The breakdown of the social pact
and its consequences for labour

Asbjørn Wahl

In order to develop political agendas, aims and strategies for the labour movement, it is decisive to analyse and learn from its history. We cannot understand the current situation if we do not understand power, power relations and the political economy of the welfare state. In the European context in particular, this includes an analysis and understanding of the social pact, of the historic compromise between labour and capital – including the effects of this compromise on the policies and ideology of the labour movement. In this contribution I will try to establish some linkages which I think are important for the understanding of the current state of play in the trade union and labour movement.

The political economy of the welfare state
Ever since capitalism became the dominant mode of production in our societies, it has developed from boom to bust, from bust to boom. The relatively unregulated laissez-faire capitalism of the 19^th and first half of the 20^th century represented strong exploitation of workers in general, and caused extraordinary misery during its bust periods. The response of the working class became to organise and fight – at the workplaces as well as at the political level. Through this fight the labour movement was able to achieve better wages, better working conditions as well as high quality social welfare provisions. The welfare state was developed. A great part of the movement initially turned politically to socialism as the necessary means to end capitalist exploitation.

It was the enormous shift in the balance of power in society, in favour of labour, which made this development possible. It is important to notice that this increased strength of labour was not only reflected in labour laws and regulations. Even more important was the general taming of market forces. The power of capital was reduced in favour of politically elected bodies. Competition was dampened through political interventions in the market. Capital control was introduced and financial capital became strictly regulated. Through a strong expansion of the public sector and the welfare state, a great part of the economy was taken out of the market altogether and made subject to political decisions. Thus, the strategy of the reformist labour movement became not to democratise the ownership of the means of production, but to delimit the political power of capital. This general taming of market forces was a precondition for the development of the welfare state, and the resulting comprehensive regulatory framework was more important than labour legislation in providing better working conditions.

Capital control, in particular, made it possible for governments to pursue a policy of national and social development without continuously being confronted with capital’s exit strategies where big corporations threatened to flag out, to move to other countries with more favourable conditions, if their interests were hurt.

The social pact and its ideological legacy
During the last century, the social struggle between labour and capital in many countries turned into static warfare in which none of the parties were very successful in advancing their positions. The labour movement was not able to capture new power positions and capital forces were not able to defeat the workers’ organisations. As a result of this, the trade union movement gradually developed a sort of peaceful cohabitation with capitalist interests. In the 1930s this cohabitation started to become institutionalised in some parts of Europe when the trade union movement stroke accords with employers’ organisations, particularly in the North, and after W.W.II also in most of Western Europe. From a period characterised by hard confrontations between labour and capital, societies entered a phase of social peace, bi- and tripartite negotiations and consensus policies. This social pact between labour and capital formed the basis on which the welfare state was developed and working conditions were gradually improved.

It is important to realise that this social partnership between labour and capital was the result of the actual strength of the labour movement – a strength which was developed through the many struggles and confrontations between labour and capital in the previous period, including the Russian revolution and thus the existence of another economic system in the East. As the British historian Eric Hobsbawm has pointed out, this created fear among capitalists in Western Europe and made them give in to many social and economic demands from the labour movement in order to dampen its radicalism.

Due to important achievements in terms of welfare, wages and working conditions, the policy of the social pact gained massive support from the working class, and the more radical and anti-capitalist parts of the labour movement were gradually marginalised. Combined with the dominant conception that free-market capitalism was defeated, this development led to the depolitisation and deradicalisation of the labour movement and the bureaucratisation of the trade union movement. It became the historic role of the social democratic parties to administer this policy of class compromise.

Based on real experience of continuous improvements in living and working conditions the common understanding which developed in the labour movement was that a way had been found to a society which brought social progress and a relatively fair distribution of wealth to ordinary people – without having to make all the sacrifices connected with class struggle and social confrontations. The dominant apprehension was that society had reached a higher level of civilisation. Through gradual reforms the labour movement had increased democratic control of the economy. The crisis-free capitalism had become a reality. No more economic crises like that of the 1930s, no more mass unemployment, no more social distress, no more concentration of wealth among the rich and privileged, no more misery among people. All social trends pointed upwards. For a great many in the labour movement this was the reformist road to socialism – and it was for everybody to see that it worked! These social achievements formed the material basis for a social partnership ideology which became, and still is, deeply rooted in the national and European trade union movement.

We should also bear in mind that the welfare state was not, from the very beginning, the final aim of the labour movement, not even the term welfare state was invented at that time. Socialism was the aim, while the welfare state was the result of a compromise – the historic compromise between labour and capital. This is also reflected in the different characteristics of the welfare state. On one hand, part of it represents the seeds of our vision of another society. On the other hand other parts work as the repair workshop of a brutal and inhuman economic system. To put it bluntly, the welfare state was what the working class achieved in exchange for giving up socialism.

