Anke Hassel

The Paradox of Liberalization – Understanding Dualism and the Recovery of the German Political Economy

What do the recent trends in German economic development convey about the trajectory of change? Has liberalization prepared the German economy to deal with new challenges? What effects will liberalization have on the coordinating capacities of economic institutions? This paper argues that coordination and liberalization are two sides of the same coin in the process of corporate restructuring in the face of economic shocks. Firms seek labour cooperation in the face of tighter competitive pressures and exploit institutional advantages of coordination. However, tighter cooperation with core workers sharpened insider-outsider divisions and were built upon service sector cost cutting through liberalization. The combination of plantlevel restructuring and social policy change forms a trajectory of institutional adjustment of forming complementary economic segments which work under different rules. The process is driven by producer coalitions of export-oriented firms and core workers’ representatives rather than by firms per se.

Adjustments in the Eurozone: Varieties of Capitalism and the Crisis in Southern Europe

This paper investigates the causes of, and reactions to, the Eurozone crisis, focusing in particular on the institutional foundations of the four Southern European Eurozone countries that have encountered an acute sovereign debt crisis. Applying the basic arguments featured in the Varieties of Capitalism literature, the paper aims to show how the interaction of the institutional set-up of coordinated and mixed market economies, with the effects of the common currency area, can explain both the evolution of the crisis, as well as the reactions to it. This paper interprets the sovereign debt crisis in the Eurozone as the combination of two features: firstly, the architecture of the common currency area, which instituted a common interest rate for widely heterogeneous regional economies, and secondly, the specific institutional foundations of two types of economies participating in the Eurozone, namely coordinated market economies and mixed market economies. Understanding these two factors and their interaction not only helps to explain why the Southern European countries were particularly vulnerable to exploding public debt, but also why, during the on-going resolution of the Eurozone crisis over the last two years, policy makers have persistently preferred austerity over the mutualisation of debt. The compensatory role of the state in mixed-market economies thereby undermines the effectiveness of financial bail-outs for economic growth strategies.

Trade Unions and the Future of Democratic Capitalism

In this chapter, I look at trends of union and business organizations and their implications for the future of democratic capitalism. As in earlier assessments, the results concentrated on a steady union decline within much more stable wage bargaining institutions. Given the rapid economic changes of deindustrialization and globalization, business coordination and wage bargaining centralization show remarkably high levels of institutional resilience. However, stability of wage bargaining institutions does not guarantee unionization rates. Wage bargaining centralization or wage bargaining coverage does not prevent unions from declining. Wage bargaining coordination can persist without union strength. Existing institutions have important benefits for employers as well as for unions. Coordination capacities can be exercised through employers’ organizations, bargaining coverage and bargaining centralization, even though trade unions are very weak. Moreover, wage inequality remains greater in countries with decentralized bargaining systems and segmented trade union structures. The trends that are described in this chapter imply that with the decline of unionization labour market institutions have become somewhat less important for economic management and the performance of modern economies. Governments pursue less policy concertation and the impact of institutions on performance has weakened.

Pathways of Change in CMEs: Training Regimes in Germany and the Netherlands

This paper provides a comparative analysis of training regimes in Germany and the Netherlands. Both countries are CMEs with similar institutions, but their training regimes differ in important ways. The paper first maps the similarities and differences in the training regimes in both countries and then turns to three questions that frame the analysis of these similarities and differences. First, how have skills regimes adjusted to changes in economic and employment structure, such as de-industrialization and the rise of the service economy? Second, how much does the structure and adaptability of the raining regime help to explain the relative success of the Dutch employment miracle? Does the Dutch training regime represent successful institutional adaptation to changed economic circumstances? Conversely, does the inflexibility of the training regime contribute to the German employment malaise? Finally, what do these findings suggest for the analysis of the political economy of skills regimes in other CMEs?

Posting, subcontracting and low-wage employment in the German meat industry

During the last few decades, the German meat industry has experienced an incomparable economic expansion, becoming one of the largest European producers and exporters in the sector. At the same time, Germany, traditionally characterized as a coordinated market economy with strong social partners and labour market institutions, has been nationally as well as internationally criticized for establishing a system of institutional exploitation of mobile and migrant labour in the industry. The aim of this article is to analyse how it was possible to create and maintain such a system under the eyes of social partners and to identify the defining factors for this development.

