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«Why don’t governments need trade unions anymore? The death of social pacts in Ireland and Italy Downloaded from at ...»

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The deal itself was contested within the union movement, both by local rivals and within the militant wing of the larger union, the CGIL (Simoni, 2010). As emphasized by Baccaro (2002), the main Italian unions used a procedural device to reaffirm their own legitimacy in striking the deal: they put it to a binding vote of union members. The union leaders won their gamble, reinforcing themselves by showing that the deal they had negotiated was democratically supported ` within the union movement. They were strengthened vis-a-vis their competitors, but also their centrality to the process of wage negotiation was reaffirmed to employers and to political actors.

Proof of the revitalized power of the Italian trade unions came in 1994, when the newly elected government of Silvio Berlusconi tried to introduce a unilateral reform of the pension system, which included an attack on seniority pensions, a hot button issue for trade unions. In response, the unions were able to organize a nationwide demonstration against the reform that forced the Berlusconi government to withdraw the measure, and shortly thereafter to resign. Their ability to mobilize broad social protest thus turned the unions into effective veto players in the pension negotiations of 1994 (Graziano and Jessoula, 2011).

In 1995, a technocratic government came to power led by Lamberto Dini, who had served as Finance Minister under the previous Berlusconi government. In sharp contrast to the exclusionary negotiating style of the previous government, ‘the ensuing negotiations took the union scheme as their starting point’, and ‘the trade union representatives participated informally in each stage of the drafting of the Government bill’ (Regalia and Regini, 1998, p. 493; Antichi and Pizzuti, 2000, p. 90). This reform achieved the goals of the previous government, but unions introduced long phase-ins—which both protected their members in the short-run, and gave those members a reason to vote for the compromise reform plan.

Page 16 of 23 P. D. Culpepper and A. Regan And it is at this point is where union involvement comprised not only the threat of political harm to the government, but also the positive capacity to mobilize consent among its members to solve government problems. As in the earlier reform of industrial relations system, the measure was put to a vote of workers.

Because unions had designed the reforms with an eye to persuading militant insiders—a perspective the government would not likely have included on its own (Culpepper, 2002)—it was able to campaign among these workers to get them to approve the bill. This ratification mechanism, which again shored up the internal Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 support of the unions (Baccaro, 2002), was of direct benefit to the government.

It was able to pass a substantial pension reform, which knowledgeable observers called ‘one of the most radical reforms in the history of the Italian welfare state’ (Regini and Regalia, 1997).

There is no doubt that Italian unions were effective veto players in the major moments of economic policy reform in the 1990s. This veto power allowed the unions to impose costs on the economy through strikes and costs on the government through protests, when governments tried to ignore them. Yet the story of the rebirth of social partnership in Italy in the 1990s is not merely a function of this deterrent power. It is also a function of the valuable capacities that unions were able to bring to the negotiating table once they worked with the government.

In short, they offered the ability to help the government design policies in such a way that it could find a supportive majority within a divided workforce. This problem-solving capacity was harder for state actors to replicate on their own.

Moreover, once the reform was agreed with the government, the democratic voting mechanisms employed by the unions proved a powerful tool to help them mobilize support for the agreement. The unions did indeed protect insider privileges in order to get the Italian pension reform passed. But they nevertheless helped design a policy that would resolve a long-standing problem facing the Italian welfare state.

4.1 The government of Mario Monti and the exclusion of unions from policymaking The first technocratic government since that of Lamberto Dini in 1995 assumed power late in 2011 under the leadership of Mario Monti and the under the cloud of the Euro crisis. Like Dini, Monti succeeded Silvio Berlusconi as prime minister, whose centre-right coalition was widely perceived as incapable of halting the growing spreads between the interest rates paid on Italian and German government bonds, and thus sustaining Italian membership of the Euro. Monti came to power with a mandate to reform social and labour market policy to make Italy once again competitive in international markets (Pasquino and Valbruzzi, 2012).

Yet the union movement faced by the Monti government was of a substantially different character than the one that that had helped pilot reforms of the Italian Why don’t governments need trade unions anymore? Page 17 of 23 social model in the 1990s. It was weaker on two fronts. First, it was much more internally divided between the big three unions (CGIL, UIL and CISL). While these unions had worked closely together in the 1990s, right-wing governments had driven a wedge between the largest group, the CGIL, and the two more moderate unions, which agreed to two social pacts that the CGIL did not sign in 2002 and 2009 (Simoni, 2010). Compared with the united unions that had mobilized workers to support difficult reforms through direct democracy in 1993 and 1995, the concertation of unions was much more divisive than in the earlier periods, Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 and therefore they were not in a strong position to help solve government problems.

These divisions among union confederations exacerbated their declining power at the shop floor, which is tied to declining membership. Union density has been in decline since the late 1970s; between 1993 and the 2007 it continued to fall further, from 39 to 33% of the workforce (Visser, 2009). Moreover, this overall density masks differences across generations and across the economy. Survey data by Baccaro and Pulignano (2011) suggest that in 2008 union density for the private sector was only 19%, and the density among the 18– 34 age group was also only 19%. This is a fragile basis of representation from which to demand a seat at the table with policymakers.

