From World War I to 1968: The institutionalization of unions and collective bargaining

By the early 20th century western European unions were making slow but steady progress toward expanding their membership, extending the range of collective bargaining, consolidating their organizations, and winning legal and political recognition. The breakthrough, however, came with World War I. Wartime mobilization brought tight labour markets, rapid expansion of mass production, long working days, hazardous working conditions in arms and ammunition factories, and soaring profits for employers. It also ushered in state intervention and economic planning on an unprecedented scale. As the war dragged on, national elites found themselves compelled to include labour leaders in the governance of the war economy as managers of rising shop-floor discontent. Typically, union cooperation was gained in exchange for promises of democratization, union recognition, and redress of social inequities after the war.

Ironically, the position of moderate union leaders in national war coalitions was strengthened by objection among workers to the war and to the sacrifices demanded of them. All over Europe, autonomous movements of shop-floor workers’ councils emerged, continuing labour’s prewar tradition of pacifism and internationalism. Workers’ councils not only opposed the governments that organized the war and the employers that profited from it but they also rejected the leadership of collaborationist unions and social-democratic political parties. Rather than parliamentary social democracy, their objective was a syndicalist political order founded on and controlled by councils of industrial workers. Especially toward the end of the war, council movements succeeded in organizing major strikes in a number of countries, and in Russia the Bolsheviks overthrew the tsar with a program of soviet (that is, “council”) democracy (see below Eastern Europe). All of this enabled moderate union leaders to extract more promises and commitments from governments, military leaders, and employers for the time after the war.

Faced with overexpanded economies, huge national debts, a radicalized and assertive working class, and the threat of revolutionary internationalism inspired and supported by the Soviet Union, employers and political elites after 1918 were eager to close ranks with the moderate labour leaders who had assumed quasi-governmental responsibility during the war. In country after country, unions obtained major concessions, such as universal suffrage and parliamentary democracy, the right to strike, legal support of union organization and industrywide collective bargaining, the extension of industrial agreements to nonunionized firms and sectors, the eight-hour working day, a wide range of social benefits, joint councils of unions and employers to oversee key industries, and works councils to represent workers at the workplace. Often these were conceded as elements of comprehensive social pacts—like the Stinnes-Legien Agreement in Germany—that were negotiated between national organizations of capital and labour and underwritten by the government, apparently foreshadowing a continuing role of unions in the governance of national economies.

In most European countries, the bulk of the concessions made in the immediate aftermath of the war were withdrawn in subsequent years. Increasingly, the stabilization of western Europe’s war-torn economies came to be perceived as possible only at the expense of workers and unions, with the fight against inflation seeming to require wage cuts, longer hours, curtailment of union rights, sharp reductions in public spending, and the resulting high unemployment. As domestic conflicts intensified, the political right found confirmed its old doubts about the compatibility of social order and national unity with democracy and free trade unions, and even the moderate left came again to question the compatibility of democracy and full employment with capitalism. The Great Depression of the early 1930s, in particular, brought large-scale unemployment and made deep inroads in the organizational strength and political influence of unions, in many countries abolishing the fragile postwar gains in the institutionalization of union rights and collective bargaining.

By the end of the 1920s at the latest, national political systems in Europe began to drift sharply apart. First in Italy and most dramatically in Germany, Fascist or conservative-authoritarian regimes either outlawed unions altogether—often driving their leaders from their countries, incarcerating them, or assassinating them—or turned them into appendages of an ever-more powerful state apparatus. Authoritarian responses to class conflict and economic crisis were encouraged by an international environment that seemed to offer little opportunity for shared economic growth and few if any alternatives to nationalist protection and preparation for renewed military hostilities.

In Sweden, on the other hand, the electoral victory of the Social Democrats in 1932 paved the way for the first successful attempt to achieve full employment by Keynesian means under political democracy and free collective bargaining within a capitalist economy. After intense industrial and social conflict in the 1920s, the Social Democrats were able to unite their country behind a platform of state-led expansion, an extensive social-welfare policy, social equality, and institutionalized autonomy for responsible, centralized, and comprehensive collective bargaining. In 1938, the peak associations of business and labour concluded the Saltsjöbaden Agreement, in which, while affirming the rights of unions to strike and of employers to lock out in retaliation, they pledged to use these measures only as a last resort and in consideration of their effect on third parties. Swedish unions, having moved into a secure position of industrial strength in which their actions inevitably affected the performance of the national economy, accepted responsibility for economic growth and monetary stability in exchange for a number of concessions: a complementary social and labour-market policy; the cooperation of employers in a reduction of pay differentials; progressive taxation; expansion of employment in the public sector; and equal participation of women in the work force. Given such economic and political strength, Swedish unions were prepared to accept employers’ claims to an almost unlimited right to manage. As World War II drew closer, therefore, Germany and Sweden represented opposite ends of a wide spectrum of western European politics and industrial relations.

It was only after 1945, under the leadership of the two victorious democracies, the United States and Britain, that unions and collective bargaining became firmly established throughout western Europe. In some countries, business and traditional elites were discredited by their collaboration with Fascist regimes or the German occupation. In others, joint resistance during the war had laid the ground for close postwar cooperation. Everywhere, the presence of Soviet Communism as an apparent alternative to capitalism seemed to make it imperative to include moderate labour movements in the reconstruction. And not least, the United States, as the architect of a system of free trade intended to be immune against the nationalism of the interwar years, needed to ensure that competing economies were saddled with the same social costs that it had incurred under the New Deal.

Modern western Europe thus came to be built on a “historical compromise” between capital and labour. Among the concessions gained by the latter were a firm commitment to parliamentary democracy; a welfare state establishing a basic floor of income and services for all citizens; a commitment of governments, of whatever political complexion, to an active full-employment policy; and the right of unions to free collective bargaining. In return, moderate labour movements pledged to pursue political reform only by constitutional means, renouncing in particular the use of the strike for political purposes; tolerated private property in the means of production; accepted a free-market economy with little or no public intervention in price formation; and agreed in principle to observe the right of management to manage. By the end of the 1950s at the latest, most European unions had, explicitly or implicitly, come to accept the terms of this bargain.

This second postwar settlement marked the beginning of the longest uninterrupted period of peace and prosperity in European history. Embedded in an international free-trade regime guaranteed and dominated by the United States, it helped accelerate the spread from America to Europe of “Fordist” modes of production and accumulation: the mass manufacture of standardized consumer durables in factories that used Taylorist methods of work organization and were operated by large, vertically integrated, and increasingly multinational corporations. By helping to expand and maintain the purchasing power of mass consumers, European unions also played an important part in the stabilization of economic growth. Moreover, by concentrating their activities on macroeconomic wage bargaining and redistributive social policies at the national level, political-industrial unions left managers the freedom to introduce new technologies and to rationalize the labour process in pursuit of higher productivity and profitability.