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European Labor: The Ideological Legacy of the Social Pact

Asbjørn Wahl is an official of the Fagforbundet (a Norwegian trade union for municipal and health sector workers) and is vice chair of the Road Transport Worker’s Section of the International Transport Workers’ Federation (ITF). He is also the national coordinator of For the Welfare State, a trade union based national alliance fighting against privatization and deregulation, and to protect the social achievements of the welfare state.

Europe’s trade union movement is on the defensive. It is also in a deep political and ideological crisis. At present, the trade unions are unable to fulfill their role as the defenders of the immediate economic and social interests of their members. They have lost ground in all sectors and industries. What was, in the post–Second World War period, the strongest and most influential trade union movement in the capitalist world is today openly confused, lacks a clear vision, and hesitates in its new social and political orientation. Ironically, the same theories, analyses, and policies which gave it its strength in the postwar period have now become a heavy burden. The ideological legacy of the “social pact” is now leading the trade union movement astray.

The Neoliberal Offensive

Behind this development is the ongoing neoliberal transformation of our societies. As this process is not the theme of this article, let us just mention a few important points. Over the last twenty years, we have been confronted with an immense offensive from neoliberal forces. Capitalist interests have gone on the offensive, and we have seen an enormous shift in the balance of power between labor and capital. Multinational companies have, of course, been at the forefront of this development. The postwar “social pact” between labor and capital, the policy of peaceful coexistence between unions and employers, has broken down. The capital side has withdrawn from the social pact and is increasingly pursuing a confrontational policy towards organized labor.

The attempts by multinational companies and their political servants to deepen and to institutionalize their newly-achieved positions of power are important parts of this development. This is being done mainly through international institutions and agreements such as the World Trade Organization (WTO) and regional power structures like the European Union (EU). Since these bodies are less democratic than local and state governments, they have proved to be the most useful and effective instruments for the institutionalization of corporate power.

The following analysis is based on the concept that the EU is today the conduit through which the neoliberal social and economic model is being institutionalized in Europe. The EU and other regional and supranational institutions are being constructed on the basis of the new balance of power and cannot be changed, democratized, or defeated until workers are able to shift the current balance of power in their direction. Such a shift would require the trade union movement to make its main long-term task the mobilization of popular and working-class power.

New Conditions, Old Policy

Unfortunately, mobilizing working-class power is not the project of the trade union movement in Europe today. The paradox labor faces is that while the economic and political climate in which the trade unions must operate has changed enormously, most unions have continued to pursue the policy of the social pact. They consider so-called globalization to be not the result of conscious strategies and new power and class relations, but rather the necessary consequences of technological and organizational changes, a position remarkably similar to that expressed by Margaret Thatcher when she infamously said, “There is no alternative.” What is needed, they say, is to transfer the policy of the social pact from the national to the regional and global level. Their methods are “social dialogue” with employer organizations and state and suprastate institutions, campaigns for the formal introduction of labor standards (such as the labor conventions of the International Labor Organization [ILO], which, among other things, prohibit forced labor, guarantee the rights of free association and collective bargaining, and prohibit employment discrimination) in international trade agreements and trade organizations, as well as the pursuit of corporate social responsibility (CSR) codes of conduct and framework agreements with multinational companies. These latter are voluntary, unbinding, and unenforceable codes of conduct developed by the multinational companies themselves. So far, they have had no identifiable effect on corporate behavior and seem to have as their main aim counteracting the negative public image of many multinational companies.

This “social dialogue” strategy is being pursued independently of a concrete analysis of power relations and without recognition of the necessity of mobilizing class and popular power to achieve social change. To understand the current state of affairs, we have to look more closely at the history of the European labor movement—in particular the policy of the social pact, whose history and impact can hardly be overestimated if we really want to understand labor’s political and ideological crisis.

