerned with social partner involvement. While the CSF does discuss the complexities involved in monitoring and assessing the outcomes of an OP in Human Resources Development (Government of Ireland, 1995: 139–43), it explicitly defined ‘throughput’ as ‘the number of people completing training in a year’ (Government of Ireland, 1995: 4). However, the funding process is premised on the notion of social partnership. There is a certain obligation on Objective 1 recipients of EU funding to underpin developmental projects with the partnership principle (ESRI, 1997a: 200). As mentioned, the Irish context lacks a negotiated involvement tradition in vocational training policy. Subsequently, the social partners’ role was limited to being represented on the Monitoring Committees of the various OPs and they were involved in some OPs. The Economic and Social Research Institute’s (ESRI) mid-term evaluation of the CSF 1994–9 stated that ‘in overall terms’, one could conclude that a partnership process operated effectively in administrating the Irish CSF (1997a: 200). The review commented that the social partners’ input tended to be limited to representing their respective constituencies rather than engaging in the spirit of partnership to ensure the OP objectives were reached (1997a: 200). The EU stipulated that the funds should be administered through partnership structures, but the Community’s propensity for ‘soft governance’ meant that the notion of partnership could be interpreted very loosely. An EU Council Regulation on Structural Funds states that ‘partnership’ should be defined by applying the principle of subsidiarity (CEC, 1993b). Subsequently, social partnership is not mentioned in the five overall Key Objectives which underpin the OP on Human Resource Development (Government of Ireland, 1995: 9). While the financial carrot provided by the Structural Funds did act as a catalyst for reform of training systems in many aspects, such as inclusion of females and people with disabilities, the failure to place social partnership centrestage of the Structural Funds criteria meant that member states were under no pressure to overhaul their training systems with respect to partnership. The Irish Administration saw the OP for Human Resource Development largely as an opportunity to address Ireland’s stubborn long-term unemployment figures, rather than also being an occasion

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to overhaul the national training system to secure social partner involvement. Table 6.1 contains a brief review of each sub-programme in terms of social partner involvement. It introduces the schemes which were undertaken within each sub-programme and the costs entailed. The table shows the roles that social partners were allotted within each scheme. The final column indicates how the social partners’ actions were assessed by the evaluations which were periodically undertaken. The overall finding which emerges from the table shows how the principle of partnership became marginalised throughout the lifetime of the OP. The OP which the Irish government drafted referred only twice to the issue of introducing the social partners into decision-making throughout each of the twenty sub-programmes’ Key Objectives (Government of Ireland, 1995: 47 and 88). This is significant because reviews and analysis of the OP tend to focus on assessing each sub-programme’s Key Objectives, and therefore the issue of social partnership was sidetracked in follow-up discussions of the OP. The Key Objectives were largely limited to desired outputs in terms of upgrading the quality of Ireland’s labour market (Goodbody, 1997: 219). Only minor reference is made to the means by which more effective use of institutional training structures may be introduced. As seen in Table 6.1 the OP text is peppered with aspirational references to social partner involvement, but it fails to spell out mechanisms or incentives to produce this end. It is clear from the table that any reference made to the social partners in follow-up reviews found, with the exception of the ‘Apprenticeship Project’, that social partner involvement is still an outstanding goal (ESF, 1998: 57–8; ESF 1999b: 234–5). The European Social Fund (ESF) Evaluation Unit drafted a general, concluding report. This report cautions that more is required than the soft recommendations that either Europe or the state establish. It asserts that providing money and vague aims is not enough to pursue concrete problems, be it long-term unemployment or systems of governance. The evaluation refers to other agencies’ reports and summarises them, stating that in order to obtain cooperation between governmental departments, social institutions and social partners one needs legislative change that is strong and unambiguous with clearly defined objectives and means of obtaining them with realistic time scales and resources – in other words, words alone, albeit the right words, will not do. (ESF, 2000: 92)

Table 6.1: Operational programme for human resources development 1994–9 Schemes: EU plus exchequer funding M£IRE

Specifications on SP involvement in OP (Government of Ireland, 1995)

Degree of SP involvement

Initial education and training

Preventive action 21 Vocational preparation and training 283.66

No reference to SP. Proposals for new programme drafted in consultation with SPs.

Apprenticeship 148.8

Middle level technical, higher technical and business skills 151.58

SP along with other actors are responsible for organisation and regulation. Involves establishing a governing body which includes SP. SP also involved in certification.

Advanced technical skills 49.47

Funding and restructuring will facilitate specific needs of industry.

Industry training for the unemployed 182.73

Key Objective: Ensure training reflects sectoral needs in industry.

No reference to SP. Lack formalised SP dimension (ESF, 1999a: 168). Deep and effective SP involvement (ESF, 1999b: 186–7). More systematic analysis of relationship between course and labour market requirements needed locally and nationally (GB, 1997: 80). Need to forge direct links between college departments and industries (GB, 1997: 86). Could benefit from private sector financial support (GB, 1997: 236). Traineeships lack formalised social partnership dimension (ESF, 1999a: 168).

Continuing training for unemployed

185

Sub-programmes

Sub-programmes

Reintegration of the socially excluded

186

Table 6.1 Continued Schemes: EU plus exchequer funding M£IRE

Specifications on SP involvement in OP (Government of Ireland, 1995)

Degree of SP involvement

Local enterprise 29.28

Operates alongside SP-oriented area partnerships.

Counselling, guidance and placement services 7.44 Community employment 131.46

Cooperate with SP-based local area partnerships. Developed in consultation with national-level SPs. Cooperate with SP-based local area partnerships. No reference to SP. Programme will be reviewed by SP alongside other relevant actors. Monitored at national-level by a consultative group, includes SP. No reference to SP.

More formal mechanism of consultation should be established at local level with employer/providers (GB, 1997: 108). No reference to SP.

Reintegration training 51.47 Community training 55.39 Vocational training opportunity scheme 81.93 Training for ex-offenders 850,000 Occupational integration of people with disabilities 156.62 Adaptation to industrial change

Training for the employed 49.6

Training delivered by a number of agencies, includes employers. Key Objective: Integrate SP’s views into action plans. Includes training of trade unionists in industrial relations practices.

No reference to SP.

No reference to SP. No reference to SP. No reference to SP. No reference to SP. Need to further develop employer-based training models (GB, 1997: 140). Need to encourage greater business-led development with strong employer involvement (GB, 1997: 243).

Improving the quality of training provision

Training services to industry 22.8

Employers decide on training programmes/providers.

Vocational training infrastructure 210.96 Training of trainers 54.73

No reference to SP.

Certification 11.2

Promotion of equal opportunities 7.51

Aim to involve all actors, including wider community, to participate in design/delivery of education. Aim to formally involve SP in programme development/ assessment. Undertaken at local level in cooperation with SP-based area partnership cos.

Greater need for incentives to encourage business input (GB, 1997: 157). No reference to SP. Requires more cooperation with employers financially and consultation-wise (GB, 1997: 246). No reference to SP.

No reference to SP.

Abbreviations: SP – Social Partners, GB – Goodbody, ESF – European Social Fund Evaluations, OP HRD – Operational Programme for Human Resource Development. Source: Communicating Europe, 1995: 27–37; Government of Ireland, 1995; Goodbody, 1997; ESF, 1999a.

187

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Discussion and some conclusions Ireland differs from other EU member states in having no established tradition in which social partner institutions provide vocational training, either collectively or individually. However, it is clear from the discussion above that the Irish administration has, over the past thirty years, aimed to integrate the social partners into vocational training infrastructure at all levels. The discussion showed that the EU has encouraged this activity with soft initiatives and this strategy has been relatively successful. It was shown that social partners now sit on executive and advisory bodies in the main national vocational training authorities. They are involved in state-funded programmes on cooperative skills networks and they have introduced initiatives and own a number of pilot schemes which operate at the local level. It was shown that the social partners have taken control over training programmes through the national partnership agreements and that IBEC and ICTU cooperate and are solely responsible for initiatives such as the training awareness campaign under ADAPT and the Skillnets project. More recently, the social partners have been integrated into consultation frameworks in the form of the National Training Advisory Committee. As such, it appears that the EU benchmarking-style of governance has paid dividends in the Irish context (Sellin, 1999: 21). While it is important to recognise that these pilot schemes, initiatives and ad hoc programmes represent progress, the big picture is essentially one of stagnation. The Irish administration has experimented with training initiatives in a dynamic fashion, but it has shown a reluctance to overhaul the entire system as other states have done in order to ensure that the social partners not only engage in the issue of training but that they own it (Kaiser, 1990; Sørensen, 1990; van Dijk et al., 1990). A CEDEFOP report highlights this inertia and suggests that it may not simply be a product of path dependency as is so often assumed. It argues that the glacial speed of developments in Ireland’s training system may be a result of the broader political situation and the interests of the many agents and actors involved. It states: During the last decades, Ireland has been governed by a number of different coalitions, including parties from both the right and the left. Although, there have not been fundamental changes in government vocational training policy during this period due to the lack of large differences between the different parties. Even where some differences exist, the likelihood of radical change would have been

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moderated by the need for agreement between coalition partners, and with the social partners in general. (CEDEFOP, 2000: 11) The report claims that debates within Ireland’s training system have been confined to the level of state funding for different activities, rather than the absolute principles involved (CEDEFOP, 2000: 11). Subsequently, the system has remained intact overall, and this argument would suggest that it did so not because of limited resources or inherited socio-economic traditions, but because the economic actors chose not to change it. Unlike altering interest or exchange rates to keep production competitive, obtaining competitiveness through an overhaul of the national training system is an enormously difficult task which challenges the most powerful interest groups – business and labour (Scharpf, 1997a: 533). An overhaul of Ireland’s training system would necessitate a complete re-evaluation of Ireland’s industrial strategy and the social partners’ role in it. It may require a statutory strengthening of social partnership at the enterprise level as well as the national level, something which would be deemed very unpopular by Ireland’s FDI sector (Gunnigle, 1995; Roche, 2001). The administration is conscious of how deeply dependent the economy is on this sector, as the recent economic downturn in the US has illustrated.9 Currently, the system entails state ownership of, funding for and provision of training initiatives, with social partners’ input limited to advice and support. After thirty years of EU soft funding and initiatives to increase the role of the social partners in training policy and thirty years of activity on behalf of the state to this end, a CEDEFOP critique made in 1988 still stands, namely, social partners’ ‘involvement is generally high in policy making and low in delivery or implementation’ (CEDFOP, 1988: 127).

Training policies in Hungary By 1990 it was very apparent that Hungary’s vocational training system was in need of fundamental reform. It supplied workers for a labour market system which operated in the 1970s but the economy and labour market had moved speedily on since then, leaving training outdated and of little market value (Csákó, 1995: section 7; Klekner and Zachár, 1997: 3). Hungarian vocational training has had to face a considerable challenge with the change in the political regime. The traditional system was shaken by the privatisation, and subsequent collapse, of the huge state enterprises which had offered training and apprenticeship courses (Strietska-Ilina, 2001: 221).

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The Vocational Training Act was passed in 1993 and, along with other innovations, it created a legal framework for the reform of Hungary’s training system within a West European model (OECD, 1999a: 12). It established a National Vocational Training List which formalised the type of training required for the acquisition of vocational qualifications recognised by the state and it provides a basis for international, and especially EU, equivalence analyses (Bócz, 2000a: 33–6). The Act included tax incentives which were created for businesses which provide apprentices with training (Government of Hungary, 1996b: 78). Labour Offices were established in 1991 to collect data on unemployment and labour market requirements. Training became decentralised, and a network of nine Regional Training Centres, serving both the unemployed and employed, was established. Finally, the reforms created a place for the social partners in the governance of Hungary’s training system. For example, the Vocational Training Fund, which is made up of obligatory business contributions of 1.5 per cent of gross wage costs, was set up in 1992 (OECD, 1999a: 13).

EU influence on Hungarian training system The system of vocational training was seen as very important in Hungary’s preparation for accession to the EU. The analysis of matters relating to education began as soon as negotiations started (Bócz, 2000b: 98). As discussed at the start of this chapter, the EU has clearly defined the limitations of its remit in the area of education and training. But it has drawn up decisions, recommendations and common positions which support the dissemination of good practices. The Hungarian National Programme for the Adoption of the Acquis (NPAA) states that while these regulations are not legally binding, and are therefore not part of the Acquis in a strict legal sense, nevertheless, ‘in a political sense these documents also constitute part of the Acquis’ (Government of Hungary, 2001: 185). The EU’s stance on this matter was made very clear at an EU-hosted conference which had been convened for associative states’ social partners. In replying to a question, the representative of the Commission’s Directorate General for Employment and Social Affairs, stated that social dialogue was an important part of the acquis communautaire and that no transition periods were possible for this requirement (CEC, 1999c: 30). Furthermore, the European Training Foundation (ETF) has commented that ‘a European educational space’ may be considered to be the acquis communautaire in the field of vocational training (ETF, 1999: Foreword).

