ABSTRACT
So far, I have considered the link between corporatist government intervention and monetary regimes. In this chapter, I will extend the line of explanation to the capacity of the government itself, examining how political institutions influence the decision of governments to intervene in wage bargaining procedures. Generally speaking, political decisions tend to be directed to preserve the status quo and governments have to overcome inertia and opposition from other political actors against change, which can use institutional devices in order to block political decisions. 79 Governments are primarily under pressure to avoid the political costs of a deflationary policy and aim to convince trade unions to commit themselves to wage restraint. Their ability to do so depends on the vulnerability of the government to the pressures from trade unions to be compensated for the negative externalities of restrictive monetary policy. This again is influenced by the political institutions themselves, the structure of the party system and the relationship between trade unions and political parties. The aim of this chapter is therefore to locate the political — rather than the economic — interaction between governments and social partners. Moreover, it aims to explain how weak governments and dependent political parties in particular use the means of government intervention to counteract economic crises that arise from the lack of adjustment of wage bargaining to a more restrictive economic environment.
