A weak tripartism only serves big business

Luxembourg finds itself at a crossroads economically and politically. New economic and geopolitical challenges that have the potential to significantly weaken EU economic performance put a strain on Luxembourg’s so-called social model: tripartism.

These challenges have also impacted political discourse, with “modernisation” and “competitiveness” standing out as two terms used by the political and economic circles of Luxembourg as tools to justify traditionally business-friendly measures such as longer working hours. For labouring mortals such as myself, the consequences of this discourse could be viscerally felt for the next decades.

Historical overview

Luxembourg’s social model, consisting of tripartite negotiations between the state, trade unions, and employers, was fine-tuned following multiple economic crises during the 20th century. A case in point is the oil crisis of the 1970s. Luxembourg’s steel industry, one of its then-fundamental economic pillars, was faced with an immediate crisis. Tripartite negotiations came into play to avert the worst consequences of such a crisis, namely mass unemployment and irreversible harm to its industry.

However, this crisis left a permanent wound in many countries. The service economy, not industry, would become the new economic pillar of the next decades. In the 1980s, the market-based approach, or neoliberalism, which favoured liberalisation and privatisation, contributed to the flourishing of services. As globalisation expanded in the 1990s, Luxembourg managed to shift its economic model while keeping tripartism. What followed: the establishment of a sophisticated financial centre that flourished thanks to the European Union and a seemingly endless pool of cross-border workforce.

Present

Now, the bubble is bursting, with the global financial crisis of 2008-2009 setting the stage. Coupled with the refugee ‘crisis’ of 2015 – avoidable had there been European unity – the conditions were ripe. Populism, or the instrumentalisation of people’s plight for political gain, germinated. Luxembourg did not remain immune, as shown by the 2015 referendum against the extension of voting rights to foreign nationals at the national level, which was overshadowed by nativist and populist discourses. Regarding tripartism, however, the DP-Green-LSAP coalition from 2013-2023 ensured its continued existence. That might be changing.

While the neoliberal approach is being abandoned by the US – its former foremost defender – through trade barriers, Luxembourg ushered in a new coalition between the CSV and the DP, with a government that advocates for this very ideology. The economically liberal wings of the CSV and DP were quick to signal their intention of implementing business-friendly measures, immediately resisted by trade unions. The Luxembourg Employers’ Association (UEL) is emboldened in their requests by what they perceive as a policy shift in their favour. This combination has made consensus-building highly difficult. Tripartism’s foundations are being shaken.

Modernisation and competitiveness

Reform is necessary in any system. However, it is worth inspecting the rationale behind the announced business-friendly measures, which is currently underpinned by two terms: modernisation and competitiveness.

The CSV/DP government coalition vowed to implement modernising measures while keeping Luxembourg competitive, with the word “modernise” appearing ten times and the word “competitive” eleven times in the CSV party manifesto of 2023. In this vein, the CSV/DP government coalition has sought, among other measures, to modify labour law under the guise of modernisation.

This includes the proposed weakening of the role trade unions would play in collective bargaining schemes, the extension of Sunday working hours, and the extension of shop opening hours in general – proposals that have been tempered due to internal and external backlash. Regarding competitiveness, some fiscal measures favourable to enterprises and to workforce from abroad are a recent example.

With special regard towards labour law, which directly impacts much of the population, I cannot help but ask myself: would the legal possibility of working longer without collective bargaining power truly be “modern”? It would, perhaps, be beneficial for certain consumers eager to use their buying power in the evening, with big retailers also potentially increasing their profit. And yet, would such a meager benefit be worthy of a “modern” society?

This ties in with the goal of competitiveness, as a moderate increase in demand keeps the economy humming – or at least stable –, ensuring stable flow of tax revenue for the state. Nevertheless, a question lingers: would this truly be a necessary measure to ensure the country’s competitiveness?

These questions have no simple answer, as they depend on each person’s socioeconomic and ideological positionality. But the framing of such measures in political discourse as modern and/or competitive is revealing of the interests the current coalition transparently favours.

Furthermore, the pursuit of such measures directly contradicts the tenets of tripartism, as one of the main parties – the employers – is blatantly at an advantage with the backing of the state. That is not to say that tripartism has worked perfectly until now, as it has always been characterised by diverging interests. However, the mediator role that the state is meant to play is strikingly absent in the current “social roundtables”, leading to a weakening of the system and a hardening of opposing positions.

Such weakening of tripartism is evident given the government’s stance that the ongoing negotiations are not taking place within a tripartite framework, which it sees as a crisis management tool instead of an inherent aspect of Luxembourg’s political system.

Perhaps an alternative understanding of modernisation and competitiveness is necessary: strengthening not only tripartism as a useful (although imperfect) method of policy planning, but also collective bargaining in the private sector, with the long-term goal of guaranteeing further economic democracy. These may be some ways to oppose an economic race to the bottom that ultimately favours big business interests. That would be, in my view, a truly modern society with a competitive edge.