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The gravity of training’s role in accession was illustrated when the Hungarian government adopted the NPAA in March 1998 and presented it to the Commission. The Commission responded to this drafted programme in its Regular Report of November 1998 in which it stated, ‘The National Programme for the Adoption of the Acquis does not cover the full acquis . . . ’. The report stressed that the NPAA had made no reference to training and human resource requirements (CEC, 1998d: 48). The Hungarian government promptly revised the document to include human resources amongst other issues (Phare, 1999a: 6). The Ministry of Education aims to fulfil obligations in the field of training prescribed for EU member states. It has done this by a number of innovations: 1 Establishment of necessary legal, administrative and funding frameworks in order to participate in the management of Structural Funds and the European Social Fund in particular.10 Opening of a National Training Centre in 1999 to coordinate and deliver training to targeted groups and gather information on the local labour market (Government of Hungary, 2001: 190). Building an EU-compatible system of education statistics (Government of Hungary, 2001: 194). 2 Increase in amount allocated from the central budget for education and training. In response to Commission critiques (CEC, 1997c: 56), teachers’ average real wages were raised in the annual budget of 1999 and 2000 (Government of Hungary, 2001: 187). 3 Initiation of a Phare project costing 9.6 million ECU which aims to integrate socially disadvantaged Hungarian young people, with special emphasis on the Roma minority. The project addresses a critique raised by the Commission in 1999 Regular Report (CEC, 1999b: 76) and 2000 Regular Report (CEC, 2000c: 20). 4 Comprehensive development of language teaching and learning. Hungary participated in the European Year of Languages 2001 (Government of Hungary, 2001: 196). 5 Concept of life-long learning adopted and implemented into Hungarian education and training policies. Proposal for the Adult Education Act has been drafted. Introduction of ‘Second- or New-Chance Schools’ for adults who failed to develop their studies (Government of Hungary, 2001: 197). 6 Full participation in CEDEFOP and ETF activities. In 1997, Hungary was the first associated member state to join the Leonardo da Vinci Programmes as a full member (Government of Hungary, 2001: 187–98).

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Consequently, Chapter 18 of Hungary’s NPAA, entitled ‘Education, Training and Youth Policy’, has been temporarily closed since spring 1999 and Hungary did not apply for any derogations in this area (Government of Hungary, 2001: 186).

Social partners’ role in Hungary’s training system Under the Communist regime there was no parliamentary basis for vocational training and employers and trade unions did not view vocational training as their business (Alex, 1997: 64). However, Hungary did have a tradition of dividing the responsibility for financing training between the state and the firm. In 1971, a Government Resolution stipulated that the costs of vocational training should be shared between the state, on the one hand, and cooperatives and companies, on the other11 (Bócz, 2000b: 98). In 1988, under a further, farsighted Act, contributions to vocational training were made mandatory for employers of skilled workers. This system was largely maintained when the Act IV of 1991 was passed. 12 Under this law the Vocational Training Fund was modified to enable the social partners, employees, employers and the chambers to participate more in decision-making, at both the macro and micro levels (Bócz, 2000b: 44). This development was consolidated on the macro-level with the establishment of the National Training Council in 1993. The Council was responsible for discussing all training issues and formulating a position on them. The Act on Vocational Training was amended in October 1995 to establish the National Vocational Training Council, which operates as a national board preparing professional decisions, making comments and submitting proposals on issues related to vocational training. (ETF, 1998: 22). Members of the Council include social partners amongst others. The Council has largely an advisory role on forthcoming decrees and legislation (Bócz, 2000b: 92–3). Social partner involvement in training was consolidated at the local level by the establishment of tripartite County Labour Councils (CLC) by the Employment Promotion Act 1991 (Ladó and Tóth, 1995b: 65). The CLCs are responsible for allocating the percentage of the Vocational Training Fund that is decentralised, and they devise policies on issues related to the development of vocational training in the county (Ladó and Tóth, 1995b: 71). Hungarian experts in training and those in the EU policy community alike, recognised that strengthening the administrative capacity of the social partners would help the national vocational training system to

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operate more effectively (Benedek and Luttringer, 1996: 13). The Hungarian administration appears to have recognised this potential quite early on in the transition years. It endeavoured to strengthen the social partners with the support of Phare funding. The following section provides a synopsis of that project in a case-study format.

Case-study: Phare social dialogue programme in Hungary 13 The Phare programme for economic assistance was established in 1990 and it coordinates a breadth of programmes in Hungary ranging from privatisation to agriculture and quality management. All these programmes are implemented in cooperation with the relevant Ministerial Office. The Programme Management Unit (PMU) which coordinated the Employment and Social Development Programme was responsible for three portfolios: • Labour Policy, Vocational Training, Health, Social Policy, • Phare Democracy Programme • Human Resources, Education and Training. Phare is concerned with developing a social dimension alongside establishing an effective market economy in Eastern Europe. In 1992 a number of new types of projects were introduced within the Phare framework which aimed at more specific social and political goals. One of these programmes was the Democracy Programme. The EU Commission wished to strengthen the local and regional administrations, as well as social dialogue – insofar as this was supported by the governments of the recipient countries (Langewiesche, 1995: 415). As the participating countries had failed to engage the social partners in the Phare-funded programmes throughout Eastern Europe, the European Parliament established the Phare Democracy Programme specifically to address what they saw as an imbalance (Langewiesche, 1995: 416). The programme aimed to contribute to the development of pluralist democratic practices by strengthening local associations and institutions. 14 The Commission dealt directly with the applicants from individual groups, bodies, and private NGOs, and it specifically encouraged ‘grass roots’ developments as part of its general policy to support the development of civil society (Phare, 1997; 9). All those interviewed on this subject stressed that while this coordination was not always harmonious, it was crucial that no policies were imposed on the administration. This discussion focuses on

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a sub-project of the Phare Democracy Programme, entitled the Social Dialogue Programme (SDP). Well before the Employment and Social Development Programme (PMU) had been established in Hungary a group of Hungarian experts had become interested in strengthening the social partnership model at all levels. A technical assistant from the Commission, who had connections with those involved in Hungarian industrial relations, arrived from Brussels with an informal message that if these experts succeeded in drawing up a work programme on social dialogue within a year, their case would be looked on favourably in Brussels. With this technical expert’s help a work programme of three main components was designed. It was the first Phare-funded project in Hungary. It existed before there was any Phare PMU cooperating with Hungary’s Ministry of Labour. The SDP programme worth ECU 1 million has been in existence since the beginning of 1993. These three components included: • The foundation of a Commission of Enquiry There was concern about the lack of data available on the national system of industrial relations. It was felt that it would be useful to have a clear picture of the system before trying to reform or improve it. There was an absence of comprehensive information on strikes, how bargaining operated at the local, sectoral and national level, etc. Terms of reference for the project were drafted containing clear areas requiring research. Each area was contracted out to experts in the field who received only symbolic payment. The work was compiled into a book format in Hungarian and English (see Ladó and Tóth, 1995a). • The establishment of an arbitration system in the country The idea of developing a system of arbitration was first introduced early in the transition when it appeared that the country might face strikes in the future and no system operated to deal with strikes outside the law courts. Phare funded the efforts involved in analysing how arbitration systems worked elsewhere. Hungarian policy-makers visited policycommunities in other, mostly West European countries. Additionally, Phare hosted a conference in November 1994 and invited experts from a number of national arbitration systems to explain how their models operate. Some of the Hungarian experts were keen to develop a Hungarian solution to arbitration, based on the British ACAS (Advisory, Conciliation and Arbitration Service) model. With the help of technical assistance from Brussels, these experts put out a tender to develop this concept and by 1996 an arbitration service was established. Funding

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also covered training and study visits for the selected arbitrators, which was contracted out to ACAS in Britain. • Consolidation of the already established tripartite National Conciliation Council (NCC) It was also found that the National Conciliation Council’s (NCC, see Chapter 5) tripartite structures were absent at both the sectoral and enterprise level. In an effort to develop the notion of partnership, Phare funded training courses for representatives of employers and trade unions and the government. An example included a week-long workshop organised by the ILO International Training Centre in Turin focusing on branch and enterprise level collective bargaining. Phare funded the running of an office which was solely concerned with keeping the NCC Secretariat functioning.

Assessment of results While the actors involved with each of the three projects were proud of how each initiative contributed to strengthening democracy in the region, it was apparent that the projects could have been more successful. For example, the newly established arbitration system was not expected to have many cases to address (despite having 98 available arbitrators). The service does not have the remit to deal with individual rights disputes, the very issue which arises most frequently. The system was established on this basis as a compromise towards the abundance of labour lawyers in Hungary whose livelihood would have been threatened by an arbitration system handling individual rights cases. Additionally, EU training projects, such as those which were undertaken in the project to consolidate the NCC, stipulate that training must have a ‘multiplication effect’. This means that those involved in training projects must have the capacity to train others on returning home. It became apparent that training courses and study visits were often opportunities to sightsee, shop or take a well-deserved break. It was clear that as the three projects drew to an end all the actors were less than satisfied with the experience. One who had been involved stated: This project is over. Why? The tripartite Secretariat [of the National Conciliation Council] is fed up with it. They have enough responsibility as it is, it gives them no reward at all. Also, the EU and Phare don’t like projects with no clear outcome in a way, no clear result. They like projects such as building brand new institutions, bridges, etc. It doesn’t like funding already existing structures. They like concrete activity, but this project is not in that nature . . .

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. . . The EU wants clear and transparent results, but with tripartism it is difficult to get positive feed-back. The EU is also happy to forget about this project and forget about social dialogue. In some respects the interviewee was quite accurate. In 1998 Phare abandoned the bottom-up approach which was inherent in the Democracy Programme. Phare funding became focused solely on accession issues (Phare, 1999b: 6). This amounts to a tightening up of the system of governance by which the EU funds and coordinates associative states. The Phare Democracy Programme was only one element of an array of programmes funded by Phare which aimed at assisting democracy and bolstering the role of the social partners (Phare, 1997: 76). Between 1995 and 1998 Phare’s Democracy Programme provided support to 149 NGOs in Hungary (Phare, 2000: 42). The Phare Vocational Education and Training reforms have promoted the notion of a systematic consultation process with social partners (Strietska-Ilina, 2001: 255). The review which was conducted on the Democracy Programme found that such assistance can never be more than enabling, helping those individuals in society who already are working for democracy. Moreover, the scale of democracy assistance is nowhere commensurate with the magnitude of the challenge. (Phare, 1997: 76) Yet it concluded that the Programme should be continued and the annual budget line increased (Phare, 1997: 77). However, a review of social partners’ position within Hungary’s Training system would suggest that the programme had few implications in this sector. Indeed the Commission’s 2001 Regular Report on Hungary’s Progress Towards Accession reads as though the Democracy Programme never ran and it boldly recommends a programme of the same nature! Sound developments in social dialogue should be actively promoted. Strengthening the administrative capacity of both social partners and the government would help them to find ways of progressively operating more effectively. To this end, the planned governmenttraining programme should now be implemented with a view to helping social partners to build up their own research and negotiation capacity. (CEC, 2001d: 62).

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EU funding and policies on training did make some progress in terms of systematic involvement of the social partners in training initiatives; however, this progress only covers a limited number of pilot schools (Strietska-Ilina, 2001: 255). It appears that developments in Hungary reflect those in Ireland in that policy innovation certainly flourished in a number of specific projects, limited institutions or restricted administrative relationships. However, there is no evidence of a spill-over from the EU programmes into the wider Hungarian training policy community. There is no sign of an overhaul of training practices. The success stories amount to ‘cathedrals in the desert’.

