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Unions are to capitalism what opposition parties are to politics.

datePosted on 16:05, July 27th, 2010 by Pablo

In the debates about the proposed labour law reforms there appears to be fundamental misunderstanding or ignorance by National and ACT of the purpose of unions in capitalism. The latter are seen by NACT as at best a source of inefficiency and profit loss; at worst parasitic wealth destroyers. They appear to misunderstand that capitalism left to its own devices, with no collective counter-weight provided to workers, is akin to a political regime without opposition parties. That is, it is inherently an authoritarian status quo in which owners rule and workers obey. Thus, if we hold it self-evident that democracy is a better form of regime than dictatorship precisely because it allows for the existence of a freely organised competitive political opposition that can contest power and times compete for it, then we must also recognise that capitalism needs unions in order to be representative and fair to the society at large. The trade off between democracy and capitalism is exactly that: a diminished rate of exploitation in direct proportion to the measure of voice exercised by workers in pursuit of a fair share for all.

That is why unions were organised in the first place: to bring a subordinate group vehicle of voice and redress to the economic system. Whatever their very evident flaws (Leninist organisation, iron law of oligarchy bureaucratic rationales), unions provide a democratic counter-weight to unfettered capitalist exploitation. Just as it is preferable not to have a closed, unaccountable (or at least vertically unaccountable) oligarchical elite run the affairs of state, so too is it undesirable, from a democratic perspective, to have a closed, vertically unaccountable economic elite determine the social relations of production. If one believes in democratic capitalism, one must believe in a central partnership role for unions within it.

This is true whether labour-based or capitalist-oriented parties are in power, since in capitalist societies the material welfare of all is dependent on the investment decisions of capitalists. But capitalists need workers to realise their investment, and workers need to be productive for profits to occur. There is consequently a structural bias in favour of providing the working conditions and larger social context in which profitable production can occur over the long term. For that to happen workers need to accept the system as given, which is a function of them perceiving a partnership stake in it. That means a modicum of voice and representation. Democratic capitalists consequently understand the need to exchange super-exploitation and authoritarian control of the workplace for increased working class representation in both politics and production. In turn workers (and their political representatives) accept the capitalist foundations of society and the dominant role of capitalists within it (in other words, they forego a move towards socialism). This exchange is at the heart of democratic capitalism. Although negotiating the margins of the democratic capitalist social contract can occur depending on the nature of the government in power, “touching the essential” aspects of it is not.

Authoritarian capitalism offers many short term advantages to business, but it does not guarantee long term gains. Unmitigated authoritarian exploitation, be it in the workplace, politics or both, breeds resentment. Born of a lack of consent to the dominant system, resentment can be manifest in everything from petty acts of social defiance to industrial sabotage to revolution. Short term acquiescence may be bought with material rewards, but the long-term picture remains clouded so long as workers do not buy in to the system as given and instead resent their subordinate status in it. Absent mass consent and given the inevitability of working class resentment, the resort to the “weapons of the weak” negatively impinges on profit, if for no other reason then that the costs of repression grow larger the longer authoritarian control is maintained. After all, you cannot repress the same amount of people in the same measure over time.  Since capitalists abhor uncertainty and seek stable rates of secure return, a peaceful, consent based socio-economic and political order is preferable to an imposed one. That gives economic utility to democratic capitalism.

In fact, where democratic capitalist systems work best (hegemonically, as it were), many if not most workers strive to become capitalists themselves (small businesspersons, at a minimum). They see themselves on a continuum of upward mobility based on workplace fair play and merit. Socialism is not their preferred option. The proof is in the mythos: is this not the Kiwi, Ozzie and American dream?

Here is where NACTs reforms and the demands of the employer class says much about their true orientation. They claim belief in freedom of choice and the benefits of market competition as the great levelers of social ambition. If that were true, then they would welcome workers to freely organise without legal constraint or negative repercussion because true market competition and workers freedom of choice would improve overall economic (labour) market efficiency. After all, according to their own logic, the market works best when all have equality of opportunity, and it clears best when all actors enter into the market exchange exercising their full potential as free agents involved in the mutual supply and demand of goods and services. So if workers exercising their free choice want unions, then more the better from a market perspective. Why put constraints on that freedom?

