The Changing Sociology of Labour Relations

William Krehm

The Wall Street Journal (1/07, "New Era for German Labor Movement?" by G. Thomas Sim and Christopher Rhoads) brings American readers tidings of novel German developments similar to those at home: "Germany’s labor unions, once powerful enough to practically bring down the nation’s leaders, have tumbled to their weakest position in the past half century.

"Over the weekend, one of Germany’s largest unions threw in the towel in its fight for shorter working hours in former East Germany. The defeat came after four weeks of strikes and negotiations. It was the first time since 1954 that the IG Metall union of metalworkers and engineers failed to eke out even a minor victory.

"Other news showed Germany’s hunger for reform as it tries to emerge from its second recession in two years. German Chancellor Gerhard Schroeder announced plans to accelerate tax cuts valued at 15.5 billion euros ($17.7 billion) in an attempt to inject new life into Germany, slashing the top tax rate to 42% from 48.5% next year instead of in 2005. The combined events prompted Bank of America yesterday to e-mail a note to clients titled ‘A little German Revolution.’

"Martin Werding, head of social policies and labor markets at Ifo Institute for Economic Research at the University of Munich, said the union’s defeat reminds him of events in the UK in the 1980s. Margaret Thatcher swept to power in 1979 as Britons flinched during the ‘Winter of Discontent.’ Workers and employers lost sympathy for unions after prolonged strikes and high wage increases. Eventually, unemployment rose, unions lost their leverage and the government enacted legislation that stripped labor unions of their power."

The labor movement internationally and social-minded political leaders have still to open their eyes to the root causes of the serious decline of the labour movement over the past thirty years.

Picture the struggle for the distribution of the national product throughout the world as an ongoing war. Up to the 1970s on its main front, like the defences of Singapore in WWII, cannon were built to point in a single direction. This expressed the official doctrine that the only war that counted was between labour and industrial capital. The rules and scoring for that ongoing battle had been drawn up in the 1930s and 1950s. But since then another front has opened up. On it the challenger had enough firing power and mobility to encircle both industry and labour. The new contender diverted all available resources to its own ends. What remained to labour and industrial capital to scrap over was of dwindling importance. The main advantage of the new aggressor, speculative capital, was his command of the new magic of digital disinformation.

A good instance of this is the surreptitious appropriation of the pension funds for the new victor’s own ends. Cast as a bone of contention between the unions and near bankrupt producing corporations in a setting of growing unemployment, there is really no way of enforcing the contracts that gave rise to the pension contracts. Steel companies, airlines or whatever, simply declare bankruptcy, and entertain offers for the sale of their physical assets rather than the companies that contracted to provide worker pensions.

"Particularly in its earlier history, the banks’ power to get businesses started or stay afloat had been a steady source of pressure on politicians from those who want the government to make borrowing easier and cheaper. It was also the source of the popular desire to keep banking a local activity. Not unreasonably, people want their bank chartered locally, owned locally, operated locally, and subject to pressure from the neighborhoods. The McFadden Act of 1926 and the Douglas Amendment to the Bank Holding Company Act of 1956, which narrowly restricted the deposit-taking offices a bank or a holding company could control, expressed the weight of the nation’s experience. The Community Reinvestment Act of 1977 was only the most generalized and idealistic of many political efforts to make local banks and branches of distant banks lend their money where they got it" (Martin Mayer. The Money Bazaars. New York: E.P. Dutton, Inc., 2984, p. 323).

What then in this perspective, are we to say of the removal of the cash base raised in deposits locally, and the credit created under deregulated multipliers being sent not only to another state of the union, but into outer space? For such are the shenanigans that our deregulated banks engage in. Let us quote Martin Mayer again: "a Walter Wriston in New York [Citicorp] ran a phantasmagorical bank in which profits were merely reported and never earned; the loans never were and never would be repaid, and the borrowers could not afford to carry them. Increasingly, the interest on these foreign loans, which Citicorp reported as revenue, was merely another loan from the bank to the borrower, building reported assets faster than reported liabilities, but yielding no cash flow."

That is the key to many of the sterile confrontations between labour and industrial corporations. What they are disputing has already been high-jacked and gambled away. It is not there any more. Still worse, ever more frequently the same can be said of the jobs that were supposed to earn the workers those pensions on retirement.

Under Presidents Eisenhower and Kennedy, increased pensions were raised to the status of a substitute for immediate pay hikes, essentially to pseudo money supply. It was a trend highly approved and even sponsored by the government. As was the increased discretion of corporations to invest their workers’ pension funds on the stock market rather than in government bonds.

The treatment of labor pensions contrasts strikingly with the quick response of the government, when confronted with a bank in trouble that is "too large to be allowed to fail." Workers and Industrialists of the World Wake Up!

William Krehm

— from Economic Reform, August 2003