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To cite this article: John Peters (2011) The Rise of Finance and the Decline of Organised
Labour in the Advanced Capitalist Countries, New Political Economy, 16:1, 73-99, DOI:
10.1080/13563461003789746
To link to this article: http://dx.doi.org/10.1080/13563461003789746
JOHN PETERS
Since the 1980s, the scope of changes to finance and labour has generated a great
deal of debate among observers. For some academic analysts, the impacts of economic globalisation have been exaggerated, and despite unemployment and rising
pension problems, it is argued that firms and labour markets have made only incremental adjustments to competition, and countries have not converged towards a
deregulated, American-style labour market.1 Instead it is commonly claimed
that there have only been gradual and incremental changes to the worlds of
finance, production and employment, in large part because of the slowly changing
John Peters, Dept of Political Science, Laurentian University, Canada. Email: jpeters@laurentian.ca
ISSN 1356-3467 print; ISSN 1469-9923 online/11/010073-27 # 2011 Taylor & Francis
DOI: 10.1080/13563461003789746
John Peters
nature of corporate governance and wage-bargaining systems, as well as because
of the importance of politics.
Most typically in a range of work that draws on institutional and Varieties of
Capitalism (VOC) approaches, it is claimed that despite recent changes to
financial markets, European companies are still run on the basis of patient
capital long-term bank financing, family ownership, cross-shareholding
among companies that props up less profitable industrial branches, and, in some
countries, government ownership and control of large firms that ensures financial
and employment stability.2 Even where finance has changed, it is argued that firm
structures, corporate governance models, and wage-bargaining institutions have
remained largely intact.3 Moreover, it is noted that countries have enacted a
range of policy responses to unions, collective bargaining, public sector employment, early retirement, and employment protection policies that have underpinned
labour markets and employment growth (Thelen 2001; Brady 2007). Unions too
have continued to play major roles in everything from workplaces, to wage
bargaining arrangements, to politics, especially in Western Europe, where
unions have signed partnership agreements or in some cases national
social pacts to protect jobs and improve social distribution in return for wage
restraint and competitive changes to industrial relations (Frege and Kelly 2004).
Looking to add to this debate, the goal of this article is to provide an assessment
of what has happened to finance, firms and labour markets since the early 1980s
and what were some of the impacts on organised labour. It goes beyond the
typical contemporary concerns of standard literatures to explore changes to
capital markets and stock markets over the past 25 years, and examines their
impact on corporate governance systems and labour markets throughout 13
countries in North America and Western Europe. It looks at how the widespread
corporate adoption of shareholder value led many companies to restructure and
change their employment practices. Finally, it seeks to broaden the discussion of
financial and corporate change by assessing their effects on unions, industrial
employment, collective bargaining, wages and wage share.
The argument is made that there are good reasons to be sceptical of arguments
about the positive or negligible impacts of finance on the real world of work
and labour. Over the past three decades, new forms of finance in everything
from hedge funds to collateralised debt obligations not only gave investment
banks the ability to make billions of dollars in stock and bond markets. They also
gave business equal opportunity to reform corporate governance and restructure
firm operations in order to boost profits and lower wage costs. Twenty years ago,
business used to finance itself from commercial bank loans. Now the vast majority
of large companies use combinations of debt and equity for financing. Moreover,
under pressure from shareholders and hedge funds for better earnings, as well as
directed by Chief Executive Officers (CEOs) on short-term contracts with compensation tied to share prices and bonuses, the vast majority of companies have adopted
much more aggressive and much more short-term investment and management
strategies.
What these changes have meant is more sharp entrepreneurs using debt to buy
out other businesses, restructure entire operations and lower labour costs by
cutting good jobs and expanding low-wage employment. It has also meant more
74
John Peters
profitability by curbing inflation and labour movements. With the rapid decline in
profits and equally rapid rise of inflation in the 1970s, North American and West
European governments moved to liberalise finance and deregulate the banking and
financial sectors in order to increase the reach and size of capital and at the same
time increase the competitive pressures to boost profitability and raise productivity
(Dumenil and Levy 2004). As a number of scholars have shown, with the fall
in profitability and the rise of inflation in the 1970s, there was a dramatic turn
toward neoliberalism across advanced capitalist countries. The decline in profitability in the 1970s and the 1980s set off a strong push by corporate management
and financial markets to improve bottom lines. In this section, I present evidence
to support the proposition that changes to finance and corporate governance
have been common throughout North America and Western Europe over the
past 25 years.
