Transformation at Work: In the New Market Economies of Central Eastern Europe

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Anna Pollert

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    Dedication

    To Joe, Jessie and Sam

    Preface

    Transformation at Work explores key issues of post-communist transformation. Rather than assuming that ‘success’ in transformation is an unproblematic concept, it questions the values which are often hidden in the burgeoning ‘transformation’ literature and reveals its own concerns as the development of industrial relations and labour representation as key elements of change. The title Transformation at Work has a double meaning: it refers to the history, economics and politics of transformation, as well as the lived experience of transformation at work. The book brings together the historical, socio-economic and political background of transformation, the broad problems of how workers and their organisations respond to the change from command to capitalist economies, and case studies of how managers, workers and trade unionists experience these changes within their organizations. The book's focus on the Visegard countries – the Czech Republic, Poland, Hungary and Slovakia – draws attention to some of the early applicants to an enlarged European Union and examines how the ‘new’ Europe relates to the advanced market economies. It analyses both similarities and national differences in the political and economic backgrounds of these countries and their emerging industrial relations systems. The perspective moves from the macro- to the micro-levels, encompassing the multidisciplinary approaches ofhistory, political economy, industrial relations and sociology. The principal aim ofthe book is to contribute to a debate on transformation which, rather than seeking the ‘right kind of capitalism’, examines more closely the problems of democratic regeneration and trade union representation as an intrinsic part of this process. The issues and arguments are of relevance to those concerned with democratization and transformation both in the post-communist world and further afield.

    List of Tables

    • Table 4.1 Macroeconomic developments in post-socialist economies, 1989–1992.
    • Table 4.2 GOP Change in Višegrad countries, 1992–1997.
    • Table 4.3 Export growth rates of Višegrad countries.
    • Table 4.4 Total employment change (annual average percentage change) and registered unemployment, 1993–1997, Višegrad countries and selected South East Europe (for comparison).
    • Table 4.5 Registered unemployment rates by sex in Višegrad countries, 1993, 1995, 1996.
    • Table 4.6 Private consumption 1992–1997 (annual percentage increase) and real wages (percentage change over same period of preceding year.
    • Table 4.7 Expected and actual inflation at time of ‘Reforms’.
    • Table 4.8 Foreign trade balance with world economy, 1993–1995 (in billion dollars).
    • Table 5.1 Methods of privatization for medium and large enterprises at end of 1995 in Czech Republic, Hungary and Poland, percentage of total.
    • Table 5.2 Czech Republic's macro-problems, 1994 1996.
    • Table 6.1 FDI inflows into Višegrad and selected countries of Central and Eastern Europe and their importance in the host economies, 1991–1995.
    • Table 8.1 Number of strikes in Czech Republic, Hungary and Poland, 1991–1993.
    • Table 8.2 Judgement of financial situation in 1993 compared with 1988, Czech Republic.
    • Table 10.1 Percentage employment by sector Višegrad countries, 1989, 1992.
    • Table 10.2 Percentage of employment accounted for by women in broad sectors and selected service branches, Višegrad countries 1989–1992.

    Acknowledgements

    This book originates in a research project financed by the Economic and Social Science Research Council's ‘East-West Programme’ on workplace restructuring in the Czech Republic from 1993 to 1995. Thanks to Irena Hradecka and Marie Cermakova, of the Institute of Sociology at the Czech Academy of Sciences, for their work with me on the Czech case studies. I would like to thank all those companies who co-operated in providing me access to conduct the case studies, and the managers, workers and trade union officers who gave up their time to talk to me. Many thanks to ČMKOS and member trade unions for their valuable assistance in supplying me with information and interviews. Thanks also to members of the Institute of Economics of the Czech Academy of Sciences, for providing me with documentation and to many others whom I spoke to in the course of my research in the Czech Republic. At the wider level of research on Central Eastern Europe, thanks to the International Labour Organization's Central and East European Team in Budapest, and to many others concerned with Central East European transformation with whom I have had fruitful exchanges of ideas.

    Special thanks to my father, and to Bill Kaye, for reading the manuscript and making valuable comments.

    As always, the ideas expressed and any mistakes remain my responsibility.

