A modern Italian Story

Alessandra Mecozzi

The 28th of January 2011 was a beautiful day for Italian metalworkers: 70% participated in the national strike and in 17 demonstrations called by FIOM (the metalworkers union affiliated to CGIL, Italy’s largest union confederation). This was a response to the aggressive strategy adopted by Fiat in several of its factories.
Only a few years ago, Sergio Marchionne, Fiat’s CEO, declared that as labour cost accounted only for 7% of the company’s total costs, there should be no reason to squeeze workers and put pressure on working conditions (interview in La Repubblica, 21/9/2006). He used the context of the global crisis to launch a direct attack on workers’ rights and conditions, with the aim of dismantling the Italian labour relations system.

From Pomigliano to Mirafiori: fear as the strategy of choice for Fiat

In April 2010, Fiat presented its strategic plan for 2010-2014, Fabbrica Italia (“Factory Italy”), which aimed to increase vehicle production in Italy from 650,000 units in 2010 to 1.4 million by 2014. During the following summer, Marchionne announced that in order to implement the plan, he would consider investing €700 million in the Pomigliano plant (where 4600 workers are employed) and relocating the production of the Panda, currently manufactured in Poland. All trade unions had to sign an agreement entailing worsened working conditions and limiting the (constitutional) right to strike. FIOM declared itself open to negotiating on labour flexibility, but “negotiation” was not the flavour of the day. The agreement was designed unilaterally by Fiat and the unions were given no choice, meaning that if the agreement was not accepted, the investment would not take place.

However, this so-called agreement was signed by the other unions (Fim, Uilm and Fismic) and presented to the workers for a referendum. FIOM declared the referendum illegal because it was taking place under blackmail. Fiat’s management and media commentators expected the referendum result to be an overwhelming YES; however, 37% of workers, overcoming their fear of jeopardizing a key investment that could save the factory, refused to sacrifice their rights for the promised investment. A young and educated new generation of workers said NO to blackmail, thus asserting their dignity and political consciousness.

In retaliation against FIOM, Fiat showed an iron fist in other plants: on the 14th of July, three FIOM delegates were dismissed in Melfi (Basilicata) because they were on strike; in the same week, a white collar employee in Mirafiori (in Turin, the largest Fiat plant in Italy) was suspended and accused of spreading propaganda because he was using a computer at the office to inform his colleagues about Fiat’s strategy against workers.

Signatory trade unions, editorialists, right-wing politicians and even part of the left and some CGIL officials misread the consequences of what was happening in Pomigliano. Many considered, with a hint of racism, that Pomigliano was a manifestation of the “southern illness”, characterized by laziness, high absenteeism, and so on. They accepted that Marchionne would “correct” this exception.

A large-scale response took place on the 16th of October 2010, when a national demonstration of metalworkers (organised by FIOM) and other social actors, including students, precarious workers, and civic associations, brought together hundreds of thousands of people in the centre of Rome.

On the side of capital, Marchionne's initiative encouraged Federmeccanica, the metal sector employers’ association, to inflict a direct blow to the national employment contract. The employers’ association signed, with the unions who had endorsed the Pomigliano agreement, a national agreement allowing for derogations to the national contract.

Fiat’s onslaught on workers’ rights quickly moved north, to Mirafiori, its historical plant. Fiat announced that some of its production would be transferred to Serbia, thanks to financial assistance the company had been offered by the Serbian government. Uncertainty and fear were spreading among workers. What would their future be? What was Fiat’s industrial plan? Where and how would the trumpeted €20 billions of “Fabbrica Italia” be invested? Marchionne always refused to give details about his projects while the government remained silent, openly leaving the market to decide on the future of the workers.

On December 23rd, a new agreement was requested by Fiat from the Mirafiori workforce (5500 workers) as a condition for the allocation of a €1 billion investment for the production of jeeps destined mostly to the American market. Again, no real negotiation took place, and the same terms as in Pomigliano were proposed: worsened working conditions and increased working time, as well as an attack on freedom of association. Workers would thus lose the right to elect their shop stewards, who would instead be appointed by the union leadership. Moreover, any union refusing to sign the agreement would be excluded from the plant. The agreement trampled on FIOM’s right to represent its members.

