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ABSTRACT

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

Analyses of the global crisis that erupted in 2007 in bank failures, liquidity shortages and business bankruptcies have obscured the connections between the real and monetary economies. Money market fetishism dominates. In the past, theories of economic crisis assigned a key causal role to labour's growing strength. In Britain, the focus of debate was trades unions' allegedly unregulated power at workplace level, but labour's presence and influence in state, business and workplace institutions has since receded. This article attempts to re-insert labour into the contemporary analysis of the crisis and highlights the shifting relations between states, capital and labour in the age of austerity.


INTRODUCTION

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

The precipitous collapse in September 2008 of Lehman's—once the fourth-largest US investment bank—dealt a hammer blow to the prevailing orthodoxy that unfettered markets work. Longstanding advocates of unleashed capitalism began to speak with foreboding of an enveloping global crisis. The theory of ‘efficient markets’ that had dominated policy analysis and debate for two decades suddenly ceased to connect with the realities of economic meltdown. Business leaders, policy makers and the millions of blameless victims of the collapsing casino economy feared the consequences. Working people were cut adrift, left wondering what it meant for them. What would happen to their jobs, their pensions, welfare and public services? Their representatives—in the trades unions, community groups, the churches and the NGOs—were ill-prepared and ill-equipped to deal with the storm ahead. That was 2008.

Ruptures in the circuits of capital have punctuated the pace, rhythms and reach of capital accumulation for two centuries, but the contemporary crisis has been judged distinctive. It is said to be different from the Great Depression of the 1930s, for example, because of its global embrace and the scale and scope of ‘financialisation’. A relatively new concept, financialisation highlights the dominance of money capital and financial institutions within the structure of contemporary economic and social relations. High dividend payments, bankers' fees and the meteoric growth and diversity of derivative markets are the most immediate legacy of the deregulation of markets in the 1980s. But these reference points, however revealing and relevant to the economic spheres of exchange and distribution, promote a view of the contemporary capitalist economy that slights production and the position of labour. The critical role of the state is ignored.

Labour's invisible role in contemporary accounts of the present crisis reflects the reality of labour's weakness to be sure, but rather than sleepwalk into a 21st-century version of mercantilism (value originates in exchange), it is essential to situate the movement of money capital within the integrated circuits of capital: the movement of capital in its commodity, productive and monetary forms. The argument and evidence presented below highlights the critical weaknesses in production that surfaced before the financial meltdown. The real economy, the labour processes in cars, construction and clothing manufacture, for example, were unable to deliver the productivity and profit advances that would guarantee a seamless articulation of the differentiated moments of the capital accumulation process. A crisis in production, bubbles in money markets and declining real wages (hence purchasing power) coincided: meltdown was a distinct possibility.

What follows is a discussion of the processes that led to the sapping of labour's organised voice. The historical reference point is postwar Britain, where arguably labour experienced its most spectacular reversal of fortunes. The analysis highlights the pivotal role of the state and the crisis that shifted the frontier of relations between state, capital and labour in the 1980s. The analysis of the current crisis is also state centric. How are the historically unprecedented interventions of the state—nationalisation of banks, bail-out of multinationals and the re-discovery of Keynesian economic principles—to be understood, historically, politically and theoretically? Crisis theory forms the focus of the third section. The conclusions discuss the implications of the twenty-first century crisis of labour.

THE DISENFRANCHISED WORKFORCE

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

The crisis, unsurprisingly, sparked a renewal of interest in the Great Crash of 1929. One of the leading analysts of the material conditions that culminated in the Crash of 1929 was the American economist Galbraith, whose classic text suddenly became the handbook for desperate finance ministers around the world (Galbraith, 1954). Attracting far less attention was his prescient account of the fragile character of the state of American monopoly capitalism (Galbraith, 1952).

Sixty years ago, he elaborated the concept of ‘countervailing power’ and the critical role that organised labour held in challenging the excesses of unbridled American corporate capitalism. With due reference to the developing Oxford school in Britain, Galbraith saw in the American unions—in steel, automobiles, clothing, for example—a powerful counterbalance to what he believed might otherwise produce the worst excesses of the unaccountable and destructive pursuit of profit. His was a general theory that put an economic case for the necessity of effective countervailing curbs on capital to circulate as unbridled self-expanding value, with labour playing the key role. The same line of argument was never pursued by the leading scholars in Britain.

