State, Labor, and the Transition to a Market Economy: Egypt, Poland, Mexico, and the Czech Republic

By Agnieszka Paczyńska

In response to mounting debt crises and macroeconomic instability in the 1980s, many countries in the developing world adopted neoliberal policies promoting the unfettered play of market forces and deregulation of the economy and attempted large-scale structural adjustment, including the privatization of public-sector industries. How much influence did various societal groups have on this transition to a market economy, and what explains the variances in interest-group influence across countries?

In this book, Agnieszka Paczyńska explores these questions by studying the role of organized labor in the transition process in four countries in different regions—the Czech Republic and Poland in eastern Europe, Egypt in the Middle East, and Mexico in Latin America. In Egypt and Poland, she shows, labor had substantial influence on the process, whereas in the Czech Republic and Mexico it did not. Her explanation highlights the complex relationship between institutional structures and the “critical junctures” provided by economic crises, revealing that the ability of groups like organized labor to wield influence on reform efforts depends to a great extent on not only their current resources (such as financial autonomy and legal prerogatives) but also the historical legacies of their past ties to the state.

This new edition features an epilogue that analyzes the role of organized labor uprisings in 2011, the protests in Egypt, the overthrow of Mubarak, and the post-Mubarak regime.

• Language: English
• Publisher: PSUPress
• Release date: Dec 12, 2012
• ISBN: 9780271069968

Agnieszka Paczyńska

Agnieszka Paczyńska teaches at the School for Conflict Analysis and Resolution, George Mason University, and is a nonresident fellow at the Stimson Center. She is the author of State, Labor, and the Transition to a Market Economy: Egypt, Poland, Mexico and the Czech Republic and editor of Changing Landscape of Assistance to Conflict-Affected States: Emerging and Traditional Donors and Opportunities for Collaboration.

Book preview

State, Labor, and the Transition to a Market Economy

State, Labor, and the

Transition to a Market Economy

..................................................................................

Egypt, Poland, Mexico, and the Czech Republic

AGNIESZKA PACZYŃSKA

The Pennsylvania State University Press

University Park, Pennsylvania

LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA

Paczynska, Agnieszka, 1967–

   State, labor, and the transition to a market economy : Egypt, Poland, Mexico, and the Czech

   Republic / Agnieszka Paczyńska.

       p.   cm.

Includes bibliographical references and index.

Summary: Explores what facilitates or hinders social group attempts to influence the process of economic restructuring and reconstruction of state-society relations by focusing on organized labor’s response to privatization of the public sector during the first decade of reforms. Compares Poland, Egypt, Mexico and the Czech Republic—Provided by publisher.

ISBN 978-0-271-03436-2 (cloth : alk. paper)

ISBN 978-0-271-03437-9 (pbk. with epilogue 2012 : alk. paper)

1. Capitalism—Cross-cultural studies.

2. Privatization—Cross-cultural studies.

3. Labor unions—Political activity—Cross-cultural studies.

4. Political culture—Cross-cultural studies.

5. Industrial relations—Cross-cultural studies.

I. Title.

HB501.P128 2009

338.9’25—dc22

2008030465

Copyright © 2009 The Pennsylvania State University

First paperback edition 2012

Epilogue Copyright © 2012

All rights reserved

Printed in the United States of America

Published by The Pennsylvania State University Press,

University Park, PA 16802-1003

The Pennsylvania State University Press is a member of

the Association of American University Presses.

It is the policy of The Pennsylvania State University

Press to use acid-free paper. This book is printed on

Natures Natural, containing 50% post-consumer waste,

and meets the minimum requirements of American

National Standard for Information Sciences—

Permanence of Paper for Printed Library Material,

ANSI Z39.48–1992.