The Historic Compromise between Labor and Capital

During the twentieth century, the trade union movement in Western Europe gradually developed a kind of peaceful accommodation with capitalist interests. During the 1930s, this accommodation was first institutionalized in some parts of Europe, mainly in the north, when the trade union movement reached accords with employers’ organizations. After the Second World War, a similar process occurred in most of the rest of Western Europe.

This social pact between labor and capital formed the basis on which the welfare state was developed and wages and working conditions were gradually improved. From a period characterized by confrontations between labor and capital, societies entered a phase of social peace, bipartite and tripartite (labor, employers, and the state) negotiations, and consensus policies. Because it led to important achievements in terms of welfare, wages, and working conditions, this policy gained massive support from the working class. As a consequence, the more radical and anticapitalist parts of the labor movement were gradually marginalized. Thus, this development led to the depoliticization and deradicalization of the labor movement and the bureaucratization of the trade union movement. It became the historical role of the social democratic parties to administer this policy of class compromise. Not surprisingly, the current difficulties plaguing the unions are mirrored in the problems facing Europe’s social democratic parties.

It is important to realize that this social partnership between labor and capital was a result of the actual strength of the trade unions and the labor movement. The employers and their organizations came to see that they were not able to defeat the trade unions. They had to recognize them as representatives of the workers and negotiate with them. In other words, the peaceful accommodation between labor and capital rested on a strong labor movement. Another important factor in the post–Second World War period was that capitalism experienced more than twenty years of stable and strong economic growth. This made it possible to share the dividend among labor, capital, and public welfare.

A decisive part of the social pact was the national regulation of capital and markets. Capital control was the order of the day in all countries. Settlements between labor and capital were made in an orderly and peaceful way within national borders. An important result of this was that the trade union movement became very nationally oriented. Internationalism in the trade union movement began to deteriorate into a sort of diplomacy within international bodies (like the ILO) and even into different forms of trade union tourism, with little or no connection with the immediate needs and interests of the members, even though some of the internationalist political rhetoric remained in place.

Socialist rhetoric notwithstanding, for the trade union movement the social pact meant the acceptance of the capitalist organization of production, the private ownership of the means of production, and the employers’ right to lead the labor process. In exchange for gains in welfare and working conditions, the trade union confederations guaranteed industrial peace and restraint in wage negotiations. Put simply, the welfare state and gradually improved living conditions were what the labor movement gained in exchange for giving up its socialist project. Today we can conclude that it was a short-term achievement in a very specific historical context, one which helped greatly to depoliticize and deradicalize the working class.

An important feature of this context was the existence of a competing economic system in the Soviet Union and Eastern Europe. As the British historian Eric Hobsbawm pointed out, this was instrumental in making the capitalists in the West accept a compromise.1 It was on the basis of this compromise that the most important welfare reforms and institutions were developed during the three decades after the Second World War. The radicalized labor movement which came out of the economic and social crisis of the 1930s and the war was, in other words, met by a conscious strategy by its capitalist counterparts. They voluntarily entered into social pacts and gave in to many of labor’s social and economic demands in order to win time and dampen socialist sentiments in the labor movement. Seen from today’s vantage point, we can say that this corporate strategy was quite successful.

A sharp division of work within the labor movement was a noticeable side-effect of the class compromise. The conditions for the buying and selling of labor were regulated by the trade union movement through negotiations, while social security for the unemployed was handled by the social democratic parties in parliament. This laid the foundation for a more narrowly economistic development of the trade union movement, something which weakens trade unions today, as social democratic parties have shrunken from even their former reformist politics.

The Ideology of the Social Pact

During the era of the social pact, this corporate strategy seemed to have blinded the labor movement. Based on the real experience of twenty years of continuous improvements in living and working conditions, the common understanding was that a way had been found for society to bring social progress and a relatively fair distribution of wealth to ordinary people without having to endure class struggle and social confrontations. It was thought that capitalist society had reached a higher level of civilization. Through gradual reforms, the labor movement had increased democratic control of the economy. A crisis-free capitalism had become a reality. There would be no more economic crises like that of the 1930s, no more mass unemployment, no more social distress, and no more misery among people. All social trends pointed upwards. For a great many in the labor movement, this was the reformist road to socialism—and everyone could see that it worked!

