Collective bargaining and transnational corporations in the global economy Some theoretical considerations
Introduction
While the global economy does not constitute an institutional vacuum, the institutions that populate it are weighted heavily towards the interests of the private firm. Workers have oft en looked to states to protect their interests in their highly unbalanced relations as small human beings with large employing organizations. At national level in democracies this has oft en been a partly successful strategy, as democratic governments have to pay attention to mass demands, even though corporations will also have major influence with governments because of the dependence of the latter on them for economic success. But global society is far from being democratic. With the exception of the International Labour Organization (ILO), few international agencies even have the condition of labour within their responsibilities. In this context workers need to look to that other force that has safeguarded their interests in various political contexts: representation by trade unions within relations of collective bargaining with employers. This too is, however, extremely weak at the transnational level. Even where labour can organize (which is by no means the case in all parts of the world), it can only with great difficulty achieve links and solidarities going beyond national level.
To understand both the challenges and possibilities facing transnational collective bargaining, it is necessary to spend some time considering the place of the transnational corporation (TNC). This will be seen to be a structure that transcends both the polity and the market, presenting major problems as to how it is to be incorporated within wider society. Collective bargaining will be seen to be one of the possible answers to that problem, but only if it can be combined with other components of an infant global civil society. Within individual countries where bargaining institutions are strong, TNCs may be brought to the bargaining table like any other corporation; they might threaten to move investments elsewhere if unions make strong demands, but, as will be discussed below in relation to sunk costs, the viability of these threats varies. The main problems occur where bargaining, to be effective, needs to operate along a TNC’s entire supply chain, or where some coordination is needed across the different labour markets of a firm with similar plants in a number of countries. In both these cases unions need to extend their reach, not only across national boundaries, but across labour markets with very varied conditions, often including countries where the combined efforts of TNCs and governments have prevented labour interests from organizing and expressing themselves.
While, as several other articles in this volume show, many of the problems experienced by labour in these situations relate to the practicalities of organization and bargaining rights as such, behind and prior to these difficulties stands another issue: the ambiguity of the political role of the firm in a capitalist economy and democratic polity. On the one hand, the rules of the free market require a mutual separation of economy and polity; on the other, the individuals who constitute the leadership of firms enjoy the democratic rights of citizens to work for their political interests, which implies some engagement between the two spheres. Two potential resolutions exist. Under pluralist theory, the existence of high levels of competition in both economy and polity prevent concentrations of either economic or political power, and thereby limit or even cancel out any undue influence exercised by particular firms. Under neo-corporatist theory, firms exercise their political influence through formally constituted associations. This both maintains a level playing field among firms, at least within the sectors represented by an association, and makes transparent the way in which influence is exercised. The rise of large TNCs threatens the already imperfect solutions presented by both these approaches. No solution exists for the analysis of these firms within the terms of nation-State based democracy, as they constitute a nondemocratic component of politics in advanced capitalism. Given that the dominant ideology of our period presents capitalist liberal democracy as a more or less complete political form, it is not normally considered appropriate to posit the existence of an established, accepted non-democratic component of that politics.
The political role of the firm
While economic theory does not have much to say about politics, some implications for political behaviour can be read off from the neoclassical model.
The firm in economic theory
First, in a pure market economy there is a strong separation between politics and economics. The State is needed to safeguard the rules necessary for the market to operate: enforcement of contracts, maintenance of currency, maintenance of rules of corporate accountability and transparency. But this role itself requires that the worlds of economy and polity do not interfere with each other. Governments should not interfere with markets, or the mathematical rationality of price-setting will be disturbed; individuals active in the market should not use their economic resources to interfere in politics to get privileged outcomes for themselves, or this too will distort the market. The vulnerable spot in this account is the puzzle specified above: there are no means to prevent individuals from using their wealth in a way that produces mutual interference by economic and political forces.
Neoclassical economics has its own answer to this, which is then paralleled by analogy in pluralist political theory: in the pure market economy, economic inequalities are limited, and therefore the influence exercised by any one individual will be quickly cancelled out by others. If larger profits or incomes than are available elsewhere arise in a particular sector, individuals in other sectors will quickly switch their resources to the more profitable one until, as a result of competition, profit and income levels reach the mean of other sectors, at which point there is no longer an incentive to shift to it. In the long run, therefore, a pure market economy should be one without sharp inequalities. As a consequence, no-one will be able to use extreme wealth to accumulate political privileges.