The result of the referendum was positive, but by a very tight margin - 47% of workers voted NO. The majority of blue-collar workers voted NO, particularly those on the assembly lines where the impact of the agreement would be stronger. The YES of the 400 supervisors and white-collar workers was decisive for the lean 53% majority.

It was a surprising victory for the union, considering the referendum, once more, took place under blackmail. The substance of the referendum was: “either you accept to curtail and/or give up your rights, or you will lose your job”. In the meantime, Marchionne was applauded across the political spectrum.

On the ground, different segments of civil society were expressing their support to FIOM. Students, precarious workers, researchers, school teachers, and progressive economists stood beside FIOM at the strike on January 28 2011, which was accompanied by demonstrations in many different cities.

The new points of the Mirafiori agreement (like the exclusion of FIOM from union representation in the plant) were added to the Pomigliano one and a new Fiat contract was designed as an alternative to the national contract. This demonstrates that Pomigliano was not an exception but the start of a strategy aiming at the destruction of the three pillars of the Italian labour relations system: labour law, the Constitution and the national collective contract.

US influence

Marchionne's strategy, which emulates the US labour relations system, is very popular among Italian commentators. His supporters should however know that the US never ratified the ILO Conventions on freedom of association and collective bargaining. Labour relations are largely dependent on the US Administration – as opposed to the Italian or European ones, which are based on laws and national collective contracts. In the US, the unionisation rate is at its lowest ever. On the whole, the lack of a real collective bargaining system has produced lower wages and longer working times.

United Auto Workers (UAW) had one and half million members during the 1970s; it has barely 400,000 today. UAW is launching a strong unionisation campaign and its president, Bob King, recently stressed that “no democracy on earth can thrive and prosper without democratic unions” (speech to the Center for Automotive Research Conference, “A UAW for the 21st century”, 2 Aug. 2010).

The powerful International Brotherhood of Teamsters (IBT, which has 1.4 million members among truck drivers) has fully understood what is at stake in Italy. The car haulers (part of IBT), one of the few sectors in which a national contract was signed in the US, have been fighting Marchionne’s restructuring plan for Fiat/Chrysler, which would terminate the collective contract and destroy thousands of jobs. FIOM supported their struggle and received their support for the January strike.

Fiat’s case is unique in Europe and even the European metalworkers federation is worried about the possible extension of this “model”.[1] It represents a dramatic attack on workers, union rights and on the entire labour relations system, which is an important part of the European social model. This leads FIOM to the conclusion that, unless we are able to build strong European and international unions, the race to the bottom is likely to continue. We have to confront it with all of our energy if we want to save worker unions and avoid the rise of market oriented company unions!

Accusations against FIOM

• “FIOM does not behave as a labour union but as a political actor”, Minister of Labour Sacconi told the media to discredit FIOM’s dedication to the struggle of workers. The reality is that Italy is facing a growing political and cultural regression that starts with the prime minister himself, and the cultural and moral model that he spreads through his media. This is exacerbated by the weakness and division of the political opposition to the government, which is unable to formulate any coherent economic or industrial policy. FIOM’s determination to stand up in defence of worker and union rights has become a point of reference for a large part of civil society. In so doing, FIOM occupies a political vacuum, as there is no political force in Parliament which represents workers.
• “FIOM’s positions lead to isolation,” say many on the political left and also some from CGIL. Is it so? Worker assemblies were in fact overcrowded, while the streets on the day of the strike were filled with metalworkers and other social actors! What does ‘isolation’ mean, then? The establishment tried to isolate FIOM. But, in the end, even the mainstream media had to cover the conflict in Mirafiori, and to show the solidarity coming from different segments of civil society. We could rather say that the political opposition is isolated because it stands so far from the people that it is supposed to represent!
• “FIOM is old-fashioned and does not understand the modernity of globalisation”. Yet, in a time of deep financial and economic crisis when the failure of neoliberal globalisation has become obvious, the modern and just attitude towards globalisation may well be the one of those standing up for their rights.

[1] See for instance the press release of the Fiat trade union coordination group, 4th of February 2011:
http://www.emf-fem.org/Areas-of-work/Company-Policy/News/Declaration-of-the-Fiat-trade-union-coordination-group

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Alessandra Mecozzi has been the International Director of FIOM (the Italian Federation of Metalworkers) since 1996. She graduated from Rome's La Sapienza University with a thesis on the history of CGIL, the largest Italian union confederation. Alessandra has been working for FIOM since 1971.