To my mother and to the memory of my father

Contents

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List of Tables

Acknowledgments

List of Acronyms

Introduction

1     Parties, Unions, and Economic Reforms

2     Ruling Parties, Organized Labor, and Transitions to Democracy: Poland and Czechoslovakia

3     Ruling Parties, Organized Labor, and Continued Authoritarianism: Egypt and Mexico

4     Labor and Privatization in Poland

5     Labor and Privatization in Egypt

6     Labor and Privatization in the Czech Republic and Mexico

Conclusion

Epilogue

Bibliography

Index

Tables

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1. Public sector restructuring

2. Unions and privatization

3. Membership in the largest Polish trade unions in 1993

4. Methods of privatization in Poland

5. Union activists’ views on the economy

6. Egyptian public sector firm losses and employees

7. Methods of privatization in Egypt

8. Change in ČSKOS membership

9. Czech trade union membership in the early 1990s

Acknowledgments

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The idea for what eventually became this book first came about in the early 1990s in Cairo during a lecture by a World Bank official. He compared Egypt’s economic reform program to the one that Poland was implementing at the time, and in particular the debt-forgiveness deal both countries made with their international creditors. This unlikely comparison intrigued me and would become the core of this study. Along the way the support of numerous people and institutions made the completion of this project possible.

I would first like to thank William Quandt, Arista Cirtautas, and Krishan Kumar for all their advice during the research and writing process. I want to thank William Quandt, whom I met while working as his research assistant at the Brookings Institution, for convincing me to come to the University of Virginia for my doctoral studies. He has been a wonderful friend and mentor since those Washington days. My greatest intellectual debt goes to David Waldner. David pushed me relentlessly, drove me crazy, and frustrated me to no end when I was his student. I will be forever grateful to him for all the amazing insights he provided (even if I didn’t always appreciate them at the time). His unrelenting constructive criticism resulted in my producing a much better study than I would have otherwise. David has become a great friend, a wonderful sounding board for ideas, and an invaluable supporter of this project.

I would also like to thank the many people in both Poland and Egypt who agreed to talk to me, answered my endless questions (and only occasionally giggled at my horrid Arabic pronunciation), and helped me better understand the process of privatization and labor’s role in public sector reform. This study would have been impossible to write without their generosity.

Many friends and colleagues in the United States, Egypt, and Poland made the completion of this project possible. I want to thank my dear friends Ranjit Singh, Beata Czajkowska, David Skully, Jillian Schwedler, Nicola Pratt, Paul Amar, Khalid Medani, Neda Zawahri, and Suzanne Simon for reading and discussing this project with me. I also want to thank Marsha Pripstein Posusney, Diane Singerman, Hilary Appel, Bob Vitalis, Bassam Haddad, Samer Shehata, Agnieszka Rybczyńska, and members of the DC Workshop on Contentious Politics, especially Christian Davenport and Virginia Haufler, for commenting on parts of this manuscript. I would also like to thank the two anonymous reviewers. Their collective insights were invaluable and their comments significantly strengthened this book.

I also want to thank Anthony Shadid, Hossam Barakat, Gasser Abdel Razek, Abdel Monem Said Aly, Mustafa Kamel al-Said, Carrie Johnson, and Wilson Jacob for all their help during my research in Egypt; and Leszek Gilejko, Juliusz Gardawski, Iza Ksiażkiewicz, Rafał Towalski, David Ost, and my Polish friends and family, especially Marta Adamska, Baśka Adamska, Guśka, Piotrek, Jaś and Antek Popławscy, Iza Stypuła, Atka Tynel, and Monika Kalinowska, for all their help during my research in Poland.

Finally, I want to extend my thanks to friends in the United States who kept me sane during this long process. I especially want to thank Andrea Akel, Liz Pelcyger, Margrete Strand Rangnes, Stevens Tucker, Aileen St. George, Peter Mandaville, Katerina Vogeli, Susan Finlay, Karen Semkow, Eva Busza, Mona Russell, Molly O’Brien, Lynn Khadiagala, Lora Lumpe, and Jim Cason. I also want to thank the Barracks Row Babysitting Co-op for allowing me to have those wonderful nights out every now and then during the revisions process.

I would also like to thank the institutions whose financial assistance made this research possible: the Woodrow Wilson International Center for Scholars, the International Research and Exchange Board, the Social Science Research Council, the American Council of Learned Societies, the University of Virginia, and the Global Studies Center at George Mason University. I also want to thank Foreign Language Area Studies and the Center for Arabic Studies Abroad for making it possible for me to acquire enough Arabic to conduct research in Egypt. Additionally, I would like to thank the School of Humanities and Social Sciences at the American University in Cairo and the Sociology Department at the Warsaw School of Economics for welcoming me when I was conducting my field work. Finally, I would like to thank the School for Conflict Analysis and Resolution at George Mason University and all my wonderful colleagues, and especially Andrea Bartoli, Susan Hirsch, Sandy Cheldelin, and Sara Cobb, for supporting me during the final revisions on this manuscript.

