Neo-Corporatist Regimes in the Era of Globalization, European Integration & Post-Industrialism: Challenges & Opportunities A Comparative Case Study of Switzerland and Austria

2001 Southwestern Political Science Association Annual Meeting Fort Worth, Texas March 16, 2001 Panel on the European Union Comparative Politics: Regimes, Institutions & Behavior Section Neo-Corporatist Regimes in the Era of Globalization, European Integration & Post-Industrialism: Challenges & Opportunities A Comparative Case Study of Switzerland and Austria Paul S. Adams, Ph.D. Program Department of Political Science University of Massachusetts-Amherst Amherst, Massachusetts Introduction The recent electoral advances made by nationalist/right-wing parties in Austria, Switzerland and other European states have produced innumerable assessments by the media and some scholars that there is a resurgence of fascism taking place in the heart of the Alps. While this analysis, often supported by extremist sound bytes and images of black-clad, neo-Nazis marching down the streets of Vienna, Berlin and Zurich, makes sensational footage for CNN, the underlying political dynamics of the rise of nationalist parties is far from a repetition of the interwar era. The recent electoral gains by the Swiss People’s Party, Austrian Freedom Party and other nationalist parties have a strong correlation to the increasing breadth of European integration and globalization, especially in matters of immigration, national economic policymaking, and state sovereignty. These parties’ stances on slowing, limiting or halting integration within Europe and attempting to stem the tide of globalization facilitate alliances with domestic economic and social groups that traditionally supported more moderate party coalitions but now seek an alternative means of voicing their discomfort with the current pace and scope of European integration and globalization. While the advancements of nationalist parties are unlikely to pose any realistic challenge to the stability of democracy in Europe, such developments may have a significant effect upon continuing and future efforts at European integration. The electoral and rhetorical victories by nationalist parties may be emblematic of a rising and growing disenchantment with some aspects of the great European experiment, the EU. These events may also be illuminating a rising trend of anti-globalization reaction in affluent, post-industrial and democratic European states. The nationalist parties are becoming the focal points for those that feel less economically and politically secure with globalization and the continuing integration of European economies and polities. In essence, the processes of European integration and globalization may have themselves become catalysts for resurgent nationalism in many European states. If these trends were to continue and intensify, the future of an integrated Europe and the perceived impacts of globalization would need significant reassessment. My research shall primarily focus upon the changes in the domestic political coalitions in both Austria and Switzerland that have lead to the rise of nationalist parties. While the Swiss People’s Party and Austrian Freedom Party followed separate paths to electoral success, there were a number of shared commonalities that contributed to events in both nations. See Ludger Helms’ comparisons of SVP and FPÖ. It will be argued that these changes occurred at three levels of analysis. First at the domestic level, significant changes in socio-economic structures have challenged the stability and efficacy of neo-corporatist institutions and processes in the Austrian and Swiss systems. As the neo-corporatist structures dysfunction, the coalitions between socio-economic units and political parties also tend toward instability due to the density of the relationship between interests, parties and neo-corporatist institutions. Second at the regional level, the act of European integration provides additional challenges to traditional political structures and party coalitions. European integration has been among the central issues of Swiss and Austrian political debate for nearly thirty years. The process of European integration will necessarily and significantly alter the roles of the state and neo-corporatist institutions in political, economic and social policymaking. The uncertainty and discomfort regarding the effects of integration are likely to result in new political cleavages in society developing along lines defined by aggressive or conservative integration. Third at the international level, globalization contributes to the challenges to the traditional political structures by undermining neo-corporatist institutions and processes in both Switzerland and Austria. As domestic actors respond to the pressures of globalization, political parties and institutions once based on more stable and predictable coalitions are fundamentally threatened. Globalization has also fundamentally eroded the capabilities of states to perform the economic functions once considered essential elements of the sovereign state. As the state’s authority has been sapped away, its ability to play a strong role in managing conflict via neo-corporatist arrangements diminishes. These changes at the domestic, regional and international level have lead to a dealignment of socio-economic interests in Swiss and Austrian political systems. The dealignment has currently produced advantages for political parties that seem most polarized on the issues of European integration and globalization, which include the Swiss People’s Party and the Austrian Freedom Party. While not the only issues being impacted by these developments, European integration and globalization, being central foci of Austrian and Swiss politics, have become the most highly identified and emblematic processes among groups wary of the impact and scope of the multi-leveled changes taking place. The question that this research shall endeavor to address is one that is often understated, what happens to post-industrial, neo-corporatist democracies in an era of changing socio-economic structures, regional integration and globalization. There is much scholarship devoted to both the detrimental and beneficial effects of these processes upon the developing world and newly democratic states primarily because the assumption is that post-industrial European democracies are part of the small group of state and non-state actors that have established regimes such as the European Union and WTO. Yet there are fundamental and uncertain consequences of post-industrialization, Europeanization and globalization to even the wealthiest and most democratic states. States possessing neo-corporatist institutions may be at a higher risk of more dramatic and traumatic changes (such as a sudden rise in nationalist parties) than primarily pluralist states. This seriously