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Fiat is at War, says Sergio Marchionne

Francesco Garibaldo

Pomigliano, situated in the economically depressed region of Campania, is the second largest Fiat plant in Italy. An experiment aimed at redefining the Italian system of industrial relations is taking place at this plant. It started with an agreement designed out of the Italian labour relations law. According to Sergio Marchionne, Fiat’s CEO, this is a necessary step to fight the war posed by global competition.

The Pomigliano agreement, signed by three of the four metalworkers’ unions (FIM, UILM and FISMIC), with the exclusion of the most representative (FIOM), gave a strong impetus to the process, started in 2009, of the deconstruction of the social pact set up in July 1993.[1] The pact, similar to the European tripartite incomes negotiation system, was based on a dual system of bargaining: on one hand, a national contract for each sector with an upper limit to wage increases, defined by the government and dependent on national macroeconomic conditions; and on the other, the possibility of the bargaining company’s agreements to redistribute the firm’s specific productivity gain. The core of the system was the national collective agreement regulating the main features of the employment relation. The company-level bargaining was only designed to fine-tune secondary aspects, not to allow local actors to depart from the national contract’s clauses. The system was ineffective in defending wages from inflation; as a result, in the past 10 years, there has been a shift of five points in the ratio of wages to profits in GDP.

Another negotiating system, replacing the 1993 system, was implemented in April 2009. Signed by three of the four union federations and Confindustria (the Italian employers’ federation), it paved the way to a separate collective agreement in the metalworking sector, which signed in October 2009. The new sectoral agreement increased the role of company-level bargaining, at the expenses of the national sector contract. Moreover it introduced a three-year term for all aspects of sectoral collective agreement, whereas previously pay terms applied for two years and non-pay terms for four years.

In between, the government launched a white paper introducing a new concept for social policies. The new metal sector agreement and the white paper framed a general shift in the Italian system of industrial relations and of the welfare state from a two-level system centred on the national contract to a new system centred at the company level, allowing concessions bargaining through derogation on specific features. Alongside this, a new welfare system emerged, based on the devolution of many public prerogatives to the private sector.

Cgil, the main Italian trade union, did not sign the April 2009 agreement and continued to support the centrality of the national contract, particularly relevant in Italy where almost 90 per cent of employees work in companies with fewer than 20 employees (and where bargaining at the company level would therefore produce uneven and unpredictable consequences). FIOM-CGIL, the metalworkers’ union, did not sign the sectoral agreement of October 2009. Instead, FIOM asked for a referendum to ratify the new agreement, but FIM and UILM refused to do so. As a result, employees could not express their opinions on the new contract, signed by two of the three main unions – but not the biggest one.

From class conflict to workplace cohesion?

In the midst of a very difficult situation for most European car producers, mainly due to overcapacity of the automotive industry, Mr. Marchionne depicted the new fierce global competition in the sector as a “war” between people working in the same company and those working in other areas of the world. From this perspective, the difference of interests between workers and managers/capitalists, not to mention the class conflict, is irrelevant. Capitalists, managers and employees of a specific company have to fight, side by side, against all the other companies to survive. Of course, during “war”, some rights cannot be guaranteed and multinationals must try to standardize employment relations. When a system such as the Italian one is less prepared for the war because it is too rigid and protective, it must be changed.

The problem is, therefore, not only to reach agreements with trade unions on flexibility and cost control, but also to change the nature of industrial relations; managers must be allowed to reshape the employment relation. Marchionne asked the workers to undergo a dramatic worsening of working conditions: the increase of the working week to 48 hours; the reduction of the breaks from two 20-minute to three 10-minute breaks; and the lunch break moved to the end of the shift. On top of these new conditions, aimed at increasing productivity, Marchionne has also requested a collective and individual liability clause over all contract terms; virtually every employee and union must accept all contract terms under penalty of exclusion from the company. This particular clause firstly seeks an ultimate disciplining of the workforce and secondly the ousting of the most representative and combative metalworkers union from the plant and ostensibly from the whole sector: if FIOM were to refuse the new conditions of the contract, it would be automatically deprived of trade union rights. Moreover, from an individual point of view, the agreement forbids any strike against the new regulations. This new approach to industrial relations represented a shock for the Italian system for many reasons.

