After World War II, the government, as well as industry and the trade unions, realized that the country could not afford to repeat the continuous social, political, and economic conflict that marked the 1920s and 1930s, when the country moved from one crisis to another until Adolf Hitler's Anschluss in ÍÍÍÍ1938. They wanted to avoid ruinous social and industrial conflict, strikes, lock-outs, and the kind of persistent social battles that had contributed to the paralysis of the Austrian economy and its body politic during the interwar years.

To find a solution, the government and its political and economic institutions reached back to earlier concepts that also had an influence on Austrian thinking and Austrian history. One was the papal encyclical Rerum Novarum of 1891, which had envisaged a working class that would be gradually absorbed into a property-owning class, not through social conflict but through constructive social cooperation. Another was the Austrian tradition of the Labor Advisory Council (Arbeitsbeirat), which had functioned as a section of the Ministry of Commerce from 1898 to the outbreak World War I and which offered a model for the pragmatic participation of the labor movement in the functions of the state and the general direction of the economy.

After World War II, these concepts coincided with the practical exigencies of the moment to force representatives of social groups to work together to cope with the combination of unemployment, inflation, and widespread poverty and misery. The ÖGB and the reestablished business organizations of the three main economic chambers played central roles in working out a series of wage-price agreements between 1947 and 1951. Those agreements, and the negotiations that led to them, were based on a mutual recognition that no social group could benefit if it imposed its demands at the expense of the collapse of the state and its economy--a collapse that often seemed all too near in the immediate postwar years.

The social partnership system works on the basis of a mutual recognition of three principles. The first is that the three main economic groups--industry, agriculture, and labor--will be properly represented through four mutually recognized organizations--the chambers of commerce, agriculture, and labor, and the ÖGB--that represent their interests and that can take the responsibility for decisions. The second is that economic decisions can be legitimately made outside the ideologically competitive political atmosphere of parliament, thus in effect depoliticizing crucial matters related to the Austrian standard of living. Third, the principle of consensus will function in such a manner that no social group is ignored, and no social group will prolong the struggle once an agreement has been reached.

The core consultative instrument of the social partnership is the Parity Commission. The commission consists of seven members of the government--the chancellor, three ministers, and three state secretaries--and two representatives each from the Federal Chamber of the Economy, the Presidential Conference of the A 141ustrianian Chambers of Agriculture, the Council of the AÍÍÍÍustrian Chambers of Labor, and the ÖGB. This distribution of seats on the commission gives the interest organizations a majority. Experts in various areas attend the meetings in an advisory capacity. The Party Commission's decisions must be unanimous, because the commission is not based on law, and participation is completely voluntary.

The Parity Commission began its work in 1957 on the basis of an exchange of letters between the president of the Federal Chamber of the Economy and the president of the ÖGB. Its original purpose was to slow down a troubling wage-price spiral, but it later expanded into much broader discussions on the general trends of the European and Austrian economies and what would be the best response to these trends. The commission has subcommittees on wages and prices. In addition, the commission includes the Advisory Committee for Economic and Social Questions, which was established in 1963 to provide the basis for an objective approach to economic policy and to conduct studies required by the Parity Commission.

The Parity Commission, however, only deals with the central questions of the economy. It establishes the general principles for solving economic problems and disagreements. Below it, at the industry level, the interest-group associations of the various chambers or the trade unions negotiate the separate and legally binding agreements governing employers or employees. The agreements are reached on the basis of the broad principles and criteria set by the Parity Commission.

Some forms of social partnership involve little or no participation of government organs. The so-called selfadministration associations require the cooperation of interest associations in such structures as social insurance institutions, agricultural boards, labor-market bodies and tribunals, and in other institutions where agreements between potentially conflicting interest groups must be reached. Those institutions more often deal with social than with economic questions, but the participants in the negotiations usually evaluate the broad economic situation and the policies agreed on in the Parity Commission as they negotiate.

Beyond the mechanics of the Parity Commission and the bitter memories of futile class conflict, however, other elements also work to produce an atmosphere of cooperative consciousness. One of these elements is the virtually universal recognition by all Austrians that theirs is a small state and a small economy in a world full of larger and potentially more competitive actors. Austria cannot afford self-indulgence because it would immediately risk its survival.

Another cause for cooperation rather than unbridled competition is the large public and foreign ownership of Austrian firms. At the beginning of the 1990s, state-owned firms constituted a total of 32.8 percent of all Austrian companies, and foreign-owned firms constituted an additional 25.1 percent, leaving only about 35 percent in private hands, with an additional 7 percent in scattered holdings.

The Austrian trade union movement is forced to moderate its demands for wage increases because of the close affiliation between the Austrian schilling and the German deutsche mark. The stability policy of the German Bundesbank thus also has an effect in Austria. Given this fact, the trade unions cannot usually argue that runaway inflation threatens the standard of living of the Austrian worker.

The social partnership has been successful in maintaining a cooperative spirit and in avoiding industrial strife. After World War II, for example, Austria had fewer strike-minutes lost per worker than any major economy. In many years, there were no strikes at all. However, there has been debate about whether the social partnership and the work of the Parity Commission and other bodies have impeded progress and if stability could become stagnation. The danger exists that new production and communications systems, as well as progressive organizational structures, will not be introduced quickly and that the social partners will find it convenient to protect established jobs and processes rather than to revise or even revolutionize them.

Data as of December 1993