Abstract
Over the past 30 years, state intervention to reshape employment relations has become a generalized feature of contemporary capitalism. A broad neoliberal reconstruction of the market order has gone hand in hand with a more active state. In this article the author argues that liberalization in the sphere of employment relations could not have taken place without a more active state. Building on a regulation theory framework and an elaboration of the concept of neoliberalism as the regulatory infrastructure of emergent growth models, the author examines how the widespread shift from wage-led growth to other forms of growth across the advanced capitalist world has encouraged changes in the role of the state in the regulation of employment relations. These roles include market making, individual employment regulation in place of collective regulation, state-directed social pacts, and redrawing the boundaries between work and non-work. The article concludes with an explanation for continuing variations in employment relations.
Identifying the start of an era is rarely easy even post hoc, but a plausible case can be made that, at least with regard to employment relations, the dawn of the neoliberal era dates from the confrontation of the Thatcher government in Britain with organized labor. Its legislative and juridical assault over the space of a decade humbled a once-mighty trade union movement that could make some claim to have brought down the prior three governments. The British case could be explained away by the specificity of its “labour question” over the previous century. So, too, perhaps could the Reagan administration’s willingness to take on union power be explained, as a kindred spirit in a new conservative revolution. And yet in the ensuing three decades and more, the use of state power to intervene in employment relations, to transform the institutions that regulate them, and to do so in ways that weaken labor while expanding the power of employers, has spread far beyond countries with governments that enthusiastically tout neoliberal economic doctrines, or those with liberal market economies. 1 State intervention to reshape employment relations has become a generalized feature of contemporary capitalism.
The role of the state has always been of critical importance to the regulation of class relations and the maintenance and periodic transformation of the institutions that mediate between capital and labor, but especially so in the past 30 years, during which a broad neoliberal reconstruction of the market order has gone hand in hand with a more active state. Across the advanced capitalist world, across different types of political economy, with different degrees of labor strength and different political systems, and across the political and ideological spectrum, a resurgence in state intervention in the regulation of class relations has taken place in parallel with a collapse in collective self-regulation. And both have happened at a time in which there is a widespread sense that we live in an era in which state capacity has eroded in the face of globalization.
In this article I put the state at the center of how those of us who study the political economy of employment relations understand systemic and institutional change. 2 Building on earlier work (Baccaro and Howell 2011, 2017a) that identified a broad liberalizing tendency in employment relations, I seek to explain one key facet of that process: the centrality of the state. The question that I ask in this article is what explains the specific roles that states have taken on in regulating employment relations over the past roughly three decades, and the similarity of these roles across different political economies? My argument is that the interventionism of the state in recent years has a common trajectory and purpose, that of facilitating liberalization, indeed that the liberalization of employment relations could not have taken place without an active state role. To this end, the article develops an approach to the state that emphasizes its changing role in response to changes in the dynamics of capitalist growth models. States have acted in similar ways despite dissimilar national contexts and different configurations of business and trade union power, because there has been a common shift away from broadly Fordist or wage-led growth models to a range of post-Fordist non-wage-led growth models. This trend has encouraged different forms of state intervention in employment relations than existed in the past.
The Argument
Table 1 lists major state-led reform projects among a handful of advanced capitalist countries. Particularly in more liberal market economies, major projects of reconstruction of entire systems of employment relations have been state-led. The legislative assault of the United Kingdom in the 1980s is a prime example, but the same process took place in the United States, though it was more protracted and involved the judicial branch, the executive branch, and legislation at the state level of government more than at the national level. In France, New Zealand, and Australia, employment relations systems with a heavy dose of statism from earlier in the 20th century have been dismantled by those same states, primarily through legislation. Among coordinated market economies, the state role was more indirect but no less essential. The Swedish state was a central actor in the transition from the corporatist/solidaristic regime of the Saltsjöbaden era to the coordinated but decentralized regime today, and in Germany the state unilaterally deregulated the labor market when the social partners failed. In Ireland and Italy (countries without corporatist traditions), new forms of social pacts were utilized as state-initiated and state-led, top-down strategies to bring about employment relations, labor market, and welfare reforms.
Selected State-Led Projects of Employment Relations Reform since 1980
There is no doubt that one could construct such a table for the period before 1980 and identify significant interventionism on the part of the state. The empirical argument and the experience to be explained is that the past three decades or so have seen remarkably expansive state-led projects of employment relations reconstruction, and these projects have differed in important ways from the collectivist and corporatist past in that they contributed to the liberalization of employment relations. In comparison to the earlier era, more recent state interventionism has been both more ambitious, in the sense that it has involved efforts to transform and reconstruct employment relations systems, and of a different type.
What is also striking about the forms of intervention in the past three decades is that cross-national differences are more important than differences among political parties within countries. The ways in which states have become more interventionist tend to reflect responses to national institutional legacies and obstacles to liberalization more than ideological proclivities. Partisan differences exist, to be sure; however, it is remarkable that similar national employment relations projects have been shared across ideological divides and pursued quite consistently over time. Socialist and Gaullist governments in France both encouraged decentralized bargaining inside the firm as a mechanism for deregulating the labor market; social democratic and bourgeois coalition governments in Sweden both followed a strategy of using government mediation and an external wage norm in order to encourage new, more flexible bargaining practices; a consensus between liberal-national governments and labor ones around a minimalist awards system emerged in Australia; even in Britain, the common policy element between conservative and New Labour governments was a commitment to a largely deregulated labor market and a rejection of collective employment relations institutions.
What this brief sketch illustrates is that a broad cross-national transformation in employment relations has occurred over the past 30 years, one that involves a profound and far-reaching liberalization (for an elaboration on the pattern and more detailed discussion of cases, see Baccaro and Howell 2011, 2017a). Widespread recognition of this process, and of its scope and scale, has taken place, but there is much less agreement on why and how it has taken place (Schmidt and Thatcher 2013; Emmenegger 2014; Thelen 2014; and for an opposing perspective see Meardi 2018). In this article I take that liberalization as a starting point and argue that the state was deeply implicated in that process. At an empirical level, this is an important finding, and this article delineates the forms that state intervention in employment relations has taken, both in the shift from wage-led growth to contemporary forms of economic growth, and across a range of national political economies.
I also seek to explain the commonality of state action by way of rethinking how the role of the state in employment relations is theorized. The influential Varieties of Capitalism (VoC) approach to political economy (Hall and Soskice 2001), at least in its initial formulations, had an extremely thin notion of politics and the state, with the latter reduced primarily to facilitating coordination among class actors, and indeed emphasized the constraints upon states that follow from institutions created and defended by business and trade union interests (Hall and Soskice 2001: 46). Most theoretical approaches to a political economy of employment relations, even those that take the state seriously, adopt, either implicitly or explicitly, a view of the state as a broadly neutral arena within which opposing class interests or cross-class coalitions compete for power and influence. This view includes more recent formulations of the VoC that emphasize the role of shifting political coalitions in undergirding state policy (Thelen 2014). To the extent that scholars acknowledge that liberalization has taken place and the state is an actor in that process, the state’s role is attributed to a shift in the relative class power of labor and capital; as unions have weakened, governments, including those led by political parties that were once traditional allies of labor, have succumbed to the gravitational pull of business interests (Allern and Bale 2017). This can be thought of as an extension to state theory of a broadly power resources argument (Korpi 2006), or even as a return to the pluralist theory of the 1950s.