Taking the argument that labour's countervailing power is a progressive force seriously presupposes the logic of its inverse case. The crisis that engulfed the Western economies in the early 1970s highlights the issue. In the Anglo-Saxon world, the 1970s crisis gave birth to Reaganomics in the US and Thatcherism in Britain. Labour's marginalisation, as discussed below, began in earnest. In mainland Europe the nature of the settlements reached to resolve the crisis were more varied and complex. Labour continued to retain a voice in the workplace and in the direction of the modernisation of industry. The disenfranchisement of labour in the United States and Britain required an intensification of state activity, not disengagement as is sometimes argued. Britain, in the second half of the 20th century, illustrates the state's crucial role in promoting the reconfiguration of labour markets, the demise of the representative voice of trade unions, and a new era of capital accumulation based on more repressive workplace regimes.

The labour markets of Britain did not evolve according to the laws of supply and demand. They did not develop in ways that would be predicted by mainstream labour economists: the exogenous forces of technology and supply side choices were largely irrelevant. They were fashioned and refashioned by state intervention in ways that never surface in the standard textbook. The movement of labour within and between different occupations in Britain reveals a complex pattern of radical shifts and incremental changes. The role of social agency in shaping those histories has been and remains crucial. The destruction of the British coal industry and the spectacular decline of manufacturing could not have been reckoned on the basis of known shifts in technology, consumer preferences or alternative energy supplies. In 1979, more than seven million people worked in (mainly manual) jobs in manufacturing, but now the figure is far fewer than three million (Nolan and Slater, 2010). To adequately account for this haemorrhaging of jobs, it is necessary to explore the material effects of the interplay of state, capital and labour relations: to grasp the historical turning points and interventions of the state that shaped the history of work, employment and patterns of industrial restructuring.

The state's potential role as a force for the renewal of industry and the forward march of labour was exposed after 1945. Emboldened by its electoral landslide, the government enacted new legislation to socialise ownership of key industries and secure under public control, health, education and local government services. The powerful obstacles that private ownership had posed to modernisation during the interwar years were, for a brief time at least, swept aside (Fine and O'Donnell, 1981). The renewal of key industries (coal, steel, railways and the utilities) entailed significant shifts in the social division of labour, creating new demands for managerial, clerical and manual workers. At the same time, the craft trades (both old and new) received a boost from the expansion of manufacturing. Yet these shifts in ownership and policy objectives left in place many entrenched features of the domestic economy. Labour productivity was and is today the Achilles heel of Britain's economy (ONS, 2010). In the early postwar years, Britain's relative under performance was masked by rapid and sustained growth throughout the international economy. But, by the early 1960s, Britain had surfaced within the advanced Western economies as a relatively low wage, low productivity economy with work and employment patterns that had deep roots and implications. The capital–labour relationship was central to Britain's future.

Throughout British industry patterns of work organisation were deemed anachronistic. The command and control systems that had been put in place to subordinate labour in the large US corporations in the early years of the twentieth century did not gain a hold until much later in Britain (Nolan and Slater, 2003). Instead the traditions of craft work and a form of inside contracting persisted in key industries (coal, steel and engineering), surviving the fitful and fragmented attempts by employers to impose their authority over the labour process. Chaotic payment systems also flourished as management delegated responsibility for pay fixing to the foremen and supervisors that bargained with the growing ranks of unpaid union officials (shop stewards) at plant level. In the mid-1960s, a Royal Commission was established to uncover the roots of the chaos that was widely deemed endemic and corrosive of industrial performance. The Commission recommended inter alia the elaboration of comprehensive factory or company-wide agreements, the formalisation of industrial relations procedures, and a raft of measures to support ‘effective and orderly’ workplace bargaining. The aim was to extend workers' collective voice in a bid to end the ‘unscientific’ management practices that were rife. Contested from the outset, the Donovan recommendations for voluntary reform were implemented opportunistically, piecemeal and typically in workplaces where unions and collective bargaining were already well established. By the mid-1970s the notion, at the centre of the Commission's proposals, that management could ‘regain control by sharing it’ had been superseded in public policy debate by a new incantation pressing for management's ‘right to manage’. Crystallised at the 1979 General Election, this new position helped sweep Thatcher into power and prefigured a sea change in the management of economy, industry and labour relations.

Thatcher's first government jettisoned the vestiges of Keynesian macro-economic policy and implemented a bastardised version of monetarism that assumed as a core objective the transformation of the power relationship between management, workers and trades unions. By the mid-1980s, the forces that had shaped work and employment patterns after 1945 had been largely dismantled (Nolan, 1994). Certainty about the cleansing properties of economic chaos—‘creative destruction’ as Schumpeter (1942) had put it—took on messianic proportions. For present purposes, there were three critical policy shifts that the Thatcher governments visited on the United Kingdom.