Labour rights under attack

The main formal issue raised against Marchionne’s new approach is that, according to the Italian constitution, the right to strike is not a trade union right but an individual right. For instance, a group of employees, even if they are a minority, can strike against an agreement signed by the trade union. A union, on the other hand, must be legitimated by the employees it claims to represent, meaning they cannot impose a dramatic worsening of workers’ rights without consulting them. The right to strike can be limited by the law for the sake of the public interest, as happens in certain areas of the public sector (e.g. hospitals and transport), but this discipline does not change the constitutional nature of the right: trade unions cannot sign an agreement limiting the right to strike without the explicit consent of members.

A second issue is the nature of the national contract and its relation with company-level bargaining. In its original form, the contract used to allow minor derogation at the company level. The possibilities for derogation increase in the revised form of the contract; nevertheless, what is reached in a specific company cannot be applied to the sector as a whole. To achieve such a sector-wide derogation is clearly what Fiat seeks to do.

The third issue is that the separate contract for the metalworkers did not legally replace the previous contract, which included FIOM, and will be formally valid until the end of 2011. It follows from the fact that the FIOM has not agreed to replace the old contract. This is important for all social actors, as in Italy contracts have a continuation clause, so if a new contract is not signed by all the signatories, the old one remains in force.

However, Fiat decided to press ahead with the new contract for the Pomigliano plant. Commenting on the possible result of the referendum among the workers, Fiat’s CEO stated openly that in case of a negative vote, the investment of Fiat to relaunch the plant would be cancelled.

The Pomigliano agreement was signed against the background of this threat, and the workers were asked to ratify it in a referendum. FIOM did not refuse to bargain on flexibility but it refused to sign the agreement and to endorse the use of a referendum in this case because the agreement altered the conditions under which an individual right – the right to strike – could be exercised. Such an alteration cannot be decided by trade unions, let alone employers, because this right is not theirs. The positive vote in the referendum was, however, fully endorsed by the other unions because they feared that employees would be made redundant by Fiat. While all the unions and the press were convinced that the referendum would be a landslide victory for Marchionne, nearly 40 per cent of employees – and the majority on the assembly lines – refused the agreement. Marchionne reacted very angrily because, although Fiat technically won the referendum, it found itself in the uneasy situation of having to operate a factory facing serious opposition and collective action from a large part of its workforce.

It was because of this result that Marchionne decided to “up the stakes” and to condition further investment in Pomigliano to an alignment of the national branch contract for metalworkers to the one adopted in Pomigliano. This would require changing the national branch contract with the agreement of Confindustria (the employers association) as well as FIM and UILM. Only if this condition were fulfilled would Fiat implement its commitment to invest. This would extend some of the most shocking concessions made in Pomigliano to all Italian metalworkers, starting with the curtailment of the right to strike, with the threat of monetary and disciplinary retaliations for each employee and for trade unions should a strike nonetheless take place.

This goal was achieved in September 2010 with an alteration of the separate collective agreement in the metalworking sector signed in October 2009, extending the clauses valid for Pomigliano to the sector as a whole. To add insult to injury, Fiat decided to shift the production of higher value added products from Pomigliano to Tychy in Poland, while transferring a product with lower added value from Tychy to Pomigliano (namely the new Panda). However, should the management not feel certain that it can exercise strict control over the plant, Fiat decided to create a new company from scratch, firing all the employees and rehiring only those who fully accept the new collective agreement.

The result is that investment in Pomigliano is still uncertain, but metalworkers have surely seen their rights shrinking dramatically and their solidarity becoming fragmented.

[1] See http://www.eurofound.europa.eu/eiro/1998/03/feature/it9803223f.htm

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Francesco Garibaldo is an industrial sociologist and the former director of the Institute for Labour (IPL) and of the Institute for Economic and Social Research (IRES-CGIL) at CGIL, Italy’s largest trade union confederation.

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Economic Democracy: An Idea whose Time has come, again?

Richard Hyman

“There can be no return to business as usual”: this was the unanimous trade union response to the global crisis. For a time in early 2009, the legitimacy of capitalism was itself questioned in unexpected quarters. In May 2009 the German union confederation, the Deutscher Gewerkschaftsbund, organised a ‘Capitalism Congress’ – using language which for decades would have been taboo – and its president warned of unrest on the streets unless jobs were more effectively safeguarded. One of its leaders, Claus Matecki, insisted that it was important to talk of capitalism rather than using the conventional but bland term soziale Marktwirtschaft (social market economy), since only thus could trade unionists make clear that the existing economic order was historically contingent and founded on a fundamental inequality between workers and employers.[1] Yet there was no follow-up.

