A capitalism with a human face? Union power in Germany

Stefan Berger (Ruhr-Universität Bochum)

Germany has arguably never had a strong neoliberal government. Instead its typical variant of corporatism has prevailed regardless of centre-right or centre-left governments. This system consists of a strong cooperation between trade unions, employers and the state in searching for agreed solutions to all questions of industrial crises without denying the basic conflict of interest that separates capital and labor. Of course, there have been degrees of difference between left and right-wing governments, but it is characteristic that some of the strongest moves towards the flexibilization of labour and the reforms to social security happened under the Social Democratic Party (SPD) government of Gerhard Schröderin the early 2000s. Yet the infamous ‘Hartz reforms,’ named after Peter Hartz, a former human resource executive of Volkswagen AG, who chaired the commission that came up with the reform proposals, was implemented in 2003/4. It included a reduction in unemployment and welfare benefits, which have often been misunderstood as a neoliberal reform package. Its aim was to make the German economy more competitive again, after the country had been dubbed ‘the sick man of Europe’ in the 1990s. However, it left intact the principle of protecting the unemployed and the poor against the vagaries of the capitalist market, whilst seeking to incentivize those excluded from the labour market to enter paid employment and end their reliance on state funding. As such, the reforms were in line with a longstanding social democratic principle of honouring labour and work and denouncing those sections of the working class that shied away from ‘hard and honest’ work. 

The SPD itself, however, was never at ease with the Hartz reforms. One of the first things that the current SPD-led German government under Olaf Scholz did last year was to replace the Hartz reforms with the so-called citizens’ basic income which indeed has done away with some of the hardships and chicaneries with which the Hartz reforms became widely associated. There is the same emphasis on incentivization, providing better access to training and employment opportunities, but with a new grace period where housing and heating costs are paid in full after someone has become unemployed. It also allows an unemployed person to retain personal savings worth tens of thousands of Euros whilst receiving unemployment benefits, and an overall increase in unemployment and welfare benefits. These changes were hailed by the centre-left as an important step in the direction of greater social justice. 

The new basic citizen’s income is the clearest and most recent sign that Germany continues down the path of forging a nation state that puts a high value on social solidarity and social justice. One of the most important guarantors of this commitment have been strong trade unions. Whilst the German unions have also been struggling with falling membership figures, which have declined from 11.8 million members in 1991 to 5.7 million in 2021, they remain far more firmly entrenched than in North America. But, they too, contend with industrial closures, union-busting in smaller companies, and the vicious denunciation of the right-wing media for whom trade unions are the last dinosaurs of the industrial age. Unions have sought to forge the kind of corporatist partnership that has characterized German industrial relations from the 1950s to the present day. The most recent collective bargaining agreements of major industrial unions, like IGBCE (mining, chemical and energy workers) or IG Metall (metalworkers) show a remarkable ingenuity and originality in protecting the wages of the workers in the face of high inflation rates. 

Germany, like many industrial nations in the global north, has faced deindustrialization of certain sectors of industry, including textiles, coal mining and steel since the 1950s. Yet, with the exception of the privatizations and liquidations that followed the integration of East Germany in the early 1990s, it has usually managed to avoid the kind of social desolation that has been so characteristic of neoliberal ways of dealing with deindustrialization. It has also followed a consensual strategy whereby the industrial sector was maintained to a far greater extent than was the case in other deindustrializing countries of the global north. Where particular industries could not be retained, they were brought to an end with a special eye towards social provisions for workers.  Germany’s coal industry is the best example of this. When the coal crisis hit in 1959 it took the best part of a decade for all the players to realize that this was not just another cyclical crisis, but the beginning of the end. With the participation of the mining union, the Ruhrkohle AG was set up as a holding company for all those mines (often located in the Ruhr region) which had become unprofitable. Through a system of state subsidies, the contraction of mining employment was undertaken gradually over sixty years until the last deep coal mine in Germany closed in 2018. In all, 600,000 miners benefited from retraining and re-employment in other industrial sectors, from generous early retirement schemes and from a slow winding down of what was Germany’s key industry in the 1950s. Deindustrialization of the German coal industry has therefore become a byword of a structural economic change that was carried out in a socially responsible way with the deliberate aim of avoiding social hardship for displaced workers. Whilst this could not be replicated in all industrial sectors in Germany, it remains a symbol for a capitalism with a human face. German trade unions were key in forging a more just economic transition.

[published in: Our Times. Canada’s Independent Labour Magazine, special issue on ‘Deindustrialization and the Trade Unions’, spring 2023, https://ourtimes.ca/magazine/issue/spring-2023 ]