SAR, Vol 15 No 2, February 2000
CLASS COMPROMISE . . .
BY GLENN ADLER AND EDDIE WEBSTER
Glenn Adler and Eddie Webster are members of the Sociology of Work Unit at Wits University where they also teach in the Sociology Department. A related version of their argument here also appears in Politics and Society, v. 27, no. 3 (1999).
As the editorial in the previous issue of SAR (Vol. 15 No. 1 [December, 1999]) suggested, current developments in South African politics appear to bolster arguments by those warning against the twin dangers of "corporatist entanglements" and labour's subordination within the Tripartite Alliance.
At first glance this is a tough position to refute.
Indeed, in an article in that same issue, Carolyn Bassett and Marlea Clarke ("Alliance woes: COSATU pays the price") persuasively argue that the ANC government has recently treated labour more like an enemy than an ally. In this year's public service wage dispute, for example, government used tactics many conservative private sector employers would hesitate to employ. Moreover, since the elections the government has reaffirmed the neo-liberal GEAR strategy as the ideological lodestar for all policy initiatives, notwithstanding commitments to the contrary made in the October 1998 Jobs Summit. In short the government is flexing its muscles: as would any government riding the wave of a two-thirds majority, and with an economic upturn (of sorts) to boot.
However, the issue is not so much the specific questions of whether the unions should end the alliance or eschew "entanglements." More important is a broad point that frames such choices: it is, we would assert, the near-impossibility of envisioning any progressive option outside the alliance and outside of precisely such "corporatist entanglements" as are evoked by such critics.
The political wilderness
It is difficult, first of all, to imagine that life would be easier for COSATU in the political wilderness or that it could exit the alliance without suffering a debilitating internal split. And unless one can sketch a credible alternative to the alliance, calls for its dissolution amount to little more than posturing. Clarke and Basset noticeably - and sensibly - stop well short of advocating such a break.
Nor are their criticisms of COSATU's handling of the recent strikes evidence that the unions should forego "entanglements" in macroeconomic and development policy making and implementation. Of course, Bassett and Clarke rightly argue that unions should broaden their agenda to include public service restructuring, training and skills development, and workplace reorganization. But it is difficult to understand how these goals could be attained save through some form of sustained multi-level involvement with capital and the state, whatever name one attaches to such participation.
Moreover, whatever position one adopts with respect to the tripartite alliance, the temptation of linking the twin dangers mentioned above should be avoided, as this risks missing the main point.
South Africa is in the midst of two difficult transformations: the deepening of a democratic order and the reconstruction of the economy. These two processes are potentially contradictory and their interaction may simultaneously undermine both democracy and growth. At the same time, it is difficult to see how one can be achieved at the expense at the other.
In a recent critical review of the latest business-side neo-liberal conjuring, van Zyl Slabbert asked "where are the historical examples of democratic stability and vigorous market-driven growth in countries with a high degree of socio-economic inequality?" ( Business Day, 6 October 1999) This, he suggests, is "the political dilemma confronting the ANC." Indeed, he might have added that this is the central dilemma for all in the policy arena: business, trade unions, political parties, community organizations. No one of these actors - including government - has been able to win overall consent for their development ideas, nor have they been able to impose their maximum agendas on others. If government has achieved a degree of quiescence, hegemony remains elusive.
This situation presents labour, and COSATU in particular, with a difficult strategic choice. It can accept government's terms - thus marginalizing itself while risking internal divisions when opposition to GEAR intensifies among its rank and file. A second option is that it simply opposes GEAR, and risks open confrontation with government and business, leading to a degenerating economic stalemate. Neither of these options overcomes Slabbert's dilemma: they will not produce consent for GEAR, nor will they succeed in imposing an alternative; moreover the conflicts generated will likely be destructive of democracy.
In short, either path leads to a destructive stalemate which is in no one's interest. This suggests the need for a third option: opposing GEAR with the aim of reaching a negotiated compromise, thus opening up the possibility of a non-zero sum solution in which the social costs of adjustment are not borne by one party alone. We call this a class compromise.
