Ineos dispute – a sign of declining labour and governmental power

The UK headlines in the last few days have featured the threatened closure of the Grangemouth petrochemicals plant owned by Ineos, a huge but privately owned firm.  What that would do in terms of supply chain issues for buyers of petrochemicals, I don't know, but I assume switched-on procurement people in this sector will have been working on their supply chain risk plans for some time.

The events provide a fascinating case study around negotiation tactics and behaviours. It looks like the trade unions misjudged the strength of the employer’s BATNA (best alternative to a negotiated agreement) and judged that the threat to close the plant was a bluff. When the employer started to go through with that threat, the union was forced into a hasty climb-down. It looks like there is after all at least a small intersecting area on the chart showing each sides “acceptable outcomes”.

But, as well as providing a case study of conflict-based negotiation strategies, it illustrates two other trends that are likely to continue over the next few years and that have some implications for everyone in business.

The first is the power struggle between what we might define in classical Marxist terms as labour and capital. When I was growing up, labour often seemed to have the upper hand, and arguably the decline of British industry through the 1970s was in part down to union power facing off against poor management, all exacerbated by a lack of a desire from both parties to modernise. But the boot is very much on the other foot now. Strikes are a rarity, and unions, with dwindling memberships, tend to be happy to preserve jobs even at the expense of members' immediate benefits. That's why Grangemouth looked so unusual for a while - a union apparently risking everything to fight for members' rights.

The second point is the relative powerlessness of governments. The Scottish government implied that they would "do something" in terms of Grangemouth – find another buyer perhaps. The UK Government expressed disappointment but has remained short of any promises. Similarly, both the Tories and Labour in Westminster are making a lot of noise about energy prices, but it remains to be seen what they will actually be able to do about the issue. Even if government legislates in this case, or freezes prices, the energy firms can withdraw from UK investment or simply turn off the generators. Who holds the power in this supply chain?

It is that power balance – towards capital and towards businesses rather than governments - that is contributing (along with other significant factors, to be sure) towards a greater polarisation in western societies, with the top few percent of people accounting for a greater and greater share of income and wealth. That wasn't too much of a problem as economies were growing rapidly, but in an environment of sluggish growth, it may turn into a real issue of social cohesion. And governments' lack of real levers to effect change may lead to greater frustration amongst the population with governments, with the big firms and with the few percent who continue to get wealthier as others struggle.

We’ve moved off supply chain matters really. But anyone who could offer a somewhat more  “socialist" solution to wealth distribution, but one that also offered effective economic management (i.e. not bankrupting their country in 2 years flat) might do rather well in elections over the next few years.

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