THE vote of the Bonn Parliament in May 1951 conceding "co-management" to labor in the coal, iron and steel industries of Western Germany was an international sensation, raising the question whether a new form of Socialism had appeared in Germany. Ever since its foundation in 1949, the German Trade Union Federation has sought Mitbestimmungsrecht--the right of labor to share in the management of industrial firms as well as in decisions on national economic planning. Its object has been to establish labor in a key position in the new German state while the social and political forces of the Federal Republic were still in flux, and to use this strength in fighting for full employment and a higher standard of living. In 1952 the issue again became acute. The Government invited the Federation to join a committee on productivity which the Vice-Chancellor sought to establish under his auspices. The Trade Union Federation countered with demands for a national economic council on which it would have equal representation with industry, as well as the extension of co-determination to workers in all major industries, including the public service. It backed its demands by a series of strikes; and negotiations last July between the Federation and the Government broke down almost as soon as they had started.

The strikes of last May were intended to warn Chancellor Adenauer against making a bargain with the right wing of his Government, by which he would oppose further extension of co-management in return for support for the Contractual Agreement being negotiated with the Western Allies. But this attempt of the unions to bring pressure upon the legislature aroused public indignation. Chancellor Adenauer, taking advantage of the opportunity to dispose of the unions' demands while the public mood was unfavorable to them, and to eliminate the issue before the debate on foreign relations, pressed for acceptance of a new law on co-management which gave labor much less than it wanted. The unions pleaded for postponement; but on July 20 the law was enacted by the Bundestag, against the opposition of the Social Democrats. The measure was likewise accepted by the Bundesrat. There was some talk of a general strike, but the Federation dropped the idea and announced that it would fight the law by democratic means. The election of a new president of the Federation, Walter Freitag, at the congress in October 1952, was a result of resentment at defeat and a sense of insecurity in the unions' general position.

The history of labor's demand for co-management goes back to 1920, when an act of the Weimar Republic provided for the establishment of works councils in industry and their representation on some boards of directors. In fact, this law gave labor little power over management; but after the Second World War it provided the inspiration for a set of laws establishing plant councils in eight of the 11 West German states. On these councils labor had the right of proposal, consultation and even of veto in "economic matters," such as methods of production, plant expansion, reduction of jobs and mergers; in one state it was even granted the right of consultation and initiatory advice on investments. In some Laender the works councils had two seats, a minority on the company boards of directors.

General Clay suspended the provisions of laws which went beyond the old German act of 1920, on the ground that such questions should not be decided in advance of the establishment of a Federal Republic. High Commissioner McCloy lifted General Clay's veto, however, on April 1, 1950, since no federal legislation had been introduced. The new law which caused the uproar last summer is a composite measure which includes parts of three different drafts which had been submitted by Christian Democrats, Social Democrats and the Government in 1950.

The unions claim that the new law offers only the pretense of co-management; and, in fact, they enjoy fewer powers under it than they possessed under the Laender acts. The "economic matters" to which it applies are production and labor methods, the production program, and the market and economic conditions of the enterprise. In plants with 100 or more workers, so-called economic committees, on which the employer and labor have equal representation, must be kept informed on these topics. The works council is given what the law explicitly calls co-management in questions involving reduction of staff or lay-offs, moving of plants, mergers, basic changes in the purpose of the plant or plant structure unless evidently required by market conditions, and new working methods unless based on technical progress. If differences of interest between employer and labor cannot be reconciled, the employer or the works council may appeal to a board of mediators. The finding of the board is not binding on the employer, though the workers will receive special protection if lay-offs become necessary because of failure of the employers to follow the board's recommendation. Representatives of the employees, elected by secret ballot, will occupy one-third of the seats on the board of directors. If only one or two representatives are to be chosen, they must come from actual employees of the company; if more than two seats are to be filled, "outsiders," i.e. union representatives, may be selected to fill the additional seats. Because of special features of German law governing the number of members of boards of directors few representatives of unions outside the plants will in practice be members of the works councils. Moreover, by defining the matters that come under co-management the new Act thereby excludes all others; the 1951 Act does not define the scope of co-management but simply establishes it by seating labor on the boards of directors, giving the workers the same number of seats as shareholders.[i] It also permits the unions to fill three-fifths of the labor seats and to control the nominations made by the works council.