    Abbreviations

    ASZOKAutonomous Trade Unions' Confederation (Hungary)
    AWSSolidarity Electoral Alliance, an alliance of ‘right’ parties formed in Poland around Solidarity to run in the September 1997 general election. It became ‘Solidarity Electoral Action Social Movement’ when it became a party in November 1997
    CEECentral Eastern Europe
    CEFTA1992 Central European Free Trade Agreement between ČSFR, Poland and Hungary
    CESACouncil of Economic and Social Agreement (Czech Republic)
    CMEACouncil for Mutual Economic Assistance: the trading bloc of the former Soviet bloc, with agreed prices and quantities
    CPCommunist Party
    ČMKOSCzech and Moravian Confederation of Trade Unions
    ČSFRCzech and Slovak Federative Republics (name of post-1989 state before Czech and Slovak Republics split on January I, 1993) Also still called Czechoslovakia
    CZKOSCzech and Slovak Confederation of Trade Unions
    CSSDCzech Social Democratic Party
    CRZZCommunist Central Council of Trade Unions (Poland) until 1981
    EUEuropean Union
    EBRDEuropean Bank for Reconstruction and Development
    ESZTIntellectual Workers Trade Unions Association (Hungary)
    FDIForeign Direct Investment
    GATTGeneral Agreement on Trade and Tariffs
    GDPGross Domestic Product
    HRHuman Resources
    HRMHuman Resource Management, interpreted here as an approach emphasizing individualizing the employment relationship, and marginalizing collective employee organization and representation. Practices include: individual contracts, performance related pay, total quality management, team working and task flexibility
    HZDSMovement for a Democratic Slovakia (populist party headed by Meciar)
    ILOInternational Labour Organization
    IPFInvestment Privatization Fund
    Czech koruna (crown)
    KDU-ČSLChristian Democratic Union-Czech People's Party (Czech Republic)
    KOZ-SRConfederation of Trade Unions of the Slovak Republic
    KUKCultural Workers' Union (Czech Republic)
    LIGADemocratic League of Independent Trade Unions (Hungary)
    MDFHungarian Democratic Forum (the conservative post-1990 democratically elected government)
    MistrForeman, Czech Republic
    MOSZNational Alliance of Workers' Councils (Hungary)
    MSZOSZNational Association of Hungarian Trade Unions
    NATONorth Atlantic Treaty Organization
    NAFTANorth American Free Trade Association
    NCRINational Council for the Reconciliation of Interests (Hungarian national tripartite body)
    NICNewly Industrialized Country
    NIFNational Investment Fund. Fifteen NIFs were established in Poland in 1993 to manage a mass privatization programme via consortia of international and Polish firms, to act as holding companies to restructure around 500 enterprises to be distributed between them
    ODSCivic Democratic Party, Czech Republic
    ODACivic Democratic Alliance, Czech Republic
    OECDOrganization for Economic Cooperation and Development
    OPZZReformed Polish Communist Trade Union Confederation (formed in 1981 from CRZZ)
    PBRPayment By Results
    PharePoland and Hungary Assistance in Restructuring Economies (origins of acronym for wider European Union assistance for research and ‘know-how’ in Central and Eastern Europe)
    PITPartners in Transition
    PPSPolish Socialist Party (pre-communist)
    PPRPolish Workers' Party (the name for the Polish Communist Party formed in 1941)
    PRPPerformance Related Pay
    PZPRThe Polish United Workers' Party, formed in 1947 when PPS forced to merge with PPR
    SDKSlovak Democratic Coalition, main opposition to HZDS, and leader of post-1998 Slovak government coalition
    SLDDemocratic Left Alliance (Polish ex-communist socialist party)
    STShock Therapy
    SOEState owned enterprise
    Solidarity NSZZPolish Solidarity Trade Union
    SZEFTrade Unions' Cooperation Forum (Hungary)
    SZOTFormer communist National Council of Trade Unions, Hungary
    UNUnited Nations
    UWFreedom Union. Polish neo-liberal party which joined the Solidarity Electoral Alliance after the 1997 election to form a coalition government
    VHJ‘výrobnÍ hospodářská jednotka’, ‘production economic unit’ – the Industry Association of firms in former Czechoslovakia
    VišegradThe ‘Višegrad Four’ of the former Czech and Slovak
    countriesFederal Republics, Poland and Hungary, a term created after their prime ministers met on February 15, 1991 at Višegrad to pledge co-operation to speed reintegration into Europe
  • Afterword: The First Decade of Transformation