contests the conclusions of Peter Katzenstein made in the early 1980’s regarding small neo-corporatist states, and will be discussed later. See Katzenstein’s Small States in World Markets and Corporatism and Change. In a nutshell, the argument is that states, specifically Austria and Switzerland, utilize neo-corporatist institutions as a means of quickly making adaptations to the global economic market with minimal socio-economic conformity costs. The interest associations are able to quickly bargain and create consensus among elites and rank-and-file members by using the strong discipline of the respective interest associations. In this way, neither labor nor capital is likely to oppose or hinder economic or political policy outcomes, therefore, allowing the state to quickly adjust to the world market. As will be argued later in this piece, the changes since the early 1980’s in the domestic post-industrial environment has eroded the strong discipline and salience of the interest associations. Concurrently, globalization and European integration have undermined the ability of states to determine and enact national economic policies. But pluralist states may not be as immune as one might imagine. Significant changes in domestic socio-economic relationships, regional economic and political organization, and the global economy may seriously influence an extensive range of traditional and previously stable social, economic and political institutions and processes. While Switzerland and Austria may seem like relatively minor cases, perhaps they are canaries in a broader European coalmine. Electoral Trends in Austria and Switzerland Despite the surge in media attention, the rise of the nationalist parties in Austria and Switzerland was neither immediate nor wholly unpredicted. Both the Swiss People’s Party (SVP) and the Austrian Freedom Party (FPÖ) had been long-established parties in both states. Both parties have held a share of power during the vast majority of the postwar era. Even with the recent victories, the trend for both parties has been a gradual increase spanning the last fifteen to twenty years. So rather than being representative of a major and immediate shift in political coalitions, the recent electoral victories of both Swiss and Austrian nationalist parties should be viewed as a culmination of several trends developing over the past two decades. However, if there was any surprise it was the significant gains made by nationalist/right-wing parties in an era of unparalleled supranational integration within the framework of the EU. The ability of nationalist parties to garner new and growing support and make strong electoral gains from election to election hinted at an underlying current inconsistent with the full ethos and intent of European integration. The fact that the SVP and FPÖ were able to expand their constituencies upon platforms that targeted immigration policy, globalization and European integration as critical issues clearly indicates that many voters in Austria and Switzerland were not entirely enthralled by the pace and scope of European integration and globalization efforts. This section will provide raw numbers over the past several elections illustrating the growth of the SVP and FPÖ. While it is numerically clear that the SVP and FPÖ have made sizable electoral gains, what is less clear is why the gains occurred. It will be herein argued that the electoral success of the SVP and FPÖ is directly linked to a significant change in the domestic political party coalitions in both states. Most intriguing, both the SVP and FPÖ made significant gains in elements of Austrian and Swiss societies where one might have been very unlikely to expect such support, among union, urban, and younger voters. For the SVP see Church (1996) and (2000), for FPÖ see Müller (2000) The Swiss People’s Party (SVP) The SVP has been part of the four-party governing coalition in the Swiss Parliament since 1959. The so-called “magic formula” grants two cabinet seats to the Social Democratic Party (SPS), Christian Democratic People’s Party (CVP) and Free Democratic Party (FDP) and one seat to the SVP. Having survived over four decades, it must be considered one of the most stable coalitions among all modern democracies. Traditionally, the SVP was the most junior member of the quadruple alliance justifying its one seat deficit in comparison to its contemporaries in the ruling coalition. Traditionally, the SVP earned its electoral support from a coalition that included primarily agricultural, rural, xenophobic, strongly pro-neutrality, German-speaking and older Swiss voters. The SVP did somewhat better in the German-speaking cantons of North-Central and Eastern Switzerland that typified the rural, agricultural and populist support the party traditionally garnered. However, even in these regions the SVP was often considered a minor party. By the late 1970’s as the SVP share fell under 10% in the national elections, there was talk of ejecting the party from the coalition Federal Council. Church, p 216. But the SVP rebounded to its traditional 11% share and the coalition survived. The stability of the “magic formula” was due in large part to the incredible stability of the four major political parties as indicated in Figure 1. The factors underlying the stability of the parties and the ruling coalition may have rested in innumerable variables; a strong and consistently growing economy, strong ties between parties and interest groups, the prevailing attitudes towards consensus among the parties and population. Figure 1 Swiss Nationalrat Elections 1947-1999 Statistics were compiled from various texts and websites including www.parliament.ch SPS CVP FDP SVP 1947 26.2% 21.2% 23.0% 12.1% 1951 26.0% 23.2% 24.0% 12.6% 1955 27.0% 23.2% 23.3% 12.1% 1959 26.3% 23.3% 23.7% 11.6% 1963 26.6% 23.4% 24.0% 11.4% 1967 23.5% 22.1% 23.2% 11.0% 1971 22.8% 21.0% 21.5% 10.0% 1975 24.9% 21.1% 22.2% 9.9% 1979 24.4% 21.4% 24.1% 11.6% 1983 22.8% 20.2% 23.4% 11.1% 1987 19.0% 19.7% 22.9% 11.0% 1991 18.5% 18.0% 21.0% 11.9% 1995 21.8% 16.8% 20.2% 14.9% 1999 22.5% 15.8% 19.9% 22.5% The increase in the SVP share translated into a gain in the 200-member Nationalrat from 25 seats in 1991 to 44 seats in 1999. In the 46-member Ständerat (Upper House) of the Swiss Parliament, the SVP share increased from 4 seats in 1991 to 7 in 1999. The surge in SVP support also occurred at the cantonal and local level. The SVP began to markedly increase its number of representatives in cantonal legislatures, town and village councils and mayoral positions. By nearly doubling its percentage in the last two national elections, the SVP had an opportunity to undo the magic formula. The SVP did initially call for two seats in the Federal Council after the 1999 results, but eventually compromised to maintain the formula once again. Church (2000) p. 215-216. For Switzerland, accustomed