Among the key moves advanced industrial economies enacted to counter stagnating economic demand, states first underwrote ever greater volumes of debt, and
by the late 1980s, when this had failed to boost demand and stimulate profitability,
they adopted more powerful forms of stimulus. Lowering interest rates in the 1990s
to historic lows, advanced industrial economies boosted unprecedented amounts of
household borrowing for mortgages and consumer goods that fed into rocketing
house prices and further consumer borrowing (Brenner 2006: 316 23; Glyn
2006: 53 6). Following the US lead, West European governments then enacted
financial liberalisation and abandoned capital controls on foreign exchange and
derivatives trading throughout the 1980s and 1990s. They went on to loosen
restrictions on the international buying and selling of domestic equity, with the
hope that capital market and product market liberalisation would boost foreign
borrowing and investment, subsequently spur domestic enterprises to restructure
and expand, and thereby increase profits and employment growth.
In Europe, the launch of the European Economic and Monetary Union (EMU) in
1990 led all 12 participating countries to abolish exchange controls, and by 1999, 11
countries gave up their national currencies for the Euro and a single capital market.
Governments also signed investment treaties to water down foreign direct investment requirements in order to spur competition and inflows of foreign direct investment (FDI), and eased the restrictions on the types of assets and equities that pension
fund managers could invest in. In addition, states passed new laws allowing the
securitisation of loans that is, giving businesses the opportunity to package
loans into bonds that were sold on capital markets to pension funds and mutual
funds. Other reforms included the lowering of bank liquidity ratios, the repeal of
legislation on share buybacks, lower taxation on capital gains from equity sales,
the legalisation of hedge funds, removing restrictions on foreign acquisition of
financial firms, and the abolition of tax on stock exchange dealings.6 Then, following European Union (EU) directives, most governments repealed legislation
restricting the foreign ownership of stock and equity.
Finally, government reforms to pension funds fuelled the rise in cross-border
equity flows and contributed to firms integrating financial and corporate operations in the attempt to attain better stock prices. With the rise of private,
defined benefit occupational pension schemes, trust, insurance and pension
funds began to play larger roles in finance and equity ownership. Lobbying
76
78
TABLE 1. The growth of FDI, stocks traded, market capitalisation (% of GDP), 19802005
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
Sweden
United Kingdom
United States
Mean
1980
1990
2000
2005
1990
2000
2005
1990
2000
2005
9
10.5
29.4
9.2
2.5
7.4
8.9
3.6
34.4
11.2
5.0
26.8
10.7
9.2
34
46.6
34.4
12.4
12.0
16.2
15.7
10.9
59.6
20.0
26.4
43.8
14.4
20.0
55
148.0
53.0
92.5
63.5
53.8
43.5
28.0
148.2
44.4
90.7
92.9
26.4
55.0
45
206.2
67.1
88.4
70.5
66.8
51.3
29.2
160.7
50.0
104.1
98.2
27.5
67.1
11
3
8
3
9
29
4
13
12
7
28
12
30
11.3
5
16
57
171
82
56
71
175
36
161
127
89
326
81.6
15
31
59
142
69
63
63
121
66
130
189
76
173
69.0
7
32
42
29
16
25
21
13
39
22
40
86
53
28.8
15
79
118
67
244
109
67
70
166
39
136
179
155
108.9
41
88
133
69
108
80
44
45
117
65
113
139
137
88.0
John Peters
John Peters
Austria
Germany
Norway
Italy
Netherlands
Denmark
Belgium
UK
France
Sweden
Canada
Finland
US
Bank loans
Pr-Equity
Bonds
Shares
67.0
52.6
47.5
46.2
43.7
43.4
41.4
41.4
39.8
34.4
30.1
22.5
15.1
0.0
0.0
12.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
13.6
0.0
24.9
22.9
23.1
14.7
22.6
16.2
37.1
22.6
11.0
19.1
17.5
10.1
8.8
26.5
10.2
24.3
25.8
31.2
40.1
19.4
36.0
47.6
41.1
48.0
46.2
68.8
33.4
listed companies replaced bank loans and internal financing with public equity and
market-based debt. Helped along by banks that increasingly merged investment
and commercial functions and that lent money backed on the basis of ever more
complex asset-back securities, firms used finance to expand and restructure
operations.