Yet in practice NACT seeks to place constraints on working class collective choice and voice so as to better exercise owner/manager prerogatives in the workplace. They are, in other words, hypocrites who do not really believe in the power of the free market or closet authoritarians out of ignorance (unlikely) or by design. Or both. No amount of political spinning can disguise that fact.

What is more, NACT does not appear to comprehend, from a cynical perspective, that allowing for unionisation, including union workplace access, while reducing limitations on the right to strike and collectively bargain across economic sectors can actually serve very usefully as an alienation device in which workers are led to believe that they are real partners in production in a system in which the fruits (surplus value) of their labour are appropriated by others (in a variant of Lenin’s “democracy as capitalism’s best possible political shell” argument). Although unfettered collective action has the potential to open the door to worker challenges to control of production, the reality is that in democratic capitalism private ownership is reified from birth to grave and most workers live with the dream of being bourgeois in culture and consumption if not employment. So whether cynically or sincerely committed to workplace democracy, enlightened capitalists understand the long-term political utility of union representation in democratic society. NACT and its business supporters appear to be anything but enlightened.

As I mentioned in my previous post on the matter (“The Blues Go Black”), the proposed reforms owe their inspiration to the Pinochet Labour Code. The question is whether NACT have the same view of unions as Pinochet and “Pepe” Pinera did, and if so, why do they make any pretense as to being democratic? Could it be that what we are seeing in NZ is the first attempts to turn the economic bases of the democratic social contract into something akin to unchecked elite imposition under manipulated electoral conditions?

9 Responses to “Unions are to capitalism what opposition parties are to politics.”

  1. KL on July 27th, 2010 at 16:32

    You have got it all wrong, National and ACT dont want democracy. They would rather see unfettered capitalism and a small elite running everything.

    They understand all to well what unions are about and hence are trying to reduce their powers.

    Whenever has John Key, National or ACT ever said it was keen on anything but what they push for, free trade, big biz and money for the lucky few?

  2. Cnr Joe on July 27th, 2010 at 20:21

    Whenever has John Key, National or ACT ever said it was keen on anything but what they push for…?

    Jeeez KL, Its how they got us to elect them…..by saying all sorts of things that should turn to ashes in their mouths

  3. Chris Trotter on July 28th, 2010 at 10:59

    Congratulations, Pablo, on a superb summary of the democratic capitalist position on unions.

    The Polish economist, Michal Kalecki, would not, however, agree. In his seminal 1943 essay “Political Aspects of Full Employment” he argues that the political power of the working-class will inevitably drive governments towards policies which prioritise jobs and social services (and you implicitly acknowledge this in your posting). But, according to Kalecki, such policies are inimical to the maintenance of capitalist hegemony.

    This is what he says:

    “We have considered the political reasons for the opposition to the policy of creating employment by government spending. But even if this opposition were overcome – as it may well be under the pressure of the masses – the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary’ measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.”

    I have long argued that the neoliberal counter-revolution, which began in Chile under Pinochet in 1973, is driven by precisely these motives. Surveying the economic and social history of Western states in the 1960s and 70s, one finds the exact conditions that Kalecki predicted.

    Democratic capitalism was deemed by the leading capitalists themselves to be carrying within it the seeds of its own destruction.

    Which means that Rosa Luxemburg was right: the choice is, indeed, between socialism and barbarism.

  4. Pablo on July 28th, 2010 at 14:02

    Thanks Chris.

    Kalecki’s analysis is a bit time bound. Changes in the nature of production, including out-sourcing, “just in time” schedules, home work, workplace flexibility schemes, increase in part time labour, etc. have diminished working class solidarity better than any union-busting effort could hope for, plus it has removed the possibility of full employment as a plausible structural reality. So capitalists now have a structural advantage that they did not have in the mid 20th century. In addition, besides the ideological preponderance of market-oriented individualist “choice” philosophies, you can add the assorted post-modern diversions that further compound working class atomisation, which means that at both the superstructural as well as structural levels you have negative incentives for a grassroots push to full employment. Thus there is less need to use the type of labour law reforms proposed by NACT as a “disciplinary” device to maintain the social position of the boss (and I must say that once the language turns to issues of discipline and punishment I think less of Foucault and more about my personal experiences with the Argentine and Chilean dictatorships that used exactly that sort of language as the pursued their state terrorist projects).

