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Austria's quiet revolution works.

Is there such a thing as a half-revolution? Can a society reach a stage in its political evolution when it can no longer be called capitalist, when it goes beyond a welfare state yet is not socialist by the traditional definition? If there is such a thing as a half-revolution, Austria probably comes closest to having achieved it.

In an interesting and little-understood experiment, workers, capitalists and government in this land of 7.5 million people have developed a unique form of collaboration called social partnership which has reduced unemployment and inflation and improved living standards. Bruno Kreisky, honorary chair of the Socialist Party and former chancellor, calls the program, of which he was a major architect, the "sublimation of the class struggle." Whatever it is, social partnership has scored a number of significant material successes.

From 1971 through 1981--before the worldwide recession began--Austria's rate of economic growth was 4.3 percent, as against the 3.2 percent average for the twenty-four-member Organization for Economic Cooperation and Development, which includes the major industrial countries of the West, Austria's cost of living rose by 6.1 percent a year, compared with 9.7 percent for the other twenty-three members, and its unemployment rate was 2 percent, the best record in the industrialized West. Even in 1984, the Austrian jobless figure was about 4 percent--one-third to one-half that of the major capitalist powers.

Austrian workers enjoy job security and a high standard of living. They receive free medical care, good pensions, family allowances and many other benefits. In the unlikely event they are laid off, workers receive about four-fifths of their previous wage for at least a year from the first day of unemployment.

The success of the social partnership has reduced the appeal of the radical left. "Most workers support it," a Communist journalist told me. "Many of our party members have resigned over it. They say we may be right in theory when we criticize social partnership, but the people don't believe us." A Trotskyist editor made a similar observation: "The average worker supports social partnerhsip because it has brought tangible results. From 1952 to 1976 we had the biggest increase in our standard of living in history." The capitalists have accepted a program that is advantageous to labor because, he says, "They are too weak to fight it."

Austria's economic success story is based on three historical accidents. First, the Nazis constructed many heavy industries in Austria after incorporating it into Germany in 1938, and after the war the Austrians nationalized that sector of the economy under pressure from their Soviet occupiers. Second, in 1955 the Soviet Union decided to end its occupation of about half of Austria in return for a pledge that the country would remain neutral in world affirs. Third, the United States and its allies never tried to undermine the Austrian economic experiment. There were no blockades, no economic sanctions, no military threats, no attempts at a coup by the Central Intelligence Agency.

Today, many enterprises, including the two major banks, and most of Austria's heavy industries, including those involved in the production of iron and steel, chemicals and metalworking machinery, are operated by the government-controlled Austrian Industrial Administration Company (O.I.A.G.). Control of those core sectors, which account for about one-third of the gross national product, gives the government enormous leverage in dealing with unemployment, inflation and wages. In order to hold down the level of unemployment during the recent recession, the nationalized industries retained thousands of people on their payrolls who would have been laid off had they worked for private companies.

Along with the O.I.A.G., another institution unique in the West, the Parity Commission, effectively determines most prices and wages. Founded in 1957 as the Joint Commission for Prices and Wages by the four largest groups outside Parliament--unions, farmers, businessmen and the Chamber of Labor--its original purpose was to control inflation and guard against monopolistic practices. Technically, the Parity Commission has no enforcement power or parliamentary status; nevertheless, it dominates the economy. It meets regularly under the leadership of the chancellor. All workers must belong to the Chamber of Labor, a body which was constituted in 1921 as a substitute for unions, at the time illegal, and which now handles nonunion labor problems. All employers must belong to the Chamber of Trade and Industry; all farmers, to the Chamber of Agriculture. Although membership in one of the fifteen unions affiliated with the Trade Union Federation, Austria's only labor federation, is voluntary, three out of five workers belong. Thus, four centralized organizations collectively make the major economic decisions on wages and prices for all but peripheral industries, such as importing and fashion. About one-third of the economy operates under the free market. The remaining two-thirds, however, is rigorously controlled.

Workers negotiate wage increases through their individual unions, but any increase must be approved by the Parity Commission's wage subcommittee. Generally, raises that are tied to greater productivity and higher prices are permitted. While the subcommittee has no power to enforce its decisions, both labor and management are subject to a variety of subtle but effective pressures to comply. A union that demands more than the commission's guidelines permit loses support from the labor federation and will find itself without strike funds. Similarly, a business that wants to hike its prices needs the commission's approval. An employer who fails to obtain it finds himself ineligible for bank loans, development funds and the like. As a last resort the government can set its own price levels. In practice, the Parity Commission's guidelines are meticulously observed.

The Austrian experiment in economic partnership raises interesting questions about the various "industrial policy" schemes being advanced by Robert Reich, Felix Rohatyn, Barry Bluestone, Lester Thurow and other economists in the United States. The industrial transformation Reich advocates, for example, would "necessitate close cooperation among business, government and labor. Government must contribute public funds in the massive task of retooling and retraining." That sounds much like Austria's system, but it is far different. Social partnership works in Austria because the Socialist Party--which has tended to be more leftist than its sister parties in France and West Germany--dominates the political institutions and uses its power to protect and improve the lot of the working class; in the United States, where big business dominates government, a social compact would result in lower living standards. Social partnership in America would be a step toward the corporate state, not toward greater industrial democracy; a suppression of the class struggle, not a sublimation of it.

Even if the Austrian model cannot be transferred to the United States, does it have anything to teach us? I think it does. Since 1917 the left has had an image of revolution based on the Soviet experience: armed insurrection, a single disciplined political party, nationalization of virtually all industry, central economic planning. Some revolutions--in China, Yugoslavia and Cuba, for example--strayed a bit from that model, but they retained most of its elements. The American left rigidly distinguishes between "capitalist" and "socialist" states; reality has become a prisoner of image. Sweden, for instance, has achieved a much higher standard of living than socialist Czechoslovakia, and its social programs, taken as a whole, are as good or better. Yet it is considered capitalist. The Austrian model demonstrates that there is such a thing as a half-revolution, a broad social change that does not emulate the Soviet Union but that brings a qualitatively better life to the injured and oppressed. Isn't that what the left has been fighting for all these years?
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Title Annotation:social partnership
Author:Lens, Sidney
Publication:The Nation
Date:Jan 12, 1985
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