In practice, actually existing capitalist economies do not conform to the pure neoclassical model. Barriers to entry can be high and irremediable, as where vast investment is required for research and development or where extensive distribution networks have to be developed before a fi rm can establish itself. Also, information, a resource fundamental to the operation of market rationality, is itself unequally distributed. To operate efficiently in capital markets in particular it is necessary to have kinds of information that can be provided only by highly skilled teams of experts; and it takes a high level of existing resources to be able to construct such teams in the first place. Therefore, those firms and individuals with the resources to acquire professional advice are able to make better use of information concerning capital markets than those who lack them, leading to a spiralling exacerbation of inequalities rather than a tendency for them to diminish.
To understand what is happening in these situations it is necessary to abandon the artificial view that firms are individuals, referred to above. The fact that the firm is an organization, and therefore capable of strategy, and not just a nexus of markets was first recognized in economic theory in the 1930s, in the theory of the firm. The main use that orthodox economics makes of this theory is in considering the trade-off between market and organization that confronts companies. It has been left to unconventional (“institutional”) economists and organization theorists to consider some of the wider implications of the idea of the firm as an organization, in particular the political implications. The larger a firm becomes, the stronger and better informed will be the organizational hierarchy that it can establish, and the existence of organization thereby becomes a source of entry barriers. True, in the long run this growing size can present problems, as the enterprise becomes top-heavy. But a firm that is sufficiently well constructed that it has reflexive capacity can even anticipate these problems. We should therefore anticipate a growing role for giant firms with extensive organizational resources within the economy.
Competition law, especially in the United States, has accommodated itself to the inevitability of the domination of large firms and limited competition. Classical US anti-trust law, developed in the first part of the twentieth century, aimed at breaking up major accumulations of corporate power, so that there was a limit to how far any one firm or group of firms could go in dominating a particular set of markets. One of the strongest examples of this was US banking law, that for many decades prevented US banks from having branches outside an individual State. It is no coincidence that US pluralist political theory (see below) developed from exactly this intellectual environment. It was as essential for democracy as it was for economic efficiency that there should not be concentrations of power so strong that they faced no effective competition. To the extent that economic power could be a major source of political power too, anti-trust policy served the purpose of protecting democratic pluralism as much as it did market competition.
It proved impossible to maintain all markets with low entry barriers and full competition, and by the late twentieth century American law and political practice had changed. Economic theorists, principally at the University of Chicago
Collective bargaining and transnational corporations in the global economy Some theoretical considerationsIntroduction While the global economy does not constitute an institutional vacuum, the institutions that populate it are weighted heavily towards the interests of the private firm. Workers have oft en looked to states to protect their interests in their highly unbalanced relations as small human beings with large employing organizations. At national level in democracies this has oft en been a partly successful strategy, as democratic governments have to pay attention to mass demands, even though corporations will also have major influence with governments because of the dependence of the latter on them for economic success. But global society is far from being democratic. With the exception of the International Labour Organization (ILO), few international agencies even have the condition of labour within their responsibilities. In this context workers need to look to that other force that has safeguarded their interests in various political contexts: representation by trade unions within relations of collective bargaining with employers. This too is, however, extremely weak at the transnational level. Even where labour can organize (which is by no means the case in all parts of the world), it can only with great difficulty achieve links and solidarities going beyond national level. To understand both the challenges and possibilities facing transnational collective bargaining, it is necessary to spend some time considering the place of the transnational corporation (TNC). This will be seen to be a structure that transcends both the polity and the market, presenting major problems as to how it is to be incorporated within wider society. Collective bargaining will be seen to be one of the possible answers to that problem, but only if it can be combined with other components of an infant global civil society. Within individual countries where bargaining institutions are strong, TNCs may be brought to the bargaining table like any other corporation; they might threaten to move investments elsewhere if unions make strong demands, but, as will be discussed below in relation to sunk costs, the viability of these threats varies. The main problems occur where bargaining, to be effective, needs to operate along a TNC’s entire supply chain, or where some coordination is needed across the different labour markets of a firm with similar plants in a number of countries. In both these cases unions need to extend their reach, not only across national boundaries, but across labour markets with very varied conditions, often including countries where the combined efforts of TNCs and governments have prevented labour interests from organizing and expressing themselves. While, as several other articles in this volume show, many of the problems experienced by labour in these situations relate to the practicalities of organization and bargaining rights as such, behind and prior to these difficulties stands another issue: the ambiguity of the political role of the firm in a capitalist economy and democratic polity. On the one hand, the rules of the free market require a mutual separation of economy and polity; on the other, the