These are certainly important insights, and not ones that I dispute. Shifting power resources or political coalitions can help explain the strategies used by states to achieve liberalization, but they fail to explain that common goal, the specific forms of state intervention in the neoliberal era, or why they are remarkably similar across the advanced capitalist world despite uneven decline in the strength of labor. In this article I take a different approach, one that emphasizes the implications of the changing nature of capitalist growth itself. I argue that the instability of capitalist growth, and its inability to secure the conditions of its own reproduction, make regulation—understood quite broadly to encompass the full range of political-economic institutions—necessary. These include the institutions that regulate employment relations. As capitalist growth regimes change over time, so the manner of their regulation will change. As such, the primary intellectual debt of this approach is to Marxian political economy and particularly regulation theory (Boyer 1990).
The contribution of this article is to understand the specific role of the state in regulating employment relations in the context of shifting forms of growth, of which the shift in a neoliberal direction is the most recent. Broadly speaking, that common trajectory of political-economic transformation has made the purpose of state intervention more similar among the participants—to facilitate liberalization—but the form that state intervention takes has varied from country to country in response, primarily, to the nature of the obstacles facing liberalization. I am making an argument in this article not for state autonomy, but rather for an emphasis on the changing force field within which states operate, and the imperatives that act on states, drawing them into regulatory roles in the context of crises of the existing accumulation or growth models. State action at the national level reflects local responses to common structural conditions, the precise form of action reflecting local obstacles and class physiognomies. Theorizing the role of states in the regulation of class relations, and the construction, maintenance, and reconstruction of employment relations institutions and systems, thus requires paying close attention to the manner in which capitalist growth models emerge, go into crisis, and are transformed.
Taking the state seriously as an actor in the regulation of class relations is hardly original. Comparative employment relations does not lack for careful, deeply informative empirical studies that highlight the role of the state as an actor. Textbooks and handbooks in the field no longer relegate the state to a footnote as was the Anglo-Saxon tradition through the 1960s. Comparative political economy, from which much of the theorizing about institutional change has come over the past 40 years, has a venerable tradition of examining the diversity of patterns of state intervention. Workers and unions themselves are not unaware of the impact of state power, or in need of academic theorizing to understand it. As Tillman Cadle, a miner from Harlan County, noted when asked by an oral historian how he had learned of the role of the state, “I didn’t have to read [about] it, mister: the damn thing fell and hit me right on top of the head” (Portelli 2011: 198). To add to which, there are always dangers to the cycle of “bringing things back in” or the easy admonition that the current cohort of scholars has bent the stick too far this way or that. An important element of this article is synthetic precisely because there has been so much superb scholarship at the intersection of employment relations, political economy, and the state.
Nonetheless, within comparative political economy we are only now coming to the end of a period of close to a quarter of a century when the state, once considered a linchpin of political economy, was pushed into the background as a marginal or secondary actor. A globalization narrative argued that state power had eroded in the face of mobile capital (Strange 1996), and the VoC approach (Hall and Soskice 2001)—ironically designed to counter globalizing claims about convergence—also worked from the presumption that “coordination” was primarily the work of class actors outside the state. And dense case studies of the micro-dynamics of employment relations change that focus on the role of the state are not the same as theorizing that role. It is one thing to say the state mattered here, at this time, in this way. It is another to recognize a distinctive cross-national pattern of state action, to understand systematically why it occurred, and to think through how and why the nature of state intervention varies across time and space. That is my goal in this article.
Theorizing the State in the Comparative Political Economy of Employment Relations
Any commentary on the role attributed to the state within the vast literatures that examine employment relations will of necessity be generalization. The goal of this section of the article is modest. It does not claim to be a comprehensive survey so much as a reflection, from a scholar who operates at the boundary of comparative political economy and comparative employment relations, on how the state has been theorized within those disciplines, and in particular, how it has been theorized in what we might term the neoliberal era.
There are essentially two arguments here. The first is that the state has tended to be undertheorized, or examined unsystematically, in ways that do not clearly recognize how the changing physiognomy of capitalism shapes, and is shaped by, the state. The second is that, somewhat paradoxically, theorization of the role of the state in the regulation of employment relations waned at precisely the point at which its importance became impossible to ignore.
For the first 20 years after World War II, the pluralist tradition within American social science tended to anticipate that national political economies would converge on an industrial society of managed capitalism, driven by imperatives of technology and industrial structure, in which shared prosperity would lead to a withering away of class conflict. In this approach the state served as a neutral arena within which organized interests competed, rather than as an actor in its own right (Dahl 2005). Within employment relations, Anglo-American pluralism mirrored this approach with the caveat that labor needed to be able to organize collectively to adequately defend workers (Hyman 1989). But with that condition satisfied, labor and capital could effectively engage in collective self-regulation without the need for extensive state intervention. The classic statement of this era was from Otto Kahn-Freund: “There exists something like an inverse correlation between the practical significance of legal sanctions and the degree to which industrial relations have reached a state of maturity” (1954s: 43–44). One does not need to endorse this position as reflecting empirical reality (for a critique, see Howell 2005) in order to see why it resulted in a focus on class actors, the workplace, and collective bargaining to the exclusion of political regulation.
The return of class conflict with a vengeance in the late 1960s, the economic crisis of the 1970s, and the apparent success of more planned political economies punctured this cozy pluralist vision of a civil society and economy able to regulate itself, and brought the state back into contention. Even before the crisis, Shonfield (1965) was demonstrating the centrality of state intervention to postwar growth, and within comparative political economy, economic slowdown and class conflict generated both an emphasis on different state responses to economic crisis (Katzenstein 1978) and a burgeoning literature on the political regulation of class conflict through corporatism and political exchange (Crouch and Pizzorno 1978; Panitch 1986). The capitalist crisis of the 1970s also generated extensive theorizing within the Marxist and Weberian traditions about the central role of states in regulating these late-capitalist, democratic societies. These debates never achieved much resolution; neo-Weberians (Evans, Rueschemeyer, and Skocpol 1985) never adequately explained how states could act consistently against dominant class interests, whereas neo-Marxists found it hard to escape the gravitational pull of functionalism without drifting off into contingency (Miliband 1969; Poulantzas 1978).
Nonetheless, the Marxist and radical pluralist debates of that period produced two insights that remain valuable. The first insight is the dependence of the state on private economic power. The most plausible accounts (O’Connor 1973; Lindblom 1982; Block 1987) largely saw the accumulation needs of capital as setting structural limits (“the market as prison”) but left the state’s actions within those prison walls largely unexplained, though Jessop’s “strategic-relational” approach is the most developed effort (1990, 2002). Second, although it remains broadly functionalist, it is worth putting down a marker for the insight developed by Habermas (1973) and Offe (1984) and then adapted by Hyman (2008) for employment relations, that all states in capitalist societies must be attentive to three imperatives: ensuring accumulation, permitting legitimation of the economic order, and pacifying civil society. These three goals may be in tension, allowing for political conflict in how they are (temporarily, partially) resolved, and all three require the involvement of the state.
The 1990s and early aughts brought more optimism about a return to market-led economic growth and pessimism about the capacity of states to manage national economies. In the course of the 1990s, comparative political economists adopted and adapted understandings of the preferences of economic actors and the operation of markets that had the effect of simultaneously pushing to one side earlier traditions of critical political economy and power resources theory (Pontusson 2005) and marginalizing the anticipated role of the state in the regulation of capitalist economies. Indeed, from as early as the mid-1980s, comparative political economy made a number of theoretical moves that had implications for how to think about conflict, change, and stability, and hence the need for political regulation: shifts away from power resource theory, toward a notion of path-dependent institutions, a delinking of markets from capitalism, a rational choice approach to the coordination strategies of economic actors, and a privileging of the individual firm. These developments culminated in the Varieties of Capitalism approach (Hall and Soskice 2001) built on assumptions about the preferences of employers and the capacity of coordination to solve economic problems. In the process they eliminated the category of statist political economies and relegated state action to one of secondary coordination.