to rather stable, perhaps boring, electoral results, the 1999 elections saw the SVP increase its share by over 7%, potentially unravel the 40 year magic formula, and show the growing strength of a party once dominated by a small group of xenophobic rural farmers that campaigned primarily on issues of immigration control, limited European integration and a less than enthusiastic acceptance of the agreement regarding World War II-era Jewish assets. Like Hider, Blocher’s more controversial comments have been well reported by the media, his opposition to the fund to pay Holocaust families formerly seized accounts, his support on limiting immigration can be found in Tony Judt “Disunion: The Growth of National Populism in Europe” in The New Republic December 13, 1999 and Elizabeth Olson “Swiss to Vote on Plan to Set Limit on Influx of Immigrants” in The New York Times September 17, 2000. The strong electoral gains beget the questions as to how the SVP managed such a remarkable turn around. The answer to this question is complex but has been analytically disaggregated into several trends. First, the SVP utilized what may be called “American-style” campaigning methods and practices. The marketing and media techniques of the SVP are closely related to Christoph Blocher, the skillful, well financed and media savvy leader in the SVP. The ability of the SVP to successfully utilize media resources (such as massive television advertising, websites, etc.) is somewhat revolutionary in Swiss politics, and paid off for the SVP. Second, the SVP was able to expand from its traditional cantons of influence into other cantons. While still dominantly a party of the German-speaking cantons, the SVP has seen a negligible rise in other areas of Switzerland. More important is that the SVP has become the major party of German-speaking cantons rather than just a party among others. Church (1996) and (2000) and Helms. Third, Clive Church has pointed to the ongoing restructuring and reorganization of the FDP and CVP as providing an opportunity for the SPS and SVP to expand. Further, the expansion of the entire four-party coalition to take over 80% of the vote was indicative of the contraction of the Swiss party system. With several small parties merging or disappearing, the opportunity for SVP to expand was made possible. Church (1996) and (2000) Fourth, a general trend in many European democracies has been the erosion of linkages between political parties and domestic interests. Kitschelt, p. 149-150. The traditional notions of party membership and party loyalty are clearly endangered. Switzerland may be no different as labor and business interests abandon their traditional party coalitions. In the 1995 and 1999 elections, the SVP made electoral inroads with several groups including urban voters, labor and small businesses previously committed to other parties. Church (1996) and (2000) and Helms. Yet these four possible explanations; the SVP use of American-style media campaigns, the consolidation of the SVP in German-speaking cantons, the ongoing reorganization of several political parties and the growing lack of party loyalty; all seem to be mere descriptions, or dependent influences, of the changes in the Swiss political parties rather than an explanation as to why the parties are in transition, or independent influences. While the previous four explanations are certainly elements of the SVP success, the most fundamental question to be asked is whether there are any underlying trends that may be broadly linked to all four developments. To further explore what may be central to the growth of the SVP in Switzerland, an additional case may help expand the possible range of hypothesizing. One needs to look no further than neighboring Austria, where an even more sensationalistic and surprising election result was also tabulated in 1999. The Austrian Freedom Party (FPÖ) The FPÖ, unlike the SVP in Switzerland, has only intermittently acted as a member of a ruling coalition in government. The FPÖ has historically been a third party in what has been called a “two and a half” party system. Pelinka (1998) p. 77. Its traditional base of support primarily existed among small rural and agricultural interests that never tallied nearly enough support to garner the FPÖ anything other than a minor position within the national legislature. The emergence of the FPÖ over the past fifteen years has been rapid and a major development in the Austrian political system. As Figure 2 illustrates, the Social Democratic Party (SPÖ) and Austrian People’s Party (ÖVP) had dominated (as a coalition or single ruling party) for the majority of the postwar era. However, since 1986 the FPÖ has emerged as a true contender for political power and position in the parliament and prime ministership. Figure 2 Austrian National Council Elections 1949-1999 Pelinka and Plasser, p 348. Müller (1996) and (2000) ÖVP SPÖ FPÖ 1949 44.0% 38.7% 11.7% 1953 41.3% 42.1% 10.9% 1956 45.9% 43.0% 6.5% 1959 44.2% 44.8% 7.7% 1962 45.4% 44.0% 7.0% 1966 48.3% 42.6% 5.4% 1970 44.7% 48.4% 5.5% 1971 43.1% 50.0% 5.5% 1975 42.9% 50.4% 5.4% 1979 41.9% 51.0% 6.1% 1983 43.2% 47.6% 5.0% 1986 41.3% 43.1% 9.7% 1990 32.1% 42.8% 16.6% 1994 27.7% 34.9% 22.5% 1995 28.3% 38.6% 21.9% 1999 26.9% 33.1% 26.9% The FPÖ has nearly tripled its share in parliamentary elections since 1986 seeing commensurate electoral victories at the Länder and local levels. Müller (2000) p. 191, 197. As in Switzerland, the recent elections have pushed what was once a minor, rural and agriculturally based party into a position of political power, upended the traditional relationship between the ÖVP and SPÖ, and simultaneously invited the scorn of its fourteen EU compatriots, Israel and the American media. Faulkner p 14-15, also see www.cnn.com article “Austrian Rightists’ Gains Set Off Alarm Bells in Israel and Europe” October 4, 1999. The election results in Austria necessarily pose a series of questions regarding how the FPÖ was able to manage a dramatic and significant resurrection that makes the SVP victories in Switzerland seem far less explosive. In many ways the FPÖ and SVP shared some basic and interesting similarities. First the FPÖ also utilized very media-oriented electoral campaigns including television advertising, marketing techniques, focus groups, and polling data more historically linked with American campaigns. Jörg Haider, the flamboyant and outspoken leader of the FPÖ, is a student of the American political system and has been extremely successful in using these techniques to the advantage of the FPÖ. Müller (2000) p 192-193, Helms p 44, and “Haider’s Secret Weapon: Austria Inc.” in Business Week, February 28, 2000, i3670, p56. Second, the FPÖ was also able to break free of its former regional constraints and broaden its appeal beyond its rural and agricultural bases. This was also supported by the ability of the FPÖ to