Two familiar and intersecting contradictions of union action were evident across Europe. One was the dilemma of short-term imperatives versus long-term objectives. Was the aim to negotiate with those wielding political and economic power for damage limitation, and perhaps a tighter regulatory architecture for financialised capitalism; or to lead an oppositional movement for an alternative socio-economic order?
According to one Belgian socialist union leader, “The situation really is not simple for trade union organisations. The analysis of the crisis is not complicated: neoliberalism cannot deliver. The difficulty is that today, discourse is not enough. It is easy to say: we need to change the balance of forces. But that does not tell us how to proceed.... Our members expect us to look after their immediate interests.”

The second contradiction was between a global economic crisis and trade union action which is essentially national or indeed sub-national in character. The international trade union organisations produced powerful analyses and progressive demands, but their impact on day-to-day trade union practice on the ground was non-existent. Indeed the dominant response has been to defend and enhance competitiveness, meaning a struggle of country against country, workplace against workplace, intensifying the downwards pressure on wages and conditions.

To these two contradictions must be added the loss of a vision of an alternative socio-economic order. Actually, ‘existing socialism’ had discredited the idea of communism long before the fall of the Berlin Wall. Social democracy likewise abandoned the struggle for a new social order in the face of economic adversity, engaging in concession bargaining with multinational capital and the international financial institutions. Centre-left trade unionists came to object to the ‘new, overmighty capitalism’ of hedge funds, asset-stripping, financial speculation and astronomical bonuses. The solution, it appeared, was to seek to restore the old capitalism: the trade union movement should ‘become a champion of good business practices, of decent relations with decent employers while ruthlessly fighting the speculators’.[2]

So has the crisis indeed been wasted? Perhaps one means of connecting short-term (and probably ineffectual) defence to a struggle for another world of work could be renewed attention to the idea of economic democracy. In the past two years, there has been much discussion of the deficiencies in existing systems of corporate governance, particularly as the liberalisation of global financial transactions has made ‘shareholder value’ the overriding corporate goal even in ‘coordinated’ market economies.[3] The solution, however, cannot simply be a technocratic regulatory fix; what is required is democratic control of capital. With the shock of crisis, some union policymakers have come to recognise that the overriding challenge is to build a movement for greater democratisation of the economy and to create new links between different levels of regulation and different issues on the regulatory agenda.

Systems of ‘codetermination’ are institutionalised in much of Europe, involving rights of collective representation through works councils, and in some countries employee board-level representation. Such provisions reflect an insistence that companies are not merely the private property of the shareholders, because employees are themselves ‘stakeholders’ with a legitimate interest in shaping corporate goals and policies. Even the strongest systems of works councils, however, have primary jurisdiction over employment issues which arise only after key decisions on investment and product strategy have already been taken: as a German trade union expert noted two decades ago, the more strategic the issue for management, the weaker the powers of the councils.[4] This becomes particularly problematic in times of economic adversity, as primarily enterprise- or establishment-based mechanisms of codetermination are forced to accommodate to the externally imposed imperatives of intensified global competition, and may be unable to do more than underwrite managerial priorities. Though formally intact, the machinery of codetermination no longer provides an effective mechanism for asserting and defending workers’ interests.[5] To address this erosion of effectiveness, ‘industrial democracy’ must be extended to encompass corporate strategy as a whole: in other words, it must be enlarged into economic democracy.