    On top of all that, no democratic capitalist government in recent times (except the Greeks, until the crisis) truly pushes policies that encourage full employment because there too they are concerned about the impact of rising wages on prices, inflation and the comparative value of and ratio between exports/imports in an often foreign debt financed globalised system of production and exchange.

    Transnational migration of labour has also served as a check on labour market saturation and union strength, simply because foreign workers in virtually all wage categories work for less and are more likely to be unorganised.

    What I do agree with is the notion that NZ employers and NACT do in fact subscribe to Kalecki’s views even though they have no real reason to do so. But then again, as you would likely agree, that is because the NZ boss class do not really believe in the virtues of the free market. What they believe in is the virtues of a skewed labour market in which power in the workplace is distributed asymmetrically to the point that any pretense of worker voice is stifled by managerial “efficientist” logics. Which is, of course, exactly what the Plan Laboral was all about.

    One footnote: the news item that an Auckland architecture firm is being lauded by the CTU for giving its workers a non-statutory long weekend holiday between the Queen’s birthday and Labour Day holidays is further evidence of the mystification powers such gestures have on workers and coopted unions alike.

  5. Chris Trotter on July 28th, 2010 at 15:39

    Those are all good points, Pablo, and I certainly concur with you about the mindset of NZ capitalists.

    What I would ask, however, is whether the internationalisation of the production process came before or after the restoration of capitalist authority in the West.

    In this regard, the decade of the 1970s was absolutely crucial. It was in the 70s that the ruling-classes in just about all the Western states felt the chill wind of working-class assertiveness most keenly. Huntington’s “Crisis of Democracy” sets forth their dilemma nicely.

    Though the fightback began in Chile in ’73, things didn’t really get moving until the late 1970s. Then came Thatcher (1979) and Reagan (1980) – and it was all on. By the fall of the Soviet Union in 1991, organised labour in the West had been well-and-truly tamed and full-employment was a pipe-dream.

    Now, if you were to map all the changes at the level of the factory and office along the same time-line as the political changes I just alluded to – would you find them moving in tandem?

    Wasn’t the restoration of “discipline in the factories” the necessary precondition for the workplace changes you describe? Or, maybe, they were one and the same.

  6. Pablo on July 28th, 2010 at 16:15


    You are correct about the ruling class fightback beginning before the post Cold War globalisation of production. In fact, that view supports a long standing belief of mine, derived from the Frankfurt School as channeled through Adam Przeworski and Jon Elster, that political rights are necessary for economic rights to obtain. That is, the working class needs to gain political rights before it can lay claim to economic rights (the same holds true for wimin and other minority/subordinate groups). This may seem obvious but I mention it because it runs counter to the pluralist belief that economic freedom precedes political liberty and the Leninist belief that economic rights supersede political rights.

    If I am correct in this belief, then what you say about the fightback is the mirror image of it: in order to strip back and deny worker’s economic rights, you first have to strip them of their political rights. That is precisely what happened under the military-bureaucratic authoritarian (MBA) experiments of the 1960s and 1970s. Once having done that (by force and well as legal fiat), the MBA’s were able to lower the threshold of mass consent along market-driven lines, which in turn allowed them to eventually transition to “democracy” on both structural and superstructural terms of their own making. The post-authoritarian context largely remains grounded on that debased threshold of consent.

    What is interesting is that in the US, UK and NZ the lowering of the threshold of consent along market-driven lines did not occur by force even if it was inspired by the MBAs. In these cases it appears that the negative impacts of successive recessions in the early and late 1970s (including the so-called “oil shocks”) was enough to allow Reagan, Thatcher and Douglas (instead of Lange, who I understand was just along for the ride when it came to economic policy making) to engage in direct legal assaults on their respective union movements (I distinctly remember the 1983 air traffic controllers strike in the US as being the moment when Reagan broke the back of the US labour movement by forcing a split between the AFL-CIO and Teamsters on the issue, which contributed to the sacking of 5,000 air traffic controllers and their replacement by first military air traffic controllers and then non-union new hires, scabs and management appointees).

    That says something about the character of mainstream unionism in these latter countries, NZ in particular. It also means that this latest round of market-driven labour law reforms is as much a political roll-back as it is an economic one (if not more). If the NZ labour movement is unable to stop these reforms from passing, then its status as a political actor will have taken another decisive, perhaps mortal, hit.

    As you have written over at your own place, this should compel the CTU and its affiliates into action that is more akin to the UNITE approach than to the corporate boardroom approach they have gotten used to over the years. After all, it is their position as agents as well as the material fortunes of their principals that is at stake here.