Overall assessment of social partnership in Hungarian training The attempt to keep enterprises interested in the provision of vocational education and training (VET) has been relatively successful in Hungary compared with other countries in the region, due largely to the early establishment of a national levy fund for vocational training and of tripartite bodies at the national and country levels (Strietska-Ilina, 2001: 221). Like Ireland, certain achievements have been obtained in Hungary. A European Training Foundation (ETF) review (ETF, 1999: 16) cites Hungary as a model example in terms of the close participation of the social partners in monitoring the training system. An OECD analysis of Hungary’s reformed training system also lauds the involvement of social partners in vocational training planning as unprecedented (OECD, 1999a: 33). However, many analysts are less optimistic and most of these upbeat perspectives come with cautious qualifications. The OECD study provides an example here. While welcoming training structures which involve the social partners, the analysis is critical of how this social partnership is panning out in Hungary, describing it as amounting to little more than ‘formal mechanisms . . . of a consultative character’ (OECD, 1999a: 39). This understanding of social partners’ role in Hungarian training systems as façade-like institutions, lacking genuine participation, is substantiated by a number of means. For example, six of Hungary’s national trade unions established a forum in February 2000, entitled the ‘European Integration Commission of Hungarian Trade Unions’ (EICHTU) (Borbély, 2000). They published a ‘civil report’ covering the main areas where they saw need for change and future development. Yet the report made no reference to training whatsoever, with the exception of a need for training on health-and-safety issues (EICHTU, 2001: 21). The social

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partners undertake virtually no involvement in research into vocational education and training in Hungary, except for training their members for industrial relations matters (Strietska-Ilina, 2001; 229).15 An ETFfunded study group made up of social partners throughout the associative member states concluded that aside from training regarding health and safety in the workplace, training is not mandatory in these countries. Subsequently, work-related training at the enterprise level depends on the will of the employer (Gieorgica and Luttringer, 1997: 10). The evidence from a large-scale survey on human resource practices in plants worldwide, called the Cranet Survey on International Strategic Human Resource Management in Europe indicates that training at the plant-level is far removed from the negotiated involvement model. The trends indicate that training development is much lower down the Hungarian-owned firm’s agenda than is the case in other countries. The responses to a question on joint management/employee working committees in areas such as ‘quality issues’, ‘new product development’ and ‘task flexibility/multi-skilling’ show that joint committees in any of these three areas are not common in Hungary. Only 3.3 per cent of all firms had such committees on task flexibility and multi-skilling, again a figure much lower than firms Europe-wide. Likewise, a mere 12.6 per cent of all firms surveyed had joint committees on quality issues and 8 per cent of all firms had committees on new product development (see Figure 6.1). These figures are low even when compared with Ireland, which as we have seen has a weak training environment. Overall, it appears that while social partnership is more developed in Hungary than in other Central European states, the social partners are 60 50 40 30 20 10 0 Ire Hu Quality Figure 6.1

Hu Ire New product development

Hu Task flexibility

Ire

Area of activity of joint consultative committees/works councils

Source: Gunnigle et al. (1997c: 211) and results from Hungarian Cranet Survey on International Strategic Human Resource Management in Europe Survey.16

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not active in shaping vocational training plans. A report from the Hungarian National Observatory stated that this lack of cooperation means that the vocational education curriculum is not able to follow the changes in the labour market resulting from technical innovations (Hungarian National Observatory, 1999: 56). Another report commissioned by the Hungarian National Observatory takes up this issue. It states: [T]aking the development of the qualification structure as an example, it must be said that most of the nearly 1,000 vocational qualifications recognised by the state have been included in the national register of vocational qualifications, not on the proposal of the social partners, but on that of the relevant ministry. This undesirable situation could be changed by improved discussion between vocational education policy-makers and the social partners and by establishing more effective information systems. (Bócz, 2000b: v. Stress in original text)

Conclusion: EU governance and policy efficacy in Hungary The question is, why, despite EU support and the resources and energy of the Hungarian administration, was so little progress made in integrating the social partners into the mechanisms which design and execute Hungary’s training policies? Commentators have pointed to two main explanations: the weak position of Hungary’s social partners, and Hungary’s weak position in terms of the global economy. The following discussion takes each in turn. It is commonly stated that the social partners in Hungary are not fully autonomous. In terms of employers, in some sectors it is difficult to differentiate between the state and the private sector as the main provider of employment, which tends to undermine the notion of social partnership (Gieorgica and Luttringer, 1997: 9). Trade unions suffer from serious fragmentation and it is clear that social partnership has emerged throughout Eastern Europe in an unfavourable context. It is difficult for the social partners to address an issue such as training when other concerns, such as unemployment, are regarded as more urgent (Benedek and Luttringer, 1996: 7). Some commentators have discussed how the problem of weak social partners could be addressed. Nesporova suggests that associative states devise a legal framework to involve social partners in training systems.

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She argues that administrations should not wait for the social partners to consolidate themselves; rather, training would be an excellent vehicle for this development. She stresses that mere recognition of their right to involvement in training is not enough, but that this right needs to be enshrined in labour law (Nesporova, 1997: 50). Neumann, however, focuses on the social partners in the Hungarian context and cautions that direct legislative or governmental intervention would not effectively bolster the social partners’ capacities. Instead, he suggests that social partners’ capabilities cannot be constructed in a top-down manner but could grow if strengthened at the roots in an autonomous manner within local business associations, municipal institutions and trade unions’ strategies (Neumann, 2000: 128). A key idea, which emerged from a workshop on social partnership that the Commission hosted in 1999, produced an interesting alternative to both of the previous stands on this issue. The participants agreed that the associative states tend to develop IR systems which rely too heavily on comprehensive packages of legislative acts. They suggested that IR systems could be reformed in these states to comply with the acquis communautaire by means of collective agreements which would allow more flexibility and would also serve to strengthen the social partners (CEC, 1999c). The endemic weakness of social partners throughout Eastern Europe should be considered within the context of the EU. The fact that the EU has opted to leave training policy at the member state level presents a certain message to associative states. Despite all the rhetoric to the contrary, it is clear that training policy does not hold the priority given to issues such as competition policy or monetary policy. There is a Hungarian law on the legislative process which obliges the government to provide an impact study when submitting drafts to the parliament, with the aim of assessing the consequences of legislative projects or the approximation process and effects on the Europe Agreement. All Bills must specify to what extent the proposed text fulfils the requirement of compatibility with the legislation of the EU.17 The Evaluation of Phare Programmes in Support of EU Integration and Law Approximation commented that this law tends to be compromised when the Europeanisation project threatens national interests. It states:

But there are flaws in the depth and openness of these assessments and sometimes national interests are estimated to be higher than the obligation to approximate accordingly. (Phare, 1999a: 21)

The European Union and National Training Systems 201

It may be unsurprising, therefore, that an issue such as vocational training, which is outside the EU’s legal remit, is not held as an urgent concern and is regarded as secondary to more urgent national interests such as attracting FDI, keeping inflation down and creating employment. The discussion of national interests brings us to the second explanation for the marginal role which the social partners play in Hungary: the country’s weak position in the global economy. The current Hungarian government which was elected in 1998 has undertaken to systematically reform the tripartite systems that were established on the eve of Hungary’s political transformation (see Chapter 5, above). Both employers and trade unions in Hungary regard this reform as an effort to marginalise the role of social partners in policy-making. A study commissioned by the EU social partners consolidates this perspective, stating, ‘the government does not hide the fact that it regards dialogue with the trade unions as a secondary matter’ (Draus, 2001: 30). This report explains the tension which pertains between the government and social partners in Hungary by a number of means. But it stresses that the government has adopted a clear anti-trade-union strategy because of its overall neo-liberal political philosophy (Draus, 2001: 31). It is perhaps unsurprising that the current Hungarian government and all post-transition Hungarian governments, including the Socialist coalition (Neumann, 2000: 127), should show reluctance to include the social partners in national policy development, when powerful external pressures are pushing for policies which are the antithesis of trade unions’ interests. The OECD and the IMF have consistently urged respective Hungarian administrations to restrain wage increases (OECD, 2000b: 17; IMF, 1999; IMF, 2000; IMF, 2001), although Hungarian wages slumped dramatically in the post-transition period and only now appear to have stabilised (Table 6.2). The other key international pressure in Hungary is FDI. As mentioned in Chapter 3, Hungary has been remarkably successful at attracting FDI. The IMF labelled Hungary ‘the vanguard of the transition economies’ (IMF, 2000). Since 1995 Hungary’s GDP has grown steadily, unemployment has fallen and export figures have increased (IMF, 2001). This Table 6.2 Development of average Hungarian monthly wages in dollars

Hungary

1990

1991

1992

1993

1994

1995

2000

295

281

345

365

395

376

392

Source: PlanEcon (2001); Nagles and Simonis (1997: 16).

202 Employee Relations in the Periphery of Europe

growth can be attributed to a number of factors and the Hungarian administration itself credits FDI for the improvement. FDI has at least partial ownership in 15 per cent of Hungary’s enterprises. These businesses employ over a third of the Hungarian workforce and produce over 30 per cent of all products with high value added ratio (Hungarian Trade Commission, 2001a). By 1999 the food and chemical industries were no longer the leading sectors in the Hungarian economy, and engineering now accounted for the largest industrial output (Kiss, 2001: 324). However, most foreign-owned companies in Hungary produce for export markets. They use international networks of suppliers rather than local contracts, which limits any technology transfer the administration may have expected (Kiss, 2001: 327). This may explain why, despite government efforts to encourage R&D (OECD, 1997b: 120), expenditure has been on a dramatic downward trend since the regime change in 1989 (Table 6.3). It is clear that there is little room for social partner involvement in a low-skilled, low-wage manufacturing strategy such as that which Hungary facilitates (Hungarian Trade Commission, 2001b). FDI employers tend not to be interested in tripartite-style national arrangements in Hungary. 18 Bócz (2000a) argues that it is the Hungarian government’s responsibility to ensure that the social partners are involved in the policy mechanisms for vocational training. It is suggested here that the Hungarian administration faces a number of concrete pressures which mitigate against social partner involvement in training policies. It is argued that the EU facilitates this model by failing to legislate for training policies at the supranational level. By leaving training policy design up to the member states, the Community indicates to attentive associative states that, contrary to all the progressive Community rhetoric on training initiatives, training is a marginal issue of little relevance.

Training patterns elsewhere An international comparative perspective is instructive in providing an insight into the obstacles which prevent initiatives such as those Table 6.3 Research and development expenditure (Hungary) as % of GDP, all sectors 1990

1991

1992

1993

1994

1995

1996

1997

1.60

1.07

1.05

0.98

0.89

0.74

0.66

0.73

Source: Eurostat Yearbook 2001 (CEC, 2001e).

The European Union and National Training Systems 203

supported by Phare from emerging as models of genuine social partnership. At the outset of this chapter it was shown that despite the substantial cross-national differences in training systems throughout Europe (OECD, 1999b: 2), some patterns do emerge. It was mentioned above that, traditionally, training systems could be categorised into three distinct blocks: those in which the social partners have an extensive role in training policy and execution; those in which they have a limited advisory role; and those in which they have only a very weak role. More recent research has shown that other noteworthy patterns are emerging, three of which are worth discussing in a little depth. Firstly, all countries within the EU’s sphere of influence have recently experienced a resurgence of interest in training as a factor which both furthered economic progress and encouraged social integration (OECD, 1999b: 2). Since the late 1980s the social partners have come to the realisation that they are natural partners in the area of education and training for working life (UNESCO, 1998: 3). A CEDEFOP report from 1990 records the efforts of a host of countries to integrate the social partners into training mechanisms. It explains that since 1981 the Greek administration aimed to integrate civil society into economic and policy development and in the domain of education this involved an effort to include social partner participation (CEDEFOP, 1990: 66). The Spanish report notes that since 1984 social partner representatives at the national level have become engaged in a tripartite General Council for Vocational Training (CEDEFOP, 1990: 84). Similarly, Belgian social partners became involved in informal coordination of training systems by the end of the 1980s (CEDEFOP, 1990: 8). The Netherlands experienced a more formal integration of the social partners in training matters when, in 1982, they were explicitly given a central role in the traditional decision-making processes (CEDEFOP, 1990: 163–5). There are few countries within the EU’s sphere of influence in which continuing training is not considered an issue for national or sectoral collective bargaining. In almost every continental European country the social partners have signed explicit agreements to promote a greater degree of dialogue and agreement in the field of training (Caprile and Llorens, 1998). The second pattern which emerges from research is that partnership initiatives are often conditioned by history. When the mechanisms for social dialogue, such as collective agreements, are solidly rooted in national tradition, it is easier to extend these practices to issues covering vocational training (UNESCO, 1998: 6). Those countries in which employment policy is coordinated by national or sectoral bargaining

Sweden

Finland

Germany

France

204

Table 6.4 Patterns in training systems in a selection of European countries Role of social partner (SP)s in national training systems3

Role of SP in enterprise-level training sytems3

R&D expenditure as % of GDP1

Social partners play an important role in initial vocational training and smaller role in further training. This role is not always enshrined in statutory provisions and may derive from collective agreements. 38%–40% of employees receive training annually. Obligatory financial contribution by companies to a fund managed by the social partners in conjunction with state aid. No obligatory financial contribution by companies. Some sectoral agreements deal with the topic of training funding. Social dialogue on training conducted at national level between umbrella organisations. Dialogue focuses on training leave, principles underlying the funding and administration of further training and integrating young people into the labour market.

Some sectoral agreements establish plant-level joint activity. Limited negotiation.

3.77

20.9

Employee bodies have information and consultation rights on training issues in plants of over 30 workers. Rights of information/ consultation exist. But bargaining is rare.

2.89

18.0

2.29

14.4

2.19

15.0

Rights of information/con sultation exist. But bargaining is rare. Negotiations take place within the various industries for purpose of transposing the national blanket agreements.

HR in sci. and tech. as % of workers2

Netherlands

Denmark

Belgium

United Kingdom

Rights of information/ consultation exist. When training is negotiated WC usually is defensive.

2.04*

16.8

Recently, sectoral agreements seek to promote WC participation in training.

1.93

18.5

Mostly unregulated. Belgian employers finance and organise in-service training for staff. WCs regularly receive firm development information.

1.84*

19.5

Mostly unregulated with some exception in public sector.

1.82

14.8

205

Obligatory financial contribution by companies and right to training during working hours is established. Social partners conclude agreements to fund continuing training in most large sectors which address remuneration, sandwich courses and establish contribution by companies. Social dialogue addresses training structure, content, funding and leave of absence. Sectoral agreements address further-training courses which are jointly managed in training centres. No obligatory contribution by companies. State is largely responsible for training and funds it. Long tradition of national collective agreements. Employers’ association support in-service training at enterprise-level. Trade unions support it at local, regional and national levels. Obligatory contribution by companies. No obligatory contribution by companies except in construction and engineering. There are few sectoral agreements on training.

