Thatcherism Delayed? The Irish Crisis and the Paradox of Social Partnership

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There has been much comment recently here and elsewhere about the strategy taken by the Irish Congress of Trade Unions as a response to the crisis, the establishment, defending of, and piñata like status of the Croke Park Agreement, and the thinking behind the Lift the Burden ‘protest’ on the 9th of February which is supposed to send, we are told by David Begg a “very clear signal to Europe”. The clear message seems to be that Congress want to get Irish workers to support the government’s stated aim of negotiating a deal on Ireland’s bank debt along the lines expressed by the Eurogroup following the June 2012 Summit, namely that it “will examine the situation of the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme”. In light of this I thought it would be worth providing some context on recent Irish industrial relations by Terrence McDonough and Tony Dundon, of the School of Business and Economics at NUI, Galway. The follow is an excerpt from the final part of a much longer paper called Thatcherism delayed? The Irish crisis and the paradox of social partnership which was originally published in Industrial Relations Journal (41:6, 544–562) in 2010.

The whole article reviews the state of Irish industrial relations in light of the current economic crisis. It argues that social partnership was rooted in the continuation of a tradition of permissive voluntarism with minimal employment rights with both direct and indirect implications for the current Irish economic crisis. As such, Irish industrial relations cannot be understood in isolation from a broader analysis of the rise and fall of social structures of capitalist accumulation.

I would like to thank Terrence McDonough and Tony Dundon for permission to republish this section of the paper on Irish Left Review.

The international financial crisis impacted Ireland significantly. At the same time, the Irish crash has a number of distinctive characteristics. The Irish property boom had distorted the economy and a disproportionate amount of both economic activity and employment depended on construction. For this reason, the collapse of the property bubble delivered a sudden body blow to the economy. The property bubble also encouraged the continuation of the tax cutting strategy pursued within the context of social partnership agreements.

Two factors are then responsible for the distinctive character of the Irish dynamic.

First, the Irish version of financialisation channelled a substantial amount of international credit into the property market.

This is a variation of the global pattern. The second factor involved was an Irish departure from the institutions of global neoliberalism in the form of a social partnership model which took responsibility for negotiated wage restraint, welfare provision and taxation. For this reason, Irish industrial relations and in particular social partnership is reviewed next.

Irish industrial relations and social partnership

To be sure, Irish social partnership shielded workers from the worst excesses of global neo-liberalism. It may even be said that social partnership democratised Irish society insofar as unionised workers had a voice at the tripartite bargaining table.

However, with declining union density and continued economic inequality, despite the Celtic Tiger boom, social partnership did not correct for tensions in the labour market between State regulation and protections for vulnerable groups not typically inside the union movement, such as older workers and women (D’Art and Turner, 2005). In trading wage moderation for personal tax reductions, the social partnership negotiations contributed to the emergence of Ireland’s low tax regime and the scramble for foreign direct investment with an attendant union avoidance approach to industrial relations (Gunnigle et al., 2005; Collings et al, 2008). Inequality, wage restraint and light-touch regulation contributed to the emergence of increasing indebtedness, as those on the lower rungs of the income ladder attempted to emulate rapidly rising consumption standards of those above them.

The essential features of Irish social partnership have been more fully explained elsewhere (see for example Von Prondzynski, 1998; Wallace et al, 2004; Roche and Geary, 2006; Roche, 2007; Teague and Donaghey, 2009). It is social partnership which sets Ireland apart from the overall neo-liberal trajectory of global capitalist accumulation, but social partnership came with the apparent absence of corporatist preconditions evident elsewhere in Europe (Teague and Donaghey, 2009a). Important elements of Irish social partnership include: voluntarist relations; adversarialism; centralisation; institutionalisation; and collectivism (Von Prondzynski, 1998; Collings et al, 2008). A number of these dimensions run counter to free market orthodoxy. Several of these features have a lineage to the period of British rule prior to the formation of the Irish Free State in 1922, while other aspects have evolved in a uniquely Irish fashion (Hardiman, 1988).