My family has been a constant source of support and love over the years. I cannot thank them enough. My brother, Martin, has been my constant and always wonderfully reliable traveling companion ever since our American adventure began in 1981. My parents, Hanna Paczyńska and Bohdan Paczyński, passed on to me their love of books, learning, and exploration. They also were a two-person grant-making institution for much of my educational career.

My deepest thanks go to my husband, Terrence Lyons, who has lived with this project for more than a decade. He never tired (or if he did, he never let me know) of listening to me talk about it and of reading the various drafts countless times. I want to thank him for all his amazing insights and for putting up with all my sometimes bizarre work habits. Most important, I want to thank him for being in my life, for being my best friend, and for his love.

I don’t think my daughter Nell really liked the process of my writing this book especially once she discovered that it would not have any colorful illustrations. But her exasperated sighs whenever I had to stay at work late did wonders to motivate me to do the final revisions. Her exuberance, her wit, and her excitement at discovering the world have been a source of constant inspiration. She truly is a wonder. Nell has also been a source of joy and hope during a time when life took many difficult turns in the final years of writing. Shortly after Nell was born, my father was diagnosed with brain cancer. In midst of grim news she made all of us smile and that was a tremendous gift. When my father passed away in April 2007, Nell’s hugs, cartwheels, and never-ending chatter injected a bit of much-needed and wonderful chaos into his funeral and memorial service. Her laughter and the special bond between her and her little cousin Asher also helped the Lyons clan as it struggled with the tragic death of my brother-in-law Brian in September 2007.

My greatest regret is that my father did not live long enough see this book published. But I am grateful that he could celebrate with me when I signed the contract for this manuscript. I will forever miss his presence in my life. I dedicate this book to my mother and to my father’s memory.

Acronyms

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Introduction

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In the 1980s, sharp increases in foreign debt and severe macroeconomic instability combined to produce urgent economic crises throughout the developing world. Drawing on newly influential economic analyses that identified state intervention as the primary culprit, reform programs sought to confine the state to a minimal regulatory role while permitting unrestrained market forces to set relative prices and thus govern resource allocation. The emerging dominance of the neoliberal paradigm was further reinforced by the changes in the structure of production, finance, and communications technologies associated with economic globalization.

The recalibration of state-economy relations was as profound as the construction of welfare systems among industrialized capitalist economies during the 1930s. In that decade, the state took on an important role in economic management. Now the state was seen as the problem rather than the solution and the politicians who ran it as corrupt, rent seeking, and ineffective. The policies that flowed from this new neoliberal analysis meant that governments facing profound crises would have to fundamentally restructure their economies. As a result, social contracts that had been in place between the state and society would have to be renegotiated. Employment guarantees would be scrapped, consumer goods subsidies would no longer be provided, and employment possibilities and prices would now be determined by market forces.

Not surprisingly, groups that had benefited from previous arrangements were often deeply concerned about the impact of these changes. How did they respond to the restructuring of the economy? And more important, were social actors able to influence and shape these structural adjustment policies? The empirical record is mixed. In some cases, social actors played a significant role, while in others reforming governments had the ability to push through restructuring policies with little input from social actors, be they business associations or labor unions. What explains these differing patterns of social groups’ influence?

This book explores what facilitates and what hinders social group attempts to influence the process of economic restructuring and hence the reconstruction of state-society relations. It examines the reasons for the very different responses of social actors to economic restructuring programs and their vastly different abilities to shape and influence the content and pace of implementing these reforms. It explores these dynamics by focusing on one social group, organized labor, and one feature of structural adjustment policy programs, the privatization of the public sector during the first decade of reforms. Specifically, it analyzes how organized labor in Egypt, Poland, Mexico, and the Czech Republic responded to and attempted to shape the processes whereby privatization programs were designed and implemented.