Under German law, a company is run not by the board of directors but by a board of managers. The board of directors appoints the managers, supervises them and receives their report. It also submits its proposal on the amount of dividend to the general meeting of the shareholders. The 1951 Act compels the board of directors to appoint to the board of managers a labor manager, who has equal rights with the others; he cannot be chosen or discharged except by agreement with the labor representatives on the board of directors. In the 23 iron companies in which co-management was first established, the board of managers was three in number--a technical, a commercial and a labor director. The unions assumed that the boards in general would be similarly composed. The labor manager is understood to be responsible for the social and personnel problems in the plant, though his duties are not necessarily limited to that field. The new Act makes no provision for a labor director. Neither the 1951 Act nor the new Act provides for profit-sharing, which is generally rejected by the unions.

There is as yet little evidence as to how co-management in the coal, iron and steel industries actually works. Elections to the boards of directors of the existing companies were concluded only recently, and some of the companies to be organized under Allied law are not yet functioning. In the firms in which co-management has been practised during the last five years, absenteeism has decreased, work has been speeded up, and board decisions have been unanimous. But these firms have had no owners, and management had authority only over production; planning and investment were done by the German Trustee Administration. To what degree the companies in the three industries will be independent in the future, or subordinated to some combine, or to government control, is still uncertain; the Schuman Plan will not work without such control. The unions favor the control of prices and the allocation of raw materials.

There has been an increase in the daily production of coal from an average of 392,490 metric tons in all of 1951 to 402,000 in the last quarter of 1951 and to 411,266 tons during the first quarter of 1952. Deutsche Zeitung, of Stuttgart, has attributed the increase partly to co-management, on the grounds that it has removed the workers' fear that increased efficiency will harm their interests, and partly to effects of a return of entrepreneurial responsibility. There has been no drop in man-hour production in these industries.

Observers in the Ruhr are doubtful whether the miners' and metal workers' unions, and the German Trade Union Federation, have sufficient trained and experienced personnel to fill the positions on the boards of directors. Moreover, trade unionists abroad tend to be skeptical about the value of the experiment. When Christian Fette, then President of the German Trade Union Federation, spoke enthusiastically about Mitbestimmungsrecht to the Congress of the International Confederation of Free Trade Unions in Milan in June 1951, the delegates remained cool. They feared the syndicalist tendencies of the German program, and doubted the wisdom of involving labor unions so deeply in the risks of enterprise and of burdening them with the responsibilities of management. A committee was set up to study the question. Privately some German Social Democrats expressed the same doubts. Officially, however, the S.P.D. has supported the program. It cannot afford to antagonize the unions, and has had no program of its own to substitute.

German union leaders do not deny that it offers problems for them. After 1920 they feared for years that the works councils might lead the workers to think mainly of improving conditions in individual plants, and make them less concerned about class solidarity. The works councils, which have helped the trade unions supervise the execution of wage agreements and labor laws, seem never to have had this effect; but the unions have always favored centralization. In the inter-war years, Fritz Naphtali, the author of "Economic Democracy" (today a mem-of the Israeli Government), stressed the danger to economic planning not only of what was called "company egoism," but also of the organization of employer-labor boards by industries; he emphasized the need of national control.