First, it abolished the tripartite institutions that had been put in place in the 1960s to assist and, in some cases, bail-out ailing industries and companies (e.g. Rolls Royce), improve the skills base, and check the problem of low pay. To advance the cause of labour market deregulation, Industrial Training Boards and Wages Councils were abruptly axed. Second, it embarked on an unfolding programme of privatisation. Beginning modestly at first, the sale of state-owned assets gathered pace during the 1980s, often at knock-down prices to private capital, and gilded with the rhetoric of advancing ‘people's capitalism’. So it was that the nationalised industries, the utilities (gas, water, electricity, telecommunications), the ports and shipbuilding industry, and many Local Authority services (refuse collection, cleaning and road maintenance, for example), were returned to the private sector. The alleged benefits of contracted-out services became a stock mantra, readily invoked but rarely if ever tested against the ‘supply or buy’ economic calculus that would have exposed the distortions and inefficiencies generated by the introduction of a profit ‘tax’ on public industries, utilities and services.

Third, as noted, the government set about transforming the legal framework to promote atomisation and wither collectivism. Trade unions, perceived to bear privileges from a past regime, faced draconian new rules and regulations that were to dramatically diminish their resources and capacity to organise on behalf of their members. Step-by-step, hard-won gains accumulated over preceding decades were swept away by an offensive that was to transform the character of work and production politics for many years to come. In the factories, mines, hospitals, offices and schools—indeed few workplaces were left untouched—the position of management and unorganised employees was given privileged status under the law over organised work groups. These attacks recorded the end of a period of trade union membership growth and influence that had been particularly notable in the public sector.

The election of a new Labour government in 1997 signalled the possibilities for a change of direction. Expectations were high to be sure but this only served to fuel public disappointment with Labour in power. The government might have striven to harness the powers of the state to promote modernisation and economic renewal and shift the character and content of work for millions of workers in public and private sectors. It might have set about developing a coherent set of policies to render more dynamic the performance of industry and the labour market, to encourage investment in plant, people and technology, and check the unbridled powers of the City and financial markets. It might have given workers and trade unions more rights to resist opportunistic and unregulated employers, and challenge the business strategies that had for decades relied on low wage, low skill and low technology routes to profitability. It might have waged war against the sources of poverty, illiteracy and job insecurity. But instead the policy agenda constructed in the final years of the twentieth century left largely intact the status quo ex ante. Embracing the debilitating language of globalisation and subscribing to the abstraction of efficient markets, New Labour surrendered any aspiration to lift the status of the work undertaken by the vast majority of employees in contemporary Britain.

THE CONTESTED ROLE OF THE STATE

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

Since 2008, the real economies and labour markets of the Western world have been in freefall, raising the spectre of a second Great Depression, but this time with profound implications for every country in the world (Stiglitz, 2009). For years, the dominant consensus in macroeconomics denied the possibility of such a crisis, but that consensus now rings hollow. In response to the credit crunch, bank and business closures and soaring unemployment rates, the governments of the western countries embarked on the most ambitious crisis-management measures in modern history. They appropriated billions of tax revenues to bail-out private corporations, nationalise ailing banks, and pursue a policy of quantitative easing to help kick-start business and consumer credit.

The British government nationalised Northern Rock in September 2007, the Bradford and Bingley a year later, and then in 2009 took a commanding interest in the Royal Bank of Scotland and the Lloyds Group (the latter having earlier annexed HBOS). The cost of the total rescue package is estimated to have lifted the budget deficit in 2010 to a staggering £170 billion sterling. Similar measures to re-capitalise the banks, increase the circulation of money, and (partially) nationalise ailing banks were put in place in Europe, sometimes through coordinated action as occurred for example when Belgium, Luxembourg and the Netherlands each took a 49 per cent stake in Fortis.

In the United States, where the concept of nationalisation is an anathema, it fell ironically to the Bush administration to approve a 700 billion dollar rescue package for the US financial sector, of which more than a third was used to buy equity in nine leading banks (including the iconic Bank of America). At the same time, the state assumed control of mortgage lending by nationalising Fannie Mae and Freddie Mac. In the industrial sector, the incoming Obama administration faced hostility and delays in Congress as it sought to prevent the collapse of the auto-industry that accounted for approximately 2.5 per cent of total GDP and hundreds of thousands of jobs in Detroit and the State of Michigan alone. General Motors and Chrysler filed for bankruptcy, Ford continued to struggle, but the three household brand names survived only with state support and 25 billion tax dollars. Despite these and other emergency measures, industrial productivity, output and wages continued to plummet. Unemployment has since hit the politically explosive rate of 10 per cent, and millions of employees have had their hours of work cut. In a striking transformation of the US labour market, men currently account for 75 per cent of all redundancies and women (often in low wage, low status and part-time jobs) now form more than half the paid workforce.

