The Paradox of Globalization: Turning the Tables on Labor and Capital in German Industrial Relations

This article uses the German case as the main point of reference for exploring the new dynamics of labor politics in northern Europe in a changing global economy. In contrast to the prevailing wisdom that employers are strengthened by increased capital mobility, we argue that globalization renders employers more vulnerable to labor's demands. The introduction of tightly coupled, often cross-national, production networks and the demands of producing at high quality on a just-in-time basis, increases the cost of industrial conflict and undermines employers' solidarity in collective bargaining. We show that employers' increased vulnerability to industrial strife contributes to the stability of collective bargaining arrangements in the short run but erodes the industrial relations system in the long run. As a result, unions are able to extract important concessions but they face a dilemma between broad coverage of collective contracts or wage gains as more employers will defect from the centrally agreed collective bargain.