Ireland

Czech Republic4

Spain

Poland4

206

Table 6.4 Continued Role of social partner (SP)s in national training systems3

Role of SP in enterprise-level training sytems3

Continuing training is mainly funded by the state. Programmes are managed by tripartite procedures. Social partners have ‘ownership’ over a number of pilot projects. Vocational schools mostly financed by the state. Social dialogue on economic and social issues is conducted at national level. No institutional framework for social partners in training at all levels. Role of social partners in designing training is limited. Tripartite committee manages funds from obligatory indirect contribution by companies. Each sector must set up joint advisory committees to approve training plans. Legal framework providing for social dialogue is not fully exploited in training. Commitment of employers/employees to

Mostly unregulated. Individual employers are primarily responsible for training at company level.

1.40*

13.9

Mostly unregulated.

1.27

–

Rights of information/ consultation exist. But bargaining is rare except large companies.

0.82

12.7

Mostly unregulated.

0.73

–

R&D expenditure as % of GDP1

HR in sci. and tech. as % of workers2

Hungary

Portugal

Greece

dialogue practice on training is weak. Initial training is paid by the state. Employers contribute to Labour Fund which trains unemployed. Obligatory financial contribution by companies. The state provides first stage of vocational training free and social partners help to fund and run educational institutions. No obligatory financial contribution by companies. Training is state’s responsibility and is mainly funded publicly. Social partners participate at various levels. No obligatory financial contribution by companies. Training is State’s responsibility and is mainly funded publicly. Social partners participate at various levels.

Training is decentralised and organised at regional level. There are few sectoral agreements. Those that exist cover health and safety training only. Mostly unregulated, with some exceptions in public sector.

Mostly unregulated.

0.68

–

0.63*

7.2

0.51*

12.7

*1997 figures. 1 Source: Eurostat (2000); Eurostat (2001). Figures for 1998, all sectors. 2 Source: Eurostat (2001). Figures for 1999, core HR in science and technology as % of labour force. 3 Source: Caprile and Llorens (1998); Gieorgica and Luttringer (1997). 4 Source: ETF (1999).

207

208 Employee Relations in the Periphery of Europe

tend to develop a virtuous circle (Soskice, 1990). They can utilise the institutional structures and relations of trust which developed in social partner bargaining over more traditional issues, such as wages, to negotiate and plan for training policies. In economically core states such as Germany and Denmark the state regulates training policies because, there, ‘training is regarded as a matter of public interest and as a valuable societal resource which should not be left to the economic interests of isolated firms’ (Lane, 1989: 67). Unlike Hungary and Ireland the German and Danish states oblige employers to partake in national training programmes (Lane, 1989: 66; Due et al., 1997). Employers, for their part, also engage in training in a very concrete manner in core regions of Europe. In France, they are legally required to invest a minimum proportion of annual turnover in updating the skills of their employees. No such system exists in Hungary or Ireland and nor must employers make known the amount they spend annually on training and development (Gunnigle et al., 1997c: 134). Rather than virtuous circles being initiated in economies with weak social partner traditions, research shows that they tend to lag behind in these developments. A 1998 study found that in Greece, Portugal and Ireland the state is still the key coordinator of training policies (Caprile and Llorens, 1998: table 1). As one would expect, and as all the EU Commission literature suggests, those countries which are capable of involving social partners in the design and execution of training policies also tend to have the most successful training systems. As Table 6.4 indicates, those countries which have statutory provisions to ensure social partner involvement in training systems, or those which have simply developed conventions of this nature, tend to be the states which have the highest percentage of GPD spent on R&D, with the highest percentage of the labour force with core Human Resources found in the science and technology sectors. However, there is evidence that countries which lack such legal provisions or traditions can quite effectively introduce them. For example, in 1992 Spain’s social partners concluded an agreement that provides for a tripartite committee which manages training funds and drafts training policies. Each sector of the economy must set up a joint advisory committee to approve training plans, which are then submitted to the national-level tripartite committee. It has been found that these developments have resulted in giving increased importance to training matters in company-level agreements (Gieorgica and Luttringer, 1997). It appears that despite national strategies and many EU initiatives, those countries in which social partnership lacks the stability that

The European Union and National Training Systems 209

convention and statute provide, have difficulty strengthening social partner involvement in training. The three categories discussed at the outset of the chapter – extensive role, limited role and weak role for social partners – still pertains. Caprile and Llorens explain: The influence of bargaining is greatest in those countries where the continuing training system is based on agreements between employers’ organisations and trade unions, which have a high degree of joint responsibility in the regulation and management of training, which is strongly linked to sectoral collective bargaining. (Caprile and Llorens, 1998: 3) Besides finding little evidence of convergence towards a social-partnerbased model of training throughout the EU, Caprile and Lloren’s research also highlighted an unexpected finding. Training is not negotiated by company-level social partners Europe-wide. They found that national collective agreements do not deal with the specific content of continuing vocational training in companies. In countries where training is coordinated by sectoral-level agreements the tendency is for partners to set up bipartite training institutions within each sector which are responsible for teaching and for certifying continuing training. However, Caprile and Lloren found that there is little collective bargaining on the issue at company level, and the right to information and consultation on the company’s training plan, which is on some countries’ statutes books, is hardly used (Caprile and Llorens, 1998: 18).

Conclusion Two clear findings emerge from this chapter. Firstly, the EU has dynamically and consistently encouraged social partner involvement in training systems since its inception. It has done this almost entirely through soft mechanisms. Secondly, this strategy has paid few dividends in both the Irish and Hungarian context and, indeed, Europe-wide. The chapter highlighted the manner in which the EU has governed this policy over the last fifty years. It stressed that the Community relied on soft governance in its effort to introduce an overhaul of national training systems. It was seen in the Irish case-study that local administrators dutifully implemented the Operational Programme for Human Resources Development to the letter. While the EU stipulates that funding of this nature should be administered through partnership structures, this stipulation is qualified, and considerably transformed

210 Employee Relations in the Periphery of Europe

because the notion of partnership must be interpreted using the principle of subsidiarity. Consequently, the notion of partnership becomes less coherent. In the Irish context, partnership is limited to initiatives the social partners may take, within structures which have been established by the state. In the case of the OP for Human Resources Development, therefore, the EU failed to introduce a novel and experimental understanding of partnership within Irish training systems. Hungary adopted a similar style of soft governance when promoting social partnership through the Phare project. It was shown that the initiative was coordinated within a demand-driven, bottom-up framework. The EU is faced with a difficult dilemma. It has specific ideas on how training could be effectively organised throughout member and associative member states, yet member states wish to retain autonomy over national training systems and associative states are under no hard, legal obligation to take EU suggestions on training policy on board at all. The chapter argued that the Community’s choice of soft policies has left the way open for more concrete pressures to shape training systems in weaker economies. It was suggested that the desperate need for countries such as Ireland and Hungary to attract FDI tends to mitigate against social partner involvement in training policies. It may be possible to square this circle by developing the idea, referred to above, that emerged from a workshop on social partnership, hosted by the Commission in 1999. It was suggested that national-level training systems could be reformed to comply with EU policies and the acquis communautaire by means of collective agreements. The idea is that while these national-level collective agreements would be binding, and social partners would be obliged to engage in negotiations and develop agreements, they would be responsible for the content. Such an approach to training policy within the EU would allow for nationallevel flexibility and would also serve to strengthen the social partners (CEC, 1999c).

7 Summary and Conclusions

. . . nor is it easy to manufacture the transition from a Fordist skill-labour nexus to a new one built upon quite different principles. For instance, the recent proposals of the European Union to fight unemployment (better education and training associated with labour market flexibility) . . . Would they succeed? They may, provided they take into account the institutional complementarity between labour reforms, macroeconomic and monetary policies, financial regulations and a well ordered trade regime. This is a huge task for policy makers . . . and social scientists. Will they be ready before . . . or after a possible major social and political crisis in Western Democracies? (Boyer, 1995b: s63)

Introduction At the outset, this book posed the timely question as to how employee practices in economically peripheral states are affected by accelerated European integration. It asked whether the EU operates as an agent of modernisation for industrially under-developed states. It was suggested that by pursuing this notion one might gain an explanation as to why peripheral economies are keen to join the Community despite the economic risks which, it was stressed, this entails. It was shown that an analysis of this nature involved two projects. One was the need to explore new theoretical territory and leave the well-worn paths, which European scholars traditionally tread, far behind. The second project the question created was an empirical one. The book showed that while the issue of under-development had been theoretically addressed in the EU context (Lipietz, 1997), there was a dearth of empirical investigations 211

212 Employee Relations in the Periphery of Europe

on the matter. This final chapter returns to the substantive and theoretical questions that were asked at the outset and establishes what the preceding chapters have contributed to them.

Theoretical innovations: institutional dependency Before reviewing the study’s main findings it is opportune to return to the theoretical construct which underpins the work. Chapter 2 pointed out that one needed to move beyond conventional theories on European integration to ascertain whether economically peripheral states engage in the EU project as an opportunity to modernise their economies. It was assumed throughout this book that the EU can be better understood if one locates patterns in the manner in which under-developed industrial regions integrate within the Community. It was argued that theories established to assess the production, distribution and consumption of wealth might have something to offer an analysis of the EU, the world’s biggest single market. It was concluded that it would be useful to analyse national data on industrial relations within a framework which regards this data as being shaped both by the national social relations of production (national industrial strategies, etc.) and the nature of EU governance. It was shown in Chapter 2 that this nexus of concerns necessitated a perspective which embodies three capabilities. Firstly, it was crucial that the work could gauge the manner in which the EU impacts on institutions such as domestic IR systems. Secondly, the research demanded an analysis which engaged in the interaction between the Community and the national level. Finally, core–periphery relations are an inherent aspect of the question addressed in this work. It was of primary importance that any theory devised to guide the study should cater for this concern. It was explained in Chapter 2 that a medium-range theory was developed to fulfil these requirements. New governance contributed distinctive features to the study. This framework provided the methodological freedom to shift the analysis between the EU and its member and associative member states without determining which level was the prominent locus of analysis, as neofunctionalism and intergovernmentalism inevitably do (Risse-Kappen, 1996). Furthermore, new governance is capable of focusing on institutional developments without losing sight of the question of power, a difficulty which institutionalist and comparative theorists are prone to (Hurrell and Menon, 1996: 394). Finally, new governance was chosen as an appropriate analytical frame-

Summary and Conclusions 213

work as it was possible to attach this largely methodological perspective on to a dependency-style theory. It was suggested that a revamped dependency theory should be integrated into this new synthesis for two key reasons. Firstly, dependency theory highlights the mode of production which states organise as it regards this as a distinctive feature of capitalism. Secondly, dependency theory addresses the notion of state autonomy by focusing on how core/peripheral relations between states are either reproduced or eroded. This is an issue which lies at the heart of this book. In short, institutional dependency, the theoretical approach, which underpins this book, amounts to an investigative analysis of the social relations of production within the EU from an ‘open’ perspective, which does not assume any inevitabilities. The research was organised into comparative studies to locate different ‘developmental trajectories’. Finally, in order to examine how the EU is making an effort to establish a new economic order within the Community and secure its position within the global relations of production, the book examined the social relations of production in terms of the organisation and effectiveness of governance within the EU rather than solely in terms of economic explanations for action.

Confirming convergence The insights that a comparative analysis provides were asserted at the outset of this work. Chapter 3 stressed that one could gain a unique insight into the implications that EU integration has on peripheral economies by comparing two IR regimes which are the products of very different historical contexts on the fringes of Europe. It was stressed that despite their unconnected histories, Ireland and Hungary have been thrown into a similar path of development by three forces: the inherently uneven nature of capitalist development (Wallerstein, 1983); mobile investment (Scharpf, 1997a: 26); and EU integration (Grahl and Teague, 1997: 114–16). It was argued throughout this work that the interface between these three factors and the national level was quite different in the Irish context from that of the Hungarian. However, the study was premised on the assumption that it was possible to regard these three factors as ‘controlled’. It was suggested that any evidence of convergence in the two IR regimes could be accounted for largely by these three influences. Two central patterns of development in the respective IR regimes were located. Firstly, it was found that domestic actors in both Ireland

214 Employee Relations in the Periphery of Europe

and Hungary are dynamically working, in cooperation with the EU, to implement IR systems organised according to principles of negotiated involvement, despite neo-Taylorist traditions which they both share. Secondly, it was found that all these very real efforts have been ineffectual to date and both states have failed to operate industrial relations systems which embody negotiated involvement. It was illustrated throughout this work that a primary reason for these fundamental shifts in IR strategies lay in the EU’s unofficial development policy. The thesis indicated that the EU ‘hard’ and ‘soft’ pressures to promote the European Social Model amounted to the chief motor behind all the initiatives examined in this study. The outstanding question, therefore, is why did all the projects discussed fail to meet their objective? In short, why is there no evidence of robust negotiated involvement-style institutions flourishing throughout Irish and Hungarian IR systems, and those of other peripheral economies which lack strong social partner traditions? By returning to our ‘controlled’ features we may gain some explanations for this failure.