  7. Tiger Mountain on July 30th, 2010 at 12:17

    A union should be led, or well influenced by experienced communists to be any kind of genuine ‘opposition’ to capitalism. The international experience and for short periods, even in New Zealand, supports this claim. The other road one way or another remains perpetually working within the system from election to election. Unions need independent strength. This is not to denigrate the hard working social democrats who admit their holy grail is to persuade employers to behave in a socially progressive and reasonable manner. Which the buggers have increasingly persised in not doing since the ascent of neo liberal ideology.

    The struggle based ‘DNA’ from the 70s to mid 80s of the old NZ Federation of Labour-FOL, has been diluted since the foundation of the NZCTU. And even prior when certain social democrat led unions supported Roger Douglas GST. The marxists in the leadership of the old FOL were mainly from the NZ Socialist Unity Party (SUP). Without giving any further joy to that party’s critics, the flaw of economism (in marxist terminology an over emphasis on trade unionism and wage bargaining to the detriment of building the movement for socialism) was clearly evident in the SUPs practice. Despite this progressive policy was adopted by the old FOL due to the efforts of all the various marxist groups of the time-CP, WCL, SAL and more. Trade Ban on Pinochet’s Chile, opposition to French Pacific nuclear testing and apartheid South Africa, support for nuke free NZ and various solidarity movements. While unionism was subject to a level of compulsion and ‘national awards’ at the time, a signficant minority of unionists took up these causes and hundreds of thousands supported the 1979 national strike.

    The NZCTU model to date really only works in the more co-operative environment of a social democratic (Labour led govt.) paid education leave for delegates, Industry training organisations, health and safety reps and training etc. It is no doubt an uncomfortable position for the majority of the current union leaderships having to shift to a conflict based form at pain of liquidation, but it must be attempted. In a period such as this unity of action between the labourites and the marxists is vital. The majority of veteran activists know this, which is why some of us were present at Sky City recently.

    The class composition of New Zealand has always provided a hard road for unions and collective action, but if unions are not going to defend workers and their communities who is?

  8. dave brown on July 31st, 2010 at 12:35

    The CTU is talking up the street to try to reactivate Labour and once more moderate capitalism along reformist lines.

    No recognition in this discussion as to why the crisis facing NZ cannot be contained by parliament. NZ is a semi-colony sinking into ‘third world’ status. The Nactional bourgeoisie is being driven by the global capitalist crisis to act as agents for the US in decline and China on the rise. Despite the history of class compromise and postmodern fragmentation, there is bound to be an awakening of militant class struggle.

    I think Pablo’s reference to Chile under Pinochet is useful. It might force the realisation that NZ faces such an historic watershed.

    The first stage of any labour revival in NZ will take the form of a renewed parliamentary populism/socialism of the Allende type. That’s because the historic role of reformism has not been exhausted. Its purpose is not only to defeat the working class, but by means of dividing the militants from the moderates over the question of reform vs revolution, and open the door for fascism, just as Allende did with his refusal to arm the workers to appease the military.

    The sooner the militants wake up to this the sooner they can prepare to overcome the limits of reformism. For that to happen we need a revolutionary Marxist leadership that is able to convey the truth about history.

  9. Pablo on July 31st, 2010 at 14:18

    TM and DaveB:

    Your comments remind me of the time I was researching a book on labour politics in Argentina, Brazil and Uruguay. Unlike the bigger two countries, the Uruguayan labour movement is led by staunch Marxists who survived the 1970s dictatorship unbowed even though imprisoned, exiled and/or tortured. I asked some Labour Ministry officials about them and was told that they made excellent leaders and bargaining agents because of the honesty and ideological commitment–in other words, they could not be bribed and did not develop the typical attitude of a labour aristocracy so evident in the other countries (and dare I say it, in NZ).

    As part of that observation it was put to me this way: having a non-Marxist (pro-business) leader of a union is akin to having a Trotskyite as the CEO of Citibank–they betray their class position by their very presence in that role.

    I am not sure that the situation is that dire in NZ, and do believe that a committed Socialist or social democratic orientation can reinvigorate the NZ labour movement. But for that to happen, the union vanguard will have to distance itself from the Labour Party vanguard simply because the interests of the former are not reducible to the interests of the latter.

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