Features Social dumping in the Baltic Sea region THE LAVAL CONFLICT AND THE QUESTION OF Solidarity

Social dumping is a concept with negative connotations that appeared in public debate shortly after the 2004 accession.

Published in the printed edition of Baltic Worlds BW 1-2 2016, pp 26-30
Published on balticworlds.com on June 23, 2016

The eastward expansion of the European Union is no different from previous enlargements, the Swedish foreign minister Carl Bildt stated on the occasion of the tenth anniversary of the 2004 EU enlargement in which eight Eastern European countries became members. He drew parallels with 1995, when Sweden was the subject of what turned out to be a successful EU enlargement. In particular, he emphasized that the initial fears of “old” member states about labor migration from the East had proved unfounded. This is supported by research and, furthermore, statistics confirm that enlarged membership has generally had positive effects on the GDP of all member states. Migration has proven to be beneficial to both sender and receiver.1

Other research does not give an equally positive picture of the implications of Eastern European labor migration, indicating that whether the overall consequences are positive or negative may be a matter of opinion.

Social dumping is a concept with negative connotations that appeared in public debate shortly after the 2004 accession. This term has been revived because economic globalization and structural changes in national and international economies have made capital increasingly mobile, allowing it to flow relatively freely across national borders, in turn increasing the fluidity of employment and labor. Step by step, national governments have lowered barriers that impeded the free reign of market forces.2

This process of globalization has occurred markedly in the EU, the legal regime of which is based on the four “freedoms”: free movement of capital, goods, people, and services within the EU.3 When the border crossings occur between states of nearly equal economic strength, there is little conflict. Problems arise, however, when countries from the former Eastern bloc become EU members, as in 2004. Then there is a distinction between high- and low-wage countries, which becomes the main reason for the emergence, at least rhetorically, of the phenomenon of social dumping. The long-awaited “return to Europe” was a re-entry with reservations. The formal political and economic division between Western and Eastern Europe disappeared, but the division between rich and poor EU states persisted, along the same geopolitical dividing lines as before.4

The Laval conflict

In Sweden, shortly after the accession of the Eastern countries to the EU, a dispute started. It became known as the “Laval conflict”, and is still, a decade later, often debated in the media, at conferences, and in academic reports. Much has been written about this conflict and its consequences, both in the media and in scholarly books and articles. In this article, I will concentrate on the phenomenon of social dumping and discuss the complexity of the notion as it appears in the context of the Baltic Sea region.

On January 16, 2003, the government of Vaxholm, a municipality near Stockholm, decided to discuss the construction of a new school, Söderfjärdsskolan. On May 1, Latvia became an EU member. On May 22, Vaxholm decided to buy the staff premises of KA 4, a coastal artilliery unit, for conversion into a school. Less than a month later, on May 27, the municipal government approved procurement. The contract went to the Latvian construction company Laval un Partneri Ltd. On June 9, the first negotiations were held between Local 1 of the Swedish Trade Union for Construction Workers 1 and Laval, but the participants failed to reach a collective agreement for the development of Söderfjärdsskolan.5

On November 2,  Byggnads blocked the construction of the school in Vaxholm, because Laval refused to sign Swedish collective agreements for its workers. Instead, the firm signed an agreement with the Latvian employee organization LAC, citing the country-of-origin principle, which states that a company is allowed to sign contracts in another EU Member State on the basis of the laws and rules in force in the company’s country of origin.6 Consequently, the construction workers from Latvia could work for wages far below the normal wages of their colleagues in Sweden. The Vaxholm case illustrates fairly well what social dumping is about: companies in countries with low levels of wages and social benefits exploiting their low-cost position to gain a competitive advantage in countries where labor costs are higher.7 With reference to Giorgio Agamben,8 the sociologist Nathan Lillie spoke of the creation of spaces of exception “in which certain people are stripped of their humanity, and deemed unworthy of what others are entitled to”.9 The schoolbuilding in Vaxholm could be seen as such a space, enclosed by invisible walls blocking out the sovereign state and normal order. The trade union blockade accentuated the site’s immurement by stopping all forms of labor-related contact with the world outside the gates. The construction work could not proceed without additional professional trades and material, in a situation that was exceptional compared with the usual order at building sites. It is important to note that people who were “stripped of their humanity” and resided in the space of exception in Sweden were Latvians and that those standing guard at the gates were Swedes. There was an ethnic/national dimension to the confrontation that strongly shaped the aftermath of the blockade.