We need to be clear about the possible options. The idea that South Africa could pursue an oppressive path - "the Chilean option" - is rejected even by many conservatives. Nor is a "revolutionary rupture" likely. Either strategy would be met with considerable resistance and would jeopardize both growth and democracy.
Nor is a conventional high-wage high-productivity social democratic exchange between capital and labour possible in our circumstances. And we cannot return to the statist developmentalist path pursued through the 1970s by many third world countries.
Any compromise must be suited to South African conditions: a fragile democracy in a low-growth, labour-surplus, highly unequal economy. It must address simultaneously problems of growth and redistribution, but in a fashion that does not sacrifice democracy: it cannot be imposed from above. Whether or not COSATU remains inside the tripartite alliance does not alter this problem.
In this article we argue that a compromise is both desirable and possible, though we are mindful of the many obstacles in its path.
What would such a compromise look like and under what conditions would it be possible?
Essentially it consists of three elements: "regulated flexibility" in which labour and business negotiate variation in employment standards; social citizenship yielding basic income security; and increased corporate taxes to finance social security.
Labour's pursuit of high wages and high job security may in certain circumstances be self-defeating. Inflexibility may encourage employers to choose labour-saving technology, to subcontract work, or to employ undocumented workers. These possibilities will lead to shell agreements: high standards on paper which apply to fewer and fewer workers in reality. On the other hand, variation may lead to a downward levelling of working and living conditions, with little increase in employment. Wage stability and variation would be more likely to have the desired effects when they are combined with social citizenship and are determined through bargaining.
Social citizenship includes: the right to income security; other forms of welfare such as education, health, and shelter; a right to share to the full in the social heritage; and the right to live in a safe environment. This simultaneously addresses many of the conditions necessary for improving productivity alongside a modest redistributive mechanism for the poor and unemployed and some compensation for those workers who have made wage and labour standards concessions. For the latter, it allows cuts in nominal wages without unduly sacrificing workers' real standard of living.
Variation depends upon a second compromise: that workers gain increased influence over investment decisions and productivity gains to ensure that surpluses generated by growth do not accrue to business alone. This could be done at the workplace and industry levels through forms of co-determination, while at societal level it could be achieved through agreements over macroeconomic policy that encourage growth and redistribution.
The integration of labour market variation and welfare allows a degree of "regulated flexibility" in the labour market - greater job and wage differentiation - in return for a minimum standard of benefits, thereby ameliorating the impact on workers of variation. Variation gives incentives to individual capitals - particularly in small, labour-intensive firms - to invest and create jobs, while the social wage provides workers at the lower end of the labour market and the unemployed with a degree of income security. Moreover, labour will be more accommodating of flexibility where workers' concessions can be offset by a system of public benefits. These benefits are extremely important in a labour-surplus economy where job creation will be slow, while the consequences of adjustment are felt immediately.
"Regulated flexibility" also means that the specific terms of the concessions should be determined in negotiations through the current industrial relations institutions. These enable workers and employers to reach agreements appropriate to a specific context and to negotiate improvements as conditions improve, thereby helping to ensure that concessions do not become permanent.
If regulated flexibility provides capital with incentives to participate in the compromise, this incentive is not open-ended. Business not only gives up a measure of control over profit and investment to workers, but also concedes power to the state. It must accept being brought fully into the state's tax regime where taxation of the increased profits helps fund the redistributive and productivist welfare policies.
The interlocking concessions and gains of the class compromise are oriented towards the stability of profit over the longer term as opposed to high rates of return in the short-term. Such a compromise would not involve one accord, but a series of agreements struck at different levels and involving an array of organizations. The range of institutions that have emerged in South Africa suit this pattern of compromise: framework agreements at NEDLAC, industry-based bargaining councils and accords, workplace agreements between business and unions, and local and regional development pacts forged in fora that include interests beyond business and labour.
In this compromise workers gain jobs, social security and a voice in decision-making. Business gains a more productive workforce and flexibility conducive to job creation, while committing itself to longer-term productive investment. The state achieves economic growth, increased tax revenues, and stability.
Compromise should not be seen simply as a way of disciplining workers, but as a conflictual process, the results of which may produce all parties' loyalty to democracy. In this sense the interlocking concessions and gains are a way of resolving the dilemma between growth and democracy.
