A Casualty of Globalization Death of the Unions

It used to be that industry could do little without first getting the support of the unions. With the globalization of the labor market though, unions have lost their power -- and many of their members. Organized labor is on life support.

By Gabor Steingart


Editor's Note: The following essay has been excerpted from the German best-seller "World War for Wealth: The Global Grab for Power and Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts from the book.

"Poor despite employment." Union members are becoming increasingly lonely in Europe and the US.
DDP

"Poor despite employment." Union members are becoming increasingly lonely in Europe and the US.

The following is an obituary.

The death, though, was never publicly announced -- and the tragedy is compounded by the fact that the closest relatives are keeping it a secret. But that does not alter the truth: Trade unions, as we knew them, are dead. The protector of the underdog is no more. What passes for a union today does not have the power to provide shelter.

In fact, even the estate executors need protection. Unions once saw themselves as a buffer against the whims of the executives. They made sure that wages were fair. They also functioned as the political voice of society. Today, such unions are a thing of the past.

The development of a global job market, the appearance of 1.2 billion new workers and the readiness of millions more to work at any cost has robbed the job brokers of their once-powerful position.

For decades, they had access to unparalleled treasures: The well-educated industrial worker was irreplaceable; the industrial robot was not yet intelligent enough; and the masses of today's competitive jobseekers were trapped behind walls and barbed wire, and sometimes simply hidden in the morass of Asian slums. These people were denied participation in Western job markets, a state of affairs which kept the price of Western labor high.

It was child's play for union negotiators to force employers to pay higher wages. The factory owner had no choice but to buy labor from the unions, because while there was a national and -- in the best case -- still a Western job market, there was no global job market that could provide the industrial skills necessary. Workers were scarce after both World Wars, and unions had a virtual monopoly on the commodity. They milked it for all it was worth.

Leather jackets and turtle necks

To keep the demise of unions from attracting more attention, the estate executors continue to take part in collective bargaining. Like their predecessors, they wear leather jackets and turtlenecks, and they deliver the same inflammatory speeches. It wasn't difficult for the public to get the impression that there was still life in this cadaver. After all, the employers on the other side of the table played along with this weird game. They feared that news of this death would upset people and they would start looking for a replacement. In any case, employers never particularly liked unions when they were still lively and alive. Indeed, they like them much better as a corpse.

But anyone who takes a closer look can see that the estate executor has no access to the power that the unions once had. The energy needed for the fight, for making demands and for going on strike is simply not available to the executor. For quite some time now, nothing has been done to substantially improve the average employee's working and living conditions. Today, the biggest concern is keeping things from getting worse.

Not long ago, the public service union for the capital city of Berlin agreed to salary cuts -- a reduction of up to 12 percent. Compare that to the 11 percent pay increase the same union was able to receive in its best days. That raise was a political and economic mistake, but this is not what concerns us here. Rather, pushing such a raise through was an unmistakable sign of the union's vitality. Naturally, the former president of the organized public-sector workers, Heinz Kluncker, was an unabashed diehard, and was prepared to damage the authority of German Chancellor Willy Brandt to get a brilliant salary package for bus drivers, nurses and garbage haulers. But from the standpoint of his followers, the man was also shamelessly successful.

In recent years -- nothing. Neither impudence nor success has been delivered. Instead, the opposite is true: Today's executors are even in the process of undoing the great union successes of yesteryear. People work more hours, there is less protection against being fired, real earnings are dropping.

A breakthrough in reverse

The Verdi Union, which represents about two and a half million employees in the retail and public sectors, referred in January 2006 to a "breakthrough" in collective bargaining. A breakthrough used to mean that dead-tired functionaries would stand before a microphone to inform their clientele about a juicy raise after all-night negotiations. In January 2006, the "breakthrough" consisted of a meagre 1 percent raise, which -- given 2 percent inflation -- amounted to a wage reduction. A breakthrough perhaps, but in the wrong direction.