The employment prospects are scarcely better elsewhere. Across Europe, unemployment rates are averaging between 8 and 10 per cent. Rates are lower in Norway, the Netherlands, Finland and Demark, but much higher in Spain, Portugal and Greece. Iceland and Ireland are in dire straits, and even the usually resilient Swedish economy experienced a staggering 50 per cent increase in unemployment between 2008 and 2010. In Ireland, the government opted for an austerity programme and slashed public sector expenditure and jobs: unemployment soared in 2010 to 14 per cent and among the young (aged 16–24) by 52 per cent. In the same year, British unemployment jumped to 8 per cent, or just under 2.5 million people. To these figures should be added the number of inactive people of working age not seeking work, which increased by 4.8 per cent in a single year and currently exceeds 8 million people. Investment, output, wages and productivity in Britain's private sector tumbled while the share of part-time jobs in total employment increased as employers reduced working hours and cut jobs.

As in previous crises, the state's role has been fiercely contested. The deficits accumulated by governments to avert a global economic meltdown have reignited a longstanding argument that can be traced back to Adam Smith's pronouncements on ‘unproductive’ expenditure in The Wealth of Nations. Two hundred years later, in the era of Thatcherism and Reaganomics, the purported economic benefits of shrinking the state was a powerful incantation of the conservative economic mainstream. In the present crisis, the revival of state dirigisme has fuelled a debate that is in turn retrospective, narrow and fractious. It is retrospective in the crucial sense that the faultlines that stifled policy initiatives in the depression years of the twentieth century have re-surfaced; narrow to the extent that the key issues have been defined with reference to a ‘new macroeconomic consensus’ that has little or nothing to say about the capitalist state; and fractious because there is much at stake. A larger role for the state in the economy raises the spectre of social ownership (nationalisation, for example), and, for many, the unwelcome restoration of constraints on the circuits of capital.

In the first Great Depression, as Skidelsky (1967) has documented for Britain, and Galbraith (1954) for the United States, the doctrine of laissez faire was deeply entrenched: the state and central banks either failed or chose not to act. Describing the Budget as a ‘political rather than economic’ event, and the Treasury as ‘the natural ally of the City’, Skidelsky observes that the Treasury expected the government to curb its spending and balance the Budget. A failure to do so and ‘give the expected lead would undermine the confidence in the offending government of both domestic and foreign businessman and bankers and thus confidence in the nation's currency, its creditworthiness, its investment possibilities and so on’ (Skidelsky, 1967: 29–31).

For 1929–1931 read 2008–2010. In the 1920s unemployment hovered around 10 per cent, and in some years reached much higher levels as in 1921 when it hit 19 per cent. But successive governments failed to deal with the problem. Opposition and establishment forces, notably the City of London that secured a return to the gold standard in 1925, ensured that the state remained a prisoner of events. The parallels with the present day are striking. The very same political struggles have resurfaced. The British electorate voted in the 2010 General Election largely on the issue of ‘big’ versus ‘small’ government. The result of the election was inconclusive but a hastily constructed coalition government has since pushed through austerity measures that will blight the lives of millions, particularly young people. Obama faced a similar contest and sustained serious losses in the US Congressional elections as voters backed the Tea Party's call to arms against the Government's fitful attempts to stave-off even more devastating job losses and business failures. In the depression years the conservative case for state passivity dominated the policy debate; but this time governments with varying degrees of conviction performed a volte-face and rediscovered as a matter of urgency the case for state activism, despite fierce political opposition particularly from mainstream economics.

The ‘new macroeconomic consensus’, developed in the years after Thatcher and Reagan, both assumes and concludes that free markets are efficient and spread wealth. The contemporary version of the faith is underpinned by the argument that economic transactions are guided by ‘rational expectations’, that is judgements about the future that are not systematically mistaken. A significant role for the state and discretionary fiscal policy is discounted, if only by a studied silence that has proved too much for some. Goodhart (2005), for example observed before the current crisis that macro-economists ‘seem intellectually happier to imagine an economy which is inhabited by private sector agents and an ‘independent’ Central Bank with its own loss function (and no mandate from, or acceptability to, a democratically elected government’ (cited in Fontana, 2009). If markets are efficient, as the theory assumes, why did investors fail to discount the risks of the sub-prime property markets? Why were the banks over-extended? Why did the G7 capitalist states and central banks develop coordinated strategies to shore up a financial system that was fast disintegrating?

Keynesian economics, sidelined since the mid-1970s, addresses some of the issues.

Speculation and private sector behaviour is not benign, consistent or guided by rational expectations. Key investment decisions are governed by uncertainty and ‘animal spirits’: investors often act like sheep. Keynesians, such as Goodhart, have little or nothing to say about nationalisation, private sector bail-outs or state offensives against labour institutions. But they do advance a clear case for public deficits when private sector output and investment fail to sustain the conditions for full employment. Public expenditure is the necessary counterweight to private sector parsimony. To those that protest that government deficits ‘crowd out’ more efficient private sector investment—a stock argument in the 1920s and 1970s (see e.g. Bacon and Eltis, 1978)—Keynesians would retort that without the current ballooning deficits, Britain, the United States, France, Italy and Germany, among others, would have fewer banks, much higher unemployment and even more bankrupt companies.