These real social achievements formed the material basis for an ideology of social partnership which remains deeply rooted in European trade union bureaucracy. Personally, I heard this ideology openly expressed for the first time when I took part in basic trade union training at the education center of the Norwegian Confederation of Trade Unions early in the 1980s. There I learned that the first third of the twentieth century was characterized by intense conflict between labor and capital—including general strikes, lockouts, and the use of police and military forces against organized workers on strike. This was a destructive period, which in the end (the 1930s) had brought the working class nowhere. It was only when this confrontational policy was abandoned, when the trade union movement started to take full social responsibility, that real progress was achieved—in the form of better working conditions, better wages, and welfare reforms. In other words, confrontations with the employers are destructive; peaceful social dialogue is the way forward. This was the lesson that was taught at the trade union educational center as late as the beginning of the 1980s.

The above analysis was wrong then, and it is wrong today. However, the consequences of this error have become more dangerous for the trade union movement as the social pact has broken down. What this analysis obscures is that the great achievements in terms of welfare and working conditions, during the period of class compromise after the Second World War, were the fruits of the previous conflict. Progress was made only because the working class had shifted the balance of power between labor and capital through confrontations and hard class struggle during the first part of the twentieth century (including the Russian revolution). In other words, it was the confrontational struggles of the previous period which made possible the gains later realized through peaceful negotiations.

The Breakdown of the Social Pact

The class compromise, however, was a fragile construction, since its survival depended upon a stable capitalist economy with a high rate of growth. The compromise was gradually eroded with the onset of deep economic crises in western capitalism in the early 1970s. The crises spurred capitalist forces to take the offensive—among other things to reduce costs—attacking trade union rights, wages, and public expenditures they undermined the very bases of the welfare state.

The deradicalized and depoliticized trade union and labor movements were taken by surprise by this development. The employers suddenly became much more hostile at the negotiating table. Negotiations, which had previously been mainly about improvements of wages and working conditions, now began to involve attacks on previous achievements and existing regulations. As most of the trade union leadership had been steeped in the environment of class compromise and social peace, it was not prepared for these attacks. Within the framework of the ideology of the social pact, the neoliberal offensive was simply incomprehensible. The trade union bureaucracy remained passive, and the trade union movement was forced on the defensive. In many countries, many workers left their trade unions altogether, as the unions proved powerless to protect their interests.

Thus, the 1980s represented an enormous setback for the trade union movement, something which can be seen in the statistics on the level of unionization (organization of the workforce) in some important West European countries (see table 1).

Table 1

The few trade unions that tried to take action against the neoliberal attacks, as did the British mineworkers, were defeated. In the British case, one reason for defeat was that the bureaucracy of the trade union confederation (TUC) considered militant industrial action to be a bigger threat to the consensus policy of the social pact than the furious attacks from the mining companies and the Thatcherite regime. Many years later, the TUC admitted that it had been wrong not to support the miners’ strike, but by then the damage had been done. And remarkably, the TUC has not altered its support for the social pact.

With the breakdown of the command economies of Eastern Europe around 1990, the only alternative to western capitalism disappeared. Capitalism had triumphed on all fronts, and for employers the compromise with labor was no longer necessary. Now capitalist forces could pursue their narrow economic and political interests with fewer inhibitions. This is why the class compromise (or the consensus model) has broken or is breaking down all over Western Europe. The historical and economic preconditions for such a compromise are no longer there, and the most important product of this compromise, the welfare state, is under increasing pressure.

