The State as Dynamic Actor in Corporatist Political Economies

In the equally important area of social security, governments in the 1990s had the courage to break with the joint control over the system exercised by the social partners. The field of social security has witnessed considerable institutional discontinuity and disagreement among unions, employers, and the government. Dutch welfare reform was an explicitly political attack on the privileged positions of the social partners and their failure to adopt needed reforms. It is not insignificant that in the past twenty years all major political parties, from Left to Right, in various grand coalitions, have participated in welfare reform, often involving significant departures from traditional paradigms of policy-making.

In the lengthy process of negotiated welfare and labor-market reform in the Netherlands, the rules of Dutch corporatism have been rewritten, and the boundaries between the respective responsibilities of the state and social partners have been redrawn. In contrast to the bipartite “de-politicization” of collective bargaining since the early 1980s, characterized by a shift in the direction of de facto Tarifautonomie, the last decade has witnessed a significant re-politicization of social security, with the exception of pensions. Hans Slomp, “The Netherlands in the 1990s: Toward `Flexible Corporatism' in the Polder Model,” in Stefan Berger and Hugh Compton, eds., Policy Concertation and Social Partnership in Western Europe: Lessons for the 21st Century (New York: Berghan, 2002). Accompanying this development has been a shift in policy paradigms, from fighting unemployment through labor-market exit, the typical continental welfare state's response to industrial restructuring, to raising employment levels for both men and women through organized wage restraint since the 1980s, to a social-liberal mixture of fiscal austerity, “flexicure” labor markets, and activating welfare policies in the 1990s. In each case, the policy agenda was set by the government rather than the social partners. However, the respective cabinets of Ruud Lubbers and Wim Kok could never have been successful without the support of the social partners on a majority of social and economic policy issues. Furthermore, the second Kok administration's failure to achieve a structural reduction in inactivity rates, despite a fundamental overhaul of the Dutch social-security system, demonstrates that suspending corporatism is not a panacea.

In contrast to the significant institutional resources available to their Dutch counterparts, German policy-makers have had to work within an institutional context marked by greater institutional, legal, and political impediments to unilateral state action. In the area of labor-market policy, German authorities continue to be constrained by the prerogatives of the tripartite Federal Labor Office and the legally enshrined principle of Tarifautonomie. As a result, German reform strategies in the early to mid-1990s tended to focus on efforts to revive moribund corporatist institutions and initiatives designed to reduce unemployment through the wage-bargaining process, in the Dutch manner. With the failure of this strategy in the late 1990s, the German government has turned to a series of “second-best” labor market policies, involving a series of independent policy initiatives to reduce unemployment, including job-creation and training programs, pressures on the unemployed to accept available work, and limiting recourse to traditional mechanisms of labor-supply reduction, notably early-retirement schemes. While somewhat limited in scope, all of these policies have been undertaken by state actors largely independently of the social partners, who have seen their authority over German labor-market policy shrink considerably.

In the domain of social policy, likewise, state intervention has been critically important in shaping reform outcomes. In this policy area, the state is not constrained by the kinds of legal impediments that it faces in labor-market policy. As a result, governments have been able to see through more ambitious reforms, again without significant input from either the social partners or political opposition. To be sure, German authorities have been in a somewhat weaker position than their Dutch counterparts, due to the federal structure of the German political system and the frequent existence of blocking majorities in the Bundesrat. The unavailability of a Dutch-style “grand coalition” over social policy, however, has not precluded significant social-policy reform, as the case of the 2000 pension reform amply demonstrates. Instead, German governments have had to seek other ways to secure the passage of reforms, such as making side-payments to certain Lander represented in the upper house of Parliament and accepting some limited compromises over policy content. Although the existence of institutional constraints has resulted in more modest social-policy reforms in Germany than in the Netherlands, they have thus not prevented authorities from securing major changes in the German social-protection system. Although the political dynamics of the reform process have differed significantly by policy area, in labor-market and social policy the German state has played a critical role in shaping both the character of political discourse and the policy outcomes that this discourse has engendered.

While nationally distinct institutional and political contexts have shaped Dutch and German policy trajectories, so, too, has a challenging economic context that makes future prospects for reform far from certain. In both countries, unemployment is on the rise, pension systems are under growing financial and demographic pressures, economic growth is sluggish or stagnant (in 2003 it was actually negative in both countries), and policy-makers are experiencing considerable difficulties in meeting EMU limits on deficits and public spending. In the face of these increasingly severe challenges, it is unclear whether Germany and the Netherlands will be able to continue to devise successful strategies for adjustment. That being said, the German and Dutch experiences offer several important lessons about the role of the state in corporatist political economies. First, conventional notions of “state strength” have little to offer analytically in terms of capturing states' ability to secure reforms, which are defined instead by the state's capacity to negotiate varying policy contexts and devise flexible responses to changing political-economic circumstances. Second, to the extent that they are able to do so, the successful adjustment of corporatist systems invariably requires the state to play a central role. Finally, the procedures and outcomes of corporatist decision-making are not beyond criticism, but rather require a certain degree of societal and political consensus. In all democratic polities, corporatist and non-corporatist alike, governments must ultimately answer to parliaments and voters. If it is to be successful, therefore, corporatist adjustment thus requires the support of a strong and vibrant democratic politics.

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