There were always exceptions, of course: accounts in which the state remained a key political-economic actor (Levy 2006; Le Galès 2014) or even the basis for a distinct type of political economy (Schmidt 2009). Even for those who continued to see a role for the state, however, that role was often understood to have become less active and direct, replaced by a “regulatory state” that acted indirectly, through rule-making rather than direct intervention, and for which non-state actors and the “non-majoritarian institutions” of the state had displaced political executives (Thatcher 2017: 180).
Comparative political economy and comparative employment relations borrow freely from each other and yet have different strengths and weaknesses (Vidal and Hauptmeier 2014; Doellgast, Lillie, and Pulignano 2018); this has contributed to the state often falling through the cracks of this awkward theoretical relationship. Comparative employment relations scholarship has been less susceptible to the adoption of equilibrium assumptions about labor markets and approaches in which employment relations institutions can be understood in terms of coordination problems, not least because class conflict is much more visible in this realm. Marxian analysis has always had greater purchase and remains less marginalized in comparative employment relations (Hyman 1975; Kelly 1998; Umney 2018), and labor process scholars from Braverman (1974) onward have maintained an approach that takes as its starting point the accumulation and valorization needs of capital, and conflict between managers and workers.
Nonetheless, as from within political economy, employment relations scholars largely came to adopt typologies of varieties of employment relations that often had the same effect of relegating the state to part of the background institutional context rather than viewing it as an actor in its own right (Hamann and Kelly 2008), even if they often rejected rational choice causal arguments in favor of explanations that privilege power resources, the ideational, or national traditions (Crouch 1993; Hyman 2001). Further, the rich empirical tradition of comparative employment relations, with its focus on sectoral- and firm-level cases and the “micro-dynamics of employment relations” (Greer and Doellgast 2017: 195), makes it highly sensitive to the role played by systemic capitalist processes and less sensitive to the role of political regulation (Vidal and Hauptmeier 2014). Although influential accounts of the role of the state in employment relations exist (Clark 2000; Hyman 2008; MacKensie and Lucio 2014; Meardi 2014, 2018; Meardi, Donaghey, and Dean 2016), they tend either to operate at a high level of abstraction regarding the relationship between capitalist development and state action or to rely on a view of the state as an arena within which class interests clash, with neoliberal policy reflecting the weakening of unions.
The past five years or so have seen the emergence (or re-emergence) of a number of heterodox approaches to political economy, all emphasizing the dynamics of capitalism and transformation of capitalism over time, through a succession of capitalist regimes or growth models. They have been the product in part of an evolving critique of the assumptions of the VoC approach, in part in response to evidence of long-standing and widespread liberalization among all advanced capitalist political economies (not just LMEs), and in part in response to the crisis of the neoliberal, financialized model of growth after 2008. These sources of renewed interest in heterodox political economy are related in that the empirical expectation of limited institutional change and failure to predict a common liberalizing trajectory that emerged out of the VoC suggest a limitation of its own theoretical assumptions. These new approaches to political economy include a “neo-Kaleckian” growth-models approach developed by Baccaro and Pontusson (2016), Blyth and Matthijs’s notion of growth regimes (2017), Streeck’s theory of sequential fixes (2014), and a renewed interest in regulation theory.
What these approaches have in common is an understanding of capitalism that is more conflictual, anarchic, and subject to crisis, while simultaneously being less subject to assumptions of stable equilibria, path dependence, peaceful coordination, and class actors defending existing political-economic institutions. In other words, they undo the theoretical moves that comparative political economy made in the 1980s, 1990s, and early 2000s. To the extent that moments of stability exist, they represent fragile class compromises based on a balance of forces, rather than a pre-strategic set of cross-class interests. This has gone hand in hand with a revival and re-elaboration of power resources theory (Korpi 2006; Schmalz, Ludwig, and Webster 2018). This work incorporates insights from earlier incarnations of political economy that emphasize radical uncertainty, the capacity of markets to undermine themselves, and the tension between accumulation and legitimation (Polanyi 1944; Habermas 1973; Schumpeter 2008; Keynes 2018).
Regulation theory provides the link between the two traditions of critical political economy (Boyer 1990, 2015; Aglietta 2001). It has two core assumptions: 1) that capitalist economies are inherently unstable and prone to crisis; left to their own devices they do not spontaneously generate growth and achieve equilibrium outcomes, and 2) that capitalism periodically transforms its growth model, seeking to achieve growth from different sources. These assumptions generate what is essentially a punctuated equilibrium model, in which growth can be stabilized by regulation primarily in the form of institutions—such as those in employment relations, financial systems, and welfare regimes—for a period before exhausting that form of growth and lapsing into crisis, at which point efforts to find a new form of growth and to construct regulatory institutions appropriate to it begin.
For the purposes of this article, what matters about this turn in political economy is that it opens up space for rethinking and recentering the role of the state in the regulation of capitalist political economies, and particularly employment relations. States become essential actors in the regulation of unstable, crisis-ridden economies subject to perpetual reinvention. Indeed, a second common feature of these heterodox approaches to political economy is that they all acknowledge the need for political regulation, and therefore for a permanent role for the state. For Blyth and Matthijs (2017), growth regimes are sequential, and each growth regime is defined by the target of state policy (unemployment, inflation), which in turn has implications for all the other political-economic institutions. For Baccaro and Pontusson (2016), governments are crucial to both reproducing the growth model itself—for example, through financial deregulation to enable debt-led growth, or wage repression for export-led growth, or public-sector spending for a consumption-led growth model—and managing the underlying social bloc; it is governments that transform a social bloc into political power. For Streeck (2014), each sequential “fix” (inflation, public debt, private debt) is enabled by government policy.
The regulation approach has tended to undertheorize the state, focusing its attention on the delineation of regimes or accumulation and their accompanying modes of regulation, though Jessop’s work is an honorable exception. Boyer, however, in his most recent theoretical statement about regulation theory, has argued that the state is crucial because all the institutional elements of a mode of regulation derive at least in part from state action, and the state is a “vector of class compromise” (2015: 43). Jessop has more recently argued (2014) that his notion of “variegated capitalism” (as opposed to Varieties of Capitalism) requires a more active role for the state as it is forced to intervene in the changing relationship between market and state. Further, he argued that the (inherent) instability of the financialized capitalism growth model may require more governance to stabilize it, a point reinforced by Vidal (2014) in his discussion of regulation in the context of a dysfunctional accumulation model.
Marxist theorizing around the state in the 1970s provided a set of expectations about its role in the management of the economy at a fairly high level of abstraction, that of the general mode of production. On the one hand, the capacity of the state to act was constrained by the accumulation needs of capitalists, making the state parasitic upon the health of the economy and setting limits to the kinds of policies available to state managers. On the other hand, capitalism was sufficiently crisis-ridden and conflictual that it could not reproduce itself without the help of the state, producing a set of potentially contradictory imperatives: to secure accumulation through various forms of regulatory intervention while also ensuring its legitimacy and limiting challenges to the social order. As such, a Marxist theory of the state recognizes a state role that is economic but that also operates in the political, social, and ideational spheres, where legitimation and pacification are likely to take place.
The regulation approach and the explosion of recent heterodox political economy operate at a lower level of abstraction, focusing on the regulatory needs of particular growth models or regimes of accumulation. There, too, one can envisage state roles responding to accumulation, legitimation, and pacification imperatives that are specific to each type of growth. Regulation theory provides a way of thinking through the implications of changes in the growth regime for employment relations institutions (Baccaro and Howell 2017b) and the role of states in managing that change, whereas the more recent additions to heterodox political economy help us understand the characteristics and regulatory imperatives of contemporary growth regimes. These developments create theoretical space for a political economy of employment relations to revisit the role of the state in the regulation of class relations in contemporary capitalism. That in turn requires consideration of what those regulatory needs might be, and thus of the character of post-Fordist capitalism. To that I now turn.
