Covid-19 and a Just Transition: What the UK can learn from Germany

Photo by Ansgar Scheffold on Unsplash

This blog is a contribution from one of IIPP’s Master of Public Administration (MPA) students. To find out more about the course, click here.

By Daniel Wainwright

n the first few Prime Minister’s Questions after Keir Starmer became Leader of the Opposition, Boris Johnson seemed to be struggling. But on June 17th, he found a new line of attack: Starmer’s refusal to say once and for all that he was in favour of reopening schools was because he had a “great ox [of the education unions] stood upon his tongue.”

Never mind that the Government’s own plan for schools eventually had to be shelved — the problem was the unions. In the same week, Angela Merkel announced that schools in Germany, which had been closed only a week longer than in the UK, would be reopening. What can the UK learn?

There are many reasons that Germany has been more successful in controlling the pandemic than the UK, not least a strong regional health system that is able to execute an effective local track and trace system. And there’s nothing new about the Conservatives accusing a Labour leader of being in the pocket of the unions. But the particularly British attitude to industrial relations may make our return to normality harder than it needs to be. As economies reopen, the role of unions and workers will be critical in determining the speed and shape of the recovery. Germany, with its unique system of ‘co-determination,’ which gives workers real power in company decision making, is well placed to navigate the complexity ahead.

British unions are built on a history of conflict…

Although similar in many respects, Britain and Germany have evolved distinct flavours of capitalism. As Thomas McCraw argues in Creating Modern Capitalism, to understand the history of capitalism in Britain requires thinking about the empire, trade, finance; in Germany the story of its creation from smaller kingdoms, its tendency towards military adventurism and experience with many forms of government have all played significant roles in shaping its economic system. But one area where the differences are particularly evident today is industrial relations. The differences between the countries reflect attitudes about class, status, and aspiration.

Britain was a world leader in early industrial relations — by the late 19th century it had the world’s strongest union movement. Union membership continued to grow through the 20th century, peaking in the early 1980s. Indeed, although union coverage in the UK had fallen to 26% by 2012, it was still notably higher than Germany, at 18%. As noted by Ronald Dore, in early 20th century Britain, top managers came almost exclusively from public schools and elite universities. Managers and workers had little in the way of shared experiences or common interests, setting up a culture of antagonism. This was compounded by the fact that the aspiration of many of these managers was to emulate the aristocracy, and they therefore sought to distance themselves from the people on the shop floor, despite relying on them to organise work and drive improvement in processes and products.

Capitalism in Britain reflects the social and class differences between managers and employees, and has limited their ability to find common ground and purpose. As a result, the trade union movement had to use the few tools at its disposal — mainly the threat of strike action — to secure improvements in workers’ pay and conditions.

…whereas Germany has embraced a more cooperative approach

The contrast with Germany is clear. Although many German businesses in the early 20th century were still family owned, top managers were much more likely to be technical experts, and people who had risen up the ranks within an organisation. Added to this, early unions pushed for greater democracy in government and in firms, rather than the narrower struggles around wages and hours typical in British and American unions. Together, this laid the foundation for the defining achievement of industrial relations in Germany in the post-war era — the introduction of co-determination. Originally targeting the coal and steel industries, the codetermination law of 1951 enshrined worker representation on company boards in law. In 2019, public companies with more than 500 people had to devote a third of their board to employee representatives; for companies of more than 2,000 people it’s half.

The emphasis on employee engagement has enabled more compromise and less conflict between employers and employees. There is a greater sense for both employers and unions that they are working for a collective good — part of the reason that Germany had one of the lowest hours lost to strike action in the 1950s-80s. Part-time working, payment systems, bonuses, performance assessment, job security and training are all legitimate areas of interest for the works council, and the forum allows them to feed in ideas and co-create solutions, rather than simply accepting or rejecting proposals offered by management.

Engagement and legitimacy will be critical to transforming a Green recovery into a Just Transition

People in both Germany and the UK recognise the need for a green recovery. In the UK, polling suggests 58% of people believe “the government should prioritise climate change” in the post-COVID recovery. Rhetorically at least, leaders in both countries are supportive — the Chancellor of the UK, Rishi Sunak, said that “this is going to be a green recovery with concern for our environment at its heart,” although the amount invested is significantly less than some other countries. But even if the budget had matched the oratory, a successful transition to a green economy will depend on the (real and perceived) fairness of the changes. Engagement drives legitimacy, which enables action. Deep engagement with people currently employed in highly polluting industries is a prerequisite to getting the necessary support — the Giles Jauntes protests of 2018 are a prime example of trying to force through change without public support.

The Lucas Plan is an example of what could have been. Lucas Industries was a British manufacturer, making car and plane components. In 1974, following declining military contracts, they announced the need to restructure the company, with mass layoffs planned. In response, the Lucas Aerospace Combine Shop Stewards Committee (a representative body of staff from across the UK sites) produced an Alternative Corporate Plan that considered how the expertise and resources of the company could be used to solve pressing social problems. These included visionary ideas for the time, such as electric and hybrid cars, remote braking systems, and alternative energy sources. Management rejected the proposals, referring to the idea of solar panels as “in the realm of the brown bread and sandals brigade.” However, many of the technologies proposed in the plan are now mainstream, and the global solar energy market is worth over $50 billion. Today it is high emissions products rather than military parts that are declining, but the lesson stands — we need to use the knowledge and skills already in the UK for a new purpose, not simply let it go to waste.

Again, Germany has done things differently. In the 1950s the Ruhr Valley, in Western Germany, employed more than 500,000 people in the coal industry. From 1958, production and employment started declining as it became cheaper to import coal. Some workers were able to switch into the metal industries of the regions; for others, early retirement or retraining were offered. Crucially, decisions were agreed with the miners, and few became unemployed, due to the co-determination law. In 2007, Germany decided to phase out coal entirely, and by 2018 the last mines had shut, and the Ruhr region had undergone a transformation, with new universities, museums, and businesses. The cultural legacy and history lives on — Zollverein, a mine in Essen, is now a UN World Heritage Site with 1.5 million annual visitors.

We must put a Green recovery at the heart of our COVID response, and the lessons from previous periods of change are clear: a Just Transition is not a nice to have, but an integral part of the plan. The evolution of industrial relations in the UK means that too often, unions and management are cast as opponents. The practice of co-determination in Germany shows that there are other ways to do things. If we are serious about radical climate action, we need to develop inclusive institutions that enable workers and management to co-design the future.

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