Ireland’s system of industrial relations is, first, premised on voluntarism, in that the main protagonists regulate employment conditions through voluntary rather than legislative arrangements (Dobbins, 2010). A second feature of Irish industrial relations is that relations between unions and employers tend to be viewed as adversarial (or antagonistic), with an acknowledgement that underlying conflicts of interest are best mediated through State-sponsored supports, such as the Labour Court (Roche, 2001). To this end collective bargaining has a long history of government support as a means of reconciling conflict. Arguably, voluntary bargaining is well suited to coexist with other elements of neo-liberalism.

Thirdly, voluntary social partnership in Ireland is very much a centralised and institutionalised arrangement at the national level, with a series of uninterrupted national agreements over 20 years covering wages, taxation and welfare provision (Roche, 2007). Finally, the collectivist dimension to social partnership and industrial relations reflects Irish society’s acceptance of trade unions in corporatist-style decision-making and historically high levels of union membership (Collings et al, 2008).

The interplay between the cooperative character of Irish social partnership and global structures of accumulation are rarely considered. The stagflationary crisis created the antecedent conditions of social partnership. Donaghey and Teague (2007:20) point out that during the 1970s and 1980s Ireland was on the verge of an ‘economic abyss’, with unemployment averaging 16.8% and national debt as much as 117% of GDP. The first national partnership agreement in 1987, the Programme for National Recovery (PNR), prioritised economic stability, tax reform and national level coordination. Seven uninterrupted partnership agreements ensued between 1987 and 2006, culminating in the latest ten-year agreement, Towards 20161. The latter was subject to review and adjustment in 2008 due to the economic crisis. Partnership collapsed when the government and unions failed to agree a series of austerity measures and public sector wage cuts (see below).

Conventional wisdom suggests that rather than following the aggressive neoliberal agenda of Thatcherism in the UK, Ireland in the late 1980s adapted voluntary partnership as an alternative and more inclusive social governance arrangement.

The PNR agreement in 1987, and subsequent partnership agreements thereafter, facilitated a consensus around national identity rather than sectional self-interest.

This incorporated a discourse of ‘cooperation, working together, and mutual gains’ which became a political lexicon that was more attractive to the labour leadership than the union exclusion or de-recognition under Thatcherism in Britain (MacSharry and White, 2000). Geary (2007: 98) concluded that “social partnership has set Ireland apart from Britain” and the inclusion of trade unions “in macro-economic management and social policy-making in Ireland is singular.”

However, the result is more complex and the considerable unevenness in these structures has been heightened by the crisis, leaving the foundations of social partnership unstable. Crucially, it was the voluntarist dynamic of Irish industrial relations that became increasingly permissive of inconsistent action at firm level (Dobbins, 2010). This resulted in what Teague and Donaghey (2009: 74) argue is an Irish blend of ‘institutional complementarities,’ a particular symbiosis among traditionally competing social and economic institutions. Among other features, these included trade unions accepting wage restraint for employment growth; economic liberalisation and market openness in return for access to (though not necessarily influence over) tripartite bargaining structures; the accommodation of a non-union model for foreign multinational capital; a minimalist welfare state in terms of social security and health care provision as it had relevance for fewer people given the grow in employment share; a minimalist adaptation of European employment directives; and few established labour standards and regulations.

