The current vogue for examining and exalting the German social market model of capitalism is at once understandable and overdue. Growth has been restored and employment retained in Germany following the 2008-9 downturn whereas the UK economy has flat-lined and unemployment spiked; the former's GDP is 1.1 per cent above its pre-crisis level, ours remains 1.4 per cent below (ONS, FSO). It has become tempting to ask why we can't have what they have. 'Why can't the UK have universal banks supervising and investing in the productive economy, alongside local county banks that embed capital locally to meet a given community's economic needs?' 'Why doesn't the UK have an intensive large-scale apprenticeship system, providing the patient nurture of future skills in careful co-ordination with industry?' 'Why can't the UK have institutions that save redundancy and later rehiring costs by protecting employment during a downturn?' The questions multiply--'why does Germany have three times the number of patent applications as the UK?' 'Why don't we have a respected workforce and collaborative workplaces with board-level representation for employees?' Before wondering too why we don't have an octopus that can correctly predict football results, the attempt to relate these questions to the British context has begun in earnest.
The employee influence that never was
While the UK's advantages are readily identified (its universities, its cultural clout, its finance hub), I would claim that the lazier answer to the Germany question (that of national psyche, 'sobriety in the Rhine') is greatly overstated. Between the post-war commitment to pursuing worker interests through the public ownership of industry and the Third Way commitment to retaining flexible labour markets while ameliorating the worst excesses of abuse and exploitation, Labour has at several points in its history pursued greater German-style participation rights beyond the traditionally exclusive avenues of centralised state direction and union bargaining (Clift, Gamble and Harris, 2000). Most notable are the Wilson and Callaghan governments' attempts to introduce a stronger form of co-determination (joint employer-employee direction) in British firms than has existed in Germany either before or since. That the commission and report on industrial democracy in 1976-77, chaired by the historian Sir Alan Bullock, was eventually abandoned doesn't lessen its contemporary significance. With the all-party push for a more responsible and accountable capitalism, Labour's call for worker representation on remuneration committees, and wider demands for industrial adjustment and corporate governance reform, it is worthwhile re-examining this fractious period of modern history.
Necessitated by the UK's weakening global trade position, declining industrial coherence, and the new opportunities and obligations that came with membership of the European Community, Harold Wilson sought initially to harmonise UK law with progressive EU draft directives on worker participation in industry. There also existed a movement to capture many of the benefits of intensive employee influence in firm processes as seen in the booming manufactures of Germany and Japan (Radice, 1974), at a time when British Leyland (caught between the antagonism of intransigent management and unions, grandstanding government, and twitchy shop stewards) notoriously failed to provide even a suggestion box for its plant workers. (Even in today's circular and artificial debate between the high road and low road to wealth-creation, a fig-leaf-shaped space is now found for employee empowerment measures within the stubborn frame of flexible, insecure labour practices and tax incentives--as in the Chancellor's tax-exempt shares for rights scheme for small business employees).
Charged with the year-long task of analysing labour relations and corporate governance arrangements at home and across the industrialised world, and with formulating rules for a 'radical extension of industrial democracy', the Bullock Committee's majority report recommended a rough 50:50 split between shareholder and employee votes electing members to a single-tier unitary board (Davies, 1978), thus giving workers in industry a level of influence unimaginable by today's standards of weak and ever more diluted employment rights. …