But if a compromise is desirable, is it possible?
Finding the answer lies in examining the conditions that produced South Africa's political miracle. First, the parties have to reach stalemate. Second, the stalemate has to lead to a situation where the costs of not compromising outweigh the perceived gains of standing fast. Third, the parties must have access to - or create - institutional arrangements that allow bargained agreements. Fourth, organizations must represent their constituencies effectively and be able to mobilize and restrain their followers. Fifth, individuals must be willing to risk making strategic choices that may break with their organization's prior commitments. Finally, international conditions must be conducive to a settlement.
The first condition - a policy stalemate - has emerged. Government refuses to negotiate revisions to GEAR. In the face of the policy's inability to generate growth or employment, their best offer remains more of the same, combined with growing impatience with trade unions. The employers' "triumph" lies in the apparent omnipotence of globalization and its supposed capacity to discipline labour. They remain committed to an even purer version of GEAR and labour market flexibility. Labour pursues many of these compromises in practice, but its rhetoric and official policies block its capacity to make wage and labour market concessions strategically. This has had profound consequences for the movement: internally it has hindered strategic thinking, while publicly it makes the unions' positions less credible to supporters and bargaining partners alike. It often concedes the flexibility business seeks without gaining much in return.
A year ago the Jobs Summit achieved an unexpectedly high degree of convergence. Notwithstanding differences about specific reforms, the parties implicitly accepted that increased investment and economic growth on their own would not generate employment unless yoked to a comprehensive job creation program, public works, and a social security system. Moreover the summit declared that macroeconomic policy must enjoy "broad support" in society such that no group can perceive "that they carry the full burden of the costs and enjoy none of the benefits of this reform." The Summit presupposed an activist state and a strong emphasis on reaching agreement through bargaining, and came close to the terms of our proposed class compromise. But the Summit's agreements have since unravelled.
The second condition for a compromise has not been met: the parties do not perceive that the benefits of compromising outweigh the costs of standing fast. The government interpreted its recent electoral victory as vindication for GEAR and as a mandate to "go it alone." Business heartily endorses this position: "We've never had it so good," the Financial Mail trumpeted in a review of GEAR. For labour, there is no evidence that strike settlements were better than those achieved via negotiations, despite a significant rise in strike activity in 1998.
If increased industrial action did not yield benefits for most strikers, it certainly discouraged employers from investing or expanding employment. Such conflict may contribute to a circle of economic decline, yet it is unlikely that conflict has been sufficient to discipline all parties into a class compromise. The danger is that the many institutions through which agreements can be reached - the third condition for a compromise - may wither if the parties do not accept the merits of bargaining.
Nor do the fourth and fifth conditions exist. It is unclear whether the parties can summon their constituencies to support a compromise, or that leaders will make bold departures and tough strategic choices. Labour may lack the capacity to make effective use of the institutions it helped create.
It is not necessarily the weakest link, however. Business associations are not encompassing, and cannot effectively discipline their members. The state may lack the resources and capacity to play the ambitious role outlined above. And the greatest problems exist in the community sector, with its plurality of competing interests, and relatively undeveloped organizations.
Surprisingly, the sixth condition is beginning to be realized. Economists are increasingly calling for some regulation over the perverse forms of financial instability generated by globalization.
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All this is not to say that a class compromise is impossible. True, South Africa's political compromise was a rare achievement, and whether it can be repeated in the economy remains to be seen. Moreover, continued stalemate and a descent into violence are quite possible. Paradoxically, however, these facts also provide the strongest incentives for South Africa to achieve what many people believe - as they did in the 1980s - a seemingly impossible task.
We therefore repeat: to argue that COSATU should withdraw from the tripartite alliance risks missing the point. It may be true that its involvement encumbers its ability to act independently in certain circumstances. Yet no one has demonstrated how it could operate effectively in the political wilderness, especially when the overwhelming majority of its membership wishes to remain in the alliance - even if the ANC fails to deliver.
The key question concerns the tension between deepening democracy and promoting economic reconstruction. If our suggestion of a class compromise is undesirable or fanciful, critics will have to show what real alternatives can best resolve this tension.
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