All four states, Mexico in the 1980s and Egypt, Poland, and the Czech Republic in the 1990s, faced deepening economic crises and embarked on ambitious economic restructuring programs. Among other reforms, all four programs contained plans for selling most public sector enterprises to private investors. Organized labor in the state-owned firms targeted for divestiture was keenly interested in how these privatization programs would be designed and implemented. Yet its ability to shape the design and implementation of public sector reform in the four cases differed. In Egypt and Poland organized labor was able to significantly influence both phases of the reform program. In Mexico and the Czech Republic, by contrast, organized labor had difficulty in effectively inserting itself into these policy debates or shaping the content of restructuring plans. This variation is not well explained by the extant studies of the political economy of reforms.

This book advances a two-stage argument to account for the observed variation in labor’s ability to shape privatization policies. The first stage of the argument explains the variation in organized labor’s influence on privatization policies by pointing to the resources available to labor organizations at the time when structural adjustment programs began. Among the most important resources are legal prerogatives and the financial autonomy of labor from the state as well as experiences of past confrontations with the state. Labor organizations that have acquired these resources before reforms begin have a greater ability to ensure that their voices become part of the debate about the shape of the reforms themselves. Their ability to draw on legal prerogatives, financial resources, and historical experience means that the political costs of silencing labor organizations are much higher than in cases where labor organizations do not have such resources.

This explanation, however, raises another question, namely, how and through what processes organized labor acquires these resources in the first place. The second stage of the argument addresses this question, through a theoretical framework that links labor resources to the historical legacies of labor’s prior relationship with the state. Specifically, this book traces how the inability of ruling parties in Poland and Egypt to construct corporatist labor institutions meant that over time these parties were forced to grant more concessions to labor in order to retain workers within their political coalition. It locates the reasons behind the unsuccessful corporatist experience in the continuing internal struggles within the ruling parties and, in particular, in the lack of adequate incentive structures to enforce the loyalty of party members and punish their disloyalty. By contrast, the ability of the ruling parties in Mexico and Czechoslovakia to manage elite conflicts facilitated maintaining effective corporatist institutions.

Privatization and Organized Labor

Having identified excessive state intervention in economic matters as the main cause of the crisis, the neoliberal prescription for restoring growth focused on reducing the state’s control over and involvement in the economy. Dubbed the Washington Consensus, the policy recommendations had a number of common features. Structural adjustment programs emphasized restoring fiscal discipline, reducing public expenditures, allowing the market to set interest rates, making the exchange rate competitive, liberalizing the trade regime, encouraging foreign direct investment, and privatizing the parastatal sector.¹

Privatization became a central component of restructuring programs and one of the most important mechanisms for curtailing state involvement in the economy. Neoliberalism viewed public sector enterprises as inherently inefficient.² In many developing countries state elites had historically turned to public sector enterprises to fulfill production quotas as well as to ensure high employment levels. Public sector firms also provided the means for the distribution of political patronage. In the long term, these varied economic, social, and political goals resulted in overstaffing, inefficiencies, stifled initiative and innovation, and mounting debts that were a drain on the state budget.

Selling state-owned enterprises, according to reform proponents, would therefore have a multitude of benefits. Not only would these enterprises no longer have to be financed by the state, thereby reducing the persistent budget deficits, but the taxation of newly privatized companies would provide new sources of revenue for the state. Furthermore, once in private hands, these enterprises, relieved of their social and political roles, would be able to produce more efficiently. Through a process of letting the market perform its magic, rather than one of allowing inefficient and overstaffed industrial mammoths to remain on life support, those entities that could not survive in a free-market environment would simply go bankrupt. By making the whole economy function more dynamically, these bankruptcies would in the long run result in higher economic growth rates, higher employment levels, and improved standards of living. Although later experience with implementation of reforms in general and privatization in particular exposed deep flaws in this neoliberal logic, during the first decade of economic restructuring, shedding of the public sector was firmly at the very center of the reform agenda. At the same time, precisely because of the central role that state-owned enterprises played in economic, social, and political life, privatization became one of the most contentious components of economic restructuring programs.