The biggest transformations came in many of the social democratic countries of
Finland, Denmark, Norway and Sweden, where businesses expanded their market
capitalisation nearly three-fold and turned to bond and equity markets for financing. In absolute terms, Austria saw the largest rise in market capitalisation, but
in relative terms, as Table 2 reveals, Austrian firms by 2005 were still in the
early stages of adopting market based financing. Also notable is the United
States long seen as the most advanced of shareholder systems for financing
which also witnessed non-financial companies going into debt, and using
upwards of 70 per cent of their cash flows to buy their own stock to prevent takeover and maintain upward pressure on stock prices, while others used private
equity for expansion, leveraged buyouts, and stock buybacks (Crotty 2005: 97
9; Brenner 2006: 273).
Unsurprisingly, with the growth in firm capitalisation rates, equity trading
exploded. Seeking better rates of return and profit differentials, fund managers
moved quickly to dump underperforming shares for those with higher returns.
Exempt from capital gains taxes or often indifferent to tax rates, institutional
investors rapidly turned over portfolios on the basis of short-term movements in
stock price (Blackburn 2002: 130; Jacoby 2005: 35). With investment banks
backing ever higher leverage ratios and often with investment banks themselves
joining in the speculative surges firms and traders alike bought and sold securities with the belief that the asset-price boom would go on endlessly.
In the late 1990s, the competitive pressures were so intense to realise better rates
of return in the New York and London exchanges that many fund managers began to
80
John Peters
changes and corporate makeovers. As Table 3 shows, throughout Western Europe,
firms sought to expand market share by acquiring others, with the total number of
mergers and acquisitions (M&As) for these 13 countries rising from 10,172 in
1990 4 to 19,604 in 2000 5.9 Under new ownership, many firms both
public and private not only put in place new directors, but also institutionalised
independent boards of directors with the responsibility of maximising shareholder
value. Even where foreign firms were not successful in their takeover bids, domestic firms and conglomerates often undertook changes at the board level to meet
the challenges of takeover bids and better share price returns and cash flows.10
Consequently, firms especially those in competitive export sectors began to
adopt new procedures for financial and strategic operation. Many introduced international accounting principles and disclosure to investors. Many also instituted the
reporting of business results by business sector and value-oriented performance
targets, all with the intent of evaluating division performance within companies
and forcing management to meet profit targets and continuously increasing productivity benchmarks. Anglo-Saxon models of technical budgeting procedures
and targets such as discounted cash flows and investment rate of returns for
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
Sweden
United Kingdom
United States
Mean
1980
1990
2005
Change
199094
199599
200005
57
54
35
79
69
18
35
50
35
58
78
51
22
51
47
54
33
75
72
10
31
39
25
59
81
39
15
39
33
53
29
72
72
8
21
33.5
21
55
76
28
12
33
224
21
26
27
3
210
214
217
214
23
22
223
210
210
154
280
750
242
246
1132
1263
598
494
198
377
1775
2663
494
276
405
1337
273
387
1263
1690
766
730
320
521
3104
4294
730
369
589
1688
454
419
1793
2208
829
879
418
804
3413
5741
829
Sources: OECD 2004, 2006; UNCTAD, Foreign Direct Investment Online Database, (http://stats.
unctad.org/fdi/)
Notes: (a) union density is union membership as a percentage of the wage and salary earners in
employment. These figures are based on the update and standardised measures of the OECD 2004,
2006. It excludes active union members who are retired. It is also adjusted to count only one member
per person (first-job ratio), rather than union members who may work two or more jobs in the labour
force. It also excludes non-paying members or supporters outside the movement, students, selfemployed, and is adjusted for the unemployed.
(b) Mergers and acquisitions, by country and region, domestic sales.
82
John Peters
financial markets should not play a strong role. However by 1998, under market
pressure to increase stock value and cash flows, Siemens had introduced a new
10-point programme that led to the sell off of divisions, layoffs of over
40,000 workers, and by 2001 the targeting of all decisions towards company
value in the preparation of a public share offering in the United States.