An echo from the past

Using industrial action to prevent social dumping is no novelty in the Swedish trade union movement. On the contrary, it has a long tradition in the history of the movement and it often targets the actions of non-organized workers who, in the event of a strike, act as strikebreakers — also called finks, scabs, knobsticks, or blacklegs.10 Historically, the national or ethnic background of the offender has been of little significance.11 The “crime” was so severe in the eyes of organized workers that it mattered little whether or not the wrongdoer was foreign. The misconduct was the same and so was the punishment. And no compassionate reasons could somehow excuse the offense.12 It seemed as though Byggnads members in Vaxholm were once again fighting a battle with methods used frequently throughout the nineteenth and twentieth centuries.

However, foreign background has mattered on certain occasions when employers imported a whole work crew of cheap labor from a nearby low-wage country, thereby “ethnifying” the relationship between strikers and strikebreakers. This occurred, for instance, in 1904 in the southern county of Skåne when landlords brought in Galicians from the Habsburg Empire and Russia to combat the rural workers’ attempt to obtain better working conditions by organizing and striking.13 There are apparent similarities to the contemporary Vaxholm case but also significant differences. The rule breakers in the modern (or postmodern) setting seldom act independently. On both sides, employers as sellers of personnel (such as Polish staffing agencies) and employers as buyers of personnel (such as Skanska) were closely involved in the appearance of an Eastern workforce at a Swedish construction workplace after EU enlargement in 2004. Moreover, a legal order backs up this kind of social dumping, in the form of the EU doctrine of the free movement of labor, the procurement law, the country-of-origin principle, the Posted Workers Directive, etc. These policies collide, as we have seen, with valid principles of the right to challenge social dumping and unfair competition. Here, in brief, we have the foundations of the Vaxholm conflict.

On one level, the blockade was a failure because Byggnads did not succeed in persuading Laval to sign a collective agreement with the Swedish construction trade union. From another perspective, the blockade was a success because Laval was finally forced to abandon the contract and the Latvian workers had to return home. This was a hard-won victory, however. Laval un Partneri left the stage in Vaxholm, but reappeared at the Swedish Labor Court, claiming that Byggnads, through its actions, had violated the EU rules regarding the free movement of capital and labor. The case was finally decided in the European Court of Justice in 2007 in favor of Laval’s claims. The verdict damaged not only Byggnads but the entire Swedish labor market model, which strongly defends the right to take industrial action in cases of social dumping. “Did the Swedish model die in Vaxholm?” was the telling title of an article in one of the debates that followed the verdict.14

Another intense debate that hit the trade union action particularly hard centered on whether the demand that the Latvian company sign a Swedish collective agreement in fact evidenced a lack of solidarity with less fortunate brothers from across the Baltic Sea or, even worse, expressed nationalistic self-interest and xenophobia. A leading figure on one side of this debate was the journalist Maciej Zaremba, author of the book Den polske rörmokaren [The Polish plumber],15 a compilation of five articles on the subject from the Swedish national newspaper Dagens Nyheter. His harsh criticism was backed by leading editorial writers, right-wing politicians, representatives of the Confederation of Swedish Enterprise (Svenskt Näringsliv), etc. On the other side, we find the representatives of Byggnads and other labor movement spokespeople defending Swedish collective wage agreements.16

This is not the place to present all the arguments and counter-arguments from this extensive media debate. A key point in Zaremba’s criticism was the claim that the picketers on one occasion shouted “Go home” at the Latvian workers (Byggnads contests this claim). This concisely illustrates Zaremba’s interpretation of the Vaxholm case. Despite all the trade union talk of a struggle for “equal pay for equal work”, Zaremba suggested that what the union really wanted to say was “Get lost!” As I understand his view, it was all about protecting Swedish privilege and, if this was the case, the famous Swedish model was allowing the worst kind of working-class bullying ever seen in the history of Europe.17 Byggnads’s position, on the other hand, is that the Vaxholm case was about social dumping and the Swedish labor movement’s right (not to say duty) to fight it, as it is in all workers’ interests to ensure equal pay for equal work, regardless of national origin.