Neoliberalism and the State
Neoliberalism is a “rascal concept” (Brenner, Peck, and Theodore 2010: 182) that has been overused and underdefined, but with sufficient definition it has promise for helping to grasp why the role of the state has both been transformed and remains central to the regulation of capitalist growth in the current period. I make no claim that there is one correct way to understand neoliberalism (for typologies of neoliberalism, see Weller and O’Neill 2014; Cahill, Cooper, Konings, and Primrose 2018), only that there are conceptualizations that better help us make sense of this changed state role. The term neoliberalism is used here to describe the institutional, political, and ideational architecture of contemporary capitalism in the period broadly from the end of the Fordist era to the present. Neoliberalism is “the contemporary mode of existence of capitalism” (Ayers and Saad-Filho 2014: 603). Or to put it in regulationist language, neoliberalism constitutes the mode of regulation of the regime of accumulation that has replaced Fordism.
Within this broad conception of neoliberalism it can be understood as simultaneously a response to the crisis of the earlier Fordist growth model and a response to the failure of classical liberalism, a failure that was as much political and ideational as economic. Thus, one can distinguish two distinct elements of a neoliberal mode of regulation. The first is neoliberalism in support of a regime of accumulation, or a family of growth models, which requires a set of institutions to stabilize growth and permit markets to function. Returning to the three imperatives noted earlier, this is a response to the accumulation imperative of post-Fordist capitalism. The second is neoliberalism as a constructivist project that involves reshaping society to allow a market order to function. This role is instead a response to the legitimation and pacification imperatives of contemporary capitalism. Both elements of neoliberalism help us to understand the role of the state in employment relations in the current period. In this article I propose that each capitalist growth model has the same broad imperatives, but their relative importance and the manner in which they can be addressed are different, leading to quite different state roles.
With regard to the first element, this is not the place to review the voluminous literature on the exhaustion of the Fordist growth model and what has replaced it. My point is only to suggest the implications of that shift for a state role in the regulation of employment relations. Fordism referred not to a single type of political economy, identical across the advanced capitalist world for the roughly 30 years after World War II, but rather to a family of political economies that shared the same growth dynamic (Harvey 1989; Glyn, Hughes, Lipietz, and Singh 1990). This dynamic was based on wage-led growth but was achieved through a range of regulatory mechanisms that linked mass production to mass consumption, from the archetypal pattern bargaining of the United States to high levels of state intervention to boost consumption in France after 1968. This implied a particular state role, as the next section will describe, and a central regulatory role for institutions of collective employment relations.
Similarly, what has replaced Fordism is not a single growth model, but a family of political economies that share the absence of wage-led growth, or rather its diminished role, and its replacement by alternative sources of demand, of which debt-led and export-led growth are the most developed. 3 Baccaro and Pontusson (2016) have outlined the characteristics of these models in the most detail, but they are consistent with a range of other contributions to an emerging heterodox and Marxian-inspired political economy, including Harvey’s work on flexible accumulation (1989) and Durand’s on financialization (2017). Debt-led growth in particular is associated with financial innovation and deregulation and rests on asset bubbles and high levels of debt exposure and financial speculation.
Two brief comments are in order here. The first is a negative implication: Neither debt-led nor export-led growth require institutions of collective employment relations, or institutional linkages between productivity and consumption (Baccaro and Howell 2017b); to the extent that they survive it is because of the power resources of organized labor, not an accumulation imperative, and states are likely to feel less pressure to maintain them. The second implication is that a strong case can be made that both of the more recent forms of growth encourage a liberalization of employment relations. Export-led growth turns the old Fordist logic on its head and represses domestic wage growth in order to spur export growth, an effect that can be negotiated but that can also be achieved through a weakening of collective institutions of employment relations. 4 Debt-led growth, and the financialization that drives it and is driven by it, encourages what Umney, Greer, Onaran, and Symon have called a return to “class discipline” through state policies of wage restraint and welfare reform that have “subverted and marginalized regulatory labour market institutions” (2017: 1). Financialization is a central element of all the growth models that have replaced Fordism (van der Zwan 2014; Durand 2017), which changes both the regulatory needs of the economy and the relative class power of labor and different fractions of business.
With regard to neoliberalism as constructivist project, what follows is heavily indebted to the work of Cahill and Konings (2017) and Dardot and Laval’s Foucauldian reading of neoliberalism (2014). Classical liberalism collapsed in a Polanyian trifecta of depression, fascism, and war. The effort to create a market order (meaning the commodification of labor, nature, and money, accompanied by self-regulating markets) turned out to not emerge spontaneously and naturally, to generate opposition and resistance, and above all to be unpopular and thus not the basis for a mass politics, or at least not a democratic mass politics. Any expectation of the market order’s natural legitimacy and self-evident efficiency proved false. 5 As Cahill and Konings put it, neoliberalism recognizes that a market order “needs to be actively constructed, institutionally and politically” (2017: 14). In this sense, neoliberalism can be understood as a terraforming project. Legitimation is thus a central element of neoliberal regulation in a way that was less true in the Fordist era.
There have been at least two distinct phases of neoliberalism (as indeed there were to Fordism) over the past three decades and more. It has evolved from an initial phase of eroding or dismantling institutions of an earlier era—what Peck and Tickell (2002: 380) referred to as “roll-back neoliberalism” and Davies (2016: 124) termed “combative neoliberalism”—to a phase of reconstruction and embedding of institutions and rationalities that make neoliberalism hard to dislodge simply by a change of government—roll-out neoliberalism for Peck and Tickell and normative neoliberalism for Davies. The role of the state is likely to be different in each phase. Understood in this way, one can glimpse a coherence to a number of seemingly disparate accounts of neoliberalism, as Table 2 indicates. All involve the state in some manner.
Elements of Neoliberalism as a Mode of Regulation
One brief additional comment on the last item on this list is warranted. My focus in this article is on the regulatory functions of states—the role that states play in managing class relations under changing growth models—rather than their form, and abundant evidence from detailed case material on institutional change in employment relations shows that national states remain central actors (Baccaro and Howell 2017a). There is also some limited discussion in the next section of the expanding role of European Union political institutions in shaping national-level employment relations. Nonetheless, even though it is beyond the task of this article, it is also important to recognize that the state itself has been transformed under neoliberalism. As the state has become less container-like (Brenner 1999), where we should look for the state and for the exercise of political power changes. The state was never a unitary actor but now its shape, form, and boundaries have become vastly more complicated and blurred. What looks like erosion may actually be relocation. It is easy to miss the state if we look for it in traditional places. The spatial dimensions of the state are also more important than during the Fordist era. In this context, familiar debates about the shift from government to governance and the emergence of multilevel governance take on new relevance (Rhodes 1996).
Cahill and Konings argued that neoliberalism is authored by the state (2017). Or to put it another way, neoliberalism is not laissez-faire. Unlike classical liberalism, neoliberalism is not about limiting state intervention, but rather about using state power in new ways to institutionalize a market order. As Davies put it: “The critical distinction between liberalism and neoliberalism is that the latter abandons the vision of market and state as independent and ontologically distinct entities” (2018: 273). Enabling new growth models, reshaping society, combating labor—all the things listed in Table 2 and more—require the state. Polanyi argued long ago that markets do not appear naturally or spontaneously. Indeed, the process of creating markets in “fictitious commodities” requires that the state overcome resistance to social and human cost: “There was nothing natural about laissez-faire; free markets could never have come into being merely by allowing things to take their course. . . . laissez-faire was enforced by the state” (1944: 139).
Fordism, the State, and Employment Relations
For the sake of contrast, before turning to an examination of the role of the state in the regulation of class relations in the neoliberal era, this article first very briefly elaborates, in stylized form, on the role of the state for the period of growth from roughly the end of the Great Depression to the end of the 1970s, often termed Fordism, which will be used here as something of an ideal type. Fordism refers to a growth model that solved the demand problem facing capitalist economies by linking mass production and mass consumption, dampening competition among capitals, and insulating national economies through a set of regulatory institutions.
