The transformation of work and industrial relations in the post-Soviet bloc: 25 years on from 1989

Introduction

The ‘revolutions’ beginning in 1989 and continuing through to 1993 in Central and Eastern Europe and beyond were momentous in their geo-political and economic impact. A new arena of academic debate opened, seeking to analyse and explain the form, content and implications. Debates have focused on the class character of socialist societies, ¹ why a specific conjuncture had emerged when it did, who were the agents of change and who were the winners and losers in the political and economic processes that unfolded. The collapse of the Soviet bloc raised as many expectations as concerns for workers and industrial relations scholars. The role played in the demise of one-party systems by Solidarność in Poland, the Democratic Forums in Central Eastern Europe (CEE) and the miners’ strikes in the Soviet Union suggested a resurgence of grass-roots civic engagement. Yet, a transition agenda of heavy economic restructuring quickly sidelined unions and sent the working population into survival mode, making union weakness and apparent labour quiescence central themes of debate.

Work, Employment and Society (WES) has carried nearly 30 articles covering post-communist work and workplaces since 1989, enabling new insights into the processes, problems and outcomes of transformation. Articles have grappled with the challenges of applying theory to practice. Questions of agency have intermingled with problems of structure. The need for interpretation of patterns of behaviour shaped by legacies of the past has added a further dimension to empirical analysis. Most recently, debates have arisen as to whether transition has ended, or is still part of an ongoing process. Political isomorphism and structural adjustment have been pursued vigorously, prompting the World Bank to declare the end of transition in Russia in 2009. Yet past legacies and post-socialist dysfunctions are still a recognizable feature of these societies. What has really changed, which makes for the timeliness of this review, is the context and terms under which early issues and newly emerging problems are discussed. In geo-political terms, the collection of new states, all striving toward a standardized Western model, has been replaced by two distinguishable regions: on the one side, CEE countries, now integrated into the EU; on the other, most soviet successor states rallying around the recently constituted trade association heralded by Kazakhstan and the Russian Federation. Socially, issues of corruption, informality and flexibility at work are viewed under a new light, less as unique features of post-socialist difference than as specific manifestations of post-crisis neoliberalism.

Regime change delivered, at least on paper, the right of employees’ independent representation and free collective bargaining. The degree to which new and past official unions have been able to reform in order to fully realize this potential has been at the core of much research in the field. Strictly related have been changes in the workplace, following privatization and liberalization, affecting workers’ ability and willingness to organize and mobilize. Key arguments have centred on the need to explain union weakness and apparent labour acquiescence in the face of social upheavals following reforms in the 1990s. Given the economic structure of planned economies, heavily skewed toward traditional manufacturing and public welfare, early research has mainly focused on these sectors.

Another key task has been to explain reasons for differences. Here the analysis has looked at exogenous forces, the size and mode of entry of foreign direct investments, as well as endogenous dynamics, the strategy adopted by elites as a response to challenges of global market integration. Arguments have raged around the role of past legacies, either cultural or institutional, to justify post-socialist difference. Indeed, within WES we can find a range of theoretical frameworks. Institutionalist approaches have sought to apply typologies associated with Western capitalism, or to focus on traditional institutions such as collective bargaining. This has proved unsatisfactory, as dysfunction rather than institutional complementarities remains a central feature of much of the post-communist experience. Path dependent analyses have identified the importance of historical continuity as an explanatory factor, only to underplay the importance of path ‘shaping’ as a process within transformation. Marxist analysis has raised fundamental questions of dependency and dispossession. In this perspective it is the agents of capitalist accumulation, whether foreign investors or new local businesses, rather than inertial structures, that gain centre stage. Within this prism, failed institutions, such as management dependent unions, labour collectives and corporatist arrangements, have found their rationale as tools for cheapening of labour and heading off conflict. Yet, as some researchers in this tradition have shown, ‘cheap’ labour in the region is not always compliant (Morrison et al., 2012) and this theme is evident in several of the WES articles that follow.