Peripherality: a pressure for convergence? Firstly, could this failure to realise negotiated involvement-style IR systems in Ireland and Hungary result from their status as economic peripheries? Chapter 3 explained that the definition of peripherality was based on Chase-Dunn’s notion that these economies largely undertake peripheral types of production, or labour tasks which are peripheral in nature (Chase-Dunn, 1989: 207). Certainly, Lipietz places great significance on a country’s peripheral status in his explanation of the reproduction of neo-Taylorist IR strategies. We saw that the Lipietzian thesis suggests that coming from an economically peripheral tradition perpetuates neo-Taylorism IR systems by two means. Firstly, it is argued, industrial strategies are path-dependent and key actors are limited in the industrial models they can opt for by the traditions and institutions they have inherited (Lipietz, 1997: 23). Secondly, it is claimed that not only are national actors limited by these social institutions and traditions but they actively and systematically reproduce those features with which they are endowed. Lipietz argues that they do this because they see the low-cost, low-skilled, flexible labour force as the most achievable method of obtaining a competitive economy. This is what Lipietz refers to as the ‘transposed Ricardian theorem’ (Lipietz, 1997: 12). The research did provide some evidence to substantiate these notions. For example, we saw that a key explanation for Hungary’s failure to establish a national negotiated wage agreement was that the national

Summary and Conclusions 215

employers’ associations’ legitimacy was questionable. This was clearly an inherited institutional feature which limited the options available to the administration. Support for Lipietz’s conception of the ‘transposed Ricardian theorem’ can also be seen in the manner in which training systems are organised in the two countries. Chapter 6 found that neither state had managed to adopt a broadly implemented, high-skilled training strategy. This finding corroborates the discussion in Chapter 3 which indicated that both Ireland and Hungary operate a relatively low-cost and a relatively well-trained labour force. It was argued that these two features were deemed to be critical in attracting inward investment. It is unlikely that administrators would abandon these ‘assets’, that are the basis on which they are successfully attracting FDI currently, and set out into the unknown terrain of establishing a highly skilled, well-paid labour force (see Boyer, 1995b, for a discussion on the difficulties which the French administration faced when attempting to jump this hurdle). However, the main body of the evidence presented in this study tends to negate Lipietz’s explanations for the perpetuation of neoTaylorism as lying in states’ peripheral status. Foremost here is the consistent and recurring finding that national actors are, with the support and pressure of the EU, making sincere efforts to implement negotiated involvement-style initiatives into their IR regimes, despite the wholly foreign nature of these initiatives. It was stressed that both Ireland and Hungary have absolutely no tradition of works councils; of wage agreements involving interest groups and coordinated at both the national and enterprise level; and of training projects engaging the social partners and concerned with skill content. Despite the entirely alien nature of these projects, we saw that both regimes had energetically attempted to implement them – within the last 30 years in the case of Ireland, and the last decade in Hungary’s case.

FDI: A pressure for convergence? The second ‘controlled’ variable throughout the study was the influence which FDI has on developments in IR systems in Europe’s periphery. Once again, Lipietz looked to the dominant role which FDI plays in peripheral economies as an explanation for the persistence of neoTaylorism in these IR systems. Lipietz claims that FDI reproduces uneven development in Europe. He introduces the notion of the ‘third international division of labour’ to indicate that trading blocs such as Europe, the US and Asia are now reconfigured into cores and peripheries according to the differential manner in which the same goods are produced

216 Employee Relations in the Periphery of Europe

(Lipietz, 1997: 16–17). Lipietz argues that not only do national administrators size up their ‘Ricardian advantages’ with FDI in mind, but, he stresses, FDI mobilises in a strategic manner to those regions which, they believe, will fulfil their criteria for competitiveness. Lipietz explains: those sectors most sensitive to the involvement of direct producers tend towards regions or sections of the labour market that are relatively more skilled and less flexible; those sectors most sensitive to low labour costs tend towards regions or sections of the labour market that are more flexible. (Lipietz, 1997: 16. Stress in original text) Certainly, some of the findings introduced in this study would tend to validate this Lipietzian explanation for the obstinacy of neo-Tayloriststyle IR practices in peripheral countries. The discussion on the transposition of the European Works Council Directive indicated that Irish civil servants were concerned about the implications which this legislation would have on the economy’s dependence on FDI. It was seen that the Act was passed in a very flexible manner as a result. Finally, it was shown that these same pressures caused Hungarian legislators to design a works council system which would not challenge inward investors, and subsequently, as we saw, the system is not only weak but its function is unclear (Tóth, 1997). That said, once again it is important to stress that the dominant finding in this research was that national actors were experimenting with negotiated involvement-based projects in spite of the implications this may have for their need to maintain and attract inward investment. Certainly, their deep-seated FDI-consciousness is likely to have coloured these novel initiatives somewhat, but nevertheless, the overall picture is one of peripheral economies taking risks by attempting to reformulate the principles on which their IR systems are organised in lines with those promoted by the EU.

The EU: a pressure for convergence? The third ‘controlled’ variable’ which was held as constant in this study was the EU. It was argued that although Ireland has been a member of the Community for almost three decades, and Hungary has only obtained associative membership, successful integration within the Community is a pivotal feature of both economies’ industrial policies. It was shown that both states have been heavily influenced by the EU’s ‘hard’ and ‘soft’ pressures to develop the European Social Model. It was

Summary and Conclusions 217

argued throughout this work that, somewhat paradoxically, the European Social Model itself may provide an explanation for the failure which Ireland and Hungary faced in their efforts to introduce negotiated involvement-style IR regimes.

The key issue: governing the EU Social Model It was stressed in this work that the EU Social Model contains internal contradictions and is ill-defined. The following section discusses both these features and it concludes by focusing on what is perceived to be the underlying issue behind these flaws in the EU Social Model, namely Europe’s soft system of governance.

The European Social Model: deep contradictions It was argued throughout this book that the European Social Model provides followers with an ill-guided map. The study argued that while the EU Social Model is enormously successful in engaging ‘disciples’, and the mechanisms by which it diffuses ideas via ‘hard’ and ‘soft’ means are effective, the model suffers from two principal weaknesses. One is that it presents contradictory messages. The second is that the model is ill-defined and vague. Evidence for the former claim is found in the case-studies on the innovations in Ireland and Hungary’s labour laws. Chapter 4 suggests that the student should not be surprised at the complexities expressed by Ireland’s administrators who are busy juggling the notion of negotiated involvement-style works councils with the pressure to maintain an ‘attractive’ site for mobile investors. It was argued that the EU Social Model itself embodies this same juggling act. The Single European Act combined with the Works Council Directive exemplifies the dilemma Irish Civil Servants are grappling with. Likewise, the examination of initiatives in wage determination highlighted the paradoxical situation whereby Irish social partners are counted in national-level decision-making forums, while their colleagues at the enterprise level are not guaranteed legal recognition. The message permeating throughout this book is that this finding should be taken as commonplace in a Europe where the Social Model reflects such inconsistencies. It was stressed that the EU unstintingly encourages social partnership as a cornerstone of the EU Social Model (most clearly consolidated in the Maastricht Treaty’s social protocol), but the Community has passed no legislation guaranteeing trade union recognition or membership (Hall, 1994: 301).

218 Employee Relations in the Periphery of Europe

European Social Model: an ill-defined guide The book disclosed the grave difficulties which the EU Social Model creates for attentive peripheral economies as a result of the model’s vague nature. The example of training projects implemented by both Irish and Hungarian administrators illustrates the difficulties arising. Chapter 6 showed that the innovative training schemes reviewed all failed to develop into more than merely exemplar projects. The chapter argued that this difficulty should be expected at the domestic level as it reflects problems within the supranational model. While the EU encourages social partnership engagement in training policies (CEC, 1994b: 23), it is vague in terms of providing concrete advice to administrators as to how to ‘write social partners into’ training initiatives. Similar vagueness is characteristic of the EU’s recommendations on whether training policies should operate primarily as a mechanism to build up the labour forces’ skills, or to address unemployment. Milner highlights this problem: First, the emphasis on retraining unemployed workers tended to encourage reactive or compensatory measures at the expense of forward-looking policy initiatives. Second, the distinction between initial and continuing vocational training or retraining has never been clearly made: the Commission’s 1991 ‘Memorandum of Vocational Training’, a key document setting out policy after Maastricht, omitted to define vocational training. (Milner, 1998: 158) Additional difficulties created by the EU Social Model’s nebulous nature were discussed in the analysis on wage determination. Chapter 6 pointed out that while both Ireland and Hungary involved the social partners in national-level wages, a novel system in the two countries, the notion of partnership has not penetrated down to the enterprise level, thus making for very unstable foundations to the partnership ideal. Once again this problem is to be expected when the model on which these systems are based has never clearly defined what is meant by partnership (Gunnigle, 1998: 5–6; CEC, 1994c: 40). The second difficulty which both wage systems encountered was that while they had managed to implement national and enterprise-level bargaining systems, as is recommended by the EU (CEC, 1990: 17), neither regime had successfully coordinated this dual system (Teague and Grahl, 1998: 3). It was shown that it is not sufficient to develop these two levels

Summary and Conclusions 219

without the ‘extra firm institutional arrangements . . . required to tie enterprise pay determination to economy-wide goals’ (Teague and Grahl, 1998: 3). Yet one should perhaps expect to see these problematic patterns emerging in Ireland and Hungary, since their EU model while recommending this dual system has no concrete advice on how to realise its potential (CEC, 1990: 17).

European Social Model: use of soft governance The European Social Model’s vague and contradictory characteristics can largely be explained by its soft, non-binding nature. The book showed that those countries in Europe which share a ‘low-road’ tradition of production have tended to continue with this strategy despite many EU initiatives to modernise production models. Chapter 4 showed that Ireland and Hungary, along with other peripheral economies, introduced works councils in a manner which does not contravene their traditional FDI-friendly IR regimes. The chapter suggested that the European Works Council (EWC) Directive was such a flexible tool that it facilitated the nationalisation of European social policies. It was seen that, as such, the EWC Directive made little progress in challenging the core/peripheral patterns of employee practices which exist throughout Europe. In Chapter 6 it was seen that despite EU and national-level commitment to the ideal of social partner involvement in training, there is little evidence that peripheral economies have fundamentally reformed their training systems to include social partners. It was argued that the EU’s propensity for ‘soft governance’ meant that the notion of partnership could be interpreted very loosely. The Irish administration experimented with training initiatives in a dynamic fashion, but it has shown a reluctance to overhaul its entire system to ensure that social partners are not only engaged in the issue of training, but that they own the policy area. It was seen that the Hungarian administration faces a number of concrete pressures which are obstacles to social partner involvement in training policies. These include under-developed social partner traditions and the country’s weak position in the global economy. It was shown that due to Hungary’s deep dependence on FDI international business tends to influence industrial policy more than indigenous social partners.

‘Tightening up’ the EU Social Model? The Community has opted for soft governance for two main reasons. The first is that on the whole member states are reluctant to let the EU

220 Employee Relations in the Periphery of Europe

shape their social policies. This was seen very clearly in Chapter 6 which showed national opposition to the Community’s attempt to develop a remit over education policies. The second reason is that the EU has shifted from an interventionist approach, adopted throughout the 1970s and early 1980s, and yet it has rejected an outright neoliberal approach. As Chapter 2 pointed out, the Community is struggling with a ‘third-way’ approach which aims to guide policy development rather than implement it and fund it in a centralised manner. It is the contention of this book, however, that such a soft system of governance not only facilitates little progress at the national level, as the discussion on works councils and training policy showed, but that it threatens to lead to dysfunctional, contradictory policy-making in countries within the EU’s sphere of influence, as the chapter on wage agreements highlighted. The question is how to ‘firm up’ (Teague, 1999: 194–5) policy-making within a Community of diverse policy traditions, competing industrial strategies and member states which are opposed to external intervention in national social policies, not to mention associative states which have no legal obligations to the EU. While this book has urged that EU soft governance has proved to be problematic, it is difficult to prescribe alternative systems of governance without drawing up binding blueprints and five-year plans. All of which clearly undermine one of the main principles on which the entire Europe project was premised at the outset – democracy. This question has been addressed by a number of commentators. Laffan et al. argue that the EU’s competence in governing and policymaking is developing in a dialectic fashion as it continues to integrate. The suggestion is that the very muddled nature of this integration progress has produced an exciting, experimental by-product of good governance. Laffan et al. claim, The Union faces limits to its authority, limits to the carrying capacity of its institutions, and limits to the level of agreement possible among the member states. It seeks to overcome these limits by innovation, experimentation, socialisation, institution-building, patience and flexibility. The evidence in this volume suggests that there is considerable strength and capacity in the EU system. (Laffan et al., 2000: 201) Their analysis, however, is largely pitched at the EU level. A scrutiny of how Community policies pan out at the national level, such as that

