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interaction and communication between workers. Furthermore, as Zolberg has noted, in many developing countries even when trade unions appear weak and not well organized, “it is relatively easy for them to make trouble for their employer, and since their employer often happens to be the state their behavior is politically threatening.”⁴ Privatization, therefore, directly affects what is frequently one of the few organized groups within society.

Despite organized labor’s anticipated interest in state sector reforms and potential ability to translate that interest into policy influence, the actual experience with public sector reform design and implementation has proven to be more complex. Many early observers of economic reforms anticipated that organized labor was likely to present a major challenge to the implementation of structural adjustment. In their view, overcoming labor resistance was crucial to consolidating the reforms.⁵ When reforms were not abandoned, the analytic pendulum swung in the opposite direction and initial concerns about the power of organized labor were brushed aside. Geddes summed up this emerging consensus on labor’s powerlessness well when she pointed out that the lack of political upheavals such as “regime breakdown” or “defeat of incumbents at the polls” or “wholesale abandonment of market reforms” made evident that organized labor was unable to affect reform dynamics.⁶ Empirical evidence suggests, however, that neither view is fully persuasive. In some cases, organized labor was able to significantly shape both stages of the reform agenda. In other cases, it was not.

      The Reform Experience

      Poland

      In Poland organized labor emerged as an influential player during the first decade of public sector reform design and implementation. Polish organized labor that emerged following the 1989 political transition was highly fragmented. However, most workers belonged to one of two large union federations, the National Confederation of Trade Unions (OPZZ) or Solidarity. These groups, because of their divergent affiliation with two different political currents, were frequently in conflict at least at the national level. Both federations fielded candidates in parliamentary elections. However, Solidarity chose to play a much more direct role in politics and it both offered political backing to governing coalitions and formed its own political organization, becoming directly involved in governing. Alongside trade unions, each state-owned enterprise had a workers’ council. In spring 1990 the government submitted its privatization program to the parliament, setting the stage for the first significant confrontation between the state and organized labor. The government proposal emphasized the need for a quick sale of state assets and gave state agencies the power to initiate and oversee the sales process. The reaction of organized labor was both swift and negative. One of the main points of contention between the government and organized labor was the issue of actual ownership of public sector firms. Union-backed deputies quickly presented the parliament with an alternative privatization plan which proposed greater social control over the process.

The final version of the privatization program represented a major victory for labor. Workers’ councils were granted the right to initiate restructuring and privatization procedures and to decide on the privatization path for their enterprise. Most important, without the approval of the workers’ council, sale of the company could not move forward.⁷ Labor organizations thus managed to significantly modify the privatization program during the design phase and played an equally significant role during implementation. In the first years of reform both trade unions and workers’ councils did little to block the restructuring of enterprises and in many cases were active promoters of these changes. At the national level, Solidarity extended a “protective umbrella” over the reforms, containing strike activities and promoting enterprise restructuring. When organized labor’s support for reforms became more tenuous and workers’ councils became reluctant to approve restructuring measures, the pace of sales of state firms slowed noticeably.

      The change in organized labor’s stance forced the government to rethink its public sector restructuring strategies. The resulting Commercialization and Privatization Act of 1996 gave organized labor additional incentives to back privatization programs through allocation of free shares in enterprise and increase in workers’ representation on company supervisory boards. The new law, however, did little to accelerate the pace of sales or to make the first decade of reforms less contentious. Polish labor organizations thus managed to significantly influence the process of privatization implementation by affecting the privatization methods employed as well as the pace of sales.

      Egypt

      In Egypt organized labor also became an influential player in the process of reform design and implementation. The way it pursued its goals differed, however, because of the lack of political opening that accompanied market reforms in Poland. In fact, as the Egyptian regime sought to liberalize its economy, it began retreating from the political liberalization experiment of the 1980s. Despite growing political repression, organized labor succeeded in modifying the privatization program during the design phase, shaped other pieces of legislation directly affecting the pace of divestitures, and significantly slowed the implementation of the public sector restructuring program.

      The first confrontation between the Egyptian Trade Union Confederation (ETUC) and the government erupted during the parliamentary debate in the summer of 1991 over the adoption of the Public Enterprise Law (Law 203), which was to guide the privatization process. The ETUC opposed the original government proposal. Because the government wanted the ETUC’s endorsement before adopting the plan, however, it agreed to a number of concessions, including guarantees against mass layoffs of workers and that only the adoption of a new labor code could override these provisions. In addition, the ETUC was guaranteed participation in all future decisions affecting the public sector.

      As the privatization program moved into the implementation phase, the ETUC continued to have substantial influence over the process. Two government proposals directly related to the implementation of the privatization program encountered especially strong objections from organized labor. One involved changes in the labor code and the other concerned the adoption of an early retirement scheme for public sector workers. The most contentious were negotiations over new labor market regulations. Both government and business groups wanted more flexible employment contracts that would allow employers to dismiss unneeded workers. Labor opposed this change but wanted the right to strike, which business and the government rejected. The negotiations lasted almost a decade and the lack of progress contributed to the slowdown in the pace of sales. Negotiations over the early retirement scheme were also contentious. In the end the ETUC succeeded in ensuring a higher compensation package and the voluntary nature of the program. The latter provision in particular affected the pace of enterprise restructuring and sales. At the same time and without ETUC approval or support, many restructuring measures also came up against enterprise-level labor opposition. Because the regime feared social unrest, the intensification of labor protests made the implementation of public sector restructuring policies politically difficult.

      The Czech Republic

      In the Czech Republic organized labor had little input into the design and implementation of public sector restructuring. In March 1990, following the fall of the Communist regime, a congress of trade unionists officially dismantled the seventeen industrial unions of the Revolutionary Trade Union Movement and established the Czechoslovak Confederation of Trade Unions (ČSKOS), which grouped labor organizations of both the Czech and Slovak republics. As in Poland, trade unions were initially supportive of the economic reform program, though not of all proposed restructuring measures. Unlike in Poland, however, the unions had difficulty in formulating counterproposals and ensuring that they would be considered by the parliament and the government as the reform program was being designed in the second half of 1990. The privatization plan adopted by the parliament in January 1991 did not reflect trade union demands.

      Once the privatization program was approved by the parliament, unions proved equally powerless to influence the process of implementation. Large-scale privatization, which included most state-owned

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