consolidate and expand its support among its traditional bases of support (rural agriculture). Third, the decline of the SPÖ and ÖVP has allowed the FPÖ to expand its support by picking up defecting members of other parties and to fill the void left by SPÖ and ÖVP losses. These developments are also closely linked to the previously mentioned trend among many European democracies seeing a decline in traditional party coalitions and loyalty. This fourth possible explanation of FPÖ success, as it was with the SVP, is evidenced by the growing flexibility among voters and interest groups to defect from traditional party alliances. The support of unions, business interests and other socio-economic groups is no longer as secure as it was only twenty years ago. The FPÖ clearly has made inroads with many such groups especially labor and small business. Müller (2000) p. 191-196. However, like the Swiss case, these four explanations are more descriptive of how the Austrian party system and coalitions have changed rather than an explanation of the underlying forces conditioning or promoting such developments. What still remains unanswered is what fundamental changes, if any, have taken place in Austrian society that have led to the election of the FPÖ, a party strongly in favor of stricter immigration controls, limiting further European integration and globalization, and possessing a decidedly conciliatory attitude towards Austrian complacency in World War II. The comments made by Haider are pretty well documented in a series of articles in The Economist and an interview/portrait done on Haider by The New York Times Magazine April 30, 2000. Propositions It is herein hypothesized that the events in Austria and Switzerland are closely related to a number of concurrent and interrelated domestic, regional and global developments. The Swiss and Austrian political systems, while differing in many aspects, do possess a number of similar social, economic and political institutions. That nationalist parties did well in both states infers more than mere coincidence when taking the similarities into respect. Even considering the differences between the distinct political cultures, processes and institutions, both states are experiencing a very similar increase in support for political parties opposed to European integration, expanded immigration and the erosion of state sovereignty. Comparing the SVP and FPÖ highlights several fundamental discrepancies between the party organizations, platforms and methods of electoral advancement. For a more detailed comparison see Ludger Helms 1997 article in West European Politics. Yet the numerous similarities seem to infer more than mere coincidence. While the individual political parties have had distinctively different histories in the Austrian and Swiss political systems, as parties they commonly share an institutional position as the arena for political coalition formation among interest groups. As such, the parties are themselves will be greatly affected by significant changes in the underlying coalitions. Further, these underlying political coalitions exist beyond the party system and are also elements of neo-corporatist institutions in both Switzerland and Austria. Due to the complexity and substantial integration of socio-economic interests, political parties and neo-corporatist institutions and practices, significant changes in socio-economic interests will likely have a cascading effect upon both political parties and neo-corporatist institutions. These changes taking place within the political parties’ coalitions and neo-corporatist institutions may consequently and significantly affect a wider range of political behavior, in essence, transforming the Swiss and Austrian political systems. The transformation, while still ongoing and not necessarily deterministic, can best be described as a transformation away from consensual politics (such as neo-corporatism or consociationalism) towards pluralism. This research shall suggest that the rise of nationalist parties in Switzerland and Austria is primarily related to significant changes made, and continuing to be made, in the socio-economic structures of Swiss and Austrian societies and polities. These changes are broadly affecting the political realm at the interest group, party and governmental levels. At the center of these interlaced structures lie the neo-corporatist institutions of both states. The dysfunction of the neo-corporatist institutions and processes is the critical factor underlying the current transformation. The sources of the dysfunction are numerous but can be divided into three analytical levels from where force is being applied. At the domestic level, both Austria and Switzerland are evolving into advanced post-industrial economies. A greater share of their economy is reliant upon information and service industries while industrial and manufacturing sectors have declined. While the transition to a post-Fordist economy will likely affect and transform numerous socio-economic structures in all post-industrial states, Switzerland and Austria are more prone to instability due to their neo-corporatist institutions and processes. Analytically, neo-corporatism in Austria and Switzerland has traditionally been cited as one of many factors that has produced and maintained affluence and stability. Further, neo-corporatism has also been endowed with the ability to quickly adapt to changes in the international environment. But as will be argued in following sections, the transition to post-industrialism has produced a number of significant challenges to neo-corporatist operations and institutions. As traditional political coalitions and institutions based upon stable labor and business interests erode, the ability for neo-corporatist systems to concurrently adapt is now limited. At the regional level, the process of European integration has also had a major effect upon domestic interest groups and socio-economic structures. As the benefits and costs of integration increase, different interest groups must respond to this new challenge. The political parties have been unable to adapt to the changing political environment due in part to their longstanding coalitions with certain ideological interests. The coalitions severely constrain the ability of certain parties to oppose or support European integrationist policies. Because European integration affects all major interest groups, it has developed into one of the major cleavages within Swiss and Austrian societies. Labor unions, once widely supportive of liberal parties like the SPÖ in Austria and SPS in Switzerland, have begun to turn against those parties due to their pro-European integration stances. Part of the SVP and FPÖ surge is directly related to stronger support by labor, an idea that would have been far-fetched only twenty years ago. Further, agricultural interests, substantially