The Austrian Way: Sozialpartnerschaft as Means to Curb the Falling Rate of Profit

Economic crises are inherent in all market systems. The leap from long boom to long downturn is attributed to the lack of advanced capitalist economies to achieve and sustain high profit rates. Economic historians vividly outline overaccumulation and overheating leading to a squeeze of profits as underlying to great booms, recessions and depressions by the historical examples of Italy, France, Germany and Japan. Overaccumulation is based on the capital account being run down due to a demand for labor, which leads to rising wages and capital flight and ultimately to unprofitable economies. Tightening labor markets during long boom phases lead eventually to class conflict, which is the starting point of the profit squeeze and eventually busts and recessions and depressions. Overheating occurs in the wake of strike waves and subsequent wage explosions, such as in Europe between 1968 and 1970 in France, Germany, Netherlands, Italy and the United Kingdom, when workers backed their claims with strike action. Capitalists were forced to concede wage rises, which eventually lowered their rate of profit. Strikes stem out of frustration over moderation of growth of real wages, reduction in labor's share and increase in the share of profits, erosion of differentials, and increased work load. Manifold conventional monetary, fiscal and social intervention strategies as counter-cyclical means to avert booms and busts are described in international examples of the past. This paper aims at adding to the existing literature the case of describing the Austrian Sozialpartnerschaft. This stakeholder engagement means practiced in Austria is shown to avert social imbalances leading to economically inefficient worker uprising, protests and strikes. Since the post-World War II era, the Austrian Wirtschaftswunder (economic miracle) is attributed to the Sozialpartnerschaft breeding economic growth alongside social stability in Austria. The relative low economic fluctuations of the Austrian economy are grounded in the model of Sozialpartnerschaft to solve class struggles and worker rights movements elegantly through self-determination, participation and compromise. The unique Austrian model of the voluntary Sozialpartnerschaft is captured to implicitly curb the falling rate of profit phenomenon. In the Sozialpartnerschaft model, the citizenry, that undermines the profit rate in many other countries, gains access to board meetings to discuss national claims. Rather than partially illegal and counterproductive, risky strike movements, the Sozialpartnerschaft forms an institutionalized relationship between the government, political parties and certain interest groups in the field of labor, social, and economic policy. While it is widely recognized as a key element in Austrian politics since the end of World War II, social partnership is neither anchored in the Austrian constitution nor laid down in any specific legal act. The insights gained from the Austrian way to structure economic growth are discussed alongside granting an international and future perspective of Sozialpartnerschaft as means to avert negative consequences in the wake of economic fluctuations. While the influence of the Sozialpartnerschaft may be decreasing in the eye of the European Union integration and in times of globalization, other countries with fairly less developed stakeholder engagement approaches may learn from the positive example of the Austrian way to gracefully social partner in reaching common economic, industrial and societal endeavors together.