Across Europe, there is growing, popular awareness that deep change is needed in the social welfare system. In Germany, for example, polls show that a majority supports change in the once-sacred rules that make it hard for companies to lay off workers. But one group remains opposed to reform: the unions. Talk to union leaders, and it's clear that they reject the premise that less government and less labor-market regulation would boost growth. Given the unions' power, the result is political gridlock and economic stagnation.
More than just old-line socialist ideology is at work here. As they have lost members, unions in Germany, France, and Italy have increasingly become special-interest groups rather than mass organizations. Labor leaders tune their rhetoric to an aging, dwindling membership stuck in an outdated mindset. In the mouths of European labor bosses, terms like "solidarity" and "social justice" have become code for "don't touch my benefits." Unions have also managed to leverage their institutional power -- as members of corporate supervisory boards of directors for example -- to compensate for their ever-scarcer numbers.
The sad irony is that unions are hastening their own demise. The welfare state the unions seek to preserve -- with its generous pensions, free university education, and high-quality health care -- is possible only in a strong economy. Yet the unions cling to policies that sabotage the economy, and they don't hesitate to use their muscle to block reform. Their reactionary attitude is one reason that so many workers, especially women and the young, choose not to join.
A few progressive union leaders have learned the value of compromise and pragmatism. Hubertus Schmoldt of the German chemical workers' union IGBCE, for example, has shown a willingness to at least discuss reforms proposed by Chancellor Gerhard Schröder. France's biggest union, the Confédération Française Démocratique du Travail (CFDT), has worked with business leaders to revamp unemployment insurance and other employer-subsidized social programs. More labor leaders should follow this example. If they did, they would one day be able to fight for their fair share in a growing pie rather than a shrinking one.