For the purposes of this article, Fordism had three characteristics. First, it relied on steadily rising wages for the great mass of wage earners (Harvey 1989; Glyn et al. 1990), thus “universalizing” the interests of workers (Przeworski 1985) by legitimizing parties and policies that favored unions and collective bargaining, full employment, and a strong social safety net. The most important and effective mechanism for achieving this was sectoral collective bargaining that could take wages out of competition and explicitly linked productivity gains to wage gains across large swaths of the economy. Second, it encouraged a relatively strong organized labor movement and permitted a positive sum class compromise between unions and business (Wright 2000), and thus the possibility of collective self-regulation. Third, at the same time, full employment and strong unions created the danger of wage-push inflation.
What followed then were three distinct roles for the state. First, where labor was indeed organizationally strong, state abstention from direct regulation of employment relations was possible (though accompanied by a supportive role, which included an accommodating macroeconomic policy and rules preventing defection). It was this conjunctural situation from which Kahn-Freund (1954) extrapolated to make a more general argument about mature industrial relations systems. Indeed, labor strength could produce, as it did for close to three decades in Britain, Sweden, and other countries where a social consensus around collective bargaining appeared to exist, the ideological response of “voluntarism” on the part of unions, which were convinced not only that state intervention was not needed but that it might limit their ability to act in the industrial sphere (Flanders 1974).
Second, where labor was organizationally weaker, state substitution could occur to produce the functional equivalent of Fordism through wage floors, extension mechanisms, and support for sectoral bargaining. The best example here is France where conservative governments responded to the strike wave of May–June 1968 with a panoply of interventions that served to partially decommodify the labor market, to extend wage gains from small areas of labor strength, and to use the public sector to drive demand (Howell 1992). For most of the 20th century, Australia also used a state-administered conciliation and arbitration system as a form of extension mechanism, allowing gains that were the result of areas of union strength to be generalized, creating de facto sectoral bargaining, and even spreading gains across sectors once the principle of comparative wage justice appeared (Cooper and Ellem 2008). And in the United States, the National Labor Relations Act created a state-administered route to union recognition and collective bargaining (Lichtenstein 2002).
Third, for the entire period in small, open economies, and more and more elsewhere as time went on, forms of corporatism emerged to limit inflation (Crouch and Pizzorno 1978; Panitch 1986). Here the state served as midwife of concertation, using political exchange in an effort to encourage class compromise to extend the life span of Fordist growth. What connected these three roles was support for a fundamentally collectivist system of employment relations that in turn served a type of growth. It is also worth noting that during this period, the state actions in the sphere of employment relations were responding primarily to the accumulation needs of the Fordist growth model. Legitimation and pacification were secondary, in part because Fordism, allied with Keynesian demand management, full employment, and welfare state programs, delivered tangible material gains for workers. Legitimation flowed from accumulation, at least until the late 1960s when grievances around the experience of mass production work reinvigorated industrial conflict.
Neoliberalism, the State, and Employment Relations
How then should we think about the role of the state in employment relations and the regulation of class relations in the neoliberal era? Unlike Fordism, the post-Fordist growth models that have emerged are not reliant on institutions of collective regulation that link productivity growth to wage growth, or that spread wage growth across the economy. From a regulation theory perspective, each regime of accumulation, or growth model, is likely to rest on a hierarchy of regulatory mechanisms. During the period of Fordist growth, employment relations institutions were the central regulatory mechanisms because of their role in linking productivity growth to increases in demand. But these institutions are more peripheral to new growth models, certainly in their collective form. Financial institutions and education and training institutions are more important. It may also be that the state role in employment relations in the neoliberal era is more about legitimation and pacification (to return to the work of Offe and Hyman) than about contributing directly to accumulation, though these roles are difficult to separate out, as the remainder of this section will indicate. This section delineates four categories of state role in the regulation of class relations in the neoliberal era. These categories appear to different degrees in different countries, their prevalence being in part a response to the nature of the obstacle to liberalization in any given country.
Market Making
The first, most important, and most pervasive role is a market-making one: In a modernized Polanyian sense, moments of liberalization require greater state intervention to recommodify labor after the Fordist period and to overcome resistance to that recommodification. States have been engaged in intervention in employment relations for this purpose across the advanced capitalist world since the early 1980s. It involves both dismantling the old regulatory institutions and constructing new regulatory institutions appropriate to emerging growth models; the state is engaged in both the roll-back and the roll-out phases of neoliberalism.
States matter here by virtue of a set of unique capacities, distinct from non-state actors—both class actors (business and labor) and other forms of private national and international actors (Le Galès and King 2017). The state literature has rightly noted the “unbundling and reconfiguration of political authority” (Genschel and Zangl 2017: 63) that has been part of the transformation of modern states and the partial transfer of authority to non-state actors. Yet this has not involved a simple zero-sum game. States remain crucial actors, not least because they retain legitimacy, material resources, and institutional capacity—elements that are far less available to even the most powerful non-state actors. The state is also needed because private industrial actors are often timid, concerned with short-term interests, and have sunk costs in existing institutions. Even the most self-confident, organized employers are not able to bring about change alone. For example, in the middle of the 1980s, the main Swedish employers association was arguably more radicalized, and certainly more prepared to envisage a wholesale reform of the employment relations system than were their British counterparts (Johansson 2005). Yet that institutional transformation came earlier and was more thoroughgoing in Britain because the Thatcher government both took the lead in reform and offered employers protection from industrial action and confidence to challenge existing employment relations (Dunn and Metcalf 1994), whereas no Swedish government has been prepared, even up to the present day, to limit the ability of unions to launch strikes.
Among the capacities unique to states that have been important to institutional reconstruction are the following. The extent of their importance is explained in part by the country-specific obstacles to liberalization.
Their coercive power (fighting public-sector strikes, giving private-sector employers confidence to do the same) is substantial. The Thatcher government and Reagan administration actions during the 1984–85 miners’ strike and the 1981 air traffic controllers’ strike, respectively, are exemplary here.
States are best placed to select successful regulatory experiments, institutionalize them, and extend them throughout the economy (Jessop 2002: chapter 1). For example, in Australia, 1996 legislation formalized and generalized enterprise-level agreements, and after 1993, Swedish governments encouraged the decentralization and individualization of bargaining that had originated in parts of the public sector.
A special case of institutional reconstruction, of particular importance in the neoliberal era, is derogation, whereby legal or contractual constraints remain, but states permit industrial actors to bypass or ignore them. Derogation permits liberalization without having to frontally challenge or replace institutions, and as such may be more palatable. It can be thought of as a form of neoliberalism as exception (Ong 2006). French governments from the Auroux laws onward permitted derogation from labor law on an ever-widening range of issues subject to a workplace agreement.
Their role in solving collective-action problems for employers and unions is instrumental, for example, through the use of legislation to prevent defection from agreements, and the provision of side payments in the form of social benefits, tax credits, and opportunities for training. German labor law is a good example of the use of framework law to bind class actors to forms of behavior, but the effect of labor law (codetermination, for example) on behavior has shifted under condition of heightened unemployment and weakened trade unionism (Streeck 2009). Related is the ability of states to anticipate alliances among class actors and to design policy that will permit positive class compromises. In Sweden, for example, mediators took on the role of crafting agreements that were neither party’s first-order preference.
Their capacity to redefine, create, and imbue with legitimacy new collective interests is something that only states are capable of. In the period since 1996, French governments have repeatedly changed the law regarding which organizations are considered legitimate and representative of workers and hence able to sign collective agreements (Howell 2009). For the first time in 1996, Australian legislation permitted non-union collective agreements to be considered valid.