Similarly, in France, stock market pressures forced corporate giants such as
Groupe Danone and Suez-Vivendi after a succession of takeovers and the widespread dispersion of shares to sell off their cross-shareholdings, dismantle their
conglomerate structures, and lay off thousands, all in the effort to raise share
prices and boost dividends. With increasingly integrated international capital
markets, such developments have been widespread in Europe over the past 15
years. Even where companies have retained insider or cascade ownership structures and are still run by a few, corporate performance was strongly affected by
share value and the profit targets of investment and hedge funds. All such
demands have forced companies to push for even better profits and performance.
Finance, M&As and the decline of good jobs
What has this meant to labour? In most cases a great deal, and in most cases the
impacts have been largely negative. In general, the maturation and spread of
shareholder capitalism has led to changes in labour management and industrial
relations that have lowered wages and created poorer jobs. Finance-driven corporate restructuring has also meant lay offs and systematic pressure to worsen collective bargaining and weaken union power. Yet much of the literature influenced by
VOC approaches has continued to maintain that such changes were common only
to the liberal market economies, while throughout Europe, unions were able to
use collective bargaining, work councils or strong employee participation rights
to protect jobs and incomes.
With equity markets becoming more liquid throughout the advanced industrial
world, American as well as European corporate executives have typically sought
to do everything possible to boost profit and raise stock values. Some engaged
investment banks and accounting firms to create new synergies in financing in
order to boost share price and increase executive compensation. Others laid off
workers, cut research and development (R&D), and increased production by
having the remaining employees work harder with existing capital. Others still
bought new companies in the attempt to realise economies of scale and protect
market share through lay offs and international integration of operations (Head
and Ries 2008).
One of the most common tactics companies used to achieve better returns in the
face of new forms of finance and pressures from reformed corporate boards was to
engage in a wave of M&As and then subsequently restructure operations and
workforces across regions and countries (Macaire et al. 2002; Pedersini 2006).
Such restructuring has negatively effected manufacturing jobs and unionised
employment throughout the majority of advanced industrial economies.
In the OECD over the period 19872001, M&A sales represented more than 82
per cent of inward FDI, while purchases of foreign assets through M&A accounted
for 71 per cent of outward FDI (Brakman, Garretsen and van Marrewijk 2008: 5).
84
John Peters
in industrial jobs. But Table 4 also reveals the widespread decline of industrial
manufacturing as a proportion of overall civilian employment, with the closure
and turnover of manufacturing firms and the continued rise of financial and
consumer service industries. Even in Canada, the growth of industrial jobs was
entirely offset by the growth of non-union, private service jobs, as industrial
employment fell as a proportion of the labour force by 6 per cent. Overall
throughout the G7, industrial employment fell as a percentage of civilian employment, from 34.5 per cent to 23.7 per cent, and in the EU industrial employment
makes up only 27 per cent of the workforce.
The impacts of the loss of industrial and manufacturing jobs as well as shareholder capitalism on union density and organised labour are well known in
Canada, the US and UK (Blackburn 2002: 130 64; Henwood 2003: 202 6).
Over the course of the 1990s, with the maturation of shareholder capitalism and
the deregulation of commercial and investment banking operations, stock
markets exploded in all three countries, and firms loaded up on debt and equity
in the attempt to realise better financial returns. Market capitalisation increased
as investment banks and pension funds cross-promoted shares, and as CEO compensation was tied to share value and stock options, firms focused on capital
growth and dividend payments as their top priorities and rapidly developed sophisticated union-busting techniques to keep unions out.
Unsurprisingly, with these changes, in many American and British firms, as
well as US MNCs operating in Canada, the emphasis on financial returns from
equity markets percolated down to all levels of operation. Company time horizons
TABLE 4. The decline of manufacturing jobs
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
Sweden
UK
United States
EU
G7
Industrial employment as
percentage of civilian
employment
1980
1990
2000
2005
1980
1990
2000
2005
1236
1269
3138.6
750
803
7664
11592
7699
1563
556
1364
9412
30315
..
89380.6
1260
1056
3191.5
726
758
6549
11132
6845
1646
494
1310
8667
31123
..
88797.5
1144.1
1063.5
3327.4
712.0
642.0
5718.0
12200.0
6766.9
1588.6
492.0
1022.0
6814.0
31500.0
59204.3
86456.3
1053.4
1045.5
3555.8
653.0
619.0
5514.0
10849.0
6940.1
1586.2
475.7
938.9
6224.0
28074.0
57984.8
78906.9
40.3
34.7
28.6
30.4
34.6
35.7
43.7
37.9
31.4
29.7
32.2
37.6
30.5
..