Although all social groups were affected by economic restructuring, the costs and benefits of reform were not distributed evenly. While some benefited from the changes, others quickly found themselves struggling to cope in the new economic environment. Similarly, the costs and benefits of discrete reform measures varied for different social groups. Consequently, we can anticipate that different groups will attempt to mobilize and influence different components of the structural reform package. Farmers are likely to watch carefully debates revolving around agricultural subsidies. Trade unions, by contrast, can be expected to pay particularly close attention to restructuring and privatization proposals, since such measures have an immediate and direct impact on workers within the public sector. While many other reforms associated with structural adjustment will affect workers’ standard of living and job prospects, the effects of measures such as trade liberalization are likely to be more diffuse and not as readily apparent. They are therefore less likely to trigger labor mobilization. Privatization that threatens job security as well as benefits and wage levels is likely to be immediately felt by workers and hence more likely to elicit labor response.

Labor’s ability to respond to these threats, at least theoretically, is much greater than that of many other interest groups within society. Not only do unions have established institutions that can be used in organizing collective action, but such flexing of the political muscle is not easily ignored by governments. Strikes can have profound impact beyond the factory gates and affect broader macroeconomic conditions within a country.³ Even in countries with low union density in which much of the population is involved in either agricultural production or is employed within the informal sector, unions are usually present within the public sector. Industrial enterprises also tend to be clustered together in urban areas, thereby facilitating interaction and communication between workers. Furthermore, as Zolberg has noted, in many developing countries even when trade unions appear weak and not well organized, it is relatively easy for them to make trouble for their employer, and since their employer often happens to be the state their behavior is politically threatening.⁴ Privatization, therefore, directly affects what is frequently one of the few organized groups within society.

Despite organized labor’s anticipated interest in state sector reforms and potential ability to translate that interest into policy influence, the actual experience with public sector reform design and implementation has proven to be more complex. Many early observers of economic reforms anticipated that organized labor was likely to present a major challenge to the implementation of structural adjustment. In their view, overcoming labor resistance was crucial to consolidating the reforms.⁵ When reforms were not abandoned, the analytic pendulum swung in the opposite direction and initial concerns about the power of organized labor were brushed aside. Geddes summed up this emerging consensus on labor’s powerlessness well when she pointed out that the lack of political upheavals such as regime breakdown or defeat of incumbents at the polls or wholesale abandonment of market reforms made evident that organized labor was unable to affect reform dynamics.⁶ Empirical evidence suggests, however, that neither view is fully persuasive. In some cases, organized labor was able to significantly shape both stages of the reform agenda. In other cases, it was not.

The Reform Experience

Poland

In Poland organized labor emerged as an influential player during the first decade of public sector reform design and implementation. Polish organized labor that emerged following the 1989 political transition was highly fragmented. However, most workers belonged to one of two large union federations, the National Confederation of Trade Unions (OPZZ) or Solidarity. These groups, because of their divergent affiliation with two different political currents, were frequently in conflict at least at the national level. Both federations fielded candidates in parliamentary elections. However, Solidarity chose to play a much more direct role in politics and it both offered political backing to governing coalitions and formed its own political organization, becoming directly involved in governing. Alongside trade unions, each state-owned enterprise had a workers’ council. In spring 1990 the government submitted its privatization program to the parliament, setting the stage for the first significant confrontation between the state and organized labor. The government proposal emphasized the need for a quick sale of state assets and gave state agencies the power to initiate and oversee the sales process. The reaction of organized labor was both swift and negative. One of the main points of contention between the government and organized labor was the issue of actual ownership of public sector firms. Union-backed deputies quickly presented the parliament with an alternative privatization plan which proposed greater social control over the process.

The final version of the privatization program represented a major victory for labor. Workers’ councils were granted the right to initiate restructuring and privatization procedures and to decide on the privatization path for their enterprise. Most important, without the approval of the workers’ council, sale of the company could not move forward.⁷ Labor organizations thus managed to significantly modify the privatization program during the design phase and played an equally significant role during implementation. In the first years of reform both trade unions and workers’ councils did little to block the restructuring of enterprises and in many cases were active promoters of these changes. At the national level, Solidarity extended a protective umbrella over the reforms, containing strike activities and promoting enterprise restructuring. When organized labor’s support for reforms became more tenuous and workers’ councils became reluctant to approve restructuring measures, the pace of sales of state firms slowed noticeably.

