Social democracy under the strain of crisis An essay of international comparison Frederic Lerais; Jean-Marie Pernot ; Udo Rehfeldt ; Catherine Vincent with support from J. Faniel, M. Capron and B. Conter, N. Prokovas, B. Nacsa and L. Neumann October, 2013 The present report stems from a study commissioned by the CGT entitled: «The strain of crisis on social democracy across Europe and the world» .This project was co-funded by the European Union DG‘Employment, Social Affairs and Inclusion’. Institut de recherches Economiques et Sociales 16, boulevard du Mont-d’Est – 93192 NOISY-LE-GRAND CEDEX (cid:11) +33 (0)1 48 15 18 90 (cid:172) +33 (0)1 48 15 19 18 www.ires-fr.org 1 TABLE OF CONTENTS INTRODUCTION................................................................................................... 4 PART I: SUMMARY REPORT……………………………………………………… 5 1. Social democracy, a concept with varying contours......................................... 5 2. The 2008 crisis and its global impact ............................................................... 7 3. Trends in Europe: commonalities and discrepancies....................................... 8 Conclusion ........................................................................................................... 21 PART II: MONOGRAPHS.................................................................................... 24 GERMANY............................................................................................................ 24 1. The foundation of the German social democracy ............................................ 24 2. Renewed upsurge of social democracy during the crisis.................................. 27 Conclusion............................................................................................................ 32 BELGIUM.............................................................................................................. 37 1. A well established, but transforming social consultation................................... 37 2. A context of multiple crises ............................................................................... 39 3. 2008-2013: from a difficult agreement to no agreement at all .......................... 40 Conclusion............................................................................................................. 43 SPAIN.................................................................................................................... 47 1. The construction of a social democracy, compatible with Europe..................... 47 2. Crisis, a telltale sign of the weaknesses of the Spanish economical and social 51 model...................................................................................................................... 3. Radical reforms on collective bargaining, a threat to the long life of social 54 democracy............................................................................................................. Conclusion............................................................................................................ 56 FRANCE................................................................................................................ 65 1. Paradoxical reinforcement of cross-industry dialogue....................................... 66 2. Industry-wide collective bargaining.................................................................... 70 3. Company-level bargaining as a new flagship..................................................... 71 2 4. Ambiguities of French-style social democracy................................................... 74 GREECE................................................................................................................ 81 1. Crisis and punishment........................................................................................ 81 2. Shortfall of social justice and social democracy................................................. 91 Conclusion.............................................................................................................. 98 HONGRIE............................................................................................................... 102 1. The reduction of social democracy and the weakening or the unions through. The 103 new labour legislation...................................................................................... 2. The reduction of individual employee rights....................................................... 110 3. Decreasing wages due to the new law............................................................... 113 Conclusion.............................................................................................................. 114 ITALY..................................................................................................................... 117 1. The foundation of the Italian social democracy ................................................. 117 2. Italian economy in the crisis............................................................................... 119 3. The « separate » 2009 tripartite agreement ON THE reform on contractual 120 system…………………………………………………………………………………… 4. The September 2010 «Growth Pact»: back to trade-unions unity ..................... 121 5. The June 28th 2011 Joint cross-confederation agreement on union 122 representativeness................................................................................................. 6. The August, 13th 2011 decree on « proximity» bargaining: last action from the 122 Berlusconi government......................................................................................... 7. The Monti government repeals Art. 18 from the Workers Statute on unfair 123 dismissals: CGIL alone once again ....................................................................... 