Intensified Competition, Industrial Restructuring and Industrial Relations

Article excerpt

Werner Segenberger *


Industrial relations and the production system are closely and intricately linked. The industrial relations system has to adapt to changes in the latter if it is to maintain its effectiveness, while the effects and implications of changes in production and industrial organization are themselves decisively influenced by industrial relations. But contrary to what is often implied, there is nothing automatic or deterministic in the relationship between the two that would enable us to predict the effects of flexible production systems, for example, on trade unions, on collective bargaining, on work organization, or on the number and quality of jobs.

When we talk about recent transformations in industrial organization it is important to bear in mind that, like industrial relations, it can be shaped by the social partners. In response to pervasive changes in the world economy during the past two decades, when the values of the mass production system have been brought into question, new types of competition have emerged and enterprises have responded in different ways to the competitive pressures. Production has frequently been decentralized or broken up into smaller units, which has resulted in an extended inter-firm division of labour, strategic alliances between large companies, and the emergence, here and there, of "industrial districts" and other forms of cooperation between small firms. Linkages and networking between firms, at times supported by on-line electronic data communication, and systemic rationalization are new characteristics not only of industrial production but also of the service sector.

The social implications of these developments are not yet clear, particularly for industrial relations. There are new opportunities for participation and a social dialogue, but there is also the spectre of new forms of dependency, hierarchization and unilateral decision-making.


During the past two decades, industrial organization in practically all the industrialized countries has undergone a major transformation. To identify and assess the changes, it is useful to recall the previous model of industrialization and the features of the industrial relations system that accompanied it.


Industrial organization, which for centuries had been rooted in craft production, started to change towards a system of mass production in eighteenth-century England. The manufacture of the same product in large numbers came to be considered more efficient and the key source of prosperity, as Adam Smith concluded in his 1776 classic on the causes of the wealth of nations. In his view, mass production required a new form of work organization based on an extended division of labour between workmen. As he demonstrated with regard to the manufacture of pins, workers who specialized in a particular task or operation would acquire more dexterity than if they manufactured a whole product. They could also save time by avoiding switching from one task to another. Eventually, as the task remained constant, it could be mechanized. It would then be profitable to invest in machinery which could do the job more efficiently than the worker could. Labour could thus be saved and freed for other activities.

The regime of mass production was extended, refined and brought to maturity in the twentieth century. In the construction of Henry Ford's famous Model T, the first car built from standardized parts and components put together on an assembly line, the features of mass production were carried a stage further. Flowline replaced nodal assembly: that is, instead of workers moving to and from the product the product flowed past the workers, thus further rationalizing the work process. Work organization now became a subject of "scientific" study. Frederick Taylor, its most prominent advocate, postulated the separation of the conception and execution of work, of planning and doing, of head and hand work. …