and peace. This strategic shift challenges the conventional wisdom that explains changes in industrial
relation systems as a universal move on the parts of employers to deregulate labor relations and a
movement along a continuum in which deregulation culminates in convergence towards a LME model. On
the contrary, reforms in Spain went the opposite direction recentralizing bargaining, clarifying the links
between central and plant-level bargaining (i.e. the 1997 AINC), and strengthening the most representatives
unions against growing challenges to give employers a reliable interlocutor at the plant level. This
development has to be explained.
While some scholars (Schmidt 2002, 127) attribute the direction of reform in state capitalist countries
towards greater coordination to “the relative levels of unionization and central organization of employers’
associations and unions,” and cross-national differences in outcomes to the differing capacity to resists
these changes, in Spain the relative level of unionization and the organization of unions and employers’
organizations has not changed significantly over the last decade and unions and employers are not much
stronger than they were a decade ago. Moreover, contrary to Italy, the state has not always been a central
actor in this process and the social actors have reasserted their autonomy.
Indeed, France, Italy, Spain, and Portugal form a third type of economies that have been characterized
by strong coordination in financial markets but not that much in labor relations. Part of the historical reason
for this development has been the high level of state intervention in economic policy making in these
countries: the coordination of labor relations was a process led by the state, in charge of setting minimum
wages, and with the ability to translate a wage increase in a firm to the entire sector. However, as states
have become more and more reluctant to coordinate their labor relations in these countries, some of these
economies are becoming less coordinated.
Yet the direction of change is not uniform. Indeed, the direction of reform is Spain seems to be towards
the CME model, as opposed to France in which the dynamic of reform seems to be leading towards the
LME model. The reason for this divergence is based on the importance of the principle of institutional
complementarities (i.e. the notion that institutions supporting effective strategic-or market-coordination in
one sphere of the political economy are usually complementary to institutions in other spheres) (see Hall
and Gingerich 2004). Whereas in France reforms in the corporate governance system are making takeovers
more common (typical of the LMEs) in Spain there is still strong strategic coordination in financial markets
(i.e. the role of networking and family financing) and hostile takeovers are rare (typical of the CMEs). The
reason for this divergence lies in the fact that while both countries have historically lacked the institutional
complementarities that characterize CMEs, in France the movement towards a LME model has been
possible because of the character of labor relations: unions are very weak, and therefore the government
and business have been able to accommodate changes to the corporate governance system without strong
In other words, based on the principle of institutional complementarities, they can do this
because of the system of industrial relations that they have. In Spain, on the contrary unions have been able
to exercise effective veto power against government unilateral reforms (see Royo 2002, 182-91), and
employers have decided, for reasons that I develop below, that it is in their best interest to move towards
further coordination.
9
Convention