Elements of such a strategy can be found in the ideas developed by Fritz Naphtali for the German trade unions in the 1920s,[6] which proved influential in the German and Austrian trade union movements in the early post-war years. Socialisation of the economy was an essential goal, but it should be achieved, not necessarily and not exclusively through state ownership but through more diverse forms of popular control. Such ideas helped inspire the demands of Swedish unions in the 1970s for ‘wage-earner funds’, drafted by Rudolf Meidner (a socialist of German origin).[7] The essence of the policy was to establish collective employee ownership of part of the profits of corporate success, in the form of shares held in a fund under trade union control. This, it was envisaged, could provide increasing control over strategic decisions in the dominant private companies. As Meidner himself later conceded, a more flexible set of proposals would have been politically prudent; certainly in countries with far lower trade union density than in Sweden, tying control of collective funds to trade unions alone is not a viable strategy (particularly given past scandals involving union-owned enterprises in Germany and Austria). Nor could the Meidner plan easily function in an era of global financial markets. Nevertheless, some of its themes are particularly apposite at a time when the banking sector has been rescued by a vast transfer of public funds; democratisation of ownership should be a logical corollary. Moreover, while the trade union movement has embraced the demand for a financial transactions tax, the question of its implementation has been little discussed. Why not use the revenue, not simply to plug the hole in national budgets, but to create investment funds under popular control, linked to a democratisation of pension funds (which are in effect, workers’ deferred wages)? These are questions with which trade unionists should surely engage.

This theme leads to a broader question: what are the possibilities for economic democratisation in the space between state and market? The labour movement has a long tradition of cooperative production and distribution, though in many countries such cooperatives mutated long ago into simple commercial ventures. But smaller-scale, cooperative economic activity has often been able to provide some counter-power to the commodification of social life, particularly in the global South. In a notable recognition of this role, the Self-Employed Women’s Association (SEWA) in India was accepted as a founding member of the ITUC.[8] Do such movements offer lessons for trade unions in the developed economies? In the French-speaking world at least, the notion of a ‘social economy’ has received growing attention on the left.[9] An imaginative response to the crisis ought to draw on such ideas.

Can economic democracy and capitalism coexist? If the central dynamic of twenty-first century capitalism involves vast concentrations of unaccountable private economic power – and this may well be the case – the answer is clearly no. You can peel an onion layer by layer, but you can't skin a tiger claw by claw... But a simple anti-capitalist response to the crisis is not on the current political agenda. To capture hearts and minds, the labour movement has to commence a campaign against global casino capitalism which is linked to a credible set of alternatives for socially accountable economic life. In the short term, perhaps, a campaign for ‘good capitalism’ may be the only politically feasible [10] For the present, what is needed, in Gramsci’s terms, is a ‘war of position’. The idea of economic democracy offers a vision of popular empowerment which could reinvigorate trade unionism as a social movement and help launch a struggle for a genuinely alternative economy - one in which, incidentally, unions themselves would be more likely to thrive.

1 Claus Matecki, ‘Warum wir vom Kapitalismus reden’, der Freitag: 26 June 2009.
2 John Monks, The Challenge of the New Capitalism, Bevan Memorial lecture, 14 November 2006.
3 See John Peters, ‘The Rise of Finance and the Decline of Organised Labour in the Advanced Capitalist Countries’, New Political Economy 16(1), 2011.
4 Ulrich Briefs, ‘Codetermination in the Federal Republic of Germany: An Appraisal of a Secular Experience’, in György Széll, Paul Blyton and Chris Cornforth (eds) The State, Trade Unions and Self-Management. Berlin: de Gruyter, 1989.
5 See Wolfgang Streeck, Re-Forming Capitalism, Oxford, OUP, 2009; Hans-Jürgen Urban, ‘Arbeitspolitik unter (Nach-)Krisenbedingungen: Gute Arbeit als Strategie’, Arbeits- und Industriesoziologische Studien 4(1), 2011.
6 Fritz Naphtali, Wirtschaftsdemokratie: Ihr Wesen, Weg und Ziel. Berlin: ADGB, 1928.
7 Rudolf Meidner, Employee Investment Funds, an Approach to Collective Capital Formation. London: Allen & Unwin, 1978.
8 SEWA defines itself as both an organisation and a movement for women workers on the margins of the formal economy. It has many of the characteristics of a trade union, an NGO and a cooperative. See http://www.sewa.org/About_Us.asp
9 Jean-François Draperi, Comprendre l'économie sociale: Fondements et enjeux. Paris: Dunod, 2007; Jean-Louis Laville, ed., L’économie solidaire: Une perspective internationale. Paris: Hachette, 2007.
10. Sebastian Dullien, Hansjörg Herr and Christian Kellermann, Der gute Kapitalismus... und was sich dafür nach der Krise ändern müsste. Bielefeld: transcript Verlag, 2009.