affected by European integration and the extensive agricultural policies of the EU, are significantly more concerned about losing their traditional privilege and protection under the Swiss and Austrian neo-corporatist regimes. In light of the changes under Austrian membership and Swiss treaty relations with the EU, agriculture has clearly consolidated support with the parties most opposed to greater integration, the FPÖ and SVP. Business interests are also in disorder over European integration. Large finance, technology, insurance, chemical, manufacturing and industrial interests see European integration as a means of expansion into the European market and a necessity for survival. See Swiss Chocolate Article on Nestle Swiss firms like Nestle, Ciba-Geigy, Credit Suisse and Sandoz see integration as a necessary step in competing in the European market and maintaining profits and potential growth. However, small domestic business interests are wary of losing their protection and privilege accorded to them by the state neo-corporatist institutions. Sciarini & Listhaug, p. 427-429. The uncertainty has led many to abandon their traditional party alliances for new parties that wish to slow or limit European integration. The split between smaller domestic-oriented business interests and the larger multi-national business interests is also a function of the growing globalization of the world economy. The interests of firms once thought to be Swiss or Austrian are no longer so clear. The very essence of the neo-corporatist model in both Switzerland and Austria was the commitment to a national social partnership and consensus-building process. Globalization may be fundamentally altering the ability of firms to participate in such a manner. Further, the ability of the government to manage or control certain monetary and economic functions is increasingly limited. States no longer have the same capacity to regulate and control their domestic economy as they did in prior decades. Globalization has taken a toll by promoting and demanding a far more neo-liberal model of economics than traditionally practiced in Switzerland and especially Austria. In such a system, states that traditionally played a far greater and interventionist role in the economy must make significant reforms including the scaling back of the welfare state, privatization, subsidy cutbacks, tax relief, and other free-market policies. Since the state no longer plays such a strong role in the economy, their position vis-à-vis neo-corporatism is consequently weakened. The transnational nature of labor, finance, information and decision-making also seems to be eroding the ability of states to identify, enact or enforce any form of national economic policy. Overall, it is herein hypothesized that the neo-corporatist institutions are a major factor in the political transformations taking place in both Austria and Switzerland. These institutions are failing on several levels. First, the traditional neo-corporatist units of interest representation are no longer as salient as they once were. The dominance of industrial labor in peak associations and the ideal of a unified national business interest fail to replicate the cleavages in evolving Swiss and Austrian societies. In this manner, the interest associations are less salient to the political debate and political parties, hence a dealignment of parties’ coalitions. Second, neo-corporatist institutions, as currently organized and operated, are failing to produce adaptive and acceptable solutions to economic and political questions. The static nature of the neo-corporatist system has consequently meant that other forms of political organization and interest representation are sought, hence an increasingly pluralist political and economic system. This is fundamentally at odds with the assessment made in the early 1980’s by Peter Katzenstein. In those assessments, the neo-corporatist institutions in Austria and Switzerland were cited as being highly effective at adaptation, especially to developments in the global economic environment. Neo-corporatist states were able to utilize the institutions of interest association to quickly and efficiently alter and expand policymaking. The system relied upon a high level of intra-association stability and discipline. In such a system, elites of the interest associations and the state could bargain and build consensus among themselves and guarantee compliance among its members not to strongly oppose or frustrate policy development and passage. Such a system meant that labor and capital conformity to the policy outcome was most likely assured, allowing the state to quickly modify monetary, fiscal or trade policy to adapt to the changing world market pressures. While this clearly did seem to support the strong growth and wealth of the economies of Austria and Switzerland in the post-war era, significant developments since the early 1980’s may have undermined this model. See Katzenstein’s Small States in World Markets and Corporatism and Change. As will be discussed in following sections, the system relies upon several key features, a strong state presence in the economy (at least stronger than neo-liberalists would normally be comfortable with), relatively disciplined and unitary interest associations, and a consensus of purpose towards advancement of broad national economic goals. What will be herein argued is that the forces of post-industrialism, European integration and globalization have weakened many of the seemingly necessary elements that made such a model operate. In response, interest groups, political parties and elites are turning to pluralist methods of operation, such as mass media electoral campaigning, unheard of only a decade ago. Pluralist systems may be more successful at gradually and incrementally integrating socio-economic changes into the political system. The flexibility and competitive nature of pluralist interest representation allows for greater experimentation, adaptation and evolution at a gradual and incremental pace. In neo-corporatist systems, the monopolistic and static structures are less prone to address and recognize socio-economic changes. Institutions that gain advantage or privilege through the system may be unwilling and stubborn to alter or undo preexisting relationships. The rise of nationalist parties may very well be emblematic of the dysfunction of the neo-corporatist institutions to address the changing nature of the Swiss and Austrian socio-economic structure. If Austria and Switzerland are becoming more pluralist and less neo-corporatist, it seems closely linked to the three levels of force affecting the socio-economic structures of the states. Each of these series of forces is worthy of significant in-depth analysis to illustrate how they are affecting the Swiss and Austrian societies and polities. Changes in the Domestic