It is no coincidence that the demise of Keynesian economics coincided with the radical attacks on trade unions, public enterprise and social welfare systems in the Western economies in the 1970s and 1980s. The Keynesian state, imbued with a spirit of benevolence, is tasked to maintain aggregate demand and pursue policies to promote full employment, however that is defined. But the radical shift in the character of state policies—the privileging of monetary targets, the sale of public assets, the tolerance of high exchange rates and the deregulation of labour markets—signalled a shift in the balance of class forces. The political terrain that promoted partial and usually fragile accommodations between labour and capital was abandoned for more abrasive and determined efforts by the state to renew the forces of capital accumulation by deepening the crisis that inhibited investment, growth and profits in the Western economies in the late 1960s. Organised labour had to be comprehensively defeated.

In the present conjuncture, the extent and character of state policy is considered central to the resolution of the crisis. Intervention may have been required to stabilise the financial system and support ailing private sector companies, but the definition of policy options has recently narrowed down considerably. The voices of senior business leaders, bankers and conservative economists have resurfaced to urge restraint, to re-state the case for immediate and savage cuts in state expenditure, and hence pre-empt a wider debate about the state regulation of bankers and business. Though couched in the language of economic prudence and the need to restore confidence, their message is unequivocal.

The focus on the damaging consequences of large public sector deficits and the speed with which they should be paid down, masks a deep seated tension between the voices of business and the state. The banks and investment institutions have been thrown a life-line, as have many private sector companies, but now they argue for state minimalism and the restoration of the status quo ex ante. Labour's voice remains muted if heard at all. After years of developing weaknesses, the institutions representing labour are confined to the margins of public policy debate. The issue of the moment concerns the limits to unleashed, reckless capital accumulation. How far and with what levers can the state regulate and limit the movement of capital? Keynesians offer a compelling account of the implications of speculative financial behaviour for the real economy, but there is no corresponding analysis of how to control the speculators. Tobin taxes, latterly ‘Robin Hood’ taxes have been proposed, but no contemporary state is pressing for a fight with the very forces that brought the global system to near collapse and now threatens the political programmes of democratic sovereign states.

The governments of Greece, Ireland, Spain and Portugal have been at the front line, spectacularly reduced to the role of servants of money markets, the IMF, ECB and bail-out governments with missions to shore up their own faltering banks. Is it possible to find a price that will satisfy money markets to buy the bonds that will sustain our public services? Betting against currencies, selling bonds and lifting borrowing costs—these are the market activities that derail policies to support jobs and shift the profile of elected governments. This is the nature of the modern global economy that continues to command the obedient support of the political and economic mainstream.

GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

Crisis theory, like the analysis of the state, remains underdeveloped. In economics, wherein one might expect to find inspiration, the possibility of general and protracted economic downturns is often flatly denied, sometimes dismissed retrospectively as the product of policy mistakes, or is traced to the effects of war and other contingent ‘shocks’. Seeing limitless possibilities for market solutions to minor and major disturbances in investment, trade and output, the mainstream, as noted, remains remarkably sanguine about the current ‘downturn’. But it has not always been like this. In the past, attempts to account for the large amplitudes in investment, output and employment have produced ingenious, sometimes eccentric, explanations of the origins of boom, bubble and slump. Sunspots, anchovies, oil and animal spirits have featured prominently.

Anchovies, as Sutcliffe (1977) elegantly recounts, provided the springboard for the meteoric growth of the fishing industry in Peru. Combined with a derivation of cereals and soya beans, anchovies became a major source of the world's animal protein food and fertiliser, but vanished overnight ‘because of an outbreak of sunspot activity. The disappearance of the anchovies led to the complete financial collapse of the Peruvian fishing industry, which was thereupon nationalised. But it also led to an immense leap in the world price of primary proteins and in the price of food generally’ (Sutcliffe, 1977: 164).

The Peruvian anchovies crisis preceded by one year the oil shortages and dramatic spot barrel price increases that followed the 1973 Yom Kippur war. Sunspots, wars, disappearing anchovies and oil cartels are located theoretically within economics as ‘acts of god’, assigned causal status as unpredictable external shocks impacting on the capitalist economy initially in one sector but possibly with wider and protracted consequences. These are the factors highlighted in contemporary textbooks to account for the movement between periods of prosperity and slump, including the generalised economic downturn that took hold in 1973. Shocks of this type can neither be predicted nor abolished, but depending on the speed of price and technological adjustments may be contained and rendered largely benign.