Summary and Conclusions 221

undertaken throughout this book, would suggest that the EU’s experimental governance is less than effective. Paul Teague (1999) has also addressed the issue of the Community’s capacity to govern. Central to his thinking is the idea that national diversity is respected within the context of an overall Europe-wide policy framework. He suggests that this could be obtained by developing agencies at the national level to support and complement new EU legislation. He cites the UK’s Equal Opportunities Commission as an example of an agency which maximised EU policy initiatives and ensures they were not marginalised or forgotten (Teague, 1999: 195). Teague argues that concrete follow-up initiatives such as this will prevent member states from engaging in EU information exchanges simply to fulfil administrative obligations to the Commission (Teague, 1999: 195). According to reports from some member states, the National Action Plans currently simply fulfil this administrative obligation (IST, 2000: 23–4). He suggests that decentralised fora for exchange of information such as those hosted by the Europe of the Regions Committee, European Works Councils and EU Employment Policy, have the potential to shape policy in a bottom-up manner and subsequently feed into supranational policy initiatives (Teague, 1999: 196–8). However, while these platforms certainly carry the potential for such democratic Community policy development, there is little evidence to date of them undertaking this role. Mückenberger et al. (2001) nudge the notion of ‘firming up’ Europe one step further along. They argue that the parameters for a Social Europe have been established through a host of disparate elements over the years through the EU Charters of fundamental social rights of 1989 and 2000, through the Employment Title, the social dialogue framework and the acquis communautaire. The authors recognise that these various initiatives aim to achieve very different goals with varying legal effects. However, they envisage that projects of this nature could be coherently linked together in a virtuous circle of mutual reinforcement with legally binding in the form of a constitution. Mückenberger et al. state: they could become the social convergence criteria advocated by the Manifesto for Social Europe of 1996. They are the functional equivalent of the economic convergence criteria which shaped EMU. (Mückenberger et al., 2001: 352–3. Stress in original text) While this idea of a strong Social Europe, governed through binding statues, is in line with the main thrust of this book, it is, in the near

222 Employee Relations in the Periphery of Europe

future at any rate, likely to be met with fundamental opposition from business within Europe and further afield. A mid-term solution to Europe’s floundering governance may be one which was referred to earlier in the book. The idea emerged from a workshop on the development of social partnership within associative states, which the Commission hosted in 1999. The participants suggested that IR systems could be reformed in these states to comply with the acquis communautaire by means of an obligation to establish collective agreements. 1 EU-enforced collective agreements would allow more flexibility and would also serve to strengthen the social partners (CEC, 1999c). It was shown throughout this book that the EU has underpinned its ‘third way’ with the principle of social partner involvement. It was seen that despite EU energy and national administrations’ support for this notion, it was only developed in a very jaundiced manner in countries without strong social partner traditions. The idea of institutionalising the acquis, by means of collective agreements which would be binding at the national level, means that the EU would have the opportunity to set the policy framework while member states would have the freedom to implement the policy according to national tradition, preference and economic strategy. Such an approach would strengthen the social partners and other civic groups while introducing binding, coherent EU-wide policies. Furthermore, by taking such concrete action on social policy the EU would send out a clear message to associative states and to attentive neighbours that ‘Social Europe matters’.

Notes Introduction 1 Any reference made to Ireland throughout this study indicates the Republic of Ireland and does not include Northern Ireland. This is primarily because industrial relations systems differ quite radically in the two areas.

1

The Costs of Europe: Why Do Small Economically Peripheral Economies Join Europe?

1 Two phrases, ‘social dialogue’ and ‘social partners’, have been adopted from ‘Euro-speak’ and they permeate the official publications of all the member and associative member states. Although they carry considerable political weight, I use them in this work as a shorthand term to denote the involvement of representatives of labour and business and often the state or EU in policy-making. 2 To avoid confusion, the term the European Union (EU) is used universally throughout this study to refer to the Community, although the term itself was not adopted until the Treaty on European Union was ratified (1993). 3 The references for the two studies are: Emerson, M., Aujean, M., Catinat, M., Goybet, P., and Jacquemin, A. (1988) The Economics of 1992 (Oxford: Oxford University Press); Cecchini, P., Catinat, M. and Jacquemin, A. (1988) The European Challenge, 1992. The Benefits of a Single Market (Aldershot: Wildwood House). 4 The HERMIN Model was a new macroeconomic model which was designed specifically to analyse to effects of EU regional policy. The model was orientated towards the problems being experienced in the Periphery (see Bradley et al., 1995). 5 In addition, the EU’s assessment of regional policy in its Fifth Periodic Report reported little improvement in employment figures for Objective 1 regions (see note 12 below) in 1986–93 (Bachtler, 1995: 224). 6 The term ‘problem-solving governance’ is taken from Laffan et al. (2000: 200). 7 This definition of the term ‘governance’ was adapted from the definition presented by the ‘Institute of Governance’ (http://www.iog.ca). 8 Cohen and Rogers prefer to label their model ‘democratic associationism’ whereby they prioritise the pursuit of egalitarian democracy. 9 This sub-title was taken from a Financial Times article by Lionel Barber (19 January, 2001). 10 Focus is available at http://www.oecd.org/puma/focus. 11 See OECD web page www.oecd.org/puma/citizens/aboutwork.htm for further discussion. 12 Objective 1 regions include all those regions where per capita GDP is less than or equal to 75% of the EU average.

223

224 Notes

2

Theories on European Integration: Integrating Theories

1 The European Union has legislated for equality of gender in recruitment (O.J. L39/76), in the work place (O.J. L45/75) and in terms of benefits (O.J. L6/79). However, this body of law does not have its origins in principles of social justice; rather, these laws were built on a clause in the Treaty of Rome which placated French fears of competition. The French had strong equality laws and were concerned that ‘weaker regimes’ would under-price French goods by use of low-paid female labour (Mazey, 1988: 67). 2 Legislation which was adopted regarding restructuring within multinational companies includes the directives on collective redundancies (O.J. L 48/75), on employees’ rights on transfer of undertaking (O.J. L 61/77), and protection of employees in the event of their employer’s insolvency (O.J. L 283/80). 3 See Morton (1997) for a comparison of employee practices in UK and Belgium. 4 Scharpf explains that the term ‘Delaware effect’ was coined by Carey in his study of the American state which was able to attract companies as a result of their sub-standard industrial regimes (see Carey, 1974). Additionally, Scharp’s reference to the ‘California effect’ was taken from Vogal’s study which argued that regulatory competition may induce states to raise the level of regulatory requirements (see Vogal, 1995). 5 Schulten also sees evidence for this paradoxical development (Schulten, 1996: 319). 6 In the human resources literature, the neofunctionalist and intergovernmental debate is often reflected in the convergence/divergence debate, while in economics it is often expressed in terms of open markets and subsequent economic dynamics versus the notion that open markets limit states’ sovereignty ‘and is a short step away from the dissolution of nationhood itself’ (Rosamond, 1997: 476). 7 The author is grateful to Alex Warleigh for the interesting ideas he presented during discussions on this topic. 8 Other Scholars who have argued that students of EU studies should avoid devising a ‘grand theory of European integration’ include Peterson (1995) and Warleigh (2000). 9 A notable exception here is presented in Bieler’s neo-Gramscian analysis of EU enlargement (Bieler, 2000). 10 See, for example, Volume One of Capital, ‘The Historical Tendency of Capitalist Accumulation’, in McLellan (ed.) (1988: 485–8). 11 Bob Jessop also stresses the open-ended perspective of marxism (Jessop, 1997: 570). 12 See Bulmer (1998) and Hix (1996) for a critique of a purely institutionalist approach.

3

The European Social Model in Economic Peripheries

1 Legal mechanisms include Regulations, Directives or Decisions. 2 These innovations always involve alterations to the founding Treaty of the EU. 3 As Lange (1993) has indicated, financial incentives are very powerful. Lange argues quite convincingly that the 3–4 economically weaker members of the

Notes 225

4

5

6

7 8 9 10 11 12 13 14 15

EU supported the Maastricht Treaty, and more importantly, convinced their constituencies to approve of this move, because they were offered a hefty compensation package. Lange argues that the wealthier EU members agreed to a five-year plan doubling the Community’s annual aid to the four poorest member states to the total of 32 billion ECU by 1997. He stresses that this money was primarily to be invested in a developmental programme for these poorer countries (Lange, 1993: 21). I would point out that on many occasions member states arrange to ‘opt out’ of Directives and, certainly, financial incentives for policy restructuring can be rejected. Therefore the term ‘coercion’ may not be so accurate. Checkel argues that other state models are less likely to combine both motivations. For example, he regards the US as a Liberal model; as such, he claims, elites experience enormous societal pressures which influence policy-making. In the US, it is argued, pressures created by interest groups force administrators to adopt a clear, rational, ‘ends-centric’ approach to policy-making. Conversely, Checkel points to the USSR as an example of a ‘state-above-society’ model where administrators operated in an lobby-free environment. Therefore, he claims, changes introduced during Perestroika can only be explained by a ‘new normative learning by the Gorbachev leadership’ (Checkel, 1997: 479). He argues that countries in between these two polar extremes are likely to practise both types of cognitive drives. Ireland’s corporation tax of 10% on manufactured goods and international services is much lower than the standard rate of any OECD country with the exception of certain projects in the Netherlands, Switzerland and Singapore (Forfás, 1996: 262). Some leading European politicians, in particular Oskar Lafountaine, were very concerned about Ireland’s corporation tax and they urged for EU intervention on the issue. This pressure has receded since Lafountaine’s resignation (Irish Times, 11 March 1998, page 1). The authors stress the dialectic relationship between the ECJ and key political actors (Garrett and Weingast, 1993: 202). Indeed, there is a certain degree of competition as Ireland and Hungary often vie for the same foreign direct investment (McManus, 2000). Others who articulate this idea in a clear manner include Streeck (1995), Porter (1990) and Dore (1973). For a discussion on how Ireland’s peripherality is embedded in its historic legacy, see O’Hearn (1994). See Kornai (1997) for discussion of how the Socialist coalition government 1994–8 addressed this goal. The journal cited by Török is Heti Világgazdaság (World Economy Weekly) HVG, 21 August 1994, page 79. OECD web site address is: www.oecd.org. The auto-industry comprised 11% of total inward investment in early 1990s (Swain, 1998: 658). Pye notes that enterprises were attracted to Hungary primarily by the ‘strategic position factor’ and access to new markets (Pye, 1998:383). A National Competitiveness Council report stresses that firms in Ireland are concerned with a host of cost/competitiveness issues besides wages. These include employers’ national insurance costs, skill shortages, transport costs and the costs

226 Notes of utilities and services such as energy, insurance and telecommunications (National Competitiveness Council, 1999).

4

The European Union and National Legal Systems

1 Case 120/78 [1979] ECR 837. 2 See Gunnigle et al. (1997c); Roche and Geary (1998); IBEC (1999); McCartney and Teague (1999). 3 The more recent study by O’Donnell and Teague was able to assess new studies that had not been undertaken at the time Gunnigle was writing. 4 See Lord Wedderburn (1991: 25–7) for a similar discussion. 5 The Social Policy Protocol was subsequently integrated into the main body of the Treaty with reforms introduced in the Treaty of Amsterdam. 6 Information from interview which author conducted with John Daly, senior civil servant, Department of Enterprise, Trade and Employment 10 July 1996. 7 Interview which author conducted with John Daly, senior civil servant, Department of Enterprise, Trade and Employment 10 July 1996. 8 http://www.eurofound.ie/ewc/index.shtml. 9 This is not a direct quote but is simply an example of the style of the agreements in this category. 10 I am grateful to Jean-Claude Le Douaron for highlighting this point to me. 11 Communication which the author had with Tom Hayes, an Employee Representative Consultant (22 June 2001). 12 Information gathered during interview which the author conducted with the Legal Advisor to the European Delegate of the European Commission to Hungary. Interview date 10 December 1996. 13 Phare was established under Regulation 3069/89. 14 Regulation 622/98, Art. 4. 15 This idea was communicated in an interview which the author conducted with Tamás Prugberger, Head of Labour Law Department, Miskale University, Hungary, 25 November 1996. 16 The database was created and maintained by the European Foundation for the Improvement of Living and Working Conditions. http://www.eurofound.ie/ ewc/index.shtml. 17 Note that in Tables 4.1 to 4.5 indigenous and FDI companies are calculated in the Irish case only, due to the small number of companies involved here. Elsewhere it is indigenous companies only which are calculated. 18 This is with the exception of semi-state companies.

5

The European Union and National Wage Systems

1 Directive 75/117/EEC. 2 Directive 76/207/EEC (OJ 1876 L 39/40). 3 75/129/EEC amended to Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the member states relating to collective redundancies, OJ L 225, 12.8.1998.