This analysis of power relations is not understood by the dominant wing of today’s trade union leadership. When the neoliberal offensive began some twenty years ago and the employers gradually broke with the policy of social partnership, the only answer most of the trade union bureaucracy could formulate was to continue its consensus policy. Some trade unions have almost been begging hostile employers for a return to the social pact. This policy has been fuelled by the strong national orientation of the trade union movement. Rather than reorienting themselves towards confronting the now more aggressive capital interests, the narrow national orientation and the social partnership ideology of the unions have led much of the trade union movement into an alliance with, and consequently a subordination to, “national” capital’s struggle to be internationally competitive. In Germany, the term “Standort Wettbewerb” is used to mean not only union alliances with German companies but support for the German state in Germany’s competition with other nations.

Great parts of the trade union movement have been drawn deeper into business unionism and legal formalism rather than shifting towards a strategy based on class analysis and an assessment of the balance of power. The German trade union movement’s struggle for “unity for work” during the middle of the 1990s is one good example of this policy of national alliance with the employers. This was a proposal for a formal renewal of the social pact. It was made by the German Confederation of Trade Unions and offered to accept poorer working conditions in exchange for job security. It was rebuffed by the employers. In the same way, the relatively narrowly focused struggle for minimum labor standards in the WTO, which leaders of the international trade union movement have been pursuing over the last ten years, is an excellent example of the legal formalism which has developed without an analysis of the balance of power between labor and capital.

The trade union bureaucrats, both at the national and at the international level, continue to see themselves as mediators between labor and capital. Today, when capitalist forces are on the offensive and have provoked the development of an international popular justice and solidarity movement which opposes the current corporate globalization, the international trade union movement is eager to define itself as a mediating force between this movement and corporate interests. This was openly expressed when the third World Social Forum (WSF) was held in Porto Alegre, Brazil in January 2003—in parallel with the World Economic Forum (WEF) of the political and economic elites in Davos, Switzerland. The international trade union movement then issued a statement, “Democratizing Globalization: Trade Union Statement to 2003 WSF and WEF,” which was signed by all the important international trade union bodies.2 Among other things it stated that:

The international trade union movement has a common message to Porto Alegre and to Davos. Vision, political will and the necessary capacities must be brought together at the global level to attain development and guarantee decent work for the millions of workers who today live in precariousness and poverty without prospects of a better future. That will require resource commitments as well as commitments on paper. It will require governance systems to promote our common good, our rights and democracy. It requires effective democratic processes, and it requires dialogue to make it happen. We will press the WEF to address the need to globalise social justice. At the same time, we will contribute in the WSF to finding constructive approaches to democratising globalisation in the interests of all working people.3

Most of the international trade union organizations do not, in other words, consider themselves to belong to the new movement against corporate globalization.4 They consider this new movement to be too politically radical. The International Confederation of Free Trade Unions (ICFTU) or the Global Unions, therefore, do not join forces with the rest of the movements when they go to the World Social Forum—they hold their own conferences and meetings on the fringe of the forums. At the same time, they send equally high-ranking delegations to the World Economic Forum. “We have always achieved most through dialogue,” is the constantly recurring refrain.

Policies Independent of Power Relations

The complete lack of analysis of power relations and the preconditions for trade union strategies is also apparent in the educational work being done internationally by the trade unions. A number of West European trade unions and confederations are running training programs in the form of solidarity projects with sister unions in Eastern Europe as well as in developing countries. In these educational projects, western unions are disseminating what they consider to be their own great success—the social pact. They are trying to convince the trade union movement in the rest of the world of the advantages of pursuing a social partnership model. Given current power relations, this kind of education is counterproductive to the trade unions in Eastern Europe and the developing world, which are under attack from aggressive, confrontational employers.

It is important to notice that all of the developments described above have affected trade unions in the manufacturing industries more strongly than those in the public sector and in parts of the transport industry. This has been because manufacturing is more strongly and directly exposed to international competition. Thus the setback of the trade unions and the political and ideological shift to the right have been more prevalent in manufacturing than in any other part of the movement.