Keynesians take a different view of the policy significance of external shocks, but occupy the same theoretical terrain as Jevons, the 19th-century political economist celebrated for his popularisation of sunspot theory. For sunspots read animal spirits. A wave of pessimism about present and future expectations of profitable investment opportunities—the so-called ‘marginal efficiency of capital’—holds the key to the Keynesian challenge to orthodoxy. Sudden shifts from scarcity to mass unemployment are interpreted with reference to a psychological shift in expectations and investment behaviour that knocks the economy off-course. The basic cause of the change is thus placed beyond the realm of economic analysis in the same way that sunspots were invoked in the past. Criticisms of the Keynesian mode of theory construction mounted during the 1970s and 1980s, but the concept of animal spirits as both cause and consequence of the economic crises has been restored in the contemporary critique of the conservative mainstream.

Neither Keynesians nor proponents of the mainstream make reference to other sources of contradiction and crisis. Traditionally this has been the central terrain of radical and Marxist social theory. The fact that productivity, profits and output growth slowed so dramatically throughout the Western economies during the late 1960s and early 1970s—nowhere more so than in Britain—scarcely attracts a footnote in the contemporary economic literature. It is as though there are no enduring lessons. Yet the events of that period provided a spur to the elaboration of new radical theories of economic change that placed capital-labour relations centre-stage. One such approach, focusing on Britain, gave primacy to the upsurge in trade union militancy, associated with the developing movement of worker representation at plant and establishment level. Glyn and Sutcliffe (1972), with whom this approach is most closely associated, argued that fragmented and often small groups of workers were able successfully to prosecute production and press wage demands that squeezed the profit margins of unusually disorganised and divided employers. The squeeze on profits that resulted from the bitter distributional struggles on the shopfloor—the focus of their analysis was on manufacturing—starved British industry of vital new investment funds and held back the modernisation of industry. The consequence in aggregate was the relative decline of the British economy.

The emphasis on class-based distributional struggle in Glyn and Sutcliffe's analysis was initially adopted by other writers on the developing economic crisis in Europe and the United States. It offered a compelling critique of the orthodox emphasis on ‘greedy’ cartels. But the approach subsequently came to be seen as too simplistic, lacking a structural content, and relying too heavily on the wider significance of wages struggle. The radical/Marxist analysis thereafter embraced a wider set of social and economic institutions and forces of contradiction in the capital-labour relationship to account for the uneven rhythms of capital accumulation that were a defining feature of economic development in the twentieth century.

French regulation theory and the American-based analysis of social structures of accumulation (SSA) dominated theory and empirical analysis in the 1970s and 1980s (for example, Aglietta, 1979; Gordon, Edwards and Reich, 1982). The latter approach addressed issues of prime concern to industrial relations research but was rapidly eclipsed by the new studies of historical branching points that connected more directly with the ‘flexibility’ agenda of the 1990s (for example, Piore and Sabel, 1984). The theory and empirical analysis of SSA, revived and extended to account for the contemporary global crisis, warrants discussion (McDonough, Reich and Kotz, 2010).

SSA are defined with reference to distinct labour market dynamics and institutions, labour processes, systems of management control, and macroeconomic regimes. Developed as an ‘intermediate’ theory of capitalist development, and less abstract than traditional Marxist accounts (eg. Sweezy, 1942), the analysis of social structures of accumulation is connected to a wider narrative about the long waves or cycles of accumulation that have allegedly defined modern economic history. The early contributions segmented the history of the advanced capitalist economies into three successive periods: proletarianisation, homogenisation, and segmentation. Each period was apparently brought to a close by a crisis in the institutions that comprised the social structure of accumulation, particularly the labour process. In each phase the essential character of the labour process is shaped by processes of institutional ‘exploration, consolidation and decay’ (Gordon, Edwards and Reich, p.10). Thus, for example, the segmentation phases having been consolidated in the post 1945 ‘golden years of economic growth is said to have erupted into crisis in the early 1970s. The bureaucratic structures of labour management (internal labour markets, large personnel departments, and growing trade union strength) are said to have come into contradiction with the conditions of valorisation in the labour process. The result was a generalised crisis of accumulation manifested in heightened conflict in the labour process, a productivity slowdown, a squeeze on profitability and a slide from relative stability into the downturn phase of the long wave.