The neo-liberal offensive and the breakdown of the social pact
The politics of the social pact culminated in the 1970s. Then, in the aftermath of a deep international economic crisis, market forces went on the offensive and the current era of neo-liberalism started. Two parallel historical processes came together and made this offensive possible. One was the economic crisis, which made capitalists and governments take action to restore profitability, the other was the depolitisation and deradicalisation of the labour movement. This opened an opportunity for capital owners to gradually withdraw from the social pact and start to attack labour laws, agreements and power positions which were won during the welfare economy, and which at that time were accepted by the employers as part of the compromise.

What we have been facing over the last twenty years, is therefore the abolition of capital control, the deregulation and liberalisation of markets, the redistribution of wealth, the privatisation of public services, the increased use of competitive tendering and outsourcing, the downsizing of the workforce to the absolute minimum and the consequent increasing labour intensity, and the flexibilisation of work. Most of the complex system of regulatory means which were used to tame the market forces, and thus to create the preconditions for the development of the welfare state, have simply been removed. This policy of deregulation has led to the development of a completely crazy, speculative economy, in which more than 90 per cent of international, economic transactions are speculative, mainly currency speculation, and to an unprecedented redistribution of wealth – from public to private, from labour to capital and from the poor to the rich. The redistribution model of the welfare has, in other words, been turned upside down. Working conditions and social welfare have as a result come under enormous pressure.

In this way, most of the economic and material basis on which the welfare state was developed, is simply gone. The power basis of the class compromise has eroded, and capitalist forces have withdrawn from the social pact. In other words, bi- and tripartite negotiations do not any longer work the same way as they did during the social pact period. The trade union movement was taken by surprise by this development. The shift from consensus to confrontation on the side of capital was incomprehensible within the consensus-oriented policy of the labour movement. The breakdown of the historic compromise therefore also led to a political and ideological crisis in the social democratic parties and the entire labour movement. With a depoliticised and passive membership, and an increasingly self-recruiting leadership which was moving into the elite of society, social democratic parties rapidly adapted to the dominant neo-liberal agenda. What once again took place was a formidable shift in the balance of power between labour and capital – but this time to the benefit of capital.

The brutalisation of work and the erosion of the welfare state
This new balance of power has led to a serious brutalisation of work. An increasing number of workers is being excluded from the labour market declared disable to work. We experience an all-time high in sick leave, as well as an increase in occupational injuries and accidents. A growing number of workers experience increasing stress and so-called chronic fatigue syndrome at the work place. In many industries and sectors workers experience degradation of work, with less influence over the work process. In short, there are many signals that something dramatic is about to happen to our labour market and to our whole relationship to work.

Many people have therefore experienced in the past years that the work pressure has become tougher, that labour laws and agreements are often undermined and put aside in the daily work and that insecurity and uncertainty have increased. A rapidly growing number of workers are being excluded from the labour market altogether. In Norway, almost 15 per cent of the total population between the ages of 16 and 67 – the latter being the ordinary age of retirement – are now on early retirement, disablement benefit or some kind of rehabilitation. The figure has doubled over the last 20 years. At the same time, trade union and labour rights are being weakened and undermined. There is no doubt, then, that a serious brutalisation of work is going on.

This development takes place in a society in which we, at least in the industrialised world, for a long period experienced a gradual improvement of working conditions – a development which included shorter and better regulated working hours, longer annual leave, better job security, the introduction and improvement of sick pay, a reduction in work intensity, less stress, the removal of many health hazardous workplaces, and the development of gradually better working environment legislation. This developed in parallel with a high level of employment, improved trade union rights, increasing co-determination in the workplace and in the companies, etc. Those were the golden years of the welfare economy.

I do not with this say that we did have an ideal working environment. Far from that, there were many problems and challenges ahead. What I do say, is that we had a positive development. Working conditions and working environments were gradually being improved. That is no longer the general trend. The shift in development is so formidable that workers’ human dignity is being heavily attacked.

The increased exclusion from the labour market does not take place because there is a general deterioration of workers’ health. The problem is related to increasing demands at work. Workers are being excluded at an earlier stage than before. Due to increased competition, more rapid restructuring of companies and public undertakings and changing working relations, less control over the work process, the demand on workers is becoming more and more intolerable. At the same time research and experience prove that measures taken by politicians and public authorities to stop and reduce this exclusion from the labour market have failed all over Europe.

From my point of view, this is not a big surprise. If you do not analyse – or if you even deny the existence of – the power structures and the driving forces which lay behind the ongoing brutalisation of work, you will never succeed in fighting it. There are causes and there are effects, and if you want to influence the effects, you will have to attack the causes. That is not being done by our politicians and public authorities today. They are scratching on the surface and attacking the symptoms rather than the causes – and their results are vain. On the contrary, through their welfare-to-work policies and their attacks on sick pay and social benefits they are spreading a climate of suspicion, disgrace and humiliation. They are individualising and privatising the problems. Workers are made believe that it is their own problems that they are being excluded from the labour market. “It is me who is not good enough and cannot master the new demands in the labour market”. Jean-Marie Le Pen, Jörg Haider, Pia Kjærsgaard and their likes should thank these politicians in their evening prayers every day of the year – because this is really fuelling right wing populism by undermining the human dignity of workers and alienating them from work and society.