Notes 227 4 Directive 77/187/EEC OJ L 61, 5.3.1977 on the approximation of the laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses, amended by the Council Directive 98/50/EC of 29 June 1998, OJ L 201, 17.7.1998. 5 94/45/EC. 6 CEC (2001g). 7 Information gathered during interview which the author conducted with senior trade unionist, 18 January 1996. 8 Irish employers were largely represented in 1987 by two groups: the Federated Union of Employers (FUE) and the Confederation of Irish Industry. Both groups amalgamated in 1993 to form the Irish Business Employers’ Confederation (IBEC). 9 The Programme for National Recovery (PNR) 1987–1990, the Programme for Economic and Social Progress (PESP) 1990–1993, the Programme for Competitiveness and Work (PCW) 1993–1996, Partnership 2000 (P2000) 1996–1999 and Programme for Prosperity and Fairness (PPF) 1999–2002. 10 Information gathered when the author interviewed the manager of Area Development Management Ltd, 4 July 1997. 11 Abbot and Whelan v. ITGWU and Southern Health Board and Others (1980). 12 The Labour Relations Commission, established in 1991, has general responsibility for good industrial relations. It was responsible for the conciliatory function and Equality Service. 13 The IDA was established in 1949 as the agency responsible for regional and national industrial planning. It provides advice, grants and other financial incentives for inwardly-investing companies. 14 The Irish Labour Court differs from many of its European counterparts, as it cannot normally issue legally binding decisions. 15 Between September and December 1996, the author interviewed spokespersons from each of the six trade unions represented in the NCC. 16 Information obtained during interview with the Head of the Economic and Political Section of the European Commission to Hungary, 6 December 1996. 17 They are: Autonomous Trade Union Confederation (ASZSZ), Democratic League of Independent Trade Unions (Liga), National Federation of Workers’ Councils (MOSZ), National Confederation of Hungarian Trade Unions (MSzOSz), Forum for the Co-operation of Trade Unions (SZEF), and Intellectual Workers’ Trade Union (ÉSZT). 18 Interview conducted 28 October 1996 with Head of International Department MSzOSz. 19 These include: Union of Agrarian Employers (AMSZ), National Confederation of Consumer Co-operatives Societies (ÁFEOSZ), National Association of Industrial Corporations (IPOSZ), National Federation of Traders and Caterers (KISOSZ), Confederation of Hungarian Employers and Industrialists (MGYOSZ), National Federation of Agricultural Co-operators and Producers, National Association of Strategic and Public Utility Companies (STRATOSZ), National Association of Entrepreneurs and Employers (VOSZ). 20 Between September and December 1996 the author interviewed representatives from Hungarian Employers Association (MMSZ), Federation of Hungarian Employers and Industrialists (MGYOSZ), National Confederation of Consumer Co-operatives Societies (ÁFEOSZ), National Association of Industrial

228 Notes

24

Corporations (IPOSZ), National Federation of Traders and Caterers (KISOSZ), National Association of Entrepreneurs and Employers (VOSZ), National Confederation of Hungarian Trade Unions (MSzOSz), Forum for the Co-operation of Trade Unions (SZEF), Intellectual Workers’ Trade Union (ÉSZT), Works Council Trade Union (MOSZ), Democratic League of Independent Trade Unions (Liga). These Committees included the Economic Committee; Wages and Labour; Information; Goodwill and Ethical Committee; Labour Market Committee; Labour Protection Committee; National Training Council; Privatisation Committee; Social-Policy Committee. The coalition was made up of MSZP (the Hungarian Socialist Party) and the SZDSZ (the Free Democrats). The government was headed by Gyula Horn and the seats are divided 54% MSZP and 18% SZDSZ (Héthy, 1995a: 361). Interview which author conducted with a spokesperson from the NCC, 26 November 1996. I am very grateful to András Tóth and Zoltan Berényi for this information.

6

The European Union and National Training Systems

21

22

23

1 The Council’s response here was to the Commission’s 1996 White Paper on Education and Training, Teaching and Learning: Towards a Learning Society (CEC, 1996a). 2 Council Decision of 2 April 1963, laying down the principles for implementing a common vocational training policy (63/266/EEC), OJ 63.20.4.63. 3 Case 242/87, Commission of the European Communities v. The Council of the European Communities (1989). 4 Examples here include the European Commission’s White Paper entitled Growth, Competitiveness and Employment (CEC, 1993c) and the White Paper on Education and Training: Towards the Learning Society (CEC, 1994d). 5 Information gathered when author conducted interview with a Senior Researcher, Human Resources Section, Department of Enterprise and Employment, 30 July 1997. 6 See, for example, Partnership at Work in Ireland (O’Donnell and Teague, 2000) which is an evaluation of how successfully components of the national agreement Partnership 2000 have been implemented. 7 The Act marks a change in the manner in which the training of people in employment is funded. The fund is resourced through a levy on employers equivalent to 0.7% of the national insurance contributions which employers are obliged to pay (Yeates, 2000). 8 Of this total figure, 90% came from the European Social Fund and the remaining 10% was contributed by the European Regional and Development Fund (ERDF). 9 See, for example, Irish Times, 6 April 2001, ‘Modest Slowdown’ (Opinion). 10 Government Decree 2073/1999 (IV. 21). 11 Resolution No. 2013/1971 (IV 28). 12 As amended by Act CXIV of 1995 (Bócz, 2000a: 111). 13 The following information was obtained during interviews the author conducted with key people: the Team Leader of the Phare Employment and

Notes 229

14 15

16 17 18

7

Social Development Programme, Budapest (28 November 1996); a Senior Researcher of the Hungarian Institute of Labour Relations (4 December 1996); and a contract Researcher for Phare Employment and Social Development Programme Management Unit (27 November 1996). Note that trade unions and employers’ associations were defined as NGOs in this programme. Information gathered by author while interviewing the Director of the Interest Defence Consultancy Service (ETOSZ) Training College for Trade Unions, 16 December 1996. The ETOSZ is a business association founded mainly by trade unions as a non-profit training and information organisation. The author is very grateful to András Tóth for giving her access to this data base. Hungarian Law No I/1994 on the ratification of the Europe Agreement, clause 5. During an interview the author conducted with the secretary of an employers’ association which represented FDI companies, it was explained that the association was not involved in any national tripartite institutions and did not plan to be (6 November 1996).

Summary and Conclusions

1 Mückenberger et al. also develop this idea (2001: 354–5).

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Author Index Amin, A., 9, 14, 29 and Tomaney, J., 12, 14 Andor, L., 19 Baldwin, R., 19, 21 Blaney, D., 54, 57–8 Blanpain, Roger, 27 Boda, D. and Neumann, L., 153 Borbély, S., 156 Bradley, J., 14, 18 Browne, J., 108–9 Burnham, P., 56 Caporaso, J., 46–7 Caprile, M. and Llorens, C., 209 Carley, M. and Marginson, P., 123–4 Casey, B. and Gold, M., 136 Cecchini, P., 7 Chase-Dunn, C., 80, 81, 214 Checkel, J., 69, 7–3 Cohen, J. and Rogers, J., 24 Colling, T., 30 and Dickens, L., 30 Cox, T. and Vass, J., 152 d’Iribarne, A., 175–6 Devine, P., 17 Dogan, R., 50 Ellingstad, M., 93 Emerson, M., 7 Fitzgerald, I. and Sterling, J., 100 Frank, Gunder, A., 56 Garret, G. and Weingast, B., 71, 72, 143 Geary, J., 101 Gerstenberg, O. and Sabel, C., 24 Goetschy, J., 136–7, 175 Grote, J. and Schmitter, P., 137 Gunnigle, P., 104

Hall, M., 36, 101 and Hoffmann, A., Marginson, P. and Müller, T., 100 Hancké, B., 132 Hayes, T., 109–10 Héthy, L., 157, 158 Hix, S., 23, 50–2 Hoffman, S., 44 and Keohane, R., 46 Hourihan, F., 103 Hurrel, A. and Menon, A., 47, 48–9 Hyman, R., 74 Inglis, K., 115 Jessop, B., 58 Kecskés, L., 114 Kenner, J., 69–70 Krugman, P., 12, 21 Laffan, B., O’Donnell, R. and Smith, M., 24, 97 Lecher, W. and Rüb, S., 100 Lee, J., 87 Lipietz, A., 31, 59–61, 62, 63, 82, 214–16 MacSharry, R. and White, P., 147 Majone, G., 19, 20, 23, 26, 27 Mangan, I., 146 Mann, M., 19 Martínez Lucio, M. and Weston, S., 98–9 McKersie, R., 102 McMichael, P., 75 Milner, S., 175–6 Moravcsik, A., 45–6 Mouzelis, N., 56–7, 75, 76 257

258 Author Index

Neal, A., 27 Nesporova, A., 199–200 Neumann, L., 113, 120, 200

Strange, S., 53 Streeck, W., 21, 23, 25, 39–40, 100, 133

O’Hearn, D., 14, 21, 88

Teague, P., 21, 25, 30, 68, 73, 98, 133, 137, 142 and O’Donnell, R., 102 and Grahl, J., 163 Tóth, A., 112, 121 Transholm-Mikkelsemn, J., 46 Traxler, F., 136 Turner, L., 61

Pedersini, R. and Seveso, P., 100 Pollack, M., 20, 50 Pollert, A., 113 Przeworski, A. and Teune, H., 79, 83 Ramsay, H., 13–14 Rhodes, M., 167 Richardson, J., 23 Roche, W., 102, 149 Royle, T., 132

Vaughan-Whitehead, D., 153, 154 Volkai, J., 153 von Prondzynski, F., 103

Scharpf, F., 25, 32, 37–9 Schulten, T. and Stueckler, A., 167–8 Scorey, D., 106, 110 Seers, D., 9 Sellin, B., 171

Wallace, H., 70–1 Wallerstein, I., 75 Warleigh, A., 46 Whittall, M., 131–2 Williams, A., 18, Wills, J., 131

Subject Index Acquis communautaire, 92, 153, 190, 191, 200, 210, 221, 222 ADAPT, 181, 188 Advisory Committee on Vocational Training, 174 Agenda 2000, 154 AnCO (An Chomhairle Oiliúna), 179 Antall, József, 118 Asia, 215 Association Agreement (between EU and Hungary) (1993), 86, 92–3, 95, 118, 119, 155 Austria, 176 Austro-Hungarian Empire, 80 Belgium, 124–31, 168, 176, 203 BMW, 131 ‘Broad Economic Policy Guidelines’, 143 Bulgaria, 113 Central Trade Union Council (SZOT), 111, 155 Cologne Process, 142 COMETT (Community Programme for Education, Teaching and Training in Technology), 172 Comitology Committees, 24, 28–9, 50 Commission, of the European Union, 49, 67, 97, 98, 99, 105, 109, 119, 133, 138, 142, 143, 147, 154, 172, 173, 174, 175, 191, 193, 194, 196, 200, 210, 221, 222 Committee of the Regions, 67, 141, 221 Communist Party (Hungary), 111, 192

Community Council on Vocational Training Policy in the Community, 178 Community Support Framework (CSF), 15, 182 Comparative research, 74–6, 79, 213 Confederation of Hungarian Employers’ Organizations for International Cooperation (CEHIC), 156 Confederation of Hungarian Trade Unions (MSzOSz), 112, 120, 155, 156 Conservative Party (UK), 148 ‘Costs of a Non Europe’, 11–17, 21, 82 Council of Ministers, 35, 67, 138, 141, 172, 173 Cranet Survey, 198 Cumulative Causation Theory, 9, 10, Czech Republic, 113, 177 De Valera, S., 148 Delors, Jacques, 118, 139 Delegation of the European Commission in Hungary, 77, 155 Denmark, 147, 176, 208 Dependency theorists, 8–10 Dependency theory, 3, 35, 53–9, 61–2, 63, 65, 213 Development economics, 8–11, 53, 211 Developmental trajectories, 57, 59, 63, 74, 76, 213 Directives (EU), 96–8, 105 collective redundancies, 95, 99, 103, 104, 109, 141 equal pay, 141 equal treatment regarding access to employment, 259

260 Subject Index

Directives (EU) – (Continued) training, promotion and working conditions, 141 equality in social security, 141 European Works Council (EWC) Directive, 39–40, 68, 95, 96, 98–101, 123–33, 141, 216, 217, 219, 221; and core peripheral relations, 101, 123–33, 132 parental leave, 68 protection of employees in cases of insolvency, 95 protection of employees’ rights in event of transfer of undertakings, 68, 95, 99, 103, 104, 109, 141 right to a contract, 68 working time, 68 Directorate General for Enlargement, 161 Directorate General for Science, Research and Development, 15 Directorate General for Employment and Social Affairs, 154, 190, ‘Doorn Group’, 167–8 Dunai, Imre, 85 Economic and Financial Affairs Directorate, 13 Economic and Social Committee (ECOSOC), 138, 141, 155, 161 Economic peripherality, 2, 6, 7, 9, 30–1, 33, 37, 55, 56, 57, 60, 62, 63,66, 76, 79, 96, 123–33, 171, 211, 212, 213, 214–15, 216, 218 and Ireland and Hungary, 80–1, 213 and Chase-Dunn, C., 80, 214 Employee Participation, 76, 99–100, and Ireland, 101–11 Employers’ associations, 98, 108, 125, 131, 134, 139, 140, 141, 163, 173, 174, 208 Employment Committee, 141

Employment policy, 67, 68, 137, 141, 172, 177, 183, 221 Erasmus Programme, 172 Euro-corporatism, 137 Europe Agreement (between EU and Hungary, 1991), 113–14, 115 European Agreements, 153 European Bank for Reconstruction and Development (EBRD), 78 European Central Bank, 142 European Centre for the Development of Vocational Training (CEDEFOP), 173, 188, 191 European Coal and Steel Community, 139 European Court of Justice (ECJ), 72–3, 114, 140, 143, 172 European competitiveness, 41, 65, 99, 138, 140, 167, 175 and social cohesion, 20–3, 29, 33, 176 European Expansion, 7 European Foundation for the Improvement of Living and Working Conditions, 101, 110, European governance, 8, 23–5, 28–31, 47, 59, 62, 73, 173, 183, 209, 212, 213, 217–22 associative democracy, 24, 29–30 soft law, 28, 29, 68–74, 96, 114, 122, 132–3, 153, 214, 216, 217, 219; and wages, 134–5, 138–40, 151, 218–19; and training, 171, 184, 189, 210, 219 hard law, 68–9, 70, 73, 96–8, 103, 104, 105, 117–19, 153, 162, 214, 216; and wages, 134–5, 136, 138, 140–3, 152, 162; and training, 170–1, 174, 210 European Integration Commission of Hungarian Trade Unions (EICHTU), 197