In more recent versions, and in contrast to the earlier narrow focus on national economies and the near total neglect of the role of financial markets and money capital, contemporary versions of the theory stress the significance of globalisation and ‘financialisation’ as key causal factors in the emergence of the current crisis. This wider purview is to be welcomed, but the problems with the overall framework, identified in the past (see Nolan and Edwards, 1984), remain. There is a tendency to over-generalise, impose a periodisation of capitalist history that slights historical particularities, subordinate the role of the state to labour process dynamics, conflate different levels of analysis, and reduce multiple and connected ruptures in the circuits of capital to singular causes and moments in the accumulation process. The continuing emphasis on the historical regularities of large amplitudes in the accumulation process is a needless constraint that produces a neglect of the multiple turning points, contradictions and uneven patterns of development that have shaped the construction of the contemporary global economy.

THE PRESENT CONJUNCTURE

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

The impact of these seminal contributions was important but ultimately confined to the margins of economic analysis. As indicated above, mainstream voices were soon to re-assert their dominant paradigm, and excise labour from the analysis of the capitalist economy. This can be seen so clearly in the present conjuncture. The usual narrative on the origins of the current crisis focuses on the destabilising effects of greed and the frenzied speculative activities that first brought global financial institutions to the brink of disaster and then toppled the real sectors of the world's economies. The ‘real’ economy is rarely clearly specified, but the concept is commonly invoked to denote the performance of industrial production and service provision. The evidence, still rather piecemeal at present, does not support a simple cause and effect argument—in other words, does not confirm the idea that the crisis in the financial sector pre-dated and precipitated the global crisis of the real economy.

Accumulating weaknesses in the industrial sectors of the advanced economies were apparent before the financial crisis erupted in 2008. In key industrial sectors—cars, steel, construction, chemicals, clothing and textiles—jobs had been declining giving credence to the notion of a capital flight from the advanced Western economies to the fast growing economies of the South (Glyn, 2006).

Figure 1 reports OECD data on movements in labour productivity growth since 1997 for the US, European and Japanese economies. It shows a striking downward convergence in the performance of all three major economic regions. By 2006, labour productivity growth had slumped to just 1 per cent, but the pattern of change over the previous 10 years varied considerably. In 1997, the growth rate in the US was 3.5 per cent, but in Europe, the average rate failed to rise above 1.5 per cent between 1997 and 2007, a record that compares un-favourably with the European performance in previous decades.

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Figure 1. EU, US and Japanese productivity growth Source:OECD ULC database.

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Figure 2 suggests that the real economy was faltering some years before the financial crisis broke. It describes productivity growth rates between 1997 and 2007 for US industry, market services and construction sectors. The data is striking. For the whole economy, productivity performance deteriorated after 1997. The industrial sector declined significantly after 2005, and market services decreased from a peak of 5 per cent in 1998 to 2 per cent growth in 2007. In the construction sector, which accounts for approximately 5 per cent of total US GDP and is a crucial determinant of aggregate US performance, productivity growth decelerated after 2002 and recorded a staggering –12 per cent drop in 2007.

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Figure 2. US productivity growth by sector Source:OECD ULC database.

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Commenting on the OECD findings, Brackfield and Martins (2009) note that these adverse trends in construction pre-dated by four years ‘the price and financing conditions in the construction and housing sectors’. ‘The boom years of the mortgage and sub-prime business coincide precisely with the periods when productivity performance was deteriorating rapidly’. There was excess supply in new start housing, but property prices, fuelled by extended credit conditions, continued to rise until the situation became unsustainable. The US construction economy, in short, was continuing to expand on the demand side, largely because of speculative investments, even as the supply side was grinding to a halt.

The performance of the European economies in the same period was more stable. Aggregate labour productivity hovered around the 1.5 per cent level between 1997 and 2004, but then fell to a historically low level of 1 per cent. Figure 3 reveals a better than average performance for the industrial sector, with growth rates fluctuating around 3 per cent, but again highlights the difficulties in construction. Productivity growth rates remained negative throughout the 10-year period.

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Figure 3. European productivity trends Source:OECD ULC database.

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The highly aggregated data reported in the Figures highlight a general deterioration in the structural performance of Japan, the US and Europe during the 10 years preceding the crisis. The data compare changes in growth rates and not movements in levels of productivity, and as such can be considered a reliable basis on which to compare the structural performance of the three different regions. Historically, labour productivity has grown at a faster rate in the US than in Europe, but as the figures show, this has not been true in recent years. This is of no small significance for the interpretation of the role of labour market factors in the productivity slowdown.

Orthodox accounts of the long-term record of comparative performance typically fix on the allegedly pernicious effects of regulated labour markets in Europe. The latter are said to burden European employers and prevent them from pursuing the ‘hire and fire’ policies that characterise the purportedly more efficient employment practices of US companies. It is highly questionable whether this argument ever had force (Nolan, 1994), and it certainly does not have much purchase on the issues underlying recent trends. Testing the conjecture that European regulations are detrimental to employment and productivity gains requires, as argued in the next section, greater theoretical precision, careful interrogation of disaggregated data, and a longer-term historical perspective. It requires, in short, more attention to the complex and uneven connections between labour market institutions, state policy and accumulation strategies.