An act of solidarity or hostility?

Unfortunately, the debate on the blockade in Vaxholm seemed to be stuck in a discursive battle with only two possible positions: “We want to help ‘them’ [i.e. the underpaid Latvian workers]” and “No, you want to get rid of ‘them’”. Both the critics and the defenders of Byggnads’s use of industrial action to stop social dumping relied on a common conception of a battle in which one national group opposes another. This was precisely the consequence of the ethnification of the labor controversy. This ethnification is unfortunate because it tends to exclude other possible interpretations. It may seem strange to scrutinize national identities in this way because they are usually seen as so natural, so inherent that they are not open to discussion. We are here dealing with conceptions that we commonly find indisputably true.

I touched on another possible perspective earlier when I mentioned the case of Galicians coming to Skåne to undercut wages and act as strikebreakers at the beginning of the twentieth century. Let us avoid the habitual way of looking at this, i.e. as a clash between Swedish and Galician workers, and instead ask ourselves what the difference is between “ordinary” strike-breakers and the ones in this example. The only difference between the cases is that the confrontation involving migrant Galician workers followed national lines. If we temporarily apply this reasoning to the contemporary case, the construction workers in Vaxholm were not doing wrong because they were Latvian citizens, but because they were undercutting wages and subsequently crossed a picket line. The basis was not specifically ethnic differences, but distinctions between those who show solidarity with the working class cause and those who do not. Likewise, it is not primarily ethnicity that determines Latvians’ wages in their home country: Latvians are not underpaid because they are Latvian but because the wage levels are lower in Latvia.

There are several reasons why Latvian wages are much lower than Swedish ones. An obvious reason is that when Latvia was part of the Soviet Union, incomes were state-regulated, while in Sweden they were subject to negotiations between the two labor market parties, the employees and the employer organizations.18 Another well-known reason I like to stress is the consequences of the neoliberal “shock therapy” the newly independent Baltic states were exposed to. All institutions that had belonged to the socialist system were removed and replaced with democratic and market economic institutions, which, it was claimed, would gradually lead to substantially higher incomes. Unfortunately, this was a big miscalculation.19 Although the economy did recover to some extent, the large mass of the population was still not in a position to benefit from the transformation, but rather experienced growing inequality. This unfulfilled prognosis is the real problem when trying to come to terms with social dumping in the Baltic Sea region. It is mainly historical, political, and economic factors that are relevant to understanding the prime reasons for the Vaxholm conflict. The wage differences also reflect crucial differences in trade union power resources between Sweden and Latvia.

Concealed class discourse

Accordingly, the dominance of the ethnic discourse has concealed the class discourse as an alternative way of understanding the conflict. From a class perspective, the opposition is not primarily between Swedish and Latvian workers. Rather, the opposition primarily stems from class-internal wage differences due to different power resources in relation to political and financial power elites. From this perspective, the dividing line does not follow that of ethnic/national belonging; rather, the main difference that matters is between workers with high and low incomes competing on the same labor market, regardless of their nationality. Considering class in a political sense, the main antagonism is not among workers with different occupations, earnings, and locations, but between two positions in society representing different interests: workers and employers.

A striking effect of the dominance of the ethnic discourse in this debate is the disappearance of business owners as relevant actors in the conflict. Laval un Partneri is the only exception, due to its position as a counterpart to Byggnads in the negotiating process and later as subject to the blockade. It seems hard to find acceptance for the position that Byggnads is fighting to defend hard-won wages and decent work standards, the outcome of decades of union struggle. When it comes to the essential conflict between workers and business owners, very little has changed, as the Laval case clearly shows. The case concerns working conditions in general, but above all how money should be distributed between two antagonistic classes.