After their rebirth in 1945, the trade unions came out for economic planning by the two "social partners"--employers and labor. Government hardly existed then. Socialization of key industries was so popular at the time that some of the Laender constitutions included it as an objective. In 1947 when the British offered co-management in some individual plants the unions had a large membership but were inactive since wages were controlled by the occupation Powers. Records had been destroyed and many of the old labor leaders were dead or abroad. The idea of entering the citadels of the former Ruhr tycoons appeared as a revolutionary step toward the socialization of the most important of all the key industries. South German labor leaders who had no Vereinigte Stahlwerke to enter, and had some contacts with American labor through the labor organizers whom the United States Army had included in Military Government, were much less enthusiastic about co-management. Today the Trade Union Federation holds that its own participation in co-management will eliminate the dangers of "company egoism."


Is co-management a new form of Socialism? Those who support the movement say that it is not, arguing that for labor to take a 50 percent share in management in a firm which is just returning to production is not "expropriation." Socialists say that it will not end the "anarchy of production" and must not "be allowed to reach a point where plant syndicalism becomes strong enough to hinder economic planning"--the essence of Socialism; they believe that the effect of co-management is very different from the effect of nationalization. The German Federation of Trade Unions continued to champion socialization of key industries after co-management was introduced in the most important steel firms. Current international Socialist theory holds that with the concentration of industry and banking that has taken place since the days of Marx, socialization of key industries and credit makes economic planning possible, and modern Socialist programs and practice have long been aligned with this change in theory. None of the German postwar socialization programs has gone beyond this. When the German Trade Union Federation demands co-management for all firms with at least 100 workers, it thinks of it as "the necessary supplement of political democracy" in the field of business, rather than as of an instrument of socialization. Under the stimulus of the depression of 1929 to 1934, the war, and the present defense program, powerful devices for the control of national economies have been developed without recourse to Socialism. If unions are vigilant labor can benefit greatly from these new practices, as the example of the United States demonstrates. It is to these devices that the German unions are gradually turning as Western thinking influences them more and more.

During 1951 the German Trade Union Federation increased its membership from 5,500,000 to approximately 6,000,000--that is, 39 percent of the labor force. This includes 47.2 percent of the men and 21.2 percent of the women. Of the employees in commerce, banking and insurance only 2.6 percent are in the Federation; the white collar workers in these trades have preferred membership in the separate Deutsche Angestelltengewerkschaft to membership in the industrial unions. The total also includes workers in gardening, forestry and agriculture where organization is traditionally low--now about 11 percent. Miners and leather workers are more than 90 percent organized; railroad, printing and paper workers are almost 80 percent within the trade unions. The metal workers, who compose the Federation's largest union, are more than 60 percent organized.

Since 1945 the unions have avoided the split into Free (Socialist), Christian and liberal unions which before 1933 embraced, respectively, 85 percent, 12 percent and 3 percent of the trade unionists. This does not mean that union members do not have political preferences; it is generally assumed than 10 percent of the membership of the Federation is Communist, that another 10 percent would belong to Christian unions if such unions existed, while the others are Social Democrats. Perhaps 10 to 15 percent of those put down as Social Democrats really have no political affiliation. All the members of the Executive Board of the Federation are Social Democrats except the First Vice-President and the Women's Secretary, who are Christian Democrats; also 15 of the 16 presidents of the industrial unions and the nine chairmen of the regional federations are Social Democrats. The hold of S.P.D. on the union membership is due to the old attraction of Socialism for the workers. But the unions are eager to maintain their independence from political control. Last year, after the death of Hans Boeckler, the Federation's first President, Dr. Schumacher tried to have Walter Freitag, a member of the S.P.D. group in Bundestag and the president of the metal workers, chosen to replace him. But the election went to Christian Fette, the President of the printers' union, who is a member of the S.P.D., though he holds no party office. This result was reversed in October with the election of Walter Freitag.