In selecting our articles we seek to present the full range of approaches within the overall rubric of transformation analysis. In doing so, we progress from case study analysis of the workplace, sector or individual state to broader and more reflective overviews. We begin with an examination of institutional transfer in the former East Germany, exploring barriers to effective implantation of ‘Western’ norms of behaviour. We then examine in more detail the unravelling of old certainties of work, employment and collective representation in selected states. Our overview studies highlight aspects of gender difference within the frame of ‘winners and losers’. In the broader and longer view the commonalities of ‘state capture’ are revealed across the states and geographical differences emerge. Finally, we identify relationships between state, labour and capital which stand outside the prescribed economic orthodoxy and the expected convergence of East with West. Instead of convergence we find variegated capitalisms unified by common traits of informal employment, systemic corruption and individualized bargaining. Our authors have all emerged as authorities on post-socialist transformation through their association with WES publications, offering a welcome alternative to structuralist determinism, essentialist views of past legacies and institutionalist idealization of Western models. In many ways the journal should be a natural home for high quality work on transformation. It has consistently adopted a critical edge, explored emerging trends within the workplace and society and adopted both qualitative and quantitative approaches.

Transition as institutional transfer?

Our first contributions focus their attention on institutional transfer and restructuring outcomes within the two sides of Germany. The German Democratic Republic (GDR) was effectively incorporated into its Western neighbour with the unification treaty of 1990. This incorporation was bound to make the East German experience different from that of other post-socialist states, where exogenous shocks were less direct. The special nature of German unification provided a ‘laboratory’ where the effects of societal and institutional change could be studied. Could it be possible for Western industrial relations to be accepted by citizens of the former East after 40 years of separation and could that be achieved in a quarter of a century, still less the 10 years initially projected by politicians? These questions are tackled in our two articles by Richard Hyman (1996) and Martin Upchurch (1998) on institutional ‘transfer’ in the former East Germany. Hyman considers whether a process of normalization had begun in the East, leading to convergence in terms of industrial relations. One key structural factor explored by Hyman is the break-up of the old East German Kombinate into privatized concerns by the Treuhandanstalt (trustee office) established by the Kohl government to manage the process of privatization. The Treuhandanstalt’s programme was a ‘big bang’ approach which in terms of practice and consequences was even more severe than the ‘shock therapy’ applied elsewhere. Despite subsidies and infrastructural support from its Western partner which helped soften the blow, there followed large scale destruction of the former East German industrial base. Within this story of rapid de-industrialization, Hyman describes the effects of transplantation of Western institutions of collective bargaining and labour law. The process was ‘smoothed’ by the rapid Westernization of the unions guided by personnel parachuted in from the West. The result is described in terms of ‘insensitivity’ to local preferences and dominance of priorities shaped by Western interests (Hyman, 1996: 607). The outcome, says Hyman (1996: 632), was not a Westernization of the East, but rather an ‘Easternization’ of the West as German employers began a process of forcing bargaining concessions from their workforce representatives against the background of Eastern unemployment. Hyman identifies both economic contingencies and ‘cultural heritage’ (Hyman, 1996: 631) as key explanatory factors of union weakness. He painstakingly reconstructs the dynamics of the transfer, giving full recognition to the agency of actors. Finally, the working of institutions is reconnected to ‘relations of production’. In this way post-socialist exceptionalism is rejected by recognizing that the failures in the East are part of a more general crisis of the German model.

These themes are pursued by Upchurch (1998) in his case study of teachers in the former East. The study investigates the themes of East German ‘uniqueness’, incorporated as it was into a Western regime, and of ‘colonization’. Colonization took different forms. First, trade union professional organizers were implanted from the West German education union (GEW) to represent Eastern teachers. Second, the curriculum was revised in Eastern schools to purge Stalinized versions of history and to retrain teachers of the (now unpopular) Russian language. All individual teachers had to undergo a Stasi test, to see if they had been informants for the secret police. Most importantly, Upchurch traces the first industrial dispute since the Weimar period as a participant observer in secondary schools. The dispute highlighted the problems faced within the newly integrated labour market, whereby teachers’ educational qualifications from GDR universities were not recognized equally in pay terms with those obtained by West-based teachers. The discrimination took place against the background of the rapid introduction (in the early 1990s) of new public management techniques into the school system. In this milieu of ideological and institutional revision teachers began to forge some collective strategy towards manipulating the newly formed Personalrat (the equivalent of the works council for the education sector in Berlin) and its lower tier Gesamtkonferenz (school ‘works council’ conference) and to engage with the GEW union. As Upchurch explains, this was not an easy process and over time ‘it would appear that (confusion) had given way to resentment at the limitations of the participative framework which was partially overcome by informal activities led by key activists in the school’ (Upchurch, 1998: 213).