Socio-Economic Structures Some of the structural socio-economic changes that have taken place in Switzerland and Austria are most notable in the organization, function and participation of labor unions in the economic and political systems. As Pontusson has illustrated, the transition of many European economies from primarily a heavy industry and manufacturing economy to a service and information economy has meant that industrial union membership has significantly contracted over the past two decades. Pontusson, Jonas (1995) “Explaining the Decline of European Social Democracy: The Role of Structural Economic Change” in World Politics, July 1995, v47, p495-533. The peak associations of labor, while encompassing both white-collar and blue-collar employees, are nonetheless dominated in organization and authority by industrial labor. The contraction of industrial union employment has had a major effect upon institutions and processes, like neo-corporatism, that traditionally equated broad labor interests with industrial union interests. While industrial labor has been contracting it has also been simultaneously transforming from a decidedly lower class and urban interest to that of a middle-class, suburban interest. As most industrial union wages meet or well exceed the median national average income, industrial employees’ interests have sharply diverged from those of service and other lower-class employment sectors. The lack of reform in organizing and recognizing new labor organizations or trends is due in part to the reticence of the existing industrial labor groups to voluntary concede their positions of privilege and guaranteed representation. Both Switzerland and Austria are experiencing the transition to the post-industrial era. Unions and industrial labor are no longer forces of lower-class urban representation; they are primarily middle-class, suburban and relatively affluent. As such their role in the neo-corporatist arrangement has changed. As service employment, which is now the primary lower class and urban employment sector, has gained an increasing share of the overall employment sector there has not been a commensurate rise in service representation vis-à-vis unions and neo-corporatist institutions. In part this is due to the unwillingness of the existing units to expand the neo-corporatist franchise. However, one must also note that service employment is far more likely to be done by immigrant or foreign labor and is much easier to exclude due to limited citizenship and voting powers. Overall, the transition to post-industrialism has meant that industrial labor and unions are far less representative of the type of worker than they were twenty or thirty years ago. The policy interests of the unions have also evolved to suit the more middle class mentality of its members. The growth of labor’s support for the SVP and FPÖ may very well be linked to this transition. Traditionally, labor strongly supported the SPS in Switzerland and SPÖ in Austria. However, the recent trends have shown the party identification and linkages between the unions and liberal parties on the decline. The liberal parties have generally supported European integration, more lenient immigration restrictions, and policies aimed at the lower class, urban workers. While the leftist parties continue to be ideologically committed to issues of the working-class and the social-welfare state, unions have become much more moderate, and perhaps even conservative, as they have moved into middle-class suburbia. Hence, the liberal-union coalitions in both Austria and Switzerland have collapsed. The SVP and FPÖ, by supporting stricter immigration rules, limited European integration, and protectionist policies for Swiss and Austrian workers and businesses are among the most attractive parties for the newly independent labor votes. The FPÖ saw a remarkable rise in union voting between 1986 and 1999, having increased it take of the union vote from less than 5% to nearly 30%. Falkner, p. 15. The SVP has seen a similar but more moderate increase. The Effects of European Integration While the socio-economic changes related to post-industrialization have contributed to the destabilization of political coalitions between unions and liberal parties, the process of European integration has also played a role in changing the traditional coalitions. Agricultural interests were always the traditional centers of SVP and FPÖ support, however, European integration has meant stronger consolidation among the farming interests in favor of the nationalist parties. While the FPÖ and SVP struggled in the 1970’s even among rural and agricultural voters, the recent trend has shown a consolidation of agricultural support. Church (1996) and (2000) With the EU’s wide-ranging agricultural policies and the uncertainty of future protection traditionally enjoyed under neo-corporatist regimes, Swiss and Austrian agriculture circled their wagons around the parties that seemed most critical of European integration and most in favor of continuing state-sponsored systems of protection and subsidy. European integration has also sparked a similar reaction among small domestic business interests. Like the agricultural interests, small businesses that were once protected or subsidized under the neo-corporatist system are uncertain of their ability to compete in a European market. As domestic firms must now compete with similar firms in other European states, many domestic businesses have also abandoned traditional coalition partners. Migros, the Swiss supermarket chain, terminated its support of the CVP based partly on the party’s stance on European integration. Church (2000) p. 216. Some of these business interests have, and may continue to, turn to the FPÖ and SVP to maintain their preferred position of neo-corporatist representation and protection. However, many business interests are widely in favor of European integration so as to gain access to the European market and potential growth opportunities. These tend to be Austrian and Swiss industrial, pharmaceutical, financial, insurance and other MNC’s whose profits and future depend upon greater access to the EU market. As such, the liberal and moderate parties are seeing greater support from these business interests that historically supported moderate-conservative party coalitions. Hence, while the SVP has made gains in Switzerland among interests opposed to integration, the SPS has made gains with those in favor. Church (1996) p. 643. The overall impact of European integration has been the creation of pro and anti-integration cleavages in Swiss and Austrian political systems. The cleavages, however, do not cleanly mesh with preexisting cleavages, such as labor-capital, therefore entailing a significant realignment of coalitions and political parties in both states. The Effects of Globalization Just as European integration and structural