Although nation-states remain central actors in the regulation of employment relations, within Europe political authority has been transformed by the process of European integration and the emergence of both European institutions and a notion of European citizenship that privileges geographic mobility over class-based collectivities (Zhang and Lillie 2015). A partial shift in the regulatory locus of employment relations has followed. The specificity of the European project over the past three decades has operated to deepen and institutionalize broader neoliberal projects and the forces of liberalization that shaped the context within which European employment relations systems have been transformed. European integration adds another layer to a political narrative to understanding liberalization. Indeed, building off a discussion of Hayek’s classic statement on the economic impact of federalism (1939), Streeck has argued that “federation inevitably entails liberalization” (2014: 100, emphasis in the original) because it exacerbates the heterogeneity of interests that stand in the way of common regulatory action.
Developments since the onset of the Eurozone crisis have moved beyond limiting national regulation to a more coercive role for European institutions in restructuring national employment relations systems (Marginson 2015). As Erne (2018: 237) noted, “Until recently, European labour politics has mainly been shaped by horizontal market integration through the free movement of goods, capital, services and people. After the financial crisis, the latter has been complemented by vertical integration effected through the direct surveillance of member states.” This has been most aggressive and far-reaching in countries subject to programme conditions and in return for loan agreements, and the results have involved radical regulatory changes (Koukiadaki and Kokkinou 2016).
Along similar lines, Scharpf (2010: 211) has forcefully argued that there is an asymmetry to the politico-legal mechanisms by which European integration takes place that has “a liberalizing and deregulatory impact on the socio-economic regimes of European Union member states.” Although European legislation requires a high degree of consensus among member countries—which themselves have very different labor movement strengths and government political orientations—the European Court of Justice (ECJ) is able to act without achieving political consensus and has tended to privilege individual rights to enter and exit market exchanges over collective and national systems of social solidarity. The case of Laval in Sweden is a good example of this privileging. In that case, in which a Latvian company used posted workers on a work site in Sweden, and unions blockaded Laval for not signing a collective agreement with the Swedish public works union, the ECJ ruled that the right to strike against firms using foreign workers is limited to core elements of an agreement. The asymmetry manifests itself thus: “The liberalizing effect of judicial decisions may be systematized and, perhaps, radicalized by European legislation. But given the constitutional status of ECJ decisions interpreting Treaty-based liberties, political attempts to use legislation in order to limit the reach of liberalization are easily blocked” (Wolfson, Thörnqvist, and Sommers 2010: 227).
Regulation without Unions
A second major role of the state in the regulation of employment relations in the neoliberal era has been to offer a modest level of protection and compensation to workers, but to do so in ways that still permit the liberalization of labor markets. Neoliberalism is associated not only with political formations on the Right, even if it appeared earliest there, and that is particularly true for its roll-out or embedding phase. Mudge has noted that neoliberalism has taken on distinctive forms on the Left, and indeed the greatest shifts in a neoliberal policy direction have taken place among center-left parties (rather than those of the Right) and countries that are not part of the “Anglo-liberal” core (2018: chapter 2). The dilemma, particularly for “modernized” center-left parties, has been how to protect workers when unions can no longer do so, particularly at a time when those same parties have become more market friendly so that protection for workers has to be balanced against the apparent imperative of flexibility (Cronin, Ross, and Shoch 2011). The frequent solution has been a more interventionist state that takes on a protective role, but that role is focused on the provision of minimal rights at work, or social protections, rather than either the bolstering and reviving of collective regulation or the use of state power to boost demand by transmitting gains from areas of labor strength to the rest of the economy.
State regulation became the centerpiece of what we might term a Third-Way form of economic management and class regulation, as center-left governments attempted to walk the line between flexibility and minimal security for workers (Crouch 2001; Howell 2004). That minimum security could take the form of workplace rights, or, as in the strategy of flexicurity, social protection in return for flexibility (Heyes 2011). These governments only very rarely offered new institutional support for unions and collective bargaining. Instead, direct legal regulation of the employment relationship deepened and expanded as collective self-regulation collapsed. A common strategy emerged under center-left governments in countries with weak coordinating mechanisms as the language of individual rights at work became pervasive and replaced an emphasis on collective rights and a public policy presumption in favor of union membership and collective bargaining. It typically involved three elements. First was the provision of minimal individual employment rights, enforced by state agencies, conceptualized as an industrial safety net. This was often accompanied by a shadow version of a beneficial constraints argument, in which minimal worker rights make it harder for “bad” employers to thrive. Second, institutions of employee voice at the firm level were encouraged in the name of partnership and unitarism. Third, less support was given to collective organization and action, with strict limits on strikes retained, which were often inherited from conservative governments.
This approach was seen in its fullest form in Britain under Tony Blair, when a new national minimum wage and a set of rights at work (some social directives imported from the European Union) were implemented, and the only explicit support for unions came in the form of a weak union recognition procedure. This was also seen in the United States during the Clinton and Obama administrations, and in the Fair Work Act in Australia (Bray and Stewart 2013). In the latter, implemented by a Labor government, the function of the awards system changed from one designed as a transmission belt from areas of union strength to the rest of the economy, to a set of minimal rights with no explicit link to union agreements, while strict limits on strikes remained. This state role—substituting for weakened trade unions and less-encompassing collective bargaining through the provision of minimal rights and protections—also produced minimum-wage legislation in Germany as part of the negotiations for a Grand Coalition in 2014.
This approach is also the preferred one at the European supra-national level (Martin and Ross 2004). From Maastricht onward, because national governments and trade unions were unable or unwilling to develop collective regulation at the European level, in its place social directives created individual rights, enforceable through European and domestic courts, for categories of atypical labor and groups such as women, migrants, and the disabled. It is worth noting the encouragement of institutions of employee voice at the firm level through requirements of information and consultation and provision for European works councils, but there was no equivalent support for unions, strikes, or collective bargaining. This state role was shared by both Third Way national governments and EU political institutions. It is an approach that is also compatible with Piore and Safford’s (2006) argument regarding the replacement of collective regulation with an employment rights regime of law, judicial opinion, and administrative ruling. Piecemeal rights are granted to specific categories of workers based on noneconomic identities or an assumption of particular vulnerability in preference to an approach that would look to unions to protect these workers.
Neoliberal Concertation
The third state role in the neoliberal era has been to facilitate austerity and to liberalize labor markets and employment relations through the use of a new type of social pact. The role here is partly one of legitimation—securing consent and participation from class actors—and partly about overcoming entrenched labor strength at the firm level or within parts of the public sector. This is concertation of a different kind from the heyday of corporatism. It is more state directed, with a different purpose—to legitimize and enable austerity and deregulation—and often in countries other than those traditionally associated with social democracy and corporatism in the Fordist era, such as Ireland and Italy. What these more recent forms of concertation have in common is an effort on the part of states to use peak-level bargaining to gain acquiescence to neoliberal macroeconomic and social policies. The distinctiveness of these new forms of social pacts has been partially captured by the addition of descriptors such as lean corporatism (Traxler 2004) or competitive corporatism (Rhodes 2001), but they might better be termed neoliberal concertation in that they combine state direction as means and liberalization as goal.
The social pacts in the 1980s and 1990s, and to a lesser extent the early 2000s, had the goal of enlisting national union support for the reform of expensive social benefits, the removal of rigidities in wage bargaining, and the deregulation of labor markets. The range of elements incorporated into these agreements varied from country to country, depending on the particular national obstacles to liberalization: wage restraint to reduce or stabilize wages; institutional reforms to limit wage indexation or deregulate the labor market; or social policy reform to slow the rate of growth of government spending and reduce budget deficits. They were especially prevalent in European countries seeking to meet Economic and Monetary Union convergence criteria, which helps to explain when and where they appeared (Baccaro 2003). Social pacts proved particularly useful in enabling liberalization when the obstacle was decentralized union strength because it used agreement from above to overcome resistance from below.
