Governance, The State, Regulation and Industrial Relations

Ian Clark

• Publisher: Routledge
• Year: 2002
• ISBN:
  9781134632060
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book examines the legacy of economic and political aims and objectives formulated by the British government during, and immediately after the second world war. It examines contemporary patterns of regulation by the state, and reform in the industrial relations system as factors of these historically embedded influences. This book makes an important contribution to the history and theory of British post-war economics.

1 Governance, regulation and industrial relations

Introduction—the aims and objectives of this book

This chapter summarizes the wider arguments developed in the main body of the book and suggests how an embedded pattern of governance constrains long-term economic performance and structures internal regulatory institutions, such as those in the industrial relations system. Moreover, although the book takes a critically informed approach, it seeks to draw out the consequences of decisions and processes that remain both historically significant and necessary.

The purpose of this book is to illustrate the conceptual and historical frailty of the period since 1979 as a contemporary transformation in economic performance, in the role of the state and in the industrial relations system. The argument of the book examines contemporary patterns of regulation by the state and also measures of economic performance and reform in the industrial relations system through historically embedded influences on the state. Contemporary patterns of regulation reflect historically embedded influences, although in many cases the contemporary period appears as a substantive break with the past. Formative influences structure historically significant processes, such as industrialization and the institutionalization and incorporation of the employed class into the state. For example, libertarian laissez faire, voluntary regulation, self-regulation and the virtues of shorttermism remain key influences in the UK state. The relationship between each appears functional, yet it is contradictory. Moreover, the prevalence of short-termism further reinforces these tendencies. Hence, a formative influence only becomes historically embedded when it appears functional to practitioner groups to act as an autonomous yet contradictory part of the state. A preference for regulation by the voluntary agreement dominates not only in the industrial relations system but also in many other areas, e.g. the Police Complaints Authority, The Advertising Standards Authority and The Press Complaints Commission. Each institution regulates voluntary agreements and standards. In contrast to this, ‘deregulation’ of public transport and the public utilities, pension provision, training provision in Training and Enterprise Councils (TECs), etc. create pressure for voluntary codes of practice and complaints procedures, with few if any underpinned by statutory regulation.

To provide a historically informed yet contemporary theory of the UK state, it is necessary to emphasize the structural emergence and pervasive impact of formative influences throughout the institutional base of the economy and civil society. The immediate post-war era saw several strategic choices in the external and internal dimension of the state. Although some of these choices were historically necessary, each remains historically significant in the contemporary period. Hence, appreciation of the contemporary period must go beyond what Carr terms mere ‘chronicle’.¹ The formulation of state policy in the contemporary period must proceed from an intellectual perspective that accepts the past and previous experience as relevant and significant. In contrast to this, the promotion of severance between ‘now’ and ‘then’ appears in terms such as ‘new industrial relations’, ‘change management’, economic transformation and the ‘hollowed out state’. Carr also makes clear that the closer one is to the contemporary the easier ignorance becomes.² This is nowhere clearer than in the empirical—historically embedded—emergence of the UK’s productivity gap that appears to have replaced the productivity miracle of the 1980s and early 1990s.

A blend of historical analysis with industrial relations, aspects of international relations and economic history creates the possibility of integrating different approaches. Each discipline highlights a particular causal process—the role of the industrial relations system in post-war decline. To address this argument, which often originates beyond the industrial relations literature, it is necessary to expose and take on some of the crass generalizations within other literature sets. For example, Fordism was ‘flawed’ in the UK by trade unions and collective bargaining, where resistance ‘flawed’ attempts by capital and the state to improve the potential of the UK manufacturing sector. More crucially than this, as an institution, workplace multi-unionism and associated restrictive practices in the early post-war period were directly responsible for low investment and low productivity in UK manufacturing until the emergence of Thatcherism reversed this tendency. Further, post-war governments made no attempt to restructure the UK economy because they were fearful of trade union resistance, etc.