8. The November 2012 « pact for productivity » and the April 2013 cross 124 Confederation Application agreement: back to trade-unions unity ........................ 9. The May 2013 cross-confederation agreement on sectoral bargaining ............ 124 Conclusion.............................................................................................................. 125 Abstract…………………………………………………………………………………... 129 3 INTRODUCTION1 Everywhere in the world, the workers’ economical insecurity is growing, along with unemployment and inequalities. According to an ILO estimate, there has been 27 million additional unemployed people since 2008, and the number of persons with a « vulnerable job » now exceeds one billion and a half (IILS, 2012). Insecurity and informal work keep spreading and wherever they exist, that is, in a minority part of the world, the social protection systems are under attacks, unprecedented since the aftermath of WWII, when most of them were produced. 2008 does seem to be a turning point. The crisis of the financial system has set in motion spiralling imbalances and stresses nearly reaching the whole world. However, the crisis is not just financial; it is the expression of a crisis of the type of capitalism set up in the 1980s and so-called neo-liberalism, which has spread in its diverse forms to a large number of countries in the world after the collapse of the soviet system and the Chinese turnaround to market economy. The CGT commissioned the IRES to engage into a study of the concept of social democracy, and more precisely to measure whether or not the existence of participatory mechanisms, more or less associating workers to the conduct of public or corporate policies, has been a differentiating factor in the modalities of crisis management since 2008. This is no small undertaking and we won’t endeavour to cover the whole planet. This is a two-part report: part 1 is a summary report; part 2 contains monographs from seven E.U. countries: Germany, Belgium, Spain, France, Greece, Hungary, and Italy. Due to its broad topic (social democracy) and delivery time constraints, the main scope of the present study is limited to Europe.                                                              1A preliminary part of the study was introduced in the transnational Toulouse Conference on March 17th 2013.  4 Part I: Summary Report This part is a brief overview of four items: (1) to define the meanings of what social democracy; (2) roughly reposition the context of economical and social policies in the world since 2008; (3) to characterise the converging and diverging elements in Europe (4) to draft at last, some clues about the relationships between social democracy and crisis management, even though, to be clear at the outset, the crisis is far from being over and this research can only be tentative. 1. Social democracy, a concept with varying contours For several years, the concept of “démocratie sociale” has been reappearing in the French discourse, quite generally without great accuracy. In a comparative approach, the translation into other languages of this concept is awkward. In English or German, it is translated as « social democracy » or « Sozialdemokratie », which differs from its meaning in France. Other, quite approaching terms can be heard abroad, such as « industrial democracy » introduced in Britain by the end of the 19th century by Beatrice and Sydney Webb, or the concept of « economical democracy » which was the particular focus of German ADG’s working in the 1920s. The point here isn’t a scientific dissection of the contents of this term; it is rather to establish a common convention, i.e. a better knowledge on meanings when comparing social systems in very different regions of the world. The proposition thus is make « social democracy » an umbrella term for a set of characteristics, not necessarily cumulative, under 5 dimensions: ‐ A sine qua none, prerequisite is the existence of a democratic political system securing at minimum the freedom of association and the freedom of expression, with the subsequent freedom and independence of trade-unions. Without those basic freedoms, social democracy is void of all meaning. ‐ Next, social democracy lies on existing mechanisms ensuring consultation, regular or occasional, between the State, employers’ organisations and representative unions of workers. Such a democratic State must agree to a sphere of relationships where the autonomy of the other stake holders in society is acknowledged and respected. ‐ This sphere of autonomy is manifest through the existence of a set of procedures for collective bargaining, whether national, provincial, sector-level or even company-level, under some proper frameworks. ‐ These conditions are contained in a set of rights or rules for public social order (or voluntary recognition), ensuring the protection of workers, consequently counterweighing the fundamental inequalities within the production relationships between capital and the workforce. These rights comprise the basic rights defined by the International Labour Organisation (ILO) and beyond, they belong to the wider scope of the necessary conditions to frame company-level bargaining, a specific area with marked inequalities between parties. ‐ An advanced social democracy also provides the rightful of possibility for workers to participate, via their representatives, in decisions about their workplace, the life of the company, or even directly on about itself, the minimum right being to be informed and consulted. 