The post-Soviet workplace

Transformation in the ex-GDR proved problematic despite massive involvement by Western investors, unions and the Federal Republic. How would it fare in post-Soviet countries where the bourgeoisie had no historical roots or powerful sponsors? What change could one expect in the workplace after privatization and would this impact union reform and workers’ ability to act independently and collectively? Most importantly, can we move beyond institutional analysis to record and consider the effects of agency in shaping the future course of events? Our two articles by Sarah Ashwin (1997) and Gregory Schwartz (2003) begin to tackle this question by turning the focus firmly onto work transformation, trade unionism and employment restructuring in post-Soviet Russia. Under the Soviet system the ‘official’ unions acted as the ‘transmission belt’ of the Communist Party, having as primary function the administration of welfare and productivity initiatives in the enterprise. The miners’ strikes of 1989 had challenged their collaborative role and new independent unions began to develop as democratic demands gathered pace. The key question for Ashwin was the prospect for reform of the union movement, either in terms of progressive development of the independent unions or a political and ideological overhaul of the official ones. During this time reform attempts by the miners’ union with the help of the General Union Federations were beginning to be conducted through a massive educational initiative, which arguably had considerable effects. Ashwin’s findings were revealing and set the tone for parallel studies in other post-socialist states. Independent unions appeared to have ‘failed to expand beyond their narrow base in the mines and aviation industry’, while the official unions had ‘not managed to transform themselves into trade unions representing workers’ interests’ (Ashwin, 1997: 115). The reasons for the impasse were mixed. The system of social relations in the workplace consolidated under Soviet rule displayed an enduring effect on the normative behaviour of trade unions throughout the transformation period. Most notably, the old system of channelling grievance through brigadiers (cadre workers with line manager functions) and plant management appeared on the surface to be more in tune with workers’ initial reactions than the alternative of turning to the union on a collective basis to solve workplace problems. This was despite increasing tensions within workplaces as the risks and uncertainties associated with marketization unfolded. The official unions’ continued administration of enterprise welfare, in post-Soviet countries at least, allowed them to maintain their position of authority. Schwartz explores the effects of restructuring on the Russian labour market and on workplace regimes of compliance and control. Again, as with Ashwin, he finds that many practices of the past lingered on. In particular he notes that, despite the apparent collapse of manufacturing output, the levels of employment in Russian enterprises appeared remarkably stable. This could only be explained by a ‘legacy effect’ whereby traditionally Soviet enterprises in Russia ‘encouraged the formation of job- and enterprise-specific skills which were indispensable in the attempts to “make the plan”’ (Schwartz, 2003: 51). This way of working was combined with managerial reliance on ‘informal means of control […] stable social hierarchies […] and loyalty and long service’. The ‘labour collective’ functioned as an internal labour market where ‘bad jobs’ became the social preserve of vulnerable workers. The trade union welfare function contributed to sustain the workplace as a societal unit with normative tasks which transcended the basic need for production output and profit. The net effect was the continuation of a diluted form of labour hoarding with stabilizing social effects. Apparently a case of ‘path dependency’, this may be less about inertial structures than about socio-political judgements made by constituent interests overriding orthodox economics logic.

Employee representation: the failure of IR transfers in CEE countries

A great deal of research has been devoted to the institutional analysis of employment practices and industrial relations in new EU member states. Westernization of institutions has been considerable and foreign direct investment (FDI) has led transformation at industry and enterprise level. This notwithstanding, the following studies identify an overall negative impact on the development of unions and collective bargaining; this happens despite variations due to host country, home country or corporate effects.

These themes are first developed in our articles focusing on collective employee representation from Carola Frege (2000) on Hungary and Adam Mrozowicki et al. (2010) on Poland. Frege presents a case study of the clothing industry and develops new explanations for labour ‘weakness’ in post-socialism based on an institutional framework. Previous explanations for the relative quiescence of organized labour had focused on the debilitating effects of structural change in the economy on workers’ bargaining power. Her starting point is that such explanations may fit countries like Russia which experienced severe production decline, but in countries such as Hungary or Slovenia economic conditions appeared more promising. She concludes that ‘post-communist unions might be weak not only because of economic or political conditions but also because they are still heavily influenced by the legacy of communist workplace relations’ (Frege, 2000: 743). Unions still relied on old patterns of tripartism in the enterprise and had failed to develop pluralist identities of ‘them and us’. This is not to say, however, as later studies have shown, that unions’ presence still had the ability to moderate employer behaviour and even to begin new processes of renewal (see, for example, Croucher and Rizov, 2012). With this in mind, a decade later Mrozowicki et al. returned to the theme of labour weakness, this time with respect to Poland. They conducted narrative interviews with 45 trade union activists and in the process uncovered a range of attitudes towards new union identities. The results of the study presented a more optimistic picture of trade unionism than had been gleaned in earlier studies. In particular they noted ‘a change at the level of unionists’ subjectivity [which] underlies a favourable bottom-up response to the revitalization strategies of union confederations’ (Mrozowicki et al., 2010: 235).

