Saturday, March 15, 2014
Empire (Omni Shoreham)
The Eurocrisis revived interest in sectoral conflict theories of political economy. An expanding school represented by Alison Johnston and Bob Hancké now claims that the reason for the Eurozone’s troubles lies in the different capacity of the EU’s core and periphery to curb excessive wage demands coming from employees that are sheltered from international competition. In the EU periphery, sheltered sector employees came to dominate bargaining institutions, which resulted in wage inflation and a loss of competitiveness vis-à-vis the core, where internationally exposed industries took the lead in bargaining. Nevertheless, in its current version, the theory is unable to explain why the sheltered sector came to accept wage moderation in the EU core but not in the periphery. The alternative account developed here therefore focuses on the internal structure of the sheltered sector and its political management as main factors explaining the divergence. Internal divisions within the sheltered sector stem from the different organization of public services, and also from industry- level and professional cleavages. These divisions are prominent in some core EU-countries, most importantly in Germany. Second, as most sheltered services are now provided or at least financed by the state, we need to shift our attention from formal bargaining institutions to the state as the main mediator between the sheltered and the exposed sector. The question is whether the state can find a balance between moderating public sector expansion while improving the quality of services that are produced there, as it happened in Scandinavia in the 1990s.