5 With so many definition criteria, social democracy appears like an ideal more than an acquired model. Few countries hardly ever reached this stage, or, if some almost did, they are hardly able to maintain it. Therefore we shall speak not of a state of social democracy but of a process, ever to reconstruct, approaching or receding from the ideal model as predefined. This definition is only an indication, we first must agree on its contents and not its formal provisions: existing consultation, « pacts » agreed upon between social players, are not necessarily the signs of building the social compromise. For example, can any consultation resulting in the disregard of trade-unions’ point of view or the infringement of the terms in an agreement between employers and workers’ unions, be labelled social democracy or is a mere sham? These aren’t uncommon occurrences: a joint report from the ILO and the World Bank (ILO, World Bank, 2012) takes stock of the social consultation during the crisis in 39 countries where many formal consultations of this type exist, from Poland, Serbia, Latvia, Montenegro, to the Russian federation, Indonesia or, closer to us, Spain. In these countries, consultation took place, sometimes common positions were proposed to government; yet governments’ unilateralism prevailed. There are some complex cases, countries without any form of nation-wide exchange between the three traditional actors, « State-employers-workers », but with intense exchanges at industry or provincial levels. In every case the contents of these exchanges in terms of social democracy must be evaluated within their wider national or regional contexts. Other question, can an agreement obtained without the main union federation(s) be considered « a social pact »? Not a purely French issue, it is also a valid question in many other countries of Europe (Italy, Portugal), but also beyond, in Central and Western Europe. It is sometimes difficult to assess whether the changes in social relationships are one more step towards social democracy or just momentary arrangements in a specific situation of crisis. The world can thus be covered, reviewing the countries which are or aren’t engaged in processes of social democracy extension, or simply into adaptation modalities to suit a transient context. In both configurations, the question remains, whether pre-existing substantial social democracy components did help recover from the crisis. Another consequential question: has the crisis itself temporarily altered pre-existing mechanisms of social democracy, or on the contrary, are professional relations systems durably taking other directions? By lack of hindsight, more questions are raised than answers brought. From the outset, other factors are obviously impactful: the role of the State, the country’s economical situation, its type of insertion on the world market, the relative power of trade-unions before the crisis, etc. The countries’ rank in the European economic exchanges and their relative position in the ladder of European decision-makers are also determining. The European Union is not just the free association between States as described in the successive treaties, but an area structured by dominance relations, where some produce norms and others are expected to comply with them. Then, what is the crisis we are talking about? The European and American crisis did reach the rest of the world; yet its dissemination was uneven, leaving more or less deep prints, for example in emerging economies. Beyond its direct impacts, the crisis, born in advanced countries was also a blatant pretence to conduct reforms 6 having the labour market as a specific target, in line with die-hard demands from employers’ organisations here and there in the world, and echoed by international institutions. Before establishing a diagnostic on the role of social relations in this period, it is necessary to detail the effects and patterns of the crisis of American sub primes on the 2008 crisis, and above all to lay out distinct time sequences of the crisis, as indeed there were different chains of events, neatly perceptible in European countries. 2. The 2008 crisis and its global repercussions The risk for a global financial crash was perceived after Lehmann Brothers’ bankrupt in September 2008. It first inspired a momentum of fear for it revealed the perversity of a system where opacity and operators’ greed equally prevailed. The hubris of finance threatened to wipe out the system; in countries with existing traditions of social democracy, dialogue and emergency measures were activated to meet the demand and preserve jobs from the looming collapse. In Europe for instance, safety nets at first were reinforced, to make up for the governmental restrictions, at that time still moderate and rather concerted. Yet a second turn point came in 2010: if the 2008 near implosion showed the need for an in-depth transformation of a system that had failed, the opposite happened: to salvage the financial system and prevent a systemic crisis, the public budgets were massively plundered, the bankrupt of a private system turned into a public debt. Then, having paid the bill as tax payers, the workers had to go through reforms – especially on employment conditions and pension access. The success of these reforms to address the crisis has never been clear. From this 2010 turn point in Europe have sprung austerity policies, sometimes radical, which left whole populations in disarray and mostly worsened the problems they claimed to solve. Europe is not the world, but the undoing of social achievements in so-called advanced countries cannot be good news for those which haven’t gained equivalent standards of welfare and social protection yet. Over the last three years, the governments opted for massive reforms of the labour markets in the world. The premise of these policies, “removing the barriers against redundancy will foster job creation”, is the singsong of most international institutions, voiced over and over since the end of the seventies. In its 2012 report on the