The central question, although rarely addressed directly, is who is going to pay the costs of the space of exception, of having a low-paid Latvian workforce working on school-building in Vaxholm. From the viewpoint of Byggnads’ counterpart there is only one alternative: in the future, Swedish construction workers will have to accept wages far below their normal level. That will certainly be the outcome, because domestic companies will otherwise lose contracts to foreign competitors. In his book, Zaremba cites the Latvian poet Knuts Skujenieks who “thinks that solidarity will return, but that first the rich must have it a little worse and the Latvians a little better”.20 For the sake of clarity, when Skujenieks mentions the rich he is referring to Swedish construction workers. According to that logic, it seems as though Swedish workers would be showing solidarity if they agreed to reduce their wages.

The labor organizations of Central and Eastern Europe, however, did not want their fellow workers to take part in social dumping in the West, arguing that it would spoil their own chances of ever reaching Western European living standards.21 Others think Swedish construction workers earn too much, a view probably shared not only by Laval, but also by most leaders of Swedish industry. Notably, the Confederation of Swedish Enterprise funded Laval’s entire lawsuit, both in the Swedish Labor Court and when the case was heard in the European Court of Justice. The Confederation’s main interest in supporting the lawsuit, I assume, was as far as possible to put an end to the right of the working class to use industrial action to counteract social dumping.22

Byggnads is thus under great pressure to pay the long-term cost and accept considerably lower wages than are customary in Sweden. Remarkably, though, very few seem to put any demands on the ultra-rich in this context. The closest to any form of criticism leveled in the business owners’ direction comes from the Social Democratic member of parliament Anders Karlsson who, in a parliamentary debate on collective agreements, said “We want to use the EU’s enlargement to raise living standards in the new countries; they [i.e. the bourgeois] want to use it to lower wages in Sweden — that’s what it’s all about”.23

Corporate profits are not mentioned in this media debate. It is fully permissible to publicly discuss workers’ wage levels, and from this highly limited information to conclude that construction workers in Sweden earn too much. The readers of the debate, however, have no opportunity to assess whether corporate profits are reasonable in relation to what is paid in wages. No voices were raised to draw attention to the fact that Laval would earn too much by using low-paid workers.

Spaces of exception

It is not difficult to see which party would win if Byggnads failed in its defense. But wage dumping is not the only thing that is profitable for business owners. Laval’s total victory was sure to lead to a considerable drop in union membership in Sweden, because the union’s loss would be a clear sign of weakness. A third severe consequence is the fomenting of division inside the working class, an old weapon in the hands of artful employers. When the landlords in Skåne invited Galicians to serve as a cheap and reliable workforce they were probably well aware that the resulting conflict would be fought between national groups of rural laborers. A further outcome of this ethnic dimension of the labor conflict on the grassroots level is that it makes social dumping seem to be just an affair between workers of different national origins. That’s why popular discourse treats foreign workers from poor countries as the ones “dumping” their low wages in rich states.24 What is concealed is the fact that social dumping often occurs inside both low-wage and high-wage countries by domestic companies and fellow workers competing for market share. There is also a tendency to forget that local corporations take part in a dumping process by using subcontractors from Eastern European countries or by offshoring production to the same countries. Of course, this also applies to big, highly mobile transnational corporations where the “race-to-the-bottom” principle is a constant business strategy.25

The union side is not unaffected by the dominant ethnic/nationalistic discourse when thinking and talking in terms of “us” and “them”. While Byggnads worries about low-paid Latvians in Vaxholm, it seems uninterested in their wage levels and working conditions in the Latvian labor market. The Latvian former foreign minister Artis Pabriks stated this well in a comment on the Vaxholm conflict: “Why don’t they [Byggnads] then worry about the Latvian workers working in Swedish companies in Latvia and who earn much less than those in Vaxholm?”26 This remark echoes Magdalena Bernaciak’s observation, in her broad discussion of social dumping in the EU, that “antisocial dumping measures had a predominantly defensive character and were aimed at protecting high standards in the richer countries”.27

I think Byggnads should worry, because it’s not easy to gain support for protests against social dumping when Eastern European workers earn more than twice as much on construction sites in Western Europe than in the same jobs in their home countries. What is considered social dumping in one country can be seen as the opposite in another. We face the paradox that the Latvian workers appear to be treated more humanely when they are in a “space of exception” in Sweden than in Latvia. They are more “stripped of their humanity” when working in their home countries, irrespective of whether they are employed in domestic or foreign companies. That is also why many Eastern European trade unions, as mentioned earlier, did not oppose Byggnads’ antisocial dumping action in Vaxholm.28 Despite disagreements, the working classes on both sides of the Baltic are evidently aware that the losers in the long run would be the workers themselves. ≈

references

1              Expressen debate, May 4, 2014, http://www.expressen.se/debatt/utvidgningen-ar-en-historisk-framgang/.

2              Jens Alber and Guy Standing, “Social Dumping, Catch-up, or Convergence? Europe in a Comparative Global Context,” Journal of European Social Policy 10 (2000): 100.