The disastrous continuation of a policy of social partnership, in a situation in which the economic and social basis for this partnership is fading away, is today being pursued by most of the European trade union bureaucracy—in particular the European Trade Union Confederation (ETUC). Thus, over the last few years, we have seen growing activities in the form of consultations, negotiations, lobbying, and so-called social dialogue between the assumed social partners in the labor market. The result so far has been a strengthened bureaucratic development in the European trade union movement. The social dialogue, or “negotiations at the EU level,” as it is wrongly being characterized by some, is an exercise which does not include the right to take industrial action. It is easy to understand, then, why the results have been so meager.

At the international level, the ICFTU is the strongest advocate for the policy of social partnership, very clearly expressed in a statement in which it commented on the United Nations Global Compact. Among other things, it boasts of having issued a joint statement with the UN, using some of the same key language as in a corresponding joint statement between the UN and the International Chamber of Commerce, namely:

It was agreed that global markets required global rules. The aim should be to enable the benefits of globalisation increasingly to spread to all people by building an effective framework of multilateral rules for a world economy that is being transformed by the globalisation of markets….The meeting agreed that the Global Compact should contribute to this process by helping to build social partnerships of business and labor.5

At the company level, European Works Councils have become the bureaucratic answer. These councils of workers’ representatives in transnational companies afford the workers no real influence, although they can be useful for gathering information and making trade union contacts. The councils have less influence than similar institutions that developed in the Nordic countries and in Germany during the postwar period, although even these have lost real influence in these countries as market forces have gained ground.

In Europe, this policy of powerless social dialogue is bringing the trade union movement into a deadlock. A trade union policy based on the mobilization of their members to confront and fight the attacks from the employers is almost nonexistent at the EU level, even though we have seen tendencies in this direction at the national level (in France in 1995 and in Italy in 2002).

The depressing result of these policies has been the acceptance by the dominant part of the trade union movement of a step-by-step reduction in welfare and working conditions. Through negotiations, trade unions have gradually accepted an increasing “flexibilization” of work. In different European countries we have seen retrenchments in welfare provisions such as reduced sick pay and pensions, cuts in unemployment benefits, higher use fees in public education, nursery schools, and health and social services, and the abolition of nonprofit housing projects. Working conditions have worsened through the undermining of labor laws and agreements, including the weakening of working hours regulations, the reduction of overtime pay, the reintroduction of shift work in many industries, reduced job security, more temporary short contract jobs, more use of contract and leased workers, and more decentralized bargaining. One important effect of this development has been the demoralization of workers and a reduction in trade union membership, as the trade unions fail to protect their members. The growth of right- wing populist parties is probably the most dangerous result of this trade union policy of indulgence.

Strategic Considerations

So what can the trade union movement do in order to confront the global corporate offensive? One thing is clear, radical rhetoric is not sufficient, even if it is common at international meetings. Experiences from the first European Social Forum in Florence, Italy in November 2002 can serve as an example. There we heard at least two types of trade union positions. One came from very militant, small, nonrepresentative groups. Another type was made by representatives from mainstream European trade unions. For example, a representative from a German union, IG Metall, wanted to open the struggle for the thirty-hour week. He did not mention, however, that the same union negotiated an agreement with Volkswagen only a year before which undermined existing wages and working conditions to induce the company to open a new factory in Germany rather than in a low-cost Eastern European country. None of these trade union representatives addressed the real problems of the trade union movement in Europe today. It is necessary to do that as a basis for developing a viable trade union strategy.

The first thing necessary is to realize that the confrontational policies of the multinational companies and other capital interests have to be met head-on by the trade unions. There are disagreements and contradictions on this position in the trade union movement—at the national and local as well as at the international level. Those in the trade unions who want to revitalize their organizations will therefore have to build new alliances based on the best parts of the movement. Even if there are many exceptions, these labor organizations are mainly to be found in the public sector, in transport, in some of the private service sectors, and in a number of local branches across the trade union movement.