Winning the battle or losing the war: the impact of European integration on labour market institutions in Germany and Denmark

ABSTRACT The European Union (EU) literature sees increasing market liberalization as a challenge for models of national capitalism. EU liberalization, it is argued, erodes national employment regimes and social protection. However, other scholars highlight the ability of national institutions to reinvent themselves. This contribution assesses these claims by exploring an extreme case of labour market pressure driven by EU liberalization. Focusing on the meat production sector, it shows that low-wage labour migration has affected employment conditions in the meat production sector in Germany and Denmark in different ways: dualization has made Germany a destination country for low-wage work; in contrast, union solidarity in Denmark has kept wages high and Danish meat producers have outsourced work to Germany. The underlying industrial relations systems have shaped actors’ responses to the use of migrant labour.

The policy consensus ruling European political economy: the political attractions of discredited economics

Abstract Since the Great Recession in 2008 academic economics has come under heavy criticism. But a straightforward alternative is not in sight either. We analyse in this article how the major flaws of applied economics are the mirror image of its attractions to policymakers, mainstream political parties and reform-minded administrations. We first assess what the consensus until recently has been and how it could have been implicated in the crisis. Secondly, we argue, following Hall, that the policy consensus continues to persist because it is politically attractive. The article ends with observations of how the management of the Euro area crisis still shows the attractiveness of the consensus. Policy recommendations: •  Introduce greater pluralism in advisory bodies on economic policy to include civil society organizations, such as trade unions, and consumer organizations as well as academic disciplines other than economics. •  Review compensation policy for representatives on advisory committees to create a level playing field for experts from civil society organizations and independent consultants with financial sector lobbyists. •  Support and back up critical voices in the financial industry and in regulatory bodies against those who defend regulatory neglect and the privilege of rent-seeking for the financial industry.

Labor Migration and the German Meat Processing Industry: Fundamental Freedoms and the Influx of Cheap Labor

Germany has historically been known for its strong interest representation for both labor and capital (Hall and Soskice 2001). Trade unions, complemented by works councils, have profited from strong legal rights regarding their participation and consultation in collective bargaining, creating a basis for stable and long-term-oriented cooperation between capital and labor. However, during the last couple of years, investigative journalists have reported increasing cases of exploitation among migrant workers. These workers come to Germany from the new member states of the European Union (EU), receiving wages ranging between €4 and €8 per hour and working shifts of twelve to fourteen hours per day. The meat processing industry, in particular, has been heavily criticized (Grossarth 2013). Companies like Danish Crown even relocated their business to Germany because of the comparatively cheap labor costs (“Deutsche sind billiger” 2010). Consequently, the Belgian government lodged a complaint with the European Commission against the low-wage policy of Germany, claiming that the “undignified practices” (European Parliament 2013) would undermine competition within the EU. In reaction, the German Ministry of Labor has called for common action to find a solution to the problems in the meat processing industry. A major impediment that surfaced in this context was the comparative weakness of social dialogue, not only between companies and labor representatives but also among the different companies participating in the

Bringing the State Back In – The Role of Fiscal Federalism for Welfare Restructuring

Welfare restructuring literature has concentrated on political institutions, electoral systems and cross class coalitions for explaining recent policy reforms. However, even in Bismarckian welfare states, which are dominated by veto positions, proportional representation electoral rules and strong unions and employers, fundamental welfare restructuring has taken place during the last decade. The paper argues that these policy changes can only be understood by taking into account the structure of welfare financing in these countries. Focusing on the reform of unemployment benefits in Germany we analyze the origins of the reform and illustrate the close interaction between labour market and fiscal policy considerations within the government. We argue that the cost-shifting nature of the German political system resulting in high non wage labour costs and a growing financial burden for municipalities was responsible for the emergence of new conflict lines. The paper concludes by reconciling coalition politics and fiscal constraints arguments.

Move to Work, Move to Stay? Mapping Atypical Labour Migration into Germany

Abstract Germany has become one of the major destination countries for labour migration within the European Union. The German government introduced temporary restrictions on labour migration after the eastern enlargement rounds of 2004 and 2007. These barriers had little impact on the overall volume of labour mobility. Rather they were accompanied by new “atypical” forms of mobility through the posting of workers, self-employment and seasonal workers, which according to EU rules are covered only by a minimum of host country regulations. The combination of temporary restrictions on regular migration and the opportunities through atypical mobility created strong incentives for companies to engage in ‘regime shopping’ strategies. This contributed to a considerable growth in outsourcing, subcontracting and flexible use of external labour added to pre-existing dynamics of low-wage competition, segmentation and fragmentation in the German labour market. Using data on the different forms of intra-EU migration to Germany, the article analyses the different paths that labour migration has frequently used since the fall of the Iron Curtain. First, it maps the changes in magnitude, character and direction of intra-EU labour mobility to Germany and the relative weight of the different channels through which such movements occurred from 2000 to 2015. Second, the article discusses the various responses by the government by the extension of collective agreements and the statutory minimum wage.