3              Nathan Lillie, “Bringing the Offshore Ashore: Transnational Production, Industrial Relations and the Reconfiguration of Sovereignty,” International Studies Quarterly 54 (2010): 694.

4              Magdalena Bernaciak, “Social Dumping: Political Catchphrase or Threat to Labour Standards?” ETUI Working Papers (2012): 12.

5              Ingvar Persson, Konflikten i Vaxholm: svensk arbetsmarknad i förändring [The conflict in Vaxholm: Swedish labor market in change] (Stockholm: Premiss, 2005), 4—5.

6              Bernaciak, “Social Dumping: Political Catchphrase,” 14.

7              Alber and Standing, “Social Dumping,” 99.

8              Giorgio Agamben, Homo Sacer: Sovereign Power and Bare Life, trans. Daniel Heller-Roazen (Stanford: Stanford University Press, 1998).

9              Nathan Lillie, “Bringing the Offshore Ashore,” 699.

10           Pietro Manzella, The Linguistics of Labour Law and Industrial Relation: A Modest Proposal, (University of Modena and Reggio Emilia: Modena, 2012), 12.

11           Samuel Edquist, “En historia om främlingar: om effekterna av en nationalistisk historieskrivning” [A story of strangers: on the effects of a nationalistic historiography], in Främlingar: ett historiskt perspektiv [Strangers: a historical perspective], ed. Anders Florén and Åsa Karlsson (Uppsala: Historiska institutionen, 1998), 92.

12           Mats Lindqvist, Klasskamrater: Om industriellt arbete och kulturell formation 1880—1920 [Classmates: industrial work and cultural formation, 1880—1920] (Malmö: Liber, 1987), 111—112.

13           Edquist,“En historia om främlingar,” 89.

14           Christer Thörnqvist and Charles Woolfson, “Dog den svenska modellen i Vaxholm? Laval-målet och den svenska arbetsmarknaden” [Did the Swedish model vanish with Vaxholm? The Laval case and the Swedish labor market], Arbetsmarknad och Arbetsliv [Labor market and work life] 17 (2011): 9—22.

15           Maciej Zaremba, Den polske rörmokaren och andra berättelser från Sverige [The Polish plumber and other stories from Sweden] (Stockholm: Nordstedts, 2006).

16           Tina Halldén, “Vaxholmskonflikten och innebörden av solidaritet: En argumentationsanalys av den svenska pressdebatten” [The conflict in Vaxholm and the meaning of solidarity: an analysis of the argumentation in Swedish press] (PhD diss. in history, Södertörn University, 2008).

17           Zaremba, Den polske rörmokaren, 68.

18           Thörnqvist and Woolfson, “Dog den svenska modellen,” 11.

19           Martin Sokol, “Central and Eastern Europe a Decade after the Fall of State-socialism: Regional Dimensions of Transition Processes,” Regional Studies 35 (2001): 645—655.

20           Zaremba, Den polske rörmokaren, 89.

21           Bernaciak, “Social Dumping: Political Catchphrase,” 14.

22           Thörnqvist and Woolfson, “Dog den svenska modellen,” 15.

23           Halldén, “Vaxholmskonflikten,” 33.

24           Bernaciak, “Social Dumping: Political Catchphrase,” 32.

25           Magdalena Bernaciak, “Social Dumping and the EU Integration Process.” ETUI Working Paper 06 (2014): 24—25.

26           Halldén, “Vaxholmskonflikten,” 26.

27           Bernaciak, “Social Dumping: Political Catchphrase,” 18.

28           Bernaciak, “Social dumping: Political Catchphrase,” 14.

Mats Lindqvist