This was the industrial relations background against which the Monti government assumed power in November 2011. Its first act of austerity was a plan called Salva Italia, much of whose cost-cutting came through an ambitious pension reform. The reform completed the move to a defined contribution system that had begun in 1995, and it raised the retirement age for women in the private sector to 62, which is forecast to increase further until it equals that of men (67) in 2018. The bill also unlinked pensions above the level of E1400 per month from inflation. Procedurally, the unions were informed of the content of the reform, but even these meetings took place in bilateral fashion, with the government representative meeting individually with each union, rather than jointly.

Concertation was out; pluralism was in. The three divided union confederations were able to unite their forces and call for a public-sector strike in protest at the pension reform, but this changed nothing in the pension reform and did little apparent harm to the government.

Clearly, the union stick was not all that threatening in the case of the pension reform. What about the carrot of problem-solving? Without unions capable of working with policymakers, governments are likely to make politically costly mistakes, as indeed happened in the case of the Monti government’s pension reforms.

Because of the changed retirement thresholds, workers who had previously taken early retirement became suddenly ineligible for pensions. Those who had left the workforce but been left behind by the changing rules of the pension system came to be called the esodati: the exiled ones. The technocratic government vowed to cover the esodati, estimating their number at 65 000. Union estimates of the Page 18 of 23 P. D. Culpepper and A. Regan exiled ones, though, were substantially higher, about 400 000—and the figure of 390 000 was eventually ratified by the state’s social security agency in June, 2012 (Repubblica, 2012). The Monti government got it wrong, while the unions got it right. The question of how to deal with the exiled ones, and their number, continued to dog the technocratic government. In October 2012, the State General Accounting Department rejected the bill on the esodati as having manifestly insufcient financial provision for those it promised to cover (Corriere della Sera, 2012).

The exiled ones were insiders, yes—but the government’s inability to provide for Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014 their plight was a politically damaging error, one that union problem-solving capacity, had it been available, may well have helped to avoid.

The pattern of non-consultation first adopted in the pension reforms continued in the Monti administration’s attempted reform of labour market policy. The government proposed to weaken the protections afforded against unfair dismissal embedded in article 18 of the labour code. Article 18 requires all firms having fewer than 15 workers to reinstate a fired worker in the case labour court decides they have been wrongfully terminated. Companies view the courts as sympathetic to workers, and thus consider the provision an effective block on firing. The Monti government negotiated with labour unions for 2 months in early 2012 and then said it would carry on without the agreement of the unions.

Unlike in the case of the pension reform, the Italian unions were this time able to use protests as a tool to rally public opinion against the change of article 18. Following large street protests, the government then retreated, allowing labour courts to reinstate workers fired for implausible economic grounds. Unions opposed even this weakened reform, which they viewed as a slippery slope to neoliberalism.

But there is no doubt that the protests around article 18 forced the government to change course. Does this instance of successful protest not belie our claim that unions do not have a stick to threaten the government?

On the contrary, the article 18 protests are consistent with our argument that unions cannot strike fear into the government, and can be generally treated as one private interest group among many. These protests were not ‘the beginning of the end’ for the Monti government. Instead, they were tactical reversals—essentially equivalent to the reversals that organized taxi drivers, pharmacists and lawyers had each extracted from the government when it attempted to liberalize those professions in January 2012. In each case, the attempt to open the closed groups to competition-led pressure groups to organize strikes and to mobilize support from the political parties associated with them (in the case of taxi drivers and pharmacists, the centre-right; in the case of labour unions, the centre-left).

Technocratic governments are still supported by political parties, and these parties are able to undermine such governments when their core constituencies protest. Yet the ability to make such demands falls well short of precipitating the fall of a government, as we could describe the strike against the Berlusconi in Why don’t governments need trade unions anymore? Page 19 of 23

1994. And indeed, the Italian labour unions acquired no momentum as a result of the article 18 protests, which they could later mobilize to achieve other policy gains on behalf of working people. By 2012, Italian trade union confederations had moved from being a veto player on all major social reforms—the position they occupied in the mid-1990s—to being one pressure group among others. The major difference between them and the taxi drivers was just a few extra members.

Downloaded from http://ser.oxfordjournals.org/ at University College Dublin on September 19, 2014

5. Discussion In both Ireland and Italy, weak governments that faced significant challenges of economic adjustment in the past worked with unions in order to be able to develop their policies of reform. During the recent Eurozone crisis, they have emphatically rejected the utility of using social pacts with unions to develop their reforms, as illustrated by the quotations from Mario Monti and Brian Lenihan with which this

article began. We have attributed this choice to a decline of two parallel capacities:

striking fear into government and the ability to solve government problems through mobilizing support for politically difficult reform packages. With neither carrot nor stick to brandish towards the government, unions in Ireland and Italy have been reduced to the role of being a narrow interest group like any other.

One alternative explanation we have not considered until now deserves consideration: that the exclusion of unions was a political choice, because the political leaders in Ireland and Italy simply disliked working with unions. Hamann and Kelly (2007) have in the past pointed to the political dimension of social partnership; it is a calculus that parties make with an eye to the next polling day. Such an argument cannot be behind the choices of Monti and Cowen to eschew social partnership, though, since the choice to exclude unions meant they had to take the full weight of electoral opprobrium for harsh reform programmes. Both faced crushing electoral rejection after their time in office.

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