When the profitable Deutsche Telekom, one-third of which is owned by the state, decided to cut 32,000 jobs, the union kept silent. The employers lauded the union for its good behavior, calling it "prudent" and "modern." The word "progressive" was even used, so joyful and exuberant were the employers -- a word choice which, given the unions' advancing rigor mortis, can only be seen as flippant.

Make no mistake: This is not about whether our unions have always acted properly. Who, after all, is beyond reproach? Of course their functionaries have made mistakes, even sometimes harming the interests of union members in the process. Of course workers' needs were sometimes exaggerated, which did them no good. The constant reduction of the workweek while maintaining full compensation was an incomparable idiocy. It turned the German economy into one of the most capital intensive in the world. Manpower was decommissioned like rejected goods. The hoped-for redistribution of working hours to more workers never took place in most companies.

But there was one thing that has to be said about the unions: They were alive. They were a challenge to capitalists, but an essential one. The unadulterated system of supply and demand was clearly not designed with humanity in mind. At the dawn of capitalism, millions of employees were victims of an uncontrolled force. They had to work until they collapsed, and there was no one there to pick them up. Nobody had a safety net, the elderly were destitute, the handicapped had to fend for themselves, and widows -- if they were lucky -- received a bit of sympathy from the factory owners when their husbands passed away.

Only the unemployed had it worse than the worker: He starved and froze. Or died. Barely 80 years have passed since the Great Depression in the United States and Europe led to extreme poverty and, in some cases, death by starvation. In mines and chemical factories, accidents were common in part because the human being as such was not highly valued. He was a production factor, and not a social partner.

The glory days of unions

The birth of unions in the West was thus no accident of world history, but rather an historical necessity. The workers and their functionaries organized for their betterment -- fused together by an impetuous capitalism and an authoritarian state. It was not long before the next generation of trade unions cropped up in numerous countries. At their height of power, the Western European unions boasted some 50 million members. Strikes and demonstrations became commonplace -- sometimes for a specific goal, often as a show of power.

Even in America, workers' organizations belatedly found their footing, achieving eight-hour workdays and a legal minimum wage, changing first the climate and then the basis of the economic system. The predatory, American-style capitalism did not completely disappear, but it became less obtrusive.

The Great Depression provided a boost to the unions. Their membership rocketed upwards through the bleak 1930s growing to a total of 15 million members by the end of World War II. Belief in the wisdom of the employer was now shaken in the homeland of capitalism: Calls rang out for the counterbalance unions provided. For the first time in the history of the USA, it was modern to be a union man. Under President Dwight D. Eisenhower, the country experienced a first: A functionary of the plumbers' union was appointed to the presidential Cabinet -- though he remained there for only eight months.

Working hours melted away while salaries rose. Companies took on the responsibility of paying pensions to retired employees. Unions continued to build their basis of power. In the post-war period, some 100,000 new members joined each year, until 17 million employees owned union manuals. At its peak, the rate of unionization reached almost 40 percent of all employees -- excellent leverage during collective bargaining.

This game is now over. For a while now, this blockbuster movie has been running backwards: Working hours have increased, salaries have stagnated or dwindled. Even the biggest names in industry, like Ford and General Motors, are seeking to free themselves of the burden of pensions -- an especially backhanded move given the lack of a decent state pension in the US.

Membership drop of 75 percent

And what are the unions doing to defend themselves in their hour of affliction? Very little. There is some discontentment here and there, but no real resistance. Like their Western European relatives, the US unions, too, have met their maker. With the disappearance of industry, they lost their energy. Only 8 percent of employees in the private sector now belong to a union: Since the high point in the mid-1940s, the membership rate has dropped by more than 75 percent.

Unions in the US were never overly powerful when it came to collective bargaining, but now they have become almost completely marginalized. Eighty-five percent of all employees in the USA work without a collective wage agreement. Those blue and white collar workers who are organized are advised by a number of individual unions, some of which have no more than 85 members. About 100,000 single-plant collective wage agreements are currently in force; on average the contracts apply to only 160 employees each.

