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8 - Labour Markets: Continuous Training and Flexibility

Published online by Cambridge University Press:  12 October 2022

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Summary

Mitbestimmung

Along the wall of the Ministry of Finance on Leipziger Strasse in Berlin, is an 18 m mural entitled Aufbau der Republik. The painting depicts a happy society with officials, tradesmen, farmers and engineers all working together for the construction of the classless East German Republic. The idea to base East German society on the equality of outcomes did not produce a sufficiently stable polity, although as George Orwell intimated in Animal Farm, party officials were more equal than others.

The ordoliberal focus was instead on achieving greater equality prior to voluntary exchange. With regards to the labour market, although Eucken argued in favour of freedom of contract, he also thought it had limits given it can lead to concentrations of power thereby curtailing freedom. Achieving a greater equality of initial conditions may therefore require some rebalancing of power between workers and managers which is why Eucken supported trade unions and worker representatives under certain conditions. Rüstow promoted the need for continuous training to address the dislocating effects of economic change, which he thought ought to be provided by the state to maintain the equality of starting conditions across the labour market. This chapter explores the effects of co-determination on the West German economy and the importance of continuous training. It relates these ideas to contemporary labour market debates including the changing returns to labour and capital and to what extent the European Commission’s idea of flexicurity encapsulates the essence of ordoliberal ideology.

During the 19th century, the relationship between labour and capital became a focal point of class struggle and revolution. In response to poor working conditions and low pay, workers in factories began to group together to form unions in order to improve their bargaining position, particularly for more commoditized labour. Highly skilled labourers that were in demand had a more equal bargaining positioning which could be observed by the difference in wages.

By the late 19th century, the British Parliament recognized that trade unions played a key role in improving the balance of power which it acknowledged was also good for employers. This led to Gladstone passing the 1871 Trade Union Act which effectively decriminalized unions. While the trade union movement can be viewed as providing an impetus to equalize initial conditions in the labour market, liberalism has not always been sympathetic towards unions.

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All Roads Lead to Serfdom
Confronting Liberalism’s Fatal Flaw
, pp. 141 - 163
Publisher: Bristol University Press
Print publication year: 2022

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