To confront transnational corporations, it is necessary to build networks and encourage cooperation between workers in the same industries across both national and company borders. The development of international, class-based solidarity will have to break with the tendency of business unionism which favors “our” company over “theirs.” This is a tendency which has a stronger tradition in the U.S. trade union movement than in Europe, but it has been strengthened also in Europe over the last twenty years, as depoliticized and deradicalized trade unions have joined forces with “their” employers to protect jobs at the national level—in competition with companies in other countries. This narrow misguided strategy must be replaced by a joint class-based struggle in which democratic control of production and distribution is taken to the fore.

Another important struggle around which a new internationalist trade union alliance will have to be built is the struggle against the ongoing corporate takeover of public services. This means fighting privatization and defending the achievements which were won through the welfare state. The corporate takeover of these parts of society represents a very important element of the shift in the balance of power between labor and capital in our societies.

Another important part of a progressive trade union strategy is to challenge the dominant thinking of the trade union bureaucracy—the ideology of social partnership and the peaceful accommodation between labor and capital. We will have to have difficult but friendly internal discussions on this particular subject within our movement. These discussions should be based on the understanding that the policy of social partnership is not the result of conspiracies or treachery, but the result of a specific historical development. We need new analyses, which can explain to people how the historical compromise between labor and capital was realized and why it has broken down. People’s discontent with current developments has to be taken seriously; their anxiety and dissatisfaction should be politicized and channeled into trade union and political class-based struggles for their working and living conditions. That is the only way to prevent these people from being mobilized by right-wing, populist parties.

We should focus on welfare and working conditions, on the brutalization of work which is taking place as a growing part of the economy is exposed to market competition, and on the reduction of workers’ influence over their working day and their control of the work process.

It is important to realize that this also has a lot to do with people’s self-confidence. Workers’ dignity is systematically being attacked—in the work places, in the media, in the general public debate, and in the social and cultural climate of a society dominated by bourgeois thinking and values and neoliberal policies. This can be changed only by reclaiming the notions of productive labor, class relationship, and class identity. It cannot, however, be imposed upon the working class from outside. It has to be developed as a part of, and during, the social struggle.

Finally, we must build alliances with the new global movement against neoliberalism—for democracy, global justice, and solidarity. This global movement of movements is currently more politically radical and system-critical than the trade union and the labor movements, even though its knowledge of class relations is rather poor. The trade union movement needs the radicalism and the militancy of this popular movement in order to break with their illusions of class compromise. If this alliance is developed constructively and correctly, the two movements could reinforce each other and bring the struggle to a higher level.

The social pact was never a defined aim of the labor movement; it was the result of a specific historical development. It was made possible only as a result of an enormous shift in the balance of power between labor and capital. The combination of the Russian revolution, a strong labor and trade union movement in the west, strong liberation movements in the third world, and a long period of stable economic growth in the capitalist economy after the Second World War were the very specific preconditions that made it possible for a relatively stable period of class compromise. To aim at a new class compromise, a new social pact, under the current much less favorable power conditions is illusory.

Our aim, therefore, must be to go beyond the social pact and the welfare state. Only a transformation of society which is deep enough to remove the material preconditions for a restoration of neoliberal policies can safeguard the interest of working people. Nothing less than socialism can provide that.


  1. Eric Hobsbawm, Age of Extremes: The Short Twentieth Century 1914–1991 (London: Penguin, 1994).
  2. These included the International Confederation of Free Trade Unions, the Global Union Federations, the Trade Union Advisory Committee to the OECD, the World Confederation of Labor, and the European Trade Union Confederation.
  3. See
  4. There are exceptions. In particular, the Public Services International, the international umbrella organization of national public sector trade unions, has played an important role in the World Social Forum movement, in particular through the WTO/world trade-focused Our World Is Not For Sale network ( An increasing number of national trade unions and local branches are also gradually involving themselves more strongly with the new global justice and solidarity movement.
  5. “ICFTU Statement on the Global Compact,”
2004, Volume 55, Issue 08 (January)
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