In the fall of 2005, the diminished popularity of unions led to a split in the American union federation AFL-CIO. Not long before the AFL-CIO celebrated its 50th birthday, the Service Employees International Union and the International Brotherhood of Teamsters among others bolted from the federation, taking 4 million members with them. Their complaint? They accused union leaders, headed by 72-year-old John Sweeney, of failing to stop the ongoing decline in union membership. "Change to Win" was the motto of the renegades. Now the divided US unions are even weaker.

In Europe the same thing is happening -- just that the time of death varies from country to country. The unions in Great Britain were the first to go. Back in the 1980s, Prime Minister Maggie Thatcher crushed them with the help of parliament and the police -- an event which led to her nickname "Iron Lady." The opportunity for Thatcher's offensive was provided by mineworkers under the leadership of the recalcitrant Arthur Scargill. In 1984, Thatcher decreed the closing of unprofitable mines and Scargill, a declared Marxist and proven firebrand, called for a nationwide strike in response. In previous years, 2,000 strikes per year was the British norm. But now this rabble-rouser was escalating toward a general attack. Thatcher had no choice but to respond in kind.

The "Iron Lady" strikes

The country was highly indebted -- the budget, not unlike that of a Third World country, was dependent on loans from the International Monetary Fund (IMF). Industry was struggling. The climax came in June 1984 when striking mineworkers faced off against mounted police in the "Battle of Orgreave." The yearlong coal miners' strike ended with a decisive defeat of the workers -- a defeat as great for the union as was its previous claim to power.

Since those fighting days, unions in the UK have lost almost half their members -- a decrease of some 6 million people. Labor Prime Minister Tony Blair did not even try to administer first aid when he came to power.

The union retreat was not limited to Britain. In Italy, workers' organizations have become thinly disguised senior clubs. More than 50 percent of members in the centrist CISL and the socialist CGIL are retirees. French unions prefer to fight among themselves. In a country with 60 million inhabitants, all workers' organizations put together have 2 million members, most of them working in the public sector. The private sector today is almost completely union free. Ninety-five percent of employees work without union representation.

In 2004, German union leaders called the doctor. He came in the form of a McKinsey consultant. With his help, an internal study about the condition and prospects of the union movement was undertaken. Unions find themselves on the "permanent defensive," the study says. The organization is defending positions won in the past, but is doing nothing to move forward. There is a lack of "sufficiently attractive new objectives" and there are no bright ideas for how to cope with the changing structure either. This study was basically nothing but a death certificate.

"Everything except self-deceit"

Over the past decade, the German Confederation of Trade Unions (DGB) has lost an average of 250,000 members per year. One fourth of all members are already gone -- self-destruction is well underway. And the remaining DGB members are not exactly what you'd call a strong fighting force. There are practically no younger members at all, with more than a quarter of the members retired or unemployed. That may help to pad the statistics, but it's not great when it comes to a labor dispute. Retirees and the jobless can complain, but not strike.

Union head Michael Sommer made the foolhardy attempt to inform members about the unfortunate death. Today's unions must confront reality, he warned in a SPIEGEL interview. They no longer would have the strength to fundamentally change the political climate to their advantage, he admitted. The social state is reduced to meeting the most basic needs. "We may well criticize this, but we can no longer change it," he said.

He was looking for a kind of truce with the new reality. Sommer wanted to cut through the foggy barrier of self-deceit and illusion that separates his organization from millions of today's workers.

After the interview was published, all hell broke loose at the DGB. The functionaries were stunned. If Sommer had not been so firmly ensconced in his leadership position, he might have lost his job. The executors of the union estate still want to keep the death a secret, both to fool themselves and the public. But Sommer, for one, has learned his lesson: "You can take everything away from people," he says. "Everything except for their self-deceit."

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