State, Labor, and the Transition to a Market Economy - Agnieszka Paczyńska

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agriculture, and trade, was implemented in two stages in 1993 and 1994. Although unions were concerned about the decline in real-wage levels, they did not manage to affect the pace of divestitures or to shape other reforms, in particular, the new labor code. The Tripartite Council, which was to facilitate government-business-labor negotiations, proved a source of frustration to unions. They felt that the government treated the council, not as a forum where agreements could be hammered out, but as a rubber stamp for decisions already taken. Yet during the first decade of reforms, even ČSKOS’s threats of strikes and demonstrations did little to influence the process of reform implementation.

      Mexico

      As in the Czech Republic, in Mexico organized labor was unable to shape the process of privatization design and implementation. However, the interaction between organized labor and successive Mexican administrations was more complex. The labor movement was composed of official unions affiliated with the ruling Institutional Revolutionary Party (PRI) as well as independent unions. All the major official trade union confederations, the Mexican Labor Federation (CTM), Revolutionary Confederation of Workers and Peasants (CROC), and Regional Confederation of Mexican Workers (CROM), were organized under the umbrella of the Labor Congress (CT). Also belonging to the CT were a number of smaller federations and a few large industrial unions. There were also independent unions not affiliated with the PRI.

      When the economic reform program began during the administration of Miguel de la Madrid (1982–88), the official unions were willing to back the government if it guaranteed adequate minimum wages. The willingness of the government to disregard that pledge was the first sign that the PRI was prepared to abandon its long alliance with organized labor as the former shifted economic policies.

      Here too privatization of the public sector was at the center of the restructuring program. Despite the long and close relationship between the official labor unions and the ruling PRI, the administration of de la Madrid and that of Salinas (1988–94) did not consult the unions during the process of privatization design and, despite intense lobbying, the CTM was unable to ensure that provisions offering protection to employees of privatized companies would be included in the program.

      Initially the CTM responded with caution and was unwilling to mount outright opposition to the program’s implementation. Some independent union organizations as well as official union locals did on occasion resist restructuring plans. However, the government was prepared to ignore such opposition and, if necessary, crush it. When the worsening economic situation led to increasing criticism from the lower levels of the official union hierarchy and from the rank and file, the CTM and CT took a more confrontational stance and demanded a rethinking of restructuring policies. This shift in official union position, however, did little to change government policies. Nevertheless, despite its inability to shape public sector reform policies, the CTM and CT were never prepared to completely break their traditional alliance with the party and join forces with the independent unions.

      Framing the Question

      Despite these differences, the struggles over the form of the new economic order playing out in Central and Eastern Europe, Latin America, the Middle East, and elsewhere stem from similar sources and are a response to similar pressures. In all these regions, deep economic crises and high levels of foreign debt forced these state-dominated economies to initiate market reforms. These structural adjustment policies had many similar features and posed a challenge to groups that had benefited from previous socioeconomic arrangements. By comparing the experiences of state-labor encounters we can thus gain a better understanding of the complex dynamics of social response to economic restructuring that are relevant across a wide range of cases. The choice of these four cases, which despite many differences shared a number of crucial similarities in the pre-reform period, allows for a systematic investigation of the factors that shape organized labor’s influence on economic change.

      What are these crucial similarities? Prior to reform initiation, all four states were authoritarian ones in which the ruling party explicitly appealed to the working class for political support and promised revolutionary socioeconomic restructuring of the society. In all four cases, the ruling party sought to construct corporatist labor organizations with the dual goal of politically mobilizing labor in support of the ruling party while at the same time establishing firm control over unions and workers. While labor was expected not to challenge the state, in return for its political quiescence workers gained access to a whole host of subsidies and other privileges that resulted, at least for a time, in improved standards of living.

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      In the decades prior to the initiation of market reforms, all four countries pursued import-substitution policies, relying heavily on the public sector both as the driving force behind economic development and as a means of achieving other sociopolitical goals. All four faced a deepening economic crisis and began implementing structural adjustment programs. In all four, privatization of public sector enterprises was a central component of the reform agenda.

      In other words, as the following section will further elaborate, our case selection allows for controlling for various explanatory variables that have often been central to explaining reform dynamics in the extant literature. For instance, there is no correlation between how labor is organized institutionally and its ability to shape and affect policies. Neither centralized nor fragmented trade unions are a good predictor of labor’s influence on public sector reform policies. The existence of technocratic teams also proves to be a poor predictor of organized labor’s ability to shape reform processes. Similarly, contrary to arguments in numerous studies of economic reform, political regime type is not a good explanatory variable for the observed variation. Among the cases analyzed here, there is no correlation between the nature of the political regime and the influence of labor organizations on privatization policies. In one democracy, the Czech Republic, organized labor’s demands were largely ignored during the design and implementation of the privatization program, while unions in the other democratic example, Poland, came to play a prominent role during both phases of the reform project. Similarly, in one authoritarian state, Mexico, organized labor was unable to influence the public sector reform program, whereas in the other, Egypt, organized labor was able to significantly shape both phases of the restructuring program. The age of the regime, also sometimes noted as an important variable explaining the level of interest group influence, does not correlate with the empirical evidence that emerges from these cases.

      In other words, the nature of the regime does not significantly affect the ability of organized labor to influence reforms. This at first glance seems surprising. As will be discussed below, many analysts have argued that authoritarian regimes are more readily able to push through painful reforms because they can silence opposing voices more easily than is the case in democracies. Authoritarian

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