Italy is a good example here, where a succession of social pacts in the 1990s enlisted national union confederations in support of cuts to social programs and a series of measures that undercut the workplace strength of unions, including reform of the scale mobile and employment protection; what could not easily be won through workplace bargaining was achieved through national pacts, which in turn permitted legislative action (Baccaro and Howell 2017a: chap. 7; Rutherford and Frangi 2018). The French case is also worth noting. From approximately 2005 onward, governments on the Left and Right established the principle of setting out a labor market reform agenda, seeking a minimum number of unions to sign on through intersectoral agreements, and then embedded that agreement in legislation (Moreau 2004). The primary role of social pacts here becomes the legitimation—through agreement between class actors—of austerity and liberalization.
Class Discipline and Embedding Market Rationality
The fourth role of the state involves embedding and naturalizing market behavior and disciplining and removing alternatives to it. It is about managing the economic, social, political, and ideational effects of neoliberal growth models, which makes it a somewhat heterogenous category of state action. It is associated with the roll-out/normative phase of neoliberalism rather than the earlier phase of dismantling the institutions, practices, and rationalities associated with Fordist growth. As such it represents “both the frailty of the neoliberal project and its deepening” (Peck and Tickell 2002: 390). In each area is a role for the state. Precarity, for example, once it becomes pervasive, produces new demands for social protection (the flip side of flexicurity), for management of an underemployed labor force, and for disciplining the behavior of precarious workers themselves.
Naturalizing market behavior can involve state action that operates to support a kind of human resource management policy designed to tie workers more closely to the firm and to tie their material interests more closely to the success of the firm and to the market more generally. This policy is fundamentally a unitarist project. What Streeck (1984) has termed micro-corporatism is one distinctive feature of neoliberal employment relations: the creation of workplace-specific, non-union organizational forms and practices. One thinks here of works councils, requirements of information and consultation, profit-sharing arrangements, and the investment of benefits in the stock market. Here government policy goes hand in hand with the work of HR managers: both facilitating and generalizing their practices, and simultaneously prodding recalcitrant employers to adopt them.
At the same time, redisciplining the labor market, or what Davies (2016: 129) has referred to as a third phase of “punitive neoliberalism,” requires the state. As Umney et al. (2017: 5–6) put it: When we talk about class discipline below, we therefore refer to efforts by the state to increase the extent to which labour is vulnerable to the agency of individual capitalists and business leaders, and diminish the extent to which it is capable of challenging that agency. . . . financialization has tended to render capital more intolerant of regulatory institutions and put pressure on the state to retrench the role of institutions that benefit labour.
The prime sites are the welfare state and the carceral state, what Wacquant (2009) called the double regulation of the postindustrial workforce. One of the features of neoliberal growth models, in contrast to Fordist ones, is the importance of marginal, atypical, often barely legal employment (Bernhardt, Boushey, Dresser, and Tilly 2008). Here state action operates at the edge of the labor market rather than at its core and often operates as much through social and migration policy as through formal employment relations policy. It also functions to draw sharper boundaries, both material and moral, between work and non-work, recommodifying and ensuring the flexibility of labor, and removing and demeaning alternatives to it.
To summarize, whereas the state role during the Fordist era sought to enable collective regulation, or to create functional substitutes, or to manage its macroeconomic effects, the role of the state in the neoliberal era has involved overcoming resistance to the expansion of employer discretion in the name of flexibility and globalization, institutionalizing the market order, offering limited protections to workers in ways that only minimally interfere with this order, and securing legitimacy and consent to do so. Weakened labor movements have been less able to resist the use of state power in these areas, and states have found themselves subject to pressures from different, non-wage-led forms of capitalist growth.
Varieties of State Intervention
These new state roles are unevenly utilized. Liberalization is a protean project, not reducible to a single blueprint or institutional architecture, or achievable by a single pathway. Multiple pathways lead to liberalization and multiple modes of state intervention, just as there were in the Fordist era. It remains too often the case that neoliberalism is conceptualized in the academic literature in Anglo-Saxon terms, as taking the form associated with liberal market economies and the deregulatory political projects of Thatcher in Britain and Reagan in the United States. As a result, the scale of the marketization that has taken place over the past three decades in countries widely considered to be hostile terrain for a neoliberal ideology and traditionally neoliberal political parties (northern Europe as well as France, for example) is widely missed, as is the internal transformation of what have tended to be described as resilient political-economic institutions. A strong case can be made, for example, for a distinct Nordic neoliberalism, clearly involving liberalization and an expansion of employer discretion, but operating through different processes and involving different actors (Andersson and Howell 2018). For the purposes of my argument, what this implies is that although states have everywhere become more interventionist in facilitating the emergence of neoliberal growth models, the precise form of state intervention has often varied from country to country.
Broadly speaking, the shift from wage-led growth to debt-led and export-led growth, from circuits linking productivity to wages and regulating labor and capital markets to financialized and flexible accumulation, imposed similar imperatives on employment relations across the advanced capitalist world, ensuring that states everywhere became more interventionist in their regulation. But the pathway to liberalization and the particular form of state intervention in employment relations reflect country-specific configurations of class power resources and the legacy of how Fordist employment relations were implemented. Together they constitute a set of obstacles and challenges to liberalization that encouraged the search for alternative state strategies. In other words, there remain varieties of capitalism and varieties of employment relations, even if they are all becoming more liberalized.
Cross-national variation in the form of state intervention is the result of a wide range of factors, some highly specific and contingent. Broadly speaking, however, the obstacles to liberalization in each particular political economy and the varying configurations of labor and business power resources are what create challenges and opportunities for the state in how it seeks to liberalize employment relations. How much resistance are trade unions able to put up? How politicized and anxious to liberalize are employers? Does the obstacle to liberalization lie primarily in state regulation or the collective power of labor, and if the latter, at which level labor is organized? Different obstacles and physiognomies of class power imply different state strategies.
This argument will be very briefly illustrated using a handful of cases. Table 3 summarizes the obstacles to liberalization, and the primary form that state action took in order to overcome it.
Varieties of State Intervention in Employment Relations
The contrast between Britain and France is particularly stark in this regard. In Britain, by the end of the 1970s, it was primarily the power of unions at the workplace level (more so even than the national level) that limited the discretion of employers over pay setting and work organization. A frontal assault on the collective strength and capacity of unions was therefore the basis of the Thatcherite response. In France, however, the obstacle to liberalization was the state’s own regulatory practices and institutions, introduced in the decade after 1968 to limit social conflict and expand demand. Therefore, the drive for flexibility would require that the state withdraw from the role that brought with it a risk of precisely the social explosion that the state had stepped in to avoid. Hence, a distinctive strategy appeared, one that has been essentially continuous from the Auroux Laws enacted under the presidency of François Mitterrand to Emmanuel Macron, that permitted flexibility primarily through derogation at the firm level rather than outright deregulation, so long as the terms of the flexibility were reached through firm-level bargaining or at least social dialogue (Howell 2009; Baccaro and Howell 2017a). Therefore, the development and spread of firm-level bargaining—which was under direct assault from the Thatcher government at the very same time—was the mechanism in France by which deregulation could take place and employer discretion could be expanded. In other words, diametrically opposed strategies were used in the two countries but to the same end of liberalization.
