| Abstract: | Abstract. Most West European countries have suffered from stagflation for many years. Mainstream economics has debated the question in particular in terms of the demand and supply of goods, labour and capital. But in recent contributions a new element has been introduced: the institutional structure of the economy as a source of imbalances. In this article we focus on the institutions of the labour market. For more than a century West European unions have been struggling to transform market economies into a more efficient and just order. Moral persuasion, strikes, and revolutionary threats were their main weapons. After the Second World War governments yielded to the pressure by building up, together with the unions, a welfare state. During the sixties however, the struggle was renewed, although the governments continued to improve the social security system and maintained their responsibility for full employment. A short sketch will be given of the ideological struggle during the first half of the twentieth century, leading to a significant institutional change: the transformation of a system of private wage bargaining into a collective wage bargaining system. Then the neoclassical, the Marxist and the Keynesian view on the effects of union power on the economic performance of a market economy and of a welfare state will be presented. The conclusion is drawn that the methods required to transform a market economy into a welfare state are anomalies as soon as a welfare state is more or less realized. This is particularly so, because the transformation of a welfare state into a centrally planned economy cannot be considered desirable. In present circumstances, it would be appropriate to pay more attention to the design of an extensive system of mediation and arbitrage to reduce the use of the strike weapon. |