The change in organized labor’s stance forced the government to rethink its public sector restructuring strategies. The resulting Commercialization and Privatization Act of 1996 gave organized labor additional incentives to back privatization programs through allocation of free shares in enterprise and increase in workers’ representation on company supervisory boards. The new law, however, did little to accelerate the pace of sales or to make the first decade of reforms less contentious. Polish labor organizations thus managed to significantly influence the process of privatization implementation by affecting the privatization methods employed as well as the pace of sales.

Egypt

In Egypt organized labor also became an influential player in the process of reform design and implementation. The way it pursued its goals differed, however, because of the lack of political opening that accompanied market reforms in Poland. In fact, as the Egyptian regime sought to liberalize its economy, it began retreating from the political liberalization experiment of the 1980s. Despite growing political repression, organized labor succeeded in modifying the privatization program during the design phase, shaped other pieces of legislation directly affecting the pace of divestitures, and significantly slowed the implementation of the public sector restructuring program.

The first confrontation between the Egyptian Trade Union Confederation (ETUC) and the government erupted during the parliamentary debate in the summer of 1991 over the adoption of the Public Enterprise Law (Law 203), which was to guide the privatization process. The ETUC opposed the original government proposal. Because the government wanted the ETUC’s endorsement before adopting the plan, however, it agreed to a number of concessions, including guarantees against mass layoffs of workers and that only the adoption of a new labor code could override these provisions. In addition, the ETUC was guaranteed participation in all future decisions affecting the public sector.

As the privatization program moved into the implementation phase, the ETUC continued to have substantial influence over the process. Two government proposals directly related to the implementation of the privatization program encountered especially strong objections from organized labor. One involved changes in the labor code and the other concerned the adoption of an early retirement scheme for public sector workers. The most contentious were negotiations over new labor market regulations. Both government and business groups wanted more flexible employment contracts that would allow employers to dismiss unneeded workers. Labor opposed this change but wanted the right to strike, which business and the government rejected. The negotiations lasted almost a decade and the lack of progress contributed to the slowdown in the pace of sales. Negotiations over the early retirement scheme were also contentious. In the end the ETUC succeeded in ensuring a higher compensation package and the voluntary nature of the program. The latter provision in particular affected the pace of enterprise restructuring and sales. At the same time and without ETUC approval or support, many restructuring measures also came up against enterprise-level labor opposition. Because the regime feared social unrest, the intensification of labor protests made the implementation of public sector restructuring policies politically difficult.

The Czech Republic

In the Czech Republic organized labor had little input into the design and implementation of public sector restructuring. In March 1990, following the fall of the Communist regime, a congress of trade unionists officially dismantled the seventeen industrial unions of the Revolutionary Trade Union Movement and established the Czechoslovak Confederation of Trade Unions (ČSKOS), which grouped labor organizations of both the Czech and Slovak republics. As in Poland, trade unions were initially supportive of the economic reform program, though not of all proposed restructuring measures. Unlike in Poland, however, the unions had difficulty in formulating counterproposals and ensuring that they would be considered by the parliament and the government as the reform program was being designed in the second half of 1990. The privatization plan adopted by the parliament in January 1991 did not reflect trade union demands.

Once the privatization program was approved by the parliament, unions proved equally powerless to influence the process of implementation. Large-scale privatization, which included most state-owned assets in industry, agriculture, and trade, was implemented in two stages in 1993 and 1994. Although unions were concerned about the decline in real-wage levels, they did not manage to affect the pace of divestitures or to shape other reforms, in particular, the new labor code. The Tripartite Council, which was to facilitate government-business-labor negotiations, proved a source of frustration to unions. They felt that the government treated the council, not as a forum where agreements could be hammered out, but as a rubber stamp for decisions already taken. Yet during the first decade of reforms, even ČSKOS’s threats of strikes and demonstrations did little to influence the process of reform implementation.