In contrast our next article, by Guglielmo Meardi et al. (2013), examines multinational practices in manufacturing and financial services in the Czech Republic, a state ‘economically the most advanced and geographically the most western of the new post Soviet bloc states’ (2013: 51). Meardi has researched and published extensively in the area of employee relations and the practices of multinational companies (MNCs) in Eastern Europe. The article, the most recent in our review, is of value because it explores the industrial relations practice of MNCs in contrasting sectors: manufacturing and finance, moving away from the exclusive focus on manufacturing. The Czech Republic displays relatively high levels of union density, works councils and statutory information and consultation rights. As such, when framed together with high levels of skills, the Czech Republic ‘offers investors more possibilities to implement a “high road”’ (Meardi et al., 2010: 42). However, despite this favourable context the researchers find prevalence in both sectors for union avoidance and the use of direct rather than indirect forms of participation in industrial relations practice (see also Croucher, 2011). The outcomes exhibit ‘enduring gaps’ with Western European practices that would appear to confirm dependency and a ‘race to the bottom’ (Meardi et al., 2010: 39). It is worth highlighting that Meardi has elaborated elsewhere on workers’ discontent, identifying first labour turnover and anti-EU political preferences as a reaction to lack of representation but also observing the growth of informal collective mobilization (Meardi, 2007). Collectively this body of work bears testimony to the enduring legacies of post-socialism but also to its complexity, which cannot be reduced to a simple path or equated with continuity. As originally envisaged by Hyman, Meardi et al. (2010) suggest the ‘race to the bottom’ and workers’ ‘exit strategies’ show that social experiments in the East have consequences for the whole of Europe.

In examining developments in the labour market we would be remiss if we did not consider the effects of East-West migration. WES has published a small selection of articles on the subject. Our selected article by Robert MacKenzie and Chris Forde (2009) focused its attention on the migration of workers from the A8 EU accession states to the UK after 2004. Their case study company employed migrant workers from a range of A8 states and the outcomes of their research appeared to confirm employers’ use of migrant labour as a cheap and compliant resource, belying any HRM rhetoric of ‘resource-based’ or ‘business case’ practice (MacKenzie and Forde, 2009: 145). Employer strategies were clearly focused on a low road approach to competitive advantage, embellished by an employer driven discourse that the East European worker was a ‘good worker’, with a strong ‘work ethic’ standing in contrast to local young recruits (MacKenzie and Forde, 2009: 150). The employer also utilized successive rounds of targeted recruitment to replenish its pool of migrant workers, partly in response to high turnover. Workers, in fact, displayed increased aspirations for better pay and working conditions once they became more settled in the host country. As the authors reflect, such practices do not bode well either for the migrant worker or the Lisbon Strategy of the EU to create more and better jobs. Further research is clearly needed here (for exceptions, see Wills, 2005), not least in examining trade union initiatives to recruit and organize migrant workers (see, for example, Fitzgerald and Hardy, 2010) and in terms of potential state regulation to protect against exploitation and to enforce citizenship rights (Ciupijus, 2011). An enduring problem in the field of industrial relations is also methodological nationalism, where attention focuses exclusively on host, i.e. generally Western, countries. This means that migration systems developing in CEE or the former Soviet Union bypassing them are paid little attention.

Beyond the workplace

Institutional change and the transformation of work in post-socialist countries have engendered wider societal change, although not always for the better. Our next article, from Anna Pollert (2003), examines the impact of transition on gender relations and equal opportunities. Pollert begins her review of five states within the region by reminding us that under the command economy, despite the official rhetoric of emancipation, women were still subject to traditional forms of patriarchy. However, the proportion of women in higher professions (e.g. medicine, accountancy, law) was relatively high when compared with the West. Many of these occupations had been subject to a degree of ‘feminization’, which, unlike in the West, went alongside relatively low pay when compared to that received in manufacturing occupations. Capitalist restoration has had contradictory outcomes for women within the labour market and in society more generally. Latent sentiments of indifference or even hostility to women’s liberation and feminism have been unleashed, generating a ‘rise in conservative gender attitudes’. Pollert argues that such entrenchment of ‘anti-feminism’ partly arises not from a return of a cult of ‘masculinity’, as some others have argued, but more from the fact that ‘deeply structured Communist-era male strongholds were perpetuated and encouraged by capitalist transition’ (Pollert, 2003: 346).

