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

the procedural concessions won through confrontations with the state provided organized labor with important legal prerogatives that in the long term significantly augmented its power vis-à-vis the state. In Poland, for instance, concessions granted to labor during the 1980s gave workers’ councils extensive powers in controlling the management of public sector enterprises. Once economic reforms began following the 1989 transition, the councils were able to make a compelling case that they had ownership rights within state firms, thus significantly altering the government’s privatization plans. In Egypt, during the 1970s the ETUC extracted important concessions from the regime that gave them the legal right to participate in policy making affecting its membership base. The ETUC made use of this legal prerogative during debates about public sector restructuring and divestiture during the 1990s.

      Resources

      As a consequence of contentious encounters between organized labor and the state, corporatist institutions can weaken over time and labor begins to acquire important resources. Crucially, such encounters often go beyond demands for improving workers’ standard of living that can be satisfied, at least in good economic times, through substantive concessions. Frequently these contentious encounters revolve around issues of control over decision making within the labor organizations themselves as well as at the national level. The procedural concessions that the party is forced to grant both because it lacks material resources to extend substantive concessions and because of the nature of the demands go to the very heart of the corporatist arrangements designed to ensure labor’s subordination to the regime. The price of maintaining labor’s political support during periods of crisis is often the long-term reduction of the regime’s ability to control labor organizations. By gradually expanding the autonomous space that labor institutions enjoy, labor’s political loyalty to the ruling party becomes that much more difficult to enforce. This in turn increases the likelihood that during the next moment of crisis the unions will be that much more willing and able to demand and extract further concessions. In other words, changes in laws and regulations governing labor relations are valuable resources that organized labor acquires during contentious encounters with the state. Over time these legal prerogatives significantly reshape organized labor’s ability to influence policy decisions it cares about.

These legal prerogatives are often accompanied by the acquisition of other resources. When the prerogatives are acquired through a bargaining process with an often reluctant state, labor organizations also gain a more intangible resource of experience. Thus labor organizations that had successfully extracted concessions from the state are more confident in their ability to challenge the state in the future and know how to do so. They had confronted the state previously and had witnessed the state backing down. Consequently, what once may have been perceived as a regime with large reservoirs of repressive tactics and a willingness to use them now comes to be seen more as an opponent that can be brought to the negotiating table. By the same token, during subsequent encounters the ruling party is aware that the once submissive labor organization has gained additional experiential resources that it can draw upon and knows how politically threatening labor unrest can be.¹¹

      Finally, the acquisition of legal prerogatives by labor organizations is also often accompanied by the expansion of fiscal autonomy from the state, through, for instance, greater control over the collection and expenditure of union dues and through the control of profit-generating ventures and economic initiatives that bypass the state, such as vacation resorts; housing; or, as was the case in Egypt, a bank. In other cases, as in Poland, organized labor can tap into foreign sources of funding that are outside state control. With greater financial autonomy, the ability of organized labor to effectively confront the state grows, since unions are now less concerned that in retaliation for insubordination the ruling party will be able to cut off all its financing. Furthermore, once acquired, these resources proved difficult to rescind and highly resilient even in the face of profound and far-reaching sociopolitical and economic transformation. Because the resources were acquired through contentious encounters with the state, workers were willing to defend them and resist attempts by the state to take them away. Chapters 2 and 3 will examine the evolution of corporatist labor institutions in the four cases. They will focus on how in two of them, Poland and Egypt, in the decades prior to reform initiation in 1989 in the former and 1991 in the latter, the contentious encounters between the state and organized labor resulted in unions’ acquiring legal prerogatives, significant financial autonomy, and experience of successfully confronting the regime. These resources allowed them to insert themselves into policy making and shape privatization strategies that were adopted when governments initiated structural adjustment reforms. These chapters will also examine how organized labor in Czechoslovakia and Mexico traveled along a very different trajectory. Here, corporatist labor institutions remained effective and unions did not acquire the resources that would allow them to influence privatization policies during the first decade of reforms.

      Dynamics Within Ruling Parties

      Why are corporatist labor institutions able to extract these recourses in some cases but not in others? After all, economic crises that triggered labor mobilization in Poland and Egypt also occurred in the other two cases, but with very different consequences for party-labor relationships. Why were ruling parties in two cases able to either prevent labor mobilization from happening in the first place even during periods of economic downturn or, when they did occur, to withstand the pressure to grant additional procedural concessions or accede to changes that resulted in greater union financial autonomy? Or put differently, why was the creation of effective mechanisms for elite conflict resolution so central to the Mexican and Czechoslovak regimes’ ability to maintain control of corporatist labor institutions?

The single or ruling party, which Duverger has called one of the great inventions of the twentieth century, shares some features with other types of political parties.¹² It does, however, exhibit a number of unique characteristics that place it in a distinct category. The single or ruling party has historically emerged primarily either in states that have undergone revolutions or in those that were engaged in nationalist, anticolonial struggles. This particular context has influenced how the party defined its functions and goals and how it related to the bureaucratic apparatus of the state. Single parties that emerged from either revolutionary or nationalist struggles came into power with promises of a complete reorganization of both the political and socioeconomic order. In cases of nationalist struggle, the single party achieved a dominant position by virtue of being the most viable political organization in the new nation. In the revolutionary context, the single party engaged in displacing any other political actors who may have posed a challenge to its authority and to its program of fundamental restructuring of socioeconomic relations.¹³

The single party’s tasks were enormous, both because of ambitious socioeconomic-transformation projects and because of the need to politically consolidate what often were newly created nations. Given this environment, the party engaged in activities that in more consolidated states are performed by other institutions, such as the mass media, the courts, or social service delivery organizations.¹⁴ In addition, to promote and implement its goals of socioeconomic transformation and working either in the absence of a well-developed bureaucracy or in a bureaucracy whose loyalty to the party’s project was suspect, the party became engaged in mobilizing, controlling, and coordinating administrative tasks; served as the main conduit for the dissemination of information and development targets from the center to the peripheries; and became the main source of training and educating the population to prepare it for implementation of the sought-after changes. At the same time, the single party began extending direct control over such social organizations as labor unions and women’s and youth leagues to make them unavailable to any other potential political entrepreneurs. This meant that while the ruling party and the government remained nominally independent of each other, in reality the two became fused.¹⁵