State, Labor, and the Transition to a Market Economy: Egypt, Poland, Mexico, and the Czech Republic

Chapter 1: Parties, Unions, and Economic Reforms

As we saw in the Introduction, the ways in which organized labor reacted to changes associated with structural adjustment—and, more important, whether it succeeded in influencing the shape of privatization policies—differed markedly in Poland, Egypt, Mexico, and the Czech Republic. As we have also seen, the extant literature, while providing many important insights into the dynamics of reform experience, does not satisfactorily account for this observed variation . In this chapter, I lay out the theoretical framework that links the historical patterns of interaction between ruling parties and organized labor, the resources that organized labor extracts from the ruling parties over time, and the ability of unions to insert themselves successfully into policy debates once economic restructuring programs are adopted. Labor Strategies To tease out how union interest in public sector reform is translated into policy influence, I distinguish between two phases of divestiture programs: design and implementation. Labor organizations can seek to influence one or both phases. During the design phase, labor organizations may attempt to influence the scope and speed of the envisioned program, the privatization methods that will be employed, and the prerogatives that workers will be granted within the program. Although regime type does not explain well whether organized labor succeeds or fails in shaping policy, what strategies labor chooses as it seeks to influence the process of privatization design does depend on the broader political context in which it exists. Hence, these strategies are likely to differ in democracies and parties, unions, and economic reforms 1 authoritarian systems, since strategies that prove most effective in pluralistic context may well be of little value in an authoritarian environment. In democracies , unions are more likely to concentrate their efforts on lobbying government officials and parliamentary deputies, making alliances with political parties that are sympathetic to labor demands and interested in unions’ electoral support, presenting alternative restructuring proposals, and appealing to the broader voting public through the media and protest actions. Similar tactics are likely to be of less utility in a context of limited political pluralism. Even if parliament and multiple political parties are present, it is unlikely that the incumbents can be voted out of office during the next electoral cycle. Therefore, lobbying parliamentarians and threatening to shift alliances to another political party prior to electoral contests are unlikely to have much influence on how government privatization proposals are formulated. More efficacious strategies entail direct lobbying, often behind the scenes, of regime officials and relying on established clientelistic networks. Once the program is designed and approved, labor organizations can seek to alter the process of implementation. While the early literature on economic reforms generally assumed that influence at the implementation stage would be manifested primarily in terms of labor organizations attempting to block restructuring and sales of enterprises, labor’s reactions to privatization tend to be more complex. During this phase, labor organizations may seek to modify the privatization methods employed as well as to influence the pace at which sales are realized. At this point, labor is also likely to turn its attention to modifying and shaping other reform measures that generally accompany privatization and are of immediate interest to workers, for example, changes in the labor code. At both stages of the process, labor organizations can also attempt to influence policies by staging strikes, protests, and demonstrations. Through such actions they can signal to political leaders their preferences. They can also make it more difficult for politicians to ignore their demands by making their dissatisfaction public and making appeals to broader sections of the society. These strategies at both phases of the reform process may or may not be successful. I evaluate whether organized labor was able to shape the design phase of privatization programs by examining the extent to which initial government proposals were modified to reflect worker demands. I assess the extent of organized labor’s ability to shape the implementation phase by examining the original timetables offered by the government in terms of the pace of divestitures, the methods of privatization the government was interested in pursuing, and the extent to which the pace and methods were modified to reflect labor demands. state, labor, and the transition to a market economy 22 Additionally, I assess whether organized labor was able to shape pieces of legislation that were directly related to the privatization program, such various labor market regulations. Clearly, a variety of factors affect the ability of governments...