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Richard Hyman is Emeritus Professor of Industrial Relations at the LSE and founding editor of the European Journal of Industrial Relations. He has written extensively on the themes of industrial relations, collective bargaining, trade unionism, industrial conflict and labour market policy. He is currently working on a book comparing trade union strategies in ten European countries.

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Trade Unions and Worker Struggles in Guangdong

Chen Weiguang interviewed by Boy Lüthje[1]

Boy Lüthje

Chen Weiguang

BL: How do you assess the labour conflicts in the auto supply industry in South China in the spring and summer of 2010?

CW: The strike at Honda Nanhai and other auto components factories in the Pearl River delta in June and July 2010 triggered a strike wave that involved several tens of thousands of workers. In the city of Guangzhou alone, more than 60 factories had strikes, including Honda Dongfeng and other major auto suppliers.

The basic cause of the strikes was low wages and poor working conditions, but the low wages were the main factor. The Guangdong provincial government basically did not view these strikes negatively. We as a trade union found the workers’ demands just and reasonable. Honda and Toyota in Guangzhou are both foreign–Chinese joint ventures, and workers’ wages in these companies were between 2,500 and 3,000[2] RMB  per month. But in Honda Nanhai and many other comparable companies, the wages were much lower, around 1,200 RMB. These companies are profitable ... but their basic wages were about the legal minimum, around 900 RMB.

We therefore believe that the demands of the workers were justified. But we hope that such economic disputes do not develop into political incidents and will not disrupt social order; this is our bottom line. We have to say that our strikes were very orderly – there were no walkouts from the factories to the streets, no destruction of machinery, no playing politics. Everything remained in the framework of disputes within factories. In all of the more than 60 conflicts in Guangzhou this summer, negotiated settlements were achieved. We can therefore proudly say that in Guangzhou no striking worker was dismissed and not one worker was arrested by the police, although the strikes included tens of thousands of workers. Of course, most of the strikes were rather short, between two or three hours and three days. We also taught our Japanese employers that they cannot treat their workers in such harsh ways.

BL: In the strike at Honda Nanhai, which gained the most attention from the national and international media, the trade union behaved in very different ways from what you just described.

CW: In this case, the trade union was not well prepared in its thinking. At the time of the strike, it could not respond with clarity to the demands of the workers. The workers did not accept the trade union as their representative, and the factory trade union lost the workers' trust from the beginning. As the strike went on, the union wavered between management and the workers, and it saw itself as a mediator. Standing between the two sides is the worst position.

In addition, the workers were confronted with physical force from outside the factory. These incidents cannot be blamed on the trade union, since these individuals were not trade unionists, but outsiders. They hoped to end the strike quickly by disguising themselves as trade unionists. They pushed and dragged workers and hurt some of them slightly. Some workers said they were beaten. The workers felt threatened and left the workshops again. Originally, some had been ready to go back to work.

After the incident, the trade union issued a letter of apology in an effort to calm the situation. Writing such a letter was equivalent to admitting people were beaten. After the letter was posted on the web, the whole world criticized the trade union. The union failed to explain its position clearly. Because it did not take a clear stand from the beginning, the chain of events following the incident put the union in a bad light. The impact of such an event is very difficult to dispel within a short period of time, and writing this letter only complicated things for the union.

BL: What was the situation in the other cases, which garnered less public attention?

CW: In the labour conflicts at Honda’s suppliers of in the city of Guangzhou, especially in the Nansha district, our approach was very different and the trade union behaved proactively. Basically, since 2007 we have educated the trade union cadres that they must represent the workers and not play the middleman. In the event of a strike, even very short ones, the trade unions have to be on the side of the workers and may not act as mediators. When the strike in Nansha occurred, we asked the district-level trade union to intervene immediately and give voice to the demands of the workers. To our knowledge, the wages of workers in this company were similar to those in Honda Nanhai. According to the factory trade union, the workers were demanding an increase in wages and fringe benefits, such as free meals during night shifts and air conditioning in the dormitory. But the company only accepted free meals during night shifts. So we were supporting the workers, but at the same time we were telling them not to disrupt the public order, and not to damage equipment and obstruct vital operations.