socio-economic shifts have caused new dynamics and political cleavages, so has globalization. The impact of globalization further strains the relationship among domestic-oriented and international-oriented business interests. As domestic business interests seek to maintain their levels of protection and guaranteed representation, international business interests seek open markets, greater regional and international economic ties and less state intervention. Labor and agricultural interests share a stake in the same debate, causing additional cracks in the traditional neo-corporatist, political, and party institutions. Globalization of the world economy has been primarily directed at creating and maintaining a global economic order based upon the principles of neo-liberalism and, to an extent, pluralism. The trade agreements such as NAFTA, WTO and GATT have primarily worked towards the liberalization of domestic economies by reducing and eliminating protectionist policies such as subsidies or sheltered industries. However, there has also been an implicit attempt to substitute existing forms of interest representation with pluralistic forms thought to more in concert with the neo-liberal, capitalist economic system. This is often a primary complaint of scholars and developing states regarding the far-reaching ramifications imposed by conditions of aid and investment made by the World Bank, WTO and other international economic regimes. Yet the decidedly pluralist bent of globalization is likely to have significant effects upon neo-corporatist regimes in Europe and around the globe. As the pressure to conform to pluralism continues to grow, neo-corporatism has been strongly eroded in many European democracies including Britain, Germany, Scandinavia, Austria and Switzerland. Hayward, p 253. States are undertaking reforms and policymaking far more likely to favor the adoption of pluralist features of interest representation in the political system. The pressures of globalization are also influencing the behavior of unions and business interests who adopt more pluralist methods of influence and abandon traditional neo-corporatist institutions and processes. The adoption of competitive forms of interest representation over consensus forms has led many scholars to see this era as the possible end to corporatism and consociationalism in Switzerland and Austria. Several excellent articles on the longevity of Austrian consociationalism appear in the Special Issue of West European Politics edited by Luther & Müller, January 1992 and in Anton Pelinka Austria: Out of the Shadow of the Past (1998). For Austrian Corporatism, the Pelinka work and the 1995 Markus Crepaz article from West European Politics are fundamental. For developments in Swiss consociationalism and corporatism, see articles by Richard Rose and Klaus Armingeon listed in bibliography. Neo-corporatism must also face the prospects of globalization which promotes a uniform neo-liberal economic structure. As firms become global, the neo-corporatist structure between state, labor and capital is weakened as it becomes more difficult to determine what firms are domestic and which are foreign (consider the merger of Daimler-Benz and Chrysler to form Daimler-Chrysler, is this a German or American corporation?). The ability of states to achieve or even create a macroeconomic policy is diminished. As international trade begins to take on a greater share of states’ GNP, as monetary policy becomes more internationalized, and as capital becomes more mobile, governments are losing their traditional methods of economic influence or control. The inability of the state to fulfill this primary role undermines many of the foundations of corporatism and neo-corporatism. As international business grows, its ability to be influenced by national corporatist regimes and institutions is weakened. The predominance of neo-liberalism has also undermined certain elements of neo-corporatism in practice. These include significant shrinkage of the welfare state, privatization of formerly state-run industries and services, and a general trend towards smaller government. This has been the trend in many neo-corporatist regimes in Europe. As the state’s role in welfare policy, the economic sector and the public sector contracts, the ability of the state to manage the neo-corporatist arrangements is simultaneously diminished. Conclusion The rise of nationalist parties in Switzerland and Austria has been a complex and deeply rooted series of developments at the domestic, European and global levels. Nationalism and its supporting parties have been successful in creating new voting coalitions that collectively express the uncertainty, discomfort and fear that these new challenges impose upon highly affluent and democratic societies. While Richard Rose has suggested that the recent rise may threaten democracy in the region, this seems to be a vast overstatement. Rose, p. 26, 40. While Rose is making an argument about the shortcomings of democratic practice in Austria and Switzerland, he still clearly implies that the nationalist victories are threatening to democracy. While the anti-Semitic and revisionist rhetoric of Haider, Blocher and other nationalists is troubling to the sense of civic discourse and failure to comprehend the true nature the wrongs of the past, the more troubling aspect is the underlying political uncertainty and instability that post-industrialization, European integration, and globalization are placing upon very democratic, affluent and stable regimes. Switzerland and Austria are emblematic of the series of changes taking place in many European democracies; a changing structure of socio-economic relations in a post-industrial era, a strong pressure to integrate the economy within the regional auspices of the European Union, and the international forces of globalization to conform their economy and polity to the neo-liberal, pluralist model. The dramatic rise in the fortunes of the SVP and FPÖ indicate a significant change in the Swiss and Austrian interests and electorates closely related to these multi-level trends. Austria and Switzerland’s neo-corporatist institutions and practices magnify and compound the effects of the forces placed upon the system. Under pressures of globalization, neo-liberalism, privatization, the contraction of the welfare state, smaller state governments, the decline of unions, the rise of the post-industrial economy, and the transference of sovereignty to the supranational level of the EU, the threats to neo-corporatism seem almost insurmountable. Compounding these threats, neo-corporatist systems, unlike pluralist systems, may be slower in adopting and reforming their internal methods and institutions of operation. When Katzenstein wrote his exceptional work on the function of small states in world markets, it was during a period when the neo-corporatist institutions, political parties and interest groups were working in a stable and consensual political system with established and relatively disciplined coalitions and methods of operation. Peter J. 