Adjusting to Globalization: A Comparative Analysis of Business Interest Groups in Capitalist Systems

Thursday, 2 July 2015: 4:00 PM-5:30 PM
TW2.3.02 (Tower Two)
Patricia A. Nelson, Stockholm School of Economics, Stockholm, Sweden
The interests of multinational corporations (MNCs) are increasingly dominating business interest groups in many countries. This trend intensified in the early 2000s with the merger of a number of peak employers’ organizations at the national level. As separate groups, these organizations represented the interests of society, labor as well as those of small and medium sized enterprises (SMEs). But post-merger, larger societal and labor concerns appear to be left out of critical decision making that could re-shape our globalized economies, namely negotiations on three major free trade agreements, the Transatlantic Trade and Investment Partnership (TTIP), the EU-Japan FTA and the Trans-Pacific Partnership (TPP).

    Relative to the merged employers’ organizations, labor may have lost some degree of its past influence, not only in the future direction of society but also in the character and nature of larger social policy making, including education policy, elderly and infirm care, pension policy and other aspects of social welfare. Instead, the interests of MNCs have gained a more influential role in government policy through the perceived power of peak business interest groups. Organized labor and individuals seem to lack adequate representation, yet as Mares (2003) among others has shown, employers’ organizations have pro-actively supported social policy that benefited their workers.

    How and why have business interest groups adjusted to globalization over time? There are at least three aspects developed in this paper that offer an explanation. First, formal links between ruling political parties and organized labor were severed as the fortunes of the ruling parties came into question. In Sweden, for example, the dominant labor organization, LO or Landsorganisationen, cut its ties with the Social Democratic Party in 1991. Previously membership in LO had automatically meant membership in the Social Democratic Party. This in effect broke the social contract dating back to 1938 that is credited with Sweden’s dramatic growth and its so-called ‘Third Way’. Further damage came in 2001 when the two peak employers’ organizations, IF or Industriförbundet and SAF or Sveriges Arbetarföreningen, merged to form Svenskt Näringsliv. Without the old ties linking workers’ and business interests inside the new organization Svenskt Näringsliv, business- government relations had become skewed toward the strong voice and power of the multinationals (interviews and correspondence with SN, 2012 and 2014).

    In Japan, because of the differing nature of its capitalist system, the breaks in the social contract, which is largely credited with creating Japan’s economic miracle, were slightly different. The first crack in the system came in 1993 when Japan’s peak employers’ organization, Keidanren which is known as the ‘boss’ of all industry, severed its financial ties to the Liberal Democratic Party (LDP). Like the Social Democrats in Sweden, the change in fortunes of the LDP was primarily due to the challenges at the ballot box from other smaller parties largely reflecting a shift from rural to urban voter power. Keidanren could no longer count on its historically good relations (and massive network of contacts) with the LDP to get things done in the economy resulting in disquiet among major employers. The second crack in Japan’s social contract came in 2002 when the two main business interest groups, Keidanren and Nikkeiren, merged. Nikkeiren, like SAF in Sweden, represented the social welfare interests of business e.g. pensions, labor rights and healthcare. The merger signaled to all that Japan’s workers had lost its strongest voice and that the postwar system was dead (interviews with Keidanren, 2012 and 2014).

    Second is the interconnected nature of our globalized economy. Mergers of peak employers’ organizations became a mini-trend in the EU (including Ireland in 1993 and Norway in 1989) because it made sense for each EU country to have one representative in the EU-wide employers’ organization Business Europe. Many EU member countries have not had two separate business interest groups and as noted above some have merged. On the other hand, much of the pressure on these organizations to merge originated from the members themselves. Many businesses found they did not need two domestic organizations in their increasingly globalized business activities. Globalization gradually made it clear that businesses need to keep an eye on many markets; domestic market interest groups became just one of the many business interest organizations in which they needed to participate. Membership in an array of organizations can be quite expensive, thus firms took an active position in favor of mergers. Further, as the domestic market contributed to a lower proportion of their revenues than in the past, the need for more than one domestic business interest group came into question. It was not unexpected, therefore, that there would be mergers.

    Third, in the case of international trade negotiations, is the increased pressure from big business to side step the World Trade Organization, which is currently stalled, and move forward via direct channels on regional negotiations including the TTIP, the EU-Japan FTA and the TPP. Such massive agreements have been – perhaps correctly – perceived of as being negotiated in favor of MNC interests at the expense of SMEs, the interests of workers and of society at large. These three trade deals encompass a depth and breadth not yet seen in existing preferential trade agreements and if (or when) they are concluded, they have the potential to redefine trade and investment relations across the board. It is essential for all business and non-business interest groups consider their potential impact.

    In conclusion, all of the pressures described above appear to have altered the historic balance between business, labor and society. To regain some balance in our times, SMEs, individuals and societal interests need to be better represented, but the question is how. Certainly employers’ organizations have a role to play. As new patterns emerge through the process of adjustment to globalization, political parties and grassroots network organizations that offer people, who may not see themselves as party to traditional organized labor, will likely also help fill the void. 

Mares, I (2003) The Politics of Social Risk: Business and Welfare State Development, Cambridge University Press.