THE 21ST-CENTURY CRISIS OF LABOUR

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES

In the past theoretical work on capital–labour relations emphasised the strength of labour institutions. Trade unions, it was commonly argued, exercised their power to interrupt production, push wages to unacceptable levels and engage in disruptive industrial actions. Labour was an unwelcome break on the circulation of capital. This perspective has attracted support both from the dominant mainstream and the radical traditions. The contention here is that this analysis is erroneous. The institutions of labour have been too weak, not too strong. In Britain and the US labour's voice has been muted and marginalised. Workers were, as a consequence of the state's pursuit of policies to promote deregulation and privatisation (or, what is the same thing, expand the frontiers of the circuits of capital) ruthlessly disenfranchised. The evolution of capital–labour relations in mainland Europe, as noted, has been more complex, nuanced and inconclusive.

The present crisis is at once a symptom of the pervasive and pernicious effects of unbridled capital accumulation and a consequence of the diminishing capacity of labour institutions to exert any influence over the definition of public policy (nationally and internationally) towards industry, work and regulation during the last quarter of the 20th century. Can the capacities of national and international state agencies be harnessed to check financial institutions, support public expenditure, and introduce measures to enhance the collective voice mechanisms in the workplace that are judged so pernicious by the voices of capital and mainstream economics?

A key focus of contemporary debate is the destructive tension between accumulation strategies that promote the ‘low road’ to profitability and those that embrace labour institutions in the quest to achieve a ‘high road’. The former involves a further stage in the degradation of work systems, wages and rights; the latter gives space for mutual accommodations between capital and labour over wages, productivity and profit. Which of these accumulation strategies is pursued depends in large part on the character, scope and coherence of state policy. Within Europe, the British state has a distinguished history of opposing, diluting and sometimes successfully derailing policies aimed at constraining capital to acknowledge the conditions necessary to promote decent work. The US state has demonstrated at best a passive adherence to the concept, while its businesses lead the way in degrading the conditions of work and workers at home and abroad.

Two years ago, as the shocking realities of the unfolding crisis swept through London and Wall Street, there appeared to be an opportunity for labour to seize the moment and assert arguments for a new agenda. The bail-out of big business, the vast sums of public money directed to the task of salvaging the banking system, and the revival of the act and objectives of nationalisation could have come with strings attached. But that would only have been possible had labour possessed an institutionalised voice. It required access to the levers of state offices that it no longer possessed. Very quickly, the moment of opportunity receded, and the incantations of the speculators and big business closed the space for a wider public policy debate.

In the new age of austerity, the prospects for labour are bleak. Governments, in Europe and beyond, are imposing measures that will push unemployment to levels that would have been judged politically intolerable a few years ago. Youth unemployment levels are rising fast as the inadequate but significant pathways into work, put in place by previous administrations, are terminated. Older workers are withdrawing from the labour market as they did during the crisis of the 1970s, and following the Thatcher governments' offensives against inter alia the coal, dock and steel industries. Tens of thousands of private sector employees are discovering that their jobs depended on the contracts that their employers secured from the public sector. Yet in a remarkable act of deception, the coalition government of Britain has sought to divert attention from the source of the fiscal deficits that it claims are so deleterious—the bank bail-outs—by attacking the scale and scope of the public sector. Public sector workers have been vilified—for their cost to the taxpayers, their alleged inefficiencies in the workplace, and their generous pay and benefits. There are, the argument runs, too many public servants. Their work can be sourced by the private sector and by volunteers.

This is not a new line of argument of course. The idea that investment in the public sector crowds out more ‘efficient’ private sector initiatives has been a stock reference point for conservative forces for many decades. But the representatives of labour—in the trade unions, in the Labour party and beyond—have signally failed to combat this economic myth. They have failed to expose the pernicious effects of removing the constraints that the public sector imposes on private capital, and they have failed to develop a compelling narrative charting an alternative achievable future. It is as if the legacy of the past weighs too heavily. The challenges ahead are forbidding to be sure, but unless labour is able to reassert its role and influence during the present crisis, the destructive forces of unleashed capital will continue to shape the future.

REFERENCES

  1. Top of page
  2. ABSTRACT
  3. INTRODUCTION
  4. THE DISENFRANCHISED WORKFORCE
  5. THE CONTESTED ROLE OF THE STATE
  6. GREED, SUNSPOTS OR ACCUMULATING CONTRADICTIONS?
  7. THE PRESENT CONJUNCTURE
  8. THE 21ST-CENTURY CRISIS OF LABOUR
  9. REFERENCES
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