Each argument appears significant and yet each is proximate. Moreover, causation, i.e. the why not the how, is often absent. A particular event or process may have several amalgamated causes—economic, political, ideological, short term and long term.³ However, priority in causation may prove inconvenient or insignificant. As the remainder of this book demonstrates, arguments that position the industrial relations system as the central factor of explanation for the UK’s post-war decline fail to constitute a hard core historical fact for two reasons. First, facts are a question of interpretation. Second, the argument, although influential, has failed to find universal acceptance—not all scholars accept it as valid and significant. The remainder of this opening chapter is divided into eight short subsections that outline the overall approach of the book.

Governance and industrial relations in the post-war period

Governance refers to the control and co-ordination of activities to attain a range of specified outcomes. In the main, this is the province of the state. In the domestic sphere, the state may delegate the control of economic and social activities to interest groups or figurehead groups that represent the interests of capital and labour. In the external arena, the individual nation state and its particularized pattern of governance confront international institutions and practices. The aims and operations of such institutions, for example the International Monetary Fund (IMF), the Marshall Plan and associated European Recovery Programme, the European Union, the North Atlantic Treaty Organization (Nato), the United Nations (UN) and the Organization for Economic Co-operation and Development (OECD), may be democratic and federal or hegemonic and unitary. Nation states create, participate within and sustain international institutions nationally; hence, the nation state remains the main governance structure in domestic and international political economy.

The term ‘national pathway’ contains an external and an internal dimension to the state. In the UK’s case, empire and early industrialization have had a seminal impact on the UK’s international relations and its position in the hierarchy of international political economy. Equally, and by association, both have influenced the UK’s overseas markets, domestic production methods and related patterns of job regulation, an impact renewed in the immediate post-war period and further renewed during the 1980s.

The legacy of economic and political aims and objectives agreed and formulated by the UK government during and immediately after the Second World War is resonant in the contemporary period. In the immediate postwar era, securing the balance of payments and the viability of sterling as a reserve and settlement currency necessitated an all-out recovery of industrial output. The seriousness of the situation produced an output drive that eschewed any large-scale reconstruction of plant and machinery.

UK industry remained committed to non-standard production of goods for its highly diverse domestic and empire markets. As a result of this, craftbased methods of production, production management and patterns of craft control on the shop floor continued to operate in many sectors of manufacturing industry. Critics label this situation as a missed opportunity or as an outright failure by the state. This may be the case, but it explains very little—a proximate and isolated argument. If markets and production methods retained continuity with the pre-war era, it appears reasonable to assume that broadly defined patterns of industrial relations, including management interests, would also retain a similar continuity.

Throughout the post-war period, many scholarly contributions from economics and political science highlight the sclerotic effects of embedded patterns of industrial relations on UK economic performance. However, many such approaches position these patterns as a proximate cause of decline. As a result, they ignore the significance of more deeply ingrained causes that are particular to the UK’s historical development. The overall theme generated by the arguments presented in this book suggests that ‘popular’ and proximate approaches to economic decline are dominant in economics and political science. In defining a prescribed role for industrial relations and the industrial relations system, these disciplines isolate one factor from critical aspects of the real economy, such as employment levels, management policy and employer interests. Equally, there is no consideration of realpolitik—the constraints and opportunities afforded by the UK’s international relations.

The innovative approach of this book centres on the integration of historically significant decisions made by UK governments during the immediate post-war years within an emergent international order. The UK’s pattern of power politics, governance in the economy and the institutional structure of civil society represent a series of interrelated continuities in a national pathway of sovereign regulation. This series of historically embedded relationships and the pursuit of independence and sovereignty they represent weaken the assertions of generalized regulation approaches to industrial capitalism in ‘Atlanticist’ states. ‘Atlanticism’ describes a conjunction of nationally regulated and interdependent policy innovations that created a coherent Atlanticist yet sovereign economic and political order. Equally, embedded independence and sovereignty illustrate a primacy of national pathways over integrative structures and institutions, termed Fordism, and wider hegemony in US foreign policy.

The UK state illuminates historically embedded and hence historically significant patterns of domination and accommodation within an individual nation state that limit the significance of generalized patterns of regulation in capitalist economies. Interaction between internal and external forces in the state reinforce these embedded aims, interests and patterns of behaviour. Moreover, an appreciation of the UK’s contemporary relationship with the European Union and emergent patterns of pan-European regulation is likely to reflect a pattern of interests and power politics evidenced in the immediate post-war years.