Subject Index 261

European Integration Council, 156–7, 160 European Monetary Union (EMU), 12–13, 41, 72, 137, 138, 142–3, 151, 167 European Parliament, 139, 141, 142 European Social Model, 7, 20, 42, 65, 66, 69, 74, 76, 121, 169, 214, 216–22 on training, 170, 209, 218, 219 on wages, 135, 148, 151, 158, 168, 218 definitions of, 65 ‘Old European Social Model’, 7, 10, 11–17, 33 ‘New Social Model’, 8, 20, 29, 31, 33 European Social Fund (ESF), 139, 178 European Territorial Pacts, 148 European Trade Union Congress (ETUC), 156, 173 European Trade Union Institute, 113 European Training Foundation (ETF), 173–4, 190, 191, 197 European Treaties Amsterdam Treaty, 10, 51, 52–3, 67, 68, 135, 139, 141, 143 Maastricht Treaty, 10, 28, 35, 52, 67, 92, 97, 98, 99, 104, 105, 135, 136, 138, 143, 171, 172, 174, 217 Single European Act, 13, 28, 33, 35, 36, 38, 52, 67, 82, 98, 99, 138 Treaty of Rome, 52, 95, 114, 138, 171, 172, 173 European Union budget, 26 consolidating democracy, 18, 152 core/peripheral relations, 34, 35–42, 46, 54, 56, 57, 62, 63, 76, 132, 212, 213, 219 democratic deficit, 28 development agency, 22, 66, economies of scale, 7, 13–15

flexible employment patterns, 35–7 health and safety, 141 industrial policy, 8, 17, 29, 33, 67 industrial relations, 31–3, 35–42, 59–64, 65, 76, 122, 131, 194, 200 Keynesian policies, 28, 175 laissez-faire ideology, 10, 19, 21, 41 macro-level competition, 7, 11–13 market, 52 micro-level restructuring, 7 military bloc, 18–19 national tripartism, 136–7, 147, 154, 161–2, 168 neo-liberalism, 7, 19, 21, 33, 68, 220 policy fields, 27–8 response to underdevelopment, 11–17, 33, 34 social partners, 136, 139, 142–3 theoretical literature, 42–63, 212–13 third way, see third way unofficial development policy, 8, 214 European Union Summits and Councils Amsterdam Summit, 68 Berlin Council, 26 Cologne Summit, 142 Copenhagen European Council, 92, 115, 118 Dublin Summit, 118 Essen Summit, 68 Lisbon Summit, 21–2, 27, 28, 30 Luxembourg Council, 99, 175 Madrid Summit, 21 Nice Summit, 23 Paris Summit, 20 Vienna Summit, 140 FÁS (Foras Áiseanna Saothair), 179 Federated Union of Employers (FUE), 145 Fianna Fáil, 144

262 Subject Index

Fidez–MPP coalition, 157 Fine Gael, 145 Fitzgerald, Eithne, 106 Flynn, Pádraig, 154 Fordism, 58, 59, 65, 167 post-Fordism, 61, 82 Foreign direct investment (FDI), 2, 37–8, 66, 79, 80, 82, 100, 102, 215–16 in Ireland and Hungary, 81–92, 123, 213, 215, 219 in Hungary, 112, 113–16 in Ireland, 148, 150 France, 117, 176, 208, 215 Germany, 163, 168, 174–5, 176, 208 trade unions system, 116 European Works Councils (EWC), 123–31 Governance, 58, 63, 68, 70, 96 Greece, 177, 203, 208 Harney, M., 147, 148 Horn, Gyuala, 84 Human Resource Management (HRM), 40, 102, 198 Hungarian Chamber of Commerce, 152, 156, 160 Hungarian National Observatory, 199, Hungarian Socialist Workers’ Party, 85, Hungary, 2, 4, 15, 19, 62, 66 Acts: Act on Companies (amended 1991), 115; Employment Promotion Act, 192; Labour Code (1992), 112, 116, 120, 122, 160, 161; Law on the Ratification of the Europe Agreement (1994), 200; Privatisation Law (1995), 84; Vocational Training Act (1993), 190, 192 arbitration, 194–5 comparative case-study, 76–93 developmental trajectory, 79

employers’ associations, 155, 156, 158, 159, 160, 192, 200, 214–15 foreign direct investment (FDI), 81–92, 113–16, 201–2, 210, 213, 215, 219 peripherality, 80–1, 201, 213 recent economic success, 76–8 relations with the EU, 92, 213 skill levels in labour force, 88–9, 189, 202 trade unions, 111–16, 152, 155, 156, 158, 159, 160, 192, 200, 201 training systems, 171, 177, 189–202, 215, 218, 219; County Labour Councils (CLC), 192; National Training Council, 192; social partners, 192–202, 197, 198, 199–201, 210, 215, 219; Vocational Training Fund, 190, 192 tripartism, 135, 152–3, 157–62, 169, 192 uprising (1956), 116 wage patterns, 86–8, 121, 201 works councils, 116–22, 160, 215, 216, 219 Industrial democracy, 99 Industrial development, 67 Industrial Development Authority, (IDA), 83, 150 Industrial relations (IR) systems, 2, 35–42, 59–64, 70, 73, 79, 100, 104, 122, 131–2, 135, 137, 212, 213, 214, 215, 216, 222 convergence and divergence, 2–3, 10, 76, 213–17 Ireland, 102, 106–7 Hungary, 111–18 Institut des Sciences du Travail (IST), 137 Institutional dependency, 62, 63, 65–6, 212, 213 Institutional theorists, 44–5, 49, 212

Subject Index 263

Intel, 83 Intergovernmentalism, 43–44, 45, 50, 54, 63, 212 Internal (single) market programme, 10, 11, 35, 137, 138, 172 International Labour Organisation (ILO), 157, 160, 195 International Monetary Fund (IMF), 201 Ireland, 2, 4, 6, 14, 15, 16, 18, 62, 66 Acts: Industrial Relations (Amendment) Act (2001), 150–1; Industrial Training Act (1967), 178; National Training Fund Act (2000), 181; Protection of Employment Act (1977); Trade Union Act (1871, 1990), 108; Transnational Information and Consultation of Employees Act (1996), 106, 107; Vocational Training Act (1930), 179 area-based partnerships, 147 comparative case-study, 76–91, developmental trajectory, 79 employee participation, 101–4 Employer Labour Conference, 144 employers’ association, 106, 107, 145, 146, 147, 148, 149, 151, 178 European Work Council (EWC) Directive, 101–11, 124–31, 216, 217, 219 foreign direct investment (FDI), 81–92, 189, 213, 215, 216, 219 Joint Labour Committees, 144 Labour Court, 144, 149, 150, 151 Labour Relations Commission, 149, 151 national debt, 145 National Economic and Social Council (NESC), 144, 145, 147

peripherality, 80–1, 213 recent economic success, 76–8 skill levels in labour force, 89–90 social partnership, 104, 135, 144, 146, 149, 151, 180, Special Negotiating Body (SNB), 104, 107 trade unions, 145, 148–51, 178 training systems, 171, 176, 177–89, 208, 215, 218, 219; and social partners, 179–89, 210, 215, 217, 219 wage agreements, 143–52, 169, 180, 215, 217; Partnership 2000, 147, 150; Programme for Economic and Social Progress (PESP), 147–8, 180; Programme for National Recovery (PNR), 147; Programme for Prosperity and Fairness, 181 wage patterns, 86–8 Irish Business and Employers Confederation (IBEC), 151, 180, 181, 188 Irish Congress of Trade Unions (ICTU), 108, 144, 145, 151, 181, 188 Italy, 177 Japan, 82, 89 Keynesian policies, 28 Kitt, T., 150 Labour Party (in Ireland), 145, 150 Landaburu, Eneko, 161 Leonardo da Vinci Programmes, 191 Liberal intergovernmentalism, 45–6 Lobby (interest) groups, 49, 53, 55, 62, 103, 135, 137, 152, 153, 155–7, 168, 189 Luxembourg, 176 Martonyi, János, 77 Marxist analysis, 53

264 Subject Index

McAleese, Mary, 77 McDonald’s, 132 Modernisation theory, 10, 44, 54 Multinational corporations (MNCs), 35, 80, 101, 104, 105, 106, 113 National Adult Learning Council, 181 National Competitiveness Council, 86, National Conciliation Council (NCC), 152, 155, 157–62, 195 National Economic Council (NEC), 160 National (Employment) Action Plans (NAPs), 24, 28, 141, 221 National European Integration Commission, 156 National Labour Council (NLC), 160, 161 Németh, Miklos, 152 Neofunctionalism, 43–4, 45, 50, 54, 63, 212 Netherlands, 124–31, 168, 176, 203 New governance, 3, 35, 46–50, 62, 63–4, 65, 212 North American Free Trade Agreement (NAFTA), 61 Operational Programme for Human Resources Development, 181–9 Organisation for Economic Co-operation and Development (OECD), 197, 201 Pál, László, 85 Partnership for a New Organisation of Work (EU Green Paper, 1997), 99, 103, 104, 163, 167 Phare, 92, 119, 154, 193–7, 210 funding criteria, 115 Poland, 113, 117, 177 Portugal, 177, 208

Privatisation in Hungary, 84–5, 91, 112–13, 189 in Ireland, 91 Progressive Democrats, 145, 147 Rational choice, 71 Reflectivist School, 71 Regime competition, 23, 37 Regional development, 9 Regulation theory, 58, 59 Regulatory competition, 37, 160 Research and development (R&D), 67, 202, 208 Skill levels in Irish and Hungarian labour force, 88–90, 215, 218 Slovakia, 113 Social Charter (Charter of Fundamental Social Rights of Workers), 21, 35–6, 37, 41, 135–6, 140, 172, 221 Social dialogue, 6, 135, 139, 141, 151, 153, 154, 155, 156, 161, 168, 169, 193, 194, 221 training, 171, 190, 203, 218, 219 Social dumping, 35, 37 Social partners, 28, 29, 30, 103, 119, 121, 124, 131, 134, 136, 137, 139, 142–3, 163, 214 training, 170, 173, 174, 175, 176, 203–9, 210, 218, 219 Social partnership, 135, 162, 169, 217, 222 Social relations of production, 53, 56, 59, 62, 70, 212, 213 Socialist Party (of Hungary), 158, 159, 160, 169, 201 Soft law, 28, 29, 68–74, 96 105, 122, 132–3, 153, 162, 214, 216, 217 wages, 134–5, 138–40, 151, 154, 168 training, 219 Soviet Union, 111 Spain, 125, 126–30, 157, 177, 203, 208

Subject Index 265

Standing Committee on Employment, 139 State analysis of, 57 autonomy, 54 denationalisation, of, 58 destatisation, 48 sovereignty, 57 Structural Funds, 13, 18, 29, 67, 147, 172, 182, 183 Subsidiarity, principle of, 28, 41, 98, 105, 183, 210 Sweden, 124–31, 176

Trade union movement, 109, 139, 163, 173, 174 Europe, 61 Hungary, 111–16 Ireland, 145, 148–51 Training systems, 62, 76, 136, 170–210, 218, 219 national-level, 176–7 Hungary, 189–202, 215 Ireland, 177–89, 215 Tripartite structures, 138 Ireland, 143–52 Hungary, 158–62

TEMPUS (Trans European Cooperation Scheme for Higher Education), 172 Theoretical literature on the EU, 43–63, 212–13 dependency theory, 3, 35, 53–9, 61–2, 63–4, 65, 213 institutional dependency, 62, 63, 65–6, 212, 213 institutional theorists, 44–5, 49, 212 intergovernmentalism, 43–4, 45, 50, 54, 63, 212 liberal intergovernmentalism, 45–6 liberalism (neo-), 7, 19, 21, 33, 175 Marxist analysis, 53 neofunctionaliasm, 43–4, 45, 50, 54, 63, 212 new governance, 3, 35, 46–50, 62, 63–4, 65 transgovernmentalism, 44 Third way, 20, 66, 220, 222 Transgovernmentalism, 44

Union of Industrial and Employers’ Confederation of Europe (UNICE), 156, 173 United Kingdom (UK), 108–9, 136, 176, 178 Equal Opportunities Commission, 221 European Works Councils (EWC), 131–2 United States (US), 82, 215 Visegrád states, 114, 118 Wage agreements, 62, 76, 121, 162–8, 218 Wage levels (in Ireland and Hungary), 86–8 Wage systems, 134, 138, 218 Hungary, 152–62 Ireland, 143–52 White Paper on European Social Policy – a Way Forward for the Union, 21 World Bank, 157 World System Theory, 75, 80