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Tripartism in the times of neoliberalism

For much of the 1990s and the first half of the present decade, many developing countries seeking integration into the global economy adopted the type of market-oriented measures pushed forward by the International Monetary Fund and the World Bank. Much has been written about the impact of these measures (known as the Washington Consensus) on governments, employers and workers in the developing world. Now a new book published by the International Labour Office (ILO) takes this issue forward and looks at how the process of consultation and negotiation between these three social partners – in other words, tripartism – altered the pace, sequence and content of these reforms. ILO Online spoke to the editor of "Blunting neoliberalism: Tripartism and economic reform in the developing world", Lydia Fraile.

Article | 18 December 2009

How did tripartism influence the neoliberal economic reforms carried out in the developing world during the 1990s and in the first half of this decade?

Lydia Fraile: This book (Note 1) compares countries with strong and weak tripartism in four regions of the developing world (sub-Saharan Africa, East Asia, Central and Eastern Europe, and Latin America). The overall conclusion is that, in countries where it was relatively strong, tripartism improved the social impact of economic reforms by making them more equitable and politically sustainable. In other words, while tripartism did not alter the basic content of market-oriented reforms, it did help to take out their sharper edges while at the same supporting economic efficiency and jobs. The mechanisms varied from country to country, but they included a combination of the following: efforts to reduce dislocation, to moderate the pace or limit the scope of structural change; measures to compensate losers and to promote adjustment through training and industrial policy; policies that bolster worker rights and social protection; and efforts to avoid excessive income inequality.

Can you give us concrete examples of how tripartism promoted social equity?

Lydia Fraile: Income policy discussions in Slovenia and Singapore are two good examples of how tripartism helped to reconcile efficiency and equity. In the case of Slovenia, tripartite wage setting has been used since the mid-1990s to bring down inflation and limit wage dispersion as it transitioned to a market economy, while keeping unemployment down. Singapore has used tripartite wage setting since the 1970s to promote moderate wage growth and wage flexibility, move the economy into higher value-added sectors and respond to external shocks. In addition to incomes policy, both countries have extensive training programs, which are the product of tripartism. This has been combined with industrial policies and active state intervention in Singapore, and with strong, well-designed job protection legislation and a gradual approach to restructuring in Slovenia to ensure smooth economic adaptation at a low social cost.

Why does tripartism make economic reforms more politically sustainable? Can you give us any examples?

Lydia Fraile: Tripartism, when strong, generates buy-in from social actors. In other words, it facilitates and promotes social dialogue among key stakeholders. This may be true even in a case of weak tripartism such as Chile, where the 1990 Framework Agreement signaled labour’s acceptance of the liberalized economy inherited from the Pinochet years as well as business’s acceptance of increased social spending under democracy. Unions in Slovenia gained through tripartism a stake in negotiated reforms that enhanced their sustainability. By contrast, in other countries, government unilateralism has often resulted in protests by disgruntled groups, that had to be settled through costly measures.

Can tripartism help during times of deep economic crisis, such as the one we are going through today?

Lydia Fraile: Evidence shows that tripartism has sometimes played an important stabilizing role during crises. For example, the 1998 social pact negotiated in the Republic of Korea helped assure the IMF and capital markets that the government would take resolute action against the Asian financial crisis, reducing uncertainty and contributing to a quick recovery. Similarly, tripartite consensus helped Uruguay in 2002 to restore public confidence in the banking system and avoid the social and political upheaval the financial crisis unleashed in neighboring Argentina. Tripartism has also helped reduce uncertainty and ensure governability during democratic transitions in South Africa, Chile and Uruguay. Finally, as stated in the ILO’s Global Jobs Pact , social dialogue is a strong basis for building the commitment of employers and workers to the joint action with governments needed to overcome the crisis and for a sustainable recovery.

How does tripartism nowadays compare to the type of tripartism seen in the corporatist model of the post-war Keynesian era?

Lydia Fraile: From a labour perspective, tripartism nowadays serves a largely defensive purpose. In this respect, it is considerably different from the classical European corporatist experience of the post-war Keynesian years, in which trade unions exchanged a commitment to moderate wage demands for full employment policies and the development of comprehensive welfare states.

Note 1 - Blunting neoliberalism: Tripartism and economic reform in the developing world. ISBN: 978-92-9014-896-8. This is a co-publication with Palgrave Macmillan. Sw. frs. 110; US$100; UK£65; €75.