Mexico

As in the Czech Republic, in Mexico organized labor was unable to shape the process of privatization design and implementation. However, the interaction between organized labor and successive Mexican administrations was more complex. The labor movement was composed of official unions affiliated with the ruling Institutional Revolutionary Party (PRI) as well as independent unions. All the major official trade union confederations, the Mexican Labor Federation (CTM), Revolutionary Confederation of Workers and Peasants (CROC), and Regional Confederation of Mexican Workers (CROM), were organized under the umbrella of the Labor Congress (CT). Also belonging to the CT were a number of smaller federations and a few large industrial unions. There were also independent unions not affiliated with the PRI.

When the economic reform program began during the administration of Miguel de la Madrid (1982–88), the official unions were willing to back the government if it guaranteed adequate minimum wages. The willingness of the government to disregard that pledge was the first sign that the PRI was prepared to abandon its long alliance with organized labor as the former shifted economic policies.

Here too privatization of the public sector was at the center of the restructuring program. Despite the long and close relationship between the official labor unions and the ruling PRI, the administration of de la Madrid and that of Salinas (1988–94) did not consult the unions during the process of privatization design and, despite intense lobbying, the CTM was unable to ensure that provisions offering protection to employees of privatized companies would be included in the program.

Initially the CTM responded with caution and was unwilling to mount outright opposition to the program’s implementation. Some independent union organizations as well as official union locals did on occasion resist restructuring plans. However, the government was prepared to ignore such opposition and, if necessary, crush it. When the worsening economic situation led to increasing criticism from the lower levels of the official union hierarchy and from the rank and file, the CTM and CT took a more confrontational stance and demanded a rethinking of restructuring policies. This shift in official union position, however, did little to change government policies. Nevertheless, despite its inability to shape public sector reform policies, the CTM and CT were never prepared to completely break their traditional alliance with the party and join forces with the independent unions.

Framing the Question

The ability of organized labor to influence and shape the process of privatization design and implementation thus varied across the four cases. However, the four cases differ significantly in their cultural, historical, regional, and political background. Additionally, during the first decade of economic restructuring programs, two cases remained under authoritarian rule, while two made a dramatic transition from authoritarianism to democracy.⁸ In particular, studies of both Central and Eastern Europe and of the Middle East have tended to present these regions as unique or even exceptional as a result of their particular sociocultural, religious, and political dynamics. In light of these differences, can we draw any broader conclusions about what factors shape organized labor’s ability to influence reform process?

Despite these differences, the struggles over the form of the new economic order playing out in Central and Eastern Europe, Latin America, the Middle East, and elsewhere stem from similar sources and are a response to similar pressures. In all these regions, deep economic crises and high levels of foreign debt forced these state-dominated economies to initiate market reforms. These structural adjustment policies had many similar features and posed a challenge to groups that had benefited from previous socioeconomic arrangements. By comparing the experiences of state-labor encounters we can thus gain a better understanding of the complex dynamics of social response to economic restructuring that are relevant across a wide range of cases. The choice of these four cases, which despite many differences shared a number of crucial similarities in the pre-reform period, allows for a systematic investigation of the factors that shape organized labor’s influence on economic change.

What are these crucial similarities? Prior to reform initiation, all four states were authoritarian ones in which the ruling party explicitly appealed to the working class for political support and promised revolutionary socioeconomic restructuring of the society. In all four cases, the ruling party sought to construct corporatist labor organizations with the dual goal of politically mobilizing labor in support of the ruling party while at the same time establishing firm control over unions and workers. While labor was expected not to challenge the state, in return for its political quiescence workers gained access to a whole host of subsidies and other privileges that resulted, at least for a time, in improved standards of living.

In the decades prior to the initiation of market reforms, all four countries pursued import-substitution policies, relying heavily on the public sector both as the driving force behind economic development and as a means of achieving other sociopolitical goals. All four faced a deepening economic crisis and began implementing structural adjustment programs. In all four, privatization of public sector enterprises was a central component of the reform agenda.

At the same time, while Egypt and Mexico initiated economic restructuring without transforming their political systems, Poland and the Czech Republic simultaneously embarked on market reforms and democratization. This case selection thus allows me to investigate whether and in what ways the legacies of the dynamics of state-labor relations persist over time and survive dramatic breaks with the past such as those that took place in Eastern Europe.⁹ It also permits a careful exploration