Semi-peripheral financialisation and labour relations in SE

The financialisation literature has explored the ways through which financialisation has impacted on the labour market and labour relations. This has been covered in two grand strands of literature. One of them has underlined the emergence of a finance-led accumulation regime that has undermined collective arrangements and labour protection laws (e.g. Boyer, 2000); the other has focused on the ascendency of a new form of management devoted to the maximisation of shareholder value, characterised by the restructuring of production around financial imperatives, resulting in a greater weight of finance standards, short-termism of management and increasing top management salaries (e.g. Crotty, 2005). Deregulation of the labour market together with new management practices are then deemed to have resulted in falling labour income shares and increasing inequality in the personal distribution of income, fuelling the rise of private debt to make up for wage stagnation or regression (e.g. Hein, 2015).

In Chapter 5, entitled ‘Financialisation, work and labour relations’, Helena Lopes examines the ascendency of new forms of governance. She argues that more analysis is needed at the firm level as the corporation is the most critical mediator between finance and workers, including listed and non-listed firms due to the contagion effects the former have on the latter. Lopes argues that financialisation has forged a finance-led management model, promoting the development of accounting practices that link financial targets to operational activities, resulting in the quantification of workers’ activities through various means — quantitative work targets, quantitative performance appraisals, pecuniary incentive schemes, systemic reporting — which infuse financial criteria into workers’ activity.

This mode of governance is deemed to lead to unprecedented levels of intensification, dehumanisation and devaluation of work, undermining its meaningfulness to workers as well as its collective character, furthering workers’ alienation with non-negligible moral and health impacts, in addition to the loss of wage income and rights. Moreover, by normalising individualism and the lack of empathy towards others, the quantification of workers’ tasks is also producing psychosocial disorders due to feelings of isolation and of culpability when performance targets are not met, emotional exhaustion, dissolution of collective solidarities, deterioration of work relations and overall depersonalisation of work interactions. What is particularly worrisome is not only that firms exploit workers’ subjective engagement in such inhumane ways — this did not originate with financialisation. What is troublesome is that financialisation, by intensifying and broadening such exploitation, facilitates these practices, which are increasingly perceived by workers as reasonable and justified. As this mode of governance is increasingly generalised and accepted as legitimate, it becomes more difficult to challenge. This is so not only because individualism hampers collective forms of action, but also because it becomes more difficult to perceive these finance-led management practices as the outcome of prior political action and thus capable of being challenged and replaced by alternatives, especially those that again place production and employment at the centre of firms’ activities (as opposed to short-term profitability for underpinning shareholder value and financial speculation). As this requires action at levels other than the firm, it entails conceiving the firm as an entity embedded in political struggle and part of the conditions of economic and social reproduction.

In addition to systemic transformations in corporate governance in listed firms and their contagion effects on non-listed (public and private) firms, undermining workers’ rights and wages, in Europe, EU institutions have actively promoted the deregulation of labour markets, particularly ofSE countries after the GFC. The conversion of the financial crisis into a public debt crisis of the weakest economies was then used to justify the implementation of particularly harsh austerity measures in those economies, which they accepted because they needed official loans as they could no longer finance themselves in the financial markets. Conditions imposed included the weakening of labour rights in national legislation, in general, and the deterioration of public employment and civil servants’ rights in particular, worsening the quality of services provided in relevant areas such as health and education (e.g. Hespanha, 2019).

Since the crisis, EU institutions such as the European Council, the European Commission and the Eurogroup have pressured member states to further reduce public spending, leading to deteriorating public services. The magnitude of the crisis then created a favourable environment for instituting a ‘new macroeconomic governance regime’ (Kantola & Lombardo, 2017), including new sets of legislative pacts and packs — the Euro Plus Pact, the Stability and Growth Pact, the Fiscal Compact and the Six-Pack — which tied member states into a commitment to keep their annual budgetary deficit below 3 per cent and their debt below 60 per cent of GDP. This added to pressure on the economically and politically weaker member states to cut public sector employment and wages.

In Chapter 6, ‘Reconfiguring labour market and collective bargaining institutions in Portugal: turning the page on internal devaluation?’, Maria da Paz Campos Lima examines recent institutional changes in labour market regulation during and after the Troika intervention, to assess the amplitude and intensity of changes and the continuities and discontinuities between the two periods. She argues that during the period 2010—2014, government practices and changes to legal regulations represent a radical shift towards the erosion of collective bargaining, the weakening of trade union power and the reduction of labour rights. The new political cycle that emerged when the Socialist party came to power, in 2015, with the parliamentary support of the left parties, aroused expectations towards the reconstruction of institutions that had been damaged by the adjustment process. However, despite the reversal of some measures, such as the cuts in nominal wages and bonuses and the unfreezing of civil servants’ careers, relevant mechanisms of internal devaluation, such as those weakening the role of collective agreements and of trade unions, continued in place.This then signals the long-term impacts of policies of internal devaluation and the difficulty in reverting them. While future governments may more easily alter wage policies in the public sector, it will be far more difficult to restore overall labour rights.

In Chapter 7, ‘Financialisation, labour and structural change: the case of Portuguese internal devaluation’, Nuno Teles, José Castro Caldas and Diogo Martins argue that the gradual loss of political power of trade unions and the implementation of regressive labour market reforms have been a deliberate outcome of EU policy. This was first initiated through soft power, as in the case of the European Employment Strategy, which explicitly and intentionally directed member states towards employment policies focused on the deregulation of the labour market conceived as a macroeconomic policy variable for the attainment of growth. The GFC provided the opportunity to harden these policies in SE. Indeed, the request for financial assistance was followed by demands for ‘structural reforms’, especially of the labour market, that targeted the dismantling of collective bargaining arrangements at national and sectoral levels, and the promotion of negotiations at the firm level that enfeebled trade unions. This resulted in loss of protection for workers through facilitating employee dismissals, intensifying working hours, and cuts in pay for night or extraordinary hours.

Consonant with the analyses in Chapters 3 and 4, Teles and co-authors argue that the option for internal devaluation is having lasting impacts on the economy through a structural change based on the relative rise of low-pay and low-productivity sectors, which have been the main drivers of the growth of employment and the recent economic recovery, accentuating the semi-peripheral and apparently irreversible condition of the country. Being perceived as the main instrument to tackle the crisis and thereby ensure debt repayment to foreign creditors, labour became more intricately dominated by foreign financial institutions. Having relinquished exchange rate and monetary policy, in a context of imposed fiscal austerity, financial agents prevail over ever more domains, such as the labour market and other areas of social reproduction. This is yet one more difference between peripheral and core countries, with a more relevant role of EU institutions in determining labour market regulation to the detriment of the democratic deliberation.³

The transformations in labour markets have impacts both on the economy and on social reproduction more broadly. The three first chapters of the first part of this volume show that the increasing economic and financial integration of SE economies in the context of a strong common currency has favoured the non-tradable sectors. The second part shows that labour market reforms have intensified the vicious circle of low wages in low-productivity sectors.The third part of the book shows that these trends have had severe impacts on social reproduction, as low-waged precarious employment compromises resources, monetised and otherwise, for sustaining norms of everyday life.