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Chapel Hill, NC, The University of North Carolina Press. Sully, Melanie A. (1981) Political Parties and Elections in Austria. London, C. Hurst & Company. Sully, Melanie A. (1996) “The 1995 Austrian Election: Winter of Discontent” in West European Politics, v19, n3, p633. Sully, Melanie A. (1997) The Haider Phenomenon. New York, Columbia University Press. Tálos, Emmerich (1996) “Corporatism – The Austrian Model” in Volkmar Lauber, editor, Contemporary Austrian Politics. Boulder, CO, Westview Press. Wiarda, Howard J. (1997) Corporatism and Comparative Politics: The Other Great “Ism”. Armonk, NY, M.E. Sharpe. In the last fifteen years, discipline, consensus and the ability to adapt have eroded as domestic, regional and global forces unravel the neo-corporatist institutions of states. The erosion of neo-corporatist institutions may consequently preface the loss of consensual politics to a more combative and competitive political arena. That perhaps is the greatest loss being suffered by Swiss and Austrian societies, the substantiation of the consensus politics of consociationalism and corporatism for the highly combative politics of neo-liberal pluralism. The development of more pluralist methods of interest representation and party coalition building may be considered a positive development in terms of confronting and adapting to these new domestic, regional and international pressures. Pluralism may, in the short run, provide far more flexible and responsive representative frameworks in addressing social, economic and political pressures than neo-corporatist institutions and their assumed static characteristics. Institutionally, the adoption of pluralist processes and institutions is one of often framed as both a choice and a necessity. The growing pluralism in the Swiss, Austria, German, British and Scandinavian systems, while partially the result of structural changes in socio-economics, is also often sought as a preferred solution by political elites. Tony Blair has typified this type of effort in Britain as his Labor Party has systematically worked towards creating alliances and relationships with individual firms or interest groups rather than through the traditional Trades Union Congress or business organizations. Even as early as the late 1960’s with the emergence of new social movements such as environmentalism, neo-corporatism was beginning to show signs of be less representative of salient cleavages within many states. While the transition from neo-corporatism to pluralism may seem to indicate a mere transformation of institutions, the implications towards political culture must not be ignored. The traditional neo-corporatist states’ adherence to procedures of consensus building over majoritarian rule complicates transitions to pluralism. Swiss and Austrian commitments to corporatism and consociationalism are fundamentally based on both institutional and cultural affinities. While the institutions may become more pluralist to suit the structural socio-economic changes in society, the underlying political culture may be far less likely to evolve at such a pace. The erosion of consensus politics such as corporatism and consociationalism is troubling considering the potential impact of the remaining traditional cleavages in both states. This is the greater lesson that this research hopes to discern, the basis of neo-corporatism and consensus politics in political culture may not neatly integrate with the institutional progress towards pluralism. Opportunities Despite the pessimistic tone implied in the focus upon the challenges facing neo-corporatism, there also exist opportunities for continuing and future consensual politics. First, even in consideration of the global and societal changes taking place and transforming neo-corporatism, traditional regimes and institutions (including neo-corporatism) often display an inordinate ability to persist despite changes taking place around them (such as the electoral college’s longevity in the U.S. political system). In this vein, neo-corporatism, despite the tidal wave of neo-liberal and pluralist forces, will likely continue to play a significant role within many states. Therefore, there will remain an inherent value in studying the existence and characteristics of neo-corporatist institutions. In fact, as systems exhibit both neo-corporatist and pluralist elements, no scholarship would be complete without taking both streams, including the neo-corporatist, into consideration. Another opportunity created by the numerous threats to neo-corporatism in Austria and Switzerland will be the pressures to reform or reorganize the current neo-corporatist institutions. While it has been argued that one of the fundamental challenges to neo-corporatism has been the declining salience of the labor-capital-agriculture cleavages, there is always the potential to reformulate the neo-corporatist institutions to better represent the post-industrial socio-economic cleavages. While it may be difficult to achieve such reforms with current peak associations stonewalling such modifications, there is room for minor adjustments which may reinforce the neo-corporatist systems and lead to more significant alterations in the future. While the trend towards supranational organization of the European economies and polities continues, there has also been a commensurate trend of delegating more authority to substate governments and actors. In the EU, this trend has been called subsidiarity, and is closely linked to the emergent popularity of federalism in regime design. As states delegate more authority to both supranational and subnational levels, there is an increased opportunity for neo-corporatist structures at several levels, subnational, national and supranational. While the traditional neo-corporatist approach rested firmly upon the role of states in the realm of power and interest representation, newer forms of neo-corporatism may exist and operate multiple levels of governance. That Austria and Switzerland, benchmarks of democracy and affluence, can still be fundamentally challenged by the transitions of post-industrialism, European integration and globalization is insightful to challenges that other neo-corporatist states may face in the future. Even pluralist states may not be as immune as one might suspect, while the effects of domestic, regional and global transitions may be less intense and more incremental, changes are occurring with uncertain yet significant consequences. The trends experienced by the Swiss and Austrians in the European coalmine should lead many others to explore the greater implications for the future of Europe.