34.5
36.9
28.3
24.4
27.5
30.4
29.7
38.6
32.3
26.3
24.8
29.2
32.3
26.2
..
30.3
30.6
25.8
22.5
26.4
27.6
24.1
33.7
32.4
20.2
21.9
24.6
25.2
23.0
29.3
26.7
27.6
24.7
22.0
24.1
25.9
22.5
30.0
31.1
19.6
20.9
22.0
22.2
19.8
27.6
23.7
Source: OECD. Annual Labour Force Statistics, Data extracted 26 May 2009.
86
John Peters
In part, the job losses in the EU have been due to restructuring, as companies
have sought to boost productivity and meet investor expectations through lay
offs and capital investment. In part, job loss was due to manufacturing enterprises
in the EU-15 countries, in everything from auto and electronics to steel and textiles, outsourcing jobs to the new European member states in Eastern Europe,
while telecommunication and information technology jobs have been predominantly moved to Asia (Morley and Ward 2009: 9). Privatisation also fostered
by EU directives on capital market liberalisation has also played a role in unionised job loss as mining, steel, utilities and telecommunications companies rationalised operations through plant closure and job cuts in the thousands. So too did
the downturn from 2000 1 lead to a wave of cutbacks and bankruptcies,
especially in telecommunications and airlines, where thousands more were
thrown out of work (Irastroza and Storrie 2007: 4 8).
However, M&As and the internal restructuring that typically followed within a
two- or three-year period also appear to have been very significant causes of
redundancies in good paying jobs (Brewster et al. 2008: 9). Until the late 1990s
neither hostile takeovers nor continuous domestic takeovers, or the announcement
of large-scale redundancies following M&As, were common in Europe. This is no
longer the case.
The financial sector (banking and insurance) has recently gone through several
periods of restructuring and an intense M&A-led consolidation process as in
Austria, Belgium, France, Germany, Greece and Italy which has led to mass
redundancies in countries where this practice was formerly rare. In retail, the
trend has been towards consolidation and rationalisation, involving the growth
of large companies, with small firms being pushed towards survival strategies,
including price and cost cutting, and narrowing product ranges. In manufacturing,
cut-throat competition has led many firms to outsource work, reduce employment
and close subsidiaries. Unions have paid the price with fewer members, and with
fewer members, unions have had fewer resources to uphold pattern bargaining and
good collective agreements.
Finance and the decline of bargaining power, wages and wage share, 1980
2005
The impacts of changes to capital and financialisation on organised labours
capacity to bargain have been equally harmful. One of the reasons is because as
pressures to meet market expectations rose, firms sought to free their hands
from unions and work councils, and restructure internal and international operations in accordance with the ever-lowering benchmarks of their competitors,
doing so through forms of decentralised bargaining or under government aegis
and social pacts. In response, unions often made use of concessions on wages,
full-time jobs and pensions, hoping this would secure jobs and investment, and
create the basis for greater labour-management cooperation (Fairbrother and
Stewart 2003: 170 5; Moody 2007: chs. 2 5). In addition, often opting for consensus and cooperation in the face of plant closings and downsizing, many union
movements developed partnership agreements or employment pacts, with the
88
John Peters
thirds of workers with the exceptions of Switzerland and Central and Eastern
Europe, has been seen as evidence of institutional inertia and strong citizen
resistance to labour market change. Moreover, union coverage (the share of workforce covered by a union contract under statutory extension), it is noted, did not
decline in Western Europe, and approximately 80 per cent of workers were
covered by a union contract in 2004 in spite of the decline of union density.
In practical terms, internal restructuring, M&As and product market competition, along with rising turnovers in portfolios and increasing market capitalisation, forced firms to make changes to their labour management and collective
bargaining practices regardless of political or institutional makeup. Typically,
business restructuring took two forms: either businesses sought to break the
kinds of pattern bargaining and strategies that unions set up to keep wages high,
or as in North America and the UK more commonly firms sought to
escape out from under union contracts altogether. Just as typically, in the
attempt to make their labour forces more flexible, governments deregulated
labour markets and restructured industrial relations along more business friendly
lines. Unions have dealt poorly with these economic and political shifts, and many
have retreated into concessions, partnership agreements and social pacts none of
which have maintained industry wage patterns, and all of which have typically
lowered the strength and appeal of unions.