individuals who constitute the leadership of firms enjoy the democratic rights of citizens to work for their political interests, which implies some engagement between the two spheres. Two potential resolutions exist. Under pluralist theory, the existence of high levels of competition in both economy and polity prevent concentrations of either economic or political power, and thereby limit or even cancel out any undue influence exercised by particular firms. Under neo-corporatist theory, firms exercise their political influence through formally constituted associations. This both maintains a level playing field among firms, at least within the sectors represented by an association, and makes transparent the way in which influence is exercised. The rise of large TNCs threatens the already imperfect solutions presented by both these approaches. No solution exists for the analysis of these firms within the terms of nation-State based democracy, as they constitute a nondemocratic component of politics in advanced capitalism. Given that the dominant ideology of our period presents capitalist liberal democracy as a more or less complete political form, it is not normally considered appropriate to posit the existence of an established, accepted non-democratic component of that politics. The political role of the firm While economic theory does not have much to say about politics, some implications for political behaviour can be read off from the neoclassical model. The firm in economic theory First, in a pure market economy there is a strong separation between politics and economics. The State is needed to safeguard the rules necessary for the market to operate: enforcement of contracts, maintenance of currency, maintenance of rules of corporate accountability and transparency. But this role itself requires that the worlds of economy and polity do not interfere with each other. Governments should not interfere with markets, or the mathematical rationality of price-setting will be disturbed; individuals active in the market should not use their economic resources to interfere in politics to get privileged outcomes for themselves, or this too will distort the market. The vulnerable spot in this account is the puzzle specified above: there are no means to prevent individuals from using their wealth in a way that produces mutual interference by economic and political forces. Neoclassical economics has its own answer to this, which is then paralleled by analogy in pluralist political theory: in the pure market economy, economic inequalities are limited, and therefore the influence exercised by any one individual will be quickly cancelled out by others. If larger profits or incomes than are available elsewhere arise in a particular sector, individuals in other sectors will quickly switch their resources to the more profitable one until, as a result of competition, profit and income levels reach the mean of other sectors, at which point there is no longer an incentive to shift to it. In the long run, therefore, a pure market economy should be one without sharp inequalities. As a consequence, no-one will be able to use extreme wealth to accumulate political privileges. In practice, actually existing capitalist economies do not conform to the pure neoclassical model. Barriers to entry can be high and irremediable, as where vast investment is required for research and development or where extensive distribution networks have to be developed before a fi rm can establish itself. Also, information, a resource fundamental to the operation of market rationality, is itself unequally distributed. To operate efficiently in capital markets in particular it is necessary to have kinds of information that can be provided only by highly skilled teams of experts; and it takes a high level of existing resources to be able to construct such teams in the first place. Therefore, those firms and individuals with the resources to acquire professional advice are able to make better use of information concerning capital markets than those who lack them, leading to a spiralling exacerbation of inequalities rather than a tendency for them to diminish.
To understand what is happening in these situations it is necessary to abandon the artificial view that firms are individuals, referred to above. The fact that the firm is an organization, and therefore capable of strategy, and not just a nexus of markets was first recognized in economic theory in the 1930s, in the theory of the firm. The main use that orthodox economics makes of this theory is in considering the trade-off between market and organization that confronts companies. It has been left to unconventional (“institutional”) economists and organization theorists to consider some of the wider implications of the idea of the firm as an organization, in particular the political implications. The larger a firm becomes, the stronger and better informed will be the organizational hierarchy that it can establish, and the existence of organization thereby becomes a source of entry barriers. True, in the long run this growing size can present problems, as the enterprise becomes top-heavy. But a firm that is sufficiently well constructed that it has reflexive capacity can even anticipate these problems. We should therefore anticipate a growing role for giant firms with extensive organizational resources within the economy.
Competition law, especially in the United States, has accommodated itself to the inevitability of the domination of large firms and limited competition. Classical US anti-trust law, developed in the first part of the twentieth century, aimed at breaking up major accumulations of corporate power, so that there was a limit to how far any one firm or group of firms could go in dominating a particular set of markets. One of the strongest examples of this was US banking law, that for many decades prevented US banks from having branches outside an individual State. It is no coincidence that US pluralist political theory (see below) developed from exactly this intellectual environment. It was as essential for democracy as it was for economic efficiency that there should not be concentrations of power so strong that they faced no effective competition. To the extent that economic power could be a major source of political power too, anti-trust policy served the purpose of protecting democratic pluralism as much as it did market competition.
It proved impossible to maintain all markets with low entry barriers and full competition, and by the late twentieth century American law and political practice had changed. Economic theorists, principally at the University of Chicago
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