The linkage between international relations and the UK’s pattern of industrial relations is evident in initially hegemonic and in subsequently anarchistic attempts to maintain and reproduce a stable international order. Both designs aimed to develop an expanding world economy encompassing a coherent international division of labour centred on the import of foodstuffs and raw material in exchange for exports of manufactured goods. In this respect, US foreign policy played a key strategic yet unsuccessful role in galvanizing a ‘Communist threat’ countered only by the integrative export of US methods of management, work organization and industrial relations. To present this argument and retain a contemporary relevance, it is necessary to contain contemporary and recent economic performance within a framework that focuses on the whole of the period since 1945.

Contemporary views of the post-war period suggest that the UK system of industrial relations regulated managers and workers through institutions and mechanisms that operated beyond embedded patterns of regulation in the UK state. To challenge this view, it is necessary to establish that, although the UK is part of a sovereign and stable European state system, the UK state has retained a peculiarly national pathway in the related areas of international relations, economic management and its industrial relations system.

As a revisionist approach (some would say heretical) to the UK state in the period since 1945, it is necessary that the argument and its material be original yet useful. This raises a methodological issue of ‘what does the book do’? But, in addition, ‘where does it look’?

Methods and sources

To add value to the existing stock of knowledge, a particular ‘research method’ must deploy a system of investigation that is capable of underpinning theoretical analysis by informing research techniques which address specific scholarly or research problems or areas of inquiry. For example, what role does an industrial relations system have in the process of economic decline? How can a presumed link be examined? Why is a presumed link seen as significant? However, theory is only one means of organizing reality. A conceptual positioning of relationships between different spheres of activity, for example the relationship between international relations and its impact on economic management and industrial relations, necessarily oversimplifies, restricts and, in the process, distorts. All scholarly methods have strengths and weaknesses, so a combination of several approaches may yield a critical mass of different types of evidence.

This project uses theoretically informed primary archival and documentary research methods to complement the use of established secondary sources in established literature sets that provide its narrative and analysis. In addition, the reconstruction of historical evidence through a relativistic approach positions the contemporary in an unending dialogue with the past. This further complements the theoretical approach to create a triangulation of methods in the examination of the state and patterns of governance.

The first priority for any state is survival. In the external dimension, this brings a nation into contact and conflict with other nations to create a pattern of international relations. In the internal dimension, state survival necessitates an effective yet acceptable organization of political institutions and economic resources to position a particular nation state in the hierarchy of the international political economy. In the political sphere, this requires sovereignty and territorial integrity, whereas economic ranking is subject to competitive economic performance that is in turn dependent on comparative productivity growth and control of unit labour costs. Both factors assume the effective regulation of labour power by the state at the workplace. However, the process of particularization peculiar to the individual nation state limits and weakens the abstract functionalism of generalized approaches to regulation that prescribe a structured role for the capitalist state.

An individual state, although sovereign, is subject to the regulatory dynamics of international political economy. Hence, in economic relations, the nation state is subject to political constraints. It is necessary to manage and maintain its comparative position in the international monetary system, e.g. under either floating or fixed exchange rate systems nations must regulate and defend the value of their currency. Politically, this has an impact upon the domestic economy and civil society, e.g. the state may have to legitimize unacceptable levels of wages, unemployment or inflation as necessary to contain unit labour costs and thereby position competitive productivity growth internationally.

The ‘hegemonic’ model of regulation, sometimes referred to as ‘Fordism’, initiated during the post-war years and recently (since the late 1980s) consolidated as ‘post-Fordism’ remains elusive and remote in the UK economy. In addition to looking beyond the expected areas, it is necessary to justify how and why this approach adds value to the existing stock of knowledge.