Social Democrat union leaders think that the International Federation of Christian Trade Unions, which has headquarters in Holland, hopes to set up separate Christian unions in Germany, but their Christian Democrat colleagues in Germany seem eager to maintain unity in the German trade union movement. Whether the "Christian" group would resist pressure from the Roman Catholic Church is another question. Dr. Adenauer, who is head of political Catholism in Germany, could hardly desire such a split now. His own Party, which set out to unite Catholics and Protestants in German politics in 1945, is now rent by dissensions and it would be very difficult for the Catholics to carry many Protestants with them if they seceded from the unions. The Catholic attitude may alter if the Government parties decide to combine their votes in the coming Bundestag election. Herr Freitag must then show wisdom, courage and flexibility--in short, statesmanship--if he wants to avoid a split in the unions which might easily put the Government groups and the Social Democrats so far apart that German democracy would no longer work. The Communists are so weak that they cannot even threaten to split the Federation. All they can do is to induce union members to voice their grievances more noisily than they would do otherwise. Union leaders have freed the works councils from Communist domination.

Though the German trade unions seek to keep free of control by political parties, they are not, of course, aloof from politics--an impossibility at a time when the scale of employment and the level of real wages is a function of government to an ever increasing degree. The unions have never found a satisfactory technique for political activity to replace the methods of their former affiliations. The American principle, "reward your friends and punish your enemies," does not work in a country where the approach to politics is so emotional and where party lines are so rigid. The unions have tried to lobby, to march in and out of government committees, and to publicize their program and to strike. They consider co-management in coal, iron and steel a great victory. But they have also suffered defeats before the setback this summer. Bonn has not yet passed the measure for holidays for workers introduced in the south by Laender legislation. And labor has suffered a reduction in representation in the joint labor-management boards which administer the sickness funds; from Bismarck's time, they have had a two-thirds vote on these boards, but now share a straight 50-50 representation with management. Unions also complain that the local employment agencies, which the unions formerly administered on equal terms with the employers, have now been bureaucratized.

The idea of co-determination, which seems to many Americans an impractical and doctrinaire notion, will perhaps become more understandable in the United States if it is seen--as German workers see it--as a much-needed method by which German labor can influence the processes of government. German workers not only seek places in the management of industry but also want to participate on terms of equality on the regional Chambers of Commerce and Chambers of Crafts which have administrative functions. Labor's objective is the establishment by law of a national economic council where the two "social partners"--and they alone--shall have equal rights. The council would issue programs but not regulations, and its programs would not be binding on government. The employers who have fought co-management (though not the works councils) reject union membership in the Chambers of Commerce and of Crafts. They do not oppose a national economic council.


A new wage program is now being developed by the unions and the Mutual Security Agency. Instead of being tied to prices, which keeps real wages at the same level, wages would rise with the increase of productivity, thus bringing labor a higher standard of living as its efficiency rose. There has been a slight trend for wage increases to go beyond rises in prices during the last year and a half. Shortly before the currency reform in June 1948, a wage rise of 15 percent was allowed by the occupation authorities. For about nine months after the reform, union leaders refrained from making wage demands in order to allow industry and commerce to reorganize production and exports. Wage rises at that time were mainly due to the earlier authorization, and to increased hours. At the beginning of 1950, the index of prices was 155 and that of wages 142, using the year 1938 as a base, or 100. In June 1950, when the cost of living was dropping, wages continued to rise. By the end of that year the cost of living had again risen 10 percent, while wages rose 20 percent. Up to September 1951, the rise in wages continued to exceed the rise in prices.

The average monthly pay of a male wage-earner was slightly above DM320 ($80) for a 49-hour week at the end of 1951. In June 1952, top monthly wages were at DM480. Although this appears very low to American eyes, the tendency in Germany is the same as it is in the United States-- wages of manual labor generally exceed or at least cover the rise in prices. The increase in wages of salaried employees and intellectuals (except technicians and some other limited groups in industry) lags behind the rise in prices. In Germany, wage increases have been gained through direct bargaining with the employers, without government arbitration.

Herr Vom Hoff, Secretary of Economic Affairs for the Federation, recently announced that the unions consented to the new wage policy. Necessary incentives to higher productivity were, he said, an increase in investments to eliminate the bottlenecks in mining, steel, electrical power and housing, and "a different climate in the plants and beyond."