Partnership agreements did not stop membership loss, nor the decline of unionised industries. Employers used bankruptcy proceedings and non-union subsidiaries to negotiate further concessions and cuts. Often managements very
successfully defined cooperation on their own terms and subsequently laid off
more workers, contracted out work, and made pay and benefits more flexible
(Fichter and Greer 2004). As a consequence, union cooperation with capital not
only failed to improve jobs or wages, but by focusing on employer pacts, many
unions have also seen job losses that have undermined their legitimacy with the
wider working population.
In Western Europe, unions have seen similarly poor rewards in pay, employment and work organisation though in many cases, these poor returns are not
only from employment pacts at the company level, but also the result of
employer pressures for decentralised bargaining and the negotiation of social
pacts. Through organised or controlled decentralisation bargaining, many
European governments have sought to accommodate employer demands for flexibility, and in Austria, Denmark, Finland, Germany, Norway or Sweden, recent
wage-setting arrangements have widened the scope for additional bargaining at
company level and/or have introduced opening clauses that allow companies to
diverge from certain collectively agreed standards at national or sectoral levels.
This has given large employers as well as employer associations significant new
plant-level powers and incentives to retire older workers, outsource, lower wages,
and introduce more flexible work practices which now includes everything
from firing more workers, laying off others for short periods of time, and hiring
more part-time and temporary workers (King and Rueda 2006). By contrast, in
adopting jointness and partnership strategies, union leaders have increasingly
tied their members job security to the fate of companies in a highly competitive
world, and subsequently seen their role diminish. The results have very often been
90
92
TABLE 5. Wage share, real wages and value added shares, 1980 2005
Austria
Belgium
Canada
Denmark
Finland
France
Germany
Italy
Netherlands
Norway
Sweden a
United Kingdom
United States
Mean
Real wages
1980
2005
Change
198090
1991-2000
200105
1980
2003
Change
89.7
70.8
73.2
71.7
72.2
79.9
71.3
77.4
75.5
74.3
88.6
82.2
72.8
76.9
65.4
63.6
66.0
58.3
57.6
61.4
59.6
61.8
63.3
65.0
65.1
73.0
63.5
63.4
217.3
27.2
27.2
214.6
218.6
211.8
213.4
212.2
29.3
29.3
223.5
215.6
29.3
213.5
1.1
1.0
0.1
1.4
1.9
1.2
1.2
1.6
20.6
24.7
0.2
1.5
0.3
0.5
1.3
1.3
0.3
0.8
0.8
1.5
1.3
20.6
21.2
0.6
1.0
1.5
1.6
0.8
0.3
0.5
0.4
1.2
2.8
1.3
0.6
0.0
21.6
21.0
2.8
1.0
20.5
0.6
12.3
17.6
17.1
19.8
13.4
23
18.5
15.8
15.8
14.6
16.1
15.5
22.1
17.0
22.4
28.6
24.8 b
24.4
21.4
31
30.5
27.3
26.7
19.5
24.8
30.3
32
26.6
10.1
11
7.7
4.6
8
8
12
11.5
10.9
4.9
8.7
14.8
9.9
9.4
Sources: Wage Share - OECD Economic Outlook, courtesy of Paul Swaim, Economics Dept., OECD; Real Wages and Value Added share calculated on
statistics from OECD Stan Indicators Database Online, and supplemented with national statistics databases.
Notes: The wage share corresponds to the share of total labour compensation in the income generated by the business sector of the economy. Real wages is
based on nominal labour compensation per unit labour input business sector excluding agriculture divided by annual average inflation. FIRE and Business
Services Value Added Shares Relative to Total Economy defined as output minus intermediate consumption.
Value added and wage share statistics do not add up perfectly to 100. The value added figure includes wages in the financial sector along with profits and
capital returns, less intermediate consumption and depreciation. a Swedish wage figures based on manufacturing 1980-1993. b Canada 2000.