A legacy of connections

Single-state analysis is for some commentators and publishers redundant in an era dominated by the growth of comparative studies or internationalized approaches imbued with a new hegemony ‘globalization’. However, comparative analysis can only build on single-state analyses that contribute to a cumulative comparative analysis. Before embarking on comparative analysis, particularly in a period of presumed and inexorable convergence, it is necessary to establish a series of thematically connected arguments particular to one nation state. As a precursor to subsequent comparative analysis, it is necessary to establish the historically distinctive features and processes that particularize an individual nation state—defining what makes it individual. Comparative studies that either pre-empt nationally embedded patterns of regulation or ignore references to it may result in haphazard comparative research which acquires only transient significance. Such studies may be able to highlight contemporary differences between states yet may be unable to provide historically significant yet contemporary relevant explanations for them.

The legacy of an unconstructed industrialization and empire has contributed directly to an internally consistent set of institutional ideologies that create an embedded pattern of governance which constitutes the UK state. The effect of political institutions on the political economy provide revealing explanations of the UK’s deteriorating economic performance since 1945. Equally, a historically positioned approach offers a multidisciplinary triangulation of methods that addresses the role of the state in the decline of the UK economy. Triangulation highlights a consistently particularized pattern of regulation in several areas crucial to explaining the position of the UK economy in the 1990s.

Contemporary analysis can only proceed by appreciating the past. This requires the use of a theoretically informed empirical, yet historically underpinned, methodology. The identification of causation in the success and the failures of the post-war UK state, in particular economic performance, necessitates an integrated analysis of internal and external aspects in state policy. This will enable an assessment of individual causes—proximate causes—identified with and significant to a particular literature set in relation to a bigger whole. For example, Kaldor has consistently argued that the UK’s post-war economic performance was no worse than its potential when examined in relation to wider political objectives that constrained the state.⁴ Equally, Kaldor identifies the qualitative significance of institutional inclusiveness. Pluralism and collective bargaining in the industrial relations system are good cases in point. Each played a role in cushioning the process of long-term comparative economic decline by contributing to the UK’s good economic performance in terms of output relative to the recent past. In addition to this, beyond the marginal, over the longer term, neither pluralism nor collective bargaining undermined the aims of economic management in the post-war period. In the contemporary period, this position appears completely reversed, whereby the promotion and isolation of individual causes from the bigger picture appear as a strategic focus in state policy.

However, movement from the post-war period to the contemporary period retained many continuities in the state but exhibited three significant differences. First, economic policy and surrounding institutional inclusiveness during the postwar period cushioned decline, whereas in the contemporary period economic policy became procyclical and accelerated economic decline. Second, institutional exclusion increasingly separated the interests of the state and capital from civil society. Third, comparative economic performance during the 1980s and early 1990s appeared insignificant. Economic performance relative to the recent past became the central measure of political success. For example, a low taxation culture, privatization, deregulation and the exclusion of trade unions from the state each created short-term gains—property booms, greater consumption, the productivity miracle—yet each has generated significant longer-term costs.

Institutional inclusiveness retains historical significance and relevance to the contemporary period. Although it is perhaps less popular as a methodology than previously, a focus on historically embedded processes prefigure the contemporary. Equally, they challenge proximate explanations of decline and transformation, such as external shocks, globalization, Thatcherism or Blairism. Historically informed political economy reveals crucial insights into the contemporary: (history is) a living entity given contemporary life by its unending dialogue with the past. Economic history and industrial relations are subject to periodic rewriting and revision, yet revisionism often displays a consistent pattern of arguments. Themes and issues retain significance in particular disciplines because they are not subject to falsification, whereas other arguments acquire significance that remains only transient. For example, Chapter 3 illustrates that the proposition of economic transformation from decline in the UK economy during the 1980s is (was) open to clear falsification. The political rhetoric of this claim runs counter to the arguments of the multivoluminous declinist literature and official data sets prepared by the OECD and the UK Central Statistical Office (CSO). Equally, claims of a singular cause for decline— fixed exchange rates, the effects of public sector crowding out or a lack of entrepreneurial spirit or the effects of the industrial relations system on productivity and unit labour costs—have all at varying times acquired a profound significance. However, each singular cause was subject to falsification because it was possible to specify both intellectually and empirically an argument or data that could dislodge, disprove or limit its significance.

The political and economic structure of a parti...