To what extent would you regard Germany and Sweden as coordinated market economies?
In an era where internationalism is contemporary, it has become crucial for countries to liberalize markets and renovate traditional structures. This is particularly important for countries whose social values and economic relationships are based on public coordination. This essay is going to explore the degree to which we consider Germany and Sweden as modern coordinated market economies, and the changes brought about in recent decades. To assess the changes we shall look at trends in trade union and employers’ association participations, collective bargaining reforms, training systems amendments, renewals in corporate governance and fluctuations of wage inequality; first by uncovering the basics in each element and then evaluating their stability in relation to globalization.
1.1 What is a coordinated market economy (CME)?
Being one of the wings of capitalism in which industrial relations and economic conditions are measured, as Bamber, Lansbury and Wailes (2011) state, CMEs can be used as “an approach for comparing…different countries, [with this comparison, it allows us] the understanding of convergence and/or divergence” between different economies. And in each of the key elements we mentioned, companies in CMEs resolve problems through relational, non-market based strategies and the outcome will be strongly dependent upon co-operation with supporting institutions.
2.1 Past dominance of trade unions and employers’ associations A key feature of a CME is the dominance of employers’ association and trade unions within the country’s industrial relations; both Germany and Sweden have had a high degree of centralization during the 1980s. Trade unions were a powerful, acting as representative for labour in large corporations and also intermediaries of employment between labour and employers. A common characteristic is that the labour unions in the two countries manage institutions for all labour participation; Hancké (1996) states that in Germany, three quarters “of the members of works councils are union members and they coordinate actions with the labour union sections (Vertrauensleute). In Sweden, local “shopfloor clubs” (Verkstadsklubben) not only negotiate company agreements with the firm…[but also] recruit every newly arrived worker”.
On the other hand, employers’ associations were also well-managed in both countries for a long post-war period; German industry federations are able to authorize private firms that are even no longer part of central arrangements on cases involved in collective bargaining, employee training and other social policies. In Sweden, Kurzer (1993) finds, “large companies in the export sector are part of financial conglomerates holding, which allows for high coordination capacities amongst large firms”.
2.2 Recent trends in memberships
However, both countries have become less concentrated in the recent decades as both have experienced less union and association densities for the massive individualization of enterprises and the falling popularity of collective agreements – now with the society seeing less value of group negotiations, which makes the industrial relations less compact compared to before.
In Germany, both employers’ associations and trade unions have been experiencing a slump in the number of members since late 1990s. This is particularly evident in industries from Eastern Germany, where many organisations have resigned or become reluctant to join associations and took preference in company level negotiations. Shroeder and Silvia (2007) use the Metals Industry Employers’ Association to exemplify that employment density in Eastern Germany has fallen more severely than Western Germany. We can notice from the diagram below that since 1992, the percentage of Eastern association density has decreased dramatically from over 65%, down to less than 25% in a decade....
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