From the beginning to the end, the company did not want to bargain. They told the workers: You can have a raise of 450 RMB, but if you do not accept within 10 minutes, you will have to leave the company. The workers did not give in. They simply continued their strike. This alarmed management, because after three days the Toyota Nansha main factory would have had to stop work. The workers knew their strength. In the end, the company had no other choice than to change its behaviour and bargaining stance. After four hours of negotiations, a wage increase of 825 RMB was agreed upon. The workers perceived this as a victory, and the employers could live with it. The workers' wage now is around 2,000 RMB, still somewhat different from the main factories of Honda and Toyota.

A very important factor concerning the outcome of this conflict was the attitude of the top political leaders in our province. They had a clear understanding that the nature of the dispute was economic and the strikes should not be treated as destabilizing incidents. Mass activities such as collective resistance, road blockages, protest marches and mass petitioning are considered as being in this category. But in this case, the workers did not leave the factory, everything remained peaceful, there was no yelling and shouting, and it was more like silent resistance. Our provincial party committee noted that these were not destabilizing incidents and that police force should not be used. The government should act as a mediator, and the trade union should bargain with the employer.

BL: Looking into the future, how do you view the prospects for democratic management of enterprises and collective bargaining?

CW: This year’s strike movements taught us many lessons. First, they educated our trade union cadres to take a very clear position when handling such conflicts. Second, they taught the employers to treat workers with dignity and not as machines. Third, they taught many of our leaders that labour relations is a very important issue. We have talked for years about the importance of wage negotiations, but this has not had a real impact on the various levels of our leadership and society. After these strikes, many people think it is a good idea to promote wage bargaining. Apart from the discussions about collective bargaining, the question of democratic elections is of the greatest concern to trade union cadres. We now have plans to introduce truly democratic elections of factory trade union representatives. Elections for trade union representatives exist, but how are candidates being selected? Often, the elections do not work very well, and most of the time a small group of leaders decides to support candidates who fit their interests, giving workers only a very limited choice. These superficial elections, in fact, are really appointments. We want to change these methods. Candidates should be recommended by the collective mass of employees: this way, we will be able to create a choice among capable candidates approved by the workers and bottom-up democracy can take shape. At the same time, top-down processes will also become more focused.

We believe that democracy must be rational and that responsible people should become leaders. Only this sort of democracy constitutes active progress, and is not a destructive force.

BL: What is your view of the prospects for coordinating wage levels between companies and establishing industry-wide wage standards?

CW: I am strongly in favour of industry-wide collective bargaining because wage standards can be much more efficiently negotiated at the level of entire industries than they can in companies of various types. We therefore have to bring into play industry trade unions and employer organizations. In the wake of the recent labour conflicts at Denso Nansha in Guangzhou, we looked into the possibility of creating an industrial trade union for the automobile sector. This seems inevitable, yet conditions are not yet ripe at the city level. But we are trying this at least at the district level. In Nansha, the conditions do exist, and the trade union at the Toyota factory in Nansha has taken the lead in developing regular contacts with the trade union at lower-tier suppliers.

I have learned about the way bargaining is conducted in Singapore. There, the workers' wage is split into three parts: the base wage, monthly premiums and yearly bonuses. The first component makes up 70 per cent of regular pay; this is negotiated by trade unions and employers’ associations at the industry level. The latter two elements are negotiated between unions and management at the factory level. The main part of the wage is subject to industry-wide negotiations, and the smaller part remains open to negotiation within the company. This leaves room for differences, but the differentiations cannot become too big. Besides, a proportion of the base wage of around 70 per cent of regular monthly income is quite healthy. In China, the base wage is very low and the freedom of employers to determine wages is too great. In comparison, I find the Singapore method very good.

BL: What can be learned from the experiences of Western trade unions in this context?

CW: As China becomes more open to the market and to the global economy, there is no reason why the trade unions should not study the wealth of international experience, particularly systems of wage negotiations. But this learning must be integrated with our country’s own conditions and experience. Our attitude should be realistic and we should learn from the facts. In this context, we should vigorously support exchange with foreign trade unions and experts.

[1] The interviewer selected and translated the text.
[2] One hundred renminbi is equivalent to 15 US dollars.

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Chen Weiguang is Chairman of the Guangzhou Federation of Trade Unions and Deputy Chairman of the People's Congress of the City of Guangzhou.

Boy Lüthje is a Senior Fellow at the Frankfurt Institute of Social Research, specializing in economic transformation and labour in China.

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