    There can be no neat summary to a book about transformation. By the time this is published, the contents will be far overtaken by events. However, several key arguments and findings will inform future debate. I have argued how historically, CEE has always been a strategic zone between world powers over which they have fought for control. Today, discussions about its early accession to an enlarged EU reflect both on these countries' own aspirations to be considered truly ‘European’, and the recognition by the existing members of the importance of their inclusion for political stability. This regional position of CEE has marked it with a past of political and economic subordination, which itself has given rise to movements for national independence and a legacy of different nationalisms. I have also discussed how CEE's insertion into the wider European economy has continued this history of dependence and subordination, and supported the conclusion that a centre periphery relationship between Western Europe and CEE has been established. The application of the mantra of free market transition policies plunged the region into slump, so that ‘transformation’ ceased to be the difficult enough task of shifting from one system, the command economy, to another, capitalism. It became a question of clawing the way out of recession. The Czech case has been a poignant example of a country starting transformation in a relatively advanced condition, both economically and in terms of human resources, only to see much of this dissipated by lack of foresight, planning and investment. For all the countries in question, the term ‘transformational recession’ has been coined by free market policy makers to neutralize the tragedy of unnecessary waste, thus allowing collective amnesia about the policies responsible for it.

    One of the questions raised about the process of transformation has been the degree to which globalization narrows the choice of individual nation states to intervene in the direction of change, and whether or not it tends towards institutional convergence which minimizes the relevance of political and industrial relations diversity. From the findings of this book, the answer must be: yes and no. Internationally imposed policies have forced similar structural adjustment policies of stabilization and deregulation and privatization; each country has, in similar ways, been forced to suffer the consequences of privatization as making capitalism without capital, and when FDI has arrived, accepted this largely on MNCs' conditions. Globalization has placed CEE in a subordinate position economically and politically within Europe and the world economy, as we have seen both in the behaviour of the World Bank, the EU and MNCs. Thus far, in a new epoch of world integration, there must be familiar resonances with their past for CEE members. At the same time, we have seen the evidence for different government responses. Nation states have responded to global pressures, on issues such as trade barriers, and on conditions for FDI. There are democratic election, and different political parties, albeit each one reined back by externally imposed policy constrained towards similar behaviour, whatever their early intentions and rhetoric. Yet even marginal differences over the question of state intervention and the role and legitimacy of tripartism and trade unions, alter the political climate and terrain in which change is fought out. At an institutional level, we have seen national diversity in labour organization and trade unionism rooted in the past and also driven by different contemporary policies, as well as areas of common ground in embeddedness in the command economy legacy.

    At a policy level, I have discussed the various possibilities for change and supported those who call for greater state involvement in transformation, but have criticized those who advocate the South East Asian model as not only historically inaccurate, but disastrous in terms of democratic accountability. A system of capitalist social democracy in which labour can develop its representation and have a real influence on policy is proposed. But how to get there? The interests in uncontrolled globalization of multinational capital are unlikely to be moved on moral grounds; the World Bank and IMF policies are set on neo-classical structural adjustment policies, and while the economic crisis of the late 1990s started in South East Asia has led some to argue that the days of neo-liberal hegemony are over, policy change from the ‘Washington consensus’ is a different matter. I have also discussed state planning and intervention, and argued that finding a different set of policies is not a matter of how states as some sort of neutral technocracies can socially engineer development policies. Not only does this ride rough-shod over transformation as a democratic project, but it also misunderstands the nature of social change. This is a process in which both structures and agents operate; among the latter, the state, capital and labour are emerging as new forces with developing capitalism, and it is only by examining the forms of these, in terms of new institutions, modes of representations, ideologies and practices, that we can begin to see the picture pan-out of both conflict and accommodation. Unlike analysis of transformation which focuses on finding a ‘best-way’ of capitalism, the unfashionable notion of class will have to re-enter the perspective. In many ways, it already has in studies of the processes of social exclusion, inequality, crime and corruption, environmental deterioration and ill health. But these are outcomes. What sociological investigation can contribute is an analysis of process – of work and employment relations, of hope and disillusion, of alternatives – inshort, ofthe lived experience of transformation.

    It is hoped that, as a theoretical contribution to the analysis of transformation, this book emphasizes that this must be a multidisciplinary exercise. First, the digging into history before and beyond the immediate forty-odd years of the communist era is essential for providing the analytic resources for understanding the multilayered ways in which the past may influence the present, both in collective memory and in the deliberate, selective mobilization of different elements of history – national, cultural, religious, political and labour movement, to name a few. The comprehension of continuity and change must be more complex than the popular, but over-simplified deployment of the concept of ‘path dependence’.