In Italy, as noted in the last section, social pacts were used to overcome resistance to decentralized labor strength, and then to legitimize austerity and reform of the welfare state. Here there was simply not the state capacity—by virtue of the electoral and party system—for an equivalent direct attack on organized labor. Sweden and Australia are mixed cases. In the former, with labor strength at both the national and local level, the reform strategy used a revival of multi-employer coordinated bargaining and an expanded role of state mediators (Elvander 2002; Kjellberg 2009). In Australia, where both labor and state regulation were obstacles to liberalization, reform strategies on the part of the state included concertation during the late 1980s, the encouragement of firm-level bargaining to legitimize deregulation in the 1990s, deregulation in the form of marginalizing the awards system in the 1990s and early 2000s, and a steadily growing number of restrictions on union collective action (Cooper and Ellem 2008; Buchanan and Oliver 2016).
Conclusion
I have sought to do two things in this article. First, I have identified and delineated a systematic pattern of increased state intervention in employment relations across the advanced capitalist world that has characterized the period since the exhaustion of Fordist growth in the early 1980s. The more direct forms of state action, aimed clearly to weaken unions and collective bargaining that are associated with early neoliberal governments in Britain and the United States, should not distract from the broader pattern of state action—albeit taking different national forms—to transform employment relations in a liberalizing direction. This path has included a market-making role in which states have exercised a set of unique powers to construct, generalize, and embed new employment relations institutions; a role of offering limited protection to workers in the absence of unions in a manner consistent with labor market flexibility; a role in legitimizing austerity and institutional reform while overcoming resistance from below through social pacts; and a role in both redisciplining labor and naturalizing market behavior. Cross-national variations in state intervention have tended to reflect less ideological difference than country-specific institutional obstacles to liberalization and the contingent configurations of business and labor power. The common trajectory of liberalization apparent over the past three decades and more could not have taken place, I have argued, without a parallel common trajectory of state action involving both more interventionist states and states that are interventionist in new ways.
Second, I have sought to step back from the empirical investigation of state action in the current period to examine why states are indispensable actors in the regulation of class relations, a task that involves a return to an older, partially dormant set of debates about the relationship between capitalist growth and state regulation. States have played a central role in the regulation of class relations since the advent of industrial capitalism, as indeed they did in pre-capitalist societies. Capitalist labor markets were themselves political constructions, born of state action that removed alternatives to selling one’s labor for a wage, and the construction, maintenance and ultimate demise of each system of labor regulation has witnessed the hand of the state. States of necessity must intervene to regulate work, employment relations, and labor markets.
This article has argued that understanding the role of the state in the regulation of employment relations requires a recognition that a fundamental bias in state action derives first from its overarching structural dependence on private investment and then from the particular regulatory needs of each distinct and successive capitalist growth model. The result is that the state cannot be neutral, nor are its actions subject only to the variable relative power resources of business and labor or shifting political coalitions. As a result, the role of the state in the sphere of employment relations, but also in other spheres, is likely to reflect the character and dynamics of the dominant growth model and to change as the growth model shifts. It is why, for example, French Gaullist governments in the 1970s enacted policies and institutions that substituted for labor strength and contributed to wage-led growth despite weak unions, and why center-left governments in Britain and the United States in the 1990s chose a regime of employment rights that offered limited legal protections to workers but did not seek to encourage collective bargaining.
The degree and form of state intervention has changed over time. During the Fordist era, wage-led demand was central to the dominant growth model, and trade unions were often organizationally strong. Under those circumstances, collective self-regulation on the part of class actors was possible, with states acting primarily to establish an enabling macroeconomic and institutional framework. Some irony arises from the fact that the heyday of national economic regulation coincided with less direct intervention in the sphere of employment relations. In this era, collective institutions of employment relations were themselves central to reproducing the wage-led growth model. This was the source of labor’s functional power during this period, regardless of its strength, as well as its organizational and political capacity. Those power resources did matter, however, for how wage-led growth was achieved, and this period saw different state strategies for achieving it, including support for collective self-regulation where labor was strong and state substitution where labor was weak.
In the neoliberal era, states have become more interventionist and interventionist in new ways, with the primary goal of intervention being the removal of obstacles to the liberalization of employment relations and labor markets. States have played a central and necessary role in the process of institutional reconstruction that has accompanied liberalization. That role has taken a variety of forms, and responded to a variety of pressures, but states everywhere have found themselves drawn into the process of transforming employment relations systems. In this article I have argued that the framework of neoliberalism, understood as the mode of regulation of contemporary post-Fordist growth models, is useful for understanding the forms that state action has taken during the recent past because it highlights both the accumulation implications of these emergent forms of growth and a constructivist element that serves to reshape institutions, norms, and rationalities so as to better permit a market society to operate. In both realms the state is a necessary actor.
In contrast to the Fordist period, collective institutions of employment relations no longer play a major or necessary functional role in reproducing post-Fordist growth models. With wage-led growth much diminished, states no longer have a compelling interest in maintaining and protecting the traditional institutions of collective bargaining. It is harder for trade unions to appeal to states or employers on that basis. In this context, the power resources of labor matter primarily for the capacity of workers and their unions to resist the common trajectory toward liberalization, hence the state strategies outlined in the last section that respond to country-specific obstacles and forms of resistance to liberalization.
This already long article is not the place to draw out the implications of a theorization of the role of the state in the regulation of employment relations for trade union strategy. But it does suggest, very tentatively, that although resistance to liberalization alone is unlikely to be a viable long-term strategy, especially as labor movements experience near-universal decline (albeit at different rates), strategies that target the growth model itself may have more success. To the extent that the wage-led components of growth can be strengthened, or the liberalizing and class disciplining implications of financialized growth can be limited, or the international framework for export-led growth can be modified, these factors are likely to create more space for both the defense of collective employment relations and an argument to states that they should be defended. In that respect, though limited and marginal at the moment, there is promise in including unions in conversations around a Green New Deal so as to ensure an explicit wage-led growth component, and promise in the campaign to regulate financial institutions from below (CWA 2019) that acts directly to modify the growth model.
The point here is that states are both central and necessary actors in the regulation of employment relations, and they are responsive not only to interest-group pressure but also to the shifting implications and imperatives of capitalist growth models. Theorizing the role of the state in the regulation of employment relations requires paying close attention to these growth models. Doing so can help us to understand both how and why that role has changed since the early 1980s, as has been the task of this article, and the conditions under which it might change in the future, which is the task of another.
Footnotes
This article began as the Kingsley Laffer Memorial Lecture in Sydney in 2017. I am grateful to the Work and Organisational Studies Discipline of the University of Sydney Business School for the opportunity to develop the argument and particularly to Bradon Ellem, Chris F. Wright, and Marian Baird for their helpful comments. I am similarly grateful to Jenny Andersson, Patrick Le Galès, and Colin Hay for their comments on a presentation of the argument at Sciences Po in March 2018. A subsequent iteration of the argument was presented at a workshop on new theory in employment relations at MIT in 2018, where the author received particularly useful comments from Virginia Doellgast and Charles Umney.
For information regarding the data and/or computer programs used for this study, please address correspondence to the author at
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This article uses the term state in preference to government because it encourages a sociological view of the state as shaped by its relationship to the society and economy within which it is embedded. That view is central to my argument in this article, that state regulation of employment relations is driven in large part by the shifting implications of different capitalist growth models, which lends a distinctive character to state action.
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In their work in progress, Baccaro, Blyth, and Pontusson identify four post-Fordist growth models: the two noted above plus foreign direct investment–led and balanced growth.
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Baccaro (personal communication, March 7, 2019) argues that Germany could not be characterized as having export-led growth prior to the mid-1990s in part because the collective bargaining system redistributed productivity gains to the domestic economy.
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Neoliberalism as a distinct body of thought emerged in the late 1930s, and subsequently developed in various ways (for its intellectual history and the role of the Mont Pelerin Society and the key contribution of Friedrich von Hayek, see 
). Whereas classical liberals were optimistic about the ability to create a market order, neoliberals were and are more pessimistic.