situation of labour in the world which reviews a pool of a hundred national and international studies, the ILO shows that the loosening of labour market constraints has no empiric evidence demonstrating any benefit in terms of job creation (ILO, 2012). Quite the contrary, in times of stagnating or recessing activity, simplified lay off procedures generate unemployment without creating anymore jobs. Yet, between 2008 and 2012, one third of the 130 studied countries have altered their employment protection legislation. Two third of these reforms aimed at deregulating labour markets. This trend was particularly obvious among industrialised countries since three quarters of those reforming have adopted such measures, including, and widely so, Europe where 19 of the 27 member States implemented them (Cazes, Khatiwada, Malo, ILO, 2012). This is probably why two thirds of the Union countries (often the abovementioned 19), have seen their unemployment rate neatly increased since 2010, especially in countries where budgets were abruptly adjusted and labour laws dramatically deregulated. 7 Many Latin American and Asian countries escaped the financial crisis or suffered minor impacts. However they do experience a slowing economy, the source of insecurity, informal work and under-employment. From 2010 to 2012, the world has known a growth recess, dropping on average from 5,6% to 3,5% according to the International Monetary Fund (IMF), and neither Asia, nor Latin America were spared, where the shortage of new jobs is especially acute, specifically qualified jobs needed to ensure the economic mutations going along with development. Zooming out to see the rest of the world, the tendency to use these labour market reforms is no different: according to the same ILO study covering 130 countries, 24 of them decreased the protection of permanent-contracts work, 15 removed the constraints for employers in case of redundancies on economic grounds, and this trend is stronger in advanced countries; in 26 of the 40 countries where data is available, the proportion of workers covered by collective agreement declined from 2000 to 2009 (IILS, 2012). Such is the case in European countries without industry- level collective bargaining, or where collective bargaining is hardly developed. For example in Germany, the rate of coverage by collective bargaining has dropped by more than 10 points between 2000 and 2009. The 2008 crisis particularly reached Africa, where its consequences stacked up on top of usual challenges: endemic poverty, lack of infrastructure and investment. Some leading countries have been shaken by violent political crises, i.e. the Ivory Coast, Nigeria and Mali. The industrialised countries’ crisis reached those regions because of a loss of export outlets, lowered international prices, loan contractions, in some cases the drop of income from tourist activities, with the additional strain (though this is not always something to be sorry for) of falling hated regimes, such as in Tunisia, Egypt or Libya. A 2012 ILO study, on ten African countries, shows a slowed-down economy, dropping public revenues, decreased formal employment, (in particular that of women), and deteriorating youth employment (Saget, Yao, 2011). Asia has other kinetics in terms of development. After the air pocket of dropping exportations to Europe and the United States, all the forecasts show recovery with significant growth rates, though still below the rates of the years 2000. In China and India, the development model based on export is said to be declining, giving way to a more self-centred development drawn by domestic demand. China, beheld by the whole world, undergoes quite deep transformations of its growth regime, partly due to the weakening export-based model but also and maybe above all, due to the domestic stress which was created by the new development model. Many social conflicts have burst in 2010, especially in the Guangdong province, the most densely populated southern part of China where the minimum wages now amount to 75 % of minimum wages in Romania. The ripples of the financial system 2008 crisis reached the rest of the world causing in many places spiralling imbalances and stresses. The transfer of private banking debts onto public debts has forced many countries into restriction policies which caused brutal upsurges of unemployment. The turn point in Europe is particularly challenging: the imposed, fast return to deficit reduction has generated austerity policies, sometimes dramatic, qualified by R. Torres, the Head of the ILO International Studies Institution, « austerity traps » where Europeans wilfully hurled down. 8 3. Europe: common trends and differences In Europe, the political turn point shook to bits the social democracy mechanisms which where the E.U.’s signature. In some countries where the economy was less affected, the prior social negotiation terms were somewhat maintained or contained, compromises were found again even if trade-unions had to concede significant social regress. Quite different is the true destruction at work in some countries of Southern Europe, or in Ireland. Many studies by the IRES – in particular in the annual special issues of the Chronique internationale (IRES 2009, 2010, 2011, 2012) – show that the so-called structural reforms, with the purpose of budgetary consolidation and short term competitiveness restoration, would degrade the condition of workers, unemployed people and pensioners, and would be adverse to a long-term social and economic recovery. Wage moderation, flexibilised labour markets, and transformed pension and healthcare rules, deeply change some social models, without helping to exit the crisis, as would do a strong, job-generating growth. The present aim is to analyse over a short period (from 2008 to nowadays), the evolutions