Institutional structures were designed that meant Ireland was an attractive location for the continued growth and expansion of global capitalism, while at the same time constraining employer choice through voluntary partnership. In many ways, the framework of social partnership created an appearance of industrial harmony which did not have deeper roots in parallel economic and social structures (Dobbins and Gunnigle, 2009). More recently, as Roche (2010) comments, political maneuverings within government ranks have diminished the legitimacy of social partnership:

“Social partnership was obviously less central to Cowen’s political identity and record than to those of his predecessor … having told the unions in private that social partnership was ‘no longer fashionable’. .. a powerful axis developed in government around Finance Minister, Brian Lenihan, which was much less well disposed towards the kind of compromises associated with social partnership and more inclined towards direct measures to cut public expenditure” (Roche, 2010)

Irish industrial relations after the crisis

Social partnership remains a contentious issue in industrial relations theory and practice (Allen, 2000; Ackers, 2002; Kelly, 2004; D’Art and Turner, 2005; Roche, 2007, 2010). One leading critic argues that an over-reliance on the institution of social partnership often results in a further weakening of labour as unions lose their capacity to resist unpalatable plans or wage cuts (Kelly, 2004). The problem is that when redistributive institutions, such as bargaining and negotiation, are embedded in a cooperative ideology then the capacity of social actors to resist or challenge employer (State) actions becomes increasingly diminished (Kelly, 1998). In this way partnership eventually undermines the power of unions to act at the level of the firm.

In contrast, more sympathetic advocates have pointed to the economic gains of social partnership in Ireland (Geary, 2008; Teague and Donaghey, 2009). The prognosis for Irish social partnership is at best mixed. In December 2009, the social partners failed to agree a coordinated response to a global economic crisis, a failed banking system and mounting public debt. Even though the trade union movement accepted the need to save €13 billion in public finances, finding a way to achieve the cuts resulted in deadlock. The government subsequently imposed public sector pay cuts in its November 2009 budget, amounting (on average) to a 15% reduction in public sector wages (Sheehan, 2010). Amidst growing resentment trade unions mounted a ‘low-key’ response to government imposed cuts, including a national one-day public sector strike, workto-rule and go-slow actions designed to disrupt public sector transformation. More recently, in an attempt resolve the deadlock and perhaps partially to rejuvenate partnership, unions and the government re-entered discussions and negotiated a public sector adjustment; the Public Service Agreement 2010-2014, otherwise known as the ‘Croke Park deal’ after the sporting stadium in which the negotiations took place2. The Croke Park agreement is being recommended by the government, IBEC and ICTU as a solution that may rejuvenate a type of social dialogue as well as revisit previous pay cuts by productivity savings created from public sector reform.

A key litmus test will be whether Ireland’s so-called unique ‘institutional complementarity’ that has underpinned social partnership without threatening the global neo-liberal stage of capitalist accumulation can be sustained during tough times. Irish social partnership has collapsed not only because of global economic crisis but also, in the words of David Begg, General Secretary of ICTU, its  foundations rest on sand’ (Begg, 2008:55). As a result of the on-going and  unprecedented economic crisis in Ireland, the argument posed here is that social partnership is not as stable or as impressive a cooperative regime as was often believed. The argument is fourfold.

First, workplace-level cooperative regimes are rare in Ireland because the conditions to sustain and support participation are weaker than the global neo-liberal forces which undermine it, especially at the level of the firm. Second, as a consequence, the public policy objective to diffuse partnership to enterprise level has consistently failed.

Third, State industrial policy has paved the way for foreign-owned multi-national corporations to engineer their own distinctive non(anti)-union human resource agenda alongside  a government discourse of partnership (Gunnigle et al, 2009).

Fourth, the government failed to develop robust institutions that provide both an auxiliary and protective labour market function: what Streeck (1997) defines as a range of ‘beneficial constraints’ resulting from a regulated rather than a voluntarist regime. Each strand of this argument is elaborated below.

