Academic journal article Capital & Class

The State and Class Discipline: European Labour Market Policy after the Financial Crisis

Academic journal article Capital & Class

The State and Class Discipline: European Labour Market Policy after the Financial Crisis

Article excerpt


This article looks at two related labour market policies that have persisted and even proliferated across Europe both before and after the financial crisis: wage restraint and punitive workfare programmes. It asks why these policies, despite their weak empirical records, have been so durable. Moving beyond comparative-institutionalist explanations which emphasise institutional stickiness, it draws on Marxist and Kaleckian ideas around the concept of 'class discipline'. It argues that under financialisation, the need for states to implement policies that discipline the working class is intensified, even if these policies do little to enable (and may even counteract) future stability. Wage restraint and punitive active labour market policies are two examples of such measures. Moreover, this disciplinary impetus has subverted and marginalised regulatory labour market institutions, rather than being embedded within them.


active labour market policies, financialisation, Marxism, policy systems, wage restraint, workfare


Why have neoliberal labour market measures survived the 2008 financial crisis? It cannot be due to their effectiveness as policies. Heterodox economic literature has challenged the policy of wage restraint, finding that declining wage shares have led to a chronic deficiency of aggregate demand, slow growth, high debt and instability in Europe (Stockhammer & Onaran 2012). Marxist scholarship has designated the current juncture a 'dysfunctional accumulation regime' (Vidal, 2013) which cannot produce stable growth in the long term. Such critiques are echoed by mainstream economists such as Stiglitz (2012) and Piketty (2014) and by social movements and parties in countries such as Greece and Spain. But those seeking to challenge them--such as Greece's former finance minister Yanis Varoufakis (cited in Ovenden 2015: 163-164)--have apparently been taken by surprise by the rigidity with which European policy elites have stuck to these measures in the face of both academic argument and popular mobilisation.

This article examines the persistence and proliferation of two specific measures which are key pillars of the pan-European austerity agenda: wage restraint and punitive active labour market policies (ALMPs). These policies, we argue, have three salient points in common. First, they both exercise a disciplinary effect over workers. Second, they have both persisted and proliferated throughout Europe despite dubious empirical records. And finally, in proliferating, they have tended to undermine and transfigure existing labour market institutions which have historically mediated the labour-capital relationship.

One explanation for the 'stickiness' of labour market policies comes from comparative institutionalism, the dominant theory in comparative employment relations (Hauptmeier & Vidal 2014). The policy paradigms (Hall 1993), path dependency (Pierson 2000) and policy regimes (Campbell & Pedersen 2014) approaches all suggest that policymakers will not necessarily respond objectively and adaptively to emerging problems, owing to the historical weight of distinct national-institutional systems. However, we argue that this literature underestimates the disruptive effects of liberalising policies on collective bargaining and welfare state institutions, despite empirical evidence of such disruption in Germany (e.g. Baccaro & Benassi 2014; Doellgast 2012; Doellgast & Greer 2007; Holst 2014), which according to comparative institutionalists should have been difficult to reform (e.g. Hall & Soskice 2001). By contrast, we present a view influenced by Marxist and Kaleckian writing, with a particular emphasis on examining how these traditions have interpreted the role of 'financialisation' in European political economy. We are more sceptical of the causal role of institutions in recent labour market policy.

In particular, we focus on the idea of 'class discipline', by which we mean efforts by the state to actively render labour more dependent upon, and less able to challenge, the interests of individual capitalists. …

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