of social dialogue in various countries in European Union. The central question in this chapter is to know whether countries which maintained a high level of « dialogue » or consultation, have had better success than the others in terms of crisis transition. This part covers six Euro Zone countries: Germany, Belgium, Spain, France, Greece, Italy, and one country of central Europe, Hungary. It is supported by various international studies including some published work from IRES’ Chronique Internationale and its special issues since 2009, as well as specific monographs in the second part of this report. In Western Europe, a certain number of these social democracy conditions, (mentioned in the introduction: political democracy, collective bargaining system, etc.) either have existed for a long time, or were set up more recently. The chosen criterion is the evolution, during this period, of « social dialogue». Social dialogue is understood as all forms of exchange, from collective bargaining to consultation, whether bipartite or tripartite, company-level, industry-level or cross-industry level. In our study we focused on the national level, but we are also careful about the way all three levels, i.e. cross-industry, industry and company levels communicate. In most of the 7 countries considered, industry-level has historically been acting as a pivotal strand for the whole system, even if cross-industry negotiation may play a major role (excepted in Germany). The recent events of the crisis have shaken long-lived and sometimes solidly anchored systems having structured the backbone of social actors’ relations. These shocks caused reactions and adaptations, depending on both the intensity of the economic shock and the density of the pre existing professional relations system. (Guyet, Tarren, Triomphe, 2012). The latter itself springs from a piece of history with many features: the role of the State, the landscape of employers and workers’ representative organisations, the system of values which secures the legitimacy of social actors, in short every component in the fabric of long term social relationships within the social and political systems in Western Europe. Thus, the countries from Central and Eastern Europe (CEECs) have different experiences requiring, where Hungary is concerned, some insight provided later in the study. 9 3.1. Common trends: decrease of union rates, decentralisation of collective bargaining Since the 80s, the systems of professional relations have been affected by two major changes which took place at different levels but converged (with some exceptions), in the different European countries: on one hand, a downwards trend in the number of members of workers’ unions, on the other hand a decentralising shift in collective negotiations, generally at company-level. (Keune, Galgóczi, 2008). This decentralisation was generally conceded by trade-unions in an environment of degraded balance of powers; the shift wasn’t uniform across the various countries of course, and its timing somewhat differed from a country to another. In France, at one end of the skewer, decentralisation towards company level occurred early; In Sweden at the other end, it is very recent. In the early 2000, there was still a cut-off line between countries with an organised decentralisation and those where it grew uncoordinated. (Rehfeldt, 2009). The so- called coordination existed when industry-level federations kept some control on the flexibility clauses (derogations) gradually instilled in the agreements at this level. Relevant in 2000, this distinction by degrees of coordination later lost its clarity and pertinence, as the diversification of the types of decentralised agreements made it ever more difficult to have a true union coordination. In any case, coordinated or not, (the trend being increasingly uncoordinated negotiation) collective bargaining underwent in the 2000s quite a major substantial formal change, in three ways. The first change is visible in the rate of bargaining coverage, which dropped in countries where extension procedures do not exist (United Kingdom, Denmark) or are hardly used (Germany); it collapsed as early as 2009 in Portugal with the umpteenth reform of the labour market which made the non-renewed collective agreements null and void. In Germany, the rate of bargaining coverage went from 76 % in 1998 to 65% in 2009, in all sectors, but dropped to 54 % in 2011 in the private sector in West Germany. This shift is caused by the great number of employers who didn’t affiliate themselves, or opted out, from employers’ organisations; this mechanically weakened the normative pervasiveness of industry-level bargaining. In Italy, there is no legal extension, but case law plays an equivalent role in maintaining a high level of bargaining coverage. The second shift also differs in intensity from a country to another; some opening clauses have been added to cross-industry or industry-level agreements, granting businesses possible local adaptations, or even possible waivers to some mechanisms of cross-industry agreement. Recently, some countries like Greece or Spain have gone much further but until 2010 and still today in many countries, the trend is more moderate even if it is a work in progress. In Italy, great confusion reigns in this matter. A tripartite national agreement, signed by the CGIL in 2009, made it possible, in case of economic hardship or to create jobs, to waive, by a company- level agreement, to industry-level collective bargaining. An Act voted by the Berlusconi government in 2011 has extended this derogatory possibility to the law itself in some cases. In the end, an agreement signed in 2011 by all the confederations with the industry-level employers’ union Confindustria aimed at trying to re-frame the waiver possibilities. 10