Mainstream media ideology on individualisation underpins this development. Increasing individualism and egoism are being used to explain why collective values are loosing ground in our (post)modern society. At least in the trade unions, in the labour market, my experience is opposite. Workers want collective solutions to their problems. It is when collective solutions break down that workers turn to the only existing alternative, to solve their problems individually. In other words, collective values do not break down because people are becoming more individualistic. It is the other way round, individualism grows because collective solutions are breaking down. If you have to turn to individual solutions, then trade unions, politicians and public regulations easily becomes problems rather than instruments, among other things because they restrict your ability to work as much overtime as you want in order to earn more money so that you can cope with ever increasing cost of living.

The ideology of the social pact is able neither to explain nor to develop counter-strategies against this development. Under the welfare economy there were direct inter-links between economic growth and better living and working conditions. These links are no longer there – the economy grows, but it leads to setbacks rather than to progress. The entire concept of the welfare state, the consensus policy, is breaking down – without being replaced by another with better ability to analyse and explain current political and economic developments. This is extraordinary important. If the entire concept of how society works has broken down, what are you then left with? At least an openness to other ways of interpreting social development. If the only alternative at hand is right wing populism, because the trade union movement as well as the previous broad political left have become a part of the “establishment”, then obviously many workers will turn to right wing populism.

The right wing populist “solution”
The new, neo-liberal power relations have led to a comprehensive setback for the trade union and the labour movement. In spite of economic growth, working conditions are being brutalised, trade union rights and social welfare are being undermined, the really existing welfare economy is breaking down. Now, more than 50 years after the development of the social pact and the welfare economy, we have to admit that the capitalists succeeded in their strategy. By giving in to many of the demands of a well-organised working class, they succeeded in deradicalising and depoliticising the labour movement, but without giving up the basics of their economic power. It is possibly a hard judgement for many, but I think that we have to admit that the ideology of the social pact has proved wrong. Nothing less than that!

In the trade union and the labour movement we have to ask ourselves - why did this policy fail? What went wrong? Part of the answer is that the social pact itself was not a stable situation, it was a compromise in a specific historic situation. Something which could have been a successful, short term, tactical compromise, gradually became the final aim of the labour movement. Since the social democratic parties became the bearers of the policy of the historic compromise between labour and capital, the breakdown of the social pact explains why these parties have been and still are in a state of deep ideological crisis.

In this situation, a great part of the workers feels betrayed by their political representatives – they “do not any longer recognise their (social democratic) party." On the contrary, many workers increasingly identify the labour parties as well as the trade union movement as parts of the “establishment” – which has distanced themselves from the reality and the daily lives of ordinary people. It has become the role of the right wing populist parties to exploit this discontent, people's political confusion and increasing feeling of powerlessness. These parties offer simple solutions, criticism of the traditional politicians and even a political perverted form of system-criticism with a strong appeal to alienated and excluded people who feel more and more powerless in a society with ever more self-confident and self-sufficient economic and political elites that are increasingly growing together. The right wing populist parties do not, however, mobilise people against the social forces behind the brutalisation of work and the attacks on the welfare state, they channelise workers’ discontent against other social groups – such as “those who take our jobs” (immigrants), “those who are a burden on society” (lonely parents, people on welfare) and “those who impose ever higher taxes” or “pursuit their own privileges” (politicians).

This is not a necessary development, of course, it is the result of a historic specific development which is possible both to analyse and to understand. When workers are being attacked, oppressed and humiliated, their anger is being directed against the existing society, and they are starting to look for alternatives, for more radical solutions. Again, if the only “credible” alternative on the market is right wing populism, then many depoliticised workers tend to follow that path. If there are “credible” left wing alternatives, we can experience a political polarisation, as has been the case in Norway over the last couple of years. Here we have seen a considerable growth of the Socialist Left Party as well as the Progressive Party (the right wing populist party), while the Social Democratic Party has lost a great part of its support among workers.

Whether we like it or not, reality is that we are moving from consensus to confrontation. We had rather be prepared. The social forces which want to defend decent working conditions and public welfare will therefore have to meet the confronting attacks from the state and capitalist forces with a counter offensive. Great parts of the trade union movement have not yet realised this. Demands for a new class compromise, obviously with a nostalgic hope that the social peace and the gradual improvement of social conditions of the 1960s should be restored, do not have any realistic basis under the current balance of power. The only way to meet this political challenge in the labour movement is therefore through a more radical and system-critical policy, which is able to analyse and explain the breakdown of the social pact and the fundamental social contradictions in our societies – as well as to develop a strategy in which people’s discontent and anger are taken seriously, politicised and turned into a collective struggle for democracy, solidarity and social welfare. In this struggle, the trade union movement should also build alliances with the new global movement for solidarity and justice, the social forum movement, which has developed so rapidly over the last few years. Such alliances could contribute to the revitalisation and radicalisation of the trade union movement, which is necessary if we really want to contain the attraction of right wing populism in the working class.

(Paper presented at the International SIREN Conference, Changes in Working Life and the Appeal of Right-wing Populism in Europe, Vienna 17-18 June 2004.)