    Second, transformation analysis requires a global, political economic context: without understanding geo-political structures and power politics, together with national developments, the wider picture is lost, and the relationship between structure and agency disappears. Much of what passes as ‘transition analysis’ is no more than description of economic ‘progress’ and degrees of adhesion to neoclassical precepts, without any reference to the politics of change, which is about power. Third, to get a real grip on ‘transformation’ as an entire social process, analysis needs to relate the macro to the micro pictures. This is why this book begins with the wide-angle lens, and focuses at the end on the enterprises and the people inside them. Both structure and consciousness must enter the picture. This book is but a beginning. Much more is needed.

    As in all social science research, value judgements inform approach. My interests are with democratic process, transformation being about renewed dignity for the majority of people, and the developments of the labour movement and industrial relations. But whatever the perspective, analysis needs to be candid recognition that capitalist transformation is not towards a balanced, stable system, but to one based on contradictory interests, crises of regulation, and only transient modes of stability and accommodation.

    Appendix I

    Terminology

    What do we call the previous ‘system’? Kornai refers simply to the ‘Socialist System’, asking ‘Why seek a label for these countries other than the one they apply to themselves?’ and contends that ‘the choice of the term is a matter of semantics’ (1992: 10). This comment raises a curious difficulty in a sociological exploration of transformation such as this; for at one level, there is a need to use a language which corresponds to current usage in referring to the past: if the people of CEE refer to their past experience as ‘socialism’ or ‘communism’, then this should be reflected in commentary. Butthe political and ideological role of both journalistic and academic discourse demands greater critical scrutiny: it bears responsibility as opinion former and legitimiser of ideas. There is always a space between current popular usage and analytical language to describe social systems. In this instance, that space is one which acknowledges the debates and passions about ‘socialism’ and ‘communism’ as a project of human emancipation and alternative system to capitalism. Uncritical usage today of ‘socialism’ and ‘communism’ as serious descriptions of the ‘real’ systems of the command economies kills both debate and vision, and legitimises the ‘end of socialism’.

    Many have attempted to qualify ‘socialism’ with the term ‘state socialism’ to denote the state's central role (see e.g. Stark and Nee, 1989, Dittrich et al, 1995, Burawoy and Krotov, 1992: 19, Thompson and Smith, 1992, and Clarke, 1993a-although the latter with inverted commas). The problem with this expression, is that it still labels the former undemocratic and distorted political-economic system as some kind of ‘socialism’; including the state dimension fails to differentiate its role in re-distribution from its role as oppressor, and tars state planning with a tyrannical role. Furthermore, the concept of ‘state socialism’ has not aided theoretical clarity about the class nature or the social relations of production of this former system. Some attempt a class-based analysis which ends up little different from that of ‘state capitalism’, although the latter is rejected. For example, Thompson and Smith contend that,

    The relations of production are based on the centralized appropriation and redistribution of the surplus through a strata of planners empowered by the fusion of party and state apparatuses. Aruling class combining the leading sections of administrative, economic, political and military elites emerges from these relationships.’ (1992: 5).

    The ruling class is not a capitalist class, but is ‘a dominant class based on the party-state apparatus (which) appropriates and distributes the surplus product through centralized command planning’ (Thompson and Smith, 1992: 19). It is far from clear why the term ‘socialist’ is ever used.

    ‘State socialism’ has now become entrenched in the literature on ‘transformation’, and for that very reason, it requires re-examination. The continuing existence of alternative models of running society in today's various social movements and organized labour, both in advanced capitalist countries, and in the former command economies, shows that projects of human emancipation, which may yet use that ostensibly outdated term ‘socialism’, still exist. Academics need not add to the flattening of vision by uncritically neutralizing that language in using ‘socialism’ and ‘state socialism’ to describe the one-party states of the command economies. Ticktin (1992 and ‘Critique’, various dates) is more cautious, avoiding the word ‘socialist’, preferring instead the ‘Soviet system’, or ‘centrally planned’ economy. This is a more rigorous approach. In this book, therefore, where communist system or bloc, or the term ‘post-communist’ are used, these are short-hand to avoid the cumbersome terminology of ‘centrally planned’ economy, and other more complex descriptions, such as ‘one-party state centrally planned command economy’. However, Kornai's ‘command’ or ‘shortage’ economy, are most often used, as pointers to the entire former political-economic system.

    Appendix II

    Summary of Top Ten Investors in Višegrad countries, end 1995.

    Appendix III

    Attitude of foreign owners to trade unions

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