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Wage share
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addition, Danish firms have pushed for and won the introduction of flexible
working time, and with low levels of employment protection, manufacturing
and retail enterprises rapidly shifted to hiring and lay off practices on flexible
schedules that rivalled those of the United States.14 Belgian firms have also
adopted similar part-time and flexible work strategies, and non-standard work
has risen rapidly over the past two decades. If earlier patterns seen in North
America and Western Europe are any indicator, such developments suggest that
labour movements and governments in both countries may soon face larger problems with the current economic downturn, bank bailouts, rising deficits and widespread lay offs.
Conclusion
How widespread have financial reforms been? Has organised labour continued to
effectively employ wage bargaining and corporatist means of coordination to
make ever larger and more financially powerful firms bargain? Has labour been
able to ensure better wages and incomes and preserve the strategic capacities
of coordinated market economies, while ensuring that firms maintain their highskills, high-value, high-wage strategies?
The evidence suggests that whether in North America or Western Europe, the
rise of financial capitalism along with the global financial integration of stock and
capital markets either directly through the rise of new financial key actors
(including extensive foreign ownership) or indirectly through altered incentive
structures strongly influenced corporate governance and firm operations
throughout North America and Western Europe. As all the key financial indicators
show from FDI stock flows to market capitalisation rates to equity trading and
M&As the shifts in finance and corporate functioning were broad and extensive,
affecting all countries, including Austria, Italy and Norway that formerly had
exceptionally stable insider corporate governance systems. So too were changes
in companies production and employment practices equally significant.
Quantitative and qualitative evidence highlights that many MNCs reacted to
financial globalisation by rapidly adopting M&As, undertaking internal restructuring, and engaging in lay offs, outsourcing and relocation that subsequently drove
forward a process of deindustrialisation and reindustrialisation across continents
that cost many unionised workers their jobs. Just as commonly, firms reacted to
financial pressures by using partnership strategies to lower wage costs while
they two-tiered their workforce, and frequently denied labour representatives
influence over investment, lay offs or training, and only reluctantly funded early
retirement packages, all the while complaining of rising social costs.
For organised labour, the impact of these changes to finance and corporate management were largely negative. It certainly was true that despite the pressures of
finance, unemployment and economic competition, political institutions alongside
market regulations and wage-bargaining institutions continued to shape firm behaviour and economic change. Equally true, businesses and governments sought
innumerable ways to become more competitive in the global economy, and
undertook a variety of measures from decentralised bargaining and social pacts,
to privatising pensions and deregulating employment protection in order to
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8.
9.
10.
11.
12.
13.
14.
ownership in Europe see Huizinga and Jonung (2005). The extent of financial integration is detailed in the
latest European Commission report (2007) on finance and financial integration.
On IPOs and market capitalisation rates, see the recent European Commission report (2007: 34) and chart 4.3;
on market capitalisation rates, see the reports Annex II, chart 3.4.
The UN currently tracks a number of financial indicators, including mergers and acquisitions by country and
region, See the Foreign Direct Investment Online Database (http://stats.unctad.org/fdi/).
Some of the best in depth coverage of changes to corporate governance and industrial relations across
Western Europe has come out of the European Industrial Relations Observatory. See, for example,
Edwards (2002), Macaire et al. (2002), and Pedersini (2006). The qualitative, country survey evidence on
which much of Edwards report is based can be accessed at: http://www.eurofound.europa.eu/eiro/2002/
09/study/index.htm.
Good country studies of recent changes to corporate governance in Western Europe include: Aguilera (2005)
on Spain; Rose and Mejer (2003) on Denmark; Goyer (2003) on France; Jackson et al. (2005) on Germany;
Poustma and Braam (2005) on the Netherlands; Reiter (2003) on Sweden; Yla-Anntila et al. (2005) on
Finland.
On the wide variation and inequality in real wages, see Andrew Glyn (n.d: 2) and Mishel et al. (2007:
12033, 2026). On the widening gap in personal earnings between full-time workers and those in nonstandard employment see, OECD (2008: 824).
For discussions on Denmark see, Jrgensen (2006), and Andersen and Svarer (2006). Rochet (2006) provides a
number of direct responses to question on the impacts of MNCs and relocation of production to work and industrial relations in Belgium. For an overview of recent trade union actions in Europe, see Gajewska (2008).
The most comprehensive survey of labour market deregulation in the OECD including changes in
Denmark is found in the country surveys provided by Brandt et al. (2005).
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