The article by Charles Woolfson (2007) probes the phenomena of the rapid growth of informal work and the informalization of the employment relationship by examining the case of Lithuania in the broader context of EU accession. Woolfson refers to the legacy of informalization from the Soviet system but argues that ‘the contemporary dynamic erosion of employment conditions through informalization is peculiarly post-communist rather than simply a consequence of an inherited communist legacy’ (Woolfson, 2007: 553). Rather than assuming that informalization will recede as the regulatory framework of market capitalism is established and accepted, he argues that informalization under post-communism is a product of a political economy of dependency and exploitation. Rather than recede it is likely to continue. Transformation has been the vehicle for low trust relationships within the workplace which has introduced a ‘cluster of labour abuses’ such as ‘envelope wages’ (whereby a non-declared cash payment is made in a ‘brown’ envelope to the worker), unpaid overtime, non-payment of wages, victimization and the denial of collective employment rights (Woolfson, 2007: 555). His views of the ‘dark side’ of the employment relationship under post-communism are amplified by John Round et al. (2008), who explore the phenomenon of corruption in the post-Soviet workplace using the example of recent graduates employed in Ukraine. The article exposes the ‘closed’ labour market within the country whereby many jobs are only secured through ‘the use of connections or the demanding, and payment, of bribes’ (Round et al., 2008: 149). The research chimes with that of both Schwartz and Woolfson on prevailing labour market practices, both in terms of the continuation of labour hoarding and the payment of unofficial ‘envelope’ wages. Corruption remains endemic in Ukrainian workplaces, with very little transparency in recruitment and promotion practice. Again, Round et al. draw links between the asymmetry of employer and employee power, corruption and informalization, presenting them as a key lever driving economic management under post-communism.

Where next?

Our chosen articles represent a richness of academic inquiry, covering 25 years of post-communist transformation and chosen from a range of examples of continuity and change within the region. In the earlier articles the focus tended towards institutional analysis and industrial relations. After two decades of transformation we find more reflective and often more articulated analyses which focus on agency, in terms of both the effects of legacy and the path-shaping activity of actors, ranging from trade unions and the state to multinational capital. We also find an increasingly diverse set of sectoral studies emerging, beginning with the public sector and heavy manufacturing, but broadening to light industry, service occupations and financial services. As the scope of study broadens we find greater diversity and it is through the study of difference that we can clearly understand the continuing dynamic of transformation. The penetration of capitalist relations drives increasing fragmentation, as first envisaged by Hyman, but not just in the labour market. Class divisions in the society at large, no less than a growing gender divide and ethnic discrimination, due to high levels of migration, should therefore receive greater attention from scholars in future research. Equally, despite much attention to union reform, there appears to be a gap in workplace studies actually focusing on workers’ representation, with an appreciation of conflict and forms of resistance (Varga, 2013).

One particular question which arises is whether or not a distinctive type of capitalism has emerged, based perhaps on dependence and labour exploitation through cheap labour within a new international division of labour. We also note, within this scenario, that the transformation experience is clearly different for different social classes and we need to tease out these variations of experience in our future research and analysis. In particular, it is necessary to assess the impact of these emerging social class divisions on social cohesion within the wider economy of Europe and the EU. The dangers of the creation of a sub-set of states in the CEE dependent in economic terms on the western half of the continent will place enormous strains on the viability of a universal European social model. Such economic dependence is also arguably being encouraged by the prescriptive nature of the policies of the international financial institutions (IFIs). The IFIs continue to wield their soft normative power both to dilute protective labour codes and to encourage market-based solutions which restrict the scope for the consolidation of societal solidarity. Finally, the continuation of clientelism in socio-political life and the persistence of corruption and mafia-like activity must also be integrated into the chemistry of praxis within the post-communist states. Further research is clearly needed to confirm or deny such interplay. We can only look forward to the role WES will play in these scientific explorations.