The first element to the argument is that the extent of permissive voluntarism reinforces a neo-liberal approach to the social and economic structures of capitalism. Social partnership in Ireland cannot be viewed as a substantial departure from this ‘permissive’ form of voluntarism because it places few constraints on employer accumulation. Accordingly, employers retain sole authority to initiate partnership arrangements or not (Dobbins and Gunnigle, 2009). In macro policy terms, voluntarism has also allowed government to maintain the ‘light-touch’ stance in key areas of employment and financial market regulation, for example, when interpreting European directives for employee information and consultation (Dundon et al., 2006). Importantly, in the context of the increasingly permissive nature of voluntarist industrial relations, it has been easy for employers (including the state) to shift from bargaining about redistributing the gains of economic prosperity, to aggressively negotiating or even imposing concessions in response to the current crisis (Roche,

2010). It has become increasingly difficult for unions to accommodate the scale of concessions sought to rectify the fiscal, financial and demand-side crises noted earlier. At the same time, it has been much easier for employers in the private sector to push through change and cut jobs owing to the lack of labour market regulation.

The second strand of the argument is that government efforts to diffuse partnership to the workplace level have failed. There is very little evidence of workplace inclusion with as few as 4% of private sector organisations reporting formal partnership arrangements (Williams et al., 2004). Employers have been free to choose a range of non-partnership options that accord with the neo-liberal ethos of greater individualisation, unilateral imposition, weak employee involvement and concession bargaining (Roche, 2007, 2010; Teague and Hann, 2010). The idea that social partnership enables employees to become stakeholders has rarely, if ever, altered the deeper cultural mindset that employers have a perceived right to rule within the firm (Edwards, 2003).

Third, Irish industrial policy has suited a global neo-liberal project by allowing inward-investing MNCs to implement sophisticated forms of union avoidance (Gunnigle et al, 2005, 2009). The role played by the State’s industrial promotions agencies has been inimical to the ideal of social partnership. For example, during the previous SSA (e.g. 1960s and 1970s), State agencies recommended union recognition among new inward investing firms by arranging introductions to trade union officials and encouraging MNCs to conclude recognition agreements. Research in this general area developed the ‘convergence thesis’: that the employment policies and practices of MNC subsidiaries would be largely similar to host country practices, which in Ireland would conform to a voluntary pluralist regime (Kelly and Brannick, 1985). However, the ‘convergence’ thesis has been brought into question in the Irish case, with MNCs (especially American subsidiaries) less likely to adjust their employment practices to suit local norms (Roche and Geary, 1995; Turner et al, 1997; Gunnigle et al, 2005).

There was a growing pattern of trade union avoidance among MNCs in Ireland, facilitated by a shift in policy among State agencies (Gunnigle et al, 1998; Lavelle et al, 2010). By the 1990s, these government bodies indicated to inward-investing firms that they had the ‘freedom to recognise or avoid trade unions’ (Gunnigle et al, 1998; McGovern 1989). Many of the inward investing firms originated from sectors of the U.S. economy that were hotbeds of anti-unionism (Foulkes, 1980; Kochan et al, 1986). Thus the public face of union legitimisation neither disturbed nor derailed global neo-liberal structures. Finally, conformity to a global neo-liberal agenda has resulted in an institutional disconnection among labour market actors in Ireland. One consequence of this, according to Thompson (2003), is the breakdown of the wage-effort bargain because employers find themselves unable (unwilling) to maintain their side of a deal as alternatives to social partnership and workforce participation are increasingly pursued under severe economic pressures. As Godard (2004) argues, in liberal-based economies unilateral management is more likely than genuine workforce participation as the former requires minimal support and resource. The implication is that strong and robust  partnership regimes are rarely successfully implemented by governments and employers because they both engender and demand a regulatory model which runs counter to neo-liberal ideology. Even when partnership is adopted, as in Ireland, this is clearly of a variant that can be tolerated only when it demonstrates commercial value, and is easily dismissed when economic conditions change. To this end, Irish social partnership falls short of the institutional complementarities necessary for what Streeck (1997) argues is the   benefit of regulated constraint.

Thatcherism delayed?

We have argued that the institutional structures of accumulation in Irish society can be broadly characterised as a variant of, or local manifestation of, global neoliberalism.

This situation has been partially obscured by those areas where Ireland differs from the overall global pattern, in particular in the area of social partnership.

