The Political Economy of Wage Bargaining in the EMU: Irish Liberal Corporatism in Crisis
1 Pages Posted: 11 Aug 2010 Last revised: 29 Sep 2010
Date Written: 2010
The economic crisis is a collective action problem. In the absence of currency devaluations and growing budget deficits eurozone governments are faced with the painful social process of competitive wage devaluations. This paper examines the strategic choices facing government and organised labour in how they respond to this problem. It will argue that the EMU contains an implicit neo-classical assumption that labour markets will automatically adjust to downward wage flexibility. This ignores the politics of collective bargaining and the diversity of national structures of wage coordination. Labour relations systems are the most regulated of all markets. Based on this institutional embeddedness the paper will outline a typology of strategic choices facing labour market actors: neo-liberal orthodoxy, national social concertation and euro-coordination. The paper will then argue that the structural pre-conditions of collective bargaining will mediate what strategy governments and organised labour adopt. It will subsequently examine the case of a peripheral economy in the EMU; Ireland, who tried and failed to negotiate a social pact in 2009. Social pacting was a central institution of public policy in Ireland for twenty years but broke down under the stress of the current crisis. Why? The article will conclude by outlining why a Euro-coordinated strategy is the most optimal and logical solution for solving the collective action problems facing EMU countries in the current crisis.
Keywords: Social pacting, Competitive Corporatism, EMU, Trade Unions, Government, Comparative Capitalism
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