To counter the general malfunctioning of the capital market a law was passed in January 1952 under which one billion Deutsche Marks are to be levied from industry. Union leaders, together with representatives of government and private enterprise, sit on the board administering the "aid." The law is only a preliminary measure, since approximately seven billion Deutsche Marks are needed. When the law on co-management in coal, iron and steel was discussed in 1951, some opponents of the measure contended that private capital, which so far has preferred investment in consumption industries, would no longer be freely available in these industries or in other heavy industries where labor would be seated on the boards of directors. Advocates of the measure replied that private capital will pursue profits, and that profits are in prospect in these industries now that the restrictions imposed on production, sales and prices have been lifted. Continued government aid to organize the market will probably be needed, however. By stating that higher wages are conditioned on investment in these industries, Hans Vom Hoff has indicated the willingness of the union to cooperate with private capital. At the same time he proclaimed that union goals are a higher standard of living for labor, secured by genuine co-management, and union participation in economic planning, beginning with the planning of investments.


The present resentment of the unions against the Government will not affect the passage of the Contractual Agreement with the Allies. The unions have no seats in the Bundestag, and the Social Democratic "no" is an old story. When the unions say that they will fight the new law by democratic means, they are referring to next year's elections, not to the vote on the agreement itself.

In a press conference last January at which Christian Fette was present, Herr Vom Hoff stated that he favored Western preparations for defense against aggression. Protest telegrams poured into the Federation's headquarters in Düsseldorf. The Executive Board thereupon decided not to take a public stand on the question of German rearmament, fearing that if it did so the suppressed differences of opinion on this subject within the Social Democratic Party would come into the open in the union locals and tear them apart. Nonetheless, the unions did not want to follow Dr. Schumacher into the impasse into which he had led his party. The recent union congress sought to maintain this same balance by rejecting, as not within its competence, a motion to oppose the Contractual Agreement, while at the same time ostentatiously dropping Hans Vom Hoff from the Executive Board.

Dr. Schumacher was set on winning the next election and therefore opposed the Government at every point. His emphatic "no" to the Western contracts was the consequence of his domestic policy. His deputy, Carlo Schmid, reflected the opinions of many Germans when he said recently[ii] that the German objectives in negotiation with the West are full German sovereignty, German participation in NATO and in Western Europe as an equal partner, settlement of the Saar issue on German terms, the end of French attempts to obtain German coal, and unity with the East Zone. Yet the Social Democratic Party, which has not abandoned Dr. Schumacher's line, cannot be said to have a real foreign policy unless it can offer an alternative to coöperation with the West. And it cannot offer any alternative since it is against German neutrality and against the unity of Germany under Russian auspices--which, it knows, it could not possibly survive.

The unions perceive that coöperation with the West is essential for the survival of German democracy, the maintenance of free trade unions and the achievement of a bearable standard of living for the German worker. They cooperate with the West in the International Confederation of Free Trade Unions, and favor the O.E.E.C., the Schuman Plan and other such developments. Nevertheless, they do not follow Dr. Adenauer's policy without reservations. They are afraid that his present Government will not prevent the return of the old officers' caste when the new armed forces are organized, and they oppose what they consider to be his attempts to build Western Europe on a capitalist and conservative basis. Since High Commissioner McCloy gave such strong support to Dr. Adenauer, United States foreign policy is thought to share these preferences. The unions consider this policy shortsighted, insisting that labor is too strong to be circumvented and that European institutions can be organized only with labor's help. To frustrate the quest of labor for a higher standard of living will bring serious disturbances, they say, which will play into Communist hands.

[i] Under the 1951 Act, the board of directors of 11 members has four who represent shareholders, four who represent labor, two more who represent the interest of labor and management but are not employed by either the company or the unions, plus one neutral member, chosen by an elaborate procedure which may go to the courts.

[ii] "Germany and Europe: The German Social Democratic Program," by Carlo Schmid, Foreign Affairs, July 1952.

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