This was manifest most clearly in the practice of negotiating extensive partnership agreements that dovetailed wage restraint, welfare levels and lowered taxation. The ‘partnership’ model has been held in contrast with the anti-union postures of the paradigmatic neo-liberal governments in the US and UK. Indeed, the enthusiasm displayed by the union leadership for social partnership stems partly from a desire to avoid the kind of brutal confrontation which occurred under Thatcherism in the UK.

While Irish social partnership contributed to the Celtic Tiger success it was itself heavily dependent for its longevity on the resources generated by the rapid expansion of the Celtic Tiger period (Rittau and Dundon, 2010). Ultimately, it lacked many of the institutional underpinnings of regulated arrangements in other European/Nordic countries, most of which have suffered less as result of the global-local interplay of the crisis (Donaghey and Teague, 2005).

Paradoxically, socio-economic cooperation in Ireland rested on the foundations of permissive voluntarism. In this area, it did not depart so radically from global neoliberal patterns. In the face of economic crisis, social partnership, successful in part in distributing the spoils of growth, proved unable to negotiate retrenchment. The abandonment of social partnership has, arguably, been central to the government’s strategy of dealing with the crisis. The government’s strategy included a comprehensive and generous rescue of the banks and their bondholders, and the establishment of fiscal rectitude through deep cuts in spending. It was unlikely the unions as social partners would endorse these strategies. Still less likely was the acceptance of unilateral public sector wage cuts as the basis for reducing living standards in support of a recovery of competitiveness.

The latest stage of development at the time of writing, the Croke Park agreement, is a further political manoeuvre to generate some resemblance of cooperative dialogue in the midst of the crisis. The agreement essentially copper-fastens previous unilateral pay reductions while containing a tentative commitment to avoid additional pay-cutting measures, unless faced with a further economic crisis. Significantly, the agreement also presumes a high degree of cooperation with public sector ‘reforms’.

While the agreement received overall public sector union approval, nine of the nineteen unions voted against, with some threatening to maintain opposition. This divisive outcome could further weaken organised labour. Cutbacks in public sector wages, it appears, may be the opening salvo in an elite strategy of restoring enterprise competitiveness and restarting accumulation. Arguably, the government is signalling the acceptability of extending wage-cutting measures to the private sector.

More than 20 years of voluntarist social partnership has meant that existing union structures have been poorly positioned to resist the assault.

It is an irony that the first consequence of the crisis has been the rapid disintegration of precisely that element of the Irish social structure which served to distinguish Ireland from the overall pattern of global neo-liberalism. In the face of the crisis, the institutions of Irish industrial relations have through the abrupt abandonment of social partnership been forcibly realigned, at least temporarily, with the market fundamentalism of the global neo-liberal era. While a full frontal Thatcherite-type ideological attack on labour is not evident, the State has prevented unions from effectively defending pay and working conditions in the face of the economic crisis. The Government’s morbid strategy of reflating the banks and deflating the rest of the economy is unlikely to work.

Crises are seldom resolved through the restoration of the old order. It remains to be seen whether a kind of Thatcherism in Ireland has been denied by social partnership, or merely delayed.

 

 

NOTES:

1. The seven national partnership agreements are: 1987, Programme for National Recovery (PNR); 1991, Programme for Economic and Social Progress (PESP); 1994, Programme for Competitiveness and Work (PCW); 1997, Partnership 2000; 1999, Programme for Prosperity and Fairness (PP&F); 2001, Sustaining Progress; 2006?2016, Towards 2016.

In 2010 a public sector only worker agreement was negotiated, the Public Service Agreement 2010?2014 (otherwise known as the ‘Croke Park’ agreement).

2. The Croke Park Public Service Agreement 2010?2014 is not a national partnership agreement as it is exclusive to the public sector and did not include all the partners typically involved in Irish social partnership negotiations.

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